WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of
global business process outsourcing (BPO) services, today announced
results for the fiscal third quarter 2012 ended December 31,
2011.
“During the third quarter, WNS continued to make progress on our
key investment programs designed to enhance our competitive
positioning and long-term revenue growth potential,” said Keshav
Murugesh, WNS Group Chief Executive Officer. “From a sales
perspective, the new business pipeline remains healthy.
Additionally, WNS was successful in closing a new strategic
insurance account, an opportunity which I have mentioned on our
past few earnings calls. WNS also signed new partnerships and
alliances during the quarter that will allow us to expand and
enhance our offerings and deliver services from new
geographies.
As anticipated, revenue less repair payments reduced
sequentially during the third quarter as a result of the
depreciation in the British pound versus the US dollar and the
impact of seasonal volume reductions in our Travel vertical. While
unfavorable exchange rates created revenue headwinds, depreciation
in the Indian rupee versus the US dollar favorably impacted
operating costs and allowed WNS to expand margins during the
quarter.
In the past quarter, the uncertain and volatile macroeconomic
outlook has resulted in near-term behavior changes for some WNS
clients and prospects. While some clients are viewing this
environment as an opportunity to engage and accelerate cost
reduction initiatives, other clients have experienced business
challenges and strategic changes which are impacting volumes with
WNS. Most of our client’s calendar 2012 budgets are expected to be
finalized in the next month, which should provide additional
clarity with respect to strategic plans and business volumes for
fiscal 2013. The company remains focused on our key investment
programs and strategic initiatives, and we believe that WNS is well
positioned to drive long-term, sustainable value for all of our key
stakeholders."
Fiscal Third Quarter 2012 Financial Results
All discussions below refer to non-GAAP financial measures.
The financial information in this release is focused on non-GAAP
financial measures as we believe that this is a true representation
of our operating performance. Reconciliations of these non-GAAP
financial 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 third 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 third quarter 2012
increased 4.9 percent to $97.2 million, compared to $92.7 million
in the prior fiscal year period, and decreased sequentially 3.0
percent from $100.2 million. The increase compared to prior year
period was primarily due to higher volumes in the Travel &
Leisure, Insurance, Consulting and Professional Services,
Healthcare and Diversified verticals. The sequential decrease for
the fiscal third quarter was driven by seasonality in the Travel
& Leisure vertical, volume reductions with a large Insurance
client, and a weaker British pound.
Adjusted gross profit excluding share based compensation
expense, as a percentage of revenue less repair payments, was 36.3
percent in the fiscal third quarter 2012, compared to 34.3 percent
in the prior fiscal year period, and 32.8 percent sequentially. The
increase in adjusted gross profit compared to the prior year period
was primarily due to higher revenue and a weaker Indian Rupee. The
sequential improvement was primarily due to the impact of currency,
as the Indian rupee depreciated versus the US dollar during the
third quarter.
Adjusted selling and marketing (S&M) expenses excluding
share based compensation expense, as a percentage of revenue less
repair payments, was 6.6 percent in the fiscal third quarter 2012,
compared to 6.5 percent in the prior fiscal year period and 6.9
percent last quarter. The sequential reduction was primarily the
result of currency favorability. 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 12.0 percent in the fiscal third quarter 2012,
compared to 14.2 percent in the prior fiscal year period and 12.3
percent sequentially. The decrease compared to the prior fiscal
year was primarily the result of rupee depreciation, cost
optimization in support functions and better operating leverage.
Sequential improvement was largely the result of currency
favorability.
Adjusted operating profit excluding amortization of intangible
assets and share based compensation, as a percentage of revenue
less repair payments, was 16.7 percent in the fiscal third quarter
2012, compared to 20.2 percent in the prior fiscal year period and
15.4 percent sequentially.
Adjusted net income (ANI) for the fiscal third quarter 2012 was
$12.1 million or $0.27 adjusted diluted income per ADS, compared to
$18.0 million or $0.40 adjusted diluted income per ADS in the prior
fiscal year period and $12.0 million or $0.26 adjusted diluted
income per ADS sequentially. Adjusted net income for the third
quarter 2012 decreased compared with the prior year period due to
wage increases, the impact of IFRS hedge accounting, and a higher
tax rate associated with tax holiday expirations. Sequentially,
depreciation in the Indian rupee versus the US dollar offset lower
revenue less repair payments and a higher effective tax rate.
From a balance sheet perspective, WNS ended the fiscal third
quarter with $23.3 million in cash and an additional $11.4 million
in bank deposits and marketable securities. Days sales outstanding
for the third quarter was 36 days, as compared to 35 days in the
prior quarter. WNS also made a scheduled repayment of $30 million
on its term loan on January 9, 2012.
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 $391 million and $393 million. This assumes
an average GBP to USD exchange rate of 1.55 for the fiscal fourth
quarter of 2012.
- Adjusted net income is expected to
range between $45 million and $47 million. This assumes an average
USD to INR exchange rate of 52.0 for the fiscal fourth quarter of
2012.
“We have narrowed our fiscal 2012 guidance range based on
current revenue visibility levels and exchange rates. The company
remains focused on our key investment initiatives and on improving
our overall financial strength and competitive positioning,” said
Alok Misra, WNS Group Chief Financial Officer.
Conference CallWNS will host
a conference call on January 18, 2012 at 8:00 am (Eastern) to
discuss the company's quarterly results.To participate in the call,
please use the following details: +1-800-659-2037; international
dial-in +1-617-614-2713; participant passcode 27043617. A replay
will be available for one week following the call at
+1-888-286-8010; international dial-in +1-617-801-6888; passcode
64158783, as well as on the WNS website, www.wns.com, beginning two
hours after the end of the call.
About WNSWNS (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 22,000
professionals across 25 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
MeasuresFor 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; 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; the effects of our different pricing
strategies or those of our competitors; 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 and in our
updates to those risk factors in our reports on Form 6-K filed with
or furnished to the U.S. Securities and Exchange Commission (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.
Growth of revenue (GAAP) and revenue
less repair payments (non-GAAP)
Three months ended
Three months ended Dec 31, 2011
compared to
Dec 31,2011
Dec 31,2010
Sep 30,2011
Dec 31,2010
Sep 30,2011
(US dollars in millions) (% growth) Revenue
(GAAP) $ 117.2 $ 152.7 $ 117.9
(23.2 )% (0.6 )% Less: Payments to repair
centers 20.0 60.0 17.7 (66.6 )% 13.1 % Revenue less repair payments
(Non-GAAP) $ 97.2 $ 92.7 $ 100.2 4.9 % (3.0 )%
Reconciliation of cost of revenue (GAAP
to non-GAAP)
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
(US dollars in millions) Cost of revenue (GAAP) $ 82.1
$ 121.1 $ 85.2 Less: Payments to repair
centers 20.0 60.0 17.7 Less: Share-based compensation expense 0.2
0.2 0.2 Adjusted cost of revenue (excluding payment to repair
centers and share-based compensation expense) (Non-GAAP) $ 61.9 $
60.9 $ 67.3
Reconciliation of gross profit (GAAP to
non-GAAP)
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
(US dollars in millions) Gross profit (GAAP) $ 35.1
$ 31.6 $ 32.7 Add: Share-based compensation expense
0.2 0.2 0.2 Adjusted gross profit (excluding share-based
compensation expense) (Non-GAAP) $ 35.3 $ 31.8 $ 32.9
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
Gross profit as a percentage of revenue (GAAP) 30.0 %
20.7 % 27.7 % Adjusted gross profit (excluding
share-based compensation expense) as a percentage of revenue less
repair payments (Non-GAAP) 36.3 % 34.3 % 32.8 %
Reconciliation of selling and marketing
expenses (GAAP to non-GAAP)
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
(US dollars in millions) Selling and marketing expenses
(GAAP) $ 6.4 $ 6.1 $ 7.0 Less: Share-based
compensation expense 0.0 0.1 0.1 Adjusted selling and marketing
expenses (excluding share-based compensation expense) (Non-GAAP) $
6.4 $ 6.1 $ 6.9
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
Selling and marketing expenses as a percentage of revenue (GAAP)
5.5 % 4.0 % 5.9 % Adjusted selling and marketing expenses
(excluding share-based compensation expense) as a percentage of
revenue less repair payments (Non-GAAP) 6.6 % 6.5 % 6.9 %
Reconciliation of general and
administrative expenses (GAAP to non-GAAP)
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
(US dollars in millions) General and administrative expenses
(GAAP) $ 12.5 $ 14.0 $ 13.1 Less: Share-based
compensation expense 0.9 0.8 0.8 Adjusted general and
administrative expenses (excluding share-based compensation
expense) (Non-GAAP) $ 11.7 $ 13.2 $ 12.3
Three months
ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
General and administrative expenses as a percentage of revenue
(GAAP) 10.7 % 9.2 % 11.1 % Adjusted general and
administrative expenses (excluding share-based compensation
expense) as a percentage of revenue less repair payments (Non-GAAP)
12.0 % 14.2 % 12.3 %
Reconciliation of operating profit
(GAAP to non-GAAP)
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
(US dollars in millions) Operating profit (GAAP) $ 8.1
$ 9.6 $ 6.9 Add: Amortization of intangible assets
7.0 8.0 $ 7.5 Add: Share-based compensation expense 1.1 1.1 1.1
Adjusted operating profit (excluding amortization of intangible
assets and share-based compensation expense) (Non-GAAP) $ 16.2 $
18.7 $ 15.5
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
Operating profit as a percentage of revenue (GAAP) 6.9 % 6.3 %
5.8 % Adjusted operating profit (excluding amortization of
intangible assets and share-based compensation expense) as a
percentage of revenue less repair payments (Non-GAAP) 16.7 % 20.2 %
15.4 %
Reconciliation of profit (GAAP to
non-GAAP)
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
(US dollars in millions) Profit (GAAP) $ 4.0 $
9.0 $ 3.4 Add: Amortization of intangible assets 7.0 8.0 $
7.5 Add: Share-based compensation expense 1.1
1.1 1.1 Adjusted net income (excluding
amortization of intangible assets and share-based compensation
expense) (Non-GAAP) 12.1 18.0 12.0 Add: Adjustment for impact of
hedge accounting 0.5 (2.1 ) 0.0
Adjusted net income (further excluding the impact of hedge
accounting) (Non-GAAP) $ 12.6 $ 15.9 $ 12.0
Three
months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
Profit as a percentage of revenue (GAAP) 3.5 %
5.9 % 2.9 % Adjusted net income (excluding
amortization of intangible assets and share-based compensation
expense) as a percentage of revenue less repair payments (Non-GAAP)
12.5 % 19.4 % 12.0 %
Reconciliation of basic income per ADS
(GAAP to non-GAAP)
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
Basic earnings per ADS (GAAP) $ 0.09 $ 0.20 $ 0.08
Add: Adjustments for amortization of intangible assets and
share-based compensation expense 0.18
0.21 0.19 Adjusted basic net income per ADS
(excluding amortization of intangible assets and share-based
compensation expense) (Non-GAAP) $ 0.27 $ 0.41
$ 0.27
Reconciliation of diluted income per
ADS (GAAP to non-GAAP)
Three months ended
Dec 31,2011
Dec 31,2010
Sep 30,2011
Diluted earnings per ADS (GAAP) $ 0.09 $ 0.20 $ 0.08
Add: Adjustments for amortization of intangible assets and
share-based compensation expense. 0.18
0.20 0.18 Adjusted diluted net income per ADS
(excluding amortization of intangible assets and share-based
compensation expense) (Non-GAAP) 0.27 0.40 0.26 Add: Adjustment for
impact of hedge accounting 0.01 (0.05)
0.00 Adjusted diluted net income per ADS (further
excluding the impact of hedge accounting) (Non-GAAP) $ 0.28
$ 0.35 $ 0.26
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