Cogeco Communications Releases its Financial Results for the Fourth Quarter of Fiscal 2024
Strong progress on the strategic priorities announced last quarter centered on synergies, digitization, advanced analytics, network expansion and wireless.
Successfully completed the combination of our Canadian and U.S. telecommunications teams.
Signed strategic partnerships to enable an upcoming launch of wireless services in Canada, in a capital-efficient manner as an MVNO.
Met or exceeded all financial guidelines set for fiscal 2024; issuing fiscal 2025 financial guidelines.
Increasing quarterly eligible dividend by 8.0% to $0.922 per share.
MONTRÉAL, Oct. 31, 2024 /CNW/ - Today, Cogeco Communications Inc. (TSX:CCA) ("Cogeco Communications" or the "Corporation") announced its financial results for the fourth quarter ended August 31, 2024 and is issuing its fiscal 2025 financial guidelines.
"Fiscal 2024 has been a year of tremendous progress for Cogeco," said Frédéric Perron, President and CEO. "Over the last six months alone, we set clear priorities to achieve sustainable growth, launched wireless in the U.S., assembled the building blocks to launch wireless in Canada as an MVNO, successfully combined our Canadian and U.S. organizations and refreshed our executive team. The recently completed restructuring, which simplified our operating model, was the first phase of a structured three-year program. We are now in a position to accelerate our digital capabilities, drive bundling across wireline and wireless, and continue to optimize our operations for ongoing growth and value creation.
"Our Canadian telecommunications business continued to perform well in Q4, driven by growth of our Internet subscriber base through Cogeco Connexion, oxio, and our network expansion program. We're particularly excited about our oxio brand's performance as its digital model has not only become a growth engine for the organization, but has also become a model for key transformation initiatives within the Corporation more broadly.
"In the U.S., the launch of Breezeline Mobile provides customers even more compelling reasons to bundle their services with us. Our Internet-led strategy and focus on operational efficiency contributed to another quarter of strong margin growth.
"Over the past year, we have maintained our balanced approach to allocating capital to growth initiatives including network expansion, product improvements, and a capital-light approach to growing wireless services in both countries, as well as returning capital through an increased dividend and share buybacks, all while progressively reducing our leverage. We will continue with our balanced approach in fiscal 2025 and with that, we are delighted to announce an increase in our quarterly dividend per share to $0.922."
Consolidated Financial Highlights
Three months ended August 31
2024
2023
(1)
Change
Change in
constant currency
(2)
(In thousands of Canadian dollars, except % and per share data) (unaudited)
$
$
%
%
Revenue
747,751
743,397
0.6
(0.7)
Adjusted EBITDA (2)
370,418
351,300
5.4
4.2
Adjusted EBITDA margin (2)
49.5 %
47.3 %
Profit for the period
85,484
91,797
(6.9)
Profit for the period attributable to owners of the Corporation
81,958
86,499
(5.2)
Adjusted profit attributable to owners of the Corporation (2)(3)
99,054
97,175
1.9
Cash flows from operating activities
319,177
281,326
13.5
Free cash flow (1)(2)
148,189
88,953
66.6
66.1
Free cash flow, excluding network expansion projects (1)(2)
205,100
121,881
68.3
67.4
Acquisition of property, plant and equipment
154,260
205,570
(25.0)
Net capital expenditures (2)(4)
152,253
176,617
(13.8)
(15.1)
Net capital expenditures, excluding network expansion projects (2)
95,342
143,689
(33.6)
(34.8)
Capital intensity (2)
20.4 %
23.8 %
Capital intensity, excluding network expansion projects (2)
12.8 %
19.3 %
Diluted earnings per share
1.94
1.95
(0.5)
Adjusted diluted earnings per share (2)(3)
2.35
2.19
7.3
Operating results
For the fourth quarter of fiscal 2024 ended on August 31, 2024:
Revenue increased by 0.6% to $747.8 million. On a constant currency basis(2), revenue decreased by 0.7% due to a decline in revenue in the American telecommunications segment, offset in part by revenue growth in the Canadian telecommunications segment, as explained below.
American telecommunications' revenue decreased by 2.3% in constant currency (remained stable as reported), mainly due to a decline in its subscriber base, especially for entry-level services, and a higher proportion of customers subscribing to Internet-only services. The decline was offset in part by higher revenue per subscriber and a better product mix resulting from improving subscriber metrics.
Canadian telecommunications' revenue increased by 0.8%, mostly driven by the cumulative effect of high-speed Internet service additions over the past year, including from network expansion projects, as well as the Niagara Regional Broadband Network acquisition completed on February 5, 2024.
Adjusted EBITDA increased by 5.4% to $370.4 million. On a constant currency basis, adjusted EBITDA increased by 4.2%, mainly due to higher adjusted EBITDA in both the Canadian and American telecommunications segments, driven by cost reduction initiatives and operating efficiencies across the Corporation as a result of our ongoing transformation program, in addition to revenue growth in the Canadian telecommunications segment.
Canadian telecommunications adjusted EBITDA increased by 3.8%, or 4.0% in constant currency.
American telecommunications adjusted EBITDA increased by 5.2%, or 2.4% in constant currency.
Profit for the period amounted to $85.5 million, of which $82.0 million, or $1.94 per diluted share, was attributable to owners of the Corporation compared to $91.8 million, $86.5 million, and $1.95 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 depreciation and amortization expense and non-cash pre-tax impairment charges of $14.9 million recognized during the quarter mostly in relation to strategic partnerships to facilitate the development of wireless services in Canada under a capital-light operating model, partly offset by higher adjusted EBITDA, lower financial expense and lower acquisition, integration, restructuring and other costs.
Adjusted profit attributable to owners of the Corporation(3) was $99.1 million, or $2.35 per diluted share(3), compared to $97.2 million, or $2.19 per diluted share, last year. The increase of adjusted diluted earnings per share over last year reflects the benefit of the Corporation's share buybacks.
Net capital expenditures were $152.3 million, a decrease of 13.8% compared to $176.6 million in the same period of the prior year. In constant currency, net capital expenditures(2) were $150.0 million, a decrease of 15.1% compared to last year, mainly resulting from lower spending due to the timing of network expansion projects in both the American and Canadian telecommunications segments, in addition to drawdowns of previously accumulated customer premise equipment inventory in the American telecommunications segment.
Excluding network expansion projects, net capital expenditures were $95.3 million, a decrease of 33.6% compared to $143.7 million in the same period of the prior year. In constant currency, net capital expenditures, excluding network expansion projects(2) were $93.7 million, a decrease of 34.8% compared to last year.
Fibre-to-the-home network expansion projects continued in both Canada and the United States by adding close to 58,000(5) homes passed during fiscal 2024, of which close to 14,000(5) were in the fourth quarter.
Capital intensity was 20.4% compared to 23.8% last year. Excluding network expansion projects, capital intensity was 12.8% compared to 19.3% in the same period of the prior year.
Acquisition of property, plant and equipment decreased by 25.0% to $154.3 million, mainly resulting from lower spending.
Free cash flow(1) increased by 66.6%, or 66.1% in constant currency, and amounted to $148.2 million, or $147.7 million in constant currency, mainly due to lower net capital expenditures, higher adjusted EBITDA and lower financial expense. Free cash flow, excluding network expansion projects(1) increased by 68.3%, or 67.4% in constant currency, and amounted to $205.1 million, or $204.1 million in constant currency.
Cash flows from operating activities increased by 13.5% to $319.2 million, mainly from the timing of payments of trade and other payables and higher adjusted EBITDA.
At its October 31, 2024 meeting, the Board of Directors of Cogeco Communications declared a quarterly eligible dividend of $0.922 per share, an increase of 8.0% compared to $0.854 per share last year.
FISCAL 2025 FINANCIAL GUIDELINES
Cogeco Communications released its fiscal 2025 financial guidelines. Fiscal 2025 will be the first year of a three-year transformation program, where investments are made in order to set the Corporation on a path to sustainable growth. On a constant currency basis, the Corporation expects fiscal 2025 revenue to remain stable resulting from a combination of Internet subscriber growth and a decline in video and wireline phone subscriptions. On a constant currency basis, fiscal 2025 adjusted EBITDA is anticipated to remain stable, mainly due to stable revenue as well as stable operating expenses, which are anticipated to benefit from the recent corporate reorganization and other operational improvements, offset by investments into new capabilities as part of a three-year transformation program. Net capital expenditures are anticipated to be between $650 and $725 million, including net investments of approximately $140 to $190 million in growth-oriented network expansions, which will increase the Corporation's footprint in Canada and the United States. Capital intensity is expected to range between 22% and 24%, or 17% and 19% excluding network expansion projects. Free cash flow and free cash flow, excluding network expansion projects, are expected to decrease between 0% and 10% due to stronger than anticipated free cash flow in fiscal 2024, continued growth-oriented investments, and higher financial expense and current income tax.
October 31, 2024
Projections
(i)
Actual
Fiscal 2025
(constant currency)
(ii)
Fiscal 2024
(In millions of Canadian dollars, except percentages)
$
$
Financial guidelines
Revenue
Stable
2,977
Adjusted EBITDA
Stable
1,442
Net capital expenditures
$650 to $725
638
Net capital expenditures in connection with network expansion projects
$140 to $190
137
Capital intensity
22% to 24%
21.4 %
Capital intensity, excluding network expansion projects
17% to 19%
16.8 %
Free cash flow
Decrease of 0% to 10%
(iii)
476
Free cash flow, excluding network expansion projects
Decrease of 0% to 10%
(iii)
613
(i)
Percentage of changes compared to fiscal 2024.
(ii)
Fiscal 2025 financial guidelines are based on a USD/CDN constant exchange rate of 1.3606 USD/CDN.
(iii)
The assumed current income tax effective rate is approximately 14%.
These financial guidelines, including the various assumptions underlying them, contain forward-looking statements concerning the business outlook for Cogeco Communications, and should be read in conjunction with the "Forward-looking statements" section of this press release.
(1)
During the fourth quarter of fiscal 2024, the Corporation updated its calculation of free cash flow and free cash flow, excluding network expansion projects, to include proceeds on disposals of property, plant and equipment. Comparative figures were restated to conform to the current presentation. For further details, please refer to the "Non-IFRS Accounting Standards and other financial measures" section of this press release.
(2)
Adjusted EBITDA and net capital expenditures are total of segments measures. Adjusted EBITDA margin and capital intensity are supplementary financial 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-IFRS Accounting Standards measures. Change in constant currency, capital intensity, excluding network expansion projects and adjusted diluted earnings per share are non-IFRS Accounting Standards ratios. These indicated terms do not have standardized definitions prescribed by IFRS® Accounting Standards, as issued by the International Accounting Standards Board ("IFRS Accounting Standards") and therefore, may not be comparable to similar measures presented by other companies. For more information on these financial measures, please consult the "Non-IFRS Accounting Standards and other financial measures" section of this press release.
(3)
Excludes the impact of non-cash impairment charges, and acquisition, integration, restructuring and other costs, net of tax and non-controlling interest.
(4)
Net capital expenditures exclude non-cash acquisitions of right-of-use assets and the purchases, and related borrowing costs, of spectrum licences, and are presented net of government subsidies, including the utilization of those received in advance.
(5)
Organic growth calculated by excluding additions resulting from acquisitions.
Financial highlights
Change in
constant currency
Change in
constant currency
Three months and years ended August 31
2024
2023
(1)
Change
(2) (3)
2024
2023
(1)
Change
(2) (3)
(In thousands of Canadian dollars, except % and per share data)
$
$
%
%
$
$
%
%
Operations
Revenue
747,751
743,397
0.6
(0.7)
2,976,524
2,984,128
(0.3)
(0.8)
Adjusted EBITDA (3)
370,418
351,300
5.4
4.2
1,442,314
1,421,066
1.5
1.0
Adjusted EBITDA margin (3)
49.5 %
47.3 %
48.5 %
47.6 %
Acquisition, integration, restructuring and other costs (4)
10,561
15,228
(30.6)
59,731
36,225
64.9
Impairment of property, plant and equipment
14,862
—
—
14,862
—
—
Profit for the period
85,484
91,797
(6.9)
354,132
417,972
(15.3)
Profit for the period attributable to owners of the Corporation
81,958
86,499
(5.2)
335,534
392,273
(14.5)
Adjusted profit attributable to owners of the Corporation (3)(5)
99,054
97,175
1.9
400,431
417,960
(4.2)
Cash flow
Cash flows from operating activities
319,177
281,326
13.5
1,175,219
962,905
22.0
Free cash flow (1)(3)
148,189
88,953
66.6
66.1
476,021
418,056
13.9
13.6
Free cash flow, excluding network expansion projects (1)(3)
205,100
121,881
68.3
67.4
613,415
590,891
3.8
3.5
Acquisition of property, plant and equipment
154,260
205,570
(25.0)
659,090
802,830
(17.9)
Net capital expenditures (3)(6)
152,253
176,617
(13.8)
(15.1)
637,833
699,506
(8.8)
(9.3)
Net capital expenditures, excluding network expansion projects (3)
95,342
143,689
(33.6)
(34.8)
500,439
526,671
(5.0)
(5.5)
Capital intensity (3)
20.4 %
23.8 %
21.4 %
23.4 %
Capital intensity, excluding network expansion projects (3)
12.8 %
19.3 %
16.8 %
17.6 %
Per share data (7)
Earnings per share
