Cogeco (CGO) Q3 2024 earnings summary

Executive summary

• Announced and implemented a new North American operating model, consolidating U.S. and Canadian telecom operations to drive synergies, digitization, and operational excellence, with reinvestment in growth areas like marketing and analytics.

• Revenue for Q3 2024 increased 1.3% year-over-year to $777.2M, driven by Canadian telecom growth and the NRBN acquisition, while American telecom revenue remained stable; profit for the period rose to $75.3M.

• Adjusted EBITDA grew 4.0% to $369.8M in Q3, with margin improvements in both Canadian and American segments; adjusted profit attributable to owners fell 23.3% to $29.1M due to higher restructuring costs.

• Breezeline Mobile launched across most of the U.S. broadband footprint, expanding bundled offerings and expected to reduce churn; Canadian wireless launch in progress.

• Welcomed new team members and appointed Frédéric Perron as President and CEO to support execution of strategic priorities.

Financial highlights

• Q3 revenue: $777.2M (+1.3% y/y); adjusted EBITDA: $369.8M (+4.0% y/y); profit for the period: $75.3M; adjusted profit attributable to owners: $29.1M (-23.3% y/y).

• Free cash flow declined 16.9% to $89.3M in Q3, mainly due to higher restructuring and integration costs.

• Dividend declared at $0.854 per share, up 16.8% year-over-year; dividend payout ratio at 39% for F2024, or 27% excluding network expansions.

• Net indebtedness to adjusted EBITDA ratio at 3.5x as of May 31, 2024; available liquidity of $700M.

• Weighted average cost of debt at 5.6%, with mostly fixed rates and 5-year average term to maturity.

Outlook and guidance

• Fiscal 2024 financial guidance maintained; new organizational structure and NRBN acquisition not expected to materially impact guidance.

• Q4 consolidated revenue expected to be stable; adjusted EBITDA growth in low single digits.

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

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

• Q4 restructuring costs expected, but lower than Q3.