The pre-released earnings were certainly a disappointment, and this was likely even a surprise to the company. TIXT has been buying back its own stock at much higher prices over the past year. This was largely unexpected, particularly from a company that has strong backing by a large company such as Telus.
The difference between a company like TIXT and others like EGLX is that TIXT is profitable, generates positive free cash flows, and has Telus behind it. The company has traded at a cheap valuation over the past ~12 months, and as a result of reduced guidance its valuation may spike, but its free cash flow yield is now around 11%.
These types of earnings surprises are challenging to navigate, but we find that reverting our focus to the long-term picture helps to re-frame why we like a certain stock. For TIXT, its fundamentals are strong - it has decent revenue growth, good margins, and generates strong free cash flows. It is backed by a large telco company, Telus. It focuses on assisting companies with digital customer experience, a trend that we do not envision going away anytime soon. More and more companies will develop an online presence and customer service experience, and TIXT will be there to assist with front-end development, user experience, design, etc. There are near-term headwinds facing the company, such as tech companies laying off employees to grow more profitably, but we feel this is more of a reflection of the current stage of the business cycle (emphasis on operational efficiency vs. top-line growth). The business cycle will ebb and flow, and companies will once again focus their efforts on top-line growth, which will require an extensive amount of customer experience. It may take several quarters for TIXT to find support, but our long-term thesis remains unchanged at this point.