Thank you, operator, and thank you, everyone, for joining us today. Speaking on the call today are Eric Ellenbogen, our CEO and Aaron Ames, our CFO.

And with us and available during the question-and-answer session are Josh Scherba, our President and Danielle Neath, our EVP of Finance and Chief Accounting Officer. First, we have some standard cautionary statements.

The matters discussed on this call include forward-looking statements under applicable securities laws with respect to WildBrain, including, but not limited to, statements regarding future investments by the company, the impacts of COVID-19 on the company and its business, the business strategies and operational activities at the company, the markets and industries in which the company operates, and the future financial and operating performance of the company as its assets including the leverage position of the company. Such statements are based on information available currently 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 most recent MD&A and Annual Information Form. Please note that all currency numbers are in Canadian dollars.

For the question-and-answer session that will follow, we ask that each analyst keep to one question with one follow-up, so that everyone has an opportunity to ask questions. If you'd like to ask an additional question please rejoin the queue.

Please note that we are all in separate locations. So we do appreciate your patience if we any encounter any lumpiness as we steer through the call.

I will now hand the call over to our CEO, Eric Ellenbogen.

Thank you, Nancy. Good morning.

Thanks to everyone for joining us today. Last week we announced yet another major project that capitalizes on our unique capabilities to manage, monetize and grow brands across content and licensing.

In partnership with SEGA we're producing a new Netflix original series called Sonic Prime which is based on the highly popular gaming franchise Sonic the Hedgehog and production is now underway in our Vancouver studio. This is an incredibly meaningful deal for WildBrain.

Like our Peanuts agreements with Apple these multi-year exclusive Sonic contracts with SEGA and Netflix add yet another premium project to our creative pipeline that translates into excellent visibility for contracted, high quality earnings streams for years to come. We're partners in a property that has tremendous momentum and massive consumer reach Sonic the Hedgehog is one of the most popular entertainment brands in the world.

And since its videogame debut in 1991 over one 1.14 billion game units have been sold and downloaded. Last year the theatrical feature film Sonic the Hedgehog grossed $320 million worldwide and it broke through a major box office milestone to become the number one grossing videogame movie of all time in North America.

And given the success the sequel to the feature is already in development from producers say SAMI and Paramount. And we expect that our new animated series will connect with and expand the enormous global fan base to well all things on it.

And I want to emphasize this is not a service project for our studio this is a true partnership as WildBrain Sega we're sharing production distribution and licensing revenues we're honored to have this partnership with Sega and believe it speaks volumes about our capabilities in managing world-class brands. We've witnessed firsthand the enduring popularity of this brand from the strong and steady global demand for our Library of Legacy Sonic series which comprises 132.5 hours in the WildBrain library.

We've also seen the strength of sonic and consumer products and we've seen that firsthand through our pre-existing licensing agency representation and Sonic across continental Europe. We expect that business to grow as we now layer on representation of Sonic Prime in that territory.

This partnership is yet another example where we get all the benefits of premium content production delivering steady state high-quality predictable earnings plus the considerable upside potential across distribution including on our own AVOD network and then in consumer products licensing. As I said to you in our last call we have a robust pipeline of premium content.

Our Sonic announcement is just a preview of further coming attractions and like Sonic in the coming quarters we expect to be talking to you about other applications for properties from our deep library. One of my top goals when I joined this company was turning it into a premier creative force in kids and family entertainment.

And a big part of that is driving into our library and surfacing evergreen brands that have strong potential servicing evergreen brands that have strong potential to renew and reinvent for today's audience. We're making great strides on these goals returning to count of an asset base that we have to build franchises which we expect will continue to improve the value of our library.

This great new content provides further high margin distribution and consumer product opportunities, opening up enormous option value across our business and our IP portfolio. Premium franchises command premium dollars across the entire value chain.

And we believe top life creative coupled with our unique capabilities to unlock and to exploit IP will create a virtual flywheel of growth and value creation for years to come. Our unique capabilities in development, production distribution licensing and audience delivery deployed against our own library are also drawing these premiere partners.

Another example of that is our new animated series Go, Dog. Go!

co-produced with DreamWorks. The series began streaming on Netflix January 26 and within a couple of days it became a top 10 show on the platform in both Canada and the United States.

This series is a case in point of doubling down on top life creative which is clearly resonating with audiences who’re recognizing that quality on the screen. Likewise our newest Peanuts series The Snoopy Show just premiered on Apple TV+ last Friday and has been getting great rave reviews.

And Apple is launching a major marketing push for The Snoopy Show not only on their own platforms but also with an extensive global advertising campaign. Just last Friday the Peanuts gang staged a global takeover of the Apple.com website.

Our studio meanwhile is hard at work on more original Peanuts content for Apple including multiple family specials and season two of Snoopy in Space. In the quarter, we deployed capital from the Capital Growth Fund to acquire rights that we didn't already own in Caillou series from PBS.

We perfected our rights ownership, importantly giving us control over Caillou to reach an even broader audience including on our WildBrain Spark network and to increase exploitation of the property across various business areas. I've said previously that we did invest in rounding out the IP rights in our library and this is just one example with an enduring property that we know well.

Caillou is one of the top brands in our AVOD network and our data analytics tell us that there are opportunities to reignite and to grow this property. Turning now to our AVOD business, WildBrain Spark, we're really encouraged by further sequential improvement as advertising revenues continue to rebound from the pressures of COVID-19 and the YouTube policy changes.

In the second quarter 2021, revenue at WildBrain Spark improved sequentially by 74% from CAD 8.9 million in Q1 2021 reflecting the build-out of our proprietary data analytic tools which are driving growth in multiple new revenue streams including direct advertising sales on our own network, paid media and digital production fees and some seasonality. These nascent revenues grew by 365% in the second quarter 2021 versus 2020.

Now, I need to contextualize that growth as building on a relatively small base. We're surely not expecting to see triple-digit growth every quarter, but the growth that we're experiencing shows that our investments are starting to pay off.

And so, we'll continue to make those investments. We know the opportunity is big and its burgeoning and we're in high gear to build out our teams and to expand our service offerings to both grow and monetize on our engaged audience.

We're highly focused on benefiting from the secular shift in ad dollars from linear to digital. The tide continues to rise as the scholarship which captures much of this revenue as we can.

We're creating a. stand by.

I'm sorry technical difficulty, so to further that our network offers advertisers an enormous scale plus enormous breadth and a variety of safe content. We believe our competitive advantage lies at the intersection of this massive advertiser friendly network and our pioneering capabilities and proprietary data analysis.

An important variable for monetizing content is watch time and that's a metric that tells us how much time people spend watching our content on YouTube. The more time people spend watching our content the more ads we conserve.

In Q2, for example, watch time increased 15% versus Q2 last fiscal to 59.7 billion minutes. Kids watching content on our platform spent 6 minutes and 16 seconds on average per view, which was up 20% from Q2 2020.

And viewership remained strong at 9.5 billion views in Q2 2021. Our direct ad sales efforts are benefiting from a shift in family viewing patterns to connected TV's which accelerated during the pandemic.

Households are increasingly using connected TV to watch ad supported streaming services like WildBrain Spark on YouTube. This important trend was confirmed by our commissioned research report titled Making Screen Time Family Time which we released in December.

We surveyed 3,000 US households with kids and found that a very large percentage of parents on the order of 90% see [indiscernible] services is important video sources for their children. We also learned in that study that connected TVs are the most popular platforms for family viewing in over 60% households.

Our data further indicate a very high rate of family viewing on our trusted network where parents are watching high quality, curated content on YouTube with their kids. And this unlocks advertising opportunities for family consumer products and brands targeted at parents and kids in a COPPA compliant environment.

The majority of WildBrain Spark viewing in major markets is now in connected TVs and the majority of that viewing is content that's at least 30 minutes long. That means in family living rooms WildBrain Spark is directly competing with linear television on the very screen that linear once owned.

This is a trend that we're confident will accelerate the shift in advertising budgets because as I've often said advertising dollars follow eyeballs after our fair share of CAD 4.6 billion of global kids advertising. And with that I'll hand the call over to Aaron.

Thank you, Eric. During Q2 we continued our disciplined approach to content investments and the management of costs and working capital as reflected in our continued generation of positive free cash flow.

We are also making significant investments to support our growth in premium production and licensing and to expand our development pipeline. In Q2 we further accelerated the build-out of our proprietary data analysis and ad sales teams at WildBrain Spark to support growth in our own and partners brands.

These continued investments were driven by strong adoption we are seeing from the marketplace from these initiatives we launched last year. Our leverage ratio remains steady from Q1 and we remain on track to be in the mid-4 level or below by the end of our fiscal 2022.

If you look at the last three years or so the source of our deleveraging has primarily been from free cash flow generation or asset sales and to a lesser extent EBITDA growth. As you look out to next fiscal year and beyond we expect EBITDA growth to take over as the principal driver in accelerating the deleveraging process amplified by improving free cash flow generation.

Turning now to our Q2 results revenue in Q2 grew 17% to CAD 142.3 million compared with CAD 122.1 million in Q2 last year. The increase was primarily driven by the large deal for the Peanuts library with Apple TV+ announced in October.

Q2 2021 net income increased to a CAD 11.3 million versus a net loss of CAD 2.3 million in Q2 last year. This improvement was driven by higher gross margin a higher non-cash foreign exchange gain and other income from litigation settlements together with lower expenses related to reorganization development and finance costs in Q2 2021 versus Q2 2020.

Positive free cash flow in Q2 increased to CAD 23.5 million compared to CAD 13.3 million in Q2 2020. The increase was partly driven by improvements in collection or of production financing other income earned in Q2 2021 and lower distributions to non-controlling interest in the current quarter.

Adjusted EBITDA increased 14% to CAD 29.1 million in Q2 2021 compared with CAD 25.6 million in Q2 2020 principally driven by the Peanuts library licensing deal continued strength in our content production and distribution businesses and other income of CAD 4.4 million from a litigation settlement. The funds from the settlement are being invested to meaningfully accelerate growth areas, principally in our proprietary data and analysis tools, direct ad sales and our licensing capabilities.

Now, I'll turn the call back to Eric.

Thank you, Aaron. Overall we're realizing positive momentum in every sector as evidenced by our Q2 financial results.

We're delivering on our long-term strategy of number one, creating premium kids content to grow key brands. Number two, monetizing our large audience on WildBrain Spark and number three, improving our cash flow and balance sheet.

And most importantly we’re striking meaningful deals supported by our 360 degree strategy to grow our own IP and partner brands by leveraging the strength WildBrain has across development, production, distribution, licensing and audience delivery. There are many more such deals to come.

So as I've said on past calls, watch this space. Finally, before opening the call to questions, I'd like to mention that we're looking at holding an Analyst Day this year probably midsummer, early fall.

I've not been with the company for 18 months and I could not be more confident about the huge opportunity before us. So, I'd like to spend some time at Analyst Day to spell out the size and the scale of that opportunity with more details to follow.

So now, I'd welcome your questions.

Good morning. Thanks for taking my question and congrats on the quarter.

I'll start with my main question and have a follow-up. In terms of the trends that you're seeing at WildBrain Spark obviously you are now lapping the impact of the YouTube rule changes.

I was wondering if you can talk to sort of the shape of the recovery that you're starting to see and anticipate. And connected to that obviously the initial take -- initial takeaways from the development of the direct ad sales initiative.

I was wondering if you can expand a little bit on that. And then as my follow-up with respect to the Sonic the Hedgehog deal, can you talk to sort of WildBrain’s share of Merch revenues down the road?

Is that something you can disclose or give us some general indications of? Thanks.

Okay. So let me take a question about direct ad sales and how those results are coming forward.

It's going quite well. And I think one of the things you pointed up, excuse me, is the change in YouTube policy which we've highlighted previously for Made for Kids which happened last January.

And for those not familiar it basically prohibited kids content providers from collecting or YouTube collecting data on individual viewers and therefore needing to move to a more contextual advertising model not dissimilar from linear television. So we made significant investments this quarter in direct ad sales which we believe will build long-term value and those are the numbers that I highlighted in my earlier remarks.

So if I can share with you what advertisers are looking for. Number one, incredible reach and that's something that we have in abundance.

Second, they're looking for brand safety and want to know their ads, where their ads are being placed. Obviously the advertising environment is critical.

And we're signing lots of deals. We have huge aspirations in this area, we're seeing a shift in revenue not just from the adjustment in the YouTube algorithms which are beginning to favor scale networks like ours, adjusting for the changes made and made for kids policy, but also in campaigns and switching on new revenue sources across WildBrain Spark.

And one of the things that we're offering which we think is incredibly compelling is a customizable solution. It's premium content based on viewing trends and data insights that we've compiled and we've also invested heavily against data analytics and ad tech with some proprietary technology that helps us better serve our audience with content that they're looking for as well as helping advertisers understand better the audience that they're reaching.

So it's probably not dissimilar as an example in linear television from understanding lead in programming and what leads to the next. And that allows us to optimize what we're doing.

And the other thing we're benefiting by clearly this isn't us. It is the shift of ad dollars from linear to digital.

And so as I pointed out we really expect to harvest our fair share of that CAD 1.5 billion that are being spent globally each year on kids advertising and then that incredibly engaged audience. Can I ask you to repeat again your second question?

Yes it relates to the Sonic the Hedgehog agreement which you announced and I apologize if I didn't hear that during the prepared remarks. Can you talk to your share of merchandise sales or any kind of product sales down the road test for this agreement?

I’ll ask Josh to address that. I'm not sure that you heard Josh.

Great. Sorry about that.

Hi, Aravinda. So certainly I would characterize this deal with SEGA as truly as a partnership.

We're going to be sharing in all revenue sources related to this IP outside of video games and in the feature film. So it begins with production and great creative and we couldn't be more excited about the series it's truly a landmark series for us in terms of creative scope and ambition it in every sense will be a premium project.

And then once we get it out in the world we're going to be managing exploitation outside of North America so representation for our CPLG group as well as utilizing our WildBrain Spark division to ensure that we're driving amplification of the brand and ultimately ancillary revenues. So it really is a great example of our ability as a 360 company to really wrap our arms around a brand and we couldn't be more thrilled So it really is a great example of our ability as a 360 company to really wrap our arms around a brand and we couldn't be more thrilled than to be doing SEGA on Sonic.

Great. Thank you.

I’ll pass the lines.

Yeah. Thanks very much.

Good morning. Just a quick follow-up on the Sega partnership and relationship.

Either Josh or Eric, you know clearly under the new management team here at WildBrain, we're kind of seeing better execution and certainly better execution on the premium side and these aren't insignificant deals you're signing. How did this partnership come about if you could provide a little bit more granularity there and then I have a follow up after that?

Thank you.

So, Drew, thanks for your question. I'll let Josh talk to you about how the partnership came about, but one of the things I'd point out which is somewhat axiomatic is the scale of this deal is significant.

Obviously, we had to provide a disclosure as a consequence of materiality. So you can obviously take away from that how important the transaction is for the company and that we've struck a partnership deal.

This is not service work as I pointed out in my earlier remarks, but rather a very extensive relationship building on a pre-existing relationship that our CPLG licensing group has had across EMEA. And I'll let Josh talk to you about the genesis of the transaction.

Yeah, so it’s been a couple of years really that we've been cultivating this partnership with Saga and really taking a methodical approach to the creative and what we would do in a series related to the Sonic moving forward and finding the right partner which ultimately with Netflix. So it's a process that certainly takes time, but overall our direction into premium are the improvements we've made at our studio, they all really help our case in terms of proving ourselves to two premium partners like Saga.

The other thing that I would highlight and Eric mentioned a little bit in the script, but the tremendous momentum in Sonic has as a brand right now, the feature film last year did incredibly well. There is a multitude of plans in the coming years around the brand including the second feature and then ultimately it's going to culminate in this premium series on Netflix.

So sometimes when we're working on brands, it's a full reboot and you're trying to kind of get momentum started. In this case we're really standing on the shoulders of some tremendous momentum that's already been built and so why we couldn't be more excited to be partnered here.

I’d add one another point, is this just in contrast to because I know you followed the company for some time to the old VHS. I'll borrow from Orson Welles.

No wine before its time. This is really just an example.

I think in contrast to the way that library properties and relationships were brought forward in the old VHS versus what we're doing today. As Josh mentioned a highly methodical, careful development, brand plans, growing the IP, understanding the DNA the IP, understanding the DNA and then going to market.

And I think it isn't just about quickly harvesting these relationships and IP in our library but rather a very, very careful approach. It takes time and so, so many of these things that we planted that the Apple Peanuts example.

Now Sonic they will bear fruit in many, many years to come. So it's not churn and burn and we thank everybody for their patience which I think is going to be rewarded amply with transactions like this and hopefully things that we'll be announcing in subsequent quarters.

That’s great and logical follow-up to that and it's a little bit of a bigger picture. It does seem that with that refocus here and the execution clearly I think investors have wondered how capital constrained the company is and as you kind of climb out of the balance sheet to the extent to which you have half the balance kind of growth and free cash flow is it a fair comment to say that the way these deals are currently being structured that versus the old days.

It's a little less capital intensive for the company to build these franchises and specifically talking about some of the OTT deals where you can get funded a little bit better upfront. And I apologize for my son's trumpet playing downstairs in the basement if you can hear it.

Well hopefully Spark at the moment. I'll let her and take that question.

Yeah. So I guess it’s -- yeah I think its two sides to it obviously we had to make the investments that we did do in the studio to increase the premium production we have to be making the investments in our audience engagement and in Spark as we had to actually build those tools give the teams the tools to do the work that they're doing which is why they want to come to us, but from the production side I think you're right, given the way that the SVODs find content that that is a lesser constraint on us, but however we do have to make the investments that we made to have the creative to have the right people and to have the right tools.

So I think it's still both things that are important. But I don't think there's a lack of capital to do those types of things.

I think that's the way we're going to grow and that's what we are focused on.

Thank you.

Well hi guys. Good morning and thanks for taking my questions.

Just one and a quick follow-up on the distribution side in AVOD versus traditional linear I’m just wonder if you can give us a sense of the difference in the margin profile? So if I can ask it maybe a little differently during in the past you had an army of distribution agents delivering content -- library content to linear broadcasters around the world how does that sales process change in the AVOD world and in global distribution and then what kind of margin benefits can you get from that new model going toward and then I've got a follow-up.

So, I’ll let Aaron address some of the margin considerations but I would say Deepak is that we are in many ways the captains of our own ship now and not subject to a lot of the vicissitudes that you know that you suffer from you know disintermediation. You know we're addressing directly our consumers.

We're talking to you know our advertisers and sponsors and that's been I think the kind of the seismic shift and frankly opportunity that's been created around MFK. So it isn't just about the passive loyalties.

We’re able to generate campaigns and unique offerings on our AVOD network and to work with advertisers and sponsors in various ways. And that's the business I referenced earlier that is burgeoning considerably.

And I think you know had it not been for that change in neutral policy, I don't know that we would have embarked as soon as we did in the direct ad sales market. I'll let Erin address the margin issues.

Yeah. And then I'll talk a little bit about margin and then I'll pass it over to Josh on how the sales happened.

I'll say we're very unique in the space from the ad the audience engagement and the WildBrain Spark perspective because we have one of the largest libraries after the studios which everyone knows. And so you know because of that our margins are you know when we put ads on that content, we own the content and that's a big distinction a lot of platforms are looking for content we have a platform and we have the content and so that creates a much higher margin profile for us as opposed to other companies that then I’ll pass it over to Josh.

He’s on mute actually. You are mute.

Yeah and so hi Deepak. Just one thing I would add in terms of the difference between the old world of licensing directed to broadcasters and AVOD is that in the old world that it was more about doing your one deal -- doing your deal supplying some marketing materials and then getting on to the next.

When it relates to AVOD and obviously WildBrain Spark is its own thing effect attackable our emphasis on YouTube but on the other AVOD platforms it is more of an ongoing partner management. So it's seeing how our content is performing working with them to make adjustments to potentially help it grow.

And one of the areas that we've actually been using across our company is some of the strengths we have is in content curation and which actually comes from our television group who have decades of experience of knowing what content is going to put that’s together and we tap into that expertise to help work with these various AVOD platforms who are often new to kids content and really giving them more of a tailored offer. So it is different from the old world but that we actually have a lot of advantages in that space given our different businesses we’re in.

That's very helpful. Thanks guys.

And then just a follow-up to that you mentioned the other platforms we see there when we think about beyond the YouTube platforms like TikTok, Instagram, Facebook I assume you have plans for diversification in the broader part ones. What can we expect in the next 12 months or 18 months regarding that size relative to the YouTube to occur?

Deepak, we're pursuing a always-on strategy with our content. And so now we drop a press release every week as we strike these new network deals with Samsung and some of the other surprising networks that have popped up.

And we're seeing all kinds of new snickets turning on for revenue. But we're basically we're going to be everywhere and you'll begin to see as an example WildBrain channels popping up really across the spectrum.

One of the things that we're learning and it’s for us in R&D process particularly the proprietary content is the ability for example to launch at Teletubbies Channel and sort of see what the audience attraction of that may be toward a specialized channels with a mix of our product. And it's one of the advantages that we also have something about Spark network is the -- these data analytics tools that really guide us and the way that the content is compiled and curated.

I don't know if Josh you have anything to add on the distribution side?

No, no, I think that's right. And we're active on a wide variety of AVOD platforms and leaning into the ones that are that are gaining traction.

We're really early adopters in this space which gives us a big advantage. So we will continue to be there and lean into the ones that are getting traction.

And by the way. Yeah, Deepak I was just going to add one other thought for you.

Which I may have highlighted previously was a real revelation to us. We with a very important library property that we had Josh and his team were in negotiations with a licensee in the on-demand space and we’ve been particularly impressed with what was being offered versus what we believe to be the value of that content.

And instead we went to a rev share model in the AVOD space and I think safe to say produced in one year a greater amount of revenue then we would have under a three year license. That was a conventional license where there was no there was no sharing of revenue.

So these are emerging platforms, technologies and fortuitously we had the content and the reach in order to be on all of these platforms and figure out how to optimize revenue from various means. But there is this aspect as well of so many leading brands that we have which is to kind of be everywhere.

And that's proving to be outstanding across all of the platforms and licensing and merchandising, helping our distribution business. It's frankly attracting a lot of partners to us as in the case of SEGA Sonic.

Well it's great to hear that you guys are back on the cutting edge and looking forward to seeing some new opportunities. Well thanks again for taking my questions.

Thank you. Good morning.

There is a lot of mention about analytics. Wondering if you could just elaborate a little bit on that journey where you are now with respect to the data collection that you're doing and where would you like to get to and perhaps maybe there's a build process and maybe the cost or investment that are may be required to get you there, so I wonder if you could elaborate a little bit on that?

Sure. Thanks for the question, Jeff.

Look we already know about views, about regions having a massive network of millions of data points. What that scale of network allows us to do is to get greater insights where viewers are coming from and going to languages et cetera.

I want to emphasize though it is not about individual viewer data that has been changed with them okay policies. It's about understanding how the algorithms work, how different brands and franchises relate to one another.

And that's where we are emerging with some great proprietary tools and data analytics and ad tech. And I would say, but for the changes in policy I don’t know that we would necessarily have developed those tools.

It is that policy has been the mother of invention of our need to be able to find our audience and frankly got to serve the audience with the content that we’re delivering. So we can now look at the viewing data as an example for every episode.

We can see which characters are performing and analyze the contents, we can flag as an example when a character or an idea is working and we can adjust the creative accordingly. We've been doing this for a while now on Caillou which I mentioned earlier where we've consolidated rights.

And that data of course is not only incredibly powerful for advertisers but we're also looking at this across a lot of business lines and opportunities. As far as the investment is concerned was that your question about the investment in the data and analytics?

Yeah just in whether that's already been done or whether that's kind of an ongoing investments that we need to account for?

Yeah, ongoing and we are obviously tuned to the results that we're getting out of it but we think that these proprietary technologies put us at a significant market advantage. And we've seen that in the discussions that we've had with media buyers, brands agencies of what we're able to offer them and have great case studies now on campaigns that we've been putting up.

So what we're going to keep investing against it. It's as I pointed out that the enormous growth that we've experienced on a percentage basis is granted on a relatively low base, but it is sequentially improving.

And we'll continue to invest against it. I think that those data tools are invaluable in helping us understand the market but not only for advertisers but as I've pointed out to better serve our audience.

Yeah I guess just I would just add to that that the two key focus areas for us where we're investing is IP and licensing and of course in WildBrain Spark and audience engagements and that’s where we have been investing but we doubled down this quarter and invested even more significantly because that's where the growth is coming from.

Thanks. And my follow up is Eric, you just made a comment that piqued my interest.

You talked about the you know that you are captain of your own ship. You have control over more control over the process.

At what point given your size and scale in the library that you have do you think it might be worthwhile to consider from a distribution perspective, you know go direct to consumer i.e. have your own app, have you own AVOD, SVOD opportunity as opposed to going through other distributors like YouTube?

Wondering if that's kind of in the cards down the road?

Interesting question. So I think we're finding out about that through the ubiquitous distribution of our content across every platform and they're evolving to be sure.

But it is about an On-Demand universe that is inevitable. Its force of gravity now in our business.

That said, YouTube is where the audience is and it's a massive, massive audience. And so I think you know at the moment our specific focus is the optimization, maximization of the YouTube audience and engaging in these direct ad sales.

Just as an example though which you may or may not be familiar with is in the direct ad sales category, you know that one of the deals or the way that works with YouTube indirect ad sales as opposed to revenue that comes through the YouTube auction where there are selling ads is that when we place media provided that we sell at or above the YouTube rate card we keep the difference so the more effective we are the more pinpoint these campaigns and are effective we are able with our premium content to charge premium rates for the advertising. And that's again something afforded by the scale of the network we have.

So I've often been asked do you like the YouTube economics I don't know that there's any content supplier that loves them and but certainly like a more generous split but that having been said the audience delivery is unmatched and it's a matter of doing the things we are doing to maximize the opportunities around YouTube ad sales some of the direct campaigns that we produce for advertisers which frankly don't touch YouTube revenue there isn't a share there where it's a bespoke program of creating content as an example for a sponsor so those are where the opportunities live and that's why I say being the captain of our own ship is beginning it's extremely rewarding and is putting us closer to the audience as well as the advertisers.

Oh, yes. Thank you.

I just have a question on the adjusted EBITDA. So I notice that it includes a litigation settlement of CAD 4.4 million.

So if you strip that out it'd be down slightly, so obviously the Peanuts deal is in here and that would be additive. So it seems like the other revenue for some reason has a much lower margin on it this quarter.

And I'm just wondering is that the correct interpretation and if so why would that be?

Sorry. David, can you just explain your question a little further.

I'm not sure I fully understand it.

Sure. Okay.

So you had attributable EBITDA in the quarter of CAD 29.1 million and the prior year of CAD 25.6 million, right that’s up CAD 3.5 million. You had a litigation settlement in there CAD 4.4 million, so if we strip that out, it's actually down slightly year-over-year.

And but at the same time you had a Peanuts licensing deal in there, so obviously that's additive. So it could to be flat when you factor in the Peanuts deal, it seems as though the margin on the non-Peanuts revenue was down quite a bit year-over-year.

And I'm just wondering why that would be?

Yeah, so I think I'm your math. I think what you're missing is there's like significant investments that we're making in the quarter.

With respect to growing the ad sales business and investing in the ad tech, and so I think we can go through that offline. But I think you're missing part of the other things that happened in the quarter, so….

Okay. And then just a follow up.

Obviously the Peanuts library deal for the revenue Peanuts Library deal drove the revenue nicely in the quarter. I’m just wondering can you provide any commentary on the outlook for the balance of the year in terms of distribution revenue?

Yeah so our pipeline is very strong and we feel very comfortable with how we're going to do for the rest of this year and then we will have some growth over the prior year. So again we have that visibility now and feeling good about this year.

Okay. All right.

Thank you.

Thanks, good morning. Just a follow-up on the SEGA deal and then a question on television.

On the SEGA deal Eric you mentioned it was material enough to press release. I know you can't give specifics but is there any way you could frame the scale of the investment or the resources you're deploying in this deal relative to say Peanuts or some of the other franchises?

And Eric could you direct this as to how we should think about the impact of this deal flow through the P&L like is it start immediately and it's kind of linear or is it going to be lumpy bigger chunks here to something like that? And then just on television there's been some speculation in the trade press about a potential challenge for distribution on family channel.

I'm just wondering if you can comment on that and how you're thinking about the stability of those subscriber revenues going forward? Thanks.

Hi. Tim.

So I'll let Josh take up the last question So, I'll let Josh take up the last question, but just to talk to you about the Sonic deal and our disclosure requirements around that first and forgive me, I guess this is the kind of awkwardness of doing these calls remotely. But I wanted to pick up on something that James said.

If I may in the last question after Aaron's explanation, which is, you know and I know you know there's always this relentless focus on quarter-to-quarter and EBITDA movements et cetera. I take a slightly different view and you know again forgive me, I come from you know 14 years of working for private equity in the entertainment and media business with a relentless focus on long-term.

And you know perhaps I should be more concerned about it, but these minor puts and takes on a quarter-to-quarter basis I don't find disconcerting as a matter of fact I find them comforting because it's a big play for the long-term and it's about setting up this pipeline which you guys are seeing now and we're experiencing. So that's my focus.

The way that I manage the company and you know I have often nipped in the bud some deals that were not good and that didn't play for the long-term in maximizing and turning to the current value. So I just want to point that out.

The other thing is that those investments which is human cap assets, look there were funds that we deployed from foreign capital, which were you know an incredible boost to our business, but obviously hit EBITDA because they business but obviously hit EBITDA they go into SG&A. So I just want to point that out I do view it as a positive development and not one that's a distraction at all.

On the EBITDA side or what that looks like on the Sonic we just executed the deal we're in production we're ramping-up and I would say that the largest impact in studio is to be expected in the next fiscal year. Consumer products will follow I would say in fiscal 2023 after the rollout of the new series but the other thing that we always see in this case because of the likely Paramount, SEGA Sammy Moody coming through the pipeline is a lot of interest at retail and among licensees and its drip and then it's a flood.

So our focus is on sustainability and that's the case not only for Sonic but across all of our IP. I knew you had a question in the middle of that as well if I can ask you to repeat that and then Josh can talk to you about the CG 3D business.

It was more or just if you could -- for any perspective on how big the Sonic deal is to the company may be relative to some of your other major initiatives?

I think in terms of scaling what I can say is probably the biggest single transaction to come through is the studio and one of the things that we're excited about is a CG 3D series and that helps build the capability that we've already developed in the studio and really augments our efforts around that technology and animation. I don’t know Josh you want to add anything to that as well as the TV question?

Yeah, no I think that's it as it relates to Sonic and while it's a miracle I actually wasn't on mute as I began to speak here. And I think you hit the nail on the head there in terms of scale of the project.

It is the largest CGI series that we've ever taken on in the studio. As it relates to your question Tim on television I mean we don't comment on any specific ongoing commercial negotiations, but it's standard course of business and in terms of the viability of our linear business, we continue to be confident that we can manage our cash flows well into the future.

I think we've shown our track record in doing that where we've got great cost controls and can manage the bottom line quite well. And we're confident we’ll be able to continue to do that.

Hey Tim. One more thing which is just to line it up.

This SEGA Sonic deal represents the fourth series that we now have at Netflix along with Johnny Test, Chip and Potato, Go Dog Go all of which are performing exceedingly well. So again it's just a constant build, they are great partner as is Apple and the other SVODs that we deal with.

And that in proving out that performance obviously just attracts more partners and that flywheel that I'm talking about sequential growth that we're pretty excited about really beginning to see those returns. And it's not just beginning to see those returns.

And it's not just leman shows and it’s about tending to those franchises. And I think I said before it grows like a weed.

It's generally a weed and we're kind of growing. We're going to the yolk, not the weed.

Thanks a lot. Good morning.

I'll just ask one question given that we're coming up on the hour. Eric you touched on EBITDA and I certainly don't fixate on one particular quarter.

As I look ahead, as you build some revenue growth into the business, can you speak at all to some of the efficiencies that you gain as you layer on some of these new big productions? Some of the operating leverage that inherently comes in the business going forward technology as you did earlier that there are some evolving investments that are being made for ad tech maybe for a human capital to scale the production side of the business or even distribution for that matter and to look ahead in terms of operating leverage efficiencies and perhaps margin expansion going forward?

Good question, Adam. And so you've actually identified the areas in which we're making those investments and certainly on the human where actually it's about talent that's where I've spent my career.

We have a team of five in China now and we're continuing to build that out. Watch that space please.

I think some exciting developments in that business that will get us operating leverage and reach. What we're also doing is integrating those business units across the entire spectrum of our company.

And that's where I think we're getting the operating leverage as well is that the previous structure honestly it was somewhat balkanized with each of the business units. They are operating in harmony now where as an example taking our capabilities in research which had been deposited in each of the business units and now you know combining that so that we just have a lot of Intel across the entire company.

The same thing in the ad tech space and our in data analysis and AVOD not just on YouTube, but sort of a cross-understanding what audiences want. So, those synergies if you will are beginning to bear fruit and I think that the you know foundation is incredibly solid unexcited.

I'm excited about the team now and you know they’re ticking on more and more, my brands group as an example…

Right.

And we hired a superstar in that area who's built out an amazing brands team and they are sequentially working through the many franchises in the library and you’ll -- we’ll be hearing soon about some of the properties that we're going to be bringing forward. I think in unique way some of them on a digital-first basis using our AVOD Network.

So, you know as far as quantification, yeah sequential growth long-term, I can't give you a specific number, but feeling very, very good about the bill that we're experiencing looking it over the that we're experiencing looking at it on a multi-quarter basis.

Okay. I’ll leave it there.

And does that answer your question?

It does but I'll follow-up and I imagine more will come this summer.

Yeah. You got that right.

Thank you, operator and I want to thank everyone for joining us today and please stay well we look forward to updating you in the next quarter. Have a great day.