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

Greetings and welcome to the Genius Brands' key business development conference call. I will now turn the call over to Michael Porter to read the safe harbor.

Thank you. Good morning, ladies and gentlemen, and welcome to the Genius Brands International Update Call. Before I turn the call over to Genius Brands' CEO, Andy Heyward, 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 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, belief, potential, will, should, project and similar expressions as they're related to Genius Brands International are as 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 Genius Brands' public filings with the 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. And on May 18, 2020, the company filed its 10-Q for the period ended March 31. So participants in this call who may not have already done so may wish to review those documents. It is now my pleasure to turn the call over to Genius Brands' CEO, Andy Heyward. Good morning, Andy.

Good morning, Michael. Good morning, everyone. This morning, we announced a groundbreaking joint venture between Genius Brands and Stan Lee’s POW! Entertainment to create Stan Lee Universe. Stan Lee Universe will assume worldwide rights in perpetuity to the name, physical license, physical signature, live and animated motion picture, television, online, digital, publishing, theme park, comic book, merchandising licensing rights with Stan Lee and his intellectual property creations. In all of Hollywood, there is no greater prize. This is the Holy Grail. Stan Lee Universe is a once in a lifetime asset drawn from over 100 original heretofore unexploited properties created by the most successful creator of intellectual property of our time. In my personal view, the potential value in this single asset is greater than any IP anywhere in Hollywood. Jointly owned by Genius and POW! and subject to due diligence and documentation, this deal will vest Genius Brands as the managing and controlling partner of the Stan Lee Universe joint venture. Let me provide a little context. Stan Lee was the creator of the most successful characters ever made, including Spiderman, Ironman, Black Panther, The Incredible Hulk, X-Men, Thor, Captain America, Ms. Marvel, Silver Surfer, Ant-Man, Guardians of the Galaxy and, of course, the #1 box office franchise of all time, The Avengers. For decades, Stan was the editor and creative force behind Marvel Comics, which was sold to The Walt Disney Company for $4.4 billion and has since proved to be worth many multiples of that amount. In addition to the #1 movie box office hit of all time, Avengers Endgame, Stan Lee created 2 of The Walt Disney Company's 3 biggest blockbusters and 5 of the 12 highest grossing movies of all time. It's almost impossible to conceive that 1 mind created all this wealth. The spinoffs alone defy the imagination. From humble beginnings in comic books to motion pictures to animated television to toys, apparel, video games and every conceivable license product imaginable, Stan Lee characters populate the screens and retail shelves worldwide. There is no creator who has influenced pop culture and created more successful and more valuable entertainment than Stan Lee, not even Walt Disney. Over and over and over again, Stan created characters and stories that resonated in the hearts and minds of peoples of all ages around the world with billions and billions of dollars of motion picture box office, television, video games and consumer product licensing. Stan Lee Universe will draw from the repository of all of the characters and IP created by Stan Lee post Marvel Entertainment, not otherwise elsewhere. From over 100 original Stan Lee creations, we will develop and license approximately 7 of these properties a year. Having worked with Stan and been a close friend for almost 30 years, this culminates a personal dream for Genius Brands to now become the guardian of both his brand and body of work. I have no doubt that the greatest characters, the greatest stories and the greatest hits from the mind of Stan Lee have yet to be told. And as big as Spiderman, Black Panther, X-Men and The Avengers are today, tomorrow, it will be Stan Lee's Tomorrow Men, his Black Fury, Stringbean and Virus. The former President of Marvel Productions, Margaret Loesch who worked intimately with him for years said Stan was a one of a kind, Stan Lee Universe is going to be an unimaginable source of blockbuster entertainment for many years to come. The former President of Walt Disney Television and our Chief Content Officer of Genius Brands' Kartoon Channel, David Neuman said, the spinoff opportunities for Kartoon Channel alone are mind boggling, including a dedicated Stan Lee Universe program block like Stan Lee Saturday for the channel. When we looked at the depth of these creations that sit in this library, the magnitude and value of this asset slowly began to seek in. There simply is no greater treasure chest of intellectual property anywhere. I feel like we went down to the basement of John Lennon and Paul McCartney's Abbey Road Studio and found 200 songs that had never been released, one was called Yesterday, another was called Hey Jude, another Sergeant Pepper. They were just waiting for us to bring them forth to the market along with the names and likenesses and signatures and the rights to merchandise the Beatles, it feels that big to us. Now let me speak to something our investors will be interested in, the financial impact on Genius Brands. The financial impact of an asset like Stan Lee Universe cannot be overstated. We have seen what properties created by Stan Lee did for The Walt Disney Company in revenues and earnings. Not just in the billions of dollars of movie box office, but in the even greater downstream revenue across the entire business, be it television, digital, consumer products, games and theme parks. We've studied the Disney Playbook and they have done a brilliant job at bringing Stan's creativity through the food chain. Having observed and learned, we believe that we can take the next surge of Stan Lee properties 2.0 to the market in no lesser way and create a massive value for our shareholders. Just like LeBron James brought his talents to Miami and then to Cleveland and where he also won a NBA championship and now to Los Angeles, we're confident that Stan Lee Universe will once again demonstrate the creative gift of this man and the power of his brand as it now comes to Genius. Spiderman was created in 1962, The Avengers in 1963. They live stronger today than ever. I have every belief that the properties introduced now from Stan Lee Universe can do the same. They are just as good and we'll have the same attention. They are standing on the shoulders of the man who had not yet perfected his craft and yet never stopped growing and evolving. I have no doubt that even the signature of Stan Lee has no less power to excite the imagination than the signature of Walt Disney, we all know and love. Why? Because like that of Walt Disney, it stands for something. On a personal note, I often went with Stan to Comic-Con. For those of you who are not aware of what Comic-Con is, it's a convention of pop culture, which has become the annual must-go-to pilgrimage, from comic books to movies to TV shows to toys, games, entertainment. It's a mecca of cosplay. It began in San Diego and subsequently spread to Comic-Cons in New York and around the world. An appearance by Stan was the ultimate validation of the event. Hundreds of thousands of people go to these Comic-Cons. It's hard to describe what occurred when Stan Lee arrived in the building. And if I hadn't been there with him myself, I would not have believed it. It was like traveling with Elvis, but even more so, if that could even be imagined. And as humble and unassuming as he was, Stan was a star of indescribable proportions. Despite all of the celebrities that would show up and do panels to promote their movies or brands, Stan sat on the top like Zeus on Mount Olympus, endless throngs of people would line up for a picture with him or an autograph. And no matter what was going on, he was always humble and gracious. He was interested to know about and talk to every person. He asked questions because he truly cared, and that is from where the magic of his characters came. He listened and he cared about people. It didn't matter if you were the biggest star in the world or a Fortune 500 CEO or the President of the United States or the guy who parked cars, Stan Lee was as interested in you as you were in him. It didn't matter how big the movie star was, they were all in awe of Stan. And when he came in the room, all of the oxygen left, there was only 1 star people wanted to see. Stan's cameos in each Marvel movie was legendary. His surprise appearances in each film were anticipated as much as the movies themselves. It was no different for television, whether he appeared as a guest star in the Simpsons or on Big Bang Theory, it was a ratings smash and the event of the season. One of the things I'm most excited about Stan Lee Universe is particularly poignant in these times today when we are examining and seeking to move society forward in a just and positive way for all. Stan was an outspoken advocate of civil rights long before it became fashionable. He spoke out against bigotry always. His heroes were champions of goodness, and he stood up for those who often could not stand up for themselves. His Anthem of Spiderman calls out today more than ever, with great power comes great responsibility. Inside Genius Brands, we feel great responsibility to steward his brand. We will be creating a dedicated business and creative unit specific to Stan Lee Universe. For the millions of Stan Lee fans, we look forward with the greatest of sensitivity, protecting its integrity and faithfully bringing the characters to the movie screens, comic books, TV, game platforms, mobile devices, toys and licensed products worldwide. For the Genius Brands shareholders, we look forward to smartly and efficiently monetizing Stan Lee Universe across all platforms. I have no doubt that we will attract the most talented producers, directors and marketers in the world, as we unlock this one of a kind treasury and bring forth the next wave of Stan Lee creations for the world to experience and enjoy. We're proceeding immediately with our due diligence and expect final documentation to follow properly thereafter. I don't think I and our team at Genius Brands could possibly be more excited. Have a great day, everyone, and stay safe. And for those of you who may not know it, I leave you this morning with Stan's sign-off signature, Excelsior.

Thank you. This concludes today's conference. You may disconnect your lines. Thank you for your participation, and have a wonderful day.