Cogeco Inc. SV ((TSE:CGO)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Cogeco Inc. SV’s recent earnings call presented a mixed sentiment, reflecting both challenges and favorable developments. The company is experiencing robust Internet subscriber growth in Canada and improvements in U.S. customer metrics. However, it faces revenue declines in the U.S., competitive pressures, and hurdles in the radio advertising sector. In response, Cogeco is undertaking strategic transformations and investments anticipated to bring long-term benefits.
Strong Internet Subscriber Growth in Canada
Cogeco Connexion’s Canadian telecommunications sector has witnessed a notable expansion of its Internet subscriber base, adding 10,700 new subscribers under the Cogeco and oxio brands. This growth underscores the company’s strong foothold in the Canadian market and its ability to attract a growing number of customers.
Breezeline Mobile Rollout
The successful launch of Breezeline Mobile has significantly contributed to customer satisfaction and has resulted in a more favorable service mix with higher margins. This rollout marks a strategic advancement in enhancing the company’s service offerings and customer relations.
Improvement in U.S. Customer Metrics
In Ohio, Cogeco has reported a substantial improvement in subscriber metrics, making it the best quarter since the acquisition of the business. This improvement signals effective strategies in addressing customer needs and strengthening the company’s U.S. market position.
Stable Adjusted EBITDA Growth
Cogeco has achieved a 1.4% increase in adjusted EBITDA at the consolidated level. This growth is attributed to the Canadian segment’s performance and reduced corporate spending, highlighting fiscal prudence and operational efficiency.
Increase in Diluted Earnings Per Share
The company reported an 18.4% increase in diluted earnings per share, driven by lower financial expenses, asset sales gains, and share repurchase initiatives. This improvement reflects strong financial management and shareholder return focus.
Digital Advertising Growth in Radio Business
Despite a challenging radio advertising market, Cogeco’s digital advertising solutions have shown resilient growth, contributing positively to the company’s overall revenue, indicating adaptability and innovation in its media strategies.
Decline in U.S. Revenue
Breezeline’s revenue in the U.S. declined by 3.4% in constant currency, primarily due to a decreasing subscriber base and the trend of video cord-cutting. This decline highlights the competitive challenges and evolving consumer preferences in the market.
Challenges in Radio Advertising
Cogeco Media faced a 7.8% revenue decrease, reflecting a tough competitive landscape in radio advertising. This downturn underscores the need for strategic adaptation in the media segment.
Pressure on Canadian EBITDA
The Canadian segment’s EBITDA is projected to decline in mid-single digits in Q2, attributed to competitive pricing pressures, increased content costs, and reinvestment in transformations. This pressure demands strategic initiatives to sustain profitability.
Increased Capital Intensity
There has been a rise in capital intensity to 20.4%, up from 19.6% last year, mainly due to increased expenditure in the U.S. This reflects the company’s commitment to investing in its infrastructure and long-term growth.
Competitive Environment and Subscriber Decline
In the U.S., Cogeco continues to face challenges with entry-level subscriber declines due to competition from Fixed Wireless Access (FWA). The company needs to navigate this competitive landscape to maintain its market share.
Forward-Looking Guidance
Looking ahead, Cogeco Inc. and Cogeco Communications Inc. provided guidance indicating a stable revenue trajectory in Canada, with a slight increase in adjusted EBITDA. However, in the U.S., Breezeline’s revenue is expected to face a small decline, though EBITDA stability is anticipated due to cost reduction efforts. The company maintains its financial guidelines for fiscal 2025, predicting slight decreases in consolidated revenue and adjusted EBITDA in Q2 due to competitive pressures and investments. Capital intensity is expected to rise, with ongoing Ontario fiber network expansion slated for completion by fiscal 2026.
In conclusion, Cogeco Inc. SV’s earnings call highlighted a mixed performance, with significant growth in Internet subscribers and improvements in customer metrics, juxtaposed with revenue challenges and competitive pressures. The company’s strategic investments and transformations are poised to address these challenges, aiming for sustained growth and stability in the future.
