Cogeco Inc. SV ((TSE:CGO)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Cogeco Inc. SV presented a mixed outlook for the company. While there are promising growth indicators in the Canadian Internet and wireless segments, as well as strategic expansions, the company is facing challenges in revenue and EBITDA, particularly in the U.S. market. Despite these hurdles, the increase in dividends and positive customer trends offer a glimmer of optimism, although persistent pressures in the U.S. could temper overall performance.
Canadian Internet Customer Growth
Cogeco Communications reported its best Canadian Internet customer growth in 13 years. This impressive growth was driven by market share gains in its legacy footprint and ongoing network expansion, highlighting the company’s strong position in the Canadian market.
Improved U.S. Subscriber Trends
The company achieved its first customer growth in Ohio in four years, marking a significant improvement in subscriber metrics in the U.S. Despite past challenges, this growth indicates a positive shift in the company’s U.S. operations.
Wireless Deployment Ahead of Plan
Cogeco’s Canadian wireless service launch is ahead of schedule, with positive early sales results. This success has allowed the company to reduce introductory offers, showcasing the strong demand for its wireless services.
Dividend Increase
Cogeco increased its dividend by 7%, reflecting strong anticipated free cash flow in fiscal ’26 and ’27. This increase is a positive sign for investors, indicating confidence in the company’s future financial performance.
Growth in Digital Advertising
Cogeco Media experienced an 8.5% increase in revenue, driven by growth in digital advertising and continued listener engagement. This growth underscores the company’s successful adaptation to the digital media landscape.
U.S. Revenue Decline
Breezeline’s revenue declined by 9.2% in constant currency due to a decline in the subscriber base and competitive pricing pressures. This decline highlights the challenges Cogeco faces in maintaining its U.S. market position.
Decreased Adjusted EBITDA
Adjusted EBITDA declined by 3.3% on a consolidated level, impacted by revenue pressure in the U.S. and increased operational investments. This decrease reflects the financial challenges the company is navigating.
Canadian Revenue Decline
Revenue in Canada declined by 1.5% in the fourth quarter, driven by lower revenue per customer from fewer video and wireline phone service subscribers. This decline points to shifting consumer preferences and market dynamics.
Free Cash Flow Decrease in Q4
Free cash flow in constant currency decreased by 27.4% in the fourth quarter, although it was up by 7.9% for the full year. This fluctuation indicates variability in the company’s financial performance.
Forward-Looking Guidance
During the earnings call, Cogeco outlined its strategy and performance metrics, including a 110 basis point year-on-year improvement in adjusted EBITDA margin and a $38 million increase in free cash flow in constant currency. The company plans to continue its network expansion with significant capital expenditures, aiming to pass 50,000 new homes in North America. Despite a projected revenue decrease of 1% to 3% for fiscal 2026, Cogeco anticipates further growth in free cash flow, targeting $600 million by fiscal 2027. The company also expects continued dividend growth supported by robust free cash flow projections.
In summary, Cogeco Inc. SV’s earnings call highlighted a mixed performance with strong growth in certain segments but challenges in others, particularly in the U.S. market. The company’s strategic expansions and dividend increases provide optimism, but revenue and EBITDA pressures remain a concern. Investors will be keenly watching how Cogeco navigates these challenges while capitalizing on growth opportunities in the coming years.