GTN Limited (GTN) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the GTN 2020 Annual General Meeting conference call. [Operator Instructions] Please be advised that this conference is being recorded today. I would now like to hand the conference over to your speaker today, Mr. Rob Loewenthal, the Chairman. Thank you. Please go ahead.

Thank you. Good morning, ladies and gentlemen. I'm Rob Loewenthal, the Chairman of GTN. On behalf of GTN Board, I'd like to welcome you here to our Virtual 2020 Annual General Meeting. A quorum is present, and I declare the meeting open. We are joined today by GTN's Board of Directors and senior executives, including the founder and CEO, Bill Yde. The COVID-19 pandemic has had a significant negative impact on both the global broadcast media industry and our business. GTN advertising revenue declined by 13% in financial year '20. Given the company's high fixed cost business model, the decline in revenue caused a 62% decrease in adjusted EBITDA. Despite the high fixed cost nature of the business, we were able to identify some material cost savings, including the nonrenewal of the Nine Radio contract, which had an immediate positive effect on EBITDA. The company has not required additional capital and will continue to weather the pandemic with its strong balance sheet and low level of net debt. The Notice of Meeting includes 6 items of business that I will discuss when we move into the formal part of the meeting. But before that, I will make some general observations about the previous financial year and the current financial year-to-date. Then Bill Yde will provide us with an update and business outlook. I will then return to open the formal proceedings. Revenue grew 1.4% in the first half of financial year '20 and was on track to achieve solid growth in the third quarter until COVID-related cancellations occurred in March 2020. Despite this loss of revenue, third quarter revenue still increased by 4% compared to the previous corresponding year, leading to a 2% increase in revenue for the 9 months up to 31 March 2020. Unfortunately, the pandemic, including lockdowns in most of our markets, led to a 57% decrease in revenue for the fourth quarter and a 13% decrease in revenue for the 2020 financial year. The company has a good track record of generating cash from its operations and the first 9 months of financial year '20 were no exception. During this period, over $16.7 million was returned to shareholders in the form of dividends and share buybacks. Revenue for the first quarter in financial year '21 was down by 33% compared to the previous corresponding period, an improvement over the quarter ending 30 June. The first quarter adjusted EBITDA in the current year was negative $1 million, and the current quarter is trending towards a positive EBITDA result. Finally, I'd like to thank the executive team, led so ably by Bill Yde who responded quickly to the pandemic. The team immediately rolled out global business continuity plans and successfully renegotiated the debt facility on favorable terms. The Board is confident in Bill's ability to navigate the current challenging environment and is pleased to announce that Bill has returned to live in Australia and will lead the local recovery alongside our seasoned sales staff. And for those of you on the meeting, Bill just got out of the hotel quarantine about 2 hours ago. So he's here with us in the meeting room at the offices of Link. The Board has, in my view, a good balance of experience and the skills required for a strong governance and local industry knowledge. We recently appointed Peter Tonagh to the Board of Directors. Peter has a great deal of experience with major media companies in Australia, including Foxtel and News Corp. We look forward to his insights as we deal with the uncertainty brought on by the COVID-19 pandemic. Most importantly, I'd like to thank shareholders for your ongoing support. It is very much appreciated. You've been supportive of the company, and we never lose sight that you are the owners of GTN. I'd now like to introduce our CEO, Bill Yde, who will provide an update on each of the group's operating divisions.

Thanks, Rob, and thank, everybody, for joining us today at our Annual General Meeting. As Rob said, this has been a very unusual year. We were headed in a direction of a very solid year of growth for us in virtually all of our major operating countries and the pandemic hit and created massive instant decreases. In short, we made a lot of cost cuts where we could. Many of them didn't start until the new fiscal year. We made significant cost cuts. And we have put the company back on a path to being EBITDA positive. We continue to have a strong balance sheet and we're well positioned to endure the COVID crisis for however long it takes and return to solid profitability. If you turn over to the presentation on Page 6, kind of the highlights of 2020 are there. And the key takeaways from this slide are that revenue was up 2% through the 3 quarters despite millions of dollars of cancellations, which started occurring late in March of that year. We're really on pace to have a very good year in all 4 of our operating entities, having great success. The profitability declined, obviously, because with massive declines in revenue and us having a high contribution margin, it was going to decrease. But regardless of the big decreases, we've maintained a strong liquidity position with a lot of cash and a very low TGR ratio of 0.52 at June 30. If you flip over to Chart #7 in your presentation, this is our balance sheet at June 30, and it shows exactly what I was talking about before. The key takeaways again from here are, we still have $57 million of cash and $64 million of debt. And despite a devastating fourth quarter, we still have a TGR of only 0.52. Moving on to Page 8. These are some of the key vital statistics we always provide to you periodically. And the key emphasis here is looking at the whole year, our average sell-out rate and our average spot rate. Normally, you would have expected to be significantly less than what occurred here. So even though the fourth quarter was devastating. Our -- we are very happy with the year. And the efforts of our teams around the world to recover from the -- from the massive amount of cancellations. If you turn over to Chart 9, this kind of shows the progress in our first quarter or in each one of the segments, and you can see that our first quarter is showing great progress. This is in Australian dollars. So you have to -- as we mitigate a little bit. If you look over on Page 10 of your presentation there, you can see what it was in local currency. So you can get a much greater picture. We're extraordinarily happy with this, especially Canada, Great Britain and Brazil in that we started at levels of revenue that were close to 0 and rapidly improved throughout the pandemic. If you prove -- if you move over to Chart Page 11 on your presentation, you can see the monthly or the quarterly improvement from first quarter to -- or fourth quarter of last year to first quarter of this year. And you can see that virtually every segment had very, very solid improvement. This improvement has carried on to the early phasings of the second quarter. Moving over to Slide 12. These are, again, the highlights. We still have a very strong balance of cash at September 30 of $56 million, net debt of $7.6 million and a total gearing ratio of 1.06x at September 30. Scott Cody, our CFO, did very solid and fabulous job of renegotiating with our lender to get approval to modify our covenants in our loan for the remainder of fiscal year 2020/'21, which gives us a reasonable expectation that we will be in compliance with our loan through the end of -- loan covenants through the end of this fiscal year. Thanks, Scott, for his efforts there. So adjusted EBITDA at the end of September was nearing breakeven. The revenue performance to date into the second quarter has been significantly better. And we believe that we're in solid position. You turn your attention over to Slide 13 of our presentation. Again, the highlights are that our revenue is improving steadily in all jurisdictions, and we're very happy. And we expect to be adjusted EBITDA positive for the second quarter of fiscal '21. And this was our initial goal when the pandemic hit. We really believe that the first quarter would be extremely devastating, and it was. We believe that the second quarter under COVID would be better, and it was. And we were hopeful to be EBITDA positive by the third quarter, and we believe that will happen. We're very happy with our results. We're very happy with the efforts of all of our staff around the world. And everybody has really sucked it up and done a really, really good job. Can we go to questions now? Or do we just move on to Rob?

Just move on.

We'll move on to Rob for the formal part of the business.

Okay. Thank you, Bill. Let me now move to the formal business of the meeting. The Notice of Meeting dated 7 October 2020 was circulated to members, and I will take the Notice of Meeting as read. Please note that only shareholders, proxy holders or shareholder company representatives may vote. Voting on the resolutions will be conducted by way of poll. Shareholders will be given the opportunity to ask questions on each resolution and generally in relation to the company's business and management at the appropriate time. Shareholders can also cast their vote using the electronic voting card received when your online registration was validated. Please revert to the virtual annual meeting online portal guide or use the help line specified, if you need assistance with that process. [Operator Instructions] As Chairman of the meeting, I intend to vote all available proxies in accordance with the voting recommendation set out in the notice. I will now move to the business of the meeting. The 2020 annual report contains the financial report, director's report and independent auditor's report. A copy of the annual report was made available on the company's website, the ASX platform and was also sent to those shareholders who requested it. The financial statements have been approved by the directors and audited by our auditors, Grant Thornton. Simon Coulton from Grant Thornton is in attendance at this meeting, and he's available to answer any questions about the conduct of the audit. This item is the receipt and consideration of the reports of GTN Limited. This is not a resolution. I will take the report as read. At this time, I would like to take any general questions or comments about the reports or for the auditor. I note that the auditor did not receive any written questions prior to the meeting. Are there any questions online?

No question, Mr. Chairman.

Okay. There are no questions online. We move to the first formal resolution of the meeting, which is the cancellation of options previously issued and the issue of new options to Bill Yde, the CEO. Details of this resolution are set out in the Notice of Meeting, but I would like to say a few words about this resolution prior to the vote taking place. The Board and Bill have considered this issue at length, and we have determined that the best outcome for shareholders, the company and for Bill is that the outstanding options canceled -- be canceled, the fixed number of options be granted and for a cash payment to be made in consideration for such modifications. The proxies are displayed on your screen. Does anyone have any questions in relation to this resolution?

There are no questions, Mr. Chairman.

Okay. There are no questions online. Thank you. Please record your vote for this resolution. [Voting]

Okay. The next resolution is the consideration of the GTN Limited remuneration report. The remuneration report was contained within the 2020 directors' report and is available on the GTN website. The proxy votes are set out on your screen, and you will see that more than 25% of proxies have been lodged against the remuneration report, which means we will get a second strike. We will continue to work with shareholders to address any concerns. The second strike also means that the conditional spill resolution, the next resolution, will need to be voted on at this meeting. Are there any questions on this resolution?

There are no questions, Chairman.

Okay. There are no online questions. Thank you. Please record your vote for this resolution. [Voting]

As I mentioned previously, as we received a second strike on the remuneration report, we are required to put resolution 3, the spill resolution to the meeting. The proxy votes are set out on your screen. Are there are any questions?

There are no questions online, Chairman.

Okay. There are no questions online. As the Chairman of the meeting, I intend to vote all available proxies against this resolution. Please now record your vote for this resolution. [Voting]