This news release contains forward-looking statements. For a description of related risk factors and assumptions, please see the section entitled "Caution Regarding Forward-Looking Statements" and the other relevant sections of this news release.
MONTRÉAL, Aug. 6, 2020 /PRNewswire/ - BCE Inc. (TSX: BCE) (NYSE: BCE) today reported results for the second quarter (Q2) of 2020.
"Even as the impacts of COVID-19 on all sectors of the economy accelerated in the second quarter, Bell continued to expand our next-generation networks in urban and rural Canada, grew broadband wireless and wireline market share with a focus on customer experience, and delivered the ongoing free cash flow growth that fuels both our investment leadership and BCE's returns to shareholders," said Mirko Bibic, President and Chief Executive Officer of BCE and Bell Canada. "Bell's performance in Q2 underscored the scale and resiliency of our networks, the strength of our financial foundation, and the Bell team's success in keeping Canadians fully connected and informed throughout the COVID-19 crisis."
"As economic activity continues to build, Bell will continue generating operating momentum while maintaining the financial flexibility to drive both our national investment strategy and the BCE common share dividend. Backed by a strong balance sheet and the best networks, Bell's dedicated and seasoned team is proud to be playing a critical role in Canada's recovery," said Mr. Bibic. "I'm also proud to highlight how the Bell team has come together to address the wide-ranging impacts of systemic racism and inequality with meaningful action at our company – including new corporate targets for Black, Indigenous and People of Colour representation in senior management and young leaders starting their careers – and in our communities, with dedicated Bell Let's Talk support for racialized Canadians and new partnerships with expert advisors to guide and strengthen our response."
KEY Q2 BUSINESS DEVELOPMENTS
Supporting BIPOC team members and communities
Bell is working to address systemic racism and inequality with new initiatives to support Black, Indigenous and People of Colour (BIPOC) team members and communities. This includes updated targets for BIPOC representation in Bell senior management (at least 25% by 2025) and intern and graduate hiring (at least 40%); new partnerships with Black Professionals in Tech Network and BIPOC TV & Film, including Bell Media's creation of a Content Diversity Task Force; and the launch of the $5 million Bell Let's Talk Diversity Fund to support the mental health and wellbeing of racialized Canadians, with inaugural funding for Black Youth Helpline and National Association of Friendship Centres.
COVID-19 response and recovery
Bell has confronted COVID-19 by keeping Canadians connected and informed; prioritizing the health and safety of the public and our team; and supporting our customers and communities with special initiatives. Despite unprecedented demand across our networks, Bell has maintained service availability at 99.99+% throughout the crisis; introduced innovative tactics to champion customer experience (including equipping 12,000 call centre agents to work from home, retraining thousands of team members as service agents and introducing innovative remote installation practices); and launched enhanced online and appointment-based sales options. With appropriate health and safety precautions, Bell call centres resumed operations and are now achieving pre-COVID service levels, while 99% of Bell, The Source and authorized dealer stores and kiosks have reopened nationwide. As part of its support for Canadian communities during COVID-19, Bell Let's Talk also announced new funding for frontline mental health providers including Kids Help Phone, Canadian Red Cross, Canadian Mental Health Association, Revivre and the Bell True Patriot Love Fund.
Champion customer experience: Virgin Mobile remains #1, CCTS leadership
Virgin Mobile Canada was ranked #1 by J.D. Power in its annual Wireless Customer Care Study for the fourth year in a row, and topped the analyst company's 2020 Wireless Purchase Experience Study as well. Bell's strategic focus on customer experience was also reflected in the latest report from the Commission for Complaints for Telecom-television Services (CCTS) in Q2, which shows a 26% drop in the number of CCTS complaints by Bell customers, again the best performance among national carriers.
Best networks: 5G leadership, rural Wireless Home Internet
Bell turned on Canada's largest 5G wireless network, offering unprecedented mobile data speeds in Montréal, the GTA, Calgary, Edmonton and Vancouver along with Canada's broadest selection of 5G-capable smartphones. Bell announced that Ericsson will join Nokia as a provider of radio access network equipment for Bell 5G, and we are partnering with Western University to accelerate 5G innovation. Following our accelerated rollout of rural Wireless Home Internet (WHI) service in response to unprecedented demand during COVID-19, Bell announced we will double WHI download speeds for rural Canada with 50/10 Internet access this fall while also expanding WHI service to rural communities throughout the Atlantic provinces.
TV and Media: Bell Streamer, Virgin TV, V acquisition
Our latest television innovation, Bell Streamer is a compact Android device offering all-in-one access to live TV and on-demand content from Bell Alt TV, support for all major streaming services, and access to thousands of apps in Google Play. Virgin TV is a new app-based television service that works across iOS and Android smartphones, tablets, laptops and streaming devices, offering Virgin Internet Members an all-new way to watch live TV and on-demand programs. Bell Media completed the acquisition of V, our first French-language conventional TV network and its ad-supported streaming service Noovo.ca, and will unveil a new brand for the network later this month. Bell Media announced its extensive slate of new English-language and French-language programming for the fall season, Crave launched HBO Max programming in Canada and CTV was named the most-watched network in primetime for the 19th straight year.
Bell sells 25 data centres to Equinix
Reinforcing our strategy to focus investment on Canada's best networks, content and services, Bell agreed to sell 25 of our data centres to Equinix in an all-cash transaction valued at $1.04 billion. Retaining 5 data centres across the country, Bell also becomes the first Equinix Platinum Partner in Canada, enabling Bell Business Markets to provide enterprise clients access to the international scale of Equinix's integrated network and cloud solutions. All regulatory approvals have been obtained and the transaction is expected to close in the second half of 2020 subject to customary closing conditions.
BCE Q2 RESULTS
Following BCE's June 1, 2020 announcement that it had agreed to sell substantially all of its data centre operations, we have reclassified amounts related to the announced sale for the previous periods to discontinued operations in our consolidated income statements and consolidated statements of cash flows to make them consistent with the presentation for the current period.
($ millions except per share amounts) (unaudited)
Net earnings attributable to common shareholders
Adjusted net earnings(1)(2)
Net earnings per common share (EPS)
Cash flows from operating activities
Free cash flow(1)(4)
"While reduced economic activity and customer demand across Bell business segments significantly impacted revenue and earnings in Q2, Bell delivered positive postpaid wireless and retail Internet growth as well as significantly improved customer churn including in legacy services such as residential home phone. Despite the COVID-19 driven decline in adjusted EBITDA, free cash flow increased 50% in the quarter to $1.6 billion, with overall free cash flow growth of more than 30% for the first half of the year," said Glen LeBlanc, Chief Financial Officer for BCE and Bell Canada. "We remain confident in the underlying, long-term fundamentals and performance of BCE, including a healthy balance sheet and substantial, ongoing free cash flow generation that provides us with considerable financial flexibility to navigate the COVID-19 recovery while more than meeting all our cash requirements for the balance of 2020."
Q2 SUBSCRIBER HIGHLIGHTS
Q2 OPERATING RESULTS BY SEGMENT
COMMON SHARE DIVIDEND
BCE's Board of Directors has declared a quarterly dividend of $0.8325 per common share, payable on October 15, 2020 to shareholders of record at the close of business on September 15, 2020.
Due to uncertainties relating to the severity and duration of the COVID-19 pandemic, including possible resurgences in the number of COVID-19 cases, and various potential outcomes, we are not able at this time to estimate the impacts of the COVID-19 pandemic on our business or future financial results and related assumptions. Our business and financial results could continue to be significantly and negatively impacted in future periods. The extent to which COVID-19 will continue to adversely impact us will depend on future developments that are unknown and cannot be predicted, as well as new information which may emerge concerning the severity, duration and possible resurgences of the COVID-19 pandemic and the actions required to contain the coronavirus or remedy its impacts, among others. Given this unprecedented and highly uncertain environment, BCE withdrew on May 6, 2020 all of its 2020 financial guidance it announced on February 6, 2020.
BCE's underlying business fundamentals remain strong. Our strong liquidity position, underpinned by a healthy balance sheet, substantial free cash flow generation and access to the debt and bank capital markets, is expected to provide significant financial flexibility to execute on our planned capital expenditures for 2020 and to sustain BCE's common share dividend payments for the foreseeable future.
See BCE's Q2 2020 MD&A for more information on the historical and future potential impacts of COVID-19 on our business, financial condition, liquidity and financial results, including, without limitation, the introduction to section 1, Overview, section 1.3, Assumptions, section 4.7, Liquidity and section 7, Business risks.
CALL WITH FINANCIAL ANALYSTS
BCE will hold a conference call for financial analysts to discuss Q2 2020 results on Thursday, August 6 at 8:00 am (Eastern). Media are welcome to participate on a listen-only basis. To participate, please dial toll-free 1-866-696-5894 or 416-641-6150 and enter passcode 7959145#. A replay will be available until midnight on September 4, 2020 by dialing 1-800-408-3053 or 905-694-9451 and entering passcode 4511636#.
A live audio webcast of the conference call will be available on BCE's website at BCE Q2-2020 conference call. The mp3 file will be available for download on this page later in the day.
The information contained in this news release is unaudited.
(1) In Q2 2020, we updated our definitions of adjusted net earnings, adjusted EPS and free cash flow to exclude the impacts of discontinued operations as they may affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. As a result of this change, prior periods have been restated for comparative purposes.
(2) The terms adjusted net earnings and adjusted EPS do not have any standardized meaning under IFRS. Therefore, they are 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 losses (gains) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and non-controlling interest (NCI). We define adjusted EPS as adjusted net earnings per BCE common share. We use adjusted net earnings and adjusted EPS, and we believe certain investors and analysts use these measures, 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 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 comparable IFRS financial measures are net earnings attributable to common shareholders and EPS. The following table is a reconciliation of net earnings attributable to common shareholders and EPS to adjusted net earnings on a consolidated basis and per BCE common share (adjusted EPS), respectively.
($ millions except per share amounts)
Net earnings attributable to common shareholders
Severance, acquisition and other costs
Net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans
Net (gains) losses on investments
Early debt redemption costs
Impairment of assets
Net earnings from discontinued operations
Adjusted net earnings
(3) The terms adjusted EBITDA and adjusted EBITDA margin do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers. We define adjusted EBITDA as operating revenues less operating costs, as shown in BCE's consolidated income statements. Adjusted EBITDA for BCE's segments is the same as segment profit as reported in Note 4, Segmented information, in BCE's Q2 2020 consolidated Financial Statements. We define adjusted EBITDA margin as adjusted EBITDA divided by operating revenues. We use adjusted EBITDA and adjusted EBITDA margin to evaluate the performance of our businesses as they reflect their ongoing profitability. We believe certain investors and analysts use adjusted EBITDA to measure a company's ability to service debt and to meet other payment obligations or as a common measurement to value companies in the telecommunications industry. We believe that certain investors and analysts also use adjusted EBITDA and adjusted EBITDA margin to evaluate the performance of our businesses. Adjusted EBITDA is also one component in the determination of short-term incentive compensation for all management employees. Adjusted EBITDA and adjusted EBITDA margin have no directly comparable IFRS financial measure. Alternatively, the following table provides a reconciliation of net earnings to adjusted EBITDA.
Severance, acquisition and other costs
Interest on post-employment benefit obligations
Impairment of assets
Other expense (income)
Net earnings from discontinued operations
BCE operating revenues
Adjusted EBITDA margin
(4) The term free cash flow 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 because it shows how much cash is available to pay dividends on common shares, repay debt and reinvest in our company. We believe 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 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.
Cash flows from operating activities
Cash dividends paid on preferred shares
Cash dividends paid by subsidiaries to NCI
Acquisition and other costs paid
Cash from discontinued operations (included in cash flows from operating activities)
Free cash flow
(5) We use ABPU, churn, capital intensity and subscriber 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 the potential impacts on our business, financial condition, liquidity and financial results of the COVID-19 pandemic, the expected continued payment by BCE of its common share dividend for the foreseeable future, our network deployment and capital investment plans, BCE's financial flexibility to navigate the COVID-19 recovery and meet its anticipated 2020 cash requirements, the expected timing and completion of the proposed sale of 25 data centres at 13 sites to Equinix, 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 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 6, 2020 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. Except as otherwise indicated by BCE, forward-looking statements do not reflect the potential impact of any special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after August 6, 2020. 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 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.
The forward-looking statements set out in this news release are based on certain assumptions including, without limitation, the following assumptions. Due to uncertainties relating to the severity and duration of the COVID-19 pandemic, including possible resurgences in the number of COVID-19 cases, and various potential outcomes, we are not able at this time to estimate the impacts of the COVID-19 pandemic on our business or future financial results and related assumptions. Accordingly, the assumptions outlined in this news release and, consequently, the forward-looking statements based on such assumptions, may turn out to be inaccurate.
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 include, without limitation: pandemics, epidemics and other public health risks including, in particular, the COVID-19 pandemic, and the uncertainty of its severity and duration, including possible resurgences in the number of cases and the potential re-introduction of emergency measures, and the adverse effects thereof; our inability to access adequate sources of capital and generate sufficient cash flows from operating activities to meet our cash requirements; our failure to maintain operational networks in the context of significant increases in capacity demands; the risk that we may need to make significant capital expenditures in order to provide additional capacity and reduce network congestion, and implement additional sanitation and safety procedures as a result of the COVID-19 pandemic; our inability to drive a positive customer experience; labour disruptions and shortages; our dependence on third-party suppliers, outsourcers and consultants to operate our business; uncertainty as to whether dividends will be declared by BCE's board of directors or whether the dividend on common shares will be increased; pension obligation volatility and increased contributions to post-employment benefit plans; regulatory initiatives, proceedings and decisions, and government consultations, positions, actions and measures that affect us and influence our business; the intensity of competitive activity, including from new and emerging competitors, coupled with the launch of new products and services; the level of technological substitution and the presence of alternative service providers contributing to the acceleration of disruptions and disintermediation in each of our business segments; the adverse effect of changing viewer habits and the expansion of OTT TV on subscriber and viewer growth and on the advertising market; rising content costs, as an increasing number of domestic and global competitors seek to acquire the same content, and challenges in our ability to acquire or develop key content; the proliferation of content piracy impacting our ability to monetize products and services, as well as creating bandwidth pressure; higher Canadian smartphone penetration and increased device costs could challenge subscriber growth and cost of acquisition and retention; the inability to protect our physical and non-physical assets from events such as information security attacks, fire and natural disasters; the failure to transform our operations, enabling a truly customer-centric service experience, while lowering our cost structure; the failure to continue investment in next-generation capabilities; the complexity in our operations resulting from multiple technology platforms, billing systems, sales channels, marketing databases and a myriad of rate plans, promotions and product offerings; the failure to implement or maintain highly effective IT systems; the failure to generate anticipated benefits from our corporate restructurings, system replacements and upgrades, staff reductions, process redesigns and the integration of business acquisitions; our failure to test, maintain, replace or upgrade our networks, IT systems, equipment and other facilities; in-orbit and other operational risks to which the satellites used to provide our satellite TV services are subject; the failure to attract and retain employees with the appropriate skill sets and to drive their performance in a safe environment; changes to our base of suppliers or outsourcers that we may decide on or be required to implement; the failure of our vendor selection, governance and oversight processes; security and data leakage exposure if security control protocols affecting our suppliers are bypassed; the quality of our products and services and the extent to which they may be subject to manufacturing defects or fail to comply with applicable government regulations and standards; the inability to manage various credit, liquidity and market risks; 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 failure to reduce costs, as well as unexpected increases in costs; the failure to evolve practices to effectively monitor and control fraudulent activities; the unfavourable resolution of legal proceedings and, in particular, class actions; new or unfavourable changes in applicable laws and the failure to proactively address our legal and regulatory obligations; the failure to recognize and adequately respond to climate change concerns or public and governmental expectations on environmental matters; health concerns about radiofrequency emissions from wireless communication devices and equipment; and the expected timing and completion of the proposed sale by BCE of 25 data centres at 13 sites to Equinix are subject to closing conditions and other risks and uncertainties.
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 2020 Second Quarter MD&A dated August 5, 2020 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 Sedar.com) and with the U.S. Securities and Exchange Commission (available at SEC.gov). This document is also available at BCE.ca.
BCE is Canada's largest communications company, providing advanced Bell broadband wireless, TV, Internet and business communications services alongside Canada's premier content creation and media assets from Bell Media. To learn more, please visit Bell.ca or BCE.ca.
The Bell Let's Talk initiative 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 leadership initiatives. To learn more, please visit Bell.ca/LetsTalk.
SOURCE Bell Canada