IDW MEDIA HOLDINGS, INC. The following information should be read in conjunction with the accompanying
condensed consolidated financial statements and the associated notes thereto of
this Quarterly Report, and the audited consolidated financial statements and the
related notes thereto and our Management's Discussion and Analysis of Financial
Condition and Results of Operations included in our Annual Report on Form 10-K
for the fiscal year ended
As used below, unless the context otherwise requires, the terms "the Company,"
"we," "us," and "our" refer to
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements that contain the words
"believes," "anticipates," "expects," "plans," "intends," and similar words and
phrases. These forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from the results projected
in any forward-looking statement. In addition to the factors specifically noted
in the forward-looking statements, other important factors, risks and
uncertainties that could result in those differences include, but are not
limited to, those discussed in the 2021 Form 10-K. The forward-looking
statements are made as of the date of this report and we assume no obligation to
update the forward-looking statements, or to update the reasons why actual
results could differ from those projected in the forward-looking statements.
Investors should consult all of the information set forth in this report and the
other information set forth from time to time in our reports filed with the
OVERVIEW
We were incorporated in the
In 2009, IDT Corporation, our former parent corporation, completed a tax-free spinoff (the "Spin-Off") of the Company through a pro rata distribution of our common stock IDT's stockholders.
? IDW Publishing , or IDWP, creates comic books, graphic novels and digital
content through its imprints IDW, Top Shelf Productions and Artist's
Editions; and
? IDW Entertainment , or IDWE, a production company and studio that develops,
produces, and distributes content based on IDWP's original IP for a
variety of formats including film and television.
Prior to
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COVID-19: Overview of Impacts
? IDWMH: Received two PPP loans related to core IDWE and IDWP operations.
o $1,195,679 on April 27, 2020 , subsequently forgiven on July 20, 2021
o $1,195,680 on April 2, 2021 , subsequently forgiven on October 27, 2021
? IDWP: Although COVID-19 caused changes in direct-market returnability in 2020,
in April 2021 the return policies reverted back to pre-COVID-19 industry
standard practices. Additionally, IDWP renegotiated the terms of one of its
lease agreements due to COVID-19 impacts. Per ASC 842 guidance, the lease
liabilities were remeasured as of the modification dates as if the leases were
new leases commencing at such time. Accordingly, the Right-Of-Use assets were
adjusted by amounts equal to the adjustments to the lease liabilities. Although
the delay in comic releases continues to have an impact on the industry, the
impact has been slowly decreasing and returning to pre-COVID-19 levels.
? IDWE: Industry-wide production suspensions halted filming and production of
Wynonna Earp Season four after the completion of six of twelve episodes. IDWE
continues its program to develop, package and pitch from its library on a
largely remote basis. While there are some in-person writer's rooms with strict
COVID protocols, the majority of writer's rooms, pitch scenarios and
development conversations are all still happening remotely, with little to no
impact on filming and production schedules.
Business Description
IDW Publishing IDWP is an award-winning publisher of comic books, original graphic novels, and
art books. Founded in 1999, IDWP has a long tradition of supporting original,
powerful creator-driven titles. In 2002, IDWP published 30 Days of Night by
In 2015, IDWP acquired
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In addition to its core of creator-driven franchises, IDWP has also partnered
with the owners of major licensed brands to publish many successful licensed
titles, including Hasbro's Transformers, G.I. Joe, Dungeons & Dragons, and My
Little Pony; Sega's Sonic The Hedgehog; Paramount Global's Star Trek and Teenage
Mutant Ninja Turtles; and Toho's Godzillas. These licensed titles bring with
them diverse built-in audiences and build cache and retailer support for IDWP.
With licensed franchises, IDWP's strategy is to focus not only on licenses that
have eager, built-in fan followings but also ongoing licensor support through
other channels, such as toys, animation, and film. This strategy enables IDWP to
expand its audience reach and to pursue sub-license opportunities with foreign
publishers. IDWP also collaborates with other comic book publishers to
co-publish certain titles, including Batman vs. Teenage Mutant Ninja Turtles and
Locke & Key/The Sandman Universe: Hell & Gone (with DC Comics), Rick & Morty vs.
Dungeons & Dragons (with
IDWP's focus is to expand and market its library of titles, from both creator-owned titles in our IDW and Top Shelf brands; and also, in partnership with our top-of-class creative partners under our IDW brand. IDWP works synergistically with IDWE to develop new titles and to support existing titles.
IDW Originals, launched in
IDWP is also home to Artist's Editions, oversized deluxe hardcovers featuring
scans of original art printed at the same size they were drawn with all the
distinctive creative nuances that make original art unique. Some of the standout
Artist's Editions titles include
Many of IDWP's titles are available worldwide through foreign licensing with 642
titles available in 62 territories in 24 languages. In 2020, IDW kicked off a
major new initiative to release key titles as Spanish-language graphic novels in
the North American market with the release of Spanish-language editions of They
Called Us Enemy, Red Panda &
IDWP's largest segment is the publication of comic book and trade paperback
products. Its comics and graphic novels are primarily distributed through three
channels: (i) to comic book specialty stores (the "direct market"); (ii) to
traditional retail outlets, including bookstores and mass market stores, on a
returnable basis (the "non-direct market"); and (iii) to Ebook distributors
("digital publishers"). IDWP's publications are widely available digitally
through popular distributors such as Comixology, Amazon, Apple iTunes and
iBooks, Google Play, Hoopla, Overdrive, and via IDWP's own webstore at
idwpublishing.com. Through the direct market and non-direct market, IDWP,
including its imprint
In
In 2014, IDWP launched IDW Games to develop and publish card, board, and
tabletop games. Similar to IDWP's book content, IDW Games offered a mix of
popular licensed titles such as
and reproducing select existing products.
To further expand and build creator-owned properties beyond publishing, IDWP works with IDWE, as well as other outside partners, to bring creator-owned franchises to television and film through licensing arrangements.
To expand its business and outperform its industry competitors, IDWP continues to focus on launching new creator-owned titles and partnering with established brands to bring fan-favorite properties to the comics market. IDWP is expanding the reach of existing and new products through the development of specialty, library, and education markets; increased direct-to-consumer initiatives; and broadening the reach of creator-driven series through licensing opportunities.
IDWP's revenues represented 85.0% and 100.0% of our consolidated revenues in the
three months ended
25
IDW Entertainment IDWE is a production company and studio that develops, produces, and distributes content based on IDWP's original IP for a variety of formats including film and television.
IDWE was formed on
IDWE has developed and/or produced a number of series for television:
?Wynonna Earp season four aired in two parts due to worldwide COVID-19 related production shutdowns. The first six episodes of season four premieredJuly 26, 2020 and the second half of season four began airingMarch 5, 2021 . The show was created byEmily Andras and starsMelanie Scrofano and is based on the IDWP comics ofBeau Smith . Season four's twelve episodes are being produced bySeven24 Films and distributed by IDWE, in partnership withSyfy and CTV Sci-Fi.Cineflix Studios is the co-producer and global distributor for the series. Season one's thirteen episodes aired in fiscal 2016. Season two's twelve episodes aired in fiscal 2017, and Season three's twelve episodes aired in fiscal 2018. ? V Wars debuted on Netflix onDecember 5, 2019 . The 10-episode vampire thriller starsIan Somerhalder and was produced byHigh Park Entertainment . The series was based uponJonathan Maberry's IDWP comic book series of the same name. The rights to IDWE's streaming genre series V Wars reverts back to IDW in 2022; as a result, we will be exploring opportunities to monetize the past season and potential opportunities to continue the story with a new partner. ? October Faction premiered on Netflix onJanuary 23, 2020 . The 10-episode show was based on the IDWP comics ofSteve Niles andDamien Worm and was adapted by showrunnerDamian Kindler and starredTamara Taylor and J.C. MacKenzie. It was also produced byHigh Park Entertainment . ? Locke & Key premiered on Netflix onFebruary 7, 2020 . The show is based on the critically acclaimed graphic novels of Joe Hill andGabriel Rodriguez published by IDWP. Season two airedOctober 22, 2021 topping Netflix's global TV charts in over 81 countries, and season three premiered August ? 10, 2022 on Netflix. IDWE's new original Apple TV+ series Surfside Girls, based on the Top Shelf ? graphic novel of the same name, premiered onAugust 19, 2022 . All ten episodes of the live action kids' series premiered in over 80 countries worldwide on the Apple TV platform. IDWE recently announced a slate of six additional titles with closed development deals with major studios, streamers, and distributors. As a part of these deals, IDWE will work closely to develop these properties as narrative television series, with the ultimate goal of securing a greenlight to production. These titles include: ? Dark Spaces withUniversal Cable Productions ("UCP") ? Earthdivers with 20thTelevision Studios and Hulu ? Rivers with HBO MAX ? Ballad for Sophie withUniversal Television International ? The Delicacy with Warner Bros.Television Studios ? Brutal Nature with leadingMexico -based animation studioAnima Studios ? A currently unannounced project with Cartoon Networks
While in the past, IDWE focused on television development and financing production opportunities, a broadening of our strategic goals has evolved to focus on lower risk investments as well as developing IP for feature film and podcast opportunities. As is the case with Surfside Girls, IDWE provides co-studio services which enables us to utilize our studio partners' infrastructure to support the needs of productions while reducing our own risk. We have also diversified our position by acting as non-writing executive producers ("NWEP") on current and future projects which allows us to secure fees for our services while minimizing costs. With more varied opportunities for our content/IP, we will be able to grow our brand, expand the perception of IDWE, increase revenue opportunities for the publishing side of the business and develop a more robust entertainment footprint.
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IDWE's revenues represented 15.0% and 0% of our consolidated revenues in the
three months ended
CTM (Discontinued operations)
As a result of the economic downturn related to the COVID-19 pandemic, and the
impact it had on CTM, the Company decided to sell CTM and focus on our
entertainment and publishing business. Pursuant to a sales and purchase
agreement ("SPA") dated as of
Results of Operations
We evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below loss from operations are only included in our discussion of the consolidated results of operations.
IDWP (in thousands) Change Three months ended July 31, 2022 2021 $ % Revenues$ 6,553 $ 6,779 $ (226 ) (3.3 )% Direct cost of revenues 3,648 3,508 140 4.0 % Selling, general and administrative 3,425 3,145 280 8.9 % Depreciation and amortization 64 52 12 nm (Loss) income from operations$ (584 ) $ 74 $ (658 ) (889.2 )% (in thousands) Change Nine months ended July 31, 2022 2021 $ % Revenues$ 20,136 $ 18,416 $ 1,720 9.3 % Direct cost of revenues 10,512 10,014 498 5.0 % Selling, general and administrative 9,738 9,059 679 7.5 % Depreciation and amortization 225 151 74 nm Loss from operations$ (339 ) $ (808 ) $ 469 58.0 %
Revenues. Revenues decreased by
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Revenues increased by
Effective
During calendar 2021, we began to winddown IDW Games and, going forward, IDW Games is only backfilling already developed games. The decision to shut down games was due to its lack of profitability, despite outliers like Batman Adventures, noted above.
Direct cost of revenues. IDWP's direct cost of revenues increased by
Gross Margin. IDWP's gross margin for the three months ended
Selling, General and Administrative. IDWP's selling, general and administrative
expenses increased by
IDWP's selling, general and administrative expenses increased by
As a percentage of IDWP's revenues, selling, general and administrative expenses
in the three months ended
28
IDWE
(in thousands) Change
Three months ended July 31, 2022 2021 $ %
Revenues $ 1,159 $ - $ 1,159 100 %
Direct cost of revenues 86 305 (219 ) (71.8 )%
Selling, general and administrative 1,017 1,528 (511 ) (33.4 )%
Depreciation and amortization 8 9 (1 ) nm
Income (loss) from operations $ 48 $ (1,842 ) $ 1,890 102.6 %
(in thousands) Change
Nine months ended July 31, 2022 2021 $ %
Revenues $ 5,479 $ 6,916 $ (1,437 ) (20.8 )%
Direct cost of revenues 1,609 7,757 (6,148 ) (79.3 )%
Selling, general and administrative 3,501 4,310 (809 ) (18.8 )%
Depreciation and amortization 26 27 (1 ) nm
Income (loss) from operations $ 343 $ (5,178 ) $ 5,521 106.6 %
nm-not meaningful
Revenues. IDWE revenues for the three months ended
IDWE revenues for the nine months ended
Direct costs of revenues. Direct cost of revenues consists primarily of the amortization of production costs that were capitalized during the production of the television episodes and direct costs related to revenue recognized during related periods.
Direct costs of revenues for the three months ended
Direct costs of revenues for the nine months ended
IDWE's gross margin for the three months ended
Selling, General and Administrative. Selling, general and administrative
expenses decreased by
Selling, general and administrative expenses decreased by
29
As a percentage of IDWE's revenues, selling, general and administrative expenses
in the three months ended
IDWMH (in thousands) Change Three months ended July 31, 2022 2021 $ % Selling, general and administrative$ 230 $ 313 $ (83 ) (26.5 )% Depreciation and amortization 2 1 1 nm Loss from operations$ (232 ) $ (314 ) $ 82 26.1 % (in thousands) Change Nine months ended July 31, 2022 2021 $ % Selling, general and administrative$ 1,025 $ 778 $ 247 31.7 % Depreciation and amortization 7 4 3 nm Loss from operations$ (1,032 ) $ (782 ) $ (250 ) (32.0 )% nm-not meaningful
Selling, General and Administrative. Selling, general and administrative
expenses decreased by
Selling, general and administrative expenses increased by
Consolidated net loss
(in thousands) Change Three months ended July 31, 2022 2021 $ %
Loss from continuing operations
- (13 ) 13 nm
Other (expense) income, net (69 ) 1,154 (1,223 ) (106.0 )%
Net loss from continuing operations (837 ) (941 ) 104 11.1 %
Net loss $ (837 ) $ (941 ) $ 104 11.1 %
(in thousands) Change
Nine months ended July 31, 2022 2021 $ %
Loss from continuing operations $ (1,028 ) $ (6,768 ) $ 5,740 84.8 %
Interest (expense) income, net (10 ) 128 (138 ) (107.8 )%
Other (expense) income, net (63 ) 1,141 (1,204 ) (105.5 )%
Net loss from continuing operations (1,101 ) (5,499 ) 4,398 80.0 % Loss from discontinued operations, net
- (1,280 ) 1,280 100.0 %
Gain on sale of discontinued operations - 2,123 (2,123 ) (100.0 )%
Net loss $ (1,101 ) $ (4,656 ) $ 3,555 76.4 %
30
nm-not meaningful
Loss from operations. Loss from operations decreased by
Loss from operations decreased by
Interest (expense) income, net. Interest income decreased by
Other (expense) income, net. Other income decreased by
Loss from discontinued operations, net. Loss from discontinued operations was
Gain on sale of discontinued operations decreased by
Liquidity and Capital Resources
General
At
We anticipate that our expected cash inflows from operations during the next
twelve months together with our working capital, including the balance of cash
and cash equivalents held as of
We satisfy our cash requirements primarily through cash provided by the Company's operating and financing activities.
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