Quarterly report [Sections 13 or 15(d)]

Segment Reporting

v3.26.1
Segment Reporting
 3 Months Ended
Mar. 31, 2026
Segment Reporting [Abstract]  
Segment Reporting

Note 21: Segment Reporting

 

ASC Topic 280, Segment Reporting, establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker (“CODM”), or group, in deciding how to allocate resources and assess performance.

 

Our Chief Executive Officer, as the CODM, organizes our company, manages resource allocations and measures performance among two operating and reportable segments, which were identified based on the nature of the products and services offered:

 

• Content Production and Distribution segment includes the operations of Kartoon Studios, Inc, Mainframe Studios, and Frederator Studios. These entities are aggregated due to their similar economic characteristics, nature of products and services, production processes, customer types, and distribution methods. This segment is focused on the creation, production, and distribution of animated and live-action content, as well as licensing and royalty revenue from intellectual property.
     
• Media Advisory and Advertising Services segment includes the Beacon Media Group and the Beacon Communications Group. These entities provide media advisory and advertising services and marketing services.

 

The Company’s CODM decides on resource allocation predominantly based on the annual budget and forecasting process. The CODM considers budget-to-actual variances on a periodic basis when making decision about allocating resources to the segments.

 

The CODM uses revenue and net income (loss) to evaluate the profitability and performance of each operating segment, because it provides insight to operational leverage and other operational metrics for each segment. The CODM reviews revenue and net operating results, as allocated based on the nature of the business activity.

 

The CODM does not evaluate the operating segments using asset information and it is therefore not disclosed.

 

Segment operating expenses include operating expenses directly attributable to the segment as well as certain shared corporate administration services and other costs which are allocated to the reportable segments, such as legal expenses, human resources expenses, accounting expenses, insurance expenses, and corporate facilities expenses. Segment operating expenses exclude certain non-recurring items and other costs, such as interest expense, interest income, share-based compensation expense and taxes.

 

The following table presents the revenue and net earnings within the Company's two operating segments (in thousands):

               
    Three Months Ended March 31,  
    2026     2025  
Total Revenues:                
Content Production and Distribution   $ 6,439     $ 8,637  
Media Advisory and Advertising Services     799       867  
Total Revenues   $ 7,238     $ 9,504  
                 
Net Loss:                
Content Production and Distribution   $ (6,009 )   $ (6,026 )
Media Advisory and Advertising Services     (356 )     (500 )
Total Net Loss Attributable to Kartoon Studios, Inc.   $ (6,365 )   $ (6,526 )

 

Geographic Information

 

The following table provides information about disaggregated revenue by geographic area (in thousands):

               
    Three Months Ended March 31,  
    2026     2025  
Total Revenues:                
United States   $ 3,978     $ 4,726  
Canada     892       3,026  
United Kingdom     2,351       1,712  
Other     17       40  
Total Revenues   $ 7,238     $ 9,504  

 

Additional considerations include the use of segment-level budgets and forecasts created by Mainframe Studios, Frederator and Kartoon Studios at the entity level. The additional financial information prepared by the segment managers is discussed at length in meetings with the CODM. The Company determines that the revenue information reviewed by the CODM, combined with the financial information discussed with the segment managers is sufficiently detailed to allow the CODM to assess each component’s performance and make resource allocation decisions. Kartoon Studios, Frederator and Mainframe Studios are separate entities, although according to ASC 280-10-50-11 all criteria are met in order to present results in aggregation.

 

When evaluating the Company’s performance and making key decisions regarding resource allocation, the CODM reviews several metrics included in net income or loss, which also include the following:

                       
    Three Months Ended March 31, 2026  
    Content Production and Distribution     Media Advisory and Advertising     Total  
                   
Revenues   $ 6,439     $ 799     $ 7,238  
                         
Less Operating Expenses:                        
Selling, Marketing and Direct Operating Costs     4,837       72       4,909  
General and Administrative Expenses     3,163       1,059       4,222  
Segment results:   $ (1,561 )   $ (332 )   $ (1,893 )
                         
Reconciliation of net (loss) income:                        
Depreciation Expense   $ 676     $ 43     $ 719  
Interest Expense     233       –       233  
Share-Based Compensation     191       –       191  
Other     3,388       (19 )     3,369  
Net Loss Attributable to Non-Controlling Interests     (40 )     –       (40 )
                         
Net Loss   $ (6,009 )   $ (356 )   $ (6,365 )

 

                         
    Three Months Ended March 31, 2025  
    Content Production and Distribution     Media Advisory and Advertising     Total  
                   
Revenues   $ 8,637     $ 867     $ 9,504  
                         
Less Operating Expenses:                        
Selling, Marketing and Direct Operating Costs     6,791       79       6,870  
General and Administrative Expenses     3,674       1,266       4,940  
Segment results:   $ (1,828 )   $ (478 )   $ (2,306 )
                         
Reconciliation of net (loss) income:                        
Depreciation Expense   $ 639     $ 47     $ 686  
Interest Expense     128       –       128  
Share-Based Compensation     87       –       87  
Other     3,409       (25 )     3,384  
Net Loss Attributable to Non-Controlling Interests     (65 )     –       (65 )
                         
Net Loss   $ (6,026 )   $ (500 )   $ (6,526 )

 

In evaluating segment expenses, the CODM primarily focuses on cash operating costs and budget-to-actual variances, as these measures are most relevant to assessing operating performance and making resource allocation decisions. All other segment items included in net income or loss are reported on the consolidated statements of operations and described within their respective disclosures.