Td analyst on tixtEvent TELUS International (TI) reported Q4/23 results. Impact: SLIGHTLY POSITIVE Signs of a recovery. Consistent with overall industry expectations, management is expecting a recovery in H2/24. This view is supported by TI growing its employee base ahead of some program ramps. Management is also planning to invest an additional $25mm this year to grow its sales team to expand geographic, account, and vertical coverage. $6mm of opex will be used to optimize service delivery costs, which should bring efficiencies in future periods. We believe these investments would position TI well ahead of an anticipated market recovery. Well-positioned to win the Appen business. TI continues to win AI programs, particularly with Google. This is evidenced from Google's revenue contribution accelerating to 34% y/y growth. We believe this momentum would continue, especially with Google disengaging from TI's major data annotation competitor, Appen. We believe these programs still need to be reallocated to other suppliers, and we do not believe other vendors have TI's scale to absorb the additional workload. If TI's data annotation competitors are at capacity, we believe TI is well-positioned to be an outsized beneficiary of increased data annotation demand in the ramping AI investment cycle. If all $83mm of Appen's Google business goes to TI, we estimate that it would increase our 2024 revenue estimate by ~3%. In addition to strength from Google, new customers are entering the fold, which we believe includes Nvidia. Moreover, management has not been told by its customers of any major changes in search quality ratings processes; this should appease investor concerns of a potential structural shift in the business following Appen's loss. Strong free cash flow. TI generated $115mm of FCF in the quarter, representing 17% of revenue, due to a number of initiatives, including working-capital improvements. We expect FCF margin to remain strong next year in the mid-teens range. TI ended the quarter with a net debt/EBITDA ratio of 2.8x, down from 2.9x q/q. TD Investment Conclusion We are maintaining our BUY rating and increasing our target price to $11.50. We continue to like TI for its strong cash flow, AI traction, and positioning ahead of a potential market recovery.