Cogeco Inc. (CGO) Earnings Call Transcript & Summary

[indiscernible] Mr. Chairman, I'm a shareholder, and I support the proposal.

Again, I will inform you that the proxy votes are received to date are in favor of this proposal at more than 96%, and that's, therefore, adopted. We will have a short break for those who wish to vote nonetheless. The next point on the agenda is the consultative vote in a matter of remuneration of -- Executive Compensation of Cogeco Inc. You will be called to vote in favor or against the proposal, which is on in the circular of information. Any questions? Having none, can I ask that a proposal be put forward?

Mr. Chairman, Elizabeth Alves, I'm a shareholder. I propose that the consultative resolution be adopted as an advisory manner without restricting the role and responsibility of the Board, the shareholders support the initiative of the Board in terms of Executive Compensation as described in the circular information of the company relative to the present General Annual Meeting of Shareholders.

Mr. Chairman, [indiscernible], and I support the proposal.

I would like to inform you again that the proxy votes are in favor by more than 96% of the proposal. It is, therefore, carried. And we will have a pause of a few seconds for those of you who haven't had the opportunity to cast their votes. The voting is now closed. I would ask the scrutineers to collect the blue ballots and compile the results of those final votes for the 2 companies. A few words perhaps on the shareholder proposals, and before we go on to the [indiscernible]. The companies have got 3 proposals from the -- move them out the protection is action and after construction discussion, [indiscernible] and Cogeco have decided not to put those to the vote, but rather to include them with the answers of the Board in the circular -- information circular that you can look up on the Internet. In spite of the fact that MEDAC [indiscernible] are not here in person, Mr. [indiscernible] wanted me to mention that Cogeco and MEDAC have agreed on the essential aspects of the MEDAC, this dealt with revealing which language were spoken and understood by the Directors, the policy vis-a-vis women in the administration of the company and representatives of MEDAC declared that they were happy following the discussions with Cogeco and the continuance of this dialogue. We are also satisfied with this result. We always want, at Cogeco to have a productive relationship with our shareholders and other factors such as MEDAC here in Québec and the agencies for proxy voting. This concludes the formal part of Cogeco Inc. meeting. Now Marie-Helene, would you want to make a few comments before the actual presentations?

Thank you, Mr. Chairman. Mr. Audet and Jette will now address the meetings in turn to talk about the business of the 2 companies. And I would remind you that the presentations that we make could be considered as prospective presentations in terms of laws and regulation dealing with publicly operated companies. And so first of all, Mr. Audet.

Thank you very much, Marie-Helene. And dear shareholders, I would wish you a warm welcome again. Before I hand over the microphone to Philippe Jette, who is the CEO of the 2 companies, Cogeco Communications, I would like to take a few minutes to talk about the spirit that animates our teams. This year was -- I'm particularly pleased with the persistence -- with our persistence and continuing to create value for our shareholders through our organic growth initiatives and strategic acquisitions while placing our customers and communities at the heart of our actions and our preoccupations. [Foreign Language] our position as a growing competitive force in North America in telecommunications and media. With one of the highest EBITDA margins in the industry, Cogeco is reliably profitable and has generated dividends with a compound annual growth rate of 12.5% within Cogeco and 10.4% at Cogeco Communications over the last 5 years. [Foreign Language] New challenges, this team is extremely well positioned to seize the many growth opportunities that lie ahead and to continue our journey of sustainable and profitable growth. Our boards are models of diversity, and I'm very proud that our governance practices are recognized. Year after year, it was among the best among dual-class, public family companies in the Globe and Mail's annual Board Games report. [Foreign Language] Social and governance practices. Philippe will discuss these in depth in his presentation. Let me just say that beginning in fiscal 2022, we elevated ESG topics -- oversight of the topics to the Board of Directors level, the highest level, which now oversees the corporation's ESG strategy, performance and related initiatives on a quarterly basis. While the human resource Committee, the good governance committee and the Audit Committee each continue their oversight of specific areas of our ESG governance. [Foreign Language] As we celebrate our 65th anniversary, it's a good time -- sorry, 6 decades. We're not up to 100 years, but I will get there. Since Louis Audet founded Cogeco in 1957 in [indiscernible], Québec, our story has been one of incredible growth or resilience and entrepreneurship. [Foreign Language] We pay special attention to what is best for our communities, customers, employees and the environment. Every day, we strive to make a positive impact on society by enriching people's lives through human connection and vibrant communities. Before closing, I would like to come back to the subject of acknowledging the outstanding contribution of one of our Directors. In January 2023, Mr. David McAusland, a Cogeco Director, is retiring from our Board. He's been a Director for over 20 years and an active member of all of our committees throughout these years. Mr. McAusland's extensive experience over the past decades, 2 of which he spent on our Board, brought a unique perspective to the Board, and his wide range of professional experience brought depth in dealing with crucial matters for our business. On behalf of the Board of Cogeco and the executive team, I would like to express our heartfelt thanks to David for his strategic vision, significant insights and enduring contributions to Cogeco's continued success. David, [Foreign Language]. I would also like to take this opportunity to thank our Board of Directors for their continued trust, wisdom and invaluable contribution, which are extremely valuable as we navigate increasingly complex environment. So let us applaud David. With the help of our Board of Directors, the corporation is supported in its mission to bring people together through powerful communications and entertainment experience. So that's our mission. I would like to thank the upper management team, the -- our frontline and support teams in our locations in Canada and the U.S. for their outstanding work. Our actions and solutions are designed to foster sustainable and inclusive growth. The future of our company, which already has a [indiscernible] looks bright. I now turn the floor over to Philippe Jette to share with you our achievements and our promising projects in the next year.

Thank you, Louis. Dear shareholders, members of the Board of Directors of Cogeco and Cogeco Communications, guests and colleagues, [Foreign Language]. Our fiscal year in 2022 was another important year. During this year, marked by many external worldwide uncertainties, our strategic priorities and financial performance remain the focus of all our efforts. Once again, we had growth in our companies and larger -- expanded our operations on the territory in which we operate while remaining committed to meeting the needs of our customers and having a positive impact on our communities and in fostering the development and growth of our employees and creating values for our shareholders. A resilient company that is well positioned to succeed even under adverse conditions. Here are a few of the highlights of the last fiscal year, including in underserved and unserved areas, we added a total of 70,000 connected homes to our network. This represents 4% increase in home's pass on our network in the United States and 2% increase in Canada. In addition to the 13 high-speed Internet expansion projects underway in several regions of Québec, Cogeco Connexion announced that it will be implementing 6 new high-speed Internet network expansion projects in several regions of Ontario under these projects will benefit 37 Ontario municipalities and enable the connection of more than 1,800 homes, businesses -- homes and businesses by the end of calendar 2025. To expand its fiber-to-the-home network in adjacent cities with attractive population and economic growth, including expansion projects in several communities in New Hampshire and West Virginia. Building on our track record of successfully integrating regional broadband operators, we are continuing to prudently pursue attractive acquisitions opportunities where we can add value through our operational expertise. Fiscal '22 was an important year in this regard. In the U.S., Breezeline announced and completed the acquisition of broadband assets in Ohio, migrated those customers to the Breezeline customer system and gradually began offering Breezeline products and services to its customer, including its new stream TV service. All along last year, we continued to expand our services to provide a distinctive customer experience to improve customer service, faster Internet speeds, technological improvements and new products. Cogeco Connexion continue to improve its EPICO IPTV service, introduce WiFi 6 for an enhanced in-home experience, modernize the self-installation process and implemented intelligent routing in its interactive voice response system in its call centers. Breezeline has continued to distinguish itself with its quality, in its programming and continue to expand its initial experience, introducing new technologies to enhance the listener experience, introducing dynamic ad insertion technology to provide seamless and personalized advertising experience. Over the last year, we continue to invest in our brands. In Canada, Cogeco Connexion has strengthened its brand strategy to increase its key differentiator, the local champion brand. To do so, we have -- we had to refresh our visual platform, which I invite you to discover in this commercial. [Presentation]

In our U.S. operations, this was articulated through the rebranding of Atlantic Broadband to Breezeline to reflect our growing geographic reach, product variety and commitment to a simplified customer experience. Since a picture is worth a thousand words, here's the latest ad campaign recently launched in the United States. [Presentation]

At Cogeco Media, we maintained a high ranking in the radio listening surveys results. 98.5 was named the most listen radio station in Canada once again. The Beat was ranked first by English-speaking listeners Page 25 to 54 in Montreal and [indiscernible] reached the largest audience in Montreal. Our plans to enter the mobile services market in Canada. The Canadian Radio Television and Telecommunication Commission, the CRTC, also release the terms and conditions of a new regulatory framework, allowing players investing in telecommunications infrastructure and spectrum to access the mobile networks of Canada's dominant providers. We were glad that the CRTC has denied many unreasonable terms and conditions that would have otherwise rendered the new mobile wholesale regime totally ineffective. As part of its decision, the CRTC has also introduced a new eligibility requirement, which is to be commercially offering a mobile service somewhere in Canada in order to lease the network of incumbents. As over the past 2 years, we have gradually started developing our mobile wireless network capabilities. We are positioned to pursue our work in capital efficient manner and prepare for the negotiation of wholesale rates with the national players. At Cogeco, we are proud of advancing our sustainability agenda through the implementation of environmental, social and governance initiatives. We are constantly following or monitoring our ESG progress using key performance indicator that are viewed regularly. The strategy, based on our long history of social engagement and community involvement, a commitment to digital inclusion, leading-edge operating practices and a deep commitment to responsible and ethical stewardship. Our ESG strategy is an integral part of the company's business strategy and is aligned with the United Nations Sustainable Development goals. Here are some key initiatives. Connectivity is a powerful tool to improve the integration of our community. We are conscious that our sector has a critical role to play in bridging the digital divide, expanding our broadband network to unserved and underserved areas continued to be a priority. We also continue to provide affordable Internet services to low-income families through the federal Federal Communications Commission, Emergency Broadband Benefit program and the Family's Connected program in Canada. Furthermore, we are determined to provide our employees with what they need to grow and thrive in a respectful and inclusive work environment. During the year, we continued to focus on improving the employee experience, including the implementation of our flex work approach and the launch of a new training and development framework coupled with wellness initiatives. Diversity and inclusion strategy in action with a focus on enhancements to processes and policies, employee education and engagement and an inclusive approach to talent acquisition, outreach and community support. In addition to the existing Cogeco's Women's Network, we established 3 new employee-led employee resource groups to promote inclusion, drive engagement and foster a sense of belonging. In fiscal 2022, 34% of women occupied managerial positions and above. While there is always more work to do in diversity and inclusion, we are pleased to report that our efforts are being recognized and highlighted through recognitions such as Globe and Mail Women's Lead Here or Equal Lead's 2022 Gender Equality Evaluation where Cogeco ranked in the list of the top 10 companies in Canada. We also know that the decisions that we make today over the next several decades will shape the future of our planet. While our industry's environmental footprint is likely smaller than many others, Cogeco is nonetheless committed, leading the way to our decarbonization in our industry. We've established near-term emission reduction targets that were endorsed in 2021 by the signed-based targets initiative as being consistent with the level required to meet the goals of the Paris Agreement. This strategy focuses on the following key levers, energy efficiency and electrification of our fleet, energy efficiency in our buildings and throughout our broadband network and investments in renewable energy. In fiscal year 2022, our various initiatives enabled us to reduce emissions from our operations by 28% compared to 2019. Reflecting our deep commitment to sustainability, we also converted Cogeco and Cogeco Communications revolving credit facilities into a sustainability-linked loan structure. They are the first syndicated sustainability loans in Canada in the telecommunication and media sector. These loan facilities incorporate incentives, pricing terms linked to our GHG emissions, reduction target and our digital inclusion initiative to bring high speed Internet access to many households in unserved and underserved areas in Canada. Finally, to further underscore our commitment, we have linked a portion of the variable compensation of our executives and other leaders to the achievement of our emission reduction targets. Social engagement is one of Cogeco's core values, and we're deeply rooted in the communities we serve. In fiscal 2022, we supported more than 600 nonprofit organizations in Canada and the U.S., and our total giving represented 3.1% of our pre-tax profits. One of the best examples of our commitment to making a difference in our communities is undoubtedly our Annual Community Involvement Day, which, again, this year was held under the team planting routes in our communities and involve tree planting as well as trail and Riverbank cleanups. Here's a short video representing the activities of this day. [Presentation]

Our efforts in the area of environmental, social and governance factors continue to be recognized. As evidenced by our inclusion in Corporate Knights Global 100 Most Sustainable Corporation in the World and Canada's 50 Best Corporation Citizen list in the past year. We are also listed in the prestigious Sustainability Yearbook 2022, presented by S&P Global, for our excellence and implementing ESG best practice -- best business practices. Finally, Cogeco is proud to have also received -- recognize and receive the inaugural Terra Carta Seal, which recognize international companies that demonstrate their commitment to creating truly sustainable markets and are leaders in their industry. These recognitions are not only a source of pride for all of us, they also demonstrate that our efforts, priorities and achievements are aligned with best practices and encourage us to continue our work. Looking at the prospectus of 2024, I would like to go back on the results of the last year, especially on the last quarter ended 30th of November 2022. For Cogeco Inc., let us underline -- for the year ended August 31, 2022, an increase in revenue of 15%, an increase in adjusted EBITDA of 14.7% and growth in earnings of 4.3%. Dividends paid to shareholders have increased by 14.7% to $2.50 per share. Diluted earnings per share increased by 5.6% to 9.37%. Net capital expenditures increased by 29.4%. August 31, '22, an increase in revenue of 15.5%, an increase in adjusted EBITDA of 15.5% and earnings growth of 5.1%. Dividends paid to our shareholders increased by 10.2% to $2.82 per share, while diluted earnings per share rose 8.2% to $9.09. Finally, net capital expenditures, mainly due to our network expansion projects, increased by 29.2%. And for the first quarter of fiscal 2023, we have met our financial targets despite a challenging environment. So for Cogeco Inc. for the first quarter ending November 30, 2022, an increase in profits of 6%, an increase of EBITDA -- adjusted EBITDA by 5.5%, an increase of profits by 3.9% or [indiscernible] increase in revenue of 6.1%, an increase in adjusted EBITDA of 5.1%, an increase in profit of 3.2% compared to the corresponding period of the previous year. The current global economic and political instability has resulted in rising inflation and interest rates. While we are proactively working at minimizing the impact on the corporation, we expect the combination of those 2 elements to continue to put pressure on revenue and on the cost to deliver our services. Let's now review our priorities for 2023. Our growth and value creation activities, our focus on growing the business organically, making acquisitions and continuously in innovating while returning capital to our shareholders and maintaining a prudent level of financial leverage. To do this, we leverage our unique North American broadband platform, strong network of radio stations, reliable and resilient networks, innovative products and services, relationship with local communities and customer-centric mindset. Vision is to be an organization that delivers the best and most sustainable value to its shareholders, including customers, communities, colleagues, suppliers and shareholders. As such, we have defined our priorities for the current years in terms of our 6 strategic growth pillars, which are customer experience, brand value, market expansion, network performance, cost effectiveness and employee experience. Our priorities for fiscal year 2023, both in Canada and the U.S., are as followed. We will continue to enhance our service and product offering to provide customers with a distinctive experience that anticipates and meets their evolving expectations. We will also continue to invest in our brand to meet the needs of our customers. Our ESG leadership and our community involvement to build a strong, socially responsible brand that is the preferred choice in our markets. Expansion strategy continuing to work with governments to bridge the digital divide, pursuing opportunities for accretive acquisitions and network expansions while remaining determined to launch a mobile service in Canada as we now see greater opportunities under the new MVNO framework. Our fiber-to-the-home network expansions are gradually beginning to contribute to the growth of our Internet customer base with EBITDA and free cash flow benefits starting in fiscal 2024. Connection, on the fiber expenses are gradually leading to contribute. We should add 150,000 homes to our network, which equates to an increase of 8% of Canadian homes through 2025. [indiscernible] 110,000 homes to the network in the U.S., representing a 5% increase expected in fiscal 2023. We will also continue to invest in the reliability and resiliency of our communication networks to ensure that they remain high performing in order to provide the best services to our customers. As far as our broadcasting activities are concerned, they are adapting to the new market reality. Cogeco Media will continue to focus on the progressive redefinition of our radio stations as multi-platform audio content providers on the expansion of our digital offering and on our talent management strategy. Our efforts to increase operational excellence and accelerate cost optimization to generate additional efficiencies and savings. In the current inflationary environment, it is essential to continue our efforts in this area. Offer an outstanding employee experience, this will remain a priority at Cogeco. And it is through a flexible and collaborative environment that drives performance for fosters well-being and supports a customer-centric culture that we will continue our success. None of what we've accomplished in the past year would have been possible without our colleagues. They are at the heart of Cogeco from Miami, Florida to the Magdalen Islands in Québec to North Bay, Ontario to Columbus, Ohio. Our clients are their family members, friends, neighbors and local businesses and through their actions and hard work, our colleagues are helping to achieve our mission, vision and goals for sustainable growth. Economic context with global supply chain disruption, talent shortages, increased competitive pressure, we are pursuing a fiscally sound growth strategy, building on our core strengths and fuel by our highly engaged teams. [Foreign Language]. We bring people together through remarkable communication and entertainment experiences. Every day, we make a positive impact on society because we exist to enrich people's lives, fostering human connection and development -- developing vibrant communities. Thank you for your attention.

Thank you, Philippe, for that excellent exposé on our activities and future activities of our companies and with the Board. And in my personal name, I want to thank you and your team for the excellent work that you've undertaken. Now we are entering question period. We invite shareholders and proxy holders to go to the microphones to identify themselves and ask your question. If you have a plurality of questions, perhaps, you can ask one and let somebody else ask their and then come back for a second question. Are there any questions dealing with this general meeting and...

My name is [indiscernible]. I am a shareholder of Cogeco Communications, and I don't understand correctly. Is Cogeco only a management company and Cogeco Communications deals with all the services being offered?

Thank you for your question. Cogeco Communications has all the telecommunication activities that is services to 1.6 million people with broadband Internet and line phones. It is controlled and held by Cogeco Inc., who on top of that, operates a network of 23 radio stations throughout Québec.

So it's only the radio stations that don't belong to Cogeco Communications?

That is correct. Thank you, ma'am. Are there any other questions? The presentation was quite clear, Philippe. So this would conclude our shareholder meetings. Thank you all for having come here and familiarise yourself with the companies. I would invite you to go outside in the [indiscernible] of the [indiscernible] room. [Foreign Language] and see you again next year.