TELUS International (Cda) Inc. (TIXT) Earnings Call Transcript & Summary

[Presentation] Good afternoon, everyone, and welcome to the Second Annual Meeting of the Shareholders of TELUS International. I'm Josh Blair, and I am pleased to be your Chair for this meeting. As we continue to adjust to the endemic stage of COVID and continue to use technology to promote connectivity with our shareholders, we are again having you attend our annual meeting in a virtual-only format via a live webcast. This approach protects the health and safety of our shareholders, employees and communities, and also importantly, allows all shareholders and appointed proxy holders from any location worldwide to attend, participate and vote at the meeting. Our guests are also welcome to attend and listen to our meeting. Now I would like to formally introduce the people helping me to conduct this meeting today. The first is Jeffrey Puritt, our long-standing President and Chief Executive Officer and a Director on our Board, and a truly exceptional champion of our caring culture and customer-centric vision. Also helping me today is Michel Belec, our Chief Legal Officer, and another long-standing and highly valued member of our executive team. Michel will be acting as the Secretary of this meeting. As well, we have Abi Sills with us. Abi is our capable and trusted Vice President of Law and Governance and/or Assisted Corporate Secretary. Abi will be acting as our moderator for the question period that will immediately follow the completion of the formal items of business and the termination of the meeting. Now before we begin, please read the cautionary statement on the screen. Today's meeting will contain forward-looking statements as is typical at these kinds of meetings. These are based on assumptions and subject to risks, including those described in our public filings. But before we proceed with the business of the meeting, let me turn the call over to Jeff, who has a few opening remarks.

Thank you, Josh. Good afternoon, everyone. On behalf of the executive leadership team and I are now almost 68,000 team members in 28 countries around the world, I'd like to begin my remarks by sincerely thanking our shareholders for your trust and ongoing support of TELUS International. In 2021, our first year as a publicly listed company on both the New York and Toronto Stock Exchanges, your company continued to successfully execute our growth strategy. Among our many noteworthy achievements. By year-end, we had generated revenues of $2.2 billion, advanced our global leadership in the exciting AI services space with the launch of our new AI Data Solutions division and significantly grew our team to meet the acceleration in existing client growth and new client demand. Building on this momentum, we've had a very strong start to 2022. On May 6, we released our company's first quarter results with highlights that included revenue of $599 million, representing double-digit organic revenue and profitability growth year-over-year and triple-digit cash flow growth for the same period. Notably, our strong profitability profile and solid balance sheet with total available liquidity growing to $907 million and a leverage ratio of 1.8 as of March 31, creates additional headroom to invest even more in our business to further accelerate our revenue growth trajectory. We continue to have significant capacity to invest in our business, as well as to pursue smart acquisitions despite prevailing macroeconomic uncertainty. Based on our consistent operating and financial performance, we reinforced our previously shared outlook for continued double-digit revenue and profitability growth at scale. TELUS International's strong outlook, robust performance and underlying growth in our core business and our ample liquidity continue to position your company as an attractive destination for capital. Although the widespread economic effects of the prolonged global pandemic and evolving geopolitical risks have significantly exacerbated the challenges of an already tight labor market, TELUS International remains an employer of choice in our industry and a top destination for talent. In the first quarter of 2022, we increased our global family by approximately 5,800 full-time team members, another record increase in a single quarter, representing an impressive organic growth rate of 32% year-over-year. In this regard, we continue to incorporate innovative and immersive solutions as part of our global digital recruitment and team member engagement strategy. This includes the launch of our new metaverse experience. where applicants attend job fairs, our recruiters assess applicant skill competencies and language proficiency and our team members refer candidates all on a virtual basis. Your company's ongoing ability to attract and retain top talent is a significant differentiator and one that continues to enable us to capture the opportunity we continue to drive in client demand. Another key factor supporting our sustained success as an employer of choice is our character that continues to serve as a strong foundation upon which we've built our company since its inception. Not only does it serve as a beacon for recruitment, it helps us engage and retain our valued team members. For 2021, our global team's engagement score was 80%. This is the eighth consecutive year that TELUS International ranked in the top quartile of all organizations of comparable size and global footprint. The numerous benefits of our highly engaged team shine through in many ways, including our ability to embrace change and innovation in order to navigate uncertain times and adapt to exogenous shocks, the impressive financial and operational results we continue to achieve quarter-after-quarter and our collaborative spirit and care for one another in the communities where we all live, work and raise families. Our environmental, social and governance strategy and initiatives also reflect our caring culture. This year, our ESG strategy and integrated reporting was shared publicly for the first time in our company's annual report, which was published on April 13, and can be found on our Investor Relations site. We look forward to progressing our holistic approach to ESG in the months and years ahead, honoring our purpose by caring for our customers, our people and our planet, alongside our team members and Board of Directors, valued partners and clients, 5 TELUS International community Boards and government business and community stakeholders that share our vision. With that, I'll invite Michel to review today's agenda and outline some procedural matters. Michel, over to you.

Thank you, Jeff, and hello, everyone. As outlined on the agenda, in addition to tabling our financial statements, there are 2 matters that we will be voting on: the election of directors and the appointment of auditors. Once both matters have been voted on, we will announce our preliminary voting results, and the business of the meeting will officially come to a close. If you have any comments not related to the business of the meeting, please save them until after the meeting. At that time, we will have our question-and-answer session, during which we would be pleased to answer your questions. Let us now turn to the meeting procedures. I'm pleased to advise that we have the necessary quorum. The preliminary scrutineers' report indicates that approximately 99.5% of eligible votes are represented here today at this meeting. I will add the final scrutineers' report to the minutes of the meeting when available. We have also received a declaration of mailing from Computershare, confirming that it sent the notice of today's meeting to all registered holders of TELUS International shares, as well as a notice advising them how to view and download our information circular. I am tabling the declaration and will add it to the minutes of this meeting. Now let me turn the call back to you, Josh. .

Thank you, Michel. I declare this meeting to be properly constituted. I would like to appoint Stephen Bandola, representative of Computershare, as the scrutineer for this meeting. Let me now introduce you to the 11 Board members standing for election and reelection. All 11 nominees are attending this virtual meeting. I, of course, are honored to serve as a member of the TELUS International Board and have already introduced you to Jeffrey Puritt, our President and CEO and a member of our Board. In addition to Jeff and I, our other nominees include Olin Anton, Kenneth Cheong, Darren Entwistle, Doug French, Tony Geheran, Stephen Lewis, Sue Paish, Carolyn Slaski and Sandra Stuart. Each nominee's biographical information can be found in our information circular. I am also very pleased to confirm that following this meeting and with the support of your Board of Directors, Darren and I have agreed to serve as Chair and Vice Chair, respectively, of the Board. Notably, Darren, Jeff and I are excited to continue our work together alongside our talented director colleagues as we look to steward the continued growth and success of this truly amazing company. I would also like to note that members of our executive team are attending our virtual meeting today. They provide the strong leadership and intense commitment that drive the success of our company. And on behalf of the Board, team, I thank each of you. Now let's proceed with those matters that require a vote at this meeting. Michel, would you please explain the voting procedure that shareholders will be following?

Yes. Thank you, Josh. However, before we discuss the voting procedure, I would like to table TELUS International's audited annual financial statements for the year ended December 31, 2021, which are included in the 2021 annual report. These were made available to shareholders in February. Additional copies are available by sending an e-mail request to our Investor Relations department at [email protected]. Now back to the voting procedure. We will be voting on 2 matters at the meeting today. Voting on both matters will be conducted by an online poll, which I will explain shortly. Let me first explain some of the basic features of our virtual meeting platform and how you can vote at our meeting. When you're logged in today, either as a shareholder or a guest, you should see the info screen display. Here, you can view information about TELUS International and ask questions related to the business of the meeting. To see our slide presentation while you are listening to the webcast, simply click the broadcast icon or the arrow. We are using Lumi, a virtual meeting platform for today's meeting. This platform has online voting for the items of business to be voted on today. Only registered shareholders or validly appointed proxy holders may vote on the items of business. We have asked Nicole Gutierrez, a proxy holder, to make motions today. This is simply intended to make the meeting flow more smoothly. Now how to vote? When the Chair declares the poll is open, you will see a voting icon on your screen and the resolution wording will be displayed. To vote, just select one of the voting options. Your response will be highlighted, and a confirmation message will appear to show that your vote has been received. To change your vote, simply select the other voting options. If you would like to cancel your vote, just press cancel. In order for your vote to be properly recorded, it's important that you remain connected to the Internet at all times. If you are not connected, your vote will not be recorded. Now Josh will open the poll on both items of business at the same time. Again, that being the election of the directors and the appointment of our auditors. This will enable you to have ample time to vote. He will remind you of your choices for each item. And after the last item of business, he will close the poll and provide a reminder for you to input your vote if you have not already done so. Now let me explain the procedure for asking questions. Again, only registered shareholders or validly appointed proxy holders are permitted to ask questions. Questions related to the business of the meeting should be asked during the meeting. Any other questions are welcome, but should be held until the question period that will immediately follow the completion of the formal items of business and termination of the meeting. When you wish to ask a question, please select the messaging tab and then type your question within the chat box at the top of the messaging screen, click the arrow button to submit and you should receive a confirmation that your message has been received. If you have a question related to the resolution that is being discussed, please submit it at the time the resolution is being presented. As mentioned, if you have a general question that is not related to the resolutions, please wait until after the business of the meeting is complete to submit your questions. Abi Sills will monitor all questions submitted and will relay them to Josh. If there are many similar questions on the same topic, Abi may pick 1 question or summarize the nature of the questions. Any questions that are personal in nature or related to customer service will be directed to a representative who will be in touch with you by e-mail after the meeting. Also, any questions pertinent to our meeting that cannot be answered today due to time constraints will be answered and posted on telusinternational.com/investors. A transcript of the questions and answers will be available on the Investor Relations section of our website as soon as practical after today's meeting and will remain online for 1 week. Once shareholders and proxy holders have had a reasonable opportunity to express their views, both for and against the matter, in the interest of keeping to our schedule, Josh may end the discussion, even if not everyone has had a chance to speak. We will now turn to the first item of business to be voted on. Josh, over to you.

Thanks, Michel. I now open the polls for both items of business. Please feel free to vote while I am speaking on each of the items. The first voting item is the election of directors for the upcoming year. The Board has set the number of directors to be elected at 11. The 11 nominees I introduced earlier in this meeting represent a cross-section of diverse experience and background. They have all agreed, if elected at today's meeting, to help direct the future of TELUS International for the next year. Further to our advanced notice requirements for director nominations, Michel has advised me that no additional nominations for election as directors were received. May we please have a motion for the nomination of these 11 individuals.

Mr. Chairman, my name is Nicole Gutierrez, and I'm a registered shareholder. I move that the 11 individuals identified as nominees in the information circular be elected as directors of the company to hold office for the ensuing year.

Thank you, Nicole. Michel, are there any questions on the election of directors?

There are no questions on this matter, Josh.

Thank you, Michel. For the election of directors, you will see the names of all 11 nominees. Please scroll down to ensure you have voted on each and all of the 11 nominees. To cast your vote for a nominee, please select for, to withhold your vote from a nominee, please select withhold. [Voting]

The next item of business to be voted on is the appointment of auditors for the ensuing year. The recommendation to appoint Deloitte LLP was made by the Audit Committee of your Board of Directors and supported by the Board as a whole. May I please have a motion for the appointment of the auditors.

Mr. Chair, I move that Deloitte LLP, chartered professional accountants, be appointed as the auditors of the company for the ensuing year at a remuneration to be fixed by the directors.

Thank you, Nicole. Michel, are there any questions on the appointment of the auditors?

There are no questions, Josh.

Thank you, Michel. On the motion to appoint the auditors, once again, to cast your vote for the auditor's appointment, please select for; and to withhold your vote, please select withhold. [Voting]

All right. Let's continue the voting. If you have not already done so, please vote on both items of business. I can give you some additional time to finalize your vote selections on both matters. [Voting]

I trust everyone has now voted. So I declare the poll closed on all items of business. Thank you. And thanks to the impressive power of today's technology, the scrutineer has tabulated the results, and we can confirm the results. On the first motion, the election of directors, the 11 nominees listed in the information circular are elected. And I so declare them elected. On the second motion, the appointment of auditors, Deloitte LLP, has been appointed as the company's auditors at a remuneration to be fixed by the directors, and I so declare them appointed. A copy of the scrutineers' report with the tabulated results will be available upon request after the meeting. The official results of the meeting will be available on our profile on sedar.com, sec.gov and on telusinternational.com following today's meeting. Now that we have completed the formal items of business for this meeting, I propose that we terminate the meeting and move on to the question-and-answer session. With the consent of the meeting, I declare the meeting terminated. And this concludes the official portion of today's meeting. And at this time, I invite shareholders and proxy holders to submit your questions online. To reiterate what Michel noted earlier, you can select the messaging tab and then type your question or comment in the chat box at the top of your messaging screen. Please remember to press the arrow button to send you should receive a confirmation that your question has been received. To ensure there is adequate time for your questions, we will continue the session for 20 minutes or until there are no further questions, whichever comes first. Questions pertinent to the meeting that cannot be answered at this time will be answered and posted on telusinternational.com/investors, as Michel mentioned, and will be available for 1 week following posting. Abi, can we please have the first question?

Sure, Josh. The first question is, where do you see the most promising growth for opportunities for TELUS International?

Well, that's definitely a question best answered by our CEO. So Jeff, I'm going to throw it over to you.

Thanks very much, Josh. Driven by necessity during the prolonged global pandemic, consumers shifted its scale from in-person brick-and-mortar experiences to digital channels to maintain their daily lives from attending school, working from home to grocery shopping and banking to exercising and consulting with health care professionals. To accommodate these new behaviors and retain and attract customers in this new normal companies had to quickly implement or transform their digital channels and capabilities, oftentimes, leveraging automation, artificial intelligence and machine learning in order to meet consumers where, when and how they were demanding to be served. Not only do brands need to be readily available, these new customer experiences were expected to be frictionless and personalized, as well as safe and secure against backdrop of increased customer scrutiny about data security and privacy and government regulations and interventions concerning fake news, inappropriate and disturbing online content and mitigating bias in AI. TELUS International has carved out an exciting market opportunity at the intersection of digital CX and digital IT, and we have positioned the company well to benefit from these powerful secular tailwinds today and well into the future. With an estimated total addressable market of over $225 billion, the demand for the type of digital experiences and new economy services we provide, such as content moderation, data annotation and computer vision, is expanding rapidly. Indeed, with AI systems being incorporated across a range of applications, from autonomous vehicles, to advanced smart products in our homes, to better search results, to expanded speech recognition, to more human-like bought interactions, AI presents a very promising growth opportunity. Today, TELUS International operated data annotation platform that has a diverse global AI community of more than 1 million members, we speak over 500 languages and dialects to support our ability to provide trusted and diverse data sets to be used in the development of AI algorithms for our customers. We continue to see exceptional traction with new and existing clients across our key verticals at all stages of our end-to-end design, build, deliver capabilities. Tech and games remains our flagship vertical as the highest contributor in absolute dollar revenue, while our eCommerce & Fintech vertical continues to build meaningful scale. Combined, these 2 verticals represent approximately 60% of our total revenues, and we expect an extremely long runway in terms of cross-selling opportunities and growth in scope and scale of services.

Thanks, Jeff. It's such an exciting future on the back of an incredible journey already. So I really appreciate the depth of that answer. Abi, back to you. Do we have any additional questions?

Yes. The next question is, can you please expand on the company's ESG priorities?

Well, given Jeff started on that topic in his comments, I'm going to ask him to continue on. So Jeff, over to you.

Happy to do so, Josh. Thanks. When it comes to ESG, environmental, social governance, impact is what matters most to us, and we harness the power of our teams, hearts, minds and hands to make a meaningful difference with respect to our planets and society's biggest challenges. We're focused on 4 ESG priorities at TELUS International that were approved in 2021 by our Board. Our first priority is hiring, motivating and promoting a diverse and talented team that exceeds our clients' expectations. A diverse team in all facets of our organization that reflects the world in which we live and in which our company operates is key to success in today's dynamic environment. As outlined in our information circular prior to the 2023 Annual General Meeting and thereafter, we're committed to having a Board composition in which at least 30% of our directors are women. We also seek to achieve greater geographic, age and ethnic diversity and will engage qualified independent external advisers to search for candidates that help us meet these diversity objectives. Notably, today, 48% of TI's global team members are women, 42% of managers and above are women and 42% of our executive leadership team are women. Our second priority is giving back to our communities by creating a meaningful and lasting impact to the efforts of our team members. Since 2007, TI has positively impacted the lives of more than 1 million citizens around the world, building stronger communities and helping those in need through large-scale volunteer events and charitable giving. 5 TELUS International community Boards have provided $4.7 million in funding to grassroots charitable organizations since 2011. In 2021 alone, our team members around the world volunteered 70,000 hours of service. With a focus on education, TI team members this year build schools, refurbished classrooms, donated computers and hardware to schools, ran literacy, entrepreneurship and mentoring programs, created instructional videos to preserve local languages and much, much more. Our third ESG priority is supporting a sustainable planet for all, where we continue to pursue a decline in our company's greenhouse gas emissions and water consumption. Over the years, our culture has cared for people and our planet. Our global teams embrace the principles of refuse, reduce, reuse, repurpose and recycle across our delivery sites and offices. Our environmental programs are spearheaded regionally and are focused on the significant ways our team can make a difference in their communities. In Guatemala alone, for example, the team has installed 700 eco stoves and 950 water filters for underprivileged families in rural areas. From planting trees, to beach and park cleanups, our team members invest their time and energy to protect our planet for future generations. Moreover, we ensure sustainability is core to how we design, construct, renovate, operate and innovate our facilities to reduce our carbon footprint. Our specific initiatives include optimizing site potential by utilizing space creatively, selecting sites near transit stations, clustering sites within close proximity of each other to reduce energy, travel and cost, leveraging technology to reduce the need to travel, using nontoxic paints and carbon-neutral or negative fixtures and finishes, offering recycling programs and so on. The TELUS International environmental policy is available on our website for more information. Our fourth priority, adhering to principles of strong corporate governance. We aim to uphold and exceed best practices in corporate governance. For example, we added 4 independent directors to our Board in 2021. Our Audit Committee is comprised solely of independent directors, and independent directors constitute a majority of the members of our Human Resources Committee, 1 independent director serves on the Governance and Nominating Committee. In 2022, TI is undertaking a comprehensive ESG materiality assessment, including confidential surveys and in-depth interviews with clients, team members and other stakeholders. The results of which will help shape the ongoing development and refinement of our ESG action plan, which will be updated and disclosed on an annual basis.

Thanks, Jeff. Super important. Abi, do we have another question?

Yes. The next question asks, if you can please provide an update on TELUS International's back-to-office post-pandemic reopening plans.

That's a big one given our global footprint. Then Jeff, over to you again.

Sure. So during the pandemic, our team members' ability and inclination to embrace innovation and digital technologies served as critical factors in our successful transition to remote work and uninterrupted delivery of our services throughout an unprecedented operating environment. Although the start of 2022 resembled 2021 with surge in cases and new variants of the coronavirus, the business landscape has recently shifted to a greater focus on return-to-work strategies. As we navigate this new phase alongside the rest of the world, we're reopening sites to welcome back our team members, and we're starting to eliminate certain protocols and restrictions, such as mask mandates in many of our locations globally. As of March 31, approximately 70% of our frontline team members continue to work remotely, while increasing numbers of our team members safely returned to our sites. The return on site, however, differs across regions and is subject to local conditions and nuances. So for example, in the Philippines, we continue to steadily and successfully transition our team members back to working in our world-class facilities, with an ongoing focus on ensuring their health and safety through enhanced workstation, common area sanitization protocols and other measures introduced during the pandemic. Contrary to some of our peers in the region, we made the purposeful decision to uphold our facilities lease commitments throughout the pandemic. Our reasoning was threefold: First, we anticipated that, although our pivot to virtual work was successful, our team members would likely need physical spaces again 1 day. Back in 2020, we weren't certain if our sites would be used for work, repurpose to connect socially or reimagine to create more moments of collaboration, innovation, alignment and community, but we knew that we wanted to have the spaces available to explore different opportunities, including hybrid work environments. It's a journey that continues today as we work to refine how we embed flexibility into our working environment for our teams now and into the future. , Second, we wanted to ensure we maintain maximum flexibility in how we're able to serve the unique and varied needs of our diverse clients. This includes how and where they want to be served and having the ability to rapidly scale. These are significant competitive advantages over our peers who gave up much of their physical space due to the pandemic when it comes to expanding our existing client relationships and winning new business. And third, as the largest employer, or among the largest employers in many of the 28 countries where we operate around the world, our business decisions can have ripple effects for families, communities, cities and even broader global environment. And as such, our decisions aren't solely based on our immediate needs or cost savings over the short term, but rather, they're about the long-term sustainable health of the ecosystem and communities in which we operate. And that overarching consideration also influences our return to on-site plans across all our regions.

Thank you, Jeff. I love how you and your management team always take into account the needs of customers, our team, our communities, responsibility in general when making these decisions. It's very admirable. Well, to all of our dear shareholders, it appears there are no other questions at this time. But please note that you are always welcome to ask questions by e-mailing us at our Investor Relations department at ir.telusinternational.com, again, that's [email protected]. We very much appreciate your attendance at our Annual General Meeting. Before we wrap up, I would like to invite Jeff to share some closing remarks.

Thanks again, Josh. Our company's strategy has been consistent over many years now and continues to propel us forward at a remarkable pace. At the core is our focus on people, on our team, on our customers and on our communities. We are committed to the pursuit of profitable growth and excellence through innovation and automation. And we continue to have a very thoughtful approach to acquisitions, which have enhanced our capabilities, expanded our global footprint and accelerated our growth. TELUS International is consistently recognized for excellence by independent third-party organizations and thought leaders in our industry. To share with you a few highlights of our recent awards, TELUS International was named the leader in IDC's Worldwide Digital Customer Care Services 2021 to 2022 market scape, and our company was named to the IAOP Global Outsourcing 100 List for the sixth consecutive year. This list reflects the best providers in our industry across size and growth, customer references, awards and certifications and programs for innovation and corporate social responsibility. TELUS International was also named one of Fast Company's Best Workplaces for Innovators International for 2021, a prestigious ranking that positions us amongst the top companies globally across all industries that are successfully fostering a culture of innovation and empowering employees to create new products and invent new ways of doing business. Most recently, our company was selected as one of Mogul's top 100 companies for diverse representation in 2022. This award recognizes companies that are leading the way with respect to investing in resources and tools and implementing practices that support hiring diverse talent and placing diverse leaders throughout their organizations. These accolades, as well as numerous other awards we received on both a global and regional scale, were made possible by our passionate and dedicated team members, exemplary efforts, dedication and accomplishments. I'd like to once again thank them for their unrelenting commitment to and belief in our company. I'd also like to thank our executive team for their inspirational leadership, and my fellow Board members for their guidance and support throughout the year. In particular, I'd like to acknowledge Josh's contributions to our success as Chair of our Board these many years, as well as express my sincere gratitude for his commitment to continue serving as Vice Chair and Darren's willingness to assume the role of Board Chair. There is no doubt that together, we will continue to capture and capitalize upon the many opportunities ahead. Finally, I'd like to once again thank our shareholders and investors for choosing TELUS International, entrusting us with their capital and their confidence in our ability to deliver growing sustainable value for many years to come. Our outlook is positive, and TELUS International is very well positioned to continue to prosper into the future. Before we conclude our webcast, I invite you all to watch a short video of thanks. Thank you. [Presentation]