David Mackey - Corporate SVP, Finance and Head, IR Keshav Murugesh - CEO Sanjay Puria - CFO Ron Gillette - COO.

Maggie Nolan - William Blair Rick Eskelsen - Wells Fargo Joseph Foresi - Cantor Fitzgerald Frank Atkins - SunTrust Ashwin Shirvaikar - Citibank Bryan Keane - Deutsche Bank Brian Kinstlinger - Maxim Group SK Prasad Borra - Goldman Sachs Dave Koning - Baird Puneet Jain - J.P. Morgan.

Good morning and welcome to the WNS Holdings’ Fiscal 2016 Third Quarter Conference Call. [Operator Instructions] 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 results highlight continued strength in the Company’s operating and financial performance. Fiscal third quarter net revenue came in at $135.9 million, representing a year over year increase of 5.9% on a reported basis and 10.4% constant currency.

Versus the third quarter of last year, the continued depreciation of several key currencies against the U.S. dollar adversely impacted our revenue. Sequentially, revenue improved 1.9% on a reported basis and 3.7% constant currency. In the fiscal third quarter, WNS added five new clients, expanded six existing relationships, and renewed 21 contracts.

The sales pipeline remains healthy and broad-based highlighted by opportunities for emerging verticals, disruptive services and large deals. In fact this quarter, WNS added over 1,500 employees with headcount crossing the milestone level of 30,000 globally.

This hiring was primarily in support of three large accounts, which will be ramping up over the next few quarters and highlights the Company’s underlying business momentum. In the third quarter, our adjusted operating and net profit margins were once again strong despite some unanticipated costs.

Sequentially, the reduction in adjusted operating margin of a 100 basis points was largely driven by a $2.2 million charge relating to an amendment of the India Payment of Bonus Act, which increased employee bonus amounts for certain wage categories retroactively from April 1, 2014.

This legislation was passed on the 31st of December 2015, and WNS strongly disagrees with the Indian government’s decision to make this amendment retroactive to the beginning of fiscal 2015. Sanjay will discuss the details of our quarter-over-quarter and year-over-year margin movements in his prepared remarks.

From a balance sheet perspective, WNS ended the third quarter with no debt and $149.2 million in cash or $2.80 per diluted share. Putting our strong balance sheet to work for us remains a key focus area for WNS.

In addition, to share repurchases, we will continue to look for tuck-in acquisitions to augment our abilities -- our capabilities rather and solutions and help position the Company for continued long-term success. As many of you are aware, there were severe floods in the city of Chennai last quarter which had a devastating impact on the city.

From an operational standpoint, WNS was able to implement our business continuity and disaster recovery plans to ensure our clients operations were not disrupted. As a result of these efforts, Q3 revenues were not impacted.

We did however incur some additional costs as a result of the flooding which included transportation, housing, overtime wages, cleanup costs and contributions to the relief and recovery efforts.

We believe the BCP capabilities and the diversified global delivery infrastructure which enables us to mitigate the impact of natural disasters as well as other geopolitical challenges including economic crisis and terrorism.

WNS combines these BCP capabilities with rigorous data and cyber security, operational excellence, and strong governance to ensure our clients’ business processes are safe and secure. This is a very exciting time for the BPM space. Today there are several disruptive forces driving clients to adjust their business models.

These include the need for digital strategies and better analytics, the ability to manage regulatory and compliance related changes, and traditional cost, quality and efficiency requirements.

This business disruption serves as a demand driver for the BPM industry, and at WNS we are seeing this manifest itself in both client discussions and the new business pipeline.

Despite all of these exciting changes, it is important to remember that at the end of the day the ability to help transform a client’s business is predicated on domain expertise.

Deep domain expertise remains the most important skill to helping clients manage their traditional, transitional and transformational requirements and to delivering quantifiable outcomes and true business impact. On the subject of digital at WNS, we are seeing new opportunities present themselves in several different ways.

The first type of digital project is helping the client create, integrate and manage new technology enabled client interaction channels to augment their traditional models. Examples of these front-end channels include mobility, social media, and data acquisition tools such as sensors.

The second type of digital engagement we are seeing is far more disruptive and transformational in nature. This is the end-to-end conversion of legacy business models to digital, impacting the client’s front, middle and back office. These engagements involve not only technology enabling processes but fundamentally changing how companies operate.

These executive level strategic initiatives must be well-planned to avoid digitizing and inefficient process and to drive competitive advantage across the organization. Finally, we are also seeing opportunities to service e-commerce organizations which were born digital.

Many of these companies are in hyper growth more and focused on improving brand awareness, market share and client acquisition. WNS is gaining a reputation as a partner that can help enable business acceleration by providing much needed process expertise, domain knowledge, and analytical capabilities.

Today WNS is servicing these types of clients in the online, travel, etail, [ph] transportation and logistics and hotel industries. They disruptive changes to our clients’ businesses will also require providers to adjust the skill sets necessary to deliver BPM solutions.

As technology and automation reduce the need for manual involvement in lower end repeatable process tasks, BPM partners will increasingly need to focus the label forces or domain expertise, operations and process knowledge, analytical capabilities and much higher levels of specialization.

Last quarter, we discussed, WNS’ increased focus on employee training initiatives to help develop these specialized higher-value skill sets. We spoke about our broad-based entry level college training program to help generate interest in BPM and create language and business skills to help increase employability.

We also highlighted our domain universities for WNS employees, which provide the structured learning environment, designed to enhance vertical expertise and operational excellence. In addition to these two initiatives, WNS recently announced a joint MBA program in business analytics with NIIT University in Delhi.

This first of its kind program was co-created by academic experts at NIIT University and senior leaders from the WNS analytics practice, and combines intensive academic content with practical work experience via WNS internship.

Graduating students will receive placements in the WNS research and analytics practice, which is currently over 2,500 professionals strong. The program will begin in June 2016 and is expected to create a dedicated supply of focused analytics experts and to help improve the WNS brand in India.

It is these types of innovative programs that will help WNS meet the changing needs of our clients. In our press release issued earlier today, WNS provided an update to our fiscal 2016 full-year guidance. We currently expect revenue to be in the range of $528 million to $532 million, representing growth of 5% to 6%.

Excluding the impacts of currency and hedging, guidance reflects growth of 10% to 11%, on a constant currency bases. Consistent with previous years, we currently have over 99% visibility to the midpoint of the range. Adjusted net income is now expected to be in the range of $99 million to $101 million or a $1.86 to $01.90 per adjusted diluted share.

In summary, we are pleased with our third quarter financial and operational performance, and overall business momentum.

We are excited with the health of the BPM space and believe that our unique combination of domain knowledge, operations expertise, analytics capabilities and technology enabled solutions position us front and center to meet the industry’s evolving requirements.

We will continue to invest in the areas of digital, analytics, domain, and technology with the goal of generating improved business value for all our keys stakeholders. I would now like to turn the call over to Sanjay Puria, our CFO, to discuss further our financials.

Sanjay?.

Thank you, Keshav. With respect to our third quarter financials, net revenue increased to $135.9 million from $128.4 million in the same quarter of last year, growing 5.9% on a reported basis and 10.4% on a constant currency basis. Year-over-year, quarter-three revenue was pressured by depreciation in key revenue currencies against the U.S.

dollar, including the British pound, Australian dollar, South African rand, euro and the Canadian dollar. Form an industry perspective, revenue growth was broad-based with the shipping and logistics, retail/CPG, travel, consulting and professional service, and utilities verticals each growing 10% or more year-over-year.

With respect to our service offerings, revenue growth versus the prior year was driven by high-end contact center work and technology services. Sequentially, net revenue increased by 1.9% or 3.7% on a constant currency basis. Quarter-over-quarter, revenue growth was broad-based and healthy despite currency headwinds net of hedging.

Adjusted operating margin in quarter three was 22.1% as compared to 22.3%, reported in the same quarter of fiscal 2015 and 23.1% last quarter.

On a year-over-year basis, adjusted operating margin decreased 25 basis points, as a result of $2 million of one-time benefits recorded in quarter three of last year for the removal of FX collars on certain client contracts; the quarterly impact of our annual wage increase and $2.2 million charge for the India Payment of Bonus Act which Keshav discussed.

Approximately half of this expense is related to the retroactive nature of this amendment and represents catch-up from fiscal 2015. These unfavorable items were largely offset by currency and hedging gains, better seat utilization, productivity improvements, and increased operating leverage on higher volumes.

The sequential adjusted operating margin reduction of 100 basis points was a result of $2.2 million charge for the India Payment of Bonus Act which was partially offset by improved productivity and higher volumes.

Interest expense this quarter was $0.1 million, down from the $0.3 million reported in quarter three of last year and slightly below last quarter’s level. The Company’s other income was $1.9 million in the third quarter, down from $3.1 million reported in quarter three of fiscal 2015 and slightly above the $1.8 million last quarter.

Year-over-year, the reduction in other income is largely the result of a change in the India budget, which increased the dividend distribution tax. In addition, interest rates in India have reduced versus last fiscal year.

WNS’ effective tax rate in the third quarter was 17.1%, down from 20% reported last year and up from 16.9% in the previous quarter. The year-over-year decline in tax rate is largely the result of the shift in our investment instruments which is offset by the lower interest income, previously mentioned.

The Company’s adjusted net income for quarter three was $26.4 million compared with $25.1 million in the same quarter of fiscal 2015 and $27.1 million last quarter. Adjusted diluted earnings were $0.50 per share in quarter three, up from $0.47 reported in the third quarter of last year and down from $0.51 in the prior quarter.

Year-to-date, the Company has increased adjusted diluted EPS 9% on a reported revenue increase of 5% and a constant currency revenue increase of 10%. As of December 31, 2015, WNS’ balances in cash and investments totaled $149.2 million and no debt.

The Company generated $27.7 million of cash from operating activities this quarter and free cash flow of $24.1 million after accounting for $3.6 million in capital expenditures. DSO in the third quarter came in at 28 days, the same as reported in quarter three of last year and up from 27 days reported last quarter.

The Company remained focused on putting our healthy balance sheet to work, and we are actively looking for tuck-in acquisitions to augment our current capabilities. The M&A pipeline continues to improve and includes opportunities in the areas of analytics, domain expertise, finance and accounting, and technology tools and platforms.

With respect to other key operating metrics, our total headcount at the end of the quarter was 31,340. As Keshav mentioned, we hire over 1,500 new employees to support win at large three accounts.

These hires occurred late in the third quarter and are expected to impact our margins in fiscal quarter four as resources are trained and work is transitioned. While we expect some modest transition revenue in quarter four from this account, the majority of revenue is expected to flow from quarter one of fiscal 2017 onwards.

Our attrition rate in quarter three was 30% down from 32% reported in the third quarter of last year and down from 35% in the second quarter. Global built seat capacity at the end of the third quarter was 25,708 and average built seat utilization came in at 1.19.

While average seat utilization was down slightly quarter-over-quarter, our period end number improved by almost 5%, as a result of a quarter three hiring. This should help drive average seat utilization higher in fiscal quarter four.

As always, we expect this metric will fluctuate quarter-to-quarter, based on facility build out requirements and hiring cycles, but directionally annual seat utilization levels are expected to improve over the next few years. In our press release issued earlier today, WNS provided revised guidance for fiscal 2016.

Based on the Company’s current visibility levels, we expect net revenue to be in the range of $528 million to $532 million, representing year-over-year revenue growth of 5% to 6%. Revenue guidance assumes an average British pound to U.S. dollar exchange rate of 1.48 for the remainder of the fiscal year.

Excluding exchange rate impact, our revenue guidance represents constant currency of 10% to 11%. We currently have well over 99% visibility to the midpoint of the revenue range, consistent with January guidance in prior years. Adjusted net income is expected to be in the range of $99 million to $101 million, based on INR 66.5 to U.S.

dollar exchange rate for the remainder of fiscal 2016. This implies adjusted EPS of $1.86 to $1.90, assuming a diluted share count of approximately 53.2 million shares.

It is important to note that without the impact of the amended India Payment of Bonus Act, our expected full year ANI in fiscal 2016 would have been higher by $2 million and $0.04 per diluted share. With respect to capital expenditures, WNS anticipates our requirement for fiscal 2016 to be in the range of $23 million to $25 million.

We’ll now open up the call for questions.

Operator?.

[Operator Instructions] Your first question comes from Anil Doradla of William Blair..

Hi. This is Maggie Nolan in for Anil Doradla.

I was wondering where you think opportunities for growth are in terms of existing clients versus new clients, and how that will drive you going forward, especially in the context that you’ve seen a slight decline in the top customer concentration this quarter?.

Yes. Actually from our perspective, I think the business momentum across, whether it is with existing clients or with new prospectus, continues to be very, very excited.

Again, having said that, I must say that the business momentum and kind of interactions that are taking place between prospects, existing clients and WNS are across the globe, across verticals and transcend all our business horizontals as well.

I think the most important area for us to be excited about is the fact that there is so much of disruption that is taking place in clients’ own business models.

So, while some existing clients may take a little longer to take decisions on the business transformation, we know that finally decisions are inevitable; they have to be influenced and impacted by us, while many of the others are moving much faster ahead.

So, at this point in time, as you look at momentum, it is coming across the globe and across all horizontals and verticals. And something new that we are seeing for the past few quarters is that is coming from the new disrupters in technology as well..

Okay, great. And then obviously your net headcount additions were quite high and this in anticipation of those three ramping large accounts.

Could we get a little more color on those three accounts, maybe what vertical those are if you foresee those becoming some of your top clients down the road?.

So, let me start out that answer and have Ron add a little more color. But yes, absolutely that’s a perfect indication of the exciting kind of change in terms of business momentum. The three verticals are across different areas, one is a utilities vertical; one is travel; and the third one is on the retail and the CPG area.

Again, these deals are large, transformational in nature and transcend geographical boundaries as well as different offering areas from WNS. And in some cases, we have to skill some of our resources, bring them in early, train them and make sure that their skills are up to date in terms of some of the new services that we will be offering here.

And that’s the reason that the early add -- the addition has taken place early, but again very-very excited in terms of the potential..

So, this is Ron. In addition to what Keshav said, we are excited about this because it is across these three different industry verticals, three different geographies and being delivered from three different geographies. We are very disciplined in our approach to transitioning and brining on new clients.

We thought it was prudent to take the time to deliver this. These are very large additions to our services, to our clients rather, and I think that we’re doing this in a very disciplined and measured way. Again, we will see the revenue impact in Q1 of ‘17 as this transition’s complete and we go forward..

Thank you. The next question comes from Edward Caso of Wells Fargo..

Hi, good morning; it’s actually Rick Eskelsen on for Ed.

I guess just following up on that last question, are these all new clients for WNS or are they expansions of existing relationships? And maybe if you could talk a little bit more about how the sales process and how long it took these deals to close?.

Sure. So, it’s a combination. Some of them are existing clients; in fact two are existing clients -- sorry the other way rather. It’s two new and one existing client. And yes, the sales process again varied. It depends on which particular one we are talking about. Some actually accelerated and went through the sales process extremely quickly.

And on the utility side, it took longer because it’s a first time outsourcer in this space and it’s in a completely new area to what WNS has traditionally serviced. So, it’s opened up a very exciting new area on the utility space that goes beyond the traditional power sector.

And so yes, it’s just I think good focus from our sales teams, lots of interactions at senior most levels between both companies. And while these are the first kind of contracts that have been signed up, we believe that the ability to penetrate and radiate all these accounts is immense. And as I said, two of them are first time outsourcers as well..

Thanks. Then just trying to the adjusted operating margin side, the strength obviously continue there; it’s better than what we had thought and sort of above the high teens number that you guys have talked about.

Is it still the right guidance; is that still the right place for investors to be thinking in terms of the longer term adjusted operating margin in the high teens?.

Yes. So from operating margin perspective, on the longer term, as we guided toward the high teens, it’s going to be a gradual movement over two to three years. And provided assumption is where the currency is there, it’s on the assumption that where the currency is now and where the hedge book is going there.

But it’s not going to be like immediate next year but gradually over two to three years on the high teens, and we are comfortable with that..

And I must also say that we are obviously extremely focused on delivering industry leading margins in order to first of all be relevant in order to make sure that we have enough surpluses to keep investing in the new exciting models and the new exciting opportunities that we are seeing.

And I think based on the differentiation and the way we are driving our technology based solutions and some of our digital based solutions, we believe our ability to hold these margins enough for the foreseeable futures is high..

And I think that’s an important distinction, Rick.

When Sanjay talks about longer term, the operating margin settling into the high teens and it taking two to three years for that to happen, essentially all we are doing is projecting that the hedging gains that we have been receiving for the last couple of years, in a stable currency environment will eventually roll off.

And if you look at having roughly $10 million of hedging gains this year on revenue of $530 million, you are looking at a 190 basis points of operating margins. So, if you look at where we are going to be this year, take a 190 basis points off of that number over the next two to three years, that’s how you get to the high teens.

But very important to remember that if currencies continue to depreciate, that number’s going to continue to get pushed out. So similar to what we talked about last quarter, similar to what we talked about last year, these adjusted operating margins are a function of where the currency and where our hedge rates are.

But operationally, we don’t see our adjusted operating margins changing much over the next couple of years..

Thank you, very helpful. Just a last question on the fiscal ‘16 guidance change on the topline. Can you decompose how much of that change was due to adverse currency moves? I mean obviously you’ve been seeing a lot of the key currencies go against you and it seems like that the majority, by our math.

But I was wondering if you could just decompose that for us? Thank you..

So from a -- on the adjusted net income basis, currency and from a topline perspective, if you see on the constant currency, our growth is -- has improved from 10.4% to 10.6% on the midpoint. And so you know the balance number over there is based on the currency impact because of the currency movement specifically.

So, it’s going to -- it’s around $2 million to $3 million..

Short answer Rick, you are absolutely correct, the only thing that’s changed from our guidance last quarter is that we’ve rolled through some additional currency softness; on a constant currency volume basis, we’re actually up slightly from a quarter ago..

The next question comes from Joseph Foresi of Cantor Fitzgerald..

Hi. I was just -- my first question is just on demand.

Have you seen any changes in decision making? And as we start this new calendar year, how does the pipeline look this year versus last year?.

Good morning, Joe. So that’s an excellent question. From our perspective, based on the earlier commentary as well as the experience we’re having interacting with existing clients and prospects, we feel extremely good about our positioning and our business momentum, as we move towards the end of 2016.

So, I think what is really positive at this point in time is we’re not seeing -- so we’re not seeing any unusual headwinds at this point in time.

And in terms of decision making, as I’ve pointed out earlier, we’re not seeing significant change in terms of how things are moving along but we’re seeing some clients wanting to climb on the bandwagon quickly and we’re seeing a much more -- it’s more client specific.

So like I said in my in earlier answer, in the case of two clients that we recently signed up, we actually found acceleration in terms of how quickly they moved with the decision. So, it’s very much client centric but nothing to be alarmed about in terms of how things are progressing.

And let’s wait and see how the business environment outside looks over a period of time. As you know, in our business, as the business environment remains moderate, actually the demand for our services actually becomes stable and sometimes accelerates. So, let’s wait and watch. But at this point in time, momentum is solid..

Can you frame for us the size of digital and/or analytics and maybe provide us some level of growth rates if you have a more -- maybe just give us some idea of what that’s meaning to your business right now?.

Sure. So, let me first talk about the impressions that we’re seeing. So first and foremost, we’re seeing clients really leveraging technology as a competitive advantage for the front, middle and back office in terms of their own business areas.

And from our perspectives, I think it is our superior domain knowledge as well as the investments we’ve made in technology, the whole smack areas as well as artificial intelligence models that enable all these clients to be even more effective and impactful.

I think the wonderful thing about this disruption and the clients’ need to get after digital models in terms of their interaction with their end customers is that there is new opportunity being thrown our way all the time.

And when clients interact with WNS, they understand that over the past few years, we’ve been investing significantly in some of these areas, so we’re a very logical choice for them.

Simple example is we spoke a few quarters ago about our disruption management solution for the airlines that’s playing very, very well with everyone of the airlines as very different to something that they have seen traditionally.

Our very fair solutions; the upgraded solution again is seen as really exciting from their perspective on the F&A side, the accounts payable workbench again is a model that they’re lapping up extremely well.

And essentially all this is doing is driving more business efficiency of our clients, but for us it is creating a much more sticky kind of revenue stream..

And then just finally, you talked about acquisitions and we’ve heard about them for a number of different years.

How’s the valuations in the pipelines in those acquisitions? And then just for clarity on the margin front, what kind of expansion do you expect per year? I know you talked about a high teens number, but I just want to get some clarity on that as well.

So what’s on the acquisition pipeline, if we get any clarity on the expansion of margins on an annual basis..

So, let me talk little bit on the M&A side. And as I’ve said for the past few quarters, the pipeline around building capability for WNS continues to remain strong. And at this point in time, we’re having some strong, very good discussions with one or two very focused kind of players. Let’s see what happens in terms of progress there.

Again, the pipeline for M&A is around capability and it transcends two or three business verticals which are the focal invest verticals for us as well as one or two horizontal kind of areas, right? And again, in terms of timing, obviously we cannot predict what will happen.

But I think it’s -- there’s a heightened sense of what we need to do and how quickly we should get things done. In terms of valuation, we haven’t seen any significant change compared to what we saw over the past few quarters. Again, it depends a lot on the kinds of deal and the area we’re after.

So, as and when we execute on something, we’ll have to keep you updated.

Sanjay, you want to take the question on margin?.

So, from a margin expansion perspective, as we’ve been driving lot of the automations and the tools and the RPA and robotics, the productivity keeps on improving. But having said that, also we have seen lot of those disruptions and we need to keep the speed.

And those margin expansions are getting continued investment back into the business from a long-term perspective. And that’s where even we have alluded that operationally we believe that we will be -- we expect that operating margin to be into the high teens and that’s going to be gradual over two to three years..

So, I think kind of the macro takeaway guys is that our overall adjusted operating margins are expected to decline over the next two to three years from where they are today into the high teens. Our operational margins excluding the impacts of currency and hedging are expected to be relatively stable.

So, as we leverage the investments that we’ve previously made, things like our global infrastructure, things like our sales force, as we leverage those investments, we are going to be reinvesting that money to make sure that we are well positioned for where the demand is moving, so more into digital; more into analytics; more into technology enablement to make sure we are able to service our clients.

So, on an operational basis, adjusted operating margin should be relatively stable. It’s just the impact of currency roll off that’s going to drive down our adjusted EBITDA operating margin over the next couple of years..

Thank you for your question. The next question comes from Frank Atkins of SunTrust..

Thanks for taking my question. I wanted to talk a little bit about the pipeline, the three large wins. Any change in terms of contract type, either fixed price or outcome based or transactions or any trends you see in the pipeline looking forward that would impact that distribution..

Yes, that’s an excellent question. And let me start with the last part of your question in terms of what kind of contracts clients are looking for.

And here I want to underline that the most important and exciting phenomena that we are seeing is a lot of clients as well as a number of prospectus that we interact with trying to accelerate their digital presence, trying to really change their legacy models to new models.

And therefore, we have to appreciate that inside every client’s environment, there is a traditional business that needs to be serviced; there is a transitional business where they have understood delivery models for years by working with people like us and they are transitioning it, we are helping them transition to a completely new model.

And there is an innovation agenda where the model of engagement also will be completely new, right? And so, all three have to be managed.

So, on the traditional side where they are outsourcing for the first time a new process, I think a lot of them are still much more comfortable with the older legacy models of interacting, so that’s both WNS and they get comfortable with each other before they move to an outcome based pricing model.

On the other two, we are seeing discussions taking place and in some cases actually, the more mature clients moving to outcome-based kind of models. So, this is the interesting change that we are seeing.

We are also seeing that in a number of engagements and discussions as well as wins that we have recently, the first level of interaction and win was around analytics.

So, as we’ve used analytics as the Trojan Horse to actually get into some of these accounts and the clients therefore see WNS as an analytics player, and around that our ability to influence the CXO suite and penetrate and radiate across all our traditional areas as well.

In terms of the business pipeline, as I’ve said earlier, momentum is the word I would use, and it continues to be extremely strong across all verticals as well as our traditional horizontals..

And then attrition ticked down nicely this quarter; any changes in the hiring environment or anything you are doing on the retention side that’s driving that or just is that a function of the macro situation? Give us a view on kind of what’s driving that..

Well, I would say attrition -- ticking down of attrition is essentially because WNS is the best place to work it. I think our talent, fees, the investments we are making in all the key areas.

The talent clearly understands we are leading the industry in terms of some of the new programs including the new tie-up on the analytics front that we spoke about.

The talent ultimately works for companies where they see huge opportunities for themselves, where they see ability to accelerate their career paths, where they see absolute clarity in terms of vision and execution of strategy. So, I think all of that is helping us quite a bit.

And I think we’ve also been favored by one or two geographies which traditionally had very high attrition where there has been a bit of a cooling off.

If you recall, over the last two quarters, we spoke about two or three geographies where there seem to be heightened kind of attrition because of captive kind of growth in some of those areas and that seems to have cooled off a bit..

I think the important thing Frank is to understand that over the last five years, we’ve pretty consistently managed that attrition rate down and directionally that’s certainly the goal. I don’t know that 30% has become the new benchmark or that we should expect that to be sustainable quarter-to-quarter.

Similar to our seat utilization, that number is going to move around. But directionally our goal is to continue decline nudge that annualized attrition rate down..

If I could sneak one more last one in, where do you stand in terms of sales capacity and headcount, and are you pretty comfortable with where you are or do you think more additional investments will be needed to make in that area?.

We are sitting right now at 66 as of the end of December. That number has bounced around between this level and 75 give or take. I would expect it will continue to bounce around at this low level before I need a few more sales people. But the focus really remains on making the team more productive, continuing to build the pipeline.

We think we have significant capacity at this 65 to 75 level to generate the kinds of growth that can really help the Company move forward. And the focus is on making those resources more productive.

If and when we need to continue to move that number up on a sustainable basis, we will talk about that but right now the focus is on leveraging what we have although we maybe up or down a few resources in any given quarter..

Thank you. The next question comes from the line of Ashwin Shirvaikar of Citibank..

So, I guess it seems like if margins are stable, then the EPS growth should depend on the topline and whatever use of the balance sheet you can make. And you guys continue to make progress with regards to the topline, so that’s been good.

And I appreciate that you are being very diligent and careful about your balance sheet; frankly, [ph] you could be sitting here two three quarters later with no change on the M&A front.

So, have you considered a constant steady buyback to sort of support the stock and help that EPS growth and help the valuation and so on; could you talk a little bit more detail about allocation of capital because you have a lot of cash on your balance sheet?.

Hi, Ashwin and thanks for your question. So, you are absolutely right, we have been quite diligent about the M&A side. And on the capital allocation side, you are aware that we executed very efficiently a buyback last year after the announcement.

I think the board is discussing a number of things around capital allocation that will include a continued buyback program for the long term, obviously M&A as well. And you should wait to watch the space in terms of how things farm out, out there.

But yes, we are extremely sensitive to the fact that we are delivering value and in terms of that value creation, the stock also is an important area of investment..

And just to add to that, internal discussion and the board discussions are being on. And we’ll also have to go and take a shareholders’ approval in order to do that program. So we will keep you updated on that..

From a clarification standpoint, this quarter it seems like there were a number of one-off sort of events. And I wasn’t sure -- I may have missed this. Could you size the Chennai cost impact? I think you did size of course the Payment of Bonus impact.

And also, I don’t want to call FX one-time but what was the topline impact in dollar terms?.

So, from a Chennai flood perspective, we did not have a revenue impact because as Keshav alluded, we did our business continuity plan which is very robust and we invoked those business continuity plans to ensure that the clients’ operations are not being impacted at all. And accordingly, we did not have our revenue impact.

From a cost side -- it was $250,000 approximately, as impact in quarter three..

And to the second part of your question, Ashwin, in terms of the revenue impact from currency, on a year-over-year basis, the movement of currency, net of hedging, cost us about $5 million and sequentially, the movement of currency net of hedging, cost us a little over $2 million..

My last question is really about your delivery platform and in addition to India obviously you guys have grown the Philippines and South Africa as leading centers.

As you look forward the next, call it two three years and think about your plans, where should we see net incremental investment in hiring preferentially? Do any of these geography offer you a better pool of talent for kinds of things that clients are looking for now?.

So, this is Ron. Let me try to answer that for you. We have been very disciplined in building globally -- global delivery infrastructure to meet our clients’ needs. And the needs vary on each client from each geography that we have to service and provide services back to.

What we have seen from us in the past year has been an expansion within the geographies. We’ve added additional delivery centers in South Africa, China, India. You’ll continue to see that as we believe we’ve got a very good footprint today. Talent across the globe is very widespread.

And we believe that we’re accessing it effectively today and will continue to do so. We’re always looking for new opportunities of new locations we can deliver from. But again, it all ties back to client needs. Sometimes, it’s geographical, sometimes it’s educational, there’s language dependency for some of our very global clients.

They want a single solution globally. So, we balance all those. But you can look for us just to have a very disciplined approach to analyzing the needs of our clients, anticipating them and making those decisions to enter new locations as required..

And I think Ashwin, the other thing that’s important, when you look at scale, right, there’s a majority of our people, majority of our deliveries still done out of India. The other two large investment areas in terms of population scales have been Philippines and South Africa.

We will continue to help service our clients from multiple geographies as their business requirements demand. But I don’t think you’re going to see 10,000 people pop up in a new geography; it’s going to be 200, 500, maybe a 1,000 people based on client need and localized requirements.

But in terms of size and scale, those are really the three areas that we’re going to be delivering the majority of our near shore and off shore centric services from..

And maybe just to add to that, as Ron alluded, based on the client specific requirement but wherever those geographies when we are present, the other opportunity and we have been constantly looking is the tier 2 location within those geographies as we keep on servicing the client and based on the talent requirement..

For example Ashwin, there’s the three large deals that we’ve talked about ramping over the next couple of quarters. One is going to be serviced largely out of India, one is going to be serviced largely out of the Philippines, one is going to serviced largely out of South Africa.

So, I think where we’ve invested is lining up quite well with where the demand and the opportunities are in the marketplace..

Thank you. The next question comes from Bryan Keane of Deutsche Bank..

The constant currency revenue growth is 10% to 11% for this fiscal year.

Will these three large deals create an acceleration to that growth rate as we head into fiscal year ‘17 or will they just backfill some other contract runoff?.

So, these three -- we are very excited about these three large deals early before we start the next year, which also helps to really offset of the usual 5% productivity, the ramp downs what we see, which is a mix of productivity and project ramp downs and the other factors over there.

And having said that good traction as Keshav alluded from a pipeline perspective, both from existing as well the new clients and we are pretty excited about that. And we definitely expect to keep on having our growth momentum to the similar, more around the growth but we will update you when we provide the next year guidance on that..

I think the exciting thing Bryan is we’re sitting here and as Sanjay mentioned in his prepared remarks, we’re going to see a little bit of transition revenue from these three large deals in Q4 but the majority of it is really going to start ramping in Q1 and into Q2, Q3 of next year. So, we do have good visibility to revenue growth.

It will allow us at a minimum to offset those normal 5% headwinds that we see to our business.

So, I think from an overall positioning standpoint, as we enter the fourth quarter here and obviously we have to see what happens in terms of signings and ramps and timing and so and so forth, but as I think as we sit here, at the end of the fiscal third quarter, we feel really good about how we’re positioned for sustainable long-term growth in our business..

And then what’s the pipeline for signing up further large deals? Do we think about it signing three large deals a year or do you accelerate to five to seven or how do you think about that as we head into fiscal year ‘17?.

Bryan, hi; this is Keshav. And you will recall that few quarters ago we stopped providing specific guidance around large deals, right, because I think people started getting too dependent on large deals as a metric for the growth of the Company. But I can tell you that we’ve already seen three of these deals being signed at this point in time.

We’re making great progress in terms of our pipeline across geographies, across business verticals and driven by some of our higher value kind of services, like finance and accounting, and analytics as well. And therefore the potential for us to sign more of these large deals is high; the pipeline is full of these kinds of deals.

But much more than just large deals, the pipeline is also full of transformational deals, deals involving the new disruptors. And that I think is the most exciting aspect of where WNS has positioned itself..

And it’s just good breadth across the organization, Bryan.

As Keshav mentioned a little bit earlier, good diversification between existing and new clients, also good diversification between new technologies, old technologies, new services, old services; and most importantly to your point, there is -- there remains a healthy pipeline for large deals, there remains a healthy pipeline for new initiatives, new clients, so feel really good about just how the overall health of the business has continued to shape up..

And just to finish up on that topic, when large deals ramp up, I think you talked about some initial ramp up costs.

Did those -- how long does it take to get to typically, to get to kind of corporate average margins; does it take a full year or two years to get to a run rate of where the corporate average margins are?.

So from a large deal perspective specifically, it all depends how quickly they ramp up; how quickly they transition. And sometimes this transition really go longer from 6 months to a 12 months to 18 months sometime and it all depends on that.

So from an average perspective, as I said, as it depends on the longer tenure as well as the shorter tenure, so it’s very difficult to put a very specific number on the impact on the operating margin because it’s volatile and you don’t -- from a tenure perspective, and very-very client, specifically even on the area where we are working whether it’s F&A or whether into the R&A and other space around that..

I think the thing that’s a little bit different here Bryan and it’s different than how we commented in the past is typically we haven’t done this kind of advanced hiring before, so the 1,500 people were talking about, we essentially got no revenue in Q3; we expect very little revenue in Q4.

And as both Keshav and Ron have mentioned, there is a sizeable amount of training and preparedness required on our side for these deals. And that’s a little bit unique. Typically when we sign a new piece of business, while it may take six to nine months for those pieces of business to ramp, we tend to remain margin neutral over that period time.

So, I think the unique thing about these large deals is there really wasn’t an upfront investment on WNS’ part, and you are going to see that impact the margins in Q4 and that’s baked into our full year guidance obviously, but little bit unique in terms of traditionally we have not hired large blocks of resource well in advance of the actual timing of revenue..

Thank you for your question. The next question comes from Brian Kinstlinger of Maxim Group. .

The first question I have is for the existing customer that you are hiring for, is that a top-3 or top-10 customer?.

It is a top-10 customer; it’s not currently a top-3 customer..

Okay, great.

And then, can you comment on how much the decline your top customer’s currency versus efficiency; and when might their large acquisitions start impacting revenue?.

So, on a year-over-year basis when you look at our largest customer, because 100% of the revenue is denominated in British pound, on a year-over-year basis is down 4%. So, 4% of the decline on a year-over-year basis comes from currency..

Great. That’s helpful.

And then as it relates to legislation that you talked about, so is the way to look at it you added about $0.5 million in recurring wages on a quarterly basis but recognized much more in the third quarter, given it’s retroactive?.

So, there are two elements to it, one is for the fiscal 2015; the other element was for fiscal 2016 and the recurring stuff. So for fiscal 2015, the impact which got recognized in quarter three was $1.1 million and annual recurring of this is we believe, it’s going to be a $1.5 million impact, based on the current headcount what we have..

So, if you look at the cost side of it Brain, we are running about 350,000 a quarter in terms of cost, maybe a little bit less than that on the ANI side, closer to 250,000 because of the tax impact..

Last one, Dave, did you say that in the fourth quarter, you expect a little bit over $2 million of FX gains, based on you said a yearly number that should come down over time; is that what you meant?.

No, I mean we are looking at the full year; we are going to do about 10 million of FX gains this year..

Thank you. The next question comes from SK Prasad Borra of Goldman Sachs..

Hi. Thanks for taking my question, couple if I may. Firstly, Keshav, to start off one on U.S.; can you elaborate on any of the newer initiatives you are taking? And especially you’ve talked a lot about focus on digital, so any of those initiatives particularly targeted at U.S.

customers?.

Yes, so Prasad that’s interesting question.

And I think the key is for us to help our sales folks appreciate and understand that while a lot of these new buzzwords are out there and creating he opportunity, really from our perspective, WNS has been investing behind the strength for the past one or two years, at this point in time and creating excitement around the fact that because of the need for existing clients and a number of first time outsourcers to really get after these digital models, so that they are not left behind in the race that is throwing up lots of new opportunities for companies like WNS.

I think that’s the first realization. Getting our people to knock the doors of clients, of prospects talking to them about what is the art of the possible that’s first. And in terms of specific geographical focus, let me tell you that it is not just the U.S. that we are focused on, it is across the U.S.

obviously but it is also all our other traditional geographies across the UK, Australia as well.

So, it’s a global outreach program; there is a very focused program in terms of how we are presenting our capability, how our marketing team is buttressing the effort through the presentations and focus on how we are interacting with the analyst community as well as the advisors across the globe including the U.S..

That’s great. And one more question on hiring, sorry for that but I’d probably still ask. Just in terms of the hiring plans you have, it seems like quite a step change in your recruitment plans.

When you compare that to say the last five years of your growth, is this something unique what happened over the last one or two quarters for you to -- obviously see the three transformation deals but also scale up to extent you are?.

Sure, I’ll take that SK Prasad. I think the difference is not so much in terms of our approach to the business; the difference is the types of requirements and the types of skills that these three customers have specifically asked for.

So, I don’t think we are going to get into a systemic situation where we’re hiring large groups of people in advance of demand. This is not a situation where we build it and they will come. This is a situation where we have firm defined requirements from the client.

We need to get these resources prepared to meet that firm demand, and it’s going to take an extra quarter of time for us to do that. So, that’s really all that this reflects. I don’t think it is a change in philosophy; I don’t think it’s a change in approach.

It’s just kind of unique situation where have three fairly sizable engagements with short compressed lead times drive us to execute some additional hiring, additional training to get ready for the ramp in these revenues..

And I just want to add in terms of the excitement around that is the fact that two of them happen to be in completely new areas.

So, while we have accelerated the hiring, brought in these people and trained them, starting with these specific clients, our ability over a period of time to leverage these resources and go after more accounts in the same space is very high. I mean that is what is exciting to me..

Yes. Essentially what we had is we had three clients help us fund investment into three new areas. And we will gladly take the one quarter of additional cost, quarter and a half of additional cost to be able to have a capability that we can then go take the market..

Thank you. The next question comes from Dave Koning of Baird..

So I guess first of all, the call center business -- the contact center business, year-to-date that’s up something like 22 million and the total Company revenue is also up about 22 million. So obviously that’s been a huge driver; and really the first two quarters of the year you have massive sequentially growth in that.

I am wondering does that continue -- you had pretty tough comps in the first half of ‘17 but is that really that’s going to be continuing to be the growth driver?.

So, though we have categories that as still a contact center, what I think the services what we have been providing, it’s more toward the customer interaction where it includes around some of the technology and multichannel mobility, all those investment what we have been doing around that..

I think that’s a very important distinction to make. This is not -- the growth that WNS is seeing is not in traditional contact center kind of business, though I think from a release point of view, I think they still mention it as contact center.

This is domain based customer interaction services focused around some of the new value offerings that we provide. And the margins on some of these are significant industry leading. And more importantly, in many cases, it allows us to get after many other areas inside a customer’s account.

And you have to appreciate that with all these clients today, when you going into the domain-based offering where you have robotics behind it, you have technology solutions behind it, you have analytics embedded in this, you need to start with the interaction with the end customer, using these models which go beyond traditional contact center across chats, across multiple platforms.

And then you move them into some of these other areas as well. So again, I just want to underline, this is domain based customer interaction services and this ismargin accretive to the Company..

And we do expect Dave, as Keshav mentioned, to leverage our knowledge, our understanding, our relationship with these clients to move into traditional F&A, R&A industry specific solutions.

So, while we clearly have seen this segment of the business grow, the reason we’re in this segment of the business aside from it being high value, high margin on a standalone basis is to make sure that we leverage that relationship to move into other areas.

And that’s clearly the goal of our Company, the goal of our sales team is to penetrate and radiate within these accounts..

Yes, that makes sense and certainly the margins are so much higher than traditional call centers is clearly differentiated work. And then second….

Dave, I’m sorry. We really take a little bit of offense to the term of call center. I mean this is contact center in terms of how we classify it. But as Sanjay mentioned, these are client interaction services, how our customers interact with their end customers.

And certainly voice is a component of that but so is email, so is chat, so is social media, so is mobility. So very important to understand the distinction between call center, contact center, and customer interaction services..

Right, right. And my question -- I actually was more focused on just -- it could have been any segment, my focus of the question was more on are we hitting a tough comp in any segment and that segment just was so strong I think sequentially up 15% in Q1; 13% in Q2.

And I was just wondering if we’re hitting tough comps and whether it was the contact center part or whether it was vertical specific or whatever it was, I was more wondering on that side..

I don’t think so, Dave. I think the overall health of the business is broad-based, as Keshav mentioned both in terms of the traction we have with our clients and in the pipeline. And I think what you’ve seen on the client interaction side is more a function of the easier comps previously than the fact that we’ve grotesquely outperformed..

I guess my second question is just, growth has been really strong but consensus revenue for next year implies about 15% constant currency growth and I’m just wondering if it’s time now just to start, not talking necessarily about next year’s guidance but just getting into the street to understand, I think today we’re at a 3% or 4% currency headwind on next year just based on where rates are and if it’s comfortable, have people at 15% growth kind of going into when you give guidance next year or not.

Should we be thinking about currency today that 3% to 4% headwind?.

Absolutely, I mean I think anytime you look at our forward years revenues, it needs to be done on a constant currency basis. And we know that we have roughly 70% of our revenue that’s based outside of the U.S. And those trends are something that needs to be taken into consideration when reported estimates are put into place.

Now from a constant currency perspective, we can have a different discussion about whether the double-digit growth that we’re going to see this year is sustainable, whether it can be accelerated. I think that’s the right place to focus on our business.

But in terms of the numbers that we’re going to report quarter-to-quarter, the numbers that we’re going to report year-to-year, absolutely need to factor in the impact of currency..

And your pipeline on a core basis, it’s really good, but I mean is it suggesting growth getting a lot better; is it suggesting just ongoing strong double-digit growth..

Well, I would say that at this point in time, it suggests strong ongoing double-digit growth. But based on how we’ve seen some recent wins as well as some discussions and early wins in 2016 as well, the potential to accelerate over the next one or two years is also high. So, we’ll have to wait and watch for guidance in April..

We know over the next three four months, Dave, by the time we sit down and give a first look at fiscal 2017 in April that we’re going to walk into the year with 90% visibility. So, we know what the visibility number’s going to look like because we know traditionally that’s been the right way to look at our business.

The real question is, is it 90% visibility to a midpoint of 10%, 15%, 7%. But as Keshav mentioned, there’s good momentum in the business; the headwinds at this point in time do not seem to be out of the normal range. And we’ve got very good traction walking into the year, especially with these three large deals ramping up..

Got you, thanks, good job. And definitely did not mean my questions to come across on that call center question. I know the very high value of the work, the margins are great and you guys are doing a great job. So, thank you..

We know Dave. We just wanted to make sure we clarify for everyone. Thank you..

The next question comes from Puneet Jain of J.P. Morgan..

Hey, thanks for taking my question here. Can you share outlook for your auto claims business Last quarter you talked about legal status for auto claims. And growth rate in this quarter improved a little bit but margins remain below average.

So, how should we think about growth profile and incremental margins in that business?.

Thanks Puneet for this question. We were really facing some challenges into the auto claims business earlier.

And as you will recall, we have been talking about that because we were not having particular ABS license which is to provide the legal services, we were not able provide it end-to-end service just to our clients, which they would prefer, fit their business partner and accordingly some of the volumes were really getting down.

Last quarter, we did speak about that we got the ABS license to now provide the legal services. And we have started seeing some momentum around that but still early stages.

And from a profitability perspective, as we were -- there was some initial set up cost to do those legal services and getting the ABS license and accordingly there was a profitability impact. But as we have started some momentum and as you know that as the volume goes up, the profitability improves because there is a fixed cost to at a present level.

So early stages, we are closely monitoring and evaluating and seeing this and then will keep you updated on that..

And can you also talk about your M&A criteria, given high ongoing valuation of some of those platforms, digital assets that you might be interested in and high return on your balance sheet cash? Can you talk about like there accretion deletion of potential acquisition be a hard constraint for you?.

That’s an excellent question Puneet and thanks for that. I think from our point of view, the focus really is M&A that adds new capability or enhances existing capability at the Company. So that’s really the core discussion that we are focused on.

At the same time, as far as possible, we are also looking to see that the M&A is not dilutive to the overall financial impact to the Company. So these are two areas that are top and central in terms of my focus areas. And we believe that there are enough assets out there that meet the criteria.

And again, in terms of where we want to invest that money on the M&A side, it is around some core verticals and capability building there, I would say healthcare being one, insurance being the other, and the F&A and analytics space being the third..

I think the other thing that’s important to remember Puneet is we really have not changed our M&A criteria. The only thing we’ve really done is organization has gotten a bit more aggressive and cast the wider net in terms of where we’re looking for opportunities.

So we do understand it’s important, we are looking for those capabilities, we continue to look for the right fit and the right assets at the right price. I think the only difference is we’re looking it harder; we’re not looking different..

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..