Shaw Announces Fourth Quarter and Full Year Fiscal 2021 Results
October 29, 2021
- Shaw delivers fourth quarter and full year financial performance and subscriber activity in line with expectations
- Fiscal 2021 consolidated results include adjusted EBITDA1 growth of 4.6% and free cash flow1 of $961 million
- Fiscal 2022 priorities include supporting the closure of the transaction with Rogers and planning for the benefits that the combined entity will provide to Canadians
Calgary, Alberta (October 29, 2021) – Shaw Communications Inc. (“Shaw” or the “Company”) announces consolidated financial and operating results for the quarter ended August 31, 2021. Consolidated revenue increased 2.1% year-over-year to $1.38 billion, adjusted EBITDA increased 3.4% year-over-year to $614 million and net income increased 44% to $252 million.
Fiscal 2021 consolidated revenue increased 1.9% year-over-year to $5.51 billion and adjusted EBITDA increased 4.6% year-over-year to $2.50 billion. Fiscal 2021 results include incremental Wireline Consumer revenue of approximately $20 million related to the release of a provision following the Canadian Radiotelevision and Telecommunications Commission (CRTC) decision on final aggregated Third Party Internet Access (TPIA) rates and higher equity-based compensation costs of approximately $24 million due to the significant increase in Shaw’s share price following the Rogers Transaction announcement on March 15, 2021. In addition, fiscal 2021 adjusted EBITDA results include a reduction in bad debt expense compared to the prior periods of approximately $10 million in the fourth quarter and approximately $28 million for the year as COVID-19 did not have a significant impact on our customers’ ability to pay their bills as expected, combined with an increased focus on collecting aged receivables.
“This past year and a half has seen a number of significant events unfold that will undeniably shape and strengthen our industry and communities that we serve. While the COVID-19 pandemic continues across the country, strong and ubiquitous connectivity has never been more essential. Our customers increasingly rely on these services, particularly as technology continues to evolve. To deliver a seamless connectivity experience in the fast-approaching 5G era, we announced our combination with Rogers on March 15, 2021, followed by resounding support from our Class A and Class B shareholders at the special meeting to approve the combination. We recognize that we can do so much more by coming together. Canadians, regardless of where they reside, need access to these vital services which requires significant ongoing investment, supported by a steady regulatory framework. Throughout the extraordinary change we have faced, the entire team at Shaw executed on our fiscal 2021 plan, ensuring that we continue to meet the needs of our customers. In the months ahead, we remain committed to delivering exceptional customer experiences, investing in the strength of our networks and continued focus on execution of our strategic business priorities. As previously stated publicly, we reiterate our continued commitment to work with Rogers to close the transaction and it is not appropriate for Shaw to comment on recent events at Rogers,” said Brad Shaw, Executive Chair & Chief Executive Officer.
Shaw and Rogers Transaction
On March 15, 2021, Shaw announced that it entered into an arrangement agreement (the “Arrangement Agreement”) with Rogers Communications Inc. (“Rogers”), under which Rogers will acquire all of Shaw’s issued and outstanding Class A Participating Shares (“Class A Shares”) and Class B Non-Voting Participating Shares (“Class B Shares”) in a transaction valued at approximately $26 billion, inclusive of approximately $6 billion of Shaw debt (the “Transaction”). Holders of Class A Shares and Class B Shares (other than the Shaw Family Living Trust, the controlling shareholder of Shaw, and related persons (collectively, the “Shaw Family Shareholders”)) will receive $40.50 per share in cash. The Shaw Family Shareholders will receive 60% of the consideration for their shares in the form of Class B Non-Voting Shares of Rogers (the “Rogers Shares”) on the basis of the volume-weighted average trading price for the Rogers Shares for the 10 trading days ending March 12, 2021, and the balance in cash. As at March 13, 2021, when the Arrangement Agreement was signed, the value of the consideration attributable to the Class A Shares and Class B Shares held by the Shaw Family Shareholders (calculated using the volume-weighted average trading price for the Rogers Shares for the 10 trading days ending March 12, 2021) was equivalent to $40.50 per share.
The Transaction is being implemented by way of a court-approved plan of arrangement under the Business Corporations Act (Alberta). At the special meeting of Shaw shareholders held on May 20, 2021, the Company obtained approval of the plan of arrangement by the holders of Shaw’s Class A Shares and Class B Shares in the manner required by the interim order granted by the Court of Queen’s Bench of Alberta on April 19, 2021. On May 25, 2021, the Court of Queen’s Bench of Alberta issued a final order approving the plan of arrangement.
On June 30, 2021 (the “Redemption Date”), the Company redeemed all of its issued and outstanding Cumulative Redeemable Rate Reset Class 2 Preferred Shares, Series A (the “Series A Shares”) and Cumulative Redeemable Floating Rate Class 2 Preferred Shares, Series B (the “Series B Shares” and, together with the Series A Shares, the “Preferred Shares”) in accordance with their terms (as set out in the Company’s articles) at a price equal to $25.00 per Preferred Share (the “Redemption Price”), less any tax required to be deducted or withheld. On the Redemption Date, there were 10,012,393 Series A Shares and 1,987,607 Series B Shares issued and outstanding. Accordingly, the aggregate Redemption Price paid by Shaw on the Redemption Date to redeem the Preferred Shares was $300 million.
The Transaction remains subject to other customary closing conditions including approvals from certain Canadian regulators. Shaw and Rogers are working cooperatively and constructively with the Competition Bureau, Innovation, Science and Economic Development Canada (ISED) and the CRTC in order to secure the requisite approvals. Subject to receipt of all required approvals and satisfaction of all closing conditions, closing of the Transaction is expected to occur in the first half of 2022.
Further information regarding the Transaction is contained in the management information circular filed April 23, 2021 on Shaw’s SEDAR profile at www.sedar.com and EDGAR profile at www.sec.gov/edgar.shtml.
Fourth Quarter Fiscal 2021
In the fourth quarter, the Company added approximately 60,500 new Wireless customers. Postpaid net additions of approximately 48,100 in the quarter were driven by the continued momentum of Shaw Mobile. Wireless service revenue growth of 10.4% is due to continued subscriber growth, partially offset by lower ARPU2 . As the Company continues to scale its lower revenue Shaw Mobile customer base, fourth quarter Wireless ARPU decreased 5.7% from the prior year period to $37.39; however, an increase in customers signing up for bundled offerings and Internet migration to faster speed tiers continues to support Internet revenue growth. Wireless postpaid churn3 of 1.49% improved approximately 8-basis points from the fourth quarter of fiscal 2020. In fiscal 2021, the Company added approximately 295,000 Wireless customers bringing its total customer base to over 2.1 million.
In the quarter, Consumer RGU4 losses of approximately 50,000 improved over the prior year period, led by Internet RGU additions of approximately 5,100 as customers continue to bundle their Internet and Wireless service together. Fourth quarter Wireline revenue was in-line with the prior year at $1.06 billion and Wireline adjusted EBITDA decreased 0.4% to $508 million.
Selected Financial Highlights
Fourth quarter Wireless revenue increased 9.2% to $321 million and adjusted EBITDA of $106 million increased 26.2% year-over-year. Wireless service revenue for the three and twelve-month periods increased 10.4% and 9.3% respectively, to $233 million and $891 million over the comparable periods in fiscal 2020 due to an increased subscriber base, including significant Shaw Mobile additions. Wireless equipment revenue for the three and twelve-month periods increased 6.0% and 8.5% respectively, to $88 million and $381 million over the comparable periods in fiscal 2020. Fourth quarter ARPU decreased 5.7% to $37.39 reflecting Shaw Mobile customer growth. For the full year, ARPU of $37.35 decreased 4.1% over the prior year.
For the twelve-month period, Wireless revenue grew 9.1% to $1.27 billion and adjusted EBITDA of $393 million improved 16.6%.
Wireline RGUs declined by approximately 45,400 in the quarter compared to a loss of approximately 71,200 in the fourth quarter of fiscal 2020. The current quarter was led by a gain in Consumer Internet RGUs of approximately 5,100 while offset with declines in Video, Satellite and Phone resulting in Consumer RGUs declining by 50,000 in the aggregate, partially offset with the addition of 4,600 Business RGUs. In fiscal 2021, the Company continued to focus on profitable Internet growth and retention, primarily through bundling with its wireless offerings.
Fourth quarter Wireline revenue of $1.06 billion and adjusted EBITDA of $508 million were in-line with the prior year. Consumer revenue of $910 million decreased 0.8% compared to the prior year as growth in Internet revenue was offset by declines in Video, Satellite and Phone subscribers and revenue. Business revenue of $149 million increased 6.4% year-over-year with Internet revenue growth and continued demand for the Smart suite of products, despite the challenging circumstances due to impacts of COVID-19 and considering the majority of Shaw Business revenue comes from the small to medium sized business sector.
For the twelve-month period, Consumer revenue decreased 0.5% to $3.66 billion and Business revenue increased 3.0% to $584 million resulting in Wireline revenue of $4.25 billion, which was approximately flat compared to the prior year. Adjusted EBITDA for the same period of $2.10 billion increased 2.6%.
Capital expenditures in the fourth quarter of $287 million compared to $307 million in the prior year. Wireline capital spending increased by approximately $29 million primarily due to higher investments in combined upgrades, enhancements and replacement categories as well as an increase in new housing development. Wireless spending of $66 million decreased by approximately $49 million year-over-year primarily due to lower planned investment in the quarter. In fiscal 2021, and in aggregate, consolidated capital expenditures of approximately $1 billion decreased 9.7% from the prior year.
Free cash flow for the quarter of $180 million compared to $152 million in the prior year. The increase was largely due to higher adjusted EBITDA and lower capital expenditures. Free cash flow for fiscal 2021 of $961 million was $214 million or approximately 29% higher than the prior year due to growth in adjusted EBITDA, lower capital expenditures and a $35 million reduction of tax related interest expense.
Net income for the fourth quarter of fiscal 2021 of $252 million compared to $175 million in the fourth quarter of fiscal 2020. Net income for fiscal 2021 of $986 million was $298 million higher than the prior year primarily due to the $109 million increase in consolidated adjusted EBITDA and $35 million reduction in interest expense as discussed above and a $133 million decrease in income taxes in fiscal 2021 compared to fiscal 2020. Tax expense declined in fiscal 2021 mainly due to a $125 million revision to liabilities for uncertain tax positions that became statute barred in 2021 as well as the recognition of a $78 million tax benefit associated with previously unrecognized tax losses in the fourth quarter of 2021 driven by management’s expectations that sufficient future taxable profit will be available to fully utilize such losses, offset by the effect of higher pre-tax income.
As at the end of fiscal 2021, the net debt leverage ratio was 2.3x5 . In fiscal 2021, the Company purchased 14,783,974 Class B Shares for cancellation for a total cost of approximately $336 million. In connection with the announcement of the proposed Transaction on March 15, 2021, the Company suspended share buybacks under its normal course issuer bid (NCIB) program.
Shaw files Year-End Disclosure Documents
Shaw announced today the filing with Canadian securities regulators of its 2021 audited annual consolidated financial statements, related management’s discussion and analysis and 2021 annual information form and the filing with the U.S. Securities and Exchange Commission of its 2021 annual report on Form 40-F which includes the Canadian filings.
These documents are available on Shaw's profile on the Canadian Securities Administrators' website (www.sedar.com). The Form 40-F is available on the U.S. Securities and Exchange Commission's website (www.sec.gov). All of these documents are also available on Shaw’s website at www.shaw.ca/corporate/investor-relations/financial-reports. Any shareholder wishing to receive a printed copy of the 2021 annual report containing the audited annual consolidated financial statements and related management’s discussion and analysis may request one at no charge by e-mail to email@example.com.
1 Adjusted EBITDA and free cash flow are non-GAAP financial measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standardized meanings, and therefore may not be a reliable way to compare us to other companies. Additional information about these measures, including quantitative reconciliations to the most directly comparable financial measures in the Company’s Consolidated Financial Statements, is included in “Non-GAAP and additional financial measures” in this press release.
2 ARPU is a supplementary financial measure which may not be comparable to similar measures presented by other issuers. Additional information about this supplementary financial measure is included in “Key Performance Drivers” in this press release.
3 Wireless postpaid churn is a metric used to measure the Company’s success in retaining Wireless subscribers. Additional information about this metric is included in “Key Performance Drivers” in this press release.
4 RGUs is a metric used to measure the count of subscribers in the Company’s Wireline and Wireless segments. Additional information about this metric is included in “Key Performance Drivers” in this press release.
5 Net debt leverage ratio is a non-GAAP ratio and net debt, which is a component of net debt leverage ratio, is a non-GAAP financial measure. Net debt leverage ratio and net debt are not standardized measures under IFRS and may not be a reliable way to compare us to other companies. See “Non-GAAP and additional financial measures” for more information about this measure and ratio.
Shaw is a leading Canadian connectivity company. The Wireline division consists of Consumer and Business services. Consumer serves residential customers with broadband Internet, Shaw Go WiFi, video and digital phone. Business provides business customers with Internet, data, WiFi, digital phone, and video services. The Wireless division provides wireless voice and LTE data services.
Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 Index (Symbol: TSX – SJR.B, NYSE – SJR, and TSXV – SJR.A). For more information, please visit www.shaw.ca