WildBrain Ltd.

Good morning and welcome to Wildbrain's fiscal 2021 second quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question during that time, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. I'd now like to turn the call over to Nancy Chan-Palmatier, Director, Investor Relations at Wildbrain. you may begin your conference.

Thank you, Operator, and thank you everyone for joining us today. Speaking on the call today are Eric Ellenbogen, our CEO, and Aaron Ames, our CFO. Also with us and available during the question and answer session are Josh Sherba, our President, and Daniel Neith, our EVP of Finance and Chief Accounting Officer. First, we have some standard cautionary statements. The matters discussed on this call include forward-looking statements under applicable securities laws with respect to Wildbrain, including but not limited to statements regarding future investments by the company, the impact of COVID-19 on the company and its business, the business strategies and operational activities at the company, the markets and industries in which the company operates, and the future financial and operating performance of the company and its assets, including the leveraged position of the company. Such statements are based on information available currently and are subject to a number of risks and uncertainties. Actual results or events in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including the risk factors set up in the company's most recent MD&A and annual information form. Please note that all currency numbers are in Canadian dollars. For the question and answer session that will follow, we ask that each analyst keep to one question with one follow-up, so that everyone has an opportunity to ask questions. If you'd like to ask an additional question, please rejoin the queue. Please note that we are all in separate locations, so we do appreciate your patience if we encounter any lumpiness as we steer through the call. I will now hand the call over to our CEO, Eric Ellenbogen.

Thank you, Nancy. Good morning. Thanks to everyone for joining us today. Last week, we announced yet another major project, that capitalizes on our unique capabilities to manage, monetize, and grow brands across content and licensing. In partnership with Sega, we're producing a new Netflix original series called Sonic Prime, which is based on the highly popular gaming franchise Sonic the Hedgehog. Production is now underway in our Vancouver studio. This is an incredibly meaningful deal for Wild Brain. Like our Peanuts agreements with Apple, These multi-year exclusive Sonic contracts with Sega and Netflix add yet another premium project to our creative pipeline that translates into excellent visibility for contracted, high-quality earning streams for years to come. We're partners in a property that has tremendous momentum and massive consumer reach. Sonic the Hedgehog is one of the most popular entertainment brands in the world, and since its video game debut in 1991, over 1.14 billion game units have been sold and downloaded. Only last year, the theatrical feature film Sonnet the Hedgehog grossed $320 million worldwide, and it broke through a major box office milestone to become the number one grossing video game movie of all time in North America. And given the success, the sequel to the feature is already in development from producers Sega Sammy and Paramount. And we expect that our new animated series will connect with and expand the enormous global fan base for all things Sonic. I want to emphasize this is not a service project for our studio. This is a true partnership as Wild Brain and Sega will share in production, distribution, and licensing revenues. We're honored to have this partnership with Sega and believe it speaks volumes about our capabilities in managing world-class brands. We've witnessed firsthand the enduring popularity of this brand from the strong and steady global demand for our library of legacy Sonic series, which comprises 132 half hours in the Wild Brain library. We've also seen the strength of Sonic and consumer products, and we've seen that firsthand through our pre-existing licensing agency representation of Sonic across continental Europe. We expect that business to grow as we now layer on representation of Sonic Prime in that territory. This partnership is yet another example where we get all the benefits of premium content production, delivering steady-state, high-quality, predictable earnings, plus the considerable upside potential across distribution, including on our own AVOD network and in consumer products licensing. As I said to you in our last call, we have a robust pipeline of premium content, Our Sonic announcement is just a preview of further coming attractions. And like Sonic, in coming quarters, we expect to be talking to you about other activations for properties from our deep library. One of my top goals when I joined this company was turning it into a premier creative force in kids and family entertainment. And a big part of that is diving into our library and surfacing evergreen brands that have strong potential to renew and reinvent for today's audience. We're making great strides on these goals. We've turned to count an asset base that we have to build franchises, which we expect will continue to improve the value of our library. This great new content drives further high margin distribution and consumer product opportunities, opening up enormous option value across our business and our IP portfolio. Premium franchises command premium dollars across the entire value chain, and we believe Top Flight Creative, coupled with our unique capabilities to unlock and to exploit IP, will create a virtual flywheel of growth and value creation for years to come. Our unique capabilities in development, production, distribution, licensing, and audience delivery deployed against our own library are also drawing these premier partners. Another example of that is our new animated series, Go Dog Go, co-produced with DreamWorks. The series began streaming on Netflix January 26, and within a couple of days, it became a top 10 show on the platform in both Canada and the United States. This series is a case in point of doubling down on top flight creative, which is clearly resonating with audiences who are recognizing that quality on the screen. Likewise, our newest peanut series, The Snoopy Show, just premiered on Apple TV Plus last Friday and has been getting great rave reviews. And Apple... is launching a major marketing push for the Snoopy show, not only on their own platforms, but also with an extensive global advertising campaign. Just last Friday, the Peanuts gang staged a global takeover of the Apple.com website. Our studio, meanwhile, is hard at work on more original Peanuts content for Apple, including multiple family specials and season two of Snoopy in Space. In the quarter, we deployed capital from the Fine Capital Growth Fund to acquire rights that we didn't already own in the Caillou series from PBS. We perfected our rights ownership, importantly giving us control over Caillou to reach an even broader audience, including on our Wild Brain Spark network, and to increase exploitation of the property across various business areas. I've said previously that we'd invest in rounding out the IP rights in our library, and this is just one example with an enduring property that we know well. Caillou is one of the top brands in our AVOD network, And our data analytics tell us that there are opportunities to reignite and to grow this property. Turning now to our AVOD business, Wild Brain Spark. We're really encouraged by further sequential improvement as advertising revenues continue to rebound from the pressures of COVID-19 and the YouTube policy changes. In the second quarter, 21, revenue at Wild Brain Spark improved sequentially by 74%, from $8.9 million in Q1 2021, reflecting the build-out of our proprietary data analytic tools, which are driving growth in multiple new revenue streams, including direct advertising sales on our own network, paid media and digital production fees, and some seasonality. These nascent revenues grew by 365% in the second quarter 21 versus 20. Now, I need to contextualize that growth. as building on a relatively small base. We're surely not expecting to see triple-digit growth every quarter, but the growth that we're experiencing shows that our investments are starting to pay off, and so we'll continue to make those investments. We know the opportunity is big and it's burgeoning, and we're in high gear to build out our teams and to expand our service offerings to both grow and monetize our engaged audience. We're highly focused on benefiting from the secular shift in ad dollars from linear to digital. The tide continues to rise as these dollars shift, and to capture as much of this revenue as we can, we're creating a standby. I'm sorry, technical difficulty. So further to that, our network offers advertisers an enormous scale plus enormous breadth and a variety of safe content. And we believe our competitive advantage lies at the intersection of this massive advertiser-friendly network and our pioneering capabilities in proprietary data analysis. An important variable for monetizing content is watch time. And that's a metric that tells us how much time people spend watching our content on YouTube. The more time people spend watching our content, the more ads we can serve. In Q2, for example, watch time increased 15% versus Q2 last fiscal to 59.7 billion minutes. Kids watching content on our platform spent six minutes and 16 seconds on average per view, which was up 20% from Q2 2020. and viewership remains strong at 9.5 billion views in Q221. Our direct ad sales efforts are benefiting from a shift in family viewing patterns to connected TVs, which accelerated during the pandemic. Households are increasingly using connected TVs to watch ad-supported streaming services like Wild Brain Spark on YouTube. This important trend was confirmed by our commission research report, titled Making Screen Time, Family Time, which we released in December. We surveyed 3,000 U.S. households with kids and found that a very large percentage of parents, on the order of 90%, see free AVOD services as important video sources for their children. We also learned in that study that connected TVs are the most popular platforms for family viewing in over 60% of households. Our data further indicates a very high rate of family viewing on our trusted network where parents are watching high-quality, curated content on YouTube with their kids. And this unlocks advertising opportunities for family consumer products and brands targeted at parents and kids in a COPA-compliant environment. The majority of Wild Brain Spark's viewing in major markets is now on connected TVs. And the majority of that viewing is content that's at least 30 minutes long. That means in family events, living rooms, Wild Brain Spark is directly competing with linear television on the very screen that linear once owned. This is a trend that we're confident will accelerate the shift in advertising budgets, because as I've often said, advertising dollars follow eyeballs. We're after our fair share of the 4.6 billion of global kids advertising. And with that, I'll hand the call over to Aaron.