WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of
global Business Process Management (BPM) services, today announced
results for the fiscal 2018 third quarter ended December 31,
2017.
Highlights – Fiscal 2018 Third Quarter:
GAAP
Financials
•
Revenue of $188.6 million, up 29.7%
from $145.4 million in Q3 of last year and up 1.1% from $186.5
million last quarter
•
Profit of $26.3 million, compared to
$18.0 million in Q3 of last year and $18.9 million last
quarter
•
Diluted earnings per ADS of $0.51,
compared to $0.35 in Q3 of last year and $0.36 last quarter
Non-GAAP
Financial Measures*
•
Revenue less repair payments of $185.2
million, up 32.4% from $139.8 million in Q3 of last year and up
1.6% from $182.3 million last quarter
•
Adjusted Net Income (ANI) of $34.2
million, compared to $25.2 million in Q3 of last year and $27.7
million last quarter
•
Adjusted diluted earnings per ADS of
$0.66, compared to $0.49 in Q3 of last year and $0.53 last
quarter
Other
Metrics
•
Added 7 new clients in the quarter,
expanded 7 existing relationships
•
Days sales outstanding (DSO) at 30
days
•
Global headcount of 35,657 as of
December 31, 2017
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 $188.6 million, representing a
29.7% increase versus Q3 of last year and a 1.1% increase from the
previous quarter. Revenue less repair payments* in the third
quarter was $185.2 million, an increase of 32.4% year-over-year and
1.6% sequentially. Excluding exchange rate impacts, constant
currency revenue less repair payments* in the fiscal third quarter
grew 28.5% versus Q3 of last year and 2.0% sequentially.
Year-over-year, fiscal Q3 revenue growth was driven by healthy
organic revenue growth across key verticals and services, our
acquisitions of HealthHelp and Denali which closed in March 2017
and January 2017 respectively, and favorability from currency and
hedging. Sequentially, revenue growth was the result of solid
performance with both new and existing clients, which helped offset
a modest headwind from currency movements net of hedging.
Operating margin in the third quarter was 13.6%, as compared to
14.2% in Q3 of last year and 10.8% in the previous quarter. On a
year-over-year basis, margin reductions were driven by the impact
of our annual wage increases, higher share-based compensation and
currency movements net of hedging. These headwinds were partially
offset by improved seat utilization and increased operating
leverage on higher volumes. Sequentially, margins increased as a
result of lower share-based compensation, improved productivity,
and currency movements net of hedging. These benefits more than
offset lower seat utilization.
Third quarter adjusted operating margin* was 19.9%, versus 21.3%
in Q3 of last year and 18.5% last quarter. On a year-over-year
basis, adjusted operating margin* reduced primarily due to the
impact of our annual wage increases and currency movements net of
hedging. These reductions were partially offset by improved seat
utilization and increased operating leverage from higher volumes.
Sequentially, adjusted operating margin* increased as a result of
improved productivity and currency movements net of hedging. These
benefits more than offset the impact of our annual wage increases
and lower seat utilization.
Profit in the fiscal third quarter was $26.3 million, as
compared to $18.0 million in Q3 of last year and $18.9 million in
the previous quarter. Adjusted net income (ANI)* in Q3 was $34.2
million, up $9.0 million as compared to Q3 of last year and up $6.4
million from the previous quarter. In addition to the explanations
discussed above, fiscal third quarter profit and adjusted net
income* increased by $5.2 million as a result of the net impact of
one-time provisional tax adjustments associated with the 2017 US
Tax Reform bill that reduced the US corporate tax rate on our
deferred tax assets and deferred tax liabilities, and required us
to record a charge for deemed repatriation of offshore
earnings.
From a balance sheet perspective, WNS ended Q3 with $208.4
million in cash and investments and $103.1 million of debt. In the
third quarter, the company generated $38.3 million in cash from
operations, and had $9.0 million in capital expenditures. WNS also
repurchased 220,461 ADSs, with our buyback program impacting cash
by $9.5 million dollars. Days sales outstanding were 30 days, the
same as reported in Q3 of last year and in the previous
quarter.
“Our differentiated positioning in the market continues to
resonate with clients, helping us add new logos and expand our
existing relationships. In fiscal Q3, WNS delivered revenue less
repair payments* of $185.2 million, representing year-over-year
constant currency* growth of 29%. Growth was once again broad-based
across key verticals, services, and geographies,” said Keshav
Murugesh, WNS’s Chief Executive Officer. “Our clients continue to
experience significant disruption in their business environments,
helping generate increased interest in BPM. We believe WNS is well
positioned to help clients address these challenges by combining
deep domain expertise with robust capabilities in the areas of
automation, analytics, and end-to-end digital solutions. We remain
focused on helping our clients improve their competitive
positioning, and delivering long-term sustainable value for all of
our key stakeholders.”
Fiscal 2018 Guidance
WNS is updating guidance for the fiscal year ending March 31,
2018 as follows:
- Revenue less repair payments* is
expected to be between $720 million and $726 million, up from
$578.4 million in fiscal 2017. This assumes an average GBP to USD
exchange rate of 1.34 for the remainder of fiscal 2018.
- ANI* is expected to range between $114
million and $116 million versus $92.2 million in fiscal 2017. This
assumes an average USD to INR exchange rate of 64.0 for the
remainder of fiscal 2018.
- Based on a diluted share count of 52.3
million shares, the company expects adjusted diluted earnings* per
ADS to be in the range of $2.18 to $2.22 versus $1.74 in fiscal
2017.
“The company has updated our forecast for fiscal 2018 based on
current visibility levels and exchange rates,” said Sanjay Puria,
WNS’s Chief Financial Officer. “Our revised guidance for the year
reflects growth in revenue less repair payments* of 24.5% to 25.5%,
or 23% to 24% 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 18, 2018 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 8369188. A replay will be available for one week following
the call at +1-855-859-2056; international dial-in +1-404-537-3406;
passcode 8369188, 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,
2017, WNS had 35,657 professionals across 53 delivery centers
worldwide including China, Costa Rica, India, Philippines, Poland,
Romania, South Africa, 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 2018
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,
2017
Dec 31,
2016
Sep 30,
2017
Revenue $ 188.6 $ 145.4
$ 186.5 Cost of revenue 124.4
97.5
125.5 Gross profit 64.1
47.9 61.0 Operating expenses: Selling and marketing expenses 10.6
7.9 10.3 General and administrative expenses 28.3 21.5 31.3 Foreign
exchange loss / (gain), net (4.4 ) (6.2 ) (4.4 ) Amortization of
intangible assets 3.9
4.1
3.7 Operating profit 25.7
20.6
20.1 Other income, net (2.5 ) (2.2 ) (2.4 ) Finance
expense 1.0
0.0 1.0
Profit before income taxes 27.2 22.8 21.4 Provision for income
taxes 0.9
4.8 2.5
Profit $ 26.3 $ 18.0
$ 18.9
Earnings per share of ordinary share Basic $ 0.52
$ 0.36
$ 0.37 Diluted $ 0.51
$ 0.35
$ 0.36
WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
(Unaudited, amounts in millions, except
share and per share data)
As at Dec 31,
2017
As at Mar 31,
2017
ASSETS Current assets: Cash and cash equivalents $ 89.7 $
69.8 Investments 118.2 112.0 Trade receivables, net 67.5 60.4
Unbilled revenue 56.1 48.9 Funds held for clients 10.1 9.1
Derivative assets 18.8 35.4 Prepayments and other current assets
26.5 27.4 Total current assets 386.9 363.1
Non-current assets: Goodwill 135.8 134.0 Intangible
assets 91.8 96.6 Property and equipment 59.4 54.8 Derivative assets
3.8 6.6 Investments 0.5 0.4 Deferred tax assets 21.9 16.7 Other
non-current assets 40.6 31.9 Total non-current assets
353.7 341.1
TOTAL ASSETS $ 740.6
$ 704.1
LIABILITIES AND EQUITY Current
liabilities: Trade payables $ 16.3 $ 14.2 Provisions and accrued
expenses 27.0 27.2 Derivative liabilities 2.5 3.9 Pension and other
employee obligations 54.9 52.9 Current portion of long term debt
27.7 27.6 Deferred revenue 3.7 5.5 Current taxes payable 4.1 1.3
Other liabilities 15.9 16.0 Total current liabilities
152.1 148.8 Non-current liabilities: Derivative
liabilities 0.6 0.8 Pension and other employee obligations 10.5
10.7 Long term debt 75.4 89.1 Deferred revenue 1.0 0.4 Other
non-current liabilities 17.9 18.5 Deferred tax liabilities 12.1
20.8 Total non-current liabilities 117.6 140.3
TOTAL LIABILITIES $ 269.7 $ 289.1
Shareholders' equity: Share capital (ordinary shares $ 0.16 (10
pence) par value, authorized 60,000,000 shares; issued: 54,701,978
and 53,312,559 shares each as at December 31, 2017 and March 31,
2017, respectively) 8.5 8.3 Share premium 363.7 338.3 Retained
earnings 339.9 278.0 Other components of equity (107.0 ) (114.9 )
Total shareholders’ equity including shares held in treasury 605.2
509.8 Less: 4,400,000 shares as at December 31, 2017
and 3,300,000 shares as at March 31, 2017, held in treasury, at
cost (134.2 ) (94.7 ) Total shareholders’ equity $ 470.9 $
415.1
TOTAL LIABILITIES AND EQUITY $
740.6 $ 704.1
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 June 29,
2017.
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 June 29, 2017.
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* and
constant currency 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, 2017 compared to
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
Dec 31,
2016
Sep 30,
2017
(Amounts in millions) (% growth) Revenue (GAAP) $
188.6 $ 145.4 $ 186.5
29.7 % 1.1 % Less: Payments to repair centers
3.4 5.6 4.2 (38.5 )% (18.2 )% Revenue less repair payments
(Non-GAAP) $ 185.2 $ 139.8 $ 182.3 32.4 % 1.6 % Exchange rate
impact (1.9 ) 2.8 (2.6 )
Constant currency revenue less repair
payments (Non-GAAP)
$ 183.3 $ 142.6 $ 179.7 28.5 % 2.0 %
Reconciliation of cost of revenue (GAAP to non-GAAP)
Three months ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
(Amounts in millions) Cost of revenue (GAAP) $ 124.4
$ 97.5 $ 125.5 Less: Payments to
repair centers 3.4 5.6 4.2 Less: Share-based compensation expense
1.0 0.6 1.3
Adjusted cost of revenue (excluding
payment to repair centers and share-based compensation expense)
(Non-GAAP)
$ 120.0 $ 91.4 $ 120.1
Reconciliation of gross profit (GAAP to non-GAAP)
Three months ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
(Amounts in millions) Gross profit (GAAP) $ 64.1
$ 47.9
$ 61.0 Add: Share-based compensation expense 1.0 0.6 1.3
Adjusted gross profit (excluding share-based compensation expense)
(Non-GAAP) $ 65.1 $ 48.5 $ 62.3
Three months ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
Gross profit as a percentage of revenue (GAAP) 34.0 %
32.9 % 32.7
% Adjusted gross profit (excluding share-based compensation
expense) as a percentage of revenue less repair payments (Non-GAAP)
35.2 % 34.7 % 34.2 %
Reconciliation of selling and marketing expenses (GAAP to
non-GAAP)
Three months ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
(Amounts in millions) Selling and marketing expenses (GAAP)
$ 10.6 $ 7.9
$ 10.3 Less: Share-based compensation expense
0.7 0.4 0.8 Adjusted selling and marketing expenses (excluding
share-
based compensation expense) (Non-GAAP)
$ 9.9 $ 7.5 $ 9.5
Three months
ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
Selling and marketing expenses as a percentage of revenue (GAAP)
5.6 % 5.4 %
5.5 % Adjusted selling and marketing expenses
(excluding share-based compensation expense) as a percentage of
revenue less repair payments (Non-GAAP) 5.4 % 5.4 % 5.2 %
Reconciliation of general and administrative expenses (GAAP
to non-GAAP)
Three months ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
(Amounts in millions) General and administrative expenses
(GAAP) $ 28.3 $ 21.5
$ 31.3 Less: Share-based compensation
expense 5.6 4.2 7.9 Adjusted general and administrative
expenses (excluding share-based
compensation expense) (Non-GAAP)
$ 22.8 $ 17.3 $ 23.4
Three months
ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
General and administrative expenses as a percentage of revenue
(GAAP) 15.0 % 14.8 %
16.8 % Adjusted general and
administrative expenses (excluding share-based compensation
expense) as a percentage of revenue less repair payments (Non-GAAP)
12.3 % 12.4 % 12.8 %
Reconciliation of operating profit (GAAP to non-GAAP)
Three months ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
(Amounts in millions) Operating profit (GAAP) $ 25.7
$ 20.6
$ 20.1 Add: Share-based compensation expense 7.2 5.1 10.0
Add: Amortization of intangible assets 3.9 4.1 3.7 Adjusted
operating profit (excluding
share-based compensation expense and
amortization of intangible assets) (Non-GAAP)
$ 36.8 $ 29.8 $ 33.7
Three months
ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
Operating profit as a percentage of revenue (GAAP) 13.6 %
14.2 %
10.8 %
Adjusted operating profit (excluding
share-based compensation expense and amortization of intangible
assets) as a percentage of revenue less repair payments
(Non-GAAP)
19.9 % 21.3 % 18.5 %
Reconciliation of profit (GAAP) to ANI (non-GAAP)
Three months ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
(Amounts in millions) Profit (GAAP) $ 26.3
$ 18.0 $
18.9 Add: Share-based compensation expense 7.2 5.1 10.0 Add:
Amortization of intangible assets 3.9 4.1 3.7 Less: Tax impact on
share-based compensation expense(1) (2.0 ) (0.9 ) (3.0 ) Less: Tax
impact on amortization of intangible assets(1) (1.3 ) (1.1 ) (1.8 )
Adjusted Net Income (excluding share-based
compensation expense and amortization of intangible assets,
including tax effect thereon) (Non GAAP)
$ 34.2 $ 25.2 $ 27.7 (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,
2017
Dec 31,
2016
Sep 30,
2017
Profit as a percentage of revenue (GAAP) 13.9 %
12.4 % 10.1
% 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)
18.4 % 18.0 % 15.2 %
Reconciliation of basic income per ADS (GAAP to
non-GAAP)
Three months ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
Basic earnings per ADS (GAAP) $ 0.52
$ 0.36 $ 0.37 Add:
Adjustments for share-based compensation expense and amortization
of intangible assets 0.22 0.18
0.28
Less: Tax impact on amortization of intangible assets and
share-based compensation expense (0.06 ) (0.04 ) (0.10 ) Adjusted
basic net income per ADS (excluding share-based compensation
expenses and amortization of intangible assets, including tax
effect thereon) (Non-GAAP) $ 0.68 $ 0.50 $ 0.55
Reconciliation of diluted income per ADS (GAAP to
non-GAAP)
Three months ended
Dec 31,
2017
Dec 31,
2016
Sep 30,
2017
Diluted earnings per ADS (GAAP) $ 0.51
$ 0.35 $ 0.36 Add:
Adjustments for share-based compensation expense and amortization
of intangible assets 0.21 0.18 0.26 Less: Tax impact on
amortization of intangible assets and share-based compensation
expense (0.06 ) (0.04 ) (0.09 ) Adjusted diluted net income per ADS
(excluding amortization of intangible assets and share-based
compensation expense, including tax effect thereon) (Non-GAAP) $
0.66 $ 0.49 $ 0.53
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version on businesswire.com: http://www.businesswire.com/news/home/20180118005594/en/
WNS (Holdings)
LimitedInvestors:David
MackeyCorporate SVP – Finance & Head of Investor
Relations+1 (201)
942-6261david.mackey@wns.comorMedia:Archana
RaghuramGlobal Head – Marketing & Communications+91 (22)
4095 2397archana.raghuram@wns.compr@wns.com
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