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DHX Media Ltd. Doubles Down on Full-Year Targets

By Anders Bylund - Feb 13, 2018 at 3:33PM

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The second quarter brought few surprises, as the children's media producer continued to integrate Strawberry Shortcake and Peanuts into its operations.

DHX Media (WLDB.F -2.02%) 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

Young girl and her mom watching TV on the living room floor, with a big bowl of popcorn.

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.

Two pie charts showing DHX Media's revenue contributions by operating segment, comparing the first halves of fiscal 2017 and 2018.

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.

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