Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cogeco Inc (CGECF, Financial) reported solid Q4 2024 results, exceeding guidance with strong free cash flow performance.
- Successful integration of US and Canadian teams under a unified operating model is generating cost savings and optimizing talent deployment.
- Deployment of AI-powered customer service chatbot managed over 80,000 inquiries, enhancing customer experience and streamlining operations.
- Continued growth in the Oxo digital brand customer base, with plans to expand on their own network with strong margins.
- Fiber network expansion added 14,000 new homes in Q4 and 58,000 for the year, contributing to a 9% growth in network since fiscal 2022.
Negative Points
- Breezeline's revenue declined by 2.3% due to a lower subscriber base, especially for entry-level services.
- Cogeco Media faced lower than anticipated revenue due to competitive dynamics in the radio advertising market.
- Fiscal 2025 is expected to be a year of reinvestment, with anticipated modest EBITDA margin compression.
- The US market remains competitive, with ongoing pressure from fixed wireless access (FWA) impacting growth.
- Subscriber losses in the US, particularly in Ohio, with 8,700 internet subscriber losses in Q4, including 4,500 ACP subscriber losses.
Q & A Highlights
Q: Can you provide details on the contribution of the NRBN acquisition to Cogeco's revenue and EBITDA growth in Canada?
A: Patrice Ouimet, CFO, stated that the NRBN acquisition contributed about 1% to revenue growth. The EBITDA margin from NRBN is slightly higher, but it does not significantly impact the overall margin percentage. The majority of EBITDA growth is attributed to the core business operations.
Q: With the ACP disconnections behind, is there potential for positive subscriber growth in the US, particularly in Ohio?
A: Frédéric Perron, CEO, mentioned that while they aim to return to net customer growth in Ohio, they are not setting a specific timeline. The competitive environment remains challenging, and they are focusing on balancing volume and ARPU.
Q: How are you approaching pricing in Canada given the competitive and political pressures?
A: Frédéric Perron noted that Cogeco is still able to implement rate increases and will continue to adjust pricing over time, considering consumer and economic pressures. Patrice Ouimet added that pricing strategies are included in their revenue guidance, with a focus on offering faster speeds and competitive acquisition costs.
Q: Can you elaborate on the cost initiatives and their impact on free cash flow?
A: Patrice Ouimet explained that while specific savings from reorganization are not disclosed, they are reinvesting in the business. The higher-than-expected free cash flow was due to inventory optimization, lower interest rates, and tax adjustments, which were not initially planned.
Q: How does the fiscal 2025 guidance account for mobility and wireless initiatives?
A: Patrice Ouimet stated that the guidance includes similar mobility costs as fiscal 2024. The Canadian MVNO launch is not yet scheduled, and US penetration is still in early stages, with more information to be provided as they gain critical mass.
Q: What is the strategy regarding the wireless spectrum in Canada?
A: Frédéric Perron clarified that Cogeco retains full control over its mid-band spectrum, providing flexibility for future use, including potential monetization or network sharing. The recent partnership with a national operator does not involve spectrum.
Q: How is the rural expansion in Canada progressing, and what is its impact on EBITDA?
A: Patrice Ouimet confirmed that the Quebec build is complete, and subscriber ramp-up is ongoing, contributing positively to EBITDA. Ontario's expansion is still in progress, with most homes to be added in the future.
Q: What is the outlook for Cogeco's EBITDA growth in 2025, considering various business factors?
A: Patrice Ouimet indicated that while certain areas like Oxo and rural expansion are expected to contribute positively, competitive pressures and strategic reinvestments are anticipated to result in stable EBITDA at the consolidated level.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
