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 October 31, 2021, which was filed with the U.S.
Securities and Exchange Commission ("SEC") on January 20, 2022 (the "2021 Form
10-K").
As used below, unless the context otherwise requires, the terms "the Company,"
"we," "us," and "our" refer to IDW Media Holdings, Inc., a Delaware corporation,
and our subsidiaries.
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 SEC
pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.
OVERVIEW
We were incorporated in the State of Delaware in May 2009.
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 Media Holdings, Inc., a Delaware corporation, is a holding company
consisting of the following principal businesses:
? 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 February 15, 2021, we also owned CTM Media Group (CTM), a company that
develops and distributes print and digital-based advertising and information
advertising for tourist destinations in targeted tourist markets in 32 states /
provinces in the US and Canada. On February 15, 2021, we consummated the sale of
CTM to an assignee of Howard Jonas, the Company's Chairman in exchange for (i)
the cancelation of $3.75 million of indebtedness we owed to our Chairman's
designee, (ii) a contingent payment of up to $3.25 million based upon a recovery
of quarterly revenues of CTM to 90% of its fiscal 2019 levels during the
18-month period following the sale, and (iii) a contingent payment if CTM is
sold within 36 months of the sale for more than $4.5 million. As of July 31,
2020, CTM was reported as a discontinued operation and CTM's operations have
since been included in the financial statements as discontinued operations.
23
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
Steve Niles and Ben Templesmith followed by other horror titles that kickstarted
a resurgence in horror-comic publishing across the industry. Since then, IDWP
has significantly diversified its publications. Joe Hill and Gabriel Rodríguez's
Locke & Key, Jonathan Maberry's V Wars, Stan Sakai's Usagi Yojimbo, Beau Smith's
Wynonna Earp, Alan Robert's The Beauty of Horror adult coloring books, and
Darwyn Cooke's graphic novel adaptations of Richard Stark's Parker novels are
just a few of the hundreds of outstanding, award-winning titles published since
its inception.
In 2015, IDWP acquired Top Shelf Productions, an award-winning critically
acclaimed publisher of graphic novels, which continues to operate as a thriving
imprint. Top Shelf Productions is renowned for publishing works of literary
significance including the #1 New York Times and Washington Post bestselling
trilogy, March, by Congressman John Lewis, Andrew Aydin, and Nate Powell. March
is the only graphic novel to have won the National Book Award and is the second
most taught graphic novel in schools. In July 2019, Top Shelf Productions
released George Takei's graphic memoir, They Called Us Enemy, which debuted at
#2 on the New York Times Paperback Nonfiction Best Sellers list and as a #1
bestseller on Amazon. Both titles are now perennial bestsellers and considered
two of the finest non-fiction graphic novels ever made. Other iconic Top Shelf
Productions titles include Kim Dwinell's Surfside Girls, Jeff Lemire's Essex
County and The Underwater Welder, and Hannah Templer's Cosmoknights.
24
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 Oni Press, Inc.) and Godzilla vs. Power Rangers (with
Boom Studios).
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 July 2022, is a line of original comics and graphic
novels from a diverse lineup of writers and artists creating content across all
genres and for all age groups. IDW Originals works with top-tier talent
including New York Times bestselling writers like Scott Snyder on Dark Spaces:
Wildfire, Stephen Graham Jones on Earthdivers, and G. Willow Wilson on The
Hunger and the Dusk, in addition to up-and-coming talent creating the
bestsellers of tomorrow. IDW Originals is also focused on creating IP that can
be exploited across all media platforms.
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 Jim Lee's X-Men, Mike Mignola's Hellboy, David
Mazzucchelli's Daredevil Born Again and Jim Sterako's Nick Fury Agent of SHIELD.
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 & Moon Bear, Locke & Key and Sonic the Hedgehog.
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 Top Shelf Productions, sold over 4.8 million units in
fiscal year 2021 and is regularly recognized as the fourth largest publisher in
its category. Diamond served as IDWP's distributor to the direct market,
worldwide, and beginning June 1, 2022, PRHPS replaced Diamond as IDWP's
distributor to the direct market. IDWP's non-direct market distributor is PRHPS.
IDWP works together with PRHPS to sell-in and promote IDWP titles to buyers at
non-direct market customers such as Amazon, Barnes & Noble, Baker & Taylor,
Ingram, Follett, Target, Walmart, and more.
In September 2021, IDWP announced an exclusive worldwide multi-year sales and
distribution agreement with PRHPS for IDW's newly published and backlist comic
book periodicals, trade collections, and graphic novels to the Direct Market
comic shops beginning June 1, 2022.
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 Dragon Ball Z and Batman the Animated Series, as
well as creator developed strategic hobby games, such as Towers of Arkhanos and
Tonari. IDW Games' products were sold to distributors worldwide and are
available through retailers such as Gamestop, Barnes & Noble, and Amazon,
independent games, and comics stores, as well as the direct-to-consumer channel
through its website and marketing campaigns. In calendar 2021, the Company wound
down IDW Games and, going forward, IDW Games is only backfilling final orders
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 July 31, 2022 and 2021, respectively and 78.6% and 72.7% in
the nine months ended July 31, 2022 and 2021, respectively.
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 September 20, 2013 to leverage IDWP properties into
television series, features, and other forms of media by developing and
producing original content. IDWE maintains a robust development slate of
properties based on IDWP properties for the adult series/features marketplace as
well as the kids, family, and animation space. IDWE is in advanced conversations
with various global studios, networks, and streamers for their exploitation.
IDWE actively recruits and acquires new franchise material for exploitation
primarily in the series format.
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
premiered July 26, 2020 and the second half of season four began airing
March 5, 2021. The show was created by Emily Andras and stars Melanie
Scrofano and is based on the IDWP comics of Beau Smith. Season four's
twelve episodes are being produced by Seven24 Films and distributed by
IDWE, in partnership with Syfy 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 on December 5, 2019. The 10-episode vampire
thriller stars Ian Somerhalder and was produced by High Park Entertainment.
The series was based upon Jonathan 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 on January 23, 2020. The 10-episode
show was based on the IDWP comics of Steve Niles and Damien Worm and was
adapted by showrunner Damian Kindler and starred Tamara Taylor and J.C.
MacKenzie. It was also produced by High Park Entertainment.
? Locke & Key premiered on Netflix on February 7, 2020. The show is based on
the critically acclaimed graphic novels of Joe Hill and Gabriel Rodriguez
published by IDWP. Season two aired October 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 on August 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 with Universal Cable Productions ("UCP")
? Earthdivers with 20th Television Studios and Hulu
? Rivers with HBO MAX
? Ballad for Sophie with Universal Television International
? The Delicacy with Warner Bros. Television Studios
? Brutal Nature with leading Mexico-based animation studio Anima 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.
26
IDWE's revenues represented 15.0% and 0% of our consolidated revenues in the
three months ended July 31, 2022 and 2021, respectively and 21.4% and 27.3% in
the nine months ended July 31, 2022 and 2021, respectively.
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 July 14, 2020, we sold all of the stock of CTM to
an assignee of the Chairman in exchange for (i) the cancelation of $3.75 million
of indebtedness owed by us to the Chairman's designee, (ii) a contingent payment
of up to $3.25 million based upon a recovery of quarterly revenues of CTM to 90%
of its fiscal 2019 levels during the 18-month period following the CTM Sale
Date, and (iii) a contingent payment if CTM is sold within 36 months of the CTM
Sale Date for more than $4.5 million. The CTM Sale closed on February 15, 2021
and CTM is only consolidated up until the sale date with the gain reflected
separately in the consolidated statement of operations.
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 $226,000 in the three months ended July 31,
2022, compared to the three months ended July 31, 2021, primarily due to a
decrease in direct market publishing revenue of $1,132,000 due to fewer titles
being released during the period, a decrease in games revenue of $333,000, and a
decrease in digital revenue of $129,000 due to an overall decrease in sales
across all platforms, partially offset by an increase in retailer exclusive
revenue of $868,000 related to Sonic the Hedgehog, a decrease in sales returns
and discounts on book sales of $156,000, an increase in non-direct market
publishing revenue of $306,000 driven by strong Teenage Mutant Ninja Turtles:
The Last Ronin and They Called Us Enemy sales, and an increase in other revenues
of 38,000.
27
Revenues increased by $1,720,000 in the nine months ended July 31, 2022,
compared to the nine months ended July 31, 2021, primarily due to an increase in
games revenue of $1,670,000 driven by the fulfillment of the direct-to-consumer
games campaign for Batman Adventures, an increase in retailer exclusive revenue
of $1,329,000 related to Sonic the Hedgehog and Transformers, a decrease in
sales returns and discounts on book sales of $456,000, an increase in non-direct
market publishing revenue of $600,000 driven by strong Teenage Mutant Ninja
Turtles: The Last Ronin and They Called Us Enemy sales, and an increase in other
revenues of $6,000, partially offset by a decrease in direct market publishing
revenue of $1,928,000 due to fewer titles being released during the period, and
a decrease in digital sales of $413,000. Sales returns continue to improve
compared to prior year due to targeted incentives with accounts to reduce return
rates, localization of inventory management at Barnes & Noble, and COVID-19
-related pressures in fiscal 2021.
Effective March 2023, our licenses for Transformers and GI Joe titles will be
terminated. While the cancellation of the licenses for Transformers and GI
Joe are anticipated to decrease revenues by approximately $1.2 million in fiscal
year 2023, IDWP plans to mitigate the loss of revenue by enhancing our other key
licensed brands through new initiatives for Star Trek, Godzilla, Dungeons &
Dragons, and My Little Pony and an expansion of Teenage Mutant Ninja Turtles:
The Last Ronin. We expect these efforts to offset any material impact on our
gross margin from the loss of the licensed titles.
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 $140,000 in
the three months ended July 31, 2022, compared to the three months ended July
31, 2021, primarily due to an increase in publishing printing costs of $338,000,
partially offset by a decrease in printing expenses and creative costs for IDW
Games of $186,000 and a net decrease in other direct costs such as costs of
artists and writers of $12,000. IDWP's direct cost of revenues increased by
$498,000 in the nine months ended July 31, 2022, compared to the nine months
ended July 31, 2021, primarily due to an increase in printing expenses and
creative costs for IDW Games of $378,000 and an increase in publishing printing
costs of $625,000, offset by a decrease in royalty expenses of $272,000, a
decrease in publishing creative costs of $167,000, and a decrease in digital and
licensing costs of $66,000. Although costs were recognized for fulfillment of
the Batman Adventures game in the current year, future games costs will only be
recognized with individual customer orders. Royalty expense as a percentage of
sales is dependent on product and title mix as different revenue streams and
titles have different royalty rates.
Gross Margin. IDWP's gross margin for the three months ended July 31, 2022
decreased to 44.3% from 48.3% in the three months ended July 31, 2021. The
decrease is principally due to decreased direct market revenue related to fewer
released titles and increased cost related to payments to creators. Gross margin
for the nine months ended July 31, 2022 increased to 47.8% from 45.6% in the
nine months ended July 31, 2021. The increase is principally due to the
recognition of revenue for the fulfillment of the direct-to-consumer games
campaign for Batman Adventures and a decrease in royalty expenses as a
percentage of revenue.
Selling, General and Administrative. IDWP's selling, general and administrative
expenses increased by $280,000 during the three months ended July 31, 2022,
compared to the three months ended July 31, 2021. The increase was driven by
increases in marketing of $390,000, salary and benefits of $100,000, travel
expenses related to San Diego Comic Con of $122,000, software costs of $94,000
related to the recently launched website, overhead allocation of $66,000, and
other net changes of $48,000, partially offset by decreases in consulting of
$282,000 and severance of $258,000. The increase in salary and benefits was
comprised of an overall increase of $536,000 offset by a $436,000 employee
retention credit ("ERC") as a result of the Coronavirus Aid, Relief and Economic
Securities Act ("CARES Act") recorded as a reduction in payroll tax expense.
IDWP's selling, general and administrative expenses increased by $679,000 during
the nine months ended July 31, 2022, compared to the nine months ended July 31,
2021. The increase was driven by increases in marketing of $456,000, software
costs of $237,000, shipping and direct-to-consumer costs of $203,000, travel and
entertainment expenses of $129,000, overhead allocation of $53,000, and other
net changes of $12,000, offset by decreases in severance of $218,000, consulting
expenses of $126,000, and salary and benefits of $67,000. The decrease in salary
and benefits was comprised of an overall increase of $369,000 offset by a
$436,000 ERC as a result of the CARES act recorded as a reduction in payroll tax
expense.
As a percentage of IDWP's revenues, selling, general and administrative expenses
in the three months ended July 31, 2022, were 52.3% compared to 46.4% in the
three months ended July 31, 2021, and 48.4% in the nine months ended July 31,
2022, compared to 49.2% in the nine months ended July 31, 2021.
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 July 31, 2022, increased by
$1,159,000 compared to the three months ended July 31, 2021. Revenues for the
three months ended July 31, 2022, include revenues from the full delivery of
Surfside Girls of $1,149,000 and revenue from two optioned projects of $10,000.
IDWE revenues for the nine months ended July 31, 2022, decreased by $1,437,000
compared to the nine months ended July 31, 2021. Revenues in the nine months
ended July 31, 2022, included revenue recognized due to the full delivery of
Locke & Key season two in an amount of $4,200,000, revenue from the full
delivery of Surfside Girls of $1,149,000, the French-Canadian license received
for V Wars of $119,000, and revenue from two optioned projects of $10,000. In
the nine months ended July 31, 2021, revenues included recognition from
delivered episodes from Wynonna Earp of $3,433,000, tax credits for V Wars and
October Factionof $3,331,000, foreign receipts from Dirk Gently of $114,000 and
other income of $37,000.
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 July 31, 2022, decreased by
$219,000 compared to the three months ended July 31, 2021. The amortized
television costs for the three months ended July 31, 2022, included full
delivery of Surfside Girls of $100,000, executive producing fees of $200,000,
inventory write offs of $87,000, residuals of $76,000, and agency commission
fees of $5,000, offset by cost recoupment from Wynonna Earp of $382,000. The
amortized television costs for the three months ended July 31, 2021, included
cost refinements from Wynonna Earp of $305,000.
Direct costs of revenues for the nine months ended July 31, 2022, decreased by
$6,148,000 compared to the nine months ended July 31, 2021. The amortized
television costs for the nine months ended July 31, 2022, consisted of delivered
episodes from Locke & Key season 2 of $999,000, full delivery of Surfside Girls
of $100,000, executive producing fees of $200,000, cost refinement from October
Faction and V Wars of $78,000, inventory write offs of $242,000, residuals of
$367,000, and agency commission fees of $5,000, offset by cost recoupment from
Wynonna Earp of $382,000. The amortized television costs for the nine months
ended July 31, 2021, included delivered episodes of Wynonna Earp of $4,924,000,
impairment charges of $2,065,000, cost refinements from October Faction and V
Wars of $728,000, and other costs of $40,000.
IDWE's gross margin for the three months ended July 31, 2022, was 92.6% compared
to 0% for the three months ended July 31, 2021. IDWE's gross margin for the nine
months ended July 31, 2022, was 70.6% compared to negative 12.2% for the nine
months ended July 31, 2021. These gross margin figures are aligned with the
explanations provided for revenues and direct costs of revenues.
Selling, General and Administrative. Selling, general and administrative
expenses decreased by $511,000 during the three months ended July 31, 2022,
compared to the three months ended July 31, 2021. The decrease was driven by
decreases in salary and benefits of $333,000, consulting expenses of $117,000,
recruitment fees of $64,000, overhead allocations of $25,000, and other net
changes of $25,000, offset by increases in non-cash compensation of $53,000. The
decrease in salary and benefits included a $87,000 ERC as a result of the CARES
act recorded as a reduction in payroll tax expense.
Selling, general and administrative expenses decreased by $809,000 during the
nine months ended July 31, 2022, compared to the nine months ended July 31,
2021. The decrease was driven by decreases in consulting costs of $396,000,
legal fees of $162,000, marketing of $107,000, salary and benefits of $349,000,
recruitment fees of $154,000, professional services of $75,000 and other net
changes of $68,000, offset by increases in overhead allocation of $357,000, and
non-cash compensation of $145,000. The decrease in salary and benefits included
a $87,000 ERC as a result of the CARES act recorded as a reduction in payroll
tax expense.
29
As a percentage of IDWE's revenues, selling, general and administrative expenses
in the three months ended July 31, 2022, was 87.7% and 63.9% in the nine months
ended July 31, 2022 compared to 62.3% in the nine months ended July 31, 2021.
IDWE recognized $0 revenue in the three months ended July 31, 2021.
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 $83,000 during the three months ended July 31, 2022,
compared to the three months ended July 31, 2021. The decrease was driven by
decreases in salary and benefits of $105,000, consulting expense of $15,000, and
other net changes of $9,000, offset by an increase in non-cash compensation of
$33,000 and shareholder relation fees of $13,000. The decrease in salary and
benefits included a $42,000 ERC as a result of the CARES act recorded as a
reduction in payroll tax expense.
Selling, general and administrative expenses increased by $247,000 during the
nine months ended July 31, 2022, compared to the nine months ended July 31,
2021. The increase was driven by increases in salary and benefits of $228,000
and shareholder relation fees of $76,000, offset by decreases in legal fees of
$45,000, and other net changes of $12,000. The increase in salary and benefits
was comprised of an overall increase of $270,000 offset by a $42,000 ERC as a
result of the CARES act recorded as a reduction in payroll tax expense.
Consolidated net loss IDW Media Holdings, Inc.
(in thousands) Change
Three months ended July 31, 2022 2021 $ %
Loss from continuing operations $ (768 ) $ (2,082 ) $ 1,314 63.1 %
Interest expense, net
- (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 $1,314,000 in the three
months ended July 31, 2022, compared to the three months ended July 31, 2021,
due to increased operating income from IDWE of $1,890,000 and a decrease in
corporate overhead of $82,000, offset by increased operating losses from IDWP of
$658,000. These changes are more fully described in the separate segment
analyses above.
Loss from operations decreased by $5,740,000 in the nine months ended July 31,
2022, compared to a loss from operations in the nine months ended July 31, 2021,
due to increased operating income from IDWE of $5,521,000 and a decrease in
operating loss from DWP of $469,000, offset by an increase in corporate overhead
of $250,000. These changes are more fully described in the separate segment
analyses above.
Interest (expense) income, net. Interest income decreased by $138,000 in the
nine months ended July 31, 2022, compared to the nine months ended July 31, 2021
due to interest income from CRA tax credits received in the nine months ended
July 31, 2021.
Other (expense) income, net. Other income decreased by $1,223,000 in the three
months ended July 31, 2022, compared to the three months ended July 31, 2021 and
by $1,204,000 in the nine months ended July 31, 2022, compared to the nine
months ended July 31, 2021 due to PPP loan forgiveness received in the nine
months ended July 31, 2021.
Loss from discontinued operations, net. Loss from discontinued operations was $0
for the nine months ended July 31, 2022, compared a loss of $1,280,000 for the
nine months ended July 31, 2021, respectively, due to the sale of CTM which
resulted in CTM no longer being consolidated with the Company as of February 15,
2021.
Gain on sale of discontinued operations decreased by $2,132,000 in the nine
months ended July 31, 2022 compared to the nine months ended July 31, 2021, as a
result of the sale of CTM.
Liquidity and Capital Resources
General
At July 31, 2022, we had cash and cash equivalents of $10,249,000 and working
capital (current assets in excess of current liabilities) of $18,108,000.
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 July 31, 2022, which includes proceeds from the
offering closed on August 6, 2021, will be sufficient to sustain our operations
for at least the next twelve months following the date of this report.
We satisfy our cash requirements primarily through cash provided by the
Company's operating and financing activities.
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