Thunderbird Entertainment Group Reports Fiscal 2024 Q2 Results

Thunderbird Entertainment Group Inc. (TSXV: TBRD, OTCQX: THBRF) ("Thunderbird" or the "Company") today announced its Q2 2024 financial results, which ended December 31, 2023, and provided a corporate update.

Financial Summary

• Revenue decreased from $47.9 million to $44.5 million and from $91.7 million to $78.1 million for the three and six months ended December 31, 2023, as compared to the comparative periods in the prior year, variances of $3.4 million (7%) and $13.6 million (15%). The decrease in revenue is primarily due to a reduction in intellectual property ("IP") deliveries over the comparative periods.
• Net income for the three months ended December 31, 2023, was $0.6 million compared to a loss of $0.3 million for the comparative period in the previous year, an improvement of $0.9 million (315%).
• Net loss for the six months ended December 31, 2023 was $0.1 million compared to a loss of $0.2 million for the comparative period in the previous year, an improvement of $0.1 million (44%).
• Free Cash Flow¹ decreased from $7.8 million to $0.4 million and $12.2 million to ($2.0) million for the three and six months ended December 31, 2023, as compared to the comparative periods, variances of $7.4 million (94%) and $14.2 million (116%). The decrease for the current quarter is primarily due to the repayment of interim production financing, share repurchases and associated costs under the Normal Course Issuer Bid ("NCIB"), severance payments, non-recurring legal costs relating to the amended and restated cooperation agreement and investments into animation content creation.
• Adjusted EBITDA¹ ("AEBITDA") decreased from $4.3 million to $3.9 million and decreased from $8.4 million to $6.4 million for the three and six months ended December 31, 2023, as compared to the comparative periods, variances of $0.4 million (10%) and $2.0 million (24%). The decrease is attributable to a reduction in IP deliveries during the quarter.

Financial Outlook

• The Company has returned to profitability in Q2 2024, with the last half of fiscal 2024 set to be the strongest, weighted to the fourth quarter.
• The Company continues to expect over 20% growth in AEBITDA¹ for fiscal 2024.
• Several cost-reduction activities have been implemented and the Company expects to realize in excess of $3 million in overall cost reductions for fiscal 2024.

During the current fiscal year, the Company has also continued to see a slower than expected recovery in the content-creation market as major buyers remain engaged in cost-cutting measures and reducing their number of greenlights. As a result of this, management has adjusted their expectations for the remainder of the fiscal year. Revenue is now expected to remain flat year-over-year as compared to the Q1 2024 guidance of a 5% increase, with service revenue moderately increasing over the prior year, offset by a marginal reduction in revenue related to IP. Consistent with guidance previously provided, AEBITDA¹ is still expected to show growth of more than 20% year over year. These projections are based on the completion of an additional 29 hours of IP delivery in the second half of the fiscal year, bringing the total IP delivered for the year to 53 hours.

"Thunderbird remains poised for a robust and rewarding future, with a series of incoming greenlit IP and service productions and great visibility into FY25 and 26," said Thunderbird's CEO and Chair, Jennifer Twiner McCarron. "Our focus is on the inherent health of our business, and we're zeroing-in on several key priorities aimed at fostering growth and maintaining stability, including the expansion of core brands, investments in proprietary IP, and ensuring consistent service revenue across both established and new series."

During the quarter, several cost reduction activities were implemented with the goal of addressing market uncertainties and creating capacity for investment in growth opportunities. Thunderbird also continues to remain proactive on streamlining operational processes and looking for additional efficiencies and cost reductions. Thunderbird is committed to maintaining a robust balance sheet and exercising prudent management decisions to remain adaptable in evolving conditions while steadfastly pursuing sustainable growth.

Normal Course Issuer Bid

Thunderbird implemented the NCIB, which is detailed in the Company's December 1, 2023 news release, pursuant to which it may repurchase its own common shares for cancellation through the facilities of the TSXV in an amount not to exceed 10% of its public float, as may be permitted by the TSXV and applicable securities laws.

During the quarter ended December 31, 2023, the Company repurchased for cancellation, 201,200 common shares under its NCIB then in effect for a total consideration of $0.4 million, representing an average price of $2.23 per common share. Subsequent to December 31, 2023, the Company purchased for cancellation 390,200 common shares at an average price of $1.98 per common share for a total cost of $0.8 million.

Thunderbird's Q2 2024 Corporate Highlights

• In Q2 2024, the Company had 24 programs in various stages of production and was working with 20 clients. Of the 24 programs in production, eight were Thunderbird IP, and 16 were service productions.
• Thunderbird Kids & Family, producing under Atomic Cartoons, was in production on 18 programs, and working for 14 clients, including: CoComelon Lane for Moonbug for Netflix, Marvel's Spidey and His Amazing Friends (Seasons 3 and 4) for Disney Junior, My Little Pony: Make Your Mark (Chapter 6) for eOne/Hasbro, The Mindful Adventures of Unicorn Island for Headspace, Zombies: The Re-Animated Series for Disney TVA, among others, and Atomic originals Rocket Saves the Day (PBS KIDS) and Mermicorno: Starfall (Warner Bros. Discovery).
• CoComelon Lane and My Little Pony: Make Your Mark (Chapter 6) both premiered in Q2, hitting #1 and #2, respectively, on Netflix Kids in the US during their launch week.
• Subsequent to Q2, Atomic became a Certified B Corporation, joining a global community of businesses that meet high standards of social and environmental impact.
• Also subsequent to Q2, Atomic announced one of its owned-IP programs in production, its first adult animated series, Super Team Canada, which is being co-produced with Will Arnett's Electric Avenue for Bell Media streamer Crave.
• In Q2, Thunderbird Unscripted, producing under Great Pacific Media ("GPM"), was in production on six programs and one podcast, and was working for six clients. Productions include: Deadman's Curse (Season 3) for History Channel, Wild Rose Vets (Season 1), a spinoff of Dr. Savannah: Wild Rose Vet, for APTN, Timber Titans (Season 1) for Discovery, Rocky Mountain Wreckers (Season 1) for The Weather Channel (US) and Discovery in Canada, and Highway Thru Hell (Seasons 12 and 13) for Discovery. The Season 13 renewal of Highway Thru Hell will see the series hit a historic 204 episodes.
• Subsequent to Q2, GPM announced the debut of new docuseries Timber Titans, which premiered on February 5 on Discovery Canada and February 18 on The Weather Channel (US), along with the commissioning of new docuseries Rocky Mountain Wreckers by The Weather Channel (US), with Bell Media serving as the Canadian production partner.
• Also subsequent to Q2, GPM announced a partnership with the World Boxing Council to create new docuseries Prizefighter (working title). In addition, Blue Fox Entertainment acquired international distribution rights, outside Canada and the US, for GPM and Wattpad Studios film Boot Camp.
• The Company currently has 14 scripted projects in active development, three of which are in active network development.
• In February, Thunderbird appointed Simon Bodymore as Chief Financial Officer, effective March 4, 2024. Thunderbird also welcomed David Lazzarato to its Board of Directors. Mr. Lazzarato was also appointed as Chair of the Strategic Advisory Committee.
• Thunderbird Distribution sold US media rights to the first season of Windy Isle Entertainment's preschool series Mittens & Pants to NBCU's Peacock and children's free ad-supported streamers HappyKids, Kidoodle.TV and Sensical.
• Thunderbird awards and accolades received during and subsequent to Q2 include, but are not limited to:
  • Thunderbird placing No. 263 of 425 companies on The Globe and Mail's 2023 list of Canada's Top Growing Companies,
  • Atomic ranking #3 on the annual Kidscreen Hot50 list of top production companies,
  • Molly of Denali receiving two nominations for the 2nd Annual Children's & Family Emmy® Awards: Writing for a Preschool Animated Program and Short Form Program (for The Big Gathering),
  • GPM's companion podcast Deadman's Curse: Slumach's Gold being named one of the Best Podcasts of the Year for 2023 by Amazon Music,
  • Young Love receiving a nomination for Best Animated Series at the Critics Choice Awards,
  • Both Young Love and Marvel's Spidey and His Amazing Friends receiving nominations for Outstanding Animated Series at the 55th annual NAACP Image Awards, and
  • Both Princess Power and Pinecone & Pony receiving nominations for the 35th annual GLAAD Media Awards in the category of Outstanding Children's Programming.

Results of Operations

¹ AEBITDA, AEBITDA Margin, and Free Cash Flow are Non-IFRS Measures, see "Non-IFRS Measures" section below for their respective definitions, and in the December 31, 2023 MD&A for detailed calculations and reconciliations.

For more information, please see the financial statements and the management's discussion and analysis (MD&A) for Q2 fiscal 2024, which ended December 31, 2023, available on SEDAR+ and the Company's website.

Thunderbird's Q2 2024 Conference Call & Webcast Information

Conference Call & Webcast Information
Date: February 29, 2024
Time: 11 a.m. PT/ 2 p.m. ET

Pre-Registration:

To pre-register for this call, please go to the following link and you will receive access details via email: https://www.netroadshow.com/events/login?show=ae360ecf&confId=59902

If you are unable to pre-register, please see the information for joining by webcast or telephone:

Webcast: https://events.q4inc.com/attendee/354984933
Canada Toll Free: +1 833 950 0062
United States (Toll-Free): +1 833 470 1428
All other locations: +1 929 526 1599
Access Code: 371243

Press *1 to ask a question, *2 to withdraw your question, or *0 for operator assistance.

Participants joining by phone are requested to call the conference line 10 minutes early to avoid wait times while connecting to the call. The conference call will be webcast live and available for replay via the "Investors" section of the Thunderbird website.

For information on Thunderbird and to subscribe to the Company's investor list for news updates, go to www.thunderbird.tv.

ABOUT THUNDERBIRD ENTERTAINMENT GROUP

Thunderbird Entertainment Group is a global award-winning, full-service multiplatform production, distribution and rights management company, headquartered in Vancouver, with additional offices in Los Angeles and Ottawa. Thunderbird creates award-winning scripted, unscripted, and animated programming for the world's leading digital platforms, as well as Canadian and international broadcasters. The Company develops, produces, and distributes animated, factual, and scripted content through its various content arms, including Thunderbird Kids and Family (Atomic Cartoons), Thunderbird Unscripted (Great Pacific Media) and Thunderbird Scripted. Productions under the Thunderbird umbrella include The Last Kids on Earth, Molly of Denali, Highway Thru Hell, Kim's Convenience, Reginald the Vampire and Boot Camp. Thunderbird Distribution and Thunderbird Brands manage global media and consumer products rights, respectively, for the Company and select third parties. Thunderbird is on Facebook, Twitter, and Instagram at @tbirdent. For more information, visit: www.thunderbird.tv.

Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this release, which has been prepared by management.

Cautionary Statement Regarding Forward-Looking Information

Thunderbird's public communications may include written, or oral "forward-looking statements" and "forward-looking information" as defined under applicable Canadian securities legislation. To the extent any forward-looking information in this news release constitutes "financial outlooks" or "future-oriented financial information" within the meaning of applicable Canadian securities laws, the reader is cautioned not to place undue reliance on such information. All such statements may not be based on historical facts that relate to the Company's current expectations and views of future events and are made pursuant to the "safe harbour" provisions of applicable securities laws.

Forward-looking statements or information may be identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "plan", "project", "should", "believe", "intend", or similar expressions concerning matters that are not historical facts. Forward-looking statements in this document include, but are not limited to, statements with respect to the Company remaining poised for a robust and rewarding future; incoming greenlit IP and service productions; visibility into FY25 and 26; the Company remaining on track to meet AEBITDA guidance; the last half of the fiscal year being the Company's largest; the Company realizing in excess of $3 million in overall cost reductions, plans for expansion of core brands, investments in proprietary IP, and ensuring consistent service revenue across both established and new series; projections and forecasted growth in revenue and AEBITDA; completion of additional IP delivery; and steadfastly pursuing sustainable growth.

Financial outlook and future-oriented financial information, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to various risks. The targets included herein, and the related assumptions, involve known and unknown risks and uncertainties that may cause actual results to differ materially. The purpose of the information is to provide readers with a more complete perspective on the Company's anticipated future operations and business activities. Readers are cautioned that the information may not be appropriate for other purposes. While management of Thunderbird believes there is a reasonable basis for these targets, such targets may not be met. The Company's actual financial position and results of operations may differ materially from management's current expectations and, as a result, the Company's future revenue and AEBITDA may differ materially from the financial outlooks and future-oriented information provided in this news release. Accordingly, investors are cautioned not to place undue reliance on the foregoing information.

Forward looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties and other factors which may cause actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic and social uncertainties; market segment conditions; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; product capability and acceptance; international risk and currency exchange rates; and technology changes. An assessment of these risks that could cause actual results to materially differ from current expectations is contained in the "Risks and Uncertainty" section of June 30, 2023 MD&A. The foregoing is not an exhaustive list. Additional risks and uncertainties not presently known to Thunderbird or that management believes to be less significant may also adversely affect the Company. Although the Company believes that the assumptions and factors used in preparing the forward-looking statements or information contained in this document are reasonable, undue reliance should not be placed on these statements which represent our views as of the date hereof and as such information should not be relied upon as representing our views as of any date subsequent to the date of this document. The Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements or information.

NON-IFRS MEASURES

In addition to the results reported in accordance with IFRS, the Company uses various non-IFRS financial measures which are not recognized under IFRS, and therefore do not have standardized meanings prescribed by IFRS, as supplemental indicators of our operating performance and financial position. The Company's method of calculating such financial measures may differ from the methods used by other issuers and, accordingly, our definition of these non-IFRS financial measures may not be comparable to similar measures presented by other issuers. These non-IFRS financial measures are provided to enhance the user's understanding of our historical and current financial performance and our prospects for the future. Management believes that these measures provide useful information in that they exclude amounts that are not indicative of our core operating results and ongoing operations and provide a more consistent basis for comparison between periods. The following discussion explains the Company's use of EBITDA, AEBITDA, Free Cash Flow, and AEBITDA Margins.

"EBITDA" is calculated based on earnings before interest, income taxes, depreciation and amortization. "AEBITDA" is calculated based on EBITDA before share-based compensation, unrealized foreign exchange gain/loss and items of an unusual or one-time nature that do not reflect our ongoing operations. EBITDA and AEBITDA are commonly reported and widely used by investors and lenders as an indicator of a company's operating performance and ability to incur and service debt, and as a valuation metric. The most directly comparable measure under IFRS is net income.

"Free Cash Flow" is calculated based on cash flows from operations, purchase of property and equipment and net interim production financing. Free Cash Flow represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. The most directly comparable measure under IFRS is cash flows from operations.

"AEBITDA Margins" is calculated as a ratio of AEBITDA over total revenues. Margin is a non-IFRS ratio when applied to non-IFRS financial measures.