Corus Entertainment Inc. (CJRB) Earnings Call Transcript & Summary

Good day, and welcome to the Corus Entertainment Annual Meeting of Shareholders. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Heather Shaw. Please go ahead, ma'am.

Thank you. Thank you, and welcome, everyone. I'm Heather Shaw, Executive Chair of Corus Entertainment, and with me today are Doug Murphy, President and CEO; and Jennifer Lee, Executive Vice President, General Counsel and Corporate Secretary. Similar to last year and in consideration of the health and safety of the company's employees, shareholders and the broader community, this meeting is being conducted virtually this year. For those shareholders that logged in with a control number, instructions will appear on your screen about how to ask questions. And for Class A voting shareholders, the voting procedures will also appear. Holders of Class B nonvoting shares will not see this voting screen. Shareholders or proxy holders who entered the meeting with a control number may submit questions in writing at any time during the meeting by following the instructions in your web portal. We will respond to the questions received on each matter of formal business at the time it comes before the meeting if it pertains to the business of the meeting. When the polls for all resolutions are opened and you're asked to vote, you will receive a message on the virtual interface requesting you to register your votes. You will only have a certain amount of time to do so when the polls are open. If you have voted your shares prior to the start of the meeting, your vote has been received by the scrutineer, and there is no need to vote those shares during the meeting unless you wish to revoke or change your vote. We have been advised by TSX Trust Company that based on the proxies already deposited with them, enough votes have been cast to carry each of the motions. As with any virtual technology, unexpected glitches may occur, but our service providers for this platform at Lumi are on standby to help. Refer to the links from the navigation menu for assistance. We will now proceed to the official business of the meeting. I call to order this Annual Meeting of Shareholders. In accordance with the bylaws of the company, I will ask Jennifer Lee to act as Secretary of the meeting, and I will chair the meeting. TSX Trust Company will act as scrutineer. The company has adopted the notice and access method of delivering materials to both registered and nonregistered shareholders. As such, Corus mailed a notice to all shareholders of record as of November 29, 2021, and to each director and the auditors. The company has posted copies of the notice and Management Information Circular and the company's 2021 annual report on the meeting documents website for this meeting, on the company's website and on SEDAR. Copies of the Management Information Circular, together with the 2021 annual report, have also been posted on the Lumi platform. We have received a statutory declaration from the company's transfer agent attesting to the proper mailing of the notice of this meeting and the accompanying materials. A copy of these documents will be kept as part of the records of the meeting. The scrutineer's report will now be read.

I am pleased to read that the scrutineer, TSX Trust Company, reports that there are 30 shareholders holding 3,263,428 Class A voting shares represented in person or by proxy at this meeting. This total represents 95.63% of the 3,412,392 issued and outstanding Class A voting shares.

A quorum is present, and I now declare the meeting duly called and properly constituted. The minutes of the last annual meeting of shareholders of the company have been posted to the Lumi platform and are available for review. Class A voting shareholders and any other shareholder that has entered the meeting with a control number may address the meeting when there is a call to discuss a motion before the meeting. Should you wish to address the Chair on any motion, please type in your question or comment in the message section. If there is any discussion or question pertaining to the motion, the secretary will read the question aloud. We will now move to the formal business of the meeting. Certain of these items will be the subject of a vote by Class A voting shareholders. All matters before this meeting must be approved by not less than a majority of the votes cast by Class A voting shareholders present in person at this meeting or voting by proxy. In accordance with the statute and bylaws governing Corus, we will conduct the votes on these matters before us by a poll. On a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder. The electronic poll will be opened for all resolutions at the same time. This will allow you to choose to vote on each resolution immediately or to wait until the conclusion of discussion on each resolution to cast your vote. As previously noted, if you have already voted on a particular resolution by proxy, any vote that you cast through the Lumi platform on the particular resolution will revoke your proxy. I now present to the meeting the audited consolidated financial statements of Corus Entertainment Inc. for the year ended August 31, 2021, and the report of the auditors on them. Copies of these documents are included in the 2021 annual report made available to shareholders on the Lumi platform and on the meeting's document website for this meeting. They are also posted on the company's website and on SEDAR, and no further approval is necessary. We will now open the electronic polls for all the resolutions and proceed to the first item of business, the election of the directors of the company. The company did not receive notice of any director nominations in connection with this meeting within the time prescribed by the advanced notice requirements in the company's bylaws. Accordingly, at this meeting, the only persons eligible to be nominated for election to the Board are the persons nominated by management as set out in the Management Information Circular. Class A voting shareholders are being asked to elect the directors of the company to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed or until they otherwise cease to hold office. I now call for someone to propose the nominees named in the company's Management Information Circular be elected as directors of the company.

Madam Chair, I'm Cathy Roozen, and I nominate as directors of the company for the ensuing year those persons described in the Management Information Circular that was sent with the notice of this meeting, namely, Fernand Bélisle, Michael Boychuk, Stephanie Coyles, Michael D'Avella, Sameer Deen, Mark Hollinger, Barry James, Doug Murphy, Heather Shaw and Julie Shaw.

Are there any comments on this nomination? I declare the nominations closed, and we will now move to the individual election of our directors by poll. I have been advised by the scrutineer that all of the proxies received by the management prior to the meeting have been voted for the election of each of the persons nominated to serve as directors. As a reminder, Class A voting shareholders who had not already voted by proxy will now have the opportunity to enter their votes in the Lumi platform. If you have already provided voting instructions or submitted a proxy, you do not need to vote on this matter. Please proceed with entering your votes. [Voting]

The final item of business is the appointment of auditors and authorization for the directors to fix their remuneration. May I please have a motion?

Madam Chair, I'm John Gossling, and I move that Ernst & Young LLP be appointed auditors of the company to hold office until the next Annual Meeting of Shareholders or until a successor is appointed and that the directors be authorized to fix the remuneration.

Madam Chair, I'm Cathy Roozen, and I second the motion.

Thank you. You have heard the resolution. Are there any comments on the motion? Class A voting shareholders who had not already voted by proxy will now have the opportunity to enter their votes in the Lumi platform. If you have already provided voting instructions or submitted a proxy, you do not need to vote on this matter. Please proceed with entering your votes, and we will be closing the polls on all motions shortly. [Voting]

Thank you. The polls are now closed with respect to voting on all of the motions. Our scrutineer has confirmed that all votes have been counted. The preliminary results of voting are as follows. Our scrutineer has confirmed that all 10 persons named in the Management Information Circular and nominated at this meeting have been individually elected as directors of the company. They will each hold office for a term to expire immediately following the next Annual Meeting of Shareholders or until their successors are elected or appointed or they otherwise cease to hold office. Our scrutineer has also confirmed that the motion to appoint Ernst & Young LLP as auditors of the company to hold office until the next Annual Meeting of Shareholders or until a successor is appointed and that the directors be authorized to fix their remuneration has been carried. The final report on voting results provided by the scrutineer after the meeting will be incorporated into the minutes of the meeting. After the meeting, we will also post the final results on the Investor Relations page of the company's website, and we'll file the results on SEDAR.

Before we conclude the formal business of the meeting, we would like to take this opportunity to thank the Board of Directors for their support and guidance and the executive leadership team and all team members of Corus Entertainment for their dedication and hard work over this past year.

Thank you. I now declare the formal part of the meeting terminated. Thank you to all of our attendees for your time and attention. I'm now going to turn the meeting over to Doug Murphy, President and CEO for some [indiscernible] and comments. Doug?

Thank you, Jen, and thank you, Heather, and good afternoon, everybody. I would like to extend my thanks to Heather Shaw, our Executive Chair, and our Board of Directors for their continued support and guidance. Please note our cautionary statement on forward-looking information on Slide 13 in this presentation and as posted on our website. Since the pandemic began, we have been steadfast in our commitment to emerge on a stronger strategic and financial footing. The purposeful execution of our strategic plan and priorities has enabled us to adeptly navigate our business through this most challenging environment and deliver the following fiscal 2021 results for you, our shareholders: consolidated revenues of $1.543 billion, up 2%; consolidated segment profit of $525 million, up 4%; resilient free cash flow of $252 million and diversification of our sources of financing with a successful $0.5 billion high-yield offering. We now have improved financial flexibility through the ongoing deleveraging of our balance sheet from 3.18x to 2.76x net debt to segment profit year-over-year, further reduced to 2.66x at the end of our most recent quarter as we progress towards our long-term leverage target of under 2.5x. We believe that our strategic plan is the foundation that will enable consolidated revenue growth year-over-year. Our focus is on diversifying and growing our revenues in advertising and subscriptions and owned content. Over the last 5 years, Corus has invested more than $50 million in transforming how we sell television by providing better data-driven audience targeting and automation to enhance the effectiveness and efficiency of advertising buys. Our new operating metric, optimized advertising revenue, which tracks our progress on this transformation and includes revenues contributed from audience segment advertising sales, increased 43% in the year and 55% in our most recent quarter, reflecting the ongoing transition from traditional advertising buys to these more targeted and automated offerings. Corus is at the forefront of changing how television is sold with a unique mix of industry, customized and automated solutions that improve targeting and drive results. When the CRTC mandated channel unbundling in 2015, it was widely proffered that it would be the demise of the TV channel business. We differed then at our contention that the channels business is here to stay, and new and reimagined ways remains. While we have seen modest erosion in the traditional subscription system, our innovative strategies seeking to put more content in more places has delivered recurring subscriber revenue of almost $500 million, 1/3 of our revenue base year after year after year. The reaggregation of the channels business on streaming platforms is providing us with more new opportunities to grow this recurring revenue. As a premier steward of some of the biggest and best channel brands, our powerful portfolio of entertainment and lifestyle channels are now available in more places. STACKTV is a game changer with this bundle of our best lifestyle and entertainment channels available, both live and on demand. This unique value proposition and its impressive appeal to Canadians is evident in the fast-growing base of subscribers who are STACKTV fans with subscriptions doubling in the past year and showing significant growth so far this year now with more than 725,000 paying subscribers to STACKTV and Nick Plus combined. Based on our success to date and our revised sizing of the addressable market for these products, we announced a new target of 1 million paying streaming subscribers. We have unlocked 2 exciting developments thus far in fiscal 2022. Last week, we revealed that we are gearing up for the planned expansion of STACKTV on Rogers Ignite TV and Rogers SmartStream platforms. This will mark the first time that STACKTV will be available through a traditional distributor and reflects the growing appeal of this Corus channel bundle now available in new ways. Yet another revenue stream has been added with the new ability to dynamically insert advertising within STACKTV video-on-demand viewing through Amazon Prime Video. Corus is the only Canadian broadcaster with dynamic advertising and sourcing capabilities with Amazon Prime Video. This provides us with the unique opportunity to deliver targeted advertising against premium long-form video content within the Amazon Marketplace. Revenue growth from the pursuit of rapidly growing streaming platforms such as STACKTV and new digital video initiatives is now captured in the new platform revenue metric we announced this past year. This metric tracks our success in putting more content in more places to find new audiences, create more viewing impressions and drive more revenue growth. New platform revenue increased 62% in the year and 41% in our most recent quarter. In early 2020, we launched our new Global TV app. Authenticated subscribers within the traditional television subscription system have access to up to 8 of our premium specialty TV channels in addition to Global TV. The Global TV app also provides a broad spectrum of viewers with ad-supported content in 14 regional global news streams for free in front of the subscription payroll. This creates additional advertising impressions and revenue opportunities for Corus while enabling sampling of our great content. Ad-supported premium video online is in high demand from audiences and advertisers alike and also provides additional value to our subscribers. Whether it's STACKTV, the Global TV app or the next new digital product in our pipeline, Corus is focused on growth opportunities in the digital video marketplace. Corus has an enviable roster of partnerships with the world's preeminent studios and content companies. Time and again, in this competitive media and content marketplace, we have successfully innovated with our partners to achieve mutually beneficial business outcomes that advance our collective strategies. A prime example of this is our multifaceted collaboration with Discovery Inc., our joint venture channel partner of over 20 years. This past year, we entered into a marketing partnership with Discovery to support their launch of discovery+ in Canada, while addressing the long-term opportunities for our highly differentiated channel joint venture that includes Canada's HGTV, Food Network, Cooking Channel and DIY Network as well as our OWN Canada relationship. That's the Oprah Winfrey Network. Beyond the Canadian border this past year, Discovery license from Corus Studios approximately 220 hours of hip lifestyle and factual reality shows to deploy across their various channels and digital platforms in the U.S. and around the world. In addition to the progress we have made with all our partners in growing our business in Canada, we have also been very successful in broadening and deepening the strategic content partnerships to pursue opportunities outside of our domestic market. The Corus Advantage is a true differentiator for our company as we pursue revenue growth in the content-hungry global video marketplace. As a producer and broadcaster, we are building an ever-growing slate of programming that drives ratings on our networks in Canada and takes advantage of the unyielding global demand for hit content. Demand for our original content from Corus Studios and Nelvana is robust as we ramp up our production investment to deliver more seasons of new and returning shows. In 2021, we produced over 350 episodes of content. Many of these are additional seasons of proven hits, which creates franchise value. Others are promising new projects, resulting from the purposeful investments we have made in our developments late over the past 2 years. Streaming platforms around the world are hungry for premium video content, as evidenced by the sales of Rust Valley Restorers and Big Timber to Netflix as well as the completion of our largest sales to date of 200 episodes of Corus Studios content to Hulu. In June, Nelvana celebrated an incredible 50 years as a globally recognized producer, developer and licensor of award-winning children's animated and live-action content. From its humble beginnings in Canada in 1971, Nelvana has produced over 4,800 episodes of programming that currently have or aired in over 180 countries and have earned over 70 major international awards, including Emmy nominations, most recently for Esme & Roy and live action series, The Hardy Boys. Nelvana's return to producing live action series is notable as we look to expand the genres in which we produce content to satisfy global marketplace demand and realize the returns from our investment in the creative development pipeline. We place the well-being and engagement of our people and the long-term sustainability of our business among our top priorities. This means we continue our focus on building a strong, purpose-led organization as we take meaningful steps to advance our leadership position in advertising innovation, expand our streaming business with unique offerings such as STACKTV and leverage our Corus Advantage to meet the robust international demand for Nelvana and Corus Studio's original content. This past year, we delivered successful diversification of our sources of financing, solid free cash flow and increased financial flexibility. We are actively pursuing our revised leverage target of below 2.5x net debt to segment profit to provide even more financial flexibility as we make targeted investments in growth opportunities and fund our attractive dividend. Last week, we announced the modification of our capital allocation policy with the addition of a normal course issuer bid that will enable us to buy back up to 5% of the public float of Corus Class B shares during the 1 year period outlined in our press release. Corus is well positioned to meet the challenges of a highly competitive industry through innovation, partnership and great content as our talented team has demonstrated time and again. Our team has a true passion for serving our local communities, and their dedication is inspiring. We are very proud to once again be recognized with the 2021 award from Waterstone Human Capital as one of Canada's most admired corporate cultures. In closing, as we look back at fiscal 2021 and take stock of where we are today, we have terrific momentum. We are confident that we have the right strategic plan and priorities that will deliver on our commitment to achieve consolidated revenue growth year over year over year. Thank you very much.

Thank you, Doug. Thank you, Heather. I think it's now appropriate to conclude the meeting. I want to thank everyone again for attending our virtual meeting today and for your ongoing interest in Corus. Operator, I will turn the call back over to you now.

Yes, ma'am. Thank you, and once again, that does conclude today's conference. And we thank you all for your participation. You may now disconnect.