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WNS Reports Second Quarter Net Loss of $10.5 million
Thursday November 15 9:00 AM
"We were able to deliver over 35% quarter-on-quarter growth in revenue less repair payments. Our sales pipeline is at its strongest for the year and we have been particularly successful with expanding existing client relationships during the quarter" said Neeraj Bhargava, Group Chief Executive Officer. "Further, our organization-wide focus on reducing employee attrition has begun to show encouraging results."
WNS recorded a basic loss per share of 25 cents due to a one-time impairment charge of $15.5 million in respect of goodwill and intangible assets and costs related to the continued redeployment of resources associated with the bankruptcy of First Magnus Financial Corporation or First Magnus. Basic income per share (excluding share-based compensation and related fringe benefit taxes, amortization and impairment of goodwill and intangible assets) was 19 cents for the quarter.
"We continue to minimize the impact of the loss of First Magnus as a client through initiatives such as a rapid redeployment of employees, the deferral of planned infrastructure expansion and a reduction in discretionary costs," said Mr. Bhargava. "These factors have collectively enabled us to perform better than we had expected for the quarter."
Financial Highlights: Fiscal Second Quarter Ended September 30, 2007
-- Quarterly revenue of $115.6 million, up 33.5% from the corresponding quarter last year.
-- Quarterly revenue less repair payments of $71.7 million, up 35.4% from the corresponding quarter last year.
-- Quarterly net loss of $10.5 million, down from net income of $6.0 million for the corresponding quarter last year.
-- Quarterly net income (excluding share-based compensation and related fringe benefit taxes, amortization and impairment of goodwill and intangible assets) of $8.0 million, up 8.4% from the corresponding quarter last year.
-- Quarterly basic loss per share of 25 cents, down from basic income per share of 16 cents for the corresponding quarter last year.
-- Quarterly basic income per share (excluding share-based compensation and related fringe benefit taxes, amortization and impairment of goodwill and intangible assets) of 19 cents, compared with 19 cents for the corresponding quarter last year.
-- Cash flows from operating activities of $15.5 million for the six months ended September 30, 2007, up from $7.9 million for the six months ended September 30, 2006
Reconciliations of non-GAAP financial measures to GAAP operating results are included at the end of this release.
Fiscal 2008 Guidance
WNS reiterates its October 3, 2007 guidance for fiscal 2008:
-- Revenue less repair payments is expected to be between $290 million and $295 million
-- Net income (excluding share-based compensation and related fringe benefit taxes, amortization and impairment of goodwill and intangible assets) is expected to be between $33.0 million to $ 35.0 million.
"We are confident of achieving our projected profitability for the year despite pressure from currency appreciation and the loss of First Magnus as a client," said Mr. Bhargava.
Conference Call
WNS will host a conference call on November 15, at 8 a.m. (EST) to discuss the company's quarterly results. To participate, callers can dial 1-800-295-3991 from within the U.S. or +1-617-614-3924 from any other country. The participant passcode is 1352836. A replay will be made available online at www.wnsgs.com for a period of three months beginning two hours after the end of the call.
About WNS
WNS is a leading provider of offshore business process outsourcing, or BPO, services. We provide comprehensive transactional, analytic and customer care services that are underpinned by expertise in our target industry sectors. We transfer the execution of the business processes of our clients, which are typically companies located in Europe and North America, to our global delivery centers. We provide high quality execution of client processes, monitor these processes against multiple performance metrics, and improve them on a continuous basis.
Our ADSs are listed on the New York Stock Exchange. For more information, please visit our website at www.wnsgs.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, 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.
The amounts invoiced to WNS clients for payments made by WNS to third-party repair centers are reported as revenue. As the company wholly subcontracts the repairs to the repair centers, it evaluates its financial performance based on revenue less repair payments to third party repair centers, which is a non-GAAP measure.
WNS believes revenue less repair payments reflects more accurately the value addition of the business process services it directly provides to its clients. 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 U.S. GAAP. WNS revenue less repair payments may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation.
Safe Harbor Statement under the provisions of the United States Private Securities Litigation Reform Act of 1995
This news release contains forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those that may be projected by these forward looking statements. These risks and uncertainties include but are not limited to a slowdown in the U.S. and Indian economies and in the sectors in which our clients are based, a slowdown in the BPO and IT sectors world-wide, competition, the success or failure of our past and future acquisitions, attracting, recruiting and retaining highly skilled employees, technology, legal and regulatory policy as well as other risks detailed in our reports filed with the U.S. Securities and Exchange Commission. These filings are available at www.sec.gov. We may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. You are cautioned not to place undue reliance on these forward-looking statements, which reflect management's current analysis of future events. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except share and per share data)
Three months ended Six months ended
September 30, September 30,
--------------------------------------
2007 2006 2007 2006
--------------------------------------
Revenue
Third parties $114,679 $84,856 $226,487 $133,905
Related parties 899 1,734 1,614 5,711
--------------------------------------
115,578 86,590 228,101 139,616
Cost of revenue 92,468 67,337 182,674 104,767
--------------------------------------
Gross profit 23,110 19,253 45,427 34,849
Operating expenses
Selling, general and
administrative expenses 18,782 12,076 33,504 22,207
Amortization of intangible
assets 479 480 1,308 951
Impairment of goodwill and
intangible assets 15,465 - 15,465 -
--------------------------------------
Operating (loss) income (11,616) 6,697 (4,850) 11,691
Other income (expense), net 2,222 (48) 4,908 (81)
Interest expense - (68) - (101)
--------------------------------------
(Loss) income before income
taxes (9,394) 6,581 58 11,509
Provision for income taxes (1,060) (557) (2,073) (892)
--------------------------------------
Net (loss) income $(10,454) $6,024 $(2,015) $10,617
======================================
Basic (loss) income per share $(0.25) $0.16 $(0.05) $0.29
Diluted (loss) income per share $(0.25) $0.15 $(0.05) $0.27
Non-GAAP measure note:
In addition to its reported operating results in accordance with U.S. generally accepted accounting principles (US GAAP). WNS has included in the table below non-GAAP operating measures that the Securities and Exchange Commission defines as "non-GAAP financial measures". Management believes that such non-GAAP financial measures, when read in conjunction with the company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the company's results. The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated.
Reconciliation of revenue less repair payments (non- Amount in
GAAP) to revenue (GAAP) thousands
Three months ended Six months ended
----------------------------------------------
September September September September 30,
30, 2007 30, 2006 30, 2007 2006
----------------------------------------------
----------------------------------------------
Revenue less repair
payments (Non-GAAP) 71,736 52,964 141,508 98,473
Add: Payments to repair
centers 43,843 33,626 86,593 41,143
Revenue (GAAP) 115,579 86,590 228,101 139,616
Amount in
Reconciliation of cost of revenue (non-GAAP to GAAP) thousands
Three months ended Six months ended
----------------------------------------
September September September September
30, 2007 30, 2006 30, 2007 30, 2006
----------------------------------------
----------------------------------------
Cost of revenue (Non-GAAP) 48,625 33,711 96,081 63,624
Add: Payments to repair
centers 43,843 33,626 86,593 41,143
Cost of revenue (GAAP) 92,469 67,337 182,674 104,767
Reconciliation of selling, general and administrative Amount in
expense (non-GAAP to GAAP) thousands
Three months ended Six months ended
----------------------------------------
September September September September
30, 2007 30, 2006 30, 2007 30, 2006
----------------------------------------
----------------------------------------
Selling, general and
administrative expenses
(excluding share-based
compensation expense and
related fringe benefit
taxes) (Non-GAAP) 16,981 11,319 30,713 21,238
Add: Share-based compensation
expense 1,175 757 2,164 969
Add: Fringe benefit taxes on
options exercised 627 - 627 -
Selling, general and
administrative expenses
(GAAP) 18,783 12,076 33,504 22,207
Amount in
Reconciliation of operating income (non-GAAP to GAAP) thousands
Three months ended Six months ended
----------------------------------------
September September September September
30, 2007 30, 2006 30, 2007 30, 2006
----------------------------------------
----------------------------------------
Operating income (excluding
share-based compensation and
related fringe benefit
taxes, amortization and
impairment of goodwill and
intangible assets) (Non-
GAAP) 6,873 8,087 15,972 13,764
Less: Share-based
compensation expense 1,918 910 3,423 1,122
Less: Amortization of
intangible assets 479 480 1,308 951
Less: Impairment of goodwill
and intangible assets 15,465 - 15,465 -
Less: Fringe benefit taxes on
share-based compensation 627 - 627 -
Operating (loss) income
(GAAP) (11,616) 6,697 (4,850) 11,691
Amount in
Reconciliation of net income (non-GAAP to GAAP) thousands
Three months ended Six months ended
----------------------------------------
September September September September
30, 2007 30, 2006 30, 2007 30, 2006
----------------------------------------
----------------------------------------
Net income (excluding share-
based compensation and
related fringe benefit
taxes, amortization and
impairment of goodwill and
intangible assets) (Non-
GAAP) 8,035 7,414 18,807 12,690
Less: Share-based
compensation expense 1,918 910 3,423 1,122
Less: Amortization of
intangible assets 479 480 1,308 951
Less: Impairment of goodwill
and intangible assets 15,465 - 15,465 -
Less: Fringe benefit taxes on
options exercised 627 - 627 -
Net income (GAAP) (10,454) 6,024 (2,015) 10,617
Reconciliation of basic income per ADS (non-GAAP to GAAP)
Three months ended Six months ended
---------------------------------------
September September September September
30, 2007 30, 2006 30, 2007 30, 2006
---------------------------------------
---------------------------------------
Basic income per ADS
(excluding share-based
compensation and related
fringe benefit taxes,
amortization and impairment
of goodwill and intangible
assets) (Non-GAAP) 0.19 0.19 0.45 0.34
Less: Adjustments for share-
based compensation and
related fringe benefit taxes,
amortization and impairment
of goodwill and intangible
assets 0.44 0.03 0.50 0.05
Basic income per ADS (GAAP) (0.25) 0.16 (0.05) 0.29
Reconciliation of diluted income per ADS (non-GAAP to GAAP)
Three months ended Six months ended
---------------------------------------
September September September September
30, 2007 30, 2006 30, 2007 30, 2006
---------------------------------------
---------------------------------------
Diluted income per ADS
(excluding share-based
compensation and related
fringe benefit taxes,
amortization and impairment
of goodwill and intangible
assets) (Non-GAAP) 0.19 0.18 0.44 0.32
Less: Adjustments for share-
based compensation and
related fringe benefit taxes,
amortization and impairment
of goodwill and intangible
assets 0.44 0.03 0.49 0.05
Diluted income/(loss) per ADS
(GAAP) (0.25) 0.15 (0.05) 0.27
WNS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
As of As of
September 30, March 31,
2007 2007
(Unaudited)
--------------------------
ASSETS
Current assets
Cash and cash equivalents $96,615 $112,340
Bank deposits - 12,000
Accounts receivable, net of allowance of
$1,741 and $364, respectively 47,356 40,592
Funds held for clients 6,097 6,589
Employee receivable 1,452 1,289
Prepaid expenses 3,637 2,162
Prepaid income taxes 2,647 3,225
Deferred tax assets 744 701
Other current assets 7,455 4,524
--------------------------
Total current assets 166,003 183,422
Goodwill 54,279 37,356
Intangible assets, net 9,172 7,091
Property and equipment, net 53,016 41,830
Deposits 7,398 3,081
Deferred tax assets 7,037 3,101
--------------------------
TOTAL ASSETS $296,905 $275,881
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $18,180 $18,751
Accrued employee costs 20,525 18,492
Deferred revenue - current 7,319 9,827
Income taxes payable 2,139 88
Obligations under capital leases -
current 6 13
Deferred tax liabilities 225 -
Other current liabilities 24,926 16,239
--------------------------
Total current liabilities 73,320 63,410
Deferred revenue - non current 4,169 5,051
Deferred rent 858 1,098
Accrued pension liability 1,211 771
Deferred tax liabilities - non current 2,280 23
Shareholders' equity:
Ordinary shares, $0.16 (GBP 0.10) par
value; Authorized 50,000,000 shares
Issued and outstanding: 42,066,106 and
41,842,879 shares, respectively 6,564 6,519
Additional paid-in-capital 160,792 154,952
Ordinary shares subscribed, nil and
30,022 shares, respectively - 137
Retained earnings 27,324 30,685
Accumulated other comprehensive income 20,387 13,235
--------------------------
Total shareholders' equity 215,067 205,528
--------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $296,905 $275,881
==========================
Contact:
Investors: WNS (Holdings) Limited Jay Venkateswaran, +1 212-599-6960 Senior VP -- Investor Relations ir@wnsgs.com or Media: Gutenberg Communications U.S. Mike Sherrill, +1 212-239-8741 msherrill@gutenbergpr.com or India: Pranav Kumar, +91 11 41324969 pranav@gutenbergpr.com
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