Q3 2025 Cogeco Communications Inc Earnings Call
Today's conference is being recorded.
At this time, I would like to turn the conference over to Mr. Patrice Ouimet, Chief Financial Officer of Cogeco, Inc. and Cogeco Communications, Inc. Please go ahead, Mr. Ouimet.
So, good morning, everyone. Welcome to our third quarter results conference call. So, as usual, before we begin the call, I'd like to remind listeners that today's discussion will include estimates and other forward-looking information.
Good day, and welcome to Cogeco Inc and Cogeco Communications in Q3 2025 earnings conference call. Today's conference is being recorded at this time, I would like to turn the conference over to Mr. Patrice. We met Chief Financial Officer of Cogeco Inc, and Cogeco Communications Inc. Please go ahead Mr. Reman
We ask that you review the cautionary language in the press releases and MD&A issued yesterday, as well as in our annual reports regarding the various risks, assumptions, and uncertainties that could cause our actual results to differ.
And with that, I'll pass the line to Fred Perrin for opening remarks. Thank you, Patrice, and good morning, everyone. We're pleased to share our Q3 results today. We'll be giving you more color on our solid Canadian internet subscriber growth, our strong free cash flow performance, and our Canadian wireless launch. We'll also be sharing insights into our U.S. challenges, and we'll explain why we're optimistic about improvements in the coming quarter. Let's start with our Canadian internet customer growth, which was strong again this quarter. We're quite upbeat about our Canada customer trends going into Q4 and next year, especially as wireless and new Ontario network expansion projects being lit up become new additional contributors to our customer growth.
Speaker Change: So, good morning everyone. Welcome to our third quarter results conference call. So, as usual, before we begin the call, I'd like to remind listeners that today's discussion will include estimates and other forward-looking information. We ask that you review, the cautionary language in the press releases and and DNA issued yesterday as well as in our annual reports regarding the various risks assumptions and uncertainties that could cause our actual results to differ and with that I'll pass
Speaker Change: Pass the line to Fred Bell for opening remarks. Thank you, patio and good morning, everyone. We're pleased to share our Q3 results. Today, we'll be giving you more color on our solid Canadian internet. Subscriber growth. Our strong free, cash flow performance and our Canadian Wireless launch. We're we'll also be sharing insights into our us challenges and we'll explain why we're optimistic about improvements in the coming quarters.
Speaker Change: Let's start with our Canadian internet, customer growth, which was strong again this quarter
Speaker Change: We're quite upbeat about our Canada customer Trends, going into Q4 and next year, especially as Wireless and new Ontario, Network expansion, projects being lit, up, become new, additional contributors, to our customer growth.
Turning over to free cash flow, when we began our three-year transformation last year, we mentioned that we expected significant OPEX and CAPEX synergies from initiatives such as combining our Canadian and U.S. operations, reducing truck roles, consolidating vendors and platforms, and digitizing our sales and service interaction. Less than one year into our transformation, we're pleased to report that our OPEX and CAPEX synergies are tracking well above plan, with significant runway still to go. For this fiscal year in particular, we now expect this to translate into a net CAPEX reduction versus our prior estimate. We're maintaining our investments in key revenue-generating projects, such as network upgrades and extensions, in line with our original plans and with historical trends.
Mentioned that we expected significant Opex and capex. Synergies from initiatives, such as combining, our Canadian and US operations. Reducing truck rolls, consolidating vendors, and platforms and digitizing our sales and service interactions.
Speaker Change: Less than 1 year into our transformation. We're pleased to report that our Opex and capex synergies are tracking well above plan with significant Runway. Still to go
Only a small part of this year's CapEx savings are deferrals to next year. So what you're seeing in terms of CapEx understanding comes mainly from real operational efficiencies and synergies. These synergies will increasingly add to our already strong balance sheet and are putting us well on track to generate approximately $600 million in free cash flow by fiscal 2027.
For this fiscal year, in particular, we now expect this to translate into a net, capex reduction versus our prior estimates. We're maintaining our investments in key Revenue generating projects, such as Network upgrades and extensions in line with our original plans. And with historical trends,
Speaker Change: Only a small part of this year's capex. Savings are deferrals to next year. So, what you're seeing in terms of capex, understanding comes mainly from real operational, efficiencies and synergies
We're poised to continue to raise our dividend and lower our debt, which stood at 3.1 times debt to adjusted EBITDA by the end of the third quarter.
Speaker Change: These synergies will increasingly add to our already. Strong balance sheet and are putting us well on track to generate approximately 600 million dollars in free, cash flow by fiscal 2027.
Speaker Change: We're poised to continue to raise our dividend and lower our debt which stood at 3.1 times debt to adjust today by the end of the, the third quarter.
Turning over to Canadian Wireless, we're ready to go. We already have an initial cohort of users on the service and will broaden sales in 12 markets over the coming weeks ahead of a full commercial launch later this fall. We won't be sharing offer details today as we want to announce it to our customers first. However, we can share the following. The product will be exclusive to customers also buying Wireline Widow. We'll target low to mid data users and we'll provide a time-limited launch bonus for the first wave of customers.
Turning over to Canadian Wireless. We're ready to go.
Speaker Change: we already have an initial cohort of users on the service and will broaden sales in 12 markets over the coming weeks ahead of a full commercial launch later this fall
Speaker Change: We won't be sharing offer details today as we want to announce it to our customers first. Uh, however, we can share the following
Speaker Change: The product will be exclusive to customers also, buying W line with us.
Speaker Change: We'll Target low to mid data users and we'll provide a Time, limited launch bonus for the first wave of customers joining us.
In the U.S., our Q3 subscriber metrics were impacted by an uptick in competition in three of our states, as mentioned in our last earnings call, and by internal execution gaps, which have now already been addressed.
Speaker Change: In the US, our Q3 subscriber metrics were impacted by an uptick in competition, in 3 of our states, as mentioned in our last earnings. Call,
The ongoing transformation of our sales and marketing capabilities, combined with the fact that some of our competitive headwinds were temporary in nature, make us confident that Q3 was a low point and that we should see gradual improvements in U.S. customer metrics over the coming quarter. In this coming Q4, more specifically, we expect U.S. customer metrics for residential intranet segments, by far our largest, to be better versus Q3.
Speaker Change: And Buy internal execution gaps which have now already been addressed.
Speaker Change: The ongoing transformation of our sales and marketing capabilities combined with the fact that some of our competitive, headwinds were temporary in nature.
Speaker Change: Make us confident that Q3 was a low point.
Speaker Change: And that we should see gradual improvements in Us, customer metrics over the coming quarters.
We will be doing a large one-time disconnect in the bulk segment during the fourth quarter, but our predictable bulk sales pipeline shows that the segment will return to growth in the following quarter. We're lowering our revenue outlook for the year as a result of the US pressures, but this decline is offset by operating efficiencies as a result of our transformation program. Therefore, we're maintaining our original Adjusted EBITDA guidance for the year.
Speaker Change: In this coming Q4 more specifically, we expect us customer metrics for our residential internet segment, by far our largest, uh, to be better versus Q3.
Speaker Change: We will be doing a large 1-time disconnect in the bulk segment during the fourth quarter.
Speaker Change: But our predictable, bulk sales pipeline shows that the segment will return to growth in the following quarters.
Speaker Change: We're lowering our Revenue outlook for the year as a result of the US pressures. But this decline is offset by operating efficiencies as a result of our transformation program.
We're also raising our free cash flow guidance thanks to the transformation-related CAPEX synergies I mentioned earlier.
Speaker Change: Therefore, we're maintaining our original adjusted ebit the guidance for the year.
Patrice will share more information on our Outlook later in this call.
Speaker Change: We're also raising our free cash flow guidance. Thanks to the transformation related capex synergies. I mentioned earlier.
Speaker Change: Patric will share more a deep information on our Outlook later in this call.
At Cogeco Media, the radio advertising market continued to face challenges, but revenue increased during the quarter, helped in part by ongoing growth in our digital advertising solutions and strong listener engagement. Our leading radio stations have continued to achieve strong market share in their target markets from recent audience surveys.
Speaker Change: at kosoko media, the radio advertising, uh, Market continue to face challenges, uh, but Revenue increase during the quarter helped in part by ongoing growth, in our, uh, digital Advertising Solutions and strong listener engagement,
Speaker Change: Our leading radio stations have continued to achieve strong market, share in their target, markets from recent audience, surveys.
Before I pass it over to Patrice for more details about our results, please allow me to comment on the current Canadian regulatory environment. The CRTC is stubbornly maintaining a broken TPIA or resale regime that has completely failed to meet its original objective to help new entrants get into the market. Today the regime is mainly used by the big three Canadian telecom companies to get even bigger.
Speaker Change: Before I pass it over to Patrice for more details about our results. Please allow me to comment on the current Canadian regulatory environment.
Speaker Change: The crtc is stubbornly, maintaining a broken tpia or resale regime that has completely failed to meet its original objective, to help new entrance, get into the market.
Speaker Change: Today the regime is the regime is mainly used by the Big 3 Canadian telecom companies to get even bigger.
On June 20th, the CRTC rejected our appeal to fix the issue. by disqualifying the big three Canadian telecom companies from leveraging. By doing so, The CRTC is misusing its power and is favoring telecom giants at the expense of regional players such as Cogeco. It's like forcing regional airlines to let national airlines use their planes. It just doesn't make any sense.
Speaker Change: By doing so.
Speaker Change: The crtc is misusing, its power and is favoring Telecom Giants at the expense of regional players such as kojico.
Speaker Change: It's like forcing Regional Airlines to let National Airlines, use their planes. It just doesn't make any sense.
As you can see from the announcements that we're making today, including the launch of a completely new wireless service for Canadians, the first major wireless launch in this country in over 10 years. Cogeco intends to remain a growing competitive force in this country.
Speaker Change: As you can see from the announcements that we're making today, including the launch of a completely new, wireless service for Canadians. The first major Wireless launched in this country and over 10 years.
Speaker Change: Cogeco intends to remain a growing competitive force in this country.
We won't let the CRTC stop us from providing more choice to Canadians and are prepared to fight for the competition and investments that Canada We urge the federal cabinet to be as passionate about competitive investments and economic growth as we are.
Speaker Change: We won't let the crtc stop us from providing more choice to Canadians and our prepared to fight for the competition and Investments that can Canada needs.
Canadian Telecom has been held back by this bad policy and the government needs to act now. That is over.
Speaker Change: We urge the federal cabinet to be as passionate about competitive, Investments, and economic growth as we are,
Canadian Telecom has been held back by this bad policy and the government needs to act now.
Thank you, Fred. In Canada, Cogeco Connections revenue declined by 1.8% in the third quarter, driven by a lower revenue per customer due to fewer video and wireline phone subscribers and a competitive pricing environment, partly upset by a growing internet subscriber base, which added 9,400 new internet subscribers during the quarter. Adjusted EBITDA declined by 1.3% in constant currency due to the lower revenue being partially offset by lower operating expenses driven by cost reduction initiatives and operating efficiency.
Speaker Change: At this over to you.
Fred Bell: Thank you Fred in the Canada Co connections Revenue declined by 1.8% in the third quarter driven by a lower revenue for customer due to 4 fewer video and War line, phone, uh, subscribers and a competitive pricing environment. Partly offset by a growing internet subscriber base.
Fred Bell: Which added 9400 new Internet subscribers during the quarter.
We added 8,200 homes passed during the quarter under our Network Expansion Program, including those through the Ontario Subsidized Program. In the U.S., Breedline's revenue declined by 6.6% in constant currency due to the cumulative decline in the subscriber base over the past year, especially for entry-level services and non-internet services. We have seen a decline of 10,400 internet subscribers during the quarter. Adjusted EBITDA declined by 3.7% in constant currency due to lower revenue, offset in part by cost reduction initiatives and operating efficiency.
Fred Bell: adjusted Abida declined by 1.3%, in constant currency due to the lower Revenue being partially offset by lower operating expenses driven by cost reduction initiatives and operating efficiencies
We added 8,200 homes passed during the quarter under our Network expansion program, including those through the Ontario subsidized program.
In the US Breeze, lines Revenue declined by 6.6%, in constant currency due to the cumulative, decline in the subscriber base, over the past year, especially for entry-level services, and none internet services.
Fred Bell: We have seen the decline of 10,400 Internet subscribers during the quarter.
Fred Bell: adjusted at the D declined by 3.7% in constant currency due to lower Revenue offset in part by cost reduction initiatives and operating efficiencies
Turning to our consolidated numbers for Cogeco Communications, at the consolidated level, revenue declined by 4.1% and adjusted EBITDA declined by 2.4%, both in constant current. It is mainly due to the revenue pressure in the U.S. and strong execution on operating efficiency. Diluted earnings per share declined by 1.8% in reported currency due to lower EBITDA and other elements partially offset by lower restructuring.
Fred Bell: Turning to our Consolidated numbers for Cogeco Communications. At the Consolidated level Revenue declined by 4.1% and adjusted. Every day I declined by 2.4% both in constant currency it is mainly due to the revenue pressure in the US and strong execution on operating efficiencies
Fred Bell: diluted earnings per share, declined by 1.8%, in reported currency, due to lower Abida, and other elements partially offset by lower restructuring costs,
Capital intensity was 17.2% down from 22.4% last year due to lower spending in both Canada and the U.S., resulting from reorganizational efficiencies related to the combination of our Canadian and U.S. operations. Also from improved inventory management and the timing of network expansion projects.
Fred Bell: Capital intensity was 17.2% down from 22.4% last year due to lower spending in both Canada and the US resulting from reorganization efficiencies related to the combination of our Canadian and US operations.
Excluding network expansion projects, capital intensity was 15.4% compared to 19.2% last Free cash flow and constant currency increased by 61.5% largely due to lower CapEx and lower restructuring costs in the quarter. Our net debt-to-adjusted EBITDA ratio was 3.1 turns at the end of the quarter, an improvement from 3.4 in Q2. This reduction in the leverage ratio was the result of lower net debt and the positive impact of exchange rates on our U.S. denominated debt.
Fred Bell: Also from improved Inventory management and the timing of network expansion projects.
Fred Bell: Excluding Network expansion projects. Capital intensity was 15.4% compared to 19.2 last year.
Fred Bell: free cash flow and constant currency, increased by 61.5%, largely due to lower capex, and lower restructuring costs in the quarter,
We continue to target a net debt to EBITDA ratio in the lower three terms. And finally, we have declared a dividend of 92.2 cents per share. At Cogeco, Inc., revenue in constant currency decreased by 3.9% and adjusted EBITDA declined by 2%, with growth in radio partially offsetting declines at Cogeco Communications. The media operations revenue increased by 4.4% due to growth in our digital advertising revenue. And the dividend of 92.2 cents per share was also declared in the quarter.
Fred Bell: Our net debt to adjust the debit. Our ratio was 3.1 turns. At the end of the quarter and improvement from 3.4 in Q2, this reduction, in the leverage ratio was the result of lower in that debt and the positive impact of exchange rates on our US denominated debt
Fred Bell: we continue to Target and add that to Aid our ratio in the low 3, turns range
Fred Bell: And finally, we have declared a dividend of 92.2 cents per share.
Speaker Change: At Co Inc.
Speaker Change: Revenue in constant currency decreased by 3.9% and adjusted debit da declined by 2% with growth in radio, partially offsetting declines at Cogeco Communications. The media operations Revenue increased by 4.4% due to growth in our digital advertising Revenue.
And the dividend of 92.2 cents per share was also declared in the quarter.
Now turning to financial guidelines for Cogeco Communications Fiscal 2025, we are revising our annual guidelines, which we first provided to investors in October to better, to basically reflect competitive pressures impacting our top line. on the one hand, and the transformation OPEX and CAPEX synergies, which are ahead of plan on the other hand. On a constant currency basis, we expect a low single-digit decline in Fiscal 25 revenue, resulting mainly from an uptick in competition in the U.S. Fiscal 2025 Adjusted EBITDA is anticipated to remain stable year-over-year as per our original guidance, since transformation-related over-delivery and cost reductions is offsetting most of our revenue headway.
Speaker Change: Fiscal 2025 we are revising our annual guidelines, which we first provided to investors in October, to better uh to basically reflect competitive pressures, impacting our Top Line.
Speaker Change: On 1 hand and the transformation Opex and capex synergies, which are ahead of plan on the other hand.
On a constant currency basis, we expect a low single digit decline in fiscal. 25 Revenue resulting mainly from an uptick in competition, in the US.
Speaker Change: Fiscal 2025 adjusted ebida is anticipated to remain stable year-over-year as per our original guidance since transformation related over delivery in cost. Reductions is upsetting most of our Revenue headwinds
Net capital expenditures are now anticipated to be between $600 million and $650 million compared to $650 million to $725 million in our prior guidance. Net capital expenditures excluding network expansions are now, sorry, related to network expansions, are now expected to be between $110 and $150 million compared to $140 and $190 in our prior guidance. We are increasing our free cash flow guidance with and without network expansion capex to stable levels versus the prior year, which is an improvement from our prior guidance, which anticipated a decline between 0 and 10%.
Net. Capital expenditures are now anticipated to be between 600 and 650 million compared to 650 to 725 in our prior guidance.
Net capital expenditures, excluding Network expansions are now, uh, sorry related to uh, Network expansions on our expense. Uh, expected to be between 110 and 150 million compared to 140 and 190 in our prior guidance.
Speaker Change: We are increasing our free cash flow, Guidance with. And without network expansion, capex to stable levels versus the prior year, which is an improvement from my prior guidance, which anticipated the decline between 0 and 10%.
As it relates to the upcoming Q4. We expect consolidated revenue to be lower than the third quarter results that we are reporting today due to pressure in the U.S. We expect Adjusted EBITDA to be similar to slightly better to what we generated in Q3 with our Canadian operations being higher and our U.S. operations being lower than in Q3. Also, when we compare Q4 results to last year, one should note that we had an uptick in our U.S. EBITDA last year due to the realization of cost reduction measures as well as year-end adjustments. which will make it for a difficult comparison.
Speaker Change: As it relates to the upcoming Q4.
Speaker Change: We expect Consolidated Revenue to be lower than the third quarter results that we are reporting today. Due to pressure in the US.
Speaker Change: We expect adjusted debit data to be similar, to slightly better to what we generated in Q3 with our Canadian operations, being higher in, our us operations being lowered and in Q3
Speaker Change: Also, when we compare Q4 results to last year, 1 should note that we had an uptick in our us ebida. Last year due to the realization of cost reduction measures as well as year-end adjustments, which will make it for a difficult comparison.
Below the EBDA line, at a consolidated level, we expect acquisition, integration, and restructuring costs to be similar to Q4 of last year at around $10 million, which incorporates operational cost efficiency measures aligned to our three-year transformation program. And our Q4 financial expense is expected to be about $15 million less than in Q3.
Speaker Change: Below the at the line at the Consolidated level. We expect acquisition integration and restructuring costs to be similar to Q4 of last year at around 10 million, which incorporates operational cost efficiency measures aligned to our 3 year transformation program.
Nr24 Financial expense is expected to be about 15 million less than in Q3.
Finally, at Cogeco, Inc., we have made the same revisions to our fiscal 2025 financial guidelines as those for Cogeco Communications.
And now, Fred and I will be happy to take your questions. Thank you.
Speaker Change: Finally at Cogeco Inc, we have made the same revisions to our fiscal 2025 Financial guidelines as those uh for Cogeco Communications and now Fred and I will be happy to take your questions.
And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star followed by the number two.
With that, our first question comes from the line of Drew McReynolds with RBC. Please go ahead. Yeah, thanks very much and good morning.
Speaker Change: Thank you. And ladies and gentlemen, we will now begin the question and answer session to ask a question. You may press the star, followed by the number 1 on your telephone keypad. If you're using a speaker-phone, please speak of your handset before pressing any keys to withdraw. Your question, please press the star followed by the number 2 with that. Our first question comes from the line of Drew MC. Renolds with RBC, please go ahead.
Patrice just for a quick clarification on on Q4. I missed your revenue commentary. If you can just repeat that, that'd be great. Yes, sir. Absolutely. So let me just. Get my documents again. So basically, when we, I'm sorry, hold on one second. Okay. So when we look at Q4, basically we expect that the revenue will be lower than the Q3 results we just issued. Actually, the exchange rate is not changing much as well between the two quarters. And you did get the information on the EBITDA, I presume? Yes, I did. No, that's great. I just missed the revenue piece.
Speaker Change: Yeah, thanks very much. Uh and good morning. Um Patrice just uh sorry a quick clarification on on Q4. Um I I missed your Revenue commentary if you can just uh repeat that. That'd be great.
Speaker Change: Yes, uh, absolutely. So let me just
Speaker Change: Get my documents again.
Speaker Change: Um so basically, when we uh I'm sorry, hold on, 1 second.
Speaker Change: Okay, so when we look at uh Q4 uh basically we expect that the revenue will be lower than the Q3 results. We just uh issued actually the exchange rate is not changing much as well between the the 2 quarters.
Speaker Change: Um, and you did get the information on the Eid. I presume
Thanks for that.
Speaker Change: Yes, I did know. That's uh, that's great. I just missed the revenue piece. Um, thanks for that. Um,
On the wireless side, just a couple from here.
In the U.S., I think you launched wireless back in 2024. You know, I know you're not yet kind of disclosing much granularity around it, but in terms of the intended impacts that wireless is having on the core cable business, obviously there's some bigger operational and competitive challenges in the U.S., but what do you see specifically in terms of how wireless is benefiting the cable business underneath the hood?
Speaker Change: On the wireless side, uh, just a couple for me here. Um, in the US, I think you, you launched Wireless uh, back in 2024. Um, you know, I know you're not yet kind of disclosing much granularity around it, but in terms of the intended impacts that wireless is having, uh, on the core Cable business. Um, obviously there's some bigger operational and and competitive challenges, uh, in the US. But what, what are you seeing specifically in terms of how how Wireless is?
Speaker Change: Is, is benefiting, uh, the Cable business, uh, underneath the hood.
Hi, Drew, it's Fred. We're not at a stage where it's yet material on the P&L, neither on cost nor on the upside. That was planned. When you look at the other cable codes in the U.S. and how long it took them for wireless to benefit their P&L, it takes a few years. However, they're now at a stage where it's a material needle mover to their overall P&L, and we expect it will be the same for us.
At a stage where it's yet, material on the p&l, neither on cost, nor nor on the upside, that was planned. When you look at the, the other cable codes in the US and how long it took them for wireless to benefit their p&l, it it takes a few years, however, they're now at a stage where it's a material needle, mover, to their overall pnl, and we expect, it will be the same for us over time.
Okay, that's great.
And. Just on the transformation, you know, clearly, Doing a great job of mitigating the revenue pressure with some pretty good margins, both sides of the border this quarter.
Okay. Okay, that's great. And
Speaker Change: um, just on the transformation, you know, clearly
I'm going to assume you're going to reserve any fiscal 2026 commentary to next quarter when you give guidance. But can you kind of directionally help us on, you know, how margins look as we head into fiscal 2026 and 2027, maybe asked a different way. Are there further cost efficiencies under the transformation that you expect to realize? And I understand the margin is not disconnected to the revenue pressure, but just would love to hear your thoughts on on margin trending.
Speaker Change: Doing a a great job of mitigating, the revenue pressure, um, with some pretty good margins, uh, both sides of the Border this quarter. Uh, I'm going to assume you're going to reserve any fiscal 2026 commentary to next quarter when you give guidance, but can you kind of directly help us on?
Speaker Change: You know how margins uh look as we you know, head into a fiscal 2026 and 2027. Um maybe asked a different way. Um are there further cost efficiencies under the transformation that you expect to realize?
And I understand the margin is not disconnected to the revenue pressure. Um but just would love to to hear your thoughts on on margin trending here.
Hi, it's Fred again. I'll start answering a bit more conceptually and I'll pass it over to Patrice on margins more specifically. When you look at our three year transformation program, it was always planned that the beginning of the three years would be more front loaded on cost reduction, especially OPEX and CAPEX. What we see is that not only is that happening, but it's happening ahead of expectations for us versus our original plan and with more runway to go, especially as more initiatives come in and also as AI kicks in over time.
What hasn't fully kicked in yet in our transformation is a transformation of our sales and marketing capabilities, especially in the US. The plan was always that that would kick in in year two of the transformation, which is about to begin, and we can elaborate on that further. But bottom line is we do see a runway in more aggressive go to market in the US and we expect this will come. I don't know if you want to add to Marge's.
Speaker Change: Hi. It's Fred again. Uh I'll start answering a bit more conceptually and I'll pass it over to, to Patric on margins. More specifically, when you look at our 3 year transformation program, it was always planned at the beginning of the 3 years would be more front-loaded on cost reduction, especially Opex and capex. What we see is that not only is that happening, uh, but it's happening ahead of expectations for US versus our original plan. And with more Runway to go, uh, especially as more initiatives come in and also, as AI kicks in over time, what hasn't fully kicked in yet in our transformation? Is the transformation of our sales and marketing capabilities? Uh, especially in the US. Uh, the plan was always that that would kick in in year 2 of the transformation, which is about to begin, uh, and we can elaborate on that further. But bottom line is uh, we do see, uh, run.
I think it's a bit early to talk about the next two years, but definitely there is more in store in terms of cost optimization and also revenue generation using the same cost base. So we do see opportunities to improve this again. We've had a significant increase, especially in the U.S. versus last year. It doesn't mean we're going to have the same level of increase every year, because that would be a large one. But we do expect further increases.
Way in more aggressive go to market in the US and we expect this will come over the coming quarters. I don't know if you want to add to margins that, that just, yeah, I think it's a bit early to talk about the the next 2 years. Uh, but definitely there's more in store in terms of, uh, cost optimization and also Revenue generation, uh, using the same cost base. So, uh, we do see opportunities to improve this again. Um, we've had a significant increase especially in the US versus last year,
Another question you could be asking is also for Q4 that's coming. We're not seeing the Q3 we just did in Canada and the U.S. as a high point. We do expect Q4 to continue to deliver good markets.
Speaker Change: Doesn't mean we're going to have the same level of increase every year because that, that would be. Uh, that's a large 1. Um, but we do expect further increases. Um, another question you could be asking is also is also for Q4 that's, uh, coming. Uh, we're not seeing, uh, the Q3 we just, uh, did in Canada, and the US has a high point. We do expect Q4 to continue to, uh, to deliver, uh, good margins.
Okay, 1 last 1 for me, thank you for that on Patrick or Frederick.
Maybe I missed this in your opening remarks. The transitional. Language or commentary in your prepared remarks in terms of the Q3 impact in the U. S. With competitive intensity, and obviously the downtick in in net losses, just just. Can you repeat what's transitional about that and and what changes here in Q4 versus Q3?
Speaker Change: Okay, uh, 1. Last 1 for me, thank you for that um on uh in Petri or or Frederick. Maybe I missed this in your opening remarks. The transitional
Speaker Change: Um, language or commentary, and your prepared remarks in terms of the Q3 impact in the US.
Yeah, I can start. As we mentioned on the last earnings call, Drew, we were seeing an uptick in competition in three of our states in which we operate in particular. Some of it is likely temporary in nature. So sometimes it was short-term promotional blitzes or a competitor did network upgrades and wanted to do some initial promotional activity around that. So some of the competitive uptick is more temporary in nature.
Speaker Change: Uh, with competitive intensity and and obviously the downtick in in net losses. Um, just just can you repeat what's transitional about that and and what changes here in Q4 versus Q3?
There were also some fix the basic things internally during the quarter, which we've already addressed. More broadly, we see a lot of upside in our sales and marketing execution in the US. There are some sales channels which are still scaling up, which were under-indexed in the past. There's lots of room to improve our pricing and our pricing strategy. Retention activities are being optimized. So a lot of the things that we've been doing in Canada that results in the good PSU trends you've seen in Canada are being replicated in the US as well now and more.
Speaker Change: Yeah, I can start uh, as we mentioned on the last earnings call, uh, Drew. We were seeing an uptick in competitions uh in 3 of our states, in which we operate in particular. Uh, some of it is likely temporary in nature. So sometimes it was short-term promotional uh blitzes or a competitor did Network upgrades and wanted to do some uh initial promotional activity around that. So so some of the competitive optic is more temporary in nature. Uh, there were also some fixed the basic
So you'll see more things coming from us over the coming months on US go-to-market. Net-net, where that leads us is in Q4, we already expect a visible improvement in our residential internet trends versus Q3. There is a one-time bulk disconnect that will cloud things a little bit, but we already see the sales pipelines are predictable. So we see bulk returning to growth in Q1 and beyond, and we see residential continuing to improve.
Months on us, go to market, net net. Where that leads us is in Q3. In Q4, we already expect a visible improvement in our residential internet Trends versus Q3, there is a 1-time, bulk disconnect that will Cloud things a little bit, but we already see the sales pipelines are predictable. So we see bulk returning to growth in Q4 and q1 and Beyond. And we see residential continuing to improve as well.
Okay, understood. I'll pass the line.
Thank you very much. Thank you.
Speaker Change: Okay, I understand I'll pass the line. Thank you very much.
Speaker Change: Thank you.
And your next question comes from the line of Arvinda Galafatige with Kanakordig Ingenuity. Please go ahead. Good morning. Thanks for taking my questions.
And your next question comes from the line of arvind. The goal of fatigue with kakore the continuity. Please go ahead.
Just sticking with the U.S. for a second, you know, last quarter you were able to actually sort of get back to, you know, call it stable EBITDA in the U.S. even with a 4.5 percent constant currency decline in top line. Obviously, this time the decline is a little bit steeper. How should we think of that equation? I mean, even with some revenue pressure, the ability to stabilize EBITDA as we – in the U.S. as we look forward in terms of, you know, basically trying to understand that dynamic of operating leverage, recognizing that there may be some cost items moving around because of the wireless launch in the U.S.
as well.
Just a little bit more color on that. So, obviously, we talked about stabilizing the PSUs and all the work we're doing basically on the revenue front, that's important, it obviously takes a bit of time to make it work, but we're already seeing some benefits in the Q4 that we're already fairly advanced in. So, if we take a longer-term view, obviously, we do want to stabilize the US. I did mention that in Q4 of this year, there will be some pressure, especially when we look at the uptick in EBITDA of last year, so it will be a more difficult comp for the US in Q4, but past that, obviously, between what we're doing on revenue and also a lot more potential on the cost side as well, definitely, the idea is to stabilize.
Arvind: Good morning. Thanks for taking my questions. Um, just sticking with the US for a second, um, you know, last quarter you were able to actually sort of get back to, um, um, you know, call it stable at the US, even with a 4 and a half percent constant currency decline in Topline. Obviously, this time, the, the decline is a little bit steeper, um, how should we think of that equation? I mean, even with some Revenue pressure, the ability to to stabilize eBid dies. We uh in the us as we look forward. Um, in terms of, you know, basically trying to understand that Dynamic of operating leverage recognizing that there may be some cost items moving around because of the wireless launched in the US as well. Just a little bit more color on that, please.
Now, it can be a bit erratic by quarter for different reasons, and we'll talk more about the upcoming year when we meet in October, but the goal is to have definitely a better year-over-year comparison on EBITDA versus what we are providing today in the US.
Arvind: Sure. Sorry vinda. Um, so obviously, uh, we talked about stabilizing, uh, the psus and all the work we're doing basically on the revenue front. That's, uh, that's important. It obviously takes a bit of time to, uh, to, uh, make it work. But we're already seeing some benefits, uh, in the Q4 that we're already, uh, uh, fairly advanced in. Um, so, if we take a, a longer term view, obviously, we do want to stabilize, uh, the US, I did mention that in Q4 of this year, um, there will be some pressure, especially when we look at the uptick in Abu last year. So, we'll be more difficult comp for the US and Q4. But past that, uh, obviously between what we're doing on revenue and also uh, a lot more, uh, potential on the cost side as well. Uh, definitely the idea is to, uh, is to stabilize. Now it can be a bit erratic by uh, by quarter for different reasons. Uh, and we'll talk more.
Arvind: About the upcoming year when we need in October. But, but the goal is to be, uh, to to, to have
Yeah, and if I can add from an operational transformation perspective, we still see lots of runway, both in cost reduction as well, which is performing ahead of plan so far, and we expect this will continue, as well as go-to-market, as I was mentioning to Drew earlier. Our go-to-market was quite under-optimized in the US, and we're starting to transform that.
Speaker Change: A uh, definitely, uh, a better, uh, year-over-year comparison on evida versus what we are, uh, uh, providing today in the US. Yeah. And if I can add from a, an operational transformation perspective, we still see lots of Runway. Uh, both in cost reduction, uh, as well uh, which is performing ahead of plan. So
As Patrice said, Q4 will be tough, given year-on-year comps, but beyond that, you'll see more in Okay, thanks for that. And then just on Canada, obviously, we continue to see good internet loading numbers, especially in the backdrop of what we see in the industry. Has that mix of the net ads changed much? Even if you look at it year over year, I know that it's a mix of perhaps some improvement in legacy, Oxio, your fiber expansion into the out-of-footprint areas. Has that kind of like the trio of the drivers, the mix, has that altered much through the course of the year or maybe year over year?
Far. And we expect this will continue as well as as Revenue as as go to market, as I was mentioning to, to Drew earlier, our go to market was quite under optimized in the US. And, and we're starting to transform that. Uh, as Patrick said, uh, Q4 will be, will be tough given year-on-year comps. Uh, but beyond that, you'll see more in our guidance, but we still see lots of Runway, both in cost and Revenue.
Speaker Change: Okay, thanks for that and then just on Canada. Uh, obviously we continue to see good uh, in an app loading numbers espec in the backdrop of what we see in the industry. Um, has that mix of the, the net adds changed much, even if you look at it year over year, I know that it's a mix of perhaps some improvement in Legacy axio. Uh, but your fiber expansion into uh, into uh, you know, the out of footprint areas. Um, has that kind of like the trio of the drivers? The mix has that altered much through the course of the year or maybe year over year.
Yeah, it varies from quarter to quarter, Aravinda, but over time, we're still in a situation where both the Cogeco and the Oxio brands are contributors to our PSU growth. The only visible mixed change that's material is a shift from Oxio out of footprint to Oxio on our own network. So most of our Oxio sales are on our own network now, which comes at a good margin.
Speaker Change: the uh,
Speaker Change: it quarter uh, to quarter arvinda. Uh, but over time, uh, we're still in a situation where both the kosher Co and the axio brands are contributors to our PSU growth. The only visible Mix Change. Uh, that's material is a shift from axio out of footprint to axio on our own network. So most of our axio sales are on our own network now, which comes at a good Mark.
And moving forward, as I mentioned in the intro remarks, we're quite upbeat because in addition to the good trends we're seeing right now, there are two more upsides coming in. Some new network expansion projects being lit up as well as wireless, which will kick in over time, but will take longer. But net-net, we're quite upbeat about Q4 next year for Canada.
Speaker Change: And and moving forward, as I mentioned, in the intro, remarks were quite upbeat because in addition to the good Trends we're seeing right now, there are 2 more upsides coming in. Uh, some new network expansion projects being lit up, uh, as well as Wireless, which will kick in over time that will take longer. Uh, but net Network quite upbeat about Q4 next year for Canada.
Okay, thanks for that.
And last question on the guidance. When I kind of sort of try to reconcile the free cash flow guidance change and the CapEx guidance change, I mean, the CapEx decline is a lot more than the free cash flow improvement if I just work on midpoint. Is there anything more there that we should be aware of?
Maybe Patrice? When you look at CapEx for Q3, it was quite low. Obviously, we don't manage CapEx on a quarterly basis. We manage it on an annual basis. We do expect Q4 to be much heavier in CapEx than what we saw in Q3 and also versus last year. That being said, there is a benefit for the full year, and that is mainly related to the benefits of the reorganization we did. We were a lot more efficient with CapEx, so that's why it's a net reduction for the full year, but not as much as what we saw in Q3.
Speaker Change: That and last question, uh, on the guidance, the when I kind of sort of try to reconcile the free cash flow, guidance change in the capex guidance change. I mean, the the capex, uh, decline is, is a lot more than the free cash flow Improvement. If I just work on midpoint. Um, is there any anything more there that we should be aware of maybe Patrice?
Patrice Reman: Yeah. So
Patrice Reman: It was quite low.
That's why we did increase free cash flow as well. One question you could have on this is whether some CapEx is being deferred to next year, and there's very little of that in the network expansions we're doing. There are certain parts of it that we don't fully control in terms of getting the permits, but it's quite small. Hopefully, I answered your question. Yes, yes. Thank you.
Patrice Reman: Uh, obviously, we don't manage capex on a quarterly basis. We manage it on an annual basis. Uh, we do expect you 4 to be much heavier in capex than what we saw in Q3 and also versus last year that being said, there is a benefit for the full year and that is mainly related to, uh, to the benefits of their reorganization. We did were a lot more efficient with the capex. So that's why it's a net reduction for the full year but not as much as what we saw in Q3. Um, and uh, yeah, so we, uh, we, that's why we, uh, we did increase, uh, free cash flow as well. Um,
1 question you could have on this is uh, whether some capex is being deferred to, uh, next year. And there's very little of that in the network. Expansions we're doing there are certain parts of it that we don't fully control in terms of getting the permits. Uh, but it's uh, it's quite small. So hopefully I answered your your question.
I'll pass the line.
Yes, yes, thank you. I'll uh I'll pass the line.
And your next question comes from the line of Stephanie Price with CIDC. Please go ahead.
Speaker Change: All right, thank you. And your next question comes from the line of Stephanie.
DC, please go ahead.
Hi, good morning. Congratulations on the announcement of the Canadian wireless launch. I'm curious if you could give us any more details around how aggressive you expect to be in terms of pricing as you enter the market, and how you kind of think about the environment here for Canadian wine. Sure. We take note, Stephanie, of a recent stabilization in wireless pricing in the industry. Our wireless product will be exclusively offered to our wireline customers, so it's not a strategy to go national or anything like that. You know, we're a rational player.
Speaker Change: Hi, good morning, congratulations on the announcement of the Canadian new wireless launch. Just curious if you could give us any more details around how aggressive you expect to be in terms of pricing as you enter the market. Um and and how you kind of think about the environment here for Canadian Wireless.
Of course, when you launch a new service, there can always be a time-limited launch offer, but that's just what it is.
Speaker Change: Sure. Uh, we take note Stephanie of recent stabilization, uh, in Wireless pricing in the industry. Uh, our wireless product will be exclusively, uh, uh, offered to our W line customers. So it's, it's not a strategy to go National or anything like that. Uh, you know, we're, we're rational player. Uh, of course, when you launch a new service, they can always be a time, limited launch offer, but that's just what it is. A Time limited launch offer.
Thank you.
And then maybe just in terms of capital allocation, Patrice, you mentioned you're continuing to target a low three-times net debt number. It looks like you're about there now.
I'm just curious how you think about leveraging capital allocation going forward. Sure. So, we were helped a little bit by FX this quarter because the debt moves faster because it's mark-to-market than the EBITDA, which takes a year to run through. If you were to use the same exchange rate for the full year, you'd be at 3.2 instead of 3.1 in a quarter. We do expect to be around there next quarter at 3.2 in Q4, so it's going to go up a little bit, but that should be FX, assuming we know where the FX will be in a couple of weeks.
Speaker Change: Great, thank you. And then maybe just in terms of capital allocation Patrice. You mentioned, you're continuing to Target a low 3 times. Net debt. Uh number looks like you're about there now. I'm just curious how you think about about leveraging Capital allocation going forward.
And then, fast forward into next year, we should normally be at around three times at the end of next year.
Patrice Reman: Sure. So um we were helped a little bit by FX this quarter because the debt moves faster because it's Mark to Market uh than the Abida which takes a year to run through. If you were to use the same exchange rate for the full year you'd be at 3.2 instead of 3.1 and a quarter. Um we do expect to be around their next quarter and a 3.2 in Q4. So it's going to go up a little bit but that that should be FX uh assuming we know what the FX will be in in a in a couple of weeks.
So, in terms of capital allocation, we normally increase our dividends in Q4, so that's something we'll come back to the market in October. As you know, our payout ratio is quite low at around 30%, so we have capacity to continue to increase the dividend. We've done share buybacks in the past.
We're not in the market right now. We don't have a live program, but at one point, that's something I'm sure we'll want to revisit as we attain our target leverage. And we will also see at that point if that target leverage is still the right one at three times, but it has been like that for many years.
Uh, and then, uh, fast forward into next year. We should normally be at around 3 times, uh, at the end of next year. So in terms of capital allocation, um, we normally increase our dividends in Q4, so that's something we'll come back to the market. Uh, uh, in October. As, you know, our payout ratio is quite low at, uh, around 30%. So we have capacity to continue to increase the dividend. Um, we've done share Buybacks in the past. Uh, we're not in the market right now. We don't have a high program but at 1 Point, that's something I'm sure we'll want to revisit as we attained our uh, our Target leverage and we will also see at that point. If that Target Leverage is, is the still the right 1 at 3 timeslot?
Patrice Reman: Great. Thank you.
And comes from the line of Matthew Griffiths with Bank of America, please go ahead. Hi, good morning. Thanks for taking the question.
Then comes from the line of Matthew gupit with Bank of America. Please go ahead.
So my first one is just on the transformation savings. It's obviously you're running ahead of your plan, but have you identified kind of greater opportunities than you initially expected, or is this entirely the case that it's just the same amount of savings are just coming earlier and the total bucket of savings, both from costs and your planned kind of sales initiatives is the same as it was initially?
Hi, good morning. Thanks for taking the question. So um, my first 1 is just on the transformation uh savings. Uh, it's the obviously you're running ahead of your plan, but have you identified kind of Greater opportunities than you initially expected? Or is this entirely the case that it's just the, the same amount of savings are just coming early and the total bucket of savings both from costs and your planned kind of, you know, sales initiatives is the same as it was initially.
Hi, Matthew. It's Fred. We've identified greater savings on both APEX and CAPEX. The CAPEX being particularly material this quarter, as you can see, but but also.
Uh, on both Opex on both Apex Opex and capex. Uh,
And is this something maybe when you give your guidance next quarter that you're going to size for the market what you expect? Because I know initially as you're launching the initiative, maybe there was a little reluctance to kind of, you know, stick a marker in the sand. But are we getting to the point maybe in the next quarter where there'll be some sort of milestones that we can, you know. For Doc, for the better word, judge your progress again.
Uh, the capex, uh, being particularly material, uh, Discord as you can see. But but also on topics,
And is this something? Maybe when you give your, uh, guidance next quarter that you're going to size for the market. What you expect? Because I know initially as you're launching the initiative, maybe there was a little reluctance to kind of, you know, stick a marker in the sand, but are we getting to the point maybe uh, in the next quarter where there'll be some sort of Milestones that we can, you know? Um,
Let us think through this. Obviously, internally, we have very defined targets. As you know, a portion of that offsets market pressure, and we wouldn't want investors to think that there is no market pressure by just giving a transformation number. But let us see how we communicate progress more than what we're just saying today. So we'll take it under advisement and see if we can say a little more than today. Yeah, you'll get a good sense from our next year guidance already. As you can see on this call, we're also reaffirming the $600 million in cash flow by fiscal 27.
Speaker Change: For back of a better word, judge your progress against.
So that's not the perfect answer, but hopefully it gives you a bit of No, it definitely does help.
Speaker Change: Yeah, let us, uh, think through this, uh, obviously internally. We have very defined, uh, targets. Um, the uh, as you know, a portion of that offsets a market pressure and, uh, we wouldn't want, uh, investors to think that there are no Market pressure by just giving a, a, a transformation number, but let us see how we can communicate progress, uh, more than what we're just, uh, saying today. Um, so we'll, uh, we'll we'll take it under advisement and see, uh, if we can sell a little more than today. Yeah, you'll get a good sense from our next year guidance already. Uh, as you can see, on, on this call, we're also reaffirming the 600 million, uh, in cash flow by uh, by fiscal 27. Uh, so
Speaker Change: That's not the perfect answer, but hopefully it gives you a bit of a Direction.
And then maybe I know on wireless, it's early to really make too many detailed comments, but just in a broad sense. Should we expect the approach that you have in the U.S.
Speaker Change: No, no, it definitely does help and then maybe, um, I know on wireless it's early to really make too many detailed comments, but just in a broad sense.
to just be replicated in Canada? The only reason I ask is obviously this is wireless is in support of your broadband business by and large. The trajectory of the broadband business in Canada is very different than the trajectory in the U.S. And so I'm wondering if this, you know, leads you to have a different strategy between the two markets or if it's the same strategy across. The commercial objective is the same, but the markets and the dynamics of each market are different and we adapt.
Speaker Change: Should we expect the approach that you have in the US to just be replicated in Canada? Um, the only reason I ask is obviously this is Wireless is in support of your Broadband business by and large. And then the trajectory of the Broadband business in Canada is very different than the trajectory in the US. And so I'm wondering if this, you know, leads you to have a different strategy between the 2 markets or if it's the same strategy across the board.
The, the commercial objective is the same, but the the markets and the Dynamics of each market are are different and we adapt to those.
So, we should expect some, you know, variation in the approach and just maybe lastly.
Okay, so we should expect some, you know, variation in the approach and just maybe lastly.
And this may be hard to answer, but, you know, broadband penetration in the U.S. has kind of been on a... The question is, can you tell us how you see the three-year decline? Do you have a sense as to where maybe a sustainable level of broadband penetration is, given the market dynamics and the states that you're operating in? Do you have a sense that we're getting close at around 35% that this is getting to a sustainable level, or any kind of take on that would be helpful? Okay, so you're talking about our own broadband penetration and share of the markets where we operate, if I hear you correctly.
Speaker Change: and this may be hard to answer but you know, the Broadband penetration in the US has kind of been on a
Our 3 year decline. Um,
Speaker Change: do you have a, a sense as to where maybe a sustainable level of broadband penetration is, uh, given the market dynamics, um, and the states that you're operating in. Like our, do you have a sense that we're getting close at around 35% that this is getting to a level or
Speaker Change: Any any kind of uh, take on that would be helpful.
Yeah, exactly. Yeah, our U.S. business is different from the Canadian one, whereas in Canada our market share tends to be more even across the different regions, whereas in the U.S. there are bigger variations and that also brings opportunities. So for example, you know Ohio, where our penetration is quite low. So I would say we got some opportunity to grow in some states like Ohio.
Speaker Change: Okay. So you're talking about our own Broadband penetration and share of the markets where we operate if I hear exactly. Yeah, exactly, yeah, the, um,
However, if you look, if you net it out to PSUs, we're not yet at a stage where we say we'll return to positive PSUs in the U.S., but certainly over the next quarter you'll see us do better, obviously, than we did in Canada.
Yeah, our us, uh, business is different from the Canadian 1, whereas, in Canada, our market share tends to be more even across the different regions. Whereas in the US, there are bigger variations and that also brings opportunities. So, for example, you know, Ohio where our penetration is is quite low. So, I would say, we got some, uh, some opportunity to, uh, to grow in some states like Ohio. Uh, how however, uh, if you look, if you net it out to psus, uh, we're not yet at a stage, where we say, We'll return to positive psus in the US. Uh, but certainly over the next quarter, you'll see us do better obviously than we did in Q3.
All right, thanks for watching.
Speaker Change: All right, all right. Thanks so much guys.
Next question.
Your next question comes from the line of Vince Valentini with TD Peace, go ahead. Hey, thanks very much. Try to clarify a couple things have been talked about one. 600 million for 2027. Is that... Should we think of that conceptually as EBITDA just stays flat here at $1440 and virtually all of the delta is CAPEX or are there other meaningful moving pieces? Yeah, so I bet. So Let's assume that the EBITDA doesn't move too much at the high level, and I'm not guiding on EBITDA for the future in that comment, but just let's make that assumption, which is in your question.
Speaker Change: Question.
Speaker Change: Your next question comes from the line of Vince Valentini with TD. Please go ahead
Hey, thanks very much. Try to
Vince Valentini: Clarify, a couple things that have been talked about 1.
Vince Valentini: 600 million for 2027 is that
Should we think of that conceptually as IBA? Just stays flat here at 1440? And virtually all of the Delta is capex or are there other meaningful moving pieces and the interest line or we're structuring line or anything else Patrice.
For sure, the CAPEX is going to come down, as we've talked about. We do expect interest costs to come down as we're repaying debt. We are seeing decreases. As a note, just to make sure you saw it, in Q3, we had about $11 million of mark-to-market loss on swap that we had related to the venture we repaid, so that's a one-timer. You're not going to see this in the future quarters, but just in general, as we repay debt, we're seeing decreases in interest costs. And besides that, in terms of the cash tax rate, we don't necessarily see a big difference going forward versus where we are this year at around 12%.
These rows change all the time, but I would say these would be between interest.
The other one you mentioned is restructuring. Yes, we should see a decline there. As we're reducing costs at one point, we should expect to see less of those, and there are certain IT costs that are cloud implementation costs that are reported within that line item right now that eventually will go away as well, so we should see some improvement.
Vince Valentini: For repaying that uh we are seeing decreases uh as a note to just to make sure you saw it in Q3 we had about 11 million dollars of Mark to Market loss, on the swap that we had related to The Venture we repaid. Uh, so that's a 1-time. You you're not going to see this in the future quarters but just in general, as we repay that we're seeing decreases uh, in interest costs. Um, we uh, and besides that, in terms of the, the cash tax rate, uh, we don't necessarily see a big difference, uh, going forward versus where we are this year at around 12%. Uh, these roles change all the time, but, uh, I would say these would be the, um, between between interest and the other 1, you mentioned is a restructuring, uh, yes. We should see a decline there. Um, as uh, we're reducing costs at 1 point, we should expect to see less of those and there's certain uh I
Vince Valentini: Toss that are Cloud implementation costs, uh, that are reported within that line item right now that eventually will go as well. So we should see some, uh, Improvement there.
That's helpful. And just the cash taxes, nothing meaningful changes in terms of how much U.S. cash tax you have to pay, like some of the initial shelters you had are not winding down by 2017. No, that's right. We still have some tax losses that came from previous acquisitions we made. So that will run for a few years still. So yeah, so for now, it might ramp up over the next two, three years by one or 2% from what we see right now. And sorry, I said 12, 12 is this year. But next year, there were some one-timers that helped this year, actually.
Speaker Change: That's helpful and just the cash tax, nothing, meaningful changes in terms of how much us cash tax. You have to pay like some of the initial, uh, shelters. You had are not winding down by 27.
Speaker Change: No, that's right. We do we still have some uh, tax losses that came from uh, previous Acquisitions. We made, uh, so that will run for a few years still. Uh, so
But next year, we'll probably be at around 14, something like that. And so when you fast forward to fiscal 27, that could be a good number as well. We'll have to see these things change all the time, but that could be a ballpark figure to assess.
Great.
Speaker Change: Yeah. So for now we uh it it might ramp up over the the next, uh, 2 3 years by 1 or 2%. Uh, from what we see right now. Um, and sorry I said 12, 12 is this year, uh, but next year there were some 1 timers that helped this year actually. But next year, we'll probably be at around the uh 14 something like that. And so when you fast forward to fiscal 27, that could be a good number as well where we'll have to see these things change all the time, uh, but that could be a ballpark figure to, to assume there.
A second one.
You mentioned in the release on May 8th, the federal court decision has caused some retroactive treatment of video distance signal costs. Did you take a charge in Q3 or was this reflected in your EBITDA or restructuring costs or something? It was very immaterial because, you know, we have to take accruals for these things, always difficult to judge given that it happened several years after the fact, but we haven't done anything material in the numbers to reflect this. You called it out in the release, but whatever cost it was, it is in the numbers already.
Speaker Change: Great. A second 1, the you mentioned in the release the on May 8th, Federal Court decision is caused some retroactive treatment of video, uh, distant signal costs. Did you take a charge in in Q3, or was this reflected in your IBA or restructuring costs or something?
We don't have to worry about it for Q4.
Yes, that's right.
Speaker Change: Uh, it was very immaterial because, you know, we have to take a cruise for these things, uh, always difficult to judge, uh, given that it happened. Several years after the fact. Uh, but, uh, We've uh, we haven't done anything material in the numbers to reflect this. So so we have. Okay, so we have you called it out in the release but, whatever, whatever cost it was, it is in the numbers already. We don't have to worry about it for Q4. Oh, that that yes, that's right.
The bulk contract in the U.S., you say you have really good visibility on it, so let me ask then, how big is it?
Can you give us some sense of how many bulk customers you're going to lose in Q4 and then perhaps get back in early fiscal 26?
Okay, the bulk contract in the US you say you have really good visibility on it. So let me ask them how big is it? Like can you give us some sense of how many bulk customers are going to lose in Q4 and then perhaps get back in early fiscal 26?
Hi Vince, it's Fred. Yeah, you can ballpark, you can think of about 2,000 in this Q4 and then you can expect Q1 to be slightly positive and then more positive after. That's very helpful, Fred.
Fred Bell: Hi, Vince. It's Fred. Yeah, you can ballpark you can think of about 2,000 in this Q4 and and then you can expect q1 to be slightly positive and then more positive after that.
And remind me. Is bulk only in your Florida markets or do you have bulk contracts elsewhere? It's mainly in Florida.
Speaker Change: That's very helpful for it and remind me is bulk. Only in your Florida markets or do you have both contracts elsewhere, too?
Speaker Change: It's mainly in Florida.
Which you may gather will segue to perhaps my last question. Anything further on? Are you still thinking about pruning assets or swapping assets or trying to optimize the portfolio of assets in the U.S.? Is there any update on expectations or timing? Yes, a bit of an update there. As you know, we've been saying for close to a year now that we were open to looking at opportunities in the U.S. to potentially prune some assets there, if it made sense strategically, operationally and from a financial standpoint. We did a big review of the operations. Obviously, these are carve-outs when we do these things and obviously it's more complicated than just regular disposals.
Speaker Change: Which you may gather. We'll segue to perhaps my last question. Um, anything further on? Are you still thinking about pruning assets or swapping assets or trying to optimize the portfolio of Assets in in the US? Is there any update on expectations or timing?
We did look at a few more practical opportunities and where we are now is that we did not actually meet these criteria internally. So at this point, I would say we are not planning in the short to medium term to proceed with disposal, having done the work over the past year. We will remain open to opportunities in the future, but given that these take time and can be a distraction, where we are right now is probably more status quo in the short to medium term.
Speaker Change: Yeah. So a bit of an update there. Um, as you know, we've been saying for close to a year now that uh, we've been we were open to looking at opportunities, uh, in the US to potentially prune some assets there. Uh, if it made sense strategically operationally and from a financial standpoint, uh, we did a big review of, uh, of the operations. Uh, obviously, these are carve outs when we do these things. And, uh, obviously it comes. It's more complicated than, uh, than just regular, uh, disposals. Uh, we uh, did look at a few, uh, more practical opportunities and, uh, where we are now is that we did not actually meet these criteria, uh, internally. So, um, at this point, I would say, uh, we are not planning in the short to medium term to proceed with the disposal, having done the work over the past year. Uh, we will remain, um, open to Opportunities and if
Is probably more status School in the short to medium term.
Thank you.
Speaker Change: Thank you.
And once again, if you would like to ask a question, please press star 1 on your telephone keypad and your next question comes from the line at Mahir Yagi with Scotia Bank. Please go ahead. Great, thank you very much.
Speaker Change: Thank you. And the, once again, if you would like to ask a question, please press the star 1 on your telephone keypad, and your next question comes from the line at Maher, yagi with Scotia Bank, please go ahead.
Merci d'avoir pris mes questions. I just wanted to start with your comment about or your guidance on EBITDA for the year. So you're calling for EBITDA to be stable on a constant currency basis. When I look at your nine-month performance so far, it's down half a percent and you're calling for the U.S. business to thank you for I just understand the puts and takes because if Q4's EBITDA is going to be down more than you know, 1.5%, 2% year-on-year, how are we going to finish the year? Yeah, so it's a good question. So you know when we put out stable originally in the year, and I was asked this on a previous call as well by one of the analysts, what does it mean in terms of more exact numbers?
Maher Yagi: Uh, great, thank you very much. I, um, I just wanted to start with, uh, your comment about, or your guidance on Abida for the year. Uh, so you're calling for Abida to be stable on a constant currency basis. When I look at your, uh, 9 months, uh, performance so far, it's down half a percent and you're calling for the US business.
To perform, uh, slightly, you know, have a tougher comp and Q4 than in Q3. And Q3 you had it down by 3.7% on a constant currency basis. So, I'm trying to, uh, you know, I just understand the, the puts and takes because if, uh, Q4 is a bit is going to be down more than
Maher Yagi: You know, 1 and a half 2% year on year. Um,
how are we going to finish the year?
Maher Yagi: Stable on aita.
And obviously we see it as a plus or minus, a certain number to call it stable. We're still within that range, but you're right, looking at the numbers, there's only one quarter left. We do expect that number to be negative, but still within the range of stable. So that's why we did not change the guidance. We did change it on revenue as you know, because that would be out of the range of the stable that we have. Okay, and maybe just to be clear, like more specific on Q4, you know, the 2.4% decline in constant currency in Q3.
Maher Yagi: Yeah. So um, so it's a good question. So you know, when we put out stable originally in the year and I, I was asked this on the previous call as well by by 1 of the analysts. Uh, what does it mean in terms of uh more exact numbers? And obviously we see it as a plus or minus uh a certain number to to call it stable. We're still within that range uh but uh, you're right looking at the numbers. There's only 1 quarter left, we do expect that number to be negative, uh, but still within the range of stable. So that's why we did not change the guidance. We we did change it on Revenue as you know, because the that will be, that would be out of the range of uh, the stable that we had before their
Is that where we're going to be around in Q4 or the percent decline can be a little bit higher than that? Yeah, I'd rather say maybe at the higher level with what we said. So I did compare it to Q3. That's probably the better benchmark to use. And in terms of consolidated EBITDA, basically what we said for Q4 is that we would be similar to slightly better than the Q3 results, again, at the consolidated level. Okay, that's on a year-on-year growth rate or the dollar? I'm in dollars between Q3 this year and Q4 this year.
Maher Yagi: okay. And uh, maybe just to be clear like more specific on Q4. Um, you know, the 2.4% decline in constant currency in Q3
Maher Yagi: Uh, is that where we're going to be around in Q4, or the percent decline can be a little bit higher than that?
Maher Yagi: Yeah. I'd rather just say maybe at the higher level with what uh, what we said. So I I did the I did compare it to Q3 that's probably the better Benchmark uh to uh, to use um and uh, in terms of Consolidated ebida basically, uh, what we said for Q4 is that we would be uh similar to slightly better than the Q3 uh results. Um, again of the Consolidated level,
Speaker Change: Okay, that's on a year-on-year. Growth rate or the dollar terms?
Okay, thank you.
Speaker Change: I I mean dollars, uh, between between Q3 this year and Q4 this. Yeah.
So again, I'll just follow up with a clarification on the guidance. So you cut your CAPEX guidance by $62 million at the midpoint. and you increase your cash flow, pre-cash flow guidance. about 24 million at the midpoint. So we're missing around $39 million. Can you just explain where those went? Yeah, so it is not necessarily perfect between all these lines because we're using ranges, right? That being said, there's a couple of things. I did refer to the loss on the swap we took in Q3. So that basically appears in free cash flow but is not part of CapEx and that was a new element that happened during the quarter.
Speaker Change: I okay, Mercy. Thank you. Uh, so again, I'll just follow up with um, a clarification on the guidance. So um, you you cut your capex guidance, uh, by 602 million at the midpoint,
Speaker Change: And you increase.
Speaker Change: Your cash flow, free cash flow guidance about 24 million at the midpoint.
Speaker Change: So we're missing around 39 million.
Speaker Change: Can you just explain where those went?
Speaker Change: Yeah. So
We are expecting, as I said in the opening remarks, some additional restructuring costs in Q4, which again reduces free cash flow but obviously doesn't touch CapEx and that's highly tied basically to the continuing work we're doing on transformation and cost reduction. There might be other elements as well but I would say these would probably be the main ones. Thank you.
It it is not necessarily perfect between all these lines because we're using ranges, right? Uh, that being said, uh, there's a couple of things. Uh, I did refer to the uh, the loss on the swap. We took in Q3. Uh, so that uh, basically appears in free cash flow, but is not part of capex. And that was a new element that happened. Uh, during the quarter. Uh, we are expecting as I said, in the opening remarks, uh, some additional restructuring costs in Q4, uh, which again, uh, reduces uh, free cash flow. But not, uh, obviously it doesn't touch capex. And that's, uh, highly tied. Basically, to the continuing work, we're doing on transformation and cost reduction. Uh, there might be other elements as well, but I would say these would probably be the the, the main ones
My last question is more operational in nature for the U.S. market. We look at Comcast and Charter and we've seen how they They've tried to stabilize their operation over time. Initially, they tried to work internally on improving churn, cost reduction, plant price adjustments, and things like that. We've seen them try to do that and come up with the conclusion that on its own, it's hard to turn around the losses materially. Both of them separately came to the conclusion that they have to take more drastic approaches, more aggressive approaches to stem the decline caused by fixed wireless.
Speaker Change: They've tried to stabilize their operational over time. Uh, initially they they, you know, they they try to
Speaker Change: Work in internally on improving turn uh cost reduction, uh plan price uh adjustments and things like that. Um, we've seen them.
Try to do that and come up with the conclusion that on its own. Uh it's hard to turn around the losses uh materially and both of them separately uh came to the conclusion that they have to take more drastic. Approaches more aggressive approaches to
Charters started, then Comcast followed this year with planned price adjustments, bringing down prices on cable customers to lock them in into longer-term contracts, offering... free wireless services.
Speaker Change: Stem. The decline caused by fixed Wireless. Uh, Charter started and Comcast, you know, followed this year with, you know, plant price adjustments. You know, bringing down prices on cable, customers to lock them in into longer term contracts, offering them.
Free wireless services.
Are you Thinking that you can turn around the business doing the internal part without material adjustment to plant prices and offering free wireless services because when we look at the bigger players, they ended up having to be more drastic and take a more aggressive approach to bring down churn. I'm asking because as we sit here, it doesn't look like 2026 guidance is implying that kind of an approach, but what will make you take that approach? That's what I'm trying to understand.
Are you?
Speaker Change: Still thinking that you can turn around the business, doing what you, you know, the internal part without, you know, material adjustment to plan prices and and offering free wireless Services. Uh, because, you know, when we look at the bigger players, they ended up having to be more drastic and approach, you know, taking more aggressive approach to to to bring down churn
Hi Mayur, it's Fred. Is there room to be more aggressive in our U.S. go-to-market activities? The answer is absolutely. And that's a big part of our three-year transformation program. I wouldn't say drastic in the sense that the activities that we have underway are not particularly ARPU damaging in our case. I'll give you some examples, and it's not only about price. We had some sales channels that were quite underutilized and underscaled in the U.S. versus competition and versus our own operation in Canada, so we're scaling up some of those operations now and that doesn't cost you.
Um I'm asking because you know as as we sit here it doesn't look like 2026 guidance is implying that kind of an an approach but what will make you take that approach? That's what I'm trying to understand. If if you do
Hi Mar. It's Fred uh, the
Maher Yagi: Is there room to be more aggressive in our us? Go to market activities? The answer is absolutely uh and that's a big part of our 3 year uh transformation program. Uh I wouldn't say drastic in the sense that the activities that we have underway are not particularly our food damaging in our case, I'll give you some examples and it's not only about pricing. We have some sales channels that were quite underutilized and under scaled in the US, uh, versus competition and versus our own operation in Canada. So we're scaling up some of those operations now, uh, and that doesn't cost you our pool.
We saw that some of our retention efforts were suboptimal and not always competitive. We're getting back on the front foot. On pricing specifically, which was your question, the opportunity sometimes is around having simplified pricing and more predictable pricing for our customers, but it doesn't mean that it always comes at a huge ARPU trade-off. And of course, we're deploying more advanced analytics across all of our activities. The last thing I would add is, as you know, we've had good success with the Auxio digital-only model in Canada and some form of that will get deployed in the U.S.
Uh, the we saw that some of our uh retention efforts were suboptimal and not always competitive. We're getting back on the front foot there on pricing specifically, which was your question the opportunity sometimes is, is around having simplified pricing and more predictable pricing for our customers. Uh, but but it doesn't mean that it always comes at a, a huge rpu. Uh, trade-off.
A lot of those activities are already underway. Some of them are starting to launch. You'll see more announcements from us over the coming months in the U.S. And that's why we see room to improve our performance without doing anything particularly drastic to our pool. And that's why we see our customer losses in the U.S. reduce quite materially over the next year.
Maher Yagi: And of course, we're deploying more advanced analytics across all of our activities. The last thing I would add is as, you know, we've had good success with the axial, digital only model uh, in Canada, and some form of that will get deployed in the US as well. Uh, so a lot of those activities are already underway.
Maher Yagi: Some of them are starting to launch, you'll see more announcements from us over the coming months in the US. And that's why we see room to improve, uh our performance uh, without doing anything, particularly drastic to to our poop. And that's why we see our our customer losses in the US, reduce quite materially over the coming quarters.
Can you give us your perception of the utility of offering free wireless service to log customers or offering price log guarantees over four or five years like some of your larger cable peers are doing in the U.S.? Are those, in your view, a good idea? Thank you.
In your view. Um,
Positive movements that can reduce churn and still grow EBITDA or if they're a bit too aggressive. On wireless, we tend to match the market. The market is indeed relatively aggressive. As I answered, I think it was to Drew earlier, it will take some time before wireless becomes material in a positive way to our bottom line. As it relates to price lock and things like that, look, we're not going to get too much into competitive strategies. But again, we see lots of upside in our U.S. execution without compromising our Poonam.
Positive.
Maher Yagi: Movements that can reduce churn and, and still grow Abida or if they're they're a bit too aggressive.
Maher Yagi: On wireless, we tend to match the market. The market is indeed, uh, relatively aggressive. Uh, as I answered, I think it was to Drew earlier. Uh, it will take some time before Wireless becomes uh, material to in a positive way to, to our bottom line.
Okay, great. Thank you very much.
Speaker Change: Okay, great. Thank you very much.
Maher Yagi: Thank you.
And we have no further questions at this time.
I would like to turn it back to Mr. Patrice. We met for closing remarks. Okay, well, thanks for joining us today, and feel free to reach out if you have additional questions.
Speaker Change: And we have no further questions at this time. I would like to turn it back to Mr. Patrice, we met we're closing remarks.
Have a good day. Thank you, presenters.
Speaker Change: Okay, well thanks for joining us today and uh feel free to reach out if you want to. If you have additional questions, have a good day.
And ladies and gentlemen, this concludes today's conference call. Thank you all for participating.
You may now disconnect. Let's mark this week's session closed for the day. Thank you for joining.
Thank you for presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now. Disconnect