PRESS RELEASE

NEW YORK & MUMBAI, India--(BUSINESS WIRE)--Jul. 20, 2017-- WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of global Business Process Management (BPM) services, today announced results for the fiscal 2018 first quarter ended June 30, 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.”

*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.

Revenue in the first quarter was $180.1 million, representing a 21.7% increase versus Q1 of last year and a 13.0% increase from the previous quarter. Revenue less repair payments* in the first quarter was $175.3 million, an increase of 24.5% year-over-year and 13.7% sequentially. Excluding exchange rate impacts, constant currency revenue less repair payments* in the fiscal first quarter grew 27.5% versus Q1 of last year and 11.7% sequentially. Year-over-year, fiscal Q1 revenue growth was driven by our acquisitions of HealthHelp and Denali, which closed in March 2017 and January 2017 respectively, and solid organic revenue performance across verticals and services. These benefits were partially offset by depreciation in the British pound against the US dollar. Sequentially, revenue growth was driven by our acquired businesses, broad-based growth with both new and existing clients, and favorable currency movements. These increases partially offset headwinds from annual committed productivity and the ramp-down of non-recurring revenues from Q4.

Operating margin in the first quarter was 11.0%, as compared to 9.8% in Q1 of last year and an operating loss margin of (2.0%) reported in the previous quarter. On a year-over-year basis, margin improvement was driven by a step-down in amortization of intangible asset expense, hedging gains net of currency movements, and increased operating leverage from higher volumes. These benefits more than offset headwinds from the impact of our annual wage increases and lower productivity associated with Q1 hiring. Sequentially, margins increased due to a Q4 non-recurring charge of $21.7 million for goodwill impairment, higher Q1 volume, and lower share based compensation expense as a percentage of revenue. These benefits more than offset headwinds from our annual wage increases, currency movements net of hedging, and a step-up in amortization of intangible asset expense associated with our Q4 acquisitions.

First quarter adjusted operating margin* was 17.1%, versus 18.6% in Q1 of last year and 18.1% last quarter. On a year-over-year basis, adjusted operating margin* reduced primarily due to the impact of our annual wage increases and lower productivity associated with Q1 hiring. These reductions were partially offset by hedging gains net of currency movements and increased operating leverage from higher volumes. Sequentially, adjusted operating margin* reduced as a result of the impact of our annual wage increases and currency movements net of hedging, which more than offset benefits from higher volumes.

Profit in the fiscal first quarter was $16.7 million, as compared to $12.2 million in Q1 of last year and a loss of ($5.0) million in the previous quarter. Adjusted net income (ANI)* in Q1 was $23.6 million, up $2.5 million as compared to Q1 of last year and down $0.4 million from the previous quarter. In addition to the explanations discussed above, fiscal first quarter profit and adjusted net income* decreased by $1.5 million sequentially as a result of a one-time tax benefit in Q4 resulting from the reversal of a 2011 tax reserve which was no longer required.

From a balance sheet perspective, WNS ended Q1 with $194.5 million in cash and investments and $116.9 million of debt. In the first quarter, the company generated $14.1 million in cash from operations, and had $7.3 million in capital expenditures. Days sales outstanding were 30 days, as compared to 29 days in Q1 of last year and 29 days reported in the previous quarter.

“Our first quarter results demonstrate the business momentum we have been able to create over the past few years. WNS delivered $175.3 million in revenue less repair payments* which represents year-over-year constant currency growth in excess of 27%, and excluding the revenue impact of our fiscal Q4 2017 acquisitions, over 13% on an organic constant currency basis,” said Keshav Murugesh, WNS’s Chief Executive Officer. “We firmly believe that our corporate focus on domain expertise, coupled with expanded investments and capabilities in key areas such as analytics, automation and digital solutions has positioned the company for long-term success in the BPM industry. We will continue to create unique solutions which help our clients solve problems and better compete in their increasingly complex and fast-moving business environments.”

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 $693 million and $723 million, up from $578.4 million in fiscal 2017. This assumes an average GBP to USD exchange rate of 1.29 for the remainder of fiscal 2018.
• ANI* is expected to range between $98 million and $106 million versus $92.2 million in fiscal 2017. This assumes an average USD to INR exchange rate of 64.5 for the remainder of fiscal 2018.
• Based on a diluted share count of 51.9 million shares, the company expects adjusted diluted earnings* per ADS to be in the range of $1.89 to $2.04 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 20% to 25%, or 19% to 25% on a constant currency* basis. We currently have 95% visibility to the midpoint of the range.”

Conference Call

WNS will host a conference call on July 20, 2017 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 50086758. A replay will be available for one week following the call at +1-855-859-2056; international dial-in +1-404-537-3406; passcode 50086758, 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 300+ 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 June 30, 2017, WNS had 34,789 professionals across 52 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, estimated capital expenditures, the expected benefits of our acquisitions of Denali and HealthHelp, 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).

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 goodwill impairment, 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 goodwill impairment, 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, goodwill impairment 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.

⁽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.

* Goodwill being non-tax deductible, there is no impact on tax thereon

* Goodwill being non-tax deductible, there is no impact on tax thereon

* Goodwill being non-tax deductible, there is no impact on tax thereon

* Goodwill being non-tax deductible, there is no impact on tax thereon

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Source: WNS (Holdings) Limited

WNS (Holdings) Limited
Investors:
David Mackey, +1-201-942-6261
Corporate SVP–Finance & Head of Investor Relations
david.mackey@wns.com
or
Media:
Archana Raghuram, +91 (22) 4095 2397
Head – Corporate Communications
archana.raghuram@wns.com ; pr@wns.com