TELUS Corporation today released its unaudited results for the
first quarter of 2020. For the quarter, consolidated operating
revenue of $3.7 billion increased by 5.4 per cent over the same
period a year ago. Earnings before interest, income taxes,
depreciation and amortization (EBITDA) increased by 2.2 per cent to
$1.4 billion and when excluding restructuring and other costs and
non-recurring losses and equity losses related to real estate joint
ventures, Adjusted EBITDA was up 4.2 per cent. This growth reflects
growth in wireline data service margins, an increased EBITDA
contribution from our TELUS International customer care and
business services, including in part increased margin contribution
from the acquisition of Competence Call Center (CCC), and health
businesses, as well as higher wireless network revenue driven by a
growing subscriber base. Our quarterly revenue and EBITDA growth
rates were partly offset by the impacts of the COVID-19 pandemic,
mainly due to the travel restrictions and border closures mandated
by various governments as well as proactive steps we elected to
take to keep our customers and employees safe during this health
crisis.
For the quarter, net income of $353 million decreased by 19 per
cent over the same period last year and Basic earnings per share
(EPS) of $0.28 decreased by 22 per cent as EBITDA growth was more
than offset by higher depreciation and amortization due to growth
in our capital assets from recent acquisitions, including CCC and
ADT Canada, as well as ongoing investments to support the expansion
of our broadband footprint, including our generational investment
to connect homes and businesses to TELUS PureFibre and enhanced LTE
technology coverage. Higher shares outstanding over the prior year,
primarily reflecting additional shares issued from our equity
offering in February 2020, also contributed to the decline. When
excluding the effects of restructuring and other costs, income
tax-related adjustments, and non-recurring losses and equity losses
related to real estate joint ventures, adjusted net income of $400
million decreased by 12 per cent compared to the prior year, while
adjusted basic EPS of $0.32 was down 16 per cent. Free cash flow of
$545 million increased by $392 million over the same period a year
ago, resulting primarily from decreased income tax payments, lower
device subsidy leasing amounts, lower restructuring and other costs
disbursements and higher EBITDA. Free cash flow before income taxes
increased by 33 per cent to $669 million.
“The COVID-19 pandemic has had a profound impact on the
communities where we live, work and serve,” said Darren Entwistle,
President and CEO. “Our team is working diligently, and with their
characteristic grit, collaboration and innovation to ensure all
Canadians stay connected at a time when the human connection has
never been more important. We are simultaneously ensuring we meet
the needs of all of our stakeholders as we begin to focus our
collective efforts on modernizing our mode of operations as a
necessary outcome of the global health emergency.”
Mr. Entwistle continued, “TELUS once again achieved strong
financial and operational results in the first quarter,
characterized by our hallmark of meaningful customer growth,
together with enhanced profitability, despite the challenging
circumstances we faced in the month of March. Our robust and
consistent performance over the longer-term, coupled with our
strong financial position, positions us well to navigate the
uncertainty caused by the global COVID-19 pandemic, as well as for
anticipated post-pandemic economic challenges and market
opportunities. Indeed, as we have responded to this unprecedented
global health emergency, our focus has been on taking care of our
team members, our customers and communities.”
“We have implemented measures to ensure the safety of our team
members and keep them productive and importantly, employed,” Mr.
Entwistle added. “Notably, over 95 per cent of our domestic team
members have been transitioned to effectively work from home, while
team members directly impacted by store closures have been
redeployed into other areas of the business requiring additional
support. In the stores that remain open to provide essential
services, we have enabled a touchless in-store experience and
provided the highest level of sanitation and personal protective
equipment, ensuring every possible measure is taken to protect our
team and customers.”
“I continue to be inspired by the TELUS team as they work around
the clock, often under exceptionally challenging circumstances, to
keep Canadians connected. Notably, we are leveraging and
significantly enhancing our strong digital capabilities to
safeguard team member and customer health and to support customer
transactions to help offset the impact of store closures. To help
alleviate the financial hardship this pandemic has placed on many
of our customers, we implemented a number of initiatives. For
consumers, we are deferring planned pricing increases, extending
promotions and offering flexible payment arrangements. We are
similarly offering a number of solutions and promotions to help our
business customers support their own customers, virtually,” Mr.
Entwistle commented.
“With global physical distancing measures in place, our
world-leading broadband services have never before been more
essential, as citizens are increasingly relying on this
connectivity to stay in touch with loved ones, access essential
health and safety information, as well as work, learn, socialize
and entertain more at home. Our technology teams continue to rise
above and focus relentlessly on maintaining robust reliability and
world-leading performance across all of our critical services,
while proactively managing record-high traffic levels, most notably
across voice and video calling, messaging, TV viewership and home
Wi-Fi. By way of illustration, during these peak periods, we
experienced traffic rates that were four times those that occurred
on Mother’s Day in 2019 – traditionally one of our highest traffic
days of the year. Our team’s efforts to sustain our networks
during the pandemic is tantamount to supporting Super Bowl-level
traffic, every day. Reflecting our significant efforts to ensure
network excellence during this critical time, Opensignal analysed
4G download speeds globally on a weekly basis from January through
the end of March 2020. The report shows that not only are Canada’s
networks continuing to operate very well through the COVID-19
crisis, Canada is the fastest across 45 countries tested for 4G
download speeds for mobile experience. By contrast, countries like
Australia and the U.K. were challenged to support the added traffic
and pressure, at times experiencing download speeds up to 15 per
cent and 30 per cent slower, respectively. Complementing this
acknowledgement, TELUS was recognized in Tutela’s Canada State of
Mobile Networks Report April 2020 for its global network
leadership, winning three of the national awards for Core
Consistent Quality, Download Throughput, and Latency, and tying for
Excellent Consistent Quality. Furthermore, J.D. Power recognized
TELUS as having the top wireless network in Canada, marking the
sixth consecutive year that TELUS has earned a J.D. Power Award for
network quality. This ranking builds on the recognition TELUS has
also consistently earned from PCMag and Ookla, in addition to
Opensignal, Tutela and J.D. Power, for three or more years.
Moreover, TELUS wireline broadband network has performed
exceedingly well, in stark contrast to networks in many other
countries around the globe where governments have had to step in
and manage traffic.”
Mr. Entwistle added, “We continue to expand our innovative
health technology and services across the country, and our virtual
care offerings have never been more important to Canadians. With
the introduction of virtual fee codes by all provincial governments
to enable remote patient care, TELUS Health launched video visit
functionality integrated with TELUS electronic medical records
(EMR), enabling 26,000 Canadian doctors using a TELUS EMR solution
to conduct virtual care with their patients. Canadians continue to
leverage our one-on-one virtual health solutions, with Akira by
TELUS Health increasing the productivity of our clinical staff by
utilizing a combination of asynchronous text messaging and secure
video for convenient, on-demand access for patients.
Correspondingly, we have experienced a tenfold surge in demand for
our Babylon by TELUS Health virtual care services and doctor
appointments, now available in B.C., Alberta and Ontario, with
other provinces launching soon. Moreover, we continue to see
tremendous adoption of our Home Health Monitoring (HHM) solutions,
with the COVID-19 protocol integrated in TELUS Health HHM solution,
and implemented by the B.C. Ministry of Health where hundreds of
patients are being monitored.”
Mr. Entwistle continued, “Throughout this emergency, and in
support of our Give Where We Live philosophy, we and the TELUS
Friendly Future Foundation (TFFF) continue to provide exceptional
support for our communities. The TFFF has committed $10
million to help build public healthcare capacity through the crisis
and beyond. This funding is in addition to the $1.5 million donated
through 131 TFFF community board grants in the first quarter alone.
In addition, we are providing support for our remote and Indigenous
communities, where they do not have the resources needed to manage
this crisis. Moreover, we donated $500,000 to the VGH and UBC
Hospital Foundation, in support of its efforts to create
therapeutic antiviral treatments for COVID-19.”
“We remain committed to our communities, ensuring that our most
vulnerable citizens and young Canadians are also able to stay
connected to what matters most. To that end, we are providing two
months of free service to all low-income families enrolled in our
Internet for Good program to help them manage the financial
challenges associated with COVID-19. Furthermore, we extended our
Internet for Good offer to families in B.C. and Alberta, with
school-aged children from kindergarten to grade 12, ensuring every
student can stay connected to exciting learning opportunities from
their homes, including the Microsoft Family learning centre,
comprised of a collection of free, curated educational resources
from around the world. In addition, working in partnership with
Apple, we are providing iPads to school boards in B.C., Alberta,
and Quebec to support continuous virtual learning with free LTE
connectivity until June 30. It is our hope that together, these
measures will make a meaningful impact and for all Canadians.
Moreover, in the first quarter, we launched seven new TELUS mobile
health clinics across Canada, bringing our total to 11 clinics.
Importantly, six of these mobile health clinics have been
repurposed, in collaboration with health authorities, to increase
the COVID-19 pandemic response capacities.”
“To demonstrate our gratitude for the tremendous courage and
selflessness of Canadian frontline healthcare workers, we expanded
our Mobility for Good program, providing a credit for two months of
wireless service to thousands of hospital workers at select
healthcare facilities in the areas across the country that have
been significantly impacted by COVID-19. Furthermore, we are
donating more than 10,000 free mobile devices and free rate plans,
valued at more than $5 million, to hundreds of organizations across
the country. These connections are giving hospitalized COVID-19
patients the ability to virtually connect with loved ones, while
also enabling isolated seniors, and low-income, homeless and
at-risk individuals with a much-needed lifeline to families, health
practitioners and vital social support services during this complex
time.”
“Our team’s unwavering commitment to improving outcomes for our
fellow citizens, in concert with our leading financial and
operating results and superior asset mix, continue to define TELUS’
leadership in social capitalism. Time and again, our team
demonstrates that when things are at their worst, you can rely on
TELUS to be at its best. Indeed, the incredible innovations we are
driving in response to the current crisis, and the tuition value
gleaned over the past several months, will help us evolve our
operating model and further enhance the resiliency of our
organization, ensuring we are strongly positioned for the new
normal on the other side of this pandemic,” concluded Mr.
Entwistle.
Doug French, Executive Vice-president and Chief Financial
Officer, said, “I am inspired by the TELUS team’s resiliency and
its commitment to delivering exceptional and innovative customer
experiences during these uncertain times. Over the last several
weeks, our team has made incredible strides as we have responded to
the COVID-19 pandemic, balancing the interests of our customers and
communities, while adapting our business to the constantly changing
situation with a focus on operational execution and cash flow.”
“We entered this global health emergency in a position of
strength. Despite the fact that our first quarter results for 2020
were impacted by COVID-19 challenges, we delivered solid financial
results, strong subscriber growth, leading customer churn and free
cash flow more than three times higher on a year-over-year basis.
We have a strong balance sheet, further supported by our successful
$1.5 billion equity offering in February, with available liquidity
of over $3 billion and no debt maturities until 2021. This puts us
in an enviable position to navigate this period of uncertainty, and
to continue to grow the business and prosper in the post-COVID-19
environment”, added Mr. French.
“In light of the evolving nature and uncertainty of the global
COVID-19 health crisis, we are presently unable to predict the full
range of positive and negative impacts of the crisis on our
business and our previously issued guidance. As a result, we have
taken the prudent decision to withdraw our existing annual
financial guidance for 2020. We intend to provide an update on our
overall assumptions and guidance when we report our second quarter
results at the end of July. While we manage through this crisis, we
are continuing to drive near-term efficiencies. For example, we
have identified more than $250 million of cost reduction and margin
accretion initiatives to date. This will allow us to mitigate the
transient impacts related to the current crisis, manage through
various stakeholder initiatives in response to the COVID-19
pandemic, and remain focused on driving free cash flow toward our
original expectation for 2020. We will look to re-allocate capital
from lower anticipated success-based investments, in certain areas,
towards network enhancements to further elevate our leadership
position, including advancing our world-leading broadband network
to drive both near and longer-term revenue and operating efficiency
benefits, as well as sustainable cash flow and future dividend
growth.”
“Based on strong free cash flow growth, we have declared a
quarterly dividend of $0.29125 cents, which remains unchanged from
our April payment, and represents a 3.6 per cent increase over the
same period last year. We remain committed to balancing the
interests of our many stakeholders and, against the backdrop of the
myriad of initiatives we have taken in response to the global
COVID-19 health crisis, we have made the decision to defer the
dividend increase that would otherwise have been made this quarter
as part of our ongoing multi-year dividend growth program. We
remain confident in the long-term outlook for our business and the
significant opportunities in front of us to further elevate the
TELUS brand and accelerate our growth strategy, and we are hopeful
that conditions will permit us to meet or exceed our targeted
dividend increase when we report our third quarter results in
November,” concluded Mr. French.
COVID-19 updateOn March 11 2020, the World
Health Organization characterized the outbreak of COVID-19 as a
pandemic and by the end of March 2020, each Canadian province and
territory had either declared a state of emergency or a public
health emergency. As the pandemic continues to significantly impact
public health and global economies, including Canada’s, we are
leveraging our world-leading technology and solutions to support
global efforts to reduce the risk of transmission and to keep
Canadians connected, entertained and healthy.
While the nature of the pandemic and predictions relating to its
duration and the appropriate response are continuously changing, we
remain focused on our customers first priority, the welfare of our
team and our fiduciary obligations to our investors, underpinned by
our commitment to our social purpose, and guided by our Medical
Advisory Council, a team of medical experts. Below are some
highlights of the steps we have taken to ensure the safety and
well-being of our customers, our team members, and our
communities.
For our customers
- Waiving certain customer fees including fees for internet data
usage in excess of contracted maximums, as well as wireless roaming
fees for customers who remain outside of Canada to ensure they are
able to stay connected to the people and information they
need.
- Expanding our Optik TV® and Pik TV® libraries for customers via
free preview channels, including free previews of educational
content for youth in partnership with Microsoft, and content
spanning health and wellness as well as technology “how to”
videos
- Offering TELUS Online Security Standard, our online security
package, free for one month.
- Supporting small businesses in their transition to support
their own customers virtually by providing three-months of free
services through our TELUS Business Solutions.
- Demonstrating our further support for our small business
customers and their shuttered stores and offices by providing,
through TELUS Secure Business, our security solution for
businesses, which provides a $1,000 equipment credit and three
months of free service.
- Assisting governments across the country through our TELUS
Enterprise Solutions and Business Customer Experience teams to
provide support in the face of rapidly increasing demand in the
healthcare sector and in respect of call centre capabilities to
support health information lines and employment insurance-related
inquiries.
- Providing one-on-one virtual care health solutions including
Akira by TELUS Health and Babylon by TELUS Health, home health
monitoring as well as enabling Canadians to access 24/7 emergency
support through our LivingWell Companion and DirectAlert by TELUS
Health.
- Enabling Canadian doctors on a core TELUS electronic medical
record solution to conduct virtual visits with their patients.
- Implementing a number of customer measures to assist our
consumer and small business customers who have been hurt
financially by the pandemic. These measures include offering
flexible payment options, deferring all planned pricing increases,
extending promotional periods, and delaying service suspensions and
cancellations for our customers who are in collections.
For our team members
- Leveraging our Work Styles program to enable approximately 95
per cent of our domestic team members to work from home, while
approximately 85 per cent of our TELUS International team have been
enabled to work to support customers from home and in other
modified work locations.
- Enabling touchless customer experiences at our essential
service locations and practising enhanced safety protocols,
informed by advice from our TELUS Medical Advisory Council.
- Redeploying front line team members, including those directly
impacted by store closures, into other areas of the business
requiring additional support.
- Launching our All Connected During COVID-19 hub on our
intranet, providing team members with access to important learning,
work-from-home best practices and the latest information and
support for their well-being, as well as a forum to share photos
and experiences.
For our
communities
- Offering financial support and free devices to vulnerable
citizens and to those whose schools have closed in B.C, Alberta and
Quebec.
- Donating over 10,000 devices and tablets, many with $0 rate
plans, through our Mobility for Good™ program to over 225
not-for-profit organizations, enabling vital connections for those
who need them the most, including COVID-19 patients, isolated
seniors and vulnerable Canadians.
- Expanding our Mobility for Good™ program to hospital workers,
providing a credit for two months of wireless service to frontline
healthcare workers at select hospitals in the areas across the
country that have been significantly impacted by COVID-19.
- Providing two months of free service to all families enrolled
in our Internet for Good™ program.
- Expanding our Internet for Good program to schools in Alberta
and B.C. to ensure all kindergarten to grade 12 students get
high-speed internet access to continue learning from safety of
their home during the COVID-19 pandemic.
- Announcing the arm’s-length TELUS Friendly Future Foundation’s
$10 million commitment to help build public healthcare capacity
through the COVID-19 crisis and beyond, including funding for new
technology and equipment, such as ventilators, as well as increased
support for food banks, elderly Canadians and mental health
programs
- Donating $500,000 to a research team from the Vancouver General
Hospital and University of British Columbia Hospital Foundation to
assist in the search for therapeutic antiviral treatments for
COVID-19 patients.
- Repurposing six of our Mobile Health Clinics (MHC) to support
response efforts, with our clinics operating as testing centres and
assessment clinics, acting as an Emergency Isolation and
Quarantine shelters in Edmonton, and in Victoria our MHC is helping
with street wellness checks and sharing health resources and
information.
Update to financial guidanceDuring these
unprecedented times, we have experienced incremental demand for
some of our products and services due to physical distancing being
imposed by varying degrees worldwide and supported through our
efforts to protect our team members and customers. Our wireless and
wireline broadband network technology is an essential services,
with Canadians increasingly relying on this connectivity to stay
connected, informed and entertained at home. While physical
distancing has affected our normal mode of operations, and thus is
expected to negatively affect revenue growth of certain other
products and services, we are adapting our go-to-market strategy
and implementing innovative solutions to continue supporting our
customers, such as touchless in-store experiences, virtual
installations and repairs, and leveraging our digital footprint as
our primary sales channel.
Due to the wide range of possible outcomes of the COVID-19
pandemic and the uncertainty with regards to the length of the
pandemic and measures in place to limit its spread and
transmission, the impact on our business cannot be accurately
forecasted as of the date of this news release. Consequently, our
operations and financial results could be materially different than
predicted in our previously issued guidance and we have decided to
withdraw our existing 2020 consolidated financial guidance. We
intend to provide an update on our overall assumptions and guidance
when we report our second quarter 2020 results at the end of
July.
For further discussion on the effect of the COVID-19 pandemic on
the environment in which we operate, refer to section 1.2 in our
first quarter 2020 Management’s discussion and analysis.
Summary of first quarter 2020 operating
highlightsIn wireless, external wireless operating
revenues decreased 2.1 per cent as network revenue growth of 1.3
per cent was offset by a decline in equipment and other service
revenues of 12 per cent. Network revenue growth reflects a 5.6 per
cent growth in our subscriber base over the past 12 months, offset
by a 1.2 per cent decline to monthly mobile phone ARPU. The decline
in mobile phone ARPU was partly driven by the impacts of COVID-19
pandemic in March, such as lower roaming revenue from changing
customer behaviour related to travel restrictions and our decision
to temporarily waive roaming charges to aid travelling customers
during the pandemic. The reduction in equipment and other service
revenues reflects lower contracted volumes, which was partially due
to impacts of the COVID-19 pandemic in March, as customers reduced
their general shopping habits and we closed 90 per cent of our
retail stores for an undetermined period of time.
In wireline, external operating revenues increased by 14 per
cent due to data services revenue growth of 18 per cent. Data
services revenue growth was driven by a combination of higher
revenues from our diverse portfolio of solutions, including our
TELUS International customer care and business services which
included contribution from our acquisition of CCC, growth in
business volumes from both expanded services and customer growth,
partly offset by temporary disruptions due to government-mandated
site closures in response to the COVID-19 pandemic. Increased
revenues from home and business smart technology (including
security) which included contribution from our acquisition of ADT
Security Services Canada, Inc. (ADT Canada), internet and third
wave data services, and TV also contributed to growth. This growth
was partly offset by impacts resulting from the COVID-19 pandemic,
including a decline in health revenue due to the temporary closure
of our Medisys Health Group (Medisys) and Copeman Healthcare centre
(Copeman) clinics for all non-essential services, as well as our
decision to waive home internet overage charges.
In the quarter, we added 119,000 new wireless, internet, TV and
security customers, up 14,000 over the same quarter a year ago. The
net additions included 21,000 mobile phones, 49,000 mobile
connected devices, as well as 26,000 internet, 8,000 TV and 15,000
security customers. Our total wireless subscriber base of more than
10 million is up 5.6 per cent over the last twelve months,
reflecting a 2.6 per cent increase in our mobile phones subscriber
base to 8.7 million and a 25 per cent increase to our mobile
connected devices subscriber base to nearly 1.6 million.
Additionally, our internet connections are up 5.9 per cent over the
last twelve months, surpassing 2 million customers, our TV
subscriber base of 1.2 million is higher by 5.2 per cent and our
security customer base expanded to 623,000. As a by-product of the
COVID-19 pandemic and measures put into place to contain the risk
of transmission, subscriber growth in the final weeks of March was
lower as customers reduced their usual shopping habits and a
significant number of physical sales channels were closed,
resulting in a decrease in both gross additions as well as customer
churn. Meanwhile, physical distancing also impacted our ability to
enter homes and businesses to complete installations, however, we
very quickly adapted to more digital and non-touch installation
processes, giving our customers easier and safe ways to continue to
transact with us.
Consolidated capital expenditures of $665 million increased by
2.9 per cent over the same period a year ago, partly due to
investments to enhance network capacity, to support increased voice
traffic and to ensure that Canadians can remain connected during
the COVID-19 pandemic. Additionally, capital expenditures included
advancing wireless speeds and coverage, including pre-positioning
for 5G, continuing to connect additional homes and businesses
directly to our fibre-optic technology, and supporting improvements
to our systems’ reliability, efficiency, and effectiveness. At the
end of the quarter, our TELUS PureFibre network covered
approximately 2.28 million premises, or approximately 71 per cent
of our high-speed broadband footprint, reflecting an increase of
approximately 340,000 fibre premises over the last twelve
months.
Consolidated Financial Highlights
C$
millions, except footnotes and unless noted otherwise |
Three months ended March 31 |
Per cent |
|
(unaudited) |
2020 |
2019 |
change |
|
Operating revenues |
3,694 |
3,506 |
5.4 |
|
Operating expenses before
depreciation and amortization |
2,285 |
2,127 |
7.4 |
|
EBITDA(1) |
1,409 |
1,379 |
2.2 |
|
Adjusted EBITDA(1)(2) |
1,475 |
1,415 |
4.2 |
|
Net income |
353 |
437 |
(19.2) |
|
Adjusted net income(1) |
400 |
453 |
(11.7) |
|
Net income attributable to common
shares |
350 |
428 |
(18.2) |
|
Basic EPS(3) ($) |
0.28 |
0.36 |
(22.2) |
|
Adjusted basic EPS(1)(3) ($) |
0.32 |
0.38 |
(15.8) |
|
Capital expenditures(4) |
665 |
646 |
2.9 |
|
Free cash flow before income
taxes(1) |
669 |
504 |
32.7 |
|
Free cash flow(1) |
545 |
153 |
n/m |
|
Total subscriber connections(5)
(thousands) |
15,270 |
14,057 |
8.6 |
|
n/m – not meaningful |
(1) |
EBITDA, Adjusted net income, adjusted basic EPS and Free cash flow
are non-GAAP measures and do not have any standardized meaning
prescribed by IFRS-IASB. For further definitions and explanations
of these measures, see ‘Non-GAAP and other financial measures’ in
this news release. |
(2) |
Adjusted EBITDA for the first quarters of 2020 and 2019 excludes
restructuring and other costs of $60 million and $36 million
respectively and non-recurring losses and equity losses related to
real estate joint ventures of $6 million in the first quarter of
2020. |
(3) |
On March 17, 2020, TELUS shareholders received one additional share
for each share owned on the record date of March 13, 2020. All
information pertaining to shares outstanding and per-share amounts
in this news release for periods before March 17, 2020, reflects
retrospective treatment of the two-for-one share split |
(4) |
Capital expenditures include assets purchased, excluding
right-of-use lease assets, but not yet paid for, and consequently
differ from Cash payments for capital assets, excluding spectrum
licences, as reported in the interim consolidated financial
statements. Refer to Note 31 of the interim consolidated financial
statements for further information. |
(5) |
The sum of active mobile phone subscribers, mobile connected device
subscribers, internet subscribers, residential voice subscribers,
TV subscribers and security subscribers, measured at the end of the
respective periods based on information in billing and other source
systems. Effective for the third quarter of 2019, with
retrospective application to the launch of TELUS-branded security
services at the beginning of the third quarter of 2018, we have
added security subscriber connections to our total subscriber
connections. December 31, 2019 security subscriber connections have
been increased to include approximately 490,000 subscribers related
to our acquisition ADT Security Services Canada, Inc. (ADT Canada)
acquired on November 5, 2019. |
First Quarter 2020 Operating HighlightsAs noted
in Section 1.2 of our first quarter 2020 Management’s discussion
and analysis, COVID-19 was characterized as a pandemic in March
2020. The nature of the pandemic and the uncertainty of its
magnitude, length and the time to recovery are not currently able
to be estimated. Therefore, results described below may not be
indicative of trends effective from the first quarter of 2020
onwards, as the COVID-19 pandemic prevents us and our customers
from operating in the normal course of business in certain areas
while we continue to adjust our mode of operations to continue
delivering on our customers first priorities and social
purpose.
TELUS wireless
- External wireless operating revenue decreased by $40 million or
2.1 per cent, as network revenue growth of 1.3 per cent was offset
by a 12 per cent decrease to equipment and other service
revenues.
- Network revenue increased by $19 million or 1.3 per cent,
reflecting growth of 5.6 per cent in the subscriber base over the
last 12 months, partly offset by declining mobile phone ARPU, as
discussed below.
- Equipment and other service revenues decreased by $53 million
or 12 per cent, reflecting lower contracted volumes, including the
impact of the COVID-19 pandemic, as customers reduced their general
shopping habits and as a significant number of physical sales
channels were closed in the final weeks of March.
- Mobile phone ABPU was $72.30, reflecting an increase of 0.2 per
cent. This increase reflects growth resulting from our combined
TELUS Easy Payment device financing, Peace of Mind endless data
plans and TELUS Family Discount offerings, which we introduced in
the third quarter of 2019, with customers selecting plans with
endless data or larger data buckets and higher-value smartphones in
the sales mix. This growth was partly offset by the impacts of the
COVID-19 pandemic in March, including lower roaming revenue from
changing customer behaviour related to travel restrictions and our
decision to temporarily waive roaming charges to aid travelling
customers during the pandemic.
- Mobile phone ARPU was $58.60 in the first quarter of 2020, a
decrease of $0.73 or 1.2 per cent. This decline was partly driven
by the impacts of the COVID-19 pandemic in March detailed above.
Mobile phone ARPU continues to be impacted by the continued trend
of declining chargeable usage and the impact of the competitive
environment putting pressure on base rate plan prices. These
declines more than offset the increased number of customers
selecting higher-tier plans with endless data or larger data
buckets.
- Mobile phone churn rate was 0.94 per cent as compared to 1.02
per cent in the same period a year prior, reflecting the success of
our customers first culture and our ongoing focus on delivering an
outstanding customer experience, combined with attractive new
products and services, effective retention programs, and leading
network quality. In addition, the impact from the COVID-19 pandemic
resulted in less switching activity between carriers in the last
two weeks of March, as customers reduced their general shopping
habits and as a significant number of physical sales channels were
closed during that period.
- Mobile phone gross additions were 265,000, reflecting a
decrease of 4,000. The reduced customer switching activity between
carriers and the temporary closure of certain sales channels in
March, in response to the COVID-19 pandemic, more than offset
growth in the first two and a half months of 2020 from high-value
customer additions as a result of successful promotions. In
addition, existing digital options for customers to transact with
us also gained momentum in the last two weeks of the quarter.
- Total subscriber net additions were 70,000, compared to 60,000
in the prior year. Mobile phone net additions were 21,000 in the
first quarter of 2020, an increase of 10,000, driven by lower
mobile phone churn, partly offset by lower mobile phone gross
additions, as described above. Mobile connected device net
additions of 49,000 were flat compared to the first quarter of
2019, as growth in our Internet of Things (IoT) offerings and
consumer health personal emergency response system (PERS) devices
were fully offset by a decline in tablet loading, which is a low or
negative margin product.
- EBITDA of $934 million increased by $26 million or 2.9 per
cent, while Adjusted EBITDA of $940 million increased by $23
million or 2.6 per cent over last year, reflecting higher network
revenue driven by a larger subscriber base, higher equipment
margins and savings from cost efficiency programs. This growth was
partly offset by the impacts of the COVID-19 pandemic in March,
including a reduction in roaming revenue due to global travel
restrictions as well as our decision to temporarily waive roaming
charges to aid travelling customers during the pandemic. Growth was
also partly offset by lower other operating income and higher
employee benefits expense.
TELUS wireline
- External operating revenues increased by $228 million or 14 per
cent driven by data services revenue growth of 18.5 per cent,
partly offset by a 6.7 cent decline in legacy voice services
revenues.
- Data services revenues increased by $225 million or 18.5 per
cent. This growth was driven by a combination of higher revenues
from our diverse portfolio of solutions, including our TELUS
International customer care and business services which included
contribution from our acquisition of CCC, growth in business
volumes from both expanded services and customer growth, partly
offset by temporary disruptions due to government-mandated site
closures in response to the COVID-19 pandemic. Increased revenues
from home and business smart technology (including security) which
included contribution from our acquisition of ADT Canada, internet
and third wave data services, and TV also contributed to growth.
This growth was partly offset by impacts resulting from the
COVID-19 pandemic, including a decline in health revenue due to the
temporary closure of our Medisys and Copeman clinics for all
non-essential services, as well as our decision to waive internet
overage charges. Data services revenues growth was also impacted
the ongoing decline in legacy data service revenues.
- Internet net additions of 26,000 improved by 4,000, due to
continued net new demand from consumers and businesses, partly due
to the launch of our unlimited home internet data plans and our new
TELUS Whole Home bundle service offering. During the last two weeks
of March we implemented more digital and self-install options for
our customers to continue to transact with us.
- TV net additions were 8,000, a decrease of 9,000, mainly due to
heightened competitive intensity and the changing landscape of
increased streaming services, partly offset by demand from the
launch of our TELUS Whole Home bundle.
- Security net additions of 15,000, reflecting an increase of
7,000, was driven by strong organic growth and demand from our
TELUS Whole Home bundle. Security net additions were limited by the
COVID-19-related physical distancing policies, which restricts
access to homes and businesses required to complete security
installations.
- Residential voice net losses of 13,000 increased by 2,000
compared to the same period a year ago. The residential voice
subscriber losses continue to reflect the trend of substitution by
wireless and internet-based services, partially mitigated by our
expanding fibre footprint and bundled product offerings, and our
strong retention efforts, including lower-priced offerings.
- EBITDA of $475 million increased by $4 million or 0.8 per cent,
while Adjusted EBITDA of $535 million increased by $37 million or
7.2 per cent. These increases reflect: an increased contribution
from our TELUS International customer care and business services,
including from the acquisition of CCC, expanded services for
existing customers, and customer growth; growth from our home and
business smart technology (including security); higher internet
margins; and a decrease in the provision related to written put
options in respect of non-controlling interests. These factors were
partly offset by the temporary disruption of both our TELUS
International and health businesses due to government-mandated site
and health clinic closures in response to the COVID-19 pandemic, as
well as our decision to waive home internet overage charges. EBITDA
growth was also impacted by the ongoing decline in legacy voice and
legacy data services, higher employee benefits expense and other
costs related to business acquisitions, and a decline in
contribution from our legacy business services
Dividend Declaration The TELUS Board of
Directors elected to declare a second quarter dividend of $0.29125
per share, payable on July 2, 2020, to shareholders of record
at the close of business on June 10, 2020. Given the uncertain
magnitude, duration and potential outcomes of the COVID-19
pandemic, the Board determined that it would be prudent at this
time to sustain the current dividend per share and defer any
dividend increase until the release of our third quarter 2020
results in November.
Thomas Flynn nominated for
election to the Board of DirectorsTom
Flynn has been nominated for election to the Board of Directors at
the annual meeting of shareholders to be held today, May 7, 2020.
Tom is the Chief Financial Officer of BMO Financial Group, a
position he has held since March 2011. Prior to that, he held
several leadership positions at the Bank of Montreal, including
Executive Vice President and Chief Risk Officer, Executive Vice
President Finance and Treasurer, and Head of the Financial Services
Corporate and Investment Banking Group in BMO Capital Markets. Tom
is Chair of the board of Sunnybrook Health Sciences Centre and has
served on the boards of a number of other private and public sector
organizations. He obtained his MBA and his Bachelor of Arts
(Honours) in Business Administration from the Ivey School of
Business at Western University and is a Chartered Professional
Accountant, Chartered Accountant and a Fellow of the Chartered
Professional Accountants of Ontario.
Corporate Highlights TELUS makes significant
contributions and investments in the communities where team members
live, work and serve and to the Canadian economy on behalf of
customers, shareholders and team members. These include:
- Paying, collecting and remitting a total of $530 million in
taxes in the first quarter of 2020 to federal, provincial and
municipal governments in Canada consisting of corporate income
taxes, sales taxes, property taxes, employer portion of payroll
taxes and various regulatory fees. When including spectrum
remittances, we have remitted approximately $32 billion in taxes
and spectrum.
- Since 2000, our total tax and spectrum remittances to federal,
provincial and municipal governments in Canada have totaled
approximately $32 billion.
- Investing approximately $665 million in capital expenditures
primarily in communities across Canada in the first quarter of 2019
and approximately $42 billion since 2000.
- Spending $1.9 billion in total operating expenses in the first
quarter of 2020, including goods and service purchased of
approximately $1.3 billion. Since 2000, we have spent $125 billion
and $84 billion respectively in these areas.
- Generating a total team member payroll of $734 million in the
first quarter of 2020, including payroll taxes of $56 million.
Since 2000, total team member payroll totals $48 billion.
- Returning $723 million in dividends year-to-date through two
quarterly dividend payments through April 2020 to individual
shareholders, mutual fund owners, pensioners and institutional
investors. Since 2004, we have returned over $18 billion to
shareholders through our dividend and share purchase programs,
including approximately $13 billion in dividends, representing over
$28 per share.
Access to Quarterly results
informationInterested investors, the media and others may
review this quarterly earnings news release, management’s
discussion and analysis, quarterly results slides, audio and
transcript of the investor webcast call, supplementary financial
information at telus.com/investors.
TELUS’ first quarter 2020 conference call is scheduled for
Thursday, May 7, 2020 at 1:30pm ET (10:30am
PT) and will feature a presentation followed by a question
and answer period with investment analysts. Interested parties can
access the webcast at telus.com/investors. An audio recording will
be available approximately 60 minutes after the call until June 7,
2020 at 1-855-201-2300. Please use reference number 1250830# and
access code 77377#. An archive of the webcast will also be
available at telus.com/investors and a transcript will be posted on
the website within a few business days.
Caution regarding forward-looking
statementsThis news release contains forward-looking
statements about expected events and the financial and operating
performance of TELUS Corporation. The terms TELUS, we, us and our
refer to TELUS Corporation and, where the context of the narrative
permits or requires, its subsidiaries.
Forward-looking statements include any statements that do not
refer to historical facts. They include, but are not limited to,
statements relating to our objectives and our strategies to achieve
those objectives, our outlook, updates, consolidated financial
targets, and our multi-year dividend growth program.
Forward-looking statements are typically identified by the words
assumption, goal, guidance, objective, outlook, strategy, target
and other similar expressions, or future or conditional verbs such
as aim, anticipate, believe, could, expect, intend, may, plan,
predict, seek, should, strive and will.
By their nature, forward-looking statements are subject to
inherent risks and uncertainties and are based on assumptions,
including assumptions about future economic conditions and courses
of action. These assumptions may ultimately prove to have been
inaccurate and, as a result, our actual results or events may
differ materially from our expectations expressed in or implied by
the forward-looking statements.
The assumptions for our 2020 outlook were described in
Section 9 General trends, outlook and assumptions, and
regulatory developments and proceedings of our 2019 annual
MD&A and were issued on February 13, 2020 under the basis that
we would be operating in the normal course of business. The extent
of the COVID-19 pandemic, including its interruption of the global
and Canadian economies, the governmental measures put into place to
contain the risk of transmission, and measures TELUS has been
taking to ensure the safety and well-being of our customers, our
team members, and our communities are matters we did not predict
upon issuing our assumptions for 2020. Therefore, given the
uncertain magnitude, duration and potential outcomes of the
pandemic, at this time, we are withdrawing all of our outlook and
assumptions issued on February 13, 2020.
Due to the wide range of possible outcomes of the COVID-19
pandemic and the uncertainty with regard to the length of the
pandemic and measures in place to limit its spread and
transmission, the impact on our business cannot be accurately
forecasted as of the date of this earnings release. Consequently,
our operations and financial results could be materially different
than predicted in our previously issued guidance and we have also
decided to withdraw our existing 2020 consolidated financial
guidance, which was provided in our news release dated February 13,
2020 and filed on SEDAR.
We intend to revisit and update our assumptions and provide an
update on our outlook and guidance when we issue our second quarter
2020 Management’s Discussion and Analysis for the three-month and
six-month periods ending June 30, 2020.
Risks and uncertainties that could cause actual performance or
events to differ materially from the forward-looking statements
made herein and in other TELUS filings include, but are not limited
to, the following:
- The COVID-19 pandemic including its impacts on our customers,
our team members and our communities, as well as changes resulting
from the pandemic to our business and operations including to the
demand for and supply of the products and services that we offer
and the channels through we offer them.
- Regulatory decisions and developments including changes to our
regulatory regime (the timing of announcement or implementation of
which are uncertain) or the outcomes of proceedings, cases or
inquiries relating to its application, including but not limited to
those set out in Section 9.1 Communications industry regulatory
developments and proceedings in our first quarter 2020 Management’s
discussion and analysis, such as the potential for government
intervention to further increase competition, for example, through
mandated wholesale access; the potential for additional government
intervention on pricing, including the March 2020 announcement by
the federal government targeting a 25% price reduction in wireless
plans using between two to six GB of data over a two year period by
the national wireless carriers; federal and provincial consumer
protection legislation and regulation; amendments to existing
federal legislation; potential threats to unitary federal
regulatory authority over telecommunications; potential threats to
the CRTC’s ability to enforce the Wholesale Code, which aims to
ensure the fair treatment by vertically integrated firms of rival
broadcasting distributors and programming services; regulatory
action by the Competition Bureau or other regulatory agencies;
spectrum and compliance with licences, including our compliance
with licence conditions, changes to spectrum licence fees, spectrum
policy determinations such as restrictions on the purchase, sale,
subordination and transfer of spectrum licences, the cost and
availability of spectrum, and ongoing and future consultations and
decisions on spectrum allocation; the impact on us and other
Canadian telecommunications carriers of government or regulatory
actions with respect to certain countries or suppliers, including
the executive order signed by U.S. President Donald Trump
permitting the Secretary of Commerce to block certain technology
transactions deemed to constitute national security risks and the
imposition of additional licence requirements on the export,
re-export and transfer of goods, services and technology to Huawei
Technologies Co. Ltd. and its non-U.S. affiliates; restrictions on
non-Canadian ownership and control of TELUS Common Shares and the
ongoing monitoring of and compliance with such restrictions;
unanticipated changes to the current copyright regime; and our
ability to comply with complex and changing regulation of the
healthcare and medical devices industry in the jurisdictions in
which we operate, including as an operator of health clinics.
- Competitive environment including: our ability to continue to
retain customers through an enhanced customer service experience,
including through the deployment and operation of evolving wireless
and wireline infrastructure; intense wireless competition,
including the ability of industry competitors to successfully
combine a mix of internet services and, in some cases, wireless
services under one bundled and/or discounted monthly rate, along
with their existing broadcast or satellite-based TV services; the
success of new products, services and supporting systems, such as
home automation security and Internet of Things (IoT) services for
internet-connected devices; wireline voice and data competition,
including continued intense rivalry across all services among
wireless and wireline telecommunications companies, cable
companies, other communications companies and over-the-top (OTT)
services, which, among other things, places pressures on current
and future mobile phone average billing per subscriber per month
(ABPU), mobile phone average revenue per subscriber per month
(ARPU), cost of acquisition, cost of retention and churn rate for
all services, as do customer usage patterns, increased data bucket
sizes or flat-rate pricing trends for voice and data, such as our
Peace of Mind™ plans and comparable plans recently launched,
inclusive rate plans for voice and data and availability of Wi-Fi
networks for data; mergers and acquisitions of industry
competitors; pressures on internet and TV ARPU and churn rate
resulting from market conditions, government actions and customer
usage patterns; residential voice and business network access line
losses; subscriber additions and retention volumes, and associated
costs for wireless, TV and internet services; our ability to obtain
and offer content on a timely basis across multiple devices on
wireless and TV platforms at a reasonable cost as content costs per
unit continue to grow; vertical integration in the broadcasting
industry resulting in competitors owning broadcast content
services, and timely and effective enforcement of related
regulatory safeguards; our ability to compete successfully in our
TELUS International customer care and business services given our
competitors’ brand recognition, consolidation and strategic
alliances, as well as technology development; in our TELUS Health
business, our ability to compete with other providers of electronic
medical records and pharmacy management products, systems
integrators and health service providers including those that own a
vertically integrated mix of health services delivery, IT
solutions, and related services, and global providers that could
achieve expanded Canadian footprints; and our ability to
successfully develop our smart data solutions business.
- Technological substitution including: reduced utilization and
increased commoditization of traditional wireline voice services
(local and long distance) resulting from impacts of OTT
applications and wireless substitution; a declining overall market
for paid TV services, including as a result of content piracy and
signal theft, a rise in OTT direct-to-consumer video offerings and
virtual multichannel video programming distribution platforms; the
increasing number of households that have only wireless and/or
internet-based telephone services; potential declines in mobile
phone ABPU and ARPU as a result of, among other factors,
substitution by messaging and OTT applications; substitution by
increasingly available Wi-Fi services; and disruptive technologies,
such as OTT IP services, including software-defined networks in the
business market, that may displace or cause us to reprice our
existing data services.
- Challenges to our ability to deploy technology including: high
subscriber demand for data that challenges wireless networks and
spectrum capacity levels and may be accompanied by increases in
delivery cost; our reliance on information technology and our
ability to streamline our legacy systems; the roll-out and
evolution of wireless broadband technologies and systems, including
video distribution platforms and telecommunications network
technologies (broadband initiatives, such as fibre to the premises
(FTTP), wireless small-cell deployment, 5G wireless and
availability of resources and our ability to build out adequate
broadband capacity); our reliance on wireless network access
agreements, which have facilitated our deployment of wireless
technologies; our choice of suppliers and those suppliers’ ability
to maintain and service their product lines, which could affect the
success of upgrades to, and evolution of, technology that we offer;
supplier limitations and concentration and market power for
products such as network equipment, TELUS TV® and wireless
handsets; our expected long-term need to acquire additional
spectrum capacity through future spectrum auctions and from third
parties to address increasing demand for data and our ability to
utilize spectrum we acquire; deployment and operation of new
wireline broadband network technologies at a reasonable cost and
the availability and success of new products and services to be
rolled out using such network technologies; network reliability and
change management; and our deployment of self-learning tools and
automation that may change the way we interact with customers.
- Capital expenditure levels and potential outlays for spectrum
licences in auctions or purchases from third parties, affect and
are affected by: our broadband initiatives, including connecting
more homes and businesses directly to fibre; our ongoing deployment
of newer wireless technologies, including wireless small cells to
improve coverage and capacity and prepare for a more efficient and
timely evolution to 5G wireless services; investments in network
resiliency and reliability; including to address changes in usage
resulting from restrictions imposed in response to COVID-19; the
allocation of resources to acquisitions and future wireless
spectrum auctions held by Innovation, Science and Economic
Development Canada (ISED), including the 3500 MHz and
millimetre wave spectrum auctions currently expected to take place
in 2020 and 2021, respectively, and the announcement of a formal
consultation on the auctioning of 3800 MHz spectrum, expected to
take place in 2022. Our capital expenditure levels could be
impacted if we do not achieve our targeted operational and
financial results or by changes to our regulatory environment.
- Operational performance and business combination risks
including: our reliance on legacy systems and ability to implement
and support new products and services and business operations in a
timely manner; our ability to manage the requirements of large
enterprise deals; our ability to implement effective change
management for system replacements and upgrades, process redesigns
and business integrations (such as our ability to successfully
integrate acquisitions, complete divestitures or establish
partnerships in a timely manner and realize expected strategic
benefits, including those following compliance with any regulatory
orders); our ability to identify and manage new risks inherent in
new service offerings that we may provide, including as a result of
acquisitions, which could result in damage to our brand, our
business in the relevant area or as a whole, and additional
exposure to litigation or regulatory proceedings.
- Data protection including risks that malfunctions or unlawful
acts could result in unauthorized access to, change, loss, or
distribution of data, which may compromise the privacy of
individuals and could result in financial loss and harm to our
reputation and brand.
- Security threats including intentional damage or unauthorized
access to our physical assets or our IT systems and networks, which
could prevent us from providing reliable service or result in
unauthorized access to our information or that of our
customers.
- Ability to successfully implement cost reduction initiatives
and realize planned savings, net of restructuring and other costs,
without losing customer service focus or negatively affecting
business operations. Examples of these initiatives are: our
operating efficiency and effectiveness program to drive
improvements in financial results; business integrations; business
product simplification; business process automation and
outsourcing; offshoring and reorganizations; procurement
initiatives; and real estate rationalization.
- Foreign operations and our ability to successfully manage
operations in foreign jurisdictions, including managing risks such
as currency fluctuations.
- Business continuity events including: our ability to maintain
customer service and operate our network in the event of human
error or human-caused threats, such as cyberattacks and equipment
failures that could cause various degrees of network outages;
supply chain disruptions, delays and economics, including as a
result of government restrictions or trade actions; natural
disaster threats; epidemics; pandemics (including the ongoing
COVID-19 pandemic); political instability in certain international
locations; information security and privacy breaches, including
data loss or theft of data; and the completeness and effectiveness
of business continuity and disaster recovery plans and
responses.
- Human resource matters including: recruitment, retention and
appropriate training in a highly competitive industry, the level of
our employee engagement, and the health of our team.
- Financing and debt requirements including: our ability to carry
out financing activities, refinance our maturing debt and/or
maintain investment grade credit ratings in the range of BBB+ or
the equivalent. Our business plans and growth could be negatively
affected if existing financing is not sufficient to cover our
funding requirements.
- Lower than planned free cash flow could constrain our ability
to invest in operations, reduce leverage or return capital to
shareholders, and could affect our ability to sustain our dividend
growth program through 2022. This program may be affected by
factors such as the competitive environment, economic performance
in Canada, our earnings and free cash flow, our levels of capital
expenditures and spectrum licence purchases, acquisitions, the
management of our capital structure, regulatory decisions and
developments, and business continuity events. Quarterly dividend
decisions are subject to assessment and determination by our Board
of Directors based on our financial position and outlook. Shares
may be purchased under our normal course issuer bid (NCIB) when and
if we consider it opportunistic, based on our financial position
and outlook, and the market price of TELUS Common Shares. There can
be no assurance that our dividend growth program or any NCIB will
be maintained, not changed and/or completed.
- Taxation matters including: interpretation of complex domestic
and foreign tax laws by the relevant tax authorities that may
differ from our interpretations; the timing and character of income
and deductions, such as tax depreciation and operating expenses;
tax credits or other attributes; changes in tax laws, including tax
rates; tax expenses being materially different than anticipated,
including the taxability of income and deductibility of tax
attributes; elimination of income tax deferrals through the use of
different tax year-ends for operating partnerships and corporate
partners; and changes to the interpretation of tax laws, including
those resulting from changes to applicable accounting standards or
the adoption of more aggressive auditing practices by tax
authorities, tax reassessments or adverse court decisions impacting
the tax payable by us.
- Litigation and legal matters including: our ability to
successfully respond to investigations and regulatory proceedings;
our ability to defend against existing and potential claims and
lawsuits (including intellectual property infringement claims and
class actions based on consumer claims, data, privacy or security
breaches and secondary market liability), or to negotiate and
execute upon indemnity rights or other protections in respect of
such claims and lawsuits; and the complexity of legal compliance in
domestic and foreign jurisdictions, including compliance with
competition, anti-bribery and foreign corrupt practices laws.
- Health, safety and the environment including: lost employee
work time resulting from illness or injury, public concerns related
to radio frequency emissions, environmental issues affecting our
business, including climate change, waste and waste recycling,
risks relating to fuel systems on our properties, changing
government and public expectations regarding environmental matters
and our responses; and challenges associated with the COVID-19
pandemic and our response to it, which may add to our accentuate
these factors.
- Economic growth and fluctuations including: the state of the
economy in Canada, which may be influenced by economic and other
developments outside of Canada, including potential outcomes of yet
unknown policies and actions of foreign governments and the ongoing
COVID-19 pandemic as well as public and private sector responses to
the pandemic; expectations of future interest rates; inflation;
unemployment levels; effects of fluctuating oil prices; effects of
low business spending (such as reducing investments and cost
structure); pension investment returns, funding and solvency
discount rates; fluctuations in foreign exchange rates of the
currencies in the regions in which we operate; the impact of
tariffs on trade between Canada and the U.S., and global
implications of the trade dynamic between major world
economies.
These risks are described in additional detail in Section 9
General trends, outlook and assumptions, and regulatory
developments and proceedings and Section 10 Risks and risk
management in our 2019 annual MD&A. Those descriptions are
incorporated by reference in this cautionary statement but are not
intended to be a complete list of the risks that could affect
TELUS.
Many of these factors are beyond our control or our current
expectations or knowledge. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial
may also have a material adverse effect on our financial position,
financial performance, cash flows, business or reputation. Except
as otherwise indicated in this document, the forward-looking
statements made herein do not reflect the potential impact of any
non-recurring or special items or any mergers, acquisitions,
dispositions or other business combinations or transactions that
may be announced or that may occur after the date of this
document.
Readers are cautioned not to place undue reliance on
forward-looking statements. Forward-looking statements in this
document describe our expectations and are based on our assumptions
as at the date of this document and are subject to change after
this date. Except as required by law, we disclaim any intention or
obligation to update or revise any forward-looking statements. The
forward-looking statements in this news release are presented for
the purpose of assisting our investors and others in understanding
certain key elements of our expected 2020 financial results as well
as our objectives, strategic priorities and business outlook. Such
information may not be appropriate for other purposes.
This cautionary statement qualifies all of the forward-looking
statements in this document.
Non-GAAP and other financial measuresWe have
issued guidance on and report certain non-GAAP measures that are
used to evaluate the performance of TELUS, as well as to determine
compliance with debt covenants and to manage our capital structure.
As non-GAAP measures generally do not have a standardized meaning,
they may not be comparable to similar measures presented by other
issuers. Securities regulations require such measures to be clearly
defined, qualified and reconciled with their nearest GAAP measure.
Certain of the metrics do not have generally accepted industry
definitions.
Adjusted net income and adjusted basic earnings per
share: These measures are used to evaluate performance at
a consolidated level and exclude items that may obscure the
underlying trends in business performance. These measures should
not be considered alternatives to Net income and basic earnings per
share in measuring TELUS’ performance. Items that may, in
management’s view, obscure the underlying trends in business
performance include significant gains or losses associated with
real estate development partnerships, gains on exchange of wireless
spectrum licences, restructuring and other costs, long-term debt
prepayment premiums (when applicable), income tax-related
adjustments, asset retirements related to restructuring activities
and gains arising from business combinations.
Reconciliation of adjusted net income
|
Three months ended March 31 |
|
C$ and in millions |
2020 |
2019 |
Change |
|
Net income attributable
to Common Shares |
350 |
428 |
(78) |
|
Add (deduct): |
|
|
|
Restructuring and other costs, after income taxes |
47 |
25 |
22 |
|
Favourable income tax-related adjustments |
(3) |
— |
(3) |
|
Non-recurring losses and equity losses related to real estate joint
ventures |
6 |
— |
6 |
|
Adjusted Net income |
400 |
453 |
(53) |
|
Reconciliation of adjusted basic EPS1
|
Three months ended March 31 |
|
C$, per share amounts |
2020 |
2019 |
Change |
|
Basic EPS |
0.28 |
0.36 |
(0.08 |
) |
Add: |
|
|
|
Restructuring and other costs, after income taxes, per
share |
0.04 |
0.02 |
0.02 |
|
Adjusted basic EPS |
0.32 |
0.38 |
(0.06 |
) |
(1)
Adjusted for two-for-one stock split effective March 17, 2020. |
EBITDA (earnings before interest, income taxes,
depreciation and amortization): We have issued guidance on and
report EBITDA because it is a key measure used to evaluate
performance at a consolidated level. EBITDA is commonly reported
and widely used by investors and lending institutions as an
indicator of a company’s operating performance and ability to incur
and service debt, and as a valuation metric. EBITDA should not be
considered an alternative to Net income in measuring TELUS’
performance, nor should it be used as a measure of cash flow.
EBITDA as calculated by TELUS is equivalent to Operating revenues
less the total of Goods and services purchased expense and Employee
benefits expense.
We also calculate Adjusted
EBITDA to exclude items of an unusual nature that
do not reflect our ongoing operations and should not, in our
opinion, be considered in a long-term valuation metric or should
not be included in an assessment of our ability to service or incur
debt.
EBITDA reconciliation |
|
|
|
|
Three months ended March 31 |
($ millions) |
2020 |
2019 |
|
Net income |
353 |
437 |
|
Financing costs |
192 |
168 |
|
Income taxes |
139 |
157 |
|
Depreciation |
523 |
470 |
|
Amortization of intangible assets |
202 |
147 |
|
EBITDA |
1,409 |
1,379 |
|
Add restructuring and other costs included in EBITDA |
60 |
36 |
|
EBITDA – excluding restructuring and other costs |
1,469 |
1,415 |
|
Add non-recurring losses and equity losses related to real estate
joint ventures |
6 |
— |
|
Adjusted EBITDA |
1,475 |
1,415 |
|
Free cash flow: We report this measure as a
supplementary indicator of our operating performance, and there is
no generally accepted industry definition of free cash flow. It
should not be considered an alternative to the measures in the
condensed interim consolidated statements of cash flows. Free cash
flow excludes certain working capital changes (such as trade
receivables and trade payables), proceeds from divested assets and
other sources and uses of cash, as found in the condensed interim
consolidated statements of cash flows. It provides an indication of
how much cash generated by operations is available after capital
expenditures (excluding purchases of spectrum licences) that may be
used to, among other things, pay dividends, repay debt, purchase
shares or make other investments. We exclude impacts of accounting
changes that do not impact cash, such as IFRS 15 and IFRS 16. Free
cash flow may be supplemented from time to time by proceeds from
divested assets or financing activities.
Free
cash flow calculation |
|
|
|
|
Three months ended March 31 |
($
millions) |
2020 |
2019 |
|
EBITDA |
1,409 |
1,379 |
|
Deduct non-cash gains from the
sale of property, plant and equipment |
(3) |
(5) |
|
Restructuring and other costs,
net of disbursements |
12 |
(33) |
|
Effects of contract asset,
acquisition and fulfilment (IFRS 15 impact) and TELUS Easy Payment
device financing |
112 |
38 |
|
Effects of lease principal
(IFRS 16 impact) |
(84) |
(88) |
|
Leases formerly accounted for
as finance leases (IFRS 16 impact) |
27 |
13 |
|
Other items: |
|
|
|
Share-based compensation, net |
23 |
19 |
|
Net employee defined benefit plans expense |
27 |
20 |
|
Employer contributions to employee defined benefit plans |
(15) |
(16) |
|
Interest paid |
(177) |
(179) |
|
Interest received |
3 |
2 |
|
Capital expenditures (excluding spectrum licences)1 |
(665) |
(646) |
|
Free cash flow before income taxes |
669 |
504 |
|
Income taxes paid, net of refunds |
(124) |
(351) |
|
Free cash flow |
545 |
153 |
|
(1) Refer to Note 31 of the interim consolidated financial
statements for further information. |
About TELUS TELUS (TSX: T, NYSE: TU) is a
dynamic, world-leading communications and information technology
company with $14.8 billion in annual revenue and 15.3 million
customer connections spanning wireless, data, IP, voice,
television, entertainment, video and security. We leverage our
global-leading technology to enable remarkable human outcomes. Our
longstanding commitment to putting our customers first fuels every
aspect of our business, making us a distinct leader in customer
service excellence and loyalty. TELUS Health is Canada's largest
healthcare IT provider, and TELUS International delivers the most
innovative business process solutions to some of the world’s most
established brands.
Driven by our passionate social purpose to connect all Canadians
for good, our deeply meaningful and enduring philosophy to give
where we live has inspired our team members and retirees to
contribute more than $700 million and 1.3 million days of service
since 2000. This unprecedented generosity and unparalleled
volunteerism have made TELUS the most giving company in the
world.
For more information about TELUS, please visit telus.com, follow
us @TELUSNews on Twitter and @Darren_Entwistle on Instagram.
Investor RelationsRobert Mitchell (647)
837-1606ir@telus.com
Media relationsFrancois Gaboury(438)
862-5136Francois.Gaboury@telus.com
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