Kartoon Studios Inc. (TOON)
NYSEAMERICAN: TOON · Real-Time Price · USD
0.6369
-0.0054 (-0.84%)
May 8, 2026, 4:00 PM EDT - Market closed
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M&A Announcement

Oct 27, 2021

Operator

On the call with us this morning is Andy Heyward, Chairman and CEO, as well as Michael Hirsh, Chairman and Chief Executive Officer of WOW. The company issued a press release this morning. If you have not received a copy, you can view this on the company's website. It's www.geniusbrands.com. Before I turn the call over to Genius Brands CEO, Andy Heyward, I would like to remind you that in this call, certain statements may constitute forward-looking statements within the meaning of the Federal securities laws. Words such as may, might, will, should, believe, expect, anticipate, estimate, continue, predict, forecast, project, plan, intend or similar expressions or statements regarding intent, believe or current expectations are forward-looking statements.

While the company believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to us on the date of this conference call.

These forward-looking statements are based upon the current estimates and assumptions and subject to various risks and uncertainties, including without limitation, our ability to generate revenue or achieve profitability, our ability to obtain financing on acceptable terms, if at all, the potential issuance of a number of shares, which would dilute our equity holders, fluctuations in the results of our operations from period to period, general economic and financial conditions, our ability to anticipate changes in popular culture, media and movies, fashion and technology, competitive pressures from other distributors of content and within the retail market, our reliance on and relationships with third party production and animation studios, our ability to market and advertise our products.

Our reliance on third parties to promote our products, our ability to keep pace with technological advances, our ability to protect our intellectual property and those other risk factors set forth in the Risk Factors section of the company's most recent annual report on Form 10-K and the company's subsequent filings with the Securities and Exchange Commission. Thus, actual results may be materially different. The company expressly disclaims any obligation to update or alter statements, whether as a result of new information, future events or otherwise, except as required by law. I would now like to turn the call over to Genius Brands CEO, Andy Heyward. Please go ahead, Andy.

Andy Heyward
Chairman and CEO, Kartoon Studios

Thank you, David. Hello, I'm Andy Heyward, Chairman and CEO of Genius Brands International. Welcome to today's investor conference call. Joining me today is Michael Hirsh, Chairman and CEO of WOW! Unlimited Media, trading under the ticker symbol WOW on the Toronto Stock Exchange. This morning, we jointly announced a definitive agreement whereby Genius will acquire 100% of WOW! Unlimited as a major step in the creation of what we believe will become the largest and most profitable children's media company in the world.

The combination of Genius and WOW will create a rapidly growing enterprise with an over 1,100% increase in pro forma revenue for the last 12 months. More importantly, it will be positioned to compete in the global creation of content for children, which will live across multiple digital streaming platforms and the coming metaverse. I'm going to ask Michael Hirsh to speak today and share with you why this transaction will be so transformative and disruptive to the entire kids entertainment industry as we immediately drive revenues and earnings for our shareholders and position this company for the future.

The combination now of Genius and WOW creates a modern entertainment company for kids through young adults, built to make growing profit for its shareholders by producing valuable and enduring animated brands and distributing them across an extraordinary digital global streaming platform, utilizing cutting-edge new technology like no other.

The addition of WOW to Genius leaves a dramatically profitable company having content, distribution and consumer product licensing, all vertically built in-house and all controlled in-house. With the addition of WOW, Genius will now own and be running one of the largest animation studios in the world and have become a first choice destination for its premier clients like Netflix, Sony, Amazon Prime, DreamWorks, Hulu, Peacock, Mattel, and Spin Master, among others. Genius now goes from a company with approximately 150 employees to over 700 professionals as we aggregate and consolidate the children's content marketplace.

In addition to Genius' rapidly growing cartoon channel with streaming distribution across Apple, Android, Amazon Prime, Amazon Fire, Roku, Tubi, Xfinity Kids, Samsung and LG smart TVs, we also now have the Frederator Channel, the number one animation driven YouTube channel network in the world, with over 2,500 channels and 1 billion advertiser supported views per month. In addition to YouTube, we now also have a very powerful presence of kids properties on social media platforms such as TikTok and GIPHY, with IP like Bee and PuppyCat with over one billion overall views and Catbug with over 200 million views on TikTok. We believe the synergy of these two distribution systems together positions us with the ability to reach more kids and youth viewers than anyone, anywhere.

Not only will this acquisition grow our last twelve months pro forma by over 1,100%, but we are rapidly adding a growing pipeline with over $62 million in secured and contracted future revenue. Added on to Genius' existing brands like Stan Lee, Super Why!, Kindergarten, Rainbow Rangers, and the upcoming Shaq's Garage will be the profitable production portfolio of TV hits like Bob the Builder, Barbie Dreamhouse, Castlevania, and Madagascar: A Little Wild, which are some of the many productions that WOW has delivered to its partners. WOW, based in Toronto, Vancouver, New York, and L.A., now provides Genius a company that is able to access the many Canadian tax credits and incentives as well as the enriched Canadian broadcaster fees.

Genius will now move our current production supply chain from China, where there are no such credits and incentives, and thus will immediately increase the profitability of every episode and series produced. I've known and worked with Michael Hirsh for many years, and between the two of us, we have created, written, and/or produced more animated TV programs than anyone, anywhere, including across the entire history of The Walt Disney Company.

Over 10,000 half-hour episodes at over $2.5 billion of production costs. The teams inside the combined Genius and WOW are responsible for brands such as Inspector Gadget, Alvin and the Chipmunks, The Magic School Bus, Ghostbusters, Care Bears, Strawberry Shortcake, the very first Star Wars costumes, Dexter's Laboratory, The Powerpuff Girls, Felix the Cat, Avatar, Captain Planet and the Planeteers, Tintin, Sabrina the Teenage Witch, Sailor Moon, Franklin, Archie, Super Mario Brothers, Sonic the Hedgehog, The Fairly OddParents, and many more.

This last year, Genius raised a lot of money, and we promised our shareholders that we would deploy our cash and stock to grow our company and make smart acquisitions. I can think of no smarter acquisition than WOW! Unlimited Media. I would like to introduce multi-Emmy winner, Animation Magazine Hall of Fame member, Ernst & Young Entrepreneur of the Year, Michael Hirsh, to talk a little bit about WOW and benefits to the investors now of its combined company.

Michael Hirsh
Chairman and CEO, WOW! Unlimited Media

Thanks for the very kind introduction, Andy. As you mentioned, we're putting together two companies that will create an end-to-end ecosystem that will drive exceptional value for shareholders of the company. This transaction represents the culmination of our extensive strategic review process that we announced on April 29th of this year. The purchase price is 34% premium based on the last 10 days VWAP and a 178% premium based on the 10 days VWAP just preceding the announcement of the strategic review, provides a very attractive price, immediate liquidity, and significant potential upside to WOW shareholders. Over the past five years, WOW has built itself into a top-end animation studio, working with marquee clients and partners, some of whom Andy mentioned.

We built our business through a solid foundation of animation services with shows such as Madagascar, Barbie, Bob the Builder, and Octonauts, as well as creating highly popular IP of our own. WOW's two studios, Mainframe and Frederator, each have a strong track record of over 20 years with fantastic management team and fantastic teams of animators working together. We've delivered many of the hits that Andy mentioned. In addition to over 500 professionals working in our state-of-the-art studio in Vancouver, we have a unique, fully virtual global studio pipeline that has allowed us to deliver our commitments to our clients and partners without fail throughout the pandemic. Over the last 12 months, from July 2020 to June 2021, our revenues have been in excess of $55 million and EBITDA over $5 million.

One of the most important financial metrics in our business is our pipeline. As of June 30, we've had over $62 million in booked animation revenue, which will be executed over the next several quarters. Among our IP portfolio is the cult hit, Castlevania on Netflix, as well as Bee and PuppyCat, which has become a super success on YouTube and is now headed for a brand new season this spring on Netflix. WOW's animation business derives strong benefits from our direct to consumer YouTube business, the Channel Frederator Network. It's an amalgamation of over 2,500 creator driven channels and serves as an incubator for us to find great talent, IP, and build audiences.

We believe that the Genius WOW combination is a very compelling deal for WOW shareholders from both a valuation and consideration standpoint, as well as for the ability to participate in the growth of the combined company. We will become a vertically integrated global animation company where WOW's discovery, development, and production will benefit from Genius's strong capabilities in distribution, licensing, and merchandising, and the Kartoon Channel's reach. While we look forward to many exciting updates with all of you in the weeks and months ahead, I'm now gonna hand it back to Andy for his closing comments.

Andy Heyward
Chairman and CEO, Kartoon Studios

Thank you, Michael. Well, I'd like to end this call with a brief summary. The acquisition of WOW is a very powerful addition in four distinct areas. First is scale. We now have a vertically integrated global animation business with creation, development, in-house production, in-house distribution, in-house licensing, and syndication. Second is growth. Our revenues grow exponentially, and WOW is a company with positive EBITDA in 2019, 2020, and the last 12 months, and a growing pipeline of contracted revenue into the future. Third is reach. The Channel Frederator Network brings direct to consumer access to over one billion views a month on a global basis. Fourth is IP. WOW's IP is uniquely complementary to ours, video game adaptations like Castlevania and anime style hits like Bee and PuppyCat. The demand for content has never been higher.

We're determined to build a globally competitive independent powerhouse that drives real shareholder value. We now have an extraordinary platform and a promise to our shareholders to continue on our path of accretive acquisitions and solid organic growth in the quarters and years ahead. Thank you for your time this morning, and thank you to all the Genius Brands shareholders, and welcome to the WOW shareholders.

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