Nancy Chan-Palmateer - Director, IR Michael Donovan - Executive Chairman Dana Landry - CEO Keith Abriel - CFO David Reagan - EVP, Strategy & Corporate Development

Aravinda Galappatthige - Canaccord Adam Shine - National Bank Rob Goff - Echelon Drew McReynolds - RBC Kevin Lee - Stifel Deepak Kaushal - GMP Securities Bentley Cross - TD Securities

Thank you, Operator and thank you everyone for dialing in this morning. On the call with us today are Michael Donovan, our Executive Chairman; Dana Landry, our Chief Executive Officer; Keith Abriel, our Chief Financial Officer; and David Reagan, our Executive Vice President of Strategy and Corporate Development.

Before we proceed, we have some standard cautionary statements. The matters discussed on this call include forward-looking statements under applicable securities laws with respect to DHX, including, but not limited to, statements regarding the effect of IAS 38 on revenues, the expensing of investments in film, gross margins, and quarterly pacing, the growth and performance of WildBrain and Teletubbies and the timing of projection schedule and deliveries, the company's penetration in China, the market and industries in which the company operate including demand from new digital customers, platforms, and territories.

The business strategies and operational activities of DHX and its subsidiaries, and the growth and financial operating performance of DHX, its subsidiaries, and investments including fiscal 2017 revenue outlook for the company. Such statements are based on information currently available and are subject to a number of risks and uncertainties.

Actual results or events in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including the Risk Factors set out in the Company's MD&A and the Company's Annual Information Form, which also form part of the Company's Annual Report on Form 40-F. For the question-and- answer session that will follow, we ask that each analyst keeps to one question with one follow-up so that everyone has a chance to ask a question.

If you would like to ask an additional question, please rejoin the queue. Before we hear from Michael, our CFO, Keith Abriel, will remind listeners of some changes to our reporting that came into effect this quarter.

Thank you, Nancy. First, for financial reporting purposes and to more accurately align with the accepted industry trade categories, we have renamed our merchandizing and licensing businesses under the new category of consumer products.

As of Q1 2017, our merchandizing and licensing owned business DHX Brands and merchandizing and licensing represented business CPLG will be referred to as consumer products owned and consumer products represented respectively. Please note that this change will only be for financial reporting purposes, the trade facing names, DHX Brands, and CPLG will remain unchanged.

Secondly on November 8, 2016, the company announced its option of amendment to International Accounting Standard 38 or IAS 38. As a result of the adoption of the amendment the company will now grew proprietary production, distribution including monogram, consumer products owned, and new media and other into a single proprietary content gross margins for the purpose of providing analysis of gross margins.

This change is only for financial reporting purposes does not affect any trade facing names. Finally, for our full revised guidance and quarterly pacings, management directs listeners to its corporate update press release of November 8, 2016.

And with that, I will turn the call over to Michael Donovan.

Thank you, Keith, and thanks everyone for joining us on the call this morning. Last quarter, Dana spoke about the emerging opportunity that we believe exists in AVOD or advertising supported video-on-demand, one of the growth areas we're most excited about is WildBrain, our AVOD multi-platform kids' network.

The Global Media Company card estimates that the worldwide advertising market for 2016 is roughly U.S. $538 billion.

Today YouTube generates approximately $9 billion in gross revenues from advertising across all categories and journals. There is wide agreement in the industry that a larger share of that $538 billion will be directed to digital platforms in Q2 so that the $9 billion number is very likely to grow.

Based on annual revenue last year, WildBrain currently has 0.21% of that $9 billion revenue buy on YouTube. So there is significant upside potential assuming we capture the same 0.21% of a much larger buy.

As YouTube and other platforms such as Amazon, Facebook, AVOD, capture more of the global advertising market, WildBrain is similarly poised to benefit from that growth. Historically a large part of building children's brand has been through the delivery of content and advertising on traditional broadcast Linear TV.

This is however a new frontier emerging through AVOD especially on YouTube and WildBrain is in the vanguard of this trend. Numerous studies have shown that a migration to mobile is underway from Linear as more and more children content is consumed on YouTube by a smartphone, tablets, et cetera.

AVOD is becoming a significant part of how the on-demand generation of kids is viewing content and brand owners are looking for ways to reach these audiences, WildBrain operates one of the largest kids' networks on YouTube and continues to exceed our expectation. We believe this is a fertile ground for content delivery and brand building and Dana will provide more color on your plans -- on our plans I should say to accelerate the growth in our WildBrain business.

But I want to say, I personally I'm extremely excited about the potential of this new frontier for the delivery of children's content into families. I will turn the call over to Dana.

Thank you, Michael, and thanks everyone for joining us on the call. Well the first quarter was off to a slower start than we were hoping for.

We have reaffirmed our expectation to deliver growth for the rest of the year in line with our recently increased annual revenue outlook on the back of continued strong global demand for ourselves. Shortly Keith will provide more detail with respect to our Q1 results but it is important to keep the full year in view.

Overall, we continue to see a strong upward trend for the balance of the year. Last week management not only reaffirmed our full year outlook but increased our top-line guidance by $3.5 million at the mid-point of our targeted range to reflect the anticipated growth at WildBrain.

This reflects our optimism for the years ahead and in a moment I will touch on a few of these areas that will provide us growth, but first I wanted to speak about the question that we have got asked a lot lately about the magnitude of our returns of the capital that we have been allocating towards our productions. And how are we done based on these decisions that we have taken.

Accordingly we have done some recent work to quantify what we've known in our guess all along to be good returns. First look at five different categories and what we'll do is we will have Nancy and David and the team obviously include this on our website afterwards for our Investor Day.

But first I want to look at the one specific acquisition that we did our largest acquisition which was the Cookie Jar Library acquisition. I'm really happy to report to-date that so far the returns on that acquisition based on the fair value of roughly $60 million that was prior to that library, when we acquired it is 70% to-date and we have -- we returned the entire investment in terms of dollar for dollars within two-and-a-half years and obviously lots of projections for multiple dollars going forward.

So that's a first big category. The second one we look at title that was sort of 10-years-old, what we would categorize is our one of our eight titles and we're very pleased to report that that title in and of itself has generated so far in total more than $22 for every dollar invested and also broke-even I should say within two-and-a-half years.

The third category that we looked at was titles -- sort of Title B or B title something that was little bit less than the A title. And what we've determined there is that the range of return is average between $2 to $5 depending on the title of course and in the worst case scenario the breakeven for that invested capital was four years.

We also did a little bit of work on two other reboot categories these are shows that we had acquired and now it has in the library a little while and have rebooted, so one of them is obviously Inspector Gadget which was done in 2013, it was also acquired by the Cookie Jar Library and happy to report on that one return to-date is 49% of every dollar invested and again the return breakeven was little less than two-and-a-half years. And the last one is the most currently boot our Teletubbies reboot which we started in late 2014 and we are almost 100% equipped as far as our individual or first investment which was additionally around when you added the purchase price somewhere in the $40 million to $50 million range.

And so we're almost fully recouped on that one and so therefore it's a 30-plus-percent return to-date with obviously lots of upside going forward and a big year expected for 2017. So those are just some highlights with respect to some of the returns on our content.

But I wanted to get back to some of the other areas of growth that we're really excited about. So as the kids and family content from DHX's mission is to create and leverage children's content and inspires, entertains, and connects the global on-demand generation.

We are guided by three key strategic imperatives to drive our business forward and to help us fulfill this mission. First, we produce engaging high quality content for kids and families.

In Q1 we delivered 35 top hours of proprietary content. We also were in production on a number of series including Teletubbies Season 2, Degrassi Season 16, Cloudy with a Chance of Meatballs Season 1, Inspector Gadget Season 2, The Deep Season 2, and many more.

Secondly, we distributed our content worldwide to pursue growth across all media and platforms. Yesterday alongside of earnings we announced five more non-exclusive VOD deals in China for more than 2,400 top hours of our content across 19 series including classic Teletubbies, Caillou and the new Inspector Gadget.

Our shows are now available on our newly all the major digital services in China ranging across 13 VOD platforms in the country for more than 6,100 top hours of DHX content. Further management has made several fix to China over the last year and we are well-positioned with our integrated business model to leverage our core competencies in production, distribution, and particularly in consumer products to capitalize on the tremendous growth prospects developing in the country.

We are looking forward to making more expanding analysis about China in the coming quarters. Another way we are executing against our key imperative is through strategic partnerships such as the one we struck with Mattel last December.

This deal is now bearing fruit. Last month we announced numerous European distribution deals Bob the Builder, Fireman Sam, and Little People, underscoring the global appetite for these brands.

In addition, new seasons of these shows have also been greenlit making an exciting step in our partnerships -- marking I should say an exciting step in our partnership to refresh these global brands and drive growth for DHX Media through partnership anticipation across multiple revenue streams. We also continue to leverage our production capabilities as the key supplier of exclusive and original series to the subscription video-on-demand market or SVOD market in North America and Europe.

Following the rapid growth of the SVOD market over the past few years, we are seeing clearly this emerge. This is generating intense competition for content between the three biggest platforms, Netflix, Amazon, and Hulu.

Since 2012, these top three streaming services has more than tripled their aggregate content spend to over $10 million in 2016. For many SVOD platforms, children content is a glue that keeps subscribers subscribing and signed in and tuned into these services.

Accordingly major SVODs are stocking up on kids content. Some 17% of Netflix offering is kids content and Amazon is even higher at 25%, while Hulu is at 4% but growing.

Netflix has stated that about half of its U.S. subscribers regularly watch kids content and the platform plans to launch 35 original children shows this year as part of their $6 billion investment content budget.

Right now, Netflix offers about 350 of original kids' content hours which is almost on par with the leading genre adult drama and almost triple the next closest drama being comedy. Children programming is clearly a key pillar in Netflix's content strategy and highlights the stickiness of kids' content in retaining and attracting subscribers.

Of note, Amazon has also been investing heavily in content and has committed to nearly doubling their investment on originals in the second half of 2016 as compared to the second half 2015. Much of that investment is expected to be in the kids' category.

Both Netflix and Amazon are also aggressively expanding into new territories around the world as these SVOD rollout international look to differentiate their offerings to complete for subscribers demand for exclusive rights either territorial or worldwide is increasing. This history is a highly competitive environment that has had a positive effect on the value of our deals.

DHX Media has benefited from the rising demand for exclusivity with series such as Degrassi, Next Step, Inspector Gadget and The Deep on Netflix Looped in the Teleca and the new Teletubbies on Amazon and Dr. Dimensionpants on Hulu.

With more deals in the pipeline, we anticipate continued strong demand and positive impact on pricing as these streaming giants execute their international rollout. Also in the distribution, our owned TV channels are an integral piece of our content cycle allowing us to greenlight and broadcast our own shows in Canada.

This feeds our library with content, we can license around the world. Management was pleased that the additional revenue generator was added to the business line recently in the form of the approval from CRTC to allow broadcast advertising effectively immediately on family channels.

We see this is a logical extension of the CRTC left out TV decision from last year when genre protection was limited ensures that pay and specialty channels will now be on a leveled playing field. We look forward to providing additional information on this in the coming quarters.

Our third strategic imperative is that we leverage our content to develop global brands in significant consumer products upside; in this regard DHX Brands and the CPLG team attended Brand Licensing Europe or BLE in London, again this October, this past October. This show was the largest ever with more than 7,500 attendees and more than 250 exhibitors and our team had more than 250 meetings over three days.

Of particular interest to licensees at this year show was the fact that CPLG, our consumer products representative business was recently appointed to represent the BBC Worldwide in Europe, the Middle East, and Africa excluding the UK. This new mandate from BBC Worldwide is an enormous vote of confidence as CPLG is being entrusted with flagship BBC brands such as Doctor Who in top gear.

Because we have boots on the ground in this area in multiple cities throughout Europe and the rest the world and while CPLG is having great success with global brands such as Despicable Me, Sesame Street, Pink Panther, and Felix the Cat, our leading position is giving us operating leverage still wider and deeper with our own brands. On the DHX Brand side, Teletubbies Toys remain the number one new freestyle property by sales in the UK and they are in the top five across all preschool properties.

The 8-inch co-plus doll is doing extremely well firmly in the overall top 20 best toys -- best selling toys. We now anticipate strong Christmas sales for all the Teletubbies skews within the UK, with particular interest being placed on the Jumping Co-Doll as one of the eight must have toys this year which has been designated by the UK Toy Retailer Association.

As we ramp up to the U.S. Toy launch in 2017, Teletubbies continues to gain momentum.

Finally I'd like to talk about WildBrain which has seen another standout quarter, up 68% to nearly $6 million in revenues as compared to Q1 of last year. This continued due to strong growth trends that we are experiencing in the AVOD business as reflected in the three-year compounded annual CAGR, annual growth rate of 66% generated by WildBrain as at the year-end.

I'd like to take few minutes now to elaborate on how we plan to grow and take advantage of this momentum. As a reminder, WildBrain's core business is quite simple.

We connect the owners of children's content with online advertisers and we do that primarily on YouTube network today. WildBrain has become a clear leader in the children's AVOD space.

There is tremendous room not only for organic growth on our WildBrain business but opportunity to expand our leadership position and capture more market share. We are executing a three pronged approach to do this.

First, we continue to produce new original made for YouTube type content, children's content such as animated and live action shorts, toy play, and onboxing videos, book readings, preschool counting, and alphabet videos, and nursery rhymes. Secondly, we are partnering with third-party brands and content owners to manage their children's channels and leverage the network effect of being part of our larger WildBrain platform to grow our online audiences and obviously revenues.

Thirdly, we are pursuing the acquisitions of third-party independent channels that feature children's content to add to our WildBrain universe that can accelerate our market expansion. Our WildBrain team has developed considerable expertise and we believe there is a huge opportunity to grab more market share as the AVOD market is still in its emerging growth phase.

We look forward to sharing more exciting news on WildBrain growth in the future. With that, I will turn the call to Keith.

Thank you, Dana, and thanks everyone for dialing this morning. Let's discuss some of the high level results for the first quarter of fiscal 2017.

Revenues for Q1 2017 were $53.8 million down 16% from $63.9 million for Q1 2016. In absolute dollars the decrease in Q1 2017 was due largely to expected declines in DHX Television and consumer products represented revenues as well as declines in proprietary production, distribution, producer owned service fees, and consumer products owned that are largely attributable to a combination of expected seasonal fluctuations and the timing of certain deliverables.

Proprietary production revenues for Q1 2017 were $3.5 million down 15% compared to $4.1 million for Q1 2016. The company added 35 proprietary half hours to the library and 27 half hours of third-party produced titles where we hold distribution rights.

Total distribution revenues were up 5% to $14.7 million from $14 million for Q1 2016 driven by strong growth in WildBrain. Management is very pleased to report that revenues for WildBrain were $5.9 million for Q1 2017 reflecting 68% growth versus Q1 2016 revenues of $3.5 million.

Revenues for consumer products owned formally M&L owned were $3.7 million in Q1 down 22% as compared to $4.7 million for Q1 2016. Management expects consumer products owned revenues for Teletubbies to begin to ramp up in late fiscal 2017.

Producer and service fee revenues for Q1 2017 were $10.4 million, a decrease of 27% versus the $14.3 million for Q1 2016. Management expects progress to accelerate for the remainder of fiscal 2017 on a number of key production service projects.

Television revenues for Q1 2017 were down 18% to $15.4 million from $18.8 million in Q1 2016. Consumer products represented revenues that's formally M&L represented or CPLG for Q1 were down as expected $0.8 million to $5.9 million compared to $6.7 million for the same period last year.

Revenues across all the preceding business units were in line with the company's revised quarterly pacings provided in its corporate update release of November 8, 2016. Gross margin for Q1 2017 was $31.2 million, a decrease in absolute dollars of $3.4 million or 10% compared to $34.6 million for Q1 2016.

The overall gross margin for Q1 2017 at 58% of revenue was near the mid-point of management's revised guidance impacted by stronger-than-expected revenue growth for WildBrain, seasonally low deliveries for proprietary production, and lower-than-expected live tour gross margins. Gross margins are expected to fluctuate from period-to-period mainly as a result of the timing of deliveries, seasonality, and product mix.

Turning to operating expenses, SG&A costs for Q1 2017 increased 2% to $17.6 million compared to $17.3 million for Q1 2016. Also of note, SG&A includes $1.29 million in non-cash share-based compensation and when adjusted cash SG&A at $15.5 million was at the low-end of management's quarterly SG&A expectations benefited somewhat by weakness in the GDP versus the Canadian Dollar.

Management intends to continue to add resources throughout the year as it continues to ramp up its WildBrain business and to drive growth in the consumer products owned business. For Q1 2017, adjusted EBITDA was $14.8 million down $3.5 million or 19% over $18.4 million for Q1 2016.

Net income for Q1 was $1.4 million compared to $7.5 million for Q1 2016 a decrease of $6.15 million. The net income for Q1 2017 was materially impacted by foreign exchange loss of $1.03 million versus a foreign exchange gain of $4.10 million for Q1 2016.

The foreign exchange loss for Q1 2017 was primarily driven by the impact of exchange rate fluctuations on foreign currency denominated receivables and payables a significant portion of which were comprised of inter-company balances. Turning to cash flows.

Cash flows from operations for the period were a negative $5.0 million for Q1 2017 versus a negative $12.3 million for Q1 2016, an improvement of $7.3 million. Similarly cash flows from adjusted operating activities were an outflow of $2.4 million for Q1 2017 versus an outflow of $13.7 million for Q1 2016, an improvement of $11.3 million.

Cash flows for Q1 2017 were directly impact by the following key points of note. First an aggressive proprietary production slate at a time when demand for content is robust, noting productions in progress at September 30, 2016, was an unprecedented $35 million, up from $25.1 million for June 30, 2016.

Second the seasonal acquisition of additional third-party content for DHX Television in advance of the fall 2016 season. The net impact was a cash outflow of approximately $6 million for Q1 2017 which is expected to partially reverse during the remainder of the year.

And third and finally the cash used -- the company used cash of $2.9 million to satisfy DHX's Televisions tangible benefit obligation representing the full amount of its expected annual expenditure for fiscal 2017. For further specifics on the Q1 2017 results as well as additional information on management's fiscal 2017 outlook and various other information including a reconciliation of GAAP and non-GAAP financial measures, I would refer you to the company's fiscal 2016 MD&A sorry the company's Q1 MD&A and financial statements which were posted on SEDAR and EDGAR last evening.

With that, I will turn it back to Dana.

Thank you, Keith. To summarize we continue to see strong global demand for our content and are very excited about the new opportunities on board, particularly with WildBrain and we look forward to sharing more into the coming months.

With that, I will turn the call over to the operator for questions from analysts.

Good morning. Thanks for taking my questions.

I want to start with sort of the guidance and particularly revised guidance that you had offered us last week. If you look at the sort of the cadence through the year, I know that -- historically the quarters have been lumpy but if you look at the guidance sort of quarterly pacings, you're looking at a very significant skew in Q4.

So if you look at the revisions last week, Q1, Q2, and Q3 how lower and then Q4 raised. Why is there such a huge skew may be perhaps unprecedented from any growth from Q1 to Q4 is that partly at least to do with sort of your expectations around Teletubbies and the M&L outflows you expect in that quarter?

Yes, thanks Aravinda, thanks for that question. Yes, exactly well there is two things that are sort of fitting into that.

One is some of that -- now that we've had another full month or so in looking at the proprietary pipeline and the capacity level within the company, the way that the deliveries are rolling out to this, as you remember this is -- in our business the revenue recognition is all or nothing and so it's all based on deliveries. And so a lot of that is skewing towards the fourth quarter distribution.

Also this year is unusually back loaded towards the fourth quarter, a lot of that has to do with when those are opening up as well and when the expectation of being able to book those digital deliveries, a lot of that is contracted and in place which is why we're confident in our guidance, number one. And then lastly on yes you're right on the Teletubbies consumer products side, this is our first Christmas, we are expecting a good one.

What inevitably happens though at Christmas time is since we have to report really pretty soon after in February for Christmas and then also in May, a lot of the reports are done sort of semiannually every six months and so lot of those we won't be receiving until May and June. So the expectation for overdues right now is too difficult for us in our first Christmas season to be forecasting that to get in Q3.

So we will expect it to generally rollout in Q4. So you're right in this your opinion is a little bit unprecedented that has everything sort of lining out that way but that is indeed the case.

So to follow-up on that, on the distribution I certainly understand the M&L in parts but on the distribution side, what you are saying is that sort of the high expectation that you have in towards the back end is to at least the great extended contract, right, I mean there is -- I'm trying to get a sense of the risk?

Yes, exactly there is, as always we have sort of three areas that we pursue in our distribution. We've got new deals and those are things that are brand-new happening.

We've got ones that are have been in the pipeline for quite some time and either contracted or near contracted. And then we have third bucket which is things that are sort of ruling over, things that expire and licenses open up again.

And then some anticipation as to our probabilities of pouring some of those through within that last that backend. So the combination of those three are giving us the confidence to guide that way.

Okay. And just lastly, further on the free cash flow, you indicated on last call that you're looking at 30% or higher in terms of EBITDA to free cash flow conversion, is that still sort of generally expectation that you for full year?

Yes, absolutely and I think this if you have a chance to go back and listen to what the element and read the MD&A as Keith said there is sort of two or three individual call first quarter lumpiness is the right way unevenness the bunch [ph] of the entire tangible benefit was spent in the first quarter versus probably everybody projected that to be evenly split throughout the year. And some of the TV stuff again because of the fall season was uploaded first and so the amortization backup quite a bit later, so there is considerable amount of, I would say may be $2 million to $5 million at least of cash flow there that would have been, if you want to call, a normalized debt, if you're looking at it from a year-by-year basis.

So we are right on track with our expectations is the summary.

Okay, great. Thanks.

I will pass the line.

Thank you.

Thanks a lot, good morning. May be just as a follow up to Aravinda's question, one item he didn't necessarily mention but I imagine it's slow but ramping is the advertising introduction on the channels particularly family channel.

I know data; I know data you telegraph this in terms of more on this in coming quarters, so maybe you can just speak to that some of the thoughts on how it's going to ramp?

Excellent question Adam. Yes, I mean I think the -- that's a great news of the announcement a couple of weeks ago was that we finally had our application approved.

Unfortunately the timing of being approved basically in November heading into the Christmas season, most of the ads have already been sold. And so what we are sort of running from behind and try to pick up the left order residuals or people that are topping up on various moving programs et cetera.

Ideally we look at that in the late December or early fall. So we've little bit missed some opportunity this year.

But having said that we now have going forward and we obviously have some aggressive plans to go into cash with some of that. But having in pace with that unfortunate timing, we -- so it was unwise to be too aggressive in our first year of projections related to ad revenue.

Obviously we are hoping that we will hit at least to the mid or if not to the high end of where we're guiding but we thought it was unwise to guide above that right now. May be in a quarter or two we'll have more clarity and we can give an update there.

Thanks for that. May be just as a follow-up for you or for Keith frankly, in terms of cost in TV they were a bit lower just in terms of timing of up spend on third-party content.

Any additional color as to how things might skew, it will be a greater skew out to the back half or a bit of an up and down as the quarters evolve?

Are you talking on the proprietary side or on the actual programming side, I'm sorry.

Programming purchases, third-party programming purchases, I think it was referenced as lower in the quarter.

Yes, so where we were Adam on the third-party content versus this they were high in the first quarter as we ramped off for the new season. They will come down if you look at it and I articulated this if you took all the balances related it accounted for basically cash outflow exceeded amortization about roughly $6 million this quarter that will reverse.

We are anticipating that number to be within $2 million to $3 million of zero either way for the year. So it will normalize as the year goes on.

And Keith, it's not with our year-end amortization is roughly about $25 million; is that right?

Yes, I'd say yes, yes.

Thanks very much for taking my question. The question would be on China, I believe last quarter you said that you got something like $1 million in revenues in 2015 to $5 million in 2016 and you were targeting plus 50% this year.

But then you said you could drastically overachieve, can you sort of talk to the two parameters there?

Yes I mean we're going to achieve our growth targets for sure. We probably have more or less hit that now.

The -- so there is upside potential. The tricky bit that we realized there is it's a different environment and the speed at which deals are done, sometimes getting there is a big weight and then all of a sudden many gets done and you wait six months.

So it's difficult to project much further beyond that. We do have some new recent trips and things coming up and so in a quarter or so we may be coming back and I think that.

But right now we're looking good to achieve or exceed that at the moment.

Thank you. And I could have follow-up on your earlier question on the distribution and the heavy weighting of that in Q4.

And you did talk to the three buckets, new pipeline and rollover. Could you perhaps go little bit deeper in terms of how much of that Q4 would be new versus pipeline versus rollover?

Yes, that's a good question. I think, generally in the past to -- I think two years ago our ratio more or less between sort of what I'd call library sales and sort of current slate at that point in time was about 70% library, 30% current slate.

Let's say that was for 2015 fiscal. For 2016 fiscal that sort of switched to probably 60:40 or 55:45, again library being slightly ahead.

Now I think for 2017 we're projecting that mix to be sort of balanced, sort of 50:50. And that I think has to deal with necessary selling only rest on the library side say it's a pre-consistent number.

But we're getting average sales price increases from individual original commissioning broadcasters. So whether that said and that's what's your [ph] welcome that with quite frankly and driven by the competition that we're still seeing and as a result of that is -- that is affecting it.

Also you will know that having a fold the company for while rather that the nature of how we produce is obviously we greenlight a show and then it goes into production for couple of years prior to actually delivering it. And so while we're busily producing the content we're obviously gathering up and gathering distribution sales as well.

And the challenges of course you don't deliver the opposite, we can also deliver the distribution. So it has a bit of a double warming effect in terms of quarterly, quarterly unevenness and so all of those things are what give us the confidence on the backend.

Yes, thanks very much. Good morning just one follow-up just in terms of again the pace in here in fiscal 2017, you had kind of walked through the distribution side of things and talked about what contract and enrolling over etcetera so, that's great.

Just on the production side, we have seen a slight reduction, production guidance between the September guidance and November. What kind of visibility do you have on that production side for 2017 is that normally what you think you will be delivered, gets delivered on time can you just speak to that?

Yes, so I mean as again going back to the point and most of time when we start a fiscal year, we probably have somewhere between 50% to 70% visibility on what that proprietary production line will be. With the one exception of being sort of either second seasons of a particular season and/or live action stuff.

And so when we are going to the slate again, as we're preparing the Q1 results and obviously looking at accounting for the changes related to the new policy. We said another look and we thought that it would be -- it would be more prudent to sort of bring that down a little bit and we sort of reapply some of the in capacity the backend towards the service and I think it's a combination of timing on scheduled deliveries of our core customers but also terms of our own pacing of our slate and sort of get it.

It seems to be getting into a more natural balance at sort of 50:50. As we go forward and cash flow improves upon from the distribution side and the consumer product side and we have a little more free cash flow related to those that we can sort of account on, we may go back to more aggressive approach in sort of 75% proprietary -- sort of 25% service but right now things are settling as the pre-even and comfortable balance.

Okay, thanks, Dana. My and just one follow-up on the SVOD business selling into the legs of the Netflix, Amazon, can you just give us an update on, we know they are all spending more on content.

Can you give us an update on just what the trend is towards them wanting to produce this content for themselves and retain kind of the global IP rights versus buying your content or alternatively you're selling your proprietary content into them, can you just talk to what the trend is there if you are seeing any change?

Yes, sure. I mean I think that the trend is on -- it's sort of unfolding as we expected is that the big guys are obviously looking for more exclusivity and that's either in the form of exclusive for a territory or a two and/or more global rights to your point.

The good news is that they're willing to pay off for that and they're competing at a pretty aggressive pace number one. And obviously we're benefiting from that as we look to roll individual new shows.

It also is giving us the new avenue for greenlighting our shows because if you recall having been in this place for quite some time, one of the changes that came out of TV was us to be able to access a lot of a subsidy system in Canada from greenlight from a digital. So that actually has unlocked a pretty significant upside in terms of let's call it customers and emptive customers.

But on the other side, what's evolving is that the big companies like us, the large independents are also they're coming called upon more frequently and in fact we're not only selling into those original new shows and have more in the works, but also looking to actually perhaps service through some of the shows that they agreement on other CEOs and ask for us to get involved. And so there's -- so an interesting sort of evolution in terms of the relationship that's happening there as well.

In fact I had one conversation right now with one of a major SVODs to the agreement in original for a classic piece of IP and they are looking to us to search produce it and also then distribute it throughout the world. So it's an interesting evolution of the relationship, it's something that we planned on and build the company, this is why we built the platform that has all facets of the equation production, distribution, and obviously consumer products to really take advantage of that.

And that's really what's happening, as far as the smaller individual producers, I expect there will be some pressure points on them going forward because they don't have that scale to be able to offer incremental -- incremental pieces to those relationships. But for us it's certainly a strength and growing and building.

And Dana sorry just one follow-up on exactly that just in terms of the exclusivity side of it, are the economics materially different one way or another for you on that and are you is that exclusivity on the property or is it just exclusivity on kind of the broadcast or on demand?

Good question, yes. So I mean the upside is quite significant, it can be as much as double, what others are offering, certainly 50% more in some cases.

For us we always have to trade that off in terms of obviously balance in terms of our custom rates but also which individual platforms in some countries like the UK, the CBB platform is at the moment which they view it as a better platform to launch CP-related properties. So those decisions come into it.

And on the last part of your question, last part was remind me?

Yes, just when you're selling kind of exclusivity into Netflix with a particular program, are you able to kind of retain any rights associated with that?

Yes right, it's the rights question yes absolutely. So effectively what happens always is there is we're selling them exclusivity within a period and that usually is anywhere from one to two years depending on the territory.

But there is always a -- let's call a hold back and then those rights come back to us to sell in the linear territory. So for instance say Inspector Gadget as example exclusive that we did in the U.S.

I believe the holdback was 18 months on that one where they had exclusivity within 18 months but then we're able to then immediately start to license it into other platforms. So it isn't better just taking exclusive rights on all of the content and at the end of the day, all of those IP comes back to us which is obviously the beautiful part of our model.

Yes, I can add, this is Michael Donovan. That just to be very clear, we never sell all the rights ever, we're not in the business of selling the rights to SVOD or anyone, we always retain the rights, we sometimes get exclusive windows in certain categories.

Thank you, good morning. This is actually Kevin Lee for Ben.

In terms of the move towards adding commercials on the family channels leaving aside the regulatory change, can you talk about that decision in terms of the competition largely Netflix which one would think mix set of service, more an attractive option for kids in parents mind because of the lack of commercial but also at a time when the U.S. networks notably call it Nickelodeon are reducing their ad loads?

Thank you.

Yes, so it's a good question Kevin. Thanks for joining.

I think that was a first question from Stifel gang, so thank you for that. I mean it's always a balance for us, you're absolutely right part of the attraction on the family channel is that, it has been to this point a paid sort of specialty service ad free.

We probably will see that be definitely very disciplined and discerning as to where we add those ads, certainly it will likely be later in the evenings and we will also then focus on key sponsorships as well and as to not as sort of water down the brand. And I believe that what your question is if there is a follow-up happy to take it.

Hi, guys thanks for taking my questions. Just a quick follow-up on the family channel question on advertising, generally in the past, we've seen kind of an inverse relationship between wholesale rate subscriber revenue versus advertising revenue.

On to your existing contracts with the BDUs, do you guys have a sliding scale there are you able to double dip and add ad revenue within the existing contract peers?

There is no sliding scale, double dip is a -- it's probably pretty aggressive zero that I would say that, again I would go back to the earlier question I just said, we're going to add it in a very sort of respectful way I think, we think that we -- we will be able to still have the attractiveness of the family channel for the vast majority of the time to being ad free particularly when it comes to the earlier hours and we will seek to explore opportunities related to that. So we will have incremental revenues for sure.

I think is the way we put it from a subscriber projection. I'd also remind the listeners that the average life of all those contractor, two-and-a-half to three years in length.

So we've got those locked up for some time and obviously we will be -- will be trying different arrangements on and will be obviously sensitive to all sides.

Got it. And finally I just wanted to know if you guys could elaborate on the M&A side you would respect to WildBrain and the AVOD business.

What are you guys looking for, what you will get in my sense was if you don't have a big quantum like your own meaning that business is not been quite profitable so, what are you looking to acquire here?

Yes, excellent question. So I think there is a couple of things one is just understanding the core principle of the network effect and I don't know how well this is understood but I will take the moment to sort of position it and I'll ask Michael to add as well as.

What we found ourselves on the, as Michael used the vanguard between sort of the text space which we've never been before as they an early adopter in the AVOD space and obviously a leader and back to our core which is sort of content ownership and management of scale of the large library. And what that means is that the algorithm in this case is our front and we have an advantage a lead where our average CPM or revenue that we're earning per thousand is probably 50% to 70% higher than the normal -- the normal.

And if you have an individual channel, I mean not like actually the leverage that we apply that need to go what we rolled out the content library. We have individual channel within YouTube and you don't have WildBrain as an overall virtual network that sort of enterprise brand that we can leverage off of within YouTube, you're getting just the regular run in the real run rate.

So your average CPM is probably down in the three may be four, if you really have $5 per thousand and ours is in the eight growing nine, 10 hopefully at some point in time. So there is a huge interesting effect and it's just coming into the network, our ability to charge instantly and the increase per thousand.

And moreover to draw leverage from our own individual channels and so growing not only in terms of the average CPM but also in terms of the number of views and so this is the beautiful virtuous circle that we have, because of our leadership position is that, the more channels that we add, the stronger we get, the more views that we get, the more views that we get, the more money that we get is the more ability to attract individual channels. And so we're really in unique position here to go and rollout the space at very attractive prices.

Again to where we rolled out the content world, starting again a decade or so ago back to the days we did deals in the four, five, six times and then getting the back of the original WildBrain ironically we -- our payback was less than two years. So we're going to aggressively to go after this market.

We've got number of deals in the pipeline, nothing is done yet, of course but we have several and we're quite optimistic that we will be announcing some very soon.

Okay, great. So it's more growing your distribution network rather than taking up unknown brands and new brands?

Exactly right, I mean obviously we will be doing a little bit of both but we think that the YouTube Network will create stars and brands will come out of that. There is already evidence where things like Masha and the Bear and a couple of other brands that have developed into global successes from YouTube.

And obviously will be -- we will be like a hoax covering for all of those and going after them aggressively. And what's great is we have got the list not only from our own research but we're also getting introductions from even the YouTube guys because people and they are interested too because if they're able to sell the ads at a higher rate, it's a mutually beneficial win for them because they're getting -- they're getting their sort of the 45% of the revenue share.

So this is a really unique moment in time which we find ourselves on in. Michael, do you have any further to add their?

That's exactly what we're seeing it's a kind of network effect that the more members we add to our network, the value of each member rises proportionately. And that's what's so exciting, one of the things, many things, so that's one of the things.

So truly exciting about what's going on in mobile and ad side. We see it as the new-new and we're in leadership there, sorry.

Okay. No that's great, that's great, it was really helpful.

I don't want to take up too much time; I do have one last housekeeping question. There are terms that you cited earlier Dana in the call on capital on your titles.

Are those the returns on the capital that you put risk or returns on the call capital put into each brand including government subsidies?

We'll clarify it's a bit of a mix for titles that are from the scratch original organic titles that's a net investment number for one that are acquired like the Cookie Jar Library and then the incremental assets that we or capital that we put to work those are sort of actual dollars. We had to put out the capital to acquire and obviously revisit the brands as well.

So it's a combination we will be very clear, when we put it up and have that.

Just to clarifying the last question, Dana for something like Teletubbies, so that 30% you mentioned would include both the purchase price of ad doll plus the constant investment to-date?

Yes, exactly, yes.

Okay. And then one last question for me, just the pricing perhaps [indiscernible], is that to do with the dynamic gone on Teletubbies because that played lot sure I think as well?

Yes we can get, there is nothing specific, so it has to be the product mix and yes the lighter delivery quarter.

Yes that's a bad metric to use because shows that we sell to ourselves that we're producing for that many channel has very little revenue attached to them and the Teletubbies dynamics to your point Bentley does skew it as well. I -- you will never hear me quote that metric because I'm not a fan of it.

Well I think going forward to I think the some of the grouping of the content section between how we sort of look at, at least for the information of you and the other listeners is that we sort of look at the proprietary production rather than sort of the initial distribution wave all in one anyway and that's just a classification now as we're going forward and sort of guiding on margins and grouping those as one category, we will probably look towards grouping those in a more significant way going forward.

Thank you very much today for joining us and we look forward to updating you on our next quarter. Thank you.

Thanks everyone.