TELUS International (Cda) Inc. Subordinate Voting Shares

Good morning, ladies and gentlemen. Welcome to the TELUS International First Quarter 2023 Investor Call. My name is Lateef, 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 would like to ask a question during this time, please press star 1-1 on your telephone keypad. If you would like to withdraw your question, press star 1-1 again. I would now like to introduce Jason Meyer, Head of Investor Relations and Treasurer at TELUS International. Mr. Meyer, you may begin the call.

Thank you, Lateef. Good morning, everyone. Thank you for joining us today for TELUS International's Q1 2023 Investor Call. Hosting our call today are Jeff Pirrett, 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 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. Jack 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 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 Pirrett.

Thank you, Jason. Good morning, everyone. To begin, I'd like to thank those of you who were able to join us for our inaugural Investor Day in February at the New York Stock Exchange. It was wonderful to finally connect with so many of you in person for the first time. I truly appreciated the opportunity to provide a more in-depth view of TI's vision, strategy, and operations than I'm typically able to on these quarterly calls. For those interested in accessing the Investor Day webcast recording and presentation materials, they continue to be available on our investor relations site. Let's turn now to our first quarter results. Despite persistent meaningful macroeconomic challenges, Talos International delivered solid performance in the first quarter of 2023 with revenue growth of 15% on a consolidated reported basis and 16% in constant currency. We also continued to grow profitably with our adjusted EBITDA increasing a healthy 9% year over year. These solid results are noteworthy given the volatility we continue to see in the broader market exacerbated by factors including interest rate uncertainty, banking sector concerns, and inflation. which in turn impacts broader economic growth, consumer confidence, and customer demand dynamics. Despite these challenges, the TI team executed very well in Q1, focusing our collective near-term efforts on operating as efficiently as possible while remaining agile as it relates to client demand. And while we anticipate that labor markets will likely start to ease in the latter part of 2023, we expect supply-side conditions will likely remain tight to the balance of Q2. Worthy of note this past quarter, TI has further diversified our delivery footprint into Africa, with an initial focus on meeting immediate demand from existing clients that are looking to grow their support in the region. We're proceeding carefully and thoughtfully, starting relatively small in South Africa and Morocco, and in financial terms, the investment to date is not material. Our longer-term goal is to ramp our presence more meaningfully in the years ahead, and I'm confident that our 18-year track record of successful global expansion will serve us well as we execute upon our plan. Another exciting milestone was our first quarter with Willowtree as part of our TI family. Integration efforts are progressing well, and we continue to engage on in-flight cross-sell opportunities with new and existing clients. This includes opportunities with our parent, TELUS Corporation, where, for example, we ramp new business in Q1, bringing Willowtree's premium digital design and build capabilities to help with TELUS's smart home design and engineering initiatives. We've also unlocked cost synergies related to IT and procurement savings to improve scale and leveraging of TI's purchasing power. Integration efforts related to sales incentive plan alignment are helping our joint go-to-market motion along with sales training and learning sessions. We've aligned our financial close process and are working through our ERP integration. We've also successfully launched our employee share purchase plan for WillowTree's U.S. and Canadian team members, providing an additional opportunity for the WillowTree team to participate in our collective success. Our sales funnel remains strong and well diversified across key verticals and service offerings. Our global sales team continues to replenish this pool of opportunities, working diligently with clients, tenured and new alike. A selection of our new logo wins this past quarter include a U.S. insurance provider focused on solutions for homeowners and renters, a rapidly growing e-commerce platform based in the United States who specifically approached TELUS International for a trusted and experienced offshore outsourcing partner, an exciting new sports streaming platform in Germany, a pioneer in the American solar power industry and global top-selling solar generator brand, and a leading software platform for digital media measurements and analytics based in the United States. Similarly, we continue to earn incremental and varied business with existing clients including the world's largest e-commerce company, an online game platform and game creation system, a cloud-based web development service provider, and a leading global logistics company and U.S.-based telecommunications company. We also continue to capture more business with our parents and anchor clients, TELUS Corporation, particularly in supporting TELUS Health, a leading global health and well-being company. This division of Pellis provides employee and family preventative health care and wellness solutions, relying upon innovative digital technologies, including AI and client service excellence, to improve health outcomes. You'll note in our disclosure this quarter that we now separate revenues generated from health care as a standalone vertical. This is now our fifth largest industry vertical accounting for 6% of our total revenue in Q1 and with year-over-year growth of 233%, specifically driven by TELUS's acquisition of LifeWorks. TI is well positioned as a digital enabler and innovator in the healthcare vertical where our expertise in CX digital transformation and tools powered by AI will play an ever more important role in how we track, analyze, and act on health data, focusing on prevention and wellness, not just on treatment and remediation in this regard i believe technology has a massive opportunity to transform our lives for the better and along this same thesis there's certainly an abundance of current discussion and debate about generative ai its applications and its impacts the discourse ranges from labeling it a danger to the public to celebrating gen ai as an advancement for humanity on par with the adoption of the internet but what it's worth My own views here are similar to those recently expressed by Sundar Pichai on 60 Minutes, somewhere in the optimistic middle. I believe two things are certain amidst all the noise. First, AI-driven algorithms must be trained and tested with trusted high-quality data, meaning diverse and near bias-free data sets. Second, humans must remain in the loop to address the ongoing governance and policy aspects of further developments. TI is well positioned to benefit from the continued proliferation of AI through our meaningful and ongoing investments in this space and to support the emerging ecosystem, including multiple key clients with the development of core generative AI data sets, an area experiencing extraordinary growth. TI's comprehensive solutions support our clients in the development and continuous optimization of their large language models, or LLMs, which fuel generative AI. We're able to assemble both industry and company-specific datasets to augment our clients' foundational models. Tapping into our AI community, we're well positioned to lead dataset collection, creation, and selection, engaging computational linguists, data scrapers, and data decontaminators. Our work in this area also includes labeling data for sentiment analysis, named entity recognition, parts of speech tagging, personally identifiable information or PII scrubbing, and identification of deepfake or otherwise not safe for work content. For our clients who have already developed an AI model, we lead the work on the validation and evaluation of AI output, as well as retraining data sets in multiple languages and for experimental task types. As part of our general AI software engineering services, we're advising clients contemplating the use of GenAI-based technology, and we're able to design, build, and deliver bespoke software engineering and data science services specifically geared for GenAI applications. We've also helped clients implement process automation for GenAI workflows. Regarding the establishment of policy guardrails for the successful and safer development of GenAI, we're helping to design content moderation rules and guidelines for our clients to limit the field of play for GenAI implementation. Continuing on the theme of AI, I'd like to share a recent case study regarding an end-to-end data collection, selection, and annotation project for an advanced driver assistance system, or ADAS, for an Asian multinational electronics company. The current project involves collecting data from 30 countries covering approximately 25,000 kilometers using multiple vehicles provided by our clients equipped with the requisite technology for data capture called VS-30. Two drivers are onboard each car with one driver operating the vehicle for data collection, while the other acts as a co-pilot to tag data. Following the validation and selection process, we used about 30% of the data collected and annotated for several use cases covering 2.3 million frames, which is a standard measuring unit of data in computer vision. To give you a sense of the revenue scale here, a project like this is billed up to approximately $1 million. In addition to finishing up this project, we're also in talks with this client for an extension of further mileage and across even more countries, leading to a potential tripling of the project contract and revenue value. Speaking more broadly, our AI team at CI has been working diligently to expand our end-to-end AI services from data collection and management to selection and annotation. We're equipped to address all of our clients' needs in the development of an advanced driver assistance system. Our agnostic approach to managing clients' data ensures that we're able to work with all data storage mechanisms, like Azure Data Disk, external hard drives, Amazon Web Services, Snow devices, and more, benefiting from the deep enterprise-grade relationship we enjoy with multiple cloud providers. In data selection, We use automated and manual data selection of edge case events and detailed analytics of class and attribute distribution from each data set. And when it comes to annotation, we're able to provide full sensor fusion annotation, automated labeling, and quality control. The next use case I'll highlight involves our trust and safety services, which services are now nearly ubiquitous across all industry verticals. For example, in travel and hospitality, Safe travels is a common expression that, while often used lightheartedly, makes reference to a very real and critical issue, personal safety. One of our clients, a global tech company, turned to Telus International to reduce incidents of fraud on their travel accommodation platform. Our client is committed to the trust and safety of its customers when on their platform and during their travel. And that begins with the fundamental steps to verify the identities of their users and preventing fraud from occurring during their on-platform payment process. TELUS International solution addresses both aspects. For identity verification, when new users join our client platform, they're required to submit government identification and an additional photo. TELUS International provides the client with a dedicated team responsible for overseeing this important checkpoint. As a testament to our strong partnership, this was the first time the client ever outsourced this aspect of their operations to a third party vendor. We earned their trust during the initial engagement with this client several years back specifically on providing background checks and other crucial verification processes from our core Ireland-based center, which subsequently became the center of excellence for our clients' broad prevention efforts. During nine years of our partnership with this client, DI has scaled this team of originally just six to now hundreds of dedicated specialists supporting this particular program while sustaining operational excellence and world-class tenures. All payments on our client's platform take place online, and while this makes payments traceable, it also creates opportunities for fraud. Six months after we began supporting our client's anti-fraud operation, our partnership expanded to deploy team members focused on online scam and payment fraud prevention. In particular, our client relies upon TI to prevent and detect chargeback fraud and unauthorized transactions, the two most common forms of payment fraud. Over the course of our partnership, we've consistently found new ways to strengthen our clients fraud prevention framework and our client relies on TELUS International to address any issues related to trust and safety on their platform. The next example comes from our TI Digital Solutions team and illustrates how TELUS International's managed cloud services help the client, a large telecommunications company, with the migration of virtual machines from their on-premises data center to Google Cloud, leveraging Google Cloud's Migrate for Compute Engine, or M4CE, to unlock new levels of cloud transformation. TELUS International's managed cloud services help the client understand Google's ecosystem, modernize the environment, and reduce technical debt by utilizing native Google Cloud services such as Cloud SQL, cloud logging, and load balancers to reduce managed operations costs and move to a no-op model. This means complete automation such that the IT environment can become so automated and abstracted from the underlying infrastructure that there's no need for a dedicated team to manage software in-house. This project requires thoughtful, methodical, timely, and non-disruptive migration of the client's existing virtual machines or VMs and their associated critical workloads. The Telus International team led the planning of the end-to-end execution strategy, a first at the client's site. In the end, our team migrated 100 VMs or 14 applications within six months with no downtime, while ensuring the client's infrastructure has dynamic capacity management to meet their demands. This enabled the deployment of new services in hours versus days. Notably, our initial success for this client led to us winning a subsequent contract to migrate an even larger, more complex scope of dynamic workflows. One final example I'll share with you today provides insight into how our Intelligent TELUS International Assistance Platform, or ITIA, delivers increased efficiency and engagement for our client CX personnel. Our client is a household name in the innovative world of consumer robotics, seeking to scale up to meet increasing consumer demand. To do so, Our client required increased ongoing training and a solution to make it easy for team members to find answers to customer questions. Our client already had an established and informative knowledge base, but it wasn't easy for frontline team members to find the content and context they were looking for while actively supporting customers. They needed relevant data retrieval to be quicker and to fit within their workflow. Our team of automation experts suggested the implementation of our ICIA platform to empower their CX operation with agent assist chatbots. Having trained the technology with the information housed within the client's existing knowledge base, the bots were then capable of effortlessly surfacing the correct information, as well as providing tips, scripts, and reminders. The intuitive automation platform helps to accelerate workflows and improve resolution rates. Importantly, our solution brought the necessary visibility to bot performance, helping this plane to evaluate analytics and generate operational insights. The bots also added value outside of the context of support interaction by reducing the learning curve for new hires. At any time, team members can look to the bots for help in navigating company and product information, offering every opportunity to solidify their knowledge in preparation for their next customer interaction. Our solution eliminates team member involvement in low-value processes and provides business intelligence data and insights into frequently asked questions that can be added to the knowledge base. With our solution, the clients saw an improvement in average handle time by 28%, while their target was only 15%, and team member satisfaction was higher by 37%, above the target of 35%, resulting in lengthened tenure for in-house team members and reduced ramp training time for the client's growing CX operation. We continue to work together on innovation projects for continuous improvement and to drive profitability enhancements. All of the case studies I just shared today, as varied as they are, at their core, showcase the same foundational elements, our end-to-end capabilities brought to life by our team members leveraging cutting edge technology. And speaking of our team members, at the end of the first quarter, TI was an engaged global team of 76,752 full-time employees, up 13% year over year, including our new WillowTree team members. Moreover, Our team features prominently in TI's 2022 sustainability report, which we released last month. This was our first standalone sustainability report available now on our website and shares our environmental, social and governance priorities and forward looking commitments. In the report, we discuss our dedication to our giving program, diversity, equity, inclusion and cybersecurity, as well as our commitment to net carbon neutral operations by 2030. On this point, We're working in collaboration with our parent company, Telus Corporation, to meet science-based targets by 2030, including to reduce absolute Scope 1 and 2 greenhouse gas emissions by 46% from a 2019 base year. We also share our environmental stewardship results, including year-over-year comparisons of Scope 1 and 2 greenhouse gas emissions and water and energy consumption going back to 2018. Greenhouse gas emissions per team member will reduce 41% when compared to 2019. In 2022, our team members volunteered more than 75,000 hours to important community projects, like planting more than 34,000 trees, installing 250 ecological stoves and an equal number of water filtration systems, as well as supporting 1.4 million bees whose role as pollinators are essential for our crops. And on March 18th, our 11th tele-stage of giving was held in Quetzaltenango, Guatemala, where more than 400 TELUS International volunteers refurbished the Escuela Oficial Rural Mixa Manuel C. Figueroa school facilities and built two classrooms. This past quarter, we also hosted a series of corporate social responsibility events throughout our site, including onsite blood drives in India, the Philippines, and Romania. team members also volunteered to help those impacted by earthquakes in Turkey and Syria, tutor children, taught English, and hosted spring cleanups. In El Salvador, our team members worked with young people from Superate and Oportunidades programs to improve their English skills so they have better opportunities either working with us if they qualify, starting their university courses, or working elsewhere. We're also making good progress on our commitment to impact sourcing with our efforts dedicated to hiring people who may need special accommodations or assistance. For example, through our unique impact sourcing programs in India, we launched a new program for our Telus International AI data solutions team in the first quarter of this year. In a pilot project that began in late March, we're working with young women from rural and economically depressed areas to give them the requisite onsite training and psychological support to be able to work independently and support their families. I'm also very pleased to report that for the fifth consecutive year, TI was named one of the Achiever's 50 Most Engaged Workplaces, an award that recognizes top employers who display leadership and innovation in employee engagement. And for the seventh consecutive year, TI was recognized by IAOP's Global Outsourcing 100, a ranking of the best outsourcing providers across categories of size and growth, customer references, awards and certifications, programs for innovation and corporate social responsibility. And with that, I'll now invite our CFO, Vanessa Cano, to share a review of our financial results, and I'll return to answer your questions as usual. Vanessa, over to you.