WildBrain Ltd.

Hello and welcome to Wildbrand's Fiscal 2021 Third Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After these previous remarks, there will be a question and answer session. During this time, please press star then the number one on your telephone keypad. If you would like to withdraw a question, press the found key. I'd now like to turn the call over to Nancy Chan-Palmatier, Director, Investor Relations at Wild Brain. 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, actual and potential commercial arrangements with the company and the expected benefits from such arrangements, 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. 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 out in the company's most recent MD&A and AIF. Please note that all 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 also know 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.

Good morning, and thank you, Nancy. Thank you, everyone, for joining our call today. Our content and our brands continue to perform quite well in this third quarter, driven by a robust production slate and strength in our consumer product segment. Wild Brain Spark saw further improvement in advertising rates, as well as growing revenue in emerging areas of direct ad sales, paid media, and digital production. And looking forward to the fourth quarter of 21, we will at last have SPARC results fully comparable to Q4 a year ago, factoring in the impact of both COVID-19 and the Made for Kids changes. Of course, there's always gonna be seasonality across the year. However, we expect SPARC's revenue to grow more than 50% in the forthcoming quarter over last year's Q4. We're also realizing the strategic value of Wild Brain Spark's massive audience engagement and its reach to secure comprehensive multi-revenue stream deals with brand owners that leverage our ability to exploit IP across content, licensing, and audience delivery. And this includes a recently announced partnership with the Emoji Company to launch EmojiTown, which is a brand new digital first series and consumer products extension of the Emoji brand. On last calls that I've had with you, I've spoken about our 360-degree integrated platform across which we exploit IP in our business segments to realize multiple revenue streams. This EmojiTown partnership is an excellent example of this. For a number of years, our licensing agency, WildBrain CPLG, has successfully represented the emoji brand across Europe and the Middle East. And in fact, they added more new territories to the remit just this past January. And through this strong relationship, Wildbrain CPLG built a bridge for the emoji company to our AVOD network, Wildbrain Spark. And the result is a significantly expanded partnership comprised of new digital-first content exclusively available on WildBrain Spark and licensing rights available exclusively through WildBrain CPLG. This is one of many such holistic agreements in our pipeline. These deals fuel growth across our company and build quality, durable earning streams with meaningful consumer products upside. And they exemplify the unique value that we bring both to our own partner brands and partner brands, I should say, and the kids and family space by leveraging our industry-leading combination of creative, studio production, and brand and licensing expertise, coupled with the incredible reach across our Wild Brain Spark network. To be sure, our transactions come in all shapes and sizes. Some are like our extended Peanuts partnership with Apple TV+, announced last fall, and our Sonic Prime partnership with Sega and Netflix announced just last quarter. And others, like Emojitown, are perfect in scale for our Spark network. Some originated as commissions from our TV channels and extend into production at our Vancouver studio and wider global distribution, while others reflect opportunities around toy, gaming, or lifestyle IP. The baseline production deals are all profitable in and of themselves, and add to our business in a meaningful way. And in a creative business like ours, there's always tremendous upside, since you just never know where the next hit is going to come from. The common thread, though, across all of this is our expertise across production, distribution, and consumer products. And these capabilities allow us to execute on quality agreements, not only for our own IP, but also for IP from partners who want to access our unique strength. And this translates into long-term profit sharing, and in some cases, equity in the underlying IP. So each of our business units provides an entry point for these types of conversations and for the opportunities for cross-selling. And each of these deals contains the potential for even larger opportunities. The one-two punch of WildBrain Spark and WildBrain CPLG is driving many of these deals, offering robust AVOD distribution plus consumer products licensing. Single brand owners, by which I mean non-studio businesses, are very keen to work with us across our business units. They recognize that Wild Brain offers a unique proposition to develop and to amplify their brands and are therefore very open to putting ownership stakes on the table for us to activate those brands. This makes us unique in the market, and we're seeing major IP companies recognize us as the go-to partner for the brands. Something else, though, makes our Spark network unique, and that is its appeal for advertisers. Ours is premium content, by which I mean the thousands of hours of library programming that originated on linear television and are now available on Wildbrain Spark's network. And not unlike the successes being experienced by startup AVOD networks like Pluto and Tubi, advertisers see greater benefit in placing media against long-form content. And compared with lower-quality short-form content found elsewhere, audiences on our network are much more engaged, there's more inventory than competitors, and much less skippability. We're focused on optimizing valuable premium content that we either own outright or have partnered with leading brands and where we have upside in consumer products. We've also built out our proprietary data analysis tools, which have been instrumental in driving 185% growth for Q3 in nascent revenues from direct advertising sales, paid media, and digital production compared to a year ago, and yet untapped. are the views on YouTube Kids, where approximately 35% of our views reside in the United States. And although we saw views begin to normalize in Q3 compared to the spikes we experienced last year during the start of the COVID lockdown, average viewing time continues to increase on our network. And while there's always some quarter-to-quarter volatility as we continue to roll out new proprietary and partner content, We anticipate views will continue to increase, likely exceeding the COVID-19 peak consumption levels. And in fact, we've already begun to see this rebound in March and April. We're building out and leveraging our expertise in ad sales, ad tech, data analytics, digital content production, and brand amplification to exploit the sizable opportunity afforded by Wildbrain Sparks' massive audience through deals like Emojitown and others that we have in the pipeline so please watch for more deals to come. Turning to consumer products, we saw continued strength in Q3, with revenues growing 12% in that segment, driven by peanuts, which experienced strong royalties in multiple categories, as well as increased commissions from WildBrain CPLG's broadening portfolio of clients and territories. And to help you all better understand how the economics of this division work, Not unlike our production business, we do have a lag between signing the deals and the recognition of revenues. But with that said, we have good visibility on an acceleration in this sector as we move into fiscal 22. I'd also like to note that this quarter's growth for Peanuts products coincided with the launch to rave reviews of the Snoopy show on Apple TV Plus in February. Apple amplified the brand with a truly mammoth marketing campaign for the series launch that was pretty hard to miss, including television, digital, social media, in-store, and out-of-home, meaning things like billboards and even bus shelters here in New York City. Peanut's content is clearly resonating with Apple's audience, given Apple's previously announced order for Season 2 of Snoopy in Space. as well as a slate of new family specials now in the works. As we continue to roll out new Peanuts content in the years ahead, we are highly confident that the Apple TV Plus partnership will drive greater and greater awareness and indeed fondness for the Peanuts brand globally, which in turn will continue to drive strong growth in consumer products licensing across new audiences and new territories. The Peanuts-Apple partnership is a perfect example of how content can support a brand's overall presence in the consumer marketplace, which is why we have great optimism for the upside potential around deals like Sonic Prime for Netflix, Emojitown for Wild Brain Spark, and others we have in our pipeline. With that, I'll hand the call over to Aaron.