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

Good afternoon, everyone, and welcome to the Fourth Annual Meeting of the Shareholders of TELUS International. I'm Josh Blair, and I'm pleased to be your Chair for this meeting. As we look to ensure that we are making ourselves and our company as accessible as possible to all of our shareholders on an effective and efficient basis, we are again having you attend our annual meeting in a virtual format via a live webcast. This environmentally friendly approach allows all shareholders and appointed proxy holders from any location worldwide to attend, participate and vote at the meeting. Guests are also welcome to attend and listen to our meeting. Now I would like to formally introduce the people helping me conduct this meeting today. The first is Jeff Puritt, our long-standing President and Chief Executive Officer and a Director on our Board, and as we all know, the heartfelt champion of our team and our company's caring culture and our customer-centric vision. Also helping me today is Michel Belec, our Chief Legal Officer. Michel will be acting as the Secretary of this meeting. As well, we have Abi Sills with us, our Chief General -- our General Counsel and Assistant Corporate Secretary. Abi will be acting as our moderator for the question period, which will immediately follow the completion of the formal items of business and termination of the meeting. 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. Before we proceed with the business of the meeting, let me turn the call over to Jeff, who has a few remarks.

Thank you, Josh, and good afternoon, everyone. Our industry experienced strong headwinds in 2023 with persistent macroeconomic pressures felt across many of the sectors we serve, where clients took a very cautious stance on spending or outright curtail their IT budgets. TELUS International's growth was adversely impacted by meaningfully lower revenues from one of our largest clients, a leading social media company, particularly as it relates to our European operations, where we saw an abrupt reduction in service volumes in the second quarter of 2023. In response, our team worked diligently to mitigate this unfavorable impact and improve our performance in the second half of 2023. We generated $2.7 billion in revenue in 2023, delivering a year-over-year increase of 10% on a reported basis and 9% in constant currency as well as growth of 2% on an organic basis. Taken in the context of a very challenging year, this was a solid result, supported by the expansion in services provided to existing clients like TELUS Corporation and Google, from which our revenues grew year-over-year by 31% and 20%, respectively, amongst other existing clients and together with the addition of new clients throughout the year. This momentum continued in Q1 2024 with TELUS and Google Drive revenues growing 22% and 30%, respectively, year-over-year. We also put into action meaningful operational efficiency programs in 2023, which will contribute $104 million in annualized savings for 2024 and helped us exit the year with a margin profile much closer to our historical average with our fourth quarter adjusted EBITDA margin of 23.7%. This improved cost base provides a solid foundation for our business to start 2024. In 2023, TELUS International also generated strong free cash flow of $405 million, a testament to our continuing focus on driving profitable growth. We have a scaled global presence with approximately 75,000 team members, greatly augmented by our access to a global AI community of more than 1 million, serving more than 650 clients across our diversified footprint of 68 delivery locations in 32 countries around the world. Our key strategic goal is to further establish TELUS International as the AI fuel customer experience partner of choice on the merits of our differentiated end-to-end service offerings and expertise including in the fast-moving area of generative AI and its application to customer experience in particular. While technology continues to reshape the world around us, our company is well positioned to play a meaningful role at the forefront of this evolution in customer experience excellence. Through this change, I believe what will remain constant is the value of the human element. Across all of our technological innovations past and future, we believe that it's the human or even more broadly humanity in the loop that will ultimately determine the success and ethical use of any technology. As part of the TELUS family, we have a long history of social responsibility and commitment to sustainability and ESG. At TELUS International, as we move further along on our public company journey, we're proud to share our second stand-alone Sustainability and ESG report that was published in April, where you can dive deeper into our progress against our 4 pillars and 23 commitments on ESG. Among notable highlights in 2023, TELUS International and our team members invested over $1.6 million in communities through local grants, including $500,000 in donations from our community boards as well as through payroll and in-kind donations. Our team members contributed 93,815 volunteer hours. We planted 25,100 trees, and we protected 3.8 million bees. While our ESG report contains noteworthy statistics, what's even more impactful is to remember that behind each of those numbers is a living person, social issue, an environmental challenge we're helping to support and address. On that note, I'll now pass it over to Michel to review today's agenda and outline some procedural matters. Michel?

Thank you, Jeff, and hello, everyone. As outlined in 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 a question-and-answer session during which we would be pleased to answer your questions. Let's now turn to the meeting procedures. I'm pleased to advise that we have the necessary quorum. The preliminary scrutineer's report indicates that approximately 98.2% of eligible votes are represented 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 a notice of today's meeting to all registered holders of TELUS International shares as well as a notice advising on how to view and download our Information Circular. I'm 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 Steven 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, am honored to serve as a Member and Vice Chair of the TELUS International Board and have already introduced Jeff Puritt, our President and CEO and a member of our Board. In addition to Jeff and I, our other nominees are Madhuri Andrews, Olin Anton, Navin Arora, Darren Entwistle, Doug French, Tony Geheran, Sue Paish, Carolyn Slaski and Sandra Stuart. Each nominee's biographical information can be found in our Information circular. I am pleased to confirm that following this meeting and with the support of our Board of Directors, Darren has agreed to serve again as our Chair of the Board. I'm also pleased to confirm that following this meeting and again, with the support of our Board of Directors, I will serve as a lead director. As was the case last year, and despite the fact that he's entitled to compensation, Darren has again requested that the company in TELUS not provide them with any compensation for his service as a member and Chair of the Board should he be reelected. I would also like to note that members of our executive team are attending our virtual meeting today. They provide the strong leadership and commitment that drive the success of our company. And on behalf of the Board, I thank each of you. Now let's proceed with those matters that require a vote at this meeting. Michel, would you explain the voting procedures that shareholders will be following?

Yes. Thank you, Josh. However, before we discuss the voting procedure, I'd like to table TELUS International's audited annual financial statements for the year ended December 31, 2023, which were included in the 2023 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'll 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 are logged in today, either as a shareholder or a guest, you should see the info screen displayed. 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're listening to the webcast, just click the broadcast icon or the arrow. We are using the Lumi Virtual Meeting platform for today's meeting. This platform allows for online voting and only registered shareholders or validly appointed proxy holders may vote. We have asked Nicole Gutierrez, a shareholder, to make motions today. This is just intended to make the meeting flow more smoothly. So when the chair declares the poll 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. Now to change your vote, just select the other voting option and if you'd like to cancel your vote just press cancel. In order for your vote to be a property recorded, it's important that you remain connected to the Internet at all times. If you're not connected, just note that your vote may not be recorded. Josh will open a poll on both items of business at the same time. And that, again, the election of the directors and the appointment of our auditors. This will enable you to have ample time to vote. He'll remind you of your choices for each item and after the last item of business, he will provide a reminder for you to vote if you have not already done so, and then Josh will close the poll. 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 just take 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's being discussed, please submit it at the time the resolution is being presented. Abi Sills will monitor all questions submitted, and we'll relay them to Josh. If there are many questions on the same topic, she may pick one question or summarize the nature of the questions. 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 also be available on the Investor Relations section of our website as soon as practical after today's meeting, and we will leave that online for at least 1 week. Now once the shareholders and proxy holders have had a reasonable opportunity to express their views, both for and against the matter, and the interest of keeping to our schedule, Josh may end the discussion and even if not everyone has had a chance to speak. All right. With that, I'll turn to the first item of business to be voted on. Josh, over to you.

Thanks again, 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 backgrounds. 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. Chair, 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.

Okay. Thank you. For the election of the directors, you will see the names of all 11 nominees. Please scroll down to ensure you have voted for all of them. To cast your vote for a nominee, please select for. To withhold your vote to a nominee, please select withhold. 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 and subsequently supported by the full Board. May I please have a motion for the appointment of the auditors?

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 auditors?

There are no questions on this matter, Josh.

Thank you. On the motion to appoint the auditors, to cast your vote for the auditor's appointment, please select for, withhold your vote, please select withhold. We will now continue with the voting. If you have not already done so, please vote on both items of business. I will give you some additional time to finalize your vote selections. [Voting]

Okay. I trust everyone has now voted. So I declare the poll closed on all items of business. Thank you very much. And our scrutineer has tabulated the results, and we can confirm these 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. This officially conclude the meeting. At this time, I invite shareholders and proxy holders to submit their questions online. As Michel noted earlier, you can select the messaging tab and then take your question or comment in the chat box at the top of your messaging screen. Please remember to press the arrow button in order to send your question you should receive a confirmation that your question has indeed been received. To ensure there is adequate time for your questions, we will continue this 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 and will be available for 1 week following posting. Abi, can we please have the first question?

Thank you, Josh. But it appears there are no questions for us to answer today.

Okay. Thanks, Abi. A reminder to those on the call that shareholders are always welcome to ask questions by e-mailing our Investor Relations team at [email protected]. Once again, that's [email protected]. In closing, I would like to reiterate the Board's confidence in our TELUS International management team and our strategy to advance TI's position as an AI-fueled, customer experience partner of choice. With the Board's active oversight, we promote thoughtful and proactive succession planning for each leadership role. From time to time, we also welcome change that brings with it new perspectives to help shape the company's strategy, navigate near-term uncertainties while advancing the longer-term vision of TELUS International. In this regard, and starting with our most recent appointments, TI's new Chief Growth Officer, Brian Hannon, has been a trusted and effective member of our commercial leadership team for several years. Having cultivated many key customer engagements around the globe, his relationships and leadership are invaluable to continue growing and evolving our TI business in 2024 and beyond. Brian is driving the implementation of the premier sales organization framework to transform TELUS International's commercial teams across all of our service lines. Additionally, in March, TI welcomed Gopi Chande as our new Chief Financial Officer. Gopi brings a wealth of experience and expertise to us, including a high degree of familiarity with the business given her 14 years of tenure as a member of the TELUS leadership community. Her stewardship of the continued drive for top line diversification across TELUS International with an ongoing focus on profitability and industry-leading free cash flow yield is already palpable. And in June of 2023, Jose-Luis Garcia took charge as our Chief Operating Officer. His critically important mandate includes accelerating our integration programs and enabling further optimization of our operational delivery on a global scale. And while certainly not new to the team at this point, I'd like to highlight the role of Tobias Dengel, President of WillowTree. Tobias is now also leading our critically important strategy to augment the company's GenAI capabilities. and to position TELUS International's Fuel iX offering, in particular, as the gold standard in the market. In summary, the leadership community here at TELUS International, who collectively have over 200 years of industry relevant experience are dedicated to realizing TI's ambitions for meaningful profitable revenue growth and free cash flow growth. On behalf of the Board and the management team at TELUS International, I would like to once again thank our shareholders and investors for their continued support. I also extend my deep and enduring appreciation to all TELUS International team members around the world for their unwavering commitment to our customers, our colleagues and our communities. With that, we'd like to share a short video discussing TI's commitment to sustainability and ESG. Thank you all for your attention today. Goodbye and best regards. [Presentation]