TELUS Corporation

Good day, ladies and gentlemen. Welcome to the TELUS 2020 Q1 Earnings Conference Call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.

Hello, everyone. Thank you for joining the call today. Our first quarter 2020 results, news release, MD&A and financial statements, and detailed supplemental information were posted on our website this morning at telus.com slash investors. On our call today, we have Darren Entwistle, President and CEO of Doug French, Executive Vice President and CFO, Zaino Malgi, President, Home Solutions, and Jim Senko, President, Mobility Solutions. Let me briefly direct your attention to slide two. Presentation and answers to questions contain forward-looking statements that are subject to risks and uncertainties and made based on certain assumptions. Accordingly, actual performance could differ from statement made today, so we ask that you do not place undue reliance upon them. We disclaim any obligation to update forward-looking statements except as required by law. And we refer you to the risks and assumptions outlined in our public disclosures, including our first quarter 2020 MD&A, our 2019 MD&A, and filings with security commissions in Canada and the U.S. With that, let me now turn the call over to you, Darren.

Thanks, Rodrigo. And hello, everyone. The COVID-19 pandemic has had a profound impact, as we all know, on the communities where we live, where we work, and where we serve. As I highlighted in my shareholder letter issued earlier today and posted on our website, our team is working diligently and with their characteristic grit, their collaboration and their innovation to ensure all Canadians stay connected at a time when the human connection has frankly never been more important. Our robust and consistent performance over the longer term, including strong Q1 financial and operating results coupled with the strength of our balance sheet and financial liquidity, positions us well to navigate the uncertainty caused by the global health crisis, and importantly, for the anticipated market opportunities thereafter. As we responded to this unprecedented emergency, our focus has been on taking care of our team members, taking care of our customers and our communities, whilst embracing our fiduciary responsibilities to you, our shareholders. Notably, we are leveraging our strong digital and work-from-home capabilities to safeguard team member and customer health and to support customer transactions to help offset the impacts within our store and call center operations that have been impacted. Looking beyond this pandemic, we will continue to leverage our digital channels across the customer journey in order to meet evolving client needs, as well as to harvest the resulting effectiveness and efficiency benefits of doing so. Myself and the leadership team at TELUS continue to be inspired by the TELUS team as they literally work around the clock to keep Canadians connected. With global physical distancing measures in place, our world-leading broadband services have never been more essential than what they are right now. Citizens are increasingly relying on this connectivity to stay in touch with loved ones and to access essential health and safety information. The strength, the speed, and the consistency of our networks have bolstered our nation's productivity. According to an independent global study examining the impact of recent work from home measures, Canadians have recorded a 170% increase in remote work since emergency measures began taking effect, contributing to an overall increase in productivity of some 25%. By comparison, the same report found that the shift to remote work had the opposite effect in Europe and the United States, where productivity has declined by 8.2% and 7.2%, respectively, since self-isolation policies came into effect. Our technology teams continue to focus relentlessly on maintaining robust reliability and world-leading performance performance. across all of our critical services while proactively managing record high traffic levels, most notably record highs in voice and video calling, messaging, TV viewership, and home Wi-Fi. Our ongoing investments in technology and infrastructure have allowed us to effectively manage a 50% daily increase in voice traffic. four times the traffic that occurred on Mother's Day last year. And they've also enabled us to respond to a near doubling of our multi-messaging service, which is currently twice what we normally see on Christmas Day. To put it all into perspective, our team's efforts to sustain our networks throughout COVID-19 is akin to supporting Super Bowl-level traffic each and every day, hour in, hour out. Reflecting our significant efforts to ensure network excellence during this critical time, OpenSignal analyzed 4G download speeds globally on a weekly basis from January through to the end of March 2020. The report shows that not only are Canada's networks continuing to operate exceedingly 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 UK were challenged to support the added traffic and pressure, at times experiencing download speeds up to 15% and 30% slower respectively. Complementing this acknowledgement, TELUS was recognized in TETELA's Canada's State of Mobile Networks Report in April of 2020 for its global network leadership, winning three of the national awards for core consistent quality, winning for download throughput and latency as well, whilst tying for excellent consistent quality delivered by our network. Furthermore, GD Power recognized Canada and TELUS as having the top wireless network in Canada, marking the sixth consecutive year that TELUS has earned a GD Power Award for network quality. I think that's terrific for our company, and I think it's emblematic as it relates to the quality of technology and infrastructure in our country, and it's terrific to have that third-party validation from GD Power. Indeed, these rankings build on the recognition TELUS has consistently earned from PCMag and Ookla in addition to OpenSignal, Tetella, and J.D. Power for three or more years. Moreover, TELUS's wireline broadband network has performed exceedingly well through the COVID-19 period. And this is in stark contrast to networks in many other countries around the globe where governments have had to step in and manage traffic volumes to help out. As we navigate the current health crisis and continue to expand our innovative health technology and services across the country, our virtual care offerings have never been more important to Canadians. With the introduction of virtual fee codes by provincial governments across Canada to enable remote patient care, TELUS helped launch virtual visit functionality integrated with TELUS Electronic Medical Records, or EMR, enabling the 26,000 Canadian doctors using our 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, utilizing a combination of chat and secure video consultations for convenient on-demand access for patients looking to interface with a nurse practitioner. Akira is helping more than 1,000 of Canada's largest employers support the health and well-being of their employees during this challenging time with our employer-funded virtual care platform. And every employer, and TELUS is tantamount to this, is thinking first and foremost about keeping their employees safe. And Akira is playing a huge role in making sure that that axiom is a reality. Additionally, we've experienced a tenfold surge in demand for our Babylon by Telus Health virtual care service, which is available in BC, Alberta, and Ontario, with other provinces across Canada launching shortly, including the French version in Quebec. This provides patients with video access to a locally licensed doctor, which helps keep both the patient and the doctor safe, leveraging physical distancing with video consultations to deliver the best health outcomes in a way that's safe for the doc and a way that's safe for the patient and delivers the Pareto optimal health outcome. The Babylon service provides same-day appointments. and continues to be rated 4.9 out of 5 by our patients, which is, by the way, the same rating that patients are giving our Acura platform on the employer healthcare front. Importantly, as it relates to our Babylon service, we are able to provide options to the 5 million Canadians that do not have a family doctor and the more than half of all Canadians that find it difficult to quickly access after-hours medical care without going to the clinic or the emergency department. This is also particularly pertinent for Canadians living in rural communities. We also continue to see tremendous adoption of our home health monitoring solution, which incorporates the COVID-19 protocol into the software, enabling hundreds of patients to be monitored by our acute care system. This solution has been implemented by the BC Ministry of Health and adopted by Saskatchewan and Nova Scotia with other provinces coming on board quickly. We've also seen a considerable increase in the demand for our Living Well Companion Service that is focused on helping our seniors live independently. And caring for our seniors during this terrible time of the contagion and the disproportionate impact that it has on our elder citizens is a responsibility that TELUS takes particularly seriously. Our GPS-enabled personal emergency response service with fall detection provides 24-7 access to care. A trained operator can assess the situation and contact loved ones and or alert emergency personnel to dispatch help right away, wherever and whenever they need it. Again, putting our most vulnerable citizens not just at the forefront of our hearts and minds, but in terms of leveraging our technology to take care of them. Let's turn now to have a look at our Q1 performance. 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 in spite of of the challenging circumstances we faced in the month of March. If the last 20 years has proven anything, TELUS team members are at their very best when things are at their very worst. In Q1, consolidated revenue and EBITDA were up 5.4% and 4.2% respectively, combined with strong free cash flow of $545 million. Notably, had we not experienced the impacts of the pandemic on our business, we would have delivered consolidated EBITDA growth of 6.2%. These transient impacts included lower wireless roaming revenue and the temporary closure of certain TELUS international centers, as well as TELUS Health's Menaces and Coatman Clinics. Our team delivered strong first quarter customer growth of 106,000 client net additions, up 12,000 over the same period last year, reflecting continued broadband network leadership and customer service excellence, and these are industry-leading results. Looking at wireless, first quarter network revenue expanded by 1.3% year-over-year, driven by our consistent focus on profitable, high-quality, smartphone-centric subscriber growth. This was diluted by the impacts of the COVID-19 pandemic in March, primarily due to a reduction in roaming revenue, as well as our efforts to support our customers, inclusive of waiving international roaming charges. inclusive of deferred planned pricing increases, and inclusive of offering customized payment arrangements for the financially challenged. TELUS achieved year-over-year wireless EBITDA growth of 2.6%, with higher network revenue, equipment margins, as well as cost efficiency savings, partly offset by the impacts of the pandemic that I just discussed. We once again led the industry by a considerable margin with our mobile phone churn rate of 0.94%, inclusive of both postpaid and our prepaid results. And our traction here continues to be excellent, and it's great to see the hallmark of our organization exemplified during the contagion. The eight basis point year-over-year improvement is indeed reflective of the continued success of our customers' first culture in action, and it's also emblematic of our leading network quality on a global basis. It also reflects less switching activity, as clearly customers reduced their physical shopping habits in the final weeks of March. In a minute, Jim Senko will provide further details on our strong performance in wireless and provide further color in respect of our continued industry-leading loyalty and subscriber net additions on the wireless front. Let's now turn and have a look at our wireline results. TELUS again delivered another quarter of industry-leading performance, buttressed by our premium, diversified, and evolving product portfolio over our globally leading network, which is underpinned, of course, by our industry-best customer service. What a duality that is between world-leading network excellence and world-leading customer service. First quarter wireline revenues increased by 17%, and wireline data revenue grew by 18.5%. which is a modern record for TELUS in respect of data revenue growth. This growth was driven by continued customer growth in high-speed Internet and TV, which came in at 26,000 and 8,000 net additions, respectively. It was driven by growth from new and existing customers in TELUS International, including the acquisition of Confidence Call Center, and it was diluted a little bit by the COVID-19 impacts that have been diluted to the overall TELUS International results. Our growth in respect of wireline was driven by strong results in home and business security with the inclusion of ADT Canada, and our home and business security came in delivering net adds of 15,000 in the quarter, which I think is a leading result in all of North America as it relates to net additions on home and small business security. This was partly offset by decreased revenue from our business customers as they redeployed resources to answer the unique challenges that they are facing within their B2B environment. Lower revenues in TELUS Health, resulting primarily from the closure of our Medicis and Copeland clinics, were partly offset by increased revenues from our hyperscaling virtual care solutions. Wireline EBITDA increased by 7.2%, driven by growth in Internet, growth in security services, and an increased contribution from TI despite the pandemic dilution. Zeno is going to have an opportunity to provide further operating color on our wireline performance in a few minutes. Our strong and consistent wireline financial and operating results clearly highlight the importance of our dedicated focus on delivering customer service excellence over what is truly a world-leading fiber network. In this regard, during the first quarter, our team expanded our pure fiber coverage to approximately 71% of our high-speed broadband footprint, on our way to 80% coverage by the end of 2020. Indeed, the current environment underscores the efficacy, the potency, and the reliability of our TELUS Pure Fiber network. Pure Fiber enables millions of Canadians to work, to learn, to access entertainment, to transact online, and to socialize virtually from home on a significantly intensified basis. All as we, as a nation, as citizens, as consumers, and as businesses take a quantum leap into the digital society and digital economy that will endure and grow well beyond the current global health crisis. It's hard to believe how fast time goes to think that we're only merely a few months away from our fiber footprint covering 80% of our original broadband topology. Notably for 2019, speaking of the power of our wireline network, TELUS was recognized as Canada's number one Netflix streaming experience and as the country's best Wi-Fi provider. TELUS is also recognized as Canada's best gaming internet service provider for major ISPs in 2020 by PCMag. These awards are a testament to the significant investments that we've made in our leading pure fiber network and the innovation and spirited teamwork exemplified by the TELUS team in putting customers first in every single thing that we do. In addition to our broadband growth engine, our wireline results continue to be supported by our unique TELUS help and TELUS international growth businesses. Despite the impact in TELUS Health resulting from the closure of our clinics, we've seen a transformational step up in the utility, coverage, and adoption of digital healthcare services in general and virtual care in particular. This will be a legacy of the current health crisis and one which TELUS is extraordinarily well-positioned to lead. Looking at TELUS International, our team responded swiftly and thoughtfully as a number of our service delivery centers closed in response to various government decisions and ensuing announcements. Impressively, we have now enabled 85% of our TELUS International team to work and support their clients from home or a modified work location, protecting the health and safety of our team members and that of their families and society, whilst enhancing the operating resiliency of the TI organization and providing continuity of service for our highly valued customers. We entered the current global health emergency in a position of strength quite clearly. Despite the impact of COVID-19, Telus delivered solid first quarter financial results, strong subscriber growth, it's industry leading, leading customer churn, and very robust free cash flow generation, both for Q1 and what we're postulating prospectively. We have a strong balance sheet, further supported by our successful and indeed timely $1.5 billion equity offering in February, and we ended the quarter with available liquidity in excess of $3 billion. This puts us in an enviable position to not only manage the current period of uncertainty, but to continue to grow our business adeptly and to prosper in the post-COVID-19 environment as we put some of our tuition value to work. With our first quarter now behind us and a new normal settling over our country, We have chosen to defer the updating of our annual financial guidance in light of the evolving nature of the global COVID-19 health crisis. We will look to provide updated annual guidance for 2020 when we report Q2 results at the end of July. Whilst we navigate this crisis, we are continuing to drive near-term efficiencies. Every crisis is accompanied by its opportunities, and we've identified more than $250 million of cost reduction and margin accretion initiatives to date and counting, and we intend to leverage those. This will allow us to mitigate the transient impacts related to the current crisis, manage through various stakeholder initiatives, position our business for future opportunities, and remain focused on driving free cash flow toward our original expectation that we set out for 2020. The criticality of technology and infrastructure to the well-being and productivity of our economy and society highlights the importance of continuing to invest smartly in the advancement of our world-leading broadband networks and digital capabilities in order to meet accelerating customer demand. These investments will clearly drive both near and longer-term revenue and operating efficiency benefits, as well as sustainable cash flow and future dividend growth. After the Board has thoughtfully weighed the interests of our many stakeholders, alongside the critical initiatives that have been so numerous that we've undertaken in response to the global health crisis, We as a board made the decision to defer our scheduled dividend increase this quarter, which was planned as part of our ongoing rigorous multi-year dividend growth program. Our quarterly dividend declared today for our dividend payment in July remains unchanged from our April payment and represents a 3.6% increase over the same period last year. Importantly, our decision to defer our dividend increase exemplifies our sensitivity to the unique circumstances our team members, our customers, and fellow Canadians are currently experiencing, as well as our commitment and prioritization to effectively manage our resources to help out our country and our citizens in need as we work collectively to move past these uncertain times and into a period of economic recovery and digital stimulation. As such, we're hopeful that conditions will permit us to meet or indeed exceed our targeted dividend increase when we report our third quarter results in early November and look to carry on with our well-established dividend growth model. Obviously, we remain confident in the outlook for our business and the significant opportunities in front of us to further elevate the TELUS brand and to leverage our digital capabilities and our winning growth strategy that's been so successful for so many years that's playing out so fruitfully given the challenging conditions that we're weathering due to the contagion. In conclusion, our team's unwavering commitment, and they deserve all the credit. Their commitment to improving outcomes for our fellow citizens in concert with our leading financial and operating results and our superior asset mix continues to define TELUS's leadership in social capitalism and the symbiotic relationship between our company and the communities that we serve. The incredible innovations we are driving in response to the current crisis and the tuition value gleaned over the past number of months will help us evolve our operating model and further enhance the resiliency and success of our organization ensuring that we continue to be positioned strongly for the new normal on the other side of this pandemic. In closing, from the head and from the heart, I would like to thank the entire TELUS team for their tireless efforts aiding our amazing healthcare workers, our government partners, our customers, our communities, and coming to the assistance of each other. It's been a breathtaking response from the team. I'm both proud and grateful. And on that note, I'll turn the call over to Jim to provide further color on our strong performance and our recent innovations in wireless that have proven successful. Jim, over to you.