What happened
Shares of Telus International (TIXT 2.48%) are sinking Friday following preliminary second-quarter results and downward guidance revisions. The information technologies specialist's stock price was down 28.4% as of noon ET, according to data from S&P Global Market Intelligence.
So what
Telus International published a press release after the market closed on Thursday and now projects that second-quarter revenue will come in between $660 million and $668 million. Hitting the midpoint of the target would have the company on track to increase sales roughly 6.5% year over year. Excluding the contribution from its acquisition of WillowTree, the company now expects a sales decline of roughly 1% year over year in the quarter.
Meanwhile, the company expects to post a loss between $0.03 per share and $0.05 per share in the quarter. Non-GAAP (adjusted) earnings per share are projected to be between $0.15 and $0.17, suggesting a year-over-year decline of roughly 46.5% at the midpoint of the target.
For the full year, management is guiding for revenue between $2.7 billion and $2.73 billion and adjusted earnings per share between $0.90 and $0.97. The company had previously targeted for sales to come in between $2.97 billion and $3.03 billion and guided for adjusted diluted per-share earnings between $1.20 and $1.25.
Now what
Telus International's second-quarter performance estimates and downward guidance revisions make it clear that the company is facing some substantial headwinds. CEO Jeff Puritt stated that the macroeconomic pressures are playing a big role in the weaker-than-anticipated performance and noted that the company had seen reduced service demand from some of its larger customers. Demand from customers in the tech sector has been particularly soft.
While it's possible that performance will rebound to more robust levels if macroeconomic pressures ease, there's a risk that the soft Q2 numbers and downward guidance revisions also reflect other demand issues. If key customers are opting for competing offerings or going with their own in-house solutions, that will make it harder for Telus International to deliver solid sales and earnings growth.