Cogeco Inc. · TSX:CGO
Cogeco — Q3 2020 Earnings Presentation
33 slides from Cogeco's earnings presentation, Jul 15, 2020
Slide 1: Investor Update
Investor Update As of July 15, 2020 TSX: CGO | TSX: CCA
Slide 2: Contents
Contents Overview 5 Cogeco Communications 10 Financial Results 19 Cogeco 27 Appendices 31 Customer Profile 32 Acronyms 33 2
Slide 3: Forward-looking statement and Presentation of financial information
Forward-looking statement and Presentation of financial information Certain statements contained in this presentation may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to our future outlook and anticipated events, business, opera
Slide 4: Non-IFRS measures
Non-IFRS measures The following non-IFRS measures are used in the presentation and are described on page 30 and 31 of Cogeco Communications’ FY2020 third quarter shareholders’ report Free cash flow(1) adjusted EBITDA add amortization of deferred transaction costs and discounts on long-term debt shar
Slide 5: Cogeco generates over $2.4 B in revenue
Cogeco generates over $2.4 B in revenue Gestion Audem AUDET FAMILY 10.0% Equity 69.0% Voting Rights Cogeco TSX:CGO $2.47 B LTM(1) Revenue Market Capitalization $1.3 B (2) 82.9% Voting Rights 100% Voting Rights 32.6% Equity 100% Equity Cogeco Communications Cogeco Media TSX:CCA 2 ND LARGEST CABLE OPE
Slide 6: Managing the COVID-19 Crisis
Managing the COVID-19 Crisis • Cogeco Communications quickly adapted to the significant usage increase in Internet, video and telephony services as network traffic increased by 25% during peak periods: Cogeco’s ongoing investments in upgrading and expanding its hybrid fibre coaxial cable network h
Slide 7: Investment highlights: Long-term profitable growth
Investment highlights: Long-term profitable growth STRONG CANADIAN CABLE OPERATIONS • Fastest Internet speeds in a large portion of our footprint • Superior locally-based customer support • Industry leading adjusted EBITDA margin • Strong free cash flow generation SUCCESSFUL U.S. CABLE EXPANSION • S
Slide 8: Six Strategic priorities to enable our growth
Six Strategic priorities to enable our growth 8
Slide 9: Corporate social responsibility ("CSR") at Cogeco
Corporate social responsibility (“CSR”) at Cogeco • CSR program overseen by a Steering Committee composed of executives from all business units • Action plans have been developed to integrate the CSR pillars in each business plan • Key performance indicators relative to environmental, social and gov
Slide 10: Cogeco Communications
Cogeco Communications (,; coceco COMMUNICATIONS
Slide 11: Cogeco Communications overview
Cogeco Communications overview Cogeco Connexion STRONG REVENUE GROWTH THROUGH U.S. CABLE • Covers a footprint of 1,774,000 households and EXPANSION REPRESENTING 150,000 businesses which provides ample room to 46% OF COMBINED REVENUE grow the Internet and business customer base • Offers services to 8
Slide 12: Capital allocation priorities
Capital allocation priorities VALUE CREATION 1. PURSUE ACQUISITIONS OF BROADBAND BUSINESSES 2. ENHANCE AND EXTEND BROADBAND NETWORKS TO OFFER MORE EVOLVED SERVICES • Launch an IPTV service in Canada • Pursue the Florida expansion • Extend coverage of the 1 Gbps Internet service • Extend network in u
Slide 13: Cogeco Connexion: Second largest cable operator in Ontario and Quebec
Cogeco Connexion: Second largest cable operator in Ontario and Quebec Serving 428 communities from Gaspé to Windsor ULTRAFAST INTERNET 37 COMMUNITY SUPPORT TO MORE THAN 2,500 EMPLOYEES IN SPEEDS TO MORE THAN TV STATIONS AND MORE 300 LOCAL OUR COMMUNITIES 13 803,000 CUSTOMERS THAN 1000 VOLUNTEERS ORG
Slide 14: Cogeco Connexion's highlights
Cogeco Connexion’s highlights STRATEGIC RESIDENTIAL POSITIONING • Leveraging superior Internet speeds in a large portion of the footprint 120 Mbps offered in virtually all of the footprint 1 Gbps Internet service offered in 70% of the footprint Offering TiVo’s advanced multiplatform video for
Slide 15: Cogeco Connexion FY2021 priorities
Cogeco Connexion FY2021 priorities 1. RESIDENTIAL: ORGANIC GROWTH THROUGH ENHANCED SERVICES & NETWORK EXTENSIONS • Launch the IPTV platform with an enhanced WiFi as an anchor to home entertainment – Customizable video content – Enhanced WiFi managed services, extenders and security – Savings through
Slide 16: Atlantic Broadband: A scale operator from Maine to Florida
Atlantic Broadband: A scale operator from Maine to Florida Serving 505 communities in 11 states in U.S.A. 1,500 EMPLOYEES IN ULTRAFAST NAMED INDEPENDENT FEATURING LATEST 21% MINORITY OUR COMMUNITIES INTERNET SPEEDS TO CABLE OPERATOR OF HIGH DEMAND SHAREHOLDER AND KEY NEARLY 500,000 THE YEAR BY THE S
Slide 17: Atlantic Broadband's highlights
Atlantic Broadband’s highlights ENHANCED GROWTH THROUGH PRUDENT ACQUISITIONS • Largely non-metropolitan areas with fragmented competition • Completed the acquisition of Thames Valley Communications for COMPETITION SUMMARY US$50 M on March 10, 2020: EXCLUDING FLORIDA(1) − Adjacent broadband systems i
Slide 18: Atlantic Broadband: FY2021 priorities
Atlantic Broadband: FY2021 priorities 1. DRIVE GROWTH THROUGH INTERNET SUPERIORITY AND COMMERCIAL BUSINESS FOCUS • Continuing residential focus on ever-increasing demand for high-speed Internet service and speed • Further expansion in commercial markets led by hosted voice service • Building custome
Slide 19: Financial Results
Financial Results (,; coceco COMMUNICATIONS
Slide 20: Revenue and adjusted EBITDA growth
Revenue and adjusted EBITDA growth • FY2019 revenue and adjusted EBITDA grew by 6.8% and 8.5%, respectively, in constant currency(1) : includes organic and acquisition growth • FY2019 profit for the year from continuing operations has declined due to a non-recurring $94 million income tax reduction
Slide 21: Strong free cash flow generation
Strong free cash flow generation • FY2019 free cash flow has grown by 50.0%, in constant currency(1), mainly as a result of adjusted EBITDA growth and a decline in financial expense and current income taxes(2) • In FY2020, Cogeco expects to realize mid single-digit FCF growth Cash flow from Capex &
Slide 22: Compensation aligned with economic value creation ("EVC")
Compensation aligned with economic value creation (“EVC”) • Between 50% and 75% of senior executives’ compensation is variable and at risk based on long-term creation of Economic Value – Reasonable use of equity compensation to minimize dilution – Stock ownership requirements for senior executives –
Slide 23: Sustained dividend growth
Sustained dividend growth Annual dividend declared per share CAGR 10% $2.32(1) $2.10 $1.90 $1.72 $1.56 FY2016 FY2017 FY2018 FY2019 FY2020 • Sustained free cash flow generation has allowed us to pursue growth objectives while returning capital to shareholders (1) Annualized quarterly dividend of $0.5
Slide 24: History of de-leveraging following acquisitions
History of de-leveraging following acquisitions Evolution of net leverage(1) ratios Liquidity: $1,448 M Atlantic Connecticut MetroCast Cogeco Broadband & system Acquisition May 31, 2020 Peer 1 Peer 1 Hosting Acquisition Acquisition Sale(4) Revolving Credit 957 Facilities(4) 3.5(3) 3.4(3) Amounts dra
Slide 25: Low cost of capital and manageable maturities
Low cost of capital and manageable maturities August May 2019 2020(2) Average Cost of Debt(1) 4.4% 3.9% Average Life 4.9Y 4.4Y Cogeco Communications Atlantic Broadband Excluding credit facility(3) Excluding credit facility(2) $M $M To be redeemed $2,149(4)(5) July 20, 2020 with excess cash $331(4) $
Slide 26: USD debt hedges U.S. operations
USD debt hedges U.S. operations • Cogeco Communications is mostly naturally hedged from a free cash flow perspective as USD adjusted EBITDA exposure is mainly offset by interest expense on U.S. denominated debt and U.S. denominated capex • The following table(1) highlights, in Canadian dollars, the
Slide 27: Cogeco
Cogeco (; coceco
Slide 28: Cogeco public market value of equity
Cogeco Cogeco TSX:CGO PUBLIC MARKET VALUE OF EQUITY $1,343 M (16.0M shares at $83.94 (1)) 15.7M shares of CCA Investment in Cogeco Communications TSX:CCA Cogeco Media RADIO BROADCASTING $1,581 M $98.82 per CGO share(1)(2) 28 (1) As of July 7, 2020 (2) Based on a CCA share price of $100.78 multiplied
Slide 29: Cogeco Media: Strong network of radio stations
Cogeco Media: Strong network of radio stations Radio broadcasting and news agency STATIONS THAT ARE RANKED AMONGST THE BEST 23 RADIO STATIONS LARGEST PRIVATE MORE THAN 5.4 MILLION INTEGRATED SALES RADIO NEWS NETWORK LISTENERS / WEEK SERVICES IN QUÉBEC IN QUÉBEC 29
Slide 30: Cogeco Media: Most important radio broadcaster in Quebec
Cogeco Media: Most important radio broadcaster in Quebec(1) Broad radio coverage • No. 1 in commercial share of hours tuned in Montreal and in Quebec City Radio is an important media for Quebecers • 86% tune in every week • Time spent listening of 17.1 hours per week News agency with a presence in m
Slide 31: Appendices
Appendices (,; coceco COMMUNICATIONS
Slide 32: Customer profile
Customer profile Cogeco Atlantic May 31, 2020 Connexion Broadband Total Homes passed 1,773,695 916,207 2,689,902 Primary service units(1) 1,802,631 937,272 2,739,903 Internet service customers 803,073 478,689 1,281,762 Internet penetration(2) 45.3% 52.2% 47.7% Video service customers 627,608 311,845
Slide 33: Acronyms
Acronyms CAGR Compound Average Growth Rate DOCSIS Data Over Cable Service Interface Specifications Gbps Gigabits per second HPBX Hosted Private Branch Exchange IP Internet Protocol Mbps Megabits per second HMNO Hybrid Mobile Network Operator WiFi WIreless FIdelity 33