Record EBITDA Margin and Strategic Growth ...

Consolidated EBITDA Growth: 2.1% increase in Q3.
EBITDA Margin: Increased by 1.7 points to 45.6%, best quarterly margin performance in over 30 years.
Free Cash Flow: Increased by 10.3% in Q3.
Wireless Net Adds: 158,412 combined mobile phone and connected device net adds.
Internet Revenue Growth: Improved to around 5%, best quarterly results since Q2 2023.
Digital Media Revenue: Up 19% year-over-year.
Net Mobile Phone Subscribers: 102,196 new net adds in Q3.
Postpaid Net Adds: 33,111, down from the previous year.
Prepaid Net Adds: 69,085, best quarterly results since Q3 2019.
ARPU: Down 3.4% due to rate plan discounting and promotional offers.
Retail Internet Subscribers: 42,415 new net adds.
Advertising Revenue: Increased for the third consecutive quarter.
Crave Subscribers: Up 12% to more than 3.4 million.
TSN and RDS Digital Subscriptions: Grew by 45%.
Total Revenue: Down 1.8% due to a 14.3% decrease in low margin product sales.
Operating Costs: Reduced by 4.8% in Q3.
Net Earnings and EPS: Declined due to $2.1 billion in non-cash asset impairment charges.
CapEx: Down $205 million in Q3, with year-to-date savings over $600 million.
Business Solutions Revenue: Grew 10% year-over-year.
Media EBITDA: Up 25.1%, with a margin increase to 32.5%.
Debt Leverage Ratio: 3.7 times adjusted EBITDA.
Revenue Guidance for 2024: Revised to a decline of approximately 1.5%.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

BCE Inc (NYSE:BCE) reported a 2.1% growth in consolidated EBITDA and a 1.7 point margin increase to 45.6%, marking the best quarterly margin performance in over 30 years.
Free cash flow increased by 10.3% in Q3, aligning with the company’s financial plan.
Digital revenues grew by 19%, driven by products like Crave with ads and connected TV, contributing to offsetting pressures in traditional media.
BCE Inc (NYSE:BCE) is making significant progress in modernizing operations, leveraging technology for cost efficiencies, and is ahead of plan in reducing CapEx by over $1 billion for 2024-2025.
The acquisition of Ziply Fiber is expected to be immediately accretive to cash flow from operations, enhancing BCE’s financial growth profile and expanding its footprint in the US fiber market.

Total revenue declined by 1.8% due to a 14.3% decrease in low margin wireless and wireline product sales, including the loss of revenue from The Source store closures.
Wireless ARPU was down 3.4%, reflecting excessive rate plan discounting and promotional offer intensity over the past year.
Net earnings and statutory EPS declined in Q3 due to approximately $2.1 billion in non-cash asset impairment charges for Bell Media’s TV and radio properties.
BCE Inc (NYSE:BCE) revised its revenue guidance for 2024, now expecting a decline of approximately 1.5% due to near-term top-line pressures.
Postpaid churn increased against the backdrop of elevated competitive activity, although there was a deceleration in the year-over-year rate of increase.

Q: How should we gauge BCE’s appetite for further M&A in the US long term, and how meaningful could the US fiber strategy be to consolidated financials? A: Mirko Bibic, President and CEO, explained that BCE is a fiber-first company, and the acquisition of Ziply Fiber aligns with this strategy. The US market presents high growth potential, particularly in high GDP states. BCE will consider further opportunities to enhance growth, leveraging Ziply Fiber’s platform to integrate additional assets if they arise.

Q: Can you clarify the impact of the TPIA subscriber write-down and the discontinuation of Bell prepaid services on ARPU? A: Mirko Bibic stated that the CRTC ruling stops the TPIA resale business, allowing BCE to serve existing customers but not add new ones. Curtis Millen, Head of Bell Ventures, added that discontinuing Bell prepaid services will have a small positive impact on ARPU.

Q: How is BCE managing the competitive pricing environment in the broadband business, and what benefits are you seeing from bundling subscribers? A: Mirko Bibic noted that BCE is capturing a larger share of new market growth due to its superior fiber service. The company focuses on acquiring high-speed tier customers and maintaining a disciplined approach to pricing. Bundling subscribers helps reduce churn and increase ARPU.

Q: What is BCE’s outlook for industry growth in Canada, and can BCE sustain positive EBITDA growth in this environment? A: Mirko Bibic acknowledged revenue headwinds but emphasized growth areas like fiber, 5G, business solutions, and digital media. He believes pricing will stabilize, supporting future growth. BCE is aligning its cost structure with revenue streams and investing in growth areas to sustain EBITDA growth.

Q: How is BCE addressing the challenge of maintaining competitiveness in the wireless market amid pricing pressures? A: Mirko Bibic emphasized focusing on the Bell brand for market share stability and growth. BCE is also lowering the cost to serve and managing customer life cycles to migrate prepaid customers to premium brands. He acknowledged the trailing effects of low pricing but remains confident in BCE’s strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Record EBITDA Margin and Strategic Growth …

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