Cogeco Inc. · TSX:CGO
Cogeco — Q4 2019 Earnings Presentation
34 slides from Cogeco's earnings presentation, Oct 30, 2019
Slide 1: Investor Update
Investor Update RESULTS FOR QUARTER-END August 31, 2019 (disclosed on October 30, 2019) TSX: CGO | TSX: CCA
Slide 2: Contents
Contents Overview 5 Cogeco Communications 7 Financial Results 18 Cogeco 26 Corporate Social Responsibility 30 Appendices 32 Customer Profile 33 Acronyms 34 2
Slide 3: Forward-looking statement and restatement of financial information
Forward-looking statement and restatement 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, operat
Slide 4: Non-IFRS measures
Non-IFRS measures The following non-IFRS measures are used in the presentation and are described on pages 72 and 73 of the Cogeco Communications 2019 annual report Free cash flow cash flow from operating activities add amortization of deferred transaction costs and discounts on long-term debt change
Slide 5: Cogeco generates over $2.4 B in revenue
Cogeco generates over $2.4 B in revenue Gestion Audem AUDET FAMILY 11.7% Equity 71.7% Voting Rights Cogeco $2.44 B FY2019 Revenue Market Capitalization $1.5 B (1) 82.3% Voting Rights 100% Voting Rights 31.8% Equity 100% Equity Cogeco Communications Cogeco Media 2 ND LARGEST CABLE OPERATOR IN ONTARIO
Slide 6: 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 STR
Slide 7: Cogeco Communications
Cogeco Communications (G; coGeco COMMUNICATIONS
Slide 8: Cogeco Communications overview
Cogeco Communications overview Cogeco Connexion STRONG REVENUE GROWTH THROUGH US CABLE Covers a footprint of 1,764,000 households and EXPANSION REPRESENTING 150,000 businesses which provides ample room to 44% OF COMBINED REVENUE grow the Internet and business customer base Offers services to 788
Slide 9: Disposal of Cogeco Peer 1
Disposal of Cogeco Peer 1 Cogeco Communications sold Cogeco Peer 1 Inc. for $720 million(1) on April 30, 2019 A net gain on disposal of $84 million was realized Net debt / adjusted EBITDA leverage has declined from 3.3x in Q2 to 2.6x in Q4 Use of proceeds Repayment of US$288 million drawn on r
Slide 10: Strategic priorities
Strategic priorities Deliver an exceptional customer experience through continuous innovation of our service offering Grow our footprint and obtain our fair share of market in current segments Optimize our cost structure and operational effectiveness by exploiting group synergies facilitated through
Slide 11: 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 Extend coverage of the 1 Gbps Internet service Launch an IPTV service in Canada Pursue the Florida expansion Extend network in u
Slide 12: Cogeco Connexion: Second largest cable operator in Ontario and Quebec
Cogeco Connexion: Second largest cable operator in Ontario and Quebec LEGEND Fibre network Cities served Serving 427 communities 12
Slide 13: 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 about 60% of the footprint Offering TiVo’s advanced multiplatform vide
Slide 14: Cogeco Connexion FY2020 priorities
Cogeco Connexion FY2020 priorities 1. RESIDENTIAL: ORGANIC GROWTH THROUGH ADDED SERVICES & NETWORK EXTENSIONS Continue to increase 1 Gbps Internet coverage and offer enhanced WiFi services and features Launch MediaFirst’s IPTV platform: – Customizable video content, WiFi devices and voice activa
Slide 15: Atlantic Broadband: A scale operator from Maine to Florida
Atlantic Broadband: A scale operator from Maine to Florida Serving 593 communities 15
Slide 16: Atlantic Broadband's highlights
Atlantic Broadband’s hightlights ENHANCED GROWTH THROUGH PRUDENT ACQUISITIONS Largely non-metropolitan areas with fragmented competition US$1.4 B MetroCast acquisition in January 2018 has COMPETITION SUMMARY led to superior revenue growth and one of the industry- EXCLUDING FLORIDA(1) leading adj
Slide 17: Atlantic Broadband: FY2020 priorities
Atlantic Broadband: FY2020 priorities 1. DRIVE CUSTOMER GROWTH THROUGH INTERNET SUPERIORITY AND BUNDLE SALES Leverage newly launched 1 Gig Internet speeds across footprint Offer Enhanced WiFi as an integral part of the Internet experience Continue to build out new TiVo features, including user
Slide 18: Financial Results
Financial Results (G; coGeco COMMUNICATIONS
Slide 19: 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 acquisition growth through Metrocast’s additional 4 months contribution and Fiberlight’s 11 months contribution • Profit for the year from continuing operat
Slide 20: Strong free cash flow generation
Strong free cash flow generation • Capex intensity expected to slightly increase in FY2020 mainly due to US network expansion • 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(
Slide 21: 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 22: Sustained dividend growth
Sustained dividend growth Annual dividend declared per share CAGR 10% $2.32(2) $2.10 $1.90 23% FY2020E $1.72 Free Cash Flow(1) $1.56 dividend payout ratio FY2016 FY2017 FY2018 FY2019 FY2020 • Sustained free cash flow generation has allowed us to pursue growth objectives while returning capital to sh
Slide 23: History of de-leveraging following acquisitions
History of de-leveraging following acquisitions Evolution of net leverage(1) ratios Liquidity: $1,552 M Atlantic Connecticut MetroCast Cogeco Broadband & system Acquisition Peer 1 Sale August 31, 2019 Peer 1 Hosting Acquisition Acquisition Revolving Credit 999 Facilities 3.5(3) 3.4(3) 3.3(3) Amounts
Slide 24: Low cost of capital and manageable maturities
Low cost of capital and manageable maturities August August 2018 2019 Average Cost of Debt(1) 4.4% 4.4% Average Life 5.7Y 4.9Y Cogeco Communications Atlantic Broadband Excluding credit facility(2) Excluding credit facility(2) $M $M $319(3) $2,119(3)(4) $300 $200 $200 $199(3) FY2020 FY2021 FY2022 FY2
Slide 25: US$ debt hedges US operations
US$ debt hedges US operations • Cogeco Communications is mostly naturally hedged from a free cash flow perspective as US$ adjusted EBITDA exposure is offset by interest expense on U.S. denominated debt and U.S. denominated capex • The following table(1) highlights, in Canadian dollars, the impact of
Slide 26: Cogeco
Cogeco (Cr coceco
Slide 27: Cogeco public market value of equity
Cogeco Cogeco PUBLIC MARKET VALUE OF EQUITY $1,545 M (16.1M shares at $95.67(1)) 15.7M shares of CCA Investment in Cogeco Media Cogeco Communications RADIO BROADCASTING $105.33 $1,701 M per CGO share(1)(2) 27 (1) As of October 25, 2019 (2) Based on a CCA share price of $108.41 multiplied by a ratio
Slide 28: Cogeco Media: Strong network of radio stations
Cogeco Media: Strong network of radio stations 28
Slide 29: Cogeco Media: Most important radio broadcaster in Quebec
Cogeco Media: Most important radio broadcaster in Quebec(1) Broad radio coverage • 23 radio stations covering most demographics • 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 17.5
Slide 30: Corporate Social Responsibility
Corporate Social Responsibility 30
Slide 31: Corporate social responsibility (CSR) at Cogeco
Corporate social responsibility (“CSR”) at Cogeco • Customer relationship at the center stage of CSR program: we strive to offer the best customer experience while maintaining strong controls over their data security and privacy PILLARS Be a trusted and Take part Take part Maintain a sound Manage ou
Slide 32: Appendices
Appendices (G; coGeco COMMUNICATIONS
Slide 33: Customer profile
Customer profile Cogeco Atlantic August 31, 2019 Connexion Broadband Total Homes passed 1,763,746 878,724 2,642,470 Primary service units(1) 1,810,366 901,446 2,711,812 Internet service customers 788,243 446,137 1,234,380 Internet penetration(2) 44.7% 50.8% 46.7% Video service customers 649,583 312,
Slide 34: Acronyms
Acronyms CAGR Compound Average Growth Rate DOCSIS Data Over Cable Service Interface Specifications FTTH Fibre To The Home FTTN Fibre To The Node Gbps Gigabits per second HPBX Hosted Private Branch Exchange IP Internet Protocol Mbps Megabits per second MNO Mobile Network Operator VOD Video On Demand