Cogeco 2015 Annual Report Download - page 38

MD&A COGECO CABLE INC. 2015 37
9.2 SEASONAL VARIATIONS
Cogeco Cable’s operating results are not generally subject to material seasonal fluctuations except as follows. In the Canadian and American
cable services segments, the number of video an Internet services customers are generally lower in the second half of the fiscal year as a result
of a decrease in economic activity due to the beginning of the vacation period, the end of the television season, and students leaving their
campuses at the end of the school year. Cogeco Cable offers its services in several university and college towns such as Kingston, Windsor,
St.Catharines, Hamilton, Peterborough, Trois-Rivières and Rimouski in Canada and in the Pennsylvania region, and to a lesser extent in South
Carolina, eastern Connecticut, Maryland and Delaware in United States. In the American cable services segment, Miami region is also subject
to seasonal fluctuations due to the winter season residents returning home from late spring through the fall. Furthermore, the second, third and
fourth quarter’s operating margin is usually higher as very low or no management fees are paid to COGECO Inc. Under the Management
Agreement, Cogeco Cable pays a fee equal to 2% of its total revenue subject to a maximum amount. As the maximum amount has been reached
in the first quarter of fiscal 2015, Cogeco Cable did not pay any management fees for the remained of the year under the amended Management
Services Agreement. In fiscal 2014, as the maximum amount was paid in the first six months, Cogeco Cable paid no management fees in the
second half of the year. The Management Agreement was amended on July 14, 2015, and is discussed in details in the “Related party transactions”
section.
9.3 FOURTH-QUARTER OPERATING RESULTS
OPERATING RESULTS
CONSOLIDATED
Quarters ended August 31, 2015 2014 Change
(in thousands of dollars, except percentages) $$ %
Revenue 520,419 490,155 6.2
Operating expenses 279,827 259,325 7.9
Adjusted EBITDA 240,592 230,830 4.2
Operating margin 46.2% 47.1%
Fiscal 2015 fourth-quarter revenue improved by $30.3 million, or 6.2%, to reach $520.4 million compared to the prior year. For the fourth quarter
ended August 31, 2015, operating expenses increased by $20.5 million, or 7.9%, at $279.8 million. As a result, adjusted EBITDA increased by
$9.8 million, or 4.2%, to reach $240.6 million and operating margin decreased to 46.2% compared to 47.1% in the fourth quarter of fiscal 2014.
CANADIAN CABLE SERVICES
CUSTOMER STATISTICS
Quarters ended August 31,
Net additions (losses)
August 31,
2015 2015 2014
PSU 1,926,542 (10,381) (10,422)
Video service customers 765,358 (9,619)(10,666)
Internet service customers 704,555 4,465 2,782
Telephony service customers 456,629 (5,227)(2,538)
Fiscal 2015 fourth-quarter PSU net losses amounted to 10,381 compared to 10,422 for the same period of the prior year mainly explained as
follows:
VIDEO
Fiscal 2015 fourth-quarter video service customers net losses stood at 9,619 compared to 10,666 for the same period of last year. The lower
decrease in video service customer is mainly due to the launch of TiVo digital advanced video services on November 3, 2014 in Ontario and on
March 30, 2015 in Québec, partly offset by promotional offers of competitors for the video services, service category maturity and the IPTV
footprint growth from competitors.
INTERNET
Fiscal 2015 fourth-quarter Internet service customers net additions stood at 4,465 compared to 2,782 in the fourth quarter of fiscal 2014. Internet
net additions continue to stem from the enhancement of the product offering, the impact of the bundled offer of video, Internet and telephony
services, the launch of TiVo's services, promotional activities and the growth in the business sector.