Q2 2022 Telus International Cda Inc Earnings Call

August 5, 2022

Good morning, ladies and gentlemen. Welcome to the TELUS International Second Quarter 2022 investor call. My name is Jonathan, and I will be your conference facilitator today. At this time, all lines have been placed on mute to avoid background noise. After the speaker's remarks, there will be a question and answer period. If you'd like to ask a question during this time, please press star, one, one on your telephone keypad. I would now like to introduce Jason Meyer.

Seat in your director, investor relations, and treasure at Tell Us International. Mr. Meyer, you may begin the call.

Thank you, Jonathan. Good morning, everyone. Thank you for joining us today for COLA's International's Q2 2022 Investor Call. Hosting our call today are Jeff Puritt, President and Chief Executive Officer, and Benefit Commune, or Chief Financial Officer. Thank you, Mr. President. Thank you, Financial Officer.

As usual, we'll begin with some prepared remarks where Jess will provide an operational and strategic overview of the corridor, followed by Vanessa, who will provide some key financial highlights. Thank you.

Will that open the line to questions from pre-qualified analysts before turning the call back to Jeff, or is closing remarks?

Before we begin, I'd like to direct your attention to slide two of the supplementary presentation available for download on this webcast and also available on our website at tell usinternational.com, slash investors.

The statements made during this call may be forward looking in nature, including all comments reflecting expectations, assumptions, or beliefs about future events or performance that do not relate solely to historical periods.

These forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from our current projections.

We assume no obligation to update any forward-looking statements.

Jeff and Vanessa will also discuss certain non- GAAP measures that the management team consider to be useful in assessing our company's underlying business performance.

An explanation of these non-GAAP measures and a reconciliation to the comparable GAAP measures can be found in the appendices of today's supplementary presentation, along with the earnings news release issued this morning and regulatory filings available on CDAR and ADGAR. There has been no

I would also like to remind everyone that all financial measures were referencing on this call and in our disclosure are in US dollars unless specified otherwise and relate only to tell us international results and measures.

With that, I'll now pass the call over to our president, CEO , Jeff Garrett.

Thank you, Jason. Good morning, everyone. Thank you for joining us today. And thank you for joining us today. And thank you for joining us today.

In the second quarter of 2022, TELUS International delivered a 17% year-over-year increase in revenue, or 21% on a constant currency basis, which is especially meaningful given the sustained macroeconomic challenges we continue to navigate. Indeed, despite non-trivial foreign exchange pressures, wage inflation, rising interest rates and heightened competition for talent, challenges which continue to adversely impact so many businesses around the world.

TI once again delivered industry leading profitability with a Q2 adjusted EBITDA margin of 24% while simultaneously generating meaningful free cash flow. Our success in Q2 can be attributed to our global team's ongoing dedication to execute upon all elements of our growth strategy. TELUS International now has almost 70,000 talented individuals located in over 28 countries around the world.

And collaboratively, they are delivering innovator that an industry leading digital services in solutions to our more than 600 global clients. And solutions to our more than 600 global clients.

Our sales team remains extremely active, generating a significant funnel of opportunities now north of $2.4 billion. Identifying new business and cultivating further opportunities with existing clients across our end-to-end portfolio of capabilities, a significant portion of which is our differentiated set of new economy services, such as our AI data solutions and premium content moderation services.

Our AI data services in particular delivered both double-digit revenue growth and double-digit EBITDA growth year-on-year, both in the second quarter and year-to-date. We have not seen a slowdown in demand for our AI services, and unlike some of our single-threaded peers in this space, we believe our end-to-end digital capabilities favourably position TI to deliver better value for money and enable better outcomes for our clients.

Our ability to meet the ever more complex criteria of demand helped us deliver key quiet winds during the quarter.

For example, among our new logo wins in Q2 is a leading digital marketplace for sports, entertainment, and event tickets. Notably, this client had been supported by our competitor of ours, but decided to partner with TI in order to improve its operational rigor and raise the bar on service quality. We also want a new client in the financial technology space, a digital platform that enables global money transfers and offers advanced digital wallet solutions.

as well as one of North America's largest public broadcasters that sought out our expertise to support its expansion into new digital channels.

Ti's ability to win incremental business with existing clients in Q2 was equally impressive, with numerous deals focused on expanded mandates for our AI, data solutions and digital solutions teams.

For example, we continue to grow our share of wallet with the world's largest e-commerce company, one of the global leaders in digital media and digital marketing solutions, a global staffing and recruiting company, and one of Western Canada's largest bulk transportation carriers.

As important as winning new and incremental businesses, successfully retaining clients has become increasingly important against the backdrop of broader macroeconomic challenges.

Nowadays, many companies are looking to consolidate vendor relationships to maximize the quality of customer experience and engagement while achieving greater cost effectiveness.

TI is often rewarded as a net winner in these scenarios, given the scope and quality of our capabilities across the design-build-deliver continuum, our ability to effortlessly scale across numerous geographies and languages, and ultimately, due to our caring culture that ensures our clients are being served by a tenured and knowledgeable team who are personally committed to their success.

Let me share with you just a few examples of some of the more exciting projects we've been working on.

As far as relates to our work with one of our longstanding technology partners, VARANT, a software company focused on customer engagement.

Working alongside another of our long-tenured clients and partners, Google, TELUS International designed and built a cloud infrastructure to enable the variant workforce engagement application suite to run on the Google Cloud Platform, or GCP, providing our clients with a powerful combination of CX tools.

Our clients are looking for efficiency, agility, scalability, and performance when it comes to managing a workforce engagement platform to keep pace with expanding customer expectations along with a less resource intensive self-management of the hardware infrastructure. To extend the benefits of the variant workforce engagement platform to our clients, TELUS International worked to reimagine our overall CX deployment model to optimize this particular application on GCP. For more information, visit TELUS.com

after developing and building the needed infrastructure in-house.

We tested the solution and got it certified on GCP in a matter of weeks.

We then migrated 30,000 users over just one weekend.

The enhanced platform is four to five times faster to deploy for clients, and it's able to take vast amounts of customer experience information and store it in the cloud. It's also been integrated with TELUS International's Cloud Contact 360 Solution, or CC 360 for short, a pure cloud omni-channel contact center platform that empowers team members with all the tools needed to improve the customer journey, providing real-time, easily accessible data to make informed decisions about workforce opportunities.

tech partners now have a road map to do the same with ease.

As a testament to the success of this project, in the second quarter of 2022, Telef International One, in the infrastructure category, a Verance Engage 2022 Integration Challenge for Integrating Verance GCP-based Solution with Telef International CC360 Solution. With Telef International CC360 Solution.

It's just one example of how our cloud and platform services at part of our broader telephone international digital solutions operators.

Accelerate our client's digital transformation with fully managed multi-cloud platforms. Cloud computing is fast becoming the de facto engine to build next-gen technology ecosystems for CX innovation. We work with clients to solve their cloud adoption challenges by overcoming their concerns around security, consumption costs, multi-cloud management, and integration with non-cloud systems. And integration with non-cloud systems.

As cloud-native technologies become more pervasive, bringing all of the technology processes and services together remains critical. We guide our clients' transformation journeys by moving and managing applications to the right cloud platform with the right deployment model. Our flexible cloud platforms and comprehensive managed cloud services are designed to support a single cloud or a multi-cloud deployment to deliver better customer experience and ensure a meaningful return on investment.

In another example, I want to share with you how our Tell us International AI Data Solutions team is working with not-for-profit organization light of dawn international. Or as it's known locally in Indonesia, the ISI International, the Ohio Char or YICF, for short.

to create job opportunities for displaced people to refugees in Southeast Asia.

According to the United Nations in 2021, there were more than 84 million refugees worldwide. This figure is nearly doubled in about a decade and unfortunately keeps growing. In most cases, these populations have typically been marginalized when it comes to recruitment opportunities.

Tell us international sought out an organization to help us provide access to our global AI community to add data annotators from across Southeast Asia to incorporate their voices and perspectives to help us deliver more diverse data sets to ultimately create more inclusive AI models to help mitigate bias.

Tell us international selected the light of dawn as a partner because of their commitment to creating opportunities for Indonesians and refugees and transit to the country.

It's a locally rooted and globally connected organization focused on transforming lives in greater Jakarta through education, vocation, and community. Our team worked with the light of dawn to expand our global workforce by engaging with refugees throughout Southeast Asia. As part of the partnership, we participated in the organization's recently launched program called VersaERMA, meaning together with a mission of providing life-changing, vocational learning experiences for unemployed Indonesian youth and refugees.

who are without legal rights to employment while they await resettlement to a new country. Through this program, individuals gain work experience, improve their language and digital literacy skills through continuous learning opportunities, and are able to become part of a supportive co-working community. To date, Vercerema has created opportunities for individuals across seven unique nationalities with a variety of ages, backgrounds, and languages represented, including English, Persian, Indonesian, and Arabic.

These individuals have quickly expanded and progressed the scope of their work in the AI community from more simple collection and categorization tasks to include more complex image annotation, audio and image transcription and categorization, and quality assurance work.

I'd also like to provide an example from our trust and safety practice. Highlighting how our team helps optimize a debt collection strategy for a leading utilities provider in the United States.

We've been a trusted CX partner to this client since 2005. And our team's impressive track record, providing exceptional customer care and sales solutions, influence this client's decision over a decade ago to broaden its relationship with Telecent International to include debt collection management.

Members of the TELUS International team in Central America have been providing first-party collection support on behalf of our clients since 2009, seamlessly resolving billing issues and improving the client's overall customer experience. All services are delivered in English, and team members are responsible for addressing fraud scenarios, resolving credit report disputes, communicating with customers on overdue accounts, performing audits, processing refunds, handling issues resolutions, and working with credit bureaus as needed.

Through our engagement, leveraging our best practices, TELUS International was able to deploy a cost-efficient and highly effective technology-driven solution for the client.

The team was able to streamline the collections process by identifying and eliminating rework, which is already generating meaningful savings all the while delivering an enhanced customer experience, which is essential to this client's industry leading brand reputation and lower customer turn. I particularly like this example, as it clearly illustrates the long tenure, diversity of mandates and stickiness of our client relationships. Our clients see us do good work in one area and reward us with more varied work. Add right knockout for the?? you

in other aspects of their operation, with our engagement often spanning over many, many years as our clients increasingly rely upon our expertise and advice.

for some of the most important areas of their business fueling longer term growth.

My final example today highlights our Tell us international digital solutions teams efforts on behalf of a large telecommunications and information technology company. Dallas's

Excuse me.

Tell us international develop the specialized response card, enabling this client's mobile customers to efficiently find information for an effortless customer experience. For an effortless customer experience,

Conversational bots are commonly used to facilitate a smooth user experience on mobile devices.

Ensuring the selection is as clear and as direct as possible, improves customer satisfaction while also reducing acclient contact center volumes through cell service. Ensuring the selection is as clear and as direct as possible, through cell service.

After assessing our clients' specific requirements and their users' journey goals, our team utilized our proprietary conversational bot platform, Intelligent Telus International Assistant, or ITIA, to establish deep linking along with a customized response card for a better mobile experience.

Deep linking is the process of creating URL shorteners the user on specific flows within a chatbot. The user on specific flows within a chatbot.

depending on their intended use case. By offering deep linking experiences, the intelligent TELUS International Assistant not only enables the client's customers to easily access the top searched inquiries from a menu, but it also smooths over any issues a customer might experience with mobile interface rendering.

The Palestinian National Development Team also created a customized response card that sorts through its trained content when a user asks a question and responds accordingly. If the customer requires further assistance, they can decide to be transferred to a live agent or continue with the chat box.

As a result of our work, the client has already seen meaningful improvements in the overall mobile user experience.

We created a branded solution customized to the client's theme, which further supported the client's brand equity.

Early in the solutions deployments, the client has already experienced over 70% of its customer calls, being rodents of the chatbot by a deep linking to create seamless interactions that deliver measurable enhancements to customer experience while simultaneously reducing their contact center volumes and costs by leveraging our technology-driven solution. Now, the client can ask for some contact, because the client, who doubts the core of the design, now at home, doesn't anymore know how to be original or reduce others' contact waited there long ago. During this key, we had flush areas used simulators to expand public contact detection control and rapid? colors and hearts. Therefore When ??? we were simply able to protect ourselves from the clients who had enough experience by monitoring human driving Rover while they could wait on our car's Thank you.

The same ITIA bot platform I just described was recently recognized with a 2022 AI Breakthrough Award, but for an informational bot in the virtual agents and bots category. This is the second consecutive year ITIA has won this industry award that's based on a variety of considerations, including innovation, design, and user experience, as well as overall technological advancement.

Also in the quarter, leading industry analyst relations from Everest Group named TELUS International as a star performer on its 2022 Everest Group Trust and Safety Content Moderation Peak Matrix, highlighting our market adoption and market share growth and ability to scale along with our enhanced language capabilities and provision of localized services.

Another notable accolade came from the Business Intelligence Group, naming TELUS International as the 2022 Excellence in Customer Service Award winner in the Organization of the Year category, recognizing our team members' superior performance in helping companies better communicate with their customers and provide a differentiated level of customer service.

Our team also want to Steve the award for sales and customer service based on our work with green tech scale up refurbed. Our team won in the front line customer service team of the year category, having supported refurbed in its growth and expansion through the delivery of an exceptional customer experience since 2020.

Additionally, I'm immensely proud of our company for being named one of MOGL's Top 100 Companies for Diverse Representation in 2022, recognizing our leadership in implementing practices, investing in resources and tools to hire diverse talent, and placing diverse leaders across our organization.

And saving perhaps the best one for last, Teleth International was included on the four list of best employers for diversity in 2022. This was a survey of over 60,000 respondents with evaluation based on four different criteria, direct recommendations, indirect recommendations, diversity among top executives and board members, and diversity engagement indicators.

This recognition of our global team's remarkable performance and commitment to our caring culture is extremely well deserved and I'd like to take this opportunity to once again sincerely thank them for ensuring we continue to bring our values to life in everything we do for our clients and for the communities where we live work and raise our families. I'm here to thank you for your support and support for our clients and for the communities where we live work and raise our families.

As I've often shared before, in many ways what I'm most proud of at Telus International is our caring culture. How we take care of our customers, one another, our communities and the planet is core to how we operate as a company and is consistent with our stated ESG priorities.

In light of this, I'd like to share some highlights of just a few of our TELUS Days of Giving activities, our signature high-impact volunteer events. Among the many held this quarter, we hosted fitness challenges in China, India, and the Philippines, where 4,000 team members raised funds for the China Association of SOS Children's Villages, Say Trees Environmental Trust in India, and World Vision Development Foundation in the Philippines. The donations will benefit 13,000 children and youth in need.

and we'll ensure more than 2,000 trees are planted creating urban forests.

On June 4th, we celebrated our 10th year anniversary of tell us days of giving in Ketzal Tanangold, Guatemala by building the second phase of La Colina Health Center that included two clinics and a warehouse and we painted the entire center. Since we started the project in 2018, we've had over 250 T-Members volunteer on the site in addition to our own direct investment.

Today, the health center benefits more than 25,000 people annually who could not otherwise access care.

And finally, before I turn the call over to Vanessa, let me also share our latest return to office updates.

Globally, more than 50% of our team members have now successfully transitioned back to working on site. Additionally, around 6% are working in a combined office or remote setup.

Not surprisingly, there's a high degree of variability in our return to office profile. With some locations like the Philippines, now at almost 90% back in the office, and others like Ireland had less than 10% and others like Ireland had less than 10%

These different in-office profiles are correlated to local legislation, customer demand, employee preferences, and team member safety, all of which we seek to balance and optimize. As we continue ramping up plans to return more of our team members safely back to our sites around the world, we're doing so while of course being very mindful of evolving developments around new virus variants as we monitor the situation in each region very closely.

With that, I'll now invite our Chief Financial Officer, Vanessa Canoe, to take you through a detailed review of our financial results, after which I'll return to answer your questions. Vanessa, over to you.

Thank you, Jeff, and good morning, everyone. Thank you all for joining us today. Thank you.

I'll begin with a look at our financial results for the second quarter and then discuss our business outlook for full year 2022.

As mentioned at the start of this call, in my review of financial results, I will refer to some items that are non- GAAP measures .

For descriptions and a reconciliation of our Guap Nam Guap measures, please see our earnings release and regulatory fouling from earlier this morning.

We had solid second quarter results with 21% revenue growth on a constant currency basis and an adjusted EBITDA margin of 24.0%.

We generated robust cost flow with 60 million of free cost flow generated in the quarter.

These results want to get illustrates our focus on maintaining a healthy balance of strong top-line growth and leading profitability matched with strong pre-cash flow. The results are in the form of a healthy balance of strong top-line growth with strong pre-cash flow. The results are in the form of a healthy balance of strong top-line growth with strong pre-cash flow.

which we believe is notable particularly against the backdrop of the current macroeconomic environment.

Let me now expand upon the components of our financial performance.

We achieved total revenues of 524 million, up 17% year over year on a reported basis, or as I mentioned earlier, 21% in constant currency. As our reported revenue included, an unstable foreign currency impact, but approximately 4% compared to the year of a bull period, predominantly driven by the strengthening US dollar against the euro exchange rate.

As Jeff highlighted earlier, we saw very strong growth from AI data services in particular, which along with content moderation are amongst our fastest growing service lines.

Looking closer at our revenues by geography, our highest quarterly revenue growth was in Asia Pacific at 42% year over year, followed by 28% growth in North America.

Central America has moved by 21%.

In Europe , we saw a slight decline of 2% due to the weaker euro related to the US dollar that I just mentioned.

And a constant currency basis we continue to see double digit growth in this region.

From an industry verticals perspective, we continue to again see growth across our key verticals.

Our largest vertical, second gain, grew 18% in Q2, with TELUS International AI data solutions remaining a key driver.

Our revenue growth in AI is not only indicative of market growth but also increasing market share.

In our e-commerce and finance at vertical, our revenues were up 26% over your adriving by our digital CXM services.

Banking financial services and insurance, or BFFI, grew by 117% year over year, driven by continued growth with relieving financial institutions in North America and globally.

Our communications and media verticals will 8% over Europe principally driven by higher revenue from Telos Corporation or Ferry Company.

And then finally, clients in our travel and hospitality verticals continue on their post-pandemic reopening trajectory, driving growth of 46% through over a year.

I should also note that across all of our verticals, the reported Webney growth rates were adversely impacted by unfavorable euro to US dollar currency movement.

Moving on to operating expenses, salaries and benefits expense in the second quarter.

For 3506 million, up 19% due to higher team member counts to support business growth and higher average and fund salary to the region.

Our goods and services purchased were $118 million in the quarter, an increase of 15% over year.

This increase was primarily attributed to business growth, including the impact of higher crowd contractor cost from the volume expansion we continue to see in our AI data solutions business.

Carbis compensation expense in the second quarter was $7 million, a decrease of 12 million or 53% year over year, primarily due to a decrease in our share price tied to recent market conditions, which resulted in lower expense on our liability account that awards.

Acquisition, integration and other charges in the second quarter were six million, a decrease of a million, primarily due to lower integration costs compared to the same quarter last year.

Our interest expense in the second quarter was 10 million, a decline of 17% over year, primarily due to lower average debt balances in our credit facility, as we have made meaningful, meaningful rather, principal repayments against our debt facility over the past year, including in the past quarter.

With rising interest rates, we also saw benefits from our hedging activities, from our cross currency interest rates who have kind of locked in favorable fixed interest rates on a meaningful portion of our debt.

Income tax expense in the second quarter was 21 million compared to 13 million in the same quarter last year. Income tax expense in the second quarter last year.

Our effective tax rate decreased from 44.8% to 27.3%, primarily due to a decrease in withholding in other taxes, a decrease in non-deductible items, and a decrease in foreign tax differential.

As a reminder, during the first half of 2021, the majority of the non-deductible items were as a result of our IPO and were non-recurring. Gameplay

Our adjusted EBITDA was 150 million in the second quarter, a year over your increase of 15%, given by an increase in revenue from both existing and new customers alike, partially offset by higher cost with support business growth, as you've mentioned.

Adjusted every margin in the quarter was 24.0% of solid achievements in the current environment with a margin expanding by 30 basis points compared to the prior quarter.

Looking at the year-over-year differential, it was primarily due to higher costs associated with our frontline team members as expected, as well as changes in revenue mix.

Adjusted net income for the quarter was 81 million up 29%. And on a first-year basis, this translated into adjusted deleted earnings per share for the quarter of 30 cents, up 25% you over year. You know, you were a very late, even you pages this. you

Moving over to the balance sheet. Our balance sheet remains very strong with further improvements during the quarter in our leverage ratio and the coup d'état position.

Cash-in-cash equivalent for 123 million as of June 30th.

Our total available liquidity, which comprises cash on hand and available capacity under our revolving credit facilities of 788 million grew to 911 million.

With our available liquidity, we continue to have ample capacity to pursue strategic work opportunities as we have done historically. We are now in the open. We are now in the open.

We also continue to reduce our leverage, lowering our net debt-to-adjustment EBITDA leverage ratio as defined for our credit agreement to 1.5x as of June 30th, a further improvement from 1.8x as of March 31st, 2022.

Just a reminder, we continue to see the 2-3x zone at the good steady state amount of leverage and continue to have the ability to go beyond this range for the right type of strategic opportunity.

In the second quarter, our free cash flow was 60 million compared to 71 million in the same quarter last year, with a decrease primarily due to higher outflows from working capital and cash taxes paid partially offset by higher operating profits.

Our capital expenditures in the quarter were $29 million, an increase of $4 million over a year, primarily attributed to additional investment in AI data solutions, including further development of our Community Manager Platform and related to our state-of-the-art site in Ballina, Ireland, as we announced a couple of weeks ago.

We also continue to invest in our digital services for additional capacity and cloud storage along with other normal course facility related capital needs.

Looking at the first half of 2022, we generated 159 million of free cash flow and increase of 79% from the same period last year, where the increase primarily driven by higher operating properties and the decrease in interest and income status space, partially offset by higher network and couple of low flow.

In the first half of the year, our capital expenditure as a percentage of revenue, we made modest at around 4%. We are now in the first half of the year. We are now in the first half of the year.

Looking at our team members, we ended the quarter with 69,218 global team members, an increase of 23% through every year, reflecting our ability to continue to hire and retain key talents to support our revenue growth.

Now turning for our outlook.

Starting with revenue.

As a reminder, approximately a third of our full year estimated revenues are denominated in Europe .

As you will recall, our initial guidance at the start of the year assumed a EUR to USD exchange rate of USD 1.13.

And it may our outlook assume the dollar eight on the exchange rate at that time.

As we are today, giving the continued strengthening of the US dollar, we are now assuming a dollar two for the second half of 2022.

Given the relative size of our European business, this FX headwind is material, not only in relation to our initial guidance at the beginning of the year, but also even when compared to our guidance at the end of just last quarter.

Despite this further dissiluration in you, however, given our strong performance here to date and the current outlook that we have for the second half, we are today again reiterating our guidance.

Anticipating revenues in the range of $2.55 to $2.60 billion, reflecting a year-over-year increase of 15.2 to 18.5% on a reported basis.

and 20 to 22% on a constant currency basis.

Compared to a constant currency growth range of 90 to 21%,

shared in our last guidance update, and also compared to a constant currency growth range of 18-20% in our initial beginning of the year guidance.

As a reminder, our outlook does not include the potential impact of material M&A.

We continue to expect adjusted EBITDA margins to be approximately 24% for the year. We also continue to expect to deliver adjusted deleted earnings per share in the range of $1.18 to $1.23, which reflects growth of 18% to 23% from last year.

This assumes the weighted average that limited share counts are approximately 270 million each of the quarters. These say olvid with estimated count of E. from higher expectation. disable lists were made from turnover until 2nd Sherinratos of the more Bye Co K bek ?die worldly??? and g Apache, Y y d n le Pal boop o b r k m d ho a J d l h i the MA B u h e Thank you.

In terms of quarterly seasonality within the second half of 2022, similar to the prior year, we expect an approximate split of 48% in Q3 and 52% in Q4 for revenue and earnings.

With that, let's move on to questions.

Trying to send over to you. Certainly. Once again, we kindly ask that you limit your questions to one at a time. Let me get back into Q if you'd like to ask another question.

We will pause for a moment to compile the queue.

And one moment for our first question.

first question comes from the line of Ramsey LSL from Barclays. Your question please.

Hi, good morning and thanks for taking my question. Sounds like things are going quite well. I wanted to ask if you could provide just in general thoughts on the demand environment. There's a lot of headlines about potential recessions on the horizon, et cetera. Maybe just some color on customer spending patterns and decisioning in particular, whether you're seeing any changes or any signals in your day to day.

Thanks for the question, Ramsay. Nice to hear your voice. Hope you're well.

We are built for the recession, I would suggest. The origins of this business were to help parent company tell us at first instance, and since then, all of our clients to find ways to do more with less, to leverage our scale and scope advantage and expertise to help them accomplish what they'd like to on their own, but frankly, they don't have the expertise or the scale or scope. And in a recession, I think that's ever more so. Over the second quarter, have you just

read and heard, I think we did exceptionally well in continuing to progress our growth strategy focused on both growth and profitability. Our outlook, as Vanessa just reaffirmed, continues to be quite robust. And whilst we're certainly mindful of and sensitive to the discourse with respect to recession, some layoffs and volume diminution in connection with some of our customer business environments.

thus far, that we've not been adversely affected at all to the contrary. We continue to see pretty exciting growth opportunities in serving existing and perspective clients. And not entirely surprisingly, we were around in the slowdown a number of years ago and then too, we were a net gainer, if you will, off the back of exactly what are developed value proposition anticipates, helping clients to navigate those challenging times, relying upon our investment.

in infrastructure, in talent, and technology.

Great, very helpful. Thank you very much.

Thank you very much. Thank you.

Thank you. Our next question comes from the line of Tiansen Hong from KP Morgan. Thank you.

Hey, thank you, good morning, real encouraging that you were able to fight through the effects and then some. I just want to ask, I guess, looking ahead to the second half of the year.

in terms of the range on the revenue side that you're laying out, the usual question, what gets you to the low end versus the high end? How much cushion do you have left, to the extent that maybe there are some surprises and also, are you seeing maybe a change in your client priorities or the types of clients that you're engaging with that provides a hedge against what Ramsey was asking? I know you mentioned the BFSI win, for example. So just trying to better understand the...

The potential range of outcomes in the second half of the year here. Thank you.

Hey, Ting-Jin, thanks for the question. Nice to hear you as well. Perhaps I'll invite Vanessa to respond in detail there.

Thanks, Jeff. Good question, Tingin. We've guided our range of outcomes that we deem to be feasible for the balance of the year. I smiled when you mentioned the word cushion and how much cushion there is in the second half guide. Clearly, we're not going to implicitly raise our guide moments after issuing it by starting to talk about how much cushion we've already built into the guidance. All I will say there, Tingin, is we do remain fairly optimistic.

As Jeff mentioned, obviously, we're in a time where there's a lot of uncertainty from a macroeconomic perspective, lots of headlines around some companies slowing down, etc. But thus far, we can seem to be in that beneficiary. We have a really strong funnel as we heard in the Inject to prepare remarks. We've got pretty good visibility as well into the second half. So not only visibility in terms of what the opportunities in our funnel, but also just based on the work that we do, we're in discussions with clients in terms of planning their projects and

But I don't think we're seeing changes in the type of clients. Certainly, we have some pretty nice new logo wins that you heard Jeff highlight. He just prepared remarks earlier to fit nicely into existing verticals. We go after very high quality clients that have the ability to actually rad with us pretty significantly. And so from that perspective, I wouldn't say that types of clients are changing in any meaningful way thus far. The type of work we're doing with clients continues to evolve in terms of, again, you heard some of the examples that Jeff shared in terms of progressing their digital.

Thanks for taking a question. I wanted to touch on M&A. So there was a reported acquisition offer that you guys made in the quarter to acquire a public competitor in the AI space. And not sure if you want to comment on that event specifically, but more broadly, can you discuss how you're thinking about M&A now that you're below your target leverage ratio? Is there a desire to continue to make large scale acquisitions like you've done in the past, or are you more comfortable with talking acquisitions and?

I guess what exactly would you be looking for in any potential targets?

Hey Ryan, thanks for the question. On the first part of your question, suffice to say, we decided that it wasn't prudent for we to proceed with the proposed transaction as a consequence. So I decided to walk away. I don't know that there's much to be gained by dwelling on the details behind that. On the latter part of your question, obviously as our leverage.

racial continues to improve, that creates more and more headroom for the possibility.

of M&A activity. And it's always been an enabler of an amplifier of our strategy, not the strategy itself. And so whilst we're certainly confident in our current capabilities to meet existing and prospective customer demand, we continue to be actively on the lookout for areas of opportunity for adjacencies, for extensions in scale, for additional capabilities that we think we can.

immediately put to good use in serving existing or prospective clients. And as you've seen over our history, we've not been restricted to either tuck-in or more transformational acquisition activity. And I think the success in our past in this regard emboldens our thinking around what we might do in the future. But as ever, you should expect us to continue to be disciplined and thoughtful about what we want to buy.

why, when and how. The market continues to be what I would call a target rich environment for potential M&A activity. But first and foremost, I think not entirely dissimilar from what you see and how we run the business organically, i.e. a focus on discipline and profitable growth. So too, you should expect that same discipline in how we approach potential M&A activity. Thank you.

Great, thank you.

Thank you. And our next question comes from Lola, and that was Stephanie Price from CIBC. Your question, please.

Good morning.

Data solutions has been an area of strength and a competitor in data annotation recently pre-nounced and we could result this week. I'm curious if you could talk a bit about what you're seeing in the competitive environment on the data solution side and whether TI's winning share there. You gotta make at least two more calls. WE've been working a lot, ever since it's restored. I never thought it would go on to every single moment, everybody needs to be fallen off on the same level. We've been long going this year.

Yeah, well, obviously we too read with interest our competitors updates. Their experience candidly is decidedly dissimilar from our own. As I shared in my comments earlier and has been asked for their illuminated our data annotation business continues to perform exceptionally well with double digit growth in revenue and EBITDA for the quarter and year-to-date.

and our outlook for balance of your continues to be equally robust.

balance of year continues to be equally robust. I'm not sure I can.

Comment on what's behind what they're seeing and why they were commenting the way they were. Obviously, I don't have perfect visibility to to their own particular circumstances. But it would seem to me that when we're growing at 40% year over year, 1 of 2 potential things is occurring. And it could be both. Either we are growing with the continued market growth and or we're taking meaningful share from them in either case. I think it's good news for us.

All right, thanks for the color.

Thank you. And our next question comes from the line of Maggie Nolan from William Blair. Your question, please.

Good morning, this is Jesse on for Maggie. I had a follow up question.

to the M&A topic. So you guys mentioned higher contractor costs in the corridor. So how are you sourcing these contractors in the AI business and could you potentially leverage M&A to gain access to more crowd-sourced annotators? Thanks, Jesse. I knew right away when I heard your voice you weren't Maggie. You have a much deeper sound to you than she does.

We obviously use a multitude of direct channels, web-based and otherwise, social media, in order to surface crowdsource worker opportunities. And as you can imagine, just given the size of that community, it is a prolific channel that we leverage on a constant basis. Acquisition activity theoretically could amplify and extend our reach in that regard. So, thank you.

We thought a little bit about it and candidly, I'm not sure that that's...

the way to address the desire the need to continue to amplify the size of that community. Given how there is.

media in order to surface crowdsource worker opportunities. And as you can imagine, just given the size of that community, it is a prolific channel that we leverage on a constant basis. Acquisition activities theoretically could amplify and extend our reach in that regard.

We thought a little bit about it and candidly sued them for working with someone else and vice versa. So so long as our talent acquisition recruiting team continues to be active and engaged, I think theoretically we could reach everybody and the very people that might be part of the community that is being sourced by an acquisition candidate. They are already theoretically available to us. Yeah, we might be able to get them a little bit more quickly, more easily through the acquisition, but.

I'm not sure that would be the primary consideration at all with respect to the value we might see in a potential acquisition. It would have to be something significantly more substantive than that before that would be the kind of acquisition we would be looking at. Thank you. We would have been looking out. Thank you. we would be looking at.

Understood. Thank you for taking my question.

My pleasure. Nice to hear your voice, Jesse.

Thank you. And our next question comes from the line of Daniel Chan from TD Security. Is your question, please?

All right guys, and congrats on the strong quarter. So tell us as acquiring life works, just wondering how involved you will be in supporting it and maybe as a fall on to that. How much of a sales effort is it to get that business or is it pretty much free growth without much sales expenses associated with it? Thank you.

Thanks very much, Daniel. Well, I certainly am hopeful that we're going to be very actively engaged in supporting LifeWorks, assuming TELUS is successful in completing that transaction. As I think you know, it's signed but yet closed. And so, upon closing, assuming that does indeed occur, we will absolutely be looking for areas of opportunity for collaboration, not dissimilar from the support we've been providing to TELUS core communications business, as well as TELUS Health, TELUS AgTech.

I think there's a multitude of areas of opportunity for enablement, leveraging our core competencies around digital transformation, an exceptional client or in their case patient experiences. The latter part of your question then made me smile only because over the last 17 years, I could tell you that I think there's perhaps a surprising misunderstanding regarding the dynamic between TELUS and PI. In many ways, I've often lamented that TELUS is the most difficult client.

We have to demonstrate value for money. We have to demonstrate that we have the requisite experience and expertise. And we don't get to automatically assume once we've won it that we get to keep it. There too, they hold us to the very same standards of performance and quality and value that they do all of their other supplier vendor partners. And tell us procurement, these guys and gals are experts at what they do. And we have

re-negotiations on our statements of work each and every time to ensure that Telus continues to derive the value it expects from the relationship from TI. And so I would anticipate assuming life works gets acquired and there is opportunities for each to enable them, that that dynamic will be no different than that which I just outweighed.

That's very helpful, Cullers. Thank you very much.

Thanks for the question.

Thank you. And our next question comes from the line of Keith Bachman from BMO. Your question please.

Hi, good morning everybody. I wanted to ask a clarification then a question, which is distinctly different from asking two questions. The question is, which is distinctly different from asking two questions.

But that's on...

Vanessa on the the margin guide that you're given for the year you're keeping 24 but I actually think you're raising margins because you're absorbing FX within that so I just wanted to try if you could just clarify how much FX you're absorbing in your operating margin.

to understand how much your net net effectively raising the EBITDA margin.

The question, Jeff, I wanted to pose to you is, if you think about the cost size equation, I just wanted to get a perspective on how that's actually transitioning as you look at it through the year. And the variables would include attrition and wage labor rates. Just want to try to understand, as you see the economy behind us weakening a little bit, are those wage inflation staying the same, getting better, getting worse, just a little bit of comments on how you see.

both attrition and wage inflation unfolding over the balance of the calendar year. Many thanks. Thanks very much, Keith. You must be a recovering lawyer in your past life. That makes that distinction good for you. Vanessa, why don't you take the first half and I'll take the second.

Thanks, Jeff. Keith, thanks for your question, for the first part of your question. Look, when we look at currency movements starting the year at $1.13 on the Euro and now at $1.02, that's an almost 10% swing within the same year. And frankly, had it not been for these currency movements, TELUS International would have been raising guidance, nominal dollar guidance, right? And so we want to make sure that folks walk away with a real key takeaway here, which is strong operational execution.

From a margin perspective, we do have puts and takes there. While we do have the currency adverse effects on the Euro, which are actually pretty significant, even against EBITDA, we have other currency movements that help protect us from the cost side. For example, we have a bit of an appreciation on the peso. It doesn't absorb fully the implications of the declining Euro, but again, back to strong operational execution, which is really what's allowing us to reiterate both the revenue and the margin percentage guide. In terms of the actual basis point impact.

Honestly, had it not been for FX, I think we'd be raising our margin guide by probably at least 20 to 30 basis points in the year. It's not more. So a lot from the go here, but strong of operating execution to help the combat visa FX for our movement.

Over to you, Jeff. Perfect.

Thanks, Vanessa. So our assumptions for the back half keys are not entirely dissimilar from what we sort of set out at the beginning of the year. There's obviously a number of puts and takes as we read about, as I referenced earlier, in my response, I think it was contingent question about recessionary effects.

Attrition continues to obviously be a challenge for we and for all of our peers. And whilst we are by no means immune from the implications of this continued tight labor market in terms of accessing at scale, the requisite talented folks to help us on these technology enabled transformational work and services we provide. As I've said many times in the past, I really do think we continue to be notculated in part because of our unique caring culture because of how we approach.

employment more broadly. And so for the back half of the year, we're not anticipating any

Further difficulties?

we think it's going to kind of continue with pace. I think there's some reason for potential optimism, ironically, in the sense that when you start to read a little bit about potential layoffs and some softening in the marketplace, maybe that means the labor market might open up a little bit for us. And while there is some cause for potential optimism there, the reality is...

most of our hiring is not happening in those markets where we're reading about these layoffs. So to the extent that we're looking to access talent, it's not where you're hearing about the layoffs necessarily. So I'm not anticipating, you know, all of a sudden, the challenges around recruitment and retention are going to somehow move in an inverse correlation to what we saw in the first half. I think it's going to continue to be challenging, not insurmountable as we've demonstrated given where you're north.

money, ensuring that the partnerships they have for support are really delivering the ROI that they expect. But that's always been the case, and that is how we positioned our business and our service offerings, our value proposition was designed to address exactly those concerns. So as I said before, I think we're going to see a not dissimilar back half from the front half, subject only to, as you heard from Vanessa before, quasi-seasonality where the back half tends to be a little bit more robust for us in terms of growth than the front half.

Okay, got it. Many thanks, team.

Okay, Goddard, many thanks team. Thank you, Keith.

Thank you. Our next question comes from the line of Jeff Cantwell from Wells Fargo. Your question, please.

If you think so much and congrats on the results.

Thanks so much and congrats on the results.

I want to ask that also all three of mine are upfront if you don't mind. I'm going to ask that first thing. I'm going to ask that first thing. I'm going to ask that first thing.

Can you tell us a little bit more about e-commerce and fintech? 26% growth this quarter. So I hope we just get a little more color on what's working out there in the market with you guys. I'd love to hear a little bit more about that.

Second one is just kind of similar key. You talk a little bit about the competitive environment. You talk a little bit about the competitive environment.

Just give us a sense of what is tightening, maybe getting a little easier for you as you progress over the last 12 months or so.

And then third, earlier there's a question about profitability. I'm just curious if you can give us a sense longer term of how you're thinking about profitability for the company, given all the moving parts with inflation and wage inflation. And obviously, there's a lot happening on the top line for you as well. So, I just want to get a sense of where you're thinking, current thinking is on that as well.

Earlier there's a question about profitability. I'm just curious if you can give us a sense longer term of how you're thinking about profitability for the company. Given all the moving parts with inflation and wage inflation and obviously, you know a lot happening on the top line for you as well. So just wanna get a sense of where you're thinking, current thinking is on that as well. Thank you.

Thanks, Jeff. I'm not sure if we have other questions in the queue. So I'm a little bit rediscent to answer all three, but I'll try and go stock so that we leave enough time if there are more I think there might be. And I'll take them in inverse order on the profitability front. As you may have heard many times in the past, then again now, it's the continued evolution in the service mix of our business that we believe, is a source of margin expansion. It's continued scale. It's continued leveraging of our own secret sauce.

There is a high degree of complexity and so many moving parts. If there was anything that was getting easier, I guess it would be, you know, as we continue to grow and scale and certainly post accessing the public markets, you know, we are no longer a well-kept secret. I certainly would appreciate even more visibility and awareness of our existence, of our expertise, of our capability, so that we got invited to even more opportunities, whether by RFP, RFI or otherwise.

We could always do better there, but we certainly get more at thoughts, if you will, than we used to when we were smaller and before we were public. So in that regard, I think the competitive environment is improving, but still challenging. I think ongoing consolidation and the high level of fragmentation in our competitive landscape, also is a dynamic. We continue to be quite mindful of and to the extent that those evs and flows represent.

risks, threats, and opportunities, we continue to navigate them as effectively as we can. And the last thing on the e-commerce and FinTech front, I think there too we just continue to see ongoing opportunity. I think that's a vertical that continues to be just filled with creative, exciting, innovative business models and capabilities. And I think as we continue to build more and more credentials and build a reputation for being a terrific partner to.

support enable amplify the success of those businesses and their platforms, whether it's through subscriber growth, protecting the integrity of their environments, ensuring the quality of the transactions that they and their customers enjoy on their platforms. We see continued upside opportunity for the foreseeable future.

Okay, that's great, Tyler. Thanks so much and congrats on the results.

Thanks very much, Jeff. Thank you. And our final question for today comes from the line of Casey Chan from Bank of America.

Hey guys, this is Cassie on for Jason Kupferberg. So I'll be quick. One is just a follow up. So like I know everyone's been talking about, you know, like wage inflation and anything. Is there any updates on your end on kind of like the ability to pass on those, you know, potential price increases to your customers? Is there any update that you've kind of baked in in your kind of full year top line guidance? And then a quick like modeling related one. Are there any updates on like below the line items? So like interest expense or like tax rate?

Oh my goodness, I just had a seniors moment and I forgot the first half of the question. For reminding me again, Cass. Yeah, no problem. So ability to pass on price increases and is there a good amount of assumption for your full year outlook for Kauplin, I think. Sorry, sorry, thank you.

I have to be excused here. I had not much sleep last night. I became...

at 6.30 this morning. I've been up all night waiting for the update from my kids. So, in any event, I think if you look at our margin profile for year-to-date and the second quarter…

That answers most of the question right there. It has been surprising in some ways, Candidly, disappointing to me, to read some of the narrative out there about passing on price increases, wage increases, the customers, whether we have cost of allowing, living allowances or CPI provisions in every single one of our customer contracts. I think the reality is we've done a reasonably good job of ensuring that as often as we can.

we are able to share some of the burden of these wage inflation dynamics with our customers. And we are so, so pleased and grateful that we've got customers, partners who are willing to work with us in some cases, of course, it's predicated on these covenants in the contracts that we have in place that allow us to do that. In many other cases, it's not explicitly because of contract language, but it's because, as I say, of the strength of the relationship that we're able to go back to them off cycle, if you will, not when there's sort of a natural incision point on an expiration or renewal date.

of an MSA or an SOW, again to work with them, but in totality, we continue to be, pleased with the progress given the continued profitability profile of the business, and for back half of the year, given Vanessa sharing as we expected, not just maintain guidance, but that means we're going to absorb continued effects impacts. Again, I think that inherently implies that it's not just we're pricing new work at new rates, but we're also able to try and mitigate.

that some of those challenges with existing are older contracted work as well. there and theres already a lot of variety of qualities. There is in our sharing level with our older contracted work as well skeleton as well.

with existing or older contracted work as well. And if that's what you want to talk about.

below the line matters? Yeah, so to answer the second half of your question, Kathy, from an interest expense perspective, I would expect just a nominal change up in terms of second half versus first half. And ETR, we had previously guided a full year range of 28 to 30 percent. And I think you can do the math in terms of where we landed in the first half to get, you know, where we're going to go in the second half. We do have seasonality there, right, where the ETR steps down in each quarter.

and so Q4 will be fast-speed your lowest. If you model to the 20 to 30 percent and make sure you split your Q3, Q4, today, Q4 to the lowest. The only variability there, as I think you already know, is obviously that assumes a certain Q-in-fictional mix or earning. So we might have a small variation there, but I think if you go with those assumptions, you should be okay.

Great. Thank you. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Mr. Purit for any further remarks.

Thanks Jonathan and thank you all for your questions. In closing, I'd like to reiterate our beliefs that telephs international is well positioned to not only continue to execute through current macro headwinds, but to thrive along the way. Our deep expertise, best in class digital capabilities and global scale directly translate into fundamental, sustainable drivers of our profitable growth strategy.

We've been through many business cycles throughout our 17-year history, and this experience reinforces our confidence in our own ability to continue to navigate these challenging times and to execute upon our growth objectives.

We're staying focused on what we can control, delivering exceptional service and value for money, as we help our clients to continue to maximize their customer experience outcomes, whilst concurrently achieving greater cost effectiveness.

Vanessa and I look forward to connecting with many of you face to face at upcoming conferences and investor events in August and September . And we hope to see you at our next quarterly call in early November . Thank you again for joining us today and keep as we help our clients to continue. Bye bye.

Thank you, ladies and gentlemen, for participation in today's conference. This concludes the program. You may now disconnect. Good day.

The conference will begin shortly. To raise your hand during Q&A you can dial star 11.

I have.

The.

Good morning, ladies and gentlemen. Welcome to the TELUS International Second Quarter 2022 Investor Call. My name is Jonathan, and I will be your conference facilitator today. At this time, all lines have been placed on mute to avoid background noise. After the speaker's remarks, there will be a question and answer period. If you'd like to ask a question during this time, please press star, one, one on your telephone keypad. I would now like to introduce Jason Meyer.

seat in your director, investor relations, and treasure at Tell Us International. Mr. Meyer, you may begin the call. Thank you, Jonathan. Good morning, everyone. Thank you for joining us today for Tell Us International's Q2 2022 investor call.

Hosting our call today are Jeff Puritt, President and Chief Executive Officer, and the benefit of the new or chief financial officer. And the benefit of the new or chief financial officer.

As usual, we'll begin with some prepared remarks where Jess will provide an operational and strategic overview of the quarter, followed by Vanessa, who will provide some key financial highlights.

We'll then open the line to questions from pre-qualified analysts before turning the call back to Jeff for his closing remarks. Before we begin, I'd like to direct your attention to slide two of the supplementary presentation available for download on this webcast and also available on our website at telestinternational.com Laçab enbuster.

These forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from our current projections.

We assume no obligations to update any forward looking statements.

Jeff and Vanessa will also discuss certain non-GAAP measures that the management team consider to be useful in assessing our company's underlying business performance.

An explanation of these non-GAF measures and a reconciliation to the comparable GAF measures can be found in the appendices of today's supplementary presentation, along with the earnings news release issue this morning, and regulatory filing available on Cedar and Atgar.

With that, I'll now pass the call over to our president, CEO , Jeff Garrett.

Thank you, Jason. Good morning, everyone. And thank you for joining us today. Jason, thank you for joining us today.

In the second quarter of 2022, TELUS International delivered a 17% year-over-year increase in revenue or 21% on a constant currency basis, which is especially meaningful given the sustained macroeconomic challenges we continue to navigate. Indeed, despite non-trivial foreign exchange pressures, wage inflation, rising interest rates and heightened competition for talent, challenges which continue to adversely impact so many businesses around the world.

TI once again delivered industry leading profitability with a Q2 adjusted EBITDA margin of 24% while simultaneously generating meaningful free cash flow. Our success in Q2 can be attributed to our global teams ongoing dedication to execute upon all elements of our growth strategy.

Tell us international now has almost 70,000 talented individuals located in over 28 countries around the world and collaboratively they are delivering innovative and industry leading digital services and solutions to our more than 600 global clients. Our sales team remains extremely active generating a significant funnel of opportunities now north of 2.4 billion dollars. Identifying new business and cultivating further opportunities with existing clients across our end to end portfolio of capabilities.

A significant portion of which is our differentiated set of new economy services, such as our AI data solutions and premium content moderation services. and premium content moderation services.

Our AI data services in particular delivered both double digit revenue growth and double digit EBITDA growth year on year, both in the second quarter and year to date. We have not seen a slowdown in demand for our AI services. And unlike some of our single threaded peers in this space, we believe our end to end digital capabilities favorably positioned TI to deliver better value for money and enable better outcomes for our clients. Our ability to meet the ever more complex criteria of demand.

offers advanced digital wallet solutions, as well as one of North America's largest public broadcasters that sought out our expertise to support its expansion into new digital channels.

TI's ability to win incremental business with existing clients in Q2 was equally impressive, with numerous deals focused on expanded mandates for our AI data solutions and digital solutions teams. For example, we continue to grow our share of wallet with the world's largest e-commerce company, one of the global leaders in digital media and digital marketing solutions, a global staffing and recruiting company, and one of Western Canada's largest of both transportation carriers.

As important as winning new and incremental businesses, successfully retaining clients has become increasingly important against the backdrop of broader macroeconomic challenges.

Nowadays, many companies are looking to consolidate vendor relationships to maximize the quality of customer experience and engagement while achieving greater cost effectiveness.

PI is often rewarded as a net winner in these scenarios, given the scope and quality of our capabilities across the design build delivery continuum, our ability to effortlessly scale across numerous geographies and languages, and ultimately due to our caring culture that ensures our clients are being served by a tenured and knowledgeable team who are personally committed to their success. Let me share with you just a few examples of some of the more exciting projects we've been working on.

As far as relates to our work with one of our long-standing technology partners, VARANT, a software company focused on customer engagement.

After developing and building the needed infrastructure in-house, we tested the solution and got it certified on GCP in a matter of weeks. We then migrated 30,000 users over just one weekend. The enhanced platform is four to five times faster to deploy for clients, and it's able to take vast amounts of customer experience information and store it in the cloud. It's also been integrated with TELUS International's Cloud Contact 360 Solution, or CC360 for short.

a pure cloud omni-channel contact center platform that empowers team members with all the tools needed to improve the customer journey, providing real time, easily accessible data to make informed decisions about workforce optimization, forecasting needs for specific skillsets, scheduling and more. Users continue to report dramatic improvements in performance and quality, and the platform enabled both a capital cost avoidance benefit for clients using CC360, along with monthly operating cost savings.

Notably, Tell us International was the first to enable the variant workforce engagement application suite on GCP. And as a result, other brands and potential tech partners now have a roadmap to do the same with ease.

As a testament to the success of this project, in the second quarter of 2022, TELUS International won in the infrastructure category of VARINTH's Engage 2022 Integration Challenge for integrating VARINTH's GCP-based solution with TELUS International's CC360 solution.

It's just one example of how our cloud and platform services at part of our broader and Chinese Financial Congress your solutions operand means.

In another example, I want to share with you how our Telus International AI Data Solutions team is working with not-for-profit organization Light of Dawn International. Or as it's known locally in Indonesia, the ISI International, the Ohio Char or YICF for short. The Ohio Char or YICF for short.

to create job opportunities for displaced people to refugees in Southeast Asia.

According to the United Nations in 2021, there were more than 84 million refugees worldwide. This figure is nearly doubled in about decade and unfortunately keeps growing. And in most cases, these populations that have typically been marginalized only comes to recruitment opportunities. It only comes to recruitment opportunities. It only comes to recruitment opportunities. It only comes to recruitment opportunities.

California National Selected the Light of Dawn is a partner because of their commitment to creating opportunities for Indonesians and refugees in transit to the country. It's a locally rooted and globally connected organization focused on transforming lives in greater Jakarta through education, vocation, and community. Our team worked with the Light of Dawn to expand our global workforce by engaging with refugees throughout Southeast Asia. As part of the partnership, we participated in the organization's recently launched program called Versaima, meaning together.

with a mission of providing life-changing vocational learning experiences for unemployed Indonesian youth and refugees who are without legal rights to employment while they await resettlement to a new country. Through this program, individuals gain work experience, improve their language and digital literacy skills through continuous learning opportunities, and are able to become part of a supportive co-working community. To date, Vercerema has created opportunities for individuals across seven unique nationalities with a variety of ages, backgrounds, and languages represented.

including English, Persian, Indonesian, and Arabic. These individuals have quickly expanded and progressed the scope of their work in the AI community for more simple collection and categorization tasks to include more complex image annotation, audio and image transcription and categorization and quality assurance work. I'd also like to provide an example from our trust and safety practice, highlighting how our team helped optimize the debt collection strategy.

for a leading utilities provider in the United States. We've been a trusted CX partner into this client since 2005, and our team's impressive track record, providing exceptional customer care and sales solutions, influence this client's decision over a decade ago to broaden its relationship with Telefint International to include debt-collectured management.

Members of the Telus International Team in Central America have been providing first party collection support on behalf of our clients in 2009, seamlessly resolving billing issues and improving the clients' overall customer experience. All services are delivered in English, and key members are responsible for addressing fraud scenarios, resolving credit report disputes, communicating with customers on overdue accounts, performing audits, processing refunds, handling issues resolution, and working with credit bureaus as needed. Through our engagement leveraging our best practices.

Telus International was able to deploy a cost efficient and highly effective technology driven solution for the client. The team was able to streamline the collections process by identifying and eliminating rework, which is already generating meaningful savings, all the while delivering an enhanced customer experience, which is essential to this client's industry leading brand reputation and lower customer churn. I particularly like this example as it clearly illustrates the long tenure, diversity of mandates and stickiness of our client relationships.

Our clients see us do good work in one area and reward us with more varied work in other aspects of their operation, with our engagement often spanning over many, many years as our clients increasingly rely upon our expertise and advice.

for some of the most important areas of their business, fueling longer term growth.

My final example today highlights our Tell us international digital solutions teams efforts on behalf of a large telecommunications Information Technology Company.

My final example today highlights our TELUS International Digital Solutions team's efforts on behalf of a large telecommunications and information technology company.

Conversational bots are commonly used to facilitate a smooth user experience on mobile devices.

In order to implement a successful chatbot, organizations must first identify the most common inquiries and the chatbot can then serve up this information as pre-populated options for the customer to select when the support application is launched. Ensuring the selection is as clear and as direct as possible, improves customer satisfaction while also reducing a client's contact center volumes through self-service. After assessing our client's specific requirements and their user's journey goals, our team utilized our proprietary conversational bot platform.

Intelligent Telus International Assistant, or ITIA, to establish deep linking along with a customized response card for a better mobile experience.

Deep linking is the process of creating URL shorteners the land to user on specific flows within a chatbot.

The TELUS International Development team also created a customized response card that sorts through its trained content when a user asks a question and responds accordingly. If the customer requires further assistance, they can decide to be transferred to a live agent or continue with the chatbot. As a result of our work, the client has already seen meaningful improvements in the overall mobile user experience.

We created a branded solution customized to the client's theme, which further supported the client's brand equity.

Early in the solutions deployment, the client has already experienced over 70% of its customer calls being routed to the chatbot via deep linking to create seamless interactions that deliver measurable enhancements to customer experience, while simultaneously reducing their contact center volumes and costs by leveraging our technology driven solution.

The same ITIA bot platform I just described was recently recognized with a 2022 AI Breakthrough Award but for an informational bot in the virtual agents and bots category. This is the second consecutive year ITIA has won this industry award that's based on a variety of considerations including innovation, design and user experience as well as overalls technological advancement. Also in the quarter, leading industry analysts relations from Everest Group.

named Teleth International as a start performer on its 2022 Everest Group Trust and Safety content moderation peak matrix, highlighting our market adoption and market share growth and ability to scale along with our enhanced language capabilities and provision of localized services. Another notable accolade came from the business intelligence group, naming Teleth International as a 2022 excellence in customer service award winner in the organization of the year category, recognizing our team members with peerier performance.

in helping companies better communicate with their customers and provide a differentiated level of customer service. Our team also won a Stevie Award for Sales and Customer Service based on our work with GreenTech Scaleup Re-Furbed. Our team won in the front line customer service team of the year category, having supported Re-Furbed in its growth and expansion through the delivery of an exceptional customer experience since 2020. The

Additionally, I'm immensely proud of our company for being named one of MOGL's Top 100 Companies for Diverse Representation in 2022, recognizing our leadership in implementing practices, investing in resources and tools to hire diverse talents, and placing diverse leaders across our organization.

This recognition of our global team's remarkable performance and commitment to our caring culture is extremely well deserved, and I'd like to take this opportunity to once again sincerely thank them for ensuring we continue to bring our values to life in everything we do for our clients and for the communities where we live, work, and raise our families. As I've often shared before, in many ways what I'm most proud of at TELUS International is our caring culture. How we take care of our customers.

One another, our communities and the planet is core to how we operate as a company and is consistent with our stated ESG priorities.

and we'll ensure more than 2,000 trees are planted creating urban forests. On June 4th, we celebrated our 10th year anniversary of tell us days of giving in Ketzalp and Angle Guatemala by building the second phase of La Colina Health Center that included two clinics and a warehouse and we painted the entire center. Since we started the project in 2018, we've had over 250 team members volunteer on the site in addition to our own direct investment.

Today, the health center benefits more than 25,000 people annually. You could not otherwise access care.

And finally, before I turn the call over to Vanessa, let me also share our latest return to office update.

Globally, more than 50% of our team members have now successfully transitioned back to working on site. Additionally, around 6% are working in a combined office or remote setup. Not surprisingly, there's a high degree of variability in our return-to-office profile, with some locations like the Philippines now at almost 90% back in the office and others like Ireland at less than 10%.

I'll now invite our Chief Financial Officer, Vanessa Canoe, to take you through a detailed review of our financial results, after which I'll return to answer your questions. Vanessa, over to you.

Thank you, Jeff, and good morning, everyone. Thank you all for joining us today.

I'll begin with a look at our financial results for the second quarter and then discuss our business outlook for full year 2022.

As mentioned at the start of this call, in my review of financial results, I will refer to some items that are non-GAAP measures.

For descriptions and the reconciliation of our GAAP to non-GAAP measures, please see our earnings release and regulatory filings from earlier this morning. We had solid second quarter results with 21 percent revenue growth on a constant currency basis and an adjusted EBITDA margin of 24.0 percent. We generated robust cash flow with 60 million of pre-cash flow generated in the quarter. These results once again illustrate our focus on maintaining a healthy balance of strong top-line growth and leading profitability matched with strong pre-cash flows.

which we believe is notable particularly against the backdrop of the current macroeconomic environment. Let me now expand upon the components of our financial performance. We achieved total revenues of $624 million, up 17% year-over-year on a reported basis, or as I mentioned earlier 21% in constant currency, as our reported revenue included an unfavorable foreign currency impact of approximately 4% compared to the year-over-year period, predominantly driven by the strengthening US dollar against the euro exchange rate.

As Jeff highlighted earlier, we saw very strong growth from AI data services in particular, which along with content moderation are amongst our fastest growing service lines. Looking closer at our revenues by geography, our highest quarterly revenue growth was in Asia Pacific at 42% year over year, followed by 28% growth in North America. Potential America has moved by 21%.

In Europe , we saw a slight decline of 2% due to the weaker euro relative to the US dollar that I just mentioned.

On a constant currency basis, we continue to see double-digit growth in this region. From an industry verticals perspective, we continue to again see growth across our key verticals.

Our largest vertical, second gain, grew 18% in Q2, with Telef International AI data solutions remaining a key driver.

Our revenue growth in AI is not only indicative of market growth but also increasing market share.

In our e-commerce and fixed debt vertical, our revenues were up 26% year over year and driven by our digital TXM services. Banking financial services and insurance or BFFI grew by 117% year over year, driven by continued growth with leading financial institutions in North America and globally. Our communications and media verticals grew 8% year over year, principally driven by higher revenue from Telus Corporation or Ferry Company.

And then finally, clients in our travel and hospitality verticals continue on their post pandemic reopening for jet trees, driving growth of 46% to year. I should also note that across all of our verticals, the reported revenue growth rates were adversely impacted by unfavorable euro to US dollar currency movement.

Moving on to operating expenses, the calories and benefits extends in the second quarter.

For 356 million up 19% due to higher team member accounts to support business growth and higher average and for use of within regions. Our goods and services purchased were 118 million in the quarter and increased to 15% over here. This increase was primarily attributed to business growth, including the impact of higher crowd contractor cost from the volume expansion we continue to see in our AI data solutions business. Chairbase compensation expense in the second quarter was 7 million, a decrease of 12 million or 53% over here.

as we have made meaningful rather principal repayments against our debt facility over the past year, including in the past quarter. With rising interest rates, we also saw benefits from our hedging activities, from our cross currency interest rates, who have that have locked in favorable fixed interest rates on a meaningful portion of our debt. Income tax expense in the second quarter was 21 million compared with 13 million in the same quarter last year. Our effective tax rate decreased from 44.8%

to 27.3 percent primarily due to a decrease in withholding and other taxes, a decrease in non-deductible items, and a decrease in foreign tax differential.

As a reminder, during the first half of 2021, the majority of the non-deductible items were as a result of our IPO and were non-recurring. Our adjusted EBITDA was 150 million in the second quarter, a year over your increase of 15%, given by an increase in revenue from both existing and new customers alike, partially offset by higher cost with support business growth as it mentioned.

Adjusted every margin in the quarter was 24.0% of solid achievements in the current environment with a margin expanding by 30 basis points compared to the prior quarter. Looking at the year over your differential, it was primarily due to higher cost associated with a front-line team members as expected, as well as changes in revenue making.

Adjusted net income for the quarter was $81 million, up 29%. And on a per share basis, this translated into adjusted deleted earnings per share for the quarter of 30 cents, up 25% year over year.

Moving over to the balance sheet, our balance sheet remains very strong with further improvements during the quarter in our leverage ratio and liquidity position. Cash in cash equivalent for 123 million as of June 30th.

Our total available liquidity, which comprises cash on hand and available capacity under our revolving credit facilities of 788 million grew to 911 million.

With our available liquidity, we continue to have ample capacity to pursue strategic growth opportunities as we have done historically. We also continue to reduce our leverage, lowering our net debt to adjusted EBITDA leverage ratio as defined for our credit agreement to 1.5x as of June 30th, a further improvement from 1.8x as of March 31st, 2022.

Just a reminder, we continue to see the 2 to 3X zone as a good steady state amount of leverage and continue to have the ability to go beyond this range for the right type of strategic opportunity. In the second quarter, our free cash flow was $60 million compared to $71 million in the same quarter last year, with a decrease primarily due to higher outflows from working capital and cash taxes paid partially offset by higher operating profits. Our capital expenditures in the quarter were $29 million, an increase of $4 million over the last year, primarily attributed to additional investment in AI data solutions.

including further development of our community manager platform and related to our state of the art site in Balena, Ireland as we announced a couple of weeks ago.

We also continue to invest in our digital services for additional capacity and cloud storage along with other normal course facility related capital needs.

Looking at the first half of 2022, we generated $159 million of free cash flow, an increase of 79% from the same period last year, with an increase primarily driven by higher operating profits and a decrease in interest and income tax estate, partially offset by higher net wealth and capital outflows.

In the first half of the year, our capital expenditure that the percentages of revenue remain modest at around 4%. This is the end of the year. Thank you.

Looking at our team members, we ended the quarter with 69,218 global team members, an increase of 23% through the year, reflecting our ability to continue to hire and retain key talents to support our revenue growth.

Looking at our team members, we ended the quarter with 69,218 global team members, an increase of 23% year over year, reflecting our ability to continue to hire and retain key talents to support our revenue growth. Now turning to our outlook. Welcome back, this is an APART

Starting with revenue. As a reminder, approximately a third of our full year estimated revenues are denominated in Europe . The estimated revenues are denominated in Europe .

As you will recall, our initial guidance at the start of the year, has assumed a euro to US dollar exchange rate of $1.13. The year has assumed a euro to US dollar exchange rate of $1.13.

And it may our outlook assume the dollar eight based on the exchange rate at that time.

As we are today, giving the continued tracing of the US dollar, we're now assuming a dollar two for the second half of 2022.

Given the relative size of our European business, this effect headwind is material, not only in relation to our initial guidance at the beginning of the year, but also even when compared to our guidance at the end of just last quarter.

Despite this further disilleration in the year, however, given our strong performance year to date and the current outlook that we have for the second half, we are today, again, reiterating our guidance. And anticipating revenues in the range of 2.55 to 2.60 billion dollars, reflecting a year over your increase of 15.2 to 18.5% on the reported basis, and 20 to 22% on a constant current basis.

Compared to a constant currency growth range of 19 to 21% shared in our last guidance update, and also compared to a constant currency growth range of 80 to 20% in our initial beginning of the year of guidance. The first time we've seen a constant currency growth range of 80 to 20% shared in our last guidance.

As a reminder, our outlook does not include the potential impact of material emanate. We continue to expect adjusted evident margin to be approximately 24% for the year. We also continue to expect to deliver adjusted deleted earnings per share in the range of $1.20 to $1.23, which reflects growth of 18 to 23% from last year.

This assumes the weighted average deleted share counts are approximately 270 million in each of the quarters. SPIM ????eries

In terms of quarterly seasonality within the second half of 2022, similar to the prior year, we expect an approximate split of 48% in Q3 and 52% in Q4 for revenue and earnings.

of quarterly seasonality within the second half of 2022, similar to the prior year, we expect an approximate split of 48% in Q3 and 52% in Q4 for revenue and earnings. With that, let's move on to questions.

Do you want to send over to you? Certainly. Once again, we kindly ask that you limit your questions to one at a time. You may get back into Q if you'd like to ask another question. We will pause for a moment to compile the queue.

And one moment for our first question.

And our first question comes from the line of Ramsey LSL from Barclays. Your question, please.

Hi, good morning and thanks for taking my question. Sounds like things are going quite well. I wanted to ask if you could provide just some general thoughts on the demand environment. There's a lot of headlines about potential recessions on the horizon, et cetera, maybe just some color on customer spending patterns and decisioning in particular, whether you're seeing any changes or any signals in your day to day.

Thanks for the question, Ranzee. Nice to hear your voice. Hope you're well. William.

Red and heard. I think we did exceptionally well in continuing to progress our growth strategy, focus on both growth and profitability. Our outlook as Vanessa just reaffirmed continues to be quite robust. And whilst we're certainly mindful of and sensitive to the discourse with respect to recession, some layoffs and volume diminution in connection with some of our customer business environments thus far.

that we've not been adversely affected at all to the contrary. We continue to see pretty exciting growth opportunities in serving existing and prospective clients. And not entirely surprisingly, we were around in the slowdown a number of years ago. And then too, we were a net gainer, if you will, off the back of exactly what our value proposition anticipates, helping clients to navigate those challenging times, relying upon our investments in infrastructure, the intelligent and technology.

Great, very helpful. Thank you very much. Thank you. Thank you. Our next question comes from the line of Tiansen Hong from KP Morgan. Your question, please. Hey, thank you. Good morning. Real encouraging that you were able to fight through the FX. And then some, I just want to ask, I guess, looking ahead to the second half of the year, in terms of the range on the revenue side, that you're laying out, the usual question, what gets you to the low end versus the high end? How much cushion do you have left?

to the extent that maybe there are some surprises and I'll suggest that you're seeing maybe a change in your client priorities or the types of clients that you're engaging with that provides a hedge against what Ramsey was asking. I know you mentioned the BFSI win, for example. So just trying to better understand the.

the potential range of outcomes in the second half of the year here. Thank you. Hey, Ting-Jin, thanks for the question. Nice to hear you as well. I'll invite Vanessa to respond in detail there.

As Jeff mentioned, obviously, we're in a time where there's a lot of uncertainty from a macroeconomic perspective, lots of headlines around some companies slowing down, et cetera. But thus far, we can seem to be a net beneficiary. We have a really strong funnel, as you heard in Jeff's prepared remarks. We've got pretty good visibility as well into the second half. So not only visibility in terms of what the opportunities in our funnel, but also just based on the work that we do, we're in discussions with clients in terms of planning, planning, their projects and priorities for the second half. So we do have some fairly strong visibility at this particular point.

Of course, back to things are, we are in uncertain times. I don't think anybody wants to suggest they've got perfect visibility at this particular point in time, but based on what we know, what we see today, we're fairly confident in the second half guidance that we've put forward. And in terms of whether we're seeing any changes in the types of clients, I mean, I'll invite Jeff to top up, but I don't think we're seeing changes in the type of clients. Certainly, we have some pretty nice new logo wins that you heard Jeff highlight. He just prepared the remarks earlier.

balancing some of the geographic distribution of work, etc. But other than that, I think I would say, based on what we're seeing, that the type of clients and the type of work we do falls right within our wheelhouse.

Great. Thank you, Vanessa. Thank you.

And our next question comes from Alain, no Brian Bonner from City. Your question please. Hey, thanks for taking a question. I wanted to touch on FNA. So I was a reported acquisition offer that you guys made in the quarter to acquire a public confederation in the AI space. And not sure if you want to comment on that event specifically, but more broadly, can you discuss how you're thinking about M&A now? That you're below your target leverage ratio. Is there a desire to continue to make?

large scale acquisitions like you've done the past or are you more comfortable with tucking acquisitions and I guess what exactly would you be looking for in any potential targets.

Hey Ryan, thanks for the question. On the first part of your question, suffice to say, we decided that it wasn't prudent for we to proceed with the proposed transaction as a consequence. Decided to walk away. I don't know that there's much to be gained by dwelling on the details behind that. On the latter part of your question, obviously as our leverage ratio continues to improve.

that creates more and more headroom for the possibility of M&A activity. And it's always been an enabler of an amplifier of our strategy, not the strategy itself. And so, whilst we're certainly confident in our current capabilities to meet existing and prospective customer demand, we continue to be actively on the lookout for areas of opportunity for adjacencies, or extension-dined scale, for additional capabilities that we think we can.

why, when and how. The market continues to be what I would call a target rich environment for potential M&A activity. But first and foremost, I think not entirely dissimilar from what you see in how we run the business organically, i.e. a focus on discipline and profitable growth. So too, you should expect that same discipline in how we approach potential M&A activity. Great, thank you.

Thank you. And our next question comes from the line of Stephanie Price from CIBC. Your question, please. Good morning.

Data solutions have been an area of strength, and a competitor in data annotation recently preannounced some weaker results this week. I'm curious if you could talk a bit about what you're seeing in the competitive environment on the data solution side and whether TI's winning share there.

Yeah, well, obviously we too read with interest, our competitors' updates. Their experience candidly is decidedly dissimilar from our own. As I shared in my comments earlier, and as Vanessa further illuminated, our data annotation business continues to perform exceptionally well with double digit growth in revenue and EBITDA for the quarter and year to date. And our outlook for balance of year continues to be equally robust.

Yeah, well, obviously we we too read with interest our competitors updates. Their experience candidly is decidedly dissimilar from our own. As I shared in my comments earlier, and as Vanessa further illuminated, our data annotation business continues to perform exceptionally well with double digit growth in revenue and EBITDA for the quarter and year to date. And our outlook for balance of year continues to be to be equally robust. I'm not sure I can.

Comment on what's behind what they're seeing and why they were commenting the way they were. Obviously, I don't have perfect visibility to to their own particular circumstances. But it would seem to me that when we're growing at 40% year over year, one of two potential things is occurring, and it could be both. Either we are growing with the continued market growth and or we're taking meaningful share from them. In either case, I think it's good news for us.

Great, thanks for the color. Thank you. And our next question comes from the line of Maggie Nolan from William Blair. If you're a question, please. your question please.

Good morning. This is Jesse on for Maggie. I had a follow-up question.

to the M&A topic. So you guys mentioned higher contractor costs in the quarter. So how are you sourcing these contractors in the AI business? And could you potentially leverage M&A to gain access to more crowdsourced annotators? commercials.

Thanks, Jesse. I knew right away when I heard your voice, you weren't Maggie, you have so much deeper sound to you than she does. We obviously use a multitude of direct channels, web-based and otherwise, social media, in order to surface crowdsource worker opportunities. And as you can imagine, just given the size of that community, it is a prolific channel that we leverage on a constant basis. Acquisition activities theoretically could amplify and extend out.

basis. Acquisition activity theoretically could amplify and extend our reach in that regard.

We thought a little bit about it and candidly, who'd them for working with someone else and vice versa. So long as our current acquisition recruiting team continues to be active and engaged, I think theoretically we could reach everybody. And the very people that might be part of the community that is being sourced by an acquisition candidate, they are already theoretically available to us. Yeah, we might be able to get them a little bit more quickly more easily through the acquisition, but I'm not sure that would be the...

primary consideration at all with respect to the value we might see in a potential acquisition. It would have to be something significantly more substantive than that. That would be the kind of acquisition we would be looking at. Understood. Thank you for taking my question. My pleasure. Nice to hear your voice, Jesse.

Thank you. And our next question comes from the line of Daniel Chan from PDC Carities. Your question please. Thank you. Your question please.

All right guys, and congrats on the strong quarter. So TELUS is acquiring LifeWorks. Just wondering how involved you will be in supporting it, and maybe as a follow-on to that, how much of a sales effort is it to get that business, or is it pretty much free growth without much sales expenses associated with it? Thank you. Thanks very much, Daniel. Well, I certainly am hopeful that we are going to be very actively engaged in supporting LifeWorks, assuming TELUS is successful in...

completing that transaction, as I think you know, it's signed but yet closed. And so, you know, upon closing, assuming that does indeed occur, we will absolutely be looking for areas of opportunity for collaboration, not dissimilar from the support we've been providing to TELUS core communications business, as well as TELUS TELUS, TELUS AgTech. I think there's a multitude of areas of opportunity for enablement, leveraging our core competencies around digital transformation, an exceptional client or in their patient experiences.

The latter part of your question then made me smile only because over the last 17 years, I could tell you that I think there's perhaps a...

surprising misunderstanding regarding the dynamic between TELUS and PI. In many ways, I've often lamented that TELUS is the most difficult client for TELUS International to win and or support. They are discerning. They are demanding. It is no day at the beach. It's more like D-Day at Normandy Beach. Sometimes I joke that we have to work hard to win that business. We compete every day with all of the usual suspects and TELUS is by no means giving TELUS International a whole pass.

are experts at what they do. And we have renegotiations on our statements of work each and every time to ensure that TELUS continues to derive the value it expects from the relationship from TI. And so I would anticipate, assuming LifeWorks gets acquired and there's opportunities for we to enable them, that that dynamic will be no different than that, which I just outlined.

they do and you know we have renegotiations on our statements of work each and every time to ensure that tell us continues to derive the value it expects from the relationship from TI and so I would anticipate assuming life works gets acquired and there's opportunities for we to enable them that that dynamic will be no different than that which I just felt. That's a very helpful callers thank you very much.

My pleasure. Thanks for the question. Thank you. And our next question comes from the line of Keith Bachman from BMO. Your question, please.

Hi, good morning everybody. I wanted to ask a clarification and then a question which is distinctly different from asking two questions.

But Vanessa on the the Margin guide that you're given for the year you're keeping 24, but I actually think you're raising margins because you're absorbing FX within that. So I just wanted to try if you could just clarify how much FX you're absorbing in your operating margin.

Vanessa on the the margin guy that you're given for the year you're you're keeping 24, but I actually think you're raising margins because you're absorbing effects within that. So I just wanted to try if you could just clarify how much effects you're absorbing in your operating margin.

to understand how much your net net effectively raising the EBITDA margin. The question, Jeff, I wanted to pose to you is if you think about the cost size equation, I just wanted to get a perspective on how that's actually transitioning as you look at it through the year. And the variables would include attrition and wage, you know, labor rates. Just want to try to understand as you see the economy behind us weakening a little bit, are those wage implications staying the same?

getting better, getting worse, just a little bit of comments on how you see both attrition and wage inflation, unfolding over the balance of the calendar year. Many thanks. You must be a recovering lawyer in your past life. I'm just saying, shink good for you. Vanessa, why don't you take the first step and I'll take the second.

Thanks Jeff. Keith, thanks for your question. For the first part of your question, look, when we look at currency movement, starting the year at $1.13 on the euro, and now at $1.2, that's an almost 10% swing within the same year. And frankly, had it not been for these currency movements, tell us in your national would have been raising guidance. Normal dollar guidance, right? And so we want to make sure that folks walk away with the real key takeaway here, which is strong operational execution.

Honestly, I did not do for FX. I think we'd be raising our margin guide by probably at least 20 to 30 basis points in the year. It's not more. So a lot from the goal here, but strong operation execution to help the combat visa FX movement. Over to you, Jeff. Okay, perfect.

Thanks Vanessa. So our assumptions for the back half, Keith, are not entirely dissimilar from what we set out at the beginning of the year. There's obviously a number of puts and takes as we read about, as I referenced earlier in my response, I think it was contingent question about recessionary effects. Attrition continues to obviously be a challenge for we and for all of our peers. And whilst we are by no means immune from the implications of this continued

tight labor market in terms of accessing at scale the requisite talented folks to help us on these technology-enabled transformational work and services we provide. As I've said many times in the past, I really do think we continue to be inoculated in part because of our unique and caring culture, because of how we approach employment more broadly. And so for the back half of the year, we're not anticipating any...

further difficulties. We think it's going to kind of continue a pace. I think there's you know some reason for potential optimism, ironically in the sense that when you start to read a little bit about potential layoffs and some softening in the marketplace, maybe that means the labor market might open up a little bit for us and what there is some cause for potential optimism there. The reality is...

Most of our hiring is not happening in those markets where we're reading about these layoffs. So at the extent that we're looking to access talent, it's not where you're hearing about the layoffs necessarily. So I'm not anticipating all of a sudden the challenges around recruitment and retention are gonna somehow move in an inverse correlation to what we saw in the first half. I think it's gonna continue to be challenging, not insurmountable as we've demonstrated, given we're in North America.

ensuring that the partnerships they have for support are really delivering the ROI that they expect. But that's always been the case. And that is how we positioned our business and our service offerings, our value proposition was designed to address exactly those concerns. So, as I said before, I think we're going to see a not dissimilar back half from the front half, subject only to, as you've heard from Vanessa before, quasi-seasonality, where the back half tends to be a little bit more robust for us in terms of growth than the front half.

Okay, got it. Many thanks, team. Thank you, Keith. Thank you. Our next question comes from the line of Jeff Cantwell from Wells Fargo. Your question, please. Hey, thanks so much and congrats on the results.

Thanks, team. Thank you, Keith. Thank you. Our next question comes from the line of Jeff Kent. From Wells Fargo. Your question, please. Hey, thanks so much. I think you can grasp on the results.

I want to ask all three of mine up front, if you don't mind. The first is, can you tell us a little bit more about e-commerce and fintech, 26% growth this quarter. So I'm just getting a little more color on what's working out there in the market with you guys. I would love to hear a little bit more about that.

Second one is just kind of similar. Can you talk a little bit about the competitive environment? She gives a sense of, you know, what is cutting in maybe getting a little easier for you? Yeah, as you progressed over to call it the last 12 months or so. And then third, you know, earlier there's a question about profitability. I'm just curious if you can give us a sense longer term of how you're thinking about profitability for the company. You know, given all the moving parts with inflation and you know, ways inflation. And obviously, you know, a lot happening on the top line for you as well. So you just want to get some sort of where you're thinking, you know, the current thinking.

margin expansion. It's continued scale. It's continued leveraging of our own secret sauce around automation and process excellence and efficiency that we think will continue to contribute, not only to mitigating the inflationary effects of wages and overall expenses in operating these businesses, but will actually give us, you know, expanded margin yields in the fullness of time. On the competition front, I wish I could tell you that I think things are getting easier. I just don't think.

of our existence, of our expertise, of our capability, so that we got invited to even more opportunities, whether by RFP or IFI or otherwise. We could always do better there, but we certainly get more at thoughts, if you will, than we used to when we were smaller and before we were public. So in that regard, I think the competitive environment is improving, but still challenging. I think ongoing consolidation and the high level of fragmentation in our competitive landscape, is improving.

Also is a dynamic we continue to be quite mindful of and to the extent that those evisant flows represent risk, threats and opportunities. We continue to navigate them as effectively as we can. And the last thing on the e-commerce and FinTech fronts, I think there too we just continue to see ongoing opportunity. I think that's a vertical that continues to be just filled with creative, exciting, innovative business models and capabilities. And I think as we continue to build more and more. And I think as we continue to build more and more.

credentials and build a reputation for being a terrific partner to support, enable, amplify the success of those businesses and their platforms, whether it's through subscriber growth, protecting the integrity of their environments, ensuring the quality of the transactions that they and their customers enjoy on their platforms. We see continued upside opportunity for the foreseeable future. Okay, that's great, Tyler. Thanks so much and congrats on the results.

Thanks very much, Jeff. Thank you. And our final question for today comes from the line of Casey Chan from Bank of America.

Hey guys, this is Cassie on for Jason Kofferberg. So I'll be quick. One is just a follow up. So I know everyone's been talking about wage inflation and anything. Is there any updates on your end on kind of like the ability to pass on those potential price increases to your customers? Is there any update that you've baked in in your full year top line guidance? And then a quick modeling related one. Are there any updates on the low-to-line item that interest expense or tax rate?

for the back half that is kind of baked into your full year outlook. Thanks guys. Thanks very much Cassie. I'll invite Vanessa to take the second half of your question second, but just briefly on the first one. Oh my goodness, I just had a seniors moment and I forgot the first half question. For reminding me again, Cassie. Yeah, no problem. So ability to pass on price increases and is there a good thing that assumptions for your full year outlook for top line? Thanks. Thanks.

Sorry, thank you. I have to be excused here. I had not much sleep last night. I became. At 63 this morning, I've been up all night waiting for the update from my kids. So in any event. I think if you look at our margin profile for year to date and the second quarter.

We are able to share some of the burden of these wage inflation dynamics with our customers. And we are so, so pleased and grateful that we've got customers, partners who are willing to work with us. In some cases, of course, if you know it's predicated on these covenants in the contract that we have in place that allow us to do that. In many other cases, it's, it's not explicitly because of contract language, but it's because as I say, of the strength of the relationship that we're able to go back to them off cycle, if you will, not when they're sort of a natural incision point on an expiration or renewal date.

of an MSA or an SOW, again to work with them, but in totality, we continue to be, you know, pleased with the progress given the continued profitability profile of the business, and for back half of the year, given Vanessa sharing as we expected, not just, you know, maintain a guidance, but that means we're going to absorb continued effects impacts. Again, I think that inherently implies that, you know, it's not just we're pricing new work at new rates, but we're also able to try and mitigate some of those challenges with existing or older contracted work as well.

And then, Vadasi, do you want to talk about below-the-line matters? Yeah, so to answer the second half of your question, Cassie, from an interest expense perspective, I would expect just a nominal change in terms of second half versus first half. And ETR, we had previously guided a full-year range of 28 to 30 percent, and I think you can do the math in terms of where we landed in the first half to get where we were going to go in the second half. We do have seasonality there, where the ETR steps down in each quarter.

and so Q4 will be fast-speed your lowest. If you model to the 20% to 30%, then make sure you split your Q3, Q4 to the lowest. The only variability there, as I think you already know, is obviously that assumes a certain few institutional mix or earning. So we might have a small variation there, but I think if you go with those assumptions, you should be okay. Great, thank you.

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Mr. Puerit for any further remarks.

Thanks, Jonathan, and thank you all for your questions. In closing, I'd like to reiterate our belief that TELUS International is well positioned to not only continue to execute through current macro headwinds, but to thrive along the way. Our deep expertise, best in class digital capabilities and global scale directly translate into fundamental, sustainable drivers of our profitable growth strategy. We've been through many business cycles throughout our 17-year history, and this experience...

reinforces our confidence in our own ability to continue to navigate these challenging times and to execute upon our growth objectives. We're staying focused on what we can control, delivering exceptional service and value for money as we help our clients to continue to maximize their customer experience outcomes whilst concurrently achieving greater cost effectiveness. While concurrently achieving greater cost effectiveness.

Vanessa and I look forward to connecting with many of you face-to-face at upcoming conferences and investor events in August and September , and we hope to see you at our next quarterly call in early November . Thank you again for joining us today, and keep your eye on us as we help our clients to continue to follow.

Q2 2022 Telus International Cda Inc Earnings Call

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