Cogeco reports drop in profits in Q3, while revenue rises slightly

Cogeco Inc. reported a steep dip in profits for the third quarter of its 2024 fiscal year. The Quebec-based telecommunications company reported profits fell by 24.8 per cent to $76.3 million in the quarter ended May 31, falling from just over $101.5 million in the same period last year. Cogeco said the decrease in profit for the quarter was due to higher acquisition, integration, restructuring and other costs, as well as depreciation and amortization expense, partially offset by higher adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and lower income tax expense. At the end of May, Cogeco announced it is combining the commercial, operational, and technical functions of its Canadian and U.S. telecom businesses, “into a simple North American organization,” as of Sept. 1. It said the restructuring costs it hit in the third quarter were mostly due to severance charges. Meanwhile, the company reported revenue “in line with expectations” of $750.58 million, a rise of 1.2 per cent from nearly $741.8 million in the third quarter of 2023. The company credited the rise to revenue growth at Cogeco Connexion and stable revenue at Breezeline, the wireless service it launched in the U.S. It offers Breezeline mobile as a bundle to its customers who also subscribe to home broadband service, by way of an MVNO agreement with a major wireless network operator, it said, plus an agreement with a national technology service company. Despite losses in almost every customer category Canada, Cogeco’s telecommunications revenue was up by 2.2 per cent in the country to $381.8 million, largely driven by the “cumulative effect” of high speed internet service additions over the past year, as well as its acquisition of the Niagara Regional Broadband Network earlier this year. Cogeco had nearly 883,000 Canadian internet subscribers for the quarter, a total that grew by 5,879 year-over-year, under both the Cogeco and Oxio brands, as well as new subscribers from fibre-to-the-home network expansions, it said. However, it faced losses in video service subscribers (612,701, down by 6,006 customers) and its wireline phone service subscribers (376,597, down by 2,971). It said its losses in video were mainly because of changes in video consumption trends, inflation, and a growing number of people only subscribing to internet services. Meanwhile, its wireline losses were credited to a higher number of people substituting for mobile phones. In the United States, Cogeco reported its telecom revenue remained stable at $368.7 million, due to a higher revenue per subscriber and a “better product mix” because customers have been subscribing to increasingly faster internet speeds. That was offset by lower video subscriptions and a lower internet subscriber base over the past year, it said, as a growing number of customers are only subscribing to its internet offerings. Its operating expenses in telecom in Canada were $180.2 million and were slightly higher in the U.S., sitting at $190.3 million, contributing to total telecom operating expenses of $379.5 million. Overall, its adjusted EBITDA was $365.8 million, up 4.1 per cent from $351.3 in the same quarter last year. Earnings per share on a diluted basis were down to $1.67 from $2.16 in Q3 2023. Excluding the effects of restructuring and other costs, the company said adjusted diluted earnings per share were up by 4.7 per cent to $2.45. Cogeco’s free cash flow was $87.3 million for the quarter, a drop of 16.4 per cent from $104.4 million in the third quarter of 2023. The company said the change is due to restructuring costs. It said cash flow from operating activities was up to $333.6 million, a change of 17.3 per cent, due to “timing of certain working capital items.” Excluding network expansion projects, free cash flow was down by 18 per cent to $111.7 million. Cogeco’s net capital expenses were $168.4 million, down 0.8 per cent from $169.8 million in Q3 2023. The company credited that to lower-than-expected spending on its telecommunications in the U.S., partially offset by higher spending on customer premise equipment and other capital spending on fibre-to-the-home expansions in Canada. Excluding network expansions, net capital expenditures were $144 million, up 4.3 per cent from $138 million in Q3 2023. The company noted that its fibre-to-the-home network expansion projects continued in Canada and the U.S., with home passed additions near 44,000 in the first nine months of this fiscal year. Cogeco spent less on acquiring property, plant and equipment this quarter, down 9.8 per cent to $171 million. Reporting by Hannah Daley at hdaley@thewirereport.ca

Cogeco reports drop in profits in Q3, while revenue rises slightly

News | | July 12, 2024

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Cogeco reports drop in profits in Q3, while revenue rises slightly

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