Cogeco Inc. Q1 2026 Earnings Call - U.S. Turnaround Showing Material Subscriber Improvement with Stable Canadian Performance

Conference Moderator: Good day, and welcome to Cogeco Inc. and Cogeco Communications Inc. Q1 2026 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.

Patrice Ouimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: Good morning, and welcome to our first 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 our actual results to differ. With that, I’ll pass the line to Fred Perron for opening remarks.

Fred Perron, CEO, Cogeco Inc. and Cogeco Communications Inc.: Merci, Patrice. Good morning, everyone, and a warm, happy New Year. Our consolidated results for the quarter were in line with our plan, as well as what we’d mentioned to you last quarter, and we’re on track to deliver our guidance for the full year for all KPIs. In the U.S., our turnaround is working. We’ve materially improved our subscriber trends for a second consecutive quarter, just as we said we would, translating into our best U.S. customer metrics in the past 15 quarters, and we’re just getting started. Our goal is now to grow our customer base across our entire U.S. operation on a repeatable basis. We had told you that this was the goal for Ohio in the past, and we’re now delivering on that, so we’re now further raising our ambition in light of our latest plans and progress.

We won’t be hitting that new ambition next quarter quite yet, but it is within realistic reach in the medium term. It’s important to remind everyone of a few key points about our American business. First, in half of our U.S. footprint, our penetration is still below 20%, which gives us ample room to keep growing our customer base in those areas and offset any losses in other regions. Second, we’re making great progress at selectively upgrading our network in a capital-efficient manner, including the launch of 2.5 gigabit speeds during the quarter, which is helping us protect and grow our business in key areas. Third, we’re still in the process of ramping up new sales channels and beefing up important marketing capabilities. We’re also launching an oxio-like fully digital second brand next month.

Thanks to the above points and more, we’re confident about materially improving financial trends for our U.S. business starting in the second half of this year. This was already recognized by Moody’s and S&P, who both improved their outlook on our debt in recent weeks, while DBRS reaffirmed its stable outlook. In Canada, our performance remains solid and resilient, with positive year-on-year EBITDA trends. We continue to consistently grow our customer base, and our wireless subscriber growth is also going well. Wireline competitive intensity got a little heated in some of our markets during Black Friday and through the holidays, so we expect a more modest wireline customer growth in the upcoming Q2, but this remains manageable overall from a revenue perspective.

Before turning to our radio operations, I’d like to reflect on yesterday’s report released by the Commission for Complaints for Telecom and Television Services, which ranked Cogeco as the best telecommunications company in Canada in terms of customer complaint reduction when aggregating brands. In a year where complaints within the telecom industry rose by 17%, Cogeco made significant progress in improving its customer service, which has resulted in a leading 15% reduction in customer complaints versus the prior year, a 25% reduction in billing complaints, and no breaches to the Internet Code. At Cogeco Media, Q1 revenue increased again this quarter on a year-over-year basis, lifted by strength in our digital advertising solutions and continued listener engagement. So, in closing, I’d summarize our overall situation by saying that our three-year transformation is on track, that our Canadian performance is resilient and solid, our U.S.

Turnaround is working, and last but not least, we continue to have one of the best balance sheets and cash flow profiles in the industry, which positions us well to keep increasing shareholder value over time, just as we have been. On that, I’ll turn it over to Patrice for more details about our results.

Patrice Ouimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: So thank you, Fred. So, in Canada, Cogeco Connexion’s revenue was stable in the first quarter, as we had a mix of a higher internet subscriber base, which added 8,900 internet subscribers during the quarter, and lower revenue per customer from fewer video and wireline phone subscribers. Adjusted EBITDA grew by 2% in constant currency due to stable revenue and lower operating expenses, resulting mainly from cost reduction initiatives and operating efficiencies coming from our three-year transformation program. We added 1,100 home passes during the quarter, mainly with fiber to the home under a network expansion program. In the U.S., Breezeline’s revenue declined by 9.9% in constant currency due to the cumulative decline in the subscriber base over the past year, a smaller rate increase than in the prior year, along with a competitive pricing environment.

The 1,100 internet subscriber decline represents a significant improvement over the last quarter and last year, while internet subscriber additions in Ohio recorded its best quarter since we acquired that business four years ago, with positive growth of 2,600 subscriber additions. Adjusted EBITDA declined by 9.1% in constant currency, mainly due to lower revenue, offset in part by lower operating expenses driven by cost reduction initiatives and operating efficiencies. Note that last year’s comparative Q1 period had the highest adjusted EBITDA level of all quarters in fiscal 25. Turning to our consolidated numbers for Cogeco Communications, at the consolidated level, revenue in constant currency declined by 4.9%, and adjusted EBITDA declined by 3.7%. The adjusted EBITDA decline was driven by a decline in U.S., partially offset by growth in Canada.

Diluted earnings per share declined by 12.2%, mainly due to a one-time gain recorded in the prior year that was associated with a sale and lease-back transaction, as well as lower Adjusted EBITDA. Capital intensity was 22.2%, up from 20.4% last year, although we are on track to hit our CapEx guidance for the year. Free Cash Flow in constant currency declined by 15.9% in the quarter, mainly due to proceeds from last year’s sale and lease-back transaction. Our net debt to EBITDA ratio was 3.2 turns at the end of the quarter, up slightly from the 3.1 turn reported in Q4. We continue to target a net debt to EBITDA ratio in the low three turns range, and we’ve declared a quarterly dividend of CAD 0.987 per share, which is up 7% year-on-year.

At Cogeco Inc., revenue in constant currency decreased by 4.5%, and adjusted EBITDA declined by 3.1%, largely explained by Cogeco Communications’ results. Media operations revenue increased by 8.1% year-on-year, driven by solid market positioning and growth in digital advertising solutions, and we’ve also declared a quarterly dividend of CAD 0.987 per share at Cogeco Inc., which is also up 7% year-on-year. Now, turning to financial guidelines, we are maintaining our annual guidelines for Cogeco Communications’ fiscal 2026 year, which we first provided to investors in October. As it relates to the upcoming Q2, we are expecting consolidated revenue and EBITDA in constant currency to decline in the low to mid-single digits compared to last year. The declines are explained by the U.S. business. We are, however, expecting much stronger financial performance in the U.S.

In the second half of the year, as we’ll benefit from improving customer trends and a new wave of upside cost and revenue initiatives. We expect both financing expense and acquisition integration and restructuring costs to be similar to Q1, while our depreciation expense should be slightly lower than in Q1. At Cogeco Inc., we are maintaining the financial guidelines as well. And now, Fred and I will be happy to take your questions.

Conference Moderator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star 4 by the 1 on your telephone keypad. If you wish to cancel your request, please press star 4 by the 2. If you’re using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. And your first question comes from the line of Aravinda Galappatthige from Canaccord Genuity. Please go ahead.

Good morning. Thanks for taking my questions. Maybe just to clarify on the Q2 guide, Patrice, is it fair to suggest that the U.S. numbers, you don’t expect any sort of variance to what we saw in Q1 and Q4, sort of high single-digit declines? And then maybe just to build on that, can you also talk to the degree of improvement that you expect in the second half? I mean, is it within the realm of possibility that you sort of get even towards break-even as you exit fiscal 2026? Maybe I’ll just start there.

Fred Perron, CEO, Cogeco Inc. and Cogeco Communications Inc.: Yes. So good morning, Aravinda. So as part of Q2, with the information we provided at a consolidated level, I think it’s a fair assumption to assume that the U.S. business will be in a similar position than in Q1, obviously, plus or minus some changes there, but definitely where we expect the change is in the second half. And when we think about the second half of the year, we’ve been losing some customers historically in the U.S., but when you look at the past two reported quarters, the situation has improved quite a bit, so that will play into it. We do have some price increases that kick in in different periods in January, so that will play a role into especially in Q3 and Q4.

And we have a number of other elements in terms of cost improvements and some other revenue measures that are going to kick in during the second half of the year. So that’s what explains basically the change.

Yeah. And Aravinda, it’s Fred, those initiatives that Patrice is alluding to that will kick in in the second half, they’re all quantified, they’re all on track, they’re all in delivery right now. So we feel pretty solid. I know the other part of your question was, can we expect a positive year-on-year EBITDA exit rate in the U.S. by the end of the year? Patrice, I don’t know if you want to.

Yeah. I think it’s still a bit early days to think about the individual quarters, but definitely trending towards a neutral position for those quarters is a good assumption, I would say, the last quarter. But again, it’s still a bit early days to talk about just one particular quarter.

Thank you. And then for Canada, Fred, I think you alluded to the prospect of maybe just slightly muted broadband trends in Q2. We obviously did see some activity even from your end. Maybe just sort of characterize for us where you’re seeing that pressure. Is it more on the legacy side, or are you perhaps not seeing as much tailwind from the other sources, oxio and your rural expansions? Maybe a little bit more context there. Sure. oxio is still going very strong, mostly in our current footprint at good margins, and that gives us a lot of optimism about launching an oxio-like brand in the U.S. as well, and we can talk about that later. So that’s still strong. Network expansion is still early days.

Our Ontario programs are being dragged a little bit over time due to permitting things, so that will take some time before it kicks in. As it relates to the legacy business, the way I would characterize it is the end of our Q1 and the Q2 that we’re in right now appears to be a period of experimentation by the different players, whether it’s dabbling into resale or some promotional activity during Black Friday. So it’s been a little up and down. The past couple of weeks have been better, and therefore we’re calling for more muted growth in Q2, but I wouldn’t see it as the new normal. Thanks, and just lastly, maybe just on the take-up on the wireless side of the business in Canada, again, very early days, but you ran a fairly attractive promotion for a while.

Any kind of feedback that you care to share would be useful. Thank you.

Yeah. Wireless Canada is going really well. Our baseline pricing is in line with the rest of the market. Where we had promotions, it was an introductory promotion because we were launching the product in the fall, but it was a promotion for one year on the first line only, and the sales are going so well right now that we’ve already done two pullbacks on that introductory offer, so we don’t offer a free line for a year anymore, so we’re already in the process of pulling back on those introductory promotions because the sales are going so well.

Thanks. I’ll pass the line.

Conference Moderator: Thank you. And your next question comes from the line of Vince Valentini from TD Securities. Please go ahead.

Hey, thanks very much. First, let’s stick with that wireless. Can you give us any color on what strong means to you? Are you over 20,000 subscribers in wireless in Canada? I mean, I think we’re all grappling with what your definition of strong is.

Hi, Vince. We don’t disclose our wireless numbers. It’s relative to our internal targets. It will take a couple of years before our wireless customer base to be material and really benefit our bottom line. But when you look at what some of the U.S. cables are doing, after a few years of being into wireless, it’s really a needle mover to their EBITDA positively, but I would not expect much of an impact in the short term. But we’re not yet at a place of disclosing the customer base.

Okay. And on the competition in Canada you were just talking about, can you unpack it all? Is it a fixed wireless access problem, or you mentioned TPIA? Is it more the TPIA or just traditional Bell competition? And a sub-question on that, to the extent you’re seeing TPIA experimentation, are you seeing that of somebody reselling your network, so you’re at least getting the wholesale fee, or are you seeing that on the telco fiber network?

Sure. Happy to answer the question. If you unpack FWA resale and just normal promotional activity, FWA is not having an impact on us. We track churn reasons. And I know some of the advertised prices can be eye-popping on FWA, but we’re really not feeling it. On resale, yeah, it does seem to be a phase of experimentation. As I said, the past couple of weeks have been a bit better. Hopefully, people will realize that it’s not good for anybody. But to your other question, yes, a big chunk of that resale activity shows up in wholesale revenue for us. So while the subscriber metrics may be more muted, that’s why I was saying that in my introductory comments that it’s manageable from a revenue perspective.

And then in terms of normal promotional activity, yeah, it popped up during Black Friday and the holidays, but let’s see how it evolves. It may just be a point-in-time thing.

Thank you. Switching to the improving trend in the U.S. internet subs, you say you won’t get back to positive sub adds in the second quarter, but you’re still trending well. Can you frame this at all? Should we be thinking about another quarter with only losing one or two thousand internet subs, or was there something unusually strong in the first quarter that can’t be replicated and maybe a slip back to four or five thousand sub losses?

Without going too, too precise because we’re still in the quarter, right? But the second quarter, do expect some losses, maybe a little bit more than the current quarter, but it’s yet to be seen. But no, it was not an unusual phenomenon in the first quarter. The trends are sustainable. And in fact, after the second quarter, we see a clear line of sight to the improvement trends resuming. We have enough quantified measures in place to believe that that will be the case. And turning positive in totality in the U.S. on HSI subs on a repeatable basis is now something we believe is realistic and is our goal in the medium term.

Excellent. And last one, if I could, very nice to see the rating warnings, whatever you call them, removed from Moody’s and S&P. Does that now free you up to consider using your free cash flow and balance sheet strength for share buybacks? I mean, as I’m sure you appreciate, if you’re still on track for 600 million or more in free cash flow in fiscal 2027, that’s an incredible free cash flow yield and a lot of excess cash after paying your dividend. Do you think about starting to use that as an opportunistically to buy back shares?

Fred Perron, CEO, Cogeco Inc. and Cogeco Communications Inc.: Yeah. So as we go through fiscal 2026, we’re still going to concentrate on reducing debt. We’re still slightly higher than the three-times target. When you look also at the ratings on the debt, there is an expectation as well of continued decrease in leverage. That being said, as we get to next fiscal year, to your point, which starts in September, then we do expect to have hit that target and also have visibility on strong free cash flow next year, and that’s a discussion we’ll have definitely at that point internally on what do we do with the excess cash? Do we resume a buyback program that we’ve run for many years in the past? So that’s a possibility for sure. Do we repay more debt? We do a mix of both.

But I would say it’s not something in the short-term, but it’s going to come. That discussion will come soon enough.

Okay. I appreciate that, Patrice. Just to state the obvious, hopefully it’s obvious. I mean, your dividend yield is higher than your cost of debt. So buying back shares still has a cash-on-cash benefit, which hopefully the rating agencies would appreciate. And certainly, I know the equity market would appreciate, but leave it to you guys, and I’ll pass the line.

Thank you.

Thank you, Vince.

Conference Moderator: Thank you. And your next question comes from the line of Maher Yagi from Scotiabank. Please go ahead.

Merci d’avoir pris mon appel. I wanted to, good morning. I just wanted to ask you first on your oxio strategy. I know there’s probably a lot more to say when you actually launch it in the U.S., but it’s been quite successful for you as a brand in Canada. And the idea to replicate that in the U.S. obviously makes sense. I just wanted to ask you, is the goal for the oxio-like brand in the U.S. is to sell a service in territory only or also out of territory like you are doing in Canada?

Bonjour, Maher. It’s Fred. Thank you for the question. We are indeed super excited about the launch of an oxio-like brand in the U.S. The short answer to your question is it’s in territory only in the U.S. But when you look at the upside potential, oxio in territory is already doing so well for us in Canada. We’ve reported our best subscriber performance in Canada in the past 13 years. Last quarter and this quarter was solid as well. And oxio is a big part of that. Now, if you contrast Canada and the U.S., the opportunity is even bigger in the U.S. because in Canada, our penetration on Cogeco is already in the low 40%. But in the U.S., in totality, we’re in the low 30s, and in half of our footprint, we’re below 20% penetration.

So you just start thinking about the possible upside from such a second brand, and it gets pretty exciting.

Yeah. Okay. Thanks for that precision. My second question is on the improving trends in the U.S. on the subscriber side. Obviously, it was quite noticeable in Q1 compared to a year ago. But I just wanted to understand what you are giving up to improve those subs because you’re kind of doing pretty much the same strategy that Charter and Comcast are doing in the U.S., which is repricing your base or repricing the offers in the marketplace for your internet service. For example, I can see you’re selling one gig for $45 a month in Ohio right now, and the first month is free. That service used to be $75 a couple of months ago. So when I think about the objective here, how should we think about ARPU progression or ARPU negative impact in the U.S. as you reprice your product to improve subs?

When we come out of this transition, where do you expect revenue growth to land at?

Okay. Hi, Maher. It’s Fred again. I’ll start answering, and maybe Patrice will want to add a little bit on this one. First of all, when you look at our year-on-year decline in our RPU, it’s not because of a massive drop in acquisition prices for new customers. It’s because mainly of cord cutting. So some customers are cutting the cord on TV, and TV itself has a higher RPU than our internet product, but it comes with very little margins. So I would say that’s the main driver. There is a bit of promotional activity for sure, and it is a fact, to your point, that new customers come in at a lower RPU than existing customers that are in Canada as well. But our improvement in our PSU trends that we’re reporting this quarter is not because of any massive change on that front.

We just stay along with the market, and there has not been a massive change in pricing. Our improvement comes from execution. It comes from beefing up some sales channels that were previously underexploited, especially in those areas where our penetration is below 20%. And it comes from simplifying our pricing as opposed to reducing it. So that’s how I’d characterize it. Patrice?

Fred Perron, CEO, Cogeco Inc. and Cogeco Communications Inc.: No, I think you summed it well. Happy to take other questions, but I think these were the main points.

Yeah. Thank you. So I did look into that, the mix of PSUs that you have in the U.S. And when I look at Q1 2025, about 25% of your PSUs were on video. And in Q1 this year, it’s 24%. And then on home phone, it was 12% last year and 12% this year. So obviously, there’s slightly less video as a percent of the overall PSU base in this quarter versus last year’s Q1, but it hasn’t moved that much. So I’m trying to figure out what’s driving the 4% price decline per PSU in the U.S. And when should we expect that to improve?

Yeah. So what this analysis doesn’t show, Maher, is which segments of TV customers are losing versus those that we’re adding. So in many cases, we’re losing the higher RPU TV customers, and we’re adding lower RPU ones. So it would get into a pretty detailed analysis, and I’m sure you can talk about it with Patrice on the follow-up calls, but we’ve analyzed this in and out, and cord cutting is the main driver of the RPU decline. Of course, to your point, new customers also do come in on promotional rates at a lower rate, and that’s also a factor. But our point is simply that the improvement in Q1 is not due to any material change in that trend.

Okay. One last question. In terms of the growth that we’re seeing in Canada, obviously quite noticeable as well, how should we think about these net adds on broadband in Canada from a sustainability point of view? And can you maybe tell us what’s giving you the advantage to add as many customers as you are? Is it oxio or the Cogeco brand is also successful in the marketplace these days?

In prior quarters, including this one, it was a combination of both. It depends quarter by quarter. Sometimes network expansion helped. Less so in more recent quarters, the Cogeco brand has held its own over time, and then it’s really oxio that’s helped generate, I would say, differentiated growth in Canada versus some of our peers. And that’s why we’re so excited about an oxio brand in the U.S. As it relates to moving forward, as we’ve said, Q2 PSU growth in Canada will be more muted, but we’re recovering a lot of that in wholesale revenue. Is that the new normal? Not necessarily. It’s still a stage where people are experimenting. And as I said, the past couple of weeks have been a bit better.

Okay. Great. Merci beaucoup.

Merci.

Conference Moderator: Thank you, and your next question comes from the line of Matthew Griffiths from Bank of America. Please go ahead.

Hi. Good morning. Thanks for taking the question. So just going back to the U.S. broadband sub picture that you’re providing, is there a way to kind of share with us whether the improvements that you’re expecting are going to be coming from reduced churn? Or you’ve mentioned sales channels as something that you’ve been working on improving. So is it a gross ad difference going forward that we should be expecting as the driver? And then secondly, I think you’ve mentioned medium term as the time period for U.S. broadband subs turning positive. Should I read medium term as 2027, or is it slightly further out than that? Is the next year too soon? Is that still near term? And maybe just finally on the transformation efforts.

As you’re progressing through this, working through the second year kind of checklist, for lack of a better word, what have you, what kind of details can you give us on what you’ve completed and what you’re moving on to in that program? Thanks.

Sure. Hi, Matt. It’s Fred. On your first question, the improvement in the U.S. coming from churn versus gross new sales, we have initiatives in flight to keep improving our churn management and our retention, blocking, and tackling, but most of the improvement will come from gross new sales. It’s the simple math of what I was saying before, which is in half of our footprint, our penetration is below 20%. So there is a real opportunity to deploy new sales channels in that footprint, plus our soon-to-be-launched second brand to materially grow our penetration in that footprint. On the definition of medium term, a handful of quarters is what we’re shooting for right now. So it’s not past calendar 2027 or even fiscal 2027. It’s not beyond that. Our goal is shorter term than that.

But please just give us a bit of grace on that one, and we’ll get there, but it has to be we have to see how the competitive environment evolves and give or take a couple of quarters, but we’ll get there. That’s our goal.

Fred Perron, CEO, Cogeco Inc. and Cogeco Communications Inc.: On the transformation.

Yeah.

Yeah. Oh, sorry. Go ahead.

No, no. I was just the transformation. Thank you.

Yes. Yeah. So on the transformation, I would say to your point, we’re in year two of the three-year program. The first year was more focused on cost optimization, which included the reorganization of our Canadian and U.S. businesses initially and a number of other elements after. We had more to do on the cost front as well, optimizing the way we operate our chatbots, IVR systems, and there’s a lot going on as well in the number of basically proactive maintenance and making sure we tackle issues in the systems before they become a customer-facing issue, which reduces truck rolls. So there’s a lot of these things still on the map for year two and year three. But I would say what’s a bit newer in year two and year three is more focused on revenue generation.

We’ve talked about this before, but this was not the focus of year one, and that has to do with the way we sell our product, the way we segment the market, the way we have contacts with the market as well. Churn reduction is an element as well. As part of that as well, launching the second brand is the idea is to be able to tackle basically different segments of the market. It’s more difficult to do with only one brand, so I would say there’s a lot going on, and the last piece I would say is, as we started this a while ago, the opportunity to use AI to do some of this work was not there at that point, but it is today.

So we have a heavy emphasis on actually using AI and the latest and greatest to make this happen rather than do it the traditional way. So hopefully that gives you some hints on what we’re doing today.

No, that’s super helpful. And maybe, sorry, if I could ask one other thing. On the 20% share in some markets, has there been any? I’m sure you’ve looked into why that is. And maybe can you share with us why is it so low in some markets? And what in your plan addresses that why and fixes it?

Okay. It comes from three places. First, Ohio is the main part of that. You may remember that we bought the Ohio business four years ago or so, and it was already an overbuilder. So by definition, the share there. The loss of share, unfortunately, through the integration at the time. The second is in newly built footprint. I think it’s in newly built footprint over the past few years where we see an opportunity to execute better from a sales perspective there. We’re not building those new network extensions anymore. We’ve stopped them shortly after I was named CEO a couple of years ago, but they do under-index in terms of sales, and we’re now ramping that up. And the last area is Florida, where Florida was typically focused on bulk sales, but we have a residential footprint there where we think we can deploy more sales force.

So you add all those three things together, and that’s how we get there. But Ohio is the main one.

Okay. That’s great. Thank you so much.

Conference Moderator: Thank you. And your next question comes from the line of Drew McReynolds from RBC. Please go ahead.

Fred Perron, CEO, Cogeco Inc. and Cogeco Communications Inc.: Yeah. Thanks very much. Good morning. And Fred, thanks for clarifying that last question. That’s super helpful. Two others for me. Number one, on the Canadian broadband margins and I guess more importantly, the trajectory. I know revenue mix certainly will drive cable margins for the industry going forward, but just would love to get your sense. Really good margin performance. We see Rogers at kind of stable revenues to almost 58%. And obviously, that’s a little bit of a bigger scale. But what do you see as upside kind of medium term here on Canadian margin? And then just secondly, with respect to commercial revenues, so I guess business revenues, both in Canada and the U.S., it generally looks kind of flattish. And just wondering if there’s anything to flag in that segment from the perspective of cable cos in general being under-penetrated in the business market, particularly SMB.

Just would like to get an update just what your growth expectations are for that segment. Thank you.

Patrice Ouimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: Yeah. That’s great. So good morning. So in terms of margins, well, we’ve been increasing margins over the years in Canada, as you know. It comes from different elements. There’s a portion that’s mixed, but a portion that comes through the cost reductions that we’ve been able to do. So it depends on the years, but typically, half a point to a point has been something we’ve been able to do. When you throw in acquisitions, obviously, it can change the mix, but we haven’t done meaningful ones recently. So when you look at this full year, I would say versus where we are in Q1, we’re probably going to be in a similar place. So we’ve had a good increase versus last year. But I would say, yeah, that’s probably it.

If your question is longer term, we do think as we continue to invest in automation and improvement in our operations. I gave a few examples on the call earlier. These typically produce increasing margins as we’re a lot more efficient in the way we operate. We’ll keep on working on this in the future.

In business segments.

Yeah. And for the business segment, yeah, it’s been more flattish. This is actually an area I would say business for us is about 10%-ish of our business, and residential is the balance. So obviously, our focus has been more on residential. We do have some focus, I would say a bit newer focus on commercial. So we’re going to be putting some efforts there. That being said, we also don’t want to go into too many products on the commercial side. Given the size of the business, it’s often not worth our while doing. So for now, I would say, yes, it’s more neutralish, but we do feel that there is some upside in that business in both countries going forward. It will be less material than what we do in residential, though.

Fred Perron, CEO, Cogeco Inc. and Cogeco Communications Inc.: Yep. Gotcha. Thanks very much.

Conference Moderator: Thank you, and your next question comes from the line of Stephanie Price from CIBC. Please go ahead.

Hi. Good morning. I just wanted to circle back on Ohio. So net adds in the Ohio region improved sequentially again this quarter. Just curious about what you’ve done in that region to move it back to growth and your ability to use the same playbook to move to growth in the rest of the U.S.

Sure. Hi, Stephanie. Without giving the entire playbook to our competitors, what I would say is we’ve deployed new sales channels in that footprint, and we’re not done doing that. That’s number one. Number two, we’ve simplified our pricing. Customers were telling us that our pricing was too complicated before, so we’ve made it more transparent, more simple. And then there’s other blocking and tackling around analytics, customer-based management, more refined targeting, both of new customers and existing customers for upsell and retention. And then, of course, last but not least, that’s the obvious place to start with our second brand. That’s not in the results yet, but that’s going to be in the future results.

You mentioned in the U.S., penetration below 20%. One of the reasons was newly built-out footprints. It looks like you added about 3,000 homes passed in the quarter in the U.S. Maybe you can talk a little bit about the opportunity there.

Yeah. I wouldn’t say we’re not building much anymore new footprint. Stephanie, in the U.S., that’s something that we’ve stopped just because of the nature of the market. Any numbers that you see, such as that 3,000, is more the residual impact of either prior long-standing projects being completed or residual commitments to some local government. But we’re not starting many new projects on that front. The opportunity is on filling the pipe, so to speak, and deploying some of the same tactics that I was talking about in your Ohio question in that footprint as well.

All right. Thank you very much.

Thank you once again. Should you have a question, please press star or follow by the one on your telephone keypad. And your next question comes from the line of Jérôme Dubreuil from Desjardins. Please go ahead.

Fred Perron, CEO, Cogeco Inc. and Cogeco Communications Inc.: Hey, everyone. Thanks for taking my questions. First one, another one on the subscriber trends in the U.S. going forward. You seem quite confident on that front. I’m wondering if on top of the operational efficiencies that you’re planning to roll out, is there any change on the pace of fiber building in your footprint that you have noticed maybe that leads you to this forecast?

The forecast comes mostly from the execution things, Jérôme, that we’ve been talking about on this call. I would describe the competitive environment as steady with some puts and takes. But it’s true that fiber penetration used to be nowhere in the U.S., and we’re getting closer over time to what would be a stability point, the same way we’ve experienced that in Canada in the past and navigated it quite well. But I would say, by and large, it’s the different measures that we’ve been explaining on this call.

Okay. Great. Thank you. Second one for me. Consolidated CapEx in the quarter was pretty much where we expected it to be. But there was quite the shift out of the U.S. and into Canada. I’m wondering if there’s something to unpack there or if it’s more of a timing thing.

Yeah. It’s more of a timing thing. The CapEx by quarter can be more volatile, but there was more CPE spend in Canada this quarter, which we won’t have in the next few quarters. So I would say overall, we’re on track for the full year, but I would not take the trend of the Q1 and apply it to the full year. It’s going to revert back to more normal numbers over the full year.

Okay. Great. Merci beaucoup.

Conference Moderator: Thank you. There are no further questions at this time. I will now hand the call back to Mr. Perron for any closing remarks.

Patrice Ouimet, Chief Financial Officer, Cogeco Inc. and Cogeco Communications Inc.: Okay. Great. So thanks for being on the call today, and happy to take any other questions you have in the future. So have a good day.

Conference Moderator: This concludes today’s call. Thank you for participating. You may all disconnect.