Q4 2025 WNS (Holdings) Ltd Earnings Call
Be happy, stay healthy, live long and prosper!!!
Thank you. Thank you. Thank you.
Speaker Change: Good morning and welcome to the WNS Holdings fiscal 2025 fourth quarter and full year earnings conference call and welcome to the WNS Holdings fiscal 2025 fourth quarter and full year earnings
Speaker Change: At this time, all participants aren't a listen-only mode. After management's prepared remarks, we will conduct a question-and-answer session instructions for how to ask a question will follow at that time. As a reminder, this call is being recorded for replay purposes.
Speaker Change: Now I would like to turn the call over to David Mackey, WNS's Executive Vice President of Finance and Head of Investor Relations. David?
Speaker Change: Thank you, and welcome to our fiscal 2025 fourth quarter and full year earnings call. With me sitting on the call I have WNS a CEO , Keshav Murugesh, and WNS a CFO , Arijit Sengupta
I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry
Speaker Change: Today's remarks will focus on the results for the fiscal fourth quarter in full year ended March 31st 2025.
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 of different 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. 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. Reconciliations of these non-GAAP financial measures to GAAP results can be found in the press release issued earlier today.
Speaker Change: Some of the non-gift financial measures management will discuss are defined as follows. 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 ADF program termination and costs associated with the transition to voluntarily reporting on U.S. domestic issue reports.
Speaker Change: 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 Affairment.
Speaker Change: ADS program termination costs, the transition to voluntarily reporting on U.S. domestic issue reforms, and all associated taxes. These terms will be used throughout today's call. I would now like to turn the call over to W&S's CEO, Keshav Murugesh. Keshav?
Thank you, David. Good morning, everyone.
I'm delighted with this quarter's results.
Speaker Change: In the fiscal fourth quarter, WNS financial results were highlighted by solid sequential revenue growth, operating margin expansion, and strong free cash flow.
Speaker Change: The company posted net revenue of $323.3 million, representing a sequential increase of 1.3% on a reported basis and 2.6% on a constant currency basis.
Speaker Change: During the quarter, healthy demand for digitally-led business transformation and cost reduction initiatives more than offset the impact of unfavorable currency movements.
Speaker Change: In Q4, WNS added 9 new logos and expanded 50 existing relationships.
Speaker Change: In addition, we are excited to report that during the quarter, the company closed two large transformational deals, one each in the banking and financial services area, as well as another in the travel vertical.
Speaker Change: We expect these engagements to begin generating revenue in the first half of fiscal 2026.
Speaker Change: On March 11th, we announced the acquisition of tp.ai, a leading provider of data management services focused on the Snowflake platform.
Speaker Change: TP brings to WNS strategy, execution, and managed service capabilities across data engineering, advanced analytics, AI, as well as data science.
Speaker Change: They are more than 600 global employees, represent one of the world's largest
Speaker Change: Snowflake certified talent pools and will significantly enhance WNS's positioning in the rapidly growing and mission-critical data management space.
Speaker Change: KIPI has built more than 250 accelerators, enablers, and solutions that allow clients to quickly leverage their data to improve decision-making and drive business outcomes at scale.
Speaker Change: Their capabilities are highly complementary to WNS's existing offerings, and we believe TP's seasoned leadership team, talented resources, and strong delivery approach represent an excellent cultural fit for us.
Speaker Change: Together we will combine domain, digital, data, and AI to create new services and solutions, add new clients, and expand the scope of our existing relationships.
Speaker Change: During WNS's 25-plus year history, the company has developed intimate knowledge of industry-specific operations, processes, workflows, and systems.
Speaker Change: This foundational business understanding is at the core of everything we do and puts WNS in a unique position to help clients harness and analyze data and leverage state-of-the-art technologies.
including AI, generative AI, and agentic AI.
Speaker Change: Our organic and inorganic investments over the past several years have been focused on strengthening and combining our capabilities across these three pillars for long-term success.
Speaker Change: Just under a year ago, we hired a Chief Business Officer to oversee WNS Next.
Speaker Change: our umbrella organization covering AI, data and analytics, and technology and automation.
Speaker Change: We have also now added a new Chief AI Research Officer, a Chief Product and Design Officer, and an EVP of Digital Strategy.
Speaker Change: These experts are leading their respective teams and helping WNS navigate the rapidly evolving technology and services landscape.
Speaker Change: In addition, our Tuck-in M&A strategy has increased the breadth and depth of our technology and AI-led capabilities with the acquisitions of Voodoo.
The Smart Cube, OptiBuy, and now Kipi.ai
Together, these investments are helping us accelerate
Speaker Change: The creation and deployment of WNS proprietary technology assets including products, platforms, tools, enablers, and accelerators that are reusable and customizable.
Speaker Change: These digital assets, which now embed AI, Gen AI, and Agentic AI, are being combined with WNS's global talent to deliver productized services for our clients.
Speaker Change: I would now like to provide you with a brief recap of the past year before turning our attention to Fiscal 26.
Speaker Change: From a financial perspective, fiscal 2025 was a challenging year for WNS, driven by customer-specific revenue headwinds, including a large healthcare client loss.
Speaker Change: The delivery transition from onsite to offshore for an internet-based procurement relationship and volume-based ramp downs in the online travel space.
Speaker Change: Full year net revenue came in at $1,266,000,000, down 1.5% on a reported basis and down 1.7% on a constant currency basis.
Speaker Change: The revenue decline resulted in lower expense coverage, which adversely impacted our adjusted operating margin.
Speaker Change: Together, these two items contributed approximately $21 million to adjusted net income and $0.46 to adjusted EPS.
Speaker Change: In fiscal 2025, WNS generated strong free cash flow and deployed our capital in a balanced, disciplined manner, including aggressive share repurchases,
Capability-based Tuck-in M&A and Scheduled Debt Repayments
Speaker Change: Other highlights from this past year include our transition from IFRS to U.S. GAAP reporting.
Speaker Change: and WNS's inclusion in the Russell 2000 as well as the MSCI U.S. Small Cap Indices, which help improve access to capital, trading liquidity, and company visibility.
Speaker Change: As we enter fiscal 2026, we are excited about the company's solid business momentum, healthy pipeline, differentiated capabilities, and expanding market opportunity.
Speaker Change: In Fiscal 2025, we added 33 new logos and expanded 179 existing relationships, representing healthy increases over the previous year.
Speaker Change: We also completed our acquisition of Kipi in the high-growth data management space, and we have closed two large deals in the fourth quarter alone.
Speaker Change: WNS has now posted two consecutive quarters of sequential top-line growth and the three customer-specific revenue headwinds mentioned earlier are now largely behind us.
Speaker Change: Today, demand for services that deliver business transformation and cost reduction remains stable and healthy despite the volatile macro environment.
Speaker Change: Our pipeline is broad-based across verticals and services and maintains a healthy balance between traditional deals and large transformational opportunities.
Speaker Change: Clients continue to move forward with decisions as evidenced by our recent large deal signings and now the new logo additions as well.
Speaker Change: And while we must be vigilant for potential changes in client behavior in the coming months as well as quarters, we are encouraged by the fact that our business model remains fundamentally defensive and recurring in nature.
Speaker Change: WNS begins fiscal 2026 with 90% visibility to the midpoint of our revenue guidance, which represents 9% growth on both a reported as well as constant currency basis.
Speaker Change: The Guidance Midpoint for ANI assumes stable year-over-year adjusted operating margins.
Speaker Change: Despite increased investments and growth in adjusted EPS of more than 11%, excluding one-time benefits in fiscal 25.
Speaker Change: deliver impactful business outcomes and drive long-term sustainable shareholder value. I would now like to turn the call over to our CFO Arijit Seng to discuss further our results as well as outlook.
Arijit?
Thank you, Keshav.
In the fiscal fourth quarter,
Speaker Change: WNS's net revenue came in at $323.3 million, down 0.8% on a reported basis from $325.9 million last year, and up 0.1% on a constant currency basis.
Speaker Change: Year over year, revenue was adversely impacted by a loss of a large healthcare client in Q2 of 2025, reductions in travel volumes, and unfavorable currency movements.
Speaker Change: Sequentially, Net Revenue increased by 1.3% on a reported basis and 2.6% Consul Currency.
Speaker Change: The quarter-over-quarter revenue growth was driven by broad-based demand for AI-led transformation
Speaker Change: automation and cost reduction solutions which more than offset reduced revenue with large utilities client resulting from the Q3 completion of a platform migration project and unfavorable currency movements.
In Q4, WNIS recorded $1.3 billion of short-term high-margin revenue.
and many more. Thank you. Thank you.
Speaker Change: Adjusted operating margin in Q4 was 21.4% as compared to 20.9% last year and 19.3% last quarter.
Speaker Change: Year over year, adjusted operating margin improvements were driven by favourable currency movements and were partially offset by increased investments in infrastructure and sales.
Speaker Change: Sequentially, margin improvement was driven by operating leverage in high volumes, improved productivity and favorable currency movements.
Speaker Change: The company's net other income slash expense was $16.9 billion of net income in the fourth quarter as compared to $0.8 billion of net income in Q4 of fiscal 2024 and $0.9 billion of net expense last quarter.
Speaker Change: Year over year, the favourable variance is the result of $16.7 billion from the sale of a facility in India.
Speaker Change: Sequentially, the favourable variance is a result of the facility sale, reduced interest expense driven by debt repayments, and increased interest income on higher cash balances.
Speaker Change: Double the effective tax rate for Q4 came in at 23.2% as compared to 21.7% last year and 22.8% in the prior quarter.
Speaker Change: Both year over year and sequentially, the tax rates increase was driven by changes in a geographical profit mix and the percentage of work delivered from tax incentive facilities.
Speaker Change: The company's adjusted net income for Q4 was $66.2 billion compared with $53.9 billion in the same quarter of fiscal 24 and $47 billion last quarter.
Speaker Change: Adjusted directed earnings were $1.45 per share in Q4, up from $1.12 in the fourth quarter of last year and up from $1.04 last quarter.
Speaker Change: As of March 31, 2025, WSIS's balances in cash and investment total $267.4 million and the company had $2.3.5 million in debt.
Speaker Change: In the fourth quarter, we generated $53.4 billion of cash from operating activities, paid $63.4 billion for an acquisition of Kipi, incurred $18.6 billion in capital expenditure and made debt repayments of $33 million.
Speaker Change: DSO in the fourth quarter came in at 34 days as compared to 33 days reported in Q4 of last year and 34 days last quarter.
and many more. Thank you. Thank you.
Speaker Change: With respect to other key operating metrics, WSS total headcount in the end of fourth quarter was 64,505 and our attrition rate was 39 percent as compared to 33 percent reported in Q4 of last year and 32 percent 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 over quarter.
Speaker Change: Build seat capacity at the end of Q4 was 42,494 and WNF averaged 72% work from office during the quarter.
Speaker Change: I would like to provide you with a brief financial summary for Fiscal 2025 before discussing our outlook for the coming year.
Speaker Change: Net revenue for fiscal year came in at $1 billion and $266 million, down 1.5% on reported basis and down 1.7% on constant currency.
and many more. Thank you. Thank you.
Speaker Change: Revenue growth during the year was driven by healthy new logo additions and existing client expansions that was overshadowed by the three client-specific revenue headwinds Keshav mentioned earlier.
Speaker Change: The company's fiscal 2025 adjusted operating margin was 19.5%, down 110 basis points versus fiscal 2024.
Speaker Change: Margin favoritism from currency movements and improved productivity was more than offset by increased investments and reduced operating leverage on low revenue.
Speaker Change: Net Interest Income Expense for the year improved by $11.7 million and was driven by a India facility sale of $16.7 million before.
Speaker Change: This benefit was partially offset by reduced interest income on lower average cash balances and increased interest expense on higher average debt levels.
Speaker Change: The company's effective tax rate was 19.9% up from 18.3% last year, but below normalized levels due to a $8.6 billion non-recurring tax benefit in Q2.
Speaker Change: Full year adjusted income came in at $208.7 million, down 4% year-on-year, while adjusted EPS came in at $4.55, representing an increase of 3%.
Speaker Change: WS's average share count reduced by 7% as a result of her aggressive share repurchase in the first half of the year.
Speaker Change: Our fiscal 2025 profitability was favorably impacted by $21 million or $0.46 per share as a result of non-recurring benefits, including a tax liability reversal in Q2 and our facility sales in India in Q4.
Speaker Change: In fiscal 2025, WNF generated $207.2 million in cash from operations, spent $54.1 million on capital expenditures, made debt repayments of $174 million and incurred $63.4 million for acquisitions.
Speaker Change: The company also repurchased 2.8 billion shares of stock at a total cost of $149.7 billion or $58.46 per share.
Speaker Change: The company's global attrition rate for the year was 35% and work from office increased to 72% as compared to 68% last year.
Speaker Change: In our press release issued earlier today, WIS provided our initial FOJA guidance for fiscal 2026.
Speaker Change: Based on the company's current visibility levels, we expect net revenue to be in the range of $1 billion and $352 million.
Speaker Change: to $1,404,000,000 representing year-over-year growth of 7% to 11% on both reported and constant currency basis.
Speaker Change: We currently have 90% visibility to the mid-point of the range, which assumes an average British pound to US dollar exchange rate of 1.29 for the full year.
Speaker Change: Guidance includes our acquisition of Kipi.ai which is expected to contribute approximately 2% revenue and be neutral to adjusted EPS.
fiscal 2026 revenue projections.
Assume a year-over-year headwind.
of approximately 2% related to
Speaker Change: Fiscal 2025 Ramdowns with the Healthcare Client and Online Travel Volumes and do not include any revenue contribution from unsigned large deals or improvements in discretionary project spending.
and many more. Thank you. Thank you.
WSS Full Year Adjusted Net Income
Speaker Change: for Fiscal 2026 is expected to be in the range of $199 billion to $211 billion based on an 87 rupee to a US dollar exchange.
Speaker Change: This implies adjusted EPS of $4.43 to $4.70 based on a diluted share count of approximately 44.9 billion shares.
As Kesha mentioned,
Speaker Change: Excluding the 49 cents of one-time benefits in fiscal 2025, the midpoint of guidance represents an increase of more than 11% in adjusted EPS.
Speaker Change: With respect to capital expenditures, WF currency expects our requirements for fiscal 2026 to be up to $65 million.
We will now open the call for questions. Operator?
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.
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.
Thank you.
Speaker Change: Our first question comes from the line of Brian Bergen of TD Cowen. Your line is now open.
Brian Bergen: Hi, guys. Good morning. Good afternoon. Thank you. I want to start on client demand. So, first off, good to hear the two large deals that were signed in the fourth quarter. I know those have been a long time coming for you. But aside from those, can you just talk about just broader client sentiment, what you've been seeing around signing, engagement ramps, and spending behavior, just particularly since the end of March?
See you soon. Thank you. Thank you. Thank you.
Yeah, Brian, so thanks for that question.
Speaker Change: Interestingly, you know, while there is a bit of uncertainty in the minds of a number of clients, essentially around
Speaker Change: where the macros are, what are the kind of pronouncements and announcements coming on tariff wars, as well as reactions of different countries which could impact each of these companies' supply chains or, you know, different elements of their business.
Speaker Change: What we are seeing is a consistent theme coming to the fore, which is
Speaker Change: Nobody wants to wait now anymore in terms of their digital transformation kind of journeys. But more importantly, everyone is quite clear about the fact that their cost reduction and cost leadership programs
must anyway happen along with it.
Speaker Change: So, you know, as you can see, we've actually been able to accelerate closures.
Speaker Change: In fact, some of the closures we were able to finish earlier than what we had anticipated before.
Speaker Change: Some of the large deals that we announced, you know, during this quarter, we originally thought would actually take a little longer to close. And the advantage of this now means that we actually get full year's revenue coming in on some of these deals, both large as well as small.
So, actually what we see is enhanced activity from clients.
clients being cautiously optimistic.
taking calls in terms of cost reduction and, you know.
Speaker Change: digital kind of disruption. And from our perspective, as long as there is no paralysis, that augurs very well for our business model for the long term. And I think just to Keshav's point, Brian,
Speaker Change: When you look at the roughly 90% of our business, that is transformation, automation, cost production, where we're actually managing operations for our clients.
Speaker Change: The reality is that's a strategic decision on Laquan's part, and if they've made that decision that they need to find a partner to accelerate that journey.
Speaker Change: The fact that we save them money at the same time is never going to be an issue in a week environment. It certainly wouldn't go as far as to say that our business is counter-cyclical, but the reality is that 90% of our business is and does continue to have a very low macro correlation.
Speaker Change: Where we have to watch for potential volatility would be on the 10% of our business project base, which at this point remains fairly stable, and to see if there are any potential impacts down the road to volumes.
and Sanjay Puri. Thank you. Thank you.
Speaker Change: Okay, makes sense. That's clear. And then if we kind of dissect the 26 growth outlook, so seven to 11 reported in constant currency with like two points in organic, can you give us a sense just on the other puts and takes as it relates to things like productivity commitments, client ramp downs, the large scale assumption, just kind of the build up to that, you know, the kind of the gross versus net growth dynamic?
Speaker Change: Sure, I think overall Brian, you know, we're kind of back to a more normalized environment. So I think the
Speaker Change: The headwinds that we're looking at for the year relative to client ramp-downs, productivity improvements.
Speaker Change: and the projects that are rolling off, right? We're still looking in that 10, 11% range for that piece of the business.
Speaker Change: The other piece that Arijit called out in his prepared remarks is we do have a 2% annualized impact
Speaker Change: from the large healthcare ramp-down and from the ramp-down that occurred throughout the year in the OTA space. So those two items will create an additional 2% Edwin in fiscal 26, but our growth algorithm in the 9% at the midpoint is inclusive of roughly 13% overall Edwin in fiscal 26.
Thank you.
Okay, thank you.
Thanks, Brian.
One moment for our next question.
Speaker Change: Our next question comes from the line of Mayank Tamden of Needham. Your line is now open.
Thank you. Dave, maybe just to extend Brian's question there...
Speaker Change: Could you talk about the cadence of growth through the fiscal 26 in terms of...
Speaker Change: you know of the organic trends versus the M&A contribution would that be pretty evenly split and then also same question on the margin front you know how we should think about the cadence of margins as the year progresses.
Thank you for watching.
Speaker Change: Yeah, look, I think we're kind of back from a cadence perspective mind to normal numbers, right? But the reality is
Speaker Change: The acquisition took place in about mid-month in March, so we should have a full quarter's worth of contribution in fiscal Q1.
Speaker Change: In terms of the cadence of the business, I think both Keshav and Arijit talked about the fact that, you know, excluding the healthcare ramp down.
Speaker Change: which was in fiscal Q2 of 25, we've now put up three orders in a row of 3% sequential growth in the business on a house of currency basis.
Thank you very much.
Speaker Change: So we enter the fiscal year with good momentum. Obviously, as you're all aware, Q1 is typically seasonally soft for us on the revenue side. So because we give our productivity improvements in Q1, the expectation walking into the year, similar as always, is that we're going to be flat, slightly up in Q1.
Speaker Change: But it's always kind of a softer quarter because of that 3-4% productivity that we have embedded in that.
Speaker Change: Similarly, from the margin perspective, Q1 is going to be soft for us because we get the productivity headwinds in Q1 on the revenue side.
Speaker Change: We give the wage increases on the cost side, and we're also going to have the ramp of these two large deals that are going to be hitting us in Q1 and into Q2. So, our expectation at this point is that we're going to be somewhere in the 17 to 17.5% operating margin for Q1.
Speaker Change: But to see that number sequentially improve as we move throughout the year and as both Arijit and Keshav mentioned, looking at at this point in time with our aggressive investments.
Speaker Change: Flattosh operating market at that nineteen and a half percent level for the full year Yeah, and just to add like, you know, if you look at from an overall year perspective
Speaker Change: We are seeing margin expansion H2 and of course as revenue visibility increases and we start tracking high projections, we also expect the overall margins to also improve.
Speaker Change: In a similar manner that we told you know this year when we when we had this year as well you would have seen a margin expanded in Q4 as well and we expect a similar trajectory to also happen but as of right now like they've mentioned we are looking at similar operating margins for principle 26 versus 25 due to reasons they've mentioned.
Thank you very much.
Speaker Change: Got it. And then just to maybe delve into the two large deals, are you able to quantify the impact and maybe discuss the type of services you're providing and to that extent, you know, are there more large deals in the pipeline that you could potentially close in fiscal 26?
Thank you very much.
Speaker Change: Yeah, look, I think, Mike, we've been consistent in our large-scale definition, right, that these are at a minimum.
Speaker Change: $10 million in annual contract value. We're still going through the process of kind of finalizing the ramp up here and we've been
Speaker Change: Hopefully conservative in terms of their contribution relative to fiscal 26.
Speaker Change: We are actively ramping these deals at this point in time. So it's not a, you know, let's hope this is going to happen
Speaker Change: but we're not going to be getting a full year's worth of revenue from either of these deals at this point. One we expect to be fully ramped hopefully by Q2. The others should be ramping as we move through the first half of the year. So obviously
Speaker Change: Those deals will be a function of both the timing of the ramp and the overall size. We have not disclosed
in terms of the
Speaker Change: The type of work that's being done, as Keshav mentioned, one of the deals is in the banking and financial services space.
It's worked for one of the world's largest payment platforms.
Speaker Change: And we're going to be doing risk operations and due diligence for them, user operations and technical payment processing.
Speaker Change: In the travel side, which is the second large deal, this is in the corporate travel management space, and it's going to be operations and fulfillment.
Speaker Change: in addition to online bookings for them. So both of these deals kind of in core middle office for these companies and focused on things that are mission critical for running the business.
Speaker Change: And just to add to your second part of your question, the pipeline going forward is also very healthy.
Speaker Change: We had a similar pipeline last quarter as well, and the pipeline continues. We are seeing some fairly late-stage conversations in three or four clients.
Speaker Change: But as we mentioned in our in our remarks a couple of quarters back
Speaker Change: From a guidance perspective, we will only include deals just signed.
Speaker Change: So while we are optimistic about getting some of these closed in a couple of quarters, once we sign them, we will give them the guidance. But the pipeline is healthy, there are some active conversations, and the conversations are on multiple levels, including some of them are sole source as well.
That's great to hear. Congrats on the quarter. Thank you.
One moment for our next question.
Speaker Change: Our next question comes from the line of Surinder Thind of Jeffries, LLC. Your line is now open.
Thank you. Thank you. Thank you.
Surinder Thind: Thank you. Just following up on the large deals, are there any characteristics that we should be aware of in terms of maybe the duration of the contracts, expectations around productivity improvement?
Surinder Thind: or just more broadly, with the newer contracts that you're signing, just any color that you can provide there with the client's anticipation of your integration of AI and the productivity expectations.
Surinder Thind: Yeah, I think that's a great question. So, I think the key is...
all of these large-deal transactions
Surinder Thind: help move us away from the traditional models that this industry normally operates in with clients and positions us
Surinder Thind: significantly away in a higher value area away from traditional BPL. So that's the first thing I would like to say because now what's coming to the fore is not just our superior knowledge of business domains and sub-domains,
But also our great understanding of technology and analytics
Surinder Thind: digital transformation, our partnerships that we didn't speak about earlier, but that we have now created across all the large players, whether it's around cloud, whether it's around technology, whether it's our agentic, you know, whatever.
Surinder Thind: All of this comes together, which means the quality of conversation with these clients
Surinder Thind: now moves from a TCO, from a just a simple cost-saving model
Surinder Thind: to much more a TCO-oriented kind of a model where we're actually walking in.
Surinder Thind: telling our clients that, you know, here's what they normally spend in a particular area. We take out, you know, large components of an area, keeping certain parts which are unique to them.
Surinder Thind: inside and then delivering all of that at a particular price point.
Surinder Thind: And that allows the company, the client on the one hand, to save money, to be far more efficient, and to see the impact of some of the technology tools that we bring to the fore. But from our point of view, it builds a very strong
Surinder Thind: relationship with the client, it creates what I call a black box approach.
Surinder Thind: to work on models that can, over a period of time, dramatically change market profile. And more importantly, we always start with one area, but these large deals always have a path towards new processes and new areas.
Surinder Thind: Like for example, the travel company that we spoke about, or the banking platform company that we spoke about, these are very large players globally.
Surinder Thind: We may have started with one area, but we have already scoped out the next two or three areas that we will go after which potentially over, you know
Surinder Thind: A couple of years, position all of these in applied as I think in the top five top 10 because of this unique approach. And this is the approach that we're taking to not just the last lines but also
Surinder Thind: other traditional bread and butter smaller clients where we believe the potential for creating a large deal is available.
I would just add to Keshav's comments, Zorinda, that...
Surinder Thind: Both of these deals are five plus years in duration. So, you know, kind of following that when you're doing transformation
Surinder Thind: It's going to take a long time for the client to get comfortable. And as a result, these deals typically don't have one, two, three year kinds of life. So both of these are five year plus deals. The other thing that's interesting that we're seeing kind of across the portfolio is that the productivity commitments that we have to give to clients.
Surinder Thind: are a function of what they're ready to do and what they're willing to let us do on the front end.
Surinder Thind: So, if a client is willing to let us deploy AI, Gen-AI, or Genetic-AI as part of the up-front solution,
Surinder Thind: then the productivity commitments over a five, six year period tend to actually be a little bit less.
Surinder Thind: If the client is moving forward with us in today's model with an understanding that over the next four to five years, we're going to be deploying more and better technology, then the productivity improvements tend to be going up a little bit. So overall, I would say when you look at the profile of the deals we're signing,
It's mixed, but overall the productivity commitments
Surinder Thind: at the company level are very similar to where they've been.
Surinder Thind: That's actually quite helpful. And then in terms of just maybe following up on some earlier commentary in the prepared remarks, when we think about client behavior, I think it makes sense that
Surinder Thind: you probably would not see a material change given the focus and the types of works that you guys do. But you also talked a little bit about
Assuming no improvement in discretionary spend.
Surinder Thind: Now, should you be assuming some degradation or is it just truly we're too early in this?
I recall.
Surinder Thind: period of uncertainty for clients to actually be changing behavior or seeing for you to be seeing any change in behavior. Is it a timing issue at this point or is it clients truly just aren't changing behavior with respect to your line of work?
Thank you for watching.
Thank you.
So look, let me try to turn that look
Speaker Change: The core business that Dev mentioned earlier is basically the technology business, right?
Surinder Thind: which is mission critical for clients and of course there we don't expect to see any changes because
Surinder Thind: We feel a lot of that business is actually macro-neutral. So, as demand for cost increases, we actually expect that sort of business to increase on similar levels. But your point on the discretionary expenditure, it's a difficult one.
Surinder Thind: So, at this point, if you recall, we've said R will be the guidance to 90% to the midpoint.
Surinder Thind: and that is in historical presence in the U.S. where we work, particularly in the Q1 of each year. So at this point in time, we are not making any improvements or degradations. We are assuming that that part of the business continues in line with our core business.
Surinder Thind: And, you know, given that, with the acquisitions of JP and the TSE and Vuram, given the fact that our project-based revenue has increased in percentage from where we were historically, any improvement in the macros or the discretionary expenditure will actually help us improve our revenue out of this.
Surinder Thind: Yeah, I think that's Arijit's point. You know, we believe we've largely de-risked this based on the visibility that we've provided here.
These projects all have a cost reduction theme to them.
Thank you.
Surinder Thind: The only difference is, as opposed to getting the savings day one, the client has to write a check first and then get the savings over time.
Surinder Thind: So while we do believe that these projects could get de-prioritized because they do drive cost savings and they are critical to clients, we believe that they're not going to drop that far in the prioritization. And in fact, if you look at project-based revenues and the revenues that we've gotten from our acquisitions, those numbers were relatively stable even in fiscal 25.
All right, that's helpful. Thank you.
One moment for our next question.
Speaker Change: Our next question comes from the line of Puneet Jain of J.P. Morgan. Your line is now open.
Puneet Jain: Hi, thanks for taking my question. So there's been like some sensitivity to travel volume in the past with like the macro environment so with like how things where they are right now as it relates to macro outlook
Thank you. Thank you.
Puneet Jain: What does the guidance begin for travel volume? How low are some of those contracts?
possibly like the minimum level of commitment from those clients.
Puneet Jain: So, let me start actually, Puneet. It's a great question and you know, I fully understand where you are coming from as far as the question is concerned because of the macros. But you know, I'll let you in on a little secret. One of the biggest pipelines that we have really now is in the travel and the shipping and logistics space, which
Speaker Change: It's a little counter-intuitive because you would expect that all that is being spoken about, those are likely to get impacted the most. But some of the wins that we have had in this last year, the pipeline that we have now built, the decisions that we have seen.
Speaker Change: are all, you know, are very much focused on these areas, which means all of them are preparing for, you know, potential changes in their business model. So everyone seems to be very focused now on the cost leadership mantra.
Speaker Change: which actually plays in extremely well, you know, from our point of view because many of them
also seem to be first-time outsourcers.
and particularly in the corporate travel space.
Speaker Change: Many of them have never actually, you know, done any of these programs. So, with that having being said, you know, I'll ask Dev and Arijit to give you a little more color on, you know, the minimums and such.
Speaker Change: Sure, let me take some of that Sunit. You know, look, I think we've been very consistent in
Speaker Change: to explain to you guys that the challenges that we've had
in the travel space have really been because
In certain areas, we operate at the intersection of
Speaker Change: A volatile segment, right, in terms of travel, a volatile service offering in terms of CX.
Speaker Change: and a volatile business model in terms of digital, right? So where we've seen this impact in our business over the last couple of years and where there's been this pressure, it's primarily been in the OTA space.
Speaker Change: It has not been an airline operation, it has not been in hotels, because what we're doing there is more middle or back office focus.
Speaker Change: If you look at the OTA space and you look at where we were in Q4, online travel was down to 3% of company revenue.
Thank you. Thank you. Thank you.
Speaker Change: We have not baked in improvements in those numbers in fiscal 26.
Speaker Change: Certainly if we add new logos, that'll help. Certainly if we can help these clients move from traditional models to AI, agentic AI-led models.
Speaker Change: that has upside for us. But at this point in time, we really feel that the online travel volumes for us are bumping along the bottom here. There really is very limited downside risk, especially because the fact that that 3% is spread over seven or eight different customers. We don't have a client concentration risk.
Speaker Change: on top of the fact that we don't have a major business risk in this sector.
Speaker Change: And just to add to further color, Keshav mentioned that our pipeline and travel is very robust.
to look at some of the views that we have.
Speaker Change: talking about. A lot of those deals are actually in different areas like corporate travel and management, etc., where, you know, which further sort of diversifies the portfolio from being OTA and airline historically to more OTA, airline, and corporate travel and management. And we feel that will also help us with any macro sort of sensitivity around this business.
Speaker Change: and gives us more depth and scale in the kind of work we do because each of these deals is a large, they're complex, they're sort of and they're really sort of integral to the client operation, right. So that's the way we're all starting to get some macro impact on the talent portfolio.
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Speaker Change: Got it, got it. No, thanks for that. And for the utilities client, like where you had some headwind, can you talk more about like nature of that headwind, what drove that, and also what percentage of your overall revenue stems from such platform-based services?
Speaker Change: So overall, I mean, you know, this is a platform migration, right? This would be part of what we report as technology services across the company.
Speaker Change: We don't do tons of this work, but certainly if we've got clients that are looking for help here, we're happy to do that. We help this large client migrate their platform from...
Speaker Change: from an asset that they were using externally to one that they purchased and then now we're continuing to manage that process on the new platform.
Speaker Change: So given our domain expertise, given our process expertise, we were the right partner for them to help do that platform migration. The challenge was that it created a little bit of a bump for us in revenue in fiscal Q2 and Q3. And once that platform migration was successfully completed, obviously that revenue stream fell off. So it remains a very healthy, happy client for us.
Speaker Change: And obviously when you look at our segment reporting and you look at our business, right, you'll see this hit the utilities vertical, you'll see this hit the CX revenues, you'll see us hit the largest client in terms of customer concentration, and you'll see us hit the UK revenue. So as that kind of rips through the segment.
Speaker Change: That's where you see the impacts to the business from Q3 to Q4.
Speaker Change: and put it just, you know, just some added commentary, you know, I wouldn't call this a headwind, right?
Speaker Change: They have mentioned why the referees in Q2 and Q3 are up.
Speaker Change: But if you exclude those, you will see over the last six quarters, the numbers have been broadly unstable. You know, so the volumes are there.
Speaker Change: Because we did some incremental work, it seems to be a headwind, but the underlying volume work continues. We have great relationships with the client across the CXOs and the board level. So at this point, we have no cause of concern in terms of time.
Got it. Thank you.
Thanks Muni.
Speaker Change: Our next question comes from the line of Robbie Bamberger of Baird. Your line is now open.
Robbie Bamberger: Yeah, thanks for taking my question. So, employees were up 2% sequentially and then accelerated to 7% in fiscal Q4. Can you maybe talk about your hiring plans and should we think of this as essentially a ramp before revenue acceleration in fiscal 2026? And then any color on geographies you're ramping in?
Robbie Bamberger: Yeah, that's exactly right, Robbie. I mean, if you look at the headcount additions...
Robbie Bamberger: in fiscal Q4. This is the ramp for these large deals that are ramping in Q1 and Q2. And obviously part of the reason we've got that margin pressure in Q1 and bleeding into Q2 a little bit is because we've hired in advance of actually getting the full revenue constitution.
Robbie Bamberger: So you see that impact in Q1, but yes a lot of a lot of what you've seen in terms of the re-acceleration and hiring in Q4 is about, you know, we kind of
Robbie Bamberger: Eight through the excess capacity in the organization in Q2 and Q3 is revenue rebounded now We're hiring for future growth
Thank you.
Speaker Change: Sorry, just a little, I am just, an initial commentary here as well.
Robbie Bamberger: The Q4 headcount also includes the impact of the acquisition of Bipi where we had about 6.4 crore joiners.
Thank you very much.
Speaker Change: And I think the headline news, as both the gentlemen have said, is that growth is back.
Speaker Change: We are hiring, we are getting, you know, people ready to deliver on our priorities. But at the same time, I also want to mention that in terms of quality, we're also hiring people, lots more people.
Speaker Change: onshore in our client-facing locations, salespeople, more digital kind of people, more technology people, all of whom, and more leaders who are actually facing off
Speaker Change: with end clients, because we actually think that next year is going to be super exciting for us. So it's not just a case of hiring people who are delivering to these processes.
Speaker Change: But it's also hiring high-quality resources who are now facing off with clients and leading these conversations around domain, digital, technology, transformation, and analysis.
Speaker Change: Yeah, very helpful. Thank you. And then maybe just turning to Gen-AI. Any way to put color on how many clients are currently using Gen-AI with you? And, you know, are you able to leverage those Gen-AI assets across, you know, multiple different clients? And then maybe thinking about the makeshift of, you know, contracts. Should it move more towards, you know, fixed base or transaction based contracts as Gen-AI comes on?
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Speaker Change: Let me take that, Robbie. You know, I think to date we've deployed Gen-AI solutions at around 20 of our clients. Most of the work that we've done there is, and Keshav spoke a little bit about this in his prepared remarks,
Speaker Change: reusable components that we've created and packaging those reusable components that feature Gen-AI as part of productized services, right? So we create a technology asset, a digital asset, it leverages AI, Gen-AI, Agenda-AI, and then what we do is we wrap services around that product.
Speaker Change: around that platform so that we can create differentiated experiences for our customers.
So, we've actually been successful in deploying these assets.
Speaker Change: with about 20 customers at this point in time and we do see good demand for these for these assets.
Speaker Change: I think we will continue to see that progress as we move throughout fiscal 26, and the expectation is that the contribution in revenue as we move throughout the year from AI to NAI to NTDA will continue to increase.
Speaker Change: And that's the reason why earlier I also spoke about the fact that we have built very strong partnerships now with some of the, you know, technology providers on the other side, you know, particularly around agentic AI and some of these, you know, specific areas that will help us. Thank you.
Speaker Change: continue to be a very smart company. So, 31 use cases across 20 clients that they've spoke about, 13 digital assets fully developed at this point in time.
Speaker Change: Strong partnerships created, but more importantly, sending out a very strong signal to prospects and clients that we are ready to help them when they are.
and many more. Thank you. Thank you.
Yep, very helpful. Thank you. Thank you.
Speaker Change: Our next question comes from the line of Vincent Colicchio of Barrington Research. Your line is now open.
Thank you.
Speaker Change: Another question on AI. Keshav, I think last year you came up with a number for what portion of revenue would be tied to AI. Would you like to take a stab at that kind of a number for 26?
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Keshav Murugesh: Oh, that's a great question. At this point in time, it is about 5%, close to 5% of our revenue from these models.
Keshav Murugesh: I think what we will expect is, it will increase, it will inch upwards, but at this point in time, we are not in a position to give you a specific number. But I think this is a question that we can keep, you know, asking across the borders.
Speaker Change: And to what extent is access to skilled labor on the AI side limiting your growth there?
Speaker Change: Not at all. Like I mentioned earlier, all the new leadership positions are actually raised out of the markets.
Speaker Change: And around them, our ability... Look, we don't need large armies of people to do this.
Speaker Change: We need focused small teams who can come in and help us, you know, manage. So if you look at it, some of it is coming in through our, you know, organic growth and acquisition of talent onshore as well as offshore.
Speaker Change: Some of it is coming through acquisitions, smart acquisitions like Kippy that we just did. I mean 600 people coming in just from that
One acquisition is how we are managing it.
Speaker Change: So, at this point in time, while we are very well set and well prepared in terms of meeting our customers.
Speaker Change: down this path, we also think there will be a time frame
for clients.
particularly the traditional clients.
Speaker Change: to move away from the old models that they're used to to some of these new models to leverage these areas. And therefore, we will have enough access to talent.
Speaker Change: We will have enough opportunity to upskill, re-skill, you know, existing talent and we will have enough opportunity to lead in terms of some of these areas.
Speaker Change: Thanks for that and just one more, what caused the spike in attrition? Is there anything meaningful to see there?
Speaker Change: Nothing specific, Vince. I mean, all the attrition was once again focused at the entry level in the organization.
Speaker Change: We've got a strong ability to manage that. Actually, there's a certain amount of attrition at that level that's healthy to running our business and maintaining our cost structure. So nothing that we're concerned about, nothing that we believe is a trend. That number just tends to jump around the corner.
Speaker Change: I think at a high level, I'd also say that, you know, when growth is back at an industry level, one should also expect some of these things to happen.
Thanks guys.
Thank you.
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Speaker Change: At this time, we have no further questions in the queue. This will conclude today's conference call. Thank you to the participants. You may now disconnect.
Thank you very much.
and many more. Thank you. Thank you.
Sanjay Puri, Keshav Murugesh, Sanjay Puria, Arijit Sengupta
and many more. Thank you. Thank you.