Cogeco Reports Strong Q4 and Steady Outlook for Fiscal Year 2025

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Cogeco Reports Strong Q4 and Steady Outlook for Fiscal Year 2025

Cogeco Inc. (CGO) and its subsidiary Cogeco Communications Inc. (CCA) reported strong financial results for the fourth quarter of the fiscal year 2024, achieving robust free cash flow and meeting their annual guidance. In a recent earnings call, CEO Frederic Perron highlighted the company's progress in strategic initiatives, including the successful integration of U.S. and Canadian teams, the introduction of an AI-powered customer service chatbot, and significant rural network expansion.

Despite a slight decline in overall revenue, the company experienced a 4.2% increase in adjusted EBITDA and announced an 8% dividend hike to $0.922 per share.

Key Points:

  • Cogeco Inc. and Cogeco Communications Inc. met annual guidance with strong free cash flow in Q4.
  • The company added 14,000 home passes in Q4, totaling 253,000 since the fiscal year 2022.
  • Cogeco Connexion gained approximately 10,000 new internet subscribers; Breezeline's EBITDA grew by 2.4%.
  • The three-year transformation program is expected to enhance operational performance by the fiscal year 2025.
  • Financial guidance for fiscal year 2025 forecasts stable revenue and adjusted EBITDA.
  • Despite a 1% decline in revenue and a 10% drop in media operations revenue, the dividend increased by 8%, reaching $0.922 per share.

Company Outlook:

  • The fiscal year 2025 outlook predicts stable revenue and adjusted EBITDA on a constant currency basis.
  • Capital expenditures are expected to be between $650 million and $725 million, with capital intensity projected at 22% to 24%.
  • Free cash flow is anticipated to decline by 0% to 10% compared to the previous year.

Negative Highlights:

  • Overall revenue decreased by 1%, with media operations revenue dropping by 10% due to a challenging advertising market.
  • Cogeco Connexion forecasts a low single-digit decline in revenue and EBITDA.
  • While consolidated revenue and EBITDA are expected to remain stable in Q1, Breezeline forecasts a low single-digit revenue decline.

Positive Highlights:

  • Adjusted EBITDA grew by 4.2%, largely due to the impact of Cogeco Communications.
  • Diluted earnings per share increased from $1.87 to $1.99, supported by share buybacks.
  • Oxio's EBITDA growth is expected to contribute positively in dollar terms.

Performance Below Expectations:

  • A strategic shift in mobility services led to an impairment charge in Q4.

Q&A Highlights:

  • Mobility initiatives were included in the fiscal year 2025 guidance, with subscriber growth expected to take time.
  • Wireless spectrum flexibility was maintained following a partnership with a national operator.
  • Operational improvements in the U.S. are expected to enhance performance.
  • Potential divestitures are being considered for areas that do not meet strategic criteria.

In summary, Cogeco Inc. and Cogeco Communications Inc. closed the fiscal year 2024 positively with strong financials and a clear strategy for the upcoming year. The company's focus on strategic priorities and operational improvements positions it well in the competitive landscape of both the Canadian and U.S. markets. Despite some pressures, the increase in dividends and stable outlook for the fiscal year 2025 reflect confidence in long-term growth and performance.