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

• Revenue increased by 16.6% (15.2% in constant currency ⁽¹⁾) compared to the same period of the prior year to reach $728.1 million;
• Adjusted EBITDA ⁽¹⁾ reached $347.6 million, an increase of 17.0% (15.8% in constant currency ⁽¹⁾);
• Profit for the period amounted to $105.4 million, an increase of 2.5%;
• Free cash flow ⁽¹⁾ amounted to $104.8 million, a decrease of 20.7% (20.3% in constant currency ⁽¹⁾), following increased network expansion activities;
• Cash flows from operating activities increased by 33.4% to reach $353.0 million;
• Cogeco Communications is releasing its fiscal 2023 financial guidelines; 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, July 13, 2022 /CNW Telbec/ - Today, Cogeco Communications Inc. (TSX: CCA) ("Cogeco Communications" or the "Corporation") announced its financial results for the third quarter ended May 31, 2022, in accordance with International Financial Reporting Standards ("IFRS").

OPERATING RESULTS

For the third quarter of fiscal 2022:

• Revenue increased by 16.6% to reach $728.1 million compared to the previous year. On a constant currency basis, revenue increased by 15.2%, mainly explained as follows:
• American broadband services revenue increased by 31.7% in constant currency, mostly resulting from the Ohio broadband systems acquisition completed on September 1, 2021 and organic revenue growth driven by a higher Internet service customer base, higher value product mix and annual rate increases implemented for certain services.
• Canadian broadband services revenue increased by 2.5% mainly as a result of last year's reduction in revenue of $4.6 million due to the retroactive impact of the CRTC's decision on wholesale high-speed Internet access services and organic revenue growth.

•  Adjusted EBITDA increased by 17.0% to reach $347.6 million compared to the previous year. On a constant currency basis, adjusted EBITDA increased by 15.8%, mainly explained as follows:
• American broadband services adjusted EBITDA increased by 33.3% in constant currency mainly resulting from the Ohio broadband systems acquisition and a higher margin driven by the organic revenue growth, partly offset by higher marketing and advertising costs, including Breezeline's rebranding costs.
• Canadian broadband services adjusted EBITDA increased by 3.9% in constant currency mainly resulting from last year's reduction in revenue of $4.6 million due to the retroactive impact of the CRTC's decision on wholesale high-speed Internet access services and organic growth.

• Profit for the period amounted to $105.4 million, of which $100.3 million, or $2.17 per share, was attributable to owners of the Corporation compared to $102.8 million, $95.7 million, and $2.02 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 decreased by 20.7% (20.3% in constant currency) to reach $104.8 million compared to the previous year, mainly due to higher capital expenditures, as Cogeco Connexion accelerated its construction efforts in connection with its high-speed Internet network expansion, and the increases in financial expense and current income taxes, partly offset by higher adjusted EBITDA.

• Cash flows from operating activities increased by 33.4% to reach $353.0 million compared to the previous year, mainly resulting from higher adjusted EBITDA, improved working capital elements and lower income taxes paid, partly offset by higher interest paid.

• Cogeco Communications maintains its fiscal 2022 financial guidelines as issued on April 13, 2022.

• Cogeco Communications purchased and cancelled 294,800 subordinate voting shares for a total consideration of $30.6 million.

• At its July 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 directly comparable IFRS financial measures.

"Our performance for the third quarter of fiscal 2022 was in line with our expectations, despite the increasingly challenging economic context," stated Philippe Jetté, President and Chief Executive Officer of Cogeco Communications Inc.

"Our Canadian broadband services business unit, Cogeco Connexion, performed well during the quarter. The financial and operational performance was in line with expectations, while the number of customer additions reflected slower activity in the industry. We are also actively building new networks in collaboration with governments and a growing number of homes are being connected and offered Cogeco's services," said Mr. Jetté.

"In the United States, we had good revenue and adjusted EBITDA growth at Breezeline, despite the challenging economic environment and market softness which are impacting customer acquisitions," added Mr. Jetté. "The Breezeline team successfully rebranded its operations in Cleveland and Columbus, Ohio, as it transitioned the customer management system."

"We were also pleased to have been ranked among Corporate Knights' 2022 Best 50 Corporate Citizens in Canada for a fifth consecutive year. This highly regarded ranking recognizes Canadian companies that are setting the standard for sustainable growth leadership," concluded Mr. Jetté.

FISCAL 2023 FINANCIAL GUIDELINES

Cogeco Communications released its fiscal 2023 financial guidelines. On a constant currency basis, the Corporation expects fiscal 2023 revenue to grow between 2% and 4% and adjusted EBITDA between 1.5% and 3.5%. Net capital expenditures ⁽¹⁾ should reach between $750 and $800 million, including net investments of approximately $180 to $230 million in network expansions which will increase the Corporation's footprint in Canada and the United States. As a result of these growth initiatives, free cash flow is expected to decrease between 2% and 12%. Excluding the fiscal 2023 network expansion projects, free cash flow on a constant currency and consolidated basis would otherwise be within a range encompassing a decrease of 5% to an increase of 5%.

(1)

During the third quarter of fiscal 2022, the Corporation changed the label of its "Acquisition of property, plant and equipment" key performance indicator measure to "Net capital expenditures". Net capital expenditures do not have a standardized definition 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.

OPERATING ENVIRONMENT

While the impact of the COVID-19 pandemic on the Corporation is generally stabilizing, our priority remains on ensuring the well-being of our employees, customers and business partners. We have conducted our operations normally during the recent quarters and will remain vigilant should the situation change in the future.

The more recent global economic and political instability has resulted in rising inflation and, for certain purchased products, more scarcity and longer delivery lead times. While we are proactively working at minimizing the impact on the Corporation, we expect the combination of those elements to put pressure on revenue, as some customers seek ways to reduce their monthly spending, and on the costs to deliver our services.

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 May 31,								Nine months ended May 31,
	2022	2021	^(1)	Change	Change in constant currency	^(2)(3)	Foreign exchange impact	^(2)	2022	2021	^(1)	Change	Change in constant currency	^(2)(3)	Foreign exchange impact	^(2)
(In thousands of    Canadian dollars,    except percentages    and per share data)	$	$		%	%		$		$	$		%	%		$
Operations
Revenue	728,118	624,308		16.6	15.2		9,056		2,175,208	1,877,769		15.8	16.4		(9,637)
Adjusted EBITDA ^(3)	347,614	296,999		17.0	15.8		3,691		1,045,988	915,086		14.3	14.8		(4,751)
Adjusted EBITDA margin ^(3)	47.7 %	47.6 %							48.1 %	48.7 %
Integration,   restructuring and   acquisition costs ^(4)	2,263	1,225		84.7					22,349	4,770		—
Profit for the period	105,406	102,786		2.5					341,927	328,241		4.2
Profit for the period attributable to owners of the Corporation	100,250	95,702		4.8					318,362	305,317		4.3
Cash flow
Cash flows from    operating activities	353,001	264,621		33.4					921,145	737,512		24.9
Free cash flow ^(3)	104,795	132,070		(20.7)	(20.3)		(458)		389,906	415,454		(6.1)	(5.7)		(1,699)
Acquisition of    property, plant and    equipment	197,345	126,570		55.9					501,066	358,006		40.0
Net capital expenditures ^(1) (3) (5)	182,181	126,570		43.9	41.4		3,159		465,404	358,006		30.0	30.4		(1,558)
Capital intensity ^(3)	25.0 %	20.3 %							21.4 %	19.1 %
Financial condition ^(6)
Cash and cash equivalents									377,710	549,054		(31.2)
Total assets									8,976,551	7,351,692		22.1
Net indebtedness ^(3) (7)									4,384,376	2,954,188		48.4
Equity attributable to    owners of the    Corporation									2,647,271	2,415,144		9.6
Per share data ^(8)
Earnings per share
Basic	2.17	2.02		7.4					6.87	6.42		7.0
Diluted	2.16	2.01		7.5					6.81	6.36		7.1
Dividends	0.705	0.64		10.2					2.115	1.92		10.2

(1)	Comparative figures have been restated following the application of the IFRS Interpretations Committee issued agenda decision Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flows) during the third quarter of fiscal 2022. Furthermore, the Corporation also changed the label of its "Acquisition of property, plant and equipment" key performance indicator measure to "Net capital expenditures" following this application. For further details, refer to the "Accounting policies" section of the Management's Discussion and Analysis ("MD&A").
(2)	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 nine-month periods ended May 31, 2021, the average foreign exchange rates used for translation were 1.2399 USD/CDN and 1.2771 USD/CDN, respectively.
(3)	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 directly comparable IFRS financial measures.
(4)	For the three and nine-month periods ended May 31, 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, as well as integration costs related to the DERYtelecom acquisition. For the three and nine-month periods ended May 31, 2021, integration, restructuring and acquisition costs resulted mostly from due diligence costs related to the acquisition of the Ohio broadband systems and costs related to the acquisition, which was completed on December 14, 2020, and integration of DERYtelecom.
(5)	For the three and nine-month periods ended May 31, 2022, net capital expenditures in constant currency amounted to $179.0 million and $467.0 million, respectively.
(6)	At May 31, 2022 and August 31, 2021.
(7)	Net indebtedness is defined as the total of bank indebtedness and principal on long-term debt, less cash and cash equivalents, excluding cash with restrictions on use.
(8)	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 of the current MD&A, and the "Fiscal 2023 financial guidelines" section 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 geopolitical instability resulting from the war in Ukraine and other contributing factors, increasing transportation lead times, scarcity of input materials and shortages of chipsets, semiconductors and key telecommunication equipment and competition for resources), regulatory risks, technology risks (including cybersecurity), financial risks (including variations in currency and interest rates), economic conditions (including elevated inflation reaching historical highs pressuring revenue, due to reduced consumer spending, and increasing costs), 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 nine-month periods ended May 31, 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", "net capital expenditures", "capital intensity" and "net indebtedness" and the most directly 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", "net capital expenditures" 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 directly 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 directly 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; - Net capital expenditures; and - Repayment of lease liabilities.	Cash flows from operating activities
Net capital expenditures	Net capital expenditures is a measure used by Cogeco Communications' management to assess the Corporation's total capital investments, net of subsidies recognized as a reduction of the cost of property, plant and equipment during the period, regardless of whether they were received in advance or not. Subsidies received in advance are recognized as a reduction of property, plant and equipment based on the costs incurred in connection with the high-speed Internet network expansion construction projects over the total expected costs. Net capital expenditures for Cogeco Communication's business units is equal to the measure reported in Note 4 of the condensed interim consolidated financial statements.	Net capital expenditures: - Acquisition of property, plant and equipment ^(1) deduct: - Subsidies received in advance recognized as a reduction of the cost of property, plant and equipment during the period.	Acquisition of property, plant and equipment
(1)   Excludes the non-cash acquisition of right-of-use assets and the purchases of spectrum licences.

Non-IFRS financial measures	Application	Calculation	Most directly comparable IFRS financial measures
Constant currency basis	Revenue, operating expenses, adjusted EBITDA, net capital expenditures 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 directly 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: - Net capital expenditures divided by: - Revenue.	No directly comparable IFRS financial measure
Net indebtedness	Net indebtedness is a measure used by management and investors to assess Cogeco Communications' financial leverage, as it represents the debt net of the available unrestricted cash and cash equivalents.	Net indebtedness: add: - Principal on long-term debt; and - Bank indebtedness deduct: - Cash and cash equivalents, excluding cash with restrictions on use.	Long-term debt, including the current portion

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN RECONCILIATION

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

	Three months ended May 31,		Nine months ended May 31,
	2022	2021	2022	2021
(In thousands of Canadian dollars, except percentages)	$	$	$	$
Profit for the period	105,406	102,786	341,927	328,241
Income taxes	28,202	31,326	78,373	102,260
Financial expense	45,334	33,506	135,268	100,555
Depreciation and amortization	166,409	128,156	468,071	379,260
Integration, restructuring and acquisition costs	2,263	1,225	22,349	4,770
Adjusted EBITDA	347,614	296,999	1,045,988	915,086
Revenue	728,118	624,308	2,175,208	1,877,769
Adjusted EBITDA margin	47.7 %	47.6 %	48.1 %	48.7 %

FREE CASH FLOW RECONCILIATION

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

	Three months ended May 31,		Nine months ended May 31,
	2022	2021	2022	2021
(In thousands of Canadian dollars)	$	$	$	$
Cash flows from operating activities	353,001	264,621	921,145	737,512
Amortization of deferred transaction costs and discounts on long-term debt	2,926	2,334	8,841	6,935
Changes in other non-cash operating activities	(54,184)	(15,536)	(44,814)	9,779
Income taxes paid	(369)	18,085	29,692	76,395
Current income taxes	(16,734)	(6,504)	(42,083)	(44,739)
Interest paid	48,984	30,342	121,137	91,472
Financial expense	(45,334)	(33,506)	(135,268)	(100,555)
Net capital expenditures	(182,181)	(126,570)	(465,404)	(358,006)
Repayment of lease liabilities	(1,314)	(1,196)	(3,340)	(3,339)
Free cash flow	104,795	132,070	389,906	415,454

NET CAPITAL EXPENDITURES RECONCILIATION

The reconciliation of net capital expenditures to the most directly comparable IFRS financial measure is as follows:

	Three months ended May 31,		Nine months ended May 31,
	2022	2021	2022	2021
(In thousands of Canadian dollars)	$	$	$	$
Acquisition of property, plant and equipment	197,345	126,570	501,066	358,006
Subsidies received in advance recognized as a reduction of the cost of property, plant and    equipment during the period	(15,164)	—	(35,662)	—
Net capital expenditures	182,181	126,570	465,404	358,006

CAPITAL INTENSITY RECONCILIATION

The calculation of capital intensity is as follows:

	Three months ended May 31,		Nine months ended May 31,
	2022	2021	2022	2021
(In thousands of Canadian dollars, except percentages)	$	$	$	$
Net capital expenditures	182,181	126,570	465,404	358,006
Revenue	728,118	624,308	2,175,208	1,877,769
Capital intensity	25.0 %	20.3 %	21.4 %	19.1 %

NET INDEBTEDNESS RECONCILIATION

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

	At May 31, 2022	At August 31, 2021
(In thousands of Canadian dollars)	$	$
Long-term debt, including the current portion	4,545,871	3,272,216
Discounts, transaction costs and other	54,548	43,032
Bank indebtedness	13,795	4,460
Cash and cash equivalents, excluding cash with restrictions on use	(229,838)	(365,520)
Net indebtedness	4,384,376	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.

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]

Conference Call:	Thursday, July 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: 1-888-396-8049
	International Access Number: 1-416-764-8646
	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.

SOURCE Cogeco Communications Inc.