WNS Announces Fiscal 2019 Third 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 2019 third quarter ended December 31, 2018
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Revenue in the third quarter was $199.7 million, representing a 5.9% increase versus Q3 of last year and a 0.3% increase from the previous quarter. Revenue less repair payments* in the third quarter was $195.9 million, an increase of 5.8% year-over-year and a 0.2% increase sequentially. Excluding exchange rate impacts, constant currency revenue less repair payments* in the fiscal third quarter grew 9.1% versus Q3 of last year and 0.1% sequentially. Year-over-year, fiscal Q3 revenue improvement was driven by healthy organic growth across key verticals, services, and geographies, which more than offset headwinds from currency movements and hedging losses. Sequentially, organic revenue growth was largely offset by seasonality in our travel business.
Operating margin in the third quarter was 16.7%, as compared to 13.6% in Q3 of last year and 14.5% in the previous quarter. On a year-over-year basis, margin improvement was the result of increased productivity, favorable currency movements net of hedging, and operating leverage on higher volumes. These benefits more than offset the impact of our annual wage increases. Sequentially, margins improved due to increased productivity and favorable currency movements net of hedging.
Third quarter adjusted operating margin* was 23.0%, versus 19.9% in Q3 of last year and 21.0% last quarter. Explanations for the adjusted operating margin* movements on a year-over-year and sequential basis are largely the same as described for GAAP operating margins above.
Profit in the fiscal third quarter was $28.6 million, as compared to $26.3 million in Q3 of last year and $24.8 million in the previous quarter. Adjusted net income (ANI)* in Q3 was $38.0 million, up $3.8 million as compared to Q3 of last year and up $4.3 million from the previous quarter. In addition to the operating margin favorability noted previously, year-over-year profit and ANI* were further increased by higher interest income and lower debt expense. These items were partially offset by a higher effective tax rate this quarter, as Q3 of last year benefitted $5.2 million from a net provision for tax adjustments associated with the 2017 US Tax Reform bill. The amount was finalized in the third quarter of this fiscal year, and resulted in an additional favorable tax adjustment of $0.4 million. Sequentially, profit and ANI* improved as a result of operating margin favorability, higher interest income, and a lower effective tax rate resulting from the $0.4 million favorable tax adjustment associated with the 2017 US Tax Reform bill and the geographic mix of profits.
From a balance sheet perspective, WNS ended Q3 with $215.2 million in cash and investments and $75.4 million of debt. In the third quarter, the company generated $59.5 million in cash from operations, and incurred $4.7 million in capital expenditures. Third quarter days sales outstanding were 32 days, as compared to 30 days reported in Q3 of last year and 35 days in the previous quarter.
“In the fiscal third quarter, WNS continued to deliver solid financial performance across revenue, margins, profits and cash flow. Third quarter revenue less repair payments* grew 6% year-over-year, or 9% on an organic, constant currency* basis, and adjusted operating margin* expanded to 23%. Adjusted diluted earnings* per ADS increased 12% versus the fiscal third quarter of last year, and cash from operations in the third quarter was the highest in the company’s history,” said Keshav Murugesh, WNS’s Chief Executive Officer. “We will continue to invest in our business to drive differentiated positioning in a healthy BPM marketplace, and the company remains committed to “co-creating” with our clients to deliver long-term sustainable business value for all of our key stakeholders.”
Fiscal 2019 Guidance
WNS is updating guidance for the fiscal year ending March 31, 2019 as follows:
- Revenue less repair payments* is expected to be between $787 million and $799 million, up from $741.0 million in fiscal 2018. This assumes an average GBP to USD exchange rate of 1.27 for the remainder of fiscal 2019.
- ANI* is expected to range between $137 million and $141 million versus $118.4 million in fiscal 2018. This assumes an average USD to INR exchange rate of 70.00 for the remainder of fiscal 2019.
- Based on a diluted share count of 52.2 million shares, the company expects adjusted diluted earnings* per ADS to be in the range of $2.62 to $2.70 versus $2.24 in fiscal 2018.
“The company has updated our forecast for fiscal 2019 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 6% to 8%, or 9% to 11% on a constant currency* basis. We currently have over 99% visibility to the midpoint of the range.”