Mr. Philippe Jette reports

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

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

• In the context of its network expansion strategy, Cogeco added 30,922 homes passed in Canada and the United States, totalling 101,000 homes passed over the past nine months;
• The acquisition of oxio expanded Cogeco Connexion's value proposition by adding a second brand to serve the telecommunication needs of Canadians;
• Revenue grew by 1.7 per cent compared with the same period of the prior year to $767.6-million;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $355.5-million increased 0.6 per cent over last year;
• Profit for the period amounted to $33.3 -mllion, a decrease of 69.3 per cent, while the loss for the period attributable to owners of the corporation amounted to $34.5-million, a decrease of $72.0-million compared with a profit last year, due to non-cash impairment charges of $88-million related to the radio operations. Adjusted profit attributable to owners of the corporation remained comparable with last year;
• Loss per share on a diluted basis was $2.22, a decrease compared with earnings per share of $2.37 last year, due to the non-cash impairment charges related to the radio operations. Adjusted diluted earnings per share rose by 1.3 per cent to $2.43;
• Net capital expenditures amounted to $170.3-million, a 7.0 per cent reduction versus last year. Acquisition of property, plant and equipment amounted to $190.1-million, a decrease of 4.1 per cent;
• Free cash flow of $107.4-million decreased by 1.4 per cent, while cash flows from operating activities decreased by 20.4 per cent to $283.2-million;
• Declared a quarterly eligible dividend of 73.1 cents per share, representing a 17.0-per-cent increase over last year.

"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.

"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 with last quarter," added Mr. Jette.

"At Cogeco Media, in an industry-wide changing advertising market, we are developing innovative digital solutions to create a multiplatform audio content model," continued Mr. Jette. "Our listener engagement remained strong across many of our stations this quarter, including at 98.5 Montreal, where it remained in the top spot of the Numeris rankings," concluded Mr. Jette.

Operating results

For the third quarter of fiscal 2023:

• Revenue increased by 1.7 per cent to reach $767.6-million. On a constant currency basis, revenue decreased by 1.4 per cent, driven by declines in the American telecommunications segment and in the media activities, 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.
  • Revenue in the media activities decreased by 3.2 per cent.
• Adjusted EBITDA increased by 0.6 per cent to reach $355.5-million. On a constant currency basis, adjusted EBITDA decreased by 2.2 per cent, due to a decline in the American telecommunications segment, while the Canadian telecommunications segment remained stable, as further explained:
  • 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 $33.3-million, while the loss for the period attributable to owners of the corporation amounted to $34.5-million, or $2.22 per diluted share, compared with a profit of $108.5-million, $37.5-million, and $2.37 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 non-cash impairment charges of $88-million related to the radio operations, 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 United States dollar.
  • Adjusted profit attributable to owners of the corporation, was $37.9-million, or $2.43 per diluted share, compared with $38.0-million, or $2.40 per diluted share, last year.
• Net capital expenditures, which account for network expansion subsidies, were $170.3-million, a decrease of 7.0 per cent compared with $183.1-million in the same period of the prior year. In constant currency, net capital expenditures were $163.5-million, a decrease of 10.7 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 $138.4-million, a decrease of 4.2 per cent compared with $144.4-million in the same period of the prior year. In constant currency, net capital expenditures excluding network expansion projects were $132.6-million, a decrease of 8.2 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.
• Acquisition of property, plant and equipment decreased by 4.1 per cent to $190.1-million, mainly due to reduced capital spending, mostly in the Canadian telecommunications segment.
• Free cash flow decreased by 1.4 per cent, or 1.1 per cent in constant currency, and amounted to $107.4-million, mainly due to higher financial expense, higher acquisition, integration, restructuring, and other costs and lower adjusted EBITDA, partly offset by lower net capital expenditures and current income taxes.
  • Free cash flow, excluding network expansion projects decreased by 5.7 per cent, or 6.1 per cent in constant currency, and amounted to $139.2-million.
• Cash flows from operating activities decreased by 20.4 per cent to reach $283.2-million, driven by a net inflow in non-cash operating activities of $20.7-million compared with $51.2-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 MHz (megahertz) and 3,500 MHz bands in Quebec in relation to the company's plan to offer mobility services within the company's operating footprint.
• Cogeco reiterates its fiscal 2023 financial guidelines as issued on Jan. 12, 2023. Furthermore, on June 8, 2023, Cogeco 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 declared a quarterly eligible dividend of 73.1 cents per share, an increase of 17 per cent compared with 62.5 cents per share in the comparable quarter of fiscal 2022.

About Cogeco Inc.

Rooted in the communities it serves, Cogeco is a growing competitive force in the North American telecommunications sector, serving 1.6 million residential and business customers. Its Cogeco Communications Inc. subsidiary provides Internet, video and phone services in the provinces of Quebec and Ontario, as well as in 13 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 Quebec 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 are also listed on the Toronto Stock Exchange (TSX: CCA).

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

The conference call will be available on Cogeco's 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's website for a three-month period.

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

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