Mr. Philippe Jette reports

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

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

"Our relentless focus on delivering high-quality product offerings and distinctive customer service to our customers was a hallmark of fiscal 2023, resulting in healthy business performance that offset challenges from the inflationary environment, increased competition and global economic uncertainty. Our ongoing commitment to enhancing and expanding our network and service offering with leading-edge technology and multiple brands for new and existing customers gives us confidence in our long-term growth opportunities," said Philippe Jette, president and chief executive officer of Cogeco Communications.

"Our Canadian telecommunications business performed solidly again this quarter as we delivered strong Internet customer additions across each of our traditional, expansion and oxio footprints," continued Mr. Jette. "Though only a half-year has passed since we acquired oxio, we have been pleased with its performance to date.

"While the economic and competitive environment in the [United States] remains challenging, demand from customers for our higher-speed offerings has resulted in rising revenue per subscriber, which has helped offset customer losses at lower price points. Although revenue declined, a more attractive product mix, combined with our focus on cost-efficiencies and integration of easy-to-use, self-install equipment, delivered a higher adjusted [earnings before interest, taxes, depreciation and amortization] margin within our U.S. business," continued Mr. Jette.

"Looking ahead, with our Quebec expansion now complete, our Ontario network expansion in its early phases and Breezeline's network expansion ongoing, we expect to continue to add new Internet customers in fiscal 2024, which will contribute to our adjusted EBITDA and free cash flow in fiscal 2024 and beyond.

"In terms of our capital allocation, we continue to focus on the growth of the business through network enhancement and expansion while developing our mobile offering in both countries. We remain confident in our growth strategy and outlook, and furthermore, we are committed to returning significant capital to our shareholders. As such, the corporation is pleased to announce a further 10.1-per-cent increase in its dividend today, marking a full decade of consecutive annual dividend increases of 10 per cent or greater.

"We are making significant strides in executing our sustainability strategy. We do this through our long-standing tradition of social engagement and community involvement, prioritizing digital inclusion and climate action, implementing leading operating practices, and pursuing our responsible and ethical management," Mr. Jette concluded.

Operating results

For the fourth quarter of fiscal 2023:

• Revenue increased by 2.5 per cent to $743.4-million. On a constant currency basis, revenue increased by 0.8 per cent, driven by growth in the Canadian telecommunications segment, which was partly offset by a decline in the American telecommunications segment, as explained below:
  • Canadian telecommunications revenue increased by 4.1 per cent, mainly driven by the cumulative effect of high-speed Internet service additions over the past year, higher revenue per customer and contribution from the oxio acquisition completed on March 3, 2023.
  • American telecommunications revenue decreased by 2.5 per cent in constant currency (increase of 0.8 per cent as reported), mainly due to a lower Internet customer base over the past year and an overall decline in video and phone service customers, offset in part by a higher revenue per customer and a better product mix resulting from customers subscribing to increasingly fast Internet speeds.
• Adjusted EBITDA increased by 1.2 per cent to reach $351.3-million. On a constant currency basis, adjusted EBITDA remained stable compared with the same period of the prior year, mainly as a result of higher adjusted EBITDA in the American telecommunications segment, which was offset by higher corporate costs, primarily due to initiatives undertaken to support the corporation's future growth and in relation to its plan to offer mobile services in Canada, and lower adjusted EBITDA in the Canadian telecommunications segment, as further explained below:
  • American telecommunications adjusted EBITDA increased by 5.7 per cent, or 2.2 per cent in constant currency, mainly resulting from a better product mix and cost reduction initiatives, which more than offset its revenue decline resulting from a lower customer base over the past year as it continued to face headwinds from the macroeconomic and nationwide competitive environments.
  • Canadian telecommunications adjusted EBITDA decreased by 1.1 per cent or 0.9 per cent in constant currency, mainly due to increased operating expenses to drive and support customer growth, while last year's operating expenses were also lower due to certain year-end adjustments.
• Profit for the period amounted to $91.8-million, of which $86.5-million, or $1.95 per diluted share, was attributable to owners of the corporation compared with $111.8-million, $104.9-million and $2.28 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, depreciation and amortization expense, and acquisition, integration, restructuring and other costs, partly offset by the impact of the appreciation of the U.S. dollar:
  • Adjusted profit attributable to owners of the corporation was $97.2-million, or $2.19 per diluted share, compared with $113.5-million, or $2.46 per diluted share, last year.
• Net capital expenditures, which account for network expansion subsidies, were $176.6-million, a decrease of 21.0 per cent, compared with $223.5-million in the same period of the prior year. In constant currency, net capital expenditures were $172.7-million, a decrease of 22.7 per cent compared with last year, mainly due to reduced spending in both the Canadian and American telecommunications segments following the completion of several rural network expansion projects, mainly in Quebec, and the timing of certain initiatives:
  • Excluding network expansion projects, net capital expenditures were $143.7-million, a decrease of 11.2 per cent compared with $161.9-million in the same period of the prior year. In constant currency, net capital expenditures, excluding network expansion projects, were $140.7-million, a decrease of 13.1 per cent compared with last year.
  • Fibre-to-the-home network expansion projects continued in both Canada and the United States, with homes passed additions of close to 196,000 over the past two fiscal years, of which close to 124,000 were added in fiscal 2023, equating to an approximate 7-per-cent growth in homes passed over the past two years. 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 23.8 per cent compared with 30.8 per cent last year. Excluding network expansion projects, capital intensity was 19.3 per cent compared with 22.3 per cent in the same period of the prior year.
• Acquisition of property, plant and equipment decreased by 15.6 per cent to $205.6-million, due to reduced capital spending in both countries.
• Free cash flow amounted to $87.9-million, or $88.5-million in constant currency, compared with $34.5-million last year. The increase in constant currency is mainly due to lower net capital expenditures and lower current income taxes, partly offset by higher financial expense:
  • Free cash flow, excluding network expansion projects, amounted to $120.8-million, or $120.6-million in constant currency, an increase of 25.8 per cent, or 25.5 per cent in constant currency, compared with the same period of the prior year.
• Cash flows from operating activities decreased by 11.8 per cent to reach $281.3-million, mainly resulting from higher interest paid and a lower net inflow in non-cash operating activities mostly due to the timing of trade and other payables.
• At its Nov. 1, 2023, meeting, the board of directors of Cogeco Communications declared a quarterly eligible dividend of 85.4 cents per share, an increase of 10.1 per cent compared with 77.6 cents per share last year.

Fiscal 2024 financial guidelines

Cogeco Communications released its fiscal 2024 financial guidelines. On a constant currency basis, the corporation expects fiscal 2024 revenue to remain stable. The corporation anticipates revenue growth in the Canadian telecommunications segment being offset by lower revenue in the American telecommunications segment as it continues to face competition in its markets, in part from fixed wireless competitors and video service cord cutting. On a constant currency basis, fiscal 2024 adjusted EBITDA is anticipated to remain stable, mainly as a result of stable revenue and an improved product mix contributing to adjusted EBITDA margin, combined with several cost optimization initiatives. The financial guidelines reflect a negative estimated 1-per-cent impact on adjusted EBITDA compared with the prior year related to additional preparation costs to offer mobility services in both countries. Net capital expenditures are anticipated to be between $700-million and $775-million, including net investments of approximately $140-million to $190-million in growth-oriented network expansions, which will increase the corporation's footprint in Canada and the United States. As a result of these growth initiatives and an anticipated increase in financial expense, free cash flow and free cash flow, excluding network expansion projects, are expected to decrease between (5 per cent) and (15 per cent), which reflects an estimated (10-per-cent) impact from additional mobility investments.

Additional information

Additional information relating to the corporation, including its annual information form, is available on SEDAR+ and on the corporation's website.

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 Canada, as well as in 13 states in the United States. Cogeco Communications' subordinate voting shares are listed on the Toronto Stock Exchange (CCA).

Conference call:  Thursday, Nov. 2, 2023, at 11 a.m. Eastern Time

The conference call will be available on Cogeco Communications' website. Financial analysts will be able to view 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.

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