PRESS RELEASE
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WNS Announces Fiscal 2018 Second Quarter Earnings, Revises Full Year Guidance
Highlights – Fiscal 2018 Second Quarter: |
Non-GAAP Financial Measures*
Other Metrics
|
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 second quarter was
Operating margin in the second quarter was 10.8%, as compared to 10.2% in Q2 of last year and 11.0% 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, improved seat utilization, and increased operating leverage from higher volumes. These benefits more than offset headwinds from higher share-based compensation expense, the impact of our annual wage increases, and lower productivity. Sequentially, margins decreased due to higher share-based compensation expense. This headwind was largely offset by improved productivity, currency movements net of hedging, and higher Q2 volume.
Second quarter adjusted operating margin* was 18.5%, versus 19.8% in Q2 of last year and 17.1% 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. These reductions were partially offset by hedging gains net of currency movements, improved seat utilization, and increased operating leverage from higher volumes. Sequentially, adjusted operating margin* increased as a result of improved productivity, currency movements net of hedging, and operating leverage on higher volumes.
Profit in the fiscal second quarter was
From a balance sheet perspective, WNS ended Q2 with
“WNS continues to perform well in a healthy business environment,
posting revenue less repair payments* in fiscal Q2 of
Fiscal 2018 Guidance
WNS is updating guidance for the fiscal year ending
-
Revenue less repair payments* is expected to be between
$705 million and $727 million , up from$578.4 million in fiscal 2017. This assumes an average GBP to USD exchange rate of 1.31 for the remainder of fiscal 2018. -
ANI* is expected to range between
$101 million and $108 million versus$92.2 million in fiscal 2017. This assumes an average USD to INR exchange rate of 65.0 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
$1.93 to$2.06 versus$1.74 in fiscal 2017.
“The company has updated our forecast for fiscal 2018 based on current
visibility levels and exchange rates,” said
Conference Call
WNS will host a conference call on
About WNS
Safe Harbor Statement
This release contains forward-looking statements, as defined in the safe
harbor provisions of the US Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on our current
expectations and assumptions about our Company and our industry.
Generally, these forward-looking statements may be identified by the use
of terminology such as “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “will,” “seek,” “should” and similar expressions. These
statements include, among other things, the discussions of our strategic
initiatives and the expected resulting benefits, our growth
opportunities, industry environment, expectations concerning our future
financial performance and growth potential, including our fiscal 2018
guidance, future profitability, and expected foreign currency exchange
rates. Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially from
those expressed or implied by such statements. Such risks and
uncertainties include but are not limited to worldwide economic and
business conditions; political or economic instability in the
jurisdictions where we have operations; our dependence on a limited
number of clients in a limited number of industries; regulatory,
legislative and judicial developments; increasing competition in the BPM
industry; technological innovation; telecommunications or technology
disruptions; our ability to attract and retain clients; our liability
arising from fraud or unauthorized disclosure of sensitive or
confidential client and customer data; negative public reaction in the
US or the
References to “$” and “USD” refer to
* 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.
† Includes 1,282 apprentices employed under the
WNS (HOLDINGS) LIMITED | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||
(Unaudited, amounts in millions, except share and per share data) | |||||||||||||
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Revenue | $ | 186.5 | $ | 149.8 | $ | 180.1 | |||||||
Cost of revenue | 125.5 | 99.7 | 124.7 | ||||||||||
Gross profit | 61.0 | 50.1 | 55.4 | ||||||||||
Operating expenses: | |||||||||||||
Selling and marketing expenses | 10.3 | 8.0 | 9.0 | ||||||||||
General and administrative expenses | 31.3 | 22.1 | 27.5 | ||||||||||
Foreign exchange loss / (gain), net | (4.4 | ) | (2.5 | ) | (4.8 | ) | |||||||
Amortization of intangible assets | 3.7 | 7.2 | 3.9 | ||||||||||
Operating profit | 20.1 | 15.3 | 19.8 | ||||||||||
Other income, net | (2.4 | ) | (2.1 | ) | (2.8 | ) | |||||||
Finance expense | 1.0 | 0.0 | 1.1 | ||||||||||
Profit before income taxes | 21.4 | 17.3 | 21.4 | ||||||||||
Provision for income taxes | 2.5 | 4.7 | 4.7 | ||||||||||
Profit | $ | 18.9 | $ | 12.6 | $ | 16.7 | |||||||
Earnings per share of ordinary share | |||||||||||||
Basic | $ | 0.37 | $ | 0.25 | $ | 0.33 | |||||||
Diluted | $ | 0.36 | $ | 0.24 | $ | 0.32 | |||||||
WNS (HOLDINGS) LIMITED | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||||
(Unaudited, amounts in millions, except share and per share data) | ||||||||||
As at Sep 30, |
As at Mar 31, |
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ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 103.0 | $ | 69.8 | ||||||
Investments | 80.4 | 112.0 | ||||||||
Trade receivables, net | 66.2 | 60.4 | ||||||||
Unbilled revenue | 54.0 | 48.9 | ||||||||
Funds held for clients | 9.5 | 9.1 | ||||||||
Derivative assets | 17.3 | 35.4 | ||||||||
Prepayments and other current assets | 26.7 | 27.4 | ||||||||
Total current assets | 357.1 | 363.1 | ||||||||
Non-current assets: | ||||||||||
Goodwill | 134.1 | 134.0 | ||||||||
Intangible assets | 92.1 | 96.6 | ||||||||
Property and equipment | 58.6 | 54.8 | ||||||||
Derivative assets | 2.7 | 6.6 | ||||||||
Investments | 0.4 | 0.4 | ||||||||
Deferred tax assets | 22.5 | 16.7 | ||||||||
Other non-current assets | 36.3 | 31.9 | ||||||||
Total non-current assets | 346.6 | 341.1 | ||||||||
TOTAL ASSETS | $ | 703.7 | $ | 704.1 | ||||||
LIABILITIES AND EQUITY | ||||||||||
Current liabilities: | ||||||||||
Trade payables | $ | 15.8 | $ | 14.2 | ||||||
Provisions and accrued expenses | 27.1 | 27.2 | ||||||||
Derivative liabilities | 6.5 | 3.9 | ||||||||
Pension and other employee obligations | 49.2 | 52.9 | ||||||||
Current portion of long term debt | 27.7 | 27.6 | ||||||||
Deferred revenue | 5.5 | 5.5 | ||||||||
Current taxes payable | 2.1 | 1.3 | ||||||||
Other liabilities | 16.8 | 16.0 | ||||||||
Total current liabilities | 150.7 | 148.8 | ||||||||
Non-current liabilities: | ||||||||||
Derivative liabilities | 2.0 | 0.8 | ||||||||
Pension and other employee obligations | 9.9 | 10.7 | ||||||||
Long term debt | 75.3 | 89.1 | ||||||||
Deferred revenue | 0.7 | 0.4 | ||||||||
Other non-current liabilities | 17.4 | 18.5 | ||||||||
Deferred tax liabilities | 18.4 | 20.8 | ||||||||
Total non-current liabilities | 123.7 | 140.3 | ||||||||
TOTAL LIABILITIES | $ | 274.4 | $ | 289.1 | ||||||
Shareholders' equity: | ||||||||||
Share capital (ordinary shares $ 0.16 (10 pence) par value, authorized 60,000,000 shares; issued: 54,547,076 and 53,312,559 shares each as at September 30, 2017 and March 31, 2017, respectively) | 8.5 | 8.3 | ||||||||
Share premium | 356.5 | 338.3 | ||||||||
Retained earnings | 313.6 | 278.0 | ||||||||
Other components of equity | (123.3 | ) | (114.9 | ) | ||||||
Total shareholders’ equity including shares held in treasury | 555.4 | 509.8 | ||||||||
Less: 4,179,539 shares as at September 30, 2017 and 3,300,000 shares as at March 31, 2017, held in treasury, at cost |
(126.0 | ) | (94.7 | ) | ||||||
Total shareholders’ equity | $ | 429.3 | $ | 415.1 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 703.7 | $ | 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
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
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)
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(Amounts in millions) | (% growth) | |||||||||||||||||||
Revenue (GAAP) | $ | 186.5 | $ | 149.8 | $ | 180.1 | 24.6 | % | 3.6 | % | ||||||||||
Less: Payments to repair centers | 4.2 | 6.0 | 4.8 | (30.6 | %) | (13.3 | %) | |||||||||||||
Revenue less repair payments (Non-GAAP) | $ | 182.3 | $ | 143.7 | $ | 175.3 | 26.9 | % | 4.0 | % | ||||||||||
Exchange rate impact | (2.6 | ) | (0.3 | ) | (0.8 | ) | ||||||||||||||
Constant currency revenue less repair payments (Non-GAAP) |
$ | 179.7 | $ | 143.4 | $ | 174.5 | 25.3 | % | 3.0 | % | ||||||||||
Reconciliation of cost of revenue (GAAP to non-GAAP)
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(Amounts in millions) | ||||||||||
Cost of revenue (GAAP) | $ | 125.5 | $ | 99.7 | $ | 124.7 | ||||
Less: Payments to repair centers | 4.2 | 6.0 | 4.8 | |||||||
Less: Share-based compensation expense | 1.3 | 0.8 | 0.8 | |||||||
Adjusted cost of revenue (excluding payment to repair centers and share-based compensation expense) (Non-GAAP) |
$ | 120.1 | $ | 92.9 | $ | 119.1 | ||||
Reconciliation of gross profit (GAAP to non-GAAP)
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(Amounts in millions) | ||||||||||||
Gross profit (GAAP) | $ | 61.0 | $ | 50.1 | $ | 55.4 | ||||||
Add: Share-based compensation expense | 1.3 | 0.8 | 0.8 | |||||||||
Adjusted gross profit (excluding share-based compensation expense) (Non-GAAP) | $ | 62.3 | $ | 50.8 | $ | 56.2 | ||||||
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Gross profit as a percentage of revenue (GAAP) | 32.7 | % | 33.4 | % | 30.7 | % | ||||||
Adjusted gross profit (excluding share-based compensation expense) as a percentage of revenue less repair payments (Non-GAAP) | 34.2 | % | 35.4 | % | 32.0 | % | ||||||
Reconciliation of selling and marketing expenses (GAAP to non-GAAP)
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(Amounts in millions) | |||||||||||||
Selling and marketing expenses (GAAP) | $ | 10.3 | $ | 8.0 | $ | 9.0 | |||||||
Less: Share-based compensation expense | 0.8 | 0.5 | 0.5 | ||||||||||
Adjusted selling and marketing expenses (excluding share-based compensation expense) (Non-GAAP) |
$ | 9.5 | $ | 7.5 | $ | 8.5 | |||||||
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Selling and marketing expenses as a percentage of revenue (GAAP) | 5.5 | % | 5.4 | % | 5.0 | % | |||||||
Adjusted selling and marketing expenses (excluding share-based compensation expense) as a percentage of revenue less repair payments (Non-GAAP) |
5.2 | % | 5.2 | % | 4.8 | % | |||||||
Reconciliation of general and administrative expenses (GAAP to non-GAAP)
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(Amounts in millions) | |||||||||||||
General and administrative expenses (GAAP) | $ | 31.3 | $ | 22.1 | $ | 27.5 | |||||||
Less: Share-based compensation expense | 7.9 | 4.7 | 5.1 | ||||||||||
Adjusted general and administrative expenses (excluding share-based compensation expense) (Non-GAAP) |
$ | 23.4 | $ | 17.5 | $ | 22.4 | |||||||
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General and administrative expenses as a percentage of revenue (GAAP) | 16.8 | % | 14.8 | % | 15.3 | % | |||||||
Adjusted general and administrative expenses (excluding share-based compensation expense) as a percentage of revenue less repair payments (Non-GAAP) |
12.8 | % | 12.1 | % | 12.8 | % | |||||||
Reconciliation of operating profit (GAAP to non-GAAP)
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Operating profit (GAAP) | $ | 20.1 | $ | 15.3 | $ | 19.8 | |||||||
Add: Share-based compensation expense | 10.0 | 6.0 | 6.4 | ||||||||||
Add: Amortization of intangible assets | 3.7 | 7.2 | 3.9 | ||||||||||
Adjusted operating profit (excluding share-based compensation expense and amortization of intangible assets) (Non-GAAP) |
$ | 33.7 | $ | 28.4 | $ | 30.0 | |||||||
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Operating profit as a percentage of revenue (GAAP) | 10.8 | % | 10.2 | % | 11.0 | % | |||||||
Adjusted operating profit (excluding share-based compensation expense and amortization of intangible assets) as a percentage of revenue less repair payments (Non-GAAP) |
18.5 | % | 19.8 | % | 17.1 | % | |||||||
Reconciliation of profit (GAAP) to ANI (non-GAAP)
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(Amounts in millions) | |||||||||||||
Profit (GAAP) | $ | 18.9 | $ | 12.6 | $ | 16.7 | |||||||
Add: Share-based compensation expense | 10.0 | 6.0 | 6.4 | ||||||||||
Add: Amortization of intangible assets | 3.7 | 7.2 | 3.9 | ||||||||||
Less: Tax impact on share-based compensation expense(1) | (3.0 | ) | (1.7 | ) | (2.1 | ) | |||||||
Less: Tax impact on amortization of intangible assets(1) | (1.8 | ) | (2.0 | ) | (1.3 | ) | |||||||
Adjusted Net Income (excluding share-based compensation expense and amortization of intangible assets, including tax effect thereon) (Non GAAP) |
$ | 27.7 | $ | 22.0 | $ | 23.6 | |||||||
(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.
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Profit as a percentage of revenue (GAAP) | 10.1 | % | 8.4 | % | 9.3 | % | ||||
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) |
15.2 | % | 15.3 | % | 13.5 | % | ||||
Reconciliation of basic income per ADS (GAAP to non-GAAP)
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Basic earnings per ADS (GAAP) | $ | 0.37 | $ | 0.25 | $ | 0.33 | ||||||
Add: Adjustments for share-based compensation expense and amortization of intangible assets | 0.28 | 0.25 | 0.21 | |||||||||
Less: Tax impact on amortization of intangible assets and share-based compensation expense | (0.10 | ) | (0.07 | ) | (0.07 | ) | ||||||
Adjusted basic net income per ADS (excluding share-based compensation expenses and amortization of intangible assets, including tax effect thereon) (Non-GAAP) | $ | 0.55 | $ | 0.43 | $ | 0.47 | ||||||
Reconciliation of diluted income per ADS (GAAP to non-GAAP)
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Diluted earnings per ADS (GAAP) | $ | 0.36 | $ | 0.24 | $ | 0.32 | |||||||
Add: Adjustments for share-based compensation expense and amortization of intangible assets | 0.26 | 0.25 | 0.19 | ||||||||||
Less: Tax impact on amortization of intangible assets and share-based compensation expense | (0.09 | ) | (0.07 | ) | (0.06 | ) | |||||||
Adjusted diluted net income per ADS (excluding amortization of intangible assets and share-based compensation expense, including tax effect thereon) (Non-GAAP) | $ | 0.53 | $ | 0.42 | $ | 0.45 | |||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20171027005254/en/
Source:
WNS (Holdings) Limited
Investors:
David
Mackey
Corporate SVP–Finance & Head of Investor Relations
+1
(201) 942-6261
david.mackey@wns.com
or
Media:
Archana
Raghuram
Global Head – Marketing & Communications
+91
(22) 4095 2397
archana.raghuram@wns.com
; pr@wns.com