Cogeco Releases its Financial Results for the Second Quarter of Fiscal 2022

• Revenue increased by 14.5% (14.7% in constant currency (1)) compared to the same period of the prior year to reach $748.1 million;
• Adjusted EBITDA (1) reached $349.2 million, an increase of 13.2% (13.4% in constant currency (1));
• Profit for the period amounted to $118.8 million, an increase of 7.8%;
• Free cash flow (1) amounted to $153.7 million, an increase of 9.4% (9.4% in constant currency (1));
• Cash flows from operating activities increased by 15.4% to reach $278.8 million;
• Fiscal 2022 financial guidelines were revised following a reduction of capital expenditures projections and a corresponding increase in projected free cash flow; and
• A quarterly eligible dividend of $0.625 per share was declared compared to $0.545 per share in the comparable quarter of fiscal 2021.

MONTRÉAL, April 13, 2022 /CNW/ - Today, Cogeco Inc. (TSX: CGO) ("Cogeco" or the "Corporation") announced its financial results for the second quarter ended February 28, 2022, in accordance with International Financial Reporting Standards ("IFRS").

OPERATING RESULTS

For the second quarter of fiscal 2022:

• Revenue increased by 14.5% to reach $748.1 million compared to the previous year. On a constant currency basis, revenue increased by 14.7%, mainly explained as follows:
• American broadband services revenue increased by 31.3% in constant currency mostly resulting from the Ohio broadband systems acquisition completed on September 1, 2021, and from a higher Internet service customer base and a higher value product mix.
• Canadian broadband services revenue increased by 2.1% mainly as a result of the DERYtelecom acquisition completed on December 14, 2020 and organic growth.
• Revenue in the media activities increased by 4.9%, mainly following the easing of public health restrictions, whereby last year's second quarter radio advertising revenue was directly impacted by COVID-19 related lockdown measures.
• Adjusted EBITDA increased by 13.2% to reach $349.2 million compared to the previous year. On a constant currency basis, adjusted EBITDA increased by 13.4%, mainly explained as follows:
• American broadband services adjusted EBITDA increased by 31.4% in constant currency mainly resulting from the impact of the Ohio broadband systems acquisition and a higher margin driven by the organic revenue growth, partly offset by costs incurred in connection with the rebranding of Atlantic Broadband to Breezeline and overall higher marketing and advertising activities and other costs which were unusually low last year in the context of the COVID-19 pandemic restrictions.
• Canadian broadband services adjusted EBITDA increased by 1.7% in constant currency mainly resulting from the impact of the DERYtelecom acquisition and organic growth.
• Profit for the period amounted to $118.8 million, of which $36.7 million, or $2.30 per share, was attributable to owners of the Corporation compared to $110.2 million, $33.7 million, and $2.12 per share, respectively, in the comparable period of fiscal 2021. The increases resulted mainly from higher adjusted EBITDA and lower income tax expense, partly offset by the increases in depreciation and amortization expense and financial expense.
• Free cash flow increased by 9.4% as reported and in constant currency to reach $153.7 million compared to the previous year, mainly as a result of higher adjusted EBITDA and lower current income taxes, partly offset by higher capital expenditures and financial expense.
• Cash flows from operating activities increased by 15.4% to reach $278.8 million compared to the previous year, mainly resulting from higher adjusted EBITDA and lower income taxes paid.
• Cogeco purchased and cancelled 154,388 subordinate voting shares for a total consideration of $12.3 million.
• At its April 13, 2022 meeting, the Board of Directors of Cogeco declared a quarterly eligible dividend of $0.625 per share compared to $0.545 per share in the comparable quarter of fiscal 2021.

"For this second quarter of fiscal 2022, we are satisfied with Cogeco's performance, which was in line with expectations," declared Philippe Jetté, President and Chief Executive Officer of Cogeco Inc.

"Results at our Canadian broadband business unit were steady with a continued positive customer trend for our high-speed Internet service," said Mr. Jetté. "Over the past months, Cogeco Connexion has accelerated its construction efforts to connect more homes in underserved communities in Québec and Ontario and continues its collaboration with governments to bridge the digital gap between large urban centres and less populated areas."

"The performance at our American broadband business unit, which now goes by the name Breezeline, was in line with expectations," continued Mr. Jetté. "Internet customer trends improved compared to the first quarter of fiscal 2022 and the integration of our acquired Ohio broadband systems continues to proceed according to plan."

"For our radio business, our revenue has grown despite a weaker advertising market due to sudden lockdowns brought on by the Omicron variant, however signs have been positive for the economy as public health measures are being lifted," added Mr. Jetté. "Cogeco Media's radio stations again found their way to the top of the Numeris winter surveys, demonstrating the continued commitment of our listeners. We were also pleased to announce in late March, that the Canadian Radio-television and Telecommunications Commission (CRTC) rendered a favourable decision on the transaction between Arsenal and Cogeco which will allow Arsenal to acquire CHOA and Capitale Rock stations in Abitibi, and Cogeco to acquire station CILM 98.3 located in Saguenay, a deal that is expected to close later this month."

"We recently published our ESG and Sustainability Report, which will henceforth be published annually, where we provide an update of our environmental, social and governance (ESG) performance indicators and other information related to our sustainability strategy. We are committed to continually enhance our sustainability program through the implementation of ESG best practices, which earned us again this year a place on the Corporate Knights Global 100 Most Sustainable Companies list," concluded Mr. Jetté.

Overall, Cogeco's financial results for the first half of fiscal 2022 were as expected in its annual financial guidelines, issued on November 11, 2021. However, as the Corporation expects in the second half of fiscal 2022 lower acquisition of property, plant and equipment than initially planned and a corresponding increase in projected free cash flow, the Corporation revised its fiscal 2022 financial guidelines. On a constant currency and consolidated basis, revenue and adjusted EBITDA projections are expected to remain the same as previously issued. Revised projections for acquisition of property, plant and equipment amount to between $725 and $755 million, including those related to the Ohio broadband systems integration and net investments of approximately $180 to $200 million in network expansion projects in Canada and the United States. Free cash flow is expected to decrease between 13% and 23% compared to the previous fiscal year, which is a lesser decline than under the previous financial guidelines. Excluding the fiscal year 2022 network expansion projects, free cash flow on a constant currency and consolidated basis would otherwise increase between 16% and 26% compared to the previous fiscal year.

While the impact of the COVID-19 pandemic on the Corporation is generally stabilizing, we remain cautious in our management of the situation which can evolve quickly. Our priority remains on ensuring the well-being of our employees, customers and business partners.

The pandemic has generally highlighted the value of the services we offer, especially our high-speed Internet services, as customers have been spending more time at home for work, education and entertainment purposes. We have generally witnessed strong demand initially for either obtaining or upgrading speeds of high-speed Internet, along with reduced operating costs due to a stable customer base and not being able to use all usual sales channels. However, operations have generally been conducted in a normal fashion during the recent quarters.

The pandemic has also accelerated the willingness of various governments to support access to high-speed Internet in underserved and unserved areas by providing subsidies to partially pay for network expansions in such areas. The Corporation has partnered with governments in both Canada and the United States in such endeavor and expects to do more in the years to come.

As for our radio operations, the pandemic continues to have an impact due to restrictions imposed on portions of the customer base, such as the travel industry, as well as supply chain disruptions limiting other customers' businesses, such as the automobile industry. Furthermore, listeners are spending less time commuting in their cars during the pandemic, which negatively impacts listening hours. In order to mitigate the impact on its operations, Cogeco Media continues to manage its operating expenses tightly, as it did since the beginning of the pandemic, while maintaining quality programming.

The Corporation's results discussed herein may not be indicative of future operational trends and financial performance. Please refer to the "Forward-looking statements" section.

Certain statements contained in this press release may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to Cogeco Inc.'s ("Cogeco" or the "Corporation") future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee", "ensure" or other similar expressions concerning matters that are not historical facts. Particularly, statements regarding the Corporation's financial guidelines, future operating results and economic performance, objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, purchase price allocation, tax rates, weighted average cost of capital, performance and business prospects and opportunities, which Cogeco believes are reasonable as of the current date. Refer in particular to the "Corporate objectives and strategies" and "Fiscal 2022 financial guidelines" sections of the Corporation's 2021 annual MD&A and the "Fiscal 2022 revised financial guidelines" of the current MD&A for a discussion of certain key economic, market and operational assumptions we have made in preparing forward-looking statements. While management considers these assumptions to be reasonable based on information currently available to the Corporation, they may prove to be incorrect. Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what Cogeco currently expects. These factors include risks such as competitive risks, business risks (including potential disruption to our supply chain worsened by the increasing instability resulting from the war in Ukraine, increasing transportation lead times, scarcity of input materials and shortages of chipsets, semi-conductors and key telecommunication equipment), regulatory risks, technology risks (including cybersecurity), financial risks (including variations in currency and interest rates), economic conditions (including elevated inflation and a potential recession), human-caused and natural threats to our network, infrastructure and systems, community acceptance risks, ethical behavior risks, ownership risks, litigation risks and public health crisis and emergencies such as the COVID-19 pandemic, many of which are beyond the Corporation's control. Moreover, the Corporation's radio operations are significantly exposed to advertising budgets from the retail industry, which can fluctuate due to changing economic conditions. For more exhaustive information on these risks and uncertainties, the reader should refer to the "Uncertainties and main risk factors" sections of the Corporation's 2021 annual MD&A and of the current MD&A. These factors are not intended to represent a complete list of the factors that could affect Cogeco and future events and results may vary significantly from what management currently foresees. The reader should not place undue importance on forward-looking information contained in this press release which represent Cogeco's expectations as of the date of this press release (or as of the date they are otherwise stated to be made) and are subject to change after such date. While management may elect to do so, the Corporation is under no obligation (and expressly disclaims any such obligation) and does not undertake to update or alter this information at any particular time, whether as a result of new information, future events or otherwise, except as required by law.

All amounts are stated in Canadian dollars unless otherwise indicated. This press release should be read in conjunction with the Corporation's MD&A for the three and six-month periods ended February 28, 2022, the Corporation's condensed interim consolidated financial statements and the notes thereto for the same periods prepared in accordance with International Financial Reporting Standards ("IFRS") and the Corporation's 2021 Annual Report.

This section describes non-IFRS financial measures used by Cogeco throughout this press release. These financial measures are reviewed in assessing the performance of the Corporation and used in the decision-making process with regard to its business units. Reconciliations between "adjusted EBITDA", "free cash flow", "indebtedness" and "net indebtedness" 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 press release 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 press release refers to the adjusted EBITDA margin and capital intensity of the Canadian broadband services and the American broadband services segments, key performance indicators used by Cogeco Communications' management and investors, respectively, to value its performance and to assess its investment in capital expenditures in order to support a certain level of revenue. These financial measures do not have standard definitions prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies.

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

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

The reconciliation of indebtedness and net indebtedness to the most comparable IFRS financial measure is as follows:

Rooted in the communities it serves, Cogeco Inc. (TSX: CGO) is a growing competitive force in the North American telecommunications and media sectors with a legacy of 65 years. Through its business units Cogeco Connexion and Breezeline (formerly Atlantic Broadband), Cogeco provides Internet, video and phone services to 1.6 million residential and business customers in Quebec and Ontario in Canada as well as in twelve states in the United States. Through Cogeco Media, it owns and operates 23 radio stations as well as a news agency, primarily in Quebec. To learn more about Cogeco's growth strategy and its commitment to support its communities, promote inclusive growth and fight climate change, please visit us online at corpo.cogeco.com.

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

SOURCE Cogeco Inc.

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