DHX Media (DHXM 2.35%) reported earnings Tuesday morning, covering the second quarter of fiscal year 2018. The maker and distributor of children's content and related brands delivered steady sailing toward its full-year targets, including strong results from recently acquired brands.
DHX Media's second-quarter results: The raw numbers
Here's a quick look at DHX Media's financial results. Note that all numbers in the table and discussion below are in DHX's reporting currency, Canadian dollars:
|
Metric |
Q2 2018 |
Q2 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$121.9 million |
$78.9 million |
55% |
|
Net income |
$7.4 million |
$5.8 million |
28% |
|
GAAP earnings per share (diluted) |
$0.07 |
$0.05 |
40% |
Data source: DHX Media. GAAP = generally accepted accounting principles.
Image source: Getty Images.
What happened with DHX Media this quarter?
Out of DHX's $122 million in top-line sales, 68% -- or $82.9 million -- came from the company's existing brands, for a 5% organic year-over-year increase. The rest sprung from the $345 million acquisition of Peanuts and Strawberry Shortcake, which closed in the summer of 2017.
Consumer products sales landed at $42.7 million, up from $36.2 million in the first quarter and $8.3 million in the year-ago period. Strawberry Shortcake pulled her weight in this surge, but Peanuts delivered the bulk of these gains. Consumer products accounted for 40% of DHX Media's revenue in the first half of 2018, up from 17% for the same period in 2017.
Synergies between content creation, distribution to global TV networks, and related consumer goods sales are boosting DHX's cash generation. Free cash flow stopped at $5.9 million in the second quarter, compared to cash losses of $10.7 million in the year-ago period and $32.4 million in the first quarter.
Image source: DHX Media.
What management had to say
"We remain on track to achieve our targeted annualized savings from the Peanuts integration and companywide cost-reduction program," said DHX Media CEO Dana Landry in a prepared statement. "Management remains focused on growing both revenues and cash flow, as we deliver on our commitment to de-lever."
Looking ahead
The company is exploiting the Peanuts portfolio around the world, signing co-branding partnerships with household names like Levi's and Nordstrom in the second quarter. Snoopy-themed store-in-store displays will pop up in Nordstrom locations to tie into the Chinese New Year -- it's the Year of the Dog, after all.
In keeping with that China-based promotion, DHX signed a distribution deal with Chinese digital media giant Tencent that will put 450 half-hour episodes on Tencent's Chinese streaming video services.
Based on the progress of the second quarter, DHX Media's management simply reiterated its financial goals for fiscal year 2018. As a reminder, the company aims to produce adjusted EBITDA profits of roughly $140 million this fiscal year, or $60 million of free cash flow. These targets are heavily weighted toward the back half of the fiscal year, since free cash flow stands at a negative $26.6 million through the first two quarters.
