DHX Media reports higher profit, revenue; says licensing revenue to drive growth

Digital platforms like Netflix and other licensing revenues are expected to drive growth at DHX Media, the children's programming company said Friday after posting higher profits and revenue in its second quarter.

Chief executive Michael Donovan said families want content for their children when it's convenient and on the device of their choice, whether it's TV or online.

"We're the leading supplier of children's content to streaming services everywhere, including Netflix," Donovan said in an interview.

Video-sharing website YouTube is also an important customer of the Halifax-based company, which creates, sells and licenses programs such as "Caillou," "Teletubbies" and "Yo Gabba Gabba."

If you sell your content to YouTube, Donovan said, "you're automatically all over the world."

DHX Media also sells content to Apple's iTunes.

DHX Media (TSX:DHX) saw net income jump to $3.2 million in its fiscal second quarter and revenues go up by 15 per cent, helped by an increase in licensing revenue.

Donovan said the company also gets growth from its merchandising products.

"We have hundreds and hundreds, if not thousands, of licences for books, for toys, for apparel, for games, for apps, that sort of thing," he said. "The list of things you can licence would fill several pages, one of which is music."

He noted that the "Yo Gabba Gabba" live tour, which features five costumed toys-come-to-life and their friend DJ Lance Rock, is creating more interest in "Yo Gabba Gabba" sneakers for kids.

DHX Media also recently signed a toy licensing deal with Imports Dragon for its children's animation series "Johnny Test." Under terms of the deal, the toy and game distributor and manufacturer has acquired the rights to create collectible figures of the action adventure star "Johnny Test" that will launch this fall.

DHX Media is also planning a "reinvention" for the "Teletubbies" with its colorful but quiet characters such as "Tinky Winky," "Laa Laa" and "Dipsy."

Donovan said he couldn't give specifics about the "Teletubbies" update, but added that audiences have "new expectations" and that new technologies are now available such as digital 3-D.

DHX Media has about 500 employees with sales teams in Toronto and Paris and Donovan said he will add to the company's ranks this year, but wouldn't say how many employees would be hired.

The company isn't actively looking for acquisitions and expects to grow through selling and licensing content, Donovan said.

Late November, DHX bought the popular Family Channel from Bell Media, giving it a platform to create and sell more shows globally.

The $170-million cash deal for the Family Channel with Bell Media (TSX:BCE) also includes the Disney Junior channels in English and French and Disney XD. Bell agreed to sell Family and the other three channels as part of the approval process for its recent acquisition of Montreal's Astral Media, the original owner of the Family and Disney channels.

In its financial results, released after markets closed Thursday, DHX Media earned three cents per share in the second quarter. That's up from $900,000 and EPS of a penny in the same quarter last year.

Revenues increased by 15 per cent to $30.4 million, up from $26.4 million year over year.

On the Toronto Stock Exchange, DHX shares closed down 19 cents or 3.68 per cent at $4.97 on Friday.