This news release contains forward-looking statements. For a
description of the related risk factors and assumptions, please see
the section entitled "Caution Regarding Forward-Looking Statements"
later in this news release. The information
contained in this news release is unaudited.
- 241,516 total wireless mobile phone and mobile connected
device, retail Internet and IPTV net activations, up 76.5%
- 3.5% consolidated revenue growth delivered 2.1% higher
adjusted EBITDA1
- Net earnings of $397 million
down 39.3% with net earnings attributable to common shareholders of
$329 million, or $0.37 per common share, down 44.8%; adjusted net
earnings1 of $722
million yielded a 9.2% decrease in adjusted
EPS1 to $0.79
- Cash flows from operating activities down 8.9% to
$2,365 million; free cash
flow1 decreased to $1,016 million on timing of working capital and
capital expenditures
- Wireless operating momentum continues: surpassed 10 million
mobile phone subscribers; wireless service revenue grew 4.4% on
highest Q2 postpaid net activations2 in 18 years, up
33.8% to 111,282 and 79,537 mobile connected device net
activations, up 79,881
- Best Q2 retail Internet net activations since 2007, up 10.2%
to 24,934; 52,148 fibre net activations, up 38.2%, delivered strong
7% residential Internet revenue growth; on pace to complete 85% of
planned broadband buildout program3 by end of
2023
- Bell Media digital revenue4 up 20% as total media
revenue and adjusted EBITDA declined 1.9% and 5.3% respectively,
due to ongoing advertising recession
- Reconfirming all 2023 financial guidance targets
MONTRÉAL, Aug. 3, 2023
/PRNewswire/ - BCE Inc. (TSX: BCE) (NYSE: BCE) today reported
results for the second quarter (Q2) of 2023.
"Bell's Q2 results demonstrate that our consistent strong
execution and delivering the compelling services that our customers
want and value is a winning approach," said Mirko Bibic, President and CEO of BCE and
Bell Canada.
"Over the past several years, we have been laser focused on
building the best networks, investing in growing our fibre
footprint and delivering ever-faster mobile and Internet speeds.
Bell pure fibre was ranked the fastest Internet in Canada in the Ookla Speedtest Award report for
Q1-Q2 2023, as well as the fastest Wi-Fi. We added 52,148 new
net fibre customers in Q2, up 38.2% over last year, and our retail
Internet net activations were up 10.2% to 24,934, our best Q2
result in 16 years. We surpassed a milestone of 10 million mobile
phone subscribers, with service revenue up 4.4% on our highest Q2
postpaid net activations in 18 years. And we achieved these results
against the backdrop of declining prices, demonstrating that our
industry is delivering the highest quality services at decreasing
prices, despite persistent inflation.
Despite the continuing advertising recession across North America, our leading content and
digital-first media strategy continues to pay off with Bell Media
digital revenue up 20% over last year, and now comprising 33% of
total Bell Media revenue. "
______________________
|
1 Adjusted EBITDA is a total of
segments measure, adjusted net earnings and free cash flow are
non-GAAP financial measures and adjusted EPS is a non-GAAP ratio.
Refer to the Non-GAAP and Other Financial Measures section
in this news release for more information on these
measures.
|
2 Refer to
the Key Performance Indicators (KPIs) section in
this news release for more information on subscriber (or customer)
units.
|
3 Baseline
broadband buildout program based on planned coverage footprint of
approximately 10 million residential and business
locations.
|
4 Digital revenues are comprised of
advertising revenue from digital platforms including web sites,
mobile apps, connected TV apps and out-of-home (OOH) digital
assets/platforms, as well as advertising procured through Bell
digital buying platforms and subscription revenue from
direct-to-consumer services and Video on Demand
services.
|
KEY BUSINESS DEVELOPMENTS
Award-winning network, new Virgin Plus plans
Bell
became Canada's most awarded Internet service provider5
after its pure fibre Internet was named the fastest Internet and
fastest Wi-Fi in the Ookla Q1-Q2 2023 Speedtest
Awards report.6 In addition, Bell MTS was
recognized as Employees' Choice: Canada's Top Broadband ISP for
Work in PCMag's first survey of Internet providers at work in
Canada.7 Virgin
Plus launched new unlimited nationwide and 5G wireless plans,
along with a new brand campaign and updated Member benefits.
Accelerate cloud strategy for Canadian businesses
Bell
completed the acquisition of FX Innovation, a Montréal-based IT
services and consulting company providing business clients with
cloud-focused managed and professional services and workflow
automation solutions. This acquisition delivers leading-edge
technology solutions for Canadian businesses and seeks to position
Bell as a tech services leader.
Delivering the most compelling content
TSN, RDS, CTV
and Noovo delivered extensive coverage of the Formula 1 Canadian
Grand Prix, which was Canada's most-watched F1 race on record,
attracting an average audience of 1.34 million viewers. The final
round of the RBC Canadian Open attracted the highest audience
on record for a Canadian Open final on TSN, with a 41% increase
compared to the 2022 final round. A total of approximately 2.35
million Canadians tuned in to watch the final. Bell Media announced
its 2023 – 2024 original content slate as part of Upfront 23 and
Futur 23. Total English and French-language original programming
includes 96 titles and 1,037 hours of content. CTV celebrated 22
consecutive years as Canada's most-watched network. On Crave,
Billionaire Murders was the top Canadian series launch ever
for first week streams and Survivor Québec was the
most-watched program of the spring on Noovo. The finale was the
week's most watched show on French Québec television and the most
watched episode on Noovo since the network's debut in 2020. Crave
expanded its direct-to-consumer subscription offering with the
launch of ad-supported tiers. Bell Media also unveiled new
advertising solutions accessible directly through the Bell
Marketing Platform, which includes Addressable TV, new upgrades to
its Strategic Audience Management (SAM) tool, expanded inventory on
its Bell demand-side platform (DSP) including Addressable Audio,
and new attribution capabilities.
Bell for Better: Better World, Better Communities, Better
Workplace
Bell entered into its first Sustainability-Linked
Derivatives, designed to align financing costs with our performance
on environmental, social and governance (ESG) targets. Continuing
to support youth mental health, Bell Let's Talk built on Bell's
longstanding partnership with The Montréal Children's Hospital
Foundation with a $500,000
donation toward increasing therapy resources available through the
hospital's Children's Eating Disorders program. Bell team members
also raised nearly $300,000 for the
annual Walk So Kids Can Talk in support of Kids Help Phone and
its Feel Out Loud movement to expand access to its e-mental
health service across Canada. Bell's commitment to ESG standards
through sustainable investments and diversity and equity
initiatives ensured another strong ranking on the Corporate Knights
Best 50 Corporate Citizens list.8
____________________
|
5 Most
awarded Internet based on Bell competitive analysis. Bell awards
include Ookla Q1-Q2 2023 Speedtest Awards; PCMag Best Major ISP for
Gaming 2023, based on PCMag's Quality Index (speed, latency and
jitter) comparing major Canadian ISPs from December 1, 2021 to
December 5, 2022; and BrandSpark Most Trusted ISP 2023. BrandSpark
is a research and consulting firm. Winners were determined by a
national survey of 15,878 Canadian shoppers who gave their
top-of-mind, unaided answers to which brands they trust most and
why in categories they have recently shopped.
|
6 Based
on analysis by Ookla, a web testing and network diagnostics
company, of Speedtest Intelligence data for Q1-Q2 2023. Ookla
compared 13,671,040 user-initiated tests that are taken on various
Speedtest applications connected to a fixed network, including
tests taken on mobile phones over a Wi-Fi connection.
|
7 Survey conducted by PCMag from
April 3 – 24, 2023 with PCMag.com community members who were asked
to rate products and services they actually use. PCMag delivers
labs-based, independent reviews of the latest technology products
and services. See more information on the survey methodology at
https://www.pcmag.com/news/readers-choice-methodology.
|
8 According to Corporate Knights Inc.
The annual ranking was released on June 28, 2023 and is based on a
set of 25 ESG indicators that compares Canadian companies with a
gross revenue of at least $1 billion. For more information:
https://www.corporateknights.com/rankings/best-50-rankings/2023-best-50-rankings/these-are-canadas-top-corporate-citizens-of-2023/
|
|
BCE RESULTS
Financial Highlights
($ millions except per
share amounts) (unaudited)
|
Q2
2023
|
Q2
2022
|
%
change
|
BCE
|
|
|
|
Operating
revenues
|
6,066
|
5,861
|
3.5 %
|
Net earnings
|
397
|
654
|
(39.3 %)
|
Net earnings
attributable to common shareholders
|
329
|
596
|
(44.8 %)
|
Adjusted net
earnings
|
722
|
791
|
(8.7 %)
|
Adjusted
EBITDA
|
2,645
|
2,590
|
2.1 %
|
Net earnings per common
share (EPS)
|
0.37
|
0.66
|
(43.9 %)
|
Adjusted EPS
|
0.79
|
0.87
|
(9.2 %)
|
Cash flows from
operating activities
|
2,365
|
2,597
|
(8.9 %)
|
Capital
expenditures
|
(1,307)
|
(1,219)
|
(7.2 %)
|
Free cash
flow
|
1,016
|
1,333
|
(23.8 %)
|
"In what has now become a hallmark for BCE, we delivered another
quarter of consistent and focused execution that yielded strong
consolidated revenue growth of 3.5% and 2.1% higher adjusted
EBITDA. This performance was driven by a healthy 7% increase in
residential Internet revenue and 4.4% higher wireless service
revenue, fuelled on the back of some of the best Q2 mobile phone
and retail Internet subscriber net activations we have seen in well
over 15 years. This was achieved despite ongoing media advertising
headwinds, increased competitive intensity and a B2B sector that
has not yet fully recovered from the global supply chain
disruptions experienced over the past several years,"
said Glen LeBlanc, Chief Financial Officer of BCE
and Bell Canada.
"With stronger projected adjusted EBITDA and free cash flow
trajectories in the second half of the year that are underpinned by
operating momentum across the business, game-changing broadband
network investments, disciplined cost management and proven
execution in a competitive marketplace, I am reconfirming all our
guidance targets for 2023."
- BCE operating revenue increased 3.5% over Q2 2022 to
$6,066 million. This was the result
of 1.3% higher service revenue of $5,303
million and a 21.5% increase in product revenue to
$763 million, driven by growth at
Bell Communication and Technology Services (Bell CTS), partly
offset by a year-over-year decline at Bell Media.
- Net earnings decreased 39.3% to $397
million and net earnings attributable to common shareholders
totalled $329 million, or
$0.37 per share, down 44.8% and 43.9%
respectively. The year-over-year declines were due to higher other
expense that included a $377 million
non-cash loss on BCE's share of an obligation to repurchase at fair
value the minority interest in one of its joint venture equity
investments, higher interest expense, higher severance, acquisition
and other costs related mainly to a workforce reduction initiative,
increased depreciation and amortization expense and higher income
taxes. These factors were partly offset by higher adjusted EBITDA,
lower impairment of assets as we recorded a charge in Q2 2022
related to office spaces we ceased using as part of our real estate
optimization strategy due to Bell's hybrid work policy, and a
higher net return on post-employment benefit plans. Adjusted net
earnings were down 8.7% to $722
million, resulting in a 9.2% decrease in adjusted EPS to
$0.79.
- Adjusted EBITDA grew 2.1% to $2,645
million, reflecting a 2.8% increase at Bell CTS, partly
offset by a 5.3% decrease at Bell Media. BCE's consolidated
adjusted EBITDA margin9 declined 0.6 percentage points
to 43.6% from 44.2% in Q2 2022, due mainly to a higher
year-over-year mix of low-margin product sales.
- BCE capital expenditures were $1,307
million, up 7.2% from $1,219
million last year, corresponding to a capital
intensity10 of 21.5%, compared to 20.8% in Q2 2022.
The year-over-year increase in capital spending was due to the
timing of planned investment to further expand Bell's pure fibre
network and higher year-over-year spending to connect more homes
and businesses to Bell Internet services.
- BCE cash flows from operating activities were $2,365 million, down 8.9% from Q2 2022,
reflecting lower cash from working capital attributable largely to
the timing of supplier payments, higher interest paid, and higher
income taxes, partly offset by higher adjusted EBITDA and lower
contributions to post-employment benefit plans.
- Free cash flow was $1,016
million, down 23.8% from $1,333
million in Q2 2022, due to decreased cash flows from
operating activities, excluding acquisition and other costs paid,
and higher capital expenditures.
_______________________
|
9 Adjusted EBITDA margin is defined
as adjusted EBITDA divided by operating revenues. Refer to the
Key Performance Indicators (KPIs) section in this news
release for more information on adjusted EBITDA margin.
|
10 Capital intensity is defined as
capital expenditures divided by operating revenues. Refer to the
Key Performance Indicators (KPIs) section in this news
release for more information on capital intensity.
|
OPERATING RESULTS BY SEGMENT
Bell Communication and Technology Services (Bell CTS)
- Total Bell CTS operating revenue increased 4.3% to $5,354 million, driven by both higher service and
product revenue.
- Service revenue grew 1.9% to $4,591
million, mainly the result of continued strong mobile phone,
mobile connected device and retail Internet subscriber base growth,
higher wireless roaming revenue, as well as the financial
contribution from acquisitions made over the past year, including
Distributel and FX Innovation. This was partly offset by ongoing
declines in legacy voice, data and satellite TV services, greater
acquisition, retention and bundle discounts on residential home
services, as well as lower sales of international long distance
minutes to wholesale customers.
- Product revenue was up 21.5% to $763
million, driven by higher telecom data equipment sales to
large enterprise customers compared to more significant global
supply chain disruptions experienced last year, as well as a
greater sales mix of higher-value mobile phones.
- Bell CTS adjusted EBITDA was up 2.8% to $2,431 million. This was driven by the
flow-through of higher year-over-year service revenue, despite a
5.5% increase in operating costs that contributed to a 0.6
percentage-point margin decline to 45.4% from 46.0% last year. The
increase in operating costs this quarter was mainly the result of
higher cost of goods sold from increased product sales, and the
acquisitions of Distributel, FX Innovation and other small
companies.
- Postpaid mobile phone net
subscriber11 activations totaled 111,282, up 33.8%
from 83,197 in Q2 2022, representing our best Q2 result in 18
years. The increase was driven by 30.4% higher gross subscriber
activations, reflecting immigration growth, continued 5G and
multi-product bundling momentum, increased penetration of second
line customer subscriptions and effective promotions. This was
partly offset by an increase in mobile phone postpaid customer
churn10 to 0.94% from 0.75% in Q2 2022, reflecting
greater overall market activity and promotional offer intensity
compared to last year.
- Bell's prepaid mobile phone customer11 net
subscriber activations decreased to 14,257 from 27,564 in Q2 2022,
despite a 4.4% increase in gross activations, due to higher
customer churn, which increased to 4.68% from 4.41% last year. The
year-over-year increase in churn was attributable to more customer
deactivations due in part to attractive promotional offers on
postpaid discount brands.
- Bell's mobile phone customer base totalled 10,028,031 at the
end of Q2 2023, a 4.4% increase over last year, comprised of
9,151,229 postpaid subscribers, up 4.6%, and 876,802 prepaid
customers, up 2.6%.
- Mobile phone blended ARPU12 was essentially
unchanged at $59.16 compared to
$59.17 in Q2 2022.
- Mobile connected device net activations totaled 79,537 compared
to a net loss of 344 in Q2 2022. The year-over-year increase was
driven by stronger customer demand for Bell IoT services, including
business solutions and connected car subscriptions, and fewer data
device deactivations. At the end of Q2, mobile connected device
subscribers11 totalled 2,589,520, a 12.7% increase
over last year.
- Bell added 24,934 net new retail Internet
subscribers,11 up 10.2% from 22,620 in Q2 2022, driven
by the ongoing expansion of Bell's fibre footprint and increased
customer penetration of bundled service offerings. This was partly
offset by higher customer deactivations in our copper service areas
attributable to aggressive promotional offers by competitors
offering cable, fixed wireless and satellite Internet services.
Within Bell's all-fibre footprint, retail Internet net activations
were 52,148, 38.2% higher than Q2 2022. Retail Internet subscribers
totalled 4,338,511 at the end of Q2, a 9.1% increase from last
year, which includes 35,080 customers gained from small
acquisitions made in the quarter.
- Bell TV added 11,506 net new retail IPTV
subscribers,11 up from 3,838 in Q2 2022, driven by
higher customer activations from greater Internet pull-through and
effective promotions. At the end of Q2, Bell served 2,010,829
retail IPTV subscribers, a 5.4% increase over last year, which
includes 243 customers gained from small acquisitions made in the
quarter.
- Retail satellite TV net subscriber11 losses
were 25,910, up from 15,365 in Q2 2022, due to fewer gross
activations and higher customer churn driven by increased
competitor promotional offer intensity. Bell's retail satellite TV
customer base totalled 712,559 at the end of Q2, down 12.7% from
last year.
- Retail residential NAS11 net losses improved by
5.9% to 49,608, reflecting our success in driving higher gross
activations through bundled service offerings. Bell's retail
residential NAS customer base totalled 2,101,740 at the end of Q2,
down 4.8% from last year, which includes 7,458 customers gained
from small acquisitions made in the quarter.
_______________________
|
11 Refer to the Key Performance
Indicators (KPIs) section in this news release for more
information on churn and subscriber (or customer) units.
|
12 Effective Q1 2023, as a result of
the segment reporting changes impacting intersegment eliminations,
ARPU has been updated and is defined as Bell CTS wireless external
services revenues (previously wireless operating service revenues)
divided by the average mobile phone subscriber base for the
specified period, expressed as a dollar unit per month. Refer to
the Key Performance Indicators (KPIs) section in this news
release for more information on blended ARPU.
|
Bell Media
- Media operating revenue decreased 1.9% to $805 million as a result of lower year-over-year
advertising revenue, partly offset by higher subscriber
revenue.
- Advertising revenue was down 9.0%, as advertiser demand and
spending across all traditional media platforms remained soft due
to unfavourable macroeconomic conditions. This was partly offset by
strong growth in digital advertising.
- Subscriber revenue increased 3.9%, driven mainly by Crave and
sports direct-to-consumer streaming growth.
- Total digital revenues grew 20%, the result of continued Crave
and sports streaming direct-to-consumer growth and increased
advertising bookings from Bell Media's strategic audience
management (SAM) TV media sales tool. Total Crave subscriptions
increased 5% from last year to approximately 3.2 million customers,
which included a 27% increase in direct-to-consumer streaming
subscribers.
- Adjusted EBITDA was down 5.3% to $214
million, yielding a 0.9 percentage-point margin decline to
26.6%, as a result of lower year-over-year operating revenue.
Despite contractual increases for premium content, operating costs
improved 0.7%, due to the normalization of hockey schedules in 2023
and cessation of CRTC Part II fees in April
2023.
- CTV remained Canada's most-watched English-language
conventional network for a 22nd consecutive year,
leading in daytime, primetime and late night with total viewers and
in all key demographics for the 2022/2023 season. Reaching over 15
million Canadians on average weekly, CTV's lead over its closest
competitor in the Spring broadcast season was approximately 30% in
primetime among all viewers and in the key A25-54 demographic.
- Bell Media was ranked number one overall and in full-day
viewership in the French-language entertainment and pay specialty
market among adults aged 25-54 in Q2. RDS remained the top-ranked
French-language non-news specialty channel, while full-day
audiences among A25-54 for Noovo increased 17% in Q2 as the
French-language conventional TV market declined 10% overall,
driving a 5-point market share gain.
COMMON SHARE DIVIDEND
BCE's Board of Directors has declared
a quarterly dividend of $0.9675 per
common share, payable on October 16,
2023 to shareholders of record at the close of business on
September 15, 2023.
OUTLOOK FOR 2023
BCE confirmed its financial guidance
targets for 2023, as provided on February 2,
2023, as follows:
|
2022
Results
|
2023
Guidance
|
Revenue
growth
|
3.1 %
|
1% to 5%
|
Adjusted EBITDA
growth
|
3.1 %
|
2% to 5%
|
Capital
intensity
|
21.2 %
|
19% to 20%
|
Adjusted EPS
growth
|
5.0 %
|
(3%) to (7%)
|
Free cash flow
growth
|
2.9 %
|
2% to 10%
|
Annualized common
dividend per share
|
$3.68
|
$3.87
|
For 2023, we expect lower tax adjustments, higher depreciation and
amortization expense and increased interest expense to drive lower
adjusted EPS compared to 2022. For 2023, we expect growth in
adjusted EBITDA, a reduction in contributions to post-employment
benefit plans and payments under other post-employment benefit
plans, and lower capital expenditures will drive higher free cash
flow.
Please see the section entitled "Caution Regarding
Forward-Looking Statements" later in this news release for a
description of the principal assumptions on which BCE's 2023
financial guidance targets are based, as well as the principal
related risk factors.
CALL WITH FINANCIAL ANALYSTS
BCE will hold a
conference call for financial analysts to discuss Q2 2023 results
on Thursday, August 3 at 8:00 am eastern. Media are welcome to participate
on a listen-only basis. To participate, please dial toll-free
1-800-806-5484 or 416-340-2217 and enter passcode 5876835#. A
replay will be available until midnight on August 31, 2023 by dialing 1-800-408-3053 or
905-694-9451 and entering passcode 4674564#. A live audio webcast
of the conference call will be available on BCE's website at BCE
Q2-2023 conference call.
NON-GAAP AND OTHER FINANCIAL MEASURES
BCE uses various financial measures to assess its business
performance. Certain of these measures are calculated in accordance
with International Financial Reporting Standards (IFRS or GAAP)
while certain other measures do not have a standardized meaning
under GAAP. We believe that our GAAP financial measures, read
together with adjusted non-GAAP and other financial measures,
provide readers with a better understanding of how management
assesses BCE's performance.
National Instrument 52-112, Non-GAAP and Other Financial
Measures Disclosure (NI 52-112), prescribes
disclosure requirements that apply to the following specified
financial measures:
- Non-GAAP financial measures;
- Non-GAAP ratios;
- Total of segments measures;
- Capital management measures; and
- Supplementary financial measures.
This section provides a description and classification of the
specified financial measures contemplated by NI 52-112 that we use
in this news release to explain our financial results except
that, for supplementary financial measures, an explanation of such
measures is provided where they are first referred to in this news
release if the supplementary financial measures' labelling is not
sufficiently descriptive.
Non-GAAP Financial Measures
A non-GAAP financial measure is a financial measure used to
depict our historical or expected future financial performance,
financial position or cash flow and, with respect to its
composition, either excludes an amount that is included in, or
includes an amount that is excluded from, the composition of the
most directly comparable financial measure disclosed in BCE's
consolidated primary financial statements. We believe that non-GAAP
financial measures are reflective of our on-going operating results
and provide readers with an understanding of management's
perspective on and analysis of our performance.
Below are descriptions of the non-GAAP financial measures that
we use in this news release to explain our results as well as
reconciliations to the most directly comparable IFRS financial
measures.
Adjusted net earnings – Adjusted net earnings is a
non-GAAP financial measure and it does not have any standardized
meaning under IFRS. Therefore, it is unlikely to be comparable to
similar measures presented by other issuers.
We define adjusted net earnings as net earnings attributable to
common shareholders before severance, acquisition and other costs,
net mark-to-market losses (gains) on derivatives used to
economically hedge equity settled share-based compensation plans,
net equity losses (gains) on investments in associates and joint
ventures, net losses (gains) on investments, early debt redemption
costs, impairment of assets and discontinued operations, net of tax
and NCI.
We use adjusted net earnings and we believe that certain
investors and analysts use this measure, among other ones, to
assess the performance of our businesses without the effects of
severance, acquisition and other costs, net mark-to-market losses
(gains) on derivatives used to economically hedge equity settled
share-based compensation plans, net equity losses (gains) on
investments in associates and joint ventures, net losses (gains) on
investments, early debt redemption costs, impairment of assets and
discontinued operations, net of tax and NCI. We exclude these items
because they affect the comparability of our financial results and
could potentially distort the analysis of trends in business
performance. Excluding these items does not imply they are
non-recurring.
The most directly comparable IFRS financial measure is net
earnings attributable to common shareholders.
The following table is a reconciliation of net earnings
attributable to common shareholders to adjusted net earnings on a
consolidated basis.
($ millions)
|
Q2 2023
|
Q2
2022
|
Net earnings
attributable to common shareholders
|
329
|
596
|
Reconciling
items:
|
|
|
Severance, acquisition
and other costs
|
100
|
40
|
Net mark-to-market
(gains) losses on derivatives used to
economically hedge equity settled share-based
compensation plans
|
(1)
|
81
|
Net equity losses on
investments in associates and joint ventures
|
377
|
42
|
Net gains on
investments
|
(79)
|
(16)
|
Early debt redemption
costs
|
1
|
-
|
Impairment of
assets
|
-
|
106
|
Income taxes for above
reconciling items
|
(5)
|
(62)
|
NCI for the above
reconciling items
|
-
|
4
|
Adjusted net
earnings
|
722
|
791
|
Free cash flow– Free cash flow is a non-GAAP financial
measure and it does not have any standardized meaning under IFRS.
Therefore, it is unlikely to be comparable to similar measures
presented by other issuers.
We define free cash flow as cash flows from operating
activities, excluding cash from discontinued operations,
acquisition and other costs paid (which include significant
litigation costs) and voluntary pension funding, less capital
expenditures, preferred share dividends and dividends paid by
subsidiaries to NCI. We exclude cash from discontinued operations,
acquisition and other costs paid and voluntary pension funding
because they affect the comparability of our financial results and
could potentially distort the analysis of trends in business
performance. Excluding these items does not imply they are
non-recurring.
We consider free cash flow to be an important indicator of the
financial strength and performance of our businesses. Free cash
flow shows how much cash is available to pay dividends on common
shares, repay debt and reinvest in our company. We believe that
certain investors and analysts use free cash flow to value a
business and its underlying assets and to evaluate the financial
strength and performance of our businesses. The most directly
comparable IFRS financial measure is cash flows from operating
activities.
The following table is a reconciliation of cash flows from
operating activities to free cash flow on a consolidated basis.
($ millions)
|
Q2 2023
|
Q2
2022
|
Cash flows from
operating activities
|
2,365
|
2,597
|
Capital expenditures
|
(1,307)
|
(1,219)
|
Cash dividends paid on
preferred shares
|
(46)
|
(34)
|
Cash dividends paid by
subsidiaries to NCI
|
(1)
|
(14)
|
Acquisition and other
costs paid
|
5
|
3
|
Free cash
flow
|
1,016
|
1,333
|
Non-GAAP Ratios
A non-GAAP ratio is a financial measure disclosed in the form of
a ratio, fraction, percentage or similar representation and that
has a non-GAAP financial measure as one or more of its
components.
Below is a description of the non-GAAP ratio that we use in this
news release to explain our results.
Adjusted EPS – Adjusted EPS is a non-GAAP ratio and
it does not have any standardized meaning under IFRS. Therefore, it
is unlikely to be comparable to similar measures presented by other
issuers.
We define adjusted EPS as adjusted net earnings per BCE common
share. Adjusted net earnings is a non-GAAP financial measure. For
further details on adjusted net earnings, refer to Non-GAAP
Financial Measures above.
We use adjusted EPS, and we believe that certain investors and
analysts use this measure, among other ones, to assess the
performance of our businesses without the effects of severance,
acquisition and other costs, net mark-to-market losses (gains) on
derivatives used to economically hedge equity settled share-based
compensation plans, net equity losses (gains) on investments in
associates and joint ventures, net losses (gains) on investments,
early debt redemption costs, impairment of assets and discontinued
operations, net of tax and NCI. We exclude these items because they
affect the comparability of our financial results and could
potentially distort the analysis of trends in business performance.
Excluding these items does not imply they are non-recurring.
Total of Segments Measures
A total of segments measure is a financial measure that is a
subtotal or total of 2 or more reportable segments and is disclosed
within the Notes to BCE's consolidated primary financial
statements.
Below is a description of the total of segments measure that we
use in this news release to explain our results as well as a
reconciliation to the most directly comparable IFRS financial
measure.
Adjusted EBITDA – Adjusted EBITDA is a total of
segments measure. We define adjusted EBITDA as operating revenues
less operating costs as shown in BCE's consolidated income
statements.
The most directly comparable IFRS financial measure is net
earnings. The following table is a reconciliation of net earnings
to adjusted EBITDA on a consolidated basis.
($ millions)
|
Q2 2023
|
Q2 2022
|
Net earnings
Severance, acquisition
and other costs
Depreciation
Amortization
Finance
costs
Interest
expense
Net return
on post-employment benefit plans
Impairment of
assets
Other
expense
Income taxes
|
397
100
936
296
359
(27)
-
311
273
|
654
40
933
266
269
(7)
106
97
232
|
Adjusted
EBITDA
|
2,645
|
2,590
|
Supplementary Financial Measures
A supplementary financial measure is a financial measure that is
not reported in BCE's consolidated financial statements, and is, or
is intended to be, reported periodically to represent historical or
expected future financial performance, financial position, or cash
flows.
An explanation of such measures is provided where they are first
referred to in this news release if the supplementary financial
measures' labelling is not sufficiently descriptive.
KEY PERFORMANCE INDICATORS (KPIs)
We use adjusted EBITDA margin, blended ARPU, capital intensity,
churn and subscriber (or customer or NAS) units to measure the
success of our strategic imperatives. These key performance
indicators are not accounting measures and may not be comparable to
similar measures presented by other issuers.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this news release are forward-looking
statements. These statements include, without limitation,
statements relating to BCE's financial guidance (including revenue,
adjusted EBITDA, capital intensity, adjusted EPS and free cash
flow), BCE's 2023 annualized common share dividend, our network
deployment plans and anticipated capital expenditures as well as
the benefits expected to result therefrom, stronger projected BCE
adjusted EBITDA and free cash flow trajectories in the second half
of 2023, our ESG objectives, BCE's business outlook, objectives,
plans and strategic priorities, and other statements that are not
historical facts. Forward-looking statements are typically
identified by the words assumption, goal, guidance, objective,
outlook, project, strategy, target, commitment and other
similar expressions or future or conditional verbs such as aim,
anticipate, believe, could, expect, intend, may, plan, seek,
should, strive and will. All such forward-looking
statements are made pursuant to the 'safe harbour' provisions of
applicable Canadian securities laws and of the United States Private Securities
Litigation Reform Act of 1995.
Forward-looking statements, by their very nature, are subject to
inherent risks and uncertainties and are based on several
assumptions, both general and specific, which give rise to the
possibility that actual results or events could differ materially
from our expectations expressed in or implied by such
forward-looking statements and that our business outlook,
objectives, plans and strategic priorities may not be achieved.
These statements are not guarantees of future performance or
events, and we caution you against relying on any of these
forward-looking statements. The forward-looking statements
contained in this news release describe our expectations as of
August 3, 2023 and, accordingly, are
subject to change after such date. Except as may be required by
applicable securities laws, we do not undertake any obligation to
update or revise any forward-looking statements contained in this
news release, whether as a result of new information, future events
or otherwise. We regularly consider potential acquisitions,
dispositions, mergers, business combinations, investments,
monetizations, joint ventures and other transactions, some of which
may be significant. Except as otherwise indicated by us,
forward-looking statements do not reflect the potential impact of
any such transactions or of special items that may be announced or
that may occur after August 3, 2023.
The financial impact of these transactions and special items can be
complex and depends on the facts particular to each of them. We
therefore cannot describe the expected impact in a meaningful way
or in the same way we present known risks affecting our business.
Forward-looking statements are presented in this news release for
the purpose of assisting investors and others in understanding
certain key elements of our expected financial results, as well as
our objectives, strategic priorities and business outlook, and in
obtaining a better understanding of our anticipated operating
environment. Readers are cautioned that such information may not be
appropriate for other purposes.
Material Assumptions
A number of economic, market, operational and financial
assumptions were made by BCE in preparing its forward-looking
statements contained in this news release, including, but not
limited to the following:
Canadian Economic Assumptions
Our forward-looking statements are based on certain assumptions
concerning the Canadian economy. In particular, we have
assumed:
- Moderating economic growth, given the Bank of Canada's most
recent estimated growth in Canadian gross domestic product of 1.8%
in 2023, down from 3.4% in 2022
- Easing, but still elevated, consumer price index (CPI)
inflation due to lower energy prices, improvements in global supply
chains and the effects of higher interest rates moving through the
economy
- Ongoing tight labour market conditions, but with some easing as
tighter monetary policy moderates the demand for labour
- Slowing growth in household spending as demand for
interest-rate-sensitive goods and services weakens and more
households renew their mortgage at higher rates
- Soft business investment growth due to slowing demand and high
financing costs
- Prevailing high interest rates expected to remain at or near
current levels
- Population growth resulting from strong immigration
- Canadian dollar expected to remain near current levels. Further
movements may be impacted by the degree of strength of the U.S.
dollar, interest rates and changes in commodity prices.
Canadian Market Assumptions
Our forward-looking statements also reflect various Canadian
market assumptions. In particular, we have made the following
market assumptions:
- A higher level of wireline and wireless competition in
consumer, business and wholesale markets
- Higher, but slowing, wireless industry penetration
- A shrinking data and voice connectivity market as business
customers migrate to lower-priced telecommunications solutions or
alternative over-the-top (OTT) competitors
- The Canadian advertising market is experiencing a slowdown
consistent with trends in the global advertising market, with
improvement expected in the medium term, although visibility to the
specific timing and pace of recovery is limited
- Declines in broadcasting distribution undertaking (BDU)
subscribers driven by increasing competition from the continued
rollout of subscription video-on-demand (SVOD) streaming services
together with further scaling of OTT aggregators
Assumptions Concerning our Bell CTS Segment
Our forward-looking statements are also based on the following
internal operational assumptions with respect to our Bell CTS
segment:
- Maintain our market share of national operators' wireless
postpaid mobile phone net additions and growth of our prepaid
subscriber base
- Increased competitive intensity and promotional activity across
all regions and market segments
- Ongoing expansion and deployment of Fifth Generation (5G) and
5G+ wireless networks, offering competitive coverage and
quality
- Continued diversification of our distribution strategy with a
focus on expanding direct-to-consumer (DTC) and online
transactions
- Moderating growth in mobile phone blended ARPU, driven by
growth in 5G subscriptions, and increased roaming revenue from the
easing of travel restrictions implemented as a result of the
COVID-19 pandemic, partly offset by reduced data overage revenue
due, among others, to the continued adoption of unlimited
plans
- Accelerating business customer adoption of advanced 5G, 5G+ and
Internet of Things (IoT) solutions
- Improving wireless handset device availability in addition to
stable device pricing and margins
- Further deployment of direct fibre to more homes and businesses
within our wireline footprint
- Continued growth in retail Internet and IPTV subscribers
- Increasing wireless and Internet-based technological
substitution
- Continued aggressive residential service bundle offers from
cable TV competitors in our local wireline areas, moderated by
growing our share of competitive residential service bundles
- Continued large business customer migration to IP-based
systems
- Ongoing competitive repricing pressures in our business and
wholesale markets
- Continued competitive intensity in our small and medium-sized
business markets as cable operators and other telecommunications
competitors continue to intensify their focus on business
customers
- Traditional high-margin product categories challenged by large
global cloud and OTT providers of business voice and data solutions
expanding into Canada with on-demand services
- Increasing customer adoption of OTT services resulting in
downsizing of TV packages
- Growing consumption of OTT TV services and on-demand video
streaming, as well as the proliferation of devices, such as
tablets, that consume large quantities of bandwidth, will require
ongoing capital investment
- Realization of cost savings related to operating efficiencies
enabled by a growing direct fibre footprint, changes in consumer
behaviour and product innovation, digital adoption, product and
service enhancements, expanding self-serve capabilities, new call
centre and digital investments, other improvements to the customer
service experience, management workforce reductions including
attrition and retirements, and lower contracted rates from our
suppliers
- No adverse material financial, operational or competitive
consequences of changes in or implementation of regulations
affecting our communication and technology services business
Assumptions Concerning our Bell Media Segment
Our forward-looking statements are also based on the following
internal operational assumptions with respect to our Bell Media
segment:
- Overall digital revenue expected to reflect continued scaling
of our Strategic Audience Management (SAM) TV and demand-side
platform (DSP) buying platforms, as well as DTC subscriber growth
contributing towards the advancement of our digital-first media
strategy
- Continued escalation of media content costs to secure quality
programming
- Continued scaling of Crave through broader content offering,
user experience improvements and expanded distribution
- Continued investment in Noovo original programming to better
serve our French-language customers with a wider array of content
on their preferred platforms
- Leveraging of first-party data to improve targeting,
advertisement delivery and attribution
- Ability to successfully acquire and produce highly-rated
programming and differentiated content
- Building and maintaining strategic supply arrangements for
content across all screens and platforms
- No adverse material financial, operational or competitive
consequences of changes in or implementation of regulations
affecting our media business
Financial Assumptions Concerning BCE
Our forward-looking statements are also based on the
following internal financial assumptions with respect to BCE
for 2023:
- An estimated post-employment benefit plans service cost of
approximately $210 million
- An estimated net return on post-employment benefit plans of
approximately $100 million
- Depreciation and amortization expense of approximately
$4,900 million to $4,950 million
- Interest expense of approximately $1,425
million to $1,475 million,
instead of $1,375 million to
$1,425 million
- Interest paid of approximately $1,450
million to $1,500 million,
instead of $1,400 million to
$1,450 million
- An average effective tax rate of approximately 26%
- Non-controlling interest of approximately $65 million
- Contributions to post-employment benefit plans of approximately
$60 million
- Payments under other post-employment benefit plans of
approximately $75 million
- Income taxes paid (net of refunds) of approximately
$800 million to $900 million
- Weighted average number of BCE common shares outstanding of
approximately 914 million
- An annual common share dividend of $3.87 per share
Assumptions underlying expected reductions in 2023 annual
contributions to our pension plans
Our forward-looking statements are also based on the following
principal assumptions underlying expected 2023 annual reductions in
contributions to our pension plans:
- At the relevant time, our defined benefit (DB) pension plans
will remain in funded positions with going concern surpluses and
maintain solvency ratios that exceed the minimum legal requirements
for a contribution holiday to be taken for applicable DB and
defined contribution (DC) components
- No significant declines in our DB pension plans' financial
position due to declines in investment returns or interest
rates
- No material experience losses from other events such as through
litigation or changes in laws, regulations or actuarial
standards
The foregoing assumptions, although considered reasonable by BCE
on August 3, 2023, may prove to be
inaccurate. Accordingly, our actual results could differ materially
from our expectations as set forth in this news release.
Material Risks
Important risk factors that could cause our assumptions and
estimates to be inaccurate and actual results or events to differ
materially from those expressed in, or implied by, our
forward-looking statements, including our 2023 financial guidance,
are listed below. The realization of our forward-looking
statements, including our ability to meet our 2023 financial
guidance targets, essentially depends on our business performance,
which, in turn, is subject to many risks. Accordingly, readers are
cautioned that any of the following risks could have a material
adverse effect on our forward-looking statements. These risks
include, but are not limited to: the negative effect of adverse
economic conditions, including a potential recession, and related
inflationary cost pressures, higher interest rates and financial
and capital market volatility; the negative effect of adverse
conditions associated with geopolitical events; a declining level
of business and consumer spending, and the resulting negative
impact on the demand for, and prices of, our products and services;
regulatory initiatives, proceedings and decisions, government
consultations and government positions that affect us and influence
our business including, without limitation, concerning mandatory
access to networks, spectrum auctions, the imposition of
consumer-related codes of conduct, approval of acquisitions,
broadcast and spectrum licensing, foreign ownership requirements,
privacy and cybersecurity obligations and control of copyright
piracy; the inability to implement enhanced compliance frameworks
and to comply with legal and regulatory obligations; unfavourable
resolution of legal proceedings; the intensity of competitive
activity and the failure to effectively respond to evolving
competitive dynamics; the combination of Rogers Communications Inc.
and Shaw Communications Inc. creating a Canadian competitor with
larger scale, and the acquisition of Freedom Mobile by Vidéotron
Ltd. also increasing its scale with a likely change in competitive
dynamics in several provinces; the level of technological
substitution and the presence of alternative service providers
contributing to disruptions and disintermediation in each of our
business segments; changing customer behaviour and the expansion of
cloud-based, OTT and other alternative solutions; advertising
market pressures from economic conditions, fragmentation and
non-traditional/global digital services; rising content costs and
challenges in our ability to acquire or develop key content; higher
Canadian smartphone penetration and reduced or slower immigration
flow; the inability to protect our physical and non-physical assets
from events such as information security attacks, unauthorized
access or entry, fire and natural disasters; the failure to
implement effective data governance; the failure to evolve and
transform our networks, systems and operations using
next-generation technologies while lowering our cost structure; the
inability to drive a positive customer experience; the failure to
attract, develop and retain a diverse and talented team capable of
furthering our strategic imperatives; the failure to adequately
manage health and safety concerns; labour disruptions and
shortages; the failure to maintain operational networks; the risk
that we may need to incur significant capital expenditures to
provide additional capacity and reduce network congestion; the
inability to maintain service consistency due to network failures
or slowdowns, the failure of other infrastructure, or disruptions
in the delivery of services; service interruptions or outages due
to legacy infrastructure and the possibility of instability as we
transition towards converged wireline and wireless networks and
newer technologies; the failure by us, or by other
telecommunications carriers on which we rely to provide services,
to complete planned and sufficient testing, maintenance,
replacement or upgrade of our or their networks, equipment and
other facilities, which could disrupt our operations including
through network or other infrastructure failures; events affecting
the functionality of, and our ability to protect, test, maintain,
replace and upgrade, our networks, information technology (IT)
systems, equipment and other facilities; the complexity of our
operations; the failure to implement or maintain highly effective
processes and IT systems; in-orbit and other operational risks to
which the satellites used to provide our satellite TV services are
subject; our dependence on third-party suppliers, outsourcers, and
consultants to provide an uninterrupted supply of the products and
services we need; the failure of our vendor selection, governance
and oversight processes, including our management of supplier risk
in the areas of security, data governance and responsible
procurement; the quality of our products and services and the
extent to which they may be subject to defects or fail to comply
with applicable government regulations and standards; reputational
risks and the inability to meaningfully integrate ESG
considerations into our business strategy and operations; the
failure to take appropriate actions to adapt to current and
emerging environmental impacts, including climate change;
pandemics, epidemics and other health risks, including health
concerns about radio frequency emissions from wireless
communications devices and equipment; the inability to adequately
manage social issues; the failure to develop and implement strong
corporate governance practices; various internal and external
factors could challenge our ability to achieve our ESG targets
including, without limitation, those related to greenhouse gas
(GHG) emissions reduction and diversity, equity, inclusion and
belonging; the inability to access adequate sources of capital and
generate sufficient cash flows from operating activities to meet
our cash requirements, fund capital expenditures and provide for
planned growth; uncertainty as to whether dividends will be
declared by BCE's board of directors or whether the dividend on
common shares will be increased; the inability to manage various
credit, liquidity and market risks; the failure to reduce costs, as
well as unexpected increases in costs; the failure to evolve
practices to effectively monitor and control fraudulent activities;
new or higher taxes due to new tax laws or changes thereto or in
the interpretation thereof, and the inability to predict the
outcome of government audits; the impact on our financial
statements and estimates from a number of factors; and pension
obligation volatility and increased contributions to
post-employment benefit plans.
We caution that the foregoing list of risk factors is not
exhaustive and other factors could also adversely affect our
results. We encourage investors to also read BCE's 2022 Annual
MD&A dated March 2, 2023 and
BCE's 2023 First and Second Quarter MD&As dated May 3, 2023 and August 2,
2023, respectively, for additional information with respect
to certain of these and other assumptions and risks, filed by BCE
with the Canadian provincial securities regulatory authorities
(available at Sedarplus.ca) and with the U.S. Securities and
Exchange Commission (available at SEC.gov). These documents
are also available at BCE.ca.
About BCE
BCE is Canada's largest communications company13,
providing advanced Bell broadband wireless, Internet, TV, media and
business communications services. To learn more, please visit
Bell.ca or BCE.ca.
Through Bell for Better, we are investing to create a better
today and a better tomorrow by supporting the social and economic
prosperity of our communities. This includes the Bell Let's Talk
initiative, which promotes Canadian mental health with national
awareness and anti-stigma campaigns like Bell Let's Talk Day and
significant Bell funding of community care and access, research and
workplace initiatives throughout the country. To learn more, please
visit Bell.ca/LetsTalk.
_______________________
|
13 Based on
total revenue and total combined customer connections.
|
Media inquiries:
Ellen Murphy
Ellen.murphy@bell.ca
Investor inquiries:
Thane Fotopoulos
514-870-4619
thane.fotopoulos@bell.ca
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SOURCE Bell Canada