Global children’s media company Genius Brands International (NASDAQ:GNUS) stock certainly has lots of appeal and attractive qualities.
It bills its portfolio of brands as ‘content with a purpose’. Indeed, the portfolio seems to be filled with assets intended to educate children on a variety of important issues and life skills. Not only is the portfolio education-based, but also it is star-studded. It features household names like Arnold Schwarzenegger, Stan Lee, Shaquille O’Neal, Jennifer Garner, and investing legend Warren Buffett.
I won’t spell out the company’s eight brands, but you can imagine based on that diverse list of names that there is a lot of purpose-driven content which could be developed around those names.
In fact, one in particular is soaring after a meteoric start.
Stan Lee’s Superhero Kindergarten
Superhero Kindergarten is a GNUS Stock asset which debuted on Apr. 23. In that short period it has received in excess of 9 million views. The show features Arnold Schwarzenegger, voiced by Arnold Schwarzenegger and a group of children with superpowers. It is proving to be a huge hit in its early life with metrics that support serious growth.
General manager Jon Ollwerther noted that it is exceeding expectations, stating: “Network hours watched went up 941% week-over-week to 349,735 hours. Unique users went up 1,841% week-over-week to 1,858,434 uniques. New application installs went up 465.9%, as we saw growth across all viewing outlets including televisions, tablets, mobile phones, computers, and game consoles, as well as growth across all the viewing platforms of Kartoon! Channel!, including Apple, Android, Roku, Amazon, You Tube, Samsung, LG, and others”
One of the more appealing aspects of the channel is that it is free because it is ad-revenue supported. No need for a subscription.
While the start for Stan Lee’s Superhero Kindergarten is auspicious, it must be noted that competition in the children’s media sector isn’t weak by any means. Genius Brands International competes with the likes of Nickelodeon, PBS Kids, Sesame Street, and Disney (NYSE:DIS).
The company strives to create content with a purpose as its differentiating factor in order to cut through that competition. In any case, that competition affects the bottom line at Genius Brands International.
While the adoption and rapid rise of Stan Lee’s Superhero Kindergarten has undoubtedly been a positive for the company, results from the past few years have been mixed.
Revenues decreased 58% at Genius International Brands from 2019 to 2020. Of the $3.425 million decrease, $3.352 million was attributable to TV & Home Entertainment.
Expenses increased by 63% between 2019 to 2020. That means Genius brands International experienced decreasing revenues and increasing expenses in that period.
However, the company has undertaken a strategic effort to improve its cash position and its cash flows have increased vastly between 2019 and 2020. In 2019 the company saw its cash flows decrease by $2.78 million.
In 2020 it was a completely different story. It generated $98 million through the sale of common stock and closed out 2020 with over a $100 million increase in cash. While this appears to be a positive, it warrants deeper examination. Yes, the company is debt free. That much is good.
However, it went from an operating loss of $11 million before taxes in 2019, to an operating loss of over $401 million in 2020.
It would be naive to simply jump into a GNUS position simply based on the early success of some of its assets. I’m of course referring to Stan Lee’s Superhero Kindergarten. Time and earnings reports will tell what actually results from it. But there’s more to consider.
Clearly GNUS stock is a risky play. After all, it is a penny stock. Despite the evident risk I do think it is worth speculating on because it has raised cash and can continue to do so through warrants. It clearly has some strong assets and great influencers on its team.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.