BCE Sees Record Margins In Q3 2024 But Takes A $1.2 Billion Net Loss Hit
BCE Inc. (TSX: BCE) reported its third-quarter 2024 earnings, with total operating revenue coming in at $5.97 billion, down 1.8% from the same quarter last year, where revenue totaled $6.08 billion. This quarter’s revenue decline was driven primarily by a significant 14.3% drop in product revenue, which fell to $685 million from last year’s $799 million.
The decline in product revenue reflects lower mobile device sales and a reduction in consumer electronics purchases as BCE has shifted away from low-margin product sales. Service revenue, while relatively stable, saw only a marginal increase of 0.1% to $5.29 billion, underscoring the slow growth in BCE’s core telecom services, which struggled to offset the lower product sales.
BCE’s net income plunged dramatically, swinging from $707 million in Q3 2023 to a net loss of $1.19 billion this quarter. This decline was largely due to a massive $2.1 billion non-cash impairment charge on Bell Media’s traditional broadcast assets. Adjusted net earnings, which exclude these charges, decreased by 7.2% year-over-year to $688 million from $741 million in Q3 2023. The adjusted earnings per share also dropped by 7.4% to $0.75, compared to $0.81 per share in the same period last year.
Adjusted EBITDA, however, provided one of the few bright spots in the report, rising by 2.1% to reach $2.72 billion. This marks an improvement from $2.67 billion in Q3 2023 and reflects the company’s ongoing efforts to streamline costs. The adjusted EBITDA margin rose to 45.6%, up from 43.9% a year ago, representing a 1.7 percentage-point increase and the firm’s highest adjusted EBITDA margin in over 30 years. CEO Mirko Bibic credited these gains to BCE’s focus on higher-margin customer acquisitions and effective cost reductions across its business units.
Free cash flow also showed growth, increasing by 10.3% to $832 million from $754 million in Q3 2023. This was largely due to a 17.7% reduction in capital expenditures, which fell to $954 million from last year’s $1.16 billion, as BCE scaled back on fibre network expansions and reduced spending on consumer electronics.
However, the company’s cash flows from operating activities dropped by 6.1% to $1.84 billion from $1.96 billion in Q3 2023, driven by higher severance and restructuring costs, increased interest expenses, and the timing of supplier payments.
The company’s wireless business faced mixed results in terms of subscriber metrics. BCE reported 158,412 total mobile phone and connected device net activations, with prepaid net activations rising to 69,085, representing an impressive 187% year-over-year increase. The company saw a steep 76.8% drop in postpaid net activations, which fell to 33,111 compared to 142,886 in Q3 2023. This significant decline reflects BCE’s strategic shift towards profitability over volume, as the company has chosen to prioritize higher-margin customer acquisitions on its main Bell brand.
Bell Media, BCE’s media segment, saw a 10.1% increase in revenue to $782 million, largely driven by strong growth in digital advertising revenue and a 12% increase in Crave streaming subscriptions. Digital revenue grew by 19%, reflecting a robust performance in Bell’s digital platforms, which have become increasingly important as traditional TV and radio advertising demand weakens. Adjusted EBITDA for Bell Media jumped by 25.1% to $254 million, pushing the segment’s EBITDA margin to 32.5% from 28.6% in Q3 2023.
BCE has adjusted its 2024 revenue guidance downward, now expecting a 1.5% revenue decline compared to previous expectations of flat to 4% growth. This revision reflects lower-than-expected wireless product revenue, which has been impacted by competitive pricing pressures and lower device sales.
The company’s adjusted EBITDA growth target of 1.5% to 4.5% remains unchanged, as does its capital intensity target, which BCE aims to keep below 16.5% by year-end.
BCE last traded at $40.06 on the TSX.
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