SOURCE: WNS

November 04, 2009 06:00 ET

WNS Announces Second Quarter Fiscal 2010 Earnings; Well Positioned to Beat Top End of Guidance for Fiscal 2010

Quarterly Revenue Increases 2.2%; Revenue Less Repair Payments Declines 8.1% Over the Corresponding Quarter in the Prior Fiscal Year

NEW YORK, NY and MUMBAI, INDIA--(Marketwire - November 4, 2009) - WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of global business process outsourcing (BPO) services, today announced results for the fiscal second quarter 2010 ended September 30, 2009, and noted that it is well positioned to beat the top end of its guidance on revenue less repair payments and adjusted net income (or net income attributable to WNS shareholders excluding amortization of intangible assets, share-based compensation, related fringe benefit tax and loss attributable to non-controlling interest) for fiscal 2010.

Revenue for the fiscal second quarter 2010 of $153.0 million represented an increase of 2.2% over the corresponding quarter in the prior fiscal year, while revenue less repair payments at $100.2 million declined by 8.1% over the corresponding period in the prior fiscal year. The revenue less repair payments decline was largely the result of the weakening of the British Pound compared with the US Dollar and the second year pricing terms of the Aviva Global Services (AGS) contract.

"We had a healthy quarter from a revenue and profitability standpoint and we are on track to beat the top end of our original fiscal 2010 guidance on both metrics," said Neeraj Bhargava, Group Chief Executive Officer. "We see the market improving and growing acknowledgment of our global BPO capabilities."

Net income attributable to WNS shareholders for the fiscal second quarter 2010 was $1.4 million compared to $0.2 million during the corresponding quarter in the prior fiscal year. The net income attributable to WNS shareholders in the current quarter increased due to the cost synergies generated out of the acquisitions made in the previous fiscal year and lower taxes compared to the corresponding quarter in the last fiscal year.

Adjusted net income was $13.7 million, an increase of 15.6% over the corresponding quarter in the prior year. The primary drivers of this increase were tighter cost management, improved scale benefits and increased profits from WNS' acquisitions. This increase was partially offset by higher foreign exchange losses.

WNS recorded a basic income per ADS of $0.03 for fiscal second quarter 2010. Adjusted basic income per ADS (or net income per ADS attributable to WNS shareholders excluding amortization of intangible assets, share-based compensation, related fringe benefit tax and loss attributable to non-controlling interest) was $0.32 for the quarter, an increase of 14.4% from the corresponding quarter last year.

"This was one of our strongest quarters in the recent past in terms of new bookings and improvement in our sales pipeline," said Anup Gupta, Group Chief Operating Officer. "We are winning multi-country deals and our global footprint is now an integral part of our value proposition. Our operations remain very strong with four straight quarters of operating margins above 19 percent."

Financial Highlights: Fiscal Second Quarter Ended September 30, 2009

--  Quarterly revenue of $153.0 million, up 2.2% from the corresponding
    quarter last year.
--  Quarterly revenue less repair payments of $100.2 million, down 8.1%
    from the corresponding quarter last year.
--  Quarterly net income attributable to WNS shareholders of $1.4 million
    compared to $0.2 million from the corresponding quarter last year.
--  Quarterly adjusted net income (or net income attributable to WNS
    shareholders excluding amortization of intangible assets, share-based
    compensation, related fringe benefit tax and loss attributable to non-
    controlling interest) of $13.7 million, up 15.6% from the corresponding
    quarter last year.
--  Quarterly basic income per ADS of $0.03, compared with $0.01 for the
    corresponding quarter last year.
--  Quarterly adjusted basic income per ADS (or net income attributable to
    WNS shareholders per share excluding amortization of intangible assets,
    share-based compensation, related fringe benefit tax and loss attributable
    to non-controlling interest) of $0.32, up from $0.28 for the corresponding
    quarter last year, up 14.4% from the corresponding quarter last year.
    

Reconciliations of non-GAAP financial measures to GAAP operating results are included at the end of this release.

Fiscal 2010 Guidance

WNS noted that it is well positioned to beat the top end of the guidance ranges for the fiscal year ending March 31, 2010:

--  Revenues less repair payments of $390 million.
--  Adjusted net income (or net income attributable to WNS shareholders
    excluding amortization of intangible assets, share-based compensation,
    related fringe benefit tax and loss attributable to non-controlling
    interest) of $52 million.
    

"While we are well positioned to beat the top end of our guidance range, we continue to see volatility in the exchange rates and volume pressure in our travel and insurance-related businesses," said Alok Misra, Group Chief Financial Officer. "As we anticipated, our adjusted net income and cash flow have both continued to improve compared with the first quarter of this fiscal. Our cash generation was particularly strong this quarter at over $24 million in operating cash and almost $22 million of free cash, providing additional strength to our balance sheet."

"Our DSOs have also improved further and are now running at 39 days. This is a testament to our ability to manage costs, improve operations and maintain strong relationships with our clients," concluded Misra.

Conference Call

WNS will host a conference call on November 4, 2009 at 8 am (ET) to discuss the company's quarterly results. To participate in the call, please use the following details: +1-866-713-8307; international dial-in +1-617-597-5307; participant passcode 87323509. A replay will be available for one week following the call at +1-888-286-8010; international dial-in +1-617-801-6888; passcode 91110852, 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 outsourcing company. Deep industry and business process knowledge, a partnership approach, comprehensive service offering and a proven track record enables WNS to deliver business value to some of the leading companies in the world. WNS is passionate about building a market-leading company valued by our clients, employees, business partners, investors and communities. For more information, visit www.wns.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, which includes WNS Assistance and Chang Limited, 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.

In order to provide accident-management services, the Company arranges for the repair through a network of repair centers. Repair costs are invoiced to customers. Amounts invoiced to customers for repair costs paid to the automobile repair centers are recognized as revenue. The Company uses revenue less repair payments for "fault" repairs as a primary measure to allocate resources and measure segment performance. Revenue less repair payments is a non-GAAP measure which is calculated as revenue less payments to repair centers. For "non fault repairs," revenue including repair payments is used as a primary measure. As the Company provides a consolidated suite of accident management services including credit hire and credit repair for its "Non fault" repairs business, the Company believes that measurement of that line of business has to be on a basis that includes repair payments in revenue.

The Company believes that the presentation of this non-GAAP measure in the segmental information provides useful information for investors regarding the segment's financial performance. 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 US GAAP.

Safe Harbor Statement under the provisions of the United States Private Securities Litigation Reform Act of 1995

These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our Company and our industry. The forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "anticipate," "believe," "estimate," "expect," "intend," "will," "project," "seek," "should" and similar expressions. Those statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be materially incorrect. These factors include but are not limited to worldwide economic and business conditions; political or economic instability in the jurisdictions where we have operations; regulatory, legislative and judicial developments; our ability to attract and retain clients technological innovation; telecommunications or technology disruptions; future regulatory actions and conditions in our operating areas; our dependence on a limited number of clients in a limited number of industries; our ability to expand our business or effectively manage growth; our ability to hire and retain enough sufficiently trained employees to support our operations; negative public reaction in the US or the UK to offshore outsourcing; increasing competition in the BPO industry; our ability to successfully grow our revenue, expand our service offerings and market share and achieve accretive benefits from our acquisition of Aviva Global Services Singapore Pte. Ltd. (which we have renamed as WNS Customer Solutions (Singapore) Private Limited following our acquisition), or Aviva Global, and our master services agreement with Aviva Global Services (Management Services) Private Limited; and our ability to successfully consummate strategic acquisitions. These and other factors are more fully discussed in our annual report on Form 20-F for the fiscal year ended March 31, 2009 filed with the U.S. Securities and Exchange Commission which is available at www.sec.gov. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans, objectives or projected financial results referred to in any of the forward-looking statements. Except as required by law, we do not undertake to release revisions of any of these 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.


                                      WNS (Holdings) Limited Fiscal Q2 2010


                         WNS (HOLDINGS) LIMITED
              CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                            (UNAUDITED)
         (Amounts in thousands, except share and per share data)


                          Three months ended          Six months ended
                             September 30,              September 30,
                       -------------------------  -------------------------
                          2009          2008         2009          2008
                       -----------  ------------  -----------  ------------

Revenue
  Third parties        $   151,532  $    148,925  $   287,425  $    270,961
  Related parties            1,515           872        2,317         1,780
                       -----------  ------------  -----------  ------------

                           153,047       149,797      289,742       272,741
Cost of revenue (a)        116,139       114,912      215,648       213,399
                       -----------  ------------  -----------  ------------

Gross profit                36,908        34,885       74,094        59,342
Operating expenses:
  Selling, general and
   administrative
   expenses (a)             22,098        21,304       42,864        39,500
  Amortization of
   intangible assets         8,081         8,012       16,281         9,481
                       -----------  ------------  -----------  ------------

Operating income             6,729         5,569       14,949        10,361
Other expense, net           2,058           275        4,882         1,788
Interest expense             3,445         3,220        7,561         3,367
                       -----------  ------------  -----------  ------------

Income before income
 taxes                       1,226         2,074        2,506         5,206
Provision for income
 taxes                         227         1,847          554         1,639
                       -----------  ------------  -----------  ------------

Consolidated net income        999           227        1,952         3,567
Less: Net loss
 attributable to non
 controlling interest         (356)           --         (470)           --
                       -----------  ------------  -----------  ------------

Net income attributable
 to WNS (Holdings)
 Limited shareholders  $     1,355  $        227  $     2,422  $      3,567
                       ===========  ============  ===========  ============

Earnings per share of
 ordinary share
Basic                  $      0.03  $       0.01  $      0.06  $       0.08
Diluted                $      0.03  $       0.01  $      0.06  $       0.08
Basic weighted average
 ordinary shares
 outstanding            42,941,588    42,513,108   42,838,295    42,459,307
Diluted weighted
 average ordinary
 shares outstanding     44,637,150    43,186,424   43,995,329    43,343,907

Note:
(a) Includes the
 following share-based
 compensation amounts:
Cost of revenue        $     1,176  $        990  $     2,052  $      1,788
Selling, general and
 administrative
 expenses              $     3,153  $      2,470  $     5,573  $      4,737


                                      WNS (Holdings) Limited Fiscal Q2 2010


Reconciliation of revenue less repair payments (non-GAAP) to revenue (GAAP)

                                                                  Amount in
                                                                  thousands

                          Three months ended          Six months ended
                       -------------------------  -------------------------
                    September 30, September 30, September 30, September 30,
                          2009          2008         2009          2008
                       -----------  ------------  -----------  ------------

Revenue less repair
 payments (Non-GAAP)   $   100,206  $    109,004  $   198,692  $    191,224
Add: Payments to
 repair centers             52,841        40,793       91,050        81,517
Revenue (GAAP)         $   153,047  $    149,797  $   289,742  $    272,741


Reconciliation of cost of revenue (non-GAAP to GAAP)

                                                                  Amount in
                                                                  thousands

                          Three months ended          Six months ended
                       -------------------------  -------------------------
                    September 30, September 30, September 30, September 30,
                          2009          2008         2009          2008
                       -----------  ------------  -----------  ------------

Cost of revenue
 (excluding share-based
 compensation expense)
 (Non-GAAP)            $    62,122  $    73,129   $   122,546  $    130,094
Add: Payments to
 repair centers             52,841       40,793        91,050        81,517
Add: Share-based
 compensation expense        1,176          990         2,052         1,788
Cost of revenue (GAAP) $   116,139  $   114,912   $   215,648  $    213,399


Reconciliation of selling, general and administrative expense (non-GAAP to
 GAAP)

                                                                  Amount in
                                                                  thousands

                          Three months ended          Six months ended
                       -------------------------  -------------------------
                    September 30, September 30, September 30, September 30,
                          2009          2008         2009          2008
                       -----------  ------------  -----------  ------------

Selling, general and
 administrative
 expenses (excluding
 share-based
 compensation expense
 and related FBT(1))
 (Non-GAAP)            $    18,643  $     18,671  $    36,832  $     34,233
Add: Share-based
 compensation expense        3,153         2,471        5,573         4,736
Add: Related FBT(1)            302           162          459           531
Selling, general and
 administrative expenses
 (GAAP)                $    22,098  $     21,304  $    42,864  $     39,500

__________________

1. FBT means the fringe benefit taxes on options and restricted share units
   granted to employees under the WNS 2002 Stock Incentive Plan and the WNS
   2006 Incentive Award Plan (as applicable) payable by WNS to the
   Government of India. In August 2009, the Government of India passed the
   Finance (No. 2) Bill, 2009 which withdrew the levy of FBT.


                                      WNS (Holdings) Limited Fiscal Q2 2010


Reconciliation of operating income (non-GAAP to GAAP)

                                                                  Amount in
                                                                  thousands

                          Three months ended          Six months ended
                       -------------------------  -------------------------
                    September 30, September 30, September 30, September 30,
                          2009          2008         2009          2008
                       -----------  ------------  -----------  ------------

Operating income
 (excluding
 amortization of
 intangible assets,
 share-based
 compensation and
 related FBT(1))
 (Non-GAAP)            $    19,441  $     17,204  $    39,314  $     26,898
Less: Amortization of
 intangible assets           8,081         8,012       16,281         9,481
Less: Share-based
 compensation expense        4,329         3,461        7,625         6,525
Less: Related FBT(1)           302           162          459           531
Operating income
 (GAAP)                $     6,729  $      5,569  $    14,949  $     10,361


Reconciliation of net income attributable to WNS shareholders (non-GAAP to
 GAAP)

                                                                  Amount in
                                                                  thousands

                          Three months ended          Six months ended
                       -------------------------  -------------------------
                    September 30, September 30, September 30, September 30,
                          2009          2008         2009          2008
                       -----------  ------------  -----------  ------------

Adjusted net income
 (excluding amortization
 of intangible assets,
 share-based
 compensation expense,
 related FBT(1) and
 loss attributable
 to noncontrolling
 interest) (Non-GAAP)  $    13,711  $     11,862  $    26,317  $     20,104
Less: Amortization of
 intangible assets           8,081         8,012       16,281         9,481
Less: Share-based
 compensation expense        4,329         3,461        7,625         6,525
Less: Related FBT(1)           302           162          459           531
Add: Loss attributable
 to noncontrolling
 interest                      356            --          470            --
Net income attributable
 to WNS (Holdings)
 Limited shareholders
 (GAAP)                $     1,355  $        227  $     2,422  $      3,567

__________________

1. FBT means the fringe benefit taxes on options and restricted share units
   granted to employees under the WNS 2002 Stock Incentive Plan and the WNS
   2006 Incentive Award Plan (as applicable) payable by WNS to the
   Government of India. In August 2009, the Government of India passed the
   Finance (No. 2) Bill, 2009 which withdrew the levy of FBT.


                                      WNS (Holdings) Limited Fiscal Q2 2010


Reconciliation of basic income per ADS (non-GAAP to GAAP)


                          Three months ended          Six months ended
                       -------------------------  -------------------------
                    September 30, September 30, September 30, September 30,
                          2009          2008         2009          2008
                       -----------  ------------  -----------  ------------

Basic adjusted net
 income per ADS
 (excluding
 amortization of
 intangible assets,
 share-based
 compensation expense,
 related FBT(1) and
 loss attributable
 to noncontrolling
 interest) (Non-GAAP)  $      0.32  $       0.28  $      0.61  $       0.47
Less: Adjustments for
 amortization of
 intangible assets,
 share-based
 compensation expense,
 related FBT(1) and
 loss attributable
 to noncontrolling
 interest                     0.29          0.27         0.55          0.39
Basic income per ADS
 (GAAP)                $      0.03  $       0.01  $      0.06  $       0.08


Reconciliation of diluted income per ADS (non-GAAP to GAAP)


                          Three months ended          Six months ended
                       -------------------------  -------------------------
                    September 30, September 30, September 30, September 30,
                          2009          2008         2009          2008
                       -----------  ------------  -----------  ------------

Diluted adjusted net
 income per ADS
 (excluding
 amortization of
 intangible assets,
 share-based
 compensation expense,
 related FBT(1) and
 loss attributable
 to noncontrolling
 interest) (Non-GAAP)  $      0.31  $       0.27  $      0.60  $       0.46
Less: Adjustments for
 amortization of
 intangible assets,
 share-based
 compensation expense,
 related FBT(1) and
 loss attributable
 to noncontrolling
 interest                     0.28          0.26         0.54          0.38
Diluted income per ADS
 (GAAP)                $      0.03  $       0.01  $      0.06  $       0.08

1. FBT means the fringe benefit taxes on options and restricted share units
   granted to employees under the WNS 2002 Stock Incentive Plan and the WNS
   2006Incentive Award Plan (as applicable) payable by WNS to the
   Government of India. In August 2009, the Government of India passed the
   Finance (No. 2) Bill, 2009 which withdrew the levy of FBT.



                          WNS (HOLDINGS) LIMITED
                  CONDENSED CONSOLIDATED BALANCE SHEETS
          (Amounts in thousands, except share and per share data)

                                                 September 30,  March 31,
                                                     2009         2009
                                                 ------------ ------------
                                                 (Unaudited)
ASSETS
Current assets:
  Cash and cash equivalents                      $     40,211 $     38,931
  Bank deposits and marketable securities               3,378        8,925
  Accounts receivable, net of allowance of $2,276
   and $1,935, respectively                            62,520       61,257
  Accounts receivable -- related parties                1,174           64
  Funds held for clients                                6,997        5,379
  Employee receivables                                  1,481          745
  Prepaid expenses                                      3,201        2,082
  Prepaid income taxes                                  6,050        5,768
  Deferred tax assets                                   1,207        1,743
  Other current assets                                 23,412       38,647
                                                 ------------ ------------
    Total current assets                              149,631      163,541
Goodwill                                               89,565       81,679
Intangible assets, net                                204,378      217,372
Property and equipment, net                            52,655       55,992
Other assets                                            7,948       11,449
Deposits                                                6,966        6,309
Deferred tax assets                                    21,370       15,584
                                                 ------------ ------------

TOTAL ASSETS                                     $    532,513 $    551,926
                                                 ============ ============
LIABILITIES AND EQUITY
Current liabilities:
  Accounts payable                               $     30,230 $     30,879
  Accounts payable -- related parties                      --           42
  Current portion of long term debt                    40,000       45,000
  Short term line of credit                                --        4,331
  Accrued employee cost                                25,471       23,754
  Deferred revenue                                      4,703        5,583
  Income taxes payable                                  3,622        3,995
  Accrued expenses                                     34,588       31,194
  Other current liabilities                            20,827       22,932
                                                 ------------ ------------
    Total current liabilities                         159,441      167,710
Long term debt                                        130,000      155,000
Deferred revenue                                        3,369        3,561
Other liabilities                                       5,563        1,967
Accrued pension liability                               2,925        2,570
Deferred tax liabilities                                8,985        9,946
Derivative contracts                                   13,864       23,163
                                                 ------------ ------------
TOTAL LIABILITIES                                     324,147      363,917
Commitments and contingencies
WNS (Holdings) Limited shareholders’ equity:
  Ordinary shares, $0.16 (10 pence) par value,
   authorized: 50,000,000 shares; Issued and
   outstanding: 43,076,459 and 42,607,403 shares,
   respectively                                         6,742        6,667
Ordinary shares subscribed: 9,001 and nil shares,
 respectively                                              68           --
Additional paid-in capital                            192,764      184,122

Retained earnings                                                   46,917
Accumulated other comprehensive loss                  (40,086)     (49,710)
                                                 ------------ ------------
    WNS (Holdings) Limited shareholders’ equity       208,827      187,996
Noncontrolling interest                                  (461)          13
                                                 ------------ ------------
    Total equity                                      208,366      188,009
                                                 ------------ ------------

TOTAL LIABILITIES AND EQUITY                     $    532,513 $    551,926
                                                 ============ ============



                          WNS (HOLDINGS) LIMITED
              CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                (UNAUDITED)
                          (Amounts in thousands)

                                                     Six months ended
                                                 -------------------------
                                                       September 30,
                                                     2009         2008
                                                 ------------ ------------
Cash flows from operating activities
  Net cash provided by operating activities      $     31,513 $     13,555

Cash flows from investing activities
  Acquisitions, net of cash received                      --      (288,788)
  Facility and property cost                           (6,365)      (5,579)
  Proceeds from sale of assets, net                       462          169
  Marketable securities and deposits sold, net          5,987        7,841
                                                 ------------ ------------
   Net cash provided by (used in) investing
    activities                                             84     (286,357)
                                                 ------------ ------------

Cash flows from financing activities
  Proceeds from exercise of stock options               1,021        1,036
  Excess tax benefits from share-base
   compensation                                           969        1,177
  Repayment of long term debt                         (30,000)          --
  Payment of debt issuance cost                           (47)          --
  Proceeds from long term debt, net                        --      199,482
  Short term (repayments) borrowing, net               (4,814)       1,032
  Short term borrowing - related parties                   --        6,336
  Principal payments under capital leases                 (57)        (169)
                                                 ------------ ------------
   Net cash (used in) provided by financing
    activities                                        (32,928)     208,894
                                                 ------------ ------------

Effect of exchange rate changes on cash and cash
 equivalents                                            2,611       (7,462)

  Net change in cash and cash equivalents               1,280      (71,370)
  Cash and cash equivalents at beginning of
   period                                              38,931      102,698
                                                 ------------ ------------
  Cash and cash equivalents at end of period     $     40,211 $     31,328
                                                 ============ ============

Contact Information

  • CONTACT:
    Investors:
    Alan Katz
    VP -- Investor Relations
    WNS (Holdings) Limited
    +1 212 599-6960 ext. 241
    Email Contact

    Media:
    Emily Cleary
    CJP Communications
    +1 212 279 3115 ext. 257