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

Good afternoon. I would like to welcome everyone to the Corus Entertainment 2024 Annual General Meeting of Shareholders. I will now turn the meeting over to Ms. Heather Shaw, Executive Chair of Corus Entertainment. Thank you. Please go ahead.

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 prior years and an effort to continue providing benefits to shareholders in the form of increased efficiency, lower carbon footprint and ease of attendance, 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 procedure 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 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 are 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 will 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. Before I call the meeting to order, I want to invite Doug Murphy, President and CEO, to make a few remarks.

Thank you, Heather, and good afternoon, everyone. Please note our cautionary statement on forward-looking information on Slide 4 in this presentation and as posted on our website. I'll start on Slide 5. 2023 was a challenging year for our business, and we are excited to put it behind us. The last 18 months have presented us with numerous challenges, including a post-pandemic influence advertising recession, elevated required Canadian programming costs, Hollywood labor strife and macroeconomic uncertainty, resulting in a significant deterioration in our financial results. Our focus remains on what we can control and influence as we execute two distinct but interconnected strategies. Video First is our audience strategy to position the company for the future as we move beyond being a television broadcaster towards becoming an aggregator of premium video content across all platforms, linear, streaming and digital, while we concurrently build our cross-platform monetization capabilities. Fit for the Future furthers our efforts to capture operating efficiencies as we streamline our operating model and rationalize our asset base. We have made notable progress, and we are not done yet. Let me provide a few examples. Our board and executive leadership team have been reduced in size, and we have implemented workforce reductions of almost 15%. We have executed on efficiency initiatives to realize significant cost savings. We have changed our capital allocation policy to prioritize debt repayment. Our animation software business, Toon Boom was sold last August at an attractive valuation with the net proceeds of $141 million used to reduce our bank debt, improving our financial flexibility. We made tough decisions to discontinue certain Canadian productions, such as ET Canada and the New Reality to reduce costs this past fall. Last week, we released our Q1 results, highlighting that we are turning the corner on two significant headwinds. First, we'll finally revert to normal levels of acquired Canadian programming spending after two challenging years. Second, the longest Hollywood strikes in the modern broadcasting era have ended. Moving to Slide 6. At Corus, we are back in business with new scripted content as we prepare to launch a winning schedule backed by smart marketing investments to drive viewers across our Video First portfolio. The steady progress we are making expanding our digital and streaming platforms while concurrently building our advanced advertising and cross monetization platform capabilities is the right plan for Corus, it's the right plan for our audiences and the right plan for our advertisers. Our programming lineup with its top-performing returning hits with pre-existing fan affinity and new buzzworthy shows is designed to bring viewers back to global this winter and into the spring starting the week of February 12. Corus specialty and streaming services will also deliver standout new and returning series, including exclusive Peacock shows and our own Corus studio originals. Over to Slide 7. Corus is well positioned to benefit from the large and expanding total video addressable market. 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 broaden the scale of our advertising offerings without having to make bet the company type investments. Our focus on growing incremental premium digital video revenue remains front and center as we expand our streaming offerings to new audiences and platforms. New platform revenue represented 13% of total TV advertising and subscriber revenue in Q4 and 11% or $146 million for the full year. This is an important metric that tracks our progress in advancing our video-first strategy as we transform into a premium video aggregator with the cross-platform monetization capabilities. With last year's launch of Pluto TV alongside the existing Global TV app, STACKTV and our global news SaaS channels, we are delivering more than 7x the digital video ad impressions than just 2 short years ago. This gives us confidence that new platform revenue remains a significant opportunity in 2024 and beyond as adoption by audiences and advertisers grows. This is clear evidence of our video-first strategy in motion. Moving to Slide 8. In 2023, we 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 resulted in increased revenues in the international marketplace last year with major distribution partners such as Hulu, Netflix and others, a nod to our creative talent with big multi-season orders of our hit shows. On to Slide 9. We are taking prudent actions to ensure the resiliency of our company. Since 2018, we have repaid over $915 million of bank debt and improved our debt maturity profile. Last fall, we 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. Our results for fiscal 2023, as shown on Slide 10, were 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 last year, resulting in pro forma leverage of 3.62x. Finally, over to Slide 11. At Corus, we have 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. It is too early to pinpoint the timing of a recovery in advertising demand and revenues. On the one hand, we expect the return of new scripted programming to catalyze primetime marketing investments by our advertisers. On the other hand, the macroeconomic environment remains uncertain, while distortions related to post-pandemic normalization of many advertising categories persist, resulting in continued low visibility. In the meantime, we are steadfast in our effort to move beyond being a television broadcaster towards becoming an aggregator of premium digital video and building cost monetization capabilities to embrace the business model of the future. We have an intense disciplined focus to execute our strategic plan to be Video First and to achieve ongoing efficiencies to get fit for the future and reduce debt to improve our financial flexibility. We are doing all the right things to evolve our business, and we are excited to have our programming supply and required content spending normalize in the coming months. We would like to thank you, our shareholders, for your ongoing support as we ready Corus for an eventual Canadian advertising recovery, benefit from a reduced cost structure and advance our strategic plan and its priorities. I would like to thank the entire team of Corus people for their hard work, dedication and commitment. I would also like to extend my thanks to Heather Shaw, our Executive Chair; and our Board of Directors for their continued support and guidance. I'll now pass the meeting back over to Heather Shaw.

Thank you, Doug. We will now proceed to the official business of the meeting. I call to order this Annual General 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 27, 2023, and to each director and the auditors. The company's notice and management information circular and 2023 annual report has been posted by the company 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 2023 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 notice -- 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 scrutineers' report will now be read.

Thank you. The scrutineer, TSX Trust Company reports that there are 24 shareholders holding 3,261,228 Class A voting shares represented in person or by proxy at this meeting. This total represents 96.9% of the 3,365,526 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 last year's Annual General and Special 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 subject to 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 course, we will conduct the votes on the matters before us by a poll. On a poll, every shareholder entitled to vote on the matter has 1 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 to the Lumi platform on that 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, 2023, and the report of the auditors on them. Copies of these documents are included in the 2023 annual report made available to shareholders on the Lumi platform and on the meeting documents 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 resolutions and proceed with 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 to be elected as directors of the company.

Madam Chair, I am 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, Charmaine Crooks, Mark Hollinger, Barry James, Doug Murphy, Margaret O'Brien, Heather Shaw and Julie Shaw.

Are there any comments on this nomination? Hearing none, 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 nearly all of the proxies received by 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 have 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]