Posted in: Comics, Comics Publishers, Current News, IDW | Tagged: bankrupt, diamond

IDW Report: Diamond Bankruptcy Leaves "Substantial Doubt" For Future

The auditor section of IDW's annual report expresses "substantial doubt" about its "ability to continue as a going concern" in wake of Diamond Bankruptcy.

IDW Media Holdings' just-released annual investor's report includes a section that expresses "substantial doubt" on their "ability to continue as a going concern," and it's all down to the uncertainty created by Diamond Comic Distributors issuing Chapter 11 bankruptcy proceedings. IDW quit being exclusively distributed by Diamond in 2021 and went exclusive with Penguin Random House, who then subdistributed to Diamond, as did Marvel, Dark Horse, and Tokyopop, with Boom Studios to follow in April. But it appears that Penguin Random House intends to pass on any unpaid debt they have from Diamond to IDW and, possibly, the other publishers as well. Penguin Random House is the biggest creditor for Diamond, to the tune of nine million dollars. And it seems that they may want IDW and the other publishers to make up these losses out of future earnings. Which may explain Marvel's interest. In the audit section of the report, prepared by an independent auditor, it is noted that there is "Substantial Doubt About the Entity's Ability to Continue as a Going Concern," the entity being IDW, and stating;

"the accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 19 to the financial statements, the collectability of certain receivables sold by the Company's distributor are in question and the dollar amount of the receivable in question cannot be estimated at this time and has stated that substantial doubt exists about the Company's ability to continue as a going concern."

They clarify further, in the previously mentioned Note 19, stating;

"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. IDW has not received any formal written communication, or definitive claim from PRH. IDW cannot at this time assess the likelihood that PRH will seek to debit any amounts against future payments to IDW, the amount of any such potential debit or the timing of any such debits. IDW is also making its own assessment of the relevant contractual language and the rights and obligations of the parties in respect of the current situation. In light of the foregoing as of the date of this report, we are unable to determine the potential impact, however it may have a significant negative impact on our future financial results and cash position. The Company will work to minimize any impact to the extent possible."

As for the overall annual report, it notes that "At October 31, 2024, we had cash of $7,432,000 and working capital (current assets in excess of current liabilities) of $17,772,000, " and that IDWP (the publishing portion of IDW Media Holdings) had a "loss from operations" of $1.4 million in fiscal year 2024 based on revenues of $26.4 million.  This was an improvement over 2023's loss from operations of $3.9 million.

As for the immediate future for IDW and other publishers, expect those Penguin Random House contracts to be gone over with the smallest of pins. While other publisher contracts may contain different terms in regard to this situation, this may be why Marvel is seeking representation in the Diamond bankruptcy proceedings. It may also be why Image has pulled out entirely from Diamond. It is possible that the subdistribution deals may not protect the publishers.

IDW's annual report  states that this situation "may have a significant negative impact on our future financial results and cash position." But what about the other publishers? You can follow along with Bleeding Cool updates to the Diamond bankruptcy story you won't find elsewhere by checking and updating the Diamond Bankruptcy tag.

When reached for comment, IDW replied with the following statement: "We will be addressing all inquiries during our upcoming earnings call on Monday, February 3, 2025. IDW's management will host this conference call, beginning at 4:30 PM Eastern Time, specifically to engage in a Q&A session with participants."

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