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.
MONTRÉAL, May 7, 2020 /PRNewswire/ - BCE Inc. (TSX: BCE)(NYSE: BCE) today reported results for the first quarter (Q1) of 2020.
"During these unprecedented times, Bell is focused on keeping Canadians connected and informed, prioritizing safety, and supporting our customers and communities as we all work through the COVID-19 crisis together. As we celebrate our company's 140th year, the Bell team is building on a proud legacy of service to Canadians by delivering the critical connections that consumers, businesses, government and public health responders need in a time of extraordinary demand," said Mirko Bibic, President and Chief Executive Officer of BCE and Bell Canada. "Bell's goal is advancing how Canadians connect with each other and the world, and the industry-leading investments we've made in network coverage and capacity have also enabled us to deliver 99.99+% network availability throughout the crisis despite significant usage increases across our wireless, wireline and broadcast networks. Building the best networks is a core strategic imperative for Bell, and we will be continuing our investments in network infrastructure and service innovation to champion the customer experience."
"As the primary builder of Canada's communications infrastructure since 1880, Bell will continue to lead the way in network investment and innovation as our country recovers from the crisis. Although we are withdrawing our previous financial guidance for the year due to the COVID-19 situation, we do not anticipate any changes to planned 2020 capital expenditures or to dividend payments for the foreseeable future. While the crisis significantly impacted retail activity, media advertising revenue and many other parts of our business in Q1, our solid results underscore Bell's ongoing leadership in network and service innovation, and consistently strong execution by the Bell team," said Mr. Bibic.
OPERATING PRINCIPLES DURING COVID-19 Canada's largest communications company, Bell continues to deliver critical services and support to consumers, businesses, governments and public health responders during the COVID-19 situation. We are guided by 3 key operating principles during this crisis: Keep Canadians connected and informed; Prioritize the health and safety of the public, our customers and team; and Support our customers and communities.
Keep Canada connected and informed
Prioritize the health and safety of the public, our customers and team
Support our customers and communities
BCE Q1 RESULTS
Financial Highlights | |||
($ millions except per share amounts) (unaudited) | Q1 2020 | Q1 2019 | % change |
BCE | |||
Operating revenues | 5,680 | 5,734 | (0.9%) |
Net earnings | 733 | 791 | (7.3%) |
Net earnings attributable to common shareholders | 680 | 740 | (8.1%) |
Adjusted net earnings(1) | 720 | 692 | 4.0% |
Adjusted EBITDA(2) | 2,442 | 2,409 | 1.4% |
Net earnings per common share (EPS) | 0.75 | 0.82 | (8.5%) |
Adjusted EPS(1) | 0.80 | 0.77 | 3.9% |
Cash flows from operating activities | 1,451 | 1,516 | (4.3%) |
Capital expenditures | 783 | 850 | 7.9% |
Free cash flow(3) | 627 | 642 | (2.3%) |
"Despite the impacts of COVID-19, Bell delivered positive service revenue and adjusted EBITDA growth in Q1, supported by ongoing broadband wireless, Internet and IPTV subscriber base expansion and a 2.6% reduction in total operating costs. Our overall financial performance this quarter, including healthy free cash flow generation to fund strategic capital investments in critical network infrastructure, reflects the strength, resiliency and durability of our business," said Glen LeBlanc, Chief Financial Officer for BCE and Bell Canada. "As Canada looks forward to moving past the COVID-19 crisis, BCE remains in a solid financial position with $3.2 billion of liquidity, a strong balance sheet, continued access to capital markets, and the free cash flow profile that is more than adequate to meet BCE's cash requirements for the balance of the year."
Q1 SUBSCRIBER HIGHLIGHTS
Q1 BUSINESS DEVELOPMENTS
Q1 OPERATING RESULTS BY SEGMENTTo align with changes in how we manage our business and assess performance, the operating results of our public safety land radio network business are now included within our Bell Wireline segment effective January 1, 2020, with prior periods restated for comparative purposes. Previously, these results were included within our Bell Wireless segment. Our public safety land radio network business, which builds and manages land mobile radio networks primarily for the government sector, is now managed by our Bell Business Markets team in order to better serve our customers with end-to-end communications solutions.
Bell Wireless
Bell Wireline
Bell Media
COMMON SHARE DIVIDENDBCE's Board of Directors has declared a quarterly dividend of $0.8325 per common share, payable on July 15, 2020 to shareholders of record at the close of business on June 15, 2020.
FINANCIAL OUTLOOKDue to the speed with which the COVID-19 situation is developing and the uncertainty of its severity, duration and potential outcomes, we are not able at this time to estimate the impacts of the crisis on our business or future financial results and related assumptions. The extent to which the COVID-19 situation will continue to impact our business, financial condition, liquidity and financial results will depend on future developments that are unknown and cannot be predicted, as well as new information which may emerge concerning the severity and duration of the COVID-19 pandemic and the actions required to contain the coronavirus or remedy its impact, among others. As a result, given this unprecedented and highly uncertain environment, BCE is withdrawing all of its 2020 financial guidance that 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 Q1 2020 MD&A for more information on the historical and future potential impacts on our business, financial condition, liquidity and financial results of the outbreak of the COVID-19 pandemic, including, without limitation, the introduction to section 1, Overview, section 1.3, Assumptions, section 4.7, Liquidity and section 6, Business risks.
CALL WITH FINANCIAL ANALYSTSBCE will hold a conference call for financial analysts to discuss Q1 2020 results on Thursday, May 7 at 8:00 am (Eastern). Media are welcome to participate on a listen-only basis. Please dial toll-free 1-800-806-5484 or 416-340-2217and enter passcode 4789815#. A replay will be available until midnight June 5, 2020 by dialing 1-800-408-3053 or 905-694-9451 and entering passcode 3452793#.
A live audio webcast of the conference call will be available on BCE's website at: BCE Q1 2020 conference call. The mp3 file will be available for download on this page later in the day.
NOTESThe information contained in this news release is unaudited.
(1) 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 and impairment charges, 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 that 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 and impairment charges, 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) | ||||
Q1 2020 | Q1 2019 | |||
TOTAL | PER SHARE | TOTAL | PER SHARE | |
Net earnings attributable to common shareholders | 680 | 0.75 | 740 | 0.82 |
Severance, acquisition and other costs | 12 | 0.01 | 18 | 0.02 |
Net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans | 20 | 0.03 | (73) | (0.07) |
Net (gains) losses on investments | (9) | (0.01) | 4 | - |
Early debt redemption costs | 12 | 0.01 | - | - |
Impairment charges | 5 | 0.01 | 3 | - |
Adjusted net earnings | 720 | 0.80 | 692 | 0.77 |
(2) 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 3, Segmented information, in BCE's Q1 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 that 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.
($ millions) | ||
Q1 2020 | Q1 2019 | |
Net earnings | 733 | 791 |
Severance, acquisition and other costs | 16 | 24 |
Depreciation | 868 | 882 |
Amortization | 234 | 221 |
Finance costs | ||
Interest expense | 279 | 283 |
Interest on post-employment benefit obligations | 12 | 16 |
Other expense (income) | 55 | (101) |
Income taxes | 245 | 293 |
Adjusted EBITDA | 2,442 | 2,409 |
BCE operating revenues | 5,680 | 5,734 |
Adjusted EBITDA margin | 43.0% | 42.0% |
(3) The terms 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 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 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 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 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) | ||
Q1 2020 | Q1 2019 | |
Cash flows from operating activities | 1,451 | 1,516 |
Capital expenditures | (783) | (850) |
Cash dividends paid on preferred shares | (36) | (26) |
Cash dividends paid by subsidiaries to NCI | (14) | (27) |
Acquisition and other costs paid | 9 | 29 |
Free cash flow | 627 | 642 |
(4) 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 outbreak of the COVID-19 pandemic, BCE's 2020 annualized common share dividend and the expected continued payment thereof for the foreseeable future, our network deployment and capital investment plans, the sources of liquidity we expect to use to meet our anticipated 2020 cash requirements, 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 May 7, 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 May 7, 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.
Material AssumptionsThe forward-looking statements set out in this news release are based on certain assumptions including, without limitation, the following assumptions. Due to the speed with which the COVID-19 pandemic is developing and the uncertainty of its severity, duration and potential outcomes, we are not able at this time to estimate the impacts of the 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.
Material RisksImportant 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 severity and duration of 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; 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; and health concerns about radiofrequency emissions from wireless communication devices and equipment
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 First Quarter MD&A dated May 6, 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.
About BCEBCE 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.
Media inquiries:
Marie-Eve Francoeur514-391-5263marie-eve.francoeur@bell.ca
Investor inquiries:
Thane Fotopoulos514-870-4619thane.fotopoulos@bell.ca
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SOURCE BCE Inc.