- Revenue increased by 3.1% (8.8% in constant
currency(1)) compared to the same period of the prior
year to reach $624.3 million;
- Adjusted EBITDA(1) reached $297.0 million, an increase of 0.8% (5.8% in
constant currency);
- Free cash flow(1) reached $132.1 million, an increase of 13.7% (14.0% in
constant currency);
- Cogeco Communications announced the acquisition of
WideOpenWest's Ohio broadband
systems; and
- A quarterly eligible dividend of $0.64 was declared.
MONTRÉAL, July 14, 2021 /CNW Telbec/
- Today, Cogeco Communications Inc. (TSX: CCA) ("Cogeco
Communications" or the "Corporation") announced its financial
results for the third quarter ended May 31, 2021, in
accordance with International Financial Reporting Standards
("IFRS").
OPERATING RESULTS
For the third quarter of fiscal 2021:
- Revenue increased by 3.1% to reach $624.3 million. On a constant currency basis,
revenue increased by 8.8%, mainly explained as follows:
-
- Canadian broadband services revenue increased by 10.2% as a
result of the DERYtelecom acquisition completed on December 14, 2020, the cumulative effect of
sustained demand for residential high-speed Internet since the
beginning of the pandemic and rate increases implemented for
certain services, partly offset by a retroactive adjustment of
$4.6 million recognized following the
CRTC's decision on aggregated wholesale Internet rates during the
third quarter of fiscal 2021 and a decline in video and telephony
service customers as some customers have migrated to Internet-only
services. Excluding the acquisition of DERYtelecom and the impact
of the $4.6 million adjustment
mentioned above, revenue in constant currency increased by
3.0%.
- American broadband services revenue increased by 7.2% in
constant currency resulting mainly from a higher Internet service
customer base, rate increases implemented for certain services and
last year's temporary waiving of late fees charged to customers as
a relief measure in the context of the COVID-19 pandemic, which
were reinstated in all states by September
2020.
- Adjusted EBITDA increased by 0.8% to reach $297.0 million. On a constant currency basis,
adjusted EBITDA increased by 5.8%, mainly explained as follows:
-
- Canadian broadband services adjusted EBITDA increased by 6.4%
in constant currency mainly resulting from revenue growth and the
impact of the DERYtelecom acquisition, partly offset by the
$4.6 million retroactive adjustment
following the CRTC's decision on aggregated wholesale Internet
rates, combined with higher sales and marketing initiatives
deferred to the second half of the year in the context of the
COVID-19 pandemic. Excluding the acquisition of DERYtelecom and the
impact of the $4.6 million adjustment
mentioned above, adjusted EBITDA in constant currency increased by
1.6%.
- American broadband services adjusted EBITDA increased by 5.9%
in constant currency mainly resulting from revenue growth driven by
a continued increase in customer demand for high-speed offerings
Internet service and by rate increases implemented for certain
services, partly offset by a non-recurring gain on disposal of
property, plant and equipment amounting to US$1.7 million recorded during the third quarter
of fiscal 2020, combined with higher sales and marketing
initiatives deferred to the second half of the year in the context
of the COVID-19 pandemic. Excluding the non-recurring gain on
disposal of property, plant and equipment, adjusted EBITDA in
constant currency increased by 8.0%.
- Profit for the period amounted to $102.8
million, of which $95.7
million, or $2.02 per share,
was attributable to owners of the Corporation compared to
$96.7 million, $90.8 million, and $1.89 per share, respectively, in the comparable
period of fiscal 2020. The increases resulted mainly from a lower
financial expense and a higher adjusted EBITDA, partly offset by
the depreciation of the US dollar and a higher total income taxes
expense.
- Free cash flow increased by 13.7% (14.0% in constant currency)
to reach $132.1 million as a result
of higher adjusted EBITDA, the decrease in current income taxes,
mainly following the harmonization of the Québec tax legislation
with the federal's accelerated tax depreciation measure, and the
decrease in financial expense, partly offset by higher capital
expenditures.
- Cash flows from operating activities decreased by 6.2% to reach
$264.6 million, mainly due to the
increase in income taxes paid and the depreciation of the US
dollar, partly offset by the decrease in interest paid.
- Cogeco Communications purchased and cancelled 414,000
subordinate voting shares for a total consideration of $49.0 million.
- Cogeco Communications maintains its fiscal 2021 revised
financial guidelines as issued on January
14, 2021.
- Cogeco Communications released its fiscal 2022 preliminary
financial guidelines. On a constant currency basis, the Corporation
expects fiscal 2022 revenue and adjusted EBITDA to grow between
3.5% and 5.5%. Acquisition of property, plant and equipment should
reach between $690 and $720 million, including net investments of
approximately $230 to $240 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 30% and 35%. Excluding
the fiscal year 2022 network expansion projects, free cash flow on
a constant currency and consolidated basis would otherwise increase
between 13% and 18%.
- At its July 14, 2021 meeting, the
Board of Directors of Cogeco Communications declared a quarterly
eligible dividend of $0.64 per share
compared to $0.58 per share in the
comparable quarter of fiscal 2020.
|
(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.
|
"Overall, we are satisfied with Cogeco Communications'
performance for the third quarter of fiscal 2021, which is in line
with expected results in constant currency," declared Philippe
Jetté, President and Chief Executive Officer of Cogeco
Communications Inc.
"In Canada, we continue to see
positive trends with our Internet services and growth in our
residential business, with the changes over the past year in how
Canadians work and live," said Mr. Jetté. "Over the course of
the quarter, Cogeco Connexion announced several network expansion
projects in collaboration with the governments of Québec and
Ontario to expand its high-speed
Internet services to underserved and unserved areas. The CRTC's
decision to maintain the 2016 wholesale rates for broadband
services, rather than adopting the even lower rates of 2019,
provides a more stable regulatory framework pending the CRTC's
review of the methodology to establish these rates. This helps
ensure continuity in our current investments to increase access to
high-speed Internet in communities outside large urban centres. In
addition, Cogeco welcomed the CRTC's decision on mobile wireless to
allow regional players investing in telecommunications
infrastructure and spectrum to access the wireless networks of
Canada's dominant providers. This
regulatory framework provides more clarity as we develop our plans
to offer mobile wireless services in a financially disciplined
way."
"At Atlantic Broadband, we are seeing a continued increase in
revenue and adjusted EBITDA results and an overall trend to more
high-speed Internet subscribers propelled by our Broadband First
offer strategy launched in the second quarter," added Mr. Jetté.
"We also recently announced Atlantic Broadband's acquisition of the
WOW Ohio systems, representing a strong strategic fit that allows
us to continue adding scale to our growing and profitable U.S.
broadband business."
"We recently unveiled Cogeco's commitment on diversity and
inclusion, which can be consulted on our corporate website. While
Cogeco has long had social inclusion at its core, we are now making
public our stance on the importance of diversity and inclusion and
committing to continued action on this front. In addition, we were
honoured to be recognized by Corporate Knights as one of
Canada's top 50 Corporate Citizens
for the fourth consecutive year, with a new high ranking of 22 on
the list. For a second year, Cogeco also recently received the
Caring Company Certification from Imagine Canada, which recognizes
outstanding leadership in community investment and social
responsibility in Canada. We are
proud of these recognitions as we continue to strengthen and invest
in our corporate social responsibility practices, ensuring the
company operates responsibly and sustainably, while being a good
corporate citizen," concluded Mr. Jetté.
ACQUISITION OF WIDEOPENWEST'S
OHIO BROADBAND SYSTEMS
On June 30, 2021, Cogeco
Communications announced that Atlantic Broadband had entered into a
definitive agreement with WideOpenWest, Inc. ("WOW") to purchase
all of its broadband systems located in Ohio ("Ohio
broadband systems"). The Ohio
broadband systems are valued at US$1.125
billion, plus transaction and financing costs. The
Ohio broadband systems pass
approximately 688,000 homes and businesses in Cleveland and Columbus and served approximately 196,000
Internet, 61,000 video and 35,000 telephony customers, as of
March 31, 2021. The acquisition
represents a strong strategic fit for Cogeco Communications as it
is complementary to Atlantic Broadband's existing footprint and
capitalizes on its existing platform. The purchase price and
transaction costs will be financed through US$900 million of committed secured debt
financing provided to Atlantic Broadband, and excess cash on hand.
The acquisition is subject to regulatory approvals along with other
customary closing conditions and is expected to close in the first
quarter of fiscal 2022.
COVID-19 PANDEMIC
The COVID-19 pandemic continues to impact our day-to-day
operations although public health restrictions are starting to be
lifted in part as vaccines are continuing to be rolled out, in both
Canada and the United States. Our priority remains on
ensuring the well-being of our employees, customers and business
partners. During the first nine months of fiscal 2021, we continued
to experience some of the trends from past quarters. Those
primarily relate to sustained demand for our residential high-speed
Internet product, due to customers spending more time at home for
work, online education and entertainment purposes, and a reduction
of certain expenses due to a more stable customer base (fewer
connections and disconnections) and not being able to use all usual
sales channels. In these unusual circumstances, we have also
decided to delay during the first half of fiscal 2021, certain
sales and marketing expenses to the second half of the year in both
countries. We expect that the current "work-from-home" trend will
continue after the COVID-19 pandemic, where more workers will work
from home than pre-pandemic on a partial or full-time basis. This
trend should benefit our various network expansion projects,
especially in underserved and unserved areas. 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.
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).
Conference
Call:
|
Thursday, July 15,
2021 at 11:00 a.m. (Eastern Daylight 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.
|
FINANCIAL HIGHLIGHTS
|
|
Three months ended
May 31,
|
Nine months ended May
31,
|
|
2021
|
2020
|
Change
|
Change in
constant
currency (1)(2)
|
Foreign
exchange
impact (1)
|
2021
|
2020
|
Change
|
Change in
constant
currency (1)(2)
|
Foreign
exchange
impact (1)
|
(In thousands of
Canadian dollars, except percentages and per share
data)
|
$
|
$
|
%
|
%
|
$
|
$
|
$
|
%
|
%
|
$
|
Operations
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
624,308
|
605,821
|
3.1
|
8.8
|
(34,874)
|
1,877,769
|
1,779,115
|
5.5
|
8.1
|
(45,642)
|
Adjusted EBITDA
(2)
|
296,999
|
294,717
|
0.8
|
5.8
|
(14,700)
|
915,086
|
854,194
|
7.1
|
9.4
|
(19,402)
|
Adjusted EBITDA
margin (2)
|
47.6%
|
48.6%
|
|
|
|
48.7%
|
48.0%
|
|
|
|
Integration,
restructuring and acquisition costs (3)
|
1,225
|
12
|
—
|
|
|
4,770
|
5,531
|
(13.8)
|
|
|
Profit for the
period
|
102,786
|
96,724
|
6.3
|
|
|
328,241
|
300,443
|
9.3
|
|
|
Profit for the period
attributable to owners of the Corporation
|
95,702
|
90,771
|
5.4
|
|
|
305,317
|
284,340
|
7.4
|
|
|
Cash
flow
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities
|
264,621
|
282,229
|
(6.2)
|
|
|
737,512
|
663,074
|
11.2
|
|
|
Acquisition of
property, plant and equipment (4)
|
126,570
|
123,653
|
2.4
|
11.3
|
(11,093)
|
358,006
|
355,795
|
0.6
|
4.6
|
(14,187)
|
Free cash flow
(2)
|
132,070
|
116,158
|
13.7
|
14.0
|
(386)
|
415,454
|
344,064
|
20.7
|
21.1
|
(1,070)
|
Capital intensity
(2)
|
20.3%
|
20.4%
|
|
|
|
19.1%
|
20.0%
|
|
|
|
Financial
condition (5)
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
—
|
366,497
|
|
|
|
305,440
|
366,497
|
(16.7)
|
|
|
Total
assets
|
105
|
6,804,197
|
|
|
|
7,020,030
|
6,804,197
|
3.2
|
|
|
Indebtedness
(6)
|
3,148,868
|
3,179,926
|
|
|
|
3,128,047
|
3,179,926
|
(1.6)
|
|
|
Equity attributable
to owners of the Corporation
|
—
|
2,268,246
|
|
|
|
2,348,645
|
2,268,246
|
3.5
|
|
|
Per share data
(7)
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
|
|
|
Basic
|
2.02
|
1.89
|
6.9
|
|
|
6.42
|
5.84
|
9.9
|
|
|
Diluted
|
2.01
|
1.87
|
7.5
|
|
|
6.36
|
5.78
|
10.0
|
|
|
Dividends
|
0.64
|
0.58
|
10.3
|
|
|
1.92
|
1.74
|
10.3
|
|
|
|
|
(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 nine-month periods
ended May 31, 2020, the average foreign exchange rates used for
translation were 1.3994 USD/CDN and 1.3466 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, including reconciliation to the most
comparable IFRS financial measures.
|
(3)
|
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 WideOpenWest's Ohio
broadband systems, announced on June 30, 2021, and costs related to
the acquisition and integration of DERYtelecom, which was completed
on December 14, 2020. For the three and nine-month periods ended
May 31, 2020, integration, restructuring and acquisition costs
resulted primarily from organizational changes initiated across the
Corporation resulting in cost optimization, as well as the
acquisition and integration of Thames Valley Communications, which
was completed on March 10, 2020.
|
(4)
|
For the three and
nine-month periods ended May 31, 2021, acquisition of
property, plant and equipment in constant currency amounted to
$137.7 million and $372.2 million, respectively.
|
(5)
|
At May 31, 2021
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
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
(1);
- Current income
taxes;
- Acquisition of
property, plant and equipment (2); 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 (2)
divided
by:
- Revenue
|
No comparable IFRS
financial measure
|
|
|
(1)
|
Excludes the non-cash
gain on debt modification of $22.9 million recognized in the second
quarter of fiscal 2020.
|
(2)
|
Excludes the non-cash
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
May 31,
|
Nine months ended May
31,
|
|
2021
|
2020
|
2021
|
2020
|
(In thousands of
Canadian dollars, except percentages)
|
$
|
$
|
$
|
$
|
Profit for the
period
|
102,786
|
96,724
|
328,241
|
300,443
|
Income
taxes
|
31,326
|
28,584
|
102,260
|
82,016
|
Financial
expense
|
33,506
|
40,356
|
100,555
|
91,791
|
Depreciation and
amortization
|
128,156
|
129,041
|
379,260
|
374,413
|
Integration,
restructuring and acquisition costs
|
1,225
|
12
|
4,770
|
5,531
|
Adjusted
EBITDA
|
296,999
|
294,717
|
915,086
|
854,194
|
Revenue
|
624,308
|
605,821
|
1,877,769
|
1,779,115
|
Adjusted EBITDA
margin
|
47.6%
|
48.6%
|
48.7%
|
48.0%
|
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
May 31,
|
Nine months ended May
31,
|
|
2021
|
2020
|
2021
|
2020
|
(In thousands of
Canadian dollars)
|
$
|
$
|
$
|
$
|
Cash flows from
operating activities
|
264,621
|
282,229
|
737,512
|
663,074
|
Amortization of
deferred transaction costs and discounts on long-term
debt
|
2,334
|
2,383
|
6,935
|
7,159
|
Changes in non-cash
operating activities
|
(15,536)
|
(19,512)
|
9,779
|
56,310
|
Income taxes paid
(received)
|
18,085
|
(6,552)
|
76,395
|
27,414
|
Current income
taxes
|
(6,504)
|
(15,845)
|
(44,739)
|
(43,919)
|
Interest
paid
|
30,342
|
38,816
|
91,472
|
108,272
|
Financial expense
(1)
|
(33,506)
|
(40,356)
|
(100,555)
|
(114,689)
|
Acquisition of
property, plant and equipment
|
(126,570)
|
(123,653)
|
(358,006)
|
(355,795)
|
Repayment of lease
liabilities
|
(1,196)
|
(1,352)
|
(3,339)
|
(3,762)
|
Free cash
flow
|
132,070
|
116,158
|
415,454
|
344,064
|
|
|
(1)
|
Excludes the non-cash
gain on debt modification of $22.9 million recognized during the
second quarter of fiscal 2020.
|
12.3 CAPITAL INTENSITY RECONCILIATION
The calculation of capital intensity is as follows:
|
|
|
|
|
|
Three months ended
May 31,
|
Nine months ended May
31,
|
|
2021
|
2020
|
2021
|
2020
|
(In thousands of
Canadian dollars, except percentages)
|
$
|
$
|
$
|
$
|
Acquisition of
property, plant and equipment
|
126,570
|
123,653
|
358,006
|
355,795
|
Revenue
|
624,308
|
605,821
|
1,877,769
|
1,779,115
|
Capital
intensity
|
20.3%
|
20.4%
|
19.1%
|
20.0%
|
For information:
Investors
Patrice
Ouimet
Senior Vice President and Chief Financial Officer
Cogeco Communications Inc.
Tel.: 514-764-4700
patrice.ouimet@cogeco.com
Media
Marie-Hélène Labrie
Senior Vice President and Chief Public Affairs, Communications and
Strategy Officer
Cogeco Communications Inc.
Tel.: 514-764-4700
marie-helene.labrie@cogeco.com
SOURCE Cogeco Communications Inc.