Cogeco (CGO) Q1 2025 earnings summary

Executive summary

• Strong Internet subscriber growth in Canada and improving U.S. subscriber performance contributed to positive momentum, supported by early progress on transformation priorities and a three-year program focused on synergies, digitization, analytics, and network expansion.

• Revenue declined 1.4% year-over-year, mainly due to lower U.S. telecom and media revenues, while Canadian telecom remained stable.

• Unified management of Breezeline and Cogeco Connexion aims to drive synergies and sustainable growth, with a focus on capital-light wireless expansion and fibre-to-the-home growth in both Canada and the U.S.

• Consistent return of capital to shareholders, including 16% share repurchase since 2019 and annual dividend increases.

• Wireless launch in Canada remains on track for the coming quarters, and Breezeline Mobile launched in 2024 in the U.S.

Financial highlights

• Revenue was $764.96M (down 1.4% year-over-year); Adjusted EBITDA rose 1.4% to $371.1M, driven by higher Canadian telecom EBITDA and cost efficiencies.

• Net profit increased 9.8% to $108.4M, aided by a $13.8M gain from a sale and leaseback transaction and lower financial expenses.

• Free cash flow grew 7.3% to $152.5M, supported by asset disposals, despite higher taxes and capital expenditures.

• Capital intensity was 20.4% (up from 19.6% last year), or 17.4% excluding network expansion projects.

• Quarterly dividend increased 8.0% to $0.922 per share.

Outlook and guidance

• Fiscal 2025 guidance is maintained, with expectations of stable revenue and adjusted EBITDA on a constant currency basis, and continued network expansion and operational transformation.

• Net capital expenditures projected at $650M–$725M, with $140M–$190M for network expansion projects; capital intensity expected to rise to 22%–24%.

• Free cash flow (excluding network expansions) projected to decrease by up to 10%.

• Q2 revenue and Adjusted EBITDA expected to decrease low single digits year-over-year due to competition and investments.

• D&A expense to be slightly above last quarter; restructuring costs of CAD 4–5 million expected in Q2.