Q3 2025 Corus Entertainment Inc Earnings Call
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Judy: Good morning, My name is Judy and that will be a conference operator today.
Ludi: Good morning, my name is Ludi and I will be your conference operator today.
Ludi: At this time, I would like to welcome everyone to the Corus Entertainment Q3 2025 Analyst and Investor Conference Call. All lines have been placed on mute to prevent any background noise.
This time I would like to welcome everyone to the chorus Entertainment skews the 2025 in our last Investor Conference call.
Judy: All lines have been placed on mute to prevent any background noise.
Ludi: 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 followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star followed by the number 2. Thank you. As a reminder, this call is being recorded.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time keep you press the star followed by the number one of your telephone keypad.
You would like to withdraw your question. Please press star followed by the brachial. Thank you as a reminder, this call is being recorded.
John Gossling: I will now turn the call over to Mr. John Gossling, CEO of Corus Entertainment. Mr. Gossling, you may begin your conference. Great. Thank you, Ludi, and good cooler morning, everyone, and welcome to Corus Entertainment's Fiscal 2025 Third Quarter Earnings Call. I'd like to remind everyone, as usual, that we have slides to accompany today's call, and you can find them on our website at www.corusent.com under the Investor Relations section.
Speaker Change: Now I'll turn the call over to Mr. John Gossiping D O of Corus Entertainment. Mr. Goldstein, you may begin your conference.
Mr. Goldstein: Great. Thank you Rudy and good cooler morning, everyone and welcome to course entertainments fiscal 2025 third quarter earnings call.
Mr. Goldstein: I'd like to remind everyone as usual that we have slides to accompany today's call and you can find them on our website at www Dot of course in Dot com under the Investor Relations section.
I'll start off today by drawing your attention to our standard cautionary statement, which can be found on slide two we note that forward looking statements may be made during this call and actual results could differ materially from forecasts projections or conclusions in these statements.
John Gossling: I'll start off today by drawing your attention to our standard cautionary statement, which can be found on slide 2. We note that forward-looking statements may be made during this call, and actual results could differ materially from forecast projections. for conclusions in these statements.
John Gossling: We'd also like to remind those on the call today that in addition to disclosing results in accordance with IFRS, Corus 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.
Judy: We'd also like remind those on the call today that in addition to disclosing results in accordance with IRS of course also provides supplementary none ive rats are 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.
Judy: Today, we will be referring to certain non-GAAP measure in our remarks.
John Gossling: Additional information on these non-GAAP measures, the company's reported results, and factors and assumptions related to forward-looking information can be found in our third quarter report to shareholders and the 2024 annual report, which can be found on CDAR Plus or on our investor relations website.
Information on these non-GAAP measures the company's reported results and factors and assumptions related to forward looking information can be found in our third quarter report to shareholders and in 2024 annual report, which can be found on SEDAR plus four on our Investor Relations website.
John Gossling: Joining me on today's call are Jennifer Lee, who is our Chief Administrative and Legal Officer, as well as Senior Finance Team members and veterans, of course, Doug Spence and Anne Duggan, all of whom are outlined on slide three. Now, over to slide four.
Judy: Joining me on today's call are Jennifer Lee, who is our chief administrative and legal officer as well as senior finance team members and veterans acquired Ducks dense and Anne Duggan, all of whom are outlined on slide three.
Now over to slide four I'll start today's call with a brief update on the recent change in the CEO role in.
John Gossling: I'll start today's call with a brief update on the recent change in the CEO role. In the past year, we did have a co-CEO structure, and that enabled the company and the management team to focus on the various challenges and initiatives throughout the business that we were navigating. Given the completion of many key actions that I will touch on in a moment, the board decided to revert to a more typical structure with a single CEO. We do want to thank Troy Reeb for his contributions to our company and the industry over the past 25 years.
Judy: In the past year, we did have a co CEO structure and that enabled the company the management team to focus on the various challenges and initiatives throughout the business.
Judy: We were navigating given the completion of many key actions that I will touch on in a moment the board decided to revert to a more typical structure with a single CEO.
Judy: What do you Wanna, Thank Troy Reed for his contributions to our company and the industry over the past 25 years.
John Gossling: And on behalf of the board and all of us at Corus, we wish him all the best in his next chapter. For my part, I look forward to continuing to work with our strong leadership team and our many talented individual teams building on the nearly 10 years we have already spent – sorry, I have already spent in a leadership role here at Corus. Over the past year, since I first transitioned to the co-CEO role, we've already undertaken meaningful changes to our business, all to position ourselves for a more sustainable future and to adapt to an ever-changing industry.
Judy: The board and all of US of course, we wish him all the best in his next chapter.
Judy: For my part I look forward to continuing to work with our strong leadership team and our many talented individual teams building on the nearly 10 years, we have already spent I'm sorry, I've already spent in a leadership role here at coarse.
Judy: Over the past year since my first transition to the co CEO role, we have already undertaken meaningful changes to our business all to position ourselves for a more sustainable future and to adapt to an ever changing industry.
Judy: Just a few things to note in March as you'll have seen we assigned amended and extended the credit facility, which provides improved terms and better positions us to create sustainability in our business.
John Gossling: A few things to note, in March, as you will have seen, we have signed, amended, and extended the credit facility, which provides improved terms and better positions for us to create sustainability in our business. We have also significantly reduced our operating costs and gained efficiencies through workflow optimization and unfortunate but necessary headcount reductions of nearly 30% compared to where we were in August of 2022. At the same time, we have pursued portfolio optimization through the sunset of three specialty television services and divested of certain real estate assets. Global remains one of Canada's most trusted and most watched networks and had the best performance in over a decade.
Judy: We have also significantly reduced our operating costs and gained efficiencies through workflow optimization and unfortunate, but necessary head count reductions of nearly 30%.
Judy: Paired to where we were in August of 2022.
Judy: At the same time, we have pursued portfolio optimization through the sunset of three specialty TV services and divested of certain real estate assets.
Judy: Global remains one of Canada's most trusted and most watched networks and had the best performance in over a decade.
John Gossling: Overall viewing of Global News is up 4% year-over-year in Spring 2025 and 6% for the year to date. We also launched our two rebranded specialty lifestyle networks, Home and Flavor, and added fresh and exciting unscripted programming to our Slice brand. In turn, this has increased the value proposition of our popular digital assets, Stack TV and the Global TV app.
Judy: We're all getting the global news is up 4% year over year in spring 'twenty, 'twenty, five and 6% for the year to date.
Judy: We also launched our to rebrand, especially lifestyle networks home and flavor and added a fresh and exciting unscripted programming to our slice brand.
Judy: In turn this has increased the value proposition of our popular digital asset stack T V and the global TV App.
John Gossling: And most important, perhaps, is that we continue to make, produce, and acquire the hit content Canadian viewers love, deployed across our conventional networks, specialty brands, and digital platforms. All right, moving to slide five. In fact, June marks a very exciting time for our business as we unveil our programming lineup for the upcoming broadcast year. As we recently shared in our upfront, our programming schedule is packed with exciting new shows and returning hits that build on the success we experienced over this year. Corus connects with over 31 million Canadians every month, bringing them the content they want, where they want to watch and listen.
Judy: And most important perhaps is that we continue to make produced and acquired the head content K viewers love deployed across our conventional network specialty brands and digital platforms.
Judy: Alright, moving to slide five in fact June marks a very exciting time for our business as we unveil our programming lineup for the upcoming broadcast year as we recently shared in our upfront our programming schedule is packed with exciting new shows and returning kits that builds on the success we experienced over this year.
Judy: Of course connects with over 31 million kids every month, bringing them the content, they want where they want to watch and listen to it.
John Gossling: Global TV was number one in core prime time for fall 2024 and spring 2025 in the adults 18 plus demo and looking to the fall We are well positioned for another great year with over 16 hours of simulcast and top returning titles like 9-1-1 Matlock the NCIS franchise Saturday Night Live which holds the crown as late nights number one show Ghost which is the number one comedy and of course Survivor the number one reality show in Canada as it heads into its landmark 50th We are also excited to have secured some new titles, for example, Workplace Comedy DMV, the latest in the FBI franchise CIA, and the highly anticipated drama Sheriff Country, which is a spin-off from the hit series Firecatcher.
Global TV was number one in core Prime time for fall 2024, and spring 2025, and the adults 18, plus demo and look into the fall we are well positioned for another great year with over 16 hours, a simulcast and top returning titles like 911 that lock gas franchise.
Judy: Saturday Night live which holds the Crown is late night number one show ghost because number one comedy and of course survivor and everyone reality show in Canada as it heads into its landmark 50 a season.
Judy: We are also excited to have secured some new titles for example, workplace comedy D. M. B somebody asked me I forgot franchise DAA and the highly anticipated drama share of country, which is a spin off from the hit series fire country.
John Gossling: Alright, on slide 6 on specialty programming, we currently have 75% of the top 20 entertainment specialty programs. And as we announced at the upfront, we have secured another incredibly strong upcoming lineup. Our exclusive content partnership with NBCUniversal is set to deliver a new Peacock and Sky original series, including The Paper, which is from the universe of the megahit The Office, The Copenhagen Test, featuring Canadian and now global star Simu Liu, and All Her Fault, a suburban thriller starring Sarah Snook. We will also welcome back new seasons of hits like Ted and Bel Air. Our unscripted and reality networks will see the return of the number one entertainment specialty program, The Curse of Oak Island, as well as our very own Top Chef Canada, which is coming back for season 12.
Judy: Alright on slide six on specialty programming. We currently have 75% of the top 20 entertainment specialty programs and as we announced at the upfront we have secured another incredibly strong upcoming lineup.
Judy: Our exclusive content partnership with NBC Universal is set to deliver new Peacock and Sky original series, including the paper, which is from the universe of the Mega hits The office, the Copenhagen test featuring Canadian and now Globalstar seemingly you and all of her fault a suburban thriller starring Saracen up we.
Judy: We will also welcome back these seasons that hits like Ted in Bel Air.
Speaker Change: Scripted and reality networks will see the return of the number one entertainment specialty program that Chris spoke island as well as their very own top chef, Canada, which is coming back for season 12.
John Gossling: We're also excited to welcome back Gordon Ramsay's Kitchen Nightmares and of course original series House of Ali and Rock Solid Build. Some of our new specialty series include Life is Messy and World War II with Tom Hanks. You can also expect new course originals like Building Bomber, Halloween Bake Shop, and Holiday Bake Shop. These are just a few of the titles that will drive tremendous performance, especially including our Refresh Bestie channel. I'd like to experience the particular success we are experiencing on Home and Flavor and our Homegrown Factual Reality series slides. Home and Flavor are both top 20 English language specialty services and the number one and number two lifestyle network.
Judy: We also are excited to welcome back Gordon Ramseys kitchen nightmares.
Judy: And our course original series serious How's the valley and rock solid belts.
Judy: Some of our new specialty series include life is messy and World War, two with Tom Hanks.
Judy: You can also expect nucor's originals like building Baumler Halloween bake shop in holiday bake shop.
Speaker Change: These are just a few of the titles that will drive tremendous performance on especially including our refresh specialty channels.
Judy: They like the experienced particular success.
Speaker Change: On home and flavor and our homegrown factuality serious life common flavor of both top 20, English language specialty services and the number one and number two lifestyle networks.
John Gossling: Place also ranks in the top 20, with audiences up 5% this spring in the key Adult 2554 demo, benefiting from refreshed content and the addition of top shows from the daily news and crime genre. All three of these services are besting their newly created direct competitor services by considerable margins.
Speaker Change: This ranks the top 20 with audience is up 5%. This spring in the key adult 25, 54 demo benefiting from refresh content and the addition of top shows from the daily news and crime genre is.
Speaker Change: All three of these services are best thing, they're newly create a direct competitor services by considerable margin.
Speaker Change: Alright, turning to slide seven.
John Gossling: All right, turning to slide seven. Our streaming portfolio had its strongest winter, spring, season really ever for tuning, and over 19 million average hours were streamed, and that's up 7% year-over-year for the winter-spring season. We are pleased that Stacked TV subscriptions have remained relatively resilient following our Q2 price adjustment. Prior to the launch of our strong upcoming fall schedule, we have added hundreds of hours of video on demand to the service, and these include back seasons of popular history, lifetime, and detour series such as Alone, Curse of Oak Island, Married at First Sight, Gypsy Rose, Life After Lockup, Supernatural, and The Mentalist, all of which create more value for existing and new subscribers.
Speaker Change: Our streaming portfolio had its strongest winter spring season really ever for tuning and over 19 million average hours were streamed and thats up 7% year over year for the winter spring season.
Speaker Change: We are pleased that that could be subscriptions have remained relatively resilient. Following our Q2 price adjustment prior to the launch of our strong upcoming fall schedule. We have added hundreds of hours of video on demand service and these include back seasons of popular history lifetime and Detour series, such as alone Christopher Oak Island, Meredith first night Gypsy Rose life after lockup Super.
Speaker Change: Natural and the Mentalist, all of which create more value for existing and new subscribers.
John Gossling: These additions, as well as the launch of new seasons of key subscription drivers like Alone, Rick and Morty, and Big Brother, are expected to support our efforts to increase viewer engagement heading into the fall. Our global TV app continues to gain momentum with audiences, particularly in live viewing. Global News, Entertainment Streams, and in recent months we've seen some of the highest levels of engagement since launching the app. We've also implemented live linear dynamic ad insertion on all of our live streams and made progress on enhanced search capabilities on key connected TV platforms. At a high level, the advertising environment remains very challenging, characterized by ongoing uncertainty in the economic environment, an oversupply of digital inventory from foreign competitors, and generally lower advertising demand on linear television.
Speaker Change: These additions as well as the launch of new seasons of key subscription drivers like alone, Rick and Morty and Big brother are expected to support our efforts to increase your engagement heading into the fall.
Speaker Change: Our global TV App continues to gain momentum with items as particularly in my viewing.
Speaker Change: Global News entertainment streams and in recent months, we've seen some of the highest levels of engagement is launching the app.
Speaker Change: You've also implemented live linear dynamic AD insertion on all of our livestreams and made progress on enhanced search capabilities on key connected TV platforms.
Speaker Change: At a high level.
Speaker Change: The advertising environment remains very challenging characterized by ongoing uncertainty in the economic environment and oversupply of digital inventory from foreign competitors and generally lower advertising demand on linear television.
John Gossling: continues to create a very low visibility environment industry-wide. As you can see in our T3 results, which I'll turn to next, we have and will focus on the most attractive opportunities whenever possible and continue to be disciplined in cost management.
Judy: Great stories continues to create a very low visibility environment industry wide as you can see in our Q3 results, which I will turn into next we have and will focus on the most attractive opportunities whenever possible and continue to be disciplined in cost management.
Judy: Alright, moving on to slide eight for an overview of our consolidated Q3 results.
John Gossling: All right, moving on to slide eight for an overview of our consolidated Q3 results. As we expected, the Canadian federal election provided a tailwind for us in the quarter, partially offsetting pressure in other advertising categories, and leading to results that were in line with our Q3 outlook for TV advertising. This combined with lower subscription revenue contributed to consolidated revenue of $298 million, and that was a 10% decrease from the prior year. Consolidated second profit was $62 million per quarter, reflecting the impact of the lower revenue and partially offset by the ongoing benefits of our cost control measure.
Judy: As we expected the Canadian federal election provided a tailwind for us in the quarter, partially offsetting pressure in other advertising categories and leading to results that were in line with our Q3 outlook for TV advertising. This combined with lower subscription revenue contributed to consolidated revenue of $298 million and that was a 10% decrease from the prior year.
Judy: Consolidated segment profit was $62 million for the quarter, reflecting the impact of lower revenue and partially offset by the ongoing benefits of our cost control measures.
John Gossling: We delivered significant total general and administrative expense reductions of $10 million or 9% in the quarter. This was at the high end of our third quarter outlook and includes a decrease of 7% in employee costs, all reflecting our state commitment to managing expenses and right-sizing our business. Consolidated segment profit margins for the quarter were 21% and that's an increase from 20% last year. Pre-cash flow of negative $33 million in the quarter decreased from last year and that reflects lower segment profit, seasonally higher working capital usage and net program rights of some investments as well as higher restructuring costs.
Judy: We delivered significant total general and administrative expense reductions of $10 million or 9% in the quarter. This was at the high end of our third quarter outlook and includes a decrease of 7% and employee costs, all reflecting our stated commitment to manage expenses and right sizing our business.
Judy: Consolidated segment profit margins for the quarter were 21% and that's an increase from 20% last year.
Judy: Free cash flow of negative $33 million in the quarter decreased from last year and that reflects lower segment profit seasonally higher working capital usage and that program rights of some investments as well as higher restructuring costs.
John Gossling: At the end of the third quarter, we were in compliance with all loan covenants and had $82 million of cash and cash equivalents, and approximately $45 million was available to be drawn under the revolving credit facility. Net debt to segment profit was 5.39 times at the end of the third quarter, and that compares to 3.84 times at the end of August 2024. That primarily reflects the impact of the lower segment profit. Looking ahead to the fourth quarter of fiscal 2025, the advertising environment factors discussed earlier are incorporated into our outlook. As a result, the over-year decline in television advertising revenue for Q4 of fiscal 2025 is expected to be in the 20% range.
Judy: At the end of the third quarter, we were in compliance with all loan covenants and had $82 million of cash and cash equivalents and approximately $45 million was available to be drawn under the revolving credit facility.
Judy: Net debt to segment profit was $5 three nine times at the end of the third quarter and that compares to $3 eight four times at the end of August 2024 that primarily reflects the impact of the lower segment profit.
Judy: Looking ahead to the fourth quarter of fiscal 2025, the advertising environment factors discussed earlier are incorporated into our outlook as a result year over year decline in TV advertising revenues for Q4 fiscal 'twenty.
Judy: <unk> to be in the 20% range amortization of TV program rate is once again expected to be relatively flat compared to the prior year quarter.
John Gossling: Amortization of TV program rights is once again expected to be relatively flat compared to the prior quarter, and our implementation of additional cost reduction initiatives is expected to benefit consolidated general admin expenses in the range of 10% to 15% reduction compared to last year. As we pursue additional initiatives to offset the lower expected revenue and await further details on the recent CRTC decision concerning the quantum of Corus's funding from the independent local news. Well, it's too early to comment on advertising trends for the upcoming broadcast year, but I mentioned earlier, we are excited and confident with the strength of our content and the 2025-26 programming lineup.
Judy: And our implementation of additional cost reduction initiatives is expected to benefit consolidate general and admin expenses in the range of 10% to 15% reduction compared to last year as we pursue additional initiatives to offset the lower expected revenue and await further detail on the recent CRT C decision considering the quantum of course as funding from the independent.
Judy: Local needs fund.
Judy: While it's too early to comment on advertising trends for the upcoming broadcast year, but I mentioned earlier, we're excited and confident that the strength of our content and the 2025 26 programming lineup. Our upfront was very well received and we are looking forward to further building on our strong audience performance this year.
John Gossling: Our upfront was very well received, and we are looking forward to further building on our strong audience performance this year.
Doug Spence: At this point, I'll pass it to Doug Spence, who will walk through the segmented results. Thank you, John. I'll start on slide nine. TV segment revenues were $275 million for the quarter, down 11%. This was mainly driven by TV advertising revenue, which declined 15% in Q3. Subscriber revenue of $111 million for the quarter was down 5%, primarily reflecting declines in the traditional distribution system and the sunset of three of our specialty television networks in the first half of this fiscal year. Excluding the impact of these portfolio changes, subscriber revenue was down approximately 2%. distribution, production, and other revenues were lower for the quarter by $0.6 million, driven by fewer episode deliveries and reduced service.
Speaker Change: At this point, a passive Doug Spence, who will walk through the segmented results.
Doug Spence: Thank you John I'll start on slide nine.
Doug Spence: Television segment revenues were $275 million for the quarter down 11%. This was mainly driven by TV advertising revenue, which declined 15% in Q3.
Doug Spence: Subscriber revenue of 101 hundred $11 million for the quarter was down 5%, primarily reflecting declines in the traditional distribution system and the sunset of three of our specialty TV networks in the first half of this fiscal year.
Doug Spence: Excluding the impact of these portfolio changes subscriber revenue was down approximately 2%.
Doug Spence: Distribution production and other revenues were lower for the quarter by <unk> 6 million drove.
Doug Spence: Driven by fewer episodes deliveries and reduced surface work.
Doug Spence: Total TV expenses were down 12% in the third quarter compared to last year. This decrease was mainly driven by 3% lower amortization of programming. A $9 million decrease in the amortization of film investments, which includes changes in film tax credit assumptions and the sale of aircraft in the prior year. as well as a decrease in other cost of sales of approximately $5 million related to certain digital initiatives. As John mentioned, the financial impacts of our cost containment measures are also evident with TV employee costs decreasing 10%. as a result of headcount reductions over the prior year quarter.
Doug Spence: Total TV expenses were down 12% in the third quarter compared to last year.
Doug Spence: This decrease was mainly driven by 3% lower amortization of program rights.
Doug Spence: A $9 million decrease in the amortization of film investments, which include which includes changes in film tax credit assumptions and the sale of aircraft in the prior year.
Doug Spence: Well as a decrease in other cost of sales of approximately $5 million related to certain digital initiatives.
Doug Spence: As John mentioned, the financial impacts of our cost containment measures.
John Gossiping: Are also evident with TV employee costs decreasing 10%.
Doug Spence: As a result of head count reductions over the prior year quarter. We also delivered a 15% decline in other general and administrative expenses through our ongoing cost management initiatives.
Doug Spence: We also delivered a 15% decline in other general and administrative expenses through our ongoing cost management initiative. Overall, TV segment profit was down 8% or $5.7 million in the third quarter, with cost reduction measures partially mitigating the impact of lower revenue. TV segment profit margins were 23% in the current year quarter, up from 22% in the prior year period.
Doug Spence: Overall, TV segment profit was down 8% or $5 7 million in the third quarter with cost reduction measures, partially mitigating the impact of lower revenues.
Doug Spence: Television segment profit margins were 23% in the current year quarter up from 22% in the prior year period.
Doug Spence: Moving to slide 10, radio segment revenue was $23 million for the quarter, just 1% lower than the prior year, as we benefited from election spending and stronger performance in Edmonton and Winnipeg, driven by NHL playoff. Radio segment profit of $5.1 million increased significantly over the prior year quarter with a 13% expense decline from cost containment measures more than offsetting the lower advertising As a result, radio segment profit margin doubled to 22% from 11% in the prior year period.
Doug Spence: Moving to slide 10.
Doug Spence: <unk> segment revenue was $23 million for the quarter, just 1% lower than the prior year as we benefited from election spending and stronger performance in Edmonton and Winnipeg, driven by NHL playoffs.
Doug Spence: Radio segment profit of $5 $1 million increased significantly over the prior year quarter with a 13% expense decline from cost containment measures more than offsetting the lower advertising demand.
Doug Spence: As a result radio segment profit margin doubled to 22% from 11% in the prior year period.
Jennifer Lee: I'll now turn it over to Jen for comments on some important regulatory developments. Thanks, Doug. Let's move to slide 11. So earlier this month, we were pleased that the PRTC confirmed Corus's eligibility for funding from the Independent Local News Fund, or ILNR. As Canada's largest independent local television news provider, we have consistently maintained that our 15 local global TV stations have met the LNF criteria. CRTC also confirmed that under revised ILNF criteria... Broadcast ownership groups can receive up to 45% of the total funding. In its recent decision, the CRTC provided some estimates that the fund will grow to approximately $50 to $60 million by the end of 2020.
Doug Spence: I'll now turn it over to John for comments on some important regulatory developments.
John Gossiping: Thanks, Doug, let's move to slide 11.
Speaker Change: So earlier this month, we were pleased with guarantee see confirmed courses eligibility for funding from the independent local news fund.
Doug Spence: Irina.
Doug Spence: As Canada's largest independent local TV news provider, we have consistently maintained that our 15 local global television stations have met the <unk> criteria for some time.
Doug Spence: <unk> also confirmed that under revised island that criteria.
Doug Spence: Cash ownership groups can receive up to 45% of the total funding and Kevin here.
Doug Spence: In its recent decision the CTC provided some estimates that the fund will grow to approximately $50 million to $60 million for the 2026 broadcast here.
Doug Spence: And we're still confirming timing and financial details. So we do not have any core specific numbers to share at this time for fiscal 2025 or beyond however.
Jennifer Lee: And we're still confirming timing and financial details, so we do not have any core specific numbers to share. for Fiscal 2025.
Jennifer Lee: However, we look forward to continuing the important work of creating and delivering local news to our community. under more equitable funding. Relatedly, I think you'll recall that the increased ILNF financing base results from the 2024 CRTC. that requires large stand-alone online streaming services to direct a percentage of their prior year's Canadian broadcast revenues to various funds that support Canadian broadcast policy priorities. That 5% base contribution, which includes the ILNF envelope, is payable by August 31st each year. However, that decision was appealed by some international streamers last year, and the matter was just heard by the court.
Doug Spence: However, we look forward to continuing the important work of creating delivering local news trucking communities and they're more comfortable funding framework.
Doug Spence: Relatedly I think youll recall that the increased island, a financing base results from the 2024 CTC decision.
Doug Spence: Requires large standalone online streaming services direct percentage at their prior years Canadian broadcast revenue to various funds that support Canadian broadcast perhaps policy priorities that include.
Doug Spence: Yes.
Doug Spence: That 5% base contribution which includes the island of envelope is payable on August 31, each year beginning in 2025.
Doug Spence: However that decision was appealed by some international streamers last year and the matter was just hurt by the court this month.
Jennifer Lee: As such, any future ILNF funding will also depend on the outcome of the... We hope to receive a decision affirming the requirement for these foreign players to finally begin contributing to the Canadian system in the future.
Doug Spence: As such any future Ireland funding will also depend on the outcome of these appeals.
Doug Spence: We hope to receive a decision affirming the requirement for these foreign place to finally begin contributing to king system in the coming months.
Jennifer Lee: I just also wanted to briefly note the important public hearing in which we just participated last week. It related to market dynamics and sustainability in the Canadian broadcast. Held by the CRTC as part of its implementation of Bill C-11, this proceeding is focused on ensuring Canadian broadcast rules promote a fair and competitive marketplace and a sustainable model for the delivery and discoverability of diverse At the hearing, as we've done for some time, we urge the Commission to implement measures to level the playing field between broadcasters and distributors, both traditional and online, to better serve Canadians and Canada's cultural policy objectives.
Doug Spence: And I just also wanted to briefly note important public hearing in which we just participated last week related to market dynamics and sustainability in the Canadian broadcast sector.
Doug Spence: Helped by the CRT fee as part of its implementation of LC 11. This proceeding is focused on ensuring Canadian broadcast rules come out a fair and competitive marketplace in a sustainable model for delivery and discovery company is diverse.
Doug Spence: Colin.
Doug Spence: At the hearing as we've done for some time, we urge the commission to implement measures to level, the playing field between broadcasters and distributors, both traditional online to better serve Canadians in Canada cultural policy objectives.
Jennifer Lee: To be clear, we advocate for smarter rules, not necessarily more rules. And we would like to see improved dispute resolution mechanisms among the various things you touched on as critical to managing the challenges.
Doug Spence: But to be clear, we advocate for smarter rules not necessarily Marvel.
Doug Spence: And we would like to see improve.
Doug Spence: The resolution mechanisms among the various things you touched on is critical to managing the challenges from foreign and Chinese fixing structural equities created by dominant domestic BD distributors.
Jennifer Lee: Fixing Structural Inequities Created by Dominant Domestic Media and Responding to Changes. all to sustain a healthy broadcast sector that delivers choice and quality.
Doug Spence: In responding to changes in the industry.
Doug Spence: <unk> sustained healthy broadcast sector that delivers choice and quality content to Canadian.
John Gossling: On that note, I'll turn it back to John. As Jen noted, our focus in the regulatory sphere is about advocating for smarter rules and processes that create sustainability and fairness in the broadcast sector. Regulatory changes that respond to the realities of the current environment, that include digital foreign giants subject to few rules and overly dominant BDUs, are critical to make Canadian broadcasters like Corus nimble and healthy for the longer term. We are still in a relatively low visibility advertising environment industry-wide, particularly when you look at the macroeconomic and environment factors overlaid on the industry ones.
John Gossiping: On that note I'll turn it back to John for some final comments great.
John Gossiping: Great. Thanks, as Jim noted our focus on the regulatory sphere is about advocating for smarter rules and processes that create sustainability and fairness in the broadcast sector.
Speaker Change: Oh, sorry changes to respond to the realities of the current environment that include digital foreign giant subject to few rules an overly dominant beta use are critical to make Canadian broadcasters like course, nimble and healthy for the longer term.
Doug Spence: We're still in a relatively low visibility advertising environment industry wide, particularly when you look at the macroeconomic environment factors overlaid on the industry ones. So it's probably not a surprise to hear that we are seeing advertising investment decisions being made increasingly closer to campaign launch or pause completely as companies await clarity whether it be on potential supply chain disruption.
John Gossling: So, it's probably not a surprise to hear that we are seeing advertising investment decisions being made increasingly closer to campaign launch or paused completely as companies await clarity, whether it be on potential supply chain disruptions or consumer confidence impacts on their business. For our part, as we head to the end of our fiscal 2025, our strategic and financial plan remains clear, appropriate, and, in our view, moving in the right direction. We continue to execute initiatives to strengthen our business, further stabilize the balance sheet, and rise through operations to meet the realities of the environment. We're making smart investments in areas and projects like digital services that promote sustainability and maximize revenue opportunities.
Doug Spence: <unk> or consumer confidence impacts on their business.
Doug Spence: Our part as we head to the end of our fiscal 2025, our strategic and financial plan remains clear appropriate and in our view moving in the right direction, we continue to execute initiatives to strengthen our business further stabilize the balance sheet and rightsize operations to meet the realities of the environment, we're making smart investments in areas and projects like digital services.
Doug Spence: The promote sustainability and maximize revenue opportunities.
John Gossling: Our team remains dedicated to working closely with advertising clients, providing support and innovative solutions to quickly adapt marketing strategies to meet evolving trends.
Doug Spence: Our team remains dedicated to working closely with advertising clients, providing support and innovative solutions to quickly adapt marketing strategies to meet evolving trends as I said earlier, our channels and programming lineup F. 'twenty six are positioned for tremendous audience success and I look forward to sharing the results of our fall launch when we provide our financial update for Q4.
John Gossling: As I said earlier, our channels and programming lineup, F26, are positioned for tremendous audience success, and I look forward to sharing the results of our fall launch when we provide our financial update for Q4.
John Gossling: On that note, I'll end today by thanking my colleagues on the leadership team for their support, as I move into the CEO role, and also thanking our exceptional teams, of course, for the dedication they show and the results they drive.
Doug Spence: On that note I'll end today by thanking my colleagues on the leadership team for their support as I move into the CEO role and also thinking and our exceptional teams of course, the dedication they show and the results they drive.
Ludi: Back to you, operator. Thank you.
Speaker Change: Back to you operator.
Doug Spence: Yeah.
Speaker Change: Thank you and ladies and gentlemen, we will now begin the question and answer session to ask a question you May press star followed by the number one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing any he did withdraw your question. Please press star followed by then a breakthrough that our first question comes from the line of Adam Shine.
Ludi: And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press a star followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press a star followed by the number two.
Adam Shine: With that, our first question comes from the line of Adam Shine with National Bank Financial. Please go ahead. Hello. Okay, the music ended. It wasn't on my side. Okay, good morning. A couple of questions.
Speaker Change: With National Bank financial Please go ahead.
Speaker Change: Sure.
Speaker Change: Hello.
Speaker Change: And that's a music music and it wasn't on my side, Okay. Good morning.
John Gossling: John, can you just – I know you went into some details already on some of the movie pieces on TV costs or at least Doug did. Can you maybe just elaborate a little bit further because obviously you did deliver a better than expected TV profit? So I think likely where we surprised to the upside were in a couple of areas. We were a little bit under on programming compared to what the outlook had been that we gave with our Q2 results. So that certainly helped. The other places are perhaps not as visible in terms of the focus that is often placed on them.
Speaker Change: Couple of questions. John can you just I know you went into some details already on.
Speaker Change: Some of the moving pieces on TV cost or at least Doug did.
Speaker Change: Maybe just elaborate a little bit further because obviously you did deliver a better than expected TV profit.
Speaker Change: So I think.
Speaker Change: Likely were we surprised to the upside when a couple of areas, we were a little bit.
Speaker Change: Under on programming compared to what the outlook had been.
Speaker Change: What we gave with our Q2 results so that certainly helped.
Speaker Change: The other places are perhaps not as visible in terms of.
Speaker Change: The focus that is often placed on them. One is on the film investment amortization Youll see that as a negative number this quarter that had to do with the tax credit true up that we had in the quarter that gave us about a 5% just over $5 million benefit in the quarter.
John Gossling: One is on the film investment amortization. You'll see that's a negative number this quarter. That had to do with the tax credit true up that we had in the quarter. That gave just over a $5 million benefit in the quarter on that particular line. And then the other place within sort of a similar category of cost of sales, we did have a pickup over last year of about $6 million related to the digital initiative. So those three things probably account for most of the positive variance that you're seeing. But without really studying detailed models, it's hard to know exactly where the beat was.
Speaker Change: On that particular line.
Speaker Change: And then the other place within sort of a similar category of cost of sales. We did have a pick up over the last year of about $6 million related to the digital initiatives. So those those three things probably account for most of the positive variance that you're seeing but.
Speaker Change: Without really studying detailed models, it's hard to know exactly where the beat was but I think given that we were basically in line with with most of our outlook.
John Gossling: I think given that we were basically in line with most of our outlook, that's likely the place that the pickup occurred. Thanks for that. Yeah, that's helpful, John.
Speaker Change: Likely the place that the pickup occurred.
John Gossiping: Thanks for that Thats, Yes, Thats helpful. John just just to clarify in terms of the digital initiatives there was $6 million.
John Gossling: Just to clarify, in terms of the digital initiatives, there was $6 million fewer or in terms of spend or something? Okay, got it.
John Gossiping: Fewer or suspend or okay got it.
John Gossiping: So the.
John Gossling: So the three-month preview for Home and Flavor, I guess, ended in March. Can you give us any clarity in terms of how subscribers maybe took up the channels and just the status of full carriage still being maintained across the major distributors? Yeah, I think the free preview was a success, and look, we're still, I'd say, strong ratings results and strong subscriber results on those channels, so I think we're quite happy just overall with how that launch has gone, and yes, you're correct, the free preview period is over, unlike the competitor channels, which seem to be in perpetual free preview.
John Gossiping: Three months free view for hoping flavor I guess ended in March.
Speaker Change: Could you give us any clarity in terms of.
Speaker Change: How subscribers maybe took up the channels at.
Speaker Change: Just the status of full carriage still base maintained across the.
Speaker Change: The major distributors.
Speaker Change: Yes, I think the.
Speaker Change: The free preview was a success and look we're still.
Speaker Change: I'd say strong ratings results in strong subscriber results on those channels. So I think we're quite happy.
Speaker Change: Just overall with how that launch has gone.
Speaker Change: And yes, you are correct. The free preview period is over unlike the competitor channels, which seem to be a perpetual free preview.
Speaker Change: Okay.
Jennifer Lee: Right. And just lastly, you know, obviously, you know, you guys are attending the CRTC hearings. You know, a couple of things. One, what exactly do you hope to get out of these hearings? When do you think any decisions ultimately get made? Do things get pushed out, frankly, you know, to early next year or even mid next year, such that things become effective for a fiscal 27 rather than anything, you know, salvaging F-26? Any thoughts on, you know, timing?
Speaker Change: Alright.
Speaker Change: I guess, just lastly, obviously you.
Speaker Change: Guys are attending the CRT see heres hubs.
Speaker Change: Couple of things widen.
Speaker Change: What exactly do you hope to get out of these hearings when DSA.
Speaker Change: Any decisions ultimately get made.
Speaker Change: Things get pushed out frankly.
Speaker Change: Early next year or even next year, such that things become effective for fiscal 'twenty seven rather than Eddie sake.
Speaker Change: Salvage against 26 any thoughts on it.
Speaker Change: Timing.
Speaker Change: Hi, it's Jen.
Jennifer Lee: Hi, it's Jen. The hearings are ongoing, but we just finished our appearance. There'll be a period where there's follow-up final written submissions from everyone.
Speaker Change: The hearings are ongoing but we just finished our appearance and there'll be a period, where there is.
Speaker Change: Follow up final written submissions from everyone.
Jennifer Lee: Look for our part, I kind of covered in the remarks, we're really looking for an overall set of rules that are a bit smarter, get things resolved a bit more effectively and efficiently for everybody, and really looking for some fairness and some fair competition, especially for broadcasters like us, with both domestic BDUs and foreign streamers. In terms of timing, the CRTC has stated that it's going to be looking to renew licenses across the industry, which were administratively renewed for quite some time, so it's supposed to be effective for F27. We're hoping, again, this is based on their stated timeline and goals, that their, let's the hearing that we just participated in on market dynamics, they're supposed to come out hopefully by the end of the calendar year, or in our F26.
Speaker Change: For our part.
Speaker Change: Kind of covered it in the remarks.
Speaker Change: Really looking for an overall set of rules that are a bit smarter.
Speaker Change: Get things resolved that more effectively and efficiently for everybody.
Speaker Change: And really looking for some fairness and some fair fair competition, especially for broadcasters like us with them both.
Speaker Change: Nick be to use an informed and streamers in terms of timing. The CRT C has stated that its going to be looking to renew licenses across the industry, which are administered we renewed for quite some time.
Speaker Change: It's supposed to be effective for F 'twenty seven.
Speaker Change: We're hoping again this is based on their stated timeline and goals thought.
Speaker Change: They are let's call it decisions or new frameworks, including for the hearing that we just participated in a market dynamic.
Speaker Change: Supposed to come out hopefully by the end of the calendar year or in our F. 'twenty six.
Jennifer Lee: So that, combined with staying on track for what the CRTC has said, will be our new license period. We're hoping we see that time soon. that they stick to it, and we're still planning for that. Okay.
Speaker Change: So that combined with staying on track for what the <unk> will be our new license period.
Speaker Change: We're hoping we see that timing.
Speaker Change: I think stick to it and we're still planning for that.
Adam Shine: Thanks for that, Jen. I appreciate it. I'll queue up again. Thank you. Thanks, Adam.
Speaker Change: Okay. Thanks for that Jen I appreciate it I'll queue up again, thank you. Thanks Adam.
Drew Mcreynolds: And your next question comes from the line of Drew McReynolds with RBC, please go ahead. Yeah, thanks very much. Maybe a follow up to Adam's question on the TV costs. John, with respect to, I guess, the margins year over year in Q3 here, you know, you kind of kept them stable. And I know you've been through a period where TV margins have bounced around quite a bit. Is stability now kind of the goal here on the margin front? And, you know, I know that's not disconnected to the top line, but just how are you thinking through margins, looking out through Q4 and obviously into fiscal 2022?
Speaker Change: And your next question comes from the line of drew Mcreynolds with RBC. Please go ahead.
Drew Mcreynolds: Yes, thanks, very much maybe a follow up to Adam's question on the TV costs.
John Gossiping: John with respect to.
Speaker Change: I guess the margin year over year.
Speaker Change: In Q3 here.
Speaker Change: Kept them stable and I know you've been through a period, where TV margins have bounced around quite a bit.
Speaker Change: As stability now kind of the goal here on the margin front and I know thats not disconnected to the top line, but just how are you how are you thinking through margins.
Speaker Change: Looking out.
Speaker Change: For Q4, and obviously in the fiscal 2026.
John Gossling: That's a good question, Drew. I know it's a theme that you've been on for a while. That would certainly be our goal to keep margins relatively stable, whether that's percentage margin or even dollar margin, which, yes, is challenging given the advertising environment. But that's certainly the case. Look, I mean, Q4 is always, it's a low quarter and, you know, there can be different things that happen in that quarter just in terms of programming deliveries. And, you know, you see the revenue outlook is quite stressed. So, I think Q4's near-term margin expectations maybe need to be tempered.
Speaker Change: Yes, it's a good question drew I know, it's a theme that <unk> been on for a while that would certainly be our goal to keep.
Speaker Change: Margins relatively stable, whether that's percentage margin or even dollar margin, which yes is challenging given the advertising environment, but that's certainly the case.
Speaker Change: Q4 is always a low quarter and.
Speaker Change: There can be different things that happened in that quarter, just in terms of programming delivery.
Speaker Change: You'll see the revenue outlook is.
Speaker Change: Quite stress, so I think Q4.
Speaker Change: Our near term margin expectations.
Speaker Change: Maybe you need to be temporary although pending the outcome of this of the island.
John Gossling: Although, you know, pending the outcome of the ILNF decision and how that impacts or doesn't impact fiscal 2025, that would have a huge impact. But obviously, we would call that out to the extent that there was something that happened on that in Q4. But, yeah, long-term, I think we're trying to stabilize things. It's a tough ad environment and the cost of content generally isn't going down, but I'd say we will do things that will manage the content cost line better as we go forward.
Speaker Change: Decision and how that impacts where it doesn't impact fiscal 2025 that would have a huge impact, but obviously, we would call that out to the extent that there was something.
Speaker Change: That happened on that in Q4, but yes long term I think we're trying to stabilize things and.
Speaker Change: It's a tough added vibrant environment and the cost of content.
Speaker Change: Generally isn't going down, but I would say, we will do things that will manage the content cost line better as we go forward.
Speaker Change: Okay.
John Gossling: Okay, that's, that's helpful. And just following up on that, in broad strokes, I know, last quarter, you alluded to the intention to keep, you know, programming amortization, largely flattish in fiscal 2026, just wondering what, you know, your updated thoughts are, both on the, the amort side, as well as just actual outlays and investments in content. How should we be thinking about those two? Yeah, I think for 26, it's a little bit early still, there are a couple of larger moving pieces that we need to just get across the finish line. So we'll have a better sense of that when we report Q4.
Speaker Change: Helpful.
Speaker Change: Just following up on that.
Speaker Change: Broad strokes I know last quarter, you alluded to the intention to keep.
Speaker Change: Programming amortization largely flattish in fiscal 2026.
Speaker Change: Just wondering what your updated thoughts are both on the <unk> side as well as just actual outlays and investments in content, how should we be thinking about those two yes.
Speaker Change: Yes, I think for 'twenty, it's a little bit early still there are a couple of larger moving pieces that we need to just get across the finish line. So we'll have a better sense of that when we report Q4, but I would say that generally we're looking we're looking for content cost to come down I think the question on that is what's the revenue impact that comes with that.
John Gossling: But I say, yeah, generally, we're looking, we're looking for content costs to come down. I think the question on that is, what's the revenue impact that comes with that? Okay, got it. And then maybe last one for me, just on the TV ad market, you know, you've stated for a while the linear pressure, but also You know, you've commented about the oversupply of premium digital video inventory. Now we have kind of the macro overlay. I'm just wondering if you can kind of maybe unpack, if you can, those three kind of deltas in terms of, and not just Q4, because we know it's the seasonally softer quarter, but just overall the impact on TV advertising.
Speaker Change: Okay, Okay got it.
Speaker Change: And then maybe last one for me just on the TV ad market.
Speaker Change: Sure.
Speaker Change: We've stated for a while the linear pressure, but also.
Speaker Change: You commented about the oversupply of premium digital video inventory now we have kind of the macro overlay I'm. Just wondering if you can kind of maybe unpack. It can those three kind of deltas in terms of not just Q4, because we know it's a seasonally softer quarter.
Speaker Change: Just overall the impact on television advertising.
John Gossling: Yeah, I think that the high-level answer to those three is yes. You know, it's hard to sort of divine out of it exactly what all the moving pieces are. But, you know, when we look at, you know, whether it's advertiser by advertiser, especially the larger ones, or we look at, you know, sort of the category trends, you know, it appears to be it's relatively across the board, which would point to economic slash supply chain slash geopolitical. And then, you know, you've got certain situations with some advertisers that are maybe shifting buys to other platforms. you know, whether it's Q3 or even what we're expecting for Q4, like, you know, every category is basically down, sort of in the range that we gave other than the exceptions are travel, and the election obviously helped in Q3.
Speaker Change: I think that the high level answer to those three is yes.
Speaker Change: It's hard to sort of divine out exactly what all the moving pieces are but when we look at whether it's advertiser by advertiser, especially the larger ones are we look at sort of the category.
Speaker Change: Trends.
Speaker Change: It appears to be its relatively across the board, which would point to economic slash supply chain class geopolitical.
Speaker Change: And then you've got certain.
Speaker Change: <unk> with some advertisers that are maybe shifting buys to other platforms.
Speaker Change: Yeah.
Speaker Change: Whether it's Q3 or even what we're expecting for Q4 like every category is basically down.
Speaker Change: Sort of in the range that we gave other than the exceptions are travel and the election, obviously helped in Q3. So it's.
John Gossling: So, you know, it's a pretty tough market generally out there. And look, we haven't seen this kind of impact since COVID. So it's, you know, it's definitely hurting, hurting the economy more than it's it's appearing to. Okay. Thanks very much, John. Appreciate it. Thanks.
Speaker Change: It's a pretty tough market generally out there.
Speaker Change: Look we haven't seen this kind of impact since COVID-19. So it's it's definitely hurting.
Speaker Change: Hurting the economy more than it's appearing to.
Speaker Change: Okay. Okay. Thanks, very much John appreciate it thanks.
Speaker Change: And once again, if you would like to ask a question you Press star followed by the number one on your telephone keypad.
Ludi: And once again, if you would like to ask a question, simply press the star followed by the number one on your telephone keypad.
Vince Valentini: Our next question comes from the line of Vince Valentini with TD Cowen, please go ahead. Hey, thanks. A couple things on the...
Speaker Change: Our next question comes from the line of Vince Valentini with TD Cowen. Please go ahead.
Speaker Change: Alrighty. Thanks.
Speaker Change: Couple of things on the.
John Gossling: Six million for digital initiative, John, just clarify for me, you mean you slowed down some of your marketing and new product development expenses deliberately and that's going to be a sustained reduction or is this some sort of one-off item? Well, I wouldn't say it's a one-off item, because it will help us going forward, not quite to that extent, probably. But no, it had more to do with particular platforms and the cost of running those platforms. So I don't know if I'd call it a slowdown. I think it's more a case of, you know, we're trying to...
Speaker Change: $6 million for digital initiative, John just clarify for me you mean, you slowed down some of your marketing and new product development expenses deliberately and thats going to be a sustained reduction or is there some sort of a one off item.
Speaker Change: Well I wouldn't say, it's a one off item because it will it will help us going forward not quite to that extent, probably but no.
Speaker Change: It had more to do with with particular platforms and the cost of running those platforms. So.
Speaker Change: I don't know if I'd call. It a slowdown I think its more a case of we're trying to.
John Gossling: With our margin focus, we're trying to right-size some of the economics of certain products that we have. So that's more what it's about. So that will help us going forward. It won't be $6 million a quarter, but it will be pretty substantial.
Speaker Change: With our margin focus we're trying to right size some of the economics of that.
Speaker Change: Certain products that we have so that's more what it is about but so that will help us going forward it won't be $6 million a quarter, but it will be pretty substantial.
Speaker Change: Okay. Okay.
Speaker Change: Okay.
Vince Valentini: And circling back to the advertising commentary. It sounds from what you're saying that the entire market is weak because of the macro uncertainty. Are we not seeing pretty good growth on digital platforms, not necessarily the ones Corus owns, but other digital platforms and the sports broadcasting platforms? It doesn't seem like all of the other media companies are down as much as you guys. Is this more you're struggling because people are still unsure about the balance sheet or unsure about how the new specialty channels fit into the universe or they just don't like general entertainment programming versus specialized digital or sports programming?
Speaker Change: And then circling back to the advertising commentary.
Speaker Change: It sounds from what you are saying that the entire market.
Speaker Change: Is weak because of the macro uncertainty.
Speaker Change: Are we not seeing pretty good growth on digital platforms, not necessarily the ones cornerstone, but other digital platforms in the sports broadcasting platforms. It doesn't seem like all of the other media companies are down as much as you guys is this more you are struggling because of the people are still unsure.
Speaker Change: The balance sheet or unsure about how the new specialty channels fit into the universe or they just don't like General Entertainment.
Speaker Change: Programming versus specialized digital or for sports programming.
John Gossling: It seems to me like it's a bit more of a problem that you guys are facing than the entire market, but tell me if I'm wrong there. Is it just the entire market is weak and that is hopefully just cyclical? No. First of all, it's hard to get a read on the entire market, including digital, but I think we've learned over time that what we're seeing is basically what you're describing, that yes, our reliance on linear is definitely putting us in a tougher spot and we do have digital products, but they're also feeling the pressure.
Speaker Change: It seems to me like its a bit more of a problem that you guys are facing in the entire market, but tell me if I'm wrong. There is it just the entire market is weak and that is hopefully just cyclical.
Speaker Change: First of all it's hard to get a read on the entire market, including digital but I think we've learned over time that.
Speaker Change: What we're seeing is basically what you are describing that yes. This is our.
Speaker Change: Our reliance on linear is definitely putting us in a tougher spot and we do have digital products, but they are also feeling the pressure. So yes, I wouldn't necessarily imply that the entire market.
John Gossling: I wouldn't necessarily imply that the entire advertising market is seeing the kind of pressure we're seeing, but we're absolutely feeling it and it's for all the reasons you mentioned. The Home and Flavor and Slice are performing well from an audience perspective, but there's more competition in the market, so that will create some advertising dollars to migrate. We're expecting some will come back because when you don't make your audience numbers and fulfill your promises, then advertisers learn from that, but I think you're right. I think sports is a big part of it, especially in the last couple of months.
Speaker Change: The entire advertising market is seeing the kind of pressure, we're seeing but we are absolutely feeling it and it's for all the reasons you mentioned.
Speaker Change: The home and flavor and sites are performing well from an IMS perspective, but theres more competition in the market. So that will create some advertising dollars to migrate.
Speaker Change: We're expecting some will come back because when you don't make your audience numbers and fulfill your promises then advertisers learn from that but I think youre right I think sports is a big part of it especially in the last couple of months and.
John Gossling: That's our challenge. It's how do we get to a place where we're not underperforming the market.
Speaker Change: Look that's our challenge is how do we get.
Speaker Change: Get to a place where we're not underperforming the market.
Speaker Change: So I asked that one first and then ask this your regulatory message I'm not sure it seems kind of.
Vince Valentini: So I asked that one first to then ask this like your regulatory message. I'm not sure it seems kind of. incrementalism as opposed to big picture like shouldn't we be going to the CRTC and saying look if The U.S. is going to fight back on a digital sales tax and we can't level the playing field by effectively making the U.S. streamers and digital players contribute, then we need to blow up the Canadian system. Like 30% contribution by you guys on prior year revenue into Canadian content needs to go to 5% and have full flexibility the more you invest those dollars, maybe not allow tax deductibility on advertising on non-Canadian platforms like we do in print.
Speaker Change: Incremental lithium as opposed to big picture like Shouldnt, we be according to the <unk> and saying look if if the U S is going to fight back on digital sales tax and we cant level, the playing field by effectively making the U S streamers and digital players contribute then we need to blow up the Canadian system like <unk>.
Speaker Change: 30% contribution by you guys.
Speaker Change: Prior year revenue into Canadian content needs to go up 5% in <unk>.
Speaker Change: And heck of full flexibility on where you invest those dollars maybe not not allowed tax deductibility on advertising on non Canadian platforms like we do in print.
Jennifer Lee: Why does your message seem so small, like it seems like this is the opportunity given the massive changes in the geopolitical environment to go for big structural changes versus just tiny tinkering of the rules. Do I have that wrong?
Speaker Change: Why are your message seem so so small like it seems like this is your opportunity given the massive changes in the geopolitical environment to go for big structural changes versus just tiny tinkering of the world. So do I have that wrong.
Speaker Change: Okay.
Jennifer Lee: Um, hi Vince, it's Jen. I wouldn't call you wrong. I think we've gone pretty heavy and pretty big picture, I think. You can take a look at our latest submission on market dynamics. It's pretty detailed and very extensive. You know, we don't like to say the word blow up necessarily because, you know, there's a Broadcast Act. We're regulated. We recognize that. Some of the areas that you've talked about, we would love to have the opportunity to go hard at that. Structurally, again, that's just in our actual licensing hearings. So, you know, without going too far into the future, I would say your general tone and tenor are aligned.
Speaker Change: And then just churn.
Speaker Change: I wouldn't call you're wrong I think it's I think we've been pretty heavy in pretty big picture I think.
Speaker Change: You cannot take a look at our latest edition on market dynamics, it's pretty detailed and very extensive.
Speaker Change: We don't like to say the word.
Speaker Change: Hello, what's necessarily because theres a broadcast back for regulated we've recognized that.
Speaker Change: Some of the areas that you've talked about we would love to have the opportunity to go harder, but structurally again, that's just in our actual licensing hearings.
Speaker Change: No.
Speaker Change: Without going too far into the future I would say.
Speaker Change: The general tone and tenor alignment, but.
Jennifer Lee: But, you know, I would say we're working hard. We'll give you an opportunity to do that. That's when our actual obligations are set, Cynthia. You mentioned a couple things that are not technically regulatory, they're more finance, right? So the digital services tax, look, we agree, we have to pay that tax as well. Obviously, you know, our contribution on that is much smaller because our digital revenues are smaller than the big streamers. But, you know, that's one that we've been, I think, quite vocal about, didn't really make a lot of sense. And they're penalizing, you know, the existing players as well.
Speaker Change: We're.
Speaker Change: Working hard.
Speaker Change: Okay. Thanks, Don.
Speaker Change: A couple of Barry will give you an opportunity to do that.
Speaker Change: That's when our actual obligations or Scott.
Speaker Change: Yes.
Jennifer Lee: I guess in that way, you could say it's a fair tax, but it doesn't seem to make any sense. And then on the deductibility issue, yeah, I mean, we've been on that for more than five years trying to push that issue. I know there's an industry-wide push on that as well now. So, you know, you're right, all these things seem to take longer than it feels like they should, just given what's going on and what you see our short-term outlook is. But I think, you know, we're trying to, you know, be constructive with the regulator and with others not alone.
Jennifer Lee: And, you know, rather than just go in and, you know, maybe we do need to create a bigger five-alarm fire. But I think realistically, we're trying to follow the process and participate constructively in it.
Vince Valentini: Okay, and if you don't mind, I'll finish just with a couple of free cash flow questions. 28 million of other income, which looks like it was mostly that foreign exchange gain. Yeah. It looks to me like that's included in your definition of free cash flow. Was the FX gain actually a cash item or did you... No, it doesn't, it doesn't go into free cash flow. It'll, it'll work through the, effectively, it comes out, but we can, we can walk you through that, where those all go. I don't, I guess... So maybe that's part of the reason why the working capital is so, was such a big outflow, is reversing some of that stuff?
John Gossling: Yeah, partly. And the other, the other thing in working capital, especially compared to last year, is that the, you know, seasonally Q3 is, is a bigger revenue quarter. So receivables will go up in Q3. That didn't happen last year, for various reasons. So when you're looking at the comparative, that's part of the reason there's a big swing, is that receivables really behaved in a more normal way this year. And last year there was actually a recovery in the cash flow line of receivables. So that's also part of it. So we're looking to Q4, the normal trend should...
John Gossling: return in working capital should be neutral or even a source of cash? Yeah, it generally is. I mean, I think there's there are a couple of larger payments that are happening this year that wouldn't necessarily have happened in the past. One of them is the HST and tax installment deferral that, you know, the payments kick back in next week. So that's going to put some pressure on Q4. But the receivable side of it should behave normally. And the last one part of that is the production burn. So that the amortization, yeah, was down more than we thought this quarter and that helps EBITDA, but you still spent a fair amount in terms of cash investment in programming.
John Gossling: Is that, does that reverse in Q4, perhaps where the amortization is flat, but the cash investment is down so that there's actually an inflow of cash from production burn? Yes, the gap won't be that big, I mean there's always sort of a natural gap that happens there, but quickly flip to something. Yeah, I think we're expecting that to be a lot tighter in Q4 for sure.
John Gossling: Okay, thanks guys. Thanks Vince. Thank you.
Ludi: And that ends our question and answer session.
John Gossling: I would like to turn it back to Mr. John Gossling for closing remarks. Great, thanks very much, Ludi, and we appreciate everyone's participation on the call today, and we wish everyone a happy Canada Day, and we will talk to you soon. Thanks, everyone.
Ludi: Thank you, presenters.
Ludi: And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.