Q1 2025 TELUS Corp Earnings Call
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I can begin no end.
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It was in the spring.
[music] and spring they came from.
The conference is now being recorded.
Okay.
Speaker Change: Good day, everyone and welcome to the Telus 2025, Q1 earnings conference call I would like to introduce your speaker Mr. Robert Mitchell. Please go ahead.
Speaker Change: Thank you for joining us today, our first quarter 2025 results news release, MD&A financial statements and detailed supplemental investor information are posted to our website earlier. This morning on our call today will begin with remarks by Darren and Doug. The Q&A portion will be joined by Zeno <unk> Jason to be brief.
Speaker Change: Briefly prepared remarks slides and answers to questions contain forward looking statements actual results could vary from these statements the assumptions on which they are based in the mature risks that could cause them to differ are outlined in our public filings with securities commissions in Canada, and the U S, including our first quarter 2025, and our annual 2024 MD&A with that over to you Darren.
Speaker Change: <unk>.
Darren: Thank you Remington and Hello, everyone in the first quarter, our teams dedication to operational excellence, coupled with cost efficiency empowered telus to deliver another quarter of industry, leading customer growth and financial performance.
Darren: These results were achieved within a dynamic operating environment, demonstrating the resiliency of our business and the strength of our leading portfolio of services.
Darren: Our industry best total mobile and fixed customer growth of 218000 net additions represented our strongest first quarter on record.
Darren: This performance was driven by strong demand for our highly differentiated integrated product offerings across mobile and home <unk>.
Darren: <unk> by a leading pure fiber and wireless broadband networks.
Darren: Our team's commitment to customer service contributed to continued strong loyalty results across our key product lines. Once again, this quarter and notably postpaid mobile phone churn was zero dot eight 4%.
Darren: This represents a six basis point improvement over last year as we progressed through our 12 consecutive year below the 1% level.
Darren: Looking at our financial results, we achieved solid and resilient T Chek EBITDA growth of 4%.
Darren: In mobile we drove Q1 total net additions of 168000.
Darren: This includes mobile phone net additions of 20000 and record Q1 connected device net additions of 148000.
Darren: These results were supported by our ongoing focus on economic margin accretive customer growth.
And this is evidenced by our consistent industry, leading lifetime revenue underpinned by our industry best churn.
Darren: Let's turn now and take a look at our wireline business.
Darren: <unk> delivered another quarter of industry, leading total fixed customer additions of 50000.
Darren: Alongside industry best fixed data services revenue growth.
Darren: Seven 3%.
Darren: Furthermore, our highly differentiated technology and data centric growth businesses continue did demonstrate impressive momentum for talents.
Darren: <unk>, which we bought begun to report as a separate business segment achieved revenue and EBITDA growth of 12 and 30% respectively.
Darren: Moreover, the team drove a 7% year over year increase in global lives covered the $76 5 million.
Darren: This was fueled by global expansion.
Alex: Alex enhancements expanding sales channels and effective cost management through technology, and synergy optimization underpinned by a deeply rooted dedication to putting customers first.
Alex: We are excited to maintain and build on this momentum throughout 2025 and well beyond.
Alex: Notably since acquiring life works, we've realized $376 million in combined annualized synergies. This.
Alex: This includes $306 million from cost efficiencies and $70 million and growing from successful cross selling strategy.
Alex: And they are plentiful.
Alex: We remain on track to meet our goal of $427 million by the end of 2025 and continuing to push the outside of that envelope well beyond the 2025 time frame.
Alex: In May <unk> acquired workplace options, a leading global provider of integrated employee well being solutions with 88 million employees or across 200 countries and territories.
Alex: In aggregate would tell US help this brings our lives covered to more than $160 million or roughly 8% of the entire global market.
Alex: Together, we will offer the most comprehensive suite of health and well being solutions globally powered by innovative technology and delivered with unmatched service excellence.
Alex: This acquisition will be made in partnership with a leading private equity investor within the health care vertical with deep expertise across the health care landscape and they will be a value added partner supporting our efforts to accelerate growth and re.
Alex: <unk> significant synergies.
Alex: Moreover, with Intel is agriculture, and consumer goods, our team demonstrated strong performance with a 20% revenue increase on a year over year basis supported by enhanced profitability and notable margin improvement.
Alex: The results that we're achieving in these businesses reflect our dedicated efforts to deliver outstanding customer experiences maximizing shareholder value and driving our social capitalism initiative.
Alex: All the while with a data centric insights based strategy just like our core telco.
Alex: The strategic investments, we've made in our leading broadband networks underpin the continued advancement of our strong financial and operational performance.
Alex: This includes obviously growing EBITDA, which when combined with moderating capex supports meaningful and sustainable free cash flow generation as evidenced by the 22, 3% growth this quarter.
Alex: This gives us a lot of confidence in the robust outlook for consistent long term profitable growth and the sustainability of our industry, leading multi year dividend growth program.
Alex: Today, we are announcing a 7% dividend increase reflecting our commitment to delivering superior value to our shareholders.
Alex: This builds on our consistent track record of delivering on our multiyear dividend growth program first established in 2011.
Alex: Furthermore, we announced today for the fifth time, the extension of our industry best dividend growth program.
Alex: Telus is targeting 3% to 8% annual growth for our dividend from 2026 through 2000 through 2028.
Alex: This moderated growth range will allow us flexibility to support the key priority of deleveraging our balance sheet and eliminating the dividend discounted drip program associated within our dividend reinvestment plan.
Alex: This is in line with our target of achieving a net debt to EBITDA ratio of circa three times by 2027 in conjunction with the rationing down and removal of the discount dividend reinvestment plan.
Alex: Our dividend growth model will be supported by the best combination of EBITDA growth rates and capital intensity ratios globally yields.
Alex: Yielding meaningful and sustainable free cash flow expansion.
Alex: Moreover, <unk>.
Alex: As we have seen today this is augmented materially by significant value creation in our emerging growth businesses.
Alex: And a succession of asset monetization opportunities that are deeply material that will further reduce <unk> leverage and interest outlays, improving the cash story, yet again at this organization.
Alex: Our management team at <unk> remains laser focused on building on our strong operational and financial performance momentum with which we exited 2024 and achieved in the first quarter.
Alex: We remain dedicated to achieving our robust targets for 2025, and delivering sustainable free cash flow expansion year in and year out for the foreseeable future.
Alex: Reflecting our telus team's long standing commitment to putting our customers and our communities first this month, we will celebrate our 20 <unk> annual Telus days of giving in 33 countries now.
Alex: Over the past two decades, thanks to the support of our valued clients. We have led our corporate peers globally by contributing $2 4 million days in the communities, where we live where we work and where we serve striving to meet the future friendly for all.
Alex: Do you want to understand why our churn rate is where it is you need to look quite clearly at the relationship that we built with our communities underpinned by the social purpose of this organization.
Alex: In closing I would like to express my gratitude to our team for their efforts in this regard and for their expertise their resiliency their grit and executing on our consistent winning strategy to meet our commitments to all stakeholders no matter how difficult market conditions may be.
Doug: And on that note I'll turn the call over to Doug.
Doug: Thank you Darrin and hi, everyone.
Doug: Effective with our Q1 results today, we have changed our reporting structure and introduced a new Telus health reporting segment, which was previously included in <unk> Tec. We have also provided historical information in our town Portela Pal, which you'll find in our IR supplemental.
Doug: Mobile network revenue was down slightly as robust mobile phone and connected device subscriber additions as well as higher Iot revenue growth of 11% were offset by lower mobile Arco the.
Doug: The $3 seven decline in <unk> is reflective of ongoing competitive pressures and lower roaming fixed data services grew 3% year over year, driven by strong customer growth across our leading product portfolio, our pure fiber internet TV and security and automation. Additionally.
Doug: Higher Internet security and automation <unk> supported that growth.
Doug: At the segment level <unk> operating revenues were up 2% driven by higher mobile equipment revenue fixed data services fixed equipment and agriculture services revenue.
Doug: <unk> adjusted EBITDA, excluding how now excluding health increased 3% alongside margin expansion of 30 basis points to 42, 4% demonstrating our disciplined operational execution and cost management in a highly dynamic operating environment.
Doug: These results were driven by our consistent emphasis on profitable customer growth and the benefits from our ongoing focus on cost efficiency and effectiveness gains planned from our noncore asset divestitures as well as our real estate and copper monetization program.
Doug: In health Health operating revenues and adjusted EBITDA grew by 12% and 30% respectively.
Doug: Growth was driven by organic growth across various services, including our pay via vertical retirement and benefit solutions cost reduction efforts as well as the mix in our of our recent acquisitions and employer solutions.
Doug: <unk> digital operating revenues and adjusted EBITDA were in line with expectations. Please refer to <unk> Digital's earnings release and analysts call commentary earlier today.
Doug: On a consolidated basis reported net income and basic EPS more than doubled year over year, primarily due to lower restructuring.
Doug: On a adjusted basis net income and EPS were essentially unchanged on a year over year basis.
Doug: Capital expenditures, excluding real estate declined by $132 million or 19%, primarily driven by planned slowdown of our fiber and wireless network builds.
Doug: Overall consolidated Catherine 11% was down 300 basis points over last year.
Doug: Our quarterly capital our quarterly free cash flow of $48 million was higher by 22% driven by lower Capex and higher EBITDA.
Doug: These factors were partially offset by higher taxes and interest paid.
Doug: Looking ahead, we remain focused on driving towards achieving our 2025 targets, which we reiterated today. This includes targeting <unk> operating revenues and adjusted EBITDA growth, including <unk> of 2% to 4% and 3% to 5% respectively.
Doug: Consolidated capital expenditures, excluding circa 100 million for capital and real estate develop initiatives are targeted to remain stable at $2 5 billion.
Doug: Lastly, free cash flow guidance for 2025 of $2 <unk> 5 billion is also confirmed.
Doug: As it relates to our balance sheet. The average term to maturity of our long term debt stands over 10 years with added weighted average cost of $4 up 4%.
Doug: While leverage is elevated at three 9% we remain a $3 nine X we remain committed to improving our leverage ratio targeting our net debt to EBITDA ratio by <unk> by 2027.
Doug: Our efforts to deleverage our balance sheet will be supported by continual operational growth, including EBITDA and free cash flow expansion. Additionally.
Doug: Additionally, ongoing monetization initiatives, including the planned divestiture of noncore assets continued real estate and copper monetization as well as our potential monetization of wireless towers are well underway and will continue to further strengthen our balance sheet.
Doug: During the quarter, we monetize certain noncore assets within the business as well as our tellers global ventures portfolio, receiving proceeds of $66 million.
Doug: In April we successfully raised $1 6 billion in hybrid debt securities with the proceeds being entirely directed to debt repayment to 50% of the proceeds receiving equity treatment by credit rating agencies on a pro forma basis, when including the benefit of our hybrid offering leverage would've been.
Doug: Approximately three eight times at the end of the quarter.
Doug: As it relates to the drip discount we expect to lower the discount from the current 2% by <unk> five percentage point in each of 26 and 27 before removing it completely at the end of 2027.
Doug: If the if.
Doug: If the balance sheet deleveraging plan as we have outlined is quicker and execution, we will review of removing the drip discount earlier than the current timeline as.
Doug: As Darren highlighted earlier, we recently completed the purchase of workplace options of approximately $500 million net of assumed debt of approximately $100 million. We've also signed a non binding term sheet with a third party investor who will invest $285 million Canadian as part of the acquisition, which we expect to be completed in Q2.
Doug: As we progress through 2025, we are well positioned to drive strong growth sustainable and sustainable growth. Despite the dynamic operating environment supported by our leading asset mix and robust business strategy.
Doug: Before we move to our Q&A I just want to congratulate Darrin on its 100 earnings call since 2000.
Speaker Change: It's been a remarkable journey over the past 25 years and congratulations Warren.
Doug: Yes.
Doug: Okay.
Doug: Robert over to you. Thank you and congratulations Darren.
Karl: Karl Please proceed with the questions.
Speaker Change: Thank you, ladies and gentlemen on the phone if you would like to just ask a question at this time. Please press star one on your phone's keypad.
Speaker Change: First question is from Stephanie price from CIBC kindly Stephanie.
Speaker Change: Good afternoon.
Speaker Change: Maybe I'll start with Telus health, just a very strong revenue and EBITDA growth in the quarter. Just curious what's fueling that is it primarily synergy related.
Speaker Change: There have been other tuck ins.
Speaker Change: So maybe you could talk a little bit about workplace solutions and what that brings to the house solution and more broadly how you see telehealth involving over the next few years and the key milestones you're looking for from that business.
Speaker Change: Our monetization opportunity.
Stephanie Price: The team will take that question Stephanie.
Speaker Change: Yeah, Thanks, Darren and thanks, Stephanie for the question.
Speaker Change: I think I'll start by saying that we've been building for a strong momentum in <unk> over the last.
Speaker Change: A couple of years and that growth is coming from.
A number of areas number one we've made some smart tuck in acquisitions that are accretive immediately accretive the synergies that we're getting from those acquisitions are on track and doing well on the other part of that I would say we've made some real.
Speaker Change: Really good investments in terms of our go to market and channel capabilities and those are yielding.
Speaker Change: <unk> returns in fact.
Speaker Change: We had our best bookings quarter.
Speaker Change: And Telus health.
Speaker Change: <unk>.
Speaker Change: Acquisition, certainly tightened the Lifeworks acquisition as Darren mentioned, we continue to have very strong.
Speaker Change: Synergies.
Speaker Change: Lot of the cost synergies are behind us, but the revenue and cross sell.
Speaker Change: Energies are just starting to really ramp up and in regards to cross sell we're starting to see some very good.
Speaker Change: Ramping across all of the <unk> asset so.
Speaker Change: For example, cross sell across the quarter, BBB Telecom healthcare, <unk>, agriculture, and consumer goods <unk> digital.
Speaker Change: What's up.
Speaker Change: Over five times relative to.
Speaker Change: This time last year, so we feel very very good about the.
Speaker Change: The momentum on health, bringing on workplace options.
Speaker Change: Is a really really positive.
Speaker Change: Development for us where acquiring workplace options from a position of strength.
Speaker Change: It's a high growth assets that again is immediately EBITDA accretive really strong industry, leading client experience capability, a really strong customer base.
Speaker Change: We're really pleased with the talent level and.
Speaker Change: The level.
Speaker Change: Leadership, that's coming along with this asset the digital.
Speaker Change: Capabilities and the data capabilities and the monetization opportunities with the data that we get with WTO is super strong there.
Speaker Change: Their cost structure is excellent there capital intensity as a slow great global reach great complementary set of products with what we have today in.
Speaker Change: In telehealth, so I think.
Speaker Change: We're really excited about WTO and more to come on that.
Speaker Change: In the subsequent quarters and then just lastly.
Speaker Change: We're very pleased to be able to report Telus health as a segment.
Speaker Change: We're excited about where it can go and in terms of the future.
Speaker Change: Well look.
Speaker Change: Pat.
Speaker Change: Right.
Speaker Change: Monetization or partnership opportunities.
Speaker Change: It evolves so.
Speaker Change: That's it for me Darren any top ups from here.
Speaker Change: Just one thing.
Speaker Change: <unk> two is today above the 30% EBITDA growth in Q1.
Speaker Change: 26% was the organic growth rate.
Speaker Change: So the preponderance coming from organic.
Speaker Change: Thank you very much.
Speaker Change: Thanks, Stephanie next question please Carl.
Speaker Change: The next question would be from Vince Valentini from TD Cowen. Please go ahead Vince.
Vince Valentini: Hey, thanks very much.
Speaker Change: Can I just clarify on the workplace options.
Speaker Change: Acquisition, the partners, putting up $285 million out of the $500 million total, but tell us is retaining over 50% control. If you can just maybe clarify that for me and then the other question bigger picture is is on wireless.
Speaker Change: Good results overall today, everybody is happy with the share price performance and great to see the dividend commitment but.
Speaker Change: Wireless service revenue almost minus 1% cannot be viewed as satisfactory I'm sure to you either Darren.
Speaker Change: Do you have any thoughts on what's going on in the market and what perhaps needs to change and do you think tell us to play a role here one sort of balancing volume versus pricing is one of the leaders in the industry to sort of set set an example for others would love to hear what your views are on the industry.
Steve: Steve Thanks.
Vince Valentini: Thanks for the question Vince.
Vince Valentini: The answer to the second part of your question is yes.
And we will provide color on that in a second.
Vince Valentini: Dan <unk> and myself.
Vince Valentini: And Doug will kick it off as it relates to the workplace options.
Vince Valentini: Acquisition and the role in the P/e front that the $2 85.
Vince Valentini: How that plays out at an equity level, Doug over to you. So that $500 million was cash events. There is a $100 million of assumed debt.
Vince Valentini: So they all in purchase price of six in.
Vince Valentini: In substance and then the 285 is obviously less than 50%.
Vince Valentini: Thank you.
Vince Valentini: Sure.
Speaker Change: Thanks, Darren and thanks, Tim for the question I think first in four months have to say that we are not satisfied with that performance and is not headed in the direction that we wanted and we are going to significantly improve it.
Speaker Change: I think it's important to highlight that <unk> <unk> that are going to be critical to achieving a better performance and I'll focus internally because we have to focus.
Speaker Change: <unk> focused on what we can control I think fundamentally we have to do a much better job of leveraging our product intensity, our bundling capabilities, improving our loyalty and retention, which is headed in the right direction, but it's certainly not achieving that performance that I think is commensurate with what we can achieve.
Speaker Change: When we put more focus and energy into that.
Speaker Change: And even in certain areas like leveraging AI and the capabilities that tell us digital provides to help us with revenue management and predictive model.
Speaker Change: I think on the other side of it is really balancing and aligning investment with outcome. So when you look at the three core element of rate subsidy.
Device pricing and the financing or ultimately in the type of environment, what we need to do is ensure that our investment in subsidy in handsets is commensurate with the right return levels and then finally I think there is an amp to.
Speaker Change: Vacation element if there are segments of the market that are still profitable to support and drive growth and we need to make sure. We continue to align the <unk> outcomes.
Speaker Change: And the cost to serve model with <unk> with.
Speaker Change: With the demographics of those markets.
Speaker Change: Those are the areas that we're going to focus on and I'll keep it sustained my peers may want to add with respect to the <unk> side, but I think it's really important to highlight that we're not satisfied and we're going to focus on net to improve that.
Speaker Change: Yeah.
Speaker Change: Okay. Thanks.
Speaker Change: Do you want to add I think literally just to top up I would say on the <unk> side.
Speaker Change: We arent satisfied either.
Speaker Change: <unk>.
Speaker Change: We have some levers in terms of strong <unk>.
Speaker Change: Iot growth, we had really strong Iot loading in the quarter.
Speaker Change: And that needs to be.
Speaker Change: More material percentage.
Speaker Change: Of our of our wireless network revenue.
Speaker Change: On the <unk> side, we've actually had <unk>.
Speaker Change: Strong loading and we will continue to focus on.
Speaker Change: Accretive loading we have an opportunity to continue to drive product intensity.
Speaker Change: Which will help both with.
Speaker Change: Churn and lifetime.
Speaker Change: Revenue that we're very much focused on end to end.
Speaker Change: The opportunity to drive geographic expansion.
Speaker Change: Cros core segments like SMB and mid market is also progressing well, but an opportunity for us to do more there.
Vince Valentini: I think Vince your point is well made.
Vince Valentini: One of the benefits of having strong and resilient financial results.
On a premium asset mix as our results have demonstrated today is it gives us the latitude to take a leadership position in the market.
Vince Valentini: And move to a more sanguine economic model so.
Speaker Change: I think the point that you are pressing on there.
Vince Valentini: Is quite cogent.
Speaker Change: Secondly.
Speaker Change: And this is I think where you would expect us to lead we have been the most progressive.
Speaker Change: On digital is driving our <unk> thesis.
Speaker Change: Not from a traditional cost cutting cost efficiency point of view.
Speaker Change: Leveraging our digital progression and leveraging our AI capabilities.
Speaker Change: We have the best assets to support that Intel is digital and putting that to work in terms of the <unk> for our business overall in wireless in particular.
Speaker Change: <unk> of what we should be able to do on digital and AI better than our peers on a global basis.
Speaker Change: I think that has to be a priority for this organization because we have a differentiated capability set there.
Speaker Change: And then lastly.
Speaker Change: You saw me make the comment that we that we set a record on connected devices, yes, Okay Clap clap, that's great, but it's not good enough.
Speaker Change: We have the scale more aggressively.
Speaker Change: On the on the connected device machine to machine Iot front that is profitable business that has attractive revenue growth for this organization.
Speaker Change: <unk> ROI on all of that money, we spent on <unk> infrastructure and spectrum along along the way. It's good business from a retention characteristics point of view and we've got to scale that business.
Speaker Change: And that's the type of thing that really.
Speaker Change: Alleviates, the <unk> pressure and shows up in terms of network revenue growth. So those are the three areas I think that are key to takeaway for investors.
Speaker Change: Thank you.
Vince Carlin: Thanks, Vince Carlin's question. Please.
Speaker Change: The next question is from Jim <unk> from <unk>. Please go ahead.
Speaker Change: Hey, Thanks for taking my question.
Speaker Change: First question for me.
Speaker Change: Sorry for the long term guidance question, but given the three year dividend growth plan I'll allow myself. So can you talk about the puts and takes maybe about the free cash flow trend that youre seeing in the coming years.
Speaker Change: With numbers if possible that allows you to grow the dividend.
Speaker Change: For the next three years that much.
Speaker Change: And then the second one.
Speaker Change: Doug you mentioned that if deleveraging is quicker than expected to EMEA removed quicker.
Speaker Change: What specifically are you referring to in terms of potential events that may happen, maybe outside of Quaker organic growth. Thank you.
Speaker Change: Okay, I'll kick it off and I'll, let Doug pull up.
Speaker Change: Our three year free cash flow view, so that he can give you multi year guidance at a quarterly level.
Speaker Change: Level.
Speaker Change: Brian.
Speaker Change: Yes.
Speaker Change: Thanks, Joe.
Speaker Change: Let's just say a couple of things.
Speaker Change: When we did the reset from 7% to 10% to 3% to eight you can imagine the amount of modeling analytics.
Speaker Change: Scenario planning contingency.
Speaker Change: Views that we put into this from a conservatism perspective.
Speaker Change: So we chose those numbers wisely.
Speaker Change: To give us the latitude that we need prospectively, let Doug comment on that in a second.
Speaker Change: <unk> is sustainability.
Speaker Change: I really meant what I said in my remarks.
Speaker Change: We are looking at <unk> to have the best combination.
EBITDA growth prospectively, and lower Capex intensity to support the success of expansion at the free cash flow level.
Speaker Change: And that's underpinned by a few things that I think are important.
Speaker Change: One is we expect to see strong continued execution within our outperforming telecom business. I think you can expect it to be resilient when we're in a corrosive competitive pricing environment and I think you can expect it to be robust.
Speaker Change: That environment gets more sanguine, which eventually it will.
Speaker Change: Will.
Speaker Change: We have an emerging growth story, and help and tell us agriculture and consumer goods.
Speaker Change: That is second to none and again youre seeing that in today's results and to <unk> excellent point.
Speaker Change: Health EBITDA expansion that we've disclosed in Q1.
Speaker Change: Is really just the carry through of what we've been reporting on over the last six quarters in.
Speaker Change: In that regard next for us.
Speaker Change: Huge factor to be able to rely on call upon leverage what <unk> digital is doing on a leading basis.
Speaker Change: The digital AI transformation because for us that's a four point game and helps us sustainably take costs out of our business, but it's equally potent in respect of revenue generating go to market strategies and so for us that's transformative and it's a unique asset within our portfolio.
Speaker Change: I don't think people have done the right tale of the tape on this because all of the above is complemented.
Speaker Change: By a very smart.
Speaker Change: Very specific very well structured laid out success a deleveraging plan.
Speaker Change: That's going to yield prospectively continued cash and economic benefits to this organization again, enabling what we want to do in terms of growth overall, but also buttressing buttressing.
Speaker Change: The sustainability the durability the predictability of the reliability of our three to eight 3% to 8% on the dividend expansion from 2026.
Speaker Change: 2028, and so I think thats a lot in terms of the free cash flow story.
Speaker Change: This organization and why it's unique the tellers, but.
Speaker Change: Maybe Doug if you want to provide a little bit of additional color on prospective cash go ahead. In addition to that as Darren highlighted we are continuing to invest in our business appropriately with capex, but with our accelerated build and the completion of fiber we have the ability to bring capex intensity down to industry, if not world leading lows as we've talked.
Speaker Change: About in the past.
Speaker Change: So that will be continue to be a future driver.
Speaker Change: As we delever cash interest well.
Speaker Change: The black line and decrease over time.
Speaker Change: So we can assume your youll get a uptick in free cash flow over interest.
Speaker Change: Restructuring costs also were elevated as we had to right size our organization through some of the digital and economic challenges that we've seen over the last little bit.
Speaker Change: And you'll see that leases will also start to decrease decrease in the future on payments.
Speaker Change: Four leases in 2026, so free cash flow starts to accelerate on all those fronts. In addition to everything that Darrin it already highlighted.
Speaker Change: In his overview of the operations of the business.
Speaker Change: And on monetization or other events that would allow us to.
Speaker Change: Two.
Speaker Change: Reduce the direct sooner we continue to talk about our enduring referred to the deleveraging plan we.
Speaker Change: Have in our base plan I would say a risk adjusted execution that allows us to hit that plan and have multiple levers to get there and if there are some items, we can't execute on and we have others.
Speaker Change: So I would say if we can continue to execute more than the assumed rate, which I believe is conservative and would allow us to delever faster and more deeply in that timeframe, which would give us the opportunity to reduce the drip faster and that includes the items that we continue to talk about Darren talked about the value.
Speaker Change: Health and AG and partnerships.
Speaker Change: Did a hi, Brad as you saw in April.
Speaker Change: We still are very low in the hybrid offering within our industry and theres more room on that opportunity should we desire to go there are asset.
Speaker Change: Divestitures between copper real estate are well underway and then you would have seen the first wave of our non strategic divestitures of $66 million. This quarter and we are not expecting anything unreasonable to hit our threet auto plan.
Speaker Change: It really has been just accelerating any of these pillars that we just talked about.
Speaker Change: A new measure I think that would be helpful. In terms of looking at Telus.
Speaker Change: As our goal to have the lowest or be near the lowest capex intensity minus the EBITDA growth rate.
Speaker Change: That that particular outcome capex intensity minus the EBITDA growth rate, we want to lead the industry with and complement that by chunking, our way through all of our deleveraging programs in a very methodical fashion.
Speaker Change: That's very helpful. Thank you.
Speaker Change: Thanks, Jerome next question please.
Speaker Change: Next question is from drew Mcreynolds from RBC capital markets. Please go ahead.
Drew Mcreynolds: Yes, thanks very much.
Three follow ups for me.
Drew Mcreynolds: First on the <unk>.
Drew Mcreynolds: I guess, Vince as wireless question.
Drew Mcreynolds: Spirit Darrin of your hundreds conference call a recall.
Drew Mcreynolds: Within one of these calls going back to 2018.
You look forward on the industry and I think it was a warning shot.
Drew Mcreynolds: On competition and wireless pricing.
Drew Mcreynolds: And it seems since then kind of still tell us to absorb whatever was coming.
Drew Mcreynolds: I guess the industry's way.
Speaker Change: I think you kind of nailed it to be honest. So just wondering on the BDC wireless side.
Speaker Change: This kind of largely commoditized now or do you really see it as transitory.
Speaker Change: Second question follow up just on the AI.
Speaker Change: Dynamic just maybe in the next three years go into 2027.
Speaker Change: Can you give us specific examples where you are.
Speaker Change: Driving.
Speaker Change: Lower costs.
Speaker Change: And alternatively.
Speaker Change: Seeing new growth revenue growth opportunities with AI, and then last quick clarification or.
Speaker Change: Comment maybe to you Doug.
Speaker Change: As you get closer to three times Whats your thought on the institution of an NCIC. Thank you.
Speaker Change: Yeah.
Speaker Change: Alright.
Speaker Change: Here, we go on that.
Speaker Change: Doug Youll give the launch date for our NCI.
Speaker Change: Right.
Speaker Change: To be us.
Speaker Change: I think it would be great for people to hear from you given your global thought leader on.
Speaker Change: AI product to go to market I think a very exciting conversation and then.
Doug Youll: We'll do the Donny and Marie <unk> to see on that front. So Doug go ahead.
Doug Youll: Yes, I would assume it would be after that 2027 period, and we will bounce it off with all the capital allocation priorities that we've talked about on what is the best shareholder return at that timeframe.
Doug Youll: Ensuring our balance sheet as to the strength not just for that hitting 2007, but our future proof as well and then appropriate investment in the business, but I would assume it's after 2007.
Doug Youll: To be if you want to comment on what excites you in terms of AI profitable revenue generating growth opportunities.
Speaker Change: Sure Darren Thank you.
Note that I am on my one one hundreds as many earnings calls as Darin today.
Speaker Change: Thank you for having me.
Speaker Change: As Darren said.
Speaker Change: <unk> is a dual opportunity for us.
Speaker Change: On the one hand, it's helping tell us.
Speaker Change: Efficiency and operating excellence, but on the other side it.
Speaker Change: It is helping us take those learnings knowhow and products.
Speaker Change: Clients to then monetize those and I think that makes sense.
Speaker Change: Gordon really unique.
Speaker Change: Not just in the industry, but in the entire competitive landscape.
Speaker Change: We have made.
Speaker Change: AI team member enablement.
Speaker Change: <unk> differentiator across tell us and tell us digital.
Speaker Change: I think what's interesting about that is it's not just access to the low ends and to AI tools.
Speaker Change: But it's an entire ecosystem around how you signed and support new ideas. How you do the change management of not just improving existing processes, but reinventing processes.
Speaker Change: Do you look at privacy.
Speaker Change: And control of your data and then how you continuously innovate.
Speaker Change: Yes.
Speaker Change: Improvement cycles, agile development techniques et cetera to make this happen and so I'll just share a couple of examples with you.
Speaker Change: As you requested so first of all we have about 50000 users in the two companies that are that have access to the tools who've built over 15000 co pilots in.
In the last nine months.
Speaker Change: 15 X 15 times increase in token consumption over the last nine months. So you can just see the.
Speaker Change: The volume.
Speaker Change: Of AI usage, that's happening in the combined company.
Speaker Change: So examples of that are and agent trainer right. We've created a fuel contact center agent trainer and usually when you're when you're dealing with technology, you're investing in here, saying all right we're going to do.
Speaker Change: Decreased costs or is this going to increase quality and with AI.
Speaker Change: In many implementations you're actually able to do both on the same time.
Speaker Change: For agent trainer, when we take our new agents through that we're getting.
<unk> to 50% reductions in training time, but also significant increases and proficiency, which then leads to customers. He sat down the road.
Speaker Change: We're giving our frontline agents co pilots.
Speaker Change: Sorry.
Speaker Change: <unk> average handle time and calls.
Speaker Change: Between 10% and 45%, but they are also increasing fee set at the same time between 10 and 20% because our agents have so much better access to the most current information. The most current offers they're able to actually upsell on the call much more efficiently than they have in the past.
Speaker Change: We have integrated into our sales motion so we have.
Speaker Change: Higher kpis, 10% to 15% higher kpis in three areas meetings coverage and funnel quantity.
Speaker Change: We've launched propensity to churn models working with today and all in pricing simulation models.
Speaker Change: We are proactive outreach based on AI analysis of data intense.
Speaker Change: That's driving up to a 50% reduction repeat calls and targeted programs and what's most exciting for us.
Speaker Change: All of this is just within tell us and this constant interplay of what we do for Telus, bringing that to our clients and then Conversely, with all the clients, we talk to and work with bringing that to tell us.
Speaker Change: It's a pretty unique opportunity for us in the industry.
Speaker Change: Yeah, another thing like the top up there now.
Was excellent to Vietnam.
Speaker Change: To wrap this up.
Speaker Change: A few comments.
Speaker Change: I guess time will tell whether they're for feta or erroneous.
Speaker Change: Number one.
Speaker Change: We have to change the psychology within the industry as it relates to marketing and sales.
Speaker Change: We have a wireless industry where.
Speaker Change: We have to have price competition parity.
And.
Speaker Change: I for one don't understand that.
Speaker Change: Why can't we have a price premium.
Speaker Change: If we have better product features but more particularly better customer service.
Speaker Change: For our clients why do we always have the price match price match price match in a race to the bottom why can't we build the culture of psychology, a set of competencies to be able to sell at a premium.
Speaker Change: That's the transformation that this organization is working Arden lead to achieve should there not be yes, a deserved premium if you can provide a higher quality of customer service and we know empirically from customers that customers value reliability more than affordability.
Speaker Change: And so the opportunity is out there for us.
Speaker Change: Secondly, as I've said, many many times, we have been a chronic underperformer on product integration or bundling.
Speaker Change: There is tremendous upside opportunity as it relates to product intensity.
Speaker Change: <unk>.
Speaker Change: The benefits of that are obvious, but the one thing that is a secondary consideration is that when you get better churn through better bundling you also get better ARPA resiliency, which supports what you want to do on the network revenue growth front.
Speaker Change: Third.
Speaker Change: Back to the comment that I made earlier that I think is underappreciated.
Speaker Change: If you can do great things like what to be it was specifically articulating on digital and AI and be more resilient on the <unk> front.
Which we should be clearly doing and you can see the manifestation of that in our results. It allows you to have greater discretion and make better choices at the <unk> front.
Speaker Change: And Thats, an eclectic combination for this organization that's tremendously powerful.
Speaker Change: Next we're still scratching the surface on Iot and machine to machine, So and let me be specific on that front.
Speaker Change: There's a lot of concentration on Iot within the logistics vertical, but our performance on Iot and health has been crap our performance on Iot and agriculture has been crap.
Speaker Change: And as it relates to B to B to C on wholesale.
Speaker Change: We are deeply underperforming.
Speaker Change: <unk> you know, we launched our smart energy product a classic Iot solution that would show up and network revenue growth and we're nowhere to build on it we have to have the ability to scale on that product and see it complement the legacy revenue lines within our.
Speaker Change: Our wireless portfolio and we have to get better at product development in general.
Speaker Change: At the end of the day, we spent all this money.
Speaker Change: On broadband broadband wireless and broadband wireline our job should be too exact economies of scope.
Speaker Change: More products over the same medium more products over the same medium so let get more product development happening within our <unk> capability set and scale. It so that it actually shows up with an impact on our <unk> and Amp, who for this organization.
Speaker Change: And then finally.
Speaker Change: I'll give you a true data insight.
Speaker Change: If we went back.
And did a set of data analytics.
Speaker Change: Over the last five quarters.
Speaker Change: What we did with pricing and all of our channels would tell us.
Speaker Change: And evaluated it on a pro forma basis as to what the optimum pricing decision would be to solve for the best economics.
Speaker Change: We left a ton of money on the table.
Speaker Change: Now you think about what to be as just said on AI if.
Speaker Change: If we can leverage that dataset leverage our AI capabilities within the area of price optimization with lifetime revenue economics, we will make better decisions and not leave that money on the table.
Speaker Change: And that's a tremendously smart thing to do and it fits well with our capability set so that's where I think we need to go in the future and Thats just AI on price optimization imagine what it can do on co pilot bundling opportunities and the like.
Speaker Change: That's where I think this industry needs to go over the next three to five years and if the industry doesn't go there will tell US will then will be the differentiated benefit.
Speaker Change: Enjoy those benefits for that so.
Speaker Change: That would be my forecast for now.
Speaker Change: Yes, very interesting insight thank you Darren.
Drew Mcreynolds: Thanks Drew currently have time for two more questions. Please.
Speaker Change: Very well. The next question is from a mere yaghi from Scotiabank. Please go ahead.
Drew Mcreynolds: Okay.
Mere Yaghi: Great. Thank you for taking my question.
So I'll go back to the question on wireless.
Mere Yaghi: Four quarters.
Mere Yaghi: Seeing our pud decline.
Mere Yaghi: Three and a half.
Mere Yaghi: From a Korea.
Mere Yaghi: Tung zone.
Mere Yaghi: When I look at your reported with our pool and correct me if I'm wrong.
Mere Yaghi: My my numbers.
Mere Yaghi: I will discuss.
Mere Yaghi: Maybe about $7 in their <unk>, who is related to handset subsidy.
Mere Yaghi: So your average.
Mere Yaghi: But rather in the ARPA was like 50 or $61 maybe.
Mere Yaghi: And when you were looking at the market.
Mere Yaghi: Front book right now for average customers is probably 40 client between accordion of 45 so.
Mere Yaghi: Are we to expect <unk> long term.
Mere Yaghi: Decline by another three.
Mere Yaghi: $3 $3 and a half before we reach or before we cycle through all of the back book into the front book or any of my numbers are wrong.
Mere Yaghi: Aye.
Mere Yaghi: Thinking backwards through the math on that and a weighted average of all of our products I'm not sure I can answer your question clearly.
Mere Yaghi: I do think.
Mere Yaghi: There is obviously product mix product quality bundling and other items that go into that on does the whole base gravitate gravitate to the floor of our dot to in essence the question you're asking.
Mere Yaghi: I think I'll have to come back with a what might that look like or Zane on can top up on.
Mere Yaghi: The opportunity is even as Darin just highlighted that there is room to not gravitate for all the reasons qual.
Mere Yaghi: Quality and product and pricing, even within a handset world where at times device floors, where we're where offers are being.
Mere Yaghi: Our being out there for our financing handset is uneconomic at <unk> levels that are well below even what you quoted so.
Mere Yaghi: I think it's going to be an average of all of that.
Speaker Change: Our goal, obviously is not to gravitate to that bottom to leverage all the tools leverage all of the products and continuing to build as Darin and Zane load highlighted.
Speaker Change: And I guess, that's probably the best I can do at that top level by analysts or any tomo.
Speaker Change: I think you covered it well.
Speaker Change: As a complex mix between BYOB and contract revenue in terms of the handset mix.
Speaker Change: And where customers are gearing in terms of our cost of devices and the length at which they're keeping their devices.
Speaker Change: I think that that all of those factors have an impact on on that calculation and then as I mentioned you look at your base and your loyalty and Hoxton and how to ensure that you have offers in the market that that are attractive to your existing base to renew coupled.
Speaker Change: With the right investment for the right rate plan and the right BYOB and improve economics for the demographic that is not loading on the handset basis. So it's a complex mix of Oliver factors and I think the key thing is that.
Speaker Change: As Darren highlighted product intensification and the ability to thrive.
Speaker Change: Our household mix and better economics overall in terms of economies of scale has to be the way that we drive accretion in the business.
Speaker Change: Okay.
Speaker Change: My question just a follow up on the question about the dividend and I don't want to make it a very theoretical here, but.
Speaker Change: As long as you have currently in place.
Speaker Change: Any increase in your dividend is.
Speaker Change: Causing more dilution to shareholders, especially with the dividend yield on the stock seven unchanged.
Speaker Change: Given also your cost of capital et cetera, you are paying out more than that.
Speaker Change: Cost of capital for Us.
Speaker Change: I tried to disassociate the leverage from the decision about the dividend because the dividend has to be paid out from annual free cash flows rather than using the balance sheet. So.
Speaker Change: Why why not wait until you stop the drip and bring down your distribution ratio below 100.
Speaker Change: Core continuing to grow the dividend that's my.
Speaker Change: The question that I was trying to figure out.
Speaker Change: I'm a bit frustrated so.
Speaker Change: Im pausing too.
Speaker Change: Bite my tongue on.
Speaker Change: On this response.
Speaker Change: Number one.
Speaker Change: We're pretty quantitative organization, so as I said previously.
Speaker Change: We've modeled this eight ways to Sunday.
Speaker Change: Flex with scenarios and conservatism.
Speaker Change: And had an endogenous factor within it looking to have a parade of optimal outcome for equity.
Speaker Change: And debt holders.
Speaker Change: Frequently they're the same.
Speaker Change: Institution.
Speaker Change: Next.
Speaker Change: At a intellectual and emotional level of the management team.
Speaker Change: Is extremely keen.
Speaker Change: To remove our discount dividend reinvestment plan.
Speaker Change: So we are preoccupied with that too.
Doug Youll: The extent to which Doug in his.
Speaker Change: Remarks.
Speaker Change: Right.
Speaker Change: <unk>.
Speaker Change: D drip ratchet.
Speaker Change: Down.
Speaker Change: As.
Speaker Change: Ceiling not a floor.
Speaker Change: And if we can do better we will do better.
Speaker Change: Than that.
Speaker Change: And that is contingent upon our deleveraging plan.
Speaker Change: Next.
Speaker Change: Our de leveraging plan.
Speaker Change: Is not aspirational.
Speaker Change: It's not <unk>.
Speaker Change: Qualitative, it's not notional and its not long term.
Speaker Change: So it's not one that extends out for the next five years, it's something that's getting done in the next 24 months and it's highly highly highly specific.
Speaker Change: And and doable.
Speaker Change: As a result, we have a lot of confidence in our ability to execute against that plan and if we can I think it prevents presents us with the opportunity to.
Speaker Change: Be more expedient in the removal.
Speaker Change: Of the D drip.
Speaker Change: And we are very much focused on the execution of that and you've seen.
Speaker Change: Seen what we've done already on the $1 6 billion with the hybrid.
Speaker Change: What we have in train right now.
Speaker Change: With the monetization.
Speaker Change: <unk> of our towers, so I think thats hard evidence that speaks to the legitimacy.
Speaker Change: What's eating our way through that well structured sequential deleveraging plan with the attendant benefits.
As it relates to the deidre.
Speaker Change: Next.
Speaker Change: If I was just going to have a look at the organization.
Speaker Change: At a.
Speaker Change: Temporal moment in time and say okay at.
Speaker Change: This particular tight time zone, we've got a pro forma modeling payout ratio range of free cash flow greater than 100% when you make certain adjustments on the deed drip upfront and say, okay, well, let's put in play.
Speaker Change: The long term plan to deal up a short term issue I don't think Thats. The right thing for this organization to do if we had a chronic issue on that front, where the payout was going to.
Speaker Change: Exceed our cash generative capability, then yes, yes, we would take a different decision.
Speaker Change: But I don't think that and when we make our decision on the dividend growth model. We are taking a longer term view for this organization.
Speaker Change: And that longer term view says that three to eight is the right thing to do balancing the interests of both equity and debt holders with the lowering of the low end of the range from 7% to 3% along the way.
Speaker Change: And it gives us the cash latitude to do what we want to do.
Speaker Change: The three dot AE is not driven off that temporal analytics on a finite basis in terms of the payout, but on the longer term view as it relates to having the best combination of EBIT Dag growth and lowering capex intensity for this company at <unk>.
Speaker Change: Flex our growing deleveraging through the execution of our asset monetization plan. It reflects the contribution from our emerging growth assets that are in per views to the price bashing nations within the telecom industry. It reflects our comp.
Speaker Change: And it's in our continued cost efficiency capabilities underpinned by digital.
And so that's the difference in terms of your question, we're putting out a longer term view that is synergistic or synchronized with the longer term view of the sustainable free cash flow expansion that this organization is generating.
Speaker Change: Including the 22, 3% in this quarter.
Speaker Change: Thank you Sir.
Carl: Thank you mayor Carl we have time for one more question. Please.
Speaker Change: The final question is from Benjamin Swinburne from Morgan Stanley. Please go ahead.
Benjamin Swinburne: Thank you for squeezing me in.
Speaker Change: And thank you for the disclosure on Telus health.
Speaker Change: Business continues to compound and I'm wondering if this is an opportunity to unlock value.
Speaker Change: Sub IPO or some other way to monetize the business and if we should interpret the decision to disclose more information is a step in that direction.
Speaker Change: And then there's been a lot of talk on the call about sort of <unk> focus on improving the wireless performance not a ton on how the competitive environment is currently shaping up here early in Q2 I don't know if you had any color on whether your competitors were.
Speaker Change: Shifting their approach to the marketplace here in early second quarter or anything any comment there would be helpful. Thank you.
Daniel: And Daniel I'll take the first one.
Speaker Change: There you can take the second.
Daniel: Yes, thanks Darren.
Daniel: So as we said before.
Daniel: <unk>.
Daniel: Are open to looking at different monetization opportunities for Telus health.
Daniel: <unk>.
Daniel: The way we're looking at it is.
Daniel: <unk>.
Daniel: When is the right time for us to.
Daniel: Maximize that value.
Daniel: <unk> seen over the last several quarters, we're seeing some really strong growth.
Daniel: We're integrating a number of the assets we have we're seeing strong top line.
Daniel: And EBITDA growth were bringing in technology components that are going to digitize the business allow us to monetize more data bring in AI in partnership with <unk> team and all of those things are critical to improving the EBITDA.
Daniel: And revenue multiple of this business and the valuation of the business. So.
Daniel: We will continue to execute well and when the timing is right.
Daniel: Look to take the right steps around monetizing this business so.
Daniel: Maybe just a quick top up and there has been a lot of interest as you can imagine in our health asset both of a partnership strategically perspective.
Daniel: On participating in that growth and moving the whole strategy forward.
Daniel: With that longer term potential IPO in.
Daniel: And maybe back to <unk> question on NCI V. It could be even more leg into a transaction such as that which can unleash the enough cash to do the next step on that front, but I would say, we will take whatever steps on partnering versus IPO.
Daniel: At the right time, as we continue to grow value.
Daniel: The <unk> business at this growth rate in this sector is gaining a lot of traction on multiple and value expansion within our organization.
Speaker Change: Thanks Go ahead go ahead sorry.
Daniel: No go ahead.
Daniel: I was just going to get into your second question did you have a tougher.
Daniel: No. No go ahead. Thank you. Thank you. So thanks for the question I think we talked a lot about our introspective view of that.
Daniel: How we want to approach the market and what our learnings are.
Daniel: I can't I can't comment specifically on our peers, but what I, what I can say.
Is that some of that element of discipline that we're trying to make sure that were aligning queue in the market. We're seeing other signs of that I think that we're seeing some.
Daniel: Performance related to looking at the offerings on the lower end of the market and aligning them with the right.
Daniel: <unk> bundle and ensuring that there's a better <unk> focus.
Daniel: And I think it's early in the quarter in terms of the way that promotional subsidies and other things will be.
Daniel: We'll be undertaken by I think what we can talk about it.
Daniel: <unk> that we're going to take and how we want to drive value in the market.
Daniel: That's helpful. Thank you.
Speaker Change: Thank you Ben and thank you everyone for joining US today, please feel free to reach out to the IR team with any follow ups.
Speaker Change: Ladies and gentlemen. This concludes the telephone 25 Q1 earnings conference call. Thank you for your participation and have a nice day.
Speaker Change: [music].
Speaker Change: [music].
Speaker Change: Good day, everyone and welcome to the Telus 2025, Q1 earnings conference call I would like to introduce your speaker Mr. Robert Mitchell. Please go ahead.
Speaker Change: Hello, everyone and thank you for joining us today, our first quarter 2025 results news release, MD&A financial statements and detailed supplemental investor information are posted to our website earlier. This morning on our call today will begin with remarks by Darren and Doug. The Q&A portion will be joined by Zeno <unk>, Jason two BS.
Speaker Change: Briefly prepared remarks slides and answers to questions contain forward looking statements actual results could vary from these statements the assumptions on which they are based in the mature risks that could cause them to differ alright outlined in our public filings with securities commissions in Canada, and the U S, including our first quarter 2025, and our annual 2024 MD&A with that over to you.
Speaker Change: Sure.
Speaker Change: Thank you Robyn.
Speaker Change: Hello, everyone.
Speaker Change: In the first quarter, our teams dedication to operational excellence, coupled with cost efficiency.