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TELUS reports operational and financial results for third quarter 2020

November 6, 2020 6:45 AM

Industry-leading customer growth of 277,000 net additions, representing TELUS’ highest quarter on record for combined wireless and wireline loading, driven by best-in-class customer experience over a world-leading network, powered by a leading team culture, alongside superior product and service offerings

Total wireless net additions of 198,000, including 111,000 high-quality mobile phone net additions, flat to the prior year, and 87,000 mobile connected devices, up 5,000; low blended mobile phone churn below 1 per cent for the third consecutive quarter

Industry best wireline net additions of 79,000, inclusive of 50,000 internet net additions representing the highest internet loading quarter since 2002

Consolidated revenue growth of 7.7 per cent and EBITDA decline of 0.6 per cent, reflective of consistent execution and resiliency in a challenging operating environment; year-to-date revenue and EBITDA growth of 5.6 per cent and 0.3 per cent respectively

Quarterly dividend increased to $0.3112 per share, representing an approximate 7 per cent increase as TELUS resumes its leading multi-year dividend growth program, supported by a robust capital structure, strong liquidity position, and healthy cash flow generation

Building on our strong and consistent operating and financial momentum, TELUS expects to achieve 2020 free cash flow at the lower end of our original target range of $1.4 to $1.7 billion

VANCOUVER, British Columbia, Nov. 06, 2020 (GLOBE NEWSWIRE) -- TELUS Corporation today released its unaudited results for the third quarter of 2020. For the quarter, consolidated operating revenue of $4.0 billion increased by 7.7 per cent over the same period a year ago. Earnings before interest, income taxes, depreciation and amortization (EBITDA) decreased by 3.1 per cent to $1.4 billion while Adjusted EBITDA was down 0.6 per cent. This decline reflects multiple impacts from the COVID-19 pandemic, declines in wireline legacy voice and legacy data services and higher employee benefits and other costs including support for business acquisitions. This was partly offset by: growth in wireline data service margins resulting from business acquisitions; expanded services and subscriber base growth; increased organic and inorganic EBITDA contribution from TELUS International (TI) business growth; and enhanced cost efficiency programs.

“TELUS once again achieved strong operational and financial results in the third quarter, characterized by excellent execution, resulting in industry-leading and record high customer growth of over 277,000 net new additions,” said Darren Entwistle, President and CEO. “This accomplishment, realized against the backdrop of an unprecedented operating environment as a result of the global pandemic, reflects the effectiveness of our world-leading performance culture, underpinned by our highly engaged team. TELUS’ recent recognition as the highest ranking Canadian organization on Forbes’ World’s Best Employers ranking is a testament to the skill, passion and grit of our high-performing team around the world.”

“Leveraging our best-in-class customer service and strong digital capabilities, we continued to achieve robust customer growth in the quarter, including 111,000 high-quality mobile phone net additions and 79,000 wireline customer additions, driven by 50,000 internet, 19,000 TV and 18,000 security net additions, in addition to the lowest residential voice net losses since 2004. This was supported by strong and enhanced customer loyalty across our key product lines, including blended mobile phone and internet churn both below one per cent, and TV churn of one per cent, backed by our world-leading wireless and fibre broadband networks.”

Darren added, “TELUS’ broadband networks continue to perform exceedingly well through the COVID-19 health crisis, and the efficacy of our ongoing technology investments is reflected in numerous awards from leading independent network authorities. Notably, UK-based Opensignal ranked TELUS as having the fastest network in the world in their Global Mobile Network Experience Awards, stating that TELUS’ 4G LTE network speeds surpass not only our Canadian competitors, but they also exceed the 5G network speeds of the top wireless carriers in the United States. This award builds on our multiple third-party acknowledgements for wireless network excellence from U.S.-based PCMag and Ookla, as well as Canada-based Tutela, all received every year for three or more years. Our PureFibre network is receiving similar recognition, with PCMag ranking TELUS as the fastest internet service provider (ISP) in Canada, further reinforcing TELUS’ leadership as Canada’s Best Gaming ISP for 2020, amongst major providers, as announced by PCMag earlier this year. As we continue to rollout our globally leading 5G and fibre networks in the months and years to come, Canadians will have access to exceptional speed, quality and coverage that will catalyse dramatic innovations in health, educational, environmental and socio-economic outcomes for the benefit of Canadians. Importantly, the growing ubiquity of our broadband technology will amplify our entrepreneurial spirit; unleash human productivity; and drive the economic growth and diversity that is key to Canada’s fiscal recovery.”

“Today, we are announcing the reinstatement of our multi-year dividend growth program, now in its tenth year and targeting annual growth between seven and 10 per cent through 2022. The 7 per cent increase reflects our confidence in the outlook for our business, the sustainability of strong results, as well as our robust free cash flow generation and expected future free cash flow expansion. Today’s increase is the 19th since 2011, and reinforces the strength of our financial and operational performance, which enable us to successfully execute on our industry-leading shareholder-friendly program in combination with a strong balance sheet. TELUS has now returned nearly $19 billion to shareholders, including $13.6 billion in dividends, representing approximately $15 per share since 2004.”

“Our TELUS team continues to manage the impacts of the pandemic, while taking care of our team members, customers and communities,” Darren expressed. “In this regard, we expanded our Internet for Good low cost, high-speed internet program, which is already accessible to economically challenged families and K-12 students, to also support Canadians living with disabilities. We have now enabled over 68,000 low-income family members and people with disabilities in B.C., Alberta and Quebec. Similarly, we extended our Mobility for Good program to all provinces across Canada, and now provide free smartphones and data plans to more than 20,000 youth who are making the difficult transition out of foster care. Moreover, we have distributed over 350,000 TELUS masks to help Canadians stay safe during the pandemic, and fundraised almost $400,000 this year for the TELUS Friendly Future Foundation to support COVID-19 health-related initiatives. Indeed, our TELUS teams’ passionate efforts to protect and support our communities and our customers was recognized by the Wall Street Journal, which ranked TELUS 29th in their 100 Most Sustainably Managed Companies in the World report, and 15th, globally, in the subcategory of social capital. TELUS is the only telecommunications company and one of only three Canadian companies named to this global list, further exemplifying our leadership in social capitalism and demonstrating that Canadians can count on the TELUS team, even during the most trying of times.”

Doug French, Executive Vice-president and Chief Financial Officer said, “In the third quarter, TELUS once again delivered a strong set of operational and financial results, during what has been an unprecedented time for all of us. Our third quarter results showcase the efficacy of our strategic focus on profitable customer growth, our strong and differentiated asset mix targeting high-growth verticals, and our proactive focus on operational effectiveness and margin accretive initiatives.”

“We have remained focused on maintaining a strong balance sheet to ensure financial flexibility amid an uncertain global economic environment,” Doug added. “In October, we leveraged attractive credit market conditions to successfully complete a $500 million debt offering at an attractive rate of 2.05 per cent, the lowest coupon on record for a Canadian BBB 10-year issuance. Our weighted average interest rate on long-term debt now sits at 3.85 per cent, down from 3.98 per cent one year ago, along with an average term to maturity of nearly 13 years. This strong financial position allows us to continue to pursue thoughtful and strategic growth initiatives, including our acquisition of Lionbridge AI announced today, as well as AFS Technologies, which further support TELUS’ long-term growth trajectory.”

“As we head into the final quarter of the year, and into 2021, we are well-positioned to build on the operating momentum established this year, taking the valuable learnings from the pandemic to enhance our go-to-market strategy and support our efforts to maintain TELUS’ track record of consistently delivering strong results quarter-in and quarter-out. Leveraging our highly differentiated and superior asset mix, we continue to focus on generating sustainable free cash flow growth, which will in turn support the consistent return of capital through our long-standing and transparent dividend growth program. Despite the challenging environment ahead, we are striving to deliver flat EBITDA growth for the full year 2020, along with strong free cash flow at the lower-end of our original target range,” Doug concluded.

In the quarter, we added 285,000 new wireless, internet, TV and security customers, up 27,000 over the same quarter a year ago. Residential voice losses of 8,000 improved by 4,000 over the same period a year ago, resulting in total net additions of 277,000. The net additions included 111,000 mobile phones, 87,000 mobile connected devices, as well as 50,000 internet, 19,000 TV and 18,000 security customers. Our total wireless subscriber base of 10.6 million is up 4.9 per cent over the last twelve months, reflecting a 2.3 per cent increase in our mobile phones subscriber base to 8.9 million and a 20.3 per cent increase to our mobile connected devices subscriber base to over 1.7 million. Additionally, our internet connections are up 7.2 per cent over the last twelve months, nearing 2.1 million customers, our TV subscriber base of 1.2 million is higher by 4.4 per cent and our security customer base expanded to 684,000.

Free cash flow of $161 million decreased by $159 million over the same period a year ago, largely from increased income tax payments as several government jurisdictions permitted the deferral of income tax instalments from the first and second quarter of 2020 into the third quarter of 2020 due to the pandemic, in addition to lower EBITDA attributed to pandemic impacts. Excluding cash taxes, free cash flow of $359 million decreased by $58 million or 14 per cent.

Consolidated capital expenditures of $741 million decreased by 0.9 per cent over the same period a year ago due to the timing of our fibre build activities and efficiencies in our 4G network expenditures. These decreases were partially offset by increased investments in our 5G network, in addition to investments to increase system capacity and reliability during the pandemic. With our ongoing investments, we are advancing wireless speeds and coverage that enabled our 5G network launch, continuing to connect additional homes and businesses directly to our fibre-optic technology, and supporting systems reliability and operational efficiency and effectiveness efforts. These investments also support our internet, TV and security subscriber growth, address our customers’ demand for faster internet speeds, and extend the reach and functionality of our business and healthcare solutions.

At the end of the quarter, our TELUS PureFibre network covered approximately 2.41 million premises, or approximately 78 per cent of our high-speed broadband footprint, reflecting an increase of approximately 270,000 fibre premises over the last twelve months. Furthermore, at September 30, 2020, our 5G network covered over 7.3 million Canadians representing almost 20 per cent of the Canadian population. At the end of the third quarter, our 5G network was available in 24 cities and we expect to increase our coverage to a total of 50 communities by the end of 2020.

For the quarter, net income of $321 million decreased by 27 per cent over the same period last year and Basic earnings per share (EPS) of $0.24 decreased by 33 per cent. These declines reflect multiple impacts from the COVID-19 pandemic, increased depreciation and amortization from capital assets growth, including acquisitions, declines in wireline legacy voice and legacy data services, and higher non-labour-related restructuring and other costs.

When excluding the effects of restructuring and other costs, income tax-related adjustments, lease-up period and other equity losses related to real estate joint ventures, and a long-term debt prepayment premium in the third quarter of 2019, adjusted net income of $356 million decreased by 22 per cent compared to the prior year, while adjusted basic EPS of $0.28 was down 28 per cent.

COVID-19 updateOn September 23, 2020, approximately 8 months after the first case of COVID-19 was reported in Canada, the Prime Minister declared that a second wave of COVID-19 was already underway in most of Canada. Since the beginning of the pandemic, we have focused relentlessly on keeping Canadians connected and on the health, safety and well-being of our team members, our customers and our communities. Our Executive Team continues to be guided by advice from our Emergency Management Operating Committee (EMOC) and the TELUS Medical Advisory Council (MAC).

The pandemic has impacted our operations and financial condition and we expect many of these trends to continue into the fourth quarter of 2020 and into 2021. As we navigate through the pandemic, we continue to take various steps to mitigate the negative effects, including pursuing cost savings initiatives and margin accretion opportunities.

Late in the second quarter of 2020, we commenced re-opening our conventional retail stores that were previously closed as a result of the pandemic and by July 31, 2020, a majority had been re-opened. While the health emergency has had a negative impact on customer loading and overall store traffic, our wireless gross additions have been resilient and only marginally lower over prior year periods as we successfully leveraged our digital assets to support customer growth and retention activities. Coinciding with wireless industry retail stores having re-opened by the third quarter of 2020, the typical third quarter seasonal promotional intensity was exacerbated by pent-up demand coming out of retail closures and lockdowns from the second quarter of 2020. This has led to industry churn starting to return to pre-pandemic levels. We have experienced decreases in wireless roaming revenues with the closure of borders and corresponding decline in customer travel. We expect declines in roaming revenue to persist throughout the health crisis as the closure of borders, including those of Canada and the U.S., and decreases in customer travel continue.

With respect to small and medium-sized business (SMB), we expect lower contribution from our business customers as we anticipate that many SMB enterprises will be forced to close and/or reduce the scope of their operations.

In our health business, we have seen an improvement as our health clinics have re-opened, but due to restrictions in place to protect patients during the pandemic, the clinics are still unable to offer their full suite of core services. Additionally, in our health business, increased demand for virtual care solutions carried into the third quarter of 2020 and we are seeing increased demand for our Home Health Monitoring (HHM) solutions within certain provinces, as well as increased demand for our LivingWell Companion™ by TELUS Health, enabling Canadians to access 24/7 emergency support.

TI was impacted by temporary operating restrictions of certain centres, however TI’s ability to quickly enable team members to work and support customers from home and in other modified work locations has helped to mitigate these impacts. Certain TI clients also continue to experience challenges, in particular those clients in travel and hospitality-related businesses, however, the decline in business from these clients was offset by increases in business from clients in the games, media and ecommerce food delivery industries. While some delivery centres have begun to welcome back more team members, TI is planning for the majority of its team to make a gradual return to its centres provided it has been deemed safe to do so by local government and health authorities, in addition to guidance from the TELUS MAC and its own best practices.

In the third quarter of 2020, cash receipts from customers have been steadily recovering from earlier declines experienced in the second quarter of 2020. We believe government assistance programs designed to support individuals and businesses, as well as the resumption of collections activities, were key contributing factors to the improvement in cash receipts in the third quarter.

In addition to the financial impacts described above, we continued to take various steps to support our community during these challenging times. As the global leader in social capitalism, TELUS made a $20 million commitment to help build public healthcare capacity and support vulnerable communities through the COVID-19 pandemic and beyond. Below are select highlights of the steps we are taking through this committment:

For further discussion on the effect of the COVID-19 pandemic on the environment in which we operate, refer to section 1.2 in our third quarter 2020 Management’s discussion and analysis.

Consolidated Financial Highlights

C$ millions, except footnotes and unless noted otherwiseThree months ended September 30Per cent
(unaudited)20202019change
Operating revenues3,981 3,697 7.7
Operating expenses before depreciation and amortization2,591 2,26314.5
EBITDA(1)1,390 1,434(3.1)
Adjusted EBITDA(1)(2)1,456 1,463(0.6)
Net income 321 440(27.0)
Adjusted net income(1) 356 458(22.3)
Net income attributable to common shares 307 433(29.1)
Basic EPS(3) ($) 0.24 0.36(33.3)
Adjusted basic EPS(1)(3) ($) 0.28 0.39(28.2)
Capital expenditures(4) 741 748(0.9)
Free cash flow(1) 161 320(49.7)
Total subscriber connections(5) (thousands)15,71914,500 8.4

(1) EBITDA, Adjusted EBITDA, Adjusted net income, Adjusted basic EPS and Free cash flow are non-GAAP measures and do not have any standardized meaning prescribed by IFRS-IASB. For further definitions and explanations of these measures, see ‘Non-GAAP and other financial measures’ in this news release.
(2) Adjusted EBITDA for the third quarters of 2020 and 2019 excludes restructuring and other costs of $58 million and $29 million respectively, and lease-up period and other equity losses related to real estate joint ventures of $8 million in the third quarter of 2020.
(3) On March 17, 2020, TELUS shareholders received one additional share for each share owned on the record date of March 13, 2020. All information pertaining to shares outstanding and per-share amounts in this news release for periods before March 17, 2020, reflects retrospective treatment of the two-for-one share split.
(4) 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 interim consolidated financial statements. Refer to Note 31 of the interim consolidated financial statements for further information.
(5) The sum of active mobile phone subscribers, mobile 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. December 31, 2019 security subscriber connections have been increased to include approximately 490,000 subscribers related to our acquisition of ADT Security Services Canada, Inc. (ADT Canada) (acquired on November 5, 2019). During the third quarter of 2020, we adjusted cumulative subscriber connections to add approximately 31,000 security subscribers as a result of a business acquisition.

Third Quarter 2020 Operating Highlights

As noted in Section 1.2 of our third quarter 2020 Management’s discussion and analysis, the COVID-19 pandemic, which emerged in the first quarter of 2020, continued to have a pervasive global impact throughout the third quarter of 2020. The nature of the pandemic and the uncertainty of its magnitude, length and the time to recovery are not currently able to be estimated. Therefore, results described below may not be indicative of future trends, as the COVID-19 pandemic prevents us and our customers from operating in the normal course of business in certain areas while we continue to adjust our mode of operations to continue delivering on our customers first priorities and social purpose.

TELUS wireless

TELUS wireline

Dividend Declaration The TELUS Board of Directors has declared a quarterly dividend of $0.3112 per share on the issued and outstanding Common Shares of the Company payable on January 4, 2021 to holders of record at the close of business on December 11, 2020. This fourth quarter dividend represents an increase of 6.8 per cent from the $0.29125 quarterly dividend paid on January 2, 2020 and is the nineteenth dividend increase since TELUS announced its original multi-year dividend growth program in May 2011.

TELUS announces agreement to acquire Lionbridge AI through TELUS International (TI)On November 6, 2020, TELUS announced that it has agreed to acquire Lionbridge AI, a market leading global provider of crowd-based training data and annotation platform solutions used in the development of AI algorithms to power machine learning, for approximately $1.2 billion (approximately US$935 million), through TI. As a division of Lionbridge Technologies, Inc. - a privately-held company that is part of the portfolio of H.I.G. Capital companies with more than 20 years of industry experience - Lionbridge AI is one of only two globally-scaled, managed training data and data annotation services providers in the world. Data annotation is the essential process of labeling data to make it usable for AI systems, and Lionbridge AI annotates data in text, images, videos, and audio in more than 300 languages and dialects for some of the world’s largest technology companies in social media, search, retail and mobile.

TELUS acquires AFS TechnologiesOn August 19, 2020, we acquired 100 per cent of AFS Technologies Inc., a business complimentary to our existing technology-related lines of business providing trade promotion and supply chain software solutions to consumer packaged goods companies, food distributors and food manufacturers for approximately $315 million. The investment was made with a view to growing our existing smart data solutions business.

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:

Access to Quarterly results informationInterested investors, the media and others may review this quarterly earnings news release, management’s discussion and analysis, quarterly results slides, audio and transcript of the investor webcast call, supplementary financial information at telus.com/investors.

TELUS’ third quarter 2020 conference call is scheduled for Friday, November 6, 2020 at 12:00pm ET (9:00am PT) and will feature a presentation followed by a question and answer period with investment analysts. Interested parties can access the webcast at telus.com/investors. An audio recording will be available approximately 60 minutes after the call until December 6, 2020 at 1-855-201-2300. Please use reference number 1252440# and access code 77377#. An archive of the webcast will also be available at telus.com/investors and a transcript will be posted on the website within a few business days.

Caution regarding forward-looking statements

This news release contains forward-looking statements about expected events and the financial and operating performance of TELUS Corporation. The terms TELUS, we, us and our refer to TELUS Corporation and, where the context of the narrative permits or requires, its subsidiaries.

Forward-looking statements include any statements that do not refer to historical facts. They include, but are not limited to, statements relating to our objectives and our strategies to achieve those objectives, our targets, outlook, updates, our plans and expectations regarding the impact of the COVID-19 pandemic and responses to it, our current expectations regarding out ability to achieve flat EBITDA growth for 2020 as well as annual free cash flow at the lower end of our original target range and and our multi-year dividend growth program. Forward-looking statements are typically identified by the words: assumption, goal, guidance, objective, outlook, strategy, target and other similar expressions, or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, predict, seek, should, strive and will. These statements are made pursuant to the “safe harbour” provisions of applicable securities laws in Canada and the United States Private Securities Litigation Reform Act of 1995.

By their nature, forward-looking statements are subject to inherent risks and uncertainties and are based on assumptions, including assumptions about future economic conditions and courses of action. These assumptions may ultimately prove to have been inaccurate and, as a result, our actual results or events may differ materially from expectations expressed in or implied by the forward-looking statements.

Due to the wide range of possible outcomes of the COVID-19 pandemic and the uncertainty with regard to the length of the pandemic and measures in place to limit its spread and transmission, the impact on our business cannot be accurately forecasted as of the date of this news release.

During the third quarter of 2020, the Canadian Prime Minister announced that a second wave of COVID-19 was already underway in most of Canada as described in Section 1.2 of the third quarter 2020 MD&A. Given the uncertain magnitude, duration and potential outcomes of this second wave, we cannot accurately provide an update on our outlook and 2020 guidance, which we withdrew in May 2020. Forward-looking statements in this press release regarding our ability to achieve flat EBITDA growth for 2020 as well as annual free cash flow at the lower end of our original target range are based on the assumption that our business, as well as overall economic conditions, will not change materially in the final quarter of 2020. In addition to the risks and uncertainties confronting our business as described below, these statements are subject to the risk that government assistance in response to the pandemic will not continue or will not be effective, that the economic recovery currently underway will stall and that the economic conditions in Canada and other jurisdictions will worsen, and that the second wave of COVID-19 will intensify beyond current expectations.

Other risks and uncertainties that could cause actual performance or events to differ materially from the forward-looking statements made herein and in other TELUS filings include, but are not limited to, the following:

These risks are described in additional detail in Section 9 General trends, outlook and assumptions, and regulatory developments and proceedings and Section 10 Risks and risk management in our 2019 annual and third quarter 2020 MD&A. Those descriptions are incorporated by reference in this cautionary statement but are not intended to be a complete list of the risks that could affect TELUS.

Many of these factors are beyond our control or our current expectations or knowledge. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation. Except as otherwise indicated in this document, the forward-looking statements made herein do not reflect the potential impact of any non-recurring or special items or any mergers, acquisitions, dispositions or other business combinations or transactions that may be announced or that may occur after the date of this document.

Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements in this document describe our expectations and are based on our assumptions as at the date of this document and are subject to change after this date. Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements. The forward-looking statements in this news release are presented for the purpose of assisting our investors and others in understanding certain key elements of our expected 2020 financial results as well as our objectives, strategic priorities and business outlook. Such information may not be appropriate for other purposes.

This cautionary statement qualifies all of the forward-looking statements in this document.

Non-GAAP and other financial measuresWe have issued guidance on and report certain non-GAAP measures that are used to evaluate the performance of TELUS, as well as to determine compliance with debt covenants and to manage our capital structure. As non-GAAP measures generally do not have a standardized meaning, they may not be comparable to similar measures presented by other issuers. Securities regulations require such measures to be clearly defined, qualified and reconciled with their nearest GAAP measure. Certain of the metrics do not have generally accepted industry definitions.

Adjusted net income and adjusted basic earnings per share: These measures are used to evaluate performance at a consolidated level and exclude items that may obscure the underlying trends in business performance. These measures should not be considered alternatives to Net income and basic earnings per share in measuring TELUS’ performance. Items that may, in management’s view, obscure the underlying trends in business performance include, but are not limited to significant gains or losses associated with real estate development partnerships, gains on exchange of wireless spectrum licences, restructuring and other costs, long-term debt prepayment premiums (when applicable), income tax-related adjustments, asset retirements related to restructuring activities and gains arising from business combinations.

Reconciliation of adjusted net income

Three months ended September 30
C$ and in millions20202019Change
Net income attributable to Common Shares307433(126)
Add (deduct):
Restructuring and other costs, after income taxes432221
Income tax-related adjustments(2)(17)15
Lease-up period and other equity losses related to real estate joint ventures8—8
Long-term debt prepayment premium, after income taxes—20(20)
Adjusted Net income356458(102)

Reconciliation of adjusted basic EPS

Three months ended September 30
C$20202019Change
Basic EPS0.240.36(0.12)
Add (deduct):
Restructuring and other costs, after income taxes, per share0.030.020.01
Income tax-related adjustments, per share—(0.01)0.01
Lease-up period and other equity losses related to real estate joint ventures, per share0.01—0.01
Long-term debt prepayment premium, after income taxes, per share—0.02(0.02)
Adjusted basic EPS0.280.39(0.11)

EBITDA (earnings before interest, income taxes, depreciation and amortization): We have issued guidance on and report EBITDA because it is a key measure used to evaluate performance at a consolidated level. EBITDA is commonly reported and widely used by investors and lending institutions as an indicator of a company’s operating performance and ability to incur and service debt, and as a valuation metric. EBITDA should not be considered an alternative to Net income in measuring TELUS’ performance, nor should it be used as a measure of cash flow. EBITDA as calculated by TELUS is equivalent to Operating revenues less the total of Goods and services purchased expense and Employee benefits expense.

We also calculate Adjusted EBITDA to exclude items of an unusual nature that do not reflect our ongoing operations and should not, in our opinion, be considered in a long-term valuation metric or should not be included in an assessment of our ability to service or incur debt.

EBITDA reconciliation
Three months ended September 30
C$ and in millions20202019
Net income 321 440
Financing costs 187 201
Income taxes 109 144
Depreciation 540 489
Amortization of intangible assets 233 160
EBITDA1,390 1,434
Add restructuring and other costs included in EBITDA 58 29
EBITDA – excluding restructuring and other costs1,4481,463
Add lease-up period and other equity losses related to real estate joint ventures 8 —
Adjusted EBITDA 1,456 1,463

Free cash flow: We report this measure as a supplementary indicator of our operating performance, and there is no generally accepted industry definition of free cash flow. It should not be considered an alternative to the measures in the Consolidated statements of cash flows. Free cash flow excludes certain working capital changes (such as trade receivables and trade payables), proceeds from divested assets and other sources and uses of cash, as found in the Consolidated statements of cash flows. It provides an indication of how much cash generated by operations is available after capital expenditures (excluding purchases of spectrum licences) that may be used to, among other things, pay dividends, repay debt, purchase shares or make other investments. We exclude impacts of accounting changes that do not impact cash, such as IFRS 15 and IFRS 16. Free cash flow may be supplemented from time to time by proceeds from divested assets or financing activities.

Free cash flow calculation
Three months ended September 30
C$ and in millions20202019
EBITDA1,3901,434
Deduct non-cash gains from the sale of property, plant and equipment(1)(3)
Restructuring and other costs, net of disbursements(5)(3)
Effects of contract asset, acquisition and fulfilment (IFRS 15 impact) and TELUS Easy Payment device financing(59)(31)
Effects of lease principal (IFRS 16 impact)(90)(62)
Leases formerly accounted for as finance leases (IFRS 16 impact)1613
Items from the condensed interim consolidated statements of cash flows:
Share-based compensation, net2514
Net employee defined benefit plans expense2520
Employer contributions to employee defined benefit plans(10)(11)
Interest paid(195)(208)
Interest received42
Capital expenditures (excluding spectrum licences)1(741)(748)
Free cash flow before income taxes359417
Income taxes paid, net of refunds(198)(97)
Free cash flow161320

(1) Refer to Note 31 of the interim consolidated financial statements for further information.

About TELUS TELUS (TSX: T, NYSE: TU) is a dynamic, world-leading communications and information technology company with $15.3 billion in annual revenue and 15.7 million customer connections spanning wireless, data, IP, voice, television, entertainment, video and security. We leverage our global-leading technology to enable remarkable human outcomes. Our longstanding commitment to putting our customers first fuels every aspect of our business, making us a distinct leader in customer service excellence and loyalty. TELUS Health is Canada's largest healthcare IT provider, and TELUS International delivers the most innovative business process solutions to some of the world’s most established brands.

Driven by our passionate social purpose to connect all Canadians for good, our deeply meaningful and enduring philosophy to give where we live has inspired our team members and retirees to contribute more than $700 million and 1.3 million days of service since 2000. This unprecedented generosity and unparalleled volunteerism have made TELUS the most giving company in the world.

For more information about TELUS, please visit telus.com, follow us @TELUSNews on Twitter and @Darren_Entwistle on Instagram.

Investor RelationsRobert Mitchell (647) 837-1606[email protected]

Media RelationsSteve Beisswanger(514) 865-2787 [email protected]

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Source: TELUS Communications Inc

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