Corus Entertainment Inc.

Good morning. My name is Ludi and I will be your conference operator today. At this time, I would like to welcome everyone to the Chorus Entertainment Q3 2025 Analyst and Investor Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star followed by the number 2. Thank you. As a reminder, this call is being recorded. I will now turn the call over to Mr. John Gosling, CEO of Commerce Entertainment. Mr. Gosling, you may begin your conference.

Great. Thank you, Ludi, and good cooler morning, everyone, and welcome to Commerce Entertainment's fiscal 2025 third quarter earnings call. I'd like to remind everyone, as usual, that we have slides. to accompany today's call, and you can find them on our website at www.coruscant.com under the Investor Relations section. I'll start off today by drawing your attention to our standard cautionary statement, which can be found on slide two. We note that forward-looking statements may be made during this call, and actual results could differ materially from forecast projections or conclusions in these statements. We'd also like to remind those on the call today that in addition to disclosing results in accordance with IFRS, the course also provides supplementary non-IFRS or non-GAAP measures as a method of evaluating the company's performance and to provide a better understanding of how management views the company's performance. Today, we will be referring to certain non-GAAP measures in our remarks. Additional information on these non-GAAP measures, the company's reported results, and factors and assumptions related to forward-looking information can be found in our third quarter report to shareholders and the 2024 annual report. which can be found on CDR Plus or on our investor relations website. Joining me on today's call are Jennifer Lee, who is our chief administrative and legal officer, as well as senior finance team members and veterans, of course, Doug Spence and Ann Duggan, all of whom are outlined on slide three. Now, over to slide four, I'll start today's call with a brief update on the recent change in the CEO role. In the past year, we did have a co-CEO structure, and that enabled the company and the management team to focus on the various challenges and initiatives throughout the business that we were navigating. Given the completion of many key actions that I will touch on in a moment, the board decided to revert to a more typical structure with a single CEO. We do want to thank Troy Reid for his contributions to our company and industry over the past 25 years. And on behalf of the board and all of us at Chorus, we wish him all the best in his next chapter. For my part, I look forward to continuing to work with our strong leadership team and our many talented individual teams, building on the nearly 10 years I have already spent in a leadership role here at Chorus. Over the past year, since I first transitioned to the co-CEO role, we have already undertaken meaningful changes to our business, all to position ourselves for a more sustainable future and to adapt to an ever-changing industry. A few things to note. In March, as you will have seen, we assigned, amended, and extended the credit facility, which provides improved terms and better positions to create sustainability in our business. We have also significantly reduced our operating costs and gained efficiencies through workflow optimization and unfortunate but necessary headcount reductions of nearly 30% compared to where we were in August of 2022. At the same time, we have pursued portfolio optimization through the sunset of three specialty television services and divested of certain real estate assets. Global remains one of Canada's most trusted and most watched networks and has the best performance in over a decade. Overall viewing of the global news is up 4% year-over-year in spring 2025 and 6% for the year to date. We also launched our two rebranded specialty lifestyle networks, Home and Flavor, and added fresh and exciting unscripted programming to our Slice brand. In turn, this has increased the value proposition of our popular digital assets, Stack TV, and the global TV app. And most important, perhaps, is that we continue to make, produce, and acquire the content Canadian viewers love, deployed across our conventional networks, especially brands and digital platforms. All right, moving to slide five. In fact, June marks a very exciting time for our business as we unveil our programming lineup for the upcoming broadcast year. As we recently shared in our upfront, our programming schedule is packed with exciting new shows and returning hits that build on the success we experienced over this year. Forrest connects with over 31 million Canadians every month, bringing them the content they want, where they want to watch and listen to it. Global TV was number one in core primetime for fall 2024 and spring 2025 in the adults 18 plus demo. And looking to the fall, we are well positioned for another great year with over 16 hours of simulcast, and top returning titles like 9-1-1, Matlock, the NCIS franchise, Saturday Night Live, which holds the crown as late night's number one show, Ghost, which is the number one comedy, and, of course, Survivor, the number one reality show in Canada as it heads into its landmark 50th season. We are also excited to have secured some new titles, for example, workplace comedy DMV, the latest NCIS franchise, CIA, and the highly anticipated drama Sheriff Country, which is a spin-off from the hit series Fire Country. All right, on slide six, on specialty programming, we currently have 75% of the top 20 entertainment specialty programs, and as we announced at the upfront, we have secured another incredibly strong upcoming lineup. Our exclusive content partnership with NBCUniversal is set to deliver a new Peacock and Sky original series, including The Paper, which is from the universe of the mega hit The Office, The Copenhagen Test, featuring Canadian and now global star Simu Liu, and All Her Fault, a suburban thriller starring Sarah Snook. We will also welcome back new seasons of hits like Ted and Bel-Air. Our unscripted and reality networks will see the return of the number one entertainment specialty program, The Curse of Oak Island, as well as our very own Top Chef Canada, which is coming back for season 12. We're also excited to welcome back Gordon Ramsay's Kitchen Nightmares and our, of course, original series, House of Ali. and rock-solid builds. Some of our new specialty series include Life is Messy and World War II with Tom Hanks. You can also expect new course originals like Building Bomber, Halloween Bake Shop, and Holiday Bake Shop. These are just a few of the titles that will drive tremendous performance on specialty, including our Refresh Bestie channels. We like to experience the particular success we are experiencing on Home and Flavor and our Homegrown Fashion Reality series, Life. Homeward Flavor are both top 20 English language specialty services and the number one and number two lifestyle networks. Place also ranks in the top 20 with audiences up 5% this spring in the key adult 2554 demo, benefiting from refreshed content and the addition of talk shows from the daily news and crime genres. All three of these services are vesting their newly created direct competitor services by considerable margins. All right, turning to slide seven. Our streaming portfolio had its strongest winter-spring season really ever for tuning, and over 19 million average hours were streamed, and that's up 7% year-over-year for the winter-spring season. We are pleased that StackTV subscriptions have remained relatively resilient following our Q2 price adjustments. Prior to the launch of our strong upcoming fall schedule, we have added hundreds of hours of video-on-demand to the service, and these include back seasons of popular history, lifetime, and detour series such as Alone, Curse of Oak Island, Married at First Sight, Gypsy Rose, Life After Lockup, Supernatural, and The Mentalist, all of which create more value for existing and new subscribers. These additions, as well as the launch of new seasons of key subscription drivers like Alone, Rick and Morty, and Big Brother, are expected to support our efforts to increase viewer engagement heading into the fall. Our global TV app continues to gain momentum with audiences, particularly in live viewing, global news, and entertainment streams. And in recent months, we've seen some of the highest levels of engagement since launching the app. We've also implemented live linear dynamic ad insertion on all of our live streams and made progress on enhanced search capabilities on key connected TV platforms. At a high level, the advertising environment remains very challenging, characterized by ongoing uncertainty in the economic environment, an oversupply of digital inventory from foreign competitors, and generally lower advertising demand on linear television. This continues to create a very low visibility environment industry-wide. As you can see in our Q3 results, which I'll turn to next, we have and will focus on the most attractive opportunities whenever possible and continue to be disciplined in cost management. All right, moving on to slide eight for an overview of our consolidated Q3 results. As we expected, the key in federal election provided a tailwind for us in the quarter, partially offsetting pressure in other advertising categories and leading to results that were in line with our Q3 outlook for TV advertising. This, combined with lower subscription revenue, contributed to consolidated revenue of $298 million, and that was a 10% decrease from the prior year. Consolidated second profit was $62 million per quarter, reflecting the impact of the lower revenue and partially offset by the ongoing benefits of our cost control measures. We delivered significant total general and administrative expense reductions of $10 million or 9% in the quarter. This was at the high end of our third quarter outlook and includes a decrease of 7% employee costs all reflecting our state equipment to managing expenses and right-sizing our business. Consolidated segment profit margins for the quarter were 21%, and that's an increase from 20% last year. Free cash flow of negative $33 million in the quarter decreased from last year, and that reflects lower segment profit, seasonally higher working capital usage, and net program rights of some investments, as well as higher restructuring costs. At the end of the third quarter, we were in compliance with all loan covenants and had $82 million of cash and cash equivalents, and approximately $45 million was available to be drawn under the revolving credit facility. Net debt to segment profit was 5.39 times at the end of the third quarter, and that compares to 3.84 times at the end of August 2024. That primarily reflects the impact of the lower segment profit. Looking ahead to the fourth quarter of fiscal 2025, the advertising environment factors discussed earlier are incorporated into our outlook. As a result, the over-year decline in television advertising revenues for Q4 of fiscal 2021 is expected to be in the 20% range. Amortization of PV program rights is once again expected to be relatively flat compared to the prior year quarter. And our implementation of additional cost reduction initiatives is expected to benefit consolidated general and admin expenses in the range of 10% to 15% reduction compared to last year. As we pursue additional initiatives to offset the lower expected revenue and await further details on the recent CRTC decision, concerning the Quantum of Courses funding from the Independent Local News Fund. Well, it's too early to comment on advertising trends for the upcoming broadcast year, but I mentioned earlier, we are excited and confident with the strength of our content and the 2025-26 programming lineup. Our upfront was very well received, and we are looking forward to further building on our strong audience performance this year. At this point, I'll pass it to Doug Spence, who will walk through the segmented results.

Thank you, John. I'll start on slide nine. TV segment revenues were $275 million for the quarter, down 11%. This was mainly driven by TV advertising revenue, which declined 15% in Q3. Subscriber revenue of $111 million for the quarter was down 5%, primarily reflecting declines in the traditional distribution system and the sunset of three of our specialty television networks in the first half of this fiscal year. Excluding the impact of these portfolio changes, subscriber revenue was down approximately 2%. Distribution, production, and other revenues were lower for the quarter by $0.6 million, driven by fewer episode deliveries and reduced service work. Total TV expenses were down 12% in the third quarter compared to last year. This decrease was mainly driven by 3% lower amortization of program rights, a $9 million decrease in the amortization of film investments, which includes changes in film tax credit assumptions and the sale of aircraft in the prior year, as well as a decrease in other cost of sales of approximately $5 million related to certain digital initiatives. As John mentioned, the financial impacts of our cost containment measures are also evident with TV employee costs decreasing 10% as a result of headcount reductions over the prior year quarter. We also delivered a 15% decline in other general and administrative expenses through our ongoing cost management initiatives. Overall, TV segment profit was down 8%, or $5.7 million, in the third quarter, with cost reduction measures partially mitigating the impact of lower revenues. TV segment profit margins were 23% in the current year quarter, up from 22% in the prior year period. Moving to slide 10, radio segment revenue was $23 million for the quarter, just 1% lower than the prior year, as we benefited from election spending and stronger performance in Edmonton and Winnipeg driven by NHL playoffs. Radio segment profit of $5.1 million increased significantly over the prior year quarter, with a 13% expense decline from cost containment measures more than offsetting the lower advertising demand. As a result, radio segments profit margin doubled to 22% from 11% in the prior year period. I'll now turn it over to Jen for comments on some important regulatory developments.

Thanks, Doug. Let's move to slide 11. So earlier this month, we were pleased that the BRTC confirmed courses' eligibility for funding from the Independent Local News Fund, or ILNF. As Canada's largest independent local television news provider, we have consistently maintained that our 15 local global TV stations have met the ILNF criteria for some time. BRTC also confirmed that under revised ILNF criteria, Broadcast ownership groups can receive up to 45% of the total funding in the given year. In its recent decision, the CRTC provides an estimate that the fund will grow to approximately $50 to $60 million for the 2026 broadcast year. We're still confirming timing and financial details, so we do not have any core specific numbers to share at this time for fiscal 2025 or beyond. However, we look forward to continuing the important work of creating and delivering local news to our Canadian communities under more equitable funding framework. Relatedly, I think you'll recall that the increased ILNF financing base results in the 2024 CRTC decision that requires large, standalone online streaming services to direct a percentage of their prior year's Canadian broadcast revenues to various funds that support Canadian broadcast policy priorities, and that includes the community. That 5% base contribution, which includes the IONF envelope, is payable by August 31st each year beginning in 2025. However, that decision was appealed by some international streamers last year, and the matter was just heard by the court this month. As such, any future IONF funding will also depend on the outcome of these appeals. We hope to receive a decision affirming the requirement for these foreign players to finally begin contributing to the game system in the coming months. I just also wanted to briefly note the important public hearing in which we just participated last week. It related to market dynamics and sustainability in the Canadian broadcast sector. Helped by the CRTC as part of its implementation of Bill C-11, this proceeding is focused on ensuring Canadian broadcast rules promote a fair and competitive marketplace and a sustainable model for the delivery and discoverability of diverse Canadian Indigenous content. At the hearing, as we've done for some time, we urged the Commission to implement measures to level the playing field between broadcasters and distributors, both traditional and online, to better serve Canadians and Canada's cultural policy objectives. But to be clear, we advocate for smarter rules, not necessarily more rules. And we would like to see improved dispute resolution mechanisms among the various things we touched on as critical to managing the challenges for foreign giants. fixing structural inequities created by dominant domestic BD distributors, and responding to changes in the industry, all to sustain a healthy broadcast sector that delivers choice and quality content to Canadians. On that note, I'll turn it back to John for some final comments.

Great, thanks. As Jen noted, our focus in the regulatory sphere is about advocating for smarter rules and processes that create sustainability and fairness in the broadcast sector. Creatory changes that respond to the realities of the current environment that include digital foreign giants subject to few rules and overly dominant BDUs are critical to make Canadian broadcasters like Chorus nimble and healthy for the longer term. We are still in a relatively low visibility advertising environment industry-wide, particularly when you look at the macroeconomic and environment factors overlaid on the industry ones. So it's probably not a surprise to hear that we are seeing advertising investment decisions being made increasingly closer to campaign launch or pause completely as companies await clarity, whether it be on potential supply chain disruptions or consumer confidence impacts on their business. For our part, as we head to the end of our fiscal 2025, our strategic and financial plan remains clear, appropriate, and, in our view, moving in the right direction. We continue to execute initiatives to strengthen our business, further stabilize the balance sheet, and rise to its operations to meet the realities of the environment. We're making smart investments in areas and projects like digital services that promote sustainability and maximize revenue opportunities. Our team remains dedicated to working closely with advertising clients, providing support and innovative solutions to quickly adapt marketing strategies to meet evolving trends. As I said earlier, our channels and program lineups, F26, are positioned for tremendous value and success, and I look forward to sharing the results of our fall launch when we provide our financial update for Q4. On that note, I'll end today by thanking my colleagues on the leadership team for their support as I move into the CEO role and also thanking our exceptional team, of course, for the dedication they show and the results they drive. Back to you, operator.

Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press the star followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press the star followed by the number to do. With that, our first question comes from the line of Adam Shine with National Bank Financial. Please go ahead.

Hello. Okay, the music ended. It wasn't on my side. Okay, good morning. A couple of questions. John, can you just – I know you went into some details already on – some of the movie pieces on TV costs, or at least Doug did. Could you maybe just elaborate a little bit further, because obviously you did deliver a better than expected TV buffet.

So I think likely where we surprised to the upside were in a couple of areas. We were a little bit under on programming compared to what the outlook had been that we gave with our Q2 results, so that certainly helped. The other places are perhaps not as visible in terms of the focus that is often placed on them. One is on the film investment amortization. You'll see that the negative number this quarter had to do with the tax credit that we had in the quarter. That gave us just over a $5 million benefit in the quarter on that particular line. And then the other place within sort of a similar category of cost of sales, we did have a pickup over last year of about $69 related to the digital initiative. So those three things probably account for most of the positive variance that you're seeing. But, you know, without really studying detailed models, it's hard to know exactly where the B was. But I think given that we were basically in line with most of our outlook, that's likely the place that the pickup occurred.

Thanks for that. Yeah, no, that's helpful, John. Just to clarify, in terms of digital initiatives, there was $6 million fewer as a spend or something? Okay, got it. So the three-month preview for Home and Flavor, I guess, ended in March. Can you use any clarity in terms of, you know, how subscribers maybe took up the channels and – just the status of full carriage still being maintained across, you know, the major distributors?

Yeah, I think the free preview was a success. And, look, we're still, I'd say, strong ratings results and strong subscriber results on those channels. So I think we're quite happy just overall with how that launch has gone. And, yes, you're correct, the free preview period is over, unlike the competitor channels, which seem to be a perpetual free preview.

Right. And just lastly, obviously, you guys are attending the CRTC hearings. A couple of things. One, what exactly do you hope to get out of these hearings? When do you think any decisions ultimately get made? Do things get pushed out, frankly, to early next year or even mid-next year such that things become effective for a fiscal 27 rather than anything salvaging F26. Any thoughts on timing?

Hi, it's Jen. The hearings are ongoing, but we just finished our appearance. There will be a period where there's follow-up final submissions from everyone. Look, for our part, I kind of covered in the remarks, We're really looking for an overall set of rules that are a bit smarter, get things resolved a bit more effectively and efficiently for everybody, and really looking for some fairness and some fair competition, especially for broadcasters like us with both domestic BDUs and foreign streamers. In terms of timing, the CRTC has stated that it's going to be looking to renew licenses across the industry, which were administratively renewed for quite some time. So it's supposed to be effective for F27. We're hoping, again, this is based on their stated timeline and goals, that their, let's call it decisions or new frameworks, including for the hearing that we just participated in on market dynamics, they're supposed to come out hopefully by the end of the calendar year or in our F26. So that combined with staying on track for what the CRTC has said will be our new license period, but we're hoping we see that timing change. and we're still planning for that.

Okay. Thanks for that, Jen. I appreciate it. I'll queue up again. Thank you. Thanks, Bill.

And your next question comes from the line of Drew Macrinos with RBC. Please go ahead.

Yeah, thanks very much. Maybe a follow-up to Adam's question on the TV costs.

John, with respect to, I guess, the margins year over year, In Q3 here, you kind of kept them stable, and I know you've been through a period where TV margins have bounced around quite a bit. Is stability now kind of the goal here on the margin front? And I know that's not disconnected to the top line, but just how are you thinking through margins looking out through Q4 and obviously into fiscal 2026?

That's a good question, Drew. I know it's a theme that you've been on for a while. That would certainly be our goal to keep margins relatively stable, whether that's percentage margin or even dollar margin, which, yes, is challenging given the advertising environment. But that's certainly the case. I mean, Q4 is always a low quarter, and there can be different things that happen in that quarter just in terms of programming deliveries, and, you know, you see the revenue outlook is quite stressed. So I think Q4's near-term margin expectations maybe need to be tempered. Although, you know, pending the outcome of the IL&F decision and how that impacts or doesn't impact fiscal 2025, that would have a huge impact, but obviously we would call that out to the extent that there was something that happened on that before. But, yeah, long-term, I think we're trying to stabilize things. And, you know, it's a tough environment, and the content generally isn't going down. But, you know, we will do things that will manage the content cost line better as we go forward.

Okay. That's helpful.

Just following up on that, in broad strokes, I know last quarter you alluded to the intention to keep programming amortization largely flattish on fiscal 2026. Just wondering what your updated thoughts are, both on the amort side as well as just actual outlays and investments in content. How should we be thinking about those two?

Yeah, I think for 2026, it's a little bit early still. There are a couple of larger moving pieces that we need to just get across the finish line. So we'll have a better sense of that when we report Q4. But I think, yeah, generally we're looking for content costs to come down. I think the question on that is what's the revenue impact that comes with that.

Okay, got it.

And then maybe the last one for me, just on the TV ad market, You know, you've stated for a while the linear pressure, but also, you know, you've commented about the oversupply of premium digital video inventory. Now we have kind of the macro overlay. I'm just wondering if you can kind of maybe unpack, if you can, those three kind of deltas in terms of, and not just Q4 because we know it's the seasonally softer quarter, but just overall the impact on TV advertising.

Yeah, I think the high-level answer to those three is yes. You know, it's hard to sort of divine out of it exactly what all the moving pieces are. But, you know, we look at, you know, whether it's advertiser by advertiser, especially the larger ones, or we look at, you know, sort of the category trends. You know, it appears to be – it's relatively across the board, which would point to economic slash supply chain slash geopolitical. And then, you know, you've got certain – situations with some advertisers that are maybe shifting buys to other platforms. You know, whether it's Q3 or even what we're expecting for Q4, like, you know, every category is basically down sort of in the range that we gave other than the exceptions are travel and the election obviously helped in Q3. So, you know, it's a pretty tough market generally out there. And, look, we haven't seen this kind of impact since COVID. So it's, you know, it's definitely hurting the economy more than it's appearing to.

Okay. Okay. Thanks very much, John. Appreciate it. Thanks.

And once again, if you would like to ask a question, see if your press is star, followed by the number one on your telephone keypad. Our next question comes from the line of Vince Valentini with TD Cowan. Please go ahead.

Hey, thanks.

Couple things on the six million for digital initiative, John. Just clarify for me, you mean you slowed down some of your marketing and new product development expenses deliberately and that's going to be a sustained reduction or is this some sort of one-off item?

Well, I wouldn't say it's a one-off item because it will help us going forward, not quite to that extent probably, but no, it had more to do with particular platforms and the cost of running those platforms, so... I don't know if I'd call it a slowdown. I think it's more a case of, you know, we're trying to – with our margin focus, we're trying to, you know, right-size some of the economics of certain products that we have. So that's more what it's about. So that will help us going forward. It won't be $6 million a quarter, but it will be pretty substantial.

Okay. And then circling back to the advertising commentary, it sounds from what you're saying that the entire market – is weak because of the macro uncertainty. Are we not seeing pretty good growth on digital platforms? Not necessarily the ones Corazon, but other digital platforms and the sports broadcasting platforms. It doesn't seem like all of the other media companies are down as much as you guys. Is this more you're struggling because people are still unsure about the balance sheet or – unsure about how the new specialty channels fit into the universe, or they just don't like general entertainment programming versus, you know, specialized digital or sports programming? It seems to me like it's a bit more of a problem that you guys are facing than the entire market. But tell me if I'm wrong there. Is it just the entire market is weak and that is hopefully just cyclical?

No. First of all, it's hard to get a read on the entire market of things digital. But I think, you know, we've learned over time that, You know, what we're seeing is basically what you're describing, that, yes, this is, you know, our reliance on linear is definitely, you know, putting us in a tougher spot. And we do have digital products, but they're also feeling the pressure. So, yeah, I wouldn't necessarily imply that the entire market, entire advertising market is seeing the kind of pressure we're seeing, but we're absolutely feeling it. And it's for all the reasons you mentioned, you know, the home and flavor insights are performing well from an audience perspective, but there's more competition in the market. So, you know, that will create some advertising dollars to migrate. You know, we're expecting some will come back because, you know, when you don't make your audience numbers and fulfill your promises, then advertisers learn from that. But I think you're right. I think, you know, sports is a big part of it, especially in the last couple months. And, you know, that's our challenge is how do we you know, get to a place where we're not underperforming the markets.

So I asked someone first to then ask this, like, your regulatory message, I'm not sure, it seems kind of incrementalism as opposed to big picture. Like, shouldn't we be going to the CRTC and saying, look, if the U.S. is going to fight back on a digital sales tax and we can't level the playing field by effectively making the U.S. streamers and digital players contribute, then we need to blow up the Canadian system. Like, 30% contribution by you guys on prior year revenue into Canadian content needs to go to 5%. And, you know, and have full flexibility on where you invest those dollars. Maybe not allow tax deductibility on advertising on non-Canadian platforms like we do in print. But why your message seems so small? Like, it seems like this is the opportunity given the massive changes in the geopolitical environment to go for Big structural changes versus just tiny tinkering of the rules. Do I have that wrong?

Hi, Vince. It's Jen. I wouldn't call you wrong. I think we've gone pretty heavy and pretty big picture, I think. You can take a look at our latest mission on market dynamics. It's pretty detailed and very extensive. You know, we don't like to say the word fast. blow up necessarily because, you know, there's a Broadcast Act regulated. We recognize that. Some of the areas that you've talked about, we would love to have the opportunity to go hard at that. Structurally, again, that's just in our actual licensing hearings. So, you know, without going too far into the future, I would say your general tone and tenor are aligned, but, you know, I would say we're working hard.

We'll give you an opportunity to do that.

That's when our actual obligations are set.

You mentioned a couple things that are not technically regulatory. They're more finance, right? So the digital services tax, look, we agree. We have to pay that tax as well. Obviously, our contribution on that is much smaller because our digital revenues are smaller than the big streamers. But that's one that we've been, I think, quite vocal about. It didn't really make a lot of sense. and they're penalizing, you know, the existing players as well, I guess. And that way you could say it's a fair tax, but it doesn't seem to make any sense. And then on the deductibility issue, yeah, I mean, we've been on that for more than five years, trying to push that issue. I know there's an industry-wide push on that as well now. So, you know, you're right. All these things seem to take longer than it feels like they should, just given what's going on and what you see our short-term outlook is. But I think, you know, we're trying to – be constructive with the regulator and with others in Ottawa, and rather than just go in and maybe we do need to create a bigger five-alarm fire, but I think realistically we try to follow the process and participate constructively in it.

Okay. And if you don't mind, I'll finish just with a couple of free cash flow questions.

$28 million of other income, which looks like it was mostly that foreign exchange gain. It looks to me like that's included in your definition of free cash flow. Would the FX gain actually a cash item?

No, it doesn't go into free cash flow. It'll work through that effectively if it comes out. But we can walk you through that, where those all go.

Part of the reason why the working capital is so with such a big outflow is reversing some of that stuff.

Yeah, partly. And the other thing in working capital, especially compared to last year, is that the, you know, seasonally Q3 is a bigger revenue quarter. So receivables will go up in Q3. That didn't happen last year for various reasons. So when you're looking at the comparative, that's part of the reason there's a big swing is that receivables really behaved in a more normal way this year. And last year there was actually a recovery in that cash flow line of receivables, so that's also part of it.

So we're looking to Q4, the normal trend should return and working capital should be neutral or even a source of cash?

Yeah, it generally is. I mean, I think there are a couple of larger payments that are happening this year that wouldn't necessarily have happened in the past. One of them is the HST and tax installment deferral, but the payments kick back in next week, so that's going to put some pressure on Q4, but the receivable side of it should behave normally.

And the last one for that is the production burn, so that the amortization, yeah, was down more than we thought this quarter, and that helps EBITDA, but you still spent a fair amount in terms of cash investment in programming. Is that reversing Q4? Perhaps we're The amortization is flat, but the cash investment is down, so there's actually an inflow of cash from production, right?

Yeah, the gap won't be that big. I mean, there's always sort of a natural gap that happens there, but let me quickly flip to something. Yeah, I think we're expecting that to be a lot tighter in Q4 for sure.

Okay. Thanks, Ed. Thanks, Ed.

Thank you. And that ends our question and answer session. I would like to turn it back to Mr. John Gosling for closing remarks.

Great. Thanks very much, Ludi. And we appreciate everyone's participation on the call today. And we wish everyone a happy Canada Day. And we will talk to you soon. Thanks, everyone.

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining me now. Disconnect.