TD
Revenue was close to expectations in Q4/22 (albeit significantly lowered
expectations subsequent to the warning on September 8), but EBITDA of $56 million
was below our estimate of $70mm and consensus of $71mm. TV segment revenue
fell $22mm Y/Y (subscription and content revenues both increased, so advertising
down 14% was the sole cause), while TV opex increased $29mm. Prior to the drop
off in advertising revenue in July/August, higher costs had already been locked in for
the quarter (mostly on the programming front, including CRTC-mandated increases
in CPE), which led to this perfect storm on EBITDA erosion (the lowest ever Q4
result since the Shaw Media acquisition). We suspect that advertising revenue trends
in Q1/23 have improved somewhat from Q4/22, so the share price reaction today
could hinge on how much clarity that management can provide on the 2023 outlook
(both revenue trends and potential opex reductions) on the call at 8:00 am ET
(1-888-394-8281).
Do not ignore FCF: Using our definition of FCF (more stringent than management's
definition because we adjust for lease costs and asset sale gains), the company
generated $170mm in 2022, $212mm in 2021, and $254mm in 2020. All three of
these years were arguably distorted somewhat by either pandemic or inflationary/
recessionary factors, but still the aggregate FCF was $636mm, or $3.05 per share
(annual average of $1.02). In just three years of sub-optimal performance (note that
FCF/share was $1.46 in 2019), the FCF generated exceeds the current share price
by 37%, and using the three-year average FCF/share points to a FCF yield of 46%.
Total revenue of $340mm (-6% y/y) versus TD/consensus of $341mm/$343mm.
Television EBITDA of $59mm compared to our estimate of $74mm (consensus
$74mm).
Radio EBITDA of $2mm compared to our estimate of $5mm (consensus $4mm).
Adjusted EPS of ($0.08) versus TD/consensus of ($0.01)/$0.01.
Despite $12mm in dividend payments and $12mm in share buybacks in Q4/22,
net debt was paid down by $12mm in the quarter. But with lower LTM EBITDA the
leverage ratio increased to 3.02x versus 2.76x.