March 24, 2022 - 9:01am EST by
2022 2023
Price: 3.82 EPS 0 0
Shares Out. (in M): 52 P/E 0 0
Market Cap (in $M): 197 P/FCF 0 0
Net Debt (in $M): -25 EBIT 0 0
TEV (in $M): 173 TEV/EBIT 0 0

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Thunderbird Entertainment is an unheralded quality studio in an age of huge demand for entertainment content. Run by a top-notch management team, the company focuses on fully financed singles and doubles with the opportunity for major hits. Specializing in unscripted shows and cartoons, the company works with all of the major channels and streaming services to distribute its content. Thunderbird participates both in production services work for other company’s shows as well as self-owned intellectual property. The production services work provides steady income while the self-owned IP provides the long-term upside for the company. The company is growing rapidly with 37% revenue growth in 2021 and is quite profitable with a 15.8% operating margin. Trading at only 1.4x fiscal (June) 2022E sales and 7x EBIT, Thunderbird is a bargain on current numbers with upside optionality if it scores a big hit show.

Thunderbird’s Factual Division, called Great Pacific Media (GPM), produces the company’s unscripted shows. These shows include Highway through Hell, which focuses on the lives of long-haul Canadian truckers. This show is in its 11th season and has been a sizable winner for the company. This show even has two spin-offs, Mud Mountain Haulers in its 2nd season and Heavy Rescue in its 7th season. Other Great Pacific Media shows include Gut Job in its 1st season, a show about remodeling difficult houses, Dr. Savannah: Wild Rose Vet in its 1st season, Deadman’s Curse, and The Teenager and The Lost Mayan, both of which are in production. Most recently GPM announced it partnered with producer Brad Peyton and physicist Michio Kaku to develop a series called If: Imagine the Impossible, based on Underknown’s What If, a top-ranked science program on social media. GPM also produces some scripted shows, including the critically acclaimed Kim’s Convenience in its 5th season, and its new spin-off, Strays, both of which run on CBC. Great Pacific Media is well respected in the industry and a go-to production house for exciting new factual series.


Thunderbird’s Kids and Family Division, known as Atomic Cartoons, produces animated television series and animated feature-length films. Currently Atomic is working on 16 television series and two feature-length films. Its shows include the hit Last Kids on Earth in its 4th season on Netflix, Mighty Express in its 4th season on Netflix, Lego Star Wars: Terrifying Tales streaming on Disney+, Trolls in its 4th season, TrollsTopia streaming on Peacock and Hulu, Marvels’s Spidey and His Amazing Friends on Disney Channel and Disney Junior, and Curious George: Cape Ahoy on Peacock. Atomic is also very well respected in the industry and has plenty of contract work to do when it is not working on its own intellectual property. For Thunderbird’s intellectual property, the company is in the process of developing toys with Jakks Pacific to capitalize on the success of its animated shows. While this process will take a while to be meaningful to the company’s revenue line, down the road it represents a large opportunity for the company.

Thunderbird sports a terrific management team. CEO Jen Twiner McCarron came up from the Atomic Cartoons division where she joined as Head of Production in 2011 and was CEO of that division since 2016. She became CEO of the entire company in 2018. She is an award-winning producer having received several Leo awards, an ELAN, a DTV, an AACTA, an Emmy award, and was voted one of the top 25 women in Animation by Animation Magazine in 2004. She is a straight-shooter and is well versed in all aspects of her business. Recently added in January of 2021 is another industry star, Richard Goldsmith, who now is the President of Global Distribution and Consumer Products. He was the Executive Vice President of Global Distribution for the Jim Henson Company and prior to that, was the Executive Advisor for Strategic Distribution Initiatives for both the Digital Distribution and Consumer Products divisions of Warner Brothers Entertainment.

The thesis on Thunderbird is easy to understand. The streaming business has become very competitive and each streamer’s focus is to come up with the best content to lure users to its service. Netflix spent $13.6 billion on content in 2021 and that number is expected to rise to $18.9 billion in 2025. Disney spent $25 billion on streaming content in 2021 and is expected to spend $33 billion in 2022. There are only a limited number of production studios that can deliver quality content on time and on budget. Thunderbird distinguished itself during the pandemic as one of the few content suppliers that did not miss a delivery because of the lockdowns. It has a great relationship with all of the streamers including Netflix, Disney+, Hulu, Peacock, etc. The company added new studios in Los Angeles and Vancouver last year to increase supply and has a runway ahead of it to become a major studio along the lines of a Lion’s Gate Entertainment Corp, which sports a $3.5 billion market cap. In fact, the founder of Lion’s Gate, Frank Giustra, serves as a director on Thunderbird’s Board.


Thunderbird is a financially strong company. Revenue grew 41% in fiscal 2020 and 37% in fiscal 2021. We think the company can grow at least at a mid-teens rate through 2025. Operating margins were at 15.8% last year and we think there is operating leverage in the model so that the company can achieve 21% operating margins by 2025. The result is that the company could do $52 million in operating profit by 2025 and on that basis, would currently be trading at 4x EBIT which is an unsustainably low multiple. At a 15x EBIT multiple, Thunderbird would be worth $15.50 by then or about a 245% return on a current investment.

What is the disconnect why Thunderbird trades so cheaply? As I said, the thesis is pretty obvious and the company has been performing very well over the past two years. Even without contemplating the home run scenario of a Peppa Pig type show where Hasbro purchased the parent company, Entertainment One, for $3.8 billion, Thunderbird is very cheap on its current consistent business. I think Thunderbird trades where it does because it is a small-cap Canadian company that trades only in Canada. There is a thought of management of a US listing but they want the company to become a little bigger before taking that route. Thunderbird’s balance sheet is solid with $25 million in cash and no debt and the company is looking at international M&A opportunities as the streamers are searching for local content in international domains. Organic plus inorganic growth over the next year may bring the company to a size to do a US listing where I think that it would enjoy more appreciation from potential investors.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


A US listing would garner much more attention to this undervalued stock.  Also, a takeout or a siginificant PE investment is possible in this consolidating industry.

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