WNS Announces Fiscal 2021 Second Quarter Earnings, Provides Full Year Guidance

New York, United States & Mumbai, Maharashtra, India: 

WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of global Business Process Management (BPM) services, today announced results for the fiscal 2021 second quarter ended September 30, 2020.

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 $222.6 million, representing a 1.6% decrease versus Q2 of last year and a 7.1% increase from the previous quarter. Revenue less repair payments* in the second quarter was $214.4 million, a decrease of 2.9% year-over-year and an increase of 6.4% sequentially. Excluding exchange rate impacts, constant currency revenue less repair payments* in the fiscal second quarter was down 2.8% versus Q2 of last year and up 4.2% sequentially. Year-over-year, fiscal Q2 revenue was adversely impacted by the COVID-19 pandemic including lower volume requirements from certain clients and service delivery constraints resulting from the transition to a “work from home” delivery model.  These headwinds more than offset the year-over-year growth from new client additions and the expansion of existing relationships.  Sequentially, revenue improvement was driven by improved service delivery capability, client expansions, and currency movements net of hedging which partially offset lower volumes with certain clients relating to COVID-19.

Profit in the fiscal second quarter was $29.2 million, as compared to $28.7 million in Q2 of last year and $14.8 million in the previous quarter. Year-over-year, profit improvement was the result of lower share-based compensation expense, a one-time reversal of our corporate leave provision, reductions in travel, facility-related and discretionary expenditures, and favorable currency movements net of hedging.  The leave provision reversal contributed $4.0 million to Q2 pre-tax profit, and was the result of a policy change which removed employee’s ability to carryforward unused leave for fiscal 2021. These benefits more than offset headwinds from the COVID-19 pandemic including revenue reductions, employee carrying costs, and increased business continuity costs. In addition, the company recorded a higher effective tax rate versus last year, driven by the geographic mix of profit. Sequentially, Q2 profit increased as a result of revenue improvement, lower headcount, reduced share-based compensation expense, the one-time reversal of our corporate leave provision, decreased business continuity costs, and a lower effective tax rate.  These benefits more than offset the headwinds from hedging losses net of currency movements.

Adjusted net income (ANI)* in Q2 was $37.9 million, down $2.7 million as compared to Q2 of last year and up $11.8 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 costs and associated tax impacts, which are excluded from ANI*.

From a balance sheet perspective, WNS ended Q2 with $366.5 million in cash and investments and $25.1 million of debt. In the second quarter, the company generated $56.7 million in cash from operations and incurred $6.5 million in capital expenditures. The company also made scheduled debt payments of $8.4 million. Second quarter days sales outstanding were 34 days, as compared to 29 days reported in Q2 of last year and 39 days in the previous quarter.  The year-over-year increase in DSO is the result of payment delays and payment term concessions relating to COVID-19.

“In the fiscal second quarter, WNS made solid progress growing our top line, adjusting our cost structure, and ensuring our ability to service clients’ requirements in a difficult business environment,” said Keshav Murugesh, WNS’s Chief Executive Officer. “As a result we were able to post solid sequential revenue growth and healthy margins.  We are also pleased that visibility has now improved to the point where the company is comfortable providing annual guidance. Looking forward, while we are seeing some delays in converting larger signed deals into revenue, we are pleased with the overall health of the sales pipeline including new opportunity additions, progress of deals through the pipeline, and contract signings for both new logos and existing client expansions. While we continue to expect some volatility in our business over the next few quarters, we remain confident in our financial strength, differentiated capabilities, underlying business momentum, and proven ability to execute.  WNS will continue to focus on ensuring the health and safety of our global employees, securely servicing the needs of our clients, and investing for the expanding BPM opportunity.”

COVID-19
The COVID-19 pandemic is having a significant impact on the global economy, our clients’ businesses, and on WNS’s operations, financials, and visibility. Revenue continues to be pressured by lower client volumes, delays in new business ramps, client concessions, and facility lockdowns which impact service delivery.  WNS is actively working to understand and manage our clients’ changing requirements, adapt our service delivery models, ensure data security, and manage costs. The company is now able to deliver 98% of our clients’ current requirements, as compared to 95% as reported on July 16, 2020. Impacts to our full year financial performance will be a function of how long the COVID-19 pandemic lasts on a global basis, and how long it takes our clients’ businesses to stabilize and recover.

Fiscal 2021 Guidance
WNS is providing guidance for the fiscal year ending March 31, 2021 as follows:

• Revenue less repair payments* is expected to be between $830 million and $854 million, down from $896 million in fiscal 2020. Guidance assumes an average GBP to USD exchange rate of 1.29 for the remainder of fiscal 2021.
• ANI* is expected to range between $121 million and $129 million versus $161 million in fiscal 2020.  Guidance assumes an average USD to INR exchange rate of 73.50 for the remainder of fiscal 2021.
• Based on a diluted share count of 52.0 million shares, the company expects adjusted diluted earnings* per ADS to be in the range of $2.33 to $2.48 versus $3.10 in fiscal 2020.