Today's News

• Total Mobile and Fixed customer growth of 301,000 up 29,000 over last year, and strongest fourth quarter on record, driven by strong demand for product portfolio of Mobility and Fixed Broadband services

  
  

• Record high customer additions of 1,043,000 for the full year

  
  

• Strong quarterly financial results leading to full year Consolidated Operating Revenues, Adjusted EBITDA and Free Cash Flow growth of 8.6 per cent, 9.5 per cent and 64 per cent, respectively; Net income for the full year up 1.2 per cent

  
  

• Targeting 2023 Operating Revenue and Adjusted EBITDA to increase by 11 to 14 per cent and 9.5 to 11 per cent, respectively

Burnaby, BC, February 13, 2023--(T-Net)--TELUS Corporation today released its unaudited results for the fourth quarter of 2022.

Consolidated operating revenues and other income increased by 3.8 per cent over the same period a year ago to $5.1 billion, or 13 per cent excluding the $410 million pre-tax gain arising from the disposition of their financial solutions business, as reported in other income, in the fourth quarter of 2021.

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 increased health services revenues attributable to business acquisitions, including LifeWorks and organic growth, higher mobile network revenues, increased data service revenues and increased mobile equipment revenues.

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

Darren Entwistle, President and CEO, TELUS Communications Inc.

"Throughout 2022, TELUS achieved strong operational and financial results across our business, including leading our North American peer group with respect to 2022 Operating Revenues, Adjusted EBITDA and Free Cash Flow growth" said Darren Entwistle, President and CEO.

"Our results are buttressed by our highly differentiated and powerful asset mix geared towards high-growth, technology-oriented verticals," continued Darren.

For the fourth quarter, net income of $265 million decreased by 60 per cent over the same period last year and Basic earnings per share (EPS) of $0.17 decreased by 64 per cent.

These decreases were driven by the after-tax impacts of lower other income and higher financing costs, as well as higher goods and services purchased, employee benefit expense and depreciation and amortization; and, as it relates to EPS, higher shares outstanding.

When excluding the effects of restructuring and other costs, income tax-related adjustments, the virtual purchase power agreement (VPPA) unrealized change in forward element in the fourth quarter of 2022 and the gain on disposition of their financial solutions business in the fourth quarter of 2021, adjusted net income of $333 million increased by 0.6 per cent over the same period last year, while adjusted basic EPS of $0.23 was flat. 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 decreased by 15 per cent to $1.6 billion, primarily due to the non-recurrence of the $410 million gain arising from the disposition of their financial solutions business in the fourth quarter of 2021. Adjusted EBITDA, which excludes restructuring and other costs, other equity (income) losses related to real estate joint ventures and the gain on disposition of their financial solutions business, increased by 11 per cent to $1.7 billion. This growth reflects: (i) higher mobile network revenues, including growth in their mobile phone and connected devices subscriber bases, in addition to ARPU growth; (ii) increased fixed data services revenues driven by business acquisitions, internet and security subscriber growth, higher revenue per internet customer and TV subscriber growth; (iii) contribution from their acquisition of LifeWorks on September 1, 2022; (iv) increased DLCX contribution; and (v) higher other income, excluding their prior year gain on the disposition of their financial solutions business. These factors were partly offset by: (i) higher employee benefits expense; (ii) higher costs related to the scaling of their digital capabilities, inclusive of increased subscription based licences; (iii) continued declines in fixed legacy voice and data services revenues; (iv) lower TV margins due to rising content costs, an increased mix of customers selecting smaller TV combination packages and technological substitution; and (v) 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 fourth quarter, the company added 301,000 net customer additions, up 29,000 over the same period last year, and inclusive of 112,000 mobile phones and 106,000 connected devices, in addition to 42,000 internet, 28,000 security and 17,000 TV customer connections. This was partly offset by low residential voice losses of 4,000. Their total TTech subscriber base of approximately 18 million was up 6.4 per cent over the last twelve months, reflecting a 4.3 per cent increase in our mobile phones subscriber base to approximately 9.7 million, and a 16 per cent increase in their connected devices subscriber base to approximately 2.5 million. Additionally, their internet connections grew by 6.3 per cent over the last twelve months to over 2.4 million customer connections, their security customer base expanded by 22 per cent to approximately 1.0 million customers, and their TV subscriber base increased by 4.7 per cent to more than 1.3 million customers. Lastly, their residential voice subscriber base remained relatively flat at 1.1 million.

In health services, at the end of 2022, and as compared to the end of 2021, virtual care members were 4.5 million, up 61 per cent or 1.7 million, and healthcare lives covered were 67.7 million, inclusive of LifeWorks, up 47.1 million. Digital health transactions in the fourth quarter of 2022 totaled 152.3 million, up 6.7 per cent over 2021.

Cash provided by operating activities of $1.1 billion increased by $230 million in the fourth quarter of 2022 and free cash flow of $323 million increased by $280 million compared to the same period a year ago. The increase in free cash flow was primarily driven by lower capital expenditures. Consolidated capital expenditures decreased by $249 million in the fourth quarter of 2022. This was driven by TTech, which experienced a $239 million decrease in the fourth quarter of 2022, mainly due to a planned slowdown of fibre build consistent with their their annual build target, compared to the acceleration of investments through 2021, as well as the reduced purchase of proprietary software licenses.

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 fourth quarter of 2022 and for the full year of 2022 was $132 million and $823 million, respectively.

This spend has enabled: (i) acceleration of premises to be connected to their PureFibre network which at the end of 2022 connected approximately 3.0 million premises, up from more than 2.7 million at the end of 2021; (ii) acceleration of their copper-to-fibre migration program; (iii) expansion of their fibre build to a number of additional communities, including many rural and Indigenous communities; (iv) advancement of their 5G network build, which covered approximately 83 per cent of the Canadian population at December 31, 2022; and (v) progress with the implementation of their digital strategy, and enhancement of products that will bolster both long-term revenue growth and operating expense efficiency.

Consolidated Financial Highlights

Notations used in the table above: n/m - not meaningful.

(1) 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 specified financial measures' in this news release.

(2) 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 their consolidated financial statements for further information.

(3) 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, 2022 on a prospective basis, following an in-depth review of their definition of a subscriber, we adjusted their connected devices subscriber base to remove 34,000 subscribers within a legacy reporting system. During the second quarter of 2022, we adjusted their cumulative security subscriber connections to add approximately 75,000 subscribers as a result of a business acquisition.

(4) Healthcare lives covered means the number of users (primary members and their dependents) enrolled in various health programs supported by TELUS Health services (e.g. virtual care, health benefits management, preventative care, personal health security and employee and family assistance programs). It is probable that some members and their dependents will be a user of multiple TELUS Health services. During the third quarter of 2022, we added 36.9 million healthcare lives covered as a result of the LifeWorks acquisition.

Fourth Quarter 2022 Operating Highlights

As noted in Section 1.2 of their annual 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 their operations for at least the first quarter of 2023 and possibly thereafter. This will depend on both domestic and international factors, such as rates of vaccination and booster doses, as well as the potential proliferation of COVID-19 variants of concern. We are committed to prioritizing the health and safety of team members and customers.

TELUS technology solutions (TTech)

• TTech operating revenues (arising from contracts with customers) increased by $506 million or 13 per cent in the fourth quarter of 2022, primarily reflecting increases in health services revenues driven by business acquisitions, including their acquisition of LifeWorks on September 1, 2022, as well as organic growth, mobile network revenues, mobile equipment and other service revenues, fixed data services revenues, fixed equipment and other service revenues, and agriculture and consumer goods services revenues, as described below. Decrease in fixed voice services was a partial offset.
  
  
• TTech EBITDA decreased by $298 million or 17 per cent in the fourth quarter of 2022, primarily due to the non-recurrence of the $410 million gain arising from the disposition of their financial solutions business in the fourth quarter of 2021, while TTech Adjusted EBITDA increased by $131 million or 10 per cent, reflecting an increase in direct contribution. This was partially offset by higher goods and services purchased and higher employee benefits expense.

Mobile products and services

• Mobile network revenue increased by $104 million or 6.5 per cent in the fourth quarter of 2022, reflecting 4.3 per cent and 16 per cent growth in the mobile phones and connected device subscriber bases, respectively, over the past 12 months, in addition to higher ARPU predominantly due to roaming improvements. As compared to the fourth quarter of 2019, network revenue is higher by 11 per cent.
  
  
• Mobile equipment and other service revenues increased by $61 million or 9.7 per cent in the fourth quarter of 2022, reflecting higher contract volumes attributed to successful efforts during the seasonal promotional periods and the impact of higher-value smartphones in the sales mix.
  
  
• TTech mobile products and services direct contribution increased by $94 million or 6.7 per cent in the fourth quarter of 2022, largely due to higher network revenues, partly offset by lower equipment margins due to heighted competitive seasonal promotional periods and higher roaming expense associated with higher roaming revenues from increased international travel volumes.
  
  
• Mobile phone ARPU was $58.69 in the fourth quarter of 2022, an increase of $1.24 or 2.2 per cent, largely due to roaming improvements as a result of increased international travel volumes. Roaming improvements were partially offset by: (i) lower overage revenues as customers continue to adopt larger or unlimited data and voice allotments in their rate plans; (ii) the impact of the competitive environment putting pressure on base rate plan prices in the current and prior periods; and (iii) greater uptake of family discount and bundling credits to their customers, which helps us drive lower churn and greater lifetime value across their mobile and fixed products and services.
  
  
• Mobile phone gross additions were 462,000 in the fourth quarter of 2022, an increase of 64,000, driven by improvements in retail traffic as pandemic-related restrictions had lessened when compared to the prior year; successful promotions during the competitively heightened seasonal periods; expanded channels, including leveraging Mobile Klinik as a channel for their certified pre-owned device inventory; and the enhanced capabilities of their digital footprint, inclusive of increased self-serve functions.
  
  
• Mobile phone net additions were 112,000 in the fourth quarter of 2022, unchanged compared to the prior year, reflecting increased mobile phone gross additions, partly offset by higher mobile phone churn, as described below. We continue to focus on profitable growth while executing customers first initiatives and retention programs, and their leading network quality.
  
  
• Our mobile phone churn rate was 1.22 per cent in the fourth quarter of 2022, as compared to 1.04 per cent in the fourth quarter of 2021, reflecting heightened competitive intensity during the seasonal promotional periods, compounded by increased retail traffic as pandemic-related restrictions had lessened when compared to the prior year, in addition to increased travel-related prepaid deactivations.
  
  
• Connected device net additions were 106,000 in the fourth quarter of 2022, an increase of 25,000 due to successful promotions of consumer and non-IoT connected devices over the seasonal promotional periods, as well as higher IoT net additions.

Fixed products and services

• Fixed data services revenues increased by $62 million or 5.9 per cent in the fourth quarter of 2022, driven by: (i) business acquisitions; (ii) increased internet and data service revenues, reflecting a 6.3 per cent increase in their internet subscribers over the past 12 months, in addition to higher revenue per customer resulting from internet speed upgrades, larger allotted data internet rate plans and rate changes; and (iii) increased revenues from home security driven by expanded services and customer growth of 22 per cent over the past 12 months. This growth was partially offset by: (i) the impact of the fourth quarter 2021 disposition of their financial solutions business; (ii) lower TV revenues, reflecting an increased mix of customers selecting smaller TV combination packages and technological substitution, mostly moderated by subscriber growth of 4.7 per cent over the past 12 months; and (iii) the ongoing decline in legacy data service revenues.
  
  
• Fixed voice services revenues decreased by $13 million or 6.3 per cent in the fourth 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 $19 million or 18 per cent in the fourth quarter of 2022, reflecting higher sales volumes and lower discounts on business and consumer premise equipment, along with higher other services revenue.
  
  
• TTech fixed products and services direct contribution increased by $167 million or 15 per cent in the fourth quarter of 2022, due to growth in health services, inclusive of business acquisitions and organic growth, as well as growth in margins for internet and data. These were partly offset by declining legacy voice and data margins, as well as declining TV margins.
  
  
• Internet net additions were 42,000 in the fourth quarter of 2022, an increase of 2,000, as our strong retention efforts overcame macroeconomic pressures impacting consumer purchasing decisions.
  
  
• TV net additions were 17,000 in the fourth quarter of 2022, a decrease of 1,000, mainly due to modestly higher churn driven by macroeconomic pressures impacting consumer purchasing decisions, partly offset by our diverse offerings.
  
  
• Security net additions were 28,000 in the fourth quarter of 2022, reflecting a decrease of 3,000 for the quarter due to higher churn driven by macroeconomic pressures impacting consumer purchasing decisions, partly offset by increased demand for our bundled product offerings and diverse suite of products and services.
  
  
• Residential voice net losses were 4,000 in the fourth quarter of 2022, compared to net losses of 10,000 in the fourth quarter of 2021. 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 $270 million in the fourth quarter of 2022, driven by our acquisition of LifeWorks on September 1, 2022 and higher revenues from the continued adoption of our virtual solutions inclusive of organic growth and business acquisitions.
  
  
• At the end of the fourth quarter of 2022, virtual care members were 4.5 million, an increase of 1.7 million over the past 12 months, due to the continued adoption of virtual solutions to keep Canadians and others safely connected to health and wellness care.
  
  
• At the end of the fourth quarter of 2022, healthcare lives covered were 67.7 million, an increase of 47.1 million over the past 12 months, mainly due to the addition of 36.9 million lives covered from our third quarter acquisition of LifeWorks as well as healthy post-acquisition growth from population increases across all of our regions. Organically, lives covered also increased due to continued demand for virtual solutions, an increase in coverage related to elective health services, and an increase in value-added services including vaccination solutions.
  
  
• Digital health transactions were 152.3 million in the fourth quarter of 2022, an increase of 9.5 million over the prior year period, largely driven by higher adjudication transactions as plan members continue to increase their utilization of elective health services with pandemic restrictions easing, as well as an increase to healthcare lives covered.

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 $3 million in the fourth quarter of 2022, largely due to contributions from increased animal health pharmacy and research revenues. Our agriculture and consumer goods revenues are largely earned in U.S. dollars, and in the fourth quarter of 2022 compared to the fourth 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 $56 million or 8.8 per cent in the fourth quarter of 2022. The increase was primarily attributable to growth in our tech and games clients, arising from additional services provided to existing clients and new clients added since the prior year. The strengthening of the U.S. dollar against the Canadian dollar resulted in a favourable foreign currency impact on our DLCX operating results, partially offset by the weakening European euro and related unfavourable foreign currency impact on our European euro-denominated operating results. Foreign exchange fluctuations on contracts denominated in U.S. dollar, European euro and other currencies will impact revenues.
  
  
• DLCX EBITDA increased by $14 million or 8.0 per cent in the fourth quarter of 2022, while DLCX Adjusted EBITDA increased by $41 million or 23 per cent. The increase in Adjusted EBITDA in the fourth quarter was primarily from revenue growth, as discussed above, and from the lower share-based compensation expense resulting from the lower average share price of TELUS International. This was partly offset by business growth, which includes higher crowdsourced contractor costs to support expansion in our TIAI business, as well as higher team member count coupled with higher salaries and wages.

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 approximately $2.4 billion in 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 approximately $34 billion in these taxes.
  
  
• Investing $3.5 billion in capital expenditures in 2022 and approximately $51 billion since 2000.
  
  
• Disbursing spectrum renewal fees of approximately $52 million to Innovation, Science and Economic Development Canada in 2022. Since 2000, our total tax and spectrum remittances to federal, provincial and municipal governments in Canada have totalled approximately $41 billion.
  
  
• Spending $9.1 billion in total operating expenses in 2022, including goods and services purchased of approximately $6.3 billion. Since 2000, we have spent $149 billion and $101 billion, respectively, in these areas.
  
  
• Generating a total team member payroll of approximately $3.5 billion in 2022, including wages and other employee benefits, and payroll taxes of approximately $197 million. Since 2000, total team member payroll totals $57 billion.
  
  
• Returning over $1.8 billion in dividends through four quarterly dividend payments in 2022 to individual shareholders, mutual fund owners, pensioners and institutional investors. Since 2004, we have returned $23 billion to shareholders through our dividend and share purchase programs, including $18 billion in dividends and more than $5 billion in share purchases, representing approximately $16 per share.

TELUS sets 2023 consolidated financial targets

TELUS' consolidated financial targets for 2023 are guided by a number of long-term financial objectives, policies and guidelines, which are detailed in Section 4.3 of the 2022 annual MD&A.

In 2023, 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; continued roaming revenue improvement; and continued ongoing investments in our leading PureFibre network and ongoing 5G deployment. 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 2023 are our unique and diversified growth assets: TELUS International, including continued demand in the digital transformation ecosystem and the acceleration of digital adoption across various sectors of the global economy as well as the acquisition of WillowTree; TELUS Health, including growing demand for our expanding portfolio of digital health services and applications as well as the acquisition of LifeWorks; and TELUS Agriculture & Consumer Goods, which is using technology to drive better food outcomes across the agriculture value chain.

Their growth profile is also underpinned by a team member culture focused on delivering customer service excellence and our ongoing focus on operational effectiveness.

(1) For 2023, we are guiding on operating revenues, which excludes other income. Operating revenues for 2022 were $18,292 million.
(2) Excludes $75 million targeted towards real estate development initiatives.

The preceding disclosure respecting TELUS' 2023 financial targets is forward-looking information and is fully qualified by the 'Caution regarding forward-looking statements' in the 2022 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 2023 in the 2022 annual MD&A. This disclosure is presented for the purpose of assisting our investors and others in understanding certain key elements of our expected 2023 financial results as well as our objectives, strategic priorities and business outlook. Such information may not be appropriate for other purposes.

Dividend Declaration

The TELUS Board of Directors declared a quarterly dividend of $0.3511 per share on the issued and outstanding Common Shares of the Company payable on April 3, 2023 to holders of record at the close of business on March 10, 2023. This quarterly dividend reflects an increase of 7.2 per cent from the $0.3274 per share dividend declared one year earlier and consistent with our multi-year dividend growth program.

Doug French, Executive Vice-president and CFO said, "In the fourth quarter, our team delivered strong operational and financial results, demonstrating our ongoing cadence of execution excellence. Indeed, in 2022, we achieved our financial targets, including Operating Revenues and Adjusted EBITDA growth, supported by our record customer growth on our leading mobile and fixed broadband networks, diversified and powerful asset mix, and our company-wide focus on delivering exceptional customer service. For the year, cash flow from operations increased by nearly 10 per cent, and free cash flow increased by 64 per cent to nearly $1.3 billion, surpassing our original target for 2022."

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