France’s Capgemini plans to acquire IT outsourcing firm WNS for $3.3 billion, beating rival suitors to a deal aimed at expanding its AI operations https://t.co/qsXlhL52IO ...

Core Insights - Capgemini is set to acquire WNS for $76.50 per share, totaling $3.3 billion, which represents a premium of 28% over the last 90-day average share price [2][5] - The acquisition is expected to enhance Capgemini's normalized EPS by 4% in 2026 and 7% in 2027 post-synergies [2][20] - The transaction has been unanimously approved by the boards of both companies and is anticipated to close by the end of the year [5][22] Strategic Rationale - The acquisition aims to create a leader in Intelligent Operations, leveraging Agentic AI to transform business processes [3][12] - Capgemini will gain scale and vertical expertise to capitalize on the shift from traditional Business Process Services (BPS) to AI-powered operations [3][5] - WNS's high-growth Digital BPS will enhance Capgemini's service offerings and increase its presence in the US market [4][10] Financial Impact - The combined entities are projected to generate revenues of €1.9 billion in Digital BPS by 2024 [10] - WNS has shown a consistent revenue growth of approximately 9% over the last three fiscal years, reaching $1,266 million in fiscal year 2025 with an 18.7% operating margin [8][9] - Capgemini expects revenue synergies of €100 million to €140 million and cost synergies of €50 million to €70 million by the end of 2027 [20] Market Positioning - The acquisition positions Capgemini to meet the growing demand for AI-driven business process transformation, addressing client needs for efficiency and agility [3][12] - The combination of Capgemini and WNS will create a robust platform for innovation and growth, enhancing their competitive edge in the market [6][17] - Both companies share a vision for Intelligent Operations, which will facilitate a smooth integration and unlock new opportunities for clients [6][21]

WNS (WNS) 2025 Conference June 03, 2025 04:20 PM ET Speaker0 Well, good afternoon, everyone. My name is Dave Koning. I'm a senior research analyst at Baird covering payments and services. Thrilled to introduce WNS. We have Dave Mackie here. He just said he's been at WNS for fourteen years. I've been at Baird for twenty three, so there's a lot of years involved. And WNS, a leader in business process management, recently reaccelerated really nicely getting back on track to normalize growth. And why don't I tu ...

Financial Data and Key Metrics Changes - The company reported a 99% operating margin, which is among the leading figures in the industry [23] - Over the last two years, the company has grown the business by about 10% despite facing a 15% headwind from client-specific issues [21] - Excluding these issues, the business has grown on average 12.5% per year, positioning it among industry leaders [21] Business Line Data and Key Metrics Changes - The insurance vertical accounts for more than 25% of the company's revenue, making it the largest vertical [6] - The company operates in eight industries, with a focus on industry-specific services that create tailored solutions [7][8] - The non-FTE (Full-Time Equivalent) business mix is over 25%, allowing the company to lead clients to specific outcomes rather than just completing tasks [12] Market Data and Key Metrics Changes - The company has a balanced portfolio, with approximately 50% of its business in North America and the other half spread across Europe, APAC, and the UK [42] - The largest customer contributes only 6% of revenue, indicating low customer concentration risk [44] Company Strategy and Development Direction - The company is focusing on AI and generative AI as components of end-to-end solutions for clients, rather than standalone offerings [11] - There is a strategic push to engage in larger deals, defined as those with a minimum annual contract value of $10 million, with some exceeding $100 million [32] - The company aims to maintain a healthy mix of smaller and larger deals to drive growth [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 9% growth rate for FY '26, with 7% organic growth and 2% inorganic growth, despite headwinds from client issues [20] - The company has 90% visibility on its revenue guidance, indicating a strong foundation for meeting financial targets [50] - Management noted that the macroeconomic environment has not significantly impacted client demand for their core services, which focus on process automation and transformation [40] Other Important Information - The company has engaged in aggressive share repurchase programs, believing its stock is undervalued [24][83] - Discretionary expenditures account for only 10-11% of the business, providing a buffer against macroeconomic downturns [52] Q&A Session Summary Question: Can you discuss the performance of the top 10 client cohort in recent months? - The company has been growing low double digits over the last couple of years, and there has not been a material change in customer concentration [81] Question: What are the capital allocation priorities moving forward? - The company will continue to focus on share buybacks, tuck-in M&A opportunities, capital expenditures for infrastructure and solutions, and debt repayment [82]

Currency and Tax Impact - The depreciation of the Indian rupee, Philippine peso, and Euro against the US dollar positively impacted the company's results of operations in fiscal 2025 [416]. - The company expects its tax rate in the Philippines to continue to impact its effective tax rate, with an estimated additional income tax expense of approximately $7.9 million in fiscal 2025 if tax holidays were not available [422]. - The Sri Lankan government revised the corporate tax rate from 0% to 15% for profits earned from export revenue, which will affect the company's current and deferred tax items recorded by its subsidiary in Sri Lanka starting in fiscal 2026 [425]. - The company operates from various delivery centers in the Philippines, eligible for tax exemption benefits expiring between fiscal 2025 and fiscal 2031, with a prevailing special tax rate of 5.0% on gross profit after the expiry of tax benefits [424]. Revenue and Profitability - Revenue for the year ended March 31, 2025, was $1,314.9 million, a decrease of $8.4 million or 0.6% compared to $1,323.4 million in 2024 [429]. - Revenue less repair payments (non-GAAP) for the year ended March 31, 2025, was $1,265.5 million, down $18.8 million or 1.5% from $1,284.3 million in 2024 [434]. - Operating profit increased to $175.4 million in 2025, representing 13.3% of revenue, compared to $140.9 million or 10.6% in 2024 [428]. - Gross profit margin improved to 35.4% in 2025 from 35.3% in 2024, while the cost of revenue as a percentage of revenue slightly decreased to 64.6% [428]. - Profit after tax for fiscal 2025 was $170.1 million, an increase of $22.6 million from $147.5 million in fiscal 2024, with a profit margin of 12.9% [457]. Client Concentration and Market Vulnerability - A few major clients account for a significant portion of the company's revenue, and any loss of business from these clients could reduce revenue and significantly harm the business [25]. - The company's revenue is highly dependent on clients concentrated in a few industries, primarily located in the US, UK, Europe, and Australia, making it vulnerable to economic slowdowns in these regions [25]. Operational Challenges - The company may experience difficulties in attracting and retaining sufficiently trained employees, which could adversely affect its operations and financial performance [29]. - The company faces competition from both onshore and offshore BPM companies, as well as from IT companies offering BPM services, which could impact its market share [25]. - The company experienced a decrease in revenue from existing clients of $66.7 million, partially offset by $57.0 million from new clients and revenue from the acquisition of Kipi.ai [429]. Segment Performance - Segment revenue for BFSI was $518.0 million in 2025, up from $461.9 million in 2024, while TSLU segment revenue decreased to $377.8 million from $406.1 million [508]. - HCLS segment revenue decreased by 18.1% to $135.9 million in fiscal 2025 from $165.9 million in fiscal 2024, primarily due to the loss of a large healthcare client and currency depreciation [514]. - BFSI segment revenue increased by 12.1% to $518.0 million in fiscal 2025 from $461.9 million in fiscal 2024, driven by revenue increases from existing clients and new clients [516]. Financial Position and Cash Flow - As of March 31, 2025, the company had cash and cash equivalents of $106.9 million, primarily held in various currencies including Indian rupees and US dollars [547]. - The company reported outstanding debt of $243.5 million as of March 31, 2025 [548]. - In fiscal 2025, net cash provided by operating activities increased to $207.2 million, up from $200.8 million in fiscal 2024, driven by a $12.9 million increase in cash inflow for working capital [558][559]. - Net cash used in investing activities increased significantly to $92.7 million in fiscal 2025 from $24.3 million in fiscal 2024, primarily due to a cash outflow of $63.4 million for acquisitions [563]. Expenses and Cost Management - Selling and marketing expenses rose to $82.9 million in fiscal 2025, up from $78.3 million in fiscal 2024, primarily due to increased employee costs and wage inflation [446][447]. - General and administrative expenses decreased to $178.5 million in fiscal 2025 from $184.1 million in fiscal 2024, mainly due to lower employee costs and share-based compensation [448]. - Finance expenses increased to $18.5 million in fiscal 2025, up from $15.3 million in fiscal 2024, primarily due to interest on long-term loans [456]. Future Outlook and Investments - The company expects capital expenditures for fiscal 2026 to be approximately $65.0 million, with fiscal 2025 capital expenditures amounting to $54.1 million [555]. - The company is investing substantially in WNS Analytics to enhance its offerings in research, data, analytics, and AI, supporting business growth and digital transformation [566]. - The company plans to continue investing in research and development to strengthen its analytics capabilities and support client transformation journeys [566].

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Financial Data and Key Metrics Changes - In Q4, the company reported net revenue of $323.3 million, a sequential increase of 1.3% and a constant currency increase of 2.6% [7][18] - For the full fiscal year, net revenue was $1.266 billion, down 1.5% on a reported basis and 1.7% on a constant currency basis [12][22] - Adjusted operating margin for Q4 was 21.4%, up from 20.9% year-over-year and 19.3% sequentially [19] - Full year adjusted operating margin was 19.5%, down 110 basis points compared to the previous year [23] - Adjusted net income for Q4 was $66.2 million, compared to $53.9 million in the same quarter last year [21] Business Line Data and Key Metrics Changes - The company added nine new logos and expanded 50 existing relationships in Q4 [8] - Full year revenue growth was driven by new logo additions and existing client expansions, despite headwinds from client-specific issues [15][22] - The company recorded $1.3 billion of short-term high-margin revenue in Q4 [19] Market Data and Key Metrics Changes - The company experienced a loss of a large healthcare client and reductions in travel volumes, impacting revenue [12][18] - Online travel revenue was down to 3% of total company revenue, with no improvements baked into fiscal 2026 guidance [70][72] Company Strategy and Development Direction - The company is focusing on digital transformation, AI, and data management, highlighted by the acquisition of Kippi.ai [9][10] - The strategy includes a tuck-in M&A approach to enhance technology and AI capabilities [11] - The company aims to leverage its industry-specific knowledge to create transformational AI-led solutions [10][17] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about client demand, noting a consistent theme of urgency in digital transformation and cost reduction [30][31] - The company has 90% visibility to the midpoint of its revenue guidance for fiscal 2026, projecting 9% growth [17][25] - Management acknowledged potential volatility in client behavior but emphasized the defensive nature of its business model [16][32] Other Important Information - The company generated strong free cash flow and engaged in aggressive share repurchases [13][24] - The attrition rate increased to 39%, up from 33% year-over-year [21] Q&A Session Summary Question: Client demand and broader sentiment - Management noted that clients are increasingly focused on digital transformation and cost reduction, leading to accelerated deal closures [30][31] Question: Growth outlook for fiscal 2026 - The company expects a 7% to 11% growth range, with a 2% headwind from previous client ramp downs [33][34] Question: Cadence of growth and margin expectations - Management indicated that Q1 is typically soft, with expectations for sequential margin improvement throughout the year [40][41] Question: Characteristics of large deals - Both large deals are five-plus years in duration, focusing on mission-critical operations for clients [56][57] Question: Travel volume sensitivity - The company has a robust pipeline in travel and logistics, with no significant downside risk anticipated [67][70] Question: Hiring plans and geographic focus - The recent increase in headcount is aimed at ramping up for future growth, particularly in client-facing roles [82][84] Question: Use of GenAI across clients - The company has deployed GenAI solutions at around 20 clients, with expectations for increased revenue contribution from these assets [86][88]

Financial Data and Key Metrics Changes - In Q4, the company reported net revenue of $323.3 million, a sequential increase of 1.3% and a constant currency increase of 2.6% [7][18] - For the full fiscal year, net revenue was $1.266 billion, down 1.5% on a reported basis and 1.7% on a constant currency basis [12][22] - Adjusted operating margin in Q4 was 21.4%, compared to 20.9% last year and 19.3% last quarter [19] - Adjusted net income for Q4 was $66.2 million, up from $53.9 million in the same quarter last year [21] - Full year adjusted net income was $208.7 million, down 4% year on year, while adjusted EPS was $4.55, representing an increase of 3% [24] Business Line Data and Key Metrics Changes - The company added nine new logos and expanded 50 existing relationships in Q4 [8] - The revenue decline in fiscal 2025 was attributed to customer-specific headwinds, including a large healthcare client loss and volume-based ramp downs in the online travel space [12][22] - The company recorded $1.3 billion of short-term high-margin revenue in Q4 [19] Market Data and Key Metrics Changes - The company experienced healthy demand for digitally led business transformation and cost reduction initiatives, which offset unfavorable currency movements [8] - The online travel segment accounted for only 3% of company revenue in Q4, indicating a significant reduction in this area [66] Company Strategy and Development Direction - The company announced the acquisition of Kippi.ai, enhancing its capabilities in data management and analytics [9] - The focus is on combining domain expertise with AI and data technologies to create new services and solutions [10] - The company aims to leverage its industry-specific knowledge to help clients harness data and technology for business transformation [10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding client demand, noting that clients are accelerating their digital transformation journeys despite macroeconomic uncertainties [30] - The company begins fiscal 2026 with 90% visibility to its revenue guidance, projecting 9% growth on both a reported and constant currency basis [17] - Management highlighted that the business model remains fundamentally defensive and recurring in nature [17] Other Important Information - The company generated strong free cash flow and engaged in aggressive share repurchases during the fiscal year [13] - The company transitioned from IFRS to U.S. GAAP reporting and was included in the Russell 2000 and MSCI U.S. Small Cap indices [14] Q&A Session Summary Question: Can you talk about broader client sentiment and spending behavior? - Management noted that clients are cautiously optimistic and are accelerating closures for digital transformation projects, indicating a strong demand for cost reduction initiatives [30] Question: Can you provide insights on the growth outlook for fiscal 2026? - The company expects a growth range of 7% to 11% for fiscal 2026, with a 2% headwind from previous client ramp downs [25][33] Question: What are the characteristics of the large deals signed? - Both large deals are five-plus years in duration, focusing on mission-critical operations in banking and corporate travel management [54] Question: How is the hiring plan structured? - The recent increase in headcount is aimed at ramping up for large deals and future growth, with a focus on hiring high-quality resources [78] Question: How many clients are currently using GenAI? - The company has deployed GenAI solutions at around 20 clients, with expectations for increased revenue contribution from these technologies [80]

Revenue Performance - Revenue for Q4 fiscal 2025 was $336.3 million, a decrease of 0.2% year-over-year and an increase of 1.0% sequentially[4] - For the full fiscal year 2025, revenue was $1,314.9 million, down 0.6% from $1,323.4 million in fiscal 2024[4] - Revenue for the three months ended March 31, 2025, was $336.3 million, a slight decrease of 0.15% compared to $336.8 million for the same period in 2024[18] - Revenue less repair payments for the three months ended March 31, 2025, was $323.3 million, a decrease of 0.8% from $325.9 million in the same period of 2024[30] - Constant currency revenue less repair payments for the three months ended March 31, 2025, was $324.6 million, showing a slight increase from $324.3 million in the same period of 2024[30] Profit and Income - Profit for Q4 fiscal 2025 was $50.8 million, compared to $14.5 million in Q4 of last year, reflecting a significant year-over-year increase[6] - Adjusted Net Income (ANI) for Q4 was $66.2 million, up from $53.9 million in the same quarter last year[7] - Net income for the three months ended March 31, 2025, was $50.8 million, up from $14.5 million in the same period of 2024, reflecting a year-over-year increase of 250.3%[18] - Adjusted net income (non-GAAP) for Q1 2025 was $66.2 million, up from $53.9 million in Q1 2024, reflecting a 22.6% growth[32] Earnings Per Share - Adjusted diluted earnings per share for fiscal 2026 is projected to be in the range of $4.43 to $4.70, an increase of 8% to 15% compared to fiscal 2025[11] - Basic earnings per share for the three months ended March 31, 2025, was $1.17, compared to $0.31 for the same period in 2024[18] - Adjusted diluted earnings per share (non-GAAP) for Q1 2025 was $1.45, up from $1.12 in Q1 2024, a growth of 29.5%[32] Operational Efficiency - Cash generated from operations in Q4 was $53.4 million, with capital expenditures of $18.6 million and debt repayments of $33.0 million[8] - Days sales outstanding (DSO) remained stable at 34 days, consistent with the previous quarter and slightly up from 33 days in Q4 of last year[8] - Operating income increased significantly to $50.3 million for the three months ended March 31, 2025, compared to $16.9 million in the same period of 2024[18] - Operating income (GAAP) for Q1 2025 was $50.3 million, up from $16.9 million in Q1 2024, representing a 197% increase[31] - Operating income as a percentage of revenue (GAAP) improved to 15.0% in Q1 2025 from 5.0% in Q1 2024[31] Client Engagement and Growth - The company added 9 new clients in Q4 and expanded 50 existing relationships, indicating growth in client engagement[4] - The acquisition of Kipi.ai was completed in Q4, enhancing capabilities in data, analytics, and AI[9] - Acquisition-related expenses for Q1 2025 totaled $2.0 million, compared to $0.6 million in Q1 2024, indicating increased investment in growth initiatives[31] Assets and Liabilities - Total assets as of March 31, 2025, increased to $1,547.5 million, up from $1,434.1 million as of March 31, 2024, indicating a growth of 7.9%[20] - Total current assets rose to $564.8 million as of March 31, 2025, compared to $529.7 million as of March 31, 2024, marking an increase of 6.6%[20] - Total liabilities increased to $709.8 million as of March 31, 2025, from $646.8 million as of March 31, 2024, reflecting a rise of 9.7%[21]

Group 1: WNS Holdings Limited - WNS shares increased by 8.3% to close at $66.59, supported by strong trading volume, and have gained 8.9% over the past four weeks [1] - The company is expected to report quarterly earnings of $1.41 per share, reflecting a year-over-year increase of 25.9%, with revenues projected at $325.57 million, a slight decrease of 0.1% from the previous year [2] - The consensus EPS estimate for WNS has been revised 3.7% higher in the last 30 days, indicating a positive trend that may lead to further price appreciation [3] Group 2: Industry Context - WNS operates within the Zacks Business - Services industry, where another company, Everi Holdings, closed 0.3% higher at $13.71, with a return of -0.6% over the past month [3] - Everi Holdings has seen a significant revision in its EPS estimate, increasing by 35.4% to $0.19, which represents a remarkable change of 280% from the previous year [4]