Cogeco Communications Inc. (TSE: CCA) Q2 2021 earnings call dated Apr. 14, 2021
Corporate Participants:
Patrice Ouimet — Senior Vice President and Chief Financial Officer
Philippe Jette — President and Chief Executive Officer, Cogeco Inc. and Cogeco Communications Inc.
Analysts:
Vince Valentini — TD Securities — Analyst
Jeff Fan — Scotiabank — Analyst
Aravinda Galappatthige — Canaccord Genuity — Analyst
Jerome Dubreuil — Desjardins — Analyst
Drew McReynolds — RBC Capital Markets — Analyst
Presentation:
Operator
Good day, and welcome to the Cogeco Inc. and Cogeco Communications Inc.’s Q2 2021 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 of Cogeco Inc. and Cogeco Communications Inc. Please go ahead, Mr. Ouimet.
Patrice Ouimet — Senior Vice President and Chief Financial Officer
Good morning, everybody, and welcome to our second quarter conference call, which Philippe Jette and I will present. So before we begin this call, as usual, I would like to remind listeners that the call is subject to forward-looking statements, which can be found in our press releases issued yesterday.
I’ll turn the call over now to Philippe Jette.
Philippe Jette — President and Chief Executive Officer, Cogeco Inc. and Cogeco Communications Inc.
[Foreign Speech] Patrice. Good morning and thank you for joining us to discuss the financial results of Cogeco Communications and Cogeco Inc. Let me first note that we continue to be very pleased with the overall performance of Cogeco for the second quarter of 2021 as both our Canadian and American broadband segments showed continued organic growth in revenue and even stronger organic growth in EBITDA compared to the second quarter of last year.
We have been — we have seen continued growth in our Internet customer base with a majority of new customers opting for Internet speeds of 100 megabit per second and more, and a good portion of our existing customer base upgrading their service over the last year, highlighting the importance of our fixed broadband product. In addition, the acquisition of DERYtelecom completed by Cogeco Connexion on December 14, 2020, and the Thames Valley acquisition completed by Atlantic Broadband on March 10, 2020, also contributed to our growth.
Similar to the previous quarter, EBITDA has organically grown at a greater pace than revenue, partly due to a reduction of certain operational expenses resulting from the more stable customer base as a result of the COVID-19 pandemic. In addition, certain sales and marketing expenses were deferred to the second half of the year in both countries when market activity is projected to return to a normal level. As for our radio operations, they continue to be negatively impacted by the pandemic, but results are nevertheless according to expectations.
Let’s review more details. Starting with Cogeco Connexion’s recent development. The acquisition of DERYtelecom, the third largest cable operator in the province of Quebec, closed on December 14 and contributed to the quarter’s growth. The integration is progressing as planned and should generate superior growth relative to our current Canadian operations as we further invest in sales and marketing to improve penetration rates and pursue DERYtelecom’s network expansion plan.
We launched in mid-January a marketing campaign for our new IPTV service called EPICO, which focus on attracting new customers and upselling a portion of our existing customer base as we gradually migrate them over time. The launch of this service has enabled us to enhance the customer experience and reduce churn. We are not only expanding our service offering but we are also continuing to expand our geographical reach through network extensions in unserved and underserved areas.
In addition to several other projects announced over the last year, we were very proud to announce on March 22 that we will carry out 13 fiber-to-the-home network expansion projects in several regions of Quebec in collaboration with the federal and provincial governments. These regional infrastructure projects represent an investment of approximately CAD240 million, of which CAD208 million will come in the form of government grants. Once these projects are completed, more than 54,000 homes and businesses will be connected to Cogeco Connexion’s network, representing a 3% increase in home pass [Phonetic]. Cogeco will focus its offering on high-speed Internet but will also offer telephony video services through its newly implemented IPTV platform. These fully digital infrastructure investment projects are scheduled to be completed by September 2022.
Including the recent announcement, Cogeco has now been awarded a total of 40 projects in Quebec and Ontario, which will accelerate our growth over the next couple of years. We are also awaiting decisions on several additional network expansion projects submitted as part of our various government-sponsored programs, aimed at providing high-speed Internet to underserved and unserved areas. The Ontario government has just announced in its last budget that it will spend an additional CAD2.8 billion to bring broadband access to more people across the province by 2025. This brings the province’s total investment to nearly CAD4 billion over the — over a six-year period. Cogeco’s deep roots in regions and rural communities in Ontario and Quebec should continue to contribute to its success in securing grants, to help close the gap in digital access.
In the Canadian industry, we have also seen the recent announcement of the transaction between Rogers and Shaw, one that would structure eliminate the fourth wireless competitor in a number of markets across Canada. Lawmakers have already indicated the Rogers/Shaw combination will be subject to close regulatory scrutiny. For Cogeco’s part, we will follow very closely developments as the approval process unfolds. It will involve the Competition Bureau, the CRTC and ISED. This proposed merger has underscored how urgent it is for the federal government to take clear policy steps in the wireless sector that can finally deliver increased competition for all Canadians.
To that end, Cogeco has proposed a balance middle ground regulatory solution, the HMNO, Hybrid Mobile Network Operator, model. This model will allow more regional network builders to participate in Canada’s wireless market and has received support from over 300 communities in Ontario and Quebec already. It will encourage ongoing investments to expand and improve Canada’s wireless networks while bringing new wireless services to underserved and under — and unserved Canadians. We continue to be interested to add mobile services to our offer, given the right circumstances and maintain LT competition in this sector.
Finally, as published by the Government of Canada, Cogeco Connexion has filed its application to participate in the spectrum auction in the 3,500-megahertz band. The auction is scheduled to start on June 15, 2021. And as clearly stated by the rules of this auction, we cannot comment any further about the auction.
Now turning to Atlantic Broadband. We are very pleased with the strong financial performance over the last two quarters, as sustained investments over the last few years have paid off. We have built a strong foundation for continued growth in the coming years with the successful integration of several acquisitions, a significant Florida network expansion, network investments where 1-gig service is now offered essentially everywhere, and the ongoing digital transformation and customer service enhancements.
During the last quarter, Atlantic Broadband continued to launch several initiatives to both improve the overall customer experience as well as to drive operational efficiencies. On the customer side, revisions to our call centers involving improved call routing, additional eCare options, expanding chat capabilities and further IVR optimization have simplified customer interactions. In addition, we continue to invest in digitization efforts. Through the use of predicting — predictive data analysis and artificial intelligence and increased self-service capabilities, we have made initial strides to fully utilize the strengths of our network to improve customer service and reduce operational expense on the longer term.
As for service offering, the main focus in the last quarter has been to fully launch a new Broadband First offer strategy along with a new and enhanced WiFi solution across the footprint. This new offer puts broadband at the center of the customer experience. We expect that it will also gradually lead to an improvement in customer satisfaction, margins and customer lifetime value.
As for Cogeco Media, its financial performance continued to be impacted by a weaker advertising markets due to the pandemic. However, results were as expected as we continue to maintain our financial discipline. We should be well positioned for growth when the advertising markets recovers, as our listeners continue to put us — to put many of our radio stations at the top of the numerous ranking during the last quarter.
I will now let Patrice discuss our financial results.
Patrice Ouimet — Senior Vice President and Chief Financial Officer
Thank you, Philip. So, in terms of the revenue at Cogeco Communications, the results are up 9.8% and EBITDA up 12.2% in constant currency compared to the last year. This was driven by EBITDA growth of 11.2% at Cogeco Connexion and 12.4% at Atlantic Broadband. Free cash flow increased by 14.2% in constant currency. The increase is mainly due to higher EBITDA and a decrease in financial expenses when excluding the non-cash interest gain last year, partly offset by an increase in current income taxes and capital expenditures. Capital intensity in the quarter was 18.2%, which is slightly lower than the 20% intensity we expect for the full fiscal year.
We are reconfirming current year’s financial guidelines, which were revised last quarter to include DERYtelecom acquisition and reflect higher organic growth expectations. On a constant — in the constant currency basis, we continue to expect mid- to high-single-digit percentage growth in revenue and adjusted EBITDA and low-double-digit percentage growth in free cash flow. As mentioned, we purposely deferred some sales and marketing activities for the second half of the year or when we return to more normal operations post pandemic. Those expenses will impact EBITDA, which has otherwise been growing at a double-digit rate for the first six months of the year.
When we announce our next quarterly results in July, we will be in a better position to provide more information on the fiscal 2022 financial impact of various fiber network expansion initiatives in both countries. The expansion program includes government-sponsored projects, which we would not otherwise be able to undertake profitably on our own, as well as plans to expand our network at ABB in attractive adjacent areas to our footprint, which is something we’ve been doing in Florida for a number of years. The expansions in both countries are expected to increase our capital intensity next year, but also increase our footprint at a higher rate than usual. We believe that those projects are attractive investments done in conjunction with other capital allocation priorities, which includes acquisitions, investing in the business and paying dividends.
As for share buybacks, Cogeco Communications seized buying back shares at the beginning of the first quarter as a result of the proposed acquisition of the company. However, in the second quarter we have resumed the program and purchased 313,000 shares for CAD35 million.
Now let’s look at the individual components. In Canada, Cogeco Connexion’s revenue increased by 10.1% in constant currency relative to the same quarter last year, while adjusted EBITDA increased by 11.2%. Excluding the impact of DERYtelecom, revenue and EBITDA have grown by 2.9% and 4.7% respectively. Organic revenue growth resulted from the cumulative effect of sustained demand for our residential high-speed Internet since the beginning of the pandemic, resulting in higher customer additions and also customers transitioning to higher value offerings, as well as rate increases implemented for certain services. The superior organic EBITDA growth was partially due to some sales and marketing activities being deferred to the second half of the year in the context of the pandemic, but also savings resulting from the operational optimization program implemented in the fourth quarter of last year.
The broadband customer additions were strong compared to last year and ARPUs were also higher due to more sales of higher tiered products. The video product losses were lower than last year, partly thanks to the new ethical IPTV launch. And finally, the phone losses were in line with historical trends except that last year was unusually strong.
Turning to Atlantic Broadband, revenue in constant currency increased by 9.5% in the second quarter compared to last year, while EBITDA increased 12.4%. Excluding the Thames Valley acquisition, revenue and EBITDA have grown by 8% and 11%, respectively, in constant currency. Starting next quarter, the Thames Valley acquisition will be included in last year’s numbers and will be comparable. Organic revenue growth comes mainly from higher residential Internet customer additions, rate increases implemented for certain services and continued business services growth. Similar to Cogeco Connexion, Atlantic Broadband deferred some — certain sales and marketing expenses to the second half of the year due to the COVID situation, which partially explains the EBITDA’s over performance in the quarter.
Broadband customer additions were higher than last year due to the continued strong demand for the product. Video customer decline is mainly related to the new Broadband First sales strategy and also the fact that we do not offer a video-only services anymore, generally. The phone product was softer than planned in our new approach, but this is something we’ve addressed since the end of the last quarter.
Now turning at — taking a look at Cogeco Inc. In the second quarter, consolidated revenue increased by 8.5% and EBITDA by 11.8% in constant currency. While the broadband business had very strong results, the media business continued to be impacted by the pandemic due to certain segments of the retail industry reducing their advertising activities. Revenue related to radio operations decreased by 23.5% during the quarter compared to last year. However, we continue to closely monitor our costs and expect the radio’s EBITDA decline in the full year to be modest versus the prior year.
I will now turn to Philip to provide his concluding remarks.
Philippe Jette — President and Chief Executive Officer, Cogeco Inc. and Cogeco Communications Inc.
Thank you, Patrice. On the basis of a strong second quarter, fiscal year 2021 looks very promising as we will continue to manage our cost closely and pursue profitable growth through leveraging the full potential of recent acquisitions, continuing to expand our networks and pursuing various other organic initiatives. Pro forma the DERYtelecom acquisition, our 2.4 times net leverage leaves ample room for other acquisitions and share buybacks.
Finally, I would like to highlight Cogeco’s continued commitment to environmental and social issues as it has been recognized and endorsed by a number of leading organizations over the last quarter. In January, Cogeco was included in the Corporate Knights’ list of the Global 100 Most Sustainable Corporations for a second year in a row, gaining 20 ranking points. In addition, Cogeco was proud to announce that it’s new emission reduction targets were approved by the Science Based Target Initiative as consistent with levels required to meet the most ambitions — ambitious goals of the Paris agreement. This makes Cogeco the first and only telecommunications company in Canada with the proved targets from SBT, which highlights our leadership and the rigor of our approach.
As part of its global climate ambitions, Cogeco has also joined other corporate leaders representing more than CAD3.6 [Phonetic] trillion in market cap in signing the business ambition for 1.5 degree Celsius commitment. Furthermore, Cogeco received 2020 Climate Change score of A- from CDP, which puts us in the leadership ban for implementing best practices in measuring, understanding and addressing corporate climate impacts.
And now, we will be happy to answer your questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] Your first question will come from Vince Valentini from TD Securities. Please go ahead, your line is open.
Vince Valentini — TD Securities — Analyst
Thanks very much. Congrats on another good quarter, guys. Couple of questions. One probably for Patrice. The delay in SG&A costs into the second half of the year, I guess, we only have 4.5 months left. Here in our part of Canada, we’re still pretty well locked down. Do you — have you started to spend that money? Is it realistic that you play catch-up or is that maybe slip into 2022?
Patrice Ouimet — Senior Vice President and Chief Financial Officer
Hi, Vince. No, we do expect to spend it probably more in Q4 than in Q3. So, that’s why we maintain our guidance. And also in the US, obviously, as you know, I would say most of the states are back to normal or close to back to normal. Canada is going to take a bit more time. But over the next few months, we do expect that the situation will change.
The other thing to note as well is, when you compare it to last year in Q3 and Q4, we will have the smaller acquisition in U.S., Thames Valley, that will be there, which was not the case in Q1 and Q2. And also in Q4 of last year, in Canada, we did highlight a CAD4 million non-recurring gain relating to programing costs and some COVID expenses, which is something that would not be there this year when you do the comparison.
Vince Valentini — TD Securities — Analyst
Thank you. Second question is, all of these new wins you’re getting in the government programs for rural and underserved areas, can you just clarify how these work once the networks are built? Do you have full control of the operation and full autonomy to price and market any way you choose or does the government have some clause attached given how much of the money they are putting up?
Philippe Jette — President and Chief Executive Officer, Cogeco Inc. and Cogeco Communications Inc.
Well, they are simply extensions of our existing network. So from a network point of view, it’s just an extension except we are going to all — complete all of them in fiber — a full digital fiber-to-the-home mode. So, that’s for the network part. Now for pricing, we have to be aligned to the large urban centers, but there are no pricing regulation at this point. We simply have to be fair and align to do all other centers in Canada.
Vince Valentini — TD Securities — Analyst
Excellent. And last, I’ll leave the wireless and if you know stuff to others. But the the spectrum auction, you can’t talk about it, but can you clarify in all of your regions where you are the incumbent cable company. If you added all those up, what would the minimum reserve price be for the 50-megahertz of set aside spectrum?
Philippe Jette — President and Chief Executive Officer, Cogeco Inc. and Cogeco Communications Inc.
Sorry, Vince, I can’t comment on this at this time given the rules auctions.
Vince Valentini — TD Securities — Analyst
Okay. I’ll pass it on. Thanks.
Operator
Your next question comes from Jeff Fan from Scotiabank. Please go ahead, your line is open.
Jeff Fan — Scotiabank — Analyst
Thank you. Good morning. As — Philip, you mentioned the Company is at a very good stay when it comes to the balance sheet. So, there is a lot of strategic initiatives in front of you. Can you or Patrice talk a little bit about the return profile of the various possible opportunities that’s in front of you. You talked a lot about rural broadband expansion, talked a bit about wireless, have to talk about the spectrum, but just wireless services in general and maybe U.S. acquisition. How do you — what’s the return profile [Indecipherable] how do we think about the pecking order and the priorities? Thanks.
Philippe Jette — President and Chief Executive Officer, Cogeco Inc. and Cogeco Communications Inc.
I’ll let Patrice go in more details. But it’s important that we don’t lose sight of the context of the pandemic, it’s changing the game in many different places. So, on the US side, the — there is a stronger and faster economic recovery. This will certainly help all products to come back to normal where we can continue our growth. On the Canadian side, as Patrice just mentioned, it will be maybe as strong, but certainly delayed compared to the U.S. footprint.
Patrice Ouimet — Senior Vice President and Chief Financial Officer
In terms of priorities, we are active on all fronts. It’s not as if we have to choose necessarily one versus another which is a good place to be given our balance sheet and our cash flow situation, which is — which provides us an ability to invest. We’re always interested in looking at M&A opportunities, as you know, and we’ve been active in, especially in the U.S. but including in Canada recently, especially with DERYtelecom. So, this will continue. These assets are not always for sale and we have a list. And when we have — when we’re invited to look at some potential assets for sale, we get involved and we see if there is a good return to do. And that has to do with the quality of the asset, the area where it is, the penetration rates. Obviously, the asking price plays into it as well. So it depends. But I would say we are generally active on that front.
In terms of network deployment, there is clearly an opportunity in Canada right now where various levels of government want to ensure that consumers that don’t have access to high-speed Internet are provided disability and Quebec was — came out with a very large program recently, Ontario has different programs and the federal level has different programs as well. So, now is the time to do it. It doesn’t mean that this will be true in five or 10 years. So we’re actively participating in it.
In the U.S., it’s — we also participate in some government programs. So, the [Indecipherable] program. There is a bit more players there. So, it really depends on where we did and there are some other areas where we are simply expanding our network like we’ve been doing in Florida. So we see opportunities to do there.
And lastly, in mobile, that’s a bigger question. It will depend on what happens especially on the regulatory front and then we’ll have to be able to determine what kind of business and returns we want to generate in that business if we get into it.
Jeff Fan — Scotiabank — Analyst
If I may just follow up on that last point, the CRTC decision looks like it’s coming out in the coming days. Can we just revisit that one for a second? You guys have put forward an HMNO proposal, it’s a very reasonable sound proposal. But what’s next if the CRTC does not come out with a decision that is similar to that HMNO? Does that mean that you forgo wireless? Does that mean you look for alternatives? How should we think about what the next step is given that decision is kind of right in front of us? Thanks.
Philippe Jette — President and Chief Executive Officer, Cogeco Inc. and Cogeco Communications Inc.
Yeah. So, Jeff, we won’t speculate of what it could be or could not be but the HMNO proposal has received already a lot of support. It might be called differently by other players in the Canadian ecosystem, but it’s a proposal that actually puts equilibrium between investment, innovation and competition. So this is what the lawmakers need to achieve. Of course, it needs to create a reasonable return, a fair return for all players in the ecosystem. But investments, innovation and competition are the three items to balance.
Jeff Fan — Scotiabank — Analyst
Great, thank you.
Operator
Your next question comes from Aravinda Galappatthige from Canaccord Genuity. Please go ahead, your line is open.
Aravinda Galappatthige — Canaccord Genuity — Analyst
Good morning. Thanks for taking my question. On — the first question is, with respect to the upgrades that you talked about in the Internet product during the pandemic, obviously, you’re benefiting from sort of the up tiering of those products. As we think about the tail end of the pandemic for the U.S., are you starting to see those upgrades perhaps taper off or are you still as recently as, let’s say, the last quarter you’re still seeing a steady rate of upgrades? I just wanted to get an update on that front.
And secondly, we know that your competitor, your telco competitor has sort of indicated a stepped up broadband expansion, both on the fiber front as well as fixed wireless. Perhaps it’s a little bit early, but I was wondering if you’re starting to see some of that activity in your footprint that is notable? Thank you.
Philippe Jette — President and Chief Executive Officer, Cogeco Inc. and Cogeco Communications Inc.
So well, thanks for that question. The pandemic has certainly induced some change, but we think they are going to endure. New subscriber coming in the broadband ecosystem from weaker networks, especially weaker technologies to a very capable networks, like the ones we’re deploying, providing 100 and more megabit per second up to 1 gig. So, there will continue to be an inflow of people wanting very fast Internet service.
On the upgrade, same thing. There are more and more devices in the home. There is the video that is also moving to the IPTV platform. So, there is more demand for very high speeds. So 100 and more megabit per second, we have 100 megabit per second, 120 megabit per second almost everywhere today in many, many different cities, in places, our networks are 1-gigabit capable. So, there is a good runway for upgrades, for continued upgrade, and the demand is certainly LT. The pandemic, to me, has simply accelerated and induced more upgrades.
What’s interesting as well to notice is that we are gaining also customers coming from pure mobile. They used to be satisfied with the data mobile package, but now clearly it’s not satisfactory, they are expensive, they have very limited amount of data, and now we’re seeing as well some customers coming from the mobile ecosystem wanting more gigabytes per month and steady connections.
Aravinda Galappatthige — Canaccord Genuity — Analyst
Thank you. And just a quick follow-up on the wireless matter from the previous discussion. I just wanted to clarify, given the Shaw/Rogers announcement, I know that historically your interest with respect to wireless was mainly with respect to your cable footprint. Has that plan changed at all? I mean, if there is an opportunity to extend a little bit beyond your footprint perhaps at the provincial level and I’m not talking about a national expansion, is that also of interest to you or you very much still — is your plan very much along the lines of your cable footprint?
Philippe Jette — President and Chief Executive Officer, Cogeco Inc. and Cogeco Communications Inc.
Yeah. This Rogers/Shaw proposal will certainly be scrutinized for many, many months with lawmakers. We will analyze and look at the — all possibilities. And I have mentioned many times that there is certainly an advantage when you have a wired network to put a mobile layer on top. But as of today, first, let’s see what the CRTC will publish this week. If the decision comes on our HMNO proposal this Thursday, and given the auction rules, again, we can’t — we’re not at liberty to fully comment on your question.
Aravinda Galappatthige — Canaccord Genuity — Analyst
Thank you very much. I’ll pass the line.
Operator
[Operator Instructions] Your next question will come from Jerome Dubreuil from Desjardins. Please go ahead, your line is open.
Jerome Dubreuil — Desjardins — Analyst
[Indecipherable] Thanks for taking my question. First question is on the Biden infrastructure plan. We’ve seen the proposed tax increase, but also a possible CAD100 [Phonetic] billion in broadband funding with however I’m wording on the government’s goal to ensure affordability. Can you comment on your initial view of the potential impact on the plan as proposed on your business?
Patrice Ouimet — Senior Vice President and Chief Financial Officer
Yeah, sure. Hi, Jerome. So, yes, on the tax front, you’ll remember that about three years ago, the tax rates have decreased in the U.S. And at that point, we did record a non-cash tax gain. I think it was $73 million. If the tax rate does increase, from what we understand, to be 21% to 28% in the future, then the reverse would happen, we would book a non-tax gain loss, it would be a smaller amount. So, that’s probably the extent of it for us. There is a discussion on minimum tax rates as well. But we have — given all the acquisitions we’ve done, we have a number of the assets that can shield taxes and tax losses as well, so we’re not currently taxable in the U.S.
As it relates to the network expansion, I would say, this is good news. Typically the way these programs are structured is that it creates an opportunity to extend networks, just like in Canada in the areas where customers or residents don’t have access to high-speed Internet, so either they have nothing with wireline or they have something that’s very slow, especially on the SL. So this could be an opportunity for us to extend our network. We’ll have to see what it means in reality and how it translates into programs, but we’re not really seeing it as a threat but as an opportunity.
Jerome Dubreuil — Desjardins — Analyst
Okay, thanks. And then fill in the U.S., I think it looks pretty clear that the FX will be a headwind next quarter. Can you explain a bit how this affects your view on the cost side and if there are hedges in place?
Patrice Ouimet — Senior Vice President and Chief Financial Officer
Yeah. So, the way we manage — and there’s also even a page in our investor presentation if you want to look at it, but the way we manage our foreign exchange exposure is we try to be fairly neutral from the free cash flow standpoint and a large portion of this is done through borrowing in US dollars, which will shield cash flows from our U.S. entity. We do have some financial instruments as well from time to time, but I would say the bulk of it is U.S. borrowings.
You’re right that in terms of revenue and EBITDA, these are things that we cannot shield. So they will get impacted temporarily by changes in foreign exchange rates. But again, free cash flow is — has very minimal impacts.
Jerome Dubreuil — Desjardins — Analyst
Great, thank you.
Operator
Your next question comes from Drew McReynolds from RBC Capital Markets. Please go ahead, your line is open.
Drew McReynolds — RBC Capital Markets — Analyst
Yeah, thanks very much. Two follow-ups for you, Patrice, and then maybe one for Philip, on the — just some housekeeping. On the FX side, in terms of interest expense and depreciation, amortization at the consolidated level, just remind us how the higher Canadian dollar is impacting those line items. And secondly, on the sales and marketing, I can’t recall if this has been kind of quantified in terms of the savings or the absence of dollars that you have spent due to COVID. Is there anything you could kind of unpack for us relative to the underlying cost efficiencies that you’re getting across the business?
Patrice Ouimet — Senior Vice President and Chief Financial Officer
Sure. On the second question, we have not quantified the sales and marketing as we’re not quantifying even the base amount, obviously, that we — is included in our cost. That being said, if you want to have some view of where we’re heading, we have obviously the guidelines for the full year. But as we’ve said on the last call, I’ll mention it again today to reconfirm it, if you look at Cogeco Connexion and ABB in constant dollars, we would expect that the EBITDA with the mid- to high-single-digit growth year-over-year. And that’s true for both countries. Canada does include the DERY acquisition. And as you know, for the first six months, we’ve been running at a higher rate than this in the two countries. So you can triangulate to what should be the growth rate in the second half of the year.
In terms of FX, or — we do have a dollar impact of the FX rates in our MD&A more at the EBITDA level, so I’m not sure I have an answer for you for financial expenses directly, but I can comment on what we did in the second quarter. So, last year it was CAD35 million in terms of financial expenses. If you do exclude special gain we had on the refinancing we did last year of CAD23 million and that decreased to CAD31.8 million this year. So it’s a reduction of CAD3 million and that has to do with lower interest rates and also a reduction in the overall debt level.
I’m not sure if that answers your question. I’m happy to add more comments on this.
Drew McReynolds — RBC Capital Markets — Analyst
That’s fine, Patrice. We can take that offline. And maybe one for you, Philip. On the — just on the wireless side, I think the horse has been kind of beaten here on the Canadian side until we get more information here. Can you just provide an update on your latest thoughts on wireless in the U.S. and the importance of getting that kind of service in some way, shape or form on tier offering over time? Thank you.
Patrice Ouimet — Senior Vice President and Chief Financial Officer
Yes. For the wireless — for wireless in the U.S., we — and we’ve said that before, we have good opportunities and other priorities right now that we think we should get at before spending more time investigating both fixed wireless access or broadband expansion, as well as mobile introduction. So we will get there, but we have other priorities in network plans, investment in customer experience as well as M&A that are more — that are higher on our priority list for the U.S. market at this point and not to forget, the investments we’re making in Florida. So, there is a number of good leads in the U.S. that we will continue to explore before getting there.
Drew McReynolds — RBC Capital Markets — Analyst
Got it. Thank you very much.
Operator
We have no further questions in queue. I’d like to turn the call back over to the presenters for any closing remarks.
Patrice Ouimet — Senior Vice President and Chief Financial Officer
Okay. Well, thanks everyone for being there today. We’re looking forward to meeting with you again in the third quarter — for the third quarter results in July. And feel free to reach out if you have any further questions. Thank you.
Operator
[Operator Closing Remarks]