Montreal, Oct. 29, 2020 - TVA Group Inc. ("TVA Group" or the "Corporation") announced today that it recorded operating revenues in the amount of $119.5 million for the third quarter of 2020, a year-over-year decrease of $6.1 million. Net income attributable to shareholders was $8.4 million for earnings per share of $0.19, compared with net income attributable to shareholders of $13.4 million for earnings per share of $0.31 for the same quarter of fiscal 2019.
Third quarter operating highlights:
- $23,363,000 consolidated adjusted EBITDA1, a $7,778,000 unfavourable variance from the same quarter of 2019.
- $16,938,000 in adjusted EBITDA1 in the Broadcasting segment, a $4,959,000 unfavourable variance due primarily to a 71.1% decrease in adjusted EBITDA1 of the specialty channels, particularly "TVA Sports" which recorded a significant increase in costs for the current quarter as a result of the postponement of the National Hockey League ("NHL") playoffs, partially offset by a significant increase in adjusted EBITDA1 generated by TVA Network and commercial production services.
- $2,947,000 in adjusted EBITDA1 in the Film Production & Audiovisual Services segment ("MELS"), a $3,535,000 unfavourable variance caused primarily by the decreased profitability of soundstage, mobile and equipment rental and visual effects services as a result of the current public health crisis. The segment's other activities posted increased profitability.
- $2,999,000 in adjusted EBITDA1 in the Magazines segment, a $555,000 favourable variance resulting mainly from the performance of all titles, as cost savings outweighed the decrease in revenues, combined with additional grants to help publishers during the public-health crisis.
- $427,000 in adjusted EBITDA1 in the Production & Distribution segment, a $109,000 favourable variance due primarily to financial assistance from the Canada Media Fund to support production companies in the resumption of their activities.
1 See definition of adjusted EBITDA below.
"As expected, the COVID-19 pandemic continued impacting our business and on our third quarter 2020 results. The periodic resurgence of the virus and the various measures taken by government authorities to curb its spread continued to cause, among other things, a significant decline in advertising revenues; a large reduction in the sporting events broadcast by the 'TVA Sports' specialty channel, despite the broadcast of the NHL playoffs in the third quarter; and a need to adapt our work environments and methods in order to protect the health and safety of our employees and the public. That said, our teams are primed and ready to resume activities, although the scope and pace of the resumption is still subject to factors such as the implementation of social distancing measures, which complicate or slow the production of certain types of content, the shaky resumption of sporting events, and the precarious situation of some of our advertisers," commented France Lauzière, President and CEO of TVA Group.
"I am proud of the work our people have been doing to pursue our mission of informing and entertaining the public under these difficult conditions. TVA Group's total market share increased by 3.2 points1 to 41.5%1 in the third quarter of 2020, while the specialty channels posted a 3.3-point increase1 as a result of a 2.0-point gain1 by "LCN", which held its status as Quebec's most-watched specialty channel with a 7.1 share.1 The "TVA Sports" channel also registered a 1.9-point increase due to the broadcast of the NHL playoffs in the third quarter of 2020 and the fact that the Montreal Canadiens qualified for the playoffs. Two sporting events in which the Montreal Canadiens appeared were among the top 30 most–watched shows in Quebec during the quarter. Three of the top five shows in Quebec during the quarter were on TVA Network, including La Voix, which was a standout again with an average audience of more than 1.5 million viewers," said France Lauzière.
"The Film Production and Audiovisual Services segment's financial results continue to be affected by the pandemic. The public-health crisis brought all film shoots, including a Disney blockbuster, to a complete halt towards the end of the first quarter. Fortunately, shoots have been able to gradually start up again thanks to our people's efforts, which have made it possible for us to offer a full range of services again, in a safe environment. Also, we are very proud of the new service MELS has introduced, a virtual stage that offers an innovative alternative to conventional soundstages and facilitates compliance with physical distancing rules. The initiative is part of MELS' push to innovate and to pursue its technological shift," added the President of TVA Group.
"While the decline in the magazines' operating revenues continued in the third quarter, it was mitigated by the additional financial assistance the Corporation has received. Our constant efforts to realize organizational synergies enabled us to reduce our operating expenses and generate a 24% margin, which is quite an accomplishment in the current business environment. TVA Group remains the largest publisher of French-language magazines in Quebec3 and the segment is making a positive contribution to the Corporation's earnings.
"The Production & Distribution segment, which includes the Incendo group's operations, performed strongly given the situation, which has hit production activities particularly hard. The segment stepped up the resumption of its activities, including two co-productions with New Zealand. In addition to diversifying our revenue streams and expanding our presence internationally, this strategy puts us in a good position to take advantage of the strong demand for original content we expect in the future.
"In conclusion, I want to highlight the outstanding work of all our employees throughout Quebec. They have made it possible for us to continue informing and entertaining Quebecers, and they are the architects of our recovery – under circumstances that demand a good deal of agility and adaptability. I thank them all," Ms. Lauzière concluded.
1 Numeris – Quebec Franco, July 1 to September 30, 2020 and 2019, Mo-Su, 2a-2a, t2+
2 Vividata, Fall 2020, Total Canada, 14+, July 1, 2019 to June 30, 2020
Update on the COVID-19 situation
Third quarter results must be viewed in the context of the COVID-19 pandemic, an unprecedented situation with major consequences for Canadians and for the global economy. As a provider of essential services, our priority is to continue our mission of informing and entertaining the public. We kept our 24/7 news services available to all on our various broadcasting platforms and provided free access to our "LCN" all-news specialty channel throughout the second quarter and also since October 15. TVA Group has taken and will continue to take all necessary measures to safeguard its employees' health and safety by delivering services remotely whenever possible, applying physical distancing rules in the workplace, and implementing stringent health precautions at its facilities.
We expect the financial impacts of this crisis will continue to be felt in the coming quarters, including:
- significant reduction in advertising revenues, which will inevitably affect the Broadcasting and Magazines segments;
- increase in bad debts as a result of the precarious situation of some advertisers;
- significant variability in our revenues and content costs related to live broadcasts of sporting events organized by professional leagues, as they resume their activities while cancelling some events and making significant changes to formats and broadcast schedules;
- possible reduction in the publication frequency of some periodicals, which would affect revenues in the Magazines segment;
- variance in the level of activity at MELS and in the Production & Distribution segment resulting from the stoppage or resumption of our content production activities due to factors such as the need to comply with health precautions and physical distancing rules on sets, the closing of borders with some countries, and production insurance challenges.
In view of the economic slowdown caused by the public health crisis, the Corporation is continuously adjusting its workforce and service delivery in order to align its cost structure with the lower volume of activities. Affected employees receive benefits under the Corporation's assistance program to compensate for being placed on stand-by. This program provides financial assistance in addition to the Canada Emergency Wage Subsidy or Canada Emergency Response Benefit. Many of the entities in the Corporation's various business segments qualified for the Emergency Wage Subsidy, enabling the Corporation to mitigate some of the impacts of the crisis.
Given the uncertainty surrounding the duration of the pandemic and its potential impacts, we are currently unable to predict the overall effect it will have on our operating and financial results. However, we believe that our current sound financial health, our strong balance sheet and the steps we have taken will enable us to continue to deliver positive cash flows.
TVA Group continues to take steps on a daily basis to implement the action plans needed to maintain business continuity and the pursuit of its long-term strategies. Our management team is working to ensure sound management of the current crisis and to plan a gradual resumption of the Corporation's activities, while following government directives.
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 others, income taxes 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.
Conference call for investors
TVA Group will hold a conference call to discuss its third quarter 2020 results on October 30, 2020, at 9:30 a.m. EDT. There will be a question period reserved for financial analysts. To access the call, please dial 1-877-293-8052, followed by access code for participants 14876#. A recording of the call will be available from October 30 to November 30, 2020 by dialling 1-877-293-8133 followed by conference access code 14876# and recording access code 14876#.
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 December 31, 2019 and the "Risk Factors" section in the Corporation's 2019 annual information form, as well as the update on risks and uncertainties in the Interim Management's Discussion and Analysis for the three-month and nine-month periods ended September 30, 2020.
The forward-looking statements in this news release reflect the Corporation's expectations as of October 29, 2020, 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 interim consolidated financial statements, with notes, and the interim Management's Discussion and Analysis for the three-month and nine-month periods ended September 30, 2020, can be consulted on the Corporation's website at www.groupetva.ca.