David Mackey - Corporate Senior Vice President, Finance and Head, Investor Relations Keshav Murugesh - Chief Executive Officer Sanjay Puria - Chief Financial Officer Ron Gillette - Chief Operating Officer.

Joseph Foresi - Janney Montgomery Scott Rick Eskelsen - Wells Fargo Bryan Keane - Deutsche Bank Ashwin Shirvaikar - Citibank Adam Dahms - Baird Prasad Borra - Goldman Sachs Brian Kinstlinger - Maxim Group.

Good morning. And welcome to the WNS Holdings’ Third Quarter Fiscal 2015 Conference Call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, we will conduct a question-and-answer session, and instructions for how to ask question will follow at that time.

Now, I would like to turn the call over to David Mackey, WNS’ Corporate Senior Vice President of Finance and Head of Investor Relations.

David?.

Net revenue is defined as revenue less repair payments; adjusted operating margin and adjusted net income, or ANI, are defined as operating margin and profit, excluding amortization of intangible assets and share-based compensation. These terms will be used throughout the call. I would now like to turn the call over to WNS’ CEO, Keshav Murugesh.

Keshav?.

Thank you, David, and good morning, everyone. Our fiscal third quarter financial results was solid with the company successfully expanding our revenue, margin, profit and cash flow. Third quarter net revenue was $128.4 million, representing a year-over-year increase of 7.3% on a reported basis and 7.2% constant currency.

Topline growth was broad base across key verticals of service offerings and was driven by both new client revenues and expansion of our existing relationships. As a reminder, our Q3 year-over-year revenue was adversely impacted by approximately 6% as a result of the OTA client transition and Aviva contract extension discussed in previous quarters.

Excluding these one-time challenges, constant currency revenue growth in the fiscal third quarter would have been over 13%. Sequentially, revenue growth was at best -- adversely impacted by the sharp depreciation in key revenue currencies against the U.S. dollar. These include the British pound, Australian dollar, South African rand and the euro.

While reported sequential revenue growth was 1.5%, growth on a constant currency basis was 4.3%. During the third quarter, WNS added five new clients, expanded four existing relationships and renewed 17 contracts. We also closed two new large deals in Q3, bringing our year-to-date total to five.

Both of these engagements are now with new logos for WNS and include a U.K. based utility and U.S. based financial services firm. We remained confident in our ability to meet our target of six large deals for this fiscal year and believe the new business pipeline remains robust. That being said, large deals are only one component of our growth engine.

The addition of new clients who may or may not begin relationships with the large deal and the farming opportunity with existing clients are of equal or more importance to our growth prospects. The track that we have transformed our client base over the past four years is a significant path of the WNS growth story.

Customer concentration levels have steadily declined at the top 1, 5, 10 and 20 levels during this period. Additionally, we expect our top 10 clients this year will include five logos that were not in the top 10 in fiscal 2011.

By reducing our customer concentration levels and adding new less mature relationships, we have been able to improve our overall farming opportunity. During the third quarter our margins and profit levels were extremely healthy resulting from solid operating performance and some non-recurring items, which Sanjay will discuss in his prepared remarks.

Year-over-year our adjusted operating margin expanded 395 basis points to 22.3%, while our adjusted net income percent -- percentage expanded 300 basis points to 19.6%.

As a result, third quarter adjusted diluted earnings per share grew 25% versus the third quarter of last year and the company was able to generate $28.1 million in cash from operations. Our balance sheet continues to strengthen and we have a high degree of visibility to healthy cash generation going forward.

As a result, we are actively working to put this cash to use in the coming quarters. During the third quarter the company reduced debt by $24.4 million as our short-term working capital lines of credit came due and were not renewed.

In addition, WNS is continuing to look for tuck-in acquisitions to drive automation, domain expertise and horizontal capabilities, but we remained rigorous in our evaluation process. We believe this is a prudent approach given current market valuation for BPM assets and our own organic growth opportunities.

The company also announced in the press release issued this morning that the Board of Directors has authorized the repurchase of upto 1.1 million ADS’s at a price range of $10 to $30 per ADS. The repurchase program would be valid for 12 months beginning 1st April 2015 and is subject to shareholder approval.

We believe that based on the company’s performance and positioning, WNS represents an excellent investment and the repurchase of ADS’s will not cover the expense of other investment opportunities. The third quarter also saw WNS receive several awards from the analyst and the advisor community.

WNS was named the leader in both property and casualty insurance BPO and transformation customer management services BPO by NelsonHall in their most recent NEAT evaluation.

In Everest 2014 PEAK Matrix report, the company was recognized as a leader in insurance BPO and a major contender in several areas including banking BPO, capital markets BPO, Procure-to-Pay, Order-to-Cash and supply chain management outsourcing. WNS also won the Data Security Council of India 2014 excellence award for security in BPM.

WNS was cited for its initiatives in protecting sensitive customer data, developing in-house forensic capabilities, using tools to improve compliance reporting and in enhancing security for its clients. As we have discussed on previous calls, the BPM market remains significantly underpenetrated.

We expect that our industry will continue to grow and evolve as comfort with BPM increases and client’s business requirements change.

In order to service our clients’ digital enterprises in the future, we will continue to enhance our capabilities in the areas of domain expertise, technology-enabled solutions, client-centric models and global footprint.

From a vertical perspective, WNS expects to increase pending on domain experts and unique niche service capabilities to leverage our differentiated vertical structure and approach, which has been created over the past four years.

We will also continue to invest in platforms, automation tools and technology expertise to develop integrated solutions, improve process efficiency, enable the transition to transaction and outcome-based models and address emerging client’s requirements such as SMAC.

These expenditures will come in several forms including senior level hiring, R&D and concept incubators, CapEx programs, strategic partnerships and mergers and acquisitions.

We are confident that by successfully executing on our strategic plans, we will be able to maintain our differentiated position in the BPM space and meet the evolving requirements of our clients. As we enter the final quarter of fiscal 2015, the demand environment for BPM services remains stable and healthy.

Our pipeline reflects solid opportunity across our key verticals, geographies and service offerings. And this broad based strength gives us additional comfort in our ability to deliver growth going forward. Looking at our full-year guidance, net revenue is expected to grow between 6% and 7% or 5% to 6% on a constant currency basis.

Excluding the headwinds from the OTA transition and Aviva contract extension, our full year constant currency growth will be approximately 11%. We currently have over 99% visibility to the midpoint of our guidance range.

Adjusted net income is now expected to be in the range of $90 million to $92 million, up from $83 million to $87 million provided as guidance last quarter. In summary, we are pleased with our performance through the first three quarters of 2015 and believe WNS remains best positioned to capitalize on the long-term BPM opportunities.

We must continue to innovate and invest in order to help our clients, meet their strategic goals and to enable WNS to grow revenue and maintain profit margins at or above industry rates. I would now like to turn the call over to Sanjay Puria, our CFO, to further discuss our financials.

Sanjay?.

Thank you, Keshav. With respect to our third quarter financials, net revenue increased to $128.4 million from $119.6 million in the same quarter of last year, growing 7.3% on a reported basis and 7.2% on a constant currency basis.

Year-over-year quarter three revenue growth was adversely impacted by approximately 6% as a result of the ramp down of our OTA client and Aviva contract extension. Revenue growth was led by our emerging vertical as utilities, healthcare, shipping and logistics and consulting and professional services, all grew over 20%.

From a service offering perspective, revenue growth versus the prior year was increased by research and analytics which grew at 15%, finance and accounting which grew at 11% and industry BPM which grew at 7%. Sequentially, net revenue increased by $1.8 million or 1.5% with broad based growth across most verticals and service offerings.

As Keshav mentioned, the rapid depreciation in key revenue currencies this quarter had a significant impact on our quarter three revenue. Net of hedging gains, currency movements in the third quarter negatively impacted our top line by $3.4 million. On a constant currency basis, third quarter revenue increased 4.3% sequentially.

Quarter three revenue was bolstered by approximately $2 million as WNS completed negotiations with various clients to remove FX collars from our contract. From both our revenue and margins endpoint, this helped WNS manage the drop-off of gain sharing and incentives reported in the second quarter.

This will however shift a negative sequential impact to the fiscal fourth quarter of this year. Adjusted operating margin was 22.3% in quarter three, as compared to 18.4% reported in the same quarter of fiscal 2014 and 21.8% last quarter.

On a year-over-year basis, adjusted operating margin improved 395 basis points as a result of currency and hedging favorability, increased operating leverage on higher volumes and improved productivity. The sum of these benefits more than offset the impact associated with the Aviva contract extension and our annual wage increases.

The sequential adjusted operating margin, improvement of 56 basis points was a result of volume leverage, slight currency and hedging favorability and improved productivity. Margin benefits this quarter associated with removing the FX collars from certain contracts were largely offset by incremental SG&A costs.

Interest expense this quarter was $0.3 million, down from the $0.7 million reported in quarter three of last year and similar to last quarter, as WNS continues to reduce our debt levels. The company’s other income was $3.1 million in the third quarter, up from $2.5 million reported in the same quarter last year and up from $2.9 million last quarter.

The year-over-year increase in other income is a result of higher cash balances. WNS’ effective tax rate in the third quarter was 20%, up from 16.4% reported last year and down from 20.7% in the previous quarter.

Year-over-year, the third quarter tax rate was unfavorably impacted by additional taxes relating to 2015 India budget, which changed the taxability of our fixed maturity plan investments. Sequentially, the effective tax rate reduced as a result of the budget change catch-up from quarter one which was booked in quarter two.

The company’s adjusted net income for quarter three was $25.1 million, compared with $19.8 million in the same quarter of fiscal 2014 and $23.9 million last quarter. This represented growth of 27% year-over-year and 5% sequentially.

Adjusted diluted earnings were $0.47 per share in quarter three, up from $0.38 reported in the third quarter of last year and from $0.45 in the prior quarter. As of December 31, 2014, WNS’ balances in cash and investments totaled $154 million.

The gross debt position was $41.1 million, with the company reporting a net cash position of $112.9 million at the end of quarter three. WNS generated $28.1 million of cash from operating activities this quarter and free cash flow of $22.8 million after accounting for $5.3 million in capital expenditures.

The company also reduced gross debt levels by $21.4 million this quarter, as improved cash generation has reduced the need to use some debt or some of our short-term working capital requirements. DSO in the third quarter came in at 28 days, down from 31 days in quarter three of last year and down from 30 days reported last quarter.

With respect to other key operating metrics, our total headcount at the end of the quarter was 27,755. On a year-over-year basis, headcount is up 4% versus revenue growth of 7%. This highlights WNS’ progress in improving productivity and automation in our service delivery.

Our attrition rate in quarter three was 32%, up from 30% reported last year and down from 35% last quarter. Global built seat capacity at the end of the third quarter was 23,831 seats. Average built seat utilization in quarter three was 1.16, the same as both last year and last quarter.

The company remains focused on improving this key operating metric over the next few years, while ensuring that we have sufficient capacity and reach to service our clients’ global requirements. In our press release issued earlier today, WNS provided our updated guidance for fiscal 2015.

Based on the company’s current visibility levels, we expect net revenue to be in the range of $502 billion to $505 billion, representing year-over-year revenue growth of 6% to 7%. Revenue guidance assumes an average British pound to U.S. dollar exchange rate of $1.52 for the remainder of the fiscal year.

Excluding year-over-year exchange rate impact, our revenue guidance represents cost and currency growth of 5% to 6%. This guidance includes a 6% revenue headwind associated with the OTA transition and Aviva contract extension in addition to our normal business volume and productivity reductions.

We currently have over 99% visibility to the midpoint of the revenue range, consistent with January guidance in prior years. Based on quarter three performance and quarter four visibility, we now expect our full year adjusted net income to be in the range of $90 million to $92 million based on a 63 rupee to U.S.

dollar exchange rate for balance of the fiscal year. This implies adjusted EPS of $1.69 to $1.73, assuming a diluted share count of approximately 53.2 million shares. The company also expects our CapEx requirements will now be in the range of $23 million to $26 million, down from the $25 million to $30 million previously discussed.

We'll now open up the call for questions.

Operator?.

[Operator Instructions] Your first question comes from the line of Joseph Foresi from Janney Montgomery Scott. Please proceed..

Think about the opportunity to accelerate growth rates next year, particularly since Aviva and some of the travel stuff is behind you?.

Sorry, Joe, could you repeat that question? I think we lost the first part of it..

Yeah. What I was asking was you signed two more large deals, which I think gives you five. And OTA and Aviva are sort of behind you now. I was wondering how you felt about the ability to accelerate growth rates next year..

Well, first of all, and as I have already mentioned in my prepared remarks that the overall market sentiment continues to be very positive for our services. We believe that the market is still very underpenetrated in terms of what we can actually do out there.

I feel extremely confident about how the company is positioned at this point in time, how we are executed both from sales as well as from an operational point of view. You should normally expect to see the usual kind of headwinds that you see at the beginning of the year. At this point in time, we expect we don’t see anything unnatural beyond that.

And we see no reason why based on the progress that we have already made in terms of some of the new clients that we brought in as well as the very exciting pipeline that has been created that we will not be able to accelerate our growth beyond the levels that we are in at today..

Okay. And then if you look at sort of I think we talked about there was a potential for some increase in productivity or seat utilization, that metric hasn’t seemed to have moved very much.

What are your expectations from a productivity standpoint or seat utilization standpoint, and its impact on margins over the next 12, 18 months?.

I will take that, Joe. I think as a company, we have been pretty upfront in discussing the fact that seat utilization is an area, where we’ve struggled to move the metrics the way we would like to move. Some of that is a function of the fact that our growth has come from newer geographies.

Some of the areas that we’ve added to service are existing clients. And that’s made it a little bit more difficult to leverage where the excess capacity is, which is largely in India.

I think the second issue, and it was highlighted a little bit in Sanjay’s prepared remarks that we’ve seen is the fact that we’ve been growing our revenue at a pace greater than our growth and headcount.

And as a result, when your headcount doesn’t grow, what you see is productivity improvements flowing through the P&L as a result of increased revenue per employee. But it makes it a little bit more difficult for us then to translate improvement in the seat utilization metric, because we are not hiring additional people to fill those empty seats.

So what I would say is that some of the productivity that you’ve seen drive our margins up to the levels that they are at today, which is industry leading, has come at the expense of our ability to improve seat utilization.

Now it doesn’t mean that going forward the company is not focused on the metric or that we don’t have goals that we are trying to achieve, but we certainly need to make sure that it’s not at the expense of delivering the right way for clients, which includes both expanding geographies when we need to and focusing on productivity and automation to drive improvements to our clients and services.

So what we are focused on that we are not happy with where it is and we do it as an opportunity going forward..

Okay. And then the last question for me, obviously the buyback, and in your comments you talked a little bit about the use of cash. Balance sheet has improved fairly well here.

How should we think about the balance between buybacks and acquisition activity? And what does the acquisition pipeline look like? And if you can give us some parameters about size and valuation on that front, that would be great..

Sure. So, Joe, I will give you some sense of some of the things that we’re considering at this point in time. Obviously, we are very excited about the way the company is positioned at this point in time. We are obviously very positive about the way the balance sheet is looking.

Our confidence around the cash generation over the next two or three years is very high. And as I mentioned the share buyback is just one attractive way of utilizing our cash. I must first and foremost say that this is not at the cost of driving some of our other investments.

This is just one more way and we want to once again underline, at this point in time I believe that based on our performance, based on our positioning and based on the opportunities in the industry, we actually think that WNS itself offers an excellent investment opportunity, and therefore, we are moving ahead with that. That’s one.

From an M&A point of view, we believe as we look at the future and as we look at a new inflection point for WNS as we move to higher value areas, as we look at getting after the digital enterprise kind of proceeds of our clients, we need to keep in investing not only in a number of things that we need to do internally and organically, but also in creating new capabilities in the verticals, horizontals and some other areas.

And I think there are few verticals like healthcare, certain specific areas within insurance, certain specific areas within finance and accounting, as well as analytics which are all attractive to us. We will keep you updated as we make progress. But I can assure you that at this point in time, we are looking very carefully at some opportunities.

All of them are niche, accretive kind of opportunities, but I am very keen to bring in. And the focus really is on driving capability and not just revenue..

Okay. Thank you..

Thanks, Joe..

Your next question comes from the line of Ed Caso from Wells Fargo..

Hey, good morning. It’s actually Rick Eskelsen on for Ed. The first question I had just -- you had some success here on the large deals, winning some new clients.

I am wondering if you can kind of give us some color about what you’re hearing from your new clients, why they were in WNS if they are new to outsourcing and BPM, and what -- sort of what’s the catalyst for them to pick the BPM realm?.

Sure. So I think the first two I would say that everyone of our new clients that we have won, we’ve had very good kind of feedback, very good experience in terms of what has already been delivered, but more importantly the potential for the journey going forward.

And therefore, we believe that each of them at this point in time is completely underpenetrated. Our footprint to penetrate and radiate inside each of those accounts is immense and that actually gives us a lot of confidence for the future.

In terms of why they chose WNS as a partner, I would say that the key reason for that is absolutely our superior understanding of their business domains and the unique models that we introduced to them that enables them to really focus on their clients base while understanding very well and being very comfortable about the fact that they had these very talented group of people with outstanding technology and processes to manage the rest of it for them.

And beyond that, I would say that based on the experience they have already had with us, the ability for us to really get after many new areas inside their environments is significant and that’s where our client partners are focused at this point in time..

Is there a difference you’re seeing between particularly geographically the U.S.

and Europe from new clients and additions?.

Yeah. The only difference I am seeing is I am seeing more and more U.S. clients really climb on the bandwagon with WNS, which I think is a great positive on how our sales team has performed..

And I think just to add to that Rick, clearly one of the focuses of the company the last few years has been to improve our visibility and improve our focus and footprint in the U.S. and WNS’ long heritage as a U.K. provider. But moving into the U.S. and making sure that we’re top of mind for U.S. clients has been a huge focus.

And we feel that we made some significant progress there. The other thing is to Keshav’s comments earlier, we feel really good about the broad-based nature of not just kind of the growth in our business, but also how the pipeline has moved and how the large deal progress has moved. We signed five deals year-to-date.

And of those five deals, they are across four different verticals and three different geographies. So the messages are resonating well and they are resonating well globally. And we are very happy to see that..

And just the last one for me is just on the -- another really strong quarter for adjusted operating margin.

Just two questions, one, what was the impact -- the one-time impact of changing the colors in the quarter? I know you said, I think it was offset by higher SG&A, but what was the number there? And then just, how should we think about that number moving forward? Thanks..

So the nonrecurring as well as the one-timers of the FX callers in my prepared remarks, as I said, it was $2 million impact for this quarter. And going forward, based on this current visibility, we don’t foresee any of those -- the nonrecurring at least for this year as well as going forward.

But as and when we cross we’ll definitely provide that detail. But having said that, from a long-term perspective, we don’t believe this operating margin will be sustainable. And as we’ve continued to invest into some of our business for the future, we expect that operating margin will be somewhere in high teens..

Great. Thank you very much..

Thanks, Rick..

Your next question comes from the line of Bryan Keane from Deutsche Bank. Please proceed.

Hi, guys. I think last quarter you talked about operating margin has been 18%to 19% kind of for the second half of the year. And obviously, they were a quite a bit stronger in that.

So I was just hoping maybe what surprise to the upside in an operating margin to get it all the way to 22.3?.

Yeah. I think, Bryan, for this quarter, the surprise really came from the one-time impact of these FX callers in the contract renegotiations, which dropped not just $2 million to the topline, but $2 million directly to the adjusted operating margin line as well.

I think the other thing is when we talked about 18%, 19% operating margins in the back half of the year, we were certainly expecting that some of the investments that we’re going to be making into the business would have phased in a little bit faster than they have.

So from an expense standpoint, I would say we probably pushed out about a quarter or so. And as a result, we were able to deliver operating margins this quarter that were over 22% on an adjusted basis.

But if you look at the implied guidance for the fourth quarter, which is embedded in our full year guidance by default, you’ll see that the operating margins are expected to come down here in Q4.

And as Sanjay mentioned, we do believe longer-term that this business will operate in that kind of high-teens range and not the 20% plus that we are going to end up posting for this fiscal year..

Okay. That’s helpful.

And then just with the currency, given volatility and rates, can you help us understand what the impact is on FX to the topline and into operating income given the moves in currency and the hedging program? And how do we think about that going forward for both the top and op income?.

Are you referring, Bryan, to kind of what’s happened in the past couple of quarters or just the impacts on currency going forward?.

Going forward just trying to make sure I have in the models how much FX headwind will be given where rates are today? And then just trying to understand what the impact is to profitability given the move in the rates, because I also know you guys do some hedging too, so it’s difficult to model out for us?.

Yeah, we do. And certainly, when you look at the again for Q4 here anyway, when you look at the implied guidance for the quarter, I mean we are looking at flat to slightly down revenues quarter-over-quarter. And the reason for that is that the $2 million of the FX clauses that are going to be nonrecurring in the fourth quarter.

But we are also looking at between $3 million and $4 million of topline impact from a currency perspective. Right now the expectation is that about 65% of our revenue currencies in the fourth quarter are going to be negatively impacted by anywhere from 4% to 5% based on our guidance. So we obviously are looking at a petty stiff headwind.

Our hedging programs tend to protect us more on a long-term basis and an annual basis than they do quarter-to-quarter.

So what you’ll see in a lot of cases depending on where the hedge rates are and how they’ve been layered on is that the ability to offset currency tends to be better on a year-over-year basis than it is on a quarter-to-quarter basis, especially when the currency moves extremely quickly. So that’s kind of the expectations for the fourth quarter.

We are happy with the hedging program we have in place. We do run a 24 to 36-month rolling hedge PRM. We will enter fiscal 2016 with 90% of our operating profits hedged. So we feel really comfortable with how the program has been behaving, but going forward we obviously have to see where currency moves.

And obviously, we’ve seen some pretty steep declines both in our euros, in our British pounds, in our South African rands and our Australian dollars each of the last two quarters..

Okay. That’s helpful.

I just want to ask about headcount, should we see an acceleration in headcount hiring given some of the ramp-up in business?.

So we do expect -- as Dave mentioned, if we exclude the nonrecurring part, there’s going to be a volume growth in the quarter four, that’s what we expect. And we do expect some of the headcount growth based on that, but we are also driving our product initiative. So our revenue growth definitely will be faster than headcount growth..

Okay. All right. That’s all I had. Thanks so much..

Thanks, Bryan..

Your next question comes from Anil Doradla from William Blair. Please proceed..

Hey, guys. This is [Matt Farrell] [ph] on for Anil. Congratulations on the quarter. My first question is around large deal pipeline.

How does it kind of look as we move into fiscal 2016? And could we possibly expect some acceleration in the number of large deals that are signed in fiscal 2016?.

Yeah. Let me start by first of all talking about the pipeline itself and I have Dave add in some more color. Like I said, we are extremely positive about the kind of deals we are playing in.

The size, scale and potential of some of these deals, the kind of business that we are seeing from new prospects, some of whom maybe first time outsourcers, some of whom are already working with other partners but are looking to bring in a niche kind of player to really help transform that business operations and in that, you see WNS is a potential partner.

And this is broad-based across horizontals, verticals and across all geography. So really interesting time in terms of what’s happening with the deal pipeline itself, of which a number of large deals.

And I can say that I am pretty confident at this point in time that the number of large deals that we are playing in are definitely higher than what we would have been playing with at the start of -- around this time last year as well, so much more than before.

I’m pretty confident that some of these will be decided on in favor of WNS sooner than later..

I think the other thing that’s important to remember guys is that the timing and these deals is unpredictable. We tend to see them slowdown significantly towards the end. But most importantly, I think, people need to make sure that they’re getting a balance view of the growth opportunities at WNS and large deals are only one component of that growth.

We’ve created a huge farming opportunity based on the new clients we’ve added, based on the large deals we’ve already signed and I really do believe that there is been a far too much focus externally on the large deal metric as a proxy for company growth.

So one of the things we need to make sure, we’re doing is giving people the right view into our business, a balance look at the drivers for growth and the growth opportunity and large deals are only one component of that and there are opportunities for us to grow double-digit at or above industry level next year, regardless of whether we sign one or two fewer large deals than we’ve sign this year or two or three more large deals than we sign this year.

So, again just make sure people are understanding that WNS is in a different position, in a different place today than where we were three, four years ago trying to reaccelerate growth from a standstill with a very stagnant legacy client base.

So just make sure that everybody is aware that there is a balanced approach that needs to be taken to the drivers of growth..

Okay.

And then kind of a follow-up to that, as these large deals are ramping, has it had really any -- is it on track in terms of both revenue contribution and impact on margins and kind of has there been any pricing? What’s the pricing environment around the new large deals and the ones that have been signed recently?.

Yeah. I’ll take that. Well, pricing environment remains stable. Its about comfort, it’s about quality, it’s about capability. When companies are going through large outsourcing initiatives, price is only one component.

But the bottomline is when you’re taking over mission critical operations, you need to make sure, you’re picking a partner who you feel comfortable to be able to successfully on that. When you look at the progress that we’ve made on large deals, I would say it’s varies.

Some of them are moving along as expected, some have actually moved ahead of the curve and we have a couple that are certainly lagging where we expect. But as an overall portfolio, I think, the progress we’ve made and the margin contribution that we expect from those deals is on par with what we would have anticipated..

And I’ll just add on little bit.

I mean, if you just look at our margin performance and how we’ve been delivering, I feel very comfortable in terms of how pricing has behaved and more importantly, how WNS has been able to position its differentiated services with all these clients, not just the new large clients, but also extension with some of our existing clients as we move to more technology intensive transformational kind of services..

And then kind of my last question here is around spending patterns from the utilities vertical? What’s been kind of driving the growth and then how has any spending patterns been impacted by recent commodity prices? Thanks..

Well, I think from the utilities perspective, clearly, it’s a business that based on operationally how it performs has lent itself to being an aggressive adopter of outsourcing in business process management for quite sometime.

So the acceleration that we’ve seen in this vertical over the last couple of year, I think is a function of how the business runs, as well as some of the challenges that they’ve had.

In terms of immediate knee jerk reaction to oil prices and some of the things that have happened over the last couple of months, obviously, given the fact that sale cycles for these initiatives are extremely long.

The progress that we’re seeing in utilities today is not of reflection of the change in the environment, although, we are certainly watching the pipeline and optimistic that as things continue to be a challenge in that vertical. It could provide acceleration for new clients to adopt business process management in the utility sector.

Hello?.

Your next question comes from the line of Ashwin Shirvaikar from Citibank. Please proceed..

Thanks. Good quarter, guys, and even better guidance, I think. Congratulations on that. I guess a few different questions. Let me start with the clarification. I know you guys have said this before, but I just want to clarify.

When the -- can you clarify when the OTA impact and the Aviva renewal impact anniversary, specifically? And then the added question to that is when you mention a normal headwind, my understanding is that kind of in the neighborhood of 200 basis point-ish each year?.

Let me take that, Ashwin. I think, from a normal headwind, what the company’s statements have been in the past that we typically expect about a 5% revenue headwind walking in this year and that’s based on a combination of declining volumes with clients, productivity requirement and changes in strategic direction.

Certain things that we know happen with respect to M&A activities, divestitures so on and so forth. So we typically expect in a normal year that our topline is going to be pressured by about 5%.

I think, can you give me a little bit background on the balance of your question, Ashwin?.

Well, so I just wanted to make sure that when you give 2016 guidance next quarter, that will obviously, the Aviva renewal priced, I think, starting the beginning of this fiscal year and the OTA stuff should be out of the way..

Okay. So from anniversary perspective, thank you. The Aviva contract extension was affective April 1st of this year, so starting the first day of the fiscal year. So on a year-over-year basis, there should be absolutely no headwind in fiscal ‘16 from the Aviva contract extension.

With respect to the OTA transition, we had a little bit of it occur in the fiscal first quarter of last year, the majority of it in the fiscal first quarter of this year and then a little bit of a tail here in the second quarter that just lapsed although is very small.

So we would expect to have some year-over-year impact from the OTA transition, mostly showing up in the fiscal first quarter but other than that no impact..

Great. And then when a large client like Aviva makes an acquisition like Friends Life something like that.

What is your expectation on volumes resulting from that?.

So let me take that. So obviously, when one of all our clients who is receiving outstanding kind of services, which are again, like I said, earlier also transformative in nature in some high-end areas and are being impacted very positively by WNS.

We would expect that when they go through any such kind of activity, WNS over a period of time will have the ability to actually introduce similar services in terms of an expanded portfolio, right. And at this point in time, you are aware that Aviva extended its relationship with us recently.

We continue to provide services in a number of areas, which are all impacting Aviva very positively and number of them are really leading edge areas. And we expect therefore as a result of which our ability to really introduce some of those services in the merge setup will be high.

Having said that, the merger is still not complete, work has still to be done. Opportunity is based on the nature of our relationship and the contract that we have with our client. And we’ll have to wait and see. No formal plans have been communicating at this point in time..

Got it. Right. And one question, I had was in -- our CapEx is down for the year even though you’re signing more deals.

And so just wanted to figure out, is that because of timing or is there something in the nature of the deals that maybe makes it less CapEx heavy something about how your business itself is changing perhaps with more tools that is driving higher revenue per employee?.

Yes. Let me just replace that with the first half but first and foremost, I want to clarify that CapEx as of now is slightly lower than what we expected at the third quarter. But you should expect to see a large lumps being spent in the fourth quarter because programs have already been finalized and they’ve been all happened during this quarter.

So we -- there will be a catchup effect definitely, that’s one. And you have to appreciate that, we -- the way we invest is based on so many factor including factors that are dependent on the customer, contracts, and many other kind of changes.

And at this point in time, we do not believe that there is any reason that we would want to delay unless, it is actually based on some very genuine reasons caused by one of these area. And we’ll continue to invest in all these areas and you should expect to see a significant catchup in the fourth quarter..

Yeah. I think just to add to that, Ashwin, the guidance that we’ve given $23 million to $26 million of CapEx for the full year represents a pretty solid increase versus last year. We were under $20 million last year.

The other thing that’s important to note is the CapEx that we spent in fiscal ‘12, ‘13, ‘14 was more about infrastructure build and infrastructure expansion, which has led to some of the seat utilizations we’ve talked about whereas the CapEx spending that we’re looking going forward here is more about as Keshav mentioned domain expertise, tools and technologies automation.

So there is also a shift in where the CapEx is going to be spent..

Right.

And that sort of was getting -- they are getting to the -- the gist of my question was as the nature of your CapEx changes and you spend more on tools and domain expertise and so on, one would expect that the revenue per employee increases that you’ve seen should sustain, right, as a driver of, eventually of margin improvement?.

Yeah. I’ll take that, Ashwin. Based on one of those initiatives and investments what we’ve already kicked in, if you see our revenue growth even for this quarter on a constant currency basis was 7%, the rest of the headcount growth was 4%.

And that’s what we expect that based on the further investments, what we’re going to do, some of in those area that our revenue growth will be faster than the headcount growth..

But just to reiterate what we said earlier, if revenue per employee and that productivity metric continues to accelerate at a very healthy level, it makes it a little bit more difficult for us as an organization to move that seat utilization metrics.

So just want everyone to be aware that lack of headcount growth does have an impact, not necessarily on the company’s overall operating margin but certainly impacts the seat utilization metric..

I get that, but at least, the point is that one or the other should be driving your margin improvements..

Hopefully both. We will continue to maintain seat utilization at a very attractive labor for further growth in the long-term..

Thank you, guys. Thank you..

Thanks, Ashwin..

Thank you..

Your next question comes from the line of Adam Dahms from Baird. Please proceed..

Hey, guys. Thanks for taking my question. Nice quarter..

Thanks Adam..

Thank you..

My questions on the contract type breakdown.

I know you guys have talked about kind of moving these contracts to more transaction outcome based, which will let you kind of implement some of this automated processes? Can you maybe talk a little bit about the trends you guys are seeing there? I think some of these known headwinds are having some impact from the numbers we are seeing.

And then maybe a little bit about how we should think about margins given those trends?.

So if you look, as Keshav mentioned that we are getting new clients, new logos and it is how the clients behave. Sometimes the clients are mature and they take a pretty aggressive stand and they are very comfortable in starting the relationship with outcome or transaction based model.

But there are various mix of other clients where they want to move in a very phase wise manner to really get comfortable, first with the lift and shift and run for us a year or two years and have a baseline and then move to the transaction model.

So our focus is by introducing more automations robotic to move to the non-linear model or outcome model, but it’s going to be in a slow and steady progress..

All right. That’s fair. And then I guess a quick one on the tax rate.

You mentioned one of the reasons it’s been up in the last couple of quarter as how some of your investments are being handled, is that something, I guess, given how those investments are been handled from a tax perspective that we should consider 20% to be a fair adjusted run rate going forward or should we expect that to come back down a little?.

So based on the India budget recent introduction of the new taxation, we are also evaluating the various other investment opportunities, which we can optimize our income and based on once we’re able to finalize then we will work on some of that stuff, we’ll be able to provide you the guidance in April when we’ll provide the guidance for FY’ 16..

Great. Thanks guys..

I think, Adam, from a modeling perspective, the important think to understand is that while there maybe some changes to the effective tax rate, the offset to that change in effective tax rate may show up on the interest income line.

So as we evaluate these new investment alternatives to take the place of the SNPs, what we need to do is balance out what the net return is and it may result in a shift in strategy, but I don’t think from a bottom line perspective it’s going to have a material impact..

Okay. Great. Thanks..

Your next question comes from Prasad Borra from Goldman Sachs. Please proceed..

Thanks for taking my questions. Couple if I may. Firstly, when you account for spending related to the new verticals, the new logos, the margin performance of the company is even more impressive compared to peers. Now you did mention and talk about some of the cost related items and the FX expenses.

But just from a pricing point of view, are your contracts at a premium compared to your peers? And just in terms of some of the differentiation you were talking about compared to the other offerings.

Can you provide any color on that? What exactly do you bring to a contract, which say your competitors can’t?.

Sure. I think from a pricing perspective, again, I think, what the clients looking for is value and at the end of the day most clients are aware of what the standard rates are in this industry for services. So the ability to charge a premium is really not out there today, but I think, pricing remains stable, it remains healthy.

I think it’s about value creation for the client and comfort most importantly.

So to me when we talk about differentiation and our ability to sell a client, it’s not about whether we are 5% more or 5% less from a pricing perspective, the economic behind this and the value delivered behind this is going to be there, whether a client saves 35% or 40%, isn’t as relevant to the customers, whether or not they are outsourcing key strategic operations to someone that they feel comfortable is able to handle that and not have an impact on their business and most importantly an impact on their end client.

So while pricing is certainly a factor in the decision, it’s more about trust relationship and demonstrated capability especially within the verticals..

That’s helpful.

Probably just on the large deals, you guys mentioned that, you are seeing more participation in the large deals? Is that factor more related to improvement in macro or it is something just on back of the incremental investments you have made in some verticals?.

The reason that we are playing more in large deals is result of all the focused kind of investments we have made over the last three or four years, the impact that we have made in the marketplace, the brand image that WNS today enjoys and the great work that all our associates have been doing for everyone of our clients.

So today if you are a prospect or a client and you wanted to interact with the top notch company that can service your traditional needs, your transitional needs and your innovative needs of the future, you would go to WNS and that’s the reason why WNS features across the globe in everyone of our verticals or horizontal areas as they must have company to be on a deal that as represented by an advisor or an analyst..

Okay.

Probably just last one and you mentioned investments related to domain expertise and some of the verticals like utilities and related stuff? Just in terms of quantification that can you provide any numbers on what should we be expecting in terms of say sales and marketing increase and other components?.

Can you repeat the question again, S.K, sorry?.

I was just saying that just in terms of your plans to expand your presence in other verticals and increase in domain expertise? Can you provide some quantification around what are the costs involved to do that?.

Well, I think, the costs obviously are going to hit a number of different areas, right. Keshav has talked about the need to invest in tools and technologies to drive niche capabilities and automation in some of these services. We have talked about M&A to augment some of this.

We are also always looking for senior leader than domain expert guys that understand processes, have worked within the verticals for many years and can be not only sales support resources for us, but also help with delivery and execution on some of these key initiatives.

So I think it constantly looking for things to deepen our knowledge, deepen our understanding and also deepen our relationship with the client at the same time.

In terms of quantification, we are not going to put a number on how much we are investing specifically in verticals, specifically in horizontals, specifically in CapEx, because a lot of these things overlap and touch each other.

But I think what is most important is we are looking at our business from several key advantage points and making sure that we are investing the right way to make sure that we are in a position to meet where the industry is headed and we know its evolving, we know its changing and we understand that we need to continue to invest to make sure that we are in the right place..

Thank you. Thank you..

Thank you..

Your next question comes from Brian Kinstlinger from Maxim Group. Please proceed..

Hi, guys. Good morning. Thank you. First question I have, you mentioned two large deals and they are not all equal, obviously.

So can you maybe size the opportunity, maybe in context to first year contribution, but then more importantly in the long-term are they top five, top 10 type customers and the location of the second one was financial services, where was that geography?.

Let me take that. Bryan, the financial services, the large deal that we signed is in the U.S., the utility that we signed is in the U.K. In terms of the amount of contribution obviously that’s a function of several things including how fast the client is up some ramps.

We don’t see either of these deals that were signed this quarter as anything that is unusual in terms of large deals we’ve had in the past. There is nothing I think here that is earth shattering in terms of size or transformational in terms of their ability to contribute to the company.

But they are large deals based on our definition of $5 million of annual contract value to start. And we would expect as we do with most of our large deals that phase in over the next two to three quarters..

And then when I look at the utilities, that’s the third utility I think that you’ve signed and not sure there is any other BPO providers that has got three utilities that gives you kind of an advantage.

Maybe you can comment on the pipeline in that sector right now and then maybe the overall pipeline?.

I think it’s our second, the second large deal we signed in utility space of the five that we’ve signed this year. But it’s clearly in area where we seem to progress. It’s in area where we’ve been able to leverage some of our large existing relationship in the utility space and kind of similar to what’s happened in the insurance and the travel space.

I think WNS is getting a very good reputation as a first tier capable provider in the utility sector. So I think Keshav has little bit to add to that. But in general, we feel really good about how we’re positioned this phase. It’s emerging and we believe it’s an area we want to continue to invest in..

Yeah. Again, I just want to add that the pipeline that we’re seeing goes beyond the traditional energy companies now that we saw.

So while the energy companies see us as a company that really understands customer service and customer interaction and premium customer interaction extremely well, they also see us as a company that understands the domain so well that we’re able to really transform a number of areas within each of their enterprises.

And therefore more and more of the pipeline is various other energy companies really dipping their toes in the model with us. But beyond that, I must say that the pipeline is also starting to look very healthy from the water companies and a few other areas as well. So we’ll just have to watch this phase.

But we are extremely positive about how we have now positioned ourselves in this area..

Great. Last question, I have, maybe can you talk about the small OTA customer that has taken over some of the back office work from your large OTA customer. You started with an initial small pilot.

How has that progressed since that transition has been made? Have you been able to gain significant work, have you’ve been able to double that small amount of work you’ve had, just maybe what your expectations are over the next year or two?.

Sure. First of all, I must say that we are happy with the progress that we’re making there, not just in terms of how we are servicing the client and how we’re delivering there but also in terms of how the relationship has really panned out. So we are seeing excellent long-term relationships with this new OTA client.

We have secured commitments that go significantly beyond what we had originally signed up for and are already starting to deliver on that. And we expect that we will continue to expand with this client.

Again I want to clarify that all transaction volumes that they have and that they have outsource to even other vendors are in place and based on some of the unique new models that we are introducing to them.

We believe we can actually help upgrade their services and models that really help improve productivity for them, which means we are a very compelling, kind of, long-term choice for them. So a very positive, very bullish about how this relationship will play out over the next two three years..

Great. Thank you, guys..

Thanks Bryan..

At this time, we have no further questions in the queue. This will conclude today’s conference call. Thank you for your participation. You may now disconnect. Have a great day..