Corus Entertainment Inc.

Good morning. My name is Joelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Chorus Entertainment Q3 2024 Analyst and Investor Conference Call. All lines have been muted to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, simply press star, then the two. Thank you. As a reminder, this call is being recorded. I will now turn the call over to Mr. John Gosling, co-CEO of Chorus Entertainment. Mr. Gosling, you may begin your conference.

Great. Thank you very much. Thanks, and good morning, everyone. Welcome to our fiscal 2024 third quarter earnings call. Joining me today is Troy Reeb, our Chorus co-CEO. Before I read the cautionary statement, I'd like to remind everyone that we have slides to accompany today's call. You can find those on our website at www.courseent.com under the investor relations dash events and presentations section. Moving on to the cautionary statement on slide two, we note that forward-looking statements may be made during this call. Actual results could differ materially from forecast projections or conclusions in these statements. We would like to remind those on our call today, in addition to disclosing results in accordance with IFRS, course also provides supplementary non-IFRS or non-GAAP measures as a method of evaluating the company's performance and to provide a better 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 our third quarter 2024 report to shareholders and the 2023 annual report. which can be found on CDAR Plus or in the Investor Relations-Financial Reports section of our website. Over to slide three. I'd like to start off today's call by acknowledging Doug Murphy's retirement and thanking him on behalf of our board and the chorus team for his commitment, leadership, and support over his 21-year career at the company. Today, Troy and I will outline our immediate areas of focus as we execute strategies that address the rapidly changing landscape enable us to pursue ongoing revenue opportunities and actively engage with our lenders. Our Board of Directors has given us a clear mandate to decisively right-size the business and create a more sustainable future. This means our priorities are to aggressively cut costs and manage our liabilities. We're making tough decisions to shutter areas of the business we can no longer sustain and pause longer-term development activities while we implement efficiency initiatives to further strengthen assets with more growth potential. The date In the fourth quarter alone, we have already announced a smaller executive leadership team and are pursuing accelerated headcount reductions with a focus on unprofitable and unsustainable initiatives and lines of business. By the end of August, we expect to have reduced our actual full-time headcount by almost 800 positions, or 25%, since the beginning of fiscal 2023. After transition period, we will cease operating two legacy AM radio stations in Vancouver and Edmonton, reducing our radio footprint. In addition, we announced that Global TV's Big Brother Canada has not been renewed after 12 incredible seasons and OWN, the Oprah Winfrey Network, will cease operations under course effective September 1, 2024, as originally planned. Additional savings have been identified on our roadmap. We are moving quickly to capture them with more announcements to follow. To reiterate, we can and will do much more. Turning to our liabilities, as disclosed, our debt covenant relief under our bank credit facilities will expire at the end of August, and we know many of you have questions on next steps. This morning, in our financials, we communicated our intention to actively pursue options for amendments or relief on certain financial covenants or repayment terms from our lenders in addition to our cost reduction initiatives. We are moving at pace to finalize a revised financial plan as part of this process. This aligns with the clear mandate I noted. Of course, this future state needs to be a more sustainable business that will focus on core activities, unique brand positioning, and areas where we can win. Before I turn it over to Troy, I wanted to comment on our new co-CEO structure. The board has delineated our roles to leverage our complementary strengths, with Troy taking on oversight of revenue and distribution in addition to content and networks, while I maintain oversight of finances, CFO, and add-on strategy, technology, and other corporate functions. This structure leverages the full range of skills and experience of our teams. I assure you that we have all hit the ground running and are fully aligned on what needs to be done, and we are committed to doing it. I'd like to congratulate Troy on his appointment. He's a valued colleague with deep knowledge and expertise in the media business and has a track record of making tough decisions to drive efficiency and reduce costs. With that, I will pass it over to you, Troy.

Thank you, John, and I also want to offer my congratulations to you. As John said, he and I have a clear mandate and vision to rightsize our company, and I look forward to our ongoing collaboration. For those of you who don't know me, I started with the company 25 years ago as a political journalist at Global News, and I continue to be a strong advocate for the role of local media and independent journalism. I first became a vice president in 2006 as the precursor to a major restructuring, which resulted in the centralization of control rooms and closure of set departments and TV stations across Canada. While difficult work, this modernization of production processes began what has been a hallmark of my career through successive roles overseeing first news and local TV stations, then later radio, the full global network, our specialty networks and streaming portfolio, and most recently our studio businesses distribution and revenue teams. I'm a passionate believer in the value of great content. We are fortunate at Chorus to have tremendous legacy in our brands, but that does not mean we also have to carry legacy cost structures. Global News won the first-ever Edward R. Murrow Award for Innovation 10 years ago by pioneering a way to have the same anchors host completely unique local newscasts in multiple cities. It enabled us to invest our content spending in the stories that matter to the local community rather than expensive studio crews and anchors replicated in stations across the country. Ten years later, we need to redouble our efforts to reduce legacy costs, not just in news but in all areas of the business. This includes changing the way we are regulated, While we have recently seen some positive developments from the CRTC, I want to be clear that we need to continue to be a prominent voice for the equitable treatment of Canadian broadcasters versus not only the foreign streaming and internet giants, but also versus Canadian distributors who compete with us for content rights at the same time as we negotiate with them for carriage of our services. I'll now take some time to discuss key tactics we're undertaking to chart our future, as well as to provide some additional context. Let's start with slide four and an update on recent developments. You will know that last month we announced that certain programming and trademark output agreements with Warner Brothers Discovery would not be renewed upon their expiry on December 31st, 2024. This is going to directly impact HGTV, Food Network, Magnolia, and the Cooking Channel. I'd like to address some misconceptions that have emerged since this announcement. It's important to note that Chorus holds all the broadcast licenses for its portfolio of specialty networks, and as a matter of course, carriage deals are not contingent on program supply agreements. That means we intend to continue to operate Canada's largest and most widely distributed networks in the home and culinary genres under new brands and with new content across our traditional television and streaming portfolios. Our rebranding plans for these channels are progressing quickly, and we expect to provide full details in the coming months. We will start from a position of strength, given one of the cornerstones of our lifestyle networks is our Canadian original programming. In HGTV Canada's latest broadcast year, 12 of the top 20 shows were Canadian originals, and all of them will be staying right where they are with Chorus. Remember that household names like the Property Brothers started out on W Network with Chorus and later moved to HGTV Canada, benefiting from our commitment to building high-quality Canadian shows and supporting up-and-coming Canadian talent. Further, our expertise in curating strong brands and content has built tremendous homegrown channels like Showcase and W Network that consistently rank in the top 10 specialty entertainment networks. we have full confidence in our team's ability to rise to the challenge again with our new lifestyle brands, given they will launch with broad carriage, all their big Canadian stars, and a fresh pipeline of the biggest series available in the global market. We are right now successfully securing new program supply, and while we will save our biggest announcements for our launch event, I'm pleased to say we've already landed Tentpole International Series Extreme Makeover Home Edition, and we can't wait to introduce you to our new brands. One final note related to our supply agreements. We have said before that we are actively exploring all legal and regulatory remedies. Our intent is to do what we need to do to protect our business. And while I'm not able to get into the details at this time, you should know this activity is well underway. Over to slide five. We're pleased that several of our major U.S. content partners have reached out to express their continued support. Our unwavering commitment to pursue success for their brands and content as a key partner in Canada has not gone unnoticed. In the coming weeks, we will announce expanded relationships with two existing studio partners that reinforce the value we offer as an independent broadcaster focused solely on media and content. At the same time as we build deeper partnerships on the channels and brands that work best for audiences and advertisers, we know that cannot be said of our entire portfolio. John mentioned earlier our decision to shut down two AM radio formats and the own specialty channels. This is part of an aggressive review of our entire portfolio with additional measures to come as we work to focus on those brands that offer the greatest opportunities for sustainable audiences, both in linear and digital. Chorus needs to be more agile than ever in our pursuit of growth opportunities in connected TV and premium digital video. Recently, we've seen advertisers accelerate their investments into that space, not as a replacement for linear television, but as part of a multi-platform future. While linear TV is no doubt in decline, it remains a crucial part of the advertising mix. Meantime, Chorus is successfully supplementing linear audiences with massive volumes of premium digital video inventory from our growing streaming portfolio. Stack TV trends are encouraging, with modest subscriber growth leading to an all-time high on Amazon Prime Video last week. We have an attractive Amazon Prime Day promotion in market right now that builds on our exclusive Peacock Originals deep-on-demand library of popular shows and, of course, 16 of our best live TV channels. More than half the viewing on both Stack TV and the Global TV app right now is coming from people watching live. And typically more than half of viewers are unduplicated from traditional television, meaning we are reaching valuable younger audiences. Another gem in our portfolio is our Global News free ad-supported television or fast channels. In addition to their home on the Global TV app, our Global News streams are available even more broadly across Amazon Prime Video, Roku, and Pluto TV. And Global News is the largest Canadian news provider internationally on YouTube. This is a winning formula for our advertisers, building on the value of our linear channels and providing unique audiences across ad-supported AVOD and fast environments. One quick final note, on June 6th, all 33 Chorus specialty channels were made available to Eastlink subscribers through brand new Chorus theme packs. We are excited that these customers once again have access to our full suite of networks. Moving to slide six. This fall represents a full return to a regular season schedule after a long period of U.S. scripted programming disruption. We've secured an outstanding slate across our networks and streaming platforms. And Global is well positioned to continue its momentum in primetime from this past spring. With 18 and a half hours of simulcast and an incredible fall lineup, including number one show Survivor, number one drama 9-1-1, and number one late night show Saturday Night Live, back for its 50th season. Our specialty networks will see a return of the ever-popular Hallmark Channel's Countdown to Christmas on W Network, and a powerful lineup of Canadian originals including Top Chef Canada on Food Network and Cora Studios' own rock-solid builds and gut job on HGTV, as well as Dead Man's Curse and Rust Valley Restorers on History Channel. Turning to regulatory developments on slide 7. Recent events underscore the fast pace of change in our industry and the need to quickly and thoughtfully update our regulatory environment to urgently address structural inequities in the market. When it comes to channel distribution, we have regulations in Canada governing how broadcasters and distributors must conduct themselves in their negotiations, and these include protections for independent programmers. We expect these rules and protections to be upheld, and we look forward to a broader discussion in the CRTC's upcoming structural relationships hearings. In the meantime, several encouraging regulatory developments have recently emerged. In May, the CRTC granted chorus interim relief for our English-language TV channels. This includes a reduction in required spending on so-called Programs of National Interest, or PNI. We've also been granted additional flexibility in how our total Canadian Programming Expenditure, or CPE, requirement is treated at the end of our license term. This is an important first step while we await more permanent regulatory change. In June, the CRTC announced another important decision as part of the Bill C-11 implementation process. Online streaming services that generate over $25 million a year in Canada and which are unaffiliated with licensed broadcasters will now be required to contribute 5% of their Canadian revenues to support the Canadian broadcast system effective with the 2024-25 broadcast year. The CRTC estimates this will provide up to $200 million a year in new funding to be directed to areas of need, including local news on radio and television. We expect a significant benefit from this to Chorus, which is currently the only conventional Canadian broadcaster not able to access regulated local expression funding. We also expect some funding to support local news through the agreement reached with Google for $100 million to be distributed to eligible news services. However, I must say the timing and quantity that Global News may receive is still unknown. Together, these are encouraging developments for our news business. While much has been made of the challenges facing journalism worldwide, I'm pleased to say Global News has bucked the trend with a 3.5% increase in revenue and 2% increase in total audience across linear and digital year-to-date. This at the same time as it has implemented substantial reductions in its cost structure. Going forward, our news team will continue to drive industry-leading efficiency efforts in order to cut costs, while also using digital technology to keep creating the local content that is most prized by audiences and advertisers. When we look across the broader media industry, the lingering impacts of the U.S. writers and actors strikes, the changing competitive environment, and macroeconomic uncertainty, we find that they are all contributing to lower advertising demand for traditional television. As large new entrants emerge in the digital and streaming realm, advertisers have expanded choices. That's leading to an oversupply of digital inventory, which is reducing share for linear television and putting pressure on price. In response, we are focused on making our inventory broadly available in the connected TV space and introducing new initiatives to stimulate advertising demand. We're also pleased to say that local TV has been a bright spot for Chorus, with robust interest from local advertisers in news. This spring saw audiences return in healthy numbers to global in prime time, giving us confidence as we prepare to launch an outstanding fall schedule. And while it's too early to predict how advertisers will behave in a market that is saturated with competing options, our sales teams are actively working to incent demand and demonstrate the value of our multi-platform media portfolio. With that, I will turn it back over to John for a review of our third quarter results. Great. Thanks, Troy.