TELUS Digital (Cda) Inc T.TIXT

More Analysis of Earnings

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Once again, this is a long term investment. GLTA

TIXT reported EPS of $0.3805 beating estimates of $0.336 and revenues of $932.14M beating estimates of $931.64M. Revenues grew by 15% for the year, and its Adjusted EBITDA of $155M grew by 9%. Its growth was driven by an expansion in services provided to existing clients as well as new clients added since the prior year. Its net profit margin shrunk compared to last year, from 5.7% to 2.0%, largely due to higher operating and other expenses. Excluding sales from its acquisition of WillowTree, revenue grew by 5%. Management reiterated its guidance for FY2023. Part of its decline in net profits was driven by higher interest expenses, as it increased its debt balance to fund the acquisition of WillowTree.

We feel guidance for FY2023 of 20.3% to 22.8% revenue growth and Adjusted EBITDA growth of 16% to 19% is strong, but the market did not like its decline in free cash and profits for the quarter, along with its increase in debt. We feel that the increased debt to fund its acquisition will prove to be a good move in the long-run. We continue to like the name and feel that it is well-priced, but we would like to see its price find some support and begin to see positive momentum. (5iResearch)