3 days Ago
IDW Media Holdings, Inc. ( OTCQB:IDWM ) Q3 2024 Earnings Conference Call September 16, 2024 4:30 PM ET Company Participants Davidi Jonas - CEO Andrew DeBaker - CFO Conference Call Participants Daniel Seyde - SpruceLine Capital Operator Greetings. Welcome to the IDW Media Holdings Third Quarter Fiscal Year 2024 Conference Call.
[Operator Instructions] Davidi Jonas, CEO; and Andrew DeBaker, CFO, will be available to answer questions and provide a company insight. Please note, this conference is being recorded. Before we begin, I'd like to review the company's abbreviated safe harbor statement.
I'd like to remind you that statements made during this conference call concerning future revenues, results from operations, financial position, markets, economic conditions, product releases, partnerships and any other statement that may be construed as a prediction of future performance or events are forward-looking statements, which may involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. Non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only.
We will now begin the question-and-answer session. [Operator Instructions] Question-and-Answer Session [Operator Instructions] The first question comes from Daniel Seyde with SpruceLine Capital. Q - Daniel Seyde Hi.
Thanks for taking my question. How much cash do you expect to recoup from Wynonna Earp in the fourth quarter and also full year 2025? Davidi Jonas Were you talking about to fourth quarter of '24 and fiscal '25? Daniel Seyde Correct. Andrew DeBaker And this is Andrew to respond.
And just to be clear, you're referring to like the recruitment that we're getting on a quarterly basis, correct? Daniel Seyde Correct, the recruitment of the cash outlays? Davidi Jonas Yes. So we know - we work obviously with Cineplex, I mean they do give us reporting. And we do know the amount roughly over the life of the contracts, many of which they just renewed this past April, generally three year contracts.
We get paid when they get paid. So it can be a little bit of hit or miss, right? So last quarter, we only received about 7,000 - and this quarter, we just reported, what, like $250, I believe, $250 and change. So next quarter - we basically assume every quarter we're going to get somewhere in the $100,000 range.
It's just for internal purposes, right, because it can be a little bit hit or miss timing-wise. So for what it's worth, I would say, likely in the fourth quarter, somewhere between maybe 100 and 150 knowing that I could be off on that obviously. And then next year in terms of the entire year, I'd basically repeat those numbers and say somewhere between 400,000 or maybe 500,000 again, depending on the timing.
Daniel Seyde Okay. Thank you. Operator The next question comes from Andrew Reef, Private Investor.
Andrew, please proceed. Unidentified Analyst Congratulations on making a profit this year, this quarter, I mean. Question I have is the general comics market has been declining in the direct market.
Question would be is how much of the business is coming from outside of the book market, which is Random House and the direct market, which is combination. How much of it is coming from - as a one conglomerate international ordering directly from your own web store - or is there another market out there? Andrew DeBaker So I mean it sounds like just to be clear, you're conflating the book market and the comic market with PRH as being just one distribution channel and you're asking about all other distribution channels? Unidentified Analyst Right, exactly. Because you went up approximately $1 million, Jimmy, in total increased sales.
And when I'm reading the ICv2, it indicates that the markets are not doing that well. So obviously, you're doing better than the general market. And I was just curious how much of your business comes outside of that since you've had such a big increase in one quarter? Andrew DeBaker Yes.
Andrew, I'll let you jump in a more specificity, my rough number, I would say, is probably around 15%, maybe 20% - up to 20% outside of the PRH market? And in terms of diversifying our sales and distribution channels, focusing on direct-to-consumer, focusing on our applications, focusing on the digital market, vertical reading, other opportunities, whether it be Kickstarter or other distribution channels, those are all things that we're looking at. Unidentified Analyst The reason for my question was to track it. I just figured I just have to track the sales of the top titles - top 200 that they publish in ICv2 and look at the book market results, I wanted to know, does that explain most of the story.
So it explains about 85% of it. Is that the point? Andrew DeBaker Not necessarily..
. Unidentified Analyst What am I losing up in other words. Davidi Jonas I mean, part of it is that we had a good quarter, and a lot of that is in the Penguin Random House market.
So even though the comics market generally might be down, we're up year-over-year in the publishing business and the traditional...
Unidentified Analyst That's why I congratulated you. Davidi Jonas It's not just that our direct-to-consumer business grew, which it did, it also is at a strong quarter. But Andrew, would you agree in terms of like the 15% to 20% range for non-PRH revenue? Andrew DeBaker Yes.
So generally, PRH is roughly 80% or so. For Q3 - and obviously, it fluctuates. For Q3, it was actually 70%.
So we did have a little bit more revenue from non-PRH. It's mostly due for this quarter, mostly due to Scholastic orders, Scholastic book fairs. They generally place two orders a year, at least historically, one in sort of the June, July period and another one sort of in the October, November period.
So in a large order from them comes through, obviously, that mix will change. But yes, generally in that sort of 80%, maybe 75% to 80% range is PRH. Unidentified Analyst Got it.
And that's due to Sonic and Teenage Ninja Turtles. Is that the primary source for Scholastic? Andrew DeBaker Yes. Davidi Jonas I don't know if Scholastic ordered anything beyond Sonic and Turtles.
But yes, those would be. Unidentified Analyst I just wanted to know because I could extrapolate that in the future, what that would be if you're going up in your Random House and the other ones, then it should probably go up the same way..
. Andrew DeBaker Just sorry, I was just going to add that with Scholastic, clearly, we obviously are constantly going to them, trying to get them interested in other titles as well. So we would hope that in the future, they will move beyond Turtles in Sonic, but at the moment, that is the driver of that revenue, yes.
Unidentified Analyst One quick question. Is the amount of revenue coming from Scholastic compared to the past years of Scholastic, is it dramatically up? Because I know that you guys used to have back in maybe 2019 something like $1 million of Scholastic revenue. Is this a new high for Scholastic as a customer? Andrew DeBaker Yes.
Good question. Davidi Jonas I mean I don't think it's outstanding. I mean it might be - it might be higher, but it's not the driver for the business.
Andrew DeBaker Yes. I would say maybe year-over-year, fiscal year-to-date this year versus last year, we might be up about maybe 10% maybe 15%. But again, with Scholastic, the timing difference, right? So like one year, maybe they'll place an order and we'll get that into October.
So we'll get into the fiscal year. Other years, maybe it will be November depending on timing. So - it's not always a strict year-over-year comparison.
Davidi Jonas What's very exciting is that in the listings that they show on comics hub, it shows that your product is selling through and it's ranking in the top 3 or 2, Jimmy in terms of dollars. So - it's not just that people are buying it, but that there is an enduring customer that buys the product, which is very exciting. Q - Unidentified Analyst Thank you.
Davidi Jonas Thank you very much. Unidentified Analyst My pleasure. Thank you.
Operator [Operator Instructions] The next question comes from Paul Sunken, Private Investor. Please proceed. Unidentified Analyst Hi Davidi.
So I guess one comment and then a couple of questions. One is I just want to express as I have in the e-mails that have sent you the appreciation for being shareholder-friendly and having these conference calls and continuing to disclose financials on a quarterly basis, I guess, there are companies that would go dark and never publish financials. And so I just wanted to express how appreciative we are.
Davidi Jonas Thank you. Unidentified Analyst The other thing is it like you've worked through a lot of cost cutting. You've made a lot of changes over the past couple of years since you kind of took over from Alan - and do you feel as though the company is at kind of an inflection point like again, without giving guidance, do you anticipate losses? Or do you think the company is going to be profitable going forward, even if it's breakeven? Davidi Jonas I feel like life is full of inflection points.
So depending on where you want to pause the tape, I definitely think we're at an inflection point. For me, the inflection point is the - as you pointed out, we've done a lot of the hard work of trying to right-size the business and the overhead and costs, et cetera. And at the same time, we really have done a pretty good job of locking down some of our key partnerships and licenses.
I'd say the vast majority of our key partnerships and licenses. So I'd say the inflection point is like now we've got to push the gas. So does that mean that we'll be profitable, I guess time will tell.
We have as much of - as much of a prediction about what the weather will be in three months from now as anybody else. But our expectation is that if we continue on the path that we're going down, that will be substantially profitable and hopefully, more so than we were in 2024. Unidentified Analyst So the other question, which kind of leads off that is like it's not a kind of a typical turnarounds model would be shrink, fix and grow.
And it seems as though you've been through the shrink and fix stages. And then I guess the question is, like I'd ask you this before, I guess, a couple of years ago, like so this is still consuming 100% of your time like in terms of your business activities? Davidi Jonas Yes. I'd say, if anything, it's consuming more of my time personally now than it ever has.
I think I'm probably as mentally unstable as they have been in a long time. So that's certainly a correlation there. I'm just kidding.
Unidentified Analyst I understand. Davidi Jonas Definitely taking up just about 100% of my time. In terms of the shrink, fix and grow, yes, I think we've sort of shrunk.
I think we've done a lot of fixing. And in terms of growing, the way I think about it is like we have a bus and we have space for more passengers on the bus. Like we have the tool ready.
We have the entire business set up, and we need to layer in additional opportunities for revenue growth for bottom line, high-value licenses as well as at the same time, we're not just interested in the cash flow of the business. We're also interested in the long-term shareholder value and creating value in the underlying IP. So taking some risks around co-creator, around new entrants, around wholly owned IP, so it may be some entertainment opportunities.
So it's a combination of putting more passengers on the bus and at the same time saying like, okay, now we have - now we have more stability in the business, that's an opportunity for us to also invest in the long-term value of the IP. Unidentified Analyst So where are you spending a lot of your time or most of your time? And I guess I understand that like profitability short term may be compromised to invest in growth opportunities? Davidi Jonas That's a good question. I tried to - I mean, I don't know if you're asking me personally or if you're asking about the business.
Unidentified Analyst Well, you, as it relates to the business. I mean, how many people work at the company now? Davidi Jonas About 50. Unidentified Analyst Okay.
So I mean you're running the show, so it's really like - have - well, I guess, how you are positioning the company and what you were emphasizing for yourself and in turn the company? Davidi Jonas Yes. I mean it's sort of a - like the way I think about the business is kind of having like two primary heads. One is the cash flow side of the business.
And I'd say that's primarily the license side of the business. And the other is the value opportunity, and that's kind of the co-creator and original IP and that franchise extension and entertainment and all the things that kind of extend further out. I'd say like I try to find the biggest problem that - I shouldn't call them problems, the biggest areas that need to be addressed and spend ample time on them to get them set up for future stability and then go on to the next issue.
So like - and at the same time, I'm also doing in a given day, I might be dealing with three or four issues on either side of the fence. So in terms of me personally, I'm thinking about how to do - how to extend our franchises, whether that's selling bourbon whiskey or thinking about other ways that we can extend franchises, whether that be tabletop games, board games, podcast, conferences, sneakers, whatever it is, to get fans exciting opportunities to engage with the franchises that they love, that might be taking up so much of my time. And then on the other side, I'm thinking about what are the next licenses that we should be focused on, how do we put more passengers on the bus and then going out and trying to land those deals and land those next opportunities.
So I'd say it's kind of right brain, left brain, but trying to make sure that each site is getting the adequate amount of time and focus to be able to deliver. Unidentified Analyst Got you. And then my last question, which is kind of a more technical question, I apologize because I don't have - I'm out of the office, so I don't have my - the filing in front of me.
But I was curious about the vesting schedule for the options. Like I wasn't sure if they invested over time because I knew that there were some market cap thresholds. So I didn't know if both of those had to be met or - and I read through it a couple of times, and I was just a little confused.
Davidi Jonas No. I think in terms of divesting, if I'm not mistaken, divesting is related to the maybe it is dual, but it's mostly - as far as investors are concerned, I think it's mostly related to the success for tax reasons, part of it is in terms of it being treated as ISOs and that are just typical options. There's only a certain amount that could be - that could divest in a given year.
So that's why - that's part of the reason I divest over such a long period of time. Unidentified Analyst Okay. So it's primarily related to market cap.
And then I know I asked you this before, but I just ask again, like the target seem to be incredibly high, which would apply you on. But I was curious about kind of why that decision was made - because I think it's like $25 million, $50 million. Davidi Jonas And $110 million.
Yes. I do think that the targets at the time that they were set were based on an expectation on that moment in time. And I think that the reality is that the lack of liquidity in the stock, the lack of interest, the - we've had a pretty good year relative to the past five years for IDW.
I mean this is a very good year and there's also more cash in the bank, and the market hasn't really reflected that kind of a turnaround. So I do think that there's - like at the time that the Board set those targets, I think there was more of an expectation of a more engaged marketplace and that would be more impacted by news and that hasn't been the case. Unidentified Analyst I can almost guarantee that the more backing and cash flow that you produce, the higher the stock will go.
So it will take care of itself. Davidi Jonas Yes. No, like I said, I think there's the two sides of that -- of the two heads of the monster, the cash flow.
And I think we can hopefully keep layering profitability. And the real upside for the business is not going to be an incremental $1 million or $2 million or $3 million of profitability because there's no real value in that profit, like it's just the cash because we don’t own the Ninja Turtles, we don’t own Sonic. And if those licenses don't get renewed, which they're not guaranteed to - so in terms of the value for the IP, that's really where the long-term opportunity is.
And I'd say the market is almost 100% discounting, I shouldn't say almost. I mean like I think, negatively discounting that possibility. I would say that the market is, in my estimation, is estimating a negative value to the future exploitation of licenses just based on liquidation value and the current market cap.
Unidentified Analyst Well, there are people out, they are like me who were willing to provide liquidity, if anybody wants to get out. Davidi Jonas Thank you. Unidentified Analyst And when they're ready to buy, we'll provide liquidity for them to get in.
Davidi Jonas I hope that efficiently answers your questions. Unidentified Analyst Yes. Thank you very much.
Davidi Jonas Pleasure. Operator Okay. We have a follow-up coming from Daniel Seyde with SpruceLine Capital.
Please proceed. Daniel Seyde Hi. What does IDW plan to do with the $3 million of capital that was recently raised? Davidi Jonas So it was raised through strategic purposes and also just kind of as a backstop.
So as the backstop, it's obviously going to continue to function as a source of security for the company. We have a material amount of our cash balance invested into secure and highly liquid market assets, just to be able to provide some value while it's sitting, but it's there for opportunities, whether it be a new license, no opportunities for the business. I can say personally, having $7 million in the bank versus just a little over $3 million, there's a lot more confidence to take healthy calculated risk knowing that we have that much cash in the bank.
Daniel Seyde Thank you. Operator Thank you. There are currently no questions in queue.
I'd like to turn the floor back to management for any closing remarks. Davidi Jonas Thank you very much, John. Thank you, everyone, for joining.
This is - I think our most robust conversation with investors yet, and I hope that will continue. We welcome questions and engagement and look forward to our next quarterly update. Thank you, everyone, and have a good day.
Operator Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
.
