Mr. Philippe Jette reports

COGECO COMMUNICATIONS RELEASES ITS FINANCIAL RESULTS FOR THE THIRD QUARTER OF FISCAL 2023

Cogeco Communications Inc. has released its financial results for the third quarter ended May 31, 2023.

"This quarter, we continued to demonstrate our strong and consistent execution in our fibre network expansion projects while remaining focused on delivering high-quality product offerings and distinctive customer service," said Philippe Jette, president and chief executive officer of Cogeco Communications.

"We are pleased with the performance of our Canadian telecommunications business again this quarter, where Internet customer additions are being driven by solid growth across our traditional and newly served footprints, as well as from our recently acquired oxio brand," continued Mr. Jette.

"Although our U.S. telecommunications business, Breezeline, continues to face headwinds from the macroeconomic and nationwide competitive environments, our higher-value product mix combined with cost-efficiency initiatives led to a higher adjusted EBITDA margin over last year and compared to last quarter," concluded Mr. Jette.

Operating results

For the third quarter of fiscal 2023:

• Revenue increased by 1.9 per cent to reach $741.8-million. On a constant-currency basis, revenue decreased by 1.3 per cent, driven by a decline in the American telecommunications segment, partly offset by growth in the Canadian telecommunications segment, which is further explained as follows:
  • Canadian telecommunications revenue increased by 3.2 per cent, mainly driven by the cumulative effect of high-speed Internet service additions over the past year, higher revenue per customer and the oxio acquisition completed on March 3, 2023.
  • American telecommunications revenue decreased by 5.7 per cent on a constant-currency basis (increase of 0.5 per cent as reported), mainly due to a lower customer base in Ohio and an overall decline in video and phone service customers, offset in part by a higher revenue per customer and a better product mix.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased by 1.1 per cent to reach $351.3-million. On a constant-currency basis, adjusted EBITDA decreased by 1.8 per cent, due to a decline in the American telecommunications segment, while the Canadian telecommunications segment remained stable, as further explained below:
  • Canadian telecommunications adjusted EBITDA remained stable as its revenue growth was offset by higher operating expenses to drive customer growth.
  • American telecommunications adjusted EBITDA decreased by 2.8 per cent, or 3.6 per cent in constant currency, mainly resulting from lower revenue partly offset by reduced operating expenses.
• Profit for the period amounted to $101.5-million, of which $95.9-million, or $2.16 per diluted share, was attributable to owners of the corporation, compared with $105.4-million, $100.3-million, and $2.16 per diluted share, respectively, in the comparable period of fiscal 2022. The decreases in profit for the period and profit attributable to owners of the corporation resulted mainly from higher financial expense and acquisition, integration, restructuring, and other costs, partly offset by lower depreciation and amortization expense, income taxes, and the appreciation of the U.S. dollar:
  • Adjusted profit attributable to owners of the corporation (3) was $103.8-million, or $2.34 per diluted share (3), compared with $101.7-million, or $2.19 per diluted share, last year.
• Net capital expenditures, which account for network expansion subsidies, were $169.8-million, a decrease of 6.8 per cent, compared with $182.2-million in the same period of the prior year. In constant currency, net capital expenditures were $163.0-million, a decrease of 10.5 per cent compared with last year, mainly due to lower capital expenditures following reduced spending, mostly in the Canadian telecommunications segment:
  • Excluding network expansion projects, net capital expenditures were $138.0-million, a decrease of 3.9 per cent compared with $143.5-million in the same period of the prior year. In constant currency, net capital expenditures, excluding network expansion projects (1), were $132.2-million, a decrease of 7.9 per cent compared with last year.
  • Fibre-to-the-home network expansion projects continued in both Canada and the United States, with unprecedented homes passed additions of more than 171,000 during fiscal 2022 and the first nine months of the current fiscal year. These fibre-to-the-home network expansion projects are increasing the corporation's footprint in the provinces of Quebec and Ontario, and in several areas adjacent to Breezeline's network in the United States.
  • Capital intensity was 22.9 per cent, compared with 25.0 per cent last year. Excluding network expansion projects, capital intensity was 18.6 per cent, compared with 19.7 per cent in the same period of the prior year.
• Acquisition of property, plant and equipment decreased by 3.9 per cent to $189.7-million, mainly due to reduced capital spending, mostly in the Canadian telecommunications segment.
• Free cash flow remained comparable as reported and in constant currency, amounting to $104.4-million. Free cash flow remained comparable in constant currency, mainly due to higher financial expense, acquisition, integration, restructuring and other costs, and lower adjusted EBITDA being offset by lower net capital expenditures and current income taxes:
  • Free cash flow, excluding network expansion projects, decreased by 5.0 per cent, or 5.4 per cent in constant currency, and amounted to $136.3-million.
• Cash flows from operating activities decreased by 19.4 per cent to reach $284.4-million, driven by a net inflow in non-cash operating activities of $26.2-million, compared with $54.2-million in the comparative period, resulting mostly from the timing of trade and other payables, as well as an increase in income taxes and interest paid.
• Spectrum licences were acquired in the 2,500-megahertz and 3,500-megahertz bands in Quebec in relation to the company's plan to offer mobility services within its operating footprint.
• Cogeco Communications reiterates its fiscal 2023 financial guidelines as issued on Jan. 12, 2023. Furthermore, on June 8, 2023, Cogeco Communications announced that it will provide its fiscal 2024 financial guidelines when it reports its financial results for the fourth quarter of fiscal 2023, which is consistent with industry practice.
• At its July 13, 2023, meeting, the board of directors of Cogeco Communications declared a quarterly eligible dividend of 77.6 cents per share, an increase of 10.1 per cent compared with 70.5 cents per share in the comparable quarter of fiscal 2022.

(1) Adjusted EBITDA and net capital expenditures are total of segments measures. Capital intensity is a supplementary financial measure. Constant-currency basis, adjusted profit attributable to owners of the corporation, net capital expenditures, excluding network expansion projects, free cash flow and free cash flow, excluding network expansion projects, are non-IFRS (international financial reporting standards) financial measures. Change in constant currency, capital intensity, excluding network expansion projects, and adjusted diluted earnings per share are non-IFRS ratios. These indicated terms do not have standardized definitions prescribed by IFRS and, therefore, may not be comparable with similar measures presented by other companies.

(2) Net capital expenditures are presented net of government subsidies, including the utilization of those received in advance.

(3) Excludes the impact of acquisition, integration, restructuring and other costs, net of tax and non-controlling interest.

All amounts are stated in Canadian dollars unless otherwise indicated. This news release should be read in conjunction with the corporation's management's discussion and analysis (MD&A) for the three-month and nine-month periods ended May 31, 2023, the corporation's condensed interim consolidated financial statements, and the notes thereto for the same periods prepared in accordance with IFRS and the corporation's 2022 annual report.

About Cogeco Communications Inc.

Rooted in the communities it serves, Cogeco Communications is a growing competitive force in the North American telecommunications sector, serving 1.6 million residential and business customers. Through its business units, Cogeco Connexion and Breezeline, Cogeco Communications provides Internet, video and phone services in the provinces of Quebec and Ontario, as well as in 13 states in the United States. Cogeco Communications' subordinate voting shares are listed on the Toronto Stock Exchange.

Conference call:  Friday, July 14, 2023, at 11 a.m. EDT

The conference call will be available on Cogeco Communications' website. Financial analysts will be able to access the conference call and ask questions. Media representatives may attend as listeners only. The conference replay will be available on Cogeco Communications' website for a three-month period.

Please use one of the following dial-in numbers to have access to the conference call 10 minutes before the start of the conference.

Local -- Toronto:  1-416-764-8658

Toll-free -- North America:  1-888-886-7786

To join this conference call, participants are required to provide the operator with the name of the company hosting the call (Cogeco Inc. or Cogeco Communications).

We seek Safe Harbor.