Transcontinental Q3 Earnings Call Highlights

Key Points

• Transcontinental reported solid fiscal Q3 results: Revenue increased 3.8%, adjusted EBITDA rose 4.1% to C$60.9 million, and adjusted EPS climbed 18.5% to C$0.32. Management remains confident that full-year adjusted EBITDA will be roughly flat year over year.
• Retail services and specialty products drove growth. Segment revenue rose 7.1%, including 38% growth in the ISM and specialty-products business, supported by acquisitions, approximately 7% organic growth and cost synergies. The company said ISM margins are improving and its acquisition pipeline remains strong.
• Raddar’s national rollout expanded reach but future impact remains uncertain. The retail-media platform now reaches more than 11 million households, or about three-quarters of Canadian households, and generated a few million dollars of quarterly revenue. Transcontinental also reduced net leverage to 2.06 times adjusted EBITDA and expects it to reach about 1.75 times by fiscal year-end.

Transcontinental TSE: TCL.A reported higher revenue, adjusted EBITDA and adjusted earnings per share in its fiscal 2026 third quarter, supported by recent in-store marketing and specialty products acquisitions, cost-reduction initiatives and the national rollout of its raddar retail-media distribution platform.

Chief Executive Officer Sam Bendavid said the company’s improved third-quarter performance reinforced management’s confidence that it can finish fiscal 2026 in line with its outlook. Management continues to expect adjusted EBITDA for the full year to be in line with the prior year.

Quarterly revenue rose 3.8% from a year earlier, while adjusted EBITDA increased 4.1% to C$60.9 million. Adjusted earnings per share from continuing operations climbed 18.5% to C$0.32, compared with C$0.27 in the prior-year period.

Chief Financial Officer Donald LeCavalier said revenue growth was driven primarily by acquisitions in the company’s in-store marketing and specialty products, or ISM, business, partly offset by lower volumes in traditional operations. Cost-reduction efforts and acquisitions also supported EBITDA, though lower traditional-printing volumes limited the gain.

Retail Services and Printing Growth

Revenue in Transcontinental’s retail services and printing segment increased 7.1% to C$233.3 million. The gain reflected recent acquisitions and the nationwide expansion of raddar, partly offset by lower traditional flyer-printing volumes.

The ISM and specialty-products business recorded revenue growth of 38% to C$99.7 million. While acquisitions accounted for a substantial portion of the increase, Bendavid and LeCavalier said the business delivered roughly 7% organic revenue growth during the quarter.

Segment adjusted EBITDA rose 2.3% to C$49.4 million. Management said the acquired businesses and cost initiatives helped profitability, but lower traditional flyer volumes and the changing revenue mix weighed on margins. LeCavalier noted that ISM margins are improving but remain below those of the company’s flyer and newspaper activities.

Bendavid said integration of recent ISM acquisitions is proceeding ahead of plan. The company has consolidated operations into existing platforms and is capturing procurement and operational synergies that are lifting margins by “a couple of percentage points,” he said. Management described the acquisition pipeline in ISM as strong and said the business could potentially double in size over time.

Raddar Rollout Reaches Most Canadian Households

Transcontinental completed the nationwide raddar rollout in mid-June, expanding distribution from about 5 million to more than 11 million households in one step. Bendavid said raddar is now delivered weekly to approximately three out of four Canadian households.

The company said advertiser interest has been encouraging, including from grocery, pharmacy and home-improvement retailers. The platform generated a revenue contribution in the third quarter, and LeCavalier said the impact totaled a few million dollars as Transcontinental took on distribution across Canada through Canada Post that had previously been handled by other parties.

However, management said it was too early to quantify the longer-term profitability and revenue-growth effects of raddar. LeCavalier said the rollout had no material bottom-line impact during the quarter and did not require significant incremental investment in the period. The company may consider additional technology investments in future years to support the platform, depending on opportunities.

Books and Education Timing Expected to Reverse

Revenue in the books and education segment declined 5.7% to C$73.1 million from C$77.5 million a year earlier. Adjusted EBITDA fell C$1.1 million to C$20.5 million, reflecting a temporary volume shift and foreign-exchange effects.

LeCavalier said the revenue decline was largely tied to the timing of education orders, including supplier-delivery issues, and management expects the shortfall to be recovered in the fourth quarter. He added that the company is encouraged by book-printing demand, saying it has replaced business from a prior-year one-time project with work expected to recur annually.

Management said the company’s fiscal year ends Oct. 25 and acknowledged that the timing of the final week could affect results. Still, LeCavalier reiterated confidence in delivering year-over-year flat adjusted EBITDA for the full year, supported in part by expected normalization in education sales.

Debt Reduction and Capital Allocation

Cash flow from operating activities totaled C$25 million in the quarter, down from C$36.5 million a year earlier, primarily because of higher tax payments. Capital expenditures were C$19.8 million, and management maintained its full-year CapEx expectation of about C$60 million.

The sale of two buildings, including the Boucherville warehouse, generated net proceeds of C$36.5 million during the quarter. Net debt to adjusted EBITDA improved to 2.06 times at quarter-end from 2.14 times three months earlier. Management expects the ratio to decline to roughly 1.75 times by fiscal year-end, largely due to a seasonal working-capital improvement in the fourth quarter.

Transcontinental has generated C$60 million from real-estate monetization since launching the program more than two years ago. It has listed a Montreal building and continues to market a Saint-Hyacinthe property, with management expecting the two sales over the next 12 months could help it reach its original C$100 million target.

On capital allocation, LeCavalier said the company’s near-term priorities are dividends, potential ISM or education acquisitions, debt repayment and capital expenditures. Management did not provide an outlook for fiscal 2027, saying its immediate focus remains on completing fiscal 2026.

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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