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WNS (HOLDINGS) LTD (WNS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 revenue was $333.0M (+2.1% YoY, +3.2% QoQ) and diluted EPS was $1.07 (+25.9% YoY, +16.3% QoQ). Net revenue (revenue less repair payments) was $319.1M (+1.0% YoY, +2.7% QoQ) with adjusted diluted EPS of $1.04 (-12.6% YoY, -8.0% QoQ) .
  • Adjusted operating margin was 19.3% (vs. 19.7% YoY; 18.6% QoQ), reflecting operating leverage on higher volumes and favorable FX; GAAP operating margin was 13.6% .
  • Guidance raised for FY2025 ANI ($205–$209M) and adjusted EPS ($4.46–$4.55), while capex lowered to “up to $60M”; net revenue guidance narrowed to $1.255–$1.271B (midpoint reduced vs. prior) .
  • Cash flow was strong: cash from operations $88.7M, DSO improved to 34 days; cash/investments $231.5M and debt $199.6M at quarter-end .
  • Stock catalysts: guidance raise on ANI/EPS; reduced online travel exposure (now ~3% of revenue); AI/GenAI commercialization across 13 digital assets and more than 30 use cases in production/committed programs .

What Went Well and What Went Wrong

What Went Well

  • Re-accelerated sequential growth and margin expansion: “reaccelerate sequential revenue growth, expand adjusted operating margin, and generate strong cash flow” (CEO) .
  • Healthy pipeline and AI/GenAI execution: 13 GenAI digital assets built; >30 use cases customer-ready; 13 clients in production and 20 underway/committed; new U.S. insurance client projected to be top 10 in FY2026 leveraging multiple GenAI assets .
  • Lower risk in travel exposure: online travel represented ~3% of company revenue in Q3, reducing risk from volume declines (IR) .

What Went Wrong

  • Adjusted EPS and ANI declined YoY despite GAAP EPS up, driven by non-GAAP adjustments and higher tax rate; adjusted diluted EPS fell to $1.04 (vs. $1.19 YoY), ANI to $47.0M (vs. $58.5M YoY) .
  • Continued headwinds from loss of a large Healthcare client, online travel volume reductions, and reduced discretionary project work; constant-currency net revenue flat YoY .
  • Large deal signings remain less visible and are excluded from guidance; timing uncertainty persists though pipeline is robust with >20 qualified opportunities .

Financial Results

Core Financials and Margins

MetricQ3 FY2024Q1 FY2025Q2 FY2025Q3 FY2025
Revenue ($USD Millions)$326.2 $323.1 $322.6 $333.0
Revenue less repair payments ($USD Millions)$315.9 $312.4 $310.7 $319.1
Net Income ($USD Millions)$41.5 $28.9 $41.8 $48.6
Diluted EPS ($USD)$0.85 $0.61 $0.92 $1.07
Adjusted Net Income (ANI) ($USD Millions)$58.5 $44.0 $51.5 $47.0
Adjusted Diluted EPS ($USD)$1.19 $0.93 $1.13 $1.04
GAAP Operating Margin (%)12.1% 11.9% 12.8% 13.6%
Adjusted Operating Margin (%) on Net Revenue19.7% 18.4% 18.6% 19.3%
Net Income Margin (%)12.7% 9.0% 13.0% 14.6%
Adjusted Net Income Margin (%) on Net Revenue18.5% 14.1% 16.6% 14.7%

Notes:

  • Constant-currency net revenue was flat YoY and +3.2% QoQ .
  • Year-over-year profit increase benefited from $13.7M contingent consideration reversal (Smart Cube), reductions in SBC/amortization, and FX; partially offset by $9.5M non-recurring tax benefits in Q3 FY2024 and higher net interest expense .

KPIs and Operating Metrics

KPIQ1 FY2025Q2 FY2025Q3 FY2025
New Clients Added (count)8 9 7
Client Relationship Expansions (count)36 41 52
DSO (days)36 38 34
Global Headcount60,513 62,951 63,390
Cash from Operations ($M)$21.4 $43.6 $88.7
Capital Expenditures ($M)$10.7 $12.7 $12.1
Cash + Investments ($M)$301.5 $221.5 $231.5
Debt ($M)$301.5 $262.8 $199.6
Attrition Rate (%)N/AN/A32%
Billed Seat Capacity (units)N/AN/A43,550
Work-from-Office (%)N/AN/A71%

Segment Breakdown

MetricQ3 FY2025
Segment revenue detailNot disclosed in the 8-K/press release or transcript

Guidance Changes

MetricPeriodPrevious Guidance (Oct 17, 2024)Current Guidance (Jan 23, 2025)Change
Revenue less repair payments ($USD Billions)FY2025$1.250–$1.296 $1.255–$1.271 Narrowed; midpoint lowered (from ~$1.273B to ~$1.263B)
ANI ($USD Millions)FY2025$190–$200 $205–$209 Raised
Adjusted diluted EPS ($USD)FY2025$4.13–$4.35 $4.46–$4.55 Raised
Capital Expenditures ($USD Millions)FY2025Up to $65 Up to $60 Lowered
GBP/USD AssumptionQ4 FY20251.31 1.25 Updated
USD/INR AssumptionQ4 FY202583.5 85.5 Updated
ANI includes one-time benefit ($USD Millions)Q4 FY2025N/A$12.2 (facility asset sale in India) New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY2025)Current Period (Q3 FY2025)Trend
AI/GenAI initiatives“Investing ahead of the curve in technology-enabled offerings leveraging AI and GenAI” (Q1) ; Pipeline building (Q2) 13 proprietary GenAI digital assets; >30 use cases; 13 clients live, 20 underway; examples in freight management and knowledge processing Strengthening execution/commercialization
Large deal pipelineRecord levels, conversion less visible; removed contribution from FY2025 guidance (Q2) ; “strengthening pipeline” (Q1) >20 qualified large deals; timing uncertain; potential closures in next 1–2 quarters; excluded from guidance Robust, progressing; timing still uncertain
Online travel volumesDeclining volumes pressuring revenue (Q1) ; reductions baked into outlook (Q2) Sequential pressure continues; online travel ~3% of revenue, risk reduced Easing risk via mix (lower exposure)
Healthcare client lossMajor headwind (Q2) ~1% unusual headwind into FY2026; anniversaries in fiscal Q1 next year Normalizing in FY2026
Sales cycles/macroDemand robust for business transformation; pipeline healthy (Q1/Q2) Traditional deal sales cycles ~6–9 months; no material changes due to macro/AI; healthy conversion Stable/healthy
Margin trajectoryAdjusted margin 18.4%–18.6% in Q1/Q2; SG&A coverage pressured 1H (Q2) Q3 adjusted margin 19.3%; Q4 targeted ~20–21%; run-rate 19–20% with seasonal Q1 dip Improving sequentially
M&A strategyNot highlightedTuck-ins for capability; disciplined on fit/price; focus on higher value-add areas (data/analytics, AI/GenAI, selected verticals) Active, disciplined

Management Commentary

  • CEO: “In the fiscal third quarter, WNS was able to re-accelerate sequential revenue growth, expand adjusted operating margin, and generate strong cash flow… We continue to make solid progress moving large transformational opportunities through the pipeline… leveraging AI and GenAI to ensure our ability to deliver long-term sustainable value.”
  • CFO on guidance/assumptions: “ANI guidance includes a one-time benefit in Q4 of $12.2 million relating to a facility asset sale in India… capital expenditures to be up to $60 million” .
  • IR on travel exposure and pipeline: online travel now ~3% of revenue; large deal pipeline >20 qualified opportunities .

Q&A Highlights

  • FY2026 outlook: Underlying run-rate growth trends support high single to low double-digit growth; unusual headwinds ~2% next year (1% healthcare anniversary; ~1% online travel reductions) .
  • Margin cadence: Q4 adjusted operating margin targeted near ~21%; run-rate margins expected 19–20% with typical Q1 seasonal reset (wage increases and productivity commitments) .
  • Large deals: Pipeline “robust and healthy” with >20 qualified; potential closures in 1–2 quarters; timing uncertainties tied to board/risk committee processes; excluded from guidance until signed .
  • Travel/Insurance dynamics: Online travel volumes pressured but exposure small (~3% revenue); insurance seeing acceleration, including a large U.S. client using GenAI for digital policy administration .
  • AI strategy: Mix of proprietary assets and best-in-class third-party components; customizable by domain; continued workforce upskilling (22,000+ trained; 51,000+ courses completed) .
  • Cash flow drivers: Strong Q3 cash generation driven by DSO reduction; SG&A coverage normalized vs. first-half pressure amid revenue recovery .

Estimates Context

  • Wall Street consensus via S&P Global (EPS and revenue) for Q3 FY2025 was unavailable due to SPGI request limits at the time of retrieval. As a result, we cannot quantify beats/misses versus consensus for this quarter. Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Sequential revenue and margin momentum returned in Q3; adjusted operating margin improved to 19.3% and GAAP EPS rose to $1.07 .
  • Guidance raised for FY2025 ANI and adjusted EPS, while capex trimmed—supportive for near-term earnings quality and cash discipline .
  • Risk exposure to online travel materially reduced (now ~3% of revenue), de-risking a key headwind into FY2026 .
  • Robust large-deal pipeline with >20 qualified opportunities; closing any could accelerate growth and provide upside optionality—monitor near-term deal announcements .
  • Strong cash conversion (CFO $88.7M) and DSO improvement to 34 days underpin balance sheet flexibility and capital deployment options .
  • AI/GenAI commercialization is tangible (13 assets, >30 use cases, 13 clients live), positioning WNS for domain-led automation and analytics differentiation across verticals .
  • Medium term: Expect high single to low double-digit revenue growth in FY2026 with margin leverage, tempered by typical Q1 seasonal reset; watch FX assumptions and tax normalization .