SOURCE: WNS Global Services

January 21, 2010 06:46 ET

WNS Announces Third Quarter Fiscal 2010 Earnings; Reaffirms Net Revenue and Adjusted Net Income Guidance for Fiscal 2010

Quarterly Revenue Increases 11.3%; Revenue Less Repair Payments Declines 2.8% Over the Corresponding Quarter in the Prior Fiscal Year; Group CEO Neeraj Bhargava to Step Down January 31, 2010

NEW YORK, NY and MUMBAI, INDIA--(Marketwire - January 21, 2010) - WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of global business process outsourcing (BPO) services, today announced results for the fiscal third quarter 2010 ended December 31, 2009 and reaffirmed its fiscal 2010 guidance of revenue less repair payments (or net revenues) of more than $390 million. It also reaffirmed its fiscal 2010 guidance of adjusted net income (ANI) (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 more than $52 million.

Revenue for the fiscal third quarter 2010 of $149.1 million represented an increase of 11.3% over the corresponding quarter in the prior fiscal year, while revenue less repair payments at $96.8 million, declined by 2.8% over the corresponding period in the prior fiscal year. The revenue less repair payments decline was largely the result of the decline in transaction volumes in the travel and insurance segments and the second year pricing terms of the Aviva Global Services (AGS) contract.

As a result, net income attributable to WNS shareholders for the fiscal third quarter 2010 was $0.3 million compared to $2.1 million during the corresponding quarter in the prior fiscal year. Similarly, adjusted net income was $11.1 million, a decline of 13.5% compared to the corresponding quarter in the prior year. Net income and adjusted net income results also reflected $1 million in costs associated with the unwinding of interest rate swaps from a $15 million prepayment WNS made on its term loan in January 2010.

"As a result of this year's sales and expansion activity, despite a challenging quarter, our longer term growth prospects look strong and we are reaffirming that we will beat the top end of our original guidance range for fiscal 2010 on net revenues and ANI," said Neeraj Bhargava, Group Chief Executive Officer.

WNS recorded basic income per ADS of $0.01 for fiscal third 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 $0.26 for the quarter, a decline of 14.8% from the corresponding quarter last year.

"We are in the ramp up stage for recent sales, and our pipeline is strong," said Anup Gupta, Group Chief Operating Officer. "While this resulted in some pressure on our margins in the third quarter, the fourth quarter should benefit from the expansion of our client base. Our operations remain on track, which we demonstrated by achieving the fifth straight quarter of adjusted operating margins of above 18 percent."

The Board of Directors also announced today that on January 31, 2010, Neeraj Bhargava, Group Chief Executive Officer, will step down from his post, as previously stated. He will remain as a strategic advisor. The Board will be making an announcement about WNS leadership shortly.

Financial Highlights: Fiscal Third Quarter Ended December 31, 2009

--  Quarterly revenue of $149.1 million, up 11.3% from the corresponding
    quarter last year.
--  Quarterly revenue less repair payments of $96.8 million, down 2.8%
    from the corresponding quarter last year.
--  Quarterly net income attributable to WNS shareholders of $0.3 million
    compared to $2.1 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 $11.1 million, down 13.5% from the corresponding
    quarter last year.
--  Quarterly basic income per ADS of $0.01, compared with $0.05 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 $0.26, down $0.04 or 14.8% 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 reaffirmed its revenue less repair payments and adjusted net income guidance for the fiscal year ending March 31, 2010, based on current exchange rate trends:

--  Revenues less repair payments of more than $390 million for the
    fiscal year.
--  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 more than $52 million for the fiscal year (excluding any
    charges for the unwinding of interest rate swaps).
    

"Despite volatility in the exchange rates and volume pressure in our travel and insurance-related businesses, we are able to reaffirm our net revenue and ANI guidance," said Alok Misra, Group Chief Financial Officer. "Our cash flows remained strong this quarter. In prepaying $15 million on our term loan in early January, we have amply demonstrated our ability to generate free cash. This prepayment will also lead to lower interest expense and improve profitability."

Conference Call

WNS will host a conference call on January 21, 2010 at 8:00 am (EST) to discuss the company's quarterly results. To participate in the call, please use the following details: +1-800-884-5695; international dial-in +1-617-786-2960; participant passcode 59398539. A replay will be available for one week following the call at +1-888-286-8010; international dial-in +1-617-801-6888; passcode 64880117, 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 future financial performance, including our fiscal 2010 guidance and future profitability; our run rate for the fiscal 2010 fourth quarter and into fiscal 2010; our ability to generate free cash; and our future operations. 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 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
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                               (UNAUDITED)
          (Amounts in thousands, except share and per share data)

                            Three months ended         Nine months ended
                                December 31,              December 31,
                        --------------------------------------------------
                             2009         2008         2009         2008
                        --------------------------------------------------

Revenue
  Third parties         $   146,912  $   133,289  $   434,337  $   404,250
  Related parties             2,202          721        4,519        2,501
                        -----------  -----------  -----------  -----------
                            149,114      134,010      438,856      406,751
Cost of revenue (a)         113,956       97,030      329,604      310,429
                        -----------  -----------  -----------  -----------
Gross profit                 35,158       36,980      109,252       96,322
Operating expenses:
  Selling, general and
   administrative
   expenses (a)              20,584       18,902       63,448       58,403
  Amortization of
   intangible assets          8,088        7,419       24,369       16,900
                        -----------  -----------  -----------  -----------
Operating income              6,486       10,659       21,435       21,019
Other expense, net            2,948        4,113        7,830        5,901
Interest expense              3,505        3,955       11,066        7,322
                        -----------  -----------  -----------  -----------
Income before income
 taxes                           33        2,591        2,539        7,796
Provision for income
 taxes                           64          705          618        2,344
                        -----------  -----------  -----------  -----------
Consolidated net
 income (loss)                  (31)       1,886        1,921        5,452
Less: Net loss
 attributable to
 non controlling
 interest                      (374)        (180)        (844)        (180)
                        -----------  -----------  -----------  -----------
Net income attributable
 to WNS (Holdings)
 Limited shareholders   $       343  $     2,066  $     2,765  $     5,632
                        ===========  ===========  ===========  ===========
Earnings per share
 of ordinary shares
Basic                   $      0.01  $      0.05  $      0.06  $      0.13
Diluted                 $      0.01  $      0.05  $      0.06  $      0.13
Basic weighted average
 ordinary shares
 outstanding             43,198,212   42,572,600   42,958,704   42,497,209
Diluted weighted
 average
 ordinary shares
 outstanding             44,755,997   42,953,582   44,255,462   43,213,936

Note:
(a) Includes the
 following share-based
 compensation amounts:
Cost of revenue         $       714  $      893   $     2,766  $     2,681
Selling, general and
 administrative
 expenses               $     2,378  $    2,612   $     7,951  $     7,349


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

                                                                 Amount in
                                                                 thousands

                         Three months ended          Nine months ended
                     -----------------------------------------------------
                     December 31,  December 31,  December 31,  December 31,
                        2009          2008          2009           2008
                     -----------------------------------------------------

  Revenue less
   repair payments
   (Non-GAAP)        $  96,772      $  99,607     $ 295,464      $ 290,831
  Add: Payments to
   repair centers       52,342         34,403       143,392        115,920
  Revenue (GAAP)     $ 149,114      $ 134,010     $ 438,856      $ 406,751


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

                                                                 Amount in
                                                                 thousands

                         Three months ended          Nine months ended
                     -----------------------------------------------------
                     December 31,  December 31,  December 31,  December 31,
                        2009          2008          2009           2008
                     -----------------------------------------------------

Cost of revenue
 (excluding share-
  based compensation
  expense)
  (Non-GAAP)         $  60,900      $  61,734     $ 183,446      $ 191,828
Add: Payments to
 repair centers         52,342         34,403       143,392        115,920
Add: Share-based
 compensation expense      714            893         2,766          2,681
Cost of revenue
 (GAAP)              $ 113,956      $  97,030     $ 329,604      $ 310,429



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

                                                                 Amount in
                                                                 thousands

                         Three months ended          Nine months ended
                     -----------------------------------------------------
                     December 31,  December 31,  December 31,  December 31,
                        2009          2008          2009           2008
                     -----------------------------------------------------

Selling, general
 and administrative
 expenses (excluding
 share-based
 compensation
 expense and related
 FBT(1)) (Non-GAAP)  $  18,206      $  16,206     $  55,038      $  50,439
Add: Share-based
 compensation expense    2,378          2,612         7,951          7,349
Add: Related FBT(1)          -             84           459            615
Selling, general and
 administrative
 expenses (GAAP)     $  20,584      $  18,902     $  63,448      $  58,403


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.


Reconciliation of operating income (non-GAAP to GAAP)

                                                                 Amount in
                                                                 thousands

                         Three months ended          Nine months ended
                     -----------------------------------------------------
                     December 31,  December 31,  December 31,  December 31,
                        2009          2008          2009           2008
                     -----------------------------------------------------

Adjusted operating
 income (excluding
 amortization of
 intangible assets,
 share-based
 compensation and
 related FBT(1))
 (Non-GAAP)          $  17,666      $  21,667     $  56,980      $  48,564
Less: Amortization
 of intangible assets    8,088          7,419        24,369         16,900

Less: Share-based
 compensation expense    3,092          3,505        10,717         10,030
Less: Related FBT(1)         -             84           459            615
Operating income
 (GAAP)              $   6,486      $  10,659     $  21,435      $  21,019


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

                                                                 Amount in
                                                                 thousands

                         Three months ended          Nine months ended
                     -----------------------------------------------------
                     December 31,  December 31,  December 31,  December 31,
                        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)          $  11,149      $  12,894     $  37,466      $  32,997
Less: Amortization
 of intangible assets    8,088          7,419        24,369         16,900
Less: Share-based
 compensation expense    3,092          3,505        10,717         10,030
Less: Related FBT(1)         -             84           459            615
Add: Loss attributable
 to noncontrolling
 interest                  374            180           844            180
Net income attributable
 to WNS (Holdings)
 Limited
 shareholders
 (GAAP)             $      343      $   2,066     $   2,765      $   5,632


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.


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

                         Three months ended          Nine months ended
                     -----------------------------------------------------
                     December 31,  December 31,  December 31,  December 31,
                        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)          $    0.26      $    0.30     $    0.87      $    0.78
Less: Adjustments
 for amortization of
 intangible assets,
 share-based
 compensation expense,
 related FBT(1) and
 loss attributable
 to noncontrolling
 interest                 0.25           0.25          0.81           0.65
Basic income per
 ADS (GAAP)          $    0.01      $    0.05     $    0.06      $    0.13


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

                         Three months ended          Nine months ended
                     -----------------------------------------------------
                     December 31,  December 31,  December 31,  December 31,
                        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)          $    0.25      $    0.30     $    0.85      $    0.76
Less: Adjustments
 for amortization of
 intangible assets,
 share-based
 compensation expense,
 related FBT(1) and
 loss attributable
 to noncontrolling
 interest                 0.24           0.25          0.79           0.63
Diluted income per
 ADS (GAAP)          $    0.01      $    0.05     $    0.06      $    0.13


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


                                                  December 31,  March 31,
                                                      2009         2009
                                                 ------------  ------------
                                                  (Unaudited)

ASSETS
Current assets:
  Cash and cash equivalents                      $     59,519  $     38,931
  Bank deposits and marketable securities                  --         8,925
  Accounts receivable, net                             61,387        61,257
  Accounts receivable -- related parties                  840            64
  Funds held for clients                                7,900         5,379
  Employee receivables                                  1,585           745
  Prepaid expenses                                      2,499         2,082
  Prepaid income taxes                                  6,763         5,768
  Deferred tax assets                                   1,219         1,743
  Other current assets                                 28,416        38,647
                                                 ============  ============
    Total current assets                              170,128       163,541
Goodwill                                               91,126        81,679
Intangible assets, net                                196,446       217,372
Property and equipment, net                            53,835        55,992
Other assets                                            9,767        11,449
Deposits                                                6,896         6,309
Deferred tax assets                                    24,980        15,584
                                                 ============  ============
TOTAL ASSETS                                     $    553,178  $    551,926
                                                 ============  ============
LIABILITIES AND EQUITY
Current liabilities:
  Account payable                                $     24,484  $     30,879
  Accounts payable -- related parties                      --            42
  Current portion of long term debt                    55,000        45,000
  Short term line of credit                                --         4,331
  Accrued employee cost                                26,580        23,754
  Deferred revenue                                      3,745         5,583
  Income taxes payable                                  4,439         3,995
  Accrued expenses                                     43,579        31,194
  Other current liabilities                            20,917        22,932
                                                 ============  ============
    Total current liabilities                         178,744       167,710
Long term debt                                        115,000       155,000
Deferred revenue                                        3,572         3,561
Other liabilities                                       4,317         1,967
Accrued pension liability                               3,439         2,570
Deferred tax liabilities                                9,299         9,946
Derivative contracts                                    8,784        23,163
                                                 ============  ============
TOTAL LIABILITIES                                     323,155       363,917
Commitments and contingencies

                                                  December 31,  March 31,
                                                      2009         2009
                                                 ------------  ------------
                                                  (Unaudited)
WNS (Holdings) Limited shareholders' equity:
  Ordinary shares, $0.16 (10 pence) par value,
   authorized: 50,000,000 shares; Issued and
   outstanding: 43,311,123 and 42,607,403
   shares, respectively                                 6,780         6,667
  Ordinary shares subscribed: 2,222 and nil
   shares, respectively                                     5            --
  Additional paid-in capital                          196,555       184,122
  Retained earnings                                    49,682        46,917
  Accumulated other comprehensive loss                (22,868)
(49,710)
                                                 ------------  ------------
    WNS (Holdings) Limited shareholders'
     equity                                           230,154       187,996
Noncontrolling interest                                  (131)           13
                                                 ------------  ------------
    Total equity                                      230,023       188,009
                                                 ------------  ------------
TOTAL LIABILITIES AND EQUITY                     $    553,178  $    551,926
                                                 ============  ============



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

                                                      Nine months ended
                                                         December 31,
                                                    ----------------------
                                                       2009       2008
Cash flows from operating activities
  Net cash provided by operating activities          $  46,725  $   40,441

Cash flows from investing activities
  Acquisitions, net of cash received                    (1,461)   (291,225)
  Facility and property cost                            (8,920)    (16,800)
  Proceeds from sale of assets, net                        576         219
  Marketable securities and deposits sold, net           9,455       7,687
                                                    ----------  ----------
  Net cash used in investing activities                   (350)   (300,119)
                                                    ----------  ----------

Cash flows from financing activities
  Proceeds from exercise of stock options                1,671       1,103
  Excess tax benefits from share-based compensation      1,222       1,544
  Proceeds from issue of shares by subsidiary to non
   controlling interest                                    698          --
  Repayment of long term debt                          (30,000)         --
  Payment of debt issuance cost                            (87)         --
  Proceeds from long term debt, net                         --     199,438
  Short term borrowing - related parties                   700          --
  Repayment of short term borrowings, net               (4,853)     (1,263)
  Principal payments under capital leases                  (58)       (182)
                                                    ----------  ----------
  Net cash (used in) provided by financing
    activities                                         (30,707)    200,640
                                                    ----------  ----------

Effect of exchange rate changes on cash and cash
 equivalents                                             4,920      (7,032)
  Net change in cash and cash equivalents               20,588     (66,070)
  Cash and cash equivalents at beginning of period      38,931     102,698
                                                    ----------  ----------
  Cash and cash equivalents at end of period        $   59,519  $   36,628
                                                    ==========  ==========

Other key information

Operating margin (Operating Income as a Percentage of Revenue) (GAAP)

                               Three months ended     Nine months ended
                               ------------------------------------------
                               December   December   December   December
                               31, 2009   31, 2008   31, 2009   31, 2008
                               ------------------------------------------
Adjusted operating margin
 (Adjusted operating income as
 a percentage of Revenue less
 repair payments) (Non-GAAP)        18.3%      21.8%      19.3%      16.7%
Operating margin (Operating
 income as a percentage of
 Revenue) (GAAP)                     4.3%       8.0%       4.9%       5.2%

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
    Email Contact