TELUS International (Cda) Inc. Subordinate Voting Shares

Good morning, ladies and gentlemen. Welcome to the TELUS International Fourth 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 any 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. If you would like to withdraw your question, simply press star 11 again. I would now like to introduce Jason Meyer, Senior Director, Investor Relations and Treasurer at TELUS International. Mr. Meyer, you may begin the call.

Thank you, Jonathan. Good morning, everyone. Thank you for joining us today for TELUS International's Q4 2022 Investor Call. Hosting our call today are Jeff Puritt, President and Chief Executive Officer, and Vanessa Canoe, 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 and year, 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 would 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. 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 EDGAR. I would also like to remind everyone that all financial measures we're referencing on this call and in our disclosure are in U.S. 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 Pierret.

Thank you, Jason. Good morning, everyone, and thank you for joining us today. In the fourth quarter, TELUS International delivered a 5% year-over-year increase in revenue, or 9%, on a constant currency basis. For the full year, TI Group revenues 12%, or 16%, on a constant currency basis. As anticipated, near-term recessionary headwinds continue to impact the timing and velocity of new projects in Q4. However, TI once again delivered solid revenue growth performance. Our team also delivered on our commitment to operate a highly profitable business, with adjusted EBITDA in the quarter increasing by 10% year-over-year and an adjusted EBITDA margin of 24.9%. And for the full year, adjusted EBITDA growth was 12%, with margin at 24.6%. These results demonstrate TI's resilient and sustainable business model, which enables us to successfully manage factors that are within our control whilst concurrently navigating challenging headwinds. This model equips us to simultaneously win new client accounts as well as to secure incremental business from the brands we already support. Indeed, our global sales team has been working diligently to identify and qualify new opportunities to not only replenish our sales funnel as deals are won or lost, but to also continue to grow it. To this end, our sales funnel as of December 31st, 2022 stood at $2.7 billion. Notably, this does not include opportunities brought to us through our recent WillowTree acquisition. Among our key wins in the quarter, new logos included a consulting firm that supports complex government, defense, and intelligence projects. One of the fastest growing e-commerce companies in the travel and entertainment industry, a disruptive AI-powered developer and service provider in the sales and marketing space, and a leading digital investment platform. Across our existing client base, we increased our share of wallet with a highly diversified list of brands, including an online food ordering and delivery platform, a global professional services company focused on HR and project management, a leading video social media network, a top provider of heavy equipment and power generation, and the largest American multinational telecommunications conglomerate. Notably, despite challenging macroeconomic conditions throughout 2022, we've maintained our focus on operational excellence. Our track record of exceeding client KPIs and our reputation as a trusted and innovative partner have positioned us favorably in the current down cycle. Additionally, with the closing of the WillowTree acquisition last month, our client base has increased by over 50 well-known brands, including Fox, Anheuser-Busch InBev, PepsiCo, Synchrony, and Marriott. We've also become more diversified across strategic verticals such as telecommunications and media, healthcare and life sciences, financial services, consumer goods, travel and hospitality, and technology and software. On that note, Tobias Dengel has now joined our executive leadership team as president of the newly rebranded WillowTree, a TELUS international company. Together with Tobias, We've also secured an exciting infusion of digital talent at scale into our already robust end-to-end digital transformation capabilities, including premium content moderation services, AI data solutions, and IT lifecycle services. The WillowTree acquisition has further elevated and differentiated our ability to design, build, and deliver premium customer experiences and digital products for the world-leading brands. Meaningful discussions are already well underway with many of our key clients, including our parent company, TELUS Corporation, a world-leading communications technology company. In this regard, TI is uniquely positioned with TELUS as an anchor client, given its differentiated asset mix that includes exciting growth-oriented assets such as TELUS Health and TELUS Agriculture and Consumer Goods. Indeed, we're already pursuing several exciting opportunities to partner with these distinct businesses, which will also result in us displacing spend away from competitors thanks to WillowTree's premium digital design and build capabilities. The large-scale, long-term projects we're currently discussing represent counter-cyclical revenue opportunities to help insulate TELUS International during the ongoing recessionary challenges. Moving on to my favorite part of these calls, sharing some of our client case studies. In the first example, TELUS International's engagement began with process consulting to streamline operations and kickstart the digital transformation journey of a large US-based provider of financial services, property information, and business intelligence across consumer credit, real estate, and capital markets. The project then progressed to TI building and implementing the solution. Companies that have seen robust growth often encounter challenges around standardizing their processes and consolidating business units. These challenges can lead to inefficiencies that negatively impact the customer experience. This was the case for our client, who saw a significant growth period resulting in many dispersed customer support centers throughout the country. The client engaged TI to assist them in assessing their existing contact centers and provide innovative solutions to drive efficiencies, improve technology, and increase client satisfaction. The TELUS International team was able to identify quick win opportunities, enabling the client to consolidate resources and maximize its people, processes, and technology. We also uncovered ways to improve the client's existing IVR design including technology enhancements to address subpar call deflection capabilities and self-serve options. During the assessment, our team determined that findings focused on one area of the business could actually be applied across various divisions to further optimize the client's overall operations. These findings expanded the scope of our client engagement from a diagnostic exercise to a process design consultation in which we created a fulsome digital roadmap for the client's tax, real estate, and platform services units. By leveraging information and data gathered by our team in the diagnostic phase, we built an improved IVR system that achieved a 25% reduction in average handle time across all business units. Notably, we achieved a 49% call deflection rate for the tax services business unit. The client has since selected TELUS International as its digital transformation partner to continue its journey to transform the company's customer experience to a full-service, omnichannel digital environment. This multi-phase project will include developing a robust knowledge base and customer-facing chatbot, introducing additional support channels and automating select processes to drive further cost savings. Another client case study I'd like to share is focused on AI solutions. A leading technology client leveraged TELUS International's AI data solutions to build a multilingual data set that helps researchers scale natural language understanding technology. With long-standing linguistic data set development experience, a diverse AI community, and streamlined large-scale project management protocols, TELUS International offered critical support to build the dataset, the first of its kind. Our client, who is a pioneering innovator of conversational AI technologies, has long prided itself on advancing natural language processing capabilities and providing research communities with access to extensive datasets that fuel AI innovation. Although voice assistants have advanced tremendously in the past decade, their multilingual language understanding capabilities are still evolving. Our client is on a mission to extend conversational aptitudes to other languages via a multilingual approach. The idea is to enable cross-linguistic training where a single machine learning model understands inputs from many diverse languages. One challenge in executing this initiative was the lack of labeled data to assist with training and evaluating the models. The client required an AI data solutions partner with deep data collection expertise who could provide realistic contextual data for a specific task. The project demanded language experts with linguistic translation, validation, or localization abilities to create comprehensive and accurate conversational utterances in specified languages. Our team of experts supervised the project and delivered effective vendor qualification strategies that included preparing qualification quizzes for other participating vendors, building detailed instructions for tasks across more than 50 local languages, and ensuring the delivery of high quality data sets. We also custom engineered training and qualification materials to support frictionless data collection with carefully curated qualification tests, detailed training materials, and clear task instructions. This enabled our AI community, excuse me, to surpass accuracy targets across all of the deliverables. Our AI community produced approximately 60% of the utterances in the dataset. The project spanned nine months, during which time TI engaged approximately 650 language experts to deliver over 600,000 high-quality language prompts in more than 30 languages, or a total of 3.5 million individual language tasks. Tasks also included translating English utterances into local languages validating utterances or checking translations for accuracy and defining localized expressions for particular prompts the data set has many machine learning use cases and contains a million realistic parallel labeled text utterances spanning more than 50 languages as well as dozens of domains with the release of this large language data set along with the open source code our client continues to promote research collaborations for natural language processing and upgraded natural language understanding modeling to advance conversational AI systems. Excuse me. And to share one more example with you today, another client of ours, one of the biggest global financial services companies, turned to Telus International to help safeguard its financial platform by ensuring overall customer safety, including customer verification and fraud protection. With the growth of e-commerce and increasing use of credit, Financial institutions and consumers require rigorous security measures to help counter fraud. Our client was also driven by its desire to meaningfully enhance their customer experience journey through credit application, verification, fraud detection and investigation, as well as billing disputes. As their partner, TELUS International scaled its program more than ninefold, from under 100 team members to nearly 900 in the span of a year. distributed across three global locations, the Philippines, Guatemala, and the United States. Our team was proud to achieve an average quality score exceeding 90%, well above the target of 85, while reducing the client's exposure to loss of revenue from fraudulent activities. I'd like to stay on the topic of trust and safety for a moment to touch upon another key component of our portfolio, which continues to be a topic of discussion with our clients and across the broader industry. our premium content moderation services. With several providers having made the decision to exit the space either in whole or in part over the past three years or so, I think it's important to point out that TELUS International remains steadfast in our commitment to performing this important work and continuing to play a critical role in ensuring safer digital spaces and online experiences for all. We also see significant short and long-term opportunities to grow our market share in content moderation due to the exponential rise in user-generated content that's driven by a persistent influx of new social platforms and emerging virtual spaces like the metaverse, as well as the growing popularity and prevalence of augmented and virtual reality. Additionally, there's continued diversification of languages and dialects used online, and younger generations continue to increase their reliance on digital services for education, work, and social interaction. We're also encouraged by the evolution from more traditional content to more complex content types, such as live chat, audio, and video streams. We believe that new opportunities in content moderation will continue to emerge as the industry transitions from restrictive to punitive legislation, such as the Digital Services Act in Europe and several similar regulatory frameworks that are pending in the United States. And we expect to see a continued expansion of content moderation use cases as more and more brands grow their online presence. These factors and more are generating an increased demand for content moderation services. More importantly, however, is that the increasing complexity of content moderation work requires that it be completed by highly experienced, dedicated, and trusted providers like TI. At TELUS International, we respectfully refer to our content moderators as digital first responders, given the critical work they perform to help keep the internet safe. Working alongside AI technology, where TI has a meaningful capability at scale to bring to bear, they are at the core of our approach, which leverages human intelligence to handle more contextual moderation decisions in accordance with our clients' guidelines. Key to our success in this area is our robust recruiting practices, onboarding programs, and continued training and support. Like everything we do at TI, we leverage the strong foundation of our caring culture as a differentiator. These include individual and group counseling sessions, access to onsite fitness facilities, and quiet spaces and virtual and in-person social activities. Our global wellness team also focuses on providing preventative wellness practices and developing a curriculum to help educate and further empower our team members to take charge of their personal health and well-being needs alongside the strong support of their leaders. We see a highly skilled and engaged team as critical to our collective success, and as of December 31st, we had over 73,000 global team members, which represents a year-over-year increase of 18% and a sequential increase of 6% versus Q3. Some of this growth is attributable to team members joining TI in support of TELUS Health's ongoing integration activities. Heading into 2023, we will continue to leverage our virtual recruitment tools as part of our broader talent acquisition strategy, including SPACE, a virtual recruitment platform that provides job seekers with a fully immersive experience in an interactive digital environment. The platform also increases the speed of the recruitment and hiring process, broadens the global recruiting talent pool, and maximizes candidate engagement. On the flip side, excuse me, Many companies continue to contend with a prolonged, challenging macroeconomic environment, and the tech sector in particular has been disproportionately affected. According to layoffs.fyi, a website created in 2020 to track tech layoffs globally, close to 160,000 workers from 1,040 companies lost their jobs in 2022, with more than half of them incurring in November and December, and nearly 98,000 individuals have been laid off to date in 2023. Although many external factors, including a rapid series of interest rate hikes by central banks, have contributed to these job losses, TI's thoughtful and agile approach to recruitment, intentionally adjusting the pace of our new hires in line with our cost optimization efforts and near-term demand dynamics, has helped us avoid overhiring and minimize these difficult situations. Our intentional and sustained investment in upskilling and cross-training our team members has also helped in this regard. In 2022 alone, our team members completed or enrolled in nearly 16,000 courses on Udemy, an online learning platform featuring a curated collection of business and technical courses. More than 2,600 team members graduated from the TELUS International University with 65 different degrees and certificates. Over 850 team members from our sites in Guatemala and El Salvador graduated from our Language Academy at TI, improving their proficiency in English and French. Through our partnership with both Amazon Web Services and Google Cloud Platform, we now have hundreds of our team members who hold cloud certification along with AWS Cloud Practitioners and Solutions Architects Associates. And lastly, our team members also completed hundreds of tech certifications such as open JavaScript Node.js application developer, test automating engineering, and professional cloud architect certification. Not only has our approach enabled us to transition team members between client accounts, we've also been able to address company-wide skills gaps and drive high engagement rates. In fact, for the ninth consecutive year, TI has achieved a top quartile engagement score as a result of a company-wide global survey conducted by a third-party provider. Our focus on culture naturally leads to better team member retention and helps drive TI's resilient margin profile and is at the core of how we delight our clients. We've seen the benefits of these investments firsthand at TELUS International. For example, a global leader in tech real estate informed us that our commitment to culture and diversity was a major factor in their decision to initially do business with us and then to expand our partnership portfolio of support within the first year. Similar feedback was received from a global tech giant who felt we differentiated ourselves among their other partners for the thoughtful and direct ways we give where we live at events like our Telus Days of Giving, which are focused on strengthening social infrastructure and environmental stewardship across the globe. In this regard, I'm proud to share a sampling of events that were held in partnership with local charitable organizations that our team members volunteered for in Q4. 1,500 volunteers cleaned and refurbished the school in the Philippines in time to welcome back 9,000 students to attend in-person classes since the beginning of the pandemic. We helped build a 12th school in Guatemala, and 850 volunteers renovated the Child Development Center at an SOS children's village in El Salvador. Team members in India planted 3,500 trees in partnership with Safe Trees Environmental Trust. Our teams in North Charleston, Las Vegas, held toy drives for their local Toys for Tots programs over the holiday season. And in North Charleston, our team built a storage unit to house supplies for victims of domestic violence, while 200 volunteers in Las Vegas supported local food banks and soup kitchens over two weekends. We'll also be releasing our first standalone TELUS International Sustainability Report in early April, focusing on our company's environmental, social, governance priorities, commitments, policies, and progress. Last year, we included considerable ESG data in our 2021 annual report, which you can access from our website. TELUS International is a compelling ESG investing opportunity with our culture at the core of our commercial success, and we're excited to offer this new element of disclosure as we look to help investors see more clearly the value we're creating for all our stakeholders and striving to do our part in making our operations, partnerships, communities, and environment more sustainable. Our commitment to our team members' well-being contributed to Telus International being recognized for the sixth consecutive year on the Global Outsourcing 100, the annual listing of the world's best outsourcing service providers. Other contributing factors leading to this distinction included our impressive customer references, programs for innovation, CSR activities, and awards and certifications. Additional award highlights from 2022 included our company being named to the Forbes Best Employers for Diversity list Mogul's Top 100 Workplaces for Diverse Representation, and for the second year in a row, we won the Best Informational Bot Solution in AI Breakthrough Awards for the Intelligent Telus International Assistance Agent Assist Bot. On that note, our team has also been exploring the exciting possibilities of how we can leverage ChatGPT and other generative AI tools to further progress our proprietary intelligent bot platform, both for our clients and internal applications. Through our Telus International iLabs, our R&D initiative launched in 2020 to design and build disruptive solutions for customer interactions, we have long been developing in-house chatbot solutions, leveraging natural language processing, speech recognition, and semantic understanding, among other tools. The possibilities presented by ChatGPT and similar alternatives are seemingly endless in how we can leverage generative AI to design and build better bots that are more conversational can better answer follow-up questions and admit mistakes and even reject inappropriate requests. Our team at WillowTree, a Telus International company, have also started to experiment with various forms of AI in their digital build process and believe it will help to standardize our coding and enable us to increase our speed to market in delivering digital solutions to our clients. Of course, Generative AI technology also represents an attractive business opportunity from a supply perspective to TI, as even the smartest AI needs to be taught and tested with best-in-class data labeling that we provide to our human-in-the-loop AI data solutions. We'll have more to share on this topic of Chad GPT and generative AI more broadly at our investor day next week and in the months ahead as we continue to integrate the WillowTree and TI ecosystems which will lead to many new use cases and enable us to create increasingly innovative solutions that leverage this exciting technology. 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.