Third quarter operating highlights:
$18,195,000 in consolidated adjusted EBITDA1, a$17,309,000 unfavourable variance compared with the same quarter of 2021.$14,067,000 in adjusted EBITDA1 in the Broadcasting segment, a$7,557,000 unfavourable variance mainly due to the decreased profitability of TVA Network, which posted an 8.2% decrease in its advertising revenues, combined with increased investments in content. The specialty channels were also affected by declining advertising revenues and reported lower profitability, with the exception of "TVA Sports ," whose adjusted EBITDA1 remained stable as a result of considerably lower costs compared with the same period of 2021, when the channel broadcast the Stanley Cup finals.$2,585,000 in adjusted EBITDA1 in the Film Production & Audiovisual Services segment ("MELS"), a$7,980,000 unfavourable variance caused by the decreased profitability of soundstage, mobile and equipment rental as well as visual effects services, while postproduction posted an increase in profitability.$1,222,000 in adjusted EBITDA1 in the Magazines segment, an$826,000 unfavourable variance due mainly to reduced government assistance and lower newsstand revenues, which were not entirely offset by operating expense reduction measures.$49,000 in adjusted EBITDA1 in the Production & Distribution segment, a$1,173,000 unfavourable variance due to lower volume of international distribution activities compared with the same period of 2021, which was boosted by the post-pandemic resumption of activities.
"Third quarter results were affected by decreased profitability in the Broadcasting segment, among other things, due to the difficult situation in advertising," said
__________________________ |
1 See definition of adjusted EBITDA below. |
"As the downward trend in advertising revenues continues to eat away at the profitability of our television business, it is important to bear in mind that advertising is essential to private over-the-air broadcasting, which relies on this sole source of revenues for its survival. The Canadian advertising environment, in addition to being impacted by the current economic situation, is set to become even more vulnerable with foreign subscription video-on-demand services like Netflix now planning to add advertising to their business models. What's more, Radio-Canada grabs some of the advertising dollars, even though it is highly government subsidized. Whereas private broadcasters struggle to hang on to advertising revenues in order to fuel their content investments, Radio-Canada continues to hold an unfair competitive advantage by selling its advertising space at a ridiculously low price and offering programming that is designed to compete directly with that of private broadcasters. The CRTC urgently needs to intervene in this regard before it is too late. As well, Bill C-18 must be adopted into law quickly to ensure that the use of our news content is recognized and paid for at fair value by the digital behemoths who currently steal advertising dollars away from local businesses. Lastly, we cannot leave unmentioned the highly prejudicial treatment of "
"In the Film Production & Audiovisual Services segment, we were affected by lower volume in a number of our business segments, with the exception of postproduction, which continued to grow for the third consecutive quarter since the start of the year. Our soundstage, mobile and equipment rental services were particularly hard hit by the absence of foreign blockbusters, whereas our sets were used for Paramount Pictures' production of Transformers in the same quarter of 2021. It is imperative that the
"In the Magazines segment, quarterly results were significantly impacted by reduced government assistance and an 11.5% decrease in newsstand revenues, which are a major revenue stream for our entertainment titles. Unfortunately, the transition from the
"Our Production & Distribution segment was able to finalize production of four films and an initial series shot in
COVID-19 pandemic
Since
Definition
Adjusted EBITDA
In its analysis of operating results, the Corporation defines adjusted EBITDA as net income (loss) before depreciation and amortization, financial expenses, operational restructuring costs and other, income taxes (income tax recovery) and share of loss (income) of associates. Adjusted EBITDA as defined above is not a measure of results that is consistent with International Financial Reporting Standards ("IFRS"). It is not intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity. This measure should not be considered in isolation or as a substitute for other performance measures prepared in accordance with IFRS. This measure is used by management and the Board of Directors to evaluate the Corporation's consolidated results and the results of its segments. This measure eliminates the significant level of impairment, depreciation and amortization of tangible and intangible assets and is unaffected by the capital structure or investment activities of the Corporation and its segments. Adjusted EBITDA is also relevant because it is a significant component of the Corporation's annual incentive compensation programs. The Corporation's definition of adjusted EBITDA may not be identical to similarly titled measures reported by other companies.
Forward-looking information disclaimer
The statements in this news release that are not historical facts may be forward-looking statements and are subject to important known and unknown risks, uncertainties and assumptions which could cause the Corporation's actual results for future periods to differ materially from those set forth in the forward-looking statements. Forward-looking statements generally can be identified by the use of the conditional, the use of forward-looking terminology such as "propose," "will," "expect," "may," "anticipate," "intend," "estimate," "plan," "foresee," "believe" or the negative of these terms or variations of them or similar terminology. Certain factors that may cause actual results to differ from current expectations include seasonality, operational risks (including pricing actions by competitors and the risk of loss of key customers in the Film Production & Audiovisual Services and Production & Distribution segments), programming, content and production cost risks, credit risk, government regulation risks, government assistance risks, changes in economic conditions, fragmentation of the media landscape, risk related to the Corporation's ability to adapt to fast-paced technological change and to new delivery and storage methods, labour relation risks, and the risks related to public health emergencies, including COVID-19, as well as any emergency measures implemented by government.
Investors and others are cautioned that the foregoing list of factors that may affect future results is not exhaustive and that undue reliance should not be placed on any forward-looking statements. For more information on the risks, uncertainties and assumptions that could cause the Corporation's actual results to differ from current expectations please refer to the Corporation's public filings available at www.sedar.com and www.groupetva.ca, including, in particular, the "Risks and Uncertainties" section of the Corporation's annual Management's Discussion and Analysis for the year ended
The forward-looking statements in this news release reflect the Corporation's expectations as of
The Condensed Consolidated Financial Statements dated
Consolidated statements of income (loss)
(unaudited)
(in thousands of Canadian dollars, except per-share amounts)
Three-month periods | Nine-month periods | ||||||||
Note | 2022 | 2021 | 2022 | 2021 | |||||
Revenues | 2 | $ | 130,519 | $ | 150,703 | $ | 422,485 | $ | 450,933 |
Purchases of goods and services | 3 | 78,155 | 81,703 | 300,819 | 294,874 | ||||
Employee costs | 34,169 | 33,496 | 109,957 | 104,454 | |||||
Depreciation and amortization | 7,446 | 8,136 | 22,528 | 24,338 | |||||
Financial expenses | 4 | 64 | 649 | 658 | 2,055 | ||||
Operational restructuring costs and other | 5 | 49 | 20 | 182 | 182 | ||||
Income (loss) before income taxes (income tax recovery) and share of loss (income) of associates | 10,636 | 26,699 | (11,659) | 25,030 | |||||
Income taxes (income tax recovery) | 2,842 | 7,587 | (2,817) | 7,181 | |||||
Share of loss (income) of associates | 195 | 111 | (217) | (552) | |||||
Net income (loss) | $ | 7,599 | $ | 19,001 | $ | (8,625) | $ | 18,401 | |
Net income (loss) attributable to: | |||||||||
Shareholders | $ | 7,623 | $ | 19,010 | $ | (8,605) | $ | 18,409 | |
Non-controlling interest | (24) | (9) | (20) | (8) | |||||
Basic earnings (loss) per share attributable to shareholders | $ | 0.18 | $ | 0.44 | $ | (0.20) | $ | 0.43 | |
Diluted earnings (loss) per share attributable to shareholders | 0.18 | 0.44 | (0.20) | 0.42 | |||||
Weighted average number of outstanding shares | 43,205,535 | 43,205,535 | 43,205,535 | 43,205,535 | |||||
Weighted average number of diluted shares | 43,307,990 | 43,466,447 | 43,205,535 | 43,414,665 |
See accompanying notes to condensed consolidated financial statements. |
Consolidated statements of comprehensive income
(unaudited)
(in thousands of Canadian dollars)
Three-month periods | Nine-month periods | ||||||||
Note | 2022 | 2021 | 2022 | 2021 | |||||
Net income (loss) | $ | 7,599 | $ | 19,001 | $ | (8,625) | $ | 18,401 | |
Other comprehensive income items that will not be reclassified to income: | |||||||||
Defined benefit plans: | |||||||||
Re-measurement gain | 8 | 1,000 | 8,500 | 30,000 | 44,500 | ||||
Deferred income taxes | (300) | (2,200) | (8,000) | (11,800) | |||||
700 | 6,300 | 22,000 | 32,700 | ||||||
Comprehensive income | $ | 8,299 | $ | 25,301 | $ | 13,375 | $ | 51,101 | |
Comprehensive income (loss) attributable to: | |||||||||
Shareholders | $ | 8,323 | $ | 25,310 | $ | 13,395 | $ | 51,109 | |
Non-controlling interest | (24) | (9) | (20) | (8) | |||||
See accompanying notes to condensed consolidated financial statements. |
Consolidated statements of equity
(unaudited)
(in thousands of Canadian dollars)
Equity attributable to shareholders | Equity | Total | ||||||||||
Capital | Contributed | Retained | Accumula- | |||||||||
Balance as at | $ | 207,280 | $ | 581 | $ | 108,175 | $ | (4,637) | $ | 1,220 | $ | 312,619 |
Net income (loss) | – | – | 18,409 | – | (8) | 18,401 | ||||||
Other comprehensive income | – | – | – | 32,700 | – | 32,700 | ||||||
Balance as at | 207,280 | 581 | 126,584 | 28,063 | 1,212 | 363,720 | ||||||
Net income (loss) | – | – | 12,095 | – | (2) | 12,093 | ||||||
Other comprehensive income | – | – | – | 4,651 | – | 4,651 | ||||||
Balance as at | 207,280 | 581 | 138,679 | 32,714 | 1,210 | 380,464 | ||||||
Net loss | – | – | (8,605) | – | (20) | (8,625) | ||||||
Dividends | – | – | – | – | (1,190) | (1,190) | ||||||
Other comprehensive income | – | – | – | 22,000 | – | 22,000 | ||||||
Balance as at | $ | 207,280 | $ | 581 | $ | 130,074 | $ | 54,714 | $ | – | $ | 392,649 |
See accompanying notes to condensed consolidated financial statements. |
Consolidated balance sheets
(unaudited)
(in thousands of Canadian dollars)
|
| |||||
Assets | ||||||
Current assets | ||||||
Cash | $ | – | $ | 5,181 | ||
Accounts receivable | 175,472 | 210,814 | ||||
Income taxes | 7,224 | 5,755 | ||||
Audiovisual content | 110,937 | 108,530 | ||||
Prepaid expenses | 6,178 | 3,866 | ||||
299,811 | 334,146 | |||||
Non-current assets | ||||||
Audiovisual content | 91,618 | 72,541 | ||||
Investments | 11,439 | 12,115 | ||||
Property, plant and equipment | 160,672 | 160,288 | ||||
Right-of-use assets | 7,456 | 9,084 | ||||
Intangible assets | 16,122 | 20,559 | ||||
21,696 | 21,696 | |||||
Defined benefit plan asset | 45,844 | 21,309 | ||||
Deferred income taxes | 6,357 | 9,353 | ||||
361,204 | 326,945 | |||||
Total assets | $ | 661,015 | $ | 661,091 |
Consolidated balance sheets (continued)
(unaudited)
(in thousands of Canadian dollars)
Note |
|
| ||||
Liabilities and equity | ||||||
Current liabilities | ||||||
Bank overdraft | $ | 8,620 | $ | – | ||
Accounts payable, accrued liabilities and provisions | 101,917 | 139,149 | ||||
Content rights payable | 89,331 | 93,383 | ||||
Deferred revenues | 11,863 | 9,961 | ||||
Income taxes | 69 | 1,622 | ||||
Current portion of lease liabilities | 2,214 | 2,503 | ||||
Short-term debt | 33,676 | 11,980 | ||||
247,690 | 258,598 | |||||
Non-current liabilities | ||||||
Lease liabilities | 6,388 | 7,857 | ||||
Other liabilities | 6,453 | 7,798 | ||||
Deferred income taxes | 7,835 | 6,374 | ||||
20,676 | 22,029 | |||||
Equity | ||||||
Capital stock | 6 | 207,280 | 207,280 | |||
Contributed surplus | 581 | 581 | ||||
Retained earnings | 130,074 | 138,679 | ||||
Accumulated other comprehensive income | 54,714 | 32,714 | ||||
Equity attributable to shareholders | 392,649 | 379,254 | ||||
Non-controlling interest | – | 1,210 | ||||
392,649 | 380,464 | |||||
Total liabilities and equity | $ | 661,015 | $ | 661,091 |
See accompanying notes to condensed consolidated financial statements. |
Consolidated statements of cash flows
(unaudited)
(in thousands of Canadian dollars)
Three-month periods | Nine-month periods | ||||||||
Note | 2022 | 2021 | 2022 | 2021 | |||||
Cash flows related to operating activities | |||||||||
Net income (loss) | $ | 7,599 | $ | 19,001 | $ | (8,625) | $ | 18,401 | |
Adjustments for: | |||||||||
Depreciation and amortization | 7,446 | 8,136 | 22,528 | 24,338 | |||||
Share of loss (income) of associates | 195 | 111 | (217) | (552) | |||||
Deferred income taxes | (2,004) | (295) | (3,543) | (976) | |||||
Other | 13 | 13 | 661 | (55) | |||||
13,249 | 26,966 | 10,804 | 41,156 | ||||||
Net change in non-cash balances related to operating activities | (15,073) | (5,376) | (19,907) | (35,976) | |||||
Cash flows (used in) provided by operating activities | (1,824) | 21,590 | (9,103) | 5,180 | |||||
Cash flows related to investing activities | |||||||||
Additions to property, plant and equipment | (3,939) | (4,488) | (16,247) | (11,224) | |||||
Additions to intangible assets | (87) | (346) | (815) | (1,847) | |||||
Business acquisitions | 5 | (2,573) | – | (6,323) | (606) | ||||
Dividends to non-controlling shareholders | (1,150) | – | (1,150) | – | |||||
Other | 271 | 271 | 271 | 271 | |||||
Cash flows used in investing activities | (7,478) | (4,563) | (24,264) | (13,406) | |||||
Cash flows related to financing activities | |||||||||
Net change in bank overdraft | 5,624 | 43 | 8,620 | 3,888 | |||||
Net change in revolving credit facility | (1,835) | (16,130) | 21,710 | 6,705 | |||||
Repayment of lease liabilities | (580) | (786) | (2,091) | (2,514) | |||||
Other | – | (125) | (53) | (178) | |||||
Cash flows provided by (used in) financing activities | 6,879 | (16,998) | 28,186 | 7,901 | |||||
Net change in cash | (2,423) | 29 | (5,181) | (325) | |||||
Cash at beginning of period | 2,423 | 2,484 | 5,181 | 2,838 | |||||
Cash at end of period | $ | – | $ | 2,513 | $ | – | $ | 2,513 | |
Interest and taxes reflected as operating activities | |||||||||
Net interest paid | $ | 450 | $ | 381 | $ | 1,038 | $ | 1,133 | |
Income taxes (received) paid | (1,975) | 5,150 | 3,748 | 18,257 |
See accompanying notes to condensed consolidated financial statements. |
Notes to condensed consolidated financial statements
Three-month and nine-month periods ended
(Tabular amounts are expressed in thousands of Canadian dollars, except per share and per option amounts)
The Corporation's businesses experience significant seasonality due to, among other factors, seasonal advertising patterns, consumers' viewing, reading and listening habits, demand for production services from international and local producers, and demand for content from global broadcasters. Because the Corporation depends on the sale of advertising for a significant portion of its revenues, operating results are also sensitive to prevailing economic conditions, including changes in local, regional and national economic conditions, particularly as they may affect advertising spending. In view of the seasonal nature of some of the Corporation's activities, the results of operations for interim periods should not necessarily be considered indicative of full-year results.
Since
1. Basis of presentation
These consolidated financial statements were prepared in accordance with the International Financial Reporting Standards ("IFRS") issued by the
These condensed consolidated financial statements were approved by the Corporation's Board of Directors on
Certain comparative figures for the three-month and nine-month periods ended
2. Revenues
Three-month periods | Nine-month periods | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Advertising services | $ | 50,472 | $ | 58,998 | $ | 189,527 | $ | 203,594 |
Royalties | 33,391 | 36,045 | 101,778 | 106,123 | ||||
Rental, postproduction and distribution services and other services rendered(1) | 32,709 | 39,560 | 88,434 | 93,453 | ||||
Product sales(2) | 13,947 | 16,100 | 42,746 | 47,763 | ||||
$ | 130,519 | $ | 150,703 | $ | 422,485 | $ | 450,933 |
1 | Revenues from rental of soundstages, mobiles, equipment and rental space amounted to |
2 | Revenues from product sales include newsstand and subscription sales of magazines and sales of audiovisual content. |
3. Purchases of goods and services
The main components of purchases of goods and services are as follows:
Three-month periods | Nine-month periods | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Rights and audiovisual content costs | $ | 53,787 | $ | 57,512 | $ | 222,491 | $ | 218,125 |
Printing and distribution | 3,385 | 3,990 | 10,090 | 11,178 | ||||
Services rendered by the parent corporation: | ||||||||
- Commissions on advertising sales | 4,536 | 4,867 | 17,674 | 18,430 | ||||
- Other | 2,381 | 1,962 | 6,845 | 6,357 | ||||
Building costs | 3,786 | 3,952 | 12,247 | 12,135 | ||||
Marketing, advertising and promotion | 3,692 | 3,543 | 11,988 | 11,742 | ||||
Other | 6,588 | 5,877 | 19,484 | 16,907 | ||||
$ | 78,155 | $ | 81,703 | $ | 300,819 | $ | 294,874 |
4. Financial expenses
Three-month periods | Nine-month periods | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Interest on debt | $ | 384 | $ | 228 | $ | 764 | $ | 614 |
Amortization of financing costs | 13 | 13 | 39 | 39 | ||||
Interest on lease liabilities | 109 | 144 | 340 | 424 | ||||
Interest (income) expense related to defined-benefit plans | (115) | 189 | (341) | 571 | ||||
Foreign exchange (gain) loss | (285) | (12) | (190) | 113 | ||||
Other | (42) | 87 | 46 | 294 | ||||
$ | 64 | $ | 649 | $ | 658 | $ | 2,055 |
5. Operational restructuring costs and other
Three-month periods | Nine-month periods | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Operational restructuring costs | $ | 49 | $ | 16 | $ | 164 | $ | 394 |
Other | – | 4 | 18 | (212) | ||||
$ | 49 | $ | 20 | $ | 182 | $ | 182 |
Operational restructuring costs
For the three-month and nine-month periods ended
Three-month periods | Nine-month periods | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Broadcasting | $ | – | $ | 68 | $ | 102 | $ | 729 |
Film Production & Audiovisual Services | 49 | – | 49 | 7 | ||||
Magazines | – | (52) | 13 | (342) | ||||
$ | 49 | $ | 16 | $ | 164 | $ | 394 |
Other
During the second quarter of 2022, the Corporation recorded a
During the same period, the Corporation reversed a
For the first nine months of 2021, the Corporation also recorded a
6. Capital stock
(a) Authorized capital stock
An unlimited number of Class A common shares, participating, voting, without par value.
An unlimited number of Class B shares, participating, non-voting, without par value.
An unlimited number of preferred shares, non-participating, non-voting, with a par value of
(b) Issued and outstanding capital stock
4,320,000 Class A common shares | $ | 72 | $ | 72 | ||
38,885,535 Class B shares | 207,208 | 207,208 | ||||
$ | 207,280 | $ | 207,280 |
7. Stock-based compensation and other stock-based payments
(a) Stock option plans
Outstanding options | ||||
Number | Weighted average | |||
As at | 369,503 | $ | 2.09 | |
Granted | 150,000 | 2.76 | ||
As at | 519,503 | $ | 2.29 | |
Vested options as at | 82,664 | $ | 3.53 | |
Quebecor | ||||
As at | 207,295 | $ | 31.12 | |
Granted | 60,000 | 27.85 | ||
Transferred | (23,079) | 30.69 | ||
As at | 244,216 | $ | 30.36 | |
Vested options as at | 33,496 | $ | 29.50 | |
During the three-month period ended
During the nine-month period ended
7. Stock-based compensation and other stock-based payments (continued)
(b) Deferred stock unit ("DSU") plans for executives
The following table shows changes in outstanding DSUs during the nine-month period ended
Outstanding units | ||||
Corporation stock units | Quebecor stock units | |||
Balance as at | 102,648 | 14,874 | ||
Granted | – | 413 | ||
Transferred | (7,401) | (1,611) | ||
Balance as at | 95,247 | 13,676 |
During the nine-month period ended
(c) Deferred stock unit ("DSU") plan for directors
Outstanding units | ||||
Corporation stock units | ||||
Balance as at | 385,440 | |||
Granted | 44,158 | |||
Balance as at | 429,598 |
During the three-month and nine-month periods ended
(d) Stock-based compensation expense
During the three-month and nine-month periods ended
8. Pension plans and post-retirement benefits
The gain on remeasurement of defined benefit plans recognized on the consolidated statement of comprehensive income results from the increase in the fair value of pension plan assets for the three-month period ended
9. Segmented information
Management made changes to the Corporation's management structure at the beginning of the year. As a result of those changes, the activities of the
The Corporation's operations consist of the following segments:
- The Broadcasting segment, which includes the operations of TVA Network, specialty services, the marketing of digital products associated with the various televisual brands, and commercial production and custom publishing services, including those of its Communications Qolab inc. subsidiary;
- The Film Production & Audiovisual Services segment, which through its subsidiaries Mels Studios and Postproduction G.P. and MELS Dubbing Inc. provides soundstage, mobile and production equipment rental services, as well as dubbing and described video ("media accessibility services"), postproduction, virtual production and visual effects services;
- The Magazines segment, which through its
TVA Publications inc. subsidiary, publishes magazines in various fields including the arts, entertainment, television, fashion and decorating, and markets digital products associated with the various magazine brands; - The Production & Distribution segment, which through the companies in the Incendo group and the
TVA Films division produces and distributes television shows, movies and television series for the world market.
9. Segmented information (continued)
Three-month periods | Nine-month periods | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Revenues | ||||||||
Broadcasting | $ | 104,601 | $ | 111,118 | $ | 340,908 | $ | 354,198 |
Film Production & Audiovisual Services | 17,304 | 28,070 | 54,989 | 64,036 | ||||
Magazines | 9,945 | 11,630 | 29,980 | 33,645 | ||||
Production & Distribution | 3,279 | 5,071 | 11,715 | 14,737 | ||||
Intersegment items | (4,610) | (5,186) | (15,107) | (15,683) | ||||
130,519 | 150,703 | 422,485 | 450,933 | |||||
Adjusted EBITDA (negative adjusted EBITDA)(1) | ||||||||
Broadcasting | 14,067 | 21,624 | (1,550) | 24,326 | ||||
Film Production & Audiovisual Services | 2,585 | 10,565 | 8,601 | 18,106 | ||||
Magazines | 1,222 | 2,048 | 3,308 | 5,569 | ||||
Production & Distribution | 49 | 1,222 | 1,113 | 3,521 | ||||
Intersegment items | 272 | 45 | 237 | 83 | ||||
18,195 | 35,504 | 11,709 | 51,605 | |||||
Depreciation and amortization | 7,446 | 8,136 | 22,528 | 24,338 | ||||
Financial expenses | 64 | 649 | 658 | 2,055 | ||||
Operational restructuring costs and other | 49 | 20 | 182 | 182 | ||||
Income (loss) before income taxes (income tax recovery) and share of loss (income) of associates | $ | 10,636 | $ | 26,699 | $ | (11,659) | $ | 25,030 |
The above-noted intersegment items represent the elimination of normal course business transactions between the Corporation's business segments.
1. | The Chief Executive Officer uses adjusted EBITDA as a measure of financial performance for assessing the performance of each of the Corporation's segments. Adjusted EBITDA is defined as net income (loss) before depreciation and amortization, financial expenses, operational restructuring costs and other, income taxes (income tax recovery) and share of loss (income) of associates. Adjusted EBITDA as defined above is not a measure of results that is consistent with IFRS. |
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