Q1 2023 WNS (Holdings) Ltd Earnings Call
Speaker 2: their management's prepared remarks, we welcome that to question the answer session, and instructions for how to ask a question will follow at that time.
Speaker 2: As our minor is called, it's being recorded for replay purposes.
Speaker 2: Now I would like to turn the call over to David Mackie, WNSS, Executive Vice President of Finance and Head of Investor Relations. David.
Speaker 3: Thank you and welcome to our fiscal 2023 first quarter earnings call. With me today on the call, I have WNS's CEO , Keshav Muragesh, WNS's CFO Sanjay Puria, and our COO, Galton Barai. 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.wns.com.
Speaker 3: Today's remarks will focus on the results for the fiscal first quarter and to June 30, 2022.
Speaker 3: 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 materially from those expressed or implied by such statements.
Speaker 3: Such risks and uncertainties include, but are not limited to those factors set forth in the company's Form 20F. This document is also available on the company website. This document is also available on the company website.
Speaker 3: During this call, management will reference certain non- GAAP financial measures which we believe provide useful information for investors.
Speaker 3: Reconciliation of these non- GAAP financial measures, GAP results can be found in the press release if you'd earlier today.
Speaker 3: Some of the non-GAAP financial measures management will discuss are defined as follows.
Speaker 3: Net revenue is defined as revenue less repair payments.
Speaker 3: Adjusted operating margin is defined as operating margin excluding amortization of intangible assets, share-based compensation, and goodwill impairment.
Speaker 3: Adjusted net income, or ANI, is defined as profit, excluding amortization of intangible assets, share-based compensation, goodwill impairment, and all associated taxes.
Speaker 3: These terms will be used throughout the call.
Speaker 3: I would now like to turn the call over to WNSS CEO , Kaysho Murugesh. Kaysho. Kaysho.
Speaker 4: Hey, thank you David and a very good morning everyone.
Speaker 4: WNS's financial results in the fiscal first quarter continue to demonstrate solid performance, including top line growth, margins, as well as free cash flow.
Speaker 4: Net revenue for Q1 came in at $274.8 million, representing a year-over-year increase of 16.3% on a reported basis and 20.8% on constant currency.
Speaker 4: Sequentially, net revenue reduced by 0.1% on a reported basis.
Speaker 4: but increased 2% on a constant currency basis after adjusting for foreign exchange.
Speaker 4: In the first quarter, WNS added seven new logos and expanded 30 existing relationships.
Speaker 4: The company also delivered strong, and existed operating margins of 21.1%
Speaker 4: and grow adjusted EPS by 18% year over year.
Speaker 4: Sanjay will provide further details on our first quarter financial performance.
Speaker 4: in his prepared remarks.
Speaker 4: For the past few years, WNES has been consistent in our message that while Tuckin MNA was a key organizational priority.
Speaker 4: We will continue to be disciplined in our approach and remain focused on finding assets that were ability based or capability based
Speaker 4: good cultural fits and had strong financial performance.
Speaker 4: On the 1st of July , we were excited to announce the acquisition of Vura, a global leader in intelligent enterprise automation, which we believe checks all the right boxes. The acquisition of Vura, a global leader in intelligent enterprise automation, a global leader in intelligent enterprise automation,
Speaker 4: From a capability standpoint, Vuram brings demonstrated experience and expertise in helping companies accelerate end-to-end digital transformation by aligning, automating and optimizing processes to enable the creation of scalable BPM solutions.
Speaker 4: Their low-code approach to intelligent automation, leveraging strategic partnerships with industry-leading technology platform and tool providers enables faster speed to market and a highly flexible approach to designing and deploying customized client solutions. To design and deploy customized client solutions.
Speaker 4: This complementary capability will not only allow WNS to accelerate new clients transformation programs.
Speaker 4: but will also help us enhance ongoing productivity improvements for existing engagements.
Speaker 4: What on services span the clients front?
Speaker 4: Middle and back office and include process automation, digital consulting, user experience, user interface, solutions, advanced analytics, quality assurance as well as testing.
Speaker 4: The company's approach to driving process automation is horizontal in nature and therefore can be easily applied to any WNS vertical or service offering.
Speaker 4: Boredom has created unique reusable components including automation accelerators specifically tailored to key verticals including banking and financial services, insurance as well as healthcare.
Speaker 4: Today, the Wurum team is comprised of more than 900 professionals providing WRS with a new set of digital skills and an additional channel for sourcing digital talent.
Speaker 4: Culturally, we also believe would have been an excellent fit for WNS as well.
Speaker 4: They utilize a client-centric approach driven by customized services and solutions.
Speaker 4: operate a globally distributed delivery model, and have a very strong focus on employee care as well as development.
Speaker 4: In fact, Hurom has been recognized as one of the best companies to work for in India each of the past five years.
Speaker 4: WURAM also brings a proven track record of delivering growth and margins which meet or exceed WNSS financial benchmarks.
Speaker 4: This past fiscal year, Buram grew revenue more than 35% and delivered adjusted operating margins in excess of 30%.
Speaker 4: We are very excited to welcome the Wurm team to the WNS family and we look forward to working together as we continue on our journey towards digitally led human assisted services and solutions.
Speaker 4: Later on, this call itself, Sanjay will share with you additional financial details of the acquisition, including the expected contribution to fiscal 2023 guidance.
Speaker 4: Today I also wanted to spend a few minutes talking about the weakening global macro environment and its potential impacts to WNF.
Speaker 4: As we all are aware, most countries today are experiencing significant economic and political challenges.
Speaker 4: Now the impacts of rising inflation, slowing growth, labor supply pressures, geopolitical conflicts, supply chain issues, as well as the COVID pandemic has increased the likelihood of a global recession and are forcing companies to reassess their business plans as well as their spending levels.
Speaker 4: Fortunately for WNS, we believe that demand for our services will continue to have low macro correlation and overall will remain healthy.
Speaker 4: Today, our revenue momentum is being driven by our clients' need to digitize processes in order to be competitive in their respective markets.
Speaker 4: This is really not optional or discretionary and cannot be postponed until the economic environment is healthy.
Speaker 4: We saw this theme emerge during the pandemic as clients moved forward, signing new transformational deals and expanding the scope of existing arrangements.
Speaker 4: despite the volatile macro.
Speaker 4: In addition, it is important to remember that the bulk of WNS' services, while helping automate processes and improve comparative positioning, also deliver significant and rapid cost savings to clients.
Speaker 4: Since there is very often little or no upfront financial investment on the client's part, the decision to move forward with these initiatives is much easier and far less exposed to budgetary pressures. In fact, we believe there is an opportunity to see the scope of work increase and sales cycles reduce as clients look to accelerate savings in this environment.
Speaker 4: While we expect demand for new business will remain healthy in a week macro, we are also comfortable with the overall stability of our existing book of business.
Speaker 4: Today, approximately 95% of WNS's revenue is recurring in nature, highly visible, and backed by long term contracts.
Speaker 4: Because the functions we manage are mission critical to the clients day-to-day business, any decision to change partners or bring back work in-house can be very risky and expensive for clients or in potential prospects.
Speaker 4: Today we are not seeing any adverse impacts to our business from a weekend macro environment. And in fact, we continue to see strength in our pipeline, deal flow, as well as business momentum.
Speaker 4: That being said, we will continue to monitor our client base for potential headwits.
Speaker 4: In short, we believe that the stable nature of our services, coupled with resilient demand, driven by our clients need to digitize, better compete and save money, will enable WNS to perform well, even in a weak global macro environment.
Speaker 4: We are also comfortable that our company is well positioned to capitalize on the growing digital opportunity in the BPM space.
Speaker 4: WS will continue to focus on investing for the future, executing on our strategic initiatives and delivering sustainable value for all of our key stakeholders. For all of our key stakeholders, for all of our key stakeholders.
Speaker 4: I would now like to turn the call over to CFO Sanjay Puria to further discuss our results and outlook. Sanjay?
Speaker 5: Thank you, Kisha. In the fiscal first quarter, WNSS Net Revenue came in at $274.8 million, up 16.3% from $236.3 million posted in the same quarter of last year and up 20.8% on a constant currency basis.
Speaker 5: Sequentially net revenue decreased by 1.1% on a reported basis and increased 2% on a constant currency.
Speaker 5: Sequentially, underlying revenue momentum was masked by currency depreciation or reduction in short term revenue and the impact of contractual productivity commitments to certain clients. In the first quarter, WLS recorded $0.2 million of short term revenue at margin above company average.
Speaker 5: Adjusted operating margin in Kotro 1 was 21.1% as compared to 20.8% reported in the same quarter of fiscal 2022 and 21.1% last quarter.
Speaker 5: Year over year, adjusted operating margin increased as a result of operating leverage on higher volumes, improved productivity and currency movements net of hedge.
Speaker 5: This benefits more than offset employee wage increases and higher facility related and travel costs associated with our return to office.
Speaker 5: Sequentially, margins decreased as a result of wage increases and a higher facility related and travel costs.
Speaker 5: This headwinds were partially offset by improved productivity, lower SGNAC cost driven by 24 $,?ar<|en|><|transcribe|>
Speaker 5: The company's net other income expense was $0.2 million of net income in the first quarter as compared to $0.5 million of net income reported in quarter 1 of fiscal 2022 and $0.9 million of net income last quarter.
Speaker 5: Year over year, the unfavorable variance is attributable to $1.2 million of interest income on a tax refund recorded in quarter one of 2022.
Speaker 5: which more than offset increased interest income on higher cash balances and lower interest expense relating to operating leases and debt repayment.
Speaker 5: Sequentially, the unfavorable variance is a result of $0.6 million of interest income on a tax refund recorded in the quarter of 2022.
Speaker 5: Dubliners effective tax rate for quarter 1 came in at 21.1% down from 21.5% last year and up from 19.7% last quarter.
Speaker 5: Year over year, a one-time tax benefit on liquid mutual funds in quarter one of last year was more than offset by shifts in our geographical profit mix and changes to the mix of work delivered from tax incentive facilities.
Speaker 5: The sequential increase in our effective tax rate resulted from the mix of work between Geography and Tax Exam Facilities.
Speaker 5: Recently, the Fiscal Incentives Review Board in the Philippines has relaxed the return to office regulation, allowing firms to operate 30% from home per facility until September 12, 2022.
Speaker 5: The change was made retroactive to April 1 and as a result, WNS's Q1 effective tax rate was not negatively impacted as we had expected.
Speaker 5: The company's adjusted net income for quarter one was $45.9 million compared with $39 million in the same quarter of fiscal 2022 and $48.3 million last quarter.
Speaker 5: Adjusted diluted earnings were 90 cents per share in quarter one but 76 cents in the first quarter of last year and 95 cents last quarter
Speaker 5: This represents your over your EPS growth of 18%.
Speaker 5: As of June 30, 2022, WNS balances in cash and investments totaled $373.5 million and the company had $31.7 million in short term debt. The company had $31.7 million in short term debt.
Speaker 5: In addition, the company has also taken an $80 million term loan for general corporate purposes on July 7, 2022.
Speaker 5: WNS generated $15.8 million of cash from operating activities this quarter and incurred $10.9 million in capital expenditures.
Speaker 5: During the quarter, the company repurchased 742,000 shares of stock at an average price of $72.48 which impacted quarter one cash by $51.2 million dollars.
Speaker 5: DSO in the first quarter came in at 29 days as compared to 32 days reported in quarter one of last year and 30 days last quarter.
Speaker 5: with respect to other key operating metrics.
Speaker 5: Total head count at the end of the quarter was 55,146. And our attrition rate in the first quarter increased to 49% up from 32% reported in quarter one of last year and up from 44% in the previous quarter.
Speaker 5: as was the case last quarter.
Speaker 5: The elevated attrition was concentrated at the junior most levels of the organization and primarily focused on voice based CX service in the Philippines resulting from the return to office mandate.
Speaker 5: In addition, it is important to note that WNS quarter 1 attrition rate typically runs approximately 2-3% higher than other quarters due to the timing of our annual review, bonus and incremental cycle.
Speaker 5: We do not believe that this elevated level is currently impacting our ability to service clients or accelerate growth and we expect the attrition rate will reduce over the next few quarters.
Speaker 5: build seat capacity at the end of the first quarter was stable coming in at 34,674 seats. coming in at 34,674 seats.
Speaker 5: The C-T utilization metrics which the company typically provides as a measure of infrastructure productivity are not meaningful given the company operated at 57 or 59 percent work from home globally in quarter one. Thank you. Thank you. Thank you.
Speaker 5: In our press release issued earlier today, WNS provided our revised full year guidance for fiscal 2023.
Speaker 5: Based on the company's current visibility levels, we expect net revenue to be the range of $1 billion and $100 million to $1 billion and $152 million representing your over-year growth of 7% to 12% on a reported basis and 11% to 17% on a constant currency bill.
Speaker 5: The acquisition of Wurum has increased our fiscal 2023 revenue guidance by 2% and our top-line projections assumes an average British pound to US dollar exchange rate of 1.20 for the remainder of the fiscal 2023.
Speaker 5: Consistent with our guidance approach in previous years, we currently have 95% visibility to the midpoint of the range, which does not include any uncommitted short-term revenue or improvement in travel volumes beyond Q1 levels.
Speaker 5: Fully as Expected Night Income for fiscal 2023 is expected to be the range of $183 million to $195 million based on a $79 rupee to US dollar exchange rate for the remainder of fiscal 2023.
Speaker 5: This implies adjusted EPS of $3.62 to $3.86, assuming a diluted share count of approximately 50.6 million shares.
Speaker 5: The guidance includes an increase of 1 cent per share associated with acquisition of Buram, which is inclusive of all acquisition and integration costs and reduction in interest income.
Speaker 5: With respect to capital expenditures, WNS currently expects our requirements for fiscal 2023 to be up to $40 million.
Speaker 5: We'll now open the call for questions.
Speaker 5: Operator.
Speaker 2: Ladies and gentlemen, if you wish to ask a question at this time, please press star then one or your touch tone telephone.
Speaker 2: In the interest of time, I will enable everyone on the call to participate.
Speaker 2: Please limit your queries to one question and one follow-up.
Speaker 2: Our first question comes from the line of Brian Burgin with Cowen. Your line is now open.
Speaker 6: Hi guys, thank you. Wanted to start here, a high-level question, digging into client sentiment, spending appetite, maybe across different regions and industries. Can you give us a sense on maybe the US-based versus UK and Europe , really anything in that decision-making, that spending appetite, the sales cycles, and then as well, just what you're seeing in travel and your thoughts going there forward. So US versus UK, Europe , and then specifically travel.
Speaker 4: Thanks Brian , this is Gautam. So what we have been seeing over the last few quarters the recovery had been led by our US clients.
Speaker 4: followed by Europe and the UK and APEC. But what we've seen in the last quarter, in fact, is the deal flow is starting to increase in UK and Europe . And the decision-making cycles have also started shrinking. So clients are making decisions a lot more quickly to start the implementation.
Speaker 4: In terms of the travel vertical, what we have seen is, once the current set of forecasts that we have and projected are at the Q1 levels that we have seen, a lot of the recovery has been let through leisure travel.
Speaker 4: The corporate travel is still not picked up to the levels of pre-pandemic days, but what we see is as airlines and airports start improving their capacity with through addition of flight crews or baggage handlers etc. that volume could start increasing over the next few quarters, but that will not get factors in there. I hope that answers the questions.
Speaker 6: Yes, it does, thank you. And then just to follow up here on the workforce and the attrition outlook, can you just give us a sense on what the company attrition would be, X Philippines? And then just more broadly, how are you thinking about the ultimate impact of Philippines through the business model?
Speaker 4: So I would say if we remove the Philippines level of attrition, we would do it about 33 to 35% levels. In terms of our ability to deliver to our client commitments or the ramps that are projected, we are seeing absolutely no pressure in terms of doing that. There are certain levels of pressure that we have in our hiring and training team, but our unique models that we have, especially with our training academy.
Speaker 5: Our ability to hire CX agents in the Philippines and deploy them rapidly into a client account is solved the problem quite well for us. Yeah, and I'll just add over there that specifically for the Philippines because work from office, we have managed what's given and a coordinate debt raise debt ratio because if you have to remember, it started from April 1. And that is where we started asking people to come back to office and accordingly the quarter world was up.
Speaker 5: Having said that, you know, we saw that picking up in April and you know me and June we have seen that coming down and accordingly you know it's too early but you know gradually we believe that we expect it to reduce over the few quarters now.
Speaker 3: And just to add to that one other piece, you know, when you look at, obviously the fact that the suppression level is putting pressure on, on the recruitment and the training teams, despite that, when you look at the overall company, we added more than 3,000 people on a net basis in the first quarter, including more than 700 in the Philippines. So certainly it's not ideal, but in terms of impacts to the business at this point very low.
Speaker 7: Okay, thank you guys.
Speaker 2: Our next question comes from my attendant with Needham.
Speaker 2: You're gonna want to smell open.
Speaker 6: My aunt Caroline is now open. Thank you. Good morning. And here my name there. I just wanted to, a case of you talked about demand being very durable. I just thought maybe you could give a little bit more breakdown in terms of what areas you might see that benefit versus areas that might see some potential softness. It sounds like a net effect is still.
Speaker 6: reasonably positive, but just wanted to get a little bit of feel for some of the areas that might be impacted, positive or negative, as we go through the slowdown globally that he talked about.
Speaker 4: Yeah, that's a great question. So, Mayank, I think the first headline item I would like to mention is that people have been talking about this forthcoming recession and the downswing in companies' fortunes, in the clients' fortunes, economies' fortunes, countries' fortunes for a while now. And what we're actually seeing is our experience has been that the nature of services that we actually provide has become so strategic.
Speaker 4: You know that you know when there is a you know there is a Decline in the overall economic position it actually accelerates the fervor for our business Now having said that as we have discussed many times before if if it's a doomsday kind of a situation for the whole world you know nobody can predict what will happen there, but I think the The significant change that the company has made I would say to a great extent the sector also has made over the past few years
Speaker 4: is that we are improving companies' competitive positioning, we're helping them create disruption, we're helping companies manage volatility, and in our conversations with every client across all sectors, what we are hearing is that everyone wants to use the so-called recession or the so-called downswing in fortunes to actually future-proof their businesses, and in that journey, what we're looking to do is actually sign up with the most.
Speaker 4: trusted partner, you know, like WNES.
Speaker 4: So from our perspective, you know, if I had to look at it from an opportunity point of view, I actually think that broad-based growth across each of our areas driven by the transformation agenda, the digitization agenda is what will drive fortunes. If there is one area that I felt could have an impact over a period of time, if things didn't work out for the world at large.
Speaker 4: It will be travel again because then companies will come into you know, come, you know, discussionary travel and things like that. So, you know, one could, you know, see some impact there. But let's, you know, agree that in our view that the opportunities from a recession far outweigh the risks at this point in time and our conversations with every one of our clients clearly demonstrates that that's how our clients are also thinking. Our pipeline continues to be the strongest it has ever been.
Speaker 4: The other thing I want to mention is today the situation is such that many of our clients are not just looking at our core offerings but are actually reaching out to us as a strategic partner to also help them with their stuffing needs. It's a very interesting new dynamic that we are seeing where clients are actually saying help me with stuffing in these locations. Now wherever it is strategic and leads to more strategic revenue for us.
Speaker 4: Obviously we are embarking on the journey with them. Where it is discretionary, short term, we are not getting involved in those discussions.
Speaker 3: That's great to hear. This has a quick follow-up on margins. Sanjay talked about some of the offsetting factors that helped margins this quarter relative to where I think you had set expectations, but could you talk about some of the levers and how we should think about margins for the rest of the year? Thank you.
Speaker 5: So from the rest of the year, we believe the margin expectation is going to be at an average of 21%. So we are not seeing any further dilution. But having said that that factors including the volume of integration as well as acquisition cost, what we have to do during the year, that also factors further, return to office percentage going up because right now we are at 41%.
Speaker 5: And we expect to end the year around 60-65%, which means more travel costs and more accommodation and facility costs is going to be there. And with our continued investment into the SG&E which is around sales, hiring, digital investments and so on.
Speaker 3: Yeah, and I think just to further that, you know, one of the things we talked about last quarter was, you know, the ongoing investment in sales and that we had kind of taken a step forward in the fourth quarter. Just as an FYI, we did continue our sales hiring again in the first quarter, and we're now up to 125 quota carrying salespeople within the organization. So that investment continues to be critical and strategic for us, and I think reflects, as Keshav was mentioning, the overall opportunity that we're looking at.
Speaker 5: I'm sorry, just to be clear, Dave and Sanjay, do you expect margins to basically be right around 21% for the rest of the quarters or is it going to be more skewed towards the back half? Just want to get a better sense of the trajectory on margins for the rest of the year. Thank you. So I think the quarter two, we expect it going to be a percent lower than quarter one at this stage because of the VURAM integration as well as the acquisition cost which is going to be higher in quarter two and then the balance of model is going to be higher.
Speaker 8: Mike, I flag.
Speaker 7: Bob.
Speaker 2: Our next question comes from Ashwin Shervaker with Citi. Your line is now open.
Speaker 6: Thank you. Good quarter folks, especially given the extreme level of volatility and change.
Speaker 6: My first question is with regards to the revenue per built-up seat, it's done sequentially very modestly, but it's still at the level that's among the best it's ever been. Can you maybe break down some of the underlying dynamics here, both for the trend itself, sequentially and year over year, but equally important on the year over year, the very high increase.
Speaker 9: how much is pricing, how much is a few other factors, the nature of fork, things like that.
Speaker 3: Yeah, I mean, there's really kind of two metrics, Ash, when I think you're kind of honing in on here. And from our perspective, the more important metric is revenue per employee, right? And on a constant currency basis, revenue per employee year over year is up a little over 3%. So that's, as reflective of the ongoing productivity in our business, the fact that we're selling higher value services and solutions, all the kinds of things that we want to see in the business. When you look at revenue per built-up seat, it's kind of a...
Speaker 3: It's kind of a metric that at this point is a little bit of a challenge because at the end of the day, we haven't been building capacity for the last two years based on the pandemic and based on the fact that we've had significant portions of our population working from home. So, you know, that metric clearly has accelerated because, you know, even today, what we're still significantly and the vast majority of our people are working from home and as a result, we haven't been...
Speaker 3: building out that infrastructure. So I would say from that metric, clearly the pandemic and the work from home environment has been the driver for the increase in the revenue per built-up seat.
Speaker 9: Got it, got it. And the second question is, can you comment on the diligence that you're doing in terms of accepting your clients and ramping your clients? And the reason I ask is because, you know, heading into the financial crisis many years ago, some of the notable clients that were signed heading in turned out to be the ones that...
Speaker 5: in terms of the kind of work that they're giving. If it's basic transactional work that adds only small bits of processes and incremental processes, we tend to stay away from it. Where we try and adopt more work is end-to-end processes where we have a greater ability to transform and digitize. And that's been the trend we've also seen in the last two years is more and more clients are demanding that we transform and digitize before we start offshoring. And that's the nature of the clients that we are actually taking on board, which gives us also premium price.
Speaker 4: of how we actually select a client. We select a client as much as they select us. And it comes from not just getting to know the client, but also understanding their balance sheet, understanding their cash position, understanding their liquidity position and things like that. We have a very strong chief worrying officer. I mean, our chief risk officer, I call as a chief worrying officer because he's all the time worried about what could go wrong with the business. And I must compliment this management team, this track record that in the last.
Speaker 4: on potentially a downturn globally over the next two years.
Speaker 10: God has got it. I appreciate the details. Thank you.
Speaker 10: Appreciate the detail. Thank you. Thanks Ashwin.
Speaker 2: Our next question comes from the line of Maggie Nolan with William Blair. Your line is now open. Your line is now open.
Speaker 11: Hi, thank you. You mentioned that the client decision cycle may be already starting to shrink some. How is that impacting your hiring plans? Just given that you're trying to hire quickly enough, you're already hiring at high levels, and then there's the additional attrition factor as well. And then there's the additional attrition factor as well.
Speaker 5: Yeah, this is Gautam. Maggie, as I mentioned earlier, one is, so once there is pressure on our hiring and training teams, our ability to hire is not been impacted. We are able to add people quite quickly. Second, and especially pressures, our pressure hiring has increased quite significantly. The second thing is our training academies are able to train people in the relevant skill sets, quite aggressively and deploy them. So as of day, we have had zero impacts or ability to stick to our commitments to new proclines.
Speaker 3: That's a lot of prospects. I think the other thing that's important to remember is this is not a, you know, build it and they will come kind of a business. We don't carry significant amounts of bench. When we hire and train resource, it's typically to firm commitments or firm visibility. So, you know, for us, just because the pipeline is healthy and just because activity levels are up, those aren't going to, those aren't going to engage hiring practices per se.
Speaker 11: It's only going to be when we've got ink on paper that we're going to start that process. Okay, got it. Thank you. And then great to see you do an interesting acquisition here. Is the plan to focus on integration of this acquisition? Is there an appetite for additional M&A from here? And if so, how is that pipeline looking?
Speaker 4: Right, Maggie, actually, thank you for that question. So yes, absolutely. The focus right now is to integrate this asset extremely well. And as you know, the base on our track record of doing the four acquisitions three or four years ago, we've actually documented that process extremely well. So the integration is going very, very well. But at the same time, like I mentioned earlier, we believe that this is not the time to step off the gas.
Speaker 4: in terms of continuing to look at the right kinds of assets, the right quality of assets, and any assets that can help us accelerate the revenue momentum and the profit momentum, and more importantly, provide the right solutions for our clients. So we'll continue to keep being very opportunistic in terms of the M&A pipeline. I must mention that the pipeline continues to be very strong in all the strategic areas that we are focused on. And what is also interesting is that with the recent meltdown and noise.
Speaker 6: Hi guys, this is Nate on for Branking. Today I just wanted to follow up on one of the earlier questions on travel. So on the last call you talked about the potential for travel to add up to 2% of top line growth if travel return to pre-pandemic levels. I'm just wondering what that upside potential looks like now. Obviously you talked about sort of the recovery in leisure travel and still waiting on business travel to get back to pre-pandemic levels. I'm just wondering what that potential upside to the top line looks like.
Speaker 3: one relative to fiscal Q4, which means the opportunity remains the same for us.
Speaker 6: Got it very helpful. And then just quickly wanted to ask on the insurance and healthcare vertical. So how did those perform out of the expectations in the quarter? And sort of what expectations do you have for the remainder of the year there? Thanks.
Speaker 3: Yeah, look, I think when you look at the first quarter, obviously what you're going to see from a reported number perspective is the fact that FX has a meaningful effect on verticals for us, like insurance, where we have a healthy amount of that revenue that comes from both the UK and Australia. The expectation is that the underlying insurance business will remain healthy. I mean, if you look at growth...
Speaker 12: We got appreciate the color.
Speaker 2: Our next question comes from Harry's Sheldkraut with Wet Bish. Your line is now open.
Speaker 2: Here is shield crouch your line as they'll open. Please check your mute button.
Speaker 1: Mooji
Speaker 2: Our next question comes from Vincent Calicchio with Barrington Research. Your line is now open.
Speaker 13: Yeah, good morning, gentlemen. Nice quarter. I'm curious if you're seeing any easing in wage pressures, giving the economic backdrop and any of your major geographies.
Speaker 5: Not at this stage because what the clients are really focused is all about the productivity as well as the total cost of ownership but nothing from a rate pressure because I think client do appreciate and understand.
Speaker 4: Yeah, so I think Sanjay heard it as great, but actually I think your question was on wages. Look, at this point in time, we are not, you know, seeing a let up in terms of the wage inflation and we continue to manage the wage inflation, you know, with all the levers that we have. But having said that, with the kind of noise we are now starting to see around the global recession and also the fact that across the globe, we are seeing a lot of
Speaker 4: We're starting to see, you know, startups that were hiring a lot of these talent and companies that were actually attracting a lot of talent that, you know, traditional companies like us had, now starting to falter in terms of their ability to raise cash. And you know, we believe that therefore over the next few quarters, employees will start behaving differently. And that will, you know, actually drive a more sensible, you know, wage inflation, you know, program that will.
Speaker 4: bring more kind of predictability to the model I would say. But having said that, in spite of all of it, we have been able to manage, you're seeing the margins, you're seeing the growth, and you're seeing the way we are delivering the productivity. And when things change for the better, I guess it will be positive for the company.
Speaker 5: Maybe I will just add one point over there. Sorry, I heard Ray earlier. But having said that, specifically on the niche skills, still definitely there are wage pressure from a compensation perspective because there is a gap between demand and supply at this stage. As Keshav mentioned, startups are filtering it out, so maybe over the quarters we may start seeing that pressure also coming down. Just to add to what Keshav and Sanjay mentioned, and as I mentioned earlier, the
Speaker 5: Our ability to hire freshers and train them is ensuring that our cost base doesn't get impacted at all and we are able to maintain the heightened levels of profitability.
Speaker 13: And a question on Vuram, the low code capabilities and some of the other skill sets they add to the company. Does that provide some differentiation versus your major competitors?
Speaker 5: Yes, it does because as we have seen over the last two to three years, clients' demand for digital transformation is at an all-time high. So where we see with companies like Urum that we have acquired is we have added hundreds of people who drive intelligent automation to low-code capabilities and that is going to continue to be an extremely unique differentiator for us in comparison to our other competitors. That's it.
Speaker 4: And I suppose they have a good engine to hire more of the type of people that have that experience, which is another important advantage for you, is that right? Yes, really. Yes, really. So, sir, two or three things, you know, I just want to expand on that because Urum is such an exciting asset for us. So, first and foremost, I think it gives us that, you know, that passing layer where the quality of conversation.
Speaker 4: involving Guarambh changes with a number of clients. Around and thereafter, I have related to rap services around it is extremely high. They have a very solid engine of hiring. And more importantly, our ability, therefore to take them to every one of WSS traditional clients now is actually very strategic. But remember, they also have a roster of clients that are independent many of whom.
Speaker 4: are not known to WNS, but they are all top quality clients. So, Arribliate now to also penetrate and radiate across their clients, the other services that WNS brings for the table is also very high. I think that's what makes this very, very exciting, strategic and differentiated. And also just, beyond the new client prospect, a lot of the committed productivity what we have with our existing clients.
Speaker 5: I think that's also this capability is very exciting to deliver that as we move forward.
Speaker 5: This capability is very exciting to deliver that as we move forward. Thanks for all the color, nice quarter.
Speaker 2: Thank you. Thank you. As a reminder, to ask a question at this time, please press star then 1.
Speaker 14: what in the mountains.
Speaker 2: Our next question comes from Puneet Jane with JP Morgan. Your line is open. Hey, thanks for taking my question and nice quarters. I hate like a similar question as one of the prior ones, but for the internet and tech clients.
Speaker 2: Those clients are about 20% of your revenue. Are you seeing any changes or any differences in client behavior?
Speaker 2: among those clients? Is there any push to cut costs or maybe to push more for offshore among those clients? I've thought about polluting and self purchase because sometimes I do stick to feed the large clients over time and I would have to Advis
Speaker 5: Thanks, Pani. What we are seeing absolutely is an increased demand from the internet-based clients as we progress through the year. In fact, a lot of them existing clients are adding more work and a few of the recent wins that we have had coming from the similar space as they look to transform their business or reduce costs.
Speaker 3: Yeah, I think honestly, Pune, we're, we're, we remain excited about the opportunity. It's also important to remember that the services that we provide to, to the internet based clients are varied, right? So, unlike what we see, for example, in CX, in, in travel, for example, you know, we're, we're kind of spread amongst front, middle and back office functions that we're providing to these clients. So,
Speaker 3: So good diversity there as well as opposed to just focusing on customer facing types of activities within that sector. So, we're going to focus on customer facing types of activities within that sector.
Speaker 2: Understood. No, that's helpful. And then with the headline inflation numbers also spiking, can you talk about COLA adjustments and if you're seeing any changes in pricing as a result of that, maybe how much of business is under those contracts or have COLA adjustments and how often pricing levels adjust for inflation metrics?
Speaker 5: So if you know majority of the contracts what we have does have a Cola class and if it does not have a Cola class it's already factored as a part of the three year pricing you know from that perspective so that has been always there and that's what you have seen over the years because inflation was always there and two factors which is Cola as well as some of the productivity what we are able to drive that offset some of the pressure what we see from the wage.
Speaker 4: I also want to mention one more thing, Punit, that while you focus on Kola and productivity with Sanjay, I think what is more exciting beyond all of this for us is this trend of our pipeline itself, one. And the fact that if you look at the results of the company and the number of logos added in the last three or four years and the last few quarters actually, are so exciting and so robust. And so many new large, high potential clients being added.
Speaker 4: that as they add more and more processes our ability to have these discussions around better pricing, around adjustment on co-lossings like that actually remains much higher as opposed to being dependent only on the old set of plans that we may have focused on a few years ago. So the big difference between WNS of old and WNS of new is the fact that a lot of the new revenue is now being generated from these new clients being added to the new
Speaker 15: your line of smell open.
Speaker 6: Hey, thanks. Congrats on strong results. Just a couple of follow-up kind of questions on regarding the numbers. Did you disclose the portion of non-recurring revenues that kind of contributed to revenues this quarter? That kind of contributed to revenues this quarter?
Speaker 5: It was $200,000 for this quarter.
Speaker 16: Okay, and I'm assuming none of that is factored in guidance for the rest of the year, right?
Speaker 16: Yeah, we have not factored any uncommitted short term revenue or non-recurring where we don't have visibility into the guidance. Okay, understood. And then just to understand the guidance, right? So you up to the lower end and higher end of your guidance by about 300 bits.
Speaker 16: 200 bits of M&A, so you really raised the organics by about 100 bits, right? Yes.
Speaker 16: Okay, and then finally, can you talk a bit about some of the synergies from the VRM acquisition that you're kind of that we can expect down the road? What's attractive in terms of verticals, client base, etc.? Thanks!
Speaker 5: Yeah, the Burem acquisition is actually a more than synergistic risk, extremely complementary to our business. And given the aggressive adoption of low-code, no-code platforms within the banking financial services industry, the insurance industry and the healthcare industry, which are again three of our prioritized verticals as we progress, and given a number of the new deals the need for committing to productivity is increasing significantly.
Speaker 5: Wurm is going to actually help in delivering that level heightened levels of productivity B in terms of clients that were actually splitting processes and the hyper automation side of the business that is now coming going to be a focused market for us because that will actually be integrated to what we do and Thirdly there are a number of clients that exist within both sides of the fence that can be tapped into now
Speaker 3: Yeah, I would just, I would add to the Gotham's common motion that at the end of the day, there were pieces of new business that we were missing out on because we did not have this capability in house. And there were other pieces of business that we've won where we actually had the partner for this capability. So kind of similar to what we did with Denali in the high end of procurement, this asset actually fits really nicely within our existing capabilities as completely complimentary as Gotham mentioned.
Speaker 3: And we think helps us with a value proposition that is differentiated from what we were able to carry to market previously. Here the conditions negative impacts on the economy of the industry. And these ollings have agree to the misuse of the stock market and that, on the market from the English market for the first time the rent margins of the Shield quality recommended to be differentiated from what we were able to carry to market previously. you
Speaker 16: And it's been a while since you did an M&A or an acquisition. So I'm assuming you've been kind of sitting on this and kind of doing your due diligence for a while. I'm assuming you've been kind of sitting on this and kind of doing your due diligence for a while.
Speaker 3: Yeah, absolutely. I think the process that we follow in terms of evaluating opportunities has remained unchanged. Last time we did a deal, we did two deals within the same quarter. So I think the process remains the same. We want to be diligent. We want to be consistent in our approach and the things that we think work for us. And this clearly fits those objectives. And this clearly fits those objectives.
Speaker 16: All right, and then final point on the pipeline. You're talking about strong numbers, strong deal flow. Is there any way to kind of qualify what you're seeing out there? Are we up 10%, 20% in terms of deal flow? Anything on that front will be helpful. Thanks a lot.
Speaker 3: Yeah, it's really hard to quantify or to qualify Moshe. I think overall we're just pleased relative to the company's growth rate in the overall growth and trajectory of the pipeline. And I think it's just safe to put it that way.
Speaker 5: They are just so out to what Dave mentioned.
Speaker 5: The bigger changes, we're seeing a lot more large deals coming into the hopper. Previously, a lot of the deals, the clients were staggering the ramp. But now what we are seeing is the clients want to ramp up aggressively.
Speaker 6: on the steps.
Speaker 17: Thanks, Moshe.
Speaker 18: Thank you.
Speaker 18: At this time, we have no further questions in the queue. This will conclude today's conference call. Thank you for participating. You may now disconnect.
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