Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cogeco Communications Inc (CGEAF, Financial) reported a 2.9% year-on-year growth in EBITDA for its Canadian telecommunications business, driven by strong cost discipline and subscriber growth.
- The company successfully launched its first AI chatbot, Charlie, in the US, which has handled tens of thousands of customer interactions with high efficiency.
- Cogeco Communications Inc (CGEAF) expanded its fiber-to-the-home network, adding close to 12,000 new homes passed in the quarter, contributing to an 8% organic growth in its network since fiscal 2022.
- The company's US MVNO wireless service has launched in the majority of its US footprint, with plans for a commercial launch in Canada, aiming to bundle wireless services with wireline products for incremental sales and higher customer retention.
- Cogeco Media reported year-over-year growth in revenue, driven by a rebound in radio advertising sales and contributions from digital advertising solutions.
Negative Points
- Cogeco Communications Inc (CGEAF) experienced a decline in diluted earnings per share by 22.7% due to restructuring costs related to its new organizational structure.
- The discontinuation of the US Affordable Connectivity Program (ACP) led to a loss of 3,300 Internet subscribers in the quarter, impacting the company's subscriber figures.
- The company reported a 16.3% decline in free cash flow in constant currency, largely due to restructuring costs recorded in the quarter.
- Cogeco Communications Inc (CGEAF) faced challenges in its Ohio market, with continued Internet subscriber losses, although there was some improvement excluding ACP impacts.
- The company's capital intensity was 22.4%, slightly lower than the previous year, but still indicating significant investment requirements, particularly for network expansion projects.
Q & A Highlights
Highlights from Cogeco Communications Inc (CGEAF) Q3 2024 Earnings Call
Q: Can you provide more details on the restructuring charges and when we should start seeing the benefits on margins?
A: The restructuring charges are primarily severance-related and are aimed at providing operating leverage to reinvest in growth areas like marketing and digital. The benefits will be seen over time as we reinvest in these areas. (Patrice Ouimet, CFO)
Q: What are the prospects for EBITDA growth in the US, considering recent improvements?
A: We had a good quarter and expect similar performance in Q4. The transformation plan will provide benefits both on revenue and cost in the future. (Patrice Ouimet, CFO)
Q: Can you elaborate on the broadband growth in Canada and what to expect in Q4?
A: The broadband growth engine in Canada is robust, driven by diversified factors like the Cogeco and oxyfuel brands and rural network expansion. We are having a decent move season so far in Q4. (Frederic Perron, President, Cogeco Connexion)
Q: What is the impact of the Affordable Connectivity Program (ACP) discontinuation on US subscriber numbers and revenue?
A: The impact will be seen again in Q4 but will ease off afterward. The ACP's discontinuation has a minimal impact on revenue and EBITDA. (Frederic Perron, President, Cogeco Connexion)
Q: How do you see the new North American operating model impacting cost synergies and performance?
A: The new model aims to create larger centers of expertise in key areas like marketing and digital, which will ensure competitiveness and accelerate performance. Cost savings will be reinvested in growth areas. (Frederic Perron, President, Cogeco Connexion)
Q: What should we expect in terms of CapEx and homes passed in the coming quarters?
A: CapEx will be higher in Q4, primarily due to Ontario builds. Homes passed will increase in the next fiscal year as the current projects are completed. (Patrice Ouimet, CFO)
Q: Can you provide more details on the US MVNO wireless service and its impact on margins and ARPU?
A: The wireless service is in its early stages and will not be a significant revenue contributor next year. The business case focuses on increasing customer retention and attracting new customers. (Patrice Ouimet, CFO)
Q: What are the expectations for free cash flow and EBITDA for the full year?
A: We expect free cash flow to be down year-over-year due to higher CapEx in Q4, but overall, it should trend well within our guidance range. EBITDA is expected to have some upside versus being exactly zero for the full year. (Patrice Ouimet, CFO)
Q: How do you plan to balance investments in growth areas with maintaining margins?
A: We aim to balance investments in growth areas like digital marketing and analytics with maintaining our strong margins. The goal is to bring ourselves back to parity with competitors while ensuring disciplined investments. (Frederic Perron, President, Cogeco Connexion)
Q: What is the expected timeline for returning to positive broadband growth in the US?
A: We aim to return to positive broadband growth in Ohio in the medium term. The impact of ACP will ease off, and we are working to balance subscriber growth with value creation. (Frederic Perron, President, Cogeco Connexion)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
