Core Insights - TELUS Corporation has reached a definitive agreement to acquire all outstanding shares of TELUS International, valuing each share at $4.50, totaling approximately $539 million [1][9] - The acquisition is expected to enhance TELUS's digital customer experience, accelerate AI capabilities, and drive SaaS transformation across its core businesses [3][9] - The deal has been unanimously approved by TELUS Digital's board and is supported by EQT, the largest minority shareholder [4][5] Financial Details - Shareholders will have three payment options: $4.50 in cash, 0.273 of a TELUS common share, or a combination of $2.25 in cash and 0.136 of a TELUS share, with no more than 25% of the total consideration paid in shares [2] - The agreed price represents a 52% premium over TELUS Digital's closing share price of $2.96 on June 11, 2025 [2] - The transaction values TELUS Digital at $2.9 billion and is subject to shareholder, court, and regulatory approvals [5] Strategic Implications - The acquisition aligns with TELUS's broader strategy to strengthen its position in digital transformation, AI, and global innovation across multiple industries [3][5] - TELUS Digital's operating revenues increased by 8% in Q2 2025, aided by a stronger U.S. dollar and euro, while adjusted EBITDA decreased by 25.8% year-over-year [6] - The integration aims to enhance TELUS's capabilities in fintech, gaming, media, and healthcare, ensuring substantial value creation for shareholders [3][5] Approval Process - A special shareholder meeting is scheduled for October 27, 2025, with TELUS Digital shareholders of record on September 12 eligible to vote [5] - If approved, the transaction is expected to close in Q4 2025, after which TELUS Digital's shares will be delisted [5][9]

Company Performance - TELUS Digital reported quarterly earnings of $0.06 per share, exceeding the Zacks Consensus Estimate of $0.05 per share, but down from $0.16 per share a year ago, representing an earnings surprise of +20.00% [1] - The company posted revenues of $699 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.93%, compared to $652 million in the same quarter last year [2] - Over the last four quarters, TELUS Digital has surpassed consensus EPS estimates two times and topped consensus revenue estimates four times [2] Stock Outlook - TELUS Digital shares have declined approximately 3.8% since the beginning of the year, while the S&P 500 has gained 7.8% [3] - The current consensus EPS estimate for the upcoming quarter is $0.09 on revenues of $675.26 million, and for the current fiscal year, it is $0.32 on revenues of $2.71 billion [7] - The estimate revisions trend for TELUS Digital was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Internet - Software industry, to which TELUS Digital belongs, is currently in the top 31% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

TELUS International (Cda) (TIXT) Q2 2025 Earnings Call August 01, 2025 10:30 AM ET Company ParticipantsElena Lebac - Investor Relations OfficerJason Macdonnell - President, Acting CEO & COO - TELUS Digital & Customer ExperienceTobias Dengel - President - TELUS Digital Solutions & WillowTreeGopi Chande - CFOPuneet Jain - Associate - Equity ResearchJonathan Lee - Managing Director - Equity ResearchDivya Goyal - Director - Equity Research - Technology, Software & ServicesAravinda Galappatthige - MD - Instituti ...

Financial Data and Key Metrics Changes - TELUS Digital generated revenue of $699 million, an increase of 7% year over year or 6% on a constant currency basis [19] - Adjusted EBITDA margin was 13.4%, reflecting a year-over-year decrease due to increased salary and benefits, as well as goods and services purchased outpacing revenue growth [22][23] - Free cash flow for the quarter was $33 million, with a year-over-year decline primarily due to increases in operating expenses outpacing revenue growth [25][26] Business Line Data and Key Metrics Changes - Revenue from AI and data solutions continued to grow, with a focus on diversification across more clients [20] - Customer experience service line faced cost pressures due to client budgetary constraints and geographic labor cost differences [32] - Digital solutions area saw strong client engagement, with approximately 10% of new bookings coming from new clients and 90% from existing clients [13] Market Data and Key Metrics Changes - Revenue growth was observed in the Americas and Europe, while revenue in the Asia Pacific segment was softer year over year [22] - The healthcare and communication/media industry verticals grew significantly, with healthcare revenue increasing by 119% [21] - E-commerce and fintech revenue decreased by 14% year over year due to a decline in service volumes [22] Company Strategy and Development Direction - The company is focused on operational improvements, service quality excellence, and talent development to drive sustainable revenue growth and improved margins [10][11] - There is an emphasis on leveraging AI capabilities and advanced methods to enhance operational efficiency [10][11] - The company aims to position itself as a trusted independent partner in the AI space, differentiating itself in a competitive marketplace [8][9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing margin pressures due to competitive pricing, labor inflation, and complex work requirements [4][5] - The outlook for revenue growth remains at approximately 2% on a constant currency and organic basis for the full year 2025 [26] - Management expressed confidence in the company's ability to navigate challenges and emphasized the importance of operational excellence [10][11] Other Important Information - The company recorded an impairment charge on goodwill in Q2 due to updated financial modeling assumptions [18] - The leverage ratio was elevated at 3.75 times as of June 30, 2025, primarily due to lower adjusted EBITDA and a non-cash increase in derivative liabilities [24][25] Q&A Session Summary Question: Can you discuss the margin pressures and the restructuring carried out in the quarter? - Management identified customer experience and content moderation as areas under pressure, with actions taken to improve workforce management and pricing discipline [32][34] - Restructuring included costs related to rebalancing with a customer in Europe and ongoing efficiency programs [36] Question: What is the update on AI solutions and market dynamics? - The AI consulting business is evolving strongly, with a shift from proofs of concept to full deployment expected in 2026 and 2027 [42] - The company is seen as a trusted advisor in large language model development, with promising projects underway [44] Question: Are there more IT services or technology vendors becoming competitive? - Management noted that while the number of competitors remains stable, the competitive pressure is increasing in terms of advancing capabilities beyond traditional customer experience work [52] Question: What verticals are seeing a return in discretionary spending? - The digital solutions space is experiencing increased demand for cost optimization projects, with a rebound in classic digital business activities [61][63] Question: Can you provide insights on key clients beyond the top three? - Growth is noted across various sectors, including healthcare and communications, with a diverse client base contributing to overall revenue growth [71][73] Question: What is the impact of the Scale AI acquisition by Meta? - The company has seen increased interest from clients seeking alternative partners following the acquisition, presenting new opportunities [49] Question: How is the company addressing margin pressures? - Management is focused on pricing accuracy, workforce management, and leveraging AI capabilities to improve efficiency and stabilize margins [88][90] Question: What types of investments are being made in Gen AI? - Investments are focused on managing workforce talent, project execution, and ensuring high-quality datasets to support model training [96][98]

Core Viewpoint - Telus International reported quarterly earnings of $0.06 per share, exceeding the Zacks Consensus Estimate of $0.05 per share, but down from $0.16 per share a year ago, indicating a 20% earnings surprise [1][2] Financial Performance - The company achieved revenues of $699 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.93%, compared to $652 million in the same quarter last year [2] - Over the last four quarters, Telus International has exceeded consensus EPS estimates two times and topped revenue estimates four times [2] Stock Performance - Telus International shares have declined approximately 3.8% since the beginning of the year, contrasting with the S&P 500's gain of 7.8% [3] Future Outlook - The company's earnings outlook is crucial for investors, with current consensus EPS estimates at $0.09 for the upcoming quarter and $0.32 for the current fiscal year, with revenues projected at $675.26 million and $2.71 billion respectively [7] - The Zacks Rank for Telus International is currently 4 (Sell), indicating expectations of underperformance in the near future [6] Industry Context - The Internet - Software industry, to which Telus International belongs, is currently ranked in the top 31% of over 250 Zacks industries, suggesting a favorable environment for stocks in this sector [8]

Exhibit 99.1 TELUS INTERNATIONAL (CDA) INC. CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 2025 TELUS International (Cda) Inc. Condensed Interim Consolidated Statements of Income (Loss) and Other Comprehensive Income (Loss) (unaudited) | | | | | Three months | | | | Six months | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Periods ended June 30 (millions except earnings per | | | | | | | | | | | share) | Note | | 2025 | | 2024 | | 2025 | | 2024 | | REVENUE | 3 ...

Core Viewpoint - TELUS Corporation has submitted a non-binding indication of interest to acquire TELUS Digital, aiming to enhance operational integration and drive AI and SaaS transformation across various sectors [1][2]. Group 1: Acquisition Proposal - TELUS proposes to acquire all outstanding shares of TELUS Digital at a price of US$3.40 per share, representing a 15% premium over the closing share price on June 11, 2025, and a 23% premium over the 30-day volume weighted average trading price [1][2]. - The acquisition is expected to provide TELUS Digital shareholders with liquidity at a compelling value and strengthen TELUS's growth strategy and operational efficiency [1][2]. Group 2: Operational Integration - Closer operational integration between TELUS and TELUS Digital is anticipated to enhance AI capabilities and SaaS transformation across telecommunications, health, agriculture, and consumer goods sectors [1][2]. - TELUS Digital is expected to remain a key business unit within TELUS, contributing to customer service excellence and digital transformation [2]. Group 3: Financial and Legal Considerations - The proposal is subject to confirmatory due diligence, agreement on transaction structure, and approval from the TELUS Digital board of directors [3][4]. - TELUS currently owns approximately 92.5% of the multiple voting shares and 6.1% of the subordinate voting shares of TELUS Digital, representing 57.4% of all outstanding shares [6][7]. Group 4: Advisory and Future Plans - Barclays is acting as the exclusive financial advisor to TELUS, while Stikeman Elliott LLP and A&O Shearman are serving as legal advisors [5]. - TELUS has no current plans beyond the acquisition proposal but may consider future transactions depending on market conditions [8].

Group 1: Earnings Performance - Telus Digital reported quarterly earnings of $0.06 per share, matching the Zacks Consensus Estimate, but down from $0.22 per share a year ago [1] - The company had a loss of $0.04 per share last quarter, which was a surprise of -300% compared to the expected loss of $0.01 per share [1] - Over the last four quarters, Telus Digital has only surpassed consensus EPS estimates once [1] Group 2: Revenue Performance - The company posted revenues of $670 million for the quarter ended March 2025, exceeding the Zacks Consensus Estimate by 2.86% and up from $657 million year-over-year [2] - Telus Digital has topped consensus revenue estimates three times over the last four quarters [2] Group 3: Stock Performance and Outlook - Telus Digital shares have declined approximately 32.7% since the beginning of the year, compared to a decline of -3.7% for the S&P 500 [3] - The future performance of the stock will depend on management's commentary during the earnings call and the earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.06 on revenues of $656.42 million, and for the current fiscal year, it is $0.33 on revenues of $2.7 billion [7] Group 4: Industry Context - The Technology Services industry, to which Telus Digital belongs, is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable outlook [8] - The top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [8]

Group 1: Earnings Performance - Telus International reported quarterly earnings of $0.06 per share, matching the Zacks Consensus Estimate, but down from $0.22 per share a year ago [1] - The company had a loss of $0.04 per share in the previous quarter, which was a surprise of -300% compared to the expected loss of $0.01 per share [1] - Over the last four quarters, Telus International has only surpassed consensus EPS estimates once [1] Group 2: Revenue Performance - The company posted revenues of $670 million for the quarter ended March 2025, exceeding the Zacks Consensus Estimate by 2.86% and up from $657 million year-over-year [2] - Telus International has topped consensus revenue estimates three times over the last four quarters [2] Group 3: Stock Performance and Outlook - Telus International shares have declined approximately 32.7% since the beginning of the year, compared to a decline of -3.7% for the S&P 500 [3] - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at $0.06 for the coming quarter and $0.33 for the current fiscal year on revenues of $656.42 million and $2.7 billion, respectively [7] Group 4: Industry Context - The Technology Services industry, to which Telus International belongs, is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Telus International's stock performance [5][6]

Revenue and Earnings - Revenue for the three months ended March 31, 2025, was $670 million, a 1.98% increase from $657 million in the same period of 2024[26] - The largest revenue contributions came from the Tech and Games sector at $282 million, followed by Communications and Media at $173 million[26] - Basic loss per share for the three months ended March 31, 2025, was $(0.09), compared to earnings of $0.10 per share in the same period of 2024[34] - The company reported a net loss of $25 million for the three months ended March 31, 2025, compared to a net income of $28 million in the same period of 2024[34] - Revenues from services provided to TELUS and its subsidiaries amounted to $178 million for the three months ended March 31, 2025, compared to $160 million in the same period of 2024[62] - TELUS accounted for 26.6% of consolidated revenue in Q1 2025, up from 24.3% in Q1 2024; Google contributed 12.0%, down from 14.5%[64] Expenses and Financial Management - Interest expense for the three months ended March 31, 2025, totaled $30 million, down from $35 million in the same period of 2024, reflecting a decrease of 14.29%[31] - The company’s interest on long-term debt, excluding lease liabilities, was $20 million for the three months ended March 31, 2025, down from $24 million in the same period of 2024[31] - Share-based compensation expense for key management personnel was recognized at $2 million for the three-month period ended March 31, 2025[63] - The company initiated a restructuring program in April 2025, which is expected to impact personnel-related provisions[50] Assets and Liabilities - The total accounts receivable as of March 31, 2025, was $459 million, slightly up from $454 million as of December 31, 2024[37] - The allowance for doubtful accounts increased from $2 million at the beginning of the period to $8 million by March 31, 2025, reflecting a significant rise in provisions[39] - The total property, plant, and equipment increased from $1,053 million at the beginning of the year to $1,098 million by March 31, 2025, indicating growth in owned assets[45] - Intangible assets and goodwill rose from $3,971 million at the beginning of the year to $4,024 million by March 31, 2025, driven by foreign exchange adjustments and software additions[46] - The accumulated amortization of intangible assets was $720 million as of March 31, 2025, reflecting ongoing depreciation of intangible assets[46] - The company reported a net book value of property, plant, and equipment of $465 million as of March 31, 2025, compared to $456 million at the end of 2024[45] - Total accounts payable and accrued liabilities decreased slightly from $321 million as of December 31, 2024, to $317 million as of March 31, 2025[65] - The company experienced a net decrease in accounts receivable of $15 million in Q1 2025, compared to a decrease of $18 million in Q1 2024[66] Debt and Capital Structure - As of March 31, 2025, total long-term debt amounted to $1,490 million, a decrease from $1,525 million as of December 31, 2024[52] - The credit facility includes an $800 million revolving credit facility and a $1.2 billion term loan, with an effective interest rate of 6.7% as of March 31, 2025[53] - The company has a Net Debt to Adjusted EBITDA ratio requirement not to exceed 3.75:1.00 for fiscal 2025, with a minimum Adjusted EBITDA to Debt Service ratio of 1.50:1.00[54] - Anticipated long-term debt repayments for 2025 total $62 million, with $1,094 million due in 2028[56] - As of March 31, 2025, the company had $595 million available under the revolving credit facility[54] - The credit facility balance was $1,284 million at the beginning of Q1 2025, with repayments of $189 million during the period[67] - Long-term debt decreased from $1,750 million at the beginning of Q1 2024 to $1,490 million at the end of Q1 2025[67] Other Financial Information - The fair value of derivative financial instruments related to currency risks from Euro business acquisition was $10 million as of March 31, 2025, with a notional amount of $33 million[43] - The fair value of derivatives used to manage currency risks from Philippine peso purchases was $1 million with a notional amount of $85 million as of March 31, 2025[43] - The company established a provision for written put options related to the acquisition of WillowTree in 2023[51] - As of March 31, 2025, the company had no recorded liability for indemnification obligations[58] - The company reported a cash payment of $28 million for capital assets in Q1 2025, compared to $19 million in Q1 2024[66] - Capital expenditures for property, plant, and equipment were $22 million in Q1 2025, compared to $13 million in Q1 2024[66] - Lease liabilities increased from $249 million at the beginning of Q1 2025 to $254 million at the end of the period[67] - The company is assessing the impacts of new accounting standards effective January 1, 2027, but does not expect material effects on financial disclosures[20] - The recoverable amount of the TELUS Digital cash-generating unit was slightly above its carrying amount, determined using a discount rate of 9.8% and a perpetual growth rate of 3.0%[47] - The company noted that any adverse changes in future financial performance could lead to material impairment charges for the TELUS Digital cash-generating unit's goodwill[49]