Cogeco Communications (CCA) Q3 2024 earnings summary

Executive summary

• Revenue for Q3 2024 increased 1.2% year-over-year to $750.6 million, driven by Canadian telecom growth and stable U.S. performance, with the NRBN acquisition contributing.

• Adjusted EBITDA rose 4.1% to $365.8 million, reflecting cost reductions and efficiencies, especially in the U.S. segment, with margin expanding to 48.7%.

• Profit for the period declined 24.8% to $76.3 million due to $45.7 million in restructuring costs, increased depreciation, and financial expenses.

• Free cash flow declined 16.4% to $87.3 million, mainly from restructuring costs, while cash from operations increased 17.3% due to working capital timing and lower taxes.

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

Financial highlights

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

• Q3 profit: $76.3M (-24.8% y/y); adjusted profit: $103.6M (-0.2% y/y); basic EPS: $1.68 (-22.6% y/y); adjusted diluted EPS: $2.45 (+4.7% y/y).

• Free cash flow: $87.3M (-16.4% y/y); cash from operations: $333.6M (+17.3% y/y).

• Net capital expenditures: $168.4M (-0.8% y/y); capital intensity: 22.4%; excluding network expansion: 19.2%.

• Quarterly dividend increased 10.1% to $0.854 per share; payout ratio at 39% of free cash flow, or 27% excluding network expansions.

Outlook and guidance

• Fiscal 2024 financial 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.

• Q4 restructuring costs expected, but lower than Q3.

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