Corus Entertainment's (CJREF) CEO Doug Murphy on Q1 2017 Results - Earnings Call Transcript

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Corus Entertainment Inc. (OTCPK:CJREF) Q1 2017 Results Earnings Conference Call January 11, 2017 9:00 AM ET

Executives

Doug Murphy - President and CEO

John Gossling - EVP and CFO

Analysts

Adam Shine - National Bank Financial

Aravinda Galappatthige - Canaccord Genuity

Jeff Fan - Scotiabank

David McFadgen - Cormark Securities

Bentley Cross - TD Securities

Drew McReynolds - RBC

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Corus Entertainment Q1 2017 Analyst and Investor Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Wednesday, January 11, 2017.

I would now like to turn the conference over to Doug Murphy, President and CEO. Please go ahead, sir.

Doug Murphy

Thank you, operator, and good morning everyone. I’m Doug Murphy, and welcome to Corus Entertainment’s fiscal 2017 first 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. The slides can be found on our website in the Investor Relations section.

We will now run through the standard cautionary statement. 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 is contained in the Company’s filings with the Canadian Security Administrators on SEDAR. Happy New Year and thanks for joining us.

I will start today’s call by sharing some highlights of the quarter and updating you on our progress so far this year, and then I will turn it over to John to take us through our segmented Q1 results.

Turning to slide three of the presentation and a review of our Q1 results. Consolidated revenue for Q1 was $468 million, up from $228 million in the prior year. Segment profit was $192 million, up from $96 million in the prior year, reflecting the inclusion of a full quarter of Shaw Media. The prior year includes the results of our Pay TV business, which was shutdown on February 29, 2016.

We would note that revenue of $31 million and segment profit of $15 million related to the Pay TV business was included in last year’s Q1 results. On a pro forma basis, including Shaw Media and excluding Pay TV for the first quarter last year, total revenue was down 5% and segment profit was down 3%. We are pleased with the strong profit margins for the quarter of 41%, up from 40% last year on a pro forma basis and we’re beginning to see the flow through from our expense savings and synergies we’ve captured in our new operating model.

During our last analyst call, we outlined some factors that would impact our comparables in the balance of calendar 2016 versus the prior year. These included the timing of key agency contract renewals, as well as some significant federal election spending on Global in the prior year. As anticipated, this is a main contributor to significant negative comparables in Q1. Subsequent to our last call, we are pleased to report that we have concluded all of our annual corporate agency negotiations for calendar 2017, the impact of which will become apparent over the coming quarters.

As a new Corus, we have been able to demonstrate the significant value we bring to our partners with our differentiated scale, powerful brands and innovative advertising products deliver a great return on their investment. Just a few examples, extremely positive reactions we have experienced to our new ad tech initiatives, such as next generation advertising and our Audience Intelligence Platform offerings. We’ve experienced favorable deal metrics based on the scale and scope of a new Corus and our unique position with women and family audiences. We are seeing growth in client marketing and integrations on our television shows. We are seeing the creation of a new business in our local markets as a result of our bundled local TV and radio selling strategy. In fact, we grew the number of our clients that buy both television and radio in Q1 compared to the prior year by approximately 30% in total value of business.

Moving to slide four and our television business. We had a great start to our new fiscal year, immediately realizing the significant benefits of the cross-promotional heft that the new Corus can deploy with the successful launch of our fall schedule. The results speak for themselves.

Global delivered the strongest fall it’s seen in over a decade, landing three of the top five new shows with Bull, MacGyver, and Kevin Can Wait. The strong fall line of the Global led to a significant improvement in our competitive position and gives us confidence that we are on the right track.

In the specialty business, our leadership position with women and families was reaffirmed with seven of the 10 top channels amongst women 25, 54 and eight of the 10 top children’s channels. We also continue to have seven of the top 10 entertainment specialty channels for all adults. In fact, we would highlight that Corus has the largest cumulative specialty audience across all broadcasters; a great result for our first fall has a new combined Corus.

In this fall, we’ve been experimenting in interesting ways to leverage the power of the new Corus to drive further audience growth and increased discoverability of our new shows. We’re deploying scale-driven opportunities such as roadblocks for example, where we promote a core programming priority across every channel and every break for entire day to drive vastly increased viewing. Vikings for example in its fifth season delivered an impressive 17% audience growth over the prior season’s finale.

We also saw the benefits of our cross-promotional power with the launch of the Cooking Channel on December 12, which is now in freeview in 8 million homes. We were able to create strong awareness for the new brand testing programming blocks on food network to cross-promote the new service, and since the launch the channel has exceeded our target audience delivery.

Turning to slide seven. We’ve been confident from day one that the scale and scope of the new Corus would bring us many new opportunities. One early contention was that the integration of our radio business with Global News would result in meaningful operational synergies. This strategy has worked well for us and we are especially pleased with the performance of our radio division this quarter. We delivered impressive segment profit growth of 4% and a segment profit margin of 31%, the highest margin delivered by the division in over three years. This was achieved despite continued advertising revenue softness in the western markets.

We also delivered a solid ratings book, witnessing growth in many markets across the country as we continue to focus on growing our audiences. A few highlights include, you’ve seen strong ratings growth for 102.1 the Edge and Q107 in Toronto with the Quebec [ph] in the top five. Country 105 remains a solid number one in Calgary. We have three stations in the top six in Vancouver including the number one morning show on CFOX. We are seeing higher ratings on our AM stations in Vancouver, Calgary and Toronto as our work in combining Global News with our News and Talk Radio portfolio produces solid results.

And finally, we have seen Diary market improvements in three of our largest markets Ottawa, London and Winnipeg. In particular, the re-launch of our heritage brand Power97 in Winnipeg has led to extremely positive rating gains in the cluster, which we expect to monetize in the coming years. These ratings improvement have positioned us well as we continue to focus on maximizing the opportunities we have as a new Corus.

It’s hard to believe that it was this time last year when we announced our transformational acquisition of Shaw Media. We have come a long, long since then. It has been a busy and productive time for our hardworking team. In fiscal 2017, we remain intensely focused on integration as we fully unite the two businesses and unlock the power of the scope and scale of the new Corus. There is much, much more to come and we look forward to sharing our continued progress with you.

I’ll now turn it over to John who will take us through our financial results by segment in further detail.

John Gossling

Thanks Doug and good morning everyone. Turning to slide eight, on a pro forma basis including Shaw Media and excluding Pay TV in the prior year quarter, total television revenues were down 5% in Q1; total advertising revenue declined 7% from the prior year for the reasons that Doug has explained in his opening remarks.

Our pacing of new calendar year indicates we are going in the right direction as we start to benefit from our new agency deal in calendar 2017. Subscriber revenues for Q1 were up 6% over the prior year on a pro forma basis due to the favorable impact of the Disney channel’s annual rate increases in our carriage agreements as well as additional VOD revenue resulting from continued product innovations.

In December, the final phase of pick-and-pay was implemented, and we continue to be confident that our leading channels and brands will continue to fare well within the new regulatory environment. Merchandising, distribution and other revenues were down 33% on a pro forma basis, mainly due to the timing of some multiyear content licensing deals in the prior year in the SVOD market. And this represents revenue of approximately $6 million in Q1 last year and there will also be an unfavorable comparable in Q2 coming up of approximately $8 million in 2016. [Ph] Television delivered a segment profit of $184 million and a segment profit margin of 43% for the quarter.

Turning to radio, revenues were down 5% with the majority of the decline attributable to the soft western economy while segment profit increased 4% in the quarter, as Doug mentioned. Radio continues to deliver strong expense control and this led to an increase in segment profit margins to 31%, up from 29% last year. We’re beginning to reap the cost benefits of our restructuring in fiscal 2016, which combined with the strong operational focus and audience share gains in our Diary markets is placing Corus Radio on a solid footing as 2017 progresses.

Net income attributable to shareholders for the first quarter of fiscal 2017 was $71 million or $0.36 per share and that compares to $41.3 million or $0.47 per share in the prior year. Business acquisition, integration and restricting costs of $13.2 million in the quarter include an onerous lease -- sorry, onerous premise lease provision of approximately $8 million for the Shaw Media Toronto offices which were fully vacated in Q1. Adjusting for the impact of these costs, results in adjusted net income attributable to shareholders of $81 million or $0.41 per share.

Heading into Q2, we remain firmly focused on delivering our financial commitments which I’ll reiterate are to ensure we identify and capture all revenue and cost synergies, delivering 40 to $50 million in cash savings in the first 18 to 24 months after the close of the Shaw Media acquisition; two, to deliver solid free cash flow, enabling prudent investments to advance our strategic priorities and reduce leverage to below three times or greater by the end of fiscal 2018; and three, to maintain our dividend of $1.14 per Class B share. We are tracking solidly against each of these priorities and are confident in our continued progress heading into fiscal 2017.

Doug Murphy

Thanks, John. And before we conclude our prepared remarks, I’d like to take a moment to acknowledge and thank the team of Corus for all the hard work on integration this past year has enabled us to make such tremendous progress to-date. We hope you have found these comments helpful. And now, we’re pleased to take any questions you may have. Thank you very much, operator.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Adam Shine with National Bank Financial. Please go ahead.

Adam Shine

Thanks a lot. Good morning and Happy New Year as well. Doug, can you talk maybe to the savings, how things are tracking? I know on the Q4 call, I think you talked about sort of tracking towards $10 million. How have you elevated up from there?

Doug Murphy

I’ll tee up and pass it over to John to give you some more color. We are extremely pleased with our progress and synergies. You’ll see it in the EBITDA margins this quarter as you parse through our results. My comments and my concluding remarks to the team were really to thank the Group for what I think has been an A plus execution of our integration work. As for the specific numbers per quarter, I’ll pass it over to John.

John Gossling

Sure. Thanks, Adam. Good morning. And in attempt to not cause the same confusion I caused on the Q4 call, let me just break it into two pieces. So that Shaw management fees, our allocated costs of $15 million per year, [ph] that was obviously done on day one of the acquisition. So, let’s just kind of park that in terms of achieved. On the other synergy buckets, the $40 million to $50 million that we talked to, for Q1, we would have burned or seen the benefit of just over $10 million of savings from synergies. So that would tell that we are on a run-rate basis going to be at the low end of the $40 million to $50 million range already with more to come obviously as we progress through this year. So, the number in the quarter is just over 10, and that excludes the Shaw allocation of three and three quarters million for a quarter.

Adam Shine

Great. Thanks for that. I realize that you’re now running the businesses combined and you are no longer providing any real specificity as to the two legacy businesses. But, is there any color or additional nuances to give us a little better understanding of perhaps how things are tracking at each of the businesses? Obviously, it looks like Global bore the brunt of the greater tough comps, particularly as it related to federal elections spending to say the least. But, if we look specifically at Corus, Corus would have had most of that SVOD dynamic related to other at Nelvana would have had the benefit I guess of follow through on the Disney channels as it relates to subscriber revenues, maybe even some advertising. Any color to the two segments would be greatly appreciated.

Doug Murphy

Well, you’re right, we’re no longer distinguishing between the two businesses, because we are one new Corus now. In subscriber revenue growth, again another very impressive quarter by the Company, that is not only the Disney channel, there is -- recall that we are copying against Q1 last year where we really had the Disney channel launched and not XD and Junior which we launched in January. So, those relative comps are behind us if you follow me. But, we also secured low digit growth on the subscriber rates ex-Disney channels across whole system because of our rate card strategies and various negotiated outcomes with our carriage agreements.

As far as the audience delivery and advertising profile, I guess I would just say that we’ve sort of elucidated the realities of the election comps which you rightly called out. We’ve talked about the importance of our negotiations on the corporate agency deals, which we have concluded and are very comfortable that we’ll see some meaningful improvements in comps on revenues as the calendar 2017 quarters roll off. I would just echo the fact that the global platform and cross-promotional heft of the combined new Corus, I think really has something to call out in the results of audience delivery in the quarter. And I really believe, Adam, we’ve just only begun to scratch the surface with the expertise our programming and marketing teams have and this new massive platform we have to cross-promote within our own ecosystem, if you would. I think you’ll see continued benefit from that in the quarters ahead.

Adam Shine

Thanks a lot. I’ll just ask one final question and then queue up again. Your free cash flow was relatively flattish year-over-year in the quarter. I think a number of us would have assumed they would have been stronger, given the combined entity, and there are obviously very bullish expectations in the marketplace of over $300 million of free cash flow for F17. Maybe John, can you talk to the scaling of free cash flow as the year unfolds and whether or not you can hint at whether Street numbers are prudently optimistic or excessively so?

John Gossling

Sure. On the quarter, I think the big story or impact was just the normal seasonality which of course is augmented now that we’ve got the scale of the business, particularly with conventional now being a big part of the advertising pie for TV. So, if you look at the working capital changes in Q1, receivables were up $110 million; that’s really the story on the free cash flow. And of course that as we get into a seasonally slower second quarter, that working capital build should reverse to a larger extent as we start to collect that money and agencies tend to be a little slow in paying at times. So, that’s really the story on free cash flow.

In terms of the annual number, the caution I have in looking at the street numbers is, there doesn’t seem to be a common definition of free cash flow. So, it’s pretty hard to look at the consensus, because the numbers individually can be all over the place. And I think we need to do a better job in educating or at least talking people through that, just in terms of the way we report free cash flow, which is essentially a GAAP definition versus the way that some of your peers look at it. So, I’m a little cautious just on the number, because the definition, not so much of what’s in it, but we need to spend there more time on that for sure.

Adam Shine

Do you want to comment at all as it relates to the Corus definition?

John Gossling

No. I mean, we don’t give guidance for other than what we’ve said in terms of leverage. So, I think in my comments I talked about the fact that we feel that we are on track on that leverage step down profile that we’ve talked about in the past down to 3.5 by the end of this year and then down to 3 by the end of 2018.

Adam Shine

Okay, great. Thanks. I appreciate that.

Operator

Our next question comes from the line of Aravinda Galappatthige with Canaccord Genuity. Please go ahead.

Aravinda Galappatthige

Good morning. Thanks for taking my question. I wanted to ask a more big picture question on advertising. Certainly, in the U.S. we’ve seen a little bit of resurgence in television advertising and a lot of the commentary coming out of there suggests that sort of the flow of ad dollars from digital to -- sorry, from TV to digital has sort of reversed. We don’t know if it’s temporary or not, but certainly some money is coming back from digital to TV as for a number reasons and one of them is being that in certain segments of digital have been disappointing in terms of the ROIs they delivered to advertisers. Doug, I wanted to get your thoughts on that. I mean, you’ve seen that sort of discussion in Canada as well and maybe talk about how that can sort of help your trends in addition to the agency deals you’ve talked about?

Dough Murphy

Sure, Aravinda. Thank you, happy New Year. We are seeing the same dynamics in our marketplace as you’re reading about in the United States. I think there is a bit of a Corus correction occurring within the advertising economy as agencies and clients are realizing that -- while digital is now an essential part of the marketing mix, there is maybe a bit of an oversteer into from that perspective over the last couple of years. And you’re seeing both large agencies and large clients redirecting and alter their marketing mix. It’s not either or, but and. And that’s showing up really in a lot of our numbers at the moment. You’re not seeing it from a growth perspective in the Q1 revenue profile, because of some of these comps we’ve I think clearly described in the past. But we are feeling pretty optimistic, cautiously optimistic that those trends are going to stay with us, because in the end of the day, what television and radio as well do bring is reach and frequency and a very strong ROI, industry recognized currency that is not sort of one company’s own currency, we all trade in market that is defined by numerous Numeris, Nielsen BBM. So, we do believe that there is some favorable sort of adjustments occurring in the marketplace.

Now, that said, we are not about to say that digital is not a competitor, because it is and always will be. And so, our answer to that is to be much more competitive with our ad tech profile and investments therein. We have made some meaningful progress in our return path data initiatives, which we coin [ph] with an umbrella term of next generation advertising, wherein we can take the second by second postal codes, specific viewer information, merge that data with either third party data or first party data from a client and deliver much more targeted advertising with higher ROI efficiency that helps us to increase our overall yield management thus squeezing out kind of more effective revenues per unit of inventory. That is becoming a very meaningful part of our business.

Furthermore, we have our audience and televisions platform which is effectively a rapidly growing database of Corus viewers who have opted in for a two way relationship with us and we are now working on ways to grow that profile significantly with that base and also append those two certain advertising strategies. And in addition to which we are looking at dynamic ad insertion tests and addressable VOD. So, whilst -- and I will conclude my answer in a moment, but just to tie together pretty bow here. Whilst we do believe that there is a warranted and appropriate shift in the mix in the marketplace, which I think will stick and that will play out this year, we are also evolving our product to be much more measurable and segmentable, both to increase our overall yield and to answer the competitive call of digital.

Aravinda Galappatthige

Thanks for that, Doug. And just to get a sense of the level of improvement that you expect in advertising, I mean the decline in pro forma was 7% in Q1. Do you think it would be sort of a realistic objective to see advertising perhaps flat as you exit fiscal 2017 or maybe even grow?

Doug Murphy

Yes, we expect. We talked in the last call about a sequential improvement which we did see, we’re still obviously negative. But our planning, our models are pacing the some of the visibility we now have, we didn’t have a quarter ago given our corporate annual deals, are leading us to feel very comfortable that our business will firm up, get to flat. And then we expect to, as the quarters roll off in fiscal 2017 and calendar 2017, we will expect to see modest revenue growth on a relatively consistent basis.

Aravinda Galappatthige

Thanks, and last question on Nelvana, I know that John mentioned the sizeable SVOD deals in Q1 and Q2. In terms of sort of building that SVOD platform, the SVOD revenue streams a little bit more, I was wondering, like have you not seen that level of uptake from some of the other OTT platforms, I mean why isn’t that sort of repeatable in fiscal 2017?

Doug Murphy

There is a couple of reasons for that. Number one, the deals we do with SVOD players tend to be two-year terms. So, they were kind of inked last year and this year is kind of the second year, so we recognize revenue in the year that we sign the deal. That’s as one. Two is quite frankly we’re doing a very thorough review strategically of kind of our portfolio of channels and services. And we’re looking at our strategies in and around the streaming platform space, both as a supplier but also as an operator. And you’ll probably note Aravinda that we’ve launched two unauthenticated streaming apps in the marketplace, the History Vault apps and the Treehouse apps. These are primarily on demand, streaming platform apps, and we’re doing this to sort of test and learn and get some proof out there as to what the market looks like.

So, we have quite a massive amount of content that is sort of ready to be deployed and monetized. We’re just is being very thoughtful and prudent to explore and experiment with ways of reaching audiences all across the country, given audience behavior.

Aravinda Galappatthige

Great, thanks.

Operator

Our next question comes from the line of Jeff Fan with Scotiabank. Please go ahead.

Jeff Fan

Hi. Good morning, happy New Year. Just a few questions, first on the year-over-year impact of the election and lost agency in the quarter. Wondering if you can help us quantify them a little bit, just wondering if we didn’t see these items, what the pro forma revenue growth would have been year-over-year.

John Gossling

Sure. Jeff, it’s John. The combined impact of those two items you mentioned is just over $20 million in the quarter. So, that’s the bulk of pro forma reduction in revenue really. There is lots of moving pieces obviously but that would be the biggest item in there. And that will be spread conventional and specialty, probably a little heavier to conventional but it would impact both sides.

Jeff Fan

Right. And then, if we look forward to the next quarter, maybe the rest of the year, besides there is still I guess a stub month related to the lost agency deals and there is the SVOD comparison in the second quarter but besides these two items, are there any other thing that we should take into account as we look at the year-over-year comparison in the second quarter and the rest of the year?

John Gossling

I guess the other item, Jeff, would be the Pay TV impact in Q2 as well as what we talked about in Q1. So, Pay was exited at the end of the February 2016, so there will be an impact and a slightly higher impact in Q1 because there were some additional fees in there in the second quarter.

Jeff Fan

Okay. And then just on the free cash flow, in arriving to the $30 million, $33 million free cash flow figure, you added back about $20 million related to business comp and strategic investment. I guess some of that is related to restructuring but maybe we can help clarify what that $20 million back is related to?

John Gossling

Sure. No, it isn’t restructuring, most of it, I’d say 95% of it relates to some cash taxes that were paid on the pay disposal. So that’s the timing issue because of course that gain was booked in fiscal 2016, but the cash taxes flow through Q1, that’s about $19 million. And the other small pieces just sum up our little investments that were funded in the quarter but that’s relatively small.

Jeff Fan

Okay. And then, finally, just on the radio and local potential revenue synergies, I think Doug, you talked about that a little bit. The radio revenue is down about 5%. So, I’m wondering, if you got synergies already baked in there in getting to these numbers or are you more talking about looking ahead as we start to see some of the local and radio synergies that that number should start to improve?

Doug Murphy

Yes. There are three kind of answers to that question, Jeff. The first is, we’re seeing this quarter the significant improvements in operating cost structure in the radio business given our new operating model having radio and global news and station operations combined under the leadership of an executive and his team. So, that’s sort of the first.

The second is there within the revenue and then correctly, you’re right that we are down year-over-year. And that’s largely on account of western Canadian provinces’ softness, Vancouver and Alberta. But what’s underneath that, which you can’t see is there is growth in bundled sales where we’ve increased the volume of revenues by around 30%, and we’re having some very exciting early success when we approach clients that have only advertised on TV. And we offer them a radio component of their buy or the other way around, is quite encouraging, the level of sort of uptake we’re getting.

The last piece, which really is I think the third and equally encouraging dynamics in the radio division at the moment, is the continued success we’re having in the ratings story. And we continue to peg up on all of our stations and even the one where we were in a bit of trouble, Winnipeg, Power 97, where we did rebrand, we just got the Diary yesterday and it was a huge, huge book for us in the Winnipeg. So, we always say that audiences lead revenues. And having a vastly improved cost structure, seeing the revenue synergies on the local bundling sites, and having all that supported by a tailwind on ratings, I think bodes very well for division. And it will be lumpy as the year rolls out, but I mean we’re feeling optimistic that the radio team is going to start posting some pretty consistent decent numbers as the quarters roll off.

Jeff Fan

Are you seeing any signs that the Alberta trends improving or stabilizing; how would you describe that?

Doug Murphy

I think really you can just look to the price of oil to dictate how we’re going to do in Alberta. So, as long as what we’re seeing there, the 50 bucks a barrel, I think we’ll start seeing employment and spending in the province improved. But at this moment, people are generally still -- visibility is pretty low and the overall market is down, the markets are down quite significantly.

Operator

Our next question comes from the line of David McFadgen with Cormark Securities. Please go ahead.

David McFadgen

Hi, a couple of questions. So, first of all, I was wondering if you could quantify the contribution of the month of December in Q2, just trying to understand the impact those recent ad deals would have in the quarter, Q2. And then secondly I was surprised that the growth in the sub revenue on a pro forma basis up 6%. I would think it’s going to drop from that level, but I was wondering if you could give us any color on that. Thanks.

John Gossling

Sure. David, on the December impact, I don’t have the phasing of Q2 in front of me. So, we’ll have to get back to you on that. Certainly, December is the biggest month in the quarter, but I’ll get you the split of that, I just don’t have it in front of me. On the sub revenue, the 6%, I think we’ve said on the last call, we’ve been pretty clear that the sequential growth in sub revenue is going to obviously trail down as we start to lap the quarters of the Disney launch last year. So, we were 10% in Q4; we’re 6% this quarter. We would expect it to come down into sort of low single-digits going forward. Just that’s the way that the quarters will play. So, we are feeling still quite bullish on subscriber revenue at this point. We are not seeing any real noticeable impacts of pick-and-pay, as I mentioned. So that’s how we see that trending.

Doug Murphy

So, just, if I could just add to that David, I mentioned earlier, just recall that we launched Disney channel in September, and we launched XD and Junior in January. So we’ve had favorable comps accordingly, and those will kind of flatten out, but we still expect to see subscriber growth on the Disney suite per se even after we lap the comps. And we still expect to have a very modest, not insignificant low single-digit growth on our networks ex-Disney channels.

David McFadgen

Okay. And if I could just add one more question. So, the merchandising and other revenue was down 33% pro forma. I know that can bounce around a fair bit on a quarterly basis. But I know you don’t like to give guidance, but I was wondering if you could tell us whether you think this revenue line -- I would going to imagine that’s going to up in your fiscal 2017 year, something like high single-digit or low double-digit, because you’re ramping Nelvana, the studio there, but I was wondering you can give us any color on that. Thanks.

John Gossling

Yes, it’s pretty lumpy. As we mentioned, the big impact this quarter was the SVOD revenue in the prior year. And as I said, we expect to see an impact in Q2 as well from that. So, it is fairly hard to predict that line for some of the reasons you just mentioned. And frankly the SVOD environment, as Doug talked about, is changing a little bit too. So, it’s pretty hard for us to really give any kind of prediction on that.

Doug Murphy

On the merchandising side, I can give a little bit, we wouldn’t expect to see high single, low double-digit growth probably as the year concludes. There has been some shifting in timing, as John noted, and as you know well, it is lumpy. Few quarters ago, we completely recalibrated our slate at Nelvana. And so, we now have a slate that’s locked and loaded and fully green lit and all in production of five different series. So, there is a certainty that those will come off -- out of the studio and be delivered. But they were delayed and so the timing of the merchandise advances and guarantees and the like were stalled and deferred [ph] by few quarters but they will come in, we expect. It’s not massive dollars overall in aggregate, but if you’re looking for some flavor on year-over-year comps, I think we get into that kind of a growth profile by the end of the year.

Operator

Our next question comes from the line of Bentley Cross with TD Securities. Please go ahead.

Bentley Cross

Good morning, gentlemen and Barbara, I guess. I just wanted to expand on that last question. Is there -- of those five series, are those all going to be delivered in the second half or is that maybe reaching out into next fiscal year?

Doug Murphy

No, those are probably not -- most of them will be delivered into the fiscal 2018.

Bentley Cross

Okay.

Doug Murphy

Most of them will be in 2018 profile.

Bentley Cross

And then last one, in the MD&A, it talks about 8 million lease provision is being especially onerous, is there any chance that you’re going to get any of that back?

John Gossling

So, Bentley, that’s recorded net of the sublease revenue that we have on that. I guess there is always an opportunity for additional sublease, because there is still some space that’s available. But that lease doesn’t have a lot of term left on. So to the extent there is anymore that could be a small recovery, but we are not obviously counting on that. We’ve only recorded the provision net of what we know we have in terms of a tenant.

Operator

[Operator Instructions] Our next question comes from the line of Drew McReynolds with RBC. Please go ahead.

Drew McReynolds

Thanks very much. Good morning. Couple from me, just first on the seasonality of Q1. If you go back and you look at the contribution of Q1’s EBITDA the full year, both on the Shaw Media side and Corus Media side, it’s really consistent in and around the low 30% range, maybe little higher for Shaw Media. When you look at the combined business and all the moving parts going forward, is there any change to seasonality that’s kind of we are flagging or is it really all like it has been over the last kind of 5 to 10 years?

John Gossling

I guess the impact -- there will be a slight impact on synergies, but we are heading in pretty good pace on that in Q1, as I mentioned. Really, it’s back to what we’ve been saying about revenue, just in terms of the way this year is going to play out and we expect it to play out. The back half will be tilted to some growth compared to what we’ve seen over the last couple of quarters. So, that will -- revenue obviously has a big impact in the flow through to the EBITDA. So, I think that could be different this year in terms of the way the quarters play but for the most part, in terms of overall, I think the seasonality will be quite similar. I mean audience seasonality is usually pretty predictable, as you mentioned. So, I think it’s really just the revenue profile that is going to be a bit different this year.

Drew McReynolds

Yes, okay, I understand that. John, thank you. On the Cooking Channel, at what point do we see actual dollars in sense begin to flow through for you guys?

Doug Murphy

We’re seeing it now. I mean, we’re monetizing the ratings. We’re delivering a meaningful increase over our pro forma plan, pro forma business plan. So, right now, basically when we’re looking to sell the food, lifestyle sort of category, we’re looking at food and cooking as a powerful duo that we offer to our advertisers and clients accordingly.

Drew McReynolds

And Doug just on the free preview period, is there kind of any dynamic there where you begin to pick up some more sub revenue for example?

Doug Murphy

No, not too much sub revenue but you pick up advertising revenue because you’re in 8 million homes. That free preview air period will roll off into January primarily, although we are in discussions for a prolonged preview on a couple of the distribution platforms because of the power of the brand. But, right now, I will say that the economics are principally in this freeview period, advertising revenue and then when freeview comes off, becomes more of a mix of sub and advertising revenue.

Drew McReynolds

Last question, Doug, big picture, just wondering if you have kind of updated thoughts on the outcome of the cultural policy review that’s obviously underway and you’ve submitted your filings; just want to get your updated thoughts there. Thanks.

Doug Murphy

Thank you. We expect to hear something from the minister end of January, early February largely centered around the export of Canadian cultural product writ large. And more specifically we expect that there will be more detail around a more formal review process that of course we are excited to participate in. Beyond that, I can’t really prognosticate too much more as to where we might go, but that’s sort of the more immediately the land as we understand it.

Operator

Mr. Murphy, there are no further questions at this time. I’ll turn the call over to you for any closing remarks.

Doug Murphy

Thank you very much, operator, and thank you for everybody’s interest. We’re always available to have further follow-up conversations by phone or feel free to come visit us at Corus Quay. In the meantime, happy New Year and thanks for your interest in our Company. Have a great day. Bye, bye.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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