WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of
global business process outsourcing (BPO) services, today announced
results for the fiscal first quarter 2012 ended June 30, 2011.
“Over the last five quarters, we have focused on the execution
of our strategy to grow revenues and enhance margins, and we
believe the strong first quarter results reflect those efforts. We
have enhanced our sales organization, in both size and
effectiveness, in line with our focus on domain expertise within
our key verticals. In addition to sales, the investments we have
made in marketing and branding, technology and internal operations
have begun to pay off in the form of increased revenue from
existing and new clients. We believe that the environment is
improving for quality domain and technology aligned BPO services,
and WNS is well-positioned to capitalize on this opportunity
despite experiencing macroeconomic headwinds within several of our
key verticals. To that end, WNS signed six new clients during the
first quarter, in addition to several expansions, and we are
optimistic about the number of new opportunities that remain in the
pipeline," said Group Chief Executive Officer, Keshav Murugesh.
During this quarter, WNS has re-negotiated contracts with
certain of its clients and repair centers in the Auto Claims
business, whereby the significant risk of services and the credit
risk are now borne by these clients instead of WNS. As a result of
these changes, WNS no longer accounts for the amount received from
these clients for payments to repair centers and the payments made
to repair centers for cases referred by these clients as revenue
and cost of revenue respectively. While this change has resulted in
a lower GAAP revenue figure, it has had no material impact on
operating metrics such as revenue less repair payments. The
contract re-negotiation process is ongoing and aimed at simplifying
the Company’s accounting requirements.
Also, as announced previously, beginning this quarter WNS is
reporting under IFRS as issued by IASB. WNS has on July 14, 2011
submitted to the US Securities and Exchange Commission (SEC) a
report on Form 6-K containing a supplementary financial information
package on its quarterly financial results for fiscal 2011 prepared
in accordance with IFRS, as issued by the IASB. The comparative
financial information in this release for the previous fiscal
periods is also under IFRS as detailed in the aforesaid package. An
explanation of how the transition to IFRS has affected WNS’s
financial position and financial performance and reconciliations of
equity and profit and loss account for the fiscal first and fourth
quarters 2011 showing the quantitative effects of transition to
IFRS from US GAAP is included in the aforesaid package.
Fiscal First Quarter 2012 Financial Results
All discussions below refer to non-GAAP financial measures.
The financial information in this release is focused on non-GAAP
measures as we believe that this is a true representation of our
operating performance. Reconciliations of these non-GAAP measures
to our GAAP operating results are included at the end of this
release. See also “About Non-GAAP Financial Measures” below. A
discussion of our GAAP measures will be contained in our
Management’s Discussion and Analysis of Financial Condition and
Results of Operations accompanying our first fiscal quarter 2012
financial statements to be submitted to the SEC under a report on
Form 6-K shortly.
Revenue less repair payments for the fiscal first quarter 2012
increased 9.6 percent to $97.8 million, compared to $89.3 million
in the prior fiscal year period, and increased sequentially 3.7
percent from $94.3 million. Revenue less repair payments for the
fiscal first quarter 2012 has increased largely as a result of
higher volume in the Insurance, Retail, Shipping & Logistics
and Healthcare verticals and a stronger British pound.
Adjusted gross profit excluding share based compensation
expense, as a percentage of revenue less repair payments, was 31.3
percent in the fiscal first quarter 2012, compared to 30.5 percent
in the prior fiscal year period, and 36.1 percent sequentially.
Adjusted gross profit for the fiscal first quarter 2012 was higher
compared with the corresponding quarter in the prior fiscal year
primarily due to higher revenues as detailed above, partially
offset by the impact of wage inflation and a stronger Indian Rupee.
The sequential decline was primarily due to the impact of wage
inflation and a stronger Indian Rupee.
Adjusted selling and marketing (S&M) expenses excluding
share based compensation expense, as a percentage of revenue less
repair payments, was 6.7 percent in the fiscal first quarter 2012,
compared to 5.7 percent in the prior fiscal year period and 6.1
percent sequentially. The increase was primarily the result of
WNS’s ongoing investment in the expansion of its sales force,
client partner programs and branding and marketing initiatives. WNS
anticipates maintaining a consistent level of investment in support
of its growth strategy.
Adjusted general and administrative (G&A) expenses excluding
share based compensation expense, as a percentage of revenue less
repair payments, was 12.0 percent in the fiscal first quarter 2012,
compared to 15.8 percent in the prior fiscal year period and 15.1
percent sequentially. The decrease was primarily the result of cost
optimization in support functions & better operating
leverage.
Under IFRS, the Company has reclassified and presented the
foreign exchange gain (loss) as part of operating profits. Under
our previous GAAP, these transactions were presented under other
(income) expenses, net.
Adjusted operating profit excluding amortization of intangible
assets and share based compensation, as a percentage of revenue
less repair payments, was 14.0 percent in the fiscal first quarter
2012, compared to 12.5 percent in the prior fiscal year period and
19.4 percent sequentially. The lower gross profit due to wage
increases and a stronger Indian Rupee, investment in the sales
force and lower hedging profits on British pound hedges as detailed
above was partially offset by the lower general &
administrative expenses and improved operating leverage.
Adjusted net income for the fiscal first quarter 2012 was $10.0
million or $0.22 adjusted diluted income per ADS, compared to $2.2
million or $0.05 adjusted diluted income per ADS in the prior
fiscal year period and adjusted net income of $18.2 million or
$0.40 adjusted diluted income per ADS sequentially. Adjusted net
income for the first quarter 2012 has increased compared with the
fiscal first quarter of 2011 as result of higher revenue, cost
management initiatives and a onetime cost impact of $5.1 million
due to an interest rate swap unwinding charge in fiscal first
quarter of 2011. The sequential decrease was primarily the result
of wage inflation and higher tax charge as a result of the
expiration of the Software Technology Parks of India tax holiday
period in India. ANI was also impacted by the difference in hedge
accounting under IFRS as detailed below.
As detailed in the fiscal 2011 IFRS supplementary financial
information package submitted to the SEC on July 14, 2011, the
accounting standard under IFRS on hedge accounting is under
revision by IASB. The change in standard is expected to remove the
difference with US GAAP on the accounting treatment for option
contracts. In the event the standard is adopted by IASB as proposed
by the fourth quarter of calendar 2011, the Company intends to
adopt this IFRS in its first IFRS financial statements for the year
ending March 31, 2012, whereupon it would also have to apply
the same accounting for the financial statements for fiscal 2011.
The impact on earnings under IFRS because of this difference in
accounting treatment is a gain of $0.3 million and $3.8 million for
the first and fourth quarters respectively of fiscal 2011 and a
loss of $0.4 million for the fiscal first quarter 2012. On adoption
of the revised accounting standard under IFRS, these impacts are
expected to be reversed in the financial statements for the
respective periods.
Excluding the impact of this difference, the adjusted net income
for the fiscal first quarter 2012 would be $10.4 million or $0.23
adjusted diluted income per ADS, compared to $1.9 million or $0.04
adjusted diluted income per ADS in the prior fiscal year period and
adjusted net income of $14.5 million or $0.32 adjusted diluted
income per ADS sequentially.
WNS also made a scheduled repayment of $20 million on its term
loan on July 11, 2011.
Fiscal 2012 Guidance
WNS updated its guidance for the fiscal year ending March 31,
2012 as follows:
- Revenue less repair payments is
expected to be between $387 million and $407 million. This
assumes an average GBP to USD exchange rate of 1.60 for the
fiscal year 2012.
- Adjusted net income continues to be
expected to range between $43 million and $47 million. This
assumes an average USD to INR exchange rate of 44.5 for the
fiscal year 2012.
“Moving forward, we see significant opportunities to continue to
improve our margins and cash generation. In addition, our lean
efforts over the past year and our industry leading DSOs have
allowed us to make the necessary investments in the client facing
part of our organization. We continue to see strong cash flows and
remain focused on maintaining a prudent balance sheet,” noted Alok
Misra, WNS’s Group Chief Financial Officer.
Conference Call
WNS will host a conference call on July, 21, 2011 at 8:00 a.m.
(ET) to discuss the company's quarterly results. To participate in
the call, please use the following details: +1 800 510 0219;
international dial-in +1 617 614 3451; participant passcode
86993144. A replay will be available for one week following the
call at +1 888 286 8010; international dial-in +1 617 801 6888;
passcode 78371934, 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. WNS offers business value to 200+
global clients by combining operational excellence with deep domain
expertise in key industry verticals including Travel, Insurance,
Banking & Financial Services, Manufacturing, Retail &
Consumer Packaged Goods, Shipping & Logistics and Healthcare
& Utilities. WNS delivers a broad spectrum of business process
outsourcing services such as finance and accounting, customer care,
technology solutions, research and analytics and industry specific
back office and front office processes. WNS has over 21,000
professionals across 21 delivery centers worldwide including Costa
Rica, India, Philippines, Romania, Sri Lanka and United Kingdom.
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 Accidents
Happen Assistance 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 certain third-party repair centers and clients.
Revenue less repair payments is a non-GAAP measure which is
calculated as revenue less payments to repair centers. 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. 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 IFRS.
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 2012 guidance and future profitability, relevant foreign
currency exchange rates, our future operations and the impact of
the adoption of IFRS on our financial position and performance
(including the expected impact of the proposed amendment to the
IFRS accounting standard on hedge accounting). 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, 2011 filed with the 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, 2011 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 GAAP refers to International Financial Reporting Standards
(IFRS) as issued by International Accounting Standards Board
(IASB). 2 Payments to repair centers, and therefore a difference
between revenue and revenue less repair payments, only applies to
the Auto Claims business. For all other businesses, revenue less
repair payments is the same as revenue. 3 Profit under IFRS
excluding amortization of intangible assets and share-based
compensation expense. *
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.”
Growth of revenue (GAAP) and revenue
less repair payments (non-GAAP)
Three months ended
Three months endedJun 30, 2011
compared to
Jun 30,2011
Jun 30,2010
Mar 31,2011
Jun 30,2010
Mar 31,2011
(US dollars in millions) (% growth) Revenue (GAAP) $
125.7
$
150.0
$
159.5
(16.2 )% (21.2 )% Less: Payments to repair centers 27.8 60.7 65.2
(54.1 )% (57.3 )% Revenue less repair payments (Non-GAAP) $ 97.8 $
89.3 $ 94.3 9.6 % 3.7 %
Reconciliation of cost of revenue (GAAP
to non-GAAP)
Three months ended Jun
30, 2011 Jun 30, 2010
Mar 31, 2011 (US dollars in millions) Cost of revenue
(GAAP) $ 95.4 $ 122.7 $ 125.8 Less: Payments to repair
centers 27.8 60.7 65.2 Less: Share-based compensation expense 0.3
0.0 0.3 Adjusted cost of revenue (excluding payment to repair
centers and share-based compensation expense) (Non-GAAP) $ 67.3 $
62.0 $ 60.3
Reconciliation of gross profit (GAAP to
non-GAAP)
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
(US dollars in millions) Gross profit (GAAP) $ 30.3 $ 27.2 $
33.7 Add: Share-based compensation expense 0.3 0.0 0.3 Adjusted
gross profit (excluding share-based compensation expense)
(Non-GAAP) $ 30.6 $ 27.2 $ 34.0
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
Gross profit as a percentage of revenue (GAAP) 24.1 % 18.2 % 21.1 %
Adjusted gross profit (excluding share-based compensation expense)
as a percentage of revenue less repair payments (Non-GAAP) 31.3 %
30.5 % 36.1 %
Reconciliation of selling and marketing
expenses (GAAP to non-GAAP)
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
(US dollars in millions) Selling and marketing expenses
(GAAP) $ 6.6 $ 5.1 $ 5.9 Less: Share-based compensation expense 0.1
0.0 0.1 Adjusted selling and marketing expenses (excluding
share-based compensation expense) (Non-GAAP) $ 6.5 $ 5.1 $ 5.8
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
Selling and marketing expenses as a percentage of revenue (GAAP)
5.3 % 3.4 % 3.7 % Adjusted selling and marketing expenses
(excluding share-based compensation expense) as a percentage of
revenue less repair payments (Non-GAAP) 6.7 % 5.7 % 6.1 %
Reconciliation of general and
administrative expenses (GAAP to non-GAAP)
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
(US dollars in millions) General and administrative expenses
(GAAP) $ 12.7 $ 14.1 $ 15.3 Less: Share-based compensation expense
1.0 0.0 1.1 Adjusted general and administrative expenses (excluding
share-based compensation expense) (Non-GAAP) $ 11.7 $ 14.1 $ 14.2
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
General and administrative expenses as a percentage of revenue
(GAAP) 10.1 % 9.4 % 9.6 % Adjusted general and administrative
expenses (excluding amortization of intangible assets and
share-based compensation expense) as a percentage of revenue less
repair payments (Non-GAAP) 12.0 % 15.8 % 15.1 %
Reconciliation of operating profit
(GAAP to non-GAAP)
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
(US dollars in millions) Operating profit (GAAP) $ 4.4 $ 3.1
$ 8.9 Add: Amortization of intangible assets 7.8 8.0 $ 8.0 Add:
Share-based compensation expense 1.5 0.0 1.4 Adjusted operating
profit (excluding amortization of intangible assets and share-based
compensation expense) (Non-GAAP) $ 13.7 $ 11.1 $ 18.3
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
Operating profit as a percentage of
revenue (GAAP)
3.5 % 2.1 % 5.6 %
Adjusted operating profit (excluding
amortization of intangible assets and share-based compensation
expense) as a percentage of revenue less repair payments
(Non-GAAP)
14.0 % 12.5 % 19.4 %
Reconciliation of profit (GAAP to
non-GAAP)
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
(US dollars in millions)
Profit/(loss) (GAAP)
$ 0.7 $ (5.8 ) $ 8.8 Add: Amortization of intangible assets 7.8 8.0
$ 8.0 Add: Share-based compensation expense 1.5 0.0
1.4 Adjusted net income (excluding
amortization of intangible assets and share-based compensation
expense) (Non-GAAP) 10.0 2.2 18.2 Add: Adjustment for impact of
hedge accounting 0.4 (0.3 ) (3.8 )
Adjusted net income (excluding the impact
of hedge accounting)
$ 10.4 $ 1.9 $ 14.5
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
Profit/(loss) as a percentage of revenue
(GAAP)
0.5 % (3.9 )% 5.5 % Adjusted net income (excluding
amortization of intangible assets and share-based compensation
expense) as a percentage of revenue less repair payments (Non-GAAP)
10.2 % 2.4 % 19.3 %
Reconciliation of basic income per ADS
(GAAP to non-GAAP)
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
Basic earnings/(loss) per ADS (GAAP) $ 0.01 $ (0.13 ) $ 0.20 Add:
Adjustments for amortization of intangible assets and share-based
compensation expense 0.21 0.18 0.21
Basic adjusted net income per ADS (excluding amortization of
intangible assets and share-based compensation expense) (Non-GAAP)
$ 0.22 $ 0.05 $ 0.41
Reconciliation of diluted income per
ADS (GAAP to non-GAAP)
Three months ended
Jun 30,2011
Jun 30,2010
Mar 31,2011
Diluted earnings per ADS (GAAP)
$ 0.01 $ (0.13 ) $ 0.19 Add: Adjustments for amortization of
intangible assets and share-based compensation expense. 0.21
0.18 0.21 Diluted adjusted net income per ADS
(excluding amortization of intangible assets and share-based
compensation expense) (Non-GAAP) 0.22 0.05 0.40 Add: Adjustment for
impact of hedge accounting 0.01 (0.01 ) (0.08 )
Adjusted diluted net income per ADS (after
excluding the impact of hedge accounting)
0.23 0.04 0.32
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