Core Insights - TELUS International (Cda) Inc. has garnered significant hedge fund interest and is listed among the 10 Cheapest Penny Stocks to Buy Now [1] - Scotiabank has raised its price target for TELUS International from $3.40 to $4.50, reflecting a proposed acquisition price that is approximately 32% higher than the initial offer [2][3] - The acquisition agreement between TELUS Corporation and TELUS International is viewed as a favorable outcome for shareholders, particularly in the current macroeconomic environment [4] Price Target Revision - Scotiabank's price target revision follows TELUS Corporation's agreement to fully acquire TELUS International, indicating optimism about the deal [2][3] - The revised target price of $4.50 aligns with the acquisition price, which is significantly higher than the initial offer [3] Company Overview - TELUS International provides global digital customer and AI-driven solutions, including cloud and automation services, trust and safety, and AI data solutions [4] - The company is recognized as one of the 10 Cheapest Penny Stocks to Buy Now, highlighting its potential for investment [4]

Group 1 - TELUS Digital has been named a Leader in the Everest Group's CXM PEAK Matrix® for the Americas [1] - The recognition is attributed to TELUS Digital's capabilities in customer experience (CX) transformation, Fuel iX™, agentic AI, and automation [1]

Group 1 - Telus International (NYSE:TIXT) is identified as a promising AI stock under $5, with Scotiabank raising its price target to $4.50 from $3.50, reflecting an 11% year-to-date increase [1][2] - The price target increase follows TELUS's announcement to acquire all outstanding shares of TELUS Digital for $4.50, which aims to enhance operational integration and AI capabilities across various sectors [2][4] - Scotiabank views the merger as the best possible outcome for shareholders in the current macroeconomic environment, indicating a positive outlook for the company's future [3] Group 2 - TELUS's President and CEO, Darren Entwistle, emphasized that the merger will enhance AI capabilities and software-as-a-service (SaaS) transformation across telecommunications, healthcare, and consumer goods sectors, benefiting global customers [4] - Telus International specializes in AI-driven digital solutions, including computer vision, data annotation, and search relevance, supporting enterprise applications across industries such as fintech, healthcare, e-commerce, and media [5]

Core Viewpoint - TELUS International has filed its management information circular in connection with a special meeting of shareholders to discuss a proposed arrangement with TELUS Corporation [1] Group 1 - The special meeting of shareholders is scheduled to be held virtually on October 27, 2025, at 9:00 a.m. Vancouver time [1] - The arrangement under consideration involves TELUS Corporation, which is listed on both TSX and NYSE [1]

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]

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 attributed to operating expenses outpacing revenue growth [24][25] Business Line Data and Key Metrics Changes - Revenue from AI and data solutions continued to grow, with a focus on diversifying client base [20][21] - The customer experience service line faced cost pressures, particularly from top-line pricing and geographic labor cost differences [30] - Digital solutions saw strong client engagement, with approximately 10% of new bookings from new clients and 90% from existing clients [13][14] Market Data and Key Metrics Changes - Revenue growth was observed in the Americas and Europe, while the Asia Pacific segment experienced softer year-over-year results [22] - The technology and gaming sectors contributed significantly to revenue, with an 11% increase driven by growth with social media and technology clients [21] - E-commerce and fintech sectors saw a 14% year-over-year revenue decrease due to declining service volumes [22] Company Strategy and Development Direction - The company aims to enhance operational methods, AI capabilities, and overall efficiency programs to mitigate margin pressures [6][10] - Focus remains on business evolution, service quality excellence, and talent development to drive sustainable revenue growth [10][11] - The company is positioning itself as a trusted independent partner in the AI space, differentiating from competitors [9] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing margin pressures due to competitive pricing, labor inflation, and complex work requirements [5][6] - There is optimism about future prospects, particularly in AI and data solutions, with expectations for continued growth [12][19] - The company reiterated its outlook for approximately 2% revenue growth for the full year 2025 on a constant currency basis [25] Other Important Information - A goodwill impairment charge was recorded 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] Q&A Session Summary Question: Can you discuss the margin pressures and restructuring carried out in the quarter? - Management identified customer experience and content moderation as areas under pressure, with actions to improve workforce management and pricing discipline [30][32][34] Question: What is the update on AI solutions and market dynamics? - The AI consulting business is evolving strongly, moving from proofs of concept to full deployment, with significant growth expected in 2026 and 2027 [39][40] Question: Are there more IT services or technology vendors becoming competitive? - Competition remains intense, but differentiation is achieved through advanced capabilities beyond traditional customer experience work [49][50] Question: What verticals are seeing differences in AI adoption? - Significant differences exist in AI application based on industry, with gaming and content moderation leading, while financial services are slower due to regulatory concerns [55][56] Question: Can you elaborate on discretionary spending recovery? - Demand for cost optimization projects is increasing across various industries, with a rebound in classic digital business activities [62][63] Question: What is the situation with Google as a client? - Revenue from Google is expected to shift from basic work to more complex projects, aligning with the company's strategic goals [73][74]

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]

[Condensed Interim Consolidated Statements of Income (Loss) and Other Comprehensive Income (Loss)](index=2&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Income%20(Loss)%20and%20Other%20Comprehensive%20Income%20(Loss)) [Income Statement Overview](index=2&type=section&id=Income%20Statement%20Overview) TELUS International reported a significant net loss for Q2 and H1 2025, driven by substantial amortization and goodwill impairment, as operating expenses exceeded modest revenue growth Income Statement Overview (millions USD) | Metric (millions USD) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $699 | $652 | $1,369 | $1,309 | | Operating Expenses | $965 | $641 | $1,632 | $1,260 | | Operating (Loss) Income| $(266) | $11 | $(263) | $49 | | Net (Loss) Income | $(272) | $(3) | $(297) | $25 | | Basic EPS | $(0.98) | $(0.01) | $(1.07) | $0.09 | | Diluted EPS | $(0.98) | $(0.08) | $(1.07) | $(0.05) | - A significant increase in **Amortization of intangible assets and impairment of goodwill** from **$44 million to $271 million** for the three months ended June 30, 2025, and from **$89 million to $317 million** for the six months ended June 30, 2025, was a primary driver of the operating and net losses[3](index=3&type=chunk) [Condensed Interim Consolidated Statements of Financial Position](index=3&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Financial%20Position) [Financial Position Overview](index=3&type=section&id=Financial%20Position%20Overview) As of June 30, 2025, the company's total assets slightly decreased compared to December 31, 2024, primarily due to a reduction in goodwill and intangible assets, while total liabilities increased, leading to a decrease in owners' equity Financial Position Overview (millions USD) | Metric (millions USD) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Assets | $4,439 | $4,521 | | Current Assets | $761 | $707 | | Non-current Assets | $3,678 | $3,814 | | Total Liabilities | $2,745 | $2,576 | | Current Liabilities | $907 | $745 | | Non-current Liabilities| $1,838 | $1,831 | | Owners' Equity | $1,694 | $1,945 | - **Goodwill decreased from $1,926 million to $1,789 million**, and **intangible assets, net, decreased from $1,379 million to $1,344 million**, contributing to the overall decrease in total assets[5](index=5&type=chunk) - **Current liabilities increased significantly from $745 million to $907 million**, driven by increases in accounts payable and accrued liabilities, due to affiliated companies, and current portion of provisions[5](index=5&type=chunk) [Condensed Interim Consolidated Statements of Changes in Owners' Equity](index=4&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Changes%20in%20Owners'%20Equity) [Owners' Equity Changes Overview](index=4&type=section&id=Owners'%20Equity%20Changes%20Overview) Owners' equity decreased significantly from $1,945 million at January 1, 2025, to $1,694 million at June 30, 2025, primarily due to a net loss of $297 million, partially offset by other comprehensive income and share-based compensation Owners' Equity Changes Overview (millions USD) | Metric (millions USD) | January 1, 2025 | June 30, 2025 | | :-------------------- | :-------------- | :------------ | | Total Owners' Equity | $1,945 | $1,694 | | Net Loss | — | $(297) | | Other Comprehensive Income | — | $34 | | Share-based Compensation | — | $12 | - **Retained earnings shifted from a positive balance of $286 million at January 1, 2025, to a deficit of $(11) million by June 30, 2025**, reflecting the net loss incurred during the period[7](index=7&type=chunk) [Condensed Interim Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Cash%20Flows) [Cash Flow Overview](index=5&type=section&id=Cash%20Flow%20Overview) Cash provided by operating activities decreased for the six months ended June 30, 2025, compared to the prior year, while cash used in investing activities remained relatively stable, and cash used in financing activities also decreased, resulting in a net decrease in cash and cash equivalents for the period Cash Flow Overview (millions USD) | Metric (millions USD) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating Activities | $63 | $124 | $132 | $250 | | Investing Activities | $(31) | $(28) | $(58) | $(53) | | Financing Activities | $(26) | $(97) | $(107) | $(171) | | Net Change in Cash | $14 | $(2) | $(23) | $25 | | Cash, End of Period | $151 | $152 | $151 | $152 | - **Cash provided by operating activities for the six months ended June 30, 2025, was $132 million, a decrease from $250 million** in the prior year, despite adjustments for non-cash items like depreciation, amortization, and goodwill impairment[10](index=10&type=chunk) - **Long-term debt issued significantly increased to $387 million** for the six months ended June 30, 2025, compared to $90 million in the prior year, while **repayment of long-term debt also increased to $452 million** from $212 million[10](index=10&type=chunk) [Notes to Condensed Interim Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Interim%20Consolidated%20Financial%20Statements) [General application](index=6&type=section&id=General%20application) This section details TELUS International's rebranding, financial statement basis, IFRS accounting updates, and capital structure policies - **TELUS International (Cda) Inc. was formally rebranded to TELUS Digital Experience in Q3 2024**, focusing on digital customer experience solutions and future-focused digital transformations[12](index=12&type=chunk) - The condensed interim consolidated financial statements are **prepared in United States dollars**, **comply with IAS 34, Interim Financial Reporting**, and **follow IFRS Accounting Standards**[17](index=17&type=chunk) [1. Condensed interim consolidated financial statements](index=6&type=section&id=1.%20Condensed%20interim%20consolidated%20financial%20statements) This section discusses financial seasonality and the limited expected impact of new IFRS 18, IFRS 9, and IFRS 7 accounting standards - The company's **financial performance is subject to seasonality**, with **revenues typically higher in the third and fourth quarters**, though this can vary based on client operating environments and foreign currency rates[16](index=16&type=chunk) - **IFRS 18, effective January 1, 2027**, will replace IAS 1, **requiring new subtotals for operating profit and profit before financing and income taxes**, and **enhanced disclosure of management-defined performance measures**, with the company **expecting limited material impact** on total financial disclosure[18](index=18&type=chunk)[19](index=19&type=chunk)[24](index=24&type=chunk) - **Amendments to IFRS 9 and IFRS 7, effective January 1, 2026**, address classification of financial assets with ESG features and de-recognition dates for electronic payments, with the company **not expecting material impacts**[20](index=20&type=chunk) [2. Capital structure financial policies](index=7&type=section&id=2.%20Capital%20structure%20financial%20policies) The company manages capital to optimize cost and availability at acceptable risk levels, defining capital as owners' equity, long-term debt, and cash - The company's objective in managing capital is to **maintain a flexible capital structure that optimizes cost and availability of capital at acceptable risk levels**[21](index=21&type=chunk) - **Capital is defined to include owners' equity, long-term debt, and cash and cash equivalents**, and **management monitors financial covenants in its credit facility**[22](index=22&type=chunk) [3. Revenue](index=8&type=section&id=3.%20Revenue) Revenue for the three and six months ended June 30, 2025, showed growth, primarily driven by the Tech and Games, Communications and Media, and Healthcare industry verticals, with Europe and North America contributing most to the revenue increase Revenue by Industry Vertical (millions USD) | Industry Vertical (millions USD) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Tech and Games | $304 | $275 | $586 | $553 | | Communications and Media | $175 | $158 | $348 | $318 | | eCommerce and FinTech | $56 | $65 | $114 | $133 | | Healthcare | $51 | $47 | $101 | $96 | | Banking, Financial Services and Insurance | $42 | $39 | $82 | $75 | | All others | $71 | $68 | $138 | $134 | | **Total Revenue** | **$699** | **$652** | **$1,369** | **$1,309** | Revenue by Geographic Region (millions USD) | Geographic Region (millions USD) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Europe | $212 | $187 | $415 | $383 | | North America | $200 | $180 | $384 | $368 | | Asia-Pacific | $160 | $164 | $317 | $321 | | Central America and others | $127 | $121 | $253 | $237 | | **Total Revenue** | **$699** | **$652** | **$1,369** | **$1,309** | - Effective for Q1 2025, **Asia-Pacific now includes Africa**, and **Central America and others includes South America**, with comparative information restated[26](index=26&type=chunk) [4. Share-based compensation](index=8&type=section&id=4.%20Share-based%20compensation) The company grants equity-settled RSUs, PSUs, and share options, with activity in these plans impacting share capital and compensation expense - RSUs and PSUs are granted, with **PSUs having variable payouts (0%-300%) based on operating performance targets or relative total shareholder return**[27](index=27&type=chunk) RSU/PSU Activity (units) | RSU/PSU Activity (units) | Outstanding, beginning of period (Non-vested) | Granted | Vested | Exercised | Forfeited | Outstanding, June 30, 2025 (Non-vested) | | :----------------------- | :-------------------------------------------- | :------ | :----- | :-------- | :-------- | :-------------------------------------- | | Three months ended June 30, 2025 | 25,277,511 | 103,094 | (105,969)| — | (3,521,056)| 21,753,580 | | Six months ended June 30, 2025 | 20,180,936 | 8,882,253| (3,167,785)| — | (4,141,824)| 21,753,580 | - As of June 30, 2025, outstanding restricted share units comprised **12,308,395 RSUs**, **8,670,676 PSUs with non-market conditions**, and **774,509 PSUs with market conditions**[29](index=29&type=chunk) Share Option Activity (units) | Share Option Activity (units) | Outstanding, beginning of period (Non-vested) | Vested | Forfeited | Outstanding, June 30, 2025 (Non-vested) | | :---------------------------- | :-------------------------------------------- | :----- | :-------- | :-------------------------------------- | | Three months ended June 30, 2025 | 2,899,794 | — | (83,279) | 2,816,515 | | Six months ended June 30, 2025 | 2,988,882 | (89,088)| (83,279) | 2,816,515 | [5. Interest expense](index=9&type=section&id=5.%20Interest%20expense) Interest expense decreased for both the three and six months ended June 30, 2025, primarily due to lower interest on long-term debt, excluding lease liabilities Interest Expense (millions USD) | Interest Expense (millions USD) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest on long-term debt, excluding lease liabilities | $21 | $26 | $41 | $50 | | Interest on lease liabilities | $9 | $8 | $16 | $15 | | Amortization of financing fees and other | $1 | — | $2 | $1 | | Interest accretion on provisions| $3 | $2 | $5 | $5 | | **Total Interest Expense** | **$34** | **$36** | **$64** | **$71** | [6. Income taxes](index=10&type=section&id=6.%20Income%20taxes) The company recorded an income tax recovery for both the three and six months ended June 30, 2025, primarily due to deferred income tax recovery and adjustments for prior periods, despite current income tax expense Income Tax (millions USD) | Income Tax (millions USD) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Current income tax expense (recovery) | $(1) | $10 | $10 | $22 | | Deferred income tax recovery | $(34) | $(6) | $(45) | $(9) | | **Total Income Tax (recovery) expense** | **$(35)** | **$4** | **$(35)** | **$13** | - The **effective income tax rate for the six months ended June 30, 2025, was 10.5%**, **significantly lower than the 34.2% in the prior year**, influenced by goodwill impairment and losses not recognized[32](index=32&type=chunk) [7. Earnings (loss) per share](index=10&type=section&id=7.%20Earnings%20(loss)%20per%20share) Basic and diluted EPS reflected a significant loss for Q2 and H1 2025 due to net loss, with anti-dilutive share-based compensation and written put options excluded EPS Metric (millions except per share) | EPS Metric (millions except per share) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income for the period | $(272) | $(3) | $(297) | $25 | | Weighted average number of equity shares outstanding | 278 | 275 | 277 | 274 | | Basic (loss) earnings per share | $(0.98) | $(0.01) | $(1.07) | $0.09 | Diluted EPS Metric (millions except per share) | Diluted EPS Metric (millions except per share) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fully diluted net (loss) income | $(272) | $(24) | $(297) | $(15) | | Weighted average number of diluted equity shares outstanding | 278 | 294 | 277 | 291 | | Diluted (loss) earnings per share | $(0.98) | $(0.08) | $(1.07) | $(0.05) | - For the periods ended June 30, 2025, **dilutive effects of share-based compensation and written put options were excluded from diluted loss per share calculation because their conversion would decrease the loss per share (anti-dilutive)**[37](index=37&type=chunk) [8. Accounts receivable](index=11&type=section&id=8.%20Accounts%20receivable) Accounts receivable increased as of June 30, 2025, compared to December 31, 2024, with a notable increase in billed customer accounts receivable over 61 days past due, and the allowance for doubtful accounts also saw a slight increase Accounts Receivable (millions USD) | Accounts Receivable (millions USD) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Accounts receivable – billed | $228 | $194 | | Accounts receivable – unbilled | $229 | $240 | | Other receivables | $43 | $28 | | Allowance for doubtful accounts | $(9) | $(8) | | **Total** | **$491** | **$454** | Customer Accounts Receivable – Billed (millions USD) | Customer Accounts Receivable – Billed (millions USD) | June 30, 2025 | December 31, 2024 | | :--------------------------------------------------- | :------------ | :---------------- | | Less than 30 days past billing date | $131 | $123 | | 30-60 days past billing date | $56 | $52 | | 61-90 days past billing date | $23 | $8 | | More than 90 days past billing date | $9 | $3 | - The **allowance for doubtful accounts increased from $8 million at the beginning of 2025 to $9 million at June 30, 2025**, with **$1 million in additions** during the six-month period[41](index=41&type=chunk) [9. Financial instruments](index=12&type=section&id=9.%20Financial%20instruments) The company uses derivative financial instruments to manage currency and interest rate risks, measured at fair value, with some designated for hedge accounting - The **carrying values of most current financial instruments and long-term debt approximate their fair values**[42](index=42&type=chunk) - **Derivative financial instruments are used to manage exposure to currency risks (EUR:USD, PHP:USD) and interest rate risk**, with fair values estimated based on market prices or discounted future cash flows[43](index=43&type=chunk)[45](index=45&type=chunk) - **Some foreign currency hedges are designated as held for trading (HFT) without hedge accounting**, while **others are designated as held for hedging (HFH) with hedge accounting applied**, particularly for currency risks from Euro business acquisition and interest rate risk[46](index=46&type=chunk)[47](index=47&type=chunk) [10. Property, plant and equipment](index=13&type=section&id=10.%20Property%2C%20plant%20and%20equipment) The net book value of property, plant and equipment increased from $456 million at December 31, 2024, to $507 million at June 30, 2025, driven by additions to both owned assets and right-of-use lease assets Property, Plant and Equipment (millions USD) | Property, Plant and Equipment (millions USD) | December 31, 2024 | June 30, 2025 | | :------------------------------------------- | :---------------- | :------------ | | Owned assets, net book value | $238 | $257 | | Right-of-use lease assets, net book value | $218 | $250 | | **Total Net Book Value** | **$456** | **$507** | - **Additions to owned assets totaled $46 million** and to **right-of-use lease assets totaled $61 million** during the six months ended June 30, 2025[48](index=48&type=chunk) [11. Intangible assets and goodwill](index=13&type=section&id=11.%20Intangible%20assets%20and%20goodwill) Intangible assets and goodwill decreased from $3,305 million to $3,133 million, primarily due to a **$224 million goodwill impairment loss** reflecting macroeconomic pressures Intangible Assets and Goodwill (millions USD) | Intangible Assets and Goodwill (millions USD) | December 31, 2024 | June 30, 2025 | | :-------------------------------------------- | :---------------- | :------------ | | Total intangible assets, net book value | $1,379 | $1,344 | | Goodwill, net book value | $1,926 | $1,789 | | **Total intangible assets and goodwill** | **$3,305** | **$3,133** | - A **goodwill impairment loss of $224 million** was recorded for the six months ended June 30, 2025, due to prolonged macroeconomic pressures affecting customer demand and key future growth assumptions[51](index=51&type=chunk) - The recoverable amount for goodwill was determined using a **fair value less costs of disposal method (Level 3 fair value measure)**, with a **discount rate of 10.1%** and a **perpetual growth rate of 2.5%**[52](index=52&type=chunk) [12. Provisions](index=14&type=section&id=12.%20Provisions) Total provisions increased from $146 million at January 1, 2025, to $163 million at June 30, 2025, primarily due to additions related to employee restructuring and other activities, partially offset by usage and reversals Provisions (millions USD) | Provisions (millions USD) | January 1, 2025 | June 30, 2025 | | :------------------------ | :-------------- | :------------ | | Employee related | $6 | $9 | | Written put options | $134 | $134 | | Other | $6 | $20 | | **Total** | **$146** | **$163** | - During Q2 2025, the company implemented a **workforce restructuring initiative** at one of its delivery locations, leading to **additions in employee-related restructuring provisions**[54](index=54&type=chunk) - A **provision for written put options related to the WillowTree acquisition in 2023 remained at $134 million**[55](index=55&type=chunk) [13. Long-term debt](index=15&type=section&id=13.%20Long-term%20debt) Total long-term debt increased to $1,560 million at June 30, 2025, from $1,525 million at December 31, 2024, primarily due to an increase in lease liabilities, and the company remains in compliance with all financial covenants of its credit facility Long-term Debt (millions USD) | Long-term Debt (millions USD) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Credit facility | $1,280 | $1,284 | | Lease liabilities | $289 | $249 | | Deferred debt transaction costs | $(9) | $(8) | | **Total Long-term Debt** | **$1,560** | **$1,525** | - The credit facility, maturing January 3, 2028, has an **effective interest rate of 6.7%** as of June 30, 2025 (vs 6.5% at Dec 31, 2024)[57](index=57&type=chunk) - The company was **in compliance with all financial covenants**, including the **Net Debt to Adjusted EBITDA ratio (not to exceed 3.75:1.00)** for 2025 and **Adjusted EBITDA to Debt Service ratio (not less than 1.50:1.00)**[59](index=59&type=chunk) Long-term Debt Maturities (millions USD) | Long-term Debt Maturities (millions USD) | Long-term debt, excluding leases | Leases (U.S. dollars) | Leases (European euros) | Leases (Other currencies) | Total | | :--------------------------------------- | :------------------------------- | :-------------------- | :---------------------- | :------------------------ | :---- | | 2025 (remainder of year) | $30 | $10 | $8 | $12 | $60 | | 2026 | $60 | $18 | $11 | $26 | $115 | | 2027 | $60 | $17 | $8 | $21 | $106 | | 2028 | $1,130 | $16 | $5 | $19 | $1,170| | 2029 | — | $20 | $5 | $14 | $39 | | Thereafter | — | $33 | $27 | $19 | $79 | | **Total Principal Repayments** | **$1,280** | **$114** | **$64** | **$111** | **$1,569**| [14. Share capital](index=16&type=section&id=14.%20Share%20capital) The company's authorized share capital includes unlimited Preferred Shares, Multiple Voting Shares, and Subordinate Voting Shares, with 164 million Multiple Voting Shares and 114 million Subordinate Voting Shares issued as of June 30, 2025 Share Capital (millions) | Share Capital (millions) | June 30, 2025 (Issued) | December 31, 2024 (Issued) | | :----------------------- | :--------------------- | :------------------------- | | Multiple Voting Shares | 164 | 164 | | Subordinate Voting Shares| 114 | 112 | - **66 million authorized but unissued subordinate voting shares are reserved for share-based compensation plans**, and **4 million for the employee share purchase plan**[62](index=62&type=chunk) [15. Contingent liabilities](index=16&type=section&id=15.%20Contingent%20liabilities) The company has indemnification obligations with no significant historical payments and is party to various legal proceedings with uncertain outcomes - Indemnification obligations are provided in conjunction with certain transactions, with no maximum limit in some cases, but historically, **no significant payments have been made**[63](index=63&type=chunk)[64](index=64&type=chunk) - The company is involved in various legal proceedings and claims, the **ultimate outcome of which is inherently uncertain and could potentially impact operations and financial condition**[65](index=65&type=chunk) [16. Related party transactions](index=17&type=section&id=16.%20Related%20party%20transactions) TELUS, the controlling parent, is a significant related party with whom the company engages in recurring service transactions and recognizes share-based compensation for key management - **TELUS and its subsidiaries receive customer care, integrated business process outsourcing, information technology outsourcing, and digital product development services** from the company[67](index=67&type=chunk) Transactions with TELUS and subsidiaries (millions USD) | Transactions with TELUS and subsidiaries (millions USD) | Three months ended June 30, 2025 | Six months ended June 30, 2025 | | :------------------------------------------------------ | :------------------------------- | :----------------------------- | | Revenues from services provided to | $179 | $357 | | Goods and services purchased from | $(6) | $(13) | | Due from affiliated companies | $28 | $28 | | Due to affiliated companies | $(314) | $(314) | - **Share-based compensation expense of $3 million and $5 million was recognized for key management personnel** during the three and six months ended June 30, 2025, respectively[70](index=70&type=chunk)[71](index=71&type=chunk) [17. Additional financial information](index=19&type=section&id=17.%20Additional%20financial%20information) This section provides supplementary financial details, including major client revenue, accounts payable breakdown, and reconciliation of non-cash working capital and financing liabilities - **TELUS, the controlling shareholder, accounted for 26.1% of consolidated revenue** for the six months ended June 30, 2025 (vs 24.4% in 2024), and **Google accounted for 11.6%** (vs 14.3% in 2024)[72](index=72&type=chunk) Accounts Payable and Accrued Liabilities (millions USD) | Accounts Payable and Accrued Liabilities (millions USD) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------------ | :------------ | :---------------- | | Trade accounts payable | $21 | $36 | | Accrued liabilities | $106 | $102 | | Payroll and other employee-related liabilities | $175 | $159 | | Advance billings | $20 | $12 | | Other | $34 | $12 | | **Total** | **$356** | **$321** | Changes in Liabilities from Financing Activities (millions USD) | Changes in Liabilities from Financing Activities (millions USD) | Six months ended June 30, 2025 (Issued or received) | Six months ended June 30, 2025 (Repayments or payments) | | :-------------------------------------------------------------- | :-------------------------------------------------- | :------------------------------------------------------ | | Credit facility | $387 | $(406) | | Lease liabilities | — | $(46) |