Cogeco (CGO) Q3 2024 earnings summary

Executive summary

• Announced a unified North American operating model, consolidating U.S. and Canadian telecom operations to drive synergies, digitization, and cost savings, 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 due to higher restructuring costs.

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

• Strong focus on sustainability, digital inclusion, and community engagement, with new leadership and organizational transformation to support 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 increased restructuring and integration costs.

• Dividend declared at $0.854 per share, with annualized F2024 dividend per share at $3.42; dividend yield at 6.6%.

• Net indebtedness to adjusted EBITDA ratio at 3.5x as of May 31, 2024; available liquidity of $738.3M.

• Repurchased 5.97M shares for $280M in Q3; 16% of outstanding shares repurchased since 2019.

Outlook and guidance

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

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

• Net capital expenditures for F2024 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% due to mobility investments.

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