TELUS International(TIXT) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - TELUS International reported a 36% year-over-year increase in revenue, reaching $533 million, and a 56% year-over-year increase in adjusted EBITDA, amounting to $131 million [9][44][55] - Adjusted diluted earnings per share doubled year-over-year to $0.24, reflecting strong revenue scale and a higher mix of value-added services [44][55] - Free cash flow increased by 109% year-over-year, totaling $71 million, driven by strong earnings growth and modest capital expenditures [44][60] Business Line Data and Key Metrics Changes - The Tech & Games vertical experienced the highest growth at 59% year-over-year, with nearly 70% of this growth attributed to the acquisition of Lionbridge AI, now rebranded as TELUS International AI Data Solutions [48] - The eCommerce & Fintech vertical achieved a revenue growth of 49% year-over-year, indicating strong demand in this sector [49] - The Communications & Media vertical grew by 11% year-over-year, while all other industry verticals collectively grew by 23% year-over-year [50] Market Data and Key Metrics Changes - Revenue growth was observed across all geographic regions, with particularly strong growth in Europe due to high demand for trust and safety services [47] - North America and Asia Pacific also showed strong growth, driven by increased client demand [47] Company Strategy and Development Direction - The company is focused on cultivating high-value digital engagements and expanding its capabilities in AI and data solutions, which are critical for future growth [9][27] - TELUS International is actively pursuing strategic acquisitions to enhance its technological capabilities and expand its market reach [58][95] - The integration of Lionbridge AI is progressing well, with successful cross-selling of services to existing clients [92] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, raising the full-year revenue guidance to a range of $2.17 billion to $2.21 billion, reflecting a growth of 37% to 40% over the previous year [63][64] - The company noted a competitive labor market but reported manageable wage inflation and a decrease in attrition levels [39][84] - Management highlighted the ongoing demand for trust and safety services and digital customer experience solutions as key drivers of future growth [68] Other Important Information - TELUS International was recognized for its diversity and inclusion initiatives, ranking among Mogul's Top 100 Workplaces [37] - The company has a strong liquidity position with approximately $815 million available, allowing for potential strategic acquisitions [57] Q&A Session Summary Question: Drivers of guidance raise and expectations for organic growth - Management raised guidance based on Q2 performance and strong momentum in trust and safety and digital CX offerings, with organic growth expected to accelerate in the latter half of the year [68][70] Question: Insights on new wins and bookings - Management indicated that recent major wins are significant multiyear contracts with potential game-changing impacts, although specific details were limited due to disclosure constraints [78][80] Question: Wage inflation and labor market dynamics - Management acknowledged wage inflation due to increased demand for talent but noted that attrition levels have decreased, indicating effective management of labor challenges [84][86] Question: Integration of Lionbridge AI and future M&A plans - The integration of Lionbridge AI is progressing well, with expectations for continued M&A activity to enhance growth and technological capabilities [90][95] Question: Growth in the eCommerce & Fintech vertical - Management highlighted strong growth in the eCommerce & Fintech vertical, driven by digital IT capabilities and partnerships with major clients [100][101] Question: Gross margins and wage hikes - Management noted that planned hiring and merit increases impacted gross margins in Q2, but normalization is expected in the second half of the year [105][106] Question: Sales funnel updates - The sales funnel remains robust, exceeding $2 billion, with a substantial portion converted in Q2 and replenished with new opportunities [112] Question: Competitive landscape and differentiation - Management emphasized the importance of innovation and strategic partnerships in maintaining competitive differentiation, particularly in the tech and gaming sectors [120][122] Question: Growth sustainability in content moderation - Management believes growth in content moderation is sustainable due to the increasing volume of user-generated content and the company's ability to manage this complexity [130][131]