Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wipro Ltd (WIT, Financial) reported an operating margin increase to 16.5%, up by 0.1% from the previous quarter.
- The company achieved a sequential growth of 0.4% in the Americas 1 market unit, driven by health and technology sectors.
- Wipro Ltd (WIT) secured 10 large deals in Q1, contributing to a total contract value (TCV) of USD 3.3 billion.
- The company has rolled out iAspire, an AI-powered career development platform, providing foundational and advanced AI training to employees.
- Wipro Ltd (WIT) reported strong cash flows of $479 million in Q1, representing 132% of net income.
Negative Points
- IT Services revenue declined by 1.2% sequentially in reported currency terms.
- Europe and APMEA markets experienced sequential declines of 1.4% and 4.2%, respectively.
- Manufacturing and energy and utility sectors showed weakness, with sequential declines of 3% and 6.3%, respectively.
- The company provided a cautious Q2 revenue growth guidance of -1.0% to +1.0% in constant currency.
- Despite growth in top accounts, there was a drop in the number of clients in the $75 million-plus tier.
Q & A Highlights
Q: Srini, my first question is on the quarter gone by. Most of the peers you have reported were kind of positively surprised by the integration during the quarter. While we have been reported the number, which is within demand, but just wondering lowering. So was there any incident in terms of no negative surprises for you? Or you think your Q1 performance was in line with what we had anticipated at the start of the quarter?
A: Thanks, Abishek. Hello. You know, Abishek, first point I want to talk about is we did do a quarter one guidance range and we were within that guidance range. That's number one. Second, like I said, we are still not seeing a significant change in the demand environment. We see clients still cautious and discretionary spend is low. However, we have seen uptick in Capco, BFSI, consumer business in the US, which I called out. Sectors like ENU and manufacturing has been soft for us. Outside of the US, we are able to see momentum build up in our other two SMUs, more specifically, Europe and APMEA. We are also still in early stage of the deal that we have signed and deals like this usually take a few quarters to realize its full potential. And that's where our quarter two guidance is between minus 1% to plus 1%.
Q: And my second and last question is on the telco deal, what you won in Q1. Is this -- do you do full ramp-up in Q2 or would you start to ramp up between Q2 and Q3?
A: Yeah, Abishek. Like Srini said, these deals typically takes some time to ramp up and it'll take a few quarters for it to realize its full revenue potential. Of course, some upside that is factored in the quarter two guidance.
Q: Srini, first question is on deal wins. Would you be able to provide some color on how average tenor has changed versus last few quarters? And also, has there been any change in the new versus renewal mix in the current quarter versus last few quarters?
A: I'll go first and then Srini, you can add. See, we don't share that mix between new versus renewal. But you know that the large deals that we have announced was net new. So that should give you some color. On your point on tenor of deal wins we do see that the TCV bookings continue to be signed for longer tenor. Some of it is also our portfolio of what we win, but that continues to go up. It's something that we have noticed Gaurav.
Q: Second question is on how are you thinking about implementing GenAI in your internal software development from a delivery point of view? And could you share some color on initial results that you might have seen across different service lines?
A: Thanks, Gaurav. GenAI is very exciting. And from my perspective, there are three ways where we are deploying GenAI. First, number one, like I said, as Wipro, as a client zero, we are actually implementing GenAI across various process areas within Wipro, across all the units. In fact, we are helping, for example, in the HR segment, the whole employee experience, if you will. Second, the iAspire that I talked about we launched. It's about how do you build career for our employees. They define what career path they want to take and what kind of training programs that we can apply to them in the context of GenAI. So those are the things that we're already doing. And this is also helping our teams kind of build more capabilities and competencies in GenAI. It's also helping Wipro to be really a truly a GenAI ready company. Second, Gaurav is that -- in fact if I have to really talk about some examples, one of the things that we have done is [WiNow], it's actually a conversational digital assistant interacting with the various corporate systems. As of today we had almost 7.4 million queries resolved in IT, HR and policy and it has almost touched I think 230,000 users. What excites me is the fact that 80% favorability rating from our employees. That actually is significant. Another one which I'm really excited about is Eliza which is AI powered sales assistant, which is supporting almost 3,000 sales force across the globe for us. So there are multiple, what I would say GenAI related solutions that we are implementing within Wipro. I tell people that you got to drink your kool-aid first and I'm very excited that employees are bringing in so much out there with the GenAI. As far as the clients are concerned Gaurav, there are three components to it. One is how do we deploy GenAI in the context of software development lifecycle, right? We all heard of GitHub Copilot. So how do you not only improve the productivity but also improve the quality in that if you ask me both on the coding side and also on the testing side. And this to me Gaurav, it will continue to improve as we move forward and there is an excitement across our clients and our own employees deploying this, so thereby we can improve the productivity and quality. The second part is how do you infuse GenAI into managed services, both on the infrastructure side and also on the process side. I think that's one area that we are constantly looking at. And how can we leverage GenAI against from a productivity and also experience for our clients. The third piece, Gaurav, what we are trying to do, like I talked about the industry solutions, cross industry solutions that we are building, right? I talked about the telecom, I talked about the OEM manufacturing, I talked about healthcare, I also talked about wealth management in the context of financial services. These are all AI powered industry solutions which are consulting-led. So combination of knowing the domain aspects of the client, understand the technology landscape of the client becomes very critical and more so data. So we are also able to help the clients in the context of their entire data strategy, data governance and how do you leverage the enterprise data within a reliable and secure way and implement GenAI. And I feel very excited because of the deals that we have won and now we are out there to execute them and some of these can be replicated across Gaurav.
Q: What has been driving the depreciation and amortization down for last two quarters? And you did talk about margin in a narrow band with an upward bias. So what would be the levers going forward? Thank you very much.
A: I think the depreciation and amortization expense doesn't really have anything that's very particular for me to call out. Perhaps a couple of quarters back we may have had some acceleration of amortization of a particular intangible, but other than that I don't think there are any one-offs to call out for Q1. Levers at play, like I've said, will continue to be the fixed price productivity
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
