WNS Q2 Earnings Beat on Improved Top Line, Guides Well - Analyst Blog

WNS (Holdings) Ltd. (WNS) reported operating net earnings of 41 cents per share for fiscal second-quarter 2015 ended Sep 30, 2014. Results surpassed the Zacks Consensus Estimate of 34 cents and improved 17.2% year over year.

Net income came in at 45 cents per share compared to 33 cents per share reported in the year-ago quarter.

WNS posted strong revenue growth and expanded operating and net income margins.

Operational Updates

WNS' total revenue came in at $126.5 million in the quarter under review, increasing 9.7% year over year. The upside was driven by better performances by the Consulting and Professional Services, Utilities and Shipping & Logistics and Insurance verticals. Revenues were almost in line with the Zacks Consensus Estimate.

During the quarter, the company added five new clients, expanded three existing relationships and renewed 13 contracts. WNS also closed one new large deal during the quarter, taking the year-to-date tally to three.

Cost of revenue increased 6% year over year to $84.5 million, while selling & marketing expenses decreased 8.9% to $8.2 million in the fiscal second quarter.

WNS' operating margin was 21.8% in the reported quarter, up 560 basis points (bps) year over year. Favorable exchange rate and hedging, improved productivity, gain sharing, and operating leverage associated with higher revenue aided the expansion.

Financial Updates    

WNS (Holdings) exited the quarter with cash and investments of $153.8 million, up 31% from the fiscal 2014-end level. The company generated $25.5 million in cash from operations and reported $8.3 million of capital expenditure.

Long-term debt of WNS was $20.6 million at the end of the reported quarter, reflecting an improvement of 21% from the fiscal 2014-end level.

Fiscal 2015 Guidance

WNS (Holdings) expects to generate revenues between $500 million and $516 million, up from $471.5 million in fiscal 2014. Net revenue is estimated to increase between 6% and 9%.

It expects operating margin to return to the 18% to 19% range in the second half of the year.

Operating net income is projected between $83 million and $87 million or $1.56 and $1.63 per share.

Zacks Rank

WNS presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the business service industry include PFSweb Inc. (PFSW), comScore Inc. (SCOR) and ExamWorks Group, Inc. (EXAM). While PFSweb sports a Zacks Rank #1 (Strong Buy), comScore and ExamWorks carry a Zacks Rank #2 (Buy).
 

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