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1. Company Snapshot

1.a. Company Description

TELUS International (Cda) Inc.provides customer experience and digital business services in Europe, North America, the Asia-Pacific, and the Central America.It offers digital experience solutions, such as AI and bots, omnichannel CX, mobility solutions, cloud contact center, big data, platform transformation, and UX/UI design; and customer experience solutions, including work anywhere/work from home, customer care, technical support, sales growth and retention, and healthcare/patient experience.


The company also provides IT lifecycle services comprising cloud and platform services, app dev and management, quality assurance and testing, system operations, IT service desk, internet of things, engineering solutions, and enterprise platform services; advisory services consisting of digital strategy, CX process consulting, data and customer analytics, workforce management, learning excellence solutions, and business and process transformation; robotic process automation, talent acquisition, finance and accounting, and supply chain management; and content moderation and social media, and fraud prevention and detection.It serves tech and games, communications and media, ecommerce and fintech, healthcare, and travel and hospitality industries.The company was founded in 2005 and is headquartered in Vancouver, Canada.


TELUS International (Cda) Inc.is a subsidiary of TELUS Communications Inc.

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1.b. Last Insights on TIXT

TELUS International (Cda) Inc.'s recent performance was driven by several positive factors. The company's Q2 earnings and revenue beat estimates, with earnings and revenue surprises of +20.00% and +5.93%, respectively. Additionally, TELUS Digital reported incremental improvement in revenue growth. A strategic partnership with ShiftMed was announced, enabling health systems to improve margins through customized workforce management solutions. Furthermore, TELUS Corporation agreed to acquire full ownership of TELUS Digital for $4.50 per share, reflecting aggregate consideration of $539 million. This acquisition will allow TELUS to better integrate TELUS Digital's AI and software capabilities.

1.c. Company Highlights

2. TELUS International Delivers Steady Q1 2025 Results Amid Strategic AI Push

TELUS International reported Q1 2025 revenues of $670 million, marking a 2% year-over-year increase, or 3% on a constant currency basis. Adjusted EBITDA margin stood at 13.4%, reflecting higher salary costs and goods purchased. The company generated $41 million in free cash flow and maintained a leverage ratio of 3.4 times, within its credit agreement threshold. Diluted EPS came in at $0.08357, surpassing the consensus estimate of $0.06718. This earnings beat underscores the company's ability to navigate cost pressures while maintaining profitability.

Publication Date: May -10

📋 Highlights
  • Revenue Growth: - Q1 revenue reached $670 million, up 2% year-over-year (3% on a constant currency basis).
  • Adjusted EBITDA Margin: - The margin was 13.4%, reflecting higher salaries and goods purchased.
  • Client Diversification: - New client wins include a global IT services firm, a Canadian energy company, and a Singapore-based AI platform.
  • Digital Solutions Growth: - Year-over-year revenue growth driven by automation and cost-efficiency needs, with new wins in healthcare, financial services, and hospitality.
  • Free Cash Flow: - Generated $41 million in free cash flow, maintaining a leverage ratio of 3.4 times.

Operational Highlights: Diversification and AI-Driven Growth

TELUS International highlighted its strategic diversification across geographies, industries, and service lines, with new client wins including a global IT services firm, a Canadian energy company, and a Singapore-based AI platform. Existing clients, such as a leading social media network, expanded engagements, particularly in AI and data solutions. The company emphasized its AI tools, powered by Pewlix, which provide real-time insights to enhance client operations, including improved sales and reduced handle times. "We are confident in our ability to leverage AI and digital transformation to drive customer experience and operational efficiency," noted the CFO during the earnings call.

Valuation Analysis: Assessing Market Expectations

With a P/S ratio of 0.28 and an EV/EBITDA of 4.98, TELUS International's valuation reflects a balanced view of its growth prospects and profitability. The stock's free cash flow yield of 48.65% highlights strong cash generation, which supports investments in AI capabilities and operational efficiencies. While the P/B ratio of 0.38 indicates undervaluation relative to book value, the market appears to be pricing in the company's strategic investments and near-term margin pressures.

Strategic Partnership with TELUS: A Catalyst for Growth

TELUS International's partnership with TELUS remains a key driver of growth, particularly in AI applications and outcome-based pricing models. This collaboration involves upfront investments by TELUS, with TELUS International providing consulting, development, and ongoing management services. The partnership serves as a testing ground for managed services models, which are expected to grow in the industry. The robust pipeline of projects across multiple business units, including consumer, health, and agriculture, further reinforces the long-term potential of this relationship.

Outlook and Investments: Positioning for Future Growth

Despite reiterating its full-year outlook, TELUS International is making strategic investments in platforms, sales and marketing, and technology, supported by a rigorous efficiency program. These efforts aim to deliver $50 million in efficiency gains, which are expected to gradually improve margins throughout the year. While some foundational investments are one-time, others will continue as part of the business transformation. Margins are not expected to return to historical levels in the mid-twenties but should improve from current forecasts. The company remains cautiously optimistic, having built flexibility into its model to handle macroeconomic uncertainties.

3. NewsRoom

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Unifor calls on WestJet to stop outsourcing Calgary call centre jobs to El Salvador

Nov -13

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Telus AI Revenue Target Could Serve as Structural Tailwind for B2B Segment, RBC Says

Nov -10

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TELUS Digital’s Fuel iX™ Makes AI Accessible to Every Team Member

Nov -04

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TELUS Completes Privatization of TELUS Digital

Oct -31

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Is TELUS International (NYSE:TIXT) Undervalued? A Fresh Look at Its Current Valuation

Oct -29

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TELUS Digital Reports Voting Results from its Special Meeting

Oct -27

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eGain (EGAN) Soars 6.0%: Is Further Upside Left in the Stock?

Oct -22

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AI Assistants Emerging as a Rival to Traditional Apps for Everyday Tasks

Oct -22

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.14%)

6. Segments

Tech and Games

Expected Growth: 7%

TELUS International's Tech and Games segment growth is driven by increasing demand for digital transformation, cloud adoption, and cybersecurity services. The rise of online gaming and esports also fuels growth. Additionally, the company's expertise in AI, data analytics, and IoT solutions enables it to capitalize on emerging trends, resulting in a 7% growth rate.

Communications and Media

Expected Growth: 5%

TELUS International's Communications and Media segment growth is driven by increasing demand for digital transformation, cloud-based services, and cybersecurity solutions. The company's strategic acquisitions, investments in 5G and IoT, and partnerships with leading technology companies also contribute to its growth. Additionally, the rising need for remote work and virtual communication solutions fuels demand for TELUS International's services, resulting in a 5% growth rate.

All Others

Expected Growth: 4%

TELUS International (Cda) Inc.'s 'All Others' segment growth is driven by increasing demand for digital transformation services, expansion into new markets, and strategic acquisitions. Additionally, growth in IT consulting, cybersecurity, and data analytics services also contribute to the segment's growth.

eCommerce and FinTech

Expected Growth: 8%

TELUS International's 8% growth in eCommerce and FinTech is driven by increasing online shopping adoption, demand for digital payment solutions, and the need for secure and efficient transaction processing. Additionally, the company's expertise in AI-powered customer experience and cybersecurity solutions also contribute to its growth in these segments.

Healthcare

Expected Growth: 5%

TELUS International's 5% growth in Healthcare is driven by increasing demand for digital healthcare services, expansion of healthcare IT outsourcing, and growing need for patient engagement platforms. Additionally, the company's investments in AI-powered healthcare solutions, telehealth services, and strategic partnerships with healthcare providers are contributing to its growth momentum.

Banking, Financial Services and Insurance

Expected Growth: 6%

TELUS International's 6% growth in Banking, Financial Services, and Insurance is driven by increasing demand for digital transformation, outsourcing of non-core functions, and adoption of cloud-based services. Additionally, the need for enhanced customer experience, risk management, and regulatory compliance are key growth catalysts.

7. Detailed Products

Customer Experience (CX) Solutions

TELUS International provides customer experience solutions that enable businesses to deliver exceptional customer service through various channels, including voice, email, chat, and social media.

Back Office Support Services

TELUS International offers back office support services, including data entry, document processing, and accounting, to help businesses streamline their operations and reduce costs.

IT Services

TELUS International provides IT services, including infrastructure management, application development, and cybersecurity, to help businesses optimize their IT operations.

Digital Solutions

TELUS International offers digital solutions, including digital marketing, analytics, and automation, to help businesses transform their operations and improve customer engagement.

Business Process Outsourcing (BPO) Services

TELUS International provides BPO services, including finance and accounting, human resources, and procurement, to help businesses optimize their operations and reduce costs.

8. TELUS International (Cda) Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

TELUS International (Cda) Inc. faces moderate threat from substitutes due to the presence of alternative communication services and technology advancements.

Bargaining Power Of Customers

Customers have high bargaining power due to the availability of multiple service providers and the ease of switching between them, which puts pressure on TELUS International (Cda) Inc. to maintain competitive pricing and services.

Bargaining Power Of Suppliers

TELUS International (Cda) Inc. has a diversified supplier base, which reduces the bargaining power of individual suppliers, allowing the company to negotiate better prices and terms.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the telecommunications industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The telecommunications industry is highly competitive, with multiple players competing for market share, which leads to intense rivalry and pressure on TELUS International (Cda) Inc. to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 46.21%
Debt Cost 8.23%
Equity Weight 53.79%
Equity Cost 8.23%
WACC 8.23%
Leverage 85.91%

11. Quality Control: TELUS International (Cda) Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Coveo Solutions

A-Score: 4.7/10

Value: 5.5

Growth: 7.3

Quality: 3.9

Yield: 0.0

Momentum: 8.5

Volatility: 3.0

1-Year Total Return ->

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EverCommerce

A-Score: 4.6/10

Value: 4.3

Growth: 7.9

Quality: 4.3

Yield: 0.0

Momentum: 6.0

Volatility: 5.3

1-Year Total Return ->

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TELUS International

A-Score: 4.5/10

Value: 8.7

Growth: 5.6

Quality: 3.1

Yield: 0.0

Momentum: 7.0

Volatility: 3.0

1-Year Total Return ->

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Repay

A-Score: 3.9/10

Value: 9.2

Growth: 5.1

Quality: 4.3

Yield: 0.0

Momentum: 1.5

Volatility: 3.3

1-Year Total Return ->

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Stock-Card
Bandwidth

A-Score: 3.9/10

Value: 6.8

Growth: 7.1

Quality: 2.6

Yield: 0.0

Momentum: 4.0

Volatility: 3.0

1-Year Total Return ->

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Backblaze

A-Score: 3.5/10

Value: 4.8

Growth: 3.2

Quality: 3.2

Yield: 0.0

Momentum: 8.0

Volatility: 2.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

6.07$

Current Price

6.07$

Potential

-0.00%

Expected Cash-Flows