WildBrain is betting big on WildBrain Spark’s growth potential, even after implementing cost cutting measures, including furloughing some employees in that division just last month.

CEO Eric Ellenbogen (pictured) announced US$17.7 million (CAD$25 million) in financing for growth initiatives. The money is earmarked exclusively for growth capital “to fund strategic, accretive transactions across the company, with a special focus on our AVOD business, WildBrain Spark.” The money will not serve as capital for the entire business, and as such WildBrain announced several cost cutting measures only a few weeks ago. Beyond furloughing employees, the company has temporarily reduced senior management salaries by 20%, in response to the COVID-19 pandemic.

WildBrain took a big net loss this month at US$156.7 million (CAD$221.7 million), compared with last year’s Q3 2019 net loss of only US$13 million (CAD$18.4 million). The loss was due largely to a non-cash goodwill impairment of US$130 million (CAD$184.5 million). The charge was taken due to the impact on advertising revenue from YouTube’s changes to targeted ads on kids content, as well as potential effects from COVID-19. That makes the company’s year-to-date net loss US$170 million (CAD$240 million)

Revenue was down 11% in Q3 2019 reaching US$69.7 million (CAD$98.3 million), compared to last year’s US$77.9 million (CAD$110 million). The drop in revenue was mainly driven by the global distribution segment, including WildBrain Spark. Year to date revenue meanwhile, grew to US$235.7 million (CAD$332.7 million), up from US$234.7 million (CAD$331 million) last year at this time.

WildBrain Spark’s revenue was down 36% to US$6.7 million (CAD$9.5 million) in Q3 2020 versus US$10.5 million (CAD$14.9 million) the year prior. The decline is attributing this to YouTube changes to advertising on kids’ content as well as the effects of the COVID-pandemic.

WildBrain Spark in Q2 experienced a 40% year-over-year revenue dip due to YouTube changing its rules, to stop serving personalized ads on content “made for kids.” Despite these declines, Ellenbogen is placing a lot of stock in the AVOD, saying that it’s “not only a rich source of emerging IP and promotion” but also a “beneficiary of advertising dollars migrating from linear to non-linear TV.” In some good news for the network, WildBrain Spark’s views grew 19% to over 10.3 billion in Q3 2020 versus Q3 2019, and its year to date views grew 42% to 59.1 billion. Watch times are up 71% as well throughout April, according to Ellenbogen. (This falls in line with what many in the YouTube space are reporting as a time of big views, but very little advertising dollars. Distributor Jetpack, for instance, said that it has seen a drop in revenue and started uploading additional content from its back catalogue to offset its channel’s losses.)

In Q3 2020 distribution revenue (excluding WildBrain Spark) was US$11 million (CAD$15.6 million) compared with US$14.7 (CAD$20.7 million) in Q3 2019. WildBrain is attributing the fluctuations in revenue to timing of deals.

Over on the production side, Ellenbogen says WildBrain’s studio is producing at over 95% capacity, including its new Johnny Test series for Netflix, which Kidscreen announced last week. The reboot has a refreshed look and will include an interactive special.

However, he says, global pullbacks in advertising due to the COVID-19 pandemic affected revenue in late Q3 and those changes are anticipated to affect WildBrain’s revenue into fiscal 2021.