Release Date: April 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cogeco Communications Inc (CGEAF, Financial) expects significant growth in free cash flow over the next two years, driven by the end of a CapEx investment cycle.
- The company has successfully merged its US and Canadian teams, leading to high engagement and collaboration, and is beginning to capture technical and operational synergies.
- Cogeco Communications Inc (CGEAF) reported strong operational performance in Q2, with results ahead of expectations and expanded consolidated EBITDA margins.
- The company's fibre-to-the-home expansion program added nearly 7,000 new homes passed in the quarter, primarily in Canada, contributing to strong Internet subscriber metrics.
- Cogeco Communications Inc (CGEAF) is seeing increasing subscriber tenure and improved customer satisfaction in the US, particularly in Ohio, which is contributing to stable EBITDA despite revenue pressures.
Negative Points
- Cogeco Communications Inc (CGEAF) experienced a 2.7% decline in consolidated revenue, driven by lower revenue in both US and Canadian segments.
- Adjusted EBITDA in Canada declined by 2.8% in constant currency due to lower revenue and higher operating expenses aimed at driving subscriber growth.
- In the US, Breezeline's revenue declined by 4.5% in constant currency due to a cumulative decline in the subscriber base, especially for entry-level services.
- Diluted earnings per share declined by 20% in reported currency, impacted by higher D&A expenses, acquisition integration and restructuring expenses, and higher taxes.
- The radio advertising market continues to face challenges, impacting Cogeco Media's operations, although digital advertising solutions are growing.
Q & A Highlights
Q: What are the plans to address the decline in broadband disconnections in the US, particularly in Ohio?
A: Frederic Perron, President of Cogeco Connexion, explained that while competition remains high, they expect a slowdown in fixed wireless access (FWA) growth based on competitors' forecasts. They are seeing improvements in wireless sales, which could support cable performance. Additionally, they are exploring a dual-brand strategy and have noted improvements in customer satisfaction, which should positively impact business over time.
Q: How sustainable is Breezeline's profitability in the US given the competitive pressures?
A: Frederic Perron noted that profitability is supported by cost reductions and operational efficiencies. TV cord-cutting is happening at low margins, and internet customers lost tend to be lower ARPU. They are also realizing healthy rate increases and seeing improvements in customer satisfaction, which contribute positively to profitability.
Q: Can you provide insights into the capital expenditure (CapEx) and free cash flow guidance for the year?
A: Patrice Ouimet, CFO, stated that while CapEx and free cash flow can be volatile, they expect higher CapEx in Q3 and Q4. They are comfortable with the guidance range provided and will reassess as the year progresses.
Q: What is the status of potential asset divestitures in the US?
A: Frederic Perron mentioned that while they have not commented on specific reports, they are open to pruning assets in the US if it makes sense operationally, strategically, and financially. This remains an area of interest for the company.
Q: How is the wireless strategy expected to impact churn reduction and profitability?
A: Frederic Perron explained that the wireless strategy is primarily aimed at reducing churn and discounting on the wireline business. The strategy is expected to become EBITDA positive over time, with the churn benefit kicking in from the start. The US cable MVNOs serve as a good proxy for expected penetration and payback timelines.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
