Cogeco Inc. · TSX:CGO
Cogeco — Q2 2018 Earnings Presentation
33 slides from Cogeco's earnings presentation, Apr 12, 2018
Slide 1: Investor Update: Results for Quarter-end February 28, 2018
INVESTOR UPDATE Results For Quarter-end February 28, 2018 (disclosed on April 12, 2018)
Slide 2: Table of Contents
TABLE OF CONTENTS OVERVIEW 6 COGECO COMMUNICATIONS 7 Financial Results 17 COGECO 24 COGECO INVESTMENT HIGHLIGHTS 28 APPENDICES 30 Network Maps 31 Customer Profile 32 Acronyms 33 2
Slide 3: Forward-Looking Statement
FORWARD-LOOKING STATEMENT Certain statements contained in this presentation may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to our future outlook and anticipated events, business, operations, financial performance, financial co
Slide 4: Non-IFRS Measures
NON-IFRS MEASURES THE FOLLOWING NON-IFRS MEASURES ARE USED IN THE PRESENTATION AND A RECONCILIATION TO THE MOST COMPARABLE IFRS FINANCIAL MEASURES IS DESCRIBED ON PAGE 58 OF THE COGECO COMMUNICATIONS 2017 ANNUAL REPORT Free cash flow cash flow from operating activities add amortization of deferred t
Slide 5: Simplified Corporate Structure
SIMPLIFIED CORPORATE STRUCTURE GESTION AUDEM (Family of the late Henri Audet) 11.4% Equity 71.2% Voting Rights COGECO Market capitalization: $1.1 billion(1) 82.2% Voting Rights 100% Voting Rights 31.7% Equity 100% Equity COGECO COMMUNICATIONS Market capitalization: $3.5 billion(1) COGECO MEDIA LTM r
Slide 6: Company Overview
COMPANY OVERVIEW COGECO COMMUNICATIONS COGECO COMMUNICATIONS ADJUSTED EBITDA SEGMENTATION(1) COGECO CONNEXION • 2nd largest cable system operator in REPORTED LAST 12 MONTHS ENDED FEBRUARY 28, 2018 Ontario and Québec Cogeco • 786,000 Internet service, 709,000 video service and 419,000 Peer 1 8% telep
Slide 7: Cogeco Communications
Cogeco Communications
Slide 8: Cogeco Connexion's Strategy
COGECO CONNEXION’S STRATEGY MEETING CUSTOMERS’ EVOLVING NEEDS WHILE PURSUING PROFITABLE GROWTH GROWING ADJUSTED EBITDA MARGIN IMPROVING ADJUSTED EBITDA MARGINS WHILE (in millions of dollars) EXPANDING SERVICE OFFERING $641 $647 $660 $678 • 120 Mbps Internet service offered in essentially all of the
Slide 9: Cogeco Connexion FY2018 Priorities
COGECO CONNEXION FY2018 PRIORITIES – continue solidifying market position through customer relations built on amazing experiences DELIVERING ORGANIC GROWTH BY INTRODUCING VALUE ADDED SERVICES 1 FOR RESIDENTIAL CUSTOMERS • Continue to invest in DOCSIS 3.1 technology to further deploy 1 Gbps services
Slide 10: Atlantic Broadband's Strategy
ATLANTIC BROADBAND’S STRATEGY ENHANCED GROWTH THROUGH PRUDENT ACQUISITIONS • Focus on largely non-metropolitan areas with fragmented competition – In August 2015, Connecticut system acquisition serving 57,700 PSUs, generated 11% revenue growth and 8% customer growth in FY2017 COMPETITION SUMMARY (1)
Slide 11: Atlantic Broadband: Favorable Impact of Tax Reform
ATLANTIC BROADBAND: FAVORABLE IMPACT OF TAX REFORM • Effective January 1, 2018, the combined Federal and State corporate income tax rate has been reduced from 40% to 27% • Limitations on interest deductibility based on EBITDA or EBIT thresholds should not have an impact over the next 4 fiscal years
Slide 12: Atlantic Broadband: FY2018 Priorities
ATLANTIC BROADBAND: FY2018 PRIORITIES INTEGRATION OF THE METROCAST ACQUISITION 1 • Common operating platform and past experience in integrating the Connecticut system • Launch of TiVo, 1Gbps Internet service, enhanced bundles and expanded business services by end of fiscal year DRIVE CUSTOMER GROWTH
Slide 13: Atlantic Broadband: MetroCast Acquisition Rationale
ATLANTIC BROADBAND: METROCAST ACQUISITION RATIONALE A GREAT FIT A scale operator from Maine to Florida covering 11 states and 834,000 homes passed • Adjacent territories in similar non-metropolitain markets • Quality network and plant • Common systems, operations and technical approaches • Complimen
Slide 14: Cogeco Peer 1
COGECO PEER 1 16 DATA CENTRES 50+ POINTS OF PRESENCE 48,000 KILOMETERS OF FIBRE 1,800 ON NET BUILDINGS 14
Slide 15: Cogeco Peer 1: Core Service Offerings
COGECO PEER 1: CORE SERVICE OFFERINGS COMPREHENSIVE HYBRIDAITCOMPLETE PROVIDING SOLUTIONS TRUSTED RANGEBYOFCUSTOMERS TO ENABLE ENTERPRISE BUSINESS INFORMATION TRANSFORMATIONTECHNOLOGY AND COMMUNICATIONS APPLICATION COMPREHENSIVE WORLD HIGH BEST IN CLASS DRIVEN CLOUD HOSTING CLASS PERFORMANCE MANAGED
Slide 16: Cogeco Peer 1: FY2018 Priorities
COGECO PEER 1: FY2018 PRIORITIES FOCUS ON SUSTAINABLE REVENUE GROWTH 1 • Hosting and Cloud Solutions - Emphasize hybrid cloud offerings by leveraging partnership with Microsoft Azure and other partners - Grow Partner and Reseller Programs, launched in 2017, to accelerate indirect sales • Connectivit
Slide 17: Financial Results
SULTS FINANCIAL R o?
Slide 18: Financial Highlights
FINANCIAL HIGHLIGHTS • Revenue and adjusted EBITDA growth of 2.3% and 2.2%, respectively, achieved in FY2017 • FY2018 revenue and adjusted EBITDA expected to grow 11-13% and 10-12%, respectively, in constant currency(1) REVENUE ADJUSTED EBITDA PROFIT (LOSS) FOR THE YEAR (in millions of dollars, exce
Slide 19: Financial Highlights: Fiscal 2018 Free Cash Flow
FINANCIAL HIGHLIGHTS FISCAL 2018 Free Cash Flow • Capex intensity in Canadian broadband and FY2018 Mid-range Guidance vs FY2017 Actuals Business ICT should remain relatively stable. Capex intensity in American broadband Free Cash Flow (FCF) decline (14.5%) expected to increase as a result of continu
Slide 20: Sustained Dividend Growth
SUSTAINED DIVIDEND GROWTH ANNUAL DIVIDEND DECLARED PER SHARE +10.5% CAGR 12% $1.90 $1.72 $1.56 $1.40 $1.20 FY2014 FY2015 FY2016 FY2017 FY2018(1) • Sustained free cash flow generation has allowed us to pursue growth objectives while returning capital to shareholders • Conservative dividend payout rat
Slide 21: Solid Balance Sheet and Liquidity Position
SOLID BALANCE SHEET AND LIQUIDITY POSITION • History of de-leveraging following acquisitions • Following a change in notching methodology for BB+ corporate issuers in December 2016, S&P assigned a secured rating of BBB-. S&P’s secured rating is now aligned with DBRS and Fitch’s ratings CONSOLIDATED
Slide 22: Manageable Maturities and Low Cost of Capital
MANAGEABLE MATURITIES AND LOW COST OF CAPITAL ($ MILLIONS) August February LONG-TERM DEBT MATURITIES(1) 2017 2018 • With the Atlantic Broadband refinancing, Average Cost of Debt (5) 4.4% 4.5%(4) the Term loan B’s maturity was extended by an additional 5 years Average Life 4.0Y 5.6Y COGECO COMMUNICAT
Slide 23: US$ Debt Reduces Free Cash Flow FX Exposure
US$ DEBT REDUCES FREE CASH FLOW FX EXPOSURE AND HEDGES NET INVESTMENTS IN US SUBSIDIARIES • Cogeco Communications is mostly naturally hedged from a free cash flow perspective as US$ EBITDA exposure is offset by interest expense on US denominated debt and capex • The following table(1) highlights in
Slide 24: Cogeco
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Slide 25: Cogeco: Public Market Value of Equity
COGECO COGECO Public market value of equity $1,130M (16.5M shares at $68.44(1)) 15.7M shares of CCA Investment in COGECO COMMUNICATIONS COGECO MEDIA $1,094M (Radio broadcasting) ($66.32 per CGO share(1)(2)) (1) As of April 10, 2018 (2) Based on a CCA share price of $69.75 multiplied by a ratio of 0.
Slide 26: Media Profile: Cogeco Media
MEDIA PROFILE: COGECO MEDIA • 30 years as a radio operator • Second most important radio player in Québec – 13 radio stations covering most demographics – No. 1 in share of hours tuned in Montréal and in Québec City • Radio is an important media for Quebecers – 86% tune in every week – Time spent li
Slide 27: Strong Network of Radio Stations
STRONG NETWORK OF RADIO STATIONS 27
Slide 28: Investment Highlights
INVESTMENT HIGHLIGHTS coceco (C;, coGeco (55
Slide 29: Investment Highlights
INVESTMENT HIGHLIGHTS • Strong Canadian Cable Franchises ̶ Leveraging superior Internet speeds in most of our footprint ̶ Stable growth with strong adjusted EBITDA margin ̶ Strong free cash flow generation • Successful U.S. Cable Expansion Strategy ̶ Strong organic growth opportunity in our largely
Slide 30: Appendices
APPENDICES
Slide 31: Cogeco Connexion: Inter-City Fiber Network
COGECO CONNEXION: INTER-CITY FIBER NETWORK 31
Slide 32: Customer Profile
CUSTOMER PROFILE February 28, 2018 Cogeco Atlantic Connexion Broadband Total Homes passed 1,742,762 833,778 2,576,540 Primary service units(1) 1,914,178 874,090 2,788,268 Internet service customers 786,314 412,887 1,199,201 Video service customers 708,584 321,317 1,029,901 Telephony service customer
Slide 33: Acronyms
ACRONYMS CAGR Compound Average Growth Rate DOCSIS Data Over Cable Service Interface Specifications Gbps Gigabits per second Mbps Megabits per second 33