Press release details

• Cogeco repurchased $280.0 million worth of its shares following CDPQ's acquisition of the entirety of Rogers' holdings in both Cogeco and Cogeco Communications;
• Cogeco further advanced its wireless ambitions by securing spectrum licences in Québec and Ontario in the 3800 MHz spectrum auction, for a total purchase price of $190.3 million. With this acquisition, Cogeco has spectrum covering 100% of its Canadian broadband network footprint as well as valuable spectrum in the greater Toronto, Montréal, Québec City and Ottawa regions;
• Cogeco Connexion reported another strong quarter of Internet subscriber performance, with 10,765 net customer additions, driven by a mix of new customers added under our digital oxio brand, in fibre-to-the-home network expansions and in other operating areas;
• Revenue declined by 1.7% compared to the same period last year to $776.2 million, as revenue growth at Cogeco Connexion was offset by lower revenue at Breezeline;
• Adjusted EBITDA⁽¹⁾ of $366.0 million decreased by 2.1% over last year, in line with our expectations;
• Profit for the period amounted to $98.7 million, a decrease of 20.3%, mainly due to higher financial expenses including a pre-tax $16.9 million non-cash loss on debt extinguishment following a US$1.6 billion refinancing;
• Free cash flow⁽¹⁾ amounted to $141.8 million, an increase of 29.5%, due to lower net capital expenditures, while cash flows from operating activities increased by 22.2% to $236.9 million. Free cash flow, excluding network expansion projects⁽¹⁾ was $173.5 million, stable compared to last year;
• Cogeco maintains its fiscal 2024 financial guidelines as issued on November 1, 2023; and
• A quarterly dividend of $0.854 per share was declared, representing a 16.8% increase over the prior year.

MONTRÉAL, Jan. 10, 2024 /CNW/ - Today, Cogeco Inc. (TSX: CGO) ("Cogeco" or the "Corporation") announced its financial results for the first quarter ended November 30, 2023.

"The first months of fiscal 2024 were transformational and historic moments for our company. We recently announced that Cogeco bought back 6.0 million of its shares and Cogeco Communications bought back 2.3 million of its shares, both at discounted market prices per share, providing free cash flow per share accretion and increasing the net asset value of Cogeco. In conjunction with these transactions, the public float of Cogeco Communications was increased therefore enhancing trading liquidity. This opportunity represented a unique and attractive use of our capital to build value for our shareholders, while strengthening our existing partnership with CDPQ as an anchor investor in Cogeco Communications. Another important milestone for us was when we secured wireless spectrum critical for the 5G technology and now have spectrum coverage for 100% of our wireline footprint. This spectrum was secured at a significantly lower cost compared to past spectrum auctions," said Philippe Jetté, President and Chief Executive Officer of Cogeco.

"Our Canadian telecommunications business chalked up another quarter of strong Internet subscriber performance, thanks to gains across each of our oxio, expansion and legacy footprints," continued Mr. Jetté. "We continue to be impressed by the oxio brand's growing adoption by consumers."

"In the U.S., our network expansion program along with demand from existing customers for our higher speed tiers helped offset customer losses at lower price points which were more directly impacted by competition and challenging market conditions. Consistent with our Internet led strategy to improve customer lifetime value, our attractive product mix and focus on cost efficiencies helped deliver another quarter of higher adjusted EBITDA margin."

"At Cogeco Media, our ongoing efforts to develop innovative digital solutions and adapt to a multi-platform audio content model are beginning to bear fruit. These, along with strong listener engagement across many of our stations, have resulted in solid year-over-year revenue growth during the quarter," continued Mr. Jetté.

"At Cogeco, we strive on a daily basis to deliver the best products and service to our clients, engage with the communities we serve, prioritize digital inclusion and climate action, and finally, execute a sustainable business model through responsible and ethical management to generate value for all of our stakeholders," concluded Mr. Jetté.

Consolidated Financial Highlights

Operating results

For the first quarter of fiscal 2024 ended on November 30, 2023:

• Revenue decreased by 1.7% to $776.2 million. On a constant currency basis⁽¹⁾, revenue decreased by 2.3%, driven by a lower customer base in the American telecommunications segment, which offset revenue growth in the Canadian telecommunications segment, as explained below.
  • Canadian telecommunications' revenue increased by 1.2%, mainly driven by the oxio acquisition completed on March 3, 2023 as well as the cumulative effect of high-speed Internet service additions over the past year.
  • American telecommunications' revenue decreased by 4.9%, or 6.0% in constant currency, mainly due to a lower customer base over the past year with an increasing proportion of customers only subscribing to Internet services, as well as the timing of price increases introduced in the fiscal 2023 first-quarter which gave rise to a difficult comparison between both periods. The revenue decrease was offset in part by a higher revenue per customer and a better product mix resulting from customers subscribing to increasingly fast Internet speeds.
  • Revenue in the media activities increased by 4.0%.
• Adjusted EBITDA decreased by 2.1% to $366.0 million. On a constant currency basis, adjusted EBITDA decreased by 2.6%, due to a decline in both the American telecommunications and Canadian telecommunications segments, as further explained below, in addition to higher corporate costs, primarily due to the timing of certain operating expenses including in relation to its plan to offer mobile services in Canada.
  • American telecommunications adjusted EBITDA decreased by 2.4%, or 3.6% in constant currency, mainly due to lower revenue, partly offset by a better product mix and cost reduction initiatives.
  • Canadian telecommunications adjusted EBITDA decreased by 1.1%, mainly due to revenue growth being offset by higher operating expenses.
• Profit for the period amounted to $98.7 million, of which $34.5 million, or $2.21 per diluted share, was attributable to owners of the Corporation compared to $123.8 million, $42.1 million, and $2.67 per diluted share, respectively, in the comparable period of fiscal 2023. The decreases in profit for the period and profit attributable to owners of the Corporation resulted mainly from higher financial expense, mostly due to a pre-tax $16.9 million non-cash loss on debt extinguishment recognized following a US$1.6 billion refinancing in September 2023, lower adjusted EBITDA and higher depreciation and amortization expense, partly offset by lower income tax expense.
  • Adjusted profit attributable to owners of the Corporation⁽³⁾ was $40.0 million, or $2.57 per diluted share⁽³⁾, compared to $42.8 million, or $2.71 per diluted share, last year.
• Net capital expenditures were $146.7 million, a decrease of 25.7% compared to $197.3 million in the same period of the prior year. In constant currency, net capital expenditures⁽¹⁾ were $145.6 million, a decrease of 26.2% compared to last year, mostly due to lower spending in both the Canadian and American telecommunications segments following the completion, or near completion, as well as the timing of several fibre-to-the-home network expansion projects.
  • Excluding network expansion projects, net capital expenditures were $115.0 million, a decrease of 12.5% compared to $131.5 million in the same period of the prior year. In constant currency, net capital expenditures excluding network expansion projects⁽¹⁾ were $114.1 million, a decrease of 13.2% compared to last year.
  • Fibre-to-the-home network expansion projects continued in both Canada and the United States, with homes passed additions of more than 13,000 during the first quarter of fiscal 2024.
• Acquisition of property, plant and equipment decreased by 34.6% to $153.8 million, due to reduced capital spending in both countries.
• Free cash flow increased by 29.5%, or 29.4% in constant currency, and amounted to $141.8 million, or $141.6 million in constant currency, mainly due to lower net capital expenditures. Free cash flow, excluding network expansion projects amounted to $173.5 million, or $173.1 million in constant currency, and remained stable compared to the same period of the prior year.
• Cash flows from operating activities increased by 22.2% to $236.9 million, resulting mostly from lower income taxes paid, and to a lesser extent, the timing of trade accounts receivable, offset in part by lower adjusted EBITDA and higher interest paid.
• On November 30, 2023, Cogeco Communications, through its wholly-owned subsidiary Elite General Partnership, secured 99 spectrum licences in urban and rural markets, including the greater Toronto, Montréal, Québec City and Ottawa areas, for a total purchase price of $190.3 million.
• On December 13, 2023, Cogeco completed the repurchase, for cancellation, of the 5,969,390 shares sold by CDPQ, for an amount of $280.0 million, following the purchase by CDPQ of the entirety of Rogers' holdings in both Cogeco and Cogeco Communications.
• Cogeco maintains its fiscal 2024 financial guidelines as issued on November 1, 2023.
• At its January 10, 2024 meeting, the Board of Directors of Cogeco declared a quarterly eligible dividend of $0.854 per share, an increase of 16.8% compared to $0.731 per share in the comparable quarter of fiscal 2023.

Financial highlights

Forward-looking statements

Certain statements contained in this press release may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to Cogeco Inc.'s ("Cogeco" or the "Corporation") future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee", "ensure" or other similar expressions concerning matters that are not historical facts. Particularly, statements regarding the Corporation's financial guidelines, future operating results and economic performance, objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, purchase price allocation, tax rates, weighted average cost of capital, performance and business prospects and opportunities, which Cogeco believes are reasonable as of the current date. Refer in particular to the "Corporate objectives and strategies" section of the Corporation's 2023 annual MD&A and of the fiscal 2024 first-quarter MD&A, and the "Fiscal 2024 financial guidelines" section of the Corporation's 2023 annual MD&A for a discussion of certain key economic, market and operational assumptions we have made in preparing forward-looking statements. While management considers these assumptions to be reasonable based on information currently available to the Corporation, they may prove to be incorrect. Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what Cogeco currently expects. These factors include risks such as general market and other conditions, competitive risks (including changing competitive ecosystems and disruptive competitive strategies adopted by our competitors), business risks, regulatory risks, technology risks (including cybersecurity), financial risks (including variations in currency and interest rates), economic conditions (including inflation pressuring revenue, reduced consumer spending and increasing costs), talent management risks (including highly competitive market for limited pool of digitally skilled employees), human-caused and natural threats to the Corporation's network (including increased frequency of extreme weather events with the potential to disrupt operations), infrastructure and systems, community acceptance risks, ethical behavior risks, ownership risks, litigation risks and public health and safety, many of which are beyond the Corporation's control. Moreover, the Corporation's radio operations are significantly exposed to advertising budgets from the retail industry, which can fluctuate due to changing economic conditions. For more exhaustive information on these risks and uncertainties, the reader should refer to the "Uncertainties and main risk factors" sections of the Corporation's 2023 annual MD&A and of the fiscal 2024 first-quarter MD&A. These factors are not intended to represent a complete list of the factors that could affect Cogeco and future events and results may vary significantly from what management currently foresees. The reader should not place undue importance on forward-looking information contained in this press release which represent Cogeco's expectations as of the date of this press release (or as of the date they are otherwise stated to be made) and are subject to change after such date. While management may elect to do so, the Corporation is under no obligation (and expressly disclaims any such obligation) and does not undertake to update or alter this information at any particular time, whether as a result of new information, future events or otherwise, except as required by law.

All amounts are stated in Canadian dollars unless otherwise indicated. This press release should be read in conjunction with the Corporation's MD&A for the three-month period ended November 30, 2023, the Corporation's condensed interim consolidated financial statements and the notes thereto for the same periods prepared in accordance with International Financial Reporting Standards ("IFRS") and the Corporation's 2023 Annual Report.

Non-IFRS and other financial measures

This press release includes references to non-IFRS and other financial measures used by Cogeco. These financial measures are reviewed in assessing the performance of Cogeco and used in the decision-making process with regard to its business units.

Reconciliations between non-IFRS and other financial measures to the most directly comparable IFRS financial measures are provided below. Certain additional disclosures for non-IFRS and other financial measures used in this press release have been incorporated by reference and can be found in the "Non-IFRS and other financial measures" section of the Corporation's MD&A for the three-month period ended November 30, 2023, available on SEDAR+ at www.sedarplus.ca. The following non-IFRS financial measures are used as a component of Cogeco's non-IFRS ratios.

Financial measures presented on a constant currency basis for the three-month period ended November 30, 2023 are translated at the average foreign exchange rate of the comparable period of the prior year, which was 1.3489 USD/CDN.

Constant currency basis and foreign exchange impact reconciliation

Consolidated

Canadian telecommunications segment

American telecommunications segment

Adjusted profit attributable to owners of the Corporation

Free cash flow reconciliation

Net capital expenditures reconciliation

Adjusted EBITDA reconciliation

Net capital expenditures and free cash flow excluding network expansion projects reconciliations

Net capital expenditures

Free cash flow

Additional information

Additional information relating to the Corporation is available on SEDAR+ at www.sedarplus.ca and on the Corporation's website at corpo.cogeco.com.

About Cogeco Inc.

Rooted in the communities it serves, Cogeco Inc. is a growing competitive force in the North American telecommunications and media sectors, serving 1.6 million residential and business customers. Its Cogeco Communications Inc. subsidiary provides Internet, video and phone services in Canada as well as in thirteen states in the United States through its business units Cogeco Connexion and Breezeline. Through Cogeco Media, it owns and operates 21 radio stations primarily in the province of Québec as well as a news agency. Cogeco's subordinate voting shares are listed on the Toronto Stock Exchange (TSX: CGO). The subordinate voting shares of Cogeco Communications Inc. are also listed on the Toronto Stock Exchange (TSX: CCA).

For information:

Investors
Patrice Ouimet
Senior Vice President and Chief Financial Officer
Cogeco Inc.
Tel.: 514-764-4600
patrice.ouimet@cogeco.com 

Troy Crandall
Head, Investor Relations
Cogeco Inc.
Tel.: 514-764-4700
troy.crandall@cogeco.com

Media
Youann Blouin
Director, Media Relations & Strategic Communications
Cogeco Inc.
Tel.: 514-297-2853
youann.blouin@cogeco.com 

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The conference call will be followed by a live webcast of the virtual Annual and Special Shareholders' Meetings at 11:30 a.m. at: https://web.lumiagm.com/#/424761509

SOURCE Cogeco Inc.