Transcontinental Inc Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Hamir Patel - CIBC Capital Markets - Analyst : Good morning. Thomas, could you speak to the revenue contribution and margin profile of the three latest acquisitions on the print side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2025 / 12:00PM, TCLa.TO - Q3 2025 Transcontinental Inc Earnings Call

Question: Hamir Patel - CIBC Capital Markets - Analyst : Okay. Great. Thanks, Thomas. How should we think about the top line contribution before any synergies on the sales side?

Question: Hamir Patel - CIBC Capital Markets - Analyst : Okay. Great. Thanks. And just turning to the packaging side, how is the volume and pricing breakdown in Q3? And how do you see Q4 shaping up?

Question: Hamir Patel - CIBC Capital Markets - Analyst : And as prices stabilized here in Q4?

Question: Hamir Patel - CIBC Capital Markets - Analyst : Okay. Great. Thanks, Donald. That's all I had. I'll turn it over.

Question: Adam Shine - National Bank Financial Research - Analyst : Thanks a lot. Good morning. Thomas, maybe just continuing on packaging. The quarter started off quite well as per your disclosures back in June. And then, I guess, things weakened a little bit. Can you give us just a little bit more color? It looks also like medical might have stood out, maybe a bit of growth there. So maybe talk to some of the negatives and some of the positives. And then, stepping into Q4, what has changed? Is it just a different dynamic in terms of seasonality trends, improvement into fall from the summer, or something else on a positive trend? Thanks.

Question: Adam Shine - National Bank Financial Research - Analyst : Okay. Thank you for that color. If I could turn to Donald maybe for the next two. The buyback ran its course in mid-June. We've seen no renewal. Of course, you have pursued some M&A. But the leverage certainly stays well below 2 times. And I'll tie it into the follow-up question just around real estate. There's still this assumption that heading into, perhaps at this point, early F26, you might conclude the two building sales. So maybe just a little color on timing expectations around the building sales and then, of course, tying that into the fact that you do have the wherewithal perhaps to do more buyback unless there's some further M&A brewing. Thanks.

Question: Adam Shine - National Bank Financial Research - Analyst : Thank you for that. Okay. Have a good day. Thank you.

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Thank you. Good morning, guys. Just a couple of questions from my side. Just with respect to the retail services and printing business and the increased guidance, looking for growth now year over year and adjusted EBITDA. Can you just break down how much of that is coming from the acquisitions that you announced versus sort of underlying organic growth?

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Right. Okay. That's great. And then just wondering if you can give an update on sort of your cost savings program and where you sit. I know you gave some color around the real estate sales which sounds like maybe a Q1 '26 item. But just in terms of the underlying cost savings, are you still sort of on track for what you've guided to in the past?

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Yeah. Okay. That's great. And then maybe just finally, Donald, you had a couple of answers, comments around acquisitions and still looking more on the ISM side. Is that sort of more of what you've currently done with respect to just kind of building out your geographic diversity around that business? Or is there anything else sort of nuanced in those acquisition commentary?

Question: Stephen MacLeod - BMO Capital Markets - Analyst : Okay. That's great. Thanks, guys. I'll get back on the line.

Question: Maher Yaghi - Scotiabank GBM - Analyst : (spoken in foreign language) Just wanted to just focus quickly on the packaging side. Your expectation was for the second half to see volume growth. I know you're still focused on Q4 to see volume growth, but is the volume that you were expecting to see in Q3 got pushed out to Q4? Or the guidance now is just for Q4 to see volume growth? Thank you. I wanted just a clarification on that.

Question: Maher Yaghi - Scotiabank GBM - Analyst : Okay. Perfect. Thank you. And just to continue on that thought, obviously, the focus of the company and the management team is to grow volumes in packaging. Apart from growing market share with your existing customer base, can you discuss a little bit what you're doing to gain market REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2025 / 12:00PM, TCLa.TO - Q3 2025 Transcontinental Inc Earnings Call share from new customers, new clients, in order to make sure that organic growth continues to be positive, irrespective, let's say, of the order volumes from your existing customer base.

Question: Maher Yaghi - Scotiabank GBM - Analyst : And generally, that pipeline of potential new clients, how would you characterize its health? Is it improving? Where are the biggest opportunities in your view?

Question: Maher Yaghi - Scotiabank GBM - Analyst : And sorry, finally, just on that, is it focused on specific industries where you're strong at like, let's say, food and medical? Or it's more broad-based?

Question: Maher Yaghi - Scotiabank GBM - Analyst : Okay. And just one last question on margins because, obviously, it has been a key strength for the organization over the last two years and we continue to see margins contribution to the bottom line. I know you obviously want to continue that pace, but at what point do you start to focus more on growing the top line versus keep costs down, i.e., cycling some of the cost savings into growing revenue, growing your marketing push? When does that switch is over?

Question: Maher Yaghi - Scotiabank GBM - Analyst : Great.

Question: Sean Steuart - TD Securities Inc - Analyst : Thank you. Good morning, everyone. I have a follow-on question on the ISM opportunity set. It sounds like you have more opportunities in Canada. Wondering if you can give some context on what the scale of that opportunity set might look like. And is there a point at which expansion into the US on that side of the business makes sense for Transcon as well?

Question: Sean Steuart - TD Securities Inc - Analyst : Okay. The second question is a broader one. You had very strong EPS growth this quarter, 17%, that's accelerated through this year. I think the general expectation is that EPS growth track will slow as -- I guess, it will be dependent on further cost reduction initiatives and this transition between the legacy business and packaging. When you're thinking about longer term projections, do you have an EPS growth target you think is sustainable over the long run? Are your objectives more based on free cash flow, yield, and growth? Can you give some perspective on what you think long term trend potential is for the company? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2025 / 12:00PM, TCLa.TO - Q3 2025 Transcontinental Inc Earnings Call

Question: Sean Steuart - TD Securities Inc - Analyst : That's great context. That's all I have. Thanks very much.

Question: David McFadgen - Cormark Securities Inc - Analyst : Great. So a couple of questions on the retail services and printing segment. So clearly, the book printing was strong in the quarter. I was just wondering, what was the driver of that?

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay. So the fulfillment of that contract, is it basically complete at the end of Q3, Q4, that short term contract? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2025 / 12:00PM, TCLa.TO - Q3 2025 Transcontinental Inc Earnings Call

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay. And you're just not sure that's going to repeat next year, right?

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay. And then when I look at the marketing and media solutions revenue, it was down. Is it down primarily due to flyers or are there other factors in there?

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay. Because if you look at the nine months revenue decline, it's down 14%. And as you said, it was down about 6% in Q3. So I'm just kind of wondering if the mid single-digit is kind of the new rate here and it's primarily driven by flyers or if you can provide some contexts, that'd be helpful.

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay. And then just on working capital, there was, so far, for the nine months, fairly big investment in working capital. I'm just kind of wondering where you expect to come out for fiscal '25.

Question: David McFadgen - Cormark Securities Inc - Analyst : So where do you think you might end up for the year? Would you still be looking at a pretty big investment or do you think you could kind of be more towards neutral or?

Question: David McFadgen - Cormark Securities Inc - Analyst : Okay. All right. Thank you.