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Analyst Blog

WNS (Holdings) Ltd. (WNS - Snapshot Report) reported operating net earnings of 33 cents per share for fiscal second-quarter 2014 ending Sep 30, 2013. Results surpassed the Zacks Consensus Estimate of 28 cents and improved 37.5% year over year. Operating net income of $17.2 million increased 41% year over year in the reported quarter.

Net income came in at 18 cents per share compared to 8 cents per share reported in the year-ago quarter.

WNS posted a strong constant currency revenue growth and expanded operating and net income margins which stemmed from its growing size of new business pipeline. The company inked deals with 6 new clients during the quarter.   

Operational Updates

WNS' total revenue grossed $115.4 million during the quarter under review. It marginally missed the Zacks Consensus Estimate of $116 million. However, top line increased 7.6% year over year. The upside was driven by better performances in the Banking & Financial Services, Utilities and Shipping & Logistics verticals. However, few international currency headwinds weighed on the upside.

Cost of revenue increased 3.5% year over year to $71.6 million, while selling & marketing expenses increased 25.3% to $8.9 million in the fiscal second quarter.

WNS’ operating margin was 16.2% in the reported quarter improving 250 basis points (bps) year over year. A strong US dollar and operating leverage aided the expansion.

Financial Updates

WNS (Holdings) exited fiscal second quarter of 2014 with cash and investments of $108.4 million, up 45.7% from the year-ago quarter. The company generated $25.3 million of cash from operations and made $5 million of capital expenditures.

Long-term debt of WNS was $28.6 million at the end of the reported quarter improving 15.1% year over year.

Fiscal 2014 Guidance

WNS (Holdings) expects its top line to grow 6-9% in fiscal 2014 to $464-$476 million.

Operating net income is projected to lie between $68 million and $72 million, representing 28-36% year over year increase.

Operating net income is expected to be $1.30 to $1.37 per share.

The company expects capital expenditure to be in the range of $20 million to $22 million.

WNS expects continuous investments in creating new services offerings, enhanced domain capabilities and technology-enabled solutions to cater to its clients’ requirements.

Zacks Rank

WNS presently carries a Zacks Rank #3 (Hold). Among others in the space, comScore Inc. (SCOR - Snapshot Report) carrying a Zacks Rank #2 (Buy) is scheduled to report its third-quarter 2013 earnings results on Oct 29. Other business services providers like SouFun Holdings Ltd. (SFUN - Snapshot Report) with a Zacks Rank #1 (Strong Buy) and PDI Inc. (PDII - Snapshot Report) with a Zacks Rank #2 are also expected to release their earnings results soon.

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