Earnings Call: Q2 2020

Apr 8, 2020

Good day, and welcome to the Cogeco Inc. And Cogeco Communications Inc. Q2 twenty twenty Earnings Conference Call. Today's conference call is being recorded. At this time, I'd like to turn the conference over to Mr. Patrice Wieme, Senior Vice President and Chief Financial Officer of Cogeco Inc. And Cogeco Communications. Please go ahead, Mr. Wimme. Thank you. So good morning, everybody, and welcome to our second quarter conference call. So I'm joined by our CEO, Philippe Jotet. Sorry, before we begin this call, I would like to remind listeners that the call is subject to forward looking statements, which can be found in our press release issued yesterday. I'll turn the call over to Philippe. Merci, Patrice, and good morning, everyone, and thank you for joining us to discuss the results of our second quarter ending 02/29/2020. In these unusual and difficult times for everyone, I would like to start by highlighting how our teams at Cogeco across Quebec, Ontario and The U. S. East Coast have worked tirelessly to make sure that we maintain a high quality of connectivity services and increase access to information and entertainment for our customers. More than ever, access to our Internet, TV, Tiffany and radio broadcast services are of paramount importance for the communities that we serve, and I thank all our employees and partners for their commitment and resilience. Cogeco's subsidiaries are quickly adapting their services to this unexpected situation and have implemented personalized measures to offer customers more flexibility while strongly encouraging them to make use of our online services. Cogeco Media also quickly transformed its radio programming in Quebec to provide all the information necessary to follow developments related to the crisis in each region of the province. As the pandemic is evolving rapidly and its duration is uncertain, Cogeco Communications has proactively managed this crisis to ensure that it could pursue its operations, protect its employees and serve its customers in light of new development occurring every day. The crisis management team has been successful at anticipating potential operational disruptions and implementing alternate modes of operation. Our efforts are focused on transitioning virtually all contact center and office employees to work from home, converting customer visits to self installation and remote repairs in part through the use of new customer friendly video technology transitioning all store operations to be handled either online, by phone or by mail increasing network capacity in certain areas to handle higher traffic providing customers with temporary relief during the crisis, including removing data overage fees for the minority of customers not subscribing to unlimited plans and providing free news, kids and movie television channels and not disconnecting nonpaying customers. In the medium term, we intend to capitalize on a number of initiatives, which we are implementing through this crisis to accelerate our digital transformation program. As we expect, many customers will continue to use online tools after the crisis. Regarding the Media segment, Fujico Media has transformed its radio programming to provide Quebecers with quality and continuous information related to the current situation while still offering musical programming. Cogeco's social engagement is an integral part of the company's DNA. In order to support our communities in these times of crisis, we have adapted our charity support activities as well as our community television programming. Cogeco was among the first companies to commit to donate to the COVID-nineteen emergency fund of Saint Raede of the Greater Montreal aimed at ensuring food security during the crisis. The company has also decided to support several food banks in its local communities across its network. On a more optimistic note, let us continue with Cogeco Communications' latest strategic development. As on February 19, Cogeco appeared at the CRTC wireless hearings and presented its hybrid model network operator model, which would encourage continued investment in the telecommunications sector while truly increasing sustainable and effective wireless competition in underserved areas. Given the high barriers to entry in this sector, which represents access to spectrum, this proposal would allow facility based wireline providers, such as Cogeco, to access portion of the national incumbents' wireless networks through an appropriate regulatory framework. The proposed framework includes mandating wholesale access with a frame of reference to negotiate roaming rates that better track market based retail rates and mandated seamless end off and end back between networks. Our proposal to the CRTC represents a balanced approach that would reduce a prohibitive barrier to entry for regional players, create new wireless choices for consumers and drive price down while simultaneously fostering innovation and investment in a high quality network. True to its commitment to better serve underserved and unserved regions, Cogeco Connections announced on January 29, in conjunction with SWIFT, a non profit municipality led broadband initiative, the development of its network to 3,650 homes and businesses in Wellington and Lambton Counties in Ontario. Cogeco will deploy fiber along 192 kilometers of underserved roads and connect these homes and businesses by the end of twenty twenty one. The announcement is aligned with Cogeco's business objective of expanding its services across Ontario and Quebec and supporting the government's goal of connecting all Canadians to high speed Internet. Moving on to Atlantic Broadband. The Thames Valley Communication acquisition was closed on March 10 for an amount of US50 million dollars Payne's Valley operates in the Southeastern Connecticut region, a region contiguous with ABB's existing Connecticut network. When the situation related to COVID-nineteen stabilize, we will be in a position to increase market share in these markets through our NS bundle offers, including the TiVo video platform. We will then also continue to look for further value accretive acquisition in The U. S. To accelerate our growth and as we enjoy a solid financial position at both Atlantic Broadband and Kagical Communications. Let us move to an overview of our consolidated financial results at Kugiko Communications. For the quarter, reported revenue has reached 5 and $86,500,000 increasing by 0.9% in constant currency. EBITDA has reached $277,400,000 representing a decline of 0.7% in constant currency and resulted in an EBITDA margin of 47.3. Atlantic Broadband's revenue and EBITDA growth were partly offset by declines at Cogeco Connection. The quarterly dividend has been reconfirmed at $0.58 per share. Let us look at the individual components. Cogeco Connection revenue has modestly increased by 0.4% relative to the first quarter, mainly as a result of rate increase effective November 1, customers' transition to higher value offerings and the continued growth in Internet service customers. On the other hand, revenue has declined by 1.4% compared to the second quarter of last year. This is mainly due to a decline in video customers and lower net pricing from consumer sales, primarily as a result of the carryover effect of product bundles being promoted more actively from the 2019 and gradually phased down during the second quarter of fiscal twenty twenty. Cogeco Connections reported EBITDA has declined by 2.5% relative to the second quarter of last year, but by a more modest 0.3% when compared to the first quarter. The decline is due to softer revenues combined with a higher level of planned marketing expenses. The loss in primary service units has remained essentially stable compared to the same quarter last year as more telephony bundles have been marketed during the first half of fiscal twenty twenty. Finally, as we are making good progress on the development of our IPTV platform, which is in testing mode at the moment. Atlantic Broadband's revenue in constant currency increased by 3.7% in the second quarter compared to last year, while EBITDA increased by 2.8%. Revenue growth comes from both residential and business Internet service customers and rate increases mostly implemented during the fourth quarter of fiscal twenty nineteen, partly offset by a reduction in video service customers. EBITDA growth for the second quarter was lower than usual. As we indicated during the last quarter's earnings call, mainly as a result of higher sales and marketing expenses, but also compensation expense related to additional headcount to support growth and additional costs related to the development of a new financial and human capital management system. Increased sales and marketing expenditures during the last year and improvement management of seasonal disconnects are paying off as PSU trends in Q2 have improved on all fronts relative to last year. Let us now take a look at Cogeco Inc. In the second quarter, consolidated revenues have increased by 0.8%, but EBITDA has declined by 1.4% in constant currency. Our radio business showed satisfying results with relatively stable revenue despite the soft radio advertising market. Cogeco Media maintained excellent ratings for its stations, which continue to focus on high quality programming and cost efficiency. I will now discuss financial guidelines and our liquidity position. As noted in my introductory remarks, the COVID-nineteen pandemic is evolving rapidly and its duration, magnitude and economic impact are all uncertain. Our telecommunications, entertainment and radio broadcasting are essential services and are in full operations. We do, however, expect the crisis to have a short term impact on financial results for the balance of the year, which is difficult to estimate at the moment. For this reason, Cogeco and Cogeco Communications are both withdrawing their financial guidelines for the balance of the fiscal year 2020. We intend to reinstate annual guidance when the situation stabilizes. Let me start for Cogeco Communication by providing some color on the potential impact of the crisis on Cogeco Communication's financial results and how well it is positioned to weather the crisis. Due to the nature of the services offered by Cogeco Communications, we expect its results to be less impacted than other industries during the crisis. Although the pandemic is expected to affect revenues and EBITDA in the short term, we do not expect a significant impact on free cash flows as certain investment initiatives can be reprioritized. As I mentioned previously, we intend to capitalize on a number of initiatives, which we are implementing through the crisis. This will all accelerate our digital transformation program and benefit us when the crisis stabilizes. Surgical Communications has a strong liquidity position to weather the crisis with $5.00 $2,000,000 of cash at hand and $948,000,000 is unused credits in unused credit facilities as of 02/29/2020. This is in addition to the ongoing generation of positive free cash flow every month. Our two borrowing structures in Canada and The United States are also well below the maximum leverage levels permitted by its various debt covenants. Effective today, Cogeco Communications announced as a precautionary measure that it was suspending its automatic share repurchase instruction under the normal course issuer bid program, which covered a period up to the May 2 expiry date. Our NCIB program remains in place, but we intend to purchase shares at a lesser pace than what our automatic share repurchase instructions implied in the past month. The pursuit of acquisition in The U. S. Remains our top capital allocation priority. We expect some sales process to be delayed during the crisis, although some opportunities may arise. A small acquisition such as the recent Tang Valley transaction can be financed with cash on hand and the unused revolver. A larger transaction would be financed through raising debt at the Atlantic Broadband level. Finally, given Cogeco Communication's strong liquidity position as and its relative stable revenue stream, Cogeco Communication has maintained dividends at €0.58 per share. As for Cogeco, Inc, the consolidated results are primarily derived from the Communications segment. The financial results of the media activities, which represent approximately 4% of Cogeco's consolidated revenue, are, however, expected to be more proportionately impacted by the crisis. The Media segment, which operates radio station, is an essential service and a strong media platform, especially during the crisis. Our talk radio and strong news programming provides critical real time information to the population, which results in strong ratings. However, these ratings are not expected to translate into equally strong revenue since the bulk of the radio's revenue is generated from the retail industry, which is impacted by the COVID-nineteen crisis. The radio business has therefore taken immediate steps by temporarily laying off approximately 25% of its employees. The severity and length of the crisis and its economic impact, especially on the retail industry, are unknown at the moment. We do, however, expect to be in a strong position from a market share perspective when the situation eventually gets back to normal. From a liquidity standpoint, Cogeco has a separate financing in place with a $100,000,000 revolving facility, of which $24,000,000 was drawn at the February. Given the economic uncertainty created by the pandemic, we stopped buying back Cogeco's share under the normal course issuer bid program, but have maintained the dividend at $47.5 per share. In conclusion, let me say that even though the crisis is a difficult moment for all of us, Cogeco is proactively managing the crisis to ensure that our employees are safe, and we continue to deliver an exceptional service to our customers more than ever deserved in light of this new development occurring every day. As we continue to prioritize our customers' needs, we intend to further innovate and reinvent some of the ways we deliver our services, building on accelerated digital transformation and new initiatives implemented during this time of crisis. And now we will be happy to answer your questions. Your first question comes from the line of Vince Valentini from TD Securities. Your line is open. Yes, thanks very much. And I hope everybody is doing well during the crisis on your end guys. I have three or four questions, I'll do them one at a time. You mentioned the push on more online self-service and self installation. Have you seen anything in the last few weeks in terms of data points on how people are embracing that and what percentage of people are willing to use sort of those functions? Yes, absolutely. It's Patrice. So we have seen well, I think, first of all, there's not much choice for operators like us and the customers as well to go this route in many areas as a lot of people are at home or close to home. And there's a lot of customers also that would prefer not seeing a technician coming in the house. So that makes a lot of sense. So I think it's a good solution for everybody. And so what we've seen recently in past two, three weeks is that we have less disconnections and less connections as well. But we're also seeing some people move from DSL services at competitors to our services, which as you know, are generally at least 120 megabits maximum speed, but we have a good portion of our network, which is a gigabit available. So our speeds are quite faster than DSL. So it's going well and we've introduced new tools as well to be able to help customers even for remote repairs through video products we're using with customers as well, which is something we're planning to keep going forward. Thanks, Patrice. Second, in terms of video packages, it's tough to figure out, I mean, there's no sports on TV. People are stuck at home. They're definitely watching more TV, is it but some people are losing their jobs and have income concerns. Can you give us any sense over the last few weeks, have you seen a net increase or decrease in the size of the channel packages people are taking or seeing more people add or more people shave? Vince, everyone is at home, as you said. So we have seen increased load throughout the day on our network. So it's not only just people wanting to be entertained in the evening period, now they want to be entertained throughout the day. I guess they are taking breaks. They're working all the time. So we see on the video side a combination of people searching for news, looking for films and also kids programming, so all kinds of entertainment. And the load on the Internet side is certainly supporting a lot of video conferencing. There's a lot of business that has been done at home, and we all know that work never stops at home, right? It starts early in the morning, and it goes all the way to the end of the evening. So people are working really hard. And our network are very capable. I think the Canadian telecom industry has built very good, very resilient networks. So that it pays actually to invest in our own infrastructure and be able to have full control over it and deal with this extra capacity coming from very early in the morning now to very late in the evening. Thanks, Philippe. I'll just ask one more then. In the Atlantic Broadband press release yesterday talking about network usage and resilience, it was mentioned that there has been a 50% increase in video on demand. Can you clarify what that is? Is that almost all just free video on demand off your servers? Or is that also an increase in paid VOD purchases for movies or other events? It's both. So you could think of the Netflix, the YouTube of the world, and there are a lot of also OTT specialized channels like Disney and others. So it's a combination of everything. So you have the free, the freemium and the paid services. Okay. Thanks very much. Your next question comes from the line of Jeff Fan from Scotiabank. Your line is open. Great. Thank you very much and hope both of you are doing well. Follow-up question on the self install. Are you seeing more self install? I mean, obviously, you're doing self install for both, but is that activity more on Internet? And what's your capability on the video self install side? Well, we see it actually a lot on Internet and video as well. So there are many neighborhoods that have been wired or prewired, if you want, for a long time. So it's not very hard in many homes actually just to receive a terminal equipment, a CPE, video and or Internet to just be hooked and to the network. And over the phone, we can activate and help the customer navigate the very quick installation process. And if they need more technical support, we now offer video conference with the customer to really guide them through step by step in setting up very easily their service. So it's on both fronts, Jeff. Okay. And on the video side, are you is that the TiVo product? Or is that the new IPTV that you're rolling out that you're the self install on? We are doing self install in a number of legacy equipment pre TiVo. We are doing it on TiVo, where the network actually was deployed for TiVo services. And the IPTV specific to the Canadian network of CoDiCo Connection is still we're expanding our trial. So there's more and more internal trials people on our system. But we're very cautious right now given the circumstances to expand. So more needs to come. But development is completed, and we're ready to expand. Great. And just as another follow-up on the your comment, I think it was Patrice who made the comment about DSO shifting over to cable. I guess that makes sense. Households are looking for faster Internet service. Are you seeing wholesale volume coming back to retail for that very reason as well? And you mentioned in your release that there is some upgrades and downgrades on Internet service. I just wondering if the net impact is still positive, more overwhelmingly more upgrades as opposed to downgrades? Yes. So on the wholesale side, it does vary by month. I mean, this crisis is extremely new. So I would say we're seeing some of the mainly the positives right now. So as we talked about some DSL moving to a faster Internet speed. Terms of the previous questions from Vince and your question on changes on the current packages, we haven't seen a lot yet. What we indicated in our MD and A in terms of things we think will happen in the future are a lot of things we haven't seen yet, but makes sense that there will be especially when we talk about the economy and some portion of the customers wanted to downgrade. This is not something we haven't seen yet. So we will. So I would say more a bit more upside right now. So speed boost, some more connects, some more transfer from DSL to our to our regular, to our network. And, yeah, I think that and for for the wholesale part, the wholesale part is already on our network, so it's not as if it's offering DSL. So we will see in the future. It's obviously, there's a lot more capacity usage being in use right now in our networks, but haven't seen a a big change there. Okay. Thanks, Chris. Your next question comes from the line of Arvinda Galappati from Canaccord. Your line is open. Good morning. Thanks for taking my questions. I'll start with a couple to assess sort of the COVID-nineteen impact and then move on to the regulatory question. On the first area, I was wondering if you can remind us a little bit of your SME exposure both in Canada and The U. S. And also, I know it's early days, but there are there any sort of early indications that you're seeing that would give you a sense of what the impact would be in terms of sort of bill credits and collection challenges that you might have? And the second question related to that is the is Internet overage generating any kind of overage revenues? Okay. So hi, Aravinda. So I'll take them in order. So in terms of the SME, it's about 10% in Canada and US. That's that's a portion of our revenues coming from commercial as opposed to residential. There's actually a note now that we have added about a year ago in our financials, you want to see the exact number to note three. So it's not a large portion and we haven't really seen movement so far. Obviously, have in there some larger enterprises, so we don't really expect a change there. We have smaller businesses, which will typically consume the Internet product, which I would expect will not change much as well. Some have also business phones, but a lot of people are working remote now, so this is often still on. And where the impact will be is in, let's say, bars and restaurants that have a video feed for their customers. So obviously, as they're closed, this is not something they need. So it's a mix of products, but we haven't really seen much on that front yet. In terms of collection, this is something that we do expect will increase. So we have taken like most all the industry in both countries, the view that if some customers have an inability to pay their bills, that we're not going to disconnect those customers. That's typically part of the process if after a period of time people are not able to pay, there's a disconnection. So we're going to hold off on this. So we do expect that that will increase, but difficult to say at this point. It was not a major element in 2018 sorry, 'twenty eight crisis. Obviously, a different kind of crisis, but we did not see a tremendous amount of increase in bad debt. So we will see this time what happens. And in terms of overages, so about 75% of our customers in Canada are on unlimited plans. So it's only 25% that are not, and we are some see some seeing some people moving to unlimited. And in The U. S, it's basically all unlimited. That's the practice there. Great. Thank you. And then just on the regulatory side for Philippe, I know that the decision by ISAID and Mr. Baines sort of complicates the regulatory picture a little bit. It's not clear how the 25 reduction directive from him affects the CRTC process. I know technically there's no direct connection, but obviously the wording seems to suggest that the CRTC process could conceivably be affected. How does what is your thinking on that, Philippe? So well, first, we've always said that we would enter the market on with a profitable business case on hand. So it's actually more relevant to look on the CRTC side right now, and that's why we participated at the hearings and the HMNO framework that we've put forward is actually supporting investment and collaboration between the industry. The fact that I said issued some guidelines, of course, the political layer influencing. In my view, it will not have a very, very strong impact. We've seen the price decline regularly in the last years. There's still a lot of room in the Canadian landscape. But the more relevant development for us is actually on the CRTC side. Okay. Thank you. I'll pass the line. Your next question comes from the line of Maher Yaghi from Desjardins. Your line is open. Thank you for taking my questions and I hope you guys are all healthy with your family. I wanted to ask you first question is on the disconnect. Can you maybe tell us what is the normal disconnect that you have on a typical quarter, which is related to unpaid customer accounts. The reason I'm asking is, as you mentioned, it's unlikely that you'll disconnect any customers during the time of any economic crisis like we have right now. So I'm trying maybe just proactively here to assess, you might have some positive impact of that on your subscribers going forward? I'm trying to maybe just clarify what the historical disconnect is in a typical quarter for unpaid customers. And the second question I had is rightfully so, I understand you guys didn't choose to provide a new guidance given that nobody has a crystal ball on when this crisis might end. Maybe trying to assess your view on your cost structure if there is pressure on the top line, how much cost can be reduced to make up for that lost revenue I. E, how much of the revenue decline can be removed, its impact on the profitability by cost savings? Thank you. Thanks, Louis. And it's Philippe. Just before Patrice gives you more color on your second question. For the first one, I think we have to look at this from the value of the product that consumers are actually getting. And we know Internet, TV, telephony are among the high the very high value products that customer needs and wants today. So their value is actually very high. And the bill on a monthly basis is not very it's not prohibitive at all right now considering the usage and the value it's delivering. So I think this will be the fundamental to look at. Of course, some people might not be paid and will flexible terms. And we're all about flexibility at Cogeco. We've always been. So if we need to work with some customers on a personalized level to give them the flexibility to go through the crisis And as their income comes back and things go back to normal, we will continue to deliver the service through the crisis and after the crisis. I think that's how it should be looked at. Now, Patrice, for the second question. Yes. And maybe just to add on the first one. I think what it's a relevant question, what will be impact on PSUs if we don't have disconnection for nonpayments. So I will suggest that I'll take a note of this for the next call because actually even looking at the past, I'm not sure it will be as relevant than what's coming up in the next two months, let's say. But there might be an impact on PSUs, which we can discuss on our next call. In terms of our cost structure, we do expect to have some savings on our cost structure. So we talked about more self installs. Right now, we had to close all our retail stores in the two countries where there was activities going on, some people returning equipment. So there's a bit of savings there. We have less truck rolls. Some is done by our employees, some is done by contractors. So we've already started reducing some of these costs. Overall, I think we can offset some revenue losses we're going to have and to be determined in the extent of it, that's why we're not providing guidance, but not fully. So I do expect an impact on EBITDA. However, when you go down to the cash flow level, there the impact should be limited as we're I do expect to have less CapEx, especially related to some network construction, less installations, which are capitalized for new customers, less CPEs within people's houses as well. So we would expect that the cash flow situation would not change that much during the period. Okay, great. And I have a question on your debt structure. I noticed in your MD and A you renegotiated and lowered your interest cost on your debt. Can you tell us how much annual savings that will provide you on income statement? Yes. So we did renegotiate our Term Loan B in The U. S. Before the crisis. So the rate came down by 25 basis points. So that's about US4 million dollars per year. If we obviously have to follow IFRS rules, which basically forced us to recognize this gain upfront. So that's why there's this large gain in the quarter, which means that when you look at our financial statements in the future using the current debt level, obviously, if we made an acquisition, things could change. But you're going to see an expense which will be higher than reality because we booked the gain upfront. But in reality, we will be paying US4 million less going forward for the next few years. Right. So the gain that you the large gain that you booked in the quarter, that's going to be amortized over the life of the contract of the debt term? Well, it's not actually. So the way the rules work, which are fairly complex rules, because the debt actually was not refinanced, but we basically just changed the rate on it. So it's basically, we have to recognize the present value of this. So the other the alternative would have been to do nothing, but we could not do this under IFRS. And you would have seen just the interest go down over time. So what's going to happen now is the interest will remain high or higher, And we book the gain now. So there's no amortization. It's all taken upfront. Okay. Thank you. Your next question comes from the line of Drew Your line is open. Yes, thanks very much. Good morning and hope everyone stays well. Three follow ups, I'll just go one by one here. Clarification, Patrice, first on the free cash flow outlook. Understand all the puts and takes on CapEx. Any change here in cash taxes as you go from EBITDA to free cash flow? Yes. So actually, this quarter had an unusual element. We did some we did make changes to our tax structure, which resulted in about $6,000,000 in tax gain during the quarter. So if you want to take a prospective view on taxes, it would be similar to what we had disclosed previously in our previous guidance, which was about 12% cash tax. And total tax generally is around 20% or so. So that's probably those are good numbers to look at versus just looking at this quarter. Perfect. Thank you. On the, I guess, debt expense as we go through the process here and fully comprehend your ability to manage not only the level, but provide flexibility in terms of keeping customers and recovering some amounts going forward. Just from an accounting perspective, presumably there's in the near term no real revenue impact, you'll take the receivable, it'll be a drain on working cap. When you get around to writing some of this off, does that write down, does it go above EBITDA from an accounting standpoint? Or can you throw it into some nonrecurring item below EBITDA? Yes, that's a good question. Expect it would fall above the line. So it would impact EBITDA. And normally, we limit what we put in restructuring, which really relate to restructuring. But it's a good question, but that would be my initial answer. And as of and as it relates to when are we going to book a reserve on older receivables is a question mark. So we're going to have to look through this during the quarter. I don't think we're going to be able to simply put everything in receivables without a bigger element of bad debts, but probably at a lower rate than before because there's circumstances that allow people in need to defer the payments. Yes. Okay. That's great. That's actually very helpful. Thank you for that. One last one for me then. With Cogeco operating both in The U. S. And Canada, early days here in what we're all going through, is there any real structural difference between Cogeco managing this whole situation in Canada versus that in The U. S? Or is North America essentially going through the same impacts here? Well, we see both actually. The there was a number of country, state, province, city level decisions throughout the crisis. So the timing of their decisions didn't actually came down in a very structured or uniform way, but we see almost everyone wanting to do the same thing. So as we we've seen some directives in some areas of our network where we quickly adapted, and then that directive actually was implemented in other places throughout North America over time. So it's actually nice to have a presence on the Canadian side and The U. S. Side as we can quickly move new process and new procedures fast through our network and actually react this way. We're exposed to 11 states and two provinces. So there's a lot of things we've seen. There's a lot of process that were adapted. And through our management network, we've just move the right information quickly on time for other parts to adapt quickly. Okay, interesting. Thank you. Thank you both. Your next question comes from the line of Matthew Griffith from Bank of America. Your line is open. Hi, thanks for taking the question. I just had a few kind of small follow ups. One is on the kind of the bundled promotion pricing that seems to have had kind of a bit of a negative impact on revenue. I was just curious if you could provide some color on how over the remainder of the year that impact will wane? Second is on the marketing expense, which has been, I think, both in The U. S. And Canada, there's been higher marketing initiatives. And wondering if you could put a dollar amount on that. And I'm assuming going forward, those initiatives would be rather limited. So just what kind of benefit that could have to expenses? And just curious on the programming cost side with sports being suspended, like what does that have a direct impact on the programming costs that we're going to see come through in the second half of the year? Or are those rates locked in? Just curious how that works. Thanks. Okay. So on the bundled promos, so we so as we stated, we did it a bit more actively during Q4, Q1 and a portion of Q2. So since then, it's been slowed down. Now these programs typically will give discounts for a period of time. So it can be six months, twelve months, even longer than twelve months. So every day, have some customers that will have an expiry on some level of promotions they got when they joined the company. So we would expect that barring the COVID-nineteen crisis, normally we would see a pickup in ARPU going into the balance of the year. And then with COVID-nineteen, we'll see what happens. But I would say just generally dealing with the promotions, I think this quarter would have been a lower point versus what we're going to see in the future. On the marketing expense, we don't disclose the exact number. I think that would be very precise. But it's part of the explanation. And we had mentioned it in previous calls that both countries would see a higher level of expenses during the first six months of the year. So we do expect a lower amount in the balance of the year. I also want to remind you, because it's been a year, but at ABB last year when we compare the EBITDA year over year with the previous year, it was up 10%. And one of the reasons is that we had decreased the marketing expenses. We were changing our plans there. So it was unusually low in The U. S. In Q2, which created the very significant increase in EBITDA, but which hurts a little bit this year when we do the comparison. In terms of programming I'm sorry, and in Canada as well, as we said on the last call, we expect the ramp up to be more towards Q3, but especially Q4. That again is without the COVID-nineteen crisis. Then we'll see what happens, but normally that was our plan. In terms of programming costs, it's a good question. This is something that's evolving right now and I don't have full clarity on it. But I can say that in The U. S, the way it's structured, there is basic programming costs and there is more sports programming in The U. S. Than we have in Canada right now. And there are some pass through recharges to the customers. So I do expect that there's going to be some movements. Some will just be a change in the pass through. And the balance will be more of what we see in Canada. So if our customers are still connected, because there is programming and there is some sports that are running as well, then it's it's same as usual. And to the extent there's some cord shaving on sports for a period of time until all sorts come back, normally then we would expect to save some money on the content cost. Okay. Thank you. As there are no other questions in the queue, we will wait a couple of moments for a few more questions. Okay. So I think we're good. So thanks, everyone, for participating in today's call. So we're going to be back in July for our third quarter. In the meantime, feel free to call us if you have any questions. Thank you. And stay safe everyone. This concludes today's conference call. You may now disconnect.