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Industry-leading total Mobile and Fixed customer growth of 247,000, up 24,000 over last year and our strongest second quarter on record, driven by higher year-over-year customer growth across our portfolio of leading Mobile and Fixed services

Burnaby, BC, August 8, 2022--(T-Net)--TELUS Corporation today released its unaudited results for the second quarter of 2022. Consolidated operating revenues and other income increased by 7.1 per cent over the same period a year ago to $4.4 billion.

This growth was driven by higher service revenues in their two reportable segments: TELUS technology solutions (TTech) and Digitally-led customer experiences - TELUS International (DLCX).

TTech service revenue growth was driven by higher mobile network revenues, increased internet and data service revenues, growth in agriculture and consumer goods service revenues, and growth in health services revenues.

Increased DLCX revenues resulted from organic growth from both expanded services for existing clients and growth from new clients. 

Darren Entwistle, President and CEO, TELUS Communications Inc.

"In the second quarter, the TELUS team once again demonstrated continued execution excellence, characterized by the consistent combination of industry-leading customer growth, resulting in strong operational and financial results across our business," said Darren Entwistle, President and CEO.

"Our robust performance reflects the potency of our globally leading broadband networks and customer-centric culture, which enabled record second quarter total customer additions of 247,000. This included strong mobile phone net additions of 93,000, our best second quarter result since 2011, and industry-leading total fixed net additions of 62,000, an all-time second quarter record for TELUS. Our leading customer growth is underpinned by our consistent, industry-best client loyalty across our mobile and fixed product lines. Notably, again this quarter, blended mobile phone, PureFibre internet, Optik TV, security and voice churn were all below one per cent. Moreover, our industry-leading postpaid mobile phone churn of 0.64 per cent was unchanged over the prior year period, and represents the seventh quarter out of the last 10 below 0.80 per cent."

"Our results are backed by our highly differentiated and powerful asset mix geared towards high-growth, technology-oriented verticals," continued Darren. "Earlier today, TELUS International (TI) once again announced strong double-digit revenue growth, coupled with leading profitability and strong cash flow in the second quarter. TI's continued robust results demonstrate its consistent execution, attractive end-to-end digital capabilities, and position TI as a leading partner of choice for premier digital customer experiences and IT services for its enviable list of clients around the world."

"At TELUS Health, our team drove attractive year-over-year health services revenue growth, while continuing to meaningfully scale our health operations as we improve health outcomes for citizens through access to better health information. This includes our healthcare programs covering more than 22 million lives, an increase of 24 per cent on a year-over-year basis, along with executing 145 million digital health transactions during the quarter, up 6 per cent over last year, and earning 1.4 million new virtual healthcare members in the last 12 months, increasing our virtual healthcare members to 3.6 million, up 64 per cent over the prior year."

"At TELUS Agriculture & Consumer Goods, our team drove agriculture and consumer goods services revenue growth of 40 per cent over the same period last year, as a result of our team's ongoing efforts to integrate and grow this compelling global business. This result is illustrative of the significant value we are creating as the leading provider of agriculture and consumer goods technology solutions around the world, where we are advancing the sector's efficiency and effectiveness, including food quality production and waste reduction, through data analytics."

"Our consistently strong operating and financial performance is buttressed by our highly engaged team who are passionate about delivering superior service offerings and digital capabilities over our world-leading wireless and PureFibre broadband networks," Darren further commented.

"More than ever before, Canadians value fast, reliable connections, and the consistent recognition from a range of independent organizations reinforces the superiority of TELUS' world-leading networks. Notably, in June, TELUS was once again named the fastest internet service provider in Canada by U.S. -based PCMag, for the third consecutive year. In addition, U.S. -based Ookla once again named TELUS the fastest mobile service provider in Canada for the tenth consecutive time. These acknowledgements, alongside the numerous other third-party network awards our skilled and dedicated team has earned, reinforces TELUS' leadership in terms of offering customers the fastest, most expansive and reliable service in Canada across both our wireless and PureFibre networks. Moreover, this recognition of the leadership of TELUS' national broadband networks underscores the value of our significant generational investments in world-leading network technologies, including our ongoing accelerated broadband expansion program through the end of 2022, which will continue to drive extensive socio-economic benefits to Canadians from coast-to-coast."

"Our acquisition of LifeWorks, announced in June and approved yesterday by Lifeworks' shareholders, will enable us to combine the respective skills and capabilities of LifeWorks and TELUS Health, creating a globally leading, end-to-end, digital-first employee primary and preventative healthcare, mental health and wellness platform covering more than 50 million lives in Canada and beyond. Customers will benefit from our team's steadfast focus on providing exceptional customer experiences over our world-leading broadband networks, our consolidated engineering talent that will incorporate best-in-class data platform technologies to positively impact health outcomes for employees and their families, and our significantly expanded economies of scope and scale. This includes complementing LifeWorks' international relationships with TI's proven expertise in digital transformation and client service excellence, as well as their expansive client base and delivery teams spanning 28 countries, to extend our offerings to customers well beyond Canada. Our combined organizations, guided by a shared set of values, will provide employers with simple, convenient and effective, data-driven primary and preventive care solutions for employees and their families to proactively manage their health and wellness, including their mental health, so that they can lead their healthiest and most productive professional and personal lives. Following LifeWorks' shareholder approval, we remain highly confident in receiving the appropriate regulatory approvals and, in turn, closing this transaction on or about the fourth quarter of 2022, and look forward to welcoming LifeWorks' employees and customers into our TELUS Health family," said Darren.

Doug French, Executive Vice-president and CFO said, "Our second quarter results showcase our consistent execution excellence and leading asset mix across our telecom and technology-oriented verticals. Indeed, these strong financial and operating results are powered by our leading customers first culture along with a longstanding focus on operational efficiency and effectiveness. In that regard, consolidated EBITDA margin expanded by 90 basis points over the same quarter a year ago, or by 70 basis points on an Adjusted EBITDA basis. This margin expansion is driven by higher margins in our two reportable segments, benefitting from our ongoing investments in simplification and digitization which are both enhancing the customer experience, while improving our cost structure on a permanent basis. Furthermore, consolidated Adjusted EBITDA growth in the second quarter of 2022 demonstrated strong sequential growth as we progress as planned towards our annual target of 8 to 10 per cent."

"During the second quarter, we continued to execute against our accelerated capital expenditure program, now in the final year before capital expenditures decline significantly beginning in 2023 to an anticipated annual run-rate of approximately $2.5 billion," commented Doug. "Our capital expenditures were up year-over-year given the increased momentum of the program, and we expect a similar level of investment in the third quarter before it begins to taper off in the fourth quarter as we advance toward the lower run-rate in 2023. We continue to expand our PureFibre network, which now reaches over 2.8 million premises, along with advancing our 5G network coverage to 78 per cent of Canadians, including investments to operationalize our 3500 MHz spectrum holdings. Furthermore, we are making steady progress on our copper-to-fibre migration program, with only approximately 7 per cent of our TV and internet customers within our PureFibre footprint currently serviced by copper, down from 10 per cent at the end of the first quarter of 2022. These investments significantly advance our leading customer experiences and network leadership position as well as enhancing our competitive positioning to drive strong profitable customer growth on a consistent basis. Indeed, since the beginning of 2020, we have added over 2.1 million new mobility and fixed customer connections, supporting our positive outlook for 2022 and beyond. This includes our expectations for continued strong Adjusted EBITDA growth and significant future cash flow expansion beginning in 2023, underpinning our long-standing dividend growth program, with our October quarterly dividend payment up 7.1 per cent on a year-over-year basis."

"As part of our commitment to reduce our carbon footprint, supporting a greener and brighter future, we have entered into virtual power purchase agreements with renewable energy projects that develop solar and wind power facilities in Alberta. These projects became operational as of the second quarter of 2022 and demonstrate our ESG leadership by enabling additional renewable-sourced electricity to the Alberta electricity grid and the renewable energy certificates received will help us achieve our scope 1 and scope 2 science-based greenhouse gas reduction targets along with reaching our goal to be net carbon neutral in our operations by 2030. By participating in renewable energy projects, TELUS is demonstrating what a committed organization can do to transition to a low-carbon future," concluded Doug.

For the second quarter, net income of $498 million increased by 45 per cent over the same period last year and Basic earnings per share (EPS) of $0.34 increased by 36 per cent over the same period last year. These increases were driven by the impacts of increased Operating income, including increased earnings before interest, income taxes, depreciation and amortization (EBITDA), as detailed below, partly 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 in the second quarter of 2021 and virtual power purchase agreements unrealized change in forward element in the second quarter of 2022, adjusted net income of $422 million increased by 21 per cent over the same period last year, while adjusted basic EPS of $0.32 was up 23 per cent over the same period last year. 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 specified financial measures' in this news release.

Compared to the same period last year, consolidated EBITDA increased by 9.8 per cent to approximately $1.6 billion and Adjusted EBITDA increased by 8.9 per cent to more than $1.6 billion. This growth reflects: (i) higher mobile network revenues driven by growth in our subscriber base over the past 12 months, in addition to higher mobile phone ARPU; (ii) increased contribution from our DLCX business; and (iii) increased internet and data service revenues driven by a combination of subscriber growth across internet, security, and TV, business acquisitions, higher revenue per customer, and expanded services. These factors were partly offset by: (i) higher employee benefits expense; (ii) higher costs related to the scaling of our digital capabilities, inclusive of increased subscription-based licences; (iii) lower legacy fixed voice and legacy fixed data services revenues; and (iv) bad debt expense returning to pre-pandemic levels driven by macroeconomic pressures compared to the prior period which saw historically low bad debt expense.

In the second quarter, the company added 247,000 net customer additions, up 24,000 over the same period last year, and inclusive of 93,000 mobile phones and 92,000 connected devices, in addition to 34,000 internet, 20,000 security and 15,000 TV customer connections. This was partly offset by residential voice losses of 7,000. Their total TTech subscriber base of 17.3 million is up 6.3 per cent over the last twelve months, reflecting a 4.3 per cent increase in their mobile phones subscriber base to over 9.4 million, and a 15 per cent increase in their connected devices subscriber base to more than 2.2 million. Additionally, their internet connections grew by 6.9 per cent over the last twelve months to over 2.3 million customer connections, their security customer base expanded by 25 per cent to 925,000 customers, including the addition of 75,000 customers from their acquisition of Vivint Smart Home, and our TV subscriber base increased by 4.3 per cent to approximately 1.3 million customers.

In health services, as of the end of the second quarter of 2022, virtual care members were 3.6 million and healthcare lives covered were 22.4 million, up 64 per cent and 24 per cent over the past 12 months, respectively. Digital health transactions in the second quarter of 2022 were 145.4 million, up 6.1 per cent over the second quarter of 2021.

Cash provided by operating activities increased by $6 million in the second quarter of 2022 and free cash flow of $205 million decreased by $5 million compared to the same period a year ago. The decrease in free cash flow was driven by the increase in capital expenditures aligned with our planned accelerated capital investments and cash interest paid, partly offset by higher EBITDA.

Consolidated capital expenditures increased by $141 million in the second quarter of 2022, due to accelerated investments in our 5G network, enhanced product development, and digitization to continue our multi-year increase in system capacity and reliability as announced on March 25, 2021. This was partly offset by reduced spend resulting from efficiencies in our 4G network and completion of some major system modernization and refresh programs in 2021.

On March 25, 2021, the company announced that they intended to accelerate $1.5 billion of capital spending in 2021 and 2022, with up to $750 million of accelerated capital in 2021 and the remainder brought forward into 2022. Accelerated capital invested during the second quarter of 2022 and first six months of 2022 was $265 million and $465 million, respectively.

This spend has enabled: (i) acceleration of premises to be connected to our fibre network; (ii) acceleration of our copper-to-fibre migration program; (iii) expansion of our fibre build to a number of additional communities, including many rural and Indigenous communities; (iv) advancement of our 5G network build, which covered approximately 78 per cent of the Canadian population at June 30, 2022; and (v) progress with the implementation of our digital strategy, and enhancement of products that will bolster both long-term revenue growth and operating expense efficiency.

At June 30, 2022, our TELUS PureFibre network covered more than 2.8 million premises, up from approximately 2.6 million premises at the end of the second quarter of 2021. Furthermore, as at June 30, 2022, approximately 7 per cent of our TV and internet customers within our PureFibre footprint are serviced by copper, down from 10 per cent at March 31, 2022. The remaining TV and internet customers serviced by copper within our PureFibre footprint are expected to be substantially migrated to TELUS PureFibre by the end of 2022.

Consolidated Financial Highlights

Second Quarter 2022 Operating Highlights

As noted in Section 1.2 of our second quarter 2022 Management's Discussion and Analysis (MD&A), the COVID-19 pandemic, which emerged in the first quarter of 2020, continued to have a global impact into 2022. 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, such as rates of vaccinations, including booster doses, as well as 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 2021, unless otherwise indicated.

TELUS technology solutions (TTech)

• TTech operating revenues (arising from contracts with customers) increased by $142 million or 4.0 per cent in the second quarter of 2022, primarily reflecting increases in mobile network revenue, fixed data services revenues, agriculture and consumer goods services revenues and health services revenues, as described below. Decreases in mobile equipment and other service revenues and fixed voice services revenues were partial offsets.
• TTech EBITDA increased by $94 million or 7.1 per cent in the second quarter of 2022, while TTech Adjusted EBITDA increased by $83 million or 6.1 per cent, reflecting an increase in direct contribution from mobile and fixed products and services, as outlined below. This was partially offset by higher employee benefits expense, higher costs related to the scaling of our health and agriculture and consumer goods businesses, and digital capabilities, inclusive of increased subscription-based licences, as well as bad debt expense returning to pre-pandemic levels driven by macroeconomic pressures compared to the prior period, which saw historically low bad debt expense.

Mobile products and services

• Mobile network revenue increased by $97 million or 6.4 per cent in the second quarter of 2022, due to growth in the mobile phones and connected device subscriber bases over the past 12 months, in addition to higher mobile phone ARPU. As compared to the second quarter of 2019, mobile network revenue is higher by 6.6 per cent.
• Mobile equipment and other service revenues decreased by $42 million or 8.4 per cent in the second quarter of 2022, reflecting lower mobile handset contract volumes as a result of changes in customer preferences to hold onto devices for longer periods of time and a greater mix of bring-your-own-device customer additions. This was partly offset by the impact of higher-value smartphones in the sales mix.
• TTech mobile products and services direct contribution increased by $111 million or 8.1 per cent in the second quarter of 2022, due to higher network revenues and higher equipment margins.
• Mobile phone ARPU was $57.74 in the second quarter of 2022, an increase of $1.18 or 2.1 per cent. This increase reflects higher roaming revenue as a result of increased international travel volumes, albeit still below our pre-pandemic baseline. Roaming improvements were partially offset by: (i) the impact of the competitive environment putting pressure on base rate plan prices in the current and prior periods; (ii) lower top-ups and chargeable usage revenues as customers continue to adopt larger data allotments in their rate plans; and (iii) a greater uptake of family discount and bundling credits to our customers, which helps us drive lower churn and greater lifetime value across our mobile and fixed products and services.
• Mobile phone gross additions were 320,000 in the second quarter of 2022, an increase of 15,000, driven by improvements in retail traffic as pandemic-related restrictions had lessened when compared to the prior year, and our successful promotions, including the bundling of mobility and home services.
• Mobile phone net additions were 93,000 in the second quarter of 2022, an increase of 4,000, driven by higher gross loading as described above. This is supported by consistently low customer churn as described below, particularly among high-value customers, while also realizing improvements driven by increased retail traffic compared to the prior year.
• Our mobile phone churn rate was 0.81 per cent in the second quarter of 2022, unchanged as compared to the second quarter of 2021, reflecting the overall continued focus on customer retention through a greater uptake of family discount and bundling efforts, and changes in customer preferences to hold onto devices for longer periods of time. Churn continues to benefit from our successful bundling of mobility and home services, our focus on executing customers first initiatives and our leading network quality and reliability.
• Connected device net additions were 92,000 in the second quarter of 2022, an increase of 8,000, largely attributed to growth in our Internet of Things connections across various industries, despite loading delays of some customers stemming from global semiconductor part shortages and supply constraints impacting the industry.

Fixed products and services

• Fixed data services revenues increased by $46 million, or 4.5 per cent in the second quarter of 2022. The increase was driven by: (i) increased internet and data service revenues, reflecting higher revenue per customer resulting from internet speed upgrades, larger allotted data internet rate plans and rate changes, in addition to a 6.9 per cent increase in our internet subscribers over the past 12 months; (ii) increased revenues from home and business security driven by expanded services and customer growth of 25 per cent over the past 12 months; and (iii) higher TV revenues, reflecting subscriber growth of 4.3 per cent over the past 12 months, mostly offset by an increased mix of customers selecting smaller TV combination packages and technological substitution. This growth was partially offset by the impact of the fourth quarter 2021 disposition of our financial solutions business and the ongoing decline in legacy data service revenues.
• Fixed voice services revenues decreased by $13 million or 6.1 per cent in the second quarter of 2022, reflecting the ongoing decline in legacy voice revenues resulting from technological substitution and price plan changes. Declines were partly mitigated by the success of our bundled product offerings, retention efforts and the migration from legacy to IP services offerings.
• Fixed equipment and other service revenues increased by $21 million in the second quarter of 2022, reflecting higher sales volume and lower discounts on business and consumer premises equipment.
• TTech fixed products and services direct contribution increased by $56 million or 5.1 per cent in the second quarter of 2022 due to growth in margins for internet and data, as well as health and agriculture and consumer goods services. These were partly offset by declining legacy data and legacy voice margins.
• Internet net additions were 34,000 in the second quarter of 2022, an increase of 4,000 for the quarter, due to our success in driving strong gross additions through bundled product offerings, including the TELUS Whole Home bundle and our bundling of mobility and home services. This was offset by modestly higher churn compared to relatively low churn rates during heightened pandemic restrictions in the prior year.
• TV net additions were 15,000 in the second quarter of 2022, an increase of 4,000, mainly due to strong loading in the business market and our diverse offerings, partly offset by modestly higher churn due to the factors discussed above for internet.
• Security net additions were 20,000 in the second quarter of 2022, relatively unchanged for the quarter, driven by strong growth in new connections through demand for our bundled product offerings and diverse suite of products and services, offset by modestly higher churn due to the factors discussed above for internet. Our continued focus on connecting more homes and businesses directly to fibre, expanding and enhancing our addressable high-speed internet and Optik TV footprint, and bundling these services together, contributed to combined internet, TV and security subscriber growth of 385,000 over the past 12 months, including the addition of 75,000 customers from our acquisition of Vivint Smart Home.
• Residential voice net losses were 7,000 in the second quarter of 2022, compared to residential voice net losses of 10,000 in the same period a year ago. The residential voice subscriber losses continue to reflect the trend of substitution to mobile and internet-based services, mostly mitigated by our expanding fibre footprint and bundled product offerings, as well as our strong retention efforts, including lower-priced offerings.

Health services

• Through TELUS Health, we are leveraging technology to deliver connected solutions and services, improving access to care and revolutionizing the flow of information while facilitating collaboration, efficiency, and productivity across the healthcare ecosystem, progressing our vision of transforming healthcare and empowering people to live healthier lives.
• Health services revenues increased by $10 million or 7.9 per cent in the second quarter of 2022, driven by: (i) higher revenues from the continued adoption of our virtual care and virtual pharmacy solutions inclusive of organic growth and business acquisitions; (ii) growth in health benefits management services with plan members resuming the use of elective health services, partly offset by rate changes associated with a contract renewal; and (iii) growth in the use of our TELUS Health Care Centres.
• At the end of the second quarter of 2022, 3.6 million members were enrolled in our virtual care services, an increase of 1.4 million over the past 12 months, due to the continued adoption of virtual solutions to keep Canadians safely connected to health and wellness care during the pandemic.
• At the end of the second quarter of 2022, our healthcare programs covered 22.4 million lives, an increase of 4.3 million over the past 12 months, mainly due to the continued demand for virtual solutions, an increase in value-added services including vaccination solutions, and an increase in coverage related to elective health services.
• Digital health transactions were 145.4 million in the second quarter of 2022, an increase of 8.3 million, largely driven by higher adjudication transactions as plan members resume the utilization of elective health services with pandemic restrictions easing.

Agriculture and consumer goods services

• Through TELUS Agriculture & Consumer Goods, we provide innovative digital solutions and actionable data-insights that better connect the global supply chain, driving more efficient production processes and improving the safety, quality and sustainability of food and consumer goods. Importantly, these efforts are also enabling better traceability to the end consumer, further supporting improved food outcomes.
• Agriculture and consumer goods services revenues increased by $23 million or 40 per cent, largely reflecting the impacts of business acquisitions, particularly with increased revenues from Software-as-a-Service (SaaS)-based revenue management software for consumer goods manufacturers, in addition to organic contributions from increased animal agriculture pharmacy and research revenues. Our agriculture and consumer goods revenues are largely earned in U.S. dollars, and in the second quarter of 2022 compared to the second quarter of 2021, the Canadian dollar weakened against the U.S. dollar, resulting in higher reported revenues in the quarter.

Digitally-led customer experiences - TELUS International (DLCX)

• DLCX operating revenues (arising from contracts with customers) increased by $122 million or 22 per cent in the second quarter of 2022. The increase was primarily attributable to i) higher revenue growth of 22 per cent in the tech and games vertical, due to expansion in our TELUS International AI Data Solutions (TIAI) business and continued growth within our existing clients and the addition of new clients; ii) higher revenue growth of 129 per cent generated from the banking, financial services and insurance vertical driven by the addition of a leading global financial institution; and iii) higher revenue growth of 31 per cent in our eCommerce and fintech vertical, which was primarily attributable to new clients and growth within our existing client base.
• DLCX EBITDA increased by $48 million or 37 per cent in the second quarter of 2022, while DLCX Adjusted EBITDA increased by $49 million or 36 per cent for the same period. The increases in EBITDA and Adjusted EBITDA were primarily from revenue growth, as discussed above, and lower share-based compensation expense associated with the lower average share price of TELUS International during the quarter, resulting in lower expense on liability-accounted awards. This was partly offset by business growth leading to a higher team member count coupled with higher salaries and wages as well as higher contractor costs from expansion in the TIAI business.

Corporate Highlights

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:

• Paying, collecting and remitting more than $1.2 billion in the first half of 2022 to federal, provincial and municipal governments in Canada consisting of corporate income taxes, sales taxes, property taxes, employer portion of payroll taxes and various regulatory fees. Since 2000, we have remitted over $32 billion in these taxes.
• Investing approximately $1.9 billion in capital expenditures primarily in communities across Canada in the first half of 2022 and over $49 billion since 2000.
• Disbursing spectrum renewal fees of approximately $52 million to Innovation, Science and Economic Development Canada in the first half of 2022. Since 2000, our total tax and spectrum remittances to federal, provincial and municipal governments in Canada have totalled approximately $40 billion.
• Spending $4.1 billion in total operating expenses in the first half of 2022, including goods and services purchased of approximately $2.9 billion. Since 2000, we have spent $144 billion and $98 billion, respectively, in these areas.
• Generating a total team member payroll of approximately $1.6 billion in the first half of 2022, including wages and other employee benefits, and payroll taxes of $115 million. Since 2000, total team member payroll totals $55 billion.
• Returning approximately $1.4 billion in dividends through three quarterly dividend payments in the first seven months of 2022 to individual shareholders, mutual fund owners, pensioners and institutional investors. Since 2004, we have returned nearly $22 billion to shareholders through our dividend and share purchase programs, including $16.6 billion in dividends and $5.2 billion in share repurchases, representing approximately $16 per share.

Dividend Declaration

The TELUS Board of Directors declared a quarterly dividend of $0.3386 per share on the issued and outstanding Common Shares of the Company payable on October 3, 2022 to holders of record at the close of business on September 9, 2022. This quarterly dividend reflects an increase of 7.1 per cent from the $0.3162 per share dividend declared one year earlier.

About TELUS

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. Our social purpose is to 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 & Consumer Goods is a global technology provider of innovative data insights and digital solutions, creating a unified, trusted and sustainable value chain. 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 moderation, for global and disruptive brands across high-growth industry verticals, including tech and games, communications and media and eCommerce and fintech. TELUS and TELUS International operate in 28 countries around the world.

Non-GAAP and other specified financial measures

We have issued guidance on and report certain non-GAAP measures that are used to evaluate the performance of TELUS, as well as to determine compliance with debt covenants and to manage our capital structure. As non-GAAP measures generally do not have a standardized meaning, they may not be comparable to similar measures presented by other issuers. For certain financial metrics, there are definitional differences between TELUS and TELUS International reporting. These differences largely arise from TELUS International adopting definitions consistent with practice in its industry. Securities regulations require such measures to be clearly defined, qualified and reconciled with their nearest GAAP measure. Certain of the metrics do not have generally accepted industry definitions.

Adjusted net income and adjusted basic earnings per share: These are non-GAAP measures that do not have any standardized meaning prescribed by IFRS-IASB and are therefore unlikely to be comparable to similar measures presented by other issuers. Adjusted Net income excludes the effects of restructuring and other costs, income tax-related adjustments, other equity losses related to real estate joint ventures, long-term debt prepayment premium and other adjustments (identified in the following tables). Adjusted basic EPS is calculated as adjusted net income divided by the basic weighted-average number of Common Shares outstanding. These measures are used to evaluate performance at a consolidated level and exclude items that, in management's view, may obscure underlying trends in business performance or items of an unusual nature that do not reflect our ongoing operations. They should not be considered alternatives to Net income and basic EPS in measuring TELUS' performance.

Reconciliation of adjusted net income

Reconciliation of adjusted basic EPS

EBITDA (earnings before interest, income taxes, depreciation and amortization): We have issued guidance on and report EBITDA because it is a key measure used to evaluate performance at a consolidated level. EBITDA is commonly reported and widely used by investors and lending institutions as an indicator of a company's operating performance and ability to incur and service debt, and as a valuation metric. EBITDA should not be considered as an alternative to Net income in measuring TELUS' performance, nor should it be used as a measure of cash flow. EBITDA as calculated by TELUS is equivalent to Operating revenues and other income less the total of Goods and services purchased expense and Employee benefits expense.

We also calculate Adjusted EBITDA to exclude items of an unusual nature that do not reflect our ongoing
operations and should not, in our opinion, be considered in a long-term valuation metric or should not be included in an assessment of our ability to service or incur debt.

Free cash flow: We report this measure as a supplementary indicator of our operating performance, and there is no generally accepted industry definition of free cash flow. It should not be considered as an alternative to the measures in the condensed interim consolidated statements of cash flows. Free cash flow excludes certain working capital changes (such as trade receivables and trade payables), proceeds from divested assets and other sources and uses of cash, as found in the condensed interim consolidated statements of cash flows. It provides an indication of how much cash generated by operations is available after capital expenditures (excluding purchases of spectrum licences) that may be used to, among other things, pay dividends, repay debt, purchase shares or make other investments. We exclude impacts of accounting standards that do not impact cash, such as IFRS 15 and IFRS 16. Free cash flow may be supplemented from time to time by proceeds from divested assets or financing activities.

(1) Refer to Note 31 of the interim consolidated financial statements (1) Refer to Note 31 of the interim consolidated financial statements