Q1 2025 TELUS Corp Earnings Call
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The conference is now being recorded.
Good day, everyone and welcome to the Telus 2025, Q1 earnings Conference call.
Speaker Change: 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 Levine Jason to be brief.
Zeno Levine: 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, well and 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: Sure.
Darren: Thank you Robin.
Speaker Change: 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 is.
Speaker Change: These results were achieved within a dynamic operating environment, demonstrating the resiliency of our business and the strength of our leading portfolio of services.
Speaker Change: Our industry best total mobile and fixed customer growth of 218000 net additions represented our strongest first quarter on record.
Speaker Change: This performance was driven by strong demand for our highly differentiated integrated product offerings across mobile and home <unk>.
Speaker Change: And by our leading pure fiber and wireless broadband networks.
Speaker Change: Our team's commitment to customer service contributed to continued strong loyalty results.
Speaker Change: So our key product lines once again this quarter.
Speaker Change: And notably postpaid mobile phone churn was zero dot eight 4%.
Speaker Change: This represents a six basis point improvement over last year as we progressed through our 12 consecutive year below the 1% level.
Speaker Change: Looking at our financial results, we achieved solid and resilient T Chek EBITDA growth of 4%.
Speaker Change: In mobile we drove Q1 total net additions of 168000 <unk>.
Speaker Change: This includes mobile phone net additions of 20000 and record Q1 connected device net additions of 148000.
Speaker Change: These results were supported by our ongoing focus on economic margin accretive customer growth.
Speaker Change: And this is evidenced by our consistent industry, leading lifetime revenue underpinned by our industry best churn.
Speaker Change: Let's turn now and take a look at our wireline business.
Speaker Change: Telus delivered another quarter of industry, leading total fixed customer additions of 50000.
Speaker Change: Alongside the industry best fixed data services revenue growth.
Speaker Change: Seven 3%.
Speaker Change: Furthermore, our highly differentiated technology and data centric growth businesses continue did demonstrate impressive momentum for talent.
Speaker Change: <unk>, which we began to report as a separate business segment achieved revenue and EBITDA growth of 12 and 30% respectively.
Speaker Change: Moreover, the team drove a 7% year over year increase in global lives covered with $76 5 million.
Speaker Change: This was fueled by global expansion.
Speaker Change: Enhancements expanding sales channels.
Speaker Change: Effective cost management through technology, and synergy optimization underpinned by a deeply rooted dedication to putting customers first.
Speaker Change: We are excited to maintain and build on this momentum throughout 2025 and well beyond.
Speaker Change: Notably since acquiring life words, we've realized $376 million in combined annualized synergies.
Speaker Change: This includes $306 million from cost efficiencies and $70 million and growing from successful cross selling strategy.
Speaker Change: And they are plentiful.
Speaker Change: 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 timeframe.
Speaker Change: In May <unk> acquired workplace options, a leading global provider of integrated employee wellbeing solution with 88 million employees across 200 countries and territories.
Speaker Change: In aggregate would tell US help this brings our lives covered to more than $160 million or roughly 8% of the entire global market.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: <unk> significant synergies.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: All the while with a data centric insights based strategy just like our core telco.
Speaker Change: The strategic investments, we've made in our leading broadband networks underpin the continued advancement of our strong financial and operational performance.
Speaker Change: This includes obviously growing EBITDA.
Speaker Change: When combined with moderating capex supports meaningful and sustainable free cash flow generation as evidenced by the 22, 3% growth this quarter.
Speaker Change: 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.
Speaker Change: Today, we are announcing a 7% dividend increase reflecting our commitment to delivering superior value to our shareholders.
Speaker Change: This builds on our consistent track record of delivering on our multiyear dividend growth program first established in 2011.
Speaker Change: Furthermore, we announced today for the fifth time the <unk>.
Speaker Change: Tension of our industry best dividend growth program.
Speaker Change: Telus is targeting 3% to 8% annual growth for our dividend from 2026 through 2000 through 2028.
Speaker Change: This moderated growth range will allow us flexibility to support the key priority of deleveraging our balance sheet and eliminating the dividend discount drip program associated within our dividend reinvestment plan.
Speaker Change: This is in line with our target of achieving a net debt to EBITDA ratio of circa three times by 2027.
Speaker Change: Conjunction with the rat, Janine down and removal of the discount dividend reinvestment plan.
Speaker Change: Our dividend growth model will.
Speaker Change: We will be supported by the best combination of EBITDA growth rates and capital intensity ratios globally yielding.
Speaker Change: Yielding meaningful and sustainable free cash flow expansion.
Speaker Change: Moreover, <unk>.
Speaker Change: As we have seen today this is augmented materially by significant value creation in our emerging growth businesses.
Speaker Change: And a succession of asset monetization opportunity that are deeply material that will further reduce <unk> leverage and interest outlays, improving the cash story, yet again at this organization.
Speaker Change: Our management team at <unk> remains laser focused on building on the strong operational and financial performance momentum with which we exited 2024 and achieved in the first quarter.
Speaker Change: We remain dedicated to achieving our robust targets for 2025, and delivering sustainable free cash flow expansion year end and year out for the foreseeable future.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: In closing I'd 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.
Speaker Change: And on that note I'll turn the call over to Doug.
Doug: Thank you Darrin and hi, everyone.
Speaker Change: <unk> with our Q1 results today, we have changed our reporting structure and introduced our new Telehealth reporting segment, which was previously included in <unk> Tec. We have also provided historical information in our <unk>, which you will find in our IR supplemental.
Speaker Change: 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 <unk>.
Speaker Change: $3 seven decline in our view as 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.
Speaker Change: Additionally, higher Internet security and automation <unk> supported that growth at.
Speaker Change: At the segment level GTECH operating revenues were up 2% driven by higher mobile equipment revenue fixed data services fixed equipment and agriculture services revenue.
Speaker Change: <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.
Speaker Change: 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 plan from our noncore asset divestitures as well as our real estate and copper monetization program.
Speaker Change: <unk> health operating revenues and adjusted EBITDA grew by 12% and 30% respectively.
Speaker Change: 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.
Speaker Change: <unk> digital operating revenues and adjusted EBITDA were in line with expectations.
Speaker Change: Please refer to <unk> Digital's earnings release, and analysts call commentary earlier today.
Speaker Change: On a consolidated basis reported net income and basic EPS more than doubled year over year, primarily due to lower restructuring.
Speaker Change: On a adjusted basis net income and EPS were essentially unchanged on a year over year basis.
Speaker Change: Capital expenditures, excluding real estate declined by $132 million or 19%, primarily driven by planned slowdown of our fiber and wireless network builds.
Speaker Change: Overall consolidated capital and 11% was down 300 basis points over last year.
Speaker Change: Our quarterly capital our quarterly free cash flow of $48 million was higher by 22% driven by lower Capex and higher EBITDA. These.
Speaker Change: These factors were partially offset by higher taxes and interest paid.
Speaker Change: 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 Consol.
Speaker Change: Consolidated capital expenditures, excluding circa 100 million for capital and real estate develop initiatives are targeted to remain stable at $2 5 billion lastly.
Speaker Change: Lastly, free cash flow guidance for 2025 of $2 <unk> 5 billion is also confirmed.
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%.
Speaker Change: While leverage is elevated at three 9% we remain our $3 <unk>, we remain committed to improving our leverage ratio targeting our net debt to EBITDA ratio by <unk> by 2027.
Speaker Change: Our efforts to deleverage our balance sheet will be supported by continued operational growth, including EBITDA and free cash flow expansion. Additionally.
Speaker Change: 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.
Speaker Change: During the quarter, we monetize certain noncore assets within the business as well as our tellers global ventures portfolio, receiving proceeds of $66 million.
Speaker Change: 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.
Speaker Change: Have been approximately three eight times at the end of the quarter.
Speaker Change: 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.
Speaker Change: If the 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.
Speaker Change: 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.
Speaker Change: 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 before we move to our Q&A I just want to congratulate Darrin on its 100th earnings call since two.
Speaker Change: <unk>.
Speaker Change: It's been a remarkable journey over the past 25 years and congratulations Warren.
Speaker Change: Yeah.
Speaker Change: Okay.
Robert Mitchell: Robert over to you. Thank you, Doug and congratulations Darren.
Karl: Karl Please proceed with the questions.
Speaker Change: Yes.
Speaker Change: Ladies and gentlemen on the phone if you would like to 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. Please go ahead Stephanie.
Stephanie Price: Good afternoon.
Speaker Change: Maybe I'll start with Telus health, just very strong revenue and EBITDA growth in the quarter. Just curious what's fueling that is it primarily synergy related.
Stephanie Price: There have been other tuck ins.
Stephanie Price: So maybe you could talk a little bit about workplace solutions and what that brings to the house solution more broadly hunker telehealth evolving over the next few years and the key milestones you're looking for from that business.
Stephanie Price: So our monetization opportunity.
Stephanie Price: Dean 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 very strong momentum in countless hours over the last.
Speaker Change: Couple of years and that growth is coming from.
Speaker Change: A number of areas number one we've made some smart tuck in acquisitions that are accretive immediately.
Speaker Change: Accretive the synergies that we're getting from those acquisitions are on track.
Speaker Change: Doing well.
Speaker Change: On the other part of that I would say we've made some really good investments in terms of our go to market and.
Speaker Change: Channel capabilities.
Speaker Change: And those are yielding.
Speaker Change: Strong returns in fact.
Speaker Change: We had our best bookings quarter.
Speaker Change: And Telus health.
Speaker Change: Since the Lifeworks acquisition, certainly tied to the Lifeworks acquisition as Darren mentioned, we continue to have very strong <unk>.
Speaker Change: Synergies a lot of the cost synergies are behind us, but the revenue and cross sell synergies 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 PDP 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: At this time.
Speaker Change: Last year, so we feel very very good about the the.
Speaker Change: The momentum on health, bringing on workplace options.
Speaker Change: Is a really really positive.
Development for us where acquiring workplace options from a position of strength.
Speaker Change: The high growth assets that again is immediately EBITDA creative 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.
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 we.
Speaker Change: We're really excited about WTO and more to come on that.
Speaker Change: Great quarters, and then just lastly.
Speaker Change: We're very pleased to be able to report Telus health as a segment.
Speaker Change: We are excited about where it can go.
Speaker Change: And in terms of the future.
Speaker Change: We will look at.
Speaker Change: <unk>.
Speaker Change: Right.
Speaker Change: Titration or partnership opportunities.
Speaker Change: As it evolves.
Speaker Change: That's it for me Darren any top ups for you.
Speaker Change: Just one thing.
Stephanie Price: Stephanie to elucidate above the 30% EBITDA growth in Q1, 26% was the organic growth rate.
Speaker Change: So the preponderance coming from organic.
Stephanie Price: Thank you very much.
Stephanie Price: Thanks, Stephanie next question please.
Speaker Change: The next question would be from Vince Valentini from TD Cowen. Please go ahead Vince.
Vince Valentini: Hey, Thank you very much.
Vince Valentini: Can I just clarify on that the workplace options.
Speaker Change: Our acquisition of <unk>.
Speaker Change: <unk> is 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.
Speaker Change: Wireless.
Speaker Change: Good results overall today, everybody is happy with the share price performance and great to see the dividend commitment, but wireless service revenue almost minus 1% cannot be viewed as.
Darren: Satisfactory I'm sure to you either Darren.
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.
Darren: One of the leaders in the industry to sort of set set an example for others I'd 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.
Speaker Change: We'll provide color on that in a second with Daniel and myself.
Speaker Change: And Doug will kick it off as it relates to the workplace options.
Speaker Change: Acquisition and the role in the P/e front at the $2 85, and how that plays out at an equity level, Doug over to you. Yes, so that $500 million was cash events. There is a $100 million of assumed debt. So they all in purchase price of six.
Speaker Change: In substance and then the 285 is obviously less than 50%.
Dana: Thank you Dana.
Speaker Change: Thanks, Darren and thanks for the question I think first and foremost 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 there is a few of the birds that are going to be critical to achieving a better performance and I will focus internally because we have to focus on what we can control I think fundamentally we have to do a much better job of leveraging our product intensity our bundling capabilities.
Speaker Change: 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 when we when we put more focus and energy into that and in India, even in certain areas like leveraging AI and the capabilities that <unk>.
Speaker Change: Digital provides to help us with revenue management and predictive model.
Speaker Change: Think on the other side of that is really balancing and aligning investment with outcome. So when you look at the three core elements of rate subsidy.
Speaker Change: <unk> pricing and financing or ultimately in this type of environment, what we need to do is ensure that our investment in subsidy in handsets is commensurate with the right return level and then finally I think there is an amp to qualification element if there are segments of the market.
Speaker Change: That are still profitable to support and drive growth and we need to make sure. We continue to align the <unk> outcome.
Speaker Change: The cost to serve model with.
Speaker Change: With the demographics of those markets. So those are the areas that we're going to focus on I'll keep it sustained.
Speaker Change: Others 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: Okay. Thanks.
I think initially 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: 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.
Vince Valentini: 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.
Vince Valentini: I think the point that you are pressing on there.
Vince Valentini: Is quite cogent.
Vince Valentini: Secondly.
Vince Valentini: And this is I think where you would expect us to lead and we have been the most progressive.
Vince Valentini: On digital is driving our <unk> thesis.
Vince Valentini: Not from a traditional cost cutting cost efficiency point of view.
Vince Valentini: Leveraging our digital progression and leveraging our AI capabilities.
Vince Valentini: 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.
Vince Valentini: <unk> of what we should be able to do on digital and AI better than our peers on a global basis.
Vince Valentini: I think that has to be a priority for this organization because we have a differentiated capability set there.
Vince Valentini: And then lastly, you.
Speaker Change: You saw me make the comment that we that we set a record on connected devices yes.
Speaker Change: K 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 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 better are key to takeaway for investors.
Speaker Change: Okay.
Speaker Change: Thanks, Vince Carlin's question. Please.
Lindsay Play: The next question is from Lindsay play from Digital Bank. Please go ahead.
Lindsay Play: Hey, Thanks for taking my question.
Question for me.
Lindsay Play: 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.
Lindsay Play: With numbers if possible that allows you to grow the dividend for the next three years that much and then the second one.
Lindsay Play: Doug you mentioned that if deleveraging is quicker than expected to EMEA removed quicker.
Lindsay Play: What specifically are you referring to in terms of potential events that may happen, maybe outside of a quicker 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 a multiyear guidance at a quarterly level.
Brian.
Brian: Thanks, Joe.
Speaker Change: Thanks, just 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 view.
Speaker Change: To us 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: Terms of sustainability.
Speaker Change: I really meant what I said in my remarks.
Speaker Change: We are looking at <unk> to have the best combination.
Of 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 when.
Speaker Change: That environment gets more sanguine, which eventually it will.
Speaker Change: I think we have an emerging growth story, and how 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: Helped EBITDA expansion that we've disclosed in Q1.
Speaker Change: It's really just the carry through of what we've been reporting on over the last six quarters and in that regard next for us its a huge factor to be able to rely on call upon leverage when <unk> digital is doing on a leading basis.
Speaker Change: 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 tailored the tape on this because all of the above is complemented.
Speaker Change: By a very smart.
Speaker Change: Very specific very well structured ledo success, our deleveraging plan.
Speaker Change: 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 of the durability of the predictability of the reliability of our <unk> eight 3% to 8% on the dividend expansion from 2026 to.
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: Doug if you want to provide a little bit of additional color on prospective cash go ahead. Yes. 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 about.
Speaker Change: 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: 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 <unk> sooner, we continue to talk about our enduring referred to the deleveraging plan we.
Speaker Change: We have in our base plan I would say a risk adjusted execution.
Speaker Change: 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.
So I would say if we can continue to execute more than the assumed rate, which I believe is conservative it 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: We did a high Brad as you saw in April.
Speaker Change: And we still are very low in the hybrid offering within our industry and there is 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.
Speaker Change: 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 program in a very methodical fashion.
Speaker Change: That's very helpful. Thank you.
Speaker Change: Thanks, Rob next question please.
Speaker Change: Next question is from drew Mcreynolds from RBC capital markets. Please go ahead.
Drew Mcreynolds: Yes, thanks very much.
Speaker Change: Three follow ups for me.
Drew Mcreynolds: First on the <unk>.
Drew Mcreynolds: I guess <unk> wireless question.
Speaker Change: Thats fair Darren of your hundreds conference call a recall.
Speaker Change: Within one of these calls going back in 2018.
Speaker Change: You look forward on the industry and I think it was a warning shots.
Speaker Change: On competition and wireless pricing.
Speaker Change: And it seems since then kind of still tell us to absorb whatever was coming.
Speaker Change: 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.
Here, we go on that.
Speaker Change: Doug Youll give the launch date or 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.
Speaker Change: We'll do the Donny and Marie <unk> to see on that front. So Doug go ahead.
Speaker Change: 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.
Speaker Change: Ensuring our balance sheet as to the strength not just for that hitting 2007, but our future proofed as well and then appropriate investment in the business, but I would assume it's after 2007.
Speaker Change: 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.
Speaker Change: 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 so.
Speaker Change: Efficiency and operating excellence, but on the other side it.
Speaker Change: It is helping us take those learnings knowhow and products to.
Speaker Change: Clients to then monetize those and I think that makes sense.
Gordon: Gordon really unique.
Gordon: Not just in the industry, but in the entire competitive landscape.
Speaker Change: We have made.
Gordon: AI team member enablement.
Gordon: <unk> differentiator across tell us and tell us digital.
Gordon: I think what's interesting about that is it's not just access to the low ends and to AI tools.
Gordon: But it's an entire ecosystem around how you find and support new ideas. How you do the changed management of not just improving existing processes, but reinventing processes.
Gordon: Do you look at privacy.
Gordon: And control of their data and then how you continuously innovate.
Gordon: Yes.
Gordon: Improvement cycles, agile development techniques et cetera to make this happen and so I'll just share a couple of examples with you.
Gordon: 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.
Gordon: In the last nine months.
Gordon: 15, <unk> 15 times increase in token consumption over the last nine months. So you can just see the.
Gordon: The volume.
Gordon: Of AI usage, that's happening in the combined company.
Gordon: 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 alright, how are we going to do.
Gordon: Decreased costs or is this going to increase quality and with AI.
Gordon: In many implementations you're actually able to do both on the same time.
Gordon: For agent trainer, when we take our new agents through that we're getting a.
Gordon: <unk> to 50% reductions in training time, but also significant increases and proficiency, which then leads to customers. He sat down the road.
Gordon: We're giving our frontline agents co pilots.
Gordon: Alright.
Gordon: Do you think average handle time and calls.
Gordon: Between 10% and 45%, but they're 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.
Gordon: We have integrated into our sales motion so we have.
Gordon: Higher kpis, 10% to 15% higher kpis in three areas meetings coverage and funnel quantity.
Gordon: Launch propensity to churn models working with Zain all in pricing simulation models.
Gordon: We are proactive outreach based on AI analysis of data intense.
Gordon: And that's driving up to a 50% reduction repeat calls and targeted programs and what's most exciting for us.
Gordon: 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.
Gordon: Creates a pretty unique opportunity for us in the industry.
Speaker Change: Yeah. Another thing like the top up there now that was excellent to bids.
Gordon: To wrap this up.
Gordon: A few comments.
Gordon: I guess time will tell whether they're for feta or erroneous.
Gordon: Number one.
Gordon: We have to change the psychology within the industry as it relates to marketing and sales.
Gordon: We have a wireless industry where.
Gordon: We have to have price competition parity.
Gordon: And.
Gordon: I for one don't understand that.
Gordon: Why can't we have a price premium.
Gordon: If we have better product features but more particularly better customer service.
Gordon: 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.
Gordon: 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.
Gordon: And so the opportunity is out there for us.
Secondly, as I've said, many many times, we have been a chronic underperformer on product integration or bundling.
Gordon: There is tremendous upside opportunity as it relates to product intensity.
Gordon: And.
Gordon: The.
Speaker Change: <unk> 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.
Gordon: 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.
Speaker Change: 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 is tremendously powerful.
Speaker Change: Next.
We're still scratching the surface on Iot and machine to machine.
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. So 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 bill on it we have to have the ability to scale on that product and see it complement the.
Speaker Change: Legacy revenue lines within 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: Broadband broadband wireless and broadband wireline, our job should be too exact economies of scope.
Speaker Change: More products over the same medium more product over the same medium so let get more product development happening within our <unk> capability 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.
Speaker Change: 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 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 is just set 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: So 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.
Amere Yaghi: Great. Thank you for taking my question.
Amere Yaghi: So I'll go back to the question on wireless.
Amere Yaghi: Four quarters, that's where you're seeing <unk> decline.
Amere Yaghi: 3.5%.
Amere Yaghi: 5% zone.
Amere Yaghi: When I look at your reports with our pool and correct me if I'm wrong.
Amere Yaghi: My my numbers.
Amere Yaghi: I will discuss.
Amere Yaghi: Maybe about $7 and your <unk> is related to handset subsidy.
Amere Yaghi: So your average.
Amere Yaghi: This revenue or <unk> was like 60 $61 maybe.
Amere Yaghi: And when you were looking at the market.
Amere Yaghi: Front book right now for average customers is probably 45 between 40 and 45 so are.
Amere Yaghi: Are we to expect our pool long term to decline by another three.
Amere 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.
Aye.
Amere 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.
Amere Yaghi: I do think.
Amere 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 two announcements the question you're asking.
Amere Yaghi: I think I'll have to come back with a what might that look like or zainal can top up on.
Amere Yaghi: The opportunity is even as Darin just highlighted that there is room to not gravitate for all the reasons quality and product and pricing even within a handset world where at times device floors, where we're where offers are being.
Amere Yaghi: <unk> been out there for our financing handset is uneconomic at.
Amere Yaghi: At <unk> levels that are well below even what you quoted so I think it's going to be an average of all of that our goal obviously is not to gravitate to that bottom.
Speaker Change: To leverage all the tools leverage all of the products and continuing to build as Darin and Zane loves highlighted.
Speaker Change: And I guess, that's probably the best I can do at that top level, but as analysts or any papa.
Speaker Change: I, just I think you covered it well.
Speaker Change: It's a complex mix between BYOB and contract revenue in terms of the handset mix and where customers are gearing in terms of the cost of devices and the length at which they are keeping their devices. So I think I think that that all of those factors have an impact on us.
Speaker Change: That calculation and then as I mentioned, you look at your base and your loyalty and have them and how to ensure that you have offers in the market that that are attractive to your existing base to renew coupled with the right investment for the right rate plan and the right <unk>.
Speaker Change: <unk> and <unk> 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: Better household mix and better economics overall in terms of economies of scale have to be the way that we drive accretion in the business.
Speaker Change: Okay.
Speaker Change: Question, just a follow up on the question about the dividend and I don't want to make it a very theoretical here, but as long as you have the tariffs 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 at seven and change.
Speaker Change: Given also your cost of capital et cetera.
Speaker Change: Hanging out more than that.
Speaker Change: Cost of capital for Us so.
Speaker Change:
Speaker Change: You know I try.
Speaker Change: We'll see.
Speaker Change: The leverage from the decision about the dividend because the dividend has to be paid out from annual free cash flow 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 core continuing to grow the dividend. That's my my question that I was trying to figure out.
Speaker Change: Yeah.
Speaker Change: I'm a bit frustrated so.
Speaker Change: I'm pausing too.
Speaker Change: Bite my tongue on.
On this response.
Speaker Change:
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: Yeah.
Flex with scenarios and conservatism.
Speaker Change: And had an endogenous factor within it looking to have a parade of optimal outcome for equity and debt holders.
Speaker Change: Frequently they're the same.
Institution.
Speaker Change: Next.
Speaker Change:
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.
Speaker Change: To the extent to which Doug in his.
Speaker Change: Remarks.
Describe.
Speaker Change: The drip ratchet.
Speaker Change: Down.
Speaker Change: As a.
Speaker Change: <unk> ceiling not a floor.
Speaker Change: And if we can do better we will do better.
Than that.
Speaker Change: And that is contingent upon our deleveraging plan.
Speaker Change: Next.
Speaker Change: Our deleveraging plan.
Speaker Change: Is not aspirational.
Speaker Change: 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.
Speaker Change: And it's highly highly highly specific.
Speaker Change: And doable 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.
Speaker Change: To be more expedient in the removal.
Speaker Change: Of the <unk> 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.
Speaker Change: As it relates to the drip.
Speaker Change: Next.
Speaker Change: If I was just going to have a look at the organization.
Speaker Change: At a <unk>.
Speaker Change: Temporal moment in time and say, okay. At this particular tight time zone.
Speaker Change: 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 place a long term plan to deal up a short term issue.
Speaker Change: 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.
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 <unk> to the price fashion nations within the telecom industry. It reflects our comp.
Speaker Change: And it's in our continued cost efficiency capabilities underpinned by digital.
Speaker Change: 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 Darren.
Speaker Change: Yeah.
Speaker Change: 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: As this 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 tell us is 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.
Speaker Change: Dan you want to take the first one.
Speaker Change: You can take the second.
Dan: Yes, thanks Darren.
Speaker Change: So as we said before.
Speaker Change: We.
Speaker Change: Are open to looking at different monetization opportunities for Telus health.
Speaker Change: <unk>.
Speaker Change: The way we're looking at it is.
Speaker Change: When is the right time for us to.
Speaker Change: Maximize that value.
Speaker Change: <unk> seen over the last several quarters, we're seeing some really strong growth.
Speaker Change: We're integrating a number of the assets we have we're seeing strong top line.
Speaker Change: 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.
Speaker Change: Critical to improving the EBITDA and revenue multiple of this business and the valuation of the business. So we.
Speaker Change: We will continue to execute well and when the timing is right look to take the right steps around monetizing this business.
Speaker Change: And then maybe just a quick thought above and there has been a lot of interest as you can imagine in our health asset both a partnership strategically perspective.
Speaker Change: On participating in that growth and moving the whole strategy forward with.
Speaker Change: That longer term potential IPO.
Speaker Change: And maybe back to <unk> question on NCI V. It could be even more leg to a transaction such as that which could unleashed enough cash to do the next step on that front, but I would say, we will take whatever steps on on partnering versus IPO.
Speaker Change: At the right time, as we continue to grow value.
Speaker Change: And the this business at this growth rate in this sector is gaining a lot of traction on multiple and value expansion within our organization.
Speaker Change: Yeah.
Speaker Change: Go ahead Sir.
Speaker Change: Oh go ahead.
Speaker Change: I was just going to get into your second question do you have a tougher.
Speaker Change: No no go ahead. Thank you. Thank you.
Speaker Change: For the question I think we talked a lot about our introspective view of that of how we want to approach the market and what our learnings are.
Speaker Change: I can't I can't comment specifically on our peers, but what I, what I can say.
Speaker Change: Is that some of that element that 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.
Speaker Change: Performance related to looking at the offerings on the lower end of the market and aligning them with the right.
Speaker Change: <unk> bundle and ensuring that there's a better <unk> focus.
Speaker Change: And I think it's early in the quarter in terms of the way that promotional subsidies and other things will be.
Speaker Change: We'll be undertaken by I think what we can talk about is is the approach that we're going to take and how we want to drive value in the market.
Speaker Change: Sure.
Speaker Change: 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 tale of 2025 Q1 earnings Conference call. Thank you for your participation and have a nice day.
Speaker Change: [music].
[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> adjacent to BS.
Speaker Change: Briefly prepared remarks slides and answers to questions contain forward looking statements actual results could vary from these statements and assumptions on which they are based in the mature risks that could cause them to differ alright aligned 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: Darren.
Darren: Thank you Robyn.
Speaker Change: Hello, everyone.
Speaker Change: In the first quarter, our teams dedication to operational excellence, coupled with cost efficiency empowered tell us to deliver another quarter of industry, leading customer growth and financial performance.
Speaker Change: These results were achieved within a dime.