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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the fiscal 2017 fourth quarter and annual results conference call. Your host for today will be Mr. Denis Rozon, Vice President and Chief Financial Officer, TVA Group, Inc.; and Ms. France Lauzière, President and Chief Executive Officer. Mr. Rozon, please go ahead, sir.
Thank you. Good morning, ladies and gentlemen. Thank you for taking part in our call today [Foreign Language]. Certain statements made on the call today may be considered forward-looking statements, and we will refer you to the risk factors outlined in today's press release and reports filed by the company with regulatory authorities. I will now turn the call over to Ms. Lauzière.
Thank you, Denis. Good morning, welcome to our conference call for the fourth quarter of fiscal 2017. Overall, we are satisfied with our results for the last quarter and our financial year as TVA Group's total market share increased to 36.4%. TVA Network's market share increased to 24.3%, and 7 of its shows attracted more than 1 million viewers, led by the finale of La Voix Junior, which peaked at 2.5 million. Allow me to talk about the hit series Fugueuse, currently airing on TVA, which deals with an important and disturbing issue, sexual exploitation of teenagers. The series reaches a weekly audience of 1.5 million viewers, including an impressive number of young people, who are the target audience, but who don't necessarily watch TV. We are proud that we are helping to raise awareness of this issue. Fugueuse has also received a great deal of media attention in Québec. Our specialty's channel continue to grow their advertising revenues and their audiences. Advertising revenues were up 9.8% and their combined market share is now at 12.1%. The LCN news channel became the most watched specialty channel in Québec with an impressive 4.6% market share. Prise 2, MOI&cie and addikTV, all posted growth. Now for TVA Sports. First of all, I want to say we're disappointed by the CRTC decision on the rate payable by Bell for its distribution of TVA Sports. Quebecor is vigorously defending its position and has filed an application in the Federal Court of Appeals for leave to appeal the CRTC decision. On a more positive note, we have signed several long-term agreements with top 5 partners in recent weeks to broadcast some of Quebecor's favorite sports. In January, TVA Sports signed a 3-year agreement with Eye of the Tiger Management and became the official broadcaster of their boxing night. We will broadcast these major live events in their entirety. As the Montréal Impact prepare for their 25th event, TVA Sports has announced that 2 former Impact players are joining their team of analysts and contributors. Former Captain Patrice Bernier, a popular figure with France, and former star player Hassoun Camara, who will be our new commentator. As you know, TVA Sports is the exclusive French-language broadcaster of the Montréal Impact, and an official broadcaster of the MLS right up to 2021. As you already know, TVA is strongly involved in its community. This week, we announced a 6-year agreement with Réseau du sport étudiant du Québec to broadcast college football. This last year, the competition between Québec universities has been intense, and we are pleased to allow the fans to follow their team on the road. Let's talk about another sector, Magazine. The various rationalization plan we have implemented in recent quarters have enabled the Magazine segment to weather the storm. Despite everything, TVA Group remains the top publisher of French-language magazines in Québec with more than 3.2 million readers on our platform. It is a leading player in the Canadian magazine market, with a total of 9.8 million readers on all platforms.During the last quarter, TVA Publications title were honored with 6 Canadian Online Publishing Awards. The recognition for Coup de Pouce, Elle Québec, Elle Canada and Clin d’oeil come from the soundness of our approach to the digital content. In January, TVA Group sold the assets associated with The Hockey News to Roustan Media in order to focus on its flagship brands. Lastly, let me say a few words about MELS. The Film Production & Audiovisual Services segments' financial results improved for the third consecutive quarter because of optimal use of our soundstages and equipment by local and international producers. The major production X-Men took up most of our facilities and large portion of our equipment in the fourth quarter. As well, postproduction, visual effects and distribution service all grew their adjusted operating income year-over-year. We are also very proud of the 4 Canadian Screen Awards nominations picked up for Achievement in Visual Effects, and in Overall Sound categories to which MELS contributed. The nomination come from MELS industry-leading expertise in these areas of postproduction. To conclude, in late January, MELS acquired the assets of Mobilimage, a company that trends out mobile production vehicles and equipment. Over the year, Mobilimage has developed this expertise in recording sporting events and shows. For 30 years, it has been serving mainly the Québec market as well other parts of Canada and the Northeastern U.S. Even after the merger, all the Mobilimage employees have joined our team. The acquisition adds mobile rental to MELS' offerings, complementing soundstages and equipment rental, VFX and postproduction and expanding the range of services we are able to offer to Québec and foreign producers. Thank you for your attention. I will now let Denis review our financial results.
Thank you, France. I would like to outline the main following financial highlights for our fourth quarter results. Consolidated operating revenues recorded an 8% decrease with a 9% decrease in Broadcasting & Production segment, 17% decrease in the Magazines segment, but a 10% increase in the Film Production & Audiovisual Service segment. The decrease in the Broadcasting & Production segment is mainly due to 6% decrease in the segment's advertising revenue, and 15% decrease in the subscription revenue of the specialty services as a result of retroactive adjustments to subscription to TVA Sports and 2 other specialty services. The decrease in the Magazines is primarily due to the loss of operating revenue resulting from the discontinuation of some titles in 2016, combined with 22% decrease in advertising revenue,[indiscernible]essentially by the women's and decorating and cooking categories, and a 13% decrease in newsstands revenue and its subscription revenues. The increase in the Film Production & Audiovisual Services segment is essentially due to 39% increase on soundstage and equipment rentals, partially offset by a decrease in the postproduction revenues. Our consolidated adjusted operating income reached $23 million, for the fourth quarter, which represent a positive variance of $1 million or 4.5% compared to last year quarter. Broadcasting & Production segment record an unfavorable variance of $1.2 million, caused mainly by a decrease of 9.5% in the adjusted operating income of TVA Sports. The Magazines segment recorded a positive variance of about $3 million essentially due mainly to the implementation of staff and expense rationalization plans in recent quarters and the decrease in operating expenses caused by the discontinuation of some titles in 2016, largely offset by the decrease in operating revenues. The Film Production & Audiovisual Services segment record a positive variance of $1.9 million of its operating income, mainly attributable to the growth from its revenue from soundstage and equipment rental activities. Finally, the corporation declared a net income attributable to the shareholders of $9.2 million or $0.21 per share compared to $5.7 million or $0.13 per share for last year quarter. This conclude the official portion of our conference call. We will now be pleased to answer your questions. Operator?
[Operator Instructions] And we do have a few questions already queued up. First one comes from Adam Shine from the National Bank Financial.
So Denis, can we talk a little bit more about these retro adjustments? Specifically, is there a way for you to quantify these? Or not necessarily willing to do so? Let's start there.
Basically, we won't want to -- we do not want to disclose the figure for main reason, those are private agreements. And, but -- it was quite major adjustment, and it was mainly adjustment for the period -- for TVA Sports was for the period covering September, up to September 1, 2016.
Okay. Yes, that goes back to the last contract. When we think about how this sort of resets things going forward, how should we look at that? Obviously, notwithstanding the backward-looking retroactive adjustments. As we look ahead, some growth, perhaps, gets muted with respect to subscriber growth on the specialty TV side. Is that a fair assumption?
I'm not sure, I did understand your question completely. Can you repeat it, please, Adam?
Absolutely. So when we think about a lot of these adjustments are backward looking, but as we look ahead into '18, do we have any lingering implications? Does it -- because we were previously seeing subscriber growth at a higher level across specialty TV networks. Do we start to see a smaller rate of increase moving ahead?
I think our forecast is still that we're going to have some increase on the subscription revenue. Mainly, we continue -- we had agreement that even if the decision we are not happy with it, it still involves some increase in the rates. So -- and also, on the subscription level, with the -- unfortunately, with the performance on Montréal, Canadian, all sports channels at Québec has been effect. But basically, it's not very material. And so we should continue to see a growth perhaps a little bit as a lower growth rate that initially anticipated for us.
Okay. And maybe just one more as it relates to pacings; I mean, you obviously addressed the fact that our Canadians are not doing too well. So that has implications, clearly for Q2 as it relates to the playoffs. But maybe that has some positive implications for TVA Network, that had 4 very strong quarters until obviously, things got lapped in the Q4 '17. Can you speak to early pacings in the first half of '18, both for TVA Network and also ultimately at MELS?
So that's a large question you have here. Actually, our pacing about TVA advertising revenue, it's always sensible to say, it's -- it could vary, but actually the pacing is, we're happy about it, I mean we are on a good pacing compared to last year. But again, it's probably short-term. No, I'm not telling you that it's going to be sustained for the full year. Last year, TVA Network and our specialty channel, we performed a lot better than the market. So we will -- we do everything to continue on that pace, but nothing could -- what I mean here is the market in TV, and you know that is not a positive market, and it's not showing growth. We are showing growth based on the result and strategy we've put in place. We are still looking for that in the next year. But are we going to get the same -- I just said that we had. It's not guaranteed, but I think we're on the good track actually. That's for TVA. France, would you like to add something about...
Maybe for TVA Sports. For sure, we're working on various content strategy, and we're looking forward to put some energy in our new license that we talked about to the MLS and the Montréal Impact, which is doing its 25th season, and also our new Eye of the Tiger Management. So all the team is working to put everything in place, and we're also working on some potential proposals who are advertisers for other -- all of our channels, including TVA Sports for sure, but including TVA Network for our strategy.
Okay. I guess the other part was the TVA Network, and I was asking about MELS, just early pacing for this year. Because obviously, '17 was a good year where EBITDA, as promised, Denis, came right back to that 2015 level.
Yes. In the soundstage business, Q1 is running about last year's and queries and about our abilities and the bookings for the upcoming years are good. It is a little bit early to confirm, but we are expecting at least the same revenue level as last year.
Next question we have in the queue comes from Bentley Cross from TD Securities.
[Foreign Language] I first wanted to expand on Adam's questions. Is -- given your outlook, and the comments you said to Adam's, is it fair to characterize, if excluding the retroactive would revenues have been up in the quarter?
That's fair.
Okay. That's helpful. And then also on TVA Sports, you said the loss was down something like 50 -- 50-something-percent. Is that imply that a loss for TVA Sports was somewhere in the ballpark of $15 million this year?
Yes.
Okay. And then lastly, just in terms of the acquisitions and divestitures you guys made, can you give us any sort of contribution for both Hockey News that's going away and then Mobilimage?
You mean...
Like how much revenue is going out the door from the Hockey News disposition? And how much revenue is coming in the door from Mobilimage?
I will express this more like this. If we sell something, it is probably because it was not a lot of money coming in. And if we buy something it is because we are expecting to have a positive impact on our results. But at the same time, it's more like -- in the case of Mobilimage, we are looking more to have a more complete offering to our customers. So it's more like to get more positive synergies on the revenue side and get more market share about the rental -- equipment rental and have a complete offering. So if you add all their studios and equipment we already have, you add now the model equipment and expertise, you add to that all our one-stop-shop for our postproduction services, VFX, sounds services, image services, distribution, digital distribution, closed captioning, and conference video description, you have a complete offering for a customer, local and at national. So that is more the strategic and all the logic behind that acquisition of Mobilimage.
We currently don't have any other questions in the queue at this time. [Operator Instructions] Next question comes from Matthew Gan from Cormark Securities.
Just wanted to clarify. So for TVA Networks in Q4 '17 we saw TVA Networks ad revenue kind of fall back to Q4 '15 levels. Just can you give us some colors on what kind of happened there? And is this expected to be kind of a one-time event? And moving forward, are we still working off of same base? Or are we on the 2017 base?
As I always said, in television, more in conventional TV, you have to be careful about comparison quarter-to-quarter, you have to look at it on a year-per-year basis. Basically, advertising revenue were up 5% for the total year, which is very -- a great performance considering that the conventional television market is negative across Canada. So it was probably quite an adjustment for the very big performance we had in the first 3 quarters.
Okay. So for 2017, we're still kind of expecting steady growth rate -- sorry, for 2018, are we still kind of expecting steady growth rate?
Working on it.
We're working on it. You still have to understand that it's at least the best, actually, in the market, is a flat market.
Okay. And then just a question on your capital allocation. You guys are expected to generate a lot of free cash. You previously alluded to the fact that you were thinking of upgrading kind of your MELS facility. Can you give us any color or update on plans there? And also, potentially some other plans with respect to what you -- what you kind of intend to do with all that cash?
Yes. About the MELS studio, we're still in the planning phase, especially in the light of certain development in the neighborhood of the potential sites, and more specifically, including the light-rail project with the construction of the new bridge in Montréal. So it probably won't be ready in 2018, for sure. But -- that plan is still under planning. So we are happy to have the fund available for that. We also have some -- we are always looking at some potential acquisition, and that's the reason why we're happy to have those funds available.
Okay. And then just kind of one final question. In terms of those acquisitions, what -- can you speak to what kind of characteristics those acquisitions you're looking at? And what stage, potentially?
Not for now.
No, we won't comment on the specifics for the moment.
And that was currently the last question in the queue.
Okay. So thank you, everybody, and we talk to you next quarter.
Have a great day.
Bye-bye.