WNS (Holdings) Limited

WNS reported fiscal Q2 net revenue of $325 million, up 12.3% from $289.3 million in the prior-year quarter and up 11% constant currency; sequentially net revenue rose 2.4% reported and 2.1% constant currency. Adjusted operating margin was 22.4% versus 20.6% a year ago, and adjusted diluted EPS was $1.09 versus $0.94 last year, both up 16%. Adjusted net income was $54.1 million versus $47.2 million last year; cash and investments were $248.1 million and debt was $164.1 million at September 30, 2023. For FY2024, WNS now expects net revenue of $1.254 billion-$1.3 billion, adjusted net income of $201 million-$211 million, adjusted EPS of $4.04-$4.24, and capex up to $60 million. Management said Q3 revenue should be 3.5% to 4% lower than Q2, with Q3 margins around 21% plus and Q4 margins around 22% plus.

Keshav Murugesh said WNS is seeing healthy demand and what he described as the strongest quality of client conversations it has seen, especially around cost takeout, digitization and AI/GenAI. He emphasized that the second-half pressure is driven by macro and client-specific issues, not by AI, and said the company still believes the current headwinds should create an accelerated growth opportunity in FY2025. His tone was cautiously upbeat: near-term caution, but strong confidence in the pipeline, pricing stability and the long-term opportunity.

Sanjay Puria focused on the numbers behind the guidance reset and the margin profile. He said Q2 adjusted operating margin was 22.4% and noted cash flow from operations of $68.5 million, capex of $15.7 million, and debt repayments of $38 million; DSO was 35 days and attrition was 30%. He also said the full-year outlook assumes an INR 83/USD rate, 97% visibility to the midpoint, and capex up to $60 million, and that share repurchases are expected to begin in Q3 under the new 3.3 million share approval.

Analysts pressed on why client ramps are taking longer despite a healthy deal pipeline, and management said the slowdown is mostly about client-specific conservatism, travel weakness, project timing and a delayed insurance captive ramp rather than a broad demand problem. They also clarified that the guidance cut is driven by about 1% FX, 2% from the insurance captive, 1% from conservative volume forecasts and 1% from project slowdown, while saying the Vuram acquisition is still growing more than 20% but below the contingent consideration hurdle. On capital allocation, management said buybacks should resume in Q3 and that tuck-in M&A remains a priority.