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

Greetings, and welcome to the Thunderbird Entertainment Conference. It is now my pleasure to introduce your host, CEO, Jennifer McCarron. Thank you, Mrs. McCarron. You may begin.

Thank you so much for welcoming today. I hope everyone can see the slides. The first one we're looking at, we're Thunderbird Entertainment. We are a pure content provider, creating content for all of the major streamers, including Netflix, Disney, HBO Max, Apple and all of the major broadcasters like Discovery, CBC, Nickelodeon, the list goes on. On the cover there is Molly of Denali, a show that we created with PBS, and most recently won the Peabody Award for -- the award matters to us because it ties into our mission statement, which is to tell authentic stories that matter and that somehow try and make the world a better place. Just going there is our forward-looking statements. Our executive summary. That's Kim's Convenience, another show that we do. It's an original IP. You may see that on Netflix. It's a big hit. And here's our executive summary. So we are a company made up of 2 main driving divisions: Atomic Cartoons, which is the Kids & Family; and Great Pacific, which is our Factual division, which does show like Highway Thru Hell and Kim's Convenience, which you saw on the former slide. This has never been a better time to be in content. The industry is booming. And companies like Thunderbird are uniquely positioned to deliver high-quality premium content that we own and then can exploit into many different forms of recurring revenue around the world. We have no corporate debt and our EBITDA is growing. So it's a really interesting time to be in an industry that hasn't been touched by the current world situation with COVID. In fact, it's booming. Here's moving into our corporate overview. Company overview. A little bit about the company evolution. It was founded in 2003 with a mission to create and own intellectual properties and leverage those incredible brands. This is a little trajectory of how we've gotten through to 2020, which is now a company of 1,000 employees around the world, Los Angeles, Vancouver, Ottawa, Toronto and growing. Never has there been a better time to be doing what we're doing and the reputation of the company is through the roof and -- not because of me, but because of the amazing work going on. And so the future is bright. This is a glimpse into our executive team. I think the key takeaway here is that we're all operational. We've all grown up in this industry, know the products inside and out, how to leverage it, and continue to do so. This is a look at our Board. Of interest here is that the Board is made up of people that have done this before. Frank Giustra and Marni Wieshofer teamed up to start Lionsgate in Vancouver and moved Lionsgate to what it is today in Los Angeles. This is a closer look at Atomic Cartoons, our Kids & Family Division. We recently won the Emmy for Last Kids on Earth. That's a show that we own. You can see there, it's based on a New York Times best-selling novel, consistently in the top 10 between sort of Captain Underpants and Harry Potter. And we've set up a toy line coming this fall with Jakks Toys as well as video game line coming early 2021 that has console, mobile and micro transactional games. I'm sure everyone out there listening with kids will relate to that. And this is an exciting way of not only do we list and sell the IP, in this case, to Netflix. We retain ownership. And then after Netflix has aired it for 2 years, we have the rights to distribute around the world in every country as well as capitalize on this amazing IP for many different forms as recurring revenue. Going on. Here are some of the titles we do. You'll see Molly, which has won the Peabody. We do work for Disney, like 101 Dalmatians, Rick and Morty. Some of you might have seen that. Hilda is another big hit. Just a snapshot of the amazing titles at Atomic. Again, just getting in, I think of note here is we've recently expanded into Los Angeles. That was a risk-free move into media studios with -- right between Disney and Hasbro where we sort of have 3 years' worth of work booked there and growing, and it was a way to tap into LA talents, more showrunners, more directors, utilizing our Canadian model and increasing IP ownership. We've also partnered with top talents on more upcoming IP. Of note will be Savannah Guthrie and Drew Barrymore with their New York Times best-selling book Princesses Wear Pants, which is sort of a new take on princesses about leadership. And the writers from The Simpsons to get into feature film work. Great Pacific Media, our other big huge driver, is that that's a look at Highway Thru Hell, which is probably the most popular Factual show in North America. And again, it's the same product we own all of the IP, and we leverage it and sell it around the world. And this high-quality IP that we own has never been more in demand. There's some look at the titles. I don't know if you see anything you'd like, $ave My Reno, Daily Planets. So by producing high-quality hits with great relationships, we're able to take those properties that we fully own and leverage it into many, many different revenue streams. This is a look at Great Pacific. Of note, they own 100% of their own IP and have been generating multiple renewals and revenue streams. And interestingly, tying together Great Pacific Media and Atomic, they're both hallmarks of what the streamers are looking for right now, which is a co-viewing strategy. How to get the family in front of the TV together? Well, what gets them together, it's things like documentary style shows and kids and family shows. Our response to COVID, we've been very grateful to our amazing IT teams. There are some pictures of everyone off-site. We were able to get 100% of people off-site with no disruption to production. We're extremely grateful that we were able to not only survive but thrive during this time. And in some ways, it's further opened our business because we're no longer constrained to the four walls of our buildings, whereas normally in a situation, if we plan to do an off-site model, it probably would have taken 18 months, but because it was reactive and our partners such as Disney were on board, we were able to meet their Tier 1 security protocols and continue to successfully do the work we are doing as well as start new shows and continue to turn them on. Going to the next slide. You can see here just some look at what the pandemic has done to the streaming boom. It was healthy before. And now of course, it's through the roof as people continue to watch content at home rather than going to theaters or going out. And again, if you're looking for a way to enter into this industry, no one is better positioned than Thunderbird with wholly owned IP and the relationships and delivering top-quality content to all of the major players. Going forward, I'll get into our industry landscape. And here, again, is the escalating demand for content. I think what's interesting here is all of these players entering into the streaming wars aren't start-ups. They are major, major players like Apple and Disney. And they're entering in because it's such a lucrative business. Coming up will be 5G, which again is going to be taking you from watching content. It's like going from a gardening hose to a firehose in terms of how quickly you can download content and watch it anytime, anywhere on any device. Here, we can see the spending, the commitment to content. Streamers constantly need to refresh their sites. They're managed based on subscription. So it constantly needs new high-quality content to keep people glued and subscribed, and this is what has been publicly announced in terms of the commitment to content spending. The industry drivers, I've touched on everybody entering into the market. To start, many more people for us to sell our amazing content to. It's also going global. It's not just North America, around the world. And again, Thunderbird is at the height of that. And because we own the IP, we can continue to leverage it and create more recurring revenue. It doesn't stop when we sell the show. Here's our financial overview. This is just a sampling of customers that we sell to daily and the reach that we have around the world. The business model, there's IP that's wholly owned that we can then leverage into anything from video games to toys to, who knows, gaming shows, Cirque du Soleil shows, you name it. Examples of wholly owned intellectual property at the company would be Highway Thru Hell, Last Kids and Kim's Convenience. There's many more services or shows that we're approached and more cash flow, plus hefty producer fee on top. And that's a really nice model as well. Examples of that would be 101 Dalmatians and Hilda. Partnership models are when people like Netflix come to us and because they need to turn on so much content, they ask us to handle everything from soup to nuts, shall I say. We hire the writers, we handle the creative, we deliver the whole thing. For that, we're cash flowed, we get a producer fee, and then we get a cut of the back-end, any consumer products and merchandise. So another chance to get up to the plate for these properties with. When IP hits, boy, can it hit. Moving on to the next slide. We also have a large library of shows that we distribute and create another, again, more forms of recurring revenue. Examples of that would be Cold Squad, Da Vinci's Inquest. You can see the titles there you probably recognize. The key takeaway is that the revenue continues to grow. These titles exist in our library forever, plus ones we're adding on like Last Kids and whatnot. And that they're needed around the world and there's no time line. People are constantly looking for new content to add to their emerging streaming sites and broadcasters are as well. Unique thing about Canada domiciled company, we're based in Canada, even though we have presence -- huge presence in Los Angeles is the unique tax credits incentives. I think the way to look at this slide is that we can put more on the screen. The Canadian government fully supports this industry. Vancouver, for example, is the #1 hub in the world for visual effects and animation. And these subsidies based on labor just help us become an unbeatable model to go with. We show up, we've got the right creative, we're working with the creators, we can execute against it. We've got the facilities to do so. And we can bring tax credit incentive to the table. It's very hard to say no to. A look at our condensed balance sheet. We will get into that. I think, again, we're debt-free and growing. We've managed to fuel our growth through high cash flow on our successful shows and reinvest in ourselves and grow this company to where we are today and growing without incurring any debt. Gives us unique opportunity to be opportunistic. Here's a little bit of our trading information and capital structure. In corporate debt, again, nil and high insider ownership with committed shareholders. Moving on. I think this is my favorite slide. Just talking about where we're going. So we are building out our consumer products and IP, distribution division, so that we can further own more. It's just about increasing ownership. And so instead of hiring anyone to distribute or set up our gaming and toy game deals, we're going to be doing that ourselves with some key talent. So this is an internally fueled growth. The expanding presence in Los Angeles allows us to have boots on ground, continue to tap into those relationships. And people are coming to us to turn on more and more work. We're also going global. So looking at how we recognize content by key joint ventures and partnerships with countries that, for example, France where 30% of everything they do needs to be French for all the new streamers, and they've got great tax credit incentives similar to Canada. Those ventures allow us to turn on more content, recognize it as owned and then run it through our IP, CP and distribution division, which increases ownership and leverages recurring revenue. Here's some of the investment highlights. So we're, again, rapidly growing. We had $10 million of EBITDA in fiscal year 2019. Watch for that to go up. Zero debt. We're working with all of the best partners around the world. And we're highly regarded as a trusted authentic company that tells stories that matter. Molly of Denali, the cover being a great -- recent example of that. The Peabody award has been around since 1921, and it recognizes excellence in storytelling, which our company could not have been more proud to have been awarded. So that's a glimpse into us. We do have a Q&A. Happy to answer any questions as they come in.

So I'm seeing here, stock price has jumped over the past week. Why? It's interesting. We've just started doing investor relations. So we recently hired Bristol. I am extremely operational, so when they asked me -- Frank Giustra, who started Lionsgate, he asked me to step forward as the CEO. We needed a while because my hands are still tied turning on all the shows, working with all the clients, hiring the key talent, et cetera. And so only within the last 2 months have we been lucky enough to work with Bristol and start to get our story out. We really haven't capitalized on being a public company or taken our story to the next level. I'm just seeing if there's any -- I'll refresh to see if there's any more questions. I don't see any. Let me just check. It does look like there are more. Here we go. Your TSX trading was spotty and OTC trading is essentially nonexistent. What types of investors are you interested in? That's a great question. So we're on a venture. We're in the process of getting it to be a little bit easier for people with OTC to buy us. We're transferring over with the goal of getting towards the TSX. We're interested in investors that are long-term investors. We're sticking to our core business. We're not going to be managing to the corridor. This is a long-term growth story. We are set to become a major studio like a Dream Works, like a Pixar. The map is there. And so we want people who want to stay with us. As the story grows, we will be managing to the corridor. This is a growth story. And so we're interested in people that believe in the story and want to stick with it. That's a great question. Another question. How much of the revenues are recurring from the licensing or resale of the IP library? It changes from project to project, but I would say, overall, with -- when you look at our IP, leveraging that with toys and whatnot and our recurring sales of the IP and distribution, well over 60% and growing. But we still make healthy profit on getting paid to do the shows. We don't create shows for nothing. The streamers, the broadcasters pay us very well in and of itself just to make them. What is the main -- and the next question, moving on, is, what is the main inflection point that investors should look for? I think we follow some of the amazing IP that we're setting up. You can look to a company like eOne out of Canada that was bought from Hasbro for $5 billion. That was based on Peppa the Pig and PJ Masks. Those 2 properties. I think following the industry, looking at the incredible demand for streamers, and if you do your research, it's clear that the relationships that Thunderbird has through Atomic Cartoons, the Kids & Family Division, and Great Pacific, their Factual and Scripted division. The work we're doing is highly, highly respected. It's global. And the demand continues to boom. So we're extremely grateful to be working in an industry that is thriving and no end and stop. Let me just refresh and see if I missed any of these good questions. Okay, I'm waiting for it to refresh. Here we go. Here's another good one. Has COVID influenced what you can produce these days? That's a great one. Yes, it has, [ Thrush. ] It has. Live action, sort of where you get 250 people on set, is unable to shoot. So the only show we had affected by that was Kim's Convenience. That's a live-action show. But we were in writing phase. And because we're in Canada, we can start shooting that in September. What that did was give our company actually a larger competitive advantage because we're so heavily based in animation. And Factual, through animation, could easily get off-site. We invested sort of less -- around CAD 200,000 on special technology to make sure we're meeting Tier 1 security protocols and animations seamlessly went off-site, as well as Factual, which is more of a gorilla style of filmmaking, smaller documentary crew. And so that, again, was able -- because those are 2 main drivers, we could produce. So people that had heavy presence in Scripted or live-action where you get you need sort of 200 people onset, it was more difficult to navigate COVID. Last question here from Taylor. What sort of acquisitions would you look for and why? It seems to you like you have a lot of organic opportunities right now to focus on. I love that question. We're looking for M&A opportunities that tie into our core business. Because we are debt-free and growing, there -- and because of the situation in the world, there's probably going to be some opportunistic M&A coming up. But it needs to tie into our core business of growth in terms of turning on more IP and ownership and creating more of a global presence around the world. So I think acquisition opportunities would be, an example, buying a studio that's already accretive in another country where we can recognize full ownership of that IP that has to be recognized regionally and increase our presence globally. We aren't going to make any acquisitions to manage the quarter or that are distractions just to raise EBITDA. It has to tie to our core business and long-term strategy. And we've been very fortunate to fuel all of this organic growth internally with no debt. I'm just going to refresh. I think there might be one more question that we have time for. I'm just double checking here. I don't see it. It takes -- I apologize to all the listeners. Here we go. Any update on the toy line launch for Last Kids? Again, from Taylor. Yes, it's launching in earnest this fall online. And the video game will be launched next spring in consort with -- we're doing interactive -- series of interactive episodes for Last Kids with Netflix. So it's sort of a choose your own adventure, the way we used to read those types of books. You can go on and pick which ending path you want for Last Kids. The video games from Outright will be launched alongside that with console, mobile and micro transactional elements. And the book is quest-based. We've only covered 3 of the books. There's 6 out, 10 plans. And that presence of an already well-established beloved book brand translating into a true franchise is exciting to watch. And it's not only what Last Kids you can look to. Other shows like Princesses Wear Pants that we're setting up with Drew Barrymore and Savannah Guthrie is set up the same type of trajectory. So I believe that's all the time we have today. They ask me to stop talking at this point. I really want to thank everyone for joining and look forward to any follow-ups and appreciate you taking the time to learn about Thunderbird and your interest in the company. Thank you so much.

This concludes today's conference. You may disconnect at this time. Thank you for your participation.