Cogeco (CGO) Q2 2025 earnings summary

Executive summary

• Transformation program underway, focusing on Canada-U.S. synergies, digitization, analytics, wireless, and network expansion, with unified management and customer satisfaction improvements in both markets.

• Ongoing expansion into wireless services and fibre-to-the-home, leveraging capital-light MVNO models, government subsidies, and strong pre-registrations in Canada.

• Fiscal 2025 guidance maintained, with stable performance in both Canadian and U.S. segments and a focus on operational efficiencies.

• Free cash flow expected to grow materially over the next two years, driven by lower CapEx and network modernization.

• Dividend increased 8% to $0.922 per share, with a sustainable payout ratio and ongoing share repurchases.

Financial highlights

• Q2 revenue was $753.2M, up 0.2% as reported but down 2.7% in constant currency; LTM revenue at $2.98B.

• Adjusted EBITDA rose 2.6% to $356.9M in Q2; LTM Adjusted EBITDA at $1.44B with a 48% margin.

• Profit for the period fell 18.4% to $76.6M; diluted EPS down 18.3% to $1.88; adjusted diluted EPS down 9.4% to $2.11.

• Free cash flow increased 12.3% to $112.8M in Q2; LTM free cash flow (excluding network expansions) at $591M.

• Net capital expenditures down 7.5% to $158.9M in Q2; capital intensity at 21.4%.

Outlook and guidance

• Fiscal 2025 revenue and Adjusted EBITDA expected to remain stable versus 2024, with continued focus on transformation and operational optimization.

• Net capital expenditures projected at $650M–$725M, with $140M–$190M for network expansion.

• Free cash flow (excluding network expansions) expected to decrease by up to 10% year-over-year.

• Capital intensity in Q3 anticipated to be 350 bps above last year.

• Free cash flow projected to grow by CAD 150 million by fiscal 2027, mainly from reduced CapEx.