Q2 2025 WNS (Holdings) Ltd Earnings Call

October 17, 2024

Good morning, and welcome to the WNS Holdings fiscal 'twenty 'twenty five second quarter earnings Conference call at this time, all participants honest and only mode.

After managements prepared remarks, we will conduct a question and answer session and instructions for how to ask a question will follow at that time.

As a reminder to call is being recorded for replay purposes.

Speaker Change: Now I would like to turn the call over to David Mackey, WNS Executive Vice President of Finance and head of Investor Relations David.

David Mackey: Thank you and welcome to our fiscal 2025 second quarter earnings call with me today on the call I have wns's CEO, <unk>, <unk> and Wns's CFO <unk> said.

David Mackey: A press release detailing our financial results was issued earlier today.

David Mackey: This release is also available on the Investor Relations section of our website at Www Dot WNS Dot com.

David Mackey: Today's remarks will focus on the results for the fiscal second quarter ended September 32024.

David Mackey: Some of the matters that will be discussed on today's call are forward looking.

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.

David Mackey: Such risks and uncertainties include but are not limited to those factors set forth in the company's form 20-F.

David Mackey: Document is also available on the company website.

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

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

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

David Mackey: Net revenue is defined as revenue less repair payments.

David Mackey: Adjusted operating margin is defined as operating margin, excluding amortization of intangible assets share based compensation acquisition related expenses or benefits and impairment of goodwill and intangible assets. We are also excluding costs related to our ABS program termination and costs associated with the transition.

David Mackey: Voluntarily reporting in U S domestic issuer forms.

David Mackey: Adjusted net income or Eni is defined as profit excluding amortization of intangible assets share based compensation acquisition related expenses or benefits goodwill and intangible asset impairment.

David Mackey: Program termination costs.

David Mackey: Transition to voluntarily reporting on U S domestic issuer forms and all associated taxes.

David Mackey: These terms will be used throughout the call.

Speaker Change: I would now like to turn the call over to Wns's CEO <unk> <unk>.

Speaker Change: Hey, Thank you David good morning, everyone.

Speaker Change: WNS second quarter revenue and margin.

Speaker Change: Largely in line with company expectations.

Speaker Change: While EPS came in above forecast.

Speaker Change: Based on one time tax benefits of $9 million.

Speaker Change: The company posted net revenue of 310 7 billion.

Representing a year over year decrease.

Speaker Change: Four 4% on a reported basis.

Speaker Change: And five 2%.

Speaker Change: On a constant currency basis.

Speaker Change: After adjusting for foreign exchange.

Speaker Change: Versus the previous quarter net revenues decreased by 0.6% on a reported basis and by one 5% on a constant currency basis.

Speaker Change: Sequentially the ramp of four large deals sold in fiscal Q4 of last year and broad based demand for process automation and cost reduction initiatives in the first half.

Speaker Change: Of 2025.

Speaker Change: Largely offset the loss of a large healthcare client and continued reductions in our online travel revenues.

Speaker Change: During the second quarter, we added nine new logos and expanded 41 existing relationships.

Speaker Change: For the full year guidance has been lowered to reflect continued reductions in online traveling volumes and slower than expected conversion of large deals.

Speaker Change: While the large deal pipeline continues to expand the timing of these contract signings as well as associated revenue ramps is proving difficult to predict.

Speaker Change: As a result at this time, we have removed the large deal revenue contribution from our fiscal <unk> guidance.

Speaker Change: Currently we have more than 20 large deals representing over $500 million.

Speaker Change: Annual contract value spread across all key verticals services as well as geographies.

Speaker Change: We are making good progress moving these deals through the pipeline and remain confident that WNS is rather position to win more than our fair share of these opportunities.

Speaker Change: For the past several quarters, we've been discussing how WNS is increasingly delivering outcomes for our clients.

Speaker Change: The intersection of domain digital as well as data.

Speaker Change: We continue to make strategic investments in all three of these areas with a focus on developing proprietary technology tools and platforms.

Speaker Change: Forging new strategic relationships as well as reshaping our global talent.

Speaker Change: Today, I want to spend a little time.

Speaker Change: Highlighting our organizational capabilities and progress in our data.

Speaker Change: Critics and AI practice.

Speaker Change: At WNS, we believe the true power of analytics.

Speaker Change: Realized when combined with technology.

Speaker Change: Domains specialization and.

Speaker Change: And process expertise.

Speaker Change: As a result, we are focused on ensuring.

Speaker Change: With analytics and technology are integrated into.

Speaker Change: Everything we do from customer so.

Speaker Change: Elections to end to end transformational engagements.

Speaker Change: Today WNS, both our mature robust and differentiated analytics practice that has been built over the past 20 years through a combination of organic investments as well as strategic acquisitions.

Speaker Change: At the core of our analytics practice is data management, which is the foundation for <unk>.

Speaker Change: All analytics work, including AI as well as generate.

Speaker Change: WNS has built a strong portfolio of data management services and platforms that enable our clients to source clean organized integrated as well as secure their data to unlock its inherent value.

Speaker Change: This includes expertise in converting unstructured data from sources like E mails.

Speaker Change: Images text audio sensors, as well as social media posts into structured data to create usable analyzed cable constructs.

Speaker Change: Our strength in optimizing get a quantity and managing data as an assets are critical to.

Speaker Change: Delaware actionable insights as well as business outcomes.

Speaker Change: In addition, our strategic acquisitions over the past several years have helped turbocharge wns's ability to combine analytics and technology to create reusable components, which underpin our services and solutions.

Speaker Change: These proprietary assets are stitched together with domain and process expertise, adding human in the loop.

Speaker Change: Create product <unk> services across both horizontal and vertical.

Speaker Change: Our product ties services enabled WNS to accelerate speed to market and deploy our solutions at scale, while maintaining the flexibility to co create customized differentiated solutions for each of our clients.

Speaker Change: To date.

Speaker Change: WNS has built AI analytics assets across all key horizontals, including finance and accounting procurement and supply chain and customer support.

Speaker Change: The company has also created unique industry specific capabilities, such as claims management and recovery services for insurance companies.

Speaker Change: R&D and clinical specialization offerings or big pharma revenue growth management services for a retail and CPG pumps and at <unk> documentation platform, our shipping and logistics.

Speaker Change: This offering has enabled WNS inadequate.

Speaker Change: Attracts some of the worlds largest brands as clients, including industry leaders and beverages.

Speaker Change: Pharma as well as restaurants.

Speaker Change: Within our data practice, we have also been investing in the expansion and enhancement of our front office.

Speaker Change: Onsite centric consulting capabilities and with the pace of change and technological advancement accelerated clients are increasingly looking for experts to help them assets. The current situations and help them co create solutions.

Speaker Change: For the past two years WNS has built a global analytics drive solutions team of senior resources that is solely focused on helping clients achieve these objectives.

Speaker Change: These senior level consultants have data as well as domain specialist backgrounds.

Speaker Change: Now responsible for helping clients with the data AI and analytics requirements.

Speaker Change: Strategies, GAAP analysis, Roadmaps change management governance and processes.

Speaker Change: The upfront consulting efforts help set the foundation for a successful business transformation programs as well as value driven relationships.

As a result of these investments WNS is analysis is experiencing strong growth. Despite the weak macro environment with our standalone analytics work growing at 20% CAGR.

Speaker Change: For the past three years.

Speaker Change: And while Standalone reported another fixed today represents 14% of <unk> revenue is it safe to say that the majority of total company revenues now has analytics embedded as part of the client solution.

Speaker Change: All of the large deals in our pipeline have technology enabled analytics is a critical component of our value proposition.

Speaker Change: WNS is solid growth and expanded capabilities in data analytics.

Speaker Change: We are increasingly being recognized by the analyst and the advisor community.

Speaker Change: Now being named the market leader by HFF and analytics AI data platforms and automation services.

Speaker Change: Pro forma for analytics business process services by Everest.

Speaker Change: A leader in data services.

Speaker Change: Services.

Speaker Change: <unk> India magazine.

Speaker Change: And then AI game changer by mass form.

Speaker Change: The company also received seven Stevie Awards for its AI machine learning and <unk> solutions, and then Excellence award from business Intelligence group for our.

Speaker Change: Jen AI capabilities.

Speaker Change: The analyst and advisors remain important to gatekeepers to many client initiatives. This positive recognition as <unk>.

Speaker Change: To go to ensure that WNS remains top of the mind.

Speaker Change: Our sourcing opportunities.

Speaker Change: In summary.

Speaker Change: Combining the power of data digital as well as domain today, WNS is able to deliver impactful business outcomes for our clients, including generating actionable insights to improve decision, making and reducing business risk enhancing customer experience.

Speaker Change: Yes.

Speaker Change: And enabling innovation and competitive differentiation.

Speaker Change: With respect to our fiscal 2025 guidance, while we remain confident comfortable and our EBITDA.

Speaker Change: They're going to close some of the large opportunities given the uncertain timing we have removed the large deal revenue contribution from our updated projections guidance also assumes a further reduction in opioid revenues in the second half of the year based on current volume trends.

Speaker Change: And despite these challenges we are comfortable in our ability to sequentially grow revenues in fiscal Q.

Speaker Change: Q3, as well as Q4, providing solid momentum exiting the year.

Speaker Change: Any second half large scale.

Speaker Change: Large deal signings.

Speaker Change: Should provide some incremental revenue this year, but more importantly will provide enhanced visibility.

Speaker Change: <unk> revenue acceleration in fiscal 2026.

Speaker Change: WNS remains committed to continuing our investments in domain expertise data analytics and technology enabled offerings, leveraging AI and <unk>.

Speaker Change: Sure our ability to deliver long term profitable growth and sustainable shareholder value.

Speaker Change: I'd now like to turn the call over to our CFO R&D spend to further discuss our results as well as outlook LNG.

Speaker Change: Thank you Cassia.

Speaker Change: In the fiscal second quarter <unk> net revenue came in at $310 7 million.

Speaker Change: Down four 4% from $325 million posted in the same quarter of last year and down five 2% on a constant currency basis.

Speaker Change: Sequentially.

Speaker Change: Net revenue decreased by $4.

Speaker Change: 6% on a reported basis and one 5% constant currency.

Speaker Change: The quarter over quarter revenue decline was driven by the loss of a large healthcare client.

Speaker Change: Volume reductions in online travel and ongoing weakness in discretionary project based revenues.

Speaker Change: These revenue headwinds were partially offset by the ramp up of large deals closed in Q4 and healthy demand for digitalization and cost reduction focus initiatives in.

Speaker Change: In fact <unk>.

Speaker Change: <unk>, the large health care client loss.

Speaker Change: Each of our verticals posted sequential growth this quarter.

Speaker Change: In Q2.

Speaker Change: <unk> recorded $1 2 million.

Speaker Change: Of shocked.

Speaker Change: High margin revenue.

Speaker Change: Adjusted operating margin in Q2 was 18, 6% as compared to 21, 5% last year and 18, 4% last quarter.

Speaker Change: Euro bond.

Speaker Change: Adjusted operating margins.

Speaker Change: <unk> as a result of lower revenue and employ utilization.

Speaker Change: Increased investments in infrastructure and sales.

Speaker Change: And higher SG&A levels, resulting from $2 1 million.

Speaker Change: Of expense provision reversals for performance incentive and bad debt in Q2 of last year.

Speaker Change: These headwinds were partially offset by favorable currency movements.

Speaker Change: Sequentially.

Speaker Change: Margin improvement was driven by favorable currency movements.

Speaker Change: The company's net other expense was $1 $4 billion of net expense in the second quarter.

Speaker Change: Compared to zero point $1 billion of net expense in Q2 of fiscal 2024, and <unk> $3 million of net expense last quarter.

Speaker Change: Both year over year.

Speaker Change: And sequentially. The unfavorable variance is a result of higher debt levels and lower cash balances driven primarily by our share repurchases.

Speaker Change: WNS effective tax rate for Q2 came in at eight 5% as compared to 22% last year and 23, 1% in the prior quarter.

Speaker Change: The Q2 tax rate reduced by almost $9 million.

Speaker Change: Primarily due to one time tax benefit associated with the reversal of a deferred tax liability on <unk> guidance.

Speaker Change: Both year over year and sequentially other changes in the effective tax rate was driven by geographical profit mix and the percentage of work delivered from tax incentive facilities.

Speaker Change: The company's adjusted net income for Q2.

Speaker Change: Was $51 5 billion.

Speaker Change: Compared with $54 4 million in the same quarter of fiscal 2024.

Speaker Change: $44 million last quarter.

Speaker Change: Adjusted diluted earnings were $1 13 per share in Q2 up from $1 10 in the second quarter of last year and drove 93 last quarter.

Speaker Change: As of September 30, primarily for.

Speaker Change: Balances in cash and investments totaled $221 5 billion.

Speaker Change: And the company had $262 8 million in debt.

Speaker Change: In the second quarter, WNS generated $43 $6 million of cash from operating activities incurred $12 7 million in capital expenditures.

Speaker Change: We made debt repayments of $43 million.

Speaker Change: The company also repurchased $1 billion 156000 shares of stock at an average price of $56 61.

Speaker Change: Which impacted Q2 cash by $71 7 billion.

Speaker Change: Through the first half of fiscal 2025.

Speaker Change: <unk> repurchased two 8 million shares of stock at an average price of $53 and 46 days and a total cost of $149 7 million.

Speaker Change: DSO in the second quarter, <unk> 38 days as compared to 35 days reported in Q2 of last year and 36 days last quarter.

Speaker Change: With respect to other key operating metrics headcount at the end of second quarter was 62, 951, and our attrition rate was 34%.

Speaker Change: As compared to 30% reported in Q2 of last year and 34% in the previous quarter.

Speaker Change: We expect attrition to average in the low to mid 30% range.

Speaker Change: But the range could remain volatile quarter to quarter.

Speaker Change: Bill feed capacity at the end of Q2 increased to 14001.

Speaker Change: And WCS averaged 72% work from office during the quarter.

Speaker Change: In our press release issued yesterday government provided a revised full year guidance for fiscal 2025.

Speaker Change: Based on the company's current visibility levels, we expect net revenue to be in the range of 1 billion and $250 million to $1 billion and $296 million.

Representing <unk>.

Speaker Change: Year over year, a range of minus 3% to plus 1% on a reported basis.

Speaker Change: On a constant currency basis, the guidance range is from minus 4% to zero percent.

Speaker Change: Application mentioned, our fiscal 2025 guidance assumes no revenue contribution from the large deal pipeline.

Speaker Change: Ongoing reductions in online travel volumes.

Speaker Change: No improvement in discretionary project spending.

Speaker Change: Guidance also excludes short term revenues and any incremental revenue from a large insurance captive.

Speaker Change: Topline projections assume an average British pound to U S dollar rate.

Speaker Change: One key one for the remainder of the fiscal year.

Speaker Change: Full year adjusted net income for fiscal <unk> is expected to be in the range of $190 million to 200 billion.

Speaker Change: Based on $83 five.

Speaker Change: <unk> to U S dollar exchange for the remainder of fiscal 2045.

Speaker Change: This implies.

Speaker Change: Adjusted EPS of $4 13 phase two.

Speaker Change: Two $4 35.

Speaker Change: Assuming a diluted share count of approximately 46 million shares.

Speaker Change: With respect to capital expenditures.

Speaker Change: <unk> currently expects our requirement for fiscal 2025 to be up to $65 million.

Speaker Change: We will now open the call for questions.

Speaker Change: Operator.

Speaker Change: Thank you, ladies and gentlemen, if you wish to ask a question at this time you will need to press star one on your telephone and we are planning to be announced if your question has been answered or you wish to remove yourself from the queue. Please press star one again, and then Joseph Tom and everyone on the call to participate please limit yourself to one question.

Speaker Change: One follow up.

Speaker Change: Standby, while we compile the Q&A roster.

Speaker Change: And our first question coming from the line of knees Vinson with Deutsche Bank. Your line is now open.

Speaker Change: Hi, guys. Thanks for the question I wanted to delve a little more into the large deal pipeline and win rates. So.

Speaker Change: So you had the four large deals in <unk> of last year, one large deal <unk>. It sounds like none this quarter at the same time can you talk about how the large deal pipeline is at record levels. So.

Speaker Change: So I'm guess I'm, just hoping for a little more clarity on the lower visibility called out versus maybe realizing lower win rates and what you've seen historically.

Speaker Change: It goes to the comments from last quarter I think you said that the large deal wins baked into the prior guide would imply a below average win rate and the pipeline. So just trying to get a sense of how much the change in guidance being driven by <unk>.

Speaker Change: General demand trends versus may be increased pressure on the competitive or pricing side of things.

Speaker Change: Okay, I think I'll take that so first of all I must mention once again want to underline. The fact that the overall pipeline for sale continues to be very strong and at record levels across most of our businesses.

Speaker Change: Packed that we spoke about for <unk> is essentially because of what I would call. The perfect strong storm around two or three specific areas that were called out in the prepared remarks.

Speaker Change: At this point in time, we continue to have a very strong pipeline of large deals.

Speaker Change: Let me just explain how these things are progressing today I would say that we have almost more than 25 plus.

Speaker Change: Large deals.

Speaker Change: Our 10 million plus in terms of ACB.

Speaker Change: ECB and many of these are very strategic in nature.

Speaker Change: Need very strong involvement both sides of the house, our side as well as the client site.

Speaker Change: What happened with many of these deals which we are now understanding better is that as the client gets much more comfortable rich they're interacting with WNS.

Speaker Change: What actually happened.

Their focus.

Speaker Change: <unk> is built on the comfort around our understanding of their business domains ready rail they definitely want to see much more attention.

Speaker Change: From the top of the house, which means I need to be personally involved in many of these deals.

Speaker Change: Many of these deals are focused not just on.

Speaker Change: Regular transformation are.

Speaker Change: Cost leadership for the Cline.

Speaker Change: Moreover, this focus around revenue accretion, which means involvement of many more layers inside the cloud.

Speaker Change: <unk> site.

Speaker Change: Want to also mention that this also means.

A very strong partnership Margaret between both sides.

Speaker Change: And it also means in a positive way that in many of these deals we've been able to more.

Speaker Change: The narrative away from procurement, which is very typical for WNS in terms of.

Speaker Change: Making sure that over a period of time.

Speaker Change: Typically result in a win win.

Speaker Change: Both sides are not driven by a procurement approach to these programs.

Speaker Change: All of these deals in terms of size and complexity as well as in.

Speaker Change: And the nature, a very very strategic and it's also by definition means more involvement from an executive committee on the other side often boards getting involved in the decision on the other side.

Speaker Change: Board from WNS. This slide also getting involved in terms of taking some of these decisions and I think that is the missteps that we make.

Speaker Change: You bet.

Speaker Change: Yeah. Some of this revenue into our guidance. If you look at how we actually have made progress a number of deals size of deals and the volumes now being predicted by some of these prospects are even higher than what we saw last time I mean, we just guided you just mentioned that we have almost $500 million of ACB in some of these deals.

Speaker Change: But the reality is it is taking a little longer.

Speaker Change: We probably assume that builds on the fact that we find some other deals in fourth quarter.

Speaker Change: At the same progress our findings.

In Q2, but we are only done at this point in time has been more conservative in terms of taking that revenue out of that.

Speaker Change: The pipeline for the rest of the year, because we understand that even when we close. This during Q3 Q4 are better where the potential for revenue. During this year will be minimal but potential for revenue in the next year will be higher I want to end again by saying these deals are very very critical for WNS.

Speaker Change: We're changing the game for us for the long term and we believe Super confident about the fact that the $1 million to $3 million means that we are continuously remain as well as some of these deals as they win.

Speaker Change: Tremendous comfort confidence.

Speaker Change: In terms of long term and some of it is also being reflected in terms of the head count that you may have seen on our books.

Speaker Change: Just to add to that real quick Nate I think the other thing.

Speaker Change: Specifically on the question you asked about win rates the removal of the large deal pipeline has nothing to do with win rates.

Speaker Change: We still believe we're extremely well positioned in these opportunities I think the removal of the large deal pipeline is about timing and not are not not relative to our expectations about the number of deals that we can win or how we're positioned within these deals.

Speaker Change: Okay.

Speaker Change: Yes, that's great to hear on the win rates and I think it was a prudent thing to take those out of the guide so.

Speaker Change: I appreciate it I guess for the follow up maybe taking a step back when I when I think about the history of WNS, you've obviously been able to differentiate yourself with a history of strong execution and consistent double digit organic growth and then being able to set expectations that you can kind of beat and raise as you move through the fiscal year. Obviously, we're in the midst of a really weak macro and still a lot of uncertainty out there, but maybe take.

Speaker Change: I think last call you mentioned that you were well set up for next fiscal year, but obviously a ton of puts and takes it takes impacting the business right. Now. So I think it would just be helpful to hear your thoughts on the businesses ability to get back to that strength you've demonstrated historically.

Speaker Change: Yes.

Speaker Change: We are super confident about our ability to get back to strong growth rates. Once again I must mention that what we have experienced this year very specific client related or specific issues that we've had to call out for this year nothing to do with the demand trends nothing to do with the tailwind we are seeing in the industry.

Speaker Change: In fact, we would expect that with all the uncertainty <unk> seen outside.

Speaker Change: We will only benefit being one of the.

Speaker Change: Legacy players and transformation.

Speaker Change: Kind of players in the industry again, I must mention that most clients are looking for.

Speaker Change: Partners, who come in with very strong understanding of digital data domain that we spoke about but most of the deals are also being led by technology and other things.

Speaker Change: In some cases generative AI as well all areas that WNS has traditionally invested in and continues to invest in up very strongly.

Speaker Change: Again, I must say that we are already.

Speaker Change: Got a lot of confidence in terms of.

Speaker Change: Revenue momentum for Q3, as well as Q4 coming back.

Speaker Change: In terms of sequential growth and as we win some of these other means the large deals as well as the traditional bread and butter.

Speaker Change: Hello.

Speaker Change: We believe that we are probably among the lowest.

Speaker Change: Are the worst of the worst is now behind us in terms of where we could be and.

Speaker Change: The future stages, one of solid growth as well as profitability.

Speaker Change: Just to add a little color to that Nate I think.

Speaker Change: As was mentioned in the prepared remarks, the underlying growth in Q2 was extremely healthy I mean, if you take out the large health care client loss, we grew in excess of 3% sequentially in Q2 the guidance. Despite removing the large deal pipelines were looking at $320 million in Q3, which represents a <unk>.

Speaker Change: 3% sequential growth from Q2, and obviously if you do the math to what's left for Q4, you're looking at a 2% to 3% sequential growth from Q3 to Q4, so the confidence in returning to double growth double digit growth comes from the 3% sequential growth rate that we're now posting despite.

Speaker Change: Not having the momentum from the large deal pipeline.

Speaker Change: I appreciate the color and good to hear about the long term confidence. Thank you.

Speaker Change: Thanks Nate.

Speaker Change: Thank you.

Speaker Change: Next question coming from the line of Bryan Bergin with TD Colin Your line is open.

Bryan Bergin: Hi, Thanks for taking my question can you comment on the OTA side of equation here just how much was this pressure.

Bryan Bergin: A result of some of the guidance reduction as well.

Speaker Change: Sure. So let me take that when you look at the guidance reduction for the full year.

Speaker Change: We're looking at about a 1% 2% impact from.

Speaker Change: The Q2 reduction in OTT and our expectation of continued volume reductions in the back half of the year. So again I think we've been we've tried to be conservative here about our expectations for the sector and we've discussed at length over the last several quarters that the reasons for the.

Speaker Change: The challenges that we've had and the otas sector, whether that's automation, whether that's <unk>.

Speaker Change: Strategy change, whether thats customer specific challenges within the Ot space.

Speaker Change: And their inability to forecast their volumes and predict predict accordingly, so I think we've taken a very conservative approach to the otas space, but I also want to reiterate some of the messages that we brought last quarter, which is that if we can't be impactful to the client if we cant Cree.

Speaker Change: Great value for the customer and if the client is not willing to recognize the value that we're delivering then thats not busy.

Speaker Change: Business that we want to be right. So we're not going to play in low end commoditized types of work and if the clients taking a commoditized view of these services and solutions, then were going to be getting out of it.

Speaker Change: Yes, but I must just add one element there which is.

Speaker Change: While that is our stated objective and we're having lots of interesting discussions with the client.

Speaker Change: Clients in the sector generally we also realize that all of them.

Speaker Change: Are also understanding that business model transformation.

Speaker Change: <unk> sales also is going to be critical in order to survive the onslaught of what's happening in the market for them long term and therefore I must say there are also lots of healthy discussions happening between both sides in terms of things that we can do for them that go well beyond some of the traditional services.

Speaker Change: May I have got commoditize that which we are walking away from but allows us to bring the rest of the power of WNS in terms of digital data demand.

Speaker Change: I'll take them into higher value kind of services. So we'd have a watson space in terms of how that governance.

Speaker Change: Suffice to say, Brian that our or to your revenues in the second quarter. We're now below 4% of total company.

Okay. Okay.

Speaker Change: And then as it relates to the just the head count growth sequentially can you just comment where where are you seeing that growth, what's attributing to that to that expansion.

Yes, So let me take that so look.

Speaker Change: They've talked about it.

Speaker Change: Our large client loss.

Speaker Change: Youll see that there is growth that's coming in Q2.

Speaker Change: Our guidance also implies a 2% 3% sequential growth year on year. So the hiring for that growth. We have already started hiding in the head count increase actually.

Speaker Change: Sorry.

Speaker Change: We are in the pipeline and the growth momentum that Gary.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: So we've already started to Heidi we are expecting to increase the revenue.

Speaker Change: In Q4.

Speaker Change: Our business in <unk>.

Speaker Change: Led us to hire.

Speaker Change: <unk> 90 to 100 reviews are good months for us to ramp and creative employees that's helpful. Doug.

Speaker Change: Heading into the.

Speaker Change: Numbers that youre seeing in Q.

Speaker Change: I think the other thing that's embedded in our if you touched on it a little bit.

Speaker Change: If youll recall, the the large healthcare client that we lost.

Speaker Change: As a technology heavy service offering right. So when you look at kind of how that works its way through through our through our sectors and things like that what Youll see is that while it was very high revenue for us the number of employees supporting that service offering we are relatively low so part of what you're seeing here is that as we replace.

Speaker Change: The health care loss client revenue with more traditional types of WNS revenues, it's going to take more people to backfill that head count.

Speaker Change: Got it okay. Thank you.

Speaker Change: Thank you.

Speaker Change: And our next question coming from the line of <unk> Tandon with Needham <unk> Company. Your line is open.

Speaker Change: Thank you good morning, Acacia and Dave I wanted to just get a better grasp on the headwinds that you called out could.

Speaker Change: Could you just walk through the timing when these headwinds will start to abate in other words when do we get to a model when it's a clean slate and we can see that growth start to show up, especially as these big deals start to ramp up potentially in a few quarters based on some of your comments.

Speaker Change: Yeah look I think we've talked about in general mines, three meaningful headwinds right over the last year year and a half.

Speaker Change: One is the large health care client loss, one is the shift from onsite to offshore of one of our large internet based clients and the other has been the otas volumes.

Speaker Change: Obviously this quarter was the the ramp down of the large health care client.

Speaker Change: So I guess, depending on whether youre looking at this on a sequential basis or a year over year basis.

We can have different discussions about kind of the headwinds, but on a sequential basis at any rate.

Speaker Change: The vast majority of this will have abated by Q3.

Speaker Change: So we don't have a sequential impact from Q2 to Q3 from the from the large health care client. We don't have the sequential impact from Q2 to Q3 from the Internet clients moving offshore and we have a modest expected headwind within the Ot able items.

Speaker Change: Got it that clears it up.

Speaker Change: And then just as a follow up I wanted to ask about margin expectations. What is embedded in the guide in the back half maybe you could walk through gross margins and the operating margins just trying to get a sense of pure <unk> going to be a little bit more fixated on expense management in the face of maybe the slower ramp of those larger deals just any color on the margin project.

Speaker Change: In the back half and your expectations to get back to that low twenties EBIT margin.

Speaker Change: Longer term as revenue start to come through.

Speaker Change: Yeah, I think Mike our expectation is that we're going to get back into the low twenty's by by the fourth quarter and that we will see margin expansion on the adjusted operating margin line in both Q3 and Q4.

Speaker Change: We're probably looking in the 19% to 20% range for adjusted operating margins for the full year.

And that's really at the end of the day, because we've removed the revenues associated with the large deals, but the investments that we've made in the business, whether that's into expanding our capabilities or building out our infrastructure, which we need to continue to do.

Speaker Change: We're not going to scale back on the bottom line is we believe in the long term health, we see the momentum of the business, we need to be planning for the future. So those investments are not going to be scaled back the infrastructure spend and the build of our global capability is not going to be scaled back.

Speaker Change: And if you look at the real reason that we've got a little bit of margin pressure on a year over year basis. It's an expense coverage issue at the end of the day, our SG&A rate is going to run a little bit higher this year, because it doesn't make sense to take those numbers down for two quarters, and then build them back up starting in it.

Speaker Change: Starting in the first quarter of next fiscal so at this point in time, we are going to see steady margin expansion through the back half of the year, but the reality is the full year margins are going to be a little bit below where we were last year.

Speaker Change: Yes, Michael ahead in fact, I just mentioned one thing. This is now all about growth.

Speaker Change: And not just about margin our focus now is we believe that the worst is now going to be behind us or the next.

Speaker Change: A few weeks months quarters based on all that we have announced we believe that we have a very very strong pipeline. We believe that we have to come back in terms of overall growth.

Speaker Change: That's where we are focused.

Speaker Change: Our investing in and we are confident that these investments that we're making in all the core areas, including sales and marketing will help us close deals and come back to the growth rates that we have traditionally delivered.

Speaker Change: The market.

Speaker Change: So I'd just say this already just to add the other question on gross margin and if you see our gross margins at last months.

Speaker Change: Flat versus last year and that gives us confidence that our underlying business continues to remain profitable while we can do to invest in installing the field's divestment.

Speaker Change: So fundamentally business continues to be profitable, we have invested in our sales and marketing and as the growth comes back operating modular.

Speaker Change: That's great color. Thank you all.

Speaker Change: Thanks, Mike.

Speaker Change: Thank you and our next question coming from the line of Puneet Jain with Jpmorgan. Your line is open.

Puneet Jain: Yes, hi, thanks for taking my question.

Tissue could you double click on client behavior as it relates to incorporating AI or analytics and their processes is their behavior different across new versus existing clients.

Puneet Jain: Are there any verticals, where you're seeing demand stronger than others.

Puneet Jain: Also you previously mentioned Jimmy.

Puneet Jain: Jim taking 5% of revenue from <unk> this year.

Puneet Jain: Is that still on track given some of the large deal contribution that keeps like have been pushed out.

Speaker Change: Yes, Puneet that's an excellent question. So just in terms of behavior as you would expect.

Speaker Change: Based on the stress our client is facing on the opportunity that we're seeing in the market.

Speaker Change: The different verticals, obviously is behaving slightly differently.

Speaker Change: A lot of time talking about things like that and I don't want to go down that path.

Speaker Change: Generally if you look at it.

Speaker Change: Everyone has a story, we're very relevant companies.

WNS understand the domain side very rather has invested so much in.

Speaker Change: In our digital and analytics and.

Speaker Change: And <unk> has been around for a while our ability to incisively use AI to deliver better outcomes for our clients has now got accelerated our enabled our sale was a loss, possibly 18 months or so because there is much greater belief backed model.

Speaker Change: Generally demand is something that everyone understands it can be something that can make.

Speaker Change: Giant models much smarter can help them with cost challenges can help them with their transformation agenda and therefore, all the past so many quarters. Our focus has been on first educating clients about how we can help them with this model about how they don't have to invest in licenses.

Speaker Change: Sure.

Speaker Change: To get the benefits of some of these models and then over a period of time help them pinpoint which are the processes that would actually benefit from some of these business model changes.

Speaker Change: So I think.

Speaker Change: I think at this point in time, what we're seeing as people now realize that this is one more change in technology and model that is going to help in terms of transformation transforming data agenda being more relevant to their end customers doing things smarter better faster more in a more impactful.

Speaker Change: <unk>, so to speak and therefore to do that as a client you need to work with.

Provider or a partner, who really is an extension of their enterprise, who understands the domain understands our history understand your strategy understands where you want to be over a period of time and what are the both leave us for you on that as well as newness in our stores each and every time right. So first and foremost.

Speaker Change: I would say that that is a huge advantage that we have because of the shared knowledge of our customers' businesses or verticals the transformation agenda and our points of view on how dependent are changing.

Speaker Change: That's the first thing the second thing is we spoke about generative yeah. We are.

Speaker Change: Now very focused after educating many of these customers in terms of leading them down specific box now.

Speaker Change: To help them understand that.

Speaker Change: Yes.

Speaker Change: <unk> offerings that we bring to the table, we make them not only more efficient, but also help transform their business models and so what's actually happening is it is allowing them to focus much more on the external but allowing us to manage the rest program coming to large deals obviously when you entered.

Speaker Change: With a new customer and Youre looking at a completely different business model, where you moved away from procurement and interacting at the top of the house on the other side when you go into just discussion.

Speaker Change: All of the <unk> that you have you know to.

Speaker Change: To the floor in order to create a transformed business model as a result of which is a CEO led initiative both sites and therefore all of the you know kind of engines that we bring to the table are really.

Speaker Change: Available upfront and center in terms of some of these new builds at the same time. This thinking is also going into expansion within our existing clients. So one can see that while the early.

Speaker Change: Earlier processes took a little longer at this point in time expansions around.

Speaker Change: Existing clients is all being focused on leveraging some of these models at any of the large deals now have a combination of all of this upfront and center and that's the reason why probably some of these closures take a little longer because it means significant amount of disruption even declined.

Speaker Change: Acceptance.

Speaker Change: All of this disruption and change validating all the assumptions and making sure that it's the handshake at the top of the house between WNS and the client right. So it's a significant change that we expect therefore that as we start winning some of these models. This will be the model of the future that will drive.

Speaker Change: Both of them.

Speaker Change: Okay, and this 5% like.

Speaker Change: A replay button doctors.

Speaker Change: I think it absolutely is the case had mentioned.

Speaker Change: <unk>.

Speaker Change: The Gen AI revenues and in the implementation.

Not specific to just new initiatives, while it's certainly a part of almost all of the new initiatives and I would say all of the new initiatives a lot of what we're doing with Gen. AI has expansion opportunities within our existing customer base and changing our operating within some of our existing customers. So that contribution is not all just kind of gross growth.

Speaker Change: It's also.

Speaker Change: Changing some of what we're doing for existing clients as well and delivering enhanced value to those customers. So I think that 5% target for the year is still good.

Speaker Change: Got it and then Dave.

Speaker Change: Like you were very helpful in identifying the T shirts and shoes.

Speaker Change: Like the timing of those.

Speaker Change: As we think about next year like can you quantify like that year on year impact we should expect from those tier had been sort of any other puts and takes that you should consider us for next year.

Speaker Change: Imagine that these headwinds will still have impact on year on year basis in the first half.

Speaker Change: Yes look I mean, I think the simple math to need as we know that the health care client.

Speaker Change: The impact three of the four quarters for this year. So we have one quarter of impact next fiscal year. So you can expect roughly 1% on a year over year basis from a large health care client.

Speaker Change: Space for the full year is going to end up costing us around three 5% of revenue.

Speaker Change: So if you just take a mid year convention for that I think youre looking at roughly one 5% to 2% for next year. So youre looking at a 3%.

Speaker Change: The lag if you will from from the ramp downs in this fiscal that bleed into fiscal 'twenty six.

Speaker Change: And is there any of that headwind that we should consider as we think about next year not at this time.

Speaker Change: Other than that.

Speaker Change: Before I say none of the other.

Speaker Change: Other than the standard headwinds that we have in our business around productivity and projects.

Speaker Change: And expectations of known ramp downs. So so I think that normal 10 to 10% to 11% is still in place.

Speaker Change: Yes of course, yes, I mean like any other unusual headwinds so thanks for clarifying that.

Speaker Change: No.

Speaker Change: Thank you.

Speaker Change: Our next question coming from the line of Maggie Nolan with William Blair. Your line is open.

Hi, guys. This is Jesse Wilson on for Maggie Thanks for taking our questions.

Jesse Wilson: So I understand your comments on visibility. So maybe can you take a step back and reflect on how you feel about.

Jesse Wilson: Some of the changes you've made in the sales force how long do you think.

Jesse Wilson: It will take some of these leaders to ramp up and as the new model pulling you into conversations with.

Jesse Wilson: A wider range of C suite execs.

Speaker Change: Yeah, Let me let me take this and then kick it you can kind of add some color here, but yes, I think our expectations around the contributions from from these senior level sales associate sales resources that we've hired a chief growth officer is across all of our verticals.

Speaker Change: Our being largely met right I think that's this is how that large deal pipeline has been curated to have 20, plus deals with 500 million plus of HCV.

Speaker Change: It's something that we're extremely excited about.

Speaker Change: It's the timing and the closure of that becomes an issue, but we built that pipeline over the last 18 months I think we remain well positioned in a lot of those opportunities theyre doing what theyre supposed to do Theyre getting case you are involved in these deals where he needs to be involved where we need that CEO to CEO connect.

Speaker Change: And we still feel good about the investments that we've made into this ended this new channel and the progress that we've made obviously, we would love to assign re more large deals this quarter and.

Speaker Change: We have not had to adjust guidance, but we also I think recognize that given the size given the complexity.

Speaker Change: And the scope of these deals that theyre going to be spotty right that it's going to be three in one quarter and nothing for two quarters and we just don't have a lot of control over that we don't have a lot of visibility to when they're going to hit but I think as long as we keep moving them through the pipeline the way we have in <unk>.

Speaker Change: Next thing with the client at the right levels.

Speaker Change: We feel good about our ability to win more than our fair share of these opportunities.

Speaker Change: Yes, and I'll just mention that the pressure on performance with our sales team is very very high and I think the tenure of these people has more than 12 months of the sponge in time. So our focus really is on the productivity of these people monitoring constantly making sure that their educators in terms of the.

Speaker Change: That is taking place at the company in terms of data or digital domain of transformation and that being able to engage prospects and clients with the right conversations. So at this point in time, we believe that almost.

Speaker Change: 65% to 70% of their sales force is actually.

Speaker Change: Productive in the sense that we want them to be at and normally it says anything about 50 or 60% is actually a decent track record and as mentioned that as well.

Speaker Change: At the same time, because we want to make sure that our people are constantly.

Speaker Change: Filling the pipeline with those wanted to $5 million needs look I want to also once again.

Speaker Change: Large deals deals alone does not accompany mix right, we need to constantly through the pipeline would be bread and butter deals, which are $1 million to $5 million and many of this over a period of time become large deals and large relationships for us. So our focus in terms of making sure we have the right people.

In those deals and the rest of the people focusing on the large deals is very intense I think we have the right energy behind it there's a huge excitement in the company in terms of what's happening there.

Great excitement in the company in terms of the new capabilities that are being built.

Speaker Change: These deals.

Speaker Change: <unk> costs in terms of global delivery locations and how all of this together.

Speaker Change: Creating magic for the company.

Got it I understand.

Speaker Change: That's helpful.

Speaker Change: For my follow up.

Speaker Change: Saw in guidance the share count is higher by I think a 100000 shares.

Speaker Change: From last time, so how much do you have left under the share repurchase program and help them that ticked up $5 1 million.

Speaker Change: Yes, I think so.

Speaker Change: I'm sorry go ahead Glen I'll go into funding.

Speaker Change: Okay.

Speaker Change: So it has come in slightly because we've had some exercises.

Speaker Change: In the last quarter, but promo, but we have we have akshay, we have a pool of feedback to the left.

Speaker Change: At this point in time, we are looking at using our capital.

Speaker Change: The strategic.

Speaker Change: Augmentation or from the cable will be that gives you have talked about.

Speaker Change: We are also looking out far and we are also looking at strategic M&A opportunities.

Physical right, if youre not able to find effective utilization of this gas we might consider to be going aggressively budget, but at this point the focus is driving more towards strategic.

Speaker Change: And just to just to kind of close the loop on the numbers, we've repurchased two 8 million shares in the first half of the year with just obviously quite aggressive we have another million three left on the authorization.

Speaker Change: That was that was done back in May.

Speaker Change: Sure.

Speaker Change: Got it thank you all.

Speaker Change: Thank you very much.

Speaker Change: Thank you and at this time, we have no further questions in the Q&A queue. This will conclude today's conference call. Thank you all for your participation and you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Morning, and welcome to the WNS Holdings fiscal 2025 second quarter earnings Conference call at this time, all participants honest and only mode.

Speaker Change: After managements prepared remarks, we will conduct a question and answer session and instructions for how to ask a question will follow at that time.

Speaker Change: As a reminder to call is being recorded for replay purposes.

Speaker Change: Now I would like to turn the call over to David Mackey, WNS Executive Vice President of Finance and head of Investor Relations David.

David Mackey: Thank you and welcome to our fiscal 2025 second quarter earnings call with me today on the call I have wns's, CEO, <unk>, <unk> and Wns's CFO <unk> <unk>.

David Mackey: A press release detailing our financial results was issued earlier today with the release is also available on the Investor Relations section of our website at Www Dot WNS Dot com.

David Mackey: Today's remarks will focus on the results for the fiscal second quarter ended September 32024.

David Mackey: Some of the matters that will be discussed on today's call are forward looking.

David Mackey: Such risks and uncertainties include but are not limited to those factors set forth in the Companys form 20-F.

Document is also available on the company website.

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

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

David Mackey: Some of the non-GAAP financial measures management will discuss are defined as follows net revenue is defined as revenue less repair payments.

Speaker Change: Turning to voluntarily reporting in U S domestic issuer forms.

Speaker Change: Adjusted net income or <unk> is defined as profit excluding amortization of intangible assets share based compensation acquisition related expenses or benefits goodwill and intangible asset impairment.

Speaker Change: S program termination costs to transition to voluntarily reporting on U S domestic issuer forms and all associated taxes.

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

Speaker Change: I would now like to turn the call over to Wns's CEO case of mortgage yes.

Speaker Change: Yes.

Speaker Change: Hey, Thank you David good morning, everyone.

Speaker Change: Yes.

Speaker Change: Second quarter revenue and margin.

Speaker Change: Largely in line with company expectations.

Speaker Change: While EPS came in above forecast based on one time tax benefit of $9 million.

Speaker Change: The company posted net revenue of 310 7 million.

Speaker Change: Representing a year over year decrease.

Speaker Change: 41, 4% on a reported basis and five 2%.

Speaker Change: On a constant currency basis after adjusting for foreign exchange.

Speaker Change: Versus the previous quarter net revenues decreased by 0.6% on a reported basis.

Speaker Change: By one 5% on a constant currency basis.

Speaker Change: Sequentially the ramp of four large deals sold in fiscal Q4 of last year and broad based demand.

Speaker Change: Process automation and cost reduction initiatives in the first half.

Of 2025, largely offset the loss of a large healthcare client and continued reductions in our online travel revenues.

Speaker Change: During the second quarter, we added nine new logos.

And expanded 41 existing relationships.

Speaker Change: For the full year guidance has been lowered to reflect continued reductions in online traveling modules and slower than expected conversion of large deals.

Speaker Change: While the large deal pipeline continues to expand the timing of these contract signings as well as associated revenue ramps is proving difficult to predict.

Speaker Change: As a result at this time, we have removed the large deal revenue contribution from our fiscal <unk> guidance.

Speaker Change: Currently we have more than 20 large deals representing over $500 million in annual contract value spread across all key verticals.

Speaker Change: Services as well as geographies.

Speaker Change: We are making good progress moving these deals through the pipeline and remain confident that WNS is rather pollution to win more than our fair share of these opportunities.

For the past several quarters, we've been discussing all WNS is increasingly delivering outcomes for our clients at the intersection of domain digital as well as data.

Speaker Change: We continue to make strategic investments in all three of these areas with a focus on developing proprietary technology tools and platforms.

Speaker Change: <unk>, new strategic relationships as well as reshaping our global talent.

Speaker Change: Today, I want to spend a little time.

Speaker Change: Highlighting our organizational capabilities and progress in our data analytics and AI practice.

Speaker Change: At WNS, we believe the true power of analytics is realized when combined with technology.

Speaker Change: Domains specialization and process expertise.

Speaker Change: As a result, we are focused on ensuring that analytics and technology are integrated into everything we do from customer solutions.

Speaker Change: Solutions to end to end transformational engagements.

Speaker Change: At the core of our analytics practice is data management, which is the foundation for all analytics work, including AI as well as generate demand.

Speaker Change: WNS has built a strong portfolio of data management services and platforms that enable our clients to source.

<unk> organized integrate as well as secure their data to unlock its inherent value.

Speaker Change: This includes expertise in converting unstructured data from sources like E Mail.

Speaker Change: Images.

Speaker Change: Audio sensors as well as social media posts into structured data to create usable analyzed gable constructs.

Speaker Change: Our strength in optimizing data quality and managing data as in essence are critical to help deliver actionable insights as well as business outcomes in.

In addition, our strategic acquisitions over the past several years have helped turbocharge wns's ability to combine analytics and technology to create reusable components, which underpin our services and solutions.

Speaker Change: These proprietary assets are stitched together with domain and process expertise, adding human in the loop.

Speaker Change: <unk> product is services across both horizontal and vertical.

Speaker Change: Our product guys services enabled WNS to accelerate speed to market and deploy our solutions at scale, while maintaining the flexibility to co create customized differentiated solutions for each of our clients.

Speaker Change: To date.

Speaker Change: WNS has built AI analytics assets across all key <unk>, including finance and accounting procurement and supply chain and customer support.

Speaker Change: The company has also created unique industry specific capabilities, such as claims management and recovery services for insurance companies.

Speaker Change: R&D.

Speaker Change: And clinical specialization offerings or big pharma revenue growth management services for a retail and CPG pumps and at <unk> documentation platform, while shipping and logistics.

These offerings have enabled WNS inadequate.

Speaker Change: Attract some of the worlds largest brands as clients, including industry leaders and beverages biopharma as well as restaurants.

Speaker Change: Within our data practice, we have also been investing in the expansion and enhancement of our front office.

Onsite centric consulting capabilities and with the pace of change and technological advancement accelerated clients are increasingly looking for experts to help them assets.

Speaker Change: Current situations and help them co create solutions.

Speaker Change: Over the past two years WNS has built a global <unk> drive solutions team of senior resources that is solely focused on helping clients achieve these objectives.

Speaker Change: These senior level consultants have data as well as domain specialist backgrounds and are responsible for helping clients with the data AI and analytics requirements.

Speaker Change: Strategies, GAAP analysis, Roadmaps change management governance and processes.

Speaker Change: The upfront consulting efforts helped set the.

Speaker Change: For a successful business transformation programs as well as value driven relationships.

Speaker Change: As a result of these investments WNS is inadequate.

Speaker Change: Experienced strong growth despite the weak macro environment with our Standalone analytics was growing at 20% CAGR over the past three years.

And while Standalone reported analytics today represents 14% of <unk> revenue is it safe to say that the majority of total company revenues now has another big embedded as part of the solution.

Speaker Change: All of the large deals in our pipeline have technology enabled analytics as a critical component of our value proposition.

Speaker Change: WNS is solid growth and expanded capabilities in data analytics that are.

Speaker Change: Are increasingly being recognized by the analyst and the advisor community.

Speaker Change: Now being named a market leader by HFF is analytics, AI and AR platforms and automation services.

Speaker Change: Pro forma for analytics business process services by evidenced.

A leader in data.

Speaker Change: Services.

Speaker Change: India magazine.

Speaker Change: And then AI game changer bye masked ball.

Speaker Change: The company also received seven Stevie Awards for its AI machine learning and <unk> solutions, and then Excellence award from business Intelligence group for our.

Speaker Change: Jen AI capabilities.

Speaker Change: The analyst and advisors remain important to gatekeepers to many client initiatives. This positive recognition is critical to ensuring that WNS remains top of the mind.

Speaker Change: Our sourcing opportunities.

Speaker Change: In summary.

Speaker Change: Yes.

Speaker Change: And enabling innovation and competitive differentiation.

Speaker Change: With respect to our fiscal 2025 guidance, while we remain confident comfortable and not <unk>.

Speaker Change: To close some of the large opportunities given the uncertain timing we have removed the large deal revenue contribution from our updated projections guidance also assumes a further reduction in opioid revenues in the second half of the year based on current volume trends.

Speaker Change: And despite these challenges we are comfortable in our ability to sequentially grow revenues in fiscal Q3, as well as Q4, providing solid momentum exiting the year.

Speaker Change: <unk> second half large fields.

Speaker Change: Large deal signings.

Speaker Change: Should provide some incremental revenue this year, but more importantly will provide enhanced visibility.

Speaker Change: Revenue acceleration in fiscal 2026.

Speaker Change: WNS remains committed to continuing our investments in domain expertise data and analytics and technology enabled operating leveraging AI and journey to ensure our ability to deliver long term profitable growth and sustainable shareholder value.

Speaker Change: I'd now like to turn the call over to our CFO R&D spend to further discuss our results as well as outlook LNG.

Speaker Change: Thank you Keisha.

Speaker Change: In the fiscal second quarter <unk> net revenue came in at $310 7 million.

Speaker Change: Down 4% from $325 million posted in the same quarter of last year.

Speaker Change: Down five 2% on a constant currency basis.

Speaker Change: Sequentially net revenue decreased by four.

Speaker Change: 6% on a reported basis and one 5% constant currency.

Speaker Change: The quarter over quarter revenue decline was driven by the loss of a large healthcare client.

Volume reductions in online travel and ongoing weakness in discretionary project based revenues.

Speaker Change: These revenue headwinds were partially offset by the ramp up of large deals closed in Q4 and healthy demand for digitalization and cost reduction focus initiatives in.

Speaker Change: In fact <unk>.

Speaker Change: <unk>, the large healthcare client loss.

Speaker Change: Each of our verticals posted sequential growth this quarter.

Speaker Change: In Q2.

Speaker Change: <unk> recorded $1 2 billion.

Speaker Change: Of shocked.

High margin revenue.

Adjusted operating margin in Q2 was 18, 6% as compared to 21, 5% last year and 18, 4% last quarter.

Speaker Change: Year over year.

Speaker Change: Adjusted operating margins.

Speaker Change: As a result of lower revenue.

Speaker Change: Employee utilization.

Speaker Change: Increased investments in infrastructure and sales.

Speaker Change: And higher SG&A levels, resulting from $2 1 million.

Of expense provision reversals for performance incentive and bad debt in Q2 of last year.

Speaker Change: These headwinds were partially offset by favorable currency movements.

Speaker Change: Sequentially margin improvement was driven by favorable currency movements.

The company's net other expense was $1 $4 billion of net expense in the second quarter.

Speaker Change: Compared to zero point $1 billion of net expense in Q2 of fiscal 2024, and <unk> 3 million of net expense last quarter.

Speaker Change: Both Europe going up.

Speaker Change: And sequentially. The unfavorable variance is the result of higher debt levels and lower cash balances driven primarily by our share repurchases.

Speaker Change: Yes.

Speaker Change: Effective tax rate for Q2 came in at eight 5% as compared to 22% last year and 23, 1% in the prior quarter.

Speaker Change: The Q2 tax rate reduced by almost $9 million.

Speaker Change: Primarily due to one time tax benefit associated with the reversal of a deferred tax liability on <unk> guidance.

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

Speaker Change: The company's adjusted net income for Q2.

Was $51 5 billion.

Speaker Change: Compared with $54 4 million in the same quarter of fiscal 2024 and $44 million.

Speaker Change: Last quarter.

Speaker Change: Adjusted diluted earnings were $1 13 per share in Q2 up from $1 10 in the second quarter of last year and drove 93 last quarter.

Speaker Change: As of September 30, frankly, Paul Douglas as balances in cash and investments totaled $221 $5 billion and the company had 262 $8 million in debt.

Speaker Change: In the second quarter, WNS generated $43 $6 million of cash from operating activities incurred $12 7 million in capital expenditures.

Speaker Change: And we have debt repayments of $43 million.

Speaker Change: The company also repurchased one.

Speaker Change: 156000 shares of stock at an average price of $56 61.

Which impacted cash by $71 7 billion.

Speaker Change: So the first half of fiscal 2025.

Speaker Change: <unk> repurchased two 8 million shares of stock at an average price of $53 and 46%.

Speaker Change: And the total cost of $149 7 million.

Speaker Change: DSO in the second quarter human at 38 days as compared to 35 days reported in Q2 of last year and 36 days last quarter.

With respect to other key operating metrics.

Count at the end of second quarter was 62, 951, and our attrition rate was 34% as compared to 30% reported in Q2 of last year and 34% in the previous quarter.

Speaker Change: We expect attrition to average in the low to mid 30% range.

Speaker Change: But the rates could remain volatile quarter to quarter.

We will see capacity at the end of Q2 increased to a positive one and WCS averaged 72% look from our peers during the quarter.

In our press release issued yesterday government provided a revised full year guidance for fiscal 2025.

Speaker Change: Based on the company's current visibility levels, we expect net revenue to be in the range of $1 billion and $250 million to $1 billion and $296 million roughly.

Speaker Change: Representing a year over year.

Speaker Change: Minus 3% to plus 1% on a reported basis.

Speaker Change: On a constant currency basis, the guidance range is from minus 4% to zero percent.

Speaker Change: As Geisha mentioned, our fiscal 2025 guidance assumes no revenue contribution from the large deal pipeline.

Speaker Change: Ongoing reductions in online travel volumes.

Speaker Change: No improvement in discretionary project spending.

Speaker Change: Guidance also excludes short term revenues and any incremental revenue from a large insurance captive.

Speaker Change: Topline projections assume an average British pound to U S dollar rate.

Speaker Change: One one for the remainder of the fiscal year.

Speaker Change: Full year adjusted net income for fiscal <unk> is expected to be in the range of $190 million.

Speaker Change: So 200 billion.

Speaker Change: Based on $83 five rupee to U S dollar exchange for the remainder of fiscal 2025.

Speaker Change: This implies a.

Speaker Change: Adjusted EPS of $4 13.

Speaker Change: Two $4 35.

Speaker Change: Assuming a diluted share count of approximately 46 million shares.

Speaker Change: With respect to capital expenditures.

Speaker Change: <unk> currently expects our requirement for fiscal 2025 to be up to $65 million.

Speaker Change: We will now open the call for questions operator.

Speaker Change: Thank you, ladies and gentlemen, if you wish to ask a question at this time you will need to press star one on your telephone and we are planning to be announced if your question has been answered or you wish to remove yourself from the queue. Please press star one again and then Joseph Tom enter NIM for everyone on the call to participate please limit yourself to one question and one.

Speaker Change: One follow up please standby, while we compile the Q&A roster.

Speaker Change: And our first question coming from the line of needs Vinson with Deutsche Bank. Your line is now open.

Speaker Change: Hi, guys. Thanks for the question I wanted to delve a little more into the large deal pipeline and win rates.

Speaker Change: So you had the four large deals in <unk> of last year, one large deal <unk>. It sounds like none this quarter at the same time you can you talk about how the large deal pipeline is at record levels.

Speaker Change: So I'm guess I'm, just hoping for a little more clarity on the lower visibility called out versus maybe realizing lower win rates and what you've seen historically.

Speaker Change: Yeah.

Speaker Change: Okay, I think I'll take that so first of all I must mention once again underline the fact that the.

Speaker Change: Overall pipeline percent continues to be very strong and at all levels.

Speaker Change: Most of our businesses.

The impact that we spoke about for <unk> is essentially because of what I would call. The perfect strong storm around two or three specific areas that were called out in the prepared remarks actually at this point in time, we continue to have a very strong pipeline of large deals let.

Speaker Change: Let me just explain how these things are progressing today I would say that we have almost more than 25 plus.

Speaker Change: Large deals.

Speaker Change: Our 10 million plus in terms of ACB.

Speaker Change: <unk> and many of these are very strategic in nature.

Speaker Change: Need very strong involvement both sides of the house, our side as well as the client site.

Speaker Change: What happened with many of these deals which we are now understanding better is that as the client gets much more comfortable rich wounds are attracting with WNS.

Speaker Change: What actually happened.

Speaker Change: Their focus.

Speaker Change: <unk> is built on the comfort around our understanding of their business domains very well there.

Speaker Change: Definitely want to see much more attention.

Speaker Change: From the top of the house, which means I need to be personally involved in many of these deals.

Speaker Change: Many of these deals are focused not just on.

Speaker Change: Regular transformation are.

Speaker Change: Cost leadership for the Cline.

Speaker Change: Lot of it is focused around revenue accretion, which means involvement of many more layer inside the <unk>.

Speaker Change: The appliance side.

Speaker Change: Want to also mention that this also means.

Speaker Change: A very strong partnership moderate between both sides.

Speaker Change: And it also means in a positive way that in many of these deals we've been able to more.

Speaker Change: The narrative away from procurement, which is very typical for WNS in terms of.

Speaker Change: Making sure that all our peer by these ultimately resulting in a win win.

Speaker Change: Both sides are not driven by a procurement approach to these programs all of these deals in terms of size and complexity as well as in.

Speaker Change: Board from WNS. Despite also getting involved in terms of taking some of these decisions and I think that is the missteps that we made.

Speaker Change: Yes some.

Speaker Change: Some of this revenue into our guidance. If you look at how we actually have made progress a number of deals size of deals and the volumes now being predicted by some of these prospects are even higher than what we saw last time I mean, we just guided you just mentioned that we have almost $500 million of ACB in some of these deals but the reality.

Is it is taking a little longer.

Speaker Change: And we probably assume that builds on the fact that we find from overseas in saltwater.

Speaker Change: At the same progress on timing.

Speaker Change: In Q2, but we are only done at this point in time has been more conservative in terms of taking that revenue out of them.

Speaker Change: Pipeline for the rest of the year, because we understand that even when we close this during Q3, our Q4, however, the potential for revenue during this year will be minimal but potential for revenue in the next years will be hi, I wanted to end again by saying these deals are very very critical for WNS.

Speaker Change: They're changing the game for us for the long term and we believe Super confident about the fact that the.

Speaker Change: In $1 million to $3 million means that we are continuously remain as well as some of these deals as they win.

Speaker Change: Tremendous comfort confidence.

Speaker Change: In terms of long term and some of it is also being reflected in terms of the head count that you may have seen on our books.

Speaker Change: Just to add to that real quick Nate I think the other thing.

Speaker Change: Specifically on the question you asked about win rate the removal of the large deal pipeline has nothing to do with win rates.

Speaker Change: I think we still believe we're extremely well positioned in these opportunities I think the removal of the large deal pipeline is about timing and not are not not relative to our expectations about the number of deals that we can win or how we're positioned within these deals.

Speaker Change: Yes, that's great to hear on the win rates and I think it was a prudent thing to take those out of the guide so.

Speaker Change: Appreciate it I guess for the follow up maybe taking a step back when I when I think about the history of WNS, you've obviously been able to differentiate yourself with a history of strong execution consistent double digit organic growth and then being able to set expectations that you can kind of beat and raise as you move through the fiscal year. Obviously, we're in the midst of a really weak macro and still a lot of uncertainty out there, but maybe <unk>.

Speaker Change: A step back you touched on this in your last answer, but maybe can you talk a little bit more about your confidence in your ability to return to their historical growth profile and execution as we move into fiscal 2006 and beyond I think last call. You mentioned that you were well set up for next fiscal year, but obviously a ton of puts and takes takes impacting the business right. Now. So I think it would just be helpful to hear your thoughts on.

Speaker Change: The business is ability to get back to that strength you've demonstrated historically.

Yes.

Speaker Change: We're super confident about our ability to get back to strong growth rates. Once again I must mention that what we have experienced this year very specific client for lenders are specific issues that we've had to call out for this year nothing to do with the demand trends nothing to do with the tailwind we are seeing in the industry.

Speaker Change: In fact, we would expect that with all the uncertainty in outside.

Speaker Change: We will only benefit being one of the.

Speaker Change: Legacy players and transformational.

Speaker Change: Kind of players in the industry again, I must mention that most clients are looking for.

Speaker Change: Partners, who come in with very strong understanding of digital data domain that we spoke about but most of the deals are also being led by technology and other things.

Speaker Change: In some cases generative AI as well all areas that WNS has traditionally invested in and continue to invest in up very strongly.