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WNS Announces Fiscal 2018 Second Quarter Earnings, Revises Full Year Guidance

27.10.2017 - 12:20:30

Business Wire India
WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of global Business Process Management (BPM) services, today announced results for the fiscal 2018 second quarter ended September 30, 2017.
 
Highlights – Fiscal 2018 Second Quarter:
GAAP Financials
  • Revenue of $186.5 million, up 24.6% from $149.8 million in Q2 of last year and up 3.6% from $180.1 million last quarter
  • Profit of $18.9 million, compared to $12.6 million in Q2 of last year and $16.7 million last quarter
  • Diluted earnings per ADS of $0.36, compared to $0.24 in Q2 of last year and $0.32 last quarter
Non-GAAP Financial Measures*
  • Revenue less repair payments of $182.3 million, up 26.9% from $143.7 million in Q2 of last year and up 4.0% from $175.3 million last quarter
  • Adjusted Net Income (ANI) of $27.7 million, compared to $22.0 million in Q2 of last year and $23.6 million last quarter
  • Adjusted diluted earnings per ADS of $0.53, compared to $0.42 in Q2 of last year and $0.45 last quarter
Other Metrics
  • Added 7 new clients in the quarter, expanded 8 existing relationships
  • Days sales outstanding (DSO) at 30 days
  • Global headcount of 35,121 as of September 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.”
 
Revenue in the second quarter was $186.5 million, representing a 24.6% increase versus Q2 of last year and a 3.6% increase from the previous quarter. Revenue less repair payments* in the second quarter was $182.3 million, an increase of 26.9% year-over-year and 4.0% sequentially. Excluding exchange rate impacts, constant currency revenue less repair payments* in the fiscal second quarter grew 25.3% versus Q2 of last year and 3.0% sequentially. Year-over-year, fiscal Q2 revenue growth was driven by our acquisitions of HealthHelp and Denali, which closed in March 2017 and January 2017 respectively, healthy organic revenue growth across key verticals and services, and favorability from currency and hedging. Sequentially, revenue growth was the result of solid performance with both new and existing clients, and favorable currency movements net of hedging.
 
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 $18.9 million, as compared to $12.6 million in Q2 of last year and $16.7 million in the previous quarter. Adjusted net income (ANI)* in Q2 was $27.7 million, up $5.7 million as compared to Q2 of last year and up $4.1 million from the previous quarter. In addition to the explanations discussed above, fiscal second quarter profit and adjusted net income* increased by $1.7 million sequentially as a result of a non-recurring tax benefit in Q2 resulting from a corporate legal entity restructuring.
 
From a balance sheet perspective, WNS ended Q2 with $183.8 million in cash and investments and $103.0 million of debt. In the second quarter, the company generated $44.0 million in cash from operations, and had $11.5 million in capital expenditures.  WNS repurchased 879,539 ADSs, impacting cash by $30.0 million dollars, and made scheduled debt payments of $14.1 million.  Days sales outstanding were 30 days, the same as reported in Q2 of last year and in the previous quarter. 
 
“WNS continues to perform well in a healthy business environment, posting revenue less repair payments* in fiscal Q2 of $182.3 million.  Growth was once again broad-based across key verticals and services, and represents a year-over-year constant currency* increase of more than 25%,” said Keshav Murugesh, WNS’s Chief Executive Officer.  “We believe that the company has positioned itself well in the BPM space, with a strategy centered on deep domain expertise and complemented by strong capabilities in the areas of automation, analytics, and end-to-end digital solutions. WNS continues to receive positive feedback on our approach from clients, prospects, and influencers, and we remain focused on delivering enhanced business 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 $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 Sanjay Puria, WNS’s Chief Financial Officer. “Our revised guidance for the year reflects growth in revenue less repair payments* of 22% to 26%, or 21% to 24% on a constant currency* basis. We currently have 98% visibility to the midpoint of the range.”
 
Conference Call

WNS will host a conference call on October 27, 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 92434435. A replay will be available for one week following the call at +1-855-859-2056; international dial-in +1-404-537-3406; passcode 92434435, 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 September 30, 2017, WNS had 35,121 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, 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. 
 
 † Includes 1,282 apprentices employed under the India government scheme, National Employability Enhancement Mission, pursuant to which apprentices undergo a three to 24 month apprenticeship to enhance their employability. There is no guarantee of employment with WNS following the completion of the apprenticeship. Our previously reported global headcount does not include apprentices.
 
WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
  (Unaudited, amounts in millions, except share and per share data)
 
      Three months ended  
      Sep 30,
2017
    Sep 30,
2016
    Jun 30,
2017
   
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,
2017
   
As at Mar 31,
              2017
 
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     @ businesswireindia.com

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