This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Good evening and welcome to the IDW Media Holdings fourth quarter and full year fiscal 2022 earnings call. During management's prepared remarks, all participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After the prepared remarks, you are invited to participate in the Q&A. To ask a question, you may press the star key, then one on your touchtone phone. To withdraw your question, Please press the star key, then 2. I will now turn the call over to Jen Belladeau of IMS Investor Relations.
spk02: Good evening. I'll take a brief moment to read the safe harbor. 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 company's SEC file. 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 actual 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. With that out of the way, I'll turn the conference over to Alan Grassman. Please go ahead, Alan.
spk06: Thank you, and thank you to everyone on the call for joining us. It's great to have you with us. My remarks today will provide an overview of our strategy and execution for the fourth quarter and full fiscal year 2022, which closed October 31st, 2022. Additionally, now with just about five months in the CEO seat, I'll provide some thoughts around our vision for IDW and our strategy moving forward. After my remarks, Brooke Feinstein, our CFO, will provide details around our financial results, and then we'll be happy to take your questions. So, onto our results. Brooke will provide a deeper dive, but at a high level, we finished 2022 with strong fourth quarter results, including consolidated revenue growth of 48%, enhanced operating results, and improved profitability. Our delivery of the third season of Lock and Key during the quarter was the primary driver of this revenue growth. For the full year fiscal 2022, we achieved consolidated revenue growth of 11%, which included delivery of seasons two and three of Lock and Key, as well as season one of Surfside Girls. We also made progress improving our full year operating results and profitability as compared to fiscal year 2021. Now let's look to the future and where we're going in the coming year. We have spoken about our heightened focus on leveraging what we believe is one of the most valuable intellectual property libraries in our industry. With hundreds of titles in our library today and hundreds of submissions coming in each year, our robust library is constantly growing. To frame how this creates tremendous opportunity for IDW, let me step back a bit to go through the basics of our strategy. IDW, along with its top shelf imprint, is a leading publisher of traditional comics as well as graphic novels, and we work with some of the best-known creators in the industry to publish original titles for all audiences, kids, tweens, teens, and adults. And some examples of titles you may recognize are March by the late Congressman John Lewis, They Called Us Enemy by George Takai, and Lock and Key by Joe Hill and Gabriel Rodriguez. These are well-known personalities and creators, and we're pleased to call them partners. Our publishing team also reviews hundreds of submissions every year from first-time or as yet undiscovered creators with the goal of identifying intriguing new stories and characters. With our solid content foundation and unique ability to find and publish new original and creative concepts, IDW is well positioned to release and capitalize on exciting new visions. We focus on attracting top talent and acquiring original content so that our team can identify which submissions have the best opportunity to move from creative idea published work to entertainment vehicle to financial success. And in today's environment of multiple media platforms, that entertainment vehicle can take many shapes. It could be a television show, a streaming series, a feature film, a podcast, or perhaps even a short form video. So at its core, our strategy is fairly simple. Continue to increase our industry recognition as the creative partner of choice so that we are presented with the best content from the most talented creators. That's our first goal. Our second is to publish comics and graphic novels that resonate with broad audiences and are successful. And our third goal is to develop those published content, graphic novels, and comics into entertainment vehicles like TV shows, feature films, podcasts, and other media platforms. To date, our success stories include Lock and Key, Surfside Girls, Winona Earp, V Wars, and October Faction. We are confident that there are more successes to come, and we currently have about 10 entertainment projects in place being developed. At this time last year, we had virtually no new development deals to speak of. Having said that, it takes time to develop a premier entertainment project from the idea to having an agreement to getting it into production, getting it delivered, and achieving success. Predicting that timing is difficult, and I, along with the entire executive team, know how frustrating that can be to shareholders. It is the nature of our business. We are focused on what we can control, growing IDW's reputation as the creative partner of choice. so that we continue to see submissions of excellent material from inventive creators to continue to expand our library, while also identifying creative material that we believe can go the distance on a variety of media platforms. From what I've seen and experienced during my first five months as CEO, I believe our company is in the early stages of realizing its enormous potential. Looking into 2023, We are focusing on various strategic initiatives on the publishing side to enhance our marketing and also to drive efficiency. We see tremendous opportunity for IDW publishing and IDW entertainment to continue to work together to optimize the financial returns of the intellectual properties which we control. And we will keep you apprised as we move through the year. Over the medium to long term, our company is very well positioned to scale revenue and drive more consistent and enhanced profitability. As we move through 2023, we have a lot of work ahead. Ultimately, we are well positioned to leverage the strength of our content library and to drive our project pipeline. IDW is a respected brand, and we, the entire management team, are energized to discover new ideas and creators as we continue to grow our position as a leading independent media entity and to drive accelerated growth across all our platforms. Long-term investors will be rewarded. Now, I'll turn the call over to our CFO, Brooke Feinstein, to go over our financials for the fourth quarter of 2022. Thank you, Alan.
spk03: My remarks today will focus on the fourth quarter and full fiscal 22 results The three and 12-month periods ended October 31, 2022. Except where I indicate otherwise, I'll be comparing the fourth quarter of fiscal 22 results to the fourth quarter of fiscal 21. And I'll also be comparing full-year fiscal 22 results to full-year fiscal 21. IDW Media Holdings' fourth quarter consolidated revenue increased 48% to $10.5 million compared to 7.1 million a year ago. IDW's fiscal year 22 revenue was 36.1 million compared to 32.4 million in fiscal 21. Publishing revenue for the fourth quarter of 22 decreased to 5.7 million compared to 6.9 million in the prior year period, primarily related to a decrease in the overall number of titles released in Q4 22. and also reflected the strong comic release of Teenage Mutant Ninja Turtles The Last Ronin No. 4 in 21. Publishing revenue for fiscal 22 increased slightly to $25.8 million, primarily due to increased non-direct market revenue, an increase in games revenue related to Batman Adventures, and an increase in retailer-exclusive revenue related to Sonic the Hedgehog. In addition to strong book market sales for Teenage Mutant Ninja Turtles, The Last Ronin, and They Called Us Enemy. This was offset by a decrease in direct market revenue due to fewer titles being published and a decrease in digital sales compared to fiscal year 21. In the fourth quarter of 22, IDW Entertainment reported revenue of $4.8 million, mainly related to the recognition of revenue for the delivery of season three of Lock and Key. For the full fiscal year 22, IDW Entertainment reported revenue of $10.3 million, primarily driven by the delivery of seasons two and three of Lock and Key, as well as season one of Surfside Girls. Our consolidated income from operation was $300,000 in the fourth quarter of 22, compared to a loss from operations of $1.9 million in the prior year period. For the full year ended October 31, 2022, we reported a loss from operations of 700,000 compared to a loss from operations of 8.7 million in fiscal year 21. IDW Publishing's loss from operations in the fourth quarter of 22 was 1.6 million compared to breakeven in the prior year period. In fiscal 22, IDW Publishing reported a loss from operations of 1.9 million compared to a loss from operations of $800,000 in fiscal 21. IDW Entertainment's fourth quarter income from operations was $2.8 million compared to a loss from operations of $1.5 million in the fourth quarter of 21. IDW Entertainment's income from operations for fiscal 22 was $3.1 million compared to an operating loss of $6.7 million in fiscal 21. Consolidated net income in the fourth quarter was $400,000 or $0.03 per share compared to a net loss of $700,000 or $0.06 per share in the prior year period. In fiscal 22, net loss was $700,000 or $0.06 per share compared to a net loss of $5.4 million or $0.51 per share in fiscal 21. Now turning to our balance sheet, at October 31st, we held $10 million in cash and cash equivalents and had no debt. Working capital, current assets, less current liabilities totaled $18.5 million. As we head into 2023, our strong balance sheet provides us with the resources to execute on our strategy. Our plan is to continue deploying capital judiciously and increase operating efficiencies to drive long-term growth. That concludes my remarks. Alan?
spk06: Wonderful. Thank you so much, Brooke. Now, we welcome questions. Operator, back to you for Q&A.
spk01: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.
spk00: At this time, we will pause momentarily to assemble our roster. The first question comes from Edward Riley with EF Hutton.
spk04: Hi, guys. Alan, you've been there for a few months now as CEO. I'm just wondering if you can maybe expand a bit on your top priorities for 2023.
spk06: Ed, delighted. We just reviewed this, and our priorities are really clear. We have a core focus, which consists of three. At the publishing group, we have some revenue growth that we're going to be focused on. And we have a key relationship with Penguin Random House that will be not only instrumental in our growth, but which we are nurturing very, very assiduously and carefully. On the entertainment, we are maniacally focused on pushing the many options that we have into production. We don't control that, but we know that there is breakout potential in what we have in place. And at Media Holdings, we have some digital initiatives that we're working on. that we will be bringing to bear this year. So that's the core focus. There are some near-term opportunities. They fall into five categories, which I can enumerate very briefly. First, other comic book companies have fallen into some challenges, some into bankruptcy. If it makes sense, we'll have a conversation there. We're looking at a form of monetizing our intellectual property through motion comics. In the past, others have tried that, so we're exploring that carefully. Third, we are exploring podcasts where we can contribute our intellectual property in return for a share. We're being very careful with how we use our resources. A fourth category is in mobile and games. We have a conversation possibly using our intellectual property in games. And our fifth category is short-form video. So those are near-term, which gets some of my attention, but we are really focused on our core. We're really focused on being the partner of choice because if we're that, we will succeed in every other important endeavor.
spk04: Okay, thanks for that. Then on the 10 entertainment projects, are these optioned? Are these officially greenlit? I'm just wondering if you could maybe give us some indication of where some of these projects stand within the whole process.
spk06: So, Ed, I'm so glad you asked that question because that needed clarity with the board and even internally. We have standardized how we're going to talk about these. We've standardized it how we talk about them within the company, how we talk about them with the board, and how we talk about them with external interested parties such as yourself. So first, what we don't talk about outside the company is when we're in negotiations, there are a large number. I have reviewed the list. It is a very large number of negotiations. We don't talk about that. The second term that we do use is optioned. Optioned means a contract has been signed and modest money has moved. The third category, which is the most important category, is where something has been put into green light and is moving towards production. That is where the opportunity is. That is, we saw the operating leverage that was provided by lock and key. That is where we are maniacally focused. I've been super clear with the entertainment team that it's great to have a tremendous number of negotiations, and it's great to have a large number of options. What we really need to do is cross the finish line or step on home base and put something into production that is outside of our control, just to be clear. but we're really focused on that. So three categories, to be clear. Negotiating, we don't talk about. Options, we do talk about, and we try to make clear what an option is. It's modest money. And the third category is put into production. That's significant. So I hope that clarifies a really important topic for you, Ed.
spk04: Yep, absolutely. And just wondering if you could maybe silo the 10 entertainment projects between options and greenlit, those categories number two and three.
spk06: So I'm going to say that at this time, we have optioned a number of projects which we've spoken about publicly. At this time, at this occasion today, none of those have been put into production. There is one small, which I believe we've announced. Brooke, you can jump in. There is a small production called Essex County. Brooke, has that been announced?
spk03: Yes, that has been announced. We are not really involved in the production. We are just getting an executive producing fee on top of that, and that is being produced in Canada with a Canadian broadcast.
spk06: So thank you, Brooke. And that's a small production. So the positive is we control the IP. Someone felt important enough to option it and produce it. It could lead to great things, but at this time, it's modest.
spk04: Okay, gotcha. And then any indication about renewal for Surfside Girls Season 2?
spk06: So Surfside Girls at Apple has not been renewed in its current form. Its current form, for all our listeners, was live action, tween-oriented, and it has not been renewed. And furthermore, we're in conversations, and we have conversations. We're in discussions about the future of Surfside Girls, and we'll share more when we can.
spk04: Okay, gotcha. And then you mentioned in a recent radio interview that you expect to release 100 to 200 new titles during the year. Just wondering how this range of new titles compares to the number of new titles released this year.
spk06: I'm sorry, are you speaking about the publishing group? Yes, yep, yes. So the publishing group has a significant increase in what we have planned. We have reviewed that. Our expectation is that we are working towards being more successful by every metric, but of course it's early in the fiscal year.
spk04: Okay, and last one for me. In the fourth quarter, looks like SG&A was up quite a bit. Brooke, just wondering what's driving that.
spk03: Yes, that's an easy one. We had the CEO severance in August. All of that was booked, and it'll be paid out cash-wise over the next two years.
spk04: Okay, great. Thank you, guys. Thank you, Ed.
spk01: The next question comes from David Marsh with Singular Research.
spk05: Hi. Thanks, guys. Congrats on the quarter. First, just to follow up on that last question, Brooke, could you quantify the non-recurring SG&A?
spk03: I guess I could. It's about 700,000.
spk05: Okay. Thank you. That's helpful. And then as we start 23, I guess one question on the entertainment side, is there any residual revenue opportunity around lock and key hitting any part of the fiscal year this year, or was all of that revenue realized in 2004?
spk03: Yes. So all of the revenue related to the prior seasons was all in this fiscal year. However, there are other opportunities that the entertainment team is currently exploring. So that's kind of open.
spk05: Okay. Thank you. That's helpful. And then I guess just on the 10 projects, Alan, obviously too early to pinpoint specific titles, but Could you give us a sense, generally speaking, around genre that these titles fall in so that we have some idea of what to expect coming forward?
spk06: So I can try to answer that, David, by two metrics. First, we have agreements with a significant, different, diversified group of partners that including Universal, including 20th Century, including Hulu, including Warner Brothers, including Cartoon Network, including Lionsgate. So we're diversified. We're not tied to, we're not hamstrung. So we have a diversified set of relationships. As it relates to genres, we are across all genres. What in the movie business is called four quadrants. We do have properties that range from animated for the Cartoon Network and children through tweens, teens, and adults. And so I would like to say that we have a wide enough portfolio of intellectual property and a diversified set of relationships that give us excellent opportunities. So I hope that answers your question, David.
spk05: Yeah, that's helpful. And you mentioned that you were exploring some opportunities, it sounds like perhaps in mobile gaming. Did I hear that correctly? And could you talk, I mean, obviously, again, no titles, but could you talk a little bit broadly about, you know, what maybe some of the kind of low-hanging fruit might be there and, you know, timing perhaps if you have any on any possible releases into, you know, iTunes and the Google Store and so forth?
spk06: So on timing, I can't. except to say it's not near term. Console games, I was in the console business before, and I've also been in the mobile business. Console games take a very long time. Mobile games do not. We are focused on opportunities that will put our intellectual property into games quickly, cheaply, and allow us to see if we can monetize it. Just to be clear, We do not invest our capital in these initiatives. We don't invest it really across podcasts or mobile games. We may put a little bit of money into some explorations in the future, including those categories. But we're in conversations, and I could call them negotiations, David, but I'm not going to. I'm going to call them conversations. People have come to us, asked if we're interested. We've said yes, and that's where we are. So it's early days.
spk05: Sure, that makes a lot of sense. And then I guess lastly for me, you guys end the year with $10 million in cash, which is a pretty solid position. As you look forward, do you feel like that's sufficient liquidity to fund operations going forward for the next multiple years if need be, just given the pipeline that you see and the expense structure that you currently have?
spk06: So we have enough cash to execute our strategy in 2023. That being said, I don't want to project beyond that. We're focused and we're careful, and our strategy is to use what we're strong in and to partner with people who are stronger in other sectors, including cash. So we're focused on conserving cash, executing our plan, and we're going to be able to do that for 2023.
spk05: Sounds good. I'm sorry, just let me slip one more in. Do you have a number projection for capital expenditures for this year? Brooke?
spk03: And what do you mean exactly by capital expenditures?
spk05: Just anything that's going to hit the investing line of a cash flow statement from a purchase of new
spk03: Like assets and stuff? I mean, we signed our two new leases this year, and you'll see those ROU assets on the balance sheet and basically the leasehold improvements and the property and equipment, all of that would have hit this year. So I would say very minimal.
spk05: Great. Hey, thanks so much, guys. Appreciate it. Good luck with moving things forward. Thank you.
spk00: As there are no more questions, this concludes our question and answer session.
spk01: Thank you.
spk00: Thank you all.
spk01: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Disclaimer