Release Date: September 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- WildBrain Ltd (WLDBF, Financial) saw strong growth in YouTube, AVOD, and FAST platforms, with significant increases in average view duration and engagement.
- The company successfully refinanced its debt, extending maturities to 2029 and simplifying its debt structure.
- Key brands like Peanuts, Strawberry Shortcake, and Teletubbies showed strong engagement and licensing growth, contributing to revenue.
- WildBrain Ltd (WLDBF) has established a significant presence in the FAST market, with nearly 50% to 60% of all kids channels on these platforms.
- The company is poised to benefit from a shift towards higher-end premium projects for families, with strong partnerships with platforms like Apple TV+ and Netflix.
Negative Points
- Fiscal year 2024 consolidated revenue was down 13%, primarily due to reduced output in studio businesses.
- Content creation and audience engagement revenue decreased by 24% year-over-year.
- Net loss for the quarter was $81 million, driven by non-cash impairment charges on the television business.
- Free cash flow for fiscal year 2024 was negative $29 million, with expectations of elevated leverage through fiscal year 2025.
- The company faced challenges in the content production industry due to a protracted slowdown and dual labor strikes in Hollywood.
Q & A Highlights
WildBrain Ltd (WLDBF) Q4 2024 Earnings Call Highlights
Q: Josh, you mentioned the normalization outlook for the backlog of shows. Can you provide more color on the quantum of content and the shifts in the streaming landscape?
A: Josh Scherba, President and CEO: There's a massive amount of consumption happening in AVOD, primarily driven by YouTube. We're seeing major increases in consumption across AVOD and FAST, with particular growth in FAST. Established streaming platforms like Netflix are focusing on fewer, bigger, better series that are kid-inclusive and based on large IP. The size of these series from a budget level is meaningfully larger, and the creative process takes more time. We're also seeing success with family features based on IP, such as our Peanuts feature in pre-production for Apple TV+.
Q: Can you elaborate on your go-to-market strategy for FAST, especially given the complexities around selling kids inventory?
A: Josh Scherba, President and CEO: Selling kids inventory has complexities, and selling for FAST adds technical and sales approach challenges. We've built out a media solutions team to sell YouTube inventory and will evolve their capabilities to capture the FAST space. FAST has traits that advertisers loved about linear, making it a logical place for ad dollars to migrate. We have a first-mover advantage with nearly 50% to 60% of all kids channels on these platforms.
Q: Has your view on non-core asset sales changed, and has the underlying assumptions of what's available or valuations changed?
A: Josh Scherba, President and CEO: Our view hasn't changed. We prioritized our debt refinancing, which had a critical timeline. Now, we're pursuing non-core asset sales with full confidence in the value of our assets. The last year hasn't been ideal for M&A in the media space due to interest rate uncertainty and regulatory environment, slowing down the pace of conversations. However, we remain optimistic about simplifying our business and bringing shareholder value from these assets.
Q: Can you provide more details on the investments you're making to address the FAST opportunity?
A: Josh Scherba, President and CEO: We've built a media solutions team initially focused on YouTube inventory and will continue to invest in this area to capture the FAST opportunity. FAST has similarities to linear, making it a comfortable platform for advertisers. We have a significant first-mover advantage and are well-positioned to take advantage of this growing market.
Q: What are the key factors that will benefit free cash flow generation in fiscal 2025 and beyond?
A: Nick Gawne, CFO: Licensing has lower upfront capital needs, particularly in the heritage space where we're seeing strength in Strawberry Shortcake and Teletubbies. We're investing less of our own capital in new content as the streaming industry and our brand strategies evolve. We've also invested in growth areas over the past three years and are now entering the stage to harvest these investments.
Q: How do you see the content creation business evolving in fiscal 2025 and beyond?
A: Nick Gawne, CFO: We expect to return to growth in the studios. The development cycle has lengthened, leading to higher quality output and larger budget productions, which contribute more to earnings. The timing of revenue in the studio business will be impacted by the ramp-up for new orders. We expect roughly one-third of the rebound in profit for content creation to flow through fiscal 2025, with the remainder in fiscal 2026.
Q: What are the key growth areas for WildBrain's brands and partnerships?
A: Josh Scherba, President and CEO: We're focusing on key brands like Peanuts, Strawberry Shortcake, and Teletubbies. Peanuts is celebrating its 75th anniversary with new content and consumer products. Strawberry Shortcake has seen impressive engagement on YouTube and FAST. Teletubbies has increased global engagement, particularly in China. We're also seeing positive responses from partners like Sega, LEGO, and Supercell for our 360-degree capabilities.
Q: How is WildBrain adapting to changes in the content production industry?
A: Josh Scherba, President and CEO: We're adapting by focusing on key brands and partnerships, repositioning our YouTube network, and expanding our FAST channels. We're also investing in premium capabilities to attract new projects and partners. The production industry is seeing a shift towards higher-end premium projects for families, and we're well-positioned to benefit from this trend.
Q: What are the key financial highlights for fiscal year 2024?
A: Nick Gawne, CFO: Fiscal year 2024 consolidated revenue was $462 million, down 13%, primarily due to reduced output in our studio businesses. Fourth quarter consolidated revenue was $130 million, up 4%. Adjusted EBITDA in fiscal year 2024 was $88 million, down 11%. Fourth quarter adjusted EBITDA was $24 million, up 25%. Net loss was $81 million in the quarter and $106 million for the year.
Q: What is the outlook for fiscal year 2025?
A: Nick Gawne, CFO: We expect revenue growth of approximately 10% to 15% and adjusted EBITDA growth of approximately 5% to 10% year-over-year. We're focusing on key brands, improving free cash flow, and making strategic capital allocation decisions. We see further profit acceleration beyond fiscal year 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
