AUGUST 4, 2023
TELUS reports resilient operational and financial results for second quarter 2023
Total customer growth of 293,000, up 46,000 over last year, a second quarter record, driven by healthy demand for our leading portfolio across Mobility and Fixed services
Strong Mobility results including Mobile Phone net additions of 110,000, our best second quarter since 2010, and record second quarter Connected Device net additions of 124,000; industry-leading blended churn of 0.91 per cent and ARPU growth of 1.8 per cent
Robust second quarter Fixed customer net additions of 59,000, including 35,000 internet customer additions, powered by leading customer loyalty in combination with TELUS’ PureFibre network
Resilient quarterly financial results including Consolidated Operating Revenue and Adjusted EBITDA growth of 13 per cent and 5 per cent, respectively, and Free Cash Flow growth of 36 per cent; Net Income lower by 61 per cent on higher depreciation and amortization, interest, and restructuring and other costs; TTech segment Operating Revenues and Adjusted EBITDA expanded by 14 and 8.1 per cent, respectively
Quarterly dividend declared of $0.3636, an increase of 7.4 per cent over the same period last year, and yielding over 6 per cent per share
Targeting Consolidated Operating Revenue and Adjusted EBITDA growth for 2023 of 9.5 to 11.5 per cent and 7 to 8 per cent, respectively, reflecting TELUS International’s (TI) updated annual outlook as issued in July; implied annual financial growth target for TTech operating segment remains unchanged and aims to mitigate near term TI shortfalls at the lower end of Original 2023 Consolidated Revenue and EBITDA guidance
Updating Free Cash Flow guidance for 2023 to approximately $1.5 billion to reflect significantly higher restructuring costs related to accelerated cost efficiency programs implemented to drive EBITDA expansion, margin accretion and accelerated cash flow growth, seeking to reduce 6,000 staff globally, with projected incremental annual savings of more than $325 million; Capital Expenditure target for 2023 of approximately $2.6 billion remains unchanged
Vancouver, B.C. – TELUS Corporation today released its unaudited results for the second quarter of 2023. Consolidated Operating revenues increased by 13 per cent over the same period a year ago to $4.9 billion. This growth was driven by higher service revenues in our two reportable segments: TELUS technology solutions (TTech) and Digitally-led customer experiences – TELUS International (DLCX). TTech service revenue growth was driven by: (i) growth in health services revenues, mainly driven by our acquisition of LifeWorks on September 1, 2022; (ii) higher mobile network revenues attributable to subscriber growth and roaming revenue improvements, which principally started in the second quarter of 2022; and (iii) an increase in fixed data service revenues, resulting from subscriber growth, business acquisitions and higher revenue per internet customer. These factors were partly offset by lower TV and fixed legacy voice services revenues, primarily due to technological substitution. Growth in DLCX operating revenues resulted from expanded services for existing clients and growth from new clients, including new clients from our acquisition of WillowTree on January 3, 2023, and favourable foreign exchange impacts, which collectively offset the impact of some DLCX clients reducing their own costs. See Second Quarter 2023 Operating Highlights within this news release for a discussion on TTech and DLCX results.
"For the second quarter, our TELUS team once again demonstrated execution strength in our TTech business segment, characterized by the potent combination of leading customer growth, complemented by strong operational and financial results," said Darren Entwistle, President and CEO. “Our robust performance in our core telecom business is underpinned by our globally leading broadband networks and customer-centric culture, which enabled our strongest second quarter on record, with total customer net additions of 293,000, up 19 per cent, year-over-year, driven by strong demand for our leading portfolio across Mobility and Fixed services. This included strong mobile phone net additions of 110,000, our best second quarter result since 2010; record second quarter connected device net additions of 124,000; and robust second quarter total fixed net additions of 59,000, including 35,000 internet customer additions, powered by leading customer loyalty in combination with TELUS’ PureFibre network. Our leading customer growth is reflective of our consistent, industry-best client loyalty across our Mobile and Fixed product lines. In this regard, our team’s passion for delivering customer experience excellence contributed to strong loyalty across our key product lines, once again this quarter, including blended mobile phone, postpaid mobile phone, PureFibre internet and residential voice churn all below one per cent. Notably, postpaid mobile phone churn is now in the tenth consecutive year of less than one per cent, and PureFibre internet has been below the one per cent threshold for 14 consecutive quarters.”
“At TELUS International, increasing macroeconomic pressure has temporarily impacted service demand from some of our larger tech clients as they aggressively address their own cost structures, slowing the expected rate of revenue and profit growth for 2023. In response, our TI team has actioned significant incremental cost efficiency efforts, including staff reductions, to address lower service volumes, and is driving additional automation and generative AI-enabled solutions to further optimize its cost structure and go-to-market sales opportunities. Despite these near-term challenges, we remain highly confident in TI’s strategy and investment thesis. This is amplified by meaningful opportunities in respect of digital transformation – particularly with generative AI adoption – and the continuing critical importance of differentiated digital customer experience solutions in the market, which remains a vibrant tailwind for TI’s medium- and long-term growth and profitability.”
“At our TELUS Health business unit, we achieved second quarter revenues of $428 million, alongside 11 per cent EBITDA growth, normalizing for LifeWorks. These results signify our continued growth and increasing scale of our health operations since our acquisition of LifeWorks in 2022, which is enabling us to make meaningful progress on our goal to be the most trusted wellbeing company in the world. This includes our healthcare services and programs now covering more than 68 million lives around the world, an increase of nearly 46 million year-over-year; supporting health outcomes on nearly 153 million digital health transactions during the second quarter, up more than five per cent over the same period a year ago; and increasing our virtual care membership to 5.3 million, up nearly 50 per cent over the prior year. We anticipate TELUS Health to continue its sustained growth and expansion over the long-term, underpinned by the integration and innovation of our diverse product suite and care delivery that enables us to support the evolving needs of our customers around the world. Since acquiring LifeWorks, our team has committed to driving $425 million in annualized synergies by the end of 2025, up from $250 million. This includes $325 million expected to be realized through operating cost synergies from continued integration, optimizing our organizational structure, systems and real estate; and $100 million from longer term revenue synergies driven by cross-selling health services products within our TELUS Health customer base, and throughout TELUS. This will allow us to re-invest in the growth of our business and improve our profitability, while we focus on delivering efficient, secure and best-in-class health and wellness solutions to our customers. To date, we have achieved $127 million in combined annualized synergies, towards our overall objective.”
“At TELUS Agriculture & Consumer Goods (TAC), second quarter revenues of $79 million were relatively flat year-over-year, reflecting headwinds in our Agribusiness vertical due to softness related to macroeconomic challenges, and one-time professional services revenue from the previous year. We continue to expect progress on our top-line in the second half of 2023, resulting in positive annual growth. This, alongside efficiency and effectiveness initiatives, as illustrated by our recent decision to move TAC to our TELUS Business Solutions (TBS) team, is reflective of our collective commitment in respect of realising quantum growth in our compelling TAC business. TAC will be able to leverage the expertise, experience, and high-performance culture and talent of our TBS team, ensuring we are well-positioned to accelerate our Customers First, sales, marketing, channel and go-to-market efforts, including exciting and plentiful cross-selling opportunities. With these changes in place, we are looking to accelerate and significantly scale our TAC business into a potent asset of consequence, focused on becoming the world’s largest global independent provider of digital technologies and data insights connecting customers – from producers to consumers – across the agricultural products, food and packaged goods industries.”
“Against the backdrop of rapid transformation in our industry and the ways in which our customers want to engage with us, today we are announcing a significant investment in an extensive efficiency and effectiveness initiative across TELUS. This is in response to the evolving regulatory, competitive and macroeconomic environment that we currently face. Importantly, the transformational investments we have prudently made over the course of more than a decade in building the best culture, and enabling industry-leading customer experiences over our globally leading wireless and PureFibre broadband networks, are now allowing us to accelerate our well-progressed plans to digitally revolutionize our business and meaningfully further streamline our operating costs. Moreover, they are driving significant economic efficiencies to support our future success for the benefit of the many stakeholders we serve. These investments will ensure we remain market leaders in driving innovation and value for our customers, realizing profitable growth for our shareholders, and supporting our team members and communities. Our winning strategy remains unchanged, and our transformational efforts will be buttressed by our decades-long track record of successfully navigating exogenous factors, from regulatory and competitive, to macroeconomic, and most recently, through the global pandemic. Our resilience and ability to embrace change and continuously evolve the way we operate are cornerstones of our TELUS culture and will continue to fuel our future success. It is therefore with a very heavy heart that we are seeking to reduce 6,000 staff positions across our global footprint, representing approximately 4,000 reductions at TELUS and 2,000 at TELUS International, including offering early retirement and voluntary departure packages. Given the scale of this program, we now expect incremental restructuring investments of up to $475 million in 2023. The program we are announcing today will yield expected cumulative annual cost savings of more than $325 million. While this will temporarily and modestly dilute our Free Cash Flow in 2023, importantly, it will support strong Free Cash Flow expansion in the years ahead, as well as the progression of our leading, multi-year dividend growth program.”
“At TELUS, our Give Where We Live philosophy is also a cornerstone of our globally recognized culture and deeply embedded within our company’s DNA,” continued Darren. “This long-standing commitment is exemplified through our annual TELUS Days of Giving. Indeed, thanks to our more than 80,000 team members, retirees, family members and friends who have collectively volunteered in 260 communities across 32 countries thus far for our 18th annual TELUS Days of Giving, 2023 is our most giving year yet. Since 2000, our TELUS family has contributed 2.2 million days of volunteerism – more than any other company in the world – helping to improve the lives of people across the globe.”
Doug French, Executive Vice-president and CFO said, “For the second quarter, our team navigated through a highly competitive environment and a challenging global macroeconomic climate, delivering healthy operating and financial results in our core telecom operations. While our domestic business continues to demonstrate our execution excellence, our technology-oriented verticals, including TI and TAC, are facing near-term headwinds from pronounced macroeconomic pressures. Despite these headwinds, we continue to target strong Operating Revenue and Adjusted EBITDA growth for 2023, as demonstrated by our recently revised outlook, and we remain highly confident in our growth prospects as we begin to emerge from the current pressurized economic environment. As part of our ongoing focus on efficiency and effectiveness, our team remains laser-focused on driving significant cost reductions, as further evidenced by the implementation of a significant cost efficiency program, targeting all parts of our organization, in response to the current regulatory, competitive and macroeconomic environment. While these decisions are difficult to undertake, they are a necessity in order to enhance innovation for our customers and drive profitable growth for our business and investors. These programs will advance sustainable EBITDA margin improvement and lead to greater free cash flow generation in the medium-to-longer-term. We anticipate the full run rate of incremental annualized cost savings of more than $325 million to be largely achieved within the next six months, strengthening our balance sheet position and the sustainability of our multi-year dividend growth program.”
“During the second quarter, we continued to execute against our capital expenditure program, advancing our PureFibre footprint and 5G coverage” commented Doug. “Consistent with our capital plan, we have accelerated in-year investments where we anticipate approximately 85 per cent of our annual capital expenditure target of $2.6 billion to be allocated through the first three quarters of the year before tapering off in the fourth quarter. We continue to expand our PureFibre network, which now reaches approximately 3.1 million premises, along with advancing our 5G network coverage to approximately 84 per cent of Canadians, including ongoing investments to operationalize our 3500 MHz spectrum holdings. These investments significantly advance our leading customer experiences and network leadership position, as well as enhancing our competitive positioning to drive strong profitable customer growth on a consistent basis.”
“As we head into the back half of the year, we remain in a strong operating and financial position, supported by our robust balance sheet, and enhanced through our cost efficiency efforts. Our ability to deliver on our dividend growth program reflects our confidence in executing our growth strategy, on a global basis, and our ability to drive meaningful and sustainable free cash flow growth. Returning capital to shareholders is balanced against our continued focus to invest strategically to unlock transformational benefits for all of our stakeholders, including our planned participation in the upcoming 3800 MHz spectrum auction, while maintaining a strong balance sheet to support critical investments that will further advance our growth strategy and support our long-term success today and well into the future,” concluded Doug.
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