Blue Ant Media (TSX:BAMI) Q3 2026 Earnings Call

0:00 Good morning. My name is Joel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Blue Ant Media Q3 Fiscal twenty twenty six Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Instructions on how to queue up to ask questions will be given at that time.

0:27 A reminder that for the purpose of the recording, today is Wednesday, 07/15/2026. I would now like to turn the conference over to Madeline Cohen, Head of Investor Relations for Blue Ant. Please go ahead. Thank you, Joelle, and good morning, everyone. Welcome to Blue Ant Media's Q3 twenty twenty six conference call for the period ended 05/31/2026. Before we begin, I would like to remind listeners on behalf of those speaking today that their remarks and comments may include forward looking information and forward looking statements within the meaning of applicable Canadian securities laws, and they may refer to non IFRS measures, including adjusted EBITDA. Forward looking information and statements are not statements of fact and are based on assumptions as of the date hereof and management's current expectations and therefore are subject to risks and uncertainties that could cause the actual results to differ materially from the forward looking statements made today.

1:20 The company undertakes no obligation to update these statements except as required by law. A description of the risks and uncertainties that may affect future results is contained in our Q3 twenty twenty six MD and A and our annual information form dated 11/26/2025 available on SEDAR plus In addition, non IFRS financial measures should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the two and relevant disclaimers can be found in our earnings press release, which is available on our investor website. Finally, please note that all amounts discussed today are in Canadian dollars unless otherwise indicated. With that, I'll turn the call over to Michael. Thanks, Madeline, and good morning, everyone. Fiscal twenty twenty six continues to be a transformational year for Blue Ant. We completed our complex go public transaction just under a year ago.

2:12 We grew significantly through three acquisitions. We implemented major operational changes and navigated shifting market conditions. And through all this change, we have decisively advanced the strategy we set out when we went public and that is to build a Canadian based internationally focused company that creates, owns and monetizes IP globally and to do that at a much larger scale. With Q3 consolidated revenue of 125,600,000 which is a 124% increase from Q3 last year and adjusted EBITDA of $16,800,000 a 15% increase from last year, our model is clearly working. Our expanded scale, output and earning power are evident in our results.

3:02 In Q3, the most meaningful revenue and earnings growth was in production and distribution. We grew our top line by more than six times compared to last year and dramatically increased our service production output working with household names including Disney, Netflix, Lego and Marvel. We continue to expand production of our owned IP with global partners including ITV in The UK, Crave in Canada and 2B in the history channel A and E in The US and we sold content to over 200 countries. Across our diverse portfolio, we continue to see growth in Magellan's SVOD service and global opportunities in FAST, with channel launches in The US, UK, France, India and Australia.

3:48 MediaPulse, our ad sales business, has consistently expanded its reach, most recently securing an exclusive direct sales and programmatic partnership with Paramount plus to sell its ad inventory in Canada. Together, these developments illustrate how we're creating value across multiple parts of the content ecosystem, from streaming and advertising to global content monetization. To strengthen our foundation for our next phase of growth, we recently made a number of organizational changes. We unified our kids, family and young adult studios including our Jam filled and Atomic Animation businesses under a single integrated leadership team. This team is led by Jennifer Twiner McCarron, former CEO of Thunderbird.

4:36 This creates a more focused, scalable operating model for a key growth area. Last month, we brought together our rights and global channels and streamings team into a single monetization unit called rights and streaming. By aligning these capabilities, we will be better positioned to serve our global customers, maximize the value of our IP across platforms and markets and drive additional operating efficiencies. These organizational changes will also be reflected in how we report the business going forward. Beginning in Q4, we intend to align our reporting segments with this new operating structure. So we'll have rights and streaming, studios and Canadian media.

5:23 Rights and streaming will include global content licensing, our international streaming and channel brands, and our MediaPulse Smart TV ad sales business. This new unit will be led by Mark Bishop, Chief Monetization Officer, Blue Ant Rights and Streaming. Studios will be comprised of our production business, including both owned IP and service work. It will be led by Matt Hornberg, Chief Content Officer, Blue Studios. Canadian media remains unchanged and includes Blue Ant's Canadian Broadcasting, Consumer Show and Cottage Life Publishing businesses. It will continue to be led by President Mitch Dent. The changes to our operating and reporting segments while improving our operations and strengthening our strategy will also provide more clarity on our business and growth drivers.

6:15 Again, are very pleased that our growth is visible in our Q3 earnings. With that, I'll hand the call over to Rob Chase, our CFO for a deeper look. Thanks, Michael, and good morning. As Michael mentioned, we saw considerable top line growth in Q3 with consolidated revenue of $125,600,000 compared to $56,000,000 in Q3 last year. This growth was driven primarily in our Production and Distribution segment, clearly reflecting the enhanced scale of the three production companies we acquired through our Go Public transaction, as well as our first full quarter of Thunderbird operations. Consolidated adjusted EBITDA was $16,800,000 compared to $14,600,000 in Q3 last year. As expected in a transformation year, our margins reflect additional public company and integration costs.

7:07 They also reflect the heavier weighting of lower margin service production. We generated $7,000,000 of cash from operations this quarter after $2,700,000 of one time costs, compared to $1,800,000 of cash from operations in Q3 twenty twenty five. To improve margins and operating efficiency, we remain on track to realize $7,000,000 in synergies from Thunderbird and are pleased with the great progress we've made on integration overall. In Q3, we recorded a net loss of CAD17.5 million compared to a net loss of CAD11.2 million in Q3 last year. The net loss is driven by a CAD33.1 million impairment of broadcast licenses in Canadian media.

7:55 This reflects the continued decline in linear subscriber and advertising revenue that we have previously mentioned. The impairment is a non cash charge that does not affect Blue Ant's cash position, liquidity or the performance of our growth businesses. We also continue to incur significant one time transaction, restructuring and integration related costs, totaling $2,700,000 in the quarter and approximately $12,000,000 year to date. I'll now provide more detail on our segment performance. Global channels and streaming generated 23,700,000 of revenue in Q3 compared to $21,200,000 in Q3 last year, while adjusted EBITDA this quarter was $4,400,000 compared to $5,600,000 in Q3 last year.

8:45 The year over year comparison reflects lower contribution from one long standing high margin FAST partnership than in the prior year period. Excluding that comparison, the remainder of our FAST portfolio performed in line with our expectations, and we continue to believe in the long term earning potential of this business.

9:07 Continuing a trend we've seen throughout fiscal twenty twenty six, MediaPulse, our smart TV ad sales business, and the MagellanTV SVOD brand were both strong contributors to segment results through advertising sales revenue and SVOD subscriber growth, respectively. Canadian Media revenue this quarter was $19,300,000 compared to $22,000,000 in Q3 twenty twenty five, while adjusted EBITDA was $7,200,000 compared to $8,800,000 in Q3 twenty twenty five. Our Canadian channels continue to face structural pressure in the linear advertising market and contributed to the negative variance over last year and the impairment I previously mentioned.

9:53 As has historically been the case, the third quarter is the most active for our Consumer Show business, which supported our segment results. Consistent with broader market trends, linear advertising was down 23% this quarter compared to Q3 twenty twenty five. The rate of decline in the market broadly and in our business has been more pronounced than anticipated at the beginning of the year. As a result, we expect soft future performance in Canadian media.

10:23 Production and Distribution had a very strong quarter with revenue of $82,700,000 compared to $12,900,000 in Q3 twenty twenty five and adjusted EBITDA of $7,300,000 compared to $1,800,000 in Q3 twenty twenty five. This quarter clearly demonstrates the impact of the enhanced production scale and capacity from our newly acquired companies, particularly with respect to service production. As we have shared previously, service work tends to have lower margins than owned IP, but it is a capital efficient business that complements and diversifies our IP portfolio, as well as strengthens our relationships with key commissioning partners. Through all the changes in our business during our first year as a public company, the strength of our balance sheet has been consistent.

11:16 As anticipated and disclosed last quarter, we received the $34,700,000 Value Assurance capital contribution from Fairfax in relation to the Go Public transaction and repaid the majority of the 40,000,000 draw used to fund the Thunderbird acquisition. We can see these movements in cash and indebtedness in our Q3 results. We have $59,900,000 in cash, 9,400,000 of bank indebtedness excluding normal course interim production financing and significant undrawn capacity under our corporate credit facility.

11:55 All taken together, we remain well capitalized and minimally leveraged, leaving us with the flexibility to steer our growth organically and through strategic M and A. I'll turn the call back to Michael for closing remarks. Thank you, Rob. As you can see in our Q3 results, the many facets of Blue Ant's growth are coming together. Our ability to commission, produce, distribute, stream, broadcast and monetize content globally enables us to maximize the value of our IP, keep pace with shifts in the marketplace and operate a well diversified business. More importantly, however, these earnings reinforce our confidence in the path ahead. Our top line growth is clear. As we continue to build and optimize our business, stabilize our public company overhead and move beyond the many one time transaction and integration costs, we expect to produce higher margins.

12:53 We also intend to grow through acquisition. Our strong balance sheet and our position in the market create real opportunities to create strong strategic assets on attractive terms at a time when many of our competitors cannot. We have a team that has built and scaled media businesses through up and down cycles and are applying that experience to the platform that we are building today.

13:17 We remain focused on executing the strategy we set out when we went public and look forward to sharing our Q4 and full year results this fall. Now let's open the call up for questions. Operator? Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Ahmed Abdullah with National Bank of Canada. Your line is now open.

13:57 Good morning. Thanks for taking my question. Looking at the Global Channels and Streaming segment, you've called out a relationship on the SaaS side that seems to be contributing a little less than you had expected. Can you give us a bit more color on that? What drove that change? What are the expectations there going forward? And how big of a part of the business is it? I guess it was one of our fast carriers in The US and their positioning of our channel and how they were positioning it ordinarily and what promotional activities they were doing with us has changed over the past year.

14:40 However, there's still a great customer of ours and the carrier of ours and which we're very pleased about. So it was big enough to call out and to mention but as we also mentioned in our remarks just now does not at all change our very positive outlook to our international FAST and AVOD business. They're still a good customer. Okay. So the expectation, would you expect that contribution to kind of revert back towards the mean or are you more of a news kind of run rate there? Well, look, we're always trying to encourage all of our customers to give us more advantageous positioning and do marketing funds with us and so on. So it's hard to predict what will happen with that in the future. But also during the period, are bringing on some other international fast carriers. We mentioned that in our remarks.

15:33 So it's hard to say with that customer where that will go.

15:37 Okay. Well, just touching on that where you've added, you know, 13 channels across nine platforms and you've launched in France and in Netherlands and Finland. Are you adding existing channels only or is there also an effort to kind of add to your product portfolio and launch new channels across these platforms? Can you give us a sense as to how that's progressing from a strategy standpoint? Yeah. From a strategy point of view, we're not really looking to add more channels right now. I mean, the fast market has grown enormously as you know, and matured to some degree. There's a lot of fast channels out there particularly in The US not so much in Europe and Australia but certainly in The US.

16:26 And to some degree the land grab looking to get beachfront property is probably over or lessening. And now a lot of our motivation is how can we maximize the relationship with the most important carrier partners that we have. And that seems like a more fruitful strategy these days than just adding more channels. There's a lot of fast channels and and

16:55 so our our strategy to improve the carriage we have and especially with the most important carriers. Yeah. And just on the industry dynamic, are you seeing any improvements from a CPM perspective in your conversations? No. And I say that hesitancy. Of course, it's always a blend between hope and like what you're seeing. It's hard to see the CPM results until afterwards. I suppose that FIFA also and just most recently for the past month has distorted the market somewhat. Maybe the American midterms will distort the market in the other direction somewhat this fall. But those are both short term things and that's not like you're getting at.

17:42 I would say that up until the end of Q3, which is what these results are for, there still is as there has been for the past two or three quarters at least, certain oversupply of inventory in the market. And part of that as we've discussed before, I think is due to the arrival about two years ago of Netflix and Prime Video into the ad supported market. So those factors are still there and it's hard for us to have but we're still bullish. We still see that streaming is growing and fast and AVOD are still growing. So it's an area we want to be in, but it's hard to make a prediction on a quarter to quarter basis, you know, when those CPMs are gonna firm up.

18:29 Okay. That's fair. I'll queue back up. Thank you very much.

18:33 Thanks. Your next question comes from David McFadden at ATB Cormark. Your line is now open. Hi. Yeah. Thank you. So a couple of questions. So when you talk about this partnership, so we should assume that it's not going to change and this is the first quarter of the impact and we'll have to wait as three quarters to to lap it. Is that is that the right way to think about that? No. It's it was a it was sort of an evolution change over several quarters, David. So part of what we were seeing in q one and q two were was a reduction. It didn't really play itself out so obviously.

19:19 So I think you should look at it and now it's clear to us which is why we've highlighted it right now in our remarks. So I think to see the impact of that, you'd you'd look at it from probably all three quarters of this fiscal. Okay. So we've had some impact in q one and q two. Yeah. And then I guess a bigger a bigger impact in q three. Right? Yes. And and it was more the summary impact of the three that it was became large enough that it was worth noting. Okay. Was that in relation to the Love Nature channel? Partly. Yes. Okay. So did they did they drop it, or they just No. No. Didn't drop it. No. Still a great platform. Still a great customer.

20:06 Okay. Okay. Because I would've thought that the Magellan because you're basically taking your your content and putting it on Magellan, so your cost of the content should be down massive. So would've thought that that lifting EBITDA would have really tough to grow the global channels EBITDA side of what would you say to that? Well Magellan has contributed revenue and some EBITDA to the business and by the way we're pleased with the success of Magellan so far. We've had some international launches that we've reported and as you would imagine, we're working on other ones that we're eager to finalize and we hope we get to report them when we do that. And I think as we mentioned when we bought Magellan, it wasn't like we could just tear off all of that rev share content on day one or even Q1.

21:03 It's not, some of it has come off and much more of it will come off but it was never something that could be taken off immediately and replaced immediately. It's happening over the course mostly of the first year. Okay, okay. And then has there been any change from the prior quarter and prior quarter conference call with respect to the advertising market for the FAST business? No. Well, that's pretty simple and blunt answer, but not really. I mean, that I'd say the comments that I think that I made last quarter would have been we still see viewership fundamentally shifting to streaming both the paid streaming and free streaming and including in that free streaming of ads which includes AVOD and FAST.

21:55 And AVOD and FAST are sort of the same thing just that FAST is scheduled program. This program at 08:00 that one at 09:00 and AVOD is a very same business but you get to select what you watch when. But AVOD and VAST really have to be seen together. No, I mean that the viewership to that, to those methods of viewing are still increasing. There's still a disconnect between the huge amount of viewing and thus the large amount of advertising inventory available representing that viewing and the advertising catching up with that. So there's still a disconnect that's causing a softness in CPMs. And so that the situation we're seeing today is I'd say very much the same story that we're seeing in Q2 or Q1.

22:45 And to say that, we therefore still are very bullish and glad that we're in the fast business both in delivering our channels but also selling ads via media pulse. Okay. And then so I'm just wondering, has your outlook changed for this year versus when you reported q two? Is it pretty much the same? Well, we are our outlook is broadly the same. I mean, the one thing I would call out is that you can see the significant reduction in Canadian media advertising revenue in the quarter, which as a percentage is almost identical to what it was in Q1 and Q2. When we reported Q1 and Q2, we couldn't, we just had that data and it was hard to project forward very far.

23:38 As we've noted in previous calls and David you would know from talking to other companies who are selling ads, there hasn't been the greatest visibility very far out and what the ad market is gonna be three or four months from now. More of the ads are being sold closer to the air date than they were a year or two or three ago. So that what we're seeing here in q three is almost almost the very same decline that we saw in q two and q one. And, unfortunately, we've now had three three quarters of it. And as I said, FIFA, which is going to be wrapped up, know, probably doesn't help either. Okay. Alright. Thanks, guys. Thank you. There are no further questions at this time.

24:25 This concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.