PRESS RELEASE
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WNS Third Quarter Net Income Increases 21.0%; Net Income (Excluding Amortization of Intangible Assets and Share-Based Compensation Expense) Increases 18.9%
Revenue Increases 105.0%; Revenue Less Repair Payments
Increases 48.8%, Over Corresponding Quarter in the Prior Fiscal Year
MUMBAI, India & NEW YORK--(BUSINESS WIRE)--Feb. 13, 2007--WNS (Holdings) Limited (NYSE: WNS), a leading provider of offshore business process outsourcing (BPO) services, today announced strong results for the quarter ended December 31, 2006, and revised upward its guidance for the 2007 fiscal year.
"We continue to see many positive dynamics within the BPO industry which has resulted in the third consecutive quarter of exceptional revenue growth," said Neeraj Bhargava, Group Chief Executive Officer. "We are ramping up client contracts more quickly than previously estimated, and accordingly have exceeded our internal expectations for third-quarter revenue growth and maintained our margins."
During its previous earnings call held on November 15, 2006, WNS said it expected the third fiscal quarter to be a period of consolidation following two quarters of strong growth in fiscal 2007.
"The rate of growth of net income was lower than the rate of growth of revenue for the three months ended December 31, 2006, primarily because of $2.4 million in deferred revenue recognized during the three months ended December 31, 2005," said Zubin Dubash, Group Chief Financial Officer. "Quarterly net income growth would have been substantially higher, excluding the impact of such deferred revenue recognized during the three months ended December 31, 2005."
Financial Highlights: Third Quarter Ended December 31, 2006 -- Quarterly revenue of $102.0 million, up 105.0% from the corresponding quarter last year. -- Quarterly revenue less repair payments of $57.2 million, up 48.8% from the corresponding quarter last year. -- Quarterly net income of $7.1 million, up 21.0% from the corresponding quarter last year. -- Quarterly net income (excluding amortization of intangible assets and share-based compensation expense) of $8.9 million, up 18.9% from the corresponding quarter last year. -- Quarterly basic income per ADS of 18 cents, up from 17 cents for the corresponding quarter last year. -- Quarterly basic income per ADS (excluding amortization of intangible assets and share-based compensation expense) of 22 cents, unchanged from the corresponding quarter last year. Financial Highlights: Nine Months Ended December 31, 2006 -- Revenue of $241.6 million, up 61.2% from the corresponding nine months last year. -- Revenue less repair payments of $155.6 million, up 46.2% from the corresponding nine months last year. -- Net income of $17.7 million, up 20.9% from the corresponding nine months last year. -- Net income (excluding amortization of intangible assets and share-based compensation expense) of $21.6 million, up 29.1% from the corresponding nine months last year. -- Basic income per ADS of 47 cents, up from 46 cents for the corresponding nine months last year. -- Basic income per ADS (excluding amortization of intangible assets and share-based compensation expense) of 57 cents, up from 52 cents for the corresponding nine months last year.
Reconciliations of non-GAAP financial measures to GAAP operating results are included at the end of this release.
Key Announcements -- As part of a previously announced succession plan, former chairman and co-founder David Tibble will retire from the company, effective March 31, 2007. -- Steve Dunning assumed Mr. Tibble's responsibilities as chairman of WNS U.K. as of January 3, 2007. Mr. Dunning is a fellow co-founder of WNS and formerly worked with Mr. Tibble as managing director of WNS U.K. -- Due diligence activities related to setting up an operations center in Eastern Europe is ongoing. Fiscal 2007 Guidance
WNS also updated its guidance for the fiscal year ending March 31, 2007:
-- Revenue less repair payments revised upwards from the previously estimated level of slightly higher than $208 million. It is now estimated to be slightly higher than $213 million. -- Net income guidance (excluding amortization of intangible assets and share-based compensation expense) remains unchanged at $30.5 million to $32.5 million. -- Capital expenditure for the year also remains unchanged at approximately $26 million.
"We continue to execute well on our business strategy and are very pleased with this quarter's results," Mr. Bhargava said. "We believe we are well positioned to achieve our adjusted targets for fiscal 2007."
Conference call
WNS will host a conference call on February 13, at 8 a.m. (EST) to discuss the company's quarterly results. To participate, callers can dial 800-295-3991 from within the U.S. or +1-617-614-3924 from any other country. The participant passcode is 1352836. A replay will be made available online at www.wnsgs.com for a period of three months beginning two hours after the end of the call.
About WNS
WNS is a leading provider of offshore business process outsourcing, or BPO, services. We provide comprehensive data, voice and analytical services that are underpinned by our expertise in our target industry sectors. We transfer the execution of the business processes of our clients, which are typically companies located in Europe and North America, to our delivery centers located primarily in India. We provide high quality execution of client processes, monitor these processes against multiple performance metrics, and seek to improve them on an ongoing basis.
Our ADSs are listed on the New York Stock Exchange. For more information, please visit our website at www.wnsgs.com.
About Non-GAAP Financial Measures
For financial statement reporting purposes, the company has two reportable segments: WNS Global BPO and WNS Auto Claims BPO. In the auto claims segment, WNS provides claims-handling and accident-management services, in which it arranges for automobile repairs through a network of third-party repair centers. In its accident-management services, WNS acts as the principal in dealings with the third-party repair centers and clients.
The amounts invoiced to WNS clients for payments made by WNS to third-party repair centers are reported as revenue. As the company wholly subcontracts the repairs to the repair centers, it evaluates its financial performance based on revenue less repair payments to third party repair centers, which is a non-GAAP measure.
WNS believes revenue less repair payments reflects more accurately the value addition of the business process services it directly provides to its clients. The presentation of this non-GAAP information is not meant to be considered in isolation or as a substitute for the company's financial results prepared in accordance with U.S. GAAP. WNS revenue less repair payments may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation.
Safe Harbor Statement under the provisions of the United States Private Securities Litigation Reform Act of 1995
This news release contains forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those that may be projected by these forward looking statements. These risks and uncertainties include but are not limited to a slowdown in the U.S. and Indian economies and in the sectors in which our clients are based, a slowdown in the BPO and IT sectors world-wide, competition, the success or failure of our past and future acquisitions, attracting, recruiting and retaining highly skilled employees, technology, legal and regulatory policy as well as other risks detailed in our reports filed with the U.S. Securities and Exchange Commission. These filings are available at www.sec.gov. We may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. You are cautioned not to place undue reliance on these forward-looking statements, which reflect management's current analysis of future events. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
WNS (HOLDINGS) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Amounts in thousands, except share and per share data) Three months ended Nine months ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006 2005 2006 2005 Revenue 101,999 49,759 241,615 149,889 Cost of Revenue (refer to note (a) below) 81,250 34,088 186,017 108,408 Gross Profit 20,749 15,671 55,598 41,481 Operating expenses: Selling, general and administrative expenses (refer to note (b) as below) 13,973 9,668 36,180 24,978 Amortization of intangible assets 490 230 1,441 349 Operating income 6,286 5,773 17,977 16,154 Other income, net 1,331 113 1,250 178 Interest expense - (114) (101) (375) Income before income taxes 7,617 5,772 19,126 15,957 (Provision)/Benefit for income taxes (525) 90 (1,418) (1,313) Net income 7,092 5,862 17,708 14,644 Basic income per share $0.18 $0.17 $0.47 $0.46 Diluted income per share $0.17 $0.17 $0.44 $0.43 Basic weighted average ordinary shares outstanding 40,067,072 33,705,909 37,869,784 32,121,555 Diluted weighted average ordinary shares outstanding 42,664,150 35,140,551 40,546,010 34,300,207 Note: Includes the following share-based compensation amounts: (a) Cost of Revenue 376 - 530 - (b) Selling, general and administrative expenses 900 1,357 1,869 1,694
Non-GAAP measure note:
In addition to its reported operating results in accordance with U.S. generally accepted accounting principles (US GAAP). WNS has included in the table below non-GAAP operating measures that the Securities and Exchange Commission defines as "non-GAAP financial measures". Management believes that such non-GAAP financial measures, when read in conjunction with the company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the company's results. The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated.
Reconciliation of revenue less repair payments (non-GAAP) Amount in to revenue (GAAP) thousands Three months ended Nine months ended -------------------------------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006 2005 2006 2005 --------------------------- ---------- --------------------------- ---------- Revenue less repair payments (Non-GAAP) 57,192 38,435 155,665 106,461 Add: Payments to repair centers 44,807 11,324 85,950 43,428 Revenue (GAAP) 101,999 49,759 241,615 149,889
Reconciliation of selling, general and administrative expense excluding share-based compensation expense (non- GAAP) to selling, general and administrative expenses Amount in (GAAP) thousands Three months ended Nine months ended --------------------------------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006 2005 2006 2005 --------------------------------------- --------------------------------------- Selling, general and administrative expenses (excluding share-based compensation expense) (Non- GAAP) 13,073 8,311 34,311 23,284 Add: Share-based compensation expense 900 1,357 1,869 1,694 Selling, general and administrative expenses (GAAP) 13,973 9,668 36,180 24,978
Reconciliation of operating income excluding share-based compensation and amortization of intangible assets (non- Amount in GAAP) to operating income (GAAP) thousands Three months ended Nine months ended -------------------------------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006 2005 2006 2005 -------------------------------------- -------------------------------------- Operating income (excluding share-based compensation and amortization of intangible assets) (Non-GAAP) 8,052 7,360 21,817 18,197 Less: Share-based compensation expense 1,276 1,357 2,399 1,694 Less: Amortization of intangible assets 490 230 1,441 349 Operating income (GAAP) 6,286 5,773 17,977 16,154
Reconciliation of net income excluding share-based compensation expense and amortization of intangible Amount in assets (non-GAAP) to net income (GAAP) thousands Three months ended Nine months ended --------------------------------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006 2005 2006 2005 --------------------------------------- --------------------------------------- Net income (excluding share- based compensation and amortization of intangible assets) (Non-GAAP) 8,858 7,449 21,548 16,687 Less: Share-based compensation expense 1,276 1,357 2,399 1,694 Less: Amortization of intangible assets 490 230 1,441 349 Net income (GAAP) 7,092 5,862 17,708 14,644
Reconciliation of basic income per ADS (excluding amortization of intangibles assets and share-based compensation expense) to basic income per ADS (non-GAAP to GAAP) Three months ended Nine months ended ------------------------------------ Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006 2005 2006 2005 ------------------------------------ ------------------------------------ Basic income per ADS (excluding amortization of intangible assets and share based compensation expense) (Non-GAAP) $0.22 $0.22 $0.57 $0.52 Less: Adjustments for amortization of intangible assets and share- based compensation expense $0.04 $0.05 $0.10 $0.06 Basic income per ADS (GAAP) $0.18 $0.17 $0.47 $0.46
WNS (HOLDINGS) LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share data) Dec. 31, March 31, 2006 2006 (Unaudited) ---------------------- ASSETS Current assets Cash and cash equivalents $103,319 $18,549 Accounts receivable, net of allowance of $442 and $373, respectively 39,136 28,081 Funds held for clients 4,553 3,047 Deferred tax assets - 353 Prepaid expenses 3,029 1,225 Other current assets 6,472 6,140 ---------------------- Total current assets 156,509 57,395 Goodwill 37,218 33,774 Intangible assets, net 7,439 8,713 Property and equipment, net 42,914 30,623 Deposits 2,746 2,990 Deferred tax assets 1,666 1,308 ---------------------- TOTAL ASSETS $248,492 $134,803 ====================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $19,051 $23,074 Accrued employee costs 15,357 11,336 Deferred revenue 11,016 8,994 Income taxes payable 589 726 Obligations under capital leases - current 26 184 Deferred tax liabilities 1,376 368 Other current liabilities 16,116 8,781 ---------------------- Total current liabilities 63,531 53,463 Obligation under capital leases - non current - 2 Deferred rent 976 824 Deferred tax liabilities - non current 531 2,350 Shareholders' equity: Preference shares, $0.20 (10 pence) par value Authorized: 1,000,000 shares and none, respectively, Issued and outstanding - none Ordinary shares, $0.20 (10 pence) par value Authorized: 50,000,000 shares and 40,000,000 shares, respectively Issued and outstanding: 40,238,516 and 35,321,511 shares, respectively 6,204 5,290 Additional paid-in-capital 143,574 62,228 Ordinary shares subscribed, 16,998 and 4,346 shares, respectively 52 10 Retained earnings 21,812 4,104 Deferred share-based compensation (57) (582) Accumulated other comprehensive income 11,869 7,114 ---------------------- Total shareholders' equity 183,454 78,164 ---------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $248,492 $134,803 ======================
CONTACT:
Investors:
WNS (Holdings) Limited
Jay Venkateswaran
Senior VP -- Investor Relations
+1 212 599 6960
ir@wnsgs.com
or
Media:
The Torrenzano Group
Al Bellenchia, +1 212 681 1700 ext. 156
abellenchia@torrenzano.com
SOURCE:
WNS (Holdings) Limited