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01/11 03:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Despite an 11.3% EBITDA increase, concerns include flat margin expectations and unclear tax benefits. Positive factors are AI Fabric's growth potential and strong free cash flow. The Q&A shows cautious optimism, with management providing limited specifics on tax benefits and satellite service details. Overall, the mixed guidance and lack of clarity on certain aspects lead to a neutral sentiment.
Total Revenue Total revenue was up 1.3%, driven by the acquisition of Ziply Fiber completed on August 1. The growth was moderated by retroactive revenue adjustments at Bell Media related to contract renewals with certain Canadian TV distributors in Q3 of '24.
Adjusted EBITDA Adjusted EBITDA increased by 1.5%, reflecting the contribution from Ziply Fiber. This led to a 10 basis point margin increase to 45.7%, the strongest result in more than 30 years. Excluding Ziply Fiber and normalizing for retroactive benefits, overall BCE's EBITDA grew by 0.4%.
Net Earnings and Statutory EPS Net earnings and statutory EPS were up significantly over last year, largely due to the $5.2 billion gain from the sale of a minority stake in MLSE on July 1 and lower asset impairment charges compared to Q3 of last year.
Adjusted EPS Adjusted EPS was up 5.3%, supported by higher EBITDA.
CapEx CapEx was down $63 million this quarter, bringing year-to-date CapEx savings to $551 million. The reduction was due to lower spending, but a year-over-year step-up in spending is expected in Q4 for Ziply Fiber's fiber build-out.
Free Cash Flow Free cash flow increased by $171 million in Q3, driven by lower CapEx, higher cash from working capital, lower severance payments, and the flow-through of higher EBITDA.
Internet Revenue (Canada) Internet revenue was up 2%, supported by fiber and a balance between subscriber growth and disciplined pricing.
AI-Powered Solutions Revenue Revenue from AI-powered solutions grew 34% year-over-year, driven by rapid growth at Ateko and Bell Cyber.
Wireless Service Revenue Wireless service revenue declined modestly by 0.4%, in line with the 0.3% decrease in Q2. The decline was attributed to the absence of a nonrecurring revenue benefit related to the G7 Summit in Q2.
Wireless Product Revenue Wireless product revenue was up $41 million year-over-year, driven by greater sales of mobile devices.
Bell CTS U.S. Revenue Total revenue for Bell CTS U.S. (Ziply Fiber) reached $160 million, driven by the strength of Ziply's Fiber-to-the-prem platform. Internet revenue grew 15% year-over-year.
Bell CTS U.S. EBITDA Bell CTS U.S. delivered $71 million in EBITDA for the period, representing a robust 44.4% margin. This performance reflects higher operating revenue and the benefits of Ziply Fiber's efficient cost structure.
Bell Media Revenue Total revenue for Bell Media was down 6.4% year-over-year. Excluding a one-time retroactive sub fee adjustment in Q3 of last year, the decline was closer to 1%. Advertising revenue was down 11.5%, reflecting softness in traditional advertising demand and the impact of divestitures.
Bell Media EBITDA Bell Media's EBITDA declined by 6.7% year-over-year. Excluding the one-time retroactive adjustment, Q3 EBITDA was up 11.3% year-over-year.
New wireless plan tiers: Introduced distinct value propositions based on network speeds, video quality, roaming, long-distance features, device discounts, and content offerings. Positive customer response and reduced churn.
AI-powered virtual assistant: Launched to transform customer experience, serving as a foundation for next-gen customer service.
AI-powered solutions businesses: Launched Ateko, Bell Cyber, and Bell AI Fabric, driving 34% year-over-year revenue growth. Expected to generate $700 million in revenue by 2025.
Streaming bundles: Introduced bundles featuring Crave, Netflix, and Disney+ for Bell Mobility and Internet customers.
Ziply Fiber acquisition: First quarter of operations under Bell CTS U.S. segment. Financial results exceeded expectations. Plans to expand U.S. fiber footprint to 8 million locations by 2028.
AST SpaceMobile partnership: Announced partnership to deliver direct-to-cell satellite service, expanding network reach in remote Canadian areas. Service launch planned for late 2026.
Postpaid churn reduction: Achieved second straight quarter of significant reduction due to customer service improvements and retention offers.
Fiber network expansion: Added 65,000 net new fiber subscribers in Q3. Plans to increase U.S. fiber footprint to 8 million locations by 2028.
Cost management: Achieved 0.6% reduction in operating costs in Canada and improved EBITDA margin to 46.8%.
3-year strategic plan: Unveiled plan focusing on customer service, network expansion, AI-powered solutions, and digital media growth. Targets long-term shareholder value.
AI and data sovereignty: Positioned Bell as a leader in Canada's sovereign AI ecosystem, leveraging AI Fabric and partnerships with Canadian tech leaders.
Digital media partnerships: Expanded partnerships with iHeartMedia and Tubi to enhance digital audio and video offerings for advertisers.
Market Conditions: Wireless service revenue and ARPU both declined slightly, indicating potential challenges in maintaining revenue growth in a competitive and stabilized wireless market.
Regulatory and Economic Uncertainties: Global instability and reassessment of long-standing relationships could impact operations and strategic plans, especially in the context of AI and technology advancements.
Supply Chain and Operational Risks: The expansion of Ziply Fiber's footprint and fiber build-out through 2026 and beyond could face cost overruns or delays, impacting financial and operational targets.
Advertising Revenue Decline: Bell Media experienced a decline in traditional advertising revenue, particularly for non-sports programming, which could affect overall media segment profitability.
Subscriber Revenue Decline: Subscriber revenue for Bell Media declined due to retroactive revenue adjustments, which could pose challenges in achieving consistent revenue growth.
Debt and Leverage: The company’s net debt leverage ratio is at 3.8x adjusted EBITDA, with a focus on reducing it to 3.5x by 2027. High leverage could limit financial flexibility.
Competitive Pressures: Competitive losses in copper areas for Ziply Fiber and softness in traditional advertising demand highlight challenges in maintaining market share and revenue.
3-Year Strategic Plan: BCE unveiled a 3-year strategic plan aimed at driving long-term shareholder value, supported by disciplined capital allocation and efficiency improvements to generate sustainable free cash flow growth.
Fiber Network Expansion: Ziply Fiber's network currently passes 1.4 million homes in the U.S., with plans to reach approximately 3 million locations by the end of 2028. Over time, BCE aims to expand its U.S. fiber footprint to 8 million locations through the Network FiberCo partnership.
Wireless Service Trends: The wireless environment has stabilized, and BCE expects this trend to continue. Wireless service revenue and ARPU declined by less than 0.5 percentage point, while postpaid churn improved by 15 basis points.
AI-Powered Solutions Growth: Revenue from AI-powered solutions grew 34% year-over-year, with expectations to generate approximately $700 million in AI-powered solutions revenue by 2025. BCE is focusing on AI-driven businesses like Ateko, Bell Cyber, and Bell AI Fabric.
Satellite Service Launch: BCE plans to launch a direct-to-cell satellite service in partnership with AST SpaceMobile by late 2026, providing voice, video, text, and broadband data capabilities in remote areas of Canada.
Digital Media and Content Expansion: BCE introduced new streaming bundles featuring Crave, Netflix, and Disney+. It also expanded partnerships with iHeartMedia and Tubi to enhance digital media offerings and create new advertising opportunities.
Capital Expenditures: BCE anticipates a year-over-year increase in capital expenditures in Q4 2025, consistent with its 2025 capital intensity guidance of approximately 15%.
Debt Reduction Goals: BCE aims to reduce its leverage ratio to 3.5x by the end of 2027 and to 3.0x by 2030 through organic EBITDA growth, free cash flow generation, and asset monetization.
Financial Guidance for 2025: BCE reconfirmed all financial guidance targets for 2025, supported by operating momentum and consistent execution.
The selected topic was not discussed during the call.
Despite an 11.3% EBITDA increase, concerns include flat margin expectations and unclear tax benefits. Positive factors are AI Fabric's growth potential and strong free cash flow. The Q&A shows cautious optimism, with management providing limited specifics on tax benefits and satellite service details. Overall, the mixed guidance and lack of clarity on certain aspects lead to a neutral sentiment.
The earnings call summary indicates a mixed outlook with several negative aspects. The dividend cut and focus on deleveraging are concerning, and while the partnership with PSP and fiber expansion are positive, the lack of updates on asset divestitures and regulatory appeals raises uncertainties. The Q&A reveals some optimism about free cash flow and wireless performance, but the reduced fiber expansion and unclear guidance on certain issues contribute to a negative sentiment. Overall, the strategic adjustments and financial uncertainties are likely to lead to a negative stock price reaction.
The earnings call shows mixed signals: strong financial metrics with improved EBITDA margin and net earnings, but weak guidance with expected revenue and EPS declines. The dividend cut, despite positive free cash flow, may concern investors. The Q&A revealed some management vagueness, adding uncertainty. The fiber growth strategy and digital revenue growth are positives, but competitive pressures and pricing issues weigh negatively. Overall, the sentiment is neutral, with no clear catalyst for a strong price movement.
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