EXPM:KWWMF - Post by User
Post by
retiredcfon May 15, 2019 8:22am
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Post# 29749048
TD
TDCurrently have KEW on their Action Buy List with a $13.00 target. GLTA
Kew Media Group Inc.
(KEW-T) C$6.05
Back-end Loaded Again in 2019
Event
Q1/19 Results
Impact: SLIGHTLY NEGATIVE
Revenue and FCF largely matched our forecasts in Q1 (see table below), but EBITDA fell short at ($0.1) million reported (versus $2.9 million expected) and then ($1.3) million prior to IFRS 16 benefits, which would be more comparable to our estimate.
Management reiterated 2019 guidance and they remain confident that higher margin sales will materialize later in the year (mostly H2) owing to both contracted business as well as normal longer-term patterns of the mix of high margin versus lower margin revenues in the distribution segment. Note that EBITDA guidance remains on track, not including expected full-year IFRS 16 benefits of $4-$5 million, which we believe management will exclude from adjusted EBITDA going forward.
But the gross margin in distribution was disappointing in Q1 as sales were skewed towards content with third party ownership interests (versus more wholly-owned product and library sales in Q1/18). Management claims that this was expected, and in line with their full year expectations, but investors might not be thrilled about having to wait for more of the full-year EBITDA to materialize in H2.
Production gross profit was basically in-line with our estimate, and up $2.5 million y/y, which we view as reflective of the acquired contribution from Essential Quail (perhaps slightly offset by organic production growth being delayed to later in the year relative to what we saw in Q1/18).
The conversion of EBITDA to FCF was somewhat encouraging in Q1, with $6.2 million in FCF post working capital but pre net film/tv rights investments, versus our estimate of ($2.6) million. This demonstrates to us that strong sales in Q4/18 converted into cash in Q1/19, but we would not be surprised to see working capital as a use of cash again in Q2/19 as activity builds in advance of the busy seasonal period in H2.