Aravinda Galappatthige

Aravinda Galappatthige asked about the differentiation of Thomson Reuters' position with larger versus smaller law firms regarding the threat from new generalized AI services, and for insights into the potential high watermark for GenAI-enabled products as a percentage of Annual Contract Value (ACV).

Answer

CEO Steve Hasker noted a different dynamic in the AI era, with equally keen demand for advanced AI tools from small, medium, and large firms, as small firms quickly recognize the impact on accuracy, quality, and bottom line. CFO Mike Eastwood explained that the percentage of ACV from GenAI-enabled products, currently at 28%, is expected to see a continued steady rise throughout 2026 and 2027, with potential spikes as more existing products become AI-enabled.

Aravinda Galappatthige asked about the differentiation of Thomson Reuters' moat for larger versus smaller law firms regarding threats from new generalized AI services. He also inquired about the expected high watermark for GenAI-enabled products as a percentage of Annual Contract Value (ACV).

Answer

CEO Steve Hasker noted that in the AI era, small firms show as much demand for advanced AI tools as large firms, seeing immediate impact on their bottom line, a dynamic different from previous product iterations. CFO Mike Eastwood explained that the percentage of ACV from GenAI-enabled products (currently 28%) is expected to rise steadily through 2026-2027, with potential spikes as more existing products become AI-enabled.

Aravinda Galappatthige asked if the current rate of innovation and product intensity is nearing its peak, connecting this to the outlook for margin expansion and ongoing incremental investments.

Answer

CEO Steve Hasker stated that the rate of innovation will accelerate and improve over the next few quarters and into 2026-2027, particularly for specialized AI tools. CFO Mike Eastwood clarified that confidence in 2026 margin expansion is not due to reduced investment, as over $200 million will be invested in AI/GenAI in 2025 and continue into 2026, with margin expansion driven by operating leverage and internal automation. Mike Eastwood also reiterated the capital allocation framework, including a potential 10% dividend increase.

Aravinda Galappatthige asked if the current rate of innovation and new product launches, particularly in AI, is nearing its peak, and how this relates to the underlying tone of margin expansion, given the $200 million incremental investments. He also inquired about the flexibility and willingness to step up share repurchase programs beyond the previously stated framework of $400 million-$500 million, given recent stock movements.

Answer

CEO Steve Hasker stated that the rate of innovation, especially for specialized AI tools, is expected to accelerate and improve into 2026 and 2027, while general-purpose tools might flatten. CFO Mike Eastwood clarified that confidence in 2026 margin expansion is not due to reduced investment; over $200 million will continue to be invested in AI/GenAI in 2026, driven by operating leverage and internal automation initiatives. Regarding capital allocation, Mike Eastwood maintained the mid-to-long-term framework of $400 million-$500 million for buybacks but affirmed the ability and willingness to step up when appropriate, as demonstrated by the recent $1 billion NCIB. He also mentioned a proposed 10% increase in the common dividend for the fifth consecutive year.

Aravinda Galappatthige of Canaccord Genuity Inc. asked if the strong EBITDA growth in the Tax & Accounting segment was mainly due to the timing of SafeSend integration costs. He also inquired about the characteristics of client cohorts and their varying appetite for adopting new AI products.

Answer

CFO Michael Eastwood confirmed that the Q2 Tax & Accounting EBITDA margin strength was primarily due to the timing of SafeSend integration expenses, which are now expected in the second half of the year. CEO Steve Hasker described the client cohorts, noting that while nearly all customers are interested in AI, about 20-30% are aggressively leaning in to differentiate themselves, with the rest adopting at a more measured pace. He highlighted that this interest spans firms of all sizes.

Aravinda Galappatthige of Canaccord Genuity asked for an update on the CoCounsel Drafting opportunity, including its addressable market and progress, and questioned if AI-related investment would increase in 2025 from the prior year's level.

Answer

CEO Steve Hasker described the drafting opportunity as significant, emphasizing the company's differentiation through its proprietary Westlaw and Practical Law content, but did not provide a specific TAM. CFO Mike Eastwood confirmed a slight uptick in AI investment for 2025 from the previous ~$200 million level, noting it is split between OpEx and CapEx and is fully reflected in the company's guidance.

Aravinda Galappatthige asked President and CEO Tony Staffieri about the cable business, specifically what factors would be needed to increase EBITDA growth to the 2% mark, given current promotional intensity and high margins, and the potential for streamlining. He then asked CFO Glenn Brandt about the outlook for restructuring charges on a go-forward basis.

Answer

President and CEO Tony Staffieri stated that Rogers is committed to efficiency in cable, seeing opportunities through new digital technologies to improve customer experience and drive operational efficiency, which will continue to drive EBITDA growth, though he cautioned about realistic expectations given the strong 59% margin. CFO Glenn Brandt explained that Shaw-Rogers restructuring is largely complete, but new restructuring charges will arise from combining RSM and MLSE operations, with a heavier part expected in 2027, dependent on the timing of acquiring the remaining 25% MLSE interest.

Aravinda Galappatthige inquired about the potential for Rogers Communications to increase cable EBITDA growth to 2%, considering high margins and streamlining options. He also asked for the outlook on restructuring costs, given a recent tick down in Q4.

Answer

President and CEO Tony Staffieri stated Rogers is committed to efficiency in cable, seeing opportunities through new digital technologies to improve customer experience and drive more efficient operations, which will continue to drive EBITDA growth, but cautioned given the strong 59% margin. CFO Glenn Brandt noted Shaw-Rogers restructuring is largely complete, with future restructuring focused on media (RSM and MLSE) synergies, expected in 2026 and 2027, depending on the 25% MLSE interest buyout timing.

Aravinda Galappatthige inquired about the sequential trend in wireless service revenue, specifically if roaming or external customer items impacted the numbers, and the potential for Agentic AI to drive operating leverage across customer experience, network operations, and marketing.

Answer

President and CEO Tony Staffieri confirmed that lower roaming volumes and wholesale revenues moving to another carrier were substantial factors in the wireless revenue decline. He also outlined three key areas for AI deployment: enhancing customer experience, improving operational efficiency, and strengthening security, noting significant opportunities for Rogers.

Aravinda Galappatthige from Canaccord Genuity Inc. requested an update on the monetization strategy for Rogers' sports assets and asked about the sustainability of the strong Cable EBITDA growth, particularly the cost reduction drivers.

Answer

President & CEO Tony Staffieri stated that while monetizing sports assets to strengthen the balance sheet is a key focus with good options available, it is premature to share specific plans or timing. Staffieri also detailed drivers for the Cable revenue turnaround, including footprint growth and the 5G home internet product. CFO Glenn Brandt added that Cable cost efficiencies are driven by broad-based, detailed operational improvements rather than a single initiative.

Aravinda Galappatthige asked about the Cable business, specifically requesting insight into the contribution from Fixed Wireless Access (FWA) and reseller initiatives to the company's broadband net additions.

Answer

President and CEO Anthony Staffieri explained that Rogers is focused on growing net adds across all technologies. He highlighted the success of the 5G wireless home modem (FWA), particularly in areas without wireline infrastructure, and noted its potential will grow with the integration of Xfinity products. He prioritized the sources of net adds as on-net first, followed by FWA, and then wholesale (TPIA).

Aravinda Galappatthige asked if recent price actions in the market differ significantly from last year and requested an update on Internet subscriber loading performance in Western Canada versus the legacy footprint.

Answer

President and CEO Tony Staffieri stated that recent price adjustments are responses to market activity and do not set a precedent for the full year. Regarding internet loading, he highlighted that the West is the fastest-growing market, benefiting from the completed mid-split upgrade and the new Rogers Xfinity product rollout, with continued progress also being made in Quebec.

Aravinda Galappatthige asked if the 2025 leverage target of ~3.7x includes non-core real estate sales and questioned what will drive the required uptick in Q4 revenue to meet full-year guidance.

Answer

Chief Financial Officer Glenn Brandt clarified that the ~3.7x leverage target for year-end 2025 factors in the MLSE acquisition but does not depend on the sale of non-core assets, citing flexibility. He stated that meeting the full-year revenue guidance will be driven by a combination of factors in a seasonally strong Q4, including continued subscriber growth and pricing initiatives.

Aravinda Galappatthigge followed up on free cash flow, asking if a higher-than-usual working capital outflow was expected in Q4 and why the 2025-2028 projections suggest consistently meaningful working capital outflows. He also asked about the competition Bell faces in the enterprise AI-powered solutions space (Ateko and Cyber).

Answer

CFO Curtis Millen confirmed Q3 free cash flow benefited from timing, with Q4 expected to have seasonally high CapEx, and explained that capital investment reduction would normalize free cash flow by 2028. CEO Mirko Bibic stated that Bell's full-stack AI offering is unique, highlighting Ateko's focused expertise and its advantage as both an operator and integrator.

Aravinda Galappatthige questioned the long-term revenue and free cash flow opportunity for the Bell AI Fabric business and followed up by asking about the potential for further asset divestitures, such as tower monetization.

Answer

President & CEO Mirko Bibic highlighted that Bell AI Fabric is a key part of an integrated enterprise strategy with a large addressable market and significant growth potential, leveraging BCE's network and speed-to-market advantages. Regarding asset sales, he noted no current updates on towers but affirmed the company remains open to opportunities to create shareholder value.

Aravinda Galappatthige from Canaccord Genuity inquired about the long-term revenue and free cash flow opportunity for the Bell AI Fabric initiative and followed up on the potential for further asset divestitures, such as tower monetization.

Answer

President & CEO Mirko Bibic highlighted the large addressable market and strong growth rates for Bell AI Fabric, emphasizing its integration with Bell's network, Ateco, and cybersecurity services at manageable investment levels. Regarding asset sales, he stated there were no updates on towers but affirmed that infrastructure is viewed as a valuable source of capital and they remain open to opportunities.

Aravinda Galappatthige of Canaccord Genuity sought confirmation on the new 14.5% CapEx intensity ceiling and asked if recent high levels of restructuring costs would continue in the coming years.

Answer

CFO Curtis Millen confirmed that CapEx intensity should be in the 14.5% range going forward. He also noted that while some one-time costs will continue as part of the transformation, they are expected to decrease from the higher levels seen in the past couple of years as the focus shifts more to process improvement.

Aravinda Galappatthige asked for more detail on the potential structure for third-party investment in the U.S. fiber expansion, specifically if it could involve a separate, non-consolidated entity. He also questioned if future Internet revenue growth would be primarily dependent on price increases.

Answer

Mirko Bibic, President and CEO, confirmed that pricing is the key lever for future Internet revenue growth, given that BCE continues to capture a majority of net subscriber additions. On the U.S. investment structure, he reiterated that any model would aim to reduce BCE's funding requirements and be guided by the principles of maintaining investment-grade ratings and deleveraging, without committing to a specific structure like a non-consolidated entity.

Aravinda Galappatthige of Canaccord Genuity Inc. asked for a breakdown of the 6% constant currency growth across the company's primary service lines, questioning whether some segments experienced declines.

Answer

Acting CEO Jason Macdonnell confirmed that while growth was relatively balanced, the e-commerce and fintech vertical declined year-over-year. CFO Gopi Chande elaborated that the AI & Data Solutions and Digital Solutions segments were strong, while the Customer Experience and Trust & Safety segments experienced more volatility, partly due to a previously announced client rebalancing in Europe.

Aravinda Galappatthige asked for elaboration on the potential business opportunities arising from the impact of tariffs on clients, and also requested a review of the long-term margin outlook beyond 2025.

Answer

Executive Tobias Dengel explained that tariffs cause clients to focus on cost reduction, creating opportunities for TELUS Digital's efficiency-focused offerings. CFO Gopi Chande addressed margins, noting the competitive pricing environment has stabilized. She stated Q1 was the margin low point, with a full-year target near 15% driven by investments and efficiency programs. Beyond 2025, she expects a gradual margin improvement, though likely not back to the historical mid-20s levels.

Aravinda Galappatthige asked about the assumptions for the Trust and Safety vertical within the 2025 guidance and questioned the competitive dynamics and growth rate of the AI data solutions segment.

Answer

Gopi Chande, CFO, stated that a material decline in Trust and Safety is not assumed, as increasing work complexity and volume are offsetting the impact of AI automation. Jason Macdonnell, Acting CEO, described the AI data solutions market as intensely competitive but rapidly growing, noting the 'pie is growing quicker than the competitors.' He highlighted that success hinges on quality and speed, with projects ranging from trials to multi-million dollar contracts.

Aravinda Galappatthige asked about the expected path to margin recovery, contrasting the current situation with the previous year's rapid rebound to over 20% levels.

Answer

President and CEO Jeffrey Puritt stated that past margin performance had relied on 'one-timers' and that the company is now intentionally lowering near-term margin expectations to win deals in a price-sensitive market. President of TELUS Digital Solutions Tobias Dengel added that near-term AI investments, like agent-assist tools, are aimed at driving operational efficiency, which should improve margins over time as they scale.

Aravinda Galappatthige from Canaccord Genuity asked about the sustainability of stabilizing core cable margins and inquired about the executive team structure for the company's expansion into English Canada.

Answer

President and CEO Pierre Karl Péladeau attributed the stable cable results to a balanced strategy of managing both the new Helix and legacy platforms to serve different customer segments effectively. Regarding the management team, he stated the integration is going very well as both Freedom and Quebecor teams share deep wireless expertise, a common language, and an understanding of the industry, creating a positive outlook for growth.

Aravinda Galappatthige of Canaccord Securities asked for a breakdown of the broadband net adds variance, specifically the wholesale component. He also requested guidance on 2023 interest expenses and the terms of the $2.4 billion credit facility for the Freedom deal, with a follow-up on leadership plans for Freedom.

Answer

CFO Hugues Simard confirmed that a significant portion of the variance in broadband net adds was due to the wholesale and B2B side, with the residential segment remaining more stable. He stated that interest expenses have been decreasing as higher-coupon debt is retired. The new $2.4 billion facility is floating-rate bank debt with three tranches up to four years, secured at favorable rates. Regarding Freedom's leadership, Simard indicated it was too early for specific announcements but that they have met with senior management and are positive about the transition.

Aravinda Galappatthige of Canaccord Genuity asked for a breakdown of the telecom margin improvement between the core cable and wireless businesses, the outlook for margins in the second half, and the company's share buyback plans in light of the pending Freedom transaction.

Answer

CFO Hugues Simard stated that while wireless was a strong contributor with 12% EBITDA growth, the wireline service margin also improved. He expects this positive momentum to continue as cost-reduction initiatives take full effect. Regarding buybacks, he noted the company remains opportunistic, as they believe the stock is undervalued.