WNS(US:WNS)2025-08-08 11:01PART I - Financial Information Item 1. Financial Statements The unaudited consolidated financial statements for Q2 2025 report total assets of $1.57 billion, revenue of $353.8 million, and net income of $21.8 million, preceding a $3.3 billion acquisition by Capgemini Notes to Unaudited Consolidated Financial Statements Notes detail accounting policies, the $66.1 million Kipi.ai acquisition, revenue disaggregation, debt structure, and segment performance, alongside ongoing tax disputes and the Capgemini acquisition - On March 10, 2025, the Company acquired Haukea Holdings Inc. (Kipi.ai) for a total consideration of $66.1 million, resulting in goodwill of $53.9 million, attributed mainly to expected synergies and the assembled workforce596064 - During the quarter ended June 30, 2025, the company purchased 1,300,000 ordinary shares for $75.4 million and cancelled 4,100,000 treasury shares123 - The company has outstanding tax assessment orders from Indian authorities for various years, which could result in an estimated $2.5 million in additional taxes, though the company believes these orders are unlikely to be sustained148321323 Revenue by Service Type (Three Months Ended June 30) | Service Type | 2025 ($ thousands) | 2024 ($ thousands) | | :--- | :--- | :--- | | Industry-specific | 161,943 | 140,043 | | Finance and accounting | 65,397 | 64,702 | | Customer experience services | 59,324 | 61,333 | | Research and analytics | 49,865 | 40,511 | | Others | 17,265 | 16,526 | | Total | 353,794 | 323,115 | Consolidated Balance Sheet Summary (As of June 30, 2025) | Balance Sheet Item | June 30, 2025 ($ thousands) | March 31, 2025 ($ thousands) | | :--- | :--- | :--- | | Total Current Assets | 548,050 | 564,794 | | Total Assets | 1,568,836 | 1,547,503 | | Total Current Liabilities | 373,550 | 320,952 | | Total Liabilities | 771,065 | 709,779 | | Total Shareholders' Equity | 797,771 | 837,724 | Consolidated Statement of Income Summary (Three Months Ended June 30) | Income Statement Item | 2025 ($ thousands) | 2024 ($ thousands) | | :--- | :--- | :--- | | Revenue | 353,794 | 323,115 | | Gross Profit | 116,573 | 113,672 | | Operating Income | 33,103 | 38,573 | | Net Income | 21,750 | 28,922 | | Diluted EPS | $0.48 | $0.61 | Consolidated Statement of Cash Flows Summary (Three Months Ended June 30) | Cash Flow Item | 2025 ($ thousands) | 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 29,499 | 21,408 | | Net cash provided by/(used in) investing activities | 23,290 | (68,484) | | Net cash (used in)/provided by financing activities | (56,685) | 44,226 | | Net change in cash, cash equivalents and restricted cash | (3,660) | (2,963) | - On July 6, 2025, the Company entered into a transaction agreement to be acquired by Capgemini S.E. in an all-cash deal valued at approximately $3.3 billion, or $76.50 per ordinary share, expected to close by the end of calendar year 2025, subject to shareholder and regulatory approvals185186 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Q2 FY26 saw revenue grow 9.5% to $353.8 million, but operating profit declined to $33.1 million and net income to $21.8 million due to higher costs and acquisition-related expenses, amidst global economic and currency risks - On July 6, 2025, WNS entered into an agreement to be acquired by Capgemini S.E. for approximately $3.3 billion in an all-cash transaction, expected to close by the end of calendar year 2025200 - The company's business is exposed to global economic risks, including inflation, rising interest rates, and geopolitical conflicts such as the war in Ukraine, which particularly affects its operations in Poland and Romania202204 - Currency fluctuations had a mixed impact, with appreciation of the pound sterling and Euro positively impacting results, while depreciation of the Indian rupee against the US dollar benefited cost structures for Q1 FY26209210 Revenue Reconciliation (GAAP to Non-GAAP) | Metric | Q1 FY26 ($M) | Q1 FY25 ($M) | | :--- | :--- | :--- | | Revenue (GAAP) | 353.8 | 323.1 | | Less: Payments to repair centers | 13.9 | 10.7 | | Revenue less repair payments (non-GAAP) | 339.9 | 312.4 | Results of Operations Q1 FY26 revenue grew 9.5% to $353.8 million, but increased cost of revenue and G&A expenses, including acquisition costs, led to a decline in operating profit to $33.1 million and net income to $21.8 million - The increase in cost of revenue was driven by higher employee costs from headcount growth (including the Kipi.ai acquisition), increased facilities costs as more employees returned to the office, and higher repair payments262 - General and administrative expenses increased primarily due to higher share-based compensation, transaction expenses for the proposed Capgemini acquisition, and costs related to the Kipi.ai acquisition267 - Income tax expense rose to $10.5 million from $9.1 million, mainly due to the expiry of a tax holiday in Sri Lanka and higher taxable profits in jurisdictions with higher tax rates274 Key Financial Metrics Comparison (Q1 FY26 vs Q1 FY25) | Metric ($ millions) | Q1 2025 | Q1 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 353.8 | 323.1 | 30.7 | 9.5% | | Gross Profit | 116.6 | 113.7 | 2.9 | 2.6% | | Operating Profit | 33.1 | 38.6 | (5.5) | (14.2)% | | Profit After Tax | 21.8 | 28.9 | (7.2) | (24.9)% | Results by Reportable Segment Q1 FY26 segment results show BFSI revenue grew 24.1% to $146.9 million and MRHP by 9.5% to $84.3 million, while HCLS declined 13.7% to $35.8 million due to client loss - BFSI segment revenue growth was driven by a $24.0 million increase from existing clients and $4.5 million from new clients291 - MRHP segment growth was primarily due to $15.3 million in revenue from new clients, partially offset by an $8.0 million decrease from existing clients287 - HCLS segment revenue decreased mainly due to the loss of a large healthcare client289 Segment Revenue (Three Months Ended June 30) | Strategic Business Unit | 2025 ($ millions) | 2024 ($ millions) | % Change | | :--- | :--- | :--- | :--- | | BFSI | 146.9 | 118.4 | 24.1% | | TSLU | 94.4 | 93.5 | 1.0% | | MRHP | 84.3 | 76.9 | 9.5% | | HCLS | 35.8 | 41.5 | (13.7)% | Liquidity and Capital Resources As of June 30, 2025, the company held $100.9 million in cash and $266.2 million in debt, with operating cash flow increasing to $29.5 million, while the pending Capgemini acquisition restricts capital actions - The company's liquidity sources include cash on hand, cash from operations, and available credit lines, with $266.2 million in debt outstanding and $153.8 million in available credit lines, of which $55.0 million was drawn as of June 30, 2025296299304 - The pending transaction with Capgemini restricts the company from taking certain actions outside the ordinary course of business, such as incurring material capital expenditures or issuing new debt, without the buyer's consent298 - Net cash provided by operating activities increased to $29.5 million for the quarter, up from $21.4 million YoY, primarily due to a decrease in cash outflow for working capital311312 - Net cash used in financing activities was $56.7 million, mainly due to $75.4 million in share repurchases and $21.1 million in long-term debt repayment, partially offset by $40.0 million drawn from short-term borrowings317 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces significant exchange rate risk, with 48.1% of expenses in Indian rupees and revenue in pound sterling/US dollars, mitigated by hedging, alongside interest rate risk from floating-rate debt - The company is exposed to significant exchange rate risk as approximately 48.1% of its expenses are in Indian rupees, while revenue is primarily in pound sterling and US dollars338 - A sensitivity analysis shows that a 10% appreciation/depreciation of the pound sterling against the US dollar would impact revenue by approximately $9.0 million, while a similar change in the Indian rupee would impact expenses by approximately $15.4 million for the quarter340 - Interest rate risk stems from floating-rate debt tied to SOFR and SONIA, which the company manages by maintaining a mix of fixed and floating rate borrowings342 Item 4. Controls and Procedures Management confirmed effective disclosure controls and no material changes to internal controls during the quarter, with the recently acquired Kipi.ai operations excluded from the assessment scope - The Group CEO and Group CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period346 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls347 - The scope of management's assessment of internal controls for the quarter excludes the operations of Kipi.ai, acquired in March 2025348 PART II - Other Information Item 1. Legal Proceedings The company is not involved in any material legal proceedings beyond the ordinary course of business, except for tax proceedings noted in financial statements - The company states that the disposition of currently instituted or asserted lawsuits, claims, and proceedings is not expected to have a material adverse effect on its financial position, results of operations, or cash flows350 Item 1A. Risk Factors A new material risk factor highlights the pending $3.3 billion Capgemini acquisition, which could disrupt business, divert management, and, if terminated, result in a $118.0 million fee - A significant new risk factor relates to the pending acquisition by Capgemini S.E., valued at approximately $3.3 billion, with completion subject to shareholder and regulatory approvals and not guaranteed352 - Risks during the pre-closing period include potential adverse reactions from clients, business uncertainty, diversion of management attention, and difficulty in attracting and retaining key personnel353 - If the transaction fails to close, the company's share price could decline, investor confidence may fall, and WNS may be required to pay a termination fee of $118.0 million under certain circumstances356 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 1,300,000 ordinary shares for $75.4 million under its approved share repurchase program, funded by cash on hand - The share repurchases were conducted under a program approved in fiscal 2025, authorizing the repurchase of up to 3,000,000 ordinary shares through November 29, 2025357 Share Repurchases (Three Months Ended June 30, 2025) | Period | Shares Purchased | Average Price Paid per Share ($) | Total Consideration ($ millions) | | :--- | :--- | :--- | :--- | | April 2025 | — | — | — | | May 2025 | 705,454 | 56.83 | ~40.1 | | June 2025 | 594,546 | 59.34 | ~35.3 | | Total | 1,300,000 | 57.98 | 75.4 | Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter359 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including the Capgemini Transaction Agreement, employment agreement amendments, and CEO/CFO certifications - Key exhibits filed include the Transaction Agreement with Capgemini S.E., amendments to executive employment agreements, and required certifications under the Sarbanes-Oxley Act360