Cogeco Releases its Financial Results for the Second Quarter of Fiscal 2025

Three-year transformation program fully underway.

Canadian wireless launch preparation on track, with customer pre-registration now ongoing.

Year-over-year increase in customer satisfaction, in both Canada and the United States.

Fiscal 2025 financial guidelines maintained.

A quarterly dividend of $0.922 per share was declared, representing an 8.0% increase over the prior year.

MONTRÉAL, April 9, 2025 Today, Cogeco Inc. (TSX:CGO) ("Cogeco" or the "Corporation") announced its financial results for the second quarter ended February 28, 2025.

"Our results for the second quarter of fiscal 2025 demonstrate that our new operating model, focused on increasing our agility and competitiveness, is gaining traction," stated Frédéric Perron, President and CEO. "We are particularly pleased with the progress we are making on our transformation initiatives, leading to increased customer satisfaction, while alleviating industry revenue headwinds with ongoing cost reductions.

"Our Internet subscriber growth in Canada remained strong, driven by both our Cogeco and oxio brands. We continued to see modest sequential improvements in Internet subscriber metrics in the U.S., began scaling up our U.S. wireless sales, and kept our Canadian wireless launch preparation on schedule.

"At Cogeco Media, the radio advertising market presents ongoing challenges; however, our digital advertising solutions continue to be a growing contributor to revenue, and our listener engagement remains strong, such as in Montréal, where 7 of the 10 most listened-to programs come from our stations, based on independent data from Numeris.

"Our three-year transformation centered on synergies, digitization, advanced analytics, wireless, and network expansion is beginning to bear fruit. We thank our employees for their hard work and dedication, and our customers and stakeholders for their ongoing support."

Consolidated Financial Highlights

Three months ended

February 28, 2025

February 29, 2024

(1)

Change

Change in

constantcurrency

(2)

(In thousands of Canadian dollars, except % and per share data) (unaudited)

$

$

%

%

Revenue

753,247

751,908

0.2

(2.7)

Adjusted EBITDA (2)

356,905

347,782

2.6

(0.2)

Profit for the period

76,610

93,930

(18.4)

Profit for the period attributable to owners of the Corporation

18,172

23,997

(24.3)

Adjusted profit attributable to owners of the Corporation (2)(3)

20,329

24,346

(16.5)

Cash flows from operating activities

250,080

286,382

(12.7)

Free cash flow (1)(2)

112,805

100,468

12.3

10.5

Free cash flow, excluding network expansion projects (1)(2)

128,378

124,858

2.8

1.4

Acquisition of property, plant and equipment

160,335

181,234

(11.5)

Net capital expenditures (2)(4)

158,859

171,756

(7.5)

(10.6)

Net capital expenditures, excluding network expansion projects (2)

143,286

147,366

(2.8)

(6.3)

Diluted earnings per share

1.88

2.30

(18.3)

Adjusted diluted earnings per share (2)(3)

2.11

2.33

(9.4)

Operating results

For the second quarter of fiscal 2025 ended on February 28, 2025:

Revenue remained stable at $753.2 million. On a constant currency basis(2), revenue decreased by 2.7%, mainly explained as follows:

American telecommunications' revenue decreased by 4.5% on a constant currency basis (increase of 1.5% as reported), mainly due to a decline in our subscriber base, especially for entry-level services, and to a higher proportion of customers subscribing to Internet-only services. The decline was offset in part by a better product mix.

Canadian telecommunications' revenue decreased by 0.9%, mainly due to a lower revenue per customer as a result of a decline in video and wireline phone service subscribers as an increasing proportion of customers subscribe to Internet-only services, as well as a competitive pricing environment, partly offset by the cumulative effect of high-speed Internet service additions over the past years, including from network expansion projects, as well as from the Niagara Regional Broadband Network acquisition completed on February 5, 2024.

Revenue in the media activities decreased by 2.7% as competitive dynamics in the radio advertising market remain challenging.

Adjusted EBITDA increased by 2.6% to $356.9 million. On a constant currency basis, adjusted EBITDA remained stable, driven by cost reduction initiatives and operating efficiencies across the Corporation as a result of our ongoing transformation program, offset by lower revenue in both the American and Canadian telecommunications segments, and higher operating expenses in the Canadian telecommunications segment, in part to drive subscriber growth.

Canadian telecommunications adjusted EBITDA decreased by 3.2%, or 2.8% in constant currency.

American telecommunications adjusted EBITDA increased by 6.8%, or 0.5% in constant currency.

Profit for the period amounted to $76.6 million, of which $18.2 million, or $1.88 per diluted share, was attributable to owners of the Corporation compared to $93.9 million, $24.0 million, and $2.30 per diluted share, respectively, in the comparable period of fiscal 2024. The decreases in profit for the period and profit attributable to owners of the Corporation resulted mainly from higher depreciation and amortization expense, acquisition, integration, restructuring and other costs and income tax expense, partly offset by lower financial expense and the impact of the appreciation of the US dollar against the Canadian dollar.

Adjusted profit attributable to owners of the Corporation(3) was $20.3 million, or $2.11 per diluted share(3), compared to $24.3 million, or $2.33 per diluted share, last year.

Net capital expenditures were $158.9 million, a decrease of 7.5% compared to $171.8 million in the same period of the prior year. In constant currency, net capital expenditures(2) were $153.5 million, a decrease of 10.6% compared to last year, mainly due to lower spending in the Canadian telecommunications segment, primarily resulting from lower capital spending related to customer premise equipment and the timing of certain initiatives, offset in part by higher spending in the American telecommunications segment, mainly due to higher costs in relation to customer premise equipment.

Excluding network expansion projects, net capital expenditures were $143.3 million, a decrease of 2.8% compared to $147.4 million in the same period of the prior year. In constant currency, net capital expenditures, excluding network expansion projects(2) were $138.0 million, a decrease of 6.3% compared to last year, mainly due to the same factors as above.

Fibre-to-the-home network expansion projects continued, mostly in Canada, with the addition of close to 7,000 homes passed during the second quarter of fiscal 2025.

Acquisition of property, plant and equipment decreased by 11.5% to $160.3 million, mainly resulting from lower spending.

Free cash flow(1) increased by 12.3%, or 10.5% in constant currency, and amounted to $112.8 million, or $111.0 million in constant currency(2), mainly due to lower net capital expenditures and financial expense, offset in part by higher acquisition, integration, restructuring and other costs. Free cash flow, excluding network expansion projects(1) increased by 2.8%, or 1.4% in constant currency, and amounted to $128.4 million, or $126.5 million in constant currency.

Cash flows from operating activities decreased by 12.7% to $250.1 million, mostly due to lower cash from other non-cash operating activities, primarily due to the timing of payments of trade and other payables, as well as the timing of grants received in connection with network expansion projects and the collection of trade accounts receivable, and higher income taxes paid, partly offset by lower interest paid.

Cogeco maintains its fiscal 2025 financial guidelines as issued on October 31, 2024.

At its April 9, 2025 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 in the comparable quarter of fiscal 2024.

__________

(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, which includes proceeds from sale and leaseback transactions. 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 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.

Financial highlights

Three and six months ended

February 28, 2025

February 29, 2024

(1)

Change

Change in

constant currency

(2)

(3)

February 28, 2025

February 29, 2024

(1)

Change

Change in

constantcurrency

(2)

(3)

(In thousands of Canadian dollars, except % and per share data)

$

$

%

%

$

$

%

%

Operations

Revenue

753,247

751,908

0.2

(2.7)

1,518,207

1,528,080

(0.6)

(2.2)

Adjusted EBITDA (3)

356,905

347,782

2.6

(0.2)

727,989

713,815

2.0

0.4

Acquisition, integration, restructuring and other costs (gains) (4)

8,644

1,222

—

(1,004)

4,487

—

Profit for the period

76,610

93,930

(18.4)

185,006

192,659

(4.0)

Profit for the period attributable to owners of the Corporation

18,172

23,997

(24.3)

47,981

58,538

(18.0)

Adjusted profit attributable to owners of the Corporation (3)(5)

20,329

24,346

(16.5)

47,550

64,384

(26.1)

Cash flow

Cash flows from operating activities

250,080

286,382

(12.7)

458,735

523,301

(12.3)

Free cash flow (1)(3)

112,805

100,468

12.3

10.5

265,256

242,546

9.4

8.6

Free cash flow, excluding network expansion projects (1)(3)

128,378

124,858

2.8

1.4

302,628

298,596

1.4

0.7

Acquisition of property, plant and equipment

160,335

181,234

(11.5)

313,849

335,023

(6.3)

Net capital expenditures (3)(6)

158,859

171,756

(7.5)

(10.6)

309,775

318,423

(2.7)

(4.6)

Net capital expenditures, excluding network expansion projects (3)

143,286

147,366

(2.8)

(6.3)

272,403

262,373

3.8

1.6

Per share data (7)

Earnings per share

Basic

1.91

2.32

(17.7)

5.05

4.53

11.5

Diluted

1.88

2.30

(18.3)

4.97

4.50

10.4

Adjusted diluted (3)(5)

2.11

2.33

(9.4)

4.93

4.95

(0.4)

Dividends per share

0.922

0.854

8.0

1.844

1.708

8.0

(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, which includes proceeds from sale and leaseback transactions. Proceeds from sale and leaseback and other disposals of property, plant and equipment amounted to $0.9 million and $20.6 million for the three and six-month periods ended February 28, 2025, respectively ($1.6 million and $1.9 million, respectively, for the same periods of fiscal 2024). 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)

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 six-month periods ended February 29, 2024, the average foreign exchange rates used for translation were 1.3452 USD/CDN and 1.3553 USD/CDN, respectively.

(3)

Adjusted EBITDA and net capital expenditures are total of segments measures. Adjusted profit attributable to owners of the Corporation, free cash flow, free cash flow, excluding network expansion projects and net capital expenditures, 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 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.

(4)

For the three-month period ended February 28, 2025, acquisition, integration, restructuring and other costs ...