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

Thank you. You have heard the motion. Are there any comments on the motion? Seeing none, the next item of business is to consider, and if deemed appropriate, approve a resolution approving the company's amended and restated stock option plan in accordance with the requirements of the Toronto Stock Exchange, all as more particularly described in the circular. I have been advised by the scrutineer that all of the proxies received by management prior to the meeting have been voted for the approval of the amended and restated stock option plan. May I please have a motion that the resolution relating to the amended and restated stock option plan be approved.

Madam Chair. I'm Kathy Rosen, and I move that the resolution approving the amended and restated stock option plan, the full text of which is set out in the management information circular be approved.

Madam Chair. I am John Gossling, and I second the motion.

Thank you. You have heard the resolution. Are there any comments on the motion? As there is none, final item of business is to consider and if deemed advisable to approve a resolution ratifying and approving the unallocated entitlements under the company's amended and restated stock option plan for the next 3 years in accordance with the requirements of the Toronto Stock Exchange, all as more particularly described in the circular. May I have a motion that the resolution relating to the ratification of unallocated entitlements be approved.

Madam Chair, I am Kathy Rosen, and I move that the resolution approving the ratification of the company's stock option plan entitlements, the full text of which is set out in the management information circular be approved.

I'm Chair, I am John Gossling, and I second the motion.

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 boats 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. We will be closing the polls on all motions shortly. [Voting] The polls are now closed with respect to voting on all of the motions. Our scrutineers confirm that all votes have been counted. The preliminary results of voting are as follows: Our scrutineer has confirmed that all 12 persons named in the 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 confirmed that the motion to appoint Ernst & Young st & Young LLP as auditors of the company to hold office until the next Annual Meeting of Shareholders or until the successor is appointed, that the directors be authorized to fix their remuneration has been carried. Our scrutineer has confirmed that the special resolution approving the reduction in the stated capital of both the Class A and Class B shares as more particularly described in the circular, has been carried. Our scrutineer has confirmed that the resolution approving the company's amended and restated stock option plan, as more particularly described in the circular, has been carried. Our scrutineer has also confirmed that the resolution ratifying and approving the unallocated entitlements under the company's stock option plan for the next 3 years, as more particularly described in the circular has been [ cured ]. 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 on the company's website, and we will 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 thank 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 the attendees for your time and attention. I will now turn the meeting over to Doug Murphy, President and CEO, for concluding comments. Doug?

I'd 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 17 in this presentation and as posted on our website. We ended our fiscal year and first quarter on a mixed note. On the one hand, we are pleased with the progress we've made in advancing our long-term strategic plan and its priorities. On the other hand, as discussed on our Q1 call last week, we are in an advertising recession. Decrease in advertising revenue is the logical result of companies trying to manage their profitability as they contend with inflation induced cost increases and the impact of supply disruptions on their businesses. One of the first choices companies make to reduce cost is to cut discretionary spending such as advertising. At this time, we do not know the depth nor the duration of this economic contraction. Based on our prior experience, when in the early stages of a recession, the broader media industry experiences abrupt declines in advertising revenues followed by an equally quick recovery once the economic contraction subsized. The Chorus we've experienced advertising recessions and economic slowdowns before, and we are confident in our ability to manage these headwinds while at the same time, executing our strategic plan. This long-term strategic plan remains unchanged. We are focused on transforming how we sell media. We are putting more content in more places, and we are investing in our owned content business. Let me spotlight some of the opportunities ahead. Corus is well positioned to benefit from the large and expanding total video addressable market for advertising. We are optimizing our fan favorite linear channels while simultaneously pursuing streaming opportunities in the growing premium digital video marketplace. Our capital-light partner-led direct-to-consumer strategy enables us to reach more audiences in new ways and broadens the scale of our advertising offerings without having to make best the company type investments. Product of our plan in action this past year and into Q1 include the successful renewal of all of our largest content supply deals comes with the term extensions and broadened rights grant to support our growth initiatives in premium digital video. We delivered a company milestone with our highest ever recurring subscriber revenue result at $518 million for fiscal 2022, given the still meaningful linear channel business further accentuated by the strength of STACKTV. We improved the value proposition of STACKTV by adding our suite of Disney channels as well as lifetime, now offering a total of 16 premium Corus channels. Corus and Paramount Global celebrated the launch of Pluto TV in Canada on December 1, with over 117 channels and more than 20,000 hours of free content, including our 24/7 global news feed and content from across our family of brands. We launched TELETOON Plus, a new premium kids and family SVOD streaming service and we expanded our authenticated content offering on the Global TV app as well as on a STACKTV, both now including more back seasons of big network franchises like NCIS and FBI, to name a few. Two years ago, we introduced revenue performance metrics designed to highlight our progress in putting more content in more places and transforming how we sell television. In our first quarter, we highlighted these results. Our new platform revenue of 10% of total television advertising and subscriber revenue reflects the progress we are making in rapidly growing streaming platforms and digital video advertising markets. Our optimized advertising revenue metric represented 55% of total television advertising revenue in Q1, which was a new milestone as more advertisers discover the benefits incorporating more targeting and automation in their campaigns. We have made meaningful progress expanding our studio offerings with a strong slate of shows from Nelvana and Corus Studios and adding new and complementary genres with the addition of aircraft pictures and waterside studios. This expanded slate of content has resulted in increased revenues in the international marketplace. Major distribution partners such as Hulu, Netflix and others, a nod to our creative talent with big multi-season orders, our hit shows. Our consolidated revenues were up 4% for the year at almost $1.6 billion, with revenue growth in advertising, subscriber and our content business for the year. Total consolidated segment profit was $444 million for the year with free cash flow of $240 million. Despite the impressive progress we made in the first 3 quarters of the year, delivering on our growth narrative. We reversed Corus in the fourth quarter, and that, coupled with higher amortization of programming rights has affected our profitability, and this has persisted into our first quarter. Our new capital allocation policy was introduced in September 2018, and since then, we have demonstrated a commitment to reducing bank debt as well as laddering out our debt from a term perspective with the issuance of 2 long-term high-yield notes. Just over 4 years, we have repaid over $700 million of bank debt, which -- and that, combined with our dividend and share repurchases, has returned to you, our shareholders, a total shareholder yield of $958 million. Recent macroeconomic challenges have impacted advertising revenue and in turn EBITDA with a resultant increase in our net debt to segment profit ratio to 3.3x -- 3.38x, excuse me. As we manage the near-term impact of the advertising recession in F '23, our long-term goal is to reduce net debt to segment profit to below 2.5x. For more than 2 decades, Corus has supported a broad range of what is now referred to as ESG initiatives. Our commitment to being a more sustainable company is outlined in our inaugural 2022 sustainability report. Our ESG goals that reflect people, planet and responsibility will be an integral part of how we deliver against our strategic and financial priorities, build resiliency and demonstrate our ongoing efforts to make Corus a great place to work. Full report is available on www.corusent.com under the Sustainability section. While we are firmly of the view that we are in an advertising recession, our expectations are that we will see sequential improvement in the rate of our advertising revenue decline as we progress through the coming quarters. We are conducting an enterprise-wide cost review that is looking at all expenses and operations with a view to streamline our operating model. In addition, we have a multiyear $50 million Canadian programming expenditure catch-up burden mandated by the CRTC from when programming was shut down at the beginning of COVID in fiscal 2020. This has introduced near-term programming cost pressure to our business, but it will pass. And when it does, we expect to see approximately $20 million of recurring cost savings. The immediate term challenges will not deter us from our purposeful execution of our strategic plan. Our owned content business will reap the rewards of our increased investments in the content slate with growth in episodic deliveries expected from Nelvana, Corus Studios and aircraft pictures in the coming quarters. We have made smart investments to renew, extend and broaden the content rights we acquired from our U.S. studio partners that will ensure the resiliency of our channels business. Our streaming portfolio now includes STACKTV, the Global TV app, the Global News over-the-top offerings, 14 of them, the TELETOON Plus and the newly debuted, Pluto TV. Our leadership team at Corus and all of our people have definitely managed through difficult environments before. We have a strong track record of prudently managing our business and expenses while maintaining focus on positioning Corus for the future by investing in the business, delevering our balance sheet and providing returns for our shareholders. We are confident in our long-term plan and in our team. Thank you. I'll now pass the meeting over to Jennifer Lee.

Okay. Thank you. I think it is appropriate now to conclude the meeting. Thank you all again for attending our virtual meeting today and for your ongoing interest in Corus. With that, I'll turn it over back to you, operator.

Thank you. The Annual General and Special Meeting of Shareholders of Corus Entertainment is now closed. You may now disconnect.