WNS (Holdings) Ltd (WNS) 2009 Q4 法說會逐字稿

Good morning and welcome to the WNS Holdings' fiscal 2009 fourth-quarter and full-year earnings conference call. At this time, all participants are in listen-only mode. After managements' prepared remarks, we will conduct a question-and-answer session and instructions for how to ask a question will follow at that time. Now I would like to turn the call over to Alan Katz, WNS' Vice President, Investor Relations. Please proceed.

Thank you. Good morning, ladies and gentlemen and good afternoon and good evening to those of you joining us from Europe and Asia. Welcome to WNS' fiscal 2009 fourth-quarter and full-year earnings conference call.

With me today I have Neeraj Bhargava, WNS' Group CEO; Alok Misra, our Group CFO; and Anup Gupta, our Group COO.

By now, all of you would have seen our press release detailing our quarterly and full-year results. This release is available on the Investor Relations section of our website, www.WNS.com.

Following this call, we will post slides on our website summarizing the presentation. If you have any trouble finding this information, please e-mail us at IR@WNSGS.com and we will e-mail it to you.

Today's remarks will focus on our recently announced results for the fiscal fourth quarter and full year ended March 31, 2009. Some of the matters that we will discuss in this call are forward-looking and you should 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 our Form 20-F, which was filed with the SEC in August 2008 and is also available on our website. We will be filing our fiscal 2009 Form 20-F before the end of the month, which will also include a similar section on risk factors.

During this call, 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 issued earlier today.

Some of the non-GAAP measures we will discuss are defined as follows. Net revenues are defined as revenues less repair payments and adjusted net income is defined as net income, excluding amortization of intangible assets, share-based compensation, related fringe benefit taxes and minority interest. These terms will be used throughout the call. I will now turn the call over to Neeraj.

Thank you, Alan and thank you all for joining today's call. Before I begin our prepared remarks, I will quickly outline the agenda. I will start by providing a brief update on WNS' financial performance during the past quarter and the fiscal 2009 year. Then I will comment on the projected numbers for fiscal 2010. Finally, I will talk about some recent client additions and expansions and the current state of the market.

Following my remarks, Anup will discuss our pipeline and some of our key operational achievements in the quarter. Alok will then provide additional details on our financial performance, our balance sheet and our outlook for fiscal 2010. We will then take your questions.

To start, we had a solid quarter and our team continued to show strong execution. In terms of our financial performance this quarter, we grew our net revenue by 27.1% to $95.5 million compared to the fourth quarter of fiscal 2008. Our adjusted net income grew by 34.5% to $13.6 million. For the full year, our net revenue grew by 32.9% to $386.4 million and our adjusted net income grew by 26% to $46.6 million.

You may recall that on our last two earnings calls, we highlighted the volatility in the British pound and as a result, lowered our revenue guidance. We finished the year in line with this revised guidance. You may also recall that we maintained our adjusted net income guidance that we established in July of last year. Because we managed our operations tightly and maintained a prudent approach to hedging, we have now delivered on our profit guidance.

Moving on to our outlook for fiscal 2010. Our net revenue guidance is $385 million to $390 million. This is based on an average rate of the US dollar to the British pound of $1.40 to $1.45. Compared with our fiscal 2009 net revenue, this represents a growth of 13% to 14% on a constant currency basis. This also represents an organic growth rate of 7% to 8%.

While we have announced a number of new clients this past year and have several others in the pipeline, we are being conservative in our revenue assumptions. We see the revenue growth from these clients offsetting revenue reductions from the weaker pound and potential volume reductions, especially from clients in the travel and insurance sectors.

On the profit front, we expect to achieve adjusted net income of $50 million to $52 million for the fiscal year ended March 2010. This represents a 7% to 12% growth rate compared to fiscal 2009. This is based on an Indian rupee to US dollar exchange rate of 49 to 50. We expect to continue to achieve this improvement in profitability in the next fiscal year based on continued improvement in our operations.

In the past few quarters, we have demonstrated very strong profitability. This has been achieved through acquisition synergies, direct expense reductions, SG&A improvement and our hedging program. In combination, they effectively protect our bottom line.

Our operating business net of currency changes is still strong and we should continue to see organic growth on a constant currency basis in the next year. We are seeing increased activity in our sales pipeline and are making progress in farming opportunities and [ramp-ups] of recent closures. However, this has been somewhat offset by the decline of the British pound and volume pressures from some of our clients in travel and insurance.

First, in our travel business, our clients have forecasted declines for the next fiscal year. While we are currently doing modestly better than these forecasts, we are being conservative and have factored in the full impact of the decline into our guidance.

Second, our insurance clients are also forecasting reduced volume. We are discussing several new business opportunities with these clients, which could mitigate the impact of the reduction in volume. In our auto claims business, while the integration of Call 24/7 is progressing well, we are seeing reduced volumes and margin pressure as a consequence of the economic environment.

We have already factored these forecasted volume declines into our guidance. Some of these pressures will be offset by recent renewals and better pricing, new client ramp-ups and expansions with existing clients. While there could be some upside potential in our overall assumption in the current environment, we have chosen to take a more conservative approach to our guidance.

Finally, we continue to invest in business transformation capabilities and sales and marketing. We have added senior resources to our transformation group and we are seeing benefits from the BizAps acquisition for our rapidly growing F&A business. We are raising our visibility with the advisor community and continue to add sales resources in high potential areas.

In other areas, our business is mostly stable and we see normal growth and farming opportunities in our client base. Overall, we had a good quarter and year and grew organically net of currency. The impact of currency fluctuations on our top line continues to be our primary challenge as indicated in our guidance. However, we are managing this impact and as I mentioned, mitigating the profit effect through tight control over our costs and our hedging program. I will now turn the call over to Anup to talk about our pipeline and operating performance.

Thank you, Neeraj. I will begin by discussing our sales pipeline. In terms of growth in the last quarter, we added two new clients and expanded key relationships. Our wins were in the financial and accounting area with a leading legal firm and another in the insurance industry. We expanded our relationship with a global travel services leader by providing them new recovery services. This revenue-enhancing service has a bottom-line impact for our client. It requires deep domain expertise and an IT platform and is a good example of a lever that we have to offset volume pressures in the present environment.

We also expanded our long-standing relationship with a financial services company and we will see growth as our client consolidates its operations across the world.

One of the important renewals in progress is our contract with a leading consumer goods player. We finished the renewal discussion and expect to get the new contract signed this quarter. With this renewal, none of our top 10 clients, which accounted for about 65% of our net revenues this quarter, come up for renewal prior to the end of 2010 calendar year. And contracts, this client is presenting about 50% of our net revenues, go out until at least 2012.

On our February call, we discussed that we expected to see two key prospective clients make their [sales] by the end of the fiscal year. I am delighted to share that we have been awarded one of these contracts. The other opportunity is on hold at this time.

In terms of growth opportunities and areas for expansion, we continue to see a high level of activity in the finance and accounting area across all industries and industry-specific opportunities across these sectors. The early stage of our pipeline continues to be active and remains healthy. However, sales closures are still taking longer.

I will now turn to our margins for this quarter. Our gross margins before share-based compensation continued to remain very strong this quarter at over 35%. This compares with 38% in the third quarter. The decline was mainly due to currency.

Operating margins before share-based compensation and related fringe benefit taxes were also strong this quarter at close to 20%. This compares to 22% in the third quarter. Again, the decline was due to currency, which was mitigated by an improvement in operating performance and offset by lower hedging losses at an ANI level.

Our success in maintaining our [currency assisted] margins this quarter was a result of ongoing improvement at our operations, including tighter bench management and increased productivity. We also continued to manage our cost base more efficiently.

SG&A costs, excluding share-based compensation and related fringe benefit taxes for the fourth quarter of fiscal 2009, were 15.6% of net revenues, 17 basis points lower than the third quarter of this fiscal and 920 basis points lower than the same quarter last year. This is a result of an improvement in operations, the weaker rupee and a lower SG&A associated with some of our acquisitions. As we discussed in our last call, most of the synergy benefits have now been realized and the trajectory of the improvement in SG&A will flatten.

In terms of our Aviva business, we have integrated the acquisition successfully and realized many of the synergy benefits faster than we anticipated.

Our operations outside of India continue to grow and we now have close to a total of 1500 employees in our overseas locations.

I will now discuss some highlights of our operating metrics from the last quarter. First, our customer satisfaction showed a notable increase to over 8.1 on a scale of 10 compared to over 7.9 a year ago. This is a major achievement in the present environment and a testament to the value that we bring to our clients.

Secondly, I am particularly proud of the reduction in our attrition numbers this quarter. Attrition declined to 22%, down from 29% last quarter and 38% in Q4 of fiscal 2008.

The employment market in India is softer compared with this time last year. We have seen lower wage inflation this year than in the past several years. Salary hikes will be in low to single mid-digits compared to 7% to 8% last year and 12% to 14% the year before.

In terms of headcount, we ended the quarter at 21,356, up from 21,328. Let me now hand over the call to Alok who will take us through our financial performance in detail.

Thank you, Anup. As you have already heard on this call, our financial performance this quarter and year was impressive. Our net revenues grew by over 27% to $95.5 million this quarter while gross margins, excluding share-based compensation, were at 35.2%, a decline of 200 basis points compared to the same quarter last year. The decline was mainly the result of the weakness of the British pound against the dollar.

Fourth-quarter fiscal 2009 operating margins, excluding share-based compensation, related fringe benefit taxes and amortization of intangible assets, were 19.6% compared with 12.4% in the fourth quarter of the prior year. This significant improvement was due to the improved scale benefits and operating leverage combined with the effect of a weaker rupee and in spite of a weaker pound. Our fourth-quarter fiscal 2009 adjusted net income was $13.6 million compared with $10.1 million for the fourth quarter of fiscal 2008.

The Indian rupee continued to weaken this past quarter, which benefited the cost side of our business. However, the rupee has remained range-bound recently. Over 70% of our costs are in rupees. So the decline against the US dollar helps to offset hedging losses that we have from the rupee hedges that we had taken last year. Our hedging losses have reduced this past quarter and will continue to come down further in fiscal 2010. We are currently almost fully hedged for fiscal 2010 and are also hedged for a part of fiscal 2011.

It is important to remember that we use a combination of options and forward contracts so we will have the ability to ride some of the upside if currency is moved in our favor.

Total FX losses for the quarter were less than $200,000. We had about $1.8 million of hedging losses in the quarter, including the cost of options. However, this was offset by a gain in our P&L from the revaluation of nonfunctional currency balances to the tune of approximately $1.6 million.

Let me now turn to some of the numbers for the full fiscal year 2009. For the 2009 fiscal, our net revenue grew by 33% to $386.4 million, while gross margins, excluding share-based compensation were at 34.3%, an improvement of 30 basis points compared to the previous year.

Fiscal 2009 operating margins, excluding share-based compensation, related fringe benefit taxes and amortization of intangible assets, were 17.4% compared with 11.3% in the prior year. Again, this improvement was due to improved scale benefits, operating leverage and the depreciation of the rupee. Our fiscal 2009 adjusted net income was $46.6 million compared with $37 million in fiscal 2008, a growth of 26%.

Currency had a significant impact on our results for this fiscal year. Total FX losses for fiscal 2009 were $8.3 million. This compares to a gain of $2.9 million in fiscal 2008. This year, we had $11.3 million of hedging losses, including the cost of options. This was offset somewhat by $3 million of gains in our P&L from the revaluation of nonfunctional currency balances and the mark-to-market of ineffective hedges.

A strong balance sheet and access to additional capital remains a focus for us. In fact, this was one of the several key metrics that we promised to focus on during the last year.

I will now review all of those metrics, starting with the same balance sheet metrics that we have highlighted on our last few earnings calls. As of March 31, our cash balance was $47.9 million. We generated $22.4 million in cash this quarter from operating activities, due primarily to improved profits and helped in some measure by the improvement in working capital.

Our current monthly operating cash flow remains above $6 million. This is approximately the monthly cash generation that we anticipate going forward. We've maintained our free cash flow generation of approximately $5 million per month prior to debt repayment. During this quarter, we generated a total free cash of $16.8 million.

Working capital management was a particular point of focus for us. Our DSOs improved dramatically in the third quarter to what we believe are industry-leading levels. We maintained that level this past quarter at 42 days. We are paying quarterly interest costs and continue to reduce our leverage through our cash flow generation. We remain within all of our debt covenants.

We are very comfortable with our leverage and our liquidity position. In fact, given our free cash generation this past quarter, in April, we pre-paid $5 million of our debt. We continue to generate the same level of free cash and we will consider another debt repayment when we make our initial scheduled installment payment in July.

In terms of working capital, we have a line of credit available to us with additional flexibility and protection. We still have some short-term debt outstanding in the Call 24/7 business; although it is lower than the level at the time of acquisition. This debt is at a very favorable rate.

Our agenda for the past fiscal also included a focus on providing investors with more insight into our financial and operational performance. My team has made some great progress in this regard. We now provide a quarterly metrics sheet, an official transcript of the call, an investor presentation and we file a long form 6-K, which goes beyond minimum disclosure requirements.

It is also our goal to reduce the time taken to release earnings and file our 20-F. Towards this end, we have already advanced the dates of our quarterly earnings release and plan to file our 20-F for fiscal 2009 by the end of this month. We will be holding our Investor Day tomorrow, during which time we will provide additional detail on our fiscal 2009 performance, the current operating environment and the long-term growth prospects for WNS.

Operationally, we still continue to see significant CapEx savings opportunities from the integration of our recent acquisitions. We had a total CapEx spend of $23 million this year and will reduce this to approximately $15 million during fiscal 2010 due to these synergies.

Finally, Neeraj discussed our net revenue guidance for fiscal 2010 of $385 million to $390 million. This net revenue guidance reflects both the volume and currency pressures that we highlighted earlier on the call and the growth that we expect through farming and new business opportunities. The guidance is based on an exchange rate of $1.40 to $1.45 to the British pound.

In terms of profits, our adjusted net income or ANI guidance for fiscal 2010 of between $50 million and $52 million reflects the operational improvements that we have highlighted on this call. This implies an adjusted EPS of between $1.14 and $1.18 to a diluted sharecount of approximately 44 million shares.

In summary, we are in a strong quarter and we ended a challenging year on a very positive note despite two major headwinds -- currency and the economy. We remain focused on growing our business and as we indicated, expect to continue to see our profitability improve in fiscal 2010 as a result of our operating focus and the declining rupee.

We have demonstrated that our cash flows are strong and that we can use this cash to pay down our debt. We look forward to providing additional detail on our operating and financial performance and our outlook for the future at tomorrow's Investor Day in New York. If you would like additional details about the day, please e-mail us at IR@WNSGS.com. This concludes our prepared remarks for today and we would now like to open the call for questions.

(Operator Instructions). Tim Fox, Deutsche Bank.

Hi, thanks. Good evening. Alok, if I could just dig in a little bit to the results, maybe you could help me walk through the net benefits to other income from currency. It looks like you benefited -- I think you had guided to around a $3.5 million loss in other income and it came out a net positive. And obviously drove some upside to earnings. Is that sort of the right way to look at it and did you -- were you hit negatively in the gross margin area to offset -- I am just trying to get a sense of whether this was sort of a clean bead from a net income perspective?

Yes, so effectively, Tim, what we lose on the operating line, you make up on the FX line. So if you look at our operating margins, we have dropped about 220 basis points from 21.8% last quarter to 19.6% this quarter. That 220 basis points is actually the net effect of a 280 basis point decline due to currency and a 60 basis point improvement due to operational improvements. And that 280 basis points then gets offset by lower FX losses in the FX line. So if you see -- in fact, when we guided earlier to the $3.5 million, we had said, at that time, that $3.5 million was what we expected in Q2 and Q3. In Q4, we expected that to come down because the old hedges would start running off. So this quarter, as you see, we had $1.8 million of hedging losses.

Now the restatement piece is something that is difficult to predict because it depends on the date on the balance sheet. Sorry -- the exchange rate on the balance sheet date. So in this quarter, it moved a little bit in our favor, so we got a restatement gain of 1.6. So that is why the net effect on the P&L was a 0.2 or a $200,000 loss.

Got it. Okay, that's very helpful. Thanks. And just to go back to -- I think it was Neeraj that was giving the guidance growth rates, constant currency, organic. It was 13% to 14% constant currency and 7% to 8% organic?

That is correct.

That is correct.

Okay, great. Thanks. And Neeraj, just one follow-up for you. Can you talk a little bit about the Aviva business? Obviously the integration has gone well and you are starting to see some operational efficiencies. Can you talk a little bit about, from a growth perspective, is it living up to your expectations at this point and in fiscal 2010, as the environment improves, are you looking at other opportunities outside your current business with Aviva? If we could just --.

Well, there is a couple of points to that, Tim. In terms of the business and we have today, given the market environment, we are seeing some modest decline in volume, which is part of my comment that I had about travel and insurance and Aviva is not an exception there either. But at the same time, I think there are quite a few advanced discussions we are having on new operations with them.

So overall, I think we are still feeling very good about it. As we mentioned earlier, our integration is ahead of track. Our capture of synergies is ahead of track. From a margin standpoint, we are doing quite well on that business and we continue to feel very, very good about the acquisition.

Wonderful. And one last if I might, maybe you will go over this tomorrow, but, Alok, is there any sense of a cash flow from operations guidance for fiscal 2010 at this point?

So I think what we have said is $6 million a month is what we expect going forward as well. We have been saying that for a while now, Tim, so we still stick by that $6 million a month of operating cash. As you can see, we have brought our CapEx down because, like we had mentioned earlier, we get some of those synergy benefits from all the facilities that we got through the Aviva acquisition. So our CapEx has shown that decline. So we are projecting, what is it, a 33% decline in our CapEx to about $15 million for next year.

Wonderful.

So you will get roughly $5 million free cash per month.

Per month? Okay. Thanks. Nice execution. See you tomorrow.

Thanks.

Joseph Foresi, Janney Montgomery Scott.

Hi, guys. I wonder if you could first just walk through the math, Alok, on how you got to the 13% to 14% constant currency and also how you get to 7% to 8% organic.

Okay, so if you take next year's exchange rate and put that back into fiscal '09, add $1.40 to the pound, our revenue would have been about $340 million to $345 million. And so from that base, if you go to $385 million to $390 million, that is a growth of around 13% to 14%. If you take $20 million as roughly the contribution of one quarter for Aviva, and you're looking at it for each quarter because obviously during the last year it grew a bit, so if we take the first quarter of last year, it would have been approximately $20 million. If you adjust for that, you will get 7% to 8% of organic growth.

So essentially just to sum up, you are basically taking the current exchange rate and applying it to last year?

That's right.

Joe, there is another --.

Another way to do it is --.

If you take -- this year's our projection at 1.72, which was the average currency rate for last year. Either way you take it, you work out to the same number.

You should end up at the same 13% to 14%.

Right. And then with Aviva, you are counting $20 million from the first quarter going forward?

That's right.

When did you close the Aviva deal?

July.

July.

11th of July.

So effectively, there is one quarter of inorganic benefit that we have from the Aviva deal.

Okay, got it. And then just secondly on visibility, I wonder if you could talk about what your visibility is this year versus last year and maybe some level of -- what level of conservatism you think you are taking at this point?

Well, historically, Joe, we have always had visibility of about 87% to 88%, north of 85%, but below 90%, of our projected revenue for the fiscal year at the beginning of the year. This year, given the environment, we have got visibility of about in the low 90%s. So we are being quite conservative about growth given the fact that we still would have some concerns about the environment. But we hope for the best.

And then if you could talk a little bit on the pricing side and what you are seeing out there. We have seen a couple of your competitors say that the pipeline -- First, I guess, first on the pipeline, the pipeline is pretty strong, but it is taking longer to close deals and then if you could talk just a little bit about pricing.

Sure, this is Anup here. I will take that. I think broadly pricing, as you have said before, continues to be stable and rational. What we see is that there are some isolated cases where clients have come back and given the pressure they are facing on their business, had a pricing discussion. But again, we are able to offset that by doing some efforts for joint productivity improvements, also looking at where the rupee is today to where these deals were done. It is not an overall trend at the moment. Like you would remember, we did around for significant renewals over the last year and most of them were on better terms because our clients have seen value from our relationships come to them over the last three to five years they have been working with us. So in general, we continue to feel good about pricing at the moment.

What I will add to that is that all our top 10 clients are now renewed through the minimum of end of 2010. So nearly 19 months from now is when we will have the next discussion with any of our top 10 clients. These clients represent over two-thirds of our revenue. So we expect to see, at an overall level, a fairly benign environment as far as pricing is concerned.

And then just on the pipeline, what does that look like versus last year and is it taking longer to close deals?

The pipeline I think is looking pretty decent. We are fairly excited about things we see particularly in the next one or two quarters. So it is a little bit better than what it was at this time last year.

Okay, great, thanks.

Ed Caso, Wachovia.

Hi, good evening. This is [Chris Whitman] for Ed Caso. I know in your opening comments you talked about reduced volume decline expectations in the travel business. Do you expect growth in that business in 2010 on a constant currency basis?

On a constant currency basis, we expect the travel business to be flat or modestly declining. Based on the forecast that we have got, and as I mentioned in my remarks as well, that based on our observations for about the first quarter by means of this year, we are doing modestly better than the forecast that we got from the clients.

Fiscal 2010 or calendar 2010?

Fiscal?

Unidentified Company Representative Fiscal, yes, yes.

Great, thank you.

Tien-Tsin Huang, JPMorgan.

Thanks. I had questions on the expenses. I know there is a lot of FX impact, but is there a way to look at a clean, sort of sequential change in your operating expense structure? Maybe just talk about how you have cut some of your discretionary spending just so we can get a clean run rate. I know the acquisition is going to change it, but I just want to get a better flavor of what you're doing to control your expenses.

So if you take the average of Q3 and Q4, you should be able to get a pretty good run rate for our SG&A expenses. As you have seen, we have been bringing that down. Some of that is, like you said, currency. But if you look at the currency rates for the fourth quarter and next year, they are pretty much in line.

So like I explained earlier, if you look at our operating margins quarter on quarter, they have come down 220 basis points. And that is -- the net impact of that is really of the 280 basis point hit due to currency and a 60 basis point improvement due to the operations. That 60 basis point improvement, like we said, we'll flatten going forward mainly because we have pretty much squeezed out what there was. If anything now, we may need to invest a little bit in our sales and marketing efforts and that is what we are looking to do next year.

Okay. And then just -- I caught some of the hedge accounting. Just at a higher level, Alok, are you comfortable with sort of the hedge efficiency and given the dollar change contribution from different currencies across the globe? I guess the better way of asking -- just understanding -- are you well hedged from a matching standpoint? Are you under or overhedged? How are you tracking that?

So we have a very process-based hedging program. I am not sure if we have discussed this before, but our hedging horizon is about 24 months. Right now, we are pretty much fully hedged for 2010, as I said in my prepared remarks. Yes, 2010 fiscal. For 2010-'11 fiscal, we are already approximately halfway hedged, 50% hedged.

So we build our hedging portfolio over a sort of 24 month horizon and we build it like a systematic investment plan. So there are no knee-jerk reactions. It is pretty much process-driven, so this is in pretty good stead. If you see our hedging losses have actually been coming down over the last three quarters. And you'll see that come down in the next fiscal again. I think we are appropriately hedged. Some of hedging is always -- different people have different opinions on hedging, but I think we have stuck by our process and it has stood us well over a period of time.

And the quarterly cost of the hedge to you again was?

This quarter, we had a hedge of $200,000 net and that is the net effect of hedging loss of $1.8 million and a restatement gain of $1.6 million.

Right. No, I am sorry. The actual cost of the hedge to execute it.

So there are forward -- forward contracts don't have any costs.

Sure.

And options, we pay a premium for the options. It depends on the mix of options that forward in that particular quarter. We haven't really gone out and given separately what the cost of our hedges are because options vary quarter to quarter. So can't really extrapolate that.

Okay, thank you.

Joseph Vafi, Jefferies & Co.

Hi, gentlemen. Good evening. I was wondering if we could turn back to the revenue line for a second, if we kind of looked at your fiscal Q4 numbers relative to your guidance and then kind of reconcile that back. Well, actually, look at Q4 and reconcile that to your guidance and some of your growth metrics. If we kind of annualize Q4, which I would imagine would have some of the travel weakness built in and the British pound effect kind of fully in there, when we look at the guidance for the next fiscal year, this fiscal year, we kind of are flat basically on a run rate basis relative to Q4 for fiscal '10. And I was wondering, kind of looking at the business, is that the right way to look at it, that we are kind of expecting flattish results relative to the guidance on the top line versus Q4?

Joe, this is Neeraj. Let me answer this one. You are right about the British pound. I think the British pound average for the quarter was $1.44, which is well within the range of $1.40 to $1.45, which we will do for our guidance. But the key point I wanted to make on the business volumes or levels going forward is that what we have got here is a combination of two things. One is, on the positive side, we have growth coming both from existing and new clients, which continues to be the case for us.

On the negative side, we have forecasts from both travel and some insurance clients for auto claims in particular, which are significantly lower than what they are running at current levels. So the impact of the decline in these two areas has not been reflected in the last quarter's results.

Having said that, we are one month into the next fiscal already. We are seeing business activity modestly level -- modestly higher than the forecasts that have been given to us. So we are optimistic that we may have a volume upside, but at this point of time I think we think in the current environment it is going to be very conservative. Base your guidance on the forecast that the clients are giving you, and hopefully, things will turn out to be better.

So yes, overall, it does reflect a flat business, but it is largely driven by volumes that we see from these areas offsetting gains we are having from existing and new clients.

Okay, that's helpful. Maybe if we could -- just a little more on the travel sector. You know, as someone who travels a lot on airplanes, at least domestically, I am noticing the planes are very full these days. Do full planes -- is that good for your business or are we talking about volume declines in other areas that might not be just reflective of the volume that the carriers are -- they currently have on their airplanes?

Yes, so I think in general, full planes are good for our business. It means higher levels of activity, which obviously translates into more business for us. Now their plan which also works for us is exceptions, (inaudible). So any disruption event, could be bad weather or could be some other local disruption, also creates a lot of work for us.

So what we are seeing in early signs yet, as Neeraj mentioned, is that the volumes in the first month in some areas were actually higher than what we had projected. So it is too early to call it as a trend, but if that continues, obviously that will be good for us.

Okay, that's helpful. And then just one more on the outlook. Is there any maybe price concession built into the top line for fiscal '10 versus fiscal '09?

Yes, I think as we mentioned earlier, a bulk of our large clients which account for a very significant portion of our revenue, what we have in store in terms of work with them as well as prices are very well negotiated already.

So any assumptions we have had to make on pricing, we have already done. But as Anup mentioned earlier, the impact of price changes, we expect that to be very little during the course of the year.

Okay. Can you just remind us again how large travel as a percent of revenue, or it was in Q4?

26% of our revenues come from travel.

Okay, and then maybe just one final one. I know with the Aviva acquisition, you were looking at some efficiencies there; maybe see turns, things like that on the Aviva facilities. I was wondering if we could get an update on that.

I think on every dimension of the Aviva acquisition, whether it is better utilization of their infrastructure or, you know, cutting down non-operating overhead costs, I think we are doing spectacularly well. The acquisition is very well-integrated, and we are clearly ahead of our targets as far as our margins are concerned.

Okay. And then maybe just one final one. I know there were some -- and I think maybe Tim asked earlier on growth opportunities in Aviva -- I know there were some areas within Aviva's organization that were not part of the deal that were potential new areas for some BPO opportunities. I was wondering if we have any update on new Aviva units that may be coming online with you.

There are very, very active and exciting discussions right now. We haven't closed a big one. There has been small movement, but we are very, very optimistic that, in the next quarter or two, there should be some good news there.

All right. Thank you very much.

[John Brewis], Baird.

Yes, hi, guys. Nice job on the free cash flow this quarter again.

Thanks.

I have a quick question on -- it looks like your interest expense picked up again sequentially. I was just wondering if there was something going on there with -- maybe with the prepayment or just --?

That is very faint.

Could you please repeat your question?

Yes, sure. The interest expense ticked up again sequentially and I was just wondering kind of if there was something going on there with the prepayment or how to think about that going forward.

So if you see we carry on our balance sheet the mark-to-market loss on the interest rate swap. So while we have factored in our calculations almost 7.3% effective rate, which is 350 on the margin and 380 on the LIBOR that we have fixed, adding up to 7.3% LIBOR today is actually ruling below 1.2%, so that mark-to-market loss we carry on our balance sheet. When we prepay on the loan, the entire interest rate swap for the entire duration of the loan needs to be unwound. So we took a hit of about $700,000 on account of the mark-to-market unwinding.

Got you. That's helpful.

That is the delta for this quarter.

Yes, thanks. That makes sense. And then my second question would be the margins in the auto claims business have bounced around a little bit with some moving parts around FX and some synergies with the acquisition there. And just kind of wondering, we are now at -- Q4 is kind of a good base to look at going forward or how to think about margins in that business.

No, actually Q4 was affected a little bit because of seasonality. So like we had explained on earlier calls, strangely enough, that business gets affected a lot by weather. Because when the weather is bad, accidents increase and therefore, our business increases. But if the weather is very bad, nobody drives and our business comes down. So given that seasonal adjustment, last quarter was slightly higher than normal. Besides which, the business mix is also changing and the growth we are seeing is in segments of the business, which have slightly lower margins.

So we would expect that segment margin to start trending downwards and as volumes are also coming down a little bit because obviously people are buying fewer cars, especially in the UK and driving less so the volumes of the business itself are coming down. So that segment's profitability, I would expect, would come down a little bit in the next year.

Got it. That makes sense. Thanks, guys.

Ashwin Shirvaikar, Citigroup.

Thanks. Could you comment on the pipeline by vertical and geography?

Sure. Pipeline right now in the US has actually picked up considerably. We see all signs of the US market getting more interesting this year a bit faster than UK and other parts of Europe. In the US, the pipeline is interestingly strong in financial services. We have seen one expansion from an existing client, which frankly we were waiting for that to happen for nearly two or three quarters, but they were just distracted so that happened. We are also seeing at least two or three interesting deals in financial services in our pipeline.

The second area that is really strong in the US is the consumer sector, the consumer products and retail area, where we have seen a fairly strong pipeline. We also are in very active discussion on one particular situation with a telco, which, in the F&A side, which we have had closures in the UK in that area before, but US is sort of a new market for us there. So I mean those are the sectors we see to be quite strong.

In the UK, we see, once again, financial services and insurance to be quite strong. We are seeing some activity in industrial there as well, which is looking pretty clearly good. But in general, our view is that we expect more closures in the US in the next quarter or two. Our sense is that the UK and Europe will perhaps be still a bit more distracted in the coming quarter, but will start to free up more after the summer. And we are particularly excited about what we are seeing in the US right now.

Okay, that is good to hear. Moving on to the cost line. The 2010 adjusted operating profit guidance on roughly flat revenues, you are definitely indicating higher incremental profitability. Can you delve a little bit more into how -- into what you need to do to get there? Are their specific cost actions you need to take? Is there any abnormal seasonality to be aware of in terms of any investments you are making?

Okay, I'll take this up, Ashwin and Alok will add. I think important to recognize that, at current run rate, we are not very far from that number. Obviously in the middle of the year, in the year, you have some impact of salary changes and we also have some SEZ capacity, which we had special economic zone in India capacity, which we had signed off a while back coming online. So I think there are some cost increases that you have during the course of the year. But -- and in sales and marketing, Alok is adding there, we have some continuing investment happening in that in transformation in building out some of our facilities further in the Philippines where we are seeing a lot of growth.

So I think if you add up all that, there are some cost increases that will happen during the year. But given the fact that you see a run rate today, that is where we are and getting to a number of where we are guiding to $50 million to $52 million is not something that we are concerned about. Our sense is that it is a prudent and conservative guidance and we have a good shot at beating that as well.

Yes, just to build on that, Anup here, I think if you look at our profitability over the last three or four quarters, you have seen us make some big improvements there based on our competency program, which we have been running with our cost and share right in the present environment. And what you see next year is pretty much a full-year impact of the initiatives we have done this year to manage our cost base better and also to get more [G&S] in our business.

When do you need to add more capacity, more cost Aviva capacity I guess?

Well, I think, in India, there have been some planned capacity additions that -- some of these things take time, which we initiated actually during the early part of the last fiscal and particularly special economic zone capacities were in short supply and given still looming issue of tax benefits in India going away, locking that in early was very, very important.

So we see some capacity growth in India happening, which is already booked. That will happen more towards I would say starting from July this year, we will see some additional capacity happening there. I think the key area that we need to build more capacity that I highlighted earlier was Philippines because that business is growing ahead of plan. Romania as well. We potentially could see some more capacity addition requirements during the course of this year.

So overall, I think we are benefiting quite a bit from the capacity we got from AGS as well, but as the year progresses and as our pipeline begins to hum a little bit more, we see capacity additions happening across the board.

Yes, important to highlight that if you look at our CapEx number for this year, the guidance Alok has given, it is much lower than where we ended last year at and we have factored in the growth that we need in our capacity in that number. So despite that, we are going to end up with a lower CapEx expense and obviously that is driven by the synergies we have been able to see on the AGS side.

Okay. And one question I have on the new credit agreement that you have, (inaudible), why did the agreement change? And I know what changed, but why did it change and was it the bank that drove it?

No, we drove that change. I am not sure we explained this in the past, but essentially when we did the Aviva acquisition, we acquired about four or five companies, independent entities in India. We already had about two or three operating companies in India. So at this point in time, we have something like nine operating companies in India alone.

So what we are trying to do is consolidate all of those into one. Because of the way the facility agreement was structured, there were sort of -- the shares of all these companies were given as security against the loan. So when you are going to merge these companies, the company is not going to exist anymore, we had to change the security structure for which the facility agreement fundamentally needed to be amended.

Got it.

And the other amendment we made was the earlier facility agreement required a minimum $10 million prepayment and then over about that minimum $10 million and then incremental $5 million, we amended that to make it $5 million in increments of $5 million. So that immediately we could make a $5 million prepayment.

Okay.

In the current environment, they were only happy to get some money back.

Absolutely. One last thing if I may. Alok, obviously the financial disclosure has improved tremendously over the last month, so thank you for that. But if I can put in a request for a quarterly cash flow from operations breakout.

I think we have started that. I know you made this request before. We have taken it onboard and I think you'll find that, from this quarter, we will provide that -- we will provide a breakout of the operating cash flow.

Okay, that would be --.

And besides which, in about three weeks time or so, we should be filing our 20-F, so you will get far more detail at that time.

That's great. Thank you, guys. See you tomorrow.

Thank you.

Vincent Lin, Goldman Sachs.

Hey, guys. I think this is a first. This is Julio sitting in for Vincent.

Oh, wow. Okay.

We had a couple of other companies going on at the same time here, so we are just all trying to help each other along here. A couple of quick questions from looking at the balance sheet, first of all. Alok, can you just walk us through a couple of items? The deferred revenue balances, I think it is down a little bit sequentially. I just want to make sure I understand what is driving the deferred revenue balance and when can we expect to see that to start to show some growth? And I don't know if that's just currency noise or what, but I am trying to understand when can we expect to see deferred revenue growth obviously.

And then secondly, accruals also appear to be down in the quarter on a quarter-to-quarter basis. Why are you not accruing enough there and just some perspective on both of those items first?

So on the deferred revenue, that purely arises out of transitions. So depending on the size of transitions that are ongoing, you will have deferred revenue on the balance sheet. So it is really not a factor of the business growth. It just depends on what kind of transitions are going on at any point in time. And what we get paid upfront and how much we have to pay for out of that.

And add to that, I think the major (inaudible) is also [wearing], it is also a reflection of transition activity because sometimes you could potentially charge lower for transitions, but have a higher price. Sometimes it could be the other way around, so that is more a reflection of transition activity and which in turn is affected by the nature of (inaudible) other transitions.

Also, if you look -- when you look at deferred revenue, you need to take current and noncurrent together.

Oh, yes. I am looking at both of them together.

Yes, so when you look at it together, I think it is just a question of what level of transitions are happening at that point in time.

Okay. And then what about --?

When the transitions get over, then the deferred revenue goes away.

And repeat the second part of your question, Julio.

On the accrual side, the accruals balance was also down quarter to quarter.

Accruals -- accounts payable or --?

Bear with me. I just lost the line that I had the file open.

The current liability has not come down.

I will take that back. We can go back to that online. And then just one last one on the balance sheet that I saw. A pretty big markup was on the other current liabilities.

Yes. Other current liabilities is not --.

Yes, what is in that?

Other current liabilities is really around some of the acquisition costs that were still pending. So those (inaudible) see in the (inaudible) liabilities, especially the earnouts and things.

Okay.

So those fit in other current liabilities.

Got it.

Most of that has been paid off now and some of it was actually paid off in April. We still had some net asset settlements around the Aviva transactions to be done with EXL and 24/7. So they were sitting in other current liabilities.

Okay. I think the direction of that line though was, if I am not mistaken, --.

We also have the option costs, the deferred option cost that sits there. So to the extent of hedges that we have taken from options where the options have not yet matured, that sits in other current liabilities.

Okay. So in December of '08, I am looking at a balance of 35.882 and then for March of '09 that has jumped up to 54.126.

Okay.

So what is driving that jump?

So some of that is the hedging costs. Some of that is also accruals for other expenses, regular expense accruals. And a little bit out of that is of the Aviva transaction. Maybe there was about -- $2.1 million was on the NAV settlement on the Aviva transaction as well.

Okay. And then maybe, Neeraj or I think Anup, can one of you guys talk a little bit more about your existing client base and how far along penetrated are you in that client base as far as your portfolio services are concerned? And can you actually continue to penetrate that client base or do you need to find other new clients to drive your growth? In other words, how much further can you really grow your existing clients' business services that you have right now?

This is Neeraj here. I will break that into three parts. One is the top 10 clients and 11 to, I would say, 20 or 25 and then all the other clients there.

In the top 10 clients, I would say about half of them are significantly penetrated and therefore, we don't have many growth expectations there. The other half of them we still see a considerable amount of growth coming, including some of the larger names that we have got there. So it is a mixed bag there. I think we find some that are stable.

Our 11 to 20 or 25, the next range of clients, these are mostly between $1 million and $5 million of revenue. We see these to be important growth drivers for us. A lot of these cases, what tends to happen is you sign an initial deal of about $1 million or $2 million and then you diversify geographically, you add more processes. That is essentially what our farming teams do for a living. So those clients are the ones that typically in the year after which you signed them are important drivers of growth of revenue for the Company.

As far as the remaining ones though that are beyond the first 25 clients, it is a mixed bag again. In two of our businesses, in auto claims and in research and analytics or knowledge services, we have some small clients that are likely to remain small because the nature of that business is that there is very quick transition and it is very standardized processes. So you pretty much can absorb small clients and make them profitable there very quickly.

But there are others there where you start with much smaller pilots and you grow beyond that. So once again, there is a mixed bag where you see some clients with good growth potential, some clients that would be stable there. So essentially our thrust of the activity as far as farming is concerned is in roughly five of the top 10 clients and I would say almost all of the 11 to 25 clients in terms of revenue. And that is where you see the bulk of the farming growth.

Yes, just to add to that, one obviously benefit for us is that we have a very diverse service offering range compared to many of our competitors. So many clients start with us, for example, in the industry space, especially the BPO area. And over a period of time, we are able to add F&A or research analytics or other horizontal like customer service capabilities through them. Some of the starts on the horizontal side and we are able to, over a period of time, add other horizontals or industry special services to that. We'll talk about some examples tomorrow when we meet, but that is some factors which works -- that is another factor which works in our favor.

Okay, great. Thanks. And then, Alok, just in terms of foreign currency losses in your guidance for fiscal '10, how do we think about what is in the $50 million to $52 million in terms of expected foreign currency either gains or losses?

So on a full-year basis, I wouldn't expect a loss and mind you, we don't really give guidance separately on the FX loss, so I can only give you an indication because what you gain on the swings, you lose on the roundabouts. So if the rupee stays and 49 to 50, I would say that we would expect to make a loss of more than maybe $2.5 million for the year.

What about if we see depreciation back down to the mid-40s or lower?

You mean appreciation of the rupee?

Yes, sorry.

Yes, then we are protected on the downside. So you will see -- then you will probably see a bigger gain. You will see a gain instead of a loss. You lose it on the operating line, but gain it on the FX line.

Got it. Okay.

Like I said, is swings and roundabouts.

Sure. All right. Great. Thanks, guys. Good luck tomorrow.

Mitali Ghosh, Merrill Lynch.

Hi, good morning. I just wanted to go back a little bit to the customer environment. If you could comment on how you have seen that changing in the last one to two months in terms of maybe new inquiries or pace of closures? Anup I think mentioned that you had two new client wins. I presume this includes one of them that you have spoken of last time. And you also spoke about one being on hold. So if you could just share some details on the client wins and why one of them was -- why those discussions went on hold.

Sure. So I think in general what we have seen is that the [state] of our pipeline continues to remain very active. We have seen -- I would say this is -- I wouldn't call it a trend at the moment -- but some early signs that people are more comfortable making decisions now and again, we see some of these opportunities progress, start progressing forward more than what we had seen maybe two months ago. So that is certainly one (inaudible) we are seeing. This is probably driven by the fact that, as (inaudible) have come down a little bit, people have kind of -- people are getting their arms around their businesses and trying to see what they need to do to take their businesses to the next level.

Financial services, we clearly see some opportunities there, which, as things are settling down, people are coming and talking to us about opportunities there. So I would say in general good early-stage activity, some signs that the decision-making environment is picking up, but too early to call it a big trend at the moment.

That's helpful. And if you could share some details on the new wins and why one of those discussions went on hold, what sort of --?

Sure. So I think the new wins that we had, as I mentioned in my remarks, were in the finance and economic side, which is an area we continue to see a lot of activity. This was actually, interestingly enough, in the UK. It was a professional services firm.

The one which went on hold, that is actually an existing client for us where we do work for them in one area. And as a part of our farming process, we have been talking to them for some time now to expand that. I think the value proposition is well accepted. However, they have had some own issues in their business and they also had some changes in their management team. So that opportunity has not gone away, but just as the new team is settling down there, they are focusing on kind of getting their arms around the business and I am sure this will come back (inaudible) at some point in time.

If I may, which vertical is this client from? Can we draw any conclusions from that?

Yes, this vertical is in the insurance and healthcare space. But again, I won't extrapolate that into any kind of trend at all. This is why I think I want to wait (inaudible) specific opportunity in this situation. (multiple speakers).

I would add an observation, which Anup mentioned this as an example is that one of the bigger challenges in deal closures last year was lack of stability and perhaps even in security about roles being played by key client decision-makers. And we are seeing that beginning to settle down. And I think that is a really big factor that will affect closures. So if that trend continues, I think we should see things starting to look up here.

Great. And in terms of news, you mentioned earlier that a large part of your clients have renegotiated contracts at least end of calendar '10 and you don't expect -- therefore, you expect some visibility on pricing. Just wondering will most of these negotiations, as per scheduled, did any of them come in midterm? And if they did come in midterm, then what gives you the confidence that you don't expect any of them to come back before the end of contract?

Okay, so we didn't have any midterm renegotiations per se. Actually just to correct that, only two out of the top 10 did come up for renewal over the year. The remaining ones were contracts which still have some distance to go. So in the two ones, we actually were able to achieve the right answer. And that kind of -- as I mentioned before, given that we have contracts running until the end of 2010 and given the general discussions we are having with the clients, at this point in time, we do not anticipate a big pressure will come back to us on pricing on those contracts as it stands today.

Okay, so just to make sure I understood that correctly, so eight of them you decided to negotiate before they came up for renewal?

No, no, no, no. They were already -- typically our contracts have three to five-year periods. So they already were -- they were done like -- some were done two years ago, some were done maybe a year and a half ago. So they still have some distance to go before they come up for renewal.

Let me correct that once again just to be very, very clear. Of the top 10 clients, six we did not have any discussion at all in the last one year because -- sorry, Anup is saying eight we did not have any discussions in the last one year because there is no renewal timing right now. With the two of them, we actually went for formal renewal and there are a few others, which are not in the top 10, where some renewal activity happened ahead of time.

Okay. And just in terms of the revenue ramp across quarters, you mentioned that you have seen cutbacks in travel and in insurance, which is it fair to assume that quarter one will probably see a decline and then a gradual ramp-up in the remaining three quarters or will it be very sharp towards the end of the year?

No, so quarter one will probably be flat. The quarter where travel is traditionally lowest is the third quarter, the October to December quarter. That has always traditionally been a low quarter for travel.

Okay. Still one more question on the competitive environment. What are you seeing -- any changes you are seeing there? Any aggressive pricing behavior from some of your integrated IT and BPO competitors.

Well, not really. I think we see the pricing has settled reasonably. I think we are seeing fairly rational behavior right now.

All right. And just a last two. One is in terms of the tax. Alok, what should we expect for the year? What should we model for the year?

Well, yes, I guess some of it depends upon who the new government is and who the new finance minister is and how benign he is and how he is disposed towards the IT industry. But for the moment, if we assume that the tax holiday will continue beyond 2010, the reason that hasn't impacted it, has an impact on the deferred tax. In that case, I would expect a tax charge to the P&L of between $2 million and $2.5 million.

For FY '10?

For FY '10. But this assumes that the tax holiday gets extended. If the tax holiday does not get extended, then there will be some changes to the deferred tax.

Okay. Okay. And just one final question, there is a lot of chatter around protectionism and a lot of proposals that are being thrown around. Your thoughts, Neeraj, on that and have you seen any impact from or any of that creeping into customer conversations?

Well, we are fortunate enough not to have any TARP customers or for that matter any -- I think -- sorry -- we have one TARP customer, but we have seen that to be quite stable. We also don't have many prospects in the public sector or people who have got bail-out money. Our observation is that the pipeline is perhaps a little bit more active than it was at this time last year. We are not seeing any reduction in interest and BPO services. In fact, we see this to be more of a survival tool for many of our prospects and clients. So at this point in time, as the economy gets a bit more stable and perhaps starts to grow, I think the trends are all going quite well for our industry.

Okay, that's great. Thanks.

Vincent Colicchio, Noble Financial.

One last question, my others were answered. What portion of the travel business is actually volume-based?

The travel business is about 26% of our overall business and of that, about 25% is volume-based.

Okay. And one more. I am sorry, I couldn't hear you, Alok. What quarter is the weak quarter for the travel business?

The third quarter. October through December.

So you would expect sequential (multiple speakers)?

Fiscal third quarter, calendar fourth quarter.

So should we expect a sequential decline in that quarter?

If things are as we are predicting them now, there might be a slight decline. But as things go on in the year, if the travel business picks up as we heard some people say planes are full, then maybe it will still remain flat.

Okay.

But historically, quarter three is always the lowest quarter and quarter four or the January to March quarter is always the highest quarter.

Just to qualify that, that is for the travel business. It need not translate into -- for the airline, for the oil company in that context.

Right. Okay. Nice quarter, guys. Thank you.

Mark Marostica, Piper Jaffray.

Good evening. It's actually Mark (inaudible) for Marostica. I will try to keep this brief. I realize we are running over here a little bit, but just a quick follow-up to the operating guidance assumptions question. What is implied in terms of net additions, as well as seat utilization? And then you talked about selling and marketing investments. As a percent of revenue, is this above or below '09 levels? And then also if you could just quantify the positive impact you are anticipating from wage declines in '10?

So firstly, I think it is important for us to clarify that we don't give any guidance around the operating profit. Like I said earlier, it is affected significantly by exchange rate movements. So if you see this quarter, our operating profit sequentially has actually declined even though we improved our operations and that was purely a factor of currency.

So I think the first thing that we would like to clarify is that we don't give any guidance around the operating profit. Our guidance is around our adjusted net income because that then takes into account all the FX movements.

Beyond that, I think we would expect to see improvements in our seat utilization. Our investment in sales and marketing would be slightly higher than the levels that we had in FY '09, which is why if you see our -- if you look at our current run rate, this quarter, we did $30.6 million, which times 4 gives you $54 million for next year. So obviously if we are going with the $50 million to $52 million guidance, there is -- the delta is really coming out of the effect of salary and wage increases, which, as we indicated in our prepared remarks, are going to be in the low to mid single digits, lower than what they were last year and the year before.

And secondly, we are going to make some investments in sales and marketing. For those who are there at the Investor Day tomorrow will have the pleasure of meeting our Chief Marketing Officer who will be able to explain in greater detail what we are doing in terms of our plan-building and some of the successes we have had on that front.

Okay, great. And just one final one. SEZ zones, can you just quantify what your revenue contribution is today and as you look out over 12 months out where you expect that to be?

So today, the revenue contribution is not that significant. We are kind of waiting and watching to see what makes sense based on how the tax laws pan out over the next two or three months. As you know, we will have a new government in India in place by the end of this month hopefully depending on how the results come out and they will then come out with their tax proposals based on which we will then take a call on how we need to -- how much we need to accelerate our SEZ investments. So if they are getting extended, then we can defer some of our SEZ investments.

Okay, great. Thanks very much.

At this time, there are no more further questions in queue. I would now like to turn the call over to Neeraj Bhargava for closing remarks.

Well, thank you all for your time today and also your support during the last fiscal. We had some very good results in a very challenging environment and we are delighted to end the year on that note.

In summary about our prospects going forward, what I would like to reiterate is that we are projecting on a constant currency basis an organic growth of 7% to 8%, which after currency corrections and the impact of the acquisition results is sort of a flat revenue. However, our earnings and EPS are going to grow once again, albeit in a very challenging environment.

Our cash generation machine is very much intact. We expect to generate a net cash flow of $5 million or so every month. That allows us enough cushion to pay our debt as per schedule and perhaps prepay some more. We continue to invest in growth behind our sales and marketing activity and our essential challenge is about how the British pound behaves and that influences our top line.

But overall, we see the market conditions beginning to get better. We are optimistic about the prospects of our business in the next fiscal year and beyond. And if one takes a step back and see we are approaching the third anniversary of our IPO, the Company has grown about 2.5 times since then. And we continue to perform solidly. So once again, thank you for your support and we look forward to meeting many of you tomorrow.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.