TVA GROUP REPORTS Q3 2023 RESULTS
TVA GROUP REPORTS Q3 2023 RESULTS
Montreal, Canada - TVA Group Inc. (TSX: TVA.B) (“TVA Group” or the “Corporation”) announced today that it recorded revenues in the amount of $118.6 million for the third quarter of 2023, a year-over-year decrease of $11.9 million. Net loss attributable to shareholders was $0.6 million or $0.01 per share, compared with net income attributable to shareholders of $7.6 million or $0.18 per share for the same period of 2022. For the nine-month period ended September 30, 2023, the net loss attributable to shareholders was $32.0 million, or $0.74 per share, compared with $8.6 million, or $0.20 per share, for the same period of 2022.
Operating highlights for the third quarter and first nine months of the year:
Ø $16,485,000 in consolidated adjusted EBITDA for the third quarter, a $1,710,000 unfavourable variance compared with the same quarter of 2022, and $11,335,000 in negative adjusted EBITDA1 for the first nine months of the year, a $23,044,000 unfavourable variance from the same period of 2022.
Ø $14,456,000 in adjusted EBITDA1 for the third quarter in the Broadcasting segment, a $389,000 favourable variance mainly due to higher adjusted EBITDA1 at Communications Qolab inc. TVA Network’s negative adjusted EBITDA1 continued to deteriorate and the specialty channels continued to suffer from the effects of a shrinking advertising market and a reduction in the number of cable subscribers (“cord-cutting”).
Ø $12,889,000 in negative Adjusted EBITDA1 in the Broadcasting segment for the first nine months of 2023, compared with $1,550,000 in negative adjusted EBITDA1 for the same period of 2022. Last February’s restructuring plan enabled the Corporation to achieve some savings, but insufficient to offset the significant drop in revenues, both from traditional advertising and specialty channel subscriptions, or to sustain the required investments in content to maintain our market share and our audience in the face of foreign digital on-demand platforms, among other things.
Ø $669,000 in adjusted EBITDA1 in the Film Production & Audiovisual Services segment (“MELS”) for the third quarter of 2023, a $1,916,000 unfavourable variance compared with the same quarter of 2022, due mainly to lower activity volume in soundstage, mobile and equipment rental, postproduction and media accessibility services, partially offset by the positive impact of the discontinuation of visual effects activities. For the first nine months of 2023, MELS posted $299,000 in negative adjusted EBITDA,1 compared with $8,601,000 in adjusted EBITDA1 for the same period of 2022, an unfavourable variance explained by the same factors as for the quarter.
Ø $1,288,000 in adjusted EBITDA1 in the Magazines segment for the third quarter, a $66,000 favourable variance compared with the same quarter of 2022, mainly because cost savings were slightly higher than the decrease in revenues, particularly in newsstand and subscription revenues. For the first nine months of the year, adjusted EBITDA1 for the Magazines segment was $1,230,000, compared with $3,308,000 in adjusted EBITDA1 for the same period of 2022.
Ø $146,000 in negative adjusted EBITDA in the Production and Distribution segment for the third quarter, a $195,000 unfavourable variance compared with the same quarter of 2022, due mainly to a lower gross margin on the international distribution of films produced by Incendo, as well as lower profitability at TVA Films, partially offset by savings on administrative expenses and a higher gross margin on Canadian distribution for Incendo. For the first nine months of 2023, adjusted EBITDA1 in the Production and Distribution segment was $81,000, compared with $1,113,000 in adjusted EBITDA1 for the same period of 2022.
Ø During the third quarter of 2023, challenging market conditions and changes in the television industry ecosystem led the Corporation to record a goodwill impairment charge of $4,813,000 and an impairment charge of $2,850,000 on certain trademarks in the Broadcasting segment.
Pierre Karl Péladeau, acting President and CEO of TVA Group, had this to say:
“Looking at our results over the last few quarters, which show a negative adjusted EBITDA1 of nearly $13 million in the Broadcasting segment, it’s clear that the broadcasting ecosystem no longer provides the conditions necessary for our conventional television activities to be viable. Even though TVA Group increased its market share by 0.5 points to 40.6% during the quarter, traditional advertising revenues continued their sharp decline of recent years. These factors led the Corporation to conclude that a $7,663,000 non-cash charge for impairment of goodwill and certain trademarks was necessary.
The crisis in the media industry has affected results more than ever, with competition from web giants and Radio-Canada monopolizing advertising revenues. For too long, TVA Group has been calling for regulatory relief to give private broadcasters greater flexibility. Moreover, despite TVA Group's extensive efforts to stabilize its financial situation, including the elimination of 140 positions in February 2023, the decline in advertising revenues is now an unfortunate fact of life with which we have to contend. Consequently, we are announcing today major changes to our organizational structure in order to secure the future of our business. Our goal is clear, to continue offering our viewers and our advertisers the best original content produced in Quebec, providing reliable, high-quality news coverage throughout Quebec, and presenting major sporting events live. The Corporation will therefore implement a reorganization plan that will refocus its mission on broadcasting, restructure its news division and optimize its real estate holdings. The goal is to reduce the Corporation’s operating costs. The plan will reduce the Corporation's workforce by 547 employees. Most of the costs associated with the elimination of positions will be recognized in the next quarter.
TVA Group’s third quarter results were affected by lower revenues across all business segments, particularly at MELS, which continues to suffer from the lack of foreign productions. Although the writers’ strike has been resolved, the actors’ strike in the U.S. continues, prolonging the absence of foreign producers at our studios. The appointment of Patrick Jutras as President of MELS will strengthen the company's local and international business ties, attract more large-scale productions and accelerate growth.
To keep our productions and film studios competitive and viable, when many other jurisdictions in the U.S. and Canada are offering producers more advantageous tax treatment, governments must quickly review tax credits for Quebec film and television productions, and for production services.
In the Magazines segment, results for all our titles were affected by a decline in revenues, offset by cost savings. The significant reduction in government assistance from the Canada Periodical Fund remains a cause for concern for this segment, which has been operating in a sharply declining market for several years.
Our Production and Distribution segment suffered a decrease in adjusted EBITDA1 primarily due to the negative impact of strikes on the order book in the U.S. industry. Incendo is currently starting its first film shoot of 2023 for Tubi.”
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 (income) loss 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 the possibility that the reorganization plan will not be carried out on schedule or at all, the possibility that the Corporation will be unable to realize the anticipated benefits of the reorganization plan in a timely manner or at all, the possibility of unknown potential liabilities or costs related to the reorganization plan, the possibility that the Corporation will be unable to successfully implement its business strategies, 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, as well as any urgent steps taken 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.sedarplus.ca 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 December 31, 2022.
The forward-looking statements in this news release reflect the Corporation’s expectations as of November 2, 2023, and are subject to change after this date. The Corporation expressly disclaims any obligation or intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the applicable securities laws.
TVA Group Inc., a subsidiary of Quebecor Media Inc., is a communications company engaged in the broadcasting, film production and audiovisual services, international production and distribution of television content, and magazine publishing industries. TVA Group Inc. is North America’s largest broadcaster of French-language entertainment, information and public affairs programming and one of the largest private-sector producers of French-language content. It is also the largest publisher of French-language magazines and publishes some of the most popular English-language titles in Canada. The Corporation’s Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B.
The Condensed Consolidated Financial Statements as at September 30, 2023, with notes, and the interim Management’s Discussion and Analysis can be consulted on the Corporation’s website at www.groupetva.ca.
Marjorie Daoust, CPA
 See definition of adjusted EBITDA below.
 See definition of adjusted EBITDA below.