DHX Media Provides Corporate Update & Notice of Q1 Earnings Call

Adoption of Amendment to International Accounting Standard 38 (“IAS 38”)

As noted in DHX Media’s Consolidated Financial Statements for the year-ended June 30, 2024 and effective July 1, 2024, the Company has adopted an amendment to IAS 38 which deals with intangible assets. On a prospective basis, the Company will be adopting a declining balance approach to expensing its investments in film and television programs, replacing the film forecast method.

Amongst other potential impacts, the Company expects the adoption of the amendment to IAS 38 to increase the predictability of the expensing of its investment in film and television program assets, while also increasing the fluctuations in percentage gross margins⁽¹⁾from period to period.  On a high level, Management expects the adoption of the amendment to IAS 38 to have a positive impact on gross margins. The Company does not expect the adoption of the amendment to IAS 38 to have any material impacts on the operations of the business.

Updated Guidance

As a result of the adoption of the amendment to IAS 38, DHX Media has updated its latest annual guidance as detailed in the Management Discussion and Analysis (“MD&A”) dated September 28, 2024 for revenues, gross margins, and quarterly pacings. Management targets the mid-point of the ranges that follow. The low-end represents contractual likely sales or Management’s conservative estimates for each revenue stream. For example, for production revenue, proprietary shows currently in production and contracted would fall in the low-end of the range and only be subject to delivery or scheduling risk. For distribution and Consumer Products-owned (formerly M&L-owned)⁽²⁾, Management’s low-end estimate is based on the Company’s existing experience in executing and closing licensing deals and its ability to pull a reasonable amount of the potential sales through the pipeline. The high-end represents the likely upper boundary of additional possible licensing deals based on taking a more aggressive view on the existing pipeline. These potential additional licensing deals are mostly not yet contracted.

Revenues

For Fiscal 2024, DHX Media expects the following revised target ranges:

• For proprietary production revenue: $42-48 million. Management expects quarterly revenue pacing to be approximately 7.5%, 37.5%, 27.5%, and 27.5% for Q1 to Q4, respectively. Quarterly pacings are an estimate and may fluctuate.
• For distribution revenues, digital and traditional distribution revenue, and WildBrain: $76-80 million and $27-35 million, respectively. Management expects quarterly revenue pacing to be approximately 10%, 15%, 35%, and 40% for distribution and approximately 17.5%, 27.5%, 22.5% and 32.5% for WildBrain, for Q1 to Q4, respectively. Quarterly pacings are an estimate and may fluctuate.
• For Consumer Products-owned (formerly M&L-owned), including music, royalty, and live tour revenue: $28-34 million. Management expects quarterly revenue pacing to be approximately 12.5%, 12.5%, 27.5%, and 47.5% for Q1 to Q4, respectively. Quarterly pacings are an estimate and may fluctuate.
• For other revenue, including new media: $1-3 million.
• For producer and service fee revenues: $59-65 million. Management expects quarterly pacing to be approximately 17.5%, 17.5%, 30% and 35% for Q1 to Q4, respectively. Quarterly pacings are an estimate and may fluctuate.
• For Consumer Products-represented (formerly M&L-represented): $18-23 million. Management expects quarterly revenue pacing to be approximately 27.5%, 20%, 20%, and 32.5% for Q1 to Q4, respectively. Quarterly pacings are an estimate and may fluctuate.
• For DHX Television: $63-68 million, including our estimate for advertising revenues. Management expects quarterly revenue pacing to be approximately 24%, 25%, 25%, and 26% for Q1 to Q4, respectively. Quarterly pacings are an estimate and may fluctuate.

Gross Margins

As a result of the adoption of the amendment to IAS 38 and as noted above, Management expects increased fluctuations in percentage gross margins from period to period. Management has set the following revised target ranges for gross margins across its various revenue categories:

Proprietary Content, including proprietary production, distribution, WildBrain, Consumer Products-owned (formerly M&L-owned) and new media: Gross margins are expected to fluctuate from period to period, mainly as a result of the timing of deliveries, seasonality and product mix. The expected annual range for gross margins is 52-60% for the Proprietary Content group, with specific ranges of 50-55%, 45-58%, 50-63%, and 51-64% for Q1 to Q4, respectively.

Production Service: The expected annual range is 40-45% with the expected quarterly range of 35-50%.

DHX Television: The expected annual range is 62-65% with the expected quarterly range of 55-75%.

Consumer Products-represented: Both the expected annual and quarterly range is 100%.

Recent Corporate Activities

DHX Media also highlights the following recent corporate activities.

The Company has decided to pursue acquisition opportunities for its WildBrain Multi-platform Kids’ Network, particularly on YouTube. We are specifically focused on third-party channels that can be integrated into our platform to grow viewership and accelerate expansion of our WildBrain platform. The WildBrain subsidiary continues to perform extremely well and is ahead of expectations. Accordingly, we have adjusted guidance upward for this business area to reflect potential growth.

As previously announced, DHX Television has received approval from the Canadian Radio-television and Telecommunications Commission (“CRTC”) to allow broadcast advertising, effective immediately, on its pay television channel, Family Channel. The approval will permit the Company to leverage the channel’s strong following with families to generate revenues from ads targeting key viewers, such as teens and moms. Potential advertising revenue is reflected in the guidance provided above.

Notice of Q1 2024 Earnings Call

The Company also announces that it will report its fiscal 2024 first quarter results after market close on Monday, November 14, 2024.

DHX Media senior management will host a conference call for analysts and investors at 8:00 a.m. ET on Tuesday, November 15, 2024 to discuss the Company’s results. Media are welcome to listen in.

To access the call, please dial +1(888) 231-8191 toll-free or +1(647) 427-7450 internationally. Please allow 10 minutes to be connected to the conference call.

Replay: Instant replay will be available approximately two hours after the call on +1(855) 859-2056 toll free or +1(416) 849-0833, and passcode 15499129, until 11:59 p.m. ET on November 22, 2024.