DreamWorks Animation shares are up about 5.5% post-market after it delivered a mixed, but for the most part upbeat, Q3 earnings report. The studio generated $11.9 million in net income, +18.5% vs. the period last year, on revenues of $180.9 million, +17%. Revenues were short of the $182.7 million that analysts forecast. But earnings per share, at 14 cents, were well ahead of projections for 8 cents.
“Driving the Company’s third-quarter results is the blockbuster performance of How To Train Your Dragon 2, which has reached over $615 million at the worldwide box office to become the highest-grossing animated film of the year,” CEO Jeffrey Katzenberg says.
Dragon accounted for $74.2 million in revenue for the quarter – a little more than half of the $142.4 million in revenues for the feature film segment which also had a gross profit of $64.3 million. Turbo added $12.7 million in revenues while The Croods brought in $1.8 million, and Rise Of The Guardians contributed $3.5 million. Library titles accounted for $50.2 million.
Classic Media, the Netflix show Turbo F.A.S.T., and DreamWorks Dragons: Riders Of Berk on Cartoon Network helped the Television segment generate $14.3 million in revenue with $2.3 million in profit. Consumer products had $12.1 million in revenues and $4.2 million in profit.
We’ll live blog the company’s quarterly conference call with analysts which starts at 1:30 PT/4:30 ET. Check it out below.
Hi everyone. The conference call is about to begin. CEO Jeffrey Katzenberg kicks it off.
It’s hard to hear Katzenberg. Sounds like he’s nowhere near the microphone. But he says he’s upbeat about the upcoming The Penguins of Madagascar which debuts next month
Pres. Ann Daly takes over for now. The next few films will cost $132 million apiece to produce, but upcoming films will average $125 million. “We are committed to remaining flexible on the release dates for each film.”
Dragon accounted for about a third of consumer products revenue for Q3. Penguins should generate $8M in total revenue. In Q4 plans to open 4 Dream Places — the mall-based, high-tech Santa greeting experience. But DWA is licensing it, and will collect fees. Consumer products tracking ahead of last year.
AwesomenessTV averages 800M monthly views, and 114M subs. And Netflix just ordered a series for 2015 based on Classic Media’s Richie Rich.
Now CFO Fazal Merchant is talking, but I doubt anyone can hear what he’s saying.
TV revenues next year will be in mid $200M range. Can’t hear what else he’s saying.
Sounds like they’re fiddling with the mic. DWA paid $3M in income taxes in the quarter. For the year the tax rate will be in the mid 20% range.
Katzenberg is back. Says he won’t talk about the acquisition discussions with Softbank.
Katzenberg: “We remain bullish about our diversification efforts.” Television will grow, as will consumer products. “This business can now bring value to DreamWorks 365 days a year.” Location-based businesses can grow to “significant size” over the next year and a half. He also talks up AwesomenessTV and opportunities in China. And with films they’re talking about “focusing on playability, marketability, and the availability of high-quality release dates.”
Q&A begins. Katzenberg says Richie Rich will be a “high-quality show.”
Asked about film production costs, Katzenberg says the $125 million target is “fully competitive.” But it should come down as the company explores “unique ways of making movies that really change meaningfully how we’re going about it.”
One of the things we couldn’t hear earlier: DWA just took an additional $2 million write-down on Turbo due to softness in the international markets.
On film marketing, Katzenberg says “we’ve actually had some meaningful reduction in costs through the operation at Fox. They have actually made a number of improvements in our spend.… Our audience is primarily kids and moms – we have not yet found a substitute for linear, traditional television. It’s still the most powerful way” to reach likely ticket buyers. It reaches about 90%.
Asked how many episodes DWA is due to produce for its TV series, Daly says each can range from 50 to 78 over three years. Most of the series have a three season run.
International theatrical box office revenue splits are in the low 40% range, Katzenberg says. “There’s no real change in that including China in the mix.”
Katzenberg says that CFO Merchant will repeat his presentation at the end of Q&A because no one could hear it.
For 2016 and 2017 Katzenberg says “we continue to look at our schedule in the competitive marketplace and remain flexible in the release of these movies and the dating of these films. You can look at our schedule as the intent of the moment. Every time something happens in the marketplace we are going to respond to that the most offensive way that we can to protect the performance of those films.” Marvel just announced some of its release dates and DWA plans to study it to see what adjustments it needs to make.
He recognizes though that films like Trolls also need to be timed to maximize consumer products sales. He adds that he’s not nervous about DWA’s original productions.
He recognizes though that films like Trolls also need to be timed to maximize consumer product sales. He adds that he’s not nervous about DWA’s original productions.
Daly says “we are most enthusiastic” about the first week of electronic sell through sales for Dragon 2. She says the platform is “a very good thing” for home entertainment.
Finally – a question about the SEC investigation into DWA’s write-down for Turbo. Katzenberg won’t answer. “We’ll move on to the next one.”
Daly says that when you factor out a transaction last year related to classic Batman rights and fees collected for Oriental DreamWorks, year-to-date consumer products is tracking ahead of last year both in revenue and gross profits.
Katzenberg says that DreamWorks’ relationship with Fox is “not contentious at all. We have an ongoing, running collaboration with them and they’ve been absolutely fantastic… We haven’t had a single conflict.”
Question period is over and CFO Merchant will repeat his presentation, which nobody could hear earlier.
That Turbo write down was $2.1 million and comes from softness in international TV markets as well as some consumer product and distribution channels. In addition, Peabody & Sherman remains in an “unrecouped position” — meaning Fox, which gets paid first, is still collecting its distribution fees — but it should be recouped in 2015.
And that’s that. Thanks for joining us.
