Thunderbird Entertainment Group Inc.

Thank you for joining us. We are here to provide a corporate update and report on Thunderbird Entertainment Group's second quarter fiscal 2022 results, which ended December 31st, 2021. Speaking on today's call, we have Ms. Jennifer Twinner McCarron, Thunderbird CEO, and Ms. Barb Harwood, Thunderbird CFO. Ms. Twinner McCarron will provide a strategic overview of Thunderbird Entertainment Group. and Ms. Harwood will review the company's Q2 2022 financials. Following the corporate update and fiscal review, the call will open for a question and answer session. If you'd like to ask a question during this time, simply press star and the number one on your telephone keypad. Alternatively, if you have any questions, you can call 1-604-683-3555 or email investors at thunderbird.tv. and the company will follow up directly after the call. At this time, all lines have been placed on mute to prevent any background noise. I'd like to remind everyone that certain statements made on today's call will be forward looking and constitute forward looking statements or forward looking information under applicable security laws. Forward looking statements and information discussed on this conference call include, but are not limited to, statements that respect to the company's objectives, goals, or future plans, and the business and operations of the company. Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors, which may cause actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to, general business, economic and social uncertainties, litigation, legislation, environmental and other judicial, regulatory, political, and competitive developments. Those additional risks set out in the company's filing statement and other public documents filed under CEDAR at www.cedar.com and other matters discussed in the quarterly news release. Although the company believes that the assumptions and factors used in preparing these forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this presentation, and no assurance can be given that such events will occur in the disclosed timeframes or at all. Expect where required by law, the company claims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. For your convenience, the press release and MD&A and unaudited financial statements for the Q2 2022 of Thunderbird Entertainment Group, which ended December 31st, 2021, are filed on CEEDAR and are available online under the investor section of our website. We do not expect to update forward-looking statements continually as conditions change. This conference call is being webcast live, and the archive will be available on the company's website at www.thunderbird.tv following today's call. Please note that Thunderbird reports in Canadian dollar unless otherwise stated. Ms. Twinner, McCarran will now provide the corporate update.

Thank you so much. My name is Jennifer Twiner McCarran, and I'm the CEO of Thunderbird Entertainment Group. On behalf of the company, I'd like to welcome you to today's call to discuss our Q2 2022 results, which ended December 31st, 2021. Thunderbird CFO Barb Harwood is with me today, and we appreciate you tuning in and following Thunderbird's trajectory. I will provide the corporate and visual updates, and Barb will share the financials. Once Barb and I are finished, we'd be happy to answer it all and any questions you may have. I want to start by taking a moment to share that as a company, we are deeply saddened about the recent events in the Ukraine, and our hearts are with those affected, and for anyone listening in that may have loved ones there. I'll now start my update. Many followers of Thunderbird have their fingers on the pulses of the major streaming companies such as Netflix, Disney+, and HBO Max, and stay informed on their content budgets, subscriber numbers, and international market expansion plans. With content budgets of $17 billion for Netflix, $33 billion for Disney+, $22 billion for Warner Brothers, and Discovery to list a few, it's no secret that the industry is booming, and demand for this type of high quality content that Thunderbird specializes in remains strong, and will do so for the foreseeable future. Thunderbird is recognized as a trusted provider across many of the major broadcasters and streamers, well-known for producing and delivering great stories that are A-plus quality, authentic, and diverse. As such, our business is healthy within the industry and very well positioned for future growth. While subscriber numbers for the individual platforms may shuffle or redistribute from one streamer to the next, it should be noted that more companies are continuing to come online. further adding competition to an already fiercely competitive market. And the companies coming online are not startups. They are major global corporations that need platforms for their own content and more. Additionally, they have deep pockets to invest in new content to attract and retain subscribers, and move into international markets for growth and expansion. For example, HBO Max is set to launch in 15 additional European countries on March 8. This follows the successful launch of HBO Max in the Nordics and Spain in October 2021. Currently, HBO Max is in 46 territories across the Americas and Europe and will be in 61 territories with the new European countries. They will need to air Europe and will be with 61 new European countries. And again, they need this content native to these regions, which is why M&A and international ownership is key for Thunderbird to further enable the company to fill that niche for trusted buyers like HBO, who we are currently working with. Also set to launch in Q1 of this year is CNN+, which will mark the arrival of yet another global streamer within the industry. And the streaming business of the newly rebranded Paramount, Paramount+, recently unveiled several new content initiatives as the company further embarks on the global opportunity in streaming in addition to linear TV and film. As a leading provider of content for many global streamers, such as Marvel's Spidey and his amazing friends, for Disney, and My Little Pony for Hasbro, E1, and Netflix, this bodes very well for our company. Moreover, it's such an exciting time. With Thunderbird, we're having 26 shows in production, 12 of which are IP or partner managed, and 50 more coming up through our pipeline. Add to this, our location in LA has been a game changer for the company. And having people on the ground there has been a tremendous lift as we are close to our buyers and can expand our crew in LA with local showrunners, directors, writers, designers, storyboard artists, editorial teams, you name it. The addition of the Global Distribution and Consumer Products Division and the potential to exploit IP and open new revenue streams in the years to come is huge. Through this division, we can further leverage some of our most popular owned IPs such as Highway Through Health, on the factual side with consumer products opportunities. There is such great value in mining the consumer products right, and we are deep into deals that set the foundation for establishing our existing IP into major global brands through toy deals and more. On top of this, we are now able to distribute third-party content, and we look forward to when we can share our first series as a distributor expanding the suite of services that Thunderbird already offers. So stay tuned for some good announcements. I often talk about how for content to be successful, it needs to appeal to the entire family and glue that key co-viewing audience, attracting and retaining the audience as part of all the streamer's strategies. And again, Thunderbird's foothold in animation and factual content positions the company nicely as both genres have great appeal for family co-viewing. which exploded during the pandemic and still presents an excellent opportunity for streamers to continue reaching the whole family, especially as theatrical releases are just no longer what they once were. On that note, despite a slight uptick in the number of expected theatrical releases in 2022 compared to 2021 and 2020, we can still expect to see far fewer theatrical releases post-pandemic as Hollywood studios continue to battle pandemic fallout. This, of course, means many of these films will arrive direct to streaming, again, driving more eyeballs to stay-at-home viewing and creating more opportunity for us as content creators. Premium content is king, and this will continue to escalate in the years to come. With that said, there's no question buyers also want to see authentic content that celebrates diversity. Truly, the increased push for diverse and authentic content was the silver lining of the pandemic. In 22 and beyond, audiences will demand representation and narrative from new areas of the world, places the industry hasn't explored. This is why international expansion is a critical component of many of the streamers' growth strategies and why we at Thunderbird are also looking to expand our studios into new jurisdictions around the world. Many conversations are underway. Again, creating diverse and authentic content is a real focus for Thunderbird. and also a differentiator for the company, as this has been an area of concentration for us for many years. We strongly believe that diversity should be weaved into the DNA of the shows we create for the next generation, and it's why we are proud to be behind shows that are celebrated for this, such as Peabody Award-winning Molly of Denali and our upcoming HBO series for HBO Max, Young Love, which is based on the Oscar Award-winning short Hair Love. Our push for diversity also extends into our casting practices for upcoming factual shows, which have been picked up by Chorus, Styled, Gut Job, and Dead Man's Curse, just some of the titles. We're also proud to partner with Opana Talks Media for bringing authentic, inspiring, indigenous stories to the forefront, and we are incredibly thrilled for both Tanya Coingotier and Shirley MacLaine, the co-founders of Opana Talks, We're also recently recognized in 22's Top 25 Women of Influence list. We look forward to the premiere of Waupana Talk Media's first series, Dr. Savannah Wild Roseette, which is set to debut this spring. At Thunderbird, we take our role as content creators seriously and acknowledge that we have a responsibility for every person, regardless of race and gender, to see themselves in content reflected back in a positive light. As noted, this is also very good for business. We are very proud to be a go-to supplier of high-quality content, and since the onset of the pandemic in March of 2020, when we were successfully able to transition to fully remote work, we haven't created any overages or had any delivery delays for our partners. This has only deepened our relationships with them and is a major driver of our growth. Beyond this, our reputation, which is the result of the incredibly talented team, also includes phenomenal artistry, creativity, and I would say kindness. Thunderbird's success continues to be rooted in our people, and we work hard to create safe working environments for our teams to flourish, and in many cases, reach new heights. If people feel safe trying new things and accept that mistakes may happen, the door is open to innovation and the risks are worth taking. The result is the top quality content witnessed in all of our top tier productions. It's a true privilege to be able to do this alongside of the most talented artists in the world. At Thunderbird, we work for our people, and I believe this is the way to a healthy bottom line. Before passing things over to Barb, I want to emphasize that we don't see an end to the demand for content, rather a continued evolution on what and how people consume it. It's special, snackable series, serialized series, very fast channels, and more digitization because people's habits, especially kids, change quickly. We've set the right foundation in place to evolve and adapt with content trends, and we are continuing to invest in our own IP and the infrastructures and people to support the company's phenomenal growth. Our outlook for the next 12 to 24 months is fantastic, and we look forward to updating you on our progress. We also look forward to being a more hybrid workplace in the future when it's safe to do so, hopefully very soon, increasingly so, as we miss the intangibles that come with having the ability to connect with our teams in person. We've added more than 440 people since the onset of the pandemic and are firing on all cylinders. We've had great organic growth, and this is ahead of any M&A opportunities or potential studio expansions that we are deeply exploring. With this, I will turn it over to Barb to go over the numbers, and then I can provide a high-level corporate update. Thanks, Jen.

Over to Barb, everybody. Thanks, Jen. The company recognized revenue of $33 million and $68 million in the three and six months ended December 31, 2021, increases of 18%, $5 million, and 43%, $20.2 million, respectively, over the comparative period. Production services revenue for the three and six months ended December 31, 2021, increased by $11 million, or 58%, and 21.4 million, 63%, respectively, over the comparative period due to an increase in the number and size of contracts. This revenue consists primarily of animation production services, which experienced continued growth. The growth in production services revenue reduces the volatility of results over quarters as the production service revenue is recognized as the work is complete. Licensing and distribution revenue, coming from our own IP, decreased by 6 million, or 68%, and 1.1 million, 8%, respectively, for the three and six months ended December 31st, 2021, over the comparative period, due mainly to the timing of recognition of IP projects. In the current quarter, revenue was recognized from seven episodes of a factual series, Highway Through Hell, Season 10, and in the comparative quarter, revenue was recognized from 10 episodes of Last Kids on Earth and six episodes of of the previous season nine of Highway Through Hell. Adjusted EBITDA decreased by 0.2 million or 4% to 5 million and increased 1.3 million, 13% over the six months to 1.3 million for the three and six months ended December 31st, 2021, respectively, as compared to 5.2 million and 10 million for the comparative period. Gross margin on revenue in the current quarter was consistent year over year, partially offset by an increase in salaries to facilitate our continued growth. Free cash flow increased by 12 million to 16.4 million and 14.3 million to 19.9 million for the three and six months ended December 31st, 2021, as compared to 4.4 million and 5.6 million for the comparative periods at December 31st, 2020, mainly due to interim production borrowing in excess of repayment as the company ramps up production volume. It's customary for our free cash flow to fluctuate over quarters relative to the timing of borrowing for our production. And that's it. Back to you, Jen.