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WNS, Announces

WNS Announces Fiscal 2020 Third Quarter Earnings, Revises Full Year Guidance

16.01.2020 - 12:31:52

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 2020 third quarter ended December 31, 2019.
 
Highlights – Fiscal 2020 Third Quarter:
GAAP Financials
  • Revenue of $239.2 million, up 19.7% from $199.7 million in Q3 of last year and up 5.7% from $226.2 million last quarter
  • Profit of $30.9 million, compared to $28.6 million in Q3 of last year and $28.7 million last quarter
  • Diluted earnings per ADS of $0.60, compared to $0.55 in Q3 of last year and $0.56 last quarter
 
Non-GAAP Financial Measures*
  • Revenue less repair payments of $228.2 million, up 16.5% from $195.9 million in Q3 of last year and up 3.4% from $220.7 million last quarter
  • Adjusted Net Income (ANI) of $40.9 million, compared to $38.0 million in Q3 of last year and $40.6 million last quarter
  • Adjusted diluted earnings per ADS of $0.80, compared to $0.73 in Q3 of last year and $0.79 last quarter
 
Other Metrics
  • Added 6 new clients in the quarter, expanded 11 existing relationships
  • Days sales outstanding (DSO) at 30 days
  • Global headcount of 44,011 as of December 31, 2019
 
 
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 $239.2 million, representing a 19.7% increase versus Q3 of last year and a 5.7% increase from the previous quarter. Revenue less repair payments* in the third quarter was $228.2 million, an increase of 16.5% year-over-year and a 3.4% increase sequentially. Excluding exchange rate impacts, constant currency revenue less repair payments* in the fiscal third quarter grew 16.1% versus Q3 of last year and 3.0% sequentially. Year-over-year, fiscal Q3 revenue improvement was broad-based across several key verticals, services, and geographies. Sequentially, revenue strength was driven by healthy growth with both new and existing clients, and favorable currency impacts net of hedging.
 
Operating margin in the third quarter was 16.3%, as compared to 16.7% in Q3 of last year and 16.1% in the previous quarter. On a year-over-year basis, margin reduced as a result of the impact of our annual wage increases, lower productivity, and currency movements net of hedging. These headwinds more than offset favorability from the impact of IFRS 16 lease accounting, improved seat utilization, and operating leverage on higher volume. Sequentially, margins improved due to lower share-based compensation expense, improved seat utilization, and operating leverage on higher volume. These benefits were partially offset by higher Selling and Marketing and General and Administrative expenses associated with increased staffing levels and bonus provisioning based on updated visibility.
 
Third quarter adjusted operating margin* was 22.8%, versus 23.0% in Q3 of last year and 23.5% last quarter. Explanations for the adjusted operating margin* movements on a year-over-year basis are the same as described for GAAP operating margins above. Sequentially, adjusted operating margin* reduced due to higher Selling and Marketing and General and Administrative expenses, which more than offset favorability from improved seat utilization and operating leverage on higher volume.

Profit in the fiscal third quarter was $30.9 million, as compared to $28.6 million in Q3 of last year and $28.7 million in the previous quarter. Year-over-year, profit favorability was driven by revenue growth and a lower effective tax rate which more than offset the impact of IFRS 16 and higher share-based compensation expense. Sequentially, profit increased as revenue growth and lower share-based compensation expenses more than offset lower operating margins. Adjusted net income (ANI)* in Q3 was $40.9 million, up $2.9 million as compared to Q3 of last year and up $0.3 million from the previous quarter. Explanations for the ANI* movements on a year-over-year and sequential basis are the same as described for GAAP profit above with the exception of share-based compensation and associated tax impacts, which are excluded from ANI*.
 
From a balance sheet perspective, WNS ended Q3 with $280.1 million in cash and investments and $47.5 million of debt. In the third quarter, the company generated $62.5 million in cash from operations and incurred $4.8 million in capital expenditures. Third quarter days sales outstanding were 30 days, as compared to 32 days reported in Q3 of last year and 29 days in the previous quarter.
 
“WNS’s differentiated capabilities in the BPM marketplace are resonating well with both existing and prospective clients, enabling the company to continue delivering solid financial and operating results. In the fiscal third quarter, revenue less repair payments* grew 16% year-over-year on both a reported and constant currency* basis. The company also posted 23% adjusted operating margin*, $0.80 in adjusted diluted earnings per share, and $62 million in cash from operations,” said Keshav Murugesh, WNS’s Chief Executive Officer. “WNS remains focused on enhancing our ability to “co-create” unique, industry-specific solutions which enable our clients to improve their competitive positioning. To do this, we will continue to invest in technology, transformation, analytics, and domain to insure we remain relevant today and in the future. Our focus remains on the long-term BPM opportunity, and on superior execution which will enable value creation for all our key stakeholders.”
 
Fiscal 2020 Guidance
 
WNS is updating guidance for the fiscal year ending March 31, 2020 as follows:
 
  • Revenue less repair payments* is expected to be between $890 million and $900 million, up from $794.0 million in fiscal 2019. This assumes an average GBP to USD exchange rate of 1.31 for the remainder of fiscal 2020.
  • ANI* is expected to range between $158 million and $162 million versus $140.4 million in fiscal 2019. This assumes an average USD to INR exchange rate of 71.00 for the remainder of fiscal 2020.
  • 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 $3.05 to $3.12 versus $2.69 in fiscal 2019.

“The company has updated our forecast for fiscal 2020 based on current visibility levels and exchange rates,” said Sanjay Puria, WNS’s Chief Financial Officer. “Our guidance for the year reflects growth in revenue less repair payments* of 12% to 13%, or 13% to 14% on a constant currency* basis.  We currently have over 99% visibility to the midpoint of the range.”
 
Conference Call
 
WNS will host a conference call on January 16, 2020 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 4254706. A replay will be available for one week following the call at +1-855-859-2056; international dial-in +1-404-537-3406; passcode 4254706, 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 Business Process Management (BPM) company. WNS combines deep industry knowledge with technology, analytics and process expertise to co-create innovative, digitally led transformational solutions with over 350 clients across various industries. WNS delivers an entire spectrum of BPM solutions including industry-specific offerings, customer interaction services, finance and accounting, human resources, procurement, and research and analytics to re-imagine the digital future of businesses. As of December 31, 2019, WNS had 44,011 professionals across 60 delivery centers worldwide including facilities in China, Costa Rica, India, the Philippines, Poland, Romania, South Africa, Spain, Sri Lanka, Turkey, the 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 2020 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 collect our receivables from, or bill our unbilled services to our clients; 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.
 
WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, amounts in millions, except share and per share data)
 
      Three months ended  
      Dec 31,
2019
    Dec 31,
2018
    Sep 30,
2019
   
Revenue       $ 239.2        $  199.7     $ 226.2    
Cost of revenue       150.0        125.2     142.1    
Gross profit       89.2        74.5     84.1    
Operating expenses:                          
Selling and marketing expenses
       13.0        10.9     12.2    
General and administrative expenses
       33.5        28.2     32.7    
Foreign exchange gain, net
      (0.2)       (1.9)     (1.1)    
Amortization of intangible assets
      4.0        3.9     3.9    
Operating profit       38.9        33.4     36.3    
Other income, net       (3.5)       (3.6)     (3.3)    
Finance expense (1)        4.2       0.8     4.3    
Profit before income taxes        38.2       36.2     35.2    
Income tax expense        7.3       7.6     6.5    
Profit after tax        $   30.9       $   28.6     $   28.7    
                           
Earnings per share of ordinary share                          
Basic       $   0.62       $   0.57     $   0.58    
Diluted        $   0.60       $   0.55     $   0.56    
                           
                               
 
Note:
(1) On account of adoption of IFRS 16 ‘Leases’ effective April 1, 2019, interest expense on lease liabilities amounted to $3.6 million and $3.7 million, respectively during the three months ended December 31, 2019 and September 30, 2019.
 
 
WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited, amounts in millions, except share and per share data)
 
    As at Dec 31, 2019     As at Mar 31, 2019  
ASSETS                
Current assets:                
Cash and cash equivalents
  $  86.7     $ 85.4  
Investments
    109.7       67.9  
Trade receivables, net
    82.9       73.9  
Unbilled revenue
     66.6       66.8  
Funds held for clients
     9.1       7.1  
Derivative assets
     16.9       13.4  
Contract assets
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