WNS (Holdings) Ltd (WNS) 2006 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter fiscal 2007 WNS Holdings earnings conference call. My name is Tawanda and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference.

[OPERATOR INSTRUCTIONS].

I would now like to turn the call over to Mr. Jay Venkateswaran. Please proceed, sir.

Thank you, Tawanda. Good morning, ladies and gentlemen, and good afternoon and good evening to those of you joining us from Europe and Asia. Welcome to today's conference call. I am Jay Venkateswaran, Senior Vice President of Investor Relations at WNS. With me on this call, I have Neeraj Bhargava, our Chief Executive Officer, and Zubin Dubash, our Chief Financial Officer. Today's remarks will focus on our recently announced results for the fiscal third quarter ended December 31, 2006. Neeraj will begin by providing an overview of the quarter's business and financial developments and Zubin will follow with specific details on our financial results. We'll then open the call to questions.

Some of the matters that we will discuss during this call are forward looking and you should keep in mind that these forward-looking statements are subject in 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 our Form 6-K to be filed today with the SEC. WNS assumes no obligations to update the information presented on this conference call.

During our call today, we will reference certain non-GAAP financial measures which we believe provide useful information for investors. You can find reconciliations of these non-GAAP measures to GAAP measures in our press release which is available on our website and in our Form 6-K filing.

Today's call is being webcast and will be replayed in its entirety beginning at approximately 10:00 a.m. Eastern. I would now like to introduce WNS's, Chief Executive Officer, Neeraj Bhargava. Neeraj?

Thank you, Jay, and thank you all for joining today's conference call. I'm pleased to share with you that WNS achieved a very strong third fiscal quarter in terms of revenue growth and profitability. In addition, we continue to see positive trends in the market, actively seek acquisition opportunities, and work towards expanding our global footprint.

We previously said that this would be a quarter of consolidation following two quarters of aggressive growth. However, we achieved 8% sequential growth in revenue less repair payments compared to the last quarter. This quarter also represents a 48.8% growth from the corresponding quarter in fiscal 2006 and the third consecutive quarter that we've exceeded our internal growth expectations. Our growth primarily is attributable to faster than expected ramp up of client contracts and is a clear testament to the strength of our business. Zubin will provide additional detail on our financial performance and the outlook for the remainder of the year, shortly.

Before he begins, I would like to provide additional color on the operation elements driving our growth. Let's first look at our industry-specific business units such as banking financial services and insurance, which we term BFSI, travel, and our emerging businesses, which drive our expansion into new industry. These verticals work together in a way that balances the peaks and troughs in each of their growth trajectories. This quarter's growth, for example, has been driven by our BFSI business unit while the earlier two quarters were driven by exceptional growth in our emerging businesses unit.

I'm encouraged by the strength of WNS's position in BFSI. We believe that we compete among the industry's top three providers in this vertical and consistently with new clients in comparative situations. Importantly, our largest new client win of fiscal 2007 was closed in December 2006. This is a finance and accounting contract with a U.S. insurance brokerage company. Additionally, we initiated a financial research and analytics pilot for a big bulge investment bank. We believe our BFSI expertise was a key factor in winning these contracts. And having closed the calendar year with these client wins, we opened the new year with significant momentum and two additional opportunities.

Our travel area continues to be steady. We won two new contracts in the revenue recovery area. In addition, we are close to completing the ramp up of a U.S. airline in the passenger revenue accounting area. We also went live with another airline client on our proprietary passenger revenue accounting platform called Jade. Further, we also secured additional work with several existing clients and strengthened many important relationships. The one that's particularly striking is a leading European airline where we've taken the headcount in this quarter to over 450.

Finally, in the emerging businesses area, which are largely driven by our functional expertise, we made some very good progress. In our enterprise services division, this includes finance and accounting, human resources and supply chain management services, and our knowledge services division includes research and analytics. As in the second quarter, we continued to see steady growth in these areas. We launched a knowledge services pilot for a manufacturing company. In addition, we won an analytics contract for a leading business information provider. We also extended our enterprise services contract with a major UK utility and a consumer products company. Lastly, we extended our legal support services for a UK-based client.

I'm particularly gratified by extension of existing client relationships because I believe they're a clear recognition of the value we provide to our clients.

Moving on to the second key aspect of our operational performance, we added a net of 665 people during the quarter, bringing our total employment to 13,729. Our attrition level has increased to 43% compared to 34% in the second quarter. Despite this, we continue to meet client SLAs and deliver on key migrations underway. Attrition continues to be a major challenge and we are working hard to combat it. Our location in Punai, in particular, is seeing a continued pressure from several caotives establishing a base in that location. Attrition is also being driven by the aggressive ramp ups we had in quarter one and quarter two. Our new HR head Aniruddha Limaye has been in place for now about four months, and he along with his team are very focused on attacking this challenge and expect to see improvements in a six- to nine-month period.

The third key aspect of our operational development relates to our management team. As announced in our January 9 Form 6-K filing with the SEC, David Tibble, my co-founder and former Chairman, will retire effective March 31, 2007. David has been a valuable contributor as WNS grew from a captive unit of British Airways to a public company, trading on the New York Stock Exchange. He most recently served as a Chairman of WNS UK where he mentored the sales team. We're very grateful for his guidance and leadership through the years and wish him well in his retirement. We also are very confident of the succession plan we have in place and believe this smooth transition is a clear reflection of the strength of our management team.

Ramesh Shah, our current Chairman, joined the company in July 14, 2005 when David first expressed his intention to retire. Steve Dunning assumed David's responsibility as Chairman of WNS UK as of January 3, 2007. He is a fellow cofounder of WNS and has formerly worked with David in terms of managing the UK business that we have. He, too, has been a valuable contributor to each stage of WNS's growth and I'm certain that we will benefit from his leadership in the UK as we look to the future.

Finally, I would like to quickly provide an update on our growth initiative. One of our key strategic objectives is to further enhance our organic growth through strategic acquisitions focused on building new capabilities and industry expertise. Going forward, our M&A pipeline continues to be very interesting. We are evaluating a number of opportunities to identify investment that compliment and broaden our existing services. We are optimistic about our prospects of concluding a deal in the near future.

Additionally, during our November 15 conference call, we announced our intention to open a location in Eastern Europe. I'm pleased to report that our team continues to make significant progress in their diligent effort in identifying the optimal location. The team is close to finalizing the location and is on track for a mid-year launch. In line with this, we are also working to identify and appoint a head of operations for this new facility.

I will now turn the call over to Zubin to provide additional color on our financial results. Zubin.

Thank you, Neeraj. And again, welcome to all of you joining us on this call. Before I review our results, it is important to note that WNS's revenue is generated primarily from providing BPO services. The company has two reportable segments for financial statement reporting purposes, WNS Global BPO and WNS Auto Claims BPO.

In the WNS Auto Claims BPO segment, we provide accident management services in which we arrange for automobile repairs for national third party repair centers. The amount invoiced to WNS clients for payments made by WNS to third party repair centers are reported as revenue. Since the company wholly subcontracts the repairs to the repair centers, it evaluates its financial performance based on revenue less repair payments to third-party repair centers. This is a non-GAAP measure..

Now, let's look at our results on a revenue less repair basis, or on a non-GAAP basis. Revenue less repair payments for the quarter was higher than expected at $57.2 million. It was up 48.8% from $38.4 million, a year earlier, and up 8% from $53 million in the previous quarter. Please note that revenue less repair payments for the quarter ended December 31, 2005 included $2.4 million in deferred revenue recognized during that quarter. This should be considered while examining margins and costs pertaining to this comparative period.

Gross profit was $20.7 million, or 36.3%, of revenue less repair payments compared with $15.7 million, or 40.8%, of revenue less repair payments in the year earlier and $19.3 million, or 36.4%, of revenue less repair payments in the previous quarter. Gross profit for the quarter includes share-based compensation expenses of $0.4 million. This expense was not incurred in the year earlier quarter. Excluding the impact of such share-based compensation, the gross profit was 36.9% of revenue less repair payments. SG&A expenses, excluding share-based compensation expenses, for the quarter was $13.1 million, or 22.9%, of revenue less repair payments compared with $8.3 million, or 21.6%, of revenue less repair payments a year earlier. This increase is primarily attributable to travel expenses associated with higher-than-anticipated sales activity this quarter.

Operating income, excluding amortization of intangible assets and share-based compensation expenses, for the quarter was $8.1 million, or 14.1%, of revenue less repair payments compared with $7.4 million, or 19.1%, of revenue less repair payments, a year earlier, and $8.1 million, or 15.3%, of revenue less repair payments for the quarter ended September 30, 2006.

As Neeraj mentioned, results this quarter were better than anticipated. Correspondingly, we are updating the guidance we provided during our previous call on November 15, 2006. We now anticipate that revenue less repair payments for the fiscal year ending March 31, 2007 will be slightly higher than $213 million. Our net income for fiscal 2007 before amortization of intangible assets and share-based compensation expenses remains unchanged and is expected to be between $30.5 million and $32.5 million, excluding the impact of the ongoing transfer pricing study. This is despite previously discussed unbudgeted investment on due diligence on a European location and an upgrade of our IT platform in the travel business unit. Our guidance for capital expenditure for the year remains the same at approximately $26 million for the year. Notably, we have added a greater number of seats than originally planned although CapEx has remained stable. The results announced today position us well to achieve these targets.

I would also like to announce an important addition to our corporate finance team. Rajiv Ranjan joins the team as Executive Vice President. He brings with him over 17 years of experience with U.S. public companies and is expected to strengthen our entire finance and accounting team, particularly the external reporting function.

With this, we are concluding our prepared remarks. Neeraj and I will take any questions you may have.

[OPERATOR INSTRUCTIONS]. Your first question comes from the line of Brandt Sakakeeny with Deutsche Bank. Please proceed.

Great. Thank you. Good morning. Nice quarter. A couple questions. One is, just first, on the attrition level. Seems like despite the higher attrition, you sort of worked your way through that. Was that a function of price increases or just increased activity in your HR pipelines or some combination thereof?

You're referring to the 43% attrition number that we reported, Brandt?

That's right, that's right. So did you combat that through either raising wage rates or did you combat it through just basically boosting your HR pipeline sufficient to offset the net departures?

I think it was really the matter that we are usually prepared for higher-than-average attrition so all preparation for this comes handy when you run through a period where you have a spike. We don't typically raise salaries intermittently. It's an annual event for us and so we were not combating that with any salary increase. Having said that, we do have a six-month review cycle. And therefore, some bonuses get paid out in the October timeframe.

Also, you have some promotions and other situations that get announced and made operational in the October timeframe as well. So in general, there is some seasonality effect you have because of the fact that people have got their bonus, that's usually a good time to resign or leave, as well as the fact that maybe some people have got some disappointment that they were not promoted.

Okay. Okay, great. And just one other question. I think this week is your customer get-together week. I don't know if it started or if it's starting soon, but could you give us some color perhaps as to what you're hearing from clients around new initiatives and just general things about outsourcing?

Well, the event actually starts in Kerala tomorrow and it's a three-day event called WNS Word. We are getting a very large number of our customers, as well as prospects, together and a lot of industry expert from some of the advisory organizations are coming there and joining our team and our customers in talking about outsourcing and key trends, as well as some very specific issues like increasing leverage of IT and outsourcing and stuff like that. So we are very excited about the event in terms of how many people of very high levels in the organization, as well as caliber and experience in this area have agreed to come together at that event. And at this point of time, I think the fact that people are excited to be there and excited about participating in an event that we are hosting. We don't have very specific things to report to but we'll be happy to talk about that at a subsequent date.

Great. Thank you very much.

And your next question comes from the line of Julio Quinteros with Goldman Sachs. Please proceed.

Hey, guys. Good evening. First of all, can I just get an update from you guys on competition? Last week, as we were traveling through India, we heard lots of commentary, obviously, from some of the pure play offshore BPO companies about positioning, competition, etc. But, increasingly, we're also hearing the multinationals talk about their positioning with regards to their own offshore BPO capabilities.

So can you just sort of give us a landscape in terms of what might be changing on the margin here? Is the environment expected to get more competitive as you kind of look forward? And how are you guys going to sort of position yourselves for the longer term?

I think, Julio, first of all, in general, we see the industry to be very healthy and a lot of activity around outsourcing and offshoring. That's a very positive trend. If you were here during the Nasscom event, it was probably the best-attended event that we've had.

Yes, I was there.

It gets better every year. So, overall, I think the pie is growing and that's a healthy trend for everyone. I think, secondly, as we've discussed in our road show and our subsequent communication, as well, we see three categories of competitors. We see the global players like Accenture and IBM. We see the IT players who diversified into BPO like Infosys, Wipro, and TCS. And that there are pure play players in the market as well. And our sense is that while the picture continues to be healthy for everyone, what we believe is distinguishing about our proposition in the market is really, a couple of things that continue to stand out.

One is the fact that we are positioning our services around industry-based offering is still a very strong driver for customers to make their decision on working with us. And some of the wins that we refered to have come against some of the best companies in the market. These are very big brand names. So our industry-specific value proposition is continuing to sell very well.

Secondly, from the perspective of the buyer, end of the day what really continues to matter is how good and if you're compatible, the operation of third-party bidding to them is. And on that front, again, running a very high quality operation, making sure that the operation itself talks the language of the client in terms of knowing its industry as well as knowing their functions, adding the functional expertise. Those factors still continue to be extremely important.

So our sense really is that it's a very attractive market. The competition's clearly there from all the three categories of players, but if you're again, very sharply focused on your key differentiators on which is for us industry expertise, as well as we still continue to run very, very high quality operations, then it's a very good market to be in.

Okay. And maybe for Zubin, back to the guidance on the net income side, obviously no change from where we were last quarter. The revenue growth looks a little bit better but we're not seeing the leverage on the net income side. Could you just go back through the comments that you made? There was something that you mentioned about a transfer pricing study, a European platform, and some other additional studies. I just didn't get all the details. Are those baked into the $30.5 million and $32.5 million or not?

Yes, both those are baked into that figure. Those are not something that we had initially anticipated when we started off the year. We mentioned this on the last call, however, that we were commencing these studies. One is in respect of due diligence to open an east European operation to compliment our English-speaking capabilities, particularly in the respect of European languages. We made significant headway out there. Similarly, we've also invested in some software in respect of a platform called Jade, which is in respect of passenger revenue accounting. We already have the software. We are just spending money to upgrade it and make it more competitive. We believe both these will result in both increase in revenue and profits in the months to come.

Okay, but these are treated as normal items. They're not unusual expenses that just weren't factored in when we started the year.

The only thing outside of the range that we've given on net income would be the conclusion of the transfer pricing study which we expect to happen in the fourth quarter.

Okay, great. Thank you.

And your next question comes from the line of Ashwin Shirvaikar with Citigroup. Please proceed.

Hi, thanks. I guess one of the questions I had was as I look at the BPO margins at companies like Infosys and Wipro, they obviously have higher margins. So should I look at that as the margin level you think you'll eventually achieve? Or are there factors that prevent you from getting there?

Yes, I think we have in all our previous communication suggested that, over time, the way our business model has been is that we will look to maintain gross margin in the range we are in today and provide leverage on reducing the SG&A expenditures as a percentage of the revenues of the company. And, also, a second statement we've consistently made is that we will not want to reduce SG&A or grow it to a point where we start compromising on our growth because we believe investors are still very attracted to our high growth story.

Well, our sense is that, overall, we would expect a margin improvement, but significant improvements will happen over a two- to four-year period. This won't reduce SG&A spend, but will come down as a percentage of revenue but still continue to spend on investing on growth as we've done with some of the initiatives we've taken in Eastern Europe this year.

The second thing is that it is hard for us to draw comparative with the BPO businesses. Lots of IT companies comparisons with BPO places, perhaps, a better way to look at that. And, overall, I think on that basis we feel quite satisfied with where we are today.

Okay, but in fiscal 2008, I should pretty much expect that directionally you will have modestly higher margins then? Not significantly higher margins. Is that fair?

We give specific guidance for that in the next few months. But that is not far out from the comments that we've made in the past on how we expect the future to look.

Okay, and one last question if I may. Any impact on your demand profile from the difficulty in the mortgage end market? Theoretically, I would expect that would be good for you but can you confirm that?

Ashwin, I think you're right. We've had a fairly good success with aftermath of our Trinity acquisition. We made that, keeping in mind that that sector was wanting to do offshoring, and secondly, they were an unofficial license to come up there which would make offshore even more attractive. At this point of time, we are very encouraged by the fact that we've expanded the customer base there and the prospects looks pretty good.

Okay. Thank you.

Your next question comes from the line of Julie Santoriello with Morgan Stanley. Please proceed.

Thank you. Just a little bit more on the margin side. On gross margins, these were a bit lower than we had saw and down, year-over-year, even if we were to adjust for the stock comp and back out of the deferred revenue. Can you talk about what's impacting the gross margin line, primarily? And also more specifically, how pricing is trending?

I think, Julie, if you make the adjustment for the $2.4 million and the stock comp, you'll find gross margins to be very similar to what they were the corresponding period of last year. As regards, yes, they are marginally lower than 37 to 39 figure that we had guided you towards. I just wanted to mention that if you even, right now, if you look at the margins for this period, they're actually at 36.9%. If you exclude the stock compensation charge of about $0.4 million, which is included in the cost of sales this quarter. We're very close to the 37% range.

Okay. And any update on pricing trends?

Pricing trends are a little bit steady. There have been one of those situations in the last quarter where the client was particularly aggressive in pitching the last two prospects against each other, and then trying to drive the price down. But, overall, I often see that pricing continues to be attractive. We do not see increase in prices other than the fact that some contracts have completion dates. Particularly, they are holding quite steady.

And just last thing. On the SG&A expense line, now that was much higher than we thought, over $1 million higher than we had thought for the quarter. And Zubin, I think you mentioned that there were increased travel expenses due to the higher sales. Should we expect a similar kind of SG&A dollar amount to carry forward into the March quarter? And how can we look at SG&A, generally, in terms of what's discretionary like new investments and new regions versus what's not discretionary like travel expense?

I think, Julie, we have two factors here. Third quarter in our fiscal year always tends to be the highest traveled quarter because this is a quarter where especially American customers are floating more RFPs and wanting more sales presentations and looking to loan more deals and it seems to be a high traveled quarter. We think the activity much larger than what we typically have which for the business is both good and bad but it tends to be high. So that's point number one.

Point number two is that we launched our Eastern European diligence initiative as well as the Jade platform initiative in this quarter, so therefore, you're seeing some impact of that come onto our SG&A and that as well.

Third is that there were some new senior hires that came into the team in Europe an origin of the people that we have announced as well as some resources that we inherited from the PRG acquisition that we announced in September as well. So if you add all these factors together, what you find is that you have SG&A is higher, but we still believe we are on target to achieve SG&A leverage for the year.

Your next question comes from the line of Mitali Ghosh with Merrill Lynch. Please proceed.

Yes, good evening, and congrats. Good quarter. My first question is on the attrition which has moved up this quarter. If you could take us a bit more through maybe some trends that you have seen in terms of possibly across levels and verticals and where you think the maximum pressures have really come from.

I think there are two changes in the market as far as we are concerned and some of them are actually a bit localized and not necessarily reflecting off of a very broad trend. The trend number one is that we've had, compared to last year, more attrition in Pune, whereas Mumbai has been kind of on the same line. Now, we've had some of the challenges of launching a new site and having processes that are launching a great scale. But other than that, I think it's not been totally unpredictable so the real issue for us has been that attrition in Pune has been higher than what it has historically been. It's a function of that city getting a lot of BPO activity.

And given the fact that we were the first company of any consequence to set up a BPO shop in Pune, we went to that city as far back as 1999 and we have a very experienced base of people. A very, very happy hunting ground for many people. So there is that localized factor which is there, and we are focusing very sharply on that and looking to address that over the next two or three quarters.

And the second trend really is that, historically, the attrition was a problem mostly for the voice market and data used to be stable. But over time, as specialized voice services and data services like F&A and some specialized areas of financial services and insurance also, need to people acquiring domain expertise. There, also, you'll begin to see attrition activity grow a little bit. So this year, we've had a little bit more of a spike in the data area because these skills have been more in demand.

We believe that this is an area where focusing back on career advancement and all the wonderful things we've done for people we've worked with. And largely, we've been a company that's grown out of transactions processing data work and insuring that we continue to emphasize the leadership and build good careers here is something that is a problem that is well within our reach to solve. But there's a clear trend that attrition in the data area is turning up in the entire industry.

Okay, and in terms of some of the metrics for the quarter, if you could take us through how utilization trended. Your shift utilization and seat utilization.

Utilization across the company has increased to 2.1 on used seats and 1.6 on total seats. This is particularly encouraging because these metrics were achieved despite the addition of 2,243 seats or 35% in the nine months ended December 31, 2006.

So this is for the nine months or the fourth quarter -- the numbers you gave us?

This is the point in time of the 31st December.

Okay. And just one last question on the forex. Would you have a number forex gains or losses this quarter? And also, your tax rate moved down a bit. Is that connected to that?

Yes. The U.S. dollar has appreciated against the GBP and the Indian rupee has appreciated against the U.S. dollar for this particular quarter. The GBP appreciation clearly benefited us. However, that was somewhat offset by the rupee appreciation as well because our costs increased as a result of that. The two factors have balanced each other out for this particular quarter, not creating any material currency translation impact on the P&L.

Okay, and the tax rate would be because of mix?

The tax rate has been because of mix. However, like I said, going forward, subject to what happens with the development of transfer pricing study, you could see that rate going up in the future.

Sure, sure. And just one final question if I may to [inaudible]. You mentioned in your opening remarks that it was looking quite healthy, the environment. If you were to think about it, maybe six months back and what the situation is today, would you say that your pipeline is much stronger for the next 12, 15 foreseeable months?

Yes, I think I would say that it is stronger. We've seen significant strength in BSFI, travel, and any of the emerging businesses. Again, the pipeline's very healthy today. One big difference that also is a [inaudible] that when you are in the September, or August-September-October period, you're largely focused on getting more business from existing clients. But things start to change starting November, when a lot of new contract situations come into play. So at this point of time, what we find is that the pipeline for new customers, especially, is very healthy. And as we've usually done, we continue to grow our existing client relationships as well. So I would say the pipeline is healthier today.

Thank you very much.

[OPERATOR INSTRUCTION]. Your next question comes from the line of Christine Pezino with JPMorgan. Please proceed.

Good morning. I just wanted to dig down a little bit more on the margin profile on some of the leverage you have. You mentioned that you're ramping new clients at a faster rate, you had higher sales activity, the Eastern Europe due diligence. And then, you said something about upgrading the IT platform. Can you go maybe go through these four different things and talk to us about how much of these are going to be ongoing costs that continue throughout the next year, possibly two years? And what exactly the investments are that you're making, specifically as it relates to the IT platform, also.

The IT platform, we expect a substantial amount of it to be completed and to be one time by the fourth quarter of this year. As regards East European initiative, I think a fair amount of the due diligence will be done this quarter. It could slip into the first quarter of the next year. However, when the entire operation starts at the new center, those financials will be communicated as part of the guidance for the following year. But the due diligence and the setup costs are all a one-time cost.

Okay.

Which were the other two things, if you could repeat them?

The higher sales activity and the ramp up of new clients at a faster rate.

I think from a sales standpoint, what we are saying is that in the last quarter, we booked our [inaudible] business in the BFSI area. We also had expansion to the other two areas as well. And as we enter this quarter, particularly in BFSI, we've watched some very good momentum and doing technical pursuing right now. And the pipeline looks very healthy. So for what it's worth, I think at this point of time, we are feeling very good about this year. And, in general, if you look at some of the parts we had on our growth rates in terms of where we see ourselves growing over a longer period of time, we believe that the trends are pretty much in shape for us to [inaudible].

I think on the question on the high ramp ups, if you look at the last three quarters, we've had over, I would say, 3,200 of net new additions in the course of the nine-month period. This was ahead, we were ahead of target here, and especially in the first two quarters of this fiscal, we were significantly ahead of target. And that's [inaudible] to the fact of a couple of things. One is that we've been very successful in farming some of our older clients. And secondly, even with some of the new clients that we signed towards the later part of last year, we've had ramp ups that have been very successful. In fact, numbers that have been higher than what we'd originally projected. So that's essentially something that is driven largely by the fact that we are delivering well, and we are executing well on the pilots and the early stages of our ramp ups, which is leading us to be able to ramp up much faster.

Okay, that's great. Thank you. And then the other factor you cited was the recognition of deferred revenue which seems to be something that happens on a quarterly basis. So, I guess, what was different this quarter? And is that something that we can expect to happen in the future as well?

Yes. This $2.4 million was actually a revenue which we effectively earned. That is, we incurred the cost for that in the year ending 2004-2005. And if you look at our prospectus, this $2.4 million has been mentioned as deferred revenue carried forward from the previous year. We normally have very little deferred revenue which is carried forward on a quarter-to-quarter basis. If at all, it would be in the $50,000 to $100,000 range. This $2.4 million was a one-time exception.

And if I can add to that, that's clearly a one-time event. You don't see that happening. The reason that it incurred was that with that client, the mix of work was -- the pricing was split into two types of work and there was a third mix of work that was [inaudible]. What ended up happening as we rolled it out was we did more work on some of the higher priced processes.

And so therefore, it took a long time to assess what the right -- where we ended up on the mix that we achieved. And the revenue was deferred because we had to go through the process and reach agreement with the client. So it is clearly a one-time event. We don't see this occurring but I will mention that if you look at our growth rates, you should factor in that this happened in the comparable quarter last year.

Okay. Got it. Thanks. And then, just my final question. Can you update us on any progress you're making in moving towards the per-transaction pricing with clients? How is that evolving this quarter?

On many of the new projects we have signed, we've got a per transaction rate from day one, or very quickly after day one. So, in general, I think we are pushing this model a lot faster with new situations than we have historically done. We mentioned that, earlier, that the British Airways contract that we've renewed was going to have a substantial portion shift to unit transaction price. While some of that has happened, some of that is still under negotiation. But in general, as a company, we are being more aggressive about pushing business to that level.

Okay, thanks.

At this time there are no further questions. I would like to turn the call over to Mr. Jay Venkatiswaran for closing remarks. Please proceed.

Thank you, Tawanda. Thank you all for joining today's call. And, as always, you can find all of the filings on our website at www.wnsgs.com. Thank you.

Ladies and gentlemen, that concludes the presentation. You may now disconnect and have a great day.