Cogeco Communications Inc.

Cogeco Communications reported CAD 169 million in free cash flow in Q3, for CAD 450 million cumulatively over the first three quarters. The company recorded a non-cash, pretax impairment charge of CAD 1.8 billion (or CAD 2.2 billion pretax as stated in another measure) mainly related to U.S. goodwill, and Cogeco Inc recorded a pre-tax CAD 26 million impairment of intangible assets. Current income tax expense for fiscal 2026 is now expected to be CAD 25 million versus the prior assumption of about CAD 40 million. Consolidated debt leverage was 3.2x at quarter-end, and the company repurchased $21 million U.S. of Term Loan B debt securities during the quarter. Management said it is maintaining its fiscal 2026 financial guidelines for Cogeco Communications, expects slightly positive year-over-year revenue and adjusted EBITDA growth in Canada for the balance of the year, and expects U.S. Q4 revenue and adjusted EBITDA to be lower year over year on a constant-currency basis, though at a smaller decline than in the first three quarters. Consolidated CapEx is expected to rise in Q4 versus Q3.

Fred Perron said the company is executing on what it can control, highlighting Canadian growth, strong OXIO performance, and early traction in wireless and Welo. He framed the U.S. as a tougher market with significant turbulence, but said management is realistic, not dogmatic, and focused on operational levers rather than rushing to a strategic reset. His tone was cautious on the U.S. near term but confident that wireless, Welo, and AI/transformation can compound over several quarters.

Patrice Ouimet focused on the impairment, explaining it reflected annual valuation work plus weaker U.S. assumptions around ARPU, promotions/retention costs, subscriber trends, and lower peer valuations. He also said the quarter benefited from a CAD 4.5 million retroactive tax adjustment, bringing the fiscal 2026 current tax assumption down to CAD 25 million from about CAD 40 million. On capital structure, he cited 3.2x leverage, $21 million U.S. of TLB repurchases, and said the company expects to keep using excess U.S. cash to buy back TLBs regularly; he also said CapEx should be managed more efficiently, with the long-term aim of staying below 20% intensity.

Analysts pressed on what drove the U.S. impairment, and management pointed to ARPU pressure, heavy promotions, retention costs, subscriber mix changes, and lower peer valuations. On strategy, Fred Perron said the company will optimize for shareholder value and focus on operational levers, while acknowledging the U.S. will likely remain difficult in the near term. Questions also covered Q4 U.S. subscriber losses, where management said the weakness is driven by a mix of temporary external factors and internal retention/marketing choices, plus the Welo ramp that should take a few quarters. Analysts asked about leverage and CapEx; management said leverage could end up below historical low-3x targets over the long term, and CapEx intensity should trend below 20% as efficiencies improve.