Montréal, Québec – Quebecor Inc. (“Quebecor” or the “Corporation”) today reported its consolidated financial results for the second quarter of 2018. Quebecor consolidates the financial results of Quebecor Media Inc. (“Quebecor Media”), a subsidiary it has wholly owned since June 22, 2018.
 

On May 11 and June 22, 2018, Quebecor Media repurchased a total of 16,064,215 of its Common Shares held by CDP Capital d’Amérique Investissements inc. (“CDP Capital”), a subsidiary of the Caisse de dépôt et placement du Québec, for a total aggregate purchase price of $1.54 billion, paid in cash. On June 22, 2018, Quebecor purchased 1,564,696 Common Shares of Quebecor Media held by CDP Capital in consideration of the issuance of convertible debentures in the principal amount of $150.0 million, convertible into Class B Subordinate Voting Shares (“Class B Shares”) of Quebecor. Upon completion of these transactions, the Corporation’s interest in Quebecor Media increased from 81.53% to 100.0%.
 

Second quarter 2018 highlights 

• Revenues: $1.04 billion, up $4.9 million (0.5%) from the second quarter of 2017.
• Adjusted EBITDA $417.1 million, up $12.8 million (3.2%). Excluding the impact of IFRS 15, adjusted EBITDA was $414.2 million in the second quarter of 2018, an $18.9 million (4.8%) increase.
• Net income attributable to shareholders: $41.3 million ($0.18 per basic share) in the second quarter of 2018, compared with $137.8 million ($0.57 per basic share) in the same period of 2017, an unfavourable variance of $96.5 million ($0.39 per basic share), including the $123.4 million combined unfavourable impact of the gain on the sale of a spectrum licence recorded in the second quarter of 2017 and the variance in losses on embedded derivatives related to convertible debentures.
• Adjusted income from continuing operating activities $106.2 million ($0.45 per basic share) in the second quarter of 2018, compared with $88.6 million ($0.37 per basic share) in the same period of 2017, an increase of $17.6 million ($0.08 per basic share) or 19.9%. Excluding the impact of IFRS 15, adjusted income from continuing operating activities was $104.3 million, a $21.1 million (25.4%) increase.
• The Telecommunications segment grew its revenues by $20.6 million (2.5%) and its adjusted EBITDA by $24.8 million (6.2%) in the second quarter of 2018. Excluding the impact of IFRS 15, segment adjusted EBITDA was up $30.9 million (7.9%).
• Videotron Ltd. (“Videotron”) significantly increased its revenues from mobile telephony ($14.9 million or 12.9%), Internet access ($14.9 million or 5.8%) and the Club illico over-the-top video service (“Club illico”) ($1.8 million or 18.4%) in the second quarter of 2018. 
• Videotron’s total average billing per unit (“ABPU”) was $49.68 in the second quarter of 2018, compared with $48.12 in the same period of 2017, a $1.56 (3.2%) increase. Mobile ABPU was $53.70 in the second quarter of 2018, compared with $53.32 in the same period of 2017, a $0.38 (0.7%) increase.
• Subscriber connections to the mobile telephony service increased by 31,900 (3.0%) and Club illico memberships increased by 8,500 (2.2%) in the second quarter of 2018.
   

Quebecor achieved a major milestone in its history in the second quarter of 2018 by completing the repurchase of all the shares of Quebecor Media held by CDP Capital, concluding the process begun in 2012. Quebecor therefore became the sole owner of Quebecor Media in the second quarter. With access to all the cash flows generated by the subsidiary, the Corporation will now be better equipped to seize business opportunities as they arise, to achieve its objectives with respect to its dividend payment policy, and to take full control of its development projects. Over the past 18 years, CDP Capital has been a top-notch financial partner that has steadfastly supported the Corporation through every stage of its development. I thank the people at the Caisse de dépôt et placement du Québec for their effective support and counsel over the years, and its presidents, Jean Claude Scraire and Michael Sabia.

On the financial front, Quebecor’s revenues and adjusted EBITDA increased again in the second quarter of 2018, strongly stimulated by Videotron’s performance. Quebecor also posted an increase of $17.6 million or 19.9% in its adjusted income from continuing operating activities, reflecting the improvement in its operating profitability as expressed by adjusted EBITDA, combined with the favourable leverage effect on results produced by the repurchase of shares previously held by CDP Capital, said Mr. Péladeau.  
 

Once again, Videotron’s growth was driven by its flagship products, including mobile telephony and Internet access, commented Manon Brouillette, President and Chief Executive Officer of Videotron. During the 12-month period ended June 30, 2018, the number of subscriber connections to the mobile telephony service increased by 125,900 or 13.2%. ‘Bring-your-own-device’ plans accounted for more than 35% of new mobile activations during the period, which helped reduce customer acquisition costs and boost the profitability of mobile services, despite slower ABPU growth resulting from those plans. Videotron has also added 54,300 subscribers (16.1%) to Club illico over the past 12 months. Club illico’s exclusive series have earned recognition in the industry for their originality and quality, picking up 16 nominations for Gémeaux awards this year. The awards ceremony will be held in September 2018 and four original series broadcast on Club illico and developed in collaboration with Quebecor Content are in the running: L’Académie, Blue Moon, La Dérape, and Pablo Escobar raconté par son fils.
 

Regarding business development, Videotron continued investing in its Internet Protocol Television project, based on our partner Comcast Corporation’s XFINITY X1 platform. Ultimately, it will enable us to deliver the best available television experience to our customers. In the business services segment, Videotron recently launched its new Cloud Communications service, which combines the power of landlines and mobile through a unified offering. We are confident that this complementary service will enable us to expand our business customer base and retain existing customers, Manon Brouillette concluded.
 

In the Media segment, despite strong ratings for the National Hockey League playoffs on TVA Sports, the Montréal Canadiens’ failure to qualify for the playoffs did lead to reduced revenues, commented France Lauzière, President and Chief Executive Officer of TVA Group Inc. TVA Network’s financial performance also declined as a result of the decrease in advertising revenues. We have responded with measures to cut operating expenses, which have not yet yielded their full expected effects. TVA Network’s market share was stable at 23.8% (Source: Numeris – French Quebec, April 1 to June 30, 2018, Mon-Sun, 2 a.m.– 2 a.m., t2+) while the combined market share of the specialty channels increased by 0.5 points. The 24-hour news channel LCN was up 1.2 points or 26.7%.
 

At a time when we are seeing a proliferation of transactions between telecoms, media organizations and content providers around the world, demonstrating the necessity and success of the convergence strategy Quebecor embraced as far back as the early 2000s, the Corporation remains very strongly positioned for growth and profitability, Pierre Karl Péladeau added.

 

 

For more details and to consult definitions of "adjusted EBITDA", "adjusted income from continuing operating activities", "revenue-generating unit" and "average billing per unit", please refer to the attached PDF file for the complete version of the press release.

 

 

Information:

Jean-François Pruneau
Senior Vice President and Chief Financial Officer
Quebecor Inc. and Quebecor Media Inc.
jean-francois.pruneau@quebecor.com
514 380-4144

Communications department
Quebecor Inc. and Quebecor Media Inc.
medias@quebecor.com
514 380-4572