Cogeco Communications Q2 Earnings Call Highlights

Key Points

• Cogeco delivered "solid" performance in Canada with positive year‑over‑year revenue and adjusted EBITDA growth and strong internet customer momentum, saying promotional intensity has eased and it has increased prices where appropriate.
• Intensified competition in the U.S. prompted a guidance reset: management cut full‑year outlook to revenue -2% to 4% and adjusted EBITDA -1.5% to 3.5% in constant currency, though executives report early signs of stabilization into the second half.
• Financial and strategic priorities include a reduced current tax rate (~8.5% after a CAD 14.8M benefit), debt leverage of 3.2x with a target of 3.0x by year‑end, and an on‑track transformation that adds new brands (oxio, Welo) and accelerated AI deployments to cut costs and improve customer retention.

Cogeco Communications TSE: CCA executives emphasized steady momentum in Canada and early signs of stabilization in the U.S. market during the company’s fiscal second-quarter 2026 earnings call, while also lowering full-year revenue and adjusted EBITDA guidance to reflect intensified competition south of the border.

Canada performance and customer momentum

President and CEO Frédéric Perron said Cogeco delivered “solid performance in Canada with positive year-on-year growth” in both revenue and adjusted EBITDA, even as overall PSU growth was “a bit more muted as expected.” He pointed to strong customer momentum in internet, noting that “in three of the past four quarters, we’ve had the best internet customer base percentage growth in all of Canadian telecom.”

On competitive conditions in Canada, Perron said the company “generally feel[s] good about the market,” adding that promotional intensity has “pulled back” and that Cogeco has “increased our prices as appropriate.” He described the outlook as “cautiously optimistic” for the Canadian market.

U.S. competition drives guidance reset

Management reiterated that the reported quarter was expected to be difficult in the U.S., but said it is seeing “signs of improvement” heading into the second half of the fiscal year. Perron told analysts competitive intensity in the U.S. had increased “even since our last earnings call,” prompting the guidance adjustment.

He said competitive pressure is not solely about headline pricing, but includes promotional behavior and network upgrades by rivals. Perron cited examples such as a competitor “offering fiber for the first six months for free” and another promoting a “five-year price lock,” alongside continued upgrades “from DSL to fiber for some of our competitors.”

Fixed wireless access (FWA) remained part of the landscape, but Perron said the company did not see an “uptick” from FWA during the quarter. He added that some competitors have shifted FWA focus toward business customers, “a segment we’re not as present in ourselves.” Perron also said Cogeco is watching a newly launched converged offer from a large U.S. telco, but the entry price is “quite high” and “we’re not feeling [it] yet.”

Still, Perron highlighted what he called a more constructive tone recently around customer acquisition tactics. He said the market had featured “very aggressive short-term customer attraction offers,” including “aggressive gift cards” and “months for free,” but that in recent weeks Cogeco has “pulled back” and sees “more constructive behavior.” He added the company has seen “early signs of return on more constructive pricing behaviors,” while cautioning it is “too early to call it an improvement.”

CFO Patrice Ouimet said the company updated its constant-currency financial guidelines. The new ranges are:

• Revenue: -2% to 4%, versus -1% to 3% previously
• Adjusted EBITDA: -1.5% to 3.5%, versus 0% to -2% previously

Ouimet said the changes “reflect higher pressure on our U.S. business coming from competition than initially expected” when guidance was introduced in October.

Second-half expectations, taxes, and deleveraging

Ouimet noted the company’s current income tax rate was negative in the quarter due to a CAD 14.8 million retroactive benefit tied to “the acceleration of tax depreciation on certain asset classes in Canada.” He said the current tax rate is now expected to be about 8.5% for the year, down from the prior assumption of 11.5%.

Looking ahead, Ouimet said Cogeco expects Canada to continue generating year-over-year revenue and adjusted EBITDA growth. In the U.S., he said revenue and adjusted EBITDA are expected to be down year over year in constant currency (or U.S. dollars), but the decline should be “at a smaller percentage” than in the first half of the year. He later added that EBITDA declines should improve more than revenue due to “cost improvements over time,” creating “some delta” between the two measures in the second half.

On the balance sheet, Ouimet said Cogeco’s debt leverage ratio was 3.2x in the second quarter, and the company plans to continue paying down debt with a goal of reaching 3.0x by fiscal year-end in August. Perron described the company as having “one of the best balance sheets in the industry,” with growing free cash flow and continued deleveraging, and said the dividend is “solid and well-funded,” with an option to resume buybacks “at some point in the future.”

Transformation plan, AI deployment, and new brands

Perron said Cogeco’s three-year transformation “remains on track,” with “substantial OpEx and CapEx synergies.” He said the company now has “four new diversified businesses,” naming oxio, Welo, and wireless offerings in both the U.S. and Canada, as additional growth sources.

In the U.S., Cogeco launched its Welo digital challenger brand in Ohio at the end of February, which Perron described as the “American equivalent” of oxio. He said Welo did not contribute volume to the quarter’s results because it launched in the final two days of the quarter. Over the next couple of quarters, he expects volumes to be “relatively small,” describing the growth trajectory as an “S-curve,” though he said it is “too soon to say” how long ramp-up will take.

Management also highlighted expanding use of artificial intelligence. Perron said Cogeco has “accelerated and broadened” AI work, building on existing customer-service chatbots. Over the coming months, the company plans to deploy “AI agents” to improve end-to-end internet troubleshooting, spanning network diagnostics, customer self-service, call centers, and technician support. He also pointed to AI use in ARPU management—particularly optimizing retention discounts by predicting churn risk—calling it a “real breakthrough” area with “a lot of money” at stake.

At Cogeco Média, Perron said digital advertising solutions are “steadily” growing, while “traditional radio advertising” remains pressured.

CapEx timing and free cash flow outlook framework

Ouimet said total CapEx guidelines were unchanged, though the company lowered its range for network-expansion CapEx. He attributed part of the timing shift in Canadian subsidized builds to factors “we don’t control,” such as access rights and permitting, and said Cogeco is “managing CapEx between the two years.”

Free cash flow guidance was also unchanged. Discussing longer-term expectations, Ouimet said the company will issue next year’s guidance in October, but added that as subsidized network expansion winds down, CapEx should ease. Perron added that consolidated cash flow is growing faster than the EBITDA headwinds the company is seeing, noting that 1% EBITDA pressure at the consolidated level equates to “CAD 15 million or so of EBITDA,” which he characterized as relatively small compared to the company’s cash flow base.

About Cogeco Communications TSE: CCA

Cogeco Communications Inc is a leading telecommunications provider committed to bringing people together through powerful communications and entertainment experiences. We provide world-class Internet, wireless, video and wireline phone services to 1.6 million residential and business subscribers in Canada and thirteen states in the United States. Our services are marketed under the Cogeco and oxio brands in Canada, and under the Breezeline brand in the U.S. We take pride in our strong presence in the communities we serve and in our commitment to a sustainable future.

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