Thunderbird Entertainment Group Inc. (TBRD.V) Earnings Call Transcript & Summary

Good morning, and welcome to Blue Ant Media Q4 and Year-End 2025 [ Interim Section ] Update Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the call over to Madeleine Cohen, Investor Relations for Blue Ant Media. Please go ahead.

Good morning. Joining me to discuss Blue Ant's definitive agreement to acquire Thunderbird Entertainment and Blue Ant's 2025 financial results are Michael MacMillan, Chief Executive Officer of Blue Ant Media; and Robb Chase, Chief Financial Officer of Blue Ant Media. We've also asked Jennifer Twiner McCarron, Thunderbird Entertainment's Chief Executive Officer, to join this call solely for the purposes of discussing the proposed transaction involving Blue Ant Media and Thunderbird Entertainment that was announced today. This call is being recorded live at 9:00 a.m. Eastern Time on November 26, 2025. Please note that some of the statements made on the call today may be forward-looking for the purposes of applicable securities laws and are based on current expectations, which management of Blue Ant believes to be reasonable. Forward-looking statements involve known and unknown risks, assumptions, uncertainties and other factors. Actual events or results may differ materially from those expressed or implied, and Blue Ant and Thunderbird each disclaim any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. A detailed cautionary note regarding forward-looking information is included in the press releases issued earlier today by Blue Ant and Thunderbird Entertainment. We encourage all investors and prospective investors to read it in its entirety. During this call, representatives of Blue Ant may also reference non-IFRS financial measures such as adjusted EBITDA. For a reconciliation of non-IFRS measures to IFRS results, please see our respective earnings releases posted to SEDAR+. Each of Blue Ant and Thunderbird do not take any responsibility for or endorse the statements made on this call in respect of matters related to the financial results or performance of the other company. Please note that the consummation of the transaction between Blue Ant and Thunderbird Entertainment is subject to the satisfaction of customary and negotiated closing conditions, including, among others, approval from Thunderbird shareholders, receipt of the applicable court orders and receipt of the approval from the Competition Bureau of Canada. All dollar figures are in Canadian dollars. Michael will begin with some introductory remarks. Jennifer will provide some comments on behalf of Thunderbird regarding the proposed transaction, and Robb will provide an update on Blue Ant's recently filed Q4 and year-end 2025 results, as well as provide some color on the financial elements of the transaction. I'll now turn the call over to Michael. Michael?

Thank you, Madeleine, and good morning, everybody. We are very pleased to be with you today to talk about our definitive agreement to acquire Thunderbird Entertainment Group, which we announced by press release earlier today. We are very excited about this proposed acquisition. Thunderbird is a strong strategic fit and highly complementary to Blue Ant's existing operations. Combining our businesses will add scale, create meaningful cost synergies, strengthen our earnings and cash flow profile, and enhance our presence in the capital markets. For those who are not familiar with Thunderbird, they are a global content creation studio that creates premium award-winning content. Headquartered in Vancouver with a team in Los Angeles, the company produces premium scripted, unscripted kids and family, and animated content for the world's leading digital platforms, as well as for Canadian and international broadcasters. Thunderbird is listed on the Toronto Venture Exchange. Thunderbird's business is comprised of Atomic Cartoons, which is a leader in animation, with a long track record of premium series for major global partners. Atomic has a robust service business and a growing stable of owned IP content. And Great Pacific Media, a leader in unscripted programming with a growing slate of projects in scripted live action, particularly in young adults. Great Pacific Media owns the majority of its IP. They also have a distribution and consumer products team that supports the monetization of Thunderbird's IP across licensing, merchandise and distribution. Over the years, Thunderbird has forged long-standing partnerships with global studios and streamers, including Disney, Netflix, Warner Bros., Marvel and LEGO. In addition to service work, it's actively growing its owned IP pipeline, building a growing library and revenue base that deliver recurring revenue. For Blue Ant, this acquisition strengthens our studio business in several important ways. It expands our production capacity, as well as our technical innovation, specifically the use of AI in our production workflows. It brings added distribution opportunities and consumer products expertise, and enhances our ability to develop, package and monetize content across multiple platforms with existing and new global customers. Financially, we expect annual cost synergies of $7 million, which can start to be realized shortly after close, driven by duplicated public company costs and other efficiencies. These cost synergies make the deal highly accretive and will improve adjusted EBITDA and cash flow in the combined business, further bolstering our earnings. Overall, the acquisition, which we anticipate will close in the first quarter of calendar 2026, positions Blue Ant as a larger, more diversified and more competitive modern media company. We expect to have enhanced earnings power, improved operational efficiency and a stronger capital markets profile. We believe the combined company will be well positioned to deliver sustained growth and long-term shareholder value. With that, I'll turn the call over to Thunderbird's CEO and Chair, Jennifer McCarron, who will be joining Blue Ant on closing to oversee a combined kids, young adult and animation business within Blue Ant Studios. Jen, over to you.

Thanks so much, Michael, and good morning to our Thunderbird shareholders. On behalf of our Board of Directors, we are extremely enthusiastic about this definitive agreement. As disclosed in our joint press release with Blue Ant earlier today, the implied consideration payable to Thunderbird shareholders is $1.77 per share based on last night's closing price, representing a total equity transaction value of $89 million. Thunderbird shareholders will be entitled to make an election to receive cash, or shares of Blue Ant, in exchange for their shares of Thunderbird, subject to the proration of the cash elections to the extent that the maximum cash amount of $40 million is exceeded. As mentioned earlier, the proposed transaction is subject to certain conditions, including the receipt of approval of shareholders of Thunderbird. Blue Ant has entered into voting support agreements with certain Thunderbird shareholders holding approximately 37% of our outstanding shares. This includes Voss Capital, the Frank Giustra Foundation and Pacific Reach Properties Capital. Further terms of the definitive agreement and select benefits to Thunderbird stakeholders are set out in the press release. As the entertainment industry continues to evolve scale and global reach are becoming more important than ever. To compete, grow and bring stories to wider audiences, Thunderbird needs to be part of a larger organization with strong resources and global connections. Joining Blue Ant Media allows Thunderbird Entertainment to do exactly that. Bringing our company together with Blue Ant, a more diversified media group with its own commissioning platforms, established global distribution operation, and a focus on IP monetization creates a stronger, more resilient and dynamic media company, poised to compete in an evolving industry. The media landscape has shifted dramatically over the last decade. Audience demand for content remains extremely high, but how and where people consume content continues to evolve. Both Blue Ant and Thunderbird have navigated this transition successfully, adapting our respective businesses to meet the needs of global platforms and new viewing behaviors. Combining our talented teams will ensure that we are even stronger together. Blue Ant has been extremely dextrous, evolving from a traditional broadcasting model to capitalizing on the shift to digital streaming consumption. And Thunderbird is no stranger to industry shifts as we broadened our relationships with global streamers, expanded our production capabilities, and we have been at the forefront of embracing AI's impact on our sector, particularly as it relates to animation production. We are collaborating with top technology partners and our strategic eye, creating new content pipelines and improving speed to market efficiencies. Together, the combined business will have the technology, scale and capabilities needed to participate more fully in the global market, and to monetize content across a much wider range of platforms and formats. This morning, Thunderbird also reported its fiscal Q1 results. Currently, we have 26 shows in production, which is up one production from last year. And our growing pipeline of new IP and service projects give us confidence in how we're progressing and the opportunities in front of us. Looking ahead, we anticipate joining Blue Ant from a position of financial strength in fiscal 2026. Productions representing approximately 76% of the revenue associated with Thunderbird's current production slate are approved and underway. Based on this current visibility, Thunderbird management expects full year revenue growth as a stand-alone business in the mid- to high single-digit range year-over-year. We also anticipate a corresponding increase in adjusted EBITDA with margins in line with 2025. For clarity, this is before giving account to the synergies we expect from this deal with Blue Ant. We're looking forward to accelerating this earnings power into a larger organization and playing a key role in creating Canada's next major global studio. And with that, I'll turn the call to Robb Chase, Blue Ant's CFO.

Thank you, Jennifer. As many of you may have seen earlier today, Blue Ant also reported its fourth quarter and fiscal 2025 results. For the fourth quarter, Blue Ant generated revenue of $60.8 million, bringing full year revenue to $204 million, as compared with $196.4 million in the prior year. Full year 2025 adjusted EBITDA was $37.1 million, consistent with $37 million in fiscal 2024, a reasonable performance given the headwinds we continue to experience industry-wide. As anticipated, we saw growth in our global channels and streaming business, primarily driven by an increase in smart TV advertising sales, which offset other challenges. Historically, Blue Ant's financial results have been weighted to the second half of the fiscal, and we expect no difference in 2026. Additionally, we anticipate that our first quarter 2026 financial results will be moderately lower than our first quarter 2025, as we received an unexpected benefit from a special promotion by one of our FAST platforms during Q1 last year that we don't anticipate recurring in Q1 2026. We continue to maintain a strong balance sheet with $54.4 million of cash as of August 31, 2025. The company also anticipates receiving an additional $48.3 million of cash related to the closing of the RTO. This is comprised of two parts. First, $34.7 million as part of the previously disclosed value assurance payment from Fairfax Financial, which we expect at the end of March 2026. And second, the intended monetization of the IDJ vendor takeback note for $13.6 million. The receipt of the value assurance payment will ensure continuing modest leverage, which is a key tenet of our capital management strategy. We are financing part of the Thunderbird transaction with debt. However, we intend to repay the debt in fiscal 2026 with the cash inflows I just mentioned. We like this transaction for many reasons, one being the financial scale that the combined businesses create. Together, we expect strong earnings and cash flow accretion per share following integration and a meaningful increase in Blue Ant's trading float, which we believe will enhance trading liquidity and overall market visibility, and as Mike mentioned earlier, $7 million of cost synergies. The combined company will also benefit from a strengthened balance sheet. Blue Ant continues to maintain a solid capital position and Thunderbird has no corporate debt, which further enhances the financial flexibility of the consolidated entity. I'll turn the call back to Mike for closing remarks.

Thank you, Robb. The acquisition of Thunderbird represents the next step in Blue Ant's long-term growth strategy and reflects our disciplined approach to M&A. It builds on the momentum that we've generated post RTO, and follows two significant transactions completed earlier this year. In early August, we completed our reverse takeover of Boat Rocker Media, which increased our scale and diversity, significantly strengthened our financial position and turned us into a public company with a listing on the TSX. In early October, we closed our acquisition of U.S.-based Magellan TV. The Magellan deal scales our global channels and streaming business, enhances our monetization opportunities, and strengthens our position as a leading provider of premium factual content worldwide. The integration of both Boat Rocker and Magellan TV is progressing as planned. Blue Ant has completed numerous M&A transactions over its history, and we have developed a proven integration playbook, one that ensures smooth onboarding of teams, continuity of customer and supplier relationships, and thoughtful alignment of systems and processes. Our integration team is actively applying that approach with Boat Rocker and Magellan, and we are encouraged by the progress to date. Upon the closing of the Thunderbird acquisition, which we anticipate in the first quarter of calendar 2026, our integration team will be fully prepared to incorporate this important business effectively and seamlessly into Blue Ant for the benefit of all stakeholders. We've made significant progress towards our growth strategy this year. Together with Thunderbird, we are building a more scale, diversified and financially resilient business, positioned to compete more effectively and execute our long-term plans. We think it's an exciting time to be part of Blue Ant Media, and we're very optimistic about our future. Thank you for joining us today and your time today, and we'll now open up the call to questions. Back to the operator.

[Operator Instructions] And your first question comes from Kenji Nicks with Cormark Securities.

Can you please talk about whether or not this was a competitive process and kind of the nature of how that came together?

We've known Thunderbird for some time and both understood the value of bringing our companies together. And after our successful RTO with Boat Rocker a few months ago, it seemed like the right time to focus on this. So this was a deal that came together by us speaking directly to Thunderbird, and it was not part of the bidding process.

And the next question comes from Robert Johnson with Bank of America.

Were there any other bids received as part of the process?

Couldn't quite hear the question. Could you repeat it, please?

Were there any other bids received as part of the process?

This was a direct negotiation and discussion between Thunderbird and Blue Ant. We dealt directly. We were not part of any kind of formal process. These are the two companies coming together to accomplish the strategic and financial goals that we outlined. So we did -- while we had financial advisers and legal advisers, it was a direct discussion and relationship between Thunderbird and Blue Ant.

And could you just discuss the time line of the process from here to the close in the first quarter?

Sure. We will be -- we are anticipating closing in the first quarter of calendar 2026, subject to TSX approval, and the Competition Bureau approval. Obviously, it's part of arrangement. So the court has to do its part too, and Thunderbird shareholder approval. So we are expecting all that to happen in the first quarter, and Thunderbird will be preparing the materials for its shareholder vote and given that mailing out as quickly as possible. But all of that, we expect to be completed in the first quarter of calendar 2026.

[Operator Instructions] And I'm showing no further questions at this time. I would like to turn it back to Michael for closing remarks.

I would just repeat that we're happy to have you on the call today, and we are delighted with this announced transaction. Thank you for joining us.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.