Mr. Frederic Perron reports

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

Cogeco Communications Inc. has released its financial results for the second quarter ended Feb. 29, 2024.

Highlights:

• 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 United States broadband footprint starting this spring.
• Revenue declined by 0.8 per cent compared with the same period last year to $730.5-million, as revenue growth at Cogeco Connexion was offset by lower revenue at Breezeline.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) (1) of $347.1-million decreased by 1.2 per cent over last year, in line with the company's expectations. Profit for the period amounted to $96.6-million, a decrease of 7.4 per cent, of which $93.7-million was attributable to owners of the corporation.
• Earnings per share on a diluted basis increased to $2.20 from $2.19 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 $100.2-million, a decrease of 15.1 per cent compared with last year, due to higher net capital expenditures, while cash flow from operating activities increased by 40.6 per cent to $285.4-million. Free cash flow, excluding network expansion projects (1), decreased by 22.2 per cent to $124.5-million.
• Cogeco Communications maintains its fiscal 2024 financial guidelines.
• A quarterly dividend of 85.4 cents per share was declared, representing a 10.1-per-cent increase over the prior year.

"During the quarter, we continued to execute on multiple initiatives, including pursuing several fibre-to-the-home network expansion projects," stated Frederic Perron, president and chief executive officer of Cogeco Communications. "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.

"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 Communications on its ambitious path of delivering high-quality and cost-effective telecommunications services to our customers across both of the countries we serve. I want to thank all of our customers and stakeholders for their support in this journey," concluded Mr. Perron.

Operating results

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

• Revenue decreased by 0.8 per cent to $730.5-million. On a constant-currency basis (1), revenue decreased by 0.7 per cent 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 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 3.1 per cent, or 2.8 per cent 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.
• Adjusted EBITDA decreased by 1.2 per cent to $347.1-million. On a constant-currency basis, adjusted EBITDA decreased by 1.0 per cent, 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 $96.6-million, of which $93.7-million, or $2.20 per diluted share, was attributable to owners of the corporation, compared with $104.3-million, $98.4-million and $2.19 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 $94.1-million, or $2.21 per diluted share (3), compared with $103.5-million, or $2.31 per diluted share, last year.
• Net capital expenditures were $170.8-million, an increase of 9.4 per cent compared with $156.1-million in the same period of the prior year. In constant currency, net capital expenditures (1) were $171.4-million, an increase of 9.8 per cent compared with 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 $146.4-million, an increase of 28.5 per cent compared with $113.9-million in the same period of the prior year. In constant currency, net capital expenditures, excluding network expansion projects (1), were $147.0-million, an increase of 29.0 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 32,000 during the first six months of fiscal 2024.
  • Capital intensity was 23.4 per cent, compared with 21.2 per cent last year. Excluding network expansion projects, capital intensity was 20.0 per cent compared with 15.5 per cent in the same period of the prior year.
• Acquisition of property, plant and equipment increased by 4.2 per cent to $180.2-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 15.1 per cent, or 15.4 per cent in constant currency, and amounted to $100.2-million, or $99.8-million in constant currency, mainly due to higher net capital expenditures. Free cash flow, excluding network expansion projects, decreased by 22.2 per cent, or 22.5 per cent in constant currency, and amounted to $124.5-million, or $124.2-million in constant currency.
• Cash flows from operating activities increased by 40.6 per cent to $285.4-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 Communications maintains its fiscal 2024 financial guidelines as issued on Nov. 1, 2023.
• At its April 11, 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.

(1) Adjusted EBITDA and net capital expenditures are total of segments measures. Adjusted EBITDA margin and capital intensity are supplementary financial measures. 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. For more information on these financial measures, please consult the non-IFRS and other financial measures section of this news release.

(2) Net capital expenditures exclude non-cash acquisitions of right-of-use assets and the purchases of spectrum licences, and 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 MD&A (management's discussion and analysis) for the three- and six-month periods ended Feb. 29, 2024, 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 2023 annual report.

Non-IFRS and other financial measures

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

Certain additional disclosures for non-IFRS and other financial measures used in this news 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 Feb. 29, 2024, available on SEDAR+.

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.

Conference call:  Friday, April 12, 2024, at 11 a.m. Eastern Daylight Time

A live audio of the analyst conference call will be available on both the investor relations and the events and presentations pages 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 conference call 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:  1-289-514-5100

Toll-free -- North America:  1-800-717-1738

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

We seek Safe Harbor.