Thunderbird Entertainment Group Inc. (TBRD.V) Earnings Call Transcript

Thank you. Hi, everyone. I'm Jen McCarron. I'm the CEO of Thunderbird Entertainment. We are a company creating content in a time when content is booming. I'm sure like myself, most of you are watching probably an increased amount of Netflix these days. Our mission at the company is to create content that makes the world a better place. We were lucky enough to recently win the Peabody Award, which was created by George Peabody in 1941 for telling stories that matter and that are important. We were also recently nominated for an Emmy award, and we received a letter from Ted Sarandos that kind of, I think, summarizes what we're trying to do. And Ted wrote, "Your story set you apart, they move hearts, connect people and have the power to change the world, thanks to everything that Thunderbird is doing." So that really encapsulates what our mission, our vision is. And I think at this time of COVID, where a lot of companies haven't been able to work, we're extremely grateful to be in an industry that's not only surviving but thriving. You can see a little snapshot of our revenue of $29.3 million; our EBITDA of $6.9 million. This was our recent Q3. Our free cash flow is $4.5 million, and we have retired debt. We have 0 debt, which is exciting time to be opportunistic. I'll go down to our next slide here, which is our team, myself, I've grown up in the industry, I'm an operator. So is Mark. I grew up. My dad was CEO of Robin Hood Multifoods for many decades, and he always said in times of recession, people stay home and bake and watch television. So he made flour and I'm making television shows. So it's -- feeling fortunate at this time. We have a team that's heavily steeped in experience. You'll see Matt Berkowitz in the lower right-hand corner, he's been key to our growth. He's based in Los Angeles, super smart, young man, boots on ground, and we've managed to expand our studio there from 5 people 3 years ago to 150 people based on the demand for content. So not only do we have the increasing presence in Los Angeles, we have over 700 people in Vancouver and another 150 in Ottawa. And here's our directors, which I'll turn it over to our Chair of the Board, Brian.

Thanks, Jen. Can you hear me okay?

Yes, you sound great.

Great. Thank you, Jen. I'm in the fortunate position to be the Chair of Thunderbird. My background is one of entrepreneurship and focused in natural resources. Predominantly, I was fortunate to start a company about 5 years that had the idea to go out and acquire lithium deposits around the world in an effort to help wean the world off fossil fuels by providing a responsible and sustainable resource through long-life lithium deposits. Through a 2.5-year journey, I was fortunate enough to sell that company for $265 million to a strategic company for cash, returning almost 20x the investment for early shareholders, which was a wonderful and life-changing experience for me. My background on that venture -- my financial background on that venture, because I had very little of capital to bring to the table myself, actually remortgaged my condo to put the first start-up capital in, was Frank Giustra. Frank Giustra is a Director and a major shareholder of Thunderbird. He's also the founder of Lionsgate Entertainment. Another Vancouver-based film and television entertainment company that was successful in elevating through the Canadian marketplace to become a household name globally in the entertainment space. He introduced me to Thunderbird through Tim Gamble, who's our Founder and Vice Chair, and I make the joke of what does a young guy do that's made a little bit of money while he gets into the entertainment business. And I've been fortunate ever since to work with incredible people like Jen, who runs the business in a very humble way that I think leadership is going and the way that the leader should be acting today in a very responsible manner. We're also surrounded with some experienced media executives like Marni Wieshofer, who was the previous CFO of Thunderbird Entertainment -- of Lionsgate Entertainment and also held a very important role as a TMT investment banker at Houlihan Lokey. Marni is important to our team because she really has a sense of the marketplace evaluations out there, of potential M&A opportunities, and she also is the Chair of our Audit Committee, which is an important role for us, as having some young team members like Jen and I who are very ambitious, but may not have all the experience that people like Marni, Frank and Tim have. It works in a very balanced manner. So that's me, and that's our predominant directors.

And so where is the opportunity? I think it's just the demand for content has never been higher. Our 2 main drivers are Kids & Family and Factual. Those are the hallmarks of all the streamers' strategy right now is to glue what they're calling co-viewing, families sitting around enjoying content together, and those are the 2 biggest areas that families seem to enjoy. You can see some of the demand that people have publicly said they're going to be spending, right, through 2024, and it's through the roof. With 5G coming online, that's going to take 3G, which is sort of, I guess, like streaming content through a garden hose and take it to 5G, which is like moving to a fire hose, and you'll be able to download a movie in about 30 seconds. And all of the players coming online, we're doing business with Netflix and Apple and HBO and Amazon, and the list goes on and these aren't start-ups. They are major, major companies that are getting into this arena because it is so lucrative and again, never been a better time to do it. And with our reputation, which is through the roof, winning these prestigious awards, working with the best clients, doing some of the most high-profile content, people want to work with us. That combined with us being a Canadian company that's able to capitalize on the amazing tax credits provided in our country for labor, about 50% of each salary is covered by the government in film and television, it's almost an unbeatable proposition right now to be working with Thunderbird. A little bit of our company evolution where we started and where we're going. And you can see that things have continued to grow and boom as we have built this high reputation and now are able to leverage and capitalize on that amazing reputation. The divisions, we've got Atomic that I've spoken to a little bit. We have our own IP. Last Kids on Earth, Princesses Wear Pants are great examples of those. Those are copyrights that we own that will stay in our library forever. And that are being set up as video games, toys, whatnot, Princesses Wear Pants is especially interesting right now. It's Netflix's princess show to go head-to-head with the Disney Princess line, and we have ownership in all of that. I don't know if anyone listening in has little girls, but I'm sure they've gone through a princess phase like mine have. And so being able to leverage that IP, use that ancillary revenue and help grow the business is quite exciting. We have scalable infrastructure with our studios in Vancouver, Ottawa and Los Angeles. And our partnerships are with top talent. Savannah Guthrie, Drew Barrymore, Reese Witherspoon. And they're choosing Atomic because of our culture, because of how we treat people, diversity and inclusivity has always been a hallmark of our company. And we do really high-quality, award-winning work. Great Pacific is a market leader in Factual and Scripted program. They've got shows like Highway Thru Hell, which is going into its tenth season; Save My Reno. They own all of their production and post-production equipment and are able to leverage that time and time again, the profitability is just tremendous. And part of the reason that we've been able to fuel the high growth of Atomic with the steady huge cash flow of Great Pacific has come together to make a really compelling business model that has incurred 0 debt in our growth, which we're really, really proud of. And then below, you'll see some of the companies that we work with. A snapshot of our current pipeline. At the top is some ownership, Last Kids on Earth I touched on, a New York Times Best Seller, Nate Create in partnership with the Jim Henson Company. I don't know how many of you like the Muppets or Fraggle Rock, I know I sure do. Princesses Wear Pants, that I've explained that one, exciting opportunity there. Mermicorno is another show we're doing with Tokidoki, which is a lifestyle brand. And Eerie Elementary with some exciting news that I will hopefully be able to press release soon, another New York Times best-selling offering. Some of the service work we do, which is great cash flow and high-profile work as Molly of Denali, which again just won the Peabody Award. We're doing Mighty Trains Express with Keith Chapman, who created PAW Patrol, don't know how many of you listening in have kids, but if you do, I am sure they have seen PAW Patrol. Trolls is based on the Trolls World Tour, which is the movie that was just successfully released home video-on-demand. We're doing a series of up to 10 Curious George movies, Dogs in Space is a partnership model with Netflix. We do a lot of work with Marvel, LEGO, Disney and Tilly you'll see there is Reese Witherspoon's first kids and family show and she chose Atomic to partner up with, again because they were looking for diverse culture that goes above and beyond as a company to treat employees fairly and has programs which we are steeped in to promote voices that may not be heard as often. So we're thrilled about that. Great Pacific here -- they're Factual driver. I'm sure some of you will recognize these shows Highway Thru Hell is a top-rated Factual show in North America. Huge on Discovery and Weather Channel, some spin-offs of that would be Heavy Rescue: 401, Mud Mountain Haulers, a lot of lifestyle shows, which do extremely well. And massively profitable division. They also handle our smaller Scripted footprint. I don't know if anyone's seen Kim's Convenience. That is another -- an incredible show that started as a theatrical show in Toronto with the Soulpepper Company. We optioned it, turned it into a comedy series that became Canada's #1 hit comedy and is now going off on Netflix. Another example of different voices being heard in a world and time where that is so important. The growth opportunities. So again, we're increasing ownership and this provides huge growth opportunities in toys, consumer products, games, microtransactions, distribution, all of this content we own in Great Pacific and Atomic can be leveraged into other businesses. It's a low-risk way that we've set it up. We're not spending a lot of money to do it. People are paying us for the rights to do a video game. And this recurring revenue between all of the amazing work we're turning on and the boom for content, it's quite a compelling time. The increased presence in Los Angeles that I've gone over gives us access, boots on ground to all of these top players that we're working with. And we are getting into some features, which is exciting, working with the writers of Simpsons. And we're also continuing to expand our Factual offerings. And again, we're so grateful that both Factual and animation can work from home. Here's some recent media recognition. Brian, I don't know if you want to go over some of this?

Well, my favorite stands out, Rick and Morty. But I think it's just recognizing, that we are starting to get picked up by some pretty big media outlets. And I think it just is a testament to the incredible high-quality work that Jen and her team and Mark and his team continue to focus on. And I think it's important differentiator that the company does have it that it is the highest quality of content in terms of the final product, but also the ideas. And as long as we stick in that lane, that continues to be in very high demand because of this generational shift in consumption of content through what Jen mentioned devices in our hands, little TVs in our hands, through tablets, through our mobile phones, through streamers as well as just the consumption of a new generation of content that we are in this very special spot. So it's nice to be recognized by some of these great publications.

Yes. And again, just some of our more recent awards, which are exciting, being called out as one of the companies to really watch within this industry. We're an emerging force. More awards continuing. We'll get to some of the select transaction comparables, which I'm sure many of you are interested in, and I'll go back to Brian.

Yes. Thanks, Jen. I think something that a company that we are inspired by greatly is what eOne was able to accomplish as a Canadian company and an incredible success by selling last summer for almost GBP 3 million to Hasbro. Why is that an inspiring story? Well, they did have a great kids and family IP in Peppa Pig. And it's something that we look up to a lot in terms of the company that we plan to build over the next few years. Another great example would be a little bit dated now, but in 2014 Leftfield Entertainment, which was known for Pawn Stars sold for $360 million. And that's important because we believe what Great Pacific has been creating, is creating with Highway Thru Hell and their other brands, Highway Thru Hell going into a 10th season. These are globally recognized #1 show on discovery and Mark is finding new ways to monetize that content. And I think the one that strikes the cord with me because I just love animated films growing up in the 90s, watching Pixar and doing a great case study on them and reading the book by Ed Catmull, I think what Jen is creating at Atomic is so special and learning for myself, from being more of a finance, entrepreneur, learning about creators, learning about animators and just a very special culture that needs to be created to yield incredible ideas that are stories that can be animated and told across languages and break down barriers and educate young people to older people. That's what Jen is really driven by and her team. So I don't think we're like actually any of these, just to give you an idea, some of the companies that have had great monetary success and created a lot of value for shareholders. We keep them in mind as we continue to build this company. Our current capitalization today, we are a publicly traded company. We trade on the Toronto Venture Exchange under the symbol TBRD. Our stock price is around CAD 1.40, with a market cap of $65 million. We successfully retired company's debt last quarter on the back of a record quarter, as Jen mentioned earlier. And we're sitting at about $12 million of cash. And our inside ownership is almost 50%. So very aligned with this ultimate success of the share price alongside our common shareholders. Total issued and outstanding is about 46 million and fully diluted is about 51 million. And we do have analyst coverage from 2 smaller Canadian investment banks, smaller, but great supporters of ours that we're thankful for, which is Canaccord and Cormark. But as part of doing conferences like this as well as working with some new capital partners in the United States, we plan to broaden that analyst coverage universe, both in the U.S. and in the U.K. over the coming quarters. Yes. And we -- this just shows the ownership of directors and key stakeholders. And our continued value that we see in the company and continued performance that -- that the management team is executing on. And you can see that some pretty notable shareholders in the industry own a lot of this company in and around these prices and continue to support them. So in summary, we are rapidly growing in highly profitable multi-platform entertainment business, and we continue to pursue an aggressive growth strategy through the acquisition of high-quality owned IP. We are well known in the industry, both through Great Pacific and Atomic, for delivering great content, innovative programming in a very artist friendly environment. Highly regarded management team and Board of Directors. We have realized, as I think Jen mentioned earlier, that we do have very scalable infrastructure from kind of 100 employees to almost 1,000 in the last few years as well as now the gift of -- or a silver lining within going through the fire drill that was COVID has allowed Jen to use technology to -- and Mark to expand the walls of the office space. We have extremely strong balance sheet, which we're very proud of, but also very careful with. And we are publicly traded. So we do plan to use our stock as a currency when the valuation seems right to be opportunistic in the capital markets.

Yes. So that's our presentation. I'll stop screen sharing now. And then if anyone has any questions for us, we love to hear from you.

All right. If anybody has a question, please feel free to type in the chat in here. Jen, I have a quick question, and I'll ask a question to get things started rolling. And you mentioned that you have several shows that are in production right now. How many do you expect to deliver to some of your media companies in the coming 12 months?

Oh, upwards of 20-plus shows, and we have good visibility over the next 3 years and are growing at an alarming rate. We're very booked. Again, animation and factual are 2 things that we were already thriving in, but in a time of COVID, when a lot of live action, can't get 250 people on the set to shoot something, you can have hundreds of animators working from home than from factual. So if anything, the increase and rate -- people wanting to turn content on, because all these streamers are booming as well, has really gone through the roof.

Okay. We have a question from the audience. And this is -- with the visibility you have, could you give a more specific range of where you think revenues could be in 2 years?

Well, we don't give guidance. We decided not to give formal guidance, but our internal goals are to continue to grow at both double-digit top and bottom lines, and I think that's as far as we'd like to go. We'd like to under promise and over deliver. But we can safely say just organically -- and this is outside of having any sort of a toy story moment, a big, big -- I don't say that lightly, I do believe that we have some very special stories coming through this company. So outside of hitting a flash of lightning like that, the core business can grow or will grow at double-digit top and bottom line over the next couple of years consistently.

Okay. To follow-up on that question. What kind of margin should this kind of business derive long term? I mean like, I know the answer, but they probably want to hear it from the horse's mouth.

Jen, do you want to start? Yes, go ahead.

Every show is different. Certainly, some margins where we own all the equipment, we own absolutely everything, it's quite remarkable. But I'd say anywhere from 30% on each production is EBITDA margin profit.

Okay. We have a couple more questions from the audience.

You got everyone going, Ishfaque.