q2 2013 telus investor conference call august 8, 2013
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Q2 2013 TELUS investor conference call August 8, 2013. Darren Entwistle President & Chief Executive Officer Joe Natale EVP & Chief Commercial Officer John Gossling EVP & Chief Financial Officer. TELUS forward looking statement. - PowerPoint PPT PresentationTRANSCRIPT
Q2 2013TELUS investor conference call August 8, 2013
Darren EntwistlePresident & Chief Executive OfficerJoe NataleEVP & Chief Commercial OfficerJohn GosslingEVP & Chief Financial Officer
TELUS forward looking statement
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Today's presentation and answers to questions contain statements about financial and operating performance of TELUS and future events, including with respect to future normal course issuer bids, 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 that expressed in the forward-looking statements. Accordingly, our comments are subject to the disclaimer and qualified by the assumptions (including assumptions for 2013 annual guidance, CEO three-year goals to 2013 for EPS and free cash flow growth to 2013 excluding spectrum costs, semi-annual dividend increases to 2016, ability to sustain and complete multi-year share purchase programs to 2016), qualifications and risk factors referred to in the first quarter and second quarter Management’s discussion and analysis and in the 2012 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.
Agenda
CEO Introduction Q2 operational highlights Q2 financial results Questions and Answers
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Welcoming competition – advocating for a level playing field Reporting solid Q2 results – wireless and wireline Returning value to shareholders through NCIB, dividends and
efficiency
CEO introduction
4
TELUS demonstrating strong results and executing on shareholder friendly initiatives
Robust postpaid net additions
5
Postpaid net adds (000s)
Q2-12
92112
Q2-13
Solid postpaid net adds with postpaid base up 5.1% y/y
Q2-11
Wireless subscribers
7.7M total
1.1Mprepaid
86%
14%
6.6Mpostpaid
100
Strong smartphone adoption and ARPU growth
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Q2-11 Q2-12 Q2-13
5.9 6.3 6.6
Postpaid subscribers (millions)Smartphone % of postpaid
$60.29 $61.12$58.88
Voice ARPUData ARPU
Smartphone penetration up 12 points to 71% of postpaid basesupporting ARPU growth of 1.4% in Q2
Q2-11 Q2-12 Q2-13
19.25
39.63
23.32
36.97
26.44
34.6842%
59%71%
Industry leading wireless churn
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1.39%
Q2-12
1.40%
Q2-13
Blended Postpaid
1.00%
Q2-12
1.03%
Q2-13Q2-11Q2-11
1.67%
1.34%
Blended and postpaid churn low and stable
Industry leading lifetime revenue per susbcriber1
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Q2-12 Q2-13
$4,366$4,337
1 Lifetime revenue derived by dividing ARPU by blended churn rate
Q2-11
$3,526
Customer First focus generating leadinglifetime revenue per subscriber
Latest TELUS innovation in evolution of Clear and Simple customer approach
Features include unlimited nationwide talk and text, and ability to share data with your family or small business
Anticipated positive impact on subscriber economics Churn benefits from shared plans and consolidation of households More-for-more value proposition
Enhanced simplicity supports efficiency
New innovative SharePlus rate plans
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Next evolution of Clear and Simple supports leading subscriber economics
Healthy TV and Internet growth
10
743595
25%
TELUS TV (000s) High-speed Internet (000s)
1,3551,2776.1%
403
1,196
Continued healthy Internet and TV subscriber growthbalanced with focus on enhanced profitability
Q2-12 Q2-13Q2-11 Q2-12 Q2-13Q2-11
Q2 2013 wireless financial results
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($M, except margins) Q2 2013 Change
Revenue (external) 1,510 5.9%
EBITDA1 666 5.1%
EBITDA excl. restr. & other like costs 676 6.0%
EBITDA margin2 47.4% 0.1 pts
EBITDA margin excl. restr. & other like costs 48.1% 0.5 pts
Capital expenditures 171 (12)%
TELUS delivers another good quarter of wireless results despite increased competitive intensity
1 EBITDA does not have any standardized meaning prescribed by IFRS-IASB. For definition and explanation, see Section 11.1 in the 2013 second quarter Management’s discussion and analysis (MD&A).2 EBITDA as percentage of total network revenue
Wireless data revenue ($M)
Q2-12
512
Q2-13
601
402
Q2-11
Strong Q2 data revenue growth of 17% year-over-yearData now 43% of wireless network revenue, up 4 points
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Q2 2013 wireline financial results
($M, except margins) Q2 2013 Change
Revenue (external) 1,316 6.3%
EBITDA 332 (1.4)%
Normalized EBITDA1 361 7.3%
EBITDA margin2 24.5% (1.8) pts
Normalized EBITDA margin 26.6% 0.3 pts
Capital expenditures 340 (3.9)%
Strong revenue growth driven by DataNormalized EBITDA up 7.3%
131. Normalized EBITDA does not have any standardized meaning prescribed by IFRS-IASB. This term is defined in this presentation as EBITDA
excluding restructuring and other like costs, and the gain net of equity losses related to TELUS Garden residential real estate partnership. 2. EBITDA as percentage of total revenue.
Wireline data revenue ($M)
Q2-12
689
Q2-13
792
635
Q2-11
Strong data revenue growth of 15% driven by TV and InternetData revenue 60% of external revenue, up 4 points
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Q2 2013 consolidated financial results
($M, except EPS) Q2 2013 Change
Revenue (external) 2,826 6.1%
EBITDA 998 2.9%
Normalized EBITDA1 1,037 6.5%
EPS (basic) 0.44 (4.4)%
Adjusted EPS2 0.54 12.5%
Capex 511 (6.6)%
Simple cash flow (EBITDA less capex) 487 15%
Strong growth in revenue, earnings and simple cash flow
151. Normalized EBITDA does not have any standardized meaning prescribed by IFRS-IASB. This term is defined in this presentation as EBITDA
excluding restructuring and other like costs, and the gain net of equity losses related to TELUS Garden residential real estate partnership. 2. Adjusted EPS does not have any standardized meaning prescribed by IFRS-IASB. See appendix for definition.
Analysis of Adjusted EPS
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($ per share) Q2 2012 Q2 2013 ChangeBasic EPS 0.46 0.44 (4.4)%
TELUS Garden1 (0.01) -
Restructuring and other like costs 0.01 0.04
Long-term debt prepayment premium - 0.03
Income tax-related adjustments 0.02 0.03
Adjusted EPS 0.48 0.54 12.5%
Adjusted EPS up 12.5% y/y
1 After-tax gain net of equity losses related to TELUS Garden residential real estate partnership.
$0.48
$0.54 $0.07 $0.01 ($0.01) ($0.01)
Adjusted EPS continuity analysis
Adjusted EPS growth driven by strong EBITDA growth
171 Normalized EBITDA excludes restructuring and other like costs and after-tax gain net of equity losses related to TELUS
Garden residential real estate partnership.2 Normalized financing excludes long-term debt prepayment premium.
Q2-12Adjusted
NormalizedEBITDA1
Depr &Amort
Higher Blended Statutory Tax
Rates
Q2-13Adjusted
Normalized Financing
costs2
investor relations1-800-667-4871telus.com/[email protected]
2012 2013 Q2 Q2
EBITDA 970 998
Capital expenditures (548) (511)
Simple Cash Flow (EBITDA less Capital expenditures) 422 487
Net employee defined benefit plans expense (recovery) 26 28
Employer contributions to employee defined benefit plans (15) (130)
Interest expense paid, net (106) (128)
Income taxes received (paid), net (31) (82)
Share-based compensation 9 13
Restructuring payments net of cash payments (13) 4
Deduct gain net of equity losses related to TELUS Garden (8) -
Free Cash Flow 284 192
Purchase of shares for cancellation - (238)
Dividends (189) (209)
Cash payments for acquisitions and related investments (11) (3)
Real Estate joint venture (5) (6)
Working capital and other (19) (8)
Funds available for debt redemption 59 (272)
Net issuance (repayment) of debt (55) 522
Increase (decrease) in cash 4 250
Appendix – Q2 2013 free cash flow comparison
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) Gain net of equity losses related to TELUS Garden residential real estate partnership; 2) Restructuring and other like costs; 3) Long-term debt pre-payment premium; and 4) Income tax-related adjustments. For further analysis of the aforementioned items see Section 1.3 in the 2013 second quarter Management’s discussion and analysis.
Glossary
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