Q2 2022 WNS (Holdings) Ltd Earnings Call
And welcome to the WNS Holdings fiscal 2022 second quarter earnings Conference call. At this time all participants are in a listen only mode. After management's prepared remarks, we will conduct a question and answer session and instructions for how to ask a question will follow at that time as a reminder, this call is being recorded.
For replay purposes.
Now I would like to turn the call over to David Mackey, Wns's Executive Vice President of Finance and head of Investor Relations David.
Thank you and welcome to our fiscal 2022 second quarter earnings call with me today on the call I have wns's CEO of Acacia mortgage Wns's, CFO, Sanjay Puria and our C O O golfing variety.
A press release detailing our financial results was issued earlier today. This release is also available on the Investor Relations section of our website at Www Dot WNS dotcom.
Today's remarks will focus on the results for the fiscal second quarter ended September 32021.
Some of the matters that will be discussed on today's call are forward looking.
Keep in mind that these forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.
Such risks and uncertainties include but are not limited to those factors set forth in the company's form 20-F.
Document is also available on the company website.
During this call management will reference certain non-GAAP financial measures, which we believe provide useful information for investors reconciliations.
<unk> of these non-GAAP financial measures to GAAP results can be found in the press release issued earlier today.
Some of the non-GAAP financial measures management will discuss are defined as follows.
Net revenue is defined as revenue less repair payments.
Adjusted operating margin is defined as operating margin, excluding amortization of intangible assets share based compensation and goodwill impairment.
Adjusted net income or a ni is defined as profit excluding amortization of intangible assets share based compensation goodwill impairment and all associated taxes. These terms will be used throughout the call I would now like to turn the call over to Wns's CEO, Acacia Moura guess Acacia.
Thank you David good morning, everyone.
Our fiscal second quarter results continue to highlight our differentiated positioning in the BPM marketplace.
And our solid execution.
Net revenue for Q2 came in at $254.4 million.
Representing a year over year, an increase of 18.7% on a reported basis and.
16.2% on constant currency.
Sequentially net revenue increased by $18 $1 million or seven 7% on a reported basis and eight 5% constant currency.
In the second quarter, the company added eight new logos and expanded 32 existing relationships.
Hiring was once again strong in support of these contracts with the company, adding more than 2500 employees during this quarter.
WNS posted strong adjusted operating margins of 21, 8% and adjusted EPS grew 17, 8% year over year.
Sanjay will provide further details on our second quarter financial performance in his prepared remarks.
This quarter I wanted to take some time to discuss digital transformation in the BPM industry.
And how WNS has positioned itself.
Clients leverage digital capabilities to bear.
Compete.
Last month, we released the results of a joint survey conducted with Corium, which pulled 101 executives.
Ross industries.
Assess the state of the digital.
Transformation journeys they were going through.
The results clearly highlights that the COVID-19 pandemic has accelerated digital transformation trends.
Across the front middle and back office processes.
Today executives I'm looking to deploy the latest digital technologies to drive enhanced customer experience streamline operations and improve decision, making through data and analytics.
However, why 97% of the Soviet responders clean they have started working on their digital transformation strategies.
Most acknowledge that they are still early in this process and that in many cases, they lack the needed data governance, and cyber security foundations to properly leverage technology and automation.
In addition, they also note that many of the technology capabilities required to accomplish that Ngos like intelligent automation are still works in progress.
The survey reinforces precisely what WNS is seen in our business today.
The pace of adoption for digital process transformation is accelerating.
And there is a massive opportunity in the coming years to help both new and existing clients with their transformation agenda.
As you are aware WNS has been investing in digital transformation.
When you're building a portfolio of solutions to meet this trend.
Key investments include a co creation and innovation labs.
Specialized centers of excellence.
Industry specific digital offerings, and perhaps most importantly, the ongoing shift towards digital and our global workforce.
We are excited to announce that WNS has recently opened two.
<unk> new state of the art co creation and innovation labs in London and in New York.
These centers help us engage directly with our clients, while collaborative leading edge digitally focused workshops.
Labs, which are being used virtually during the pandemic enabled WNS to better understand.
Client ski challenges opportunities threats and future requirements. So that we can co create tailored solutions designed to solve critical business problems and also meet their digital transformation needs.
In addition to the innovation Labs WNS is also building function specific centers of excellence or what vehicle coes, which combine our industry expertise and best practices.
This digital technologies and dedicated subject matter experts to create specialist teams that design and implement digital transformation solutions for our clients.
To date, we have rolled out nine of these knowledge hubs, including insurance claims.
While banking healthcare medical Bill review.
Apply chain.
I'll go and collections and we plan to add an additional seven centers in the next 12 months.
The combination of our Coes innovation labs, and differentiated vertical structure is enhancing our ability to create industry specific digital accelerators and solutions.
These very unique offerings, which are resonating well with both existing clients as well as new prospects allows companies to fast track their shift to digital.
Are you ready to go solution.
To date, we have created capabilities in key areas, including patient scared management insurance underwriting.
Customer experience and data management.
Many of these new offerings apply our disruptive domain, driven hyper automation strategy that accelerates the adoption and scaling of real end to end digital transformation to deliver a step change in business performance.
This advanced and future ready solution brings together, our industry operations and agile expertise with a flexible and leading edge digital orchestration platform.
The overall solution harnesses the power of intelligent data processing artificial intelligence machine learning robotics, and itchy eyes to deliver digital transformations for our clients, which in turn drive meaningful improvements in customer experience and business out.
Comps.
One final area of digital transformation investment that would like to discuss is our global workforce as evidenced by the expansion of both our strategic hiring and talent management programs.
Over the past few quarters, we have continued to add both the depth and breadth.
Digital transformation teams.
We have created an experienced onshore digital transformation consulting and advisory team in all of our key markets, including North America, Europe and Asia Pacific.
Client demand for these consultative capabilities is very high.
And these teams are directly leading to new logo additions and relationship expansions.
WNS will continue to build this team over the next several quarters in order to meet the growing transformation opportunity and further strengthen our strategic client alignment and relationships.
Also hiring key resources for our global digital transformation teams with a mix of highly specialized skills, including human based design user experience organizational change management agile methodologies.
Methodologies cognitive or AI intelligent automation computer vision and data driven transformation.
The WNS transformation themes now cover all of our verticals and Horizontals units and we have experienced leaders in place working directly with clients to access solution develop and drive.
This digital transformation.
We are also investing in the Reskilling and Upskilling, our global workforce for the digital World.
The WNS education Learning Academy offers our employees the opportunity to become certified digital BPM professionals, while both in person as well as virtual classroom formats designed to broaden the capabilities of our people.
And create a digital ready workforce.
We've also created a digital future screening program designed to help middle level and senior leaders build their digital acumen.
This program is helping to improve discussions with clients regarding the strategic risks opportunities and requirements.
Through our strategic investments in people solutions and technology, we are proactively shifting the overall profile of WNS.
These investments will continue to expand in order to help our clients transform and manage their businesses to compete in a digital world. The good news is is that our investments in digital transformation are resonating extremely well in the marketplace and are driving an expanded pipeline.
Healthy New logo addition, and differentiated value for our existing and current clients.
Today WNS has more than 40 digital transformations underway with these clients, including 80% of our top 20 relationships.
These transformation initiatives across all our key verticals geographies and service offerings.
Looking forward, we see an accelerating and expanding opportunity in the BPM space, driven by clients' need to leverage technology and analytics and industry specific expertise.
From their own business models and compete in their respective industries.
WNS is extremely well positioned to capitalize on this trend.
<unk> continued to innovate co create invest and execute in order to deliver the business outcomes our clients require.
We believe this approach has enabled WNS to generate industry, leading financial performance over the past several years and create sustainable value for all of our key stakeholders I would now like to turn the call over to our CFO Sanjay Puria to further discuss our.
As well as our outlook.
Sanjay.
Thank you Keisha.
In the fiscal second quarter WNS net revenue came in at 254 $4 million.
18.7, full thing from $214 $4 million.
In the same quarter of last year, and up 16, 2% on a constant currency basis.
Sequentially net revenue increased by seven 7% on a reported basis.
Eight five plus they're offering.
Sequential revenue improvement was broad based across verticals services angiography and driven by new logos the expansion of existing relationships and increased travel volumes. In addition, the company recorded $2 $2 million of high margin short term.
Revenue during the quarter.
Adjusted operating margin in quarter, two was 20, 158% as compared to 23, 4% reported in the same quarter of fiscal 2021 and.
28% last quarter.
Yeah.
Adjusted operating margin decreased as a result of employee wage increases at the reinstatement of our cockpit leave policy.
Increased facility related and business continuity cost.
This headwind more than offset increased operating leverage on higher volumes and favorable currency movements net of hedging.
Sequentially margins improved as a result of operating leverage on increased volumes high.
High margin short term revenue and favorable currency movements net of hedging.
This benefit more than offset incremental increases provided in quarter two.
The company's net other income expense was $9 million of net expense in the second quarter.
That's compared to $7 million of net expense reported in quarter two of fiscal 'twenty or 'twenty one.
$5 million of net income last quarter.
Yeah.
Unfavorable that N is attributable to reduced interest income driven by lower rate, which was partially offset.
By lower interest expense.
Everything from Shanghai.
Sequentially. The unfavorable weather that is largely the result of $1 $2 million of nonrecurring interest income on tax refund recorded in Ottawa.
The effective tax rate for quarter, two gaming go anywhere.
1% down from 23, 5% last year and down from 21, 5% last quarter.
Yeah.
The reduction in our effective tax rate is the result of <unk>.
Andre because profit mix, but it wasn't by Covid impact last year.
So actually favorably in the mix of profits between geographies and the mix of book delivered from tax incentive facilities more than offset the one time tax benefit of $8 million recorded in quarter, one relating to the tax treatment of our liquid mutual funds.
The Companys existing net Inc. Fourth quarter, two was $43 1 million.
Compared with $37 $9 million in the same quarter of fiscal 'twenty, 'twenty, one and $39 million.
Last quarter.
Adjusted diluted earnings were <unk> 86 per share in quarter two.
703 cents in the second quarter of last year, and 76% last quarter.
As of September 32021.
WNS balances in cash and investments totaled $332 2 million.
And the company had $8 4 million uptake.
WNS generated $47 $3 million of cash from operating activities this quarter and incurred.
$7 1 million in capital expenditures.
During the quarter. The company also made scheduled debt payment of $8 4 million.
DSO in the second quarter gave me not have you wanted it as compared to 44 days last year and 32 days last quarter.
With respect to other key operating metrics.
Total headcount at the end of the quarter was 49500 at 11 am.
And our attrition rate in the second quarter increased to 34% up from 24% reported in quarter two of last year and up from 32% in the previous quarter.
Hiring in the quarter continued in support of new business ramp and volume increases in travel, which helped drive sequential revenue growth.
<unk> capacity at the end of the second quarter increased slightly to 35134.
The seat utilization metric, which took.
Companies typically for life as a measure of infrastructure productivity are not meaningful given we are currently operating at 83% work from home globally.
In our press release issued earlier today.
<unk> provided our revised full year guidance for fiscal 2022.
Based on the company's current visibility levels.
We expect net revenue to be in that range of $984 million to $1 billion and $16 million representing.
You don't want to get a growth of 13% to 17% on a reported basis and 11% to 15% constant currency.
Revenue guidance assumes an average British pound to Euro dollar exchange rate of 136 for the remainder of fiscal 2022.
Consistent with our guidance approach in previous years, we currently have 98% visibility to the midpoint of the range and our projections do not include any uncommitted short term revenue or improvement in travel volumes be arent utilized.
Full year adjusted net income.
<unk> 2022 is expected to be in the range of 163 $271 million.
Based on our 75 rupee to US dollar exchange rate for the remainder of fiscal 2022.
This implies adjusted EPS of $3 18 to $3 and 34%, assuming a diluted share count of approximately $51 2 million shares.
With respect to capital expenditures WNS currently expects our requirement for fiscal 2022 to be up to $35 million will now open the call for questions operator.
Ladies and gentlemen, if you wish to ask a question at this time Press Star then the one key on your Touchtone telephone.
If your question has been answered or you wish you remove yourself from the queue press the pound key.
Interest of time and to enable everyone on the call to participate please limit your query to one question and one follow up.
First question comes from Bryan Bergin with Cowen Your line is open.
Hi, Thank you.
I wanted to dig in a little bit on travel. So can you just comment on where committed volume levels stand across travel clients today versus the depths of COVID-19 or versus pre pandemic levels and then any notable change it and just travel client forecast, particularly as trans Atlantic has reopened.
Yes.
In line with our earlier philosophy.
We'll forecast stick into account the committed Q2 volumes actually delighted by our clients.
Committed Q2 volumes have predominantly been serviced through the otas clients and especially related to domestic travel.
What do we do anticipate that as the lockdowns ease in different regions of the world and International Alicia and international business travel starts picking up momentum and as airlines expand on their capacity. We do expect to see these volumes just start increasing but again directly related in terms of the way the lockdown started.
Start getting dealt with across different parts of the globe.
And just to add a little color to that Brian we ran about $40 million in revenue in the travel vertical during Q2, which which means we're still running roughly 7% below the pre pandemic levels.
However, I think it's important to understand that part part of the growth in travel.
It's related to not only the recovery of volumes, but also new logos that had been added during the past year year and a half. So when we look at travel today, we still think that we're probably somewhere around $5 million to $7 million a quarter.
That's left to recover in terms of lock volume and it's got the mentioned, that's primarily going to be in international travel and airlines related revenues.
Okay. Thank you that's helpful. And then just digging in and around this onshore digital transformation consulting practice can you give us a sense of the scale of that team and is this an area you expect to accelerate through M&A or are you primarily planning for organic development and then you mentioned proactively shifting the profile of WNS does that.
Does that imply the commercial structure or maybe an impact on margin may look a bit different as you grow this.
Sure Brian that's a great question and yes, I think what we are doing at this point in time is to make sure that we are ahead of the curve in terms of the demand for some of these kinds of processes and some of these journeys the clients I'm looking to undertake over the next few years. So what we have started with.
It is making sure that over the past few years, we've been investing significantly in terms of the labs, you spoke about new practices, new offerings as well as bringing really high quality people into each of these offices.
We intend to therefore really is first and foremost to make sure that we are.
Front and center in front of our clients in terms of leading them in terms of their digital journeys.
The second would obviously be also position to position ourselves as a small company that will use this to expand our portfolio of clients and move existing clients.
<unk> down these kinds of journeys no winter.
Okay. The other question all options are really open obviously, you're going to invest organically in this area are significantly but at the same time, we're all the time looking for very accurately.
Any tuck in kind of assets or any other M&A kind of assets that could be brought in that can enhance our capability here. So all options are open at this point in time.
Okay. Thank you.
Thank you. Our next question comes from <unk> Tandon with Needham Your line is open.
Thank you congrats on the quarter Acacia you did touch on some of the.
Supply side issues in terms of retention and hiring right.
Just curious given that we're hearing this in the market from the it services companies around digital talent, how are you addressing that.
Two one recruit retain and then of course the.
Subsequent wage pressures how is that impacting your ability to grow and does that present, a gating factor to growth in the out quarters.
The resource constrained environment continues to impact the industry.
Yeah again, great question, Mike and first and foremost let me equally where can we see that there is no impact in terms of potential to grow from this issue that.
A lot of our peers are talking about a month now first and foremost I think the first thing I want to mention is there is definitely a difference between the traditional players and the BPM players.
In all areas for us the attrition is really not in every issue and of course in the areas, where we have overlap with them.
Also have the same issues, but because of the fact that our business is so diversified across verticals.
What it goes geographies.
And processes, our focus really in terms of attrition really is on the.
High demand areas finance and accounting digital Tech fueled this thing and I can tell you as a smart company. We have done lots of really interesting things within the company first and foremost to position ourselves as a company there.
As a talent magnet pest control most of them and everyone wants to join a company that is growing faster than the market and is creating huge opportunities for them. That's one.
Second beyond that is a company, where they can experience new things and participate in the long term growth story of this company.
And the third as you know from a hygiene point of view, we are continuously taking a number of steps.
To ensure that you're not really able to attract deploy.
Deploy and became the standard and for US, it's very important to keep it into standard essentially because.
As you hire new people you ended up being you know you end up with inflation in terms of those countries and I think I'd experienced and now has been solid based on all the proactive measures that would be a bucket.
And maybe you know Mike I'll, just add to that.
It is more challenged from a supply side perspective, you will see from the last two quarters, we have almost added more than 5500.
In the organization and I think what Ken was alluding is more around some of them escape and again, you know no challenges from supply, but yet yeah, just how many of them are expensive.
Stage.
That's very helpful. And then as a quick follow up I'm, sorry, if I missed this in terms of the trajectory on revenue and margins in the back half of the year should we expect a pretty even.
<unk> or the third and fourth quarters or will it be skewed towards one quarter in terms of growth and <unk>.
Margins to hit your full year number.
So it all from.
The back half perspective at this stage.
Based on the visibility of what we have and specifically does that a 98% which is very consistent.
The write down to.
<unk> at this stage.
Frankly, we have not factored any unpermitted revenue because of the short term revenue generally we see as we progress during the quarter as well as also not factored any.
Growth.
Volumes beyond quarter to what we have because it all of our clients are very conservative problem, giving any forecast because in earlier quarters.
That must be.
You mentioned that once.
I want to give you a forecast 90% committed to it so they are ready.
At this stage and also.
Therefore, some known ramp downs.
In the second half, which was already baked in our guidance earlier.
Based on some of the time, we get productivity on the contract renewals, what we had earlier as well as you don't predict because there's no decision.
No not for one of our clients in it.
South Africa occupancy further because it was a modest underwriting profit and.
So you don't you just walk away from that so he is on that it seems to be a blackwater at this stage, but there is a potential upside.
Better visibility on the margin front right now at this stage.
The back half is in the range of 31% to 32% allocated to us.
Cause of the increase they apply to our communications spoke about.
No no short term revenue.
Increasing the facility cost as well as you know some of the most likely due to cough.
And the talent may come back to the office currently we are at 17%.
We anticipate an assumed that that would increase and acceleration of our digital investment program. So that will be I don't know anyone who don't include Boston.
Got it that's very helpful. Thank you so much for taking my questions. Congrats on the quarter. Thank you Mike.
Okay.
Thank you. Our next question comes from Moshe country with Wedbush Securities. Your line is open.
Yeah. Thanks, very strong members congrats two questions first spoke.
Spoke about wage increases during the quarter can you remind us how the cycle works that WNS. When do you typically provide these wage comps during the year.
Is there anything different in terms of wage increases this year versus what we've seen in the past and then.
I don't know if I heard a lot about bookings in general.
But is there a way to kind of break it down between renewals and new logos.
Yeah, so in terms of.
Each increased packaging more predominantly a large chunk of our associates.
The imaging piece happening around the month of April, but we follow a yearly cycle. So what ends up happening is the remainder of the folks who are not.
Who did not have the reagent pieces falling in the month of April based on their antibodies site anniversary side, because they go through what really kind of wage increase.
Okay, and just to add.
A little bit of color to that motion we have.
It's got some said we typically provide the bulk of our wage increases April one.
Which is why we have historically had very soft margins in the first quarter.
What is unique at this point in time in both Sanjay in case, you have alluded to it is the fact that we have provided for additional compensation increases as a result of the current environment that we're operating in so there is some incremental wage pressure to kind of our normal cycles. If you will in this given year and that's really.
Just a function of.
Trying to manage attrition trying to make sure that we've got key resources in the right places to service our clients.
Like vacation I've mentioned, we don't think we have a supply issue, but we do have a little bit of a cost issue in that.
Part of the reason that we've got muted muted margin expectations for the second half of the year.
And the booking mix.
Yeah look I think we're obviously pretty happy with how we've progressed here again.
New logos through the first half of the year a significant acceleration in terms of.
The number of Av.
Relationship expansions that we posted I mean this quarter, we did 32 I believe in the first quarter we did.
717, so 49 through the first half of the year, which is which is pretty solid for us.
Typically most of that when we look at our business at the end of the day, we're going to end up with somewhere between 2% and 4% of our revenue in a given year coming from new logos and I don't think this year is going to be any different than that kind of that kind of a profile.
And just if I may just a follow up another follow up you indicated a couple of quarters ago, but while building your pipeline.
New business, you've got a couple of new logos from the travel and hospitality vertical.
Can you kind of give us an update on how these have been proceeding in terms of ramping.
Yes, they have been ramping up.
Both of them are strong opiates and.
And they've been proceeding as per plan.
That's when we anticipated these ramp ups to come in and get hired in advance during the during Q1.
And they've gone life after clients and we expect the basketball you can start recovering over the next couple of quarters.
Should start getting a lot more ramp from different clients.
And that's part of the reason Moshe when we spoke a little bit earlier about the travel vertical what when we look at the progress that we've made in terms of getting back to that $40 million per quarter level. Some of it is the recovery of volumes that were lost during COVID-19, but it got mentioned some of this or are the new logos that have been that have been brought on are helping.
Contribute to the solid sequential.
Acceleration that we've seen in our travel readiness.
Great. Thanks, Thanks for the color.
Thanks.
Our next question comes from Maggie Nolan with William Blair. Your line is open.
Thank you I wanted to dig in on those.
32 client relationships that you expand it does feel like a step up and Dave you alluded to how much of it compared to last quarter.
There.
A reason behind that why you saw such an acceleration and and not expansion this quarter or is there an inflection point here that we should be paying attention to.
Maggie and never really kind of give a ton of credence to any one quarter right. I mean, we have some quarters, where we had a dozen new logos and then someone will get two or three.
Do believe though when you look at the first half of the year and as I mentioned, the fact that we've added 49, new we've expanded 49 relationships versus the total of 71 last year.
It means that we're tracking for better expansions and I think this is a function of the <unk>.
Arming organization I also think it's a function of digital transformation, but the fact that we are able to help clients do things now that they werent doing two years ago three years ago allows us to get into new areas right. It allows us to do things within our existing customer base to help them become more competitive so we can.
Talk a lot about digital transformation and how it creates certain headwinds from.
From a productivity perspective.
But the flipside to that is and we've been speaking about it for a while the flip side to that is it does expand our addressable market.
What technology and transformation allows us to do is get into areas that previously clients weren't willing to look at outsourcing and I think that's some of what youre seeing here in terms of the expansion profile.
Okay that makes sense and then how does the acquisition pipeline looking it looks like maybe you might have spent some cash on an asset this quarter as well based on the cash flow.
So they don't talk about an acquisition.
Southern Sanjay So let me start by saying that you know.
He was absolutely right I think the adoption of the model for US has been extremely strong and digital transformation is definitely making a huge difference for our clients and prospects. We're also seeing the model shift and the validation of the work from home and the hybrid models now tested approved and therefore.
A lot of prospects not wanting to claim on.
On the bandwagon. So all of this is actually if there's anything very well from a pipeline point of view now from our point of view. Therefore, it means how do we continuously investing in terms of.
Ensuring and enabling those capabilities that clients are looking for all leading them with new capabilities now some of this can actually be built in house a lot of it is being done and some of it.
You know actually how to work on to make us as a build versus buy kind of position and that's where I must say that our M&A pipeline has been extremely strong.
In fact, a lots of very interesting discussions going across.
You know very key areas from our point of view, but having said that you know from our point of view, we will do whatever we need to do at the right time based on.
No unusual philosophy that I've explained before and during this quarter, we did something very interesting.
Rich I lost time due to talk a little bit about but again that expense capability for us, which we can now take across many other clients.
Yes.
As Kishore mentioned are definitely the pipeline is pretty much N V and we are pursuing a lot of deals in various capabilities. What exactly we are looking forward to help us to accelerate our growth.
Including some of the you know the new processes from some of our existing clients.
What we have done.
The growth in one of the thing what we did in shipping and logistics area, which has expanded the new processes.
Including.
Adding almost adding almost more than thousand.
Head count over there so.
That adds a capability that domain specific shipping and logistics.
Capability.
And such kind of deals as well as you know the more acquisition plan.
What we would have it but as it is.
As a matter of the right assets at the right valuation and lifetime.
Just to just to clarify a little bit yeah.
So you understand that acquisition.
Value that you saw in the cash flow statement.
Just under $2 million that was showing up.
It relates to what Sanjay was mentioning here, which was oh.
Taking over a process from one of our large existing clients. This actually would fall more into the category of a captive carve out then and a real acquisition. So we had kind of talked about the different ways. We were looking at expanding our capabilities and some of it was kind of the traditional M&A route but some of it also was increased opportunities.
And in the captive units of our existing clients, who are looking for not only people to take it over but to take it over improve it and.
Help them provide the kind of transformation that they're looking for going forward.
And that's exactly what this deal was.
Okay. Thank you.
Thank you. Our next question comes from Ashwin <unk> with Citi. Your line is open.
Yeah.
Hey, thanks.
Good quarter guys.
My question is with regards to.
Comment that you had that 80% of your.
Okay top clients had already working with on digital pursuit, and so on and so forth and I wanted to delve into that a bit.
More to kind of figure out what are the other is doing is it just a matter of time.
Hi.
Obviously you have been.
Pivoting towards more and more digital for some time, but from a sales perspective and relationship management perspective.
Do you have the full set of capabilities today, how is that evolving could you could you kind of give us an update.
Yeah.
Yes, great question Ashwin, so from our perspective execution of alluded towards the past few years, we've been consistently investing across our digital capabilities, whether it is the transformation of experts debate this transformational experts across our analytics expertise.
And also people with strong local.
Local skills all of that put together along with the domain expertise and the number of the verticals that could be have enabled us to deal with clients as they've started maturing.
Definitely wanting to adopt digital transformation. So my view is it's not just me.
The top 20, the other folks who are going to start falling quite quickly. It just depends in terms of where the industry is currently in terms of the impact due to COVID-19.
Emerging from that particular area, if they're going to start adopting this more aggressively what does this also enabled us to do is expand our digital unit a relationship.
Strength of.
Engagement with each one of these clients and broaden beyond where they used to be pre COVID-19 level.
So that's helping a strongly.
Yeah look I think ashwin when you when you look at the consultative capabilities that we've added from a from a digital perspective, what we're actually doing is helping lead our clients right.
Them understand not not only kind of where they are today, but where they should be going and leveraging not only that transformational consultative capability, but also the knowledge that we have from having worked with several other clients in their respective vertical to understand and bring that understanding of kind of where the industry is headed as well so.
I think what you'd see from a visibility perspective, obviously, having 80% of the top 20 currently in some form of digital transformation journey makes a lot of sense right. These are very large.
Relationships, where we do a lot of work for them, but it's also important that case I've mentioned that we've got 40 plus of these underway at this point in time. So there's another 24 clients beyond the top 20, where we've got.
Ongoing transformation activities going on with existing customers. The other thing is it's important to understand is when you look at the pipeline and you look at the new opportunities that are out there.
Digital is pervasive in every single one of them. So so you're not seeing labor arbitrage deals showing up in the pipeline anymore.
Want to take that step to go from doing work in house to being digitally transform day, one they don't want to have to go through a traditional outsourcing process in between so what we're seeing this digital across everything.
Yeah, I know shrimp tissue.
Just got to finish up there because I'm quite excited to get to your question in the all of these answers, but I think WNS is no more just being seen as a company that can really save money not just a safe pair of hands not just too costly, but frankly, a partner that has invested in ahead of Covid and is now transform.
During how clients will do business in the future now. So we are really excited about the pipeline got video exciting about the agenda of our clients and prospects, but I can tell you. There are many of them who are still not really for this right and with the kind of investments we have made particularly the digital talent at the front end the co creation.
Labs that have now been at least.
Disposal for them to come and visit as well.
This is actually involved.
Digitally.
And the ability for us to now lead these clients in terms of how they should present themselves to their end customers in the future is the new magic that is happening and I think that's what's really exciting for us for the long term.
Got it and my next question might not keep tie in to the density you already gave acacia.
It is looking at through the through the metrics sort of notice.
Our U S dollar.
Clients have U S dollar percentage incentives.
Yeah.
Almost towards kind of 50%, so I'm kind of thinking is that.
Because U S clients, leaving that at Cody.
Is it more of a cloud component that is making a comeback.
And we should then see.
The rest of the world follow.
Is that just some sort of timing that.
We are seeing.
Yes sure.
You're spot on.
The U S is leading the recovery in terms of increased adoption of digital ad.
Moving down the path of outsourcing services.
Talking to see strong traction emerging Europe, followed by the rest of the world. So I think it's just a matter of time, but the rest of the region start catching up but yes U S is leading the way at the moment.
And maybe I shouldn't I'll just add that also you're right. It's also from a travel recovery perspective, specifically from the <unk>.
Our van bottomed at a low double or one of the couple of bogie Clive.
North America led the recovery is happening so that is also leading towards the U S dollar and goods.
Yeah.
That being said what.
While it's great to see and we see the percentage is shifting I think the other thing that's important to remember is that.
No.
All the other geographies with the exception of one continue to grow right. So obviously the U S is leading you look at you can look at the U S through.
In the quarter up 24% year over year, which is great and it's clearly important right, but Europe is up 13%. The U K is up 15%. So it's not not just the U S. It's just that the U S growth is somewhat outsized compared to the other geographies.
Thank you two questions and six senses I should stop plan ahead.
Yeah.
Thanks.
Thanks, Ashwin. Thank you Shannon.
Thank you. Our next question comes from Puneet Jain with J P. Morgan.
So.
Hey, Thanks for taking my question and great quarter guys.
Thanks Patricia.
Are you actively looking at portfolio management and the services you provide to your clients you talked about transformation setting up offices in London.
Getting out of South Africa this client.
So and second as you focus on providing those transformation services what is it that doubling this brings to table or traditional consulting firms. Many of those clients might have been using for similar services in the past.
Thanks Puneet. This is gautam. So in terms of the strength that you didn't get in comparison to a number of the consulting firms as our depth of domain in specific areas of the industry. So it's a contributor is linked directly to the operational deck that.
So when it comes to give you an example.
It cleans and an insurance industry there.
One of the market leaders in terms of P&C claims across the board.
We are able to do is keep the industry best practices.
Use other domain.
Expertise analytics knowledge and extensive benchmarking that we do to adopt what is best in breed and help lead declines, which actually takes it beyond the traditional opex savings and leads to savings such as costa around cost ratios, which directly impact the balance sheet at the end of the day you pick it.
Another example, being on our health care side of the business that with the changing regulations that are underway in the U S. With regards to patient care management, including turnaround times et cetera have a strong digital suite of products, what they ended up doing it alone.
Could get these done appropriately whilst at the same time meeting the regulatory requirements, which did actually have an impact on the company's new sales additions up.
Patients are members such as the main deck, along with what's been built over the last few years that makes it extremely unique.
And Puneet I think the core difference between the traditional consulting firms and offices.
We don't just tells we delivered we actually execute and deliver ROI to our clients I think that's a huge difference and clients are lapping itself.
And into the first part of your question Puneet, which was on kind of the portfolio management side.
Two different things embedded in there right. One is when you look at transformation capabilities and services and look at the potential for M&A and strategy downtown those level than in the other areas of investment needs are clearly about capabilities right about making sure that we've got the right services and solutions to support.
Not only were our clients are today, but where our clients are headed there.
The conversation about the South African client that we've decided not to pursue moving forward. It's a completely different decision that that was more a business decision around a specific piece of business with a specific client and the client view is too.
How that business needed to proceed. So clearly we were misaligned in terms of our objectives with their objectives on this one piece of work.
The good news is we continue to maintain that client is a client we continue to do high value work for them. So it was just something that seems to work well for both of US that they wanted to go into different direction for that one piece of work and we didn't want to provide the work in that in that type of a model.
Got you makes sense and did you size.
The impact you expect on second half from a helicopter company declined.
You can comment on pricing environment. Thank you.
Yeah, So I don't go up from South.
South Africa based like specifically I think the second half impact.
We'll be around you know maybe $7 million to $8 million at this stage.
Because as we said that we decided for the Commoditized process, we are not going to go here, but at the same time, we don't we are continuing with the high value.
The services for that client so the client the student debt and that's where our focus is.
And can you comment on overall pricing environment for yourselves.
That's definitely not the overall.
Overall, the pricing environment remains stable and healthy you know all of our clients are looking for transformation there, they're looking for things to be more productive, they're looking for things to better position, but for.
A pricing perspective no change.
Got it thank you.
Thank you. Our next question comes from Vincent Colicchio with Barrington Research. Your line is open.
Yes.
Yes.
So are you experiencing a faster.
Faster ramp of large contracts a change there.
No no change from that perspective, we continue to have all transitioned starting up after the defeat determined dates that we have agreed upon.
And the number of the clients, we are seeing the transition happening in multiple disease and the pace of which is starting to increase over the last couple of months.
The reality is Vince even for these very large transformational kinds of deals it's still going to be done in a phased approach it it.
It needs to be done that way from a risk mitigation perspective. So so the reality is even if the scope of the deal is set to move 60 properties over the next three or four years youre going to see five to 10 move in phase one and once they've been transitioned and stabilized we will move to phase two so.
That's not going to change our business can't be done in parallel from that perspective, it needs to be done serially.
Travel and leisure side it sounds like.
The demand is broad based.
I'm curious are some of your larger clients largely driving the improvement.
Yeah, I think I think as Gautam mentioned, its been driven largely by our U S. Based OTC clients that have driven the bulk of the recovery rate, which makes perfect sense in terms of the alignment with what the travel industry has seen.
For us the airlines the European Otas the agencies.
This does not fully recovered and then this this is what presents the opportunity over the next 234 quarters for us as their business is their business firms up because we have not included a pickup in those businesses and for those specific clients either in the back half of this year or going forward, but we certainly believe.
That will happen over time is it.
The country specific kind of.
Rules and regulations, if you will about about Covid and then entry start to eat so as long as the pandemic continues to eat globally, where we're going to see this business start to pick up and come back in and it certainly presents an opportunity for us going forward.
And what verticals should grow fastest in the second half sequentially.
I think youre going to continue to see strength in travel I think youre going to continue to see strength in shipping and logistics. It would be the two focus areas that I would look at.
They're also the businesses that are least exposed to some of the known ramp downs that we've discussed as well.
Uh huh.
Thanks for asking for answering my questions.
Thanks Vince.
Yeah.
Thank you and I'm showing no further questions at this time.
This will conclude today's conference call. Thank you for participating you may now disconnect.
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