TELUS Digital reports first quarter 2025 results, with revenue and profitability in line with expectations; management reiterates 2025 outlook
VANCOUVER, British Columbia--(BUSINESS WIRE)--May 09, 2025--
TELUS Digital Experience (TELUS Digital) (NYSE and TSX: TIXT), a leading global technology company specializing in digital customer experiences, today released its results for the three-month period ended March 31, 2025. TELUS Corporation (TSX: T, NYSE: TU) is the controlling shareholder of TELUS Digital. All figures in this news release, and elsewhere in TELUS Digital disclosures, are in U.S. dollars, unless specified otherwise, and relate only to TELUS Digital results and measures.
"In the first quarter of 2025, TELUS Digital's operating and financial results were in line with expectations and support our reiteration of the full-year outlook," said Jason Macdonnell, Acting Chief Executive Officer and Chief Operating Officer, TELUS Digital and President, Customer Experience. "Our relationship with TELUS Corporation as an anchor client as well as our overall service diversification continue to provide a certain level of insulation and stability in the current environment. We will continue to invest in and evolve our market and technology capabilities to the benefit of our clients in our pursuit to be the partner of choice as our clients navigate today's business challenges."
Tobias Dengel, President of TELUS Digital Solutions added, "In Digital Solutions, similar to other players in our industry, we're closely monitoring client sentiment trends during the recent period of market volatility. At the same time, we are seeing good engagement with clients on their automation and cost efficiency needs. Focusing on the longer term, we believe the demand for transformation of consumer-facing digital experiences should provide a solid basis for our future growth. We are encouraged that our positioning as a differentiated partner in helping our clients innovate their customer journeys resulted in the first quarter's year-over-year growth in Digital Solutions revenues."
Gopi Chande, Chief Financial Officer said, "Across TELUS Digital's service lines, in the first quarter of 2025 we achieved year-over-year revenue growth, primarily driven by AI & Data Solutions as well as Digital Solutions. We saw growth among the majority of our top five largest clients in the quarter, on both a sequential and year-over-year basis. Our continued targeted efficiency programs and measured approach to the timing of our investments are yielding solid and growing cost reduction results. As part of reiterating our full-year financial outlook, we are committed to delivering on expectations and achieving a gradual improvement in our performance, while we navigate a fluid macroeconomic backdrop and continue to manage our client concentration."
Provided below are financial and operating highlights that include certain non-GAAP measures and ratios. See the Non-GAAP section of this news release for a discussion on such measures and ratios.
Q1 2025 vs. Q1 2024 summary
-- Revenue of $670 million, an increase of $13 million or 2% on a reported
basis and 3% on a constant currency basis1, primarily driven by growth in
services provided to existing clients, including TELUS and a leading
social media client, among others, and new clients added since the same
period in the prior year, partially offset by lower revenues from certain
technology and eCommerce clients. Total revenue increase in the quarter
included an unfavorable foreign currency impact of approximately 1%
compared with the same quarter of the prior year, associated with the
strengthening U.S. dollar exchange rate against the euro.
-- Net loss of $25 million and diluted EPS of $(0.09), compared with net
income of $28 million and diluted EPS of $0.05, respectively, in the same
quarter of the prior year, due to an increase in operating expenses
outpacing revenue growth and other income recognized in the comparative
period arising from changes in business combination-related provisions
that did not reoccur in the current period, partially offset by lower
income taxes and interest expense. Net loss margin, calculated by
dividing net loss by revenue for the period, was 3.7%, compared with net
income margin of 4.3% for the same quarter in the prior year. Net loss
and diluted EPS include the impact of acquisition and integration charges,
amortization of purchased intangible assets and interest accretion on
written put options, among other items. Adjusted Net Income1, which
excludes the impact of such items, was $17 million, compared with $65
million in the same quarter of the prior year, primarily due to higher
salaries and benefits, goods and services purchased, and share-based
compensation expense, which were partially offset by higher revenues
earned and lower income tax expense.
-- Adjusted EBITDA1 was $90 million, compared with $153 million in the same
quarter of the prior year, primarily due to the increases in salaries and
benefits and goods and services purchased outpacing revenue growth, as
well as other income generated in the prior year's comparative period
from changes in business combination-related provisions, and higher
share-based compensation in the current period. Adjusted EBITDA Margin1
was 13.4%, compared with 23.3% in the same quarter of the prior year, due
to the aforementioned factors. Adjusted Diluted EPS1 was $0.06, compared
with $0.22 in the same quarter of the prior year.
-- Cash provided by operating activities was $69 million and Free Cash Flow1
was $41 million, compared with $126 million and $107 million,
respectively, in the same quarter of the prior year, primarily due to
increases in operating expenses outpacing revenue growth, higher capital
expenditures and timing of certain large client payments.
-- Net Debt to Adjusted EBITDA Leverage Ratio1 as per our credit agreement
was 3.4x as of March 31, 2025 compared with 3.2x as of December 31, 2024.
-- Team member count was 78,424 as of March 31, 2025, an increase of 5%
year-over-year, resulting from the expansion and ramp of our service
programs and new wins across our various regions.
A discussion of our results of operations is included in our Management's Discussion and Analysis for the three-month period ended March 31, 2025, which is filed on SEDAR+ and as Exhibit 99.2 to our Form 6-K filed on EDGAR. Such materials and additional information are also provided at telusdigital.com/investors.
Outlook
For the full-year 2025, management continues to expect:
-- Revenue growth of approximately 2% on an organic basis -- Adjusted EBITDA of approximately $400 million -- Adjusted Diluted EPS of approximately $0.32
Q1 2025 investor call
TELUS Digital will host a conference call today, May 9, 2025 at 10 a.m. $(ET)$ / 7 a.m. $(PT)$, where management will review the first quarter results, followed by a question and answer session with pre-qualified analysts. A webcast of the conference call will be streamed live on the TELUS Digital Investor Relations website at: https://www.telusdigital.com/investors/news-events and a replay will also be available on the website following the conference call.
Non-GAAP
This news release includes non-GAAP financial information, with reconciliation to GAAP measures presented at the end of this news release. We report certain non-GAAP measures used in the management analysis of our performance, but these do not have standardized meanings under International Financial Reporting Standards, as issued by the International Accounting Standards Board (IFRS$(R)$ Accounting Standards). These non-GAAP financial measures and non-GAAP ratios may not be comparable to GAAP measures or ratios and may not be comparable to similarly titled non-GAAP financial measures or non-GAAP ratios reported by other companies, including those within our industry and TELUS Corporation, our controlling shareholder.
Adjusted EBITDA, Adjusted Net Income (Loss), Free Cash Flow, revenue on a constant currency basis, and Net Debt are non-GAAP financial measures, while Adjusted EBITDA Margin, Adjusted Diluted EPS, revenue growth on a constant currency basis and Net Debt to Adjusted EBITDA Leverage Ratio are non-GAAP ratios.
Adjusted EBITDA is commonly used by our industry peers and provides a measure for investors to compare and evaluate our relative operating performance. We use it to assess our ability to service existing and new debt facilities, and to fund accretive growth opportunities and acquisition targets. In addition, certain financial debt covenants associated with our credit facility, including Net Debt to Adjusted EBITDA Leverage Ratio, are based on Adjusted EBITDA, which requires us to monitor this non-GAAP financial measure in connection with our financial covenants. Adjusted EBITDA should not be considered an alternative to net income in measuring our financial performance, and it should not be used as a replacement measure of current and future operating cash flows. However, we believe a financial measure that presents net income adjusted for these items provides a more consistent measure for management to evaluate period-over-period performance and would enable an investor to better evaluate our underlying business trends, our operational performance and overall business strategy.
We exclude items from Adjusted Net Income (Loss) and Adjusted EBITDA, such as acquisition, integration and other, foreign exchange gains or losses and, additionally, with respect to Adjusted Net Income (Loss), the interest accretion on written put options, amortization of purchased intangible assets, and the related tax effect of these adjustments. Full reconciliations of Adjusted EBITDA and Adjusted Net Income (Loss) to the comparable GAAP measures are included at the end of this news release.
We calculate Free Cash Flow by deducting capital expenditures from our cash provided by operating activities, as we believe capital expenditures are a necessary ongoing cost to maintain our existing productive capital assets and support our organic business operations. We use Free Cash Flow to evaluate the cash flows generated from our ongoing business operations that can be used to meet our financial obligations, service debt facilities, reinvest in our business, and to fund, in part, potential future acquisitions.
Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by consolidated revenue. We regularly monitor Adjusted EBITDA Margin to evaluate our operating performance compared to established budgets, operational goals and the performance of industry peers.
Adjusted Diluted EPS is used by management to assess the profitability of our business operations on a per share basis. We regularly monitor Adjusted Diluted EPS as it provides a more consistent measure for management and investors to evaluate our period-over-period operating performance, to better understand our ability to manage operating costs and to generate profits. Adjusted Diluted EPS is calculated by dividing Adjusted Net Income (Loss) by the weighted average number of diluted equity shares outstanding during the period.
Revenue on a constant currency basis is used by management to assess revenue, the most directly comparable GAAP measure, excluding the effect of foreign currency fluctuations. Revenue on a constant currency basis is calculated as current period revenue translated using average foreign exchange rates in the comparable prior period.
Revenue growth on a constant currency basis is used by management to assess the growth of revenue, the most directly comparable GAAP measure, excluding the effect of foreign currency fluctuations. Revenue growth on a constant currency basis is calculated as current period revenue growth translated using average foreign exchange rates in the comparable prior period.
Net Debt to Adjusted EBITDA Leverage Ratio as per our credit agreement is calculated based on Net Debt and Adjusted EBITDA, both as per our credit agreement. Over the long term, we seek to maintain a Net Debt to Adjusted EBITDA Leverage Ratio in the range of 2-3x. We may deviate from our target Net Debt to Adjusted EBITDA Leverage Ratio as per our credit agreement to pursue acquisitions and other strategic opportunities that may require us to borrow additional funds and, additionally, our ability to maintain this targeted ratio depends on our ability to continue to grow our business, general economic conditions, industry trends and other factors.
We have not provided a quantitative reconciliation of our full-year 2025 outlook for Adjusted EBITDA and Adjusted Diluted EPS to our full-year 2025 outlook for net income and diluted EPS because we are unable, without making unreasonable efforts, to calculate certain reconciling items with confidence, which could materially affect the computation of these financial ratios and measures.
Cautionary note regarding forward-looking statements
This news release contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "aim", "anticipate", "assume", "believe", "contemplate", "continue", "could", "due", "estimate", "expect", "goal", "intend", "may", "objective", "plan", "predict", "potential", "positioned", "seek", "should", "target", "will", "would" and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.
These forward-looking statements are based on our current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management's beliefs and assumptions, and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, uncertainties or otherwise, except as required by law.
Specifically, we made several assumptions underlying our financial outlook for the full-year 2025 results, including key assumptions in relation to: our ability to execute our growth strategy, including by expanding services offered to existing clients and attracting new clients; our ability to maintain the competitiveness of our service offerings and meet changing customer needs, including by continuing to invest in, develop and deploy new technologies and digital transformation capabilities; our ability to maintain our corporate culture and attract and retain talent; our ability to integrate, and realize the benefits of, acquisitions that align with our strategy and enhance our core capabilities and solutions; the relative growth rate and size of our target industry verticals; our projected operating and capital expenditure requirements; our ability to manage costs and adjust our cost structure as needed; and the impact of global conditions on our and our clients' businesses, including macroeconomic uncertainty, inflation, interest rates fluctuations and geopolitical conditions. Our financial outlook provides management's best judgement of how trends will impact the business and may not be appropriate for other purposes.
Risk factors that may cause actual results to differ materially from current expectations include, among other things:
-- We face intense competition from companies that offer services similar to
ours.
-- Our business and financial results have been and could be adversely
affected by a number of global conditions and the effects of these same
conditions on our clients' businesses and demand for our services.
-- Because the majority of our costs is fixed in the short-term, we may
experience a delay in our ability to immediately adjust our cost
structure in response to prolonged lower client demand.
-- A limited number of clients account for a significant portion of our
revenue and loss of or reduction in business from, or consolidation of,
these or any other major clients could have a material adverse effect on
our business, financial condition, financial performance and prospects.
-- Our ability to grow and maintain our profitability could be materially
affected if changes in technology, including without limitation
generative artificial intelligence (GenAI), and client expectations
outpace our service offerings and the development of our internal tools
and processes or if we are not able to meet the expectations of our
clients.
-- Our growth prospects are dependent upon attracting and retaining enough
qualified team members to support our operations, and competition for
talent is intense.
-- If we cannot maintain our unique culture as we grow, our services,
financial performance and business may be harmed.
-- Our business could be adversely affected if we lose members of our senior
management.
-- We could be unable to successfully identify, complete, integrate and
realize the benefits of acquisitions or manage the associated risks.
-- The unauthorized disclosure of sensitive or confidential client and
customer data, through cyberattacks or otherwise, could expose us to
protracted and costly litigation, damage to reputation and cause us to
lose clients / revenue.
-- Our business may not develop in ways that we currently anticipate due to
negative public reaction to offshore outsourcing, content moderation and
proposed legislation or otherwise.
-- Our policies, procedures and programs to safeguard the health, safety and
security of our team members, particularly our content moderation team
members, may not be adequate.
-- Our business would be adversely affected if individuals providing data
annotation services through AI Data Solutions were classified as
employees (not as independent contractors).
-- The dual-class structure contained in our articles has the effect of
concentrating voting control and the ability to influence corporate
matters with TELUS.
-- TELUS will, for the foreseeable future, control the TELUS Digital board
of directors.
-- The market price of our subordinate voting shares may be affected by low
trading volume and the market pricing for our subordinate voting shares
may decline as a result of future sales, or the perception of the
likelihood of future sales, by us or our shareholders in the public
market.
These risk factors, as well as other risk factors that may impact our business, financial condition and results of operation, are also described in our "Risk Factors" section of our Annual Report available on SEDAR+ and in "Item 3D--Risk Factors" of our Annual Report on Form 20-F filed on February 13, 2025, and available on EDGAR.
TELUS International (Cda) Inc.
Condensed Interim Consolidated Statements of Income
(unaudited)
Three months
-----------------
Periods ended March 31 (millions except earnings
per share) 2025 2024
------------------------------------------------ ----- ----
REVENUE $ 670 $ 657
OPERATING EXPENSES
Salaries and benefits 444 416
Goods and services purchased 129 116
Share-based compensation 7 1
Acquisition, integration and other 6 7
Depreciation 35 34
Amortization of intangible assets 46 45
----- ----
667 619
----- ----
OPERATING INCOME 3 38
OTHER EXPENSES (INCOME)
Changes in business combination-related
provisions -- (29)
Interest expense 30 35
Foreign exchange gain (2) (5)
----- ----
(LOSS) INCOME BEFORE INCOME TAXES (25) 37
Income tax expense -- 9
----- ----
NET (LOSS) INCOME $ (25) $ 28
----- ----
EARNINGS (LOSS) PER SHARE
Basic $(0.09) $0.10
Diluted $(0.09) $0.05
TOTAL WEIGHTED AVERAGE SHARES OUTSTANDING
(millions)
Basic 276 274
Diluted 276 289
TELUS International (Cda) Inc.
Condensed Interim Consolidated Statements of Financial Position
(unaudited)
As at (millions) March 31, 2025 December 31, 2024
---------------------------------- ---------------- -------------------
ASSETS
Current assets
Cash and cash equivalents $ 137 $ 174
Accounts receivable 459 454
Due from affiliated companies 31 16
Income and other taxes receivable 9 8
Prepaid and other assets 56 42
Current portion of derivative
assets 12 13
------------ --- --------------
704 707
------------ --- --------------
Non-current assets
Property, plant and equipment, net 465 456
Intangible assets, net 1,351 1,379
Goodwill 1,953 1,926
Derivative assets -- 15
Deferred income taxes 12 12
Other long-term assets 26 26
------------ --- --------------
3,807 3,814
------------ --- --------------
Total assets $ 4,511 $ 4,521
------------ --- --------------
LIABILITIES AND OWNERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 317 $ 321
Due to affiliated companies 260 231
Income and other taxes payable 71 68
Current portion of provisions 44 7
Current maturities of long-term
debt 125 116
Current portion of derivative
liabilities 1 2
------------ --- --------------
818 745
------------ --- --------------
Non-current liabilities
Provisions 98 139
Long-term debt 1,365 1,409
Derivative liabilities 2 --
Deferred income taxes 248 256
Other long-term liabilities 28 27
------------ --- --------------
1,741 1,831
------------ --- --------------
Total liabilities 2,559 2,576
------------ --- --------------
Owners' equity 1,952 1,945
------------ --- --------------
Total liabilities and owners'
equity $ 4,511 $ 4,521
------------ --- --------------
TELUS International (Cda) Inc.
Condensed Interim Consolidated Statements of Cash Flows
(unaudited)
Three months
----------------
Periods ended March 31 (millions) 2025 2024
------------------------------------------------- ---- ----
OPERATING ACTIVITIES
Net (loss) income $ (25) $ 28
Adjustments:
Depreciation and amortization 81 79
Interest expense 30 35
Income tax expense -- 9
Share-based compensation 7 1
Changes in business combination-related
provisions -- (29)
Change in market value of derivatives and other (10) (6)
Net change in non-cash operating working capital (7) 11
Income taxes paid, net (7) (2)
---- ----
Cash provided by operating activities 69 126
---- ----
INVESTING ACTIVITIES
Cash payments for capital assets (27) (22)
Cash payments for acquisitions -- (3)
---- ----
Cash used in investing activities (27) (25)
---- ----
FINANCING ACTIVITIES
Shares issued 1 1
Withholding taxes paid related to net share
settlement of equity awards (2) (2)
Long-term debt issued 150 45
Repayment of long-term debt (211) (94)
Interest paid on credit facilities (19) (24)
---- ----
Cash used in financing activities (81) (74)
---- ----
Effect of exchange rate changes on cash and cash
equivalents 2 --
---- ----
CASH POSITION
(Decrease) increase in cash and cash equivalents (37) 27
Cash and cash equivalents, beginning of period 174 127
---- ----
Cash and cash equivalents, end of period $ 137 $ 154
---- ----
Non-GAAP reconciliations
(unaudited)
Three Months Ended
March 31
--------------------------
(millions, except percentages) 2025 2024
------------------------------------------- ------ -----
Revenue, as reported $ 670 $ 657
Foreign exchange impact on current period
revenue using prior comparative period's
rates 7 (2)
------ -----
Revenue on a constant currency basis $ 677 $ 655
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