WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of
global business process outsourcing (BPO) services, today announced
results for the fiscal second quarter 2012 ended September 30,
2011.
“Over the last few quarters, we have begun to see the results of
the key strategic investments we have made in the business and the
focused efforts of the WNS team,” said Keshav Murugesh, WNS Group
Chief Executive Officer. “From a top line perspective, revenue less
repair payments continued to improve in the face of currency
headwinds. Our revenue less repair payments in the fiscal second
quarter crossed the $100 million mark for the first time in the
past three years, and on a constant5 currency basis grew at an
accelerating rate for the third consecutive quarter.
"While we continued to invest in SG&A during the second
quarter, sequential revenue growth drove improved operating
leverage. Combined with depreciation in the Indian rupee, the
company was able to sequentially expand gross margin, operating
margin and profit in the second quarter.
"Although macroeconomic uncertainty persists, the environment
for BPO services remains relatively stable and healthy. Decision
cycles are still long, but we are seeing continued improvement in
the quantity, quality and size of the deals in our pipeline. We
believe that the pipeline reflects increased traction from our
expanded and upgraded sales function, with the true benefits of
these investments yet to come."
Fiscal Second 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 second 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 second quarter 2012
increased 7.6 percent to $100.2 million, compared to $93.1 million
in the prior fiscal year period, and increased sequentially 2.4
percent from $97.8 million. The increase compared to prior year
period was primarily due to higher volumes in the Insurance,
Consulting and professional services, Travel & leisure,
Diversified businesses and Utilities verticals and a stronger
British pound. The sequential increase for the fiscal second
quarter was driven by higher volume in the Travel & leisure,
Consulting and professional services and Utilities verticals, which
was partially offset by a weaker British pound.
Adjusted gross profit excluding share based compensation
expense, as a percentage of revenue less repair payments, was 32.8
percent in the fiscal second quarter 2012, compared to 36.4 percent
in the prior fiscal year period, and 31.3 percent sequentially. The
decrease in adjusted gross profit compared to the prior year period
was primarily due to wage inflation and a stronger Indian Rupee.
The sequential improvement was primarily due to the impact of
higher revenue and a weaker Indian rupee during the quarter.
Adjusted selling and marketing (S&M) expenses excluding
share based compensation expense, as a percentage of revenue less
repair payments, was 6.9 percent in the fiscal second quarter 2012,
compared to 6.8 percent in the prior fiscal year period and 6.7
percent sequentially. The sequential spending increase of $0.4
million was primarily the result of WNS’s ongoing investments in
the breadth and depth of client-facing teams, along with programs
targeted at improving corporate branding and marketing. WNS
anticipates maintaining a consistent level of investment on a
percentage basis in support of its growth strategies.
Adjusted general and administrative (G&A) expenses excluding
share based compensation expense, as a percentage of revenue less
repair payments, was 12.3 percent in the fiscal second quarter
2012, compared to 13.5 percent in the prior fiscal year period and
12.0 percent sequentially. The decrease compared to the prior
fiscal year was primarily the result of cost optimization in
support functions and better operating leverage.
Adjusted operating profit excluding amortization of intangible
assets and share based compensation, as a percentage of revenue
less repair payments, was 15.4 percent in the fiscal second quarter
2012, compared to 17.9 percent in the prior fiscal year period and
14.0 percent sequentially.
Adjusted net income (ANI) for the fiscal second quarter 2012 was
$12.0 million or $0.26 adjusted diluted income per ADS, compared to
$14.5 million or $0.32 adjusted diluted income per ADS in the prior
fiscal year period and adjusted net income of $10.0 million or
$0.22 adjusted diluted income per ADS sequentially. Adjusted net
income for the second quarter 2012 has decreased compared with the
fiscal second quarter of 2011 as a result of wage increases, a
stronger Indian rupee and a higher tax rate associated with tax
holiday expirations. The sequential increase was primarily the
result of higher revenue less repair payments and a weaker Indian
rupee.
From a balance sheet perspective, WNS ended the fiscal second
quarter with $16.1 million in cash. Days sales outstanding has
improved to 35 days, as compared to 39 days in the prior quarter.
WNS also made a scheduled repayment of $20 million on its term loan
on July 11, 2011.
Fiscal 2012 Guidance
WNS updates its guidance for the fiscal year ending March 31,
2012 as follows:
- Revenue less repair payments is
expected to be between $388 million and $404 million. This assumes
an average GBP to USD exchange rate of 1.55 for the fiscal third
and fourth quarters of 2012.
- Adjusted net income is expected to
range between $44 million and $47 million. This assumes an average
USD to INR exchange rate of 48.5 for the fiscal third and fourth
quarters of 2012.
“Our guidance factors in the recent volatility in the currency
markets, along with a seasonally weak fiscal third quarter for our
Travel vertical. Overall, the company’s profitability and cash
generation continue to be strong,” noted Alok Misra, Group Chief
Financial Officer.
Conference Call
WNS will host a conference call on October 19, 2011 at 8:00 a.m.
(Eastern) to discuss the company's quarterly results.
To participate in the call, please use the following details:
+1-800-798-2884; international dial-in +1-617-614-6207; participant
passcode 33970741. A replay will be available for one week
following the call at +1-888-286-8010; international dial-in
+1-617-801-6888; passcode 63233056, 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 and Financial Services, Manufacturing, Retail and Consumer
Packaged Goods, Shipping and Logistics and Healthcare and
Utilities. WNS delivers an entire 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 23 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, potential benefits
from our investments in our sales function, our deal pipeline and
the impact of the adoption of IFRS on our financial position and
performance (including the 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 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, 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 Refer to the press release dated 21st July, 2011 explaining
the change in accounting for repair payments.
3 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.
4 Profit under IFRS excluding amortization of intangible assets
and share-based compensation expense.
5 Revenue less repair payments growth, on a constant currency
basis, is derived by applying the foreign currency exchange rate of
the reporting period to the preceding periods
* 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 ended Sep 30,
2011compared to
Sep 30,2011
Sep 30,2010
Jun 30,2011
Sep 30,2010
Jun 30,2011
(US dollars in millions) (% growth) Revenue (GAAP) $
117.9 $ 154.2 $
125.7
(23.5 )% (6.2 )% Less: Payments to repair centers 17.7 61.1 27.8
(71.0 )% (36.4 )% Revenue less repair payments (Non-GAAP) $ 100.2 $
93.1 $ 97.8 7.6 % 2.4 %
Reconciliation of cost of revenue (GAAP
to non-GAAP)
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
(US dollars in millions) Cost of revenue (GAAP) $ 85.2 $
120.4 $ 95.4 Less: Payments to repair centers 17.7 61.1 27.8 Less:
Share-based compensation expense 0.2 0.1 0.3 Adjusted cost of
revenue (excluding payment to repair centers and share-based
compensation expense) (Non-GAAP) $ 67.3 $ 59.2 $ 67.3
Reconciliation of gross profit (GAAP to
non-GAAP)
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
(US dollars in millions) Gross profit (GAAP) $32.7 $33.8 $
30.3 Add: Share-based compensation expense 0.2 0.1 0.3 Adjusted
gross profit (excluding share-based compensation expense)
(Non-GAAP) $32.9 $33.9 $ 30.6
Three months ended
Sep 30,2011
Sep 30,2010
June 30,2011
Gross profit as a percentage of revenue (GAAP) 27.7 %
21.9 % 24.1 % Adjusted gross profit (excluding share-based
compensation expense) as a percentage of revenue less repair
payments (Non-GAAP) 32.8 % 36.4 % 31.3 %
Reconciliation of selling and marketing
expenses (GAAP to non-GAAP)
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
(US dollars in millions) Selling and marketing expenses
(GAAP) $ 7.0 $ 6.4 $ 6.6 Less: Share-based compensation expense 0.1
0.0 0.1 Adjusted selling and marketing expenses (excluding
share-based compensation expense) (Non-GAAP) $ 6.9 $ 6.3 $ 6.5
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
Selling and marketing expenses as a percentage of revenue (GAAP)
5.9 % 4.1 % 5.3 % Adjusted selling and marketing expenses
(excluding share-based compensation expense) as a percentage of
revenue less repair payments (Non-GAAP) 6.9 % 6.8 % 6.7 %
Reconciliation of general and
administrative expenses (GAAP to non-GAAP)
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
(US dollars in millions) General and administrative expenses
(GAAP) $ 13.1 $ 13.0 $ 12.7 Less: Share-based compensation expense
0.8 0.4 1.0 Adjusted general and administrative expenses (excluding
share-based compensation expense) (Non-GAAP) $ 12.3 $ 12.5 $ 11.7
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
General and administrative expenses as a percentage of revenue
(GAAP) 11.1 % 8.4 % 10.1 % Adjusted general and administrative
expenses (excluding share-based compensation expense) as a
percentage of revenue less repair payments (Non-GAAP) 12.3 % 13.5 %
12.0 %
Reconciliation of operating profit
(GAAP to non-GAAP)
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
(US dollars in millions) Operating profit (GAAP) $ 6.9 $ 8.1
$ 4.4 Add: Amortization of intangible assets 7.5 7.9 $ 7.8 Add:
Share-based compensation expense 1.1 0.6 1.5 Adjusted operating
profit (excluding amortization of intangible assets and share-based
compensation expense) (Non-GAAP) $ 15.5 $ 16.6 $ 13.7
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
Operating profit as a percentage of revenue (GAAP) 5.8 % 5.3 % 3.5
% Adjusted operating profit (excluding amortization of intangible
assets and share-based compensation expense) as a percentage of
revenue less repair payments (Non-GAAP) 15.4 % 17.9 % 14.0 %
Reconciliation of profit (GAAP to
non-GAAP)
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
(US dollars in millions) Profit (GAAP) $ 3.4 $ 6.0 $ 0.7
Add: Amortization of intangible assets 7.5 7.9 $ 7.8 Add:
Share-based compensation expense 1.1 0.6
1.5 Adjusted net income (excluding
amortization of intangible assets and share-based compensation
expense) (Non-GAAP) 12.0 14.5 10.0 Add: Adjustment for impact of
hedge accounting 0.0 (0.3 ) 0.4
Adjusted net income (excluding the impact of hedge accounting) $
12.0 $ 14.2 $ 10.4
Three months ended
Sep 30,2011
Sep 30,2010
June 30,2011
Profit as a percentage of revenue (GAAP) 2.9 % 3.9 % 0.5 % Adjusted
net income (excluding amortization of intangible assets and
share-based compensation expense) as a percentage of revenue less
repair payments (Non-GAAP) 12.0 % 15.6 % 10.2 %
Reconciliation of basic income per ADS
(GAAP to non-GAAP)
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
Basic earnings per ADS (GAAP) $ 0.08 $ 0.14 $ 0.01 Add: Adjustments
for amortization of intangible assets and share-based compensation
expense 0.19 0.19 0.21 Basic adjusted net
income per ADS (excluding amortization of intangible assets and
share-based compensation expense) (Non-GAAP) $ 0.27 $ 0.33 $ 0.22
Reconciliation of diluted income per
ADS (GAAP to non-GAAP)
Three months ended
Sep 30,2011
Sep 30,2010
Jun 30,2011
Diluted earnings per ADS (GAAP) $ 0.08 $ 0.13 $ 0.01 Add:
Adjustments for amortization of intangible assets and share-based
compensation expense. 0.18 0.19 0.21
Diluted adjusted net income per ADS (excluding amortization of
intangible assets and share-based compensation expense) (Non-GAAP)
0.26 0.32 0.22 Add: Adjustment for impact of hedge accounting
0.00 (0.01 ) 0.01 Adjusted diluted net income
per ADS (after excluding the impact of hedge accounting) $ 0.26 $
0.31 $ 0.23
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