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

Hello, and welcome to the Thunderbird Entertainment Investor Presentation. [Operator Instructions] It's now my pleasure to turn the call over to your host, Glen Akselrod of Bristol Capital. Glen, please go ahead.

Thanks, Kevin, and thank you, everybody, for joining our webcast today with Thunderbird Entertainment. Again, the purpose of today's presentation is to introduce the company and to give our audience a better understanding of the business through a PowerPoint discussion and then a Q&A with the management. That discussion will be led by Jennifer McCarron, company's CEO, who is also joined on the call by Barb Harwood, CFO; and Mark Miller, President. We will break for Q&A at the end of the formal presentation. When we do break, we encourage questions. And as a reminder, we're only going to be taking questions via the web portal. If you're listening on the telephone, please access the web link sent earlier to ask a question. Remember, you can submit a question using the question text box within the webinar portal at any time. I will ask the questions on the air for everyone to hear and management will then answer. I will not reference any names but simply read the questions asked. As we have a very large audience today, if I can't get to your question online, and it has not been addressed and can be, I will come back to you via e-mail. If for some reason you're experiencing any issues, once we start, please remember you could e-mail me at glen@bristolir.com, and I'll be happy to assist. I'm not going to read the forward-looking statements, but I do state that they apply, and I reference them on Page 2 of this PowerPoint. With that said, once again, thank you for joining us. Remember, this is fairly informal, and we do encourage Q&A to help you better understand the business and its growth path. And now I'll turn the call over to Jennifer to start her part of the discussion and presentation.

Thank you so much, Glen. I'm Jen McCarron. I'm CEO of Thunderbird. Starting out, looking at our first slide. Here's Thunderbird. It's who we are. We're a pure content play, doing really high-quality entertainment and for many, many companies around the world, and I think the thing that's interesting about this first slide is, that's Molly of Denali, we won the Peabody award for the show, which is the recognizing stories that matter. Our mission is to make content that makes the world a better place, provide a healthy escape for people, especially during these strange times. Here's our forward-looking statements. Our executive summary, that's Kim's Convenience, the show you might know from the CBC. I think that the main takeaways I'd like everyone to hold on to are we're a micro-cap company with revenues of $61 million and EBITDA of $11 million and growing. We have partnerships with more than 250 distributors and streamers globally, including Netflix, HBO Max, Apple TV, Nickelodeon, Discovery, Disney+, CBC and more. GPM and Atomic are our 2 main divisions, factual, and kids, and family. And our award-winning team of 800-plus talent is drawn from all studios. And just this summer alone, we've won an Emmy Award and Peabody, Television Critics Award and more. Our extensive library continues to generate recurring revenue with titles like Da Vinci's Inquest, Beat Bugs, Cold Squad and properties like Last Kids on Earth, Highway Thru Hell. We're setting up toy lines, video games, tons of recurring revenue. Moving on. Here we are, a little bit more on the executive summary. Again, main takeaway here is that we have no debt. So with everything going on at a time when content is exploding and I would say we're in industry dialing in the content space, we're uniquely positioned to capitalize and be nimble. Heading into the company overview. The company was started in 2003 by our founder, Tim Gamble, and he had a vision to create and lift IT. The highest quality is what will stand out right now. And that is what we're doing and leveraging that into many different forms of recurring revenue. The trajectory of the companies we -- Thunderbird then purchased Great Pacific, Atomic, and we've opened studios in Los Angeles, Vancouver, and Ottawa, and are 800-plus strong today. I look at our experienced executive team. The main takeaway here is that we're all operational. We've all grown up, produced many, many shows and are deeply involved and hands on with the business. Our executive directors, we have an interesting and amazing combo of Marni and Frank, who started Lionsgate together out of Toronto and took that to Los Angeles. And that's where our studio is going. We're on our way to be a major -- the similar trajectory with the mentorship of people like Frank, Marni, and Brian, and our founder, Tim. Atomic Cartoons is the first division I'll speak about. That on the cover there is Last Kids on Earth. This is one of many shows that we own and are setting up into many different forms of recurring revenue. There'll be a toy line with JAKKS this fall, video game with mobile micro transactional and console games this spring, and these amazing New York Times best-selling book regularly between Captain Underpants and Harry Potter is one of many high-end branded properties. This one is on Netflix. And we're also launching some interactive episodes, Choose Your Own Adventure in the spring of '21 to complement the video game line. Here's some other titles from Atomic, some ones you might note meant to see are 101 Dalmatians for Disney. We have Lego Star Wars with Lucasfilm. Hello Ninja is a Netflix offering. Rick and Morty, some of the older fans out there might recognize. Beat Bugs, which was the first kids and family original picked up by Netflix and started our relationship so strongly many years ago. As another slide up here on Atomic. I think the key takeaway is that we've continued to expand when increasing presence in Los Angeles that gives us boots on ground with everyone that's buying and an incredible workforce and talent base to execute on that work and growing. We have increasing partnerships with more IP coming in. A recent example that include Savannah Guthrie, Drew Barrymore. We're doing their New York Time's best-belling book Princesses Wear Pants. And we've joined forces with the writers from the Simpsons to also commence a future film line, where we have ownership in that. And boy, there are a lot of people to sell content to you right now. Great Pacific Media, our amazing factual division. On the cover there, you'll see Highway Thru Hell. Every single thing Great Pacific does is wholly owned. They are a global leader, and some of the titles you'll recognize here are Save My Reno, Queen of the Oil Patch, Daily Planet, the list goes on. Interestingly, with Great Pacific, they have a data-driven AI approach that can predict rating success and the rhythm of shows to help draw people in. They have 100% owned IT again and are absolute leaders in ratings and renewals. Moving on. I think part of what makes us so successful, especially in the creative industry is the talent working for us. This is just a sampling of companies that people have left to join Thunderbird. You'll see Disney, National Geographic, Pixar, et cetera. And this world-class talent is coming to Thunderbird because they, too, see something special happening and how uniquely poised we are too, indeed, be a major studio. Interestingly, at these times, our response to COVID. We managed to get 100% of our staff off-site. We didn't miss any deliveries, didn't miss a beat. And if anything, our company has benefited from the pandemic by people watching so much content. And the 2 main drivers of the company are animation and factual. Well, both of those can work. They are able to shoot guerrilla style film making with our factual, Great Pacific Media, and animator can, of course, work from home. So not only were we able to survive, we've been able to thrive. Additionally, what all of the buyers are finding is that they're looking to glue that elusive co-viewing audience, which is families who mean portals, our kids and family material or documentary-style factual television programming. So there has been an increased demand, and we are able to work unlike live-action where you can't get 200 people on a film set. Moving on. This is just sort of underscoring what I've been saying, the incredible streaming boom that we're seeing. And it was hot before, and it just continues to get hotter. Checking in under industry landscape, hugely escalating demand for content, the people coming into the marketplace to give people like Netflix a run for their number are large start-ups. They're Disney, they're Apple, et cetera, and their commitment to spending on content that we can then own, sell to them, and then leverage into many other forms of ancillary business to create recurring revenue is -- again, there's never been a better time to be doing what we're doing. The launch of 5G will also further drive that demand. That's like going from a garden hose sort of onto a fire hose, and people are going to be able to download content anytime, anywhere on any device. Content spending, again, on the rise. We can take a look at some of the people that we work with. We have shows set up at Apple right now, Hulu, Amazon, and Netflix, everyone here and their commitment publicly to spending for content because their merit is based on subscriptions, and they have to constantly renew content on their platforms to glue those subscriptions, especially kids and family and factual, which, again, Thunderbird is uniquely poised. The industry drivers, the entry of the tech giants really have been a game changer. And direct-to-consumer is showing no hint of slowing down SVOD and AVOD. They need this exclusive content. Moving on to our financial overview. Actually, there's a -- that slide got enough. So I'm going to go to 23 here. Sampling of customers. This is just everyone that we work with and many, many more. Thunderbird's reputation is through the right roof as a quality provider that operates with integrity and create hits, and that is a good bunch of people to be working with. Our business models, to give you a 500,000-foot overview. Essentially, there's 3 business models. Intellectual property is 100% owned. That includes titles like Highway Thru Hell or Last Kids on Earth and Kim's Convenience. When we 100% own something, we will sell it to somebody like a Netflix or a Discovery Channel, where they have a window of exclusivity. We then get that property back after a predetermined window to sell around the world. Additionally, we can translate any of these properties into toy lines, consumer products, video games, and that sort of things get quite exciting. We have a very healthy service business. An example of that would be 101 Dalmatians or Hilda, you might have seen. And that's when we're approached by companies like Disney to take one of their heritage franchises of beloved 101 Dalmatians, and they will cash flow our production plus very healthy producer fee to execute upon the work. The third bucket is a partnership model where people will come to us. An example would be Hello Ninja like Netflix to execute on the whole entire production from soup to nuts, hiring the writers' right through final post production. And because they need to turn on so much content, they need partners like Thunderbird that are completely full service and can handle absolutely everything for them. And for that, they will cash flow it plus a healthy producer fee plus a piece of back end will get a slice of any consumer products that are lifted for handling the entire production. Moving on. Our library is also of note. These are titles that I mentioned in my introduction, like Cold Squad or Da Vinci's City Hall, where we are able to sell around the world. So these also are titles drawn from GPM or Atomic that we can then distribute to anywhere, like, you name it. Everybody is looking for content all of the time on either traditional broadcast or streamers, and it's a very substantial cash flow going forward with our ever-increasing library. The tax incentives are unique to Thunderbird and to Canada, and this is a really compelling offering where the Canadian government essentially gives a rebate on Canadian labor, and it can be quite lucrative. We can put more on the screen. And it's almost impossible to say no to us as a Canadian studio. When we bought all of the relationships, they can see how we can execute against it. We're an ever-growing, emerging, award-winning studio, and then bringing the tax credits to the table is almost a no-brainer that we're turning on more and more work. With that being said, I will pass the next slide, 27, over to Barb Harwood, our CFO, to walk us through the financials. Barb?

Thanks, Jen. Hi, everybody. Happy you could join us today. I'm just going to go through the balance sheet and the income statement and highlight maybe 4 main things on the balance sheet and then kind of walk through quite briefly on how we recognize revenue and related expenses on our projects. On the balance sheet on Slide 27, you can see that we've got quite a high number on trade receivables and other. That's basically -- about 85% of that is tax credits receivable. The way the tax credits work is that you claim them after the project is done on your tax return, and so they do take a while to come in. And they do form quite a large basis of our financing, and that's what makes the company such a good thing to be in Canada to get those tax credits. The second line item, investment in content. That's the line item where our IP projects sit. So in there are our projects in development, our projects that we own that we're currently in production with, and some of our released projects are in there, too. Basically, what happens is, as we produce a show, as we work on a show, it sits in that line item until it's delivered to the final broadcaster, and then once it's delivered, we recognize the revenue and we amortize some of those costs. So if we own a show like Last Kids, which has a long pipeline due to the fact that it's animation, we can be working on that show for 2.5 years and have the whole studio full of animators working on the show, but we don't recognize the revenue until it gets delivered to Netflix and until Netflix can exploit it. The third line item, property and equipment. You can see it's got quite a jump from 2020 to 2019. That's due to a new accounting standard that came in called IFRS 16, whereby all our leases, all our rents, everything have to now be capitalized as right-to-use assets and then amortized over time, whereby they used to be expensed as we incurred the expense. As an offset to the property equipment, the liability of those leases are set up as long-term lease obligations and current lease obligations. So that's the other line items that kind of match up with the property and equipment, and that's why there's such an increase between 2019 and 2020. The other line item in liabilities I just want to highlight is the interim production financing. Basically, all of our projects are fully financed before we start production. They're financed with a combination of the tax credits, as mentioned, broadcaster licenses, licenses from the OTTs like Netflix, and sometimes some other government funding if they're fully Canadian content. The timing of the payments from the broadcasters and the tax credits, of course, is different than the timing of the cash outflows. And so each production, we take it to the bank in interim production finance, it's basically like factoring receivables. The Slide 28, just want to turn over to the income statement and talk a little bit about how we recognize revenue and expenses. As I mentioned, when we own the copyright in a show and it's our own IP, we recognize it once we deliver it to the client and once it can be exploited by that client, and then we amortize some of the costs on different basis, depending on the future economic viability of that project. For production services, as Jen mentioned, that's the other type of show we do, and partnerships. We recognize the revenue and the related costs as we go kind of on a percentage of completion basis like the construction industry. The other line I want to highlight here is just the amortization of property, equipment and intangibles. Again, that's where, under the new accounting standard, IFRS 16, we amortize the right-to-use assets. So that's why it's come on up. And yes, as of our 3 months, March 31, we were hitting EBITDA of $11 million as compared to our year ended $8.2 million last year. So we're well on our way to beating our last year's numbers. Back to you, Jen.

Absolutely. And I just -- this is my favorite part. Again, our 0 corporate debt, which, especially right now, allows to be quite nimble and secure in our growth, which we've been able to fuel organically. The growth opportunities, again, we continue to acquire IP that we can translate into every different exciting form of recurring revenue you can think of, skating shows, Cirque du Soleil, you name it. We have expanded our presence in Los Angeles. That was due to the volume of work. We were booked. It was a low-risk expansion, gave us more access to amazing show runners, directors, and that increased and boots on ground allows from our sales, more ownership. We are building out our own consumer products and distribution division. This will further pull those divisions in-house, increasing ownership so that when we distribute around the world, we don't need to pay a third-party to do that for us. And we will set up our own toy line deals, our own video game deals, again, just increasing ownership. International expansion, as we look to where streamers are going to turn on more subscriptions, we have unique opportunities to expand our presence internationally by having a footprint in territories around the world that especially have proactive governance, where they are making provisions that any content turned on in the region, let's be local to that region. We'll have an opportunity by having a presence in these countries to own that content and then funnel it through our consumer products and distribution divisions. We are looking at strategic acquisitions that feed into our core business. We're not interested in roll-ups simply to get bigger for the sake of being bigger. We do have -- we're a highly technical company. Much of what we do is based on technology, and we've written a lot of our own and continue to expand, looking in that area. Again, because we have 0 debt, we are nimble. And we're continuing to improve on our operating results, as Barb described. And we're, again, getting into feature films. People can't get into theaters anymore, but Boy Oh Boy are these streamers buying features, our first offering, which I mentioned earlier. Stay tuned for that. The investment highlights. In summary, we're rapidly growing, we're highly profitable. We have 0 debt. We're working with world-class partners around the world. Our reputation is exceptional, not because of the management team but because of the people working at the company and the work that we're delivering and winning awards for. We're at a time of huge growth and an ability to be nimble through that growth. And I think that never has there been a better time to be doing what we're doing with a true mission to try and create content that makes the world a better place. And even if that's as simple as providing a healthy escape for people during this time or allowing parents to boil potatoes safely while their kids are watching an episode of Beat Bugs, that's a win for us. I'm extremely proud to be part of this company, and I really want to thank each and every one of you for joining and listening to our story today. Thank you so much.

Super. Thanks a lot, Jennifer. I guess that concludes our formal presentation. And to our audience, if you have a question, please use the question-and-answer text box. We do have a number of questions in the queue, Jennifer. So I'll just start firing away at you, and I'll try to combine some into one as they are reoccurring themes. So first question is, how many hours of programs are in your library. And of your $61 million in revenues, how much of that is reoccurring in nature?

I will pass on the library because Barb is doing the audit right now and the recurring revenues over to Barb.

Yes. Actually, I'll just comment on the library thing. It's up -- we have in our library, probably upwards in the 800 hours. And then -- I mean some of that is obviously out and spoken for in different territories and stuff, but we do have quite a bit of content. Of the $61 million, well, I consider reoccurring revenues to be also things like series that constantly renew. So in other words, Highway Thru Hell is now in its 10th season. It's hit its 100th episode. I see that as reoccurring revenue. It does incredibly internationally. So under those definitions, I'd say probably reoccurring revenue, at least 50% of that $61 million.

Perfect. And I guess a similar question from another audience member is how much visibility would you have into 2021 in terms of your revenues?

Yes. We have -- I might defer to Jen here, but...

I think we're going to say the same thing.

Yes. We have great visibility. Yes.

Yes. We're booked. And it's looking awesome. Yes, it's great. We're booked.

Very good. Next question. Employees are obviously coming from other companies to join Thunderbird and hoping that Thunderbird becomes a major studio. Can you please talk about your compensation/stock equity ownership that you possibly provide as opportunities for these employees or any? And also talk about the subsidies that you receive in the process of, I guess, generating shows.

Yes. So I probably can't go into too much detail since its contracts with people. The reason -- main reason people are joining us because they are a voice at the table. They see the trajectory line. We do have an employee stock option plan. And our -- we have full benefits for any of our employees. Even if people are hired on contract for the duration of the show, we hire them as employees, try to create a culture where we're putting the employee first with RRSP matching or 401(k) in the U.S. Really, we want people to participate in the success of the company, and the employees deserve that. Another unique offering is that when you pitch a show at Thunderbird, most companies, if you have an idea will instantly own that that idea. We don't do that. We let the artists be artists. They -- if we want to develop the idea with them and lift it, they retain ownership. We will help them do that and participate in that. But again, we're putting employee ownership and -- first.

Okay. Super. I'm going to combine a couple of different questions into one. It's regarding your L.A. studio. So first off, how does the L.A. studio help you? Then the next part of that is, can -- how does the L.A. studio affect your margins, given that you have a Canadian tax benefit? And then the third part to that question is, can you just comment on any potential issues of the U.S., Mexico, Canada free trade agreement?

Certainly. So the first, L.A. helps us because the people that we've hired are -- they've come to us from DreamWorks, Nickelodeon, you name it, incredible group, and they have the relationships. So even during COVID, they're spending their weekends hiking with people from Netflix and whatnot. And that -- we can't do that from Vancouver. As well, they're incredibly talented creative bunch. It's a hub of the industry. It also gives us access to some of the world's top show runners. Scott Peterson, who's the show runner on Last Kids on Earth that I can speak of was the show runner on Phineas and Ferb. And so that talent puts us above the line, and it also continues to bring up everyone in the company. And with regards to the tax credits, certainly, there is a bit of a hit in terms of the labor, but the volume of work, it certainly offsets that. And even though we'll have a presence in Los Angeles, we'll always still have a presence in either Vancouver or Ottawa or Toronto to offset that. We -- the majority of the work will still happen in Canada and often be directed from Canada. We look at every production as its own entity and what's the best way to do the best possible work and put the most on the screen because you're only as good as your reputation. With regards to free trade, any issues, we don't see any whatsoever in that arena.

Okay. Jennifer, I've got a question from the audience for somebody who'd like to know a little bit more about your personal background and I guess your path to Thunderbird. And then a couple of follow-up questions on that.

Certainly. So I graduated from University, instantly got into the industry. Was -- started out as an office production assistant at Mainframe Entertainment where they were doing ReBoot, which was the first computer animated television series of all time. I think in fact it's in the Smithsonian now. And I worked my way up through the industry. Anytime a door would open a responsibility, I would work through it and took the promotions as they came. I was running Rainmaker Entertainment when I was on my last maternity leave, and Atomic Cartoons had called and said, we'd love you to come over and run our studio and join us. And at the time, they were only 20 people. And so I thought, well, that would be fun to be part of a build again. So I joined. And together with the talent who's doing all the hard work, we managed to grow the studio to over 500 people. Thunderbird had a show called Beat Bugs, which was the music of The Beatles that they had optioned and owned the rights too, and they needed an animation company to produce it. So they looked for the best up-and-coming animation company, found Atomic, and we decided that if the production went well, we would stop dating and we would get married, which is what we did. And it was, again, a hugely successful first kids and family original offering for Netflix. And after that, Thunderbird purchased us, at which point, prior to going public, they wanted the CEO for the full company. And I was honored to be asked to be -- to step into the CEO role for all of Thunderbird at that time prior to going public in the fall of 2018.

Super. Shifting a little bit, what are your capital market strategy when it comes to potentially an uplift in the U.S. major exchange?

Yes. We are determined to have more of a U.S. presence. Barb, do you want to speak to where we're at in terms of that trajectory?

Yes. I mean, just to say that there's constant conversations amongst the leadership team of what the next direction is, and definitely, we're looking to the U.S. to see if we can fit in there as soon as we can.

Okay. Super. And then another question from the same individual is, have prices paid for content gone up or is it just higher demand for shows?

I would say it depends on the offering. There's certainly -- if you get a property that you auction that has -- is hot, then you're going to create a bit more of a bidding more. And because there's so many players looking for content right now, it's a great time to create that marketplace tension. Across the board, prices, I think, are fairly stable unless you get that hit that you've developed. And what's increasing more so is the overall volume.

Okay. A very quick follow-up question to the revenue discussion we had earlier. What percentage of your current revenues come from services?

Barb, do you want to handle that one?

Yes. Yes. Sorry, I don't have that off the top of my head. It's probably -- I think it's probably about half. It's disclosed in our MD&A. Yes. It's disclosed in our MD&A in Q3.

Okay. Sorry...

I don't have that. I don't have that off the top of my head.

I will give you this... We'll get back to the individual who was asking the question. I've got a number of questions here, I guess, about Highway Thru Hell, given, I guess, it's one of your bigger shows. Can you talk about what the average audience is for a show like that and I guess, extrapolated to a typical hit show? And then a follow-up to that is, do you generate any revenue from ads based on ratings within these type of shows?

If Mark's on line, he would be best to address Highway Thru Hell. He created that company and runs it so successfully today. Is Mark there? No. Well, I will jump in. So it is, I think...

I'm here, Jen.

You are, Mark. Sorry. Sorry, Mark. Go for it.

Yes. Second question first. We don't take any revenue for any of the advertising. We sell the show to the broadcaster for a license period, usually around 2 years in the international market. Then we go back and renew it. We'll look at the ratings data and then arrive at a new renewal price. So that's sort of how we get rewarded there. And then in terms of total ratings, currently, Highway Thru Hell, Heavy Rescue and then the third spin-off from the series all run on Weather Channel in the U.S. And Weather Channel in the U.S. is the largest cable channel in the U.S. that isn't sports. It's in over 100 million U.S. homes. So in Canada, the show generates well over 1 million views per week, and then that continues to grow and repeat in the U.S. It depends on the night, but it's often in that sort of $3 million area. And then internationally, it runs in 200 other territories and in 40 languages around the world. So it consistently has rated #1 in the U.S. and #1 in Canada. It was on Netflix. I think that license is just coming up for renewal now, and that's why we continue to get renewed. We're going into our 10th season as we speak.

Perfect. And then maybe as a follow-up from a different audience member. On a show like Highway Thru Hell, what does that generate in terms of revenue and EBITDA per season? And then do you disclose or you can give me comment on how much you pay, I guess, some of these factual actors on your shows?

Yes. So because it's a documentary series, we don't pay anybody. This is what makes us fundamentally different from a reality show. Our company is focused on creating authentic, original real stories, where, ironically, reality shows are often soft-scripted. They should actually be called unreality shows because they're not real. Our company focuses on real. And as a result, we don't pay anybody. People participate because they want to tell the story. If you look at Highway Thru Hell, we have fundamentally changed the worldview of the tow truck driver who used to -- the tow truck driver is 8, 9 years ago was kind of greasy, a little bit untrustworthy. Now they're viewed up there with police and firefighters and ambulance attendance as heroes of the Highway. So that was a big goal, and that's why people participate in the kinds of shows that we make because they are real, accurate, and they tell a real story about a very difficult world that these people work and live in.

Perfect. And just the first part of that question, if you could comment on the type of revenues or EBITDA you could expect per season on a show like that, maybe perhaps without getting specifics.

Yes. I think that's difficult to do because when you combine a show like this with spin-offs, ancillary properties, gaming, it's difficult to pin down where the revenue has come from. Its one show feeds another show. In fact, we have a project in development with the team at Atomic right now and they do an animated version of Highway that's already starting to sort of generate some heat. So it's difficult to pin it down. It's also part of our competitive advantage. It's a -- we have a very unique way of financing our shows and doing our shows. And I think it's reflected in our bottom line if you look at our total EBITDA.

Okay. Super. I'll move on from that show now. Can you comment, and this is for any of you, where the 1,000 employees are located? And what are the numbers if you want to break them down based on function as a sales, creative or administration?

Sure. Certainly. We have currently around 150 coming up, 150 employees in Los Angeles. I think Vancouver would be around 650 right now and then another 150 or so in Ottawa and all growing. And then we, of course, have a smaller footprint in Toronto when Kim's Convenience is shooting, which will commence shooting again, luckily, this September 9. The breakdown, by far, in a way, is the talent. We have a strong and nimble administrative base that is housed in -- mostly in Vancouver, where our head office is.

Okay. In your PowerPoint, you talk about the potential acquisition strategy, and clearly, there's a history of that. Can you talk a little bit about what your criteria for acquisition is? What sort of things are you looking for as you go down that road?

I think it's, again, not a roll-up strategy, but a complementary strategic one. Number one would be a cultural fit. I think what sets us apart as a company is the very strong culture, one of diversity, inclusivity, putting the talent first. So number one would be culture and then moving into more strategic elements of -- they're doing something that we don't do. So do they have an international global presence? Is it expanding our technology side, which, again, we're heavily based technology company? So these are all things that are circling right now, and there's a lot of great opportunities presenting themselves and that we're actively seeking.

Okay. Super. Given that you generate a lot of cash every year, can you talk a little bit about how you guys think about reinvesting that cash into the business? Do you have a specific target or number that you think about?

I wouldn't say there is a specific target or a number. But because of the health of the business, we've been able to grow. Within the last years, we've opened up a studio in Ottawa. We've expanded into Los Angeles with 0 debt. So we're opening up the consumer products and distribution division, again, funneling that into the growth of the company that will then increase our ability to tap into more ancillary business and recurring revenue and the overall health of our corporation.

Okay. A follow-up to a previous discussion on tax credits. Is there any way you can monetize those credit receivables earlier than waiting for them to be paid after all the work is done?

I'll turn that one to Barb or Mark.

Well, we're using those tax credits to pay for the production. And so we interim finance the tax credits and then use the interim financing to pay for the production. So in terms of that, I mean, that's how we're using the tax credits. There's often pieces afterwards that the bank doesn't secure. They only secure like 95% of the estimated tax credits. So we usually get quite a bit more after that. And so we're able to use that cash after the fact and reinvest it into the company.

And just to pick up on that point, that extra money that comes in after the tax credit payments are made and we paid back the interim loan, we often can use that cash then to help cash flow the business. So that's part of the reinvestment part. It actually smooths out very nicely, certainly on the factual side, the timing of the tax credit payments. So we pay a very small fee to finance them but to smooth out the disbursement of those tax credits. So in effect, we are bringing them in early. They're a guaranteed thing. Banks write paper against the tax credit very easily. There's not -- there's no risk there at all, and we have a very efficient way of collecting those tax credits, tracking them and bringing them in. In fact, that's one of the things that sets us aside from some of our competitors is our ability to work within the tax credit system in arguably the most efficient way I know of in the industry.

Okay. And I guess speaking -- staying on this topic, do you use or incorporate any tax incentive monetization on state or federal level in your model in the U.S. and/or presales revenue?

In the U.S., in a sense, we do, for instance, with Mud Mountain, our new show, there is some U.S. money in that show, but it's still being produced in Canada with Canadian talent, even though it's partially a U.S. production. That's a big part of the service business is U.S. production will come to Canada. We did a series for TLC called Untold Stories of the ER, where the show simply wasn't feasible to be produced in Los Angeles anymore. We brought it to Canada, and we produced 8 more seasons of it by using tax credits on the Canadian talent portions, although there were many Americans working on the show as well. But we collect tax credits on the Canadian portion, Canadian talent, and that is helping finance the shows.

Okay. Jennifer, earlier on, I think in the presentation, you used a term fully cash flowed. Can you just expand on what that means?

Absolutely. So in the service model or the partnership model, we are paid for every milestone payment up front. So it's an interesting and healthy blend of service partnership with IP where you get paid upon delivery. So by fully cash flowed, I mean, you're never out of pocket. And even with IT, we aren't either because we just take the paper to the bag and interim finance it. But that's what I meant by that statement.

Okay. Next question. What might be the financial impact to build out the distribution and consumer products teams, including in international markets?