IDW Media Holdings Inc

OTC:IDWM

Earnings Call Transcript

[Operator]

Good evening, and welcome to the IDW Media Holdings Third Quarter Fiscal Year 2021 Earnings Call. In today's presentation, IDW's Chief Executive Officer, Ezra Rosensaft, will discuss the company's operational and financial results for the 3 months ended July 31, 2021. After his presentation, Mr. Rosensaft will answer investor questions. [Operator Instructions]

Any forward-looking statements made during this conference call, either in the prepared remarks or in the Q&A session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates.

These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports that IDW posts periodically with the OTC market. IDW assumes no obligation either to update any forward-looking statements that they have made or may make or to update the factors that may cause results to differ materially from those that they forecast.

Please note that the IDW earnings release is available on the Investor Relations page of the IDW Media Holdings' corporate website.

I will now turn the conference over to Mr. Rosensaft.

[Ezra Rosensaft, executive]

Thank you, Karen. And thanks to everyone for joining us on this call. My remarks today cover the third quarter of our fiscal year 2021, the 3 months ended July 31, 2021. On our call today, I will discuss the third quarter's results and several subsequent key strategic, operational and financial developments. And then I will be happy to take your questions.

We took important steps to accelerate our growth trajectory, strengthen our balance sheet and enhance the visibility and liquidity of our stock during and shortly after the third quarter. Most notably, our successful capital raise is providing $9.6 million to fund strategic priorities led by investments in high-quality original IP, intellectual property, content for synergistic development across our publishing and entertainment businesses.

Our approach to development of the Locke & Key franchise serves as a prototype to how we intend to holistically build fandoms from our expanding portfolio of original IP. In fact, I am very, very excited by the quality of the original IP. We have already begun to acquire through partnerships with some of the world's leading comic and graphic novel storytellers.

We are moving well beyond our roots in horror and sci-fi to reach new audiences, genres with grounded thrillers, [indiscernible] coming-of-age tales, grounded comedies and manga-inspired comics. The results will be nothing less than transformative for the company over the next several years. We're also dedicating a portion of the proceeds from the capital raise for technology, including a revamped database, providing valuable business intelligence and an upgraded IDW Publishing retail website that's launching next month with enhancements to our data analytics and direct-to-consumer marketing capabilities.

In conjunction with the capital raise, we uplisted to the New York Stock Exchange, American Exchange from the OTC market and now trade under the ticker symbol IDW, which is most appropriate. The uplist is part of our broader commitment to enhance liquidity of our Class B common stock and raise our profile in the investment community.

Turning now to our third quarter financial and operational results. IDW Publishing boosted revenue to $6.8 million, an increase of 30% compared to the year ago quarter and 14% sequentially. The division operated at breakeven during the third quarter, generating $74,000 in income from operations compared to a loss from operations of $40,000 in the year ago quarter.

Congratulations to Nachie Marsham, our publisher, and the publishing team on another solid quarter. Thanks to our leadership, publishing was well positioned to benefit from a reviving direct market. Direct market sales increased $1.3 million year-over-year, led by titles from our most popular licensed property, Viacom's Teenage Mutant Ninja Turtles and, in particular, The Last Ronin #3.

Deepening relationships with those key IP licensor partners, whose properties lead the pack in terms of the value and growth potential is a fundamental component of our go-forward strategy. They not only drive direct market sales, they make important contributions to our ongoing brand and fandom building effort.

In the trade market, They Called Us Enemy and the late Congressman John Lewis' March, continued to lead the pack, while The Locke & Key Keyhouse Compendium was a leading title across both markets.

Looking ahead to the fourth quarter and the balance of 2021. With Locke & Key Season 2 slated to air in October on Netflix and Season 3 in 2022, publishing is prepared to capitalize on the intention and the new audiences with strong Locke & Key backlist and terrific new titles. In the coming weeks, we'll release the next title in The Sandman Locke & Key crossover series, Locke & Key The Sandman Universe, Hell & Gone #2 and for Season 3 next year we're collaborating with DC Comics on a crossover collective edition.

All of this comes at a very good time. New York Comic Con in early October kicks off with typically the strongest season for the comics industry followed by Halloween, Black Friday, and then into the holiday season. We're capitalizing on the associated opportunities with some of our most prominent promotions entire releases of the year, led by some exciting [indiscernible] SKUs.

The tactile appeal of these high-quality print titles has resonated with readers during the pandemic, and we have made the most of the opportunity by ramping up new releases that are carefully crafted to meet our customers' quality and value expectations given the premium price points.

All in all, IDW Publishing had a strong third quarter and are strategically positioned to continue the momentum into the fourth quarter of our 2021 fiscal year and first quarter of fiscal 2022. At IDW Entertainment, we announced in July, industry veteran, Paul Davidson would assume leadership of the business. Paul succeeds Lydia Antonini, who has chosen to focus on her work as a producer.

Paul has deep experience in the industry, highlighted by a 5-year stint at the Orchard, where we rose to head worldwide film and TV division. In 8 weeks since his arrival, Paul and his team have accelerated and expanded IDWE or IDW Entertainment, IDWE's development pipeline with a focus on IDW's original IP properties.

IDW Entertainment reported no third quarter revenue. As you may recall, under GAAP revenue recognition is tied to the timing of the delivery of episodes to the streamer, distributor, and therefore results in fluctuating streams revenue. In that regard, we expect to record significant revenue and EBITDA in the fourth quarter upon delivery of all 10 Locke & Key Season 2 episodes to Netflix.

In the TV landscape, we continue to partner with top creators to build out our development pipeline and are optimistic that we'll have some good news on the front before long. Looking ahead because Paul and Nachie are working cooperatively to expand our portfolio of original IP, IDW Entertainment is now able to socialize properties earlier in the development process, sharing the excitement about new additions to development slate with potential partners.

This is just one of the significant advantages afforded by our unified approach to original IP development across both businesses. Outside of TV, Paul's focused IDW Entertainment on building out capabilities to pursue opportunities and other platforms, such as feature films and podcast film, of course, has long leveraged proven graphic novel and comic properties.

More recently, podcast has proven to be a low-cost, low-risk channel to develop, test and refine properties while building fandoms that will help us propel stories into TV or film. On a consolidated basis, revenue declined to $6.8 million in the third quarter of fiscal 2021 from $8.5 million in the third quarter of 2020.

In the year ago quarter, we reported significant IDWE revenue from Wynonna Earp and V Wars, which more than offset the growth of publishing revenue. However, neither show is financed through the derisked models we now employ and both incurred significant losses, a thing of the past. Thanks God. Consequently, this quarter, we were able to narrow our net loss from continuing operations to $0.09 per share from $0.35 in the third quarter of 2020.

As our bottom line results continue to improve, our balance sheet continues to strengthen. In particular, over the past year, we've eliminated over $14 million in bank debt, over $8 million in current liabilities held for sale and discontinued operations and nearly $4 million in related party loans.

At July 31, our only remaining debt was a $1.2 million PPP loan, for which we intend to apply for forgiveness since it was used entirely for qualified purposes. Even prior to the post quarter and cash infusion from the offering, working capital totaled $11.9 million, including $9.9 million in cash and cash equivalent.

Wrapping up, the third quarter results were a significant improvement on the year ago as we continue to move to sustainable long-term profitability. We're excited to now be listed on a national exchange as an SEC reporting company and have already begun to put the capital raised in conjunction with our uplisting to work in ways that we expect will drive significant value for shareholders.

Now I would welcome your questions. Operator, Karen, back to you.

[Operator]

[Operator Instructions] And as there are no questions at this time, this concludes our question-and-answer session and our conference call. We thank you for attending today's presentation. You may now disconnect, and have a great day.