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TELUS Corporation (TU - Free Report) reported mixed third-quarter 2021 results, wherein the bottom line matched the Zacks Consensus Estimate but the top line missed the same. However, its earnings and revenues improved on a year-over-year basis. A growing subscriber base, accelerated broadband network investments, expanded service offerings, and operating efficiencies on the back of positive cash flow drove TELUS’ quarterly results. In response to the results, shares of Canada-based telco rose 2.3% to close the trading session at $23.25 on Nov 5.
Net Income
Net income attributable to common shares in the September quarter increased 12.4% year over year to C$345 million or C$0.25 per share. The year-over-year improvement was driven by higher EBITDA and operating income. However, it was partly offset by increased depreciation and amortization charges.
Quarterly adjusted net income was C$392 million or C$0.29 per share ($308.4 million or 23 cents per share) compared with C$356 million or C$0.28 per share in the prior-year quarter. The bottom line matched the Zacks Consensus Estimate.
TELUS Corporation Price, Consensus and EPS Surprise
Encouraged by its business resiliency post the COVID-19 mayhem, quarterly total operating revenues jumped 6.8% year over year to C$4,251 million ($3,376 million). The growth reflects higher demand for premium bundled offerings that resulted in total customer net additions of 320,000, an all-time quarterly record for the company. Higher Internet and third-wave data service margins along with an increased contribution from Digitally-led customer experiences – TELUS International segment and growth in mobile equipment margins acted as major tailwinds as well.
A robust asset mix focused on technology-oriented verticals with best-in-class digital capabilities and superior service offerings across wireless and fiber broadband networks acted as key driving factors. Also, accelerated broadband build, augmented fiber footprint, copper-to-fiber migrations supported by disciplined cost controlling measures continue to spur its operating momentum and long-term profitability. The top line, however, missed the consensus estimate of $3,457 million.
Quarterly Segment Results
TELUS reports its revenues in two segments — TELUS technology solutions (TTech) and Digitally-led customer experiences – TELUS International (DLCX).
In the third quarter, TTech revenues improved 4.1% year over year to C$3,669 million, primarily driven by higher mobile network revenues followed by solid performance across fixed data services and health services. However, it was moderately offset by a decline in fixed voice services revenues and soft mobile and fixed equipment revenues. Mobile network revenues rose 3.7% to C$1,588 million due to increasing mobile phone ARPU supported by a 6.5% growth in the mobile phones and connected devices subscriber base.
Fixed voice services declined 6.3% to C$208 million from C$222 million in the year-ago period. This reflects the ongoing decline in legacy voice revenues from technological substitution accompanied with greater use of long-distance plans and price plan changes. Health services increased 12.1% to C$130 million, driven by the positive impact of business acquisitions and growth in health benefits management services.
The segment’s adjusted EBITDA of C$1,410 million increased 7.3% over the same period a year ago, led by higher revenues from mobile, and fixed products, and services along with lower bad debt expense. Adjusted EBITDA margin came in at 38.4% compared with 37.2% in the year-ago quarter. Capital expenditures increased 34.7% to C$962 million.
Revenues from TELUS International (DLCX) soared 23.2% year over year to C$700 million. Operating revenues (arising from contracts with customers) soared 27.3% to C$587 million, primarily driven by business acquisitions within tech and games sectors along with organic growth in customers.
The segment’s adjusted EBITDA of C$149 million rose 4.9% from the year-ago quarter’s figure. Adjusted EBITDA margin was 21.1% compared with 24.8% in the prior-year quarter. Capital expenditures were up 7.4% to C$29 million.
TELUS PureFibre network covered more than 2.6 million premises at the end of third-quarter 2021, up from more than 2.4 million premises in the year-ago quarter.
Other Details
EBITDA was C$1,496 million, up 7.6% year over year, driven by higher Internet and third wave data service margins, higher fixed data service margins from accretive subscriber base, growth in mobile equipment margins, lower bad debt expense, improved cost efficiency programs, and increased contribution from TELUS International segment. The positive impact from business acquisitions was a driving factor as well. Adjusted EBITDA increased 7.1% year over year to C$1,559 million. Capital expenditures soared 33.7% to C$991 million on the back of increased 5G investments, fast-tracked investments in broadband build and digitization to increase system capacity and higher purchase of equipment to support subscriber growth.
Cash Flow & Liquidity
In the first nine months of 2021, TELUS generated C$3,511 million of cash from operating activities compared with C$3,541 million in the year-ago period. Free cash flow for the same period plunged 39.7% to C$734 million. As of Sep 30, 2021, the company had C$1,864 million ($1,480.2 million) of net cash and temporary investments with C$18,250 million ($14,492.4 million) of long-term debt.
Moving Ahead
For 2021, TELUS expects to continue generating positive financial outcomes and strong customer growth. Backed by a robust capital structure, the company is confident of the long-term sustainability of its industry-leading dividend growth program. Solid EBITDA and value creation across health and agriculture businesses will support future dividend growth. Further, TELUS’ investment in 3500 MHz wireless spectrum enables it to deliver transformational, next-gen 5G connectivity.
This, in turn, will help in enhancing its competitive positioning to drive strong profitable customer growth supported by consistent strategic execution, a healthy balance sheet, strong cash flow outlook, and customer service leadership position. It also remains committed to supporting its $1.5 billion accelerated broadband expansion program through 2022 on the back of an augmented Canadian market footprint.
Image: Bigstock
TELUS (TU) Q3 Earnings Meet Estimates, Revenues Rise Y/Y
TELUS Corporation (TU - Free Report) reported mixed third-quarter 2021 results, wherein the bottom line matched the Zacks Consensus Estimate but the top line missed the same. However, its earnings and revenues improved on a year-over-year basis. A growing subscriber base, accelerated broadband network investments, expanded service offerings, and operating efficiencies on the back of positive cash flow drove TELUS’ quarterly results. In response to the results, shares of Canada-based telco rose 2.3% to close the trading session at $23.25 on Nov 5.
Net Income
Net income attributable to common shares in the September quarter increased 12.4% year over year to C$345 million or C$0.25 per share. The year-over-year improvement was driven by higher EBITDA and operating income. However, it was partly offset by increased depreciation and amortization charges.
Quarterly adjusted net income was C$392 million or C$0.29 per share ($308.4 million or 23 cents per share) compared with C$356 million or C$0.28 per share in the prior-year quarter. The bottom line matched the Zacks Consensus Estimate.
TELUS Corporation Price, Consensus and EPS Surprise
TELUS Corporation price-consensus-eps-surprise-chart | TELUS Corporation Quote
Revenues
Encouraged by its business resiliency post the COVID-19 mayhem, quarterly total operating revenues jumped 6.8% year over year to C$4,251 million ($3,376 million). The growth reflects higher demand for premium bundled offerings that resulted in total customer net additions of 320,000, an all-time quarterly record for the company. Higher Internet and third-wave data service margins along with an increased contribution from Digitally-led customer experiences – TELUS International segment and growth in mobile equipment margins acted as major tailwinds as well.
A robust asset mix focused on technology-oriented verticals with best-in-class digital capabilities and superior service offerings across wireless and fiber broadband networks acted as key driving factors. Also, accelerated broadband build, augmented fiber footprint, copper-to-fiber migrations supported by disciplined cost controlling measures continue to spur its operating momentum and long-term profitability. The top line, however, missed the consensus estimate of $3,457 million.
Quarterly Segment Results
TELUS reports its revenues in two segments — TELUS technology solutions (TTech) and Digitally-led customer experiences – TELUS International (DLCX).
In the third quarter, TTech revenues improved 4.1% year over year to C$3,669 million, primarily driven by higher mobile network revenues followed by solid performance across fixed data services and health services. However, it was moderately offset by a decline in fixed voice services revenues and soft mobile and fixed equipment revenues. Mobile network revenues rose 3.7% to C$1,588 million due to increasing mobile phone ARPU supported by a 6.5% growth in the mobile phones and connected devices subscriber base.
Fixed voice services declined 6.3% to C$208 million from C$222 million in the year-ago period. This reflects the ongoing decline in legacy voice revenues from technological substitution accompanied with greater use of long-distance plans and price plan changes. Health services increased 12.1% to C$130 million, driven by the positive impact of business acquisitions and growth in health benefits management services.
The segment’s adjusted EBITDA of C$1,410 million increased 7.3% over the same period a year ago, led by higher revenues from mobile, and fixed products, and services along with lower bad debt expense. Adjusted EBITDA margin came in at 38.4% compared with 37.2% in the year-ago quarter. Capital expenditures increased 34.7% to C$962 million.
Revenues from TELUS International (DLCX) soared 23.2% year over year to C$700 million. Operating revenues (arising from contracts with customers) soared 27.3% to C$587 million, primarily driven by business acquisitions within tech and games sectors along with organic growth in customers.
The segment’s adjusted EBITDA of C$149 million rose 4.9% from the year-ago quarter’s figure. Adjusted EBITDA margin was 21.1% compared with 24.8% in the prior-year quarter. Capital expenditures were up 7.4% to C$29 million.
TELUS PureFibre network covered more than 2.6 million premises at the end of third-quarter 2021, up from more than 2.4 million premises in the year-ago quarter.
Other Details
EBITDA was C$1,496 million, up 7.6% year over year, driven by higher Internet and third wave data service margins, higher fixed data service margins from accretive subscriber base, growth in mobile equipment margins, lower bad debt expense, improved cost efficiency programs, and increased contribution from TELUS International segment. The positive impact from business acquisitions was a driving factor as well. Adjusted EBITDA increased 7.1% year over year to C$1,559 million. Capital expenditures soared 33.7% to C$991 million on the back of increased 5G investments, fast-tracked investments in broadband build and digitization to increase system capacity and higher purchase of equipment to support subscriber growth.
Cash Flow & Liquidity
In the first nine months of 2021, TELUS generated C$3,511 million of cash from operating activities compared with C$3,541 million in the year-ago period. Free cash flow for the same period plunged 39.7% to C$734 million. As of Sep 30, 2021, the company had C$1,864 million ($1,480.2 million) of net cash and temporary investments with C$18,250 million ($14,492.4 million) of long-term debt.
Moving Ahead
For 2021, TELUS expects to continue generating positive financial outcomes and strong customer growth. Backed by a robust capital structure, the company is confident of the long-term sustainability of its industry-leading dividend growth program. Solid EBITDA and value creation across health and agriculture businesses will support future dividend growth. Further, TELUS’ investment in 3500 MHz wireless spectrum enables it to deliver transformational, next-gen 5G connectivity.
This, in turn, will help in enhancing its competitive positioning to drive strong profitable customer growth supported by consistent strategic execution, a healthy balance sheet, strong cash flow outlook, and customer service leadership position. It also remains committed to supporting its $1.5 billion accelerated broadband expansion program through 2022 on the back of an augmented Canadian market footprint.
Zacks Rank & Stocks to Consider
TELUS currently has a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader industry are National Fuel Gas Company (NFG - Free Report) , UGI Corporation (UGI - Free Report) , and Northwest Natural Holding Company (NWN - Free Report) . While National Fuel sports a Zacks Rank #1 (Strong Buy), UGI and Northwest Natural carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
National Fuel delivered a trailing four-quarter earnings surprise of 10.7%, on average.
UGI delivered a trailing four-quarter earnings surprise of 24.4%, on average.
Northwest Natural delivered a trailing four-quarter earnings surprise of 24.7%, on average.
Conversion rate used:
C$1 = $0.794104 (period average from Jul 1, 2021 to Sep 30, 2021)
C$1 = $0.786678 (as of Sep 30, 2021)