• Revenue was $95.5 million in Q1 2021 vs $112.3 million in Q1 2020.
• Net loss improved to $3.3 million in Q1 2021 vs a net loss of $16.0 million in Q1 2020.
• Free Cash Flow was negative $2.7 million in Q1 2021 vs positive Free Cash Flow of $7.7 million in Q1 2020, partly due to timing of distributions to non-controlling interests in the current quarter.
• Adjusted EBITDA in Q1 2021 was $17.5 million vs $19.6 million in Q1 2020.
• Gross Margin improved to 45% from 44% in Q1 2020.
• WildBrain Spark revenue was $8.9 million in Q1 2021, a sequential improvement from $6.5 million in the previous quarter. This compared to $22.1 million in Q1 2020.
• WildBrain Spark continued to attract a highly engaged audience watching 64.2 billion minutes of videos in Q1 2021, up 14% from Q1 2020. The average view time was up 27% to approximately six minutes per view.
• Paid down $5.0 million on the revolving facility in Q1 2021.
• Post quarter-end, announced expanded partnership with Apple TV+ for the largest production commitment in WildBrain’s history for a new slate of Peanuts originals and specials as well as licensing the current Peanuts library of classic specials. Deal provides significant multi-year production pipeline for our studio business.

Halifax, NS – November 10, 2020 – WildBrain Ltd. (“WildBrain” or the “Company”) (TSX: WILD), a global leader in kids and family entertainment, today reported its Fiscal 2021 first quarter results for the three-month period ended September 30, 2020 (“Q1 2021”).

Eric Ellenbogen, WildBrain CEO, said: “We kicked off Fiscal 2021 with an expanded Apple TV+ partnership that will see a new generation of kids and families enjoying a full slate of new Peanuts originals plus the long-running classic specials on a leading global media platform. This multi-year, worldwide agreement is the largest production commitment in our company’s history.  It aligns with our strategy of creating premium content in long-term deals that will meaningfully grow our earnings base.  We have and will continue to line up a book of production business that you’ll see play out in our numbers in the coming quarters and years ahead.  This Peanuts deal illustrates how we’re maximizing the profitability of our key IP across the value chain by leveraging new production to also secure high-value library sales and consumer products opportunities.  As we close more content deals and switch on key brands, we’ll continue to build momentum, driving growth for years to come.”

Ellenbogen continued: “In Q1, we delivered financial results that reflected strong production revenue and resilience in our consumer products and television businesses in the face of current macro-economic headwinds.  We’re also encouraged by the sequential improvement in Q1 revenue at WildBrain Spark.  We’re in a great position to benefit from the secular movement of advertising dollars to digital given our network scale, global reach, data insights and kid-safe, premium programming.  We expect our direct advertising sales, as well as other initiatives designed to monetize the huge audiences on our AVOD network to help speed recovery and growth at WildBrain Spark as advertising demand returns.”

Aaron Ames, WildBrain CFO, added: “During Q1, we continued to execute on our disciplined approach to content investments while managing working capital and controlling our costs. We also paid down $5.0 million on our revolving credit facility in Q1 and the outstanding balance of $5.0 million in October, subsequent to quarter-end. The recently expanded deal with Apple TV+ will begin to add to our EBITDA in Fiscal 2022 and is also a meaningful positive for our consumer products business.  While we expect our Total Net Leverage Ratio2 to increase moderately in Q2 2021 due to timing, based on our current expectations of how the pandemic will play out coupled with the enhanced visibility we now have around our revenue, earnings and content pipeline over the next 18-plus months, we expect our Total Net Leverage Ratio to be comfortably in the mid-4x level, or below, by the end of Fiscal 2022.”

In Q1 2021, we reclassified our financial reporting to better reflect our 360° approach to IP management and the characteristics of the transactions that we are entering into with global streaming services (“SVODs”) and across other distribution channels3.  Growth in our production revenue reflects global SVODs investing heavily to deliver high-quality, exclusive programming.  Under this model, typically the SVODs pay for the cost of production inclusive of production fees, while we retain ownership of the underlying IP as well as linear distribution rights (after a holdback of approximately 24 to 36 months) and all consumer products revenues.  This differs from the traditional production/distribution model of covering production costs from multiple linear broadcasters, with margins realized over multi-year licensing cycles. Since our slate has become a combination of both these models, we have revised our reporting to aggregate production and distribution, which is consistent not only with the integrated management of our business, but also with industry practice.

Accordingly, we now report production and distribution in one revenue line under “Content Production and Distribution”.  We also consolidated reporting of all revenue streams related to consumer products, including our licensing agency WildBrain CPLG, under “Consumer Products”.  Our WildBrain Spark business, which generates revenues primarily from advertising and sponsorships, continues to be reported under “WildBrain Spark”.  Collectively, the three preceding revenue lines will now comprise our “Content Business” segment for reporting purposes.  For clarity, our Canadian television business has been renamed “Canadian Television Broadcasting” and continues to be reported separately.

In Q1 2021, revenue was $95.5 million compared with $112.3 million in the prior year quarter.  This decrease was primarily driven by WildBrain Spark, resulting from pressures on global advertising due to COVID-19 and policy changes on YouTube for “Made for Kids” content, partially offset by stability in our other businesses.

Content Production and Distribution revenue increased to $36.3 million in Q1 2021 vs. $35.1 million in Q1 2020, due to higher production revenue.  Production revenue increased in Q1 2021, driven by premium proprietary projects including new Peanuts originals such as The Snoopy Show, a number of family specials and a second season of Snoopy in Space. The increase was also driven by new seasons of Johnny Test, Fireman Sam, Polly Pocket and Chip & Potato.  The Peanuts library deal, which was signed after quarter-end, will be reflected in second quarter results.

While COVID-19 and YouTube’s changes in targeted advertising policies continued to negatively impact advertising sales at WildBrain Spark, with revenue declining 60% to $8.9 million in Q1 2021 vs Q1 2020, we are encouraged by the sequential growth in revenue.  Revenue improved sequentially month-over-month as we moved through the quarter, reflecting an increase of 37% compared with $6.5 million in Q4 2020. This trend has continued in October as digital advertising begins to show improvement and we continue to implement initiatives to monetize the significant viewership consuming content on our AVOD network.  WildBrain Spark has one of the largest and most engaged global audiences in the kids and family space with 62.4 billion minutes of videos watched this quarter, up 14% vs Q1 2020.  On average, the duration of each view amounted to approximately six minutes, an increase of 27% from Q1 2020.  Viewership remained strong at 10.7 billion views in Q1 2021.

Excluding the expiring MetLife contract which represented $3.6 million in Q1 2020, Consumer Products revenues were stable at $38.8 million in Q1 2021, reflecting the continuation of strong licensing royalties from our Peanuts franchise and increased commissions from our licensing agency WildBrain CPLG.

Gross Margin increased to 45% in Q1 2021 vs 44% in Q1 2020, driven by growth in production revenue derived from a growing slate of higher-margin premium projects in our studio.

Positive operating cash flow4 of $19.6 million in Q1 2021 vs $29.9 million in Q1 2020, due to timing of settlement of working capital balances.  Free Cash Flow for Q1 2021 was negative $2.7 million, compared to positive Free Cash Flow of $7.7 million in Q1 2020, partly due to timing of distributions to non-controlling interests in the current quarter vs no payments in the prior year quarter.

Adjusted EBITDA was $17.5 million in Q1 2021 compared with $19.6 million in Q1 2020, principally related to the weakness in advertising revenue at WildBrain Spark.

Q1 2021 net loss was $3.3 million vs a net loss of $16.0 million in the same prior year quarter.  This improvement was attributable to lower SG&A, lower reorganization and development costs and a higher non-cash foreign exchange gain in Q1 2021 compared to Q1 2020.