Operator: Good day, and welcome to Cogeco Inc. and Cogeco Communications Inc. Q4 2026 earnings conference 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, Cogeco Inc. and Cogeco Communications Inc. Please go ahead, Mr. Ouimet.
Patrice Ouimet: Thank you. Good morning, and welcome to our Q4 results conference call. As usual, before we begin the call, I would 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 our press releases and MD&A issued yesterday, as well as in our annual reports regarding the various risks, assumptions, and uncertainties that can cause our actual results to differ. With that, I will pass the line to Fred Perron for opening remarks.
Fred Perron: Merci, Patrice. Good morning, everyone. Our Canadian business continued to perform well in the quarter with a re-acceleration of our internet customer growth, continued strong wireless sales, and growing year-on-year adjusted EBITDA again this quarter. We were delighted to see our oxio digital brand be recognized as the most loved telecom brand in Canada. oxio sales are beating new internal records, and we are just starting to scratch the surface of how big that business can become for us. We have continued to upgrade our Canadian high-speed internet network and now offer one gig and two gig residential speeds in approximately 95% and 50% of our Canadian footprint respectively. In the US, we have observed an even further degradation in our competitive environment. This has resulted in elevated internet customer losses in the quarter, as we had indicated last time we spoke.
Fred Perron: In light of these factors, we are introducing fiscal 2027 financial guidelines, which reflect lower year-on-year performance than last year. Rest assured that we are quite clear-eyed about the very challenging state of the US market. We are nevertheless delivering significant operational improvements at Breezeline. In addition to wireless, we have built new sales channels, launched a new digital second brand, and just a couple of months ago, launched a new over-the-top TV streaming solution. More broadly across the enterprise, we are executing well against what we can control and continue to hit the CapEx and OpEx reduction targets from our transformation program. We now have AI agents deployed across most key operational functions, and that automation is really starting to bear fruit.
Fred Perron: Thanks to our disciplined execution, we delivered CAD 554 million in free cash flow in fiscal 2026 for Cogeco Communications, near the top end of our original guidance for the year and representing a 33% growth over three years. That strong free cash flow generation is enabling us to grow our dividend once again, albeit modestly, for a 23rd consecutive year. At Cogeco Media, we are pleased with our strong radio audience engagement, which reached 4.6 million listeners per week. In summary, as we enter the third year of our three-year transformation program, our priorities are to first, keep growing wireless in both countries, which is pure upside for us. Second, keep growing our oxio and welo digital brands, leveraging the very high customer satisfaction these brands are getting in both Canada and the US.
Fred Perron: Third, continue to reduce our OpEx and CapEx, including but not limited to leveraging our rapid progress on AI in order to keep delivering superior free cash flow generation. On that, I will pass it over to Patrice for more details about our results. Patrice?
Patrice Ouimet: Thanks, Fred. I will highlight a few items from the quarter and then move on to our fiscal 2027 guidelines and Q&A. Our Canadian business performed well in Q4 with strong internet customer additions and growing revenue year-on-year. We also had stronger than expected adjusted EBITDA, which benefited from growing revenue, cost reductions, and some year-end adjustments. In the US, the quarter was more challenging than expected due to higher internet customer losses and elevated competitive pressures impacting revenue and adjusted EBITDA. During the quarter, we announced the launch of a partnership with DIRECTV, an over-the-top streaming solution for the US business. We expect this product to have positive impact on future adjusted EBITDA and free cash flow.
Patrice Ouimet: It's however important to note that we will gradually see a negative impact on our video subscriber metrics since we will not be counting DIRECTV in our disclosed subscribers. Our practice is to only account for company-owned brands and reported subscribers. It will also reduce revenue over time, since we will only account for the earned commissions in revenue rather than the full video subscription. But as I mentioned, it will be positive for adjusted EBITDA and free cash flow going forward. The consolidated debt leverage ratio stood at 3.1 turns at the end of Q4 versus 3.2 turns reported last quarter. During Q4, we refinanced maturing debt with a new CAD 200 million tranche, and we repurchased USD 46 million of Term Loan B debt securities.
Patrice Ouimet: We expect to continue to use excess cash to repay debt in the Canadian and US borrowing structures over the coming quarters. As for free cash flow, we continued to deliver capital efficiencies throughout the year, which allowed us to grow free cash flow at Cogeco Communications by 7.3% for the full year on a constant currency basis. We also increased the dividend for both Cogeco Communications and Cogeco Inc. by 2%. In determining this percentage, our goal was to strike a balance between shareholder distributions and debt repayments. Now, let's discuss the financial 2027 guidelines, which we are introducing today. As a reminder, we provide our financial guidelines in constant currency since foreign exchange rates can be volatile and close to half of our revenue and adjusted EBITDA is generated in US dollars. Free cash flow is, however, much less impacted by FX rate movements.
Patrice Ouimet: Cogeco Communications expects revenue to decrease by a low to mid-single-digit percentage compared to the prior year due to a combination of growth in the Canadian customer base, offset by both pricing pressures and subscriber losses in the US due to a highly competitive and promotional market. Adjusted EBITDA is anticipated to decrease by a mid to high single-digit percentage compared to the prior year, due to lower revenue from the elevated competition in the US that is expected to persist throughout fiscal 2027. This is partly offset by cost efficiencies as we progress through our three-year transformation program. As for capital expenditures, we are expecting to spend between CAD 425 million and CAD 475 million, driven by operational efficiencies and the near completion of many network expansion and upgrade projects.
Patrice Ouimet: Free cash flow is expected to be between CAD 500 million and CAD 550 million, since US EBITDA pressures, higher financial expenses, and higher income taxes are partially offset by capital efficiencies. For fiscal 2027, we assume financial expenses to be in the range of CAD 250 million and CAD 300 million, and the current income tax to be in the range of CAD 30 million to CAD 60 million. Finally, at Cogeco Inc., we have issued the same financial guidelines as Cogeco Communications, with the exception of net capital expenditures and free cash flows, which are slightly higher. Fred and I will be happy to take your questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the star followed by the one on a touch-tone phone. If you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star one if you wish to ask a question. Your first question is from Vince Valentini from TD Cowen. Your line is now open.
Vince Valentini: Hey, thank you. Couple things from me. One, the outlook for the Canadian segment in 2027. I mean, you finished the year strong on financials and internet subscribers. You seem pretty confident in recent conference commentary that the pricing environment is as disciplined as it has been in a few years, and you are still obviously quite bullish on the wireless traction and the oxio traction. That all sounds to me like you expect slightly positive revenue and EBITDA growth in Canada in 2027, but I do not see that in your official guidance or commentary. If you can clarify that for us, and if it is not positive, is there something one-off you can point to? Are there still wireless startup costs, for example, or anything else that are an unusual drag on EBITDA that we maybe should know about? That is question one.
Vince Valentini: I will just throw out my other two quickly for you so you can think about them. Working capital seemed unusually strong in both the Q4 and the full year of, what, CAD 88 million inflow in Q4 and CAD 138 million inflow in the full year of 2026. Is that just timing issues or maybe some of the rural subsidy stuff you have been doing and you finally are getting the subsidy payments on a lag basis from the government or something else going on there? Would you expect that to be even remotely sustainable in 2027, Patrice? Last, just a technical question if you know it. On spectrum transfers, obviously, ISED has to approve anything. Do you know how finicky they are or how complicated it is to get approval for a subordination of your spectrum if you are just basically leasing it to somebody?
Vince Valentini: For example, if you wanted to lease it to a foreign satellite giant, would you have to go through ISED approval, or could you just do that at your leisure? Thanks for those three.
Patrice Ouimet: Great. Good morning, Vince. I will start with the order you asked them. First of all, for the guidance, as you see, we have a range. Obviously, it is provided at a consolidated level, and the range allows for over and under performance at a consolidated level. If we look at only by country, the commentary I could provide is that for Canada, we are expecting to be relatively stable during the year for revenue and EBITDA. Obviously, then there is a range around that. We did perform well last year. As part of that, there is different elements. There is pricing, there is the customer additions, which we are planning to continue to grow. We have our transformation program in there. There is a mix shift as well, where we have, over the years, a bit more focus on internet products. Mobility is picking up as well.
Patrice Ouimet: You take all this together, stability would be the way I would look at it for Canada. Your next question is on working capital. Sorry. This one can be more volatile by quarter. What we expect for the coming year would be to be positive, actually, on working capital. Probably not by a huge extent, but some extent. We do have some receivables that are related to subsidized bills, as you pointed out. Some of these contracts pay completely at the end once you are really done fully with a region. We will collect some of that in the coming year and in fiscal 2028 as well. Probably some slight positive movement or generation on working capital in the coming year.
Fred Perron: Hi, Vince, it is Fred. On the third question, as you pointed out, ISED has a lot of discretion on approving both spectrum transfers and subordination, so your understanding is correct. As it relates to the unnamed US satellite giant, I think they have said publicly that their wireless strategy for Canada is very different from the US. Our understanding is that they are not intending on building a full terrestrial wireless service in Canada. For that reason, it would make that type of spectrum monetization for us less likely. However, there are other ways of monetizing our spectrum, as we have discussed in the past.
Vince Valentini: Very helpful. Thank you.
Operator: Thank you. Your next question is from Aravinda Galappatthige from Canaccord. Your line is now open.
Aravinda Galappatthige: Good morning. Thanks for taking my questions. First one's on Canada. As was mentioned earlier, pretty good operating leverage. 3.5% EBITDA growth, on much lower revenue growth. Patrice, are there any other items that we need to be aware of that drove that operating leverage? Was there more significant movement on the wireless side that perhaps exaggerated that? I wanted to understand that dynamic a little bit better.
Patrice Ouimet: Yeah. I would say if you look at only Q4, we had, that's right, a higher margin there. That's why in the opening remarks, I mentioned higher than planned growth year over year. So I would not necessarily expect that it would be at that level in the future. That's why I was talking more about stability. We did have some one-timers that were positive in Canada in Q4, but it doesn't explain necessarily the full amount of it. So these are non-recurring, and it's normal, like year-end, we typically have a bit more of those, and we had some negative ones in the US. That being said, we've been performing well with the growth in the sub-base, which has been helping in the results over the year for sure, and that transformation has continued to pay off. The transformation program helps with costs.
Patrice Ouimet: It helps with capital expenditures as well. It helps with revenue, although the revenue piece, as we've always said, is a bit more in the third year. Once we're done with the third year, we'll want to pursue that program. So it's not necessarily going to end there, but it's going to be the end of our first phase of the transformation.
Fred Perron: Yeah. Aravinda, it's Fred. I would simply add, as Patrice said, there were some one-offs in Q4, so I wouldn't necessarily extrapolate Q4. But as a longer-term trend going into next year, we had a bit of more end of promo. We got a bit of a bump from end of promo expiries in the previous year, which will not repeat to the same extent next year. In an earlier answer, Patrice also alluded to the product mix shift and the customer mix shift. As we do more and more oxio, the internet margin on oxio is comparable to the internet margin on Cogeco, but we sell less TV, for example. So there's an impact from that as well.
Aravinda Galappatthige: Thank you, Fred. Maybe just a second one for you. On the US business, we know a couple of years ago you did consider part of the footprint or explore the prospect of a divestiture there. Is there any sort of thought on maybe revisiting that idea? I realize sentiment is weaker and perhaps bids could even be harder to come by, but not all regions are the same. Was wondering if that's something that's still on your desk or still a consideration, given the outlook at this point.
Fred Perron: Sure. A couple of things. First, as I said in the introductory remarks, we're very clear-eyed about the challenging state of the US market. So there's no magic thinking here about that. Secondly, we understand that many of you and many investors put very little value on our US business when looking at the sum of the parts approach, so we understand that as well. We're working hard doing the best we can to improve the performance of the business operationally. We launched a second brand similar to oxio in Canada. Earlier this week, we've announced that we are expanding that brand to two more states, and in two weeks, we'll announce two more states. So by then, we will offer that brand in 70% of our US footprint. We launched a DIRECTV product, and we're building new sales channels as well.
Fred Perron: We're doing everything we can on that front. As it relates to your question, we always seek the best possible way to create shareholder value. We don't need necessarily to think about it in black and white all the time. There's a variety of colors in between. But we always seek the best way to create shareholder value.
Aravinda Galappatthige: Thanks, Fred. Last question, on the dividend increase, maybe just your thoughts around. It is a considerable step down from the high single-digit increases that you were implementing. Considering the free cash flow is still very strong, your CapEx is stepping down. It is a very low dividend payout ratio. Maybe your thought process about dropping that to 2%, and I will pass the line. Thanks.
Patrice Ouimet: Yeah. It is a difficult decision to make on where to land with this, whether last year we had done 7%. We always knew we would not necessarily stay at a very high level compared to what peers are doing, let us say, annually, because ultimately you need to grow the free cash flow at the same level to get to a similar ratio. What we wanted to do is to grow the dividend because we do believe in growing the dividend as we have done for many years now.
Patrice Ouimet: At this point, obviously, the business has seen some more volatility as well. We are focusing more of the dollars on debt repayment, and I am talking more of the US business as we integrate it into the consolidated numbers, and we thought that was a reasonable place. Obviously, our dividend yield is quite high right now when you look at the stock price.
Patrice Ouimet: It is not necessarily the factor we are using mainly to make that decision, but it is something we looked at as well. We will have to see in the future. We are not necessarily married to one percentage going forward, but we thought it was the appropriate thing to do given where we are and the guidance we are giving for next year.
Aravinda Galappatthige: Thank you.
Operator: Thank you. Your next question is from Drew McReynolds from RBC. Your line is now open.
Drew McReynolds: Yeah, thanks very much. Maybe for you starting out, Patrice, on the increase in financing expenses in the guidance for fiscal 2027. Is that just a rate, interest rates are higher, or is there anything else just in that guidance?
Patrice Ouimet: Yeah. There's a mix of things. One of them is rates. We have a portion of our borrowings, which is floating. The majority is fixed, but we have a portion that's floating, especially related to the US business, and the rates have been going up in the US, so that's one element. There's another element is the refinancing we did in Canada. It's not large, but we did issue a new tranche at a higher rate than the previous tranche. We had also some non-recurring gains last year in the financial expense that came through purchases we did of debt on the market. We've assumed, we typically don't project a number for that this year. We've assumed some costs related to an upcoming refinancing we'll have to do on a tranche in the US. I would say it's a mix of these four elements.
Drew McReynolds: Okay. Yeah, that's very helpful. Maybe secondly, on the margin outlook for American Broadband. Given the underlying pressure, you've done wonderful things on margins over the last couple of years, but just implied in your fiscal 2027 guidance, it seems to imply a step down here. Is that all related to maybe a deteriorating TV margin, just given what you're trying to do with some of the initiatives, or are there other dynamics here on the margin front?
Patrice Ouimet: Yeah. When you look at the US business, obviously given the competition, you have seen some reduction in the subscriber base. Not the cost base, the subscriber base. At the gross margin, which is not the number you see, it does not change anything. At the net margins or the EBITDA margin, we do have some fixed costs, so that plays into it. When we have a mix shift with less TV, actually, this helps. That goes the other way. This helps with the margin. There is some pricing pressure. When we acquire new customers or for customers that we have generally, there has been some pressure, not just for us, for other players as well. We have to absorb this.
Patrice Ouimet: Either we take it in the EBITDA, which impacts the margin negatively, or we offset it with some cost reductions, which we are also doing through the transformation. Given the intensity of competition today in the US, we are doing all these things, but the level of cost reductions is not enough to offset the pressure on revenue, which basically pressurizes the EBITDA margin.
Drew McReynolds: Okay. Yeah, makes sense. Last one from me. In your deck, you talk about welo being in a pre-inflection stage. Just wondering, in fiscal 2027, does that go post-inflection, or is that something for fiscal 2028? Thank you.
Fred Perron: Hi, Drew, it is Fred. A couple of things on welo, and then I will answer your question. A couple of things, reasons to feel good about that initiative. First, customer satisfaction is extremely high from the subscribers we have connected so far. We get 4.9 stars out of 5 on Google. NPS is as high as what we see on oxio in Canada and one of the highest I have ever seen in telecom around the world. We feel good about that. The margin on those subscribers is also as high, if not slightly higher than the margin that we get on the Breezeline brand. On volume and penetration, which is your question, we are still very much pre-inflection. It is hard to know for sure when the inflection in the S-curve will happen. It will happen. These things usually do follow an S-curve.
Fred Perron: As it relates to the outlook for the year, I would say we are not yet expecting a massive inflection in our forecast. That is hard to call. If the massive inflection does happen in the year, then we will be positively surprised.
Drew McReynolds: Okay. All very helpful. Thank you.
Operator: Thank you. Your next question is from Jérome Dubreuil from Desjardins Securities. Your line is now open.
Jérome Dubreuil: Thanks for taking my question. Just one for me. On leverage, obviously your level of distribution in terms of the dividend is still very manageable. I have it about a third of your free cash flow for the next year. So enables quite a bit of debt repayment. However, with what is going on with the EBITDA growth next year, do you think you can still deleverage on the net debt to EBITDA basis in 2027?
Patrice Ouimet: Yeah. We finished the year with 3.1x of debt to EBITDA, the consolidated level. Using the guidance we provided, let's say at the midpoint, you get to a small reduction, so you would be at around three times by year-end.
Jérome Dubreuil: Okay.
Operator: Thank you. Your next question is from Matthew Griffiths from Bank of America. Your line is now open.
Matthew Griffiths: Yeah. Hi, good morning. Thanks for taking the question. Maybe just on the subscriber performance. It seems like the headwinds in the US are spread more evenly across the entire footprint but less so in Ohio. As a two-part question here maybe. What should we expect as you launch welo across a greater portion of the footprint? If it is successful, and I know the timeframe is difficult to pin down, but is this a big tool for you guys, do you think, to reverse that trend and address the competitive pressures? Or is there more to come on how you are going to be addressing that in the future and we will stay tuned for future initiatives? Then just one separate one on the margins in the US. I hear you that there is some one-times at year-end, but there seemed to be a big year-over-year deterioration.
Matthew Griffiths: Curious if there is additional spending that is accompanying the transformation initiatives to try to implement these AI initiatives and to generate revenue and so on that you could call out, or if it is really just all on the competitive side. Thanks.
Fred Perron: Hi, Matt. It's Fred. I'll take the first one, and I'm sure Patrice will take the second one. I'll give you a somewhat long answer on the US competitive environment and what it means for our sub-trends, because I'm sure many listeners are curious about that topic. As we mentioned, the competitive environment got worse. We've been mentioning that at several conferences in recent months. It's a variety of factors hitting us at the same time. I'll mention them in growing order of importance. Satellite is there, but we only feel it in our most rural footprint, so it's not a major factor at this point. FWA is still present, but I would say it has slightly less velocity than a year or two ago, but it's still present. Really what's impacting us the most is various forms of overbuilding and rebuilding.
Fred Perron: This can come in three different factors. It can be a DSL player upgrading to fiber. It can be a PE-backed type fiber overbuilder coming as an additional player in our footprint. Or it could be a large existing cable operator coming in as an an overbuilder, often with fiber in our existing footprint. Now, those things have been happening for a while. It's not like they spike up all of a sudden in a quarter, but they've been progressively growing. On top of that, when those players build or overbuild, they're then very focused on filling the pipe. What you see is sometimes some pretty aggressive door-to-door blitzes, like we've seen this summer, trying to fill their pipes with very aggressive offers. There are offers like fiber for $50 for a 10-year price lock we've heard of.
Fred Perron: Whereas you hear from some analyst reports of green shoots of large telecom players in the US bringing their prices up, that is not yet what we see in the door-to-door and under-the-counter type channels. All of that makes the situation quite intense. You see it in our PSU results from Q4. I would not expect Q1 to be any better. As you look at longer-term trends, it's yet to be seen. It's a bit hard to call how this will unfold. There's a case to be made that people can't keep deploying this amount of capital with the cost of capital rising and ARPUs dropping. It's hard to think how that makes so much sense to do so much overbuilding. But even if it was to slow down, people will keep wanting to fill their pipe that they've just built for some time.
Fred Perron: Now, on your question on welo, as I was mentioning to Drew earlier
Fred Perron: We are only forecasting a modest inflection in welo for this year. It is always hard to call exactly when the inflection will be in a product like this. Yes, we are rolling out four more states, but it takes some time for people to get reviews on the product and get familiar with a completely different brand. If the inflection happens faster, sooner, we will be pleased. Overall, I would say, in summary, I would not necessarily expect a significant improvement in sub-trends this year in the US, but let us see how it goes.
Patrice Ouimet: On the margins in the US, I would say there are not that many costs related to our transformation other than our regular costs. We have staffing, some technology costs, but it is not something that is necessarily going up. I would say it is mainly the pressure we have in the business on the average revenue per user and the fact also that we have less users or less subscribers. It basically impacts the margin we have because we do have some fixed costs in there.
Matthew Griffiths: Okay, great. That is excellent color. Thank you so much, both of you.
Patrice Ouimet: Thank you.
Operator: Thank you. Your next question is from Stephanie Price from CIBC. Your line is now open.
Sam Schmidt: Hi there, it's Sam Schmidt on for Stephanie Price. Thanks for taking my question. You've talked about the optimization of capital investments to facilitate free cash flow generation in the past. Can you talk broadly about how you're thinking about capital investments here? Can you talk through puts and takes to the top versus bottom end of the free cash flow guide for 2027?
Fred Perron: Sure. Hi, it's Fred. Good to meet you. I'll comment on our capital investments and how we're able to reduce CapEx in the way we are. Patrice, you can comment on the cash flow. Essentially, we are quite comfortable with the reduction in CapEx that we're projecting for this year, and we are not concerned about any revenue impact of that reduction. The reason is the reduction is coming from a few different areas. There are a lot of synergies. I would even say we've talked about our transformation. We're entering the third year now of our transformation. The third year is disproportionately focused on CapEx benefits. As we see real synergies across the two countries and how we manage our network and how we manage our technology, we've been consolidating vendors, we've been consolidating teams.
Fred Perron: That's why we feel quite comfortable about the guide. We've also, as I said in the introductory comments, we've been investing in recent year in upgrading our network speeds, in both Canada and the US, and we're now reaching a point where we got more speed than we need. So we can pause these investments and be completely fine. So, we're very comfortable about the reduction and the lack of impact on revenue.
Patrice Ouimet: For the free cash flow range, it is difficult to comment further. We just provided a range today as we introduce the guidance for next year. Perhaps as we go on throughout the year, I will be able to answer that, but it is still early days in the year.
Sam Schmidt: That is helpful. Maybe one more on the AI initiatives that you mentioned in the prepared remarks. How are those progressing, and how should we think about impact in 2027 and beyond? Thanks.
Fred Perron: Sure. We are doing a lot on AI across both customer operations and customer service, as well as revenue management. We have talked about pre-inflection in other contexts on this call. I would say we are also pre-inflection in terms of the impact of those initiatives. We do expect some level of inflection to happen throughout the year. It is already in our guidance, and it helps offset other factors on the cost front.
Sam Schmidt: Thank you. I will pass the line.
Operator: Thank you. Your next question is from Maher Yaghi from Scotiabank. Your line is now open.
Maher Yaghi: Merci. I just wanted to ask you first, I know you stopped doing the hard promotional offers that you had late last year and well into early this year. Are the losses that you're seeing, the higher losses in internet in the US, are some of these guys that you onboarded during those offers that you did where you were giving 2 months free and $250 Visa cards discounts? Is this the reason why we're seeing this elevation recently in losses in some of your markets in the US?
Fred Perron: Hi, Maher, it's Fred. Yeah, thanks for pointing out that we've been rationalizing our promotional offers in the US. To your specific question, it was a small factor in the quarter. I would say, it's one of the reasons, especially in Ohio, why Ohio was not as good in the quarter, but it's not the biggest factor. The biggest factor is the other headwinds that I was mentioning before. The factor you're alluding to would be very temporary in nature, given that we've stopped doing those things anyways. More broadly,
Fred Perron: We are now getting a better NPV per customer we acquire in the US thanks to those rationalized offers. Even though the sub trends are not looking as good, the NPV is a little bit better.
Maher Yaghi: Okay. Makes sense. I just wanted to ask you also on this, how do you account for the prepaid gift cards that you are giving away during this period? Are these costs amortized over multiple months in your P&L or are they charged directly in the month where these customers were loaded back in January and February and December of last year?
Patrice Ouimet: Yeah. They get amortized over the expected life of the customer. Obviously, when we have specific promotions, we will have cohorts, and these cohorts will always have a portion of the customers that churn faster than others, and some will stay for a long time. So we use an average of this, and we amortize it over that period.
Maher Yaghi: Okay. When a customer leaves, if they receive that prepaid gift card and that person leaves, will you charge the rest of the unamortized portion in the same month that they leave? I guess, is this maybe why we are seeing the EBITDA getting hit so much in the US right now?
Patrice Ouimet: Yeah. We do not do it at the individual customer level. That would be very complex accounting. We do it at a higher level, but based on the real data. I would say it is not the main reason. The main reason is just the pricing in general. We do have, as part of the activities as well, there is some repricing of the base as well from time to time as people get to the end of promos and we have the new customers that come in at lower pricing than before. There has also been some cord-cutting on TV that has been going on, so that is why we signed this alternative provider as well that we did not have in our lineup of services before. But that also plays a little bit into it.
Maher Yaghi: Okay. All right. In terms of the pressure that you're seeing in the US, obviously, you're not in it alone. We're seeing a lot of your cable peers also in the US feel the same pressure. They're taking aggressive actions to reduce cost without talking about each independent company. They're able to offset, in a way, the revenue decline enough to not see the EBITDA reduction being a lot more than double the top line decline. What actions are possible for you to take in order to prevent this from continuing? I guess the question is into the future for too long.
Patrice Ouimet: Yeah. Hi, Maher. Without discussing too much other people's strategies, I know exactly what you're alluding to. There are rumors about some of the big cable players cutting large percentages of their staff.
Maher Yaghi: Right.
Fred Perron: In understanding what they do, the types of things that they're doing are things that we started doing two years ago. I would confidently claim that we were a bit ahead on those types of measures. You've heard us talk about merging the Canadian and US operations. We've taken significant percentages of the management layers, in particular, out of the business. Because we were ahead, there's less to catch up on for us at this point. However, what is still an opportunity is all the AI initiatives that we've talked about. There's lots of efficiency from AI in customer service operations and revenue management. That's where the next wave will come from. The short answer is that some of the quick hits that they're looking at, we've already done in the past.
Maher Yaghi: Okay, perfect. Just one last question on your Canadian operation. Obviously, a very different looking picture versus the US. Can you maybe tell us a little bit what's driving the subscriber loading? Is oxio still performing well above your Cogeco brand, and for how long you think that can continue to happen?
Fred Perron: Yeah, we see no sign of slowing down in oxio. In fact, we keep beating our internal records pretty much every quarter. That is coming mostly on our own footprint, so it comes with good margin on internet. As I said before, it does not come with TV, but at least the internet margin is good. So we see no sign of slowing down on that brand. What is very helpful is a lot of our sales come from referrals because customer satisfaction is so high, so the marketing cost is pretty low as well.
Maher Yaghi: Okay. Thank you very much.
Fred Perron: Thank you.
Operator: Thank you. Your next question is from Tim Casey from BMO Capital Markets. Your line is now open.
Tim Casey: Thanks. Just a quick one for me. Patrice, can you remind us how you are accounting for the wireless initiatives now? Is that reflected directly in the segmented EBITDA, or is there still some carriage in corporate? Maybe just tie that into the guidance. Is that having any meaningful impact on the guide for 2027 in terms of your outlook of EBITDA contributions or losses in 2027? Thanks.
Patrice Ouimet: Sure. It is all in the business units now when you look at the segmented results. In the US it has always been the case, and we have always had a very small team there. As you know, we are relying on an MVNO as well, and we have an external party as well that does the technology piece, like billing, and tracking of the minutes consumed or the gigs consumed. In Canada, because that was not available, we did it a different way, especially on the technology piece with a third party. Initially, it was housed in the corporate bucket for a while as we were pre-commercial or full commercial launch. Last year since we did it, so for fiscal 2026, we did move it. On a year-over-year, I am getting to the second part now.
Patrice Ouimet: Year-over-year for fiscal 2027, it is apples to apples for the Canadian piece because everything has already been moved to the Cogeco Connexion side or the Canadian side.
Tim Casey: Thank you.
Operator: Thank you. There are no further questions at this time. Please proceed with the closing remarks.
Patrice Ouimet: Well, good talking to you this morning. Thank you for your questions, and we remain available if you have other questions for us. Have a good day.
Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may now disconnect your lines.
