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spk07: Good morning, ladies and gentlemen. Welcome to the TELUS International Third 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 11 on your telephone keypad. As a reminder, today's program is being recorded. I would now like to introduce Jason Meyer, Senior Director, Investor Relations and TELUS Treasure International. Mr. Meyer, you may begin your call.
spk04: Thank you, Jonathan. Good morning, everyone. Thank you for joining us today for TELUS International's Q3 2022 Investor Call. Hosting our call today are Jeff Puritt, President and Chief Executive Officer, and Vanessa Canu, our Chief Financial Officer. As usual, we'll begin with some prepared remarks where Jeff 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 telusinternational.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. Jacqueline 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 EDGAR. I would also like to remind everyone that all financial measures we're referencing on this call and in our disclosure are in US dollars, unless specified otherwise, and relate only to TELUS International results and measures. With that, I'll now pass the call over to our President and CEO, Jeff Peiris.
spk09: Thank you, Jason. Good morning, everyone, and thank you for joining us today. It's my pleasure to be speaking with you today, along with Vanessa, live from our TELUS International El Salvador site. We're here to join more than 1,000 TIT members, clients, and other local stakeholders at a TELUS International Days of Giving volunteer event. Together, we're kicking off a massive rebuilding project to restore a child development center run by the global nonprofit organization SOS Children's Village. This is on the heels of a terrific event in Guatemala City just a few days ago where our team finished building a school, our 12th in Guatemala, that will benefit more than 2,000 students. I'll use this opportunity to once again thank our team members for their passion, dedication and hard work in organizing these meaningful and vital events in the regions where we operate. Now, moving on to our financial and operating results reported earlier this morning. For the third quarter of 2022, TELUS International delivered an 11% year-over-year increase in revenue or 16% on a constant currency basis, a solid result given the prolonged geopolitical uncertainties and macroeconomic challenges we continue to operate within. With a potential global recession looming, our attention and efforts have remained on the factors within our business that we can control. In this regard, our team's ongoing diligence in harvesting efficiencies and productivity in our operations helped to deliver strong double-digit profitability growth in Q3, with adjusted EBITDA up 15% year-over-year and an adjusted EBITDA margin of 25.7%. Moreover, TI has continued to successfully deliver robust free cash flow, up 56% year-over-year, enabling our continued rapid deleveraging. As we've shared in past quarters, TI partners with more than 600 clients globally, including many tech-forward enterprises and digital disruptors. We've benefited from the tailwinds of their growth over the years, which we've helped enable. More specifically, among our key verticals, clients in our tech and games, e-commerce and fintech sectors account for nearly 60% of our total revenue. While performance within these sectors has been mixed, there's no doubt that they've been under considerable pressure of late, as the same inflationary pressures and fears that businesses are facing have been increasingly impacting their own customers' purchasing behaviours. This, in turn, has further compounded challenges to our clients' revenue growth, which is being reflected through the Q3 earnings cycle, with many reporting lower than expected results and calling down their expectations for future growth. While concerns about a potential recession were starting to build last quarter, we did not anticipate the magnitude and the rapidity of the impact to our clients, especially since we engage in regular joint forecasting and capacity planning with them. These joint forecasts are typically quite reliable, so given what we now see, we have accordingly adjusted our own forecasted expectations for the next quarter. We view this as a short-term headwind, that will continue to successfully navigate through our demonstrated ability to focus on disciplined cost management to help us through these near-term exogenous impacts. On a longer-term basis, there are several significant factors in our favor. Although a cooling economy and unchecked inflation naturally triggers companies to protect their earnings by freezing budget spending, many are doing so to meet earnings expectations in the very short term. Once the proverbial dust settles in this regard, we anticipate that these companies will undoubtedly turn back to longer-term planning and strategies to sustainably manage their cost profile, which typically includes an increase in outsourcing activity to improve the effectiveness and efficiency of their operations. TI is poised to win in this environment with our ability to partner with our clients to streamline, optimize, and modernize their processes to enable scalable digital solutions. Additionally, the trend towards vendor consolidation is gaining traction as more companies are looking to create trusted and strategic relationships with their suppliers to drive long-term benefits of digital transformation. We believe our integrated end-to-end digital capabilities make TI a one-stop shop solutions provider, giving us a significant edge in the market while also opening the door for us to cross-sell complementary services that further support our clients' digital transformations. The projected growth of the global digital transformation market is expected to continue to expand as businesses across all industries streamline operations and amplify workforces through automation, migration of applications to the cloud, modernization of products, services, and systems with AI, and delivering differentiated customer experiences that are seamless, personalized, and secure. TI is very well positioned to be the net beneficiary here as well, given we can compete successfully with a rather diverse set of industry players across sectors including globally diversified IT consulting companies, digital transformation providers, CX players, and single-threaded data annotation companies. Our agreement to acquire WillowTree only further amplifies TI's unique value proposition in this regard, unlocking exciting net new areas of opportunity. The impressive end-user experiences that they already design and build for clients like Anheuser-Busch InBev, Fox, Manulife, Marriott, PepsiCo, and Synchrony, to name just a few, will be game-changers for our existing and new clients. Turning back to our Q3 results, our sales funnel as of September 30th remained robust. However, in line with my prior comments, we're seeing longer than typical ramp timelines on our new projects and on existing program expansions, resulting from our clients' more extensive due diligence processes in the face of the more challenging macroeconomic environment. To provide some color on TI's new logo wins in Q3, we onboarded a new multinational banking and financial services corporation, a leader in conversational commerce, and a leading provider of trucking roadside assistance in the United States. Each of these new clients across a diverse mix of industries rely heavily upon digital solutions to serve their customers, enable their businesses, and generate incremental revenue. And TI is delivering the solutions they need to level up their businesses. Within our existing client base, Q3 highlights include winning incremental business with an online game platform and creation system. This allowed us to expand our service volumes in a specific geography, notably by replacing a vendor that couldn't match TI's high service standards. We also grew our service contract with one of North America's largest energy services providers. Our AI team secured more business with a German car parts maker, and we increased our share of wallet with an American luxury retailer. Furthermore, our work with the world's largest e-commerce company continues to grow due to our exceptional track record of exceeding KPIs and the trust we've earned over the course of this partnership. In all of TI's engagements, our ultimate goal is to understand our clients' businesses, their needs, and challenges in order to drive value in both the near and long term. With this in mind, allow me to share with you some recent in-depth examples of our team in action. In this first case, TELUS International implemented a comprehensive intelligent automation solution for a U.S.-based financial services company that provides title insurance protection and professional settlement services. Our client was looking for a digital automation solution that could provide their team with 24x7 support when responding to customer queries. This included guiding staff to accurate knowledge base information, handling refund and claim adjustments, and utilizing de-escalation techniques, among other capabilities. Using our intelligent TELUS international assistant platform, we implemented digital co-workers that enabled the client support team to easily access the right information stored in their internal knowledge base. This significantly reduced search time from six minutes to 60 seconds. while decreasing the average handle time of customer inquiries by 9%. Overall, our solution decreased employee effort and increased service quality and transaction efficiency, as well as customer and employee satisfaction for this financial services client. Since then, the company's customer SAT scores have jumped by 40%, while escalation requests or queries received by supervisors has dropped by 80%. In conjunction with the implementation of TI's chatbot solution, the client also adopted our unique intelligent insights platform to manage all of the client's digital workforce needs more effectively. In the next case study, one of our clients, a US-based wearable fitness tracker brand, asked us to help streamline their operations and enhance customer experience by automating tasks that previously required extensive time and effort from employees. The specific task at hand here was to develop an efficient solution to convert more than 60,000 Salesforce data files for storage in the cloud within two weeks. Due to the sheer amount of manual work required by team members, this kind of project could typically take up to two months if relying on humans alone. Instead, TI designed and implemented bots, specifically robotic process automation or RPA bots. In total, 17 RPA bots logged into our client's Salesforce platform, operating 24-7 to successfully convert all files in just four days with zero defects. RPA technology is an increasingly common solution available to help companies address operational inefficiencies while simultaneously enabling employees to focus on more creative, and complex work. In fact, Research and Markets estimates that the global RPA market will reach more than $25 billion by 2027, expanding at a compound average growth rate of approximately 41% over this period. Our expertise in intelligent automation favorably positions TI to gain share in this exciting space. Moving on to another example, our AI data solutions team continues to work closely on new projects with one of our most tenured clients, a global tech giant whose services include online advertising, cloud computing, and more. This client needed an experienced partner to analyze data on merchant quality and validate risk assessment ratings to better understand the buyer experience and enhance the overall user experience. In addition, the client wanted support for the detection of counterfeit items and irregular shipping practices to eliminate fraudulent merchants and protect end customers. First, TI established a data review process to evaluate merchant performance based on a set of defined criteria. TI's experienced remote data evaluators follow this standardized process for each evaluation stage from purchase to refund. Guided by a strict playbook with clearly defined guidelines and criteria, our crowd community inputs merchant quality data into a dashboard for evaluation. This dashboard also provides benchmark quality data to support and align merchant evaluations on a global scale. To date, we've checked and identified more than 20,000 fraudulent transactions, generating approximately $11 million in savings. We've also flagged a further 9,000 suspicious transactions within the program. In team-related news, we announced in late August the appointment of Beth Howen as TELUS International's Chief Transformation Officer. In this newly established role, Beth is leading the creation of more defined and robust processes around TI's product and service development portfolio. She's also supporting the next evolution of how we go to market, which will enable TI to further capitalize on the demand for customer experience partners with end-to-end digital service capabilities and expertise. With more than 25 years of experience in tech, Beth has held senior leadership roles in large and complex US government agencies, nonprofits, and private sector organizations. This considerable knowledge she brings to TI will help us continue to optimize and grow our company's expertise in digital automation, product management and development, customer insights, consulting and enterprise transformation, solution development, and global digital services delivery. In the third quarter, Our global team members continue to receive industry recognition for their unwavering commitment to delivering the best of customer service. Everest Group, a leading global research and advisory firm, released its Customer Experience Management Peak Matrix Assessment for 2022, in which it ranked TI a leader in the Americas. Notably, only six of 37 providers received this distinction as a result of Everest Group's ranking market success, vision and strategy, service focus and capabilities, digital and technological solutions, domain investments, and client feedback. TI was also named a star performer for this peak matrix in the EMEA region. During the Clinton Global Initiative 2022 meeting in September, Pellis International was part of Everest Group's commitment to action to grow the impact sourcing market from its current level of 350,000 full-time employees to half a million in three years. The commitment to action focuses on connecting marginalized individuals to new jobs working alongside service providers, governments, and non-governmental organizations in collaborative efforts, which TI has been committed to since our company's inception. In Q3, our team members around the world volunteered at many events focused on environmental stewardship. Over 500 TELUS International team members took part in the 10th anniversary of TELUS Days of Giving in Bulgaria, assembling 60 beehives to house 3.5 million bees and extracting 600 jars of honey to support 50 local beekeepers. During Eco TELUS Days of Giving events this past quarter, 350 volunteers in Guatemala and El Salvador installed 200 ecological stoves and 200 water filters in local homes to provide cleaner air for the community and safe water supplies for more than 1,000 people. In August, TELUS International launched Spectrum chapters in Guatemala and in El Salvador. Spectrum is TELUS International's LGBTQ2 plus employee resource group to help encourage everyone at TI to bring their authentic selves to work. We also recently celebrated the launch of a new Connections chapter in Chengdu, China. Connections is a team member resource group with a mission to support and inspire women at TI to pursue career excellence through networking, personal and professional growth, recognition and community involvement. Before I hand off to Vanessa, I'd like to provide some additional context about WillowTree and share two case studies for those who were perhaps unable to attend our investor webcast last week following our announcement. Founded in 2008, Willowtree is headquartered in Charlottesville, Virginia, and is led by their founder and president, Tobias Dengel. The company operates 13 global studios across the U.S. and Canada, as well as in Brazil, Portugal, Spain, Poland, and Romania. There are more than 1,000 highly skilled digital strategists designers, engineers, and project managers partner with more than 50 companies, many of whom are listed on the Fortune 500 list, on mission-critical, large-scale initiatives delivering world-class digital products that bridge the highest quality customer experiences with measurable performance. The significant growth in our digital capabilities upon closing of the acquisition will help enable TI's mix shift to faster-growing digital services, along with improved diversification of industry verticals and service lines. Looking across the current M&A landscape, Willowtree stands out as a unique asset in that the company is both high growth and profitable with a global scale that will support a more effective joint speed to market versus if we had made multiple smaller subscale acquisitions and then tried to stitch them all together. We also believe the revenue synergies ahead are significant given the very limited client overlap that would indicate, excuse me, that would indicate considerable white space in terms of TI cross-selling WillowTree services to our clients and vice versa. More specifically, we have already identified multiple opportunities within our parent company, TELUS, to further enhance and accelerate its digital transformation, in addition to elevating its optic TV offering, as well as its TELUS health, agriculture, consumer goods, and energy software-as-a-service businesses. To assist in further illuminating exactly what Willowtree does, I'll share a couple of high-profile project examples. Top of mind for me is the story of PepsiCo and the Super Bowl. Over the past eight years, Willowtree has become a key partner to PepsiCo, helping drive Pepsi's ongoing market leadership through its digital channels by leveraging their strategy, research, product design, and custom development solutions. Among the recent initiatives Willowtree has supported, perhaps the most exciting is the creation of Pepsi's Super Bowl 56 halftime app. For 10 years now, Pepsi... has been the title sponsor of the Super Bowl, and earlier this year they partnered with Willowtree to help create a companion digital experience for the Super Bowl that would give consumers unprecedented access to the event. The team developed an app to put Pepsi front and center on a day where brands compete fiercely for consumer mindshare. In the lead up to the Super Bowl, Pepsi engaged fans weekly with more than 30 in-app content drops, ranging from artist merchandise giveaways to exclusive interactive photo filters that were built in partnership with Snap. On game day, Willowtree and Pepsi launched an in-app exclusive, the Pepsi Ultra Pass, that granted fans access to a groundbreaking, fully immersive second screen viewing experience, effectively putting them on stage with the artists during the live performance. The Super Bowl 56 halftime show was one of the most watched halftime shows in the event's history. Willowtree ensured the app's back-end infrastructure was engineered to handle the significant load. The results were impressive. 85% of users streamed the full show in the app, and Pepsi was the event's most talked-about brand, thanks in large part to the digital experience provided by Willowtree. Another case that illustrates Willowtree's exciting capabilities comes from their seven-year client partnership with Fox, which included developing a highly successful weather app. Described as precise, personal, and powerful, and developed in close collaboration with the Fox team, Willowtree's Fox weather app shows users the world's weather and long-range forecasts with beautiful visuals and a straightforward design. Other features include live streaming and video clips of severe weather, as well as widgets on users' home screens that display information like sunrise and sunset, high and low temperatures, weather warnings, and peek-ahead forecasts when relevant. Users can customize their experience by selecting locations that matter to them, like the homes of family members in other states or countries, or favorite vacation spots, and setting up long-range forecasts or subscribing to severe weather alerts. With more than 500,000 downloads, the Fox Weather app is the number one most downloaded weather app in the app store. As you can imagine, given the tremendous benefits to be realized by the acquisition of a fast-growing, profitable, scaled, and scarce asset like WillowTree, it was an extremely competitive process. bolstered by our successful M&A track record and underpinned by our infrastructure, processes, and unique transaction structure that will keep management motivated and focused on delivering profitable growth We're confident in our ability to surface meaningful incremental value, including rapid deleveraging post-closing. This investment in the long-term growth strategy of our business is another exciting milestone in TI's journey, highlighting how we continue to position TI for profitable and sustainable growth, and I look forward to updating you on additional details of the transaction post-closing in early 2023 and providing progress updates in the quarters ahead. For those of you that may have not yet had their fill of me sharing my excitement about our Willow Tree acquisition, the webcast recording along with presentation slides is available on our Investor Relations website. 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.
spk06: Thank you, Jeff, and good morning, everyone. Thank you all for joining us today. As usual, in my review of financial results, I will refer to some items that are non-GAAP measures. For descriptions and a reconciliation of our GAAPs and non-GAAP measures, please see our earnings release and regulatory filings from earlier this morning. Now, let me expand upon the components of our financial performance for the quarter. In the third quarter, we delivered revenue of $615 million, up 11% year-over-year on a reported basis and 16% on a constant currency basis, despite a challenging macroeconomic environment that has impacted the velocity of spend for some of our larger clients who, as Jeff mentioned earlier, are approaching short-term spending decisions with more caution due to cooling demand in their own end-customer markets. We can see this impacting many areas of the global economy, with heightened uncertainty driving market volatility and near-term budget adjustments as negative headlines exacerbate fears of recession. In spite of all of this, Telus International has stayed true to its strategy of focusing on profitable growth, robust free cash flow generation, and rapid deleveraging, all of which were successfully achieved during the third quarter, and will continue to be of critical importance during challenging macroeconomic periods. Looking more closely at our revenue performance across industry verticals and geographies, our reported growth rates were negatively impacted by the weaker euro to US dollar, as previously mentioned. The overall impact to our top line growth was an unfavorable 500 basis points. As I speak to our vertical and geographic revenue performance, I will provide constant currency commentary where helpful. Starting with revenues by vertical. In the third quarter, our largest vertical, Tech and Games, grew 15% year-over-year on a reported basis. On a constant currency basis, this vertical grew by a very healthy 23% in the third quarter. Our second largest client globally, a leading social media network whose revenues fall within the Tech and Games vertical, saw softer revenues in Q3 on a reported basis but was up 6% on a constant currency basis. Strong double-digit growth from many other notable clients in this vertical helps to moderate the impact of this one client to still achieve 23% year-over-year constant currency organic growth. In our e-commerce and fintech vertical, revenues declined 4% on an as-reported basis, but grew 8% year-over-year in constant currency terms. This traditionally fast-growing vertical has recently experienced moderation in the rate of growth from certain FinTech clients, even though we continue to expand our share of wallet with other e-commerce clients within this vertical, including the world's largest e-commerce company. Growth in our communications and media vertical remains strong, with quarterly revenues increasing 10% year-over-year, driven principally by higher revenues from Telus Corporation, our parent company. Banking, financial services, and insurance, or BFSI, continue to grow rapidly, with revenues increasing 68% year-over-year, fueled by ongoing growth with leading financial institutions in North America and globally. And finally, to round out the top five verticals, clients in our travel and hospitality vertical grew by 19% year-over-year. In looking at our revenues by geography, revenues from Europe, which comprise 34% of our overall revenues, were down 9% year-over-year on a reported basis, while on a constant currency basis we saw growth of 4% in Europe, as that region as a whole continues to experience increased macroeconomic softness as compared to other regions. Revenues in North America, on the other hand, which comprise 26% of our total revenues, grew by an exceptional 27% year-over-year, while revenues in Asia Pacific and Central America, which comprise 24% and 16% of our total revenues, respectively, each grew by a very healthy 23% year-over-year on an organic basis. Moving down the income statement, on to operating expenses. Salaries and benefits expense in the third quarter increased was $346 million, up 12%, due to higher team member counts to support business growth and higher average employee salaries and wages, partially offset by the lower exchange rates across a variety of currencies relative to the U.S. dollar. As a percentage of revenue, salaries and benefits for the quarter were steady at 56% compared with the same quarter a year ago. Our goods and services purchased were $111 million in the quarter, an increase of 1%, as higher crowdsourced contractor costs from our AI business were partially offset by spend efficiencies during Q3 and the lower average exchange rates across a variety of currencies relative to the U.S. dollar. Share-based compensation expense in the third quarter was $6 million, a decrease of 15 million or 71% year-over-year, primarily due to the lower average share price during the quarter tied to recent market conditions. Acquisition, integration and other charges in the third quarter were $7 million, an increase of just $1 million versus the same time last year. Our interest expense in the third quarter was also steady over year at $10 million as lower average debt balances in our credit facility were offset by higher average interest rates during the period. As interest rates have risen steadily over the course of this year, we have continued to benefit from floating to fixed rate hedges that have fixed about half of our debt at very attractive negative LIBOR levels. Income tax expense in the third quarter was $26 million, compared with $15 million in the same quarter last year. At the same time, our effective tax rate decreased from 39.5% to 30.6%, primarily due to a decrease in non-deductible items and a decrease in withholding and other taxes, as a percentage of net income before taxes, partially offset by an increase in adjustments recognized in the current period for income tax of prior periods. Looking at overall profitability, our adjusted EBITDA was $158 million in the third quarter, a year-over-year increase of 15%, driven by higher revenue earned from existing and new customers, partially offset by the higher salaries and goods and services purchased that I just spoke about. Adjusted EBITDA margin in the quarter was 25.7%, expanding not only quarter-over-quarter, but also by 110 basis points year-over-year. The year-over-year expansion in margin was primarily achieved through cost containment measures in the quarter, along with certain retroactive pricing adjustments during the quarter, which helps us to maintain our best-in-class margins during this volatile period. Adjusted net income for the quarter was $87 million, up 24%, driven primarily by higher revenues from existing and new customers, partially offset by the higher costs I just spoke to, and higher income tax expense. On a per-share basis, this translated into adjusted deleted earnings per share of the quarter of $0.32, up a very strong and healthy 23% year-over-year. Now turning to our cash flow and balance sheets. In the third quarter, we generated free cash flows of $98 million, up 56% year-over-year, driven by higher operating profits, higher net inflows from working capital, and lower share-based compensation payments. As a percentage of revenue, free cash flow was 15.9% of revenue in Q3, compared to 11.3% in the year-ago period, an increase of 460 basis points year-over-year. Our capital expenditures in the quarter were $26 million, an increase of $3 million year-over-year, primarily attributed to facility build-outs in the Philippines as we grow business in that region, and further investments in the AI data solution software platform. As a percentage of revenue, our capital expenditures remain modest at around 4% of revenue. We have also continued to reduce our leverage, lowering our net debt to adjusted EBITDA leverage ratio, as defined by our credit agreement, to 1.3x as of September 30th, a further improvement from 1.5x as of June 30th, 2022. This improvement moves TELUS International into its lowest interest cost year, which saves us an incremental 25 basis points in interest costs prospectively. Our total available liquidity at the end of the quarter was approximately $982 million, which includes cash on hand of $143 million and our available capacity under our revolving credit facilities of $839 million. With a strong and healthy balance sheet and liquidity position, we continue to maintain meaningful capacity for strategic growth opportunities, just like the recently announced willow tree acquisition. And as we have demonstrated on a consistent basis, even during a downturn, our robust free cash flow profile enables us to rapidly repay debt. Moving on to team member count, at the end of the third quarter, we had 69,252 global team members, which was up 18% year-over-year and consistent with the prior quarter. While attrition in Q3 was stable relative to last quarter, we have intentionally adjusted the pace of our new hires to align with the current outlook. And turning to our outlook, given the macroeconomic environment, we are recalibrating our outlook to reflect softer client demand and slower sales cycles, particularly from our technology sector clients, as we spoke about earlier. We anticipate revenues in the range of $2.45 to $2.49 billion, reflecting a year-over-year increase of 11.7% to 13.5% on a reported basis and 16% to 18% on a constant currency basis. Given the further depreciation of the Euro relative to the US dollar, our outlook now assumes an average Euro to US dollar exchange rate of 98 cents for Q4. Given these exogenous factors, we are focusing on what we can control in terms of internal efficiencies and driving cost optimization initiatives. As a result, we are increasing our adjusted EBITDA margin to be in the range of 24.4% to 24.6%, reflecting our commitments So not just revenue growth at all costs, but profitable revenue growth at best-in-class margins. We expect to deliver adjusted deleted earnings per share in the range of $1.18 to $1.23, reflecting growth of 18% to 23% over last year. This assumes a weighted average deleted share count of approximately $270 million in each of the quarters. Similar to Jeff, I'd like to conclude my remarks with some commentary on our agreement to acquire WillowTree. As you may have heard on our investor call last week, Not many companies were able to grow revenues in the first half of this year by 48%, while driving healthy profitability at approximately 20% adjusted EBITDA margin, along with robust free cash flows. WillowTree's focus on high-value digital engagement, as evidenced by their leading annualized revenue for team member of approximately $190,000, puts them significantly ahead of peers such as Globant and DAVA, EPAM, and even Accenture. While we expect this transaction to close early in 2023, integration planning has already begun. This early planning approach has served TI very well in our history, and given WillowTree will be our 10th acquisition, we have an established track record of successful acquisitions and corresponding integrations. In terms of deal structure, like many of our previous acquisitions, we've thoughtfully considered ways in which WillowTree management will be incented to ensure alignment of financial and operating goals. The equity rollover commitment that is in place as part of the deal considerations that we spoke about last week reinforces that Willowtree's management has significant skin in the game to continue to grow the business profitably together with TI. And as mentioned last week, we have secured committed financing for this transaction, reflecting an upsize to our credit facility of $2 billion and extending it for a new five-year term. While our leverage at close will be around 3x, well within our steady state leverage ratio range, we expect the robust cash flow generating capabilities of both TI and WillowTree will allow for continued rapid deleveraging. With that, let's move on to questions. I will kindly ask you to please keep it to one question at a time so that everyone can participate. Jonathan, now over to you.
spk07: Thank you, Ms. Gnu. Ladies and gentlemen, if you do have a question at this time, please press star 1-1 on your telephone. And once again, we'd kindly ask you to please limit yourself to one question. You may get back in the queue as time allows. And our first question comes from the line of Ramsey LSL from Barclays. Your question, please.
spk05: Thanks so much for taking my question this morning. It feels like a very uneven discussion. demand environment across your verticals with pretty localized weakness, I guess, in e-commerce and FinTech. I guess, can you provide some more color on sort of what's going on in that sector and whether you feel good that some of the diversity, diversification in your business might shield you from similar trends evolving in these other verticals?
spk09: Hey, Ramzi, nice to hear your voice once more. Thanks for the question. Yeah, I think you're spot on. I think there is a high degree of heterogeneity within that e-commerce and fintech vertical for us. Some of those clients are crypto-centric businesses, and I think you've seen and heard from others that that sector has been candidly ravaged. And as a consequence, it's had an adverse impact in part on us. Thankfully, we didn't have significant exposure there, but not meaningless. Conversely, we continue to support a fairly robust and, as I say, heterogeneous mix of e-commerce fintech providers, and in totality, we're cautiously optimistic that we're going to continue to see meaningful growth, as Vanessa shared, I think on a constant currency basis, still growth in that group, not where it had been historically, but in the fullness of time, we continue to be optimistic. And thankfully, we're not, as I said, overexposed to the crypto subsector, if you will.
spk05: Great. Thanks so much. Great to be diversified at this point. I appreciate your answers today.
spk09: Indeed. Indeed. Thank you.
spk07: Thank you. One moment for our next question. And our next question comes from the line of Tenshin Huang from JP Morgan. Your question, please.
spk13: Thanks, Jeff and Vanessa. I wanted to Maybe I ask you to elaborate on the cost containment that you're doing right now. Can you give us a little bit more detail or examples of that, and how much more can you do to, you know, in the event that some of the volume starts to slow even more than you're anticipating now?
spk06: Hi, Tenjin. I'll kick your question, and maybe Jeff, feel free to top up. So, we're not really doing anything unusual here from a cost containment perspective. I think you and hopefully the rest of the audience recognize that TELUS International has always been very focused on ensuring that the cost profile was highly aligned to the revenue growth profile. And we've always had pretty strong operating leverage within our financial model. As we've been looking at how Q3 has unfolded, as Jeff mentioned earlier, we've always engaged in joint forecasting with these clients. And as we did our forecast with these clients, Last quarter, it was on the strength of those forecasts and the historical accuracy of those forecasts that we put our guidance together. As the quarter unfolded and we started to see signs of soft nets within those clients themselves, and we started to see that in our own business, clearly, that meant that we needed to look at our cost profile and with a particular focus around third-party spending. In terms of internal team member counts, you may have heard me say in my prepared remarks, we're not reducing our internal team member counts. However, the pace of hiring we have realigned to meet what we think are now the expected growth profiles for at least the near term. So not cutting back on internal head counts per se or team member counts. but certainly looking at the pace of hires to ensure that we're not aggressively hiring relative to the current market environment. And then the rest of the cost containment is really around third-party spend. We're negotiating third-party contracts and ensuring that we're seeing efficiencies within that third-party cost bucket.
spk09: The only thing I'd add, Tinjin, is on the offset, if you will, focusing on securing price increases as pervasively as possible to provide us with the additional headroom we need in order to try and continue to balance the business. As we've discussed many times, I think you'll recall during our IPO Roadshow, you and I specifically talked about the offset, the potential toggle of revenue growth versus profitability. And I said then and would continue to believe now that of the two, I want to be focused on profitable growth, not just growth for the sake of growth. And so in this particularly pressurized environment, staying disciplined in that regard I think is continuing to serve us well. And as long as we continue to remain in the double-digit top-line revenue growth zip code, which we are, 16% on a constant currency basis, and continue to deliver meaningful profitable growth, again, 15% EBITDA growth, I feel like we are appropriately managing those somewhat competing considerations on occasion as we weather through what I anticipate will be three, six, perhaps nine months of continued challenge.
spk13: For sure. Thank you both, and be safe at the home building. Thanks very much.
spk07: Thank you. One moment for our next question. And our next question comes from the line of Stephanie Price from CIBC. Your question, please.
spk00: Hi, good morning. I hope you can talk a little bit about the mix of growth between new wins versus existing customer expansions. Just wondering if it's changed at all given the current environment here.
spk06: Hey, Stephanie, it's Vanessa here. I'll start and Jeff, please feel free to top up. The mix of new versus existing, I wouldn't suggest has changed meaningfully in terms of the recognized revenue in the quarter. I think so as you kind of look at, you know, you know, the you know, as you look at our overall revenue profile, about 10% of the revenue in any given quarter will be new client contributions, so to speak, because that tends to take a couple of quarters to really ramp up. So in the immediate quarter, the revenue contribution doesn't tend to be as meaningful, but it is over the course of time as those new clients tend to build up and ramp up over time. So I don't think the profile is that different when you look at the recognized revenue. In terms of new wins, I think, you know, going back to Jeff's earlier points, we are seeing sort of a longer... sales cycle. So the funnel continues to be very, very robust, and that's the funnel of not only growth from existing clients, but also growth from new clients. That's a robust funnel, but particularly as it pertains to new clients, we are seeing elongated sales cycles and longer decision timeframes. And that's, you know, frankly, partly what we've reflected in the outlook that we put together this morning.
spk00: Thank you.
spk07: Thank you. One moment for our next question. And our next question comes from the line of Divya Goyal from Scotiabank. Your question, please.
spk01: Good morning, guys. Just talking about the client demand, I wanted to understand what's the impact on the client demand more so on the legacy business like the BPOCX business, or did you see material impact on the digital side as well? And adding to that, how do you I know you don't provide guidance for fiscal 2023 yet, but how do you expect or how should we anticipate that cycle over the next few quarters?
spk09: So maybe I'll take the first half, Divya, and Vanessa can speak to the second half. I'm not sure that I can discern a meaningful difference between the timeliness, the slowdown, the overall demand dynamic between our DCX and digital IT both continue to be reasonably strong. I think the real challenge for us has been the slowdown in decision making. So by way of specific example, we generally were seeing either net new or growth to existing opportunities that would come to our attention through either RFP or direct bid opportunities. We'd enter into negotiations, discussions, and a decision would be taken by the client, and we'd be off to the races between three, six, nine months. and on renewals, considerably less than that, again, across both DCX and digital IT. What we've been seeing now over the last couple of months has been continued discussion and opportunities around demand. So we're not seeing a lessening in the overall size of our funnel, but customers seem to be taking a lot longer to pull the trigger on finally saying, okay, let's get going. and signing off on the statement of work and or a new master services agreement. So this is what is, I guess, tempering our enthusiasm in the near term but continuing to provide us confidence in the longer term because no one is saying, you know, we simply don't see a path to continuing with this plan, project, transformation or otherwise. What we're seeing is we need to slow things down because of the uncertainty of what's going to happen with our own customer consumer demand in the near term. And so we just want to proceed a little bit more cautiously. In terms of the 23 outlook, I'll leave that to my colleague.
spk06: So thanks for your question, Divya. So we're not providing 2023 guidance this morning, but I think we can all agree that, you know, even think about, you know, sort of estimations of GDP growth rates are lower today than they were even, say, six months ago, or frankly, even three months ago. And I think we can also probably agree that the headwinds, the macro headwinds that we're all talking about, not just this morning, but for the last several weeks, are probably not going to end after this earnings call ends today. So I think, you know, based on that, while we're not giving 2023 guidance, we could probably assume that the macro softness we have today is probably going to continue for a little while longer. But consistent with our past practice, we will provide guidance for 2023, concurrent with our Q4 results, which will be in early February.
spk01: Thank you, Divya.
spk06: Thank you.
spk07: Thank you. One moment for our next question. And our next question comes in the line of Jesse Wilson from William Blair. Your question, please.
spk02: Hi, thank you for taking my questions. This is Jesse on for Maggie. So, Jeff, you provided some examples of clear cost saving solutions and intelligent automation and in the AI data solutions offering as well. Are you seeing longer sales cycles even for these types of work?
spk09: Yes. Yeah, it feels like everybody's moving with a degree of caution right now just because of the continued uncertainty. I think the looming recession is a euphemistic expression I keep hearing, and I think others are recognizing, suggesting it's not looming any longer. It's here. and as a consequence, you know, folks are just being a lot more cautious, taking a lot longer in terms of their own diligence to validate that they really need to move forward with these expenditures at this particular juncture, and as I said just a moment ago in response to Divya's question, it's not like I'm hearing anyone say, you know, we are just back-burnering this The need for this particular project, their evolution in our own capability to better serve our clients and do more with less, they're just taking longer to get on with it, which is, as you can imagine, it's frustrating, disappointing, but we obviously want to continue to be ready to go and engaging with these clients on a regular basis so that when they're finally comfortable to move, we're right there.
spk02: Understood.
spk07: Thank you.
spk09: Thank you.
spk07: One moment for our next question. And our next question comes from the line of Keith Bachman from BMO. Your question, please.
spk03: Hey, good morning, team. Jeff, I wanted to ask you about the kind of sensitivity to the economy. And I'll phrase it in a context of I think you said Europe constant currency was – growth was much lower. It sounded like 4%, but it may have missed that number. Regardless, Europe, economy is worse than the U.S., and your growth there is worse than the weighted average. And I'm just trying to understand how we should be thinking about, as the U.S. seems to be tilting, as you just said, into the recession, how we should be thinking about the economic sensitivity. You actually produced what I thought was a pretty good quarter here, all around, but as the U.S., you know, in particular, growth weakens and perhaps the rest of the world, you know, I'm just trying to tie that with the growth that you're seeing now in Europe, which is significantly lower than what you're experiencing here and in Asia. How would you be trying to tie all those threads together to think about the risk, so to speak, in 2023? Thanks, Keith. Good question.
spk09: It feels to me, to us right now, that there is obviously a bifurcated experience between Europe and North America as reflected in the results we just shared. Our outlook for balance of year anticipates sort of a continuation across that trend line. To Vanessa's point, we're not yet in a position to offer guidance for 2023. much as I'm inclined to want to try and say something about it, the best I'm allowed to offer. I continue to be quite bullish on the local economy here in managing to deliver, to support our ability to deliver meaningful double-digit growth. I think in part it's a a consequence of where businesses seem to be in their own life cycle, in their own appetite to embrace digital transformation. I have seen and continue to see that our North American customers' perspective in existing are just further ahead in leveraging these capabilities at scale and whilst certainly the the recession and the fears of perhaps a deeper, broader one persist for now, I think there's a fairly pervasive recognition that digital transformation is actually a potential panacea for that in part, really enabling businesses to do more with less. And I think historically there was this perception that these were mutually exclusive outcomes. You either spent more in order to get more, or you spent less and you got less. And what I think is so unique and special about digital transformation is you can actually spend less and get more. And just by way of specific example, some of the work that I highlighted in the case studies there, by leveraging a bot solution, by deploying self-help and automation capabilities, you're actually spending less on the support and you're getting significantly improved outcomes, whether it's shorter time to serve and higher customer satisfaction, higher employee satisfaction scores. And I think our opportunity in North America continues to be a little bit more scaled and robust in the near term. So I don't think even if the economy worsens in North America, that all of a sudden our growth from that region goes to 4%. I think we stay in the double-digit zip code.
spk07: Thank you, Jeff.
spk09: Thank you.
spk07: One moment for our next question. And our next question comes from the line of Dan Perlin from RBC. Your question, please.
spk12: Thanks. Good morning. I had a question about, I guess, really the overall cost structure in kind of the current environment and then maybe even to go forward to the extent we're in the recession. So rather than kind of ask the question about, like, where can you pull the toggles, my question is, Are you in an environment where the rate of change of your input costs are probably going up faster than your ability to pass that through? Like how long do you think you're going to be able to sustain, you know, a positive margin trajectory? And my sense is, and we've heard this from other companies, you know, companies that have longer-term contracts with CPI escalators, I mean, you can kind of push some costs through, but it seems like the near-term input costs are just so much greater. Thanks.
spk06: Thanks. I'll start, and Jeff, certainly you can top up. This has been the question that's been asked of TELUS International, it seems like, forever, and then it just keeps getting asked every quarter. But every quarter, our margins, you know, we demonstrate that we're actually able to maintain our margins. So I think we've sort of demonstrated this through actual experience and not just, you know, explanations. But really to come back to your question, you're right. So input costs are rising fast. We've spent a lot of time on prior calls talking about wage inflation specifically. Yes, there's obviously other, you know, forms of inflation. But in our case, wage inflation has been the biggest element. But we've successfully managed through inflation. the wage inflation. We built that into our initial guidance of approximately 24%, and now you're seeing an increase in our profitability yield in the guidance of 24.4% to 24.6%. So I think it's been sustainable there, Keith, and we're approaching that across many different fronts. It is passing on the increased inflation to customers, but you're right, there's a limit to that. But we actually have had success in passing on increases to many of our customers, and you can see that reflected in our margin profile. But we also, which is something we've always historically done, managing for better efficiencies within our own business. And that's not necessarily new for TI. We've always had fairly strong operating leverage, and we'll continue to do so prospectively. So as we look at overall cost profile management, we're not doing anything unsustainable. There's a lot of headlines around companies out there reducing workforce by 5%, 10%, and sometimes even greater amounts. But you're not going to see those kinds of headlines anymore. about Telus International. That's not how we're sustaining our profitability, but we are making sure that we are being increasingly efficient, just given the challenges that you just mentioned. And I feel pretty good. I mean, to come out with a higher profitability yield in this kind of environment, I think speaks well for execution.
spk12: Yeah, no, I agree. I thought the margin targets were quite impressive in the current environment. I was just trying to think about to the extent that that escalates against you, but okay. Okay. Thanks, Vanessa.
spk06: So we feel pretty good about what we've put together for 2022. You know, clearly, I don't think I... I'm not inclined to speak beyond 2022 at this particular juncture until we give our formal guidance. But again, you know, I think what we've done, you know, well in the past, we'll continue to do well prospectively. And as inflation, you know, whether inflation starts to get better or worse, you know, we'll again continue to make sure that we pass on whatever price increases we're able to. Again, we've seen success so far and we'll continue to do that prospectively and we'll continue to manage our cost structure. in meaningful ways that are, you know, not essentially detrimental to the long-term growth trajectory of the organization.
spk09: Yeah, and the one top up there, Dan, would be the continued improvement in the mixed shift. As we continue to progress, the proportion of our revenues that are derived from less labor-intensive delivery models, that creates headroom that provides a bit of relief for us in terms of managing that inexorable wage inflation dynamic that all of we in the technology services sector are forced to deal with on a regular basis. I think it's a fair question, but I have to say, when I hear and read some of your peers continue to question our ability to sustain these margins when we've been doing so quarter in and quarter out, not just throughout our tenure as a public issuer, but as one will have seen in the three-year historical financials we filed as part of our IPO and although one wouldn't have had visibility to it for every year of our existence prior thereto, it starts to weigh on me when folks continue to question our ability to manage this business at these margin levels for the longer term when not only have we demonstrated we're doing so, but the level we're at is best in class across our entire peer group.
spk12: Totally understood. Thank you.
spk09: Thanks, Dan.
spk07: Thank you. One moment for our next question. And our next question comes from the line of Richard South from National Bank. Your question, please.
spk10: Yes, thank you. I had a question on WillowTree. How would you compare WillowTree to your other acquisitions? You know, would you say it's sort of easier or harder to integrate on your model, you know, relatively the other names? And I guess in a related question, I'm just kind of curious, like how many WillowTree type companies are there out there in the market today? Thanks.
spk09: Hey, Richard, good questions. So on the latter one, I would suggest there are no other targets out there like Willowtree. And as you might expect, we have been spending a great deal of time and effort in our corporate development function evaluating potential candidates for quite some time. This transaction, I would suggest, is squarely within the crosshairs of what Vanessa and I have been talking about Frankly, since our IPO roadshow, and even more so over the last year, this hopefully didn't come as a surprise to anybody in terms of the capabilities that Willowtree brings to TELUS International in providing us with expertise and scale, particularly around the design and build components of the design, build, deliver ecosystem in which we operate. In terms of the anticipated integration roadmap relative to other transactions, I don't want to be dismissive in terms of the complexity. I think integration is always where the rubber hits the road on making acquisitions accretive or not, in delivering incremental shareholder value or not. And as Vanessa said, we've already spent a great deal of time and effort, first independently, based on available information, sort of mapping out how we think to best realize and leverage the synergy potential through the combination, and then, you know, post-execution of the agreement pre-closing, working, you know, as collaboratively as we can with the willow tree leadership community, again, subject to limitations as a result of awaiting, you know, antitrust approval to get going here. But I think this one's going to be pretty darned exciting only because right at the headline, what attracted us to this business beyond the stellar revenue growth rate, profitability profile and scale was the people in that business, the cultural alignment. And I know sometimes folks in this industry, and by that I mean financial services, financial analysts and evaluation, think about culture as one of those fluffy things touchy, feel-good soundbites. But I can tell you from experience, it matters a great deal if the people in the business that you're looking to combine with your own approach their team members, their customers, their stakeholders differently than you do. And in this case, Tobias and his leadership community, I certainly felt like a strong kinship right out of the gate. They approach those assets in their business no differently than we do. And so I'm anticipating that we're going to get along like a house on fire i think the opportunity to work collaboratively to sell our services to their clients their clients excuse me their services to our clients i mean goodness even during the confirmatory customer diligence conversations uh that to be is hosted with me you know some of his customers when hearing more about TI's trust and safety content moderation capabilities, which Willowtree doesn't have, he was saying, well, as soon as you guys close, you've got to come back and see me and talk about how we can access some of that stuff. So I think we're feeling pretty confident about the opportunity on the integration front, perhaps even more so, for example, than we did on the Lionbridge deal previously, which, as you'll remember, was a carve-out, which had a whole bunch of incremental complexities that this one doesn't have.
spk02: Okay, good stuff. Thanks for that. Thanks, Richard.
spk07: Thank you. And one moment for our next question. And our next question comes from the line of Daniel Chan from TD Securities. Your question, please.
spk08: Hi, good morning. Another question on Willowtree. They seem to have some exposure to the consumer goods segment, just given some of the examples you provided. Given the current macro backdrop and we've seen some weakness in consumer retail, how did you get comfort around the exposure and your due diligence, and how did the macro dynamics impact how you thought about the timing to execute that deal?
spk09: Thanks, Daniel. Another good question. I think consumer goods is an exciting area of opportunity, and the challenges that that sector and others are having right now, as I mentioned at least inferentially in my comments earlier, I think as they look to manage through these current challenging times, finding ways to leverage automation through technology and innovation is going to be a key component of their survival and success. So we believe there's going to continue to be an embracing of the capabilities that Willowtree has. And as I think you know, our sister organization, Pellis Ag and Consumer Goods, gives us some pretty meaningful visibility here. into opportunity for synergy realization. And as you might expect, as part of this early integration planning, my Willowtree colleagues are already speaking directly with my TELUS Ag and TELUS Health colleagues, for example, about areas of opportunity for collaboration. So obviously we're mindful of these macro dynamics, but near term and through the longer term, we think there's lots and lots of exciting opportunity to really exploit the WillowTree expertise and capabilities to help these clients that continue to win.
spk07: Thank you. And our final question, one moment for our final question. Our final question for today comes from the line of Ryan Potter from CIBC. Your question, please.
spk11: Hey, thanks for taking my question. So the outlook implies a pretty wide range for 4Q. Like I'm getting to about 7% to 60% accounts currency growth. Are there any reasons behind this? Like has visibility reduced at all given the macro? Are you giving yourself a buffer for specific clients? And also, could you probably kind of discuss your overall budgeting and outlook formation process?
spk06: So, hey, Ryan, I noticed that they suggested you're from CIBC, but we know that you're from Citi. No worries. But absolutely. So we do have a range. Clearly, I think we are in some fairly uncertain times, right? So the range is really just reflecting the level of uncertainty. But I know very well that you guys tend to typically, you know, converge around the midpoint of the range. But we do know that there is a level of uncertainty. I mean, FX continues to be very, very volatile, just as one example. You know, every quarter we adjust down the FX and it just gets worse, right? So that's just one example of the volatility, not to mention some of our very large, you know, technology clients who continue to be under, you know, some of their own earnings pressures. So, you know, for those reasons, we've given ourselves a bit of cushion there in the implied Q4 guide. That being said, it's still a fairly healthy year-over-year growth from a constant currency perspective and from a full year basis. Again, not just looking at Q4 specifically, but looking at the full year. Again, that puts us firmly in the 16% to 18% constant currency revenue growth, which again we think is a fairly impressive number given the times that we're in, especially when you think about the margin profile that goes along with it. In terms of budgeting and what's informing our forward thinking on that, I guess similar to the Divya's question earlier, more to come there. We're clearly at this point in time in our budgeting cycle, as are many of our clients. But, you know, as Jeff mentioned earlier, there's two things, right? There's what's happening in the near term right now, and then there's, frankly, the long-term growth trajectory of the organization, and also the long-term growth trajectory of the segments that we serve, and the verticals that we serve. So we are continuing to be bullish on a long-term basis, and that's really what we want to make sure that, you know, that's the parting message. I really don't think that we're going to see a pulling back on a long-term basis of what we've seen historically in terms of growth, you know, in you know, concept moderation, AI, digital IT, and frankly, even, you know, CX. I don't think that those are going to slow down on a long-term basis. But yes, in the near term, we need to factor in what's happening today. And that's what you've seen in our guidance. And we'll come back and talk more about 2023 concurrent with our Q4 earnings.
spk07: Great. Thanks again. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Mr. Puritt for any further remarks.
spk09: Thanks, Jonathan, and thank you all for your questions. As always, we appreciate you taking the time to join us for our quarterly investor calls. Since our inception in 2005, TI has demonstrated its resilience in the face of various challenges, extracting tuition value along the way that has served to guide our company's differentiated approach to service quality excellence. We believe that the ongoing necessity for digital transformation continues to create significant long-term opportunities for TI, and we remain well positioned to capture our fair share thanks to our 70,000 highly engaged team members and an AI community of more than 1 million talented members, our diverse set of end-to-end digital capabilities and new economy services, our globally scaled and agile delivery model, our relentless focus on efficiency and productivity within our operations, and our caring culture that's brought to life through volunteer initiatives like our Telus Days of Giving here in Central America, to name but a few. These foundational elements of our business will also help us continue to execute upon our strategy of profitable growth, driving robust cash flow complemented by thoughtful M&A. Many of you may have heard me share this sentiment about our company on other occasions, but I believe it bears repeating, especially in this current challenging economic cycle within which we're operating. TI's unique combination of people, culture, and capabilities and the equal emphasis we place on what we do and how we do it will continue to support our ability to attract and retain top talent, design, build, and deliver best-in-class client outcomes, and ultimately win in the marketplace. And I believe we've only yet just scratched the surface of the possibilities ahead of us. With this thought in mind, Vanessa and I have a very busy conference agenda lined up from now until early December, where we hope to connect with many of you in person. Otherwise, our next quarterly investor call will take place in February of 2023. And in the meantime, please keep yourselves and loved ones safe. Thank you again and goodbye.
spk07: Thank you for your participation at today's conference. This does conclude the program. You may now disconnect. Good day.
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