Thunderbird Entertainment Group Inc.

Thank you for joining Thunderbird Entertainment Group's fiscal 2025 first quarter earnings call. Frank Alfano from Bristol Capital will read the forward-looking statement disclaimer.

Thank you for joining us. We are here to provide a corporate update and report on Thunderbird Entertainment Group's Q1 2025 results for the three months ended September 30, 2024. Speaking on today's call are Ms. Jennifer Twyner-McCarran, CEO and Chair of the Thunderbird Board, and Mr. Simon Boddymore, Thunderbird CFO. Ms. Twyner McCarran will provide a strategic overview of Thunderbird Entertainment Group, and Mr. Boddymore will review the company's financial Q1 2025. Following the corporate update and financial review, the call will open for a Q&A session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. Alternatively, if you have any questions, you could call 1-604-683-7000. 3555 extension 2 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 contain forward-looking information for purposes of applicable securities laws. Forward-looking statements and information discussed on this conference call include but are not limited to statements regarding anticipated adjusted EBITDA growth, sustained growth, and a return to historical profitability levels, consumer product licensing opportunities, Murmur Cornhole, Starfall, and Super Team Canada resonating with North American audiences, yielding cost savings, Thunderbird's ability to produce and sell more content and execute on growth strategies, changes in total revenue, future updates from broadcasters, the status and outcome of negotiations between the AMPTP and timing for filming new productions. Forward-looking statements are based on estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which are set out in the company's most recent MD&A and other public document filed under the company's profile on CDAR. 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 today's date, and no assurance can be given that such events will occur in the disclosed timeframes or at all. Except where required by law, the company disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. 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 dollars unless otherwise stated. Ms. Twiner-McCarran will now provide the corporate update.

Thank you so much, Frank. My name is Jennifer Twiner-McCarran, and I am the CEO and Chair of Thunderbird Entertainment Group. On behalf of the company, I'd like to thank you for joining today's call to discuss Thunderbird's fiscal 2025 Q1 results. Thunderbird CFO Simon Boddymore is with me, and we appreciate you taking the time to hear the company's earnings update. Once Simon and I are finished, we will happily answer any and all of your questions and provide clarity where needed. Q1 creates a nice check-in to share how Thunderbird is tracking following our recently announced year-end results. I am pleased to share that we entered fiscal 2025 on solid footing, maintaining our forecast of returning to top-line growth by the end of the fiscal year. Our continued strong performance underlines that Thunderbird remains a healthy, successful business, even with today's challenging media industry environment. With our great visibility to the future, we are lined up to build significant value for our shareholders with a robust content pipeline, incredibly strong industry relationships, and signs of a stabilizing market environment. For example, we are encouraged that Disney's recent fourth quarter revenues rose 6% to $22.6 billion, and this increase is boosted in part by its streaming and content sales segment. Market stabilization and Thunderbird's position was further demonstrated at MIPCOM in October. MIPCOM is a major trade show for the global entertainment industry held in Cannes, France. This event is often referred to as the mother of all entertainment content markets. While overall attendance was slightly down this year, there were 340 exhibitors, which is up from 320 last year, including 34 country pavilions, 10 of which were brand new. The 3,240 strong buyer contingent was led by US programmers, followed by the UK, France, Germany, and Spain. From a company perspective, our team of four held 132 meetings with the leading content platforms in the world, including Netflix, Disney, Fox, BBC, Apple, Amazon, and saying signs to name a few. We also saw that the oversupply of content in the market is starting to rectify with the number of companies unfortunately announcing that they were ceasing operations or restructuring. Again, while we never like to see other companies fail, The rebalance strengthened Thunderbird's market position, providing more opportunity for the company to ultimately create, produce, and sell more of our content. We also noticed a resurgence in co-production, with many companies looking to partner with reputable studios like Thunderbird, which opens up more opportunities for us in the market. One additional theme coming out of the week-long event came from Lucy Smith, who's director of MIPCOM, and Nick London at RX. She highlighted that while the industry still does have its challenges, the key is to find new ways of working and new opportunities. Simply put, a core element of success in the industry for any company involves its ability to be nimble and adept, and this is the roots of Thunderbird. Audience behaviors don't revert, rather they evolve. Our industry is resilient. The key is to remain open-minded and willing to reinvent. A clear example of reinvention is adapting content to how audiences want to receive it, like fast channels, YouTube, short-form segments, you name it. Several of Thunderbird Productions fit into these buckets. Take Highway Through Hell, for example. It's on Discovery, The Weather Channel, two fast channels, YouTube, and Banagier Rights holds the right to license, distribute, publish, and broadcast all short-form segments. This series, now in pre-production for its 14th season, is also being considered for select consumer products licensing opportunities. It truly has no limits, and the power of a brand, another way just showing content is here to stay and remains a happy escape for everyone. Another big takeaway from MIPCOM is that content licensing is still very much in demand, and there's a greater demand for ready-made series and films than ever before. Identifying and optimizing these opportunities is critical to companies like Thunderbirds as we adapt and evolve our business amid a changing content landscape. Thunderbird distribution and brands is a core part of our growth strategy. For example, our latest third-party IP, Betty Buys, will debut on 2BB's next year and was met with a really positive reaction and strong interest from buyers across Europe and the U.S. Many remarked that the series focused on helping preschoolers with their bedtime routine and truly filled the gap in the market. and any parent dealing with bedtime knows how challenging that can be. Many of you have heard me say it before, and I'll say it again. And again, premium content is king. And as the market ebbs and flows, the demand for the high-quality content that Thunderbird creates remains constant. Thunderbird's strategy of keeping quality at their North Star and monetizing the content underscores the success and milestones they continue to achieve as we are viewed as a go-to resource for great content from so many big buyers for both service and IP. Having the in-house capabilities to go from the initial concept through to screen and to retail is a unique advantage. Another unique advantage is being based in Canada, which allows us to focus on the production of high-quality content while offering more competitive budgets. With the decision to remain public for now, our team is laser-focused on Thunderbird's growth strategies. This includes increasing our visibility through consistently strong results and proactive engagement with the investment community to maximize liquidity and allow others to participate in our great story. Notably in Q1, Thunderbird was recognized by Report on Business magazine, ranking of Canada's top growing, one of Canada's top growing companies in 2024. Thunderbird earned its spot for the second year in a row this year with a three-year growth rate of 105%. Look forward to building on the success in the years to come and the next phase of our company's growth. Before passing things off to Simon, I would be remiss if I didn't mention that negotiations between the Alliance of Motion Picture and Television Producers and the Animation Guild, also known as Local 839, are ongoing. The negotiation process may, this is underscored may, delay production greenlights across the industry, which could potentially impact some of our forecasts and timelines as we look at the timing of upcoming productions. We continue to monitor this closely and hope for an equitable resolution shortly. The company also wishes to inform our shareholders that due to the Canada postal strike, the Q1 fiscal 2025 documents will not be mailed out until the strike is over. The Q1 fiscal 2025 interim financial statements and MD&A are filed electronically and can be viewed on CDAR. With this, I will now pass things on to Simon to go over the numbers.

Thanks, Jan. And hello, everyone. I'll spend some time now walking through the key highlights of our first quarter results. Revenue for the first quarter was $45.7 million compared to $33.6 million for the same period last year. That's a 36% increase. The strong quarterly results demonstrates the health and success of the company, even as we navigate the current challenging market. Production service engagements drove the year-on-year increase in revenue. The animation side of the business saw a $4.4 million year-on-year increase in revenue, representing 14% growth. while unscripted and scripted production services contributed $9.6 million of revenue in the quarter. During the same period last fiscal year, we had no unscripted or scripted production service engagements being worked on. Licensing and distribution revenue decreased by $1.9 million year-on-year, a 61% decline. This decrease is due to a change in timing this year for the network release of Highway Through Hell. In the prior fiscal year, we were able to recognize revenue relating to season 12 of this show in the first quarter. Revenue for season 13 will be recognized in the later quarter of the current fiscal year as a result of changes made to air dates by our broadcast partners. Our gross margin declined year on year from 23.5% to 19.6%. This is in line with our expectations and primarily because of two factors. The first being the increased levels of scripted and unscripted business, which, as we mentioned in our year-end call, attracts lower gross margin than animation production services. The second factor is the year-on-year reduction in unscripted licensing fees. The owned IP shows we sell generally attract healthy margins, and the $1.9 million decrease in revenue from that source this quarter has resulted in a slight impact to margins. For the first quarter, we recorded our fourth straight quarter of positive earnings with net income of $1.6 million. This compares to a loss of $0.7 million for the same period last year. Management has worked hard to streamline costs and increase efficiencies wherever possible over the past year with the intent of returning the company to profitability on a consistent basis. As mentioned a few weeks ago on the year end call, during fiscal 2024, management implemented cost cutting actions that realized savings of over $3 million in that fiscal year. Most of those cost cutting actions were permanent, allowing us to enter fiscal 2025 with a lower fixed cost base. Accordingly, our G&A costs were $4.7 million for the current quarter, compared to $5.1 million for the same period last year. Within that year-on-year decreasing costs, there were, however, permanent savings in salaries and wages of $0.7 million, which were offset by a slight year-on-year increase in legal and professional fees as we worked with external consultants in the current year closing out our strategic review process. We continue to maintain a disciplined approach to managing costs as we move through 2025 and aim to implement further savings in discretionary areas wherever possible. First quarter adjusted EBITDA increased to $4.1 million compared to $2.5 million in the same period last year as a result of our lower cost base and growth seen in revenues year on year. As we move forward, we continue to be optimistic and see opportunities to maintain top line growth throughout the year. There continue to be headwinds in the market, but we have good visibility throughout 2025 and into 2026. through ongoing production service contracts, as well as with many of our ongoing unscripted titles, which have already received commitments for future series to be produced. In addition, we expect to begin to see the results of the investments we've made during the last 18 months in a couple of our own IP animated shows, Murmacorn of Starfall and Super Team Canada, which are expected to air during the latter part of fiscal 2025. At this time, we are reaffirming our previously announced fiscal 2025 revenue and adjusted EBITDA targets on a targeting revenue growth of 20% and adjusted EBITDA growth of over 10%. As previously discussed, our adjusted EBITDA is expected to grow more slowly than revenue in the upcoming year as a result of the mix of work being undertaken, especially on the non-animation side of the business. While that part of the business is traditionally focused on owned IP creation, With the current market headwinds we've seen, we've taken on additional production services work, which generally attracts a lower margin. As the market settles, we'll consider taking on more production services work where it makes sense. This provides us with the opportunity to highlight the adaptability of our teams and the high quality work we can produce, as well as introducing us to new customers. We continue to operate with a strong balance sheet that carries no corporate debt, providing the financial flexibility to pursue growth opportunities as they present themselves. Coupled with disciplined financial oversight, we believe we're well positioned to succeed in an evolving market landscape. And with that, I'll pass you back over to Jen to continue with our corporate update.

Thanks so much, Simon. I'll now provide the corporate update for the first quarter. In Q1, the company had 25 programs in various stages of production, and was working with 17 clients. Of the 25 programs in production, seven were Thunderbird IP and 18 were service productions. Thunderbird Kids and Family, producing under Atomic Cartoons, was in production on 18 programs and working for 11 clients, including Super Teen Canada for Bell Media's Crave, The Day You Begin for PBS Kids, Marvel's Iron Man and his awesome friends for Disney Junior, and Marvel's Spidey and His Amazing Friends Season 3 and 4 for Disney Junior, among others, and Atomic Original Mermicorno Starfall for Warner Bros. Discovery. Thunderbird Unscripted, producing under Great Pacific Media, was in production on six Unscripted series in Q1, including Dead Man's Curse Season 3 for the History Channel, Timber Titans Season 2 for Discovery, Highway Through Hell Season 13 for Discovery, Rocky Mountain Wreckers Season 1 for the Weather Channel, and U.S., and Discovery in Canada. GPM was also in production on one scripted project in Q1 titled Sideline to QB and Me. Premiering on November 29th on Tubi, the movie is based on the Wattpad YA sensation The QB, Bad Boy, and Me, written by Taye Marley, and the film is directed by Justin Wu, known for Kim's Convenience, and Reginald the Vampire, both Thunderbird Productions, and penned by Mary Guilano from Upload and Crystal Ferreiro from Diary of a Future President. We are excited to finally have this amazing project out in the world, reaching global audiences and the buzz is building. Speaking of scripted productions, during the quarter, the company had 12 scripted productions in active development, of which three are in paid network development, which means the prospective buyer is paying for the development for the series. During the quarter, Thunderbird Distribution also made several announcements. Banajay Rights, the global distribution arm of content powerhouse Banajay Entertainment, and the long-time distributor of Highway Through Hell, internationally acquired short-form segment rights for the long-running hit docu-series. As well, several distribution deals for the children's series Boost New, including DR Denmark, PCCW Now in Hong Kong, and SVT in Sweden, which all picked up season one. EBS in South Korea, NKR in Norway, TVO Kids in Canada, Canadian French-language broadcaster Télé-Québec all picked up seasons one and two. Plus, U.S. platforms NBCU's Peacock, Fox's Tubi, and Teachers Today Happy Kids also picked up season one. Mittens & Pants distribution reach also expanded its initial 34 territories. Tubi, and public library-affiliated streamer Kanopy have taken the first season in the U.S. and new international platforms taking the series include BIN MENA Season 1, NRK Norway Seasons 1 and 2, and Alibaba's Youku China Seasons 1 and 2. Additionally, China-based content distributor Beijing 24 Bridges will be selling both seasons of Mittens and Pants in the territories. And if you haven't checked out any of these shows, I seriously suggest you do. And a massive thanks to all the talented crews that make these happen. In closing, as demonstrated by the results of this quarter, Thunderbird has once again proven to be resilient. With the right talent and the right partners, we have continued to build a nimble company, not losing sight of our roots, that is capable of navigating challenges as they arise. We recognize that as the industry changes, we're adapting alongside it. Josh Silverman, who is EVP and President and CFO at Mattel, or Chief Franchise Officer, I should say, spoke to Admit Junior attendees about the changing landscape. His advice rings true for Thunderbird. What makes me very positive and optimistic is the ability for us to continue to tell great stories and the opportunity for us to do so. We've been telling great stories as humanity for a thousand years. We'll be telling great stories for a thousand more years. The ways that we do and the types of platforms that we do it on, we will have to leverage and continue to evolve with it. It starts with great storytelling. And storytelling is and always will be at the heart of Thunderbird as we continue to make great content. This concludes the formal part of our corporate update. And Simon and I are more than happy to gladly take all of your questions. Thank you so much.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. And our first question today comes from the line of David McFadden from Cormark Securities. Your line is open.

Oh, hi, great. Yeah, a couple of questions, everyone. So I noticed in the quarter you didn't buy back any shares. I'm just wondering, are you guys planning on buying back shares this year?

Well, the NCIB remains open and certainly as we consider the best use of our cash, very much, you know, we've just renewed, you know, the ability to use it. We've just, you know, as you know, David, coming out of the process, we have an ability to go, okay, how do we meaningfully grow this company on our own? We're stable, we're healthy, we're well regarded. Let's get after it. And as we consider the best use of our cash, the NCIB will always remain an option.

Okay. So you talked about the potential for a strike. Have you guys thought about what the impact might be if there is a strike? Could you share that with us?

Yeah, I mean, the impact is what we're feeling right now. It's just the unknown. So some people are holding green lights to say, well, we don't want to green light something right now if there's a strike in two days. So that's what we're feeling now, just a delay to things we know are going. The union has signaled that by December 2nd, they're hoping to reach a resolution one way or the other. You know, long-term down the road, it could have positive effects for Canada. More could come here. It's not a terrible long-term story. We're just, you know, the only impact that we are seeing and that we're flagging is without a resolution, a delay to green light.

Okay. I'm just wondering if, yeah, okay. And then this year, what do you expect the cadence will be in terms of sort of quarterly distribution and revenue and EBITDA?

So, David, we're not going to give quarterly guidance just because there's a lot of things that tend to move around within the business that we can't always control. So we're going to stick to that annual guidance of 20% revenue growth and 10% EBITDA growth. You know, I think as you look at the current numbers and absorb them, you'll see that we've got some good size projects ongoing right now that will kind of tail off as we go into the back end of the year. And then the math will kind of make the rest of the year fit into that 20% top line growth. Sorry, I can't be very specific there, but we don't want to come out and start issuing quarterly guidance and then have it be a miss each quarter just because production moves around in terms of air dates and things like that.

No, no, yeah, no, I understand. I I guess I was just looking for sort of, you know. 40% or whatever I was picked numbers over here. 40% is recognized in the first half and 60 in the latter half. That kind of thing. But anyways, OK, thank you.

Thank you, David.

Yeah, again, if you'd like to ask a question, please press star one in your telephone keypad. Your next question comes from the line of Michael K from. K Associates, your line is open. Michael, your line is open.

Yes, hello. I asked this question the last time. It seems the company is making good progress. You have a profitable quarter. But it seems there's not much liquidity and the share price isn't doing anything. Don't you have any plans to... go to trade associations or use, you know, brokerage companies so that you would give presentations indicating the, you know, the story about Thunderbird Entertainment, its prospects, because that's the only way that, you know, shareholder value could be increased. As they say, you can make a better mousetrap, but it doesn't do any good unless people know about it. Perhaps you should hire some, an investor relations company that could help you make the company more visible to institutions and investment organizations?

Yeah, we couldn't agree more, Michael, and thank you for that. We are working with Bristol IR firm. We do have a large webinar planned in December to get the message out where we should have sort of hundreds of new shareholders hopefully calling in. and then planned road trips very shortly thereafter. So Simon and I couldn't agree more with you. And now that we're coming out of the blackout and sort of inability to market ourselves as a public company for the time that we were in the process, we really want to get after it. Simon, did you want to add to that at all?

Yes, I think this is time because... The company seems to have turned around, and from what you said, there are many exciting projects in the works and plans, so I appreciate that very much.

Well, we appreciate you listening. Expect to see us on the road. Expect to see us on the road, Michael. If you would like us to call in and see you on the way through, we'll happily do that, but we hear you loud and clear, fully agree. and have a plan in place with Bristol who are helping us get out on the road.

Very good. Thank you.

And this concludes our call today. If you have any questions, please call plus 1-604-683-3555 or email investors at thunderbird.tv. Thank you for joining us today.