Q4 2022 WNS (Holdings) Ltd Earnings Call
Good morning, and welcome to the WNS Holdings fiscal 2022 fourth quarter and full year earnings conference call.
At this time, all participants are in listen only mode.
After managements prepared remarks, we will conduct a question and answer session and instructions for how to ask a question will follow at that time.
A reminder, this call is being recorded for replay purposes.
I'd 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 fourth quarter and full year earnings call with me today on the call I have wns's CEO of Acacia <unk>, Wns's, CFO , Sanjay Puria and our COO Gautam variety.
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 Dot com.
Today's remarks will focus on the results for the fiscal fourth quarter and full year ended March 31 2022.
Some of the matters that will be discussed on today's call are forward looking please keep in mind that these forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ differ materially from those expressed or implied by such statements such risks and uncertainties include but are not limited to.
To those factors set forth in the Companys form 20-F <unk>.
This 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 of these non-GAAP financial measures to GAAP results can be found in the press release issued earlier today.
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.
Adjusted net income or NII 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 CEO of case of mortgage Acacia.
Thank you David and good morning, everyone.
We are pleased with Wns's financial results in the fiscal fourth quarter.
And our overall performance in fiscal 2022.
Net revenue for the fourth quarter came in at $275 million, representing a year over year increase of 24% on a reported basis.
And 21, 9% constant currency.
Sequentially net revenue increased by $14 million.
Five 3% on a reported basis.
Five 4% constant currency.
In the fourth quarter. The company added 10, new logos and expanded 33 existing relationships.
WNS also delivered strong adjusted operating margins of 21, 5%.
And grew adjusted EPS by 33% year over year.
Sanjay will provide further details on our fourth quarter.
And full year financial performance in his prepared remarks.
While the company executed extremely well and delivered solid financial results this past year.
Fiscal 2022 was not without its challenges.
During the year WNS successfully navigated significant pandemic related business volatility across our global delivery locations, including the impact of the Delta and Omicron surges.
The fluctuating infection rates resulted in shifts back and forth between work from office and work from home.
And walliams changes with several key clients as well.
In addition, increasing digital demand across industries combined with global labor shortages created resource supply pressure, which impacted our compensation costs and attrition rates.
Despite these obstacles fiscal 2022 was a milestone year for WNS.
The company accelerated full year revenue beyond the $1 billion, mark delivering organic constant currency growth of more than 16%.
Our highest rate since becoming a public company in 2006.
In addition, we signed 36, new clients and expanded a 108 existing relationships, which also represent record high levels.
In support of top line management.
<unk> added more than 8000 net employees pushing our global head count passed the 52000 FTE Mark.
Full year revenue growth was broad based across all segments of our business, including continued progress in servicing internet based clients.
In fiscal 2022 revenue from these digital Disruptors grew 29% year over year and now represent 19% of total company revenue.
From a delivery perspective.
And has successfully managed the pandemic related volatility and resource supply constraints.
Serviced our clients rapidly evolving keep him requirements and maintained our industry leading margins at 21, 4%.
We were able to achieve these margins, while continuing to make the necessary strategic investments in areas such as domain expertise technology enabled solutions digital consulting and transformation advanced analytics, cyber security and the training and Reskilling of our.
Global employee base.
As a result of our efforts adjusted EPS in fiscal 2022 grew more than 25% to $3 and 41.
I'm also pleased with the progress the company continues to make on the ESG front.
This past year, WNS was able to prioritize our employees' safety and welfare during a global pandemic and hence cyber security protocols for both in office and at home delivery models.
Steps to reduce our carbon emissions improve diversity and inclusiveness metrics as reflected in the 2022 Bloomberg gender equality index.
And expand our corporate social responsibility efforts through the WNS gas foundation, including support for displaced families in UK.
Additionally, WNS has kicked off efforts towards adoption of the science based targets and the United Nations Global.
Compact initiatives and is actively evaluating additional ESG standards at frameworks, which are most relevant to our business.
We also plan to release, our second annual corporate sustainability report in May.
While we are happy with our fiscal 'twenty Grant to performance. We are equally excited about the opportunities for WNS in fiscal 'twenty three and beyond.
Including a robust BPM demand environment.
<unk> differentiated positioning in the market and healthy business momentum.
Today, we continue to see increased demand for BPM solutions as clients look to leverage technology and automation to help transform their business models as well as achieve their strategic goals.
Our objectives include optimizing efficiency and cost leveraging data and analytics to enhance decision, making improving the end customer experience and generating new revenue streams increasingly clients also recognize the need to partner with a firm like WNS.
Who can help them design build and run their business processes.
The decision to partner is being driven but the clients need for access.
For excess of specialized talent digital technologies process expertise.
Domain talk leadership and speed to market.
With this favorable demand backdrop WNS enters fiscal 2023, with a healthy pipeline and strong topline momentum.
Deal pipeline, which is broad based across verticals services and geographies.
The healthy as to does ever be the.
The pipeline continues to transition towards higher end services and solutions, including digital consulting and transformation.
Advanced analytics and domain centric offerings.
We are also seeing more large end to end transformational opportunities in the pipeline and reduced sales cycles for the expansion of existing relationships.
Part of the pipeline health.
The result of an expanded farming opportunity.
Is directly attributable to the acceleration of new logos signed over the past few years today, we have 147 clients of more than $1 million to follow up with 103 of these clients currently generating only 1 million to $5 million annual.
Lee.
These relationships provide us with a solid foundation for growth and excellent expansion opportunities and as we help these clients move forward with their strategic BPM initiatives.
In addition, we exit fiscal 2022 with existing with improving revenue momentum, having accelerated our year over year constant currency revenue growth over the past three quarters.
WNS also has the opportunity for a continued recovery in our travel vertical which has the potential to add 2% to our topline growth rate as in when Vale.
Volumes return.
All of this momentum comes with the added benefit of our recurring highly visited visible as well as a resilient business model that.
That being said as a company we must remain vigilant with respect to pandemic related volatility and incremental challenges in labor supply wage inflation as well as attrition.
We also recognize the need to invest in our business, both organically and Inorganically based on the long term opportunity in the BPM space.
The company has built a strong M&A pipeline and we are working diligently to find the right assets leverage our healthy balance sheet and accelerate our capabilities.
I am confident that we have a focused disciplined process in place for evaluating opportunities and we will continue to follow this approach, which has proven to be successful for us.
In summary, we believe that the market for BPM services, driven by Digitization has never been better and the WNS is.
WNS remains extremely well positioned to capitalize on this opportunity.
The company will continue to focus on driving best in class execution investing to differentiate our capabilities and fostering our corporate culture of innovation and co creation.
We believe these efforts will enable WNS to deliver long term sustainable business value for our clients shareholders employees as well as global communities.
I would now like to turn the call over to our CFO Sanjay Puria to further discuss our results as well as outlook.
Over to you Sanjay.
Thank you Keisha.
In the fiscal fourth quarter WNS net revenue came in at $275 million.
Up 24% from $228 $3 million posted in the same quarter of last year and up 21, 9% on a constant currency basis.
Sequentially net revenue increased by five 3% on a reported basis and five 4% on constant currency.
Sequential revenue improvement was broad based across most verticals services and geographies.
Driven by new logos and expansion of existing relationships.
Please travel volumes in.
In the fourth quarter, WNS recorded $1 $7 million of short term high margins limit.
Adjusted operating margin in bottom for 'twenty.
21, 5% as compared to 28% reported in the same quarter of fiscal 2021, and 21, 4% last quarter.
Year over year, adjusted operating margin increased as a result of operating leverage on higher volumes.
Product productivity high margin short term revenue and currency movements net of hedging.
This benefit more than offset employee wage increases and highest facility related and travel costs.
Sequentially margins increased as a result of operating leverage on increased volumes high margin short term revenue and currency movements net of hedging.
These benefits were largely offset by higher G&A costs.
And additional facility related and travel expenses.
The company's net other income expense was $9 million of net income in the fourth quarter.
As compared to $2 million of net expense reported in quarter four of fiscal 'twenty, 'twenty, one and negligible net income or loss last quarter.
Year over year, the favorable variance is attributable to increased interest income on higher cash balances and lower interest expense.
Related to operating leases and debt repayment.
Sequentially. The favorable variance is the result of <unk> 6 million of interest income on a tax reform and increased interest income driven by higher cash balances.
WNS effective tax rate for quarter four came in at 19, 7% down from 22, 6% last year and down from 26% last quarter.
Both year over year and sequentially the <unk> effective tax rate as a result of changes in our geography.
And in the mix of work delivered from tax incentive facilities.
The company's adjusted net income for quarter, four was $48 3 million.
Compared with $36 $7 million in the same quarter of fiscal 2021, and $44 4 million last quarter.
Adjusted diluted earnings were <unk> 95, plus <expletive> in quarter four.
71, <unk> in the fourth quarter of last year, and 88% last quarter.
This represents 33% growth year over year, and 8% growth sequentially.
As of March 31, 2020 to WNS balances in cash and investments totaled $413 million and the company had no debt.
WNS generated $67 $9 million of cash from operating activities this quarter incurred $7 $4 million in capital expenditures and meet scheduled debt payment of $8 4 million.
DSO in the fourth quarter gaming, but it is the same as reported in both quarter four of last year and the previous quarter.
With respect to other key operating metrics total head count at the end of the quarter was 52081, and our attrition rate in the fourth quarter increased to 44% up from 30% reported in quarter four of last year and up from 36% in the previous quarter.
The fourth quarter Spike in accretion was concentrated at the junior most levels of the organization and primarily focused on voice based CX services.
The increase was driven by hyperinflation in Sri Lanka, and the requirement by the Philippine Economic zone at Oddity net employees.
Return to office.
We do not believe that this elevated attrition level is impacting all will impact.
Our ability to service clients or accelerated growth.
Bill seat capacity at the end of the fourth quarter, while stable coming in at 34494 seats.
<unk> utilization metrics, which the company typically for white as a measure of infrastructure productivity.
Meaningful given the company operated at 79% work from home globally in quarter four.
I would now like to provide you with a brief financial summary of fiscal 2022.
Before discussing our outlook for the coming year.
Net revenue in fiscal 2022 gaming at $1 billion and $27 million up 18, 2% on a reported basis and up 16, 4% on an organic constant currency basis.
Full year revenue growth was broad based across geography services and vertical.
And driven by strength in both new logo additions and existing client expansions.
Doug goodness topline was bolstered by a partial recovery of pre pandemic travel volumes and currency movements net of hedging.
The company's 2022 adjusted operating margin came in at 21, 4% down slightly from 21, 5%.
Reported in fiscal 2021.
Margin favorability from operating leverage on higher volumes improved productivity and currency movement net of hedging, but offset by wage increases the renewal period.
Compared to the new policy higher infrastructure related and travel expenses associated with easing pandemic restrictions and a reduction in full year high margin short term revenues.
In fiscal 2022 net other income expense improved by $2 8 million as a result of nonrecurring interest income on tax refunds.
Increased interest income on higher cash balances and lower interest expense on debt and operating needs.
Our effective tax rate for the year was 27% down from 23, 3% last year as a result of a gene in the mix of profit by geography, and a one time tax benefit in quarter, one of $5 8 million.
The combination of solid revenue growth margin stability higher interest income a lower effective tax rate and a reduced share count resulted in a full year adjusted diluted earnings per share improving 25, 4% coming in at $3 and 41.
In fiscal 2022, the company generated $187 5 million in cash from operations and $159 1 million in free cash.
During the year WNS repurchased one 1 million shares of stock at a cost of $85 million.
All $77.31 per share.
Spent $28 3 million of capital expenditures and made scheduled debt payment of $16 8 million.
We ended the year with a net cash balance of $413 million or approximately $8 at <unk>.
Our diluted share and no debt.
The press release issued earlier today WNS provided our initial full year guidance for fiscal 2023.
Based on the company's current visibility levels, we expect net revenue to be in the range of $1 billion and $98 million to.
The $1 billion and $154 million.
Representing year over year growth of 7% to 12% on a reported basis and 8% to 14% on a constant currency basis.
At the midpoint constant currency revenue growth is 11%, which represents initial guidance above our historical level of 10%.
Revenue guidance assumes an average British pound to Euro dollar exchange rate of 1.32 for fiscal 2023.
Consistent with our guidance approach in previous years, we currently have 90% visibility to the midpoint of the range, which does not include any uncommitted short term revenue improvement in travel volumes beyond quarter four levels.
So let's go to the guidance assumes a top line headwind of approximately 10%, which factors in year over year productivity commitments non project Randall and variety of short term revenues.
Full year adjusted net income for fiscal 2023 is expected to be in the range of $177 million $289 million based on a 7% rupee to us dollar exchange rate.
This implies adjusted EPS of $3.50 to.
<unk> to $3 73 things, assuming a diluted share count of approximately $50 6 million share with respect to capital expenditures WNS currently expects our requirement for fiscal 2023 to be up to $40 million.
We'll now open the call for questions operator.
Ladies and gentlemen, if you wish to ask a question at this time. Please press Star then one on you touched on the telephone.
Just a quick question has been answered or you wish to move yourself from the queue. Please press the pound key.
Answer some time and to enable everyone on the call to participate please limit your queries to one question and one follow up.
Our first question comes from the line of Bryan Bergin with Cowen Your line is open.
Hi, guys. Thank you.
Wanted to ask a question with the annual productivity equipment Sunday I think I, just heard you say, 10% headwind a number around 10%, but I think that included more than just the productivity commitments can you. So can you break that down for us as far as the level, you're assuming there in 'twenty three versus last year and I know you had proactively address a number of our larger clients last year I'm curious.
If you're doing that again this year for any others.
Yes, so you know.
Yes, Youre right it assumes more than the just the productivity.
Just from overall perspective, there, 10% Teva productivity.
With your 3% ramp downs of 6%, including some of the proactive exit.
What we have spoken about the South Africa, one of the clients did mention as well as the short term revenue.
We don't have a visibility of 1% and I would just say that the new normal from.
Some of them are from a overall.
A number of perspective, which was earlier, 5% to 6% has moved to 7% to 8% due to the digital intervention. The property with you what is required from the Cline.
But it also helps to expand our relationship and to drive mostly good relation.
Listen chip from them and opportunity.
Okay, alright, thanks for breaking that down and then just on the operating margin. It's applied here to be down at the midpoint year on year can you just talk about the factors driving that op margin trajectory as far as inflation.
Inflation assumptions returned to office assumptions.
And also just how to think about how that margin trajectory on folds as we go through this fiscal year. Thank you.
So as compared to this year at all or what we have assumed the operating margin.
<unk> at this stage is that.
21%.
For that.
A couple of factors, which is driving that.
Higher wages, because we have seen some of the higher accretion due to.
In my prepared remarks, I did mentioned evolved the Philippines, and Sri Lanka, which is at the lowest levels return to office right. Now we have assumed at a 60% by the end of the year.
As well as some of the travel coming back including continues our investment.
In the digital journey as well as from a sales perspective, a lot of these things have been really core to our productivity did.
Digital dollars that I mentioned.
And the growth what we'll be having.
But we were driving from an external perspective so.
One of the other factor is that we have not as we don't have a visibility we have not factored the shutdown revenue what was there during this year with the high margin in this year. It said that contributed almost 30 basis points.
And some of those things are not factors. So right now you know year over year comparison, it looks to be just a few basis points down, but as we move forward have a better visibility there are opportunities to expand some of those but I think just to add to what Sanjay said and to kind of reinforce that message. Obviously, when we give our topline guidance I think everyone's aware that we don't include.
The short term revenues and that we've averaged we've averaged somewhere between 1% and 2% every year coming from that but there's also a margin impact that goes with that because what we've seen is that Merck that revenue tends to be extremely high margin because it's it's gained share or its outcome based and as a result, we don't include that revenue in the full year guidance.
Include the high margin that's associated with it so to <unk> point, we had $7 million of short term revenue in fiscal 'twenty. Two that contributed about 30 basis points to the overall adjusted operating margin that we posted which was 21 four so it really at the end of that kind of explains the big difference between our guidance on the margin.
And in the fiscal 'twenty two numbers that we posted.
Other thing I want to mention in Gulf and we can kind of chime in here a little bit as well.
We do have some pretty sizable investments that are baked into fiscal 'twenty, three which recovered including a step function in the salesforce.
We added nine new salespeople at the end of the fiscal fourth quarter, you didn't really see it affect the <unk>.
Sales and marketing expense in the fourth quarter, but you will see that affect us in fiscal 'twenty three.
I think what's really important is we're really kind of maintaining our margins, but we're also funding. Some of these investments that allow us to both accelerate growth and kind of manage the business going forward.
Thanks, David and as.
And just David alluded with the strong momentum that we see across the board with our existing clients and new clients and the hunting cycles, which have shortened especially in the U S. The investments across sub hunting and farming across all regions I E.
U S Europe , and UK along with APAC.
And also increasing our talent across digital streams transformation streams actually helps us actually reap the benefits quite early on.
Okay, alright, thanks for that to you guys. So is it fair to assume that margins will build as we go through the year as you absorb these upfront yeah, absolutely Brian was obviously set up the way we look at our business for Q1 to be a sequential decline we've got the impact of.
The productivity commitments that we give to clients as well as the lack of inclusion of short term revenues in the first quarter. We've got the impact of our wage increases which are effective April one we've got this head count that's coming on so yes, we're looking at a pretty severe drop in margins and flattish.
Revenues in the first quarter, which is not terribly uncommon for us.
Wouldnt be surprised to see revenue effectively flat quarter over quarter and in the margins down in the 250 to 300 basis point range, but you are correct as we move throughout the year, we should build both the acceleration of the top line growth and the margin to where we finished with obviously as we just kind of noted at this point, 11% constant.
Currency at the midpoint without any short term revenue and 21% margins.
Thank you.
Our next question comes from <unk> Tandon with Needham Your line is open.
Hi, this is actually Stan.
Good day, Thanks for taking my question and congrats on the results.
Eliminate touch first on attrition.
I have a little deeper here could you talk a little bit more about the dynamics right.
I can nutrition.
Last quarter, you guys mentioned expectations for sure seem to stabilize around the 35% level.
For the next few quarters.
Is this still the expectation for the upcoming year and.
Are we getting on what the strategy is hitting that number.
Thanks. This is gautam over here look we continue to experience elevated levels of attrition, but what is significant what is significant to add over there is the attrition this actually centered around the lower levels of our stock.
<unk>.
And the number of.
Number of interventions that we've made over the course of last year has actually stabilized and in fact reduce the attrition across some of our mid to senior level staff and along some of our niche skills also a bit of a unique train and hire the hire train and deploy modules that we have our ability to recur.
<unk> is quite quite good and we do not see and we have not actually seen any issues in terms of delivering to the astellas standards that we have to maintain for our clients.
To add rock bottom said, absolutely all the intervention, what we need is really walk because other than the lowest level and primarily on the white sites.
We have seen the accretion that's gone down.
You can see it all on the data on the new Skus on their digital and technology.
This wasn't just a sudden surprise from efficient high integration perspective, primarily driven by two factors, which I did mentioned in my prepared remarks, one was on the Philippines with the exemption of the regulations to work from home has been withdrawn.
There is a reaction to that from an <unk> perspective, as well as on a geopolitical issue in Sri Lanka.
It had been Super hyper inflation. So there has been some reaction towards that.
I do believe that the.
As soon as this all will settle down and back to the normalization.
Does attrition plus or did should come back down.
Just to add a little bit because it is an important issue and obviously with the elevated attrition numbers. This quarter, it's something that everybody wants to and needs to understand.
But both Sanjay and Gotham have kind of talked about some of the factors that drove this and obviously it was a surprise to us as well I don't think it was something that was known to anybody in the industry. So this is going to be a common thread a common theme across anyone who is doing work in geographies like Philippines and Sri Lanka.
I think what's really important is we kind of look at how attrition will normalize over time, which we believe it will it is important to understand that when you look at our business model.
Executives have wns's accompany the objectives of our clients in terms of where they want work to be performed from the objectives of our employees and kind of where they want to work from and also what's going on with the respective local regulators may not be aligned in the short term, so theres going to be some some.
Utility and those attrition numbers as people kind of settle into what the new normal is going to look like longer term.
Honestly at this point I don't know that anybody knows that but as long as we are as an organization to <unk> point able to maintain the attrition.
The lower levels of the organization as long as it's not affecting our middle to upper tiers, we're very comfortable in our business and our ability to run our business.
Got it that makes sense, that's really helpful. Thanks.
Okay.
And then just on the travel vertical.
That area saw some nice growth this quarter and it seems to be trending nicely coming out of the pandemic.
You guys talked a little bit more about what youre seeing here, what the expectations are for the upcoming year.
How the demand environment looks versus pre pandemic levels.
Yes, so from a travel vertical perspective, what we're seeing is the volumes are almost back to the pre COVID-19 levels in terms of processing and the agents that we have across the board. This is due to two factors. One is the domestic travel, but just almost come back to the normal levels pre COVID-19 . The second is the new processes and the new work that we have.
And across the last two years that has increased our volumes. What this does not take into account. This potential increase as business travel continues to increase along with the rest of you will increase in terms of leisure travel and that should definitely see our volumes start to pick up a lot more.
And maybe I'll just add to Baltimore.
You mentioned from a pre pandemic level, it's all electric power vertical, but when you look from a different segment perspective.
We do expect and we believe that there's still an opportunity of almost like 2% of the company's revenue.
As we move forward because of some of the international travel and some of the other sectors. Adjusted impacted also really important to note that <unk> got some kind of touched on a little bit when you look at the healthy performance. This year and when you look at the expectation at least today for the healthy performance in fiscal 'twenty three.
Key driver for that while we have had some recovery of pre pandemic volumes. The key driver for that growth has been the addition of new logos and the expansion of the number of processes that we manage for our existing clients. So.
It's our normal path for growth as a company, we typically don't grow our business by adding volume, we grow by adding new clients and we grow by adding a number of processes that we manage anything that we pick up in terms of volumes through those processes as a bonus because honestly, we don't have a ton of control over it but the reality is what's driving the health in this vertical is.
The standard approach to our business. The fact that the travel vertical needs our help to digitize their business to move their business forward.
Okay.
Got it that's super helpful.
Thank you for taking the questions.
Thank you.
Our next question comes from Maggie Nolan with William Blair. Your line is open.
Thank you and nice quarter I wanted to follow up on the conversation around attrition you projected to confidence in your hiring ability to offset some of this so could you elaborate a little bit on what youre doing its differentiated on the hiring side and how that can help to stabilize that's going on with attrition.
Yes, Maggie this is gautam. So from what we have is due to our deep vertical structure. What we have is each of our verticals have strong learning and training academies and what we do is through our campus recruitment programs through our lateral hire programs, we're able to attract a lot of talent and then train them over a period of six months.
Well weeks in terms of the requisite processes.
It does it gives us a healthy pipeline, but domain centered specialists.
Manage the processes for our clients.
And also at <unk>.
Price point, which is lower than the industry norms.
Yes, I would also add to <unk> comment.
Comment Maggie that when you look at kind of the proof if you will obviously as an organization, we're not happy with having a 43% attrition rate in the quarter, but despite having a 43% attrition rate. We added 2500 employees on a net basis during the quarter, despite having a 36% attrition rate for the year, we added almost.
Eight more than 8000 people. So the engine is fully capable of doing that and to <unk> point. When you really look at as long as youre not losing the seasoned people to people that are driving digital to people that are driving advanced analytics, one with domain knowledge.
The entry level to our business there is still more than enough supply to meet demand actually theres excess supply. So we're still able to interview multiple people for every role that we hire as you move up that chain that you run into the real challenges with finding the kinds of talent you need to support your clients.
Okay. Thank you and then.
Dave You had mentioned how important this client additions are to that long term growth narrative, you had really strong client additions this quarter in this year.
How many of those are including things like analytics and automation.
From the onset.
How does that compare to what you were seeing last year.
Yes, I think overall when you look at the profile in golf and kind of chime in here with some additional color, but it's very clear that digitization is a part of every new logo that we're adding period.
Some have more analytics involved on the front end than others, depending on the type of work that we're doing but I would say even for the stuff that industry specific or its M&A driven there's a component to analytics to everything that we're doing it's not sold as a separate analytics deal, but there is clearly an analytics that are embedded in those processes as well.
Yeah, and just to add to what Dave said, almost all our deals have a sizable portion of embedded analytics that we actually drive which is a part of our digital and fixed strategy, which our clients expect over a year on year basis and this is the nature of the way the deals are structured at the moment, where clients want to see increased transformation benefits.
As pass through which is which can only be provided through an infusion of digital and analytics and it's not just the new logos that we're seeing this either Maggie we talked last year about having a 2% headwind walking into the year because of the new logo of the existing logos that we renewed early what we're also clearly.
Seeing as that as our contracts come up or as we have ongoing discussions with our clients, they're looking to accelerate those productivity improvements through automation and technology across the board, which is why we see another 1% or so headwind to our business on a year over year basis. It's now structural it's because digitization is involved in every.
The discussion that we have.
Understood. Thank you.
Thank you.
Our next question comes from Puneet Jain with Jpmorgan. Your line is open.
Yes, hi, Thanks for taking my question, obviously in fiscal 'twenty two growth was pretty strong in travel.
Vertical.
Can you also review performance self insurance and health care declined.
And fourth quarter.
Talk about the outlook for those two verticals.
Yeah again, both in insurance and healthcare, we continued to see strong momentum across a broad set of clients. In fact, what is interesting is the amount of large deals that we continue to come across in both these verticals continue to increase of course, the closure time for these is a bit longer than the short term.
Smaller deals, but again I think that's quite a healthy pipeline that we've seen both of these verticals that we're excited about the prospects over the next 12 months with <unk> and.
And maybe an update just to add you don't you just refrain from that cargo perspective.
Seeing.
Not in proportion to some of the other verticals.
We did mentioned that last year, we did renew one of the a couple of the large clients from the insurance and the productivity comment you mentioned the digital intervention, what we have to do.
In that process, but as I said this is making the relationship most acute as well as the much better expansion opportunity as we move forward and accordingly got them.
You alluded it as we move forward, we are going to see more and more traction on <unk> and just to add we are also starting to see an uptick in volumes coming through as travel restrictions. The road road restrictions on travel and the Covid related restrictions are starting to reduce the claims volume have started to increase across different geographies.
Accretion of these spending across elective surgeries and treatments in the U S has started to increase so as these volumes increasing we definitely see an increase in terms of our processing capabilities across both these and I think at the end of the day, we talked about the broad based health of the pipeline I think when you take out some of these these one timers.
If you will and you look at the growth across these these vertical segments.
Theres nothing that we had last year with the exception of the manufacturing retail vertical which had the large south African clients. There isn't a single vertical that we had in fiscal 'twenty two that did not grow double digits. So this is as broad based as youre going to get and I think obviously, our comfort and confidence about what fiscal 'twenty three.
It looks like from a growth perspective is pretty healthy because.
I personally can't remember a separate starting the year at 11%.
Yes, Puneet. This is geisha I think lots has been said about the revenue momentum and I just want to add a little bit in terms of the excitement I personally have about how broad based this momentum is we're actually seeing and while you focus your questions on specific verticals that reach both spoke over to others.
Reality is we are actually seeing not just deals in the digital transformation.
Deals in analytics deals in traditional verticals and whatnot, we are actually seeing that based on the way. We operated during the pandemic can be created certainty for clients across a broad spectrum spectrum, we're actually seeing a lot of prospects clients, who had not outsourced or actually in.
Back on the journey of automation actually now climbed this bandwagon. So what we are seeing what my salespeople are telling me is that every prospect that they're interacting with even not the traditional kind of names that we had service before or spoken to before are now looking for predictable outcomes in unpredictable.
<unk> kind of times.
Business variability all of them want to leverage that to build completely new business models for themselves all of them are looking for partners like us to build.
Lillian business models involving more pandemic contingency planning as opposed to the traditional BCP, everyone wants control and compliance and want to ensure that they are working with a partner.
In these uncertain times, who take care of the cyber safety kind of outcomes and finally are helping them drive their business transformation.
An agenda involving leveraging domain expertise.
And things like that and I think it has become so broad based that we've actually said that at this point in time, we must get after this growth we must leverage all the investments we have made to drive faster revenue momentum and even if it means therefore, taking.
A minor hit in terms of operating margins because of some of the things that we spoke about in the past we will not let go of the opportunity to grow momentum at this point in time, so very very excited about this opportunity.
No that's great. Thanks for the clarification and then second on wage inflation I know you talked about seeing hyperinflation in Sri Lanka.
Can you also talk about level of with inflation, you expect to see it.
In India and Philippines.
Yes.
So.
<unk>.
We all have already known that has really positioned us really high across all geography, but from an overall are diluting us perspective.
We are expecting the vision patient to be 10% for next year. Historically. It was always has an average of 8%. This year. It was 9% because some of the intervention what we have to do around the new scale that as we.
You spoke about and which in fact has started to be providing us. The result, so in our guidance right.
As an average 10% has been already big Okay, and then just to clarify the inflation issue that we were talking about in Sri Lanka wasn't a wage inflation issue. It was a it was inflation issue as it related to the overall standard of living with entry level. So the bottom line is the currency is dramatically devalued the the <unk>.
Inflation in that country is honestly gone out of control and as a result employees are struggling to make ends meet given how expensive things have gotten in Sri Lanka. So it wasn't that the wage inflation for us it spiked it's the countrywide inflation spike.
Understood. Thank you.
Thank you.
Our next question comes from Dave Koning with Baird. Your line is open.
Yeah, Hey, guys, thanks, and good job.
So first of all just on travel again, I know you did a great job of explaining the kind of incremental wins and incremental processes you do.
Does that really explain like that.
We look at it relative to COVID-19, you did 128% of revenue a calendar 19th quarter in the prior quarters on a 100. So you had a huge acceleration and just kind of that relative performance.
In the travel market got a little bit better, but not dramatically in the quarter. So is that just fully explained by.
The new wins, and new processes, and not really travel picking up.
Sequentially.
Absolutely.
Okay Wow.
So those are incredible wins, just inject growth kind of organic growth that's great.
Remember, we talked a lot about how we were taking advantage of the pandemic to kind of reposition ourselves in the travel vertical how to help clients move forward how to create service offerings that allowed for things like vaccine cards, and so on and so forth because that all required digitization and automation. So we have definitely been very aggressive in it.
Spanning the number of logos that we've added during this time period and also expanding the types of work and the quantity of work that we did with our existing customers right and some of the clients were actually very very.
Happy with our efforts and how we were able to help them during the pandemic and as a result, they gave us more work as part of that so we really took advantage of the pandemic to strengthen our relationships with these travel clients and what youre seeing of the fruits of those efforts and also just to add to what David is saying what is interesting is the new volumes in <unk>.
<unk> that we are picking up along with the new clients are at the high end digital services and digital voice operations akin to the Internet based operations that we drive which actually leads to more stickier revenue ability to transfer more and better margin profile.
Yes, Dave I, just mentioned something to this discussion.
<unk> been having lots of excellent conversations with Ceos in the travel space on the other side and it's interesting.
<unk> done a very decent job from a governance point of view in terms of.
Grabbing market share going after new logos and going after a very relevant new age kind of businesses, but all of these logos. The reality is all through the last two on our viewers a store.
A number of players in the travel space.
Space actually reacted to Colgate Colgate in different ways. Some reacted a little more materially somebody that could quite materially. If you ask me and a lot of knee jerk reactions as well. So what has also happened is that.
In terms of my joke reactions, where they have to actually.
Impact their capacities in the short term now, they're all scrambling to get partners like us to help them.
Recall, but more importantly, what has also happened is during this pandemic all of them have actually.
Restructured their balance sheet restructured their fleets completely change the way they want to go to the market and that is where they are looking to.
Lighting partner led WNS, helping them in that journey travel is not yet fully back it is still coming back and from our perspective, therefore, the opportunity around travel. During this next year is going to be very very exciting for us and it had been completely new areas. So we believe that very broad based <unk>.
Yes, it's awesome good companies take changing environments, and capitalize youre doing a great job.
And then just a second quick follow up tax rate. It seems like we back into around 23%. If we take all the data you gave us is that the ballpark.
22% to 23%.
Yeah Okay.
Great. Thanks, guys.
Thank you and as a reminder to ask a question at this time.
Our next question comes from.
Operator, I think we're ready for next question.
Thank you Hello managed to ask a question at this time.
Thank you and as a reminder, operator at this time. Please press Star then one on your into some telephone.
Thank you and as a reminder to ask a question at this time. Please press Star then one on your Touchstone telephone.
Our next question comes from Vincent Colicchio with Barrington Research. Your line is open.
Good morning, guys.
To what extent are you benefiting in terms of seeing new client interest due.
Due to the tight labor conditions and their inability to serve there.
Access to market.
Please standby your conference call one of my personal loans currently.
Thanks.
Are we going to your call.
Thank you.
Vince are you on the line.
Yes, Sam.
Sorry, everyone not quite sure what happened I can tell you for sure for once in a long time that the entire teams together in New York, taking this call. So this is not a this is not a global issue.
Yeah.
But please please please go ahead, sir sorry about that everyone. Vince. Please proceed.
Yes, so suitcase shift.
To what extent are you benefiting from new client interest given the tight labor conditions and their inability to access talent are you seeing a lot of new companies to outsourcing for this reason.
Actually.
Maybe I think a few of them would be.
Asking for solutions around that but I think the bulk really getting after.
The core of our transformation method. The fact that we understand their business domains very well the fact that they get comfort around the fact that we have invested so much in technology. The fact that obviously, we are able to leverage analytics to the Hilton and we have so much of experience across the entire industry.
And our delivery digital transformation for them. So I think what is actually happening video at this point in time is a lot of clients who are trying to do some of these things 10 films have now realized that they do not want to get.
Got it.
In terms of any potential uncertainty in the future. They would rather go with a trusted partner who is capable of making all these investments at the backend and who has a real solid track record in terms of delivery and I think that's what we're looking for a partner who can deliver certainty a partner that is investing in all of these new exciting areas.
And a partner to some extent that will lead them out of the darkness.
And you had mentioned in your prepared remarks tuck in M&A could.
Could you review for us.
Maybe at the top of your list currently in terms of focus.
Sure. So R R.
Focus really is around any core.
<unk> capability that drew.
But would also enhance.
Some of our core verticals, our horizontal capability right. So from our perspective. There is this choice of build versus buy in terms of digital finance and accounting analytics and also potentially anything transformation that we really want to look at in terms of some of our larger key core businesses as well so it's a.
Very interesting.
At this point in time, where we have a very solid pipeline that we're looking at some of them will be smaller sized kind of assets, but add huge capability for WNS some of them could be cigna.
Significantly larger I think at the end of the day it becomes kind of the same three key areas that we're looking for digital and digital transformation advanced analytics and anything from an industry perspective industry.
Industry specific perspective that helps us deepen our capabilities and differentiate our service offerings within that vertical.
Okay.
Thanks for answering my questions.
Thanks Vince.
Thank you. Our next question comes from Ashwin <unk> with Citi. Your line is open.
Thank you.
<unk> folks.
Good to hear from all of you.
Great.
Hey, So my question is on sales productivity could you remind us what's typical given that you are making a number of these incremental.
Investments, where do you normally expect.
Yes.
When salespeople become.
Become productive and also could you remind us where you stand in that process.
Making these making these investments.
Sure So ashwin I think.
When you look at the sales productivity side of it the expectations for example around hunting are dramatically different than the expectations around farming clearly if we're going to put a seasoned salesperson into an account with the goal of expanding that relationship. The expectations are that those folks will generate revenue in <unk>.
Further fairly short order.
When you start looking at hunting. However, given for example for larger deals RFP cycles, and things that can last anywhere between six months and 18 months, depending on the size and scope the expectations are much lower so it's mixed some of this should should be able to deliver benefits in fiscal 'twenty three more around the farming.
Versus the hunting side, which will really.
Really be able to generate more benefits fiscal 'twenty four and beyond.
To be honest when you look at it we've gone roughly I believe 18 months since the last step function that we've taken in sales so somewhere between 12 and 18 months to a step function.
When you look at the hiring that we did in the fourth quarter. We added nine people. We finished last fiscal 'twenty, one with 112 salespeople. We finished fiscal 'twenty two with a 121 those adds were all relatively late in the quarter. So there was there was virtually no contribution in fiscal 'twenty three revenue from those sale.
To add this should be 'twenty, three 'twenty four 'twenty five productivity and.
The sooner we make the next step function, obviously, the sooner we're confident in the productivity of the existing team and our ability to accelerate beyond.
Okay.
Listening to the background, you're definitely out of New York City.
Okay.
Yes.
My next question I know a lot's been asked on this call about wage inflation, but could you talk specifically wage inflation versus pricing.
That's a very quick quick question, we get from investors is.
What percent of contracts.
Once a year call it pricing what might have.
Other contractual conditions, Great then maybe two more.
More seamlessly.
Could you kind of characterize how investors should think about that timing issue.
And then also from a.
Promo to offset really the majority of our contracts definitely do have a cooler.
<unk>.
Though it is GAAP and it is linked to the inefficient from a blind geography.
Dave.
Also as and when we are going from a new deals we're expecting all of this vision patients are being factored in as part of the cost, but they know what the client really looks forward is more from a.
Total cost of ownership and that is what we are able to really offset some of this.
<unk> cost to our digital intervention auto our technology and automation what we.
What we try and provide as a solution to our clients one bottom Acacia was alluding that everybody is all about the transformation as well as a digital interventional with that including the embedded analytics that.
The short answer is ashwin.
US it covers a part of it but between the fact that it's pegged to.
Indices that are not necessarily aligned to wages and peg two geographies that are not necessarily aligned to where we deliver from.
It's never going to cover the full impact of wages, but there's no way, we're passing on our wage increases to our clients were able to pass on a portion of its cap, but it's really the productivity the efficiency. The digitization that enables us to maintain margins and to offset the impact of wage increases and also just to add to what Dave mentioned.
As we continue to add more end to end processes, along with digital and tech interventions across new deals, we're actually able to attract premium pricing, which also offset some of the pressures that we have.
Got it alright, thank you for putting putting all of the details together alright.
Congratulations thanks, Thank you ashwin.
Thank you at this time, we have no further questions in the queue.
This concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
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Sure.
Okay.
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