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

Good morning. My name is [ Laira ], and I will be your conference operator today. At this time, I would like to welcome everyone to the Corus Entertainment Q4 and Year-End 2023 Analyst and Investor Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I will now turn the call over to Mr. Doug Murphy, President and CEO of Corus Entertainment. Mr. Murphy, you may begin your conference.

Thank you, operator, and good morning, everyone. Welcome to Corus Entertainment's Fiscal 2023 Fourth Quarter and Year-End Earnings Call. I'm Doug Murphy, and joining me this morning is John Gossling, Executive Vice President and Chief Financial Officer. Before I read the cautionary statement, I'd like to remind everyone that we have slides to accompany today's call. You can find them on our website at www.corusent.com under the Investor Relations-Events and Presentations section. Now let's move to the standard cautionary statement found on Slide 2. We note that forward looking statements may be made during this call. Actual results could differ materially from forecasts, projections, or conclusions in these statements. We'd like to remind those on the call today that in addition to disclosing results in accordance with IFRS, Corus also provides supplementary non-IFRS or non-GAAP measures as a method of evaluating the company's performance and to better provide an understanding of how management views the company's performance. Today, we will be referring to certain non-GAAP measures in our remarks. Additional information on these non-GAAP financial measures, the Company's reported results, and factors and assumptions related to forward-looking information can be found in Corus' Fourth Quarter 2023 Report to Shareholders and the 2022 Annual Report, which can be found on SEDAR+ or in the Investor Relations-Financial Reports section of our website. I'll now start on Slide 3. With a look at our year-end results and then provide an update on the current environment and what we're seeing in the media marketplace. I'm using the term double-whammy to describe the twofold blow that we've been dealt in fiscal 2023. The first blow has been the meaningful decline in advertising revenues. The second has been a significant increase in required spending on Canadian programming. This 1-2 combination has resulted in a very challenging year for our company. Our focus remains on what we can control and influence. We are undeterred in the pursuit of our premium digital video growth initiatives. Our strategic plan and its priorities, reimagines our business beyond broadcast television towards our evolution into a multiplatform aggregator of premium video with cross-platform monetization capabilities. This is what we call our Video First strategy. In service of this Video First ambition, we are concurrently demonstrating a disciplined approach to streamline our operations and rationalize our asset base. This enterprise-wide cost review, which we call Fit for the Future has revealed meaningful opportunities to change the way we work and to better position Corus for the future. We are taking prudent actions now to ensure the resiliency of our company. We have proactively secured amendments to our credit agreement and further redirected our use of free cash flow to debt repayment, which will provide additional financial flexibility while we position Corus for the expected eventual recovery in advertising and program supply conditions. Against this backdrop, our results for the year are as follows: our consolidated revenues were $1.5 billion for the year. Total consolidated segment profit was $334 million for the year with free cash flow of $107 million. We reduced bank debt by $172 million this year, resulting in pro forma leverage of 3.62x. John will take you through the results for the fourth quarter and year in more detail in his remarks. Moving to Slide 4. The word distortion fittingly describes this very unusual post-pandemic environment we find ourselves in. The definition of distortion is the "Act of twisting or altering something out of its true natural or original state." Let me explain. Supply chain disruptions have affected and still affect companies producing goods and services. Labor shortages persist throughout the economy impacting industries everywhere as wage inflation challenges business models. Economists still debate the likelihood that we will avoid a hard landing and move from today's slow motion rolling recession to a top landing. Geopolitical tensions remain an unknowable risk to the markets and the economy. And now consumers themselves once purchasers of durable goods such as furniture, electronics, home renovation during the pandemic are now favoring the service economy by dining out, traveling and going to concerts. These same consumers are contending with high prices at the pump, increasing mortgage expenses and food inflation. Last summer, we began to see the effect of these distortions impact our clients' businesses with chief marketing officers cutting top of the funnel marketing investments to protect their margins. That's the macroeconomic backdrop. Now turning the dial to the entertainment and media industry where we've been dealing with the distortion field of our own. Let's briefly review what's happened in our industry. In recent years and certainly during the pandemic, all of the U.S. media and entertainment studios launched subscription video-on-demand products to offset declines and people viewing linear television. As interest rates increased, the challenging economics of the streaming industry became apparent, and we witnessed a pivot from a subscriber growth at all cost mentality be more of a disciplined pursuit of a path to profitability. On that path to profitability, these very same SVOD services now embraced advertising-supported video, launching advertising layers to grow their revenues and ARPU. In parallel, we witnessed the launch of free advertising supported streaming television, fast channels that successfully leveraged quality library programming cost effectively to grow online advertising revenues with no charge to audiences. So as the demand from the macroeconomic distortions weakened, the industry was creating a whole new supply of premium digital video impressions to monetize. Then midway through the broadcast year, the entertainment industry was distorted once again when the Writers Guild of America walked out on May 2, followed by the actors on July 14. The last time writers and actors were both on strike at the same time was in 1960. At that time, business models were changing and the unions wanted to get better residuals from movies that were now being broadcast on the television networks and new technology at the time. The actors strike now almost over 100 days -- that now over 100 days in length persist, although both sides have returned to the table this week. There remains uncertainty as to the duration of the strike, but across the industry, there is optimism about achieving a resolution by U.S. Thanksgiving. Writers' rooms are open. If that timeline is realized, we could then expect a full schedule by March, just in time for our second largest advertising revenue quarter Q3. In our first quarter, however, these strikes have caused all deliveries unscripted some cast content to stop. This significantly reduced our audience delivery during prime time, impacting advertising demand and revenues during what is our largest quarter typically. Over to Slide 5. The Fit for the Future initiatives demonstrate the hard work we are doing to streamline our operating model and rationalize our asset base. We have tenaciously implemented cost cuts and ongoing workforce structural reviews throughout the company to deliver reductions quarter-by-quarter as you find ways to work differently and improve productivity across all aspects of our business to lower our cost base. Let me give you a few examples. In the fourth quarter, we successfully completed the sale of Toon Boom, with net proceeds of $141 million used to pay down bank debt and rationalize our asset base. We have reorganized our sales team to deepen expertise and cross-platform selling. As we transform into an aggregator of premium video, our goal is to provide a seamless buying experience for our advertisers. We have streamlined our approach to content, introducing the expanded role of Executive Vice President, Networks and Content and eliminating the role of Executive Vice President, Content and Strategy. This consolidated role is accountable for the oversight of all programming investments for both Canadian and foreign program as we streamline our programming operating model and maximize our audience delivery across all platforms. We have made tough decisions to discontinue certain Canadian productions to reduce costs that will provide 2 examples. After 18 amazing seasons as our flagship entertainment news program, the difficult decision was made to wind down Canadian Screen award-winning entertainment news program, ET Canada. Equally difficult, we're shuttering the global news production, The New Reality, a new program launched during the COVID-19 pandemic. The New Reality answered the public's most pressing questions of the day during an uncertain time while looking forward to the future. Corus invested more in news at that time than other broadcasters were but not anymore. When we last spoke in June, we mentioned that our cost reduction efforts were translating into an almost 8% reduction in our workforce. Based on our current work, that number is now approaching 15%, and we continue to look at all other opportunities to reduce costs. Moving to Slide 6. Our rapidly expanding scale in digital video is creating exciting new opportunities for advertisers. With our investments in cross-platform monetization, we now deliver dynamic ad insertion across all streaming platforms, offering more targeted and effective solutions to clients. With last year's launch of Pluto TV alongside the Global TV app, STACKTV and our Global News fast channels, we're delivering more than 7x the digital video ad impressions than just 2 short years ago. This gives us confidence that the new platform revenue remains a significant opportunity for us as adoption by audiences and advertisers grows and as evidence of our Video First strategy in motion. In Q4, 13% or $33 million of total TV advertising and subscriber revenue was attributable to new platform revenues, while representing 11% or a $146 million for the year. Corus remains steadfast in our efforts to offer more targeted ways for advertisers to better reach their desired audience. We are extending our industry segments across all platforms, linear and digital like to improve our cross monetization capabilities. In Q4, 55% or $75 million of advertising revenue was optimized and 54% or $411 million for the year, which is an important step towards breaking out of the legacy TV trading model. And with that, I'll turn it over to John.

Great. Thanks, Doug. Good morning, everyone. I'm starting on Slide 7. Given the prolonged advertising market distortions and unexpected labor disruptions in our industry, as Doug has mentioned, this morning, we announced certain prudent actions to support our approach to capital allocation. This includes the suspension number of dividend and an amendment to our bank credit facility. We announced the suspension of our dividend to enable free cash flow to be redirected from dividends to debt repayment. We also announced a further amendment to our credit facility, which we proactively secured given the uncertain duration of the current macroeconomic conditions and the ongoing actor strike, which is impeding our program supply and impacting audience levels in advertising demand, as mentioned earlier and also as pointed out in our outlook. In February 2023, we had renegotiated the covenants under our bank credit facility to address the persistent headwinds in the economic environment and provide us with additional financial flexibility. But at that time, of the February amendment, the writers and actors' strikes were not in view. Today's amendment increased the maximum total debt to cash flow ratio permitted up to and including the end of the fiscal year, August 31, 2024, we introduced mandatory quarterly repayments of the term facility totaling 5% per annum, changed certain conditions related to the use of net proceeds on asset disposals and introduce additional restrictions on distributions to shareholders. Our intense focus on deleveraging is appropriate and necessary given the low revenue visibility and the uncertain outlook at this time. We continue to expect improvement in macroeconomic conditions and a resolution of the actor strike, both of which should have positive impacts on our TV advertising revenue in the coming quarters. Over the past 5 years, we have reduced our debt by $912 million and diversified our sources of financing, improving our debt profile to maintain financial flexibility. At the end of the fourth quarter, we were in compliance with all covenants and had $56 million of cash and cash equivalents and $286 million available to be drawn under our revolving credit facility. Our pro forma leverage at August 31, 2023, 3.62x net debt to segment profit reflects a significant repayment of bank debt of $172 million for the year, and that includes the net proceeds of $141 million from the sale of Toon Boom in the fourth quarter that were used to pay down the debt. As Doug noted, our Fit for the Future initiatives will continue to result in aggressive cost reduction measures, which are increasingly reflected in our financial results while maintaining focus on our long-term strategic objectives. All right. Now over to Slide 8, a review of the consolidated results. Advertising revenue in our fourth quarter was impacted by the ongoing challenges in the economic landscape compounded by the writers and actor's strike. This was largely offset by positive results from our content business, contributing to a relatively consistent Q4 consolidated revenue of $339 million. For the year, we delivered $1,511 million in consolidated revenue and increased -- sorry, a decrease of 5% from the prior year. Consolidated segment profit for the fourth quarter was $46 million and $334 million for the year, and that reflects the lower advertising and subscriber revenue together with the increased programming costs that we saw. This included higher Canadian programming expenditures, or what we call CPE of $5 million for the quarter and $11 million for the year, and that was partially offset by G&A cost saves that were identified as a result of our enterprise cost review. Consolidated segment profit margins were 14% for the quarter and 22% for the year. Net income attributable to shareholders for the quarter was $0.25 per share, and that includes the gain on sale of Toon Boom of $142 million, partially offset by noncash impairment charges of $100 million in the television segment and as a result of the continued contraction in advertising demand and the lower share price since May 31, 2023. The net loss per share for the year was $2.15, which includes the gain on the sales Toon Boom and noncash impairment charges totaling $690 million in the Television segment. We delivered free cash flow of $32 million in the quarter and $107 million for the year, and that reflects the impact of lower segment profit in both periods. All right. Let's turn to our TV results for the fourth quarter and the year, and that's on Slide 9. Overall, TV segment revenues of $314 million in the fourth quarter were consistent with the prior year. And for the year, revenues of $1.4 billion were down 6%. TV advertising was 10% lower in the fourth quarter, and it was down 11% for the year. The persistent challenges in the macroeconomic conditions contributed to significant contraction in advertising demand for both the quarter and the year. Subscriber revenue was down 1% in the quarter and declined 3% for the full year. Distribution production and other revenue grew a significant 46% for the quarter and 21% for the year, and that was driven by increased content deliveries from all of our content businesses, Nelvana and Aircraft Pictures and Corus Studios. Direct cost of sales was up 10% for the quarter and 7% for the year, and that's as a result of the increased amortization of programming costs, and that was driven mainly by a ramp-up in the Canadian spend as well as investments in U.S. studio output deals in the year and the increase in amortization of film investments, and that's driven by the higher production deliveries at Nelvana and Aircraft Pictures that we saw. Our effective CPE rate for the year was more than 35%, and that was driven by higher regulated revenue in the prior year and further exacerbated by the required CPE catch-up spending from COVID-related production shutdowns in 2020. This level of spending for the year was required under the terms of our broadcast licenses and came at a time where we experienced significant pressure due to many factors. Total general and administrative costs in TV declined 6% in the quarter and 3% for the year. Employee costs were down 6% and 4% for the quarter and the year, respectively, and other G&A expenses declined 5% and 1%, respectively. Overall, TV segment profit was down in the fourth quarter and year, primarily as a result of the situation with advertising, reduced subscriber revenue and higher amortization of program mites and some investments, partially offset by the aggressive cost controls. TV segment profit margins were 16% in the quarter and 24% for the year, and that compares to 19% and 31% in the respective prior periods. Looking ahead to the first quarter of fiscal 2024, we expect continuing macroeconomic uncertainty coupled with the impact of the extended writers and actor strikes, we expect television advertising revenue to decline in the range of 15% to 20% compared to the prior year. Amortization of program rights is expected to decline by a similar range due to lower programming deliveries. We continue to aggressively pursue a number of cost management initiatives in response to these factors. While we expect improvement in the economic environment in the medium term, our visibility remains extremely limited at this time. All right. Let's turn to our Radio results now on Slide 10. Fourth quarter results reflect revenue softness, particularly in entertainment, professional services, restaurants and telecommunications categories, that was partially offset by growth in categories such as retail and automotive. The full year results reflect the impact of the broader environment and on national advertising across all categories. Radio segment revenue decreased $0.8 million for the quarter and $3.1 million for the year as a result of lower advertising sales, partially offset by higher podcasting revenue. Radio segment profit increased $1.2 million and $0.2 million in the quarter and year, respectively, as a result of cost control measures. Q4 segment profit margins for radio were 12% and that was up from 7% last year, while full year segment profit margin was 13%, consistent with the prior year. It is a new fiscal year, and we are hopeful for improved visibility in the coming months. In the meantime, we are taking prudent actions as we navigate unfavorable market conditions. We are reducing costs, putting appropriate measures in place to maintain our financial flexibility, repaying debt and strengthening our balance sheet. This is all part of how we maintain a disciplined focus on the long-term health and stability of our company. We have tremendous operating leverage, which we stand to benefit from when these cyclical pressures eventually dissipate. And with that, back to Doug.

Thank you, John. Finally, over to Slide 11. Last week, the CRTC indicated that it is inclined to issue an order granting course, the interim relief we first requested in November of 2022. This relief would come after years of structural changes that have meaningfully impacted the whole broadcasting industry. The regulators statement last week was the most substantive move toward regulatory change that our company has seen in years, and we are encouraged by it. I won't get into the specifics of costs or timing right now as we will be working through this once the decision becomes final. However, P&I relief and a CPE underspend extension acknowledges the challenges and opportunities of the moment. It would provide the much-needed flexibility in our content planning and spending for the coming years by letting us focus more on producing the best content that drives our linear and digital businesses. Bill C-11 gets the big things right in its stated objective to level the playing field. We remain supportive of its implementation, but also note that more comprehensive regulatory reforms are still urgently needed additional contributions from forward-owned streaming platforms must result in permanent reductions in Canadian broadcast with overall Canadian programming expenditure requirements. Our focus is on navigating this unusual environment while delivering strong execution of our strategic plan and its priorities. We will continue our work on our Fit for the Future initiatives focusing on improving productivity across all aspects of our business to lower costs. Our programming and sales teams are ready to quickly pivot with a great lineup of returning hits a new shows on our spring schedule once the actor strike is resolved. In the meantime, our work continues as we move beyond being a television broadcaster to becoming an aggregator of premium digital video and building cross monetization capabilities as we embrace the Video First business model of the future. With that, I'll turn it back to you, operator, for our questions.

[Operator Instructions] Your first question comes from the line of Adam Shine from National Bank Financial.

So Doug, I will push you obviously on the CRTC relief. We'll hear more about that, I guess, in due course. But can we pivot to the size of the cost cuts as you alluded to, I think it was about 250 positions that had been eliminated in the context of the near 8%. Can you just speak a little bit more to the nearly 15% restructuring amount of savings that this could involve and when most of that might start to hit in F 2024 and then perhaps we can pivot next to John on any details around the amendments, but I can elaborate after.

It was like a qualitative comment. John can touch on the quantitative. So we're -- this is sort of an ongoing quarter-to-quarter analysis. We're doing it all across all aspects of our business. We announced a number of quarters ago, our enterprise-wide cost, which we've now named Fit for the Future work. And so you're seeing the numbers showing up now in our G&A and sales and benefits line. And I'll just underscore the fact that we're not done this work yet. It's critically important as a countermeasure to the uncertainty on the revenue outlook that we manage what we can control and influence, and that's specifically our expense lines.

Yes. Adam, back to my remarks. Employee costs in TV were down 6% in the quarter, and that's been accelerating through the year. I'd say going forward, Doug mentioned a couple of the shows that we had to take down. Some of those costs are going to show up in program amortization as well. So we'll try to bundle that going forward, so we get a complete picture of it because it will be across different lines in our reporting starting in Q1.

And just on the amendments, I think you were stepping down on the covenant to 4.5x in Q1. Obviously, there might be some related adjustments over the next couple of quarters. Are you able to give us any sense of how the covenant metric has been updated?

Yes. Look, the pattern that we've amended to as of today is very similar to what we did back in -- earlier in the year. It's just extending that relief. So the pattern has us staying at the higher level through Q3 and then it starts to step down in Q4. So it's really, I guess, effectively an extension of another 3 quarters with the first one -- sorry, with Q1 this year being slightly higher than it was going to be.

Got it. Okay. I know where you're heading with that. Understood. Maybe just one last one for you, Doug. Just as we kick into the new year and the scramble that all broadcasters need to pursue in regards to sub new products, some repeats, sub international product. Could you speak to how the Frankenstein schedule has come together and how advertisers are effectively reacting to this? Is it a wait and see? Is it any particular commitment in pockets of the schedule?

First I'm impressed with your seasonal Halloween Frankenstein comment, you sound like a program ahead. So a couple of things. First off, as I mentioned in my comments, the writers' rooms are all open now. So all the studios are just cranking on getting the scripts completed for the episodes of comedies and for the drama. So that's super encouraging. The -- as I said also, the consensus, generally speaking, or at least the opinions of our friends south of the border is that we should get resolution effectively before the U.S. Thanksgiving. And once that begins, then we understand that the comedies will be quicker to be completed and then the dramas. The returning shows will come a lot faster than the pilots and the new shows, that's pretty logical. Luckily for us on our schedule, we have a lot of returning shows. So we're cautiously optimistic that the third quarter, we should have a full schedule and we'll move beyond the Frankenstein schedule to a very strong showing in our second highest quarter. As for the advertiser demand, you're right. At the moment, people are waiting to see what's going to happen out there with the audience delivery. We've seen these strikes in the past, the return to a full schedule usually brings with it a very significant reinvestment in marketing dollars once the schedule is locked. So we are, again, expecting the same outcome once we can get closure and resolution on the active strike.

Your next question comes from the line of Vince Valentini from TD Cowen.

First, I'm going to go back to the debt covenants, John. First, on the mandatory repayment, at 5% of the principal per year, that's like $17 million, if I'm correct?

Yes, debt.

Almost like why even bother, you're paying down way more than that anyway. Is there any reason why it wouldn't be much higher than that?

Well, you're right. The plan is to repay more than that. So that takes us back to where we had been a few renewals to go. And look, I think it's part of a total package that we took to the bank syndicate and that was a piece of it. So -- but you're right, I don't feel like that's going to be particularly onerous on us because we were planning to do that anyway.

Okay. So I just want to make sure it's not like 5% of what the original principle was 3 or 4 years ago, it's 5%...

No, no, no. No. And if you look at -- we've actually pro forma-ed the debt maturity ladder on Slide 7 of the presentation. So you can see where that $17 million number pops in between '24, '25 and '26 before we get to the maturity in '27.

And not that you're not going to generate $17 million free cash flow anyway, plus you've got cash. But just for technical purposes, and there's a lot of people following the bonds now as well as the equity. What is the ability to use the revolver to pay down bank debt if it seems a bit strange to me that you take from one bank pocket and put it in another bank pocket and they would characterize that as being adequate. Are you allowed to do that or is the revolver untouchable until the bank loans are paid down?

No, no. The revolver is subject to availability based on the leverage. So we quote every quarter what the available amount of the $300 million revolver is, I think it was $285 million or $286 million this quarter. So the revolver has that cap on it, but that's just the leverage cap. You're right. That's not something that we would want to do, but the revolver availability and what it can be used for is sort of a separate thing. So yes, the revolver is still there.

And any update on tie these 2 together. Other asset sales processes and then the ability to use those asset sales to buy back your bonds that are now at even lower levels than the last time we talked about it. You can't use all the proceeds it sounds like, given the new bank covenants, but can you use some of it if you're able to sell any of your noncore assets?

There's an availability that's quite de minimis under the revised package that we can use asset disposal proceeds or we don't need to apply them to repay the term loan. But that's more designed for things like smaller asset sales and surplus pieces of land or vehicles or things like that. So at this point, anything that's material would be swept into the term loan.

So you basically have to get the term loan to 0 before you can take advantage of where the bond price is now?

I don't think that's quite the way the timing works, but we can get a little more specific on that, if you'd like. I just don't have the full amendment in front of me.

And just -- Adam asked, but I mean, we haven't seen the filing yet. I don't think it's there. It's going to be there, though, we'll be able to see the impact ratios every quarter. Can you not just lay out the next 4 quarters? Is it 4.5x maximum Q1, Q2 and Q3 and then drops to 425?

No. Where we had taken them to back in earlier in the year was 475 each quarter, then -- well, it ramped up to 475 then it came down to 450 in Q1, and then we went back to 425 which is the sort of back to normal, if you want to call it that. So what we've done is we've pushed it back to 475 through Q1, Q2, Q3, and then it starts to ramp down to 450 in Q4 and then back to 425 million for the start of what would be our fiscal '25.

Okay. Separate topic. Probably still for you, though, John. I'm not quite sure I can reconcile the amount of money spent on programming in the fourth quarter. The cash spend was $180 million versus $161 million in Q4 last year, and the amortization was only $140 million, so the cash then was way above the amort. How did you spend so much money when everybody was on strike and there wasn't plus it's a seasonal slow period in Q4 for deliveries anyway. Is that just a lot of the CRTC catch-up stuff that disappears as soon as we get into fiscal '24 or is there something else unusual on that?

No. I'd say it's more -- it's absolutely not just a bit more. It's absolutely a case of what was happening last year. So this year, I'd say it was a bit more normal. And last year, if you look at how the whole year played quarter-by-quarter in '22, it was actually quite a bit lower in Q4 than it should have been. And you saw that come through in Q1 actually of '23. So the increase we're just talking about the cash here not the net is primarily timing related to some of our big output deals. Those are U.S. That's the big chunk of it. Canadian cash was actually down a little bit in Q4. So it's not due to the catch-up, where we feel bad largely. Some of that was earlier in the year, but the output timing is what's doing it to us. And again, I mean, we've talked about this before. The way that we are invoiced for some of these deals is very erratic. And we'll get no invoices for 2 quarters, then we'll get 3 quarters all at once. And that's completely beyond our control, but of course, we're going to pay our bills. So that's our frustration. I know it creates frustration for you trying to understand what's going on and forecast this. But unfortunately, for whatever reason, it's just not a steady stream.

Okay. So -- but based on what you just said, Q1 of '23 had jumped back to more normal levels. So you now have an easier comp in Q1 of '24. So if amortization is down 15% to 20%...

For sure, right...

Cash outflow would be that same amount in Q1?

Well, especially since most of the programming reductions we're seeing are global prime time, and those are on pay-per-play pricing. So that means that if we don't get delivery, we don't pay for them. And that's on a relatively short fuse in terms of the cash. So absolutely, like that will get us relief on cash in Q1 that's similar, I would say, to what's happening with the amortization. Again, subject to the variability on the way the outputs get invoiced and paid. But I think your main point is bang on, which is bad amor reduction will result in a cash reduction.

That's when which, we will allow Doug to speak. The 15% to 20% down on TV ad revenue in the first quarter, is there any way to roughly break that down as to how much of it is just not having an inventory of impressions because you're not getting the programming versus how much of it is just the lack of advertising demand for impressions that you do have?

It's a good question. And feel free to keep asking John questions too, if you want, Vince. The -- I would say it's kind of sort of 50-50. So let me to kind of pick a lane. Clearly, not having a full schedule for the highest quarter of demand is going to give you a pretty significant inventory issue. On the flip side, and as I tried to explain with my many kind of distortions theme, yes, there's just so much noise out there in terms of the advertising marketplace and uncertainty. So there's -- even within categories, there's massive variability. Some CPG players are heavying up and others are -- they're long gone and waiting. And some of that's a function of trying to establish brand positioning, we have designed advertising, strategically investing when your competitors aren't. But some of the reasons why the competitors aren't advertising because they're having inventory and packaging issues getting goods on shelves over-the-counter medicines, et cetera. Those -- every single category has similar type issues. Even autos, for example, which is a growth category at the moment, is growing more significantly south of the border than it is in Canada. Why? Well because most of the inventory that's coming out of the plants is going to the states and not coming up to Canada. So days of supply on lots in Canada are still significantly lower than what dealers would like to have. And now of course, with the walkouts in UAW, that's further complicating it. So I guess, speak for hours on a category-by-category basis as to what the noise is happening here. And so it's all those factors that are on the top line as well.

So let me ask one final one then, Doug, if the schedules are back to normal by your fiscal third quarter, as you aspired to, I know you don't have perfect certainty on the actor strike that nobody does. But if you had a full schedule in Q3, and assuming there's some stabilization in the economy and some of these disrupted ad categories come back to even close to normal. It's not going to be anybody's forecast on the street, to be clear. But just in terms of a blue sky scenario, is there any reason you can't get like double-digit advertising revenue growth in the third quarter off of a minus 12% comp in the prior year and all the shows coming back. If things all worked out, is that even remotely possible? Or has there been some structural change in the business that you'll never get back to what's been lost in the past year?

I don't know if I go down to the path of double digit. I think we could -- I think there's reason to expect a stronger quarter, relatively speaking, in Q3 versus last year should we have a full schedule. But even today, what we're doing is we're being conservative in our outlook and not assuming meaningful year-over-year growth. I think it's important for us at this stage to be conservative in our outlook and refocus on what we can control, which is the expense part of the equation.

Your next question comes from the line of Drew McReynolds from RBC.