- U.S. Turnaround Progress: 2,600 Internet subscriber additions in Ohio, strongest quarterly performance since acquisition four years ago.
- Financial Declines: Revenue down 4.9% (constant currency), adjusted EBITDA down 3.7%, and diluted EPS fell 12.2% due to prior-year one-time gain.
- Dividend Increase: Quarterly dividend rose 7% to $0.987/share, reflecting confidence in capital structure despite net debt/EBITDA at 3.2x.
- Canadian Broadband Margins: 15% reduction in customer complaints and 8.1% year-on-year revenue growth in Media driven by digital advertising.
- U.S. Strategic Focus: Shift to fill existing infrastructure, with simplified pricing and analytics improving net adds; no new footprint expansion planned.
Segment Performance
The company's U.S. business is showing signs of turnaround, with improved subscriber trends for the second consecutive quarter. Cogeco added 2,600 Internet subscribers in Ohio, its best quarter since acquiring the business four years ago. In Canada, performance remains solid, with positive year-on-year EBITDA trends and a 15% reduction in customer complaints. The Canadian broadband margins have been increasing, with a good margin performance in Q1.
Guidance and Outlook
For Q2, the company expects consolidated revenue and EBITDA in constant currency to decline in the low to mid-single digits compared to last year. However, the U.S. business is expected to improve in the second half of the year, driven by customer trends and cost and revenue initiatives. The company aims to grow its customer base across its entire U.S. operation on a repeatable basis.
Valuation and Dividend
The company declared a quarterly dividend of $0.987 per share, up 7% year-on-year, with a dividend yield of 5.45%. The stock trades at a P/E Ratio of 7.7, EV/EBITDA of 3.72, and a P/S Ratio of 0.22. Analysts estimate next year's revenue growth at -1.7%. The dividend yield is higher than the cost of debt, making share buybacks beneficial. With a ROIC of 6.28% and ROE of 9.92%, the company's profitability metrics indicate a stable performance.
Strategic Initiatives
The company plans to launch a second brand in the U.S. to tackle different market segments and is leveraging AI to improve operations and revenue generation. In Ohio, the company has improved net adds through new sales channels, simplified pricing, and analytics, a playbook that can be applied to other U.S. regions. The competitive environment is steady with some fluctuations, and fiber penetration in the U.S. is approaching a stability point similar to what was experienced in Canada.