IDW Media Holdings reported a loss for its fiscal Q4 and year ended October 31, and revealed that Penguin Random House, which distributes IDW Publishing titles to both the direct market and book channel, has told IDW to prepare for losses if PRH’s receivable from Diamond Comic Distributors is completely or partially uncollectable.
In a note to the annual report, IDW explained the receivables situation. “PRH is a creditor of Diamond, including related to IDW products distributed by PRH through Diamond. PRH paid IDW for IDW products ordered by Diamond, and, as a result of Diamond’s bankruptcy, PRH may not be able to collect all or any of the corresponding amounts owed to PRH by Diamond. PRH has informally indicated to IDW that their understanding of the relevant terms of the contract between IDW and PRH provides that the significant majority of such uncollected amounts will be debited by PRH from future payments from PRH to IDW.”
Penguin Random House is the largest unsecured creditor in the Chapter 11 bankruptcy of Diamond Comic Distributors (see “Diamond Files“); it was owed $9,202,181 as of the date of filing earlier this month (“PRH is Largest“).
In its annual report, IDW said that PRH was 80.3% of its trade receivables at fiscal year-end last October 31, or around $5 million. IDW said it has received no formal notice from PRH, and that it has not completed its own contract analysis to see if it agrees that PRH can pass through receivables losses.
Regardless, the situation was dangerous enough that auditors gave IDW a “going concern” opinion, stating that “…substantial doubt exists about the Company’s ability to continue as a going concern.” For its part, IDW stated that it expects cash from operations and cash on hand will be sufficient to support operations for at least the current fiscal year, pointing to positive operating cash flow in fiscal 2024, and staff reductions conducted in April 2023, April 2024, and August 2024 that have allowed it to cut expenses.
IDW did cut its losses for the fiscal year, ending with a $1.4 million loss, a big improvement over the $4.9 million loss in the previous year. The quarterly loss was $388,000, compared to a $496,000 profit in the year ago quarter.
Sales were near flat for the year, at $26.4 million vs. $26.6 million in fiscal 2023. Downward sales pressure was attributed to higher returns, the ending of games revenue, and a decline of digital sales; partially offset by sales increases in both the book channel and direct market.
While the Diamond receivable risk is significant, IDW had $7.4 million in cash at the end of its fiscal year, and has shown an ability to raise additional equity financing to fund losses in the past.
Source: ICV2
