Q2 2020 Earnings Call
Good day, and welcome to the Cogeco, ANC and Cogeco Communications Inc. Q2.
20.
120 earnings conference call.
Today's conference call is being recorded at this time I'd like to turn the conference over to Mr. Patrice remain.
Senior Vice President and Chief Financial Officer of Cogeco, Inc. and Cogeco communication.
Please go ahead Mr. we me.
Thank you so good morning, everybody and welcome to our second quarter conference calls on join buyers see your old so the good thing.
Sorry, before we begin this call I'd like to remind listeners that the call is subject to forward looking statements, which can be fun or press release issued yesterday.
Turning the call over to fit.
No secret Booth and good morning, everyone and thank you for joining us to discuss the results of our second quarter ending February 29 Twentytwenty.
And these unusual in difficult times for everyone I would like to start by highlighting how our teams up cogeco across cubic, Ontario, and the U.S. East coast.
Worked tirelessly to make sure that we maintain a high quality of connectivity services and increased access to information and entertainment where our customers.
More than ever.
Access to.
Our internet TV telephony and radio broadcaster services.
Our paramount importance for the communities that we serve.
And I think all our employees and partners for their commitment and resilience.
Could you go subsidiaries are quickly adapting their services to this unexpected situation and I've implemented personal lines measures to offer customers more flexibility, while strongly encouraging them to make use of our online services.
Could you could media also quickly transform its radio programming and get back.
Provide all the information necessary to follow developments related to the crisis.
In each region of the crop.
As the pending me is evolving rapidly.
And it's duration is uncertain.
Did you communications as proactively manage this crisis.
To ensure that it could pursue its operations.
With that.
Its employees.
And served its customers in light of new development Hunkering every day.
The crisis management team has been successful at anticipating potential operational disruptions.
And implementing alternate modes of operation.
Our efforts are focused on transitioning virtually all contact center and office employees to work from.
Converting customer visits to self installation.
And remote prepared in part through the use of new customer friendly video technology.
Transitioning all store operations to be and do.
Either online by phone or by mail.
Increasing network capacity in certain areas to end to higher traffic.
Providing customers with temporary relief during the crisis, including removing data overage fees or the minority of customers not subscribing to unlimited plan.
And providing free news.
Good good movie television channels.
And not disconnecting nonpaying customer.
In the medium term.
We intend to capitalize on a number of initiatives, which we are implementing through this crisis to accelerate their digital transformation program. That's the biggest expect many customers will continue to use online tools after the crisis.
Regarding the media segment could you go media as transform and three new programming.
Provide quebeckers with quality and continuous information related to the current situation.
While still a friend musical programming.
Could you go social engagement is an integral part of the company's DNA.
In order to support our communities in these times of crisis.
We have adapted our chairman and support activities.
Well as our community television programming.
Could you go with among the first companies to commit to donate to the Covidien 19 emergency fund of Sonatide United way.
Well, the greater Montreal aimed at ensuring food security during the crisis.
The company has also decided to support several food banks and its local communities across its network.
On the more optimistic no that is continue with Cogeco communications latest strategic development.
On February 19 could you go appeared to the C or D wireless hearing and presented its hybrid model network operator model.
Which would then grid.
Continued investment in the telecommunication sector.
Wow truly increasing sustainable and effective wireless competition in underserved there.
Given the high barriers to entry into sector, which represents access to stay with required or access to spectrum.
This proposal would allow for mid teens wireline providers such as cogeco.
To access portion of the National incumbents wireless network.
Through an appropriate regulatory framework.
The proposed framework includes mandating wholesale access with the frame of reference to negotiate roaming rates that better track market base retail rates, and then David seamless and golf and and back between networks.
Our proposal to the C or D. C represents a balanced approach that would reduce approved the barriers to entry for regional players.
Create new wireless choices for consumers and drives writes down while simultaneously fostering innovation and investment in the high quality network.
Through to its commitment to better serve underserved and uncertain region.
Surgical connections announced on January 29.
In conjunction with Swift and non profit municipality that broadband initiatives.
The development of its network 30, who treat thousand 650 home.
And businesses and Wellington, and then turn counties in Ontario.
Could you go we'll deploy fiber alone 192 kilometers of Unders underserved roads and connect these homes and businesses by the end of 2021.
The announcement is aligned with Cogent goes business objective.
Extending his services across Ontario, and Quebec.
And supporting the government school of connecting all Canadian.
Two high speed Internet.
Moving onto Atlantic broadband.
The teams Bally communication acquisition, which closed on March 10, we're in the amount of 15 million U.S. dollar.
Teams Valley operates in the South Eastern Connecticut region.
A region can contiguous with ABTS existing Connecticut network.
When do situation related to cool 19, stabilizes, we will be in a position to increase market share in these markets to our and then bundled offers.
Including the Tivo video platform.
We will then.
Also continue to look for further value accretive acquisition in the U.S. to accelerate our growth.
And.
As we enjoy a solid financial position that both the Atlantic broadband and digital communications.
Let us move to an overview of our consolidated financial results at Cogeco communication.
For the quarter.
Reported revenue has reached 586.5 million increasing 5.9% in constant currency.
It's been D.A. has reached 277.4 million representing a decline of 0.7.
Per cent in constant currency and the resulted in an EBITDA margin of 47.3%.
Atlantic broadband revenue and EBITDA growth, we're part partly offset by declines of Cogeco connection.
The quarterly dividend has been reconfirm at 58 cents per share.
Let us look at the individual component.
Cogeco connection revenue as modestly increased 5.4% for this it through the first quarter.
Mainly as a result of rate increase effective November 1st.
Customers transition to a higher value offerings.
And the continued growth in Internet service customers.
On the other end revenues declined by 1.4% compared to the second quarter last year.
This is mainly due to a decline in video customers.
And lower net pricing from consumer sales, primarily as a result of the carryover effect of product bundles being promoted more aggressive actively from fourth quarter fiscal 2019, and gradually phase down during the second quarter fiscal 2020.
Could you go connections reported it Didnt <unk> has declined by 2.5% relative to the second quarter of last year, but by a more modest 0.3% when compared to the first quarter.
The decline is due to softer revenues combined with a higher level of planned marketing expenses.
The last and primary service units as remain essentially stable compared to the same quarter last year as more Tiffany bundles I've been market. The during the first half of fiscal 2020.
Finally as we.
Our making good progress on the development of our IP TV platform, which isn't testing mode at the moment.
But then huh Atlantic broadband revenue.
In constant currency increased by 3.7% into second quarter compared to last year.
Well they did the increased by 2.8%.
Revenue growth.
It's from both residential and business Internet service customers and rate increases mostly implemented during the fourth quarter of fiscal 19.
Partly upset by a reduction in video service customers.
EBIT da growth for the second quarter was lower than usual.
As we indicated during the last quarters earnings call.
Mainly as a result of iron sales and marketing expenses, but also compensation expense related to additional headcount to support growth and additional costs related to the development of a new financial and human capital management system.
Increased sales and marketing expenditure during the last year and improvement management. The seasonal disconnect are paying off.
Yes, you trends in Q2 of improve on all fronts relative to last year.
Let's now take a look at Cogeco, Inc.
In the second quarter consolidated revenues have increased 5.8%, but it did diego declined by 1.4% in constant currency.
Our radio business showed satisfying result.
With relatively stable revenue, despite the soft radio advertising market.
Cogeco media maintain excellent ratings for its basins, which continued to focus on high quality programming and cost efficiency.
I will now discuss financial guidelines and our liquidity position.
As noted in my introductory remark.
Cool the colder than 19 pandemic is evolving rapidly and its duration magnitude and then economy impact are all uncertain.
Our until the Communications Entertainment and radio broadcasting are essential services and are in full operations.
We do however expect the crisis two other short term and pack on finance.
On financial results for the balance of the year, which is difficult to estimate at the moment.
For this reason.
Could you go and Cogeco communications are both withdrawing their financial guidelines for the balance of the fiscal year 2020.
We intend to reinstate annual guidance when the situation stuff at night.
Let me start for Cogeco communication by providing some color on the potential impact of the on of the crisis Oncological Communications financial results and how will it is positioned to weather the crisis.
Due to the nature of the services offered by Cogeco Communications, we expect its results to be less impacted them other industries during the crisis.
Although the pandemic is expected to affect revenues and EBITDA in the short term, we do not expect the significant impact on free cash flows as certain investment initiatives and be reprioritize.
As I mentioned previously we intend to capitalize on a number of initiative.
Which we are implementing through the prices.
This will all accelerator digital transformation program.
And benefit us when the crisis that stuck to that.
Well, just hoping you cases as a strong liquidity position.
Whether the crisis with 500 than 2 million.
Dollars of cash at hand, and 948 million is unused credits in unused credit facility as of February 29, 2020.
This is in addition to the ongoing generation the positive free cash flow agreement.
Our two borrowing structures in Canada, and the United States are all too well below the maximum leverage levels permitted by its there just that covenants.
Effective today, Cogeco communications and ounce as the precautionary measure that it was suspended thing it's automatic share repurchase installer instruction under the normal course issuer bid program.
Which covered the period up to the me second expiry date.
Our NC IB program remains in place, but we intend to purchase shares and at the lesser pace than what our automatic share repurchase instructions implied in the past.
The pursue up acquisition in the U.S. remains our top capital allocation burn.
We expect some sales process to be delayed during the crisis.
Although some important these may arise.
A small acquisitions such as the recent tame bounding transaction can you find ends with cash on hand, and the unused revolver.
A larger transaction would be fine ends true raising debt at the Atlantic broadband level.
Finally, given couldn't Cogeco communications strong liquidity position as a true as.
And its relative stable revenue stream cogeco communication and maintain dividend at 58 cents per share.
As for Cogeco, Inc. The consolidated results are primarily derived from the communication segments.
The financial results of the media activities, which represented approximately 4% of Koji coasts consolidated revenue.
Our however expected to be more proportionately impacted by the Craig.
The media segment, which operates radio station isn't Essentials service.
And a strong media platform, especially during the crisis.
Our talk radio station.
And as patients and strong news programming provides critical real time information to the population which results in strong ratings.
However, these ratings are not expected to translate into equally strong revenue.
Since the bulk of the reviews revenue is generated from the retail industry.
Which is impacted by the cold at 19 price.
The radio business as their or taking immediate that buddy temporarily laying off approximately 25% of his employee.
The severity and then the crisis and its economy impact, especially on the retail industry are unknown at the moment.
We do however expect to be in a strong position from a market share perspective, when the situation eventually gets back to normal.
So from a liquidity standpoint, cogeco as a separate financing in place with a 100 million revolving facility of which 24 million was drawn at the end of February.
Given the economy can certainty created by the time to me, we stopped buying back which it goes share under the normal course issuer bid program.
But I have maintained a dividend at 47.5.
Per share <unk> dollars.
Centsper share.
Compete in confusion.
Say that.
Even though the crisis is a difficult moment for all of it.
Cogeco is proactively managing the crisis to ensure that our employees are safe.
And we continue to deliver an exceptional service to our customers.
More than ever.
Oh.
More than ever deserve in light of this new development the occurring every day.
As we continue to prioritize our customary need we intend to further innovate and reinvent some of the way.
We deliver our service.
Building on accelerated digital transformation and new initiatives implemented during this time of crisis.
And now we will be happy to answer your question.
At this time I like to remind everyone in order to ask a question. Please press star and the number one on your telephone keypad.
Your first question comes from the line a fence selling genie.
TD Securities Your line is open.
Yeah, Thanks, very much and I hope that British drilling wells during the crisis on your end guys I have three or four questions that are doing what are the time you mentioned the push on more online self service and self installation have you seen anything in the last few weeks in terms of data points on how people are embrace.
Saying that in and what percentage of people are are willing to chew use sort of those those functions.
Oh, yes, absolutely its success. So we we have seen well I I think first of all there's not much choice for operators like us and the customers as well to build this route in many areas as a lot of people are at home or close to home.
And there's a lot of customers also that a would prefer not seeing a technician coming in the house. So that makes a lot of sense. So I think it's a good solutions for everybody and so what we've seen recently in the in the past two three weeks is that.
We have a less disconnections unless connections as well.
We're also seeing some people move from DSL services, our competitors to our services, which as you know are generally or at least 120 megabits a maximum speed, but we have a good portion of our network, which as I get that available.
So our speeds are quite faster than the himself. So so it's going well and we've introduced new tools as well to be able to help customers even for remote repairs.
True video products were using with customers This law, which which is something we're planning to keep going for.
Thanks Theresa.
In terms of video packages.
Talk to figure out again, there's no sports on TV or people are stuck at home or definitely watching more TV is it but some people are losing their jobs and net income concerns.
I will give us any sense of the last few weeks have you seen a net increase or decrease in in the size of the channel packages people are taking we're seeing more people out or more people shape.
Well [laughter] Vince.
Everyone that home as you said so.
We haven't seen increased load.
Throughout the day on our network. So it's not only just people wanting to be entertain.
The in the evening peer is now they want to be interesting throughout the day. They I guess they are taking breaks are working all the time. So we see on the video side a combination of.
People searching for use of you're looking for and films and also kids.
Programming, so all kinds of entertainment and the load on the Internet side is certainly supporting a lot of video conferencing. There's a lot of the business that has been done at home and we all know that.
[laughter] work never stops at home right that starts early in the morning, and it goes all the way to the end of the evening. So people are working really hard.
And our network or.
Our our very capable do they I think the Canadian telecom industry have built very good very resilient networks.
So the it pays actually to invest in our own infrastructure and be able to a full control over it then and deal with this extra capacity coming from very early in the morning now to a very late that in the evening.
Thanks for the I'll, just add one more than.
In the Atlantic broadband press release yesterday.
Talking about network usage and resilience. It was mentioned that there has been a 50% increase in video on demand can you.
If I what that is is that.
Almost all just free video on demand off your servers or is that is that also an increase in paid beauty purchases for movies or other events.
It's the boat so you could think of the Netflix or the you tube.
Of the world than there are a lot of also ODP specialized channels like Disney and others.
So it's a combination of everything so you have to the freed the freemium and the paid services.
Okay. Thanks very much.
Your next question comes from the line of Jeff Fan from Scotiabank. Your line is open.
Great. Thank you very much and hope poster you're doing well.
Follow up question on the self install.
Are you seeing more self install I mean, obviously you didn't sell for salt for both but is that activity more on internet.
And what's your capability on the video self install side.
Well, we see it actually a lot on internet and video as well. So there are there there are many neighborhoods that on the that I've been a wired them or pre wired. If you want a four for a long time, so it's not very hard in many homes actually.
Just to receive a terminal equipment the C P.
Uh huh.
Thank you and or Internet to just be hooked up and to the network and over the phone weekend activate and help the customer navigate the very quick.
Installation process and if they need more technical support we now offer video conference with the customer to really guide them through step by step.
And and setting up varies leaders that are that so it's it's been booked friendship.
Okay and on the video side are you is that the chevelle product or is that the new IP TV a that you're rolling out that you did in the self installed.
We are doing self installed and in a number of legacy equipment. The pre to you own we are doing it on T. little where the network or actually was deployed for T O services and the HGTV specific to the can eat in written network of Cogeco connection.
Phil we're expanding our.
Our trial.
So there's more and more internal trials.
People on our on our system.
But we're we're very cautious right now given the circumstances to to expand so I'm more used to come up but doubleclick bid is completed and we're ready to expand.
Right and just the from another follow up on the your comment I think those Patrice and made the comment about dsos shifting over to cable [laughter] I guess that makes sense of households are looking for.
Faster Internet service.
Are you seeing wholesale volume coming back to retail.
Without very reason as well and you mentioned in your release that Theres, some upgrades and downgrades on Internet service.
I'm just wondering if the net impact is still positive.
More overwhelmingly upgrades as opposed to downgrade.
Yes, so a on the wholesale side that it does vary by a month I mean this crisis is extremely new.
[noise], So I would say, we're seeing some of the mainly the positives right now so as we've talked about some DSL moving to sort of faster internet or.
Speed. This in terms of the previous question Sundance and your question.
On changes on the crank packages, we havent seen a lot yeah, what we indicated in our Mdna in terms of things, we think will happen in the future are a lot of things we haven't seen yet but makes sense that there will be especially when we talk about the economy and some.
Some portion of the customers wanted to downgrade. So this is not something we haven't seen yet so we are well so I would say more.
More upside right now so speed boost some more connex.
So more transfer from DSL to our time regular [noise].
To our network and yeah, I think a lot and farm put a wholesale parts of the wholesale part is arner already on our network. So it's not as if its offering DSL. So we will see in the future. It's obviously, there's a lot more capacity usage being a news right now are not networks, but haven't seen a a big change.
So.
[laughter].
Your next question comes from a line of our vendor gala Patty from Canaccord.
Line is open.
Good morning, Thanks for taking my questions I'll start with a couple two out.
Assess that at the corporate 19 impact and then move onto a the regulatory question.
On the fast area.
I was wondering if it came to remind us a little bit of your ass any exposure both in Canada and the U.S. and also I know it's early days, but there are there any set oh, the indications that you're seeing that would give you a sense of what they impact would be in terms of citadel credits and collection challenges that you might have.
The second question related to that is the is internet overage can you disclose what proportion of your Internet subs are on unlimited plans and therefore, not generating any kind of operating revenues.
Okay, so high or even though so oh I'll take them in order. So in terms of the semi or it's about 10% in Canada in U.S., but that's a portion of revenues coming from commercial as opposed to a residential a there's actually you know so now that we have added about a year ago in our financial since you want us to be exists.
Number three.
So it's not it's not a large portion and we haven't really seen movement so far.
Obviously, we have been there some larger enterprises. So we don't who they expect will change there [noise], we have smaller businesses.
Which will typically consume the internet product, a which I would like I would expect will not change much as well.
Some have also business homes, but a lot of people are working remote now. So this is often still on and where are the impact will be isn't or let's say a bars and restaurants that have the video feed for their customers. Obviously under close this is not something they need so it's a mix of products, but we.
I haven't really seen much.
On that front yet in terms of collection. This is something that we do expect will increase so we have taken like most or all the industry in both countries.
The the view that if some customers habit.
I haven't inability to pay their bills.
We're not getting a disconnect those customers. That's typically part of the process. If after a period of time people are not able to pay there's or this connection. So we're going to hold off on this so we do expect that bad debts will increase but difficult to seven despite it was not a major elements in 2018 that sorry, 28, a crisis obvious.
Said different kind this crisis, but we did not see a tremendous amount of increasing bad that so we're well see this time what happens.
And.
In terms of Overages, so about 75% of our customers in Canada, our I'm not unlimited plans, so it's only 25% that or not.
And we are some seats I'm seeing some people moving to and the negative.
And then the U.S., a it's a basically all unlimited, but so practice there.
Great. Thank you and that just on director to sites for city I.
I know that.
I'll be your decision by I said.
Stood pains complicates the regulatory picture a little bit.
Not clear how that 25% reduction directives from heaven affects the CR Tc process I know technically there's no direct connection, but obviously the wording seem to suggest that the CFTC process could conceivably be affected how does what is your thinking on.
On on that topic.
So well first we've always said that we would.
Enter the market than a.
With a profitable business a case and so it's actually more relevant to look on this year Tc side right now and that's why we participated at the hearings and the HM and no framework that we've put forward is actually supporting investment.
And collaboration between the industry. The the fact that I said.
Issued some some so some guidelines of course, the political layer influencing.
In my view, we will not of a very very strong impact we've seen the price decline regularly in the last years, there's still a lot of room in the Canadian landscape.
But the more of a relevant.
I am development for US is actually on this year Tc side.
Okay. Thank you I'll pass it off.
[noise] again, if he'd like to ask a question. Please press star and the number one on your telephone keypad.
Your next question comes from the line of my here Yeah, Okay Yaghi from Desjardins. Your line is open.
Thank you for taking my questions on the I Hope you guys Roe [noise].
Healthy.
With your family I wanted to ask your first question is on the disconnect I can you maybe tell us what is the normal disconnect that you have on a difficult quarter.
When the pretty level, which is related to unpaid.
Customer account us the reason I'm asking here as you mentioned it kinda likely that you'll disconnect any customers.
During the time upright and it kind of economic cap.
Crisis like we have right now.
So I'm trying maybe just proactively here too.
Yes.
You know you might have some positive impact that back on your subscribers going forward I'm trying to maybe just clarify what the historical disconnect is on in a typical quarter four on tape customers.
The second question I have the aired.
Right rightfully. So I understand you guys didn't choose to provide a new guidance given that nobody has a crystal ball on one the crisis, Mike and.
Maybe trying to [laughter] or your view on your cost structure or if there is pressure on on on the topline.
How much cost can be a reduced to make up for that lost revenue.
He how much of the revenue decline can be.
Removed.
Impact on on profitability by cost saving.
Thank you.
Thank you.
Just before that his gives you a more color on your second question for the first one I think we have to look at this from the value of the products that consumers are actually getting and we know internet TV to live and he are among the high.
The very high value products that customer needs and wants to do so the the their value is actually very high and there the bill I'm on a monthly basis is not very poorly but it is not prohibitive, but all right now considering the you just the usage and.
To that you, it's delivering so I I think this will.
Beat the fundamental to look at of course, some people might not be paid and will need a flexible terms and where we're all of the flexibility at cogeco. We've always been so if we need to work with some customers on the personalized level to give them the flex.
Ability to go through the crisis and other income comes back and.
When things go back to normal week, we will continue to deliver the service through the crisis and after the crisis I think that's always should be looked on.
With that because for the second question.
Ah, Yes, and maybe just talk on the first one I think what a it's a relevant question what will be the impact on P.S. use if we don't have this connection for non payments.
So I will suggest that I will take an older. This for the next call because actually even looking at the time I'm not sure. It will be I was relevant than what's coming up in the next two months lets say, but ah, but there might be an impact on P.S. use which we can discuss on our next call.
In terms of our cost structure, we do 'em, we do expect to have some savings on our cost structure. So we talked about more self installs.
Right now we are we have to close a all our retail stores in the two countries.
There was activities going on some people return and quick men. So there's a bit of savings. There are we have a mess truck rolls somebody's Dunbar employees on is the Banco tractors. So we've already started I really reducing some of these costs overall I think we can offset.
Some revenue losses were going to have and to be determined the extensive it that's why we're not providing guidance.
But not fully so I do expect an impact on EBITDA.
However, when you go down to the cash flow level, there or the impact should be limited as were I do expect to have less capex, especially related to some network construction left less installations, which are capitalized for new customers unless C.P. split them People's houses.
As well.
So we would expect that the cashel situation will not change that much and during the period.
Okay, Great and a I have a question on your debt structure I noticed in your and give me you renegotiated and lowered your interest costs.
On your Duck can you tell us how much annual savings that will provide you on Uh huh.
On your about on your income statement.
Yes, so we definitely negotiates our term loan b and U.S. before the crisis. So the rate came down by 25 basis points. So that's about $4 million U.S. per year.
If we are we obviously have to follow IRS rules, which basically forced us to recognize that gain upfront.
So that's why there's this large gain in the quarter.
Which means that when you look I thought our financial statements in the future using the current that level. Obviously, if we made an acquisition things could change.
But you're gonna see an expense, which will be higher than reality, because we book the gain upfront.
But in reality, we will be paying 4 million U.S. less going forward for the next few years.
Right. So are the game that to the to the large game that you booked in the quarter, that's gonna be I'm more cars over the life.
[laughter] contracts that are currently while it's not actually so the way the rules work, which are fairly complex rules or.
Because the death actually was not refinance but are we basically just change the rates on it.
So it's a basically we have to recognize the present value of this so.
So the other the alternative would have been to do nothing but he could not do this under I stress and you would've seen just the interest go down overtime. So what's going to happen now is the interest will remain high or higher and we booked again, though so there's no amortization at Celtic upfront.
Okay. Thank you.
Your next question comes from the line doing Mcdonald from RBC. Your line is open.
Yes, thanks, very much good morning, and hope everyone stays well three a follow up so I'll just go one by one here clarification Patrice first on the free cash flow outlook.
Understand in all the puts and takes on Capex any any change here in cash taxes.
As you go from EBITDA to free cash flow.
Yeah. So actually this quarter had a an unusual elements. We did some we didnt make changes to our tax structure rich resulted in about $6 million and tagging during the quarter. So if you want to take a perspective you on taxes. It would be similar to what we have disclosed previously in the.
Our previous guidance, which was about 12% cash tax.
In total tax generally is around 20% for so so that's probably those are good numbers to look after versus just looking at this quarter.
Perfect. Thank you on the.
I guess bad debt expense as we go through the the process and fully comprehend your ability to manage not only the level, but provide flexibility in terms of keeping customers and.
Recovering you know some amounts going forward just from an accounting perspective, presumably.
There's in the near term no real revenue impact you will take the receivable it'll be a drain on working cap when you get around to writing some of this off does that.
Right down does it go above EBITDA from an accounting standpoint, or can you throw it into you know some nonrecurring items below EBITDA.
Yeah. That's good question I would expect it would fall a above the line so it would impact EBITDA.
And normally we limit what he put 10 or restructuring, which really relate to restructuring, but it's a good question, but that would be by initial answer and as of and as it relates to when are we going to book a reserve on.
Older receivables is a question Mark So we're gonna have to look through this during the quarter I don't think we're going to be able to simply.
To put everything in receivables without a bigger.
A bigger elements of bad debt, but probably have to lower rate than before because their circumstances that allow people need to defer to payments.
Oh, Okay. That's great. That's actually very helpful. Thank you for that one last one for me then.
With Cogeco operating both in the U.S. in Canada early days here in what we're all going through is there any real kind of structural difference between.
Cogeco managing you know this whole situation in Canada versus that in the U.S. or.
It's in North America, essentially going through the same same impacts here.
Well, we are [laughter], we see boat or actually the there was.
A number of Uh huh.
Okay country.
They problems.
The level a decisions throughout the crisis. So the timing of their decision then Ah that didn't actually came down in a very structured or uniform way, but.
We see almost everyone wanting to do the same thing so as we.
We've seen.
Some.
Some directives.
In some areas of the of our network, where we quickly adapted and then that directive actually was implemented in other places throughout North America overtime. So.
It's actually nice do they present somebody can eat inside the U.S. side as we can quickly move.
New process and new procedures, a pass through our network and actually to react. This way. We're we're exposed to 11 states and two province.
So there's there's a lot of things we've seen there's a lot of process that were adapted and a two or management network. We just moved the right information quickly on time for other parts to adapt quickly.
Okay interesting. Thank you I think you both.
[laughter] again, if you'd like to ask a question. Please press star and the number one on your telephone keypad.
Your next question comes from the line Matthew Griffin from Bank of America. Your line is open.
Hi, Thanks for taking the question I said, a few kind of smoke follow ups.
One is on the kind of the bundled promotion pricing that tests with had kind of a bit of a negative impact on the revenue I was just curious if you could provide some color on how well the remainder of the error that impacts will wane second is on the marketing.
Spend switched Ben I think both in the USA and Canada, a there's been higher marketing initiatives and once you get put a dollar amount on that and I'm, assuming a going forward that those initiatives will be a rather limited. So just what kind of benefit that could have she's expenses and just curious on the program.
Any cost side with.
Sports you know being suspended like what does that have the direct impact on the programming costs that were going to see come through in the second half of the year or are those rates locked and I'm just curious how that works. Thanks.
Okay. So on the bundle promos so we.
As we stated we did it's a bit more actively during Q4 Q1 and the portion of Q2 or so senza then that's a it's been slow down now. These these programs are typically will give a discounts for a period of time. So it can be six months 12 months, even longer and into.
Most so everyday we have some customers that will have an expiry on some level of promotions. They got when he joined the company.
So we would expect that bearing the cold in 19 prices.
Normally we would sit pick up in ARPU are going going into the balance of the year and then with called the 19, we'll see what happens, but I would say just generally dealing with.
Promotions.
I think this quarter would have been a lower point versus what we're going to finish future.
Marketing expense. So we don't disclose the exact number that things would be very precise.
But it's part of the explanation than we had 'em. We had mentioned that in previous calls that both countries would see a higher level of expenses.
During the first six months of the year.
So we do expect a lower amounts in the balance of the year I also want to remind you because it's been a year, but that's a b b last year, when we compare the EBITDA year over year with the previous year. It was up 10% and one of the reason is that we have decreased and marketing expenses, we were changing or.
There are so it was unusually low in the U.S. and Q2, which created the very significant increase in EBITDA, but which hurts a little bit this year with the do it the comparison.
In terms of programming I'm, sorry, I'm in Canada as well as we said on the last call. We expect the ramp up to be more towards Q3, but especially Q whore that again is it without the called the 19 crisis, then we'll see what happens, but normally that's a that was our plan.
In terms of programming costs are so good question listen something that's a evolving right now and I don't have full clarity on it.
But I must say I can play that in the U.S. the weight structured.
There is basic programming costs and there is more price sportswear running in the U.S. that we have been we haven't Canada right now and there are some passthrough charges to the customers. So I do expect that there's going to be some movements. Some will just be a change in the pass through.
And the balance will be more of what we see in Canada. So if our customers are still connector because there is programming and there is some sports that are running as well them. It's a it's saying as usual and to the extent or something or cord shaving on sports or for a period of time until all sports come back.
A normal than we would expect to save some money on the on the content costs.
Thank you.
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So thanks, everyone for participating in today's call. So we're going to be back in July for our third quarter in the meantime feel free to call. This if you have any questions. Thank you.
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