Cogeco Communications Inc (CGEAF) Q3 2026 Earnings Call Highlights: Navigating Challenges and ...

Cogeco Communications Inc (CGEAF) Q3 2026 Earnings Call Highlights: Navigating Challenges and ...

Stocks snap two-week win streak as AI-trade bleeds, pushing chips into bear market GuruFocus - - Free Cash Flow: $169 million for Q3, cumulative total of $450 million after three quarters. - Noncash Impairment Charge: CAD1.8 billion (USD1.3 billion) impacting goodwill, pretax CAD2.2 billion (USD1.6 billion).

- Current Income Tax Adjustment: Favorable impact of $4.5 million due to tax depreciation adjustments. - Current Income Tax Expense: Revised assumption of $25 million for fiscal ’26, down from $40 million. - Consolidated Debt Leverage: 3.2 times at the end of Q3.

- Term Loan B Debt Repurchase: USD21 million repurchased during the quarter. - Impairment of Intangible Assets: Pretax $26 million impairment recorded for radio assets. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points - Cogeco Communications Inc (CGEAF) generated $169 million in free cash flow this quarter, contributing to a cumulative total of $450 million after three quarters. - The Canadian segment showed strong performance with positive year-on-year growth in adjusted EBITDA for the third consecutive quarter.

- The oxio digital business is performing well with high customer satisfaction and referral rates. - Wireless sales are ahead of plan, with a clear churn benefit from fixed mobile convergence.

- The company is focusing on AI-based tools to generate additional revenue and operating efficiencies, aiming to sustain strong free cash flow performance. - Cogeco Communications Inc (CGEAF) took a noncash impairment charge of CAD1.8 billion (USD1.3 billion) due to ongoing competitive pressures in the US market. - The US cable sector is experiencing significant turbulence, impacting financial performance.

- The company expects Q4 revenue and adjusted EBITDA in the US to be lower than the previous year. - There is a material increase in customer losses expected in Q4 in the US, attributed to both internal and external factors. - The company is facing challenges with ARPU and subscriber trends in the US, leading to a cautious outlook on financial performance.

A: Patrice Ouimet, CFO: The impairment was due to changes in ARPU, subscriber trends, and market valuations. We conduct annual valuations, and recent market conditions necessitated this review. Frederic Perron, CEO:

Strategically, we’re focused on operational improvements in the US, but we’re open to optimizing shareholder value through various means. Q: What is the outlook for the US business, and when do you expect a return to growth? A: Frederic Perron, CEO: The competitive environment and inflation have increased pressures, affecting ARPU and customer retention.

While we see potential for improvement in PSUs, we anticipate continued financial challenges in the US. Our key improvement levers, including wireless and AI, will take several quarters to impact positively. Q: Can you provide insights into the Canadian business’s adjusted EBITDA growth and CapEx efficiency?

A: Patrice Ouimet, CFO: Excluding one-time items, Canadian adjusted EBITDA growth was around 2.5%. We’re working on CapEx efficiencies through procurement and self-installs, aiming to maintain CapEx intensity below 20% as we complete expansion programs. Q: How is the Welo brand performing in Ohio, and what are the expectations for its growth?

A: Frederic Perron, CEO: Ohio has shown PSU growth for four consecutive quarters, with Welo contributing modestly so far. We expect Welo to scale up over time, similar to oxio in Canada, with high customer satisfaction and referral rates indicating strong potential. Q: Are you seeing increased competition from satellite providers in the US?

A: Frederic Perron, CEO: Satellite competition is limited to very rural areas and is not a significant threat to our broader footprint. New satellite technologies are more of a marginal phenomenon. For the complete transcript of the earnings call, please refer to the full earnings call transcript.