• Net Revenue: $310.7 million, down 4.4% year-over-year and 5.2% on a constant currency basis.
• Adjusted Operating Margin: 18.6%, compared to 21.5% last year and 18.4% last quarter.
• Adjusted Net Income: $51.5 million, compared to $54.4 million last year and $44 million last quarter.
• Adjusted Diluted Earnings Per Share (EPS): $1.13, up from $1.10 last year and 93 cents last quarter.
• Cash and Investments: $221.5 million as of September 30, 2024.
• Debt: $262.8 million as of September 30, 2024.
• Cash from Operating Activities: $43.6 million in the second quarter.
• Capital Expenditures: $12.7 million in the second quarter.
• Share Repurchases: 1,156,000 shares at an average price of $56.61, impacting Q2 cash by $71.7 million.
• Days Sales Outstanding (DSO): 38 days, compared to 35 days last year and 36 days last quarter.
• Headcount: 62,951 at the end of the second quarter.
• Attrition Rate: 34%, compared to 30% last year and 34% last quarter.
• Fiscal 2025 Revenue Guidance: $1.25 billion to $1.296 billion, representing a year-over-year range of -3% to +1% on a reported basis.
• Fiscal 2025 Adjusted Net Income Guidance: $190 million to $200 million.
• Fiscal 2025 Adjusted EPS Guidance: $4.13 to $4.35.
• Fiscal 2025 Capital Expenditures Guidance: Up to $65 million.

• Warning! GuruFocus has detected 3 Warning Signs with WNS.

Release Date: October 17, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• WNS (Holdings) Ltd (NYSE:WNS) reported EPS above forecast due to a one-time tax benefit of $9 million.
• The company added nine new logos and expanded 41 existing relationships during the second quarter.
• WNS has a strong pipeline of over 20 large deals representing more than $500 million in annual contract value.
• The company's analytics practice is experiencing strong growth, with standalone analytics work growing at a 20% CAGR over the past three years.
• WNS has been recognized as a market leader in analytics and AI by several industry analysts and received multiple awards for its AI solutions.

Negative Points

• Net revenue decreased by 4.4% year-over-year and 5.2% on a constant currency basis.
• The company lost a large healthcare client and experienced continued reductions in online travel revenues.
• Full-year guidance has been lowered due to reductions in online travel volumes and slower-than-expected conversion of large deals.
• Adjusted operating margin decreased to 18.6% from 21.5% last year, impacted by lower revenue and increased investments.
• The effective tax rate for Q2 was significantly reduced due to one-time tax benefits, which may not recur in future quarters.

Q & A Highlights

Q: Can you provide more clarity on the large deal pipeline and win rates, especially given the record levels of the pipeline? A: Keshav Murugesh, CEO, explained that the pipeline remains strong with over 25 large deals, each over $10 million in annual contract value. These deals are strategic and require significant involvement from both WNS and client executives. The timing of these deals is unpredictable, but the company remains confident in its ability to win a fair share. David Mackey, EVP of Finance, added that the removal of large deal revenue from guidance is due to timing, not win rates.

Q: How confident are you in returning to historical growth rates and execution as we move into fiscal 2026 and beyond? A: Keshav Murugesh expressed confidence in returning to strong growth rates, emphasizing that the current challenges are client-specific and not indicative of broader demand trends. The company expects sequential revenue growth in Q3 and Q4 and believes that the worst is behind them. David Mackey noted that underlying growth in Q2 was healthy, and the guidance for Q3 and Q4 reflects sequential growth.

Q: How much did the reduction in online travel agency (OTA) volumes impact the guidance? A: David Mackey stated that the OTA sector contributed to a 1-2% impact on the full-year guidance. The company has taken a conservative approach to OTA volumes due to ongoing challenges in the sector. Keshav Murugesh added that WNS is focusing on higher-value services and is in discussions with clients about transforming their business models.

Q: Can you discuss the headwinds and when they might abate, allowing for growth to resume? A: David Mackey identified three main headwinds: the loss of a large healthcare client, the shift from on-site to offshore for a large internet client, and OTA volume reductions. Most of these headwinds will have abated by Q3, with only a modest impact from OTA expected. The company expects sequential growth in Q3 and Q4.

Q: How are clients incorporating AI and analytics into their processes, and is the 5% revenue target from generative AI still achievable? A: Keshav Murugesh noted that clients are increasingly recognizing the value of AI and analytics for transformation and efficiency. WNS is focused on educating clients and integrating these technologies into their business models. David Mackey confirmed that the 5% revenue target from generative AI is still achievable, as it includes both new initiatives and expansions within existing clients.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.