Thunderbird Entertainment Group Reports Fiscal 2023 Q2 Results

Q2 2023 Revenue increased $15 million (45%) to $48 million compared to the prior year’s Q2

Free cash flow of $7.8 million in the quarter

26 shows in production; 11 are IP, partner-managed or a global IP buyout

Conference call and webcast today, Thursday, February 23 at 11 a.m. PT/ 2 p.m. ET

Thunderbird Entertainment Group Inc. (TSXV: TBRD, OTCQX: THBRF) (Thunderbird or the Company) today announced its financial results for fiscal Q2 2023, which ended December 31, 2022, and provided a corporate update.

Financial Summary

• Revenue increased by $15.0 million (45%) to $48.0 million and $23.7 million (35%) to $91.7 million for the three and six months ended December 31, 2022, as compared to $33.0 million and $68.0 million for the comparative periods in the prior year. Both the number of episodes of intellectual property (IP) projects delivered and recognized and the number and magnitude of production services projects increased quarter-over-quarter (51 total half hours of IP deliveries in the current quarter compared to 14 total half hours in the prior year’s second quarter).

• Free Cash Flow decreased by $8.6 million (52%) to $7.8 million and $7.7 million (39%) to $12.2 million for the three and six months ended December 31, 2022, as compared to $16.4 million and $19.9 million for the comparative periods in the prior year. The decrease is primarily due to positive changes in working capital partially offset by repayment of interim production financing.

• Adjusted EBITDA decreased by $0.7 million (14%) to $4.3 million and $2.9 million (26%) to $8.4 million for the three and six months ended December 31, 2022, compared to $5.0 million and $11.3 million for the comparative periods in the prior year. The decrease is predominantly attributable to an increase in general and administrative expenses. With talent at a premium, the Company continued to invest in several key new hires in the first quarter of fiscal 2023 in kids & family and scripted development, consumer products and distribution and business affairs. Additionally, the Company invested in software and technology upgrades to improve production processes and create production efficiencies. These investments provide the Company with the ability to continue to deliver industry-leading, quality programming that will further facilitate long term growth.

“Though 2023 holds a level of global economic uncertainty, our commitment to providing quality premium content ensures that we remain very well-positioned in our industry to capitalize on all opportunities,” said Jennifer Twiner McCarron, Thunderbird CEO and Chair. “We have invested in initiatives to support future growth and we know that these investments will bear fruit in future years and generate great returns for our shareholders."

Cooperation Agreement and Proxy Contest

On January 19, 2023, Thunderbird announced that it had entered into a Cooperation Agreement with Voss Capital LLC (the Cooperation Agreement). Under the terms of the Cooperation Agreement Asha Daniere and Mark Trachuk filled the vacancies resulting from Marni Wieshofer and Frank Giustra resigning as independent directors on the Board. Thunderbird CEO Jennifer Twiner McCarron took on the additional role as Chair of the Board. The Cooperation Agreement further provides that, promptly following the Company’s upcoming 2022 annual general and special meeting of shareholders, which is scheduled for March 6, 2023, the Board will appoint a third independent director to be identified by the Company from candidates put forward by Voss.

For the three months and six months ended December 31, 2022, which was prior to the Cooperation Agreement, Thunderbird incurred proxy contest expenses of $0.5 million, compared with nil a year earlier. Thunderbird expects to incur additional proxy contest expenses of approximately $1.8 million, including Cooperation Agreement expenses, for the three months ended March 31, 2023. There were no similar expenses in the comparative period.

Outlook

Industry-wide economic factors, along with the uncertainty regarding the potential proxy contest, delayed the start of several scheduled productions, resulting in the timing of the income earned from these productions shifting from fiscal 2023 to fiscals 2024 and 2025. As a result of this unexpected delay the Company is no longer anticipating the second half of fiscal 2023 to be its strongest of the year and is anticipating a lower Adjusted EBITDA in fiscal 2023 compared to fiscal 2022.

However, Thunderbird has not lost any planned work, and its pipeline remains robust. With the shift in the timing of the Company’s production slate, and resolution of the proxy contest, Thunderbird anticipates sizable growth in Adjusted EBITDA in fiscals 2024 and 2025, which includes the addition of several fully owned IP productions with adjacent merchandise opportunities coming to fruition.

Thunderbird Entertainment’s Q2 2023 Corporate Highlights

• In Q2, the Company had 26 programs in various stages of production. Of the 26 programs, eight were Thunderbird IP and 18 were service productions. Two of the service productions were partner managed, and one is a global IP buyout, where the production was originally optioned by the Company, then acquired by the partner with Thunderbird receiving an increased percentage of net profits from merchandising and licensing as a result.

• Thunderbird kids & family content, which is produced under Atomic Cartoons (Atomic), was comprised of 18 programs in production for 14 different clients. Productions included Oddballs for Netflix, Night at the Museum: Kahmunrah Rises Again for Disney+, CoComelon Lane for Moonbug for Netflix, My Little Pony for Eone/Hasbro, Young Love for Sony and HBO Max, Teenage Euthanasia (Season 2) for Adult Swim, and Princess Power for Netflix.

• Working for four different clients, Thunderbird unscripted content, which is produced under Great Pacific Media (GPM), was comprised of six unscripted series and one documentary in production, including: Mud Mountain Haulers (Season 3), Highway Thru Hell (Season 12), Heavy Rescue: 401 (Season 7), Deadman’s Curse (Season 2), Styled (Season 2), Dr. Savannah: Wild Rose Vet (Season 2), and After the Storm, a documentary based on the 2021 flooding in B.C. which premiered on December 15, 2022.

• In Q2, GPM was also in production on Boot Camp, a new scripted production for which it acquired the film and TV rights. The film adaptation stars Drew Ray Tanner (Riverdale) and is based on the popular Wattpad story by Gina Musa of the same name.

• During the quarter, Thunderbird launched a scripted team, which is based in Los Angeles, with five scripted projects representing an array of New York Times bestselling books and award-winning authors, at various stages in the development pipeline.

• Subsequent to the quarter, Atomic commenced production on the first 26 x 22-minute episode season of the children's series Mermicorno, inspired by tokidoki's hit toy brand of the same name. Atomic is producing this series as original IP in partnership with tokidoki, and broadcast partners will be announced in the coming months.

• Also subsequent to Q2, GPM’s scripted dramedy Reginald the Vampire was renewed for a second season by SyFy.

• In January, Princess Power launched on Netflix worldwide, receiving significant media coverage in outlets such as People, TODAY, Nightly News Kids, Entertainment Tonight and The Drew Barrymore Show. The potential reach of digital publicity from online posts exceeded 32.9MM views. In the days following its premiere, it ranked #8 on the Netflix Kids chart in the US.

• SMART Technologies launched a new digital battle-card game based on Thunderbird IP called The Last Kids on Earth: Hit the Deck!, which is now available.

Results of Operations

EBITDA, Adjusted EBITDA and Free Cash Flow

For more information please see the Financial Statements and the Management’s Discussion and Analysis (MD&A) for the three and six months ended December 31, 2022 available on SEDAR and the Company’s website.

Conference Call Webcast on Thursday, February 23, 2023, at 11 a.m. PT/ 2 p.m. ET

Thunderbird will hold a conference call and webcast to share the Company’s Q2 2023 results today, Thursday, February 23, 2023, at 11 a.m. PT/ 2 p.m. ET.

Conference Call & Webcast Information

Date: February 23, 2023

Time: 11 a.m. PT/ 2 p.m. ET

Webcast: https://events.q4inc.com/attendee/242528219

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=b840076f&confId=46708

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

Canada dial-in number (Toll Free):1 833 950 0062

United States: 1 844 200 6205

All other locations: +1 929 526 1599

Access code: 209052

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, Toronto, 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. Thunderbird’s vision is to produce high quality, socially responsible content that makes the world a better place. 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), formerly known as Thunderbird Factual, and Thunderbird Scripted. Productions under the Thunderbird umbrella include The Last Kids on Earth, Molly of Denali, Highway Thru Hell and Kim’s Convenience, among others. The Company also has a team dedicated to global distribution and consumer products. 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. 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, 2022 and December 31, 2022, Management Discussion and Analysis. 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.

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 the Company’s ability to continue to deliver industry-leading, quality programming that ensures that we remain well-positioned to capitalize on opportunities; expectations that investments made in the business to support future growth will bear fruit in future years and generate returns consistent with previous performance; the election of a seventh director following the upcoming annual general and special meeting of shareholders; the expected costs to be incurred in connection with the proxy contest; the expectations regarding lower Adjusted EBITDA in fiscal 2023 over fiscal 2022; the anticipation of sizable growth in Adjusted EBITDA in fiscals 2024 and 2025, including the addition of several fully owned IP productions with adjacent merchandise opportunities coming to fruition; announcement of international broadcast partners for Mermicorno; new IP announcements; and timing for hosting the conference call and webcast to share the Company’s Q2 2023 results. 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 December 31, 2022 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, as supplemental indicators of our operating performance and financial position. 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, Adjusted EBITDA, Free Cash Flow, Cash Available for Use, and Cash Required for Use in Productions.

“EBITDA” is calculated based on earnings before interest, income taxes, depreciation and amortization. “Adjusted EBITDA” 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 Adjusted EBITDA 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. EBITDA and Adjusted EBITDA are not earnings measures recognized by IFRS and therefore do not have a standardized meaning prescribed by IFRS. Therefore, EBITDA and Adjusted EBITDA may not be comparable to similar measures presented by other issuers.

“Free Cash Flow” (FCF) is calculated based on cash flows from operations, purchase of property and equipment and net interim production financing. FCF represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.

“Cash Available for Use” is defined as the total cash and cash equivalents of the Company less Cash Required for Use in Productions. Cash Available for Use funds ongoing working capital requirements, principal and interest payments on corporate demand loans as well as ongoing development and growth efforts and thus is an important liquidity measure that management uses to monitor the business on an ongoing basis.

“Cash Required for Use in Productions” is defined as cash required for the funding of productions from the development stage through to completion that is not considered by the Company to be available for other uses. The cash is not legally restricted and has not been classified as Restricted Cash on the consolidated statement of financial position. This cash has been provided by buyers and third-party IP owners that have engaged the Company to provide services, as well as banks with whom the Company has contracted to provide interim production financing. Management uses the amount of Cash Required for Use in Productions to determine the Company’s Cash Available for Use.

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