Press release details

• Cogeco Connexion reported a fifth consecutive quarter of strong Internet subscriber growth, driven by a mix of new customers added under the Cogeco brand, which include fibre-to-the-home network expansions, and its digital oxio brand.
• Breezeline to launch mobile service within its U.S. broadband footprint starting this spring.
• Revenue declined by 0.7% compared to the same period last year to $751.9 million, as revenue growth at Cogeco Connexion was offset by lower revenue at Breezeline.
• Adjusted EBITDA⁽¹⁾ of $347.8 million decreased by 1.1% over last year, in line with our expectations. Profit for the period amounted to $93.9 million, a decrease of 8.4%, of which $24.0 million was attributable to owners of the Corporation.
• Earnings per share on a diluted basis increased to $2.30 from $2.15 in the second quarter of fiscal 2023, reflecting the benefit of the Corporation's repurchase and cancellation of shares.
• Free cash flow⁽¹⁾ amounted to $98.8 million, a decrease of 16.5% compared to last year, due to higher net capital expenditures, while cash flow from operating activities increased by 38.5% to $286.4 million. Free cash flow, excluding network expansion projects⁽¹⁾ decreased by 23.3% to $123.2 million.
• Cogeco maintains its fiscal 2024 financial guidelines.
• A quarterly dividend of $0.854 per share was declared, representing a 16.8% increase over the prior year.

MONTRÉAL, April 11, 2024 /CNW/ - Today, Cogeco Inc. (TSX: CGO) ("Cogeco" or the "Corporation") announced its financial results for the second quarter ended February 29, 2024.

"During the quarter, we continued to execute on multiple initiatives, including pursuing several fibre-to-the-home network expansion projects," stated Frédéric Perron, President and Chief Executive Officer of Cogeco Inc. "We also leveraged the technological enhancements we have made to our networks to drive growth in our Internet customer base, notably those subscribing to higher speeds. On the wireless front, we recently announced the launch of Breezeline Mobile, using a capital-light MVNO approach, and are making progress with our wireless preparations in Canada. At Cogeco Media, radio advertising sales continued to build momentum again this quarter. Meanwhile, our strong listener engagement and intense focus on providing digital solutions and multi-platform audio content also helped drive meaningful revenue growth."

"While we operate in a challenging environment, value creation continues to be at the forefront of our strategy and culture. Our plans will therefore place a strong focus on driving profitable growth through digitization and operational effectiveness," continued Mr. Perron. "I look forward to leading Cogeco on its ambitious path of delivering high-quality and cost-effective telecommunications and media services to our customers across both of the countries we serve. I want to thank all of our customers, listeners and stakeholders for their support in this journey," concluded Mr. Perron.

Consolidated Financial Highlights

Operating results

For the second quarter of fiscal 2024 ended on February 29, 2024:

• Revenue decreased by 0.7% to $751.9 million. On a constant currency basis⁽¹⁾, revenue decreased by 0.6% due to revenue growth in the Canadian telecommunications segment being offset by a decline in the American telecommunications segment, as explained below.
  • Canadian telecommunications' revenue increased by 1.4%, 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 3.1%, or 2.8% in constant currency, mainly due to lower video subscriptions and a lower customer base over the past year, with an increasing proportion of customers only subscribing to Internet services, partly offset by 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 4.2%.
• Adjusted EBITDA decreased by 1.1% to $347.8 million. On a constant currency basis, adjusted EBITDA decreased by 1.0%, mainly due 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, while adjusted EBITDA remained stable in both the Canadian and American telecommunications segments, as explained below.
  • Canadian telecommunications adjusted EBITDA remained stable mainly due to revenue growth being offset by higher sales and other operating expenses to drive and support customer growth.
  • American telecommunications adjusted EBITDA remained stable mostly due to a better product mix of higher margin services and lower operating expenses driven by cost reduction initiatives and operating efficiencies, partially offset by a lower customer base.
• Profit for the period amounted to $93.9 million, of which $24.0 million, or $2.30 per diluted share, was attributable to owners of the Corporation compared to $102.6 million, $33.8 million, and $2.15 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 depreciation and amortization expense and financial expense, and lower adjusted EBITDA, partly offset by lower income tax expense and acquisition, integration, restructuring and other costs.
  • Adjusted profit attributable to owners of the Corporation⁽³⁾ was $24.3 million, or $2.33 per diluted share⁽³⁾, compared to $35.6 million, or $2.27 per diluted share, last year.
• Net capital expenditures were $171.8 million, an increase of 9.5% compared to $156.8 million in the same period of the prior year. In constant currency, net capital expenditures⁽¹⁾ were $172.4 million, an increase of 9.9% compared to last year, mainly due to higher costs in relation to customer premise equipment in the Canadian telecommunications segment, partly offset by lower spending in the American telecommunications segment, mainly due to the timing of network expansion projects.
  • Excluding network expansion projects, net capital expenditures were $147.4 million, an increase of 28.6% compared to $114.6 million in the same period of the prior year. In constant currency, net capital expenditures, excluding network expansion projects⁽¹⁾ were $148.0 million, an increase of 29.1% 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 32,000 during the first six months of fiscal 2024.
• Acquisition of property, plant and equipment increased by 4.4% to $181.2 million, mainly due to higher costs in the Canadian telecommunications segment, partly offset by lower spending in the American telecommunications segment.
• Free cash flow decreased by 16.5%, or 16.8% in constant currency, and amounted to $98.8 million, or $98.5 million in constant currency, mainly due to higher net capital expenditures. Free cash flow, excluding network expansion projects decreased by 23.3%, or 23.5% in constant currency, and amounted to $123.2 million, or $122.9 million in constant currency.
• Cash flows from operating activities increased by 38.5% to $286.4 million, resulting mostly from the timing of trade and other payables and trade accounts receivable, lower income taxes paid and acquisition, integration, restructuring and other costs, offset in part by higher interest paid and lower adjusted EBITDA.
• Cogeco maintains its fiscal 2024 financial guidelines as issued on November 1, 2023.
• At its April 11, 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 relating to 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 second-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 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" section of the Corporation's 2023 annual MD&A and of the fiscal 2024 second-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 and the forward-looking statements contained in this press release 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 and six-month periods ended February 29, 2024, 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 and six-month periods ended February 29, 2024, 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 and six-month periods ended February 29, 2024 are translated at the average foreign exchange rate of the comparable periods of the prior year, which were 1.3488 USD/CDN and 1.3489 USD/CDN, respectively.

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
Troy Crandall
Head, Investor Relations
Cogeco Inc.
Tel.: 514-764-4600
troy.crandall@cogeco.com

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

SOURCE Cogeco Inc.