• Net Revenue: $319.1 million, up 1% year-over-year, flat on a constant currency basis.
• Sequential Revenue Growth: Increased by 2.7% on a reported basis and 3.2% on a constant currency basis.
• Adjusted Operating Margin: 19.3%, compared to 19.7% last year and 18.6% last quarter.
• Adjusted Net Income: $47 million, down from $58.5 million in the same quarter last year.
• Adjusted Diluted Earnings Per Share: $1.04, down from $1.19 last year.
• Cash and Investments: $231.5 million as of December 31, 2024.
• Debt: $199.6 million as of December 31, 2024.
• Cash from Operating Activities: $88.7 million in the third quarter.
• Capital Expenditures: $12.1 million in the third quarter.
• Debt Repayments: $58.4 million in the third quarter.
• Days Sales Outstanding (DSO): 34 days, compared to 35 days last year.
• Headcount: 63,319 employees at the end of the third quarter.
• Attrition Rate: 32%, compared to 29% last year.
• Fiscal 2025 Revenue Guidance: $1.255 billion to $1.271 billion, representing a year-over-year range of -2% to -1% on a reported basis.
• Fiscal 2025 Adjusted Net Income Guidance: $205 million to $209 million.
• Fiscal 2025 Adjusted EPS Guidance: $4.46 to $4.55.
• Fiscal 2025 Capital Expenditures Guidance: Up to $16 million.

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

Release Date: January 23, 2025

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

Positive Points

• WNS (Holdings) Ltd (NYSE:WNS) achieved sequential revenue growth of 2.7% on a reported basis and 3.2% on a constant currency basis in fiscal Q3.
• The company expanded its adjusted operating margin and generated strong cash flow during the quarter.
• WNS added seven new logos and expanded 52 existing relationships, indicating strong client engagement.
• The large deal pipeline remains robust and healthy, with opportunities across key verticals.
• WNS has developed over 30 GenAI use cases and 13 unique digital assets, showcasing its innovation in AI and GenAI solutions.

Negative Points

• Year-over-year, adjusted operating margins decreased due to lower employee utilization and increased investments in infrastructure and sales.
• The company's effective tax rate increased significantly to 22.8% from 6.7% last quarter, impacting net income.
• Attrition rate increased to 32% compared to 29% in the same quarter last year, indicating potential challenges in employee retention.
• Fiscal 2025 guidance indicates a potential year-over-year revenue decline of 1% to 2% on a reported basis.
• The timing of large deal signings and associated revenue contributions remains uncertain, affecting future revenue visibility.

Q & A Highlights

Q: Can you provide more color on the fiscal '26 outlook for high single to low double-digit growth and how headwinds are shaping up for next fiscal year? A: David Mackey, Corporate Senior Vice President of Finance & Head of Investor Relations, explained that typical headwinds are in the 10% to 11% range, including productivity commitments and project falloffs. For fiscal '26, unusual headwinds are about 2%, significantly below previous years, with 1% from a healthcare client and 1% from online travel reductions.

Q: How do you see the cadence of operating margins evolving into fiscal '26? A: Keshav Murugesh, Group CEO, stated that margins should improve due to operating leverage as revenue growth returns. They expect to maintain margins in the 19% to 20% range, with sequential reductions from Q4 to Q1 due to wage increases and productivity commitments, followed by improvements in the last three quarters.

Q: Can you discuss the progress and visibility of the large deal pipeline? A: Keshav Murugesh noted positive momentum in the large deal pipeline, with over 20 qualified deals moving through. The uncertainty lies in the timing due to the scale and impact of these deals, often requiring CEO, CFO, and board involvement. They are confident in closing deals in the next one or two quarters.

Q: How did travel and insurance verticals perform relative to forecasts? A: David Mackey mentioned that travel volumes were consistent with expectations, with online travel representing only 3% of revenue. Insurance saw healthy acceleration, particularly with a large US client leveraging GenAI for policy administration, unrelated to the large insurance captive.

Q: What is the impact of Agentic AI on WNS and client adoption? A: Keshav Murugesh explained that while Agentic AI presents short-term threats, it offers long-term opportunities. WNS is investing in this area, and while client adoption is not aggressive yet, they expect it to create a tailwind over the next three years.

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