TELUS Corporation (TU) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
TELUS's earnings call reflects strong performance, with record customer additions, significant revenue growth in health and agriculture, and improved EBITDA margins. The Q&A revealed management's focus on leveraging AI and synergies for growth, despite some concerns over wireless revenue. The commitment to debt reduction and strategic investments is positive. However, the lack of clarity on free cash flow and DRIP removal timelines tempers enthusiasm slightly. Overall, the company's solid financials and optimistic guidance should lead to a positive stock price movement.
Key Financial Performance
Total Mobile and Fixed Customer Growth 218,000 net additions, representing the strongest first quarter on record, driven by strong demand for integrated product offerings.
Postpaid Mobile Phone Churn 0.84%, a 6 basis point improvement year-over-year, reflecting continued strong customer loyalty.
TTech EBITDA Growth 4% year-over-year growth, supported by operational excellence and cost efficiency.
Mobile Net Additions 168,000 total net additions, including 20,000 mobile phone net additions and record Q1 connected device net additions of 148,000.
Fixed Data Services Revenue Growth 3% year-over-year growth, driven by strong customer growth and higher ARPU.
TELUS Health Revenue Growth 12% year-over-year growth, driven by global expansion and product enhancements.
TELUS Health EBITDA Growth 30% year-over-year growth, supported by organic growth across various services.
Combined Annualized Synergies from LifeWorks Acquisition $376 million, including $306 million from cost efficiencies and $70 million from cross-selling strategies.
Revenue Growth in TELUS Agriculture and Consumer Goods 20% year-over-year increase, supported by enhanced profitability and notable margin improvements.
Free Cash Flow Growth 22% year-over-year growth, driven by lower CapEx and higher EBITDA.
Quarterly Free Cash Flow $48 million, higher by 22% year-over-year.
Capital Expenditures Decline $132 million or 19% decline year-over-year, primarily due to a planned slowdown in fiber and wireless network builds.
TTech Operating Revenues Growth 2% year-over-year growth, driven by higher mobile equipment revenue and fixed data services.
TTech Adjusted EBITDA Margin Increased by 30 basis points to 42.4%, demonstrating disciplined operational execution.
Net Income and Basic EPS More than doubled year-over-year primarily due to lower restructuring costs.
Average Term to Maturity of Long-term Debt Over 10 years with a weighted average cost of 4.4%.
Leverage Ratio Elevated at 3.9x, with a target to improve to 3x by 2027.
Proceeds from Monetization of Non-core Assets $66 million received during the quarter.
Hybrid Debt Securities Raised $1.6 billion raised, directed entirely to debt repayment.
Acquisition of Workplace Options Approximately $500 million, net of assumed debt of approximately $100 million.
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Operating Highlights
TELUS Health Revenue Growth: TELUS Health achieved revenue growth of 12% and EBITDA growth of 30%.
Workplace Options Acquisition: TELUS acquired Workplace Options for approximately $500 million, expanding its health and wellbeing solutions.
Global Lives Covered: TELUS Health now covers over 160 million lives globally, representing about 8% of the global market.
Customer Growth: TELUS reported 218,000 net customer additions, the strongest first quarter on record.
Churn Rate: Postpaid mobile phone churn improved to 0.84%, marking the 12th consecutive year below 1%.
Free Cash Flow Growth: Quarterly free cash flow increased by 22% to $48 million.
Dividend Increase: TELUS announced a 7% increase in dividends, targeting 3% to 8% annual growth from 2026 to 2028.
Debt Management: TELUS aims to achieve a net-debt-to-EBITDA ratio of approximately 3x by 2027.
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Risk or Challenges
Competitive Pressures: Ongoing competitive pressures have led to a 3.7% decline in mobile ARPU, impacting revenue despite subscriber growth.
Regulatory Issues: The company acknowledges potential risks related to regulatory changes that could affect operations and financial performance.
Supply Chain Challenges: There are concerns regarding supply chain disruptions that may impact the delivery of services and products.
Economic Factors: The dynamic operating environment poses risks related to economic fluctuations that could affect customer demand and overall financial performance.
Debt Management: Elevated leverage at 3.9x net debt to EBITDA presents a risk, with a commitment to reduce this ratio to 3x by 2027.
Acquisition Risks: The recent acquisition of Workplace Options for approximately $500 million carries integration and operational risks.
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Guidance & Outlook
Customer Growth: TELUS achieved a record 218,000 net customer additions in Q1 2025, driven by strong demand for integrated product offerings.
TELUS Health Growth: TELUS Health reported a 12% revenue growth and a 30% EBITDA growth, with a 7% increase in global lives covered to 76.5 million.
Acquisition of Workplace Options: TELUS acquired Workplace Options for approximately $500 million, expanding its health services to cover over 160 million lives globally.
Synergies from LifeWorks Acquisition: TELUS realized $376 million in annualized synergies from the LifeWorks acquisition, with a target of $427 million by the end of 2025.
Dividend Growth: TELUS announced a 7% dividend increase and targets 3% to 8% annual growth from 2026 to 2028.
Deleveraging Strategy: TELUS aims to achieve a net-debt-to-EBITDA ratio of approximately 3x by 2027.
Revenue Growth: TELUS targets TTech operating revenues growth of 2% to 4% and adjusted EBITDA growth of 3% to 5% for 2025.
Capital Expenditures: Consolidated capital expenditures are targeted to remain stable at $2.5 billion for 2025.
Free Cash Flow Guidance: Free cash flow guidance for 2025 is confirmed at $2.15 billion.
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Shareholder Return Plan
Dividend Increase: TELUS announced a 7% dividend increase, reflecting its commitment to delivering superior value to shareholders.
Dividend Growth Program: The company extended its multi-year dividend growth program, targeting 3% to 8% annual growth from 2026 to 2028.
Dividend Reinvestment Plan (DRIP): TELUS plans to eliminate the discount associated with its DRIP by the end of 2027.
Shareholder Value: TELUS is focused on maximizing shareholder value through operational growth and strategic investments.
Debt Repayment: Proceeds from a recent $1.6 billion hybrid debt securities offering will be directed entirely to debt repayment.
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Key Q&A
Q:What’s fueling the strong revenue and EBITDA growth in TELUS Health?
A:The growth is coming from smart tuck-in acquisitions, strong synergies from the LifeWorks acquisition, and investments in go-to-market capabilities. Cross-sell across B2B assets has ramped up significantly.
Q:Can you clarify the Workplace Options acquisition and TELUS's control?
A:The total purchase price is $500 million, with $285 million from a partner, and TELUS retains over 50% control.
Q:What are your thoughts on the wireless service revenue decline?
A:Management is not satisfied with the performance and plans to improve it by leveraging product intensity, bundling capabilities, and AI for revenue management.
Q:Can you discuss the free cash flow trend and dividend growth?
A:Management is confident in their ability to grow free cash flow and sustain dividend growth through strong EBITDA growth and lower CapEx intensity.
Q:What are the potential events that may allow for quicker removal of the DRIP?
A:Faster deleveraging than expected, asset divestitures, and strong performance in health and agriculture could allow for quicker removal of the DRIP.
Q:Can you provide examples of AI driving lower costs and new growth opportunities?
A:AI is helping reduce training time for agents, increasing proficiency, and improving customer satisfaction. It’s also being used for predictive models and proactive outreach.
Q:Is there an opportunity to unlock value in TELUS Health through a sub-IPO?
A:Management is open to monetization opportunities for TELUS Health and will look for the right timing to maximize value.
Q:What is the current competitive environment in the wireless market?
A:Management sees signs of discipline in the market and is focused on aligning offerings with value bundles.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the specific numbers related to free cash flow trends and the exact timeline for the removal of the DRIP. Additionally, there was a lack of clarity on the competitive environment in the wireless market, with no specific details provided about competitors' actions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Capital
DRIP discount
Executive Vice
Nazim
Officer
President Chief
President TELUS
Solutions
TELUS Digital
Vice President
Workplace Options
Zainul
acquisition
addition record
asset estate
community
copper monetization
core
country
debt ratio
dedication
dividend reinvestment
employee
equity
healthcare
interest
internet
proceeds debt
reinvestment plan
reporting
resiliency
security automation
solution
support
technology
TU Transcript
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TELUS shows strong strategic initiatives with EBITDA growth, stable CapEx, and plans for cash flow expansion. The Terrion partnership and AI revenue growth strategy are positive indicators. Despite slight ARPU challenges, TELUS is leveraging AI and bundling to counteract pressure. The Q&A reveals a proactive approach to market dynamics and financial management, including effective lease restructuring. Overall, the earnings call reflects a positive outlook, with strategic growth in health services and internet expansion, likely leading to a stock price increase.
TELUS Corporation (TU) Q2 2025 Earnings Call Transcript
Positive8-1
The earnings call highlights TELUS's robust customer growth, strategic acquisitions, and positive free cash flow guidance. Despite concerns about pricing and increased churn, the company is leveraging AI and strategic partnerships to address these issues. The 7% dividend increase and strategic deleveraging plans further bolster investor confidence. The Q&A session reveals no major negative surprises, and the optimistic guidance and strategic initiatives suggest a positive outlook for the stock price.
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The earnings call highlighted several negative factors: decreased revenue, increased net debt, negative free cash flow, and significant foreign exchange impacts. Despite a slight increase in net profit and share buybacks, the challenges of high raw material prices, inflation, and tariffs overshadowed positives. The Q&A session reinforced concerns about economic volatility and sales policy issues. The company's cautious outlook, lowered sales growth, and adjusted gross profit margin further indicate a negative sentiment, leading to an expected stock price decline in the range of -2% to -8%.
TELUS Corporation (TU) Q1 2025 Earnings Call Transcript
Positive5-9
TELUS's earnings call reflects strong performance, with record customer additions, significant revenue growth in health and agriculture, and improved EBITDA margins. The Q&A revealed management's focus on leveraging AI and synergies for growth, despite some concerns over wireless revenue. The commitment to debt reduction and strategic investments is positive. However, the lack of clarity on free cash flow and DRIP removal timelines tempers enthusiasm slightly. Overall, the company's solid financials and optimistic guidance should lead to a positive stock price movement.
TU Report
Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
