WNS(WNS) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net revenue of $310.7 million, a year-over-year decrease of 4.4% and a 5.2% decrease on a constant currency basis [4][15] - Adjusted operating margin for Q2 was 18.6%, down from 21.5% in the same quarter last year [16] - Adjusted net income for Q2 was$ 51.5 million, compared to $54.4 million in the same quarter of fiscal 2024 [17] - The effective tax rate for Q2 was 8.5%, significantly lower than 22% last year, primarily due to a one-time tax benefit [17] Business Line Data and Key Metrics Changes - The company added nine new logos and expanded 41 existing relationships during the quarter [4] - Revenue declines were partially offset by the ramp of large deals closed in Q4 and healthy demand for digitization and cost reduction initiatives [15] - Excluding the loss of a large healthcare client, each vertical posted sequential growth [15] Market Data and Key Metrics Changes - The company has more than 20 large deals in the pipeline, representing over$ 500 million in annual contract value [5] - OTA revenues in Q2 were below 4% of total company revenue, reflecting ongoing challenges in that sector [37] Company Strategy and Development Direction - The company is focused on delivering outcomes at the intersection of domain, digital, and data, with strategic investments in these areas [6][12] - WNS aims to leverage AI and generative AI to enhance its service offerings and drive long-term growth [12][51] - The company has removed large deal revenue contributions from its fiscal 2025 guidance due to timing uncertainties [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to strong growth rates, citing specific client-related issues rather than overall demand trends as the cause of current challenges [29] - The company anticipates sequential revenue growth in Q3 and Q4, despite the removal of large deal contributions from guidance [14][31] - Management emphasized the importance of maintaining investments in capabilities and infrastructure to support future growth [45] Other Important Information - The company repurchased 2.8 million shares in the first half of the year, with another 1.3 million shares remaining under the authorization [67] - The attrition rate was 34%, consistent with the previous quarter, and headcount at the end of Q2 was 62,951 [19] Q&A Session All Questions and Answers Question: Can you provide clarity on the large deal pipeline and win rates? - Management confirmed that the large deal pipeline remains strong, with over 25 large deals in progress, but emphasized the need for executive involvement and the complexity of these deals [22][23] Question: How do you view the company's ability to return to historical growth rates? - Management expressed confidence in returning to strong growth rates, attributing current challenges to specific client-related issues rather than overall demand trends [29][30] Question: Can you comment on the OTA side and its impact on guidance? - Management indicated that the OTA sector's challenges contributed approximately 1% to 2% impact on the full-year guidance reduction [33] Question: What are the expectations for margins in the back half of the year? - Management expects adjusted operating margins to improve in Q3 and Q4, aiming for low 20s EBIT margins in the long term [45][46] Question: How is client behavior changing regarding AI and analytics? - Management noted that clients are increasingly recognizing the value of AI and analytics, leading to more significant discussions about transformation and business model changes [49][51]