Telus Digital: TELUS Digital reports first quarter 2025 results, with revenue and profitability in line with expectations; management reiterates 2025 outlook

In This Article: VANCOUVER, British Columbia, May 09, 2025 --( BUSINESS WIRE )--TELUS Digital Experience (TELUS Digital) (NYSE and TSX: TIXT), a leading global technology company specializing in digital customer experiences, today released its results for the three-month period ended March 31, 2025. TELUS Corporation (TSX: T, NYSE: TU) is the controlling shareholder of TELUS Digital. All figures in this news release, and elsewhere in TELUS Digital disclosures, are in U.S. dollars, unless specified otherwise, and relate only to TELUS Digital results and measures. "In the first quarter of 2025, TELUS Digital's operating and financial results were in line with expectations and support our reiteration of the full-year outlook," said Jason Macdonnell, Acting Chief Executive Officer and Chief Operating Officer, TELUS Digital and President, Customer Experience. "Our relationship with TELUS Corporation as an anchor client as well as our overall service diversification continue to provide a certain level of insulation and stability in the current environment. We will continue to invest in and evolve our market and technology capabilities to the benefit of our clients in our pursuit to be the partner of choice as our clients navigate today's business challenges." Tobias Dengel, President of TELUS Digital Solutions added, "In Digital Solutions, similar to other players in our industry, we're closely monitoring client sentiment trends during the recent period of market volatility. At the same time, we are seeing good engagement with clients on their automation and cost efficiency needs. Focusing on the longer term, we believe the demand for transformation of consumer-facing digital experiences should provide a solid basis for our future growth. We are encouraged that our positioning as a differentiated partner in helping our clients innovate their customer journeys resulted in the first quarter's year-over-year growth in Digital Solutions revenues." Gopi Chande, Chief Financial Officer said, "Across TELUS Digital's service lines, in the first quarter of 2025 we achieved year-over-year revenue growth, primarily driven by AI & Data Solutions as well as Digital Solutions. We saw growth among the majority of our top five largest clients in the quarter, on both a sequential and year-over-year basis. Our continued targeted efficiency programs and measured approach to the timing of our investments are yielding solid and growing cost reduction results. As part of reiterating our full-year financial outlook, we are committed to delivering on expectations and achieving a gradual improvement in our performance, while we navigate a fluid macroeconomic backdrop and continue to manage our client concentration." Provided below are financial and operating highlights that include certain non-GAAP measures and ratios. See the Non-GAAP section of this news release for a discussion on such measures and ratios. Q1 2025 vs. Q1 2024 summary Revenue of $670 million, an increase of $13 million or 2% on a reported basis and 3% on a constant currency basis 1 , primarily driven by growth in services provided to existing clients, including TELUS and a leading social media client, among others, and new clients added since the same period in the prior year, partially offset by lower revenues from certain technology and eCommerce clients. Total revenue increase in the quarter included an unfavorable foreign currency impact of approximately 1% compared with the same quarter of the prior year, associated with the strengthening U.S. dollar exchange rate against the euro. Net loss of $25 million and diluted EPS of $(0.09), compared with net income of $28 million and diluted EPS of $0.05, respectively, in the same quarter of the prior year, due to an increase in operating expenses outpacing revenue growth and other income recognized in the comparative period arising from changes in business combination-related provisions that did not reoccur in the current period, partially offset by lower income taxes and interest expense. Net loss margin, calculated by dividing net loss by revenue for the period, was 3.7%, compared with net income margin of 4.3% for the same quarter in the prior year. Net loss and diluted EPS include the impact of acquisition and integration charges, amortization of purchased intangible assets and interest accretion on written put options, among other items. Adjusted Net Income 1 , which excludes the impact of such items, was $17 million, compared with $65 million in the same quarter of the prior year, primarily due to higher salaries and benefits, goods and services purchased, and share-based compensation expense, which were partially offset by higher revenues earned and lower income tax expense. Adjusted EBITDA 1 was $90 million, compared with $153 million in the same quarter of the prior year, primarily due to the increases in salaries and benefits and goods and services purchased outpacing revenue growth, as well as other income generated in the prior year's comparative period from changes in business combination-related provisions, and higher share-based compensation in the current period. Adjusted EBITDA Margin 1 was 13.4%, compared with 23.3% in the same quarter of the prior year, due to the aforementioned factors. Adjusted Diluted EPS 1 was $0.06, compared with $0.22 in the same quarter of the prior year. Cash provided by operating activities was $69 million and Free Cash Flow 1 was $41 million, compared with $126 million and $107 million, respectively, in the same quarter of the prior year, primarily due to increases in operating expenses outpacing revenue growth, higher capital expenditures and timing of certain large client payments. Net Debt to Adjusted EBITDA Leverage Ratio 1 as per our credit agreement was 3.4x as of March 31, 2025 compared with 3.2x as of December 31, 2024. Team member count was 78,424 as of March 31, 2025, an increase of 5% year-over-year, resulting from the expansion and ramp of our service programs and new wins across our various regions. A discussion of our results of operations is included in our Management's Discussion and Analysis for the three-month period ended March 31, 2025, which is filed on SEDAR+ and as Exhibit 99.2 to our Form 6-K filed on EDGAR. Such materials and additional information are also provided at telusdigital.com/investors. Outlook For the full-year 2025, management continues to expect: Revenue growth of approximately 2% on an organic basis Adjusted EBITDA of approximately $400 million Adjusted Diluted EPS of approximately $0.32 Q1 2025 investor call TELUS Digital will host a conference call today, May 9, 2025 at 10 a.m. (ET) / 7 a.m. (PT), where management will review the first quarter results, followed by a question and answer session with pre-qualified analysts. A webcast of the conference call will be streamed live on the TELUS Digital Investor Relations website at: https://www.telusdigital.com/investors/news-events and a replay will also be available on the website following the conference call. Non-GAAP This news release includes non-GAAP financial information, with reconciliation to GAAP measures presented at the end of this news release. We report certain non-GAAP measures used in the management analysis of our performance, but these do not have standardized meanings under International Financial Reporting Standards, as issued by the International Accounting Standards Board (IFRS ® Accounting Standards). These non-GAAP financial measures and non-GAAP ratios may not be comparable to GAAP measures or ratios and may not be comparable to similarly titled non-GAAP financial measures or non-GAAP ratios reported by other companies, including those within our industry and TELUS Corporation, our controlling shareholder. Adjusted EBITDA, Adjusted Net Income (Loss), Free Cash Flow, revenue on a constant currency basis, and Net Debt are non-GAAP financial measures, while Adjusted EBITDA Margin, Adjusted Diluted EPS, revenue growth on a constant currency basis and Net Debt to Adjusted EBITDA Leverage Ratio are non-GAAP ratios. Adjusted EBITDA is commonly used by our industry peers and provides a measure for investors to compare and evaluate our relative operating performance. We use it to assess our ability to service existing and new debt facilities, and to fund accretive growth opportunities and acquisition targets. In addition, certain financial debt covenants associated with our credit facility, including Net Debt to Adjusted EBITDA Leverage Ratio, are based on Adjusted EBITDA, which requires us to monitor this non-GAAP financial measure in connection with our financial covenants. Adjusted EBITDA should not be considered an alternative to net income in measuring our financial performance, and it should not be used as a replacement measure of current and future operating cash flows. However, we believe a financial measure that presents net income adjusted for these items provides a more consistent measure for management to evaluate period-over-period performance and would enable an investor to better evaluate our underlying business trends, our operational performance and overall business strategy. We exclude items from Adjusted Net Income (Loss) and Adjusted EBITDA, such as acquisition, integration and other, foreign exchange gains or losses and, additionally, with respect to Adjusted Net Income (Loss), the interest accretion on written put options, amortization of purchased intangible assets, and the related tax effect of these adjustments. Full reconciliations of Adjusted EBITDA and Adjusted Net Income (Loss) to the comparable GAAP measures are included at the end of this news release. We calculate Free Cash Flow by deducting capital expenditures from our cash provided by operating activities, as we believe capital expenditures are a necessary ongoing cost to maintain our existing productive capital assets and support our organic business operations. We use Free Cash Flow to eval