Jul 13, 2016
Executives
Doug Murphy – President and CEO Tom Peddie – EVP and CFO
Analysts
Adam Shine – National Bank Financial Aravinda Galappatthige – Canaccord Genuity Drew McReynolds – RBC Capital Markets David McFadgen – Cormark Securities Jeff Fan - Scotia Bank Robert Peters – Credit Suisse Vince Valentini - TD Securities
Presentation
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the Corus Entertainment Q3 2016 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, July 13, 2016.
I’ll 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. Welcome to Corus Entertainments fiscal 2016 third quarter analyst and investor call.
Joining me on the call today is Tom Peddie, our retiring Executive Vice President and Chief Financial Officer and his successor John Gossling. Before we get started I would like to take a moment to acknowledge Tom's significant contributions to Corus.
As our founding CFO Tom has helped guide, grow, and shape our company over the past 17 years from taking the company public in September of 1999 through to our most recent transformational acquisition of Shaw Media in April of this year. He has been a great friend, outstanding partner, and I would like to thank him for his invaluable guidance and support.
Thank you Tom. Tom and I are both very pleased to find a terrific successor in John Gossling who we announced a few weeks ago as our incoming Executive Vice President and Chief Financial Officer.
John brings extensive experience in the media and communications industry and we are very pleased that a leader of his caliber join our team. Welcome to the call this morning John.
Moving on to the discussion of our third quarter and year-to-date results, we would like to remind you 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. Turning to slide 3 of the presentation we will review our results for the quarter.
We were very excited to close our acquisition of Shaw Media on April 1st. It is the big first step on our journey to transform Corus into an integrated media and content company.
The new Corus has powerful, differentiated scale, and the leading brands that will enable us to compete effectively in the evolving media landscape. It has only been three months since we came together as one team and we have already made tremendous progress on our integration.
More on this shortly but first I would like to turn the call over to Tom to discuss our Q3 results. Tom.
Tom Peddie
Thanks Doug. This marks the first quarter of consolidated results following our acquisition of Shaw Media.
There is a fair bit of noise in the financials this quarter which is primarily related to the acquisition as well as the discontinuance of our Pay TV business at the end of Q2. Specifically, as of April 1, 2016, 100% of the operating results of Shaw Media as well as its assets and liabilities have been fully consolidated.
This means that two months of Shaw Media results are included in the quarter and year-to-date numbers as part of the television segment. In addition this is the first time that our Pay TV business which was discontinued on February 29, 2016 is not included in the results of the television segment for the quarter.
We are not providing pro forma results for Shaw Media for the prior year as we did not own the assets at that time. We are also not providing Q3 pro forma numbers for our discontinued Pay TV business as the asset is no longer in our mix.
Our business has transformed into the new Corus and our focus is on the future particularly fiscal 2017. Accordingly our discussion today will be on the performance of the new combined company on a go forward basis and not the individual parts with one exception.
We have provided some color for you on Shaw Media's performance for the two months period ended May 31, 2016 which can be found in Note 17 of our consolidated financial statements. Shaw Media's revenue was $187 million and net income attributable to shareholders was $40 million over this period.
In addition our net debt to segment profit on a pro forma basis is 3.8 times which is in line with the guidance we have previously provided. With the integration of Shaw Media well underway our internal goal has been to complete as much of the integration as possible by the end of August in order to position us well for fiscal 2017.
With this in mind let's now turn to review of the results for the third quarter and year-to-date. Consolidated revenues for the third quarter of fiscal 2016 were $361 million, up 78% from $203 million last year.
On a year-to-date basis revenues increased 27% to $787 million, up from $622 million in the prior year. Consolidated segment profit for the third quarter of fiscal 2016 was $130 million, up 90% from the $69 million last year.
On a year-to-date basis segment profit increased 38% to $306 million up from $222 million in the prior year. However, this excludes the amortization of disposed Pay TV program and film rights of $15.6 million.
Adjusting for this, segment profit would be up 31% from last year. Net loss attributable to shareholders was $15.8 million or $0.10 per share for the quarter compared to a net loss of $8.1 million or $0.09 per share in the prior year.
Net income attributable to shareholders was $127.8 million or $1.16 per share year-to-date. The Q3 results include business acquisition, integration, and restructuring cost as well as debt financing cost.
On an adjusted basis net income attributable to shareholders for the quarter was $53 million or $0.34 per share compared to $31.6 million or $0.36 per share in the prior year. On a year-to-date basis adjusted net income attributable to shareholders was $116.4 million or $1.05 per share.
I will now turn the call back to Doug for a discussion of our business segment results.
Doug Murphy
Thank you, Tom. As Tom noted the results of our television business was significantly impacted by the discontinuation of our Pay TV business on February 29th and the acquisition of Shaw Media on April 1st which contributed $187 million in revenues for the quarter.
We would like to note that on a full quarter basis Shaw Media's total revenues were down 9% driven primarily by lower advertising revenues as a result of overall soft market conditions. On a combined basis advertising revenues increased 236% in the quarter due to the acquired assets.
Excluding Shaw Media, specialty advertising revenues in the third quarter were relatively flat compared to the prior year. This reflects growth in English Canada particularly from kids directed advertising on our kid's network as well as our women's and family brands offset partly by a decline in French Canada across media.
The 16% increase in subscriber revenues this quarter was driven largely by the acquisition of Shaw Media services. Excluding the impact of the Shaw Media acquisition and the discontinuation of our Pay TV business prior to the third quarter, subscriber revenues were up 9% as we continued to benefit from the launch of our suite of Disney channels earlier this fiscal.
In fact we are pleased to report that as initially stated, the Disney services are accretive to segment profit in year one. Further we would also highlight that it has now been several months since the launch of pick and pay in Canada and as we originally opined the impact on our business has been negligible.
In Q3 we reported a 24% increase in merchandizing, distribution, and other revenues that was primarily attributable to other revenues from the acquisition of Shaw Media including a video on demand services and TV everywhere initiatives such as Global Go. This was partially offset by a decline in production and distribution revenues from Nelvana mostly due to the timing of our studios service work.
We remain optimistic about our owned content strategy for the years to come and I will discuss this further shortly. But first I would like to discuss our radio business.
The revenues were down 2% with the majority of the decline attributable to softness in the West particularly in Edmonton and Winnipeg. However, overall radio segment profit grew 2% in Q3 as the division benefited from strong cost control measures and our new innovative organizational design of our local radio and Global TV operations.
The radio team continues to make good progress with our content and programming strategies and with the recent combination of radio and Global we are very enthusiastic about our future. On the audience front our most recent PPM ratings maintained their forward momentum.
Contributors Rock 101 and CFOX ranked in the top four stations for adults 25 to 54. Edmonton's CISN Country 103.9 gained significant share ranking an impressive fourth from its previous number sixth position for adults 25 to 54 and number one with females 25 to 54.
In Calgary our recent formats flipping the market is creating some tight compression as the four top stations shares this fall was in 0.4% of each other. Country 105 ranked fourth for adults 25-54 in the spring of PPM ratings but has more recently returned to its number one ranked position.
Toronto's 102.1 Edge continued to gain momentum climbing one rank to number six for adults 25-54 trading places with Q107 which now ranks seventh. We have made a number of changes within our radio segment this quarter immediately realizing synergies as a result of our acquisition of Shaw Media.
The combination of our local radio and global news sales force is creating exciting new opportunities to bundle offerings for our local advertisers. We have also implemented a content leadership team across global news and radio which will harness the combined power of these two highly complementary assets as part of the new Corus.
These teams will tap into the collective expertise and inherent synergies in the businesses to enable us to realize our goal of becoming a powerful new player in Canadian local advertising across radio, TV, and digital. We will continue to build audience across all platforms and in turn increase revenues to drive earnings growth as we benefit from our newly improved cost structure.
Turning to slide four, we are excited to provide an update on the shaping of the new Corus. The integration of Shaw Media has been a key value for this quarter and we are pleased to share that we are tracking ahead of our targets.
Upon closing the acquisition on April 1st we hit the ground running as we said we would do with the integration teams in place and a clear plan of action. Our goal is to capture $40 million to $50 million in cost synergies over the next 18 to 24 months.
We have made tremendous progress in terms of both our plans, timelines, and synergy targets. On day one we launched our new corporate identity, a powerful visual cue that the new Corus has arrived.
We also announced a strong, experienced leadership team, one that has the best of the best and is equally balanced with the executives in Corus and Shaw Media optimizing the talent and insights from both organizations. Since that time we have undertaken an organizational redesign with the majority of our teams now designed down to the ground.
We expect a vast majority of our structural changes to be completed by the end of August. Our focus for fiscal 2017 will continue to be on identifying and capturing all revenue and cost synergy opportunities as we continue to rapidly and thoughtfully work our way through the integration.
Importantly we remain steadfast in our commitment to deliver free cash flow to fund our dividends, invest to advance our strategic priorities, and reduce our leverage below three times by the end of fiscal 2018. Now moving to slide five, we will provide an update on our strategic priorities.
In addition to the significant progress we reported on our integration, we remain intensely focused on advancing these strategic priorities. They are to own and control more content, to engage our audiences, and to expand into new and adjacent markets.
We have made meaningful progress this quarter on a number of fronts, let me highlight a few. We are seeing continued success from our lifestyle factual reality slate launched this past year.
In April we announced more sales in multiple territories for two of our original series Buying the View and Masters of Flip as we continued to build international interest for our compelling lifestyle content. We will beat our internal sales target this year with a slate of approximately seven hours of new honed lifestyle reality programming.
As part of our integration work and identifying revenue synergies we are also examining all opportunities to organically accelerate our own more content strategy given our larger scale and the team is already building an exciting future slate of lifestyle reality programming. Continuing on with our own more content strategy lets return to our kids business.
Last year we announced that we had forged a promising new relationship with Sony Pictures Animation to produce a new animated TV series based on Sony's global hit feature film franchise Hotel Transylvania. Produced at our Nelvana Studio here in Toronto we are excited to build on the incredible global success of this powerhouse franchise with this acclaimed story coming to life on television for fans around the world.
On June 1st we are excited to announce that Nelvana and Sony Pictures Animation has now licensed the Hotel Transylvania series to the Walt Disney company's Disney Channel on a worldwide basis. A great example of building scales through existing partnerships.
The series scheduled to debut in 2017 is another example of our impressive ability at Nelvana to attract high quality intellectual property and distribution partners. We also announced an expanded relationship with the Cartoon Network which renews our channel agreement for an extended term and sees Nelvana becoming the exclusive merchandizing agent for Cartoon Networks properties in Canada.
We will leverage our existing Nelvana infrastructure in Canada to maximize all opportunities for Cartoon Networks brand with specifically supporting the pending re-launch of the Power Puff Girls this fall and Ben 10 in 2017. In May we went to Los Angeles for our first LA screenings as the new Corus.
And not only did we acquire some great program and it will drive audiences on both our conventional and specialty services, we spent wisely coming back from the screens with money in our pocket. And on the heels of this we held our first ever Corus Upfront on June 9th where we unveiled our super fall schedule.
We also celebrated the power of Corus showcasing the many new solutions at Corus which our differentiated scale can provide to our advertisers and agency partners. We announced the expansion of our next generation advertising program which combines privacy compliance set box data with consumer and demographic data offering advertisers the ability to buy shows based on their target demographics and consumer profiles rather than the traditional age and sex demos.
Another highlight was our recently announced partnership with Comcast's Visible World which is attracting considerable interest from the advertising community. We will develop a platform that will enable us to bring programmatic capabilities to linear television offering a unique data driven TV advertising product and where we can advertise as customers more effectively and efficiently.
Both of these initiatives are part of the advances underway at Corus as we evolve our business to compete and win. And our goal is to innovate in this area will ensure us we can provide offerings at significant value for our advertising partners as we work to grow our share of the overall advertising pie.
We have already seen that clients who have engaged with our next generation advertising program spend more with us than clients who have not yet participated. And while it is early days we believe that we are competitively and uniquely positioned with the highly differentiated audiences, increased scale, and investments such as these in next generation advertising solutions.
And finally last week we held our first ever Corus Live event, the CMT Music Fest which took place in Bingemans in Kitchener, Ontario. With this great entertainment lineup the Zac Brown Band and others, this two day festival wrapped up with total attendance of over 18,000 persons.
As we look to expand into adjacent markets and further engage our audiences with our brands across these platforms, this event was an exciting first foray into an area that makes strategic sense. Over 10 sponsors came on board for the festival and we had talent appearances from across our networks.
It was a great learning experience that we can build on moving forward. Overall a great deal has been accomplished in our first quarter as the new Corus and we would like to thank our talented team for all their hard work in driving our business forward as we bring our strategic priorities to life and continue with our integration process.
We see lots of opportunity ahead as the new Corus. Our key focus for fiscal 2017 will be on execution, leveraging the benefits of our new found scale which will allow us to compete in a bigger way moving forward and delivering on our commitment to delever.
We hope you have found these comments helpful and now we are pleased to take any questions you may have. Thank you and over to you operator.
Operator
[Operator Instructions]. And our first question comes from the line of Adam Shine with National Bank Financial.
Please go ahead.
Adam Shine
Thanks a lot and good morning. Let me start by just wishing Tom all the best in retirement or pseudo retirement, whatever he will be up to and welcoming John aboard.
So interesting quarter, I know you are not providing much in the way of Shaw Media related disclosures. But you did touch on revenue and the 3Q is the second most important quarter of the broadcast here, and we have got Shaw Media down I guess about 9% in revenue, that is more than a doubling I guess of what we have seen in the prior couple of quarters.
So, maybe Doug you can elaborate, is this a function of an assay or bit of a limbo between the announcement of the deal and the closing of the deal, are you seeing any dysynergies perhaps as you bring all the assets together on the specialty TV side, and/or was this a function of some of the hockey run and other sporting related activities, if that have any particular impact one way or other on the conventional side of the business, maybe we will start there and I will follow-up with another one?
Doug Murphy
Great, and good to hear from you. I will start with -- you have actually more or less answered your own question with your final comment.
Q3 was -- primarily two things happened in Q3, first off was in general conventional audiences were down across the board. So that was sort of a market condition.
And in specific we saw growth in sports related audiences on specialty which hurt our specialty audience delivery. So, with the rappers [ph] play upfront and baseball back and hockey there was a shift in audience over.
That I would not attribute because I believe the teams have been focused on maintaining the momentum in each of the respective businesses. I would not attribute the softness to anything but market conditions.
I think our teams have done a superb job executing. We have been very diligent and focused on espousing the importance of keeping our eyes on the prize as we integrate these two businesses.
So there was marked conditions and we see it as a kind of one time blip.
Adam Shine
Thanks Doug. You talked about the $40 million to $50 million in synergies but I don’t see any reference anywhere to as the initial 15 million of integration savings that was expected around the time of the closing.
Can you speak to that, was that at all factored into these Q3 results or maybe that comes a bit more in Q4?
Tom Peddie
I think most of that comes in fiscal 2017 Adam. We -- the 15 of allocation is still are coming forward and that is in addition to the $40 million to $50 million and we are -- as we signaled effectively we are ahead of our targets and costs for fiscal 2017 and we visualize to be there.
So, that -- you kind of take that and work it into your model.
Adam Shine
Okay, and then maybe one last one, just as it relates to the Upfront that you referenced, can you talk to sort of how the response so far has been, how sales are tracking?
Doug Murphy
It has been overwhelming. We as -- my grand mum used to say you have one chance to make a first impression and we certainly came out of the blocks in color.
We booked Mattamy Center which was -- with gardens and had a huge event for 700 people. We revealed the new brand identity.
We had more than 60 stars present from all of our services. We showcased our executive team.
We had advertisers and clients, we had seated dinner by Mark McEwan with the talent sprinkled amongst the tables. Overwhelming feedback from clients and advertising agencies and this was a in from U.S.
to your partners. This was one of the best Upfronts they have been to in a very long time.
And we are quite pleased with the revenue implications that have come from that Upfront and we have sort of followed.
Adam Shine
Okay, great. Thanks, I will queue up again.
Doug Murphy
Alright, thank you.
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 questions. Doug I have noted in the past you have kind of given us pretty good idea of the subscriber, the agreements that you had on the Corus side, now it is included in your company.
I was wondering if you can given us a quick update of where things stand on that front in terms of signing on or renewing with the BDU's, just maybe I will start at the back?
Doug Murphy
Well we have an idea [ph], we signaled a number of areas of revenue synergies that we were committed to extracting in the coming years. They are bundling conventional specialty radio, digital, local sales bundling which I referred to in my remarks.
The benefits of producing not only content at no additional cost by building our lifestyle reality slate, giving a larger scale and look at opportunities to extract or predict value from our carriage agreements, the latter of which was the question you just asked. We -- obviously we are 12.5 weeks into the combined companies and so what I can tell you is that we are building a plan to approach and negotiate our carriage agreements with our BDU partners that will bring the scale of the combined company to bare.
But it is clearly early days in terms of giving you any specific feedback on what that is going to look like.
Aravinda Galappatthige
Okay, great, thanks. And just to kind of help us with the modeling going forward, can you give us a sense of what your expectations are for the programming cost inflation let's say over the next 6 to 12 months, now that you probably have some element of visibility on that front?
Tom Peddie
Aravinda, it is Tom. I think the key point there was in Doug's opening comments were when we went to LA we returned with some cash in our pockets so that we were able to buy very prudently.
As Doug also said we were quite excited with the programming slate that we have for the fall. So, we are in good control of them over that.
And we as you know from a kids point of view there is limited inflation on that other than the deal that we did with Nickelodeon and Disney last year which we had previously talked about. So, I would say that there is not a lot of pressure on our numbers from a cost point view in fiscal 2017.
Doug Murphy
Maybe I will just add on that, I know you are looking for some directional guidance on this one unless you get too deep into that right now. But I will say that the programming team led by Barbara Williams our Chief Operating Officer and her talented group have put together a really impressive strategy that leverages content across networks in a way that we had always believed was possible, thus reducing cost accordingly by getting more penny for your buck from the existing program that we already had inside the tent.
And further there was a number of very promising complimentary scheduling strategies and tests that the team are doing which leads us to believe that by some clever moving around of programming and looking at what goes on, on what channels, when we can build audience and keep them inside the new Corus's video echo system if you would. So, I guess the nerve I am trying to hit there is we are going to make what we own work harder and have a better returns because we have the environments on the winning surfaces and the scale of the new company.
Aravinda Galappatthige
Okay, that is good color. Thanks Doug.
And last question is actually for Tom, with all the balance sheet movements now behind us can you just remind us just sort of what the average cost of debt would be going forward, thanks?
Tom Peddie
Sure, Aravinda it will be probably be in the 4.8 to 4.9 range.
Aravinda Galappatthige
Okay, great. Thank you and Tom all the best, just wanted to add my best wishes as well.
Thank you.
Tom Peddie
Thank you very much.
Operator
Our next question comes from the line of Drew McReynolds with RBC. Please go ahead.
Drew McReynolds
Thank you, good morning, and also Tom congratulations. I think it has been about 70 conference calls since we first started, so all the best going forward.
Tom Peddie
Well I was going to a conference call this morning but I decided I probably wouldn’t go there. I think they won't probably know what you have missed Casey.
He has been covering us so Tim before you come on the call I would look for you to answer that question for us, how many quarters it has been, over to you Drew.
Drew McReynolds
That's right, thanks. So, two or three questions here, just back to just a commentary around growth in sports specialty, kind of cannibalizing other specialty.
I thought the Corus specialty advertising was quite good this quarter, certainly improved sequentially and just wondering is then that the implication here that conventional drag more shot down, more end or your audience is just not as cannibalized as Shaw's audience would be with sports?
Doug Murphy
Yes, in short that is the answer right there. I would also say that the audience -- I will also from a revenue perspective keep in mind that the kids services were allowed in only three major categories.
Right, so you got entertainment, food, and toy. And we had a very strong quarter on the theatrical front with big feature films primarily from Walt Disney Company and a couple of others.
And that impacted meaningfully as well.
Drew McReynolds
Okay, now that makes sense. Just two other more modeling questions, just first on as you go through your realization cost synergies, I think overwhelmingly we all have confidence of you meeting your target, will you provide us an update on what of the 40 or 50 has been realized kind of in period, do you plan to do that quarter-to-quarter or at least give us an update maybe at the end of this year?
Tom Peddie
Drew, it is Tom, I think we are probably more inclined to give you an update during the year. As you heard from Doug our focus in 2017 is capturing those particular synergies, focusing on delevering.
We want to continue to drive top line growth because we are going to focus on delivering high volumes. So, delevering or synergies is a key to us and as Doug said we are well on pace to that and we hope to be able to report back to you in the future that we exceeded the target by x million dollars.
Drew McReynolds
Okay, and then last one from me, I guess for you Tom, can you just give us the Pay TV kind of revenue and EBITDA that was essentially stripped out of the quarter just for modeling purposes or maybe I missed that somewhere in the MD&A?
Tom Peddie
We did not put that in the number. We have given guidance when we first disposed that particular asset and said that there was I think about $125 million worth of revenue and I think we said there is about $34 million or $32 million worth of earnings on that on an annual basis.
So that was the comparable number.
Drew McReynolds
Okay, and that is all for me. Thank you.
Doug Murphy
Thanks Drew.
Operator
Our next question comes from the line of David McFadgen with Cormark Securities. Please go ahead.
David McFadgen
Yes, so just kind of following up on the Shaw Media quarter, can you give us an outlook on how it is tracking so far in the fourth quarter the revenue?
Tom Peddie
Hi David, certainly. I would say that market overall remains soft.
Obviously we all needed practice [ph] like a hole in their head. I mean [indiscernible] over the years that advertising was a competence business and I think we are continuing to see a very soft advertising market.
I would say that to pull out phrase out of Drew's earlier -- we are seeing sequential improvement off of Q3 on the Shaw Media portfolio. And we expect to continue to strength on the kids piece of the business.
But I don’t want to sound overly optimistic because we are still in a soft market. And maybe just to go a little further on this, Q4 keep in mind, the Euro Cup is now behind us but we do have the Olympics coming.
And I know you have been covering us for quite some time. In prior Olympics what tends to happen is that you have some advertisers who shift dollars into the sports surface.
You have advertisers that decide to stay out of the market. So we are being cautious in our forecasting for Q4 but we do see improvements over Q3 on the Shaw [ph] video side and we do see continued buoyancy on the kids business.
David McFadgen
Okay, and then earlier on the call you talked about seeing a negligible impact from pick and pay, is it all quantifiable?
Doug Murphy
Other than it is negligible. I mean, really this is one of the things out there where I know you and I have talked about this and I have talked to everybody on the call over the last 18 months.
And the combination of the value that a bundle provides our subscribers with the fact that we have some of the most coveted entertainment specialty channels and that we have very well designed penetration based rate cards has positioned us to be in a good spot with the roll out of the pick and pay environment. And we are also of the view which we have also articulated on a regular basis that you need to follow the consumer, you are going to follow the viewer, and we are supportive of doing that.
David McFadgen
Okay, that's it from me, thank you.
Doug Murphy
Thank you.
Operator
Our next question comes from the line of Jeff Fan with Scotia Bank. Please go ahead with your question.
Jeff Fan
Thanks and good morning. First, just a clarification on the integration costs or allocated cost from Shaw Media, the 15 million, why is that not immediately accretive your numbers, why do I have to wait until fiscal 2017?
Tom Peddie
Jeff, it is Tom. It is immediately accretive and the way we are recognizing it on a quarter-to-quarter basis so that you will see that fed through -- the first two months we just reported on and in the next three months for the balance of the fiscal year.
So…
Jeff Fan
Oh, so it is in the numbers, okay. On the restructuring cost or charges, you booked 29 million in the quarter, can you just update us on what the total amount of restructuring charges we are expected to put through and is that all going to come through before year-end?
Tom Peddie
I would say, Jeff it is Tom again, I would say that some -- most of it as Doug said our goal is to try to capture and complete the organizational structure by the end of August. So most of the cost will be recognized from a P&L point of view.
From a cash cost point of view it could be spread out because in some cases with restructuring our employees and salary continuance so the cash cost would be spread. So, we will have some of those particular costs sliding into 2017 and I think from a guidance point of view, what we had said in earlier calls is that our cost to capture these synergies is probably comparable to the synergies that we capture.
Doug Murphy
Jeff, if I could just maybe add a little more color here, because I do want to make sure that it is appreciated that management was resilient in our commitment to move as quickly as possible given the timing of the main screens and the necessity to do the June Upfronts. The reality of the year-end of August we wanted to get out of the gate and break really sharply and we have done that.
I mean we are well ahead in terms of timing on our cost synergies extractions and more importantly I would say from a longer term perspective is that we are positioning the company to have a great start for fiscal 2017 with as minimal disruption as possible and take their long view of implementing our strategic priorities. But in 2017 I really intend to focus on delevering.
Jeff Fan
Great and maybe another one for Tom, on the cash flow or free cash flow looking out to 2017 and 2018, 2017 you still have the drip on the dividend team into Shaw but 2018 I guess without any changes the expectations that there will be cash dividend to Shaw Communications at the same time you have got some mandatory repayment on your term facility. Can you just give us some sense as to how the funding and where the source of funding is going to come from as you look out to the next especially in 2018 when the cash dividend goes up?
Tom Peddie
It is bit tough I guess to comment on 2018 but I think what we would say is that we have an awful lot of confidence in our top line revenue growth and we will show a significant increase in our free cash flow as we move into 2017-2018. Particularly as we get to 2018 we have a number of cash commitments that would disappear, first off the restructuring cost that I referred to.
As you probably have in your model we have about $25 million worth of CMTC benefits that we will incur in 2017 as part of the Shaw previous commitment. So a number of those items would help us in 2018.
But we do recognize that in a lot of commitment to our shareholders with the cash to dividend, we are not sure at this particular point in time what the charge will come up to drip but they are supportive of us. But our agreement says if they are allowed to and so you are right and that we will have cash, an increase in our debt retirement cost but at the same time as Doug also said our commitment is to get our leverage down to three times as we have reduced our leverage, our cost to borrowing goes down.
So we have got a number of positive factors that will work in our favor as we look out to 2018.
Jeff Fan
Okay, maybe a final one for Doug, I know you are still working through the plans for looking at revenue synergies, looking out to the next couple of years, but without quantifying maybe can you just help us identify in priorities which of the big buckets of revenue synergies do you think the opportunities are, just to kind of give us a sense as to what to focus on in the next year or two?
Doug Murphy
Sure, happy to. I guess I would -- this is not in a descending order of bucket size but just because it is top of mind for me, one of the things that I have been real impressed with as I have been watching the teams gel is the power of the local opportunity and local advertising is really sticky.
It is an interesting, it is a different kind of revenue profile than what we see on national advertising or carriage agreements or the lumpy revenues we get in the content piece of the business. And we have already seen some real wins as we put together the local TV and local radio sales teams in those five large markets.
There has already been I would say a handful of incremental pickups on deals that are solely accountable to the bundling and the scale we bring in those local markets. So, I am enthusiastic by the great job that our local sales teams are doing, that's one.
As regards and Aravinda was asking it earlier, carriage and the advertising scale benefits those are going to be playing out throughout the year. So, the five big agency buying groups and those corporate deals begin to be negotiated in earnest.
Over the next few months we have a series of staggered carriage agreements that will be -- we have turned our attention to but we will be engaging with our partners there almost steadfastly as well. So, it is really hard to give you any kind of visibility as I said earlier to Aravinda but those are big chunks of revenues there.
We said we were able to extract some growth that really will flow right to the bottom line. Our cost structure in fiscal 2017 is going to be such that the flow through in incremental revenue to EBITDA and cash is going to be really impressive.
And so rest assured that the team now that we have secured the media cost strategies, the team was acutely focused on deploying our scale to realize similar revenue synergies.
Jeff Fan
Great, thanks for that answer.
Doug Murphy
You are welcome.
Operator
Our next question comes from the line of Rob Peters with Credit Suisse. Please go ahead.
Robert Peters
Hi, thanks for taking my questions. Doug maybe -- I was just wondering if you could talk to the trends in your women's segment, I am not sure if I have missed some commentary on that but I know it has been doing well recently and then it looks like you had kids show some strong performance this quarter.
I am just kind of wondering if you can kind of give the break down in the total kind of Corus advertising and maybe secondary to build on that was there any impact from the shift in Easter this year?
Doug Murphy
Rob, first no. The Easter shift -- we got the revenues, some maybe a small amount but nothing that I wouldn’t deem to be meaningful revenues because of Easter.
The women's lifestyle services in both businesses continue to be the best and strongest women services in the country. The WHG, Food Showcase both our power houses and remain at the top of the pile in terms variability to drive audience to attract advertisers because of their environmental benefits.
So, we continue to be very, very excited about the promise of those surfaces Rob for the future. Specifically, we are seeing continued audience growth on W and continued revenue growth on W.
So, we are delighted with that. We have a number of very promising conversations evolving with our partners at Scripps as regards HG and food.
We are recently down and spent some time down in Knoxville. It was a very exciting, great partners there.
So, we are going to keep our foot on the paddle on the women services because that is where we are so powerful and that compliments of course as you know our kids services where we have unheralded scale in Canada. So, the joining of both those segments if you would will continue and will always be a defining characteristic of the new Corus.
Robert Peters
Great, thank you very much. And maybe you talked about coming back from the Los Angeles screenings with money in your pocket and that is fantastic to hear, just wanting to -- from what I understand over the top services were maybe a bit more active on bidding for some of the U.S.
network shows this year. I was wondering how you kind of think about the competitive environment for content after coming back from LA?
Doug Murphy
Well you are right in noting that Rob. We do -- obviously we have new competitors for our viewers time.
Time spent watching television is still a massive amount of time and monetizable there in. But we did see Amazon and Netflix and others looking at our marketplace.
We were pleased and we know that the other conventional broadcasters of Canada were equally pleased that in the end the Canadian model which relies on the simulcast window from the U.S. premier networks remained in place.
And so that to us was an encouraging outcome. There is not a finite checkbook for buying content and this varying opinions out there is to how much longer this "bubble" for content can continue.
One of the merits of our business model of Corus is that we are licensing our shows into that bubble if you would with Nelvana in our evolving lifestyle reality slate. But net-net when we look at every investment especially for the coming fiscal year it is both to advance our strategic priorities but also to have a cash on cash return.
We can speak with some degree of confidence about the yields on cash. Our inclination is to take that and pay down the debt.
And so we were delighted to come out of the LA screenings with 15 hours of simulcast which is higher than we have had on global for a number of years. A lot of returning big franchises, NCIS Chicago franchise.
We have got a great new comedy slate on Tuesdays and Thursdays from CBS. Fantastic CanCon shows that we – obviously weren’t from LA screenings.
So, I think the team did a superlative job balancing the required prudency of managing our cash and ensuring that we put our best foot forward and not allowing us to get bid up by some of these new entrants on some of these shows.
Robert Peters
Fantastic, thank you very much. I will pass the line but I do want to say congratulations to Tom and thanks for all your help over the years.
Tom Peddie
You are welcome, thank you.
Doug Murphy
Thanks Rob.
Operator
[Operator Instructions]. Our next question comes from the line of Vince Valentini with TD Securities.
Please go ahead.
Vince Valentini
Thanks very much. Let me start off by trying to clarify a couple of things.
Doug when you said there was sequential improvement for Shaw Media in Q4 versus Q3 I assume you are seasonally adjusting that comment because Q4 is always way weaker than Q3?
Doug Murphy
Yes, I am just saying, I mean I am addressing the blip that was Q3 and that seasonally adjusted we are improving out the blip.
Vince Valentini
Great, and that 9% decline figure, just to clarify that is March, April, May the entire three month period this year versus last year, that's right?
Doug Murphy
Yes, that is right. We are trying to -- obviously we are not providing a lot of detail but we provided a little bit of detail for you guys.
Vince Valentini
And you have said conventional was particularly weak. The specialty TV ad revenues for Shaw Media were negative.
One piece I am not clear subscriber revenues for Shaw Media, I assume those were at least close to flattish in the quarter?
Doug Murphy
That is correct.
Vince Valentini
Okay, great. Couple other little things, sorry.
Fiscal 2017 guidance, is that something you plan to give and can you give us any idea when?
Doug Murphy
We will be having a fulsome discussion with our Board in the next few weeks on the merits of that. And of course I will be talking to our newly appointed Chief Financial Officer to get his perspective on what we think we should be doing.
So, I’ll have to put that in the stay tuned category.
Vince Valentini
Okay, great. And when you talk about the revenue benefits of the merged company, lot of programs you have in place and executives you have geared mostly just through those revenue initiatives.
Can you give us any sense of how those people are being compensated, what happens in Q3 and Q4 really matter or is everything they are doing really geared towards driving results in 2017 and beyond?
Doug Murphy
I would say yes for both. I mean Q3 and Q4 we want to finish strong.
Both businesses are incentives based on their preexisting plans for the fiscal year-end question. And then we are harmonizing and have harmonized or will be harmonizing the incentives for fiscal 2017 so that we are aligned and all pulling in one direction.
We will be presenting to our Board our operating plan for fiscal 2017 in the coming weeks. As I mentioned in my comments, we have had complete participation from the leaders of our company who are equally balanced from both sides of the business.
And we are all acutely aware of what are targets and goals are. So, we kind of have one eye on this fiscal because we obviously want to maximize the results for this fiscal to get off to a good start for fiscal 2017.
But also a lot of the business has got a long lead time so we are also working on making sure we are off to a good start in 2017.
Vince Valentini
So, one last thing, subscription video on demand service of your own is there any updated thoughts on doing that?
Doug Murphy
As I referred, in the last call we have a number of initiatives underway but I have nothing to reveal at this point in time.
Vince Valentini
Thank you.
Operator
Mr. Murphy there are no further questions registered.
I will turn the call back over to you for closing remarks.
Doug Murphy
Thank you very much operator and thank you everybody on the call who participated and who listened in. We are very excited about the future of the new Corus.
I will echo my heartfelt congratulations to Tom on his pending retirement and would encourage all of you to take him to dinner in the coming weeks. And I very much want to welcome John Gossling to the team who will be spending a lot of time with you in the coming quarters.
I would like to once again reiterate my heartfelt thanks to the Corus team, everyone in the business, at all levels of the company, and all parts of the country have been working extremely hard and accomplishing great things. So, thank you to all of you and have a great day.
Bye-bye now.
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.