Q1 2025 WNS (Holdings) Ltd Earnings Call

Good morning and welcome to the WNS Holdings Fiscal 2025 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode.

Unknown Executive: First Quarter Earnings Conference Call At this time, all participants are in a listen-only mode. After management's prepared remarks, we will conduct a question and answer session, and instructions on how to ask a question will follow at that time. As a reminder, this call is being recorded for replay purposes. Now, I would like to turn the call over to David Mackey, WNS's Executive Vice President of Finance and Head of Investor Relations. David, please go away.

Unknown Executive: 1st quarter earnings conference call. At this time, all participants are in a listen, and we move.

Unknown Executive: After management prepaid remarks, we will conduct a question and answer session, and instructions for how to ask a question we'll follow at that time. As a reminder, this call is being recorded for replay purposes.

After management's prepared remarks, we will conduct a question and answer session and instructions for how to ask a question will follow at that time. As a reminder, this call is being recorded for replay purposes.

David Mackey: Now, I would like to turn the call over to David Mackey, WNS Executive Vice President of Finance and Head of the Invest Relations.

David Mackey: Now I would like to turn the call over to David Mackey, WNS's Executive Vice President of Finance and Head of Investor Relations. David, please go ahead.

David Mackey: David, please go ahead. Thank you and welcome to our fiscal 2025 First Quarter 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, Arijit Sen.

David Mackey: Thank you, and welcome to our Fiscal 2025 First Quarter 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. This release is also available on the Investor Relations section of our website at www.wns.com. Today's remarks will focus on the results for the fiscal first quarter ended June 30, 2024.

David Mackey: Thank you and welcome to our Fiscal 2025 First Quarter Earnings Call.

Speaker Change: 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.

David Mackey: A press release detailing our financial results was issued earlier today. This release is also available on the Investor Relations section of our website at www.wns.com. Today's remarks will focus on the results for the fiscal first quarter and in June 30th, 2024. Some of the matters that we'll be discussed on today's call are forward-looking.

Speaker Change: A press release detailing our financial results was issued earlier today. This release is also available on the Investor Relations section of our website at www.wns.com.

Speaker Change: Today's remarks will focus on the results for the fiscal first quarter ended June 30, 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. Such risks and uncertainties include, but are not limited to, those factors set forth in the company's Form 20-F, which is also available on the company website.

David Mackey: 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 that are not limited to those factors set forth in the company's Form 20-F. This document is also available on the company website.

Speaker Change: Some of the matters that will be discussed on today's call are forward-looking. Please keep in mind that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

Speaker Change: Such risks and uncertainties include, but are not limited to, those factors set forth in the company's Form 20-F.

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-GAAP financial measures management will discuss are defined as follows. Net revenue is defined as revenue less repair; 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 Aspects.

David Mackey: During this call, management will reference certain non-GAAP financial measures which we believe provide useful information for investors. Reconciliation of these non-GAAP financial measures to GAAP results can be found in the press release issued earlier today. Some of the non-GAAP financial measures management we'll discuss are defined as follows. Net revenue is defined as revenue less repair payments. Adjusted operating margin is defined as operating margin excluding amortization of intangible assets, share-based compensation, acquisition-related expenses or benefits, and impairment of goodwill and intangible assets. We are also excluding costs related to our ADS program termination and costs associated with the transition to voluntarily reporting on U.S.

Speaker Change: This document is also available on the company website.

Speaker Change: During this call, management will reference certain non-GAAP financial measures, which we believe provide useful information for investors.

Speaker Change: Reconciliations of these non-GAAP financial measures to GAAP results can be found in the press release issued earlier today.

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 issue reform. 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.

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

Speaker Change: Net revenue is defined as revenue less repair payments.

Speaker Change: 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.

Speaker Change: We are also excluding costs related to our ADS program termination and costs associated with the transition to voluntarily reporting on U.S. domestic issue reforms.

David Mackey: domestic issuer forms. 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 the transition to voluntarily reporting on U.S. domestic issuer forms and all associated taxes. These terms will be used throughout the call today.

Speaker Change: Adjusted Net Income, or ANI, is defined as profit excluding amortization of intangible assets, share-based compensation, acquisition-related expenses or benefits,

Speaker Change: Goodwill and Intangible Asset Impairment

Speaker Change: ADS Program Termination Costs, the Transition to Voluntarily Reporting on U.S. Domestic Issuer Forms, and all associated taxes.

David Mackey: ADS Program Termination Costs, Transition to Voluntarily Reporting on U.S. Domestic Issuer Forms and All Associated Tax, These terms will be used throughout the call today. I would now like to turn the call over to WNS' CEO, Keshav Murugesh. Keshav?

Keshav Murugesh: I would now like to turn the call over to WNSS CEO, the case of my request, case of.

Speaker Change: These terms will be used throughout the call today.

Speaker Change: I would now like to turn the call over to WNS's CEO , Keshav Murugesh. Keshav?

Keshav Murugesh: Hey, thank you, David, and good morning everyone. In the fiscal footwater, the WNSS financial results were in line with company expectations, posting net revenue of $312.4 billion. Now the strength is in a year-over-year decrease of 1.6% on a reportant basis, and a 1.8% reduction on a constant currency basis. Sequentially, net revenue decreased by 4.1% on a reportant basis, and by 3.9% on a constant currency basis after adjusted for products. Demand continues to be healthy for business transformation initiatives, leveraging digital and analytics, while certain client volumes and project-based work remain pressure. During the first quarter, we added eight new logos, including one large transformation deal, and expanded 36 existing relationships.

Keshav R. Murugesh: Hey, thank you, David. And good morning, everyone. In the fiscal fourth quarter, WNS's financial results were in line with company expectations, posting net revenue of $312.4 million. However, this represents a year-over-year decrease of 1.6% on a reported basis and a 1.8% deduction on a constant currency basis. sequentially, net revenue decreased by 4.1% on a reported basis and by 3.9% on a constant currency basis. After adjusting for quarantine.

Keshav R. Murugesh: Hey, thank you David and good morning everyone. In the fiscal fourth quarter, WNS's financial results were in line with company expectations.

Speaker Change: Posting Net Revenue of $312.4 Million

Speaker Change: and a 1.8% reduction on a constant currency basis.

Speaker Change: Sequentially, net revenue decreased by 4.1% on a reported basis and by 3.9% on a constant currency basis after adjusting for forex.

Keshav R. Murugesh: Demand continues to be healthy for business transformation initiatives, leveraging digital and analytics, while certain client volumes and project-based work remain pressured. During the first quarter, we added eight new logos, including one large transformational client, and expanded 36 existing relationships. In the fiscal first quarter, our ongoing efforts to improve access to capital and increase share price stability made significant progress. As discussed last quarter, on March 28th, the company reached its first major milestone.

Speaker Change: Demand continues to be healthy for business transformation initiatives, leveraging digital and analytics, while certain client volumes and project-based work remain pressured.

Speaker Change: During the first quarter, we added 8 new logos including one large transformational deal and expanded 36 existing relationships.

Keshav Murugesh: In the fiscal first quarter, our ongoing efforts to improve access to capital and increase share price stability made significant progress. As discussed last quarter, on March 28, the company reached its first major milestone: exchanging our ADS' for ordinary shares. This change helped facilitate WNS' addition to the initiative. In addition, effective this quarter, we have voluntarily transitioned to domestic pilot status and are reporting our financials under U.S.

Speaker Change: In the fiscal first quarter, our ongoing efforts to improve access to capital and increase share price stability made significant progress.

Speaker Change: As discussed last quarter, on March 28th, the company reached its first major milestone – exchanging our ADSs for ordinary shares.

Keshav R. Murugesh: Exchanging our ADSs for ordinary shares. This change helped facilitate WNS's addition to the Russell 2000 Index on June 28. In addition, effective this quarter, we have voluntarily transitioned to domestic fire status and are reporting our financials under US GAAP.

Speaker Change: This change helped facilitate WNS's addition to the Russell 2000 Index on June 28.

Speaker Change: In addition, effective this quarter, we have voluntarily transitioned to domestic filer status and are reporting our financials under U.S. GAAP.

Keshav Murugesh: gang. This transition should enable WNS to access additional index fund complexes, improve ESG, visibility, and make our financials more consistent with peers. With respect to capital allocation, on May 30, WNS held an extraordinary general meeting where our shareholders overwhelmingly approved re-purchases of up to 4.1 million ordinary shares. The company began executing against this plan in early June, buying back over 1.6 million shares in fiscal first quarter at a total cost of $84.2 million, and we will be continuing our re-purchase programs in Q2. As AI and Gen AI continue to be important themes for our clients, shareholders, as well as employees.

Keshav R. Murugesh: This transition should enable WNS to access additional index fund complexes, improve ESG visibility, and make our financials more consistent with peers. With respect to capital allocation, on May 30th, WNS held an extraordinary General Meeting where our shareholders overwhelmingly approved repurchases of up to 4.1 million ordinary shares. The company began executing against these plans in early June, buying back over 1.6 million shares in the fiscal first quarter at a total cost of $84.2 million.

Speaker Change: This transition should enable WNS to access additional index fund complexes.

Speaker Change: Improve ESG visibility and make our financials more consistent with peers.

Speaker Change: With respect to capital allocation, on May 30th, WNS held an extraordinary general meeting where our shareholders overwhelmingly approved repurchases of up to 4.1 million ordinary shares.

Speaker Change: The company began executing against these plans in early June .

Speaker Change: Buying back over 1.6 million shares

Speaker Change: in fiscal first quarter at a total cost of $84.2 million and we will be continuing our repurchase programs in Q2.

Keshav R. Murugesh: And we will be continuing our repurchase programs in Q2. As AI and Gen AI continue to be important themes for our clients, shareholders, as well as employees, we wanted to provide some additional color on our efforts in these areas. We continue to see that WNS's ability to combine domain, data, and digital is responding well with clients, and that industry-specific and process-specific knowledge remains the key to unlocking the power of data and technology, from a technology perspective, as we have discussed.

Speaker Change: As AI and Gen AI continue to be important themes for our clients, shareholders, as well as employees,

Keshav Murugesh: We wanted to provide some additional color on our efforts in these areas. We continue to see that WNS' ability to combine domain, data, and digital is resonating well with the clients, and that our industry-specific and process-specific knowledge remains the key to unlocking the power of data and technology. From its significant experience and a program tracker of leveraging artificial intelligence in our services as well as solutions. In fact, the company has now been delivering AI projects for more than 15 years, utilizing quantitative analytics as well as machine learning algorithms to help improve jobs. Later, the company introduced the WNS Analytics and Decision Engine Framework, or Wade, which combined multiple components of an AI solution, including data sources, data correlation and virtualization, data analysis, and machine learning modeling, and a presentation layer into a single compact structure.

Speaker Change: We wanted to provide some additional color on our efforts in these areas.

Speaker Change: We continue to see that WNS's ability to combine domain, data and digital is resonating well with clients.

Speaker Change: and that our industry-specific and process-specific knowledge remains the key to unlocking the power of data and technology.

Keshav R. Murugesh: WNS has significant experience and a proven track record of leveraging artificial intelligence in our services as well as solutions. In fact, the company has now been delivering AI projects for more than 15 years. Using quantitative analytics as well as machine learning algorithms to help improve outcomes. Later, the company introduced the WNS Analytics and Decision Engine Framework, or WADE, which combined multiple components of an AI solution, including data sourcing, data correlation, and virtualization, data analysis, and machine learning modeling, and a presentation layer into a single compact platform.

Speaker Change: From a technology perspective, as we have discussed, WNS has significant experience and a proven track record of leveraging artificial intelligence in our services as well as solutions.

Speaker Change: In fact, the company has now been delivering AI projects for more than 15 years, utilizing quantitative analytics as well as machine learning algorithms to help improve outcomes.

Speaker Change: Later, the company introduced the WNS Analytics and Decision Engine Framework or WADE.

Speaker Change: which combined multiple components of an AI solution including data sourcing, data correlation and virtualization, data analysis and machine learning modeling and a presentation layer into a single compact structure.

Keshav Murugesh: Since then, the breadth and depth of our AI capabilities have continued to progress, embedding the power of deep learning and big data into our operas. WNS has been invested in employee training, as well as re-skilling, launched AI co-creation labs to drive innovation and form strategic partnerships with leading technology firms, including the three major hyperscalers. We have also now created best practice consulting frameworks for leveraging ethical AI across strategy, data management, governance, as well as business outcomes. As a result of all these efforts, in fiscal 2014, approximately one-third of company revenue was delivered with AI as a component of the solution.

Keshav R. Murugesh: Since then, the breadth and depth of our AI capabilities have continued to progress, embedding the power of deep learning and big data into our offerings. WNS has been investing in employee training as well as re-skilling, launched AI co-creation labs to drive innovation, and formed strategic partnerships with leading technology firms, including the three major hyperscalers. We have also now created best practice consulting frameworks for leveraging ethical AI across strategy, data management, governance, as well as business outcomes.

Speaker Change: Since then, the breadth and depth of our AI capabilities have continued to progress, embedding the power of deep learning and big data into our offerings.

Speaker Change: WNS has been investing in employee training as well as re-skilling.

Speaker Change: Launched AI co-creation labs to drive innovation and formed strategic partnerships with leading technology firms, including the three major hyperscalers.

Speaker Change: We have also now created best practice consulting frameworks for leveraging ethical AI across strategy, data management, governance, as well as business outcomes.

Keshav R. Murugesh: As a result of all these efforts, in fiscal 2024, approximately one-third of company revenue was delivered with AI as a component of the solution. Today, WNS' AI practice has approximately 7,000 resources globally, and we have created over 70 industry-specific AI models. Our extensive experience with AI has provided the foundation for our ability to develop and deploy Gen AI use cases as well as solutions that leverage the power of large language models.

Speaker Change: As a result of all these efforts, in fiscal 2024, approximately one-third of company revenue was delivered with AI as a component of the solution.

Keshav Murugesh: Today, WNS's AI practice has approximately 7,000 resources globally, and we have created over 70 industries-specific AI models. Our extensive experience with AI has provided the foundation for our ability to develop and deploy genuine use cases as well as solutions, which leverage the power of large language models. To date, we have developed over 100 unique genuine use cases, with more than 30 ready for deployment, and have integrated genuine into each of our WNS proprietary digital assets. We have now successfully implemented genuine solutions for six of our clients, and currently have an additional 11 installations in progress.

Speaker Change: Today, WNS' AI practice has approximately 7000 resources globally and we have created over 70 industry-specific AI models.

Speaker Change: Our extensive experience with AI has provided the foundation for our ability to develop and deploy Gen AI use cases as well as solutions which leverage the power of large language models.

Keshav R. Murugesh: To date, we have developed over 100 unique Gen-AI use cases, with more than 30 ready for deployment, and we have integrated Gen-AI into 8 of our WNS proprietary digital assets. We have now successfully implemented JNAI solutions for six of our clients and currently have an additional 11 installations in progress. Several of our recent client wins include Gen-AI as a key element of the overall solution, and we estimate that in fiscal 2025, 5% or more of total company revenue will have a Gen-AI component. Increasingly, clients are looking for partners who can help them drive technology-led process transformation to deliver superior outcomes. A great customer experience and Maximize Business Impact. These initiatives are larger in size.

Speaker Change: To date, we have developed over 100 unique GenAI use cases with more than 30 ready for deployment and have integrated GenAI into 8 of our WNS proprietary digital assets.

Speaker Change: We have now successfully implemented JNAI solutions for 6 of our clients and currently have an additional 11 installations in progress.

Keshav Murugesh: Several of our WNS include genuine AI as a key element of the overall solution, and we estimate that in fiscal 2025, 5% or more of total company revenue will have a genuine AI component. Increasingly, clients are looking for partners who can help them drive technology-like process transformation to deliver superior outcome of great customer experiences and maximize business impact. These initiatives are larger in size, strategic, complex, and disruptive in nature, and require executive level support. To capitalize on this evolving trend, over the past 18 months, WNS has increased our organizational focus on elevated relationships to the highest levels of client organizations and properly positioning our end-to-end transformational capable.

Speaker Change: Several of our recent client wins include Gen AI as a key element of the overall solution and we estimate that in fiscal 2025, 5% or more of total company revenue will have a Gen AI component.

Speaker Change: Increasingly, clients are looking for partners who can help them drive technology-led process transformation to deliver superior outcome, great customer experiences, and maximize business impact.

Keshav R. Murugesh: Strategic, complex, and disruptive in nature, and require executive level support to capitalize on this evolving trend over the past 18 months. WNS has increased its organizational focus on elevating our relationships to the highest levels of client organizations and properly positioning our end-to-end transformational capability. Some of the key investments include the addition of six senior-level vertically-aligned chief growth officers focused on driving large deals; the expansion of our regional sales model into continental Europe and Canada to help build in-country relationships; and the hiring of a global head of advisory to drive WNS's positioning with the analysts and advisor community and help identify captive carve-out opportunities.

Speaker Change: These initiatives are larger in size, strategic, complex and disruptive in nature and require executive level support.

Speaker Change: to capitalize on this evolving trend.

Speaker Change: Over the past 18 months,

Speaker Change: WNS has increased our organizational focus.

Speaker Change: on elevating our relationships to the highest levels of client organizations and properly positioning our end-to-end transformational capabilities.

Keshav Murugesh: News. Some of the key investments include the addition of six senior level virtually aligned chief growth officers, focused on driving large deals; the expansion of our regional sales model into continental Europe and Canada to help build in-country relationships; and the hiring of a global head of advisory to drive WNS' positioning with the analysts and advisory community and help identify captive cargo opportunities. We also have built in the same team, including strategic hires for consultative selling across technology, enablement, and domain expertise. And as a result, over the past five quarters, the WNS sales force has grown by 16 percent.

Speaker Change: Some of the key investments include the addition of six senior level vertically aligned chief growth officers focused on driving large deals.

Speaker Change: The expansion of our regional sales model into continental Europe and Canada to help build in-country relationships.

Speaker Change: and the hiring of a global head of advisory to drive WNS's positioning with the analysts and advisor community and help identify captive carve-out opportunities.

Keshav R. Murugesh: We have also upgraded the sales team, including strategic hires for consultative selling across technology enablement and domain expertise. And as a result, over the past five quarters, the WNS sales force has grown by 16%. In addition, WNS announced last month that we have added a new Head of Strategic Growth Initiatives responsible for establishing CXO-level relationships for WNS and expanding our geographic reach. This executive position is working closely with our Chief Growth Officer, Business Unit Heads, and myself to engage directly with CXOs, understand and address their critical business challenges, and create new and exciting opportunities for WNS.

Speaker Change: We have also updated the sales team, including strategic hires for consultative selling across technology enablement and domain expertise.

Speaker Change: And as a result, over the past 5 quarters, the WNS sales force has grown by 16%.

Keshav Murugesh: In addition, WNS announced last month that we have added a new head of strategic growth initiatives responsible for establishing CSO-level relationships for WNS and expanding our geographic reach. This executive position is working closely with our Chief Growth Officer, business unit heads, and myself to engage directly with CSOs, understand and address the critical business challenges, and create new and exciting opportunities for WNS. Our focus approach is already bearing fruit in the form of large deal signings and a material increase in our large deal pipeline. As discussed last quarter, the company closed four large deals in fiscal Q4, and in the fiscal first quarter, we added one more large deal and made good progress on several others.

Speaker Change: In addition, WNS announced last month that we have added a new Head of Strategic Growth Initiatives responsible for establishing CXO level relationships for WNS and expanding our geographic reach.

Speaker Change: This Executive position is working closely with our Chief Growth Officer, Business Unit Heads and myself to engage directly with CXOs, understand and address their critical business challenges

Keshav R. Murugesh: Our focused approach is already bearing fruit in the form of large deal signings and a material increase in our large deal pipeline. As discussed last quarter, the company closed four large deals in fiscal Q4. And in the fiscal first quarter, we added one more large deal and made good progress on several others. Our pipeline now includes more than 20 large deals, each over 10 million dollars in ACV, which have the potential to close this fiscal year.

Speaker Change: and create new and exciting opportunities for WNS.

Speaker Change: Our focused approach is already bearing fruit in the form of large deal signings and a material increase in our large deal pipeline.

Speaker Change: As discussed last quarter, the company closed four large deals in Fiscal Q4 and in the Fiscal First Quarter, we added one more large deal and made good progress on several others.

Keshav Murugesh: Our pipeline now includes more than 20 large deals each over $10 million in ACV, which have the potential to close this fiscal year. These deals total more than $400 million in ACV, and we believe WNS is very positioned for success in many of these opportunities. In summary, demand for digital transformation and cost reduction initiatives remain healthy, and our new business pipeline has expanded to record levels. At the same time, fiscal full year 2025 visibility continues to be challenged by the timing of large deals and the macro uncertainty, which is impacting business volumes and project-based work.

Speaker Change: Our pipeline now includes more than 20 large deals.

Speaker Change: Each over 10 million dollars in ACV which have the potential to close this fiscal year.

Keshav R. Murugesh: These deals total more than $400 million in ACV, and we believe WNS is well positioned for success in many of these opportunities. In summary, demand for digital transformation and cost reduction initiatives remains healthy, and our new business pipeline has expanded to record levels. At the same time, fiscal full year 2025 visibility continues to be challenged by the timing of large deals and macro uncertainty, which is impacting business volumes and project-based work.

Speaker Change: These deals total more than $400 million in ACV and we believe WNS is well positioned for success in many of these opportunities.

Speaker Change: In summary, demand for digital transformation and cost reduction initiatives remain healthy and our new business pipeline has expanded to record levels.

Speaker Change: At the same time, fiscal full-year 2025 visibility continues to be challenged by the timing of large deals and the macro uncertainty which is impacting business volumes and project-based work.

Keshav R. Murugesh: WNS remains focused on accelerating profitable growth and investing in AI as well as Gen AI. We are confident that these strategic initiatives are well underway and that successful execution through the remainder of this year will position the company well entering fiscal 2026. In addition, we remain committed to investing ahead of the curve, in technology-enabled offerings, leveraging AI as well as Gen AI, improving our access to capital, and opportunistically repurchasing stock. I would now like to turn the call over to our CFO, Sanjay Puria, to further discuss our results as well as our outlook. Thank you, Keshav.

Keshav Murugesh: WNS remains focused on accelerating profitable growth and investing in AI as well as January. We are confident that these strategic initiatives are well underway and that successful execution through the remainder of this year will position the company well entering fiscal 2026. In addition, we remain to investing ahead of the curve in technology enabled offerings, leveraging AI as well as January, improving our access to capital and opportunistically repurchasing stock.

Speaker Change: WNS remains focused on accelerating profitable growth.

Speaker Change: and Investing in AI as well as Gen AI.

Speaker Change: We are confident that these strategic initiatives are well underway and that successful execution through the remainder of this year will position the company well entering fiscal 2026.

Speaker Change: In addition, we remain committed to investing ahead of the curve in technology-enabled offerings, leveraging AI as well as Gen AI, improving our access to capital, and opportunistically repurchasing stock.

Sanjay Puria: I would now like to turn the call over to our CFO , Sanjay Puria, to further discuss our results as well as the outcome.

Sanjay Puria: As mentioned earlier, in Fiscal Quarter 1, we have voluntarily shifted from Foreign Private Issuer status reporting under IFRS to Domestic Filer status reporting under US GAAP and will be filing our first Form 10-Q in the coming weeks, in a press release issued on July 9. WNS provided US GAAP historical financials and reconciliations, which previously reported IFRS numbers for FY2023 and FY2024. We have also provided additional details, including restated fiscal 2022 financials in our quarterly metrics file, which was posted on the company website this morning. All of the numbers discussed today will be on a U.S. GAAP basis.

Sanjay Puria: Thank you, Keshav.

Sanjay Puria: As mentioned earlier, in Fiscal Quarter 1, we have voluntarily shifted from Foreign Private Issuer status reporting under IFRS to Domestic Filer status reporting under US GAAP.

Speaker Change: We will be filing our first Form 10-Q in the coming weeks.

Speaker Change: In a press release issued on July 9, WNS provided US GAAP historical financials and reconciliations to previously reported IFRS numbers for FY2023 and FY2024.

Speaker Change: We have also provided additional details including restated fiscal 2022 financials in our quarterly metrics file posted on the company website this morning.

Sanjay Puria: In the fiscal first quarter, WNS net revenue came in at $312.4 million, down 1.6% from $317.5 million posted in the same quarter of last year and down 1.8% on a constant currency basis. Sequentially, net revenue decreased by 4.1% on a reported basis and 3.9% on a constant currency basis. The sequential revenue decline was driven by volume reductions with certain clients. Continued Weakness in Discretionary Project-Based Revenues, the impact of our annual productivity improvements and unfavorable currency movements, Q1. Volume reductions were primarily in the OTA or online travel sector and were greater than expected in our April guidance. In this phase, we must continue to expect transaction volumes and client forecasts to be highly volatile given macro exposure. Company-specific challenges and the potential risks and opportunities from automation.

Speaker Change: All of the numbers discussed today will be on a US GAAP basis.

Speaker Change: In the fiscal first quarter, WNS net revenue came in at $312.4 million.

Speaker Change: Down 1.6% from $317.5 million posted in the same quarter of last year and down 1.8% on a constant currency basis.

Speaker Change: Sequentially, net revenue decreased by 4.1% on a reported basis and 3.9% on a constant currency basis.

Speaker Change: The sequential revenue decline was driven by volume reductions with certain clients, continued weakness in discretionary project-based revenues, the impact of our annual productivity improvements and unfavorable currency movements.

Speaker Change: Q1, Volume reductions were primarily in the OTA or online travel sector and were greater than expected in our April guidance.

Speaker Change: In this phase, we must continue to expect transaction volumes and client forecasts to be highly volatile given macro exposure.

Speaker Change: Company Specific Challenges and the Potential Risks and Opportunities from Automation

Sanjay Puria: These headwinds were partially offset by healthy demand for digitization and cost reduction focus initiatives. In the first quarter, WNS recorded $0.6 million of short-term, high-margin revenue. Exhausted Operating Margin in Q1 was 18.4% as compared to 20.1% last year and 20.9% last quarter. Year-over-year adjusted operating margins decreased as a result of lower revenue and employee utilization and higher SG&A levels associated with marketing programs, sales hiring, large healthcare client ramp-down costs, and bad debt.

Speaker Change: These headwinds were partially offset by healthy demand for digitization and cost-reduction-focused initiatives.

Speaker Change: In the first quarter, WNS recorded $0.6 million of short-term, high-margin revenue.

Speaker Change: Exhausted operating margin in Q1 was 18.4% as compared to 20.1% last year and 20.9% last quarter.

Speaker Change: Year over year, adjusted operating margins decreased as a result of...

Speaker Change: Lower Revenue and Employee Utilization

Speaker Change: and higher SGNA levels.

Speaker Change: Associated with

Speaker Change: Sales Hiring, Large Healthcare Client Ramp Down Cost & Bad Debt

Sanjay Puria: These headwinds were partially offset by improved productivity and favourable currency movements. However, sequentially, margin reduced as a result of lower volume, the impact of annual productivity commitments, the higher Q1 SG&A levels, and unfavourable currency movements. The company's net other income expense was $0.3 million of net expense in the first quarter as compared to $1.5 million of net income in quarter one of fiscal 2024 and $0.8 million of net income last quarter. Both year over year and sequentially, the unfavorable variance is the result of higher debt levels and lower cash balances driven primarily by our share repurchase. In addition, year-over-year results were adversely impacted by $0.8 million of non-recurring interest income on tax refunds recorded last year.

Speaker Change: These headwinds were partially offset by improved productivity and favourable currency movements.

Speaker Change: Sequentially, margin reduced as a result of lower volume, the impact of annual productivity commitments, the higher Q1 SG&A levels, and unfavorable currency movements.

Speaker Change: The company's net other income expense was $0.3 million of net expense in the first quarter.

Speaker Change: as compared to $1.5 million of net income

Speaker Change: in Q1 of Fiscal 2024 and $0.8 million of Net Income last quarter.

Speaker Change: Both year over year and sequentially, the unfavorable variance, the result of higher debt levels and lower cash balances driven primarily by our share repurchase.

Speaker Change: In addition, year-over-year results were adversely impacted by $0.8 million of non-recurring interest income on tax refunds recorded last year.

Sanjay Puria: WNS's effective tax rate for Q1 came in at 23.1% as compared to 21.7% last year and in the prior. Both year over year and sequentially, changes in the effective tax rate were driven by our geographical profit mix and the percentage of work delivered from tax incentive facilities. The company's adjusted net income for Q1 was $44 million compared with $51.1 million in the same quarter of fiscal 2024 and $53.9 million last quarter. Adjusted diluted earnings were 0.93 cents per share in Q1, down from $1.02 in the first quarter of last year and from $1.12 in the previous quarter.

Speaker Change: WNS effective tax rate for Q1 came in at 23.1% as compared to 21.7% last year and in the prior quarter.

Speaker Change: Both year over year and sequentially, changes in the effective tax rate were driven by our geographical profit mix and the percentage of works delivered from tax incentive facilities.

Speaker Change: The company's adjusted net income for Q1 was $44 million compared with $51.1 million in the same quarter of fiscal 2024 and $53.9 million last quarter.

Speaker Change: Adjusted diluted earnings were $0.93 per share in Q1, down from $1.02 in Q1 of last year and from $1.12 last quarter.

Sanjay Puria: As of June 30, 2024, WNS balances in cash and investments totaled $301.5 million, and the company had $301.5 million in debt. In the first quarter, WNS generated $21.4 billion of cash from operating activities, incurred $10.7 million in capital expenditures, and made debt repayments of $10.5 million. The company also repurchased 1,644,000 shares of stock at an average price of $51.24, which impacted Q1 cash by $78 million. DSO in the first quarter came in at 36 days as compared to 34 days reported in Q1 of last year and 33 days last quarter. With respect to other key operating metrics,

Speaker Change: As of June 30, 2024, WNS balances in cash and investments totaled $301.5 million and the company had $301.5 million in debt.

Speaker Change: In the first quarter, WNS generated $21.4 billion of cash from operating activities,

Speaker Change: Incurred $10.7 million in capital expenditures and made debt repayments of $10.5 million.

Speaker Change: The company also repurchased 1,644,000 shares of stock at an average price of $51.24.

Speaker Change: which impacted Q1 cash by $78 million.

Speaker Change: DSO in the first quarter came in at 36 days as compared to 34 days reported in Q1 of last year and 33 days last quarter.

Sanjay Puria: Total headcount at the end of the first quarter was 60,513, and our attrition rate was 34% as compared to 32% reported in Q1 of last year and 33% in the previous quarter. We expect attrition to average in the low to mid-30% range, but the rate could remain volatile quarter to quarter in the current labor environment. Build seat capacity at the end of Q1 increased to 41,676, and WNS averaged 71% walk from office during the quarter.

Speaker Change: With respect to other key operating metrics,

Speaker Change: Total headcount at the end of the first quarter was 60,513 and our attrition rate was 34% as compared to 32% reported in Q1 of last year and 33% in the previous quarter.

Speaker Change: We expect attrition to average in the low to mid 30% range, but the rate could remain volatile quarter to quarter in the current labour environment.

Speaker Change: Build seat capacity at the end of Q1 increased to 41,676.

Speaker Change: and WNS averaged 71% walk from office during the quarter.

Sanjay Puria: In our press release issued earlier today, WNS provided our revised full year guidance for Fiscal 2025. Based on the company's current visibility levels, we expect net revenue to be in the range of $1,290,000,000 to $1,354,000,000, representing year over year growth of 0 to 5% on both reported basis and constant currency basis. As Keshav mentioned, the Guidance Factor, in Known Client Ramp Downs and Reduced Visibility to Client Guidance does not include short-term revenues, incremental revenue from overly large insurance captives, or an improvement in the macro environment.

Speaker Change: In our press release issued earlier today, WNS provided our revised full-year guidance for FY 2025

Speaker Change: Based on the company's current visibility levels,

Speaker Change: We expect net revenue to be in the range of $1,290,000,000 to $1,354,000,000.

Speaker Change: representing year-over-year growth of 0 to 5 percent on both reported basis and constant currency basis.

Speaker Change: As Keshav mentioned, guidance factors in known client ramp downs and reduced visibility to client volumes and discretionary projects.

Keshav R. Murugesh: Guidance does not include short-term revenues, incremental revenue from over large insurance captives, or an improvement in the macro environment.

Sanjay Puria: The top line projection assumes an average British Pound to US Dollar exchange rate of 1.28 for the remainder of the fiscal year. Full-Year Adjusted Net Income for Fiscal 2025 is expected to be in the range of $203 million to $215 million based on a Rs 83.4 to US Dollar exchange rate for the remainder of Fiscal 2025.

Speaker Change: Top line projection assumes an average British Pound to US Dollar exchange rate of 1.28 for the remainder of the fiscal year.

Speaker Change: Full Year Adjusted Net Income for Fiscal 2025 is expected to be in the range of $203 million to $215 million

Speaker Change: Based on a Rs 83.4 to US Dollar exchange rate for the remainder of fiscal 2025.

Unknown Executive: This implies adjusted EPS of $4.42 to $4.68. Assuming a diluted share count of approximately 45.9 million shares, the midpoint of guidance represents an 8% increase in adjusted EPS. With respect to capital expenditures, WNS currently expects our requirement for FY2025 to be up to $65 million. We'll now open the call for questions. Operator?

Speaker Change: This implies adjusted EPS of $4.42 to $4.68.

Speaker Change: Assuming a diluted share count of approximately 45.9 million shares.

Speaker Change: Excluding the $0.21 of one-time benefits to tax and interest income in fiscal 2024, the midpoint of guidance represents an 8% increase in adjusted EPS.

Speaker Change: With respect to capital expenditures, WNS currently expects our requirements for FY2025 to be up to $65 million.

Unknown Executive: Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please press star 1-1 on your telephone and wait for your name to be announced. If your question has been answered or you wish to remove yourself from the queue, please press star 1-1 again.

Speaker Change: We will 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 11 on your telephone and wait for your name to be announced. If your question has been answered or you wish to remove yourself from the queue, please press star 11 again.

Unknown Executive: In the interest of time and to enable everyone on the call to participate, please limit your queries to one question and one follow-up. Please stand by while we compile the Q&A roster. And the first question comes from Ryan Potter with Citi. Your line is now open.

Speaker Change: In the interest of time and to enable everyone on the call to participate, please limit your queries to one question and one follow-up. Please stand by while we compile the Q&A roster.

Speaker Change: And the first question comes from Ryan Potter with Citi. Your line is now open.

Ryan Edward Potter: Hey, thanks for taking my question. I just wanted to start on the execution of large deals. I know last quarter you mentioned that you signed four large deals, and this quarter you've already signed one. Could you give some color on how the ramps of these large deals have progressed so far? Has there been any revenue contribution from these deals in one queue?

Speaker Change: Satsang with Mooji

Ryan Potter: Hey, thanks for taking my question. I just wanted to start on the kind of large deal execution. I know last quarter you mentioned that you signed four large deals and this quarter you've already signed one.

Speaker Change: Could you give us some color on how those ramps of these large deals have progressed so far? Was there any revenue contribution from these deals in 1Q? And how much of revenue contribution from the ramps do you expect in 2Q?

Unknown Executive: And how much of a revenue contribution from the ramps do you expect in the two queues? And then, of the one large deal you signed in the one queue, how does that compare versus your initial kind of pipeline conversion expectation? Yeah, I'll answer that question, Ryan.

Speaker Change: And then of the one large deal you signed in one cue, how does that compare versus your initial kind of pipeline conversion expectations?

Unknown Executive: You know, the four large deals that we signed in Q4 had minimal revenue contribution in Q1, insignificant, which is what we expected. These deals, though, are staffed, and they are ramping. They're a big part of the story in terms of the offset in our fiscal second quarter to the large healthcare ramp down that we see coming. And the expectation is that those four large deals should be reaching steady state, if not early, then towards the end of fiscal Q3.

Speaker Change: Yeah, I'll answer that question, Ryan. You know, the four large deals that we signed in Q4 had minimal revenue contribution in Q1.

Speaker Change: Insignificant, which is what we expected.

Speaker Change: These deals though are staffed, they are ramping.

Speaker Change: They are a big part of the story in terms of the offset in our fiscal second quarter to the large healthcare ramp down that we see coming.

Speaker Change: And the expectation is that those four large deals should be reaching steady state, if not early, then towards the end of fiscal Q3.

Unknown Executive: Relative to the one large deal that we signed in the first quarter, no contribution in Q1 and minimal contribution expected in Q2. I think we continue to see good progress, as Keshav mentioned in his prepared remarks on these large deals. Given the complexity and the business impact and the level of disruptions that they create, obviously, the timing is something that we don't have a ton of visibility into. But having the large number of large deals that we have now in the pipeline and the expanding number of large deals that we have in the pipeline gives us good confidence about our ability to close some of these deals here in Q2 and again in Q3. I got it.

Speaker Change: Relative to the one large deal that we signed in the first quarter, no contribution in Q1 and minimal contribution expected in Q2.

Speaker Change: I think we continue to see good progress, as Keshav mentioned in his prepared remarks on these large deals, given the complexity and

Keshav R. Murugesh: The business impact and the level of disruptions that they create, obviously, the timing is something that we don't have a ton of visibility to, but having the large number of large deals that we have now in the pipeline and the expanding number of large deals that we have in the pipeline.

Keshav R. Murugesh: gives us good confidence about our ability to close some of these deals here in Q2 and again in Q3.

Unknown Executive: I guess maybe kind of following up on that and the visibility comment. It seems like the second half kind of assumes a relatively sharp kind of revenue growth acceleration. I mean, it's based on my math, so maybe it's a little bit off.

Speaker Change: Got it. I guess maybe kind of following up on that and the visibility comment.

Speaker Change: It seems like the second half kind of assumes a relatively sharp kind of revenue growth acceleration. I mean, it's based on my math. Maybe it's a little bit off.

Speaker Change: What gives you confidence in this implied second half? Is it continuing to close these large deals? Is it some improvement in kind of client volumes? I guess what needs to happen to hit the low end of that look versus the top end for the full year?

Unknown Executive: But what gives you confidence in this implied second half? Is it continuing to close these large deals? Is it some improvement in client volumes? I guess what needs to happen to hit the low end of that look versus the top end for the full year? Sure.

Speaker Change: Sure, so I think first and foremost it's important to understand that when you look at our guidance for fiscal 25

Unknown Executive: So, I think first and foremost, it's important to understand that when you look at our guidance for Fiscal 25, the assumption for Q2 is that revenue will be relatively flat. We're looking at roughly a $13.5 million sequential ramp-down because of the loss of the large healthcare client that we need to make up. So, if you look at the underlying growth and momentum in the business, even in Fiscal Q2, it's extremely healthy.

Speaker Change: The assumption for Q2 is that revenue will be relatively flat. We're looking at roughly a $13.5 million

Speaker Change: sequential ramp down because of the loss of the large healthcare client that we need to make up. So if you look at the underlying growth and momentum in the business, even in fiscal Q2, it's extremely healthy.

Unknown Executive: As I mentioned, we don't expect to see a full quarter's worth of revenue from the four large deals that were signed in Q4 in Q2, so that ramp continues into Q3, plus everything that we've sold in Q1 and Q2. So, I think we're pretty comfortable with the build.

Speaker Change: As I mentioned, we don't expect to see a full quarter's worth of revenue from the four large deals that were signed in Q4 and Q2, so that ramp continues into Q3.

Unknown Executive: There is nothing assumed in terms of incremental volume from existing clients in Q3 and Q4. As a matter of fact, we have assumed continued weakness in those volumes, particularly in the travel space, in Q3 and Q4. So, you know, our goal here, obviously, is to try and provide a forecast that's realistic but also somewhat de-risked from that perspective. You know, as we said last quarter, we expected volume declines in the travel space. They actually came in worse than we expected, but to the extent that we can, we've tried to de-risk this.

Speaker Change: Plus everything that we've sold in Q1 and Q2. So, I think we're pretty comfortable with the build. There is nothing assumed.

Speaker Change: In terms of incremental volume from existing clients in Q3 and Q4, as a matter of fact, we have assumed continued weakness.

Speaker Change: in those volumes, particularly in the travel space in Q3 and Q4. So, you know, our goal here obviously is to try and provide a forecast that's realistic, but also somewhat de-risked from that perspective.

Speaker Change: As we said last quarter, we expected volume declines in the travel space. They actually came in worse than what we expected.

Speaker Change: But, to the extent that we can, we've tried to de-risk this, we've looked at the client forecasts, we've tried to be conservative about what they've provided us.

Speaker Change: But essentially it's the expansion of existing relationships in terms of new process additions. It's the sale of

Unknown Executive: We've looked at the client forecasts. We've tried to be conservative about what they've provided us, but essentially, it's the expansion of existing relationships in terms of new process additions. It's the sale of small and medium-sized deals that remains healthy. That gives us comfort and confidence in the second half of the year. And then obviously, we need to close some of these large deals to meet those numbers, but our expectation is that given the large number of these deals and the size of these deals, we should be able to do that here in Q2 and Q5. Great, thanks again.

Speaker Change: Small and medium-sized deals which remains healthy that gives us comfort and confidence in the back half of the year And then obviously we need to close some of these large deals to meet those numbers But our expectation is given the large number of these deals and the size of these deals that We should be able to do that here in Q2 and Q3

Unknown Executive: One moment for the next question. The next question will come from Surinder Thind, with Jeffrey. Your line is open.

Speaker Change: Great. Thanks again.

Speaker Change: In one moment for the next question.

Speaker Change: The next question will come from Surinder Thind with Jeffrey. Your line is open.

Surinder Singh Thind: Thank you. I'd like to start with a question on the Gen AI implementations that you guys have done or deployed to date. Are you able to provide any color on the relative benefit that the client is seeing? Or put another way, the impact of revenue that you guys are experiencing in terms of the productivity improvement and how those are being made? Sure, Surinder.

Surinder Singh Thind: Thank you. I'd like to start with a question on the Gen-A AI implementations that you guys have done or deployed to date.

Surinder Singh Thind: Are you able to provide any color on the relative benefit that the client is seeing or put another way the impact of revenue that you guys are experiencing in terms of the productivity improvement and how those are being made up?

Unknown Executive: So I think when you look at the breadth of the Gen-AI use cases that we've implemented and the deals where we've put Gen-AI to use at this point, we have not seen any revenue pressure. The reality is that the goals of the deals that we've signed and the goals of the existing clients where we've leveraged these tools to date have been more about expanded benefits than looking for clients to take out costs.

Surinder Singh Thind: Sure, Surinder. So, I think when you look at the breadth of the Gen AI use cases that we've implemented and the deals where we've put Gen AI to use at this point,

Speaker Change: We have not seen any revenue pressure. The reality is the...

Surinder Singh Thind: The goals of the deals that we've signed and the goals of the existing clients where we've leveraged these tools to date has been more about expanded benefits.

Surinder Singh Thind: Then it has been, you know, looking for clients to take out cost.

Unknown Executive: Overall, while there's been productivity on some of these, our clients' goals are more about customer satisfaction, new revenue streams, and looking at ways for them to retain and attract new clients. So, I don't think when you look at the revenue impacts from these today, they've all been additive for us. They haven't been negative to date. Now again, it's not to say that we don't expect to see some level of pressure over time as Gen-AI implementations at scale start to get put in, but the niche solutions that we're leveraging today tend to be more additive to WNS's revenues and capabilities than negative. That's helpful.

Surinder Singh Thind: Overall, while there's been productivity on some of these, the goals from our clients are more about customer satisfaction, new revenue streams, looking at ways for them to retain and attract new clients.

Surinder Singh Thind: So I don't think when you look at the revenue impacts from these today, they've all been additive for us. They haven't been negative to date. Now again, it's not to say that we don't expect to see some level of pressure over time as

Surinder Singh Thind: Gen AI implementations at scale start to get put in, but the niche solutions that we're leveraging today tend to be more additive to WNS's revenues and capabilities than negative.

Unknown Executive: And then a question about just attrition and the commentary around maybe it being a bit more volatile. Any color that you can provide there that helps us understand the dynamic? I think just more, Surinder, about the overall environment and the fact that, quarter to quarter, those numbers do tend to move. You know, when we came out of COVID, we obviously had a significantly elevated attrition rate. We were running in the low 40s, and we knew that was not going to be a sustainable attrition rate for the company. We've gotten down to kind of more normal levels over time. We've been, you know, as low as 28%. We've been as high as 35, 36.

Speaker Change: That's helpful. And then a question about just attrition and the commentary around maybe it being a bit more volatile. Any color that you can provide there that helps us understand the dynamics?

Speaker Change: I think just more, Surinder, about the overall environment and the fact that quarter-to-quarter those numbers do tend to move, you know, when we came out of COVID, we obviously had a significantly elevated...

Speaker Change: Attrition rate, we were running in the low 40s, and we knew that was not going to be a sustainable attrition rate for the company. We've gotten down to kind of more normal levels over time. We've been, you know, as low as 28%. We've been as high as 35, 36.

Unknown Executive: I think it's more just to set the expectation that, you know, putting up a 34% attrition rate like we did this quarter versus, you know, 33 or 32 or 35, it's not something that's unusual. So, you know, we do, as Keshav said in his prepared remark, I'm sorry, as Sanjay said in his prepared remarks, we do expect that attrition rate to be relatively But overall, on a quarter to quarter basis, that number can move around. Thank you.

Speaker Change: I think it's more just to set the expectation that, you know...

Sanjay Puria: Putting up a 34% attrition rate like we did this quarter versus, you know, 33 or 32 or 35, it's not something that's unusual. So, you know, we do, as Keshav said in his prepared remark, I'm sorry, as Sanjay said in the prepared remarks, we do expect that attrition rate to be relatively stable in the low to mid 30s.

Speaker Change: But overall, on a quarter-to-quarter basis, that number can move around.

Speaker Change: Thank you.

Unknown Executive: One moment for the next question. The next question comes from Brian Bergin with TD Cohen. Your line is now open. Hi, thank you.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Brian Bergin with TD Cohen. Your line is now open.

Unknown Executive: I wanted to ask about the large deal. So just curious if there is some reliance on winning a handful of those still, as you forecast the 25 growth outlook. And then, just more broadly, there seem to be more large deals here that we're talking about. Is this an overall expansion of the market? Or really, the company-specific benefits that you see based on that strong sales headcount. Yeah, Brian, thank you. That's a good question.

Bryan C. Bergin: Hi, thank you.

Bryan C. Bergin: I wanted to ask on the large deal, so just curious if there is some reliance on winning a handful of those still.

Speaker Change: as you have forecast the 25 growth outlook. And then just more broadly, there seems to be more large deals here that we're talking about. Is this an overall expansion of the market or really the company-specific benefits that you see based on that strong sales headcount growth?

Keshav R. Murugesh: So I think what is exciting about some of these large deals is that they are essentially a result of the investments that WNS has now been making over the past few quarters, in particular. The focus that we brought into this area over the last year or year and a half, and the fact that we hired and invested significantly in some real solid talent across each of our sales functions as well as the business unit.

Speaker Change: Yeah, Brian , thank you. That's a good question.

Speaker Change: I think what is exciting about some of these large deals

Speaker Change: is they are essentially a result of the investments that WNS has now been making over the past few quarters in particular. The focus that we brought into this area over the last you know year or year and a half or so

Speaker Change: and the fact that we hired and invested significantly behind some real solid talent across in each of our you know sales functions as well as the business units.

Keshav R. Murugesh: And I think what is interesting is that, you know, the change that we're seeing is that we are now interacting with, first and foremost, CXOs, you know, communities, and people who do not have budgets to provide, but more importantly, who have to deliver impact to the street. So these are CEOs, CFOs, and Chief Operating Officers and that profile.

Speaker Change: And I think what is interesting is that, you know, the change that we're seeing is we are now interacting with, you know, first and foremost, CSO level, you know, community and people who do not have budgets.

Speaker Change: you know to provide but more importantly who have to deliver impact to the street.

Speaker Change: So these are CEOs, CFOs, and Chief Operating Officers, and that's for five.

Keshav R. Murugesh: The second thing is, in most cases, these are deals being created where there was no deal when the discussion started. So these are not the traditional kind of deals that come through the advisor networks or through the analyst community. And obviously, with this high-impact sales team and the investments we made on our vertical side, we continue to invest very strongly in those channels. But the reality is, a lot of these large deals are new creations being created. Directly by, you know, some of these new leaders that we have brought in, as well as this new, exciting, you know, journey that we have embarked on. So that's one.

Speaker Change: One. Second thing is, in most cases, these are deals being created where there was no deal when the discussion started.

Speaker Change: So these are not the traditional kind of deals that come through the advisor networks or through the analyst community obviously with this high impact sales team and The investments we made on our on the vertical side. We continue to invest very strongly in those channels

Keshav R. Murugesh: The second thing I will say is, from our point of view, it's exciting to see a scale-up in the number of these deals. We're happy with the five deals that we won between last quarter as well as this quarter. So I'm really excited about this initiative. And while all this is happening, the bread and butter in terms of, you know, hunting and farming, the traditional revenue sources, is not at all a flight.

Speaker Change: But the reality is, a lot of these large deals are new creations being created.

Speaker Change: Directly by you know some of these new leaders that we have brought in as well as This new exciting you know journey that we have embarked on

Speaker Change: So that's one. The second thing I will say is...

Speaker Change: You know, from our point of view, it's exciting to see, you know, a scale-up in the number of these deals. We're happy with the five deals that we won between last quarter as well as this quarter. We're also delighted to see a lot of the other deals making good progress.

Speaker Change: At this point in time, in fact, all of those 20 deals, a few of those deals, you know, are at very advanced stages.

Speaker Change: So our expectation is over the next quarter and the following quarters we will start seeing more of these wins, which will result in not just momentum for 2025, but more importantly

Speaker Change: and I am really excited about this initiative. And while all this is happening, the bread and butter in terms of, you know, hunting and farming, the traditional revenue sources.

Keshav R. Murugesh: And I think just to add to that. To your specific question, Brian, about the need for large deals to meet the guidance, the answer is obviously yes, we do need a couple of these deals to come through. But again, I think the comfort and the confidence in being able to do that lies in, to Keshav's point, the size of the large deal pipeline, right? I mean, to convert two or three large deals out of a pipeline of more than 20 is not exactly a hit rate that we would be proud of as an organization. So we think the opportunity is clearly there for that to happen. All right, understood. And then on the travel vertical, so can we talk a little bit more about volume pressure?

Speaker Change: is not at all a flagging.

Speaker Change: And I think just to add to that, you know,

Bryan C. Bergin: To your specific question Brian about the need for large deals to meet the guidance, you know, the answer is obviously yes You know, we do need a couple of these deals to come through

Bryan C. Bergin: But again, I think the comfort and the confidence in being able to do that.

Bryan C. Bergin: lies in Takeshi's point, the size of the large deal pipeline, right? I mean, to convert two or three large deals out of a pipeline of more than 20 is not exactly a hit rate that we would be proud of as an organization. So we think the opportunity is clearly there for that to happen.

Unknown Executive: Is it broad-based across the portfolio or more concentrated in the kind of cohort of larger travel clients? I know you've talked about a larger OTA client. Just curious if there's signs of relief in any of the larger cohorts here?

Speaker Change: All right understood and then on the travel vertical so just can we talk a little bit more on the volume pressure

Speaker Change: Is it broad-based across the portfolio or more concentrated in the kind of cohort of larger companies?

Speaker Change: Travel Clients. I know you've talked about a larger OTA client. Just curious if there's signs of relief in any of the larger cohort here?

Unknown Executive: Yeah, so I'll take I'll take a first cut at that. And you know, Arjit can join in here as well and give some color on the travel space. You know, I think overall, Brian, we're dealing with multiple, multiple headwinds that are affecting the revenue portfolio in the travel industry. And particularly, I think it's important to note that where we're seeing the pressure is fundamentally in the OTA or the online travel space, where we have a high degree of customer service or CXO.

Speaker Change: Yeah, so I'll take a first cut at that and, you know, Arijit can join in here as well and give some color on the travel space.

Speaker Change: You know, I think overall, Brian , you know, we're dealing with multiple

Arjit: Multiple headwinds that are affecting the revenue portfolio in the travel space.

Arjit: and particularly I think it's important to note that where we're seeing the pressure is fundamentally in the OTA or the online travel space where we have a high degree of customer service or CX exposure.

Unknown Executive: So we know that business is always going to be more volatile than, for example, our airline business, where we do a lot of operations management or a lot of finance and accounting. That being said, we're seeing that the pressure is across the entire OTA portfolio, and it's driven by a number of different things. Some of it is macro-related, some of it is client strategy change, some of it is mix of business, and some of it is we're starting to see clients get a little bit more aggressive about pushing certain types of transactions to automated channels. Now again, that's not to be confused with Gen-AI; this is more about clients redirecting certain types of services to chatbots and automated channels that historically have been done through voice-based channels.

Arjit: So we know that business is always going to be more volatile than, for example, our airline business where we do a lot of operations management or a lot of finance and accounting related activities.

Arjit: That being said, we're seeing that the pressure is across the entire OTA portfolio.

Arjit: And it's driven by a number of different things. Some of it is macro related, some of it is client strategy change.

Arjit: Some of it is a mix of business.

Arjit: And some of it is we're starting to see clients get a little bit more aggressive about pushing certain types of transactions to automated channels. Now again, that's not to be confused with Gen AI. This is more about clients redirecting certain types of services.

Arjit: to chatbots and automated channels that historically have been done through voice-based channels.

Unknown Executive: In terms of the volume reductions that we've seen, I think the expectation is that we have to continue to see pressure in this space until something happens differently, right? We also know that coming out of the pandemic, there was a right-sizing that needed to take place for the OTA business. So lots of things going on here; it's been consistent pressure across the last year and a half in this space. The good news is, I think at this point, we've meaningfully de-risked it.

Arjit: In terms of the volume reductions that we've seen, I think the expectation is that we have to continue to see pressure in this space.

Arjit: Until something happens differently right? We also know that coming out of the pandemic there was a right sizing that needed to take place for the OTA business.

Arjit: So...

Arjit: Lots of things going on here. It's been a consistent pressure across the last

Unknown Executive: I mean, our OTA revenues in the first quarter were less than 5% of total company revenue. So the hope is here that while we may continue to see some pressure throughout the rest of the year, the bottom line is the ability to impact us in fiscal 25 and the ability to impact us potentially going forward as things like productivity and AI and Gen-AI continue to infuse themselves is also reduced. Having said that, the good part is also that in some of the large deals that Keshav talked about, we are seeing a lot of traction amongst clients in travel.

Arjit: Year and a half in the space

Arjit: The good news is, I think at this point we've meaningfully de-risked it. I mean, our OTA revenues in the first quarter were less than 5% of total company revenue. So, the hope is here that while we may continue to see some pressure throughout the rest of the year, the bottom line is the ability to impact us in fiscal 25 and the ability to impact us potentially going forward as things like productivity and AI and Gen AI continue to infuse themselves.

Arjit: is also reducing.

Speaker Change: Next, yeah.

Speaker Change: Having said that, you know, the good part also is that, you know, some of the large deals that Keshav talked about, you know, we are seeing a lot of traction amongst clients in travel.

Unknown Executive: And as we go forward, we believe that the mix of business will move from OTA into other areas of travel, which also will make this revenue a lot stickier, and that's what we're working on as well. One moment for the next question. The next question comes from Nate Stevenson with Deutsche Bank. Your line is open.

Speaker Change: and as we go forward you know it'll be you know we are we're trying to see we believe that the mix of business will move from OTA into other areas of travel which also will make this revenue uh a lot more stickier and therefore that's that's what we're working on as well.

Speaker Change: Okay, thank you.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Nate Stevenson with Deutsche Bank. Your line is open.

Nate Stevenson: Hi guys, thanks for the question. I had a two-parter on the insurance vertical. So I think previously you talked about the volume impact from a couple of insurance clients who are exiting a few key geographies, and it looks like insurance revenues decelerated pretty materially in the quarter. So just wondering if you can give an update on the volumes in the insurance vertical more generally and kind of what you expect from that business for the remainder of the year.

Nate Stevenson: Hi guys, thanks for the question. Had a two-parter on the insurance vertical. So I think previously you talked about the volume impact from a couple of insurance clients who are exiting a few key geographies and it looks like insurance revenues decelerated pretty materially in the quarter. So just wondering if you can give an update on the volumes in the insurance vertical more generally and kind of what you expect from that business to the remainder of the year. And then the follow-up there is just any update on the insurance captive. I think last time you spoke, you talked about something like, I don't know, 25% of the phase two revenues with 75% of that opportunity outstanding. So how are things progressing on the captive front as well?

Nate Stevenson: And then the follow-up there is just an update on the insurance captive. I think last time you spoke, you talked about something like, I don't know, 25% of the phase two revenues with 75% of that opportunity outstanding. So how are things progressing on the captive? Sure.

Unknown Executive: So when you look at the insurance revenues in the first quarter, a couple of things. Clearly, as we had alluded to, and as we saw in the first quarter, volumes were impacted for specifically three or four of our larger clients as they look to exit what I would call lower-profit businesses. So for U.S. insurers, this is the impact of having fewer claims and fewer policies in force as they've gotten out of states like Florida, California, and Louisiana based on the number of disasters and the inability to charge premiums. Now, again, our hope here is that over the next three to six months, we'll see some relief there. I do believe that there is now more of an ability for them to charge in those areas.

Speaker Change: Sure, so when you look at the insurance

Speaker Change: Revenues in the first quarter. A couple of things. Clearly, as we had alluded to and as we saw in the first quarter, volumes were impacted for specifically three or four of our larger clients.

Speaker Change: As they look to exit what I would call lower profit businesses. So for U.S. insurers, this is the impact of having fewer claims and fewer policies in force.

Speaker Change: As they've gotten out of states like Florida, California, and Louisiana based on the number of disasters and the inability to charge premiums. Now, again, our hope here is that over the next...

Speaker Change: Three to six months, we'll see some relief there. I do believe that there is now more of an ability for them to charge.

Unknown Executive: So hopefully, we will start to see some of those volumes come back. But the expectation is that, at least at this point, the volumes in that space should be fairly stable. The issue in the UK that we have on the insurance side was a proactive decision that one of our clients made from a strategic perspective to get out of some of the low-end regional broker channels and focus on high net worth types of activities.

Speaker Change: in those areas. So hopefully, we start to see some of those volumes come back. But the expectation is that at least at this point, the volumes in that space should be fairly stable. The issue in the UK that we have on the insurance side was a proactive decision that one of our clients made.

Speaker Change: from a strategic perspective to get out of kind of the low end

Speaker Change: Regional broker channels and focus on high net worth types of activities So we should have also seen that impact already in the numbers and have anniversary did but overall I think we expect the insurance base will Make sure To look at their Situations and See if

Unknown Executive: So we should have also seen that impact already in the numbers and anniversaries it. But overall, I think we expect the insurance space to be a good growth engine kind of as we move throughout the rest of the year. But let's give you some color on that.

Speaker Change: will be a good growth engine kind of as we move throughout the rest of the year, but let Arjit give you some color on that.

Unknown Executive: Yeah, thanks, Dave. So, like Dave said, you know, I think we are very focused in terms of growing the insurance business. If you recall, one of the large clients who worked in Q4 was actually in this space. And again, a lot of, we're seeing a lot of traction, the sales pipeline is related to insurance clients. And that's where we are quite confident that going forward, this sector for us will grow significantly.

Arjit: Yeah, thanks Dave. So like Dave said, you know, I think we are very focused in terms of growing the insurance business.

Arjit: If you recall, one of the large clients who worked in Q4 was actually in this space.

Arjit: And again, a lot of, we are seeing a lot of traction in the sales pipeline as it relates to insurance clients. And that's why we are quite confident that going forward, this sector for us will grow significantly.

Unknown Executive: Yeah, and that being said, to the second part of the second part of your question, we have not included anything new relative to the large insurance captive. We continue to have good, healthy discussions with them, not only about the rest of phase two of our relationship that still has yet to ramp up, but also about new opportunities that we can take over within their portfolio. So I'd say that remains an opportunity, obviously not one that would be included in the large deal pipeline, and not one that's included in guidance either.

Arjit: And that being said to the second part of the second part of your question, we have not included.

Arjit: Anything new relative to the large insurance captive?

Arjit: We continue to have good, healthy discussions with them, not only about, you know, the rest of the Phase 2 of our relationship that still has yet to ramp up.

Arjit: but also about new opportunities that we can...

Arjit: We can take over within their portfolio, so I'd say that remains an opportunity, you know, obviously not one that would be included in the large deal pipeline and not one that's included in guidance either, so.

Unknown Executive: So the sooner we can get some closure on some of those pieces of business and get them ramping, that has the ability to materially impact fiscal 25 and fiscal 22. Got it. I appreciate the color there.

Arjit: The sooner we can get some closure on some of those pieces of business and get them ramping, that has the ability to materially impact Fiscal 25 and Fiscal 26.

Unknown Executive: So for my follow-up question, it's great to see increased buyback authorization and other capital allocation more generally going forward. Yeah, so our buyback program, as you recall, the Prepared Remarks Initiative was already started in Q1, and the program will continue to Q2. We think currently that our entire buyback should be concluded by Q2. We have a plan out, and we're looking to buy back almost 2.5 billion shares by the end of Q2. As part of our capital allocation program, M&A continues to be a focus area for us.

Speaker Change: Got it. I appreciate the color there. So for my follow-up question, it's great to see the increased buyback authorization and

Speaker Change: sort of lower share count assumptions, I guess. Can you give color on the cadence of that expected buyback through the remainder of the year? Is that going to be maybe more weighted to 2Q or the back half, or is it just you're going to be more opportunistic? And then I guess the more general follow-up on capital allocation more generally is, I guess, what are your thoughts on

Speaker Change: M&A given the new buyback assumptions, you know, we've lapped the acquisitions, you know, a couple of quarters ago at this point. So just thoughts on buybacks, thoughts on M&A and other capital allocation more generally going forward.

Speaker Change: So our buyback program as you recall the prepared remarks was already started in Q1 and the program will continue to Q2.

Speaker Change: We think currently our entire buyback should be concluded by Q2. We have a plan out that's out and we're looking to buy back almost 2.5 billion shares by the end of Q2.

Speaker Change: From our capital allocation program, M&A continues to be a focus area for us.

Unknown Executive: We are on the lookout for strategic tuck-in M&As that we think will give us a capability addition to our portfolio. Having said that, our capital allocation, if you recall, is on four pillars. So M&A continues to be a core pillar. Share repurchases, which are underway. We have capital allocation. CapEx expenditure is almost $65 million for this year, we plan.

Speaker Change: We are on the lookout for strategic tuck-in M&As that we think will give us a capability addition to our portfolio.

Speaker Change: Having said that, our capital allocation, if you recall, is on four pillars. So, M&A continues to be a core pillar.

Speaker Change: Share repurchases which are underway. We have capital allocation, CAPEX expenditure is almost 65 million dollars for this year we've planned and we have scheduled debt repayment that's also planned for this year.

Unknown Executive: And we have scheduled debt repayment that's also planned. Yeah, and I'll just add here that we continue to be very confident about our business. We continue to make all the investments in each one of the core areas that we have to be investing in at this point in time.

Speaker Change: Yeah, and I'll just add here that

Speaker Change: We continue to be very confident about our business. We continue to make all the investments.

Unknown Executive: We realize that there are a few non-recurring kind of headwinds, but nothing that is underlying the growth themes that the company is after at this point in time. And therefore, if you leave out those one-timers, which are headwinds that we spoke about earlier, both for 2024 as well as 2025, growth is more or less in double-digits. And therefore, from our point of view, as far as capital allocation goes, we believe that, you know, our stock is underpriced, and therefore, we will continue to progress with our business. Thanks for the call.

Speaker Change: In each one of the core areas that we have to be investing in at this point in time.

Speaker Change: We realize that there are a few non-recurring kind of headwinds

Speaker Change: But nothing that is underlying the growth themes that a company you know is after at this point in time and And therefore, you know, if you leave out those, you know one-timers which are headwinds that we spoke about earlier

Speaker Change: Both for 2024 as well as 2025, growth is more or less in double-digit, and therefore, from our point of view, as far as capital allocation goes, we believe that, you know, our stock is underpriced, and therefore we will continue to progress with our buybacks.

Unknown Executive: I appreciate it. One moment for the next question. The next question comes from Maggie Nolan with William Blair. Your line is out. Hi, thank you. What are your expectations for the cadence of operating margin over the course of the year, given some of the moving parts in revenue and some of the considerations you discussed? Yeah, so I'll take that one, Maggie.

Speaker Change: Thanks for the call. I appreciate it.

Speaker Change: One moment for the next question.

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

Margaret Marie Niesen Nolan: Hi, thank you. What are your expectations for the cadence of operating margin over the course of the year, given some of the moving parts on revenue and some of the cost considerations you discussed? Thank you. Thank you.

Unknown Executive: I think, you know, the expectation for Q2 at this point in time, as we have the ramp down in the large healthcare clients and the ramp up of the large deals from Q4, particularly, right? As I mentioned earlier, the expectation is that revenue sequentially will be relatively flat. I think the expectation on the margin side is also that we will be relatively flat from Q1 to Q2. So, I think overall, Q1 and Q2 are going to look a lot alike.

Speaker Change: Yes, so I'll take that one, Maggie. I think, you know, the expectation in Q2 at this point in time, as we have the ramp down in the large healthcare clients and the ramp up of the large deals,

Speaker Change: from Q4 particularly, right? As I mentioned earlier, the expectation is that revenue sequentially will be relatively flat. I think the expectation on the margin side is also that we will be relatively flat from Q1 to Q4.

Unknown Executive: The opportunity for margin expansion as we move into Q3 and Q4 is leveraging those investments that Keshav spoke about, right-sizing the headcount based on the ramp-ups and the ramp-downs that we have taken place in Q2. And then the normal productivity that tends to work its way through our P&L across the four quarters of the year, based on our ability to digest the annual productivity improvements and the wage increases. So, you know, kind of a normal cadence, other than the fact that, you know, I think Q1 came in a little bit higher than we had expected, which is a good thing.

Speaker Change: Q2. So, I think overall, Q1 and Q2 are going to look a lot alike. The opportunity for margin expansion as we move into Q3 and Q4 is leveraging those

Speaker Change: Those investments that Keshav spoke about, right-sizing the headcount based on the ramp-ups and the ramp-downs that we have taking place in Q2.

Speaker Change: and then the normal productivity that tends to work its way through our P&L across the four quarters of the year based on our ability to digest the annual productivity improvements and the wage increase.

Speaker Change: So...

Speaker Change: You know kind of a normal cadence other than the fact that you know I think you one came in a little bit higher than we had expected which is a good thing the expectation is that it'll be flattish

Unknown Executive: The expectation is that it'll be flattish in Q2. But then, as we move through the back half of the year, and revenue starts to re-accelerate, we should be able to see operating leverage and margins improving. Thank you.

Margaret Marie Niesen Nolan: And I believe in your prepared remarks that in 2025, you're expecting 5% or more of revenue to have a generative AI component. Are those types of engagements going to be structured differently than your typical engagement in the past that did not have a generative AI component, or is there anything else unique about those contracts that we should be considering? I think it's a combination of things, Maggie.

Speaker Change: Thank you. And I believe in the prepared remarks, you said in 2025, you're expecting 5% or more of revenue will have a generative AI component.

Speaker Change: to it. Are those, you know, types of engagements going to be structured differently than your typical engagement in the past that did not have a generative AI component? Or is there anything else unique about those contracts that we should be considering?

Unknown Executive: I think in some cases, we're putting generative AI capabilities into existing processes that we manage to help make them more efficient, to help drive different kinds of results and different kinds of behaviors. And in those cases, I don't expect a material change to how we're going to charge or how the relationship is going to be in the short run. I think for some of the newer deals where we're seeing meaningful components of Gen AI as part of the service and solution, we are seeing more non-FTE types of relationships put into place, whether that's transaction-based or outcome-based or gain-sharing kind of based.

Speaker Change: I think it's a combination of things, Maggie. I think in some cases we're...

Speaker Change: putting a generative AI capabilities into

Speaker Change: existing processes that we manage to help make them more efficient to help drive different kinds of results and different kinds of behaviors. And in those cases, I don't

Speaker Change: Expect a material change to the how we're going to charge or how the relationship is going to be in the short run

Speaker Change: I think for some of the newer deals where we're seeing meaningful components of Gen AI as part of the service and solution.

Speaker Change: We are seeing more non-FTE types of relationships put into place, whether that's

Unknown Executive: But I think, as we've spoken about in the past, as the gen AI services and solutions go mainstream, as we implement them more at scale across a customer base and start relationships with gen AI types of capabilities, the expectation is that our portfolio of work should shift more towards non-FTE structures than what we've historically seen. So, our expectation is that while, again, that creates some risk that comes with gain sharing. It also creates margin opportunities for us. Thank you. Thank you.

Speaker Change: Transaction based or outcome based rate or gain sharing kind of based but I think as we've spoken about in the past

Speaker Change: As the Gen AI services and solutions go more mainstream, as we implement them more at scale across

Speaker Change: a customer base and start relationships with Gen AI types of capabilities.

Speaker Change: The expectation is that our portfolio of work should shift.

Speaker Change: More towards non-FTE structures than what we've historically seen so

Speaker Change: Our expectation is that while, again, that creates some...

Speaker Change: Some risk that comes with gain sharing, it also creates margin opportunity for us.

Speaker Change: Thank you.

Puneet Jain: One moment for the next question. The next question comes from Puneet Jain with J.P. Morgan. Your line is open.

Speaker Change: Thank you. One moment for the next question.

Speaker Change: The next question comes from Puneet Jain with J.P. Morgan. Your line is open.

Puneet Jain: Hey, thanks for taking my question. Are you seeing any changes in client behavior, specifically as they try and understand and assess how Gen-AI impacts their business processes? I'm assuming the large deals you are signing do not include any benefits from Gen-AI or any potential applications of Gen-AI at this point. So, Puneet, thanks for that question.

Puneet Jain: Hey, thanks for taking my question. Are you seeing any changes in client behavior, specifically a pause as they try and

Puneet Jain: understand, assess how Gen AI impact their business processes. I'm assuming the large deals you are signing like they do not include any benefits from Gen AI or any potential applications of Gen AI at this point.

Unknown Executive: So, I think the first thing is... clients continue to be focused on whatever is strategic for themselves. So whether it is, you know, cost, leadership, whether it is the transformation, you know, kind of areas, whether it is, you know, which is the right partner for them to help them navigate the opportunity and potentially whatever threat that they see through Gen-AI, that's really their focus. One of the things that we have seen over the past few quarters is that the general hype that we saw around generative AI, at least from a client point of view, has subsided, and has given way to much more focus around the ecosystem outside, the economic situation, the challenges they're facing with their business, and how they can leverage strategic partners like us in terms of just delivering what they need to deliver to their shareholders.

Puneet Jain: So, Puneet, thanks for that question. So, I think the first thing is...

Speaker Change: Clients continue to be focused on whatever is strategic for themselves, so whether it is, you know, cost leadership, whether it is the transformation, you know, kind of areas, whether it is, you know,

Puneet Jain: which is the right partner for them to help them navigate the opportunity and potentially whatever threat that they see through Gen AI that's really their focus. What are the things that we have seen over the past you know few quarters is

Puneet Jain: The general hype that we saw around generative AI

Puneet Jain: At least from a client point of view, has subsided, has given way to much more, you know, focus around

Puneet Jain: The ecosystem outside, the economic situation, the challenges they are facing with their business and how they can leverage

Unknown Executive: So we're back to cost impact, digital transformation, as well as the safety of the right partner who brings the digital domain and data all together to deliver the outcomes. Now, obviously, AI and generative AI continue to be a very important theme in that, and therefore, they're picking their partners in terms of who are the right people who understand their business, who understand data better, and who can, when the time is right, provide the right solutions and outcomes for them.

Speaker Change: Strategic partners like us.

Speaker Change: in terms of just delivering what they need to deliver to their shareholders, right? So, we're back to, you know, cost impact, digital transformation, as well as safety of the right partner who brings digital domain and data all together to deliver the outcomes. Now, obviously, AI and generative AI continue to be a very important theme in that, and therefore, they're picking their partners in terms of who are the right people who understand their business,

Unknown Executive: And in this scheme of things, as we look at some of the large deal pipeline that we're talking about, obviously, we are looking at leveraging some of the generative AI-infused solutions that we already have. And that is what gives us confidence that while the client is still figuring out how they want to deal with some of this, they also have a lot of comfort and confidence that WNS has, through its offering program, infused all of these solutions into the, you know, outcome-based kind of solutions that we are providing for them.

DataBetter: DataBetter and who can?

Speaker Change: You know, when the time is right, provide the right, you know, solutions and outcomes.

Speaker Change: you know, for them.

Speaker Change: And in this scheme of things,

Speaker Change: As we look at some of the large deal pipeline that we are talking about, obviously we are looking at leveraging some of the generative AI infused solutions that we anyway have.

Speaker Change: and that is what gives us confidence that while the client is still figuring out how they want to deal with some of this, they also have a lot of comfort and confidence that WNS

Speaker Change: has, through its offering program, infused all of these solutions

Unknown Executive: So, you have to assume that all of these solutions are, you know, digital-led, technology-led, transformation-led, very heavy on domain, but also have a mix of generative AI, as a result of which we're able to provide them outstanding, you know, pricing, and outcomes. And just to add a little color to Takesha's comment, Puneet, two of the four large deals that we signed in Q4 have a Gen-AI component, one in the insurance space and one in the shipping and logistics space.

Speaker Change: into the, you know, outcome-based kind of solution that we are providing for them. So, you have to assume that all of these solutions are, you know, digital-led.

Speaker Change: Technology led, transformation led, very heavy on domain but also have a mix of generative AI as a result of which we're able to provide them outstanding pricing and outcome based models.

Puneet Jain: And just to add a little color to Keshav's comment, Puneet, two of the four large deals that we signed in Q4 have a Gen AI component, one in the insurance space, one in the shipping and logistics space.

Unknown Executive: But Takesha's point, I think what's most important is to understand that clients don't come to us and say they want an AI or a Gen-AI solution. What they're doing is they're coming to us saying they want a solution to a business problem. How we deliver that for them is far less important than the business results we're capable of delivering.

Speaker Change: But to Keshav's point, I think what's most important is to understand that clients don't come to us and say they want an AI or a Gen AI solution. What they're doing is they're coming to us saying they want a solution to a business problem.

Speaker Change: How we deliver that for them is far less important than the business results we're capable of delivering.

Speaker Change: Understood, understood. No, that's good to know and thanks for that detailed answer.

Unknown Executive: I'd like to follow up on Maggie's questions on margins, like with this gap reporting from here on, I guess some of the lease expenses will move above the line. So how should we think about margins for this year for the entire year at adjusted operating margin levels as well as beyond this year? Yeah, so let me take that.

Speaker Change: I'd like to follow up on Maggie's questions on margins like with this Gap reporting from here on like I guess like some of the lease expenses will move above the line So how should we think about margins like for this year for the entire year?

Speaker Change: at Adjusted Operating Margin Levels as well as beyond this year.

Unknown Executive: So if you look at from an IFRS to US GAAP perspective, the adjusted operating margin would trend about 1% lower. However, having said that, the interest costs that we'd also see would be lower by almost 1.1%. So at the ANI level, we are seeing a very marginal increase of 10 basis points. And some of that will flow into the EPS as about 3 to 4 cents impact from IFRS. Yes, so in general, I think the expectation now would be that, Overall, the adjusted operating margin will run 100 basis points lower than it used to, right?

Speaker Change: So, let me take that. So, if you look at from IFRS to US GAAP perspective, you know, adjusted operating margin.

Speaker Change: who trended about 1% lower.

Speaker Change: However, having said that, the interest costs that we'd also see would be lower by almost 1.1%. So, at the ANI level, we are seeing a very marginal increase of 10 basis points. And some of that will flow into the EPS to about 3 to 4 cents impact from IFRS to US GAAP.

Speaker Change: Yes, so in general, I think,

Speaker Change: The expectation now would be that...

Speaker Change: Overall, adjusted operating margin will run 100 basis points lower than it used to, right? I think we're still 20% plus in terms of adjusted operating margins, which keeps us in an industry-leading position.

Unknown Executive: I think we're still 20% plus in terms of adjusted operating margins, which keeps us in an industry-leading position. But the reality is, you know, instead of running, for example, this year, in a 20, 21, to 22 range, we're going to be running in a 20 to 21. And maybe Puneet, I'll just add, you know, it's just a reclassification; overall, ANI is just neutral, in fact, positive; it has just moved from, you know, operating margin before interest line, which is like, you know, there is always an operating margin after interest; it's just reclassified, specifically the lease charges, you know, from bottom to the top.

Speaker Change: But the reality is, you know, instead of running, for example, this year in a 20, you know, a 21 to 22 range, we're going to be running in a 20 to a 21 range.

Unknown Executive: So overall, net to net, it's neutral. But yes, you know, on the operating margin, it's 100% impact. Got it. No, I understand, like, the reclassification. So quickly, if I can quickly ask, like, about this year's margin. So the first half, you will be 18 and a half, give or take.

Speaker Change: And maybe Puneet I'll just add, you know, it's just a reclassification.

Puneet Jain: Overall ANI is just neutral orbit, in fact positive.

Puneet Jain: It has just moved from, you know, Operating Margin...

Speaker Change: Keshav Murugesh, Sanjay Puria

Speaker Change: Got it. Now I understand like the reclassification. So quickly if I can quickly ask like about this year's margins. So the first half you will be 18 and a half give or take.

Unknown Executive: So, do you feel confident that, like, with revenue growth, with everything, you can get to 20% plus margins for the entire year? Yes, yeah. Got it.

Speaker Change: So do you feel confident that like with revenue growth with everything like you can get to 20% plus margins for the entire year?

Speaker Change: Yes

Speaker Change: Got it. Thank you.

Unknown Executive: Thank you. One moment for the next question. The next question comes from Dave Koning with Baird. Your line is open.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Dave Koning with Baird. Your line is open.

David John Koning: Yeah, hey guys, thank you. And just to kind of review the obviously four verticals, healthcare will step down next quarter and be down pretty significantly year over year the rest of the year. Which verticals are going to make up for it and see what seems like pretty big sequential step-ups the next couple quarters and year over year as well? Like, where should we really see that from a vertical?

David John Koning: Yeah, hey guys, thank you and um

Speaker Change: Just to kind of review, you know, the obviously four verticals...

Speaker Change: Healthcare will step down.

Speaker Change: Next quarter and be down pretty significantly year over year the rest of the year Which verticals are going to make up for it and see what seems like pretty big, you know Sequential step up some next couple quarters and and year over year as well. Like where should we really see that from a vertical basis?

Unknown Executive: Sure, so as you rightly say, Dave, obviously, Q2 is going to be a challenge for us primarily because of the healthcare vertical ramp down and the ongoing challenges that we see in the travel space. So, you know, with that in mind, when you look at where the opportunities are, we talked about the ramp-up in insurance in Q2 based on the large deal that we signed in Q4.

Speaker Change: Sure. So I think, you know, as you rightly say, Dave, obviously, Q.

Speaker Change: Q2 is going to be a challenge for us primarily because of the the healthcare vertical ramp down and and the ongoing

Speaker Change: challenges that we see in the travel space.

Speaker Change: So, you know, with that kind of in mind, when you look at where the opportunities are, we talked about...

Unknown Executive: We're going to talk about a ramp-up in Q2 and into Q3 in the shipping and logistics space, which we believe will be one of our leading verticals for this fiscal year. You know, when you look at the high-tech professional services vertical, that should be a growth engine for us as well as utilities, which have been on a really nice trend over the last 4 or 5 quarters. So, I think overall the business should be very, very healthy across most of our verticals with the exception of travel and health care. Gotcha. Okay. No, thank you.

Speaker Change: The ramp-up in insurance in Q2 based on the large deal that we signed in Q4. We're going to talk about a ramp-up in Q2 and into Q3 in the shipping and logistics space, which we believe will be

Speaker Change: One of our leading verticals for this fiscal year, you know, when you look at the high-tech professional services.

Speaker Change: Vertical that should be a growth engine for us as well as utilities Which has been on a really nice trend over the last four or five quarters, so I think overall the business should be

Speaker Change: Very, very healthy across most of our verticals with the exception of travel and health care.

Unknown Executive: That's helpful. And then, uh, one other thing I just noticed that the largest client was up pretty substantially year over year. I know it's not huge.

Speaker Change: Gotcha. Okay. No, thank you. That's helpful. And then one other thing just noticed that the largest client was up pretty substantially year over year. I know it's not huge. It's maybe five, 6% of total revs, but it was up mid twenties percent or so year over year. What, what was that? And is that sustainable?

Unknown Executive: It's maybe five, 6% of total revs, but it was up mid-twenties percent or so year over year. What, what was that? And is that sustainable?

Unknown Executive: Yeah, I think I think it is right. So we've got a client who is expanding their relationship with us. They've been a client and a really good client and a top five client for an extended period of time, but we found new ways to engage with them. We found other things to do with them.

Speaker Change: Yeah, I think I think it is right so we've got a client who is expanding their relationship with us

Speaker Change: They've been a client, and a really good client, and a top five client for an extended period of time, but we found...

Speaker Change: New ways to engage with them. We found other things to do with them. We're seeing volume increases with this customer. So, overall, the relationship is healthy and it's helping, you see it largely impacting our utility space.

Unknown Executive: We're seeing volume increases with this customer, so overall, the relationship is healthy, and it's helping you see it largely impacting our utilities. Thanks guys. Thanks Dave. Thank you.

Speaker Change #100: Got you. Thanks, guys.

Unknown Executive: One moment for the next question. The next question comes from Vincent Colicchio with Barrington Research. Your line is open.

Speaker Change #101: Thanks Dave. Thank you. One moment for the next question.

Speaker Change #102: The next question comes from Vincent Colicchio with Barrington Research. Your line is open.

Vincent Alexander Colicchio: Yes, I think your case of your headcount increased by 1% sequentially. Could you help us understand how your headcount may grow relative to revenue growth for the balance of the year? Yeah, so from a headcount perspective, the reason why headcount grew was, you know, we've had some, because of the Q4 wins, we've had, for example, some headcount to account for the increase in Q2, and they've also mentioned that, you know, in Q2, we will have a reduction in the healthcare client, and therefore, utilization of headcount would be low in Q1.

Vincent Alexander Colicchio: Yes, I think your case of your head count increased 1% sequentially.

Vincent Alexander Colicchio: Can you help us understand how your headcount may grow relative to revenue growth for the balance of the year?

Vincent Alexander Colicchio: And we expect that to improve as we go into Q2 and Q3 onwards and as we start ramping up other deals as well. So from a headcount perspective, I think that's the reason why Q1 came in slightly higher versus Q4. But as we go forward in the year, and as we, as the healthcare client ramps down, I think we will see a more steady increase in headcount versus revenue. Yeah, I think the other thing that's important, Vince, and I'm glad you brought it up.

Speaker Change #104: Yeah, so from a Hedcon perspective, the reason why Hedcon grew was, you know, we've had some, because the Q4 wins, we've had, for example, some Hedcon to account for the increase in Q2.

Speaker Change #105: Dave also mentioned that in Q2 we will have the reduction in the health care client and therefore utilization of headcount has been low in Q1 and we expect that to improve as we go into Q2 and Q3 onwards and as we start ramping up other deals as well.

Speaker Change #105: So from a headcount perspective, I think that's the reason why Q1 came in slightly higher versus Q4 But as we go forward in the year and as we as we as the healthcare client ramps down I think you will see a more steady increase in headcount versus revenue

Unknown Executive: The ramp down that we're going to see in Q2 relative to the healthcare client was a heavily technology-enabled set of services. So the reality is what you're going to see is a disproportionate ramp-down in revenue relative to a ramp-down in headcount. This is going to affect, for the full year, it's going to affect our revenue per employee metrics, but essentially, to re-accelerate that growth and to re-accelerate it based on the four deals that we signed in Q4, the one we signed in Q1, and the deals that are in the large deal pipeline, we're going to need to be aggressively hiring through the rest of the year. And Keshav, kudos to your investments on the sales side.

Speaker Change #105: Yeah, I think the other thing that's important, Vince, and I'm glad you brought it up, the ramp down that we're going to see in Q2 relative to the healthcare client was a heavily technology-enabled set of services.

Speaker Change #106: So the reality is what you're going to see is a disproportionate ramp down in revenue relative to a ramp down in headcount.

Keshav R. Murugesh: I mean, the increase in transformational deals in the pipeline looks fairly impressive. Are you expecting that pipeline to continue to expand for transformational deals as the year progresses? Yeah, Vince, so first of all, thank you for that compliment. It's because of the new restructuring that we did in terms of our corporate, you know, kind of structure, as well as the credit goes to all the, you know, people managing each of the strategic business units and sales of this company. So it's all to their credit.

Keshav R. Murugesh: But having said that, I must tell you, this is the new way of business for WNS for the long term. So not only will we continue to focus on building a new, large, transformational deal impact. But I think over a period of time, as each of these deals comes to fruition, I think there's a new discipline, and there's a new excitement about creating this pipeline, which I think will carry well into 2026 and 2027.

Keshav R. Murugesh: I think that's the most exciting area of growth for WNS. And again, I just want to underline the fact that these are deals being created where there is no deal, you know, that is coming out in the market. It is actually coming as a result of our senior people interacting with decision makers on the other side, understanding their pain points, understanding the value proposition that they would like to have, and then crafting a solution on a win-win basis, leveraging the best of WNS digital domain data, AI, generative AI, and outcome-based, you know, impact. And one other point I'd like to make, Vince, and it's subtle, but I think it's important.

Speaker Change #109: On a win win basis, leveraging the best of Dublin is digital domain.

Speaker Change #106: Generative AI and outcome based.

Speaker Change #107: The impact from pricing.

Speaker Change #107: And one other point I would like to make Vince and it's subtle but I think it's important we have historically as a company talked about large deals as being 5 million plus in HCV are annual contract value.

Unknown Executive: We've historically, as a company, talked about large deals as being $5 million plus in ACV, or annual contract value. The $20 plus deals that Keshav spoke about in his prepared remarks are all more than $10 million in ACV. So the reality is we still have what we consider historically to be large deals in the pipeline. We still have expansion opportunities in the pipeline. But this very large deal pipeline, and several of them having moved down a path over the last couple of quarters here, that's several. It's something that's very new for us, and it's really in addition to what we've historically seen as opposed to in places.

Speaker Change #113: The 20 plus deals that <unk> spoke about in his prepared remarks are all more than $10 million ACB.

Speaker Change #107: So the reality is we still have what we considered historically to be large deals in the pipeline, we still have expansion opportunities in the pipeline, but this very large deal pipeline and several of them, having moved down down a path over the last couple of quarters here last several quarters.

Speaker Change #107: It's something that's very new for us and it's really in addition to what we've historically seen as opposed to in place up.

Unknown Executive: Thanks, guys. Thanks, Blaine. 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 #108: Thanks, guys.

Vince: Thanks Vince.

Speaker Change #112: And this time, we have no further questions in the queue.

Speaker Change #111: This will conclude today's conference call. Thank you for your participation you may now disconnect.

Speaker Change #108: Okay.

Speaker Change #108: Okay.

Speaker Change #108: [music].

Speaker Change #108: Okay.

Speaker Change #108: Yes.

Speaker Change #108: [music].

Unknown Executive: Ltd.