Xilam Animation: Navigating Stormy Waters Toward a Content-Driven Renaissance

The animation industry is in flux. Streaming platforms, once the engines of growth, have shifted their priorities toward profitability over content expansion. For Xilam Animation—the French studio behind Oggy and the Cockroaches, Zig & Sharko, and The Doomies—this pivot has created headwinds. Yet, beneath the surface of its first-half 2025 revenue decline lies a strategic recalibration that could position it for a resurgence. Let's dissect the challenges, the shifts, and the undervalued opportunities.

The Revenue Decline: A Necessary Trade-Off

Xilam's first-half 2025 revenue dropped to €4.2 million, a 64% slide from the same period in 2024. The pain is stark: sales from new productions collapsed to €2.0 million, down from €9.3 million in H1 2024, as international streaming platforms scaled back orders. This reflects a broader industry trend, with studios like Xilam caught in the crossfire of streaming's profit-first ethos.

But the numbers mask a deliberate shift. Xilam has moved aggressively toward a proprietary production model, where it retains ownership of content rather than relying on commissioned service work. In H1 2025, proprietary projects contributed 65% of revenue (up from 29% in H1 2024). This pivot, though painful in the short term, aligns with a long-term strategy to build a sustainable revenue stream through IP ownership.

The Financial Foundation: Resilience Amid Decline

Despite the top-line slump, Xilam's balance sheet remains robust. It entered 2025 debt-free, with €7.3 million in cash and a net financial cash position of €1.6 million. Free cash flow hit €7.9 million in 2024, a testament to cost discipline. The company's decision to write down €28 million in 2024—primarily tied to underperforming titles—was a non-cash adjustment that cleared the books for recovery.

The catalog's staying power is another pillar of resilience. While H1 2025 catalog sales were flat at €2.2 million, they have historically surged in the fourth quarter due to AVOD advertising deals and licensing renewals. Flagship franchises, which account for 66% of catalog revenue, continue to draw 8 billion YouTube views annually. This library, now valued at €51 million, is a moat against competitors.

The Growth Catalysts: Projects and Partnerships

Xilam's pipeline is its greatest hope for recovery. In 2025, it is advancing high-profile projects such as:
- Lucy Lost: A family feature film adaptation of Michael Morpurgo's novel, showcased at Annecy with strong industry buzz.
- Piggy Builders: A preschool series targeting international co-productions.
- The Doomies: A dark comedy for Disney+, already greenlit for a second season.

These projects are designed to leverage its creative strengths while reducing reliance on volatile service work. Partnerships, such as the Oggy renewal with Sony Pictures Networks India and the TF1-backed Turbo Twins, further diversify revenue streams.

Valuation: A Discounted Opportunity

At a €14.18 million market cap (as of July 2025), Xilam trades at a significant discount to its assets. Its catalog alone is worth over €50 million, yet the stock price reflects only €2.60 per share—a 42% drop year-over-year. This disconnect suggests the market is pricing in prolonged industry stagnation, but it ignores Xilam's strategic progress:

1. Lower Risk Profile: Debt-free with ample liquidity.
2. IP Dominance: Flagships have decades of global appeal.
3. Cost Efficiency: Fixed costs reduced by €3 million annually.

Risks and Considerations

• Streaming Volatility: U.S. platforms may delay recovery, prolonging the downturn.
• Catalog Dependency: Over 60% of revenue still ties to existing IP; new projects must succeed.
• Regulatory Shifts: Moving to Euronext Growth Paris could affect liquidity.

Investment Thesis: A Contrarian Play

Xilam is a value-driven contrarian opportunity. The stock's decline has priced in worst-case scenarios, while the company's pivot to proprietary content and catalog strength position it to rebound once streaming demand stabilizes. Key catalysts include:
- Deliveries of Piggy Builders and The Doomies in late 2025.
- Licensing deals for Lucy Lost in early 2026.
- Catalog sales surging in Q4 2025 (as seen in 2024).

Recommendation: For investors with a 2–3 year horizon, Xilam offers asymmetric upside. The current valuation leaves little room for downside, while recovery in 2026 could re-rate the stock significantly. Monitor for Q3 2025 earnings and renewed streaming partnerships as near-term triggers.

In conclusion, Xilam's challenges are real but temporary. Its strategic shift, coupled with an undervalued asset base, makes it a compelling bet on animation's next chapter—one where IP ownership and creative resilience triumph.