WNS (Holdings) Limited (NYSE: WNS), a leading provider of global
business process outsourcing (BPO) services, today announced
results for the fiscal third quarter 2009 ended December 31, 2008
and reaffirmed its guidance on revenue less repair payments and
adjusted net income (or net income excluding amortization of
intangible assets, share-based compensation, related fringe benefit
taxes and minority interest share of loss) guidance for fiscal
2009.
Revenue for the fiscal third quarter 2009 of $134.0 million
represented an increase of 15.9% over the corresponding quarter in
the prior fiscal year, while revenue less repair payments at $99.6
million increased 34.5% over the same quarter in corresponding
period. Aviva Global Services (AGS) and Call 24/7 Limited, which
WNS acquired in July and April 2008, respectively, contributed to
the growth in this quarter.
�We had another strong quarter in terms of bottom line growth
and margin expansion, which resulted in the highest adjusted net
income quarterly results we have ever achieved. While the impact of
exchange rates continues to affect our top line, we experienced
increased volumes and organic growth on a constant currency basis,�
said Neeraj Bhargava, Group Chief Executive Officer. �I am pleased
that our focus on operational efficiencies, which includes a
decrease in attrition, has resulted in improved margins this
quarter.�
Net income including minority interest for the fiscal third
quarter 2009 was $2.1 million compared to $5.5 million during the
corresponding quarter in the prior fiscal year. The net income in
the current quarter was impacted by amortization charges from the
acquisition of AGS and higher foreign exchange losses due to the
re-valuation of British Pound-denominated assets.
Adjusted net income was $12.9 million, an increase of 59.8% over
the corresponding quarter in the prior year. The primary drivers of
this increase were revenue growth, tighter cost management and
increased income from WNS�s acquisitions. This increase was
partially offset by losses associated with the re-valuation of
British Pound-denominated assets.
WNS recorded a basic income per ADS of $0.05 for fiscal third
quarter 2009. Adjusted income per ADS (or income per ADS excluding
amortization of intangible assets, share-based compensation,
related fringe benefit taxes and minority interest share of loss)
was $0.30 for the quarter.
�Despite the base business being on track this quarter, the
continued decline of the British Pound significantly impacted our
reported revenues. However, our adjusted net income was strong and
we see additional opportunities to improve profitability by
achieving greater synergies through integration of our recent
acquisitions,� said Alok Misra, Group Chief Financial Officer. �Our
DSOs decreased substantially to what we believe is now an
industry-leading metric. In this economic environment, this
demonstrates our focus on improving collection of our receivables
and close management of our cash flows.�
Financial Highlights: Fiscal
Third Quarter Ended December 31, 2008
- Quarterly revenue of $134.0
million, up 15.9% from the corresponding quarter last year.
- Quarterly revenue less repair
payments of $99.6 million, up 34.5% from the corresponding quarter
last year.
- Quarterly net income including
minority interest of $2.1 million compared to $5.5 million from the
corresponding quarter last year.
- Quarterly adjusted net income
(or net income excluding amortization of intangible assets,
share-based compensation, related fringe benefit taxes and minority
interest share of loss) of $12.9 million, up 59.8% from the
corresponding quarter last year.
- Quarterly basic income per ADS
of $0.05, compared with $0.13 for the corresponding quarter last
year.
- Quarterly adjusted basic income
per ADS (or income per share excluding amortization of intangible
assets, share-based compensation, related fringe benefit taxes and
minority interest share of loss) of $0.30, up from $0.19 for the
corresponding quarter last year.
Reconciliations of non-GAAP financial measures to GAAP operating
results are included at the end of this release.
Key Business and Organizational
Developments
In the past quarter, WNS announced the following key
developments:
- Contract renewal for three years
with extension options with Centrica, WNS�s third largest client,
to provide support for customer service for its subsidiaries,
British Gas and Direct Energy.
- Contract renewal for six years
with SAS Airlines, the largest airline company in Scandinavia, to
deliver passenger revenue accounting processes.
- Contract renewal for five years
with SITA, a global specialist in air transport communication and
information technology solutions, to enhance supply chain
management and customer service.
- On January 27, 2009, WNS
announced that Neeraj Bhargava will transition into the role of
Strategic Advisor. Mr. Bhargava will remain in his current role as
CEO and Board member until a successor transitions into the CEO
position.
Fiscal 2009 Guidance
WNS reiterated the following guidance for the fiscal year ending
March 31, 2009:
- Revenue less repair payments is
expected to be between $385 million and $400 million. This
assumes an average USD to GBP range of 1.45 to 1.60 for the
remainder of the year.
- Adjusted net income (or net
income excluding amortization of intangible assets, share-based
compensation, related fringe benefit taxes and minority interest
share of loss) is expected to range between $46 million and $49
million.
�The value of the British Pound has further declined since we
last updated our revenue guidance. While we are confident of
meeting our guidance, our top line performance will likely fall to
the lower end of the range for the fiscal year 2009 given where the
Pound is today,� continued Misra. �Cash generation remains strong
and our cash balance has grown. We are well-positioned to meet our
debt obligations in July 2009, when the first payment on our term
loan is due.�
Conference Call
WNS will host a conference call on February 5, 2009 at 8 am (ET)
to discuss the company's quarterly results. To participate, callers
can dial: +1-800-295-3991; international dial-in +1-617-614-3924;
participant passcode 1352836. A replay will also be made available
for one week following the call at +1-888-286-8010; international
dial-in +1-617-801-6888; passcode 10750661, for a period of three
months beginning two hours after the end of the call. A webcast
will be available online at www.wns.com.
About WNS
WNS Holdings Ltd. [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. WNS is passionate about
building a market-leading company valued by our clients, employees,
business partners, investors and communities. For more information,
visit 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, which includes WNS Assistance and Chang
Limited, 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.
In order to provide accident-management services, the Company
arranges for the repair through a network of repair centers. Repair
costs are invoiced to customers. Amounts invoiced to customers for
repair costs paid to the automobile repair centers are recognized
as revenue. The Company uses revenue less repair payments for
�fault� repairs as a primary measure to allocate resources and
measure segment performance. Revenue less repair payments is a
non-GAAP measure which is calculated as revenue less payments to
repair centers. For �Non fault repairs,� revenue including repair
payments is used as a primary measure. As the Company provides a
consolidated suite of accident management services including credit
hire and credit repair for its �Non fault� repairs business, the
Company believes that measurement of that line of business has to
be on a basis that includes repair payments in revenue.
The Company believes that the presentation of this non-GAAP
measure in the segmental information provides useful information
for investors regarding the segment�s financial performance. 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 US GAAP.
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 US Private Securities
Litigation Reform Act of 1995. These forward-looking statements
include statements regarding expected future financial results.
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 technological innovation; telecommunications or
technology disruptions; future regulatory actions and conditions in
our operating areas; our dependence on a limited number of clients
in a limited number of industries; our ability to attract and
retain clients; our ability to expand our business or effectively
manage growth; our ability to hire and retain enough sufficiently
trained employees to support our operations; negative public
reaction in the US or the UK to offshore outsourcing; regulatory,
legislative and judicial developments; increasing competition in
the business process outsourcing industry; political or economic
instability in India, Sri Lanka and Jersey; worldwide economic and
business conditions, including a slowdown in the US and Indian
economies and in the sectors in which our clients are based and a
slowdown in the BPO and IT sectors world-wide; our ability to
successfully grow our revenues, expand our service offerings and
market share and achieve accretive benefits from our acquisition of
Aviva Global Services Singapore Private Limited and our master
services agreement with Aviva Global Services (Management Services)
Private Limited; our ability to successfully consummate strategic
acquisitions, as well as other risks detailed in our reports filed
with the US 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.
Reconciliation of revenue less repair payments (non-GAAP) to
revenue (GAAP) � �
�
Three months ended
Nine months ended
December 31, �
December 31, �
2008 � �
2007 � �
2008 � �
2007 (Amount in
thousands) Revenue less repair payments (Non-GAAP) $ 99,607 � $
74,056 $ 290,831 � $ 215,564 Add: Payments to repair centers �
34,403 � � 41,589 � � 115,920 � � 128,182 Revenue (GAAP) $ 134,010
� $ 115,645 � $ 406,751 � $ 343,746 �
Reconciliation of cost of
revenue (non-GAAP to GAAP) �
Three months ended Nine
months ended December 31, �
December 31, �
2008 � �
2007 � �
2008 � �
2007
(Amount in thousands) Cost of revenue (Non-GAAP) $ 62,627 $
50,272 $ 194,509 $ 146,354 Add: Payments to repair centers � 34,403
� � 41,589 � � 115,920 � � 128,182 Cost of revenue (GAAP) $ 97,030
� $ 91,862 � $ 310,429 � $ 274,536 �
Reconciliation of selling,
general and administrative expense (non-GAAP to GAAP) �
Three months ended Nine months ended December
31, �
December 31, �
2008 � �
2007 � �
2008 � �
2007 (Amount in thousands) Selling,
general and administrative expenses (excluding share-based
compensation expense and FBT(1)) (Non-GAAP) $ 16,206 $ 16,653 $
50,439 $ 47,367 Add: Share-based compensation expense 2,612 892
7,349 3,056 Add: FBT1 � 84 � � 232 � � 615 � � 859 Selling, general
and administrative expenses (GAAP) $ 18,902 � $ 17,777 � $ 58,403 �
$ 51,282
1
�
FBT means the fringe benefit taxes
on options and restricted share units granted to employees under
the WNS 2002 Stock Incentive Plan and the WNS 2006 Incentive Award
Plan (as applicable) payable by WNS to the government of India.
Three months ended �
Nine months ended December
31, �
December 31, �
2008 � �
2007 � �
2008 � �
2007 (Amount in thousands) Operating
income (excluding amortization and � � impairment of goodwill and
intangible assets, share-based compensation and FBT(1)) (Non-GAAP)
$ 21,667 $ 7,724 $ 48,564 $ 23,696 Less: Amortization of intangible
assets 7,419 897 16,900 2,205 Less: Impairment of goodwill and
intangible assets � � � 15,464 Less: Share-based compensation
expense 3,505 1,486 10,030 4,909 Less: FBT1 � 84 � � 232 � � 615 �
� 859 Operating (loss) income (GAAP) $ 10,659 � $ 5,109 � $ 21,019
� $ 259 �
Reconciliation of net income (non-GAAP to GAAP) �
Three months ended Nine months ended December
31, �
December 31, �
2008 � �
2007 � �
2008 � �
2007 (Amount in thousands) Net income
(excluding amortization and impairment of goodwill and intangible
assets, share-based compensation, FBT(1) and minority interest
share of loss) (Non-GAAP) $ 12,894 $ 8,069 $ 32,997 $ 26,877 Less:
Amortization of intangible assets 7,419 897 16,900 2,205 Less:
Impairment of goodwill and intangible assets � � � 15,464 Less:
Share-based compensation expense 3,505 1,486 10,030 4,909 Less:
FBT1 84 232 615 859 Add: Minority interest share of loss � 180 � �
� � � 180 � � � Net income (GAAP) $ 2,066 � $ 5,454 � $ 5,632 � $
3,440
1
� FBT means the fringe benefit taxes on options and restricted
share units granted to employees under the WNS 2002 Stock Incentive
Plan and the WNS 2006 Incentive Award Plan (as applicable) payable
by WNS to the government of India.
Reconciliation of Basic
income per ADS (non-GAAP to GAAP) �
Three months ended �
Nine months ended December 31, �
December 31,
�
2008 � �
2007 � �
2008 � �
2007 Basic
income per ADS (excluding amortization � � and impairment of
goodwill and intangible assets, share-based compensation, FBT(1)
and minority interest share of loss) (Non-GAAP) $ 0.30 $ 0.19 $
0.78 $ 0.64 Less: Adjustments for amortization and impairment of
goodwill and intangible assets, share-based compensation, FBT(1)
and minority interest share of loss � 0.25 � � 0.06 � � 0.65 � �
0.56 Basic income per ADS (GAAP) $ 0.05 � $ 0.13 � $ 0.13 � $ 0.08
�
Reconciliation of Diluted income per ADS (non-GAAP to
GAAP) �
Three months ended Nine months ended
December 31, �
December 31, �
2008 � �
2007 � �
2008 � �
2007 Diluted income per ADS
(excluding amortization and impairment of goodwill and intangible
assets, share-based compensation, FBT(1) and minority interest
share of loss) (Non-GAAP) $ 0.30 $ 0.19 $ 0.76 $ 0.63 Less:
Adjustments for amortization and impairment of goodwill and
intangible assets, share-based compensation, FBT(1 )and minority
interest share of loss � 0.25 � � 0.06 � � 0.63 � � 0.55 Diluted
income/(loss) per ADS (GAAP) $ 0.05 � $ 0.13 � $ 0.13 � $ 0.08
1
� FBT means the fringe benefit taxes on options and restricted
share units granted to employees under the WNS 2002 Stock Incentive
Plan and the WNS 2006 Incentive Award Plan (as applicable) payable
by WNS to the government of India.
WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) (Amounts in thousands, except per share
data) � �
Three months ended �
Nine months ended
December 31, �
December 31,
�
2008
� �
�
2007
�
�
2008
�
�
2007
� � � Revenue Third parties $ 133,289 $ 114,781 $ 404,250 $ 341,268
Related parties � 721 � � � 864 � � � 2,501 � � � 2,478 � � 134,010
115,645 406,751 343,746 Cost of revenue � 97,030 � � � 91,862 � � �
310,429 � � � 274,536 � � Gross profit 36,980 23,783 96,322 69,210
Operating expenses Selling, general and administrative expenses
18,902 17,777 58,403 51,282 Amortization of intangible assets 7,419
897 16,900 2,205 Impairment of goodwill and intangible assets � � �
� � � � � � � � � � 15,464 � � Operating income 10,659 5,109 21,019
259 Other (expense) income, net (4,113 ) 2,052 (5,901 ) 6,963
Interest expense �
(3,955
)
� � (21
)
� � (7,322 ) � � (23
)
� Income before income taxes 2,591 7,140 7,796 7,199 Provision for
income taxes � (705 ) � � (1,686 ) � � (2,344 ) � � (3,759 ) �
Income before minority interests 1,886 5,454 5,452 3,440 Minority
interest share of loss � 180 � � � � � � � 180 � � � � � Net income
$ 2,066 � � $ 5,454 � � � 5,632 � � $ 3,440 � � � Basic income per
share $ 0.05 $ 0.13 $ 0.13 $ 0.08 Diluted income per share $ 0.05 $
0.13 $ 0.13 $ 0.08
WNS (HOLDINGS) LIMITED CONDENSED
CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except
share and per share data) �
December 31 �
March
31 2008 2008 (Unaudited) ASSETS
Current assets: Cash and cash equivalents $ 36,628 $ 102,698 Bank
deposits and marketable securities � 8,074 Accounts receivable, net
of allowance of $7,564 and $1,784, respectively 62,221 47,302
Accounts receivable � related parties 47 586 Funds held for clients
4,909 6,473 Employee receivables 1,126 1,179 Prepaid expenses 4,440
3,776 Prepaid income taxes 3,256 2,776 Deferred tax assets� current
672 618 Foreign currency derivative contracts � current 10,184 �
Other current assets 17,959 8,596 � Total current assets 141,442
182,078 Goodwill 85,093 87,470 Intangible assets, net 227,418 9,393
Property, plant and equipment, net 54,014 50,840 Other assets � non
current 2,719 1,278 Deposits 8,420 7,391 Deferred tax assets � non
current 16,129 8,055 �
TOTAL ASSETS $ 535,235
$ 346,505 � �
LIABILITIES AND SHAREHOLDERS�
EQUITY Current liabilities: Accounts payable $ 22,905 $ 15,562
Accounts payable � related parties � 6 Long term debt � current
20,000 � Short term line of credit 5,511 � Accrued employee costs
25,215 26,848 Deferred revenue � current 6,326 7,790 Income taxes
payable 4,693 1,879 Deferred tax liabilities � current 1,489 211
Accrual for earn-out payment � 33,699 Other current liabilities
35,882 25,806 � Total current liabilities 122,021 111,801 Long term
debt � non current 180,000 � Deferred revenue � non current 3,134
1,549 Deferred rent 2,301 2,627 Accrued pension liability 2,152
1,544 Deferred tax liabilities � non current 10,709 1,834 Liability
on outstanding derivative and interest swap contracts � non current
11,818 � Minority interest 120 � � TOTAL LIABILITIES 332,255
119,355 Shareholders� equity: Ordinary shares, $0.16 (10 pence) par
value, authorized: 50,000,000 shares;
Issued and outstanding: 42,582,566
and 42,363,100 shares, respectively
6,664 6,622 Additional paid-in capital 180,182 167,459 Ordinary
shares subscribed: Nil and 1,666 shares, respectively � 10 Retained
earnings 44,471 38,839 Accumulated other comprehensive (loss)
income (28,337 ) 14,220 � Total shareholders� equity 202,980
227,150 �
TOTAL LIABILITIES AND SHAREHOLDERS� EQUITY
$ 535,235 $ 346,505 WNS (HOLDINGS)
LIMITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (Amounts in thousands)
�
�
Nine months ended
�
December 31,
�
2008
�
�
2007
� � �
Cash flows from operating activities Net cash provided
by operating activities $ 40,441 $ 20,730 �
Cash flows from
investing activities Acquisitions, net of cash received
(291,225
)
(34,815 ) Facility and property cost (16,800 ) (21,725 ) Proceeds
from sale of assets, net 219 101 Transfer of delivery centre to
AVIVA � 1,570 Marketable securities and deposits � 7,687 � � 12,000
� Net cash used in investing activities � (300,119 ) � (42,869 ) �
�
Cash flows from financing activities Proceeds from
exercise of stock options 1,103 1,851 Excess tax benefits from
share-based compensation 1,544 1,987 Proceeds from long term debt,
net 199,438 � Initial Public Offering expenses � (150 ) Short term
borrowing availed 7,980 � Short term borrowing repaid (9,244 ) �
Principal payments under capital leases � (182 ) � (7 ) Net cash
provided by financing activities � 200,640 � � 3,681 � � � � Effect
of exchange rate changes on cash and cash equivalents (7,032 )
2,643 � Net change in cash and cash equivalents
(66,070
)
(15,815 ) Cash and cash equivalents at beginning of period �
102,698 � � 112,340 � �
Cash and cash equivalents at end of
period $ 36,628 �
$ 96,525 �
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