TDCorus Entertainment Inc. (CJR.B-T) C$0.73 Trough Quarter Hopefully in the Rear View Mirror
Recommendation: SPEC BUY Risk: SPECULATIVE 12-Month Target Price: C$4.50 12-Month Dividend (Est.): C$0.00 12-Month Total Return: 516.4%
Event Q1/24 results. Call at 8:00 am ET (1-888-664-6383). Impact: SLIGHTLY POSITIVE Corus exceeded consensus and TD estimates on EBITDA, FCF, and EPS. Revenue trends remained weak, but TV segment opex declined 18% Y/Y and it was 7% better than consensus. Some of these gains relate to programming, which will return post-strike, but some will be permanent G&A reductions that should drive operating leverage if/when we get a cyclical recovery in ad revenue. We also continue to await meaningful opex relief from regulatory reform (latest note on November emergency CRTC hearing here: LINK). The weak revenue trends included a 17% decrease in advertising revenue and a 7% decrease in subscriber revenue (drivers of this need to be explored on the call). The fall in advertising revenue was expected given the macro uncertainty along with the lack of new scripted shows following the Hollywood strikes. There was a decline in advertising revenue from almost all major categories. However, we will be paying attention to any green shoots that have emerged since quarter end. Additionally, while television revenue was weak, we believe that this was likely the trough quarter given the easing of hard landing fears along with regular programming returning in February. We also note that Corus exceeded our FCF (TD Definition) estimates in the quarter. We had anticipated FCF of -$48mm but Corus produced $14mm of FCF. While higher-than-anticipated EBITDA results were helpful, the main driver behind the FCF beat resulted the better-than-expected net change in non-cash working capital. While we had estimated an outflow of ~$99mm, Corus reported an outflow of only ~$43mm. Consequently, despite an arguably trough quarter for revenue, FCF was still positive and debt leverage inched up only slightly, to 3.67x at November 30 versus 3.62x at August 31. Total revenue $370 million (-14% y/y) vs. TD/consensus $376mm/$373mm. Total EBITDA $121 million (-8% y/y) vs. TD/consensus $112mm/$108mm. Television EBITDA $122 million compared to TD estimate $112mm (consensus $107mm). Radio EBITDA of $5 million compared to TD estimate $5mm (consensus $7mm). Adjusted EPS $0.20 versus TD/consensus $0.15/$0.14.