Transcontinental TSE: TCL.A reported lower second-quarter revenue and slightly lower adjusted profitability from continuing operations, while management said it expects stronger results in the second half of fiscal 2026 following recent contract wins, cost reductions and the national rollout of its raddar distribution platform.
On the company’s June 4 earnings call, newly appointed Chief Executive Officer Sam Bendavid said the business is entering a new phase following the sale of its packaging operations. As of the second quarter, Transcontinental is reporting through two sectors: Retail Services and Printing, and Books and Education, which combines TC Media with book printing activities.
Bendavid said recent facility visits showed “strong energy and engagement across the organization,” and he pointed to momentum in several parts of the company, including artificial intelligence initiatives, in-store marketing acquisitions and education technology.
Second-quarter results show lower volume pressure
Executive Vice President and Chief Financial Officer Donald LeCavalier said second-quarter revenue from continuing operations declined 5% from the same period last year, mainly because of lower volume in traditional activities. The decline was partially offset by recent acquisitions in in-store marketing and specialty activities, as well as a stronger U.S. dollar.
Consolidated adjusted EBITDA from continuing operations was CAD 45.4 million, slightly below last year. LeCavalier said the decline was primarily due to lower volume, partly offset by lower incentive compensation and administrative expenses, recent acquisitions and favorable foreign exchange.
LeCavalier cautioned that the lower incentive compensation and administrative expenses were mainly tied to executive departures and timing of expenses, and that the company does not expect the same tailwind in the second half of the year.
Net financial expenses rose CAD 2.2 million to CAD 9.9 million, mainly because of exchange rates, despite a lower debt level after the March sale of the packaging business and strong cash flow generation over the past 12 months. Adjusted income tax declined CAD 0.6 million to CAD 4 million, representing an effective tax rate of 20%.
Adjusted earnings per share from continuing operations were CAD 0.19, compared with CAD 0.20 in the prior-year quarter.
Retail Services and Printing pressured by flyer volumes
In the Retail Services and Printing sector, revenue fell 3.8% to CAD 219.5 million. Adjusted EBITDA declined CAD 8.2 million to CAD 41.1 million. Management attributed the decline mainly to lower volumes in flyer printing, partially mitigated by recent acquisitions.
Bendavid said the lower flyer volume reflects a trend seen over recent quarters and was anticipated by the company. He said the raddar platform is intended to change the economic model for both Transcontinental and its customers.
The company plans to roll out raddar nationally in mid-June. Bendavid described raddar as a mass media platform with roughly 11.6 million copies per week, reaching about three in four Canadians across 537 zones. He said early bookings are encouraging and that the company expects a strong start.
Bendavid also said the platform is expected to become more technology-enabled over time, with analytics, data-driven audience targeting, omnichannel touchpoints and AI-powered personalization.
Management said it expects stronger second-half performance in Retail Services and Printing, helped by multi-year agreements recently signed with Postmedia and Glacier Media, improved results from in-store marketing activities and cost reduction initiatives. In response to an analyst question, management said it could not disclose the full contribution from the Postmedia and Glacier agreements, but indicated that new outsourcing sales could be “north of CAD 5 million” for the rest of the year, with margins aligned with the rest of that business.
Books and Education faces tough comparison
The Books and Education sector reported revenue of CAD 50.1 million, down from CAD 55.9 million a year earlier. Adjusted EBITDA declined CAD 0.5 million, or 6.7%, to CAD 7 million.
Management said the sector faced a difficult comparison with the second quarter of fiscal 2025, when it benefited from a large one-time contract. Bendavid said the book printing team has secured new customers and grown existing accounts, including in comics, and is pursuing opportunities tied to publishers considering onshoring printing work.
Bendavid said the company expects a strong second half for Books and Education, consistent with normal seasonality. He also said educational publishing is expected to see marginal, “GDP-style” growth over the longer term.
For fiscal 2026, management reiterated that adjusted operating earnings before depreciation and amortization from continuing operations are expected to remain stable relative to fiscal 2025.
Cash flow, leverage and capital allocation
LeCavalier said Transcontinental had CAD 56.3 million in negative working capital in the second quarter, mainly due to accounts payable and accrued liabilities. The company expects some of that negative working capital to reverse in the second half.
Capital expenditures were CAD 12.9 million in the quarter, in line with last year. The company continues to target full-year capital expenditures of CAD 55 million to CAD 60 million.
After selling its packaging activities, Transcontinental used proceeds for a special distribution of CAD 20 per share to shareholders and to reduce debt by about CAD 330 million. The company’s net debt ratio was 2.14 times at the end of the second quarter. Including the sale of its Boucherville warehouse at the end of April, LeCavalier said the ratio would be slightly below two times.
The company expects strong second-half cash flows to reduce the ratio to around 1.75 times by year-end, excluding potential acquisitions. LeCavalier said Transcontinental is comfortable operating between one and two times leverage apart from acquisitions, and that it has the capacity to pursue deals.
The board approved a regular quarterly dividend of CAD 0.05 per share.
Acquisition strategy remains focused on in-store marketing
Bendavid said the integration of recent in-store marketing acquisitions, including Mirazed and PDI Group, is progressing well and has expanded the company’s offering and customer base. He said the acquisitions have strengthened Transcontinental’s national scale, particularly in Eastern Canada.
Management said the company remains interested in additional acquisitions in in-store marketing and related visual solutions, but will be selective. Bendavid described the overall in-store marketing market as relatively flat, while noting that Transcontinental is over-indexed toward grocers, a segment he said is expected to grow roughly 3% to 4.5%.
Bendavid also said the company’s offering extends beyond printed in-store materials. He said Transcontinental is already involved in other media, including screens deployed in retailer networks, where it can produce and distribute content and provide installation services when required.
About Transcontinental TSE: TCL.A
Transcontinental, or TC Transcontinental, is a Canadian printer and flexible packaging provider that operates in three segments: packaging, printing, and other. Its packaging segment features the production of different plastic products geared toward consumer goods. Production plants specialize in extrusion, lamination, printing, and converting. The company offers premedia, printing, and distribution services through the printing segment. Publishers, retailers, cataloguers, and marketers are some of the customers who tap TC Transcontinental for these printing solutions.
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