IDW Media Holdings, Inc. ($IDWM)

Greetings. Welcome to the IDW Media Holdings First Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] Davidi Jonas, CEO; and Andrew DeBaker, CFO, will be available to answer 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 statements 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 that 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.

Thank you. Hello, and thank you for joining today's call. I am Andrew DeBaker, Chief Financial Officer here at IDW. While we typically move directly into the questions and discussion, we thought it would be helpful to begin with a brief overview of the quarter and share a few perspectives on how we see the remainder of the year developing. The first quarter started strong across the board. Revenue increased 13% year-over-year with growth across comics, books, digital, royalties and direct-to-consumer channels, while returns actually declined compared to the prior year. We attribute part of the decrease in returns and the overall strength in revenue to a change in Amazon's purchasing patterns. As Amazon continues transitioning to smaller regional distribution centers, it has moved towards a more just-in-time inventory model. This has resulted in a shift in their holiday purchasing from September and October, which is our Q4 to November and December, which falls into our Q1. We expect this buying pattern to persist, although we don't really anticipate any material impact on overall annual sales. In fact, as Amazon carries less inventory than in prior years, the risk of future returns is likely reduced. Our Q1 included several new titles that meet expectations. TMNT # 13, which included a new creative team led by writer Gene Yang. TMNT versus Godzilla # 1, and our latest volume of Sonic The Hedgehog trade paperback. We also saw strong performance in our backlist titles, including 2 of our perennial favorite, TMNT: The Last Ronin, and They Called Us Enemy, both which had double-digit increases year-over-year. This strength in backlist sales also contributed to a strong gross margin of 45% for the quarter. IDW Publishing achieved a 47% gross margin which is actually its highest Q1 margin since 2022. We are being disciplined in managing our creative and printing costs. Our printing costs, especially though, continue to face upward pressure due in part to the ongoing conflict in the Middle East affecting global shipping routes. As with most companies, we are working closely with our logistics and shipping partners to assess the potential impact and to take any steps necessary to maintain our publishing schedules while minimizing cost increases where possible. Operating expenses also continues to decline as the personnel changes implemented over the past several years have taken full effect and our teams continue to find ways to cut costs in areas like marketing, IT and rent and utilities. Discounting the impact the Diamond Comic Distributors bankruptcy had on our Q1 2025. This quarter's operating expenses actually declined more than 6% year-over-year. As a result of all of this, we entered the remainder of the year with positive net income compared to the loss we've seen in many past Q1s. So we're encouraged by the progress the company has made over the past several years and are beginning to see the results of the strategic and operational improvements we've implemented. We also have several exciting initiatives either recently launched or upcoming. These include our Godzilla RPG Kickstarter campaign, which is active right now, so you can find on kickstarter.com. It's our first campaign in more than 5 years. The launch of Rocketeer American whiskey in the next few weeks, and the recent announcement of IDW Crime, our newest imprint focused on creator-driven [ Newar ], thriller and dark mystery storytelling. We also just signed with Sanrio to create a comic universe centered on HELLO KITTY, which will launch later this year. All of this builds on the continued success of our IDW Dark imprint, which has delivered strong performance with titles such as, Beneath The Trees Where Nobody Sees, and its sequel Rite of Spring, Exorcism at 1,600 Penn, and Exorcism at Buckingham Palace, along with licensed titles, including Event Horizon and Smile. Also recently announced that Exorcism at 1,600 Penn is being adapted for film with Blumhouse, and we also have additional original and new license projects in development that we look forward to announcing and discussing with you all in the coming quarters. In short, it's a great time to be at IDW. And so with that, I will turn the call back for questions and discussion.

[Operator Instructions] Thank you. 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.