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Edited Transcript of WNS earnings conference call or presentation 27-Apr-17 12:00pm GMT

Thomson Reuters StreetEvents

Q4 2017 WNS (Holdings) Ltd Earnings Call

Mumbai May 3, 2017 (Thomson StreetEvents) -- Edited Transcript of WNS (Holdings) Ltd earnings conference call or presentation Thursday, April 27, 2017 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David Mackey

WNS (Holdings) Ltd. - Head of IR and SVP of Finance

* Keshav R. Murugesh

WNS (Holdings) Ltd. - Group CEO and Director

* Sanjay Puria

WNS (Holdings) Ltd. - Group CFO

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Conference Call Participants

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* Anil Kumar Doradla

William Blair & Company L.L.C., Research Division - Analyst

* Ashwin Vassant Shirvaikar

Citigroup Inc, Research Division - Director and U.S. Computer and Business Services Analyst

* Brian Kinstlinger

Maxim Group LLC, Research Division - SVP and Senior Information Technology Services Analyst

* Bryan C. Bergin

Cowen and Company, LLC, Research Division - VP

* Edward Stephen Caso

Wells Fargo Securities, LLC, Research Division - MD and Senior Analyst

* Francis Carl Atkins

SunTrust Robinson Humphrey, Inc., Research Division - Associate

* Joseph Anthony Vafi

Loop Capital Markets LLC, Research Division - Analyst

* Joseph Dean Foresi

Cantor Fitzgerald & Co., Research Division - Analyst

* Mayank Tandon

Needham & Company, LLC, Research Division - Senior Analyst of IT Services of Financial Technology

* Puneet Jain

JP Morgan Chase & Co, Research Division - Computer Services and IT Consulting Analyst

* Vincent Alexander Colicchio

Barrington Research Associates, Inc., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to the WNS (Holdings) Fiscal 2017 Fourth Quarter and Full Year Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Mr. David Mackey, WNS' Corporate Senior Vice President of Finance and Head of Investor Relations. David?

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [2]

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Thank you, and welcome to our Fiscal 2017 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 COO, Ron Gillette. 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, 2017. 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, 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.

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [3]

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Thank you, David, and good morning, everyone. In the fiscal fourth quarter, WNS posted solid financial results and continued to make progress in positioning the company for long-term success.

Q4 net revenue came in at $154.1 million, an increase of 13.9% versus last year on a reported basis and 19.1% constant currency. Sequentially, revenues were up 10.2% on a reported basis and 9.9% constant currency. Excluding our acquisitions of Value Edge, Denali and HealthHelp, organic constant currency revenue increased 13.9% year-over-year and 6.2% sequentially.

In the fourth quarter, WNS added 36 new clients, including acquisitions, expanded 10 existing relationships and renewed 14 contracts. Adjusted operating margin and adjusted net income margin, which were impacted by acquisition costs of approximately $2 million, came in at 18.1% and 15.6%, respectively.

During the fourth quarter, we closed 2 strategic acquisitions designed to address capability gaps in our horizontal and vertical service offerings. In January, we finalized our acquisition of Denali Sourcing Services, a leading provider of strategic BPM procurement solutions. The acquisition of Denali is highly complementary to WNS' existing capabilities and enables us to get to market end-to-end Source-to-Pay procurement solutions and a strengthened finance and accounting solution set.

Integration is going well, and we have already been successful in expanding Denali's revenues.

In March, we announced the acquisition of HealthHelp, an industry leader in care management. We believe this asset is an excellent fit for our BPM approach, as it addresses 3 key focus areas for WNS. First, HealthHelp positions WNS as a strategic player in the care management BPM space and the health care vertical. HealthHelp's solutions are focused at the very top end of a payer's environment, addressing high-value clinical business, processes including population health management and health care utilization.

At the core of HealthHelp's solutions is deep domain expertise that the team is largely comprised of industry experts, including MDs, PhDs and registered nurses. The company's collaborative nondenial model is truly differentiated in the marketplace and drives long-term sustainable cost savings for the health care industry, while helping to improve patient outcomes.

Second, HealthHelp's solutions are delivered with a combination of proprietary technology and predictive analytics. Over 70% of HealthHelp's current assessments are handled automatically with a scalable clinical decision support platform called Consult. The technology leverages predictive analytics, which evaluate and drive further health care improvement opportunities.

Third, this asset meets our key financial objectives, including strong growth, healthy margins, significant cross-selling opportunities and a recurring revenue model.

I would now like to provide you with a brief recap of our fiscal 2017 performance and then discuss the 2018 outlook. From both the financial and operational perspective, we are pleased with the progress we made in 2017. WNS was able to post full year growth of 8.9% or 15.8% on a constant-currency basis. Organic constant currency revenue growth was a robust 14%, and our adjusting operating margins finished the year at 19.4%. We believe both of these metrics are among the highest in the BPM industry. We also repurchased 2.2 million shares of stock in fiscal 2017, representing approximately 4% of the shares outstanding.

During the year, we continued to invest in creating differentiation in the marketplace and positioned the company for long-term success. WNS rolled out several new capabilities and offerings during the year, addressing key areas, such as domain expertise, analytics, technology, digital solutions and employee training.

Examples include: SocioSEER, a social media analytics platform which combines machine learning and domain expertise to help companies manage brand health, customer-centricity and revenue retention;

DecisionPoint is a second offering, a thought leadership platform designed to provide C-suite executives with data-driven perspectives on current and emerging business trends; Brandttitude, a cloud-based business intelligence analytics platform that tracks brand performance, understands customer behavior and perceptions and identifies buying patterns; and WNS TRAC, our consolidated suite of comprehensive next-generation technology solutions for managing complex business processes across industries. TRAC leverages domain expertise, embedded analytics, in-depth process knowledge and cutting-edge technology to create end-to-end offerings.

WNS also accelerated employee-training efforts, expanding our analytics MBA program and strengthening our domain universities to ensure our teams are prepared for the future of BPM.

In addition to these investments, the company completed 3 tuck-in acquisitions during fiscal 2017, adding Value Edge, Denali and HealthHelp to the WNS family. These assets help WNS to address capability gaps in the areas of pharma analytics, strategic procurement and technology-enabled health care, respectively.

We've also expanded our strategic partnership programs to augment our internal capabilities, including technologies such as RPA. WNS has formalized relationships with Blue Prism, Automation Anywhere and Fusion, and we are currently in advanced discussions with several other product tool and platform companies.

During the year, we received several awards from the analyst and adviser community, highlighting our favorable positioning in key verticals at services including insurance, health care, finance and accounting, procurement, analytics, technology and digital services. WNS was also recognized as a leader in quality, innovation, learning and development and corporate social responsibility.

In addition, we announced several large deal wins with a potential to become top 10 accounts over the next few years and continued to make progress, improving the productivity of both our hunting and farming sales teams.

It is clear that our investments in technology, analytics and domain expertise are paying off and helping us generate solid revenue growth. As we enter fiscal 2018, our business momentum, included the deal pipeline, contract signings and new project ramps, remains broad-based and healthy.

To-date, we have not seen Brexit or potential U.S. policy changes meaningfully impact our existing business or client decision-making. While we must remain vigilant regarding behavior -- regarding changes in behavior -- pardon me, we remain comfortable that the value we create for our clients will continue to drive business opportunities.

The BPM industry is rapidly evolving as client requirements change. For WNS, this will necessitate continued investment in our business with an emphasis on domain specialization, automation and technology, digital solutions and advanced analytics. Successful BPM companies will only -- will not only have these capabilities but be able to combine them to provide clients with real solutions to real business problems. Increasingly, our clients will require that their processes to be delivered with components of automation. While this has the potential to reduce requirements for some lower-level labor-based functions in the coming years, we believe this trend creates a longer-term opportunity to move up the value chain with our clients.

As our clients' willingness embrace technology-enabled solutions and outcome-based models increases, WNS will be able to drive higher margins, make our relationships more resilient and generate more tangible value for our clients.

In our press release issued earlier today, WNS provided our initial guidance for fiscal 2018. We currently expect revenue to be in the range of $680 million to $713 million, representing top line growth of 18% to 23%. Excluding the impacts of currency and hedging, guidance reflects constant currency revenue growth of 19% to 25%. Visibility to the midpoint of revenue is 90%, consistent with April guidance in previous years. Adjusted net income for fiscal 2018 is expected to be in the range of $97 million to $105 million or $1.88 to $2.04 per adjusted diluted share.

In summary, we believe WNS has been executing well on our strategic plans, and as a result, is well positioned for success in the BPM marketplace. We will continue to target industry-leading financial performance and generate increased value for all of 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?

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Sanjay Puria, WNS (Holdings) Ltd. - Group CFO [4]

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Thank you, Keshav. With respect to our fourth quarter financials, net revenue came in at $154.1 million, up 13.9% from $135.3 million posted in the same quarter of last year and up 19.1% on a constant-currency basis.

Organic constant currency revenues grew 13.9%, with acquisitions contributing $6.6 million. Year-over-year, fourth quarter revenue was pressured by a 14% depreciation in the British pound against the U.S. dollar. By vertical, revenue growth was broad-based with the health care, retail/CPG, shipping and logistics, and travel verticals, each growing more than 10% year-over-year.

With respect to our service offerings, revenue growth versus the prior year was driven by strength in finance and accounting, research and analytics and high-end customer interaction services. Sequentially, net revenue increased by 10.2% or 9.9% on a constant currency basis. Our acquisitions contributed $5.3 million quarter-over-quarter or 3.7% of revenue.

Fourth quarter revenues also included approximately $4 million of onetime revenues related to project extensions, gain-sharing and client-transition work. We do not expect this amount to continue in the first quarter of fiscal 2018.

Adjusted operating margin in quarter 4 was 18.1% as compared to 22% reported in the same quarter of fiscal 2016 and 21.3% last quarter. On a year-over-year basis, adjusted operating margin decreased due to acquisition cost of approximately $2 million, the impact of our annual wage increases and currency movements, net of hedging. These headwinds were partially offset by operating leverage on high volumes.

Sequentially, adjusted operating margins reduced as a result of acquisition cost, hiring in advance of large-deal ramps and currencies, net of hedging. These margin pressures were partially offset by operating leveraged on higher volumes.

The company's other income was $1.6 million in the fourth quarter, down from $2.6 million reported in quarter 4 of fiscal 2016 and $2.2 million last quarter. Difference in the other income, both over year-over-year and quarter-over-quarter, reflects $0.4 million of interest expense on debt associated with our acquisitions and the lower effective interest rate on our investments.

WNS' effective tax rate in the fourth quarter was 18.9%, down from 27.9% last year and 21.4% in the previous quarter. Quarter 4 taxes included a onetime benefit of approximately $1.5 million, resulting from the reversal of the 2011 tax reserve, which was no longer required. Other changes in the tax rate are primarily due to the mix of profits between geographies, including lower U.S. profits resulting from onetime expenses associated with our acquisitions.

The company's adjusted net income for quarter 4 was $24 million compared with $23.4 million in the same quarter of fiscal 2016 and $25.2 million last quarter. Adjusted diluted earnings were $0.46 per share in quarter 4 versus $0.44 in the fourth quarter of last year and $0.49 last quarter.

In the fourth quarter, WNS recorded a nonrecurring reduction in GAAP profit of $21.7 million for goodwill impairment relating to our Auto Claims business. The company believes these impairment charge was necessary, given quarter 4 development, including proposed regulatory changes in the U.K. legal services market, which will result in WNS exiting this portion of the business, the impact this change will have on our ability to sell bundled services in the auto claims marketplace, and the loss of business due to contract reductions and cancellations in our traditional claim retail business. The impairment charge has been excluded from our calculation of adjusted operating margin and adjusted net income, as it is nonrecurring in nature and headwinds associated with the reduced auto claims volumes have been included in our fiscal 2018 guidance.

As of March 31, 2017, WNS' balances in cash and investments totaled $182.2 million, and the company had $116.7 million of debt. WNS generated $30.7 million of cash from operating activities this quarter and free cash flow of $23.3 million after accounting for $7.4 million in capital expenditures.

DSO in the fourth quarter came in at 29 days versus 28 days reported in quarter 4 of last year and 30 days reported last quarter.

With respect to other key operating metrics, our total headcount at the end of the quarter was 33,968. Similar to last year, the company had aggressively hired and begun training for firm committed client requirements, including large-deal ramps in the first half of fiscal 2018.

Our attrition rate in the fourth quarter was 34% as compared to 35% reported in quarter 4 of last year and 32% in the previous quarter.

Global billed seat capacity at the end of the fourth quarter was 28,008, and average billed seat utilization was 1.20. We expect the seat utilization metric will often fluctuate quarter to quarter, based on facility build-out requirements and hiring cycles.

I would now like to provide you with a brief financial summary for fiscal 2017 before we turn our attention to the coming year. Net revenue for the year came in at $578.4 million, growing 8.9% on a reported basis and 15.8% on a constant currency basis. Excluding the impact of acquisitions, organic constant currency revenue growth was 14%.

Full year revenue growth was led by the health care, retail CPG, shipping and logistics and travel verticals, which all grew over 15%. The company's fiscal 2017 adjusted operating margins were down 240 basis point to 19.4%, driven by the impacts of our annual wage increases, currency movement net of hedging and costs associated with our acquisitions. This headwind was partially offset by operating leverage on higher volumes and operational productivity.

Our effective tax rate came in at 23.5%, down from 26.8% in fiscal 2017, primarily due to $2.5 million of onetime benefits taken in quarter 3 and quarter 4.

Full year adjusted net income increased from $90.9 million in fiscal 2016 to $92.2 million in fiscal 2017, and adjusted diluted earnings per share rose from $1.69 to $1.74. WNS generated $92.1 million in cash from operations and $69.3 million in free cash.

The company spent $135.6 million on acquisitions, $22.9 million on capital expenditures and repurchased 2.2 million shares of stock at cost of $64.2 million or $29.10 per share. We borrowed $118 million this year to help finance our acquisitions and had $116.7 million in debt on March 31. The net result of these movements was that WNS ended fiscal 2017 with a net cash balance of $65.5 million or approximately [$1.25] per diluted share.

The company was also pleased with our continued progress in several of our key operating metrics in 2017, including reduced customer concentration level and an increase of over 7% in constant currency revenue per employee.

In our press release issued earlier today, WNS provided our initial guidance for fiscal 2018. Based on the company's current visibility levels, we expect net revenue to be in the range of $680 million to $713 million, representing year-over-year revenue growth of 18% to 23%.

Revenue guidance assumes an average British pound to U.S. dollar exchange rate of 1.25 for fiscal 2018 as compared to 1.31 last year. Excluding exchange rate impacts, revenue guidance represents constant currency growth of 19% to 25%. Acquisitions have added $69 million of year-over-year revenue to the guidance or 12% of revenue.

Fiscal 2018 revenue guidance includes a headwind of approximately 8% relating to committed productivity improvements, project runoffs and lower client volumes, including the forecasted reduction for the auto claims business discussed earlier. Similar to prior years, these headwinds are skewed towards our fiscal first quarter.

We currently have 90% visibility to the midpoint of the revenue range, consistent with April guidance in prior years. Adjusted net income is expected to be in the range of $97 million to $105 million based on INR 64.5 to U.S. dollar exchange rate for fiscal 2018. This implies adjusted EPS of $1.88 to $2.04, assuming a diluted share count of approximately 51.5 million shares.

With respect to capital expenditures, WNS anticipates our requirements for fiscal 2018 to be in the range of $28 million to $30 million.

We'll now open up the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Joseph Foresi with Cantor Fitzgerald.

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Joseph Dean Foresi, Cantor Fitzgerald & Co., Research Division - Analyst [2]

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I was wondering if you delve a little bit deeper into HealthHelp. Can you give us some broad parameters on the financial impact there? And is there any client concentration or client overlap that you could point to?

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [3]

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Sure, I'll take that, Joe. In terms of the financials, we talked about having a $69 million year-over-year impact as a result of the 3 acquisitions that we've done. We do expect the run rate of HealthHelp to be around $55 million annually. So we had just over $2 million of revenue in the fiscal fourth quarter. We expect roughly $55 million for next year. From a margin perspective on HealthHelp, we do expect the margins to be slightly below corporate average just because we know we have to make some investments into this business. The technology needs a bit of refresh, and there are definitely some opportunities on the sales side that we can take advantage of. So we obviously expect it to be accretive to our numbers in fiscal '18 and a contributor to what we're seeing in terms of growth on the top line. But I think what's more important is how it fits within our overall service portfolio, the positioning it gives us within health care vertical. There is virtually no overlap with our existing customer base. So we do view this as a nice cross-selling opportunity both in terms of our ability to sell HealthHelp capabilities into WNS clients base as well as the opportunity to sell incremental WNS services into the HealthHelp client base. So it should be a real nice fit for us in fiscal '18 and beyond.

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Joseph Dean Foresi, Cantor Fitzgerald & Co., Research Division - Analyst [4]

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Okay. And then my follow-up is just on the FX side. What is the impact on the top and bottom line? Can you give us a little more granularity there? And particularly on the margin front, wondering what the rupee impact's going to be versus hedging further for the upcoming year?

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [5]

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Are you talking about for fiscal '18, the currency impact on the margin line?

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Joseph Dean Foresi, Cantor Fitzgerald & Co., Research Division - Analyst [6]

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Yes, fiscal '18 top and bottom line, but particularly the margins where the rupee move?

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [7]

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Sure. So right now, on the top line, we're looking at about 2% -- to 1.5% to 2% headwind on the revenue line as a result of currency. We still do have, obviously, depreciation with the pound at 1.25, which is what's assumed guidance. We are seeing depreciation versus the 1.31 that we've this year. On the operating margin side, the combination, the net impact of all the currency movements, net of hedging is about 24 basis points of headwind year-over-year.

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Operator [8]

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Our next question comes from Ashwin Shirvaikar with Citi.

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Ashwin Vassant Shirvaikar, Citigroup Inc, Research Division - Director and U.S. Computer and Business Services Analyst [9]

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I guess, my questions -- the first question is, can you provide a bridge between fiscal '17, '18 revenues in terms of sort of the specific acquisition contribution FX? I wasn't clear about the piece you're walking away from in the U.K. And with regards to organic part of the [revenue], how much of that is ramping new work, recently signed clients, versus has anything changed positively with regards to legacy clients stepping up the level of outsourcing to you? Because it seemed to be much stronger level of growth than one might normally expect.

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [10]

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Yes. So let me take a crack at that, Ashwin. A lot of things embedded in there. I think, as we spoke about -- when you look at the growth that we're expecting in fiscal 2018, there are some moving parts, obviously. We do have some healthy organic growth. And at the midpoint of guidance, right now, we are at 10% organic constant currency growth. And I think the mix between expansion of existing customers and the addition of new customers is similar to what we've seen in the past. I don't see that trend changing, if you will. Acquisitions are going to contribute above $69 million on a year-over-year basis. So roughly 12% of the top line growth is going to come from acquisitions. As I mentioned, we do have a currency headwind, which is going to negatively affect the revenue line by roughly $6 million to $7 million on a year-over-year basis. And I think the balance -- we haven't called out specifically the headwind, but we do know that we have roughly an 8% headwind in total for the year, as Sanjay mentioned in his prepared remarks. 5% is, kind of, our normal recurring headwind that we typically see for productivity improvements, volume reductions, changes in client behavior, things like that. But on top of that, normal 5%, today we've got visibility to an incremental 3% headwind on a year-over-year basis related to items like auto claims, some ramp-down of a few accounts that extended into Q4, and some additional volume pressures with a few largest clients. So just, kind of, a mixed bag, but overall, I think the 10% organic constant currency growth that we have 90% visibility today to actually include this incremental headwind of 3%. So we feel really good about where we are, where the momentum and the trajectory in the business is, and hope that if things line up here, we're positioned to meet and beat our members throughout the year as we did in fiscal '17.

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Ashwin Vassant Shirvaikar, Citigroup Inc, Research Division - Director and U.S. Computer and Business Services Analyst [11]

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Got it. And then, Keshav, I appreciate the comment that you're not seeing any impact from Brexit or U.S. policy changes to large retails, but are you proactively taking any steps, any other country, just, kind of, anticipating what might happen business changes, things like that?

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [12]

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Yes. Actually, that's an interesting question, Ashwin. So from our perspective, obviously, our clients and our prospects are probably reading the same news that all of us are also seeing in each of the other countries, but I -- and therefore, are also wary about what could be potential changes that would impact their decision-making longer term. Having said that, what we can do as a company is really focus our energies with our clients as well as our prospects in terms of pushing them towards taking the right decisions around the significant change that they have to face in terms of business models, in terms of technology, in terms of being relevant to the end customers, and I think we've done a great job, I would say, of really enabling our clients and prospects to remain focused on the business issues at hand, and as a result of which we've we feel so confident about -- we're also confident about both our pipeline as well as the growth trajectory from here. In terms of specific actions in specific countries, wherever it is required, we are taking the necessary steps in terms of making the right investments and building the comfort and the confidence with our clients, which is, I think, the right thing for us to do at this stage.

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Ashwin Vassant Shirvaikar, Citigroup Inc, Research Division - Director and U.S. Computer and Business Services Analyst [13]

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So that would include things like building local centers and stuff like that?

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [14]

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Yes, absolutely. So at this point in time, I would just remind you that we now operate, out of 12 countries, about 47 delivery centers across the globe. So we are doing whatever is right to run our business and to be very relevant to our clients across geographic footprint as well as our offering program, as well as our technology-affiliated program. So it's business as usual, and we are stepping up investments in each one of these areas.

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [15]

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And I think, just to add to that, Ashwin, I think, when you look at the business and how it's evolved from a customer perspective as well as from an execution perspective, for us, I think the one thing we can do, in light of all of the global economic uncertainty that's going on and political uncertainty that's going on, is to make sure that we continue to diversify our business. And I think what you'll see is that both from a customer perspective as well as from a delivered perspective, we've done a pretty good job of doing that over the last 4 to 5 years. So I would hope and expect to see that continue going forward.

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Operator [16]

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Our next question comes from Frank Atkins with SunTrust Robinson.

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Francis Carl Atkins, SunTrust Robinson Humphrey, Inc., Research Division - Associate [17]

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Following up on the last question a little bit, there is increased headcount in the U.S. and U.K. Just wanted to know how much of that is related to acquisitions and how much of that is, kind of, client demand or shifting mix of services? And then more broadly, any comments on the talent environment and your ability to hire, given what's going on in the U.S. as well as changes in the wage and pricing?

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Sanjay Puria, WNS (Holdings) Ltd. - Group CFO [18]

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Yes. From a headcount perspective, the increase in U.S. is primarily related to the acquisitions what we have. And in U.K., it -- it's due to a new relationship what we have started in U.K., and as Keshav alluded, we are having 47 delivery centers and it's expanding globally. So that's a newly started expansion what we have in U.K. for that. And -- so this is the prime reason and there's nothing from a big mix or something (inaudible) as what you have seen in the past. We are expanding in the location where the demand is and where end of the business is coming from the client.

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [19]

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But at the same time, let me add on to that in terms of your other part of the question, which was around hiring and talent, and skills, and things that. And I must say that first and foremost, from an overall demand environment, I think we are extremely comfortable with how the demand is panning out for WNS. So very healthy pipeline, very strong traction in terms of existing clients as well as prospects. And I think that confidence of that message is available to our salespeople, to our operational folks, and that is also being reflected in the discussion we are having with that talent in the market as well. Now having said that, one of the things that we have been very, very focused on is to lead the industry in terms of some of the new, kind of, programs that we have spoken about over years. And as we look at changing our business profile as well as leading our customers in terms of certain areas, we have invested significantly in the areas of business analytics with our MBA in Business Analytics program that we spoke about earlier, and I covered again in my prepared remarks, as well as certain specific, kind of, courses that we are co-creating with some -- with our other university in the area of design thinking. We believe that these kind of investments are called for. These are required in order to train not only to bring in employee, I mean a customer-ready talent, but also to retrain and reskill the talent that we have within the company as well. So from an overall perspective, very comfortable with the talent pipeline, our scaling program, our learning and development program. And I would say that WNS really is a talent magnet at this point in time, and we have no issues in terms of hiring the best talent into this company.

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [20]

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And just to give you a little more color, Frank, on your question about the numbers, we hired roughly -- or we added, I should say, roughly 1,800 people in the fourth quarter. Approximately 700 of those resources came via the acquisitions of HealthHelp and Denali. The balance represents our visibility to growth in the first half of the year. So this is not that we're hiring people and hoping that we can go sell these resources. This is a similar pattern to what we saw in the third and fourth quarter of last fiscal year, where we're hiring at the end of the year for firm demand and large client ramps that we see occurring in the first half of fiscal 2018. So obviously, that's part of the reason that we have good visibility to healthy growth as we enter the year.

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Francis Carl Atkins, SunTrust Robinson Humphrey, Inc., Research Division - Associate [21]

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Okay. That's fantastic. I appreciate the color there. And for my follow-up, I wanted to ask a little bit about the goodwill impairment. Can you give us a little bit more specifics around the regulatory change, the areas that you're exiting? And as we model going forward, should that have an impact on the amount of repair repayments?

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Sanjay Puria, WNS (Holdings) Ltd. - Group CFO [22]

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Okay. So as in my prepared remarks I said, the regulatory changes what has happened on the personal injury claim side, [they] enhance the small-cap limit on the whiplash as well as the nonwhiplash amount from GBP 1,000 to GBP 5,000. That's the range. And due to that, we believe that it's going to impact the transition volumes as well as outgoing fees. Related to the legal services, where we invested -- we started investments last 18 months into this business, and we were seeing a good traction. But due to this proposed regulatory changes, we believe it's going to impact the business and it's going to force us to exit the legal services part of it. Having said that, as along with the legal services, it was bundled -- I know the service what we are giving for auto insurance part, so it may have some impact on some of the volumes going forward based on that. And accordingly, as I've said, it's going to be a 1% headwind on the auto claims business in fiscal 2018, which we have already baked into the guidance.

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [23]

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And I just want to also mention that this impairment charge that we took actually related to some acquisitions that were done in between 2002 and 2008. And therefore, from our perspective, we will keep all our options open as far as this business was concerned, but this is caused essentially by some other factors that Sanjay just spoke about.

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Sanjay Puria, WNS (Holdings) Ltd. - Group CFO [24]

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And just to add, there was another development during quarter 4 with along with the proposed regulatory changes, where some of contract termination as well as the contract reduction, which -- due to which we'll have also headwind going forward in the fiscal 2018.

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [25]

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So the net all that, Frank, is that not only is the growth opportunity in the legal services business impaired, but as we look forward, we've got, because of an inability to sell bundled services, that will affect our claims volumes as well as some of the contractual issues that Sanjay mentioned. So at this point in time, we've actually baked in a roughly 30% drop in our auto claims business on a year-over-year basis, and that's included in the guidance.

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Operator [26]

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Our next question comes from Anil Doradla with William Blair.

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Anil Kumar Doradla, William Blair & Company L.L.C., Research Division - Analyst [27]

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So starting with a big-picture question. Keshav, over the last almost 1 year or 1.5 years, you've had a series of acquisitions, health care, some on the analytics and so forth. So stepping back, can you share with us what is the big strategy here? It sounds like this is something you've been active on. You've talked about being active on the M&A front. But is this more client-driven requirement acquisitions or it's part of the, kind of, a weaving in a bigger theme here? So how are you looking at this whole strategy right now? And I have a follow-up.

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [28]

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Well, that's an excellent question, Anil. So I want to let out by saying that the acquisition strategy as well as the entire execution strategy at WNS comes from the excitement that we have around the trends in the marketplace, the inflection points that we saw in the past maybe 18 months or so and the potential for us to accelerate both revenues as well as profitability from a long-term point of view and lead the industry. And let me start by saying that for a while now, I've been saying that the clients, as they have matured in terms of the business cycles, have now emerged as having 3 sub-clients inside each client environment. The traditional client that looked at the old model, the client that has had certain processes serviced by WNS for the past few years are looking to go into a new model based on outcome-based pricing or risk-reward pricing, or output-based pricing, or whatever, and the same client also trying to drive a digital strategy to become even more impactful in terms of their end customer. So traditional, transitional, transformational are all 3 clients now baked into 1 client.

And therefore, you could actually look at this as something that can scare you, or you can look at it as something that is a big opportunity. We have seen this as a big opportunity based, essentially, on the fact that we are a company that goes to the market around domain specialist. We understand the business domains. We understand the changes that are taking place in the business domains. We understand the impact of disruption and the disruptive trends that we are seeing in our business environments, and each of those areas, we believe, are actually posing new opportunities for us, whether it's the Internet of Everything, whether it is the whole area of personalization, whether it is automation and everything, whether it is the ability to provide asset-light models from a client to an end customer, whether it is all the changes that you're seeing around remote medicine, telemedicine and the health care, all of this really is an opportunity for us. And from our perspective, therefore, we have said we must understand that this disruption has to be seen as part of our business model.

We have baked these models into our model. We have to understand and appreciate that technology is a qualifier. We have to build IP within the company. We have to align with the right technology providers, and that's where we have created assets like WNS TRAC and others as a result of which in some of the wins that we have announced recently, we are actually leading with technology. Now along with this, we also found that there were certain gaps in our portfolio in terms of offerings, and all we have done is plugged those gaps through these acquisitions. So clearly, every one of these acquisitions have been very carefully thought through. They fill a particular gap that we may have had in specific areas that we have spoken about. And what is really exciting is, all of it has come together quite well and the timing is right, while many others are struggling with what's happening in the market around demand, around disruption. From our perspective, our clients actually are responding very favorable to our investment -- very favorably to our investment program and the fact that we are probably the only company that understands the business domains so well. So from our perspective, we believe that this is something that we continue be very opportunistic in terms of M&A and tuck-in, kind of, acquisitions and grow faster than the market.

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Anil Kumar Doradla, William Blair & Company L.L.C., Research Division - Analyst [29]

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Okay. And when I look at the $69 million through acquisition revenues in fiscal '18 and I look at the attributes in terms of growth, organically you are talking about 10% growth. Should we be expecting these acquisitions to be outpacing over the next 3, 4 years than the core business?

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [30]

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Yes. I think, when you look at the positioning of these assets, Anil, and the track record of growth in most of these businesses, and most importantly, the opportunity for cross-sell, I think it's definitely safe to assume that these businesses should be growing faster than the corporate average over the next 2 to 3 years.

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Anil Kumar Doradla, William Blair & Company L.L.C., Research Division - Analyst [31]

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Great. And if you don't mind, squeeze one. Sanjay, can you clarify? There seem to be a tailwind on FX this quarter but a headwind for the full year, and what's the basic reason for that?

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Sanjay Puria, WNS (Holdings) Ltd. - Group CFO [32]

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So in quarter 4, as I mentioned, there were a couple of items, including the one-time, which accelerated the revenue. So in quarter 4, we had revenue coming from acquisitions, which is Denali and HealthHelp; we have revenue coming from the new wins and the new logos what we started; as well as some of the onetimes, which include at the gain sharing from the client, the contract extension as well as some of the accelerated client transition based on the rates what we had, which we expect is not going to be there in 2018.

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Operator [33]

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Our next question comes Joseph Vafi with Loop Capital.

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Joseph Anthony Vafi, Loop Capital Markets LLC, Research Division - Analyst [34]

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Just another question on acquisitions and modeling guidance. You are -- obviously done a good job in modeling the core business. This year, we're got a lot of acquisition revenue and guidance for the year. And I was wondering if you think modeling the acquisitions for guidance is more difficult than the core business? Or did you have to be a little more conservative with the guidance on these new assets versus the core business?

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [35]

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Let me take that, Joe. I think, when we look at these businesses, again, the nice thing about them is -- and then part of the reason that we've acquired them is, from an operating model perspective, they look and behave and act like our businesses. So most of these companies have recurring revenue streams. We certainly believe we have a very good feel for what the run rate is in the business. There isn't a heavy project component to it. So we're not either counting on that falling off or expecting it to ramp up. The real question is, is how successful can the combination of these 2 companies be and accelerate again. And certainly, what we've seen with Denali, for example, in just a few months is that there was some very, very significant low-hanging fruit in terms of the ability to sell Denali's high-end procurement services into our customer base and our ability to sell everything else that WNS does into what was essentially a high-end procurement-only relationship. So clearly, that type of a business has some very easy lines of sight to opportunities and growth. HealthHelp, a little bit of a different animal in terms of the acquisition opportunities looking forward, because the business is different. It positions us differently in a vertical, and I think the sales cycles and the cross-sell opportunities within HealthHelp will be a little bit longer than they were, for example, with an asset like Denali.

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Joseph Anthony Vafi, Loop Capital Markets LLC, Research Division - Analyst [36]

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Okay, that's helpful, and then just was curious on growth. I think it was -- I think Keshav said 6% sequentially in the quarter and then, obviously, 10% for the year. The -- it'd be interesting to get your perspective on the growth -- where the growth is coming from in terms of classifying the volumes from, say, kind of, newer, kind of, maybe Internet-centric or online businesses looking to that are more or less growth companies versus your growth coming from, perhaps, kind of, old school brick-and-mortar that are really more in cost-cutting mode than growth mode themselves.

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [37]

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Yes. Great question, Joe, and I think it's extremely safe to say that our Internet-based businesses, our digital-based businesses, if you will, are growing much faster on a percentage basis than the rest of our business and the traditional brick-and-mortar business in terms of their outsourcing spend. However, I will also put to caveat on that, that the base that they're growing off of is also much smaller. So we think it's a huge opportunity. We've seen some good traction. We expect it to be a contributor in fiscal '18 and beyond, and we've seen some real good traction with some great brand name logos in the digital Internet-based world. But again, I think the growth rate should be extremely healthy. It should be well above corporate average, but off of a much smaller base.

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Operator [38]

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Our next question comes from Bryan Bergin with Cowen.

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Bryan C. Bergin, Cowen and Company, LLC, Research Division - VP [39]

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Can you talk about the sequential change in scale composition of the pipeline? Any specific services you are seeing increased appetite versus others? And then how clients are approaching bundled services?

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [40]

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Yes, let me take that. In terms of the overall pipeline, I would say that it's very strong. So we are actually seeing strong demand across verticals, across geographies and across all our key offering areas. And what is also interesting is, as we have kept investing very strongly on the technology front, a number of deals that we are working on and which we have won recently has been led by technology, kind of, platforms in our deals, where we have created the IP, gone in and then driven process, kind of, services around that. What's also very interesting is more and more clients are looking at us because of our superior understanding of the domain but also the fact that our appreciation of technology and the ability to bundle analytics with it is very, very strong. So let me tell you that at this point in time, we believe that with many of our clients, whether they are new prospects or our existing clients as well, these have now become stable -- table stakes. So while, with our existing clients in many areas, we are still working on some of the old traditional, kind of, processes and models, many of them are also shifting into completely new areas as WNS has made these investments in these areas. And therefore, from an overall perspective, we believe the pipeline is very robust and the potential for us to grow continues to be very high.

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Bryan C. Bergin, Cowen and Company, LLC, Research Division - VP [41]

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Okay. And then on capital allocation priorities in '18, any changes there you can, kind of, give us puts and takes around continued M&A versus repo versus debt payment? Just trying to understand the levers you may have on that EPS range?

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [42]

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Sure, let me take that. So I think, as everyone knows, we have an outstanding share repurchase program, where we have 3.3 million shares authorized. We've used 2.2 million shares. We've bought 2.2 million shares against that debt outstanding offering. And as a result, we've got about 1.1 million left to buy that we are allowed to buy. We certainly are going to watch what happens with the stock and with the cash and with the [alternate] opportunities for us. But we continue to see share repurchases as one of the important tools in our toolkit for capital allocation. We are going to be continue to be opportunistic on the tuck-in M&A aside, continue to build the pipeline, continue to look for assets that are a good fit for us, while balancing, obviously, what our cash needs are, what our requirements are, our ability to successfully integrate multiple acquisitions at the same time and making sure that we're still finding the right assets at the right price. We went several years without doing anything. Now we've done 3 in 1 year, but I think it's more about getting the right assets at the right time at the right price than formally saying we're going to buy 1 or 2 assets and we're going to add 5% to 10% to revenue. That's not what we're looking for. We're looking for the right assets that fit with what we're trying to do within our business. So from an overall capital allocation perspective, I think we just need to make sure we continue to move forward with a balanced approach, looking at putting our capital to work through a combination of tuck-in acquisitions and share repurchases.

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Operator [43]

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Our next question comes from Ed Caso with Wells Fargo.

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Edward Stephen Caso, Wells Fargo Securities, LLC, Research Division - MD and Senior Analyst [44]

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I was curious about the moment toward automation and how that has changed the conversation with the client? A little bit around, is there a movement away from starting relationships on an FTA -- FTE basis? I mean, are we skipping over that step and moving more towards sort of a managed or fixed-price relationship sooner on?

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [45]

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Again, great question, Ed. And I must mention that no, with new clients, the conversation is still around, "Can you do all these things for me?" So it's a question of just they are getting comfort that we understand the business domain, we understand technology well, that we are willing to service them in models that resonate with them for the long-term, that we can embed analytics, we can help them with their Big Data, the data, kind of, issues, and we can also help them in terms of providing corporate and decision support. But when they actually stopped working, they want to still start with the traditional, kind of, model. But because of the intensity with which we've kept investing in the technology side and creating our own IP or creating these partnerships, I think the trust factor with these people is increasing significantly. So where in the past, somebody would have said maybe this other strategic partner is better for me than WNS because of the technology -- because of technology, that is not -- we are seeing less of that at this point of time is all I want to say. We are actually seen as a full service, kind of, player, and all the strategic messages are resonating well from our perspective. But that shouldn't take away from the fact, when clients start, they start with the FTE basis.

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Edward Stephen Caso, Wells Fargo Securities, LLC, Research Division - MD and Senior Analyst [46]

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So maybe extending on to that, are you suggesting that the sort of IT-plus-BPO model, sort of, "Hey, I run your software, therefore, let me run your process," is that gaining traction or not gaining traction? Maybe said more simply, are you losing business to the big Indian IT players?

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [47]

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No. Actually, it's just the converse. I think there is a much greater belief in our customer set around people like us who understand their business well, who understand the business process as well as business innovation well and are able to work with multiple technology platforms that they may have and consolidate it with connectors that we, we have created ourselves in order to give them better, kind of, impact in terms of the overall ROI for their investment. So I must again clarify. Clients are extremely discerning. Where there was confusion in the past around the IT -- the integrated IT, kind of, players who try to do something in BPO and the BPM players, they are getting more and more convinced that people like us who understand BPM and who are not in the application development and maintenance areas but are using technology to give them better ROI are much, much more trustworthy. And based on assets like WNS TRAC and some of the other things we spoke about, the belief is much, much stronger. And therefore, I must say, in many deals, we are leading with technology IP that we have created. But that reason they do business with us is because they understand that we know business domain very well, we can integrate analytics into it and we are providing the technology solutions which gives them very quick returns on investment.

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Operator [48]

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Our next question comes from Mayank Tandon from Needham & Company.

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Mayank Tandon, Needham & Company, LLC, Research Division - Senior Analyst of IT Services of Financial Technology [49]

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Great. Most of my questions have been answered, but just sort of, either Keshav or Dave, I wanted to get your thoughts in terms of, as you look at the guidance range for the year, what are the various puts and takes that would you get to the high end versus coming in up to lower end of that range?

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [50]

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So let me start -- maybe let me start by saying that at this point in time, the guidance range is a range that they have given, which is consistent with our philosophy that we give each year. And from that point of view, we didn't want to make any change there, and that was the same business on which we gave guidance for last year. And as the year progressed, we probably get much better than what was baked in the initial guidance. Having said that, I must give you a sense about the fact that our pipeline going into this year is very strong. And as I said earlier again, it is across industries, it is across verticals, it is across geographies, and because of the impact of some of the new acquisitions and offerings that we are -- now bring to the table, it is actually getting stronger. So going into the year, we are extremely comfortable, first and foremost, with our guidance range, but also with the fact that if we execute well and have decisions get taken on time, some of which we didn't see last year. Remember, we kept saying, last year also, that while we were confident, some of the decisions actually got pushed towards the end of the year. So the ability to recover revenue due to last year was minimal, but which are flowing into this year. I think, as long as we don't see those, kind of, the surprises, the potential for us to go -- to grow beyond that midpoint and towards the higher point of the guidance range is high. And that's the confidence which we go into the year.

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [51]

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And I think just real quick, Mayank, when you look at the range and when you look at the range and you look at 90% of visibility to the midpoint for us to end up at the low end of the range, something would have to go wrong.

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Mayank Tandon, Needham & Company, LLC, Research Division - Senior Analyst of IT Services of Financial Technology [52]

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Right. Now and that's helpful color. And then just take quick follow-up. In terms of quarterly trajectory, should we expect the usual seasonality in terms of a softer 1Q and then the revenue and margin profile builds up over the course of the year?

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Sanjay Puria, WNS (Holdings) Ltd. - Group CFO [53]

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Yes. I think, it's right to expect that the seasonality within the quarters because usually, like in quarter 1, we'll have the wage increases, the bulk of which happened in quarter 1. So that's where the operating margin have pressure. Some seasonality in quarter 3 from travel vertical, year-over-year we've seen, so it's right to assume those similar pattern of seasonality as we walk in FY '18.

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [54]

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Right. So I think, Mayank, I think to keep in mind is, we certainly should have a little bit of a lift from having 4 quarters' worth of the acquisitions on board. That flip side to that is, we had roughly $4 million of onetimers in fourth quarter, which are nonrecurring. We have a little bit of headwind in auto claims business as that ramps down, and then we do have the annual seasonality in our business, which is the productivity improvements that we get to our larger clients that a front-end loaded to our business. So we would expect the business to grow. It would probably be growing at less than what we expect the business to grow on a -- it's, kind of, a normal straight-line basis, as Sanjay mentioned, a little bit soft in Q1, little bit soft in Q3 because of the travel seasonality, but other than that, a good trajectory throughout the year.

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Operator [55]

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Our next question comes from Brian Kinstlinger of Maxim Group.

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Brian Kinstlinger, Maxim Group LLC, Research Division - SVP and Senior Information Technology Services Analyst [56]

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David, all those moving parts into nonrecurring, the acquisitions, currency repairment reductions in volumes, and with the high visibility you have, maybe it's reasonable in the first quarter to give, kind of, a range of what you're thinking, because there are so many moving parts. I know it's not typical of management to do that, but maybe in this case, it's appropriate?

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David Mackey, WNS (Holdings) Ltd. - Head of IR and SVP of Finance [57]

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We're not going to deviate from our standard approach, Brian. We don't want people focused on quarter-to-quarter. We want people looking at the long-term opportunities in our business. I think, we're happy to discuss some of the things that affect us on a quarter-over-quarter basis in some of the moving parts, and we try to call out specifically those that are nonrecurring, like $4 million in revenue and $2 million in acquisition cost. But in terms of formal guidance for first quarter, even a range for first quarter, where we're not going to do that at this point of time.

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Brian Kinstlinger, Maxim Group LLC, Research Division - SVP and Senior Information Technology Services Analyst [58]

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Okay. Lastly, you sufficiently covered efficiencies for existing customers. Can you talk about the pricing environment from new customers? Are rates relatively the same for first- and second-time projects? Or are they higher or lower than you've seen maybe in the past?

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [59]

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Look, the rate environment has been quite stable. I think, from our perspective, because of the fact that we're embedding so much of technology analytics and have different kind of models. Our ability, therefore, to leverage those pricing, kind of, models to deliver the, kind of, margin that we expect is also strong. So overall, I would say that we are moving away from the traditional bill rates, kind of, model to much more TCO, kind of, model. Customers appreciate it, understand it, and are focused with us on totally an ROI, kind of, approach, which works well for both sides.

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Operator [60]

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Our next question comes from Vincent Colicchio of Barrington Research.

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Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division - Research Analyst [61]

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Just one from me, Keshav. In process automation, clearly per your comments, you're doing well, and you're seeing a lot of inroads from the IT players. I'm just curious, are you seeing any start-ups or any sort of other form of new competition that may become a factor down the road in any of your domains?

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [62]

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Yes. So I think that's an interesting question. I think that there are always point-solution, kind of, players that come in with specific offerings, which are attractive to our clients. If our clients want just that and not the rest of the experience that a company like WNS gives, then so, yes, there would be some such players and some people would gravitate towards them. We haven't seen too much of that. From our perspective, I think the current clients really interacting with our clients who are really looking at bringing in a long-term strategic partner to help them really handle all the, kind of, disruption they are seeing in terms of their business model for the long term. So that's one aspect I want to talk about. The second thing I want to mention is that if you just look at the demand trends for our business and the pipeline, and if you just look at the, kind of, clients that even we are bringing into this business models, I actually think that the demand trends still are very nascent. This market is still very under-penetrated. I think there's enough business for many more players, if you ask me, and at this point in time, provided you have a very strong, kind of, value proposition and you are really adding value to your customer. So from our perspective, while we partner with a number of these, kind of, start-ups to give them a bigger, kind of, platform, we also believe that there's enough business for us to keep getting after, without being disturbed by any impact that we may see from 1 or 2 of these players.

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Operator [63]

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Our next question comes from Puneet Jain with JPMorgan.

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Puneet Jain, JP Morgan Chase & Co, Research Division - Computer Services and IT Consulting Analyst [64]

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So, Keshav, your comments on no impact in client decision is very different from what IT services firms have been saying? Would you say the difference stems from nature of BPO services types recurring in nature and has no visa exposure? Or are there WNS-specific drivers, given you have been investing in the business for a while?

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [65]

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Yes. I think you more or less answered one of the other questions about the difference between IT services and business process management. These are 2 -- I think, the realization with clients that these are 2 completely different businesses is out there now. Yes, I've been talking about it for a while, but the buyers are completely different. The value proposition is completely different. The sales cycles are completely different. Definition of large deals for BPM is at $10 million and for IT at $100 million is completely different. And the risk profiles for a procurement manager to want to bundle everything with one player is also not there. So from our perspective, really, I think it is a case of how we go to the market, position our value proposition, showcase to our client that in this era of tremendous disruption, how we can make their costs completely variable and the potential for upside actual, right? I think, a lot of the IT services players, it is still all about, "Can you give me part of your budget?" And frankly speaking, there is no one out there who has a budget anymore. Everyone out there from a business point of view, has to only deliver business outcomes in an era of disruption, automation, robotics and Big Data. So I think the kind of conversation is completely different in terms of what I think the well-investing BPM companies are having, and I am proud to say that in that perspective, I think WNS is right on top in terms of the quality of conversations that we are having with our clients.

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Puneet Jain, JP Morgan Chase & Co, Research Division - Computer Services and IT Consulting Analyst [66]

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No, I appreciate it. And one last from me more like a follow-up on auto claims. Why not explore strategic options for that business, given that it's not part of your core services, does not grow and is not profitable either?

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Keshav R. Murugesh, WNS (Holdings) Ltd. - Group CEO and Director [67]

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No, that's an excellent question. Very frankly speaking, being a responsible, kind of, corporate, we will keep all our options open.

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Operator [68]

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