Trian Partners Activist Presentation Deck
March 2024, 30 slides
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restore the responses to claims march vote using the blue proxy card a partners | Trian Partners
performance and transformation in we delivered and non diluted growth of we to non while this is a step in the right direction guidance of per share for is still lower than non reese ere in fact guide is lower than non nine years ago in | Trian Partners
performance and transformation trending to exceed guidance of yoy are trending to exceed our free cash flow guidance of a year over year free cash flow target is still below peak free cash flow in of to help ensure there is follow through on achieving this target and growing free cash flow going forward restore the | Trian Partners
performance and transformation accountability structures elevated spend to support prior media structure streaming operating loss high volume of content ongoing churn responsibility for a failed transition and overseeing poor execution and business strategy for more than two and a half years is successfully delivering change rapidly changing lists all the problems at the as of page we question whether would have taken these actions or moved as quickly without our engagement and whether the company will fall back to its complacent ways if nominees are not elected to the board there is follow through on these and other key initiatives despite recent claim that the company has turned the corner stock announced that it had embarked on a significant transformation wall street estimates for and non have declined by and respectively since the end of the ares | Trian Partners
performance and transformation starting in our board adapt to sector disruption and creation rebuttal deck page beginning of the announcement of the acquisition the announcement and closing of the fox acquisition the launch of the announcement of the company events has had nearly ten years to adapt to this new paradigm and yet than they were in the a | Trian Partners
performance and transformation enduring franchises highlight our powerful and unique monetization investment for the frozen franchise for the toy story franchise for the avengers franchise for the star wars was which is well below the company cost of capital and experiences page other things this film franchise math seemingly excludes the costs of acquiring the intellectual property in the first place experiences was nearly our cost of capital | Trian Partners
on pace to exceed annual cost savings target up from purported cost savings do not appear to be hitting the company bottom line announced however is guiding to about half that in per share expecting to achieve at least the end of exceeding the target announced in page the majority of the so called cost savings appear to simply be cost avoidance not cost we question whether slashing content spend by this much while raising prices for subscribers is the right strategy or whether it runs the risk of impairing growth and user based on our experiences at several other companies we suspect there are additional we are targeting a entertainment cash content spend restore the | Trian Partners
cost savings within three months of we announced a page execution and is a major indictment of both the board and management team at least by the end of page | Trian Partners
creative studio our creative engine is rejuvenated and thriving page when was last billion movie released seven movies in that content sales licensing and other segment which encompasses studios posted an operating loss of million last quarter and a loss of reinvigorating creativity in our film dramatically increased suggesting that creative engine is sputtering strengthening the creative output of restore the | Trian Partners
line of sight to streaming profitability beginning in full year reduction from and from prior year to put path to streaming profitability in context has incurred billion in streaming operating losses since in total has invested billion in streaming if you add the billion net the company has set a target of double digit margins for the business which implies approximately to billion of at that pace it seems like it could be decades before earns a good return on this billion investment reached profitability in reiterated intent to achieve or the timing to achieve them the company committed to a double digit target only after highlighted slow pace towards streaming profitability and encouraged profitability streaming business actually reached profitability two years in eight years after launch based on total reported streaming operating income less the streaming business allocated proportion of other operating expenses seventeen years after launch page achieved scale much than and had an opportunity to learn from experience that also translate to a path to meaningful ten years after launch page restore the | Trian Partners
faster than after eight months and million in less than a year and a half it took eleven years to get to million subscribers but it was profitable three years is nearly years further along than on its journey page in when had roughly the same revenue scale as business today earned an operating profit margin of higher than losing margin of in when compared to at that same time cost structure appears inefficient in terms of cost of revenue technology and other operating expenses and a and launched at different times with unique strategies and investment requirements resulting in different financial profiles reflecting their ignores the fact that hulu which assumed full operating control of in has operated a streaming service since and provided with many capabilities | Trian Partners
has built leading scaled global streaming platforms in just of most streamed movies across all streaming platforms in the us in page streaming lost subscribers in the most recent quarter and is unwilling to commit to a announced sports streaming service with fox and warner discovery fall target launch and plan to launch flagship in fall page we believe jumping the gun on this announcement reduced negotiating leverage we learned from fox that the joint sports streaming service is targeting only million subscribers within five years from launch which likely to move the needle or long term solution for one of most valuable assets cannibalize other sports offerings hulu live restore the | Trian Partners
stock price performance evaluate business generational disruption across pay ignores of companies self selected media industry peer group including its biggest competitor in streaming this is the same peer group that uses to help evaluate compensation levels for its so claim that this peer group is only appropriate for purposes of companies by far in the media industry peer group for all periods presented discovery and segment operating income rebuttal deck page launch of restore the | Trian Partners
returns for shareholders throughout his tenure as board or seeking to remove him as buying stock over the last leading up to there have shareholder bought stock on out we believe the recent in stock price is due to the pressure we have brought been in reaction to our campaign and to actions taken by in response to our rebuttal deck page significant transformation in and during nearly any other logical and relevant time period the | Trian Partners
and maria as the global economy confronts integration and about key global issues page according to own proxy statement every single director has global business compensation committee to planning ensuring executive compensation is aligned with the estimates executives have been paid over billion over the last ten years despite significant the covid pandemic restore the ens | Trian Partners
and maria as every year since she became chair of the compensation committee in pay votes have averaged just which ranks in the bottom of all companies | Trian Partners
nelson and jay nelson has media page nelson understand the challenges page is facing directors have any media and entertainment experience this does not seem to be a prerequisite for joining board company split nelson understand gamble and that had lost their way in each of those cases nelson and helped drive lasting positive change by addressing many of the same issues that plague today delight consumers through the hard work of thousands of people working together towards again this campaign is not about is not opposing or his continued role as did not drive strategy restore the | Trian Partners
nelson and jay lay has delivered exceptionally poor as lead independent oversee a transformation in business model and to help best position it for success in an evolving industry including by overseeing a process that has significantly down across the its self selected media industry peer group and the during the board in it that some aspects of business have changed but most of core businesses parks and resorts film and studios linear and consumer products are faces today lay has further executive since leaving his role at eight years ago his perspectives are restore the | Trian Partners
nelson and jay jay is oblivious he stuck with legacy thinking page oblivious is unbecoming of any public company let alone one as prominent and respected as jay was the company during its last string of successful second might claim that the fox deal was about streaming but the fact is that two content spend has doubled since the fox deal further demonstrating that is not making the most of the fox library and acquired succession planning hes offers no evidence for this claim this is yet another example of seeking to deflect attention from its own issues view this is a far cry from own succession process jay serves as chair of the compensation committee which oversees succession planning basis this includes both short term planning in the event of a sudden departure and long pay did not drive he has no credible succession as part responsibilities the committee develops and regularly reviews succession deck page restore the | Trian Partners
me response served on the board of capital acquisition consummate a transaction | Trian Partners
nelson only novel ideas demonstrate his lack of we already have in motion the vast majority of nelson nelson has no plan at all for page plan a dangerous plan or a plan that is already executing these statements business plan that is the role of management has never said that it wants to creativity this is a red herring nelson on the board sends a message that creativity is being to the contrary recognizes that flywheel spins when is producing exceptional content wants to reignite creative engine so that can reclaim its leadership position at the box office and drive growth in other businesses like direct to consumer entertainment parks resorts and consumer products suggestion for a board led page that said seems to be implying that the board should have no role in or oversight of the creative process we disagree | Trian Partners
has a rack record of significant value destruction outside of the consumer packaged goods industry page nelson and his colleagues chronically on boards page untrue performance based on some flawed math which we describe in detail in our white paper the results of portfolio companies where nelson served on the board have been powerful absolute from involvement through year end exceeding the by more than the | Trian Partners
maximum met which would be a destabilizing companies it is a common scare tactic used by companies in proxy contests time and time again we have demonstrated our ability to work constructively with nelson would create a significant distraction and waste time and resources page to demonstrate our ability to work collaboratively in the we provided nelson is not part of a shadow management team he is an informed and engaged director the fact that thinks this is something to be feared demonstrates in our the new york times interviewed a dozen former executives at companies in which nelson engagement that a knowledgeable and committed director can bring was known to establish committed to advancing restore the | Trian Partners
was partially plagiarized from other activist presentations rebuttal deck page similarity to that of any other investor because certain slide formats charts layouts we think needs to improve upon this is exactly the kind of charged disingenuous rhetoric that has been using for weeks to distract from the company own and the board poor oversight which we believe underscores the need for change in the | Trian Partners
the board has skin in the companies in the world and have been paid hundreds of millions of dollars during their careers yet collectively they own only million of stock shares on the open market during their tenures has sold nearly all of his stock more than billion and currently holds approximately million in equity management directors excluding the shares which entrusted to owns over million and more than the entire board the entirety of the group stake is beneficially owned by as is the case with any arrangement an investment manager or asset manager has with its investors the if does not consider this to be a meaningful investment then we are not sure how it restore the a | Trian Partners
me response stock ownership sold shares from to in the of the proxy fight page investment vehicles approaching the end of their life has been a net buyer of stock over the last months and is one of the restore the | Trian Partners
motivations for its campaign has said little about role and influence because it is irrelevant this proxy contest improve and create value oversight of marvel studio was severed in entrusted his shares to because he believes is best positioned to help enhanced value for all of shareholders has said little about the role and influence of rebuttal deck page an advisor to suggesting that valued his perspectives and experience having spent more than years at jay loves the company and wants to see it jay is happily retired from executive roles and has no interest in a management position at restore the | Trian Partners
motivations for its campaign nelson has a history of firing to insert his person does not present any support for its claim that nelson has a history of firing and inserting his person corporate that are better qualified than nelson to oversee succession the | Trian Partners
engagement with has offered own proxy statement lists only interactions the vast majority of which were just page in our view the fact that refers to these as meaningful interactions says a lot the board page offered meetings with the first time met with the board in early we were given only minutes during did not think that was a productive meeting it certainly did not seem that the board was interested in our perspective under this agreement would not even have had an obligation to hear our ideas and seemingly to create a record then offered to meet with us after it rejected our candidates frankly we did not believe this would be productive offered an sharing agreement and quarterly restore the a | Trian Partners
confidential information in the possession of the company that could lead it or to disagree with conclusions reserves the right to restore the | Trian Partners
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