|WNS (HOLDINGS) LTD filed this Form 6-K on 01/17/2019|
WNS Announces Fiscal 2019 Third Quarter Earnings,
Revises Full Year Guidance
NEW YORK, NY and MUMBAI, INDIA, January 17, 2019 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.
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.
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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 companys history, said Keshav Murugesh, WNSs 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:
The company has updated our forecast for fiscal 2019 based on current visibility levels and exchange rates, said Sanjay Puria, WNSs 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.
WNS will host a conference call on January 17, 2019 at 8:00 am (Eastern) to discuss the companys 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.
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.
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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).
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WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, amounts in millions, except share and per share data)
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WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited, amounts in millions, except share and per share data)
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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 periods 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 managements 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 WNSs financial results prepared in accordance with IFRS.
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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)
Reconciliation of cost of revenue (GAAP to non-GAAP)
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Reconciliation of gross profit (GAAP to non-GAAP)
Reconciliation of selling and marketing expenses (GAAP to non-GAAP)
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Reconciliation of general and administrative expenses (GAAP to non-GAAP)
Reconciliation of operating profit / (loss) (GAAP to non-GAAP)
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Reconciliation of profit / (loss) (GAAP) to ANI (non-GAAP)
Reconciliation of basic earnings per ADS (GAAP to non-GAAP)
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Reconciliation of diluted earnings per ADS (GAAP to non-GAAP)
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