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WNS (HOLDINGS) LTD (WNS)·Q2 2025 Earnings Summary

Executive Summary

  • Fiscal Q2 2025 revenue was $322.6M (-3.4% YoY; -0.2% QoQ) and net revenue (revenue less repair payments) was $310.7M (-4.4% YoY; -0.6% QoQ). Adjusted diluted EPS was $1.13 (+2.7% YoY; +21.5% QoQ), while GAAP diluted EPS was $0.92; EPS was above company forecast due to a one-time tax benefit (~$9M) and contingent consideration reversal. Guidance was cut and large-deal revenue was removed from FY25 projections .
  • Adjusted operating margin was 18.6% (vs. 21.5% a year ago; 18.4% last quarter). Management expects margin expansion into the low 20s by Q4 FY25 as volumes recover and operating leverage improves .
  • Guidance change: revenue less repair payments reduced to $1.250B–$1.296B (from $1.290B–$1.354B), ANI to $190M–$200M (from $203M–$215M), and adjusted diluted EPS to $4.13–$4.35 (from $4.42–$4.68). Capex held “up to $65M.” FX assumptions updated (GBP/USD 1.31; USD/INR 83.5) .
  • Stock narrative catalysts: the removal of large-deal revenue from guidance and continued OTA volume pressure create near-term visibility headwinds; management targets sequential growth in Q3 and Q4 and cites a record large-deal pipeline (>20 deals; >$500M ACV), positioning FY26 for acceleration .

What Went Well and What Went Wrong

What Went Well

  • Adjusted diluted EPS up YoY/QoQ to $1.13; GAAP EPS above internal forecast driven by a one-time tax benefit and contingent consideration reversal; headcount ramp supports expected H2 growth. “EPS came in above forecast as a result of a one-time tax benefit” — Keshav Murugesh .
  • Record large-deal pipeline (>20 deals; >$500M ACV) across verticals, with conversions expected to be spotty but supportive of FY26 acceleration. “More than 20 large deals representing over $500 million in annual contract value” — Keshav Murugesh .
  • Strong analytics/AI capabilities embedded across offerings, recognized by industry analysts; standalone analytics growing ~20% CAGR over past 3 years; GenAI expected to contribute ~5% of FY25 revenue. “Stand-alone analytics was growing at a 20% CAGR… 5% target for Gen AI still good” — management .

What Went Wrong

  • Top-line softness: revenue declined YoY and net revenue fell on both YoY and QoQ bases; adjusted operating margin compressed YoY (18.6% vs. 21.5%) with higher SG&A and lower utilization .
  • Sector headwinds: OTA volumes pressured (now <4% of revenue in Q2) and loss of a large healthcare client; continued weakness in discretionary projects .
  • Guidance cut: FY25 net revenue (less repair payments), ANI, and EPS reduced; large-deal revenue removed from guidance due to timing uncertainty, limiting near-term visibility .

Financial Results

MetricQ4 2024 (Mar 31, 2024)Q1 2025 (Jun 30, 2024)Q2 2025 (Sep 30, 2024)
Revenue ($M, GAAP)$336.8 $323.1 $322.6
Payments to repair centers ($M)$10.9 $10.7 $11.9
Revenue less repair payments ($M, non-GAAP)$325.9 $312.4 $310.7
Operating income ($M, GAAP)$16.9 $38.6 $41.3
Adjusted operating income ($M, non-GAAP)$68.2 $57.6 $57.7
Net income ($M, GAAP)$14.5 $28.9 $41.8
Adjusted Net Income (ANI) ($M, non-GAAP)$53.9 $44.0 $51.5
Diluted EPS (GAAP)$0.30 $0.61 $0.92
Adjusted diluted EPS (non-GAAP)$1.12 $0.93 $1.13
Adjusted operating margin (% of net revenue)20.9% 18.4% 18.6%
Adjusted net income margin (% of net revenue)16.6% 14.1% 16.6%
Net income margin (% of revenue)N/A9.0% 13.0%

KPIs and balance sheet

KPIQ4 2024Q1 2025Q2 2025
DSO (days)33 36 38
Global headcount60,125 60,513 62,951
Attrition rate33% 34% 34%
Cash + investments ($M)$244.3 $301.5 $221.5
Total debt ($M)$179.2 $301.5 $262.8
Cash from operations ($M)$67.6 $21.4 $43.6
Capex ($M)$10.4 $10.7 $12.7
Share repurchases1.2M @ $59.62; $71.5M 1.64M @ $51.24; $78.0M 1.16M @ $56.61; $71.7M

Vertical exposure highlights

ExposureQ4 2024Q1 2025Q2 2025
OTA share of revenueN/A<5% <4%
Internet & Tech share~17% of company revenue N/AN/A

Notes:

  • EPS above company forecast primarily due to a one-time tax benefit (~$9M deferred tax liability reversal) and contingent consideration reversal (OptiBuy) .
  • Revenue softness driven by healthcare client loss, OTA volume reductions, and lower discretionary projects; partial offsets from new logos, expansions, and FX .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue less repair payments ($B, non-GAAP)FY2025$1.290–$1.354 $1.250–$1.296 Lowered
Adjusted Net Income (ANI) ($M)FY2025$203–$215 $190–$200 Lowered
Adjusted diluted EPS ($)FY2025$4.42–$4.68 (diluted shrs ~45.9M) $4.13–$4.35 (diluted shrs ~46.0M) Lowered; share count slightly higher
Capex ($M)FY2025Up to $65 Up to $65 Maintained
GBP/USD assumptionFY20251.28 1.31 Updated higher
USD/INR assumptionFY202583.4 83.5 Updated slightly

Management explicitly removed large-deal revenue from FY25 guidance given timing uncertainty; ongoing OTA volume reductions and flat discretionary projects assumed .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Large-deal pipeline4 large tech-led deals signed; pipeline building; lumpiness expected >20 deals; >$400M ACV; need some wins to meet guide >20 deals; >$500M ACV; removed from guide due to timing; visibility low Pipeline size up; timing uncertainty persists
AI/GenAI initiativesStrong capabilities; cautious client adoption; analyst recognition 100+ GenAI use cases; ~5% FY25 revenue with GenAI; training & partnerships AI/analytics differentiated; awards; GenAI 5% still on track Expanding capabilities; client adoption broadening
OTA/travel volumesBroad-based pressure; rightsizing; automation shifts OTA <5% of rev; continued volatility OTA <4% of rev; 1–2% guide impact; walking from commoditized work Ongoing headwind; mitigating mix shift
Healthcare client loss~3% FY25 headwind; client strategy change Ramp-down to impact Q2; utilization effects Headwind largely anniversaried by Q3 sequentially Impact abating sequentially
MarginsIndustry-leading adjusted OPM 22%; FY25 21–22% Q1/Q2 flattish; back-half expansion Low-20s by Q4; full-year ~19–20% adjusted OPM Compression in H1; expansion expected H2
Capital allocationAccelerated buybacks; $150M FY25 plan 1.64M shares repurchased; program continues; M&A focus 1.16M repurchased in Q2; 1.3M left on authorization Active buybacks; selective M&A
IFRS→US GAAP transitionStaged transition announced Transition completed; reconciled history Operating metrics disclosed under US GAAP Completed; comparability improved

Management Commentary

  • “Second quarter revenue and margin were largely in line with company expectations, while EPS came in above forecast as a result of a one-time tax benefit.” — Keshav Murugesh .
  • “We have removed the revenue contribution from large deals from our fiscal 2025 guidance… focused on closing these sizeable opportunities in the second half of fiscal 2025 to help position the company for revenue acceleration in fiscal 2026.” — Keshav Murugesh .
  • “Our guidance… reflects revenue less repair payments of -3% to +1% on a reported basis, and -4% to 0% on a constant currency basis… We continue to expect capital expenditures of up to $65 million.” — CFO .
  • “Adjusted operating margin… will get back into the low 20s by the fourth quarter… full year 19% to 20% range… investments will not be scaled back.” — Management .
  • “We remain committed to investing ahead of the curve in domain expertise, data and analytics, and technology-enabled offerings leveraging AI and GenAI.” — Keshav Murugesh .

Q&A Highlights

  • Large deals: Removal from guidance is about timing, not win rates; pipeline >25 large deals ($10M+ ACV) with executive-level engagement on both sides .
  • OTA: Continued pressure; guidance reduction impact ~1–2%; WNS exiting commoditized work and pursuing higher-value digital/data/analytics services; OTA <4% of revenue in Q2 .
  • Margins: Expect adjusted operating margin expansion in Q3/Q4; target low-20s by Q4; full-year adjusted OPM ~19–20% despite ongoing investment .
  • Headwinds cadence: Healthcare client and Internet on-site→offshore impacts largely abate sequentially by Q3; modest OTA headwind remains .
  • Buybacks: 2.8M shares repurchased in H1; 1.3M shares remain on current authorization .

Estimates Context

  • S&P Global consensus for Q2 2025 EPS and revenue was unavailable at the time of this analysis; therefore, Street beat/miss versus consensus cannot be assessed.
  • Company framing: EPS was above internal forecast due to one-time tax benefits; revenue and margin were “largely in line.” Given the guidance cuts (net revenue less repair payments, ANI, and adjusted EPS), sell-side FY25 estimates likely need to be recalibrated lower to the updated ranges .

Key Takeaways for Investors

  • Quarter quality: Net revenue down YoY/QoQ; adjusted EPS up YoY/QoQ on one-time tax benefit; underlying margin still compressed YoY; watch sustainability of EPS absent one-time items .
  • Guidance reset: FY25 net revenue less repair payments, ANI, and adjusted EPS lowered; large-deal revenue explicitly removed due to timing uncertainty, reducing near-term visibility .
  • H2 setup: Management targets sequential revenue growth in Q3/Q4 and margin expansion to low-20s by Q4; hiring underway to support ramps; monitor conversion of pipeline .
  • Sector mix: OTA revenue now a small share (<4%); healthcare client loss impact largely anniversaried by Q3; portfolio derisked from single-client concentration in Internet/Tech (~17% of revenue previously, diversified today) .
  • Capital allocation: Continued buybacks (1.3M authorization remaining) alongside capex/infrastructure and sales investment; balance sheet flexibility with $221.5M cash+investments and $262.8M debt at Q2 .
  • AI/analytics differentiation: Strong recognition and embedded analytics/AI across offerings; GenAI expected ~5% of FY25 revenue, which can support pricing models (shift towards non-FTE/outcome-based) and margins over time .
  • FY26 catalyst: Record large-deal pipeline (>20 deals; >$500M ACV) provides line-of-sight to revenue acceleration in FY26 once timing issues resolve; track deal closures and ramp cadence .