TELUS International reports first quarter 2023 results

TELUS International, 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, released its results for the quarter ended March 31, 2023. TELUS Corporation 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 first quarter of 2023, our global team delivered solid performance for TELUS International against the persistent backdrop of numerous macroeconomic challenges, geopolitical uncertainties and historic demand softness. Despite these challenges, our team executed very well in the quarter, with our near-term focus on operating the business with the utmost efficiency, while remaining agile to meet our clients’ increased demand through the balance of the year,” said Jeff Puritt, President and CEO of TELUS International. “Highlights this quarter include progress on WillowTree’s back office process integration, along with new business ramps as we continue to engage with clients on cross-sell opportunities. TELUS International’s sales funnel remains robust, and our global sales and marketing teams continue to diligently replenish our funnel of opportunities. Our new client wins this quarter include a U.S. insurance provider focused on solutions for homeowners and renters; a rapidly growing eCommerce platform based in the United States; an exciting, new sports streaming platform in Germany; a pioneer in the solar power industry with global-leading sales based in the United States; and a leading software platform for digital media measurement and analytics based in the United States.”

Jeff added, “Similarly, we continue to gain incremental and varied business with our existing clients, including the world’s largest eCommerce company; an online game platform and game creation system; a cloud-based web development services provider; a leading global logistics company; and a U.S.-based telecommunications company. Also, in support of existing client demand, TELUS International is further diversifying our delivery footprint to Africa, a continent that’s home to a high-quality talent pool. We are starting small, with a thoughtful approach to unlock new opportunities for future profitable growth over the long term.”

Jeff concluded, “To start the year, TELUS International was recognized for multiple industry awards, a testament to our caring culture and our status as a trusted partner for clients and employer of choice for top global talent. For the fifth consecutive year, our company was named one of the Achievers 50 Most Engaged Workplaces®, an award that recognizes top employers who display leadership and innovation in employee engagement. For the seventh consecutive year, TELUS International was recognized by IAOP’s Global Outsourcing 100, a ranking of the best outsourcing providers across categories of size and growth, customer references, awards and certifications, programs for innovation and corporate social responsibility.”

Vanessa Kanu, CFO said, “TELUS International remains focused on delivering profitable growth, with solid revenue growth of 15% year-over-year, 16% in constant currency, in the first quarter of 2023. When excluding WillowTree, we achieved revenue growth of 5% year-over-year, and 7% in constant currency, which is noteworthy in light of the current challenging macroeconomic environment. Alongside the progress on the integration of WillowTree, debt repayment remains among our key priorities. To this end, after closing of the WillowTree acquisition, we improved our Net Debt to Adjusted EBITDA Leverage Ratio as per our credit agreement to 2.8x in the first quarter, despite WillowTree transaction related outflows that created a one-time impact on cash flows this quarter.”

Vanessa concluded, “Today, we are reiterating our outlook for the full-year 2023. While we expect some headwinds in the near term, we do see some offsetting opportunities and are focusing our collective efforts on what we can control to be as efficient with costs as possible.”

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.

Q1 2023 vs. Q1 2022 highlights

• Revenue of $686 million, up $87 million, a 15% increase year-over-year and 16% on a constant currency basis, driven by growth in services provided to existing clients as well as new clients added since the prior comparative period, including new clients from the acquisition of WillowTree. Excluding revenue earned from WillowTree, our revenue increased 5% and included an unfavorable foreign currency impact of approximately 2% compared with the same quarter of the prior year, associated with the strengthening U.S. dollar exchange rate against the euro.
• Net income of $14 million and diluted EPS of $0.05, compared with $34 million and $0.13 respectively, in the same quarter of the prior year as higher revenues were offset by higher overall operating and other expenses. Net income margin, calculated by dividing net income by revenue for the period, was 2.0%, compared with 5.7% 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 10% higher year-over-year at $76 million in the first quarter of 2023, up from $69 million in the same quarter of the prior year.
• Adjusted EBITDA was $155 million, up 9% from $142 million in the same quarter of the prior year, as higher revenue earned from existing and new clients, including new clients from the acquisition of WillowTree, more than offset the combined increase in salaries and benefits and goods and services purchased. Adjusted EBITDA Margin2 was 22.6%, compared with 23.7% in the same quarter of the prior year, due largely to changes in our revenue mix across industry verticals and geographic regions, higher salaries and benefits costs compared with the prior year, and higher service delivery costs in Europe. Adjusted Diluted EPS was $0.28, 8% higher year-over-year.
• Cash provided by operating activities was $80 million and Free Cash Flow2 was $65 million, compared to $129 million and $104 million, respectively, in the same quarter of the prior year, primarily due to higher net outflows from working capital arising from our acquisition of WillowTree. Excluding these non-recurring acquisition costs, Free Cash Flow would have been $101 million, a decrease of $3 million, or 3%, compared with the same quarter last year.
• Net Debt to Adjusted EBITDA Leverage Ratio as per our credit agreement of 2.8x as of March 31, 2023 compared with 1.1x as of December 31, 2022 and 2.9x immediately after closing of the WillowTree acquisition in January 2023. The improvement in the leverage ratio since the WillowTree acquisition was driven mainly by debt reduction from Free Cash Flow.
• Team member count was 76,752 as of March 31, 2023, an increase of 13% year-over-year.

  A discussion of our results of operations is included in our management’s discussion and analysis for the three-month period ended March 31, 2023, 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.