Dear Madam, Dear Sir, Dear Shareholder,

I am delighted to be addressing you via this ‘letter to our shareholders’, the first in our company’s history. We hope to involve you more closely in our activities; after all, you are an essential player in our growth.

Our pace of development has accelerated significantly in recent years. The main drivers of this shift have been, on the one hand, a relentless improvement of our expertise in the design and production of children’s animated serials destined to enrich Xilam’s proprietary catalogue, and on the other, the explosion of distribution channels, particularly digital media, which are accelerating a globalized distribution of our content. Thus, the powerful underlying trends in our sector all contribute to the strength and resilience of our model: our productions are growing in volume and visibility, thus acquiring ever more long-term value. We sell faster, at a higher price, and reinvest in skills-building and new productions, reinforcing a virtuous cycle. The essential ingredient for the sustainability of our growth remains the creativity of our talents and the quality of our end product, which must be sought by children and approved by parents. The success of our productions depends on our ability to ceaselessly renew ourselves and continue to surprise our demanding audience with fun and friendly works.

In a frantic scramble to secure market share, the major streaming platforms (Netflix, Disney+, Amazon Prime Video, Apple TV+ and soon HBO Max (Warner Media) as well as Peacock (NBC Universal),…) are engaged in an all-out investment war, resulting in significant and continuous increases in the purchase price of animation programs. The internal resources of these players can no longer cover their needs, and they must call on rare skills that can be provided only by the best external animation studios, including Xilam. Meanwhile, we continue to pursue our development on AVOD platforms, especially YouTube, a major source of advertising revenue, and an opportunity for us to reach out to children directly, bypassing traditional distribution platforms.

The outlook for Xilam is therefore promising. Current regulatory changes in France are also very favorable to us; beginning January 1, 2020, they will oblige the American majors as well as all streaming platforms to invest 16% to 20% in French production, including 7% to 10% allocated to independent production (transposition of the EUs AVMS Directive).

I would again like to thank you, and all our shareholders, both longstanding and new, for your invaluable support, which will contribute to turning our goals into achievements.

Marc Du Pontavice
Chairman and Chief Executive Officer of Xilam Animation