Consolidated Financial Highlights
|
Three months ended June 30 |
Six months ended June 30 |
(In
millions of Canadian dollars, except per share amounts,
unaudited) |
2023 |
2022 |
% Chg |
2023 |
2022 |
% Chg |
|
|
|
|
|
|
|
Total revenue |
5,046 |
3,868 |
30 |
|
8,881 |
7,487 |
19 |
|
Total service revenue |
4,534 |
3,443 |
32 |
|
7,848 |
6,639 |
18 |
|
Adjusted EBITDA 1 |
2,190 |
1,592 |
38 |
|
3,841 |
3,131 |
23 |
|
Net income 2 |
109 |
409 |
(73 |
) |
620 |
801 |
(23 |
) |
Adjusted net income 1 |
544 |
463 |
17 |
|
1,097 |
925 |
19 |
|
|
|
|
|
|
|
|
Diluted earnings per share 2 |
$0.20 |
$0.76 |
(74 |
) |
$1.19 |
$1.57 |
(24 |
) |
Adjusted diluted earnings per
share 1 |
$1.02 |
$0.86 |
19 |
|
$2.11 |
$1.81 |
17 |
|
|
|
|
|
|
|
|
Cash provided by operating
activities |
1,635 |
1,319 |
24 |
|
2,088 |
2,132 |
(2 |
) |
Free cash flow 1 |
476 |
344 |
38 |
|
846 |
859 |
(2 |
) |
"We delivered strong results in the second
quarter and continued to demonstrate solid momentum in our core
businesses," said Tony Staffieri, President and CEO. "We upgraded
our financial guidance for the year and I am pleased to share the
integration with Shaw is tracking ahead of plan. We're proud that
more Canadians continue to choose Rogers as we invest in our
customers and our networks to deliver long-term growth."
1 Adjusted EBITDA is
a total of segments measure. Free cash flow is a capital management
measure. Adjusted diluted earnings per share is a non-GAAP ratio.
Adjusted net income is a non-GAAP financial measure and is a
component of adjusted diluted earnings per share. See "Non-GAAP and
Other Financial Measures" in our Q2 2023 Management's Discussion
and Analysis (MD&A), available at www.sedarplus.ca, and this
earnings release for more information about each of these measures.
These are not standardized financial measures under International
Financial Reporting Standards (IFRS) and might not be comparable to
similar financial measures disclosed by other companies.2 The
significant decrease in net income and diluted earnings per share
includes an approximate $0.5 billion ongoing increase in quarterly
depreciation and amortization as a result of the assets acquired
through the $26 billion Shaw Transaction completed on April 3,
2023. For the purposes of calculating adjusted net income and
adjusted earnings per share, we have removed depreciation and
amortization of $0.2 billion on the incremental fair value of these
assets. |
Shaw Transaction
On April 3, 2023, after receiving all required
regulatory approvals and after the Freedom Transaction (as defined
below) closed, we acquired all the issued and outstanding Class A
Participating Shares and Class B Non-Voting Participating Shares
(collectively, Shaw Shares) of Shaw Communications Inc. (Shaw)
(Shaw Transaction) for total consideration of $20.5 billion,
consisting of:
- $19 billion of cash (consisting of
$13 billion of cash and restricted cash and $6 billion borrowed
from our $6 billion non-revolving term loan facility); and
- approximately $1.5 billion through
the issuance of 23.6 million RCI Class B Non-Voting common shares
(based on the opening share price of Rogers Class B Non-Voting
Shares on April 3, 2023 of $61.33).
We also assumed approximately $2.9 billion of
debt, net of cash and consideration received from the Freedom
Transaction, on April 3.
The Shaw Transaction was implemented through a
court-approved plan of arrangement under the Business Corporations
Act (Alberta).
On April 3, 2023, the outstanding shares of
Freedom Mobile Inc. (Freedom), a subsidiary of Shaw, were sold to
Videotron Ltd. (Videotron), a subsidiary of Quebecor Inc.
(Quebecor) (Freedom Transaction). The Freedom Transaction was
effected pursuant to an agreement entered into on August 12, 2022
among Rogers, Shaw, Quebecor, and Videotron, which provided for the
sale of all Freedom-branded wireless and Internet customers and all
of Freedom's infrastructure, spectrum licences, and retail
locations. The Freedom Transaction did not include the sale of Shaw
Mobile-branded wireless subscribers; accordingly, these wireless
subscribers remained with the Shaw business acquired by Rogers.
On April 3, 2023, following the completion of
the Shaw Transaction, Shaw Communications Inc. was amalgamated with
RCI. As a result of this amalgamation, RCI became the issuer and
assumed all of Shaw's obligations under the indenture governing
Shaw's outstanding senior notes with a total principal amount of
$4.55 billion as at April 3, 2023. As a result, the assumed senior
notes now rank equally with RCI’s other unsecured senior notes and
debentures, bank credit facilities, and letter of credit
facilities. In connection with the Shaw Transaction, RCCI provided
a guarantee for Shaw's payment obligations under those senior
notes.
Regulatory approvalOn March 31,
2023, the Minister of Innovation, Science and Industry approved the
transfer of Freedom's spectrum licences to Videotron, following
which the Freedom Transaction closed on April 3, 2023. As part of
the regulatory approval process, we agreed to certain legally
enforceable undertakings with Innovation, Science and Economic
Development Canada (ISED Canada), each of which is detailed in
"Regulatory Developments".
The acquired Shaw businessThe
Shaw business we acquired provides cable telecommunications,
satellite video services, and data networking to residential
customers, businesses, and public-sector entities in British
Columbia, Alberta, Saskatchewan, and Manitoba (Western Canada).
Shaw's primary products include Internet (through Fibre+), Video
(through Total TV and Shaw Direct satellite), home phone services,
and Wireless services (through Shaw Mobile to consumers in British
Columbia and Alberta). Subsequent to closing, we stopped selling
services under the Shaw Mobile brand to new customers. These
services continue to be offered by Rogers to existing Shaw Mobile
customers.
The combined Rogers and Shaw has the scale,
assets, and capabilities delivering unprecedented wireline and
wireless broadband and network investments, innovation, and growth
in new telecommunications services, and greater choice for Canadian
consumers and businesses. The combination is accelerating the
delivery of critical 5G service across Western Canada, from rural
areas to dense cities, more quickly than either company could
achieve on its own, by bringing together the expertise and assets
of both companies.
The results from the acquired Shaw wireline
operations are included in our Cable segment and the results of the
acquired Shaw Mobile operations are included in our Wireless
segment, from the date of acquisition, consistent with our
reportable segment definitions.
The major classes of assets acquired, along with
the preliminary allocation of fair value to each, consist of
property, plant and equipment ($7.5 billion) and intangible assets
($6.3 billion, primarily customer relationships). We have
recognized preliminary goodwill of $12.3 billion associated with
the acquisition. The recognition of these assets will result in a
material increase to our depreciation and amortization expense on
an ongoing basis. We also expect a material increase in finance
costs in relation to the financing incurred to fund the acquisition
and acquiring Shaw's long-term debt. See "Review of Consolidated
Performance" in our Q2 2023 MD&A for more information.
In addition, targeted cost synergies, together
with organic service revenue and earnings growth, are anticipated
to result in an offsetting and material increase to our adjusted
EBITDA and net income on an ongoing basis.
Financial Guidance
As a result of strong execution in the first
half of the year, we are adjusting our consolidated guidance ranges
for full-year 2023 adjusted EBITDA and free cash flow from the
ranges provided on March 31, 2023. We have not changed our guidance
ranges for full-year 2023 total service revenue and capital
expenditures. The updated 2023 guidance ranges are presented
below.
|
2022 |
March 31, 2023 |
July 26, 2023 |
(In
millions of dollars, except percentages) |
Actual |
Guidance Ranges 1, 2 |
Guidance Ranges 1, 2 |
|
|
|
|
|
|
|
|
Total service revenue |
13,305 |
Increase of 26% |
to |
increase of 30% |
Increase of 26% |
to |
increase of 30% |
Adjusted EBITDA |
6,393 |
Increase of 31% |
to |
increase of 35% |
Increase of 33% |
to |
increase of 36% |
Capital expenditures 3 |
3,075 |
3,700 |
to |
3,900 |
3,700 |
to |
3,900 |
Free
cash flow |
1,773 |
2,000 |
to |
2,200 |
2,200 |
to |
2,500 |
1 Guidance ranges presented as percentages
reflect percentage increases over full-year 2022
results.2 Guidance ranges presented include the results of the
acquired Shaw business from and after the closing on April 3,
2023.3 Includes additions to property, plant and equipment net
of proceeds on disposition, but does not include expenditures for
spectrum licences, additions to right-of-use assets, or assets
acquired through business combinations.
Our guidance, including the various assumptions
underlying it, is forward-looking and should be read in conjunction
with "About Forward-Looking Information" in this earnings release
(including the material assumptions listed under the heading "Key
assumptions underlying our full-year 2023 guidance") and in our
2022 Annual MD&A and the related disclosure and information
about various economic, competitive, legal, and regulatory
assumptions, factors, and risks that may cause our actual future
financial and operating results to differ from what we currently
expect.
Operating Environment and Strategic
Highlights
Our five objectives guide our work and
decision-making as we further improve our operational execution and
make well-timed investments to grow our core businesses and deliver
increased shareholder value. Below are some highlights for the
quarter.
Build the biggest and best networks in the
country
- Signed exclusive agreements with
SpaceX and Lynk Global to bring satellite-to-mobile phone coverage
to Canada.
- Announced plans to modernize and
expand the cellular network in the Toronto subway system (TTC)
through the acquisition of BAI Communications' Canadian operations
(BAI Canada) on April 24, 2023.
- Continued to expand Canada's
largest 5G network as at June 30, 2023, reaching over 2,100
communities.
- Invested over $1 billion in capital
expenditures, more than 55% of which was invested in our wireless
and wireline network infrastructure.
Deliver easy to use, reliable products and
services
- Introduced Retail Direct, helping
customers get the device of their choice shipped directly to their
homes.
- Launched our "We Speak Your
Language" program across all retail stores, with the goal of
serving customers in their preferred language.
- Updated our credit policy for
newcomers to make it easier for them to activate more lines and
give them access to more smart device options.
Be the first choice for Canadians
- Attracted 170,000 net postpaid
mobile phone subscribers, up from 122,000 last year.
- Introduced new 5G plans starting at
$55/month to make 5G more accessible to more Canadians.
- Attracted almost 20% more fans to
Toronto Blue Jays home games.
Be a strong national company investing in
Canada
- Successfully completed the historic
Shaw Transaction on April 3, 2023.
- Repatriated customer care roles to
ensure every phone call or online chat with customers is answered
by a customer solution specialist based in Canada.
- Donated $1 million to the Canadian
Red Cross Alberta Wildfires Appeal.
Be the growth leader in our industry
- Generated total service revenue of
$4,534 million, up 32%; adjusted EBITDA of $2,190 million, up 38%;
and net income of $109 million, down 73%.
- Generated free cash flow of $476
million and generated cash provided by operating activities of
$1,635 million.
- Increased our full-year 2023
guidance for adjusted EBITDA and free cash flow.
Quarterly Financial Highlights
Revenue Total revenue and total
service revenue increased by 30% and 32%, respectively, this
quarter, driven substantially by revenue growth in our Cable and
Wireless businesses.
Wireless service revenue increased by 7% this
quarter, primarily as a result of the cumulative impact of growth
in our mobile phone subscriber base and revenue from Shaw Mobile
subscribers acquired through the Shaw Transaction. Wireless
equipment revenue increased by 20%, primarily as a result of a
continued shift in the product mix towards higher-value devices and
an increase in new subscribers purchasing devices.
Cable service revenue increased by 93% this
quarter as a result of our acquisition of Shaw.
Media revenue increased by 4% this quarter as a
result of higher sports-related revenue, primarily at the Toronto
Blue Jays.
Adjusted EBITDA and
marginsConsolidated adjusted EBITDA increased 38% this
quarter and our adjusted EBITDA margin increased by 220 basis
points, primarily due to improving synergies and efficiencies.
Wireless adjusted EBITDA increased by 9%,
primarily due to the flow-through impact of higher revenue as
discussed above. This gave rise to an adjusted EBITDA margin of
63.6%.
Cable adjusted EBITDA increased by 97% due to
the flow-through impact of higher revenue as discussed above and
the achievement of cost synergies associated with integration
activities. This gave rise to an adjusted EBITDA margin of
51.0%.
Media adjusted EBITDA increased by $2 million
this quarter, primarily due to higher revenue as discussed above,
partially offset by higher Toronto Blue Jays player payroll
costs.
Net income and adjusted net
incomeNet income decreased by 73% this quarter, primarily
as a result of higher depreciation and amortization, higher
restructuring, acquisition and other costs, primarily associated
with Shaw acquisition- and integration-related activities, and
higher finance costs, partially offset by higher adjusted EBITDA.
Adjusted net income3 increased by 17% this quarter, primarily
as a result of higher adjusted EBITDA.
Cash flow and available
liquidityThis quarter, we generated cash provided by
operating activities of $1,635 million (2022 - $1,319 million); the
increase is primarily a result of higher adjusted EBITDA. We also
generated free cash flow of $476 million (2022 - $344 million), up
38% as a result of higher adjusted EBITDA, partially offset by
higher capital expenditures and higher interest on long-term
debt.
As at June 30, 2023, we had $5.1 billion of
available liquidity4 (December 31, 2022 - $4.9 billion),
including $0.4 billion in cash and cash equivalents and a combined
$4.8 billion available under our bank credit and other
facilities.
As a result of the Shaw Transaction closing this
quarter, our debt leverage ratio has increased to 5.14 as at
June 30, 2023. This has been calculated on an adjusted basis
to include trailing 12-month adjusted EBITDA of a combined Rogers
and Shaw as if the Shaw Transaction had closed at the beginning of
the trailing 12-month period. If calculated on an as reported basis
without the foregoing adjustment, our debt leverage ratio3,4 as at
June 30, 2023 was 6.2 (December 31, 2022 - 3.3).
We also returned $252 million in dividends to
shareholders this quarter and we declared a $0.50 per share
dividend on July 25, 2023. In the third quarter, we intend to
amend our dividend reinvestment plan (DRIP) to (i)
provide for a small discount on the dividend reinvestment share
price and (ii) allow for the issuance of treasury shares for the
settlement of the DRIP dividends.
3 Effective this quarter,
adjusted net income excludes depreciation and amortization on the
incremental fair value of Shaw Transaction-related property, plant
and equipment and intangible assets. See "Non-GAAP and Other
Financial Measures" for more information.4 Available liquidity
and debt leverage ratio are capital management measures. Pro forma
debt leverage ratio is a non-GAAP ratio. Pro forma trailing
12-month adjusted EBITDA is a non-GAAP financial measure and is a
component of pro forma debt leverage ratio. See "Non-GAAP and Other
Financial Measures" in our Q2 2023 MD&A for more information
about this measure, available at www.sedarplus.ca. See "Financial
Condition" in our Q2 2023 MD&A for a reconciliation of
available liquidity. |
About Rogers
Rogers is Canada's leading wireless, cable and
media company that provides connectivity and entertainment to
Canadian consumers and businesses across the country. Our shares
are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and
RCI.B) and on the New York Stock Exchange (NYSE: RCI).
Investment community
contact |
Media
contact |
|
|
Paul Carpino |
Sarah Schmidt |
647.435.6470 |
647.643.6397 |
paul.carpino@rci.rogers.com |
sarah.schmidt@rci.rogers.com |
Quarterly Investment Community
Teleconference
Our second quarter 2023 results teleconference
with the investment community will be held on:
- July 26, 2023
- 8:00 a.m. Eastern Time
- webcast available at
investors.rogers.com
- media are welcome to participate on
a listen-only basis
A rebroadcast will be available at
investors.rogers.com for at least two weeks following the
teleconference. Additionally, investors should note that from time
to time, Rogers' management presents at brokerage-sponsored
investor conferences. Most often, but not always, these conferences
are webcast by the hosting brokerage firm, and when they are
webcast, links are made available on Rogers' website at
investors.rogers.com.
For More Information
You can find more information relating to us on
our website (investors.rogers.com), on SEDAR+ (sedarplus.ca), and
on EDGAR (sec.gov), or you can e-mail us at
investor.relations@rci.rogers.com. Information on or connected to
these and any other websites referenced in this earnings release is
not part of, or incorporated into, this earnings release.
You can also go to investors.rogers.com for
information about our governance practices, environmental, social,
and governance (ESG) reporting, a glossary of communications and
media industry terms, and additional information about our
business.
About this Earnings Release
This earnings release contains important
information about our business and our performance for the three
and six months ended June 30, 2023, as well as forward-looking
information about future periods. This earnings release should be
read in conjunction with our Second Quarter 2023 Interim Condensed
Consolidated Financial Statements (Second Quarter 2023 Interim
Financial Statements) and notes thereto, which have been prepared
in accordance with International Accounting Standard 34, Interim
Financial Reporting, as issued by the International Accounting
Standards Board (IASB); our Second Quarter 2023 MD&A; our 2022
Annual MD&A; our 2022 Annual Audited Consolidated Financial
Statements and notes thereto, which have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as issued by the IASB; and our other recent filings with Canadian
and US securities regulatory authorities, including our Annual
Information Form, which are available on SEDAR+ at sedarplus.ca or
EDGAR at sec.gov, respectively.
Effective this quarter, we have retrospectively
amended our definitions of (i) adjusted net income and (ii)
adjusted net debt. See "Non-GAAP and Other Financial Measures" in
this earnings release and in our Q2 2023 MD&A for more
information.
For more information about Rogers, including
product and service offerings, competitive market and industry
trends, our overarching strategy, key performance drivers, and
objectives, see "Understanding Our Business", "Our Strategy, Key
Performance Drivers, and Strategic Highlights", and "Capability to
Deliver Results" in our 2022 Annual MD&A.
We, us, our, Rogers, Rogers Communications, and
the Company refer to Rogers Communications Inc. and its
subsidiaries. RCI refers to the legal entity Rogers Communications
Inc., not including its subsidiaries. Rogers also holds interests
in various investments and ventures.
All dollar amounts in this earnings release are
in Canadian dollars unless otherwise stated and are unaudited. All
percentage changes are calculated using the rounded numbers as they
appear in the tables. This earnings release is current as at
July 25, 2023 and was approved by the Audit and Risk Committee
of RCI's Board of Directors (the Board) on that date. This earnings
release includes forward-looking statements and assumptions. See
"About Forward-Looking Information" for more information.
We are publicly traded on the Toronto Stock
Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange
(NYSE: RCI).
In this earnings release, this quarter, the
quarter, or second quarter refer to the three months ended
June 30, 2023, the first quarter refers to the three months
ended March 31, 2023, and year to date refers to the six months
ended June 30, 2023, unless the context indicates otherwise.
All results commentary is compared to the equivalent period in 2022
or as at December 31, 2022, as applicable, unless otherwise
indicated.
Trademarks in this earnings release are owned or
used under licence by Rogers Communications Inc. or an affiliate.
This earnings release also includes trademarks of other parties.
The trademarks referred to in this earnings release may be listed
without the ™ symbols. ©2023 Rogers Communications
Reportable segmentsWe report our results of
operations in three reportable segments. Each segment and the
nature of its business is as follows:
Segment |
Principal activities |
Wireless |
Wireless telecommunications operations for Canadian consumers and
businesses. |
Cable |
Cable telecommunications operations, including Internet, television
and other video (Video), Satellite, telephony (Home Phone), and
smart home monitoring services for Canadian consumers and
businesses, and network connectivity through our fibre network and
data centre assets to support a range of voice, data, networking,
hosting, and cloud-based services for the business, public sector,
and carrier wholesale markets. |
Media |
A diversified portfolio of media properties, including sports media
and entertainment, television and radio broadcasting, specialty
channels, multi-platform shopping, and digital media. |
Wireless and Cable are operated by our wholly
owned subsidiary, RCCI, and certain of our other wholly owned
subsidiaries. Following the Shaw Transaction, aspects of Cable are
also operated by Shaw Cablesystems G.P., Shaw Telecom G.P., and
Shaw Satellite G.P. Media is operated by our wholly owned
subsidiary, Rogers Media Inc., and its subsidiaries.
Summary of Consolidated Financial Results
|
Three months ended June 30 |
Six months ended June 30 |
(In
millions of dollars, except margins and per share amounts) |
2023 |
2022 |
% Chg |
2023 |
2022 |
% Chg |
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
Wireless |
2,424 |
|
2,212 |
|
10 |
|
4,770 |
|
4,352 |
|
10 |
|
Cable |
2,013 |
|
1,041 |
|
93 |
|
3,030 |
|
2,077 |
|
46 |
|
Media |
686 |
|
659 |
|
4 |
|
1,191 |
|
1,141 |
|
4 |
|
Corporate items and intercompany eliminations |
(77 |
) |
(44 |
) |
75 |
|
(110 |
) |
(83 |
) |
33 |
|
Revenue |
5,046 |
|
3,868 |
|
30 |
|
8,881 |
|
7,487 |
|
19 |
|
Total service revenue 1 |
4,534 |
|
3,443 |
|
32 |
|
7,848 |
|
6,639 |
|
18 |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
Wireless |
1,222 |
|
1,118 |
|
9 |
|
2,401 |
|
2,203 |
|
9 |
|
Cable |
1,026 |
|
520 |
|
97 |
|
1,583 |
|
1,071 |
|
48 |
|
Media |
4 |
|
2 |
|
100 |
|
(34 |
) |
(64 |
) |
(47 |
) |
Corporate items and intercompany eliminations |
(62 |
) |
(48 |
) |
29 |
|
(109 |
) |
(79 |
) |
38 |
|
Adjusted EBITDA |
2,190 |
|
1,592 |
|
38 |
|
3,841 |
|
3,131 |
|
23 |
|
Adjusted EBITDA margin 2 |
43.4 |
% |
41.2 |
% |
2.2 pts |
43.2 |
% |
41.8 |
% |
1.4 pts |
|
|
|
|
|
|
|
Net income |
109 |
|
409 |
|
(73 |
) |
620 |
|
801 |
|
(23 |
) |
Basic earnings per share |
$0.21 |
|
$0.81 |
|
(74 |
) |
$1.20 |
|
$1.59 |
|
(25 |
) |
Diluted earnings per share |
$0.20 |
|
$0.76 |
|
(74 |
) |
$1.19 |
|
$1.57 |
|
(24 |
) |
|
|
|
|
|
|
|
Adjusted net income 2 |
544 |
|
463 |
|
17 |
|
1,097 |
|
925 |
|
19 |
|
Adjusted basic earnings per share
2 |
$1.03 |
|
$0.92 |
|
12 |
|
$2.12 |
|
$1.83 |
|
16 |
|
Adjusted diluted earnings per share |
$1.02 |
|
$0.86 |
|
19 |
|
$2.11 |
|
$1.81 |
|
17 |
|
|
|
|
|
|
|
|
Capital expenditures |
1,079 |
|
778 |
|
39 |
|
1,971 |
|
1,427 |
|
38 |
|
Cash provided by operating
activities |
1,635 |
|
1,319 |
|
24 |
|
2,088 |
|
2,132 |
|
(2 |
) |
Free cash flow |
476 |
|
344 |
|
38 |
|
846 |
|
859 |
|
(2 |
) |
1 As defined. See "Key Performance
Indicators". 2 Adjusted EBITDA margin is a supplementary
financial measure. Adjusted basic earnings per share is a non-GAAP
ratio. Adjusted net income is a non-GAAP financial measure and is a
component of adjusted basic earnings per share. See "Non-GAAP and
Other Financial Measures" in our Q2 2023 MD&A for more
information about each of these measures, available at
www.sedarplus.ca.
Results of our Reportable Segments
WIRELESS
Wireless Financial Results
|
Three months ended June 30 |
|
Six months ended June 30 |
(In
millions of dollars, except margins) |
2023 |
2022 |
% Chg |
2023 |
2022 |
% Chg |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
Service revenue |
1,920 |
|
1,791 |
|
7 |
|
3,756 |
|
3,514 |
|
7 |
|
Equipment revenue |
504 |
|
421 |
|
20 |
|
1,014 |
|
838 |
|
21 |
|
Revenue |
2,424 |
|
2,212 |
|
10 |
|
4,770 |
|
4,352 |
|
10 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Cost of equipment |
501 |
|
437 |
|
15 |
|
1,009 |
|
863 |
|
17 |
|
Other operating expenses |
701 |
|
657 |
|
7 |
|
1,360 |
|
1,286 |
|
6 |
|
Operating expenses |
1,202 |
|
1,094 |
|
10 |
|
2,369 |
|
2,149 |
|
10 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
1,222 |
|
1,118 |
|
9 |
|
2,401 |
|
2,203 |
|
9 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin 1 |
63.6 |
% |
62.4 |
% |
1.2 pts |
63.9 |
% |
62.7 |
% |
1.2 pts |
Capital expenditures |
458 |
|
457 |
|
— |
|
910 |
|
794 |
|
15 |
|
1 Calculated using
service revenue.
Wireless Subscriber Results 1
|
Three months ended June 30 |
Six months ended June 30 |
(In
thousands, except churn and mobile phone ARPU) |
2023 |
2022 |
Chg |
2023 |
2022 |
Chg |
|
|
|
|
|
|
|
Postpaid mobile phone 2, 3 |
|
|
|
|
|
|
Gross additions |
430 |
|
303 |
|
127 |
|
748 |
|
557 |
|
191 |
|
Net additions |
170 |
|
122 |
|
48 |
|
265 |
|
188 |
|
77 |
|
Total postpaid mobile phone subscribers 4 |
10,107 |
|
9,035 |
|
1,072 |
|
10,107 |
|
9,035 |
|
1,072 |
|
Churn (monthly) |
0.87 |
% |
0.68 |
% |
0.19 pts |
0.83 |
% |
0.69 |
% |
0.14 pts |
Prepaid mobile phone |
|
|
|
|
|
|
Gross additions |
231 |
|
197 |
|
34 |
|
448 |
|
348 |
|
100 |
|
Net (losses) additions |
(5 |
) |
55 |
|
(60 |
) |
(13 |
) |
39 |
|
(52 |
) |
Total prepaid mobile phone subscribers 4 |
1,242 |
|
1,205 |
|
37 |
|
1,242 |
|
1,205 |
|
37 |
|
Churn (monthly) |
6.33 |
% |
4.05 |
% |
2.28 pts |
6.14 |
% |
4.43 |
% |
1.71 pts |
Mobile phone ARPU (monthly) 5 |
$56.79 |
|
$58.83 |
|
($2.04 |
) |
$57.17 |
|
$58.02 |
|
($0.85 |
) |
1 Subscriber counts and subscriber churn
are key performance indicators. See "Key Performance
Indicators".2 On April 3, 2023, we acquired approximately
501,000 postpaid mobile phone subscribers as a result of our
acquisition of Shaw, which are not included in net additions, but
do appear in the ending total balances for June 30, 2023.3
Effective April 1, 2023, we adjusted our postpaid mobile phone
subscriber base to remove 51,000 subscribers relating to a
wholesale account.4 As at end of period.5 Mobile phone
ARPU is a supplementary financial measure. See "Non-GAAP and Other
Financial Measures" in our Q2 2023 MD&A for more information
about this measure, available at www.sedarplus.ca.
Service
revenueThe 7% increases in service revenue this
quarter and year to date were primarily a result of:
- cumulative impact of growth in our
mobile phone subscriber base over the past year; and
- the impact of the Shaw Mobile
subscribers acquired through the Shaw Transaction in April
2023.
The year to date increase was also affected by
higher roaming revenue associated with increased travel.
The decrease in mobile phone ARPU this quarter
was primarily a result of an increase in the mix of lower cost
plans arising from our acquisition of Shaw Mobile.
The increase in postpaid gross and net additions
this quarter and year to date were a result of sales execution and
customer satisfaction in a growing Canadian market.
Equipment
revenue The 20% increase in equipment revenue this
quarter and 21% increase year to date were a result of:
- a continued shift in the product
mix towards higher-value devices;
- higher device upgrades by existing
customers; and
- an increase in new subscribers
purchasing devices; partially offset by
- promotional activity.
Operating
expensesCost of equipment The 15% increase in the
cost of equipment this quarter and 17% increase year to date were a
result of the equipment revenue changes discussed above.
Other operating expenses The 7% increase in
other operating expenses this quarter and 6% increase year to date
were primarily a result of:
- higher costs associated with the
increased revenue and subscriber additions, which included
increased roaming and commissions; and
- investments made in customer
service; partially offset by
- cost efficiencies.
Adjusted
EBITDA The 9% increases in adjusted EBITDA this
quarter and year to date were a result of the revenue and expense
changes discussed above.
CABLE
Cable Financial Results
|
Three months ended June 30 |
|
Six months ended June 30 |
(In
millions of dollars, except margins) |
2023 |
2022 |
% Chg |
2023 |
2022 |
% Chg |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
Service revenue |
2,005 |
|
1,037 |
|
93 |
|
3,011 |
|
2,067 |
|
46 |
|
Equipment revenue |
8 |
|
4 |
|
100 |
|
19 |
|
10 |
|
90 |
|
Revenue |
2,013 |
|
1,041 |
|
93 |
|
3,030 |
|
2,077 |
|
46 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
987 |
|
521 |
|
89 |
|
1,447 |
|
1,006 |
|
44 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
1,026 |
|
520 |
|
97 |
|
1,583 |
|
1,071 |
|
48 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin |
51.0 |
% |
50.0 |
% |
1.0 pts |
|
52.2 |
% |
51.6 |
% |
0.6 pts |
Capital expenditures |
538 |
|
269 |
|
100 |
|
857 |
|
525 |
|
63 |
|
Cable Subscriber Results 1
|
Three months ended June 30 |
Six months ended June 30 |
(In
thousands, except ARPA and penetration) |
2023 |
2022 |
Chg |
2023 |
2022 |
Chg |
|
|
|
|
|
|
|
Homes passed 2,3 |
9,815 |
|
4,755 |
|
5,060 |
|
9,815 |
|
4,755 |
|
5,060 |
|
Customer relationships |
|
|
|
|
|
|
Net additions |
5 |
|
14 |
|
(9 |
) |
6 |
|
19 |
|
(13 |
) |
Total customer relationships 2,3 |
4,787 |
|
2,603 |
|
2,184 |
|
4,787 |
|
2,603 |
|
2,184 |
|
ARPA (monthly) 4 |
$139.68 |
|
$133.15 |
|
$6.53 |
|
$142.18 |
|
$133.01 |
|
$9.17 |
|
|
|
|
|
|
|
|
Penetration 2 |
48.8 |
% |
54.7 |
% |
(5.9 pts) |
48.8 |
% |
54.7 |
% |
(5.9 pts) |
|
|
|
|
|
|
|
Retail Internet |
|
|
|
|
|
|
Net additions |
25 |
|
26 |
|
(1 |
) |
39 |
|
39 |
|
— |
|
Total retail Internet subscribers 2,3 |
4,284 |
|
2,271 |
|
2,013 |
|
4,284 |
|
2,271 |
|
2,013 |
|
Video |
|
|
|
|
|
|
Net additions |
12 |
|
21 |
|
(9 |
) |
4 |
|
35 |
|
(31 |
) |
Total Video subscribers 2 |
2,732 |
|
1,528 |
|
1,204 |
|
2,732 |
|
1,528 |
|
1,204 |
|
Smart Home Monitoring |
|
|
|
|
|
|
Net losses |
(4 |
) |
(3 |
) |
(1 |
) |
(9 |
) |
(7 |
) |
(2 |
) |
Total Smart Home Monitoring subscribers 2 |
92 |
|
106 |
|
(14 |
) |
92 |
|
106 |
|
(14 |
) |
Home Phone |
|
|
|
|
|
|
Net losses |
(29 |
) |
(18 |
) |
(11 |
) |
(42 |
) |
(40 |
) |
(2 |
) |
Total Home Phone subscribers 2,3 |
1,684 |
|
872 |
|
812 |
|
1,684 |
|
872 |
|
812 |
|
1 Subscriber results are key performance
indicators. See "Key Performance Indicators".2 As at end of
period.3 On April 3, 2023, we acquired approximately 1,961,000
retail Internet subscribers, 1,203,000 Video subscribers, 890,000
Home Phone subscribers, 4,935,000 homes passed, and 2,191,000
customer relationships as a result of the Shaw Transaction, which
are not included in net additions, but do appear in the ending
total balances for June 30, 2023. The acquired Satellite
subscribers are not included in our reported subscriber, homes
passed, or customer relationship metrics.4 ARPA is a
supplementary financial measure. See "Non-GAAP and Other Financial
Measures" in our Q2 2023 MD&A for more information about this
measure, available at www.sedarplus.ca.
Service revenueThe 93%
increase in service revenue this quarter and 46% increase year to
date were a result of:
- approximately $1 billion of revenue
related to our acquisition of Shaw; partially offset by
- continued increased competitive
promotional activity.
The higher ARPA this quarter and year to date
was primarily a result of the acquisition of Shaw.
Operating expenses The 89%
increase in operating expenses this quarter and 44% increase year
to date were primarily a result of:
- our acquisition of Shaw, partially
offset by the realization of cost synergies associated with
integration activities; and
- investments in customer
service.
Adjusted EBITDAThe 97%
increase in adjusted EBITDA this quarter and 48% increase year to
date were a result of the service revenue and expense changes
discussed above.
MEDIA
Media Financial Results
|
Three months ended June 30 |
Six months ended June 30 |
(In
millions of dollars, except margins) |
2023 |
2022 |
% Chg |
2023 |
2022 |
% Chg |
|
|
|
|
|
|
|
|
Revenue |
686 |
|
659 |
|
4 |
|
1,191 |
|
1,141 |
|
4 |
|
Operating expenses |
682 |
|
657 |
|
4 |
|
1,225 |
|
1,205 |
|
2 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
4 |
|
2 |
|
100 |
|
(34 |
) |
(64 |
) |
(47 |
) |
|
|
|
|
|
|
|
|
Adjusted EBITDA margin |
0.6 |
% |
0.3 |
% |
0.3 pts |
|
(2.9)% |
(5.6)% |
2.7 pts |
Capital expenditures |
43 |
|
19 |
|
126 |
|
104 |
|
41 |
|
154 |
|
RevenueThe 4% increases in revenue this quarter
and year to date were a result of:
- higher sports-related revenue,
primarily at the Toronto Blue Jays; partially offset by
- lower advertising revenue across
all divisions; and
- lower Today's Shopping Choice revenue driven by lower
demand.
Operating expensesThe 4%
increase in operating expenses this quarter and 2% increase year to
date were a result of:
- higher Toronto Blue Jays player
payroll; partially offset by
- lower Today's Shopping Choice costs
in line with lower revenue.
Adjusted EBITDAThe increases
in adjusted EBITDA this quarter and year to date were a result of
the revenue and expense changes discussed above.
CAPITAL EXPENDITURES
|
Three months ended June 30 |
Six months ended June 30 |
(In
millions of dollars, except capital intensity) |
2023 |
2022 |
% Chg |
2023 |
2022 |
% Chg |
|
|
|
|
|
|
|
|
|
Wireless |
458 |
|
457 |
|
— |
|
910 |
|
794 |
|
15 |
|
Cable |
538 |
|
269 |
|
100 |
|
857 |
|
525 |
|
63 |
|
Media |
43 |
|
19 |
|
126 |
|
104 |
|
41 |
|
154 |
|
Corporate |
40 |
|
33 |
|
21 |
|
100 |
|
67 |
|
49 |
|
|
|
|
|
|
|
|
|
|
Capital expenditures 1 |
1,079 |
|
778 |
|
39 |
|
1,971 |
|
1,427 |
|
38 |
|
|
|
|
|
|
|
|
|
|
Capital intensity 2 |
21.4 |
% |
20.1 |
% |
1.3 pts |
22.2 |
% |
19.1 |
% |
3.1 pts |
1 Includes additions to property, plant and
equipment net of proceeds on disposition, but does not include
expenditures for spectrum licences, additions to right-of-use
assets, or assets acquired through business
combinations.2 Capital intensity is a supplementary financial
measure. See "Non-GAAP and Other Financial Measures" in our Q2 2023
MD&A for more information about this measure, available at
www.sedarplus.ca.
One of our objectives is to build the biggest
and best networks in the country. As we continually work towards
this, we expect to spend more on our wireless and wireline networks
this year than we have in the past several years. This year, we
will continue to roll out our 5G network (the largest 5G network in
Canada as at June 30, 2023) across the country, including our
commitment of expanding the coverage across Western Canada. We also
continue to invest in fibre deployments, including
fibre-to-the-home (FTTH), in our cable network and we will expand
our network footprint to reach more homes and businesses, including
to rural, remote, and Indigenous communities. We continue to direct
capital expenditures to strengthen the resilience of our networks
and make significant investments to strengthen our technology
systems, increase network stability for our customers, and enhance
our testing.
These investments will strengthen network
resilience and stability and will help us bridge the digital divide
by expanding our network further into rural and underserved areas
through participation in various programs and projects.
WirelessCapital expenditures in
Wireless this quarter were in line with prior year. The increase in
capital expenditures in Wireless year to date was a result of
greater investments made to upgrade and expand our wireless
network. The ongoing deployment of 3500 MHz spectrum substantially
augments the capacity and resilience of our earlier 5G deployments
in the 600 MHz spectrum band.
CableThe increase in capital
expenditures in Cable this quarter and year to date reflect our
acquisition of Shaw, and continued investments in, and expansion
of, our infrastructure, including additional fibre deployments to
increase our FTTH distribution. These upgrades will lower the
number of homes passed per node and incorporate the latest
technologies to help deliver more bandwidth and an even more
consistent customer experience as we progress in our connected home
roadmap, including service footprint expansion and upgrades to our
DOCSIS 3.1 platform to evolve to DOCSIS 4.0, to offer increased
network resilience and stability along with faster download speeds
over time.
MediaThe increases in capital
expenditures in Media this quarter and year to date were primarily
a result of higher Toronto Blue Jays stadium infrastructure
expenditures to complete the new fan experience renovations at the
Rogers Centre.
CorporateThe increase in
corporate capital expenditures this quarter and year to date were a
result of higher investments in our corporate information
technology infrastructure.
Capital
intensityCapital intensity increased this quarter
and year to date as a result of higher capital expenditures, as
noted above, partially offset by higher revenue.
Regulatory Developments
See our 2022 Annual MD&A for a discussion of
the significant regulations that affected our operations as at
March 9, 2023. The following are the significant regulatory
developments since that date.
ISED Canada review of the Shaw Transaction
On March 31, 2023, the Minister of Innovation,
Science and Industry approved the transfer of Freedom's spectrum
licences to Videotron, following which the Freedom Transaction
closed on April 3, 2023.
As part of the regulatory approval process, we
have agreed to certain legally enforceable undertakings with ISED
Canada, which reflect commitments we made when the Shaw Transaction
was announced, including:
- $1 billion of investments over five
years to connect rural, remote, and Indigenous communities across
Western Canada and to close critical connectivity gaps faster for
underserved areas, including to make broadband Internet services
available where broadband Internet at a minimum 50 megabit per
second (Mbps) download speeds and 10 Mbps upload speeds is not
currently available and to make 5G wireless service available where
mobile service using long-term evolution (LTE) is not
available;
- $2.5 billion of investments over
five years to enhance and expand 5G coverage across Western Canada
and $3 billion over five years related to additional network,
services, and technology investments, including the expansion of
our Cable network;
- expanding Connected for Success,
our low-cost, high-speed Internet program, to low-income Canadians
across Western Canada and implementing a new Connected for Success
wireless program for low-income Canadians across Canada, such that
Connected for Success will be available to more than 2.5 million
eligible Canadians within five years;
- maintaining a strong presence in
Western Canada, including creating 3,000 new jobs within five years
(and maintaining those jobs until the tenth anniversary of closing)
and maintaining a Western Canada headquarters in Calgary for at
least ten years; and
- continuing to offer wireless plans
to existing Shaw Mobile customers as at the closing date with the
same terms and conditions (including eligibility) as the Shaw
Mobile plans that were available as at the closing date for five
years.
We will report on our progress towards each of
these undertakings every year until such commitments have been met
or for up to ten years after the closing date of the Shaw
Transaction, whichever is earlier, including through a report that
will be posted publicly on our website. If any material element of
any of the above commitments is not met, we could be liable to pay
ISED Canada $100 million in damages per year (to a maximum of $1
billion) until the earlier of (i) such material elements having
been met or fulfilled or (ii) ten years after the closing date of
the Shaw Transaction.
CRTC Review of Wholesale Wireline
Telecommunications Services
On March 8, 2023, the Canadian Radio-television
and Telecommunications Commission (CRTC) released Telecom Notice of
Consultation (CRTC 2023-56) to provide notice of a public hearing
to be held for its review of the existing framework for wholesale
high-speed access (HSA) services in light of changing market
conditions, the significant challenges in implementing the
framework, and the importance to Canadians of having access to
greater choice and more affordable services. The CRTC has requested
comments on several issues, including the preliminary views that
(i) the provision of aggregated wholesale HSA services should be
mandated; (ii) access to FTTH facilities should be provided over
these services; and (iii) the provision of FTTH facilities over
aggregated wholesale HSA services should be mandated on a temporary
and expedited basis until the CRTC reaches a decision as to whether
such access is to be provided indefinitely.
ISED Canada consultation on wireless
services within the TTC subway system
On July 24, 2023, ISED Canada announced it had
initiated a Consultation on Conditions of Licence relating to the
Provision of Service within the Toronto Transit Commission (TTC)
Subway System. ISED Canada proposes to introduce additional
conditions on spectrum licences relating to the provision of
service in subway stations and tunnels operated by the TTC. Among
other things, ISED Canada is seeking comments on a process for
licensees to reach commercial or arbitrated agreements regarding
access, as well as the timing of provision of wireless services
within the TTC subway system. Initial comments are due by August 8,
2023, with reply comments due 15 days after publication of initial
comments, following which ISED Canada will issue its decision.
CRTC decision on final offer arbitration
between Rogers and Quebecor regarding MVNO access
rates
In Telecom Regulatory Policy CRTC 2021-130 –
Review of Mobile Wireless Services, the CRTC mandated that the
national carriers, including Rogers, provide mobile virtual network
operator (MVNO) service to regional carriers possessing mobile
spectrum licences. Under the policy, if parties are unable to agree
upon commercial rates, either party may refer the dispute to the
CRTC for final offer arbitration. Because Rogers and Quebecor were
unable to reach an agreement, the matter was put before the CRTC.
On July 24 2023, the CRTC accepted Quebecor’s offer and directed
the parties to enter into an MVNO access agreement consistent with
that offer. We are reviewing the impact of the decision
Updates to Risks and Uncertainties
See our 2022 Annual MD&A for a discussion of
the principal risks and uncertainties that could have a material
adverse effect on our business and financial results as at March 9,
2023, which should be reviewed in conjunction with this earnings
release. The following updates and supplements those risks and
uncertainties.
Shaw TransactionAs a result of
the Shaw Transaction, we are subject to a number of additional
risks, many of which are outside the control of Rogers. Certain of
these risks are disclosed in our 2022 Annual MD&A. Updates and
additions to these risks are described below.
We may fail to realize the expected synergies
and other benefits of the Shaw TransactionAchieving the anticipated
benefits of the Shaw Transaction depends on our ability to
consolidate and integrate Shaw's businesses, operations, and
workforce in a manner that facilitates growth opportunities and
achieves the projected cost savings and revenue growth without
adversely affecting the combined company's current operations. Even
if we successfully integrate Shaw's businesses, the anticipated
benefits of the Shaw Transaction may not be fully realized or they
could take longer to realize than expected.
The integration process may result in the loss
of key personnel, the termination or alteration of existing
material contracts or relationships, the disruption of ongoing
businesses, or inconsistencies in standards, controls, procedures,
and policies. There could be potential unknown liabilities and
unforeseen expenses associated with the Shaw Transaction that were
not discovered while performing due diligence. Coordinating certain
aspects of the operations and personnel of Rogers with Shaw will
involve complex operational, technological, and personnel-related
challenges. In addition to the day-to-day operations of Rogers,
management will need to focus on the integration of the Shaw
business.
Videotron Ltd.On April 3, 2023,
Rogers and Videotron settled the lawsuit arising on October 29,
2021, when Videotron launched a lawsuit against Rogers in the
Quebec Superior Court, in connection with an agreement entered into
by the parties in 2013 for the development and operation of a joint
LTE network in the province of Quebec. The lawsuit involved
allegations by Videotron that Rogers breached its contractual
obligations by developing its own network in the territory and
sought damages of $850 million. Rogers remains committed to serving
our customers through continued investment in the joint
network.
July 2022 network outageAs a
result of the network outage that occurred on July 8, 2022, a total
of four applications were filed in the Quebec Superior Court
seeking authorization to commence a class action against Rogers in
relation to this network outage. One of the applications was
subsequently withdrawn. A second application has since been
suspended. Each of the remaining two applications seeks to
institute a class action on behalf of all persons in Quebec who,
among other things, experienced a wireless or wireline service
interruption as a result of, or were otherwise impacted by, the
outage. Each remaining application also claims various damages,
including, among others, contractual damages, damages for lost
profits, and punitive damages. On June 22, 2023, a carriage hearing
was heard in respect of the two remaining applications; we expect a
decision identifying the representative plaintiff to follow later
this year.
At this time, we are unable to assess the
likelihood of success of these applications, or predict the
magnitude of any liability we might incur by virtue of the claims
underlying those applications or any corresponding or similar
claims that may be brought against us in the future. As such, we
have not recognized a liability for this contingency. If
successful, one of those claims could have a material adverse
effect on our financial results or financial condition. It is also
possible that similar or corresponding claims could be filed in
other jurisdictions.
TechnologySatelliteThe acquired
Shaw business utilizes three satellites (Anik F2, Anik F3, and Anik
G1) owned by Telesat to provide satellite services to customers.
Telesat has publicly disclosed anomalies with two of four thrusters
used for station-keeping on Anik F2. Customers in remote
geographies have begun experiencing periodic service interruptions
and the overall survivability estimations have been reduced.
To ensure continuity of service, workarounds
have been implemented by both Telesat and Rogers. To further
mitigate risk, we have accelerated our set-top box deployment plan
to transition impacted services away from Anik F2 to Anik G1. Such
workarounds and risk mitigation strategies may not be able to fully
mitigate present and future anomalies or failure of the
satellite.These operational anomalies, and any future anomalies or
failure of any satellite, could negatively affect customer service
and our relationships with our customers and may have a material
adverse effect on our reputation, operations, and/or financial
results.
We do not maintain any insurance coverage for
the transponders on Anik F2, Anik F3, and Anik G1, including
business interruption insurance, that would cover damage related to
the loss of use of one or more of the transponders on the
satellites.
The provision of Internet connectivity in rural
areas by new entrants leveraging low Earth orbit satellite
technology, or expanded broadband and/or wireless infrastructure
from legacy providers, could also result in declining subscriber
trends among Satellite customers.
Key Performance Indicators
We measure the success of our strategy using a
number of key performance indicators that are defined and discussed
in our 2022 Annual MD&A and this earnings release. We believe
these key performance indicators allow us to appropriately measure
our performance against our operating strategy and against the
results of our peers and competitors. The following key performance
indicators, some of which are supplementary financial measures (see
"Non-GAAP and Other Financial Measures"), are not measurements in
accordance with IFRS. They include:
- subscriber counts;
- Wireless;
- Cable; and
- homes passed (Cable);
- Wireless subscriber churn
(churn);
- Wireless mobile phone average
revenue per user(ARPU);
|
- Cable average revenue per account
(ARPA);
- Cable customer relationships;
- Cable market penetration (penetration);
- capital intensity; and
- total service revenue.
|
Non-GAAP and Other Financial Measures
Reconciliation of adjusted
EBITDA
|
Three months ended June 30 |
Six months ended June 30 |
(In millions of dollars) |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
Net income |
109 |
|
409 |
|
620 |
|
801 |
|
Add: |
|
|
|
|
Income tax expense |
27 |
|
135 |
|
212 |
|
288 |
|
Finance costs |
583 |
|
357 |
|
879 |
|
615 |
|
Depreciation and amortization |
1,158 |
|
638 |
|
1,789 |
|
1,284 |
|
EBITDA |
1,877 |
|
1,539 |
|
3,500 |
|
2,988 |
|
Add (deduct): |
|
|
|
|
Other income |
(18 |
) |
(18 |
) |
(45 |
) |
(24 |
) |
Restructuring, acquisition and other |
331 |
|
71 |
|
386 |
|
167 |
|
|
|
|
|
|
Adjusted EBITDA |
2,190 |
|
1,592 |
|
3,841 |
|
3,131 |
|
Reconciliation of adjusted net
income
|
Three months ended June 30 |
Six months ended June 30 |
(In
millions of dollars) |
2023 |
2022 |
2023 |
2022 |
|
|
|
|
|
Net income |
109 |
|
409 |
|
620 |
|
801 |
|
Add (deduct): |
|
|
|
|
Restructuring, acquisition and other |
331 |
|
71 |
|
386 |
|
167 |
|
Depreciation and amortization on fair value increment of Shaw
Transaction-related assets 1 |
252 |
|
— |
|
252 |
|
— |
|
Income tax impact of above items |
(148 |
) |
(17 |
) |
(161 |
) |
(43 |
) |
|
|
|
|
|
Adjusted net income |
544 |
|
463 |
|
1,097 |
|
925 |
|
1 Adjusted net income includes depreciation
and amortization on the acquired Shaw property, plant and equipment
and intangible assets based on Shaw's historical cost and
depreciation policies. It therefore excludes depreciation and
amortization on the fair value increment recognized on acquisition
of Shaw Transaction-related property, plant and equipment and
intangible assets.
Reconciliation of pro forma trailing
12-month adjusted EBITDA
|
As at June 30 |
(In
millions of dollars) |
2023 |
|
|
|
Trailing 12-month adjusted
EBITDA |
7,103 |
|
Add (deduct): |
|
|
Acquired Shaw business adjusted EBITDA - July 2022 to March
2023 |
1,547 |
|
|
|
|
Pro forma trailing 12-month adjusted EBITDA |
8,650 |
|
Reconciliation of free cash flow
|
Three months ended June 30 |
|
Six months ended June 30 |
(In millions of dollars) |
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
|
|
|
|
|
|
Cash provided by operating
activities |
1,635 |
|
1,319 |
|
|
2,088 |
|
2,132 |
|
Add (deduct): |
|
|
|
|
|
Capital expenditures |
(1,079 |
) |
(778 |
) |
|
(1,971 |
) |
(1,427 |
) |
Interest on borrowings, net and capitalized interest |
(510 |
) |
(325 |
) |
|
(749 |
) |
(560 |
) |
Interest paid, net |
489 |
|
227 |
|
|
812 |
|
441 |
|
Restructuring, acquisition and other |
331 |
|
71 |
|
|
386 |
|
167 |
|
Program rights amortization |
(26 |
) |
(19 |
) |
|
(44 |
) |
(39 |
) |
Change in net operating assets and liabilities |
(261 |
) |
(216 |
) |
|
443 |
|
105 |
|
Other adjustments 1 |
(103 |
) |
65 |
|
|
(119 |
) |
40 |
|
|
|
|
|
|
|
Free
cash flow |
476 |
|
344 |
|
|
846 |
|
859 |
|
1 Consists of post-employment benefit
contributions, net of expense, cash flows relating to other
operating activities, and other (income) expense from our financial
statements.
Reconciliation of adjusted net debt
|
As atJune 30 |
As atDecember 31 |
(In
millions of dollars, except ratios) |
2023 |
2022 |
|
|
|
Current portion of long-term debt |
2,725 |
|
1,828 |
|
Long-term debt |
38,411 |
|
29,905 |
|
Deferred transaction costs and discounts |
1,084 |
|
1,122 |
|
|
42,220 |
|
32,855 |
|
Add (deduct): |
|
|
Adjustment of US dollar-denominated debt to hedged rate 1 |
(1,140 |
) |
(1,876 |
) |
Subordinated notes adjustment 2 |
(1,497 |
) |
(1,508 |
) |
Short-term borrowings |
2,583 |
|
2,985 |
|
Current portion of lease liabilities |
448 |
|
362 |
|
Lease liabilities |
2,019 |
|
1,666 |
|
Cash and cash equivalents |
(359 |
) |
(463 |
) |
Restricted cash and cash equivalents 3 |
— |
|
(12,837 |
) |
|
|
|
Adjusted net debt 1,4 |
44,274 |
|
21,184 |
|
1 Effective this quarter, we amended our
calculation of adjusted net debt such that we include our US-dollar
denominated debt at the hedged foreign exchange rate. Our US-dollar
denominated debt is 100% hedged and we believe this presentation is
better representative of the economic obligations on this debt.
Previously, our calculation of adjusted net debt had included a
current fair market value of the net debt derivative
assets.2 For the purposes of calculating adjusted net debt and
debt leverage ratio, we believe adjusting 50% of the value of our
subordinated notes is appropriate as this methodology factors in
certain circumstances with respect to priority for payment and this
approach is commonly used to evaluate debt leverage by rating
agencies.3 For the purposes of calculating adjusted net debt
prior to closing the Shaw Transaction, we deducted our restricted
cash and cash equivalents as these funds were raised solely to fund
a portion of the cash consideration of the Shaw Transaction or, if
the Shaw Transaction was not consummated, were to have been used to
redeem the applicable senior notes excluding any premium. We
therefore believe including only the underlying senior notes would
not represent our view of adjusted net debt prior to the
consummation of the Shaw Transaction or the redemption of the
senior notes.4 Adjusted net debt is a capital management
measure. This is not standardized financial measures under IFRS and
might not be comparable to similar financial measures disclosed by
other companies. See "Non-GAAP and Other Financial Measures" in our
Q2 2023 MD&A for more information about this measure, available
at www.sedarplus.ca.
Rogers Communications Inc.Interim
Condensed Consolidated Statements of Income(In millions of
Canadian dollars, except per share amounts, unaudited)
|
Three months ended June 30 |
Six months ended June 30 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
Revenue |
5,046 |
|
3,868 |
|
8,881 |
|
7,487 |
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Operating costs |
2,856 |
|
2,276 |
|
5,040 |
|
4,356 |
|
Depreciation and amortization |
1,158 |
|
638 |
|
1,789 |
|
1,284 |
|
Restructuring, acquisition and other |
331 |
|
71 |
|
386 |
|
167 |
|
Finance costs |
583 |
|
357 |
|
879 |
|
615 |
|
Other income |
(18 |
) |
(18 |
) |
(45 |
) |
(24 |
) |
|
|
|
|
|
Income before income tax expense |
136 |
|
544 |
|
832 |
|
1,089 |
|
Income tax expense |
27 |
|
135 |
|
212 |
|
288 |
|
|
|
|
|
|
Net income for the period |
109 |
|
409 |
|
620 |
|
801 |
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
Basic |
$0.21 |
|
$0.81 |
|
$1.20 |
|
$1.59 |
|
Diluted |
$0.20 |
|
$0.76 |
|
$1.19 |
|
$1.57 |
|
Rogers Communications Inc.Interim
Condensed Consolidated Statements of Financial Position(In
millions of Canadian dollars, unaudited)
|
As atJune 30 |
As atDecember 31 |
|
2023 |
2022 |
|
|
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
359 |
463 |
Restricted cash and cash equivalents |
— |
12,837 |
Accounts receivable |
4,290 |
4,184 |
Inventories |
545 |
438 |
Current portion of contract assets |
160 |
111 |
Other current assets |
1,008 |
561 |
Current portion of derivative instruments |
359 |
689 |
Total current assets |
6,721 |
19,283 |
|
|
|
Property, plant and equipment |
23,693 |
15,574 |
Intangible assets |
18,433 |
12,251 |
Investments |
2,111 |
2,088 |
Derivative instruments |
698 |
861 |
Financing receivables |
885 |
886 |
Other long-term assets |
794 |
681 |
Goodwill |
16,404 |
4,031 |
|
|
|
Total assets |
69,739 |
55,655 |
|
|
|
Liabilities and shareholders' equity |
|
|
Current liabilities: |
|
|
Short-term borrowings |
2,583 |
2,985 |
Accounts payable and accrued liabilities |
3,550 |
3,722 |
Other current liabilities |
347 |
252 |
Contract liabilities |
655 |
400 |
Current portion of long-term debt |
2,725 |
1,828 |
Current portion of lease liabilities |
448 |
362 |
Total current liabilities |
10,308 |
9,549 |
|
|
|
Provisions |
58 |
53 |
Long-term debt |
38,411 |
29,905 |
Lease liabilities |
2,019 |
1,666 |
Other long-term liabilities |
1,463 |
738 |
Deferred tax liabilities |
5,918 |
3,652 |
Total liabilities |
58,177 |
45,563 |
|
|
|
Shareholders' equity |
11,562 |
10,092 |
|
|
|
Total liabilities and shareholders' equity |
69,739 |
55,655 |
Rogers Communications Inc.Interim
Condensed Consolidated Statements of Cash Flows(In
millions of Canadian dollars, unaudited)
|
Three months ended June 30 |
Six months ended June 30 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Operating activities: |
|
|
|
|
Net income for the period |
109 |
|
409 |
|
620 |
|
801 |
|
Adjustments to reconcile net income to cash provided by operating
activities: |
|
|
|
|
Depreciation and amortization |
1,158 |
|
638 |
|
1,789 |
|
1,284 |
|
Program rights amortization |
26 |
|
19 |
|
44 |
|
39 |
|
Finance costs |
583 |
|
357 |
|
879 |
|
615 |
|
Income tax expense |
27 |
|
135 |
|
212 |
|
288 |
|
Post-employment benefits contributions, net of expense |
6 |
|
(69 |
) |
4 |
|
(63 |
) |
Other |
79 |
|
(14 |
) |
70 |
|
(1 |
) |
Cash provided by operating activities before changes in net
operating assets and liabilities, income taxes paid, and interest
paid |
1,988 |
|
1,475 |
|
3,618 |
|
2,963 |
|
Change in net operating assets and liabilities |
261 |
|
216 |
|
(443 |
) |
(105 |
) |
Income taxes paid |
(125 |
) |
(145 |
) |
(275 |
) |
(285 |
) |
Interest paid |
(489 |
) |
(227 |
) |
(812 |
) |
(441 |
) |
|
|
|
|
|
Cash provided by operating activities |
1,635 |
|
1,319 |
|
2,088 |
|
2,132 |
|
|
|
|
|
|
Investing activities: |
|
|
|
|
Capital expenditures |
(1,079 |
) |
(778 |
) |
(1,971 |
) |
(1,427 |
) |
Additions to program rights |
(12 |
) |
(10 |
) |
(37 |
) |
(22 |
) |
Changes in non-cash working capital related to capital expenditures
and intangible assets |
9 |
|
76 |
|
(29 |
) |
(96 |
) |
Acquisitions and other strategic transactions, net of cash
acquired |
(17,001 |
) |
— |
|
(17,001 |
) |
(9 |
) |
Other |
3 |
|
49 |
|
12 |
|
61 |
|
|
|
|
|
|
Cash used in investing activities |
(18,080 |
) |
(663 |
) |
(19,026 |
) |
(1,493 |
) |
|
|
|
|
|
Financing activities: |
|
|
|
|
Net (repayment of) proceeds received from short-term
borrowings |
(1,931 |
) |
108 |
|
(589 |
) |
611 |
|
Net issuance (repayment) of long-term debt |
5,788 |
|
(600 |
) |
5,400 |
|
12,711 |
|
Net (payments) proceeds on settlement of debt derivatives and
forward contracts |
(106 |
) |
20 |
|
121 |
|
(54 |
) |
Transaction costs incurred |
(1 |
) |
— |
|
(265 |
) |
(169 |
) |
Principal payments of lease liabilities |
(84 |
) |
(76 |
) |
(165 |
) |
(153 |
) |
Dividends paid |
(252 |
) |
(252 |
) |
(505 |
) |
(504 |
) |
|
|
|
|
|
Cash provided by (used in) financing activities |
3,414 |
|
(800 |
) |
3,997 |
|
12,442 |
|
|
|
|
|
|
Change in cash and cash equivalents and restricted cash and cash
equivalents |
(13,031 |
) |
(144 |
) |
(12,941 |
) |
13,081 |
|
Cash and cash equivalents and restricted cash and cash equivalents,
beginning of period |
13,390 |
|
13,940 |
|
13,300 |
|
715 |
|
|
|
|
|
|
Cash and cash equivalents and restricted cash and cash equivalents,
end of period |
359 |
|
13,796 |
|
359 |
|
13,796 |
|
|
|
|
|
|
Cash and cash equivalents |
359 |
|
665 |
|
359 |
|
665 |
|
Restricted cash and cash equivalents |
— |
|
13,131 |
|
— |
|
13,131 |
|
|
|
|
|
|
Cash and cash equivalents and restricted cash and cash equivalents,
end of period |
359 |
|
13,796 |
|
359 |
|
13,796 |
|
About Forward-Looking Information
This earnings release includes "forward-looking
information" and "forward-looking statements" within the meaning of
applicable securities laws (collectively, "forward-looking
information"), and assumptions about, among other things, our
business, operations, and financial performance and condition
approved by our management on the date of this earnings release.
This forward-looking information and these assumptions include, but
are not limited to, statements about our objectives and strategies
to achieve those objectives, and about our beliefs, plans,
expectations, anticipations, estimates, or intentions.
Forward-looking information
- typically includes words like
could, expect, may, anticipate, assume, believe, intend, estimate,
plan, project, guidance, outlook, target, and similar
expressions;
- includes conclusions, forecasts,
and projections that are based on our current objectives and
strategies and on estimates, expectations, assumptions, and other
factors that we believe to have been reasonable at the time they
were applied but may prove to be incorrect; and
- was approved by our management on
the date of this earnings release.
Our forward-looking information includes
forecasts and projections related to the following items, among
others:
- revenue;
- total service revenue;
- adjusted EBITDA;
- capital expenditures;
- cash income tax payments;
- free cash flow;
- dividend payments;
- the growth of new products and services;
- expected growth in subscribers and the services to which they
subscribe;
|
- the cost of acquiring and retaining subscribers and deployment
of new services;
- continued cost reductions and efficiency improvements;
- our debt leverage ratio;
- the benefits expected to result from the Shaw Transaction,
including corporate, operational, scale, and other synergies, and
their anticipated timing; and
- all other statements that are not historical facts.
|
Specific forward-looking information included or
incorporated in this document includes, but is not limited to, our
information and statements under "Financial Guidance" relating to
our 2023 consolidated guidance on total service revenue, adjusted
EBITDA, capital expenditures, and free cash flow, which were
updated on July 26, 2023.
Key assumptions underlying our full-year 2023
guidanceOur 2023 guidance ranges presented in "Financial Guidance"
are based on many assumptions including, but not limited to, the
following material assumptions for the full-year 2023:
- continued competitive intensity in
all segments in which we operate consistent with levels experienced
in 2022;
- we continue to invest in similar
amounts to pre-Shaw Transaction levels to deliver better services
to more Canadians;
- anticipated cost synergies,
operating efficiencies, and other benefits of the Shaw Transaction
are realized;
- no significant additional legal or
regulatory developments, other shifts in economic conditions, or
macro changes in the competitive environment affecting our business
activities;
- Wireless customers continue to
adopt, and upgrade to, higher-value smartphones at similar rates in
2023 compared to 2022;
- overall wireless market penetration
in Canada grows in 2023 at a similar rate as in 2022;
- underlying growth in immigration to
Canada remains strong;
- continued subscriber growth in
Internet at or above previous performance;
- declining Video subscribers,
including the impact of customers migrating to Ignite TV from our
legacy product, as subscription streaming services and other
over-the-top providers continue to grow in popularity;
- in Media, continued growth in
sports and relative stability in other traditional media
businesses;
- no significant sports-related work
stoppages or cancellations will occur;
- with respect to capital
expenditures:
- we continue to invest to ensure we
have competitive networks through (i) expanding our 5G wireless
network and (ii) upgrading our hybrid fibre-coaxial network to
lower the number of homes passed per node, utilize the latest
technologies, and deliver an even more reliable customer
experience; and
- we continue to make expenditures
related to our Home roadmap in 2023 and we make progress on our
service footprint expansion projects;
- a substantial portion of our 2023
US dollar-denominated expenditures is hedged at an average exchange
rate of $1.25/US$;
- key interest rates remain
relatively stable throughout 2023; and
- we retain our investment-grade
credit ratings.
Our conclusions, forecasts, and projections are
based on a number of estimates, expectations, assumptions, and
other factors, including, among others:
- general economic and industry
conditions;
- currency exchange rates and
interest rates;
- product pricing levels and
competitive intensity;
- subscriber growth;
- pricing, usage, and churn
rates;
- changes in government
regulation;
- technology and network
deployment;
|
- currency exchange rates and interest rates;
- availability of devices;
- timing of new product launches;
- content and equipment costs;
- the integration of acquisitions; and
- industry structure and stability.
|
Except as otherwise indicated, this earnings
release and our forward-looking information do not reflect the
potential impact of any non-recurring or other special items or of
any dispositions, monetizations, mergers, acquisitions, other
business combinations, or other transactions that may be considered
or announced or may occur after the date on which the statement
containing the forward-looking information is made.
Risks and uncertainties
Actual events and results can be substantially
different from what is expressed or implied by forward-looking
information as a result of risks, uncertainties, and other factors,
many of which are beyond our control, including, but not limited
to:
- regulatory changes;
- technological changes;
- economic, geopolitical, and other conditions affecting
commercial activity;
- unanticipated changes in content or equipment costs;
- changing conditions in the entertainment, information, and
communications industries;
- sports-related work stoppages or cancellations and labour
disputes;
- the integration of acquisitions;
- litigation and tax matters;
- the level of competitive intensity;
- the emergence of new opportunities;
- external threats, such as epidemics, pandemics, and other
public health crises, natural disasters, the effects of climate
change, or cyberattacks, among others;
- in the event we place certain assets for sale, we may not be
able to achieve the anticipated proceeds in relation to the sale of
those assets and sales of assets may not be achieved within the
expected timeframes or at all;
|
- risks related to the Shaw Transaction or Freedom Transaction,
including the possibility:
- we may not be able to achieve the anticipated cost synergies,
operating efficiencies, and other benefits of the Shaw Transaction
within the expected timeframes or at all;
- the integration of the businesses and operations of Rogers and
Shaw may be more difficult, time-consuming, or costly than
expected; and
- that operating costs, customer loss, and business disruption
(including, without limitation, difficulties in maintaining
relationships with employees, customers, or suppliers) may be
greater than expected;
- new interpretations and new accounting standards from
accounting standards bodies; and
- the other risks outlined in "Risks and Uncertainties Affecting
our Business" in our 2022 Annual MD&A and "Updates to Risks and
Uncertainties" in this earnings release.
|
These factors can also affect our objectives,
strategies, and intentions. Many of these factors are beyond our
control or our current expectations or knowledge. Should one or
more of these risks, uncertainties, or other factors materialize,
our objectives, strategies, or intentions change, or any other
factors or assumptions underlying the forward-looking information
prove incorrect, our actual results and our plans could vary
significantly from what we currently foresee.
Accordingly, we warn investors to exercise
caution when considering statements containing forward-looking
information and caution them that it would be unreasonable to rely
on such statements as creating legal rights regarding our future
results or plans. We are under no obligation (and we expressly
disclaim any such obligation) to update or alter any statements
containing forward-looking information or the factors or
assumptions underlying them, whether as a result of new
information, future events, or otherwise, except as required by
law. All of the forward-looking information in this earnings
release is qualified by the cautionary statements herein.
Before making an investment
decisionBefore making any investment decisions and for a
detailed discussion of the risks, uncertainties, and environment
associated with our business, its operations, and its financial
performance and condition, fully review the sections of this
earnings release entitled "Updates to Risks and Uncertainties" and
"Regulatory Developments" and fully review the sections in our 2022
Annual MD&A entitled "Regulation in our Industry" and
"Environmental, Social, and Governance (ESG)", as well as our
various other filings with Canadian and US securities regulators,
which can be found at sedarplus.ca and sec.gov, respectively.
Information on or connected to sedarplus.ca, sec.gov, our website,
or any other website referenced in this document is not part of or
incorporated into this earnings release.
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