Mr. Philippe Jette reports

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

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

• A quarterly 15-year record of 14,041 Internet service customer net additions at Cogeco Connexion driven by organic growth, new customers gained from network expansions and under the oxio brand;
• Cogeco Communications added 23,031 homes passed in Canada and the United States as part of its fibre-to-the-home network expansion strategy. Total number of homes passed for fiscal 2023 rose by almost 124,000, or 3.4 per cent;
• Successfully completed the Quebec subsidized network expansions in October, subsequent to fiscal year-end, connecting 180 municipalities;
• Revenue grew by 2.6 per cent to $766.7-million compared with the same period of the prior year;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $351.9 million increased 1.0 per cent over last year;
• Profit for the period amounted to $90.5-million, a decrease of 18.7 per cent, mainly due to higher financial expense. Profit for the period attributable to owners of the corporation amounted to $29.2-million, a decrease of 19.8 per cent;
• Free cash flow amounted to $86.2-million compared with $34.7-million last year due to lower net capital expenditures, while cash flows from operating activities decreased by 12.9 per cent to $284.4-million. Free cash flow, excluding network expansion projects, was $119.2-million, an increase of 23.7 per cent;
• Cogeco is releasing its fiscal 2024 financial guidelines;
• Declared a quarterly eligible dividend of 85.4 cents per share, representing a 16.8-per-cent increase over last year.

"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.

"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 U.S. 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 EBITDA 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. We are pleased to announce a 16.8-per-cent increase in the dividend today, which brings the quarterly dividend per share to 85.4 cents. With this increase, we have now closed the gap in quarterly dividends between Cogeco and Cogeco Communications' dividends, which is a process that has been under way for three years.

"Cogeco Media's focus on financial discipline has remained steadfast over the past year as the challenges facing the traditional advertising markets have encouraged us to accelerate the adoption of new innovative digital solutions as we move to a multiplatform audio content model," continued Mr. Jette. "Fiscal 2024 holds several exciting developments for us at Cogeco Media, as we look to grow the already strong listener engagement held by many of our stations over the past year. Finally, we are proud to announce that our station 98.5 Montreal, remained in the top spot of the Numeris rankings for its sixth consecutive quarter and once again, recorded not only the highest radio listenership in Quebec, but the entire country.

"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 2.6 per cent to $766.7-million. On a constant currency basis, revenue increased by 1.0 per cent, driven by growth in the Canadian telecommunications segment and higher revenue in the media activities, which were partly offset by a decline in the American telecommunications segment, as explained herein:
  • 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.
  • Revenue in the media activities increased by 8.3 per cent.
  • 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 1.0 per cent to reach $351.9-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 herein.
  • 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 $90.5-million, of which $29.2-million, or $1.87 per diluted share, was attributable to owners of the corporation compared with $111.4-million, $36.4-million and $2.31 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 United States dollar.
  • Adjusted profit attributable to owners of the corporation was $33.0-million, or $2.12 per diluted share, compared with $39.5-million, or $2.50 per diluted share, last year.
• Net capital expenditures, which account for network expansion subsidies, were $178.5-million, a decrease of 20.6 per cent compared with $224.8-million in the same period of the prior year. In constant currency, net capital expenditures were $174.6-million, a decrease of 22.3 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 $145.6-million, a decrease of 10.8 per cent compared with $163.1-million in the same period of the prior year. In constant currency, net capital expenditures, excluding network expansion projects were $142.5-million, a decrease of 12.6 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 approximately 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.
• Acquisition of property, plant and equipment decreased by 15.3 per cent to $207.4-million, due to reduced capital spending in both countries.
• Free cash flow amounted to $86.2-million, or $86.8-million in constant currency, compared with $34.7-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 $119.2-million, or $118.9-million in constant currency, an increase of 23.7 per cent, or 23.4 per cent in constant currency, compared with the same period of the prior year.
• Cash flows from operating activities decreased by 12.9 per cent to reach $284.4-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 declared a quarterly eligible dividend of 85.4 cents per share, an increase of 16.8 per cent compared with 73.1 cents per share last year. With this increase, the dividends per share of the corporation and Cogeco Communications are now fully aligned.

Fiscal 2024 financial guidelines

Cogeco 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 services 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.

These financial guidelines, including the various assumptions underlying them, contain forward-looking statements concerning the business outlook for Cogeco.

About Cogeco Inc.

Rooted in the communities it serves, Cogeco is a growing competitive force in the North American telecommunications and media sectors, serving 1.6 million residential and business customers. Its Cogeco Communications Inc. subsidiary provides Internet, video and phone services in Canada, 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:   Thursday, Nov. 2, 2023, at 11 a.m. Eastern Time

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 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 or Cogeco Communications.

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