WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of
global Business Process Management (BPM) services, today announced
results for the fiscal 2019 third quarter ended December 31,
2018.
Highlights – Fiscal 2019 Third Quarter:
GAAP
Financials
•
Revenue of $199.7 million, up 5.9% from
$188.6 million in Q3 of last year and up 0.3% from $199.1 million
last quarter
•
Profit of $28.6 million, compared to
$26.3 million in Q3 of last year and $24.8 million last
quarter
•
Diluted earnings per ADS of $0.55,
compared to $0.51 in Q3 of last year and $0.48 last quarter
Non-GAAP
Financial Measures*
•
Revenue less repair payments of $195.9
million, up 5.8% from $185.2 million in Q3 of last year and up 0.2%
from $195.5 million last quarter
•
Adjusted Net Income (ANI) of $38.0
million, compared to $34.2 million in Q3 of last year and $33.7
million last quarter
•
Adjusted diluted earnings per ADS of
$0.73, compared to $0.66 in Q3 of last year and $0.65 last
quarter
Other
Metrics
•
Added 4 new clients in the quarter,
expanded 6 existing relationships
•
Days sales outstanding (DSO) at 32
days
•
Global headcount of 38,892 as of
December 31, 2018
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 in the third quarter was $199.7 million, representing a
5.9% increase versus Q3 of last year and a 0.3% increase from the
previous quarter. Revenue less repair payments* in the third
quarter was $195.9 million, an increase of 5.8% year-over-year and
a 0.2% increase sequentially. Excluding exchange rate impacts,
constant currency revenue less repair payments* in the fiscal third
quarter grew 9.1% versus Q3 of last year and 0.1% sequentially.
Year-over-year, fiscal Q3 revenue improvement was driven by healthy
organic growth across key verticals, services, and geographies,
which more than offset headwinds from currency movements and
hedging losses. Sequentially, organic revenue growth was largely
offset by seasonality in our travel business.
Operating margin in the third quarter was 16.7%, as compared to
13.6% in Q3 of last year and 14.5% in the previous quarter. On a
year-over-year basis, margin improvement was the result of
increased productivity, favorable currency movements net of
hedging, and operating leverage on higher volumes. These benefits
more than offset the impact of our annual wage increases.
Sequentially, margins improved due to increased productivity and
favorable currency movements net of hedging.
Third quarter adjusted operating margin* was 23.0%, versus 19.9%
in Q3 of last year and 21.0% last quarter. Explanations for the
adjusted operating margin* movements on a year-over-year and
sequential basis are largely the same as described for GAAP
operating margins above.
Profit in the fiscal third quarter was $28.6 million, as
compared to $26.3 million in Q3 of last year and $24.8 million in
the previous quarter. Adjusted net income (ANI)* in Q3 was $38.0
million, up $3.8 million as compared to Q3 of last year and up $4.3
million from the previous quarter. In addition to the operating
margin favorability noted previously, year-over-year profit and
ANI* were further increased by higher interest income and lower
debt expense. These items were partially offset by a higher
effective tax rate this quarter, as Q3 of last year benefitted $5.2
million from a net provision for tax adjustments associated with
the 2017 US Tax Reform bill. The amount was finalized in the third
quarter of this fiscal year, and resulted in an additional
favorable tax adjustment of $0.4 million. Sequentially, profit and
ANI* improved as a result of operating margin favorability, higher
interest income, and a lower effective tax rate resulting from the
$0.4 million favorable tax adjustment associated with the 2017 US
Tax Reform bill and the geographic mix of profits.
From a balance sheet perspective, WNS ended Q3 with $215.2
million in cash and investments and $75.4 million of debt. In the
third quarter, the company generated $59.5 million in cash from
operations, and incurred $4.7 million in capital expenditures.
Third quarter days sales outstanding were 32 days, as compared to
30 days reported in Q3 of last year and 35 days in the previous
quarter.
“In the fiscal third quarter, WNS continued to deliver solid
financial performance across revenue, margins, profits and cash
flow. Third quarter revenue less repair payments* grew 6%
year-over-year, or 9% on an organic, constant currency* basis, and
adjusted operating margin* expanded to 23%. Adjusted diluted
earnings* per ADS increased 12% versus the fiscal third quarter of
last year, and cash from operations in the third quarter was the
highest in the company’s history,” said Keshav Murugesh, WNS’s
Chief Executive Officer. “We will continue to invest in our
business to drive differentiated positioning in a healthy BPM
marketplace, and the company remains committed to “co-creating”
with our clients to deliver long-term sustainable business value
for all of our key stakeholders.”
Fiscal 2019 Guidance
WNS is updating guidance for the fiscal year ending March 31,
2019 as follows:
- Revenue less repair payments* is
expected to be between $787 million and $799 million, up from
$741.0 million in fiscal 2018. This assumes an average GBP to USD
exchange rate of 1.27 for the remainder of fiscal 2019.
- ANI* is expected to range between $137
million and $141 million versus $118.4 million in fiscal 2018. This
assumes an average USD to INR exchange rate of 70.00 for the
remainder of fiscal 2019.
- Based on a diluted share count of 52.2
million shares, the company expects adjusted diluted earnings* per
ADS to be in the range of $2.62 to $2.70 versus $2.24 in fiscal
2018.
“The company has updated our forecast for fiscal 2019 based on
current visibility levels and exchange rates,” said Sanjay Puria,
WNS’s Chief Financial Officer. “Our guidance for the year reflects
growth in revenue less repair payments* of 6% to 8%, or 9% to 11%
on a constant currency* basis. We currently have over 99%
visibility to the midpoint of the range.”
Conference Call
WNS will host a conference call on January 17, 2019 at 8:00 am
(Eastern) to discuss the company’s quarterly results. To
participate in the call, please use the following details:
+1-888-656-9018; international dial-in +1-503-343-6030; participant
passcode 5895908. A replay will be available for one week following
the call at +1-855-859-2056; international dial-in +1-404-537-3406;
passcode 5895908, 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 350+
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 interaction
services, technology solutions, research and analytics and industry
specific back office and front office processes. As of December 31,
2018, WNS had 38,892 professionals across 57 delivery centers
worldwide including China, Costa Rica, India, Philippines, Poland,
Romania, South Africa, Spain, Sri Lanka, Turkey, 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 2019
guidance, 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; our dependence on a
limited number of clients in a limited number of industries;
regulatory, legislative and judicial developments; increasing
competition in the BPM industry; technological innovation;
telecommunications or technology disruptions; our ability to
attract and retain clients; our liability arising from fraud or
unauthorized disclosure of sensitive or confidential client and
customer data; negative public reaction in the US or the UK to
offshore outsourcing; our ability to expand our business or
effectively manage growth; our ability to hire and retain enough
sufficiently trained employees to support our operations; the
effects of our different pricing strategies or those of our
competitors; our ability to successfully consummate, integrate and
achieve accretive benefits from our strategic acquisitions, and to
successfully grow our revenue and expand our service offerings and
market share; and future regulatory actions and conditions in our
operating areas. 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).
* 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) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited, amounts in millions, except
share and per share data)
Three months ended Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
Revenue $ 199.7 $ 188.6
$ 199.1 Cost of revenue 125.2
124.4
129.0 Gross profit 74.5 64.1 70.1 Operating
expenses: Selling and marketing expenses 10.9 10.6 11.3 General and
administrative expenses 28.2 28.3 27.9 Foreign exchange loss /
(gain), net (1.9 ) (4.4 ) (1.9 ) Amortization of intangible assets
3.9 3.9
4.0 Operating profit
33.4 25.7
28.8 Other (income) /
expenses, net (3.6 ) (2.5 )
(3.0
)
Finance expense 0.8
1.0 0.8
Profit before income taxes 36.2 27.2 31.0 Income tax expense
7.6 0.9
6.2 Profit after tax $ 28.6
$ 26.3
$ 24.8 Earnings per share of ordinary
share Basic $ 0.57 $ 0.52
$ 0.50 Diluted $ 0.55
$ 0.51
$ 0.48
WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
(Unaudited, amounts in millions, except
share and per share data)
As at Dec 31,
2018
As at Mar 31,
2018
ASSETS Current assets: Cash and cash equivalents $ 85.3 $
99.8 Investments 49.6 121.0 Trade receivables, net 73.8 71.4
Unbilled revenue 55.7 61.7 Funds held for clients 9.9 10.1
Derivative assets 15.0 11.7 Prepayments and other current assets
20.7 24.8 Total current assets 310.0 400.5 Non-current
assets: Goodwill 130.0 135.2 Intangible assets 82.1 89.7 Property
and equipment 57.4 60.6 Derivative assets 6.7 3.2 Investments 80.3
0.5 Deferred tax assets 21.9 27.4 Other non-current assets 59.0
42.4 Total non-current assets 437.5 359.0
TOTAL ASSETS
$ 747.5 $ 759.6 LIABILITIES
AND EQUITY Current liabilities: Trade payables $ 20.0 $ 19.7
Provisions and accrued expenses 27.7 28.8 Derivative liabilities
4.7 6.5 Pension and other employee obligations 55.6 64.6 Current
portion of long-term debt 27.8 27.7 Contract liabilities 4.7 2.9
Current taxes payable 2.0 1.3 Other liabilities 14.7 15.7 Total
current liabilities 157.3 167.3 Non-current liabilities: Derivative
liabilities 0.5 2.3 Pension and other employee obligations 10.5 9.6
Long-term debt 47.5 61.4 Contract liabilities 1.2 0.6 Other
non-current liabilities 10.4 11.7 Deferred tax liabilities 11.2
11.8 Total non-current liabilities 81.3 97.3
TOTAL
LIABILITIES $ 238.6 $ 264.6 Shareholders' equity: Share capital
(ordinary shares $0.16 (10 pence) par value, authorized 60,000,000
shares; issued: 51,069,370 shares and 54,834,080 shares; each as at
December 31, 2018 and March 31, 2018, respectively) 8.0 8.5 Share
premium 262.2 371.8 Retained earnings 448.5 364.4 Other components
of equity (153.4 ) (115.5 ) Total shareholders’ equity including
shares held in treasury $ 565.3 $ 629.2 Less: 1,100,000 shares as
at December 31, 2018 and 4,400,000 shares as at March 31, 2018,
held in treasury, at cost (56.4 ) (134.2 ) Total shareholders’
equity $ 508.9 $ 495.0
TOTAL LIABILITIES AND EQUITY $
747.5 $ 759.6
About Non-GAAP Financial
Measures
The financial information in this release includes certain
non-GAAP financial measures that we believe more accurately reflect
our core operating performance. Reconciliations of these non-GAAP
financial measures to our GAAP operating results are included
below. A more detailed discussion of our GAAP results 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 16,
2018.
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 16, 2018.
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 / (loss)
excluding share-based expense and amortization of intangible
assets) as a percentage of revenue less repair payments, and (2)
ANI, which is calculated as profit excluding share-based expense
and amortization of intangible assets and including the tax
effect thereon, and other non-GAAP financial measures included in
this release as supplemental measures of its performance. WNS
presents these non-GAAP financial measures because it believes they
assist investors in comparing its performance across reporting
periods on a consistent basis by excluding items that are
non-recurring in nature and those it believes are not indicative of
its core operating performance. In addition, it uses these non-GAAP
financial 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 financial measures are not meant to be considered in
isolation or as a substitute for WNS’s financial results prepared
in accordance with IFRS.
The company is not able to provide our forward-looking GAAP
revenue, profit and earnings per ADS without unreasonable efforts
for a number of reasons, including our inability to predict with a
reasonable degree of certainty the payments to repair centers, our
future share-based compensation expense under IFRS 2 (Share Based
payments), amortization of intangibles associated with future
acquisitions and currency fluctuations. As a result, any attempt to
provide a reconciliation of the forward-looking GAAP financial
measures (revenue, profit, earnings per ADS) to our forward-looking
non-GAAP financial measures (revenue less repair payments*, ANI*
and Adjusted diluted earnings* per ADS respectively) would imply a
degree of likelihood that we do not believe is reasonable.
Reconciliation of revenue (GAAP) to revenue less repair
payments (non-GAAP) and constant currency revenue less repair
payments (non-GAAP)
Three months ended
Three months ended
Dec 31, 2018 compared to
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
Dec 31,
2017
Sep 30,
2018
(Amounts in millions) (% growth) Revenue (GAAP) $
199.7 $ 188.6
$
199.1 5.9 % 0.3 % Less: Payments
to repair centers 3.9 3.4 3.6 13.1 % 6.5 % Revenue less repair
payments (non-GAAP) $ 195.9 $ 185.2 $ 195.5 5.8 % 0.2 % Exchange
rate impact (0.1 ) (5.7 ) 0.1
Constant currency revenue less repair
payments (non-GAAP)
$ 195.7 $ 179.4 $ 195.6 9.1 % 0.1 %
Reconciliation of cost of revenue (GAAP to non-GAAP)
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
(Amounts in millions) Cost of revenue (GAAP) $ 125.2
$ 124.4
$ 129.0 Less: Payments to repair
centers 3.9 3.4 3.6 Less: Share-based compensation expense 1.2 1.0
1.1 Adjusted cost of revenue (excluding payment to repair centers
and share-based compensation expense) (non-GAAP) $ 120.1 $ 120.0 $
124.3
Reconciliation of gross profit (GAAP to non-GAAP)
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
(Amounts in millions) Gross profit (GAAP) $ 74.5
$ 64.1
$ 70.1 Add: Share-based compensation
expense 1.2 1.0 1.1 Adjusted gross profit (excluding share-based
compensation expense) (non-GAAP) $ 75.8 $ 65.1 $ 71.2
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
Gross profit as a percentage of revenue (GAAP) 37.3 %
34.0 %
35.2 % Adjusted gross profit (excluding
share-based compensation expense) as a percentage of revenue less
repair payments (non-GAAP) 38.7 % 35.2 % 36.4 %
Reconciliation of selling and marketing expenses (GAAP to
non-GAAP)
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
(Amounts in millions) Selling and marketing expenses (GAAP)
$ 10.9 $ 10.6
$ 11.3 Less: Share-based compensation expense
1.3 0.7 0.9 Adjusted selling and marketing expenses (excluding
share-based compensation expense) (non-GAAP) $ 9.6 $ 9.9 $ 10.4
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
Selling and marketing expenses as a percentage of revenue (GAAP)
5.5 % 5.6 %
5.7 % Adjusted selling and
marketing expenses (excluding share-based compensation expense) as
a percentage of revenue less repair payments (non-GAAP) 4.9 % 5.4 %
5.3 %
Reconciliation of general and administrative expenses (GAAP
to non-GAAP)
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
(Amounts in millions) General and administrative expenses
(GAAP) $ 28.2 $ 28.3
$ 27.9 Less: Share-based compensation
expense 5.2 5.6 6.1 Adjusted general and administrative expenses
(excluding share-based compensation expense) (non-GAAP) $ 23.0 $
22.8 $ 21.8
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
General and administrative expenses as a percentage of revenue
(GAAP) 14.1 % 15.0
% 14.0 % Adjusted general
and administrative expenses (excluding share-based compensation
expense) as a percentage of revenue less repair payments (non-GAAP)
11.7 % 12.3 % 11.1 %
Reconciliation of operating profit / (loss) (GAAP to
non-GAAP)
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
(Amounts in millions) Operating profit (GAAP) $ 33.4
$ 25.7
$ 28.8 Add: Share-based compensation
expense 7.7 7.2 8.1 Add: Amortization of intangible assets 3.9 3.9
4.0
Adjusted operating profit (excluding
share-based compensation expense and amortization of intangible
assets) (non-GAAP)
$ 45.1 $ 36.8 $ 41.0
Three months
ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
Operating profit as a percentage of revenue (GAAP) 16.7 %
13.6 %
14.5 %
Adjusted operating profit (excluding
share-based compensation expense and amortization of intangible
assets) as a percentage of revenue less repair payments
(non-GAAP)
23.0 % 19.9 % 21.0 %
Reconciliation of profit / (loss) (GAAP) to ANI
(non-GAAP)
Three months ended
Dec 31,2018
Dec 31,2017
Sep 30,2018
(Amounts in millions) Profit (GAAP) $ 28.6
$ 26.3
$ 24.8 Add: Share-based compensation
expense 7.7 7.2 8.1 Add: Amortization of intangible assets 3.9 3.9
4.0 Less: Tax impact on share-based compensation expense(1) (1.5 )
(2.0 ) (2.1 ) Less: Tax impact on amortization of intangible
assets(1) (0.8 ) (1.3 ) (1.1 ) Adjusted Net Income (excluding
share-based compensation expense and amortization of intangible
assets, including tax effect thereon) (non-GAAP) $ 38.0 $ 34.2
$ 33.7
(1) The company applies GAAP methodologies in computing the tax
impact on its non-GAAP ANI adjustments (including amortization of
intangible assets and share-based compensation expense). The
company’s non-GAAP tax expense is generally higher than its GAAP
tax expense if the income subject to taxes is higher considering
the effect of the items excluded from GAAP profit to arrive at
non-GAAP profit.
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
Profit as a percentage of revenue (GAAP) 14.3 %
13.9 %
12.5 %
Adjusted net income (excluding share-based
compensation expense and amortization of intangible assets
including tax effect thereon) as a percentage of revenue less
repair payments (non-GAAP)
19.4 % 18.4 % 17.2 %
Reconciliation of basic earnings per ADS (GAAP to
non-GAAP)
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
Basic earnings per ADS (GAAP) $ 0.57
$ 0.52
$ 0.50 Add: Adjustments for share-based
compensation expense and amortization of intangible assets 0.23
0.22 0.23 Less: Tax impact on share-based compensation expense and
amortization of intangible assets (0.04 ) (0.06 ) (0.06 ) Adjusted
basic earnings per ADS (excluding share-based compensation expenses
and amortization of intangible assets, including tax effect
thereon) (non-GAAP) $ 0.76 $ 0.68 $ 0.67
Reconciliation of diluted earnings per ADS (GAAP to
non-GAAP)
Three months ended
Dec 31,
2018
Dec 31,
2017
Sep 30,
2018
Diluted earnings per ADS (GAAP) $ 0.55
$ 0.51 $ 0.48 Add: Adjustments
for share-based compensation expense and amortization of intangible
assets 0.23 0.21 0.23 Less: Tax impact on share-based compensation
expense and amortization of intangible assets (0.05 ) (0.06
)
(0.06 ) Adjusted diluted earnings per ADS (excluding amortization
of intangible assets and share-based compensation expense,
including tax effect thereon) (non-GAAP) $ 0.73 $ 0.66 $ 0.65
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190117005265/en/
Investors:David
MackeyCorporate SVP – Finance & Head of Investor
RelationsWNS (Holdings) Limited+1 (201)
942-6261david.mackey@wns.com
Media:Archana RaghuramGlobal
Head – Marketing & Communications and Corporate Business
DevelopmentWNS (Holdings) Limited+91 (22) 4095
2397archana.raghuram@wns.compr@wns.com
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