Thunderbird Leisure Group Inc. (THBRF) Q3 2024 Earnings Name Transcript

Thunderbird Leisure Group Inc. (OTCQX:THBRF) Q3 2024 Outcomes Convention Name Might 23, 2024 2:00 PM ET

Firm Members

Glen Akselrod – Bristol Capital
Jennifer Twiner-McCarron – CEO and Chair
Simon Bodymore – CFO

Convention Name Members

David McFadgen – Cormark Securities

Operator

Thanks for becoming a member of Thunderbird Leisure Group’s Q3 2024 Earnings Name. Glen Akselrod from Bristol Capital will learn the forward-looking assertion disclaimer.

Glen Akselrod

Thanks for becoming a member of us. We’re right here to supply a company replace and report on Thunderbird Leisure Group’s Q3 2024 outcomes for the three and 9 months ended March 31, 2024. Talking on right now’s name are Ms. Jennifer Twiner-McCarron, CEO and Chair of Thunderbird Board; and Mr. Simon Bodymore, Thunderbird’s CFO. Ms. McCarron will present a strategic overview of Thunderbird Leisure Group and Mr. Bodymore will assessment the corporate’s monetary Q3 2024. Following the company replace and monetary assessment, the decision will open for a question-and-answer session [Operator Instructions]. Alternatively, you probably have any questions, you may name 1-604-683-3555 extension 2, or e-mail buyers at thunderbird.television and the corporate will follow-up straight after the decision. At the moment, all strains have been positioned on mute to forestall any background noise. I would prefer to remind everybody that the sure statements made on right now’s name represent forward-looking statements or data underneath relevant securities legal guidelines. Ahead-looking statements and knowledge mentioned on this convention name embrace, however usually are not restricted to, adjusted EBITDA development and This autumn being the strongest quarter, sustained development and a return to historic profitability ranges, Mermicorno resonating with North American Children, future updates on the gross sales course of utilizing the NCIB opportunistically, yielding price financial savings in fiscal 2024, further income ensuing from One Animation manufacturing, modifications in complete income, future updates from broadcasters and timing of filming new films. Ahead-looking statements are based mostly on estimates and assumptions that whereas thought of cheap are topic to unknown and identified dangers, uncertainties and different components, that are set out within the firm’s most up-to-date administration’s dialogue and evaluation and different public paperwork filed underneath the corporate’s profile on SEDAR.

Though the corporate believes that the assumptions and components utilized in getting ready these forward-looking statements are cheap, undue reliance shouldn’t be positioned on these statements, which solely seem as of the date of this presentation, and no insurance coverage could be provided that such occasions will happen within the disclosed time frames or in any respect. Besides the place required by regulation, the corporate disclaims any intention or obligation to replace or revise any forward-looking statements whether or not results of new data, future occasions or in any other case. This convention name is being webcast reside and the archive will probably be out there on the corporate’s Website at www.thunderbird.television following right now’s name. Please word that Thunderbird experiences in Canadian {dollars} until in any other case acknowledged. Ms. McCarron will now present the company replace.

Jennifer Twiner-McCarron

Thanks a lot, Glen. My title is Jennifer McCarron, and I’m the CEO and Chair of Thunderbird Leisure Group. On behalf of the corporate, I would prefer to thanks for becoming a member of right now’s name to debate Q3 2024. Thunderbird CFO, Simon Bodymore, is with me and we recognize you taking the time to listen to the corporate’s earnings replace. As soon as Simon and I are completed, we are going to reply your questions and supply readability the place wanted. I subscribe to the previous adage that you must look again to maneuver ahead, and my function right here is to guide and help Thunderbird’s development. And significant to this success is knowing how each the businesses and the industries at giant historical past, which might inform our technique and function a motivational software for our groups. For instance, final 12 months right now, the Writers Guild of America elected to strike intently adopted by the SAG-AFTRA strike. Main streamers had been reducing their content material budgets and a number of other leisure and media organizations had been streamlining operational efficiencies. These, together with different headwinds, shifted and impacted the business, and the best way that it collectively moved ahead, exhibiting — showcasing resilience, I believe, tenacity and agility. Right this moment, throughout the business, the general outlook is starting to enhance. Positive factors are being made.

For instance, Disney not too long ago introduced that the corporate’s streaming enterprise is near profitability, which is a superb factor and that the leisure facet of the direct-to-consumer division turned a $47 million revenue in Q2. Throughout the Netflix Q1 replace, the streamer introduced that it had exceeded quarterly earnings and income estimates. Paid subscribers additionally elevated by 16% from the 12 months ancient times. Although Netflix shared that it’ll now not report paid membership beginning subsequent 12 months as the corporate turns its focus in the direction of rising revenue quite than simply rising its subscriber base. Amazon additionally revealed final month that its Prime Video service now has greater than 200 million month-to-month viewers. Together with their streaming promoting, Amazon CEO, Andy Jassy acknowledged that the corporate has growing conviction that Prime Video is usually a giant and worthwhile enterprise in and of its personal. A rising tide lifts all boats and the success of Netflix and our different companions generates extra alternative for Thunderbird as a trusted supplier of premium content material to all the key streamers. The necessity for A+ content material is right here to remain, and Thunderbird, Atomic and GPM are extensively generally known as the go to suppliers. Thunderbird has sturdy footholds in animation and unscripted content material and a rising presence in scripted, and a strong licensing and distribution providing.

Throughout the earlier a part of the 12 months, strategic price discount measures had been carried out to navigate these market uncertainties and pave the best way for funding in future development prospects. And our efforts to steer again in the direction of strong development are positively paying off. We’re delighted to share it that Thunderbird has not solely achieved profitability for the second consecutive quarter however can be on monitor to meet our adjusted EBITDA goal of greater than 20% development year-over-year for fiscal 12 months 2024. As we have mentioned beforehand, This autumn will probably be our strongest quarter this fiscal. And with clear perception into 2025 and ’26, we anticipate sustained development and a return to our historic profitability ranges. Our administration crew stays steadfast in its dedication to sustaining a resiliency and a powerful steadiness sheet and exercising prudent choices to navigate evolving market dynamics, whereas diligently pursuing sustainable development. Thunderbird’s success can be underscored by relationship constructing and growing consciousness of our manufacturers at key business occasions. Atomic’s head of manufacturing, Joel Bradley, not too long ago traveled to Eire to attend Animation Dingle, one of many premier animation targeted occasions in Europe, to symbolize Canada and Atomic amongst a powerful grouping of animation business leaders from Netflix, Disney, Pixar, BBC, you title it. The occasion lives and breathes the most effective facets of what the animation business is all about.

Members of our GPM crew are scheduled to attend the Banff World Media Pageant, Content material London, [The Real Stream Sentiment], the NAB Present and extra. And as well as, Richard Goldsmith, President of Thunderbird International Distribution and Shopper Merchandise, will probably be attending the TV Children Summer time Pageant in June as a panelist. Richard will probably be a part of a session referred to as the watching home windows, the place he’ll be part of business leaders as they talk about the present state of Children TV gross sales market and the way distributors are using new methods to maximise their enterprise. Moreover, our Atomic crew will probably be touring to Annecy, France for the yearly animation pageant, the biggest animation marketplace for exhibiting casing expertise, content material and consumers worldwide. Lastly, our Thunderbird manufacturers crew can be at the moment wrapping up a productive week at Licensing Expo, the world’s largest commerce present for licensing and shopper tasks business. They’ve met with most of the high toy, attire, equipment and promotions corporations within the US as potential companions for the corporate’s third occasion acquisitions, Mittens & Pants, and [Indiscernible] [Boost New] and our owned IP, together with Tremendous Staff Canada and Mermicorno: Starfall.

Talking of Mermicorno, the Thunderbird Model’s crew not too long ago shared thrilling updates with the announcement of further platform and licensing companions. The primary season of Mermicorno: Starfall will probably be made out there in Warner Brothers, Discovery’s streaming service Max within the US, LATAM, Latin America and the Caribbean, in addition to Cartoon Community LatAm and Southeast Asia. The sequence has additionally been acquired by Narrative Leisure’s Pop UK and Corus Leisure for Treehouse, Stack TV and Teletoon in Canada as properly. Thunderbird Manufacturers has additionally appointed the primary worldwide licensing agent for the IP. Corus Leisure’s Nelvana, a famend worldwide producer, distributor and licensor of kids’s animated and reside motion content material, will symbolize the sequence within the Canadian market, overlaying all main classes outdoors of toys and publishing. Mermicorno has all the precise components for achievement from tokidoki’s iconic type and Thunderbird and Atomic’s character pushed sequence to Nelvana’s retail and licensing experience in Canada. With Nelvana on board and the US program properly underwary, as Jazwares preps for a fall ’25 launch at specialty retail, Mermicorno: Starfall is bound to resonate with the American children. It is already a well-known and beloved tokidoki model.

The genres we play in, children and household and unscripted, additionally supply Thunderbird a stage of stability. I’ve mentioned it many occasions earlier than, Children content material is the stickiest content material, as a result of households are much less prone to unsubscribe. TV rev not too long ago observed that youthful shoppers and households stay a high goal for all streamers, as a result of this demographic is a reliably decrease churn threat. In a report by Parrot Analytics, it was acknowledged that kids’s programming is one style that’s constant in excessive demand but in low provide within the US. In actual fact, demand for teenagers programming exceeds provide on Disney+, Paramount+, Amazon Prime Video, Netflix, Hulu and Max. The report additional particulars the worth of the trusted children manufacturers like Disney, Cartoon Community and Nickelodeon, and highlights the potential of platforms like YouTube, calling it a go to vacation spot for teenagers programming. On the subject of unscripted content material for streamers, it may well supply a price environment friendly technique to maintain audiences engaged for an extended time period versus flashy scripted sequence. All through the pandemic and throughout the 2023 Hollywood labor disputes, unscripted tv emerged, showcasing actual world points, uncovering new untold tales and highlighting a various vary of voices and views, which has turn into so essential within the content material creation business. With scripted work now, nevertheless, is admittedly coming again into the fold, which is nice and the demand for unscripted work is anticipated to stage out, but it surely needs to be famous it has secured its place with audiences worldwide.

For our companions in children and household and unscripted and within the different areas of our enterprise which can be steadily rising, we stay a dependable accomplice and useful resource for delivering A+ premium content material, and we proceed to be acknowledged for this throughout the business. Not too long ago, the nominees for the 2024 Leo Awards, celebrating achievement in British Columbia movie and tv had been introduced. Large congrats to all of the Thunderbird groups who acquired a mixed 18 nominations. Once we succeed, our companions succeed, due to this fact, reinforcing the power and stability of our enterprise and model. We proceed to have a lot to be pleased with and I am unable to wait to be sharing extra thrilling updates on the horizon. Earlier than passing issues over to Simon, I need to share that the gross sales course of is ongoing, and I’ll share extra updates as quickly as I can. Our NCIB additionally stays in place and the corporate will proceed to opportunistically use the NCIB as we assess the most effective use of our money. And whereas we’re in blackout from doing that for the time being, given the method and no computerized buy plan, the aim of the method is to shut the valuation hole between the place we’re buying and selling and what we predict the enterprise is price and to create extra shareholder worth. Once more, we’ll give an replace on the method when applicable. And relying on the end result, we’ll regulate the technique round capital allocation accordingly and shortly. I’ll now move issues over to Simon to go over the numbers. We’ll then share particular updates from the groups earlier than we transfer to the Q&A. Over to you, Simon.

Simon Bodymore

Thanks, Jen. And good day, everybody. I am going to now take a number of moments to stroll via the monetary highlights of the quarter. Income for the three months ended March thirty first was $35.4 million, bringing our complete income for the primary 9 months of the fiscal 12 months to $113.5 million. This represents a $1.9 million or 5% lower for the quarter in comparison with final 12 months and a $15.5 million or 12% lower for the 9 month interval in comparison with final 12 months. Of the $35.4 million in present income, manufacturing companies accounted for $32.7 million or 92% of [revenues]. This represents a 1% enhance year-on-year. For the 9 months interval, manufacturing companies income was $94.3 million, 83% of complete income. Income from manufacturing companies was 1% decrease for the primary 9 months of fiscal 2024 in comparison with final 12 months. This income consists primarily of animation manufacturing companies and is acknowledged because the work is accomplished. This helps scale back the volatility of outcomes over quarters because the manufacturing companies income and the massive quantity and dimension of contracts gives consistency in income flows. Initiatives with vital revenues throughout the present quarter embrace Marvel’s Spidey and His Wonderful Associates, Zombies: The Re-Animated Collection and CoComelon Lane.

Licensing and distribution income was $2.7 million for the present quarter, 45% decrease than the income of $4.9 million recorded final 12 months for a similar interval. For the 9 months interval, licensing and distribution income was $19.2 million, 44% decrease than the $34.3 million recorded final 12 months. The decline is on account of fewer tasks being produced and delivered throughout the present 12 months. Within the present quarter, income was acknowledged from the supply of eight episodes of the unscripted sequence, Timber Titans. Within the comparative quarter, 13 episodes of the unscripted sequence Heavy Rescue: 401 had been delivered in addition to the popularity of a distribution contract for the primary season of Reginald the Vampire. Income from Reginald the Vampire Season 2 will probably be acknowledged within the fourth quarter of fiscal 2024 as that season not too long ago premiered on Syfy and CTV’s Syfy Channel. The corporate reported web revenue after tax of $5,000 for the present quarter in comparison with a web loss after tax of $2.3 million in the identical interval final 12 months. For the 9 months interval, the corporate has generated a web loss after tax of $100,000 in fiscal 2024 in comparison with a web loss after tax of $2.4 million final 12 months. This enchancment has been pushed by a discount usually and administrative prices, in addition to amortization of property and tools and intangible property. Adjusted EBITDA for the present quarter was $3.3 million, in comparison with $3.7 million for a similar interval final 12 months. It is a discount of 11%. For the 9 month interval, adjusted EBITDA was $9.7 million within the present 12 months, a discount of $2.4 million or 20% from the $12.1 million generated in the identical interval of final 12 months. The principle driver of this decline is the discount seen in IP deliveries within the present 12 months. Free money move for the present quarter was $13.4 million in comparison with adverse money move of $15.8 million, which was recorded for the comparative interval final 12 months. For the 9 month interval, free money move was $11.4 million for fiscal 2024 in comparison with a adverse $3.7 million final 12 months. The numerous enhance is as a result of receipts of accounts receivable and assortment of tax credit within the present interval.

As we have talked about on earlier calls, the restoration within the content material creation market has been slower than we anticipated with main consumers implementing price reducing measures and inexperienced gentle actions reducing. This has been managed by making certain our groups proceed to create and ship work of the very best high quality to our prospects coupled with energetic price administration of our personal. Throughout the earlier a part of the 12 months, strategic price discount measures had been carried out with the expectation of yielding cumulative financial savings exceeding $3 million for fiscal 2024. On the finish of the present quarter, the enterprise continued to function consistent with expectations and we witnessed wholesome ranges of exercise with our prospects. One notable improvement was the growth of 1 ongoing animation manufacturing within the present quarter, which is able to lead to roughly 30% further income over the time period of this venture. This growth represents further secured income for the corporate for fiscals 2025 and 2026 and can positively influence outcomes for each years respectively. The brief time period monetary influence from this growth is a slight discount and anticipated income from that manufacturing throughout the fourth quarter. It’s because the corporate is required to acknowledge income based mostly on the share of the venture accomplished inside the interval. Whereas there are a number of compensating components with different productions to counter this transformation, we now anticipate Thunderbird’s complete income to be roughly 3% lower than the prior 12 months. Regardless of this, the corporate anticipates adjusted EBITDA development for fiscal 2024 to be above 20%. This projection relies on the completion of a further 16 hours of IP supply within the fourth quarter of the fiscal 12 months, bringing the whole IP supply for the 12 months to 53 hours. As Jen talked about earlier, for the quarter ended March 31, 2024, Thunderbird reported its second consecutive worthwhile quarter and we proceed to anticipate the ultimate quarter of the 12 months to be our most strong. We stay steadfast in our dedication to sustaining a resilient steadiness sheet and exercising prudent administration choices in an evolving market whereas pursuing sustainable development. With this, I am going to move again to Jen to proceed her company replace.

Jennifer Twiner-McCarron

Thanks a lot, Simon. Throughout this quarter, the corporate had 22 packages in varied levels of manufacturing and was working with 18 purchasers. Of the 22 packages in manufacturing, seven had been Thunderbird IP and 15 had been service productions. Thunderbird Children & Household producing underneath Atomic was in manufacturing on 16 packages and dealing for 11 purchasers, together with CoComelon Lane for Moonbug and Netflix, Marvel’s Spidey and His Wonderful Associates Seasons 3 and 4 for Disney Junior, Zombies: The Re-Animated Collection for Disney TVA, and Atomic Originals’ Mermicorno: Starfall for Warner Brothers, Discovery and Tremendous Staff Canada for Crave. Tremendous Staff Canada is being produced alongside Will Arnett’s Electrical Avenue and cocreated by Canadian comedy writers Robert Cohen and Joel Cohen. It represents Atomic’s first grownup animated unique sequence and Crave’s first fee of an unique animated sequence. There will probably be some updates on this sequence shared by the broadcaster in June, so keep tuned. Thunderbird Unscripted, producing underneath Nice Pacific Media, was in manufacturing on 5 unscripted packages, one scripted and one podcast and was working with seven purchasers.

Productions embrace Useless Man’s Curse season 3 for Historical past Channel, Wild Rose Vets Season 1, a spin-off of Dr. Savannah Wild Rose Vets for APTN, Timber Titans Season 1 for Discovery, Rocky Mountain Wreckers Season 1 for Discovery Canada and The Climate Channel USA, and Freeway Through Hell Season 13 for Discovery. Season 13 will even see the historic hit, a historic 204 episodes. Nice Pacific Media’s Freeway Through Hell additionally broadened its distribution in Q3 and could be seen on two FAST channels, that are free advert supported streaming TV channels. One is a part of a partnership with Banijay Rights that launched within the spring within the UK and Australia and in addition options Heavy Rescue: 401. Bell Media launched the second with the CTV Gridlock channel now that includes traditional episodes of Freeway Through Hell and the whole sequence of Heavy Rescue: 401. Because the month-to-month prices for streaming service subscriptions can add up for individuals, increasingly shoppers are listening to FAST channels, balancing watching ads with the no charge providing. Within the US alone, you may entry greater than 1,000 channels and hundreds of movies and TV reveals via FAST TV. A brand new report from Circana additionally discovered that FAST platforms now have a each day viewers attain of 19.7 million US households. It is fairly spectacular to have Freeway and Heavy Rescue featured on two FAST channels, permitting a rising viewers to entry these reveals and discover our work.

Talking of recent content material mediums, Deadman’s Curse: Slumach’s Gold companion podcast Season 2 can be in manufacturing. This historic true crime podcast is hosted by Kru Williams, who’s acknowledged from Historical past Tv and in addition as a foremost character within the hit sequence. This podcast was the recipient of three Sign Awards, together with a Gold historical past podcast, a Silver for writing for an unscripted podcast, and a Lister’s Alternative Award for writing for an unscripted podcast. It was additionally named to Amazon Music’s Better of 2023 listing for Canadian podcasts. In Q3, Nice Pacific Media was additionally engaged on Season 2 of Reginald the Vampire, which premiered this month on CTV Syfy. And not too long ago, it was additionally introduced that Fox’s advert supported streamer Tubi one other FAST channel platform has commissioned The QB Dangerous Boy and Me, an unique film based mostly on a Wattpad story that’s being produced by Nice Pacific with Blue Fox Leisure managing worldwide distribution. Blue Fox has simply introduced gross sales to companions in Germany and Austria, Latin America, Spain, Portugal and South Africa, France, Switzerland, Turkey, Scandinavia and Jap Europe, excluding Poland. Filming begins in Victoria on Might twenty ninth. Lastly, the scripted crew based mostly in Los Angeles at the moment has 12 scripted tasks in improvement, three of that are already in energetic community improvement.

This concludes the company replace. And earlier than we open issues up for questions, I’d additionally prefer to thank Matthew Berkowitz for his many contributions to Thunderbird as president and CEO earlier than he leaves us on the finish of the month. His wonderful work will probably be carried on by our unimaginable crew in Los Angeles, and we will probably be discovering methods to work with Matt once more. Our management crew stays mighty and nimble and we now have the precise people in place to hold Thunderbird ahead, delivering distinctive outcomes that can maximize shareholder worth as our story continues to develop and evolve. Thanks all a lot for listening in. We’re now comfortable to reply all questions.

Query-and-Reply Session

Operator

[Operator Instructions] And our first query right now is from the road of David McFadgen of Cormark Securities.

David McFadgen

So a few questions. You cited simply overseeing the business that with the strike’s over, it simply looks as if the business is a bit slower when it comes to getting again to regular. And the streamers are a little bit extra targeted on income, a little bit extra choosy at commissioning new content material. So we all know it is — however you have had some influence in ’24. So do you anticipate that to linger into ’25 as properly? Simply sort of questioning what sort of development we’d anticipate in 2025.

Jennifer Twiner-McCarron

Why do not I converse to the qualitative after which flip over to you, Simon, for the quantitative. I believe what we’re seeing now’s the business is beginning to get well, slowly however absolutely. There are some types of consolidation taking place. You see streamers beginning to bundle with Disney, Hulu, Max with an providing. And the fact is that all of them want content material. They should put up new prime quality content material to draw and glue subscribers. And Thunderbird is properly generally known as a vacation spot of alternative for that content material and more and more so is Canada. As they appear to extend profitability, our tax credit, our expertise, our change fee, has turn into extra enticing than ever. So these are actually positives as we see issues evolve. And inside the business, it is extensively believed that in the summertime and in the direction of the autumn, we are going to proceed to see issues choose up, and we’re already seeing the entire indicators pointing in that course. Regardless of all that, our firm has remained extremely wholesome, worthwhile, rising, and that’s due to the good work the groups are doing. Simon, I did not know when you wished so as to add to that in any respect.

Simon Bodymore

Jen, the decision dropped me off utterly. I’ve simply rejoined, so I missed that query.

Jennifer Twiner-McCarron

I am glad you are again. Dave McFadgen was asking about with the strikes, how the slowdown has affected us and once we see the recovering. I answered that half. However David, I believe the second a part of your query was asking about visibility into development in ’25 and ’26. Is that right, David?

David McFadgen

Sure. Simply questioning what sort of development buyers ought to search for in ’25.

Simon Bodymore

At the moment, we’re not providing steering on 2025 as a fiscal 12 months. However what I’ll say is we now have a superb proportion of our studio capability crammed up already and we now have good visibility into subsequent 12 months. So I believe Jen has talked about in her a part of the script that we anticipate to return to sort of extra strong development than sort of earlier profitability ranges. So we see that the longer term is wanting a little bit bit extra seen for us, which is sweet. However as issues sort of fall out, we’re not really offering steering for subsequent fiscal 12 months absolutely right now.

David McFadgen

So would you — whenever you report your fourth quarter, I assume, you’ll anticipate to present some kind of steering then. Is that right?

Simon Bodymore

We are going to. Sure, that is right. We are going to.

David McFadgen

And simply questioning, once we take into consideration the outlook for the enterprise. The place do you see extra development, do you see it on the service facet of the enterprise or do you see it extra on the proprietary facet of the enterprise?

Jennifer Twiner-McCarron

I see it each. They’re extraordinarily complimentary, which is why we have continued to pursue each equally. Our studio’s pension for dealing with main world manufacturers has served us and proceed to serve us very properly, as a result of we receives a commission as we go for service. It permits for the wholesome money flows you see inside our financials and also you receives a commission upon deliveries for IP. So it helps clean issues out. It helps reinvest a few of that cash into constructing long run worth of our firm with IP. So we take into account them of equal significance. We have had a whole lot of development in manufacturing companies that can proceed however we even have a whole lot of IP teed up that we all the time cannot converse of immediately. So I hope that solutions your query.

Operator

[Operator Instructions] With no additional questions on the road, this may conclude right now’s name. When you’ve got any questions, please name +1-604-683-3555 or e-mail buyers at thunderbird.television. Thanks.