UPDATED 17:56 EDT / MAY 10 2024


Telus International CEO delivers blunt assessment of firm’s performance: ‘very disappointed’

Customer experience service and technology firm Telus International Inc. reported higher earnings but declining revenue on Thursday. Despite issuing an upbeat press release and reaffirming full-year guidance, the company is clearly struggling to offset lower revenues in its contact center outsourcing with artificial intelligence-based customer experience market growth. Contact center services have been under pressure from technology innovation and overseas competition.

Telus International Chief Executive Jeff Puritt (pictured) was blunt in a Friday interview with SiliconANGLE.

“I was very disappointed both in the company’s performance and more so in the market’s reaction,” he said. Telus International shares peaked at just under $36 per share in October 2021 and closed at $6.38 Friday, down more than 60% from a year ago.

“It’s a tough, tough macro we’re all dealing with in our sector right now,” Puritt said. “I perhaps mistakenly hoped that beating on profitability and free cash flow would have been well-received,  but not only was the market disappointed with our underwhelming performance on the revenue growth front, but we also had the misfortune of reporting on the same day as EPAM.”

Shares of EPAM Systems, Inc., which competes in Telus International’s digital experience business, plunged 27% Thursday on lower full-year revenue guidance.

Tough macroeconomic environment

“It is an unfortunate sign of the times right now that unless [a business shows] extraordinary growth and profitably, the market is just not looking to be particularly generous, it seems,” Puritt said.

The market has been unkind to Telus International, which three years ago staged the largest initial public offering in Canadian history. It hasn’t been kind to its competitors either. Call center software provider Five9 Inc.’s share price is 68% off its mid-2021 high and Smartsheet Inc., a maker of digital workflow platforms, is down 45% over the same time period.

Puritt expressed frustration that Telus International’s diversification initiatives of two years ago have failed to shield it from the turmoil in the markets.

“One would have thought that heterogeneity in our service offering would have inoculated us from some of the disappointing narratives out there,” he said. “If one part of the business is doing poorly, the other part hopefully can compensate. The challenge seems to be that across the board, there is a perception that demand for IT overall is clearly down.”

That assumption is up for debate as some companies have reported strong results this earnings season. Still, earnings in the IT sector in general have been a mixed bag.

Contact center services, which remain a core Telus International offering, have been particularly roiled by generative artificial intelligence, Puritt said. “A number of critics believe that the customer experience sector is going to see their entire businesses wiped out by bots,” he said. “While most of us in the business recognize intermediation at scale coming, it’s not quite as dire as that.” He estimated generative AI bots will take on between 20% and 40% of contact center tasks over the long term.

Reining in expenses

Nevertheless, Telus International is adjusting its expenses accordingly. Last year, the company said it laid off 2,000 employees, or less than 3% of its total workforce. In reality, Puritt said, “it was considerably more than 2,000.” He didn’t offer specifics.

The layoffs were particularly painful for Telus leadership, which has stressed the quality of work life as a core asset. “For both me and my leadership team, who have invested so much time and effort bringing talented team members into the TI community, we take responsibility to keep them gainfully employed pretty seriously,” he said. “That was not something we did easily.”

Telus International is continuing to reduce its focus on contact center outsourcing and stepping up its efforts to position itself as a technology services provider, particularly generative AI. Although services have historically been a low-margin business, technology is changing that, Puritt said.

“To generate a dollar of revenue historically took 60 cents of human labor and 20 cents of technology,” he said. “We’re anticipating in the future the proportion of labor will be 40 cents with 35 cents of technology and 20 to 25 cents of return.”

Photo: Telus International

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