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

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 third quarter ended December 31, 2017.
 

Highlights – Fiscal 2018 Third Quarter:

GAAP Financials Revenue of $188.6 million, up 29.7% from $145.4 million in Q3 of last year and up 1.1% from $186.5 million last quarter Profit of $26.3 million, compared to $18.0 million in Q3 of last year and $18.9 million last quarter Diluted earnings per ADS of $0.51, compared to $0.35 in Q3 of last year and $0.36 last quarter Non-GAAP Financial Measures* Revenue less repair payments of $185.2 million, up 32.4% from $139.8 million in Q3 of last year and up 1.6% from $182.3 million last quarter Adjusted Net Income (ANI) of $34.2 million, compared to $25.2 million in Q3 of last year and $27.7 million last quarter Adjusted diluted earnings per ADS of $0.66, compared to $0.49 in Q3 of last year and $0.53 last quarter Other Metrics Added 7 new clients in the quarter, expanded 7 existing relationships Days sales outstanding (DSO) at 30 days Global headcount of 35,657 as of December 31, 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 third quarter was $188.6 million, representing a 29.7% increase versus Q3 of last year and a 1.1% increase from the previous quarter. Revenue less repair payments* in the third quarter was $185.2 million, an increase of 32.4% year-over-year and 1.6% sequentially. Excluding exchange rate impacts, constant currency revenue less repair payments* in the fiscal third quarter grew 28.5% versus Q3 of last year and 2.0% sequentially. Year-over-year, fiscal Q3 revenue growth was driven by healthy organic revenue growth across key verticals and services, our acquisitions of HealthHelp and Denali which closed in March 2017 and January 2017 respectively, and favorability from currency and hedging. Sequentially, revenue growth was the result of solid performance with both new and existing clients, which helped offset a modest headwind from currency movements net of hedging.
 
Operating margin in the third quarter was 13.6%, as compared to 14.2% in Q3 of last year and 10.8% in the previous quarter. On a year-over-year basis, margin reductions were driven by the impact of our annual wage increases, higher share-based compensation and currency movements net of hedging. These headwinds were partially offset by improved seat utilization and increased operating leverage on higher volumes. Sequentially, margins increased as a result of lower share-based compensation, improved productivity, and currency movements net of hedging. These benefits more than offset lower seat utilization.
 
Third quarter adjusted operating margin* was 19.9%, versus 21.3% in Q3 of last year and 18.5% last quarter. On a year-over-year basis, adjusted operating margin* reduced primarily due to the impact of our annual wage increases and currency movements net of hedging. These reductions were partially offset by improved seat utilization and increased operating leverage from higher volumes. Sequentially, adjusted operating margin* increased as a result of improved productivity and currency movements net of hedging. These benefits more than offset the impact of our annual wage increases and lower seat utilization.
 
Profit in the fiscal third quarter was $26.3 million, as compared to $18.0 million in Q3 of last year and $18.9 million in the previous quarter. Adjusted net income (ANI)* in Q3 was $34.2 million, up $9.0 million as compared to Q3 of last year and up $6.4 million from the previous quarter. In addition to the explanations discussed above, fiscal third quarter profit and adjusted net income* increased by $5.2 million as a result of the net impact of one-time provisional tax adjustments associated with the 2017 US Tax Reform bill that reduced the US corporate tax rate on our deferred tax assets and deferred tax liabilities, and required us to record a charge for deemed repatriation of offshore earnings.
 
From a balance sheet perspective, WNS ended Q3 with $208.4 million in cash and investments and $103.1 million of debt. In the third quarter, the company generated $38.3 million in cash from operations, and had $9.0 million in capital expenditures. WNS also repurchased 220,461 ADSs, with our buyback program impacting cash by $9.5 million dollars. Days sales outstanding were 30 days, the same as reported in Q3 of last year and in the previous quarter. 
 
“Our differentiated positioning in the market continues to resonate with clients, helping us add new logos and expand our existing relationships. In fiscal Q3, WNS delivered revenue less repair payments* of $185.2 million, representing year-over-year constant currency* growth of 29%. Growth was once again broad-based across key verticals, services, and geographies,” said Keshav Murugesh, WNS’s Chief Executive Officer. “Our clients continue to experience significant disruption in their business environments, helping generate increased interest in BPM. We believe WNS is well positioned to help clients address these challenges by combining deep domain expertise with robust capabilities in the areas of automation, analytics, and end-to-end digital solutions. We remain focused on helping our clients improve their competitive positioning, and delivering long-term sustainable 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 $720 million and $726 million, up from $578.4 million in fiscal 2017. This assumes an average GBP to USD exchange rate of 1.34 for the remainder of fiscal 2018.
• ANI* is expected to range between $114 million and $116 million versus $92.2 million in fiscal 2017. This assumes an average USD to INR exchange rate of 64.0 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 $2.18 to $2.22 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 24.5% to 25.5%, or 23% to 24% 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 18, 2018 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 8369188. A replay will be available for one week following the call at +1-855-859-2056; international dial-in +1-404-537-3406; passcode 8369188, 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 350+ 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 December 31, 2017, WNS had 35,657 professionals across 53 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).
   

			Three months ended
			Dec 31, 2017				Dec 31, 2016				Sep 30, 2017
Revenue			$	188.6			$	145.4		$	186.5
Cost of revenue				124.4				97.5			125.5
Gross profit				64.1				47.9			61.0
Operating expenses:
Selling and marketing expenses				10.6				7.9			10.3
General and administrative expenses				28.3				21.5			31.3
Foreign exchange loss / (gain), net				(4.4	)			(6.2	)		(4.4	)
Amortization of intangible assets				3.9				4.1			3.7
Operating profit				25.7				20.6			20.1
Other income, net				(2.5	)			(2.2	)		(2.4	)
Finance expense				1.0				0.0			1.0
Profit before income taxes				27.2				22.8			21.4
Provision for income taxes				0.9				4.8			2.5
Profit			$	26.3			$	18.0		$	18.9
Earnings per share of ordinary share
Basic			$	0.52			$	0.36		$	0.37
Diluted			$	0.51			$	0.35		$	0.36

 

				As at Dec 31, 2017			As at Mar 31, 2017
ASSETS
Current assets:
Cash and cash equivalents		$	89.7				$	69.8
Investments			118.2					112.0
Trade receivables, net			67.5					60.4
Unbilled revenue			56.1					48.9
Funds held for clients			10.1					9.1
Derivative assets			18.8					35.4
Prepayments and other current assets			26.5					27.4
Total current assets			386.9