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Thank you for joining Thunderbird Entertainment Group’s Fiscal 2023 Q3 Results Call. Glen Akselrod from Bristol Capital will read the forward-looking statement disclaimer.
Thank you for joining us. We are here to provide a corporate update and report on Thunderbird Entertainment Group’s fiscal 2023 Q3 results, which ended March 31, 2023. Speaking on today’s call are Ms. Jennifer Twiner McCarron, Chair of Thunderbird, CEO; and Ms. Barb Harwood, Thunderbird’s CFO. Ms. McCarron will provide a strategic overview of Thunderbird Entertainment Group and Ms. Harwood will review the company’s Q3 2023 financials. Following the corporate update and financial review, the call will open for questions and answers. [Operator Instructions] Alternatively, if you have any questions you can call 1604-683-3555 or e-mail investors@thunderbird.tv, and the company will follow-up directly after the call. At this time, all lines have been placed on mute to prevent any background noise.
I’d like to remind everyone that certain statements made on today’s call constitute forward-looking statements or information under applicable securities laws. Forward-looking statements and information discussed in this conference call include, but are not limited to, statements with respect to business future volume of content, future IP opportunities for Thunderbird, the company becoming a go-to for major streamers, projections for the global expansion of streaming platforms, future expansion into premium scripted content, timing for the debut and anticipated success of Mermicorno: Starfall, the company becoming the next major global studio, projected financial results for fiscal 2024 and 2025, anticipated gross adjusted EBITDA, fully owned IP productions, and merchandise opportunities coming to fruition, and future opportunities and stronger partnerships and greater growth leading to the company becoming the next major global studio.
Forward-looking statements are based on estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties and other factors which are set out in the company’s most recent management’s discussion and analysis and other public documents filed on the company’s profile on SEDAR. Although the company believes that the assumptions and factors used in preparing these forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this presentation and no assurance can be given such events will occur or the disclosed timeframes or at all. Except when required by law the company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. This conference call is being webcast live and the archive will be available on the company’s website at www.thunderbird.tv following today’s call. Please note that Thunderbird reports in Canadian dollars unless otherwise stated. Ms. Twiner McCarron will now provide the corporate update.
Thank you so much, Glen. My name is Jennifer Twiner McCarron and I am the CEO and Chair of Thunderbird Entertainment Group. On behalf of the company, I’d like to thank you for joining today’s call to discuss our Q3 2023 results, which ended March 31, 2023. Thunderbird’s, CFO, Barb Harwood, is with me and we appreciate you taking the time to hear the company’s Q3 earnings update. Once Barb and I are finished, we will be more than happy to answer any and all questions. We have often referenced that Thunderbird is uniquely positioned for growth within the industry.
And today, I want to take this opportunity to expand on this as it pertains to recent industry announcements. We are regularly learning how our peers and customers are strategically shifting their businesses to remain competitive and stay relevant. For example, Disney is in the process of reviewing its content and Bob Iger was quoted as saying that Disney is getting much more surgical about the content it makes, acknowledging that the streamers spend a lot of time and money producing and marketing content that maybe didn’t move the needle in terms of subscribers.
Disney intends to produce lower volumes of content in alignment with this strategic shift, but still recognizes that now more than ever, it needs premium, high-quality content to retain and attract subscribers. Disney is focusing on big brands and this is amazing news for Thunderbird as we have built a strong partnership with Disney over the years that continues to strengthen with projects like Donald Duck, 101 Dalmatians, Spider-Man, Night at the Museum, LEGO Marvel Avengers, to name a few of the great collaborations over the years. Our push for quality over quantity continues to win us merit and Disney’s strategic shift to double down on the high-quality key brands supports Thunderbird’s growth trajectory.
Another example is Warner Bros., Discovery’s streaming service, Max, which launched on Tuesday under a new mandate to establish itself as a general entertainment platform for the whole family, including kids. Max decided that kids content will be a key component of the platform’s success. And we happily announce that Warner Bros. Discovery acquired the exclusive U.S. television rights to Mermicorno: Starfall, a brand new animated and 100% fully owned IP original series that is being created and produced by Atomic Cartoons in partnership with Tokidoki. This fantastical adventure comedy series will debut on Max in 2025 and global distribution sales for the series along with mass market licensing program, toys, videogames, co-managed with Tokidoki, are also underway.
Another shift that highlights Thunderbird’s great positioning is Bill C-11. Recently, the Canadian government passed Bill C-11, also known as the Online Streaming Act. The bill modernizes Canada’s Broadcasting Act, its first update since 1991 so that regulations around Canadian content requirements now apply to streaming services and online platforms as they do with traditional TV and radio broadcasters. The passage of this bill means even greater IP opportunities for Thunderbird. With our reputation for delivering A++ premium content and our positive working relationships with our partners, we are very well positioned to be the go-to for major streamers as they continue to look to us to meet their Canadian content needs. Importantly, Bill C-11 also allows us to turn on and green light more of our own IP of which we are having great success in doing.
Thunderbird’s unique position for growth also benefits from an industry that despite ebbs and flows is still growing itself, albeit at a slightly slower pace. Digital TV Research projects the addition of 400 million subscribers between 2022 and 2028 to reach 1.76 billion. By platform, Netflix will be the frontrunner with 277 million subscribers in 2028. Prime Video will follow with 265 million. And Disney+ is forecasting to have 222 million, just to list a few.
Furthermore, by 2028, 24 countries will have more than 10 million SVOD subscribers with platforms expanding across the globe. Thunderbird’s strong footholds in animation and unscripted, which is factual programming, have underscored the company’s success to-date. GPM and Atomic continue to be industry darlings, because of the incredible talent and our amazing hardworking teams. With the news of the WGA strike, we anticipate our unscripted work will see some increased demand as platforms still need content.
Additionally, the company’s expansion into premium scripted content as the third key content vertical is one of our next big opportunities. By the time the strike is wrapped, we will be ready to roll. We have 13 scripted productions at various stages of development and are ramping up our efforts with the appointment of Hillary Zwick Turner in the new role of SVP scripted content in Los Angeles. We also recently announced that the company optioned New York Times’ best-selling novel, Mad Honey, which was co-written by Jodi Picoult and Jennifer Finney Boylan, for a premium series adaptation. Mad Honey is a powerful story and represents the kind of IP we are looking for as we build our premium scripted business. On a daily basis, we’re continually reminded of the importance of premium content, and now we are also seeing the evolution of the role of quality IP. Hub entertainment research recently reported that viewers are more drawn to shows and brands versus streaming platforms. In fact, 41% of respondents admitted to signing up for a new streaming service, just to watch one show, have noted that streamers must leverage the brands of the key IP to stand out from the pack. Two Thunderbird projects, Mermicorno: Starfall and Mad Honey, represent excellent opportunities for the company to optimize these acclaimed brands.
With the deep following that Tokidoki has already created for the Mermicorno brand, this is the kind of content that will cut through the noise. As with Mad Honey, these are the opportunities to turn on IP and elevate the success of these brands even further. We also continue to be a leading company for handling and excelling in service production for some of the world’s top brands, like CoComelon, My Little Pony, just to list a few.
Thunderbird is also currently handling three major brands for Disney. Thunderbird’s consistent growth amongst the changing history has been my theme today, and I’m incredibly proud of the team’s progress to date and what the company’s future holds as we continue our journey to become the next major global studio. We have visibility into fiscal ‘24 and ‘25, and there is a hugely exciting future ahead, which includes continued company growth and adjusted EBITDA and several fully owned IP productions with adjacent merchandise opportunities coming to fruition. Our ongoing successful organic growth doesn’t mean we are immune to change.
Last week’s announcement around Thunderbird’s appointing ACF Investment Bank to evaluate and assist with strategic alternatives for Thunderbird’s evolution is a critical next step in our company’s journey. This came from a commitment Thunderbird made to form an advisory committee that would assess all opportunities to fully maximize the value creation for our shareholders as part of the cooperation agreement from the proxy contest. Our Strategic Advisory Committee, which will be working closely with ACF, will assist us in reviewing all options for growth, so we can continue building on Thunderbird’s tremendous momentum. This momentum is possible because of how well positioned we are to capitalize on opportunities.
We’ve established strong relationships with our partners who count on us to deliver premium high-quality content now more than ever. And as streamers contract their teams and navigate new Canadian content requirements, more than ever, Thunderbird remains their trusted partner. At this time in the calendar year, we have record production bookings for the fiscal year ahead and are solidly on track for our strongest EBITDA year ever on record. Traditionally, we are about 60% booked in May for this fiscal year ahead. Currently, we are well over 80% booked.
With this, I will let Barb present the financial update, and then I will share some additional corporate highlights. Over to you, Barb.
Thanks Jenn and good morning and good afternoon to everybody, depending on where you are. Revenue increased to $37.3 million and $129 million in the 3 and 9 months ending March 31, 2023, as compared to $36.9 million and $104.9 million for the comparative period, increase of $0.4 million and $24.1 million, respectively. Specifically, production services revenue increased to $32.3 million and $95 million from $32.1 million and $87 million in the comparative 3 and 9-month period, increases of $0.2 million and $8 million, respectively, due to an increase in the size of production contracts.
Projects with significant revenues during the quarter include Princess Power, Marvel’s Spidey and His Amazing Friends, My Little Pony, Teenage Euthanasia and CoComelon Lane. Licensing and distribution revenue, which represents revenue from Thunderbird’s owned IP, increased to $4.9 million and $34 million from $4.7 million and $17.5 million in the comparative 3 and 9-month period, increases of $0.2 million and $16.5 million, respectively. These increases were mainly due to the distribution of the scripted series, Reginald the Vampire. The company also delivered 13 episodes of the unscripted series, Heavy Rescue: 401, Season 7, in the current quarter.
Similarly, in the comparative quarter, Season 6 of Heavy Rescue: 401 was delivered, along with the documentary, The Teenager and the Lost Mayan City, which was also delivered in the comparative quarter. Adjusted EBITDA decreased to $3.7 million and $12.1 million from $6.4 million and $17.7 million in the comparative 3 and 9-month periods, decreases of $2.7 million and $5.6 million, respectively.
The decrease is attributable to the delay of several productions as a result of industry-wide economic factors and the proxy contest, and due to an increase in G&A expenses due to investment in new hires and talent retention. Thanks very much, and back to you, Jenn.
Thanks so much, Barb. As of March 31, 2023, the company had 27 programs in various stages of production. Of these 27 programs in production, 10 were Thunderbird IP and 17 were service production. One production is a global IP buyout with substantial power where the production was originally optioned by the company, developed, and then acquired by the partner, Netflix, with Thunderbird receiving an increased percentage of net profits for merchandising and licensing as a result.
At the end of Q3 2023, the company was in various stages of production on 19 animated series for 17 different clients. Examples of these programs include, again, Princess Power for Netflix, Marvel’s Spidey and His Amazing Friends, Season 2, for Disney Jr.; CoComelon Lane for Moonbug for Netflix; My Little Pony: Mark Your Excellence for eOne and Hasbro; Young Love for Sony Max; and Teenage Euthanasia, Season 2, for Adult Swim. Several Thunderbird kids and family productions debuted during the quarter, including Molly of Denali, Season 3, for PBS Kids; Princess Power, again for Netflix; Oddball, Season 2, for Netflix, among others.
On the unscripted side of the business, the company was in production on six unscripted series, including Highway Through Hell, Season 12; Heavy Rescue: 401, season 7; Dead Man’s Curse, Season 2; Styled, Season 2; Mud Mountain Haulers, Season 3; and Dr. Savannah: Wild Rose Vet, Season 2.
It should be noted that the seventh and final season of Heavy Rescue: 401 aired on discovery, and we are so proud of the run that this series had. Yahoo News profiles Gary and Collin Vandenheuvel, the father, son duo featured in Heavy Rescue: 401, who reminisce about their time on the series, calling the final season bittersweet, but leading the wrap over 120%. So, congrats to everyone on wrapping this amazing series. GPM was also in production on Reginald The Vampire Season 2, starring Jacob Batalon, and Boot Camp, a scripted production based on the popular Wattpad story by Gina Musa during the quarter. GPM has also formally announced that Mike Armitage has joined their team as the new VP of Development. Mike’s focus is to develop more titles that fit in GPM’s current slate of outdoor driven factual series as well as to expand GPM’s slate into competition series. Also, with our push into the U.S. market, he is looking at U.S. stories and characters to better connect with buyers across the border.
Our previous quarter Q2 was significant to the company as we achieved one of the milestones in our long-term growth strategy and launched the dedicated scripted team based in L.A. As I previously mentioned, this team already has 13 scripted projects, representing an array of New York Times best-selling books and award-winning authors at various stages in the development pipeline. We can’t wait to share more about these amazing and exciting productions when we can.
And before we move to the Q&A, I want to share a few company recognitions, including Thunderbird, ranking in the top 10 of all independent production companies in Canada, on Playback’s 2023 Indie List, just published today. Thunderbird’s Chief Operating Officer, Sarah Nathanson, being recognized for the 2023 Best Executive Award from Report on Business Magazine in the operational category. Thunderbird, making Report on Business Magazine’s Women Lead Hero list for a second year in a row. Atomic being named on the annual Kidscreen Hot 50 list in the top production companies. Animator, Wayne-Michael Lee, being recognized as a Rising Star of Animation by Animation Magazine, wait till you see what Wayne has coming next, so amazing. Atomic receiving a number three ranking on Business in Vancouver’s list of the biggest digital art companies in BC, and GPM being named to the Realscreen’s Global 200 list for the 11th consecutive year. And last week, the 2023 Leo Award nominations were released, and Thunderbird produced series record of a total of 18 nominations, huge congrats to the team.
As the industry changes and Thunderbird evolves, we can’t lose sight of the dedication, passion and fortitude of our teams. This is what drives our ability to create A++ premium quality content so that we can celebrate recognitions like the ones just mentioned and push ourselves even further. We are a top choice for artists and our HR teams received this feedback regularly. Our leadership team continues to focus on what we can control, which is we are doubling down on building the absolute healthiest business possible, which we are on a path that will lead us to more opportunities, stronger partnerships and even greater growth.
With that summary of Q3, Barb and I now welcome any and all questions.
[Operator Instructions] Our first question comes from David McFadgen with Cormark Securities. Please go ahead, David.
Okay. Thank you. A couple of questions, is there anything needed to report on the strategic review? I will just start with that one first.
Not at this time, David. However, we will be sure to keep the market updated. We are off to a great start. I think Thunderbird is a gem, and it is garnering a lot of interest as we discuss what is our next growth opportunity.
Okay. And is the writer strike, is that having any impact on the company in terms of delivering results for this year or maybe potentially next year?
No. Luckily, the animation teams are not in that union. The writers belong to a separate union. And it doesn’t affect our unscripted business and where we are at in our premium scripted, which will service everything from kids to adult is just the development phase. So, from all accounts by the time we are ready to set up that writer’s room, the strike should have wrapped.
Okay. And then lastly, I saw that you licensed Kim’s Convenience to the FAST channel. I was wondering, have you heard about any FAST channels commissioning brand-new content, or are they just purchases of library content?
I think it’s – increasingly, they are looking at brand-new content. More and more people are starting to personalize content, what they want to watch and what it means to them. And FAST channels is a huge opportunity for us, with future distribution and sales, one that we really do see increasing. And to answer your question directly, I would say they are increasing the commissioning of some new work as well as established already completed work.
Okay. But you haven’t at least yet licensed any new content to FAST channel, right, so not any new content?
Not at this time. Not at this moment. We are off to Annecy Animation Festival next week, the Licensing show as well in Vegas. We are dividing and conquering as well as MIP, and we have many, many meetings with FAST channel. So, hopefully some good news to report.
Okay. Alright. Thank you.
Thank you, David.
Thank you for your questions, David. There are currently no questions registered. [Operator Instructions] There are no questions waiting at this time. I will now pass the conference back over to our management team for any additional remarks.
Thank you all so much for joining us today. Looking forward to having a follow-up with many of you, and please don’t hesitate to reach out. Thank you very much for being on this journey with us at Thunderbird. We truly appreciate it.
This concludes our call today. If you have any questions, please call 1-604-683-3555 or e-mail investors@thunderbird.tv. Thank you.