Q2 2026 Cogeco Communications Inc Earnings Call
Speaker #2: Good morning, and welcome to our second quarter results conference call. 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.
Speaker #2: 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.
Speaker #2: With that, I'd like to pass the line to Fred Perron for opening remarks. Merci, Patrice. Good morning, everyone. We're pleased to report solid performance in Canada.
Speaker #2: With positive year-on-year growth and adjusted EBITDA again this quarter, our PSU growth was a bit more muted as expected, but we remain very confident about our customer momentum.
Speaker #2: As a reminder, in three of the past four quarters, we've had the best Internet customer base percentage growth in all of Canadian telecom. Our sales and marketing capabilities are strong, and we'll continue to be a sustainable growth driver for us moving forward.
Speaker #2: In the U.S., we had indicated that we had another tough quarter ahead, which is the one we reported last night. But we now see signs of improvement in our financials as we progress into the second half of our fiscal year.
Speaker #2: Patrice will share more details about our outlook in a moment. We launched our new Welo Digital Challenger brand in Ohio at the end of February, and expect to expand it further across our footprint throughout the fiscal year.
Speaker #2: Welo is the American equivalent of our Auxio Canadian Digital brand, which is driving a big part of our success north of the border. As a reminder, in about half of our American footprint, we have around 20% market share.
Speaker #2: So there's room to grow. Our three-year transformation remains on track. We're driving substantial OPEX and CAPEX synergies, and now have four new diversified businesses.
Speaker #2: Auxio, Welo, and Wireless in both the US and Canada, which are giving us additional sources of growth for the years to come. We've accelerated and broadened our work on AI throughout the quarter.
Speaker #2: Building on the customer service chatbots we'd already launched in recent years, over the coming months, we'll be deploying AI agents to improve our full end-to-end internet troubleshooting journey.
Speaker #2: From network diagnostics to customer self-serve, to call center support, to home technician help, our size, agile operating model, and centralized data structure allow us to move very rapidly in this space.
Speaker #2: At Kojiko Media, our digital advertising solutions continue to steadily grow, backed by our strong market position, even as the traditional radio advertising market remains pressured.
Speaker #2: In summary, our Canadian performance is strong, and we see signs of improvements in the US. We have one of the best balance sheets in the industry, our free cash flow is growing, we're deleveraging, our dividend is solid and well-funded, and we also have the option of resuming buybacks at some point in the future.
Speaker #2: For all these reasons, we feel quite positive about our ability to keep growing shareholder value over the coming quarters and years. On that, I'll pass it over to Patrice for more details about our outlook.
Speaker #2: Patrice? Thanks, Fred. So, since our detailed financial results were published last night, I'll only focus on a few items and then open it up for questions.
Speaker #2: So, first, you'll notice that the current income tax rate is negative this quarter. It is because we've recognized a $14.8 million retroactive benefit from the acceleration of tax depreciation on certain asset classes in Canada.
Speaker #2: As a result, the current tax rate should be approximately 8.5% for the year, compared to our previous assumption of 11.5%. We have updated our financial guidelines for both companies.
Speaker #2: We now have a range of negative 2 to 4 percent for revenue, versus negative 1 to 3 percent previously. And negative 1.5 to 3.5 percent for adjusted EBITDA, versus 0 to negative 2 percent previously.
Speaker #2: The changes reflect higher pressure on our U.S. business coming from competition than initially expected when we introduced guidelines in October. CAPEX guidelines are unchanged, but we have lowered our range of CAPEX for the network expansions.
Speaker #2: And free cash flow guidelines remain unchanged as well. As a reminder, the guidelines are provided in constant currency, since foreign exchange rates can be volatile and close to half of our revenue and EBITDA is generated in the United States.
Speaker #2: Note, however, that free cash flow is much less impacted by FX rates, since U.S.-denominated debt and CAPEX serve as a natural hedge against FX fluctuations.
Speaker #2: Looking at the balance of the year, we expect the Canadian business to continue to generate year-over-year revenue and adjusted EBITDA growth. In the U.S., on a constant currency basis, or U.S. dollars, we expect revenue and adjusted EBITDA to be lower than the previous year, but at a smaller percentage decline than what was generated in the first half of the year.
Speaker #2: Finally, our debt leverage ratio stood at 3.2 turns during the second quarter, and we intend to continue to pay down debt with a goal of achieving three times by the end of the fiscal year in August.
Speaker #2: And now, Fred and I will be happy to take your questions. So, operator, you can go ahead. Yes, thank you. Thank you, ladies and gentlemen.
Speaker #2: We will now begin the question-and-answer session. If you have a question, please press star, followed by the one on your touch-tone phone.
Speaker #2: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two.
Speaker #2: If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Matthew Griffiths with Bank of America.
Speaker #2: Your line is now open.
Speaker #3: Hi, good morning. Be efficient, start to the call. Thanks. Just wanted to ask, in the US, just some color on the competitive environment. For me, when I look at the pricing across the market, it doesn't really appear that Breezeline is getting outcompeted on price.
Speaker #3: And so maybe you can delve a little bit into where you think the competition is being successful and what you are trying to how you're trying to counter that.
Speaker #3: And maybe, kind of in the same vein, historically, I think fixed wireless access has been a source of some of the competitive pressure. Just, it’d be interesting to hear your thoughts on how the increased emphasis on convergence in the US, particularly among the fiber players, might be contributing to the next leg of competitive pressure—or maybe not.
Speaker #3: I'd like to hear your thoughts. Thanks.
Speaker #4: Hi, Matt. It's Fred. Thanks for your question. I'll comment on the U.S. competitive environment and your various questions. First, yes, we have seen a slight uptick even since our last earnings call.
Speaker #4: And that's the main reason for the adjustment in the guidance. Now, let me elaborate on that a bit. It's not all pricing, Matt, but there is some pricing in there.
Speaker #4: For example, we saw one of our competitors start offering fiber for free for the first six months. So these types of promotions certainly don't help.
Speaker #4: You've seen some of our large competitors promote, even more aggressively, a five-year price lock as well. So even though we're equipped to compete price-wise, the accumulation of all of those things doesn't help.
Speaker #4: Plus, there are always ongoing fiber upgrades from the SL to fiber for some of our competitors, and that's a factor as well. FWA, I wouldn't call an uptick for us in the quarter.
Speaker #4: FWA is something we've been dealing with for quite some time. It's still there, but we're able to deal with it. And you see some of the players also shift some of their FWA focus more towards the B2B segment.
Speaker #4: And therefore, that's a segment we're not as present in ourselves. I'd say these are the main factors. Convergence—yes, there is one of the large U.S. telcos that launched a new converged offer over the past couple of weeks, but I'd say the entry point for that offer is quite high.
Speaker #4: So it's something that we're watching, but that we're not feeling yet. Now, on the positive side, a couple of things. One of the things that I know Maher has been very vocal on as well is very aggressive short-term customer attraction offers in the US.
Speaker #4: Both by our competitors, and something that we've had to match as well at times—things such as aggressive gift cards for joining us, and months for free.
Speaker #4: I would say we see more constructive behavior on those types of offers in recent weeks, and we've also pulled back ourselves. So we're less aggressive with gift cards.
Speaker #4: We've scaled back on months for free. So, whereas the market got more aggressive, I would say short-term, unsustainable offers have been less pervasive—certainly for us.
Speaker #4: And the last thing I would add is that, over the past couple of weeks, we've seen early signs of return on more constructive pricing behaviors.
Speaker #4: But it's too early to call it an improvement. That's why we remain cautious with the guidance.
Speaker #3: Okay, that's really helpful color. And maybe just a final thing—the introduction of the kind of Auxio-type brand, WeLo, in the US. What is the ramp-up period that you expect for that to have an impact?
Speaker #3: Obviously, it's starting from a new, a fresh introduction. So, is this a 12-month or 24-month type of ramp-up period that we should expect before it starts to have an impact?
Speaker #4: Sure. So, well, first of all, you don't see volume from it in the results that we just reported—just to be clear on that—because it launched in the last two days of the quarter.
Speaker #4: In the next couple of quarters, it's still relatively small volumes, but every bit counts. It will be an S-curve for sure. That's what we saw with Auxio as well.
Speaker #4: What is exactly the length of the S-curve? It's a little too soon to say, Matt.
Speaker #3: Okay, great. That's so helpful. Thanks, guys.
Speaker #4: Thank you.
Speaker #2: Your next question comes from Aravinda. Your line is now open.
Speaker #5: Good morning. Thanks for taking my question. A quick I'll start with a quick clarification. Patrice, your comments on Q3 expectations, so it sounds like when you say it's going to be better than in Q2, I assume you're referring to the sort of the constant currency number.
Speaker #5: It suggests sort of mid-single-digit-type epidemic declines. Is that the right way to kind of characterize that?
Speaker #4: Yeah, so my comment was more on the balance of the year—so basically both Q3 and Q4 together. Because obviously, if we commented just on Q3, you'd have Q4 indirectly as well.
Speaker #4: So my comment was a bit more general. And yes, it is in constant currency. As you know, we provide guidance in constant currency, and there has been more volatility in the FX rates recently because of what's going on around the world.
Speaker #4: So that's a part we don't control. But as I said, we are more naturally hedged from a free cash flow standpoint. So that's how we can manage the currency.
Speaker #4: But to your question, yes, my comments were in constant currency. And for what I said—for Canada, obviously, the currency doesn't really have an impact.
Speaker #4: We're planning for the balance of the year, so the two quarters, to see positive year-on-year growth. That's our current expectation, like we've had in the first two quarters.
Speaker #4: And in the US, we do see a decline in constant currency or in US dollars, but the percentage decline should be better than what we've seen in Q1 and Q2.
Speaker #5: Thanks, Patrice. And then just sticking to Canada for a bit, I mean, as you pointed out, I think, as was pointed out, the wireline performance in Canada is quite strong—better than most, if not all, of your peers.
Speaker #5: Maybe just talk to the sustainability of that. I know that there's been a little bit of promotional activity, but comments coming more recently from the carrier suggest that the level of discounting and aggression has eased on the wireline side of it.
Speaker #5: I know that you yourselves were a fair bit active several months ago. Maybe just give us a lay of the land there and your ability to kind of sustain price and perhaps maintain sort of the current trend.
Speaker #4: Hi, Aravinda. It's Fred. Thanks for pointing out our solid Canadian performance. And as Patrice said, we expect solid financials for the rest of the year in Canada as well.
Speaker #4: With regards to competition, in Canada, we generally feel good about the market. There has been a bit of pullback in promotional intensity. We've also increased our prices as appropriate.
Speaker #4: So I would say cautiously optimistic in general about the Canadian market.
Speaker #5: Okay, thank you. And my last question—I was wondering if we can talk to, sort of, where we should be looking for the benefits of the transformation plan going forward for the rest of ’26, but also fiscal ’27.
Speaker #5: Maybe just an update there. Are there still more bottom-line-oriented tailwinds from the program that we should be looking for?
Speaker #4: Sure. So the first half of our transformation was more focused on cost. As we go into the second half of our transformation, there will be, or there is, more of a focus on revenue as well.
Speaker #4: As I mentioned in my introductory comments, we're really starting to make good headway into AI agents across our operations. The example I gave in the introductory comments was more about technical troubleshooting and customer service.
Speaker #4: But we also are starting to deploy AI for our pool management, and, as you know, there's a lot of money in areas such as retention discounts, for example, in our P&L.
Speaker #4: And there's a real breakthrough right now in using AI to predict whether a customer is really likely to churn, and optimize the allocation of our retention discounts based on that.
Speaker #4: That's just one example. So that's certainly an increasing area of focus for us. Of course, some of that is being erased by the headwinds—the revenue headwinds—in the US.
Speaker #4: But that's directionally where we're going, and there's a lot of money there.
Speaker #5: Thank you, Fred. I'll pass the line.
Speaker #2: Your next question comes from Drew McGrannels with RBC. Your line is now open.
Speaker #4: Yeah, thanks very much, and good morning. Maybe first a wireless question for Frederick in Canada. Obviously, the street's seen some pretty unwelcoming promotional activity through a pretty seasonally low period here in Q1 by the Big Three.
Speaker #4: And to some extent, Quebec, or just from a Cogeco perspective—just curious on your observation of that, in terms of how you're wanting to grow your wireless business and whether that impacts your plan as we go forward.
Speaker #4: And then maybe a second, bigger-picture question. I think, Fred, you talked about the four stages of telecom before, and it feels like we're increasingly in that maturation and pricing pressure—kind of the third stage.
Speaker #4: I think you've referred to—in the US, how close, or perhaps what's the path to the kind of steady state that the fourth state is?
Speaker #4: It's really about market share being more balanced in the US. I know it's a pretty big question, but just at the highest level, what are your working assumptions in terms of kind of getting to that steady state in the US?
Speaker #4: Thank you. Sure. Thanks, Drew. Good question. So, my answer is maybe a bit longer. So, on wireless, first, when you look at a benchmark for wireless for us, in both countries actually, when you look at the US cables deploying MVNO models, they've typically reached 20% wireless penetration of their wireline base after a few years.
Speaker #4: And 20% may not sound like a lot, but it's clearly enough for it to be a materially positive P&L needle mover for them. So, not stating a goal here, but that's not a bad benchmark to use for us.
Speaker #4: As it relates to our—for both countries, as it relates to our wireless efforts in Canada, our sales have actually been slightly ahead of plan.
Speaker #4: And I would say that we're quite insulated from all the noise happening between the big three—or now the big four—in wireless in Canada.
Speaker #4: Our model is very different. We cross-sell to our existing customers. In a more rurally skewed footprint, we also target lower data users, which we're doing successfully.
Speaker #4: And we're doing so by also reminding our customers that they can do automatic offload onto their Cogeco wireline network when they're at home. So I would say we're doing our own thing.
Speaker #4: We're not fighting in the excessively large data bundles that customers don't need, and we're doing just fine. So, long way of saying, the recent price war in Canada wireless has not really impacted us.
Speaker #4: In terms of the four stages of telecom, and just to remind everyone, the four stages are—I've seen them in Europe before.
Speaker #4: So it's always the same story. There's the growing penetration of telecom services, which is Chapter 1. Then there's share of wallet increase, which is Chapter 2, where you upsell customers and you do sometimes rate increases.
Speaker #4: And Chapter 3 is what I call the bursting of the bubble, where prices start falling. And Chapter 4 is when things restabilize again at a lower price level that customers are comfortable with.
Speaker #4: And I'd say, when I was in Europe, we've gone through Chapter 3, and many European countries are now in Chapter 4, where telecoms have regained renewed stability.
Speaker #4: Where are we in our two countries? I'm cautiously optimistic that Canada is approaching Chapter 4. Of course, we don't have a crystal ball. And, as I said to Arvinda before, we see more constructive behaviors in Canada and things seem to be settling down.
Speaker #4: The US is still very much in Chapter 3, which is price wars. In terms of your question on what is the path to stabilization in the US, there are a couple of things.
Speaker #4: So, some of the offers that we're seeing right now just simply don't seem sustainable from a net present value perspective—from our competitors. So, hopefully somebody is going to wake up somewhere and realize that that doesn't make sense.
Speaker #4: But also, what we're doing is we're looking at our market share in every single one of our U.S. markets. And we're doing pretty granular predictions of, given the number of players in that market, given the overbuilt dynamics in that market, what is our fair share market share in that town?
Speaker #4: And there are places where market share is still a little high, but there are places where we also have room to grow to reach our fair share.
Speaker #4: And as you net all of that out, what we see for us is that we're pretty close to fair share on the Breezeline brand because our market share is lower than most of the larger U.S. cable players.
Speaker #4: And what we load on top, we have an opportunity to grow share over time. So, that's a long way of saying: what is the path to more stability in the US?
Speaker #4: Well, for us, it comes back to being close to fair share. And for each of the different players, I would ask, where are they compared to their fair share?
Speaker #4: And more broadly, hopefully, people will realize over time that some of the offers we're seeing are not quite sustainable.
Speaker #5: Yeah, that's great perspective. Thank you.
Speaker #6: Your next question comes from Vince Valentini. Your line is now open.
Speaker #7: Hey, thanks very much. And let me reiterate: thank you for not repeating everything from the results in MD&A and to start the call. Very efficient.
Speaker #7: I have a couple of questions. One, in your recap of the competitive drivers to Matthew's question earlier, one thing you didn’t mention was Starlink.
Speaker #7: We're hearing more and more noise about them competing in selective urban markets with very aggressive offers. Maybe it's just a hype thing around their IPO, or maybe it's sustainable.
Speaker #7: Nobody's quite sure. But are you seeing any evidence of Starlink trying to steal any customers in any of your markets yet? No, we're not.
Speaker #7: Vince hired Fred. Starlink—it's important to separate two things, right? There's the Starlink on the cell phone as a complementary solution to the existing cell phone technologies.
Speaker #7: Obviously, we're less exposed to that. On the wireline side, we're not feeling it either. Maybe I can pass it to Patrice to share some of the observations and analysis we've done.
Speaker #5: Yeah, obviously, this is something that we're keeping in mind and looking at the development. But as Fred said, we're not really seeing it. Obviously, you can — I'm sure you can look up the technology behind it and the capacity, including the new satellites that are going to come.
Speaker #5: Typically, it doesn't work well in regions where you have some level of population density. And that's usually where you have wired networks, whether it's cable or FTTH.
Speaker #5: You can always get—I mean, the time is unlimited because basically satellites can reach everyone. But the capacity is quite limited in terms of spectrum usage in a specific area.
Speaker #5: And that spectrum has to be shared by all operators as well. And also at the consumer level, when you think about it, a lot of our—well, I would say a higher proportion of our customers in rural areas will have bundles.
Speaker #5: So, with TV, that's not something that's being offered by satellite right now. We typically see much lower speeds as well—something like 100 megabits per second.
Speaker #5: This can grow over time, but a lot of our customers take much faster speeds than this. It requires an external antenna as well—not something everybody wants to install on the side of the house, compared to having an already wired house with traditional cable or FTTH.
Speaker #5: And in terms of stability, it's obviously different. It can usually provide less stability of feed than what you'll have with a wired network. And lastly, I'll say, as you touched on price, price can change quite a bit.
Speaker #5: But obviously, you need to take into account all the costs. So whether it's the monthly costs, the equipment—which can come in different versions of pricing—and, again, the installation of the antenna.
Speaker #5: So, something we're watching. And obviously, newer versions of higher-density satellites are going to come. They're not yet there, but they're going to come over the coming years.
Speaker #5: But today is not something that we're seeing.
Speaker #7: Okay, thanks for that. Second question, probably for you, Patrice. In terms of the outlook commentary for the second half of the year—in the second quarter, the revenue decline in the US is very similar to the EBITDA decline.
Speaker #7: Is that the
Speaker #1: The expectation is the same in Q3 and Q4 as well. Or is there anything on the cost side that starts to cause a bit of a divergence there?
Speaker #1: Like maybe some of the startup marketing costs in Ohio and for Willow, or any of the transformation benefits—is it possible that the EBITDA decline could be a little bit less than the revenue decline in constant currency at Breezeline in the second half, or should we expect them to be pretty similar?
Speaker #2: Yeah , I would say so . First of all , just to be clear , we do expect for the balance of the year that both numbers will if you take the two quarters together , will have a lower percentage decline than in the first half .
Speaker #2: But to your point , there were exactly the same number in revenue decline in the EBITDA decline in Q2 . We anticipate that we'll have a lower decline on EBITDA in the future versus the revenue , which is your question .
Speaker #2: Because of cost improvements over time. So yeah, there should be some delta there.
Speaker #1: And should be double clear on what you just said—switched it from one pocket to another.
Speaker #2: Yeah . So that's so the year is not finished . But but that's something we're looking into . Exactly . So in construction of a new areas , especially the subsidized areas in Canada , it's been taking a bit longer than planned for portions for a portion of the work that we don't control that has to do with the rights and , and permitting .
Speaker #2: So we're , we're managing CapEx between the two years . But again , it's . It's something , there's certain things we can play around with between years and some that we don't .
Speaker #2: So , so that would be the plan . And maybe just before I forget , as you were talking in your previous question , I did not provide any commentary on Q3 versus Q4 .
Speaker #2: I was talking about the balance of the year, but keep in mind that in Q4 last year in the US, the comparative figures were lower than in Q3.
Speaker #2: So, when we look at the balance of the year, that will play a role. So it will naturally help Q4 versus Q3.
Speaker #1: Great . Thank you
Speaker #3: Your next question comes from Stephanie Price with CIBC. Your line is now open.
Speaker #4: Thanks . Good morning . Just follow up on one of Vince's questions there . Just around , you know , first half results .
Speaker #4: Looks like they came in a bit lower than the revised full-year guide. Just curious what you're seeing in the second half that leads you to expect an improvement there.
Speaker #4: And maybe related, just the puts and takes to get to the top versus the bottom end of the new guide. Is it primarily the US?
Speaker #2: Yeah , sure . Good morning . So in terms of the balance of the year , I guess you're focusing on the US business .
Speaker #2: We're looking at more. I guess I'm going to repeat some of the stuff we've said before on the call. So, we have more benefits coming from the transformation actions we're taking.
Speaker #2: And some of them have been in the works for a while , and now we're starting to see the benefits . It's it's just starting , especially the new AI tools that Fred was talking about , which will have a bigger impact next year .
Speaker #2: But we're starting to see the benefit this year . So that's one thing we have made some price adjustments in the US in January , February , so that fully benefits Q3 and Q4 , but not so much the first half of the year .
Speaker #2: There's also some as part of our transformation , some other revenue generation activities that we are doing that will , will have some benefits on for the balance of the year .
Speaker #2: And I did mention the Q4 , especially easier comps last year . So that that will that will make a difference in the numbers , especially in Q4 this year .
Speaker #5: And the second part of the question, Stephanie, was around what will be the drivers of reaching the top or bottom end of the guidance?
Speaker #5: And is it mostly in the US? I guess the answer is yes, it's mostly in the US. I don't know if you want to add to that.
Speaker #2: Yeah . So I , I , I would say the US is the key . The key factor when you look at the Canadian business , the first two quarters have been fairly stable .
Speaker #2: And in terms of growth year over year, we assume something in the same ballpark for the balance of the year and stability in growth.
Speaker #2: So this is where the U.S. has more impact. Now, I won't necessarily comment on where we think we'll land in the ranges.
Speaker #2: So that's why we have ranges. But we still have six months to go. Yeah.
Speaker #4: That's helpful . Thank you . And then maybe digging into the US a bit more . Just curious if some regions are what regions are more competitive than others .
Speaker #4: And you mentioned you've seen some improvement in the last few weeks. Has that been across the board in the U.S., or has it been certain regions that you've really been focused on here?
Speaker #5: Sure . Hi , it's Fred . So well , first of all , I'll remind everyone that we managed to grow our customer base in Ohio for a third consecutive quarter , and that we can consider that the new normal can't .
Speaker #5: We don't . Again , we don't have a perfect crystal ball . There may be quarters that are tougher than others in the future , but we think in a large majority of quarters , we will be growing our customer base in Ohio .
Speaker #5: So there's a lot of potential there as it relates to the other regions without, you know, being too specific in terms of competitive intelligence.
Speaker #5: There's one region of the northeast where one player was very price aggressive , and there are two other states where we saw in one state , we saw overbilled by one of the cables .
Speaker #5: It's nothing new, but it's something that we've had to deal with. And in the other state, there was a legacy DSL player upgrading to fiber.
Speaker #5: But by and large , we see Ohio and Florida , especially Florida residential continue to grow in the future . And the legacy market it's going to depend on on the ups and downs of the competitive dynamics in recent weeks .
Speaker #5: I think the other part of your question is , in recent weeks , where has to pull back been ? We've seen actually some the one of the some of the large national players actually pull back in some of their pricing .
Speaker #5: Let's see , let's see if that sticks . But overall , that's that's how it plays out .
Speaker #4: That's helpful color. Thank you very much.
Speaker #5: Thank you
Speaker #3: Your next question comes from Jerome W. with Desjardins. Your line is now open.
Speaker #6: Hey . Good morning . Thanks for taking my questions . First one is on is on CapEx . So hopefully not too similar to Vince's question , but you you've maintained your your CapEx guidance for the year , but you're about 10% behind what you had done so far in the year versus last year .
Speaker #6: Is there any reason to be expecting some acceleration, or should we be thinking more about targeting the lower end of the range there for the year?
Speaker #2: It's still it's still a bit early days on this one . So we'll see what follows within which year . But I would say , as you've seen in prior years , the level of CapEx can change quite a bit between quarters .
Speaker #2: So we really manage the envelope on the on a yearly basis . I would say , given that we were changing guidance for other reasons , if we thought we'd come up short on this guidance , we would have moved it like we did for the one related to network expansions .
Speaker #2: But for now , we still feel we'll will be within the within the range . And again , I don't want at this point still with six months to go , to be too precise on where we would land within the within the range .
Speaker #6: That makes sense . And maybe tying it back all together , what , what needs to happen for , for you to , to report that 600 million free cash flow guidance that that you were expecting for , for 2027 ?
Speaker #2: Yeah , I would say , obviously , we provide the actual guidance on an annual basis , as you know . So we will come up with guidance for next year in October .
Speaker #2: But when you look at this year , we did not move the free cash flow guidance . And it's we're in the like midpoint is in the 535 , $40 million .
Speaker #2: If you just use the , the midpoint of it in constant currency and as we're eventually finishing all the network expansions , the ones that are subsidized because we always do a bit of network expansion every year , we'll see an easing there .
Speaker #2: So if you take if you take what we're planning to do this year , and we are still planning to grow free cash flow next year , you'll normally get in that in that range .
Speaker #2: So we'll see exactly where , where we'll land for next year . But but our view is to grow free cash flow again next year .
Speaker #2: And get to around that range.
Speaker #5: Yeah . And I'll simply add that , you know , even when we get a 1% EBITDA pressure , for example , due to us dynamics , 1% at the consolidated level is 15 million or so of EBITDA , which is still a relatively small number relative to the size of , of our cash flow .
Speaker #5: So, bottom line is the cash flow is growing faster than the EBITDA headwinds that we're seeing.
Speaker #6: Great . Merci beaucoup
Speaker #3: Ladies and gentlemen , as a reminder , should you have a question , please press star one . Your next question comes from Mariaj with Scotiabank .
Speaker #3: Your line is now open
Speaker #7: With Bonjour . Merci de . I just wanted to go back on the guidance change . You know , as you mentioned , it was driven by the US business .
Speaker #7: Can you maybe provide maybe dissect that ? Is it is it was , you know , in in the MDA , MDMA , you mentioned it's a pricing issue , but any of the change in the guidance was the result of a different outlook on subscribers or it's all pricing
Speaker #5: It's both . It's us revenue . Maher . And it's a combination of subscribers and Rpu simply put , a couple of things .
Speaker #5: As I mentioned to you on a couple of questions already, there has been more competitive intensity even since our last earnings call.
Speaker #5: And therefore, what you see is Q2 came in slightly below what we were expecting as a result of that. And things are turning around; it's just taking a little bit more time on both subs, especially on subs and RPO.
Speaker #5: The . Yeah , because pricing dynamics impact both the . As I mentioned on an earlier question , I know you had noted some unhealthy pricing dynamics in the market , such as gift cards and months for free The good news there is that we're starting to successfully pull back from some of that .
Speaker #5: So that's encouraging . And again , I want to remind everyone that even though we have a medium term aspiration of growing our customer base in the US , that is not how we steer the business .
Speaker #5: We steer the business for for value and , and , you know , maybe one day growing the subscriber base will be an outcome .
Speaker #5: But really, NPV and customer lifetime value is what we're steering for here.
Speaker #7: Okay , okay . So maybe on , on the subscriber trends , you know , could you update us on , on your outlook for the US broadband subscriber trends last quarter ?
Speaker #7: If I rephrase, maybe what you, you know, you had mentioned is that you did expect Q2 to be worse than Q1 a little bit, but expected that the rest of the year we should start to see improvements year on year.
Speaker #7: Are you still expecting Q3, for example, to be better than Q2 in terms of fewer losses?
Speaker #5: Yeah, it's hard to be overly precise because we're still not even halfway through. We're just roughly halfway through the quarter, so a lot can still happen.
Speaker #5: What I can say to you, Maher, is that the days where we were losing 8,010 thousand subscribers a quarter are likely behind us.
Speaker #5: And in the medium term , we see over the quarters , we see a path to progressively improving subscriber performance in the US .
Speaker #5: To call a specific quarter that's not even finished, it would be overly precise right now.
Speaker #7: Okay . If you were to , you know , if you , if you had to think about what's driving what drove the , the , the decline and subscribers in Q2 versus Q1 , was it a churn issue or was it a gross addition issue ?
Speaker #5: Yeah , the easiest thing would be to give you the year on year . If I may . So because there's always seasonality .
Speaker #5: So and I'll do it by by region instead of churn versus acquisition , because churn and acquisition can be correlated . Sometimes if acquisition is low , if churn is higher , acquisition is usually higher as well .
Speaker #5: So, if you could compare Q2 that we just reported—internet subscribers in the US compared to Q2 of the prior year—they were actually similar.
Speaker #5: But when you look under the hood, we're starting to look to do much better in Ohio. So we were ballpark 3,000 better year on year in Ohio.
Speaker #5: And that's something we see as sustainable. But we were 3,000 worse year on year in the other regions. Half of that is because we were connecting new bulk buildings in Florida in the prior year.
Speaker #5: So, take 1,500 as being the real year-on-year pressure. And that's just ups and downs of certain competitive dynamics in our legacy market.
Speaker #7: Okay , that's , that's helpful . Thank you . And maybe one last question on on the pricing side . So can you I mean , the pricing is , is , is dictated by how you react to your competitors or how you price your own product or , you know , price increases that you put in place , which obviously are built into the assumptions that you did .
Speaker #7: You , when you first provided the guidance for 2026 . So what has changed on the pricing side ? That is causing you to affect your new guidance ?
Speaker #7: Is it that you're reacting more to the competition by reducing your own prices, or are there prices that you want to implement?
Speaker #7: Price increases that you wanted to implement, that you might not do going forward?
Speaker #5: Yeah, I'd say price increases on our legacy customer base are still quite sticky, so that is not the main driver. I would say we're doing well in terms of new acquisition, customer acquisition position in the market.
Speaker #5: As I was telling Matt earlier , I think , you know , we're quite equipped to be a price competitive in the market .
Speaker #5: It's just when you see more players running more promotions , it just makes it harder . So that impacts both your volume , which you're seeing are subbrands are slightly behind what our ambitions were as well as your acquisition .
Speaker #5: Rpu stays under pressure . However , as I said to you . Earlier , we're at least trying to do that in a in a more healthier fashion by pulling back from gift cards and things like month for free as well .
Speaker #5: So the short answer would be it's not the right increases on the legacy base. We should still are quite confident about that.
Speaker #5: It's a combination of subs, as well as acquisition RPU.
Speaker #7: Okay . Thank you . Thank you , Fred for for this . Yes . Thank you for taking my questions .
Speaker #5: Thank you
Speaker #3: There are no further questions at this time. I will now turn the call over to Patrice Ouimet for closing remarks.
Speaker #2: All right . So thanks for participating today . It will be happy to take other questions . In the meantime , if you want , before we meet for Q3 in a few months .
Speaker #2: Thank you. Have a good day.
