TELUS Corporation today released its unaudited results for the
second quarter of 2020. For the quarter, consolidated operating
revenue of $3.7 billion increased by 3.6 per cent over the same
period a year ago. Earnings before interest, income taxes,
depreciation and amortization (EBITDA) decreased by 1.0 per cent to
$1.4 billion while Adjusted EBITDA was down 2.9 per cent. This
decline reflects the financial impacts arising from the COVID-19
pandemic, primarily from lower wireless roaming revenue, partly
offset by growth in wireline data service margins resulting from
business acquisitions, expanded services and subscriber base
growth, an increased EBITDA contribution from our organic TELUS
International (TI) business, and numerous enhanced cost efficiency
programs.
“TELUS achieved resilient financial and operational results in
the second quarter, characterized by strong customer growth of over
141,000 net new additions, despite the challenges we faced in the
quarter with respect to the COVID-19 pandemic”, said Darren
Entwistle, President and CEO. “This accomplishment, realized
against the backdrop of an unprecedented operating environment, is
reflective of our longstanding and consistent focus on creating a
world-leading culture, enabled by our highly engaged team.
Importantly, our strong first quarter results were attained as 95
per cent of our domestic team members embraced a work-from-home
environment, while continuing to provide best-in-class customer
service. Leveraging our strong digital capabilities, in concert
with our team’s characteristic adaptability, we achieved healthy
customer growth in the quarter, including 61,000 high-quality
mobile phone net additions, comprised entirely of higher-value
postpaid customers, and 47,000 wireline customer additions, driven
by 37,000 internet and 12,000 security net additions, both up
year-over-year. This was supported by strong and enhanced customer
loyalty across our key growth product lines, including historically
low postpaid churn of 0.59 per cent, backed by the TELUS team’s
longstanding dedication to delivering premium customer experiences
over a world leading network.”
Mr. Entwistle added, “TELUS’ broadband network has continued to
perform exceedingly well throughout the health crisis, inclusive of
the resulting significant changes in usage patterns and added
demands on our network. The efficacy of our ongoing broadband
technology investments is also reflected in numerous recent awards
from leading independent network authorities across both wireline
and wireless. Notably, U.S.-based PCMag ranked TELUS as the fastest
internet service provider in Canada. In addition, Tutela recognized
our wireless network as best in consistent quality, lowest latency,
and fastest download speeds for the second consecutive time.
Furthermore, in early July, TELUS won U.S.-based Ookla’s 2020
Speedtest Fastest Mobile Award – marking the sixth consecutive year
that TELUS has won this award – as well as the 2020 Best Mobile
Coverage Award for the third time. Moreover, in “The State of Rural
Canada’s Mobile Network Experience – May 2020 Report”, UK-based
Opensignal found that rural Canadians benefit from some of the
fastest download speeds in the G7. It noted that the rural
experience on TELUS’ network is better and faster than in any
location within G7 nations, with the exception of Japan, a
significantly smaller country than Canada, which at 49 Mbps was
only slightly faster than TELUS’ 48 Mbps. Consistently earning
these prestigious, third-party accolades is particularly gratifying
as our entire team focuses relentlessly on ensuring robust
reliability and world-leading performance across all of our
services, in rural as well as urban areas, enabling Canadians to
work and learn remotely, apply for critical government resources,
receive vital medical care, and stay connected to family and
friends.”
“In June, we announced the first wave of our 5G network roll-out
in Vancouver, Montreal, Calgary, Edmonton, and the Greater Toronto
Area, with expansion to an additional 26 markets across Canada
planned throughout the remainder of the year,” Mr. Entwistle
continued. “Our 5G network will profoundly enhance the way our
customers will connect to information and one another, and is
available at no additional cost on TELUS Peace of Mind plans with
endless data and no overage fees. Building on our consistently
world-leading technology, our 5G network will bridge digital
divides and drive innovation across businesses, government,
healthcare, education and social pursuits, whilst creating an
estimated 250,000 jobs and contributing an anticipated $40 billion
annually to Canada’s economy. This critical development in our 5G
ecosystem is a testament to our team’s skill and dedication to
building a world-leading 5G experience in Canada from coast to
coast, and from urban to rural.”
“As we continue to advance our broadband leadership and embrace
our winning go-to-market strategy, backed by our globally
recognized culture and industry-best customer experience, we remain
confident in the long-term outlook for our business and the
significant opportunities before us to further elevate the TELUS
brand and accelerate our growth strategy. Our robust and consistent
performance over the longer-term, coupled with our strong balance
sheet, positioned us well to navigate the uncertainty caused by the
global health emergency. For 2020, we are driving to flat to
modestly positive EBITDA growth, and free cash flow within the
lower-half of our original target range. Moreover, we remain
hopeful that conditions will permit us to meet or exceed our
targeted dividend increase when we report our third quarter results
in November. Alongside the incredible innovations we are driving in
response to the current crisis, and the tuition value gleaned over
the past several months, our strong performance will support the
ongoing evolution of our operating model and resiliency of our
organization, ensuring we are strongly positioned for anticipated
post-pandemic economic challenges and market opportunities,” Mr.
Entwistle further commented.
“Our TELUS team remains committed to ensuring Canadians stay
connected to what matters the most,” Mr. Entwistle expressed. “In
this regard, our TELUS team continues to deliver on our commitment
of $150 million to support COVID-19 relief efforts across Canada.
Notably, since the start of the global pandemic, the TELUS Friendly
Future Foundation has contributed $5.5 million to 326 charitable
health projects. In addition, with the launch of our virtual TELUS
Days of Giving, this quarter alone, TELUS team members have
participated in 200,000 Acts of Giving, including 450,000 volunteer
hours served and 131,000 masks sewn for our communities. As
Canadians continue to seek healthcare from the safety of their
homes, we are leveraging the unique breadth and scope of our TELUS
Health offerings to enable the ongoing expansion of our virtual
care solutions, helping to improve health outcomes of our fellow
citizens – particularly the most vulnerable among us. In this same
vein, we continue to mobilize our Health for Good mobile clinics to
support with COVID-19 testing efforts, building on the 36,000
patient visits to our mobile health clinics since the inception of
the program. Moreover, during the pandemic, we distributed 14,000
free devices with $0 mobile plans to over 325 organizations that
support vulnerable citizens. This is in addition to the 5,300
at-risk youth our team has supported with a free smartphone and
free data plan since the start of our Mobility for Good program,
ensuring these community members are connected during these
unprecedented times.” Mr. Entwistle continued, “This
past quarter, we expanded our TELUS Internet for Good program to
help people living with disabilities access the vital tools and
resources they need to live fulfilling lives, from the comfort of
their own home. Since introducing our Internet for Good program, we
have enabled more than 65,000 Canadians from low income families
with low cost, high-speed TELUS internet.”
Doug French, Executive Vice-president and Chief Financial
Officer said, “Our resilient second quarter results are reflective
of our leading culture, and the remarkable way our highly engaged
team collectively embraced the rapidly evolving environment,
carrying forward our first quarter momentum, and delivering strong
subscriber growth while managing profitability through a
challenging period. Our success is enabled by our intense focus on
customer service excellence and network leadership, leveraging our
digital capabilities and simplification, and further supported by
our continued focus on driving cost efficiency and margin-enhancing
initiatives across the business to mitigate the negative impacts of
the pandemic.”
“As we navigated through the unique circumstances this quarter,
we successfully took advantage of attractive credit market
conditions to refinance early our 2021 maturities at attractive
rates, further strengthening our balance sheet and enhancing our
liquidity position to more than $3.6 billion. As a result, our
weighted average interest rate on long-term debt is 3.86 per cent,
with an average term to maturity of 13 years, and no maturities
until 2022. This strong financial position continues to support our
growth initiatives as well as strategic acquisitions to further
enhance our growth trajectory. Our continued network investments
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 a result, we are
well-positioned to continue building on our track record of
providing investors with the industry’s best multi-year dividend
growth program, while also preparing ourselves for important
spectrum auctions in the coming years.”
Mr. French added, “As we progress through the back half of the
year, our team will look to carry this operating momentum forward,
and sustain our relentless focus on operational efficiency,
supported by the unique growth attributes of TELUS International,
TELUS Health and TELUS Agriculture. While we recognize that the
remainder of the year will present its own set of unique
challenges, the TELUS team has consistently demonstrated its
remarkable ability to adapt and evolve amid any operational
environment. In light of the continued evolving nature and
uncertainty of the global COVID-19 health crisis, we remain unable
to accurately forecast an exact range of positive and negative
impacts of the pandemic on our business and our previously issued,
and subsequently withdrawn, annual financial guidance for 2020. For
the year, as we strive to achieve EBITDA that is flat to slightly
accretive, and spend according to our original capex plan, we are
driving toward strong free cash flow within the lower-half of our
original target range of $1.4 to $1.7 billion. Our free cash flow
objective is not amplified by capex as we continue to anticipate
capital investments of approximately $2.75 billion, to support
ongoing prudent investments in fruitful opportunities we see to
advance the delivery of our leading network technologies.”
In the quarter, we added 151,000 new wireless, internet, TV and
security customers, down 55,000 over the same quarter a year ago,
while our residential voice losses of 10,000 remained stable,
resulting in total net additions of 141,000. The net additions
included 61,000 mobile phones, 33,000 mobile connected devices, as
well as 37,000 internet, 8,000 TV and 12,000 security customers.
Our total wireless subscriber base of more than 10 million is up
4.9 per cent over the last twelve months, reflecting a 2.4 per cent
increase in our mobile phones subscriber base to 8.8 million and a
21 per cent increase to our mobile connected devices subscriber
base to over 1.6 million. Additionally, our internet connections
are up 6.4 per cent over the last twelve months, surpassing 2
million customers, our TV subscriber base of 1.2 million is higher
by 4.4 per cent and our security customer base expanded to
635,000.
Free cash flow of $511 million increased by $187 million over
the same period a year ago, resulting primarily from decreased
income tax payments, lower device subsidy amounts, and lower
restructuring and other costs disbursements, partly offset by an
increase in interest paid.
Consolidated capital expenditures of $756 million decreased by
1.8 per cent over the same period a year ago due to the timing of
our fibre build activities and lower success-based capital
congruent with the decline in gross loading activity during the
pandemic. This was partially offset by increased investments in our
5G network, in addition to investments to enhance systems
reliability during the COVID-19 pandemic. Additionally, capital
expenditures included advancing wireless speeds and coverage,
supporting systems reliability and operational efficiency and
effectiveness efforts, and continuing to connect additional homes
and businesses directly to our fibre-optic technology. At the end
of the quarter, our TELUS PureFibre network covered approximately
2.33 million premises, or approximately 73 per cent of our
high-speed broadband footprint, reflecting an increase of
approximately 290,000 fibre premises over the last twelve
months.
For the quarter, net income of $315 million decreased by 39 per
cent over the same period last year and Basic earnings per share
(EPS) of $0.23 decreased by 47 per cent. These declines reflect
multiple impacts from the COVID-19 pandemic, higher income tax
primarily attributable to non-recurrence of the prior year
revaluation of the deferred income tax liability for the multi-year
reduction in the Alberta provincial corporate tax rate, increased
depreciation and amortization, as well as higher financing costs
primarily resulting from the $18 million long-term debt prepayment
premium recorded in the second quarter of 2020 related to our 2021
early bond redemptions. When excluding the effects of restructuring
and other costs, income tax-related adjustments, lease-up period
and other equity losses related to real estate joint ventures,
long-term debt prepayment premium and a gain on the retirement of a
provision arising from business acquisition-related written put
options within TI, adjusted net income of $316 million decreased by
24 per cent compared to the prior year, while adjusted basic EPS of
$0.25 was down 29 per cent.
COVID-19 updateAs the COVID-19 pandemic
continues to have a pervasive global impact, our persistent focus
has been on keeping Canadians connected and ensuring the health,
safety and well-being of our team members, our customers and our
communities. Throughout the quarter, we thoughtfully balanced the
interests of all of our stakeholders, including our shareholders.
Our response to the pandemic was based on advice from our Medical
Advisory Council and guided by our customers first priority, our
desire to protect the health and safety of our team and our social
purpose.
As a resilient organization with strong digital and e-commerce
capabilities, we were able to quickly embrace the new operating
environment, ensuring business continuity despite our proactive
decision to temporarily close approximately 90 per cent of our
retail stores and despite physical distancing restrictions that
prevented our field technicians from entering customer premises.
With these physical channels limited, we experienced increased
demand across our digital assets, including using our e-commerce
capabilities to support the sale of new devices to our customers,
along with strong adoption of our virtual technician model, which
allowed technicians to complete their tasks without entering a
customer’s premises. While the pandemic-related restrictions still
resulted in temporary declines to gross additions and customer
renewals, our agility and digital-first focus resulted in strong
customer growth in spite of the challenges presented by the
pandemic. During the final weeks of the quarter, our retail stores
began gradually reopening, and, upon agreement from both the
customer and technician, our technicians began entering customers’
premises to perform complex installs and repairs that could not be
done virtually, all while following strict operating
procedures.
The global pandemic has created conditions that affected our
second quarter financial results. With the closure of borders and
the corresponding decline in customer travel, as well as our
decision to temporarily waive wireless roaming fees up to April 30,
2020, we experienced a significant decrease in roaming revenues. We
also experienced decreases in chargeable wireless data usage as
more people remained home and offloaded their mobile devices to
Wi-Fi networks. While TELUS Health’s virtual care solutions
continued to see strong demand through the second quarter of 2020,
we experienced a decrease in revenues coming from our Medisys and
Copeman clinics, as these remained closed for most of the quarter
and have only began gradually reopening in recent weeks.
Our TI business continued to demonstrate strong resiliency,
transitioning from having not a single front line team member
working from home prior to the pandemic to having more than 90 per
cent of team members equipped to provide remote support. While some
of TI’s clients experienced significant impacts, with a decline in
demand from travel and hospitality-related businesses, this was
offset by increases in gaming and media industries, as well as
ecommerce food delivery.
Additionally, in the current economic environment, our business
customers are facing reduced and/or closed operations, which
resulted in lower revenue and EBITDA contribution in the quarter.
Although the net impacts have been modest so far, we anticipate
that these pressures will persist and grow as the extended
recessionary impacts take effect. In recognition of the financial
hardships that our customers are facing during these challenging
times, we implemented certain customer friendly measures including
flexible payment options, as well as delayed suspensions,
cancellations and write-offs. While we did not experience a
significant change in the collectability of receivables during the
quarter, we recorded higher bad debt expense to reflect the
financial pressures that households and businesses are currently
facing, in-line with our historical best practices.
In addition to the financial impacts described above, we
continued to take various steps to support our team members, our
customers, and our community during these challenging times. Below
are select highlights of the steps we are taking:
- Offering flexible payment options for consumers and small
business customers who have been financially affected by the
pandemic.
- Deferring planned price increases and extending promotional
periods.
- Delaying suspensions, cancellations and write-offs for our
customers who were in collections, and accepting payment
arrangements.
- Waiving wireless roaming fees up to April 30, 2020, and home
internet overage charges for customers without unlimited data plans
up to June 30, 2020.
- Offering free content options to households to ensure that
Canadians stay entertained and educated while remaining home,
including free channel previews on Optik TV and Pik TV, educational
content for youth in partnership with Microsoft, content spanning
health and wellness, and several technology “how to” videos.
We also provided the first month free of TELUS Online
Security Standard to help Canadians stay on top of their online
security and privacy.
- Providing families currently participating in our Internet for
Good program with a credit for free service and recently expanding
the program to people living with disabilities who receive
financial disability assistance from the provincial governments in
British Columbia, Alberta and Quebec.
- Expanding our Mobility for Good program to hospital workers,
providing a credit for wireless service to frontline healthcare
workers at hospitals across the country that have been
significantly impacted by the COVID-19 pandemic.
- Mobilizing our Health for Good™ clinics to support COVID-19
response efforts, with our mobile clinics operating as testing
centres and assessment clinics in Halifax, Vancouver, Ottawa and
the Waterloo region, our Mississauga-Brampton region clinic
supporting people leaving isolation and recovering from COVID-19,
and our Edmonton clinic supporting its emergency isolation and
quarantine shelter.
- Supporting the public health crisis through a unique leadership
gift, TELUS CEO Darren Entwistle donated three months of his gross
salary to essential hospitals, community health centers and
critical COVID-19 research across Canada. Mr. Entwistle’s
philanthropic gift includes: a $100,000 donation to BC Women’s
Hospital + Health Centre Foundation to support virtual care
technology; a $100,000 contribution given to McGill University
Health Centre Foundation to enable ICU patients to virtually
connect with loved ones; Covenant Health Foundation in Alberta also
received a $100,000 gift to support vulnerable and isolated
seniors; and a final $100,000 donation was given to Sunnybrook
Hospital Foundation in Ontario to urgently address the alarming
increase in suicides during the pandemic. Additionally, the
Entwistle Family Foundation matched a portion of the salary
donations in order to maximise the TELUS team’s commitment to
supporting healthcare in Canada and helping those most impacted by
COVID-19.
- Donating over 14,000 devices and tablets to enable isolated
seniors, hospitalized patients and vulnerable Canadians stay
connected.
- Launching our #StandWithOwners initiative to support Canadian
small businesses. This social media campaign exceeded target in
four days and we committed $500,000 in direct revenue, marketing
and expert advice.
- Avoiding layoffs by redeploying front line team members,
including those directly impacted by store closures, into other
areas of the business requiring additional support.
- Reallocating our capital expenditures in 2020 to provide
Canadians with the network speed, reliability and coverage and to
stay connected as well as accelerating our PureFibre capital
investments in Calgary.
- Empowering team members to continue to be productive while
working from home by providing alternate arrangements to balance
COVID-19 pandemic-related impacts, such as school closures
- Ensuring the health and well-being of our team members by
implementing strict hygiene and physical distancing standards for
the remaining employees who continue to work at TELUS premises or
in a customer-facing role, both domestically and
internationally.
For further discussion on the effect of the COVID-19 pandemic on
the environment in which we operate, refer to section 1.2 in our
second quarter 2020 Management’s discussion and analysis.
Consolidated Financial Highlights
C$
millions, except footnotes and unless noted otherwise |
Second quarters ended June 30 |
Per cent |
(unaudited) |
2020 |
2019 |
change |
Operating revenues |
3,728 |
3,597 |
3.6 |
Operating expenses before
depreciation and amortization |
2,369 |
2,224 |
6.5 |
EBITDA(1) |
1,359 |
1,373 |
(1.0) |
Adjusted EBITDA(1)(2) |
1,361 |
1,402 |
(2.9) |
Net income |
315 |
520 |
(39.4) |
Adjusted net income(1) |
316 |
416 |
(24.0) |
Net income attributable to common
shares |
290 |
517 |
(43.9) |
Basic EPS(3) ($) |
0.23 |
0.43 |
(46.5) |
Adjusted basic EPS(1)(3) ($) |
0.25 |
0.35 |
(28.6) |
Capital expenditures(4) |
756 |
770 |
(1.8) |
Free cash flow(1) |
511 |
324 |
57.7 |
Total subscriber connections(5)
(thousands) |
15,411 |
14,254 |
8.1 |
(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 second quarters of 2020 and 2019 excludes
restructuring and other costs of $70 million and $29 million
respectively, lease-up period and other equity losses related to
real estate joint ventures of $3 million in the second quarter of
2020, and a gain on the retirement of a provision arising from
business acquisition-related written put options within TI for $71
million in the second 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. |
Second Quarter 2020 Operating Highlights
As noted in Section 1.2 of our second quarter 2020 Management’s
discussion and analysis, the COVID-19 pandemic, which emerged in
the first quarter of 2020, continued to have a pervasive global
impact throughout the second quarter of 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 third 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 $152 million
or 7.7 per cent, as network revenue declined 3.3 per cent and
equipment and other service revenues fell 21 per cent.
- Network revenue decreased by $51 million or 3.3 per cent,
reflecting a 5.8 per cent decline in mobile phone ARPU as discussed
below, partly offset by a 4.9 per cent increase in the subscriber
base over the last 12 months.
- Equipment and other service revenues decreased by $95 million
or 21 per cent, reflecting lower contracted volumes, due to
customers reducing their general shopping habits primarily
attributed to the closure of certain sales channels for an
undetermined period of time due to the COVID-19 pandemic. Device
financing programs, which provide transparency of full device costs
resulting in customers deferring device upgrade purchases also
contributed to the decrease.
- Mobile phone ABPU was $69.65, reflecting a decrease of 5.1 per
cent. This decrease reflects the impacts caused by the COVID-19
pandemic including: (i) changing customer behaviour related to
travel restrictions, as well as our decision to temporarily waive
roaming charges for customers in response to the pandemic; (ii) the
closure of 90 per cent of our conventional retail stores for an
undetermined period of time, which hindered customer opportunities
for device upgrades and the upgrade or selection of higher-tier
plans; (iii) decreases in chargeable data usage as more people work
from home and offload their mobile devices onto Wi-Fi networks; and
(iv) our decision to temporarily waive late payment charges, partly
offset by: (v) increased chargeable voice usage revenue primarily
generated in the early stages of the COVID-19 pandemic prior to the
easing of certain related restrictions. Mobile phone ABPU was also
impacted by continued declines in chargeable data usage, and the
impact of the competitive environment putting pressure on base rate
plan prices in the current and prior periods. Mobile phone ABPU
declination was partly offset by growth resulting from our combined
TELUS Easy Payment device financing, Peace of Mind endless data
plans and TELUS Family Discount offerings, which we introduced at
the beginning of the third quarter of 2019, with customers
selecting plans with endless data or larger data buckets and
higher-value smartphones in the sales mix.
- Mobile phone ARPU was $56.82 in the second quarter of 2020, a
decrease of $3.48 or 5.8 per cent. This decline was primarily
driven by the impacts of the COVID-19 pandemic detailed above.
Mobile phone ARPU also 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 0.80 per cent as compared to 1.01
per cent in the same period a year prior, reflecting the impacts of
reduced switching activity between carriers due to the COVID-19
pandemic as customers reduced their general shopping habits,
partially attributed to the closure of certain conventional sales
channels discussed above. This was in addition to the successful
utilization of our TELUS Easy Payment device financing program,
Peace of Mind endless data plans, Bring-It-Back™ and TELUS Family
Discount offerings, our focus on executing customers first
initiatives and retention programs, and our leading network
quality.
- Mobile phone gross additions were 268,000, reflecting a
decrease of 68,000 compared to the same period a year prior. This
decline is reflective of reduced customer-switching activity
between carriers and the closure of certain conventional sales
channels for an undetermined period of time in response to the
COVID-19 pandemic. The decline more than offset growth in the
Canadian population, successful promotions and expanded channels,
including enhancing the use of our digital footprint. During the
pandemic period, as we temporarily closed our conventional retail
stores to ensure the safety of our customers and team members, we
successfully executed our customers’ use of our digital footprint
as our primary sales channel.
- Total subscriber net additions were 94,000, compared to 154,000
in the prior year. Mobile phone net additions were 61,000 in the
second quarter of 2020, a decrease of 21,000. Mobile connected
device net additions of 33,000 as compared to 72,000 in the second
quarter of 2019, as growth in our consumer health personal
emergency response system devices was more than offset by lower IoT
gross additions from reduced business customer activity.
- EBITDA of $870 million decreased by $49 million or 5.3 per
cent, while Adjusted EBITDA of $890 million was lower by $34
million or 3.7 per cent over last year, reflecting the impacts of
the COVID-19 pandemic including lower roaming revenue resulting
from restricted travel, the closure of certain conventional sales
channels for an undetermined period of time, decreases in
chargeable data usage as more people work from home and offload
their mobile devices onto Wi-Fi networks, our increased bad debt
expense and temporary waives of late payment charges. This was
partially offset by higher equipment margins and enhanced cost
efficiency programs in response to the COVID-19 pandemic.
TELUS wireline
- External operating revenues increased by $283 million or 18 per
cent, driven by data services revenue growth of 18 per cent or $228
million, and other operating income growth of $68 million which was
substantially from a $71 million gain on the retirement of a
provision arising from business acquisition-related written put
options within TI. This growth was partly offset by a 5.2 cent
decline in legacy voice services revenues.
- Data services revenues increased by $228 million or 18 per
cent. Data services revenue growth was driven by a combination of
higher revenues from our diverse portfolio of solutions, including
our TI customer care and business services which included
contribution from our acquisition of Competence Call Center (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 2019 acquisition of ADT Canada, internet and third wave data
services, and TV also contributed to growth. Additionally, this
growth was driven by increased revenues from our virtual care
solutions. This growth was partly offset by impacts resulting from
the COVID-19 pandemic, including a decline in health revenue mainly
from the temporary closures of our conventional Medisys and Copeman
clinics for all non-essential services and reduced health benefit
claims, in addition to lower revenue from business customers as
they redeploy their resources. Data services revenues growth was
also impacted the ongoing decline in legacy data service
revenues.
- Internet net additions of 37,000 improved by 12,000, due to
continued net new demand from consumers and businesses as we keep
our customers connected through offering a range of installation
options including virtual installations, as well as improved churn
resulted from our customer first initiatives and retention programs
and reduced switching activity between providers due to the
COVID-19 pandemic. Additionally, we continued our focus on
connecting more homes and businesses directly to fibre.
- TV net additions were 8,000, a decrease of 8,000, mainly due to
lower gross additions as a result of the impact of the COVID-19
pandemic and the changing landscape of increased streaming
services, partly offset by lower customer churn rate from strong
retention efforts and reduced switching activity due to the
COVID-19 pandemic.
- Security net additions of 12,000, reflecting an increase of
1,000, was driven by strong organic growth as we keep our customers
connected and protected through offering a range of installation
options and demand from our bundled product offerings.
- Residential voice net losses of 10,000 increased by 1,000
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 $489 million increased by $35 million or 7.7 per
cent, and when excluding the effects of a gain on the retirement of
a provision arising from business acquisition-related written put
options within TI of $71 million, wireline EBITDA decreased by $36
million or 7.9 per cent. Adjusted EBITDA of $471 million decreased
by $7 million or 1.2 per cent. This decrease reflects: impacts from
the COVID-19 pandemic including the temporary capacity disruptions
in our TI business due to government-mandated site closures, the
impacts to our health business from the temporary closures of
Medisys and Copeman clinics and reduced health benefit claims,
customers first initiatives including temporary overage waives, and
increased bad debt expense. As well, lower Adjusted EBITDA in the
second quarter of 2020 was impacted by continued declines in legacy
voice and legacy data services, higher employee benefits expense
mainly from business acquisitions and to support TI revenue growth,
and a decline in the EBITDA contribution from our legacy business
services. These factors were partly offset by an increased
contribution from the TI acquisition of CCC, expanded services for
existing customers and customer growth, growth from our home and
business smart technology (including security), and higher internet
margins.
Dividend Declaration The TELUS Board of
Directors elected to declare a second quarter dividend of $0.29125
per share, payable on October 1, 2020, to shareholders of
record at the close of business on September 10, 2020.
TELUS completes Mobile Klinik acquisitionOn
July 1, 2020, we acquired 100 per cent of Mobile Klinik, a
storefront wireless device repair and sales business complementary
to our existing wireless line of business. Consideration of $165
million consisted of: cash of $138 million; working capital
adjustments; and contingent consideration of $31 million, payment
of which is dependent upon achieving revenue, profitability, store
expansion and wireless subscriber addition targets through 2023.
The investment was made with a view to growing our wireless
business.
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 $979 million in
taxes in the first half 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 $33 billion in taxes
and spectrum since 2000.
- Investing over $1.4 billion in capital expenditures primarily
in communities across Canada in the first half of 2020 and
approximately $43 billion since 2000.
- Spending $3.8 billion in total operating expenses in the first
quarter of 2020, including goods and service purchased of
approximately $2.7 billion. Since 2000, we have spent $127 billion
and $86 billion respectively in these areas.
- Generating a total team member payroll of $1.4 billion in the
first half of 2020, including payroll taxes of $95 million. Since
2000, total team member payroll totals $49 billion.
- Returning $1.1 billion in dividends year-to-date through three
quarterly dividend payments through July 31, 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 more than $13 billion in dividends, representing over $14
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’ second quarter 2020 conference call is scheduled for
Friday, July 31, 2020 at 12:00pm ET (9:00am 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 August 31,
2020 at 1-855-201-2300. Please use reference number 1251847# 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 targets, outlook, updates, our plans and
expectations regarding the impact of the COVID-19 pandemic and
responses to it, 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. These statements are made
pursuant to the “safe harbour” provisions of applicable securities
laws in Canada and the United States Private Securities Litigation
Reform Act of 1995.
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 expectations expressed in or implied by the
forward-looking statements.
The assumptions on which our 2020 outlook was based 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 proactive measures we have
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, and we no longer
believe that these assumptions are valid. Therefore, in May 2020,
given the uncertain magnitude, duration and potential outcomes of
the pandemic, we withdrew our 2020 outlook and the assumptions on
which it was based. Statements in this press release regarding our
expectations for EBITDA, free cash flow and capital expenditures
are based on our current assumption that the reopening of the
economy across Canada will continue as it has begun in the second
quarter of 2020 and that, although cases of COVID-19 will continue
to be identified, there will not be a pronounced “second wave” of
infections in Canada or material worsening of the pandemic in the
United States or internationally that would have a significant
impact on our business or customers.
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 news release. Consequently, our
operations and financial results could be materially different than
predicted in our previously issued guidance and in May 2020, we
withdrew 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 our assumptions and consider updating our
outlook and guidance when we issue our third quarter 2020 MD&A
for the three-month and nine-month periods ending September 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 which 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 this Management’s discussion and
analysis (MD&A), 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 (reiterated in June 2020) 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, availability and timing 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, and decisions of other foreign
governments; 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, 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; 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 with
both currently expected to take place in 2021, 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 or 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, but are not limited to 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
|
Second quarters ended June 30 |
|
C$ and in millions |
2020 |
2019 |
Change |
Net income attributable
to Common Shares |
290 |
517 |
(227) |
Add (deduct): |
|
|
|
Restructuring and other costs, after income taxes |
42 |
22 |
20 |
Income tax-related adjustments |
2 |
(123) |
125 |
Lease-up period and other equity losses related to real estate
joint ventures |
3 |
— |
3 |
Long-term debt prepayment premium, after income taxes |
14 |
— |
14 |
Retirement of a provision arising from business acquisition-related
written put options within TI, after income taxes |
(35) |
— |
(35) |
Adjusted Net income |
316 |
416 |
(100) |
Reconciliation of adjusted basic EPS
|
Second quarters ended June 30 |
|
C$ and in millions |
2020 |
2019 |
Change |
Basic EPS |
0.23 |
0.43 |
(0.20) |
Add (deduct): |
|
|
|
Restructuring and other costs, after income taxes, per share |
0.04 |
0.02 |
0.02 |
Income tax-related adjustments, per share |
— |
(0.10) |
0.10 |
Long-term debt prepayment premium, after income taxes, per
share |
0.01 |
— |
0.01 |
Retirement of a provision arising from business acquisition-related
written put options within TI, after income taxes, per share |
(0.03) |
— |
(0.03) |
Adjusted basic EPS |
0.25 |
0.35 |
(0.10) |
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 |
|
|
|
Second quarters ended June 30 |
($ millions) |
2020 |
2019 |
Net income |
315 |
520 |
Financing costs |
202 |
189 |
Income taxes |
117 |
31 |
Depreciation |
505 |
470 |
Amortization of intangible assets |
220 |
163 |
EBITDA |
1,359 |
1,373 |
Add restructuring and other costs included in EBITDA |
70 |
29 |
EBITDA – excluding restructuring and other
costs |
1,429 |
1,402 |
Add lease-up period and other equity losses related to real estate
joint ventures |
3 |
— |
Deduct retirement of a provision arising from business
acquisition-related written put options within TI |
(71) |
— |
Adjusted EBITDA |
1,361 |
1,402 |
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
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 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 |
|
|
|
Second quarters ended June 30 |
($ millions) |
2020 |
2019 |
EBITDA |
1,359 |
1,373 |
Add non-cash losses (deduct non-cash gains) from the sale of
property, plant and equipment |
1 |
(5) |
Restructuring and other costs, net of disbursements |
14 |
1 |
Effects of contract asset, acquisition and fulfilment (IFRS 15
impact) and TELUS Easy Payment device financing |
102 |
15 |
Effects of lease principal (IFRS 16 impact) |
(81) |
(64) |
Leases formerly accounted for as finance leases (IFRS 16
impact) |
27 |
13 |
Other items: |
|
|
Share-based compensation, net |
41 |
20 |
Net employee defined benefit plans expense |
25 |
19 |
Employer contributions to employee defined benefit plans |
(12) |
(12) |
Interest paid |
(199) |
(147) |
Interest received |
3 |
3 |
Capital expenditures (excluding spectrum licences)1 |
(756) |
(770) |
Free cash flow before income taxes |
524 |
446 |
Income taxes paid, net of refunds |
(13) |
(122) |
Free cash flow |
511 |
324 |
|
(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 $15 billion in annual revenue and 15.4 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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