Keshav Murugesh - Chief Executive Officer Sanjay Puria - Chief Financial Officer Gautam Bari - Chief Operating Officer David Mackey - Executive Vice President, Finance, Head of Investor Relations.

Good morning, and welcome to the WNS Holdings, Fiscal 2022 Second Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. After management’s prepared remarks, we will conduct a question-and-answer session and instructions for how to ask a question will follow at that time.

As a reminder, this call is being recorded for replay purposes. Now, I would like to turn the call over to David Mackey, WNS' Executive Vice President of Finance and Head of Investor Relations. David..

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. Good morning, everyone. Our fiscal second quarter results continue to highlight our differentiated positioning in the BPM marketplace and our solid execution. Net revenue for Q2 came in at $254.4 million, representing a year-over-year increase of 18.7% on a reported basis and 16.2% on constant currency.

Sequentially, net revenue increased by $18.1 million or 7.7% on a reported basis and 8.5% constant currency. In the second quarter the company added eight new logos and expanded 32 existing relationships. Hiring was once again strong in support of these contracts, with the company adding more than 2,500 employees during this quarter.

WNS posted strong adjusted operating margins of 21.8% and adjusted EPS grew 17.8% year-over-year. Sanjay will provide further details on our second quarter financial performance in his prepared remarks.

This quarter I wanted to take some time to discuss digital transformation in the BPM industry and how WMS has positioned itself to help clients leverage digital capabilities to better compete.

Last month we released the results of a joint survey conducted with Corinium, which polled 101 executives across industries to assess the stage of the digital transformation journeys they were going though.

The results clearly highlights that the COVID-19 pandemic has accelerated digital transformation trends across the front, middle and back office processes. Today, executives are looking to deploy the latest digital technologies to drive enhanced customer experience, streamline operations and improve decision making through data and analytics.

However, while 97% of the survey respondents claimed they have started working on their digital transformation strategies, most acknowledged that they are still early in this process, and that in many cases they lack the needed data governance and cyber security foundations to properly leverage technology and automation.

In addition, they also note that many of the technology capabilities required to accomplish their end goals like Intelligent Automation are still works in progress.

The survey reinforces precisely what MNS is seeing in our business today, that the pace of adoption for digital process transformation is accelerating and there is a massive opportunity in the coming years to help both new and existing clients with their transformation agendas.

As you are aware, WNS has been investing in digital transformation to continue building our portfolio of solutions to meet this trend.

Key investments include our core creation and innovation labs, specialized centers of excellence, industry specific digital offerings and perhaps most importantly the ongoing shift towards digital in our global workforce.

We are excited to announce that WNS has recently opened two new state-of-the-art co-creation and innovation labs in London and New York. These centers help us engage directly with our clients, while our collaborative leading edge digital focused workshops.

The labs which are being used virtually during the pandemic enable WNS to better understand our client's, key challenges, opportunities, threats and future requirements, so that we can co-create tailored solutions designed to solve critical business problems and also meet their digital transformation needs.

In addition to the innovation labs, WNS is also building functions specific centers of excellence or what we call COEs, which combine our industry expertise and best practices, the latest digital technologies and dedicated subject matter experts to create specialist teams that design and implement digital transformation solutions for our clients.

To-date we have rolled out nine of these knowledge hubs, including insurance claims, retail banking, healthcare, medical bill review, supply chain, cargo and collections and we plan to add an additional seven centers in the next 12 months.

The combination of our COEs, innovation labs and differentiated vertical structure is enhancing our ability to create industry specific digital accelerators and solutions.

These very unique offerings which are resonating well with both existing clients, as well as new prospects, allow companies to fast track their shift to digital with a ready to go solution. To-date we have created capabilities in key areas, including patient care management, insurance underwriting, customer experience and data management.

Many of these new offerings apply our disruptive domain driven, hyper automation strategy that accelerates the adoption and scaling of real end-to-end digital transformation to deliver a step change in business performance.

This advanced and future-ready solution brings together our industry, operations and agile expertise with a flexible and leading edge digital orchestration platform.

The overall solutions, harnesses the power of intelligence data processing, artificial intelligence, machine learning, robotics and APIs to deliver digital transformations for our clients, which in turn drives meaningful improvements in customer experience and business outcomes.

One final area of digital transformation investment I would like to discuss is our global workforce, as evidenced by the expansion of both our strategic hiring and talent management programs. Over the past few quarters we have continued to add both depth and breadth to our digital transformation teams.

We have created an experienced onshore digital transformation consulting and advisory team in all of our key markets, including North America, Europe and Asia Pacific. Client demand for these consultative capabilities is very high, and these teams are directly leading to new logo additions and relationship expansions.

WNS will continue to build this team over the next several quarters in order to meet the growing transformation opportunity and further strengthen our strategic client alignment and relationships.

We are also hiring key resources for our global digital transformation teams with a mix of highly specialized skills, including human based design, user experience, organizational change management, agile methodologies, cognitive or AI Intelligent Automation computer vision and data driven transformation.

The WNS transformation teams now cover all our verticals and horizontal units and we have experienced leaders in place working directly with clients to access solution, develop and drive this digital transformation. We're also investing in the res-killing and up-skilling our global workforce for the digital word.

The WNS education learning academy offers our employees the opportunity to become certified digital BPM professionals via both in-person, as well as virtual classroom format, designed to broaden the capabilities of our people and created digital ready workforce.

We have also created a digital futures trading program designed to help middle level and senior leaders build their digital acumen. This program is helping to improve discussions with clients regarding the strategic risks, opportunities and requirements.

Through our strategic investments in people, solutions and technology, we are proactively shifting the overall profile of WNS. These investments will continue to expand in order to help our clients transform and manage their businesses to compete in a digital world.

The good news is that our investments in digital transformation are resignation extremely well in this marketplace and are driving an expanded pipeline, healthy new logo addition and differentiated value for our existing and current clients.

Today WNS has more than 40 digital transformations underway with these clients, including 80% of our top 20 relationships. These transformation initiatives are across all our key verticals, geographies and service offerings.

Looking forward, we see an accelerating and expanding opportunities in the BPM space, driven by clients need to leverage technology, analytics and industry specific expertise to transform their own business models and compete in their respective industries.

While WNS is extremely well positioned to capitalize on this trend, we must continue to innovate, co-creator, invest and execute in order to deliver the business outcomes our clients require.

We believe this approach has enabled WNS to generate industry leading financial performance over the past several years and create sustainable value for all of our key stakeholders. I would now like to turn the call over to our CFO, Sanjay Puria to further discuss our results as well about outlook. Sanjay. .

Thank you, Keshav. In the fiscal second quarter WNS net revenue came in at $254.4 million, up 18.7% from $214.4 million posted in the same quarter of last year and up 16.2% on a constant currency basis. Sequentially, net revenue increased by 7.7% on a reported basis and 8.5% on constant currency.

Sequential revenue improvement was broad based across verticals, services and geographies and driven by new logs, the expansion of existing relationships and increased travel volumes. In addition, the company recorded $2.2 million of high margin, short term revenue during the quarter.

Adjusted operating margin in quarter two was 21.8% as compared to 23.4% reported in the same quarter of fiscal 2021 and 20.8% last quarter. Year-over-year, adjusted operating margin decreased as a result of employee based increases, the reinstatement of our corporate leave policy and the increased facility related and business continuity cost.

This headwind more than offset increased operating leverage on higher volumes and favorable currency movement net of hedging. Sequentially, margins improved as a result of operating leverage on increased volumes, high margin short term revenue and favorable currency movements net of hedging.

This benefit more than offset incremental wave increases provided in quarter two. The company’s net other income expense was $0.9 million of net expenses in the second quarter second quarter, as compared to $0.7 million of net expense reported in quarter two of fiscal 2021 and $0.5 million of net income last quarter.

Year-over-year the unfavorable variant is attributable to reduce interest income driven by lower rates which was partially offset by lower interest expense resulting from scheduled debt repayments. Sequentially the unfavorable variant is largely the result of $1.2 million of non-recurring interest income of tax refunds recorded in quarter one.

WNS effective tax rate for quarter two came in at 21%, down from 23.5% last year and down from 21.5% last quarter. Year-over-year the reduction in our effective tax rate is a result of geographical profit mix driven by COVID impact last year.

Sequentially, favorability in the mix of profits between geographies and the mix of work delivered from tax incentive facilities more than offset the one-time tax benefit of $0.8 million recorded in quarter one relating to the tax treatment of our liquid mutual funds.

The company's existing net income for quarter two was $43.1 million compared with $37.9 million in the same quarter of fiscal 2021 and $39 million last quarter. Adjusted diluted earnings were $0.86 per share in quarter two versus $0.73 in the second quarter of last year and $0.76 last quarter.

As of September 30, 2021, WNS balances in cash and investments totaled $332.2 million and the company had $8.4 million of debt. WNS generated $47.3 million of cash from operating activities this quarter and incurred $7.1 million in capital expenditures. During the quarter, the company also made scheduled debt payment of $8.4 million.

DSO in the second quarter came in at 31 days as compared to 34 days last year and 32 days last quarter.

With respect to other key operating metrics, total headcount at the end of the quarter was 49,511 and our attrition rate in the second quarter increased to 34%, up from 24% reported in quarter two of last year and up from 32% in the previous quarter.

Hiring in the quarter continued in support of new business ramps, and volume increases in travel which helped drive our sequential revenue growth. Base seat capacity at the end of the second quarter increased slightly to 35,134.

The seat utilization metrics which the company typically provides as a measure of infrastructure productivity, are not meaningful given we are currently operating at 83% work-from-home globally. In our press release issued earlier today, WNS provided our revised full year guidance for fiscal 2022.

Based on the company's current visibility levels, we expect net revenue to be in the range of $984 million to $1.16 billion, representing year-over-year growth of 13% to 17% on a reported basis and 11% to 15% on a constant currency. Revenue guidance assumes an average British pound to U.S. dollar exchange rate of 1.36 for the remainder of fiscal 2022.

Consistent with our guidance approach in previous years, we currently have 98% visibility to the midpoint of the range and our projections do not include any uncommitted short-term revenue or improvement in travel volumes beyond Q2 levees.

Full year adjusted net income for fiscal 2022 is expected to be in the range of $163 million to $171 million based on the INR 75 to U.S. dollar exchange rate for the remainder of fiscal 2022. This implies adjusted EPS of $3.18 to $3.34, assuming a diluted share count of approximately 51.2 million shares.

With respect to capital expenditures, WNS currently expects our requirement for fiscal 2022 to be up to $35 million. We’ll now open the call for questions. Operator. .

[Operator Instructions]. Our first question comes from Bryan Bergin with Cowen. Your line is open..

Hi! Thank you. I wanted to dig in a little bit around travel, so can you just comment on were committed volume levels stand across travel clients today versus the depths of COVID-19 or versus pre pandemic levels. And then any notable change in just travel client forecast, particularly as Tans Atlantic has reopened. .

Yes, in line with our earlier philosophy, our forecasts take into account the committed Q2 volumes as provided by our clients. The committed Q2 volumes have predominantly been serviced to the OTA clients and especially related to domestic travel.

What we do anticipate as the locked down ease in different regions of the world, as international leisure and international business travel starts picking up momentum and as airlines expand on that capacity, we do expect to see these volumes start increases.

But that directly related in terms of the way the lockdown start getting dealt with across different parts of the globe. .

And just to add a little color to that Bryan, you know we ran about $40 million in revenue in the travel vertical during Q2, which means we're still running roughly 7% below the pre pandemic levels.

However, I think it's important to understand that part of the growth in travel is related to not only the recovery of volumes, but also new logos that have been added during the past year, year and a half.

So when we look at travel today, we still think that we're probably somewhere around $5 million to $7 million a quarter, that’s left to recover in terms of lost volume and as Gautam mentioned, that’s primarily going to be in international travel and airlines related revenues. .

Okay, thank you, that's helpful. And then Keshav, just digging in around this onshore digital transformation consulting practice, can you give us a sense of into the scale that came in. Is this an area you expect to accelerate though M&A or are you primarily planning for organic development.

And then you mentioned proactively shifting the profiles of WNS, does that imply to commercial structure or maybe an impact on margin may look a bit different as you grow this. .

Sure Bryan, that's a great question. And yes, I think what we're doing at this point in time is to make sure that we are ahead of the curve in terms of the demand for some of these kinds of processes and some of these journeys that clients are looking to undertake over the next few years.

So what we have started with is making sure that over the past few years we've been investing significantly in terms of the labs. We spoke about new practices, new offerings, as well as bringing really high quality people into each of these offices.

Intent therefore really is first and foremost to make sure that we are front and center in front of our clients in terms of leading them, in terms of their digital journeys.

The second would obviously be also positioned, to position ourselves as a smart company that will use this to expand our portfolio of clients and move existing clients down these kinds of journeys.

Now, in terms of your other question, all options are really open and obviously we will invest organically in this area significantly, but at the same time we are all the time looking you know for – very actively for any tuck-in kind of assets or any other, M&A kind of assets that’s can be brought, that can enhance our capability here.

So you know all options are open at this point in time. .

Okay. Thank you. .

Thank you. Our next question comes from Mayank Tandon with Needham. Your line is open. .

Thank you. Congrats on the quarter. Keshav, you did touch on some of the supply side issues in terms of retention and hiring. But I was just curious, given that we're hearing this in the market from the IT services companies around digital talent.

How are you addressing the ability to one, recruit, retain and then of course the subsequent waste pressures. How is that impacting your ability to grow, and does that present a gating factor to growth in the out quarters if the resource contained environment continues to impact the industry. .

Yeah, again great question Mayank and first and foremost let me equivocally [ph] say that there is no impact in terms of our potential to grow from this issue that a lot of our peers are talking about a lot.

Now, first and foremost I think the first thing I want to mention is there is definitely a great difference between the traditional IT players and the BPM players in all the areas. For us the attrition is really not in every issue and of course in the areas where we have overlap with them, we also have the same issues.

But because of the fact that our business is so diversified across the verticals, geographies and processes, our focus really in terms of attrition, really is on the high demand areas, finance and accounting, digital, tech, a few of those things. And I can tell you as a smart company we have done lots of very interesting things within the company.

First and foremost to position ourselves as a company where – which is a talent magnet first and foremost. I mean everyone wants to join a company that is growing faster than the market and is creating huge opportunities for them, that's one.

The second beyond that is a company where they can experience new things and participate in the long term growth story of this company. And the third is from a hygiene point of view, we are continuously taking a number of steps to ensure that we are also to attract, deploy and retain this talent.

And for us it's very important to keep retaining this talent, essentially because as you hire new people, you end up paying – you end up with inflation in terms of those salaries. I think our experience till now has been solid based on all the proactive measures that we have got to play. .

And maybe you know Mayank, I’ll just add over there. There is no challenge from a supply side perspective.

You will see from the last two quarters we have almost added more than 5500 talent in the organization and I think what Keshav was alluding is more around some of the new skills, and again, no challenge from supply, but yes, they are just some bit of expenses at this stage. .

That’s very helpfulness. As a quick follow-up, and sorry if missed this. In terms of the project revenue and margins in the back half of the year, should we expect a pretty even trajectory over the third and fourth quarters or will it be skewed towards one quarter in terms of growth and margins to hit your full year number. .

So you know from a back half perspective, at this stage based on the visibility of what we have and specifically it is at a 98% which is very consistent, it is right now you know two flat quarters at this stage. And probably you know we have not factored any un-submitted revenue, which are the short term revenue.

Generally we see as we progress during the quarter, as well as also not factored any growth, the travel volumes beyond quarter two what we have.

Because you know our clients still are very conservative from giving any forecast, because in earlier quarters if you – in you remember we mentioned, that you know once they give the forecast you know 90% we are committed to it.

So they are very conservative at this stage, and also they have got some know ramp downs in the second half which was already baked into our guidance earlier based on some of the committed productivity on the contact renewals what we had earlier, as well as we don’t repeat.

We took a business decision for one of our client in South Africa, not to pursue further because it was more of a moderate process and so you don’t – we just walked away from that. So based on that it seems to be a flat quarter at this stage, but there is a potential of an upside over there as we get better visibility.

On the margin front, right now at this stage, you know the back half is in the range of 21% to 22%. Again, because of the increased employee cost which Keshav spoke about, no short term revenue.

Some of the increase in the facility cost, as well as you know some of the business continuity costs, as people and the talent may come back to the office, currently we’re at 17% and that we anticipate and assume – that will increase as acceleration of our digital investment program. So that will be around 21% to 22%. .

Got it. That’s very helpful. Thanks you so much for taking my questions. Congrats on the quarter. .

Thank you, Mayank..

Thank you. Our next question comes from Moshe Katri with Wedbush Securities. Your line is open. .

Hey thanks! Very strong numbers. Congrats! Two questions, first talk about wage count increases during the quarter.

Can you remind us how the cycle works at the WNS, one that you typically provide these wage comps during the year? Is there anything different in terms of wage comp increases this year versus what we've seen in the past and then I don't know if I heard a lot about bookings in general, but is there a way to kind of break it down between renewals and new logos.

Thanks. .

Yes, so in terms of our wage increase strategy, more predominantly a larger chunk of our associates have their wage increase happening around the month of April, but we follow a yearly cycle.

So what ends up happening is the remainder of the folks who are not, who do not have their wage increases following in the month of April, based on the anniversary cycle they got though a quarterly kind of wage increase. .

And just to add a little bit of color to that Moshe. We have – as Gautam said, we typically provide that the bulk of our wage increase is April 1, which is why we’ve historically had very soft margins in the first quarter.

What is unique at this point in time, and both Sanjay and Keshav alluded to it is the fact that we have provided for additional compensation increases as a result of the current environment that we're operating in.

So there is some incremental wage pressure to kind of our normal cycles if you will in this given year and that's really just a function of trying to manage attrition, trying to make sure that we've got key resources in the right places to service our clients.

Like Keshav mentioned, we don't think we have a supply issue, but we do have a little bit of a cost issue and that's part of the reason that we've got muted margin expectations for the second half of the year. .

And the booking mix?.

Yeah, look I think we're obviously pretty happy with how we progressed here again. 15 new logos through the first half of the year, a significant acceleration in terms of the number of relationship expansions that we posted.

I mean this quarter we did 32; I believe in the first quarter we did 17, so 49 through the first half of the year, which is pretty solid for us.

Typically Moshe when we look at our business at the end of the day, we're going to end up with somewhere between 2% and 4% of our revenue in a given year coming from new logos, and I don't think this year is going to be any different than that kind of a profile. .

And just if I may, just a follow-up, another follow-up. You indicated a couple of quarters ago that while building your pipeline of new business you got a couple of new logs from the travel and hospitality vertical.

Can you kind of give us an update on how these have been proceeding in terms of ramping?.

Yes, they have been ramping up. Couple of – both of them are strong OTAs and they have been proceeding as per plan. That’s where we had anticipated these ramp-ups to come in a bit higher and advanced during Q1 and they have gone live as per plans.

And we expect that as volumes start recovering over the next couple of quarters, we should start getting a lot more ramp from these sort of clients. .

And that’s part of the reason Moshe, when we spoke a little bit earlier about the travel vertical, when we look at the progress that we've made in terms of getting back to that $40 million a quarter level, some of that is the recovery of volumes that were lost during COVID, but as Gautam mentioned, some of this are the new logos that have been brought on and are helping contribute to the solid sequential acceleration that we’ve seen in the inner travel revenues.

.

Great! Thanks for the color. .

Thanks..

Our next question comes from Maggie Nolan with William Blair. Your line is open..

Thank you. I wanted to dig in on the 32 client relationships that you expand. This does feel like a step up, and Dave you alluded to how much of this compares to the last quarter.

Is there a reason behind that, why you saw such an acceleration and net expansion next quarter? Is there any inflection point here that we should be paying attention to?.

Maggie, I never really kind of gave a ton of credence to any one quarter, right. I mean we have some quarters where we had a dozen new logo's and then some where we had two or three.

I do believe though when you look at the first half of the year, and as I mentioned the fact that we've added 49 new – we’ve expanded 49 relationships versus a total of 71 last year, it means that we're tracking for better expansions, and I think this is a function of the farming organization. I also think it's a function of digital transformation.

It’s the fact that we are able to help clients do things now that they weren't doing two years ago, three years ago, allows us to get into new areas, right. It allows us to do things within our existing customer base to help them become more competitive.

So you know we talk a lot about digital transformation and how it creates certain headwinds from a productivity perspective, but the flipside to that is, and we’ve been speaking about it for a while. The flip side to that is it does expand our addressable market.

What technology and transformation allows us to do is get into areas that previously clients weren't willing to look at outsourcing, and I think that some of what you're seeing here in terms of the expansion profile. .

Okay, that makes sense. And then how is the acquisition pipeline looking? It looks like maybe you might have spent some cash on an asset this quarter as well based on the cash flow. [Cross Talk].

Sorry Sanjay. So let me start by saying that David was absolutely right. I think the adoption of the model for us has been extremely strong and digital transformation is definitely making a huge difference for clients and prospects.

We're also seeing the model shift and the validation of the work-from-home and the hybrid models now tested and proved and therefore a lot of prospects now wanting to climb on the bandwagon, so all of this is actually resonating very well from a pipeline point of view.

Now from our point of view therefore it means, how are we continuously investing in terms of you know ensuring and enabling those capabilities that clients are looking for or leading them with new capabilities.

Now some of these can actually be built in house, a lot of it is being done, and some of it will – you know actually have to work on this make versus build versus buy kind of decision. And that’s where I’m afraid that our M&A pipeline has been extremely strong.

In fact lots of very interesting discussions going across very key areas from our point of view. But having said that, you know from our point of view, we will do whatever we need to do at the right time based on our usual philosophy that I’ve explained before.

And during this quarter we did something very interesting, which I’ll ask Sanjay to talk a little bit about. But again, that expands capability for us which we can now take across many other clients. .

Yeah, so you know, because Keshav mentioned it, definitely the pipeline is pretty much healthy and we are posting a lot deals in various capabilities, what exactly we are looking for, which will help us to accelerate the growth, including some of the, the new processes from some of our existing clients, what we have done, which have accelerated our growth and one of the things what we did in the shipping and logistics area which has expanded the new processes, including getting almost, adding almost more than 1000 headcounts over there.

So that adds a capability in the entire domain specific shipping and logistics capability and area. And such kind of deals, as well as the more acquisition plans what we are having. But as said, it’s the matter of the right asset and the right valuation at the right time. .

And just to clarify a little bit, just so you understand. That acquisition value that you saw in the cash flow statement and the just under $2 million that was showing up, that relates to what Sanjay was mentioning here, which was taking over a processes from one of our large existing clients.

This actually would fall more into the category as a captive carve-out in a real acquisition.

So we have kind of talked about the different ways we were looking at expanding our capabilities and some of it was kind of the traditional M&A routs, but some of it also was increased opportunities in the captive units of our existing clients who are looking for not only people to take it over, but to take it over and prove it and help them provide the kind of transformation that they are looking for going forward, and that’s exactly what this deal was.

.

Okay. Thank you..

Thank you. Our next question comes from Ashwin Shirvaikar with Citi. Your line is open..

Hey thanks! Good quarter guys. My question is with regards to a comment that you had, that 80% of your top clients you are already working with on digital pursuit and so on and so forth.

And I wanted to delve into that a bit more to kind of figure out what are the others doing; is just a matter of time? Obviously you’ve been pivoting towards more and more digital for some time, but from a sales perspective and relationship management perspective, do you have the full set of capabilities today? How is that evolving? Could you kind of give us an update?.

Yes, great question Ashwin. So from our perspective, application was alluded, over the past few years we have been consistently investing across our digital capabilities, whether it is the transformational experts, the domain based transformational experts across our analytics expertise, AIML and also people with strong API and low codes skills.

All of that put together, along with the domain expertise and the number of the verticals that we have has enabled us to deal with clients as they have started maturing and aggressively wanting to adopt digital transformation. So my view is it’s not just the 16 of the top 20. The others also are going to start following suite quite quickly.

It just depends in terms of where the industry is currently in terms of their impact due to COVID and as they start emerging from that particular area, they are going to start adopting this more aggressively.

What it has also enabled us to do is expand as David alluded, our relationship and our strength of engagement with each one of these clients and grow them beyond where they used to be pre-COVID levels. So that’s helping us strongly. .

Well look, I think Ashwin when we look at the consultants of capabilities that we’ve added from a digital perspective, what we’re actually doing is helping lead our clients, right.

Helping them understand not only kind of where they are today, but where they should be going and leveraging not only that transformational consultant of capability, but also the knowledge that we have from having worked with several other clients in their respective verticals to understand and bring that understanding of kind of where they industry is headed as well.

So I think what you see from a visibility perspective, obviously having 80% of the top 20 currently in some form of digital transformation journey makes a lot of sense, right.

These are very large relationships where we do a lot of work with them, but it's also important that with – you know Keshav mentioned that we've got 40 plus of these underway at this point in time. So there's another 24 client beyond the top 20 where we've got ongoing transformation activities going on with existing customer.

The other thing is, it’s important to understand when you look at the pipeline and you look at the new opportunities that are out there, digital is pervasive in every single one of them. So you're not seeing labor arbitrage deals showing up in the pipeline anymore.

Clients want to take that step to go from doing work in the house to being digitally transformed day one. They don't want to have to go through a traditional outsourcing process in between. So we are its digital across everything. .

Yeah Ashwin, Keshav. I just got to finish up there, because I’m quite excited with your question and all these answers. But I think WNS is no more just being seen as a company that really saved money.

Not just a safe pair of hands, not just a cost play, but frankly a partner that has invested ahead of the curve and is now transforming how clients will do business in the future.

Now so we are very excited about the pipeline, we are very excited about the agenda of our clients and prospects, but I can tell there are many of them who are still not ready for this, right.

And with the kind of investments we have made, particularly the digital ready talent at the front end, the co-creation labs that have been placed at the disposal for them to come and visit, as well as services that actually involved digital transformation.

The ability for us to now leave these clients in terms of how they should present themselves to their end customers in the future is the new magic that is happening and I think that's what's really exciting for us for the long term. .

Got it. My next question might actually tie into the answer that you already gave Keshav. Because as I was looking at it through the metrics, I sort of noticed that U.S. dollar clients have or U.S. dollar percentages have sort of jumped almost towards kind of 50%. I am kind of thinking, is that because U.S.

clients are leading the recovery or there is a more of a travel component that’s making a comeback and we should then see rest of the world follow or is that just some of timing cork that we are seeing?.

Yes Ashwin, you are spot on. The U.S. is leading the recovery in terms of increased adoption of digital and moving down to parts of outsourcing services, we are starting to see strong tractions emerge out of Europe followed by rest of world. So I think it’s just a matter of time, while the rest of the region starts catching up. But yes, U.S.

is leading the way at the moment. .

And maybe Ashwin, I’ll just add that also you are right. You know it’s also from a travel recovery perspective. So completely from the U.S. where you know Gautam did allude about one of the, couple of the OTA clients in North America where the recovery is happening, so that is also leading towards the U.S. dollar increase. .

Well, that being said, while it’s great to see and we see the percentages shifting, I think the other thing that's important to remember is that all the other geographies with the exception of one continue to grow, right. So obviously the U.S. is leading. If you look at the U.S.

through, in the quarter up 24% year-over-year, which is great and it’s clearly important, right. But Europe is up 13%, the UK is up 15%. So it’s not just the U.S., it’s just that the U.S. growth is somewhat outsized compared to the other geographies. .

Thank you. Two questions and six answers, I should stop while I’m ahead. Thanks. .

Thanks Ashwin.

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

Hey! Thanks for taking my question and great quarter guys. .

Thanks Puneet. .

Keshav, are you actively looking at portfolio management and the services you provide to your clients.

You talked about transformations, setting up offices in London, New York, getting out of a South Africa based client, so – and second as you focus on providing those transformation services, what is it that WNS brings to the table over traditional consulting firms back many of those clients might have been using for similar services in the past. .

Thanks Puneet, this is Gautam. So in terms of the strength that we bring in comparison to a number of the consulting firms, is our depth of domain in specific areas of the industry. So – and this is billing directionally to the operational debt that exists.

So when it comes to give you an example, you take clams in an insurance industry, where we have some of the market leaders in terms of PNC claims across the broad.

What we are able to do is take the industry best practices, use our domain expertise, our analytics knowledge and our extensive benchmarking that we do to adopt what is best in breed and help lead the clients, which actually takes it beyond the traditional OpEx savings and leads to savings such as cost around cost ratios, which directly impact the balance sheet at the end of the day.

If you take an example, another example being on our healthcare side of the business, that the changing regulations that are underway in the U.S.

with regards to patient care management, including turnaround times, etc., our strong digital suite of products, what they end up doing is allow patient care to be done appropriately whilst at the same time meeting the regulatory requirements, which directly have an impact on the company’s new sales additions of patients or members.

So it’s a domain depth, along with what we have built over the last few years that makes it extremely unique. .

And Puneet, I think the core difference between the traditional consulting firms and us is, we don’t just tell, we deliver. We actually execute and deliver ROI to our clients. I think that’s a huge difference and clients are lapping it up. .

And then to the first part of your question Puneet, which is on kind of the portfolio management side, you know two different things embedded in there, right.

One is, when you look at transformation capabilities and services and look at the potential for M&A and then strategy on those levels and the other areas of investments, these are clearly about capabilities, right.

About making sure that we've got the right services and solutions to support not only where our clients are today, but where our client are headed. The conversation about the South African client that we’ve decided not to pursue moving forward is a completely different decision.

That was more a business decision around a specific piece of business, with a specific client, and the client’s view is to how that business needed to proceed. So clearly we were misaligned in terms of our objectives with their objectives on this one piece of work.

The good news is we continue to maintain that client as a client, we continue to do high value work for them. So it was just something that seemed to work well for both of us. They wanted to go in a different direction for that one piece of work and we didn't want to provide the work in that type of a model. .

Got you. It makes sense. And did you size the impact you expect on second half from South Africa based client, and also if you can comment on pricing environment. Thank you. .

Yeah, so you know from a South Africa based client, specifically, I think the second half impact will be around maybe $7 million to $8 million at this stage. Because as you said, we decided for the communized process, we are not going to go ahead. But at the same time we are continuing with the high value, the services for that client.

So the client is still there and that’s where our focus is. .

And can you comment on overall pricing environment for your services.

Has there been any?.

Overall the pricing environment remains stable and healthy. You know all of our clients are looking for transformation. They are looking for things to be more productive, they are looking for things to better position, but from a pricing perspective, no change. .

Got you. Thank you. .

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

Yes, so you are experiencing a faster ramp of large contracts.

Any change there?.

No, no change from that perspective. We continue to have all transitions starting off as per the pre-determined dates that we have agreed upon. And a number of the clients that we are seeing, the transition happening in a multiple ways, and the pace of which is starting to increase over the last couple of months. .

The reality is Vince, even for these very large transformational kinds of deals, it’s still going to be done in a phased approach. It needs to be done that way from a risk mitigation perspective.

So the reality is you know even if the scope of a deal is to more 60 processes over the next three four years, you are going to see five to 10 move in phase one and once they have been transitioned and stabilize we’ll move to phase two. So that’s not going to change.

Our business can’t be done in parallel from that perspective; it needs to be down serially. .

On our travel and leisure side, it sounds like the demand is broad based. But I’m curious, are some of your larger clients, largely driving the improvement. .

Yeah, I think as Gautam mentioned, it’s been driven largely by our U.S. based OTA clients that have driven the bulk of the recovery, right, which makes perfect sense in terms of the alignment with what the travel industry is seeing.

You know for us the airline, the European OTA’s, the agency, these businesses have not fully recovered and this is what presents the opportunity over the next two, three, four quarters for us and their business firms up, because we have not included a pick-up in those business and for those specific clients either in the back half of this year going forward.

But we certainly believe that will happen over time as the counties specific kind of rules and regulations if you will about COVID and then entry start to ease. So as long as the pandemic continues to ease globally, we are going to see this business start to pick up and come back and this certainly presents an opportunity for us going forward. .

And what verticals should grow fastest in the second half sequentially?.

I think you're going to continue to see strength in travel, I think you're going to continue to strengthen in shipping and logistics. These would be the two focus areas that I would look at. There are also the businesses that are least exposed to some of the known ramp downs that we discussed as well. .

Thanks for answering my questions. .

Thanks Vince. .

[End of Q&A]:.

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