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Good morning. My name is Matthew, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Corus Entertainment Second Quarter 2018 Analyst and Investor Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I will now turn the call over to Mr. Doug Murphy, President and CEO of Corus Entertainment. Please go ahead, sir.
Thank you, Matthew, and good morning, everyone. I'm Doug Murphy, and welcome to Corus Entertainment's Fiscal 2018 Second Quarter Analyst Call. Joining me on the call today is John Gossling, our Executive Vice President and Chief Financial Officer. Before we read the cautionary statement, we would like to inform everyone that there are a series of PowerPoint slides that accompany this call. You will find them on our website. Slide #2. This discussion contains forward-looking statements that may involve risks and uncertainties. Additional information concerning factors that could cause actual results to materially differ from those in our forward-looking statements are contained in the company's filings with the Canadian Securities Administrators on SEDAR. Slide #3. I'll start today's call by sharing some highlights from the quarter and will then provide an update on progress we have made in advancing our strategic priorities. In short, we are making steady progress on our financial and strategic objectives. We are taking steps to mitigate ongoing softness in Television advertising revenues. We remain committed to diversifying our revenue base. And we continue to transform our operating model and our cost structure. On Slide 4. Our second quarter results were in line with our expectations. Consolidated revenue was relatively flat at $369 million with Radio, content and TV subscriber revenue gains offsetting an expected decline in Television advertising revenue. Our consolidated segment profit increased 10% to $113 million, up from $103 million in the prior year's quarter. This improvement reflects the benefits of our new and leaner cost structure as well as prudent management of our programming expenses. A reduction in share-based compensation expense due to the share price decline post our Q1 earnings release also contributed to these results. The segment profit gain resulted in a modest improvement in consolidated segment profit margin, which came in at 31% for the quarter. Consolidated free cash flow for the year increased to $165 million, up from $130 million last year, as we maintained a disciplined focus on maximizing the cash generated by the business. On Slide 5. Our ability to generate solid free cash flow was the foundation for the 3 financial objectives we set out to achieve when we acquired Shaw Media 2 years ago, mainly to achieve cost savings of $40 million to $50 million over a 24-month period. As you know, we overachieved on this goal and we continue to transform our operating model to further improve our cost structure. To maintain our annual dividend of $1.14 per Class B share through to the end of fiscal 2018, we intend to achieve this objective. We understand there is market interest in our dividend beyond fiscal 2018. We are carefully considering our go-forward capital allocation strategy and will address the details of our post fiscal 2018 dividend when we report our Q3 results in June. And to delever our balance sheet from 4.2x net debt-to-segment profit to 3.5x by the end of fiscal '17, which we achieved 1 quarter ahead of schedule, and to 3.0x by the end of fiscal 2018. As we noted last quarter, with soft Television advertising revenues, it is unlikely we'll get to 3.0x this year, but we are very, very focused on this important goal. As we enter our third year as a new Corus, we recognize that our Television and Radio businesses operate in a mature and evolving market which brings challenges. Nonetheless, we believe there are still significant opportunities to be realized through smart investments in content and technology. As Canada's leading pure-play media and content company, we are focused on 2 overarching priorities: one, to maximize the profitability of our media businesses here in Canada; while we, two, build our international content business over time to diversify our revenue base.With regard to our media business, Television advertising revenue remains soft, impacting our company's overall revenues. And visibility of future revenue from this revenue source is still limited. As anticipated, this quarter, our Television advertising revenue was lower than the prior year partly due to the impact of the Winter Olympics, though the decline this quarter was an improvement relative to our first quarter results. Turning to Slide 6. To maximize the profitability of our Television segment while offering innovative solutions to our distribution and advertising partners, we are focused on 3 key priorities in our TV segment. One, grow our high-value audiences. In today's very competitive environment, we remain a top destination for viewers with strong valuable brands and compelling content. Our recognizable and highly differentiated channel brands can cater to women, kids and families, which provides great value to our viewers, advertisers and distributors. Viewing habits are changing, but linear Television viewing still delivers vastly more time spent per week than any other platform. Two, expand our reach to meet the growing appetite for on-demand content. We are following our viewers. And we're satisfying our viewers' new consumption habits, many of whom want to binge-view our content. Our new premium video-on-demand product began to rollout last quarter and has been met with significant consumer and distributor interest. Likewise, advertisers have realized the unique value of dynamic ad insertion in the on-demand environment. This is an exciting opportunity within the broadcasting distribution ecosystem, and we are working closely with our BDU partners to further develop this new revenue stream. Three, invest in technology to expand data-driven, advanced advertising solutions. Corus is accelerating our transformation into a consumer-centric, data-driven company. Our technology and data solutions are changing the way we sell audiences. In fact, over 10% of Television advertising revenue now comes from targeted audience-based buying rather than simple demo buying. And this number continues to steadily increase. Our technology road map will soon enable us to offer advertisers a customer experience similar to what our digital competitors can provide but within a trusted and a safe environment with a proven ability to build brands over the long term. Our automated buying platform begins beta testing with select agency partners next month with a full rollout planned later in the year. This platform provides an easy-to-use interface for advertisers, comparable to what they used to buy digital ads, and offers an opportunity for even more buyers to use audience-based buying. It also makes it simpler for advertisers to bring their own custom and third-party data into their Corus advertising buy, creating even more effective targeted advertising solutions. We believe there's incredible value for advertisers with this advanced new product for the television industry in Canada. This is not an overnight solution but is an important part of our longer-term objective to maximize the profitability of our domestic media business. On to Slide 7. Another way we are working to improve our profitability is to build revenue diversity beyond national television advertising. Our local Radio and TV businesses are performing well. As John will comment in more detail, Corus is realizing the revenue synergies from bringing together Global Television and our large market radio stations across Canada as well as the performance of our small-market radio stations. 2 years ago, we outlined that the combination of these assets will provide a real opportunity to strengthen our presence in local markets and increase our overall ratings, which we've done and have effectively monetized. We have also realized significant cost efficiencies through this period. And moving forward, we'll maintain our focus on finding additional efficiencies as we refine our processes, deploy new digital technologies and further leverage synergies between Global Television and our Radio network. On to Slide 8. We continue to make good progress in building the scale of our international content business through partnerships and an expanding slate of original shows. Nelvana announced yet another significant partnership with a global leader in kids. In February, we announced Nelvana is working with Sumitomo Corporation to develop and coproduce our original anime properties for the international market. This new venture adds to our roster of coproduction partnerships that now includes Discovery Kids, Sesame Workshop and Nickelodeon, all of which will help us create more content more quickly while opening the door to broader international distribution and merchandise opportunities. As we mentioned last quarter, Nelvana, along with partners, Spin Master and TMS Entertainment, plan to relaunch the globally renowned and successful Bakugan franchise to a new generation of kids. This is yet another example of the leading partnerships that we collaborate with every day to build our international business. On to Slide 9. Corus Studios' global reach continues to expand each year with its slate of original content. Our premium library of lifestyle content continues to resonate with a broadening range of international buyers as multiple seasons of hit series, including Masters of Flip and Home to Win, along with Backyard Builds and $ave My Reno, satisfy increased demand in the international market and create value for Corus. As these properties broaden their reach into new territories worldwide, we continue to expand our library and develop new series under the Corus Studios banner. For example, we have recently greenlit 5 new original series for sale at MIPTV this month and for, of course, broadcast on our networks here in Canada, including new Corus Studios' fashion competition series, STITCHED, which is currently in production and is slated to premiere in fall of 2018. Also for sale at MIP are 3 new original docuseries: Big Rig Warriors, Rust Valley Restorers and World Without as well as a previously announced new original lifestyle reality show, Island of Bryan. It is important to note that while we are confident in the long-term revenue potential of our owned content business, it will fluctuate from quarter-to-quarter and can be a significantly impacted by the timing of content deliveries, merchandising cycles and multiyear distribution agreements. I'll now turn it over to John, who will take us through our financial results by segment.
Thanks very much, Doug, and good morning, everyone. Total Television segment revenues were relatively flat compared to last year. As Doug mentioned earlier, subscriber and merchandising, distribution and other revenue gains were offset by the 3% decrease in TV advertising revenue this quarter as compared to the prior year. While Doug has just outlined the activities we're advancing to help improve advertising revenue performance in Television, this is an area where we continue to have limited visibility into future revenues. Consistent with our expectations, Television subscriber revenue increased 1% compared to the same quarter last year. Merchandising, distribution and other revenue from the Television segment increased 28% or $4 million compared to the same quarter in the prior year. This is mainly reflective of higher distribution and merchandising revenues from our new slate of content at Nelvana as well as increased revenues at Kids Can Press, our publishing business, and Toon Boom. Turning to programming expense. We note that the second quarter did benefit from some programming that we shifted into future quarters by our U.S. content partners to the Olympics. And While this has yielded savings in the second quarter, it will negatively impact the third quarter with additional costs. To that end, we will continue to diligently manage our programming costs while ensuring we execute on our programming strategy. The Television segment ended the quarter with a 2% increase in segment profit and a segment profit margin of 31%, which is an increase from 30% last year. looking forward into the third quarter, we anticipate a tough comparable with various items that result in approximately $8.5 million of segment profit in the prior year quarter, which will not recur this year. And that includes revenue from a multiyear video-on-demand agreement and a retroactive adjustment on a BDU partner carriage agreement that was renewed in the prior year.Turning to the Radio segment. As Doug has already outlined, we are pleased to deliver revenue growth this quarter, an important milestone, which we've been working diligently towards. Overall revenues were up 3% in the quarter with gains in both local and national advertising. And segment profit increased 9%, mainly reflecting increased operating leverage and diligent cost control. That's helped improve our segment profit margin in Radio to 21%. And that compares to 20% last year. We saw both local and national revenue growth this quarter, driven by a number of factors: one, retail conditions are improving in the West with the exception of Calgary and Ontario remains very strong; two, we have witnessed some growth in key categories, such as restaurants and professional services; and three, we benefited from new pricing and inventory management strategies on the local side as well as effective management of our national corporate radio deals to encourage compliance. Before I turn things back over to Doug, let me reaffirm that we remain fully focused on delevering towards the 3x net debt-to-segment profit. Our net debt-to-segment profit ratio now stands at 3.4x. And that's supported by improved segment profit in the quarter and continued scheduled debt repayment. We remain very focused on delivering strong free cash flow as evidenced by the year-to-date increase we are seeing so far. And I'd just like to point out that if you look at a trailing 12-month basis, our free cash flow is now $328 million. I'll now turn it back to Doug.
Thank you, John. I'm on Slide 12. Before we take your questions, let me close by saying this. We recognize that the environment is changing and we need to change with it. We began this journey 2 years ago. And as we enter our third year, we remain focused on the following: mitigating the softness in national television advertising by, one, maximizing audiences through smart investments in programming, and two, bringing innovative data-driven advertising solutions to the marketplace; continuing to diversify our revenue base within Canada through local TV and Radio advertising growth, and internationally by leveraging the Corus Advantage to fund our Own More Content strategies and by increasing our presence across nonlinear platforms within Canada and internationally; and remaining relentlessly focused on cost efficiencies while we continue to transform and improve our operating model and cost structure throughout the entire company. And though we are pleased with the results of our second quarter, we recognize that in our rapidly changing industry, there will be variability from quarter-to-quarter. Across these quarters though, we remain focused on our long-term goal of optimizing the core business and positioning the organization and the company for success within a changing media landscape. To wit, we are laser-focused on the tasks ahead, driving cost efficiencies and deleveraging the balance sheet to gain increased financial flexibility as we progress our plan. Moving forward, we're confident we have the right team, the right strategy and the drive and commitment to reach our goal of more consistently delivering on our revenue objectives over time. Thank you very much. And we'd be pleased to take your questions.
[Operator Instructions] Our first question comes from the line of Jeff Fan with Scotiabank.
A couple of clarification questions for John and then a bigger-picture question perhaps for Doug. First, on the -- on just the year-over-year tougher comparison that you mentioned, John, for the next quarter, you mentioned $8.5 million operating profit in Television. Does that include the timing of the amortization shift from Q2 to Q3? And can you just help us roughly quantify what that amortization timing impact on the cost was?
Sure. So Jeff, that's all about what was in last year in Q3. So that's not referring to what's coming in Q3 this year, that $8.5 million. And just for a little bit more detail on that, that $8.5 million breaks down about $5.5 million of that was revenue and $3 million was cost. So that's what you're going to see both top line and then total at the segment profit line. In terms of what's moved -- and this has to do with global and programming amortization from Q2 to Q3. So as I said, with the Olympics, there were fewer shows delivered to us than we would have seen in the prior year. It's hard to estimate exactly what that is because you don't know what you didn't get or what you could've gotten necessarily. But it's single-digit millions. It's a relatively small number. And I guess I would say it's less than what the revenue impact of the Olympics was. So to that extent, I think I'm really just trying to point out that Q3 is going to be a little bit higher on programming and Q2 got a little bit of a benefit.
Okay. And then on the G&A line within TV, it looked like a big swing this quarter from an increase last quarter. I'm just wondering what are some of the contributors to this. Was there any slowdown in investment on the advanced ad tech? Or was it staff reduction? What would drove that G&A number?
I'm just looking at the overall detail. Obviously, the programming is a big part of it that's not in the G&A line. No, there was no slowdown on ad tech investment or for that matter, we had the impact in Q1 of global morning shows moving out of the benefits line and into OpEx. So I don't think there's any one item in particular. I think it's just a continued focus and really pushing hard on all the OpEx categories.
Okay. And now the question for Doug is really, I guess, wrapped into your capital allocation comment, looking out through F '19 and the dividend. Do you think that -- I mean, given the amount of dividend that you're paying out, does it -- is it a limiting factor in terms of what you would like to invest into the business in various initiatives in order to drive longer-term growth for the company? It's kind of a bigger-picture question, but just wondering how you think about that.
Well, Jeff, as we assess our capital allocation strategy, we're really balancing 3 very important priorities: the dividend because we understand that our investor base is a yield investor base; our bank delevering, which we are really, really focused on, we've continually focused on that since we bought Shaw Media; and organic investments to accelerate the pace of our revenue diversification. We take our financial commitments seriously. And we understand that all of you are very encouraging of a rapid deleveraging profile, and we completely agree. That said, we set the objective of a dividend of $1.14 a couple of years ago, and we intend to achieve that. So we're taking a very disciplined process here to understand what's the right mix between bank repayment, dividend and organic investment. It's a very important, as you could imagine, strategic decision. But we will reveal that, so we'll remove any kind of uncertainty when we release our Q3 results end of June.
Our next question comes from the line of Aravinda Galappatthige with Canaccord Genuity.
Doug, I'll just start with the ad trends that you see early in Q3. You sounded a bit cautious in your prepared comments. Are we sort of tracking down in Q3? Or is it sort of not clear at this stage what the trajectory is?
Aravinda, I think the message -- there's a couple of messages. Number one is visibility remains limited. And we've seen a number of quarters now where it's just not the way it used to be a couple of years ago, so we have limited visibility. We're also offsetting that by really focusing on thinking about our audiences differently and redefining how to best reach our audiences and equally importantly how to monetize our audiences. And the audience base buying strategies are an essential piece of that. Removing off buying a big, bulky demo, and we're talking about specific psychographic and demographic traits, like auto intenders, foodies, empty nesters, cruise ship lovers, et cetera. That is really resonating with our advertisers and we're seeing steady growth in those investments in advertising campaigns. So while it's hard to see with any confidence what the visibility is, what is very evident to us is that we're on the right path.
Okay. And then with respect to just a more specific question on sort of the on-demand side, can you give us just a rough sense of like what proportion of the ratings today are coming from VOD or generally, like nonlinear at this stage? And obviously, proportionate to that, what proportion is coming from -- what proportion of advertising is coming from VOD?
The vast majority of ratings in ad dollars are from linear television. So I would say that it's an emerging opportunity on-demand on 2 fronts. One is the measurement of on-demand. There's a lot of good work happening in the industry with Numeris to explore a total video audience measurement campaign, which would pick up all video consumed across all platforms. And that's moving into a test later this spring. That's the first step down the journey that needs to happen to have a much more of an all-encompassing measurement, discipline and metric. So that's kind of account number one. Account number two is as we continue to provide content to our viewers, I mean, this whole notion of, "Why should the larger television industry advocate the on-demand behavior?" It's just an opportunity for us and everybody in the industry. So we continue to provide some outstanding premium VOD packages to our BDUs. The update continues to be encouraging. And in parallel, we're working with the BDUs on their platform roadmap to ensure that we're building the dynamic ad insertion functionality. As those audiences grow, we want to be able to optimize the economics. What I can say is that we've seen a rapid growth of those premium VOD packages that we've sold to the BDUs that have the vision to do this. We've seen rapid growth in the consumption of content. And we're seeing binging, for example, on our HTV -- HGTV package, we're seeing binge-viewing of Property Brothers, which is not surprising because I see it at my house all the time. But it's nice to see it showing up on the set-top box data. So this also feels like we're in the right spot. But to circle back to your original question, it's relatively small compared to the existing base.
Okay. And then perhaps lastly, on the content side, I mean, you -- there's obviously some interesting and exciting partnerships that you have in the U.S. And you have some sort of new shows kind of hitting to that merch stage as we kind of go into fiscal '19. I know that it's obviously volatile on a quarterly basis. But is there a prospect of when you kind of look at the sum of everything you've talked about and bringing back Bakugan and I think some of the -- some of your -- some of the other brands that you've been nurturing sort of getting to that merch stage, should we expect a material upswing in fiscal '19 as we kind of look beyond '18 here?
I would say steady growth will remain the right kind of descriptor. And then maybe let me just unpack just a little bit. We've been very deliberate in striking these partnership deals. We are very confident it's the right way to go. It's a risk-mitigating strategy and is an option value-optimizing strategy because we're bringing to bear good partners with strong global footprints, access to intellectual property and a genuine financial commitment to win. And I think the caliber of those 4 partners now is obviously unequivocal. So we're focused on doing that. Within those, our content business, there's a number of other highlights I'd just like to note here. We've got -- we have great performance from our animation software company, Toon Boom, which is the global leader in 2D animation software, which continues to grow and is a real bright spot for us. Our Kids Can Press business continues to have some very, very strong performance. And then we have, as I reflected in my comments, our Corus Studios. So there's a real team of content players bringing the performance of that other revenue sector to bear here. And as far as F '19 is concerned, I would say kind of continue -- I'd just draw a straight line through the trend as opposed to any kind of a hockey stick, I guess, probably would be my quick answer.
Actually, if I may squeeze one quick one on the cost base, you did a good job obviously in Q2 and have been in the past. Given the uncertainty on the revenue side, is there an extra layer that you can look at if you have to look at to sort of maintain EBITDA and profitability at a -- if sort of ad trends kind of worsen? I mean, there's obviously a lot of smaller channels out there that you could look to rationalize. Just any color on that, either Doug or John.
Actually, listen, costs are always on the table. And if anything, I think you'd all agree that management has demonstrated a strong ability to continually take cost out of the business. And our focus is continually to find ways to operate more efficiently. If there's one thing that's true, the business is rapidly changing. And we have to look at activities and resources that we commit to in our business and say, "Are we getting the return? If not, we're going to stop doing them." Further, we have to redivert those resources into the revenue diversification strategies that we've discussed or deleveraging. So I would say that we have a continual outlook on operational savings, given the uncertainty on the revenue and Television advertising.
Our next question comes from the line of Adam Shine with National Bank.
John, maybe you can just further elaborate on the Nelvana context, because I thought part of the boost last year at Nelvana was also driven by the timing of some TV deliveries. Is that a lesser factor going into the Q3?
Sorry, I'm not totally clear on your question. Are you talking about Q3 last year?
Yes, in terms of one of the incremental boosts last year.
Well, that would be within that revenue number that I quoted, the $5.5 million last year of the $8.5 million. So there's a little bit there. Nelvana is still relatively small, but it definitely does have variability.
And then maybe just going back to some of the cost control efforts. Notwithstanding G&A going down, and Doug certainly elaborating on the ongoing restructuring efforts afoot with you guys, corporate costs moved up. I know there's a bit of a timing factor there. But is that just something you might want to elaborate on? Again, maybe just a timing factor or is there any consideration there of some creep-up?
Yes, you're talking outside of the stock base comp, obviously. It's relatively small. I'm not sure there's -- yes, it's timing. There's nothing that's worthy of calling out specifically there.
Okay. And then lastly, inasmuch as we saw the launch of, I guess, Global Go and we continue to anticipate perhaps that CBS All Access eventually comes into Canada, I think it was telegraphed as a first half event, I know you guys have, I think, talked on the prior call and in the past that you guys deem that to be a nonevent. Are there any other sort of evolving changes in the marketplace, positive or negative, that we haven't yet necessarily addressed? I mean, the secular challenges are there. You guys are pursuing some ad-tech and other revenue initiatives. Are there any potential for divestitures? I mean, it was alluded to earlier that maybe there are opportunities on the channel front. But does Nelvana ever come into play as a divestiture candidate or not really on the table now?
I would say no to Nelvana as a divestiture candidate. Its growing content is a pivotal part of our two-pronged strategy: win at media in Canada and grow content internationally to diversify revenue. We moved very quickly to sell H&S. That is pending, but we're confident that, that will be approved and that will be obviously a major factor in an accelerated profile as we deleverage the balance sheet. Your comment on CBS All Access and all the streaming platforms, yes, we continue to feel -- and we're -- CBS is a great partner of ours, but -- and we're not entirely fussed about the impact of that on our audiences. I think the one thing I would note is that there's a number of interesting conversations afoot in Canada with the vMVPDs, the players in the U.S., YouTube channels, Amazon streaming platforms, Sling. I think in the coming 24 months, we'll begin to see the arrival of these players in Canada, which presents a small opportunity for us. That'd be the only kind of new thing in the marketplace, I'd answer your initial question with.
And our next question comes from the line of Bentley Cross with TD Securities.
First, I wanted to ask, I mean, you've been very clear that visibility in the ad market remains limited. But maybe we can just look backwards for a second. Is it possible to kind of give us a number ex Olympics is what you thought ad revenue was in the quarter?
I'll give you an answer. We grew TV ad revenue in December and January. And then we gave it back in February.
Okay, great. And then separately on the merch side, obviously it's lumpy from quarter-to-quarter on the revenue side but also can be lumpy on the margin side. Was there any different margin profile in the quarter? Or was that kind of at Corporate level?
You're right, Bentley, that the revenue can be quite lumpy. I think we don't want to overstate that though. I mean, the merch revenue for the quarter is still kind of in a very low single-digit millions, so -- but you're right, the margin is very good on that particular line. But there's nothing particularly unusual about the margin there for this quarter.
I just maybe got a comment on that, it's Doug. The merch business is kind of bifurcated because we've got our own brands, which as the licensing business is a high-margin business in and of itself. But we also are acting as an agent in Canada. The Nelvana Enterprises' team is building a new business. And we're currently working as an agent for our friends at eOne with their hit property, Peppa Pig, and their soon-to-be new hit, PJ Masks. Furthermore, we also are an agent for Cartoon Network. So we're leveraging the scale of our company in Canada, our ability to schedule strategically with content and our relationships at retail to kind of both set the table for our brands but also work with partner brands. And we're seeing some nice growth in that business off a small base, as John notes.
Okay, great. And then one last one for me. I mean, to see Radio revs up for the first time since, I think, 2013 was -- certainly took us by surprise. Was there anything out of the ordinary? Or are you just guys gained share? Or what really drove that in the quarter?
Well, it gives me a chance to shout out to the Radio and the local Global TV teams because they're doing a fantastic job. It is the scale benefits at local. And it's really showing up. It's showing up on our Global News a.m. radio network. We're sharing content, sharing talent. It's showing up on our leveraging the disciplines that we have with our multi-market content kind of approach, where -- with our news business, where we kind of scale across multiple markets our news product. We're now scaling across multiple markets our music strategies, which leads to both solid ratings gains and cost efficiencies. And then finally, in those large markets where we are co-located with Global Television and Corus Radio, the sales teams are just having a great time selling Television and Radio together. And we continue to grow at a double-digit rate again off of a small base, but it's meaningful. Those advertisers that are now experimenting with Television, that they all used to be in Radio or vice versa. So it's a wonderful confluence of events that is leading to the growth at local. And we're pretty confident that, that's a good business for us. And that's why I wanted to call it out on my remarks as part of our team here both achieving revenue diversity.
[Operator Instructions] Our next question comes from the line of David McFadgen with Cormark.
So a couple of questions. So you say you're going to address the dividend for fiscal 2019 when you report Q3. I think the stock is down a fair bit. Maybe just -- the people wondering if there is going to be a dividend. Can you comment at all about that, whether you think that there would be some sort of dividend going forward for fiscal 2019? Just to give people some sort of assurance on that.
I can assure you there will be some sort of dividend going forward in 2019.
Okay, great. So just on the Radio business, do you think that we've now hit a point where there could kind of be a new trend going forward, where we might see Radio posting better results? Or is this just kind of you're setting at quarter-end, it's just the visibility is just too low to say right now?
So okay, there's two ways -- I'm going to answer that question with 2 beats. The first one, I really want to make sure we all understand, is our business is relatively variable. So we're going to have good quarters and we're going to have tough quarters. And I think we have to be taking the long ball theme here. So that's just a note that we've made. John mentioned in his remarks, I mentioned in my remarks, it was purposeful. As regards to the Radio division, I'm thrilled I've been -- I've had the pleasure of working with Radio since 2010. And my first number of years has been quite the challenge. And the nice thing about Radio is it remains a high time-spent reality with consumption. Radio has got a powerful local talent connection, both to the listeners but also to the advertisers. There is an art for programming. And I do believe we've got some fantastic programmers in our company that we know have conceptualized a strategy. So we're not running programming strategies on a market-to-market basis. We have a view from the bridge, which is showing up. And I'll once again underscore the news product that we have, which is derivative from our great Global News team and the news-gathering that is really shoring up our a.m. Global News radio stations. So I'm cautiously optimistic that, yes, in fact, there has been a turn put in the Radio segment. But also I would equally balance out with the fact that these quarters will be variable.
And David, I think if you look at what happened in Q2, let me just add to Doug's point, for Radio to get to the level it got to in Q2, it needs national and local revenue to be performing. And what we've seen in the last several quarters, really last couple of years, is one has actually been performing well, but the other one has been down a little bit. And this was a quarter where both we're kind of firing on all cylinders. So -- and as Doug said, that can change from quarter-to-quarter. So local has been doing quite well the last several quarters. National has been a bit more challenged, but that can easily change in the next quarters. So that's why we hedge a little bit because it's just -- it's hard to see how those 2 pieces are going to move. Radio is a 70% local business, so that's the biggest driver, obviously. But the National still has a big impact.
And if I could just also color in Radio, Radio just spins cash. I mean, it's a great business. It's a really, really good operating leverage business. And so any kind of revenue growth we get has got a lot of torque and we like the cash flow profile.
Okay. And then if I can just ask a question on the merchandising side, so the revenue growth was strong in Q2. It's up 17% for the first 6 months. Do you think that -- or can you give us an idea about the merchandising revenue trends for the full year? Do you think it will be up double digits? I'm just wondering if in the latter half of the year if we're going to see merchandising be flat or down, just given you've had a very strong first half.
Well, and just to be clear, David, that line isn't just merchandising, right? Merchandising is a very, very small part of that. I think the back half is going to be lower than what it's been in the front half. I think that is relatively clear. And that gets driven a lot by Nelvana's delivery schedule and a few of the other pieces that make it up. So yes, it's been a good first half, it won't be as strong in the second half.
So when you say lower, you mean lower in terms of year-over-year growth or lower in terms of just absolute dollars?
Well, I'm still focusing on what the full year is looking like. And it will still be up overall, but just not to the extent that it has been. And as I mentioned, that SVOD sale in Q3 last year will have a big impact in Q3, right, because that's typically where that revenue tracks.
Okay. And then just following up on a previous question, just on the TV advertising, it wasn't clear to me, if you ex out the Olympics, was revenue down? Or was it flat?
It's hard to -- it's really hard to isolate it. I think I'll just stand by my earlier comment, we had a couple months of growth leading into Olympics and then the audiences all shift. Canadians love Winter Olympics, so -- and this is the volatility and the visibility issues that we've spoken to on the call.
So you can take from that, that if we're down 3% for the quarter, that February was down significantly. As Doug said, Dave, it's really hard to count what you didn't get, right, so...
Our next question comes from the line of Drew McReynolds with RBC.
Three follow-ups from my perspective. First, for you, Doug, a big-picture one on your programming buying strategy, TV buying strategy. Just wondering as you kind of go forward in the next few years, there isn't a lot of visibility in TV advertising as we all know. In the past, you've done longer-term output deals with obviously the key premium players in the U.S. Just wondering, with the absence of visibility in the top line, how that programming purchasing strategy or negotiation kind of changes over, let's say, the next 2 to 3 years, if it does at all?
I would say that our output deals -- we've done, I think, a very smart series of deals over the years to secure content, trademark, digital output from the best brands in the U.S. on an exclusive nature for multiyear terms. Those -- we love those deals. I'm not going to speak in too much about them because they're -- it's competitively sensitive. What I would say is the areas in the portfolio, I think, that we're looking at are not the big -- those big services because we think those have got a long way to go across multiple platforms. We've got deep and long partnerships with those U.S. content providers. I think that what I would do is invert your question and say in the next few years, what happens to channels that have no content supply, no distinguishing brand, limited carriage? And I think that's where we're really focusing on optimizing our portfolio. We're going to hunt with the big dogs, and we're going to increasingly look to focus to grow. And I think that's really a key piece of the next chapter of our channel portfolio strategy.
Okay, that's helpful, Doug. Just on a separate note, on the regulatory side, when you look forward, clearly anybody on the legacy side of the business is disappointed by a playing field that's not level clearly with a lot of the over-the-top folks that increasingly come here to Canada. What is the next regulatory development or review or process by which you can again try and kind of state your case for a re-leveling of the playing field?
Well, there's -- there's a pretty full docket right now, which I'm quite thankful for, honestly. Listen, we believe that there's real opportunities to deregulate our industry to allow for greater competition and increased opportunities for Canadian media and Canadian producers to thrive. There's been a push, for example, by a number of folks to regulate online platforms. Frankly speaking, we need less regulation, not more, although I do believe that having a level playing field as far as taxes is a sensible approach. We're though, in general, supportive of easing the regulatory burden on broadcasters and on BDUs. We're very supportive of CanCon requirements because it's part of our longer-term view to grow our content business. And we support both producing our own content but also the CMPA and the independent producers in Canada. We're supportive of more financial support for local news. We've all -- I don't have to tell anybody on the phone about the fake news issues, all the data problems. I mean, local news is the lifeblood of a local community. And we believe in the importance of being a broadcaster in that regard. We support regulatory changes to increase scale in Canada. We support regulatory changes to allow increased foreign investment in Canada. We're supportive of the CBC's own recommendations. And so we've been advocating with a louder voice, and we'll continue to do so.
Okay. And final question maybe for you, John. Just with respect to the consolidated CapEx outlook for the company, on a kind of capital intensity perspective, Corus clearly running quite low, a big EBITDA to free cash flow conversion rate, which is obviously nice within the context of all your objectives. Just wondering over the medium term, let's say, 2 to 4 years, are there any chunky CapEx projects that would kind of bump up your capital intensity where -- relative to where it is today?
Yes, Drew. No, it's a good question. We have been running quite low. And that sort of $20 million to $25 million range is probably where we'll end up for fiscal 2018. In terms of anything on the horizon, there's the normal replacement cycle as technologies change and we can become more efficient through doing those types of investments. I guess the big question, and there's lots of news flow on this, not related to Corus necessarily, but the 600 megahertz spectrum auction will require us to relocate some of our frequencies to make room for that spectrum. Now it's not completely clear how or if that will be compensated at all through the proceeds of the auction. So there's still efforts on that front. Our total cost on that, which will probably happen over 2 to 3 fiscal years is likely in the $20 million range. So that's manageable, I would say, within our existing CapEx envelope. So we don't look to see a big spike in CapEx from that. I think we can deal with it as it comes.
And that's all for questions. I'll turn the call back over to you.
Great. Thank you, Matthew, and thank you, everyone. We appreciate your time and support this morning. We look forward to speaking with you in the future. All the best now.
This concludes today's conference call. You may now disconnect.