TELUS Digital reports second quarter 2024 results, delivering consistently strong cash flows despite prolonged macroeconomic pressures; revises the full-year outlook and announces executive leadership appointments
VANCOUVER, British Columbia--(BUSINESS WIRE)--Aug. 2, 2024-- TELUS International (Cda) Inc. (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- and six-month periods ended June 30, 2024. In the third quarter of 2024, we expect to formally complete the rebranding of TELUS International as TELUS Digital Experience (TELUS Digital). The legal name of the company will remain TELUS International (Cda) Inc. In this news release and related disclosure, we refer to TELUS International (Cda) Inc. as TELUS Digital. TELUS Corporation (TSX: T, NYSE: TU) is the controlling shareholder of TELUS Digital. All figures in this news release, and elsewhere in TELUS Digital disclosures, are in U.S. dollars, unless specified otherwise, and relate only to TELUS Digital results and measures.
“It is with immense gratitude and appreciation for his innumerable contributions to TELUS Digital over the past two decades, and almost a quarter of a century as a TELUS team member, that we announce the retirement of Jeff Puritt, President and CEO of TELUS Digital, effective September 3rd,” said Darren Entwistle, President and CEO of TELUS and Chair of the Board of TELUS Digital. “Jeff played a pivotal role in leading and shaping our TELUS Digital business since its inception. In recognition of his unwavering commitment to our global team throughout our company’s journey, Jeff will be assuming the new role of Executive Vice-Chair of the Board of Directors at TELUS Digital. In alignment with the company’s strategy of bringing the best of technology to enable excellence in customer service, and robust succession of the executive leadership talent, we are pleased to welcome Jason Macdonnell as Acting CEO of TELUS Digital and President, TELUS Digital Customer Experience. Jason is a 20-year tenured member of our TELUS senior leadership team, with core expertise and a proven track record in leading customer service excellence across multiple teams at TELUS. In addition, Tobias Dengel, founder and President of WillowTree, will take on the elevated role of President of TELUS Digital Solutions, to propel the continued and successful evolution of our company to the next frontier of technology in CX. Meanwhile, in Jeff’s new capacity, he will be responsible for our corporate development activities, given his expertise in mergers and acquisitions. Jeff’s efforts will complement and amplify the company’s return to profitable growth. In his role, Jeff will also support the government and investor relations functions within TELUS Digital. This will allow Jason and Tobias to fully focus on the organic progression of our strategy and the material elevation of our operational excellence and financial performance.”
Jeff Puritt, President and CEO of TELUS Digital said, “TELUS Digital's second quarter results reflected a macroeconomic and operating environment that remains challenged and is felt by all peers across our industry. Notwithstanding the persistent headwinds, we continue to generate consistently strong cash flows, which we reinvest into the business. Along with good momentum with our two largest clients, TELUS Corporation and Google, we saw further stabilization in revenue with our third largest client, a leading social media network, albeit at the cost of a meaningful re-rating of that account’s margin, which added pressure to our overall profitability in the quarter and for the near term. With a delay in broader demand recovery, we continue to face intensified price competition this year, even though we pivoted toward a revenue growth focus, while carefully recalibrating our margin expectations, to help us support the top line growth in the near term. In another more fundamental pivot, we continue to grow our AI-related business, which generated ~15% of our overall revenue in the first half of 2024, growing 13% year-over-year. Currently, AI-related opportunities represent approximately 10% of our overall sales funnel.”
Jeff continued, “Building upon the early success within our AI funnel, in the second quarter of 2024, our WillowTree sales team won GenAI Jumpstart mandates with one of the largest non-profit organizations in the world, as well as with one of Canada's provincial government departments and with the Agriculture and Consumer Goods business at TELUS, while opportunity exploration engagements are also underway with other clients. Among other notable new logo wins in the quarter, our WillowTree team partnered with a well-known New York business-focused daily publication, and with Wiley, one of the world's largest publishers and a global leader in research and learning, specifically to modernize their marketing technology stack. The WillowTree team further expanded their engagement with Inspira Financial – an American financial services company – in addition to winning more business with CEATI, a membership-based provider of shared cost R&D, training and networking services for power industry professionals, as well as with a large marine boat and propulsion manufacturer and one of the world’s largest hospitality brands, among others. At the same time, our global TELUS Digital sales team won new clients across several diverse sectors, including healthcare, transportation and consumer packaged goods. We expanded engagements across our existing client base, not least as we seek to stabilize volumes with our third largest client, a leading social media network. Our relationship with Google remains strong, driven by AI Data Solutions in particular; and we continue to grow our meaningful and diversified workstreams with TELUS Corporation, as we enable our parent company’s success in digital transformation across all areas of their unique business portfolio.”
Jeff added: “Our efforts to position TELUS Digital as the AI-fueled customer experience partner of choice continues to attract notable recognition in the market. For the fourth consecutive year, TELUS Digital won the Best Informational Bot Solution award from AI Breakthrough, in a nod to the advanced capabilities of our intelligent bot platform. In May, our parent company TELUS made history by becoming the first in the world to be internationally certified in Privacy by Design for its GenAI customer support tool, powered by Fuel iX. And more recently, IDC in collaboration with Foundry’s CIO, selected the Single Point of Contact (SPOC) Copilot, that operates on the Fuel iX platform at TELUS, as a recipient of a 2024 CIO of the Year Award for Canada; the copilot revolutionizes the IT support experience through AI-driven automation and self-service capabilities that enhance employee experience, drive cost savings and instill a digital-first mindset across the organization. Proven success of these real use cases, and the value we are creating for TELUS, serve as direct testimonials for our other clients across various industries.”
Gopi Chande, CFO said, “From a financial performance view, earlier in the year we saw solid signs of the demand recovery on the horizon, including a record in new client bookings in the first quarter, but the pace of new client bookings slowed in the second quarter, despite continued strength in the sales funnel. At the same time, there are many cost efficiency and transformation initiatives underway across our global footprint and all levels of the enterprise to help us transform our delivery costs. However, these will need more time to yield meaningful results to help offset the impact of softer revenue and margin pressures in the near term. Similar to our peers not seeing improvement in the macroeconomic environment, we no longer expect the magnitude of recovery previously expected for the second half of this year. As a result, our financial outlook for the full year 2024 is revised to better reflect the current balance of risks and opportunities.”
Gopi concluded: “Even though overall demand volumes have not yet returned at the levels previously anticipated, we continue to be encouraged by the composition of our sales funnel and expect stabilization over the next two quarters, also supported by further recovery in the demand for WillowTree services. Our revised outlook implies stability and incremental improvement in the sequential half-year revenue and stabilization in margins aligned with the second quarter, when normalized for impacts associated with the WillowTree earnout. At the same time, we continue to push forward with targeted investments in sales and marketing, further strengthening our efforts to rejuvenate growth in certain larger accounts and across our broader client base. While adding some incremental pressure on our margins, these are the right investments to support our ongoing efforts to diversify and grow our revenues prospectively. Importantly, cash flows generated by our business will continue to support our debt repayment and reinvestment into the technology-centric evolution and longer-term growth of TELUS Digital.”
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.