TELUS Corporation (TU) Earnings Call Transcript & Summary

Good morning, everyone. My name is Ryan Rice, and I'm an associate with the JPMorgan Healthcare Investment Banking team. Welcome to the session for TELUS Health. Presenting today, we have the President, Mohamed El-Demerdash. The presentation will be roughly 15 minutes, and then we'll have a few minutes of Q&A to follow. With that being said, I'll leave it over to Mohamed to kick off. All right.

Thank you. Good morning, everyone. My name is Mohamed El-Demerdash. For those of you who don't know me, I'm an engineer. I've been in the med device industry and health tech broadly for the latter -- bigger part of 3 decades. And I got the opportunity to work all sorts of places around the world, developing products, got the opportunity to live outside of North America for about 10 years, delivering services and health care to many around the world. And it really got me thinking and got me wondering, but from a technology standpoint and the spend, we spend a lot of time, a lot of money on the downstream delivery of acute care diagnosis and therapy. And when you start getting into places where people don't have access to acute care and the systems are so fragmented, you start thinking what if we had taken the same technologies and start spending it more upstream from a preventive standpoint and start taking advantage of the opportunities for helping people change the trajectory of their health journey earlier upstream. That is fundamentally what TELUS Health does, and that's what we do. We're about preventative health upstream, looking at how we can change the trajectory of people's health and their health journey and improving the health and well-being of the workforce. So what are we at TELUS Health? We're a global leader in workforce well-being and digital health solutions. When we talk about well-being, there are a lot of questions like what is well-being? Well-being is not just about the physical. It's about the physical, it's about the mental, it's about financial, it's about social, it's organizational. It's everything. And when you think of it from an employer or organizational standpoint, all of these factors come in, in a transfer function that yields an effective and positive workforce. We deliver services for over 50% of the Fortune 500 companies that are out there. We serve over 160 million lives. Importantly, we are geographically situated just about everywhere around the world. We serve more than 200 countries. We have offices in over 27 countries out there. We deliver in local language. We have a large network of providers that serve. So how do we get to this point of preventive care? So I talked about going upstream. So when you think about going upstream, we think about 2 different entry points where we can get to individuals out there at an early point before the conditions become worse and more expensive to treat. One is through employer and the second is through primary care. So I'm going to talk about both those things and tell you how we impact those and the importance of those. So when we think about workforce and from an employer standpoint. One of our major entry points is from an employer standpoint. And let me start by giving you a couple of statistics that will give a good indication as to why this is important. So from 2019 to 2025, if we compare both of those workforces, there is a 2x to 3x increase in the number of people in 2025 versus 2019 that indicate that they have high amount of anxiety in work, and they are at risk of a mental health event, not too surprising. Now this is the interesting one. If we look at those that are entering the workforce, so ages 20 to 29, 2025 versus those that are exiting the workforce, 50 to 59, there is more than 2x the rate of those individuals that self-report having high anxiety and difficulty at work due to one or more factors. And in fact, if you start breaking that down even further and start looking at all the different factors, the same difference between entering the workforce versus exiting the workforce on mental, social, well-being, physical, all of those factors are self-reported as being an issue that is affecting them in the workplace. So when we think about from an employer standpoint, what we do at TELUS Health is look at the various different entry points into the life cycle of the individuals there. So if we think about a student in Vietnam, certainly, the way the problems that they might be encountering is very much different than an executive in San Francisco. The -- an individual from an indigenous group in New Zealand is not going to have the same solution space as somebody who is in Latin America, for example, or Western Europe. So what we've been very focused on is building a digital solution that is going to self-navigate and help everybody go through to find the solution that's appropriate for them for that point in time, which obviously changes as they go through their journey. Whether it be helping, again, from a student standpoint at that level from a family perspective or helping somebody who just has a life change from a family, a new mother, new father or somebody that's going through cancer treatment, all of these different factors require a different solution. And what we're able to do is to develop a solution that is backed by humans to deliver these services across the board. Importantly, we're able to deliver these services with local specificity. And when we say local specificity, the first thing that comes to your mind is language. Obviously, that is there. We have our solutions in 17 different languages, but not just about the language. It's about cultural awareness and actually being locally present. One of the things that is unique, and I'll show a bit more data about this here in the upcoming a few slides for TELUS Health is that we are geographically present around the world. We have a network that is one of one in our presence. pick a country, we are there physically available to deliver service. Now I talked about 2 different entry points for preventive care. So at the employer standpoint, so a lot of people -- everybody attempts to be in the workforce, a lot of people in the workforce, so that captures a lot. Now the other entry point is through primary care. And if you think about the ecosystem of health and health delivery, yes, we all -- when we need some sort of medical intervention, we usually start from primary care, pharmacy, we have our health benefits, and we start inevitably kind of progressing through the health system until you get to acute care and the rest of that. Think about how many times as we go through that system, we get asked the same questions. We get the same data, same tests done over and over and over because of the inconsistency and the fragmentation of the ecosystem and how data is transferred across the entire different sets. So what we've been doing at TELUS Health is building solutions, I'll call the Level 1 solution in the space, which is at the EMR level, EHR level, pharmacy management, benefits management. So at the fundamental entry point where we can have providers give better service to the patients that are coming through, have care-specific AI journeys that they can find them, think about heart health. Primary care physician will usually not be able to diagnose much and will have to progress you to the system. Think about areas where getting to a specialist is going to take months and months and months. Can you provide solutions to that primary care physician that will help them prioritize the urgency of that individual based on data and based on a lot of the tests that would have already been run at that level. Now past that, and here's where the magic happens. We've been able to build on top of that a platform that results in interoperability across all of these systems, right? Think of how many different systems, think of any city, state, country, province, territory. They're going to have purchased hundreds upon hundreds of different systems over the years. Data is found in different formats, different places. And what we're able to do is build an interoperability layer on top of all of these systems that connects it all together so we can truly have the opportunity to develop population health strategies and for the individual for them to truly own their data across the ecosystem. And I'll share a few examples of where technology has brought all of this to life because a lot of what I just shared is kind of theoretical, but I'll talk you through some of the solutions that we have to solve for this. So from a mental health standpoint, we have agentic AI-enabled platform that supports an individual to help navigate through where they need to go. So it's going to take you through whether you need to get some videos, plan, et cetera, that will drive you through a solution or whether you need to actually talk to somebody with a human care approach that is underneath the platform. We're going to be able to, through this application, start plugging in more and more care pathways. So we've got 23 different care pathways today that understand specific. So for example, first responders, first responder is going to require a different approach, as I mentioned earlier. They're going to have the same starting point through the application, but they're going to get specific solutions and specific attention to their needs. 94%, as you see on the slide here, of employees that used the application or report that it has helped them solve the problem and they gain benefit out of it. Now when we talked about the second solution here from a well-being standpoint, this is a gamified physical health application that has very high utilization and adoption by those that use it. This helps you from what food to eat, et cetera, back to the heart health example that I gave, we're starting early to help change and bend that trajectory. And then finally, an example here of this platform that I talked about earlier in the presentation around the interoperability. So in this case, province of Nova Scotia, over 600 different data down to the dentist offices that they have in the province. We are able to connect all of those through a single digital front door. So now think about it as a citizen, I can go to a single place, schedule my appointments, I can see all of my data. I can see all of the history of the data that I have. And then from a provider standpoint and from the province, think about the things that they can do from a population health standpoint. If they want to ensure that the right mammogram screening is happening, that the right prostate screening that is happening at the right age in the right place, they can get down to the right individual, make sure that they're getting prompted and they can understand the population scenario for the entire province. And you can take that example and think about how that would scale globally in the different places that you can take them and the Agentic AI that could be built on top of that to start helping deliver faster services to the individual. One of the things that I talked about earlier in the presentation that really is diversified or special about TELUS Health is our strategic approach towards how we've diversified our customer base and our sources of revenue. So when we think about sources of revenue, the interesting thing here is because we go upstream, we are not tied to a single industry. So from a resilience standpoint, we've got customers that use our products from aerospace industry. We've got consumer, hospitality, financial, health care, you name it, these needs and these employee expectations are there as well. So when we talk about 14% of our revenue comes from our top 10 customers. Only a single industry, the highest takes up 20% of our -- of the total of our revenue. From a geography standpoint, we've got revenues coming from every region around the world and continuing to diversify more into outside of North America being in 200 different countries around the world. So from a resilience standpoint, we find ourselves in a position where we can be very hardened against any issues or standards that could happen out there. TELUS Health in conclusion, global scale, capacity to grow. We're a team that is focused on preventive health. We have a tech-enabled platform that is AI-driven to help get upstream into the preventive health side. We're a trusted brand. We've got a massive focus on cyber. There's a lot of data, as you can imagine, coming through. I didn't really have time to talk through it in the previous presentation or previous slide, but the cyber and data protection side becomes really important, especially as we talk about the global footprint that we have. And we have a team that is mission-focused, mission-driven around this belief that we have that everybody deserves care. And everybody deserves care where they need it and when they need it and how they need it, which is not the situation that we have around the world today. And it is our goal to change that trajectory for everybody else out there. And that is what we do at TELUS Health. Thank you. Questions?

I'm fascinated about the interoperability layer. And I don't know a question to ask, but what are the other use cases? Are you talking to payers about it?

Yes. So yes, when we think of our customer base, payers, providers, a big portion of it. So the underlying connecting point between all of that is data. And every single pillar across that. If you think about the provider, they're interested in the data so they could provide better health cheaper. When you think about the payer, they're certainly wanting to understand it so they can provide the appropriate care to the appropriate place. So that is absolutely where we look at from doing this. So the example that we have is in Canada, this is -- we're talking about a single payer model. So it essentially goes to that in that case, the payer, whether an insurer or the provincial government in that case is essentially the same output, but it is a big interest for everyone. And even when you get down to the primary care physicians or the providers, they're interested in seeing the data even down to the research level.

When did you launch it?

So this was about 9 to 12 months ago, and we are in process of launching in a couple of other provinces as well. So we're really bullish about the opportunity here of taking what we've been able to do in these scenarios and take that from a global perspective. Other questions?

Yes. Mohamed, technology clearly plays a big role in your business. Can you just expand a little bit more on the role of AI in the business going forward?

Yes. So listen, I spent a lot of time in my career on AI and when the starting point of everybody having a lot of fears of what it's going to do and take my job and the rest of that. So the way we look at AI is a foundational component to drive outcome. So we're not in the business of just saying, hey, let's just do AI for the sake of AI. So we start by the outcome that is needed, go back to the starting point of the technology then and say, all right, this is where AI can actually play a role, and this is where AI can make a difference for us. And this is where we become very hyper-focused on preventing or getting outcomes, both for our members, so our customers and our clients. So when they use our solutions, when they consume our solutions, it's helping them navigate better. It's helping them get better outcomes, our primary care physicians and the like, but also internally. So for us, operational effectiveness is a really important portion of the company. We run a pretty large organization and operation globally. So eliminating waste and understanding where that is, is really important. AI plays a massive role for us as well internally. So as a couple of very simple examples, when we think about our clinicians or counselors when they take calls in, there's an AI agent that is up there that's listening to the call that is prompting and filling in some of the forms for them so they can focus on the individual that they're talking to and not have to spend time typing everything in, taking it and making sure that they've actually captured it. The same thing that we have for -- same technology for our EMR solutions, so the physicians and the nurse practitioners, when they see a patient, it's listening in as well and helping them fill up. So we get the opportunity to take the technology and use it in multiple ways.

In the U.K. where the organizations are looking for holistic solutions, covering well-being, definitely, but also health care and other paradigms of health like chronic disease management, early disease detection, chronic disease, et cetera. How do you bridge that gap in various territories? And also, how do you think about the clinical and regulatory challenges?

Love the question. So our point of view is that we're setting the foundational level. What we are going to be able to do at an employer level as well, by the way. It's easier, as I describe it, to do at a physician or nurse practitioner if somebody is coming to you with some sort of symptoms, some sort of condition, something that you need to do. What's more interesting for me is at the employer level, so the heart health condition that I just talked about or that care pathway, if I can take that a lot earlier, our solutions are monitoring through wearables, your exercise, your heart rates, the rest of that stuff. If I can start integrating at that level solutions that are able to identify earlier on before Jimmy or Mary at age 24 know that they actually have an underlying heart condition or something. If I can start guiding them from that point on, to a better path, maybe the clinical event that was going to happen to them at age 40, maybe it's predetermined it's going to happen anyways. But maybe it's pushed out to age 50 because I was able to early on tell them eat better, exercise better, do this, catch this, go do that test. We are not there yet. But when we think about from a vision standpoint and what we can do with the fact that we are so penetrated from a foundational layer, both from an employer standpoint and from a primary care standpoint, we're thinking through how do we build out of that specific care pathways. And we think through heart health, we think through brain health, we think through women's health as well as some of those primary ones where we think we can actually impact it from an earlier perspective. You asked about regulators and regulations. That's a challenging scenario, but we believe that if we do enough from a preventive standpoint. So I don't think we need to get to the point where we're diagnosing, we're prescribing, we're doing that. But if I can get to a point where I can actually just nudge somebody towards a better path that is specific and personalized to them, we think we can bend that curve for many people and reduce cost in health care over the long term.

One more here. Can you expand a little bit more on your growth strategy in relation to global expansion? What are the key near-term opportunities and markets you're looking at making the biggest impact?

Yes. So I'll actually go back to one of the stats that I shared on the 2x to 3x increase from 2025 to 2019. Interestingly, there is obviously a range there regionally around the world. It is much higher in Europe and Southeast Asia than it is in North America. It is high across the board. But the -- if we look at the range, it's more like 4x in those regions as far as the impacts increasing. And the access to solutions and support around these various different challenges that they have are not present. We are very much systemically and strategically getting into these markets, knowing that there's going to be growth. I'll give a couple of examples in Japan. Japan is a market where you -- the government mandates a stress check on -- every company has to do for every employee that they have as long as they have more than 50 employees every year. So there's a mandate to drive towards that. There's not a whole lot of advancement from a technology standpoint on what to do with that data once they have it, right? Korea is another one where there's a very high level of awareness of the needs. Regulations are starting to get in place, but there's still not a whole lot of technological sophistication to do something there. So these are all places where we think there's going to be a lot of growth. By and large, because it's all industries, all segments eventually, I get asked the question frequently on what's your TAM. And I don't know, bazillion is the TAM because what do you limit? It's every employer, every human being out there has these challenges. We all know it and our families know it as well. So it's a matter of getting the awareness up to that level. And there's just a whole lot of opportunity outside of North America. I'll just add one last thing here. We find ourselves in position to take advantage of that better than most else or anybody else because of the presence that we have around the country. All right. Thank you all for taking the time to listen.