TELUS Corporation

Good day. Welcome to the TELUS 2024 Q2 earnings conference call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.

Hello, everyone. Thank you for joining us today. Our second quarter of 2024 results, news release, MD&A and financial statements, and detailed supplemental investor information were posted to our website earlier this morning. On our call today, we'll begin with remarks by Darren and Doug. For the Q&A portion, we'll be joined by other members of our leadership team, Briefly, prepared remarks, slides, and answers to questions contained forward-looking statements. Actual results could vary materially from these statements. The assumptions in which they're based and the material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the U.S., including second quarter 2024 and annual 2023 MD&A. With that, over to you, Darren.

Thank you, Ringo, and hello, everyone. In the second quarter, our team built upon our track record of execution excellence, to drive industry-leading customer growth and strong financial results, leveraging our premier portfolio of assets, coupled with a relentless pursuit to drive cost efficiency and effectiveness. Our results clearly demonstrate how we are delivering sustainable, profitable growth, underpinned by our consistent strategic focus on margin and creative customer expansion, our globally leading broadband networks, and, of course, our customer-centric culture. This enabled a record second quarter with total customer net additions of 332,000, up 13% on a year-over-year basis. This included healthy mobile phone net additions and record second quarter customer growth for both connected devices and total fixed net additions. Our team's passion for delivering customer service excellence once again contributed to leading loyalty results across our key product lines. Notably, post-paid mobile phone churn was again below 1%, alongside pure fiber churn of circa 1%. This showcases the consistent potency of our unmatched bundled product offerings across mobile and home, and our leading customer experience over our industry-best pure fiber and wireless broadband networks. For the second quarter, TELUS achieved resilient EBITDA growth of 5.6% and margin expansion of 170 basis points. These results reflect the progression of our ongoing transformational efficiency programs that are clearly bearing fruit. Let's turn now and take a look at our T-TECH mobile results. Telus realized second quarter customer growth of 262,000 net additions, our strongest second quarter on record. This included robust mobile phone net additions of 101,000, driven alongside our continued focus on profitable margin accretive customer growth. Indeed, we are doubling down on our disciplined focus on profitability as we progress through the remainder of 2024 and beyond. Our efforts will ensure our mobile customer growth drives sustainable EBITDA and cash flow accretion for our business and our investors. Mobile subscriber growth also included record second quarter connected device net additions of 161,000, which represents a 30% increase on a year-over-year basis. This reflects continued strong momentum with respect to our 5G and our IoT B2B solutions. Importantly, our team delivered another quarter of leading loyalty results, which of course continues to be a hallmark of our TELUS team. Blended mobile phone churn of 1.07% was up against the backdrop of elevated competitive activity relative to seasonal trends. While this is not a level of which our team is content, it once again represented an industry best result by a substantial margin versus our peer group. Notably, postpaid mobile phone churn was 0.89% in the quarter as we progressed through our 11th consecutive year with a churn rate below 1%. This is an outstanding result, on a global basis and reflective of the industry-best customer experience our TELUS team delivers time and time again. The close on mobile second quarter ARPU of $58.49 was down year over year. This was a result of continued intense promotional market activity and heightened competition. Notwithstanding the competitive pressures, our team is distinctly dissatisfied with our ARPU results, and we remain focused on driving a better outcome through multiple levers prospectively. These include enhancing our premium bundled offers across mobility and fixed, and driving unmatched product development, differentiation, and intensity across all while maintaining strategic focus on profitable growth and sustainable economics. Our flanker brands offer strong customer value in key growth segments, some with lower associated ARPU, but notably compelling AMPU attributes. Through digital transformation, we are meaningfully lowering our cost to serve across the board. inclusive of supporting an attractive AMPU for BYOD and flanker activity. Furthermore, our growing product intensity increases both average revenue and average margin per home whilst reducing churn. Thus, we see sequential benefits as we layer more fixed and mobility products, significantly enhancing lifetime revenue and the associated economics. These efforts will continue to be supported by our team's passion for winning and retaining profitable customers whilst remaining highly disciplined in respect of device subsidies. Furthermore, we continue to expect connected devices and IoT to increasingly contribute to network revenue, network ARPU and AMPPU, and seeing that growth grow at a level of materiality prospectively. Importantly, our industry-leading customer loyalty and focus on profitable growth allow us to continue delivering industry-best mobile phone lifetime revenue, which consistently exceeds our national peers by a considerable margin of up to 38% in the second quarter alone. Now let's take a look at our T-TECH fixed operating results, where Telus delivered another quarter of industry-best total wireline customer growth. Indeed, our team achieved robust and industry-leading second quarter internet net additions of 33,000, similar to the prior year and up slightly versus the first quarter of 2024. Importantly, consumers in the West are choosing TELUS for our pure fiber superiority, coupled with our customer service excellence, which is sustaining strong growth on a year-over-year basis. We're also continuing to drive healthy growth in our TV product line, with industry-leading net additions of 25,000, up 47% on a year-over-year basis. Additionally, modest residential voice losses of 8,000 were flat over last year, and again, represented an industry-best result compared to our national peers by a notably wide margin. Strong and leading security net additions of 20,000 were up 33% and reflect our successful multi-product penetration strategy as well as the distinctive performance on premium versus our peers. Overall, our industry-leading external fixed net additions of 70,000 again represented a record second quarter result for the TELUS organization. This demonstrates the strength of our unique and highly attractive bundled offers across our unmatched portfolio of products and services in combination with our superior customer experience over our ever-expanding pure fiber networks. It's terrific to be able to deliver that magnitude of net fixed results for this organization in terms of getting an ROI on the billions of dollars that we've invested in pure fiber connectivity. These particular strengths will be further enhanced by continued significant innovation on our differentiated product roadmap where we will be delivering a series of new products in the months and quarters to come. In this regard, TELUS has built the first device-agnostic smart home platform leveraging new IoT services in close partnership with AWS, as well as the development talent and capacity of our TELUS digital experience team, formerly TELUS International. This platform will enable us to enter many new verticals, such as energy management, which we launched earlier this week. Furthermore, that will enable the enhanced integration of existing capabilities, such as health and wellness, whilst at the same time driving cost-to-serve improvements at a material level and driving as well licensing savings within our core business operations. It's really the embodiment of what we did on AMPOO on the wireless front being driven into the wireline side of our business. Our product development, differentiated service portfolio, and product intensity driven by leading data and AI capabilities not only positions us for growth, but helps Canadians save money in an affordability-challenged environment. Looking forward, this integrated product platform will deliver a multitude of innovative products, which will further solidify our product intensity leadership and present new revenue sources in the quarters to come that are completely differentiated from our competitive peer group. Let's turn now and look at TELUS Business Solutions, or TBS, which once again delivered a robust order of growth across all areas of the business. Our focus in B2B continues to be on accelerating profitable growth. And in this regard, notably, in the second quarter, TBS achieved strong cash flow growth of 8% on a year-over-year basis. Reflective of our strong customers-first culture, global best networks, digital capabilities, and, of course, focused execution, Telus Business drove industry-leading loyalty results in Q2. a lead we've maintained now for nine consecutive quarters. Our business solutions team continues securing significant wins and strategic renewals in the commercial and public sector space. This included an eight-figure deal to deploy TELUS's leading next-generation video security services for a high-profile client with a roadmap to expand with our video analytics, IoT, and automation solutions. We also secured a new strategic partnership that will see TELUS supporting thousands of Canadian vehicles with their industry-leading IoT services. This win builds on our multi-year collaboration with GM to provide connected car technology for its Canadian customers. In TELUS Health, we are pleased with the solid performance. Returning to positive top-line growth of 4% as investments in our products, sales capacity, and distribution channels deliver strong momentum across multiple lines of service. This includes MyCare, pharmacy management systems, virtual pharmacy, retirement benefit solutions, health benefits management, our precision health, and our employee assistance programs. The performance at Telus Health has been strong across all of our product and business lines. And notably, we expect this positive momentum to continue in the quarters ahead. Furthermore, our Telus Health team delivered over 33% adjusted EBITDA contribution growth in the second quarter of 2024. And this was supported by accelerated revenue growth alongside the continued progression of our Synergy program at Telus Health. Notably, on the synergy front, we achieved $297 million in combined annualized synergies since acquiring Lifeworks back in 2022, including an increase of $46 million in the past quarter alone. Since the acquisition, We've driven $248 million in cost synergies along with $49 million in cross-selling as we work towards our overall objective of $427 million by the end of 2025. This means we've got about 130 million synergies left to go and about 80 million are going to come from the cost side and $50 million as it relates to cross-selling. Moreover, in the second quarter, we saw a 10% year-over-year increase in our global lives covered by TELUS Health to now stand at more than 75 million. Similarly, within TELUS Agriculture and Consumer Goods, or TAC, we are yielding positive outcomes as we strengthen our market position, delivering strong second quarter revenue growth of more than 15%. This reflects some inorganic growth from tuck-in acquisitions and as well improving organic revenue performance in our consumer goods, precision agronomy, and animal agriculture businesses. Furthermore, it comes on the heels of continuing strong sales performance quarter to quarter to quarter, where we have now realized... In terms of our performance, we've more than doubled our year-to-date sales bookings versus this time last year. Nice to see that doubling of our year-to-date sales bookings in terms of our performance in 2024 versus 2023. And as a result of all of these factors, we expect positive organic growth intact in the quarters ahead. Our commitment to amplifying the substantial growth potential of our distinctive global health and agriculture businesses includes capitalizing on significant cross-selling opportunities throughout all of our businesses, showcasing the collective talent and effectiveness of our team in propelling our success. Watch for more in that space in the quarters to come. Turning to TELUS International, which will formally complete its rebranding to TELUS Digital Experience in the third quarter. TELUS Digital's second quarter results reflect a macroeconomic and operating environment that remains distinctly challenged. Whilst we are obviously not pleased with this performance, our confidence in the business and assets remains steadfast, and our team is committed to proving this throughout strong execution, and exceptional service delivery starting in the second half of 2024 and building momentum for a much more successful 2025 and beyond. This is going to be achieved by reinvesting TELUS Digital's strong cash flow generation back into the business to support the reacceleration of top-line profitable growth along with the ongoing and extensive focus on cost efficiencies and digital transformation initiatives that will improve not just our cost base, but the operational tempo of this organization. In that regard, Telus Digital's promising capabilities in data and IR services include as well as their early success with Fuel IX, is capturing customer demand as demonstrated by the double-digit revenue growth within its AI data solutions line of service in the first half of this year. And that growth is indeed encouraging. Furthermore, our relationship with TELUS Digital offers a unique competitive advantage as the strength of the GenAI-fueled solutions created for and tested at TELUS fortify their go-to-market efforts with other external clients. Whilst we are encouraged by these positive indicators of longer-term significant growth potential, The challenges TELUS Digital is facing impact the expected levels of revenue and profit for 2024 as seen in the revised outlook for the full year. It's clear that TELUS Digital must execute on its strategy to deliver the financial results that our investors expect and that we know that we can achieve given the quality of the asset base. In a moment, Doug will provide further commentary on both T-TECH and Telus Digital's results. In closing, the record customer growth we continue to report is underpinned by our dedicated team, who are indeed passionate about delivering superior service offerings and digital capabilities over our world-leading wireless and broadband fiber networks. The significant broadband network investments we have made are enabling our resilient EBITDA growth, ongoing monetization of pure fiber and 5G, the financial and strategic benefits of copper decommissioning, intense strategic focus on efficiency enhancement and notable revenue and profit progression in TELUS health and TELUS agriculture and consumer goods. That's quite the combination. Together, this combination of factors solidly positions TELUS to focus on what's next. And you will see this organization doubling down in these areas and evolving our product roadmap and customer-centric offerings in the weeks and months ahead in a way that will drive further significant differentiation and profitable and material revenue growth opportunities. that will be exemplified in terms of cross-selling and improved multi-product penetration, or what we call product intensity. This supports the continued advancement of our financial and operational performance, which is the bedrock of the long-term sustainability of our industry-leading dividend growth program. Finally, I'd like to take a moment to acknowledge the wildfires that devastated the beautiful community of Jasper last week. The thoughts of our entire TELUS team are with all those impacted by the fire. To support the community through this extremely challenging time, TELUS has committed over $100,000 and growing to assist with the vital rebuilding efforts. Moreover, our team members, worked around the clock to support evacuees and local authorities and first responders, leveraging our technology to keep everyone connected when it mattered most. In addition, we provided care kits and a free 50-gigabit data top-up for those tragically displaced from their homes as a result of the wildfires. As a further demonstration of our support, we activated a free community crisis hotline through TELUS Health, offering professional emotional support to anyone affected. I am, and the entire team is, sincerely grateful to the countless team members who continue to demonstrate that when things are at their worst, our TELUS team is at their very best. Indeed, I can think of no better exemplification of putting our customers first than by putting our citizens in need first, such as the symbiotic relationship between customers and communities. And before handing off to Doug, I'd like to take this opportunity to express my immense gratitude and appreciation to Jeff Puritt for his innumerable and important contributions to TELUS Digital over the past two decades and almost a quarter of a century as a TELUS team member. Jeff will retire as president and CEO of Telus Digital, effective on the 3rd of September, and he will assume his new role as executive vice chair of Telus Digital and join the board of directors at that same time. As you know, Jeff has played a pivotal role in leading and shaping our Telus Digital business since its inception. From a single delivery center in the Philippines to with fewer than 2,000 team members back in 2005 to an integrated global provider of AI, digital, and customer experience services with over 75,000 employees now serving more than 650 clients from 32 countries around the world. Supported by robust senior leadership talent succession and in alignment with the company's strategy of bringing the best of technology to enable excellence in customer service, we are extremely pleased to welcome Jason McDonnell as CEO of Telus Digital and President of Telus Digital Customer Experience. Jason is a 20-year tenured member of our TELUS senior leadership team with a proven track record of bringing the capabilities that TELUS has developed to lead in its industry in client care, leading in loyalty, leading in cost efficiency, and leading in digital transformation excellence, bringing these capabilities to all the business verticals that TELUS Digital addresses with external clients. In addition, Tobias Dengel, founder and president of Willowtree, will take on the elevated role of president of digital solutions at TELUS Digital Solutions. Tobias is both the industry-leading expertise, he's got the experience, he's got the credentials, and he's got the entrepreneurial acumen and drive needed to ensure we continuously deliver best-in-class solutions across our digital, gen AI, and AI modeling businesses. Both Jason and Tobias will work together with me closely and report directly to the TELUS Digital Board of Directors. And we are eager to see the significant leadership contribution and impact that they are going to have and make in returning TELUS Digital to material profitable growth. And on that note, I'll turn the call over to Doug.