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Donovan takes CEO position at DHX

Halifax-based DHX Media announced co-founder Michael Donovan is taking over as CEO. TIM KROCHAK • THE CHRONICLE HERALD
Halifax-based DHX Media announced co-founder Michael Donovan is taking over as CEO. TIM KROCHAK • THE CHRONICLE HERALD - The Chronicle Herald

Company co-founder Michael Donovan has taken over as DHX Media Ltd. chief executive officer, to go along with his role as executive chairman.

Donovan’s move, announced Monday, was taken as the Halifaxbased company continues a strategic review, including the potential sale of the children’s entertainment company.

Dana Landry indicated in the Monday news release by the company that he would be stepping down as both CEO and as a member of the board, “to pursue other projects.”

DHX also announced that former Postmedia CFO Doug Lamb has been appointed chief financial officer to replace Keith Abriel, who will be leaving the company after a short transition.

A strategic review of the company was announced by DHX in October 2017 following disappointing financial results.

More recently, the Landry-led DHX indicated the company’s second-quarter results were better and that company management would be continuing its focus on improving both revenues and cash flow, while trimming its debt load.

In the second quarter, which ended Dec. 31, 2017, DHX recorded net income of $7.4 million on total revenue of $121.9 million. In the same quarter last year, DHX had net income of $5.8 million on total revenue of $78.9 million. That indicates a 55 per cent improvement in year-over-year quarterly revenue.

The company had adjusted earnings before interest, taxes, depreciation and amortization in the quarter, which is an indication of profitability, of $32 million. In the same quarter in fiscal 2016-17, DHX reported adjusted EBITDA of $24 million.

“We delivered a second consecutive quarter of organic revenue growth in our core business, paired with strong cash flow from Peanuts,” Landry proclaimed in a company news release a couple of weeks ago.

“Our organic distribution revenue growth of 37 per cent was led by WildBrain, which grew organically by 73 per cent year over year and also from investments made in our partnership with Mattel,” Landry said at the time of the release.

“We remain on track to achieve our targeted annualized savings from the Peanuts integration and company-wide cost-reduction program. Management remains focused on growing both revenues and cash flow, as we deliver on our commitment to de-lever.'

It appears the DHX board of directors didn’t feel the same about the second-quarter results. During the first half of the 2017-18 

fiscal year, DHX had adjusted EBITDA of $54.8 million and $15.6 million net income.

In its news release, management indicated it remained on track to achieve $11 million in targeted annual synergies on Peanuts and company-wide cost reductions by the end of fiscal 2019-18.

Of the synergies, about $5 million to $6 million is expected to be realized in fiscal 2018-17.

One trouble spot may have been in productionrevenue. In the second quarter, production revenue was $26.6 million, compared with $28.1 million during the same period a year

ago. Despite the downward trajectory, management at the time suggested it was in line with a focus on selected properties, which meet a demand for original content.

During the quarter, DHX added 52 new proprietary half-hours, generating $8.6 million in revenue,while service projects accounted for revenue of $18 million.

The service pipeline continued to be strong,according to the company, including ongoing production of new episodes under the Mattel partnership, which drives revenue participationacross multiple licensing categories and generated $7.1 million in distribution revenue and consumer products royalties in

the second quarter.

“At quarter-end, we had $32.6 million invested in productions in progress, which will feed future growth opportunities in distribution and consumer products,” DHX indicated in its news release.

Charlie Brown and the Peanuts franchise continued to perform well, the company said, “providing a stable revenue stream and significant scale to our brands portfolio.”

It remains to be seen whether DHX will continue along the same path outlined by Landry or if Donovan will take the company in a new direction.


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