Q4 2024 WNS (Holdings) Ltd Earnings Call
Yes.
[music].
Operator: Good morning, and welcome to the WNS Holdings Fiscal 2024 Fourth Quarter and Four Year Earnings Conference Call. At this time, all participants are in a listen-only mode.
Speaker Change: Good morning, and walk them through the WNS Holdings' fiscal 'twenty 'twenty, four fourth quarter and full year earnings conference call.
Speaker Change: At this time all participants are in a listen only mode.
Operator: After management's prepared remarks, we will conduct a question and answer session, and instructions for how to ask the question will follow at that time. As a reminder, this call is being recorded for replay purposes. Now, I would like to turn the call over to David Mackey, WNS, Executive Vice President of Finance and Head of Investor Relations. David
Speaker Change: 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.
Speaker Change: As a reminder, this call is being recorded for replay purposes.
Speaker Change: Now I would like to turn the call over to David Mackey W. N S Executive Vice President of Finance and head of Investor Relations David.
David Mackey: Thank you and welcome to our fiscal 2024 fourth quarter and full year earnings call. With me today on the call, I have WNS's CEO, Keshav Murugesh, WNS's CFO, Sanjay Puria, and our Corporate Financial Controller, Arjit Sen. A press release detailing our financial results was issued earlier today. The press release is also available on the Investor Relations section of our website at www.wns.com.
David Mackey: Thank you and welcome to our fiscal 2020 for fourth quarter and full year earnings call.
David Mackey: With me today on the call I have Wns's CEO, <unk>, <unk>, Wns's, CFO, Sanjay Puria, and our corporate financial controller, our Richardson.
David Mackey: Press release detailing our financial results was issued earlier today.
David Mackey: This release is also available on the Investor Relations section of our website at Www Dot WNS Dot com.
David Mackey: Today's remarks will focus on the results for the fiscal fourth quarter and full year ended March 31st, 2020. 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 20-F. This document is also available on the company website.
David Mackey: Today's remarks will focus on the results for the fiscal fourth quarter and full year ended March 31 2024.
David Mackey: 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.
David Mackey: Risks and uncertainties include but are not limited to those factors set forth in the company's form 20-F.
David Mackey: This document is also available on the company website.
David Mackey: 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-GEP financial measures management will discuss are defined as follows. Net revenue is defined as revenue less repair payment. Adjusted operating margin is defined as operating margin excluding amortization of intangible assets, share-based compensation, acquisition-related expenses or benefits, and impairment of goodwill and intangible assets.
David Mackey: 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.
David Mackey: Some of the non-GAAP financial measures management will discuss are defined as follows.
David Mackey: Net revenue is defined as revenue less repair payments adjust.
David Mackey: Adjusted operating margin is defined as operating margin, excluding amortization of intangible assets share based compensation acquisition related expenses or benefits and impairment of goodwill and intangible assets. We are also excluding costs related to our ABS program termination and costs associated with the <unk>.
David Mackey: We are also excluding costs related to our ADS program termination and costs associated with the transition to voluntarily reporting on U.S. domestic issues. Adjusted Net Income, or ANI, is defined as profit excluding amortization of intangible assets, share-based compensation, acquisition-related expenses or benefits, goodwill, and intangible asset impairment, ADS program termination costs, and Transition to Voluntarily Reporting on U.S. domestic issues. Domestic Issue Reforms and All Associated Taxes These terms will be used throughout today's call. I would now like to turn the call over to WNS' CEO, Keshav Murugesh. Keshav?
David Mackey: In addition to voluntarily reporting in U S domestic workforce.
David Mackey: Adjusted net income or a ni is defined as profit excluding amortization of intangible assets share based compensation acquisition related expenses or benefits goodwill and intangible asset impairment.
S program termination costs, the transition to voluntarily reporting on U S. Domestic issuer forms and all associated taxes. These terms will be used throughout today's call.
Speaker Change: I would now like to turn the call over to Wns's CEO ship murder Acacia.
Acacia: Hey, Thank you David.
Acacia: And a very good morning, everyone.
In the fiscal fourth quarter WNS business.
Speaker Change: Solid results, despite a very challenging macro environment.
Speaker Change: The company posted fourth quarter net revenues of $335 million.
Speaker Change: Representing <unk>.
Speaker Change: Year over year increase of 6.9%.
Speaker Change: On a reported basis and five 9%.
Speaker Change: Constant currency.
Keshav R. Murugesh: Hey, thank you, David, and a very good morning, everyone. In the fiscal fourth quarter, WNS's business delivered solid results despite the very challenging macro environment. The company posted fourth quarter net revenues of $325.9 million, representing a year-over-year increase of 6.9% on a reported basis and 5.9% constant current. Sequentially, net revenue increased by 3.2% on a reported basis and 2.4% on a constant currency basis.
Speaker Change: Sequentially net revenue increased by three 2% on a reported basis and two 4% on a constant currency basis.
Speaker Change: After adjusting for foreign exchange.
Speaker Change: Demand continues to be healthy for our business transformation initiatives, leveraging digital and analytics, while drive volumes and project based work.
Speaker Change: We remain pressure.
Speaker Change: During Q4, we added nine new logos and expanded 40 existing relationships.
Speaker Change: New logos include four logs technology led transformational deals.
Speaker Change: Is that expected to begin ramping towards the end of fiscal Q1.
Speaker Change: In the quarter.
Speaker Change: <unk> delivered adjusted operating margins of 22% and grew adjusted EPS by more than 8% versus last year.
Speaker Change: On March the 28, okay.
Speaker Change: The company completed the first two.
Speaker Change: Thus improving access to capital.
Speaker Change: Exchanging our aviators or ordinary shares.
Speaker Change: We are also on track.
Keshav R. Murugesh: After adjusting for foreign, demand continues to be healthy for Business Transformation Initiatives. Leveraging digital and analytics while trying volumes and project-based work remain fresh air. During Q4, we added 9 new logos and expanded 40 existing relationships. The new logos include four large technology-led transformational deals, which are expected to begin ramping towards the end of fiscal Q1. In the quarter, WNS delivered adjusted operating margins of 22% and grew adjusted EPS by more than 8% versus last year.
Speaker Change: Voluntarily shift from foreign private issuer status reporting under <unk>.
Speaker Change: Mastic filer status.
Speaker Change: Porting under U S. GAAP in the fiscal first quarter of <unk> <unk> five.
Speaker Change: These initiatives are expected to improve our ability to participate in the U S indexes and certain active investment funds.
Speaker Change: Reduce share price volatility.
Speaker Change: Despite his company specific headwinds and the weak macro in fiscal two exit rate default.
Speaker Change: WNS delivered topline growth of <unk>.
Speaker Change: 10, 5%.
Speaker Change: Driven by our differentiated domain focused strategy.
Speaker Change: <unk> maintained our industry, leading adjusted operating margins at 21, 5%.
Speaker Change: And grew our adjusted earnings per share.
Speaker Change: 13, 5%.
Other full year highlights include the implementation of our <unk>.
Speaker Change: Bu organizational structure.
Keshav R. Murugesh: On March 28th, the company completed the first step towards improving access to capital by exchanging our ADSs for ordinary shares. We are also on track to voluntarily shift from foreign private issuer status reporting under IFRS to domestic filer status.
Speaker Change: Careful integration of three acquisitions.
Speaker Change: Reduced corporate attrition.
Speaker Change: A healthy pipeline.
Speaker Change: Im good traction in large digitally led transformational deal signings.
Speaker Change: During the year WNS also continues to make the investments necessary to drive sustainable market differentiation.
Speaker Change: And help our clients.
Speaker Change: Pete in a rapidly changing world.
Speaker Change: These strategic investments are designed to enhance our capabilities across domain expertise advanced analytics and data management.
Keshav R. Murugesh: Reporting under U.S. GAAP in the fiscal first quarter of 2025. These initiatives are expected to improve our ability to participate in the U.S. indexes and certain active investment funds and reduce Share Price Volatility. Other full year highlights include the implementation of our SBU Organizational Structure. During the year, WNS also continues to make the investments necessary to drive sustainable market differentiation. In fiscal 24, we created a robust pipeline of use cases.
And cutting edge technology with a heightened focus on leveraging artificial intelligence as well as general caveat.
Speaker Change: In fiscal 'twenty, four we created a robust pipeline of use cases.
Speaker Change: Built digital assets with <unk> capabilities and successfully deployed customized solutions integrating AI and journey across multiple service offerings.
Speaker Change: All of these solutions are underpinned by deep domain expertise.
Speaker Change: And combined human intelligence and artificial intelligence to deliver business outcomes for clients that go beyond cost reduction in fact.
Speaker Change: Many of these use cases are focused on driving our clients' top line too.
Speaker Change: Two new offerings improved customer retention.
Speaker Change: And highest quality of service.
Speaker Change: During the year before strategic partnerships with AI leaders.
Keshav R. Murugesh: Integrating AI and Gen AI across multiple service offerings and verticals. Furthermore, all of these solutions are underpinned by deep domain expertise. During the year, we forged strategic partnerships with AI leaders as well as hyperscalers, including Microsoft, Azure, OpenAI, AWS, and Google, and continued to make progress in proactively hiring talent and training our global employee base on AI as well as GenAI technology. WNS is also receiving positive recognition for its AI capabilities from the analysts as well as the advisor community last month. WNS was one of only 11 companies cited for having the product.
Speaker Change: As well as Hyperscale, Inc.
Speaker Change: Including Microsoft Azure opening.
Speaker Change: AWS and Google and continue to make progress and proactively hiring talent and training our global employee base.
Speaker Change: On Gi.
Speaker Change: As well as Ginny.
Ladies.
WNS is also receiving positive recognition for our AI capabilities from the analysts as well as the advisor community and lost money.
Speaker Change: Was named a 'twenty three before artificial intelligence award winner by the business Intelligence group.
Speaker Change: WNS was one of only 11 companies.
Speaker Change: We're having the products culture and people consistently delivering innovative solutions in the gym.
Speaker Change: <unk>.
Speaker Change: While it is clear that AI and Jenny will be critical confidence of driving transformation and automation.
Speaker Change: And delivering improved outcomes. It is also important to understand that clients are proceeding cautiously with enterprise wide initiatives given the many uncertainties that exist today.
Speaker Change: Key concerns impacting clients' willingness to adopt and implement at scale.
Speaker Change: <unk> data quality and data privacy.
Keshav R. Murugesh: Technology Setup and Integration, and increase focus on driving collaboration, innovation, competitive differentiation, as well as business outcomes. Looking forward to fiscal 2025, HP is challenged by the timing of these deals and macro weakness, which continues to impact business volumes as well as project-based work. As a result, at this point in time, we expect revenue growth to be in the 0% to 5% range on an organic constant currency basis. We also expect our industry-leading margins to remain in the 21-22% range.
Underlying model bias evolving regulations and costs associated with data preparation.
Technology setup and integration.
Speaker Change: This measured approach was confirmed in the recent generic market impact to your board.
Speaker Change: <unk> Bye Wls and Hff's rich solid fitbit insights from enterprise leaders across industries and mirrors comments from the largest hyperscale.
Speaker Change: Global systems integrators and industry analysts.
Despite these challenges the company continues to believe that our ability to help clients properly leverage these technologies presents more opportunity that's correct.
Speaker Change: Today. In addition to working closely with clients on pilots proof of concepts and customized for use cases. We are also seeing AI at Jennie O improve the quantity and quality of conversations and increased focus.
Speaker Change: On driving collaboration innovation competitive differentiation as well as business outcomes.
Speaker Change: In response to this evolving opportunity and the contraction in our share price.
Keshav R. Murugesh: Given the current share price weakness, we are requesting your support as the company believes the proxy guidelines on repurchase price maximums and program duration are just not practical given our share price movement over the past year. This morning, WNS also issued a press release announcing an upcoming CFO transition. Arijit Sen, our current Corporate Financial Controller, will formally become CFO on 25th July of this year.
Speaker Change: WNS accelerated our buyback program in fiscal 'twenty for <unk>.
Speaker Change: Purchase a $3 3 million shares or almost 7% of the company's outstanding flock.
Speaker Change: Looking forward to fiscal 2025.
Speaker Change: Demand for digital transformation and cost reduction is healthy.
Speaker Change: Our new business pipeline remains robust.
WNS is extremely well positioned in several large industry specific deals.
Speaker Change: First our operating model transformation, which have the potential to materially impact our fiscal directly quantify and fiscal 'twenty 'twenty six growth rates that being said our full year visibility to date is.
Speaker Change: It's challenged by the timing of these deals and macro weakness, which continues to impact business volumes as well as project based work.
Sanjay Puria: In the fiscal fourth quarter, WNS net revenue came in at $325.9 million, up 6.9% from $305 million posted in the same quarter of last year. Year-over-year adjusted operating margins increased as a result of higher revenue, improved productivity, and favorable currency movement. These benefits were partially offset by the impact of our annual wage increases. The company's net other income expense was $2.7 million of net expense in the fourth quarter, as compared to $0.4 million of net expense reported in quarter four of fiscal 2023 and $2.8 million of net expense last quarter. Existing diluted earnings were $1.12 per share in Q4, up from $1.04 in Q4 of last year and down from $1.18 last quarter. DSO in the fourth quarter came in at 33 days.
Speaker Change: In addition, as you are aware the company announced on February the second set of large healthcare client had notified us of their intent to terminate our contract book convenience. This gas solution, which will create a headwind up three 2% to revenue growth in fiscal two regulatory.
Speaker Change: Five was driven by price changes in leadership strategy and business model.
Speaker Change: As a result at this point in time, we expect revenue growth to be in the zero to 5% range on an organic constant currency basis, which assumes no improvement in volumes our discretionary spending.
Speaker Change: Our fiscal year.
Speaker Change: We also expect our industry, leading margins to remain in the 21% to 22% range.
Speaker Change: In fiscal 'twenty five the company plans to repay repurchase up to $150 million of stock given.
Speaker Change: Given the current share price weakness.
Speaker Change: To this we will likely require shareholders, who overvalued certain proxy adviser recommendations.
Speaker Change: And to work against our.
Speaker Change: Our repurchase proposal.
Speaker Change: I wanted to clarify that we expect proxy adviser recommendations.
Speaker Change: To work against and we want you our support to work for.
Speaker Change: These recommendations.
Speaker Change: Coming Egypt planned for late May.
Speaker Change: We are requesting your support as the company believes the proxy guidelines, our repurchase price Maxim models and program duration or just not practical given our share price movement over the past year.
Speaker Change: This morning, WNS also issued a press release.
Speaker Change: One thing and upcoming CFO transition.
Speaker Change: Sanjay <unk>, who is with me today in London will be stepping down at the end of July for personal family reasons, but will remain with the company in an advisory role through the end of April directly 25.
Sanjay Puria: With respect to other key operating metrics, total headcount at the end of the quarter was 60,125, and our accretion rate in the fourth quarter was 33% as compared to 40% reported in quarter four of last year. I would now like to provide you with a brief financial summary for fiscal 2024 before discussing our outlook for the coming year. Organic revenue growth was broad-based across geographies, services, and verticals and driven by both new logo additions and existing client expansions.
Speaker Change: <unk>.
Speaker Change: Our current corporate financial controller will formally become CFO on the 21st of July of this year.
Speaker Change: <unk> has been with WNS.
Speaker Change: 15 years in progressively responsible role as acting as Sanjay right hand, and bringing both companies specific experience and BPM industry expertise to the CFO function.
Speaker Change: We will be introducing <unk> to our analysts and investors in the coming months.
Speaker Change: As a trusted partner.
Speaker Change: Trusted partner to myself and the entire organization.
Speaker Change: I would like to sincerely take this opportunity to thank Sanjay.
Speaker Change: 14, plus years of dedication leadership and contribution to our success. Thank you my friend Sanjay.
Speaker Change: And my Heartiest congratulations to USD.
Speaker Change: And with that I would now like to turn the call over to Sanjay to further discuss our results as well as outlook Sanjay.
Sanjay Puria: Margin favorability from operating leverage on higher volumes, improved productivity, and currency movements was partially offset by wage increases and return to office costs. In fiscal 2024, it let other income extend, and reduced interest income driven by lower average cash balances during the year. The company's effective tax rate for the year was 18.2%, down from 19.1% last year as a result of a $9.5 million one-time benefit from the reversal of a deferred tax liability in Order 3.
Sanjay Puria: Thank you for your kind words <unk>.
Sanjay Puria: In the fiscal fourth quarter WNS net revenue came in at 395 9 million up six 9%.
Sanjay Puria: $305 million.
Sanjay Puria: Posted in the same quarter of last year.
And up five 9% on a constant currency basis.
Sanjay Puria: Sequentially net revenue increased by three 2% on a reported basis and two 4% on a constant currency basis.
Sanjay Puria: The sequential revenue improvement was driven by healthy demand for cost reduction focused initiatives and favorable currency movements, which were partially offset by volume reductions with certain clients and continued weakness in discretionary project based revenues.
Sanjay Puria: In the fourth quarter <unk> recorded $7 million of short term high margin revenue.
Sanjay Puria: Adjusted operating margin in quarter, four was 22% as compared to 26% reported in the same quarter of fiscal 2023 and 'twenty.
Sanjay Puria: In Fiscal 2024, WNS generated Rs. 229.2 million in cash from operations. The company also repurchased 3.3 million shares of stock at a total cost of $215.3 million or $65.24 per share. WNS provided our initial full-year guidance for fiscal 2025. This implies adjusted EPS of $4.34 to $4.59, assuming a diluted share count of approximately 47.5 million shares. Please stand by while we compile the Q&A roster. But there's also, maybe some.
Sanjay Puria: 26% last quarter.
Sanjay Puria: Year over year.
Sanjay Puria: Adjusted operating margin increased as a result of higher revenue improved productivity and favorable currency movements.
Sanjay Puria: These benefits were partially offset by the impact of our annual wage increases.
Sanjay Puria: Sequentially margins expanded as a result of higher revenue improved productivity and currency favorably.
Sanjay Puria: The company's net other income expense was $2 $7 million of net expense in the fourth quarter.
Sanjay Puria: Compared to five $4 billion of net expense reported in quarter four of fiscal 2023.
And two $8 million of net expense last quarter.
Net interest expense increased due to quite $1 million of nonrecurring interest income on tax reform recorded last year.
Sanjay Puria: And the combination of higher debt levels, and lower cash balances driven primarily by our share repurchases.
Sanjay Puria: WNS effective tax rate for quarter four came in at 21, 5% as compared to 15, 8% last year and six 6% last quarter.
Keshav R. Murugesh: So certainly, the big deals do create a little bit more lumpiness, but obviously, once they do close, they create good visibility into long-term steady growth across a two to three year period. That's helpful. And then as a follow-up, there's some commentary around just clients being a bit more cautious. Is that also impacting decision making in the sense that, in our case, we've also had a specific situation with some specific clients that we spoke about, which are continuing to play out.
Sanjay Puria: Year over year, the effective tax rate increased as a result of <unk>.
Sanjay Puria: One $7 million.
Non recurring tax benefit booked in quarter four of fiscal 2023.
Sanjay Puria: Sequentially. The tax rate increase was the result of a one time tax benefit of <unk>.
Sanjay Puria: $9 $5 billion.
Sanjay Puria: Everything from the reversals.
Sanjay Puria: All of our deferred tax liability on intangibles taken in quarter three.
Sanjay Puria: Both year over year and sequentially other changes.
Sanjay Puria: Effective tax rate.
Sanjay Puria: As those of shifts in our geographical profit base.
Sanjay Puria: Changes to the mix of book delivered from tax incentive facility.
Keshav R. Murugesh: But as Dave said, the large deal pipeline, four of which more or less already have been signed during Q4, and many of which are in progress, actually is the new opportunity we're seeing irrespective of where the macros are, irrespective of what pressures clients are going through, because they all understand that with the big changes that are taking place in the world and the big changes taking place in technology and transformation and tech and ops, Gen-AI or no Gen-AI And therefore, people who have not actually dipped their toes in the model, or people who realize they have to be far more aggressive, are actually engaging very well with us, right? And I think that's the core of the discussion here.
Sanjay Puria: The company's adjusted net income for quarter, four was $54 $1 million.
Sanjay Puria: Compared with 52 $4 million in the same quarter of the bill.
Sanjay Puria: 2023 and.
Sanjay Puria: And 58 2 million.
Sanjay Puria: Last quarter.
Sanjay Puria: Adjusted diluted earnings were 1.1 to say plus share in quarter four up from $1 <unk> in the fourth quarter of last year and down from $1 18 last quarter.
Sanjay Puria: As of March 31, 2020, full WNS balances in cash and investments totaled $244 $3 million.
Sanjay Puria: And the company had.
Sanjay Puria: $179 $2 million index.
Sanjay Puria: In the fourth quarter, WNS generated $67 $6 million of cash from operating activities.
Sanjay Puria: Incurred $10 4 million in capital expenditures.
Sanjay Puria: And made debt repayments of $8 million.
Sanjay Puria: The company also repurchased one 2 million shares of stock at an average price of $59 60 to say <unk>.
Keshav R. Murugesh: On the one hand, while disruption and the macro issues cause some uncertainty, which I think will play out, it is also creating new opportunities for us. And, like I said before, in my prepared remarks, and Dave said, the size of these deals is much larger. Now, somewhere along the way, as people get comfortable with using some of these Gen-AI models and getting comfortable that WNS is the right partner to help them navigate those opportunities, Gen AI specifically.
Sanjay Puria: Impacted order for cash by $71 $5 million.
Sanjay Puria: DSO in the fourth quarter came in at all.
Sanjay Puria: Three days.
Sanjay Puria: As compared to 32 days reported in <unk> of last year, and 75 days last quarter.
Sanjay Puria: With respect to other key operating metrics.
Total headcount at the end of this quarter was 60125.
Sanjay Puria: Our attrition rate in the fourth quarter.
Sanjay Puria: 3%.
Sanjay Puria: It's not back to 40% reported in quarter four of last year.
Sanjay Puria: 29% in the previous quarter.
Sanjay Puria: We expect attrition to average in the low to mid 30% range.
Sanjay Puria: Denise will remain volatile quarter to quarter in the current level and Wyoming.
Keshav R. Murugesh: What they are looking for is business. In a year or two, that may mean productivity coming from tools and technologies like Gen AI. But they also realize that they don't have two to three years to wait to see how that entire rollout will play out.
Sanjay Puria: We will seat capacity at the end of the quarter fold increase to 41599 feet.
And doubling this at least 70% work from office during the quarter.
Speaker Change: I would now like to provide you with a brief financial summary for fiscal 2024.
Speaker Change: Before discussing our outlook for the coming year.
Keshav R. Murugesh: So, you know, clients are moving forward. But I think that the biggest issue here is the fact that clients are looking to do things that are transformational that are inherently disruptive to their business models. And that's really what's driving the length of the sales cycle, not which technology is going to be deployed to deliver those. Thank you. That's actually very helpful.
Speaker Change: Net revenue in fiscal 2020, full <unk> 1 billion and $284 million.
Speaker Change: Up 10, 5% on a reported basis and up nine 9% on a constant currency basis.
Speaker Change: Acquisitions contributed just under 3% for the company's growth rate.
Organic revenue growth was broad based across geographies.
Speaker Change: And vertical and driven by strength in both new logo additions and existing client expansion.
Revenue growth during the year was partially offset by an anvil in the health care business.
Keshav R. Murugesh: Thank you. Sure, Brian, let me take a crack at that. So, you know, I think as we look into fiscal 25, what we're seeing, Yeah, but I just want to add that while that's the state of the nation as of today, and we know, you know, uncertainty is all around us anyway, that's also creating new opportunities. And I just want to underline the fact that a number of these clients are also, therefore, moving ahead with decisions which may take time to implement but, you know, decisions on, you know, expansion in completely new areas where, maybe, in the past, they may have said, we'll hold on to some of these processes or, you know, operations ourselves.
Speaker Change: The transition of a large internet line from onsite offshore delivery.
Speaker Change: Softness in transaction volumes and macro related reduction in discretionary project work.
Speaker Change: The company's disciplined 2024, and adjusted operating margin came in at 21, 5%.
Speaker Change: Up 50 basis points versus fiscal 2023.
Speaker Change: Margin favorability from operating leverage on higher volumes improved productivity and currency mix was partially offset by wage increases as the central office costs.
Speaker Change: In fiscal 2024.
Net other income expense.
Speaker Change: Unfavorable by $11 million as a result of increased interest expense on debt.
Speaker Change: Hi, operating lease loss.
Speaker Change: And reduced interest income driven by lower average cash balances during the year.
Speaker Change: The company's effective tax rate for the year was 18, 2%.
Speaker Change: Down from 19, 1% last year.
Keshav R. Murugesh: We are also seeing that new prospects and new clients are moving aggressively in terms of wanting to, you know, get involved in much larger-scale kind of interactions with us. Again, some of these things take time to close, but, you know, what I'm delighted to say is that, in the last quarter, we actually closed four already, right? And therefore our ability to do more of that timing irrespective is high, which means this uncertainty is also creating, you know, a massive new opportunity for us that should play out well in the second half of 2026.
As a result of a $9 5 million one time benefit from the reversal of our deferred tax liability in August three.
And changes in the mix of profit by geography.
Speaker Change: And the percentage of book delivered from tax incentive facilities.
Overall, our full year adjusted diluted earnings per share improved <unk>, 5%.
Speaker Change: In that $4 <unk>.
Speaker Change: In fiscal 2020 for WNS generated 292.
Speaker Change: $2 million in cash from operations.
Speaker Change: Spanning $54 3 million on capital expenditures and may be.
Speaker Change: PMA up $97 1 million.
Speaker Change: The company also repurchased three 3 million shares of stock at a total cost of $215 3 million.
Speaker Change: $65 and 24 plus years.
Keshav R. Murugesh: Okay, understood. And I guess just given all the moving parts here, any important considerations for kind of quarterly cadence as you go through fiscal 25 on, I guess, both growth and margin? Yeah, let me take that, Brian.
Speaker Change: We ended the year with a net cash balance of 65 $1 million or approximately $1 35.
Speaker Change: Diluted share.
Speaker Change: Our global attrition rate reduced from 49% with parking lot footprint.
Speaker Change: Well from a market increase from 54% to 68% and revenue per employee expanded by more than three cluster.
Speaker Change: Our press release issued earlier today.
Speaker Change: WNS provided our initial full year guidance.
Speaker Change: 2025.
Sanjay Puria: So I think obviously, we know Q1 is typically seasonally soft for us. In addition to that, we've got volumes that continue to ramp down. So we are looking at, you know, a sequential decline in fiscal Q1, probably in the 5% range.
Speaker Change: Based on the company's current visibility levels, we expect net revenue to be in the range of $1 billion and $293 million to $1 billion and $357 million.
Speaker Change: Yes, I don't want to grow 1% to 6% on a reported basis.
Speaker Change: And zero percent of 5% on an Austin currency.
Speaker Change: As you were mentioning.
Speaker Change: This factors in non client ramp downs and reduced visibility to client volumes and discretionary projects.
Sanjay Puria: And in addition to the productivity improvements that we're giving and the headcount utilization challenges and the operating leverage issues that we're going to see in Q1, margins, you know, we're expecting to be in the 18 to 19% range. That being said, despite the large healthcare ramp down in Q2, and some of the challenges that that'll create, the expectation for us is that as we move across Q2, Q3, and Q4, we should see good steady acceleration in both the top line and the margin line.
Speaker Change: Guidance does not include short term revenues incremental revenue from a large insurance captive on an improvement in the macro environment.
Speaker Change: Topline projections assumes an average British pound to Euro dollar exchange rate of 127 for the full year.
Speaker Change: Full year adjusted net income for fiscal 2025 is expected to be in the range of $206 million to $218 million Virtanen eighty-three rupee to us dollar exchange rate.
Speaker Change: This implies adjusted EPS of $4 <unk> to.
Speaker Change: The $4 59.
Assuming a diluted share count of approximately 47 5 million shares.
Speaker Change: Excluding the 21 day or one time benefits from tax and interest income in fiscal 2024, the midpoint of guidance represents a 7% increase in adjusted EPS.
Sanjay Puria: Yeah, you know, so as we move forward, FY 25, we expect the headcount to grow. It can be volatile a little bit between the quarters, but based on, you know, the seasonality, what we spoke about in quarter one, you will see that the growth is going to be back-half loaded, and accordingly, you know, the headcount growth is going to be there as we move forward to support that growth, not only for FY 25. But also, I appreciate all the callers. Thanks.
Speaker Change: With respect to capital expenditures.
Speaker Change: <unk> currently expects our requirement for fiscal 2025 to be up to $65 million.
We'll now open the call for questions operator.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, if you wish to ask a question at this time. Please press star one on your telephone and wait to hear your name to be announced.
Speaker Change: If your question has been answered or you wish to remove yourself from the queue. Please press star one again.
Speaker Change: In the interest of time and Tonight enable everyone on the call to participate please limit your courage to one question and one follow up.
Speaker Change: Please standby, while we compile the Q&A roster.
Okay.
Surinder Singh Thind: Our first question comes from the line of surrender thing with Jefferies. Your line is open.
Surinder Singh Thind: Thank you.
Surinder Singh Thind: I'd like to start with a question about the forward guidance here.
When putting that together you talked about perhaps a healthy pipeline.
Jefferies: But there's also maybe some.
Jefferies: What I would call it sounds like increased lumpiness in terms of the pipeline with the potential for some large wins.
Can you provide a bit more color there and how that compares to maybe historical pipelines at this point.
David Mackey: Thank you. Please stand by for our next question. Sure. Let me take that one, Moshe.
Speaker Change: Sure let me take that surrender. So I think when you look at the pipeline. Its case you have mentioned in his prepared remarks.
Speaker Change: The pipeline remains extremely healthy what we have seen over the past year as a steady build and the number of large transformational deals that are in that pipeline. So so obviously, we've got a healthy amount of opportunities for small deals for client expansions, but look we are.
David Mackey: I think the short answer to the question is no change. At this point in time, we've been given about 25% of phase two. We continue to engage with the client in discussing not only the rest of the transition for phase two work but also new statements of work with that customer. So we also know that they're not going to hit their full year, five-year commitment unless they find new things for us to do.
Speaker Change: Seeing is that clients are looking for transformational kinds of solutions that span multiple towers in multiple areas of their business and those deals inherently are much larger and much more complex to deal with as a result.
Speaker Change: The sales cycle for those deals tends to be longer now again, what we're seeing is that clients are making decisions. They are moving forward as geisha mentioned, we closed four large deals in the fourth quarter alone.
David Mackey: So actively engaged with this customer in terms of how and when we can get them moving forward with the rest of the phase two work, but also actively engaged at this point in time with other streams of potential revenue for us to take, to enable us to get to where we need to be in three, four years. Just to reiterate, none of that potential is included in our guidance. As I understand it, I just want to confirm that I understand it the right way.
Speaker Change: But I think part of the opportunity as we move forward into fiscal 'twenty five and beyond.
Speaker Change: Is that we're participating in several additional very large deals where we believe the company is extremely well positioned for success.
Speaker Change: And the timing of how and when those deals close and what our success rate is on those those deals.
Speaker Change: Have a material impact on the back half of this fiscal year in fiscal 'twenty six so certainly the big deals do create a little bit more lumpiness, but obviously once they do close create a pretty good visibility into long term steady growth across our two to three year period.
Speaker Change: That's helpful and then as a follow up.
Speaker Change: There was some commentary around just clients being a bit more cautious about.
Adopting AI for a number of reasons, whether it's data quality bias regulation costs tax back.
Speaker Change: When you put all of that together and you look at kind of these big transformation deals.
David Mackey: If we normalize guide, the guide for, you know, captive and the healthcare client kind of disengagement. Okay, understood. And then final one, can you talk a bit about what you're seeing in the travel vertical in terms of volume? And then, in general, can you remind us which part of the revenue base is actually exposed to more discretionary project work? Thanks a lot.
Speaker Change: Is that also impacting the decision making in the sense that.
Speaker Change: If you think about trying to.
Speaker Change: Turning to new contracts would do workflows, our clients' hesitant to even commit.
Speaker Change: Because they're fearful that maybe.
Speaker Change: AI solutions will change a year from now or some of the types of things that theyre thinking about will be to be revisited.
Speaker Change: How does that work into the equation here in terms of the slowdown.
Speaker Change: Yes.
Speaker Change: Great question very deep questions Linda Thank you for that.
So I think the first thing I want to mention is.
Speaker Change: That.
Speaker Change: I think the current macros that we're all seeing and which is now extended for quite a while.
It's causing significant.
Speaker Change: Dangers in terms of clients on ability to plan.
Speaker Change: Project.
David Mackey: Customer-specific issues, it's macro-related issues, it's changes in strategy and business. On the discretionary project side, you know, I think, obviously, we've seen that number come down when we did the acquisitions about a year and a half ago. At the peak, I would say the discretionary component of our business from a project perspective was around 12% of company revenue. That number today is probably down to just below 10% of company revenue.
Speaker Change: And along with that.
Speaker Change: <unk> business model disruptions that a number of clients or number of businesses exited the market.
Speaker Change: <unk>.
Speaker Change: Means that clients and prospects who are looking at.
Speaker Change: Dipping their toes in the model or accelerating the journeys <unk>.
Speaker Change: Looking much more time to get their arms calendars.
Speaker Change: That's really the core of.
Speaker Change: How people.
Speaker Change: People are looking at some of these things.
Speaker Change: And why going into the year and also we are also being.
Speaker Change: We are also looking at our guidance, we'll definitely.
Speaker Change: In our case, we've also had a specific situation with some specific lines that we spoke about was the continued to play out.
Speaker Change: But as Dave said.
Large deal pipeline in Florida of which model.
Speaker Change: More or less already have been signed during the Q4 and many of which are in progress.
Speaker Change: The new opportunity, we are seeing invest Victor all brand of macros.
Speaker Change: In that spectrum of blocks.
David Mackey: And based on the projections that we've currently embedded for fiscal 25, that number is probably coming down to like 8% of revenue. So, we continue to see this as a long-term opportunity as and when discretionary spend comes back. The businesses, the capabilities of these assets that we have, both in terms of the new acquisitions that we've done and in terms of our historical capability in areas like procurement and analytics are strong.
Speaker Change: Uh huh.
Speaker Change: But as those clients are going through because they all understand that.
Speaker Change: Big changes that are taking place in the world are the big changes, taking place in technology and transformation and tech and ops kind of an environment.
Speaker Change: <unk> means the first half to take decisions soon and therefore people who have not actually dip that goes in the models are people, who realize they have to be far more aggressive appeared engaging very well with us and I think thats. The core of the discussion here on the one hand, while disruption the macro issues.
There's some uncertainty, which I think will play out. It is also creating new opportunity for us and like I said before in my prepared remarks, Dave said the size of those deals is much larger now some that are underway as people get comfortable with using some of these <unk> models.
Speaker Change: Getting comfortable that WNS is the right partner to help them navigate those opportunities.
Speaker Change: All of that will come to bear.
David Mackey: So we do see that as an upside, but at this point in time, the visibility and the client's willingness to commit to those types of initiatives are very, very limited. Disruption and macro issues are creating these impacts in travel.
Speaker Change: In our planning, we assume that will be introduced some of these offerings integrated Cogs.
Speaker Change: Some kind of revenue cannibalization for us it will cause some kind of short term impact, but in spite of that we expect significant growth and profitability.
Speaker Change: I think just just to add to that surrender I think it's important to understand that when clients are coming to us for transformational solutions. They are not looking for <unk>.
Keshav R. Murugesh: We're also seeing that they are extremely receptive in terms of our strategic messages, in terms of helping them with some of their other corporate functions make them much more nimble, you know, for the long term, and in fact, some of the recent large deals that we are talking about actually come into the sector for the future. So that is a very interesting development that we're also seeing. So these guys are all getting ready for the business to come back, and in the meantime, they're also looking at, you know, re-engineering their internal functions as well. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Mayank Tandon with Needham. Your line is open.
Speaker Change: Jen AI, specifically, what they are looking for our business outcomes and Theyre looking for us to deliver those impacts those outcomes to the business now over time, we know theyre going to hold us accountable for leveraging whatever the latest and greatest technology is and in a year or two that may mean productivity.
Speaker Change: <unk> coming from tools and technologies like Gen AI, but they also realize that they don't have two to three years to wait to see how that that entire rollout will play out. So clients are moving forward, but I think that the biggest issue here is the.
Speaker Change: The fact that clients are looking to do things that are transformational that are inherently disruptive to their business models and thats really whats driving the length of the sales cycle, not which technology is going to be deployed to deliver those results.
Speaker Change: Thank you that's actually very helpful.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Bryan Bergin Cowen.
Bryan C. Bergin: Cowen Your line is open.
Keshav R. Murugesh: Thank you, Keshav or Dave. I wanted to ask about the large deals. So, as you approach the market, are you taking your go-to-market strategy in pursuing these large transformational type deals? And does that mean incremental investments in the sales force or how you go about, you know, comping your sales force, any changes that you're making to make sure you win more than you lose in this type of market dynamic? Yeah, Mike, that's a great question.
Speaker Change: Hi, guys. Thank you I wanted to dig in a bit more on the 25 growth outlook here, so coming off a year with some known client specific headwinds. How did you think about building this outlook to potentially provide for more flexibility just given the uncertain environment out there and can you help us with what incremental year over.
Speaker Change: Headwinds may be factored across the portfolio as you enter the year through productivity and normal ramp downs.
Speaker Change: Sure, Brian Let me, let me take a crack at that so I think as we look into fiscal 'twenty five what we're seeing.
Brian: Today, it's about an 18% headwind to the business right now we know that in a typical year, we're going to have a 10% 11% headwind that comes from productivity that comes from the known ramp Downs that comes from the short term project related work I think as we look into <unk> into fiscal 'twenty five we've got another six 7% head.
Keshav R. Murugesh: So, first and foremost, I think the fact that our organizational restructuring has all come together very well over the past, you know, one year or so is one of the very important reasons for the change in this dynamic. I must first say that because today we go to the market with four very focused SBU units, right? And therefore, within those SBU units, we have strong leaders who can actually make, you know, effective decisions on what kind of sales talent they want, what kind of changes they want in terms of market orientation for some of these people, and also make sure that the capabilities that we acquired over the past four or five quarters are also being integrated well when we go into having a business and a transformation conversation with clients.
Speaker Change: With that we're dealing with.
Speaker Change: That's creating the big challenge for US now I think most of most of us know and understand based on the conversations.
Speaker Change: And the disclosures that we've made over the past six to nine months that <unk>.
Speaker Change: 3% plus of that is coming from the large healthcare client that terminated their contract. Another 1% is coming from the annualized impact of the large internet clients moving from on.
Speaker Change: Onsite centric to offshore centric.
Speaker Change: The piece that I think is different relative to where we would have been three months ago. Four months ago is really that deterioration in the visibility and the commitment levels that clients are willing to make to transaction volumes and to projects and that's probably cost us another 3% here.
Speaker Change: As <unk> alluded to where we're seeing that primarily impacting us in the travel and in the insurance basis.
Speaker Change: But the reality is I think.
Speaker Change: The volatility in the macro environment has created challenges for our clients in projecting what's going to happen over the next next six to 12 months and we're seeing that manifest itself in the projections that they are providing to us.
Keshav R. Murugesh: It therefore means that a bunch of very smart people from within WNS, as well as a bunch of smart people who have been trained even more in a higher set of capabilities, and another bunch of people who may have been hired in the recent past, as well as the repositioning of talent across geography is actually helping us with this, you know, strong pipeline that we're seeing.
Speaker Change: Yes, but I just wanted to add that while that's the state of the nation as of today.
Speaker Change: As you know uncertainties all around as anybody that's also creating new opportunities.
Speaker Change: Just want to underline the fact that a number of these clients are also therefore moving ahead with a.
Speaker Change: Decisions, which may take time to implement but our decisions on.
Speaker Change: Expansion in completely new areas, where maybe in the past we may have said, we'll hold onto some of these.
Speaker Change: Processes are in operations ourselves. We are also seeing new prospects and new clients are moving aggressively in terms of wanting to get involved in much larger scale kind of retraction because again.
Keshav R. Murugesh: The second thing is what we're seeing is our ability to have much higher-quality conversations around transformation, around digital, around analytics, around giving comfort that we are the right partner to help them navigate, you know, AI and Gen AI kind of outcomes when they're actually ready is responding extremely well. We are elevating all these combinations now to the CEO, CFO, and COO level on the other side. And therefore, the size of some of these deals being discussed is much bigger than what we have traditionally discussed before. So that's the core.
Speaker Change: Some of these things take time to close.
Speaker Change: I'm delighted to say that in the last quarter, we actually close for already right and therefore, our ability to do more of that timing gives aspect. There is high which means. This uncertainty is also creating a massive new opportunity for us that should play out in the second half.
Speaker Change: During 2016.
Speaker Change: Okay.
Speaker Change: Okay understood.
Speaker Change: Just given all the moving parts here any important considerations for kind of quarterly cadence as you go through fiscal 'twenty five.
Speaker Change: Both growth and margin.
Speaker Change: Yes, let me, let me take that Brian. So I think obviously, we know Q1 is typically seasonally soft for us.
Speaker Change: In addition to that we've got the volumes that are continuing to ramp down. So we are looking at.
Speaker Change: A sequential decline in fiscal Q1, probably in the 5% range.
David Mackey: So there are a lot of changes that are happening, but a lot of them, I would give credit to the acquisition strategy that this company has pursued. And more importantly, to the reorganization, which I think we have successfully been doing. And just to add to that, Mayank, where the rubber hits the road, we're exiting Fiscal 24 with a sales headcount, a sales force, that's about 10% above where we exited Fiscal 23. So those investments have been made, and those investments were back half loaded in Fiscal 24.
Brian: And in addition to the productivity improvements that we give and the head count utilization challenges in the operating leverage issues.
Brian: We're going to see Q1 margins were expecting to be in the 18% to 19% range that being said despite the large healthcare ramp down in Q2, and some of the challenges that that will create the expectation for us is that as we move across Q2 Q3 Q4, we should see good.
Speaker Change: Good steady acceleration in both the top line and the margin line.
Speaker Change: So.
Speaker Change: And maybe I'll just add David Ben Chen.
Speaker Change: Because right now.
Speaker Change: Some of the visibility, which is not there from a client perspective.
Speaker Change: And because of the seasonality in that Arthur one.
Speaker Change: We expect.
Speaker Change: The revenue to be lower.
Speaker Change: Lower than compared to quarter, four and that mathematically also.
David Mackey: So I don't think we've fully seen the benefits of this investment, but I think you're starting to, to Kesha's point, see it in terms of the successes we've had recently here in large deal signings and the large deal pipeline that we have, where the company is extremely well positioned for success going forward. So, yeah, the investments are taking place kind of behind the scenes to drive the pipeline and drive the success in selling these larger deals. That's very helpful.
Speaker Change: The compression on the margin because of the operating leverage what will not be able to get that I saw.
Speaker Change: The investments has been done for the scalability as we move forward, although growth, but it's going to be just a seasonal impact in quarter one of them yes.
Speaker Change: Yes, so just to reiterate expectations in the neighborhood of like $310 million ish for Q1, and the operating margin in the 18% to 19% range.
Speaker Change: Okay.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thanks, Brian.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Mike Swanson with Deutsche Bank. Your line is open.
Mike Swanson: Hi, guys I kind of wanted to talk about the mix of your bookings obviously been a lot of focus on the shift towards larger deals and obviously the pressure remaining on shorter project based work. So I'm just thinking how this is impacting sort of average contract value and how much of a change there has been kind of from your historical Contra.
Keshav R. Murugesh: And then, as my follow-up question, I wanted to ask about the capital allocation side. I know, Keshav, you mentioned up front that you're pursuing this large buyback opportunity, which makes all the sense given where your valuation is. But would you also be considering M&A? Or do you have a lot to digest at this time with some of these headwinds you're tackling that might put that on hold? Any thoughts around that? Let me first introduce myself.
Mike Swanson: Average annual contract value level versus what we're seeing now so kind of just as an example, if you have 1 billion of bookings over five years, that's $200 million a year, but it's all short term.
Mike Swanson: $1 billion in one year, so I'm, just kind of trying to understand how that's evolved over time and any impact to the model going forward from the shift to larger transformational deals.
Speaker Change: Yes.
Speaker Change: It's a good question Nate I mean, clearly what we've seen across the last couple of years is a meaningful increase in the average contract value and the total contract value of the deals and then more specifically the clients that we've signed right. So.
Speaker Change: There's kind of two ways to slice that one is when you are <unk>.
Arijit Sen: As mentioned by Keshav, I've been with WNS for 15 years now, and a significant part of my work has been with Sanjay. Sanjay's a big show to film, but I'm hoping I'm sufficiently well trained to take over this role and move ahead. Specifically to your question on M&A, you know, M&A continues to be a very key component of our capital allocation strategy. You know, our M&A philosophy, as you would recall from our prior earnings calls, continues to be around the addition of key capabilities in chosen areas of investment, you know, areas like data analytics, digital, and industry-specific competencies.
Speaker Change: Signing a new relationship.
Speaker Change: What is that initial value look like right. So.
Speaker Change: What we've seen is the clients are willing to take bigger bites on the front end net debt ACB TCE number is.
Speaker Change: Is up meaningfully over the last couple of years, but we also have clients who proceed in under a different route right they'll give us one or two.
Speaker Change: One or two statements of work to start the relationship and then a year or two into it they will give us another 234 right. So that's kind of the expansion side of the business.
Speaker Change: Both are extremely healthy, but the surrenders question earlier, the large deal profile does create a little bit more lumpiness in terms of the visibility of how and when those revenues come onto the P&L.
Speaker Change: But very clearly what we are seeing across the portfolio and its across verticals, it's across geographies as the clients understand that the need for transformation and automation and cost reduction is best provided by multi tower multi process types of solutions.
Arijit Sen: We definitely have a very healthy M&A pipeline right now and will just continue to evaluate all of these assets based on the strategic fit and appropriate valuation. Yeah, Mayank, and thanks, Adi. That was a great introduction to the street.
Speaker Change: Got it I appreciate that color. There my other question that I had was on head count growth I think going back to last quarter. I think there might have been an expectation for maybe a slight uptick in headcount growth in <unk>, but looks like there was actually about a point.
Speaker Change: Contraction in head count sequentially. So maybe given given your new updated 2020 fiscal 'twenty five guidance sort of what are your expectations for head count your need to grow sort of when you might have to ramp or how much you might be able to lean on utilization as opposed to head count growth that'd be helpful. Thank you.
Keshav R. Murugesh: But I must tell you upfront that Mayank, we are going to continue to execute very well. We're super confident about our large-scale pipeline. We are going to continue to focus on aggressive buybacks, like I spoke about, because we think our stock is definitely not appreciated or undervalued at this point in time. And we will continue to invest in the business. So we already spoke about a $65 million CapEx program for this year.
Speaker Change: So as we move forward rate by 25, we expect the head count to grow again be watertight little bit between the authors but.
Speaker Change: Based on the seasonality what we spoke about our one you will see that.
Speaker Change: The growth is going to be a back half loaded and accordingly, the headcount growth is going to be that.
Speaker Change: As we move forward to support that growth not only for FY 'twenty five but also stopped early.
Speaker Change: Early that portfolio 586 million.
Speaker Change: Yes, I think to <unk> point.
Speaker Change: What youll see in the first half is.
Speaker Change: While the overall numbers may remained somewhat static theres going to be a mix shift going on under the covers.
Speaker Change: We've got ramp downs in certain verticals and certain types of services like we talked about with travel.
Keshav R. Murugesh: And we continue to invest in sales and marketing, in terms of creating new capabilities. And we will keep our radar on for looking at the right capability-led acquisitions that can keep enhancing our market positioning at a time when companies like us should be doing that to deliver great outcomes for our shareholders over the years. Thank you so much for the call; I appreciate it.
Speaker Change: And.
Speaker Change: With the help the large health care client, but offsetting that we've got these four large deals that are going to be ramping up. So you are going to see while the overall head count numbers look relatively similar youre going to see under the covers there are mix shifts going on there that allow us to kind of support the changes in the business going forward.
Speaker Change: I wouldn't.
Speaker Change: I missed the opportunity to also talk about the fact that while all of this is happening.
Speaker Change: We are also implementing.
Speaker Change: Internally a number of tech enabled solutions that we are using.
Speaker Change: To drive even more efficiency.
Operator: Thanks, Mark. Please stand by for our next question. Our next question comes from the line of Maggie Nolan with William Blair. Your line is open.
Speaker Change: Deliver on the promises we made to our clients continue to manage the margin requirements.
Speaker Change: In a constrained macro and at the same time also.
Speaker Change: And show up as a result of that.
Speaker Change: Manage the head count.
Speaker Change: May be required for the long term so with all of these solutions being deployed what's happening is we're also moving some of our people to higher value work and some of this will also impact.
David Mackey: Thank you. So I think it's important to just clarify the large healthcare client and the internet clients; obviously, those are different circumstances. Do you have any concerns that there might be something structural here to consider or whether there might be a risk of similar situations across the client base? Or are these more one-offs?
Speaker Change: The head count so you should realize a number of moving parts.
Speaker Change: I appreciate all the color. Thanks.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Moshe <unk> with Wedbush. Your line is open.
Moshe: Hey, thanks, much definitely from Wedbush Sanjay Good luck on your future endeavors.
Moshe: So I wanted to go to a couple of questions here can we get an update on the captive client.
David Mackey: I mean, look, I think the company has a very good track record of being transparent about issues and challenges within the business. And, you know, when we evaluate what's gone on in these two instances, both with the large healthcare client and the internet client moving from on-site to offshore, there's nothing within those two customer-specific decisions that we believe gives us pause or gives us concern relative to our other clients, other relationships, right?
Moshe: Where are we in terms of.
Moshe: Generating revenues the phases et cetera. Thanks.
Sanjay Puria: Sure let me take that one Moshe I think the short answer to the question is.
Speaker Change: No change.
Moshe: At this point in time, we've been given about 25% of the phase two.
Speaker Change: We continue to engage with the client and discussing not only the.
Moshe: The rest of the transition for the phase two work, but also new statements of work with that customer.
Moshe: We also know that theyre not going to hit their full year five year commitment unless they find new things for us to do so actively engaged with this customer in terms of how and when we can get them moving forward with the rest of the phase two work, but also actively engaged at this point in time with other streams of potential revenue.
Moshe: For us to take two.
Moshe: To enable us to get to where we need to be three or four years from now.
David Mackey: Other than the fact that we understand that clients' businesses in this environment are being disrupted, are being disrupted, I'm sorry, and that they're going to be making decisions across everything that they do in order to manage that disruption, right? So if you really look at what's at the core of the large healthcare client, it's the fact that there are material changes in their business. If you look at why the client, on the internet side, moved from onsite to offshore, they're still doing this work with WNS.
Speaker Change: No not yet.
Moshe: Just to reiterate none of none of that potential is included in our guidance.
Moshe: Right and then going back to fiscal 'twenty five guide.
Moshe: As I understand I, just wanted to confirm that I understand that the right way if we normalize.
Moshe: Guide the guide for <unk>.
Moshe: Captive in the healthcare client tenant this engagement.
Moshe: Gather its about 67% headwind does that the right way of looking at it for this year.
Speaker Change: Youre right absolutely.
Speaker Change: Together around that 6% to 7% I would say.
Speaker Change: The healthcare.
Speaker Change: <unk> as well as.
Speaker Change: The internet apply from onshore to offshore more altogether is going with some element of it.
Speaker Change: Okay understood and then.
Speaker Change: Final one can you talk a bit about what youre seeing the travel vertical in terms of volumes and then in general can you remind us which part of the revenue base is actually exposed to more discretionary project work. Thanks a lot.
Speaker Change: Sure. So let me, let me talk a little bit about the travel side and then get to the the discretionary spend side.
David Mackey: It's not a change in vendor, it's not a change in strategy, it's a change in how they want those services to be provided and services to be executed. So, as a partner, we're going to have to be flexible to do what our clients want. But both of these situations, from our perspective, represent one-off scenarios.
Speaker Change: The pressure that we're seeing and travel is kind of across the board I would say, we're seeing it in the airline space, we're seeing at the Otas space.
Speaker Change: And it's a combination of factors to be honest with you Moshe. So some of it is macro related where clients are experiencing limited growth.
Speaker Change: Some of it is that they had over hired or over projected recoveries coming out of the pandemic and we're seeing right sizing. Some of this is travel.
Speaker Change: <unk> is within the corporate World, where we have for example, a number of our OTA customers.
David Mackey: And we see nothing in them today that gives us concerns about other clients, other relationships, or something structural, either within the company or the BPM itself. Thank you. That's very helpful.
Speaker Change: We specialize in the corporate travel side as opposed to the retail travel side. So those have created challenges for us.
Speaker Change: And that's really I think overall, what the story is relative to the travel space.
Speaker Change: It's customer specific issues, it's macro related issues, it's changes in strategy and business.
Keshav R. Murugesh: And then on the strategic partnerships that you mentioned, Azure, OpenAI, Google, how are you starting to leverage these across your employee base and across your clients? Yeah, so obviously, in conjunction with the strategic partnerships that we've put in place, we've got very aggressive training, reskilling, and upskilling programs that are underway within the company. And it's across all areas of the company. So when you look at what we're doing, you know, functionally and cross-functionally within the company, you know, focusing on trying to make sure that our teams, from entry-level agents to senior leaders, are thinking about and understanding how to leverage these tools and technologies.
Speaker Change: But at the end of the day, yet we continue to see.
Speaker Change: Losses in terms of volumes, we're not losing customers, we're not losing ownership of processes, but we are losing as transaction volumes within those within those customers on.
Speaker Change: On the discretionary projects side I think obviously we've seen.
Speaker Change: That number come down when we did the acquisitions about a year and a half ago.
Speaker Change: The.
Speaker Change: Peak I would say the discretionary component of our business from a project perspective was around 12% of company revenue that number today is probably down to just below 10% of company revenue.
Speaker Change: And based on the projections that we've currently embedded for fiscal 'twenty, five that number's, probably coming down to like 8% of revenue. So.
Speaker Change: We continue to see this as a long term opportunity as and when discretionary spend comes back.
Speaker Change: The businesses the capabilities of these assets that we have both in terms of the new acquisitions that we've done and in terms of our historical capability in areas like procurement and analytics.
Keshav R. Murugesh: And we are working with not only the hyperscalers and kind of the big-name partners and providers there, but we're also working with other industry types of organizations and agencies in terms of supporting our training programs and training plans. And we'll certainly be providing more of that, but, you know, across things like awareness, evangelism, practitioners for AI, thought leaders for AI. These are all areas where we've got aggressive training programs in place right now and are leveraging, you know, organizations and institutions to help with these training programs, whether that's Google or LinkedIn learning or mind map consulting or, you know, looking at universities like Oxford. These are all institutions that we've engaged with in our AI training program. Very helpful. Thank you. Thank you.
Speaker Change: Our strong so we do see that as upside but at this point in time, the visibility and clients' willingness to commit to those types of initiatives is very very limited.
Speaker Change: But I must say that.
Speaker Change: Green shoots coming out of all of this is while.
Speaker Change: The disruption in the macro issues are creating these impacts and driver. We're also seeing that they are extremely receptive in terms of our strategic messages in terms of helping them with some of the other corporate functions make them much more nimble.
Speaker Change: While there for the long term and in fact some of the recent large deals that we are talking about actually come into the sector.
Speaker Change: So that is a very interesting development that we're also seeing so these guys are all getting ready.
Speaker Change: For the business to come back and in the meantime, they're also looking at.
Speaker Change: Reengineering, the internal functions as well.
Speaker Change: Thank you.
Speaker Change: Thank you please.
Speaker Change: Please standby for our next question.
Speaker Change: Our next.
May: Comes from the line of May at tandem with Needham Your line is open.
May: Thank you.
May: <unk> or Dave I wanted to ask about the.
May: Large deals so as you approach the market, where you can go to market strategy in pursuing these large transformation type deals and does that mean incremental investments in the sales force or how you go about.
May: Pumping your sales force to any changes that youre, making to make sure you win more than you lose in this type of market dynamic.
Operator: Please stand by for our next question. Our next question comes from the line of Ryan Potter with Citi. Your line is open.
Speaker Change: Yes, Mike It's a great question, so first and foremost I think.
May: The fact that our.
May: Organization restructuring.
May: All coming together very well over the past one year or so.
David Mackey: Hey, thanks for taking my question and wish Sanjay all the best. You talked about the 10% to 11% in normal headwinds as you enter the year. Could you double-click on the productivity portion and provide some color on if you're seeing clients ask for higher levels of productivity given the environment? Just trying to figure out if the macro or things like AI are maybe pushing clients to maybe ask for higher levels of productivity than normal or if those levels of health breaks are associated with that. Sure.
Speaker Change: One of the very important reasons for the change in this dynamic I'm supposed to say that because today. We go to the market with four very focused SBU units and therefore, we didn't build as many units we have strong leaders who can actually make.
May: Effective decisions on what kind of sales talent, they want what kind of changes they want in terms of the.
May: The market orientation for some of these deeper and also making sure that the.
May: The capabilities that we acquired over the past.
May: Four to five quarters I'd also be integrated rail when we go into having a business in transformation called conversation with clients is therefore it means that.
May: A bunch of very smart people from within WNS as well as a bunch of smart people, who have been trained even more in our highest capabilities and another bunch of people who may have been hired in the recent past as well as the re positioning of talent across geography is actually helping us.
David Mackey: Across the portfolio, Ryan, I think we've probably seen a little bit of a change, but nothing that's going to move the needle materially. I think the productivity improvements, the commitments that we're baking into our contracts are still in that 3 to 4% range. The reality is that while there's a lot of talk and a lot of conversation, and as Keshav spoke about in his prepared remarks, the use cases, pilots, proof of concepts, the reality is that clients' willingness to leverage these technologies at scale across an enterprise is still extremely limited.
May: Strong pipeline that we have seen one second thing is what we're seeing is our ability to have much higher quality conversations.
May: Transformation around digital around analytics around giving comfort that we have the right partner.
May: Help them navigate.
May: And Jimmy.
May: Kind of outcome.
May: Outcomes from that actually already is resonating extremely well.
May: Elevating all these conversations now to CEO CFO.
May: Zero level on the other side and therefore the size of some of these deals being discussed are much bigger than what we have traditionally.
May: Discussed before so that score. So there are a lot of changes that are in our <unk>.
May: And a lot of it I would give credit to the acquisition strategy that is being pursued and more importantly through the reorganization, which I think we are successfully now implemented.
May: Just to just to add to that Mike where the rubber hits. The road, we're exiting fiscal 'twenty four with a sales head count sales force, that's about 10% above where we exited fiscal 'twenty three so those investments have been made.
David Mackey: So to the extent that we're not able to deploy these tools because clients won't allow us to deploy these tools, the productivity that we're able to deliver today is still limited to traditional approaches, traditional tools, traditional technologies, and our domain expertise.
May: Those investments were back half loaded in fiscal 'twenty four so I don't think we've fully seen the benefits of this investment but.
David Mackey: We certainly believe, and we've said it multiple times in the past, that as these technologies and their adoption improve, we believe that productivity numbers can continue to creep up. But the reality is that we believe it should also be offset by an increase in the opportunities for us to get into new areas of our existing customers' portfolios. And, as Keshav has mentioned multiple times today, the ability to bring new people to the table.
Speaker Change: But I think youre starting to <unk> point see it in terms of the successes. We've had recently here in large deal signings in the large deal pipeline that we have where.
May: Where the company is extremely well positioned for success going forward. So.
Speaker Change: Yes, the investments are taking place kind of behind the scenes to to drive the pipeline and drive the success in selling these larger deals.
Speaker Change: That's very helpful. And then as my follow up I wanted to ask about the capital allocation side.
May: So have you mentioned upfront that youre pursuing this large buyback opportunity, which makes all the sense given where your valuation is but would you also be considering M&A or do you have a lot to digest at this time with some of these headwinds you're tackling that that might put that on hold any thoughts around that thanks.
Speaker Change: Yeah. Thanks, So let me first introduce yourself.
Keshav R. Murugesh: Yeah, I think it's important to just underline this, because I think with all of these new technologies and all this excitement being created about some of these new technologies and new models, First and foremost, the potential penetration of new white spaces for the industry will be increasing. There will always be some parts of the existing industry that will go through massive change, as we'll see. I'm calling it disruption. I'm calling it maybe affected by macro issues.
Keith: As mentioned by Keith.
Speaker Change: You guys mentioned vacation with Douglas <unk> no.
Speaker Change: I mean, a significant part of my figures. It would suggest so yes, so I did a big shoes to fill but it sort.
Speaker Change: Well being a subsea well paid to sort of take over the scope will hit.
Speaker Change: Specifically to your question on M&A M&A continues to be a key component of our capital allocation strategy.
Speaker Change: All right.
Speaker Change: M&A philosophy as you would recall from back.
Speaker Change: Sort of earnings calls.
Speaker Change: He used to be around additional key capabilities and choices in areas of investment areas like data analytics digital and industry specific competencies, we definitely have a very healthy M&A pipeline right now.
Speaker Change: To evaluate all of these assets based on the strategic fit and appropriate valuations.
Speaker Change: Yes, Mike.
Mike Swanson: Thanks Eddie.
Mike Swanson: Introduction.
Speaker Change: To the street.
Speaker Change: I must tell you upfront that we are going to continue to execute very well, we're super confident about large deal pipeline.
Keshav R. Murugesh: But also, it is getting clients much more focused on what they want to invest in against what they want the partner to be focused on and invested in. And so when Dave spoke about how we are training and getting our people ready, it was also because a number of our clients and prospects are telling us openly that, listen, we want to focus on our core business, and we would like to work with a trusted partner like you, who's training their people, who's getting all of the models in place, and who can deliver the ROI that we need.
Speaker Change: We are.
Speaker Change: Going to continue to focus on aggressive buybacks like I spoke about because we think our stock is definitely it's not appreciated or undervalued at this point in time, and we will continue to invest in the business. So we always spoke about a $65 million kind of Capex program for this year and we continue to invest in sales marketing and <unk>.
Speaker Change: Creating new capabilities and we will keep.
Mike Swanson: Keep it up on looking at the right.
Mike Swanson: Capably led acquisitions that can keep enhancing our market positioning.
Mike Swanson: At a time when companies like us should be doing that is to deliver great outcomes for our shareholders.
Mike Swanson: Yes.
Speaker Change: Thank you so much for the color I appreciate it.
Speaker Change: Thanks, Mike.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Maggie Nolan with William Blair. Your line is open.
Margaret Marie Niesen Nolan: Thank you.
Margaret Marie Niesen Nolan: So I think it's important to clarify the large healthcare clients and the internet clients. Obviously those are different circumstances do you have any concerns that there might be something structural here to consider or whether there might be a risk of similar situations across the client base or are these more one off in nature.
Keshav R. Murugesh: It's also allowing us to move up the value chain, go into white spaces, which traditionally, this BPM industry may not have addressed in the past. I think that's an exciting opportunity for the next decade or so. And maybe I'll just add that, just taking a step back, with the multiple technological evolution, as Dave was talking about around 3% to 4% productivity, if you recall earlier, it was just 1% to 2% productivity.
Speaker Change: Yeah, let me take that Maggie I mean look.
Margaret Marie Niesen Nolan: I think the company has a very good track record of being transparent with.
Margaret Marie Niesen Nolan: Issues and challenges within the business and.
Speaker Change: When we evaluate what's gone on in these two instances both with the large health care client in the Internet clients moving from on site to offshore there is nothing within those two customer specific decisions that we believe gives us pause or gives us concern relative to our other clients other.
Speaker Change: <unk> chips right other than the fact that we understand that clients businesses in this environment are being disruptive.
Keshav R. Murugesh: But with the technology evolution, that increased to 3% to 4%, but it also increased the expandable market, and that is where the net growth just kept on climbing. So I think there are multiple of those examples going through the entire evolution of this technology. And that is where we believe that is going to continue to drive and help us to address the white space, to which Kesha was alluding.
Speaker Change: Being disrupted I'm, sorry, and that theyre going to be taking decisions across everything that they do in order to manage that disruption right. So if you really look at what's the core of the large health care client.
Speaker Change: The fact that there are material changes in their business model right. If you look at why the client on the Internet side move from onsite offshore Theyre still doing this work with WNS, it's not a change in vendor it is not a change in strategy.
Speaker Change: James in how they want those services to be provided in services to be X. So as a partner we're going to have to be flexible to do what our clients want but both of these situations from our perspective represent one off types of scenarios and we see nothing in them today that gives us concerns about other.
David Mackey: And that kind of dovetails into, I guess, some of the opportunities in the large deal pipeline that you talked about. I just want to be clear if some of those assumptions around large deal opportunities are included in Outlook, or do they represent potential upsides to Outlook? And then, I guess, on top of that, what kind of success rate have you had on these types of large deals? And do they tend to have different ramp times or cycles than some of your more traditional deals? Sure, so let me take a crack at that, Ryan.
Speaker Change: Clients other relationships or something structural either within the company or the BPM industry.
Speaker Change: Thank you.
Speaker Change: Very helpful.
Speaker Change: And then on the strategic partnerships that you mentioned as your open AI, Google how are you starting to leverage data across your employee base and across your client base.
Speaker Change: Yes, so obviously in conjunction with the strategic partnerships that we've put in place we've got very aggressive.
Speaker Change: Training re skilling up skilling programs that are underway within the company.
David Mackey: I think, you know, from a success rate perspective, obviously, we think we're doing extremely well. For the deals where we have the domain expertise, where we're well positioned, I would say we're winning more than our fair share of deals. And obviously, having four large deals in kind of in the bag at this point that were signed in the fourth quarter and having in the pipeline today, seven or eight opportunities where we believe decisions could come in the next two to three months. These are exciting things for us because we believe we're extremely well-positioned in terms of capability, in terms of solution, in terms of relationship to win these deals. Are they somewhat more lumpy?
Speaker Change: And it's across all areas of the company. So when you look at what we're doing.
Speaker Change: Functionally and cross functionally within the company.
Speaker Change: Focusing on trying to make sure that our teams.
Speaker Change: From entry level agents, two senior leaders are thinking about and understanding how to leverage these tools and technologies and we are working with not only the hyper scaler and kind of the big name partners and providers there, but we're also working with other industry.
Speaker Change: Types of organizations and agencies in terms of supporting our training programs and training plants, and we'll certainly be providing more of that but across things like awareness evangelism.
Speaker Change: Practitioners for AI thought leaders for AI.
Speaker Change: Are all areas, where we've got aggressive training programs in place right now and leveraging.
Speaker Change: <unk> and institutions to help with these training programs, whether thats, Google or Linkedin learning or my map consulting or looking at universities like Oxford. These are all.
David Mackey: Kind of going back to Surinder's question earlier, yeah, these deals are a little bit more lumpy because the timing is a little less certain than, for example, an expansion of an existing relationship or a small F&A process that we take over. So, I think there's a little bit of that uncertainty relative to the guidance. I think when you look at what we've done here, we haven't specifically said, hey, we've baked in seven large deals, and that's how we've gotten to where we are.
Speaker Change: Institutions that we've engaged with in our in our AI training programs.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Ryan Potter with Citi. Your line is open.
Ryan Potter: Hey, Thanks for taking my question, then which Sanjay on the bus.
Ryan Potter: You talked about.
Ryan Potter: The problem you talked about the 10% to 11 MRSA in normal headwinds as you entered the year.
Ryan Potter: Double click on the productivity portion.
Ryan Potter: Provide some color on if youre seeing clients ask for higher levels of productivity given the environment just trying to figure out if the macro or things like AI is maybe pushing clients to maybe ask for higher levels of productivity than normal or disposals of how it breaks us up.
David Mackey: The reality is that we know that there is business that needs to be signed as we progress throughout the year. We believe we've been realistic in terms of our ability to close that new business relative to what we've been able to do in the past and relative to what's in the pipeline today. But it's not specific to large deal signings versus expansion signings versus the potential for a macro, right? These are all potential sources of filling that gap, but we don't specifically say, "OK, if we don't sign these three large deals, we're not going to be able to make our way."
Speaker Change: Sure across the portfolio Ryan I think we've probably seen a little bit of a change, but nothing thats going to move the needle materially I think the productivity improvements the commitments that we're baking into our contracts are still in that 3% to 4% range.
Speaker Change: The reality is that while.
Speaker Change: There's a lot of talk and a lot of conversation and efficacious spoke about in his prepared remarks, the use cases pilots proof of concepts.
Speaker Change: The reality is clients willingness to leverage these technologies at scale across an enterprise is still extremely limited so to the extent that we're not able to deploy these tools because clients won't allow us to deploy these tools the productivity that we're able to deliver today is still limited to.
Speaker Change: Final approaches traditional tools traditional technologies and our domain expertise.
David Mackey: And maybe, you know, I can just, you know, add to what Dave was mentioning, basically, as based on the pipeline, these are at various stages of the discussion. And, you know, it can be large, it can be multiple other new prospects, what we are discussing, expansion. So, you know, based on the stages where they are and the probability, what we internally follow, it's a mix of all this stuff that becomes the basis for our guidelines.
Speaker Change: And we certainly believe and we've said it multiple times in the past that as these technologies and the adoption improves that we believe that productivity number can can continue to creep up but the reality is that we believe it should also be offset by an increase in the up.
Speaker Change: <unk> for us to get into new areas of our existing customers portfolios and this case you are as mentioned multiple times today, the ability to bring new people to the table.
Speaker Change: Yes, I think it's important to just underlying this because.
Speaker Change: And with all of these new technologies and all this excitement about some of these new technologies and new models.
Speaker Change: First and foremost.
Speaker Change: The potential penetration of new white spaces.
David Mackey: But as some of the large deals may get closed, and, you know, if, if the transition is going to be at a much faster pace, maybe some of those things may change. And that is where it helps us also to move the upside, you know, the upper end of the, Yeah, it's a little bit, it's a little tough to kind of nail down, right? And I guess that's kind of the commentary around lumpiness.
Speaker Change: The industry I think it will be increasing there would always be.
Speaker Change: Some some parts will be existing industry that will go through a massive J C oncology disruption I'm, calling it may be affected by macro ratios, but also it is getting clients much more focused on what they want to invest them against what they wanted a partner to be focused on an investor.
Speaker Change: So when Dave spoke about how we are training and getting our people ready. It is also because a number of our clients and prospects are telling us hopefully that listen we want to focus on our core business and we would like to work with a trusted partner like <unk>, who is training that people is getting.
Speaker Change: All of the.
David Mackey: We've signed one large deal here in the fourth quarter that's going to ramp very aggressively, at least that's certainly kind of what the plan is right now. But as we discussed, for example, with the captive carve out a year and a half ago, there's a second phase to that deal that was contractually committed, that's still moving slowly. So, you know, it's going to be client specific. And, you know, there's no rhyme or reason to that other than organizationally, whether or not they're ready to take on that change. I got it. Thank you again.
Speaker Change: The model is in place and who can deliver the Ottawa that beauty is also allowing us to move up the value chain going into white spaces, which traditionally this BPM industry may not have existed in the past I think that's the exciting opportunity for the next decade.
Speaker Change: And maybe I'll, just add that and I'll, just taking a step back the <unk>.
Speaker Change: Our duplex technology evolution.
Speaker Change: Dave was talking about around 10% to focus on productivity for recall a year if I just wanted to wassa.
Speaker Change: The technology evolution.
Speaker Change: It increased to three two bolt was but it also increased the expandable market and that is a net net growth and just scale.
Speaker Change: Kept on climbing up so I think that a multiple of those.
Speaker Change: Examples going to the evolution of this technology and that is where we believe that is going to continue to grow.
Speaker Change: And help us, but it does the lifestyle location related.
Speaker Change: Got it.
Speaker Change: Tom.
Speaker Change: <unk> got some opportunities in the large deal pipeline that you talked about but just wanted to be clear if some of the assumptions around the large deal opportunity are those included in the <unk>.
Operator: Please stand by for our next question. Our next question comes from the line of Puneet Jain with J.P. Morgan. Your line is open.
Speaker Change: Or does that represent potential upside to our and then I guess on top of that.
Speaker Change: What kind of success rate have you had in these types of large deals do they tend to have different ramp time for cycles than some of your more traditional deals.
David Mackey: Yeah, hi, thanks for taking my question. Quickly on the internet and tech clients, can you talk about how large those clients are and what the outlook is? So if you look kind of across the portfolio, Puneet.
Speaker Change: Sure. So let me take a crack at that Ryan I think from a success rate perspective, obviously, we think we're doing extremely well.
Speaker Change: For the deals where we have the domain expertise, where we're well positioned.
Speaker Change: I'd say, we are winning more than our fair share of deals and obviously having for large deals.
David Mackey: Internet and tech clients today represent about 17% of company revenue. But certainly, when you look at the expectation for this year, some of the volume pressures, especially relative to, for example, the travel vertical, some of the volume pressures that we expect this year will be in that area. Obviously, we had a large internet client last year that's bled into this year, moving work from onsite to offshore that's created some headwinds there.
Speaker Change: In kind of in the bag at this point that were signed in the fourth quarter and having.
Speaker Change: Having in the pipeline today, seven or eight opportunities, where we believe decisions could come in the next two to three months.
Speaker Change: These are exciting things for us because we believe we're extremely well positioned in terms of capability in terms of solution in terms of relationship to win these deals.
Speaker Change: Are they somewhat more lumpy kind of going back to surrenders question earlier, yes. These deals are a little bit more lumpy.
Speaker Change: Because the timing is a little less certain than for example, an expansion of an existing relationship or a small F&I process that we take over so I think theres, a little bit of that uncertainty relative to the guidance.
David Mackey: But I think where we're comfortable at this point in time is that when you look at our exposure to internet-based clients and you look at that 17% of revenue. What you'll see is that we don't have meaningful exposure to any one client anymore at this point. So part of the upside, if you will, if there is any, of some of the challenges and the pressures that we've had on the volumes over the last year or so, and relative to the guidance for fiscal 25, The good news, if you will, is that I think we've de-risked the ability for any one single client to have a meaningful impact on what our numbers look like for fiscal 25 and beyond, got it got it and uh also if you can talk about like the headcount reduction you had uh this quarter uh it seemed like it's been a while since your headcount was down on sequential basis so if you can double click on like the technology uh that helped reduce headcount dependency uh as well as uh what should we expect uh for headcount uh over the near term So, Puneet, Sanjay here.
Speaker Change: I think when you look at what we've done here, we have not specifically said hey, we've baked in seven large deals and that's how we've gotten to where we are.
Speaker Change: The reality is we know that there is a business that needs to be signed as we progressed throughout the year.
Speaker Change: We believe we've been realistic in terms of our ability to close that new business relative to what we've been able to do in the past relative to what's in the pipeline today, but it is not specific to large deal signings versus expansion signings versus the potential for a macro right. These are all potential.
Speaker Change: Sources of filling that gap, but we don't say specifically, okay. If we don't sign these three large deals we're not going to be able to make our numbers and maybe I'd just.
Speaker Change: Add to what Jim.
Speaker Change: Was mentioning basically.
Speaker Change #100: These are the pipeline do you done at various stages of the discussion.
Speaker Change #101: I'll bet.
Speaker Change: It can be large students can be.
Speaker Change: Multiple other new prospects, what we are discussing expansion. So it will be under the stages of MTR and probably what we internally follow it's a mix of all of this stuff.
Speaker Change: The basis for our guideline.
Speaker Change: Yes, some of the large deals may get close.
Speaker Change: If.
Speaker Change: Debt.
Speaker Change: The transition is going to be at much faster pace, maybe some of those things may change and that is where it helps us also to move the.
Speaker Change #102: I'll put it into the guidance.
Speaker Change #102: Yes, it's a little bit it's a little tough to kind of nail down right and I guess, that's kind of the commentary around Lumpiness. We've signed one large deal here in the fourth quarter, that's going to ramp very aggressively at least thats certainly kind of what the plan is right now, but as we discussed for example, with the captive carve out a year and a half ago there was a <unk>.
David Mackey: So, you know, again, headcount reduction is a mix of various initiatives, you know, including the quarter one seasonality, what we saw and what we alluded to that, you know, revenue is going to be lower as compared to quarter four. So that's, you know, that's causing that.
Speaker Change #102: Second phase to that deal that was contractually committed that's still moving slowly so.
Speaker Change #102: It's going to be client specific and there's no rhyme or reason to that other than organizationally, whether or not they are ready to take on that change.
Speaker Change #103: Got it thanks again.
Speaker Change #104: Thank you.
Speaker Change #105: Please standby for our next question.
Speaker Change #105: Our next question comes from the line of Puneet Jain with Jpmorgan. Your line is open.
Sanjay Puria: And also, if you recall, the impact of our large healthcare client is going to start in Q2, right? So those, those are a couple of the things which are impacting, but driving technology interventions, you know, driving productivity, and those also, it's a mix of various things around it. But as we move forward, and, you know, as I mentioned earlier, from an F525 perspective, the growth is going to be, you know, back half loaded.
Puneet Jain: Yes, hi, thanks for taking my question.
Puneet Jain: Quickly on.
Puneet Jain: And Jonathan Tech clients can you talk about like how large.
Puneet Jain: Those clients on.
Puneet Jain: Okay.
Jonathan: So if you look kind of across the portfolio.
Puneet Jain: You need.
Puneet Jain: Internet and tech clients today represent about 17% of company revenue.
Puneet Jain: But certainly when you look at the expectation for this year some of the volume pressures, especially relative to for example, the travel vertical some of the volume pressures that we expect this year will be in that area. Obviously, we had a large internet client last year, that's bled into this year moving work from onsite to offshore that's created.
Puneet Jain: Some headwinds there, but I think where we're comfortable at this point in time is that when you look at our exposure to Internet based clients and you look at that 17% of revenue.
Sanjay Puria: And accordingly, we expect the headcount to keep on growing, you know, from Q2 onwards. Yeah, and I think relative to, you know, the deployment of technology and automation, what you've seen, and Sanjay mentioned it in his prepared remarks, what you've seen pretty consistently from WNS is that each year, we're delinking the growth in revenue from the growth in headcount by anywhere from 2% to 4%, right? So this year, on a constant currency basis, you know, we had about a 3.5% change in revenue per employee, right, which is kind of where this is really manifesting itself.
Puneet Jain: What youll see is that we don't have meaningful exposure to any one client any more at this point. So we've meaning part of the upside. If you will if there is any of some of the challenges and the pressures that we've had on the volumes over the last year or so and relative to the guidance for Phil.
Puneet Jain: 25.
Puneet Jain: Some of the.
Puneet Jain: The good news if you will is that I think we've derisked the ability for any one single client to have a meaningful impact on what our numbers look like for fiscal 'twenty five and beyond.
Speaker Change #107: Got it got it.
Speaker Change #108: And also if you can talk about like the head count reduction.
Speaker Change #108: This quarter it seemed like it's been online since your head count was down on a sequential business. So if we can double click on like the technology.
Puneet Jain: Reduced headcount dependency as.
Puneet Jain: As well as.
Puneet Jain: What should we expect.
Puneet Jain: For head count over extending ourselves.
Puneet Jain: So puneet that also on DSO.
Puneet Jain: Again headcount reduction as a mix of various initiatives.
Sanjay Puria: And I think that it should be expected going forward that, you know, we should see disconnects between the number of people we need to deliver revenue and that revenue growth in the 2% to 4% range. Obviously, doing much more than that in any given year is going to be very, very difficult as clients migrate to these new models and to these new types of services and solutions. But that productivity improvement that we're able to deliver is part of how we are able to keep our margins stable, right?
Puneet Jain: Including the corner one seasonality.
Puneet Jain: What we saw and what we alluded at generics will be.
Puneet Jain: And it really is going to be lower as compared to quarter four.
Speaker Change #110: So thats the.
Puneet Jain: That's why I think that and also <unk>.
Puneet Jain: You'll recall the impact of our large healthcare line is going to start from Q2 right.
Puneet Jain: Those those are couple of other things, which are impacting but.
Puneet Jain: Driving technology interventions in order to drive the productivity and those on so it's a mix of various things around it but as we move forward and as.
Puneet Jain: As I mentioned earlier from an FY 'twenty five perspective, the growth is going to be.
Puneet Jain: Back half loaded and accordingly, we expect the headcount to keep on.
Sanjay Puria: I mean, if we're giving 3% to 4% productivity to clients, we've got to continue to do more work with fewer people in order to be able to maintain our margins. And this is part of, you know, when we talk about productivity from the customer side, yes, it creates a revenue headwind. But this is productivity from the operation side that allows us to reduce costs at or above the same rate as we're reducing them.
Puneet Jain: <unk>.
Puneet Jain: From Q2 onwards.
Puneet Jain: And I think relative to the.
Puneet Jain: The deployment of technology and automation, what you've seen and Sanjay mentioned in his prepared remarks, what you've seen pretty consistently from from WNS is that.
Puneet Jain: Each year, we're D link King the growth in revenue from the growth in head count by anywhere from 2% to 4%. So this year on a constant currency basis.
Puneet Jain: We had about a three 5% change in revenue per employee, which is kind of where this is really manifesting itself and I think that should be expected going forward.
Puneet Jain: We should see disconnect between the number of people, we need to deliver revenue and that revenue growth in the <unk>.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Vincent Colicchio with Barrington Research. Your line is open.
Puneet Jain: 2% to 4% range, obviously doing much more than that in any given year is going to be very very difficult as clients migrate to these new models into these new types of services and solutions, but.
David Mackey: Yes, are you seeing any pricing pressure on any of your horizontals? No, at this stage, no pricing pressure. I think, as we discussed earlier, also, the focus is all about the total cost of ownership, you know, ownership instead of, you know, at a bill rate or, you know, a traditional model. So it's, you know, it's more about the solution, the value creation, what, you know, we are able to create for our client. So there is no pricing pressure at this stage.
Puneet Jain: That productivity improvement that we're able to deliver as part of how we are able to keep our margins stable.
Puneet Jain: If we're giving 3% to 4% productivity to clients. We've got to continue to do more work with fewer people in order to be able to maintain our margins and this is part of when we talk about productivity from a customer side, yes. It creates a revenue headwind, but this is productivity from the operation side that allows us to reduce cost at or.
Puneet Jain: Above the same rate as we are reducing revenue.
Puneet Jain: Yes.
Speaker Change #117: Okay. Thank you.
Speaker Change #111: Thank you Brent.
Speaker Change #119: Standby for our next question.
Puneet Jain: Our next question comes from the line of Vincent Colicchio with Barrington Research. Your line is open.
David Mackey: And in fact, we're seeing a very solid pipeline build with some of these horizontals. So we believe the verticals will benefit from some of the pipelines being generated through these horizontals, which are now integrated well, post the restructuring that I spoke about. And then just one last one here. I know we're getting late on the call. What caused the large sequential increase in transaction contracts? Is there anything to call out there?
Vincent Alexander Colicchio: Yes are you seeing any pricing pressure in any of your horizontals.
Vincent Alexander Colicchio: No at this stage.
Vincent Alexander Colicchio: Not no pricing pressure I think.
Vincent Alexander Colicchio: As we discussed earlier so the focus is all about.
Vincent Alexander Colicchio: Total cost of.
Vincent Alexander Colicchio: The ownership instead of <unk>.
Vincent Alexander Colicchio: The bill rate.
Vincent Alexander Colicchio: Our traditional model so it's.
Vincent Alexander Colicchio: It's all going to be a BARDA solution the value creation.
Vincent Alexander Colicchio: Right.
Vincent Alexander Colicchio: So no pricing pressure at this stage.
Vincent Alexander Colicchio: And in fact, we are seeing a very solid pipeline building with some of these horizontals. So.
Vincent Alexander Colicchio: Within the verticals will benefit.
Vincent Alexander Colicchio: With some of the excitement of the agenda.
Vincent Alexander Colicchio: So how we can figure out good growth.
Vincent Alexander Colicchio: Both the restructuring that I spoke about.
Speaker Change #113: And then just one last one here I know, we're getting late on the call.
David Mackey: The large sequential increase in transaction... transaction-based contracts, the percentage contribution increased quite a bit sequentially. I think the transaction-based contract, you know, the increase sequentially, what we have is the movement of what, you know, one of our clients, which was on the, you know, the costless kind of a model, they have just changed the model to the transaction-based model. As we move forward, again, you know, it's going to be more around those technology interventions and, and the larger aspect we are working on.
Speaker Change #114: What caused the large sequential increase in transaction contracts is there anything to call out there.
Speaker Change #113: The large sequential increase trend.
Speaker Change #113: Transaction based contracts that the percentage contribution increased quite a bit sequentially.
Speaker Change #113: Oh.
Speaker Change #113: I think the transaction based contract the increase sequentially.
Speaker Change #113: Is the movement of water.
Speaker Change #113: One of our clients.
Speaker Change #113: Which was on the cost plus Jennifer Martin.
Speaker Change #113: I'll just use a model to a transaction based.
Speaker Change #113: As we move forward again, it's going to be more around those technology interventions and.
Speaker Change #113: And the latter aspect of what we are working on.
Speaker Change #115: Okay. Thank you.
David Mackey: What you'll see, Vince, if you look, is that you'll see kind of on a percentage basis a corresponding reduction in the outcome-based revenues. So essentially, what we did is we had a large customer that moved from one type of engagement model to another.
Speaker Change #115: What youll see Vince if you look is that youll see kind of on a percentage basis, a corresponding reduction.
Speaker Change #115: In the outcome based revenues.
Speaker Change #115: So essentially what we did is we had we had a large customer that moved from one type of engagement model to another.
David Mackey: Okay, thank you. Thanks, Vince. Thank you. At this time, we have no further questions in the queue. This will conclude today's conference call. Thank you for your participation. You may now disconnect. Thank you for watching!
Speaker Change #116: Okay. Thank you.
Speaker Change #120: Thanks Vince.
Speaker Change #118: Thank you.
Speaker Change #121: At this time, we have no further questions in the queue. This will conclude today's conference call. Thank you for your participation you may now disconnect.
Speaker Change #118: Yes.
Speaker Change #118: [music].
Speaker Change #118: Okay.
Speaker Change #118: [music].