Responsible Social Media, Education, Animation and Family Entertainment
“Russell Hicks has a history of success and was involved in the development of hits such as Scooby-Doo, SpongeBob Square Pants, Dora the Explorer, and Paw Patrol.
Grom Social Enterprises Inc. (NASDAQ: GROM) is an entertainment, technology and social media company dedicated to family-friendly programming, web-filtering technology and safe, secure social media for kids. What sets Grom apart is that they invite parents and caregivers to join in playing an active role to keep kids safe, engaged and entertained.
Chart Coiled – Volume Picking Up
Oversold chart with a 14 day RSI of 29.6 and MACD running very tight sitting just above 52 week lows.
52 week high $19.50/share
52week low $0.79/share
Current $1.05/share
Grom Operates Four Verticals
Grom Social – The Company delivers content through mobile and desktop environments (iOS and Android) that entertain children, allow kids to interact with their peers safely, all while promoting good digital citizenship.Visit www.gromsocial.com
Grom Educational Services – Web Filtering for Schools, Federal/Municipal Government and Private Businesses. Visit www.gromedu.com
Top Draw Animation – An award-winning producer of top-quality animation and a leading source of 2D animated programming for global entertainment providers.Visit www.topdrawanimation.com
Curiosity Ink Media – Curiosity is a cross-platform media & entertainment company serving kids and families with ground-breaking original story-telling content.Visit www.curiosityinkmedia.com
Investment Highlights – Acquisition of Curiosity Ink Media
The company purchased Curiosity Ink Media (CIM) in August 2021. CIM is a creator, developer, and producer of kids and family entertainment content that was created by Russell Hicks in 2018. We believe the company is poised to benefit from the increase in expected spending on content from major streaming services.
Russell Hicks has a history of success and was involved in the development of hits such as Scooby-Doo, SpongeBob Square Pants, Dora the Explorer, and Paw Patrol.
He was a driving force behind the success of Nickelodeon in the early 2000s, where he was the president of content and production from 2012–2017 and Chief Creative Officer from 1998-2012. We believe his past history of developing hit content is repeatable.
The team at CIM has a strong incentive to develop successful content due to the earn-out structure from the acquisition. Grom paid roughly $5.7M for CIM up front, but the selling party has the opportunity to earn up to $17.5M more upon achieving certain EBITDA targets from 2023-2025.
According to Ampere Research, streaming services spent more than $220B for content in 2021, representing an increase of 14% over 2020. In 2022, Ampere expects investment for content to exceed $230B, representing an increase of 4.5%
Top Draw Animation Tailwinds
With recent contract wins in 4Q21, we believe the company’s backlog is roughly $8.6M, which represents a 33% increase above the backlog stated at the beginning of FY21 and a 23% increase above the backlog stated at the beginning of FY20.
Russell Hicks was appointed to Managing Director of Top Draw Animation in August 2021. The founder of Top Draw Animation, Wayne Dearing, resided in the Philippines and retired in August 2021. The company now has direct access to Hollywood through the connections that Russell Hicks has built over the past 40 years.
According to former Nickelodeon executive, Paul Ward, who joined the company in March 2021 as President of Grom, many of Russell Hicks’ colleagues hold key decision-making roles at major companies such as NBC Universal, Netflix, Hulu, and Amazon.
As a result, we believe the company’s Top Draw Animation business will win a lot of new contracts going forward.
Positive Momentum in KPIs and Revenue Trends
Grom boasts a high online usage duration versus some of its peers and continues to grow its user base. The company currently has roughly 2.5M total monthly active users, up from 876K in 2019, representing approximately 60% growth per year.
EFHutton Analyst Price Target $5/Share
“Grom was assigned a $5.00 price target using a sum of the parts analysis and a relative valuation from peers.”
EFHutton’s price target implies a return of more than 400% from the current PPS.
Share Statistics A/O Most Recent Quarter, Balance Sheet A/O Most Recent Quarter and Income Statement
Avg Vol (3 month) 337.25k
Avg Vol (10 day) 162.06k
Shares Outstanding 12.6M
Float 8.75M%
Held by Insiders 22.32%%
Held by Institutions 10.64%
Shares Short (Feb 15, 2022) 355.49k
Short % of Float (Feb 15, 2022) 3.11%
Balance Sheet
Market Cap $13.61MCash on Hand $9.1MTotal Debt $3.6MBook Value Per Share $2.07Current PPS $0.906
Income Statement (ttm= trailing 12 months)
Revenue (ttm) 6.46M
Revenue Per Share (ttm) 0.52
Quarterly Revenue Growth (yoy) 5.20%
Gross Profit (ttm) 2.81M
EBITDA -4.28M
Grom Management
Zach MarksFounder / Chief Content Developer
Darren MarksChairman / CEO / President
Over 30 years of public company experience at the CEO and Director levelCo-founder and creator of Nasdaq listed telecommunications companyExtensive experience in commercializing new products.
Melvin LeinerVice Chairman / Executive Vice President
Over 40 years of high-profile senior executive level experience in the public and private sectors chairman, co-founder and CEO of a Nasdaq listed telecommunications company strong operational and financial skills.
Jason WilliamsChief Financial Officer
Financial executive with over two decades of demonstrated success and leadership experience in accounting, finance and operations for both publicly-traded and privately-held companies.
Paul WardPresident of Grom Social
Over 20 years with Nickelodeon as Executive Vice President where he oversaw daily operations of Nick at Nite while working with all departments to drive ratings and brand success.
Russell HicksCCO of Curiosity Ink Media and President of Top Draw Animation
With a distinguished tenure as President of Nickelodeon Animation Studios, Russell Hicks has masterminded countless iconic franchises like Scooby-Doo, SpongeBob and Dora the Explorer.
We encourage you to view the GROM Investor Deck
Recent Article- Deep Dive: Grom Social Enterprises
Our goal is that this initial introduction gets everyone started with their own research.
***Note that GROM is currently on the NASDAQ’s Reg SHO Threshold List. Failures to deliver to the clearing agency usually indicate some naked short selling within the security.
Regulation SHO is a 2005 SEC rule that governs short selling. The regulation introduced the “locate” and “close-out” requirements aimed at curtailing naked short selling.
There is a lot to cover with Grom, I will have more soon.
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