Thank you so much. On behalf of everyone at Thunderbird, I'd like to welcome you to this morning's call to discuss our Q3 results for fiscal 2021, which ended March 31, 2021.

My name is Jennifer Twiner McCarran, and I'm the President & CEO of Thunderbird Entertainment Group. I'm here today with our CFO, Barb Harwood, and we are both very thankful to have you here with us.

Once Barb and I finish our update, we will be happy to answer all questions you may have.

Thanks, Jen. I'm very fortunate to work with an incredible finance team at Thunderbird who support me every day and certainly made me look better than I would otherwise.

And now to the Q3 results. Q3 was our strongest quarter ever, with revenue of $37.7 million and $85.4 million for the three and nine months ending March 31, 2021 as compared to $29.6 million and $60.2 million for the comparative periods of fiscal 2020, increases of 27% and 42% respectively.

The majority of these increases over the comparative periods in 2020 is related to growth in production services attributed to the Kids and Family Division. The company has two principal revenue streams, production services and licensing and distribution.

Production services revenue is earned for service work performed on projects where the company does not own the IP. Licensing and distribution revenue is earned when the company owns the copyright to a project and subsequently enters into a broadcast or distribution agreement to license the project for a specific term.

Thanks so much, Barb. Q3 is typically strong in our business, and this is tied to some of our productions delivery schedules.

It should also be noted that quarters can be lumpy in this industry and it's best to evaluate the company's growth on an annual basis, because this is where you will see a natural and exciting growth cadence with us in year-over-year results. We're still on track in 2021 to meet or beat the growth that we saw in 2020.

At this point, I'd like to take a deeper look at our Q3 corporate update. This quarter Thunderbird was in production on 21 projects with 10 of them being owned IP or partner managed.

Our Kids and Family Division, Atomic Cartoons was in various stages of production on 12 animated series and two feature length animation projects, 14 productions in total. This included Mighty Express for Netflix, produced in partnership with Spin Master; Molly of Denali season$ 2 for GBH and PBS kids; The Last Kids on Earth for Netflix; My Little Pony for Hasbro and Entertainment One; Team-Up for Disney+ bringing Spider Verse to the ; and we're also producing another Curious George Thumb for Peacock.

Atomic has owned IP for The Last Kids on Earth, also saw two new exciting milestones in the quarter, including the premier of our company's first ever Netflix Interactive Special in April, which subsequently made Netflix top 10 list for all shows watched, not just Kids and Family. And a June 4th launch for upcoming video game with Outright Games.

These two achievements demonstrate the importance of owned IP for us at Thunderbird and The Last Kids on Earth is just the start of what we've got in the works.

Also great to say that we're very proud that $ave My Reno, our lifestyle series for HGTV was also nominated for 2021 Leo Award. And out of the press, Corus just announced yesterday 35 green lights and renewals, of which there are three new Great Pacific Media series.

We will have more to share on this in the coming weeks. On the scripted side, I wanted to highlight an upcoming comedy in production called Strays, which is a spinoff of Kim's Convenience.

Strays is slated to premier on CBC Television in 2021-‘22 television season, and will follow Shannon Ross, Nicole Power, as she embarks on a new career in a new city. Many of the creatives behind Kim's Convenience are also attached to Strays, and we look forward to seeing how our audiences respond when it premiers.

Speaking of Kim's, it was announced that Kim's Convenience would end after these five ground breaking seasons. We are so incredibly proud of everyone involved in this series.

At Thunderbird as producers, we would have loved to keep going beyond five seasons, but we always support our showrunners in their creative decisions. Ins Choi and Kevin White, the co-creators of Kim's felt that the series and its characters had run their course, and the vision was to end on a high note, which we can get behind.

We're also proud of the enduring legacy of Kim's Convenience which is behind as one of Canada's most popular scripted comedy, including winning four Canadian Screen Awards just recently, including Best Actor in a Comedy, Best Supporting Actor in a Comedy, Best Guest Actor in a Comedy and Best Photography in a Comedy. It was also nominated for two Leo Awards, which will be announced later this month.

We also cannot wait to see what the talented cast and crew of Kim's Convenience will come up with next. Starting with Simu Liu starring in the upcoming Marvel film, Shang-Chi and the Legend of the Ten Rings scheduled to premiere this September.

In addition to Nicole Power in Strays, Andrew Phung also has an upcoming series in production for CBC, which is entitled Run the Burbs. Paul Sun-Hyung Lee and Jean Yoon also have some exciting projects in the works, and we can't wait to see those come to fruition.

Now I'd like to focus on our IP strategy. To take full advantage of the opportunities we have for leveraging our growing IP library, we have launched a new global distribution and consumer products division in Q3, headed by Richard Goldsmith.

Here we are incredibly honored to have him joined our team. While regarded as one of the best in the industry and having worked with Disney, Warner Brothers, The Jim Henson Company, Richard joined Thunderbird because he saw the incredible work taking place in our studio.

Since bringing him on Board, our leadership team has been getting regular calls from partners around the world asking, “Wow, how did you hire Richard?” This new division will allow us to further increase and exploit our IP ownership in video games, merch, cross-media exploitation as we produce and distribute content around the world.

This means we will be able to further increase and leverage ownership for Thunderbird properties and no longer need to bring on third-party consumer products and distribution partners. The division also means we have the capacity to act in this role for other companies seeking expertise, representing another opportunity to diversify and grow our business.

Beyond our IP for the New York Times bestselling book series The Last Kids on Earth, other announced properties that we're setting up with the new division include Nate Create with the Jim Henson Company, Muppets fame, and Mermicornos from tokidoki, the insanely popular Japanese inspired by style brand. We've also identified several IP opportunities from our Factual and Scripted Division, including video games emanating from an action-oriented factual series like Heavy Rescue: 401.

Before I conclude my remarks today, I'd like to share a few recent survey findings from Deloitte, which confirms that 2021 continues to be an excellent time to be in the business of content creation. According to Deloitte, 82% of U.S.

consumers now subscribe to at least one paid streaming video service. And the average subscriber is already paying for four separate platforms.

When you factor in these consumer preferences to what streamers were willing to spend on content was more than 112 billion estimated spend in 2021 alone, the opportunities we have before at Thunderbird Entertainment Group are truly massive. The consolidation that we're seeing in the industry only helps companies like Thunderbird as high quality premium content like Thunderbird continue to be under increasing demand.

The confidence our global partners place on Thunderbird is one of the key reasons we have dozens of projects in our development pipeline, plus visibility and bookings well into 2023. We also have exciting new projects that are just entering production, plus a batch of recently confirmed series.

As soon as we're able to share the details, you'll be among the first to know. As I wrap up my remarks today, I'd like to thank you again for joining us to discuss the results we achieved in the third quarter of fiscal 2021.

We are well on our way to becoming the next major global studio and are thrilled to be on this journey with all of you. Now, Barb and I are pleased to take any and all of your questions.

Thank you so much.

First question is on Kim's Convenience and broader question on scripted in general. I've recently discovered that it's really a great program.

I think it's representative of your culture. Your first scripted program, but very successful.

You sold at the largest streamer, and you pick up a lot of the Canadian subsidies for production costs. And you’ve announced the first spin.

So a couple questions on that. Will that be picked up in the U.S.

presumably? Are there more projects coming from the producers?

You've talked a bit about the -- some of the actors and what they're doing. And then just from a macro perspective, scripted, even though you don't have a lot of scripted programs, it seems like you've been very, very successful.

So from an investor standpoint, you would seem to want more and more and more of that. Can you talk about that, please?

Yes, absolutely. So to address the first part of your question, definitely Kim's is ours.

We own the copyright. We will distribute it.

So all of those five seasons stay with us. We can set them up anywhere around the world and continue to highlight in those seasons.

It already is airing second window with Netflix, but we have the ability to sell Kim's Convenience wherever we want. And with regards to our scripted strategy, that's a great question, Barry.

We’ve approached it opportunistically and we're really lucky that our two main drivers, Great Pacific Media and Atomic Cartoons, Kids and Family and Factual, check that key co-viewing box. Every streamer strategy is that you need to grow kids and family to grow subscribers.

And what the kids and family watch, animation or factual? They're much less likely to subscribe and unsubscribe and kids and family are good.

Scripted is a part of our strategy going forward. We want to create diverse content that appeals around the globe.

We've taken really safe place. You can look at some of our comps and see how sometimes it can go very, very well, and sometimes not.

I think part of our extremely clean balance sheet and growth is that we -- while we take calculated risks, we want to be sure of the return on net investment. So I would say, absolutely, stay tuned for more scripted.

There is some amazing discussion in the works. But we're going to approach it in a way where we feel really confident of the success and delivery to our shareholders.

And just on that, the production team is still working with Thunderbird and we may see some progress from them?

100% that's correct.

That's great news. A question for Barb, or actually, a couple questions, if you don't mind, on some of the numbers.

I believe -- correct me if I'm wrong, this is the first time we're seeing the backlog number and can you describe what that means. And that's in the MD&A.

How does that relate -- if I look at that backlog number, how can I use that as a forward-looking indicator to look at future revenue? Specifically, how far out might that backlog come into revenue?

And I know you discussed in the description of backlog that there's certain types of revenue that are not included in the backlog number, variable and so on. I don't know how important those types of revenue are versus the other types that are in the backlog.

Could you give us a sense of how we can use backlog to forecast future results?

Great question. Thanks, Barry.

Yes, backlog is something that we're disclosing for the first time this quarter. And essentially what it is, it's the main bulk of our business.

It's the production service agreements for production, the licensing and distribution agreements. And what it is, anytime an agreement is signed, if we have not yet recognized that revenue, it will fall into backlog.

And given the fact that usually an agreement isn't signed until we're green-lit and we're almost started production and that kind of thing, the backlog is typically going to be within -- recognized within 12 to 24 months. And given that this is the first time I'm starting to track those numbers, I'll start to see a pattern as we continue to disclose it.

The variable portion of it is relatively minuscule. The things that we can't predict, of course, in backlog is FX wins from U.S.

contracts and that kind of thing. Does that help?

And then the timeline, does it go like years or months or days?

Between 12 and 24 months, the majority of it is in the next 12 months.

Okay. And another question for you, Barb, while I have you in the heart's hot seat, if you don't mind.

You gave out some non-financial metrics, specifically the number of episodes that are recognized in licensing and distribution revenue. And then on production, when you gave those numbers, as you gave those out in terms of the number of series that you're working on.

I want to ask you again, if I can get a little assistance on using those numbers to understand what you've just recorded. So for example, licensing and production, I think you called out 56 episodes.

Is that inclusive? I'm assuming it's not that there's some library that was recognized.

And then on production, can we use that as a forward indicator, presumably increasing now those are going to show up in revenue going forward?

Yes. So in our MD&A, we disclosed between production services revenue and licensing and distribution.

The licensing and distribution is our owned content. So when we disclose what number of episodes that we are recognizing in that licensing and distribution number, that kind of gives you an idea of what content is in that number.

Now unfortunately, as I mentioned, every project is sort of a different business model. So you can't just take that number, divide it by 40 episodes and come up with a per episode number.

Because each project has a different model and a different finance plan and that kind of stuff. But it does give you an idea on a year-over-year basis of what like a future period might look like, if we have season renewals, because we've had so many season renewables on our Heavy Rescue, we're in season 5, Mud Mountain Haulers Season 1, $ave My Reno Season 4, that kind of stuff.

So if you can look back at the past history, you can kind of predict the future as long as you know that those series are renewed. On the production services side, it's a little bit more difficult.

We talk about what we're in production in now to sort of indicate that in future periods we will have revenue coming in for production services, which is recognized on a percentage of completion basis. So I guess if you -- logically, if you look at a particular project in production services, our animation pipelines are between -- probably the shortest is 12 months up to 2 years.

That project is going to be contributing revenue and direct costs over that period of time. Does that help?

That's incredible. And just one clarification.

So on licensing distributions, you've called out 56 episode. Is that work -- is that all of the revenue reported or the majority of or are there some other sources of revenue in there?

There'll be some other sources of revenue that are more minor, like every quarter we always have some library revenue. So some projects that have already been delivered, there'll be things like music royalties and that kind of thing.

But the bulk of it is from those first initial deliveries on those shows that we disclose. And yes, I’m adding them up, 53 episodes plus 3 actually, so we're 56 episodes.

And 40 episodes of the factual series and 13 episodes of Kim's and three episodes of The Last Kids.

I got -- I have a couple of questions. Jen, just on the owned IP.

I know you talked about the success you've had with Last Kids on Earth. You're doing a lot of good service work for the other major SVOD platforms.

I wanted to sort of get some insight into what conversations you might be having with respect to work on the owned IP side. So these other major platforms, when you think about Apple, Peacock, HBO Max et cetera, is there anything in the pipeline, given you've already done some good service work for them?

So I wanted to get some color there. And secondly, maybe for Barb on the backlog.

Are you able to kind of give us a sense of the split between production and service? I don't know if it was in the MD&A, and just a bit -- just wondering if there's any clarification you can provide there?

Thanks so much, Aravinda. Definitely, we are having a lot of conversations.

The team, Matt, Richard, our team in Los Angeles, the development team has been out pitching shows. We are working with all of the streamers pretty much.

And so when you do a great job in service, it's that much easier to turn around and sell your own IP. And there's a lot of exciting things I can't speak in detail right now, but we have a very strong slate.

We're bringing out several projects at a time. And yes, there's a ton of activity and conversations happening, of which I'm very excited about.

And in terms of your backlog question, we do not disclose the separation between the IP and service yet. Backlog is obviously, a new thing this quarter and it's a good -- it would be a good question.

So I'll think about that for future quarters as we track the backlog.

Thanks, Barb. And just one more before I hand off.

You've had a good balance sheet for a long period of time. I know that you are not close to the idea of M&A.

Is anything -- can you just talk to what your thoughts are? Is it essentially the same you're looking for, potentially opportunities on the international front and perhaps even IP?

Has anything changed or are you -- is valuation is a problem? Just wanted to get a sense of what you're running into when you think about M&A?

What's sort of turning you off or what's -- what feedback you're getting?

Yes. No, we're, I'd say, increasing conversations in that area, Aravinda.

It’s -- we are extremely excited about having more of an international footprint. Be it one to go -- where are the streamers going, where do they need to increase subscriptions, where are countries we can own and turn on more of our own IP?

Where are countries that will provide us a greater capacity pipeline? As well as developing those countries into being their own IP giants, signing up their own rights.

And we are looking within North America as well for complementary exciting skill sets. As we discussed we are -- we've got a really clean balance sheet.

We have fantastic organic growth with wonderful visibility. So we don't -- we're in this fortunate position of having a runway where we don't need to look at anything like a roll off strategy.

Getting bigger for the sake of getting bigger is not of interest to us. We're being strategic.

We have a lot of great opportunities at hand, and we have many conversations underway.

So I guess I can just follow-up on the last set of questions by asking some more about M&A. Within that talk, I guess what type of situation do you think are the most attractive in terms of like the actual content?

I know, it's tough to say, but are you looking at more of like maybe the animated space or more, like, production, documentary type space? And how would you kind of value that sort of thing and how are you sort of thinking about the returns on that potential spends?

I guess, what I'm asking is like, how are production companies valued? And how are you guys kind of looking at that, as you kind of scan the landscape?

Yes, great question, Adam. We're looking across all of our core competencies in terms of making an international play, and being able to leverage the great relationship we have with the streamers.

They would love us to have ownership in countries where they're required to turn on content native to that region. So that could be animated.

It could be factual, it could be scripted. Certainly, when we look at companies and their valuation, we're thinking what's their runway?

Do they have this competency internally to create their own IP? Are they doing excellent work?

Do they have a shared value system? Is quality their North Star?

How do they treat their employees? Will be a huge for us.

And as we continue to dig in with the many conversations that we have, we're looking at culture and strategy, the financial tasks make sense that needs to be accretive. And we think, is this a lot of downstream?

Or will the market and our partners and the core of our business respond to this in a way that's like, “Oh, that makes a ton of sense. This is amazing.”

All of those things in mind, and we feel really fortunate that we are having so many conversations and that really inspiring exciting companies around the world are happy to have these conversations with us. So they're well underway as we continue to use our wonderful organic growth runway, our work that's already well booked.

But of course, we do have a goal to become the next major global studio and with that comes an international play and increased ownership. So it's incredibly exciting for our team as we embark upon the journey.

And just in line with that, your comments, the distribution part I get completely, but is M&A talk also kind of a statement on maybe there's a ceiling on organic growth, or how are you guys kind of thinking about that? Obviously, as you scale, it requires increased investment in talent, which, I don't really know the landscape in that respect too well, but is there sort of a cap on, it’s how you're looking at that?

Or is it just more like a complement or to enhance distribution? How are you guys kind of thinking about that?

Yes. So we want to keep putting up the same numbers we have in the year-over-year growth, and it's just getting bigger for the sake of getting bigger, at a certain point, you'll start to do what you do really well, which is make really high quality content and be a company that every buyer wants to work with.

And so there's a lot of different strategies behind it. If we were to acquire a company that creates their own IP, then we're feeding our own consumer products and distribution lines.

Then we're looking at complementary core competencies, maybe it's in technology that we're using, certain different types of production, that we can look at companies that also that can help us expand capacity, because they have similar pipelines. And we can show them, we say no to a lot of work.

So we're confident that if we were to acquire someone overseas, we can keep them busy. And we can also tap into what makes these companies great with regards to -- or countries that have similar tax credit structure to Canada, where the government is invested in the industry.

They have tax credits, they have bills that are being passed, similar to Canada's that say, hey, streamers, if you want to stream, here is certain percentage of the profits you make, makes you reinvested in business system. All of that strategy comes into play when we're circling around who to target.

Just two more high level questions for me. You kind of touched on one a second ago a little bit.

Just in talking about the current environment, now that the world and I'm assuming Hollywood, et cetera, is getting comfortable, sort of going back to normal, as your pipeline or demand environment change at all, are you seeing sort of any increased competition for bids, et cetera? I know you just mentioned you're turning down a lot of work.

Any color you want to provide on that would be helpful?

Yes, no, it's -- if anything, it's just heating up. So it just allows us as a company to be in the luxurious position of sort of choosing what makes the best alignment for quality, for business sense.

All of that. The boom for content is here to stay.

Industry-wide, the professional opinion is that, at least for the next five, seven, eight years, this incredible boom, and investment and content that we're seeing is not going anywhere.

And then last one, in looking at recently reported gross margins, I guess just in general, what sort of revenue mix and why it would be optimal for you guys to see either short-term or maybe down the road in terms of the mix between service work and licensing and distribution? And how are you sort of thinking about layering your consumer products and distribution on top of that, as it maybe relates to like 1 percent of your business that you're interested in seeing it grow to?

Yes. Certainly, we are increasing our focus on IP by -- we're so fortunate to hire Richard Goldsmith, and by opening up that division that allows us to be able to turn more work into IP, but it's a very healthy mix.

And we will -- the next couple years are investment. We won’t start to see the fruits of the labor of having selling new shows, making them and setting up, consumer products and whatnot until sort of ‘23, ‘24, ‘25.

So, we're -- it takes a while to turn all that work on and to start to see the fruits of that labor. So continuing forward growth, we'll keep adding shows via partnership, service, IP.

Currently, we have a pretty healthy mix. And again, start to see the real benefit of that investment in increased content in '23 and beyond.

A couple of questions. If I can just -- maybe a few question about your expectations for 2021.

You said that you expect to record the same level or higher growth than you experienced in 2020. And I was just wondering, is that for revenue or EBITDA or is that for both?

That's for both statements, David.

Okay, excellent. And then just on the backlog, could you give us the breakdown between the two divisions, Kids and Family and the Scripted and Non-Scripted?

Hi, David. We don't actually do that.

We don't disclose that breakdown. Just as we don't -- we see it more as a production services versus IP, just as we don't disclose animation versus factual divisions.

We see them as all one company.

Okay. And then just a question on Strays.

Obviously, this is a replacement for Kim's Convenience. I was just wondering, does it have the same or similar financial impact as Kim's Convenience

I'd say extremely similar, if not slightly better.