WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of
global business process outsourcing (BPO) services, today announced
results for the fiscal second quarter 2011 ended September 30,
2010.
Fiscal Second Quarter 2011 Financial Highlights
Revenue for the fiscal second quarter 2011 increased by 5.6
percent to $154.2 million, compared to $146.0 million in the
corresponding quarter in the prior fiscal year, and increased by
2.8 percent sequentially from $150.0 million in the fiscal first
quarter of 2011. Revenue less repair payments* for the fiscal
second quarter 2011 declined 6.6 percent to $93.1 million, compared
to $99.7 million in the corresponding quarter in the prior fiscal
year, and increased 4.3 percent sequentially from $89.3 million in
the fiscal first quarter of 2011. Revenue less repair payments
declined largely as a result of the change in pricing terms with a
large travel client, the weaker British Pound compared with the
second quarter of fiscal 2010, lower volumes in the insurance and
travel businesses. These headwinds were partially offset by the
positive impact of improved pricing with a large insurance client
and ramp ups of business with existing clients. The sequential
increase in revenue less repair payments was a result of a stronger
British Pound, improved pricing with a large insurance client and
ramp ups of business with existing clients.
Gross margin, as a percent of revenues were 21.5 percent in the
fiscal second quarter 2011, compared to 25.3 percent in the
corresponding quarter in the prior fiscal year and 17.8 percent in
the fiscal first quarter of 2011. WNS’s adjusted gross margin
excluding share based compensation expense*, as a percent of
revenue less repair payments, decreased to 35.9 percent in the
fiscal second quarter 2011, compared to 38.2 percent in the
corresponding quarter in the prior fiscal year, and increased
compared to 30.1 percent in the fiscal first quarter of 2011. The
decrease compared with the corresponding quarter in the prior
fiscal year was primarily due to the impact of wage inflation, a
stronger Indian Rupee and the change in pricing with a key travel
client, as mentioned above. The sequential increase in adjusted
gross margin excluding share based compensation* was primarily due
to a lower number of employees on a quarterly average basis, a
stronger British Pound and LEAN initiatives which have led to
operational improvements.
Selling, General and Administrative (SG&A) expenses, as a
percentage of revenues, were 12.7 percent in the fiscal second
quarter 2011, compared to 15.1 percent in the corresponding quarter
in the prior fiscal year and 13.1 percent in the fiscal first
quarter of 2011. Adjusted Selling, General and Administrative
(SG&A) expenses excluding share based compensation expense and
related fringe benefit tax*, as a percentage of revenue less repair
payments, were 20.3 percent in the fiscal second quarter 2011,
compared to 18.7 percent in the corresponding quarter in the prior
fiscal year and 21.5 percent in the fiscal first quarter of
2011.
Operating income, as a percentage of revenues, was 3.6 percent
in the fiscal second quarter 2011, compared to operating income of
4.6 percent in the corresponding quarter in the prior fiscal year
and operating loss of 0.5 percent in the fiscal first quarter of
2011. 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
15.6 percent in the fiscal second quarter 2011, compared to 19.5
percent in the corresponding quarter in the prior fiscal year and
8.6 percent in the fiscal first quarter of 2011. Operating margins
during the fiscal second quarter were negatively impacted, as
compared with the corresponding quarter in the prior fiscal year,
by a change in pricing with a larger travel client, wage inflation
and a stronger Indian Rupee. Operating margins improved
sequentially as a result of a price increase with a large insurance
client, a stronger British Pound and LEAN initiatives which have
led to operational improvements.
Net income attributable to WNS shareholders for the fiscal
second quarter 2011 was $4.9 million or $0.11 diluted income per
ADS, compared to net income attributable to WNS shareholders of
$1.4 million or $0.02 diluted income per ADS in the corresponding
quarter in the prior fiscal year and net loss attributable to WNS
shareholders of $6.0 million or $0.14 diluted loss per ADS in the
fiscal first quarter of 2011. Adjusted net income* for the fiscal
second quarter 2011 was $13.8 million or $0.31 adjusted diluted
income per ADS, compared to $13.7 million or $0.31 adjusted diluted
income per ADS in the corresponding quarter in the prior fiscal
year and adjusted net income of $2.2 million or $0.05 adjusted
diluted income per ADS in the fiscal first quarter of 2011.
Operational Highlights
“This quarter, we made significant progress on the five-point
plan I had elaborated on during our last earnings call. We are
eliminating waste and are running a more efficient organization. We
are now operating as a vertical-led structure and have added
top-quality talent to our sales, vertical and horizontal teams. Our
renewed focus on domain offerings and sales and marketing will
continue to positively impact our pipeline while positioning us in
larger and more sophisticated deals," said Group Chief Executive
Officer Keshav Murugesh.
“We still have opportunities to both streamline our business and
expand our pipeline. We see tremendous growth potential in the
global market and believe we are very well positioned to take
advantage of these trends,” continued Murugesh.
Fiscal 2011 Guidance
WNS updated its revenue less repair payments guidance and
reaffirmed its adjusted net income guidance for the fiscal year
ending March 31, 2011 as follows:
- Revenue less repair payments is now
expected to be between $363 million and $378 million. This assumes
an average GBP to USD exchange rate of 1.55 for the second half of
the 2011 fiscal year, implying an average full year rate of
1.53.
- Adjusted net income is expected to
range between $43 million and $46 million. This assumes an average
USD to INR exchange rate of 45 for the second half of the 2011
fiscal year, implying an average full year rate of 45.5.
“We have significantly improved our profitability this past
quarter compared to the fiscal first quarter. In spite of a
stronger Rupee, we are still on track in terms of our ANI guidance
as a result of operational improvements which have led to a
reduction in costs, a stronger British Pound and our long-term
hedging strategy,” said Alok Misra, Group Chief Financial Officer.
“We are investing some of our cost savings back into the business,
supporting our front end and increasing our hunting and farming
resources.”
Conference Call
WNS will host a conference call on October 27, 2010 at 8:00 am
(EDT) to discuss the company's quarterly results.
To participate in the call, please use the following details:
+1-866-730-5763; international dial-in +1-857-350-1587; participant
passcode 30993249. A replay will be available for one week
following the call at +1-888-286-8010; international dial-in
+1-617-801-6888; passcode 82171647, 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, WNS 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, WNS 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. WNS 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 WNS provides a consolidated suite of accident
management services including credit hire and credit repair for its
“Non fault” repairs business, WNS believes that measurement of that
line of business has to be on a basis that includes repair payments
in revenue.
WNS 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 WNS’s financial results prepared
in accordance with US GAAP.
WNS presents Adjusted Net Income (ANI) and the other non-GAAP
measures included in this release as supplemental measures of its
performance. WNS presents these non-GAAP measures because it
believes they assist investors in comparing its performance across
reporting periods on a consistent basis by excluding items that it
does not believe are indicative of its core operating performance.
In addition, it uses these non-GAAP measures (i) as a factor in
evaluating management’s performance when determining incentive
compensation and (ii) to evaluate the effectiveness of its business
strategies.
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, 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 Revenue less repair payments only applies to the Auto Claims
business. For all other businesses, revenues less repair payments
are the same as revenues
3 Net income attributable to WNS shareholders excluding
amortization of intangible assets, share-based compensation,
expense, related fringe benefit tax and net loss attributable to
redeemable non-controlling 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. See also “About Non-GAAP Financial Measures”
below.
Growth of revenue (GAAP) and revenue less repair payments
(non-GAAP)
Quarter ended
Quarter ended Sep 30,
2010compared to
Sep 30,2010
Sep 30,2009
Jun 30,2010
Sep 30,2009
Jun 30,2010
(US dollars in millions) (% growth) Revenue (GAAP) $
154.2 $ 146.0 $ 150.0
5.6 % 2.8 % Less: Payments to repair centers
61.1 46.3 60.7 31.8 % 0.6 % Revenue less repair payments (Non-GAAP)
$ 93.1 $ 99.7 $ 89.3 (6.6 )% 4.3 %
Reconciliation of cost of revenue (GAAP to non-GAAP)
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
(US dollars in millions) Cost of revenue (GAAP) $ 121.0
$ 109.1 $ 123.3 Less: Payments to repair
centers 61.1 46.3 60.7 Less: Share-based compensation expense 0.3
1.2 0.1 Adjusted cost of revenue (excluding payment to repair
centers and share-based compensation expense) (Non-GAAP) $ 59.6 $
61.6 $ 62.5
Reconciliation of gross margin (GAAP to non-GAAP)
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
(US dollars in millions) Gross margin (GAAP) $ 33.2
$ 36.9 $ 26.7 Add: Share-based compensation expense
0.3 1.2 0.1 Adjusted gross margin (excluding share-based
compensation expense) (Non-GAAP) $ 33.5 $ 38.1 $ 26.8
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
Gross margin as a percentage of revenue (GAAP) 21.5 %
25.3 % 17.8 % Adjusted gross margin (excluding
share-based compensation expense) as a percentage of revenue less
repair payments (Non-GAAP) 35.9 % 38.2 % 30.1 %
Reconciliation of selling, general and administrative expense
(GAAP to non-GAAP)
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
(US dollars in millions) Selling, general and administrative
expenses (GAAP) $ 19.7 $ 22.1 $ 19.6 Less:
Share-based compensation expense 0.7 3.2 0.4 Less: Related FBT1 -
0.3 - Adjusted selling, general and administrative expenses
(excluding share-based compensation expense and related FBT1)
(Non-GAAP) $ 18.9 $ 18.6 $ 19.2
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
Selling, general and administrative expenses as a percentage of
revenue (GAAP) 12.7 % 15.1 % 13.1 % Adjusted selling, general and
administrative expenses (excluding share-based compensation expense
and related FBT1) as a percentage of revenue less repair payments
(Non-GAAP) 20.3 % 18.7 % 21.5 %
Reconciliation of operating income (loss) (GAAP to
non-GAAP)
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
(US dollars in millions) Operating income (loss) (GAAP) $
5.6 $ 6.7 $ (0.8 ) Add: Amortization of
intangible assets 7.9 8.1 $ 8.0 Add: Share-based compensation
expense 1.0 4.3 0.5 Add: Related FBT1 - 0.3 - Adjusted operating
income (excluding amortization of intangible assets, share-based
compensation expense, and related FBT1) (Non-GAAP) $ 14.5 $ 19.4 $
7.7
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.
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
Operating income (loss) as a percentage of revenue (GAAP)
3.6 % 4.6 % (0.5 )% Adjusted operating
income (excluding amortization of intangible assets, share-based
compensation expense, and related FBT1) as a percentage of revenue
less repair payments (Non-GAAP) 15.6 % 19.5 % 8.6 %
Reconciliation of net income (loss) attributable to WNS
shareholders (GAAP to non-GAAP)
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
(US dollars in millions) Net income (loss) attributable to
WNS (Holdings) Limited shareholders (GAAP) $ 4.9 $
1.4 $ (6.0 ) Add: Amortization of intangible assets 7.9 8.1
$ 8.0 Add: Share-based compensation expense 1.0 4.3 0.5 Add:
Related FBT1 - 0.3 - Less: Net loss attributable to redeemable
non-controlling interest 0.1 0.4 0.3 Adjusted net income (excluding
amortization of intangible assets, share-based compensation
expense, related FBT1 and net loss attributable to redeemable
non-controlling interest) (Non-GAAP) $ 13.8 $ 13.7 $ 2.2
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
Net income (loss) as a percentage of revenue (GAAP) 3.2 %
0.9 % (4.0 )% Adjusted net income
(excluding amortization of intangible assets, share-based
compensation expense, related FBT1 and net loss attributable to
redeemable non-controlling interest) as a percentage of revenue
less repair payments (Non-GAAP) 14.8 % 13.8 % 2.4 %
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 income (loss) per ADS (GAAP to
non-GAAP)
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
Basic income (loss) per ADS (GAAP) $ 0.11 $
0.02 $ (0.14 ) Add: Adjustments for amortization of
intangible assets, share-based compensation expense, related FBT1,
net loss attributable to redeemable non-controlling interest and
impact from changes in carrying amount of redeemable
non-controlling interest. 0.20
0.30 0.19 Basic adjusted net income per ADS
(excluding amortization of intangible assets, share-based
compensation expense, related FBT1 and net loss attributable to
redeemable non-controlling interest) (Non-GAAP) $ 0.31
$ 0.32 $ 0.05
Reconciliation of diluted income (loss) per ADS (GAAP to
non-GAAP)
Three months ended
Sep 30,2010
Sep 30,2009
Jun 30,2010
Diluted income (loss) per ADS (GAAP) $ 0.11 $
0.02 $ (0.14 ) Add: Adjustments for amortization of
intangible assets, share-based compensation expense, related FBT1,
net loss attributable to redeemable non-controlling interest and
impact from changes in carrying amount of redeemable
non-controlling interest. 0.20
0.29 0.19 Diluted adjusted net income per ADS
(excluding amortization of intangible assets, share-based
compensation expense, related FBT1 and net loss attributable to
redeemable non-controlling interest) (Non-GAAP) $ 0.31
$ 0.31 $ 0.05
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.
Note: Any discrepancies in any table between totals and sums of
the amounts listed are due to rounding.
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