Cogeco Communications (CCA) Q3 2024 earnings summary

Executive summary

• Revenue for Q3 2024 increased 1.2% year-over-year (0.9% in constant currency), driven by Canadian segment growth, NRBN acquisition, and stable U.S. performance; fibre-powered network serves 1.6M subscribers across North America.

• Adjusted EBITDA rose 4.1% (3.9% in constant currency), reflecting operational efficiencies and cost reductions, especially in the U.S. segment.

• Profit for the period declined 24.8% in Q3, mainly due to restructuring costs, increased depreciation, and financial expenses.

• Major organizational restructuring announced, combining U.S. and Canadian telecom operations to drive synergies and cost savings, effective September 1, 2024.

• Breezeline launched wireless service in the U.S. in May 2024, with Canadian wireless launch planned.

Financial highlights

• Q3 revenue: $750.6M (+1.2%); adjusted EBITDA: $365.8M (+4.1%); margin: 48.7%.

• Profit for Q3: $76.3M (-24.8%); basic EPS: $1.68 (-22.6%); adjusted diluted EPS up 4.7% to $2.45.

• Free cash flow declined 16.4% to $87.3M, mainly due to restructuring costs.

• Capital intensity at 22.4%, down from 22.9% last year; net capital expenditures Q3: $168.4M (-0.8%).

• Quarterly dividend increased 10.1% to $0.854 per share; dividend yield at 6.6%.

Outlook and guidance

• Fiscal 2024 annual guidance maintained; Q4 consolidated revenue expected to be stable, with low single-digit adjusted EBITDA growth.

• Net capital expenditures for 2024 expected between $700M and $775M; network expansion capex $140M–$190M.

• Free cash flow and free cash flow excluding network expansions expected to decline 5%–15% year-over-year due to mobility investments.

• Dividend payout ratio targeted at 39% of free cash flow, or 27% excluding network extensions.

• Q4 restructuring costs expected, but lower than Q3.