Q4 2022 Telus Corp Earnings Call

February 9, 2023

Speaker 2: Will be back? By what?

Speaker 3: Just a way to dance for no more I'm wild and sitting down We'll be dancing in the dance Cause a way to come and go Ooh We'll never even need me And behind

Speaker 4: Good day everyone. Welcome to the Tell us 2022 Q4 Earnings Conference call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.

Speaker 5: Thanks, Carl. Hello everyone. Thanks for joining us today. Our fourth quarter and year end 2022 results News release MDNate Financial Statements and Detailed Supplement Fund information. We're posted on our website this morning at tellus.com slash investors.

Speaker 6: Our call today will begin with remarks by Dharan and Doug. The Q&A portion of our call will be joined by the Zanel Malge President Consumer Solutions, Navin Aurora President Business Solutions, Jim Senkel, our Chief Product Officer, 20th Dharan and Chief Operating Officer, Jeff Pura, President and CEO of Tells International, John Reigns, President.

Speaker 7: of telephotoagriculture and consumer goods and Michael Dangle chief operating officer I tell it's help. Briefly, this discussion on answers questions contained for looking statements. Actual results could vary materially from those statements.

Speaker 8: These assumptions in which they're based and the material risks could cause such a differ are outlined in our public filings with security commissions in Canada and the US, including in our 2022 annual MDNA.

Speaker 9: material that risks the good cause of the different ROI and their public filings with security commissions in Canada and the US, including in our 2022 annual MDNA. With that, I'm Oudir.

Speaker 10: Thanks, Diego, and hello, everyone. Throughout 2022, tell us a chief 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.

Speaker 11: This is a trend the tele-team is consistently demonstrated over the longer term.

Speaker 12: Our robot performance in the fourth quarter and for the full year reflects the chemistry of our globally reading broadband networks and customers' first culture, driving our hallmark combination of profitable customer growth alongside strong financial results.

Speaker 13: Industry meeting telecom net additions of 301,000 represented our best fourth quarter on record and concluded another year of industry meeting expansion of our customer base.

Speaker 14: Indeed, in 2022, we delivered all-time record customer growth, surpassing total annual net additions of more than 1 million for the first time.

Speaker 15: This included another best every 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.

Speaker 16: 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.

Speaker 17: 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, peer fiber internet, object TV, security and voice churn all below 1%.

Speaker 18: for the year. Also for the full year, operating revenue growth of 8.6% came in above our revised guidance of approximately 8% while EBITDAG growth of 9.5% led it comfortably in the midpoint of our revised guidance range.

Speaker 19: Moreover, we achieved strong free cash flow growth of 64% for the year, exceeding our original free cash flow target.

Speaker 20: 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.

Speaker 21: Strength in our court telecom operations continues to be bolstered by continued strong operating momentum in our highly differentiated technology oriented business. Tell us international, tell us health and tell us agriculture and consumer goods.

Speaker 22: Let's now turn and take a look at the fourth quarter.

Speaker 23: Tell us once again achieved industry leading operating revenues and EBITDAG growth of 12.6% and 11.3% respectively.

Speaker 24: 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.

Speaker 25: Notably, the strength continued to be driven primarily by loading on our premium brand, reflecting our consistent focus on profitable customer growth.

Speaker 26: It also included leading and record fourth quarter connected device net additions of 106,000 up 31% on a year over your basis.

Speaker 27: Importantly, our team delivered another quarter of industry-based loyalty results, which continues to be the hallmark of the Telus organization.

Speaker 28: 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.

Speaker 29: Looking at our industry leading post-paid mobile churn, this was once again below 1% in the quarter.

Speaker 30: Indeed, at 0.75% for the year and relatively flat over last year, 2022 represented our ninth consecutive year of industry-leading post-paid wireless churn below 1%.

Speaker 31: One key factor behind this consistent industry best performance is the superiority of our world-leading networks.

Speaker 32: In this regard, in 2022, tell us once again, earned numerous accolades from independent third party organizations.

Notably, Global Analytics Company opened signal out of the UK, recognized tell us with five industry awards in the year for both our 4G and 5G networks. Making tell us Canada's most awarded network by Open Signal for the 11th consecutive time.

Similarly, TELUS was honored with three awards from US-based OOCLA in 2022, including being named North America's fastest mobile network according to results from their speed test.

Moreover, Canada-based Attela recognized our wireless network with four national awards for excellent, consistent quality, core, consistent quality, 5G, excellent, consistent quality, and 5G core, consistent quality.

Likewise, our wireless network also received praise. Ranked as the fastest nationwide internet service provider in Canada amongst major carriers by PC Mag for the third consecutive year.

These acknowledgments clearly illustrate tell us leadership in offering our customers the fastest, most expansive, and most reliable servicing Canada across both our wireless and pure fiber networks.

Or over this recognition of Tel Aviv's 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.

The close-up mobile industry leading fourth quarter are to 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, lights are in turn, and the revenue that we generate continues to be up in terms of lights time 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. 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-fast 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 editions of 17,000 relatively flat over the prior year despite modestly higher turn

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 results since 2002.

Notably, this reflects our momentum with respect to our product intensity or product bundling, if you will, and the inherent turn benefits associated with this strategy that are proving to be so successful for TELUS.

Strong and leading security net additions of 28,000 further reflects 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.

are leading customer-centric culture, as well as our strong and highly differentiated social capitalism attributes that truly do underpin the strength of the Telus, Brad, and culture.

Now let's take a look at our tell us 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 light works with telet health together under the telet health name and one brand going forward with the aim of integrating the best of the global brand and culture from across both light works and telet.

The expanding scale of our healthcare programs within our integrated telehealth 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 percent over the prior year.

For 2023, we anticipate strong growth at Telehealth, 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 3 to 5 years, inclusive of revenue synergies from cross selling.

and $60 million in near-term cost energies. 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 Costa Raju as our president of Talatel.

With more than 20 years of global experience 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 Tel-A-Tel.

Indeed, 11 genus 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 CID and our Tele-Telos Health 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 Stemternet will put us on the IPO trajectory that we all find so exciting.

Turn in 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 acquisition 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 recalapticution.

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.

I tell it's international.

Despite a challenging macroeconomic environment, this morning, telecentral national 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 Teleth as an anchor customer, enabling Teleth with superior customer service excellence, and powering our digitization strategy, a unique relationship that significantly benefits COiled Corona ???laiz.

position if 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, Willow Tree, 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 TIE's enviable list of client partners.

Importantly, Telus International and Willow Tree also support the acceleration of Telus' ongoing digital transformation and key product development across the totality of our business, but in particular in health and agriculture and consumer goods.

Doug is going to have an opportunity to provide further commentary on both TTEC and TELUS International's fourth quarter results in just a moment.

In closing, the telling 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 percent and 11 percent, 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 represent a historic low-fertilis 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 ebidog growth and the material capital expenditures depth 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, and deliver these capabilities, tapping into the accelerated need for premium digital customer

content moderation and AI data solutions across the strategic industry verticals on a global basis.

Importantly, the unparalleled steel, 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 getting one and a half billion dollars, including two million days of global volunteerism.

myself and the leadership team continue to be inspired by the uncomparalleled compassion of our tele-sfamily and their dedication to making the future friendly for all of our stakeholders. They are indeed the best and exemplification of our brand values in action.

Before it came to tell us...

I spent

10 years.

In Global Telecom.

hunting for value

In most places

on the planet.

So it is with some degree of familiarity.

That I'd 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.

Are you the dog row?

Our cash flow growth.

And that's not just the story for 2020-3. It's the story for 2024-2025. It's the story for 2021-2.

and beyond and that truly makes it unique.

And on that note, I'll add in the call over to Uncle Doug.

Thank you, Darren, and hello, everyone. Our fourth-quarter results extend our track record of delivering leading operational and financial results, supported by our high growth and diversified asset mix.

In the quarter, we continue to see strong growth across all areas of our business.

In mobility, we delivered network revenue growth at 6.5% driven by strong customer growth and higher RPUs. Furthermore, as compared to the pre-pandemic Q4 2019 period, mobile network revenue is 11% higher, showcasing our strong, consistent growth and customer service X.

consistent focus on high-quality customer growth, executing on our 5G monetization strategy, excellent base management, diligent cash management on handsets, and leveraging our leading churn profile within a competitive and dynamic market environment.

6th data services revenue group 5.9% year over year, or nearly 6.8% when considering the Dybat's decision, Dybat secure the planning to services business in December of 2021.

Within fixed data, residential internet revenue grew, 8.4% year-rear, as we continue to drive market share alongside higher R-POOT.

Customers are continuing to move to our high-speed tiers, recognizing the superior customer excellence on our pure fiber network, while the compelling value of symmetrical speeds and reliability lead in this product set.

Health Services revenue of 411 increase by 270 million over the prior period reflecting the contribution from life works as well as continued organic growth.

As we progress into 2023, we remain very focused on the life-first integration and executing on the significant synergies and health outcomes our combined organizations can unlock together.

Early in 20 January , we announced the successful acquisition of Willow Tree as highlighted by Darren.

Together, these trends, actions represent important steps we are taking to scale our high-growth technology oriented business, further setting us apart from our global peer group while at adding capacity for value creation and diversification of our overall business.

At the segment level, TTAC operating revenues were up 13% year over year.

As a reminder, in the fourth quarter of 2021, we recognize a $410 million gain from the sale of our financial services business to flow through other income.

T-TEC adjusted EBITDA grew 10% for the quarter, and capital expenditure is declined by 28% reflecting the conclusion of our accelerated capital program.

DLCX operating revenues from external customers were higher by 9% year-over-year, primarily for growth in our tech and game clients, arriving from additional services provided to existing customers, and the addition of new customers.

DLCX adjusted EVDA was up 23% while margins improved 200 basis points to approximately 25%. Consolidated operating revenues increased by 13% year over year and adjusted EVDA growth by over 11%. What's changed?

Furthermore, our annual EBAGA growth in each of 2020, 2021 and 2022, our cumulative EBAGA growth was over 1.3 billion since the pandemic started, while most of our industry peers are still humanly negative. We did not go negative in any year.

Consolidated income was down 60% year-over-year, while EPS was down 64% due to the disposition of the financial services business I highlighted earlier.

Excluding the impacts of our virtual power purchase agreements, financing costs and 24 were primarily higher due to higher indebtedness over the past 12 months, along with higher interest rate environment.

On an adjusted basis, an income was slightly higher while ETS remained unchanged to 23 cents.

Precash low of 323 million and Q4 increased by 280 million, driven by decline in capital expenditures and higher EBITDA, partially offset by higher mobile contracted volumes during a highly competitive Black Friday period and higher cash interest in the period.

Looking ahead, we have set leading annual financial targets while advancing our leading growth profile and building on the momentum of strong and consistent operating momentum.

In 2023, our operating revenue growth of 11 to 14% in the adjusted E.V.A. growth of 9.5 to 11. Our financial outlook.

reflects continued healthy growth within our telecom business, including profitable customer growth and continued demand for superior bundled products over our broadband networks.

In 2023, we anticipate growing contributions from our unique IN businesses including Telus International which is highlighted by Darren released their targets today as well as Telus Health and Agriculture and Consumer Goods.

Not included in our formal CapEx target of our core capital is $75 million earmarked for real estate development. As we progress through our Copper Decommissioning Program and work to delivering on our strategy of delivering certain surplus real estate assets within the footprint.

which we will monetize in the future.

Our portfolio and real estate holdings will continue to increase over time with commercial, residential, and industrial sites.

Lastly, free cash flow for 2023 is forecasted to increase by over 700 million or 60% over 2022 to approximately 2 billion. The increase is industry leading and materially higher than our peers driven by EBITA and lower cup-acts

This is partially offset by a couple of non-off rating items such as higher cash flow or in cash interest as highlighted an increase in cash restructuring to drive margin accretion. Higher hand set investments from me.

continued loading of our high value customers and higher taxes with our higher operating income.

Let's do these details or detailed in our 9.3 of RM DNA.

We are confident in our ability to continue generating strong pre-cash flow for years to come, benefiting from an industry-leading growth profile and consistently showcasing our superior asset mix and operational execution.

Our continued strong operational financial performance supports our robust balance sheet and liquidity position. We have a strong debt maturity schedule with average debt to maturity over 12 years and only $500 million of debt maturing in 2023. The average cost of long term debt remains at a low 4%.

while 86% of the debt is fixed. Additionally, our balance sheet straight will further be enhanced by the strong cash flow it's highlighted.

The strong position further supports our dividend growth will now be in place till 2025 along with the delivery of our balance sheet and supporting strategic investments.

Robert O'Ree. Thank you, Doug. Carl, please proceed with questions.

As a reminder for people on the phone, if you would like to queue up to ask a question, please bow to star one on your phone's keypad. If ever you wish to withdraw from the question. So the first question is from Ayuragy, from Social Bank. Please go ahead.

Thank you for taking my questions.

Maybe I'll start with a question on the health.

By my calculation, I'm getting around 5% organic growth on the business, on the revenue side and 2% on life work. You discuss in your MDNA that demand for health and well-being services has never been...

higher than it is right now. So I'm trying to figure out is it a pricing issue that you guys are having that is the pressuring the top line from growing faster. And when you talk about your expectations for 2023 with the integration with LightUp Lightworks.

demand for our products as you can see our KPIs continue to grow. There was a re-rate in one of our more material customers as we renewed for a long period of time. That is generating significant long-term value. And I think the opportunity in front of us is Michael will highlight.

of a customer reprise on a renewal. Q4 also saw our team laser focused on two priorities. The first being servicing our global customer base and the second being increasing the pace of our post acquisition integration activities with respect to life works.

In addition to our post-acquisition integration efforts, the Tellus Health team has been hard at work partnering across Tellus.

to seize opportunities for collaboration as highlighted by our substantial partnership with TELUS International, which is focused on customer experience and digital transformation, including bringing AI to TELUS Health's market-leading digital health solutions.

In Q4, we deepened our partnership with TI by partnering on over $100 million in business, which affords us the opportunity to deliver increased customer value through increased customer service levels across our business units.

we're ahead of our integration plans which sets us up very well for 23 and beyond. As Darren shared earlier, 2023 sees us going to market under one brand Telus Health underpinned by our strategic intent to be the most trusted well-being company in the world.

expect strong contributions from tele-SELF in 2023 and beyond.

Combining the skills and capabilities of Telus Health and LifeWorks creates a globally leading end-to-end, digital first employee wellness platform that now covers better than 68 million lives.

Our teams continue to drive strong growth fueled by the life for its acquisition as evidence by cross-selling and upselling velocities across our global customer base today.

We're focused on the pursuit of our unparalleled opportunity in telehealth to become a global leader in EFAP alongside with data-driven Preventative health care, wellness and mental health.

Finally, I'll say we work tirelessly to extend our social purpose every day. Our recent collaboration with Tell Us Agriculture and Consumer Goods is a good example of this as we partnered to bring mental health services to Canadian farmers in a partnership with the Canadian Center for Agriculture and Wellbeing.

Thank you Mayor. Next question please call.

The next question is from Jerome Dubraille from Déjallein, please go ahead, Jerome.

Yes, thanks very much for taking my question. Mine is on the strategy update that you gave us a year ago. I wonder if you can update us on this, basically the points you were making is that you were looking to maintain tech leadership, res directing B2B, and reducing cost as well as scaling the tech ventures. I wonder if there's an...

given that was referenced in the question, why don't you provide a succinct response to that component?

Yeah, thank you, Darren.

So as you said, there in the B2B has had a very strong 2022 and we expect that trend to not only continue but accelerate in 2023. And what I think is notable, especially as we look across other global B2B communication service providers in that, tell us as B2B team.

delivered strong growth, not only on an EBITDA basis, but also revenue, margin and cash. And another key highlight is that this profitable growth came from across all B2B segments, right from small business through to enterprise and public sector.

Looking ahead, we feel quite bullish on where the business is going and we expect strong and consistent growth over the next several years. And underpinning that growth are a few important contributors. So first digitization and automation is really helping to concurrently improve.

further both their capabilities and our digitization efforts in B2B. Next, leveraging our significant investments and coverage in both pure fiber and 5G, which both reduce costs and improve service quality. We feel...

We've got a lot of opportunity to continue to drive further penetration and growth in these core connectivity areas. Also tied to 5G, we're very keen to see new revenue growth through vertical and horizontal based industry solutions.

as well as the data monetization opportunities. And as part of this industry solutions capabilities, we see some really strong adjacencies with both health and agriculture in terms of how we go to market. And those adjacencies also drive some very significant differentiation in the market.

And then lastly, really strong geographic segment and product diversity, which gives us several levers to drive growth with significant market share upside. So all this to say we expect.

strong cash contribution as well as accelerating revenue margin, Nebita gross in 2023 and beyond. And we expect that trend to accelerate not only in 23, but for several years beyond that.

So I will pass back to you, Derns.

Thanks, the meeting.

Thanks for your time, Karl. Next question please.

The next question is from...

Sorry, Gary Patekate, please go ahead.

Thanks. I wanted to focus a little bit on tellers. Thanks for the color early on, but, you know, leave aside the synergies and I recognize that's material with life works. I wanted to get a sense of how we should think about the shape back towards perhaps strong.

maybe a little bit of definition around what kind of partnership you're looking for, which areas, what criteria to the extent that you can disclose right now. Thank you.

Okay, so.

Firstly, 12-18 months is not the IPO time cycle.

But it could be the time cycle for bringing in a strategic partner.

for bringing in a strategic partner. If you're...

wanting color on what that model looks like. I think the example that we set in 2016 with bearings.

coming in to TELUS International.

As a precursor to what we would eventually do on the IPO front is a very good model to draw an inference front.

The one area of important differentiation that we would be looking for is a partner coming in, not just from a cash and a valuation point of view, but what they could add to the business strategically and commercially. And in that regard, there's two key things that matter.

to us in terms of potentially seeking a partner. What can they do to assist us in the area of products and technology, and what can they do to assist us in the area of distribution channels and global reach in terms of scaling?

our customer penetration, and our global customer growth. Those are the attributes that we would be seeking if we chose to strike a partnership.

that we'd be fair to say that we do like the two-step model, establishing a partnership first, creating a semblance of independence of the business, while of course still integrated in terms of the operations with both Teleths and Teleths International.

We think it's a good discipline in terms of getting the business to stand on its own two feet in a run-up to eventually earning the way to the IPO. And one of the things that we implemented with TELUS International that we would again emulate with TELUS Health is that we had at TI a pre-flight IPO checklist.

of things that needed to be achieved by Telus International if they were going to earn their way to the right of IPO-ing the business in servitude to the strategy. And so the other thing that we would be looking at which gets to the first part of your question is a business where we deliver very strong organic growth.

double digit organic growth at the revenue level and at the EBITDA level. And that of course allows us to earn our way to the M&A opportunities because

When you have a strong organic underpinning from a growth profile, you make better acquisition decisions because they are discretionary rather than necessities. Also, when you have stronger organic growth, you integrate those acquisitions significantly more effectively.

And if you look at some of the choices that TELUS International has made in terms of its acquisition path and how well those choices were and how well those acquisitions were integrated, that of course, is going to be indicative of the etiology with TELUS Health. And then lastly,

If we're going to do an IPO, it's going to be for a high valuation because clearly an organization like Talents.

where going forward the sources of cash are going to significantly and chronically exceed the uses of cash. It's not for a need of money. It's to establish a great valuation and a transaction currency that increases or amplifies the market of acquisition opportunities that we can pursue.

given the multiple that we've established with our transaction currency. We are only going to realize that high level of multiple if we have great execution results for telehealth in 2023, 2024 and 2025. And those will be underpinned by excellence in organic growth but also the harvesting.

of the synergies with life works. And those synergies are deeply significant. We've given you lots of color on those on 200 million plus, elistically, and 50 million in the near term on the cost front, but the strength of what we can do on the cross-selling side of things, the strength of combining EAP with virtual care, the strength of what we can do on new product development.

And of course, underscored by the significant efficiency opportunities, I think that that's going to butt for us the growth profile that we want to have in terms of the tele-tell us IPO.

Thank you. Thanks for your visit. Carl next question please.

The next question is from Drew McReynolds from RBC Capital Marcus. Please go ahead Drew.

Thanks very much. Maybe for you, Doug, with respect to free cash flow, obviously a lot of growth year over year. It's nice to see CapEx come down. I don't know if everyone on this call, investor-wide, knows, but your free cash flow definition Health!?

is probably the most conservative among your peers and I think all the analysts understand that. So when you think about below EBITDA free cash flow items my question is,

When you think about the $2 billion in 2023 with respect to your earmarked cat backs, your cash taxes, the contract assets, all of kind of the moving parts, is that $2 billion in your view kind of more of a normalized level? Or are these things still kind of swinging?

back and forth a little bit more volatile with a little bit more volatility than usual.

Let's back and more forth over to you Douglas. Exactly. There's definitely a few one items in there. The restructuring cash that we anticipate for 2023, we would assume would be a decline over time. So again, that would be more creative outside the 2023 time frame.

I think with handsets, and thank you for pointing that out on the definition side, on the handsets we've assumed an intensity level as we saw in Q4 throughout part of 2023 and including an investment in high quality loading is exactly what we should be doing.

and we were transparent in our assumptions around that. I think because COVID was a bit of a wall, that once we get over 2023, we should see a normal run rate or more of a normal run rate on a handset. So I think the climb back out of COVID, again, would be limiting a little bit this year, but 2024 and beyond, again.

would be a year over year neutral basis. And then when you look at our cat-backed continuous and the growth we talked about in the DA, I would say we're gonna have nothing but accelerated growth on pre-touch growth in the future. An interest. Oh, an interest as we de-lover you're right. Thank you, Darren.

We are at a bit of that peak after the military acquisition. You'll see us deliver over the next few quarters and as your progresses into the next few years. And with that, the interest amount also will be more managed or more reduced.

a bit of that peak after the willow tree acquisition, you'll see us deliver over the next few quarters and as your progresses into the next few years. And with that, the interest amount also will be more managed or more reduced. Thank you.

Thanks, Drew. Carl, our next question please. The next question is from Vince Valentini from TD Securities. Please go ahead, Vince.

Yeah, thanks very much. Question on connected devices and the impact they're having. The first time you gave us disclosure was 2018. There was about 1.2 million and now it's more than doubled to 2.47 million devices. Is that starting to have a meaningful impact on the

on your service revenue in ARPU and maybe you could just clarify or verify for me that you include that in service revenue but it's not counted as a subscriber so it should be inflating ARPU if the extent that line gets bigger. So that's correct. It's included in revenue but it's not included in the sub base and if you look at the 2.2 percent.

tremendous upside on that front still to be harvested, which I think will be aided and abetted by what we're doing on the 5G front and product development that leverages 5G bandwidth in that regard. Naveen, do you want to maybe just top up a little bit on the connected device front, maybe even if you want.

highlight a couple of vertical examples that are indicative of the future growth that we expect to realize and the strong economics that go with it. And maybe also highlight that this is not just an ARCOO story on connected devices. It's an AMPOO story given the attractive margins over to you Navi...

Yes, thanks, Aaron. So, agree fully. We are very bullish on IoT connected devices and actually the industry solutions, capabilities that will ride on top of that connected device and connectivity capability.

So as I mentioned previously, this is a meaningful nine figure business for us. It has double digit growth on the IOT and industry solution side, and we're getting some good traction in the market across several key verticals.

and horizontal. You know, just before I give some examples, we're really liking how by GIP and PureFiber are driving some nice adjacencies across our health and agriculture business units, again providing some important market differentiation.

One example would be really how we're taking advantage of our Western incumbency and the logical linkage to key natural resource industries. TELUS was selected to help build one of the largest private wireless network solutions for a mining operation in Canada.

Another key area where we are focused is on transportation. And so recently, Telus was selected as the exclusive 5G connectivity partner for Project Arrow, which is Canada's electric vehicle manufacturing initiative.

And maybe one other example of where we're partnering with academia and industry is we just announced $5 million investment with University of Windsor to accelerate the development of 5G technology applications in agriculture at Dance Manifest.

driven by a high volume business with a lot of automation, a lot of self-serve and end-to-end digital capabilities. So in terms of scaling that revenue growth, huge potential.

but at very little cost increases. So, you know, we definitely like the economics of this business.

So with that, I'll pass it back to you, Darren.

that I'll pop back here there. Also with

sticky turn in terms of client retention, another attractive feature which helps you achieve attractive lifetime revenues out of the IoT sector. And then secondly, the biggest opportunity going forward is milking the data analytics.

overall those data volumes. Okay, let's go to the thanks Vince for the question.

Next question please.

The next question is from Stephanie Price from CIBC World Markets. Please go ahead Stephanie.

Please be seated.

I was curious to give you about the strategy around the acquisition of two small internet service providers in Ontario. Just curious to give you the interest to know wireless plus wireline offering in Ontario. And maybe more broadly how you think about the growth vectors in telecom, post-appidental Rogers-Charmerger.

Thanks, Stephanie. Sandals, do you want to take that question?

Sure. So Stephanie, we have been doing small tuck-in acquisitions in specific areas where we've competed for a number of years. These are no different. We have a very significant and growing smart home security business as an example.

These particular acquisitions are helping to advance our capabilities in that area. And so, you know, they're relatively consistent with the types of acquisitions we've done in the past in Ontario and nationally.

just on two points if I could.

I know you just released 2023 guidance, but if I look ahead a little bit, can you talk about what your expectations are for maybe improving flow through your EBITDA growth to free cash flow as you move forward with some of these acquisitions in your plan?

And secondly, on the 75 million of CAPEX for the kind of real estate opportunity.

kind of a lapse for this type of activity. Thanks. Doug, what do you take? Yeah, so we'll start the second question first. So on the real estate one, the 75 million does not include a partner at the moment. We have assumed we would get potentially partners on individual real estate opportunities where appropriate and bring in high quality partners to get things up and running. But it really is to start to build the portfolio so that over time frame you're thinking we would have something of substance that could be monetized probably in the three year period is probably the appropriate ramp.

on that one, but we absolutely intend to bring in partners and that number could go down the more we do that. On the flow through, I think in this, and you know, and Darren highlighted that it's for the direction up on free cash flow and margins. If you look at the integration costs we're currently doing for life works, our margins are going to continue.

addition to what Navine had highlighted. And so I think you're gonna continue to see more and more flow through on an ongoing basis, both in 2023 and beyond on all of those fronts in addition to the strength of our core business.

And if you look at that EBITDA flow through and the cash flow trajectory over 23, 24, and 25, also calculate what the dividend payout ratio is a free cash flow and the headroom that we're creating as it relates to our dividend growth model.

I think those figures are very interesting.

those figures are very interesting. Great. Thanks so much.

Thanks, Matt. Carl, we have time for one more question, please. The final question is from Simon Flannery from Oregon Stanley. Please go ahead, Simon.

Great. Thanks for the question. Can you talk a little bit about the market environment for 2023? I think looking through your discussion, you're assuming a slower macro growth right next year. We've obviously had a lift from COVID in terms of 10% demand. Sounds like you think that will continue.

How do we think about the overall industry KPIs across wireless and across broadband? Do you think we can sustain the pacing across the industry that we've seen in 2022 and 2023 given continued immigration, etc. or are you expecting some sort of moderation overall?

Okay, Jim, why don't you take that off? They know why don't you do the part two.

Okay, so for sure we're seeing persistence.

promotional activity in the low end of the market.

activity in the low end of the market. But that said,

You know, industry best ARPU growth at 2.2%, really good underlying domestic ARPU characteristics coming from the high value subscriber mix and also the base management and the step up to 5G.

We're also seeing industry best churn on the back of our product intensity and our customer experience.

In fact, our post-aid churn continued to be really strong, very similar to pre-pandemic levels. Our pre-paid churn is elevated due to travelers, but over 200 basis points better than our competitors. And when you look at our NACTS, our NACTS.

Q4 nets were up 80,000 versus pre-pandemic 2019. So a lot of the focus we've gone on distribution, like mobile clinic, digital, direct to consumer, are driving benefits. And so when we look into next year, we would expect that that promotional activity is going to continue at the low end of the market.

We will continue to see that high value subscriber mix washing through the base.

Our base management around 5G and Kudo pick your perk step ups is working really well. The growth in our IoT subscriber base is now contributing meaningfully to our network revenue growth. And we're not as reliant on the low end flanker promotions, which is good. So, you know, I...

I feel really good on the wireless side that will continue this trajectory and we'll see that kind of consistent.

growth. On the home solution side, and Daniel maybe you want to top up, but we're seeing similar characteristics especially around the bundling and with the bringing together of mobility and home solutions in the consumer organization that presents tremendous opportunities for us to drive further efficiencies and even better bundling.

that clients are choosing tell us, we're getting the larger premium share of the market. We have a higher level of product intensity, a lower level of churn, and a higher RPU position. So the delta between us and our peers on customer lifetime value is significant and there's an opportunity for growth and continued growth there on the back of our complex.

a higher product intensity, 25% less cost, and 70% less fewer outside plant repairs. So we have an incredible margin of creation opportunity, and we also have a significant level of digitization and product development taking place so that we can continue to grow our share.

and to develop new products under Jim's leadership, as well as leverage TI and WillowTree in terms of driving margin accretion across our segments so that even in the lower end of the market where we see significant immigration growth, we can come to the table with value props that are more margin accretive than our...

value, higher levels of value in their purchase patterns, but because we provide solutions at every end of the market we're really poised well for that growth.

Thanks a lot.

Thanks Simon and thank you everyone for joining us today. Please feel free to reach out to the IR team with any follow-up questions you may have.

This concludes the TELUS 2022 Q4 earnings conference call. Thank you for your participation and have a nice day.

I you.

Welcome to the TELUS 2022 Q4 Earnings Conference call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead. Thanks, Karl. 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.

My call today will begin with remarks by Dharan and Doug. The Q&A portion of recall will be joined by Zanel Malgis, President Consumer Solutions, Navin Aurora, President of Business Solutions, Jim Senkel, or Chief Product Officer, 20 Dharan and Chief Operating Officer, Jeff Pura, President and CEO of Tell Us International, John Reigns, President of Tell Us Agriculture and Consumer Guests, and Michael Dangle, Chief Operating Officer, at Tell Us Health.

Briefly, this discussion on answers questions contained for looking statements. Actual results could vary materially from those statements.

The assumptions in which they're based and the material that risks the good cause of the different our online Republic filings with security commissions in Canada and the US including in our 2022 annual MDNA with that. Oh dear

Thanks Diego and hello everyone. Throughout 2022, tell us a chief 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 that the tele team has consistently demonstrated over the longer term. Our robot performance in the fourth quarter and for the full year reflects the chemistry of our globally-reeding broadband networks and customers' first culture, driving our hallmark combination of profitable customer growth alongside strong financial results.

Industry meeting 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 editions of more than one million for the first time.

This included another best every 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 by the product offerings across mobile and home and team member culture focused on delivering exceptional customer experiences over our globally leading peer 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, peer 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 achieve 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 court telecom operations continues to be bolstered by continued strong operating momentum in our highly differentiated technology-oriented business. Tell us international, tell us health, and tell us agriculture and consumer goods. Let's now turn and take a look at the fourth quarter.

Tell us once again achieved industry leading operating revenues and EBITDAG growth of 12.6% and 11.3% respectively. Looking at mobile, tell us 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, the 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 meditations of 106,000 up 31% on a year over year basis. Importantly, our team delivered another quarter of industry fast loyalty results, which continues to be the hallmark of the Telus organization. Blended mobile phone churn was an industry low 1.22% in the

relatively flat over last year, 2022 represented our ninth consecutive year of industry leading post-paid wireless turn 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 US-based Ookla.

in 2022, including being named North America's fastest mobile network according to results from their speed test.

Moreover, Canada-based Attela recognized our wireless network with four national awards for excellent, consistent quality, core consistent quality, 5G excellent consistent quality, and 5G core consistent quality.

Likewise, our wireline network also received praise, ranking it 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. The Cows 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-fast wireline customer growth.

Our team achieved strong 4th quarter internet net additions of 42,000, up 5% on a year-over-year basis. We continued 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 represent our best fourth quarter results.

since 2002. Notably, this reflects our momentum with respect to our product intensity or product bundling, if you will, and the inherent turn benefits associated with this strategy that are proving to be so successful for tell us.

Strong and leading security net additions of 28,000 further reflects 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.

are leading customer centric culture, as well as our strong and highly differentiated social capitalism attributes that truly do underpin the strength of the Telus, Brad, and culture.

Now let's take a look at our tell us 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 life works 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 like works with telehealth together under the telehealth name and one brand going forward.

with the aim of integrating the best of the global brand and culture from across both LifeWorks 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 percent over the prior year. For 2023, we anticipate...

strong growth at Teles Health, including solid organic growth as we continue to integrate and expand business into an asset of scale and significant global consequence.

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 Costa Raju as our president of Tallah Tal.

Indeed, 11 teen is 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 CIS 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 Stem's 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, the road to

We look forward to strong progress and double digit revenue growth in this business. Now let's take a look at Tell us International.

also reflect the important relationship with Telus as an anchor customer, enabling Telus with superior customer service excellence, and powering our digitization strategy. A unique relationship that significantly benefits both organizations and one that is expected to kitchen you 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 digital solutions.

cross-selling opportunities for both organizations. The transaction resulted in the addition of new marquee customers that further diversified GI's enviable list of client partners.

Doug is going to have an opportunity to provide further commentary on both TTEC 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 the differentiated asset base, best-in-class customer experiences, world-leading growth, 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 percent and 11 percent, 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 CAPAC's 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.

TI's financial objectives will be back by their end-to-end design capabilities as they build and deliver these capabilities, capping in to 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 seven 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 one and a half 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 getting one and a half billion dollars, including two million days of global volunteerism. Myself and the leadership team continue to be inspired by the uncomparalleled compassion.

of our tele-sfamily 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 tell us, I'd spent...

families and their dedication to making the future friendly for all of our stakeholders. They are indeed the best and exemplification of our brand values in action. Before I came to tell us, I'd spent 10 years.

and global telecom 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.

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.

In the quarter, we continue to see strong growth across all areas of our business. In mobility, we delivered network revenue growth at 6.5% driven by strong customer growth and higher RPUs. Furthermore, as compared to the pre-pandemic Q4 2019 period, mobile network revenue is 11% higher.

showcasing our strong, consistent growth and customer service excellence. We continue to see a steady improvement in roaming revenue, with a huge four-amount reproximate 122 percent as compared to pre-andemic levels.

Remain focused on driving sustainable R-POO growth by maintaining our consistent focus on high-quality customer growth, executing on our 5G monetization strategy, excellent base management, diligent cash management on hand sets, and leveraging our leading churn portfolio within a competitive

and dynamic market environment. Fixed data services revenue grew 5.9% year over year, or nearly 6.8% when considering the divestiture of the financial services business in December 2021.

Within fixed data, residential internet revenue grew, 8.4% year-a-year, as we continue to drive market share alongside higher R-POOT. Customers are continuing to move to our high-speed tiers, recognizing the superior customer excellence on our pure fiber network, while the compelling value of symmetrical speeds and reliability.

lead in this product set. Health services revenue of 411 increase by 270 million over the prior period reflecting the contribution from life work as well continued organic growth.

As we progress into 2023, we remain very focused on the life-works integration and executing on the significant synergies and health outcomes our combined organizations can unlock together.

Early in 20 January , we announced the successful acquisition of Willow Tree, as highlighted by Darren.

Together, these transactions represent important steps we are taking to scale our high-growth, technology-oriented business, further setting us apart from our global peer group while adding capacity for value creation and diversification of our overall business. At the segment level, TTAC operating revenues were up 13% year.

by 28% reflecting the conclusion of our accelerated capital program.

DLCX operating revenues from external customers were higher by 9% year-over-year, primarily for growth in our tech and game clients, arising from additional services provided to existing customers, and the addition of new customers. DLCX adjusted EVTA with up 23% or margin to-

2021 and 2022 are cumulative. EVTA growth was over 1.3 billion since the pandemic started, while most of our industry peers are still humanly negative. We did not go negative in any year.

Consolidated income was down 60% year-to-year. While EPS was down 64% due to the disposition of the financial services business I highlighted earlier.

Excluding the impacts of our virtual power purchase agreement, financing costs in Q4 were primarily higher due to higher indebtedness over the past 12 months, along with higher interest rate environment.

On an adjusted basis, then income was slightly higher while ETS remained unchanged to 23 cents.

Precash low of 323 million in Q4 increased by 280 million, driven by declining capital expenditures and higher EBTA, partially offset by higher mobile contracted volumes during a highly competitive Black Friday period and higher cash interest in the period. Looking ahead, we have set leading annual financial targets.

while advancing our leading growth profile and building on the momentum of strong and consistent operating momentum. In 2003, our operating revenue growth of 7 to 15 percent in the Judity Vity Group of 9 and a half to 11. Our financial outlook.

reflects continued healthy growth within our telecom business, including profitable customer growth and continued demand for superior bundled products over our broadband networks.

In 2023, we anticipate growing contributions from our unique IN businesses including Telus International, which is highlighted by Darren, released their targets today, as well as Telus Health and Agriculture and Consumer Goods.

Not included in our formal CAPEX target of her core capital is 75 million earmarked for real estate development. As we progress through our Cochrane commissioning program and work to delivering on our strategy of delivering certain surplus real estate assets within the footprint, which we will monetize in the future.

Our portfolio and real estate holdings will continue to increase over time with commercial, residential, and industrial sites.

items such as higher cash flow or in the cash interest as highlighted, an increase in cash restructuring to drive margin accretion, higher handset investments from the continued loading of our high-value customers and higher taxes with our higher operating income. A list of these details are detailed in our 9.3 of our...

liquidity position. We have a strong debt maturity schedule with average debt to maturity over 12 years and only 500 million of debt maturity in 2023. The average cost of long-term doctor means that a low 4%, while 86% of the debt is fixed.

Additionally, our balance sheet strength will further be enhanced by the strong cash flow as highlighted. The strong position further supports our dividend growth will now be in place for 2025, along with the delivery of our balance sheet and supporting strategic investments.

Robert O'Ree. Thank you, Doug. Carl, please proceed with questions.

Certainly. As a reminder for people on the phone, if you would like to queue up to ask a question, please dial star one on your phone's keypad. If ever you wish to withdraw from the question, star two. So the first question is from Larry Y twisting Bank. Please go ahead.

Thank you for taking my question. Maybe I'll start with a question on the health.

But my calculation, I'm getting around 5% organic growth on the business, on the revenue side and 2% on life work. You discussed in your MDNA that demand for health and well-being services has never been higher than it is right now. So I'm trying to...

figure out, is it a pricing issue that you guys are having that is the pressuring the top line from growing faster? And when you talk about your expectation for 2023 with the integration with LightUpLightworks, can you talk a little bit on...

What do you expect the business to look like in 2023? Thank you Doug will kick it off and then Michael will do the follow-up As you can see on our KPIs yes there is significant demand for our products as you can see our KPIs continue to grow

There was a re-rate in one of our more material customers as we renewed for a long period of time. That is generating significant long-term value. And I think the opportunity in front of us as Michael will highlight will be the integration and cross-selling that is in its infancy with LifeWorks at the moment. So Michael maybe I can have you talk about that.

Thank you Doug and thank you for the question. That's right while Q4 did see a slight slowdown in respect of one segment in the health business as a result of a customer reprice on a renewal Q4 also saw our team laser focused on two priorities the first being servicing our global customer base and the second being

increasing the pace of our post-acquisition integration activities with respect to life works. In addition to our post-acquisition integration efforts, the Telus Health team has been hard at work partnering across Telus to seize opportunities for collaboration as highlighted by our substantial partnership with Telus International.

which is focused on customer experience and digital transformation, including bringing AI to Telus Health's market-leading digital health solutions.

And we're ahead of our integration plans, which sets us up very well for 23 and beyond. As Darren shared earlier, 2023 sees us going to market under one brand, Telus Health, underpin by our strategic intent to be the most trusted well-being company in the world. Expect strong contributions from Telus Health in 2023.

for its acquisition as evidenced by cross-selling and upselling velocities across our global customer base today.

We're focused on the pursuit of our unparalleled opportunity in teles health to become a global leader in EFAP alongside with data-driven preventative health care, wellness and mental health.

Finally, I'll say we work tirelessly to extend our social purpose every day. Our recent collaboration with TELUS Agriculture and Consumer Goods is a good example of this, as we partnered to bring mental health services to Canadian farmers in a partnership with the Canadian Centre for Agriculture and Wellbeing.

Thank you. Thank you, Mayor. Next question, please, Carl.

The next question is from Geron Dubrai, from Desjardins, please go ahead, Geron. Yes, thanks very much for receiving my question. Mine is on the strategy update. You gave us a year ago. I wonder if you can update us on this. Basically, the points you were making is that you were looking to maintain tech leadership, resurrecting B2B.

and reducing costs as well as killing the tech ventures. I wonder if there's any tilt or shift in these strategic priorities or well-tailed on the same road map? Maybe, basically, thank you. We're on the same road map, Jerome, explicitly, in that regard.

Naveen, maybe given the improving EBITDA trajectory of our B2B operations, given that was reference in the question, why don't you provide a succinct response to that component?

Yeah, thank you, Darren. So, as you said, Darren, the B2B has had a very strong 2022, and we expect that trend to not only continue, but accelerate in 2023. And what I think is notable, especially as we look across other global B2B, is that the trend is not only going to continue, but it's also going to continue to grow.

communication service providers, and that tell us as B2B team delivered strong growth not only on an EBITDA basis, but also revenue, margin, and cash. And another key highlight is that this profitable growth came from across all B2B segments, right from small business through to enterprise and public sector. So...

Our cost structure removed non-value ad work all while improving the customer experience. Telecentral National will play a very important role in enabling this digitization capability and we look to the recent willow tree act position to help further both their capabilities and our digitization efforts in B2B. Uh next!

leveraging our significant investments and coverage in both pure fiber and 5G, which both reduce costs and improve service quality. We feel we've got a lot of opportunity to continue to drive further penetration and growth in these core connectivity areas. Also tied to 5G, we're very keen to see new revenue growth, revenue growth through vertical and horizontal.

And then lastly, really strong geographic segment and product diversity, which gives us several levers to drive growth with significant market share upside. So all this to say, we expect strong cash contribution as well as accelerating revenue.

margin NIBITA growth in 2023 and beyond. And we expect that trend to accelerate not only in 2023 but for several years beyond that.

So I will pass it back to you, Darren. Thanks,

The next question is from Ariven, sorry, Arivendi, Gally Patigapes, please go ahead. Thanks, my question. I wanted to focus a little bit on tellers' health. Thanks for the color early on, but leave aside the synergies and I recognize that's material with life for it. Let's see if he's well appreciated.

the latter option, maybe a little bit of definition around what kind of partnership you're looking for, which areas, what criteria to the extent that you can disclose right now. Thank you.

Firstly, 12 18 months is not the IPO time cycle.

But it could be the time cycle for bringing in a strategic partner. If you're wanting color on what that model looks like, I think the example that we set in 2016 with bearings.

coming in to tell us international as a precursor to what we would eventually do on the IPO front is a very good model to draw an inference front.

What can they do to assist us in the area of products and technology? And what can they do to assist us in the area of distribution, channels, and global reach in terms of scaling our customer penetration and our global customer growth? Those are the attributes that we would be seeking if we chose to strike the partnership. It would be fair to say that we do like the two-step model.

Establishing a partnership first, creating a semblance of independence of the business, whilst of course still integrated in terms of the operations with both TELUS and TELUS International.

pre-flight IPO checklist of things that needed to be achieved by Telus International if they were going to earn their way to the right of IPO in the business in servitude to the strategy. And so the other thing that we would be looking at which gets to the first part of your question is a business where

We deliver very strong organic growth, double digit organic growth at the revenue level and at the EBITDA level. And that of course allows us to earn our way to the M&A opportunities because when you have a strong organic underpinning from a growth profile, you make better acquisition decisions because you have a strong organic footprint.

they are discretionary rather than necessities. Also, when you have stronger organic growth, you integrate those acquisitions significantly more effectively. And if you look at some of the choices that telecentral national is made in terms of its acquisition path, and how well those choices were, and how well those acquisitions were integrated,

That, of course, is going to be indicative of the ideology with Teleshelp. And then lastly, if we're going to do an IPO, it's going to be for a high valuation because clearly an organization like Teles, where going forward the sources of cash are going to significantly and chronically exceed the uses of cash, it's not for a need of money.

It's to establish a great valuation and a transaction currency that increases or amplifies the addressable market of acquisition opportunities that we can pursue, given the multiple that we established with our transaction currency. We are only going to realize that high level of multiple if we have great institution results.

for TELUS Health in 2023, 2024, and 2025. And those will be underpinned by excellence in organic growth, but also the harvesting of the synergies with LifeWorks. And those synergies are deeply significant. We've given you lots of color on those, on 200 million plus holistically, and 60 million in the near term on the cost front.

But the strength of what we can do on the cross-selling side of things, the strength of combining EAP with virtual care, the strength of what we can do on new product development, and of course underscored by the significant efficiency opportunities, I think that that's going to buttress the growth profile that we want to have in terms of the tele-tell IPO. Thank you.

Thanks for your attention. Next question please. The next question is from Drew McRennels from RBC Capital Markets. Please go ahead Drew.

Yeah, thanks very much. Maybe for you, Doug, with respect to free cash flow, obviously a lot of growth year over year. It needs to see tap-backs come down. I don't know if everyone on this call investor I know knows, but your free cash flow definition.

is probably the most conservative among your peers. And I think all the analysts understand that. So when you think about below EBITDA, free cash flow items, my question is when you think about the $2 billion in 2023 with respect to your earmarked catbacks, your cash taxes, the contract assets, all of kind of the moving parts.

Is that 2 billion in your view kind of more of a normalized level or are these things still kind of swinging back and forth a little bit more volatile with a little bit more volatility than usual? Let's back and more forth over to Douglas. Exactly. There's definitely a few one.

pointing that out on the debt issue, you guys. On the handsets, we've assumed at intensity levels we saw in Q4 throughout part of 2023, and including an investment in high quality loading is exactly what we should be doing and we were transparent in our assumptions around that. I think because COVID was a bit of a lulled,

that once we get over 2023, we should see an enormous run rate or more of a normal run rate on handsets. So I think the climb back out of COVID again would be limiting a little bit this year, but 2024 and beyond again would be a year-over-year neutral basis.

And then when you look at our cat-backs continuus and the growth we talked in the DA, I would say we're going to have nothing but accelerated growth on pre-couch growth in the future. And interest. Oh, and interest as we de-lover you're right. Thank you, Darren. We are at a bit of that peak after the willow tree acquisition.

You'll see a sea lever over the next few quarters and as your progresses into the next few years. And with that, the interest amount also will be more managed or more reduced.

Thank you. Thanks, Drew. Carl, our next question, please.

The next question is from Vince Valentini from TD Securities. Please go ahead, Vince. Yeah, thanks very much. Question on connected devices and the impact they're having. The first time you gave us disclosure was 2018. There was about 1.2 million and now it's more than doubled to 2.47 million devices. Is that starting to have a meaningful impact on?

So that's correct. It's included in revenue but it's not included in the sub-base and if you look at the 2.2% ARPU growth, both absolutely and relative to our peers, I think you can see the success of connected devices finding its way through to the economics of the business. Frankly, it's still not yet scaled sufficiently so there's tremendous upside.

on that front still to be harvested, which I think will be aided and abetted by what we're doing on the 5G front and product development that leverages 5G bandwidth in that regard. Naveen, do you want to maybe just chop up a little bit on the connected device front, maybe even if you want?

highlight a couple of vertical examples that are indicative of the future growth that we expect to realize and the strong economics that go with it and maybe also highlight that this is not just an ARPU story on connected devices, it's an AMPU story given the attractive margins. Over to you, Naveen.

Yeah, thanks, Darren. So, grieffully, we are very bullish on IoT connected devices and actually the industry solutions capabilities that will ride on top of that connected device and connectivity capability.

So, as I mentioned previously, this is a meaningful nine-figure business for us. It has double-digit growth on the IoT and industry solution side. And we're getting some good traction in the market across several key verticals and horizontals. Just before I give some examples.

We're really liking how by GIP and peer fiber are driving some nice adjacencies across our health and agriculture business units, again providing some important market differentiation. One example would be really how we're kicking advantage of our Western needs.

area where we are focused is on transportation and so recently TELUS was selected as the exclusive 5G connectivity partner for Project Arrow which is Canada's electric vehicle manufacturing initiative.

by a high volume business with a lot of automation, a lot of self-serve and end-to-end digital capabilities. So in terms of scaling that revenue growth, huge potential, but at very little cost increases. So we definitely like the economics of this business.

in business with a lot of automation, a lot of self-served and digital capabilities. So in terms of scaling that revenue growth, huge potential, but at very little cost increases. So we definitely like the economics of this business. So that I'll pass it back to you there.

Also, with sticky churn in terms of client retention, another attractive feature which helps you achieve attractive lifetime revenues out of the IoT sector. And then secondly, the biggest opportunity I'm going forward is milking the data analytics.

overall those data volumes. Okay, let's go to the thanks Vince for the question. Next question please, Carl. The next question is from Stephanie Price from CIBC World Marcus, please go ahead Stephanie. Hi, good afternoon. I was sure you could think about the strategy around the acquisition of two small interstitials.

that question? Sure. So Stephanie we have been doing small tuck-in acquisitions in specific areas where we've competed for a number of years that these are no different. We have a very significant and growing.

Smart home security business as an example. These particular acquisitions are helping to advance our capabilities in that area. And so, you know, they're relatively consistent with these types of acquisitions we've done in the past in Ontario and nationally.

Great. Thank you. Thanks, Stephanie. Next question, please. Scott. The next question is from David Barton from Bank of America. Hi, it's Matt sitting in for Dave. Thanks for taking the question. I was wondering just on two points.

move forward with some of these acquisitions and your plans. And secondly, on the 75 million of CAPEX for the real estate opportunity.

Can you touch on whether or not this includes also a partner? I know that's been a discussion in the past that you might bring in a partner for these things. And then also on the lag between when you would make these investments and when you might see a return. Like how many years, if that's the right measure, should we expect to kind of elapse for this type of activity? Thanks.

Doug, what do you take? Yeah, so we'll start the second question first. So on the real estate one, the 75 million does not include a partner at the moment. We have assumed we would get potentially partners on individual real estate opportunities where appropriate.

bring in high quality partners to get things up and running. But it really is to start to build the portfolio so that over time frame you're thinking we would have something of substance that could be monetized probably in the three year period is probably the appropriate ramp on that one.

but we absolutely intend to bring in partners and that number could go down the more we do that. On the flow through, I think in this, and you know, and Darren highlighted that it's for the direction up on free cash flow and margins. If you look at the integration costs we're currently doing for life works, our margins are going to continue to enhance.

The double-digit growth we have in health is going to continue to contribute to that. As a Zag, that some of the acquisitions we did were J-Curse. The double-digit growth in both revenue and even GA in both AG are now going to contribute in addition to what Navine had highlighted. And so I think you're going to continue to see more and more flow through.

on an ongoing basis, both in 2023 and beyond on all of those friends in addition to the strength of our core business. And if you look at that EBITDA flow through and the cash flow trajectory over 23, 24, and 25, also calculate what the dividend payout ratio is a free cash flow.

and the headroom that we're creating as it relates to our given and growth model. I think those figures are very interesting.

as it relates to our dividend growth model. I think those figures are very interesting. Thanks so much.

Thanks Matt. Carl, we have time for one more question please. The final question is from Simon Flannery from Morgan Stanley . Please go ahead Simon.

Great. Thanks for the question. Can you talk a little bit about the market environment for 2023? I think looking through your discussion, you're assuming a slower macro growth rate next year. We've obviously had a lift from COVID in terms of pent up demand. Sounds like you think that will continue. But how do we think about the overall industry KPIs across wireless and across broadband?

Do you think we can sustain the pacing across the industry that we've seen in 2022 and 2023 given continued immigration, etc. or are you expecting some sort of moderation overall? Jim, why don't you kick that off? Dana, why don't you do the part two? So for sure, we're seeing persistence.

promotional activity in the low end of the market. But that said, industry best, our poor growth at 2.2%, really good underlying domestic, our poor characteristics coming from the high value subscriber mix.

and also the base management and the step up to 5G. We're also seeing industry best churn on the back of our product intensity and our customer experience. In fact, our post-paid churn continued to be really strong, very similar to pre-pandemic levels.

Our prepaid churn is elevated due to travelers, but over 200 basis points better than our competitors. When you look at our next, our next Q4 nets, we're up 80,000 versus pre-pandemic 2019. So a lot of the focus we've done on distribution like mobile clinic.

digital, direct-to-consumer are driving benefits. And so when we look into next year, we would expect that that promotional activity is gonna continue at the low end of the market, but our strength is really on the premium side of the market and right now we've got two more products to do our work in.

and bundling and we feel that's very robust. So we expect consistent trajectory from where we are on ARPU. We see upside and business roaming. We're already seeing that in Q1. We will continue to see that high value subscriber mix washing through the base. Our base management around 5G.

and Kudo, take your perks, step ups is working really well. The growth in our IoT subscriber base is now contributing meaningfully to our network revenue growth. And we're not as reliant on the low end flanker promotions, which is good. So I feel really good on the wireless side.

that will continue this trajectory, and we'll see that kind of consistent growth. On the home solution side, and Zangol maybe you want to top up, but we're seeing similar characteristics, especially around the bundling, and with the brain together of mobility and home solutions in the consumer organization. That's...

presents tremendous opportunities for us to drive further efficiencies and even better bundling. But St. Oln maybe you want to say a couple words on that on that solution side. Sure. Thanks, Jim. And I think you gave a really great summary and one thing I would top up on as well is that we've been...

the lion's share of the net porting winner. So I think we demonstrate across the board that you know clients are choosing Telus. We're getting the larger premium share of the market. We have a higher level of product intensity, a lower level of churn and a higher ARPU position. So the delta between us and our peers on customer lifetime value is significant and there's an opportunity for growth and continued growth there.

less costs and 70% fewer outside plant repairs. We have an incredible margin accretion opportunity and we also have a significant level of digitization and product development taking place so that we can continue to grow our share.

So we're quite excited about the growth potential in the market and we think that we're positioned incredibly well across segments and across the demographics. We absolutely do see some customers characterized as looking for value in their bundle, higher levels of value in their purchase patterns.

This concludes the tell us 2022 QVU running conference call. Thank you for your participation and have a nice day.

Q4 2022 Telus Corp Earnings Call

Request a DemoDemo

T.TO

TELUS

Earnings