Transcontinental (TSE:TCL.A) used its first-quarter fiscal 2026 earnings call to highlight a major portfolio milestone, leadership changes, and a near-term earnings dip tied to price concessions and volume pressure in its continuing operations.
Packaging divestiture and special dividend
Executive Chair Isabelle Marcoux said the company “successfully completed the sale of our packaging business,” calling it the close of a 12-year build and a turning point for the organization. Earlier in the day, the board approved a special dividend of CAD 20 per share, which Marcoux said is intended to deliver “immediate and tangible value” to shareholders and reflects the strength of the former packaging operation.
With packaging sold, Marcoux said the company is entering “a new chapter” with a focus on retail services and printing and educational publishing.
Leadership transition effective April 6
Marcoux also announced senior leadership changes effective April 6, describing the move as part of succession planning focused on continuity and growth. The company’s next CEO will be Sam Bendavid. Marcoux characterized Bendavid as “a man of action” and “an exceptional deal maker,” citing his experience across M&A, procurement, coatings, and a two-year profitability program.
Pat Braley will move into a newly created COO role. Marcoux said Braley, who has been leading retail services and printing, has driven strategic repositioning and innovation initiatives including raddar and the use of artificial intelligence in retail flyer content production. Patrick Lizée will continue to lead the educational publishing business as president of TC Media; Marcoux said the media sector has more than doubled revenues over the past decade under his leadership and has also introduced AI to improve processes and product offerings.
Outgoing CEO Thomas Morin used the call to endorse the leadership changes and discussed performance trends in the quarter’s continuing operations.
Q1 results: revenue up, adjusted EBITDA down
CFO Donald LeCavalier reported revenue from continuing operations rose 2.3% versus the same quarter last year. He attributed the increase primarily to acquisitions in in-store marketing (ISM) and a positive foreign exchange impact, partially offset by lower volume and price concessions in retail services and printing.
Profitability declined, with consolidated adjusted EBITDA down CAD 7.2 million, or 17.9%, to CAD 33.1 million. LeCavalier said the decrease was mainly due to lower volume and price concessions in retail services and printing, partially offset by the contribution from acquisitions and favorable exchange rates. He also noted that an increase in the company’s share price contributed to higher incentive compensation expense.
Net financial expenses decreased CAD 4.4 million to CAD 9.3 million, mainly due to lower debt levels following strong cash flow generation over the last twelve months, partially offset by lower interest income compared with the prior year. Adjusted income tax decreased CAD 4.0 million to CAD 1.5 million, representing an effective rate of 18.3%. Adjusted earnings per share from continuing operations were CAD 0.08 versus CAD 0.10 a year earlier.
LeCavalier said the company expects adjusted EBITDA to be below last year in the second quarter, before recovering in the second half as cost reductions and profit improvement initiatives begin to show results.
Operational drivers: price concessions, flyer distribution mix, and raddar plans
Morin said ISM acquisitions helped offset lower volumes in traditional books and flyer printing, though profitability was affected by price concessions. He emphasized that strategic concessions are used to secure multi-year commitments from large customers. In Q&A, management quantified the price concessions taken in the first quarter as north of CAD 1 million, with an annualized impact of roughly CAD 4 million. LeCavalier said the concessions hit results immediately because they occurred at the beginning of new contracts, while the company expects to offset them over time through synergies and efficiencies.
Asked why adjusted EBITDA fell disproportionately relative to organic revenue pressure in retail services and printing, management pointed to a decline in flyer distribution in the rest of Canada, which it described as a higher-margin activity, creating an unfavorable mix effect.
Morin also provided an update on raddar, the company’s flyer-related platform initiative. He said the business is preparing to launch raddar in Ontario in the next few months, with the goal of providing customers lower costs and greater reach. He added that the company sees an opportunity for raddar to become a national advertising platform within the next 12 months. In Q&A, management said Ontario plans will be pursued in collaboration with distribution partner Torstar and will begin with tests in certain regions. Management also noted that as raddar replaces traditional flyer volume, reported revenue can decline due to lower paper usage, while the company’s focus remains on maintaining EBITDA.
In the media sector, Morin said volumes were lower mainly due to the end of a contract related to an electronic tendering system, and he reminded listeners the business is seasonal with Q3 and Q4 being the most important quarters.
Cash flow, leverage outlook, and financing
LeCavalier said working capital was seasonally negative in the quarter, with CAD 10.8 million of working capital usage, an improvement from CAD 36.4 million in Q1 last year, mainly due to lower inventory. Capital expenditures were CAD 11.9 million, in line with last year and consistent with full-year guidance of CAD 55 million to CAD 60 million.
The company’s adjusted net indebtedness ratio was 1.69x at quarter-end, compared with 1.59x three months earlier. Management said it expects the ratio to increase over the next two quarters before improving in the fourth quarter, citing the typical strength of Q4 EBITDA and free cash flow, the timing of expected acquisitions, and the later-year impact of cost savings.
On real estate monetization, LeCavalier said the company expects to close the sale of one building in the next few months with a value “in the order of CAD 30 million,” and added there are two other properties in the pipeline (a smaller one in the U.S. and another south of Montreal), though timing depends on market conditions.
Management also said that following the packaging sale, the company signed a revised credit agreement that secures the funds needed to repay $250 million notes due in July 2026 and provides flexibility to pursue its growth strategy. Addressing a question about a recent credit rating downgrade, LeCavalier said the new financing is more closely based on the debt-to-EBITDA ratio and that pricing is expected to be close to what the company had at a BBB-minus or investment-grade level, adding that the agency’s decision was more related to the company’s post-sale size than its balance sheet strength.
On M&A, management said it expects to close another ISM acquisition in Q2 and described an active pipeline, though it did not disclose transaction size. LeCavalier later reiterated that the company has previously discussed a plan to save roughly CAD 30 million of corporate costs over the next two years, with some benefit expected in the second half of fiscal 2026 and a fuller run-rate impact expected next year, depending in part on transition services arrangements with ProAmpac.
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.
