Kartoon Studios Inc (TOON) 2019 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Genius Brands International conference call. After the presentation -- I'm sorry, at this time, I'd like to turn the conference over to Mr. David Waldman, Investor Relations. Sir, the floor is yours.

Thank you. Good morning, everyone, and welcome to Genius Brands' business update conference call. On the call with us this morning is Andy Heyward, Chairman and CEO. The company issued a CEO newsletter this morning, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020 or ir@gnusbrands.com.

I'd also like to remind everyone that certain statements contained within this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements on this conference call other than the statement of historical fact are forward-looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company's filings with the U.S. Securities and Exchange Commission as well as this morning's newsletter. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events or circumstances after the date hereof that bear upon forward-looking statements.

I'd now like to turn the call over to Andy Heyward. Please go ahead, Andy.

Thank you, David. Well, first thing, I would like to thank everybody for taking the time this morning to come to our call. And these are, of course, very challenging times for all of us, and I hope we can share some good news with you all today. At a time when we're all rightfully focused on the health of our families and our communities, I'm very happy to share with you that the health of Genius Brands is strong.

This morning, we announced -- not this morning, excuse me, Tuesday morning, this week, we announced an $11 million financing of senior secured convertible notes. I was pleased to participate and help lead this financing. It was based on very strong and growing numbers of our 2 tentpole series, Rainbow Rangers and Llama Llama, both in the global broadcast marketplace and in the retail marketplace, more of which we're going to talk about for you now. Additionally, our new series, Stan Lee's Superhero Kindergarten, which will be upcoming and which we are co-producing with the Alibaba company of China, China's largest company, continues to gather a great deal of steam. We plan to announce our U.S. broadcast partner on this next week along with a number of other announcements next week. It will be on one of the most important and dynamic platforms in the world.

Meanwhile, our programming service, Genius Brands Network, which is a 24-hour on-demand kids' animation platform that is carried by Comcast, Cox, Dish, Roku, Amazon, a dozen other major over-the-top platforms across over 100 million U.S. TV households, is now growing rapidly. It's gaining viewership, and it's exceeding our internal revenue forecasts.

Okay. I want to talk today about why Genius Brands is on such a strong footing and particularly, in these very uncertain times. First of all, we now have the money that's necessary to operate the business, and we have significantly enhanced our balance sheet by paying down our debt.

Second, our 2 tentpole brands, Rainbow Rangers and Llama Llama, I spoke of earlier, are now proven hits. They're working. And that means that consumer products are coming into the marketplace and shelves this year. Those consumer products will have tremendous amount of recognition, and they're going to have appeal to the audience of kids and moms.

Third, our business model is stronger than ever. I want to repeat that we have the same model as The Walt Disney Company. It's very simple. We make animated entertainment, which we distribute worldwide for fees, and we license toys and consumer products based on characters from those programs worldwide.

So that brings me to the question that I've been asked quite a bit in recent days increasingly. Everybody wants to know, in light of COVID-19, will Genius be affected like other businesses? Well, the answer is a simple one, thankfully so. No, we won't. The business of cartoons has proven over and over again that its appeal is timeless. Just like The Walt Disney Company, and as Bob Iger said at the Disney shareholder meeting last Wednesday, what we create has never been more important or necessary. Animated entertainment has shown to be extremely insulated to factors that other asset classes are not, whether it's the price of oil, the price of gold and Brexit, impeachment, wars, elections, recessions and today, even the COVID-19 coronavirus. We're a tiny company, but our model is similar to The Walt Disney Company.

However, unlike some large entertainment groups, we don't have cruise lines, we don't have theme parks. We don't have live Broadway shows to be cut down -- shut down. We make cartons, and we sell licensed products from those cartoons. Kids watch cartoons through all weather and events. It doesn't matter if baseball practice is not happening, if the soccer games are canceled, if the Girl Scout meetings are canceled, even if school is closed. Kids will still watch cartoons. Maybe even they'll watch more cartoons. Our stories are uplifting. They all have positive messages. They have enriched content, and the kids learn from most of them. Thus, our cartoons are parent-friendly as well. In fact, we've now begun to see an increase in our viewership, which equates to more revenue, to more recognition, appeal of the characters, and that ultimately equates to product sales at retail. And that is how our business makes money. Cartoons endure.

On Tuesday, I also announced that Rainbow Rangers is now up to 26 broadcast per week on Nick Jr. We intend to share a significant number of releases regarding Rainbow Rangers in the coming days, but I do want to say in brief that it's now being broadcast in the entire western hemisphere. We're on the best broadcasters there are, not just Nick Jr. in the U.S. and Nick Latin America. In Mexico, we're on the #1 kids' broadcaster, Televisa. In Canada, we're on the #1 kids' broadcaster now, Treehouse. Whether it's in Italy where we're on the top broadcaster, Cartoonito, or to Israel, where we're on NOGA. All, again, the same story. Rainbow Rangers is gaining traction worldwide. We're closing a broadcast deal in Australia shortly, and we'll announce that soon as well as we will announce next week, a major deal in China with the largest and most important broadcaster there, where Rainbow Rangers will become available to be seen by over 1.2 billion viewers.

It continues to grow, and we have increasing confidence that we're going to meet the high expectations that we've spoken about for this series from the beginning. Over the coming days, we'll be rolling out more and more news about what has been going on, not just for the Rainbow Rangers, but for Llama Llama as well. As is what is happening with the tentpole series we'll be launching new, Stan Lee's Superhero Kindergarten. We have a major retail event with Llama Llama that we'll announce next week as well. It will only bring more awareness to the brand, which is now strong and growing also.

And while the major studios and the production companies who churn out production for the networks and the broadcasters worldwide called all live action production to a halt, Hollywood has come to a standstill. Our business continues to thrive and is growing. We have more content, we have more viewers, and we have more consumer product licensees. We don't have actors who have to go home because they can't be on a set full of people. We don't have film crews which are gathered together. Our artists work at their computers. And while the rest of Hollywood is grinding to a stop, we're creating new products for what is proving to be an insatiable audience that is growing now out of the new technologies and streaming services, all of them which are hungry for new content.

To that point, just in the last 6 months, I'm sure all of us have seen that not just the success of Netflix and Hulu, but new services that are popping up constantly: HBO Max; Disney+; Peacock, which will be out shortly; CBS All Access. The rush of new streaming broadcasters we're seeing here in the U.S. is being mimicked all around the world. What they share in common is that they need product, and children's animation content is a staple of virtually every broadcaster around the world. What we do at Genius Brands is we supply them that content. And our global sales team now is busy signing deals. We're going to be busy next week announcing one after another for you. We now have built a rich and growing catalog of first-class automated cartoons. We also have a robust pipeline. We have powerful brands coming forth. It's not yet announced, but we're very confident that they're going to be much in demand.

It's been a long road to get here. We've had a lot of bumps and challenges, and we still have a long way to go, but we're finally at the door. And with this week's announcement of financing, the road has become a lot clearer. Our earliest products now are in Target, Walmart and Amazon. Those also will start announcing next week. We've just barely begun to arrive at the U.S. retail. International retail will follow that.

Other than retailers such as Target, Walmart and Amazon, we have commercial partners, and they include Mattel Toys and Nickelodeon, Netflix and Amazon Prime. We also have powerful international partners like Alibaba and Televisa and Treehouse that I spoke to earlier and China's CCTV, a national broadcaster there. As I've often stated, these companies play to win. We're selling our shows around the world to the most important and established broadcasters, and we expect international retail to follow and mimic the U.S.

I spoke in my newsletter this morning a little bit about Walmart, and I want to talk about them again right now. Maintaining a relationship with Walmart is fundamental in our business to maximizing revenue and profitability because the cartoons we broadcast all have products which we license at retail. And with half of all retail in America occurring at Walmart, I cannot state how important this relationship is. Some of our first products are now already in Walmart. However, we expect to have a robust assortment of products and categories of Rainbow Rangers products and retail in the coming fourth quarter. As we come -- become authorized to discuss, we will share this further with you, our shareholders.

Having said the above, I'm very privileged to have been asked to become the emcee of the annual upcoming Helen R. Walton Children's Enrichment Center gala in Bentonville, Arkansas. It's an annual event held in Bentonville, and one very near and dear to the entire Walmart family. Actually, the event was originally planned to be in 2 weeks, the first week of April. But for obvious reasons, it's now been postponed and been rescheduled to take place in the first week of October. I'm very proud to be a part of this and for Genius Brands' connection to Walmart. I share this just to underscore that Genius Brands has been working on nourishing the entire food chain from which our company will flourish, not just the broadcasters, where it begins.

Well, I don't want to leave everybody on a cliff hanger, but I'm going to say we have a number of particularly important news items that are converging throughout next week, and they will speak for themselves. I'm very excited to be able to share them with you next week.

Yesterday morning, I had the privilege to talk with Warren Buffett. And some of you may recall, he plays himself in our series, Warren Buffett's Secret Millionaires Club, which teaches kids lessons about money and investing. I was reminded of one of Warren's important quotes. He said that successful investing takes time, discipline and patience. It doesn't matter how great the talent or effort is. Some things just take time. So in that spirit, I want to thank all of our shareholders and investors for their continued support and patience, some of whom have been with us since we began the company at the beginning of 2014. We look to drive significant shareholder value in the months and years ahead. Most importantly, I want to wish everybody to remain safe and healthy.

God bless to you all, and we'll be speaking to you more next week.

Ladies and gentlemen, this does conclude today's conference. We appreciate your participation. You may disconnect at this time, and have a great day.