CORUS ENTERTAINMENT ANNOUNCES FISCAL 2023 FOURTH QUARTER AND YEAR END RESULTS

Consolidated revenue was flat for the quarter and decreased 5% for the yearConsolidated segment profit(1) decreased 18% for the quarter and 25% for the yearConsolidated segment profit margin(1) of 14% for the quarter and 22% for the yearNet income attributable to shareholders of $50.4 million ($0.25 per share basic) for the quarter, which includes gain on business divestiture of $142.3 million and impairment charges of $100.0 million related to broadcast license and brands and trade marks. Net loss attributable to shareholders of $428.7 million ($2.15 loss per share basic) for the year, which includes a gain on business divestiture of $142.3 million as well as non-cash impairment charges of $690.0 million for the yearProforma net debt to segment profit(1) of 3.62 times at August 31, 2023, which excludes contributions to segment profit from business divestiture, up from 3.02 times at August 31, 2022, and down from 3.85 times at the end of the third quarterFree cash flow(1) of $31.7 million for the quarter and $106.8 million for the yearCorus suspends dividend; intends to redirect capital to debt repayment

TORONTO, Oct. 27, 2023 /PRNewswire/ – Corus Entertainment Inc. (TSX: CJR.B) announced its fourth quarter and year end financial results today.

“Our fourth quarter results reflect ongoing weakness in the advertising economy further impacted by more recent distortions resulting from the WGA and SAG-AFTRA strikes that persisted much longer than anticipated,” said Doug Murphy, President and Chief Executive Officer. “We are focused on what we can control as we navigate through these challenges. We will prudently redirect capital from dividends to debt repayment. Our intense pursuit of efficiencies and improved productivity is resulting in significant expense reductions as we streamline our operating model and evolve our business into a multi-platform aggregator of premium video with leading cross platform monetization capabilities. Corus will benefit from a more normalized content supply in the quarters ahead with an improved cost structure as we await a concurrent improvement in the advertising economy.”

Financial Highlights

Segment Revenue

Operational Highlights 

Corus advanced its strategic priorities on multiple fronts. The Company launched its Fall 2023 schedule for Global TV, its Specialty networks and STACKTV, implemented cost savings initiatives, completed the sale of Toon Boom Animation Inc. and used the net proceeds from the sale to pay down bank debt. The Company continues to navigate an uncertain macroeconomic environment as well as the impact of U.S. media industry labour strikes on its programming supply.

Global confirmed its Fall 2023 schedule of new and returning programming. Global announced its Fall 2023 slate of premieres, including top reality show Survivor, new original drama Robyn Hood and the Canadian broadcast premiere of hit U.S. series Yellowstone.Corus completed the sale of its animation software business; net proceeds used to repay outstanding bank debt. Corus completed the sale of Toon Boom Animation Inc. to Integrated Media Company on August 23, 2023 for net proceeds of $141.2 million.Entertainment Tonight Canada end of production announced. The final new episode aired on October 6, 2023, with the decision to end production of the daily entertainment newsmagazine show being due to production costs and a challenging advertising environment.Corus Studios and Nikki Ray Media Agency announced four new TV movies set to premiere in 2024. Represented internationally by Corus Studios, the made-for-tv movie franchise The Love Club Moms will premiere on W Network and STACKTV in 2024.

Financial Highlights

Free cash flow(1) of $31.7 million in Q4 and $106.8 million for the year compared to $44.7 million and $239.6 million, respectively, in the same comparable prior year periods. The decrease in free cash flow(1) for the fourth quarter is mainly attributable to a decrease in cash provided by operating activities of $18.5 million as the net proceeds from the sale of Toon Boom Animation Inc. on August 23, 2023 of $141.2 million that were used to pay down bank debt are not included in free cash flow(1). The decrease in free cash flow(1) for the year ended August 31, 2023 is mainly attributable to a decrease in cash provided by operating activities of $94.2 million, that excludes the net proceeds from the sale of Toon Boom Animation Inc. and cash provided by investing activities in the prior year ended August 31, 2022, related to a $43.5 million non-recurring venture fund distribution.Net debt to segment profit(1) was 3.48 times at August 31, 2023. Proforma net debt to segment profit(2) was 3.62 times at August 31, 2023, up from 3.02 times at August 31, 2022, however lower than at the end of the third quarter of 3.85 times. The main driver of the increase in this ratio is the decrease of segment profit(1) for the most recent four quarters.As of August 31, 2023, the Company had $56.2 million of cash and cash equivalents and $300.0 million available under its Revolving Facility, $285.9 million of which could be drawn.

Dividends

In fiscal 2024, the Company announced its Board of Directors has prudently suspended the dividend to redirect the use of free cash flow(1) from dividends to debt repayment given the impact of continuing macroeconomic uncertainty, and the impact of the extended Writer’s Guild of America (“WGA”) strike (resolved on October 9, 2023) and the ongoing labour action of Screen Actors Guild-American Federation of Television and Radio Artists (“SAG-AFTRA”) on audience levels, advertising demand and revenue.

Corus Entertainment Inc. reports its financial results in Canadian dollars.

The unaudited interim condensed consolidated financialstatements and accompanying notes for the three months and year ended August 31, 2023 and Management’s Discussion and Analysis are available on the Company’s website at www.corusent.com in the Investor Relations section and under the Company’s SEDAR profile at www.sedarplus.ca.

A conference call with Corus senior management is scheduled for October 27, 2023 at 8:00 a.m. ET. While this call is directed at analysts and investors, members of the media are welcome to listen in. To instantly join the conference call by phone, please use the following URL to easily register and be connected to the conference call automatically: https://emportal.ink/48EOK3t . You can also dial direct to be entered into the call by an Operator. The dial-in number for the conference call for local and international callers is 1.416.764.8650 and for North America is 1.888.664.6383. This call will be archived and available for replay in the Investor Relations section of the Corus website beginning October 27, 2023, at 11a.m.ET or accessible by telephone until November 3, 2023, at 1.888.390.0541 (toll-free North America) or 416.764.8677 (local or international), using replay code 367305#. More information can be found on the Corus Entertainment website at www.corusent.com in the Investor Relations section.

Risks and Uncertainties

Significant risks and uncertainties affecting the Company and its business are discussed under the heading “Risks and Uncertainties” and “Seasonal Fluctuations” in the 2022 MD&A, as filed at www.sedarplus.ca on October 24, 2022.

As discussed further in the 2022 MD&A, the Company’s operating performance is affected by general Canadian and worldwide economic conditions. Changes or volatility in domestic or international economic conditions, economic uncertainty or geopolitical conflict and tensions, including current ongoing factors that can create or exacerbate recessionary conditions, may affect discretionary consumer and business spending, including on advertising and marketing, resulting in changes to demand for Corus’ product and services offerings. The continued elevated consumer price index inflation also affects the Company’s business, operations and financial performance through disruption to supply chains, increased costs of programming, services and labour, reduced advertising demand or spending, or lower demand for the Company’s products and services, all of which may lead to decreased revenue or profitability. Although the WGA strike was resolved on October 9, 2023, the continued labour action of the SAG-AFTRA will continue to impact the majority of scripted productions world-wide that employ SAG-AFTRA talent. This will impact the timing of premium content premieres and types of programming on the Company’s services in the coming months, which may negatively impact audience levels and may result in decreased revenue or profitability.

Other financial risks which may be related to or elevated by the foregoing include leverage risk related to the Company’s financial covenants and debt servicing payments, requirements and compliance under its credit facility, and impacts thereof; the volatility of the market price for the Company’s Class B Non-Voting Shares, which can be impacted by factors beyond the Company’s control and which can decline even if the Company’s operating results, underlying asset values or prospects have not changed; and risks related to the payment, amount or timing of dividends. Please see the 2022 MD&A for a full discussion of these and other risks and uncertainties.

Outlook

Given continuing macroeconomic uncertainty and its impact on advertising demand, combined with the extended WGA strike (resolved on October 9, 2023) and ongoing labour action of SAG-AFTRA, which impedes the Company’s ability to deliver new episodes of scripted programming on television, resulting in lower audience levels and advertising demand, the Company expects its Television advertising revenue in the first quarter of fiscal 2024 will decline in the range of 15-20% compared to the prior year. Amortization of program rights is expected to decline by a similar range along with the further implementation of additional cost management initiatives. The Company has suspended its dividend and intends to redirect the use of free cash flow from dividends on Class A and Class B shares to debt repayment. While the Company continues to expect improvement in the macro-environment and the normalization of program supply over the medium term, visibility remains limited at this time.

Use of Non-GAAP Financial Measures

This press release includes the non-GAAP or non-IFRS financial measures of segment profit (loss), segment profit margin, free cash flow, adjusted net income (loss) attributable to shareholders, adjusted basic earnings (loss) per share, net debt to segment profit, proforma net debt to segment profit, as well as supplementary financial measures not presented in the financial statements such as optimized advertising revenue, and new platform revenue. Non-GAAP or non-IFRS measures that are not in accordance with, nor an alternate to, generally accepted accounting principles (“GAAP”) and may be different from non-GAAP or non-IFRS measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS. They are limited in value because they exclude charges that have a material effect on the Company’s reported results and, therefore, should not be relied upon as the sole financial measures to evaluate the Company’s financial results. The non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, IFRS financial results. A reconciliation of the Company’s non-GAAP measures is included in the Company’s most recent Report to Shareholders for the three months and year ended August 31, 2023, which is available on Corus’ website at www.corusent.com as well as on SEDAR at www.sedarplus.ca.

Caution Concerning Forward-Looking Information

This press release contains forward-looking information and should be read subject to the following cautionary language:

To the extent any statements made in this press release contain information that is not historical, these statements are forward-looking statements and may be forward-looking information within the meaning of applicable securities laws (collectively, “forward-looking information”). This forward-looking information relates to, among other things, the Company’s objectives, goals, strategies, targets, intentions, plans, estimates and outlook, including the adoption and anticipated impact of the Company’s strategic plan, advertising and expectations of advertising trends for fiscal 2024, subscriber revenue and anticipated subscription trends, distribution, production and other revenue, the Company’s dividend policy and the payment of future dividends; the Company’s leverage target; the Company’s ability to manage retention and reputation risks related to its on-air talent; expectations regarding financial performance, including capital allocation strategy and capital structure management, operating costs and tariffs, taxes and fees, and can generally be identified by the use of words such as “believe”, “anticipate”, “expect”, “intend”, “plan”, “will”, “may” or the negatives of these terms and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances may be considered forward-looking information.

Although Corus believes that the expectations reflected in such forward-looking information are reasonable, such information involves assumptions, risks and uncertainties and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied with respect to the forward-looking information, including without limitation, factors and assumptions regarding the general market conditions and general outlook for the industry including: the impact of recessionary conditions and continuing supply chain constraints; the potential impact of new competition and industry mergers and acquisitions; changes to applicable tax, licensing and regulatory regimes; inflation and interest rates, stability of the advertising, subscription, production and distribution markets; changes to key suppliers or clients; operating and capital costs and tariffs, taxes and fees, the Company’s ability to source, produce or sell desirable content and the Company’s capital and operating results being consistent with its expectations. Actual results may differ materially from those expressed or implied in such information.

Important factors that could cause actual results to differ materially from these expectations include, among other things: the Company’s ability to attract, retain and manage fluctuations in advertising revenue; the Company’s ability to maintain relationships with key suppliers and clients and on anticipated financial terms and conditions; audience acceptance of the Company’s television programs and cable networks; the Company’s ability to manage retention and reputation risks related to its on-air talent; the Company’s ability to recoup production costs; the availability of tax credits; the availability of expected news, production and related credits, programs and funding; the existence of co-production treaties; the Company’s ability to compete in any of the industries in which it does business including with competitors which may not be regulated in the same way or to the same degree; the business and strategic opportunities (or lack thereof) that may be presented to and pursued by the Company; conditions in the entertainment, information and communications industries and technological developments therein; changes in laws or regulations or the interpretation or application of those laws and regulations including statements, decisions or positions by applicable regulators including, without limitation, the Canadian Radio-television and Telecommunications Commission (“CRTC”), Canadian Heritage and Innovation, Science and Economic Development Canada (“ISED”); changes to licensing status or conditions; unanticipated or un mitigatable programming costs; the Company’s ability to integrate and realize anticipated benefits from its acquisitions and to effectively manage its growth; the Company’s ability to successfully defend itself against litigation matters and complaints; failure to meet covenants under the Company’s senior credit facility, senior unsecured notes or other instruments or facilities; epidemics, pandemics or other public health and safety crises in Canada and globally; physical and operational changes to the Company’s key facilities and infrastructure; cybersecurity threats or incidents to the Company or its key suppliers and vendors; and changes in accounting standards.

Additional information about these factors and about the material assumptions underlying any forward-looking information may be found under the heading “Risks and Uncertainties” in the Company’s Management’s Discussion and Analysis for the year ended August 31, 2022 and under the heading “Risk Factors” in the Company’s Annual Information Form for the year ended August 31, 2022. Corus cautions that the foregoing list of important assumptions and factors that may affect future results is not exhaustive. When relying on the Company’s forward-looking information to make decisions with respect to Corus, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Unless otherwise specified, all forward-looking information in this document speaks as of the date of this document and may be updated or amended from time to time. Except as otherwise required by applicable securities laws, Corus disclaims any intention or obligation to publicly update or revise any forward-looking information whether as a result of new information, events or circumstances that arise after the date thereof or otherwise.

About Corus Entertainment Inc.

Corus Entertainment Inc. (TSX: CJR.B) is a leading media and content company that develops and delivers high quality brands and content across platforms for audiences around the world. Engaging audiences since 1999, the company’s portfolio of multimedia offerings encompass 33 specialty television services, 39 radio stations, 15 conventional television stations, digital and streaming platforms, and technology and media services. Corus is an internationally-renowned content creator and distributor through Nelvana, a world class animation studio expert in all formats and Corus Studios, a globally recognized producer of hit scripted and unscripted content. The company also owns full-service social digital agency so.da, lifestyle entertainment company Kin Canada, and children’s book publishing house, Kids Can Press. Corus’ roster of premium brands includes Global Television, W Network, HGTV Canada, Food Network Canada, Magnolia Network Canada, The HISTORY® Channel, Showcase, Adult Swim, National Geographic, Disney Channel Canada, YTV, Global News, Globalnews.ca, Q107, Country 105, and CFOX, along with streaming platforms STACKTV, TELETOON+, the Global TV App and Curiouscast. Corus is the domestic advertising representative and an original content partner for Pluto TV, a Paramount Company, which is the leading free ad-supported streaming television (FAST) service. For more information visit www.corusent.com.

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SOURCE Corus Entertainment Inc (IR Group)