WNS (Holdings) Limited (WNS) (NYSE: WNS)
Financial Highlights:
GAAP Measures
-- Q1 revenues of $150.0 million, up 12.7% from the corresponding quarter
last year and down 4.8% sequentially
-- Q1 net loss(1) of $6.0 million, compared to net income(1) of
$1.0 million in the corresponding quarter last year and net income of
$1.0 million sequentially
-- Q1 diluted loss per ADS of $0.14, compared to diluted income per ADS of
$0.02 in the corresponding quarter last year and diluted income per ADS
of $0.03 sequentially
Non-GAAP Measures
-- Q1 revenue less repair payments of $89.3 million, down 8.8% from the
corresponding quarter last year and down 7.7% sequentially
-- Q1 adjusted net income (ANI)(2) of $2.2 million, compared to $12.6
million in the corresponding quarter last year and $13.3 million
sequentially
-- Q1 adjusted diluted net income per ADS of $0.05, compared to $0.29 in
the corresponding quarter last year and $0.30 sequentially
Global headcount of 21,406 as of June 30, 2010
WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of
global business process outsourcing (BPO) services, today announced
results for the fiscal first quarter 2011 ended June 30, 2010.
Fiscal First Quarter 2011 Financial Highlights
Revenue for the fiscal first quarter 2011 increased by 12.7
percent to $150.0 million, compared to $133.1 million in the
corresponding quarter in the prior fiscal year, and decreased by
4.8 percent sequentially from $157.6 million in the fiscal fourth
quarter of 2010. Revenue less repair payments* for the fiscal first
quarter 2011 decreased 8.8 percent to $89.3 million, compared to
$97.9 million in the corresponding quarter in the prior fiscal
year, and decreased 7.7 percent sequentially from $96.7 million in
the fiscal fourth quarter of 2010. Revenue less repair payments
declined largely as a result of lower volumes within the insurance
businesses stemming from technology and operating efficiencies by a
key client, the change to the pricing structure of the contract
with a key client in the travel vertical, as previously disclosed,
and the decline in the value of the British Pound. These headwinds
were partially offset by increased volumes from existing clients in
the shipping and logistics industries, ramp ups from Finance and
Accounting contracts and revenues from new clients.
Gross margin, as a percent of revenues declined to 17.8 percent
in the fiscal first quarter 2011, compared to 27.9 percent in the
corresponding quarter in the prior fiscal year and 21.6 percent in
the fiscal fourth quarter of 2010. WNS's gross margin excluding
share based compensation expense*, as a percent of revenue less
repair payments, declined to 30.1 percent in the fiscal first
quarter 2011, compared to 38.8 percent in the corresponding quarter
in the prior fiscal year and 36.2 percent in the fiscal fourth
quarter of 2010. This decline was primarily due to the impact of
wage inflation and the change in pricing of a key travel client, as
mentioned above.
Selling, General and Administrative (SG&A) expenses, as a
percentage of revenues, were 13.1 percent in the fiscal first
quarter 2011, compared to 15.6 percent in the corresponding quarter
in the prior fiscal year and 14.5 percent in the fiscal fourth
quarter of 2010. Selling, General and Administrative (SG&A)
expenses excluding share based compensation expense and fringe
benefit tax*, as a percentage of revenue less repair payments, were
21.5 percent in the fiscal first quarter 2011, compared to 18.6
percent in the corresponding quarter in the prior fiscal year and
20.0 percent in the fiscal fourth quarter of 2010.
Operating loss, as a percentage of revenues, was 0.5 percent in
the fiscal first quarter 2011, compared to operating income of 6.1
percent in the corresponding quarter in the prior fiscal year and
operating income of 2.1 percent in the fiscal fourth quarter of
2010. Adjusted operating income excluding amortization of
intangible assets, share based compensation and related fringe
benefit tax*, as a percentage of revenue less repair payments, was
8.6 percent in the fiscal first quarter 2011, compared to 20.3
percent in the corresponding quarter in the prior fiscal year and
16.2 percent in the fiscal fourth quarter of 2010. Operating
margins during the fiscal first quarter were negatively impacted by
lower volumes in the insurance business, the strengthening Rupee,
wage inflation, and the change in pricing of a key travel client,
as mentioned above.
Net loss attributable to WNS shareholders for the fiscal first
quarter 2011 was $6.0 million or $0.14 diluted loss per ADS,
compared to net income attributable to WNS shareholders of $1.0
million or $0.02 diluted income per ADS in the corresponding
quarter in the prior fiscal year and net income attributable to WNS
shareholders of $1.0 million or $0.03 diluted income per ADS in the
fiscal fourth quarter of 2010. Similarly, Adjusted net income* for
the fiscal first quarter 2011 was $2.2 million or $0.05 adjusted
diluted income per ADS, compared to $12.6 million or $0.29 adjusted
diluted income per ADS in the corresponding quarter in the prior
fiscal year and adjusted net income of $13.3 million or $0.30
adjusted diluted income per ADS in the fiscal fourth quarter of
2010. Adjusted net income was negatively impacted by the issues
listed above, as well as one-time costs associated with the
refinancing of the term loan, as detailed below.
On July 6, 2010, WNS announced that it had taken advantage of
favorable conditions in the debt markets and refinanced its term
loan facility at lower interest rates than the previous term loan
facility. The refinancing entailed making the third scheduled
repayment of $20 million on the existing term loan and prepaying
the remaining $115 million on the loan with cash on hand and
proceeds from a new term loan facility for $94 million. At the same
time, WNS also announced that it had established a $30 million line
of credit in the U.K., which will be drawn down from time to time
to partly fund WNS's U.K. business. The interest rate of the new
term loan and the credit line is approximately 100 basis points
lower than the existing facility. The payment schedule of the new
$94 million term loan will mirror the payment schedule of the
previous term loan. The prepayment resulted in a one-time charge of
approximately $5.4 million primarily on account of the
reclassification of fair value of interest rate swaps from "Other
Comprehensive Income" on our balance sheet to earnings as the swaps
on the existing term loan have lost hedge effectiveness, the
write-off of a portion of the remaining debt issuance costs
associated with the existing term loan taken in 2008 and debt
refinancing cost for the new term loan taken in July 2010.
Operational Highlights
"During the first quarter, we completed our strategic review of
all facets of the business and are now finalizing the details of
our plan. We have already started some of the new growth
initiatives, including the reorganization of the sales force into
hunting and client engagement teams, and finalizing some of our key
strategic initiatives," said Group Chief Executive Officer Keshav
Murugesh.
"This is an exciting time for WNS. Our management team is
re-energized and focused on building out our core verticals. We now
also have a formalized cross-selling strategy in place to help us
expand with our current client base. WNS is establishing a strong
foundation on which we will build a leading global BPO company,"
continued Murugesh.
Fiscal 2011 Guidance
WNS provided the following guidance on May 21, 2010 for the
fiscal year ending March 31, 2011:
-- Revenue less repair payments is now expected to be between $353 million
and $378 million. This assumes an average GBP to USD exchange rate of
1.45 for the 2011 fiscal year.
-- Adjusted net income is expected to range between $43 million and $46
million. This assumes an average USD to INR exchange rate of 46.5 for
the 2011 fiscal year.
"Our top and bottom lines reflect a challenging currency
environment, including a strengthening Rupee and weakening Pound,
the move to baseline pricing with one of our larger clients, wage
increases and one-time costs associated with refinancing our term
loan. We also had bonus, severance and insurance premium payouts
this quarter, which impacted our cash flow. Excluding the one-time
costs of refinancing the term loan and the severance costs, we
would have realized ANI of $8.1 million," said Alok Misra, Group
Chief Financial Officer. "We are seeing more positive trends
recently as the British Pound has strengthened, volumes in both our
travel and insurance clients are improving more than we previously
expected and our interest expense is expected to come down
significantly starting with the second fiscal quarter. We should
see these tailwinds reflected in next quarter's results."
Conference Call
WNS will host a conference call on July 22, 2010 at 8:00 am
(EDT) to discuss the company's quarterly results.
To participate in the call, please use the following details:
+1-800-320-2978; international dial-in +1-617-614-4923; participant
passcode 67143887. A replay will be available for one week
following the call at +1-888-286-8010; international dial-in
+1-617-801-6888; passcode 61813609, as well as on the WNS website,
www.wns.com, beginning two hours after the end of the call.
About WNS
WNS (Holdings) Limited (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.wns.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 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 are based on
our current expectations, assumptions, estimates and projections
about our Company and our industry. The forward-looking statements
are subject to various risks and uncertainties. Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as "anticipate," "believe,"
"estimate," "expect," "intend," "will," "project," "seek," "should"
and similar expressions. Those statements include, among other
things, the discussions of our business strategy, industry growth
potential, expansion opportunities, expectations concerning our
future financial performance and growth potential, including our
fiscal 2011 guidance and future profitability, our ability to
generate free cash, relevant foreign currency exchange rates, and
our future operations. We caution you that reliance on any
forward-looking statement involves risks and uncertainties, and
that although we believe that the assumptions on which our
forward-looking statements are based are reasonable, any of those
assumptions could prove to be inaccurate, and, as a result, the
forward-looking statements based on those assumptions could be
materially incorrect. These factors include but are not limited to
worldwide economic and business conditions; political or economic
instability in the jurisdictions where we have operations;
regulatory, legislative and judicial developments; our ability to
attract and retain clients; 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; the
implications of the accounting changes and restatement of our
financial statements as detailed in our annual report on Form 20-F
for the fiscal year ended March 31, 2010 filed with the U.S.
Securities and Exchange Commission (SEC), and any adverse
developments in existing legal proceedings or the initiation of new
legal proceedings; 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;
increasing competition in the BPO industry; our ability to
successfully grow our revenue, expand our service offerings and
market share and achieve accretive benefits from our acquisition of
Aviva Global Services Singapore Pte. Ltd. (which we have renamed as
WNS Customer Solutions (Singapore) Private Limited following our
acquisition), and our master services agreement with Aviva Global
Services (Management Services) Private Limited; our ability to
successfully consummate strategic acquisitions; and volatility of
WNS's ADS price. These and other factors are more fully discussed
in our annual report on Form 20-F for the fiscal year ended March
31, 2010 filed with the SEC which is available at www.sec.gov. In
light of these and other uncertainties, you should not conclude
that we will necessarily achieve any plans, objectives or projected
financial results referred to in any of the forward-looking
statements. Except as required by law, we do not undertake to
release revisions of any of these forward-looking statements to
reflect future events or circumstances.
References to "$" and "USD" refer to the United States dollars,
the legal currency of the United States; references to "GBP" refer
to the British Pound, the legal currency of Britain; and references
to "INR" refer to Indian Rupees, the legal currency of India.
(1) Net income (loss) attributable to WNS shareholders
(2) Net income attributable to WNS shareholders excluding
amortization of intangible assets, share-based compensation and
related fringe benefit taxes and gain/loss attributable to
redeemable noncontrolling interest
* This is a Non-GAAP measure. Reconciliations of non-GAAP
financial measures to GAAP operating results are included at the
end of this release
Growth of revenue (GAAP) and revenue less repair payments (non-GAAP)
Quarter ended
June 30, 2010
Three months ended compared to
---------------------------- ------------------
June 30, June 30, Mar 31, June 30, Mar 31,
2010 2009 2010 2009 2010
-------- -------- -------- -------- --------
(US dollars in millions) (% growth)
-------- -------- -------- -------- --------
Revenue (GAAP) $ 150.0 $ 133.1 $ 157.6 12.7% (4.8)%
Less: Payments to
repair centers 60.7 35.2 60.8 72.3% (0.3)%
Revenue less repair
payments (Non-GAAP) $ 89.3 $ 97.9 $ 96.7 (8.8)% (7.7)%
Reconciliation of cost of revenue (GAAP to non-GAAP)
Three months ended
----------------------------
June 30, June 30, Mar 31,
2010 2009 2010
-------- -------- --------
(US dollars in millions)
-------- -------- --------
Cost of revenue (GAAP) $ 123.3 $ 96.0 $ 123.5
Less: Payments to repair centers 60.7 35.2 60.8
Less: Share-based compensation expense 0.1 0.9 1.0
Adjusted cost of revenue (excluding
payment to repair centers and share-based
compensation expense) (Non-GAAP) $ 62.5 $ 59.9 $ 61.7
Reconciliation of gross margin (GAAP to non-GAAP)
Three months ended
----------------------------
June 30, June 30, Mar 31,
2010 2009 2010
-------- -------- --------
(US dollars in millions)
-------- -------- --------
Gross margin (GAAP) $ 26.7 $ 37.1 $ 34.1
Add: Share-based compensation expense 0.1 0.9 1.0
Adjusted gross margin (excluding
share-based compensation expense)
(Non-GAAP) $ 26.8 $ 38.0 $ 35.0
Three months ended
----------------------------
June 30, June 30, Mar 31,
2010 2009 2010
-------- -------- --------
Gross margin as a percentage of
revenue (GAAP) 17.8% 27.9% 21.6%
Adjusted gross margin (excluding
share-based compensation expense)
as a percentage of revenue less
repair payments (Non-GAAP) 30.1% 38.8% 36.2%
Reconciliation of selling, general and administrative expense
(GAAP to non-GAAP)
Three months ended
----------------------------
June 30, June 30, Mar 31,
2010 2009 2010
-------- -------- --------
(US dollars in millions)
-------- -------- --------
Selling, general and administrative
expenses (GAAP) $ 19.6 $ 20.8 $ 22.8
Less: Share-based compensation expense 0.4 2.4 3.4
Less: Related FBT(1) - 0.2 -
Selling, general and administrative
expenses (excluding share-based
compensation expense and related FBT(1))
(Non-GAAP) $ 19.2 $ 18.2 $ 19.3
Three months ended
----------------------------
June 30, June 30, Mar 31,
2010 2009 2010
-------- -------- --------
Selling, general and administrative
expenses as a percentage of revenue
(GAAP) 13.1% 15.6% 14.5%
Selling, general and administrative
expenses (excluding share-based
compensation expense and related FBT(1))
as a percentage of revenue less repair
payments (Non-GAAP) 21.5% 18.6% 20.0%
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) paid by WNS to the
Government of India. In August 2009, the Government of India passed the
Finance (No. 2) Act, 2009 which withdrew the levy of FBT with effect
from April 1, 2009.
Reconciliation of operating (loss) income (GAAP to non-GAAP)
Three months ended
----------------------------
June 30, June 30, Mar 31,
2010 2009 2010
-------- -------- --------
(US dollars in millions)
-------- -------- --------
Operating (loss) income (GAAP) $ (0.8) $ 8.2 $ 3.2
Add: Amortization of intangible assets 8.0 8.2 8.1
Add: Share-based compensation expense 0.5 3.3 4.4
Add: Related FBT(1) - 0.2 -
Adjusted operating income (excluding
amortization of intangible assets,
share-based compensation expense, and
related FBT(1)) (Non-GAAP) $ 7.7 $ 19.8 $ 15.7
Three months ended
----------------------------
June 30, June 30, Mar 31,
2010 2009 2010
-------- -------- --------
Operating (loss) income as a percentage
of revenue (GAAP) (0.5)% 6.1% 2.1%
Adjusted operating income (excluding
amortization of intangible assets,
share-based compensation expense, and
related FBT(1)) as a percentage of
revenue less repair payments (Non-GAAP) 8.6% 20.3% 16.2%
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) paid by WNS to the
Government of India. In August 2009, the Government of India passed the
Finance (No. 2) Act, 2009 which withdrew the levy of FBT with effect
from April 1, 2009.
Reconciliation of net (loss) income attributable to WNS shareholders
(GAAP to non-GAAP)
Three months ended
------------------------------
June 30, June 30, Mar 31,
2010 2009 2010
--------- --------- ---------
(US dollars in millions)
--------- --------- ---------
Net (loss) income attributable to WNS
(Holdings) Limited shareholders (GAAP) $ (6.0) $ 1.0 $ 1.0
Add: Amortization of intangible assets 8.0 8.2 8.1
Add: Share-based compensation expense 0.5 3.3 4.4
Add: Related FBT(1) - 0.2 -
Less: Net loss attributable to redeemable
noncontrolling interest 0.3 0.1 0.2
Adjusted net income (excluding
amortization of intangible assets,
share-based compensation expense,
related FBT(1) and loss attributable to
redeemable noncontrolling interest)
(Non-GAAP) $ 2.2 $ 12.6 $ 13.3
Three months ended
------------------------------
June 30, June 30, Mar 31,
2010 2009 2010
--------- --------- ---------
Net (loss) income as a percentage of
revenue (GAAP) (4.0)% 0.8% 0.7%
Adjusted net income (excluding amortization
of intangible assets, share-based
compensation expense, related FBT(1) and loss
attributable to redeemable noncontrolling
interest) as a percentage of revenue less
repair payments (Non-GAAP) 2.4% 12.8% 13.8%
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) paid by WNS to the
Government of India. In August 2009, the Government of India passed the
Finance (No. 2) Act, 2009 which withdrew the levy of FBT with effect
from April 1, 2009.
Reconciliation of basic (loss) income per ADS (GAAP to non-GAAP)
Three months ended
------------------------------
June 30, June 30, March 31,
2010 2009 2010
--------- --------- ---------
Basic (loss) income per ADS (GAAP) $ (0.14)$ 0.02 $ 0.03
Add: Adjustments for amortization of
intangible assets, share-based compensation
expense, related FBT(1), loss attributable to
redeemable noncontrolling interest and
impact from changes in carrying amount of
redeemable noncontrolling interest. 0.19 0.27 0.28
--------- --------- ---------
Basic adjusted net income per ADS (excluding
amortization of intangible assets,
share-based compensation expense, related
FBT(1) and loss attributable to redeemable
noncontrolling interest) (Non-GAAP) $ 0.05 $ 0.29 $ 0.31
========= ========= =========
Reconciliation of diluted (loss) income per ADS (GAAP to non-GAAP)
Three months ended
------------------------------
June 30, June 30, March 31,
2010 2009 2010
--------- --------- ---------
Diluted (loss) income per ADS (GAAP) $ (0.14) $ 0.02 $ 0.03
Add: Adjustments for amortization of
intangible assets, share-based compensation
expense, related FBT(1), loss attributable to
redeemable noncontrolling interest and
impact from changes in carrying amount of
redeemable noncontrolling interest. 0.19 0.27 0.27
--------- --------- ---------
Diluted adjusted net income per ADS
(excluding amortization of intangible
assets, share-based compensation expense,
related FBT(1) and loss attributable to
redeemable noncontrolling interest)
(Non-GAAP) $ 0.05 $ 0.29 $ 0.30
========= ========= =========
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) paid by WNS to the
Government of India. In August 2009, the Government of India passed
the Finance (No. 2) Act, 2009 which withdrew the levy of FBT with
effect from April 1, 2009.
CONTACT: Investors & U.S. Media: Alan Katz SVP - Investor
Relations WNS (Holdings) Limited +1 212 599-6960 ext. 241
ir@wns.com India Media: Smita Gaikwad VP - Corporate Communications
WNS (Holdings) Limited +91 22 40952461 smita.gaikwad@wns.com
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