WNS (Holdings) Limited

Good morning, and welcome to the WNS Holdings Fiscal 2025 Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in 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. 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?

Thank you, and welcome to our fiscal 2025 fourth quarter and full year earnings call. With me today on the call, I have WNS' CEO, Keshav Murugesh, and WNS' CFO, Arjun Sen. Press release detailing our financial results was issued earlier today. This release is also available on the investor relations section of our website at www.wns.com. Today's remarks will focus on the results for the fiscal fourth quarter and full year ended March 31st, 2025. 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 to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, those factors set forth in the company's Form 20F. This document is also available on the company website. 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. Some of the non-GAAP financial measures management will discuss are defined as follows. Net revenue is defined as revenue-less repair payments. 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 ADF program termination and costs associated with transition to voluntarily reporting on U.S. domestic issues. 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 impairment, 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 WNS' CEO, Keshav Murugesh.

Keshav. Hey, thank you, David. Good morning, everyone. I'm delighted with this quarter's results. In the fiscal fourth quarter, WNS' financial results were highlighted by solid sequential revenue growth, operating margin expansion, and strong free cash flow. 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. During the quarter, healthy demand for digitally led business transformation and cost reduction initiatives more than offset the impact of unfavorable currency movements. In Q4, WNS added nine new logos and expanded 50 existing relationships. 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. We expect these engagements to begin generating revenue in the first half of fiscal 2026. On March 11th, we announced the acquisition of tippy.ai, a leading provider of data management services focused on the Snowflake platform. tippy brings to WNS strategy, execution, and managed service capabilities across data engineering advanced analytics ai as well as data science their more than 600 global employees represent one of the world's largest snowflake certified talent pools and will significantly enhance wns's positioning in the rapidly growing and mission-critical data management space. 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. Their capabilities are highly complementary to WNS's existing offerings, and we believe Kipi's seasoned leadership team, talented resources, and strong delivery approach represent an excellent cultural fit for us. 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. During WNS's 25-plus year history, The company has developed intimate knowledge of industry-specific operations, processes, workflows, and systems. 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. 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. Just under a year ago, we hired a chief business officer to oversee WNS Next, our umbrella organization covering AI, data and analytics, and technology and automation. We've also now added a new chief AI research officer, a chief product and design officer, and an EVP of digital strategy. These experts are leading their respective teams and helping WNS navigate the rapidly evolving technology and services landscape. 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 Vura, the Smart Cube, OptiBuy, and now Kipi.ai. Together, these investments are helping us accelerate the creation and deployment of WNS proprietary technology assets, including products, platforms, tools, enablers, and accelerators that are reusable and customizable. These digital assets, which now embed AI, GenAI, and agentic AI, are being combined with WNS's global talent to deliver productized services for our clients. By creating solutions at the intersection of domain expertise, data, and technology, WNS is now able to understand industry problems well, create transformational AI-led solutions, and deliver differentiated outcomes. I would now like to provide you with a brief recap of the past year before turning our attention to fiscal 26. From a financial perspective, fiscal 2025 was a challenging year for WNS, driven by customer-specific revenue headwinds including a large healthcare client loss, the delivery transition from onsite to offshore for an internet-based procurement relationship, and volume-based ramp downs in the online travel space. 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. The revenue decline resulted in lower expense coverage, which adversely impacted our adjusted operating margin. Despite this pressure, WNS continued to invest in accelerating capabilities and building organizational depth, including a 16% increase in our sales force during the fiscal year. From a profitability standpoint, WNS was able to offset the revenue and margin pressure with non-recurring benefits from the reversal of a tax liability in the second quarter and the sale of a facility in India in the fourth quarter. Together, these two items contributed approximately $21 million to adjusted net income and 46 cents to adjusted EPS. 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. Other highlights from this past year include our transition from IFRS to US GAAP reporting and WNS's inclusion in the Russell 2000 as well as the MSCI US small cap indices, which help improve access to capital, trading liquidity, and company visibility. As we enter fiscal 2026, we are excited about the company's solid business momentum, healthy pipeline, differentiated capabilities, and expanding market opportunity. In fiscal 2025, we added 33 new logos, and expanded 179 existing relationships, representing healthy increases over the previous year. We also completed our acquisition of KPI in the high-growth data management space, and we have closed two large deals in the fourth quarter alone. 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. Today, demand for services that deliver business transformation and cost reduction remains stable and healthy despite the volatile macro environment. Our pipeline is broad-based across verticals and services and maintains a healthy balance between traditional deals and large transformational opportunities. Clients continue to move forward with decisions as evidenced by our recent large deal signings and now, the new logo additions as well. 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. WNS begins fiscal 2026 with 90% visibility to the midpoint of our revenue guidance which represents 9% growth on both reported as well as constant currency basis. The guidance midpoint for ANI assumes stable year-over-year adjusted operating margins despite increased investments and growth in adjusted EPS of more than 11%, excluding one-time benefits in fiscal 25. In summary, By using our industry-focused operational knowledge to unlock the power of data and state-of-the-art technologies like AI, GenAI, and Agenting AI, WNS is well-positioned to meet our clients' rapidly evolving requirements, deliver impactful business outcomes, and drive long-term sustainable shareholder value. I would now like to turn the call over to our CFO, Arijit Sen, to discuss further our results as well as outlook. Thank you, Keshav. In the fiscal fourth quarter, 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. 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. Sequentially, net revenue increased by 1.3% on a reported basis and 2.6% constant currency. The quarter-over-quarter revenue growth was driven by broad-based demand for AI-led transformation automation, and cost reduction solutions, which more than offset reduced revenue with large utility supply, resulting from the Q3 completion of a platform migration project and unfavorable currency movements. In Q4, Dubnus recorded $1.3 billion of short-term high margin revenue. Adjusted operating margin in Q4 was 21.4% as compared to 20.9% last year, and 19.3% last quarter. Year over year, adjusted operating margin improvements were driven by favorable currency movements and were partially offset by increased investments in infrastructure and sales. Sequentially, margin improvement was driven by operating leverage in higher volumes, improved productivity, and favorable currency movements. The company's net other income slash expense was $16.9 million of net income in the fourth quarter as compared to $0.8 million of net income in Q4 of fiscal 2024 and $0.9 million of net expense last quarter. Year over year, the favorable variance is the result of $16.7 million from the sale of facility in India. Sequentially, the favorable variance is the result of the facility sale, reduced interest expense driven by debt repayments, and increased interest income on higher cash funds. Doubles in effective tax rates for Q4 came in at 23.2% as compared to 21.7% last year and 22.8% in the prior quarter. 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. The company's adjusted net income for Q4 was $66.2 million compared with $53.9 billion in the same quarter of fiscal 24, and $47 billion last quarter. 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. As of March 31, 2025, WMS's balances in cash and investment totaled $267.4 million, and the company had $243.5 million in debt. In the fourth quarter, we generated $53.4 million of cash from operating activities, paid $63.4 million for an acquisition of Kipi, incurred $18.6 million in capital expenditures, and made debt repayments of $33 million. 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. With respect to other key operating metrics, WS's total headcount at the end of fourth quarter was 64,505 and our attrition rate was 39% as compared to 33% reported in Q4 of last year and 32% in the previous quarter. We expect attrition to average in the low to mid 30% range, but the rate could remain volatile quarter over quarter. Bill seat capacity at the end of Q4 was 42,494, and WNS averaged 72% work from office during the quarter. I would like to provide you with a brief financial summary for fiscal 2025 before discussing our outlook for the coming year. 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. Revenue growth during the year was driven by healthy new low auditions and existing client expansion that was overshadowed by the three client-specific revenue headwinds Keshav mentioned earlier. The company's fiscal 2025 adjusted operating margin was 19.5%, down 110 basis points versus fiscal 2024. margin favoritity from currency movements and improved productivity was more than offset by increased investments and reduced operating leverage on low revenue net interest income expense for the year improved by 11.7 million dollars and was driven by a india facility sale of 16.7 million dollars before This benefit was partially offset by reduced interest income on lower average cash balances and increased interest expense on higher average debt levels. The company's effective tax rate was 19.9% up from 18.3% last year, but below normalized levels due to a $8.6 million non-recurring tax benefit in Q2. Full year adjusted net 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%. WS's average share count reduced by 7% as a result of our aggressive share increase in the first half of the year. Our fiscal 2025 profitability was severely impacted by $21 million, or 46 cents per share, as a result of non-recurring benefits, including a tax liability reversal in Q2, and our facility sales in India in Q4. In fiscal 2025, WMS generated $207.2 billion in cash from operations, spent $54.1 billion on capital expenditures, made debt repayments of $174 million, and incurred $63.4 million for acquisitions. The company also repurchased 2.8 billion shares of stock at a total cost of $149.7 billion, or $58.46 per share. Our disciplined balanced approach to capital allocation resulted in WNS ending the year with a net cash balance of $24 million. The company's global attrition rate for the year was 35%, and work from office increased to 72% as compared to 68% last year. In our press release issued earlier today, WNS provided our initial FUJIA guidance for fiscal 2026. Based on the company's current visibility levels, we expect net revenue to be in the range of $1,352,000,000 to $1,404,000,000 representing year-over-year growth of 7% to 11% on both reported and constant currency basis. We currently have 90% visibility to the midpoint of the range, which assumes an average British pound two US dollar exchange rate of 1.29 for the full year. 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 headway of approximately 2% related to fiscal 2025 ramp-downs 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. WMS's full year adjusted net income 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. 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, 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. With respect to capital expenditures, WS Currency expects our requirements of fiscal 2026 to be up to $65 million. We will now open the call for questions. Operator?