Cogeco Inc. · TSX:CGO
Cogeco — Investor Presentation (July 2021)
39 slides from Cogeco's investor presentation, Jul 14, 2021
Slide 1: Investor Update
Investor Update As of July 14, 2021 TSX: CGO | TSX: CCA
Slide 2: Contents
Contents Overview 5 Cogeco Communications 11 Financial Results 25 Cogeco 33 Appendices 37 Customer Profile 38 Acronyms 39 2
Slide 3: Forward-looking statements and Presentation of financial information
Forward-looking statements 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, oper
Slide 4: Non-IFRS financial measures
Non-IFRS financial measures The following non-IFRS financial measures are used in the presentation and are described in section 16 of Cogeco Communications’ FY2020 annual report and in section 12 of the 3rd quarter shareholders’ report Adjusted EBITDA profit for the period and/or year from continuin
Slide 5: About Cogeco
About Cogeco 5
Slide 6: Cogeco generates $2.6 B in revenue
Cogeco generates $2.6 B in revenue Gestion Audem AUDET FAMILY 10% Equity 69% Voting Rights Cogeco TSX:CGO $2.6 B LTM(1) Revenue Market Capitalization $1.6 B (2) 83% Voting Rights 100% Voting Rights 33% Equity 100% Equity Cogeco Communications Cogeco Media TSX:CCA 2 ND LARGEST CABLE OPERATOR LTM(1) R
Slide 7: Unique North American Broadband platform
Unique North American Broadband platform SUCCESSFUL US CABLE EXPANSION • Agreement with WideOpenWest ("WOW!") to purchase all of its Ohio broadband systems provides an opportunity to increase US revenue base by 28% and deliver superior growth • Management team has a strong track-record of successful
Slide 8: Cogeco Communications: Key strategic moves
Cogeco Communications: Key strategic moves • Since 2012, Cogeco is pursuing its expansion in the US market through 6 broadband acquisitions totaling approximately CDN$5.2 billion • Acquisitions include an agreement to acquire WOW!’s Ohio broadband systems, serving 198,000 customers, for US$1.125 bil
Slide 9: Five strategic growth pillars
Five strategic growth pillars Customer Employee Market Cost Brand Experience Experience Expansion Efficiency Value Deliver a Foster a highly Augment our Optimize operational Build a strong distinctive customer collaborative, geographic reach effectiveness and and socially experience by engaging and
Slide 10: Delivering the best and most sustainable value to all our stakeholders through strong ESG practices
Delivering the best and most sustainable value to all our stakeholders through strong ESG practices Environmental Social Governance First Canadian Taking additional steps to foster a In the top tier of Canadian telecommunications company culture of Diversity & Inclusion (D&I) family-controlled dual-
Slide 11: Cogeco Communications
Cogeco Communications 11
Slide 12: Cogeco Communications overview
Cogeco Communications overview ATLANTIC BROADBAND Strong revenue growth through US • Cogeco Communications acquired Atlantic Broadband in expansion representing 51% of November 2012 and the segment has grown through 4 combined revenue other acquisitions since then pro forma the Ohio acquisition • Co
Slide 13: 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 • Leverage the new IPTV service, branded EPICO, across the Canadian footprint and launch an IPTV solution by the end of calendar 2021 i
Slide 14: Atlantic Broadband: A scale operator from Maine to Florida
Atlantic Broadband: A scale operator from Maine to Florida Serving more than 500 communities in 12 states in the US pro forma the Ohio acquisition 14
Slide 15: Atlantic Broadband's highlights
Atlantic Broadband’s highlights • The announced Ohio acquisition will add meaningful scale with Enhanced Growth pro forma revenue over US$1 Billion Opportunity • Network expansion is expected to result in significant homes passed growth in adjacent areas with good growth profile and attractive demog
Slide 16: Atlantic Broadband: FY2022 priorities
Atlantic Broadband: FY2022 priorities • Ohio acquisition integration Acquisition − Integrate technical and operational systems and increase network capacity integration − Welcome new colleagues into the ABB family • Network expansion Network − Network expansion is expected to result in significant h
Slide 17: Atlantic Broadband: Ohio broadband systems overview
Atlantic Broadband: Ohio broadband systems overview • WOW! is a broadband provider of Internet, Network video and telephony services • Robust network with an active 100Gbps ring • The Ohio assets are comprised of WOW!’s • 100% homes passed are served by DOCSIS 3.1 platform market presence in Clevela
Slide 18: Ohio acquisition: Enhances growth profile
Ohio acquisition: Enhances growth profile • Leverages the strong demand for Internet services which should exhibit robust growth for many years • Adds scale in the American Broadband segment which generates superior growth and Strategic is expected to continue generating strong free cash flow • Thes
Slide 19: Ohio acquisition: Expansion in very attractive markets
Ohio acquisition: Expansion in very attractive markets 1 Ohio market stability WOW!Ohio Key Stats • Strong market demographics with younger population, young families and higher income and home ownership contribute to a stable subscriber base 1.5x PSUs(1) 198,000 Customers • Stable competitive dynam
Slide 20: Accelerating network expansion in attractive areas
Accelerating network expansion in attractive areas EXPANSION INTO ADJACENT CITIES WITH ATTRACTIVE GROWTH • Opportunity to capitalize on demand for high-speed Internet and expand in areas with good growth profile and attractive demographics • The only fiber-to-the-home provider in expansion territori
Slide 21: Cogeco Connexion: Second largest cable operator in Ontario and Québec
Cogeco Connexion: Second largest cable operator in Ontario and Québec Serving more than 600 communities from Gaspé to Windsor 21
Slide 22: Cogeco Connexion: highlights
Cogeco Connexion: highlights • CCX is building human connections and vibrant communities Who we are • We are challengers, we are smaller, yet we go further • Acquisition of DERYtelecom in December 2020 which generates approximately $105 million in revenue and is expected to lead to superior growth •
Slide 23: Cogeco Connexion: FY2022 priorities
Cogeco Connexion: FY2022 priorities • Deliver the most reliable connection at all times Perfect − Invest in our network to maintain top reliability and sustained performance Internet − Offer managed Wi-Fi experiences to position Cogeco as the preferred provider of in-home connectivity • Save our cus
Slide 24: Accelerating network expansion in attractive areas
Accelerating network expansion in attractive areas RURAL EXPANSION WITH FINANCIAL CONTRIBUTION FROM FEDERAL AND PROVINCIAL GOVERNMENTS • Unique opportunity over the next 3 years to connect households in more rural and remote areas • Virtually all in fiber-to-the-home deployment in areas where compet
Slide 25: Financial Results
Financial Results Cogeco Communications 25
Slide 26: Revenue and adjusted EBITDA growth
Revenue and adjusted EBITDA growth • Cogeco expects to realize mid to high single-digit revenue and adjusted EBITDA percentage growth, in constant currency in FY2021(1) due to organic growth and the contribution of DERYtelecom(2) • Cogeco expects to achieved 3.5% to 5.5% revenue and adjusted EBITDA
Slide 27: Strong free cash flow generation
Strong free cash flow generation • In FY2021, Cogeco expects to invest approximately 20% of its revenue in capex and to realize low double-digit FCF percentage growth(1) • In FY2022, Cogeco expects to invest approximately 27% of its revenue in capex and expects a decrease of -30% to -35% in FCF(2).
Slide 28: 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 – B
Slide 29: Sustained dividend growth
Sustained dividend growth Annual dividend declared per share CAGR 10% $2.56(1) $2.32 $2.10 $1.90 $1.72 FY2017 FY2018 FY2019 FY2020 FY2021 • Sustained free cash flow generation has allowed us to pursue growth objectives while returning capital to shareholders • Estimated FY2021 free cash flow dividen
Slide 30: History of de-leveraging following acquisitions
History of de-leveraging following acquisitions Evolution of net leverage(1) ratios Liquidity: $1,066 M Atlantic Pro forma May 31, 2021 Connecticut MetroCast Sale Broadband & system Acquisition of data DERY Peer 1 Hosting Acquisition centers telecom and Revolving Credit (4) Acquisition Ohio Faciliti
Slide 31: Low cost of capital and spread-out maturities
Low cost of capital and spread-out maturities DEBT MATURITIES August May Excluding credit facilities and lease liabilities(2) 2020 2021 $M Average Cost of Debt(1) 3.8% 3.4% Average Life 4.2Y 3.4Y Cogeco Communications Atlantic Broadband $290(3) $300 $1,881(3)(4) $200 $181(3) FY2021 FY2022 FY2023 FY2
Slide 32: USD debt hedges US operations
USD debt hedges US 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 US denominated debt and US denominated capex • The following table(1) highlights, in Canadian dollars, the impact
Slide 33: Cogeco
Cogeco 33
Slide 34: Cogeco public market value of equity
Cogeco Cogeco TSX: CGO PUBLIC MARKET VALUE OF EQUITY $1,552 M (16.0M shares at $97.00 (1)) 15.7M shares of CCA Investment in Cogeco Communications TSX: CCA Cogeco Media RADIO BROADCASTING $1,905 M $119.03 per CGO share(1)(2) (1) As of July 2, 2021 (2) Based on a CCA share price of $121.39 multiplied
Slide 35: 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 4.4 MILLION INTEGRATED SALES RADIO NEWS NETWORK LISTENERS / WEEK SERVICES IN QUÉBEC IN QUÉBEC 35
Slide 36: Cogeco Media: Most important radio broadcaster in Québec
Cogeco Media: Most important radio broadcaster in Québec(1) Broad radio coverage • No. 1 in commercial share of hours tuned in Montréal and in Québec City Radio is an important media for Québecers • 85% tune in every week • Time spent listening of 16.6 hours per week News agency with a presence in m
Slide 37: Appendices
Appendices (C; coceco COMMUNI CATIONS
Slide 38: Customer profile
Customer profile Cogeco Atlantic May 31, 2021 Connexion Broadband Total Homes passed 1,982,255 935,520 2,917,775 Primary service units(1) 2,002,736 973,655 2,976,391 Internet service customers 909,901 517,851 1,427,752 Internet penetration(2) 45.9% 55.4% 48.9% Video service customers 680,456 309,242
Slide 39: Acronyms
Acronyms CAGR Compound Average Growth Rate DOCSIS Data Over Cable Service Interface Specifications Gbps Gigabits per second IP Internet Protocol Mbps Megabits per second Wi-Fi WIreless FIdelity 39