Mr. Mirko Bibic reports

BCE REPORTS SECOND QUARTER 2023 RESULTS

BCE Inc. has released financial results for the second quarter of 2023.

"Bell's Q2 results demonstrate that our consistent strong execution and delivering the compelling services that our customers want and value is a winning approach," said Mirko Bibic, president and chief executive officer of BCE and Bell Canada.

Mr. Bibic added: "Over the past several years, we have been laser focused on building the best networks, investing in growing our fibre footprint and delivering ever-faster mobile and Internet speeds. Bell pure fibre was ranked the fastest Internet in Canada in the Ookla Speedtest Award report for Q1/Q2 2023, as well as the fastest Wi-Fi. We added 52,148 new net fibre customers in Q2, up 38.2 per cent over last year, and our retail Internet net activations were up 10.2 per cent to 24,934, our best Q2 result in 16 years. We surpassed a milestone of 10 million mobile phone subscribers, with service revenue up 4.4 per cent on our highest Q2 postpaid net activations in 18 years. And we achieved these results against the backdrop of declining prices, demonstrating that our industry is delivering the highest-quality services at decreasing prices, despite persistent inflation.

"Despite the continuing advertising recession across North America, our leading content and digital-first media strategy continues to pay off with Bell Media digital revenue up 20 per cent over last year, and now comprising 33 per cent of total Bell Media revenue."

Key business developments

Award-winning network, new Virgin Plus plans

Bell became Canada's most-awarded Internet service provider after its pure fibre Internet was named the fastest Internet and fastest Wi-Fi in the Ookla Q1/Q2 2023 Speedtest Awards report. In addition, Bell MTS was recognized as Employees' Choice: Canada's Top Broadband ISP for Work, in PCMag's first survey of Internet providers at work in Canada. Virgin Plus launched new unlimited nationwide and 5G wireless plans, along with a new brand campaign and updated member benefits.

Accelerate cloud strategy for Canadian businesses

Bell completed the acquisition of FX Innovation, a Montreal-based information technology services and consulting company providing business clients with cloud-focused managed and professional services and workflow automation solutions. This acquisition delivers leading-edge technology solutions for Canadian businesses and seeks to position Bell as a tech services leader.

Delivering the most compelling content

TSN, RDS, CTV and Noovo delivered extensive coverage of the Formula 1 Canadian Grand Prix, which was Canada's most-watched F1 race on record, attracting an average audience of 1.34 million viewers. The final round of the RBC Canadian Open attracted the highest audience on record for a Canadian Open final on TSN, with a 41-per-cent increase compared with the 2022 final round. A total of approximately 2.35 million Canadians tuned in to watch the final. Bell Media released its 2023/2024 original content slate as part of Upfront 23 and Futur 23. Total English-and French-language original programming includes 96 titles and 1,037 hours of content. CTV celebrated 22 consecutive years as Canada's most-watched network. On Crave, Billionaire Murders was the top Canadian series launch ever for first-week streams, and Survivor Quebec was the most-watched program of the spring on Noovo. The finale was the week's most-watched show on French Quebec television and the most-watched episode on Noovo since the network's debut in 2020. Crave expanded its direct-to-consumer subscription offering with the launch of ad-supported tiers. Bell Media also unveiled new advertising solutions accessible directly through the Bell Marketing platform, which includes addressable TV, new upgrades to its strategic audience management (SAM) tool, expanded inventory on its Bell demand-side platform (DSP), including addressable audio, and new attribution capabilities.

Bell for Better: better world, better communities, better workplace

Bell entered into its first sustainability-linked derivatives, designed to align financing costs with its performance on environmental, social and governance (ESG) targets. Continuing to support youth mental health, Bell Let's Talk built on Bell's long-standing partnership with The Montreal Children's Hospital Foundation with a $500,000 donation toward increasing therapy resources available through the hospital's Children's Eating Disorders program. Bell team members also raised nearly $300,000 for the annual Walk So Kids Can Talk in support of Kids Help Phone and its Feel Out Loud movement to expand access to its e-mental health service across Canada. Bell's commitment to ESG standards through sustainable investments and diversity and equity initiatives ensured another strong ranking on the Corporate Knights Best 50 Corporate Citizens list.

BCE results

"In what has now become a hallmark for BCE, we delivered another quarter of consistent and focused execution that yielded strong consolidated revenue growth of 3.5 per cent and 2.1-per-cent-higher adjusted EBITDA [earnings before interest, taxes, depreciation and amortization]. This performance was driven by a healthy 7-per-cent increase in residential Internet revenue and 4.4-per-cent-higher wireless service revenue, fuelled on the back of some of the best Q2 mobile phone and retail Internet subscriber net activations we have seen in well over 15 years. This was achieved despite ongoing media advertising headwinds, increased competitive intensity and a B2B [business-to-business] sector that has not yet fully recovered from the global supply chain disruptions experienced over the past several years," said Glen LeBlanc, chief financial officer of BCE and Bell Canada.

Mr. LeBlanc added: "With stronger projected adjusted EBITDA and free cash flow trajectories in the second half of the year that are underpinned by operating momentum across the business, game-changing broadband network investments, disciplined cost management and proven execution in a competitive marketplace, I am reconfirming all our guidance targets for 2023."

Highlights:

• BCE operating revenue increased 3.5 per cent over Q2 2022 to $6,066-million. This was the result of 1.3-per-cent-higher service revenue of $5,303-million and a 21.5-per-cent increase in product revenue to $763-million, driven by growth at Bell communication and technology services (Bell CTS), partly offset by a year-over-year decline at Bell Media.
• Net earnings decreased 39.3 per cent to $397-million and net earnings attributable to common shareholders totalled $329-million, or 37 cents per share, down 44.8 per cent and 43.9 per cent, respectively. The year-over-year declines were due to higher other expense that included a $377-million non-cash loss on BCE's share of an obligation to repurchase at fair value the minority interest in one of its joint venture equity investments, higher interest expense, higher severance, acquisition and other costs related mainly to a work force reduction initiative, increased depreciation and amortization expense, and higher income taxes. These factors were partly offset by higher adjusted EBITDA, lower impairment of assets as the company recorded a charge in Q2 2022 related to office spaces it ceased using as part of its real estate optimization strategy due to Bell's hybrid work policy, and a higher net return on postemployment benefit plans. Adjusted net earnings were down 8.7 per cent to $722-million, resulting in a 9.2-per-cent decrease in adjusted earnings per share to 79 cents.
• Adjusted EBITDA grew 2.1 per cent to $2,645-million, reflecting a 2.8-per-cent increase at Bell CTS, partly offset by a 5.3-per-cent decrease at Bell Media. BCE's consolidated adjusted EBITDA margin declined 0.6 percentage points to 43.6 per cent from 44.2 per cent in Q2 2022, due mainly to a higher year-over-year mix of low-margin product sales.
• BCE capital expenditures were $1,307-million, up 7.2 per cent from $1,219-million last year, corresponding to a capital intensity of 21.5 per cent, compared with 20.8 per cent in Q2 2022. The year-over-year increase in capital spending was due to the timing of planned investment to further expand Bell's pure fibre network and higher year-over-year spending to connect more homes and businesses to Bell Internet services.
• BCE cash flows from operating activities were $2,365-million, down 8.9 per cent from Q2 2022, reflecting lower cash from working capital attributable largely to the timing of supplier payments, higher interest paid and higher income taxes, partly offset by higher adjusted EBITDA and lower contributions to postemployment benefit plans.
• Free cash flow was $1,016-million, down 23.8 per cent from $1,333-million in Q2 2022, due to decreased cash flows from operating activities, excluding acquisition and other costs paid, and higher capital expenditures.

Operating results by segment

Bell CTS:

• Total Bell CTS operating revenue increased 4.3 per cent to $5,354-million, driven by both higher service and product revenue.
• Service revenue grew 1.9 per cent to $4,591-million, mainly the result of continued strong mobile phone, mobile connected device and retail Internet subscriber base growth, higher wireless roaming revenue, as well as the financial contribution from acquisitions made over the past year, including Distributel and FX Innovation. This was partly offset by continuing declines in legacy voice, data and satellite TV services, greater acquisition, retention and bundle discounts on residential home services, as well as lower sales of international long-distance minutes to wholesale customers.
• Product revenue was up 21.5 per cent to $763-million, driven by higher telecom data equipment sales to large-enterprise customers compared with more significant global supply chain disruptions experienced last year, as well as a greater sales mix of higher-value mobile phones.
• Bell CTS adjusted EBITDA was up 2.8 per cent to $2,431-million. This was driven by the flow-through of higher year-over-year service revenue, despite a 5.5-per-cent increase in operating costs that contributed to a 0.6-percentage-point margin decline to 45.4 per cent from 46.0 per cent last year. The increase in operating costs this quarter was mainly the result of higher cost of goods sold from increased product sales, and the acquisitions of Distributel, FX Innovation and other small companies.
• Postpaid mobile phone net subscriber11 activations totalled 111,282, up 33.8 per cent from 83,197 in Q2 2022, representing Bell's best Q2 result in 18 years. The increase was driven by 30.4-per-cent-higher gross subscriber activations, reflecting immigration growth, continued 5G and multiproduct bundling momentum, increased penetration of second-line customer subscriptions and effective promotions. This was partly offset by an increase in mobile phone postpaid customer churn to 0.94 per cent from 0.75 per cent in Q2 2022, reflecting greater overall market activity and promotional offer intensity compared with last year.
• Bell's prepaid mobile phone customer net subscriber activations decreased to 14,257 from 27,564 in Q2 2022, despite a 4.4-per-cent increase in gross activations, due to higher customer churn, which increased to 4.68 per cent from 4.41 per cent last year. The year-over-year increase in churn was attributable to more customer deactivations due in part to attractive promotional offers on postpaid discount brands.
• Bell's mobile phone customer base totalled 10,028,031 at the end of Q2 2023, a 4.4-per-cent increase over last year, comprising 9,151,229 postpaid subscribers, up 4.6 per cent, and 876,802 prepaid customers, up 2.6 per cent.
• Mobile phone blended ARPU (average revenue per user) was essentially unchanged at $59.16, compared with $59.17 in Q2 2022.
• Mobile connected device net activations totalled 79,537, compared with a net loss of 344 in Q2 2022. The year-over-year increase was driven by stronger customer demand for Bell IoT (Internet of things) services, including business solutions and connected car subscriptions, and fewer data device deactivations. At the end of Q2, mobile connected device subscribers totalled 2,589,520, a 12.7-per-cent increase over last year.
• Bell added 24,934 net new retail Internet subscribers, up 10.2 per cent from 22,620 in Q2 2022, driven by the continuing expansion of Bell's fibre footprint and increased customer penetration of bundled service offerings. This was partly offset by higher customer deactivations in Bell's copper service areas attributable to aggressive promotional offers by competitors offering cable, fixed-wireless and satellite Internet services. Within Bell's all-fibre footprint, retail Internet net activations were 52,148, 38.2 per cent higher than Q2 2022. Retail Internet subscribers totalled 4,338,511 at the end of Q2, a 9.1-per-cent increase from last year, which included 35,080 customers gained from small acquisitions made in the quarter.
• Bell TV added 11,506 net new retail IPTV subscribers, up from 3,838 in Q2 2022, driven by higher customer activations from greater Internet pull-through and effective promotions. At the end of Q2, Bell served 2,010,829 retail IPTV subscribers, a 5.4-per-cent increase over last year, which included 243 customers gained from small acquisitions made in the quarter.
• Retail satellite TV net subscriber losses were 25,910, up from 15,365 in Q2 2022, due to fewer gross activations and higher customer churn driven by increased competitor promotional offer intensity. Bell's retail satellite TV customer base totalled 712,559 at the end of Q2, down 12.7 per cent from last year.
• Retail residential NAS (network-attached storage) net losses improved by 5.9 per cent to 49,608, reflecting Bell's success in driving higher gross activations through bundled service offerings. Bell's retail residential NAS customer base totalled 2,101,740 at the end of Q2, down 4.8 per cent from last year, which included 7,458 customers gained from small acquisitions made in the quarter.

Bell Media:

• Media operating revenue decreased 1.9 per cent to $805-million as a result of lower year-over-year advertising revenue, partly offset by higher subscriber revenue.
• Advertising revenue was down 9.0 per cent, as advertiser demand and spending across all traditional media platforms remained soft due to unfavourable macroeconomic conditions. This was partly offset by strong growth in digital advertising.
• Subscriber revenue increased 3.9 per cent, driven mainly by Crave and sports direct-to-consumer streaming growth.
• Total digital revenues grew 20 per cent, the result of continued Crave and sports streaming direct-to-consumer growth and increased advertising bookings from Bell Media's strategic audience management TV media sales tool. Total Crave subscriptions increased 5 per cent from last year to approximately 3.2 million customers, which included a 27-per-cent increase in direct-to-consumer streaming subscribers.
• Adjusted EBITDA was down 5.3 per cent to $214-million, yielding a 0.9-percentage-point margin decline to 26.6 per cent, as a result of lower year-over-year operating revenue. Despite contractual increases for premium content, operating costs improved 0.7 per cent, due to the normalization of hockey schedules in 2023 and cessation of CRTC (Canadian Radio-television and Telecommunications Commission) Part II fees in April, 2023.
• CTV remained Canada's most-watched English-language conventional network for a 22nd consecutive year, leading in daytime, prime time and late night with total viewers and in all key demographics for the 2022/2023 season. Reaching over 15 million Canadians on average weekly, CTV's lead over its closest competitor in the spring broadcast season was approximately 30 per cent in prime time among all viewers and in the key A25-54 demographic.
• Bell Media was ranked No. 1 over all and in full-day viewership in the French-language entertainment and pay specialty market among adults aged 25 to 54 in Q2. RDS remained the top-ranked French-language non-news specialty channel, while full-day audiences among adults aged 25 to 54 for Noovo increased 17 per cent in Q2 as the French-language conventional TV market declined 10 per cent over all, driving a five-point market share gain.

Common share dividend

BCE has declared a quarterly dividend of 96.75 cents per common share, payable on Oct. 16, 2023, to shareholders of record at the close of business on Sept. 15, 2023.

Outlook for 2023

BCE has confirmed its financial guidance targets for 2023, as provided on Feb. 2, 2023 (see an attached table).

For 2023, BCE expects lower tax adjustments, higher depreciation and amortization expense and increased interest expense to drive lower adjusted earnings per share compared with 2022. For 2023, BCE expects growth in adjusted EBITDA, a reduction in contributions to postemployment benefit plans and payments under other postemployment benefit plans, and lower capital expenditures will drive higher free cash flow.

Conference call with financial analysts

BCE will hold a conference call for financial analysts to discuss Q2 2023 results on Thursday, Aug. 3, 2023, at 8 a.m. ET. Media are welcome to participate on a listen-only basis. To participate, please dial 1-800-806-5484 (toll-free) or 416-340-2217 and enter passcode 5876835 followed by the pound key. A replay will be available until midnight on Aug. 31, 2023, by dialling 1-800-408-3053 or 905-694-9451 and entering passcode 4674564 followed by the pound key. A live audio webcast of the conference call will be available on BCE's website.

About BCE Inc.

BCE is Canada's largest communications company, providing advanced Bell broadband wireless, Internet, TV, media and business communication services.

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