WNS Sees Revenues Rise By 29.7% In Q3; Ups Guidance
WNS (Holdings), a leading provider of global Business Process Management (BPM) services, today announced results for the fiscal 2018 third quarter ended December 31, 2017.
Revenue in the third quarter was $188.6 million, representing a 29.7% increase versus Q3 of last year and a 1.1% increase from the previous quarter. Revenue less repair payments* in the third quarter was $185.2 million, an increase of 32.4% year-over-year and 1.6% sequentially. Excluding exchange rate impacts, constant currency revenue less repair payments* in the fiscal third quarter grew 28.5% versus Q3 of last year and 2.0% sequentially. Year-over-year, fiscal Q3 revenue growth was driven by healthy organic revenue growth across key verticals and services, our acquisitions of HealthHelp and Denali which closed in March 2017 and January 2017 respectively, and favorability from currency and hedging. Sequentially, revenue growth was the result of solid performance with both new and existing clients, which helped offset a modest headwind from currency movements net of hedging.
Operating margin in the third quarter was 13.6%, as compared to 14.2% in Q3 of last year and 10.8% in the previous quarter. On a year-over-year basis, margin reductions were driven by the impact of our annual wage increases, higher share-based compensation and currency movements net of hedging. These headwinds were partially offset by improved seat utilization and increased operating leverage on higher volumes. Sequentially, margins increased as a result of lower share-based compensation, improved productivity, and currency movements net of hedging. These benefits more than offset lower seat utilization.
Third quarter adjusted operating margin* was 19.9%, versus 21.3% in Q3 of last year and 18.5% last quarter. On a year-over-year basis, adjusted operating margin* reduced primarily due to the impact of our annual wage increases and currency movements net of hedging. These reductions were partially offset by improved seat utilization and increased operating leverage from higher volumes. Sequentially, adjusted operating margin* increased as a result of improved productivity and currency movements net of hedging. These benefits more than offset the impact of our annual wage increases and lower seat utilization.
Profit in the fiscal third quarter was $26.3 million, as compared to $18.0 million in Q3 of last year and $18.9 million in the previous quarter. Adjusted net income (ANI)* in Q3 was $34.2 million, up $9.0 million as compared to Q3 of last year and up $6.4 million from the previous quarter. In addition to the explanations discussed above, fiscal third quarter profit and adjusted net income* increased by $5.2 million as a result of the net impact of one-time provisional tax adjustments associated with the 2017 US Tax Reform bill that reduced the US corporate tax rate on our deferred tax assets and deferred tax liabilities, and required us to record a charge for deemed repatriation of offshore earnings.
From a balance sheet perspective, WNS ended Q3 with $208.4 million in cash and investments and $103.1 million of debt. In the third quarter, the company generated $38.3 million in cash from operations, and had $9.0 million in capital expenditures. WNS also repurchased 220,461 ADSs, with our buyback program impacting cash by $9.5 million dollars. Days sales outstanding were 30 days, the same as reported in Q3 of last year and in the previous quarter.
“Our differentiated positioning in the market continues to resonate with clients, helping us add new logos and expand our existing relationships. In fiscal Q3, WNS delivered revenue less repair payments* of $185.2 million, representing year-over-year constant currency* growth of 29%. Growth was once again broad-based across key verticals, services, and geographies,” said Keshav Murugesh, WNS’s Chief Executive Officer. “Our clients continue to experience significant disruption in their business environments, helping generate increased interest in BPM. We believe WNS is well positioned to help clients address these challenges by combining deep domain expertise with robust capabilities in the areas of automation, analytics, and end-to-end digital solutions. We remain focused on helping our clients improve their competitive positioning, and delivering long-term sustainable value for all of our key stakeholders.”
On the guidance front, WNS has said it expects revenues after adjusting for repair payments to centers to be between $720 million and $726 million, up from $578.4 million in fiscal 2017. This assumes an average GBP to USD exchange rate of 1.34 for the remainder of fiscal 2018. Adjusted net income is expected to range between $114 million and $116 million versus $92.2 million in fiscal 2017. This assumes an average USD to INR exchange rate of 64.0 for the remainder of fiscal 2018.
