TELUS International Reports Fourth Quarter and Full-Year 2021 Results, Delivering Double-Digit Revenue and Profitability GrowthMonday, February 14, 2022
Industry-leading fourth quarter total Mobile and Fixed customer growth of 272,000, the company's best fourth quarter on record and an increase of 19,000 over last year
Consolidated Revenue, Net Income, and Adjusted EBITDA grew 20 per cent, 145 per cent, and 7.6 per cent, respectively; excluding the recognized gain on sale of financial solutions business, Revenue and Net Income up 10 per cent and 16 per cent, respectively
Full year consolidated Operating Revenue, Net Income, and Adjusted EBITDA up 9.8 per cent, 35 per cent, and 6.4 per cent, respectively, alongside record 960,000 net customer additions
Burnaby, BC, February 14, 2022--(T-Net)--TELUS Corporation today released its unaudited results for the fourth quarter of 2021.
Consolidated operating revenues and other income increased by 20 per cent over the same period a year ago to approximately $4.9 billion.
In the fourth quarter, the company recognized a $410 million pre-tax gain arising from the disposition of their financial solutions business, as reported in other income. Excluding the gain, operating revenues and other income increased by 9.9 per cent.
Darren Entwistle, President and CEO, TELUS Communications Inc.
"Throughout 2021, TELUS achieved strong operational and financial results across our business," said Darren Entwistle, President and CEO.
"This is a trend the TELUS team has demonstrated over the long-term and, in 2021, was once again successfully achieved against the backdrop of an unprecedented operating environment. Our performance in the fourth quarter, and for the full year, was characterized by our hallmark combination of robust, high-quality and profitable customer growth, alongside strong financial results. The quarter concluded another year of industry-leading customer growth, with all-time record total net customer additions of 960,000, including another best-ever year for Fixed customer growth of 255,000 reflecting the potency of our expansive PureFibre network capabilities. Furthermore, over the last two years we have added over 1.7 million customer additions, demonstrating the significant economic value we are creating through the strong demand for our leading product portfolio. Notably, we achieved strong Free Cash Flow for the year, slightly ahead of our guidance as updated in May to reflect our accelerated broadband expansion program. Our industry-leading customer growth was driven by our team's passion for delivering outstanding customer experiences, which once again contributed to strong client loyalty across our key product lines, including blended Mobile Phone, Internet, Optik TV, Security and Voice churn all below one per cent for the year. Indeed, 2021 represented our eighth consecutive year of industry-leading postpaid wireless churn below one per cent."
"Our results are buttressed by our highly differentiated and potent asset mix geared towards high-growth, technology-oriented verticals," continued Darren.
"Earlier today, TELUS International (TI) announced strong double-digit revenue and profitability growth for the fourth quarter, concluding their first year as a public company with impressive financial results that surpassed their financial targets for 2021. TI's continued robust results demonstrate its consistent execution, and position as a leading partner of choice for premier digital customer experiences and IT services for its over 600 clients around the world. TI's enviable list of client partners rely on TI's talented and engaged team, along with its deep end-to-end digital capabilities to deliver a superior customer experience, including a unique and unparalleled mix of content moderation and artificial intelligence (AI) capabilities.
"At TELUS Health, our team drove double-digit year-over-year health services revenue growth for both the quarter and the year, while achieving important milestones along the way as we continue to meaningfully scale our health operations. This includes our healthcare programs covering over 20 million lives, an increase of nearly 22 per cent on a year-over-year basis, along with realizing more than 550 million digital health transactions in 2021 and earning over one million new virtual healthcare members, representing a 65 per cent increase over the prior year. We continue to successfully leverage our leading position in healthcare technology solutions to deliver improved health outcomes for citizens through access to better health information, which has never been more critical".
"In TELUS Agriculture, through our team's ongoing efforts to integrate and grow this unique business, we drove strong double-digit revenue growth across our three lines of business - agribusiness; food, beverage and consumer goods; and animal health - exceeding our annual revenue objective with revenues in agriculture, including telecom connectivity, of over $400 million in 2021. This is illustrative of the significant value we are creating as the globally-leading provider of agriculture technology solutions. We look forward to expanding disclosure with respect to agriculture in 2022 and beyond, which we are confident will further illustrate the value and asset of consequence we are creating in this important area."
Doug French, Executive Vice-president and CFO said, "In the fourth quarter, the TELUS team delivered strong operating and financial results that met our financial targets. Our results continue to reflect our operational execution excellence, supported by our leading broadband networks and our high quality asset mix geared towards high growth verticals and the growing global economy. Throughout 2021, our team continued to deliver on our customers' first promise, achieving nearly one million new customer additions along with leading loyalty results, reflecting our superior bundled offerings and strong customer retention efforts."
"During the quarter, our team continued to execute on our accelerated broadband build program, connecting more homes and businesses directly to our leading PureFibre network, finishing the year with more than 2.7 million premises enabled with fibre along with over 1.3 million customers connected to our world-leading PureFibre network," Doug added. "Our 5G network now reaches 70 per cent of the Canadian population and, in the months ahead, we will continue enhancing the customer experience with the deployment of our recently acquired 3500 MHz spectrum. Furthermore, we continue to migrate copper customers to our PureFibre network, finishing 2021 with only 11 per cent of our TV and internet customer base within our fibre footprint on copper. Notably, we are well on our way to substantially completing all of our copper-to-fibre migrations by the end of this year, leading to improved customer experiences and cost efficiencies, benefiting margins and cash flow, along with offering ongoing real estate rationalization opportunities."
"Our consolidated financial targets for 2022 build off our well established operating momentum strength and are supported by our healthy balance sheet, which provides us with the financial flexibility to further bolster our unrivaled growth profile, both through thoughtful organic investments, as well as targeted acquisitions. Our financial outlook reflects continued healthy growth within our core business, including profitable customer growth driven by continued demand for our superior bundled offerings over our leading broadband networks. Supporting our growth profile in 2022 are our unique and high growth businesses, including TELUS International, which today released its own set of strong financial targets for 2022, as well as TELUS Health and TELUS Agriculture, which are both increasingly becoming important contributors to revenue, profitability and cash flow."
"Our Capital Expenditure target for 2022 of approximately $3.4 billion, slightly below our preliminary guidance and inclusive of our accelerated broadband capital investment program now in its final year, will further enhance our strong competitive positioning. Specifically, these generational investments are advancing our PureFibre network coverage, connecting more homes and businesses to world-leading network technology, accelerating our 5G deployment across urban and rural Canada, as well as progressing our digitization strategy to bolster the customer experience and drive further efficiencies within our business. Furthermore, as we ramp down our accelerated broadband build at the end of this year, our capital expenditure profile will decline materially going forward, beginning in 2023, supporting sustainable cash flow generation and our commitment to our transparent dividend growth program. Powered by our leading asset mix, we are well positioned to continue executing against our long-standing growth strategy, while driving a collective focus on social capitalism, and delivering outstanding value for all TELUS stakeholders for years to come, while at the same time achieving our ambitious environmental goals," concluded Doug.
For the fourth quarter, net income of $663 million increased by 145 per cent over the same period last year and Basic earnings per share (EPS) of $0.47 increased by 135 per cent. These increases were driven by the impacts of increased Operating Income, including increased EBITDA, as detailed below, which were partially offset by higher depreciation and amortization; higher income taxes; and, as it relates to EPS, higher shares outstanding. When excluding the effects of restructuring and other costs, income tax-related adjustments, other equity losses related to real estate joint ventures, and the tax-effected gain arising from the disposition of our financial solutions business in the quarter, adjusted net income of $331 million increased by 15 per cent, while adjusted basic EPS of $0.23 was up 4.5 per cent. Adjusted net income is a non-GAAP financial measure and adjusted basic EPS is a non-GAAP ratio. For further explanation of these measures, see 'Non-GAAP and other financial measures' in this news release.
Earnings before interest, income taxes, depreciation and amortization (EBITDA) increased by 41 per cent to approximately $1.9 billion, in part due to the gain on disposition of our financial solutions business, while Adjusted EBITDA, which excludes the aforementioned gain, increased by 7.6 per cent to $1.5 billion. This growth reflects: (i) growth in network revenues from increases in our mobile phone and connected devices subscriber bases, and higher year-over-year roaming margins; (ii) growth in mobile equipment margins; (iii) higher internet and data service margins, as well as other fixed data service margins, resulting from subscriber base growth and expanded services; (iv) an increased contribution from our digitally-led customer experiences - TELUS International (DLCX) segment from customer growth, including business acquisitions, and increased depth and breadth of services offered to its existing customers; and (v) lower bad debt expense. This growth was partly offset by lower legacy fixed voice and legacy fixed data services margins, and higher employee benefits expense.
In the fourth quarter, the company added 272,000 net customer additions, up 19,000 over last year, and inclusive of 112,000 mobile phones and 81,000 connected devices, in addition to 40,000 internet, 31,000 security and 18,000 TV customer connections. This was partly offset by residential voice losses of 10,000. Our total TELUS technology solutions (TTech) subscriber base of 16.9 million is up 5.9 per cent over the last twelve months, reflecting a 4.1 per cent increase in our mobile phones subscriber base to approximately 9.3 million, and a 19 per cent increase in our connected devices subscriber base to more than 2.1 million. Additionally, our internet connections grew by 6.2 per cent over the last twelve months to approximately 2.3 million customers, our security customer base expanded by 14 per cent to 804,000 customers, and our TV subscriber base increased by 4.1 per cent to approximately 1.3 million customers.
In health services, as of the end of 2021, virtual care members were 2.8 million and healthcare lives covered were 20.6 million, up 65 per cent and 22 per cent over the past 12 months, respectively. Digital health transactions in the fourth quarter of 2021 were 142.8 million, up 5.7 per cent over the fourth quarter of 2020.
Cash provided by operating activities decreased by $137 million in the fourth quarter of 2021 and free cash flow of $43 million decreased by $175 million compared to the same period a year ago. The decrease in free cash flow was driven by higher capital expenditures aligned with our planned accelerated capital investments and higher income taxes paid, partly offset by higher EBITDA.
Consolidated capital expenditures increased by $296 million in the fourth quarter of 2021, due to accelerated investments in our 5G network, broadband build, enhanced product development, and digitization to increase system capacity and reliability, as announced on March 25, 2021. With our investments, we are advancing the mobile speeds and coverage of our expanding 5G network, continuing to connect additional homes and businesses directly to our fibre optic technology, enhancing product development, and supporting system reliability and operational efficiency and effectiveness efforts. These investments also support our internet, TV and security subscriber growth, address our customers' demand for faster internet speeds, and extend the reach and functionality of our business, as well as our healthcare and agriculture solutions.
On May 7, 2021, the company announced that it intended to accelerate up to $750 million of capital spending in 2021. $708 million of accelerated capital had been invested throughout 2021, to advance their fibre build and 5G coverage.
This spend has enabled: (i) additional premises to be connected to our fibre network; (ii) acceleration of our copper-to-fibre migration program; (iii) expansion of the number of communities they are bringing fibre to, including many rural and Indigenous communities; (iv) advancement of their 5G network build which now covers over 26.2 million Canadians, representing 70 per cent of the Canadian population at December 31, 2021; and (v) progress in the implementation of their digital strategy and enhanced product development that will bolster both top-line revenue growth and operating expense efficiencies.
At December 31, 2021, our TELUS PureFibre network covered more than 2.7 million premises, up from approximately 2.5 million premises at December 31, 2020. Furthermore, at December 31, 2021, approximately 11 per cent of our TV and internet customers within our PureFibre footprint are serviced by copper, down from 12 per cent at September 30, 2021. The majority of the remaining customers are expected to be substantially migrated to TELUS PureFibre by the end of 2022.
Consolidated Financial Highlights
|C$ millions, except footnotes and unless noted otherwise||Three months ended
|Operating revenues and other income(1)||4,872||4,060||20.0|
|Total operating expenses||3,820||3,513||8.7|
|Net income attributable to common shares(1)||644||260||147.7|
|Adjusted net income(2)||331||289||14.5|
|Basic EPS ($)(1)||0.47||0.20||135.0|
|Adjusted basic EPS(2) ($)||0.23||0.22||4.5|
|Capital expenditures (excluding spectrum licenses)(3)||909||613||48.3|
|Cash provided by operating activities||896||1,033||(13.3)|
|Free cash flow(2)||43||218||(80.3)|
|Total subscriber connections(4) (thousands)||16,887||15,943||5.9|
|(1)||Includes a gain on the disposition of our financial solutions business of $410 million ($349 million tax effected; $0.26 cents per share).|
|(2)||These are non-GAAP and other specified financial measures, which do not have standardized meanings under IFRS-IASB and might not be comparable to those used by other issuers. For further definitions and explanations of these measures, see 'Non-GAAP and other financial measures' in this news release.|
|(3)||Capital expenditures include assets purchased, excluding right-of-use lease assets, but not yet paid for, and consequently differ from Cash payments for capital assets, excluding spectrum licences, as reported in the Consolidated financial statements. Refer to Note 31 in our consolidated financial statements for further information.|
|(4)||The sum of active mobile phone subscribers, connected device subscribers, internet subscribers, residential voice subscribers, TV subscribers and security subscribers, measured at the end of the respective periods based on information in billing and other source systems. Effective January 1, 2021, with retrospective application to January 1, 2020, in alignment with our segment reporting changes, we made a retroactive adjustment to remove internal network service revenue and approximately 29,000 subscribers from our mobile phone subscriber base and associated operating statistics (average billing per subscriber per month (ABPU) / average revenue per subscriber per month (ARPU) and churn). Effective January 1, 2021, on a prospective basis, following an in-depth review of customer accounts within a legacy subscriber provisioning system to be decommissioned, we adjusted our internet subscriber base to remove 16,000 subscribers.|
Fourth Quarter 2021 Operating Highlights
Commencing with the three-month period ended March 31, 2021, we transitioned to our new segment reporting structure and have recast comparative amounts on a comparable basis.
The TELUS technology solutions (TTech) segment includes: network revenues and equipment sales arising from mobile technologies; data revenues (which include internet protocol; television; hosting, managed information technology and cloud-based services; software, data management and data analytics-driven smart food-chain technologies; and home and business security); certain healthcare software and technology solutions; voice and other telecommunications services revenues; and equipment sales.
The digitally-led customer experiences - TELUS International (DLCX) segment, which has the U.S. dollar as its primary functional currency, is comprised of digital customer experience and digital-enablement transformation, including artificial intelligence and content management solutions, provided by TELUS International.
As noted in Section 1.2 of our 2021 annual MD&A, the COVID-19 pandemic, which emerged in the first quarter of 2020, continued to have a pervasive global impact throughout 2021. We expect the pandemic to continue to affect our operations until at least 2023. Whether this occurs will depend on both domestic and international factors, including vaccination progress and the potential proliferation of COVID-19 variants of concern. Therefore, results described below may not be indicative of future trends, as the COVID-19 pandemic prevents us and our customers from operating in the normal course of business in certain areas, while we continue to adjust our mode of operations to continue delivering on our customers first priorities and social purpose. Our results discussed below are compared to the equivalent period in 2020, unless otherwise indicated.
TELUS technology solutions (TTech)
Mobile products and services
Fixed products and services
Digitally-led customer experiences - TELUS International (DLCX)
TELUS makes significant contributions and investments in the communities where team members live, work and serve and to the Canadian economy on behalf of customers, shareholders and team members. These include:
TELUS sets 2022 consolidated financial targets
TELUS' consolidated financial targets for 2022 are guided by a number of long-term financial objectives, policies and guidelines, which are detailed in Section 4.3 of the 2021 annual MD&A.
In 2022, TELUS plans to continue generating positive financial outcomes and strong customer growth. We expect growth in EBITDA to be driven by continued demand for data in our mobile and fixed products and services; roaming revenue improvement corresponding with a reduction in pandemic restrictions; and continued significant ongoing investments in our leading fibre broadband network and growing 5G deployment, supported by our accelerated broadband build program. Our strategic efforts to enhance operational simplicity and efficiency, in addition to our constant focus on improving the customer experience across all areas of our operations, is also expected to contribute to our growth.
Supporting our growth profile in 2022 are our unique and diversified growth assets: TELUS International, including growing demand in the digital transformation ecosystem and the acceleration of digital adoption across various sectors of the global economy; TELUS Health, including growing demand for our expanding portfolio of digital health services and applications; and TELUS Agriculture, which is using technology to drive better food outcomes across the agriculture value chain. Our growth profile is also underpinned by a team member culture focused on delivering customer service excellence and our ongoing focus on operational effectiveness.
In 2022, we expect the COVID-19 pandemic to continue to have impacts on our business, primarily in the first half of the year, attributable to economic factors such as continued travel advisories and border restrictions, decreasing business and consumer travel continuing to impact our roaming revenues, global supply chain challenges and subsequent business lockdowns, and/or reduced scope of operations impacting our TELUS Health Care Centres. We expect the pandemic impacts in 2022 to be smaller in scale than in 2021, primarily due to the uptake of COVID-19 vaccinations in the general population, allowing for the re-opening of the global economy in areas where we conduct business.
Our assumptions for 2022 are set out in Section 9.3 TELUS assumptions for 2022 in the 2021 annual MD&A.
|Operating revenues(1)||Growth of 8 to 10%|
|Adjusted EBITDA||Growth of 8 to 10%|
|Free cash flow||$1.0 billion to $1.2 billion|
|Capital expenditures (excluding spectrum licenses)||Approximately $3.4 billion|
|(1) For 2022, we are guiding on operating revenues, which excludes other income. Operating revenues for 2021 were $16,838 million.|
The preceding disclosure respecting TELUS' 2022 financial targets is forward-looking information and is fully qualified by the 'Caution regarding forward-looking statements' in the 2021 annual MD&A filed on the date hereof on SEDAR, especially Section 10 Risks and Risk Management thereof which is hereby incorporated by reference, and is based on management's expectations and assumptions as set out in Section 9.3 TELUS assumptions for 2022 in the 2021 annual MD&A.
The TELUS Board of Directors declared a quarterly dividend of $0.3274 per share on the issued and outstanding Common Shares of the Company payable on April 1, 2022 to holders of record at the close of business on March 11, 2022. This quarterly dividend reflects an increase of 5.2 per cent from the $0.3112 per share dividend declared one year earlier. The sum of the last four quarterly dividends declared per common share totals $1.2872, compared to $1.2049 for the four preceding quarters, reflecting 6.8 per cent growth.
TELUS sells financial solutions business
On December 6, 2021, we announced the disposition of our financial solutions business for $500 million. Net proceeds from the transaction will be used to support strategic growth investments including connecting more homes and businesses to our TELUS PureFibre network, advancing our 5G network build and investments to support enhancing new areas of growth including our offerings to small and medium-sized businesses, as well as in TELUS Health and TELUS Agriculture. Proceeds will also support debt retirement.
TELUS acquires Fully Managed
On January 1, 2022, we acquired 100 per cent ownership of Fully Managed Inc. (Fully Managed) for cash and contingent consideration of approximately $137 million. Fully Managed is the market leader in the managed service space, providing fast and efficient IT support, technology strategy and proactive network management. This investment was made with a view of building our end-to-end capabilities to support small and medium-sized business customers.
Giving back to our communities
Empowering Canadians with connectivity
Driving social impact
Global Social Capitalism awards and recognition
Access to Quarterly results information
Interested investors, the media and others may review this quarterly earnings news release, management's discussion and analysis, quarterly results slides, audio and transcript of the investor webcast call, supplementary financial information at telus.com/investors.
TELUS (TSX: T, NYSE: TU) is a dynamic, world-leading communications technology company with $17 billion in annual revenue and 17 million customer connections spanning wireless, data, IP, voice, television, entertainment, video, and security. We leverage our global-leading technology and compassion to drive social change and enable remarkable human outcomes. Our longstanding commitment to putting our customers first fuels every aspect of our business, making us a distinct leader in customer service excellence and loyalty. The numerous, sustained accolades TELUS has earned over the years from independent, industry-leading network insight firms showcase the strength and speed of TELUS' global-leading networks, reinforcing our commitment to provide Canadians with access to superior technology that connects us to the people, resources and information that make our lives better.
TELUS Health is Canada's leader in digital health technology, improving access to health and wellness services and revolutionizing the flow of health information across the continuum of care. TELUS Agriculture provides innovative digital solutions throughout the agriculture value chain, supporting better food outcomes from improved agri-business data insights and processes. TELUS International (TSX and NYSE: TIXT) is a leading digital customer experience innovator that designs, builds, and delivers next-generation solutions, including AI and content management, for global and disruptive brands across high-growth industry verticals, including tech and games, communications and media, ecommerce and FinTech, healthcare, and travel and hospitality. TELUS and TELUS International operate in 25+ countries around the world.
Driven by our passionate social purpose to connect all citizens for good, our deeply meaningful and enduring philosophy to give where we live has inspired TELUS, our team members and retirees to contribute more than $900 million and 1.8 million days of service since 2000. This unprecedented generosity and unparalleled volunteerism have made TELUS the most giving company in the world. Together, let's make the future friendly.
These statements are made pursuant to the "safe harbour" provisions of applicable securities laws in Canada and the United States Private Securities Litigation Reform Act of 1995. By their nature, forward-looking statements are subject to inherent risks and uncertainties and are based on assumptions, including assumptions about future economic conditions and courses of action. These assumptions may ultimately prove to have been inaccurate and, as a result, our actual results or events may differ materially from our expectations expressed in or implied by the forward-looking statements.
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