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

WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of global Business Process Management (BPM) services, today announced results for the fiscal 2020 second quarter ended September 30, 2019.

Highlights – Fiscal 2020 Second Quarter:

GAAP Financials

· Revenue of $226.2 million, up 13.6% from $199.1 million in Q2 of last year and up 5.4% from $214.6 million last quarter

· Profit of $28.7 million, compared to $24.8 million in Q2 of last year and $27.6 million last quarter

· Diluted earnings per ADS of $0.56, compared to $0.48 in Q2 of last year and $0.53 last quarter

Non-GAAP Financial Measures*

· Revenue less repair payments of $220.7 million, up 12.9% from $195.5 million in Q2 of last year and up 4.3% from $211.6 million last quarter

· Adjusted Net Income (ANI) of $40.6 million, compared to $33.7 million in Q2 of last year and $37.6 million last quarter

· Adjusted diluted earnings per ADS of $0.79, compared to $0.65 in Q2 of last year and $0.72 last quarter

Other Metrics

· Added 6 new clients in the quarter, expanded 9 existing relationships

· Days sales outstanding (DSO) at 29 days

· Global headcount of 42,602 as of September 30, 2019

Reconciliations of the non-GAAP financial measures discussed below to our GAAP operating results are included at the end of this release. See also "About Non-GAAP Financial Measures."

Revenue in the second quarter was $226.2 million, representing a 13.6% increase versus Q2 of last year and a 5.4% increase from the previous quarter. Revenue less repair payments* in the second quarter was $220.7 million, an increase of 12.9% year-over-year and a 4.3% increase sequentially. Excluding exchange rate impacts, constant currency revenue less repair payments* in the fiscal second quarter grew 12.8% versus Q2 of last year and 4.8% sequentially. Year-over-year, fiscal Q2 revenue improvement was broad-based across several key verticals, services, and geographies. Sequentially, revenue strength was driven by healthy growth with both new and existing clients which more than offset unfavorable currency impacts net of hedging.

Operating margin in the second quarter was 16.1%, as compared to 14.5% in Q2 of last year and 16.6% in the previous quarter. On a year-over-year basis, margin improvement was the result of increased productivity, the impact of IFRS 16 lease accounting, operating leverage on higher volumes, and hedging gains net of currency movements. These benefits more than offset higher share-based compensation expense and the impact of our annual wage increases. Sequentially, margins declined as higher share-based compensation expense more than offset increased productivity, hedging gains net of currency movements, and operating leverage on higher volumes.

Second quarter adjusted operating margin* was 23.5%, versus 21.0% in Q2 of last year and 22.8% last quarter. Explanations for the adjusted operating margin* movements on a year-over-year and sequential basis are the same as described for GAAP operating margins above, with the exception of share-based compensation which has no impact on adjusted operating margin*.

Profit in the fiscal second quarter was $28.7 million, as compared to $24.8 million in Q2 of last year and $27.6 million in the previous quarter. Year-over-year, profit favorability was driven by revenue growth, higher operating margin, and a lower effective tax rate which more than offset the impact of IFRS 16 and higher share-based compensation expense. Sequentially, profit increased as revenue growth and a lower effective tax rate more than offset lower operating margins including higher share-based compensation expense. Adjusted net income (ANI)* in Q2 was $40.6 million, up $6.9 million as compared to Q2 of last year and up $3.0 million from the previous quarter. Explanations for the ANI* movements on a year-over-year and sequential basis are the same as described for GAAP profit above with the exception of share-based compensation and associated tax impacts, which are excluded from ANI*.

From a balance sheet perspective, WNS ended Q2 with $223.8 million in cash and investments and $47.5 million of debt. In the second quarter, the company generated $45.5 million in cash from operations and incurred $7.6 million in capital expenditures. In Q2, WNS repurchased 296,478 ADSs at an average price of $58.95 per ADS, which impacted Q2 cash by $15.7 million dollars. The company also made scheduled debt payments of $14.1 million. Second quarter days sales outstanding were 29 days, as compared to 35 days reported in Q2 of last year and 30 days in the previous quarter.

"Our financial performance continues to reinforce WNS's differentiated positioning in the BPM space, and our ability to execute. In the fiscal second quarter, revenue less repair payments* grew 13% year-over-year on both a reported and constant currency* basis. The company also delivered year-over-year margin expansion and 22% growth in adjusted diluted earnings per share," said Keshav Murugesh, WNS's Chief Executive Officer. "We continue to be confident with the overall health of the BPM marketplace, and WNS's ability to help clients "co-create" solutions to meet their rapidly evolving business requirements. The company remains focused on the long-term BPM business opportunity, and on driving enhanced value for our clients, shareholders, employees, and the communities in which we live and work."

Fiscal 2020 Guidance

WNS is updating guidance for the fiscal year ending March 31, 2020 as follows:

• Revenue less repair payments* is expected to be between $861 million and $892 million, up from $794.0 million in fiscal 2019. This assumes an average GBP to USD exchange rate of 1.23 for the remainder of fiscal 2020.

• ANI* is expected to range between $152 million and $160 million versus $140.4 million in fiscal 2019. This assumes an average USD to INR exchange rate of 71.00 for the remainder of fiscal 2020.

• Based on a diluted share count of 51.9 million shares, the company expects adjusted diluted earnings* per ADS to be in the range of $2.93 to $3.08 versus $2.69 in fiscal 2019.

"The company has updated our forecast for fiscal 2020 based on current visibility levels and exchange rates," said Sanjay Puria, WNS's Chief Financial Officer. "Our guidance for the year reflects growth in revenue less repair payments* of 8% to 12%, or 10% to 14% on a constant currency* basis. We currently have over 98% visibility to the midpoint of the range."

Conference Call

WNS will host a conference call on October 17, 2019 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 7391577. A replay will be available for one week following the call at +1-855-859-2056; international dial-in +1-404-537-3406; passcode 7391577, as well as on the WNS website, www.wns.com, beginning two hours after the end of the call.