Q2 2015 investor conference call
Friday, August 7, 2015
Darren Entwistle, Executive Chair
Joe Natale, President & CEO
John Gossling, EVP & CFO
Caution regarding forward looking statements
Today's presentation and answers to questions contain statements about financial and
operating performance of TELUS (the Company) and future events, including with respect to
future dividend increases and normal course issuer bids through 2016 and the 2015 annual
targets and guidance that are forward-looking. By their nature, forward-looking statements
require the Company to make assumptions and predictions and are subject to inherent risks
and uncertainties. There is significant risk that the forward-looking statements will not prove
to be accurate. Readers are cautioned not to place undue reliance on forward-looking
statements as a number of factors could cause actual future performance and events to
differ materially from those expressed in the forward-looking statements. Accordingly, this
presentation is subject to the disclaimer and qualified by the assumptions (including
assumptions for the 2015 annual targets and guidance, semi-annual dividend increases
through 2016 and our ability to sustain and complete our multi-year share purchase program
through 2016), qualifications and risk factors referred to in the first and second quarter
Management’s discussion and analysis and in the 2014 annual report, and in other TELUS
public disclosure documents and filings with securities commissions in Canada (on SEDAR
at sedar.com) and in the United States (on EDGAR at sec.gov). Except as required by law,
TELUS disclaims any intention or obligation to update or revise forward-looking statements,
and reserves the right to change, at any time at its sole discretion, its current practice of
updating annual targets and guidance.
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Driving success by executing on long-term strategy
• Delivering strong financial and leading operating results
• Focusing on exceptional customer service culture
• Investing for sustainable long-term future growth
• Returning significant capital to our shareholders
3
Operating results
4
Strong wireless postpaid net additions
Postpaid net adds (000s)
78
Wireless
subscribers
1.1M
prepaid
76
14%
8.35M
total
86%
Q2-14
Q2-15
7.2M
postpaid
Continued expansion of postpaid base
47% share of postpaid net additions among national carriers
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Industry-leading customer loyalty
Postpaid
Blended
1.37%
1.17%
0.90% 0.86%
Q2-14 Q2-15
Q2-14 Q2-15
Postpaid churn below 1% for an impressive two full years
Blended churn down 20 bps to a low 1.17%
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Industry-leading wireless ARPU
$61.69
$63.48
Q2-14
Q2-15
19th consecutive quarter of y/y blended ARPU growth
as demand for data continues to grow
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Industry-leading lifetime revenue per subscriber1
$5,426
$4,503
Q2-14
1
Q2-15
Lifetime revenue derived by dividing ARPU by blended churn rate.
Customers First culture delivering industry-leading
lifetime revenue per subscriber – up 20% y/y
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Growing Internet, TV offsetting residential NAL losses
Net additions (000s)
High-speed Internet
TELUS TV
45
50
44
38
39
Residential NALs
-19
Total Internet, TV, Residential NALs
-24
-20
Q2-14
Q3-14
Q4-14
19
21
30
-20
-20
Q1-15 Q2-15
Delivering positive subscriber growth
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Key second quarter operating highlights
• Leading postpaid wireless subscriber growth
• Lowest postpaid wireless churn in North America
• Industry-leading and growing ARPU
• Industry-leading and growing lifetime revenue per customer
• Most rapidly growing wireline business in Canada
Strong second quarter performance demonstrates
execution of strategy and powerful customers first culture
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Financial results
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Second quarter 2015 wireless financial results
($ millions, except margin)
1,722
+7.4%
Network revenue
1,568
+6.1%
719
+1.5%
755
+6.3%
41.4%
(2.4) pts
43.5%
(0.5) pts
227
(0.4)%
EBITDA (excluding restructuring)
EBITDA margin2
EBITDA margin (excluding restructuring)
Capital expenditures
2
y/y change
Revenue (external)
EBITDA1
1
Q2 2015
EBITDA does not have any standardized meaning prescribed by IFRS-IASB. Please see the appendix for the definition.
EBITDA as a percentage of total revenue.
Momentum continues with strong revenue and underlying EBITDA growth12
Second quarter 2015 wireline financial results
($ millions, except margin)
Revenue (external)
EBITDA
EBITDA (excluding restructuring)
EBITDA margin
EBITDA margin (excluding restructuring)
Capital expenditures
Q2 2015
y/y change
1,380
+2.4%
362
(0.9)%
385
+2.9%
25.4%
(0.8) pts
27.0%
+0.2 pts
437
+7.1%
Steady trends continue with revenue and underlying EBITDA
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Second quarter 2015 consolidated financial results
($ millions, except EPS)
Q2 2015
y/y change
Revenue
3,102
+5.1%
EBITDA
1,081
+0.7%
1,140
+5.1%
0.56
(9.7)%
0.66
+4.8%
Capital expenditures
664
+4.4%
Free cash flow
300
+43%
EBITDA (excluding restructuring)
EPS (basic)
Adjusted EPS1
1 Adjusted
EPS does not have any standardized meaning prescribed by IFRS-IASB. Please see the appendix for the definition.
Strength in both wireless and wireline delivering strong
consolidated growth in revenue and profitability
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Questions?
Investor relations
1-800-667-4871
telus.com/investors
ir@telus.com
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Appendix - free cash flow comparison
EBITDA
Capex (excluding spectrum licenses)
Net employee defined benefit plans expense
Employer contributions to employee defined benefit plans
Interest expense paid, net
Income taxes paid, net of refunds
Share-based compensation
Restructuring (disbursements) net of restructuring costs
Free Cash Flow
Spectrum
Common Shares and Non-Voting Shares issued
Purchase of Common Shares for cancellation
Dividends paid to holders of equity shares
Cash payments for acquisitions and related investments
Real estate joint ventures
Working Capital and Other
Funds available for debt redemption
Net issuance of debt
Increase (decrease) in cash
Q2 - 2014
1,073
(636)
Q2 - 2015
1,081
(664)
2014 YTD
2,150
(1,132)
2015 YTD
2,216
(1,299)
22
26
44
54
(22)
(124)
(122)
23
(4)
(21)
(126)
(63)
25
42
(51)
(184)
(346)
39
(19)
(48)
(211)
(178)
2
35
210
300
501
571
(914)
(177)
(224)
(3)
(1,688)
(106)
(243)
(1)
(1,143)
(336)
(446)
(40)
(1,990)
(262)
(487)
(5)
(10)
49
(15)
(30)
(24)
(191)
(22)
(205)
(1,069)
(1,783)
(1,679)
(2,400)
1,074
281
1,400
2,417
5
(1,502)
(279)
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Appendix - EPS analysis
EPS Q2-2014 as reported
Restructuring and other like costs
EPS Q2-2014 adjusted
$0.62
0.01
$0.63
Higher EBITDA excluding restructuring and other like costs
0.07
Lower shares outstanding from NCIB
0.01
Higher financing and other1
(0.03)
Higher depreciation and amortization
(0.02)
EPS Q2-2015 adjusted
$0.66
Restructuring and other like costs
(0.07)
Income tax-related adjustments
(0.02)
Asset retirement from Black’s Photography
(0.01)
EPS Q2-2015 as reported
$0.56
1 Excludes
interest income from the settlement of prior years’ income tax-related matters, as it is reflected in
the ‘Income tax-related adjustments’ line.
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Appendix - definitions
• EBITDA does not have any standardized meaning prescribed by
IFRS-IASB. We have issued guidance on and report EBITDA
because it is a key measure used to evaluate performance at a
consolidated level and the contribution of our two segments. For
definition and explanation, see Section 11.1 in the 2015 second
quarter Management’s discussion and analysis.
• Adjusted EPS does not have any standardized meaning prescribed
by IFRS-IASB. This term is defined in this presentation as excluding
(after income taxes): 1) restructuring and other like costs; 2) income
tax-related adjustments; and 3) asset impairment from the planned
closure of all Black’s Photography retail stores. For further analysis
of the aforementioned items see Section 1.3 in the 2015 second
quarter Management’s discussion and analysis.
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