CGO Cogeco Inc

• Strong customer momentum driven by solid Internet subscriber growth in Canada and improving subscriber performance in the U.S.
• Three-year transformation program centered on synergies, digitization, advanced analytics and network expansion, as well as initiatives to transform our radio business, fully underway.
• On track to launch wireless in Canada over the coming quarters.
• Adjusted EBITDA⁽¹⁾ grew by 1.4% over last year, while profit for the period increased by 9.8%.
• Fiscal 2025 financial guidelines maintained.
• A quarterly dividend of $0.922 per share was declared, representing an 8.0% increase over the prior year.

MONTRÉAL, Jan. 13, 2025 /CNW/ - Today, Cogeco Inc. (TSX: CGO) ("Cogeco" or the "Corporation") announced its financial results for the first quarter ended November 30, 2024.

"As we enter fiscal 2025 under a new operating model focused on synergies, digital, and analytics, we are already seeing positive developments in many aspects of our business," said Frédéric Perron, President and CEO. "High-speed Internet subscriber growth remains strong in Canada, subscriber metrics are improving in the U.S, and our preparation for an upcoming Canadian wireless launch is on track.

"Our Canadian telecommunications business recorded solid Internet subscriber growth in both the Cogeco and oxio brands, as well as from the network expansion program in Ontario.

"In the U.S., our financial results were as expected. Our overall product mix continued to improve, driven by demand for higher speed offerings, while efficiency initiatives drove another quarter of solid adjusted EBITDA margin. Furthermore, we recorded improving subscriber trends, including our best performance in Ohio since we acquired the business.

"At Cogeco Media, competitive dynamics in the radio advertising market remain challenging, however, our digital advertising solutions continue to provide a growing contribution to our overall revenue, and we continue to experience strong listener engagement with radio stations remaining at the top of the ratings.

"We have successfully embarked on a three-year transformation program to improve our agility and competitiveness by pursuing new growth initiatives and forging a simpler cost-efficient North American organization. I would like to thank our employees and stakeholders for their continued support."

Consolidated Financial Highlights

Operating results

For the first quarter of fiscal 2025 ended on November 30, 2024:

• Revenue decreased by 1.4% to $765.0 million. On a constant currency basis⁽¹⁾, revenue decreased by 1.8% due to a decline in revenue in the American telecommunications segment and in the media activities, while revenue remained stable in the Canadian telecommunications segment.
  • American telecommunications' revenue decreased by 2.6%, or 3.4% in constant currency, mainly due to a decline in our subscriber base, especially for entry-level services, and to a higher proportion of customers subscribing to Internet-only services. The decline was offset in part by a better product mix.
  • Revenue in the media activities decreased by 7.8% as competitive dynamics in the radio advertising market remain challenging.
  • Canadian telecommunications' revenue remained stable, mainly driven by the cumulative effect of high-speed Internet service additions over the past years, including from network expansion projects, as well as from the Niagara Regional Broadband Network acquisition completed on February 5, 2024, offset by an overall decline in video and wireline phone service subscribers as an increasing proportion of customers subscribe to Internet-only services.
• Adjusted EBITDA increased by 1.4% to $371.1 million. On a constant currency basis, adjusted EBITDA increased by 1.0%, mainly due to higher adjusted EBITDA in the Canadian telecommunications segment and lower corporate costs driven by initiatives undertaken in relation to the strategic wireless partnerships announced in August, offset in part by lower revenue in the media activities, while adjusted EBITDA remained stable in the American telecommunications segment.
  • Canadian telecommunications adjusted EBITDA increased by 1.6% as reported and in constant currency, mostly due to lower operating expenses driven by lower technology licensing costs and the timing of certain operating expenses, a $2.6 million gain on disposals of certain property, plant and equipment, as well as cost reduction initiatives and operating efficiencies.
  • American telecommunications adjusted EBITDA remained stable as reported and in constant currency, driven by cost reduction initiatives and operating efficiencies, offset by lower revenue.
• Profit for the period amounted to $108.4 million, of which $29.8 million, or $3.09 per diluted share, was attributable to owners of the Corporation compared to $98.7 million, $34.5 million, and $2.21 per diluted share, respectively, in the comparable period of fiscal 2024. The increase in profit for the period resulted mainly from a lower financial expense due in part to last year's pre-tax $16.9 million non-cash loss on debt extinguishment recognized following a US$1.6 billion refinancing in September 2023, a pre-tax $13.8 million non-cash gain recognized during the first quarter of fiscal 2025 in connection with a sale and leaseback transaction of a building in Ontario, and higher adjusted EBITDA. The increase was partly offset by higher depreciation and amortization expense and higher income tax expense. The decrease in profit for the period attributable to owners of the Corporation mainly reflected the impact of the reduced ownership in Cogeco Communications following a share repurchase transaction in December 2023.
  • Adjusted profit attributable to owners of the Corporation⁽³⁾ was $27.2 million, or $2.82 per diluted share⁽³⁾, compared to $40.0 million, or $2.57 per diluted share, last year. The increase of adjusted diluted earnings per share over last year reflects the benefit of last year's December's share buyback transaction.
• Net capital expenditures were $150.9 million, an increase of 2.9% compared to $146.7 million in the same period of the prior year. In constant currency, net capital expenditures⁽¹⁾ were $150.2 million, an increase of 2.4% compared to last year, mainly due to higher spending in the American telecommunications segment mostly due to the timing of certain initiatives, offset in part by lower spending in the Canadian telecommunications segment, also mainly due to the timing of certain initiatives and lower purchases of customer premise equipment.
  • Excluding network expansion projects, net capital expenditures were $129.1 million, an increase of 12.3% compared to $115.0 million in the same period of the prior year. In constant currency, net capital expenditures, excluding network expansion projects⁽¹⁾ were $128.4 million, an increase of 11.7% compared to last year, mainly due to the same factors as above.
  • Fibre-to-the-home network expansion projects continued in both Canada and the United States, with the addition of close to 9,500 homes passed during the first quarter of fiscal 2025.
• Acquisition of property, plant and equipment amounted to $153.5 million and remained stable compared to last year.
• Free cash flow⁽²⁾ increased by 7.3%, or 7.2% in constant currency, and amounted to $152.5 million, or $152.2 million in constant currency⁽¹⁾, mainly due to net proceeds from disposals of property, plant and equipment, including net proceeds amounting to $16.5 million received in connection with a sale and leaseback transaction of a building in Ontario, offset in part by higher current income taxes and net capital expenditures. Free cash flow, excluding network expansion projects⁽²⁾ amounted to $174.3 million, or $174.0 million in constant currency, and remained stable compared to the same period of the prior year.
• Cash flows from operating activities decreased by 11.9% to $208.7 million, mostly due to lower cash from other non-cash operating activities, due in part to the timing of grants received in connection with network expansion projects and the collection of trade accounts receivable, and higher income taxes paid, partly offset by higher adjusted EBITDA.
• Cogeco maintains its fiscal 2025 financial guidelines as issued on October 31, 2024.
• At its January 13, 2025 meeting, the Board of Directors of Cogeco declared a quarterly eligible dividend of $0.922 per share, an increase of 8.0% compared to $0.854 per share in the comparable quarter of fiscal 2024

Financial highlights

Forward-looking statements

Certain statements contained in this press release may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to Cogeco Inc.'s ("Cogeco" or the "Corporation") future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee"; "ensure" or other similar expressions concerning matters that are not historical facts. Particularly, statements relating to the Corporation's financial guidelines, future operating results and economic performance, objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, purchase price allocation, tax rates, weighted average cost of capital, performance and business prospects and opportunities, which Cogeco believes are reasonable as of the current date. Refer in particular to the "Corporate objectives and strategy" and "Fiscal 2025 financial guidelines" sections of the Corporation's fiscal 2024 annual Management's Discussion and Analysis ("MD&A") for a discussion of certain key economic, market and operational assumptions we have made in preparing forward-looking statements. While management considers these assumptions to be reasonable based on information currently available to the Corporation, they may prove to be incorrect. Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what Cogeco currently expects. These factors include risks such as general market conditions, competitive risks (including changing competitive and technology ecosystems and disruptive competitive strategies adopted by our competitors), business risks, regulatory risks, tax risks, technology risks (including cybersecurity), financial risks (including variations in currency and interest rates), economic conditions (including inflation pressuring revenue, reduced consumer spending and increasing costs), talent management risks (including the highly competitive market for a limited pool of digitally skilled employees), human-caused and natural threats to the Corporation's network (including increased frequency of extreme weather events with the potential to disrupt operations), infrastructure and systems, sustainability and sustainability reporting risks, ethical behavior risks, ownership risks, litigation risks and public health and safety, many of which are beyond the Corporation's control. Moreover, the Corporation's radio operations are significantly exposed to advertising budgets from the retail industry, which can fluctuate due to increased competition and changing economic conditions. For more exhaustive information on these risks and uncertainties, the reader should refer to the "Uncertainties and main risk factors" section of the Corporation's fiscal 2024 annual MD&A and of the fiscal 2025 first-quarter MD&A. These factors are not intended to represent a complete list of the factors that could affect Cogeco and future events and results may vary significantly from what management currently foresees. The reader should not place undue importance on forward-looking information contained in this press release and the forward-looking statements contained in this press release represent Cogeco's expectations as of the date of this press release (or as of the date they are otherwise stated to be made) and are subject to change after such date. While management may elect to do so, the Corporation is under no obligation (and expressly disclaims any such obligation) and does not undertake to update or alter this information at any particular time, whether as a result of new information, future events or otherwise, except as required by law.

All amounts are stated in Canadian dollars unless otherwise indicated. This press release should be read in conjunction with the Corporation's MD&A for the three-month period ended November 30, 2024, the Corporation's condensed interim consolidated financial statements and the notes thereto for the same period prepared in accordance with IFRS^® Accounting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards") and the Corporation's fiscal 2024 Annual Report.

Non-IFRS Accounting Standards and other financial measures

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

Reconciliations between non-IFRS Accounting Standards and other financial measures to the most directly comparable IFRS Accounting Standards measures are provided below. Certain additional disclosures for non-IFRS Accounting Standards and other financial measures used in this press release have been incorporated by reference and can be found in the "Non-IFRS Accounting Standards and other financial measures" section of the Corporation's MD&A for the three-month period ended November 30, 2024, available on SEDAR+ at www.sedarplus.ca. The following non-IFRS Accounting Standards measures are used as a component of Cogeco's non-IFRS Accounting Standards ratios.

Financial measures presented on a constant currency basis for the three-month period ended November 30, 2024 are translated at the average foreign exchange rate of the comparable period of the prior year, which was 1.3654 USD/CDN.

Constant currency basis and foreign exchange impact reconciliation

Consolidated

Canadian telecommunications segment

American telecommunications segment

Adjusted profit attributable to owners of the Corporation

Free cash flow and free cash flow, excluding network expansion projects reconciliations

Net capital expenditures reconciliation

Adjusted EBITDA reconciliation

Net capital expenditures and free cash flow, excluding network expansion projects reconciliations

Net capital expenditures

Free cash flow

Additional information

Additional information relating to the Corporation is available on SEDAR+ at www.sedarplus.ca and on the Corporation's website at corpo.cogeco.com.

About Cogeco Inc.

Cogeco Inc. is a North American leader in the telecommunications and media sectors. Through Cogeco Communications Inc., we provide world-class Internet, video and wireline phone services to 1.6 million residential and business subscribers in Canada and thirteen states in the United States. We also offer wireless services in most of our U.S. operating territory. Through Cogeco Media, we operate 21 radio stations in Canada, primarily in the province of Québec, as well as a news agency. We take pride in our strong presence in the communities we serve and in our commitment to a sustainable future. Both Cogeco Inc.'s and Cogeco Communications Inc.'s subordinate voting shares are listed on the Toronto Stock Exchange (TSX: CGO and CCA).

For information:

Investors
Troy Crandall
Head, Investor Relations
Cogeco Inc.
Tel.: 514 764-4600
troy.crandall@cogeco.com

Media
Claudja Joseph
Director, Communications & DEI
Cogeco Inc.
Tel.: 514 764-4600
claudja.joseph@cogeco.com

SOURCE Cogeco Inc.