Good morning, and welcome to the WNS (Holdings) Fiscal 2019 Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

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

David?.

Thank you, and welcome to our fiscal 2019 fourth quarter and full year earnings call. With me today on the call, I have WNS’ CEO, Keshav Murugesh; WNS’ CFO, Sanjay Puria; and our new COO, Gautam Barai. A press release detailing our financial results was issued earlier today.

This release is also available on the Investor Relations section of our website at www.wns.com. Today’s remarks will focus on the results for the fiscal fourth quarter and full year ended March 31, 2019. Some of the matters that will be discussed on today’s call are forward-looking.

Please keep in mind that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, those factors set forth in the company’s Form 20-F.

This document is also available on the company website. During this call, management will reference certain non-GAAP financial measures, which we believe provide useful information for investors. Reconciliations of these non-GAAP financial measures to GAAP results can be found in the press release issued earlier today.

Some of the non-GAAP financial measures management will discuss are defined as follows.

Net revenue is defined as revenue less repair payments; adjusted operating margin is defined as operating margin excluding amortization of intangible assets, share-based compensation and goodwill impairment; adjusted net income, or ANI, is defined as profit excluding amortization of intangible assets, share-based compensation, goodwill impairment and all associated taxes.

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. Fiscal fourth quarter financial performance was once again solid as our clients continued to validate WNS’ differentiated positioning in the BPM marketplace. Net revenue came in at $206.6 million, representing a year-over-year increase of 4% on a reported basis and 9% organic constant currency.

In the fourth quarter, WNS added eight new clients, expanded 24 existing relationships and renewed 17 contracts. Q4 adjusted operating margin came in at 21% and adjusted EPS grew 16% versus the fourth quarter of last year to $0.73 per share. Sanjay will discuss the details of our fourth quarter financial performance in his prepared remarks.

This morning, I would like to take a few minutes to review the highlights of our full year fiscal 2019 results before turning our attention to the business and financial outlook for fiscal 2020. Overall, I’m pleased with the financial and operational progress WNS made in fiscal 2019.

From a top line perspective, the company grew revenue less repair payments by 7% or 10% on a constant-currency basis. All of our growth in fiscal 2019 was organic. Revenue growth was broad-based and healthy across key verticals, service offerings and geographies, reflecting the overall strength of the BPM market.

During the year, we added 25 new clients with an average annual contract value that was 35% higher than last year. We also expanded 59 existing relationships, the largest number in WNS history.

This is a function of the strength of our expanded service offerings, cross-selling and up-selling opportunity within our customer base and the successful execution of our sales and delivery teams. In addition to our solid revenue performance, WNS also continue to deliver premium margins, profitability and cash flow.

In fiscal 2019, our adjusted operating margins expanded almost 200 basis points to 21%. As a result of this margin expansion, we were able to grow fiscal 2019 EPS by 20% to $2.69. In fiscal 2019, WNS bought back 1.1 million shares. And over the past 4 years, we have now repurchased a total of 5.5 million shares.

We ended the year with a net cash balance of $174 million or $3.34 per diluted share. Operationally, fiscal 2019 was also a good year for the company. We continued to invest for the future by enhancing capabilities in the areas of domain expertise, technology and automation and analytics.

One key component of our investment strategy is the hiring, training and rescaling of our global workforce to meet the evolving needs of our clients.

In fiscal 2019 or 18,000 of our employees or 49% of the global workforce received specialized training, including programs designed to deepen domain expertise, develop leadership skills as well as create a digital-ready workforce. Our investments are resonating well with not only clients and prospects, but also with the influencer community.

In fiscal 2019, WNS was recognized as an industry leader in the insurance, travel and utilities verticals and was cited for our capabilities in domain expertise, customer experience, analytics and business process transformation through RPA and AI.

As we head into fiscal 2020, we are excited about the opportunities in our addressable market despite macro uncertainty, including global slowdowns, Brexit and trade policy, the demand environment for BPM remains stable and healthy.

Business disruption continues to be the driving force behind outsourcing discussions with both new prospects and existing clients looking to strategic BPM partners to help transform their businesses and improve their competitive positioning.

Our approach to cocreating custom solutions, which combines WNS capabilities in domain, technology, analytics and process expertise with a strategic goal to the client, is resonating well in the marketplace.

We enter fiscal 2020 with 90% visibility to double-digit organic constant currency growth and a pipeline, which is broad-based, healthy and increasingly comprised of larger transformational deals. As a company, we continue to target industry-leading organic constant currency growth and operating margin as financial objectives.

We are also committed to leveraging our solid balance sheet with a disciplined, balanced, capital allocation program. This includes tuck-in acquisitions, share repurchases, ongoing capital expenditures and debt repayment. On the M&A front, tuck-in acquisitions remains a key strategic priority for the company.

We continue to look for assets, which fill gaps in our capabilities; have a healthy growth and profitability profile are strong cultural fits and are properly valued. Our pipeline for M&A is robust and we are evaluating multiple opportunities to enhance our positioning.

That being said, we will only do a deal if we feel it is the right asset at the right price. We believe that WNS’ track record of successful acquisitions and healthy returns on share repurchases speak to our best-in-class approach to capital deployment.

In summary, we believe WNS remains well positioned for success in a healthy and rapidly evolving BPM market.

Today, we are helping our clients reduce costs, increase operational efficiency and flexibility, ensure regulatory compliance, generate actionable insights, increase revenue sources, drive digital transformation and improve their end-customer experience.

The company is focused on investing to enhance our differentiated capabilities, executing on our core strategies and creating long-term sustainable business value for all our key stakeholders. I would now like to turn the call over to Sanjay Puria, our CFO, to further discuss our results and guidance.

Sanjay?.

Thank you, Keshav. With respect to our fourth quarter financials, net revenue came in at $206.6 million, up 4.2% from $198.2 million posted in the same quarter of last year, and up 9.1% on organic constant-currency basis.

By vertical, revenue growth was broad-based with the banking and financial services, Consulting and Professional Services, Insurance and Healthcare verticals each growing at least 10% year-over-year. With respect to our service offerings, revenue growth versus the prior year was driven by strength in industry-specific BPM and Finance & Accounting.

Sequentially, net revenue increased by 5.5% on a reported basis and 5% organic constant currency. Quarter-over-quarter, revenue performance was driven by solid growth with both new and existing clients and favorable currency and hedging. In the fourth quarter, WNS recorded approximately $0.5 million of short-term non-recurring revenue.

Adjusted operating margin in quarter four was 20.8% as compared to 20.4% reported in the same quarter of fiscal 2018 and 23% last quarter. On a year-over-year basis, adjusted operating margin increased as a result of currency movements, net of hedging; operating leverage on higher volumes; and improved productivity.

These benefits more than offset the impact of our annual rate increases. Sequentially, adjusted operating margin decreased as a result of unfavorable currency movement and hedging and lower productivity associated with quarter four hiring. These headwinds more than offset operating leverage on higher volumes.

The company’s net other income expense was $3.9 million in the fourth quarter, up from $2.4 million reported in quarter four of fiscal 2018 and up from $2.8 million last quarter.

Both year-over-year and quarter-over-quarter favorability was a result of higher interest income driven by higher cash balances and lower interest expense resulting from scheduled debt payments. WNS’ effective tax rate for quarter four came in at 19.3%, down from 23% last year and down from 20.7% last quarter.

Changes in the quarterly tax rate are primarily due to the mix of work delivered from tax incentive facilities and the mix of profits between geographies. For fiscal 2020, we expect our effective corporate tax rate to be in the 22% to 23% range.

The company’s adjusted net income for quarter four was $37.8 million compared with $33 million in the same quarter of fiscal 2018 and $38 million last quarter. Adjusted diluted earnings was $0.73 per share in quarter four versus $0.53 in the fourth quarter of last year and $0.73 last quarter. This represents growth in EPS of 15.9% year-over-year.

As of March 31, 2019, WNS balances in cash and investments totaled $235.8 million and the company had $61.4 million of debt. The company generated $44.9 million of cash from operating activities this quarter and free cash flow of $27.3 million after accounting for $7.7 million in capital expenditures.

DSO in the fourth quarter came in at 30 days as compared to 30 days last year and 32 days last quarter. With respect to other key operating metrics. Total headcount at the end of the quarter was 39,898, up over 1,000 people from last quarter.

Our attrition rate in the fourth quarter was 24% as compared to 21% reported in quarter four of last year, and 28% in the previous quarter. Global billed seat capacity at the end of the fourth quarter was 32,764 and average billed seat utilization was 1.21.

I would now like to provide you with a brief financial summary for fiscal 2019 before discussing our outlook for the coming year. Net revenue for the year came in at $794 million, growing 7.1% on a reported basis and 9.8% on an organic constant-currency basis.

Full year revenue growth was led by Shipping and Logistics, Insurance, Consulting and Professional Services, Healthcare and banking financial services verticals, which all grew over 10%. The company’s fiscal 2019 adjusted operating margin came in at 20.9%, up from 19% reported in fiscal 2018.

Margin improvement was driven by improved productivity, operating leverage on higher volumes and currency movements, net of hedging. Our effective tax rate was 20.8%, up from 19.9% last year largely as a result of the onetime impact of the 2017 U.S. Tax Reform Bill in fiscal 2018.

Full year adjusted net income rose 19% and adjusted diluted earnings per share rose 20% in fiscal 2019, reaching $140.4 million and $2.69, respectively. In fiscal 2019, WNS generated $149.7 million in cash from operations and 174 point – $117.4 million in free cash.

During the year, the company repurchased 1.1 million shares of stock at a cost of $56.4 million or $51.18 per share, spent $32.3 million on capital expenditures and made scheduled debt payment of $28.1 million. WNS ended the year with a net cash balance of $174.5 million or approximately $3.24 per diluted share.

In our press release issued earlier today, WNS provided our initial full year guidance for fiscal 2020. Based on the company’s current visibility levels, we expect net revenue to be in the range of $854 million to $900 million, representing year-over-year revenue growth of 8% to 13%. Revenue guidance assumes an average British pound to U.S.

dollar exchange rate of 1.31 for fiscal 2020. Excluding exchange rate impacts, revenue guidance represents constant currency growth of 7% to 13%, all of which is organic. We currently have 90% visibility to the midpoint of the revenue range, consistent with April guidance in prior year.

As in previous quarters, our guidance does not include a projection of any short-term nonrecurring revenue. Adjusted net income is expected to be in the range of $139 million to $151 million based on a INR 59 to a U.S. dollar exchange rate for fiscal 2020.

This implies adjusted EPS of $2.67 to $2.90, assuming a diluted share count of approximately 52.1 million shares. Our fiscal 2020 guidance also includes the – an offset of IFRS 16, which is applicable to WNS effective April 1, 2019.

IFRS 16 requires companies to treat leases over 12 months in duration as right of use assets and as a result, recognize depreciation of the asset and interest expense on the liability. This accounting change is expected to reduce our annual direct cost by approximately $11 million and increase our interest expense by $14.6 million.

IFRS 16 will increase our adjusted gross and operating margins by approximately 125 basis points but reduce our full year EPS by $0.05 per share. As a result of this change, we now expect our fiscal 2020 adjusted operating margin to be approximately 21%.

With respect to capital expenditures, WNS currently expects our requirement for fiscal 2020 to be up to $37 million. We’ll now open up the call for questions.

Operator?.

[Operator Instructions] Our first question comes from the line of Korey Marcello of Deutsche Bank. Your line is open..

Good morning. Thanks for taking my questions, guys. I think I heard you guys talk about the ACV being up 35% higher in fiscal 2019 than the prior year. Did I hear that right? And then how does that compare to that 26% that you guys mentioned last quarter? I believe you said it was new client additions.

So is that just due to new wins? Or maybe you can help us understand those two steps and the difference between them..

Sure. So Korey, the stat is actually the exact same stat. You have the number right. For the full year in fiscal 2019, we added 25 clients. The average contract value of those 25 clients was 35% higher than the 29 clients that we added in fiscal 2018.

So really what it is, is a metric to show that the size of the deals that we’re signing, the size of the new relationships that we’re adding are larger on the front end than they’ve been historically..

Got it. Okay. And then as we go into fiscal 2020, I don’t think I heard you guys talk about some of the typical headwinds that you typically face. And I think there was a 9% headwind kind of last year, so maybe it’s a little bit more favorable.

But maybe can you talk through that and maybe the quarterly cadence of the guidance for revenue growth going forward?.

So right now, for fiscal 2020, we expect a 7% headwind as compared to the 9% when we walked in the in the – last year. And this is typically 5% to 6% what we have as a regular headwind. And other 1% is the short-term projects, what we have.

And maybe another 1% is the non-recurring revenue, what we had last year, which has not been in our guidance for 2020..

Right. So we do walk in – you’re right, Korey, we do walk into the year with a – about a 2% headwind favorability relative to where we were at the same point of last year..

And how does that stack up in terms of like the quarterly cadence to the year? Is it front-half, back-half loaded? I know last year, we kind of went into it with a couple of different verticals in the back half expected to be weak.

So any color there maybe?.

Yes. Definitely front-half loaded, which is typically what we see. Again, if you look at the biggest component of that headwind, it’s the productivity commitments that we provide the clients. And as we’ve discussed in the past, our first quarter tends to be most impacted by those productivity improvements.

Hey, as an aside, I will also say from a quarterly cadence perspective, similar to what we’ve seen in the past, we do expect Q1 to be soft not only from a revenue perspective, but also from a margin perspective.

We have obviously the productivity commitments that affect the revenue line and the margin line, but we also have the impact of our annual wage increases, which affects us April 1. So seasonally, we do see Q1 as typically soft on the top line, soft on the bottom line.

And the expectation at least, at this point, generally, is for revenue to be relatively flattish Q4 to Q1..

Thanks, guys..

Thank you. Our next question comes from the line of Maggie Nolan of William Blair. Your line is open..

Hi. So I wanted to talk about your industry-specific revenues. So those have been turning up nicely over the last few years.

And as we see that business shift, maybe we can read into how do you expect your customer interaction service business to perform and change kind of as that shift takes place in your business but also as your client business has changed?.

Sure, Maggie. This is Keshav. I’ll address the early part of the question and have Gautam talk a little bit about the integration of CIS with the rest. But yes, your observation is absolutely right.

What we are seeing is that with the kind of impact that we have created in the marketplace around strong knowledge of this business domain first, along with our solutions on the automation as well as the analytics side, we’re actually seeing clients prefer to interact with WNS around some of these core solutions.

And they trust us in terms of the significant transformational kind of exercises that they are looking to undertake. And I spoke about some of these projects in the early part of my prepared remarks.

We’re actually seeing a very solid pipeline across all our core verticals, which is driven by trust, which is driven around the fact that customers believe that we are a very good company who understands their business and who have really helped them navigate the uncertainties around technology, around analytics, around finance and accounting, around robotics, integrating AI, ML, all of it.

And as we have made investments on some of our horizontal services, including the CIS area, we have continued to move the value of that offering to a very different level. As a result of which, we’re able to embed analytics into some of the core offerings that we provide to them.

So overall, I will say that we are really pleased with the way our strategy is being executed at this point in time and more importantly with the way that’s resonating with our client set.

Gautam, you want to add something on the CIS side?.

Yes. Thank you, Keshav. Just to add to what Keshav said, with our deep domain expertise, and as Keshav mentioned, I – embed analytics and digital solutions, what we’re starting to see is just on a standard customer experience perspective, it is moving to more of an end-to-end solution where the customer experience pieces just a cog in the wheel..

And I think you’re seeing some of that, Maggie. I think when you look at the financial metrics, what you’re seeing is not only increasing demand with these larger transformational deals on the front end for charging mechanisms, if you will, that are independent of traditional horizontals.

But you’re also seeing the migration of some of our legacy clients to more end-to-end types of solutions where the actual just stand-alone customer interaction services component is less important. So I think you’re kind of seeing a convergence of those two issues..

Okay. That’s great detail. And then that was a great stat that you all gave on the average contract value.

But you’ve been talking about large deals for a while now and if you kind of rewind the year, you had talked about a couple of large deals that you had signed at the end of the year that you expected to ramp nicely and heard you’ve been talked about potential of those deals becoming top 10, top five clients.

So can we kind of revisit the last year, how some of those larger deals ramped? Is there still an expectation that clients can be moving into the top 10 and top five? And how has that been playing out?.

Yes. Great question. So obviously, the two large deals that we talked about, for example, and spoke specifically about a year ago at this point, one in the shipping logistics space, one in the insurance space, have both been meaningful contributors in fiscal 2019.

Obviously, we saw the shipping and logistics client move extremely quickly to a set of solutions that drove very solid growth in the shipping and logistics space this year. I mean when you look at the revenue growth in Shipping and Logistics year-over-year, 47%. So it was a key component in helping drive that.

From the insurance perspective, we did talk about this having the potential to be a top five and even a potentially top three client, but this is a transformational journey. This is one that’s going to take three, four, five years to get to that kind of position.

It certainly was a meaningful contributor for us in fiscal 2019, but we also believe that there are three or four solid legs of growth going forward. And it’s actually moving along the path that we had anticipated..

And maybe just to specifically add, the shipping and logistic, what Dave mentioned, is already part of the top 10 during this year because of the massive growth, what we saw. And really on the insurance side, it’s a journey, what we expect in the next couple of years..

All right, guys. Thanks, everyone..

Thanks, Maggie..

Thank you. And our next question comes from the line of Joseph Foresi of Cantor Fitzgerald. Your line is open..

So typically, heading into the year, you have a specific amount of visibility on annual numbers, and you kind of walk us, I guess, up, those are my words, not yours, throughout the year as that visibility improves. So two questions on that one.

First, do you expect any specific differences this year versus other years in that methodology? And what are the deltas to the upside of FX and some of the nonrecurring stuff that you have to compensate for?.

So I think from a visibility perspective, it’s very consistent, as you mentioned, and what we already said in our prepared remarks. So we don’t see anything change over there. But definitely, as we mentioned that it does not include the nonrecurring revenue, what’s there in the last year’s number.

So definitely that may be a possibility from an upside perspective.

As well as how the year progresses based on some of the sales closures, early closure and the ramps for some of the large deals, what we have closed earlier as well as we expect to close this year, there’s a definitely possibility from an upside perspective and as well, the revenue range, which moves from 7% to 13% from a constant currency perspective..

I think just to add on to what Sanjay said, the approach is absolutely consistent with how we’ve guided in the past. The upside is going to come from accelerations in terms of ramp-ups and deal closures that we don’t have visibility to today, so it’s not included in the number.

Similarly, we don’t include the short-term revenues because we don’t have that visibility either. So those certainly present the two most visible paths to the high end of guidance. And to your point, Joe, we do have a track record over the last three years of beating the midpoint of revenue guidance from where we entered the year.

So certainly, consistent in terms of approach and optimistic that if things fall the right way, we have a great opportunity here to continue to accelerate our revenue growth..

Great. And then my follow-up, I think I’ll get this question out of the way, any commentary you might have around Brexit, its impact to your business? And I saw that Utilities was a little bit weaker, and I think most of the business is in the UK. So I wanted to ask around those two areas..

Yes. So Joe, Brexit, as I’ve mentioned before also is – other than the currency impact, has really not had much impact on our business. And we continue to see that as an opportunity actually to grow our business.

And who knows how this – potentially, people think that some decision is around the corner over the next few months, maybe it’ll even be solitary to our business. So at this point in time, all I can say is it not had a negative impact on our business.

What you saw on the utility side for this quarter is I think just a temporary kind of a situation based on – especially customer activity and some action that we are taking. But overall, I would say that other than the currency impact – our currency volatility impact, it’s just a nonevent for us..

Yes. And maybe just to add on the Utilities front, specifically, this was some of the known ramp downs what was – what we expected and then this caused the temporary phase..

Yes. The utilities ramp down had absolutely nothing to do with Brexit. And to Keshav’s point, I think we see the potential for more upside relative to Brexit than downside. We continue to see clients moving forward, and the feedback we’re getting is fairly consistent. We’re now three years into the announcement that the UK was going to exit the UN.

What clients are understanding is that if something does happen, it’s going to create a change in their processes, but the reality is they can’t continue to wait for that decision. They need to run their business, they need to transform their business, they need to be competitive.

So – and what we’re seeing is that the strategic approach to business is trumping the tactical side of what Brexit might mean in terms of process redesign..

Thank you..

Thank you. Our next question comes from the line of Mayank Tandon of Needham & Company. Your line is open..

Thank you. Good morning.

Keshav or Dave, can you comment on the RPA impact to your business at least in terms of are you partnering with the various vendors? Are you competing with them directly? How are these deals being structured? And maybe just two comments around what your win rate might be on these RPA-specific-type deals?.

Sure, Mayank. I’ll start the answer and again, we’ll have Gautam add on your color in terms of a specific operational impact as well as how it’s helping us with the sales process.

But really, the whole RPA game and the automation game, generally, from our perspective is something that is one more lever or one more tool that we use in order to grow our business with clients.

As we have said in the past as well, WNS has a very strong internal technology engine that has been created, a very strong team that goes across all the core areas that we spoke about earlier. And therefore, wherever there is IP that must be created in-house, we do that. And that is a strategic area for us.

In addition to that, we have very strong relationships with the software companies and very strong partnerships with many of their usual suspects. So from an RPA point of view, what we are doing is actually leveraging that whole area in order to make our processes, first of all, far more impactful from a client point of view.

And then also using the relationships we have with each one of these kind of partners in order to make sure that there is the return on client’s own technology investments continues to be very, very strong.

Overall, I would say that if you just look at how we have leveraged each of these models in order to get into a new client, for example, complete the technology transformation first, leveraging all of these models where there is RPA, retooling something, adding an ML and a human kind of component and then providing actionable insight to a client, all of it has actually been very positive for us.

Gautam, you want to add anything to that?.

Yes, Keshav. In terms of where we see RPA, it’s just a lever in terms of our digital transformation solution. And as we go through every deal, it is becoming an integral part of our solution that’s driving the business. And we partner with all the major RPA providers across-the-board.

Where we are seeing an increasing trend is rather than having a stand-alone RPA implementation happening, it’s becoming an integral part of end-to-end process redesign, which is why we are seeing an increasing demand across clients who are coming to us after having seen some of the stand-alone RPAs fail..

Yes. The reality is, Mayank, if you look at what’s going on, clients need help realizing the real value that RPA can bring to the table. And it’s only going to come from people who can manage the process, redesign the trends, the process transformation and leverage RPA that they’re actually going to get business value..

Great. That’s helpful color. And if I can squeeze one more in. Just around the attrition, we haven’t seen that level in quite some time. So if could you just provide some more color on why the attrition spiked.

And do you expect it to come down or do you expect it to remain elevated, just given some of the competition for talent out there?.

Yes. In terms of attrition rates, whilst we see a bit of a spike this quarter, but that’s also due to the seasonality and in terms of some of the solutionings that we do which drive increased productivity upfront.

But where we see – from where we stand at the moment, we’re extremely comfortable in terms of not having any impact to our business at all..

Yes. It’s going to bounce around a little bit, Mayank. But we’re comfortable running this business from an attrition perspective in the high 20s, low 30s and don’t believe that there’s going to be an impact.

As we’ve talked about in the past, the real issue, the real thing to watch is not necessarily the amount of attrition that you have in your organization but where that attrition is..

Yes. So I’ll just mention here, Mayank, that’s a great question. And from a WNS point of view, I’m extremely comfortable with the fact that at the appropriate levels across our core offering areas and the senior management team, attrition actually is at probably one of its lowest levels.

And actually, that is a very significant comment that I’m making..

Excellent. Thank you very much..

Thanks, Mayank..

Thank you. Our next question comes from the line of Edward Caso of Wells Fargo. Your line is open..

Hi. Good evening. Good morning.

Can you talk a little bit about pricing, particularly on some of these larger deals, both from over the life cycle of these contract relationships? And also, how much of it is sort of output-based or transaction processing based, so more variable in nature?.

Sure. Let me take a cut at that, Ed. I think we’ve seen a gradual trend in our business for clients as they get more and more comfortable in the scope of work that they do moving towards transaction and outcome-based models.

It’s typically something that happens only when the client is comfortable giving up control of those processes, which, based on the client-specific culture, background, history, can happen quickly or can happen over an extended period of time. We have different clients that are in very, very different phases of that kind of a transition.

But across the industry, we see this as a trend that’s not going to stop. The reality is clients are going to want to hold us accountable for results. Those results will come from having a variable model and results that come from the client only paying for the types of benefits that are tangible and quantifiable.

When you look at the pricing, for us, regardless of whether it’s an FTE-based model or a transaction-based model, the bottom line is the clients expect us to deliver productivity improvements.

And they can come in the sense of having fewer FTEs, delivering the same scope of services in an FTE model or the reduction in unit pricing or transaction pricing in a UTP or transaction pricing model. But we don’t see that changing.

That’s part of the value proposition that we provide to clients, and it’s not something that we see that will change in the near future. In terms of unit pricing, no changes in the marketplace..

Yes. And may I just add to that. Specifically, there are clients who are like first-time outsourcer, and they may start with a FTE-based model.

But we can see that the behavioral change from a client perspective that they are very comfortable now to add up a contractual clause that maybe a year or two years later, there’s a whole part of going from an FTE-based to a transaction-based or an outcome-based model..

My other question is around share repurchase, which, I guess, front-end loaded in the year that just ended.

Is there a goal to sort of just hit that 1.1 million shares every year or so? Are we sort restarting the clock again on share repurchase for the current year given the, I guess, the three-year authorization that you have?.

I think that’s correct, Ed. We got a three-year authorization for 3.3 million shares. We had to go to shareholders to get that approved, and they did so. The general plan is to buy back 1.1 million shares per year for three years, which will allow us to manage the impact that our overall share count of restricted stock is issued to employees.

It also allows us to add some dry powder in the event that the stock does get artificially soft and allow us to buy back shares in an accelerated rate similar to what we did in the year of Brexit when we bought back 2.2 million shares. So and Keshav mentioned that over the last four years, we bought back 5.5 million shares.

We bought back three – 1.1 million in three of those years and 2.2 million in the year of Brexit..

Thank you..

Thanks..

Thank you. Our next question comes from the line of Bryan Bergin of Cowen and Company. Your line is open..

Hi. This is actually Jared Levine on for Bryan. So in terms of the insurance industry vertical, can you describe what the constant currency growth was in the vertical during the quarter? It looks like there was 5% in USD.

And then, how do you see that growth proceeding there?.

In the quarter, if you look at the growth rate in the Insurance vertical, we actually – are talking sequentially or year-over-year? So year-over-year....

Year-over-year, please..

Yes. Year-over-year, Insurance grew 10%. So you’re probably looking at roughly 11% constant currency growth. On a year-over-year basis, the majority of our work in the Insurance verticals is in Australia and the UK And the British pound year-over-year for us was relatively flat at 1.31..

And was that for the full year or was that for the fourth quarter alone, that year-over-year rate?.

I’m sorry, that’s for the fourth quarter. For the full year, Insurance was up 13%, which will be closer to 15% constant currency..

All right. Perfect. And I just have one follow-up. In terms of your fiscal year 2020 guide, it looks like the USD range, 8% to 13%, but the constant currency range is 7% to 13%.

Is there any reason the top end of that is in 12%? Is that just maybe rounding or is something else you’re missing?.

It’s rounding. It’s just math. Yes..

Okay, perfect. Thank you..

Thank you. Our next question comes from the line of Dave Koning of Baird. Your line is open..

Yes. Hey, guys, a couple of questions. The first one – so Travel. Travel got a lot better this quarter. It was down low double digits last quarter and got back to growth again.

Maybe what was that, I guess, first of all?.

Yes. So I think as we’ve spoken about in the past, Dave, we, in fiscal Q3 always have a headwind in our Travel business. There’s a seasonality component to that business where at the end of the day, not a lot of people actually book their travels in the fourth quarter. The holiday travels tends to be booked in previous quarters.

So the reality is part of what you’re seeing sequentially from a Travel improvement is just the natural seasonalization. That being said, Travel did have a strong quarter, even over and above the typical headwinds..

Okay. Okay. It was just that. And then one interesting phenomenon, every group of clients is growing really well except for the small group from client number two through five. It was actually down I think 9% year-over-year. And if it wasn’t for that, your total business would have grown 4% faster.

So again, this isn’t a critique really because every group is growing so fast except for that little group.

And I’m just wondering, are there a couple of clients in there that are some one-off factor happening?.

There are a couple of clients where we did have some issues and we talked about those known headwinds walking into the year with a couple of larger clients. The other thing that you’ve got, David, you have to remember, is that while you’re comparing the concentration on the customer level, the customer names are not necessarily the same.

So we do have some shifting and some moving around between the clients in the top three, top five and even for us in the top one..

And is it possible to think of – is that something almost every year, there’s going to be a little of that sort of thing happening? Or can we almost look at it as an easy comp that could create some kind of nice acceleration in 2020?.

I don’t think so, Dave. I mean we know where a lot of the health of the acceleration in the growth was going be. Maggie asked earlier about the new large Insurance client. And that’s one that’s not going to show up in the top 10 in fiscal 2019, but clearly one that has the opportunity to get there in fiscal 2020.

So you are going to see the growth coming from all of these segments. The real question is, do you have some that are challenges. We know for the past several years of EBIT’s been a little bit of a headwind. We know for the past few years, we’ve had some of these nonrecurring issues where we’ve got known ramp downs.

I spoke a little bit earlier about a volume issue with one of our Utilities clients in the UK. So these are the kinds of things that can kind of move some of these names, if you will, around and kind of change how the specific buckets appear year-to-year. But overall, you’re right.

I think when you look at the opportunity – and we talked a lot about expansions this year, and that’s really where the short-term growth in our business comes from. It’s not the new clients. It’s the expansion of the existing ones.

And we feel really comfortable having 120 clients of at least $1 million walking out of this year and a nice diversification of those clients between $1 million and $5 million, $5 million and $10 million and those that are north of $10 million. So I think we’re in a good position if we do the right things and execute and don’t have any surprises..

Okay, great. Thanks. You guys just keep crushing it. Appreciate it..

Thanks, Dave..

Thank you. Our next question comes from the line of Vincent Colicchio of Barrington Research. Your line is open..

Yes. Keshav, what level should we assume for wage inflation? And maybe you can characterize that as compares to the year ago period.

And also, as part of my question, I guess, are there any particular areas that are spiking in a way that’s – that was unexpected by you?.

So from a wage inflation perspective, it’s the usual as we had last year. It’s a – has an 8% average. It’s get spread across over the year. But having said that, as part of the attrition, it gets backfilled. So the net impact for the year, which is pretty standard, is going to somewhere around 5% to 6%..

I think to Sanjay’s point, Vince, 8% inflation for the year, very similar to where we’ve been prior years. I think we have seen a trend over the last few years to where an increasing portion of that increase is allocated to specialized scales in the higher third of the delivery pyramid, if you will.

And that’s a function, obviously, of supply and demand at the lower end. But the reality is the overall numbers are similar and the impact to the P&L is similar..

Okay. That’s it for me. My other questions were asked. Thanks..

Thanks, Vince..

Thank you. Our next question comes from the line of Puneet Jain of JPMorgan. Your line is open..

Yes. Hi. Thanks for taking my question. So you talked about 700 basis points in impact from known headwinds this year. While that’s below last year’s 900 basis points, but still above what used to be normal level.

So is 700 a new normal for such adverse impact every year? Or should it return to normal of 500 or so?.

So 500 basis points was normal. But if you recall, the nonrecurring was not that – approximately 100 basis points, which was our bet earlier. If you have seen in the last maybe couple of years, that adds to the 100 basis point – additional to the 500 basis points. As we said that that’s not the biggest part of the guidance.

So maybe the new normal definitely can be around 600 basis point unless there is any other additional visibility from that particular number..

Got it.

So it’s more driven by how you guide rather than like the actual impact from automation or anything that’s driving higher impact?.

Absolutely..

Yes. It’s a function of visibility..

Understood. And then auto claims, I understand it’s super small business right now, but it appears to have deteriorated in second half of last year after it improved earlier in the year. And the high decline resulted in material impact on overall Q4 growth.

So can you talk about expectations from that business in fiscal 2020?.

So your observation is right from an auto claim perspective. If you recall, last year when we started with a large deal and that was excluding the auto claims component from that, that has helped us from a first half perspective. But there was again a – the ramp down from – which no one expected as part of the overall 9%, what we guided.

And that happened in the second half of the year from an auto claims’ perspective. Going forward, we still are opportunistic about this business. From the overall growth perspective, we are seeing some early pipeline as we move forward.

So we expect it to grow from there – where it is, but we’re still be opportunistic about because it’s become a very small portion of the overall revenue but still very relevant when we look at the overall from an insurance perspective..

Yes. I think that’s the key, Puneet. I think to Sanjay’s point, what’s most important and hopefully, what we see over time is that as we’re kind of less and less one-off transactions in the auto claims and more about auto claims as part of an overall solution for large Insurance clients, we should see more stability in that business.

So hopefully, a little bit less volatility, a little bit better opportunity, kind of run the business the right way, makes some good decisions and leverage the margins over time, but kind of still in the transition period away from the historical transactional one-off auto claims business towards selling auto claims as part and parcel to an end-to-end solution..

Got it. Thank you..

Thanks, Puneet..

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