Cogeco 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, as well as transforming our radio business.
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 Inc. (TSX:CGO) ("Cogeco" 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.
"While competitive dynamics in the radio advertising market remain challenging, many of Cogeco Media's radio stations remained high in the ratings again this quarter. Furthermore, our digital advertising solutions continue to provide a growing contribution to our overall revenue.
"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
constantcurrency
(2)
(In thousands of Canadian dollars, except % and per share data) (unaudited)
$
$
%
%
Revenue
768,656
766,652
0.3
(1.0)
Adjusted EBITDA (2)
371,216
351,925
5.5
4.2
Profit for the period
81,437
90,521
(10.0)
Profit for the period attributable to owners of the Corporation
19,248
29,234
(34.2)
Adjusted profit attributable to owners of the Corporation (2)(3)
25,562
33,006
(22.6)
Cash flows from operating activities
326,723
284,370
14.9
Free cash flow (1)(2)
143,055
87,274
63.9
63.4
Free cash flow, excluding network expansion projects (1)(2)
199,966
120,202
66.4
65.5
Acquisition of property, plant and equipment
156,577
207,434
(24.5)
Net capital expenditures (2)(4)
154,570
178,481
(13.4)
(14.7)
Net capital expenditures, excluding network expansion projects (2)
97,659
145,553
(32.9)
(34.1)
Diluted earnings per share
1.99
1.87
6.4
Adjusted diluted earnings per share (2)(3)
2.65
2.12
25.0
Operating results
For the fourth quarter of fiscal 2024 ended on August 31, 2024:
Revenue remained stable at $768.7 million. On a constant currency basis(2), revenue decreased by 1.0% due to a decline in revenue in the American telecommunications segment and in the media activities, 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.
Revenue in the media activities decreased by 10.1% as competitive dynamics in the radio advertising market remain challenging.
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 5.5% to $371.2 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 $81.4 million, of which $19.2 million, or $1.99 per diluted share, was attributable to owners of the Corporation compared to $90.5 million, $29.2 million, and $1.87 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 $15.2 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 and lower financial expense.
Adjusted profit attributable to owners of the Corporation(3) was $25.6 million, or $2.65 per diluted share(3), compared to $33.0 million, or $2.12 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 $154.6 million, a decrease of 13.4% compared to $178.5 million in the same period of the prior year. In constant currency, net capital expenditures(2) were $152.3 million, a decrease of 14.7% 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 $97.7 million, a decrease of 32.9% compared to $145.6 million in the same period of the prior year. In constant currency, net capital expenditures, excluding network expansion projects(2) were $96.0 million, a decrease of 34.1% 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.
Acquisition of property, plant and equipment decreased by 24.5% to $156.6 million, mainly resulting from lower spending.
Free cash flow(1) increased by 63.9%, or 63.4% in constant currency, and amounted to $143.1 million, or $142.6 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 66.4%, or 65.5% in constant currency, and amounted to $200.0 million, or $198.9 million in constant currency.
Cash flows from operating activities increased by 14.9% to $326.7 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 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 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 $660 and $735 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. 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
3,074
Adjusted EBITDA
Stable
1,455
Net capital expenditures
$660 to $735
643
Net capital expenditures in connection with network expansion projects
$140 to $190
137
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, 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. 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 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
Three months and years ended August 31
2024
2023
(1)
Change
Change in
constantcurrency
(2)
(3)
2024
2023
(1)
Change
Change in
constantcurrency
(2)
(3)
(In thousands of Canadian dollars, except % and per share data)
$
$
%
%
$
$
%
%
Operations
Revenue
768,656
766,652
0.3
(1.0)
3,073,985
3,081,136
(0.2)
(0.7)
Adjusted EBITDA (3)
371,216
351,925
5.5
4.2
1,454,817
1,432,929
1.5
1.0
Acquisition, integration, restructuring and other costs (4)
12,177
15,239
(20.1)
63,298
36,245
74.6
Impairment of property, plant and equipment, intangible assets and goodwill
15,229
—
—
15,229
88,000
(82.7)
Profit for the period
81,437
90,521
(10.0)
349,381
350,235
(0.2)
Profit for the period attributable to owners of the Corporation
19,248
29,234
(34.2)
96,746
70,630
37.0
Adjusted profit attributable to owners of the Corporation (3)(5)
25,562
33,006
(22.6)
119,048
149,298
(20.3)
Cash flow
Cash flows from operating activities
326,723
284,370
14.9
1,185,150
968,214
22.4
Free cash flow (1)(3)
143,055
87,274
63.9
63.4
475,765
424,083
12.2
12.0
Free cash flow, excluding network expansion projects (1)(3)
199,966
120,202
66.4
65.5
613,159
596,918
2.7
2.4
Acquisition of property, plant and equipment
156,577
207,434
(24.5)
664,004
806,237
(17.6)
Net capital expenditures (3)(6)
154,570
178,481
(13.4)
(14.7)
642,747
702,913
(8.6)
(9.0)
Net capital expenditures, excluding network expansion projects (3)
97,659
145,553
(32.9)
(34.1)
505,353
530,078
(4.7)
(5.1)
Per share data (7)
Earnings per share
Basic
2.02
1.89
6.9
8.63
4.53
90.5
Diluted
1.99
1.87
6.4
8.55
4.51
89.6
Adjusted diluted (3)(5)
2.65
2.12
25.0
10.52
9.53
10.4
Dividends per share
0.854
0.731
16.8
3.416
2.924
