Cogeco Communications Releases its Financial Results for the Second Quarter of Fiscal 2022

• Revenue increased by 14.8% (15.0% in constant currency ⁽¹⁾) compared to the same period of the prior year to reach $728.5 million;
• Adjusted EBITDA ⁽¹⁾ reached $349.1 million, an increase of 13.7% (13.8% in constant currency ⁽¹⁾);
• Profit for the period amounted to $119.9 million, an increase of 8.5%;
• Free cash flow ⁽¹⁾ amounted to $153.0 million, an increase of 7.2% (7.2% in constant currency ⁽¹⁾);
• Cash flows from operating activities increased by 21.6% to reach $281.2 million;
• Fiscal 2022 financial guidelines were revised following a reduction of capital expenditures projections and a corresponding increase in projected free cash flow; and
• A quarterly eligible dividend of $0.705 per share was declared compared to $0.64 per share in the comparable quarter of fiscal 2021.

MONTRÉAL, April 13, 2022 /CNW/ - Today, Cogeco Communications Inc. (TSX: CCA) ("Cogeco Communications" or the "Corporation") announced its financial results for the second quarter ended February 28, 2022, in accordance with International Financial Reporting Standards ("IFRS").

OPERATING RESULTS

For the second quarter of fiscal 2022:

• Revenue increased by 14.8% to reach $728.5 million compared to the previous year. On a constant currency basis, revenue increased by 15.0%, mainly explained as follows:
  
  
• American broadband services revenue increased by 31.3% in constant currency mostly resulting from the Ohio broadband systems acquisition completed on September 1, 2021, and from a higher Internet service customer base and a higher value product mix.
  
  
• Canadian broadband services revenue increased by 2.1% mainly as a result of the DERYtelecom acquisition completed on December 14, 2020 and organic growth.
• Adjusted EBITDA increased by 13.7% to reach $349.1 million compared to the previous year. On a constant currency basis, adjusted EBITDA increased by 13.8%, mainly explained as follows:
  
  
• American broadband services adjusted EBITDA increased by 31.4% in constant currency mainly resulting from the impact of the Ohio broadband systems acquisition and a higher margin driven by the organic revenue growth, partly offset by costs incurred in connection with the rebranding of Atlantic Broadband to Breezeline and overall higher marketing and advertising activities and other costs which were unusually low last year in the context of the COVID-19 pandemic restrictions.
  
  
• Canadian broadband services adjusted EBITDA increased by 1.7% in constant currency mainly resulting from the impact of the DERYtelecom acquisition and organic growth.
  
  
• Profit for the period amounted to $119.9 million, of which $111.3 million, or $2.40 per share, was attributable to owners of the Corporation compared to $110.6 million, $102.9 million, and $2.16 per share, respectively, in the comparable period of fiscal 2021. The increases resulted mainly from higher adjusted EBITDA and lower income tax expense, partly offset by the increases in depreciation and amortization expense and financial expense.
  
  
• Free cash flow increased by 7.2% as reported and in constant currency to reach $153.0 million compared to the previous year, mainly as a result of higher adjusted EBITDA and lower current income taxes, partly offset by higher capital expenditures and financial expense.
  
  
• Cash flows from operating activities increased by 21.6% to reach $281.2 million compared to the previous year, mainly resulting from higher adjusted EBITDA and lower income taxes paid.
  
  
• Cogeco Communications purchased and cancelled 189,425 subordinate voting shares for a total consideration of $19.2 million.
  
  
• At its April 13, 2022 meeting, the Board of Directors of Cogeco Communications declared a quarterly eligible dividend of $0.705 per share compared to $0.64 per share in the comparable quarter of fiscal 2021.

_______________________

(1) The indicated terms do not have standardized definitions prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section of this press release, including reconciliation to the most comparable IFRS financial measures.

"For this second quarter of fiscal 2022, we are satisfied with Cogeco Communications' performance, which was in line with expectations," declared Philippe Jetté, President and Chief Executive Officer of Cogeco Communications Inc.

"Results at our Canadian broadband business unit were steady with a continued positive customer trend for our high-speed Internet service," said Mr. Jetté. "Over the past months, Cogeco Connexion has accelerated its construction efforts to connect more homes in underserved communities in Québec and Ontario and continues its collaboration with governments to bridge the digital gap between large urban centres and less populated areas."

"The performance at our American broadband business unit, which now goes by the name Breezeline, was in line with expectations," continued Mr. Jetté. "Internet customer trends improved compared to the first quarter of fiscal 2022 and the integration of our acquired Ohio broadband systems continues to proceed according to plan."

"We recently published our ESG and Sustainability Report, which will henceforth be published annually, where we provide an update of our environmental, social and governance (ESG) performance indicators and other information related to our sustainability strategy. We are committed to continually enhance our sustainability program through the implementation of ESG best practices, which earned us again this year a place on the Corporate Knights Global 100 Most Sustainable Companies list," concluded Mr. Jetté.

FISCAL 2022 REVISED FINANCIAL GUIDELINES

Overall, Cogeco Communications' financial results for the first half of fiscal 2022 were as expected in its annual financial guidelines, issued on November 11, 2021. However, as the Corporation expects in the second half of fiscal 2022 lower acquisition of property, plant and equipment than initially planned and a corresponding increase in projected free cash flow, the Corporation revised its fiscal 2022 financial guidelines. On a constant currency and consolidated basis, revenue and adjusted EBITDA projections are expected to remain the same as previously issued. Revised projections for acquisition of property, plant and equipment amount to between $720 and $750 million, including those related to the Ohio broadband systems integration and net investments of approximately $180 to $200 million in network expansion projects in Canada and the United States. Free cash flow is expected to decrease between 13% and 23% compared to the previous fiscal year, which is a lesser decline than under the previous financial guidelines. Excluding the fiscal year 2022 network expansion projects, free cash flow on a constant currency and consolidated basis would otherwise increase between 16% and 26% compared to the previous fiscal year.

COVID-19 PANDEMIC

While the impact of the COVID-19 pandemic on the Corporation is generally stabilizing, we remain cautious in our management of the situation which can evolve quickly. Our priority remains on ensuring the well-being of our employees, customers and business partners.

The pandemic has generally highlighted the value of the services we offer, especially our high-speed Internet services, as customers have been spending more time at home for work, education and entertainment purposes. We have generally witnessed strong demand initially for either obtaining or upgrading speeds of high-speed Internet, along with reduced operating costs due to a stable customer base and not being able to use all usual sales channels. However, operations have generally been conducted in a normal fashion during the recent quarters.

The pandemic has also accelerated the willingness of various governments to support access to high-speed Internet in underserved and unserved areas by providing subsidies to partially pay for network expansions in such areas. The Corporation has partnered with governments in both Canada and the United States in such endeavor and expects to do more in the years to come.

The Corporation's results discussed herein may not be indicative of future operational trends and financial performance. Please refer to the "Forward-looking statements" section.

FINANCIAL HIGHLIGHTS

	Three months ended February 28,								Six months ended February 28,
	2022		2021		Change	Change in constant currency	^(1)  (2)	Foreign exchange impact	^(1)	2022		2021		Change	Change in constant currency	^(1)  (2)	Foreign exchange impact	^(1)
(In thousands of Canadian dollars, except percentages and per share data)	$		$		%	%		$		$		$		%	%		$
Operations
Revenue	728,549		634,548		14.8	15.0		(1,007)		1,447,090		1,253,461		15.4	16.9		(18,693)
Adjusted EBITDA ^(2)	349,087		306,994		13.7	13.8		(410)		698,374		618,087		13.0	14.4		(8,442)
Adjusted EBITDA margin ^(2)	47.9	%	48.4	%						48.3	%	49.3	%
Integration, restructuring and acquisition costs ^(3)	1,451		2,330		(37.7)					20,086		3,545		—
Profit for the period	119,911		110,559		8.5					236,521		225,455		4.9
Profit for the period attributable to owners of the Corporation	111,275		102,936		8.1					218,112		209,615		4.1
Cash flow
Cash flows from operating activities	281,199		231,166		21.6					568,144		472,891		20.1
Acquisition of property, plant and equipment ^(4)	142,195		115,214		23.4	23.6		(265)		283,223		231,436		22.4	24.4		(4,717)
Free cash flow ^(2)	153,000		142,768		7.2	7.2		(50)		285,111		283,384		0.6	1.0		(1,241)
Capital intensity ^(2)	19.5	%	18.2	%						19.6	%	18.5	%
Financial condition ^(5)
Cash and cash equivalents										178,192		365,520		(51.2)
Total assets										8,907,266		7,351,692		21.2
Indebtedness ^(2) (6)										4,684,887		3,319,708		41.1
Equity attributable to owners of the Corporation										2,563,605		2,415,144		6.1
Per share data ^(7)
Earnings per share
Basic	2.40		2.16		11.1					4.69		4.39		6.8
Diluted	2.38		2.14		11.2					4.65		4.36		6.7
Dividends	0.705		0.64		10.2					1.41		1.28		10.2

(1)	Key performance indicators presented on a constant currency basis are obtained by translating financial results from the current periods denominated in US dollars at the foreign exchange rates of the comparable periods of the prior year. For the three and six-month periods ended February 28, 2021, the average foreign exchange rates used for translation were 1.2744 USD/CDN and 1.2957 USD/CDN, respectively.
(2)	The indicated terms do not have standardized definitions prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section of this press release, including reconciliation to the most comparable IFRS financial measures.
(3)	For the three and six-month periods ended February 28, 2022, integration, restructuring and acquisition costs resulted mostly from costs incurred in connection with the acquisition, completed on September 1, 2021, and ongoing integration of the Ohio broadband systems. For the three and six-month periods ended February 28, 2021, integration, restructuring and acquisition costs resulted mostly from the acquisition and integration of DERYtelecom, which was completed on December 14, 2020.
(4)	For the three and six-month periods ended February 28, 2022, acquisition of property, plant and equipment in constant currency amounted to $142.5 million and $287.9 million, respectively.
(5)	At February 28, 2022 and August 31, 2021.
(6)	Indebtedness is defined as the total of bank indebtedness and principal on long-term debt.
(7)	Per multiple and subordinate voting share.

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 Communications Inc.'s ("Cogeco Communications" 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 regarding 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 Communications believes are reasonable as of the current date. Refer in particular to the "Corporate objectives and strategies" and "Fiscal 2022 financial guidelines" sections of the Corporation's 2021 annual MD&A and the "Fiscal 2022 revised financial guidelines" of the current 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 Communications currently expects. These factors include risks such as competitive risks, business risks (including potential disruption to our supply chain worsened by the increasing instability resulting from the war in Ukraine, increasing transportation lead times, scarcity of input materials and shortages of chipsets, semi-conductors and key telecommunication equipment), regulatory risks, technology risks (including cybersecurity), financial risks (including variations in currency and interest rates), economic conditions (including elevated inflation and a potential recession), human-caused and natural threats to our network, infrastructure and systems, community acceptance risks, ethical behavior risks, ownership risks, litigation risks and public health crisis and emergencies such as the COVID-19 pandemic, many of which are beyond the Corporation's control. For more exhaustive information on these risks and uncertainties, the reader should refer to the "Uncertainties and main risk factors" sections of the Corporation's 2021 annual MD&A and of the current MD&A. These factors are not intended to represent a complete list of the factors that could affect Cogeco Communications 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 which represent Cogeco Communications' 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 and six-month periods ended February 28, 2022, the Corporation's condensed interim consolidated financial statements and the notes thereto for the same periods prepared in accordance with International Financial Reporting Standards ("IFRS") and the Corporation's 2021 Annual Report.

NON-IFRS FINANCIAL MEASURES 

This section describes non-IFRS financial measures used by Cogeco Communications throughout this press release. These financial measures are reviewed in assessing the performance of the Corporation and used in the decision-making process with regard to its business units. Reconciliations between "adjusted EBITDA", "adjusted EBITDA margin", "free cash flow", "capital intensity", "indebtedness" and "net indebtedness" and the most comparable IFRS financial measures are also provided. These financial measures do not have standard definitions prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies.

This press release also makes reference to key performance indicators on a constant currency basis, including revenue, "adjusted EBITDA", acquisition of property, plant and equipment and "free cash flow". Measures on a constant currency basis are considered non-IFRS financial measures and do not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies.

Non-IFRS financial measures	Application	Calculation	Most comparable IFRS financial measures
Adjusted EBITDA and adjusted EBITDA margin	Adjusted EBITDA and adjusted EBITDA margin are key measures commonly reported and used in the telecommunications industry, as they allow comparisons between companies that have different capital structures and are more current measures since they exclude the impact of historical investments in assets. Adjusted EBITDA is one of the key metrics employed by the financial community to value a business and its financial strength.   Adjusted EBITDA for Cogeco Communications' business units is equal to the segment profit (loss) reported in Note 4 of the condensed interim consolidated financial statements.	Adjusted EBITDA: - Profit for the period add: - Income taxes; - Financial expense; - Depreciation and amortization; and - Integration, restructuring and acquisition costs.	Profit for the period
		Adjusted EBITDA margin: - Adjusted EBITDA divided by: - Revenue.	No comparable IFRS financial measure
Free cash flow	Management and investors use free cash flow to measure Cogeco Communications' ability to repay debt, distribute capital to its shareholders and finance its growth.	Free cash flow: - Adjusted EBITDA add: - Amortization of deferred transaction costs and discounts on long-term debt; - Share-based payment; - Loss (gain) on disposals and write-offs of property, plant and equipment; and - Defined benefit plans expense, net of contributions; deduct: - Integration, restructuring and acquisition costs; - Financial expense; - Current income taxes; - Acquisition of property, plant and equipment ^(1); and - Repayment of lease liabilities.	Cash flows from operating activities
Constant currency basis	Revenue, operating expenses, adjusted EBITDA, acquisition of property, plant and equipment and free cash flow are measures presented on a constant currency basis to enable an improved understanding of the Corporation's underlying financial performance, undistorted by the effects of changes in foreign exchange rates.	Constant currency basis is obtained by translating financial results from the current periods denominated in US dollars at the foreign exchange rates of the comparable periods of the prior year.	No comparable IFRS financial measure
Capital intensity	Capital intensity is used by Cogeco Communications' management and investors to assess the Corporation's investment in capital expenditures in order to support a certain level of revenue.	Capital intensity: - Acquisition of property, plant and equipment ^(1) divided by: - Revenue.	No comparable IFRS financial measure

(1)	Excludes the non-cash acquisition of right-of-use assets and the purchases of spectrum licences.

Non-IFRS financial measures	Application	Calculation	Most comparable IFRS financial measures
Indebtedness and net indebtedness	Indebtedness and net indebtedness are measures used by management and investors to assess Cogeco Communications' financial leverage, as they represent the debt and the debt net of the available cash and cash equivalents, respectively.	Indebtedness: add: - Principal on long-term debt; and - Bank indebtedness.	Long-term debt, including the current portion
		Net indebtedness: - Indebtedness deduct: - Cash and cash equivalents.

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN RECONCILIATION

The reconciliation of adjusted EBITDA to the most comparable IFRS financial measure and the calculation of adjusted EBITDA margin are as follows:

	Three months ended February 28,				Six months ended February 28,
	2022		2021		2022		2021
(In thousands of Canadian dollars, except percentages)	$		$		$		$
Profit for the period	119,911		110,559		236,521		225,455
Income taxes	32,721		35,412		50,171		70,934
Financial expense	44,979		31,839		89,934		67,049
Depreciation and amortization	150,025		126,854		301,662		251,104
Integration, restructuring and acquisition costs	1,451		2,330		20,086		3,545
Adjusted EBITDA	349,087		306,994		698,374		618,087
Revenue	728,549		634,548		1,447,090		1,253,461
Adjusted EBITDA margin	47.9	%	48.4	%	48.3	%	49.3	%

FREE CASH FLOW RECONCILIATION

The reconciliation of free cash flow to the most comparable IFRS financial measure is as follows:

	Three months ended February 28,		Six months ended February 28,
	2022	2021	2022	2021
(In thousands of Canadian dollars)	$	$	$	$
Cash flows from operating activities	281,199	231,166	568,144	472,891
Amortization of deferred transaction costs and discounts on long-term debt	2,993	2,323	5,915	4,601
Changes in other non-cash operating activities	22,544	19,953	9,370	25,315
Income taxes paid	4,701	16,529	30,061	58,310
Current income taxes	(10,786)	(18,373)	(25,349)	(38,235)
Interest paid	40,554	39,278	72,153	61,130
Financial expense	(44,979)	(31,839)	(89,934)	(67,049)
Acquisition of property, plant and equipment	(142,195)	(115,214)	(283,223)	(231,436)
Repayment of lease liabilities	(1,031)	(1,055)	(2,026)	(2,143)
Free cash flow	153,000	142,768	285,111	283,384

CAPITAL INTENSITY RECONCILIATION

The calculation of capital intensity is as follows:

	Three months ended February 28,				Six months ended February 28,
	2022		2021		2022		2021
(In thousands of Canadian dollars, except percentages)	$		$		$		$
Acquisition of property, plant and equipment	142,195		115,214		283,223		231,436
Revenue	728,549		634,548		1,447,090		1,253,461
Capital intensity	19.5	%	18.2	%	19.6	%	18.5	%

INDEBTEDNESS AND NET INDEBTEDNESS RECONCILIATION

The reconciliation of indebtedness and net indebtedness to the most comparable IFRS financial measure is as follows:

	At February 28, 2022	At August 31, 2021
(In thousands of Canadian dollars)	$	$
Long-term debt, including the current portion	4,626,208	3,272,216
Discounts, transaction costs and other	58,679	43,032
Bank indebtedness	—	4,460
Indebtedness	4,684,887	3,319,708
Cash and cash equivalents	(178,192)	(365,520)
Net indebtedness	4,506,695	2,954,188

ABOUT COGECO COMMUNICATIONS INC.

Rooted in the communities it serves, Cogeco Communications Inc. (TSX: CCA) is a growing competitive force in the North American telecommunications sector with a legacy of 65 years. Through its business units Cogeco Connexion and Breezeline (formerly Atlantic Broadband), Cogeco Communications provides Internet, video and phone services to 1.6 million residential and business customers in Quebec and Ontario in Canada as well as in twelve states in the United States. To learn more about Cogeco Communications' growth strategy and its commitment to support its communities, promote inclusive growth and fight climate change, please visit us online at corpo.cogeco.com.

                                                                                               

Conference Call:	Thursday, April 14, 2022 at 11:00 a.m. (Eastern Time)
	A live audio webcast will be available on Cogeco Communications' website at https://corpo.cogeco.com/cca/en/investors/investor-relations/. Members of the financial community will be able to access the conference call and ask questions. Media representatives may attend as listeners only. The webcast will be available on Cogeco Communications' website for a three-month period.
	Please use the following dial-in number to have access to the conference call 5 to 10 minutes before the start of the conference:
	Canada/United States Access Number: 1-877-291-4570
	International Access Number: 1-647-788-4919
	In order to join this conference, participants are required to provide the operator with the name of the company hosting the call, that is, Cogeco Inc. or Cogeco Communications Inc.

For information:

Investors: 
Patrice Ouimet
Senior Vice President and Chief Financial Officer
Cogeco Communications Inc.
Tel.: [phone]
[email protected]

Media:
Marie-Hélène Labrie
Senior Vice President and Chief Public Affairs, Communications and Strategy Officer
Cogeco Communications Inc.
Tel.: [phone]
[email protected]

SOURCE Cogeco Communications Inc.