TELUS International (Cda) Inc. Subordinate Voting Shares

Good morning, ladies and gentlemen. Welcome to the TELUS International fourth quarter 2023 investor call. My name is Jonathan, and I will be your conference facilitator today. At this time, all lines have been placed on me 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 11 on your telephone keypad. If you would like to remove yourself from the queue, simply press star 11 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, Jonathan. Good morning, everyone. Thank you for joining us today for TELUS International's Q4 2023 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 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'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 talusinternational.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 considered to be gap measures and the reconciliation to the comparable gap 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 Plus and EDGAR. I'd 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 Garrett.

Thank you, Jason. Good morning, everyone. Ellis International performed well to close what was a very challenging year for our industry. In the fourth quarter, TI grew revenues 10% year over year, and importantly, saw continued improvement in our adjusted EBITDA margin to exit the year at 23.7%, demonstrating the efficacy of our cost efficiency programs that we discussed over the past two quarters. Despite the continuing challenging macroeconomic environment, PI secured several new client wins this past quarter, including a North American customer engagement software and analytics company, Western Canada's premier heavy-duty truck and bus dealership, and a German research institution focused on innovative visual systems. Additionally, our team at Willowtree also welcomed several new clients in the quarter, including a personal finance company, a U.S. wireless provider, and an American biotech company. We also continue to grow business with our existing clients, including with our largest client, TELUS Corporation, supporting their ongoing digital evolution of multiple areas, including TELUS Health in particular. As well, we've secured new engagements with other existing clients, such as a Canadian multinational banking and financial services corporation and Google, our second largest client. Moreover, our team at Willowtree continues to gain incremental market share in the financial services vertical, in which we already count numerous Fortune 500 brands as clients. And I'll share more details about one of these clients in particular in a case study shortly. During the quarter, the Willowtree team also grew our business with existing clients, including an American hotel company and the world's largest brewing company that owns multiple global brands. Although macroeconomic conditions continue to constrain the full potential of our cross-selling efforts, TI and Willowtree are making progress in fostering our fully integrated go-to-market strategy with several proposals in various stages of review with clients in the logistics, e-commerce, financial services, and technology industries. To stay on Willowtree for a moment, last week, some of you may have tuned into a segment at the Today Show. It covered the highly anticipated release of Apple's Vision Pro virtual reality headset. Featured prominently during the show segment was the 3D volumetric capture studio located at Nova Southeastern University in Florida. That studio was built by our team at Willowtree for Sonos. and it runs on our virtual reality capture and render platform that enables 3D modeling used in virtual and augmented reality. Specifically, our engineering team built the software platform and the camera interface for the studio. We took the project from early stage proof of concept to production ready within three months. Our team also built additional tools that ensure the successful integration of hardware and software, including a new cloud render pipeline to leverage remote computing resources to produce 3D graphics and animations. As an update on Fuel IX, while it's still early days, we're encouraged by the engagement with clients and the contracts that are in various stages of negotiation. We believe our suite of Gen AI offerings is a great enablement platform that provides enterprises with secure access to large language models, which would otherwise be too costly and time consuming of an investment for many companies, especially those that are just getting started on their Gen AI journeys. In fact, IDC recently featured our GenAI Jumpstart Accelerator program as an example of successful GenAI implementation customer care business process services. The specific use case featured WillowTree's engagement with one of North America's leading banks. Over the span of eight weeks, our team developed a proof of concept to validate the feasibility and viability of a trustworthy AI-powered chatbot for this banking client's customer experience. As a starting point, Our WillowTree team facilitated audience workshops, determined best practices for AI technical and UX design, conducted product design and research around business outcomes, and presented functional solutions and prototype education to project stakeholders upon finalization of the proof of concept. Through user interviews, testing strategy, risk analysis, and reporting, we were able to not only understand users' needs, mental models, expectations, and desires related to AI-powered chatbots, but we also established UX guidelines and added to the bank's bot experience knowledge base simultaneously. The solution our Willowtree team worked on demonstrates the power of GenAI in enhancing customer service and empowering customers with a robust conversational financial literacy tool. Across all of our client discussions on GenAI, of key concern is the security and confidentiality of their data. With our FuelIX platform, we ensure client data stays separated from the core LLM models. Moreover, our clients can choose the right LLM tool for any given application, optimizing costs and reducing the risk of vendor lock-in within the rapidly evolving AI ecosystem. As the FuelIX platform is deployed with clients, we work with them to launch specific modules, for example, a CX agent support bot, based on each client's data set and current IT tools and infrastructure. Our platform enables clients to deploy, orchestrate, and administer multiple Gen AI applications quickly off of the same foundation to deliver value for clients while maintaining the ability to scale up as fast as the client needs. Dual IX provides the flexibility and resiliency to avoid application obsolescence as the foundational model space rapidly evolves. Indeed, the generative AI space remains very active with regulatory oversight a top priority to continue development and adoption in a responsible manner. In early December, the European Parliament and Council of the EU reached an agreement on the shape and content of the EU regulation on artificial intelligence, the AI Act, which, among other provisions, restricts facial recognition and defakes and defines how businesses can use AI. While the details and the final form of the Act are still a work in progress, onus is on industry participants to establish their own AI governance programs and processes to ensure compliance. At TI, we anticipated this event and proactively adopted data practices consistent with the draft act. For example, we have already established governance processes for new technologies, including AI, to continuously assess the compliance of our revolving solutions with regulatory requirements and industry standards. Our global security and risk policy features an expanded segment on the acceptable use of AI tools, specifically including a dedicated section for generative AI with a focus on guardrails used in our approach to new technologies. Elsewhere within our AI data solutions line of service, we're leveraging our scale from our million-plus crowdsourced AI community to serve clients with their generative AI development needs. To build upon this, in December, we launched Experts Engine, a fully managed, tech-enabled, experts-on-demand sourcing solution for generative AI model builders to help them more quickly, more accurately, and more cost-effectively secure the high-quality training data sets they need to build the most demanding foundation models, including large language models. At the core of Expert's Engine is TI's proprietary machine learning model, conceived and built in-house here at TI. Based on a client's specific project requirements, Experts Engine programmatically matches the tasks to be performed, such as data creation, collection, annotation, and validation, to the best qualified individuals and assigns the correct quality control workflows to the project. Specifically, for large-scale data projects, Experts Engine eliminates the over-allocation of expertise to simpler tasks by ensuring the right contributors are working on the right tasks at all times. Ultimately, this enables us to better address more complex and customized data set requirements for our clients. We've been seeing solid momentum in working with hyperscalers, such as Google in particular, in supporting the development of their large language models to enhance their respective Gen AI products and services. TI is playing a central role in the reinforcement learning from human feedback loop and supervised fine tuning, which, thanks to our scale and resource management, enables our AI crowd community to be more efficient and effective. Among other engagements, our AI data solutions team is currently supporting the development of an automatic speech recognition for pre-trained language models owned by a Santa Clara based company in the chip industry that is also at the forefront of AI. On a similar note, our computer vision team continues to work with several clients to advance autonomous driving technologies, as well as to provide data sets help them develop and enhance various vehicle features such as automated driving collision avoidance systems auto braking lane departure warning and parking assistance systems to assist with development of the hands-free systems for urban and suburban driving as well as freeway automation with an eye on continuous improvement and efficiency our team uses semi-automated type data tagging and selection algorithms in some cases for more than a dozen metadata parameters and we equip our data labeling platform with pre-labels to facilitate the optimization of computer vision annotation. In a case study that spans both trust and safety and AI, there's incredibly important work we do for our client, Thorn, an international organization committed to addressing the role of technology in the facilitation of human trafficking and child sexual exploitation. Founded in 2012, Thorn has data science and engineering teams focused solely on developing new technologies to use across the child safety ecosystem to accelerate victim identification, prevent re-victimization, and proactively prevent abuse. Pellis International successfully completed an in-facility data annotation project for Thorne, annotating 90,000 images and text strings from the client's confidential database and the dark web over an eight-week period. The labeled data was used to train one of their machine learning AI models to identify online sexual harms to children. As this project required the annotation of highly sensitive material, we selected a team of annotators based on a number of key criteria, including seniority, skill profile, and emotional maturity. The classification work required the annotators to determine which offensive material category and image or texturing belonged to. Due to the sensitive nature of the project, the team worked in secure rooms at a TELUS International facility using our in-house annotation platform. For heightened security, we set up a secure API and file transfer system so that the images were not stored locally. Our team members worked on a reduced schedule, but at full pay, to mitigate the impact of prolonged exposure to the material. These team members also had access to our robust wellness program that included custom counseling and regular wellness check-ins. Our team delivered the project on time and with minimal revisions required, achieving a 93% accuracy rate. Our client noted how TI consistently demonstrated a dedication to both the wellness of annotators and the quality of the project delivery, as both aspects are critical for a successful annotation project. For the final case study I'll share today, I'll focus on Telus, our parent company. As you likely know, we serve Telus across hundreds of programs, helping to augment and digitize their customer experience ecosystem, leveraging technology and talent to help them outpace their competition. To start, Let me illustrate how TI's homegrown AI-enabled classification system is helping to manage TELUS's customers' inquiries. Historically, customer inquiries, or tickets, were subject to a labor-intensive and rather inefficient process in which tickets were read, categorized, and triaged manually by humans. With TI being a digital enabler for TELUS, we developed a proprietary and customized solution for them that automates this process. leveraging AI to allow technology to tackle most of this work. We built a classification system, which is a combination of multiple customized models and an internally used language model. I'd like to stress here that we're not using ChatGPT in this particular instance, but rather a TI solution that has been trained on user-specific data to improve the accuracy and understanding of the client data. Each incoming ticket is analyzed by our AI model, which then categorizes the ticket into a specific topic bucket and then takes appropriate actions without involving humans. The classification is not limited solely to topic, but also includes parameters such as urgency of response, sentiment, or trend formation within larger groups of customers, language translation, and ticket closer success, whereas the model identifies and retains for future use the most successful resolution cases. Any issue or ticket that is beyond the model's classification parameters is automatically routed to an administrator, a human, who manually assigns it to the correct category. This human-in-the-loop process helps train our model so that there's no need for human intervention for similar tickets in the future. The beauty of the solution is that it can adapt and start understanding the nuances and language of our client's business, in this case, TELUS, in a matter of just a few hours, not months or days, but hours. Reliable and specific sample data and the variety of this data for training our model are critical elements to ensure the classification accuracy. Our deep partnership and history with Telus has certainly enabled TI to develop expertise within the telecommunications space in particular, and indeed helped us better engage with some of the world's leading communications and media companies with AI enabled CX solutions, a suite of network optimization solutions, and of course, robust digital transformation capabilities. In the fourth quarter, TELUS International was once again recognized externally with industry awards. In addition to being featured in the IDC report on gen AI applications in CX that I mentioned a moment ago, PI was named a leader in the IDC market scape for worldwide data labeling software for 2023. This global assessment evaluated vendors offering data labeling software technologies and capabilities, including TELUS International's proprietary AI data labeling platform. Earlier this week, 5.9, our strategic partner for our intelligence, cloud native contact center as a service application platform, recognize TI as its Canadian partner of the year and notably its global partner of the year for 2023. With 5.9, we're working to reimagine CX in the cloud. With TI's agile and scalable solutions, harnessing the power of generative AI to deliver for our clients and their customers end-to-end CX experiences and innovation, and at the same time drive better performance and cost efficiencies. And to start the new year, U.S. recruitment platform RippleMatch selected WillowTree as a 2024 Campus Forward Award winner for our unwavering commitment to recruiting and hiring early career tech talent and the investments we continue to make in nurturing and retaining the next generation of diverse talent. Offering opportunities for advancement and career growth, set within our global footprint of inspiring facilities will continue to play a meaningful role in our team members' satisfaction, engagement, and retention. Increasingly, environmental impacts of our footprint are top of mind. In November of 2023, we announced our new site in Casablanca, Morocco, with a capacity for 800 team members, providing AI data solutions and CX services. Completed in three phases, The construction of our state-of-the-art facility combines cutting-edge technology with our environmentally friendly ethos. The building was constructed to triple green certification standards and designed with numerous sustainable features, integrating the use of renewable energy through 2,000 square meters of solar panels on the roof to produce more energy than the building consumes and with more than 11,000 square meters of green space. Elsewhere at TI in the fourth quarter, our team members kept their commitment to give back to communities where we live and work. For example, in October, our team in Eston, Germany hosted their first Telus Days of Giving, where our team refurbished a transitional refugee home for women and children, while our US team members in Las Vegas refurbished Gray Elementary School. Meanwhile, in Ireland, our volunteers established the first community garden in Mahan, an area to the southern east side of Cork. Personally, I had the great pleasure of attending one of our Days of Giving events in Central America in November, where more than 800 team members rolled up their sleeves to build our 13th school in Guatemala City. Over the course of just eight hours, we built nine classrooms, two principal offices, a computer lab, a kitchen, two sets of bathrooms, and a multi-sports court that will benefit 950 students. As well in El Salvador, our more than 1,100 volunteers refurbished the SOS Children's Village Child Development Center in Santa Tecla. It's these tangible contributions by our team members and making our communities better that truly inspire me. and are foundational to our differentiated culture at TI and reflect our broader approach to sustainability. To that end, we plan to release our second sustainability report in the spring, where you can learn more about our team's and company's progress towards our goals and achievements in 2023, as well as our priorities in 2024 and beyond to continue to address the environmental, social, and governance aspects of our business, global operations, and stakeholder engagement. And finally, As you will have seen in our earnings release issue this morning, our Chief Financial Officer, Vanessa Canu, has made the decision to lead Telus International at the end of March. Before I turn the call over to her this morning, I'd like to take a moment to acknowledge and thank her for her many contributions to our company since she joined in 2020. It's difficult to summarize her achievements in the short time I have now, as Vanessa has been a pivotal member of my executive team. helping us navigate a period of rapid growth for TELUS International, including our successful IPO in February 2021. I was honoured to stand shoulder to shoulder with her and many of our senior leaders last year as we finally had the opportunity to ring the closing bell at the New York Stock Exchange to commemorate the accomplishment. I greatly appreciated Vanessa's counsel and support as we've developed, iterated and executed upon our strategy amidst challenging global macroeconomic conditions Just as importantly, I've admired Vanessa's indefatigable work ethic, exceptional intellect, expertise, and insights, as well as her ability to forge and sustain excellent relationships with our stakeholder community. Vanessa, it goes without saying, but I'll say it anyway, you will indeed be missed here at TR. And now over to you, Vanessa, to share the details of our financial results.