Thunderbird Entertainment Group Reports Fiscal 2023 Year End Results

Fiscal 2023 revenue $166.7M; 12% year-over-year increase

28 shows in production; 10 are owned IP

Conference call and webcast today, October 5, at 11 a.m. PT/ 2 p.m. ET

Thunderbird Entertainment Group Inc. (TSXV: TBRD, OTCQX: THBRF) (“Thunderbird” or the “Company”) today announced its year end results for fiscal 2023, which ended June 30, 2023, and provided a corporate update.

Financial Summary

• Revenue decreased from $44.1 million to $37.7 million and increased from $149.0 million to $166.7 million for the three months and year ended June 30, 2023, as compared to the comparative periods in the prior year, variances of $6.4 million (14%) and $17.7 million (12%) respectively. Both the number of episodes of Intellectual Property (“IP”) projects delivered and recognized and the magnitude of production services projects have increased year-over-year (125 total half hours of IP deliveries in the current year compared to 120 total half hours in the prior year).
• Free Cash Flow¹ increased from ($0.7) million to $8.0 million and decreased from $13.9 million to $4.3 million for the three months and year ended June 30, 2023, as compared to the prior year, variances of $8.7 million (1169%) and $9.6 million (69%) respectively. The decrease for the annual period is primarily due to repayment of interim production financing offset by positive changes in working capital.
• Adjusted EBITDA (“AEBITDA”)¹ decreased from $2.4 million to $0.7 million and from $20.1 million to $12.8 million for the three months and year ended June 30, 2023, as compared to the prior year, variances of $1.7 million (71%) and $7.3 million (36%) respectively. The decrease is attributable to an increase in general and administrative expenses and industry-wide economic factors resulting in the delay of several productions.

“Thunderbird’s steady growth is due to our robust – and diversified – production slate, which includes legacy IP like Highway Thru Hell and new Company originals like Rocket Saves the Day, as well as repeat service production on big brands such as our LEGO productions and Marvel’s Spidey and His Amazing Friends for Disney Jr.,” said Thunderbird’s CEO and Chair, Jennifer Twiner McCarron. “I am proud of the teams’ hard work, and how they continue to create so many wins despite the headwinds the industry and Company faced in 2023. Our healthy balance sheet continues to serve Thunderbird well as we assess opportunities, including a liquidity event, to not only enhance but maximize shareholder value.”

“We have made great strides with our owned IP work and we’re thrilled to have started production on several exciting IP projects that span multiple genres - including the sale of our first original IP adult animated series. These projects were greenlit in 2023 and we expect net income to start hitting our books in fiscal 2025 and beyond. To see these efforts coming to fruition affirms the strategic decisions we have made on our path to becoming the next major global studio. We have several exciting announcements on the horizon, and look forward to sharing more about these productions when we are able,” Twiner McCarron said.

Strategic Review Advisory Committee and Share Buyback Update

Pursuant to the Cooperation Agreement between Thunderbird and Voss Capital, LLC (“Voss”), which is detailed in the Company’s January 19, 2023 news release, Thunderbird formed a Strategic Advisory Committee (“Committee”) composed of three directors (including two of the independent directors put forward by Voss) and a Voss-appointed non-voting observer.

Since March 2023, the Committee has been assessing Thunderbird’s capital allocation strategy and all opportunities to maximize shareholder value for ultimate recommendation to the board of directors (“Board”). This has involved working alongside ACF Investment Bank (“ACF”) to evaluate any unsolicited inbound expressions of interest that may be received by the Company from time to time and handle the potential sale of Thunderbird in the event that an offer is received that meets the Company’s standard for shareholder value creation.

The Committee’s most recent analysis has indicated a considerable difference between the Company’s internal assessment of Thunderbird’s valuation, based on management’s line of sight on production services bookings, promising owned IP pipeline, and expectations for margin expansion, versus the valuation that prospective buyers might be willing to currently offer given the negative macro environment in the media industry. The Committee believes that this discrepancy does not reflect the true potential and long-term value of the Company. As such, it is in the best interest of the Company and its respective shareholders to wait until Thunderbird’s strategic initiatives begin to materialize to demonstrate its true worth. While the Committee will continue to evaluate any unsolicited inbound expressions of interest in Thunderbird, this approach will ensure that when proactive engagement begins with such opportunities, it will be from a position of strength, ensuring maximum value for shareholders.

In the interim, the Board has approved pursuing the implementation of a normal course issuer bid (the “NCIB”), pursuant to which the Company may repurchase its own common shares through the facilities of the TSX Venture Exchange (“TSXV”), as may be permitted by the TSXV and applicable securities laws. Implementation of an NCIB remains subject to obtaining the prior acceptance of the TSXV. Further details regarding the proposed NCIB will be provided in a subsequent news release as they become available.

Outlook

With the majority of its forecasted service revenue contracted for the year, management is targeting double-digit revenue growth in fiscal 2024 as well as meaningful growth to AEBITDA¹ to return to levels attained prior to fiscal 2023.

Looking to the next few years, the Company anticipates a double-digit compound annual revenue growth rate (“CAGR”)¹ from fiscals 2023 to 2026, with forecasted revenue of approximately $220M in fiscal 2026 (fiscals 2021 to 2023 revenue CAGR¹ of 22%). Additionally, management is targeting AEBITDA Margin¹ growth with double-digit margins projected in fiscals 2025 and 2026. The Company greenlit multiple animated IP projects in fiscal 2023, all of which are currently in production, which are projected to contribute to net income starting in fiscal 2025.

Management is, however, mindful of the current industry challenges. Uncertain conditions including cost cutting from major buyers has led to a slowdown in greenlights which could impact the Company’s outlook for the next fiscal year. Thunderbird continues to focus on strategic priorities of growing key brands and investing in owned IP while continuing to expand and deliver consistent service revenue from a robust slate of returning and new series. To address the uncertain market conditions, the Company is committed to maintaining a strong balance sheet and prudently managing its cost base while pursuing sustainable growth.

Thunderbird’s Fiscal 2023 Corporate Highlights

• At June 30, 2023, the Company had 28 programs in various stages of production and was working with 24 clients. Of the 28 programs in production, 10 were Thunderbird IP, and 18 were service productions.

• Thunderbird Kids & Family, producing under Atomic Cartoons (“Atomic”), was in production on several animated series throughout fiscal 2023 including: Oddballs for Netflix, Molly of Denali (Season 3) for GBH/PBS, CoComelon Lane for Moonbug for Netflix, Marvel's Spidey and His Amazing Friends (Seasons 2, 3 and 4) for Disney Junior, My Little Pony: Make Your Mark for eOne/Hasbro, Young Love for Sony and Max, Teenage Euthanasia (Season 2) for Adult Swim, and Little Demon for FX Network, among others.

• In fiscal 2023, Atomic commenced production on the first 26 x 22-minute episode season of the children's series Mermicorno: Starfall, inspired by tokidoki's hit toy brand of the same name. Atomic is producing this series as original IP in partnership with tokidoki. Warner Bros. Discovery has acquired the exclusive US television rights. Renowned toymaker Jazwares has also been announced as global master toy licensee and will focus on producing a mass market toy line for all distribution channels, including mass-market, e-commerce and direct-to-consumer platforms.

• Thunderbird Unscripted, producing under Great Pacific Media (“GPM”), was in production on several series in fiscal 2023, including: Heavy Rescue: 401 (Season 7), Deadman’s Curse (Season 2), Styled (Season 2), Dr. Savannah: Wild Rose Vet (Season 2); After the Storm (documentary for Discovery); and Highway Thru Hell (Season 11 and 12).

• GPM was also in production on two scripted programs in fiscal 2023. It acquired the film and TV rights to the Wattpad property Boot Camp and produced a movie of the week based on the property. GPM also produced Reginald the Vampire, which debuted its first season in October 2022 on SyFy (US) and Amazon Prime Video (Canada). GPM recently wrapped production on Season 2 of this series.

• In fiscal 2023, GPM-owned IP Deadman’s Curse (Season 1) premiered on History Channel. The series ranked as one of the top 10 Canadian original specialty series. The companion podcast, Deadman’s Curse: Slumach’s Gold, also premiered and hit number 4 on Apple’s History charts. Production on Seasons 2 and 3 is underway.

• In fiscal 2023, Thunderbird launched a Los Angeles based scripted team, with several scripted projects representing an array of New York Times bestselling books and award-winning authors, at various stages in the development pipeline, including MAD HONEY. Co-written by Jodi Picoult and Jennifer Finney Boylan, MAD HONEY will be adapted by Thunderbird into a premium series.

• Thunderbird also launched Thunderbird Brands, a key growth area for the Company, representing product, experience and service licensing rights for Thunderbird’s original series and select third-party properties under the Company’s management. Under Thunderbird Brands, Season 1 of Mittens & Pants, a CBC Kids/Sky Kids preschool series, was sold to international buyers, including Warner Bros. Discovery.

• Thunderbird appointments included Marsha Newbery being appointed to the new role of Vice President, Sustainability & Business Affairs at Thunderbird to oversee the Company's ESG efforts, Hillary Zwick Turner to the new role of SVP, Scripted Content, and Mike Armitage joining GPM as Vice President of Development.

• In fiscal 2023, Thunderbird began development of a robust ESG action plan and roadmap to reflect the Company’s desire to be a purpose-led, people-first, net positive company. While this is a long-term initiative, Thunderbird has already taken steps forward, including exploring sustainability and storytelling initiatives, joining Creative BC’s Reel Green industry initiative, and more.

• Company recognitions in fiscal 2023 included Thunderbird ranking in the top 10 of all independent production companies in Canada on Playback's 2023 Indie List, Atomic being included on the annual Kidscreen Hot50 list of top production companies (#7), Molly of Denali receiving a 2022 BC Reconciliation Award, a 2022 Kidscreen Award for Best Web / App Series – Branded, and GPM being named to Realscreen’s Global 200 list, for the 11^th consecutive year. Thunderbird was also recognized on The Globe and Mail’s fifth-annual ranking of Canada’s Top Growing Companies in September 2023.

For more information, please see the financial statements and the management’s discussion and analysis (MD&A) for fiscal 2023, which ended June 30, 2023, available on SEDAR and the Company’s website.

Loan Forgiveness

On December 16, 2021, Thunderbird’s President received a non-interest-bearing loan from the Company to cover taxes payable in respect of the exercise of certain stock options (the “Loan”). On October 4, 2023, the Board of the Company agreed to forgive the Loan in full.

Thunderbird’s Year End Fiscal 2023 Conference Call & Webcast Information

Date: October 5, 2023

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=1ad25aea&confId=55045

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

Webcast: https://events.q4inc.com/attendee/477089089

Canada Toll Free: +1 833 950 0062

United States (Toll-Free): +1 833 470 1428

All other locations: +1 929 526 1599

Access Code: 412284

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 of 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. These statements represent management’s current beliefs and are based on information currently available to management and inherently involve numerous risks and uncertainties, both known and unknown. Many factors could cause actual results to differ materially including general economic and market segment conditions, competitor activity, product capability and acceptance, international risk and currency exchange rates and technology changes. An assessment of the risks that could cause actual results to materially differ from current expectations is contained in the “Risks and Uncertainty” section of the June 30, 2023 MD&A. The foregoing is not an exhaustive list.

The forward-looking statements or information contained in this document 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.

Forward-looking statements in this document include, but are not limited to, statements with respect to opportunities, including liquidity events to maximize shareholder value, evaluating unsolicited inbound expressions of interest received by the Company, the potential sale of Thunderbird and proactive engagement with any such opportunity; strategic initiatives materializing; the proposed NCIB and additional details being announced in a subsequent news release; forecasted growth in revenue, AEBITDA and CAGR; AEBITDA margin expansion; greenlit animated IP projects contributing to net income starting in fiscal 2025; the slowdown in greenlights impacting the Company’s outlook for the next fiscal year; production of a mass market toy line; plans for global distribution sales and mass market licensing of Mermicorno: Starfall to come to fruition, MAD HONEY being adapted into a premium series being greenlit; and Thunderbird Brands contributing to the Company’s 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; 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 are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this document, and no assurance can be given that such events will occur in the disclosed time frames or at all. Except where required by law, the Company disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

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, AEBITDA Margins and Compound Annual Growth Rate.

“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.

“Compound Annual Growth Rate” (“CAGR”). CAGR is a metric used to evaluate the growth in our business. It represents the growth rate over a period of time on an annual compounded basis. CAGR is a non-IFRS ratio when applied to non-IFRS financial measures.

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

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