QUEBECOR INC. REPORTS CONSOLIDATED RESULTS FOR SECOND QUARTER 2023

MONTRÉAL, Aug. 10, 2023 /PRNewswire/ - Quebecor Inc. ("Quebecor" or "the Corporation") today reported its consolidated financial results for the second quarter of 2023. Quebecor consolidates the financial results of its wholly owned Quebecor Media Inc. ("Quebecor Media") subsidiary.

Second quarter 2023 highlights

• In the context of the acquisition of Freedom Mobile Inc. ("Freedom") on April 3, 2023, Quebecor recorded revenues of $1.40 billion, up $283.3 million (25.4%), adjusted EBITDA¹ of $605.2 million, up $113.8 million (23.2%), and adjusted cash flows from operations² of $455.3 million, up $94.3 million (26.1%) compared with the same period of 2022.
• The Telecommunications segment increased its revenues by $288.6 million (31.6%), its adjusted EBITDA by $120.1 million (24.6%), and its adjusted cash flows from operations by $92.3 million (25.0%), reflecting, among other things, the contribution of the Freedom acquisition.
• The Telecommunications segment's revenues from mobile services and equipment increased by $275.9 million (104.2%) due to the impact of the Freedom acquisition and growth in the revenues of Videotron Ltd. ("Videotron"), and its revenues from Internet access services increased by $17.0 million (5.6%).
• Organic growth added 24,600 revenue-generating units ("RGUs")³ (0.4%) during the quarter, including 49,100 subscriber connections (2.8%) in mobile telephony and 5,300 Internet access subscriptions (0.3%).
• Following the acquisition of Freedom, the Telecommunications segment now has 3,610,100 mobile telephony connections and 1,716,800 Internet access customers.
• TVA Group Inc. ("TVA Group") recorded an $8.7 million (–5.9%) decrease in revenues and negative adjusted EBITDA of $3.8 million, an unfavorable variance of $7.1 million compared with the second quarter of 2022.
• The Sports and Entertainment segment's revenues increased by $3.8 million (8.4%) and there was a $1.7 million unfavourable variance in its adjusted EBITDA in the second quarter of 2023.
• Quebecor's consolidated net income attributable to shareholders: $174.1 million ($0.75 per basic share), up $16.7 million ($0.09 per basic share) or 10.6%.
• Adjusted income from continuing operating activities:⁴ $182.3 million ($0.79 per basic share), up $20.6 million ($0.11 per basic share) or 12.7%.
• On April 3, 2023, Videotron acquired Freedom from Shaw Communications Inc. ("Shaw"). Videotron paid $2.07 billion in cash, net of cash acquired of $103.2 million. As part of the transaction, Videotron assumed certain liabilities, mainly lease obligations. The consideration paid is subject to certain post–closing adjustments. The acquisition includes the Freedom brand's entire wireless and Internet customer base, as well as its owned infrastructure, spectrum and retail outlets. The transaction also includes a long–term undertaking by Shaw and Rogers Communications Inc. ("Rogers") to provide Videotron with transport services (including backhaul and backbone), roaming services and wholesale Internet services. Through the acquisition of Freedom, Videotron has entered the British Columbia and Alberta telecommunications markets and strengthened its position in the Ontario market.
• On April 3, 2023, Videotron entered into a new $2.10 billion secured term credit facility with a syndicate of financial institutions to finance the acquisition of Freedom. The term credit facility consists of three tranches of equal size maturing in October 2024, April 2026 and April 2027, bearing interest at floating rates. On April 10, 2023, Videotron entered into a floating–to–fixed interest rate swap agreement in connection with the $700.0 million tranche maturing in April 2027, fixing the interest rate at 5.203% based on Videotron's then leverage ratio.

Comments by Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor:

The acquisition of Freedom in April 2023 has positioned Quebecor as Canada's fourth national wireless provider. Our mobile network now reaches nearly 70% of Canada's population and we will be able to further expand our coverage by functioning as a mobile virtual network operator ("MVNO"). In just four months, we have lowered telecom prices across the country by increasing competition and delivered on the majority of the commitments we made to Canadians and to Innovation, Science and Economic Development Canada ("ISED Canada").

We have rapidly enhanced our product and service offerings and significantly upgraded Freedom's wireless network. On July 27, 2023, we proudly unveiled an ultra–competitive suite of wireless plans including true nationwide coverage. Now supported by a first class 5G network, our new plans enhance the customer experience in Ontario, British Columbia and Alberta.

Another important development was the Canadian Radio–television and Telecommunications Commission (CRTC) decision issued on July 24, 2023, which selected Quebecor's proposed rates for MVNO access to Rogers' network, enabling us to offer affordable and accessible plans in more Canadian regions.

Driven by the Freedom transaction, Quebecor delivered an outstanding financial performance in the second quarter of 2023 with increases of 25.4% in revenues, 23.2% in adjusted EBITDA and 26.1% in adjusted cash flows from operations. The Telecommunications segment reported increases of 31.6% in revenues, 24.6% in adjusted EBITDA and 25.0% in adjusted cash flows from operations, which rose to $461.7 million.

Our Telecommunications segment's range of plans continued to attract more customers. Over the past twelve months, it has added 124,700 (7.5%) mobile telephony connections and 38,100 (2.4%) Internet access customers.

We now have a total of 3,610,100 subscriber connections to our mobile telephony service and 1,716,800 subscribers to our Internet access services nationwide and we are executing our development plan to increase market share and profitability. Our strong cash flows will also enable us to continue to invest in our networks and to enhance online services for our customers, building on the complementary strengths and successes of our Videotron, Freedom and Fizz brands.

TVA Group continued to be impacted by lower profitability across all of its businesses and all of the industries in which it operates, posting a $7.1 million unfavourable variance in adjusted EBITDA. The restructuring plan announced on February 16, 2023 has not yet generated sufficient savings to offset the major impact of the decline in the advertising market, which is the sole source of revenue for over–the–air television stations, and the absence of foreign productions in the film production and audiovisual services segment. Unfortunately, there is no reason to believe the situation will improve in the short or medium term, in view of the conditions throughout the entire North American broadcasting industry. Only Radio-Canada is not subject to the profit imperative, which forces us to make difficult decisions to ensure the business's sustainability.

Despite the challenging environment, we continued to invest in content to protect our market share, both for TVA Network and the specialty channels. As a result, TVA Group's market share rose to 42.7%, up 0.4 points from the same period of 2022. TVA Network had four of the top five shows in Québec during the quarter. However, in order to be able to continue investing in programming and news content, it is imperative that we have a legislative and regulatory framework that applies to the web giants and requires them to contribute financially to Canada's broadcasting system. It is also critical to remove advertising from all of Radio–Canada's platforms. The public broadcaster is engaging in unfair competition with private broadcasters in the race for ratings and advertising revenue, despite the fact that it receives huge amounts of government funding to fulfil its mandate.

Over the past several months, we have clearly demonstrated our ability to execute, and our determination to achieve, our goal of fostering healthy competition in the wireless marketplace for the benefit of all Canadian consumers. With our solid track record and strong financial position, we are more committed than ever to our cross–Canada growth strategy and our goal of creating long–term value for all our stakeholders.

We look to the future with confidence because of our agility and rigour, as demonstrated by our operating costs, which are the lowest in the Canadian telecom industry. And it should be noted that, despite the acquisition of Freedom without any issuance of capital stock, Quebecor's debt leverage ratio remains among the lowest in the industry.

Non–IFRS Financial Measures

The Corporation uses financial measures not standardized under International Financial Reporting Standards ("IFRS"), such as adjusted EBITDA, adjusted income from continuing operating activities, adjusted cash flows from operations, free cash flows from continuing operating activities and consolidated net debt leverage ratio, and key performance indicators, including RGU. Beginning in the first quarter of 2023, the Corporation has elected to exclude subscriptions to over–the–top (OTT) video services and customers of third–party Internet access ("TPIA") providers from its RGUs, as they are not highly representative for the purpose of assessing the Corporation's performance. Definitions of the non–IFRS measures and key performance indicator used by the Corporation in this press release are provided in the "Definitions" section.

Financial tables

Table 1
Consolidated summary of income, cash flows and balance sheet
(in millions of Canadian dollars, except per basic share data)

2023/2022 second quarter comparison

Revenues: $1.40 billion, a $283.3 million (25.4%) increase.

• Revenues increased in Telecommunications ($288.6 million or 31.6% of segment revenues), due to the impact of the Freedom acquisition and growth in mobile services and equipment and Internet access services, and in Sports and Entertainment ($3.8 million or 8.4%).
• Revenues decreased in Media ($7.8 million or –4.1%).

Adjusted EBITDA: $605.2 million, a $113.8 million (23.2%) increase.

• Adjusted EBITDA increased in Telecommunications ($120.1 million or 24.6% of segment adjusted EBITDA), including Freedom's contribution.
• There was an unfavourable variance in Media ($4.6 million) and a decrease in Sports and Entertainment ($1.7 million or –36.2%).
• The change in the fair value of Quebecor stock options and stock–price–based share units resulted in a $1.4 million unfavourable variance in the Corporation's stock–based compensation charge in the second quarter of 2023 compared with the same period of 2022.

Net income attributable to shareholders: $174.1 million ($0.75 per basic share) in the second quarter of 2023, compared with $157.4 million ($0.66 per basic share) in the same period of 2022, an increase of $16.7 million ($0.09 per basic share).

• The main favourable variances were:
  • $113.8 million increase in adjusted EBITDA;
  • $3.7 million favourable variance in gains and losses on valuation and translation of financial instruments, including $3.8 million without any tax consequences.
• The main unfavourable variances were:
  • $59.0 million increase in the depreciation and amortization charge;
  • $31.7 million increase related to financial expenses;
  • $9.8 million unfavourable variance in the charge for restructuring, acquisition costs and other.

Adjusted income from continuing operating activities: $182.3 million ($0.79 per basic share) in the second quarter of 2023, compared with $161.7 million ($0.68 per basic share) in the same period of 2022, an increase of $20.6 million ($0.11 per basic share) or 12.7%.

Adjusted cash flows from operations: $455.3 million, a $94.3 million (26.1%) increase due primarily to the $113.8 million increase in adjusted EBITDA, partially offset by a $19.7 million increase in additions to intangible assets.

Cash flows provided by operating activities: $358.4 million, a $116.7 million (48.3%) increase due primarily to the increase in adjusted EBITDA, the favourable net change in non–cash balances related to operating activities and the decrease in current income taxes, partially offset by the increase in the cash portion of financial expenses and the unfavourable variance in the cash portion of restructuring, acquisition costs and other.

2023/2022 year–to–date comparison

Revenues: $2.51 billion, a $310.9 million (14.1%) increase.

• Revenues increased in Telecommunications ($310.2 million or 17.1% of segment revenues), due to the impact of the Freedom acquisition and growth in mobile services and equipment and Internet access services, and in Sports and Entertainment ($18.2 million or 23.0%).
• Revenues decreased in Media ($18.8 million or –5.1%).

Adjusted EBITDA: $1.05 billion, a $114.5 million (12.3%) increase.

• Adjusted EBITDA increased in Telecommunications ($134.3 million or 14.2% of segment adjusted EBITDA), including Freedom's contribution, and Sports and Entertainment ($1.8 million or 39.1%).
• Adjusted EBITDA decreased in Media ($19.1 million) and there was an unfavourable variance at Head Office ($2.5 million).
• The change in the fair value of Quebecor stock options and stock–price–based share units resulted in a $5.0 million unfavourable variance in the Corporation's stock–based compensation charge in the first half of 2023 compared with the same period of 2022.

Net income attributable to shareholders: $295.0 million ($1.28 per basic share) in the first half of 2023, compared with $278.8 million ($1.17 per basic share) in the same period of 2022, an increase of $16.2 million ($0.11 per basic share).

• The main favourable variance was:
  • $114.5 million increase in adjusted EBITDA.
• The main unfavourable variances were:
  • $52.8 million increase in the depreciation and amortization charge;
  • $32.1 million increase related to financial expenses;
  • $14.5 million unfavourable variance in the charge for restructuring, acquisition costs and other.

Adjusted income from continuing operating activities: $318.3 million ($1.38 per basic share) in the first half of 2023, compared with $290.4 million ($1.22 per basic share) in the same period of 2022, an increase of $27.9 million ($0.16 per basic share) or 9.6%.

Adjusted cash flows from operations: $801.3 million, a $124.2 million (18.3%) increase due primarily to the $114.5 million increase in adjusted EBITDA and a $25.0 million decrease in additions to property, plant and equipment, partially offset by a $15.3 million increase in additions to intangible assets.

Cash flows provided by operating activities: $630.3 million, a $160.9 million (34.3%) increase due primarily to the increase in adjusted EBITDA, the favourable net change in non–cash balances related to operating activities and the decrease in current income taxes, partially offset by the increase in the cash portion of financial expenses and the unfavourable variance in the cash portion of restructuring, acquisition costs and other.

Financing transactions

• On June 28, 2023, TVA Group entered into a new $20.0 million secured revolving credit facility repayable on demand. On the same date, TVA Group terminated its secured revolving credit facility in the amount of $75.0 million.
• On April 3, 2023, Videotron entered into a new $2.10 billion secured term credit facility with a syndicate of financial institutions to finance the acquisition of Freedom. The term credit facility consists of three tranches of equal size maturing in October 2024, April 2026 and April 2027, bearing interest at Bankers' acceptance rate, Secured Overnight Financing Rate (SOFR), Canadian prime rate or U.S. prime rate, plus a premium determined by Videotron's leverage ratio. On April 10, 2023, Videotron entered into a floating–to–fixed interest rate swap agreement in connection with the $700.0 million tranche maturing in April 2027, fixing the interest rate at 5.203% based on Videotron's then applicable leverage ratio. The swap became effective on May 4, 2023 and matures on April 3, 2027.

Normal course issuer bid

On August 9, 2023, the Board of Directors of the Corporation authorized a normal course issuer bid for a maximum of 1,000,000 Class A Multiple Voting Shares ("Class A Shares"), representing approximately 1.3% of issued and outstanding Class A Shares, and for a maximum of 2,000,000 Class B Subordinate Voting Shares ("Class B Shares"), representing approximately 1.3% of issued and outstanding Class B Shares as of August 1, 2023. The purchases can be made from August 15, 2023 to August 14, 2024, at prevailing market prices on the open market through the facilities of the Toronto Stock Exchange or other alternative trading systems in Canada. All the repurchased shares will be cancelled. As of August 1, 2023, 76,970,888 Class A Shares and 153,965,202 Class B Shares were issued and outstanding.

The average daily trading volume of the Class A Shares and Class B Shares of the Corporation between February 1, 2023 and July 31, 2023 on the Toronto Stock Exchange was 4,244 Class A Shares and 539,941 Class B Shares. Consequently, the Corporation will be authorized to purchase a maximum of 1,061 Class A Shares and 134,985 Class B Shares during the same trading day, pursuant to its normal course issuer bid.

The Corporation believes that the repurchase of these shares under this normal course issuer bid is in the best interests of the Corporation and its shareholders.

The Corporation also announced that on or around August 11, 2023 it will enter into an automatic securities purchase plan ("the plan") with a designated broker whereby shares may be repurchased under the plan at times when such purchases would otherwise be prohibited pursuant to regulatory restrictions or self–imposed blackout periods. The plan received prior approval from the Toronto Stock Exchange. It will come into effect on August 15, 2023 and terminate on the same date as the normal course issuer bid.

Under the plan, before entering a self–imposed blackout period, the Corporation may, but is not required to, ask the designated broker to make purchases under the normal course issuer bid. Such purchases shall be made at the discretion of the designated broker, within parameters established by the Corporation prior to the blackout periods. Outside the blackout periods, purchases will be made at the discretion of the Corporation's management.

Between August 15, 2022 and August 1, 2023, of the 1,000,000 Class A Shares and 6,000,000 Class B Shares it was authorized to repurchase under its previous normal course issuer bid, the Corporation repurchased no Class A Shares and 2,668,500 Class B Shares at a weighted average price of $27.35904 per share on the open market through the facilities of the TSX and alternative trading systems.

In the first half of 2023, the Corporation did not purchase and cancel any Class A and Class B Shares (in the same period of 2022, 4,202,951 Class B Shares were purchased and cancelled for a total cash consideration of $123.1 million).

Dividends declared

On August 9, 2023, the Board of Directors of Quebecor declared a quarterly dividend of $0.30 per share on its Class A Shares and Class B Shares, payable on September 19, 2023 to shareholders of record at the close of business on August 25, 202