Kartoon Studios Inc. (TOON) Earnings Call Transcript & Summary

Greetings. Welcome to Genius Brands International Business Update conference call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Michael Porter of Porter LeVay & rose. Mr. Porter, you may begin.

Good morning. Thank you, Sherry. Good morning, ladies and gentlemen, and welcome to the Genius Brands updated call. First, I want to hope that everybody out there is well and safe from this awful time that we're going through. Before I turn the call over to Genius Brands, CEO, Andy Hayward. I would like to remind you that in this call, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question-and-answer session, which we're probably not going to have. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially. When used in this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will. should, project and similar expressions as they relate to Genius Brands international, are such a forward-looking statement. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which may cause actual results to differ from those anticipated by Genius Brands at this time. In addition, other risks are more fully described in the Genius Brands public filings with the U.S. Securities and Exchange Commission, which can be reviewed at www.sec.gov. On March 30, 2020, the company filed its 2019 10-K with the SEC. So participants in this call who may not have. already done so may wish to review these documents. I would like to now turn the call over to Genius Brands CEO, Andy Heyward. Good morning, Andy.

Good morning. Thank you, Michael. I want to echo what you said, and I hope that everyone and their families are all safe and sound during these very challenging times. While we weather, not only the health issues of corona, but also the economic impact that, that has had upon us all at our global community, I want to share with you some exciting and positive news occurring within Genius Brands. While virtually the entire Hollywood entertainment and production community has shut down to a halt, that is not the case at Genius Brands at all. We find ourselves thriving and busier than ever with major developments, which I'll share with you today. They will be enriching our asset base, our revenues and ultimately, the company's profitability. We don't have the part. We don't have cruise lines. We don't have broadway plays. We don't make live-action films and TV series on sound stages that are full of people. We have one very simple business at its timeless, evergreen and international. We produce animated cartoons. There is no production cut down, no production shutdown. Our animators are at their workstations doing as I speak. Our character designers and background painters, likewise. Our writers are at their desks, turning in scripts. Our voice actors are recording their lines over phone patches. In fact, recently, we recorded both Warren Buffett and Jennifer Garner from their homes who led their voices to newly produced Secret Millionaires club and Lama Lama Public service announcements, teaching kids lessons on hand washing hygiene. In these days, more people are watching animated cartoons than ever. Netflix, where coincidentally, our hit series law Lama Lama as being broadcast is seeing its highest viewing levels than ever. Likewise, that's the case for our own Genius Kids network now distributed across 100 million U.S. TV hospitals, cable satellite and OTT platforms on both advertising and ad-free subscription models. Against that backdrop, I'm very proud, honored, excited, today to announce that our upcoming animated Series Danley Superhero Kindergarten will be broadcast in the United States on the premier platform of Amazon Prime. This will join the previously announced partnership of Genius Brands with Alibaba, to not just coproduce Superhero Kindergarten with us, but also to be the broadcaster and commercial platform for consumer products in China. I need to amplify with some detail to underscore the importance of this announcement today. Alibaba is the largest broadcaster and commercial platform in China. Amazon is the largest broadcaster and commercial platform in the United States. Together, they cover the 2 biggest and most lucrative territories in the world. To put that in perspective, Amazon Prime has over 100 million subscribers in the U.S. that has doubled the subscriptions of Disney+. With Stanley's Superhero Kindergarten launching on these 2 mammoth platforms and the commerce from consumer products based on the show driven across those platforms as well, we have what I'd like to call plutonium in a bottle, launching with a full complement of episodes, 52 11 minute shows. And we expect to shortly announce a broad lineup of Tiffany consumer product licensees. In addition to launching on these 2 mega platforms, Stanley Superhero Kindergarten will be promoted vigorously, across the social media platforms of both Arnold Schwarzenegger and Stanley and their combined 70 million followers. Add to this, the global Superstar standing of Arnold's Schwrzenegger and Stanley, which will drive the component of parental co-viewing. And it's easy to see how the appeal of this brand is going to be so large. It is not only the last, I'm going to say, one of the last shows, if not the last, created by the iconic Stanley, who obviously created Spider-Man, Iron Man, X men, the incredible hulk, Black Panther, the Avengers, so many more. Stanley himself is a star in the series as well. Through the medium of animation, we have a digitized version of Stan who will appear as a cameo in every single episode, just as he has done in each of the Marvel, billion-dollar blockbusters that he created over and over again for so many years. Writing this series is one of the most successful writers in Hollywood, Fabian [indiscernible], who is not only a longtime collaborator of Stanley, but also himself, the creator of the huge hit Dead Pool. The pilot script has already been written, we're producing the main title sequence, which will be ready within 4 weeks and deliveries will begin end of year and broadcast will be Q1 2021. The early animatic, which is the blueprint for the actual animated product will be ready this month. And we will begin sharing it and the excitement at that time for our licensees. The commerce coming out of the show will be led by a top #1 master toy licensee with whom we are already negotiating, who will have a full complement of action figures and play sets. In addition, there will be role play products, which come out of the unusual play pattern of these super heroes. What is that play pattern? Well, let me say, rather than getting bitten by a radioactive spyder like Stanley Spider-Man or getting their Superpower from elsewhere, our kids in Superhero Kindergarten are able to harness their superpowers through ordinary items in a kindergarten classroom, creons, Elmer's glue, silly putty, wooden blocks. All of these items together are parts of how these special incredible kids learn to do amazing things and save the day. The classroom teacher, Arnold [indiscernible], played by Arnold Schwarznegger, of course, formerly Superhero Captain Courage plays a former Superhero himself and teaches them not only how to use their awesome powers, but how to use their powers for good. Log their way, there will be lessons in health, exercise, nutrition, anti bullying in every episode. [indiscernible] are important to us and important to Arnold and which we feel will be equally appreciated by the parents of our young viewers. Superhero kindergarten is action adventure with comedy and hygiene. It's designed for parental co viewing, as I said, which means that the parents and the kids will go into the retailers with a high degree of familiarity with the property. In fact, each of the consumer products will feature a surprise presence of Stanley's lightness on the packaging. These are the types of items that drive not only collectability, but also make the product line more valuable. Now speaking of collectibility and value, let me speak for a moment what this does for the value of Genius Brands. We now have 2 and soon to be a third major children's property lined up on perhaps the 3 most successful platforms in the entertainment business today. Netflix, Nickelodeon and now Amazon. Superhero Kindergarten on Amazon, along with Lama Lama on Netflix and Rainbow Rangers on Nickelodeon, makes a trifecta of power. Let's be mindful that our 3 key partners, who will be the platforms of Genius Brands model going forward, have shown themselves to thrive, not just survive, but thrive in the new world of corona uncertainty. That's Netflix, Amazon and Walmart. And abroad, Alibaba in China. These are the commercial pillars upon which Genius is being built going forward. Speaking of Rainbow Rangers earlier, the first of our licensed products, toys from Mattel will be arriving on shelf to Walmart in August, and we'll be speaking of that in much greater detail as the date comes closer. This is in addition to the earlier announcement a week ago of the Rainbow Ranger series now being fully distributed across the entire Western Hemisphere. That's a ton Twister, with sales to the premier broadcaster in Canada, Treehouse and the premier broadcaster in Mexico, Televisa, all joining Nickelodeon U.S. and Nick Latin America. Lama Lama, meanwhile, has attracted a major promotion with another big box retailer, and we will be announcing that shortly as well. For those of you who missed our Lama Lama story earlier this week. Last week, we announced the bevy of new licensees coming to the market in key categories, including Kids hydration, Kids betting, home decor, and even a new book with the plus set. Today's news is like no other we've done before. There is no other studio or production company in Hollywood that I'm aware of, including even the Walt Disney company that has 3 major properties coming forth now on 3 top distribution platforms in America, Netflix, Nickelodeon and Amazon Prime. And one of which, in partnership with Alibaba to be distributed in the world's second largest territory. As we look forward in 2020, Genius Brands is positioned to explode. It will be a pivotal year for Genius brands as we build both our distribution and our consumer products revenues, and we look forward to now Stanley Superhero Kindergarten becoming a major contributor. To all of our investors who have been patient, I thank you, and I am confident to tell you that your patience will be rewarded. We're not going to do questions today, but I would encourage anyone who has questions forward them to Michael Porter, who runs our IR, and we will get them answered to you properly back today. Thank you.

This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.