Good morning, and thank you for standing by. Welcome to the Capgemini Investors Conference Call. In order to allow as many people as possible to connect, the call will start at 8:05 A.M. CET. Good morning, and thank you for standing by. Welcome to the Capgemini Investors Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Aiman Ezzat, Chief Executive Officer of Capgemini. Sir, please go ahead.
Thank you. Good morning, and thank you for joining us at such a short notice for this strategic acquisition announcement in the age of agentic AI. I'm joined this morning by Keshav Murugesh, the CEO of WNS, and Nive Bhagat, our CFO. This transaction positions the group as a leader in the emerging market of intelligent operation, which is the most significant opportunity for our clients to create value in the area of Gen AI and agentic AI. The strategic value of this transaction lies in the complementarity of capabilities and expertise between Capgemini and WNS to provide intelligent operations at scale. This is about making the benefits of AI real for our clients. We do expect normalized EPS accretion of 4% in 2026 and 7% in 2027.
We target synergies run rate by the end of 2027 of EUR 100 million-EUR 140 million in terms of revenues and EUR 50 million-EUR 70 million in terms of cost. The integration in our business services' global capabilities is expected to be straightforward based on the cultural fit and complementarity of capabilities. The definitive transaction agreement is based on a cash consideration of $76.5 per WNS share, representing a 28% premium to WNS' last 90-day VWAP. The transaction has been unanimously approved by the Board of Directors of Capgemini and WNS. Now, this transaction represents a total cash consideration of $3.3 billion. The closing is subject, of course, to approval by the Royal Court of Jersey and WNS shareholders, as well as all customary regulatory approvals. We do expect the transaction to close by the end of 2025.
The group has secured a EUR 4 billion bridge covering the purchase of securities for $3.3 billion, as well as the gross debt and similar obligations for around $0.4 billion, and the EUR 0.8 billion bond redeemed in June 2025. We plan to refinance the bridge with available cash for around EUR 1 billion and the balance by debt issuance. Now, since the advent of ChatGPT and Gen AI, enterprises have focused significant attention and increasing amounts of investment around Gen AI and more broadly AI. Clients today apprehend what the technology can actually deliver. Their focus is shifting from individual productivity to the transformation of end-to-end business processes. Large enterprises want to focus their Gen AI investment to change the way they operate for both efficiency and growth, reshape, and invent.
It is the realization that end-to-end business processes provide the playground to fully leverage the power of Gen AI and agentic AI. It is a unique opportunity to make AI real and reap its expected benefits. Capgemini is a recognized leader in Gen AI and agentic AI. Having positioned data and AI as a core pillar of our strategy more than five years ago, we invested early on the Gen AI wave, building 25 strategic partnerships, upskilling our talent, and developing a wide portfolio of offerings. With Gen AI bookings exceeding EUR 900 million last year, clients rely on Capgemini as their business and technology partner for the Gen AI transformation journey. Looking at demand in the last 12 months, we saw a significant increase in client interest in the next revolution of business process services driven by agentic AI.
We are convinced that intelligent operations, which is a consulting-led approach to transform and operate business processes leveraging Gen AI and agentic AI, will be the primary showcase for agentic AI in terms of value creation. This is about making Gen AI and agentic AI real for our clients. Business Process Services, or BPS, emerged 20 years ago with a primary focus on cost reduction, driven mainly by labor cost arbitrage and a first attempt at process standardization. Then, with the advent of robotic process automation and investment in digital platforms, digital BPS players achieved sizable additional efficiency gains. They introduced non-FTE-based pricing, and by developing sector expertise, they were able to address not only horizontal processes but also vertical ones, creating increased value for our clients. Intelligent operation is the next revolution in the BPS market. It includes a consulting-led business process transformation leveraging Gen AI and agentic AI.
It provides clients with efficiency, speed, and agility through process hyper-automation at scale, while significantly improving business outcomes by combining data, AI, and digital. The client focus has shifted from cost and efficiency to agility, speed, and significantly better business outcomes. This is about value creation. In parallel, the BPS market is shifting away from its labor-based drivers to being consulting-led and tech-driven. This is not just about process hyper-automation but making people and AI agents coexist on an end-to-end process to deliver the real value expected from AI. This is a paradigm shift. Intelligent operation is a consulting and technology-led transformation that requires breadth of capabilities and industry expertise, leveraging the full power of AI to drive significant value. It requires strategy and transformation consulting, deep technology expertise, and in-depth knowledge of the horizontal and sector processes to deliver an end-to-end process transformation.
The build and run of agentic operation blends advanced agentic AI agents, custom Gen AI assistants, enterprise data, data platforms, and management, as well as digital solutions. Capgemini is essentially all the ingredients to answer its clients' need for intelligent operation. This is about scaling digital BPS. This is about industry knowledge to lead intelligent operation. This is the strategic value of this transaction. Now, let me now spend a few minutes to introduce WNS. WNS is a global leader in digital business process services, operating at scale with deep industry and process expertise. Their offerings are powered by a comprehensive stack of solutions and platforms and fueled by a set of data and analytics solutions. Their vertical industry-specific expertise supports over 40% of their revenue, while their data and analytics contribute 13%, underscoring WNS's commitment to data and insight-led business process transformation.
WNS and its 65,000 employees serve a blue-chip client base, including names like United Airlines, Aviva, Centrica, M&T Bank, and McCain Foods, and are consistently recognized as a market leader by industry analysts. For fiscal year 2025, WNS reported $1.3 billion in revenue, with 24% coming from non-FTE-based models, highlighting a shift towards outcome-based delivery. Operating margin, as per Capgemini taxonomy, stood at 18.7%. The company's revenue is geographically diversified, with 92% of revenue generated outside of Continental Europe and with North America representing nearly half of it. Sector-wise, financial services and insurance lead at 37%, followed by travel, healthcare, logistics, and utilities. WNS brings deep industry expertise through outcome-based platforms tailored to key verticals. For every industry it serves, WNS has developed and deployed proprietary platforms that deliver measurable value to its clients. It includes, for example, WNS Malkom. It's an end-to-end AI-powered shipment documentation platform.
It automates bills of lading, invoices, and consignment notes, turning core manual and error-prone processes into digital workflows. Malkom is differentiated by Gen AI assets, leveraging deep logistics domain knowledge across shipping, trucking, 4PLs, and more. Now, for WNS clients, Malkom intelligent architecture is delivering 40%-60% productivity gains. The ROI is up to 4x and 99% data accuracy. It's also reducing invoice disputes by 20% and cutting documentation cycle times from 24 hours to just two. Thanks to its industry-specific IP, WNS can unlock client value through its vertical-specific platform. This approach positions WNS as an industry-led AI-enabled partner focused on delivering tangible business outcomes. The acquisition of WNS immediately unlocks value. With a fiscal year 2026 outlook of 7-11% of revenue growth and an operating margin in the high teens, WNS is immediately accretive to the group.
Digital BPS also comes with long-term recurring contracts that are beneficial to our resilience. In addition, with a complementary set of capabilities, offerings, and clients, the combination immediately unlocks cross-selling opportunities as we fully leverage the extensive portfolio of Capgemini service offerings with WNS clients, mainly U.S. and U.K.-driven. We also see a great opportunity to leverage WNS' digital BPS offering, notably in platform and sector expertise in our client base. I think about banking and insurance clients, for example, where today we can benefit from their vertical process capabilities. You will have understood by now this acquisition creates a unique combination of capabilities required to become a leading AI-powered business and technology transformation partner.
Starting with strategy and transformation to help our clients navigate complex shifts and transformations, then our strengthened sector expertise built on deep vertical knowledge and platforms across industries will ensure relevance and impact of our solution, while our strong horizontal process expertise will ensure end-to-end transformation coverage. Finally, our data and AI capabilities will be a key differentiator. We have invested in talent, innovation, and an ecosystem of strategic partners. Our approach is industry-specific and AI-powered. All these capabilities will be supported by an extended delivery network that brings scale and geographic diversity, enabling global reach. Together, we have a unique set of capabilities that enable end-to-end business process transformation. Now, briefly on the financials of the combined entity. This slide shows a combined view for the calendar year 2024. The acquisition adds significant scale to our business process services activities with EUR 1.9 billion of combined revenues.
It immediately positions us as a scale player in this business. The combination is also accretive to our operating margin by around 30 basis points on a 2024 basis. Continuing with some illustrative breakdown based on calendar 2024, this acquisition will strengthen Capgemini outside of Continental Europe, notably North America and the U.K. From a sector perspective, it will increase our scale in financial services that will account for 22% of our revenues. Finally, in terms of headcount with WNS, our footprint in Europe moves from 35% down to 30%, and our offshore increases from 58% to 63%. Now, coming to value creation, we do expect to achieve an increase in revenues of EUR 100 million-EUR 140 million in annual run rate by the end of 2027. The cross-selling is an immediate lever. We have delivered on its promise in every large acquisition in the last 20 years.
Beyond the cross-selling, we also take into account in this revenue accretion the initial ramp-up of revenue synergies coming from intelligent operational deals. As it relates to cost and operating model synergies, we target EUR 50 million-EUR 70 million in annual run rate by the end of 2027, coming from traditional levers in SG&A and operational consolidation. Accretion to normalized EPS before synergies targeted at 4% in 2026 and at 7% post-synergies in 2027. Accretion is expected to continue increasing after that point as intelligent operation contracts start to ramp up. From a timeline perspective, we expect the transaction to close by the end of the year. As discussed earlier, the transaction is subject to the approval by the Royal Court of Jersey and WNS shareholders. This indicative timeline also takes into account the customary regulatory approvals. In summary, this acquisition is strategic to both Capgemini and WNS.
We share the same vision of the market and the fast-emerging opportunity around intelligent operation driven by Gen AI and agentic AI. We are convinced that the complementarity of our capabilities and offerings will position Capgemini as a leader in this fast-emerging intelligent operations market while providing great cross-selling revenues and cost synergies in the short term. This is a friendly transaction with great cultural fit, which leads to a straightforward integration, enabling us to quickly focus on the strategic value creation opportunity resulting from this deal. This is about making Gen AI and agentic AI real for our clients by delivering significant value creation through the transformation of their end-to-end business process. This will create value for our clients, our employees, and our shareholders.
Before opening the Q&A, I'd like to remind you that this call is dedicated to this transaction and that we are in the quiet period prior to our H1 2025 results. We will therefore not comment on H1 2025 performance beyond what is included in the press release. Let's now open the Q&A, and to allow a maximum number of people in the queue to ask questions, I kindly ask you to restrict yourself to one question and a single follow-up. Operator, could you please share the Q&A instructions?
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We will now take the first question from the line of Mohammed Moawalla from Goldman Sachs. Please go ahead.
Great. Thank you. Morning, Aiman. Morning, Nive . Yes, as a first question, kind of the perception from kind of the outside in is that sort of you're acquiring a sort of BPO business in a kind of world of agentic AI. This is perhaps from a kind of structural standpoint kind of harder to digest. I know you sort of laid out some of the kind of industrial logic, but could you perhaps tell us how much of this was also obviously a strategic push to kind of agentic AI, but obviously this clearly also diversifies the group from a kind of end market and obviously increases your exposure to the US, and how much of this was kind of driven given the challenges you've had in the past 18 months, particularly from a cyclical standpoint. My sort of follow-up question is on WNS.
You talked about a 9% historical growth rate and kind of a forward outlook of 7%-11%. What's the kind of organic assumption of that sort of 7%-11% growth rate, and what gives you kind of confidence that this growth rate certainly can be sustained as you sort of drive the integration of the two businesses? Thank you very much.
Okay. To answer your first question, this transaction makes sense because of a strategic value. My position is I leverage the balance sheet, which is the case because we're going to raise debt if I consider this strategic value creation. The reason we did this transaction is because in the age of Gen AI and agentic AI, the business process end-to-end transformation, leveraging AI and agentic AI, is going to be the showcase of the value creation for agentic AI and Gen AI.
I think it's very important because this is the core reason of the transaction. This is why we are doing it. With Keshav, we shared the same vision in terms of where the market was evolving, and really the emergent intelligent operation, which is not something we're only betting on in the future. We see it in the deal pipeline. We have seen the increase in the last 12 months since agentic AI became more prominent, and we see the size of these deals and the ambition of clients to drive significant transformation, as I say, not just about cost, which has been more the traditional remit of BPO in the early days, but really around significantly better business outcome. I did give an example of that, but we have a number of others that exist.
There are secondary benefits, if you want, around resilience, around more exposure to U.S. and U.K. The primary benefit is really the reason we did the deal, is for the strategic value it is creating. Keshav, maybe on the growth?
Sure, Aiman. First and foremost, thank you for that question. As far as growth is concerned, let me just lay out a little bit in terms of the market penetration rates itself for the traditional business process or what we now call as global business process, intelligent operations side of the business. If you look at some of the reports that have come out in the recent past, including, I think, Gartner and a few others, they have essentially said that as opposed to traditional IT services, on the business process side, the market penetration rates are in the region of 25% or 30%.
Therefore, I think what is really exciting from a WNS point- of- view is that with agentic AI, as well as investments in AI and the ability to accelerate, our vision of going after that other 70% white space is now enabled with the help of this combination. From our point- of- view, while we have, on a regular basis, been very comfortable in delivering close to double-digit growth rates, we actually believe that with this combination, the ability to accelerate beyond that is now very, very high. I can tell you our Board, our Management Team supports this combination very, very strongly. We believe that this combination will allow us the opportunity to accelerate the business to where the market is now headed.
As you can see, we see the same thing. I can tell you we also have significant acceleration of growth in our business services business. As a confirmation that, contrary to what people believe, this business is not getting eroded by Gen AI and agentic AI. On the contrary, we have seen a significant increase in opportunities from clients looking to very complex transformations because this is not a simple endeavor that requires breadth of capability and experience to be able to drive this kind of transformation. The reason they are looking at it is because the value creation goes way beyond just the cost reduction.
Got it. Thank you very much.
Thank you. We will now take the next question from the line of Frederic Boulan from Bank of America. Please go ahead.
Yes, thank you. Can you hear me?
Yes, I can hear you. Good morning.
Hi, h i. Good morning, Aiman. Yeah, quick question around the underlying assumption from a synergy perspective. I mean, I get the overall we have businesses which are highly complementary. So I would say some limited overlap. Can you spend a bit more time around the synergy assumptions from a revenue and cost perspective, in particular on the revenue side, I guess? That's probably the area where you might get a bit more challenged. I guess the cost is pretty limited in terms of scope. Yeah, if you can spend a bit more time on key areas of revenue synergies.
Sure. I mean, listen, on the revenue synergies, first, I'd like to remind you that every single large acquisition we have done, the initial cross-selling opportunities have materialized, and we have achieved most of the revenue synergies initially just through cross-selling.
The ability to be able to cross-fertilize our offerings across our client base drives a lot of cross-selling opportunities at the beginning. Okay? When I look at iGATE, when I look at Altran, when I look at even Cambay, when I look at some of the accounts we inherited, some of them which were small or limited, and the size of these accounts today, I'm quite confident on the revenue synergies. As I say, this revenue synergy is really the initial phase. We're talking by the end of 2027, so two years through the deal. They do not really factor for the moment significant acceleration we expect on revenue, which would come from the large opportunities which will come from intelligent operation. Some of these deals are pretty long in terms of decision-making cycle.
We only here, taking into account some of the initial phases of ramp-up of some of these deals. I know, Fred, on the cost one, I mean, this is traditional cost synergies. WNS is a pretty well-run company and pretty efficient. There is always integration cost synergies. We feel confident in the range that we have portrayed. If there's more to come, we will see. Right now, we consider this is a reasonable target. Again, the focus is really around the acceleration in terms of top line, notably coming from the intelligent operation play. There are cost synergies, and of course, we will achieve them.
Thank you.
Thank you. As a reminder, if you wish to ask a question, please press star one one on your telephone. Our next question comes from the line of Nicolas David from ODDO BHF. Please go ahead.
Yes. Good morning. Thank you for taking my question. First question is, could you comment, please, on the potential exposure of WNS holding, sorry, to commercial BPO and customer support services like call centers, if there is any, and what are the trends there, if there is? My second question is, how did you approach when you decided to do the deal, the people management part of it? I understand the potential of Gen AI and agentic AI on this area, but there is also a lot of disruptions. Is there some difference you need to implement in the way you manage people, and how will evolve the profile and the nature of headcount of the BPO, BPS businesses in like five years? Thank you.
Keshav, maybe ask on the customer service and customer experience part.
Yeah. Again, thank you for that question. First and foremost, I must clarify that the work that we do is very domain-intensive, and the core of our work is really focused on core digital operations, as Aiman spoke about earlier. We also have a very significant and fast-growing analytics practice, which is delivering both on a standalone basis and is also embedded in terms of the traditional offerings that we bring to the fore. As far as CX is concerned, that is not a focal area of the company at all. Traditionally, digital CX is something that we embed in terms of providing an end-to-end customer service to our customers, whether it is around insurance or banking, healthcare, or even on the horizontal side of our business.
What we have done over the years is, as we have kept making investments in technology and really leapfrogging the industry, we have constantly put technology to work in order to dramatically reduce the impact of the traditional CX or voice-based business. What has actually happened now is, at the most, a call is picked up as a result of an end-to-end service offering because of which you will see that the growth rates of the company over the years have been strong. More importantly, the profitability of the company has always been very, very strong. CX is not really a focal area for us, and we are generally not presented as a CX company.
Okay. On the people management side, I mean, your question is valid, but it's valid for all the businesses that we do. I mean, the evolution of our software developers in the last 20 years is phenomenal. What they do today compared to what they did 10 or 20 years ago has been that we have been reskilling our people. We keep upgrading our people. Yes, we do expect people to evolve in terms of capabilities. We will have to continue training and upskilling the people we have in the BPS business to be able to better deliver. Again, compared to what we started with 20 years ago with many driven by cost arbitrage and standardization, we have evolved already in digital BPS. We have embedded the research and analytics. This is a continuous evolution in capabilities that a business like us has to do on an ongoing basis to be able to adapt capabilities to the evolving need of the market.
I mean, we feel quite confident. What we need is that compared to what the people in the BPS business, we are injecting a lot of capabilities in terms of consulting and strategy and transformation, in terms of technology, in terms of AI, in terms of data to complement capabilities that we have in the BPS business to be able to deliver on this intelligent operation opportunity, which I remind you is really going to be the showcase of how we deploy Gen AI and agentic AI.
All right. Thank you very much.
Thank you.
Thank you. We will now take the next question from the line of Charles Brennan from Jefferies. Please go ahead.
Great. Good morning, guys. Just two questions for me. Firstly, if I look at WNS, I think we saw growth dipping negative 12 months ago. Can you just give us some reasons behind that deceleration in growth and why you're confident that that's a one-off and the double-digit ambitions more sustainable now? Secondly, when I've looked at WNS in the past, the cash flow characteristics have been relatively weak, I think a combination of working capital and CapEx. Can you give us some insight into what level of cash conversion you think is achievable for this business? Do you actually think that this is free cash flow accretive in 2026 and 2027 by the time we take account of the costs of extracting the synergies? Thank you.
Okay. This is Keshav. Let me start with the earlier part of the question. Again, thank you for that question. First and foremost, as I laid out in the early part of this discussion, I think the market penetration levels continue to be low, and the potential for our business continues to be strong. That is essentially how historically WNS has always grown at at least a double-digit growth rate. When you refer to one year ago or a particular year, it is actually caused by a series of idiosyncratic customer events which were reported by us. It was all one time. Since then, you will see that over the last two or three quarters, sequentially, growth has come back very well to WNS. In fact, I would request you to wait to see the ensuing quarter results, which will again demonstrate solid growth exactly as we had envisioned in the past.
As far as the cash flow is concerned, I'll give you, I'll just take a stab at it, but I'm sure Aiman and Nive will have more to talk about how it impacts the overall company. This actually is a very strong cash-generating business, right, as opposed to your impression. Offline, separately, we can share, our team can share with you specifics of the quarterly cash flows and things like that, but it's actually a strong cash generator. Okay. Nive on the-
Yeah. I think to answer your question, Charles, we will remember what I always say, that we will maintain our free cash flow to net income above one, and that's something that I continue to stand by. As far as WNS piece is concerned, they will generate accretion to net income in 2026 and beyond. Yes, that is indeed the case.
Charles?
Yeah. Thank you. But you said it's accretive to net income. Do you think it will be accretive to free cash flow by the time we take account of the costs of delivering the synergies?
Yes, it will.
All right. Thank you.
Thank you. We will now take the next question. One moment, please. Just one moment. The next question comes from the line of Sunil Nair from WNS. Please go ahead.
Hi. Am I audible?
Apologies. I would like to hand back over to Aiman Ezzat for closing remarks.
Okay. Thank you very much. Thank you. As this was done at short notice, I'm sure we'll have a lot more interaction over the coming days, and we look forward to interacting with you and going more in-depth around the strategic value of the deal. I look forward to interacting with you over the coming days. Thank you very much. Have a great day.
This concludes today's conference call. Thank you for participating. You may now disconnect.