Mr. Philippe Jette reports

COGECO COMMUNICATIONS RELEASES ITS FINANCIAL RESULTS FOR THE FIRST QUARTER OF FISCAL 2024

Today, Cogeco Communications Inc. released its financial results for the first quarter ended Nov. 30, 2023.

• Cogeco Communications repurchased $116.5-million worth of its shares following CDPQ's acquisition of the entirety of Rogers' holdings in both Cogeco and Cogeco Communications. As a result of this transaction, CDPQ has become an anchor investor in Cogeco Communications.
• Cogeco Communications further advanced its wireless ambitions by securing spectrum licences in Quebec and Ontario in the 3,800 MHz (megahertz) spectrum auction, for a total purchase price of $190.3-million. With this acquisition, Cogeco Communications has spectrum covering 100 per cent of its Canadian broadband network footprint as well as valuable spectrum in the greater Toronto, Montreal, Quebec City and Ottawa regions.
• Cogeco Connexion reported another quarter of strong Internet subscriber performance, with 10,765 net customer additions, driven by a mix of new customers added under the company's digital oxio brand, in fibre-to-the-home network expansions and in other operating areas.
• Revenue declined by 1.9 per cent compared with the same period last year to $747.7-million, as revenue growth at Cogeco Connexion was offset by lower revenue at Breezeline.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $359.0-million decreased by 2.3 per cent over last year, in line with the company's expectations.
• Profit for the period amounted to $95.8-million, a decrease of 20.5 per cent, mainly due to higher financial expenses including a pretax $16.9-million non-cash loss on debt extinguishment following a $1.6-billion (U.S.) refinancing.
• Free cash flow amounted to $137.6-million, an increase of 30.9 per cent, due to lower net capital expenditures, while cash flows from operating activities increased by 22.1 per cent to $237.0-million. Free cash flow, excluding network expansion projects, was $169.3-million, stable compared with last year.
• Cogeco Communications maintains its fiscal 2024 financial guidelines as issued on Nov. 1, 2023.
• A quarterly dividend of 85.4 cents per share was declared, representing a 10.1-per-cent increase over the prior year.

"The first months of fiscal 2024 were transformational and historic moments for our company. We recently announced that Cogeco Communications bought back 2.3 million of its shares at a discounted market price per share, providing free cash flow per share accretion. In conjunction with this transaction, 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 per cent of our wireline footprint. This spectrum was secured at a significantly lower cost compared with past spectrum auctions," said Philippe Jette, president and chief executive officer of Cogeco Communications.

"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. Jette. "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," continued Mr. Jette.

"At Cogeco Communications, 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. Jette.

Operating results

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

• Revenue decreased by 1.9 per cent to $747.7-million. On a constant currency basis, revenue decreased by 2.5 per cent, driven by a lower customer base in the American telecommunications segment, which offset revenue growth in the Canadian telecommunications segment, as explained herein.
  • Canadian telecommunications' revenue increased by 1.2 per cent, 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 per cent, or 6.0 per cent 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.
• Adjusted EBITDA decreased by 2.3 per cent to $359.0-million. On a constant currency basis, adjusted EBITDA decreased by 2.8 per cent, due to a decline in both the American telecommunications and Canadian telecommunications segments, as further explained herein, 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 per cent, or 3.6 per cent 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 per cent, mainly due to revenue growth being offset by higher operating expenses.
• Profit for the period amounted to $95.8-million, of which $89.5-million, or $2.01 per diluted share, was attributable to owners of the corporation compared with $120.4-million, $111.5-million, or $2.44 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 pretax $16.9-million non-cash loss on debt extinguishment recognized following a $1.6-billion (U.S.) 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 was $103.7-million, or $2.33 per diluted share, compared with $113.5-million, or $2.48 per diluted share, last year.
• Net capital expenditures were $146.4-million, a decrease of 25.7 per cent compared with $197.0-million in the same period of the prior year. In constant currency, net capital expenditures were $145.4-million, a decrease of 26.2 per cent compared with 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 $114.8-million, a decrease of 12.5 per cent compared with $131.1-million in the same period of the prior year. In constant currency, net capital expenditures, excluding network expansion projects, were $113.9-million, a decrease of 13.2 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 more than 13,000 during the first quarter of fiscal 2024.
  • Capital intensity was 19.6 per cent compared with 25.8 per cent last year. Excluding network expansion projects, capital intensity was 15.3 per cent compared with 17.2 per cent in the same period of the prior year.
• Acquisition of property, plant and equipment decreased by 34.6 per cent to $153.5-million, due to reduced capital spending in both countries.
• Free cash flow increased by 30.9 per cent, or 30.7 per cent in constant currency, and amounted to $137.6-million, or $137.4-million in constant currency, mainly due to lower net capital expenditures. Free cash flow, excluding network expansion projects, amounted to $169.3-million, or $168.9-million in constant currency, and remained stable compared with the same period of the prior year.
• Cash flows from operating activities increased by 22.1 per cent to $237.0-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 Nov. 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, Montreal, Quebec City and Ottawa areas, for a total purchase price of $190.3-million.
• On Dec. 13, 2023, Cogeco Communications completed the repurchase, for cancellation, of the 2,266,537 shares sold by Cogeco, for an amount of $116.5-million, following the purchase by CDPQ of the entirety of Rogers' holdings in both Cogeco and Cogeco Communications.
• Cogeco Communications maintains its fiscal 2024 financial guidelines as issued on Nov. 1, 2023.
• At its Jan. 10, 2024, 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 in the comparable quarter of fiscal 2023.

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 (TSX: CCA).

Conference call:  Thursday, Jan. 11, 2024, at 9:30 a.m. ET

A live audio webcast of the analyst call will be available on the investor relations page and on the events and presentations page on Cogeco Communications' website. Financial analysts will be able to access the live conference call and ask questions. Media representatives may attend as listeners only. A recording of the webcast will be available on Cogeco Communications' website for a three-month period.

Please use the following dial-in number to access 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, that is, Cogeco Inc. or Cogeco Communications Inc.

The conference call will be followed by a live webcast of the virtual annual and special shareholders' meetings at 11:30 a.m.

We seek Safe Harbor.