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 its results for the three-month period ended March 31, 2024. 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.
“TELUS International delivered first quarter results in line with our expectations, amidst a backdrop of lingering macroeconomic pressures,” said Jeff Puritt, President and CEO of TELUS International. “At all levels and across all areas of our organization, we continue to focus on further establishing ourselves as the AI-fueled customer experience partner of choice by our clients, prospects and partners, as well as throughout the industry based on our differentiated end-to-end service offerings and expertise. With this objective in mind, we are starting to see the success of our efforts manifest through the client mandates we are winning, the continued evolution of our capabilities, the partnerships we are forming and the industry recognition we are receiving.”
Jeff continued, “We’re encouraged by the progression of our Fuel iX generative AI client engagements led by our WillowTree team. The momentum we are starting to establish is supported by the beta launch of Fuel iX Core and Fuel iX Apps, two new solution layers we introduced to the market in April as part of the product roadmap for our enterprise-grade AI engine. In the first quarter, our WillowTree sales team won deals with two well-established American financial services companies, including Inspira Financial, on the strength of our Fuel iX offering. The team also secured mandates with a multinational consumer credit reporting agency, an American biotechnology company, a movie theater chain that operates the second-largest theater circuit in the United States, and a global fashion house Coach, among other new clients. Our global TELUS International sales team won deals with several new clients in the quarter as well, including a multinational hospitality company and a Canada-based global e-commerce powerhouse, among others. We also expanded our scope of work with many of our long-tenured clients, including one of the largest global logistics providers, a leading ride-hailing services company and an American telecommunications and media conglomerate. Our momentum remains strong in AI Data Solutions, driven by the strength of our relationship with Google in particular, while we’re also working diligently on pilots and opportunities with many major foundational AI model developers. We also continue to be a beneficiary of steady growth with TELUS Corporation, our parent company and anchor client, including further ramp up within its TELUS Health business that we expect to continue throughout 2024.”
Jeff added: “Our global team also started the year with some well-deserved industry rankings, recognition and awards. This included a Leader ranking in Everest Group’s PEAK Matrix Assessment 2024 for Data Annotation and Labeling Solutions for AI and Machine Learning, and being named on The Global Outsourcing 100 list for the eighth consecutive year, placing us amongst the best providers for size and growth, customer references, awards and certifications, programs for innovation and corporate social responsibility. Also for the eighth year in a row, our company was recognized by the Business Intelligence Group, receiving a 2024 Excellence in Customer Service Award, for our team’s commitment and contribution to transforming customer experiences in today's digital economy.”
Gopi Chande, CFO said, “In the first quarter of 2024, TELUS International maintained a robust level of profitability and continued to generate strong cash flows, despite persistent macroeconomic pressures. In addition to meaningful global cost efficiency programs executed over the past nine months that provided solid foundation for our business at the start the year, we are on a continued path to recovery, with our results in the first quarter reflecting our global team’s focus on harvesting efficiency gains, while managing our expenses and capital expenditures carefully to drive strong cash flow.”
Gopi concluded: “Our outlook for 2024 is unchanged and remains prudent based on our view of client demand and our assumptions around the macroeconomic conditions in the near-term—we still expect to see demand starting to recover in the latter part of 2024. Our entire organization remains committed to delivering profitable growth, fueling investments in sales and marketing, along with ongoing technology innovation. Our balance sheet remains healthy and our leverage position is within our steady-state range, with strong cash flow generation to enable further debt repayment throughout the remainder of 2024.”
Provided below are financial and operating highlights that include certain non-GAAP measures and ratios. See the Non-GAAP section of this news release for a discussion on such measures and ratios. Beginning in the three-month period ended March 31, 2024, we no longer exclude share-based compensation expense, changes in business combination-related provisions, and the tax effects of these items, as applicable, in our presentation of Adjusted Net Income, Adjusted Basic and Diluted EPS, and Adjusted EBITDA. We believe this presentation is more indicative of underlying business performance, and better aligns the presentation of these non-GAAP financial measures and ratios with comparable measures and ratios of TELUS Corporation, our parent company. All comparative financial information herein has been restated to conform to the current period presentation.
Q1 2024 vs. Q1 2023 summary
- Revenue of $657 million, a decrease of $29 million or 4% year-over-year on a reported basis and a decrease of 5% on a constant currency basis1, due to lower revenues from a leading social media client and a reduction in revenue in other industry verticals, notably in eCommerce and FinTech and Travel and Hospitality, reflecting macroeconomic conditions, which were partially offset by growth in services provided to existing clients, including TELUS Corporation and Google, as well as new clients added since the same period in the prior year; the first quarter revenue included a favorable impact of less than 1%, associated with the weakening U.S. dollar exchange rate against the euro.
- Net income of $28 million and diluted EPS of $0.05, compared with net income of $14 million and diluted EPS of $0.05, respectively, in the same quarter of the prior year, reflecting other income arising from business combination-related provisions, lower share-based compensation, and lower salaries and benefits, partially offset by lower revenues, while diluted EPS were impacted by an increase in weighted average number of diluted equity shares outstanding during the period. Net income margin, calculated by dividing net income by revenue for the period, was 4.3%, compared with 2.0% for the same quarter in the prior year. Net income and diluted EPS include the impact of acquisition and integration charges, amortization of purchased intangible assets and interest accretion on written put options, among other items. Adjusted Net Income1, which excludes the impact of such items, was $65 million, compared with $63 million in the same quarter of the prior year, due to other income arising from business combination-related provisions and lower share-based compensation expense, which were offset by a decline in revenue outpacing the decline in operating expenses.
- Adjusted EBITDA1 was $153 million, an increase of 9% from $141 million in the same quarter of the prior year, primarily due to other income arising from business combination-related provisions and lower share-based compensation expense, which were partially offset by lower revenue. Adjusted EBITDA Margin1 was 23.3%, an improvement of 270 basis points from 20.6% in the same quarter of the prior year, due to the aforementioned factors, as well as changes in our revenue mix across industry verticals and geographic regions. Adjusted Diluted EPS1 was $0.22, compared with $0.23 in the same quarter of the prior year, due to an increase in weighted average number of diluted equity shares outstanding during the period.
- Cash provided by operating activities was $126 million and Free Cash Flow1 was $107 million, with a year-over-year growth of 58% and 65%, respectively, primarily due to higher net inflows from working capital, which included higher cash receipts from TELUS Corporation, and lower income taxes paid, with these increases partially offset by lower operating profits and, in the case of Free Cash Flow, higher capital expenditures.
- Net Debt to Adjusted EBITDA Leverage Ratio1 as per credit agreement was 2.9x as of March 31, 2024 compared with 2.8x as of December 31, 2023, but remained within our target steady-state range of 2-3x.
- Team member count was 74,590 as of March 31, 2024, a decrease of 3% year-over-year, primarily reflecting team member reductions taken since the first quarter of the prior year, particularly in Europe to better align with demand volumes.
A discussion of our results of operations is included in our Management’s Discussion and Analysis for the three-month period ended March 31, 2024, which is filed on SEDAR+ and as Exhibit 99.2 to our Form 6-K filed on EDGAR. Such materials and additional information are also provided at telusinternational.com/investors.
1 Revenue growth on a constant currency basis, Adjusted EBITDA Margin, Adjusted Diluted EPS and Net Debt to Adjusted EBITDA Leverage Ratio are non-GAAP ratios, while Adjusted Net Income, Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. See the Non-GAAP section of this news release.
Outlook
For the full-year 2024, management continues to expect:
- Revenue in the range of $2,790 to $2,850 million, representing growth of 3% to 5%
- Adjusted EBITDA in the range of $623 to $643 million, representing growth of 7% to 10%, and Adjusted EBITDA Margin in the range of 22.3% to 22.6%
- Adjusted Diluted EPS in the range of $0.93 to $0.98, representing growth of 7% to 13%