Genius Brands International Inc (GNUS)

[rickn23]

Genius Brands: Investors Might Have One Last Chance To Get Out Before The Stock Crashes

https://seekingalpha.com/article/4353973-genius-brands-investors-might-one-last-chance-to-get-out-stock-crashes

This is not the first time the company has promised to make it big

Even though there's no guarantee of history repeating itself, empirical evidence can be used to gauge a measure of the quality of the management team of a company by evaluating whether they presented a true and reliable picture of new developments in the past. Below are some of the comments I found in a few shareholder letters going back to 2016.

Shareholder letter 2018 (access the document here):

There will always be a Tom & Jerry and there will always be a Mickey Mouse. There will also always be an Inspector Gadget, an Alvin and the Chipmunks, a Strawberry Shortcake and a Care Bears, four series which I produced and know well. There will also always be a Llama Llama and a Baby Genius and a Rainbow Rangers. Five years from now, people might not remember Robert Mueller, but they will certainly remember Llama Llama.

The company CEO is comparing a couple of brand names owned and marketed by Genius Brands to the likes of Tom and Jerry, which, I believe, is quite a stretch.

Shareholder letter December 2017 (access the document here):

As the Walt Disney Company--the largest purveyor of children's and family content in the world--continues to aggregate assets and consolidate its leadership position, Genius Brands International, with its rapidly growing business of kid's content and distribution, is finding itself the last oasis in the desert.

In this letter, the CEO goes on to claim that no other company in the United States other than Genius Brands has the ability to reach the entire U.S. marketplace for animated content for kids. The numbers, however, have remained flat following these claims.

Shareholder letter September 2017 (access the document here):

Yesterday morning Amazon and Genius Brands International announced that Amazon Channels will offer an exclusive kids' animation subscription streaming channel, Kid Genius Cartoons Plus!, to all 80 million+ subscribers of Amazon Prime. It is the most important transaction in the history of Genius Brands, and its value to the company cannot be overstated. The agreement between Amazon and Genius Brands is a multi-year deal, which will be offered at $3.99/month per subscriber. The launch of Kid Genius Cartoons Plus! this Thursday, September 28, is nothing short of transformational for the company.

Well, the transformation never really happened and Genius Brands continued to lose money.

Shareholder letter August 2016 (access the document here):

Despite the continuing investment in Genius' seven core kids brands and catalogue, I anticipate us to be cash flow positive on an operational basis for 2016.

No, the company never really made positive operating cash flows in 2016. The company, in fact, reported negative operating cash flows of $3.7 million in 2016 and, since then, has reported even larger amounts of negative cash flow from operations.

The list goes on. There have been many promises to make it big but Genius Brands has failed to deliver the goods time and again, which makes me err on the side of caution when it comes to the enthusiasm of the company executives regarding the launch of Kartoon Channel on June 15.