IDW Media Holdings, Inc. (IDWM) Earnings Call Transcript & Summary

Greetings. Welcome to IDW Media Holdings Second Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] Davidi Jonas, CEO; and Andrew DeBaker, CFO, will be available to answer your questions and provide company insight. Please note this conference is being recorded. Before we begin, I'd like to read you the company's abbreviated safe harbor statement. I'd like to remind you that statements made during this conference call concerning future revenues, results from operations, financial position, markets, economic conditions, product releases, partnerships and any other statement that may be construed as a prediction of future performance or events are forward-looking statements, which may involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. Non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. I'd now like to turn it over to Andrew DeBaker, CFO, for opening remarks.

Hello, and thank you for joining today's call. I am Andrew DeBaker, CFO of IDW Media Holdings. We're very pleased to share our continued positive momentum, I'd say, across our financial performance. The second quarter sustained a robust start to our fiscal year with strong execution across the board. First half fiscal year revenue increased 13%, rising by $1.5 million. This growth was broad-based across nearly every category. Our book channels were anchored by core Teenage Mutant Ninja Turtles and Sonic The Hedgehog collections. And perennials like Teenage Mutant Ninja Turtles: The Last Ronin, March and They Called Us Enemy continue to perform exceptionally well, alongside surging interest in our IDW Dark fan favorite Beneath the Trees Where Nobody Sees. In fact, our comic sales for the first 6 months of the fiscal year reached their highest level since fiscal 2022. This trajectory is driven by a fantastic fan engagement with our current Teenage Mutant Ninja Turtles series, led by writer Gene Yang, and the success of our IDW Dark titles, including Beneath the Tree, Rite of Spring, the sequel, Smile, A Quiet Place and Exorcism at Buckingham Palace. We are also seeing excellent traction in our direct-to-consumer and licensing channels. idwpublishing.com website sales grew 20% year-over-year, and meanwhile, royalty revenue surged 86% over last year, fueled by high demand crossover events like Teenage Mutant Ninja Turtles versus Mighty Morphin Power Rangers and Teenage Mutant Ninja Turtles versus Master of the Universe. Turning to margins, sustained backlist strength has helped elevate our year-to-date gross margin to 43%, marking our strongest performance since fiscal '23. This margin includes a proactive inventory cleanup that we did here in Q2 as we concluded our My Little Pony license and resolved some slower-moving legacy artist addition titles. Macroeconomic factors, particularly the ongoing instability in the Middle East continue to pressure global shipping costs. Our operations team remains highly focused on balancing competing priorities, reprint efficiencies with disciplined inventory management. On the operating expense side, we continue to demonstrate rigorous cost control. Year-to-date operating expenses were flat year-over-year when normalizing for last year's Q1 Diamond Comic Distributors' bankruptcy impact. In fact, adjusted operating expenses represents an all-time low for IDW Media Holdings, both in absolute dollars and as a percentage of revenue. Despite increasing inflationary pressures, we are successfully balancing quality with operational efficiency. As a result of these efforts, our net income achieved breakeven for the first half of the year. This represents our strongest first half financial position since fiscal 2022 when IDW Entertainment recognized revenue for Locke & Key Season 2. We expect this momentum to accelerate and our upcoming release slate is incredibly strong. In July, we released Teenage Mutant Ninja Turtles #20, a historic landmark as our 300th Teenage Mutant Ninja Turtles issue since its first release 15 years ago, and has already exceeded our most optimistic preorder projections. July also brings Sonic The Hedgehog versus Godzilla #1, followed by Hello Kitty officially joining the IDW family with a premier issue in August. We will also expand our portfolio with several suspenseful new titles under the IDW Crime imprint. These highlights represent only our currently disclosed pipeline, and we look forward to sharing further major announcements in the coming months, including new licenses and new collaborations. So thank you for your continued partnership and trust in IDW Media Holdings. We look forward to connecting with many of you next month at Comic-Con here in San Diego. And with that, I will turn the call back to the operator to open the line for questions.

[Operator Instructions] We have reached the end of the question-and-answer session. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.