GuruFocus –
- Consolidated Revenue: $327 million, a 12% decrease from last year.
- Consolidated Segment Profit: $84 million, reflecting lower revenue and a 3% increase in amortization of program rights.
- Consolidated Segment Profit Margin: 26%, compared to 31% last year.
- Free Cash Flow: Negative $10 million, impacted by lower segment profit, higher restructuring costs, and seasonal working capital use.
- Net Debt to Segment Profit: 4.48x, compared to 3.84x at August 31, 2024.
- TV Segment Revenue: $304 million, down 11%.
- TV Advertising Revenue: Down 16% in Q1.
- Subscriber Revenue: $116 million, down 2%.
- TV Segment Profit Margin: 28%, compared to 36% in the prior year.
- Radio Segment Revenue: $24 million, a 14% decrease from the prior year.
- Radio Segment Profit Margin: 16%, down from 17% in the prior year.
- Employee Costs: Decreased by 14% on a consolidated basis.
- Cash and Cash Equivalents: $88 million at the end of the first quarter.
- Available Credit Facility: Approximately $31 million available to be drawn.
Release Date: January 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Successful launch of new lifestyle brands, Flavor Network and Home Network, with strong advertiser interest and audience demand.
- Corus (TSX:) was the only Canadian private broadcaster to see a lift in overall share of viewing during the fall season.
- Strong performance in specialty entertainment television, holding 16 of the top 20 programs for the fall season.
- Streaming platforms showed significant growth, with total hours streamed increasing by 24% year-over-year.
- Cost-saving initiatives resulted in a meaningful decrease of 14% in employee costs on a consolidated basis.
Negative Points
- Consolidated revenue decreased by 12% year-over-year, impacted by lower television advertising demand and subscription revenue.
- Free cash flow was negative $10 million, affected by lower segment profit and higher restructuring costs.
- Net debt to segment profit ratio increased to 4.48x, driven by lower segment profit and increased borrowing.
- Television advertising revenue is expected to continue declining due to oversupply of digital advertising inventory.
- Challenges in monetizing improved audiences due to changes in the advertising marketplace and increased competition from streaming services.
Q & A Highlights Q: Are there any potential regulatory lifelines expected in the next few months amidst current challenges?
A: Troy Reeb, Co-CEO, mentioned that while regulatory processes are slow, there is optimism about the CRTC’s new consultation on market dynamics. However, no significant short-term relief is anticipated. John Gossling, Co-CEO and CFO, added that potential cash contributions from Google (NASDAQ:)’s C18 payments could be helpful, but details are not yet confirmed.
Q: Can you provide insights into the subscription revenue outlook for TV services in Q2 and Q3?
A: John Gossling stated that while specific subscriber data is hard to obtain, streaming revenues are performing well, with a record high number of paying streaming subscribers at the end of Q1. The linear side is expected to remain similar to Q1, with a 2% decline in subscriber revenue.
Q: How is Corus addressing the covenant coverage for Q2 and Q3, given the upcoming stricter ratios?
A: John Gossling explained that for Q2, a high covenant level of 7.25x leverage was negotiated, providing a buffer. Beyond that, Corus is actively working on a comprehensive plan to address the debt situation, though specifics cannot be disclosed at this time.
Q: What are the expectations for the transition from Food and HGTV to the new brands in terms of advertising and audience?
A: Troy Reeb noted that while there are fluctuations due to new competing channels, Corus remains confident in maintaining dominance in the lifestyle space. The transition offers more programming flexibility, allowing better alignment of supply with demand.
Q: Can you elaborate on the disconnect between strong audience ratings and the pressure on TV advertising revenue?
A: Troy Reeb attributed the pressure to an increase in premium video digital inventory from new ad tiers by major streaming services. This has led to a competitive environment where Corus must continue to demonstrate the value of its reach and targeting capabilities to advertisers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
