WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of
global Business Process Management (BPM) services, today announced
results for the 2015 fiscal second quarter ended September 30,
2014.
Highlights – Fiscal Second Quarter 2015:
GAAP Financials
- Revenue of $134.1 million, up 8.9%
from $123.1 million in Q2 of last year and up 2.3% from $131.0
million last quarter
- Profit of $15.3 million, compared to
$9.3 million in Q2 of last year and $12.1 million last
quarter
- Diluted earnings per ADS of $0.29,
compared to $0.18 in Q2 of last year and $0.23 last
quarter
Non-GAAP Financial
Measures*
- Revenue less repair payments of
$126.5 million, up 9.7% from $115.4 million in Q2 of last year and
up 3.7% from $122.1 million last quarter
- Adjusted Net Income (ANI) of $23.9
million, compared to $17.2 million in Q2 of last year and $20.4
million last quarter
- Adjusted diluted earnings per ADS of
$0.45, compared to $0.33 in Q2 of last year and $0.39 last
quarter
Other Metrics
- Added 5 new clients in the quarter,
expanded 3 existing relationships
- Days sales outstanding (DSO) at 30
days
- Global headcount of 27,734 as of
September 30, 2014
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* in the fiscal second quarter was
$126.5 million, representing a 9.7% increase versus the second
quarter of last year, and a 3.7% increase from the previous
quarter. Year-over-year, fiscal Q2 revenue was adversely impacted
by the transition of a large online travel agency (OTA) client to
another OTA pursuant to a strategic marketing agreement, and
pricing and productivity headwinds from a five plus year contract
extension with Aviva. These headwinds were more than offset by
broad-based revenue growth and currency favorability resulting from
appreciation in the British Pound against the US dollar.
Sequentially, top line improvement was driven by broad-based growth
in our core verticals and service offerings. Excluding exchange
rate impacts, constant currency revenue less repair payments* in
the second quarter grew 3.9% versus Q2 of last year and 3.8%
sequentially.
Adjusted operating margin* for the quarter was 21.8%, as
compared to 16.2% in Q2 of last year and 17.9% reported in the
first quarter. On a year-over-year basis, operating margin
increased as a result of exchange rate and hedging favorability,
improved productivity, gain sharing, and operating leverage
associated with higher revenue. Partially offsetting this
favorability were pricing and productivity headwinds associated
with the Aviva contract extension and the impact of our annual wage
increases. The expansion in adjusted operating margin* from Q1 to
Q2 was driven by currency and hedging favorability, gain sharing,
and improved productivity.
Adjusted net income (ANI)* in the fiscal second quarter was
$23.9 million, up $6.7 million as compared to Q2 of last year and
up $3.5 million from the previous quarter. Second quarter ANI*
margin was 18.9%, as compared to 14.9% in Q2 of last year, and
16.7% reported last quarter. The second quarter ANI* includes
incremental taxes of $1.0 million resulting from the finalization
of the India budget, which changed the taxability of our Fixed
Maturity Plan investments.
From a balance sheet perspective, WNS ended the fiscal second
quarter with $153.7 million in cash and investments and $62.5
million of gross debt. In the second quarter, the company generated
$25.5 million in cash from operations, reduced debt levels by $20.5
million and had $8.3 million in capital expenditures. Days sales
outstanding were 30 days, as compared to 30 days in Q2 of last year
and 32 days reported in the previous quarter.
“WNS is pleased with the operational and financial progress made
during our fiscal second quarter,” said Keshav Murugesh, WNS’s
Chief Executive Officer. “The company’s performance with respect to
revenue, margin, profit and cash were all encouraging. During Q2,
we were able to finalize our contract extension with Aviva, add 5
new clients and sign our third ‘large deal’ of the year. As we move
forward, the company will remain focused on improving our sales
force productivity, including the addition of new client logos and
the expansion of existing relationships. While our market
positioning and differentiation remain solid, we must continue to
invest in domain expertise, technology-enablement and new service
offerings to meet the evolving needs of our BPM clients. We believe
that this will enable WNS to grow revenue and maintain profit
margins at or above industry levels.”
Fiscal 2015 Guidance
WNS has updated guidance for the fiscal year ending March 31,
2015 as follows:
- Revenue less repair payments* is
expected to be between $500 million and $516 million, up from
$471.5 million in fiscal 2014. This assumes an average GBP to USD
exchange rate of 1.62 for the remainder of fiscal 2015.
- ANI* is expected to range between $83
million and $87 million, up from $72.4 million in fiscal 2014. This
assumes an average USD to INR exchange rate of 61.0 for the
remainder of fiscal 2015.
- Based on a diluted share count of 53.3
million shares, the company expects adjusted diluted earnings* per
ADS to be in the range of $1.56 to $1.63.
“The company has updated our forecast for fiscal 2015 based on
current visibility levels and exchange rates,” said Sanjay Puria,
WNS’s Chief Financial Officer. “Our revised guidance for the year
reflects top line growth of 6% to 9%, with 99% visibility to the
midpoint of the range. This guidance represents 3% to 6% revenue
growth on a constant currency* basis. WNS continues to expect
profitability to expand faster than revenue, with our ANI* guidance
reflecting 15% to 20% year-over-year improvement. Our revised full
year ANI* guidance anticipates $2.0 million of negative impacts
resulting from the finalization of the India budget, including the
$1.0 million tax impact in Q2.”
Conference Call
WNS will host a conference call on October 16, 2014 at 8:00 am
(Eastern) to discuss the company's quarterly results. To
participate in the call, please use the following details:
+1-877-703-6106; international dial-in +1-857-244-7305; participant
passcode 69293615. A replay will be available for one week
following the call at +1-888-286-8010; international dial-in
+1-617-801-6888; passcode 20367570, 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 management 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, Healthcare and Utilities.
WNS delivers an entire spectrum of business process management
services such as finance and accounting, customer care, technology
solutions, research and analytics and industry specific back office
and front office processes. As of September 30, 2014, WNS had
27,734 professionals across 35 delivery centers worldwide including
China, Costa Rica, India, Philippines, Poland, 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 2015
guidance and future profitability, 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 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 BPM 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 is contained in “Part I
–Item 5. Operating and Financial Review and Prospects” in our
annual report on Form 20-F filed with the SEC on May 14, 2014.
For financial statement reporting purposes, WNS has two
reportable segments: WNS Global BPM and WNS Auto Claims BPM.
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 for “fault” repair cases where WNS acts
as the principal in its dealings with the third party repair
centers and its clients. WNS believes that revenue less repair
payments for “fault” repairs reflects more accurately the value
addition of the business process management 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 May 14, 2014.
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 presented by
recalculating prior period’s revenue less repair payments
denominated in currencies other than in US dollars using the
foreign exchange rate used for the latest period, without taking
into account the impact of hedging gains/losses. Our non-US dollar
denominated revenues include, but are not limited to, revenues
denominated in pound sterling, South African rand, Australian
dollar and euro.
WNS also presents (1) 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 (2)
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
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited, amounts in millions, except
share and per share data)
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
Revenue $ 134.1 $ 123.1
$
131.0
Cost of revenue 84.5 79.7 86.2 Gross profit 49.5 43.4 44.8
Operating expenses: Selling and marketing expenses 8.2 9.0 7.7
General and administrative expenses 17.0 13.0 16.2 Foreign exchange
loss/ (gain), net (0.7 ) 4.6 1.3 Amortization of intangible assets
6.0 5.8 6.1 Operating
profit 18.9 10.9 13.5 Other income, net (2.9 ) (1.8 ) (3.1 )
Finance expense 0.3 0.8 0.5
Profit before income taxes 21.5 12.0 16.1 Provision for
income taxes 6.2 2.6 4.0
Profit $ 15.3 $ 9.3
$
12.1
Earnings per share of ordinary share Basic $ 0.30
$ 0.18
$
0.23
Diluted $ 0.29 $ 0.18
$
0.23
Growth of revenue (GAAP) and revenue
less repair payments (non-GAAP)
Three months ended
Three months ended
Sep 30, 2014 compared to
Sep 30,2014
Sep 30,2013
Jun 30,2014
Sep 30,2013
Jun 30,2014
(Amounts in millions)
Revenue (GAAP) $ 134.1 $ 123.1 $ 131.0
8.9 % 2.3 % Less: Payments to repair centers 7.5 7.7 8.9
(2.0 ) % 15.6 % Revenue less repair payments (Non-GAAP) 126.5 115.4
122.1 9.7 % 3.7 % Constant currency revenue less
repair payments (Non-GAAP)
$ 126.4 $ 121.7 $ 121.8 3.9 % 3.8 %
Reconciliation of cost of revenue (GAAP
to non-GAAP)
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
(Amounts in millions) Cost of revenue (GAAP) $ 84.5 $ 79.7 $
86.2 Less: Payments to repair centers 7.5 7.7 8.9 Less: Share-based
compensation expense 0.0 0.4 0.4 Adjusted cost of revenue
(excluding payment to repair centers and share-based compensation
expense) (Non-GAAP) $ 77.0 $ 71.6 $ 76.9
Reconciliation of gross profit (GAAP to
non-GAAP)
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
(Amounts in millions) Gross profit (GAAP) $ 49.5 $ 43.4 $
44.8 Add: Share-based compensation expense 0.0 0.4 0.4 Adjusted
gross profit (excluding share-based compensation expense)
(Non-GAAP) $ 49.5 $ 43.8 $ 45.2
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
Gross profit as a percentage of revenue (GAAP) 36.9 % 35.3 %
34.2
%
Adjusted gross profit (excluding share-based compensation expense)
as a percentage of revenue less repair payments (Non-GAAP) 39.2 %
38.0 %
37.0
%
Reconciliation of selling and marketing
expenses (GAAP to non-GAAP)
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
(Amounts in millions) Selling and marketing expenses (GAAP)
$ 8.2 $ 9.0 $ 7.7 Less: Share-based compensation expense 0.3 0.1
0.2 Adjusted selling and marketing expenses (excluding share-based
compensation expense) (Non-GAAP) $ 7.9 $ 8.9 $ 7.5
Three
months ended Sep 30, 2014 Sep 30, 2013 Jun 30,
2014 Selling and marketing expenses as a percentage of revenue
(GAAP) 6.1% 7.3% 5.8% Adjusted selling and marketing expenses
(excluding share-based compensation expense) as a percentage of
revenue less repair payments (Non-GAAP) 6.3% 7.7% 6.1%
Reconciliation of general and
administrative expenses (GAAP to non-GAAP)
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
(Amounts in millions) General and administrative expenses
(GAAP) $ 17.0 $ 13.0 $ 16.2 Less: Share-based compensation expense
2.3 1.5 1.6 Adjusted general and administrative expenses (excluding
share-based compensation expense) (Non-GAAP) $ 14.8 $ 11.5 $ 14.6
Three months ended Sep 30, 2014
Sep 30,2013
Jun 30,2014
General and administrative expenses as a percentage of revenue
(GAAP) 12.7 % 10.6 % 12.4 % Adjusted general and administrative
expenses (excluding share-based compensation expense) as a
percentage of revenue less repair payments (Non-GAAP) 11.7 % 10.0 %
12.0 %
Reconciliation of operating profit
(GAAP to non-GAAP)
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
(Amounts in millions) Operating profit (GAAP) $ 18.9 $ 10.9
$ 13.5 Add: Amortization of intangible assets 6.0 5.8 6.1 Add:
Share-based compensation expense 2.6 2.0 2.2 Adjusted operating
profit (excluding amortization of intangible assets and share-based
compensation expense) (Non-GAAP) $ 27.6 $ 18.7 $ 21.8
Three months ended Sep 30, 2014 Sep 30, 2013
Jun 30, 2014 Operating profit as a percentage of revenue
(GAAP) 14.1 % 8.9 % 10.3 % Adjusted operating profit (excluding
amortization of intangible assets and share-based compensation
expense) as a percentage of revenue less repair payments (Non-GAAP)
21.8 % 16.2 % 17.9 %
Reconciliation of profit (GAAP to
non-GAAP)
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
(Amounts in millions) Profit (GAAP) $ 15.3 $ 9.3 $ 12.1 Add:
Amortization of intangible assets 6.0 5.8 6.1 Add: Share-based
compensation expense 2.6 2.0 2.2 Adjusted net income (excluding
amortization of intangible assets and share-based compensation
expense) (Non-GAAP) $ 23.9 $ 17.2 $ 20.4
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
Profit as a percentage of revenue (GAAP) 11.4 % 7.6 % 9.2 %
Adjusted net income (excluding amortization of intangible assets
and share-based compensation expense) as a percentage of revenue
less repair payments (Non-GAAP) 18.9 % 14.9 % 16.7 %
Reconciliation of basic income per ADS
(GAAP to non-GAAP)
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
Basic earnings per ADS (GAAP) $ 0.30 $ 0.18 $ 0.23 Add: Adjustments
for amortization of intangible assets and share-based compensation
expense 0.17 0.16 0.16 Adjusted basic net income per ADS (excluding
amortization of intangible assets and share-based compensation
expense) (Non-GAAP) $ 0.46 $ 0.34 $ 0.40
Reconciliation of diluted income per
ADS (GAAP to non-GAAP)
Three months ended
Sep 30,2014
Sep 30,2013
Jun 30,2014
Diluted earnings per ADS (GAAP) $ 0.29 $ 0.18 $ 0.23 Add:
Adjustments for amortization of intangible assets and share-based
compensation expense. 0.16 0.15 0.16 Adjusted diluted net income
per ADS (excluding amortization of intangible assets and
share-based compensation expense) (Non-GAAP) $ 0.45 $ 0.33 $ 0.39
WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
(Amounts in millions, except share and
per share data)
As atSeptember30,
2014
As atMarch
31,2014
ASSETS Current assets: Cash and cash equivalents $ 31.4 $
33.7 Investments 122.4 83.8 Trade receivables, net 63.8 62.0
Unbilled revenue 33.9 34.7 Funds held for clients 14.0 15.9
Derivative assets 11.0 6.8 Prepayments and other current assets
18.3 16.9 Total current assets 294.7
253.8 Non-current assets: Goodwill 83.4 85.7 Intangible assets 55.0
67.2 Property and equipment 46.0 45.2 Derivative assets 3.4 4.1
Investments - 28.7 Deferred tax assets 30.9 37.1 Other non-current
assets 17.2 16.7 Total non-current assets
235.8 284.6
TOTAL ASSETS $ 530.5
$ 538.4 LIABILITIES AND EQUITY Current
liabilities: Trade payables $ 24.2 $ 29.1 Provisions and accrued
expenses 24.7 23.9 Derivative liabilities 5.7 9.1 Pension and other
employee obligations 31.9 36.3 Short term line of credit 41.9 58.6
Current portion of long term debt 20.6 12.6 Deferred revenue 6.0
5.4 Current taxes payable 3.5 3.3 Other liabilities 5.4
6.6 Total current liabilities 163.9 184.8
Non-current liabilities: Derivative liabilities 0.6 1.4 Pension and
other employee obligations 5.7 5.2 Long term debt - 13.5 Deferred
revenue 0.8 1.7 Other non-current liabilities 4.1 3.9 Deferred tax
liabilities 2.6 2.9 Total non-current liabilities
13.9 28.6
TOTAL LIABILITIES $
177.8 $ 213.5 Shareholders' equity:
Share capital (ordinary shares $0.16 (10 pence) par value,
authorized 60,000,000 shares; issued: 51,695,178 and 51,347,538
shares each as at September 30, 2014 and March 31, 2014,
respectively) 8.1 8.0 Share premium 281.9 276.6 Retained earnings
149.1 121.7 Other components of equity (86.3) (81.4)
Total shareholders' equity 352.8 325.0
TOTAL
LIABILITIES AND EQUITY $ 530.5 $
538.4
* 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.
WNS (Holdings) LimitedInvestors:David
Mackey, 201-942-6261Corporate SVP–Finance & Head of
Investor Relationsdavid.mackey@wns.comorMedia:Archana
Raghuram, +91 (22) 4095 2397Head – Corporate
Communicationsarchana.raghuram@wns.com ; pr@wns.com
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