Good day, and welcome to the Cogeco Inc. and Cogeco Communications Inc. Q1 2021 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Patrice Ouimet, Senior Vice President and Chief Financial Officer of Cogeco Inc. and Cogeco Communications Inc. Please go ahead, Mr. Ouimet. Good morning, everybody, and welcome to our first quarter conference call, which Philippe Jetté and I will cover. Before we begin this call, as usual, I'd like to remind listeners that the call is subject to forward-looking statements, which can be found in our press releases issued yesterday. I'll turn the call over to Philippe Jetté. Merci, Patrice. Good morning. Thank you for joining us to discuss the financial results of Cogeco Communications and Cogeco Inc. Let me first note that we are very pleased with the overall performance of Cogeco for the first quarter of 2021, as both our Canadian and American broadband segments showed strong increases in EBITDA compared to the first quarter of last year. This is largely explained by unique circumstances that were favorable to our business. During the quarter, we continued to experience some of the trends from the past quarters, higher demand from our residential high-speed internet products, and a deferral or reduction of certain expenses due to a more stable customer base as a result of the COVID-19 pandemic. In these unusual circumstances, we have decided to delay certain sales and marketing expenses to the second half of the year in both countries. As for our radio operations, they continue to be negatively impacted by the pandemic, but to a lesser extent than the previous quarter. Although we are pleased to report strong results in the current circumstances, we remain cautious in our management, as uncertainties remain on the potential of human, operating, and financial impact of the pandemic. Starting with Cogeco Connexion's recent initiatives, I am pleased to report that we closed the acquisition of DERYtelecom on December 14. The acquisition of the third-largest cable operator in the province of Quebec enables Cogeco Connexion to expand its activities in more than 200 municipalities in Quebec and adds approximately 100,000 customers to its base. This key strategic acquisition has increased our foothold in Quebec and is highly complementary in terms of geographic areas. We expect that the acquisition of DERY will generate superior growth relative to our current Canadian operations, as we will pursue DERY's network expansion and introduce Cogeco Connexion's product lineup. During the quarter, we continued to gradually roll out our IPTV service called EPICO, which is now offered in approximately 85% of our Canadian footprint. We are planning to launch a marketing campaign next week, which will allow us to attract new customers and upsell a portion of our current customer base. EPICO provides many benefits, such as customization settings for customers, access to the Google Play Store, integration with OTT platforms, a Wi-Fi connection, self-installation capabilities, and an overall lower delivery cost. We have continued to be active in bidding for network expansion projects as part of various government-sponsored programs aimed at providing high-speed internet to unserved and underserved areas. Cogeco was awarded a total of 25 projects in Quebec and Ontario, including four projects for DERYtelecom, since the programs were launched. We have submitted more than 100 additional projects, which are currently being reviewed. With deep roots in regions and rural communities in Ontario and Quebec, Cogeco is at the forefront of solving the connectivity challenges faced by consumers and businesses in underserved and unserved areas. With these network expansions, we will continue to help close the gap in digital access and extend our regional high-speed internet coverage. As we await the CRTC's conclusion on its mobile wireless services review, we continue to forge ahead with our plan to enter the mobile services market aimed at providing more choice to Canadian customers in the regions we serve. Turning to the key initiatives at Atlantic Broadband. The main focus in the last quarter has been to put in place a new offer strategy, which is simple, transparent, and puts broadband at the center of the customer experience. We expect our new Broadband First offer strategy to increase customer experience and satisfaction while improving both customer lifetime value and contribution margins. The Broadband First offer is currently in market and will be fully launched across the footprint during the second quarter. The related new pricing strategy revolves around the internet offering and puts less emphasis on bundling than in the previous construct. Customers will still have access to the full product lineup, but be incentivized to add more services through modular pricing. The video product, which still face sizable cost increases, will be priced in line with the cost of delivery and ensure that it continues to contribute to earnings in the long term. For this reason, it will generally no longer be offered to new customers as a standalone product, except for some bulk contract with higher bundling potential. With the increasing number of connected devices at home, it is essential to have a strong Wi-Fi customer experience, which means a stable network working well across the home and easy to set up and modify. Atlantic Broadband has therefore upgraded its Wi-Fi product and, as announced on January 11th, the launch of a new enhanced Wi-Fi solution. This new solution integrates a leading-edge customer-facing application, including parental controls and network optimization, while facilitating initial installation and providing remote assistance and diagnostics for proactive network maintenance. The solution also enables seamless integration of network extenders, which can be added as needed, depending on the size of the home. The Wi-Fi experience improvement is also planned to be launched at Cogeco Connexion shortly. As for Cogeco Media, its financial performance was better than expected, with a lower decline in revenue relative to the last quarter and improved EBITDA compared to the same quarter last year, as we have been maintaining our financial discipline given the continued impact of the pandemic on the advertising market. Regarding recent changes to our executive team, I am pleased to announce that Zouheir Mansourati has joined the Cogeco group at the end of November as Senior Vice President and Chief Technology Officer. Zouheir has nearly three decades of experience in the telecommunication industry, several executive positions planning and leading major broadband network implementations. Zouheir's years of experience in telecommunications, combined with his drive, leadership, and collaboration skills, will be instrumental in furthering Cogeco's technology and innovation strategy. I will now let Patrice discuss our financial results. Thank you, Philippe. For the quarter, revenue at Cogeco Communications is up 5.7% and EBITDA 10.5% in constant currency when compared to the previous year. This was driven by EBITDA growth of 8.9% at Cogeco Connexion and 14.3% at Atlantic Broadband. Consolidated revenue reached CAD 619 million, and EBITDA reached CAD 311 million, generating a margin of 60.3%. Free cash flow has also increased by 36.9% in constant currency. The increase is mainly due to higher EBITDA, but also a decline in capital expenditures, financial expenses, and current income tax. Capital intensity in the quarter was 18.8%, which is slightly lower than the 20% target we have for the full year. Quarterly dividend has been reconfirmed at CAD 0.64 for Cogeco Communications. Now I'll discuss the components of it. At Cogeco Connexion in Canada, revenue has increased by 2.2% relative to the same quarter last year, mainly due to the cumulative effects of sustained demand for residential high-speed internet since the beginning of the pandemic, a better product mix, and rate increases implemented for certain services. Cogeco Connexion's EBITDA increased by 8.9% as a result of increased revenue and a decline in operating expenses. The decline in OpEx is due partially to lower sales and marketing activity deferred to the second half of the year in the context of the pandemic and lower compensation expenses resulting from an operational optimization program implemented during the fourth quarter of last year. The broadband customer additions were slightly lower than usual in the quarter, but at higher ARPU due to a better product mix. The video product losses were in line with historical trends. Finally, the phone losses were also in line with historical trends, except that last year had an unusual addition due to bundling strategy used at the time. At Atlantic Broadband, revenue and constant currency increased by 9.8% in the first quarter compared to last year, while EBITDA increased by 14.3%. If we exclude the Thames Valley acquisition impact, revenue and EBITDA would have grown by 8.2% and 12.8%, respectively. Organic revenue growth comes mainly from residential and business internet service customer additions throughout the pandemic. Rate increases implemented for certain services and increased political advertising revenue related to the United States presidential election. Superior organic EBITDA growth was mainly due to revenue increasing at a greater pace than operating expenses. Similar to Cogeco Connexion, Atlantic Broadband deferred certain sales and marketing expenses to the second half of the year, primarily due to the COVID-19 situation. Also note that video contract cost increases normally take effect on January 1st and will be fully reflected in the second quarter results. Atlantic Broadband had very strong customer additions with 12,000 new internet customers and has continued to modestly grow video and phone customers as well for the third quarter in a row, partially thanks to new Florida bulk residential customer activations, which were stronger than usual during the quarter. Let us now take a look at Cogeco Inc. In the first quarter, consolidated revenue increased by 4.3% and EBITDA by 10.4% in constant currency. While the broadband business had strong results, the media business continued to be impacted by the pandemic due to certain segments of the retail industry reducing advertising budgets. Revenue related to the radio operations decreased by 13% versus last year in the first quarter. It is an improvement from the last quarter, the previous quarter, Q4, where we had a decrease of 29% year-over-year. We will continue to monitor the situation closely in the coming quarters, as uncertainty remains for the economy in general and more specifically for certain categories of advertising, with operations being in lockdown at the moment. Finally, the quarterly dividend has been reconfirmed for Cogeco Inc. at CAD 0.545 per share. We will now discuss guidelines. Cogeco Communications has revised its guidelines for the full year to reflect the DERYtelecom acquisition, which closed on December 14, and the stronger than expected first quarter results, especially at Atlantic Broadband. On a constant currency basis, we do expect mid to high single-digit percentage growth in consolidated revenue and EBITDA for fiscal 2021. The acquisition of DERYtelecom is expected to have a positive impact of approximately 3% on both revenue and EBITDA. Underlying those guidelines, at a Cogeco Connexion, we do expect to achieve mid to high single-digit growth in revenue and EBITDA for the year, which is a combination of the DERYtelecom acquisition and low single-digit organic growth. Note that EBITDA is expected to gradually decline in terms of growth year-over-year, decline over the next three quarters as sales and marketing costs ramp up in the balance of the year, and certain cost savings related to the pandemic are expected to decline in the second half of the year. Note that last year's comparative period in 2020, in the last two quarters of the year, was especially strong. At Atlantic Broadband, we expect mid to high single-digit growth in revenue and EBITDA, resulting from strong residential and business sectors and the continued expansion in Florida. Similar to Cogeco Connexion, Atlantic Broadband's growth should gradually decline over the next three quarters as a result of sales and marketing costs ramping up, internet growth gradually returning to pre-pandemic levels, and having the results of the Thames Valley acquisition in the comparative periods for Q3 and Q4. On a consolidated basis, capital intensity is expected to remain at 20%, and free cash flow on a constant currency basis is expected to grow at a low double-digit percentage. As for Cogeco Inc., we do expect, in constant currency, mid to high single-digit growth in revenue and EBITDA and a high single-digit percentage growth in free cash flow. I will now turn to Philippe for concluding remarks. Thank you, Patrice. On the basis of a strong first quarter, fiscal year 2021 looks very promising despite the unfavorable economic impacts related to the pandemic, as we will continue to manage our costs closely and pursue profitable growth through various organic initiatives and acquisitions when possible. Pro forma the DERYtelecom acquisition. Our 2.5x net leverage leaves ample room for other acquisitions and share buybacks. True to our commitment to bring new services and competitive choices to our communities, especially in underserved regions, we remain engaged in launching a mobile wireless service in the regions we serve, if the regulatory conditions are conducive to our entry in the market and are meeting our financial return objectives. Finally, I would like to highlight how proud I am that I achieved or surpassed essentially all of our corporate social responsibilities targets in the last fiscal year. We have been a trusted and reliable partner for our customers in this challenging environment, and we have contributed to the development of our employees in addition to surpassing our gender diversity objective. Furthermore, we have taken part in developing our communities, surpassing our target donations, and have efficiently managed our environmental footprint by reducing more GHG emissions than our target. Finally, we have maintained a sound culture and a strong corporate governance as we remain in the top tier of family-controlled, publicly listed Canadian companies as ranked by The Globe and Mail Board Games. Now we will be happy to answer your questions. If you would like to ask a question, please touch star followed by the number one on your telephone keypad. To withdraw your question, please press the pound key. Your first question comes from Vince Valentini from TD Securities. Please go ahead. Your line is open. Yeah. Thanks very much, and congratulations on these strong first quarter results. First, Patrice, probably, can you flesh out a bit more the deferred marketing costs that you're talking about, both in terms of quantity, if you can. Are we talking CAD 5 million or CAD 10 million that you expect to catch up on spending in the next three quarters? Also in terms of timing, I assume it starts in the second quarter if your launch of IPTV goes more public starting next week. I assume the costs ramp up at that time. That's question number one. Number two, just more broadly on allocation of capital and share buybacks. With your free cash flow guidance going up pretty substantially to low double digits from low single-digit growth for this year, and your balance sheet's obviously still pretty strong even after paying for DERYtelecom. Is there any consideration to increasing the share buyback program, either the NCIB getting more active or perhaps even a substantial issue of it? Thank you. Good morning, Vince. Yeah. On the OpEx side, this is a story for both countries for different reasons. What happened is the COVID situation has slowed down the number of connections and disconnections, and for that reason, we thought it was wiser to defer some of these expenses as the economy gets back to normal in the back end. You should expect that there's going to be more in Q2, but especially more than that in Q3 and Q4. It would be difficult to quantify what it is, because actually even the exact spending by quarter is not fully determined yet. What we would have normally spent this quarter without COVID is undetermined as well. That's why we prefer referring to yearly guidance. We provided we're a bit more precise than usual on ABB and CCX or Cogeco Connexion to help you with this. Difficult to quantify more than this, but I would say a ramp up throughout the year. You also know that our Q4 ends with the back to school, that's normally a period where there's more activity. On the capital allocation, we are absolutely in favor of buying back shares. We have been fairly active, I would say, over the past year, except in the fall. Given the circumstances that you know well, we were advised to not buy shares, that's why you did not see anything. We are planning to be active in the future in terms of buying back shares. Normally, an NCIB allows for significant capacity. Our program allows for up to 10% of the float, given that we haven't bought in a couple of months, we have ample capacity in that program. Thank you. Your next question comes from Jerome Dubreuil from Desjardins. Please go ahead. Your line is open. Yeah, thank you very much. Thanks for taking my question. We've seen a strong acceleration in U.S. growth. Can you please break down what proportion of this growth is due to political ads, rates increase, and maybe subscriber we can calculate it, but with the other two, please? Yeah. The political ads, this is something we don't control. Obviously, it depends on the agenda. It did add about 1% to revenue in the quarter versus last year and about 2% to EBITDA. This goes directly down to the EBITDA line because there's no cost attached to it. Now, in terms of price increases, subscriber increases, and also a better product mix, as we've been able to sell higher packages than usual. I would say it's a mix of all three. There's not necessarily one element that represents 80% of it, so it's a mix. Thanks. Regarding the acceleration in broadband net additions in the U.S., I'm just trying to understand if this could impact the seasonality of future net adds. Do you think there's a lot of summer homes maybe? Should we expect more seasonal disconnections going forward? Well, when we bought MetroCast, there was a bit of adjustment in the year-over-year comparison. We're past that now. I would not assume anything major. You should note, however, that Florida was stronger than usual in terms of new, I would say, lighting up of bulk contracts. These contracts take a bit of time between. Selling, building, and lighting up the building. Both in video and HSI, Florida has added about 3,000-4,000 PSUs. That's for both video and HSI. It's been a bit more spotty than usual, but still very good performance on HSI besides this. Going forward, we do expect to have better performance in the U.S. in terms of PSU additions than usual, given the COVID situation. Thank you. Your next question comes from Matthew Griffiths from Bank of America. Please go ahead, your line is open. Hi, thanks for taking the question. I wanted to ask about the Atlantic Broadband and the Broadband First strategy, which seems like a little bit of a pivot. I think previously, it was a focus on the bundle. I was just wondering what you're seeing in the U.S. that made you shift like this and what you hope the impact will be, going forward. Maybe separately, on the integration of DERYtelecom, if you could lay out some milestones that you're expecting in integration, whether it's, I'm thinking of the realization of costs that you may have to incur upfront, and maybe the realization of synergies as you go through the year. Anything you can talk about how the integration is expected to play out. Thanks. Thank you, Matthew. It's Philippe. I will address the Broadband First. Patrice will add more on DERYtelecom. To summarize the change or the shift that is happening in the market, it's in part driven by the technology change. Video was delivered on dedicated video networks, as we all know in the past. Now video is actually moving as an IP application or an IP service, over the top of these broadband, faster, and more quality broadband networks that we've been building everywhere. Not only broadband to connect to the high-speed internet, there's a strong increase there, but video consumption on top of broadband, is becoming more and more popular. That will certainly create a world where legacy video will remain for a long time as it winds down, and will take time. The new video markets are mostly broadband driven. That's why we're shifting to a Broadband First, making sure we can install fast and high-quality networks as well as Wi-Fi inside the home, to make sure that every device, every laptop, every iPad, every connected device inside the home, including the video devices, benefit from a strong Wi-Fi platform. That's the shift that is happening and that we're staying ahead of. Now for DERY. For DERYtelecom, actually, we closed about a month ago, and things are going well. Obviously, when we make acquisitions like this, there's an integration of the teams, a reporting line. That's been done already. There's also integration of the systems, which takes a bit more time. That's gonna be a bit later in the year. We do expect to generate additional revenues from bringing the Cogeco product lineup to DERYtelecom, including on the business side. This will start soon. There's cost synergies on procurement that is already in motion. I would say, I would expect that all these things will fall into place throughout the year. That was the plan initially. Starting next year, we're gonna be in a normal mode of operation. Okay, thanks. Your next question comes from Jeff Fan from Scotiabank. Please go ahead, your line is open. Thanks. Good morning. Hope you guys are all well. I want to follow up on the U.S. broadband only. I understand the rationale. I'm wondering what you think that move will have the impact on margins. We've seen other cable companies, smaller ones, secondary markets that are focused on broadband-only strategy. We've seen pretty significant margin expansion. Your ABB segment is about 45%. 60% margins are not unreasonable to think about. I'm wondering if you can comment there, in terms of the medium, longer-term impact. The second question is on Canada. Just to follow up on, Philippe, your comments about entering the wireless market. Leaving spectrum and leaving regulatory aside, from an operational perspective, I just wanna hear your thoughts or your take on the readiness of Cogeco to enter the market. Specifically, when we talk about things like billing systems that handle wireless customers whether you plan to invest in your own core retail location. Wondering if you can just touch on that, maybe in a general sense, about the potential cost impact when and if you do decide to enter as a wireless player. Thanks. Well, I'll just touch briefly on video broadband margins. Patrice can complement, I will answer your wireless question. On the shift to broadband, there's definitely an increase in margins there. We all know the contribution margins of broadband is good. As customers will shift from a legacy video network delivery and legacy CPEs as well that are very costly to the new ones, IP-based, on the broadband fiber optic networks that we're building, there will be an improvement over time there. That's a gain. Now, on the wireless side, it's still too soon with absence of decisions from the CRTC and other decisions that Industry Canada could make and announce in the near-term future to disclose our go-to-market strategy. Let me say this, on the adding a mobile wireless layer to our networks in the current operating areas, we have ample capacity. The transport of all the signals can be made very easily. We simply have to add the radio access network. The core in terms of transport is already built. It is feeding our broadband strategy today. We have a number of systems that were upgraded in recent years that could handle easily things like commissioning and billing. There is a very small addition to the core network that we need to make. We know exactly what to do and how to do it. Now, as to the model for the go-to-market that we will choose, I've said it many times, we will bring more competition to the marketplace with a leading-edge market in terms of go-to-market. I won't expand more for obvious competitive reasons at this point, but we are first and foremost expecting the CRTC and ISED to address the barriers to entry for regional players like Cogeco throughout Canada. Back to margins with Patrice. Basically, our strategy in the U.S. is more an evolution rather than a break from what we've been doing in the past. Obviously, over time, we've been migrating towards, like the whole industry, having the broadband as the key product. The way we're restructuring our go-to-market approach, it's going to be more visible than it used to. It's more of an evolution, and as Philippe said, with new tools as well, new, better devices in the home to provide a better service from a broadband standpoint. That being said, we did generate about 45% in margin last year. We would expect margin to increase a little bit this year. Our goal is to remain profitable and generate free cash flow on video, which we're doing today. As we move into an IP mode eventually, we're not there yet in the U.S., this will help decrease costs as well and make sure that we have a valuable and profitable video product. Difficult to say where we'll be in the future, but we would rather have a gradual increase in margins over a good revenue base than accelerate margin on a declining revenue base on video. That's the goal at this point. Thanks for the color. Maybe we could just simply add as well as the CPE are costing far less with IP on IP and broadband networks. The CapEx savings there will also be reused for network expansion. We will grow these broadband networks, and the video expenditures will decline. Great. Thank you. Your last question comes from Tim Casey from BMO Capital Markets. Please go ahead. Your line is open. Hi, thanks. I'm wondering if you could give us, given as you say, it's an evolution in the broadband, would you be willing to share any numbers on what the ARPU levels you're getting out of broadband in both territories? Second, just a point of clarification, Patrice. You said prices start to come in in January, I believe, in the U.S. Could you just review for us the magnitude of price increases, I guess, on both sides of the border and when they would kick in? Thank you. Okay. Let me start with the last one. On video price increases, we normally sign multi-year contracts. Usually, they're two or three-year contracts, and there's some years that are more lengthy than others. This year there's a bit more than last year, starting in January 1st. It's not all the contracts, it's a portion of them. In Canada, it's a bit more normal. Overall, in both countries, on a per customer basis, we expect mid-single digit increase in video costs. It used to be higher than this in the U.S. It used to be low double digits at one point. That's why we're managing this closely. Sometimes we have to make choices also on the video programming that we carry to make sure that the channels we carry are profitable and we can generate the revenue on. That would give you a view of it. You should not expect a great increase, but even last year, a number of programs did kick in on January 1st. We don't segregate our revenue or our ARPU by product. That's not really something I could comment on at this point. However, with the new strategy, which is early days, we have it in market right now. We've had it in a non-promoted fashion. It's small scale, just to test the water. It's going well, and we've been able to increase ARPUs, especially on the broadband side so far with what we have. We'll be able to talk more to that once we're at a larger scale in market and comment on what we're seeing. Thank you. We do have a follow-up from Vince Valentini from TD Securities. Please go ahead. Your line is open. Thanks for getting me back in. A couple things we haven't addressed, Patrice. The timing of your own rate increases to customers as opposed to the programming cost increases that you're absorbing. I think some of that stuff got delayed because of the pandemic over the past 12 months. Can you just level set us and remind us when the last price increases were and what the most likely schedule is for the next round? The other question, just for Philippe, if you want, is the playbook for acquisitions in the U.S. Any update there on how the pipeline looks of the targets that could become available? Is there much for sale? Are prices still pretty high? Do you have any hopes that something might get done in the next 6-12 months? That'd be great. Thanks. Okay. On the price increases, we did have some price increases on some products in Ontario in June, and we had some in Quebec starting in November. Overall, if you take the two of them, it's about 3% on an annual basis, and that does include video as well. We need to obviously increase prices on our products to match inflation and we need to be able to maintain margins on video. That's about 3%. In the U.S., it was about 4%, and the price increases were done in September. As to the future, it's something we generally don't comment on because we prefer announcing it to our customers at the same time. These decisions vary during the year, especially during COVID. As you pointed out, we did slow down the price increases by a number of months to help our customers. We'll have to see how this plays out in the future. I would not necessarily assume anything unusual going forward. For M&A in the U.S., we continue to view the sizable potential in the U.S. market. There's a number of companies, still between 30-40, maybe a little bit more, but the pandemic has certainly had an effect there. Conversations are taking place, but negotiations have been slowed down. We continue to be optimistic. We continue to work very hard on acquisitions. You've seen that we've closed three in the past year. We would like to do more than that. We are good partners, but we need to take the time it takes to do it well and do it right. Thank you. I would now like to turn the call over to the presenters for any closing remarks. Okay. Well, thanks for participating today. We're going to be back with the second quarter results in April, and feel free to call us if you have any questions in the meantime. Thank you. Have a good day. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.