Q1 2024 WNS Holdings Ltd Earnings Call

Good morning and welcome to the WNS Holdings fiscal 2024 first quarter earnings conference call. At this time, all participants are in listen only mode. After management's prepared remarks.

We will conduct a question and answer session and instructions for how to ask a question will follow at that time. As a reminder, this call is being recorded for replay purposes. Now I would like to turn your call over to David Mackey, WNS's Executive Director of the National Institute of National Health Services.

of finance and head of investor relations. Please go ahead.

Thank you and welcome to our fiscal 2024 first quarter earnings call. With me today on the call, I have WNS's CEO , Keshav Muragesh, and WNS's CFO , Sanjay Puriya.

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.

Today's remarks will focus on the results for the fiscal first quarter ended June 30th, 2023.

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.

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.

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.

Some of the non-GAAP financial measures management will discuss are defined as follows.

Net revenue is defined as revenue less

Adjusted operating margin is defined as operating margin excluding amortization of intangible assets, share-based compensation, acquisition related expenses or benefits, and goodwill impairment.

A just and net income, or ANI, is defined as profit, excluding amortization of intangible assets, share-based compensation, acquisition-related expenses or benefits, goodwill impairment, and all associated taxes.

These terms will be used throughout today's call. I would now like to turn the call over to WNS's CEO , Keshav Muragesh. Keshav? Hi, I'm Keshav Muragesh.

Thank you, David, and good morning, everyone.

In the first quarter, WNS continued to deliver healthy financial results and position our business for long term success.

Despite the challenging macro environment, WNS posted Q1 net revenue of $317.5 million.

representing a year-over-year increase of 15.5% on a reported basis.

and 17.5% constant currency.

Sequentially, net revenue increased by 4.1% on a reported basis and 3.6% on a constant currency basis after adjusting for foreign exchange.

Our acquisitions added approximately 6% to year-over-year growth and had no impact sequentially. In the first quarter, W&S added six new logos and expanded 36 existing relationships.

Sanjay will provide further details on our first quarter financial performance in his prepared remarks.

Today, the advance of generative AI and its potential impacts on business and society are being discussed and debated globally.

The growth in the size and sophistication of large language models is a significant technological advance that will have meaningful and wide-ranging impacts.

But there is still much to be learned in the coming months and years about its costs.

benefits, risks, and applicability.

That being said, WNS is extremely excited about the opportunities Gen AI will create for our business moving forward.

as we work to create new and innovative use cases for Gen AI.

It is important to remember that GenAI is a tool that represents only one component of an impactful solution.

Leveraging the benefits from this and other technologies will require the expertise of firms like W&S who can combine deep domain and process expertise, advanced analytics and global challenge to deliver business outcomes.

In fact, we believe that meaningful disruptions to our client's models

such as technology advancements, help drive increased opportunities for BPM providers, including expanding the addressable market.

growing existing relationships and accelerating adoption.

Over the past 15 years, we have seen several disruptive forces impact our clients' business such as macro cost pressure, the internet, the cloud, the emergence of big data, digitization and automation, as well as the COVID pandemic.

Each of these themes has now proven to generate increased adoption of new services and process outsourcing.

In addition, we also see Gen AI as a catalyst for driving higher value services solutions as well as engagement models.

We believe that Gen AI will enable WNS to continue moving our relationships up the value chain and shift engagements from headcount-based pricing to models based on ownership and accountability for results. Gen AI will enable WNS to continue moving our relationships up the value chain and shift

As a result, we will be able to better align relationship objectives, delivering great outcomes for clients, and stickier revenues with increased margin opportunities for WNS.

As we are seeing already, one undisputable impact from Gen AI will be improvements in productivity.

Similar to other disruptive technologies, we understand that this will reduce the reliance on some existing skills, enhance the performance of others, and result in the creation of completely new roles. For VPN providers, committed year-over-year productivity improvements are business as usual.

At WNS, our experience demonstrates that increased productivity headwinds driven by technology and automation have been more than offset by relationship scope expansion and the ability to attract new clients.

This is due to the under-penetrated nature of both our industry and the majority of our client engagements, as well as the need for clients to increasingly leverage new technologies to remain competitive.

As a result, despite market fears to the contrary,

Technology advancements have proven to generate net outsourcing gains for BPM providers.

With this backdrop, I want to provide you with a look at WNS's current approach and capabilities with respect to generative AI.

Over the past 10 plus years, WNS has demonstrated a unique ability to leverage our culture of innovation, flexibility, and client centricity to adapt and flourish. We've been able to successfully manage several key industry changes and challenges.

including Brexit, SMAC, digital, and COVID, while delivering industry-leading growth and margins for the company and co-creating differentiated solutions for all our clients.

We believe that with respect to Gen AI, innovation and adaptability will be important requirements for success.

In addition, WS has also the foundational skills necessary to help our clients leverage the capabilities of GenAi.

Our internal investments and strategic acquisitions over the past several years in technology, data and analytics, as well as domain expertise have positioned W&S to meet our clients' evolving requirements. And today, we have approximately 5,000 people in the company.

with data, AI and Gen AI skills. And another 1000 plus people with the core skill sets to be rapidly trained and up-skilled for growth.

These include analysts.

engineers, scientists, developers, and architects with skills across data, AI, cloud, enterprise, and UI and UX.

In terms of solution development, WNS has already embedded Gen AI capabilities into seven of our existing digital assets which are now enabled and ready to go.

In addition, we currently have more than 75 Gen AI use cases in various stages of development across horizontals as well as verticals, of which nine are currently built, demoed, and ready for deployment.

For example, in the healthcare space, we have combined our deep industry knowledge with Gen AI to create a medical summarization solution which can summarize, analyze, and synthesize complex clinical as well as medical records.

By leveraging Gen AI to process diverse data sets, including patient history, lab results, medical codes, and treatment plans, we can make a difference.

WNS is able to help healthcare payers and providers access critical information rapidly, improve decision making and drive better patient outcomes.

Most importantly, we continue to believe that our decades-long focus on domain first.

remains our key differentiator, and that industry knowledge will be the most important enabler to leveraging generative AI.

Our role as a domain-centric partner provides us with unmatched visibility and knowledge of industry-specific processes, data, and operations across a large number of clients.

Since domain expertise is critical to data sourcing and selection, model training, and utilizing large language models to create new solutions, we feel W&F is uniquely qualified to help our clients leverage Gen AI to solve industry problems as well as drive challenges.

Great outcomes for them.

So to summarize, we believe that AI and Gen AI create more opportunity than threat for our business and that WNS is best embracing and well positioned to take advantage of this technological advancement.

With respect to our full year outlook, companies appear to be slightly more cautious about a sustained macro slowdown. As a result, we are seeing defensive behaviours from some clients.

such as reduced volume projections and delays in decision making. To date, this has not impacted our revenues and we believe the volume projections they are providing are conservative.

Despite these challenges, we continue to expect low to mid-double-digit revenue growth and stable industry-leading margins for this year.

WNS's new business pipeline remains extremely strong. The company is executing well and we continue to invest in domain, technology and talent in order to drive long-term sustainable value for all of our key stakeholders.

I would now like to turn the call over really to CFO Sanjay Purya to further discuss our results and outlook. Over to you Sanjay. Thank you.music playing

Thank you, Keshav.

Sequential net revenue increased by 4.1 percent on a reported basis and 3.6 percent on cost and currency basis.

Acquisitions contributed approximately 6% to year-over-year revenue growth and had no impact versus last quarter.

Our sequential revenue growth was driven by broad-based momentum with both new and existing line and favorable collective movements.

This benefit was partially offset by the impact of contractual productivity commitments to contribute to the upfronthend course focused on a significant faculty.

In the first quarter, WLS recorded $2.6 million of high-margin short-term revenue.

Adjusted operating margin in quarter 1 was 21% as compared to 21.1% reported in the same quarter of the year 2023 and 20.6% last quarter.

Here over here adjusted operating margin decreased slightly as headwinds from annual wage increases and return to office costs were largely offset by operating leverage on higher volumes and favorable capacity movements. The operating margin increased as a result of higher volumes.

favorable currency impact, including the FX losses on our monetary assets and liabilities deterred in order to cope and high margin short term revenue.

This benefit was partially offset by wage increases and higher return to office costs.

The company's net other income expense was 2 million dollars of net expense in the first module.

$2 million of net income reported in Q1 of fiscal 2023 and $4 million of net expense last quarter.

Here over here, net interest expense increased driven by higher debt levels, new operating yields and lower cash balances resulting from acquisitions and share repurchase.

This has been partially offset by higher interest rates and interest income on tax reports.

Sequentially, the unfavorable variance was the result of reduced benefit from interest income on tax reports.

Lower average cash balances and additional interest expense stemming from $40.2 million of short-term debt taken in Ottawa.

WNS's effective tax rate for quarter one came in at 21.8%, up from 21.1% last year, and up from 15.8% last quarter.

Both ear over ear and sequentially.

Changes in our effective tax rate are largely the result of shifts in our geographical profit rates.

changes to the mix of work delivered from tax incentive facilities.

Sequentially, the tax rate also increased as a result of a one-time tax accounting benefit of $1.7 billion in quarter-score of last year.

The company's Existed Net Income for Quarter 1 was $50.6 million, compared with $45.9 million in the same quarter of fiscal 2023 and $52.4 million last quarter.

Adjusted diluted earnings were $1.01 per share in quarter one versus 90 cents in the first quarter of last year and $1.04 last quarter.

As of June 20, 2023, WLS balances in cash and investments totaled $242.6 million.

and the company had 206.2 million dollars in debt. Included in this debt amount is 40.2 million dollars borrowed for general corporate purposes against our lack of credit during the quarter.

In quarter one, WNS generated $19.5 billion of cash from operating activities.

incurred $17.8 million in capital expenditure and made scheduled debt repayments of $10.6 million.

The company also repurchased 1.1 million shares of stock at an average price of $77.84.

which impacted auto-work cash by $85.6 million.

DSO in the first quarter came in at 34 days as compared to 29 days reported in quarter one of last year and 32 days last quarter.

With respect to other key operating metrics, total headcount at the end of the quarter was 59,871 and our attrition rate in the first quarter was 32% as compared to 49% reported in quarter one of last year and 40% in the previous quarter.

In the quarter, attrition for entry level, voice based,

In the quarter, attrition for entry level voice based CX services reduced significantly.

We expect attrition will normalize over time in the low to mid 30% range but could continue to be volatile quarter to quarter in the current labor environment. The rate of the increased street capacity at the end of the quarter 1 increased to 38,945.

And WLS continued our progress towards in-person operations, averaging 65% work from office during the quarter.

In our press release issued earlier today, WNS provided our revised full year guidance for fiscal 2024.

Based on the company's current visibility levels, we expect net revenue to be in the range of $1,296,000,000 to $1,354,000,000 to $1,354,000,000 to $1,8

Representing your overdrive rose of 12% to 17% on a reported basis and 11% to 16% on the past 26 years.

Our acquisitions are expected to contribute 3% inorganic growth in fiscal 2024. We currently have 92% visibility to the midpoint of the range.

Top line projections assumed and British count to US dollar and average exchange rate of 1.27 for the remainder of the fiscal year.

Our revised revenue guidance includes a headway of approximately 1% for reduced volume projections from certain clients.

As K.M. mentioned, we have not seen these reductions materialized to date, but in a week at uncertain macro, it is not surprising that clients are being conservative relative to their future wallet commitments.

We have incorporated this lower estimate into our guidance.

Consistent with the company's visibility-based approach.

Full year's adjusted net income for fiscal 2024 is expected to be in the range of $211 million to $223 million based on a 82 rupee to US dollar exchange rate for the remainder of fiscal 2024.

This implies adjusted GPS of $4.21 to $4.45 assuming a diluted share count of approximately 15.1 million shares.

The midpoint of guidance represents more than 12% growth in EPS. With respect to capital expenditures, WNS currently expects our requirement for fiscal 2024 to be up to $60 million. I would also like to mention that beginning this quarter, the

WNS has changed our segment for financial reporting purposes to align with our new SBU structure.

You will now see revenue and margin contribution by SBU in our company MatrixFi and relevant SEC filings.

We will now open the call for questions. Operator. Ladies and gentlemen, if you wish to ask a question at this time, please press star 1 1 on your touch telephone and wait for your name to be announced. If your question has been answered or you wish to remove yourself from the queue, please press star 1.

please press star 11 again. In the interest of time and to enable everyone on the call to participate, please limit your queries to one question and one follow-up.

Please stand by while we compile the Q&A roster. The first question comes from Brian Bergen with TD Cohen. Your line is open. Hi. Thank you. One second please.

I wanted to start on demand and the growth outlook here. So understand that your actual volumes have not been impacted yet, but can you give us some more color on the industries that are providing the more conservative forward volume projections? Also, how broad-based is the slower decision-making comment? Anything more you can say on that.

Sure, let me take a first cut at that, Brian , and Keshav and Sanjay can contribute here. When you look at where we're seeing the volume slowdowns, I think in terms of the commitments from clients, it's the places you would expect. So we are seeing it in the OTA travel space. We're seeing it in high tech.

We're seeing it in shipping and logistics. This is a very similar pattern to what we saw during the pandemic in terms of conservativism. Obviously, the way our contracts are structured, clients have a pretty significant incentive to be conservative in that, if they give us projections.

they're not able to meet those projections. They're on the hook for paying for resources. So I think this is just a function of the environment. Certainly, you know, we would prefer that these commitments be stable to increasing in nature, but given the macro, it's not surprising. In terms of the demand environment, I think overall the demand environment remains extremely healthy. We just wanted to call out here.

Yeah, I just add that you know, we are actually

continuing to see a very healthy pipeline, as I called out earlier, Brian , one. Second thing is we're seeing lots of new deals getting added to that pipeline. And as Dave said, because of all the current macros, maybe one or two delayed decision, cycles taking place with the clients.

And more importantly, we are seeing a lot of conservatism in terms of people providing volume projections. But the core is people, clients are flying up and down, interacting with us across the globe, our people are flying around and interacting with them in a space never seen before. And overall, I am quite happy about the quality of the pipeline and the fact that in this macro.

While transformation continues to be very, very important, we also think now that people are starting to look at the cost-saving initiatives as well, which is also adding to this pipeline. So, remember when we went into the first quarter also, we saw similar trends.

But the quarter actually has delivered far better than our earlier anticipation.

Obviously, it's very early with all of this, but how are clients viewing W&S as a partner in this type of work, and what types of investments do you need to scale? So I hear you on the solution development you've made internally. I'm just curious what the nature is on those external client conversations. And then on the investments, do you see this as an opportunity to lean in incrementally on capability investment, or is this just more so?

first of all in terms of domain, in terms of technology transformation, as well as analytics over the years that have led the way in terms of their own transform models over a period of time. So I think the comfort that we are operating as an extension of their enterprises and therefore we can lead them in unknown areas.

you know, around generative AI proactively is a big, big converting factor. That's the first thing I must tell you. In many of my conversations with clients, I'm also realizing that a number of them are wondering why there is so much hype on this particular area, right? And the reason for that is because they say, yo.

You guys have led us through all the other disruptions that we have seen across the years. We are super confident that you will lead us through this one as well. And it is not that any of them want to dramatically change their models overnight because there is a generative AI kind of outlook out there in the market space. What they are looking for is only comfort that our partners understand the space.

can integrate it quickly as the space evolves and can help us in terms of faster go to market, higher productivity, all the other good things. So from that point of view, we are very comfortable. We spoke about a lot of initiatives that we're driving in house and some of...

BPM space, right? And therefore we'll have to watch this space because we are excited. We will keep making announcements around things that we're doing, but it's going to be in a very measured manner. And it will be all around, not only helping every one of our clients, you know, with the opportunity around generative AI, but also getting after new areas that we think are now getting opened up as a result of our investments in this space.

And maybe I'll just add over there that specifically there will be certain acceleration of the investments in the Gen. AI as well as the AI area of what Aishwarya spoke about. So this is a time not to shy away but leading those investments from the need of our perspective. And accordingly maybe I'll start saying quarter two.

a margin to be a little bit lighter than order one, compared specifically along with some of the return to office and some of the short-term revenue in the high-margin market. Just to add to that, Brian , just to give some folks some color about what we're seeing in terms of activity levels and inbound.

questions from our customers. We are currently in discussions with more than 20 of our clients about specific Gen AI use cases. And at this point in time, we have secured commitments from three of those clients to implement those use cases.

We are seeing people come to us, as Keshav mentioned, to help them with this journey, to understand what it means for them, and I think we're in a great position to be able to lead them through this journey.

are seeing people come to us as Keshav mentioned to help them with this journey to understand what it means for them and and I think we're in a great position to be able to lead them through this journey. Okay, thank you very much.

Please stand by for the next question. The next question comes from Ashwin Sherbaker with CIDI. Your line is open. Thank you. Thank you, good day, and congratulations on the quarter.

I wanted to ask about the new organization structure implemented at the beginning of April .

beginning to see the benefits that you expected or is it too early? I mean in terms of just looking at growth profile, looking at demand, looking at responsiveness, what metrics are you using and any kind of early update that you can.

well has been accepted very well and we can see that you know as far as the forest views are concerned the impact with clients actually has already started being very positive because now there is much more focus on a global footprint of you know every client since is now handled globally

and therefore we're seeing some larger global deals enter as a result of this organization structure. Similarly, we're also seeing leadership pipeline inside the company obviously increasing because you're having an end to end, P&L responsibilities with four senior leaders inside the company. That obviously generates a...

you know, a different kind of behavior, including a lot more aggression in terms of focusing on their specific area. At the same time, the clamor for investments within each of those SPU structures, you know, in some of the areas that we have traditionally invested in, but also all these new areas including the need for, you know, stuck in kind of M&A, you know, and capital allocation is also...

pipeline, much better understanding of client's needs in a transformative market, and finally a much deeper understanding of how to invest and maintain and grow margins in a very transformative macro.

Got it got it. That's good. That's good to know. The 2nd question is. As I look at the. Updated outflow can be updated. Visibility number, you know, I'm trying to see what change and on the. Positive side is.

there's FX, there's 1QB, there's the continued, seeming continued strength in terms of flow through from signed deals. On the negative side, you've already reflected the lower visibility. Are there other factors that perhaps I'm missing? Maybe at a...

segment level, like I see the BFSI strength, for example. Any overall color in terms of additional points we should be thinking of? No, I think I should be able to learn a little bit more specific points, whatever is there.

Other than just what to highlight, this visibility, I just want to remind that also factors based on certain of the short-term revenue, based on certain acquisitions, what we have done, but with a very high growth opportunity over there. And that itself, you have a couple of percentage points.

impact on the visibility, right, but still it has gone from 88 to 92 percent. And just wanted to remind that this does not still include the short-term revenue where we don't have a visibility as we go forward. Yeah, so I think to Sanjay's point, Ashwin, this is pretty much business as usual for us. I think if you were to look at kind of what's really changed from

from a couple of months ago when we provided guidance. We obviously had revenue come in stronger for Q1, which is a positive. And the only other thing that's changed is we faked in that 1 percent headwind from the lower volume forecast that we've received from clients. Again, I think

Those will hopefully prove to be conservative in nature, but other than that, this is business as usual for us. Got it. Okay. Thank you.

Please stand by for the next question.

The next question comes from Sam Salbas with Needham & Company. Your line is open.

Great, thanks. Hey guys, I'm on for my own today. Thanks for taking the questions here. I just wanted to ask about those new logo wins, the sixth, this quarter. Could you guys talk a little bit more about those in terms of the size, scale, and what verticals those were?

Sure, I can take that. We usually don't discuss the size, but I think when you look at the six new logos, one of them is what I would consider to be transformational in terms of the size and capability to become a top 10 customer. So very excited about.

about that specific opportunity, with respect to the areas where they are again, kind of reflective of our overall business. So the six logos, we've got two in banking and financial services, we've got one in travel, we've got one in insurance, we've got one in retail manufacturing, and we've got one in healthcare. So again,

6 logos spread across five different verticals. You know, I would say three of them good in size with one of them with the potential to be a very meaningful contributor to the company over the next two to three years. Got it. That's helpful. Thanks for that. And then just quick follow up.

Are you guys seeing any difference in terms of demand between your larger versus smaller customers over the past few months? So I'll take that. Frankly, like I mentioned earlier.

We are seeing, you know, we're continuing to see excellent conversations with, you know, everyone of the clients and prospects that we have. We're continuing to see a lot of travel up and down in terms of, you know, what is the art of the possible.

in terms of clients transformation agenda and how the business can help them. And the pipeline continues to be healthy and continues to fill up extremely well. And as I mentioned, in addition to the transformation agenda, we're starting to see also people wanting to look at now the cost saving agenda as well. All of, we actually think it should be positive for us.

The only change that we're saying is clients not wanting to commit volumes and get committed at this point. And I think that's much more to do with they're trying to figure out how this whole macro is gonna play out, what's gonna happen, the inflation and therefore, in fact, in their own businesses. But the green suits there also, is that in a lot of few weeks.

We have seen that countries have started announcing better control over inflation. And I saw that the UK also announced better numbers on inflation yesterday or day before. So we are expecting that we will have to refine this law clear once again positively for the sector. But generally I think the sector is...

Very much insulated from all of the issues that this point and right now it's much more of a projection issue from a customer's market. Let's follow. Yeah, and I just want to reiterate to to Keisha's point when you look at the first quarter performance on a constant currency basis six of our eight verticals grew it over 20%.

And of the two that didn't, one is healthcare where we had the significant ramp down of a large process. So, Takedia's point, what we're seeing is that the demand for our services is healthy and broad-based. You'll see a very similar profile. If you look at this by geography and by service level as well. Yep.

Okay, awesome, that's helpful. Thanks guys, nice to be here. Thanks Sam. Thank you.

Please stand by for the next question. The next question comes from Puneet Jane with JP Morgan. Your line is open. Hey, thanks for taking my question. A quick question on Jen.

result and increased outsourcing by clients.

Actually the combination of both but see for them to make changes on existing is going to take some time right. I think all they're doing there is getting comfort around the fact that you know how we can leave them in some of those areas and what benefit will be.

available to them and you know, I'm how what are the process for getting that done. But I think some of these conversations also emerging and the you know, POC has been discussed are also around new opportunity areas, which I think is very, very exciting from our point of view.

See, the thing I want to mention is that, you know, this obviously is something that everyone is looking at as, you know, one of the biggest democratization forces on planet Earth for the future. So everyone wants to be, you know, on this journey, wants to have a solid partner, you know, whom their trust and who works, as I keep saying, as an extension of their enterprise.

to help them get there. And I'm also looking for new proactive ideas for people like us in terms of at 75% area, which is under penetrated where we actually believe that they can start models using some of these technologies to go after areas that they have kept insulated from the industry for some time. So that's how it is emerging.

So let's wait and watch the space, but from our point of view, it is helping our clients understand that in some of the current engagements, we will actually introduce some of it and how we would share the benefits of it and how we would then take it into other new processes and how we will move the model to a completely outcome based or a different model as a result of which.

they are only focused on the outcomes and let's or how we do it. Got it. And then for this quarter in your revenue breakdown, it seems like North America was softer than other regions.

Can you talk about what you expect there, specifically given that there was like a large insurance client that was ramping up in North America or is expected to ramp up in North America?

Yeah, you know, maybe a political thing. You know, it was softer because if you recall that, you know, there was a one large case process and not, and it was one of the reasons because it was not like a time. But having said that, you know, on the insurance side as well as as Dave.

spoke about it, the growth has been across. You see all the verticals, which is more than 20% growth over there. So we believe as we move forward, the growth is going to be widespread across including North America.

And is that healthcare client like that headwind from that is that completely in numbers? But now it's supposed to be a headwind on sequential basis going forward.

Now at this stage you know it is already completely done you know I have just been for what

Got it. Thank you. Thank you.

Please stand by for the next question. Next question comes from Vincent Collaquia with Barrington Researcher. Line is open.

Yes, Casey. I can see the generative AI being a, you know, creating a bigger opportunity over time. But in the near term, if I'm going to client choose, I've got to have some confusion about, you know, how to invest my dollars if gender to AI is going to provide all these new opportunities.

So I'm curious if, you know, is this impacting sales cycles or, you know, just client interest in moving forward with the certain projects?

So, generally, we are at this point in time, is a hot topic of discussion. Having most of the building comfort around, you know, how we are going to help them prepare for the journey. And in many cases, we are proactively discussing many pilots with all of them in some of our existing processes as well.

Right? Understanding fully when that is how you build trust with clients. You know that you go proactively, you sometimes cannibalize a little bit of your revenue to do it, but also go after larger.

spaces inside the environment. So today is a lot more about discussion and proving the concept with them in many areas because just in depending on the process and the sector, there is still a lot that they need to get comfortable with as clients as well. You know, Venturatoria is a deployable, but you know.

Helping the dry, higher productivity gains, reducing the cost is frankly a no-brainer and we can actually go into that. And that's what they were talking about, when he spoke about some of the pilots, the 20 clients, the active discussions, all of that kind of stuff. But longer term, I think what is gonna happen is, these generated AI solutions are gonna get integrated into the core of dub illness, right? And so as we have any interaction with a client,

It is going to be all about a Gen AI driven kind of a solution, which allows us to take an end to end view of the process and take that out. And as a result of which, clients will obviously see significant change in terms of say efficiency, productivity or whatever. But from our point of view also, because a lot of it could also be reusable.

The ability for us to use it to go up to larger pieces of business and at the same time dramatically over a period of time increase our margin impact also is high. So I think this is an emerging space. It is, you know, it is today a situation where we are giving comfort to our clients.

improving the concepts and then slowly making the announcements to the market also about how we will deal with some of these things. And then quick follow up on your acquisitions of Verum Smart Cuban OptiBuy. Is there any meaningful?

performing as expected they're being successfully integrated into the company's operations so I would just say at this point in time the acquisitions are doing exactly what they thought they'd do. I just had one point you know at the time we did some of those acquisitions generally it was not such a hot topic and today they are now these are some of these acquisitions are the same.

The next question comes from Dave Conning with Baird. Your line is now open. Yeah. Hey, guys. Thanks so much. And I guess one observation, I mean, your sequential growth in Q1 was actually far better than normal Q1. So, I mean, just great momentum there, I guess, relative to even normal.

Does that mean Q2 might be a little slower than normal sequential progression? And you gave a little comment about some of the delayed cycles and employees were kind of flattered. So it looks like you're preparing for just a little slower growth than normal after a really good quarter. Is that all a fair way to think about it? Yeah, you know, at this stage, you know, I think provided the guidance based on the visibility.

It does not factor some of the four cars which the line has not come in to. Yes, and then exactly what is on quarter one. When we entered quarter one, it was a similar situation, but as volume is in the flow, the oil type keep on coming up. Have you any of the money?

So, we have to just wait and watch. Also, just wanted to add over there which was factored by this earlier. And then the condition of over and the exercise from an answer to the show, you know, that was already part of the product.

Yeah, I think Dave to Sunji's point, when we look at the sequential numbers, we've obviously expecting a more modest growth rate as compared to what we saw sequentially from Q4 to Q1. That being said, we significantly outperformed what our expectations were for Q1. And I think some of this is the nature of...

numbers than you've historically seen, but less visibility to those numbers. So, our hope certainly is that as we move throughout Q2, as Sanjay mentioned, that we'll continue to build on that number, but in terms of visibility and in terms of what's baked into our guidance at this point, it does show a slowed down in the growth rate sequentially from Q4.

Yeah, yeah, that that all makes sense. And then just follow up in the new segment guidance. First of all, some cool new industry acronyms. So those are kind of interesting, I like it. But then also there's a new line called less reconciling items that used to be kind of two to three million a quarter, kind of going back many quarter, like for a lot of quarters.

line what is in there because if you look at if you look at kind of how the SBUs are laid out now in addition to kind of the normal you know eight verticals that we would talk about right travel shipping and logistics health care we also have procurement that's broken out separately because it's run as a separate business. So these reconciling items on the revenue line are really two things.

One, it's the duplicate revenue credit that comes from procurement. And the second is the FX gain and loss line. So those, because we can't specifically allocate them to an SBU, sit as a reconciling item. On the cost side, you'll see that same procurement duplicate revenue credit go up with the cost. The second piece that shows up in the cost unallocated is unallocated facility costs, so seats that aren't being used.

Please stand by for the next question.

The next question comes from Maggie Nolan with William Blair. Your line is open. Your line is open.

Thank you so much and congrats on the results. I wanted to ask you what have past technology waves meant for your value proposition as a company? Okay, that's a great question Maggie. So, I think what it has done is it has kept it Anita.

enhancing the impact of our domain specialism and our core differentiator that we have always spoken about to clients. So every time there was a change in technology, the fact that clients were working with people who understood the core of their business first.

And then integrated, you know, these technologies to deliver higher value proposition in terms of impact, efficiency cost, and other things actually has been really, you know, the core. So I would say for us, it's essentially the fact that, you know, it has enhanced...

the our capability are on domain and the fact that people now realize how important domain is in this business while you should expect the technology will keep changing and will only keep getting enhanced and better across. Yeah and I think from a business perspective, Maggi, we've spoken about it to the most of you folks and most

like AI, like machine learning, have accelerated that productivity that we provide to clients into the three to 4% range. So we know that when we leverage technology, some of that benefit is gonna go back to the client. But we've also seen, and in case you've spoke about it in his prepared remarks, is that what this does is it opens up new areas for us to get into, both within existing clients, as well as the pressure to drive new clients to look at outsourcing.

So while we know that these technologies will create some additional headwinds from a productivity perspective, we also know and have seen consistently that what it does is drive increased demand. And that's why when you look at our business, despite the fact that productivity improvements have been increasing, we've been delivering progressively higher growth rates.

the face of those higher headwinds. Yeah, I think that is more underlined in the last statement Dave, you know the fact that if you look at our results over the past few years when technology kept getting unleashed and introduced and we kept absorbing it, our revenues actually grew from single digit numbers to...

and the fact that 75% of this industry is still not penetrated is I think the biggest opportunity coming from this new paradigm.

Thank you, that's great to hear. And then for my follow-up, you mentioned travel seeing some conservatism. Can you just kind of walk us through what you think travel can do this year? Can it return kind of closer to pre-pandemic levels or how is your outlook specifically for that vertical?

Yeah, okay, you want to go ahead Sanjay? Go ahead. So you know from a world travel perspective, definitely you know at this stage if you see the travel industry still may come back at 90% of the pre-pandemic level. But from a WNS perspective you will see that you know significantly we have...

60% of the pre-pandemic and that's where we believe that there's an opportunity of volume. And from the other side, we still believe one and a half percent to two percent, that upside potential is there at the bottom of the line. Yeah, and that being said, the travel business, as Sanjay mentioned, is extremely healthy today. I mean, if you look at our first quarter performance, we grew.

8% sequentially, we've grown 18% on a year over year basis. Our travel revenues now are well above where they were pre-pandemic as a company. But to Sanjay's point, we still do have roughly a dozen clients and they're mostly in the international and the business travel areas for the airlines. We have about a dozen clients that are still running below pre-pandemic levels and the...

call. Thank you for your participation. You may now disconnect.