Cogeco Reports Strong Performance For The First Quarter Of Fiscal 2021

• Revenue increased by 4.5% (4.7% in constant currency (1) ) compared to the same period of the prior year to reach $646.4 million ;
• Adjusted EBITDA (1) reached $321.1 million , an increase of 10.5% (10.7% in constant currency);
• Free cash flow (1) reached $148.2 million , an increase of 36.1% (36.3% in constant currency);
• Cogeco 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 $0.545 was declared.

MONTRÉAL, Jan. 14, 2021 /CNW Telbec/ - Today, Cogeco Inc. (TSX: CGO) ("Cogeco" 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 4.5% to reach $646.4 million . On a constant currency basis, revenue increased by 4.7%, 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%; partly offset by
• lower revenue in the media activities due to a decline of the radio advertising market resulting directly from the COVID-19 pandemic.
• Adjusted EBITDA increased by 10.5% to reach $321.1 million . On a constant currency basis, adjusted EBITDA increased by 10.7%, 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;
• 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 $120.4 million of which $40.5 million , or $2.55 per share, was attributable to owners of the Corporation compared to $94.2 million , $31.3 million , and $1.96 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 36.1% to reach $148.2 million . On a constant currency basis, free cash flow increased by 36.3% 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 55.9% to reach $235.5 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 declared a quarterly eligible dividend of $0.545 per share compared to $0.475 per share in the comparable quarter of fiscal 2020.

"We are pleased with the overall performance of Cogeco for the first quarter of 2021," declared Philippe Jetté, President and Chief Executive Officer of Cogeco 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 36% 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."

"As for Cogeco Media, we are satisfied with its results and have been maintaining our financial discipline given the continued impact of the pandemic on the advertising market," 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.

As for our radio operations, they were negatively impacted by the pandemic with a revenue decline of 13% in the quarter compared to the previous year, due to certain segments of the retail industry reducing or cutting their advertising activities. However, the decline in revenue was an improvement compared to the previous quarter which had 29% year-over-year revenue decline. As it did in prior quarters, Cogeco Media managed its operating expenses tightly while maintaining quality programming.

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 high single-digit growth in free cash flow for fiscal 2021. The acquisition of DERYtelecom is expected to have a positive impact of approximately 3% on fiscal 2021 revenue and adjusted EBITDA.

ABOUT COGECO

Cogeco Inc. is a diversified holding corporation which operates in the communications and media sectors. Its Cogeco Communications Inc. subsidiary provides residential and business customers with Internet, video and telephony services through its two-way broadband fibre networks, operating in Québec and Ontario, Canada , under the Cogeco Connexion name, and in the United States under the Atlantic Broadband brand (in 11 states along the East Coast, from Maine to Florida ). Its Cogeco Media subsidiary owns and operates 23 radio stations with complementary radio formats and extensive coverage serving a wide range of audiences mainly across the province of Québec, as well as Cogeco News, a news agency. Cogeco's subordinate voting shares are listed on the Toronto Stock Exchange (TSX: CGO). The subordinate voting shares of Cogeco Communications Inc. are also listed on the Toronto Stock Exchange (TSX: CCA).

For information:

Investors
Patrice Ouimet
Senior Vice President and Chief Financial Officer
Cogeco 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 Inc.
Tel.: 514-764-4700
marie-helene.labrie@cogeco.com

FINANCIAL HIGHLIGHTS

12. NON-IFRS FINANCIAL MEASURES

This section describes non-IFRS financial measures used by Cogeco 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" and "adjusted EBITDA" 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. In addition, this MD&A refers to the capital intensity of the Canadian broadband services and the American broadband services segments, a key performance indicator used by Cogeco Communications' management and investors to assess the Cogeco Communication's investment in capital expenditures in order to support a certain level of revenue. This financial measure does not have standard definitions prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies.

12.1 ADJUSTED EBITDA RECONCILIATION

The reconciliation of adjusted EBITDA to the most comparable IFRS financial measure is as follows:

12.2 FREE CASH FLOW RECONCILIATION

The reconciliation of free cash flow to the most comparable IFRS financial measure is as follows:

SOURCE Cogeco Inc.

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