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WNS Announces Third Quarter Fiscal 2010 Earnings; Reaffirms Net Revenue and Adjusted Net Income Guidance for Fiscal 2010
NEW YORK, NY and MUMBAI, INDIA, Jan 21, 2010 (MARKETWIRE via COMTEX) -- 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:
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
SOURCE: WNS Global Services