TELUS International (NYSE and TSX: TIXT), a leading digital
customer experience innovator that designs, builds, and delivers
next-generation solutions, including artificial intelligence (AI)
and content moderation, for global and disruptive brands, today
released a preliminary summary of financial results for the quarter
ended June 30, 2023, and updated its full-year 2023 outlook. All
figures in this news release, and elsewhere in TELUS International
disclosures, are in U.S. dollars, unless specified otherwise, and
relate only to TELUS International results and measures.
“During the second quarter, as a result of persistent global
macroeconomic pressures, TELUS International experienced more
pronounced and unexpected reductions in service demand from some of
our larger clients, particularly within the technology vertical. We
also experienced delays and lower than expected activity in
converting opportunities into spend commitments, as clients
continue to address their own cost structures, including successive
employee downsizing. These issues have in turn impacted TELUS
International’s overall revenue and profitability to a larger
extent than previously anticipated, contributing to a more cautious
outlook for the balance of 2023,” said Jeff Puritt, President and
CEO of TELUS International.
Vanessa Kanu, CFO said, “The magnitude of the headwinds we’re
experiencing and our preview of second quarter performance data
prompted a revision to the full-year outlook for 2023 to better
reflect our updated expectations for the remainder of the year.
We’ve actioned significant cost efficiency programs, including
staff reductions to address lower service volumes in the technology
vertical. Additionally, we are driving further automation and
generative AI enabled solutions to further optimize our cost
structure. The benefits of these efficiency programs will help
mitigate the near-term challenges we are facing. Moreover, we do
see meaningful opportunities as it relates to digital
transformation, generative AI adoption, and the continuing critical
importance of differentiated digital customer experience solutions
in the market that we believe will be a tailwind for TELUS
International’s long-term growth and profitability.”
Summary preliminary Q2 2023 financial results
- Revenue in the range of $660 to $668 million, reflecting
year-over-year growth of 6% to 7% on a reported basis and 6% to 7%
on a constant currency basis1, and a decline of approximately 1%
when excluding revenue earned from WillowTree. These year-over-year
revenue growth rates are lower due to lower than expected business
volumes primarily within our technology vertical.
- Net loss in the range of $7 to 10 million, reflecting a
year-over-year decline of 113% to 118%, and net loss margin in the
range of 1.0% to 1.5%. Adjusted EBITDA1 in the range of $117 to
$120 million, reflecting a year-over-year decline of 20% to 22%,
and Adjusted EBITDA Margin1 in the range of 17.7% to 18.0%,
impacted by higher than expected costs in certain regions,
principally Europe, and temporary demand imbalances across certain
regions that were only partially offset by cost efficiency program
efforts.
- Diluted EPS in the range of $(0.03) to $(0.05), reflecting a
year-over-year decline of 114% to 124%. Adjusted Diluted EPS1 in
the range of $0.15 to $0.17, reflecting a year-over-year decline of
43% to 50%, impacted by the factors described above, in addition to
higher interest expense due to higher debt levels associated with
the WillowTree acquisition.
- Net Debt to Adjusted EBITDA Leverage Ratio as per credit
agreement to remain just under 3 times, despite the year-over-year
decrease in Adjusted EBITDA.
All financial information in this news release is preliminary as
TELUS International has not yet completed its quarterly financial
close procedures, nor have external auditors reviewed the financial
information contained herein for the second quarter of 2023. The
summary preliminary Q2 2023 financial results included in this
update constitute forward-looking statements and does not present
all necessary information for an understanding of TELUS
International's financial condition as of the date of this news
release, or its results of operations for the second quarter of
2023. As TELUS International completes its quarterly financial
close procedures and finalizes its financial statements for the
quarter, it may be required to make significant judgments in a
number of areas. It is possible that TELUS International may
identify items that require adjustments to the preliminary
financial information set forth above and those changes could be
material. TELUS International intends to provide its full financial
results for the second quarter of 2023 on August 4, 2023. Until
that time, the preliminary results described in this news release
are estimates and remain subject to change based on management's
ongoing review of results of the quarter and completion of its
quarterly financial close procedures.
Outlook revision
For the full-year 2023, management now expects:
- Revenue in the range of $2,700 to $2,730 million, including
$205 to $215 million from WillowTree, representing revenue growth
of 9% to 11% on a reported basis, and growth of 1% to 2% excluding
WillowTree. This assumes an average exchange rate of one euro to
1.09 U.S. dollars for 2023.
- Adjusted EBITDA in the range of $575 to $600 million, and
Adjusted EBITDA Margin in the range of 21.3% to 22.0%.
- Adjusted Diluted EPS in the range of $0.90 to $0.97.
Investor call
TELUS International will host a conference call today, July 13,
2023 at 5:30 p.m. (eastern time), where management will offer brief
remarks regarding its preliminary results for the second quarter of
2023, followed by a question and answer session with pre-qualified
analysts. A webcast of the conference call will be streamed live on
the TELUS International Investor Relations website at:
https://www.telusinternational.com/investors/news-events and a
replay will also be available on the website following the
conference call.
Q2 2023 release scheduling
TELUS International will release its second quarter of 2023
financial results the morning of August 4, 2023 and host a
conference call at 10:30 a.m. (eastern time) on such date, where
management will review the second quarter results in more detail,
followed by a question and answer session. At that time, a live
stream and a replay of the conference call will also be available
at the same link as noted above.
Non-GAAP
This news release includes non-GAAP financial information, with
reconciliation to GAAP measures presented at the end of this news
release. We report certain non-GAAP measures used in the management
analysis of our performance, but these do not have a standardized
meaning under IFRS. These non-GAAP financial measures and non-GAAP
ratios may not be comparable to GAAP measures or ratios and may not
be comparable to similarly titled non-GAAP financial measures or
non-GAAP ratios reported by other companies, including those within
our industry and TELUS Corporation, our controlling
shareholder.
Adjusted EBITDA, Adjusted Net Income, and revenue on a constant
currency basis are non-GAAP financial measures, while Adjusted
EBITDA Margin, Adjusted Diluted EPS, and revenue growth on a
constant currency basis are non-GAAP ratios.
Adjusted EBITDA is commonly used by our industry peers and
provides a measure for investors to compare and evaluate our
relative operating performance. We use it to assess our ability to
service existing and new debt facilities, and to fund accretive
growth opportunities and acquisition targets. In addition, certain
financial debt covenants associated with our credit facility are
based on Adjusted EBITDA, which requires us to monitor this
non-GAAP financial measure in connection with our financial
covenants. Adjusted EBITDA should not be considered an alternative
to net income in measuring our financial performance, and it should
not be used as a replacement measure of current and future
operating cash flows. However, we believe a financial measure that
presents net income adjusted for these items would enable an
investor to better evaluate our underlying business trends, our
operational performance and overall business strategy.
We exclude items from Adjusted Net Income and Adjusted EBITDA as
we believe they are driven by factors that are not indicative of
our ongoing operating performance, including acquisition,
integration and other, share-based compensation and, with respect
to Adjusted Net Income, the interest accretion on written put
options entered into in connection with our acquisition of
WillowTree, foreign exchange gains or losses and amortization of
purchased intangible assets, and the related tax effect of these
adjustments. Full reconciliations of Adjusted EBITDA and Adjusted
Net Income to the comparable GAAP measure are included at the end
of this news release.
Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA
by consolidated revenue. We regularly monitor Adjusted EBITDA
Margin to evaluate our operating performance compared to
established budgets, operational goals and the performance of
industry peers.
Adjusted Diluted EPS is used by management to assess the
profitability of our business operations on a per share basis. We
regularly monitor Adjusted Diluted EPS as it provides a consistent
measure for management and investors to evaluate our
period-over-period operating performance, to better understand our
ability to manage operating costs and to generate profits. Adjusted
Diluted EPS is calculated by dividing Adjusted Net Income by the
diluted total weighted average number of equity shares outstanding
during the period.
Revenue on a constant currency basis is used by management to
assess revenue, the most directly comparable GAAP measure,
excluding the effect of foreign currency fluctuations. Revenue on a
constant currency basis is calculated as current period revenue
using foreign exchange rates prevailing in the comparable prior
period.
Revenue growth on a constant currency basis is used by
management to assess the growth of revenue, the most directly
comparable GAAP measure, excluding the effect of foreign currency
fluctuations. Revenue growth on a constant currency basis is
calculated as current period revenue growth using foreign exchange
rates prevailing in the comparable prior period.
We have not provided a quantitative reconciliation of our
full-year 2023 outlook for Adjusted EBITDA, Adjusted EBITDA Margin
and Adjusted Diluted EPS to our full-year 2023 outlook for net
income, net income margin and diluted EPS because we are unable,
without making unreasonable efforts, to calculate certain
reconciling items with confidence, which could materially affect
the computation of these financial ratios and measures.
For more information on our non-GAAP financial measures and
ratios, including an explanation of Net Debt to Adjusted EBITDA
Leverage Ratio as per credit agreement, see our Annual Report on
Form 20-F for the year ended December 31, 2022 and other filings
with the Securities and Exchange Commission.
Cautionary note regarding forward-looking statements
This news release contains forward-looking statements concerning
our preliminary financial results, our financial outlook for the
full-year 2023 results, our business, operations and financial
performance and condition, as well as statements relating to the
expected benefits and synergies of our acquisition of WillowTree
and its impact on our business, including expectations regarding
deleveraging and the ability to obtain valuable cross-selling
opportunities and diversify the client base, our expectations
regarding customer demand for our services, and the effect of
digital customer experience solutions on our growth and
profitability. We caution the reader that information provided in
this news release regarding our financial outlook for full-year
2023 results, as well as information regarding our objectives and
expectations, is provided in order to give context to the nature of
some of the company’s future plans and may not be appropriate for
other purposes. Any statements contained herein that are not
statements of historical facts may be deemed to be forward-looking
statements. In some cases, you can identify forward-looking
statements by terminology such as “aim”, “anticipate”, “assume”,
“believe”, “contemplate”, “continue”, “could”, “due”, “estimate”,
“expect”, “goal”, “intend”, “may”, “objective”, “plan”, “predict”,
“potential”, “positioned”, “seek”, “should”, “target”, “will”,
“would” and other similar expressions that are predictions of or
indicate future events and future trends, or the negative of these
terms or other comparable terminology.
These forward-looking statements are based on our current
expectations, estimates, forecasts and projections about our
business, the benefits, synergies and risks related to our
acquisition of WillowTree, and the industry in which we operate and
management's beliefs and assumptions, and are not guarantees of
future performance or development and involve known and unknown
risks, uncertainties and other factors that are in some cases
beyond our control.
Specifically, we made several assumptions underlying our
financial outlook for the full-year 2023 results, including key
assumptions in relation to: our ability to execute our growth
strategy, including by expanding services offered to existing
clients and attracting new clients; our ability to maintain our
corporate culture and competitiveness of our service offerings; our
ability to attract and retain talent; our ability to integrate and
realize the benefits of our acquisition of WillowTree; the relative
growth rate and size of our target industry verticals; our
projected operating and capital expenditure requirements; and the
impact of global conditions on our and our clients’ businesses,
including reduced demand for our services, demand imbalances in our
geographies and a potential economic recession, increased use of
automation and generative AI enabled solutions, changes in interest
rates and the Russia-Ukraine conflict on our business, financial
condition, financial performance and liquidity. Our financial
outlook provides management’s best judgement of how trends will
impact the business and may not be appropriate for other
purposes.
Risk factors that may cause actual results to differ materially
from current expectations include, among other things:
- We face intense competition from companies that offer services
similar to ours.
- Our business and financial results could be adversely affected
by a number of global conditions, and the effects of these same
conditions on our clients’ businesses and demand for our
services.
- Three clients account for a significant portion of our revenue
and loss of or reduction in business from, or consolidation of,
these or any other major clients could have a material adverse
effect.
- Our growth prospects are dependent upon attracting and
retaining enough qualified team members to support our operations,
as competition for talent is intense.
- The timing and success of our cost efficiency programs.
- Our ability to grow and maintain our profitability could be
materially affected if changes in technology and client
expectations outpace our service offerings and the development of
our internal tools and processes or if we are not able to meet the
expectations of our clients.
- If we cannot maintain our culture as we grow, our services,
financial performance and business may be harmed.
- Our business could be adversely affected if we lose one or more
members of our senior management.
- Our business may not develop in ways that we currently
anticipate due to negative public reaction to offshore outsourcing,
content moderation and proposed legislation or otherwise.
- Our business would be adversely affected if individuals
providing data annotation services through TIAI’s crowdsourcing
solutions were classified as employees (not as independent
contractors).
- We could be unable to successfully identify, complete,
integrate and realize the benefits of acquisitions, including our
acquisition of WillowTree or manage the associated risks.
- The unauthorized disclosure of sensitive or confidential client
and customer data, through cyberattacks or otherwise, could expose
us to protracted and costly litigation, damage our reputation and
cause us to lose clients / revenue.
- Our policies, procedures and programs to safeguard the health,
safety and security of our team members, particularly our content
moderation team members, may not be adequate, which could adversely
affect our ability to attract and retain team members and could
result in increased costs, including due to claims against us.
- The dual-class structure contained in our articles has the
effect of concentrating voting control and the ability to influence
corporate matters with TELUS Corporation.
- The market price of our subordinate voting shares may be
affected by low trading volume and the market pricing for our
subordinate voting shares may decline as a result of future sales,
or the perception of the likelihood of future sales, by us or our
shareholders in the public market.
- TELUS Corporation will, for the foreseeable future, control the
TELUS International board of directors.
These risk factors, as well as other risk factors that may
impact our business, financial condition and results of operation,
are also described in our “Risk Factors” section of our Annual
Report available on SEDAR and in “Item 3D—Risk Factors” of our
Annual Report on Form 20-F filed on February 9, 2023 and available
on EDGAR, as updated by our management’s discussion and analysis
for the three-month period ended March 31, 2023, which is filed on
SEDAR and as Exhibit 99.2 to our Form 6-K filed on EDGAR.
Non-GAAP reconciliations
(unaudited)
(US$ millions, except
percentages)
estimated range Q2
2023
Q2 2022
Revenue
$
660
$
668
$
624
Foreign exchange impact on current period
revenue using prior comparative period's rates
(1
)
(1
)
Revenue on a constant currency
basis
$
659
$
667
Revenue growth
6
%
7
%
Revenue growth on a constant currency
basis
6
%
7
%
(US$ millions, except per share
amounts)
estimated range Q2
2023
Q2 2022
Net (loss) income
$
(10
)
$
(7
)
$
56
Add back (deduct):
Acquisition, integration and other
21
21
6
Share-based compensation
2
2
7
Interest accretion on written put
options
3
3
—
Foreign exchange gain
(3
)
(3
)
(14
)
Amortization of purchased intangible
assets
45
45
31
Tax effect of the adjustments above
(15
)
(15
)
(5
)
Adjusted Net Income
$
43
$
46
$
81
Diluted (loss) earnings per
share
$
(0.03
)
$
(0.05
)
$
0.21
Adjusted Diluted Earnings Per
Share
$
0.15
$
0.17
$
0.30
(US$ millions, except percentages)
estimated range Q2
2023
Q2 2022
Net (loss) income
$
(10
)
$
(7
)
56
Add back (deduct):
Acquisition, integration and other
21
21
6
Share-based compensation
2
2
7
Foreign exchange gain
(3
)
(3
)
(14
)
Depreciation and amortization
81
81
64
Interest expense
36
36
10
Income taxes
(10
)
(10
)
21
Adjusted EBITDA
$
117
$
120
$
150
Net (loss) income margin
(1.5
)%
(1.0
)%
9.0
%
Adjusted EBITDA Margin
17.7
%
18.0
%
24.0
%
About TELUS International
TELUS International (NYSE & TSX: TIXT) designs, builds and
delivers next-generation digital solutions to enhance the customer
experience (CX) for global and disruptive brands. The company’s
services support the full lifecycle of its clients’ digital
transformation journeys, enabling them to more quickly embrace
next-generation digital technologies to deliver better business
outcomes. TELUS International’s integrated solutions span digital
strategy, innovation, consulting and design, IT lifecycle including
managed solutions, intelligent automation and end-to-end AI data
solutions including computer vision capabilities, as well as
omnichannel CX and trust and safety solutions including content
moderation. Fueling all stages of company growth, TELUS
International partners with brands across strategic industry
verticals, including tech and games, communications and media,
eCommerce and fintech, banking, financial services and insurance,
healthcare, and others.
TELUS International’s unique caring culture promotes diversity
and inclusivity through its policies, team member resource groups
and workshops, and equal employment opportunity hiring practices
across the regions where it operates. Since 2007, the company has
positively impacted the lives of more than 1.2 million citizens
around the world, building stronger communities and helping those
in need through large-scale volunteer events and charitable giving.
Five TELUS International Community Boards have provided $5.2
million in funding to grassroots charitable organizations since
2011. Learn more at: telusinternational.com.
________________________ 1 Revenue growth on a constant currency
basis, Adjusted EBITDA Margin and Adjusted Diluted EPS are non-GAAP
ratios, while Adjusted EBITDA is a non-GAAP financial measure. See
the Non-GAAP section of this news release.
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version on businesswire.com: https://www.businesswire.com/news/home/20230713871680/en/
TELUS International Investor Relations Jason Mayr (604)
695-3455 ir@telusinternational.com TELUS International Media
Relations Ali Wilson (604) 328-7093
media.relations@telusinternational.com
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