TELUS Corporation

Good day, everyone. Welcome to the TELUS 2022 Q4 Earnings Conference Call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.

Thanks, Carl. Hello, everyone. Thanks for joining us today. Our fourth quarter and year-end 2022 results, news release, MD&A and financial statements, and detailed supplemental information were posted on our website this morning at telus.com slash investors. Our call today will begin with remarks by Darren and Doug. The Q&A portion of our call will be joined by Zainul Malji, President of Consumer Solutions, Naveen Arora, President of Business Solutions, Jim Senko, our Chief Product Officer, Tony Guerin, our Chief Operating Officer, Jeff Puritt, President and CEO of TELUS International, John Raines, President of TELUS Agriculture and Consumer Goods, and Michael Dingle, Chief Operating Officer at TELUS Health. Briefly, this discussion and answers to questions contained forward-looking statements. Actual results could vary materially from those statements. The assumptions in which they're based and the material risks It could cause us to differ. Our outline in our public filings with security commissions in Canada and the U.S., including in our 2022 annual MD&A. With that, over to you, Darren.

Thanks, Diego, and hello, everyone. Throughout 2022, Telus achieved strong operational and financial results across our business, leading our North American peer group with respect to 2022 operating revenue, adjusted EBITDA, and free cash flow growth, along with most operating metrics. This is a trend the TELUS team has consistently demonstrated over the longer term. Our robust performance in the fourth quarter and for the full year reflects the chemistry of our globally leading broadband networks and customers-first culture, driving our hallmark combination of profitable customer growth alongside strong financial results. Industry-leading telecom net additions of 301,000 represented our best fourth quarter on record, and concluded another year of industry-leading expansion of our customer base. Indeed, in 2022, we delivered all-time record customer growth, surpassing total annual net additions of more than 1 million for the first time. This included another best-ever year for fixed subscriber growth of 274,000 and the highest mobile phone net additions for our organization since 2010, with 401,000 net new customers. Our industry-leading growth reflects the consistent potency of our operational execution, unmatched bundled product offerings across mobile and home, and team member culture focused on delivering exceptional customer experiences over our globally leading Pure Fiber and 5G networks. Our team's passion for delivering customer experience excellence once again contributed to strong client loyalty across our key product lines, including blended mobile phone, pure fiber internet, optic TV, security, and voice churn, all below 1% for the year. Also for the full year, operating revenue growth of 8.6% came in above our revised guidance of approximately 8%, while EBITDA growth of 9.5%, landed comfortably in the midpoint of our revised guidance range. Moreover, we achieved strong free cash flow growth of 64% for the year, exceeding our original free cash flow target. In addition, CapEx was in line with our target and reflected the final year of our accelerated broadband build program that has been considerably successful. Strength in our core telecom operations continues to be bolstered by continued strong operating momentum in our highly differentiated technology-oriented businesses, TELUS International, TELUS Health, and TELUS Agriculture and Consumer Goods. Let's now turn and take a look at the fourth quarter. TELUS once again achieved industry-leading operating revenues and EBITDA growth of 12.6% and 11.3%, respectively. Looking at mobile, Telus achieved strong customer growth of 218,000 net additions in the fourth quarter. This included healthy mobile phone net additions of 112,000, which was similar to last year. Notably, this strength continued to be driven primarily by loading on our premium brand, reflecting our consistent focus on profitable customer growth. It also included leading and record fourth quarter connected device net additions of 106,000, up 31% on a year-over-year basis. Importantly, our team delivered another quarter of industry-best loyalty results, which continues to be the hallmark of the Telus organization. Blended mobile phone churn was an industry-low 1.22% in the fourth quarter, reflecting a year-over-year increase as a result of the intensely competitive Black Friday promotional environment. Looking at our industry-leading postpaid mobile churn, this was once again below 1% in the quarter. Indeed, at 0.75% for the year and relatively flat over last year, 2022 represented our ninth consecutive year of industry-leading postpaid wireless churn below 1%. One key factor behind this consistent industry best performance is the superiority of our world-leading networks. In this regard, in 2022, TELUS once again earned numerous accolades from independent third-party organizations. Notably, global analytics company OpenSignal out of the UK recognized TELUS with five industry awards in the year for both our 4G and 5G networks. making TELUS Canada's most awarded network by OpenSignal for the 11th consecutive time. Similarly, TELUS was honored with three awards from U.S.-based UCLA in 2022, including being named North America's fastest mobile network according to results from their speed test. Moreover, Canada-based TELUS recognized our wireless network with four national awards for excellent consistent quality, core consistent quality, 5G excellence consistent quality, and 5G core consistent quality. Likewise, our wireline network also received praise, ranking it as the fastest nationwide internet service provider in Canada amongst major carriers by PCMag for the third consecutive year. These acknowledgments clearly illustrate TELUS's leadership in offering our customers the fastest, most expansive and most reliable service in Canada across both our wireless and pure fiber networks. Moreover, this recognition of TELUS' national broadband network leadership underscores the tremendous value of our generational investments in world-leading network technologies, including our now concluded accelerated broadband expansion program undertaken over the past couple of years. Importantly, These investments will continue to drive extensive socioeconomic benefits to Canadians in communities from coast to coast for decades to come. To close on mobile, industry-leading fourth quarter ARPU growth of 2.2% over last year was supported by roaming improvements as a result of increased international travel. It was also supported by strong performance on our premium brand also supported by strength within our MRC and supported, of course, by our low churn rate keeping our premium customers. Notably, mobile phone, lifetime churn, and the revenue that we generate continues to be up in terms of lifetime revenue by 48% higher than our national peers, reflective of the critical combination of our consistent focus on high-quality economic customer growth and leading client loyalty. And what a combination that is, and what a huge differentiator that is versus our peers. Now let's take a look at our fixed operating results, where TELUS delivered another quarter of industry-best wireline customer growth. Our team achieved strong fourth quarter internet net additions of 42,000, up 5% on a year-over-year basis. We continue to drive strong growth in our TV product line, with industry-leading net additions of 17,000, relatively flat over the prior year, despite modestly higher churn. Furthermore, residential voice was again a very positive story this quarter, with industry-low line losses of only 4,000, which was down 60% on a year-over-year basis and represents our best fourth quarter result since 2002. Notably, this reflects our momentum with respect to our product intensity or product bundling, if you will, and the inherent churn benefits associated with this strategy that are proving to be so successful for TELUS. Strong and leading security net additions of 28,000 further reflect our successful strategy of driving profitable customer growth and multi-product penetration. Overall, our robust, industry-leading external fixed net additions of 83,000 represented our best quarterly wireline customer growth on record. These performance attributes reflect the strength of our unique and highly attractive bundle offers across our unmatched portfolio of products and services. products and services that are buttressed by our ever-expanding broadband networks, our leading customer-centric culture, as well as our strong and highly differentiated social capitalism attributes that truly do underpin the strength of the TELUS brand and culture. Now let's take a look at our TELUS Health business. In 2022, health services revenue increased by 75%, nearing the $1 billion revenue milestone, including four months of contribution from the acquisition of LifeWorks at the beginning of September. As we progress into 2023, we continue to focus intensely on integrating and scaling our global health operations to build the healthiest communities and workplaces on the planet. Notably, we recently united Lightworks with TELUS Health together under the TELUS Health name and one brand going forward with the aim of integrating the best of the global brand and culture from across both Lightworks and TELUS. The expanding scale of our healthcare programs within our integrated TELUS Health organization includes covering 68 million lives, an increase of more than 47 million over last year. In addition, digital health transactions were up over 5% in 2022 to more than 580 million. Furthermore, we welcomed 1.7 million new virtual care members in the last 12 months alone, increasing our membership to 4.5 million, up 61% over the prior year. For 2023, We anticipate strong growth at TELUS Health, including solid organic growth as we continue to integrate and expand this business into an asset of scale and significant global consequence. This will be supported by our intense focus on crystallizing meaningful synergies of $200 million or more that we expect to drive over the next three to five years, inclusive of revenue synergies, from cross-selling and $60 million in near-term cost synergies. And of course, TELUS International has a critical role to play to help us achieve these results and beat the targets that we've set for ourselves. Before we close on health, I'm pleased to share the appointment of Sid Khosraju as our President of TELUS Health. With more than 20 years of global leading organizations with a focus on innovative healthcare technology and services, Sid is exceedingly well positioned to lead the ongoing transformation and scaled growth of TELUS Health. Indeed, leveraging his tremendous expertise, Sid will drive product innovation, distribution strength, and an engaged culture that puts customers first across our healthcare business. Myself and the executive leadership team look forward to supporting Sid and our telehealth team as we accelerate our transformational strategy of leveraging data analytics and dynamic insights to revolutionize access to advanced healthcare services, including preventative health and wellness optimization solutions, driving remarkable health experiences for the benefit of the clients, and individuals that we serve in Canada and worldwide. The economic growth that stems from that will put us on the IPO trajectory that we all find so exciting. Turning to tell us agriculture and consumer goods, annual revenues of $354 million were up 24% in 2022 over the prior year. through a combination of organic growth and the impact of business acquisitions in 2021 as our team continues to integrate and grow this compelling global business. We are creating significant value as the leading provider of agriculture and consumer goods technology solutions around the world as we advance the sector's efficiency and effectiveness, including food quality production, waste reduction, food and retail execution, trade promotion optimization, and doing it all through advanced data analytics and dynamic insights that help our customers from agribusiness to food retailing. In 2023, we look forward to strong progress and double-digit revenue growth in this business. Now let's take a look at TELUS International. Despite a challenging macroeconomic environment, this morning TELUS International announced strong 2022 results, including double-digit revenue growth, leading profitability, and robust cash flow for the full year. Indeed, TI's strong results and strong outlook also reflect the important relationship with TELUS as an anchor customer, enabling TELUS with superior customer service excellence, empowering our digitization strategy, a unique relationship that significantly benefits both organizations and one that is expected to continue growing, and we will realize the success of that mutualism. TI's continued focus on profitable growth, powered by an attractive end-to-end set of digital capabilities, position it as a trusted advisor for premier digital customer experiences and IT services for its over 650 global clients. Earlier in January, TI consummated the acquisition of full-service digital provider WillowTree, significantly bolstering TI's front-end development and design competencies, and importantly, unlocking unprecedented and deeply attractive cross-selling opportunities for both organizations. The transaction resulted in the addition of new, marquee customers that further diversified TI's enviable list of client partners. Importantly, Telus International and Willowtree also support the acceleration of TELUS's ongoing digital transformation and key product development across the totality of our business, but in particular in health and agriculture and consumer goods. Doug's going to have an opportunity to provide further commentary on both T-TECH and TELUS International's fourth quarter results in just a moment. In closing, The Telus team's ability to consistently drive profitable growth over the longer term on the back of a differentiated asset base, best-in-class customer experiences, world-leading networks, and our unique growth businesses provide us with our confidence in the robust outlook for our business and our ability to deliver on the ambitious annual targets that we announced today. For the year, we are targeting industry-leading operating revenue and adjusted EBITDA increases of up to 14% and 11%, respectively. As previously announced, we expect a very meaningful drop in core capital expenditures to approximately $2.6 billion following the successful completion of our accelerated broadband investment program. This will represent a capex intensity ratio of circa 13%, which represents a historic low for TELUS and is amongst the lowest globally within our peer group. As a result, we expect free cash flow of approximately $2 billion, up close to 60%, supported by strong EBITDA growth and the material capital expenditures stepped down. Our targets will be supported by the Healthy Guidance for 2023 announced this morning by TELUS International, once again targeting double-digit revenue and EBITDA growth alongside leading margins as they continue to drive solid and profitable operating momentum. TI's financial objectives will be backed by their end-to-end design capabilities as they build and deliver these capabilities tapping into the accelerated need for premium digital customer experiences, digital transformation, content moderation, and AI data solutions across its strategic industry verticals on a global basis. Importantly, the unparalleled skill, innovation, grit, and execution excellence of our team In progressing our consistent and winning strategy, underpins our leading multi-year dividend growth program, now unbelievably in its 13th year, and extended that particular ambition for annual growth of 7% to 10% through to the end of the 2025 financial year. Finally, I'd like to take this opportunity to recognize our team for the way they continue to exemplify our social purpose in action. In 2022 alone, our team members and retirees donated $125 million and volunteered close to 1.5 billion hours in support of charitable and community organizations. This is more than any other company in Canada. Indeed, since 2000, we've demonstrated our global leadership in social capitalism by gifting $1.5 billion, including two million days of global volunteerism. Myself and the leadership team continue to be inspired by the unparalleled compassion of our TELUS family and their dedication to making the future friendly for all of our stakeholders. They are indeed the best exemplification of our brand values in action. Before I came to TELUS, I spent 10 years in global telecoms, hunting for value in most places on the planet. So it is with some degree of familiarity that I say the growth profile that we have is truly unmatched on a global basis. I don't know of a global peer that can match the strength and critically, the sustainability of our revenue growth, our EBITDA growth, our cash flow growth, and our dividend growth. And that's not just the story for 2023. It's the story for 2024, 2025, and beyond. And that truly makes us unique. And on that note, I'll hand the call over to Uncle Doug.