This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
5/13/2025
Carrier code 604-683-3555, 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 the implementation and effective tariffs on the film and television industry, anticipated adjusted EBITDA growth, sustained growth, and the ability to add more scripted content and grow our production slate, consumer product and ancillary licensing opportunities, Zimmer-McCornell, Starfall, Rocket Saves the Day, The Day You Begin, and Super Team Canada, resonating with North American audiences, the production and success of Sideline 2 intercepted, Thunderbird's ability to navigate industry headwinds, produce and sell more content, and execute on growth strategies, changes in total revenue, 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 documents filed under the company's profile on CDAR. Although the company believes that the assumptions and the factors used in preparing these forward-looking statements are reasonable, under-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 time frames or at all. Except for a 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. Twyner-McCarran will now provide the corporate update.
Thank you so much, Frank. My name is Jennifer Twyner-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 Q3 results. Thunderbird CFO Simon Bodymore 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. We started our last Q2 earnings call by addressing the global tariff situation and we wanted to follow suit with Q3, specifically the recent news around the Trump administration starting to reevaluate the movie production industry. Right now, the entire industry is just waiting to learn more, as limited details have been shared outside of Jon Voight's proposal to make Hollywood great again. As we meet with our partners and wait for more concrete information, we will continue to focus on the health of the business and creating premium content for audiences to enjoy worldwide. At this current juncture, there is no impact to the production we are currently handling. What we do know is that if tariffs are introduced on foreign production, the likelihood of retaliatory tariffs increases at a global level. We also know that the US entertainment industry still maintains a positive trade balance with every market in the world. In fact, according to the Motion Picture Association, the business exports more than three times as much as it imports. Add to this, the world's 10th highest grossing movies last year were all released by U.S. studios. Hollywood benefits from exporting its product all over the world, and movies make a lot of money from international sales. With all this said, this is a fluid situation and one that we will monitor. Our focus is still on just what we can control. We have great relationships with our partners, a busy production slate, and are so proud of the content we regularly deliver to our partners. In the past, Thunderbird has demonstrated resiliency and the ability to thrive in other macro situations, and we will hit this situation in the very same manner. Our company's resilience underpins our success. With or without the possibility of tariffs, it continues to be a time of disruption, and opportunity in our industry. This is witnessed in the evolution of how people consume content with social media platforms further establishing themselves. The 2025 Digital Media Trends Report by Deloitte highlights that the average U.S. consumer consumes about six hours of media and entertainment a day. What's more, the report underscores that each user has a different mix of SVOD, UGC, social, music, podcasts, and more that make up these hours. Not one form of media commands all six hours. Looking across generations, preferences are shifting towards streaming, video services, social platforms, gaming, music, and podcasts. This trend report also highlights that the average household subscribes to four streaming platforms, but consumers are feeling stretched, and many are dropping or considering dropping one or two to ensure that they still have access to content. while also mindfully cutting expenses. An underlying message in this report from our perspective is that business success is reliant on diversification, and this extends across products, content, genres, and partnerships. This is where Thunderbird's business model really shines, and let me explain briefly, starting with our partnerships. Thunderbird has trusted partnerships with the major buyers. Many of you heard me say our company is a go-to for reliable premium content. This is demonstrated by our renewals and repeat business. Highway Through Hell is currently in production on Season 14, and Spidey and His Amazing Friends were renewed for Season 5. Earlier this week, it was announced that Tubi has greenlit the new film, How to Lose the Popularity Contest, based on the 2024 Loveless script by Caitlin Riley and Dorian Keyes. This high school rom-com about a bad boy and a type A overachiever teaming up to win student body president is being produced by Lindsay McAdam and Jason Fisher on behalf of GPM. This exciting announcement demonstrates the traction we are making and the strong reputation we've established in young adults, all underscoring our ability to diversify and thrive. It should be noted in Q3, our company was working on 15 projects with 15 different clients on 24 productions. Cultivating trusted relationships across many productions mitigates risk, spreading our work across multiple channels, and connecting it with viewers worldwide. When it comes to products, we're also diversifying in this respect. For example, JPM's hit series, Dead Man's Curse, has a companion podcast, Dead Man's Curse Volcanic Gold, which has been recognized with a Gold 2024 Signal Award for Best History Series two years in a row. Thunderbird Brands, together with Tokidoki and Space Junk Studios, launched a Murmucorno Roblox game on May 1st. The Roblox game just scratched the surface on the Murmucorno opportunity, and we look forward to more content and consumer products soon to come. Speaking of Roblox, Acquired Preschool Series Mittens and Pants is also featured on the platform with My Carrot Simulator game. Eventually launched this past winter, this game is continually updated with new quest systems and weekly leaderboards. Working with partners like Roblox allows us to tap into new audiences while strengthening brand awareness. Roblox also recently shared its Q1 earnings, and there are no signs of this company slowing down. The gaming platform's revenue increased by 29% to exceed US $1 billion in Q1. while its daily active user count climbed to 97.8 million. Mittens and Pants content is also available on several social platforms, such as YouTube, Instagram, TikTok, with a growing legion of followers across all platforms. This is in addition to Mittens and Pants being available in 78 territories, including U.S. streamers Peacock, Happy Kids, Cadoodle TV, Canadian French-language broadcasters, TFO, and Radio-Canada. Adding podcasts, video games, and social channel content are examples of the new mediums where our content is now being showcased. Increasingly, we are being thought of as a company whose skills in creating content can build and support brands in all industries, not just media. This, of course, in addition to the premium productions we're already widely recognized for, is another great growth area that we see emerging. Premium content continues to set the bar across the industry, and its demand remains constant, even in times of economic volatility, as people still look to content for healthy escapes. In the premium content space, our company is diversifying our portfolio. Atomic Super Team Canada, which premieres on May 16th on Crave, represents our first official story into adult animation with company-owned IP. We're super excited for this series, and we couldn't ask for better timing to launch a show that rallies behind Canada. It truly meets the moment of renewed patriotism, and we're excited to see how this series is being received. Speaking of premieres, Mermacornos Season 2 will be available on May 15th, and Sideline 2 intercepted recently wrapped production. The scripted movie will build on the success of Sideline 1 and the popular Wattpad novel. After its release on Tubi, Sidelined was the number one movie in Canada and the U.S. on Tubi, drawing the largest number of viewers of any title on the platform in its first seven days. With all this said, Thunderbird remains a very healthy company, and our Q3 numbers do reflect this. We are busy today and into the future. While we're seeing, again, a settling back to pre-pandemic levels in terms of demand, Thunderbird's future remains incredibly bright, the strength of the company's growth strategy, and our ability to adapt and be nimble in an ever-changing marketplace. As supply and demand continues to settle and other companies, unfortunately, will go away, it won't be us, and we will get more looks at everything, be it service sales or our own IP. Our multiple locations, including an LA studio, conservative approach, and debt-free balance sheet set us apart from other competitors, demonstrating the incredible upside working with us from every angle thunderbird has tremendous potential content consumption is evolving but it's not diminishing just look at disney's recent numbers the company posted us 23.6 billion in revenue in their q2 representing a seven percent increase over the same period last year and operating income was up 15 percent to us 4.4 billion The streamer added 1.4 million subscribers in Q2 and is forecasting more growth for Q3. Content remains king. The fact is that multiple players are looking for this content, and this has expanded to content for many mediums, sports, games, social, podcasts, you name it. And while the recent threat of media tariffs from the U.S. government compounds an already uncertain environment, our focus will remain on long-term resiliency for the company. which includes capitalizing and seizing opportunities in a time of media disruption while continuing to operationally strengthen our business. These opportunities include exploring deals such as game acquisitions, IP acquisitions, media and entertainment technology, geographic expansion, and other synergistic forms of content creation. All of this is within our means. In fact, We believe initiatives and opportunities like these will provide greater future earnings than a share buyback. We do believe our stock is undervalued. However, in an uncertain environment, cash will remain king. Thunderbird's strong balance sheet provides us with the financial flexibility to act on the right opportunities and ensure the ongoing health of our business. At this time, I will now pass to Simon to go over the numbers. Thank you so much.
Thanks, Jen. And hi, everyone. I'll now walk you through the highlights of our third quarter results. Revenue for the third quarter was $45.5 million, compared to $35.4 million for the same period last year, a 29% increase. Year-to-date, this brings our total revenue to $138.3 million, which is a 22% increase over the $113.5 million recorded for the first nine months last year. The year-on-year growth this quarter is driven by a mix of continued growth in production services, as well as a strong quarter for licensing and distribution revenues. Production services revenue increased 6% year-on-year in the current quarter, totaling $34.6 million, and has grown 31% to $123.4 million for the year to date. While the majority of this revenue comes from our animation division, the current year has seen a meaningful contribution from scripted and unscripted engagements, including for the current quarter where $3.5 million of revenue was contributed. While we haven't traditionally performed a large amount of production services engagement outside of our kids and family division, this year we've been able to secure some high-profile wins in this area. We've previously discussed the work we carried out on the hit movie Sideline, The QB and Me, and we're excited that the current quarter has benefited from the filming of the sequel, Sideline 2, Intercepted. Licensing and distribution revenue also increased by $8.1 million to $10.8 million this quarter compared to the same period last year. This represents a 302% increase and is due to the delivery of 26 episodes of Mermacorn of Starfall and 12 episodes of the 13th season of Highway Through Hell. During the same quarter last year, the main source of license revenue was the delivery of season one of Timber Titans. Year-to-date licensing and distribution revenue has decreased $4.3 million, or 22%, to $14.9 million. This reflects the market conditions we've mentioned in previous calls where the demand for unscripted IP shows has been weaker in the current year. The revenue decline in this area has been filled, though, through scripted and unscripted production service engagements, although that work does generally attract lower margins. And on that front, our gross margin for the quarter was 24.2% compared to 23.3% in the same period last year. This is in line with our expectations and primarily as a result of the higher level of license revenue we recorded this year. For the nine months ended March 31st, our gross margin is 21.7% compared to 22.9% for the same period last fiscal year. And reflects the larger trend we've seen this year, production service engagements representing a larger portion of our overall revenue. For the third quarter we recorded our sixth straight quarter of positive earnings with net income of $2.2 million. This compares to a profit of $5,000 for the same period last year. Management continues to work hard to streamline costs and increase efficiencies wherever possible with the intent of returning the company to profitability on a consistent basis. Like many other companies, we're experiencing pricing pressures from some of our vendors, as well as a small impact from tariffs on certain purchases. We continue to manage these challenges as best we can, and where possible, we'll source other vendors. However, options are limited with respect to certain purchases of software used in our production workflow and therefore were impacted whenever vendors of those products increased their pricing. Third quarter adjusted EBITDA increased to $5.9 million compared to $3.3 million in the same period last year as a result of our lower cost base and growth seen in revenues year-on-year. For the nine-month period, adjusted EBITDA increased 46% from $9.7 million to $14.2 million. As we move forward, we continue to be optimistic and see opportunities to maintain top line growth. However, the recent announcement of potential tariffs directed towards non-US produced content has created a large amount of uncertainty. At this time, we believe our previously announced fiscal 2025 revenue and adjusted EBITDA guidance holds and a targeted revenue growth of 20% and adjusted EBITDA growth of over 10%. While we have a good level of visibility beyond 2025 with several ongoing productions that will continue into the next fiscal year, the potential impact of threatened tariffs is unknown and could lead to buyers changing or delaying their plans. We'll continue to monitor this situation and adapt our plans if required as further details are announced and any policy changes in the U.S. are enacted. Despite the recent uncertainty in the industry, 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 or to weather any short-term disruption from broader market conditions. And with that, I'll pass back over to Jen to continue with our corporate update.
Thank you so much, Simon. And I'll now provide a corporate update for the third quarter. In fiscal 2025 Q3, the company had 24 programs in various stages of production and was working with more than 15 clients. Of the 24 programs in production, six were Thunderbird IP and 18 were service productions. Thunderbird Kids and Family, producing under Atomic, was in production on 17 programs and working for 10 clients, including Super Teen Canada for Bell's Media Craze, The Day You Begin for PBS Kids, Zombies, the reanimated series for Disney+, Marvel's Iron Man and His Awesome Friends for Disney Junior, Marvel's Spidey and His Amazing Friends Season 3 and 4 for Disney Junior, among others, and Atomic Original Mermacorno Starfall for Warner Bros. Discovery. Thunderbird Unscripted, producing under GPM, was in production on six Unscripted series for five clients in Q3, including Timber Titan Season 2 for USA Network Canada, Highway Through Hell Season 14 for US Network Canada, Rocky Mountain Records Season 1 for the Weather Channel US, and USA Network Canada. Extracted Season 1 for Fox, Sony Pictures, and Wild Rose Vets Season 2 for APTX. GPM was also in production on the scripted movie Sideline 2, Intercepted, which is the sequel to the Tubi movie, original Sideline to QVME. During the quarter, the company had seven scripted projects in active development, of which three are in paid network development. Thunderbird Brands also announced new distribution agreements for Boost New with LRT Lithuania Seasons 1 and 2, PTS in Taiwan Seasons 1 and 2, ERR in Estonia Season 1, and SVT in Sweden Season 2. Thunderbird Brands' acquisitions of Mittens & Pants, which is produced by Toronto-based Windy Isle Entertainment, was greenlit for a third season by CBC. with Sky Kids UK and Ireland on board as a broadcast partner. The series is now available in 78 territories. During and subsequent to the quarter, we celebrated Molly's Nolly winning a Children and Family Emmy Award for outstanding writing for a preschool animated series for the episode Not a Mascot, and Thunderbird Productions being recognized with eight 2025 Canadian Screen Awards nominations and two BAFTA nominations. In closing, we recognize that there continues to be industry headwinds, and Thunderbird remains uniquely positioned to continue nimbly navigating any situation. As demonstrated by our earnings report, we continue to progress and be profitable. Because of the uber-talented teams and operational prowess, we continue to stand out and shine, and more opportunities are continually coming our way. so proud of the achievements and dedicated to putting in the work to continue to build on them. This concludes the formal part of our corporate update, and Simon and I are more than happy to take all of your questions.
Thank you. We will now begin the question and answer session. If you have dialed in and 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. We'll take our first question from David McFadgen at Cormark.
Oh, hi. Yeah, thanks. Yeah, just a couple of questions. So, you know, you talked about the potential for tariffs and how it's creating more uncertainty. Have you noticed, say, a greater hesitation now to greenlight new shows, just given what's going on? And I thought... and maybe I'm wrong, but at least right now, the Trump administration is just opposing to put tariffs on feature films. So maybe you could just, I'd love to get your comments on that.
Yeah, I think what we do know is that there's not any details right now, David. And, you know, do feature films mean movie industry as a whole? I think there's just no details and there is no visibility and our buyers don't have any visibility either. So, It's not like they're working with a set of information that we don't have. Anytime in any industry, there's sort of these types of threats that creates uncertainty. We have not yet seen any immediate impact on our business. It's just we're being prudent because, you know, this has been stated with no detail and we can only continue to operate on what we know. But it's certainly in the water. Simon, I don't know if you want to add to any of that.
No, I think we're just dealing with a situation where we know that the industry in general is potentially being targeted, and we're all waiting to see how that lands. It's more just flagging that there's a lot of uncertainty in the market right now.
Okay. All right. So then just moving on, just wondering what your thoughts are on your NCIB case.
Yeah, I addressed that in the call. At this point, we are continuing to operate with the uncertain waters with the premise that cash remains king. And so that we believe there's other more beneficial ways of spending our cash at this current juncture to create meaningful value for our shareholders and make sure, most importantly, with all of these unknowns without any details, that our cash balance sheet remains so strong so that, as in the past, the pandemic has evidenced how we handle macro situations, we can continue to navigate these with, you know, skillfully as a company and maintaining the inherent health.
Okay. Okay. That's it. Thanks.
Thanks, David. And just a reminder, press star one if you do have a question. We'll go next to Michael Kay at Kay Associates.
Hello.
Hi, Michael.
Well, I congratulate you on your positive but realistic outlook in dealing with uncertainty. And that's why we're here and not the dinosaurs. Dinosaurs weren't able to adapt to changing conditions, but humans were. Anyhow, it came to mind, you know, after I learned that Qatar is giving the President Trump, pardon the expression, a gift of a multi-million dollar airplane, perhaps you could have some of your talented people make a documentary concerning Trump's life and career, extremely positive, but of and hand it to him, and then maybe he would take an interest. Okay, now to get serious.
That's an interesting idea.
Yeah, I have a lot of things, and I think also your prime minister should make a counteroffer that the United States would be interested in acquiring the state of Washington, California, and Oregon. because i think it's just ludicrous and um idiotic his proposal to want to acquire canada but um it gets people's interest anyhow okay but i did mean it that uh you are very um uh you know respond we could only control certain things and those we can't we just have to adapt as well as we could uh okay just two questions could you please um discuss what the impact is on um artificial intelligence and how that may impact the company either positively or negatively. I think there's still a lot of uncertainty there as well regarding laws and regulations and such. And the second thing is the company seems to be doing well under the circumstances and the balance sheet and the profitability is very excellent. and seems that it will continue. So have many steps been taken to publicize the company and let investment managers know of its existence? I think some may perceive it, especially after hearing your presentation, which was very candid and realistic, but positive as kind of like an undiscovered gem. So those are my two questions. Sorry for the-
No, I appreciate your commentary, Michael. And certainly, with regards to the first question, AI, we are very much embracing it right now as a company and as a tool. Things are evolving all of the time. I do see it as a positive for the industry, not a negative. It'll be another... means another tool the same way 3D animation came in or motion capture came in of creating content as another vertical. So more to come. I wish I could say more because there is, I think, a lot of compelling developments happening for a company that are positive for all of our stakeholders, employees, buyers, and shareholders alike. So yes, it's here to stay. It's a tool. It's a powerful one and one that we are embracing. With regards to your second question, question. Thank you for thinking we're an undiscovered gem. I think so too. We've been through a lot of situations in the last couple of years as a company, be it proxy fights or pandemics and whatnot. We're here, we're well, we're alive and thriving. And Simon and I are continuing to get the word out in more meaningful ways from an investor relations perspective. And we welcome that commentary because we do believe that it's a special story and that content is one thing we know here to stay. People use it as a happy escape and will continue to do so. And within all of this disruption, there's a lot of opportunity for companies like ours to pivot and grow. So I appreciate all of your commentary and those two great questions.
Okay, thank you very much. And I look forward
to you and the company uh continuing this success thank you very much michael appreciate it and that concludes our q a session i will now turn the conference back over to jennifer for closing remarks uh thank you so much and uh please don't hesitate to reach out uh to simon and i directly or through bristol if we fail to address any of your concerns or interested in a one-on-one, we'll be happy to meet with you then and really appreciate everyone taking the time out of their busy schedule to hear our Q3 update and story.
And this concludes our call today. If you have any questions, please call 1-604-683-3555 or email investors at thunderbird.tv. Thank you. You may now disconnect.