WNS Announces Fiscal 2019 Fourth Quarter and Full Year Earnings, Provides Guidance for Fiscal 2020

WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of global
Business Process Management (BPM) services, today announced results for
the fiscal 2019 fourth quarter and full year ended March 31, 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 fourth quarter was $210.5 million, representing a 3.8%
increase versus Q4 of last year and a 5.4% increase from the previous
quarter. Revenue less repair payments* in the fourth quarter was $206.6
million, an increase of 4.2% year-over-year and a 5.5% increase
sequentially. Excluding exchange rate impacts, constant currency revenue
less repair payments* in the fiscal fourth quarter grew 9.1% versus Q4
of last year and 5.0% sequentially. Year-over-year, fiscal Q4 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, revenue growth was
the result of broad-based revenue strength and favorability from
currency and hedging.

Operating margin in the fourth quarter was 15.3%, as compared to 14.5%
in Q4 of last year and 16.7% in the previous quarter. On a
year-over-year basis, margin improvement was the result of favorable
currency movements net of hedging, operating leverage on higher volumes,
and increased productivity. These benefits more than offset the impact
of our annual wage increases. Sequentially, margins reduced due to
currency movements and hedging and lower productivity associated with Q4
hiring. These headwinds more than offset lower share-based compensation
expense and operating leverage on higher volumes.

Fourth quarter adjusted operating margin* was 20.8%, versus 20.4% in Q4
of last year and 23.0% 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.

Profit in the fiscal fourth quarter was $29.7 million, as compared to
$24.5 million in Q4 of last year and $28.6 million in the previous
quarter. Adjusted net income (ANI)* in Q4 was $37.8 million, up $4.9
million as compared to Q4 of last year and down $0.1 million from the
previous quarter. In addition to the operating margin favorability noted
previously, year-over-year profit and ANI* were further increased by a
lower effective tax rate, higher interest income, and lower debt
expense. Sequentially, profit increased as a lower effective tax rate,
higher interest income, and lower debt expense more than offset the
impact of lower operating margin. ANI* declined sequentially, as the
favorable quarter-over-quarter impact of lower share-based compensation
expense is excluded from the ANI* calculation.

From a balance sheet perspective, WNS ended Q4 with $235.8 million in
cash and investments and $61.4 million of debt. In the fourth quarter,
the company generated $44.9 million in cash from operations, and
incurred $7.7 million in capital expenditures. Fourth quarter days sales
outstanding were 30 days, as compared to 30 days reported in Q4 of last
year and 32 days in the previous quarter.

“In the fiscal fourth quarter, WNS once again delivered solid
operational and financial performance. Q4 revenue less repair payments*
grew 4% year-over-year, or 9% on a constant currency* basis, and we
added 8 new logos during the quarter. Our full year results demonstrate
WNS’s differentiated positioning in the BPM marketplace and our ability
to execute. For fiscal 2019, WNS grew organic, constant currency*
revenue by 10%, delivered adjusted operating margin of 21%, grew
adjusted diluted earnings* per ADS by 20% to $2.69, and increased our
net cash position by $42.3 million,” said Keshav Murugesh, WNS’s Chief
Executive Officer. “As we enter fiscal 2020, the BPM marketplace remains
healthy with business disruption driving transformational opportunities.
We believe WNS’s deep domain expertise, combined with our capabilities
across technology and automation, analytics, and process, uniquely
positions us to help clients better compete. We remain focused on
investing for the future, and to ‘co-create’ with our clients to deliver
long-term sustainable business value for all of our key stakeholders.”

Fiscal 2020 Guidance

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

• Revenue less repair payments* is expected to be between $854 million
  and $900 million, up from $794.0 million in fiscal 2019. This assumes
  an average GBP to USD exchange rate of 1.31 in fiscal 2020 versus 1.31
  in fiscal 2019.
• ANI* is expected to range between $139 million and $151 million versus
  $140.4 million in fiscal 2019. This assumes an average USD to INR
  exchange rate of 69.00 in fiscal 2020 versus 69.92 in fiscal 2019.
• Fiscal 2020 guidance includes an anticipated reduction in adjusted
  diluted earnings* per ADS of $0.05 as a result of IFRS 16 (as
  discussed below).
• Based on a diluted share count of 52.1 million shares, the company
  expects adjusted diluted earnings* per ADS to be in the range of $2.67
  to $2.90 versus $2.69 in fiscal 2019.

“The company has provided our initial 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 13%, or 7% to 13% on a constant
currency* basis. Consistent with our guidance methodology in previous
years, we enter fiscal 2020 with 90% visibility to the midpoint of the
range. For the year, we expect capital expenditures of approximately $37
million.”

IFRS 16:

As of April 1, 2019, WNS adopted the new IFRS standard on lease
accounting (IFRS 16 ‘Leases’). The standard requires a lessee to
recognize a right of use asset and lease liabilities for all leases,
initially measured at the present value of-future lease payments. It
replaces the prior accounting policy of a straight-line lease expense
model with a higher interest accruing at a higher rate in earlier years
and decreasing over the lease term while depreciation is on a
straight-line basis. Under the IFRS 16 adoption method chosen by WNS,
prior years are not restated to conform to the new policies.
Consequently, the year-over-year changes in profit, assets and
liabilities, and cash flows in fiscal 2020 will be impacted by the new
policies.

The actual impact of IFRS 16 on our profit depends not only on the lease
agreements in effect at the time of adoption but also on new lease
agreements entered into or terminated in fiscal 2020. Based on WNS’s
current lease volumes, we expect the impact of IFRS 16 on our fiscal
2020 profit to be as follows:

• Adjusted gross profit* and adjusted operating margin* percentages are
  expected to increase by 120 to 130 basis points.
• Finance expense as a percentage of revenue is expected to
  increase by 160 to 170 basis points.
• ANI* is expected to reduce by $2.8 million or 30 basis points, which
  translates to a reduction in adjusted diluted earnings* per ADS of
  $0.05.

Conference Call

WNS will host a conference call on April 25, 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 8167019. A replay will be
available for one week following the call at +1-855-859-2056;
international dial-in +1-404-537-3406; passcode 8167019, as well as on
the WNS website, www.wns.com,
beginning two hours after the end of the call.

About WNS

WNS (Holdings) Limited (NYSE: WNS) is a leading Business Process
Management (BPM) company. WNS combines deep industry knowledge with
technology, analytics and process expertise to co-create innovative,
digitally led transformational solutions with over 350 clients across
various industries. WNS delivers an entire spectrum of BPM solutions
including industry-specific offerings, customer interaction services,
finance and accounting, human resources, procurement, and research and
analytics to re-imagine the digital future of businesses. As of March
31, 2019, WNS had 39,898 professionals across 59 delivery centers
worldwide including facilities in China, Costa Rica, India, the
Philippines, Poland, Romania, South Africa, Spain, Sri Lanka, Turkey,
the United Kingdom, and the United States. For more information, visit www.wns.com.

Safe Harbor Statement

This release contains forward-looking statements, as defined in the safe
harbor provisions of the US Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on our current
expectations and assumptions about our Company and our industry.
Generally, these forward-looking statements may be identified by the use
of terminology such as “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “will,” “seek,” “should” and similar expressions. These
statements include, among other things, the discussions of our strategic
initiatives and the expected resulting benefits, our growth
opportunities, industry environment, expectations concerning our future
financial performance and growth potential, including our fiscal 2020
guidance and the expected impact of IFRS 16 on our profit, future
profitability, and expected foreign currency exchange rates.
Forward-looking statements inherently involve risks and uncertainties
that could cause actual results to differ materially from those
expressed or implied by such statements. Such risks and uncertainties
include but are not limited to worldwide economic and business
conditions; political or economic instability in the jurisdictions where
we have operations; our dependence on a limited number of clients in a
limited number of industries; regulatory, legislative and judicial
developments; increasing competition in the BPM industry; technological
innovation; telecommunications or technology disruptions; our ability to
attract and retain clients; our liability arising from fraud or
unauthorized disclosure of sensitive or confidential client and customer
data; negative public reaction in the US or the UK to offshore
outsourcing; our ability to expand our business or effectively manage
growth; our ability to hire and retain enough sufficiently trained
employees to support our operations; the effects of our different
pricing strategies or those of our competitors; our ability to
successfully consummate, integrate and achieve accretive benefits from
our strategic acquisitions, and to successfully grow our revenue and
expand our service offerings and market share; and future regulatory
actions and conditions in our operating areas. These and other factors
are more fully discussed in our most recent annual report on Form 20-F
and subsequent reports on Form 6-K filed with or furnished to the US
Securities and Exchange Commission (SEC) which are available at www.sec.gov.
We caution you not to place undue reliance on any forward-looking
statements. Except as required by law, we do not undertake to update any
forward-looking statements to reflect future events or circumstances.

References to “$” and “USD” refer to the United States dollars, the
legal currency of the United States; references to “GBP” refer to the
British pound, the legal currency of Britain; and references to “INR”
refer to Indian Rupees, the legal currency of India. References to GAAP
refers to International Financial Reporting Standards, as issued by the
International Accounting Standards Board (IFRS).

About Non-GAAP Financial Measures

The financial information in this release includes certain non-GAAP
financial measures that we believe more accurately reflect our core
operating performance. Reconciliations of these non-GAAP financial
measures to our GAAP operating results are included below. A more
detailed discussion of our GAAP results is contained in “Part I – Item
5. Operating and Financial Review and Prospects” in our annual report on
Form 20-F filed with the SEC on May 16, 2018.

For financial statement reporting purposes, WNS has two reportable
segments: WNS Global BPM and WNS Auto Claims BPM. Revenue less repair
payments is a non-GAAP financial measure that is calculated as (a)
revenue less (b) in the auto claims business, payments to repair centers
for “fault” repair cases where WNS acts as the principal in its dealings
with the third party repair centers and its clients. WNS believes that
revenue less repair payments for “fault” repairs reflects more
accurately the value addition of the business process management
services that it directly provides to its clients. For more details,
please see the discussion in “Part I – Item 5. Operating and Financial
Review and Prospects – Overview” in our annual report on Form 20-F filed
with the SEC on May 16, 2018.

Constant currency revenue less repair payments is a non-GAAP financial
measure. We present constant currency revenue less repair payments so
that revenue less repair payments may be viewed without the impact of
foreign currency exchange rate fluctuations, thereby facilitating
period-to-period comparisons of business performance. Constant currency
revenue less repair payments is presented by recalculating prior
period’s revenue less repair payments denominated in currencies other
than in US dollars using the foreign exchange rate used for the latest
period, without taking into account the impact of hedging gains/losses.
Our non-US dollar denominated revenues include, but are not limited to,
revenues denominated in pound sterling, South African rand, Australian
dollar and Euro.

WNS also presents (1) adjusted operating margin, which refers to
adjusted operating profit (calculated as operating profit / (loss)
excluding share-based expense and amortization of intangible assets) as
a percentage of revenue less repair payments, and (2) ANI, which is
calculated as profit excluding share-based expense and amortization of
intangible assets and including the tax effect thereon, and other
non-GAAP financial measures included in this release as supplemental
measures of its performance. WNS presents these non-GAAP financial
measures because it believes they assist investors in comparing its
performance across reporting periods on a consistent basis by excluding
items that are non-recurring in nature and those it believes are not
indicative of its core operating performance. In addition, it uses these
non-GAAP financial measures (i) as a factor in evaluating management’s
performance when determining incentive compensation and (ii) to evaluate
the effectiveness of its business strategies. These non-GAAP financial
measures are not meant to be considered in isolation or as a substitute
for WNS’s financial results prepared in accordance with IFRS.

The company is not able to provide our forward-looking GAAP revenue,
profit and earnings per ADS without unreasonable efforts for a number of
reasons, including our inability to predict with a reasonable degree of
certainty the payments to repair centers, our future share-based
compensation expense under IFRS 2 (Share Based payments), amortization
of intangibles associated with future acquisitions and currency
fluctuations. As a result, any attempt to provide a reconciliation of
the forward-looking GAAP financial measures (revenue, profit, earnings
per ADS) to our forward-looking non-GAAP financial measures (revenue
less repair payments*, ANI* and Adjusted diluted earnings* per ADS
respectively) would imply a degree of likelihood that we do not believe
is reasonable.

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