Today, and welcome to the Cogeco and Cogeco Communications Q2 2025 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 of Cogeco Inc and Cogeco Communications Inc. Please go ahead, Mr. Ouimet. Thank you. Good morning, everyone. 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. 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 actual results to differ. With that, I will now pass the line to Fred Perron for opening remarks. Thank you, Patrice. Good morning, everyone. We're pleased to share our Q2 results today and also provide an update on our transformation. As a reminder, our plan is to create additional shareholder value by increasing our cash flow, sustaining our dividend growth, and reducing our debt, with the option of also resuming share buybacks at one point in the future. More specifically, we expect free cash flow to grow materially over the next two years. Let me be clear, this is not just an aspiration; it's a plan. This increase in cash flow will be enabled, in particular, by the natural end of a CapEx investment cycle in rural network builds and, to a lesser extent, network modernization efforts having reached our objectives. In addition, our relatively low dividend payout ratio as a percentage of cash flow provides sustainability and room for continued dividend growth. During the second quarter, we continued to pursue our three-year transformation program to further accelerate our performance, with the same five priorities we've been communicating since last year. That is, Canada-U.S. synergies, digitization of sales and service interactions, advanced analytics, network expansion completion, and wireless ramp-up. The merger of our U.S. and Canadian teams is now well behind us, and we're very pleased to see the high level of engagement and collaboration of our colleagues on both sides of the border. While a lot of organizational synergies are already being captured from this change, we're just starting to scratch the surface around technical and operational synergies. On the wireless front, U.S. volumes are starting to ramp up following an initial tuning period, and the preparation for an upcoming Canadian wireless launch is progressing well. We've now opened pre-registrations for our existing Canadian wireline customers as part of our wireless pre-launch lead generation campaign, and demand has exceeded our expectations so far. In terms of operational performance, second quarter results were ahead of expectations as the teams continued to execute well and as we deferred certain investments to the back half of the year. More specifically, our transformation efforts contributed to the expansion of our consolidated EBITDA margins. Our fiber-to-the-home expansion program added close to 7,000 new homes passed in the quarter, mainly in Canada. In Canada, we also experienced another quarter of strong internet subscriber metrics despite ongoing competitive intensity in the market. In the U.S., our customer satisfaction metrics and Ohio performance continue to show year-over-year improvement. At Cogeco Connexion, our Canadian telecommunications business, we grew our internet customer base by a total of 8,300 subscribers this quarter. We've been adding customers under both the Cogeco and Oxio brands over the past year. Our Ontario-subsidized network expansion program will continue throughout fiscal 2025, with an expected completion in fiscal 2026. As a reminder, our Quebec network expansion program was largely completed in our previous fiscal year, and we're very satisfied with our customer additions in the completed regions of Quebec and Ontario to date, with higher customer penetration levels than target. We've now increased the number of Canadian homes passed by nearly 145,000 since the beginning of fiscal 2022, primarily via fiber-to-the-home and in collaboration with governments. At Breezeline, EBITDA in constant currency was stable with last year as revenue pressures from industry headwinds were offset by transformation-related cost savings. We're seeing increasing subscriber tenure resulting from higher customer satisfaction and an improved mix of higher margin services as a greater proportion of our Breezeline customers take increasingly fast internet speeds. This has helped offset the decline in subscribers for entry-level internet services due to competition. At Cogeco Media, the radio advertising market faces ongoing challenges. However, our digital advertising solutions continue to be a growing contributor to revenue, and our listener engagement remains strong. In Montreal, for example, seven of the ten most listened-to radio programs in the city come from our stations. Let me turn the call over to Patrice to provide more details on our financial performance for the quarter. Patrice. Thank you, Fred. Let's start in Canada. Cogeco Connexion 's revenue declined by 0.9%, driven by the lower revenue per customer due to fewer video and wireline phone services subscribers, sorry, and a competitive pricing environment, partly offset by a growing internet subscriber base under both the Cogeco and Oxio brands over the past year and a contribution from the NRBN acquisition. Adjusted EBITDA declined by 2.8% in constant currency due to lower revenue and higher operating expenses to drive subscriber growth. In the U.S., Breezeline's revenue declined by 4.5% in constant currency due to the cumulative decline in the subscriber base, especially for entry-level services and non-internet services, partly offset by an improving product mix. Adjusted EBITDA was stable, driven by cost reduction initiatives and operating efficiencies. Turning to our consolidated numbers for Cogeco Communications, at the consolidated level, revenue declined by 2.7%, and EBITDA was stable in constant currency. The decline in revenue was driven by lower revenue in both the U.S. and Canadian segments, while the stable adjusted EBITDA was due to operating efficiencies and lower corporate costs. Diluted earnings per share declined by 20% in reported currency due to higher D&A expenses, higher acquisition integration and restructuring expenses, and higher taxes, partially offset by lower financial expenses and the appreciation of the U.S. dollar. Capital intensity was 21.6%, down from 23.4% last year due to lower spending in Canada, partially offset by higher spending in the U.S. Excluding network expansion projects, capital intensity was 19.4%. Free cash flow in constant currency increased by 12.8%, largely due to lower capital expenditures and financial expenses. Our net debt-to-adjusted EBITDA ratio was 3.4 turns at the end of the quarter, unchanged from Q1 due to the negative impact of exchange rates on our U.S. denominated debt, as it takes more time for EBITDA to fully reflect the FX impact. We continue to target a net debt-to-EBITDA ratio in the low-three turns range over time, and we declared a quarterly dividend of CAD 0.922 per share. At Cogeco Inc, revenue in constant currency decreased by 2.7%, and adjusted EBITDA was stable as a result of Cogeco Communications' performance. Media's operations revenue decreased by 2.7% due to challenging competitive dynamics in the radio advertising market, partially offset by positive contributions from digital advertising revenue. A dividend of CAD 0.922 per share was also declared for the quarter at Cogeco Inc. Now, turning to financial guidelines for Cogeco Communications' fiscal year 2025, we are maintaining our annual guidelines, which we first provided to investors in October. As it relates to the upcoming Q3, we expect both consolidated revenue and adjusted EBITDA in constant currency to decrease in the low single digits compared to last year. Capital intensity is anticipated to be approximately 350 basis points above Q3 of last year. At Cogeco Connexion, with the acquisition of NRBN now fully lapped, we expect Q3 revenue to decrease in the low single digits due to customer base being offset by video and wireline cord cutting and competitive pricing pressures. Adjusted EBITDA is expected to decrease in the low to mid single digits, reflecting lower revenue and higher operating expenses, which includes spending related to subscriber growth and transformation initiatives. At Breezeline, we expect in constant currency a mid single digit decrease in revenue versus last year, reflecting a lower subscriber base. We expect stable EBITDA year over year as operating cost discipline and lower video content costs are expected to offset the revenue decline. Below the EBITDA line at the consolidated level, with our restructuring program largely complete, we expect acquisition integration and restructuring costs to be approximately $4 million in Q3, which partially relates to IT cloud implementation costs. In regard to our Q3 financial expense, we expect it to be about $2 million higher than reported in Q2 using today's FX rates. At Cogeco Inc, we are also maintaining financial guidelines. Fred and I will be happy to take your questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch-tone phone. 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. 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 Maher Yaghi with Scotiabank. Your line is now open. Great. Thank you for taking my question, and thank you for the detailed outlook for Q3 and the rest of the year, Patrice. I wanted to just focus a little bit on the U.S. side to start. You're having much better churn metrics in Ohio. What else can you do for the rest of the business in the U.S. to stem the decline in broadband disconnections? We saw the year-on-year disconnections accelerate a little bit here in Q2 versus Q1. Can you maybe just discuss what drove that acceleration in the disconnections, and do you have any plan to attack the market? We've seen some of your peers in the cable industry lean on wireless to support the cable metrics. Comcast is launching a plan shortly. What can you do to work on those metrics to improve them? Thank you. Hi, Maher. It's Fred. Maybe I can unpack the question first by talking about the market in the U.S., and then I can talk about some of our performance levers. It is true that we're showing sequential improvement in our U.S. PSUs. I would say that the competition in the market, Maher, remains elevated. Over time, we do expect FWA to slow down a bit, and this is just based on the numbers that the three FWA players report in terms of their future targets. You look at those numbers, and we should see a deceleration based on what they're forecasting. We have not seen that deceleration yet, but it should come over time. We've actually seen over the past few weeks a slight further uptick in competition as some of the fiber players, for example, in the Northeast, there was one in particular that increased their promotional intensity in recent weeks, and we're feeling it in our Q3 PSUs right now. That being said, that may be tactical and short-lived, so I wouldn't read too much into it. As it relates to the other part of the question, which is, what can we do? We're seeing an acceleration of our wireless sales, which, as you've pointed out, over time do become a contributor to cable core performance. You've seen it from the big two out there. That's one. The other one is we're exploring how we could possibly use a dual-brand strategy to compete in the U.S. market, leveraging, for example, an oxio-like strategy. We're not ready to announce anything today, but that's just something that we're looking at. Thirdly, as the OTT players keep raising their prices, and some of these prices are really getting quite high, we're seeing green shoots of possible deceleration in U.S. TV cord cutting. Last but not least, there's a lot we can do in terms of continuing to improve our ongoing sales and marketing blocking and tackling, which we are in the process of doing right now. I would also add, in conclusion, that we're seeing material improvements in our U.S. customer satisfaction due to a number of operational improvements, and that will be a net positive contributor to our business over time. Can I ask from a strategic point of view, do you see some of your peers in the U.S. are leaning on wireless too, and essentially giving a free line of wireless to subsidize the retention on the cable side? What's your view, your broad view on going in that direction or sustaining that kind of promotional effort long-term? Is it feasible for you given your cost structure and your view on what it takes to reduce churn as fixed wireless continues to be a headwind? Sure. Our wireless strategy in the U.S., and by the way, Canada will not be that different, is primarily about churn reduction and discount reduction on the wireline business. We are not targeting hugely positive gross contribution margin on those new wireless ads, and the benefit will come from the wireline, as you pointed out. That allows us to be fairly aggressive on wireless. We have a fair amount of wiggle room there. I am not going to comment too much on specific pricing strategy. Certainly, giving wireless for free on a promotional time-limited basis is always an option. Just generally, if we need to be aggressive, we can be, as I said earlier. [Foreign language] Thank you. Thank you. Your next question comes from the line of Aravinda Galappatthige from Canaccord Genuity. Please go ahead. Good morning. Thanks for taking my questions. Two from me. I just wanted to focus on the profitability side in the U.S. Obviously, even on a constant currency basis, you've been able to stabilize EBITDA, and judging by Patrice's comments, I mean, that's going to be sustained into Q3. Even with the competitive pressure, Fred, that you talked about, do you feel that that profitability and Breezeline can be sustained, especially when you kind of layer in any tailwinds from wireless and sort of the streamlined structure that you have? Secondly, in Canada, just wanted to get a sense of any changes to churn. I know there was one of your price increases occurred in March. Any kind of reaction or impact to that, and maybe an update on the competitive conditions there? Thank you. Sure. I can talk generally about U.S. commercial trends, and then I'll answer your second question about the Canadian rate increase as well. In the U.S., there are a few things that are giving us good tailwinds from a profitability perspective, Aravinda. The first one is TV cord cutting is happening at little and sometimes no margin. You are losing empty calories there. Whereas some of our PSU and certainly revenue decline that we are reporting, sometimes we lose very little profitability from that. We are also seeing that on the internet side, some of the customers that we are losing tend to be lower ARPU because they go towards FWA. We do see that on the legacy base, given that we still have a technology advantage in many of the markets where we operate, that we are still able to realize healthy annual rate increases. I would also add on the cost side that we keep overperforming in terms of our cost reduction, and we do not see an end in sight on this one because the cost reduction is happening not just from squeezing, but from actually reducing customer demand. We are seeing material declines in the rate of customers calling us with issues and the rate of customers asking for a truck roll. Even when they do call us, we are seeing a very large increase in the number of chatbot interactions and the increase in chats as well. You put all these things together, and I would say we do feel good about U.S. profitability. Patrice, I do not know if you wanted to add anything on that topic. I think I'm clear. On the second part of your question about Canadian rate increases, the rate increase that we implemented in Canada on March 1st was actually slightly smaller than last year. What we are seeing is it is pretty calm. We are not seeing much churn from it, but we rarely see much churn from it. What we would see more is calls for retention and new discounts. So far, it has been pretty calm, Aravinda. Great. Thank you very much. I'll pass the line. Thank you. Your next question comes from the line of Vince Valentini from TD Cowen. Please go ahead. Yeah. Thanks very much. First question is on your guidance, especially for CapEx and free cash flow. You seem to be trending below the low end of CapEx and above the high end of the free cash flow targets you set for the year. Are you highly confident this is just timing and you have detailed schedules for construction in the second half of the year to catch back up, or is it possible that we will end up at least in the better end of both of those ranges? I will throw the second question out at the same time, just so you can stew on it. There seems like there's been a fair amount of chatter on a process to look at divesting your Florida fiber assets. Is there anything you can tell us there? Is there truth that that's an ongoing process? If so, any thoughts on how it's going and what the timeline might be? Thank you. Sure. Hi, Vince. On the first question, it's still early. For CapEx, the free cash flow is directly linked to it and can be volatile during the year, especially when we look at the seasons to build. There will be higher CapEx in Q3, as I mentioned earlier, and there will be some in Q4 as well. I would not assume necessarily that we'll come in at the low end of CapEx, but we feel comfortable that we'll be within the range that we mentioned. I would say probably a similar story on free cash flow. Next time we do a report, there's going to be just one quarter left. We'll see if we're trending a little better, but for now, we feel comfortable with the ranges we gave. On Florida? Yeah. Sure. On the second question on asset pruning, I'll answer it more generally. We have not commented anything to whatever comes out from journalists, but just generally, it's something we've said before. We're still interested in pruning some assets in the U.S. if we think it makes sense operationally, strategically, and financially. It's still something we're looking at right now. That's all we can comment on at this point. Fair enough. Thank you. Thank you. Thank you. Your next question comes from the line of Drew McReynolds from RBC. Please go ahead. Yeah. Thanks very much. Good morning. Maybe first for you, Frédéric, on the wireless strategy and your objective of churn reduction, can you give us a sense just what kind of wireless penetration generally is required before you see that inflection point on the churn reduction on the cable business and just how you're looking at that from either penetration or timing perspective? Then secondly, maybe for you, Patrice, on the level of reinvestment through the transformation that you're making. I don't know if you can quantify this, but ultimately, when that transformation begins to wind down, in terms of basis points of margin, what kind of reinvestment comes out of the numbers that we're seeing right now on a run rate basis? In the context of the question, it's clearly you're seeing very good efficiency gains, which is great to see. I'm just wondering if we get a step down in OpEx or a gradual decline as that reinvestment comes out of the equation. Thank you. Hi, Drew. It's Fred. Thanks for the first question on wireless. First, let me start by saying, Drew, that in both countries, our wireless kind of OpEx investments, and there's very little CapEx, you already see most of it in our current financials. I wouldn't expect a big increase there. It is mostly upside from here, therefore. In terms of how fast the upside comes, I think a good proxy to use, Drew, would be the U.S. cable MVNOs, both in terms of the end penetration that they reach as well as the time that it takes for the payback to really show. As you look at those, you'll see that it's a lower penetration level than truly fully converged players who have both infrastructures. It does become accretive over time. When you listen to Charter and Comcast, they do talk about how it's a net positive contributor to their EBITDA. It is an S curve. As you launch a service like that, it takes time for your sales force to get good at selling it. The churn benefit kicks in from the very beginning. It's just you do not have the full scale yet to absorb your fixed cost. After a little while, you start reaching critical mass, and then over time, your fixed costs, which, as I said before, are already in our financials, your fixed costs eventually end up being compensated for, and the whole thing turns out to be net positive. Short answer would be it's upside from here. Patience on the time that it takes to get that upside in cable MVNOs are a good proxy. On the second question, we have a number of elements to cover as part of the transformation. Some pay off quicker, and some pay off later in the three-year program. We are in year one right now. I would say at this point, we are obviously investing in certain areas, but it is not major investments and usually paid for by some savings we are able to generate. We have already seen this. Like you saw, the margins improve year over year, especially in the U.S. I know I have been asked before, where do we see this going forward? The current level of margins in the U.S. is probably something we can do for the balance of the year. I do not see a reason why in future years it would be a lower number. As we are able to generate bigger gains from the transformation, there could be some upside on margins there. As to your, I guess the second part of your question is, would we reduce investments we are making now? Given that they are financed by the benefits we are getting, I would not see a major impact from this going forward. It is just bigger benefits as we are able to activate the different elements of the plan. Okay. Thank you both. Thank you. Your next question comes from the line of Stephanie Price from CIBC. Please go ahead. Hi, good morning. Maybe following up on Drew's question there a little bit. It's halfway through the year, and EBITDA is up a little over 2% on a consolidated basis versus the full-year guide of stable EBITDA. It sounds like you're seeing benefits from the transformation initiative. Just wondering how we should think about the second half of the year and the puts and takes around EBITDA and expenses in the back half. Yeah. You're—hi, Stephanie. You're talking at the consolidated level, right? Yeah, exactly. Yeah. Yes. Yeah. There are different elements in the back half of the year. I've provided a glimpse at Q3. Still a bit early for Q4, but obviously, we do have some price increases that we've put through in February and March for different products in the two countries. There is some seasonality to some expenses, especially when we look at marketing budgets and back to school that hit more in Q4. Different elements there. We've actually done better than what we thought initially for Q2, but some of the reason is that we do have expenses that will occur later on. As I said, basically in the opening remarks, we do expect that in Q3 for the EBITDA, it should be negative year over year in Canada and more stable in the U.S. in constant dollars. That gives you small pressure in Q3. Again, our plan as part of our annual guidance we did provide as stable. Hopefully, that answers your question. Thanks. Yeah. Maybe one more for me. We've seen a few M&A deals in the U.S. telecom space recently. Just curious if you anticipate any changes to the competitive landscape amid the further consolidation. It is still early days because some of these transactions have not occurred in areas where we operate. The ones that have been announced where sometimes it is in areas where we operate have not necessarily closed. I would not say that we saw major changes. It is very dynamic. Every week, there are new types of offers being put out by the different players in the different states that we operate in. It is still a bit early days. Okay. Thank you. Thank you. Your next question comes from the line of Jérôme Dubreuil from Desjardins. Please go ahead. Hey, [Foreign language]. Thanks for taking my question. Fred, you started the call talking about your potential for growing free cash flow over the next two years. On the public broadcast of one of the conferences you attended earlier this quarter, you were talking about growth of free cash flow of $150 million over the next two years. Wondering if you can confirm or maybe discuss that you still have this view here. Hi, Jérôme. Thanks for the question. Yes. For everyone's benefit, what we were talking about is the growth in cash flow from this fiscal year to fiscal 2027. I would say at this point, Jérôme, that indeed CAD 150 million would be a decent assumption to use. The reason for the increase is quite straightforward, which is we got our Ontario network expansion programs that we will complete by then. We are also quite pleased by how we were able to quietly modernize the rest of our network over time. By the time we reach fiscal 2027, we will have reached our objectives. You put those things together, and as you know, CapEx is relatively under our control. Therefore, a CAD 150 million increase by then is not a bad assumption. Great. I guess the obvious kind of strategic follow-up to that is that what would be the impact on EBITDA growth over the longer term? What I understand is that most of this is coming from CapEx reduction. Now you have planned deploying with new houses. I totally commend you for only investing on plans that make sense from an ROIC perspective. Do you think there's going to be a noticeable impact on the profitability side? You mean on the growth? Yes. Yeah, look, I think it will take—we have quite a lot of runway for these expansion programs to get fully penetrated. We reach very high penetration rates, and they do not happen immediately. We have quite a few years of room there in terms of growth. It is also not our only growth driver. We have talked about many others, such as we were talking with Drew earlier, that wireless will become more and more material over time, and especially in the time horizon that you and I are discussing now. On the modernization CapEx, we are really starting to reach levels that in many cases exceed what a customer can even use in terms of speed. That is the reason why modernization CapEx may ease off over time. Yeah. Jérôme, maybe if I can add also, every year, we will add some parts to our network. In areas where we operate, there are always new neighborhoods that are being built. We are always doing those. Obviously, those are high-return investments. We remain available to talk to different people, especially at the government level, when we want to participate in programs. It is just that there are no big ones coming up from what we are seeing, but we are doing some smaller ones. We have one in Virginia right now. It can be at the provincial in Canada or state level. The bigger one that we have been talking about in the past, the BEAD program, is something we will probably not do too much of. At the smaller level, there are some possibilities. [Foreign language] Thank you. Your next question comes from the line of Matthew Griffiths from Bank of America. Please go ahead. Great. Thanks for taking the question. On the same subject of the network modernization, sorry, there was no mention of kind of a DOCSIS 4.0 upgrade. Is that contemplated in that normal course upgrade cycle to the end of 2027? Or are you seeing customer usage not requiring that, so you're kind of delaying any kind of spending that would be related to that? Secondly, just on pricing in Canada, in the materials, you called out competitive pricing pressure, which isn't necessarily new. I was wondering if you're seeing that mostly on kind of the new gross ads, or are you seeing the pricing pressure affect your base where you're getting an increased number of subscribers within your base kind of repricing themselves lower? That's driving the competitive pricing pressure that you called out. Thanks. Sure. Hi, Matthew. It's Fred. On the second part of the question, I would not say there is anything dramatically different there in terms of the competitive pricing pressure. It is the same thing and the same trend we have been facing for a few years by now. The good news is we are still able to realize annual rate increases. We adjust them. As I mentioned earlier, we made it slightly smaller this year than we did last year, but that is in the tweaking space. Nothing major. Sure. On DOCSIS, yeah. On DOCSIS, we use different technologies, as you know. Our network is pretty much very close to being all DOCSIS 3.1. In most places, we have one gig or more in terms of download speeds. We've been building fiber to the home for many years, especially all the new areas. More recently, there are certain areas in the U.S. where we saw with new technologies an opportunity to go and do brownfield FTTH builds rather than go through the split and DOCSIS 4.0 way. We can go directly to fiber. We don't do this if it doesn't make sense financially. The costs have come down, and there are new technologies that allow us to do that. We started doing this. As for DOCSIS 4.0, it's still something we're planning to do over time, but we're not planning to do a big blitz with this and do it when it makes sense. It's not something that we have yet started to implement given we didn't have to do it from a demand standpoint. Also, when you look at the equipment costs, usually those come down over time. It makes sense to wait a bit. Yeah. I do not know if this was behind the question, Matt, but in the $150 million cash flow increase we are talking about, we do not anticipate big surprises coming from DOCSIS 4.0 erasing some of that. Okay. No, good to hear. Maybe if I can just sneak one more in just on the subscriber trends in the U.S. I know you've already spoken about improvements in Ohio, and then there's kind of some degradation outside of Ohio. Obviously, fixed wireless access has a role to play in that. In the past, Florida has been a little lumpy and maybe occasionally responsible for some of the outside-of-Ohio ups and downs that we see. Was there anything to call out on any kind of bulk agreement or anything that accounts for the losses outside of Ohio in this last period? No. Our Florida business has been quite stable. When I talked earlier about a slight uptick in competition, even going into Q3, it's mostly in Mid-Atlantic and Northeast. Okay. Okay. Very helpful. Thank you so much. Thank you. Thank you. There are no further questions at this time. I will now hand the call back to Mr. Patrice Ouimet for any closing remarks. Okay. Thanks everyone for participating today. As usual, feel free to call us if you have additional questions. Have a good day. Thank you. This concludes today's call. Thank you for participating. You may all disconnect.