CONVERGENCE CULTURE ENVIRONMENT INNOVATION Activity Report TWO T H O U S A N D NINETEEN 2019 Table of Contents 3 2019 IN BRIEF 6 HIGHLIGHTS 9 MESSAGE TO SHAREHOLDERS 12 TELECOMS 26 MEDIA 52 SPORTS AND ENTERTAINMENT 60 CORPORATE SOCIAL RESPONSIBILITY 78 BOARD OF DIRECTORS AND OFFICERS OF QUEBECOR INC. 79 BOARD OF DIRECTORS AND MANAGEMENT COMMITTEE OF QUEBECOR MEDIA INC. 2 2019 in brief $4.29B QUEBECOR’S 2019 ANNUAL REVENUES UP 2.7% YEAR OVER YEAR. $1.88B ADJUSTED EBITDA UP 5.8% YEAR OVER YEAR. CASH FLOWS FROM OPERATIONS +13% CLUB ILLICO YEAR OVER YEAR. Close to 460,000 subscribers and more than 500,000 views since launch. Videotron launches its MOBILE NETWORK IN RIMOUSKI in February 2020 and will start up in ABITIBI-TÉMISCAMINGUE in the near future. HELIX makes its debut in Québec households Videotron buys in August 2019 and achieves more than 10 LOW-FREQUENCY BLOCKS 190,000 revenue-generating units.* IN THE 600 MHz BAND *As of March 12, 2020. for $256M in the latest ISED Canada commercial mobile spectrum auction. +176,700 MOBILE SUBSCRIBER CONNECTIONS Largest annual increase since the launch of Videotron’s mobile network in 2010. 3 Videotron partners with VIDEOTRON NAMED ONE OF Samsung Electronics to build out LTE-A AND 5G ACCESS MONTRÉAL’S NETWORKS. TOP EMPLOYERS BY MEDIACORP CANADA. In May 2019, FIZZ receives the global industry association TM Forum’s prestigious DISRUPTIVE INNOVATION AWARD, which recognizes a business venture that TVA Network holds on to its exemplifies digital evolution in the global No. 1 spot with 23.7% market share and telecommunications industry. 90% average live viewing rate. TVA GROUP’S TVA SPORTS DIRECT SPECIALTY New streaming platform for sports fans CHANNELS launches in March 2019. ARE THE MOST-WATCHED IN QUÉBEC, LCN IS NO. 1. 81 ORIGINAL PRODUCTIONS RÉVOLUTION, PRODUCED IN COLLABORATION Named Format of the Year by the WITH QUEBECOR CONTENT IN 2019. respected trade magazine Playback. LA FAILLE, an original production released by Club illico in December 2019, smashes viewing records in its first weekend. FONDS MELS grants 7 Québec producers and directors of small-budget fictional QUEBECOR and documentary feature films NEWSPAPERS support worth a total of $1M. REACH MORE THAN 4 MILLION READERS PER WEEK ON ALL PLATFORMS. 4 TVA PUBLICATIONS SIGNIFICANT 7% GROWTH INVESTIGATIVE BUREAU IN MAGAZINE READERSHIP 200+ reports and articles produced in ACROSS ALL PLATFORMS. 2019 for Quebecor media outlets shine the light on a multitude of matters of public concern. QUB RADIO Videotron Centre presents 9M+ listens for audio clips and 8.7M 97 CULTURAL AND SPORTING EVENTS podcast downloads since launch. in 2019, up 6.6% from 2018, and is ranked 92nd among the world’s arenas by concert ticket sales by Pollstar. No. 1 in Québec 7 JOURS MAGAZINE CELEBRATES ITS TH 30 BIRTHDAY in September 2019. Quebecor acquires minority interest in the assets of MULTICOLORE Quebecor’s publishing houses publish in December 2019. 7 OF THE 20 BESTSELLING QUÉBEC NOVELS OF 2019. Anna et l’enfant vieillard, published by Libre Expression, is No. 1. 100% ELECTRIC Quebecor’s action plan to accelerate electrification of its vehicle fleet is launched Songs from two Quebecor record label in January 2020. artists, Alex Nevsky and 2Frères, are NO. 1 ON THE FRENCH- LANGUAGE RADIO Quebecor gives CHARTS IN 2019, DONATIONS AND SPONSORSHIPS according to the Top 100 BDS and the WORTH $45M+ Top 100 Correspondants, respectively! TO 500 ORGANIZATIONS across Québec. MUSICOR’S STREAMING CATALOGUE grows by nearly 60% and its streaming revenues by 37% in 2019. 5 HIGHLIGHTS FINANCIAL YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017 (in millions of Canadian dollars, except per share data) 2019 2018 2 2017 2 OPERATIONS Revenues $ 4,293.8 $ 4,181.0 $ 4,125.1 Adjusted EBITDA1 1,879.5 1,776.3 1,659.5 Cash flows from operations1 1,144.2 1,012.3 896.5 Contribution to net income attributable to shareholders: Continuing operating activities1 581.0 469.8 348.2 Loss on valuation and translation of financial instruments ( 6.1 ) (61.4 ) (195.6 ) Unusual items (19.6 ) (8.2 ) 223.3 Discontinued operations 97.5 3.5 14.8 Net income attributable to shareholders 652.8 403.7 390.7 Cash flows provided by continuing operating activities 1,211.8 1,424.0 1,193.4 BASIC DATA PER SHARE Contribution to net income attributable to shareholders: Continuing operating activities1 $ 2.27 $ 1.96 $ 1.44 Loss on valuation and translation of financial instruments (0.02 ) (0.26 ) (0.81 ) Unusual items (0.08 ) (0.03 ) 0.92 Discontinued operations 0.38 0.02 0.06 Net income attributable to shareholders 2.55 1.69 1.61 Dividends 0.39 0.19 0.10 Equity attributable to shareholders 3.84 1.87 3.62 Weighted average number of shares outstanding (in millions) 255.6 239.3 241.8 Number of shares outstanding (in millions) 254.6 257.1 238.2 FINANCIAL POSITION Long-term debt $ 5,957.5 $ 6,428.2 $ 5,536.6 Lease liabilities 137.9 144.4 167.9 Convertible debentures, including embedded derivatives 165.8 155.2 892.2 Equity 1,072.1 568.5 1,397.0 Total assets 9,725.9 9,657.5 10,108.7 EMPLOYEES 10,000 10,000 10,100 1 See definitions of “Adjusted EBITDA”, “Adjusted income from continuing operating activities” and “Cash flows from operations” on next pages. 2 Comparative numbers have been restated to reflect the adoption of IFRS 16, Leases. Revenues, Adjusted EBITDA Cash flows from operations and cash flows provided Share Price (QBR.B) and net income (loss) by continuing operating activities In Canadian dollars In millions of Canadian dollars In millions of Canadian dollars 5,000 2,000 4,500 4,125 4,181 4,294 3,902 4,057 4,000 1,424 3,500 1,500 1,212 1,140 1,193 3,000 1,102 2,500 1,880 1,000 1144.2 2,000 1,513 1,597 1,660 1,776 1012.3 896.5 1,500 812 658 708.3 1,000 529 442 500 297 500 (1) 0 -500 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Revenues Adjusted EBITDA Net income (loss) Cash flows provided by continuing operating activities Cash flows from operations 6 DEFINITIONS ADJUSTED EBITDA In its analysis of operating results, the Corporation defines adjusted EBITDA as reconciled to net income under IFRS, as net income before depreciation and amortization, financial expenses, loss on valuation and translation of financial instruments, restructuring of operations, litigation and other items, income taxes and income from discontinued operations. Adjusted EBITDA as defined above is not a measure of results that is consistent with IFRS. It is not intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity. It should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The Corporation uses adjusted EBITDA in order to assess the performance of its investment in Quebecor Media. The Corporation’s management and Board of Directors use this measure in evaluating its consolidated results as well as the results of the Corporation’s operating segments. This measure eliminates the significant level of impairment and depreciation/amortization of tangible and intangible assets and is unaffected by the capital structure or investment activities of the Corporation and its business segments. Adjusted EBITDA is also relevant because it is a significant component of the Corporation’s annual incentive compensation programs. A limitation of this measure, however, is that it does not reflect the periodic costs of tangible and intangible assets used in generating revenues in the Corporation’s segments. The Corporation also uses other measures that do reflect such costs, such as cash flows from segment operations and free cash flows from continuing operating activities of the Quebecor Media subsidiary. The Corporation’s definition of adjusted EBITDA may not be the same as similarly titled measures reported by other companies. The table below provides a reconciliation of adjusted EBITDA to net income as disclosed in Quebecor’s consolidated financial statements. RECONCILIATION OF THE ADJUSTED EBITDA TO THE NET INCOME FINANCIAL YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017 (in millions of Canadian dollars, except per share data) 2019 2018 2017 Adjusted EBITDA $ 1,879.5 $ 1,776.3 $ 1,659.5 Depreciation and amortization (750.4 ) ( 753.1 ) ( 740.1 ) Financial expenses ( 327.5 ) (332.0 ) ( 317.2 ) Loss on valuation and translation of financial instruments (6.5 ) ( 61.3 ) (199.8 ) Restructuring of operations, litigation and other items (28.6 ) (29.1 ) (17.5 ) Gain on sale of spectrum licences – – 330.9 Impairment of goodwill and intangible assets – – (43.8 ) Loss on debt refinancing – – (15.6 ) Income taxes (205.7 ) (162.8 ) (146.0 ) Income from discontinued operations 97.5 3.8 18.3 Net income $ 658.3 $ 441.8 $ 528.7 7 CASH FLOWS FROM OPERATIONS Cash flows from operations represents adjusted EBITDA less additions to property, plant and equipment and to intangible assets, including the amounts related to the current net change in corresponding accounts payable but excluding licence acquisitions and renewals. Cash flows from operations represents total funds available for interest and income tax payments, expenditures related to restructuring programs, business acquisitions, licence acquisitions and renewals, payment of dividends, repayment of long-term debt and share repurchases. Cash flows from operations is not a measure of liquidity that is consistent with IFRS.