Traders News Source Senior Editor, Mark Roberts Interviews Grom Social Enterprises Management
Full Interview
Darren Marks, CEO
First thank you for your time. As you mentioned in our initial conversation you are the Entrepreneur of the Grom family?
To be fair, it was a labor of love that could never have happened without the hard work and dedication of several team members who really stuck with Grom from day one. The inspiration for Grom Social was my son, Zach, who decided to create his own social media for kids under 13, who are not supposed to be on social media without their parents consent. As you can see, a lot of kids find a way on without mom and dad knowing. Zach wasn’t so lucky. We pulled his Facebook account because he was too young and he rebelled by creating his own site for kids and Grom was born.
Could you give us a brief overview of your vision for the company?
Grom Social Enterprises is firmly rooted in safe social media for kids and family entertainment. Our vision is to maximize the potential of all our assets and enhance shareholder value. We have four pillars: Grom Social, which offers younger kids social media but it a compliant and supervised app; Grom Educational, which keeps kids safe in school through web filtering solutions that prevent kids from using school tech to wander the web; Top Draw Animation, which oversees animation production for major cartoon series for several, leading global entertainment providers and; our most recent acquisition, Curiosity Ink Media, which is led by former Nickelodeon President, Russell Hicks. Russell was so instrumental in cultivating SpongeBob, Dora the Explorer and Paw Patrol into hits. Today, he’s leading the charge on creating original content – that Grom and Curiosity own – that we believe will have enormous consumer appeal and great revenue potential. In short, we want to create programming that we would want our own families to watch and build something that makes us feel incredibly proud. We are off to a great start.
Paul Ward, President Grom Social
Paul, first, thank you for taking time out of your busy schedule to talk with us. The biggest question on everyone’s mind here is what led to and the thought process behind the move from Nickelodeon to ultimately Grom Social?
Thank you so much for having me here. Briefly, I spent the bulk of my career at Nickelodeon and loved how creativity and hard work were the recipe for success. In Grom, I saw incredible assets and the opportunity to use the blueprints applied at Nick and bring that same unstoppable thinking to a company that understands how to entertain in a variety of settings.
Any plans or thoughts of introducing a live role model like a Mr. Rogers to the platform?
Mr. Rogers is a great example, however, it’s more likely we would tap into kid personality to better reflect the Grom brand. I recently read a biography that delved into Mr. Rogers and the positive impact he made on helping kids understand the benefits of kindness and positivity. That approach of helping guide kids into responsible young adults certainly aligns with our desire to make the Grom experience one that kids and families find additive.
You have significant operations in Manila. Is it easy to find creative talent there?
Fortunately, the Philippines is rich with incredible talent, particularly in animation. The competition for them, however, is fierce, and we make it a top priority to ensure our entire team feels gratitude for their amazing contributions and has access to great career development in an atmosphere that champions creativity.
Can you give any guidance for revenue, or interactive user growth for FYE 2022?
We’re not in the business of over-promising or forecasting but I can tell you that Top Draw is doing great and the stars are aligned for it to resume pre-covid production levels, something we’re very happy about. Simultaneously, we are cultivating a slate of amazing properties for success like Santa.com and the great original IP coming out of Curiosity. As the success model for all of these is an iterative process, we are excited about the steps we’re taking every day to ready these properties for various successes in the coming months and years. And, of course, we are so happy to have Russell Hicks – who helped guide SpongeBob and Dora the Explorer into global phenoms – driving our creative content strategy. For Grom Social, we are working behind the scenes right now to fortify the environment, grow our audience and enhance the value of our social media offering, which we intend to monetize to its potential.
Do you anticipate any one segment to proportionally drive revenue growth in FYE 2022 more than the others?
Darren: As you know, Top Draw is our baseline driver and we expect that to remain true through 2022. Our vision is to embrace a broader revenue mix as our IP really begins to come to life. We have a number of properties coming to fruition in publishing and ecommerce that we have very high hopes for in taking Grom to new heights.
Can we expect Gross Profit Margin and Operating Income to scale on a par with rising revenues?
Darren: The short answer is yes. As new, ancillary revenue streams come to life, we expect to see improvement and increased performance that will ultimately flow through to gross profits and overall operating income.
Does the company have any acquisition targets or investments, near term, that you are willing to discuss?
We are constantly taking a hard look at acquisitions, partnerships or synergistic opportunities that we think complement our portfolio, serve the entertainment needs of kids and, of course, bring additional shareholder value. We are always looking under the hood at market opportunities that have the potential to be accretive, promote organic growth or immediately bolster our bottom line.
You have a very modest share structure, an attribute many investors look closely at. How likely is your share level to increase in 2022 beyond the potential impact of convertible notes and warrants?
Darren: We have an incredible relationship with our investment banker and maintain a fluid dialog. At this moment, we have no definitive plans, however, this could change if the right opportunity comes along.
Will you issue financial or operational guidance for any upcoming quarters or for FYE 2022?
Darren: We are not in the habit of issuing financial guidance, however it’s important to recognize that some of our core businesses are in various phases of development and – reaping the benefits of hit content is a step-by-step process that requires a little runway to really take off. We have great faith in many of these properties and we’re so grateful to our investors that understand the strategy and stay in lock-step with our approach as we continue to build.
Your acquisition of Curiosity Ink Media (CIM) is relatively new. Can you talk about the combination and any synergies you may have discovered since the acquisition?
What the Curiosity acquisition does for Grom is give us a strong presence in Hollywood and family entertainment. First and foremost, the Curiosity mission is to put rich storytelling front and center, something we’re doing right now with the development of Baldwin’s Big Adventure, a preschool property, as well as other animated properties like our recently announced Laugh On Lorp (working title), and Thunderous, which debuts as a graphic novel in late April. With Thunderous, we’re utilizing the debut in bookstores as an opportunity to bring great synergy to Grom and, at the same time, help promote literacy. For Top Draw, having a proven animation leader like Russell Hicks, who is well known among the animation pros in Hollywood, which is where production decisions are made. Moving forward, we see great potential for having Grom Social, Curiosity’s content and Top Draw interact and benefit one another on an ongoing basis..
Content is everything for media companies. Do you think any of the larger media companies may consider Grom a target?
Not really. With the explosive growth of subscription services like Netflix and Disney+, programmers everywhere are hoping and scrambling for premium content to grow audiences and we see a great opportunity to be an incredible resource for top-shelf shows and specials, especially in animation, which can have a very long shelf life and potentially lead to other revenue streams like consumer products and global distribution.
What exactly does a COPPA compliant environment mean?
COPPA compliance literally means that we strictly adhere to the Children’s Online Privacy Protection Act, which calls for responsible behavior from app providers with kid users like Grom. Much has been made lately about kids and targeted advertising, which the current administration seeks to ban. Grom offers advertising but not targeted ads, which is what sets us apart from the bigger guys and shows that responsible social media for kids is possible, but it takes a lot of work, which we’re happy to do day-in and day-out. Additionally, we do not sell or exploit kids’ data, which is something our competitive set cannot claim. Lastly, Grom is continually certified by kidSAFE, which audits and verifies the safety practices of kid-targeted digital content.
Can you describe Grom’s relationship with each of Disney, Dreamworks, Warner Brothers, Nickelodeon, and Hasbro?
Our adjacency to several leading global brands is primarily through the animation production we offer at Top Draw. Since we bid on those assignments and the terms of those deals are private, we rarely name specific properties we’re working on, however, we have done work with these global programmers and have made Top Draw a proud and reliable supplier of premium animation production. Moving forward, these relationships we see as a potential gateway to servicing these brands with Curiosity-produced original programming.
How does GROM Educational Services web filtering for schools work exactly? And what is CIPA compliance?
Our NetSpective Web Filter solution provides technology protection measures and internet safety for school students from kindergarten through high school. It includes filtering and monitoring the online activities of students while they use school internet services or work on school-issued devices. The Children’s Internet Protection Act (CIPA) was enacted by Congress in 2000 to address concerns about children’s access to obscene or harmful content over the Internet and is monitored by the FCC. Grom Educational Services helps schools stay compliant.
You’ve landed some nice sized contracts recently, anything in the works you can discuss?
As I described earlier, the terms of specific contracts are private, however I can tell you we are excited to welcome new business in addition to being rewarded with production assignments for new seasons of shows for existing clients as well as welcoming some new clients from all over the world. With new leadership, things are going great at Top Draw and we’re thrilled.
What is the company’s current backlog and which segment has most of it?
The current view at Grom is promoting backlog is financial guidance. I can tell you that we are seeing a really nice ramp up at Top Draw, which represents most of our current revenue.
Can you tell investors reading this what you believe the company is doing to enhance shareholder value?
Absolutely. At Grom Social, we are revamping the app to reflect the changing needs of kids to grow the audience and continue to reinforce safety. Top Draw has renewed swagger thanks to fresh leadership. Grom Educational is hard at work keeping kids safe at school and, as educational and tech conferences resume, we see a chance to enhance our reach. Curiosity is primed to really contribute to overall shareholder value with a very deep library of original IP. We have a lot of great things going on and are hard at work to make Grom Social Enterprises as successful as it can be.
Thank you for your time.
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