TELUS reports operational and financial results for first quarter 2020
Providing critical support to Canadians and our communities during the COVID-19 pandemic; embracing our new mode of operations as we continue to deliver exceptional customer service
Consolidated revenue and EBITDA growth of 5.4 and 4.2 per cent respectively combined with strong free cash flow of $545 million
Solid first quarter customer growth of 106,000 net client additions, up 12,000 over the same period last year, reflecting continued broadband network leadership and customer service excellence
Wireless net additions of 70,000, including 21,000 high-quality mobile phone net additions and low blended mobile phone churn of 0.94 per cent
Strong wireline results, including EBITDA growth of 7.2 per cent and 36,000 net additions, up 2,000 over the same period a year ago driven by stronger Internet and security additions
Declaring quarterly dividend of $0.29125 per share; unchanged and supported by strong free cash flow growth
In light of the evolving nature and uncertainty of the global COVID-19 health crisis, TELUS deferring an update to its 2020 financial guidance to the second quarter 2020 earnings release; Continuing to focus on driving free cash flow and future dividend growth
Vancouver, B.C. – 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.”
“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-overyear 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.
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