WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of
global business process outsourcing (BPO) services, today announced
results for the 2013 fiscal first quarter ended June 30, 2012 and
the resignation of Alok Misra, the company’s Chief Financial
Officer.
Highlights:
GAAP Financials
- Revenue of $107.8 million, down
14.2% from $125.7 million in Q1 of last year (primarily due to
change in accounting for repair payments) and down 4.9% from $113.3
million last quarter
- Profit of $2.8 million, compared to
$0.7 million in Q1 of last year and $4.4 million last
quarter
- Diluted earnings per ADS of $0.06,
compared to $0.01 in Q1 of last year and $0.09 last
quarter
Non-GAAP Financial
Measures*
- Revenue less repair payments of
$102.6 million, up 4.9% from $97.8 million in Q1 of last year and
up 2.8% from $99.8 million last quarter
- Adjusted Net Income (ANI) of $11.1
million, compared to $10.0 million in Q1 of last year and $13.2
million last quarter
- Adjusted diluted earnings per ADS of
$0.22, compared to $0.22 in Q1 of last year and $0.27 last
quarter
Operations Update
- Finalized acquisition of Fusion
South Africa
- Announced first US delivery center
in Columbia, South Carolina
- Added 3 new clients in the quarter,
expanded 10 existing relationships
- Days sales outstanding (DSO) at 33
days
- Global headcount of 25,939 as of
June 30, 2012
Reconciliations of the non-GAAP financial measures discussed
below to our GAAP operating results are included at the end of this
release. See also “About Non-GAAP Financial Measures.”
Revenue less repair payments* of $102.6 million in the first
quarter increased 4.9% year-over-year, and 2.8% as compared to the
previous quarter. Sequential revenue growth was broad-based, with
particular strength in the Insurance, Healthcare, and Utilities
verticals. Year-over-year, revenue improvement was also broad-based
and driven by growth in the Utilities, Travel, and Insurance
verticals.
Adjusted gross margin* for the quarter was 33.9%, as compared to
the 31.3% in Q1 of last year, and 35.5% reported last quarter.
Sequentially, gross margins were pressured as a result of our
annual wage increases. Depreciation in the Indian rupee helped
partially offset this impact. On a year-over-year basis, gross
margin favorability was driven by higher revenue and rupee
depreciation, which was partially offset by wage increases and
higher infrastructure costs. First quarter adjusted operating
margin* was 13.2%, as compared to 14.0% in Q1 of last year and
17.5% reported in the fourth quarter. The sequential reduction was
driven by annual wage increases and expenses associated with the
Fusion South Africa acquisition. On a year-over-year basis, the
reduction in operating margin is the result of wage increases,
infrastructure expansion and acquisition costs. Currency
favorability and operating leverage associated with higher revenue
partially offset these costs.
Adjusted net income (ANI)* in the first quarter was $11.1
million, down $2.1 million sequentially. The reduced adjusted
operating margin* discussed above was partially offset by favorable
income on cash balances and a lower effective tax rate. On a
year-over-year basis, ANI* increased $1.1 million as lower
operating margin was more than offset by increased income on cash
balances and a reduced effective tax rate.
From a balance sheet perspective, WNS ended the fiscal first
quarter with $52.2 million in cash and an additional $12.8 million
in marketable securities. The Fusion South Africa acquisition
reduced the quarter-ending cash by approximately $8 million. Gross
debt at the end of the first quarter was $87.2 million, consistent
with Q4 levels. Days sales outstanding for Q1 was 33 days, down
from 35 days in the prior quarter.
“WNS continues to make progress towards our financial and
operational objectives. Revenue less repair payments improved 7.0%
on a constant currency basis* versus the same quarter of last year,
despite some short-term client-specific headwinds in auto claims
and travel. WNS was also able to significantly enhance our global
delivery capability during the quarter, as we completed the
acquisition of Fusion Outsourcing in South Africa and announced the
opening of our first U.S. delivery center in South Carolina,” said
Keshav Murugesh, WNS Group Chief Executive Officer.
“We remain cautiously optimistic about the market environment
for BPO services, which currently remains stable and healthy. WNS
will continue to invest in expanding our geographic footprint,
technology-enabling our solutions and driving non-linear revenue
growth. Additionally, the entire organization remains focused on
enabling our sales force to improve productivity and accelerate
profitable revenue growth.”
Fiscal 2013 Guidance
WNS has updated guidance for the fiscal year ending March 31,
2013 as follows:
- Revenue less repair payments* is
expected to be between $420 million and $440 million. This assumes
an average GBP to USD exchange rate of 1.55 for the remainder of
fiscal 2013.
- ANI* is expected to range between $50
million and $54 million. This assumes an average USD to INR
exchange rate of 56.0 for the remainder of fiscal 2013.
“The updated fiscal 2013 guidance is based on current visibility
levels and exchange rates. Guidance for the year reflects top line
growth of 6% to 11%, with 95% visibility to the midpoint of the
range. Revenue guidance includes the impact of the recently
completed Fusion acquisition, which is expected to contribute
between $9 million and $10 million to fiscal 2013 revenue. On a
constant currency basis, our updated guidance implies higher 2013
organic revenues of $5 million to $6 million compared to our
previous guidance,” said Alok Misra, WNS Group Chief Financial
Officer.
Company CFO Resigns
WNS also reported today that Alok Misra, the company’s Chief
Financial Officer, has announced his resignation in order to return
with his family to Bangalore, India. Mr. Misra will continue to be
an officer and employee of the company through August 16, 2012, and
afterwards will continue with the company in a consulting role to
ensure a smooth transition. Kumar Subramaniam, WNS’s Corporate
Senior Vice President, Finance, will assume the role of interim CFO
from August 17, 2012. The company has initiated a search for a new
CFO.
“Alok has been a valued member of the WNS team for over four
years. We wish him well as he moves on, and thank him for his many
contributions,” said Murugesh.
“WNS is an excellent company with a strong future,” said Misra.
“It has been a privilege to be a part of a talented team that has
positioned the company for long-term success in the industry. I am
committed to helping ensure an orderly transition in the coming
months.”
Conference Call
WNS will host a conference call on July 18, 2012 at 8:00 am
(Eastern) to discuss the company's quarterly and full year results.
To participate in the call, please use the following details:
+1-866-314-4483; international dial-in +1-617-213-8049; participant
passcode 56582973. A replay will be available for one week
following the call at +1-888-286-8010; international dial-in
+1-617-801-6888; passcode 20237067, 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. As of June 30, 2012, WNS
had 25,939 professionals across 28 delivery centers worldwide
including Costa Rica, India, Philippines, Romania, South Africa,
Sri Lanka, United Kingdom and the United States. For more
information, visit www.wns.com.
Safe Harbor Statement
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 and assumptions about our Company and our
industry. Generally, these forward-looking statements may be
identified by the use of terminology such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “will,” “seek,” “should”
and similar expressions. These statements include, among other
things, the discussions of our strategic initiatives and the
expected resulting benefits, our growth opportunities, industry
environment, expectations concerning our future financial
performance and growth potential, including our fiscal 2013
guidance and future profitability, Fusion’s expected results of
operations and their expected impact on our results of operations,
and expected foreign currency exchange rates. Forward-looking
statements inherently involve risks and uncertainties that could
cause actual results to differ materially from those expressed or
implied by such statements. Such risks and uncertainties include
but are not limited to Fusion’s volume of business; our ability to
successfully integrate Fusion’s business operations with ours; our
ability to successfully leverage Fusion’s assets to grow our
revenue, expand our service offerings and market share and achieve
accretive benefits from our acquisition of Fusion; 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; and increasing competition
in the BPO industry. These and other factors are more fully
discussed in our most recent annual report on Form 20-F and
subsequent reports on Form 6-K filed with or furnished to the US
Securities and Exchange Commission (SEC) which are available at
www.sec.gov. We caution you not to place undue reliance on any
forward-looking statements. Except as required by law, we do not
undertake to update any 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.
References to GAAP refers to International Financial Reporting
Standards, as issued by the International Accounting Standards
Board (IFRS).
About Non-GAAP Financial
Measures
The financial information in this release is focused on non-GAAP
financial measures as we believe that they reflect more accurately
our operating performance. Reconciliations of these non-GAAP
financial measures to our GAAP operating results are included
below. A discussion of our GAAP measures are contained in “Part I
–Item 5. Operating and Financial Review and Prospects” accompanying
our fiscal 2012 financial statements submitted to the SEC under our
annual report on Form 20-F filed with the SEC on April 26,
2012.
For financial statement reporting purposes, WNS has two
reportable segments: WNS Global BPO and WNS Auto Claims BPO.
Revenue less repair payments is a non-GAAP financial measure that
is calculated as (a) revenue less (b) in the auto claims business,
payments to repair centers (1) for “fault” repair cases where WNS
acts as the principal in its dealings with the third party repair
centers and its clients and (2) for “non-fault” repair cases with
respect to one client to whom WNS provides services similar to its
“fault” repair cases. WNS believes that revenue less repair
payments for “fault” repairs reflects more accurately the value
addition of the business process outsourcing services that it
directly provides to its clients. For more details, please see the
discussion in “Part I – Item 5. Operating and Financial Review and
Prospects – Overview” in our annual report on Form 20-F filed with
the SEC on April 26, 2012.
Constant currency revenue less repair payments is a non-GAAP
financial measure. We present constant currency revenue less repair
payments so that revenue less repair payments may be viewed without
the impact of foreign currency exchange rate fluctuations, thereby
facilitating period-to-period comparisons of business performance.
Constant currency revenue less repair payments is calculated, for
the indicated periods, by restating the prior period’s revenue less
repair payments denominated in pound sterling or Euro, as
applicable, using the foreign exchange rate used for the latest
period.
WNS also presents (1) adjusted gross margin, which refers to
adjusted gross profit (calculated as gross profit excluding
share-based compensation expense) as a percentage of revenue less
repair payments, (2) adjusted operating margin, which refers to
adjusted operating profit (calculated as operating profit excluding
amortization of intangible assets and share-based compensation
expense) as a percentage of revenue less repair payments, and (3)
ANI, which is calculated as profit excluding amortization of
intangible assets and share-based compensation expense, and 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. These non-GAAP measures are not meant to be considered
in isolation or as a substitute for WNS’s financial results
prepared in accordance with IFRS.
WNS (HOLDINGS) LIMITED
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(Amounts in millions, except share and
per share data)
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
Revenue $ 107.8 $ 125.7 $ 113.3 Cost of revenue 73.4
95.4 78.2 Gross profit 34.4 30.3 35.1 Operating expenses:
Selling and marketing expenses 7.4 6.6 6.3 General and
administrative expenses 12.6 12.7 13.0 Foreign exchange
loss/(gains), net 2.4 (1.3 ) 0.2 Amortization of intangible assets
6.6 7.8 7.1 Operating profit 5.2 4.4 8.7 Other
(income)/expenses, net (1.0 ) (0.2 ) 0.2 Finance expense 1.0
1.2 0.9 Profit before income taxes 5.2 3.4 7.5
Provision for income taxes 2.4 2.7 3.1 Profit
$ 2.8 $ 0.7 $ 4.4 Earnings per share of ordinary share Basic
$ 0.06 $ 0.01 $ 0.09 Diluted $ 0.06 $ 0.01 $ 0.09
Growth of revenue (GAAP) and revenue
less repair payments (non-GAAP)
Three months ended
Three months ended Jun 30,2012
compared to
Jun 30,2012
Jun 30,2011
Mar 31,2012
Jun 30,2011
Mar 31,2012
(Amounts in millions) (% growth)
Revenue (GAAP) $ 107.8 $ 125.7 $
113.3
(14.2 )% (4.9 )% Less: Payments to repair centers 5.2
27.8 13.5 (81.3 )% (61.5 )% Revenue less repair payments (Non-GAAP)
$ 102.6 $ 97.8 $ 99.8 4.9 % 2.8 %
Reconciliation of cost of revenue (GAAP
to non-GAAP)
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
(Amounts in millions) Cost of revenue (GAAP) $ 73.4
$ 95.4 $ 78.2 Less: Payments to repair centers
5.2 27.8 13.5 Less: Share-based compensation expense 0.4 0.3 0.3
Adjusted cost of revenue (excluding payment to repair centers and
share-based compensation expense) (Non-GAAP) $ 67.8 $ 67.3 $ 64.4
Reconciliation of gross profit (GAAP to
non-GAAP)
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
(Amounts in millions) Gross profit (GAAP) $ 34.4
$ 30.3 $ 35.1 Add: Share-based compensation
expense 0.4 0.3 0.3 Adjusted gross profit (excluding share-based
compensation expense) (Non-GAAP) $ 34.8 $ 30.6 $ 35.4
Three
months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
Gross profit as a percentage of revenue (GAAP) 31.9 % 24.1 % 31.0 %
Adjusted gross profit (excluding share-based compensation expense)
as a percentage of revenue less repair payments (Non-GAAP) 33.9 %
31.3 % 35.5 %
Reconciliation of selling and marketing
expenses (GAAP to non-GAAP)
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
(Amounts in millions) Selling and marketing expenses (GAAP)
$ 7.4 $ 6.6 $ 6.3 Less: Share-based
compensation expense 0.1 0.1 0.1 Adjusted selling and marketing
expenses (excluding share-based compensation expense) (Non-GAAP) $
7.3 $ 6.5 $ 6.2
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
Selling and marketing expenses as a percentage of revenue (GAAP)
6.9 % 5.3 % 5.5 % Adjusted selling and marketing expenses
(excluding share-based compensation expense) as a percentage of
revenue less repair payments (Non-GAAP) 7.1 % 6.7 % 6.2 %
Reconciliation of general and
administrative expenses (GAAP to non-GAAP)
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
(Amounts in millions) General and administrative expenses
(GAAP) $ 12.6 $ 12.7
$
13.0
Less: Share-based compensation expense 1.1 1.0 1.3 Adjusted general
and administrative expenses (excluding share-based compensation
expense) (Non-GAAP) $ 11.5 $ 11.7 $ 11.7
Three months
ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
General and administrative expenses as a percentage of revenue
(GAAP) 11.7 % 10.1 % 11.4 % Adjusted general and administrative
expenses (excluding share-based compensation expense) as a
percentage of revenue less repair payments (Non-GAAP) 11.2 % 12.0 %
11.7 %
Reconciliation of operating profit
(GAAP to non-GAAP)
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
(Amounts in millions) Operating profit (GAAP) $ 5.2
$ 4.4
$
8.7
Add: Amortization of intangible assets 6.6 7.8 $ 7.1 Add:
Share-based compensation expense 1.7 1.5 1.7 Adjusted operating
profit (excluding amortization of intangible assets and share-based
compensation expense) (Non-GAAP) $ 13.5 $ 13.7 $ 17.4
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
Operating profit as a percentage of revenue (GAAP) 4.9 % 3.5 % 7.6
% Adjusted operating profit (excluding amortization of intangible
assets and share-based compensation expense) as a percentage of
revenue less repair payments (Non-GAAP) 13.2 % 14.0 % 17.5 %
Reconciliation of profit (GAAP to
non-GAAP)
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
(Amounts in millions) Profit (GAAP) $ 2.8 $
0.7
$
4.4
Add: Amortization of intangible assets 6.6 7.8 $ 7.1 Add:
Share-based compensation expense 1.7
1.5 1.7 Adjusted net
income (excluding amortization of intangible assets and share-based
compensation expense) (Non-GAAP) 11.1 10.0 13.2 Add: Adjustment for
impact of hedge accounting (0.3 ) 0.4
0.0 Adjusted net income
(excluding the impact of hedge accounting) $ 10.9 $ 10.4 $ 13.2
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
Profit as a percentage of revenue (GAAP) 2.6 % 0.5 % 3.9 % Adjusted
net income (excluding amortization of intangible assets and
share-based compensation expense) as a percentage of revenue less
repair payments (Non-GAAP) 10.8 % 10.2 % 13.2 %
Reconciliation of basic earnings per
ADS (GAAP to non-GAAP)
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
Basic earnings per ADS (GAAP) $ 0.06 $ 0.01 $ 0.09 Add: Adjustments
for amortization of intangible assets and share-based compensation
expense 0.16 0.21 0.19 Adjusted basic earnings
per ADS (excluding amortization of intangible assets and
share-based compensation expense) (Non-GAAP) $ 0.22 $ 0.22 $ 0.28
Reconciliation of diluted earnings per
ADS (GAAP to non-GAAP)
Three months ended
Jun 30,2012
Jun 30,2011
Mar 31,2012
Diluted earnings per ADS (GAAP) $ 0.06 $ 0.01
$ 0.09
Add: Adjustments for amortization of
intangible assets and share-based compensation expense
0.16 0.21
0.18 Adjusted diluted earnings per ADS (excluding amortization of
intangible assets and share-based compensation expense) (Non-GAAP)
0.22 0.22 0.27 Add: Adjustment for impact of hedge accounting
(0.01 ) 0.01 0.00
Adjusted diluted earnings per ADS (excluding the impact of hedge
accounting) $ 0.21 $ 0.23 $ 0.27
WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
(Amounts in millions, except share and
per share data)
As atJune 30, 2012
As atMarch 31, 2012
(Unaudited) ASSETS Current assets: Cash and
cash equivalents
$
52.2
$
46.7
Marketable securities 12.8 26.4 Trade receivables, net 58.3 66.4
Unbilled revenue 33.8 35.9 Funds held for clients 24.6 20.7 Current
tax assets 3.4 3.9 Derivative assets 3.1 3.7 Prepayments and other
current assets 24.9 21.9 Total current
assets 213.0 225.6 Non-current assets:
Investments 0.0 0.0 Goodwill 81.7 86.7 Intangible assets 102.4
115.1 Purchase price pending allocation 8.1 Property and equipment
45.7 45.4 Derivative assets 1.5 1.5 Deferred tax assets 44.8 43.7
Other non-current assets 6.5 6.9 Total
non-current assets 290.7 299.4
TOTAL
ASSETS
$
503.7
$
525.0
LIABILITIES AND EQUITY Current liabilities:
Trade payables
$
33.2
$
47.3
Provisions and accrued expenses 34.1 31.9 Derivative liabilities
16.3 9.8 Pension and other employee obligations 23.6 29.0 Short
term line of credit 21.0 24.0 Current portion of long term debt
26.1 26.0 Deferred revenue 5.8 6.2 Current taxes payable 8.7 8.2
Other liabilities 15.5 5.2 Total
current liabilities 184.3 187.6
Non-current liabilities: Derivative liabilities 2.1 1.2 Pension and
other employee obligations 4.5 4.6 Long term debt 40.1 36.7
Deferred revenue 3.8 4.1 Other non-current liabilities 2.6 2.7
Deferred tax liabilities 3.9 4.1 Total
non-current liabilities 57.1 53.3
TOTAL LIABILITIES 241.3
240.9 Shareholders' equity:
Share capital (ordinary shares $ 0.16 (10
pence) par value,authorized 60,000,000 shares; issued: 50,138,634
and 50,078,881 shareseach as at June 30, 2012 and March 31, 2012,
respectively)
7.9 7.8 Share premium 265.2 263.5 Retained earnings 62.0 59.1 Other
components of equity
(72.6
)
(46.4
)
Total shareholders' equity 262.4 284.1
TOTAL LIABILITIES AND EQUITY
$
503.7
$
525.0
* See “About Non-GAAP Financial Measures” and the
reconciliations of the historical non-GAAP financial measures to
our GAAP operating results at the end of this release.
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