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Operator: Ladies and gentlemen. Thank you for standing by. Welcome to the Genius Brands International Second Quarter 2022 Business Update Call. At this time, all participants are in a listen-only mode. I would now like to turn the call over to David Waldman, Investor Relations. David, please go ahead.
David Waldman: Thank you. Good afternoon, everyone and welcome to Genius Brands' Second Quarter 2022 Financial Results and Investor Update Conference Call. On the call with us this afternoon is Andy Heyward, Chairman and CEO; Bob Denton, Chief Financial Officer; and Michael Hirsch, CEO of WOW!. The company issued a press release this morning. If you have not received a copy, you can view it on the company's website at gnusbrands.com. Before I turn the call over to Genius Brands' CEO, Andy Heyward, I would like to remind you that this call certain statements 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, belief 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 call. These forward-looking statements are based upon current estimates and assumptions, and are subject to various risks and uncertainties, including 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, not. Thus, actual results could differ materially from those reported. 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. Following their prepared remarks, the company will field the number of questions that investors have submitted in anticipation of the call. I'd now like to turn the call over to Genius Brands CEO, Andy Heyward. Please go ahead Andy.
Andy Heyward: Thank you, David and good morning, everyone. The second quarter was very strong for Genius Brands. We experienced significant top line growth with record revenues of $21 million, which we now expect to continue and accelerate. The assets currently now in-house and those being acquired and developed, we believe will lead to recurring positive cash flow, more growth and sustained profitability. During this last quarter, we've gone from a company with 100 employees to a company of over 900 employees, with offices in Los Angeles, New York, New Jersey, Toronto, Vancouver, Munich and London. We've grown our owned or controlled catalog of animated children's programs from 450 episodes to over 3,800 episodes and now have over 22,000 animated children's episodes under license to the Kartoon Channel! system. We have grown our Kartoon Channel! distribution footprint from just the US to now being seen in over 60 territories worldwide via satellite, cable and terrestrial, as well as streaming in Europe, the Middle East, Africa, Latin America and Asia. We've gone from a company producing 26 episodes of content at this time last year to producing over 200 half-hour episodes with over $135 million of production and a robust pipeline with significant committed contracts going forward for the next three years and beyond. Our programs are seen not only on our growing Kartoon Channel! but are additionally licensed to Netflix, Amazon, YouTube, Peacock, Paramount+, HBO Max and terrestrial and satellite broadcasters worldwide. We completed the transformational acquisition of WOW! Unlimited Media, signed a 20-year deal with Marvel Studios and the Walt Disney Company to license Stan Lee for use in feature films, television productions and Disney theme parks and experiences and we are in additional and material conversations with the Walt Disney Company on separate opportunities. Also during this quarter, we partnered with world-renowned chef restaurateur and philanthropist Wolfgang Puck to create an animated children's series and healthy food products licensed from and based on the series entitled Wolfgang Puck's Secret Chef Academy. Wolfgang Puck worldwide now generates approximately $650 million in worldwide revenues and we see an opportunity from the show to partner on similar kitchen and healthy food products now designed for children. In addition, we are pleased to report the highest revenues in the history of the company. Our Q2 revenues of $22.1 million, which is nearly a tenfold increase over the same quarter last year. We believe the continued and accelerating revenue growth is a precursor to earnings, which we are confident will be forthcoming. Our key units and businesses are growing, increasing market share and margin. Meanwhile, the company continues to maintain high levels of cash. The non-exclusive deal we signed to license the name and likeness of Stan Lee to Marvel Studios for movies and television and the exclusive license to the Walt Disney theme parks and attractions to create Stan Lee merchandise and consumer products to be sold in the Walt Disney theme parks cruise ships and other entertainment venues for the next 20 years, all of which Genius Brands will enjoy royalty income from. While the company received a $2.5 million license fee, the bulk of the revenues that Genius will get as a result of this agreement, we expect to come from royalties that will be generated from Disney's creation and sale of Stan Lee merchandise in the Walt Disney theme parks and theme park experiences for the duration of the 20-year agreement. We also anticipate additional benefits from the ongoing and enriched exposure of the Stan Lee brand, driving retail sales of our own upcoming Stan Lee content and merchandise programs separately. We consider the rights we own and control in Stan Lee universe to be extremely valuable and we will be announcing significant news prior to Stan Lee's 100th birthday on December 28 this year. As a close friend of Stan's for many years, I can share that this was his personal desire and we believe it's a privilege to act as a responsible steward of the Stan Lee brand on his behalf. During the past quarter, we continued to make great strides in many segments of our business, which will have a significant impact on the future of the company, as well as our financial growth. Also during the quarter, Kartoon Channel!, our flagship streaming platform for children, continues to experience monthly growth in downloads, viewership, advertisers, distribution and most importantly revenues. We are investing aggressively in Kartoon Channel! to secure the best content, the best features, the most robust distribution and the overall most attractive user experience. We believe Kartoon Channel! will be a key driver and tentpole of Genius Brands' revenues and earnings for years to come. Kartoon Channel! is now being carried on virtually every major platform in the United States, including Apple iOS, Apple TV, Android TV, Android Mobile, Amazon Prime, Amazon Fire, Roku, Tubi, Comcast, COX Samsung Smart TVs, LG Smart TVs, Pluto TV; and the increasingly important YouTube platform. In fact, if you happen to be flying on JetBlue, you'll now see Kartoon Channel! carried there as well. Kartoon Channel! is now firmly established as a premier viewing destination for kids and families with viewer rankings regularly placing us ahead of our major competitors in both the Apple and the Google app stores. Advertising revenues have continued their solid growth trajectory, as we continue to sign up new advertisers and have invested to build out a premium ad sales team, led by a proven industry leader, Cindy Kelly, who joined Genius Brands during the quarter and now oversees all advertiser sales. Concurrent with Kartoon Channel! as a free product, supported by advertising, we launched in the second quarter, our commercial-free streaming subscription product at $3.99 a month, the Kartoon Channel! Kidaverse. We expect subscription growth to become a critical component of our future revenue stream as it is for all content providers, such as Netflix, Disney+ and HBO Max. However, whereas several of our competitors have seen declines, Genius subscriber statistics are growing. We're building both on the subscription distribution we have now in Amazon Prime, as well as the subscription network we acquired with the Ameba Channel acquisition in January and their technology and superb management group. As we continue to roll out the subscription-based Kartoon Channel Kidaverse and its metaversal features, we believe Kidaverse will be a breakthrough first-of-its-kind offering for kids including avatars, emojis, games, Kidaverse VR goggles, immersive content, NFTs for kids, collectible digital cards based on many of the channels popular with characters, including Stan Lee universe, a digital currency for kids, which we refer to as KidaBucks, childsafe messaging, which we refer to as Messies, podcasts, music and more. The combination now of Kartoon Channel! as a free ad-supported service and Kartoon Channel Kidaverse, our enriched commercial-free service, enables us to capture those parents, who want their kids to have a premium channel for free, as well as those, who prefer to have a children's channel without commercials containing enriched features and are prepared to pay a monthly subscription fee. Having an ad-free and a subscription product grounded always and safe, positive, programming for children is the essence of our channel strategy to grow and capture market share worldwide. Okay. Let's talk worldwide for a moment. The company made a strategic investment in Your Family Entertainment, the premier German children's entertainment company trading on the Frankfurt Exchange. YFE not only has a 3,000-titled catalog of animation, but also an existing global distribution platform now in over 60 markets across Europe, Asia, the Middle East, Africa, and Latin America. Under the leadership of Paul Robinson, who previously was Managing Director of Disney Channels Worldwide, this channel system is now being rebranded as Kartoon Channel! Worldwide and rolling out in virtually every major territory. We are now in more than 60 countries around the world and in various stages of discussion in additional markets with a group of important carriage deals currently pending. We've also witnessed growth in viewership of Kartoon Channel! on platform such as Amazon Prime. We believe this trend will continue as we continuously add attractive new content, markets, and distribution partners to our portfolio. In addition to our owned and produced shows like Rainbow Rangers and Stan Lee Superhero Kindergarten, we continue to acquire timeless top-performing content from around the world including Peppa Pig, PAW Patrol Shorts, Scooby-Doo, Yu-Gi-Oh as well as Roadblocks and Minecraft-based gaming content. Strong proven content with positive values that children will want to see will always be a component of our program strategy to increase market share revenues and profits. Separate from the rollout of Kartoon Channel! and Kartoon Channel! Kidaverse the company acquired the Frederator channel as part of the acquisition of WOW!. The importance of the Frederator channel as part of Genius' overall distribution business can't be overstated. The Frederator channel is distributed exclusively on YouTube and is a platform of over 3,000 producers, which makes up the largest animation platform on YouTube and currently generates an astonishing 1 billion views per month. In itself Frederator channel is already a profitable service, however, we expect to grow and harness it dramatically more so as we migrate top-performing YouTube programs from there to Kartoon Channel! and Kartoon Channel! Kidaverse unlocking new value for the company and Frederator's producers. It's kind of like the biggest farm league of animation which we are now bringing up regularly to the big leagues. The combination of Genius Brands' WOW!, Frederator Channel, Ameba, and Your Family Entertainment now provides Genius with one of the largest and most desirable children's content catalogs in the world as well as a fully integrated distribution system and consumer product infrastructure to maximize value. I can't emphasize this point enough as each of the catalogs has tremendous intrinsic value. Most importantly, animation is not only timeless but an asset that grows in value over time. One needs only to look at the Flintstones, Tom & Jerry, and others that live on forever. Decades later you still see branded consumer products on store shelves around the world. The more the animation is consumed, the more the value of the portfolio grows over time. Now, I want to turn the call over to Michael Hirsch, CEO of WOW! to discuss possibly the most important event in the history of the company the acquisition and integration of WOW! into Genius Brands. Michael you're up.
Michael Hirsch: Thank you, Andy. The integration of WOW! Unlimited Media consisted of Frederator Networks and Studio and Mainframe Studios into the Genius Brands family has been going extremely well. The transaction was expected to provide immediate and continuing financial benefits along with strong revenues as a result of significant contracted bookings into 2023 and beyond. Indeed WOW! has had a banner year and continues to see revenues increasing at an accelerated pace. We are currently producing over 183 episodes of animated content with production budgets in excess of $100 million. The company operates at a profit on a cash basis and we expect to see working with Genius to increase our margins and make a significant contribution to the overall Genius bottom-line. As a result of the combination, Genius Brands now has an end-to-end animation ecosystem that has produced many profitable titles including Cocomelon, the number one children series in the world today; as well as Barbie: It Takes Two, Octonauts: Above and Beyond and . While many of these are work for hire, we are also now doing our own original content and currently have shows in production for YouTube, Netflix, Sony, and elsewhere. Our series Team Zenko Go with DreamWorks Animation just launched its second season on Netflix and our new series Bee and PuppyCat will launch on Netflix on September 6th. Bee and PuppyCat has had tremendous support on Twitter with millions of views for our Netflix trailer as well as other social platforms from the show's enthusiastic fans. It represents a major success for the Frederator approach to developing a show first on a Tier 2 platform and then upon success migrating it to a more commercial platform that broadens the show's appeal. The addition of captive in-house animation production for Genius Brands is expected to drive significant cost synergies resulting in economies of scale, which will drive increased shareholder value as new brands have -- been brought to market and eventually the Kartoon Channel! and through the Genius Brands licensing organization. This transaction is a transformational event for Genius Brands as the company will continue to execute on its strategy to establish itself as a foremost producer, broadcaster and licenser of high-quality children's entertainment and children's consumer products on a global basis. There are very few asset classes with proven and enduring value as animated children's programming. And we are extraordinarily excited about what the future holds for this powerful combination. I would now like to turn the call over to Bob Denton, CFO -- to discuss the company's financial results for the quarter. Bob?
Bob Denton: Thanks, Michael. As Andy mentioned earlier, total revenues for the quarter ended June 30, 2022 were $22.1 million largest quarterly revenues in the history of the company, an increase of $19.7 million or 843% from $2.3 million in the same quarter last year. These increases are primarily due to the addition of Ameba in January and the acquisition of WOW! at the beginning of the quarter. Expenses for the quarter increased primarily due to an increase in direct operating costs an increase in general and administrative expenses including the onetime charge professional fees associated with the acquisition of WOW! and its subsidiaries, an increase in incentive compensation expense, which is a non-cash expense and the inclusion of WOW! general and administrative expenses for the three months ended June 30, 2022. The net loss attributable to Genius Brands for the quarter ended June 30, 2022 was $13.3 million or $0.04 per share compared to $7.4 million or $0.02 per share for the three months ended June 30, 2021. This increase is directly related to the increase in expenses noted above. Turning to the balance sheet. As of June 30, 2022 we had current assets of $150.3 million including cash, cash equivalents and marketable securities of $105.2 million, working capital of $63.6 million and total stockholders' equity of $143.1 million. We are closely managing our cash balances which we consider the most important indicator for the company as we integrate and build our combined businesses and increase our assets with the goal of increasing earnings and becoming cash positive. Our acquisition and investments are indications of our commitment to continue creating top-tier children's content, creating a global and enduring animation catalog and the expansion of our Kartoon Channel! distribution system. We believe that it is the best and smartest deployment of our capital and that in the long-term it will ultimately yield the most value for our shareholders. I would now like to turn the call back over to Andy for some final comments. Andy?
Andy Heyward: Thank you, Bob. First I want to thank all of our investors for participating in the call today and for your support over the years as we've transformed Genius into a powerhouse within the children's entertainment industry. We are growing across key units, increasing market share building timeless assets and all signs point to that momentum continuing and accelerating. We are now in year two since the launch of Kartoon Channel! and as I said at the beginning top-line revenue growth this quarter of more than 800% to over $22 million broke all records. We will continue to make decisions to grow our asset base and reach sustainable and growing profitability. As we continue to build on the substantial progress, I look forward to speaking with everyone again in keeping you informed of initiatives how we are building best programs for children license products from those programs and the most effective distribution programs. But as they say the best is yet to come. Last but not least I am particularly excited about our upcoming series Shaq's Garage and the strong vehicle-based consumer products program that we anticipate will come from it. Shaqâs Garage is a series we are very proud of because it has extraordinary entertainment, which we think will be a huge performer but also it shows extremely positive value to kids in a diverse and responsible world. Shaquille O'Neal has been personally hands-on throughout and he's very committed to the positive storytelling that the series will embrace alongside the humor and hygiene. The pilot episode will enjoy a sneak peek on Kartoon Channel! effective immediately. It's up now and lasting for 48 hours. I encourage everyone to go see it. And not only see Shaq but also his costar Rob Gronkowski. Now we want to take this opportunity to answer questions that were previously submitted to the company. David I think you have the questions?
A - David Waldman: Yeah. Thank you, Andy. Sorry. In our conference call announcement press release, we suggested interested parties submit their questions in advance. We'd like to address those questions for you now. Some of them were duplicative, so we did our best to reconcile those where possible. If you have further questions after the call please feel free to follow up with Investor Relations and we'll be sure to respond as quickly as possible. Our first question from investors is the following. Given the company's revenue growth at what point do you expect to turn profitable?
Andy Heyward: Good question. We're not prepared to give formal guidance right now. But as we continue to grow, we do expect to turn profitable in the not distant future and generate quite significant cash flow. In the meantime, we're carefully managing expenses expect to generate significant cost synergies from the WOW! acquisition and the path to sustained and reliable and continuing earnings is from the build-out of our global animation catalog and our global distribution system. We're building Genius to become a dominant force in kidâs entertainment. And in order to do that, we must invest wisely to maximize long-term value for our shareholders.
David Waldman: Thank you Andy. Our next question is, how are you managing the rapid growth now to a company of over 900 people?
Andy Heyward: Good question. Our Board member, Tony Thomopoulos has graciously agreed to now serve as Vice Chairman of the Genius Brands Board of Directors. Tony brings a distinguished career of experience coming from being President of ABC Entertainment and ABC Broadcast Group, Chairman of United Artists Pictures, and President of Steven Spielberg's, Amblin Television. Tony will not only lead our greenlight committee but will also focus on unifying the many pieces of the company now and working with all of the units to help ensure they stay on their growth and earnings targets. We're very fortunate to indeed have his wisdom and experience. He's already instituted protocols and disciplines. He's been working with Bob Denton and Mike Jaffa to help ensure we hit our targets and good governance remains a top priority.
David Waldman: Great. Thank you Andy. The next question is what are the company's plans to buy back stock?
Andy Heyward: I would say that given the volatility in the market and the importance of preserving capital, we've not undertaken a buyback up to this point, but we have and will continue to evaluate all our options of which that is one.
David Waldman: Okay. Thank you. Our next question, is Genius Brands affected by interest rates, energy or inflation?
Andy Heyward: Good question. Well, we're not really an energy consumer. You don't use energy to build automated cartoons. We use creative energy. So if I could be a little whimsical, I would say we could be said to be an energy supplier not a user. Interest rates, we have minimal exposure to interest rates. We have a lot of cash in the company right now. And while we do have some production based borrowing that's not really effective for us.
David Waldman: Great. Thank you. Our next question, does Genius have exposure to China through its productions or otherwise?
Andy Heyward: Good question. We enjoy good relations, because of our super stroke kindergarten series now being broadcast with our Chinese partner, Alibaba on their Youku platform. That's the most robust kid's platform in China. And to the best of my knowledge we're the only American supplier of children's content to Alibaba. We are paid cash for our programs we sell to China in US dollars. At the same time, our exposure to commercial pressures from China is minimal because we've migrated the bulk of our nation production from Chinese animation studios to Indonesia and the Philippines where pricing is currently much more favorable and production quality remains high.
David Waldman: Thank you. Our next question, can you provide an update on Shaqâs Garage and what you think sets it apart from other productions?
Andy Heyward: I've talked a little bit about it earlier, but the current plan for Shaqâs Garage is to begin delivering episodes in the fourth quarter of this year. All of the scripts are written, both Shaquille and Rob Gronkowski have recorded 90% of their voices. The show we consider to be a PAW Patrol with cars. It's very cool. The music is very cool. The stories are aspirational and fun, more cool cars than you can ever imagine. We're also excited about a show within a show that will appear in many of the episodes. It's a segment called Baby Shaq. I'm not going to say more about it now only that if you like Baby Shark, you're going to love Baby Shaq. We're going to do a sneak peek of the first episode. It will be on for 48 hours only. It's up now on Kartoon Channel!.
David Waldman: Great. Our next question is given the growing importance of ESG, what if any steps is Genius taking including environmental measures?
Andy Heyward: Okay. So our management has decided to take a leadership role in the entertainment industry on how we can best protect the environment as corporate citizens, as we tell stories to depict positive environmental steps for our children. Our Chief Diversity Officer, Michael Riley has now been given the additional role and responsibility of Chief Environmental Officer and the company has put a number of specific initiatives in place to make us a more environmentally friendly company and a leader in social responsibility overall. These range from carpooling incentives, adding LED energy light saving -- saving lights to having environmental lessons in our shows for the kids to learn from. We have an all-company electronic recycling day coming shortly. We have toxin reduction programs and we have a conservation program promoting company-wide steps of reduce reuse and recycle. These are all on our website starting today for all our clients and shareholders to see. We understand the importance of stepping forth on environmental issues. We embrace this responsibility in the stories we tell, as well as broadcast on our channels. And the impact it has on children as well as the concrete steps that we've taken to make the company more environmentally friendly. We believe that our company will continue to grow and flourish not in spite of our commitments to sustainability and social responsibility, but because of it. Next question, David.
David Waldman: Great. Thank you. Can you talk about the merchandising strategy and when we can expect to see toys and other products on the shelves?
Andy Heyward: The kids merchandise business is unpredictable. But every year there are some very, very big hits. We don't know which of our characters if any will catch fire, but we believe we have several very good shots. Many of our brands have pre-sold market value and existing businesses associated with them that will drive sampling. Wolfgang Puck, for example, as I said earlier, it's currently a $650 million a year business. We would be very excited to have a kids version, which is a fraction of that. Stan Lee merchandise will be coming very shortly and you can expect a significant announcement on that in the near future. The Disney merchandise of Stan Lee, which will appear in the parks and theme park experiences will be forthcoming on their schedule. I believe they're very enthusiastic about this and look forward to having Stan be an important part of their Marvel experience. We have a variety of brands with different activities in different stages, including Llama has an ongoing staple and Rainbow Rangers, which we are going to reboot with a new master toy licensee because we believe in it. Shaqâs Garage we think is a natural on many fronts. It has the same play has some very successful products like Hot Wheels, Pixar's Cars and PAW Patrol. However, we think the creative premise is very special and differentiated. There are a number of products now coming out of Frederator and Mainframe, which we have the potential to become significant in merchandising for us as well. Bee and PuppyCat which was first incubated on YouTube and has developed a large audience and will debut next month on Netflix is one of them.
David Waldman: Great. Thank you Andy. That does conclude the questions. We appreciate everybody's support, and we look forward to providing further updates. Thank you.
Operator: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.