Second quarter operating highlights:

• Consolidated adjusted operating income¹ of $2,427,000, an unfavourable variance of $4,944,000 (-67%) from the same quarter of 2024;
• $2,431,000 adjusted operating loss¹ in the Broadcasting & Production segment, a $3,298,000 negative variance due primarily to a 20% increase in the adjusted operating loss¹ of “TVA Sports” because of lower advertising sales resulting from the failure of the Montreal Canadiens and other Canadian teams in the National Hockey League (“NHL”) for the Stanley Cup playoffs;
• $3,920,000 adjusted operating income¹ in the Magazines segment, up $2,701,000 (222%) mainly because of the addition for part of the quarter of the adjusted operating results generated by the magazines acquired from Transcontinental, the operational synergies realized since the integration of the acquired magazines, and other cost-cutting initiatives;
• $938,000 adjusted operating income¹ in the Film Production & Audiovisual Services segment (“MELS”), a negative variance of$4,347,000 (-82%) due to lower volume of activities in soundstage and equipment rental and in visual effects. In the same quarter of 2024, our soundstages and production equipment were heavily used for the major US production X‑Men Apocalypse.

“Our quarterly results were impacted by the decline in the TVA Sports channel’s advertising sales, due in large part to the fact that the Montreal Canadiens didn’t make the NHL playoffs. Apart from that unusual circumstance, we are satisfied with the performance of the other units of our Broadcasting & Production segment, particularly TVA Network, which grew its adjusted operating income by 2.2% and increased its market share to 23.4%,² up 1.4 percentage points from the same period of 2024. TVA Network carried 4 of the top 5 most-watched programs in Quebec, including La Voix, which was the Number one show again with more than 2.7 million viewers”, commented Julie Tremblay, President and Chief Executive Officer of the Corporation.

“The increase in the Magazines segment’s operating results was the result of a concerted effort to successfully integrate the magazines acquired from Transcontinental on April 12, 2024. Our editorial and content management teams are constantly improving the content of our brands and magazines in order to address our readers’ ever-changing needs. The latest Vividata³ surveys show that we have grown our print readership by 2% and maintained our leading position in Canada’s magazine publishing industry with nearly 9 million readers across all platforms”, said Ms Tremblay.

“Finally, the Film Production & Audiovisual Services segment suffered from the absence of any major Hollywood production in the second quarter of 2024, whereas the movie X–Men Apocalypse was filming on our soundstages in the same period of 2024. However, we are pleased with the bookings we have for next months,” concluded Julie Tremblay.

Definition

Adjusted operating income (loss)

In its analysis of operating results, the Corporation defines adjusted operating income (loss) as net income (loss) before depreciation of property, plant and equipment, amortization of intangible assets, financial expenses, operational restructuring costs, impairment of assets and others, income taxes and share of loss (income) of associated corporations. Adjusted operating income (loss) as defined above is not a measure of results that is consistent with International Financial Reporting Standards (“IFRS”). Neither is it intended to be regarded as an alternative to other financial 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 operating income (loss) is also relevant because it is a significant component of the Corporation’s annual incentive compensation programs. The Corporation’s definition of adjusted operating income (loss) may not be identical to similarly titled measures reported by other companies.

TVA Group

TVA Group Inc., a subsidiary of Quebecor Media Inc., is an integrated communications company engaged in the broadcasting, film and audiovisual production, and magazine publishing industries. TVA Group Inc. is the largest broadcaster of French-language entertainment, information and public affairs programming, in North America, and one of the largest private production companies. TVA Group is also a leading publisher of French-language magazines and publishes some of Canada’s most popular English-language titles. The Corporation’s Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B.

On August 1, 2024, the Board of Directors approved the interim condensed consolidated financial statements for the three-month and six-month periods ended June 30, 2024 and 2024.

TVA GROUP INC.
Notes to interim condensed consolidated financial statements

Three-month and six-month periods ended June 30, 2024 and 2024 (unaudited)
(Tabular amounts are expressed in thousands of Canadian dollars, except per share and per option amounts)

TVA Group Inc. (“TVA Group” or the “Corporation”) is governed by the Québec Business Corporations Act. TVA Group is an integrated communications company engaged in the broadcasting and production, film production and audiovisual services, and magazines publishing industries (note 12). The Corporation is a subsidiary of Quebecor Media Inc. (“Quebecor Media” or “the parent corporation”) and its ultimate parent corporation is Quebecor Inc. (“Quebecor”). The Corporation’s head office is located at 1600 de Maisonneuve Boulevard East, Montreal, Quebec, Canada.

The Corporation’s businesses experience significant seasonality due to, among other factors, seasonal advertising patterns, consumers’ viewing, reading and listening habits, and demand for production facilities from international and local producers. Because the Corporation depends on the sale of advertising for a significant portion of its revenues, operating results are also sensitive to prevailing economic conditions, including changes in local, regional and national economic conditions, particularly as they may affect advertising expenditures. Accordingly, the results of operations for interim periods should not necessarily be considered indicative of full-year results.

1.   Basis of presentation

These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), except that they do not include all disclosures required under IFRS for annual consolidated financial statements. In particular, these consolidated financial statements were prepared in accordance with IAS 34, Interim Financial Reporting, and accordingly, they are condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the Corporation’s 2024 annual consolidated financial statements, which describe the accounting policies used to prepare these financial statements.

Certain comparative figures for the three-month and six-month periods ended June 30, 2024 have been restated to conform to the presentation adopted for the three-month and six-month periods ended June 30, 2024.

2.   Revenues

The breakdown of revenues between advertising services, royalties, rental and postproduction services and other services rendered, and product sales is as follows:

3.   Purchases of goods and services

The main components of purchases of goods and services are as follows:

4.   Financial expenses

5.   Operational restructuring costs, impairment of assets and others

In the three-month and six-month periods ended June 30, 2024 and 2024, the Corporation recorded the following operational restructuring costs, mainly in connection with elimination of positions:

In the second quarter of 2024, the Corporation recognized a $198,000 loss on the contingent consideration receivable from Sogides Group Inc. in connection with the sale of the book publishing operations acquired in the transaction with Transcontinental Inc. (note 6).

Furthermore, during the three-month period ended June 30, 2024, the Corporation recorded professional fees in the amount of$12,000 in connection with business acquisitions made in 2024 and 2024 ($469,000 in the same period of 2024). During the six-month period ended June 30, 2024, the Corporation recorded professional fees in the amount of $72,000 in connection with those acquisitions ($631,000 in the same period of 2024).

6.   Business acquisitions and disposals

On April 12, 2024, the Corporation acquired 14 magazines from Transcontinental Inc, four of which are owned and operated in partnership, as well as three websites, custom publishing contracts and book publishing operations, for a purchase price of$56,286,000 in cash, including $786,000 paid in the fourth quarter of 2024 as a final adjustment contingent upon a predetermined working capital target agreed to by the parties. The process of allocating the purchase price was completed during the three-month period ended December 31, 2024.

The acquisition was in keeping with the Corporation’s strategy of investing in the production and dissemination of diverse, rich, high-quality entertainment and information contents. The acquired intangible assets basically consist of customer lists and brands. The goodwill related to the acquisition arises mainly from the quality of the content and the expected synergies.

The final purchase price allocation between the fair value of identifiable assets and liabilities related to this acquisition breaks down as follows:

As part of this transaction, the Corporation simultaneously transferred the acquired book publishing operations to Sogides Group Inc., a corporation under common control, for the agreed price of $720,000, including $300,000 in cash and a contingent consideration receivable valued at $420,000. The transferred net assets included $807,000 in current assets, a $127,000 publishing fund and$214,000 in current liabilities. During the three-month period ended June 30, 2024, the Corporation received a final contingent consideration of $222,000 and recorded a $198,000 loss under other items to reflect the change in value of that consideration (note 5).

Goodwill in the amount of $6,758,000 is deductible for income tax purposes.

Global Vision

As of June 30, 2024, the Corporation had recognized a $1,217,000 balance payable as a preliminary adjustment to the purchase price for the acquisition of substantially all of the assets of A.R. Global Vision Ltd. in 2024. As a result, the preliminary allocation of the fair value of assets and liabilities for this acquisition has been reviewed, leading to recognition of a deferred income tax asset of $373,000, additional goodwill of $821,000, and a downward adjustment to long-term liabilities in the amount of $23,000. The process of allocating the purchase price was completed during the three-month period ended December 31, 2024.

7.   Capital stock

a) Authorized capital stock

An unlimited number of Class A common shares, participating, voting, without par value.

An unlimited number of Class B shares, participating, non-voting, without par value.

An unlimited number of preferred shares, non-participating, non-voting, with a par value of $10 each, issuable in series.

b) Issued and outstanding capital stock

On March 20, 2024, the Corporation completed a subscription rights offering to its shareholders, whereby it received net proceeds totalling $110,000,000 from the issuance of 19,434,629 Class B Non-Voting Shares. Transaction costs of $1,870,000, less $503,000in income tax, were charged to share capital as a reduction of net proceeds from the issuance. The transaction costs included$1,100,000 in commitment fees paid to Quebecor Media.

c) Loss per share attributable to shareholders

The following table shows the computation of loss per basic and diluted share attributable to shareholders:

The loss per diluted share calculation does not take into consideration the potential dilutive effect of stock options of the Corporation, because their impact is non-dilutive.

8.   Stock-based compensation and other stock-based payments