Mr. Philippe Jette reports

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

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

"The first months of fiscal 2024 were transformational and historic moments for our company. We recently announced that Cogeco bought back 6.0 million of its shares and Cogeco Communications bought back 2.3 million of its shares, both at discounted market prices per share, providing free cash flow per share accretion and increasing the net asset value of Cogeco. In conjunction with these transactions, 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 wire line footprint. This spectrum was secured at a significantly lower cost compared to past spectrum auctions," said Philippe Jette, president and chief executive officer of Cogeco.

"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 [United States], 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 [earnings before interest, taxes, depreciation and amortization] margin.

"At Cogeco Media, our ongoing efforts to develop innovative digital solutions and adapt to a multiplatform audio content model are beginning to bear fruit. These, along with strong listener engagement across many of our stations, have resulted in solid year-over-year revenue growth during the quarter," continued Mr. Jette.

"At Cogeco, 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 1.7 per cent to $776.2-million. On a constant currency basis(1), revenue decreased by 2.3 per cent, driven by a lower customer base in the American telecommunications segment, which offset revenue growth in the Canadian telecommunications segment, as explained below:
  • 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 first quarter fiscal 2023, 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.
• Revenue in the media activities increased by 4.0 per cent.
• Adjusted EBITDA decreased by 2.1 per cent to $366.0-million. On a constant currency basis, adjusted EBITDA decreased by 2.6 per cent, due to a decline in both the American telecommunications and Canadian telecommunications segments, as further explained below, 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 $98.7-million, of which $34.5-million, or $2.21 per diluted share, was attributable to owners of the corporation compared with $123.8-million, $42.1-million and $2.67 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 (3) was $40.0-million, or $2.57 per diluted share (3), compared with $42.8-million, or $2.71 per diluted share, last year.
• Net capital expenditures (2) were $146.7-million, a decrease of 25.7 per cent, compared with $197.3-million in the same period of the prior year. In constant currency, net capital expenditures (1) were $145.6-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 $115.0-million, a decrease of 12.5 per cent, compared with $131.5-million in the same period of the prior year. In constant currency, net capital expenditures excluding network expansion projects (1) were $114.1-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 passing additions of more than 13,000 during the first quarter of fiscal 2024.
• Acquisition of property, plant and equipment decreased by 34.6 per cent to $153.8-million, due to reduced capital spending in both countries.
• Free cash flow increased by 29.5 per cent, or 29.4 per cent in constant currency, and amounted to $141.8-million, or $141.6-million in constant currency, mainly due to lower net capital expenditures. Free cash flow, excluding network expansion projects, amounted to $173.5-million, or $173.1-million in constant currency, and remained stable compared with the same period of the prior year.
• Cash flows from operating activities increased by 22.2 per cent to $236.9-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 completed the repurchase, for cancellation, of the 5,969,390 shares sold by CDPQ, for an amount of $280.0-million, following the purchase by CDPQ of the entirety of Rogers's holdings in both Cogeco and Cogeco Communications.
• Cogeco maintains its fiscal 2024 financial guidelines as issued on Nov. 1, 2023.
• At its Jan. 10, 2024, 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 in the comparable quarter of fiscal 2023.

(1) Adjusted EBITDA and net capital expenditures are total of segments 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-international financial reporting standard measures. Change in constant currency and adjusted diluted earnings per share are non-IFRS ratios. These indicated terms do not have standardized definitions prescribed by international financial reporting standards and, therefore, may not be comparable with similar measures presented by other companies.

(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, and gains/losses on debt modification and/or extinguishment, net of tax, and non-controlling interest.

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 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 (CGO). The subordinate voting shares of Cogeco Communications are also listed on the Toronto Stock Exchange (CCA).

Conference call:  Thursday, Jan. 11, 2024, at 9:30 a.m. Eastern Standard Time

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's website. Financial analysts will be able to listen to the live conference call and ask questions. Media representatives may attend as listeners only. A recording of the webcast will be available on Cogeco's website for a three-month period.

Please use the following dial-in number to listen 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 Inc. or Cogeco Communications Inc.

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

We seek Safe Harbor.