Telus International Earnings Call: Mixed Signals Amid Growth

Telus International (Cda), Inc. ((TSE:TIXT)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Telus International (Cda), Inc. painted a mixed picture for investors. While the company showcased moderate revenue growth and strong client relationships, these positives were tempered by a decline in adjusted EBITDA margin and increased leverage. The call highlighted promising developments in AI, data solutions, and strategic partnerships, but also underscored ongoing financial challenges, particularly in maintaining profitability and managing leverage.

Revenue Growth

Telus International reported a revenue of $670 million, marking a 2% increase year over year, or 3% on a constant currency basis. This growth was primarily driven by advancements in AI, data solutions, and digital solutions, indicating a positive trajectory in these innovative sectors.

Strong Client Relationships

The company emphasized its robust client relationships, with revenue from its largest client, TELUS, growing by 12% year over year. Additionally, there was notable growth with a leading social media client, contributing to a diversified and resilient client base.

Expansion in AI and Data Solutions

Telus International is actively expanding its AI and data solutions offerings, including training solutions for large language models (LLM). This service line has seen significant growth with several clients, positioning the company as a key player in the AI landscape.

Partnerships and New Client Wins

The company announced new partnerships and client expansions, such as a collaboration with Sumsub for trust, safety, and security solutions. Growth was also observed in sectors like healthcare and financial services, highlighting the company’s strategic focus on broadening its market reach.

Decline in Adjusted EBITDA Margin

Despite revenue growth, the adjusted EBITDA margin fell to 13.4%, a decrease from the previous year. This decline was attributed to increased salaries and benefits, higher capital expenditures, and an unfavorable comparison with the prior year.

Leverage Ratio Increase

The net debt to adjusted EBITDA leverage ratio rose to 3.4 times as of March 31, up from 3.2 times at the end of the previous year. This increase indicates a growing challenge in managing the company’s financial leverage.

Challenges in Specific Industry Verticals

While there was growth in the tech and games sectors, it was partially offset by lower revenue from other clients within this vertical. The company also faced challenges in maintaining stable revenue across certain geographies, reflecting the complexities of its diverse market presence.

Forward-Looking Guidance

Looking ahead, Telus International reaffirmed its guidance for the full fiscal year, projecting approximately 2% organic revenue growth. The company anticipates an adjusted EBITDA of around $400 million and an adjusted diluted EPS of 32¢. The focus remains on geographic and service diversification, aiming to navigate market uncertainties and sustain growth through enhanced client engagement, AI-driven solutions, and strategic partnerships.

In conclusion, the earnings call for Telus International (Cda), Inc. highlighted a balanced outlook, with moderate revenue growth and strong client relationships being key positives. However, challenges such as a decline in adjusted EBITDA margin and increased leverage remain areas of concern. The company’s forward-looking strategies, including AI expansion and strategic partnerships, aim to address these challenges and drive future growth.