Cogeco Releases its Financial Results for the First Quarter of Fiscal 2023
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Revenue increased by 6.0% (2.4% in constant currency (1)) compared to the same period of the prior year to
$789.7 million ; -
Adjusted EBITDA (1) was
$373.9 million , an increase of 5.5% (2.3% in constant currency (1)); -
Profit for the period amounted to
$123.8 million , an increase of 3.9%; -
Earnings per share on a diluted basis was
$2.67 , an increase of 10.8%; -
Net capital expenditures (1) (2) amounted to
$197 .3 million, an increase of 39.5% (33.2% in constant currency). Excluding network expansion projects (1), net capital expenditures amounted to$131 .5 million, an increase of 8.2% (3.7% in constant currency); -
Acquisition of property, plant and equipment amounted to
$235.0 million , an increase of 60.6%; -
Free cash flow (1) amounted to
$109.5 million , a decrease of 19.4% (19.0% in constant currency (1)), due to intensified network expansion projects. Free cash flow, excluding network expansion projects (1) was$175 .3 million, an increase of 12.5% (10.7% in constant currency); -
Cash flows from operating activities decreased by 34.8% to
$193.8 million , mainly resulting from working capital items; -
Purchased and cancelled 27,700
Cogeco subordinate voting shares for a total consideration of$1 .6 million; - Fiscal 2023 financial guidelines were revised; and
-
A quarterly eligible dividend of
$0.731 per share was declared, compared to$0.625 per share in the comparable quarter of fiscal 2022, an increase of 17%.
OPERATING RESULTS
For the first quarter of fiscal 2023:
- Revenue increased by 6.0% to reach
$789.7 million . On a constant currency basis, revenue increased by 2.4%, mainly explained as follows: - Canadian telecommunications' revenue increased by 4.8% as reported and in constant currency, mainly driven by the cumulative effect of high-speed Internet service additions over the past year, a higher value product mix and rate increases.
- American telecommunications' revenue increased by 7.4%. On a constant currency basis, revenue decreased by 0.1%. In constant currency, stable revenue resulted from a higher value product mix and rate increases, offset by a lower customer base in
Ohio . - Revenue in the media activities increased by 2.5%.
- Adjusted EBITDA increased by 5.5% to reach
$373.9 million . On a constant currency basis, adjusted EBITDA increased by 2.3%, mainly explained as follows: - Canadian telecommunications adjusted EBITDA increased by 5.7%, or 6.4% in constant currency, primarily due to revenue growth, partly offset by increased operating expenses.
- American telecommunications adjusted EBITDA increased by 3.8%. On a constant currency basis, adjusted EBITDA decreased by 3.4%, mainly resulting from unusually low spending in marketing and advertising and less staff last year in
Ohio while the assets were still operating under the previous owner's brand. - Profit for the period amounted to
$123.8 million , of which$42.1 million , or$2.67 per diluted share, was attributable to owners of the Corporation compared to$119.1 million ,$38.5 million , and$2.41 per diluted share, respectively, in the comparable period of fiscal 2022. The increases resulted mainly from higher adjusted EBITDA and lower acquisition, integration, restructuring and other costs, partly offset by increases in income tax expense, financial expense and depreciation and amortization expense. - Net capital expenditures, which account for construction subsidies, were
$197.3 million , compared to$141.5 million in the same period of the prior year, driven by increased network expansion activities inCanada andthe United States . Excluding network expansion projects, net capital expenditures amounted to$131.5 million compared to$121.5 million in the same period of the prior year. - Fibre-to-the-home network expansion projects continued in both
Canada andthe United States where about 20,000 and 17,000 homes passed were added during the quarter, respectively. - Acquisition of property, plant and equipment increased by 60.6% to
$235.0 million , mainly due to network expansion projects in both countries. - Free cash flow decreased by 19.4%, or 19.0% in constant currency, and amounted to
$109.5 million , mainly due to higher net capital expenditures driven by increased network expansion activity in both countries and higher financial expense, partly offset by lower acquisition, integration, restructuring and other costs, higher adjusted EBITDA and lower current income taxes. Free cash flow, excluding network expansion projects increased by 12.5%, or 10.7% in constant currency, and amounted to$175.3 million . - Cash flows from operating activities decreased by 34.8% to reach
$193.8 million , driven by a$69.9 million outflow in non-cash operating activities versus a$19.7 million inflow in the comparative period, resulting from the timing of trade and other payables, as well as increased interest and income taxes paid, partly offset by higher adjusted EBITDA and lower acquisition, integration, restructuring and other costs. - Cogeco purchased and cancelled 27,700 subordinate voting shares for a total consideration of
$1 .6 million. - At its
January 12, 2023 meeting, the Board of Directors of Cogeco declared a quarterly eligible dividend of$0.731 per share, an increase of 17% compared to$0.625 per share in the comparable quarter of fiscal 2022. - On
January 12, 2023 , the Board of Directors of Cogeco also approved the renewal of Cogeco's normal course issuer bid ("NCIB") to repurchase for cancellation up to 325,000 subordinate voting shares, subject to the approval of theToronto Stock Exchange . The current NCIB expires onJanuary 17, 2023 .
"We have met our financial targets during the first quarter of fiscal 2023," stated Philippe Jetté, President and Chief Executive Officer of Cogeco Inc.
"
"In
"With respect to our broadcasting operations, while the market remains challenging,
FISCAL 2023 REVISED FINANCIAL GUIDELINES
Cogeco has revised its fiscal 2023 financial guidelines as issued on
Compared to fiscal 2022, on a constant currency and consolidated basis, revenue and adjusted EBITDA are now expected to increase between 0.5% and 2.0%. The expected growth in revenue and adjusted EBITDA results mainly from expected growth in Internet service customers and a high value product mix. The expected increase in net capital expenditures compared to fiscal 2022 is primarily due to the continued net investments in network expansions which will increase the Corporation's footprint in
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Revised projections |
(1) |
Original projections |
(1) |
Actual |
(In millions of Canadian dollars, except percentages) |
Fiscal 2023 (constant currency) |
(2) |
Fiscal 2023 (constant currency) |
(2) |
Fiscal 2022 |
$ |
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$ |
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$ |
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Financial guidelines |
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Revenue |
Increase of 0.5% to 2.0% |
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Increase of 2% to 4% |
|
2,995 |
Adjusted EBITDA |
Increase of 0.5% to 2.0% |
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Increase of 1.5% to 3.5% |
|
1,406 |
Net capital expenditures |
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692 |
Net capital expenditures in connection with network expansion projects |
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|
157 |
Free cash flow |
Decrease of 2% to 12% |
(3) |
Decrease of 2% to 12% |
(3) |
433 |
Free cash flow, excluding network expansion projects |
Decrease of 5% to an increase of 5% |
(3) |
Decrease of 5% to an increase of 5% |
(3) |
590 |
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(1) |
Percentage of changes compared to fiscal 2022. |
(2) |
Fiscal 2023 financial guidelines are based on a USD/CDN constant exchange rate of |
(3) |
The assumed current income tax effective rate is approximately 11%. |
These financial guidelines, including the various assumptions underlying them, contain forward-looking statements concerning the business outlook for Cogeco, and should be read in conjunction with the "Forward-looking statements" section of this press release.
OPERATING ENVIRONMENT
The current global economic and political instability has resulted in rising inflation and interest rates. While we are proactively working at minimizing their impact on the Corporation, we expect the combination of those elements to continue to put pressure on revenue, as some customers seek ways to reduce their monthly spending, and on the costs to deliver our services. At the same time, and partially as a reaction to a more challenging market, some telecommunications providers have adopted more aggressive strategies and price points in order to generate sales activity.
While the Corporation experienced sustained demand for its residential high-speed Internet product in the context of the COVID-19 pandemic restrictions, a softening of the market is being observed with the re-opening of the economy in the recent quarters and a return to the workplace. While we remain cautious in our management of the situation, our priority remains on ensuring the well-being of our employees, customers and business partners. Although we have conducted our operations normally during recent quarters, we will remain vigilant should the situation change in the future.
Furthermore, our radio operations have been impacted by a portion of their customer base, such as the travel and automobile industries, reducing their advertising budgets in the context of a challenging economic environment and supply chain disruptions. In order to mitigate the impact on its operations,
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.
(1) |
Adjusted EBITDA and net capital expenditures are total of segments measures. Constant currency basis, net capital expenditures, excluding network expansion projects, free cash flow and free cash flow, excluding network expansion projects, are non-IFRS financial measures. Change in constant currency is a non-IFRS ratio. These 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 information on these financial measures, please consult the "Non-IFRS and other financial measures" section of this press release. |
(2) |
Net capital expenditures are presented net of government subsidies, including the utilization of those received in advance. |
FINANCIAL HIGHLIGHTS
Three months ended |
2022 |
2021 |
(1) |
Change |
Change in
constant |
(2) (3) |
(In thousands of Canadian dollars, except percentages and per share data) |
$ |
$ |
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% |
% |
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Operations |
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Revenue |
789,690 |
745,258 |
|
6.0 |
2.4 |
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Adjusted EBITDA (3) |
373,882 |
354,394 |
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5.5 |
2.3 |
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Acquisition, integration, restructuring and other costs (4) |
2,677 |
18,635 |
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(85.6) |
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Profit for the period |
123,808 |
119,139 |
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3.9 |
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Profit for the period attributable to owners of the Corporation |
42,081 |
38,523 |
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9.2 |
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Cash flow |
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Cash flows from operating activities |
193,821 |
297,342 |
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(34.8) |
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Free cash flow (3) |
109,483 |
135,820 |
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(19.4) |
(19.0) |
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Free cash flow, excluding network expansion projects (3) |
175,317 |
155,836 |
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12.5 |
10.7 |
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A cquisition of property, plant and equipment |
235,008 |
146,329 |
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60.6 |
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Net capital expenditures (1)(3) |
197,342 |
141,509 |
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39.5 |
33.2 |
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Net capital expenditures, excluding network expansion projects (3) |
131,508 |
121,493 |
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8.2 |
3.7 |
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Per share data (5) |
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Earnings per share |
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Basic |
2.68 |
2.42 |
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10.7 |
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Diluted |
2.67 |
2.41 |
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10.8 |
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Dividends |
0.731 |
0.625 |
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17.0 |
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As at |
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(In thousands of Canadian dollars) |
$ |
$ |
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Financial condition |
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Cash and cash equivalents |
408,498 |
379,001 |
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Total assets |
9,777,227 |
9,468,025 |
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Long-term debt |
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Current |
341,880 |
340,468 |
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Non-current |
4,671,508 |
4,398,142 |
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Net indebtedness (3) |
4,734,886 |
4,545,809 |
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Equity attributable to owners of the Corporation |
956,837 |
919,843 |
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(1) |
Comparative figures have been restated following the application of the IFRS Interpretations Committee issued agenda decision Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flows) during the third quarter of fiscal 2022. Furthermore, the Corporation also changed the label of its "Acquisition of property, plant and equipment" key performance indicator measure to "Net capital expenditures" following this application. For further details, refer to the "Accounting policies" section of the first quarter of fiscal 2023 Management's Discussion and Analysis ("MD&A"). |
(2) |
Key performance indicators presented on a constant currency basis are obtained by translating financial results from the current period denominated in US dollars at the foreign exchange rate of the comparable period of the prior year. For the three-month period ended |
(3) |
Adjusted EBITDA and net capital expenditures are total of segments measures. Free cash flow, free cash flow, excluding network expansion projects and net capital expenditures, excluding network expansion projects are non-IFRS financial measures. Change in constant currency is a non-IFRS ratio. Net indebtedness is a capital management measure. These 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 information on these financial measures, please consult the "Non-IFRS and other financial measures" section of this press release. |
(4) |
For the three-month period ended |
(5) |
Per multiple and subordinate voting share. |
FORWARD-LOOKING STATEMENTS
Certain statements contained in this
press release may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to
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-month period ended
NON-IFRS AND OTHER FINANCIAL MEASURES
This press release includes references to non-IFRS and other financial measures used by Cogeco. These financial measures are reviewed in assessing the performance of Cogeco and used in the decision-making process with regard to its business units.
Reconciliations between non-IFRS and other financial measures to the most directly comparable IFRS financial measures are provided below. Certain additional disclosures for non-IFRS and other financial measures used in this press release have been incorporated by reference and can be found in the "Non-IFRS and other financial measures" section of the Corporation's MD&A for the three-month period ended
CONSTANT CURRENCY BASIS AND FOREIGN EXCHANGE IMPACT RECONCILIATION
Consolidated
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Three months ended |
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Change |
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2022 |
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Foreign exchange impact |
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2022 in constant currency |
(1) |
2021 |
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Actual |
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In constant currency |
(In thousands of Canadian dollars, except percentages) |
$ |
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$ |
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$ |
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$ |
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% |
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% |
Revenue |
789,690 |
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(26,910) |
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762,780 |
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745,258 |
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6.0 |
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2.4 |
Operating expenses |
415,808 |
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(15,435) |
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400,373 |
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390,864 |
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6.4 |
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2.4 |
Adjusted EBITDA |
373,882 |
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(11,475) |
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362,407 |
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354,394 |
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5.5 |
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2.3 |
Free cash flow |
109,483 |
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594 |
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110,077 |
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135,820 |
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(19.4) |
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(19.0) |
Net capital expenditures |
197,342 |
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(8,904) |
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188,438 |
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141,509 |
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39.5 |
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33.2 |
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(1) |
Fiscal 2023 first-quarter in constant currency is translated at the average foreign exchange rate of fiscal 2022 first-quarter, which was |
Canadian telecommunications segment
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Three months ended |
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Change |
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2022 |
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Foreign exchange impact |
|
2022 in constant currency |
(1) |
2021 |
|
Actual |
|
In constant currency |
|
(In thousands of Canadian dollars, except percentages) |
$ |
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$ |
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$ |
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$ |
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% |
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% |
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Revenue |
372,084 |
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— |
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372,084 |
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355,047 |
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4.8 |
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4.8 |
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Operating expenses |
173,451 |
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(1,168) |
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172,283 |
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167,186 |
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3.7 |
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3.0 |
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Adjusted EBITDA |
198,633 |
|
1,168 |
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199,801 |
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187,861 |
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5.7 |
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6.4 |
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Net capital expenditures |
115,238 |
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(3,360) |
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111,878 |
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67,471 |
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70.8 |
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65.8 |
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(1) |
Fiscal 2023 first-quarter in constant currency is translated at the average foreign exchange rate of fiscal 2022 first-quarter, which was |
American telecommunications segment
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Three months ended |
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Change |
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2022 |
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Foreign exchange |
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2022 in constant currency |
(1) |
2021 |
|
Actual |
|
In constant currency |
|
(In thousands of Canadian dollars, except percentages) |
$ |
|
$ |
|
$ |
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$ |
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% |
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% |
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Revenue |
390,216 |
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(26,910) |
|
363,306 |
|
363,494 |
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7.4 |
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(0.1) |
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Operating expenses |
207,710 |
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(14,267) |
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193,443 |
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187,730 |
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10.6 |
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3.0 |
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Adjusted EBITDA |
182,506 |
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(12,643) |
|
169,863 |
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175,764 |
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3.8 |
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(3.4) |
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Net capital expenditures |
80,408 |
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(5,544) |
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74,864 |
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73,227 |
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9.8 |
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2.2 |
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(1) |
Fiscal 2023 first-quarter in constant currency is translated at the average foreign exchange rate of fiscal 2022 first-quarter, which was |
FREE CASH FLOW RECONCILIATION
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Three months ended |
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2022 |
2021 |
(In thousands of Canadian dollars) |
$ |
$ |
Cash flows from operating activities |
193,821 |
297,342 |
Amortization of deferred transaction costs and discounts on long-term debt (1) |
3,062 |
2,942 |
Changes in other non-cash operating activities |
69,949 |
(19,729) |
Income taxes paid |
47,293 |
26,336 |
Current income taxes |
(9,290) |
(15,549) |
Interest paid |
61,206 |
32,872 |
Financial expense |
(57,527) |
(45,608) |
Net capital expenditures |
(197,342) |
(141,509) |
Repayment of lease liabilities |
(1,689) |
(1,277) |
Free cash flow |
109,483 |
135,820 |
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(1) |
Included within financial expense. |
NET CAPITAL EXPENDITURES RECONCILIATION
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Three months ended |
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|
2022 |
2021 |
(1) |
(In thousands of Canadian dollars) |
$ |
$ |
|
Acquisition of property, plant and equipment |
235,008 |
146,329 |
|
Subsidies received in advance recognized as a reduction of the cost of property, plant and equipment during the period |
(37,666) |
(4,820) |
|
Net capital expenditures |
197,342 |
141,509 |
|
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|
(1) |
Comparative figures have been restated. For further details, refer to the "Accounting policies" section of the fiscal 2023 first-quarter MD&A. |
ADJUSTED EBITDA RECONCILIATION
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Three months ended |
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|
2022 |
2021 |
(In thousands of Canadian dollars) |
$ |
$ |
Profit for the period |
123,808 |
119,139 |
Income taxes |
33,480 |
18,383 |
Financial expense |
57,527 |
45,608 |
Depreciation and amortization |
156,390 |
152,629 |
Acquisition, integration, restructuring and other costs |
2,677 |
18,635 |
Adjusted EBITDA |
373,882 |
354,394 |
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NET CAPITAL EXPENDITURES AND FREE CASH FLOW EXCLUDING NETWORK EXPANSION PROJECTS RECONCILIATIONS
Net capital expenditures
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Three months ended |
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Change |
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2022 |
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Foreign |
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2022
in constant |
(1) |
2021 |
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Actual |
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In
constant |
(In thousands of Canadian dollars, except percentages) |
$ |
|
$ |
|
$ |
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$ |
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% |
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% |
Net capital expenditures |
197,342 |
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(8,904) |
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188,438 |
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141,509 |
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39.5 |
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33.2 |
Net capital expenditures in connection with network expansion |
65,834 |
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(3,362) |
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62,472 |
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20,016 |
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— |
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— |
Net capital expenditures, excluding network expansion projects |
131,508 |
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(5,542) |
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125,966 |
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121,493 |
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8.2 |
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3.7 |
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(1) |
Fiscal 2023 first-quarter in constant currency is translated at the average foreign exchange rate of fiscal 2022 first-quarter, which was |
Free cash flow
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Three months ended |
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Change |
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2022 |
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Foreign |
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2022
in |
(1) |
2021 |
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Actual |
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In
constant |
(In thousands of Canadian dollars, except percentages) |
$ |
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$ |
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$ |
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$ |
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% |
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% |
Free cash flow |
109,483 |
|
594 |
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110,077 |
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135,820 |
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(19.4) |
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(19.0) |
Net capital expenditures in connection with network expansion |
65,834 |
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(3,362) |
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62,472 |
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20,016 |
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— |
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— |
Free cash flow, excluding network expansion projects |
175,317 |
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(2,768) |
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172,549 |
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155,836 |
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12.5 |
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10.7 |
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(1) |
Fiscal 2023 first-quarter in constant currency is translated at the average foreign exchange rate of fiscal 2022 first-quarter, which was |
ADDITIONAL INFORMATION
Additional information relating to the Corporation is available on the SEDAR website at www.sedar.com and on the Corporation's website at corpo.cogeco.com.
ABOUT
Rooted in the communities it serves,
Conference Call: |
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A live audio webcast of the analyst call will be available on Cogeco's website at https://corpo.cogeco.com/cgo/en/investors/investor-relations/. The webcast will be available on Cogeco's website for a three-month period. Members of the financial community will be able to access the conference call and ask questions. Media representatives may attend as listeners only. |
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Please use the following dial-in number to have access to the conference call 5 to 10 minutes before the start of the conference: |
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Local - |
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Toll Free - |
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In order to join this conference, participants are required to provide the operator with the name of the company hosting the call, that is, |
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The conference call will be followed by the Annual Shareholders' Meetings at |
SOURCE