Rogers Communications Reports Fourth Quarter 2023 Results; Announces 2024 Financial Guidance

Rogers reports record 2023 results driven by strong execution on Shaw acquisition combined with industry-leading performance as more Canadians are choosing Rogers than any other carrier for second straight year

Rogers delivers industry-leading 2023 financial results led by strong execution by entire team

• Service revenue of $16.8 billion, up 27%
• Adjusted EBITDA¹ of $8.6 billion, up 34%
• Free cash flow¹ of $2.4 billion, up 36%
• 2023 postpaid mobile phone nets adds of 674,000, up 24%
• Ended year with 11.6 million wireless customers and 4.2 million retail Internet customers from coast to coast
  

Q4 results reflect industry-leading growth in Wireless and Cable operations

• Total service revenue up 30%; adjusted EBITDA up 39%
• Wireless service revenue up 9%; adjusted EBITDA up 10%
  • Q4 postpaid mobile phone net adds of 184,000; growth in pro forma Wireless blended ARPU of 1% (for Shaw Mobile); down 1% as reported
• Cable service revenue up 94%; adjusted EBITDA up 113%
  • Q4 retail Internet net additions of 20,000, more than double last year
    

Shaw integration and synergy targets continue ahead of plan

• Industry-leading Cable margins of 56%, up from 51% last year
• Synergies realized since closing now at $375 million; exited Q4 at $750 million run rate - six months ahead of plan
• Wireless and wireline market share gains accelerating in the West supported by largest and best 5G network and only coast-to-coast Internet network
  

Launched transformative firsts in technology for Canadians

• Agreements for satellite-to-mobile coverage with SpaceX and Lynk Global; made Canada's first test call
• Satellite-connected wildfire sensors and AI cameras connected to Rogers' 5G network for early wildfire detection
• Essential 5G cellular connectivity on Highway 16 in B.C. providing key lifeline and improved public safety
• First carrier to activate 5G services for all riders at all TTC subway stations and busiest tunnels

Substantially reduced debt leverage ratio to 4.7 times at year-end, down over half a turn on synergy cost reductions, earnings growth, proceeds from asset sales, and commencing the payback of acquisition-related debt

Delivered on 2023 financial guidance; 2024 guidance targets robust growth

• Total service revenue growth range of 8% to 10%
• Adjusted EBITDA growth range of 12% to 15%
• Capital expenditures of $3.8 billion to $4.0 billion
• Free cash flow of $2.9 billion to $3.1 billion, compared to $2.4 billion in 2023

TORONTO, Feb. 01, 2024 (GLOBE NEWSWIRE) -- Rogers Communications Inc. (TSX: RCI.A and RCI.B; NYSE: RCI) today announced its unaudited financial and operating results for the fourth quarter ended December 31, 2023.

"We delivered industry-leading results in the fourth quarter and for the full year," said Tony Staffieri, President and CEO. "We led the industry in growth, exceeded our Shaw targets, and delivered a number of innovative firsts to Canadians. We've delivered eight straight quarters of growth and I remain very confident in our future. Our industry-leading growth targets for 2024 reflect continued momentum and disciplined execution."

Consolidated Financial Highlights

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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" 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.

Quarterly Financial Highlights

Revenue
Total revenue and total service revenue increased by 28% and 30%, respectively, this quarter, driven substantially by revenue growth in our Cable and Wireless businesses.

Wireless service revenue increased by 9% 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 acquisition of Shaw Communications Inc. (Shaw, and the Shaw Transaction). Wireless equipment revenue increased by 17%, primarily as a result of an increase in new subscribers purchasing devices and a continued shift in the product mix towards higher-value devices.

Cable service revenue increased by 94% this quarter primarily as a result of the Shaw Transaction.

Media revenue decreased by 8% this quarter primarily as a result of lower sports-related revenue associated with a distribution from Major League Baseball in 2022.

Adjusted EBITDA and margins
Consolidated adjusted EBITDA increased 39% this quarter and our adjusted EBITDA margin increased by 340 basis points, as a result of improving synergies and efficiencies.

Wireless adjusted EBITDA increased by 10%, primarily due to the flow-through impact of higher revenue as discussed above. This gave rise to an adjusted EBITDA margin of 63.9%.

Cable adjusted EBITDA increased by 113% 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 56.1%.

Media adjusted EBITDA decreased by $53 million, or 93%, primarily due to lower sports-related revenue as discussed above.

Net income and adjusted net income
Net income decreased by 35% this quarter, primarily as a result of higher depreciation and amortization associated with assets acquired through the Shaw Transaction; 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 income² increased by 14% this quarter, primarily as a result of higher adjusted EBITDA.

Cash flow and available liquidity
This quarter, we generated cash provided by operating activities of $1,379 million (2022 - $1,145 million); the increase is primarily a result of higher adjusted EBITDA, partially offset by higher interest paid. We also generated free cash flow of $823 million (2022 - $635 million), up 30% as a result of higher adjusted EBITDA, partially offset by higher interest on long-term debt and higher capital expenditures.

As at December 31, 2023, we had $5.9 billion of available liquidity³ (December 31, 2022 - $4.9 billion), consisting of $0.8 billion in cash and cash equivalents and $5.1 billion available under our bank credit and other facilities.

As a result of the Shaw Transaction, our debt leverage ratio was 4.7² as at December 31, 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 as at December 31, 2023 was 5.0 (December 31, 2022 - 3.3). See "Financial Condition" for more information.

We also returned $265 million in dividends to shareholders this quarter and we declared a $0.50 per share dividend on January 31, 2024.

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² Effective the second quarter of 2023, we retrospectively amended our definitions of (i) adjusted net income (see "Review of Consolidated Performance") and (ii) adjusted net debt, a component of debt leverage ratio and pro forma debt leverage ratio (see "Financial Condition").

³ 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" for more information about these measures. These are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other companies. See "Financial Condition" for a reconciliation of available liquidity.

Strategic Highlights

The five objectives set out below 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 year.

Build the biggest and best networks in the country

• Invested a record $3.9 billion in capital expenditures, primarily in our wireless and wireline network infrastructure.
• Recognized as the best and most reliable wireless network in Canada for the fifth straight year by umlaut in July 2023.
• Expanded Canada's largest and most reliable 5G network to 267 new communities.
• Launched 5G service for all transit riders in the busiest sections of the Toronto Transit Commission (TTC) subway system.
• Signed agreements with SpaceX and Lynk Global to bring satellite-to-mobile phone coverage and completed Canada's first test call.
• Secured 3800 MHz spectrum licences, making Rogers the largest 5G spectrum investor.
• Invested in wildfire detection and prevention technology to help combat climate change events.
• Delivered an additional 50 kilometres of 5G cellular connectivity on Highway 16 in British Columbia to improve public safety.

Deliver easy to use, reliable products and services

• Introduced Rogers Internet and TV services to customers in Western Canada.
• Upgraded all migrated legacy Shaw Mobile customers to Rogers 5G service.
• Introduced the red Rogers Mastercard with 48-month device equal payment plan with 0% interest and up to 3% cashback value for customers.
• Introduced Ignite Self Protect for customers to self-monitor their homes with connected devices.

Be the first choice for Canadians

• Led the industry in wireless subscriber additions with 674,000 postpaid mobile phone net additions.
• Launched our "We Speak Your Language" program across all retail stores, with the goal of serving customers in their preferred language.
• Secured number-one spots for flagship radio brands 98.1 CHFI, CityNews 680, and KiSS 92.5 for the Summer 2023 ratings period.
• Helped bring Taylor Swift to Canada in 2024 for six shows in Toronto and three in Vancouver.
• Signed a long-term broadcast agreement with UFC that will bring live UFC events to Sportsnet.
  

Be a strong national company investing in Canada

• Successfully completed the historic Shaw Transaction in April 2023.
• Repatriated the Shaw customer service teams as part of our commitment to 100% Canada-based teams.
• Expanded Connected for Success, our high-speed, low-cost Internet program to Western Canada.
• Announced a new five-year deal as title sponsor of the Shaw Charity Classic.
• Drove benefits to community organizations across Canada of over $100 million.
  

Be the growth leader in our industry

• Total service revenue up 27%; adjusted EBITDA up 34%.
• Generated free cash flow of $2,414 million and cash provided by operating activities of $5,221 million.
• Achieved strong Cable adjusted EBITDA margin expansion of 330 basis points; Shaw integration tracking ahead of plan.
• Delivered on industry-leading 2023 financial guidance.

Achieved 2023 Guidance

The following table outlines guidance ranges that we had previously provided and our actual results and achievements for the selected full-year 2023 financial metrics.

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¹ The table outlines guidance ranges for selected full-year 2023 consolidated financial metrics provided in our February 2, 2023 earnings release and subsequently updated on July 26, 2023. Guidance ranges presented as percentages reflect percentage increases over full-year 2022 results.
² 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.

2024 Outlook

For the full-year 2024, we expect growth in total service revenue and adjusted EBITDA will drive higher free cash flow. In 2024, we expect to have the financial flexibility to maintain our network advantages and to continue to return cash to shareholders.

¹ Guidance ranges presented as percentages reflect percentage increases over full-year 2023 results.
² 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.

The above table outlines guidance ranges for selected full-year 2024 consolidated financial metrics. These ranges take into consideration our current outlook and our 2023 results. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2024 financial results for evaluating the performance of our business. This information may not be appropriate for other purposes. Information about our guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with "About Forward-Looking Information" (including the material assumptions listed under the heading "Key assumptions underlying our full-year 2024 guidance") and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause our actual future financial and operating results to differ from what we currently expect.

We provide annual guidance ranges on a consolidated full-year basis that are consistent with annual full-year Board of Directors-approved plans. Any updates to our full-year financial guidance over the course of the year would only be made to the consolidated guidance ranges that appear above.

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).

Quarterly Investment Community Teleconference

Our fourth quarter 2023 results teleconference with the investment community will be held on:

• February 1, 2024
• 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 twelve months ended December 31, 2023, as well as forward-looking information (see "About Forward-Looking Information") about future periods. This earnings release should be used as preparation for reading our forthcoming Management's Discussion and Analysis (MD&A) and Audited Consolidated Financial Statements for the year ended December 31, 2023, which we intend to file with securities regulators in Canada and the US in the coming weeks. These documents will be made available at investors.rogers.com, sedarplus.ca, and sec.gov or mailed upon request.

The financial information contained in this earnings release is prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. This earnings release should be read in conjunction with our 2022 Annual MD&A, our 2022 Audited Consolidated Financial Statements, our 2023 First, Second, and Third Quarter MD&A and Interim Condensed Consolidated Financial Statements, and our other recent filings with Canadian and US securities regulatory authorities, which are available on SEDAR+ at sedarplus.ca or EDGAR at sec.gov, respectively.

Effective the second quarter of 2023, we 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.

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 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. Information is current as at January 31, 2024 and was approved by RCI's Board of Directors (the Board).

We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).

The results from the acquired Shaw operations are included in our segment and consolidated results from the date of acquisition, consistent with our reportable segment definitions.

In this earnings release, this quarter, the quarter, or fourth quarter refer to the three months ended December 31, 2023, first quarter refers to the three months ended March 31, 2023, second quarter refers to the three months ended June 30, 2023, third quarter refers to the three months ended September 30, 2023 and year to date or full year refer to the twelve months ended December 31, 2023. 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 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. ©2024 Rogers Communications

Reportable segments
We report our results of operations in three reportable segments. Each segment and the nature of its business is as follows:

During the quarter, Wireless and Cable were operated by our wholly owned subsidiary, Rogers Communications Canada Inc. (RCCI), and certain of our other wholly owned subsidiaries. Following the Shaw Transaction, aspects of Cable were also operated by Shaw Cablesystems G.P., Shaw Telecom G.P., and Shaw Satellite G.P. Media was operated by our wholly owned subsidiary, Rogers Media Inc., and its subsidiaries.

Summary of Consolidated Financial Results

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. These are 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" for more information about these measures.

Results of our Reportable Segments

WIRELESS

Wireless Financial Results

¹ Calculated using service revenue.

Wireless Subscriber Results ¹

¹ Subscriber counts and subscriber churn are key performance indicators. See "Key Performance Indicators".
² On April 3, 2023, we acquired approximately 501,000 Shaw Mobile postpaid mobile phone subscribers as a result of our acquisition of Shaw, which are not included in net additions. As at December 31, 2023, we had completed migrating these subscribers to the Rogers network; there were 18,000 deactivated subscribers that could not be migrated and were therefore removed from our postpaid mobile phone subscriber base effective December 31, 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 Effective December 1, 2023, we adjusted our Wireless prepaid subscriber base to remove 94,000 subscribers as a result of a change to our deactivation policy from 90 days to 30 days.
⁶ Mobile phone ARPU is a supplementary financial measure. See "Non-GAAP and Other Financial Measures" for an explanation as to the composition of this measure.

Service revenue
The 9% increase in service revenue this quarter was primarily a result of:

• the 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 decrease in mobile phone ARPU this quarter was primarily a result of the impact of the Shaw Mobile subscribers acquired through the Shaw Transaction in April 2023.

The continued significant postpaid gross and net additions this quarter were a result of sales execution in a growing Canadian market.

Equipment revenue
The 17% increase in equipment revenue this quarter was primarily as a result of:

• an increase in new subscribers purchasing devices; and
• a continued shift in the product mix towards higher-value devices; partially offset by
• lower device upgrades by existing customers.
  

Operating expenses
Cost of equipment
The 15% increase in the cost of equipment this quarter was a result of the equipment revenue changes discussed above.

Other operating expenses
The 9% increase in other operating expenses this quarter was primarily a result of:

• higher costs associated with the increased revenue and subscriber additions including commissions and costs associated with our expanded network; and
• investments made in customer service.

Adjusted EBITDA
The 10% increase in adjusted EBITDA this quarter was a result of the revenue and expense changes discussed above.

CABLE

Cable Financial Results

Cable Subscriber Results ¹

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 December 31, 2023. The acquired Satellite subscribers are not included in our reported subscriber, homes passed, or customer relationship metrics.
⁴ On November 1, 2023, we acquired approximately 22,000 retail Internet subscribers, 8,000 Video subscribers, 19,000 Home Phone subscribers, 8,000 homes passed, and 30,000 customer relationships as a result of our acquisition of a Cable services reseller. None of these subscribers are included in net additions.
⁵ Effective October 1, 2023, and on a prospective basis, we reduced our retail Internet subscriber base by 182,000 and our customer relationships by 173,000 to remove Fido Internet subscribers as we stopped selling new plans for this service as of that date. Given this, we believe this adjustment more meaningfully reflects the underlying organic subscriber performance of our retail Internet business.
⁶ ARPA is a supplementary financial measure. See "Non-GAAP and Other Financial Measures" for an explanation as to the composition of this measure.

Service revenue
The 94% increase in service revenue this quarter was a result of:

• revenue related to our acquisition of Shaw, which contributed approximately $1 billion for the quarter; and
• an increase in our retail Internet subscriber base and the movement of retail Internet customers to higher speed tiers in our Ignite Internet offerings; partially offset by:
• continued increased competitive promotional activity; and
• declines in our Home Phone, Smart Home Monitoring, and Satellite subscriber bases.

The higher ARPA this quarter was primarily a result of the acquisition of Shaw.

Operating expenses
The 75% increase in operating expenses this quarter was 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 EBITDA
The 113% increase in adjusted EBITDA this quarter was a result of the service revenue and expense changes discussed above.

MEDIA

Media Financial Results

Revenue
The 8% decrease in revenue this quarter was a result of:

• lower sports-related revenue associated with the impact of a distribution from Major League Baseball in 2022; partially offset by
• higher advertising and subscriber revenue.

Operating expenses
The 1% increase in operating expenses this quarter was a result of higher programming costs.

Adjusted EBITDA
The decrease in adjusted EBITDA this quarter was a result of the revenue and expense changes discussed above.

CAPITAL EXPENDITURES

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" for an explanation as to the composition of this measure.

One of our objectives is to build the biggest and best networks in the country. As we continually work towards this, we spent more on our wireless and wireline networks this year than we have in the past several years. This year, we continued to roll out our 5G network (the largest 5G network in Canada as at December 31, 2023) across the country, and continued with our commitment to expand coverage across Western Canada and in the TTC subway system. We also continued to invest in fibre deployments, including fibre-to-the-home (FTTH), in our cable network and we expanded our network footprint to reach more homes and businesses, including in rural, remote, and Indigenous communities. We continued strengthening the resilience of our networks and made 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.

Wireless
The decrease in capital expenditures in Wireless this quarter was due to the timing of investments. We continue to make investments in our network development and 5G deployment to expand our wireless network. The ongoing deployment of 3500 MHz spectrum continues to augment the capacity and resilience of our earlier 5G deployments in the 600 MHz spectrum band.

Cable
The increase in capital expenditures in Cable this quarter reflects our acquisition of Shaw and continued investments in our infrastructure, including additional fibre deployments to increase our FTTH distribution. These investments incorporate the latest technologies to help deliver more bandwidth and an enhanced 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, offering increased network resilience, stability, and faster download speeds over time.

Media
The increase in capital expenditures in Media this quarter was primarily a result of higher Toronto Blue Jays stadium infrastructure-related expenditures associated with the second phase of the Rogers Centre modernization project.

Capital intensity
Capital intensity decreased in the quarter as the increase in capital expenditure investments, as noted above, was offset by higher revenue.

Review of Consolidated Performance

This section discusses our consolidated net income and other income and expenses that do not form part of the segment discussions above.

n/m - not meaningful

Depreciation and amortization

Total depreciation and amortization increased this quarter, primarily as a result of the property, plant and equipment, right-of-use assets, and customer relationship intangible assets acquired through the Shaw Transaction.

Restructuring, acquisition and other

The Shaw Transaction-related costs in 2022 and 2023 consisted of incremental costs supporting acquisition and integration activities related to the Shaw Transaction.

The restructuring and other costs in the fourth quarters of 2022 and 2023 included severance-related costs associated with the targeted restructuring of our employee base. In 2023, we also incurred costs related to real estate rationalization programs.

Finance costs

¹ Interest on borrowings includes interest on short-term borrowings and on long-term debt.

Interest on borrowings, net
The 112% increase in net interest on borrowings this quarter was primarily a result of:

• a reduction in interest earned on restricted cash and cash equivalents, as we used these funds to partially fund the Shaw Transaction;
• interest expense associated with the borrowings under the term loan facility used to partially fund the Shaw Transaction;
• interest expense associated with the long-term debt assumed through the Shaw Transaction; and
• interest expense associated with the $3 billion senior note issuance in September 2023; partially offset by
• the repayment at maturity of our US$850 million senior notes in November 2023 and US$500 million senior notes in March 2023.
  

Deferred transaction costs and other
The increase in "deferred transaction costs and other" this quarter is primarily a result of the amortization of the $262 million of consent fees paid in January 2023 to extend the special mandatory redemption outside date for the SMR notes issued in March 2022.

Income tax expense

Cash income taxes paid increased this quarter due to the timing of installment payments. The decrease in our statutory income tax rate this quarter was a result of a greater portion of our income being earned in provinces with lower income tax rates.

Net income

Adjusted net income
We calculate adjusted net income from adjusted EBITDA as follows:

¹ Effective the second quarter, we retrospectively amended our calculation of adjusted net income to exclude depreciation and amortization on the fair value increment recognized on acquisition of Shaw Transaction-related property, plant and equipment and intangible assets. For purposes of calculating adjusted net income, we believe the magnitude of this depreciation and amortization, which is significantly affected by the size of the Shaw Transaction, affects comparability between periods and the additional expense recognized may have no correlation to our current and ongoing operating results. Depreciation and amortization excludes depreciation and amortization on Shaw Transaction-related property, plant and equipment and intangible assets for the three and twelve months ended December 31, 2023 of $249 million and $764 million (2022 - nil), respectively. 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.
² Other income for the twelve months ended December 31, 2023 excludes a $422 million loss related to one of our joint venture's obligations to purchase at fair value the non-controlling interest in one of its investments.
³ Income tax expense excludes recoveries of $85 million and $366 million (2022 - recoveries of $12 million and $75 million) for the three and twelve months ended December 31, 2023, respectively, related to the income tax impact for adjusted items and it also excludes a $52 million expense (2022 - nil) for the three and twelve months ended December 31, 2023 due to a revaluation of deferred tax balances resulting from a change in our income tax rate.

Managing our Liquidity and Financial Resources

Operating, investing, and financing activities

Operating activities
This quarter, cash from operating activities increased primarily as a result of higher adjusted EBITDA, partially offset by higher interest paid.

Investing activities
Capital expenditures
During the quarter we incurred $946 million on capital expenditures before changes in non-cash working capital items. See "Capital Expenditures" for more information.

Acquisitions and other strategic transactions
In December 2023, we sold our investment interests in Cogeco Inc. and Cogeco Communications Inc. for $829 million to Caisse de dépôt et placement du Québec in a private transaction. We subsequently used the cash received to repay a portion of our outstanding term loan facility (see "Long-term debt" below).

We also acquired a small Cable services reseller this quarter.

Financing activities
During the quarter we paid net amounts of $2,585 million (2022 - paid $22 million) on our short-term borrowings, long-term debt, and related derivatives. See "Financial Risk Management" for more information on the cash flows relating to our derivative instruments.

Short-term borrowings
Our short-term borrowings consist of amounts outstanding under our receivables securitization program, our US CP program, and our short-term non-revolving credit facilities. Below is a summary of our short-term borrowings as at December 31, 2023 and December 31, 2022.

The tables below summarize the activity relating to our short-term borrowings for the three and twelve months ended December 31, 2023 and 2022.

¹ Borrowings under our non-revolving facility mature and are reissued regularly, such that until repaid, we maintain net outstanding borrowings equivalent to the then-current credit limit on the reissue dates.

Concurrent with our US CP issuances, we entered into debt derivatives to hedge the foreign currency risk associated with the principal and interest components of the borrowings. See "Financial Risk Management" for more information.

In April 2023, we repaid the outstanding $200 million of borrowings under Shaw's legacy accounts receivable securitization program, subsequent to which the program was terminated. This repayment is included in "repayment of receivables securitization" above.

In November 2023, we entered into three non-revolving credit facilities with an aggregate limit of $2 billion. In December 2023, we terminated two of these credit facilities and reduced the amount available from $2 billion to $500 million. The remaining facility can be drawn until June 2024 and will mature one year after we draw. Any drawings on this facility will be recognized as short-term borrowings on our consolidated statement of financial position. Borrowings under this facility will be unsecured, guaranteed by RCCI, and will rank equally in right of payment with all of our other credit facilities and senior notes and debentures. We have not yet drawn on this facility.

In December 2022, we entered into non-revolving credit facilities with an aggregate limit of $1 billion, including $375 million maturing in December 2023, $375 million maturing in January 2024, and $250 million maturing one year from when it was drawn. Any borrowings under these facilities were recorded as "short-term borrowings" as they were due within 12 months. Borrowings under the facilities were unsecured, guaranteed by RCCI, and ranked equally in right of payment with all of our other credit facilities and senior notes and debentures. These facilities were repaid and terminated throughout 2023.

Long-term debt
Our long-term debt consists of amounts outstanding under our bank and letter of credit facilities and the senior notes, debentures, and subordinated notes we have issued. The tables below summarize the activity relating to our long-term debt for the three and twelve months ended December 31, 2023 and 2022.

¹ Borrowings under our term loan facility mature and are reissued regularly, such that until repaid, we maintain net outstanding borrowings equivalent to the then-current credit limit on the reissue dates.

In April 2023, we drew the maximum $6 billion on the term loan facility upon closing the Shaw Transaction, consisting of $2 billion from each of the three tranches. The three tranches mature on April 3, 2026, 2027, and 2028, respectively. In September 2023, we repaid $500 million of the tranche maturing on April 3, 2027. This quarter, we repaid an additional $1.1 billion of the same tranche such that the term loan facility has been reduced to $4.4 billion, of which $400 million remains outstanding under the April 3, 2027 tranche.

Issuance of senior and subordinated notes and related debt derivatives
Below is a summary of the senior and subordinated notes we issued during the three and twelve months ended December 31, 2023 and 2022.

¹ Gross proceeds before transaction costs, discounts, and premiums.
² Transaction costs, discounts, and premiums are included as deferred transaction costs and discounts in the carrying value of the long-term debt, and recognized in net (loss) income using the effective interest method.
³ Accounted for as a modification of the respective financial liabilities. Reflects initial consent fee of $557 million incurred in September 2022 and additional consent fee of $262 million incurred in December 2022.
⁴ Deferred transaction costs and discounts (if any) in the carrying value of the subordinated notes are recognized in net income using the effective interest method over a five-year period. The subordinated notes due 2082 can be redeemed at par on March 15, 2027 or on any subsequent interest payment date.
⁵ The US$1 billion senior notes due 2025 can be redeemed at par at any time.

Repayment of senior notes and related derivative settlements
In October 2023, we repaid the entire outstanding principal of our US$850 million 4.10% senior notes and the associated debt derivatives at maturity.

In November 2023, we repaid the entire outstanding principal of our $500 million 3.80% senior notes at maturity. There were no derivatives associated with these senior notes.

In January 2024, we repaid the entire outstanding principal of our $500 million 4.35% senior notes at maturity. There were no derivatives associated with these senior notes.

Dividends
Below is a summary of the dividends declared and paid on RCI's outstanding Class A Voting common shares (Class A Shares) and Class B Non-Voting common shares (Class B Non-Voting Shares) in 2023 and 2022. On January 31, 2024, the Board declared a quarterly dividend of $0.50 per Class A Voting Share and Class B Non-Voting Share, to be paid on April 3, 2024, to shareholders of record on March 11, 2024.

In August 2023, we amended 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.

Free cash flow

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 Cash income taxes are net of refunds received.

The increase in free cash flow this quarter was primarily a result of higher adjusted EBITDA, partially offset by higher interest on borrowings and higher capital expenditures.

Financial Condition

Available liquidity
Below is a summary of our available liquidity from our cash and cash equivalents, bank credit facilities, letter of credit facilities, and short-term borrowings as at December 31, 2023 and December 31, 2022.

¹ The US CP program amounts are gross of the discount on issuance.
² The total liquidity sources under our bank credit facilities and receivables securitization represents the total credit limits per the relevant agreements. The amount drawn and letters of credit are currently outstanding under those agreements.

¹ The US CP program amounts are gross of the discount on issuance.
² The total liquidity sources under our bank credit facilities and receivables securitization represents the total credit limits per the relevant agreements. The amount drawn and letters of credit are currently outstanding under those agreements. The US CP program amount represents our currently outstanding US CP borrowings that are backstopped by our revolving credit facility.
³ Our restricted cash and cash equivalents as at December 31, 2022 are not included in available liquidity as the funds were raised solely to fund a portion of the cash consideration of the Shaw Transaction.

Our term loan facility that had an initial credit limit of $6 billion related to the Shaw Transaction is not included in available liquidity as we could only draw on that facility to partially fund the Shaw Transaction and the facility is now fully drawn. Our Canada Infrastructure Bank credit agreement is not included in available liquidity as it can only be drawn upon for use in broadband projects under the Universal Broadband Fund, and therefore is not available for other general purposes.

Weighted average cost of borrowings
Our weighted average cost of all borrowings was 4.85% as at December 31, 2023 (December 31, 2022 - 4.50%) and our weighted average term to maturity was 10.4 years (December 31, 2022 - 11.8 years). These figures reflect the expected repayment of our subordinated notes on the five-year anniversary.

Adjusted net debt and debt leverage ratio
We use adjusted net debt and debt leverage ratio to conduct valuation-related analysis and to make capital structure-related decisions.

¹ Effective the second quarter of 2023, we amended our calculation of adjusted net debt to 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. Pro forma trailing 12-month adjusted EBITDA is a non-GAAP financial measure. These are 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" for more information about these measures.

Trailing 12-month adjusted EBITDA reflects the combined results of Rogers including Shaw for the period since the Shaw Transaction closed in April 2023 to December 2023 and standalone Rogers results prior to April 2023. To illustrate the results of a combined Rogers and Shaw as if the Shaw Transaction had closed at the beginning of the trailing 12-month period, we have also disclosed a pro forma trailing 12-month adjusted EBITDA and pro forma debt leverage ratio. Pro forma adjusted EBITDA incorporates an amount representing the results of Shaw's adjusted EBITDA, adjusted to conform to Rogers' accounting policies, for the three months beginning January 1, 2023.

These pro forma metrics are presented for illustrative purposes only and do not purport to reflect what the combined company's actual operating results or financial condition would have been had the Shaw Transaction occurred on the date indicated, nor do they purport to project our future financial position or operating results and should not be taken as representative of our future financial position or consolidated operating results.

As a result of the significant debt we issued to finance the Shaw Transaction, and as planned when the Shaw Transaction was first announced, our debt leverage ratio has increased. As at December 31, 2023 our debt leverage ratio was 5.0 (December 31, 2022 - 3.3) and our pro forma debt leverage ratio was 4.7. In order to meet our stated objective of returning our debt leverage ratio to approximately 3.5 within 36 months of closing the Shaw Transaction, we intend to manage our debt leverage ratio through combined operational synergies, organic growth in adjusted EBITDA, and debt repayment, as applicable.

Credit ratings
Below is a summary of the credit ratings on RCI's outstanding senior and subordinated notes and debentures (long-term) and US CP (short-term) as at December 31, 2023.

¹ We have not sought a rating from Fitch or DBRS Morningstar for our short-term obligations or from DBRS Morningstar for our subordinated debt.

Outstanding common shares

¹ Holders of Class B Non-Voting Shares are entitled to receive notice of and to attend shareholder meetings; however, they are not entitled to vote at these meetings except as required by law or stipulated by stock exchanges. If an offer is made to purchase outstanding Class A Shares, there is no requirement under applicable law or our constating documents that an offer be made for the outstanding Class B Non-Voting Shares, and there is no other protection available to shareholders under our constating documents. If an offer is made to purchase both classes of shares, the offer for the Class A Shares may be made on different terms than the offer to the holders of Class B Non-Voting Shares.

On April 3, 2023, we issued 23.6 million Class B Non-Voting Shares as partial consideration for the Shaw Transaction.
On October 3, 2023 and January 2, 2024, we issued 1.5 million and 1.2 million Class B Non-Voting Shares, respectively, as partial settlement of the dividend payable on those dates under the terms of our DRIP.

Financial Risk Management

This section should be read in conjunction with "Financial Risk Management" in our 2022 Annual MD&A. We use derivative instruments to manage financial risks related to our business activities. We only use derivatives to manage risk and not for speculative purposes. We also manage our exposure to both fixed and fluctuating interest rates and had fixed the interest rate on 85.6% of our outstanding debt, including short-term borrowings, as at December 31, 2023 (December 31, 2022 - 91.2%).

Debt derivatives
We use cross-currency interest rate exchange agreements, forward cross-currency interest rate exchange agreements, and foreign currency forward contracts (collectively, debt derivatives) to manage risks from fluctuations in foreign exchange rates and interest rates associated with our US dollar-denominated senior notes, debentures, subordinated notes, lease liabilities, credit facility borrowings, and US CP borrowings. We typically designate the debt derivatives related to our senior notes, debentures, subordinated notes, and lease liabilities as hedges for accounting purposes against the foreign exchange risk or interest rate risk associated with specific issued and forecast debt instruments. Debt derivatives related to our credit facility and US CP borrowings have not been designated as hedges for accounting purposes.

Credit facilities and US CP

Below is a summary of the debt derivatives we entered into and settled related to our credit facility borrowings and US CP program during the three and twelve months ended December 31, 2023 and 2022.

As at December 31, 2023, we had US$3,241 million and US$113 million notional amount of debt derivatives outstanding relating to our credit facility borrowings and US CP program (December 31, 2022 - nil and US$158 million), at an average rate of $1.352/US$ (December 31, 2022 - nil) and $1.369/US$ (December 31, 2022 - $1.352/US$), respectively.

Senior and subordinated notes
We did not enter into any debt derivatives related to senior notes issued during the three and twelve months ended December 31, 2023. In the twelve months ended December 31, 2023, we settled the derivatives associated with our US$1 billion senior notes due 2025, which were not designated as hedges for accounting purposes. We subsequently entered into new derivatives associated with our US$1 billion senior notes due 2025; these derivatives are designated as hedges for accounting purposes. Below is a summary of the debt derivatives we entered into related to senior and subordinated notes during the three and twelve months ended December 31, 2022.

¹ Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.

In October 2023, we repaid the entire outstanding principal amount of our US$850 million 4.10% senior notes and the associated debt derivatives at maturity, resulting in a repayment of $877 million, net of $288 million received on settlement of the associated debt derivatives.

As at December 31, 2023, we had US$14,750 million (December 31, 2022 - US$16,100 million) in US dollar-denominated senior notes, debentures, and subordinated notes, of which all of the associated foreign exchange risk had been hedged using debt derivatives, at an average rate of $1.259/US$ (December 31, 2022 - $1.233/US$).

During the twelve months ended December 31, 2022, we terminated US$2 billion notional amount of forward starting cross-currency swaps and received $43 million upon settlement.

Lease liabilities
Below is a summary of the debt derivatives we entered into and settled related to our outstanding lease liabilities for the three and twelve months ended December 31, 2023 and 2022.

As at December 31, 2023, we had US$357 million notional amount of debt derivatives outstanding relating to our outstanding lease liabilities (December 31, 2022 - US$225 million) with terms to maturity ranging from January 2024 to December 2026 (December 31, 2022 - January 2023 to December 2025) at an average rate of $1.329/US$ (December 31, 2022 - $1.306/US$).

See "Mark-to-market value" for more information about our debt derivatives.

Expenditure derivatives
We use foreign currency forward contracts (expenditure derivatives) to manage the foreign exchange risk in our operations, designating them as hedges for accounting purposes for certain of our forecast operational and capital expenditures.

Below is a summary of the expenditure derivatives we entered into and settled during the three and twelve months ended December 31, 2023 and 2022.

As at December 31, 2023, we had US$1,650 million notional amount of expenditure derivatives outstanding (December 31, 2022 - US$960 million) with terms to maturity ranging from January 2024 to December 2025 (December 31, 2022 - January 2023 to December 2023) at an average rate of $1.325/US$ (December 31, 2022 - $1.250/US$).

See "Mark-to-market value" for more information about our expenditure derivatives.

Equity derivatives
We use total return swaps (equity derivatives) to hedge the market price change risk of the Class B Non-Voting Shares granted under our stock-based compensation programs. The equity derivatives have not been designated as hedges for accounting purposes.

During the twelve months ended December 31, 2023, we entered into 0.5 million equity derivatives with a weighted average price of $58.14 as a result of the issuance of additional performance restricted share units this year.

During the twelve months ended December 31, 2023, we executed extension agreements for the remainder of our equity derivative contracts under substantially the same commitment terms and conditions with revised expiry dates to April 2024 (from April 2023).

As at December 31, 2023, we had equity derivatives outstanding for 6.0 million (December 31, 2022 - 5.5 million) Class B Non-Voting Shares with a weighted average price of $54.02 (December 31, 2022 - $53.65).

See "Mark-to-market value" for more information about our equity derivatives.

Cash settlements on debt derivatives and forward contracts

Below is a summary of the net proceeds (payments) on settlement of debt derivatives and forward contracts during the three and twelve months ended December 31, 2023 and 2022.

Mark-to-market value
We record our derivatives using an estimated credit-adjusted, mark-to-market valuation, calculated in accordance with IFRS.

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:

Non-GAAP and Other Financial Measures

We use the following "non-GAAP financial measures" and other "specified financial measures" (each within the meaning of applicable Canadian securities law). These are reviewed regularly by management and the Board in assessing our performance and making decisions regarding the ongoing operations of our business and its ability to generate cash flows. Some or all of these measures may also be used by investors, lending institutions, and credit rating agencies as indicators of our operating performance, of our ability to incur and service debt, and as measurements to value companies in the telecommunications sector. These are not standardized measures under IFRS, so may not be reliable ways to compare us to other companies.

Reconciliation of adjusted EBITDA

Reconciliation of adjusted net income

¹ Reflects a loss related to the change in the value of one of our joint venture's obligations to purchase at fair value the non-controlling interest in one of its investments.

Reconciliation of pro forma trailing 12-month adjusted EBITDA

Reconciliation of free cash flow