Patrice Ouimet - Senior Vice President and CEO Louis Audet - President and CEO Andrée Pinard - Vice President and Treasurer René Guimond - Vice President, Public Affairs and Communications Pierre Maheux - Vice President and Controller Alex Tessier - Vice President, Corporate Development

Dvai Ghose - Canaccord Genuity Greg MacDonald - Macquarie Capital Markets Maher Yaghi - Desjardins Securities Phillip Huang - Barclays Vince Valentini - TD Newcrest Glen Campbell - Bank of America Merrill Lynch Tim Casey - BMO Nesbitt Burns Jeff Fan - Scotia Capital Markets Drew McReynolds - RBC Capital Markets

Good day. And welcome to the COGECO Inc. and Cogeco Cable Inc. Q1 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Patrice Ouimet, Senior Vice President and Chief Financial Officer. Please go ahead, Mr. Ouimet.

Thank you. Good morning, everybody. And welcome to our first quarter conference call. Joining me today are Louis Audet, our President and CEO; Andrée Pinard, our Vice President and Treasurer; René Guimond, Vice President, Public Affairs and Communications; Pierre Maheux, Vice President and Controller; Alex Tessier, Vice President, Corporate Development. Before we begin this call, I would like to remind listeners that the call is subject to the forward-looking statements, which can be found in the press release we issued yesterday by COGECO Inc. and Cogeco Cable. I will now turn the call to Louis Audet before we proceed with questions-and-answers period.

Thank you, Patrice, and good morning, ladies and gentlemen. And thank you for joining us today to discuss results of COGECO Inc. and Cogeco Cable Inc. for our first quarters ended November 30, 2014. We are very pleased with the solid results generated by both company. Let us begin with Cogeco Cable, where revenue is up 4.6% reaching $497 million and EBITDA is up 3.5% reaching $219 million. In Canadian cable in particular at Cogeco Cable Canada on November 3, 2014, we launched our industry-leading TiVo service in Ontario and plan to launch this spring in Québec. While it’s a bit early to comment any further, I am pleased to confirm that this is being well-received by customers. And I would like to point out that even without the help of TiVo in the first quarter video customer losses have essentially stabilize. High speed internet additions continued to be brisk, thanks to our industry-leading speed and service. In U.S. Cable at Atlantic Broadband, the influence of TiVo is now being felt through video customer losses, which were reduced by half compared to last year, as well as with higher ARPU and higher bundle sales. PSU additions in the United States are the best of they have been since we acquired the company in November 2012 and momentum continues to build in small, medium and large business sale. In the Enterprise data sector which is comprised of Cogeco data serves and Peer 1 Hosting, you will have noted in our release this morning that Peer 1 Hosting is now C-198 compliant, Cogeco data services of course had been for a long time. The controlled efficiencies at Peer 1 Hosting, which led to the adjustments in the third and fourth quarter of fiscal 2014 can be traced back in part to the first and second quarter of fiscal 2014. Hence there is a disappointing comparison when you compare the first and second quarter of fiscal 2015 with the first and second quarter of fiscal 2014. Now that this is behind us, we can focus on growing the business to a single-digit level this fiscal year and back to low double-digit figures for the years ahead. The markets are healthy, our positions are strong and the transition period is now over. We have fair capacity at Peer 1 Hosting and are currently completing the build of pods 3 and 4 in Barrie and pod 1 Montreal, ensuring the availability of collocation capacity at Cogeco data services. Let us now turn to Cogeco Inc. where revenue is up 4.1% to reach $538 million and EBITDA is up 4.4% to reach $234 million. Our Media sector continues to deliver good results, thank to our many market leading stations and faces, despite what is admittedly a weak advertising environment. When you have leading properties, of course, it’s a lot easier to weather these temporary market weaknesses. In conclusion, we maintain our guidance for fiscal 2015 and we continue to be very focused on delivering results. So these are my only comments and we would now be delighted to answer your questions.

So, Operator, we are now ready to proceed with the Q&A session.

Thank you [Operator Instructions] We’ll take our first question from the line of Dvai Ghose. Please go head.

Yeah. Thanks very much and good morning. I think one of the key positives that we saw in the quarter was a very strong broadband growth both at ABB, as well as in the Canadian cable services. We saw some pretty decent broadband numbers from Shaw this morning as well and this is really following a trend that we saw the end of last year as well? I am wondering what is driving this growth and what is a seemingly mature market?

Yeah. Well, it’s mature, but we continue to offer what we believe to be a superior service in terms of speed available, in terms of reliability of the service and I think consumers are increasingly recognizing that. And as I’ve said in prior calls, there continues to be a movement towards cable providers because of those facts and those facts are basically related to the quality of the technical infrastructure and of course, to our industry-leading customer service.

Now that's fair. On the Atlantic Broadband, Louis, you saw some pretty good revenue growth both in U.S. and even in Canadian, and even in U.S. dollars without the currency appreciation, but obviously, the EBITDA margin was down 200 beeps? Now you said in the past that in the private equity management, the marketing expense was unusually low and you're playing catch-up, there has obviously been some programming cost inflation as well? But little surprised by the margin degradation given the fact that I thought that the programming costs had been offset by higher pricing, the marketing I assume would have normalized by now on a year-over-year basis and that leave some to worry about TiVo and the margin impact it's having in the U.S. and what may happen in Canada? Could you give us some idea as to the breakdown of this margin degradation and when you think margins will start to increase again?

Well, I am sure, Patrice, will want to complement, but for starters, I would say, first off, Atlantic Broadband enjoys market leading EBIT DA margins in the United States. So you might have a slight fluctuation in part attributable to the fact that we had higher programming increases, unusually high and we’ve recovered them and we may have had higher marketing expenditures due to the TiVo that is now in full swing. But I would not consider this to be permanent margin degradation. I consider this to be a temporary blip in the story of Atlantic Broadband, one, that on the other hand as an extremely successful on the PSU acquisition front with what is the best performance since we bought the company. Patrice, do you want to add anything to that or.

Yes. Perhaps a few other comments, obviously, in terms of margin compared to Q4 of last year we’ve had an increase in the margin. So it’s -- year-over-year it’s degradation if you look at the past few quarters it’s a strong percentage. And when we pass along some higher content costs especially for sport packages, we are conscious of what we’re passing along to customers as well for the margin charge on these increases is not necessarily the same as what we are doing on the basic service.

That makes sense. Last but not least just to confirm that you're still confident that the TiVo launch in Canada will not have a significant negative impact on margin and cash flow?

That is indeed. That was what we believe and still is what we believe.

Well, thank you very much and congratulations on the quarter.

Thank you.

Thank you.

Our next question comes from the line of Greg MacDonald. Please go ahead.

Thanks. Good morning, guys.

Good morning.

I wanted to -- a couple things. Number one, verify on the broadband subscriber growth? This is mostly a consumer growth result that we're seeing here and this is not sort of disproportionate growth in business, is that the case?

No. It's largely consumer driven, but of course, our business sales continue to grow very nicely as well.

Can you say then, Louis, that proportionately the consumer business is growing at a similar rate to the business segment or is one growing higher, one would assume that the business segment should grow at a higher growth rate?

Yeah. Business is growing at a higher growth rate but the absolute value in consumer sales that have been taking the day.

Okay. Thank you for that. Secondly, this is what I really wanted to ask. What -- when I am thinking about content inflation in both Canada and the U.S. for 2015? Is it safe to say the majority of contracts for your content pricing have been -- have already been negotiated for fiscal 2015?

Yes. The -- sort of the difficult ones to do were done and there are continue to be some. There will always be a certain number throughout the year, but the big ones were identified and dealt with and the costs were passed on to consumers generally with the margin.

So can you give us some color on expectations for the outlook for content inflation in Canada and the U.S., a lot of people still have this concern that the U.S. could see material surprises to the upside, I wonder if you share that view?

It continues to be a subject that we think a lot about. The notion that programming costs would stop growing is probably wrong, content costs will continue to go up. Our job is to explain this to consumers, pass them through and when necessary rearrange our packages. That's our job, so that we continue to do well for our shareholders. The rest of the world will go the way it go, but we have to maneuver in consequence and do well and this is what we have been able to do so far and I see no reason why we can't continue to do that.

And then just a final question on plans for rate increases, there has been some discussion in the industry on concerns over what might be happening with respect to online video, maybe a willingness to allow a little more slack in the pricing of cable services but a push toward increased prices on broadband. For starters, do you share that view and second, are there plans for rate increases that you haven’t communicated previously that you could communicate now?

We generally do not announce rate increases to the markets until after we’ve told our customers so that they -- it's sort of an internal rule that we follow and which we would like to continue to follow in a respectful way towards our customers. So you will forgive me for not answering that question.

Thank you. Appreciate it.

Now, the issue of their being flexibility as between programming cost, passthroughs and internet pricing, that flexibility exists. We can’t deny that. But I would say that video providers that have not passed on their programming cost as they occur, generally find themselves in a disadvantaged position with the passage of time. So we’ve made it our rule that we’ll rearrange packages if necessary. We’ll market differently. We’ll explain what’s going on to consumers but we will not skip a beat in passing on the cost because otherwise it’s just -- the situation can get worse and we don’t want to be in that position.

That’s helpful. Thanks Louis.

Thank you.

Our next question comes from the line of Maher Yaghi. Please go ahead.

Yes, thank you for taking my question. Louis, I wanted to ask you, I know it’s early on in the launch period. Can you give us some of your experiences you’ve had with TiVo in Canada. So far, that gives you the optimism that the takeup will be as expected?

That’s a very good question, which I have the answer for you. Let’s be realistic. We’ve been assets for just a few months. So I would say so far so good. This is headed in the direction that we wanted to be headed in. But being more specific than that, I really couldn’t at this stage.

Right, it’s too early, I understand. Just, I wanted to ask you in terms of the pricing. We talked about this in the past conference call and when you launched the servicing calendar, you are pricing the product at $20 a month for the DVR, now you are offering $15 rebate on the service. Can I ask you about the pricing of the product? Is the reason for the $15 discount a reaction to what consumer request not to pay fully for that product since your competition is also asking clients zero money for the DVRs?

Let me explain this perhaps a bit differently to you. Our legacy product is marketed in a certain way. Our TiVo product is marketed much in the same way except it costs more. $7 more for the main TiVo unit and $5 more for the second, third and so on units. So there are extra costs on top of our existing pricing grid.

And the $15 discount that you are offering on the DVR right now. How -- let's say we want to look at the profitability of that product in terms of the licensing fees that you’ll be paying for using TiVo technology. Can you maybe just again that goes to the maybe some of the margin declines we saw in the U.S.? Can you maybe clarify what if any, there will be any impact on margins in the Canadian cable business from using and paying for the license for the TiVo product?

If I were you, I would not place too much importance on the margin glitch in the United States. That is not -- in my opinion, that’s not a leading indicator to anything on the type that your question suggests that this is not a sign that we are paying more in costs than we are selling it. You shouldn’t take it that way. We are happy that we are making good margin on our product. It’s helping us retain customers. It’s bringing in revenue at an ARPU. So this is not a concern of ours at this point in time without being more specific but it’s not a concern of ours.

Okay. And just finally, when we look at the overall cable business in Canada, we saw maybe a leading indicator this morning with Shaw reporting their first time residential cable business segregated on their own and we are seeing some of the pressure that wireless substitution, cord shaving and competition is having on the residential business. When you look at your residential business in Canada, maybe the wireless substitution and the competition has not affected you to the same extent that Shaw has been affected by. But when you look out into 2016 and ’17, you still expect residential cable business to continue to grow its EBITDA line, knowing and taking into consideration on what we you just talked about.

Well, I guess we discovered what you discovered about other companies announced results today and so I don’t have any time to reflect on this. But our plans do not contemplate performance reductions in future years now. If you are asking me can you guarantee that there won’t be weakness? Of course I can’t guarantee. But as our visibility lead us to believe that we will continue to grow in cable in Canada and in the United States, the answer is yes.

Okay. Thank you, Louis.

Thank you.

Our next question comes from the line of Phillip Huang. Please go ahead.

Yes. Thanks. Good morning. Question on, first on Bell, your primary competitor here. So Bell’s now privatized Bell Aliant and we may see them look to reallocate some capital from outlying Canada to central Canada following sometime this year or next several quarters. Just wondering have you seen any signs of Bell accelerating their investment with fibre within your footprints so far and whether you guys have made any revisions internally to your plans perhaps in anticipation of a greater or earlier expansion of your competitor’s footprint?

Bell has announced a while ago that they would bring their byproduct deeper into our territory, so that’s a given. In terms of how far they are, of course they would know that a lot better than we. So we will leave that question for them to answer. But our job is to continue to generate superior results for our customers and for our shareholders and that’s what we are focused on and that’s what TiVo is all about. TiVo is about providing a superior that is better than what is currently offered by other players in the market, a superior video product. As you know, we already offer a superior Internet product and we offer a priority phone service. So we are well equipped regardless of what our competitors do, not to say that we take our competitors lightly because we never take them lightly. They are big companies and we take them seriously. But I think we are well equipped to face the future whatever it may be.

Great. Got it. Have you seen any like response -- I know it's early days still, but have you seen a response from Bell in areas where you have launched, in Ontario where you have launched TiVo?

If there is, I'm not aware of it.

Got it. Okay. Another question for you. So your leverage has come down earlier than expected, looks like you guys are once again ready to execute on acquisition opportunities now. And you're building capacity in the data centers business. There are limited opportunities in Canada. So it leads me to believe that you might look upon -- to build upon your U.S. Cable platform which is performing quite well. Can you maybe talk a bit about the potential opportunities you see ahead of you and also maybe some general comments around what the valuation expectations are from sellers or potential sellers in the market?

Well, that’s a very complicated question. First off, I will start with the enterprise sector. In the enterprise sector, demand continues to outstrip supply. For individual companies there might be variations. Some companies might jump on contracts and severely discount their prices, gain customers that way. We’ve tented to be more disciplined. We are willing in some instances to wait a little longer and get better prices for our capacity, because as I said, over the medium, long term, demand outstrips capacity. So there are good growth prospects in the business enterprise sector, whether it’s in colocation or whether it’s in managed hosting and cloud services. So that would be the first statement. In cable, there continues to be as you can see with our results interesting growth opportunities. And yes, the reason we bought Atlantic Broadband in the United States is to eventually participate in consolidation that will occur. And in considering these opportunities, of course we are very mindful of the fact that we have a very good stock price which we would like to maintain and protect. We have an investment-grade rating, which we would like to maintain as much as possible. And you are correct in identifying that we are now in a position where we can start looking around and starting thinking about what we might do which really wasn’t on our mind for the last two years, but now we lift our heads up and start looking around. So that’s -- you correctly identified that.

Yes, maybe I should clarify that I understand that there are growth opportunities in each lines of your business, but I think more in the context of the way you look at acquisitions. It seems to me like in enterprise and data centers business, you can -- you still have to factor it in your building capacity there. And so it seems to me like acquisition in that area would seem a little early or you might actually see better priority looking at U.S. cable as opposed to also Canadian cable where there are a little bit of opportunities in Canada right now. And so lead me to believe that you are looking at more acquisition opportunities in the U.S. cable platform at least for the foreseeable future. And I was wondering if you based on your early assessments of that market, whether you see valuations as being attractive in that -- in the U.S. cable market?

Yes. Well, I think you summarized the position, the situation probably better than I have. As for pricing, I think it’s way too early for me to comment on that.

Got it. Thanks very much. That’s helpful.

Our next question comes from the line of Vince Valentini. Please go ahead.

Yes. Thanks very much. Is there any way you can quantify the impact at Peer 1 this quarter from the certification process and that caused the margins to be a bit weak?

Hi, Vince. So what we have disclosed in the past basically is that we have had adjustments of $6 million last year in the second half of the year. And a portion of that was related to billing adjustments, which were -- which occurred basically, the sales occurred in Q1 and Q2 of last year. So we don’t disclose the exact amounts, but it gives you some perspective on the amounts there.

So I am just -- I am bit confused. Hopefully you can set this straight a bit. If you took -- if you’re no longer counting those revenues in the past because they were incorrectly booked I guess, but you haven’t restated last year’s numbers to take those revenues out, it’s somehow just impacting this year?

Well, no, it’s a year-over-year comparison. So what we did was there were some revenues that were booked in the first half of the year and they were corrected in the second half of the year. So we did correct it within the year, but if you look at quarter-over-quarter, year-over-year basically you don’t have a restatement there basically.

Well, that, not, okay. I got it. And that will -- just to clarify as well that, this impact will still be there in the second quarter of this year than it will be gone by Q3?

That’s right, Vince.

Okay. Thanks.

Thank you.

Our next question comes from the line of Glen Campbell. Please go ahead.

Yeah. Thanks very much. I mean, just a follow up on that last question that at least, so if I understand correctly, in Q4 there was a restatement or a reduction in revenues and then there was some in Q1 as well? Can you give us a sense, if we compare the two quarters, Q1 to Q4? Is there organic revenue growth there or is it running flat or down?

Well, just on your first point basically the adjustments last year were done in Q3 and Q4.

Yeah.

They were none in Q1 of this year. And they related to various items, but some billings, some revenues, basically, that were in Q1 and Q2 of last year and now so I think that’s might be a little different than what you mentioned earlier. And so your question is comparing basically this Q1 versus Q4 of last year, right?

Right. Sequentially. Looks like we are down there, is that right by couple million?

It’s about flat basically if you were to adjust for that yeah.

But if I at it in Canadian dollar terms, it's pretty flat already. If I convert to U.S. dollars, it looks like it’s down slightly. If there was a negative adjustment in Q4 than it would seem to be down significantly, am I missing something here?

Yeah. I need to just calculate the FX impact just for you, I have it basically Q1 over Q1 with last year, that I’ll just try to back later in this call on Q4 versus Q1.

Okay. Fair enough.

Okay.

Thanks. Louis, I wanted to follow-up, you made the comment in response to Phil’s question, about stock price being good? I mean, it has been the top performer in Canada over the last year. I think when you ask the question a few quarters ago, about whether you might do an equity issue, you said, no, because of the level of stock price? Are we right to conclude that your thinking on that might have changed and if so, is it you -- would you sort of look to find an acquisition first or would it make more sense in your view to pre-fund an acquisition?

Our view about that has not changed since our last call. We do not perceive that there is a need to issue equity. We can get debt at very cheap level and we want to protect our investment grade rating as much as possible. So these are the parameters with which we are working.

Okay. Thanks. If I can squeeze one last one in about competitive conditions in Canada? I mean, we see very variation some time to time and whether the telcos are offering promotions on the three to six-month basis or three-year basis to your discounts on the bundle and whether they’re very narrowly targeted or broadly targeted? Can you talk a little bit about what you're seeing out there now? Are we seeing more of the two-year and if so, is it broad or narrow?

I’m sorry, I’m going to disappoint you. These are all temporary movement and in the fullness of time they are not very important. What's important is, what are the fundamental things initiatives you take in your cable systems to ensure that you serve your customers well and that in the long-term they win and your shareholders win. So everything else is noise to the degree that the Canadian market as is the U.S. market as a disciplined marketplace where all players are doing their best to generate adequate returns for their shareholders. Now we’re all aware of situations elsewhere in the world where this is not the case. But in Canada and in the United States, this is the case. So everything else is in my opinion, temporary noise up-and-down and that’s okay.

Okay. Thanks very much.

And just getting back to your question basically, so in Canadian dollars, as you pointed out, the revenues Q4 to Q1 are slightly up and in respective currencies basically we’d be talking -- looking at the revenues being down about $0.5 million. We have U.S. dollar and we have the GDP as well in there.

So just to make sure, I’m not misunderstanding the math, was that Q4 number not -- was sort of an organically higher number, net of our -- an adjustment of some few million dollars to restate say revenues that we’ve booked earlier near which would then imply an organic decline?

Yes, there were some of that in the Q4. So there is an organic decline, quarter-over-quarter a slight decline in -- without the FX component?

Okay. But would -- you wouldn’t call it a trend?

No, no absolutely not and basically in the enterprise business, we have been growing our sales force which is active now basically throughout our different decisions. And as you know, we are booking also on the colocation business. Definitely, this is not a trend we’re looking at. We’re looking at growth later on this year and in the coming year as well.

Okay. Thanks.

Thank you.

Our next question comes from the line of Tim Casey. Please go ahead.

Thanks. So Louis, can you just flush out a little more for us your confidence that you can get this enterprise business back up to, I think you said double digit rate in ‘16. Is there anything specific there or is that more a comment on overall demand exceeding supply conditions that you mentioned early? And secondly, could you comment on how you’re viewing or approaching the various OTT offers that are out there specifically Xiaomi and CraveTV versus Netflix and your TiVo offering. How is your thinking evolving on those? Thanks.

Sure. So in the order that you have asked them, the enterprise data segment is a very healthy growing segment. The transport part of it is going through fairly competitive price eroding periods, which are made up through volume. And as all these facilities are state-of-the-art fiber facility that can easily be accommodated. On the hosting colocation, managed hosting, cloud services side of the house, the markets are very healthy. They are growing. The amount of data being transported in the world and on our networks is growing. And they have to be stored somewhere. So the fundamentals are very good. We have had to adapt with our acquisition of PEER 1 and the adjustments we have had to make and the corrections we have had to make. These are now behind us. So the markets are good. We as -- as Patrice has said, we restructured our sales force. Our customers continue to ask for increasingly complex solutions. The inquiries that PEER 1 made in the markets about customer attitudes which were published earlier, I think at the end of 2014 were that 80% of respondents would not compromise security for lower prices. Half would not comprise speed for lower prices and 90% would not compromise customer service for lower prices. So all the indicators are pointing in the right direction. We have had to make adjustments and that shows in our results. We are confident that we have made the right adjustments. We have good solid assets. Some of which we decided to construct without having angered tenants. It’s cost us a bit in sales. We think in the longer term, we’ll be rewarded with higher profitability. So that’s how I would categorize the enterprise data services segment. Now with regards to your second question, we are in contrast too many other players you might have heard in your discussions. We think that over the top fully complements our cable line up, pay line up and that’s why we want to make all these over the top alternatives available on our TiVo platform. So Netflix was willing to negotiate a decent arrangement with us. So they are on. They are on in the United States. They are on in Canada. We are currently negotiating with Xiaomi, CraveTV, with [indiscernible] in Québec and we want them on our systems. Of course, there have to be reasonable conditions offered to us. But as soon as we can do that, we will have them on and the more the better. So that’s our attitude and our attitude stems from the belief that if you don't give customers what they want and make it easy for them, they will find it elsewhere. We'd rather they found it with us.

Thank you.

Our next question comes from the line of Jeff Fan. Please go ahead.

Thanks. Good morning. Most of my questions have been answered. Just a few to tie up some loose ends. On the broadband side, you had strong consumer broadband growth. Wondering if there's any wholesale number included in there or is that all retail?

Yeah. There is some third-party Internet access growth in there for sure.

Can you help quantify a bit, just so that we can come to the conclusion that its retail largely driven?

No, I don't think we wish to comment on that. It’s healthy but it's not overwhelming.

The wholesales healthy but it’s not overwhelming.

That’s correct.

Okay. On the TiVo, I know it’s early in Canada but I wanted to ask about the installation process. My understanding is it’s still not yet a self installed. So what is the current update on how long roughly it takes through the number of manpower to install the TiVo service and any sort of read through from the U.S. experiences as to how that would improve and how that may trend over time?

Perhaps a good question, I'm not sure we should get into that at this stage. I think the key here is understanding that this is a more complex installation because it takes into account wireless modems many times more than one depending on the size of the house. It takes into account the TV decoders, the main station with the main TV set and the secondary units with each other television set. It takes into account integrating use of the tablet and of the wireless phone into the system because they can be used along with the remote. They can be used as a selection tool, as a programming content and search tool as you use the TiVo search tools to find the program, whether it's on linear recorded PVR, pay on cable or over-the-top on the Internet. So all of that has to be tied together and in many cases, you have to also make use of the internal wiring for MoCA. So it is in my opinion, it is not realistic to hope that this will be done on a self installed basis anytime soon and that's okay. That’s part of our business plan. It’s part of our modeling and so we accepted as such. Of course, we never stop looking for better solutions, more efficient, more economical solutions. But this is a very exciting leading-edge service and it requires many moving parts to be well coordinated and this is beyond the scope of most households. So we will continue to install them until we find a better way.

And can you tell us what the penetration of TiVo is in the U.S. right now since you’ve had a few quarters under your belt?

No, we have not divulged that yet.

Okay. And then the last question is just on your foreign exchange assumption, rates assumptions for this year. Can you just remind us, Patrice, what the U.S. dollar and the pound exchange rate for this year is that’s in your guidance?

That’s why we are using one-tenth in our guidance, which obviously, is different than the current rate.

One-tenth the U.S. dollar.

Yes. 1.1, yes.

And what about the pound, because that would impact your Enterprise segment?

Yeah. It’s 170.

170 and as we look out to the Enterprise growth, just tying it back to the last question regarding getting it back to double digits? Are we expected to see that double-digit on both revenue and EBITDA, were those comments specific to revenue alone?

I think we want them in EBITDA.

Okay. Okay.

That’s what we are looking for.

So how, I guess, there is been a few questions about Enterprise growth? Did the margin even if we exclude the adjustment related to the billings in the first half, we are still seeing margin decline on a year-over-year basis. So, what, I guess, what drivers would sort of get us get the margins to stabilize or even improve?

Well, I think that now we have our -- we got our act together with our acquisition and the way things work there. And I think that that’s the major point that we should focus on as being the key to restoring growth to that sector.

Okay. Thank you.

And as we grow the business basically with our facilities available and we increase the utilization rates, obviously, this will impact gross margin rates.

Can you tell us what, I don't know what numbers you can talk about, but where is your utilization rate at this point either at Peer 1 or CDS or I don’t know how you want to disclose that?

I am sorry to disappoint you these are numbers that we have not disclosed.

But it’s safe to say that -- do you expect that to increase and that will help drive the margin?

We have ample capacity and we are actually building more capacity. And there's lots of room to grow and as you grow that they -- their profitability increases.

Okay. Thank you very much.

Thank you. And I am sorry we have our Annual Meeting today. So we have time for one more question.

Our final question will come from the line of Drew McReynolds. Please go ahead.

Yeah. Thanks very much for fit me in. One follow-up from my perspective, just on the Canadian margin outlook for this year? I think, Louis, you had mentioned last quarter that you are likely to see some year-over-year margin pressure as higher programming cost flow through? We didn't really see that in Q1? So I am just wondering in terms of that budget for higher programming costs? Have we seen the full impact of higher costs in Q1 or is there still some inflation that the flow-through based on the timing of your contract renewal? Thanks.

Well, that’s a good question. Yeah, we did mention that there would be pressure and we sort of did what we have to do and worked hard and in the end there was no pressure. So we'll see what the other quarters lead to. But I would qualify the situation as essentially stable and from that point on it is up to us to do our best to keep these margins up and if not growing and it’s a little difficult for me to be more specific in answering your questions other than that's our job.

Okay. Thank you.

Thank you.

Thank you.

So, Operator, if you would like to conclude the conference, so…

Ladies and gentlemen…

Yeah. Excuse me for interrupting. So thank you everyone for joining us. We are delighted that you could make it with us this morning. Thank you for your interest and support in our company and we look forward to disclosing our second quarter results in mid-April and we’ll be back to you with a press announcement just specifying the exact date. Until then Patrice and Andrée remain available if you have any questions you are always welcome. Thank you very much.

Thank you.

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your line and have a great day.