Earnings call transcript: Cogeco Communications beats Q1 2025 targets, stock dips

Cogeco Communications Inc. (CCA) reported its first-quarter 2025 earnings, exceeding analysts' expectations with an EPS of $1.90 against a forecast of $1.64. The company's revenue also surpassed predictions, coming in at $732.43 million compared to the expected $732.17 million. According to InvestingPro data, the company maintains a FAIR financial health score, with revenue growth of 50.09% over the last twelve months. Despite these positive results, the stock price fell by 6.27%, closing at $62.14, reflecting investor concerns over broader market conditions and company-specific challenges.

Key Takeaways

• Cogeco's EPS of $1.90 beat the forecast by 15.9%.
• Revenue slightly exceeded expectations, reaching $732.43 million.
• Stock dropped by 6.27% post-earnings, closing at $62.14.
• Decline in consolidated revenue by 2.7% year-over-year.
• Free cash flow increased by 12.8% in constant currency.

Company Performance

Cogeco Communications reported a mixed performance for Q1 2025. While the company managed to surpass earnings expectations, its consolidated revenue saw a decline of 2.7% compared to the previous year. With a beta of 0.5, the stock shows lower volatility than the broader market. The telecommunications sector remains highly competitive, particularly in the US market, where Cogeco is facing increased pressure. However, the company achieved strong internet subscriber growth in Canada, adding 8,300 new subscribers. InvestingPro analysis reveals the company has raised its dividend for 21 consecutive years, demonstrating consistent shareholder returns despite market challenges.

Financial Highlights

• Revenue: $732.43 million, a slight increase over forecast.
• Earnings per share: $1.90, up from the forecast of $1.64.
• Free cash flow: Increased by 12.8% in constant currency.
• Capital intensity: Decreased from 23.4% to 21.6%.
• Net debt to adjusted EBITDA ratio: 3.4 turns.

Earnings vs. Forecast

Cogeco's EPS of $1.90 exceeded the forecast of $1.64 by approximately 15.9%. Revenue also slightly surpassed expectations, coming in at $732.43 million against the forecast of $732.17 million. This performance marks a positive surprise for investors, although the magnitude of the beat was not enough to offset broader market concerns.

Market Reaction

Despite the earnings beat, Cogeco's stock fell by 6.27%, closing at $62.14. This decline may reflect investor apprehension about the company's revenue decline and competitive pressures in the telecom sector. The stock remains below its 52-week high of $75.09, indicating potential investor caution.

Outlook & Guidance

Looking ahead, Cogeco maintains its annual guidance of stable EBITDA, with expectations for free cash flow to grow by $150 million by fiscal 2027. The company anticipates low single-digit decreases in revenue and EBITDA for Q3 2025, focusing on cost efficiency and transformation initiatives. InvestingPro data shows three analysts have recently revised their earnings downwards for the upcoming period, suggesting potential headwinds in the near term.

Executive Commentary

Fred Perrant, a company executive, emphasized the importance of the company's strategic initiatives, stating, "We expect free cash flow to grow materially over the next two years and let me be clear, this is not just an aspiration, it's a plan." He also highlighted improvements in customer satisfaction in the US due to operational enhancements.

Risks and Challenges

• Competitive pressures in the US and Canadian markets.
• Declining radio advertising market.
• Potential challenges in executing the Canadian wireless launch.
• Macroeconomic uncertainties affecting consumer spending.
• Ongoing need for network modernization and cost management.

Q&A

During the earnings call, analysts focused on Cogeco's wireless strategy and network modernization plans. Executives addressed concerns about competitive pressures and clarified potential asset pruning strategies to enhance operational efficiency.

Full transcript - Cogeco Communications Inc (CCA) Q2 2025:

Conference Operator: Good day, and welcome to the Cogeco Inc. And Cogeco Communications Inc. Q2 twenty twenty five Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr.

Patrice Wimet, Chief Financial Officer of Coteco, Inc. And Coteco Communications Inc. Please go ahead, Mr. Wimet.

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: Thank you. So good morning, everyone. Welcome to our second quarter results conference call. So as usual, before we begin the call, I'd like to remind listeners that today's discussion will include estimates and other forward looking information. We have that you review the cautionary language in the press releases and MD and A issued yesterday, as well as in our annual reports regarding the various risks, assumptions and uncertainties that could cause actual results to differ.

With that, I will

Fred Perrant, Executive (likely CEO), Cogeco Inc. and Cogeco Communications Inc.: now pass the line to Fred Perrant for opening remarks. Thank you, Patrice, good morning, everyone. We're pleased to share our Q2 results today and also provide an update on our transformation. As a reminder, our plan is to create additional shareholder value by increasing our cash flow, sustaining our dividend growth and reducing our debt with the option of also resuming share buybacks at one point in the future. Now more specifically, we expect free cash flow to grow materially over the next two years and let me be clear, this is not just an aspiration, it's a plan.

This increase in cash flow will be enabled in particular by the natural end of a CapEx investment cycle in rural network built and to a lesser extent, network modernization efforts having reached our objectives. In addition, our relatively low dividend payout ratio as a percentage of cash flow provides sustainability and room for continued dividend growth. During the second quarter, we continued to pursue our three year transformation program to further accelerate our performance. With the same five priorities we've been communicating since last year, that is Canada US synergies, digitization of sales and service interactions, advanced analytics, network expansion completion, and wireless ramp up. The merger of our US and Canadian teams is now well behind us, and we're very pleased to see the high level of engagement and collaboration of our colleagues on both sides of the border.

While a lot of organisational synergies are already being captured from this change, we're just starting to scratch the surface around technical and operational synergies. On the wireless front, US volumes are starting to ramp up following an initial tuning period, and the preparation for an upcoming Canadian wireless launch is progressing well. We've now opened pre registrations for our existing Canadian wireline customers as part of our wireless pre launch lead generation campaign and demand has exceeded our expectations so far. In terms of operational performance, second quarter results were ahead of expectations as the teams continued to execute well and as we deferred certain investments to the back half of the year. More specifically, our transformation efforts contributed to the expansion of our consolidated EBITDA margins.

Our fiber to the home expansion program added close to 7,000 new homes passed in the quarter, mainly in Canada. In Canada, we also experienced another quarter of strong internet subscriber metrics, despite ongoing competitive intensity in the market. And in The US, our customer satisfaction metrics and Ohio performance continue to show year over year improvement. At Cogeco Connection, our Canadian telecommunications business, we grew our internet customer base by a total of 8,300 subscribers this quarter. We've been adding customers under both the Cogeco and OXIO brands over the past year.

Our Ontario subsidized network expansion program will continue throughout fiscal twenty twenty five with an expected completion in fiscal twenty twenty six. As a reminder, our Quebec network expansion program was largely completed in our previous fiscal year and we're very satisfied with our customer additions and completed regions of Quebec and Ontario to date with higher customer penetration levels than target. We've now increased the number of Canadian homes passed by nearly 145,000 since the beginning of fiscal twenty twenty two, primarily via fiber to the home and in collaboration with governments. At Breezeline, EBITDA in constant currency was stable with last year, as revenue pressures from industry headwinds were offset by transformation related cost savings. We're seeing increasing subscriber tenure, resulting from higher customer satisfaction and an improved mix of higher margin services, as a greater proportion of our BREEZE line customers take increasingly fast internet speeds.

This has helped offset the decline in subscribers for entry level internet services due to competition. At Cogeco Media, the radio advertising market faces ongoing challenges. However, our digital advertising solutions continue to be a growing contributor to revenue and our listener engagement remains strong. In Montreal, for example, seven of the 10 most listened to radio programs in the city come from our stations. And now, let me turn the call over to Patrice to provide more details on our financial performance for the quarter.

Patrice?

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: Thank you, Fred. So let's start in Canada. So Cogeco Connections revenue declined by 0.9%, driven by the lower revenue per customer due to fewer video and wireline phone service subscribers, sorry, and a competitive pricing environment, partly offset by a growing internet subscriber base under both the Cogeco and OXO brands over the past year and a contribution from the NRBN acquisition. Adjusted EBITDA declined by 2.8% in constant currency due to lower revenue and higher operating expenses to drive subscriber growth. In The US, BreatheVein's revenue declined by 4.5% in constant currency due to the cumulative decline in the subscriber base, especially for our entry level services and non internet services, partly offset by an improving product mix.

Adjusted EBITDA was stable, driven by cost reduction initiatives and operating efficiencies. Turning to our consolidated numbers for Cogeco Communications, at the consolidated level revenue declined by 2.7 and EBITDA was stable in constant currency. The decline in revenue was driven by lower revenue in both The US and Canadian segments, while the stable adjusted EBITDA was due to operating efficiencies and lower corporate costs. Diluted earnings per share declined by 20% in reported currency due to higher D and A expenses, higher acquisition, integration and restructuring expenses and higher taxes, partially offset by lower financial expenses and the appreciation of the U. S.

Dollar. Capital intensity was 21.6% down from 23.4% last year due to lower spending in Canada, partially offset by higher spending in The US. Excluding network expansion projects, capital intensity was 19.4%. Free cash flow in constant currency increased by 12.8% largely due to lower capital expenditures and financial expenses. Our net debt to adjusted EBITDA ratio was 3.4 turns at the end of the quarter, unchanged from Q1 due to the negative impact of exchange rates on our U.

S. Denominated debt, as it takes more time for EBITDA to fully reflect the FX impact. We continue to target a net debt to EBITDA ratio in the low three turns range over time. And we declared a quarterly dividend of 92.2¢ per share. At Cogeco Inc, revenue in constant currency decreased by 2.7% and adjusted EBITDA was stable as a result of Cogeco Communications performance.

Media's operations revenue decreased by 2.7% due to challenging competitive dynamics in the radio advertising market, partially offset by positive contributions from digital advertising revenue. And a dividend of 92.2¢ per share was also declared for the quarter at Cogeco Inc. Now turning to financial guidelines for Cogeco Communications fiscal year 2025. We are maintaining our annual guidelines, which we first provided to investors in October. As it relates to the upcoming Q3, we expect both consolidated revenue and adjusted EBITDA in constant currency to decrease in the low single digits compared to last year.

Capital intensity is anticipated to be approximately three fifty basis points above Q3 of last year. At Cogeco Connection, with the acquisition of NRBM now fully lapped, we expect Q3 revenue to decrease in the low single digits due to the customer base being offset by video and wireline foreign cord cutting and competitive pricing pressures. Adjusted EBITDA is expected to decrease in the low to mid single digits, reflecting lower revenue and higher operating expenses, which include spending related to subscriber growth and transformation initiatives. At Breezeline, we expect in constant currency a mid single digit decrease in revenue versus last year, reflecting a lower subscriber base. And we expect stable EBITDA year over year as operating cost discipline and lower video content costs are expected to offset the revenue decline.

Below the EBITDA line at the consolidated level, with our restructuring program largely complete, we expect acquisition, integration and restructuring costs to be approximately $4,000,000 in Q3, which partially relates to IT cloud implementation costs. In regard to our Q3 financial expense, we expect it to be about $2,000,000 higher than reported in Q2 using today's FX rates. At Cogeco Inc, we are also maintaining financial guidelines. And now Fred and I will be happy to take your questions.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Maher Yaghi with Scotiabank. Your line is now open.

Maher Yaghi, Analyst, Scotiabank: Great. Thank you for taking my question and thank you for the detailed outlook for Q3 and the rest of the year, Patrice. So, I wanted to just focus a little bit on The US side to start. You you're having much better churn metrics in Ohio. What else can you do for the rest of the business in The U.

S. To stem the decline in broadband disconnections? We saw the year on year disconnections accelerate a little bit here in Q2, so versus Q1. So can you maybe just discuss what drove that acceleration and the disconnections? And do you have any plan to attack the market?

We've seen some of your peers in the cable industry lean on wireless to support the cable metrics. You know, Comcast is launching a plan shortly. What can you do to work on those metrics to improve them? Thank you.

Fred Perrant, Executive (likely CEO), Cogeco Inc. and Cogeco Communications Inc.: Hi, Maher, it's Fred. Maybe I can unpack the question first by talking about the market in The US and then I can talk about some of our performance levers. So it's true that we're showing sequential improvement in our U. S. PSUs.

I would say that the competition in the market remains elevated. We time, we do expect FWA to slow down a bit. And this is just based on the numbers that the three FWA players report in terms of their future targets. You look at those numbers and we should see a deceleration based on what they're forecasting. We have not seen that deceleration yet, but it should come over time.

We've actually seen over the past few weeks, a slight further uptick in competition as some of the fiber players, for example, in the Northeast, there was one in particular that increased their promotional intensity in recent weeks. And we're feeling it in our Q3 PSUs right now. Now that being said, that may be tactical and short lived, so I wouldn't read too much into it. As it relates to the other part of the question, which is what can we do? We're seeing an acceleration of our wireless sales, which as you've pointed out over time do become does become a contributor to Cable Co performance.

You've seen it from the big two out there. So that's one. The other one is we're exploring how we could possibly use a dual brand strategy to compete in The US market, leveraging for example, an OXIO like strategy. We're not ready to announce anything today, but that is something that we're looking at. Thirdly, as the OTT players keep raising their prices and some of these prices are really getting quite high.

We're seeing green shoots of possible deceleration in US TV cord cutting. And last but not least, there's a lot we can do in terms of continuing to improve our ongoing sales and marketing blocking and tackling, which we are in the process of doing right now. I would also add in conclusion that we're seeing material improvements in our US customer satisfaction due to a number of operational improvements, and that will be a net positive contributor to our business over time.

Maher Yaghi, Analyst, Scotiabank: Can I ask from a strategic point of view, do you see, know, some of your peers in The US are leaning on wireless to and essentially giving a free line of wireless to subsidize the retention on the cable side? What's your view, your broad view on going in that direction or sustaining that kind of promotional effort long term? Is it feasible for you given your cost structure and your view on what it takes to reduce churn in as fixed wireless continues to be a headwind?

Fred Perrant, Executive (likely CEO), Cogeco Inc. and Cogeco Communications Inc.: Sure. So, our wireless strategy in The US and by the way, Canada won't be that different is primarily about churn reduction and discount reduction on the wireline business. So, we're not targeting hugely positive gross contribution margin on those new wireless ads and the benefit will come from the wireline as you pointed out. So, that allows us to be fairly aggressive on wireless. We have a fair amount of wiggle room there.

I'm not going to comment too much on specific pricing strategy. Certainly giving wireless for free on a promotional time limited basis is always an option. And just generally, if we need to be aggressive, we can be, as I said earlier. Thank you.

Conference Operator: Thank you. And your next question comes from the line of Aravinda Galappatich from Canaccord Genuity. Please go ahead.

Aravinda Galappatich, Analyst, Canaccord Genuity: Good morning. Thanks for taking my questions. Two from me. Just wanted to focus on the profitability side in The U. S.

Obviously, you've even on a constant currency basis, you've been able to stabilize EBITDA and judging by Patrice's comments, mean, that's going to be sustained into Q3. Even with the competitive pressure for that you've talked about, do you feel that that profitability and Breezeline can be sustained, especially when you kind of layer any tailwinds from wireless and the sort of the streamlined structure that you have? And then secondly, in Canada, wanted to get a sense of what any changes to churn. I know there was one of your price increases occurred in March. Any kind of reaction or impact to that and maybe an update on the competitive conditions there?

: Thank you.

Fred Perrant, Executive (likely CEO), Cogeco Inc. and Cogeco Communications Inc.: Sure, I can talk generally about US commercial trends and then I'll answer your second question about the Canadian rate increase as well. In The US, there are a few things that are giving us good tailwinds from a profitability perspective, Aravinda. The first one is, TV cord cutting is happening at little and sometimes no margin. So you're losing empty calories there. So whereas our some of our PSU and certainly revenue decline that we're reporting sometimes, we lose very little profitability from that.

We're also seeing that on the internet side, some of the customers that we're losing tend to be lower ARPU, because they go towards FWA. And we do see that on the legacy base, given that we still have a technology advantage in many of the markets where we operate, that we're still able to realize healthy annual rate increases. I would also add on the cost side, that we keep over performing in terms of our cost reduction and we don't see an end insight on this one because the cost reduction is happening, not just from squeezing, but from actually reducing customer demand. So we're seeing material declines in the rate of customers calling us with issues and the rate of customers asking for a truck roll. And even when they do call us, we're seeing a very large increase in the number of chat bot interactions and the increase in chat as well.

So you put all these things together and I would say we have we do feel good about US profitability. Patrice, I don't know if you wanted to add anything on that topic. Okay, okay. On second part of your question about Canadian rate increases, the rate increase that we implemented in Canada on March 1 was actually slightly smaller than last year. And what we're seeing is it's pretty calm.

So we're not seeing much churn from it, but we rarely see much churn from it, but we would see more is calls for retention and new discounts. But so far it's been pretty calm, Aravinda.

Aravinda Galappatich, Analyst, Canaccord Genuity: Great, thank you very much. I'll pass the line.

Conference Operator: Thank you. And your next question comes from the line of Vince Valentini from TD Cowen. Please go ahead.

Vince Valentini, Analyst, TD Cowen: Yes. Thanks very much. First question is on your guidance, especially for CapEx and free cash flow. I mean, you seem to be trending below the low end of CapEx and above the high end of the free cash flow targets you set for the year. Are you highly confident this is just timing and you have detailed schedules for construction in the second half of the year to catch back up?

Or is it possible that we will end up at least in the better end of both of those ranges? And I'll throw the second question out at the same time, just so you can stew on it. There seems like there's been a fair amount of chatter on a process to look at divesting your Florida fiber assets. Is there anything you can tell us there? Is there the truth that that's an ongoing process and if so, any thoughts on how it's going and what the timeline might be?

Thank you.

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: Sure. Hi, Vince. So on the first question, it's still early. So obviously for CapEx, the free cash flow will is directly linked to it and can be volatile during the especially when we look at the seasons to build. So there will be higher CapEx in Q3, as I mentioned earlier.

And there will be some in Q4 as well. So I would not assume necessarily that will come in at the low end of CapEx, but we feel comfortable that will be within the range that we mentioned. And I would say probably a similar story on free cash flow. Obviously, time we do report, there's going to be just one quarter left. We'll see for if we're trending a little better.

But for now, we feel comfortable with the ranges we gave. Yeah, sure. On the second question on acid pruning, I'll answer it more generally. We have not commented anything to whatever comes out from journalists, but just generally is something we've said before. We're still interested in pruning some assets in The US if we can fit, if we think it makes sense operationally, strategically and financially.

And it's still something we're looking at right now. That's all we can comment on at this point. Fair enough. Thank you. Thank you.

Conference Operator: Thank you. And your next question comes from the line of Drew McReynolds from RBC. Please go ahead.

Drew McReynolds, Analyst, RBC: Yes. Thanks very much. Good morning. Maybe first for you, Frederic. On the wireless strategy and your objective of churn reduction,

Maher Yaghi, Analyst, Scotiabank: can you give us

Drew McReynolds, Analyst, RBC: a sense just what kind of wireless penetration generally is required before you see that inflection point on the churn reduction on the cable business and just how looking at that from either penetration or timing perspective? And then secondly, maybe for you, Patrice, on the level of reinvestment through the transformation that you're making, I don't know if you can quantify this, but ultimately when that transformation begins to wind down in terms of basis points of margin, what kind of reinvestment comes out of the numbers that we're seeing right now on a run rate basis? In the context of the questions, clearly you're seeing very good efficiency gains, which is great to see. I'm just wondering if we get a step down in OpEx or a gradual decline as that reinvestment comes out of the equation. Thank you.

Fred Perrant, Executive (likely CEO), Cogeco Inc. and Cogeco Communications Inc.: Hi, Drew, it's Fred. Thanks for the first question on wireless. First, let me start by saying, Drew, that in both countries, our wireless kind of OpEx investments and there's very little CapEx, you already see most of it in our current financials. So I wouldn't expect a big increase there. And then it's mostly upside from here, therefore.

And in terms of how fast the upside comes, I think a good proxy to use, Drew would be The US cable MVNOs, both in terms of the end penetration that they reach, as well as the time that it takes for the payback to really show. So, as you look at those, you'll see that it's a lower penetration level than truly fully converged players who have both infrastructures, but it does become accretive over time. And when you listen to Charter and Comcast, they do talk about how it's a net positive contributor to their EBITDA. It is an S curve. So as you launch a service like that, it takes time for your Salesforce to get good at selling it.

The churn benefit kicks in from the very beginning, it's just you don't have the full scale yet to absorb your fixed costs. But after a little while, you start reaching a critical mass and then over time, your fixed costs, which as I said before, are already in our financials, your fixed costs eventually end up being compensated for and the whole thing turns out that positive. So, short answer would be it's upside from here. Patients on the time that it takes to get that upside and cable MVNOs are a good proxy.

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: So on the second question, we have a number of elements to cover as part of the transformation, some pay off quicker and some pay off later in the three year program. So we're in year one right now. I would say at this point, we are obviously investing in certain areas, but it's not major investments and usually paid for by some savings we're able to generate. So we've already seen this, like you saw the margins improve year over year, especially in The US. I know I've been asked before where do we see this going forward, the current level of margins in The US is probably something we can do for the balance of the year.

And I don't see a reason why in future years, it would be a lower number. So as we are able to generate bigger gains from the transformation, there could be some upside on margins there. As to your, I guess the second part of your question is, would we reduce investments we're making now given that they're financed by the benefits we're getting it, I wouldn't see a major impact from this going forward. It's just bigger benefits as we're able to activate the different elements of the plan.

Drew McReynolds, Analyst, RBC: Okay, thank you both.

Conference Operator: Thank you. And your next question comes from the line of Stephanie Price from CIBC. Please go ahead.

Stephanie Price, Analyst, CIBC: Hi, good morning. Maybe following up on Drew's question there a little bit. It's halfway through the year and EBITDA is up a little over 2% on a consolidated basis versus the full year guide of stable EBITDA and it sounds like you're seeing benefits from the transformation initiative. Just wondering how we should think about the second half of the year and the puts and takes around EBITDA and expenses in the back half.

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: Yeah, so you're Hi, Stephanie. So you're talking at the consolidated level,

Stephanie Price, Analyst, CIBC: Yeah, exactly. Yeah.

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: Yeah, so there's different elements in the back half of the year. I've provided a glimpse at Q3, still a bit early for Q4, but obviously we do have some price increases that we've put through in February and March for different products in the two countries. There are there is some seasonality to some expenses, especially when we look at marketing budgets and back to school that hit more in Q4, so different elements there. And we've actually done better than what we thought initially for Q2, but some of the reason is that we do have expenses that will occur later on. So as I said basically in the opening remarks, we do expect that in Q3 for the EBITDA should be negative year over year in Canada and more stable in The US in constant dollars.

And so that gives you a small pressure in Q3. But again, all plan as part of our guide annual guidance, we did provide as a stable. Hopefully that answers your question.

Stephanie Price, Analyst, CIBC: Thanks. Yeah, and then maybe one more for me. We've seen a few M and A deals in The US telecom space recently. Just curious if you anticipate any changes to the competitive landscape amid the further consolidation.

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: So it's still early days because some of these transactions have not occurred in areas where we operate. And the ones that have been announced where sometimes it is in areas where we operate have not necessarily closed. So I wouldn't say that we saw major changes. And it's very dynamic. Every week, there are new types of offers being put out by the different players in the different states that we operate in.

So, it's still a bit early days.

Stephanie Price, Analyst, CIBC: Okay, thank you.

Conference Operator: Thank you. And your next question comes from the line of Jerome De Brule from Desjardins. Please go ahead.

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.0: Good morning, gentlemen. Thanks for taking my question. Fred, you started the call talking about your potential for growing free cash flow over the next two years. And I read on the public broadcast of the conference you attended earlier this quarter, you were talking about growth of free cash flow of $150,000,000 over the next two years. Wondering if you can confirm or maybe discuss that you still have this view here.

Fred Perrant, Executive (likely CEO), Cogeco Inc. and Cogeco Communications Inc.: Hi, Jerome. Thanks for the question. Yes, so for everyone's benefit, what we were talking about is the growth in cash flow from this fiscal year to fiscal twenty twenty seven. And I would say at this point, Jerome, that indeed 150,000,000 would be a decent assumption to use. The reason for the increase is quite straightforward, which is we got our Ontario network expansion programs that we'll complete by then.

We're also quite pleased by how we were able to quietly modernize the rest of our network over time. And by the time we reach fiscal twenty twenty seven, we should have reached we will have reached our objectives. So you put those things together and as you know, CapEx is relatively under our control and therefore $150,000,000 increase by then is not a bad assumption.

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.0: Great. And then, I guess the obvious kind of strategic follow-up to that is that, what would be the impact on EBITDA growth over the longer term? What I understand is that most of this is coming from CapEx reduction and now you have plan deploying with new houses. Now I totally commend you for only investing on plans that make sense from an ROIC perspective, but do you think there's going to be a noticeable impact on the profitability side?

Fred Perrant, Executive (likely CEO), Cogeco Inc. and Cogeco Communications Inc.: You mean on the growth? Yes. Yeah, look, I think it will take we have quite a lot of runway for these expansion program to get fully penetrated. We reach very high penetration rates and they don't happen immediately. So we have quite a few years of room there in terms of growth.

It's also not our only growth driver. We've talked about many others such as we were talking with Drew earlier that wireless will become more and more material over time. And especially in the time horizon that you and I are discussing now. And on the modernization CapEx, we're really starting to reach levels that in many cases exceed what a customer can even use in terms of speed. So we're that's the reason why modernization CapEx may ease off over time.

And Jerome, maybe if I can add also, every year we will add some parts to our network. So in areas where we operate, there's always new neighborhoods that are being built. So we're always doing those. Obviously, those

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: are high return investments. And we remain available to talk to different people when especially at the government level when we want to participate in the programs. It's just that there's no big ones coming up from what we're seeing, but we're doing some smaller ones like we have one in Virginia right now. So it can be at the provincial in Canada or state level. The bigger one that we've been talking about in the past, the bead program is something we'll probably not do too much of.

But at the smaller level, are some possibilities.

Conference Operator: Thank you. And your next question comes from the line of Matthew Griffith from Bank of America. Please go ahead.

: Great. Thanks for taking the question. On the same subject of the network modernization there was no mention of kind of a DOCSIS for upgrade. Is that contemplated in that normal course upgrade cycle to the end of twenty twenty seven or are you seeing customer usage not requiring that so you're kind of delaying any kind of spending that would be related to that? And secondly, just on pricing in Canada, you know, the materials you called out, you know, competitive pricing pressure, which, you know, isn't necessarily new.

But I was wondering, you know, if you're seeing that mostly on kind of the new gross ads or are you seeing the pricing pressure affect your base where you're getting an increased number of subscribers within your base kind of repricing themselves lower and that's driving the competitive pricing pressure that you called out? Thanks.

Fred Perrant, Executive (likely CEO), Cogeco Inc. and Cogeco Communications Inc.: Sure. Hi, Matthew, it's Fred. So, the second part of the question, I wouldn't say there's anything dramatically different there in terms of the competitive pricing pressure. It's the same thing and the same trend we've been facing for a few years by now. And the good news is we're still able to realize annual rate increases.

We adjust them, as I mentioned earlier, we made it slightly smaller this year than we did last year, but that's in the tweaking space, nothing major.

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: Sure, on DOCSIS, we use different technologies, as you know. So we have our network is pretty much very close to being all DOCSIS three point one. So we have, in most places, one gig or more in terms of download speeds. We've been building fiber to the home for many years, especially all the new areas. And more recently, there are certain areas in The US where we saw with new technologies and opportunity to go and do brownfield FTTH builds, rather than go through the split and DOCSIS four way, we can go directly to fiber, we don't do this if it doesn't make sense financially.

But the costs have come down and there's new technologies that allow us to do that. So we started doing this. And as for DOCSIS four, it's still something we're planning to do over time, but we're not planning to do a big blitz with this and do it when it makes sense. It's not something that we have yet started to implement given the we didn't have to do it from a demand standpoint. And also when you look at the equipment costs, usually those come down over time.

So it makes sense to wait a bit.

Fred Perrant, Executive (likely CEO), Cogeco Inc. and Cogeco Communications Inc.: Yeah, so if I don't know if this was behind the question, Matt, but in the 150,000,000 cash flow increase we're talking about, we don't anticipate big surprises coming from DOCSIS for erasing some of that.

: Okay, good to hear. And maybe if I can just sneak one more in just on the subscriber trends in The US. I know you've already spoken about improvements in Ohio and then there's kind of some degradation outside of Ohio and obviously fixed wireless access has a role to play in that. But in the past Florida has been a little lumpy and maybe occasionally responsible for some of the outside of Ohio ups and downs that we see. Was there anything to call out on any kind of bulk agreement or anything that that accounts for the losses outside of Ohio in this last period?

Fred Perrant, Executive (likely CEO), Cogeco Inc. and Cogeco Communications Inc.: No, our Florida business has been quite stable. So when I talked earlier about a slight uptick in competition even going into Q3, It's mostly in Mid Atlantic and Northeast.

: Okay. Okay. Very helpful. Thank you so much. Thank you.

Conference Operator: Thank you. And there are no further questions at this time. I would now hand the call back to Mr. Patrice Woumet for any closing remarks.

Patrice Wimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: Okay. Well, thanks everyone for participating today. And as usual, feel free to call us if you have additional questions. Have a good day.

Conference Operator: Thank you. And this concludes today's call. Thank you for participating. You may all disconnect.

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