Freehold Royalties Ltd. (FRU) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the Annual Meeting of Shareholders of Freehold Royalties Ltd. I appreciate the good turnout we're getting today. I'm sure this beautiful Calgary Spring Day that the golf course was calling, but you made a much better decision. So let me thank you for attending today's 2024 Annual Meeting. My name is Marvin Romanow, and I am the Chairman of Freehold's Board of Directors. For the past 3 to 4 years, your Board is focused on improving the talent level and execution capacity at the senior management level. The capability and success of this transformation and the strength of our team shows in the results we have delivered for shareholders. David Spyker, our CEO, was appointed 3.5 years ago and we'll discuss these results in a few minutes. The Board has also turned its attention to overseeing the expansion of our business into the resource-rich oil and gas basins of Texas. This expansion is making our company better in numerous dimensions and most importantly, in providing multiple years of drilling inventory and associated reserves that complement our Canadian asset base. We have also kept a keen eye on both Board and corporate governance. We have taken steps to reduce our cyber risk. We have improved our governance scores provided by the key external rating agencies that rate us. And through this, we have also improved our environmental and social governance performance. These are relatively new areas of corporate ranking, and we score well on both of these fronts. Now good corporate governance can't guarantee strong operating and financial results. Your Board takes a practical and applied approach to governance, while primarily focusing on delivering the business results that investors expect and deserve. Today's meeting marks the 28th Annual Meeting for Freehold. Through the volatility of our industry, we take pride in the consistent returns freehold has provided our investors over its history. We have paid a monthly dividend for the past 28 years, and we haven't missed a month, a rare accomplishment in our industry. I will now move on to the more formal part of the meeting, but before I do that, I would like to advise you that this meeting is being webcast and all the references in my comments and in the slides are Canadian dollars unless otherwise noticed. For those attending the AGM for the first time or for those new to Freehold, I would like to introduce our executive team, and I'd ask each of you to stand when you're introduced. David Spyker, President and CEO; Rob King, Chief Operating Officer; David Hendry, Vice President of Finance and CFO; Lisa Farstad, Vice President, Corporate Services; Ian Hantke, Vice President of Diversified Royalties, and Susan Nagy, Vice President, Business Development. For the purpose of the meeting today, voting on all matters except for termination of the meeting will be conducted by ballot. I would also like to introduce standing for election today, all of our directors. Please stand as your name is called. Gary Bugeaud. We're not going by height. We're going by alphabetical order. Maureen Howe, Douglas Kay, Kimberley Lynch Proctor, Valerie Mitchell, myself, Marvin Romanow, Mathieu Roy related to the goalie, but you can talk to him later about that. David Spyker, who is also President and CEO of Freehold, and Aidan Walsh. I would also like to introduce the representatives from KPMG, our auditors, Heather Steinley, right at the back, and Lindsay Phone right next. I would like to recognize Sylvia Barnes who is not standing for reelection to the Board at this meeting. We thank Sylvia for the many contributions she has made to the company. Peter Harrison will also not be standing for a reelection and will retire from Freehold's Board of Directors. Mr. Harrison is a founder of Freehold and has been a Freehold Board member since its initial public offering in 1996. There are very few people in town here who get to tag founder besides their name. And we do not hold it against Peter, that he still resides in Montreal. We think he brings enormous capability and has done a wonderful job for the company. He has been instrumental in the growth and success of our company. And we have to thank him and want to thank him for everything that he has contributed to Freehold over the past 28 years for his very hard work, his wisdom and his leadership throughout his tenure on the board. Peter, I will miss your steady, positive and practical approach to managing businesses. We wish you all the best in your retirement. Maybe he'll relocate to Calgary in his retirement. He's been here enough times. Standing for election today for the first time are Kim Lynch Proctor and Mathieu Roy. Ms. Lynch Proctor is an independent businesswoman and an experienced tax lawyer, accountant and executive with over 25 years of industry experience. Her prior roles include Chief Financial Officer and General Counsel of KERN Partners Limited, an energy-focused private equity firm and a practicing lawyer and chartered professional accountant with Felesky Flynn, Bennett Jones, and Deloitte. Ms. Lynch Proctor holds both a Bachelor of Commerce and a Bachelor of Law degrees from the University of Calgary, a Master of Law degrees from New York University and is also a chartered professional accountant. She holds an ICD designation from the Institute of Corporate Directors. Welcome. Mr. Roy is the Managing Director of Real Assets at CN Investment Division. I'm sure that I have not yet met his counterpart who is managing unreal assets at the pension fund, but you can ask Mathieu about that later. He has over 20 years of experience in capital markets, including 16 years at the CN Investment Division, and he's recently just taken on more responsibilities, including ourselves and a few other things. So we look forward to his participation on our board. He has been attending meetings as a guest for the last little while. So he's not going to get any benefit of training wheels. We expect him to contribute from day one. Mr. Roy holds a Bachelor and Master's degree in finance from the University of Sherbrooke and he is a chartered financial analyst. Kim and Mathieu will be key contributors to the growth of Freehold for many years to come, and we appreciate them standing for election today. And we are a company with a lot of stability. Just yesterday, I learned that in our 28-year history, we've only had 4 CEOs and 3 Chairman. And I think that is a remarkable amount of stability, and I think it's part of what's delivered the performance that you're going to see Dave talk about. Okay. Now we move to the start of the formal part of the meeting. And to make best use of our time, we have prearranged with certain shareholders attending today to move and to second the resolutions, which we'll consider in one motion today and which are set out in the notice of meeting. Other than the election of directors, all matters will be considered and will be put to a vote by a single motion. Shareholders will though be able to vote on each of the matters separately by ballot. If you have already sent in your proxy, your vote has already been counted, and you do not need to vote at this meeting. We ask that questions during this formal part of the meeting refer only to the matters set out in the notice of meeting. Following this formal part of the meeting after we adjourn it, David Spyker will be making a presentation, including with very colorful slides to update you on our business results and our strategies. He and I will be happy to answer any additional questions at that time. The meeting will now come to order. I am the Chairman of Freehold and will act as Chairman of the meeting. Brianna Guenther at the far right there, my right, and representatives of the Computershare Trust Company of Canada will act as scrutineers. I have received a sworn affidavit as to the meeting of notice of Annual Meeting of Shareholders -- of the mailing of the Notice of Annual Meeting of Shareholders, the information circular, the instrument of proxy and the annual report to shareholders. I direct that this sworn affidavit together with copies of the documents mailed to the shareholders be kept by the Secretary with the minutes of this meeting. A quorum for a meeting of shareholders of the corporation is 25% or greater of the outstanding common shares present in person or by proxy. There is a quorum today, and in excess of 49% of the shares have been voted by proxy. The interim scrutineer's report indicates that a majority of shares have voted and have voted in favor of each of the matters to be considered at today's meeting, including the election of each of the director nominees. I now declare the meeting to be regularly called and properly constituted for the transaction of business. We will now move to voting. We will conduct each vote by way of ballot other than termination of the meeting. I understand that the scrutineers have collected all the ballots. And if you have a ballot, please provide it to the scrutineers now. The annual financial report to shareholders, which includes the financial statements of the corporation for the fiscal year ended December 31, 2023, and the auditor's report for the same period was mailed to those shareholders who requested it. There are extra copies of the report available here today. They are also available on Freehold's website as well as on SEDAR+ website. As noted earlier, to make best use of our time, I will be asking for a motion to consider and, if not appropriate, approve certain of the remaining items of business set forth in Freehold's notice of Annual Meeting and Management Information Circular. However, before doing so, I will speak to the nomination and election of the directors of Freehold. According to the governance agreement between Freehold and Rife Resources. Rife is a wholly owned subsidiary of CN, Rife has the right to nominate 2 individuals for election as directors. Rife has nominated Mathieu Roy and David Spyker for election as Directors of the corporation. In accordance with this governance agreement and the advanced notice bylaw of Freehold, the only individuals entitled to be nominated as directors at this meeting are the persons named as nominees in the information circular. Therefore, as directed by the Board and in accordance with the notice of meeting and information circular, these persons, Gary Bugeaud, Maureen Howe, Douglas Kay, Kimberley Lynch Proctor, Valerie Mitchell, Marvin Romanow, Mathieu Roy, David Spyker and Aidan Walsh are hereby nominated as directors at Freehold or directors of Freehold to hold office until the next annual election of Directors or until their successors are elected or appointed, subject to the provisions of the Business Corporations Act and the bylaws of Freehold. Is there any discussion or question from any registered shareholder or proxy holder? The rule of thumb I use at meetings when I ask questions like this is 8 seconds. And 8 seconds can be a long time. Okay. We've got our 8 seconds in. I declare those nominated as duly elected directors of Freehold. Particulars of the votes cast on the election of directors will be available via a news release after the meeting. I will now ask for a motion to approve each of the remaining items of business set forth in Freehold's notice of Annual Meeting and Management Information Circular.

Mr. Chairman, I move that the firm of KPMG LLP chartered accountants be appointed auditors of Freehold until the next annual meeting or until their successors are appointed and that the resolution set forth in Freehold's information circular regarding Freehold's approach to executive compensation be approved and adopted.

Mr. Chairman, I second the motion.

Is there any discussion or questions from any registered shareholder or proxy holder. I have been advised by the scrutineers that each of the matters considered today have been approved by the requisite majorities. I direct that the scrutineers report be annexed to the minutes of this meeting as a schedule. As mentioned earlier, the results of the votes will be made available in the news release to be issued by Freehold and in the report of voting results to be posted on SEDAR+. Unless there are any questions of the floor, I would entertain a motion that the meeting be terminated. Give me a few seconds, Dave.