WNS reports higher Q2 profit on lower costs

WNS (Holdings) Ltd. has reported a slightly higher profit in the fiscal second quarter at $29.2 million compared with $28.7 million in Q2 of last year.

“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 expenditure and favourable currency movements net of hedging,” the company said in a statement.

The leave provision reversal contributed $4 million to Q2 pre-tax profit, and was the result of a policy change which removed employee’s ability to carry forward 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, the company said.

In addition, the company recorded a higher effective tax rate versus last year, driven by the geographic mix of profit.

Revenue in the second quarter was $222.6 million, representing a 1.6% decrease versus Q2 of last year.

Revenue less repair payments in the second quarter was $214.4 million, a decrease of 2.9% year-over-year.

Excluding exchange rate impacts, constant currency revenue less repair payments in the fiscal second quarter was down 2.8% versus Q2 of last year.

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, the company said.

These headwinds more than offset the year-over-year growth from new client additions and the expansion of existing relationships, it added.

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.

“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, chief executive officer, WNS said.

“We are also pleased that visibility has now improved to the point where the company is comfortable providing annual guidance,” he said.

“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,” he said.

“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,” the CEO said.

“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,” he added.

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