Traders News Source Senior Editor, Mark Roberts Interviews Darren Marks, CEO Grom Social Enterprises, Inc.
Darren Marks, CEO
Grom Social Enterprises, Inc. (NASDAQ: GROM)
Thank you for giving us your time to answer our questions.
Could you give us a brief overview and future vision for your company?
Absolutely. With the acquisition of Curiosity Ink Media last year, combined with bringing on two highly regarded Nickelodeon veterans, Russell Hick and Paul Ward, we quickly upconverted the company from a kids social media provider, animation production studio and educational services, into an emerging player in kids and family entertainment with two feet squarely in Hollywood. The creative energy pulsing through Curiosity’s top-shelf, kid-first content, aligns perfectly with our legacy assets: Grom Social, Top Draw Animation, and Grom Educational Services. With the new Grom, there are three core beliefs currently driving our vision:
- Curiosity Ink Media Can Play a Vital Role in Reversing Fortunes of Programmers
As new subscribers are a top priority for most subscription video on demand (SVOD) providers (like Netflix, Amazon, Hulu, etc.), many are waking up to the opportunity that original content for preschoolers and animation represents. Today’s budget-conscious millennial parents are more likely to incur the expense of a subscription if the programming includes content for their kids. In the Curiosity model, our aim is to make true partners in the development of our programming by sharing the investment costs of bringing shows to life through partners who can provide the right backing (marketing, PR and positioning) and platforming each show for success. An animated or preschool hit, for example, can often lay the groundwork for other revenue streams (consumer products, international distribution, licensing, live tours, etc.) and bring SVODs new subscribers as well as ancillary revenue that helps offset losses from subscriber erosion.
- Top Draw Is Now a Hollywood Player
Grom’s acquisition of Top Draw Animation (TDA) in 2016 proved to be a stellar move as the studio has served as a consistent and reliable revenue source for Grom. TDA’s studio in the Philippines boasts nearly 400 animation pros, who for the last 20 years, have delivered premium animation to programmers around the world. TDA now has a meaningful presence in Hollywood and managing it alongside Curiosity allows us to offer its services to key decision makers – many of whom now occupy C-Suite roles and are longtime colleagues and friends of Russell Hicks – in a streamlined approach. Previously, TDA’s studio in Manila gave it limited access to animation producers and obscured its considerable strengths. Having TDA in the center of the entertainment universe, we believe, heightens the opportunity for even more lucrative assignments.
- Protecting Kids on Social Has Never Been So Vital; Grom is Ready
The world has finally woken up to the importance of protecting kids in the digital universe. Every day, Grom is keeping our kids safe, both online and in school. Lawmakers nationwide and globally are taking major steps to hold the most popular social media companies accountable for their lax oversight in protecting kids from harmful content. Although most apps bar kids under 13 without parental consent, unfortunately, the age rule is easy to circumvent as millions of kids still find a way onto these apps without their parents’ knowledge. Grom, aimed solely at users who are under the age of 13, has been quiet lately…here’s why. For the past several months, we have been hard at work behind-the-scenes to refresh the Grom app and make it even more appealing to kids. We aim to serve them with many of the things they love about social media, but – and this is what sets Grom apart – is just for kids, offers an environment that filters inappropriate content (such as bullying and harsh language), has live monitoring and invites parents to play an active role in keeping kids safe.
Top Draw Animation has been the biggest revenue generator at Grom, and you’ve announced some new customers. Do you expect Top Draw Animation to show revenue gains in FYE 2022 over FYE 2021?
As an animation supplier, we are sometimes subject to the whims of the entertainment industry, including production delays, canceled shows and budget cuts. For the remainder of calendar 2022, we certainly see the potential for matching our FYE 2021 and possibly even exceeding it. We have a nice balance of projects currently in production with others scheduled to start during the third and fourth quarter. In fact, we just announced an additional $1.3MM in new business for TDA and we are so pleased to have a dedicated team in the Philippines bringing premium animation to life.
Can you answer that same question about revenue gains for Grom Educational Services?
To be candid, the Curiosity acquisition is our real priority at this point and where we see the most growth potential. The pandemic has created a marketplace for Grom Educational that is saturated with competitors offering a suite of services, including those that compete directly with our NetSpective web filtering solutions. We will look to fortify this business as effectively as possible while we consider alternatives to help broaden our reach and product portfolio in a very crowded educational tech space.
You’ve indicated that Santa.com will have an operational storefront in the coming holiday season. Is there a consumer awareness program in place and do you expect significant revenues from the website in 2022?
Given that e-commerce is new to Santa.com, and with consumers belt-tightening, it feels unwise to make predictions about revenue at this particular moment. We are certainly energized by the debut of e-commerce in Santa.com, but we also have our eyes on legacy competition that consumers already know. That said, we have amassed an incredible team and are hard at work to make the site a success for Grom. Our emphasis is on earned media SEO optimization and have set aside a modest amount for advertising. What sets Santa.com apart from the competition is experiential content for both kids and grown-ups and a ton of holiday-themed editorial that we anticipate will invite consumers in, help solve some holiday needs, and brighten the holiday for all of our visitors.
It’s been a year since Grom made an investment in Curiosity Ink Media. Since then, the company has developed an impressive IP portfolio and assembled a top-notch team. Aside from Santa.com, when should investors expect to see revenues generated by Curiosity Ink Media?
As we all know, there is no magic formula to predict exactly when a specific property will bring shareholder value, but we are incredibly excited by what the growing library of content, and the strategy to bring them to market, could mean to Grom. Thankfully, Curiosity is not a one trick pony and our content is premiering in a number of ways. Santa.com is online and a hub for holiday information and e-commerce. Baldwin, a prime example of a classic preschool property, will debut in publishing and is already being pitched as a series. Two of our intellectual properties – Thunderous and Legions of Forgettable Supervillains, are graphic novels as fans of comic books exhibit the consumer behaviors entertainment companies want and need in order to grow. The Pirate Princess is being shopped to movie studios for theatrical release. Our approach may differ with each IP, but see great potential for many, if not all of this content to win with consumers.
Which of Curiosity’s potential content franchises do you think could be the first “hit” with consumers?
Again, there is no way to predict which of our originals will catch on the fastest, but we are confident that the acquisition of Curiosity Ink Media last summer was absolutely the right move for Grom. One of Curiosity’s principals, Russell Hicks, was so instrumental in cultivating the biggest hits for Nickelodeon, including SpongeBob Square Pants, Dora the Explorer and Paw Patrol and he brings that same blueprint and creativity into all of our originals. That said, we are very pleased with the early success of Thunderous, which debuted in April as a graphic novel, and we are preparing for its next round of success. We are also energized by the prospects of preschool properties Baldwin and Aloha Hoku, two original animated shows that offer all of the classic elements of a kids’ entertainment success story. Our aim is to cultivate programming hits before pursuing other, and very lucrative, revenue streams like consumer products and global distribution. We are not a big media company, so hitting the ball out of the park can mean significant growth for Grom and its stakeholders as we lay the groundwork for even more original entertainment.
You’ve indicated the potential for a partnership with a subscription video on demand provider (like Netflix, Amazon, Hulu, etc.). Has Curiosity Ink Media had any preliminary talks with any such subscription video on demand provider?
The terms of all of our conversations are private, but I can tell you we are in active conversations with both programming providers as well as movie studios to lay the groundwork for much of our content. Additionally, we are actively preparing for the MIPCOM gathering in Cannes, France, in October. MIPCOM is widely considered to be the premiere showcase for programmers and TV executives from over 100 countries and a great place to potentially start a bidding war to get in on the ground floor for original content from the great mind of Russell Hicks, who’s imprint on the Nickelodeon portfolio is without question. We anticipate having more to share in the coming weeks and months.
Do you see the Grom Social website generating revenues in FYE 2022 or in FYE 2023?
It’s more likely that revenue success for Grom Social will come in 2024 and there are a number of reasons why. As a premiere app that’s just for kids and places an emphasis on safety, we are already ahead of the competition when it comes to safety. Right now, we are hard at work behind the scenes making Grom Social more relevant and meaningful to kids and will debut new features over the next several months. Once the new features are unveiled and we push for greater success, the goal is to really monetize Grom with ad sales and sponsorship opportunities that allow the right marketers to connect with a pure demo of kids under the age of 13. We are very excited about the new phase of Grom Social, to put it mildly.
As I write these questions, GROM’s market value is at $8M. Can you make a case to our readers for a higher market value for GROM?
As we stated in our shareholders letter from July, we firmly believe the current valuation of Grom is a poor reflection of our revenue potential, asset portfolio and market opportunities. Like other companies, our stock price is at the mercy of environmental factors that challenge our valuation including major indexes recording big losses, high inflation and rising interest rates – to name a few – all of which have a way of placing increased pressure on small cap stocks, Grom Social Enterprises included. Our position is straight-forward: We have a smart strategy, a deep bench of talented leaders and a roster of potentially lucrative intellectual properties in development that we anticipate could unlock new revenue streams. Collectively, we view these favorable conditions as the bedrock foundation of our organization that will allow us to cultivate significant growth potential. Now is the perfect time to express our vision and bring further clarity to our mission that challenges the current narrative and underscores how undervalued GROM is at an $8.MM+ market cap.
In a nutshell, these are exciting times at Grom. Our uplisting to NASDAQ last June was followed weeks later by the acquisition of Curiosity Ink Media, immediately making us an emerging player in kids and family entertainment. The creative energy that resonates through Curiosity aligns perfectly with our core objective to provide top-shelf, kid-first content across all of our platforms and businesses.
Thank you Darren,
The Traders News Team