WNS WNS Holdings Limited

WNS (Holdings) Limited (NYSE: WNS), a leading provider of offshore business process outsourcing (BPO) services, today announced results for the quarter ended December 31, 2007 and raised its net income guidance for fiscal 2008. Revenue for the third fiscal quarter was $115.6 million, an increase of 13.4% over the corresponding quarter in the prior fiscal year. Revenue less repair payments of $74.1 million increased 29.5% over the same period a year ago. Revenue less repair payments for the quarter did not include any revenue contribution from First Magnus Financial Corporation due to its bankruptcy filing in August 2007. However, revenue less repair payments for the corresponding quarter in the prior fiscal year included $3.8 million of revenue from this client. Net income for the third fiscal quarter was $5.5 million, a decrease of 23.1% over the corresponding quarter in the prior fiscal year. Net income (excluding share-based compensation, related fringe benefit taxes and amortization of intangible assets) was $8.1 million, a decrease of 8.9% from the corresponding quarter last year. This decrease is primarily due to the appreciation of the Indian Rupee against the US Dollar. WNS recorded a basic income per share of $0.13. Basic income per share (excluding share-based compensation, related fringe benefit taxes and amortization of intangible assets) was $0.19 for the quarter. �With a solid third quarter behind us and the continued secular growth trend in offshore BPO, we remain focused on growth,� said Neeraj Bhargava, Group Chief Executive Officer. �With low mortgage and banking sector exposure, after the loss of First Magnus as a client, and a steady flow of opportunities in other sectors we are optimistic about growth even in a challenging economic environment.� Financial Highlights: Fiscal Third Quarter Ended December 31, 2007 Quarterly revenue of $115.6 million, up 13.4% from the corresponding quarter last year. Quarterly revenue less repair payments of $74.1 million, up 29.5% from the corresponding quarter last year. Quarterly net income of $5.5 million, down 23.1% from the corresponding quarter last year. Quarterly net income (excluding share-based compensation, related fringe benefit taxes and amortization of intangible assets) of $8.1 million, down 8.9% from the corresponding quarter last year. Quarterly basic income per share of 13 cents, down from basic income per share of 18 cents for the corresponding quarter last year. Quarterly basic income per share (excluding share-based compensation, related fringe benefit taxes and amortization of intangible assets) of 19 cents, down from 22 cents for the corresponding quarter last year. Cash flows from operating activities of $20.7 million for the nine months ended December 31, 2007, down from $26.4 million for the nine months ended December 31, 2006 Reconciliations of non-GAAP financial measures to GAAP operating results are included at the end of this release. Key Organizational Developments WNS earlier announced it has strengthened its leadership team with the appointment of Alok Misra as its new CFO. He was previously the Chief Financial Officer of MphasiS Ltd., an EDS company. �Alok has consistently demonstrated strong financial leadership for global services companies,� said Mr. Bhargava. �As WNS expands its global footprint, Alok�s significant experience and expertise will help drive the success of the company�s overall business strategy. He is a valuable addition to the WNS management team.� WNS last month also announced the launch of its operation in Bucharest, Romania, for high-end finance and accounting and customer support services. The center will also be a hub for providing European language services. WNS has also announced several awards during the past quarter that recognize the company�s operational excellence and high-quality service delivery. These awards include: Best Performing FAO Provider by Global Services and neo IT Named as part of The Global Services 100 list for 2008 by Global Services and neo IT WNS Assistance recognized as the Best Accident Management Company by the Auto Body Professionals Club, a UK automobile repair trade organization The Best Achievement of Six Sigma in Outsourcing by Global Six Sigma experts and practitioners The Golden Peacock Innovation Award by The Institute of Directors, India The Supplier Innovation Award by KLM, a key travel client Eric Selvadurai, Managing Director, WNS Europe, awarded the �Market Maker Award� by FAO Today magazine Fiscal 2008 Guidance WNS raises its November 14, 2007 guidance for fiscal 2008: Revenue less repair payments is expected to be between $290 million and $295 million, in line with the company�s previous guidance. Net income (excluding share-based compensation and related fringe benefit taxes, amortization and impairment of goodwill and intangible assets) is expected to be between $34.0 million to $ 36.0 million. This represents a $1.0 million increase from the company�s previous guidance of $33 million to $35 million. �We are targeting better than expected profits for the year due to expansion of current client relationships, the accelerated growth of our analytics services businesses, and an ability to control costs, which have allowed us to weather pressure from currency appreciation and declines in mortgage revenue,� said Mr. Bhargava. Conference Call WNS will host a conference call on February 8, at 8 a.m. (EST) to discuss the company's quarterly results. To participate, callers can dial 1-800-295-3991 from within the U.S. or +1-617-614-3924 from any other country. The participant passcode is 1352836. A replay will be made available online at www.wnsgs.com for a period of three months beginning two hours after the end of the call. About WNS WNS [NYSE: WNS] is a leading global Business Process Outsourcing company. Deep industry and business process knowledge, a partnership approach, comprehensive service offering and a proven track record enables WNS to deliver business value to some of the leading companies in the world. With over 17,000 employees, WNS is passionate about building a market leading company valued by our clients, employees, business partners, investors and communities. For more information, please visit our website at www.wnsgs.com. About Non-GAAP Financial Measures For financial statement reporting purposes, the company has two reportable segments: WNS Global BPO and WNS Auto Claims BPO. In the auto claims segment, WNS provides claims-handling and accident-management services, in which it arranges for automobile repairs through a network of third-party repair centers. In its accident-management services, WNS acts as the principal in dealings with the third-party repair centers and clients. The amounts invoiced to WNS clients for payments made by WNS to third-party repair centers are reported as revenue. As 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, which is a non-GAAP measure. WNS believes revenue less repair payments reflects more accurately the value addition of the business process services it directly provides to its clients. The presentation of this non-GAAP information is not meant to be considered in isolation or as a substitute for the company's financial results prepared in accordance with U.S. GAAP. WNS revenue less repair payments may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation. Safe Harbor Statement under the provisions of the United States Private Securities Litigation Reform Act of 1995 This news release contains forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from�those that may be projected by these forward looking statements. These risks and uncertainties include but are not limited to a slowdown in the U.S. and Indian economies and in the sectors in which our clients are based, a slowdown in the BPO and IT sectors world-wide, competition, the success or failure of our past and future acquisitions, attracting, recruiting and retaining highly skilled employees, technology, legal and regulatory policy as well as other risks detailed in our reports filed with the U.S. Securities and Exchange Commission. These filings are available at www.sec.gov. We may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. You are cautioned not to place undue reliance on these forward-looking statements, which reflect management�s current analysis of future events. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. WNS (HOLDINGS) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Amounts in thousands, except per share data) � � Three months ended December 31, � Nine months ended December 31, 2007 � 2006 � 2007 � 2006 � � � Revenue Third parties $114,781 $101,325 $341,268 $235,229 Related parties 864 � 674 � 2,478 � 6,386 115,645 101,999 343,746 241,615 Cost of revenue 91,862 � 81,250 � 274,536 � 186,017 Gross profit 23,783 20,749 69,210 55,598 Operating expenses Selling, general and administrative expenses 17,777 13,973 51,282 36,180 Amortization of intangible assets 897 490 2,205 1,441 Impairment of goodwill and intangible assets - � - � 15,464 � - Operating income 5,109 6,286 259 17,977 Other income (expense), net 2,052 1,331 6,963 1,250 Interest expense (21) � - � (23) � (101) Income before income taxes 7,140 7,617 7,199 19,126 Provision for income taxes (1,686) � (525) � (3,759) � (1,418) Net income $5,454 � $7,092 � $3,440 � $17,708 � Basic income per share $0.13 $0.18 $0.08 $0.47 Diluted income per share $0.13 $0.17 $0.08 $0.44 Non-GAAP measure note: In addition to its reported operating results in accordance with U.S. generally accepted accounting principles (US GAAP). WNS has included in the table below non-GAAP operating measures that the Securities and Exchange Commission defines as �non-GAAP financial measures�. Management believes that such non-GAAP financial measures, when read in conjunction with the company�s reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the company�s results. The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. Reconciliation of revenue less repair payments (non-GAAP) to revenue (GAAP) � Amount inthousands � Three months ended � Nine months ended December 31, 2007 � December 31, 2006 � December 31, 2007 � December 31, 2006 � � � � � � � Revenue less repair payments (Non-GAAP) 74,056 � 57,192 � 215,564 155,665 Add: Payments to repair centers 41,589 44,807 128,182 85,950 Revenue (GAAP) 115,645 101,999 343,746 241,615 Reconciliation of cost of revenue (non-GAAP to GAAP) � Amount inthousands � Three months ended � Nine months ended December 31, 2007 � December 31, 2006 � December 31, 2007 � December 31, 2006 � � � � � � � Cost of revenue (Non-GAAP) 50,272 � 36,443 � 146,354 100,067 Add: Payments to repair centers 41,589 44,807 128,182 85,950 Cost of revenue (GAAP) 91,862 81,250 274,536 186,017 Reconciliation of selling, general and administrative expense (non-GAAP to GAAP) � Amount inthousands � Three months ended � Nine months ended December 31, 2007 � December 31, 2006 � December 31, 2007 � December 31, 2006 � � � � � � � Selling, general and administrative expenses (excluding share-based compensation expense and FBT1 (Non-GAAP) 16,653 � 13,073 � 47,367 34,311 Add: Share-based compensation expense 892 900 3,056 1,869 Add: FBT1 232 - 859 - Selling, general and administrative expenses (GAAP) 17,777 13,973 51,282 36,180 Reconciliation of operating income (non-GAAP to GAAP) � Amount inthousands � � Three months ended � Nine months ended December 31, 2007 � December 31, 2006 � December 31, 2007 � December 31, 2006 � � � � � � � Operating income (excluding share-based compensation, amortization of intangible assets, impairment of goodwill and intangible assets,and FBT1) (Non-GAAP) 7,724 � 8,052 � 23,696 21,817 Less: Share-based compensation expense 1,486 1,276 4,909 2,399 Less: Amortization of intangible assets 897 490 2,205 1,441 Less: Impairment of goodwill and intangible assets - - 15,464 - Less: FBT1 232 - 859 - Operating income (GAAP) 5,109 6,286 259 17,977 Reconciliation of net income (non-GAAP to GAAP) � Amount inthousands � Three months ended � Nine months ended December 31, 2007 � December 31, 2006 � December 31, 2007 � December 31, 2006 � � � � � � � Net income (excluding share-based compensation, amortization of intangible assets, impairment of goodwill and intangible assets, and FBT1) (Non-GAAP) 8,069 � 8,858 � 26,877 21,548 Less: Share-based compensation expense 1,486 1,276 4,909 2,399 Less: Amortization of intangible assets 897 490 2,205 1,441 Less: Impairment of goodwill and intangible assets - - 15,464 - Less: FBT1 232 - 859 - Net income (GAAP) 5,454 7,092 3,440 17,708 Reconciliation of basic income per ADS (non-GAAP to GAAP) � Three months ended � Nine months ended December 31, 2007 � December 31, 2006 � December 31, 2007 � December 31, 2006 � � � � � � � Basic income per ADS (excluding share based compensation expense, amortization of intangible assets, impairment of goodwill and intangible assets, and FBT1) (Non-GAAP) $0.19 � $0.22 � $0.64 � $0.57 Less: Adjustments for share-based compensation expense, amortization of intangible assets, impairment of goodwill and intangible assets, and FBT1 $0.06 $0.04 $0.56 $0.10 Basic income per ADS (GAAP) $0.13 $0.18 $0.08 $0.47 Reconciliation of diluted income per ADS (non-GAAP to GAAP) � Three months ended � Nine months ended December 31, 2007 � December 31, 2006 � December 31, 2007 � December 31, 2006 � � � � � � � Diluted income per ADS (excluding share based compensation expense, amortization of intangible assets, impairment of goodwill and intangible assets, and FBT1) (Non-GAAP) $0.19 � $0.21 � $0.63 � $0.53 Less: Adjustments for share-based compensation expense, amortization of intangible assets, impairment of goodwill and intangible assets, and FBT1 $0.06 $0.04 $0.55 $0.09 Diluted income per ADS (GAAP) $0.13 $0.17 $0.08 $0.44 WNS (HOLDINGS) LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share data) � � As of December 31, 2007 As of March 31, 2007 (Unaudited) � � ASSETS Current assets Cash and cash equivalents $96,525 $112,340 Bank deposits - 12,000 Accounts receivable, net of allowance of $1,926 and $364, respectively 55,372 40,592 Funds held for clients 6,445 6,589 Employee receivable 1,161 1,289 Prepaid expenses 4,812 2,162 Prepaid income taxes 4,095 3,225 Deferred tax assets 800 701 Other current assets 8,301 � 4,524 Total current assets 177,511 183,422 � Goodwill 54,060 37,356 Intangible assets, net 10,184 7,091 Property and equipment, net 53,533 41,830 Deposits 10,214 3,081 Deferred tax assets 8,681 � 3,101 TOTAL ASSETS $314,183 � $275,881 � LIABILITIES AND SHAREHOLDERS� EQUITY Current liabilities Accounts payable $19,926 $18,751 Accrued employee costs 24,840 18,492 Deferred revenue � current 9,009 9,827 Income taxes payable 2,518 88 Deferred tax liabilities 224 ? Other current liabilities 27,212 � 16,252 Total current liabilities 83,729 63,410 � Deferred revenue � non current 1,376 5,051 Deferred rent 2,369 1,098 Accrued pension liability 1,352 771 Deferred tax liabilities � non current 2,143 � 23 Total liabilities 90,969 70,353 Shareholders� equity: Ordinary shares, $0.16 (?0.10) par value; Authorized 50,000,000 shares Issued and outstanding: 42,120,137 and 41,842,879 shares, respectively 6,574 6,519 Additional paid-in-capital 163,548 154,952 Ordinary shares subscribed, nil and 30,022 shares, respectively ? 137 Retained earnings 32,779 30,685 Accumulated other comprehensive income 20,313 � 13,235 Total shareholders� equity 223,214 � 205,528 TOTAL LIABILITIES AND SHAREHOLDERS� EQUITY $314,183 � $275,881 1 FBT means the fringe benefit taxes on options and restricted share units granted to employees under WNS 2002 and 2006 Incentive Award Plan payable by WNS to the government of India.