Telus Corporation headquarters in downtown Vancouver.DARRYL DYCK/The Canadian Press
Telus International Inc. TIXT-T slashed its previous earnings forecast and announced a leadership shakeup that will see chief executive Jeff Puritt make way for a fresh face after a 16-year run.
The company’s shares plunged 36 per cent to a record low.
The Vancouver-based digital services provider, controlled by telecom giant Telus Corp., delivered an ugly update on its growth and financial expectations Friday.
Profit guidance for the year was cut by more than half, a reset that the company blamed in part on fierce industry pricing competition and a slowing pace of new customer bookings. A decline in spending from a big, unnamed customer, understood to be social-media company Meta Platforms Inc., has also hit revenue and profit margins.
“Our efforts to address the challenges we’ve experienced since last year, and our resulting underperformance, has put a tremendous dent into our longer-term track record of delivering sustained profitable growth,” Mr. Puritt told analysts and investors on a conference call Friday after the leadership shuffle was announced.
The corporation now expects full-year revenue to come in at a range of between $2.61-billion and $2.67-billion, down from previous guidance of $2.79-billion to $2.85-billion. It said adjusted earnings before interest, taxes, depreciation and amortization should hit a range of $465-million to $485-million, down from the $623-million to $643-million range previously expected.
Profit margins and adjusted profit were also revised downward. The company is now forecasting adjusted earnings per share of $0.39 to $0.44, down from the range of $0.93 to $0.98 previously expected.
Revenue from Google LLC and Telus Corp., which together made up about 39 per cent of Telus International revenue through the first half of the year, is diversified and growing. But it wasn’t enough to offset other pressures on the business, the company said.
The macroeconomic environment over the past 18 months has fuelled customer expectations of receiving “more and better for less, something that will likely persist for all players in our industry,” Mr. Puritt told analysts on the conference call Friday. He said some rivals, particularly those with AI expertise, appear willing to book business at lower profit margins just to grab sales.
The challenge for the company is that it keeps losing opportunities as a result, Mr. Puritt said. “We just decided that we can’t keep missing out on opportunities. So we’re going to have to intentionally lower expectations in the near term to the levels that are reflected in the [guidance] that you’ve seen so that we can get back on track.”
Telus International executives said they no longer assume that customer demand will recover strongly in the second half of the year. They said margins should stabilize at current levels for the remainder of 2024. And they said they were too optimistic on the speed of cost-cutting efforts, saying they’ll probably only achieve half the $60-million in savings previously planned for this year.
Senior leadership is “coming to terms with reality,” Scotiabank equity analyst Divya Goyal said in a research report. “In our view, Telus International needs to closely reassess its longer-term business strategy and realign itself to its core value proposition. We expect the digital engineering sector to see some recovery over coming quarters with improving macroeconomic conditions but [the company] has to be positioned to benefit from the upside.”
It’ll be up to a revamped C-suite to deliver.
Mr. Puritt, who’s led Telus International since 2008 and has spearheaded its growth, will retire as president and CEO effective Sept. 3, and take a new role on the board, the company said Friday. He’ll be replaced by Telus senior executive Jason Macdonnell.
Jose-Luis Garcia, who’d served as chief operating officer since May, 2023, is also leaving the company, Telus International spokesperson Amber Rubin confirmed. Former chief financial officer Vanessa Kanu quit this past spring and was replaced by Gopi Chande.
Telus International reported a net loss of $3-million in its latest quarter on revenue of $652-million. The loss was eight cents on a per-share basis. Stripping out one-time gains and costs, earnings came in at 16 cents a share, missing the 19 cents that analysts surveyed by Zacks Investment Research had expected.
Telus International went public in 2021, with a market value of $8.5-billion. At the time, it was the biggest technology initial public offering in the history of the Toronto Stock Exchange. Its shares also trade in New York.
The company is rebranding as Telus Digital Experience.