- Revenue increased by 5.5% (5.7% in constant currency(1)) compared to the same period of the prior year to reach $618.9 million;
- Adjusted EBITDA(1) reached $311.1 million, an increase of 10.3% (10.5% in constant currency);
- Free cash flow(1) reached $140.6 million, an increase of 36.7% (36.9% in constant currency);
- Cogeco Communications is revising its fiscal 2021 financial guidelines following the acquisition of DERYtelecom, the third largest cable provider in the province of Québec; and
- A quarterly eligible dividend of $0.64 was declared.
MONTRÉAL, Jan. 14, 2021 /CNW/ - Today, Cogeco Communications Inc. (TSX: CCA) ("Cogeco Communications" or the "Corporation") announced its financial results for the first quarter ended November 30, 2020, in accordance with International Financial Reporting Standards ("IFRS").
OPERATING RESULTS
For the first quarter of fiscal 2021:
- Revenue increased by 5.5% to reach $618.9 million. On a constant currency basis, revenue increased by 5.7%, mainly explained as follows:
- Canadian broadband services revenue increased by 2.2% as a result of the cumulative effect of sustained demand for residential high speed Internet since the beginning of the pandemic due to customers spending more time at home for work, online education and entertainment purposes, and rate increases implemented for certain services, partly offset by a decline in video service customers; and
- American broadband services revenue increased by 9.8% in constant currency resulting mainly from strong residential Internet service additions, rates increases, the impact of the Thames Valley Communications acquisition completed on March 10, 2020 and increased political advertising revenue related to the United States' presidential election. Excluding revenue from Thames Valley Communications, revenue in constant currency increased by 8.2%.
(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. |
- Adjusted EBITDA increased by 10.3% to reach $311.1 million. On a constant currency basis, adjusted EBITDA increased by 10.5%, mainly explained as follows:
- Canadian broadband services adjusted EBITDA increased by 8.8% in constant currency mainly due to an increase in revenue combined with a decrease in operating expenses attributable primarily to sales and marketing activity deferred to the second half of the year in the context of the COVID-19 pandemic; and
- American broadband services adjusted EBITDA increased by 14.3% in constant currency mainly due to an increase in revenue, the impact of the Thames Valley Communications acquisition and the timing of certain initiatives deferred to the second half of the year. Excluding adjusted EBITDA from Thames Valley Communications, adjusted EBITDA in constant currency increased by 12.8%.
- Profit for the period amounted to $114.9 million, of which $106.7 million, or $2.24 per share, was attributable to owners of the Corporation compared to $89.7 million, $84.2 million, and $1.71 per share, respectively, in the comparable period of fiscal 2020. The increase resulted mainly from higher adjusted EBITDA and lower financial expense, partly offset by the increase in income taxes;
- Free cash flow increased by 36.7% to reach $140.6 million. On a constant currency basis, free cash flow increased by 36.9% as a result of higher adjusted EBITDA combined with decreases in acquisition of property, plant and equipment due to the timing of certain initiatives, financial expense and current income taxes;
- Cash flows from operating activities increased by 62.0% to reach $241.7 million mainly due to changes in non-cash operating activities primarily due to changes in working capital, combined with higher adjusted EBITDA and the decrease in financial expense paid, partly offset by the increase in income taxes paid;
- On December 14, 2020, Cogeco Connexion, completed the acquisition of DERYtelecom, the third largest cable operator in the province of Québec, for a purchase price of $403 million, subject to customary post-closing adjustments; and
- At its January 14, 2021 meeting, the Board of Directors of Cogeco Communications declared a quarterly eligible dividend of $0.64 per share compared to $0.58 in the comparable quarter of fiscal 2020.
"We are pleased with the overall performance of Cogeco Communications for the first quarter of 2021," declared Philippe Jetté, President and Chief Executive Officer of Cogeco Communications Inc.
"Both our Canadian and American broadband segments showed strong increases in EBITDA compared to the first quarter of last year, largely explained by unique circumstances that were favourable to our business," said Mr. Jetté. "In particular, the pandemic continued to accelerate changes in customer behavior and highlight the value of our fixed broadband product while allowing for the deferral of certain operating activities to the second half of the year. This resulted in a strong operating performance which, combined with lower capital expenditures, allowed us to increase free cash flow by 37% compared to the same period last year."
"We were also pleased to announce the completion of the DERYtelecom acquisition, the third-largest cable operator in the province of Québec, enabling us to significantly expand our activities in more than 200 municipalities in Québec and adding approximately 100,000 customers to Cogeco Connexion's client base," concluded Mr. Jetté.
COVID-19 PANDEMIC
The COVID-19 pandemic continued to impact our day-to-day operations. Our priority remained on ensuring the well-being of our employees, customers and business partners. During the quarter, we continued to experience some of the trends from past quarters. Those primarily relate to sustained demand for our residential high speed Internet product and a reduction of certain expenses due to a more stable customer base (fewer connections and disconnections). In these unusual circumstances, we have also decided to delay certain sales and marketing expenses to the second half of the year in both countries. Although we are pleased with the financial results to date under the circumstances, we remain cautious in our management of this situation as uncertainties remain on the potential human, operating and financial impact of the pandemic. The Corporation's results discussed herein may not be indicative of future operational trends and financial performance.
FISCAL 2021 REVISED FINANCIAL GUIDELINES
The Corporation revised its fiscal 2021 financial guidelines giving effect to the impact from the acquisition of DERYtelecom which was completed on December 14, 2020, and considering the strong fiscal 2021 first-quarter financial results. On a constant currency basis and consolidated basis, the Corporation expects mid to high single-digit percentage growth in revenue and adjusted EBITDA, and low double-digit growth in free cash flow for fiscal 2021. Capital intensity is expected to be at approximately 20%. The acquisition of DERYtelecom is expected to have a positive impact of approximately 3% on fiscal 2021 revenue and adjusted EBITDA.
ABOUT COGECO COMMUNICATIONS
Cogeco Communications Inc. is a communications corporation. It is the 8th largest cable operator in North America, operating in Canada under the Cogeco Connexion name in Québec and Ontario, and along the East Coast of the United States under the Atlantic Broadband brand (in 11 states from Maine to Florida). The Corporation provides residential and business customers with Internet, video and telephony services through its two-way broadband fibre networks. Cogeco Communications Inc.'s subordinate voting shares are listed on the Toronto Stock Exchange (TSX: CCA).
For information:
Investors
Patrice Ouimet
Senior Vice President and Chief Financial Officer
Cogeco Communications Inc.
Tel.: 514-764-4700
[email protected]
Media
Marie-Hélène Labrie
Senior Vice President and Chief Public Affairs, Communications and Strategy Officer
Cogeco Communications Inc.
Tel.: 514-764-4700
[email protected]
Analyst Conference Call: |
Friday, January 15, 2021 at 9:30 a.m. (Eastern Time) |
Media representatives may attend as listeners only |
|
Please use the following dial-in number to have access to the conference call by dialing five minutes before the start of the conference: |
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Canada/United States Access Number: 1-877-291-4570 |
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International Access Number: 1-647-788-4919 |
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In order to join this conference, participants are only required to provide the operator with the company name, that is, Cogeco Inc. or Cogeco Communications Inc. |
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By Internet at http://corpo.cogeco.com/cca/en/investors/investor-relations/ |
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The conference call on Friday, January 15, will be followed by a live webcast of the virtual Annual Shareholders' Meetings at 11:30 a.m. Information to join the virtual Annual Shareholders' Meetings is available on the Cogeco Inc. and Cogeco Communications Inc. websites. You will be able to log into the virtual Annual Shareholders' Meetings at https://web.lumiagm.com/494965290 starting at 10:30 a.m. on January 15, 2021. Note that the Annual Shareholders' Meetings are not accessible via the Internet Explorer web browser. |
FINANCIAL HIGHLIGHTS
Three months ended |
||||||||||
Years ended August 31, |
November 30, |
November 30, |
Change |
Change in |
Foreign |
|||||
(In thousands of Canadian dollars, except percentages and per share data) |
$ |
$ |
% |
% |
$ |
|||||
Operations |
||||||||||
Revenue |
618,913 |
586,827 |
5.5 |
5.7 |
(1,171) |
|||||
Adjusted EBITDA (2) |
311,093 |
282,105 |
10.3 |
10.5 |
(510) |
|||||
Adjusted EBITDA margin (2) |
50.3 |
% |
48.1 |
% |
||||||
Integration, restructuring and acquisition costs (3) |
1,215 |
61 |
— |
|||||||
Profit for the period |
114,896 |
89,708 |
28.1 |
|||||||
Profit for the period attributable to owners of the Corporation |
106,679 |
84,178 |
26.7 |
|||||||
Cash flow |
||||||||||
Cash flows from operating activities |
241,725 |
149,192 |
62.0 |
|||||||
Acquisition of property, plant and equipment (4) |
116,222 |
121,302 |
(4.2) |
(3.9) |
(391) |
|||||
Free cash flow (2) |
140,616 |
102,844 |
36.7 |
36.9 |
(151) |
|||||
Capital intensity (2) |
18.8 |
% |
20.7 |
% |
||||||
Financial condition (5) |
||||||||||
Cash and cash equivalents |
428,982 |
366,497 |
17.0 |
|||||||
Total assets |
6,853,579 |
6,804,197 |
0.7 |
|||||||
Indebtedness (6) |
3,148,868 |
3,179,926 |
(1.0) |
|||||||
Equity attributable to owners of the Corporation |
2,341,846 |
2,268,246 |
3.2 |
|||||||
Per share data (7) |
||||||||||
Earnings per share |
||||||||||
Basic |
2.24 |
1.71 |
31.0 |
|||||||
Diluted |
2.22 |
1.70 |
30.6 |
|||||||
Dividends |
0.64 |
0.58 |
10.3 |
|||||||
(1) |
Key performance indicators presented on a constant currency basis are obtained by translating financial results from the current period denominated in US dollars at the foreign exchange rate of the comparable period of the prior year. For the three-month period ended November 30, 2019, the average foreign exchange rate used for translation was 1.3223 USD/CDN. |
(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, including reconciliation to the most comparable IFRS financial measures. |
(3) |
For the three-month period ended November 30, 2020, integration, restructuring and acquisition costs resulted mostly from due diligence costs and legal fees related to the acquisition of DERYtelecom, which was completed on December 14, 2020. |
(4) |
For the three-month period ended November 30, 2020, acquisition of property, plant and equipment in constant currency amounted to $116.6 million. |
(5) |
At November 30, 2020 and August 31, 2020. |
(6) |
Indebtedness is defined as the total of bank indebtedness and principal on long-term debt. |
(7) |
Per multiple and subordinate voting share. |
12. NON-IFRS FINANCIAL MEASURES
This section describes non-IFRS financial measures used by Cogeco Communications throughout this MD&A. These financial measures are reviewed in assessing the performance of the Corporation and used in the decision-making process with regards to our business units. Reconciliations between "free cash flow", "adjusted EBITDA", "adjusted EBITDA margin" and "capital intensity" 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 MD&A 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 |
Application |
Calculation |
Most |
Adjusted EBITDA and adjusted EBITDA
|
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: - Profit for the period add: - Income taxes; - Financial expense; - Depreciation and amortization; and - Integration, restructuring and acquisition costs. |
Profit for the |
Adjusted EBITDA margin: - Adjusted EBITDA divided by: - Revenue |
No comparable |
||
Free cash flow (1) |
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 (1): - 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; - Defined benefit plans expense, net of contributions; deduct: - Integration, restructuring and acquisition costs; - Financial expense (2); - Current income taxes; - Acquisition of property, plant and equipment (3); and - Repayment of lease liabilities.
|
Cash flows from |
Constant currency |
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 |
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 (3) divided by: - Revenue |
No comparable |
(1) |
During the second quarter of fiscal 2020, the Corporation modified the calculation method of its free cash flow in order to reflect how the Corporation analyzes and makes projections of its free cash flow. This modification has no impact on the result under the current and former calculation, and therefore free cash flow for the comparable periods were not affected by this change. |
(2) |
Excludes the non-cash gain on debt modification. |
(3) |
Excludes the acquisition of right-of-use assets and the purchases of spectrum licenses. |
12.1 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 |
|||||
November 30, |
November 30, |
||||
(In thousands of Canadian dollars, except percentages) |
$ |
$ |
|||
Profit for the period |
114,896 |
89,708 |
|||
Income taxes |
35,522 |
29,931 |
|||
Financial expense |
35,210 |
39,270 |
|||
Depreciation and amortization |
124,250 |
123,135 |
|||
Integration, restructuring and acquisition costs |
1,215 |
61 |
|||
Adjusted EBITDA |
311,093 |
282,105 |
|||
Revenue |
618,913 |
586,827 |
|||
Adjusted EBITDA margin |
50.3 |
% |
48.1 |
% |
|
12.2 FREE CASH FLOW RECONCILIATION
The reconciliation of free cash flow to the most comparable IFRS financial measure is as follows:
Three months ended |
|||||
November 30, |
November 30, |
||||
(In thousands of Canadian dollars) |
$ |
$ |
|||
Cash flows from operating activities |
241,725 |
149,192 |
|||
Amortization of deferred transaction costs and discounts on long-term debt |
2,278 |
2,537 |
|||
Changes in non-cash operating activities |
5,362 |
81,213 |
|||
Income taxes paid |
41,781 |
16,152 |
|||
Current income taxes |
(19,862) |
(23,597) |
|||
Financial expense paid |
21,852 |
39,115 |
|||
Financial expense |
(35,210) |
(39,270) |
|||
Acquisition of property, plant and equipment |
(116,222) |
(121,302) |
|||
Repayment of lease liabilities |
(1,088) |
(1,196) |
|||
Free cash flow |
140,616 |
102,844 |
|||
12.3 CAPITAL INTENSITY RECONCILIATION
The calculation of capital intensity is as follows:
Three months ended |
|||||
November 30, |
November 30, |
||||
(In thousands of Canadian dollars, except percentages) |
$ |
$ |
|||
Acquisition of property, plant and equipment |
116,222 |
121,302 |
|||
Revenue |
618,913 |
586,827 |
|||
Capital intensity |
18.8 |
% |
20.7 |
% |
|
SOURCE Cogeco Communications Inc.
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