ACTIVITY REPORT 20 18 convergence telecommunications mobile connectivity entertainment media television cinema newspapers magazines distribution digital out of home advertising network books sports and entertainment events shows music hockey corporate social responsibility employees environment giving governance 1 TABLE OF CONTENT 3 2018 in Brief 6 Highlights 8 Message to Shareholders 11 Telecoms 24 Media 50 Sports and Entertainment 58 Corporate Social Responsability 74 Board of Directors and Officers of Quebecor Inc. 75 Board of Directors and Management Committee of Quebecor Media Inc. 2018 IN BRIEF QUEBECOR REPURCHASED THE CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC’S INTEREST IN QUEBECOR MEDIA IN MAY AND JUNE 2018 $1.73B ADJUSTED EBITDA UP NEW 100% DIGITAL 7.1% YEAR OVER MOBILE AND YEAR $4.18B INTERNET PROVIDER QUEBECOR’S ANNUAL LAUNCHED IN FALL 2018 REVENUES UP 1.4% YEAR OVER YEAR 5 YEARS 420,800 OF ENTERTAINMENT SUBSCRIBERS IN FRENCH TO CLUB ILLICO TVA GROUP ACQUIRED THE ÉVASION AND ZESTE SPECIALTY CHANNELS IN FEBRUARY 2019 12.7%+ CONNECTIONS TO THE MOBILE 37.7% TELEPHONE MARKET SHARE FOR SERVICE TVA GROUP IN 2018, AN ALL-TIME RECORD TVA GROUP ACQUIRED THE COMPANIES IN THE INCENDO MEDIA GROUP IN APRIL 2019 3 14 OF THE 30 MOST- RÉVOLUTION WATCHED SHOWS SOLD IN THREE COUNTRIES IN QUÉBEC WITHIN A FEW MONTHS WERE ON TVA NETWORK TVA SPORTS BECAME THE OFFICIAL FRENCH-LANGUAGE BROADCASTER OF THE PRESTIGIOUS 2020 UEFA EUROPEAN FOOTBALL CHAMPIONSHIP (EURO 2020). TVA GROUP ACQUIRED AUDIO ZONE IN NOVEMBER 2018 AND THE ASSETS OF MOBILIMAGE QUB RADIO IN JANUARY 2018 QUEBECOR’S FIRST DIGITAL RADIO STATION LAUNCHED IN OCTOBER 2018 HELIX THE OUTLINES OF VIDEOTRON’S NEW WORLD-CLASS TECH PLATFORM +75 UNVEILED IN OCTOBER 2018, ORIGINAL LAUNCH IN 2019 PRODUCTIONS CREATED IN COLLABORATION WITH QUEBECOR CONTENT AND BROADCAST ON TVA GROUP’S PLATFORMS AND ON CLUB ILLICO QUEBECOR’S NEWSPAPERS REACHED ALMOST 4,000,000 QUEBECOR ACQUIRED READERS LE GUIDE DE L’AUTO PER WEEK ON ALL PLATFORMS TO ENRICH ITS AUTOMOTIVE CONTENT IN AUGUST 2018 4 QUEBECOR’S PUBLISHING HOUSES PUBLISHED 7 OF THE 20 TVA PUBLICATIONS IS BESTSELLING CANADA’S No. 1 BOOKS PUBLISHER IN QUÉBEC OF PAID-CIRCULATION PRINT MAGAZINES RECORD BOX OFFICE RECEIPTS HISTORIC $15M FOR THE PAUL MCCARTNEY CONCERT AT THE VIDEOTRON CENTRE DONATION TO THE FONDATION DU CENTRE HOSPITALIER DE L’UNIVERSITÉ DE MONTRÉAL (CHUM) IN FEBRUARY 2018 VIDEOTRON CENTRE WAS NO. 5 ON BILLBOARD MAGAZINE’S LIST OF TOP CANADIAN ARENAS BY CONCERT RECEIPTS 11 TITLES FROM LES DISQUES MUSICOR ARTISTS QUEBECOR GAVE WERE IN THE 500+ ORGANIZATIONS TOP 100 TRACKS BY QUEBECOR ACQUIRED ACROSS QUÉBEC GIFTS AND RADIO AIRPLAY SPONSORSHIPS WORTH MARIO PELCHAT’S $45M+ MP3 DISQUES LABEL IN NOVEMBER 2018 5 HIGHLIGHTS FINANCIAL YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016 (in millions of Canadian dollars, except per share data) 2018 2017 3 2016 3 OPERATIONS Revenues $ 4,181.0 $ 4 ,12 5 .1 $ 4 , 0 57.1 Adjusted EBITDA1 1,732.1 1,617.2 1,555.6 Contribution to net income attributable to shareholders: Adjusted income from operating activities2 468.1 347.9 343.9 Loss on valuation and translation of financial instruments (61.4 ) ( 195.6 ) (68.4 ) Unusual items (8.7 ) 223.4 (42.4 ) Discontinued operations 3.5 14.8 0.8 Net income attributable to shareholders 401.5 390.5 233.9 Cash flows provided by continuing operating activities 1,387.5 1,161.7 1,109.9 BASIC DATA PER SHARE Contribution to net income attributable to shareholders: Continuing operations2 $ 1.96 $ 1. 4 4 $ 1. 41 Loss on valuation and translation of financial instruments (0.26 ) (0.81 ) (0.28 ) Unusual items (0.04 ) 0.92 ( 0.17 ) Discontinued operations 0.02 0.06 – Net income attributable to shareholders 1.68 1.61 0.96 Dividends 0.19 0.10 0.09 Equity attributable to shareholders 1.90 3.65 2.46 Weighted average number of shares outstanding (in millions) 239.3 241.8 244.6 Number of shares outstanding (in millions) 257.1 238.2 243.7 FINANCIAL POSITION Long-term debt $ 6,428.2 $ 5,536.6 $ 5,668.7 Convertible debentures, including embedded derivatives 155.2 8 92 . 2 7 9 0 . 0 Equity 577.9 1,409.0 1,024.5 Total assets 9,531.6 9,961.9 9,503.5 EMPLOYEES 10,000 10,100 10,100 1 See definition of “Adjusted EBITDA” on next page. 2 See definition of “Adjusted income from continuing operating activities” on next page. 3 Comparative numbers have been restated to reflect the adoption of IFRS 15, Revenue from Contracts with Customers. Share price (QBR.B) Revenues, adjusted EBITDA and net income (loss) In Canadian dollars In million of Canadian dollars , 4,125 4,181 , 3,902 4,057 3,629 , , , , 1,732 , 1,433 1,472 1,556 1,617 , 529 , 297 439 (1) (304) 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Revenues Adjusted EBITDA Net income (loss) 6 DEFINITIONS ADJUSTED EBITDA (FORMERLY “ADJUSTED OPERATING INCOME”) In its analysis of operating results, Quebecor (or “the Corporation”) defines adjusted EBITDA, as reconciled to net income under the International Financial Reporting Standards (“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, gain on sale of spectrum licences, impairment of goodwill and intangible assets, loss on debt refinancing, 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, 2018, 2017 AND 2016 (in millions of Canadian dollars, except per share data) 2018 2017 2016 Adjusted EBITDA $ 1,732.1 $ 1, 617. 2 $ 1,555.6 Depreciation and amortization (720.2 ) ( 707.9 ) ( 651.1 ) Financial expenses (323.5 ) ( 307.4 ) ( 327.0 ) Loss on valuation and translation of financial instruments (61.3 ) (199.8 ) (70.3 ) Restructuring of operations, litigation and other items (29.8 ) ( 17.2 ) (28.0 ) Gain on sale of spectrum licences – 330.9 – Impairment of goodwill and intangible assets – (43.8) (40.9 ) Loss on debt refinancing – (15.6) (7.3 ) Income taxes (161.9 ) (145.9 ) (134.8 ) Income from discontinued operations 3.8 18.2 0.9 Net income $ 439.2 $ 528.7 $ 297.1 ADJUSTED INCOME FROM CONTINUING OPERATING ACTIVITIES The Corporation defines adjusted income from continuing operating activities, as reconciled to net income attributable to shareholders under IFRS, as net income attributable to shareholders before loss on valuation and translation of financial instruments, restructuring of operations, litigation and other items, gain on sale of spectrum licences, impairment of goodwill and intangible assets, loss on debt refinancing, net of income tax related to adjustments and of net income attributable to non controlling interest related to adjustments, and before income from discontinued operations attributable to shareholders. Adjusted income from continuing operating activities, as defined above, is not a measure of results that is consistent with IFRS. It should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The Corporation uses adjusted income from continuing operating activities to analyze trends in the performance of its businesses. The above listed items are excluded from the calculation of this measure because they impair the comparability of financial results. Adjusted income from continuing operating activities is more representative for forecasting income. The Corporation’s definition of adjusted income from continuing operating activities may not be identical to similarly titled measures reported by other companies. 7 MESSAGE TO SHAREHOLDERS In 2018, Quebecor opened a new chapter in its history by INNOVATING TO BETTER buying out the interest in Quebecor Media held by the Caisse de dépôt et placement du Québec. Our strategic partnership SERVE CUSTOMERS with the Caisse has left us in a strong position. Today, Quebecor 2018 was a watershed year for Videotron in several respects. has access to all the cash flows it generates and can launch First of all, Manon Brouillette announced her departure after more new projects and seize more business opportunities. We 14 years of loyal service, including the last 5 as President and owe this new chapter to the entrepreneurial spirit of our Chief Executive Officer.