Earnings released
Revenue of $615 million, up 11% year-over-year and 16% on a constant currency basis1 Net income of $59 million, compared with $23 million in the same quarter last year Diluted EPS of $0.22, compared with $0.09 in the same quarter last year Adjusted EBITDA1 of $158 million, 15% higher year-over-year Adjusted Diluted EPS1 of $0.32, 23% higher year-over-year Strong cash flow supports continued deleveraging and enhanced liquidity position Acquisition of WillowTree to bolster design and build capabilities, and drive high-value cross-sell opportunities Full-year 2022 outlook recalibrated to current macro conditions, calls for healthy double-digit top-line growth with continued strong profitability profile VANCOUVER, British Columbia, November 04, 2022--(BUSINESS WIRE)--TELUS International (NYSE and TSX: TIXT), a leading digital customer experience innovator that designs, builds, and delivers next-generation solutions, including AI and content moderation, for global and disruptive brands, today released its results for the quarter ended September 30, 2022. TELUS Corporation (TSX: T, NYSE: TU) is the controlling shareholder of TELUS International. 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. "In the third quarter of 2022, our highly engaged team members continued to execute upon our long-term strategic vision, achieving healthy double-digit revenue growth while navigating a period of prolonged macroeconomic uncertainties. Despite these challenging headwinds, we remain confident that our ongoing efforts and investments will enable us to further capitalize on the growth in demand for digital transformation capabilities, differentiating TELUS International as the premier global partner to help brands implement, enhance and scale all aspects of their digital customer experience. The recently announced agreement to acquire WillowTree demonstrates our commitment to making strategic investments to expand our design and build capabilities, as part of our end-to-end digital offering. The cross sell and up sell opportunities are exciting, including in particular TIs mission critical role in continuing to enable TELUS Corporations digital transformation journey. There is very little client overlap between TIs over 600 clients and WillowTrees marquee client list that includes the likes of Anheuser-Busch InBev (AB InBev), FOX, Manulife, Marriott, PepsiCo and Synchrony, which further amplifies the opportunity. WillowTree also expands our geographic presence with two new delivery countries and increases our onshore and nearshore presence with high-caliber, tenured and growth-minded tech talent who share our commitment to excellence," said Jeff Puritt, President and CEO of TELUS International. "Notwithstanding the challenges of compounding exogenous events, we continue to deliver double-digit revenue growth while maintaining our leading margins and generating solid cash flow. In the face of current recessionary fears, our focus remains on what we can control, including providing our clients with premium digitally enabled outcomes and allowing them to shift internal resources back to their core competencies. By maintaining this focus and also leveraging ongoing operational efficiencies, we will continue to favorably position our business for long-term profitable growth." Jeff continued, "Our global team helps clients find incremental ways to do better with less, while providing unique solutions that are critical to their own long-term growth and digital transformation strategies. In the third quarter, our key new client wins included a multinational banking and financial services company; a leader in conversational commerce, who is reinventing business-to-consumer communication; and the leading provider of trucking roadside assistance in the United States, whose operations rely heavily on technology. In all our engagements, we work relentlessly to become a trusted partner and strategic advisor for our clients, which opens the door for cross-sell and up-sell opportunities for complementary services and solutions. This approach also cultivates longer tenured and more sustainable client partnerships, enabling us to win more business across our existing client base. For example, in the third quarter we secured incremental business with a number of our clients, including the worlds largest e-commerce company; an online game platform and game creation system; one of North America's largest energy and energy-related services providers; a German car parts maker; and an American integrated luxury retailer. In addition, with the acquisition of WillowTree, we will be welcoming more than 50 new marquee brands to our more than 600 existing clients. These additions will further diversify our companys client base and significantly increase cross-selling opportunities." Jeff added, "In the third quarter, our team received industry recognition for their unwavering commitment to delivering superior customer service. Global research and advisory firm, Everest Group, named TELUS International a Leader on its 2022 Customer Experience Management PEAK Matrix in the Americas and a "Star Performer in the EMEA region, indicating our above-market growth and expansion of our client base across the UK and Eastern Europe. These rankings assess market success, vision and strategy, service focus and capabilities, digital and technological solutions, domain investments and client feedback. Additionally, TELUS International joined Everest Groups Commitment to Action presented during the Clinton Global Initiative meeting, to grow the impact sourcing market from its current level of 350,000 full-time employees to half a million in three years by connecting marginalized individuals to new job opportunities." Vanessa Kanu, CFO said, "While the macroeconomic challenges and implications have persisted, TELUS International continued to show resilience in the third quarter of 2022, delivering revenue growth of 11%, or 16% on a constant currency basis, with Adjusted EBITDA growing 15% and Adjusted Diluted EPS growing 23% when compared with the prior year. TIs relentless focus on profitable growth and cash flow drove continued deleveraging and has further enhanced our liquidity position and, as a result, our capacity and ability to pursue meaningful acquisition activity such as our agreement to acquire WillowTree." Vanessa continued, "WillowTree has demonstrated strong revenue growth from a high quality list of diverse client partners, while maintaining a healthy profitability profile. WillowTrees ability to drive leading annual revenue per team member is an indication of the high value services they offer. Much like TELUS International, WillowTree has been able to grow, while keeping capital expenditures as a percentage of revenue in low single digits, driving meaningful free cash flow conversion that will also help support TIs track record of rapid deleveraging after the acquisition closes." Vanessa concluded, "Our outlook for the full-year 2022 has been recalibrated to reflect the impact that prolonged macroeconomic uncertainties are expected to have as we close the year. While we expect some revenue headwinds in the fourth quarter driven by softer than expected client demand and longer sales cycles, we are focusing our collective efforts on what we can control and be as efficient with cost as possible. As such, we expect our Adjusted EBITDA margin to be higher than previously guided, while reiterating our outlook on Adjusted Diluted EPS." Provided below are financial and operating highlights that include certain non-GAAP measures. See the Non-GAAP section of this news release for a discussion on such measures. Q3 2022 vs. Q3 2021 highlights Revenue of $615 million, up $59 million or 11% increase year-over-year was driven by growth in services provided to existing and new clients. Our revenue growth included an unfavourable foreign currency impact of approximately 5% compared with the same quarter of the prior year, which was predominantly driven by the strengthening U.S. dollar exchange rate against the euro. Net income of $59 million and diluted EPS of $0.22, compared with $23 million and $0.09 respectively, in the same quarter of the prior year. Net income margin, calculated by dividing net income by revenue for the period, was 9.6%, up from 4.1% for the same quarter in the prior year. Net income and diluted EPS include the impact of share-based compensation, acquisition and integration charges and amortization of purchased intangible assets, among other items. Adjusted Net Income2, which excludes the impact of these items, was 24% higher year-over-year at $87 million in the third quarter of 2022, up from $70 million in the same quarter of the prior year. Adjusted EBITDA was $158 million, up 15% from $137 million in the same quarter of the prior year, driven by higher revenue earned from existing and new clients, partially offset by higher salaries and benefits and goods and services purchased to support overall growth in the business, and Adjusted EBITDA Margin2 was 25.7%, an increase from 24.6% in the same quarter of the prior year, primarily due to revenue growth outpacing the increase in costs during the period. Adjusted Diluted EPS was $0.32, 23% higher year-over-year. Cash provided by operating activities was $124 million, up 44% from $86 million in the same quarter of the prior year, and Free Cash Flow2 was $98 million, up 56% from $63 million in the same quarter of the prior year, with both increases primarily driven by higher operating profits, higher net inflows from working capital, and lower share-based compensation payments. Net Debt to Adjusted EBITDA Leverage Ratio as per credit agreement of 1.3x as of September 30, 2022 further improved from 1.5x as of June 30, 2022, reflecting continued debt repayment from cash provided by operating activities. Team member count was 69,252 as of September 30, 2022, an increase of 18% year-over-year, reflecting broad-based growth across geographies in support of client demand. YTD Q3 2022 vs. YTD Q3 2021 highlights Revenue of $1,838 million, up $244 million or 15% increase year-over-year was driven by growth in services provided to existing and new clients. Our revenue growth included an unfavourable foreign currency impact of approximately 5% compared with the same period of the prior year, which was predominantly driven by the strengthening U.S. dollar exchange rate against the euro. Net income of $149 million and diluted EPS of $0.55, compared with $42 million and $0.16 respectively, for the same period in the prior year. Net income margin was 8.1%, up from 2.6% for the same period in the prior year. Net income and diluted EPS include the impact of share-based compensation, acquisition and integration charges and amortization of purchased intangible assets, among other items. Adjusted Net Income, which excludes the impact of these items, was 23% higher year-over-year at $237 million, compared with $192 million in the same period of the prior year. Adjusted EBITDA was $450 million, up 13% from $397 million in the same period of the prior year, and Adjusted EBITDA Margin was 24.5%, compared with 24.9% in the same period of the prior year, due to higher costs associated with our front-line team members, as well as changes in our revenue mix across industry verticals and geographic regions. Adjusted Diluted EPS was $0.88, 22% higher year-over-year. Cash provided by operating activities was $337 million, up 55% from $218 million in the same period of the prior year, and Free Cash Flow was $257 million, up 69% from $152 million in the same period of the prior year, with both increases primarily driven by higher operating profits, lower income taxes paid, lower share-based compensation payments, lower net outflows from working capital, and lower interest paid. A discussion of our results of operations is included in our third quarter 2022 Managements Discussion and Analysis dated November 4, 2022 and filed on SEDAR and as Exhibit 99.2 to our Form 6-K filed on EDGAR. Such materials and additional information is also provided at telusinternational.com/investors.