Cogeco Communications Releases its Financial Results for the Third Quarter of Fiscal 2021

• 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 8^th 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.: [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]

SOURCE Cogeco Communications Inc.