Form 6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the quarter ended June 30, 2017

Commission File Number 001—32945

 

 

WNS (HOLDINGS) LIMITED

(WNS (Holdings) Limited)

 

 

Gate 4, Godrej & Boyce Complex

Pirojshanagar, Vikhroli (W)

Mumbai 400 079, India

+91-22 - 4095 - 2100

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

Part I — FINANCIAL INFORMATION

  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

     3  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

     4  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

     5  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

     6  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

     8  

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

     9  
Part II — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS      40  

Part III — RISK FACTORS

     65  

SIGNATURES

     92  


Table of Contents

WNS (Holdings) Limited is incorporating by reference the information set forth in this Form 6-K into its registration statements on Form S-8 filed on July 31, 2006 (Registration No: 333-136168), Form S-8 filed on February 17, 2009 (File No. 333-157356), Form S-8 filed on September 15, 2011 (File No. 333-176849), Form S-8 filed on September 27, 2013 (File No. 333-191416), and Form S-8 filed on October 11, 2016 (File No. 333-214042).

CONVENTIONS USED IN THIS REPORT

In this report, references to “US” are to the United States of America, its territories and its possessions. References to “UK” are to the United Kingdom. References to “India” are to the Republic of India. References to “China” are to the People’s Republic of China. References to “South Africa” are to the Republic of South Africa. References to “$” or “dollars” or “US dollars” are to the legal currency of the US, references to “ ” or “rupees” or “Indian rupees” are to the legal currency of India, references to “pound sterling” or “£” are to the legal currency of the UK, references to “pence” are to the legal currency of Jersey, Channel Islands, references to “Euro” are to the legal currency of the European Monetary Union, references to “South African rand” or “R” or “ZAR” are to the legal currency of South Africa, references to “A$” or “AUD” or “Australian dollars” are to the legal currency of Australia, references to “RMB” are to the legal currency of China, references to “LKR” or “Sri Lankan rupees” are to the legal currency of Sri Lanka and references to “PHP” or “Philippine Peso” are to the legal currency of Philippines. Our financial statements are presented in US dollars and prepared in accordance with International Financial Reporting Standards and its interpretations (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), as in effect as at June 30, 2017. To the extent the IASB issues any amendments or any new standards subsequent to June 30, 2017, there may be differences between IFRS applied to prepare the financial statements included in this report and those that will be applied in our annual financial statements for the year ending March 31, 2018. Unless otherwise indicated, the financial information in this interim report on Form 6-K has been prepared in accordance with IFRS, as issued by the IASB. Unless otherwise indicated, references to “GAAP” in this report are to IFRS, as issued by the IASB. References to “our ADSs” in this report are to our American Depositary Shares, each representing one of our ordinary shares.

References to a particular “fiscal year” are to our fiscal year ended March 31 of that calendar year, which is also referred to as “fiscal”. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

In this report, unless otherwise specified or the context requires, the term “WNS” refers to WNS (Holdings) Limited, a public company incorporated under the laws of Jersey, Channel Islands, and the terms “our company,” “the Company,” “we,” “our” and “us” refer to WNS (Holdings) Limited and its subsidiaries.

In this report, references to the “Commission” or the “SEC” are to the United States Securities and Exchange Commission.

We also refer in various places within this report to “revenue less repair payments,” which is a non-GAAP financial measure that is calculated as (a) revenue less (b) in our auto claims business, payments to repair centers for “fault” repair cases where we act as the principal in our dealings with the third party repair centers and our clients. This non-GAAP financial information is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” that are based on our current expectations, assumptions, estimates and projections about our company and our industry. The forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “project,” “seek,” “should” and similar expressions. Those statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources, tax assessment orders and future capital expenditures. We caution you that reliance on any forward-looking statement inherently involves risks and uncertainties, and that although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be materially incorrect. These 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 business process management 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;

 

  future regulatory actions and conditions in our operating areas; and

 

  volatility of our ADS price.

These and other factors are more fully discussed in our other filings with the SEC, including in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in our annual report on Form 20-F for our fiscal year ended March 31, 2017. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans, objectives or projected financial results referred to in any of the forward-looking statements. Except as required by law, we do not undertake to release revisions of any of these forward-looking statements to reflect future events or circumstances.

 

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Part I- FINANCIAL INFORMATION

WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Amounts in thousands, except share and per share data)

 

     Notes      As at
June 30, 2017
    As at
March 31, 2017
 
            (Unaudited)        

ASSETS

       

Current assets:

       

Cash and cash equivalents

     5      $ 105,102     $ 69,803  

Investments

     6        88,985       111,992  

Trade receivables, net

     7        62,727       60,423  

Unbilled revenue

        54,819       48,915  

Funds held for clients

        8,943       9,135  

Derivative assets

     13        26,898       35,401  

Prepayments and other current assets

     8        30,367       27,385  
     

 

 

   

 

 

 

Total current assets

        377,841       363,054  

Non-current assets:

       

Goodwill

     9        135,024       134,008  

Intangible assets

     10        94,086       96,624  

Property and equipment

     11        58,004       54,796  

Derivative assets

     13        3,790       6,581  

Deferred tax assets

        19,712       16,687  

Investments

     6        439       429

Other non-current assets

     8        32,184       31,944  
     

 

 

   

 

 

 

Total non-current assets

        343,239       341,069  
     

 

 

   

 

 

 

TOTAL ASSETS

      $ 721,080     $ 704,123  
     

 

 

   

 

 

 

LIABILITIES AND EQUITY

       

Current liabilities:

       

Trade payables

      $ 18,372     $ 14,239  

Provisions and accrued expenses

     15        29,486       27,217  

Derivative liabilities

     13        5,224       3,947  

Pension and other employee obligations

     14        39,637       52,933  

Current portion of long term debt

     12        27,645       27,613  

Deferred revenue

     16        4,649       5,478  

Current taxes payable

        1,950       1,322  

Other liabilities

     17        16,006       16,015  
     

 

 

   

 

 

 

Total current liabilities

        142,969       148,764  

Non-current liabilities:

       

Derivative liabilities

     13        1,191       836  

Pension and other employee obligations

     14        12,001       10,680  

Long term debt

     12        89,230       89,130  

Deferred revenue

     16        534       378  

Other non-current liabilities

     17        17,070       18,469  

Deferred tax liabilities

        20,302       20,800  
     

 

 

   

 

 

 

Total non-current liabilities

        140,328       140,293  
     

 

 

   

 

 

 

TOTAL LIABILITIES

      $ 283,297     $ 289,057  
     

 

 

   

 

 

 

Shareholders’ equity:

       

Share capital (ordinary shares $0.16 (10 pence) par value, authorized 60,000,000 shares; issued: 53,848,955 shares and 53,312,559 shares; each as at June 30, 2017 and March 31, 2017, respectively)

     18        8,402       8,333  

Share premium

        346,254       338,284  

Retained earnings

        294,684       277,988  

Other components of equity

        (116,872 )     (114,854 )
     

 

 

   

 

 

 

Total shareholders’ equity, including shares held in treasury

        532,468       509,751  
     

 

 

   

 

 

 

Less: 3,300,000 shares as at June 30, 2017 and March 31, 2017, held in treasury, at cost

     18        (94,685 )     (94,685 )
     

 

 

   

 

 

 

Total shareholders’ equity

        437,783       415,066  
     

 

 

   

 

 

 

TOTAL LIABILITIES AND EQUITY

      $ 721,080     $ 704,123  
     

 

 

   

 

 

 

See accompanying notes.

 

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WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except share and per share data)

 

            Three months ended June 30,  
     Notes      2017     2016  
            (Unaudited)  

Revenue

      $ 180,123     $ 147,980  

Cost of revenue

     19        124,747       98,684  
     

 

 

   

 

 

 

Gross profit

        55,376       49,296  

Operating expenses:

     

Selling and marketing expenses

     19        9,025       7,698  

General and administrative expenses

     19        27,484       20,863  

Foreign exchange gain, net

        (4,812 )     (130 )

Amortization of intangible assets

        3,923       6,325  
     

 

 

   

 

 

 

Operating profit

        19,756       14,540  

Other income, net

     21        (2,779 )     (2,329 )

Finance expense

     20        1,092       68  
     

 

 

   

 

 

 

Profit before income taxes

        21,443       16,801  

Provision for income taxes

     23        4,747       4,639  
     

 

 

   

 

 

 

Profit

      $ 16,696     $ 12,162  
     

 

 

   

 

 

 

Earnings per ordinary share

     24     
     

 

 

   

 

 

 

Basic

      $ 0.33     $ 0.24  
     

 

 

   

 

 

 

Diluted

      $ 0.32     $ 0.23  
     

 

 

   

 

 

 

See accompanying notes.

 

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WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Amounts in thousands)

 

     Three months ended June 30,  
     2017     2016  

Profit

   $ 16,696     $ 12,162  

Other comprehensive loss, net of taxes

    

Items that will not be reclassified to profit or loss:

    

Pension adjustment

     (832 )     (2,833 )

Items that will be reclassified subsequently to profit or loss:

    

Changes in fair value of investment in mutual funds

     (2      

Changes in fair value of cash flow hedges:

    

Current period (loss)/gain

     (1,162 )     10,786  

Reclassification to profit/(loss)

     (8,769 )     (3,729 )

Foreign currency translation

     5,621       (15,912 )

Income tax (provision)/benefit relating to above

     3,126       (2,208
  

 

 

   

 

 

 
   $ (1,186 )   $ (11,063 )
  

 

 

   

 

 

 

Total other comprehensive loss, net of taxes

   $ (2,018 )   $ (13,896 )
  

 

 

   

 

 

 

Total comprehensive income/(loss)

   $ 14,678     $ (1,734 )
  

 

 

   

 

 

 

See accompanying notes.

 

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WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands, except share and per share data)

 

            Other components of equity        
            Foreign                     
            currency     Cash flow                  Total  
     Share capital      Share     Retained      translation     hedging      Pension     Treasury shares     shareholders’  
     Number      Par value      premium     earnings      reserve     reserve      adjustments     Number      Amount     equity  

Balance as at April 1, 2016

     52,406,304      $ 8,211      $ 306,874     $ 240,225      $ (124,357 )   $ 5,928      $ 1,769       1,100,000      $ (30,461 )   $ 408,189  

Shares issued for exercised options and RSUs (Refer Note 22)

     260,785        37        602       —          —         —          —         —          —         639  

Purchase of treasury shares (Refer Note 18)

     —          —            —          —         —          —         750,000        (22,931 )     (22,931 )

Share-based compensation expense (Refer Note 22)

     —          —          5,386       —          —         —          —         —          —         5,386  

Excess tax benefits relating to share-based options and RSUs

     —          —          (439 )     —          —         —          —         —          —         (439 )
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Transactions with owners

     260,785        37        5,549       —          —         —          —         750,000        (22,931 )     (17,345 )
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Profit

     —          —          —         12,162        —         —          —         —          —         12,162  

Other comprehensive income/(loss), net of taxes

     —          —          —         —          (15,912 )     4,849        (2,833 )     —          —         (13,896 )
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total comprehensive income/(loss) for the period

     —          —          —         12,162        (15,912 )     4,849        (2,833 )     —          —         (1,734 )
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Balance as at June 30, 2016

     52,667,089      $ 8,248      $ 312,423     $ 252,387      $ (140,269 )   $ 10,777      $ (1,064 )     1,850,000      $ (53,392 )   $ 389,110  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands, except share and per share data)

 

                                Other components of equity                     
     Share capital      Share     Retained      Foreign
currency
translation
    Cash flow
hedging
    Investment in
mutual funds

fair value
adjustments
    Pension     Treasury shares     Total
shareholders’
 
     Number      Par value      premium     earnings      reserve     reserve       adjustments     Number      Amount     equity  

Balance as at April 1, 2017

     53,312,559      $ 8,333      $ 338,284     $ 277,988      $ (132,174   $ 17,348       7   $ (35     3,300,000      $ (94,685   $ 415,066  

Shares issued for exercised options and RSUs (Refer Note 22)

     536,396        69        1,239       —          —         —         —         —         —          —         1,308  

Share-based compensation expense (Refer Note 22)

     —          —          6,362       —          —         —         —         —       —          —         6,362  

Purchase of equity from non-controlling interest

     —          —          (52     —          —         —         —         —         —          —         (52

Excess tax benefits relating to share-based options and RSUs

     —          —          421       —          —         —         —         —         —          —         421  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Transactions with owners

     536,396        69        7,970       —          —         —         —         —         —          —         8,039  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Profit

     —          —          —         16,696        —         —         —         —         —          —         16,696  

Other comprehensive income/(loss), net of taxes

     —          —          —         —          5,621       (6,805     (2     (832     —          —         (2,018
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total comprehensive income/(loss) for the period

     —          —          —         16,696        5,621       (6,805     (2     (832     —          —         14,678  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Balance as at June 30, 2017

     53,848,955      $ 8,402      $ 346,254     $ 294,684      $ (126,553   $ 10,543     $ 5   $ (867     3,300,000      $ (94,685   $ 437,783  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

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WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

 

     Notes     Three months ended June 30,  
           2017     2016  

Cash flows from operating activities:

      

Cash generated from operations

     $ 19,468     $ 20,688  

Income taxes paid

       (4,894     (3,155 )

Interest paid

       (880     (31

Interest received

       398       180  
    

 

 

   

 

 

 

Net cash provided by operating activities

       14,092       17,682  
    

 

 

   

 

 

 

Cash flows from investing activities:

      

Acquisition of Value Edge, net of cash acquired

     4 (c)      —         (11,956

Restricted cash, held in escrow

     4 (c)      —         (5,112 )

Purchase of property and equipment and intangible assets

       (7,276     (5,174 )

Deferred consideration paid towards acquisition of Denali

     4 (b)      (522     —    

Proceeds from restricted cash held in escrow

       239       —    

Government grant received

       168       —    

Proceeds from sale of property and equipment

       25       29  

Dividends received

       873       1,322  

Marketable securities sold/(purchased), net

       23,507       48,824  
    

 

 

   

 

 

 

Net cash provided by investing activities

       17,014       27,933  
    

 

 

   

 

 

 

Cash flows from financing activities:

      

Buyback of shares

       —         (22,931 )

Proceeds from exercise of stock options

       1,308       639  

Excess tax benefit from share-based compensation expense

       130       191  

Purchase of equity of non-controlling interest

       (52     —    

Payment of debt issuance cost

       (298     —    
    

 

 

   

 

 

 

Net cash provided by/(used) in financing activities

       1,088       (22,101 )
    

 

 

   

 

 

 

Exchange difference on cash and cash equivalents

       3,105       (954 )

Net change in cash and cash equivalents

       35,299       22,560  

Cash and cash equivalents at the beginning of the period

       69,803       41,854  
    

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

     $ 105,102     $ 64,414  
    

 

 

   

 

 

 

Non-cash transactions:

      

Investing activities

      

  (i) Liability towards property and equipment and intangible assets purchased on credit

     $ 6,354     $ 3,376  

See accompanying notes.

Reconciliation of liabilities arising from financing activities

 

            Cash flows      Non-cash changes         
     Opening balance
April 1,

2017
    

 

     Amortization of debt
issuance cost
     Closing balance
June 30,
2017
 

Long term debt (including current portion)

   $ 116,743      $ —        $ 132      $ 116,875  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

1. Company overview

WNS (Holdings) Limited (“WNS Holdings”), along with its subsidiaries (collectively, “the Company”), is a global business process management (“BPM”) company with client service offices in Australia, Dubai (United Arab Emirates), London (UK), New Jersey (US), Switzerland, Germany and Singapore and delivery centers in the People’s Republic of China (“China”), Costa Rica, India, the Philippines, Poland, Romania, Republic of South Africa (“South Africa”), Sri Lanka, Turkey, the United Kingdom (“UK”) and the United States (“US”). The Company’s clients are primarily in the insurance; travel and leisure; diversified businesses including manufacturing, retail, consumer packaged goods (“CPG”), media and entertainment and telecommunications; utilities; consulting and professional services; banking and financial services; healthcare; and shipping and logistics industries. During the year ended March 31, 2017, the Company completed certain acquisitions (Refer Note 4).

WNS Holdings is incorporated in Jersey, Channel Islands and maintains a registered office in Jersey at 22, Grenville Street, St Helier, Jersey JE4 8PX.

These unaudited condensed interim consolidated financial statements were authorized for issue by the Board of Directors on July 28, 2017.

 

2. Summary of significant accounting policies

Basis of preparation

These condensed interim consolidated financial statements are prepared in compliance with International Accounting Standard (IAS) 34, “ Interim financial reporting” as issued by IASB. They do not include all of the information required in annual financial statements in accordance with IFRS, as issued by IASB and should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s annual report on Form 20-F for the fiscal year ended March 31, 2017.

The accounting policies applied are consistent with the policies that were applied for the preparation of the consolidated financial statements for the year ended March 31, 2017.

 

3. New accounting pronouncements not yet adopted by the Company

Certain new standards, interpretations and amendments to existing standards have been published that are mandatory for the Company’s accounting periods beginning on or after April 1, 2017 or later periods. Those which are considered to be relevant to the Company’s operations are set out below.

 

i. In May 2014, the IASB issued IFRS 15 “Revenue from Contracts with Customers” (IFRS 15). This standard provides a single, principle-based five-step model to be applied to all contracts with customers. Guidance is provided on topics such as the point at which revenue is recognized, accounting for variable consideration, costs of fulfilling and obtaining a contract and various other related matters. IFRS 15 also introduced new disclosure requirements with respect to revenue.

The five steps in the model under IFRS 15 are: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contracts; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

IFRS 15 replaces the following standards and interpretations:

 

    IAS 11 “Construction Contracts”

 

    IAS 18 “Revenue”

 

    IFRIC 13 “Customer Loyalty Programmes”

 

    IFRIC 15 “Agreements for the Construction of Real Estate”

 

    IFRIC 18 “Transfers of Assets from Customers”

 

    SIC-31 “Revenue - Barter Transactions Involving Advertising Services”

When first applying IFRS 15, it should be applied in full for the current period, including retrospective application to all contracts that were not yet complete at the beginning of that period. In respect of prior periods, the transition guidance allows an option to either:

 

    apply IFRS 15 in full to prior periods (with certain limited practical expedients being available); or

 

    retain prior period figures as reported under the previous standards, recognizing the cumulative effect of applying IFRS 15 as an adjustment to the opening balance of equity as at the date of initial application (beginning of current reporting period).

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

In April 2016, the IASB issued amendments to IFRS 15, clarifying some requirements and providing additional transitional relief for companies. The amendments do not change the underlying principles of IFRS 15 but clarify how those principles should be applied. The amendments clarify how to:

 

    identify a performance obligation (the promise to transfer a good or a service to a customer) in a contract;

 

    determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and

 

    determine whether the revenue from granting a license should be recognized at a point in time or over time.

In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies IFRS 15. The amendments have the same effective date as IFRS 15.

IFRS 15 is effective for fiscal years beginning on or after January 1, 2018. Earlier application is permitted. The Company expects to apply this standard retrospectively with the cumulative effect of initially applying this standard recognized at April 1, 2018 (i.e. the date of initial application in accordance with this standard). Further, the Company is currently evaluating the impact that this new standard will have on its consolidated financial statements.

 

ii. In July 2014, the IASB finalized and issued IFRS 9 – “Financial Instruments” (“IFRS 9”). IFRS 9 replaces IAS 39 “Financial instruments: recognition and measurement”, the previous Standard which dealt with the recognition and measurement of financial instruments in its entirety upon former’s effective date.

Key requirements of IFRS 9:

Replaces IAS 39’s measurement categories with the following three categories:

 

    fair value through profit or loss (“ FVTPL ”)

 

    fair value through other comprehensive income (“ FVTOCI ”)

 

    amortized cost

Eliminates the requirement for separation of embedded derivatives from hybrid financial assets, the classification requirements to be applied to the hybrid financial asset in its entirety.

Requires an entity to present the amount of change in fair value due to change in entity’s own credit risk in other comprehensive income.

Introduces new impairment model, under which the “expected” credit loss are required to be recognized as compared to the existing “incurred” credit loss model of IAS 39.

Fundamental changes in hedge accounting by introduction of new general hedge accounting model which:

 

    increases the eligibility of hedged item and hedging instruments; and

 

    introduces a more principles–based approach to assess hedge effectiveness.

IFRS 9 is effective for annual periods beginning on or after January 1, 2018.

Earlier application is permitted provided that all the requirements in the Standard are applied at the same time with two exceptions:

(1) The requirement to present changes in the fair value of a liability due to changes in own credit risk may be applied early in isolation; and

(2) Entity may choose as its accounting policy choice to continue to apply hedge accounting requirements of IAS 39 instead of new general hedge accounting model as provided in IFRS 9.

The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

iii. In January 2016, the IASB has issued IFRS 16 – “Leases” (“IFRS 16”). Key changes in IFRS 16 include:

 

    eliminates the requirement to classify a lease as either operating or finance lease in the books of lessee;

 

    introduces a single lessee accounting model, which requires lessee to recognize assets and liabilities for all leases, initially measured at the present value of unavoidable future lease payment. Entity may elect not to apply this accounting requirement to short term leases and leases for which underlying asset is of low value;

 

    replaces the straight-line operating lease expense model with a depreciation charge for the lease asset (included within operating costs) and an interest expense on the lease liability (included within finance costs);

 

    requires lessee to classify cash payments for principal and interest portion of lease arrangement within financing activities and financing/operating activities respectively in the cash flow statements; and

 

    requires entities to determine whether a contract conveys the right to control the use of an identified asset for a period of time to assess whether that contract is, or contains, a lease.

IFRS 16 replaces IAS 17 – “Leases” and related interpretations viz. IFRIC 4 – “Determining whether an Arrangement contains a Lease”; SIC-15 – “Operating Leases—Incentives”; and SIC-27 – “Evaluating the Substance of Transactions Involving the Legal Form of a Lease”.

IFRS 16 substantially carries forward lessor accounting requirements in IAS 17 –“Leases”. Disclosures, however, have been enhanced.

IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019. Early application is permitted for entities that apply IFRS 15 – “Revenue from Contracts with Customers” at or before the date of initial application of IFRS 16.

A lessee shall apply IFRS 16 either retrospectively to each prior reporting period presented or record a cumulative effect of initial application of IFRS 16 as an adjustment to opening balance of equity at the date of initial application.

The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

iv. In June 2016, the IASB issued amendments in IFRS 2 – “Share-based Payment” to clarify the following:

 

    the accounting for cash-settled share-based payment transactions that include a performance condition should follow the same approach as for equity-settled share-based payment;

 

    the classification of share-based payment transactions with net settlement features for withholding tax obligations should be classified as equity-settled in its entirety, provided the share-based payment would have been classified as equity-settled had it not included the net settlement feature; and

 

    modifications of a share-based payment that changes the transaction from cash-settled to equity-settled to be accounted for as follows:

 

  i. the original liability is derecognized;

 

  ii. the equity-settled share based payment is recognized at the modification date fair value of the equity instrument granted to the extent that services have been rendered up to the modification date; and

 

  iii. any difference between the carrying amount of the liability at the modification date and the amount recognized in equity should be recognized in the statement of income immediately.

The above amendments are effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted. The amendments are to be applied prospectively. However, if an entity applies the amendments retrospectively, it must do so for all of the amendments described above.

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

 

v. In December 2016, the IFRS Interpretations Committee (‘IFRIC’) issued amendments to IFRIC 22 – “Foreign Currency Transactions and Advance Consideration” to clarify the exchange rate to use for translation when payments are made or received in advance of the related asset, expense or income (or part of it) in foreign currency.

The exchange rate in this case will be the rate prevalent on the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration.

IFRIC 22 is effective for annual reporting periods beginning on or after January 1, 2018. Earlier application is permitted.

On initial application, entities have the choice to apply the Interpretation either retrospectively or, alternatively, prospectively to all assets, expenses and income in the scope of the Interpretation initially recognized on or after:

 

    the beginning of the reporting period in which the entity first applies the Interpretation; or

 

    the beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the Interpretation.

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

 

vi. In June 2017, the IFRIC issued IFRIC 23 – “Uncertainty over Income Tax Treatments” to clarify the accounting for uncertainties in income taxes, by specifically addressing the following:

 

    the determination of whether to consider each uncertain tax treatment separately or together with one or more uncertain tax treatments;

 

    the assumptions an entity makes about the examination of tax treatments by taxations authorities;

 

    the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates where there is an uncertainty regarding the treatment of an item; and

 

    the reassessment of judgements and estimates if facts and circumstances change.

IFRIC 23 is effective for annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted.

On initial application, the requirements are to be applied by recognizing the cumulative effect of initially applying them in retained earnings, or in other appropriate components of equity, at the start of the reporting period in which an entity first applies them, without adjusting comparative information. Full retrospective application is permitted, if an entity can do so without using hindsight.

The Company is currently evaluating the impact of this pronouncement on its consolidated financial statements.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

4. Business Combinations

 

  a) HealthHelp

On March 15, 2017 (“Acquisition date”), the Company acquired all ownership interests of MTS HealthHelp Inc. and its subsidiaries (“HealthHelp”), which provides benefits management across several specialty healthcare areas, including radiology, cardiology, oncology, sleep care, orthopedics, and pain management, for a total consideration of $68,337, subject to adjustments for cash and working capital, including a contingent consideration of $8,545, payable over a period of two years linked to revenue targets and continuation of an identified client contract. The fair value of the contingent consideration liability was estimated using level 3 inputs which included an assumption for discount rate of 2.5%. The potential undiscounted amount of all future payments that the Company could be required to make under the contingent consideration arrangement is between $0 and $8,876.

The Company has funded the acquisition primarily with a five year secured term loan. The Company is expected to leverage HealthHelp’s capability in care management to address the needs of payor, provider and insurance organizations.

The Company has incurred acquisition related costs of $1,809, which have been included in “General and administrative expenses” in the consolidated statement of income for the year ended March 31, 2017.

The purchase price has been allocated on a provisional basis, as set out below, to the assets acquired and liabilities assumed in the business combination.

 

     Amount  

Cash

   $ 3,119  

Trade receivables

     4,910  

Unbilled revenue

     1,854  

Prepayments and other current assets

     1,070  

Property and equipment

     4,612  

Intangible assets

  

- Software

     1,274  

- Customer contracts

     4,537  

- Customer relationships

     49,584  

- Service mark

     400  

- Covenant not-to-compete

     4,693  

- Technology

     4,852  

Non-current assets

     96  

Term loan

     (29,249

Current liabilities

     (2,688 )

Non-current liabilities

     (1,423 )

Deferred tax liability

     (18,146 )
  

 

 

 

Net assets acquired

   $ 29,495  

Less: Purchase consideration

     68,337  
  

 

 

 

Goodwill on acquisition

   $ 38,842  
  

 

 

 

Goodwill of $14,643 arising from this acquisition is expected to be deductible for tax purposes. Goodwill is attributable mainly to expected synergies and assembled workforce arising from the acquisition.

The purchase consideration has been allocated on a provisional basis based on management’s estimates. The Company is in the process of making a final determination of the fair value of assets and liabilities. Finalization of the purchase price allocation may result in certain adjustments to the above allocation and revision of amounts recorded as of June 30, 2017 to reflect the final valuation of assets acquired or liabilities assumed.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

  b) Denali Sourcing Services Inc.

On January 20, 2017 (“Acquisition Date”), the Company acquired all outstanding shares of Denali Sourcing Services Inc. (“Denali”), a provider of strategic procurement BPM solutions for a purchase consideration of $39,635 (including the contingent consideration of $6,277, dependent on the achievement of revenue targets over a period of three years and deferred consideration of $522 payable in first quarter of fiscal 2018), subject to adjustments for cash and working capital. The fair value of the contingent consideration liability was estimated using level 3 inputs which included an assumption for discount rate of 2.5%. The potential undiscounted amount of all future payments that the Company could be required to make under the contingent consideration arrangement is between $0 and $6,578. The payment was funded through a three year secured term loan.

During the quarter ended June 30, 2017, the Company made the payment of $522 towards deferred consideration.

Denali delivers global sourcing and procurement services to high-tech, retail and CPG, banking and financial services, utilities, and healthcare verticals. The acquisition of Denali is expected to add a strategic procurement capability to the Company’s existing Finance and Accounting services and enables the Company to offer procurement solutions to its clients.

The Company has incurred acquisition related costs of $502, which have been included in “General and administrative expenses” in the consolidated statement of income for the year ended March 31, 2017.

The purchase price has been allocated on a provisional basis, as set out below, to the assets acquired and liabilities assumed in the business combination.

 

     Amount  

Cash

   $ 1,204  

Trade receivables

     3,093  

Unbilled revenue

     1,256  

Prepayments and other current assets

     95  

Property and equipment

     53  

Deferred tax asset

     18  

Intangible assets

  

- Software

     3  

- Customer contracts

     3,025  

- Customer relationships

     8,000  

- Trade name

     545  

- Covenant not-to-compete

     1,718  

Non-current assets

     27  

Current liabilities

     (3,848 )

Short-term line of credit

     (475

Non-current liabilities

     (343 )

Deferred tax liability

     (5,020 )
  

 

 

 

Net assets acquired

   $ 9,351  

Less: Purchase consideration

     39,635  
  

 

 

 

Goodwill on acquisition

   $ 30,284  
  

 

 

 

Goodwill arising from this acquisition is not expected to be deductible for tax purposes. Goodwill is attributable mainly to expected synergies and assembled workforce arising from the acquisition.

The purchase consideration has been allocated on a provisional basis based on management’s estimates. The Company is in the process of making a final determination of the fair value of assets and liabilities. Finalization of the purchase price allocation may result in certain adjustments to the above allocation and revision of amounts recorded as of June 30, 2017 to reflect the final valuation of assets acquired or liabilities assumed.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

  c) Value Edge

On June 14, 2016 (“Acquisition Date”), the Company acquired all outstanding equity shares of Value Edge Research Services Private Limited (“Value Edge”) which provides business research and analytics reports and databases across the domains of pharmaceutical, biotech and medical devices, for a total consideration of $18,265 including working capital adjustments of $765 and contingent consideration of $5,112 (held in escrow), subject to compliance with certain conditions, payable over a period of three years. The acquisition is expected to deepen the Company’s domain and specialized analytical capabilities in the growing pharma market, and provide the Company with a technology asset, which is leverageable across clients and industries.

During the quarter ended June 30, 2017, the Company paid an amount of $1,693 towards contingent consideration to the sellers.

The Company has incurred acquisition related costs of $24, which have been included in “General and administrative expenses” in the consolidated statement of income for the year ended March 31, 2017.

The purchase price has been allocated, as set out below, to the assets acquired and liabilities assumed in the business combination.

 

     Amount  

Cash

   $ 432  

Trade receivables

     370  

Unbilled revenue

     706  

Investments

     87  

Prepayments and other current assets

     99  

Property and equipment

     78  

Deferred tax asset

     49  

Intangible assets

  

- Software

     10  

- Customer contracts

     701  

- Customer relationships

     1,894  

- Trade name

     104  

- Covenant not-to-compete

     2,655  

- Technology

     1,238  

Non-current assets

     74  

Current liabilities

     (1,236 )

Non-current liabilities

     (126 )

Deferred tax liability

     (2,281 )
  

 

 

 

Net assets acquired

   $ 4,854  

Less: Purchase consideration

     18,265  
  

 

 

 

Goodwill on acquisition

   $ 13,411  
  

 

 

 

Goodwill arising from this acquisition is not expected to be deductible for tax purposes. Goodwill is attributable mainly to expected synergies and assembled workforce arising from the acquisition.

During the year ended March 31, 2017, the Company concluded the fair value adjustments of the assets acquired and liabilities assumed on acquisition. Corresponding changes to the comparatives for the three months ended June 30, 2016 have not been made, as the impact of the change on finalization of purchase price allocation is not material to the Company’s statement of financial position or statement of income.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

5. Cash and cash equivalents

The Company considers all highly liquid investments with an initial maturity of up to three months to be cash equivalents. Cash and cash equivalents consist of the following:

 

     As at  
     June 30,
2017
     March 31,
2017
 

Cash and bank balances

   $ 52,441      $ 46,110  

Short term deposits with banks

     52,661        23,693  
  

 

 

    

 

 

 

Total

   $ 105,102      $ 69,803  
  

 

 

    

 

 

 

Short term deposits can be withdrawn by the Company at any time without prior notice and are readily convertible into known amounts of cash with an insignificant risk of changes in value.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

6. Investments

Investments consist of the following:

 

     As at  
     June 30,
2017
     March 31,
2017
 

Investments in marketable securities and mutual funds(1)

   $ 64,550      $ 87,652  

Investments in fixed maturity plans (“FMPs”)

     98        96  

Investment in fixed deposits

     24,776        24,673  
  

 

 

    

 

 

 

Total

   $ 89,424      $ 112,421  
  

 

 

    

 

 

 

Note:

 

(1) Marketable securities represent short term investments made principally for the purpose of earning dividend income.

 

     As at  
     June 30,
2017
     March 31,
2017
 

Current investments

   $ 88,985      $ 111,992  

Non-current investment

     439        429  
  

 

 

    

 

 

 

Total

   $ 89,424      $ 112,421  
  

 

 

    

 

 

 

 

7. Trade receivables, net

Trade receivables consist of the following:

 

     As at  
     June 30,
2017
     March 31,
2017
 

Trade receivables

   $ 64,415      $ 62,136  

Less: Allowances for doubtful accounts receivable

     (1,688 )      (1,713 )
  

 

 

    

 

 

 

Total

   $ 62,727      $ 60,423  
  

 

 

    

 

 

 

The movement in the allowances for doubtful accounts receivable is as follows:

 

     Three months ended June 30,  
     2017      2016  

Balance at the beginning of the period

   $ 1,713      $ 4,446  

Charged to operations

     203        332  

Write-offs, net of collections

     (118 )      (2,454 )

Reversals

     (159 )      (208 )

Translation adjustment

     49        (113 )
  

 

 

    

 

 

 

Balance at the end of the period

   $ 1,688      $ 2,003  
  

 

 

    

 

 

 

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

8. Prepayment and other assets

Prepayment and other assets consist of the following:

 

     As at  
     June 30,
2017
     March 31,
2017
 

Current:

     

Service tax and other tax receivables

   $ 7,607      $ 8,029  

Deferred transition cost

     425        423  

Employee receivables

     1,157        1,215  

Advances to suppliers

     1,656        2,087  

Prepaid expenses

     12,388        8,819  

Restricted cash, held in escrow (Refer Note 4 (c))

     1,535        1,611  

Others assets

     5,599        5,201  
  

 

 

    

 

 

 

Total

   $ 30,367      $ 27,385  
  

 

 

    

 

 

 

Non-current:

     

Deposits

   $ 7,935      $ 7,569  

Income tax assets

     11,053        10,202  

Service tax and other tax receivables

     7,127        6,236  

Deferred transition cost

     468        365  

Restricted cash, held in escrow (Refer Note 4 (c))

     1,535        3,222  

Others assets

     4,066        4,350  
  

 

 

    

 

 

 

Total

   $ 32,184      $ 31,944  
  

 

 

    

 

 

 

 

9. Goodwill

 

     As at  
     June 30,
2017
     March 31,
2017
 

Gross carrying amount

   $ 157,550      $ 155,681  

Accumulated impairment of goodwill

     (22,526 )      (21,673
  

 

 

    

 

 

 

Total

   $ 135,024      $ 134,008  
  

 

 

    

 

 

 

The movement in goodwill balance by reportable segment as at June 30, 2017 and March 31, 2017 is as follows:

Gross carrying amount

 

            WNS         
     WNS      Auto         
     Global BPM      Claims BPM      Total  

Balance as at April 1, 2016

   $ 46,503      $ 29,739      $ 76,242  

Goodwill arising on acquisitions (Refer Note 4(a), 4(b) & 4(c))

     82,127        —        82,127  

Foreign currency translation adjustment

     1,248        (3,936 )      (2,688 )
  

 

 

    

 

 

    

 

 

 

Balance as at March 31, 2017

   $ 129,878      $ 25,803      $ 155,681  
  

 

 

    

 

 

    

 

 

 

Goodwill arising on acquisitions (Refer Note 4(b))

     410        —          410  

Foreign currency translation adjustment

     443        1,016        1,459  
  

 

 

    

 

 

    

 

 

 

Balance as at June 30, 2017

   $ 130,731      $ 26,819      $ 157,550  
  

 

 

    

 

 

    

 

 

 

Accumulated impairment losses

 

            WNS         
     WNS      Auto         
     Global BPM      Claims BPM      Total  

Balance as at April 1, 2016

   $
—  
 
   $ —      $ —  

Impairment of goodwill recognized during the year

     —        21,673        21,673  
  

 

 

    

 

 

    

 

 

 

Balance as at March 31, 2017

   $ —        $ 21,673      $ 21,673  

Foreign currency translation adjustment

     —        853        853  
  

 

 

    

 

 

    

 

 

 

Balance as at June 30, 2017

   $ —        $ 22,526      $ 22,526  
  

 

 

    

 

 

    

 

 

 

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

10. Intangible assets

The changes in the carrying value of intangible assets for the year ended March 31, 2017 are as follows:

 

Gross carrying value

   Customer
contracts
     Customer
relationships
    Intellectual
property
rights
    Trade
names
     Technology      Leasehold
benefits
     Covenant
not-to-
compete
    Service
mark
     Software     Total  

Balance as at April 1, 2016

   $ 156,786      $ 63,147     $ 4,450     $ —        $ —        $ 1,835      $ 326       —        $ 19,760     $ 246,304  

Additions

     —          —         —         —          —          —          —         —          4,611       4,611  

On acquisition (Refer Note (4(a),(b),(c))

     8,263        59,478       —         649        6,090        —          9,066       400        1,287       85,233  

Translation adjustments

     1,952        (703 )     (589 )     4        41        —          59       —          (72     692  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Balance as at March 31, 2017

   $ 167,001      $ 121,922     $ 3,861     $ 653      $ 6,131      $ 1,835      $ 9,451     $ 400      $ 25,586     $ 336,840  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Accumulated amortization

                         

Balance as at April 1, 2016

   $ 145,483      $ 58,992     $ 4,450     $ —        $ —        $ 1,835      $ 326     $ —        $ 8,101     $ 219,187  

Amortization

     10,653        4,016       —         78        167        —          650       —          4,975       20,539  

Translation adjustments

     1,840        (833 )     (589 )     2        5        —          (12 )     —          77       490  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Balance as at March 31, 2017

   $ 157,976      $ 62,175     $ 3,861     $ 80      $ 172      $ 1,835      $ 964     $ —        $ 13,153     $ 240,216  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net carrying value as at March 31, 2017

   $ 9,025      $ 59,747     $ —       $ 573      $ 5,959      $ —        $ 8,487     $ 400      $ 12,433     $ 96,624  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

The changes in the carrying value of intangible assets for the three months ended June 30, 2017 are as follows:

 

Gross carrying value

   Customer
contracts
     Customer
relationships
     Intellectual
property
rights
     Trade
names
     Technology      Leasehold
benefits
     Covenant
not-to-
compete
     Service
mark
     Software      Total  

Balance as at April 1, 2017

   $ 167,001      $ 121,922      $ 3,861      $ 653    $ 6,131      $ 1,835      $ 9,451        400    $ 25,586      $ 336,840  

Additions

     —          —          —          —          —          —          —          —          1,193        1,193  

Translation adjustments

     397        320        152        1        6        —          19        —          229        1,124  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance as at June 30, 2017

   $ 167,398      $ 122,242      $ 4,013      $ 654      $ 6,137      $ 1,835      $ 9,470      $ 400      $ 27,008      $ 339,157  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization

                             

Balance as at April 1, 2017

   $ 157,976      $ 62,175      $ 3,861      $ 80    $ 172    $ 1,835      $ 964      $ —        $ 13,153      $ 240,216  

Amortization

     693        924        —          59        198        —          589        —          1,460        3,923  

Translation adjustments

     368        300        152        —          —          —          10        —          102        932  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance as at June 30, 2017

   $ 159,037      $ 63,399      $ 4,013      $ 139      $ 370      $ 1,835      $ 1,563      $ —        $ 14,715      $ 245,071  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net carrying value as at June 30, 2017

   $ 8,361      $ 58,843      $ —        $ 515      $ 5,767      $ —        $ 7,907      $ 400      $ 12,293      $ 94,086  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

19


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

11. Property and equipment

The changes in the carrying value of property and equipment for the year ended March 31, 2017 are as follows:

 

Gross carrying value

   Buildings      Computers
and
software
    Furniture,
fixtures and
office
equipment
    Vehicles     Leasehold
improvements
    Total  

Balance as at April 1, 2016

   $ 10,150      $ 69,203     $ 60,860     $ 459     $ 52,589     $ 193,261  

Additions

     —          4,411       7,455       135       8,105       20,106  

On acquisition (Refer Note 4(a),(b),(c))

     —          1,014       1,895       14       1,820       4,743  

Disposals/retirements

     —          (3,407     (1,619     (33     (1,723     (6,782 )

Translation adjustments

     96        (1,350     286       12       201       (755 )
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at March 31, 2017

   $ 10,246      $ 69,871     $ 68,877     $ 587     $ 60,992     $ 210,573  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation

             

Balance as at April 1, 2016

   $ 3,661      $ 58,768     $ 47,375     $ 347     $ 36,874     $ 147,025  

Depreciation

     505        5,742       5,126       92       5,438       16,903  

Disposals/retirements

     —          (3,327     (1,241     (20     (1,354     (5,942

Translation adjustments

     42        (1,372     171       10       222       (927
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at March 31, 2017

   $ 4,208      $ 59,811     $ 51,431     $ 429     $ 41,180     $ 157,059  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital work-in-progress

                1,282  
             

 

 

 

Net carrying value as at March 31, 2017

              $ 54,796  
             

 

 

 

The changes in the carrying value of property and equipment for the three months ended June 30, 2017 are as follows:

 

Gross carrying value

   Buildings      Computers
and
software
    Furniture,
fixtures and
office
equipment
    Vehicles     Leasehold
improvements
    Total  

Balance as at April 1, 2017

   $ 10,246      $ 69,871     $ 68,877     $ 587     $ 60,992     $ 210,573  

Additions

     —          841       1,863       75       1,956       4,735  

Disposals/retirements

     —          (66     (209     (23     (985     (1,283 )

Translation adjustments

     19        845       442       4       370       1,680  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at June 30, 2017

   $ 10,265      $ 71,491     $ 70,973     $ 643     $ 62,333     $ 215,705  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation

             

Balance as at April 1, 2017

   $ 4,208      $ 59,811     $ 51,431     $ 429     $ 41,180     $ 157,059  

Depreciation

     128        1,635       1,535       28       1,475       4,801  

Disposals/retirements

     —          (66     (142     (23     (985     (1,216

Translation adjustments

     8        760       313       2       229       1,312  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at June 30, 2017

   $ 4,344      $ 62,140     $ 53,137     $ 436     $ 41,899     $ 161,956  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital work-in-progress

                4,255  
             

 

 

 

Net carrying value as at June 30, 2017

              $ 58,004  
             

 

 

 

Certain property and equipment are pledged as collateral against borrowings with a carrying amount of $150 and $170 as at June 30, 2017 and March 31, 2017, respectively.

 

20


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

12. Loans and borrowings

Long-term debt

The long-term loans and borrowings consist of the following:

 

                 As at  
                 June 30, 2017      March 31, 2017  

Currency

  

Interest rate

   Final
maturity
(fiscal
year)
     Foreign
currency
     Total      Foreign
currency
     Total  
US dollars    3M USD Libor +1.27%      2020        $    —          34,000        —          34,000  
US dollars    3M USD Libor +0.95%      2022        $    —          84,000        —          84,000  
           

 

 

       

 

 

 

Total

              118,000           118,000  
           

 

 

       

 

 

 
Less: Debt issuance cost               1,125           1,257  
           

 

 

       

 

 

 

Total

              116,875           116,743  
           

 

 

       

 

 

 
Current portion of long term debt             $ 27,645        —        $ 27,613  
Long term debt             $ 89,230         $ 89,130  

In January 2017, WNS North America Inc. obtained from BNP Paribas, Hong Kong, a three-year term loan facility of $34,000 at an interest rate equal to the three-month US dollar LIBOR plus a margin of 1.27% per annum to finance the acquisition of Denali Sourcing Services Inc. WNS North America Inc. has pledged its shares of Denali Sourcing Services Inc. as security for the loan. In connection with the term loan, the Company has entered into an interest rate swap with a bank to swap the variable portion of the interest based on three month US dollar LIBOR to a fixed rate of 1.5610%. The facility agreement for the term loan contains certain financial covenants as defined in the facility agreement. This term loan is repayable in six semi-annual installments. The first five repayment installments are $5,650 each and the sixth and final repayment installment is $5,750. On July 20, 2017, the Company repaid the first scheduled repayment of $5,650. As at June 30, 2017, the Company has complied with the financial covenants in all material respects in relation to this loan facility.

In March 2017, WNS (Mauritius) Limited obtained from HSBC Bank (Mauritius) Ltd. and Standard Chartered Bank, UK a five-year term loan facility of $84,000 at an interest rate equal to the three-month US dollar LIBOR plus a margin of 0.95% per annum to finance the acquisition of HealthHelp. The Company has pledged its shares of WNS (Mauritius) Limited as security for the loan. In connection with the term loan, the Company has entered into interest rate swaps with banks to swap the variable portion of the interest based on three month US dollar LIBOR to a fixed rate of 1.9635%. The facility agreement for the term loan contains certain financial covenants as defined in the facility agreement. This term loan is repayable in ten semi-annual installments of $8,400 each. The first scheduled repayment is in September 2017. As at June 30, 2017, the Company has complied with the financial covenants in all material respects in relation to this loan facility.

The Company has pledged trade receivables, other financial assets and property and equipment with an aggregate amount of $94,125 and $88,730 as of June 30, 2017 and March 31, 2017, respectively, as collateral for the above borrowings.

Short-term lines of credit

The Company’s Indian subsidiary, WNS Global Services Private Limited (“WNS Global”), has unsecured lines of credit with banks amounting to $63,157. The Company has also established a line of credit in the UK amounting to £9,880 ($12,823 based on the exchange rate on June 30, 2017). Further the Company has also established a line of credit in South Africa amounting to ZAR 20,800 ($1,593 based on the exchange rate on June 30, 2017).

As at June 30, 2017, no amounts were drawn under these lines of credit.

 

21


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

13. Financial instruments

Financial instruments by category

The carrying value and fair value of financial instruments by class as at June 30, 2017 are as follows:

Financial assets

 

     Loans and
receivables
     Financial
assets at
FVTPL
     Derivative
designated
as cash flow
hedges (carried
at fair value)
     Available
for
sale
     Total
carrying
value
     Total
fair value
 

Cash and cash equivalents

   $ 105,102      $ —      $ —      $ —      $ 105,102      $ 105,102  

Investment in fixed deposits

     24,776        —        —        —        24,776        24,776  

Investments in marketable securities and mutual funds

     —        —        —          64,550        64,550        64,550  

Investment in FMPs

     —        98        —          —        98        98  

Trade receivables

     62,727        —        —        —        62,727        62,727  

Unbilled revenue

     54,819        —        —        —        54,819        54,819  

Funds held for clients

     8,943        —        —        —        8,943        8,943  

Prepayments and other assets(1)

     4,581        —        —        —        4,581        4,581  

Other non-current assets(2)

     9,470        —        —        —        9,470        9,470  

Derivative assets

     —        3,353        27,335        —        30,688        30,688  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total carrying value

   $ 270,418      $ 3,451      $ 27,335      $ 64,550      $ 365,754      $ 365,754  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

 

     Financial
liabilities at
FVTPL
     Derivative
designated
as cash flow
hedges (carried
at fair value)
     Financial
liabilities at
amortized
cost
     Total
carrying
value
     Total
fair value
 

Trade payables

   $ —      $ —      $ 18,372      $ 18,372      $ 18,372  

Long term debt (includes current portion)(3)

     —        —        118,000        118,000        118,000  

Other employee obligations(4)

     —        —        32,808        32,808        32,808  

Provision and accrued expenses(5)

     —        —        29,486        29,486        29,486  

Other liabilities(6)

     17,974        —        644        18,618        18,618  

Derivative liabilities

     1,330        5,085        —        6,415        6,415  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total carrying value

   $ 19,304      $ 5,085      $ 199,310      $ 223,699      $ 223,699  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Notes:

 

(1) Excluding non-financial assets $25,786.
(2) Excluding non-financial assets $22,714.
(3) Excluding non-financial asset (unamortized debt issuance cost) $1,125.
(4) Excluding non-financial liabilities $18,830.
(5) Excluding non-financial liabilities $Nil.
(6) Excluding non-financial liabilities $14,458.

 

22


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The carrying value and fair value of financial instruments by class as at March 31, 2017 are as follows:

Financial assets

 

     Loans and
receivables
     Financial
assets at
FVTPL
     Derivative
designated
as cash flow
hedges (carried
at fair value)
     Available
for sale
     Total
carrying
value
     Total
fair value
 

Cash and cash equivalents

   $ 69,803      $ —      $ —      $ —      $ 69,803      $ 69,803  

Investment in fixed deposits

     24,673        —        —        —        24,673        24,673  

Investments in marketable securities and mutual funds

     —        —        —          87,652        87,652        87,652  

Investment in FMPs

     —          96        —          —        96        96  

Trade receivables

     60,423        —        —        —        60,423        60,423  

Unbilled revenue

     48,915        —        —        —        48,915        48,915  

Funds held for clients

     9,135        —        —        —        9,135        9,135  

Prepayments and other assets(1)

     4,262        —        —        —        4,262        4,262  

Other non-current assets(2)

     10,791        —          —        —        10,791        10,791  

Derivative assets

     —        5,041      36,941      —        41,982      41,982  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total carrying value

   $ 228,002      $ 5,137      $ 36,941      $ 87,652      $ 357,732      $ 357,732  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

 

     Financial
liabilities at
FVTPL
     Derivative
designated
as cash flow
hedges (carried
at fair value)
     Financial
liabilities at
amortized
cost
     Total
carrying
value
     Total
fair value
 

Trade payables

   $ —      $ —      $ 14,239      $ 14,239      $ 14,239  

Long term debt (includes current portion)(3)

     —        —        118,000        118,000        118,000  

Other employee obligations(4)

     —        —        46,701        46,701        46,701  

Provision and accrued expenses

     —        —        27,217        27,217        27,217  

Other liabilities(5)

     19,678      —        1,086        20,764        20,764  

Derivative liabilities

     26      4,757      —        4,783        4,783  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total carrying value

   $ 19,704      $ 4,757      $ 207,243      $ 231,704      $ 231,704  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Notes:

 

(1) Excluding non-financial assets $23,123.
(2) Excluding non-financial assets $21,153.
(3) Excluding non-financial asset (unamortized debt issuance cost) $1,257.
(4) Excluding non-financial liabilities $16,912.
(5) Excluding non-financial liabilities $13,720.

For the financial assets and liabilities subject to offsetting or similar arrangements, each agreement between the Company and the counterparty allows for net settlement of the relevant financial assets and liabilities when both elect to settle on a net basis. In the absence of such an election, financial assets and liabilities will be settled on a gross basis.

 

23


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

Financial assets and liabilities subject to offsetting, enforceable master netting arrangements or similar agreements as at June 30, 2017 are as follows:

 

    

Gross

amounts of

    

Gross amounts

of recognized

financial

liabilities offset

in the

    

Net amounts

of financial

assets

presented in

     Related amount not set off in
financial instruments
        

Description of types of financial assets

   recognized
financial
assets
     statement of
financial
position
     the statement
of financial
position
     Financial
instruments
    Cash
collateral
received
     Net
Amount
 

Derivative assets

   $ 30,688      $ —        $ 30,688      $ (2,066   $ —        $ 28,622  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 30,688      $ —        $ 30,688      $ (2,066   $ —        $ 28,622  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

    

Gross

amounts of

    

Gross amounts

of recognized

financial assets

offset in the

    

Net amounts

of financial

liabilities

presented in

     Related amount not set off in
financial instruments
        

Description of types of financial liabilities

   recognized
financial
liabilities
     statement of
financial
position
     the statement
of financial
position
     Financial
instruments
    Cash
collateral
pledged
     Net
Amount
 

Derivative liabilities

   $ 6,415      $ —        $ 6,415      $ (2,066   $ —        $ 4,349  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 6,415      $ —        $ 6,415      $ (2,066   $ —        $ 4,349  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Financial assets and liabilities subject to offsetting, enforceable master netting arrangements or similar agreements as at March 31, 2017 are as follows:

 

    

Gross

amounts of

    

Gross amounts

of recognized

financial

liabilities offset

in the

    

Net amounts

of financial

assets

presented in

     Related amount not set off in
financial instruments
        

Description of types of financial assets

   recognized
financial
assets
     statement of
financial
position
     the statement
of financial
position
     Financial
instruments
    Cash
collateral
received
     Net
Amount
 

Derivative assets

   $ 41,982      $ —        $ 41,982      $ (1,712   $ —      $ 40,270  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 41,982      $ —      $ 41,982      $ (1,712   $ —      $ 40,270  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

    

Gross

amounts of

    

Gross amounts

of recognized

financial assets

offset in the

    

Net amounts

of financial

liabilities

presented in

     Related amount not set off in
financial instruments
        

Description of types of financial liabilities

   recognized
financial
liabilities
     statement of
financial
position
     the statement
of financial
position
     Financial
Instruments
    Cash
collateral
pledged
     Net
Amount
 

Derivative liabilities

   $ 4,783      $ —      $ 4,783      $ (1,712   $ —      $ 3,071  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 4,783      $ —      $ 4,783      $ (1,712   $ —      $ 3,071  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Fair value hierarchy

The following is the hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — other techniques for which all inputs have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3 — techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The assets and liabilities measured at fair value on a recurring basis as at June 30, 2017 are as follows:

 

                   Fair value measurement at reporting date using  

Description

          June 30,
2017
     Quoted
prices in
active
markets
for identical
assets
(Level 1)
     Significant
other
observable
inputs
(Level 2)
     Significant
unobservable
inputs
(Level 3)
 

Assets

              

Financial assets at FVTPL

              

Foreign exchange contracts

      $ 3,353      $ —        $ 3,353      $ —    

Investment in FMPs

        98        98        —          —    

Financial assets at fair value through other comprehensive income

              

Foreign exchange contracts

        27,297        —          27,297        —    

Interest rate swaps

        38        —          38        —    

Investments in marketable securities and mutual funds

        64,550        64,111        439        —    
     

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

      $ 95,336      $ 64,209      $ 31,127      $ —    
     

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

              

Financial liabilities at FVTPL

              

Foreign exchange contracts

      $ 1,330      $ —        $ 1,330      $ —    

Contingent consideration

        17,974        —          —          17,974  

Financial liabilities at fair value through other comprehensive income

              

Foreign exchange contracts

        4,517        —          4,517        —    

Interest rate swaps

        568        —          568        —    
     

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

      $ 24,389      $ —        $ 6,415      $ 17,974  
     

 

 

    

 

 

    

 

 

    

 

 

 

 

25


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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The assets and liabilities measured at fair value on a recurring basis as at March 31, 2017 are as follows:-

 

            Fair value measurement at reporting date using  

Description

   March 31,
2017
     Quoted
prices in
active
markets
for identical
assets
(Level 1)
     Significant
other
observable
inputs
(Level 2)
     Significant
unobservable
inputs
(Level 3)
 

Assets

           

Financial assets at FVTPL

           

Foreign exchange contracts

   $ 5,041      $ —      $ 5,041      $ —  

Investment in FMPs

     96        96        —        —    

Financial assets at fair value through other comprehensive income

           

Foreign exchange contracts

     36,733        —        36,733        —  

Interest rate swaps

     208        —        208        —  

Investments in marketable securities and mutual funds

     87,652        87,223        429      —  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 129,730      $ 87,319      $ 42,411      $ —  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Financial liabilities at FVTPL

           

Foreign exchange contracts

   $ 26      $ —      $ 26      $ —  

Contingent consideration

     19,678        —                 19,678  

Financial liabilities at fair value through other comprehensive income

           

Foreign exchange contracts

     4,136        —        4,136        —  

Interest rate swaps

     621        —          621        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 24,461      $ —      $ 4,783      $ 19,678
  

 

 

    

 

 

    

 

 

    

 

 

 

Description of significant unobservable inputs to Level 3 valuation

The fair value of the contingent consideration liability was estimated using a probability weighted method and achievement of revenue target with a discount rate of 2.5%. One percentage point change in the unobservable inputs used in fair valuation of the contingent consideration does not have a significant impact on its value.

The fair value is estimated using discounted cash flow approach which involves assumptions and judgments regarding risk characteristics of the instruments, discount rates, future cash flows and foreign exchange spot, forward premium rates and market rates of interest.

During the three months ended June 30, 2017 and the year ended March 31, 2017, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Fair value on a non-recurring basis as at March 31, 2017

The non-recurring fair value measurement for the Auto Claim BPM CGU of $38,492 (before cost of disposal of $656) has been categorized as level 3 fair value based on the inputs to the valuation technique used.

Derivative financial instruments

The primary risks managed by using derivative instruments are foreign currency exchange risk and interest rate risk. Forward and option contracts up to 24 months on various foreign currencies are entered into to manage the foreign currency exchange rate risk on forecasted revenue denominated in foreign currencies and monetary assets and liabilities held in non-functional currencies. Interest rate swaps are entered to manage interest rate risk associated with the Company’s floating rate borrowings. The Company’s primary exchange rate exposure is with the US dollars and pound sterling against the Indian rupee. For derivative instruments which qualify for cash flow hedge accounting, the Company records the effective portion of gain or loss from changes in the fair value of the derivative instruments in other comprehensive income (loss), which is reclassified into earnings in the same period during which the hedged item affects earnings. Derivative instruments qualify for hedge accounting when the instrument is designated as a hedge; the hedged item is specifically identifiable and exposes the Company to risk; and it is expected that a change in fair value of the derivative instrument and an opposite change in the fair value of the hedged item will have a high degree of correlation. Determining the high degree of correlation between the change in fair value of the hedged item and the derivative instruments involves significant judgment including the probability of the occurrence of the forecasted transaction. When it is highly probable that a forecasted transaction will not occur, the Company discontinues the hedge accounting and recognizes immediately in the consolidated statement of income, the gains and losses attributable to such derivative instrument that were accumulated in other comprehensive income (loss).

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The following table presents the notional values of outstanding foreign exchange forward contracts, foreign exchange option contracts and interest rate swap contracts:

 

     As at  
     June 30,
2017
     March 31,
2017
 

Forward contracts (Sell)

     

In US dollars

   $ 253,871      $ 241,673  

In United Kingdom pound sterling

     136,890        126,441  

In Euro

     21,276        14,769  

In Australian dollars

     53,426        43,474  

Others

     3,971        3,511  
  

 

 

    

 

 

 
   $ 469,434      $ 429,868  
  

 

 

    

 

 

 

Option contracts (Sell)

     

In US dollars

   $ 83,806      $ 84,490  

In United Kingdom pound sterling

     98,704        94,094  

In Euro

     19,954        14,494  

In Australian dollars

     22,585        19,412  

Others

     1,757        1,978  
  

 

 

    

 

 

 
   $ 226,806      $ 214,468  
  

 

 

    

 

 

 

Interest Rate Swap contracts

     

In US dollars

     118,000        118,000  

The amount of gain/ (loss) reclassified from other comprehensive income into consolidated statement of income in respective line items for the three months ended June 30, 2017 and 2016 are as follows:

 

     Three months ended June 30,  
     2017      2016  

Revenue

   $ 3,778      $ 1,453  

Foreign exchange gain, net

     5,202        2,276  

Finance expense

     (211      —    

Income tax related to amounts reclassified into consolidated statement of income

     (3,231 )      (1,421 )
  

 

 

    

 

 

 

Total

   $ 5,538      $ 2,308  
  

 

 

    

 

 

 

As at June 30, 2017, the gain amounting to $11,017 on account of cash flow hedges in relation to forward and option contracts entered is expected to be reclassified from other comprehensive income into consolidated statement of income over a period of 24 months and loss amounting to $474 on account of cash flow hedges in relation to interest rate swaps is expected to be reclassified from other comprehensive income into consolidated statement of income over a period of 57 months.

Due to the discontinuation of cash flow hedge accounting on account of non-occurrence of original forecasted transactions by the end of the originally specified time period, the Company recognized in the consolidated statement of income for the three months ended June 30, 2017 and 2016 a loss of $152 and gain of $666, respectively.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

14. Pension and other employee obligations

Pension and other employee obligations consist of the following:

 

     As at  
     June 30,
2017
     March 31,
2017
 

Current:

     

Salaries and bonus

   $ 32,808      $ 46,701  

Pension

     873        770  

Withholding taxes on salary and statutory payables

     5,956        5,462  
  

 

 

    

 

 

 

Total

   $ 39,637      $ 52,933  
  

 

 

    

 

 

 

Non-current:

     

Pension and other obligations

   $ 12,001      $ 10,680  
  

 

 

    

 

 

 

Total

   $ 12,001      $ 10,680  
  

 

 

    

 

 

 

 

15. Provisions and accrued expenses

Provisions and accrued expenses consist of the following:

 

     As at  
     June 30,
2017
     March 31,
2017
 

Accrued expenses

     29,486        27,217  
  

 

 

    

 

 

 

Total

   $ 29,486      $ 27,217  
  

 

 

    

 

 

 

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

16. Deferred revenue

Deferred revenue consists of the following:

 

     As at  
     June 30,
2017
     March 31,
2017
 

Current:

     

Payments in advance of services

   $ 689      $ 717  

Advance billings

     2,814        4,014  

Others

     1,146        747  
  

 

 

    

 

 

 

Total

   $ 4,649      $ 5,478  
  

 

 

    

 

 

 

 

     As at  
     June 30,
2017
     March 31,
2017
 

Non-current:

     

Payments in advance of services

   $ 515      $ 359  

Others

     19        19  
  

 

 

    

 

 

 

Total

   $ 534      $ 378  
  

 

 

    

 

 

 

 

17. Other liabilities

Other liabilities consist of the following:

 

     As at  
     June 30,
2017
     March 31,
2017
 

Current:

     

Withholding taxes and value added tax payables

   $ 5,594      $ 5,356  

Contingent consideration (Refer note 4(a), 4(b) and 4(c))

     8,235        8,252  

Deferred rent

     682        677  

Other liabilities

     1,495        1,730  
  

 

 

    

 

 

 

Total

   $ 16,006      $ 16,015  
  

 

 

    

 

 

 

Non-current:

     

Deferred rent

   $ 5,640      $ 5,292  

Contingent consideration (Refer note 4(a), 4(b) and 4(c))

     9,739        11,426  

Other liabilities

     1,691        1,751  
  

 

 

    

 

 

 

Total

   $ 17,070      $ 18,469  
  

 

 

    

 

 

 

 

29


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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

18. Share capital

As at June 30, 2017, the authorized share capital was £6,100 divided into 60,000,000 ordinary shares of 10 pence each and 1,000,000 preferred shares of 10 pence each. The Company had 50,548,955 ordinary shares (excluding 3,300,000 treasury shares) outstanding as at June 30, 2017. There were no preferred shares outstanding as at June 30, 2017.

As at March 31, 2017, the authorized share capital was £6,100 divided into 60,000,000 ordinary shares of 10 pence each and 1,000,000 preferred shares of 10 pence each. The Company had 50,012,559 ordinary shares (excluding 3,300,000 treasury shares) outstanding as at March 31, 2017. There were no preferred shares outstanding as at March 31, 2017.

Treasury shares

On March 16, 2016, the Company’s shareholders authorized a share repurchase program for the repurchase of up to 3.3 million of the Company’s ADSs at a price range of $10 to $50 per ADS. Pursuant to the terms of the repurchase program, the Company’s ADSs may be purchased in the open market from time to time for 36 months from March 16, 2016, the date of shareholders’ approval. The Company is not obligated under the repurchase program to repurchase a specific number of ADSs, and the repurchase program may be suspended at any time at the Company’s discretion.

During the year ended March 31, 2017, the Company purchased 2,200,000 ADSs in the open market for a total consideration of $64,224 (including transaction costs of $33 for share repurchase of 2,200,000 ADSs, $111 paid towards cancellation fees for ADSs in relation to share repurchase of 2,200,000 ADSs which was completed during the year ended March 31, 2017, and $55 paid towards cancellation fees for ADSs in relation to share repurchase of 1,100,000 ADSs, which was completed during the year ended March 31, 2016). The shares underlying these purchased ADSs are recorded as treasury shares.

During the quarter ended June 30, 2017, the Company has not made any share repurchases under the said share repurchase program.

 

19. Expenses by nature

Expenses by nature consist of the following:

 

     Three months ended June 30,  
     2017      2016  

Employee cost

   $ 108,721      $ 81,314  

Repair payments

     4,844        7,192  

Facilities cost

     21,939        17,926  

Depreciation

     4,801        4,123  

Legal and professional expenses

     5,574        3,271  

Travel expenses

     5,920        4,602  

Others

     9,457        8,817  
  

 

 

    

 

 

 

Total cost of revenue, selling and marketing and general and administrative expenses

   $ 161,256      $ 127,245  
  

 

 

    

 

 

 

 

20. Finance expense

Finance expense consists of the following:

 

     Three months ended June 30,  
     2017      2016  

Interest expense

   $ 749      $ 68  

Interest rate swaps

     211        —    

Debt issue cost

     132        —    
  

 

 

    

 

 

 

Total

   $ 1,092      $ 68  
  

 

 

    

 

 

 

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

21. Other income, net

Other income, net consists of the following:

 

     Three months ended June 30,  
     2017      2016  

Interest income

   $ 791      $ 470  

Dividend income

     873        1,323  

Net gain arising on financial assets designated as FVTPL

     2        —  

Others, net

     1,113        536  
  

 

 

    

 

 

 

Total

   $ 2,779      $ 2,329  
  

 

 

    

 

 

 

 

22. Share-based payments

The Company has three share-based incentive plans: the 2002 Stock Incentive Plan adopted on July 1, 2002 (which has expired), the 2006 Incentive Award Plan adopted on June 1, 2006, as amended and restated in February 2009, September 2011 and September 2013 (which has expired), and the 2016 Incentive Award Plan effective from September 27, 2016 (collectively referred to as the “Plans”). All these plans are equity settled. Under the Plans, share-based options and RSUs may be granted to eligible participants. Options and RSUs are generally granted for a term of ten years and have a graded vesting period of up to three years. The Company settles employee share-based option exercises with newly issued ordinary shares. As at June 30, 2017, the Company had 2,530,364 ordinary shares available for future grants.

Share-based compensation expense during the three months ended June 30, 2017 and 2016 is as follows:

 

     Three months ended June 30,  
     2017      2016  

Share-based compensation expense recorded in

     

Cost of revenue

   $ 776      $ 609  

Selling and marketing expenses

     524        295  

General and administrative expenses

     5,062        4,482  
  

 

 

    

 

 

 

Total share-based compensation expense

   $ 6,362      $ 5,386  
  

 

 

    

 

 

 

Upon exercise of share-based options and RSUs, the Company issued 536,396 and 260,785 shares, respectively, for the three months ended June 30, 2017 and 2016, respectively.

RSUs related to Total Shareholder’s Return (‘TSR’)

During the quarter ended June 30, 2017, the Company has issued 135,630 RSUs to certain key employees linked to the TSR of the Company in addition to service and performance conditions.

The performance of these RSUs shall be assessed based on the TSR of the custom peer group (based on percentile rank) and the industry index (based on outperformance rank). The RSUs granted with the TSR condition, shall vest on the third anniversary of the grant date, subject to the participant’s continued employment with the Company through the applicable vesting date and achievement of the specified conditions of stock performance and total shareholder return parameters.

The fair value of these RSUs is determined using Monte-Carlo simulation. The grant date fair value was determined at $36.52. As at June 30, 2017, there was $4,717 of unrecognized compensation cost related to these RSUs.

 

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

23. Income taxes

The domestic and foreign source component of profit/ (loss) before income taxes is as follows:

 

     Three months ended June 30,  
     2017      2016  

Domestic

   $ (808 )    $ (1,013 )

Foreign

     22,251        17,814  
  

 

 

    

 

 

 

Profit before income taxes

   $ 21,443      $ 16,801  
  

 

 

    

 

 

 

 

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The Company’s provision for income taxes consists of the following:

 

     Three months ended June 30,  
     2017      2016  

Current taxes

  

Domestic taxes

   $ —      $ —  

Foreign taxes

     4,726        6,314  
  

 

 

    

 

 

 
   $ 4,726      $ 6,314  
  

 

 

    

 

 

 

Deferred taxes

  

Domestic taxes

     —        —  

Foreign taxes

     21        (1,675 )
  

 

 

    

 

 

 
     21        (1,675 )
  

 

 

    

 

 

 

Provision for income taxes

   $ 4,747      $ 4,639  
  

 

 

    

 

 

 

Domestic taxes are nil as there are no statutory taxes applicable in Jersey, Channel Islands at a rate of 0%. Foreign taxes are based on applicable tax rates in each subsidiary’s jurisdiction.

Provision (credit) for income taxes has been allocated as follows:

 

     Three months ended June 30,  
     2017      2016  

Income taxes on profit

   $ 4,747      $ 4,639  

Income taxes on other comprehensive income/(loss)

     

Unrealized gain on cash flow hedging derivatives

     (3,126      2,208  

Income taxes recognized in equity

     

Excess tax deductions related to share based options and RSUs

     (291      642  
  

 

 

    

 

 

 

Total income taxes

   $ 1,330      $ 7,489  
  

 

 

    

 

 

 

The Company has a delivery center located in Gurgaon, India registered under the Special Economic Zone (“SEZ”) scheme, and is eligible for 50% income tax exemption from fiscal 2013 to fiscal 2022. The Company in fiscal 2012 started operations in delivery centers in Pune, Mumbai and Chennai, India registered under the SEZ scheme which were eligible for a 100% income tax exemption until fiscal 2016 and is eligible for a 50% income tax exemption from fiscal 2017 to fiscal 2026. During fiscal 2015, the Company started its operations in new delivery centers in Gurgaon and Pune, India registered under the SEZ scheme that are eligible for a 100% income tax exemption until fiscal 2019, and a 50% income tax exemption from fiscal 2020 to fiscal 2029. The Government of India pursuant to the Indian Finance Act, 2011 has also levied a minimum alternate tax (“MAT”) on the book profits earned by the SEZ units at the prevailing rate which is currently 21.34%. The Company’s operations in Costa Rica are eligible for a 100% income tax exemption until fiscal 2017 and a 50% income tax exemption from fiscal 2018 to fiscal 2021. The Company’s operations in one of the units located in the Philippines were eligible for tax exemptions which expired in fiscal 2016. During fiscal 2013, the Company started operations in a delivery center in Techno Plaza II, Manila which was eligible for a tax exemption that expired in fiscal 2017. During fiscal 2016, the Company started its operations in a new delivery center in the Philippines which is eligible for a tax exemption until fiscal 2020. During fiscal 2017, the Company opened two additional delivery centers in Iloilo, Manila and Alabang, Philippines which are eligible for a 100% tax exemption until fiscal 2021. The Government of Sri Lanka has exempted the profits earned from export revenue from tax, which enables the Company’s Sri Lankan subsidiary to continue to claim a tax exemption.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

From time to time, the Company receives orders of assessment from the Indian tax authorities assessing additional taxable income on the Company and/or its subsidiaries in connection with their review of their tax returns. The Company currently has orders of assessment outstanding for various years through fiscal 2013, which assess additional taxable income that could in the aggregate give rise to an estimated $36,995 in additional taxes, including interest of $13,701. These orders of assessment allege that the transfer prices the Company applied to certain of the international transactions between WNS Global and its other wholly-owned subsidiaries were not on arm’s length terms, disallow a tax holiday benefit claimed by the Company, deny the set off of brought forward business losses and unabsorbed depreciation and disallow certain expenses claimed as tax deductible by WNS Global. The Company has appealed against these orders of assessment before higher appellate authorities.

In addition, the Company has orders of assessment pertaining to similar issues that have been decided in favor of the Company by first level appellate authorities, vacating the tax demands of $45,003 in additional taxes, including interest of $13,897. The income tax authorities have filed appeals against these orders at higher appellate authorities.

Uncertain tax positions are reflected at the amount likely to be paid to the taxation authorities. A liability is recognized in connection with each item that is not probable of being sustained on examination by taxing authority. The liability is measured using single best estimate of the most likely outcome for each position taken in the tax return. Thus the provision would be the aggregate liability in connection with all uncertain tax positions. As at June 30, 2017, the Company has provided a tax reserve of $12,484 primarily on account of the Indian tax authorities’ denying the set off of brought forward business losses and unabsorbed depreciation.

As at June 30, 2017, corporate tax returns for years ended March 31, 2014 (for certain legal entities) and onward remain subject to examination by tax authorities in India.

Based on the facts of these cases, the nature of the tax authorities’ disallowances and the orders from first level appellate authorities deciding similar issues in favor of the Company in respect of assessment orders for earlier fiscal years and after consultation with the Company’s external tax advisors, the Company believe these orders are unlikely to be sustained at the higher appellate authorities. The Company has deposited $12,081 of the disputed amounts with the tax authorities and may be required to deposit the remaining portion of the disputed amounts with the tax authorities pending final resolution of the respective matters.

Others

On March 21, 2009, the Company received an assessment order from the Indian service tax authority, demanding payment of $5,391 of service tax and related penalty for the period from March 1, 2003 to January 31, 2005. The assessment order alleges that service tax is payable in India on BPM services provided by the Company to clients based abroad as the export proceeds are repatriated outside India by the Company. In response to the appeal filed by the Company with appellate tribunal against the assessment order in April 2009, the appellate tribunal has remanded the matter back to lower tax authorities to be adjudicated afresh. After consultation with Indian tax advisors, the Company believes this order of assessment is more likely than not to be upheld in favor of the Company. The Company intends to continue to vigorously dispute the assessment.

 

24. Earnings per share

The following table sets forth the computation of basic and diluted earnings per share:

 

     Three months ended June 30,  
     2017      2016  

Numerator:

     

Profit

   $ 16,696      $ 12,162  

Denominator:

     

Basic weighted average ordinary shares outstanding

     50,285,835        51,238,414  

Dilutive impact of equivalent stock options and RSUs

     2,273,014        2,100,814  

Diluted weighted average ordinary shares outstanding

     52,558,849        53,339,228  

The computation of earnings per ordinary share (“EPS”) was determined by dividing profit by the weighted average ordinary shares outstanding during the respective periods.

 

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

25. Subsidiaries

The following is a list of subsidiaries of WNS as at June 30, 2017:

 

Direct subsidiaries

 

Step subsidiaries

  

Place of

Incorporation

WNS Global Services Netherlands Cooperatief U.A.

     The Netherlands
  WNS Global Services Philippines Inc.    Philippines
  WNS Global Services (Romania) S.R.L.    Romania

WNS North America Inc.

     Delaware, USA
  WNS Business Consulting Services Private Limited    India
  WNS Global Services Inc.    Delaware, USA
  WNS BPO Services Costa Rica, S.R.L    Costa Rica
  Denali Sourcing Services Inc.(1)    Delaware, USA

WNS Global Services (UK) Limited(2)

     United Kingdom
  WNS Global Services SA (Pty) Limited    South Africa
 

- WNS B-BBEE Staff Share Trust(3)

   South Africa
 

- Ucademy (Pty) Limited(4)

   South Africa

WNS Assistance Limited (previously WNS Workflow Technologies Limited)

     United Kingdom
  WNS Assistance (Legal) Limited(5)    United Kingdom
  Accidents Happen Assistance Limited    United Kingdom
  WNS Legal Assistance LLP(6)    United Kingdom

WNS (Mauritius) Limited

     Mauritius
  WNS Capital Investment Limited    Mauritius
 

- WNS Customer Solutions (Singapore) Private Limited

   Singapore
 

- WNS Global Services (Australia) Pty Ltd

   Australia
 

- WNS New Zealand Limited(7)

   New Zealand
 

- Business Applications Associates Beijing Ltd

   China
  WNS Global Services Private Limited(8)    India
 

- MTS HealthHelp Inc.(9)

   Delaware, USA
 

- HealthHelp Holdings LLC(9)

   Delaware, USA
 

- HealthHelp LLC(9)

   Delaware, USA
 

- Value Edge Research Services Private Limited(10)

   India
 

- Value Edge Inc.(10)

   Delaware, USA
 

- Value Edge AG.(10)

   Switzerland
 

- Value Edge GmbH(10)

   Germany
  WNS Global Services (Private) Limited    Sri Lanka
  WNS Global Services (Dalian) Co. Ltd.    China

Notes:

 

(1) On January 20, 2017, the Company acquired all outstanding equity shares of Denali Sourcing Services Inc.
(2) WNS Global Services (UK) is being jointly held by WNS Holdings Limited and WNS Global Services Private Limited. The percentage of holding of WNS Holdings Limited is 49.3% and of WNS Global Services Private Limited is 50.7%.
(3) The WNS B-BBEE Staff Share Trust (‘the trust’) was registered on April 26, 2017 with the principal object of creating meaningful participation of our Black employees in the growth of our Company. The trust holds 10% of the equity capital of WNS Global Services SA (Pty) Limited and the balance 90% is held by WNS Global Services (UK) Limited. The financial statements of the trust are included in the consolidated financial statements of the Company.
(4) Ucademy (Pty) Limited has been incorporated as a subsidiary of WNS Global Services SA (Pty) Limited with effect from June 20, 2016.
(5) WNS Assistance (Legal) Limited, a wholly owned subsidiary of WNS Assistance Limited, was incorporated on April 20, 2016.
(6) WNS Legal Assistance LLP is a limited liability partnership, organized under the laws of England and Wales in November 2014. WNS Legal Assistance LLP provides legal services in relation to personal injury claims within the Auto Claims BPM (as defined in Note 26) segment in the UK. During the quarter ended June 30, 2017, the Company acquired 20% equity shares from Prettys Solicitors; the non-controlling interest in WNS Legal Assistance LLP, as a consequence of which, WNS Legal Assistance LLP has become a wholly owned subsidiary of WNS Assistance Limited. As at June 30, 2017, WNS Legal Assistance LLP is 98.75% owned by WNS Assistance Limited and 1.25% owned by WNS Assistance (Legal) Limited.
(7) WNS New Zealand Limited, a wholly owned subsidiary of WNS Global Services (Australia) Pty Ltd, was incorporated on June 13, 2017.
(8) WNS Global Services Private Limited is being held jointly by WNS (Mauritius) Limited and WNS Customer Solutions (Singapore) Private Limited. The percentage of holding for WNS (Mauritius) Limited is 80% and for WNS Customer Solutions (Singapore) Private Limited is 20%.
(9) On March 15, 2017, the Company acquired all ownership interests of MTS HealthHelp Inc. and its subsidiaries, which existed on that date. HealthHelp Holdings LLC is 63.5% owned by MTS HealthHelp Inc. and 36.5% owned by WNS North America Inc.
(10) On June 14, 2016, the Company acquired all outstanding equity shares of Value Edge Research Services Private Limited. As part of the acquisition, the Company also acquired the three subsidiaries of Value Edge Research Services Private Limited, which existed on that date.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

26. Operating segments

The Company has several operating segments based on a mix of industry and the types of services. The composition and organization of these operating segments currently is designed in such a way that the back office shared processes, i.e. the horizontal structure, delivers service to industry specific back office and front office processes i.e. the vertical structure. These structures represent a matrix form of organization structure, accordingly operating segments have been determined based on the core principle of segment reporting in accordance with IFRS 8 “Operating segments” (“IFRS 8”). These operating segments include travel, insurance, banking and financial services, healthcare, utilities, retail and consumer products groups, auto claims and others. The Company believes that the business process outsourcing services that it provides to customers in industries other than auto claims such as travel, insurance, banking and financial services, healthcare, utilities, retail and consumer products groups and others that are similar in terms of services, service delivery methods, use of technology, and long-term gross profit and hence meet the aggregation criteria in accordance with IFRS 8. WNS Assistance and Accidents Happen Assistance Limited (which provide automobile repair through a network of third party repair centers), and WNS Legal Assistance LLP (which provides legal services in relation to personal injury claims), which constitute WNS Auto Claims BPM, do not meet the aggregation criteria. Accordingly, the Company has determined that it has two reportable segments “WNS Global BPM” and “WNS Auto Claims BPM.”

The Group Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”). The CODM evaluates the Company’s performance and allocates resources based on revenue growth of vertical structure.

In order to provide accident management services, the Company arranges for the repair through a network of repair centers. Repair costs paid to automobile repair centers are invoiced to customers and recognized as revenue except in cases where the Company has concluded that it is not the principal in providing claims handling services and hence it would be appropriate to record revenue from repair services on a net basis i.e. net of repair cost. The Company uses revenue less repair payments (non-GAAP) for “Fault” repairs as a primary measure to allocate resources and measure segment performance. Revenue less repair payments is a non-GAAP measure which is calculated as (a) revenue less (b) in the Company’s auto claims business, payments to repair centers for “Fault” repair cases where the Company acts as the principal in its dealings with the third party repair centers and its clients. For “Non-fault repairs,” revenue including repair payments is used as a primary measure. As the Company provides a consolidated suite of accident management services including credit hire and credit repair for its “Non-fault” repairs business, the Company believes that measurement of that line of business has to be on a basis that includes repair payments in revenue.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The segment results for the three months ended June 30, 2017 are as follows:

 

     Three months ended June 30, 2017  
     WNS
Global BPM
     WNS Auto
Claims BPM
     Inter
segments*
     Total  

Revenue from external customers

   $ 170,718      $ 9,405      $ —        $ 180,123  

Segment revenue

   $ 170,734      $ 9,405      $ (16 )    $ 180,123  

Payments to repair centers

     —          4,844        —          4,844  
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue less repair payments (non-GAAP)

     170,734        4,561        (16 )      175,279  

Depreciation

     4,731        70           4,801  

Other costs

     136,233        4,220        (16 )      140,437  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment operating profit

     29,770        271        —        30,041  

Other income, net

     (2,390 )      (389 )      —        (2,779 )

Finance expense

     1,092        —        —        1,092  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit before income taxes

     31,068        660        —        31,728  

Provision for income taxes

     4,649        98        —        4,747  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit

     26,419        562        —        26,981  

Amortization of intangible assets

              3,923  

Share based compensation expense

              6,362  
           

 

 

 

Profit

            $ 16,696  
           

 

 

 

Addition to non-current assets

   $ 8,897      $ 66      $ —      $ 8,963  

Total assets, net of elimination

     604,182        116,898        —        721,080  

Total liabilities, net of elimination

   $ 206,502      $ 76,795      $ —      $ 283,297  

 

* Transactions between inter segments represent invoices issued by WNS Global BPM to WNS Auto Claims BPM for business process management services rendered by the former to the latter.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The segment results for the three months ended June 30, 2016 are as follows:

 

     Three months ended June 30, 2016  
     WNS
Global BPM
     WNS Auto
Claims BPM
     Inter
segments*
     Total  

Revenue from external customers

   $ 134,992      $ 12,988      $ —      $ 147,980  

Segment revenue

   $ 135,036      $ 12,988      $ (44 )    $ 147,980  

Payments to repair centers

     —        7,192           7,192  
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue less repair payments (non-GAAP)

     135,036        5,796        (44 )      140,788  

Depreciation

     4,039        84           4,123  

Other costs

     104,765        5,693        (44 )      110,414  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment operating profit

     26,232        19        —        26,251  

Other income, net

     (2,098 )      (231 )      —        (2,329 )

Finance expense

     68        —        —        68  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit before income taxes

     28,262        250        —        28,512  

Provision for income taxes

     4,581        58        —        4,639  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit

     23,681        192        —        23,873  

Amortization of intangible assets

              6,325  

Share based compensation expense

              5,386  
           

 

 

 

Profit

            $ 12,162  
           

 

 

 

Addition to non-current assets

   $ 4,053      $ 229      $ —      $ 4,282  

Total assets, net of elimination

     365,178        148,681        —        513,859  

Total liabilities, net of elimination

   $ 42,992      $ 81,757      $ —      $ 124,749  

 

* Transactions between inter segments represent invoices issued by WNS Global BPM to WNS Auto Claims BPM for business process management services rendered by the former to the latter.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

External Revenue

Revenues from the geographic segments are based on domicile of the customer. The Company’s external revenue by geographic area is as follows:

 

     Three months ended June 30,  
     2017      2016  

Jersey, Channel Islands

   $ —      $ —  

UK

     66,092        65,795  

US

     73,071        45,132  

Europe (excluding UK)

     9,851        9,376  

South Africa

     10,509        9,479  

Australia

     13,519        10,597  

Rest of the world

     7,081        7,601  
  

 

 

    

 

 

 

Total

   $ 180,123      $ 147,980  
  

 

 

    

 

 

 

 

27. Commitment and Contingencies

Leases

The Company has entered into various non-cancelable operating lease agreements for certain delivery centers and offices with original lease periods expiring between 2018 and 2028 that are renewable on a periodic basis at the option of the lessor and the lessee and have rent escalation clause. The details of future minimum lease payments under non-cancelable operating leases as at June 30, 2017 are as follows:

 

     Operating Lease  

Less than 1 year

   $ 25,566  

1-3 years

     41,647  

3-5 years

     26,711  

More than 5 years

     26,822  
  

 

 

 

Total minimum lease payments

   $ 120,746  
  

 

 

 

Rental expenses were $7,987 and $6,487 for the three months ended June 30, 2017 and 2016, respectively.

Capital commitments

As at June 30, 2017 and March 31, 2017, the Company had committed to spend approximately $7,460 and $6,257, respectively, under agreements to purchase property and equipment. These amounts are net of capital advances paid in respect of these purchases.

Bank guarantees and others

Certain subsidiaries of the Company hold bank guarantees aggregating $2,237 and $1,190 as at June 30, 2017 and March 31, 2017, respectively. These guarantees have a remaining expiry term ranging from one to five years.

Restricted time deposits placed with bankers as security for guarantees given by them to regulatory authorities aggregating $426 and $355 as at June 30, 2017 and March 31, 2017, respectively, are included in other current assets. These deposits represent cash collateral against bank guarantees issued by the banks on behalf of the Company to third parties.

Contingencies

In the ordinary course of business, the Company is involved in lawsuits, claims and administrative proceedings. While uncertainties are inherent in the final outcome of these matters, the Company believes, after consultation with counsel, that the disposition of these proceedings will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

 

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Part II — MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this report. We urge you to carefully review and consider the various disclosures made by us in this report and in our other SEC filings, including our annual report on Form 20-F for our fiscal year ended March 31, 2017. Some of the statements in the following discussion are forward-looking statements. See “Special note regarding forward-looking statements.”

Overview

We are a leading global provider of BPM services, offering comprehensive data, voice, analytical and business transformation services with a blended onshore, near shore and offshore delivery model. We transfer the business processes of our clients to our delivery centers, located in China, Costa Rica, India, the Philippines, Poland, Romania, South Africa, Sri Lanka, Turkey, the UK, and the US, with a view to offer cost savings, operational flexibility, improved quality and actionable insights to our clients. We seek to help our clients “transform” their businesses by identifying business and process optimization opportunities through technology-enabled solutions, process design improvements, analytics and improved business understanding.

We win outsourcing engagements from our clients based on our domain knowledge of their business, our experience in managing the specific processes they seek to outsource and our customer-centric approach. Our company is organized into vertical business units in order to provide more specialized focus on each of the industries that we target, to more effectively manage our sales and marketing process and to develop in-depth domain knowledge. The major industry verticals we currently target are the insurance; travel and leisure; diversified businesses including manufacturing, retail, CPG, media and entertainment, and telecom; utilities; consulting and professional services; healthcare; banking and financial services; and shipping and logistics industries.

Our portfolio of services includes vertical-specific processes that are tailored to address our clients’ specific business and industry practices. In addition, we offer a set of shared services that are common across multiple industries, including customer interaction services, finance and accounting, research and analytics, technology services, legal services, and human resources outsourcing.

Although we typically enter into long-term contractual arrangements with our clients, these contracts can usually be terminated with or without cause by our clients and often with short notice periods. Nevertheless, our client relationships tend to be long-term in nature given the scale and complexity of the services we provide coupled with risks and costs associated with switching processes in-house or to other service providers. We structure each contract to meet our clients’ specific business requirements and our target rate of return over the life of the contract. In addition, since the sales cycle for offshore business process management is long and complex, it is often difficult to predict the timing of new client engagements. As a result, we may experience fluctuations in growth rates and profitability from quarter to quarter, depending on the timing and nature of new contracts. Our operating results may also differ significantly from quarter to quarter due to seasonal changes in the operations of our clients. For example, our clients in the travel and leisure industry typically experience seasonal changes in their operations in connection with the US summer holiday season, as well as episodic factors such as adverse weather conditions. Our focus, however, is on deepening our client relationships and maximizing shareholder value over the life of a client’s relationship with us.

The following table represents our revenue (a GAAP financial measure) for the periods indicated:

 

     Three months ended June 30,  
     2017      2016  
     (US dollars in millions)  

Revenue

   $ 180.1      $ 148.0  

 

 

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Our revenue is generated primarily from providing business process management services. We have two reportable segments for financial statement reporting purposes — WNS Global BPM and WNS Auto Claims BPM. In our WNS Auto Claims BPM segment, we provide both “fault” and “non-fault” repairs. For “fault” repairs, we provide claims handling and repair management services, where we arrange for automobile repairs through a network of third party repair centers. In our repair management services, where we act as the principal in our dealings with the third party repair centers and our clients, the amounts which we invoice to our clients for payments made by us to third party repair centers are reported as revenue. Where we are not the principal in providing the services, we record revenue from repair services net of repair cost. See Note 2.s of the consolidated financial statements included in our annual report on Form 20-F for our fiscal year ended March 31, 2017. Since we wholly subcontract the repairs to the repair centers, we evaluate the financial performance of our “fault” repair business based on revenue less repair payments to third party repair centers, which is a non-GAAP financial measure. We believe that revenue less repair payments (a non-GAAP financial measure) for “fault” repairs reflects more accurately the value addition of the business process management services that we directly provide to our clients. Management believes that revenue less repair payments (non-GAAP) may be useful to investors as a more accurate reflection of our performance and operational results.

For our “non-fault” repairs business, we generally provide a consolidated suite of accident management services including credit hire and credit repair, and we believe that measurement of such business on a basis that includes repair payments in revenue is appropriate. Revenue including repair payments is therefore used as a primary measure to allocate resources and measure operating performance for accident management services provided in our “non-fault” repairs business. Our “non-fault” repairs business where we provide accident management services accounts for a relatively small portion of our revenue for our WNS Auto Claims BPM segment. In our WNS Auto Claims BPM segment, effective July 1, 2015, WNS Legal Assistance LLP, a subsidiary of WNS Assistance Limited, received an approval from Solicitors Regulatory Authority, UK to provide legal services in relation to personal injury claims.

Revenue less repair payments is a non-GAAP financial measure which is calculated as (a) revenue less (b) in our auto claims business, payments to repair centers for “fault” repair cases where we act as the principal in our dealings with the third party repair centers and our clients. This non-GAAP financial information is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Our revenue less repair payments (non-GAAP) may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation.

The following table reconciles our revenue (a GAAP financial measure) to revenue less repair payments (a non-GAAP financial measure) for the periods indicated:

 

     Three months ended June 30,  
     2017      2016  
     (US dollars in millions)  

Revenue

   $ 180.1      $ 148.0  

Less: Payments to repair centers(1)

     4.8        7.2  
  

 

 

    

 

 

 

Revenue less repair payments (non-GAAP)

   $ 175.3      $ 140.8  
  

 

 

    

 

 

 

Note:

 

1) Consists of payments to repair centers in our auto claims business for “fault” repair cases where we act as the principal in our dealings with the third party repair centers and our clients.

 

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The following table sets forth our constant currency revenue less repair payments (a non-GAAP financial measure) for the periods indicated. Constant currency revenue less repair payments is a non-GAAP financial measure. We present constant currency revenue less repair payments (non-GAAP) so that revenue less repair payments (non-GAAP) 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 (non-GAAP) is presented by recalculating prior periods’ revenue less repair payments (non-GAAP) 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 revenue includes, but is not limited to, revenue denominated in pound sterling, Australian dollars, South African rand and euros. Management believes constant currency revenue less repair payments (non-GAAP) may be useful to investors in evaluating the underlying operating performance of our company. This non-GAAP financial information is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Our constant currency revenue less repair payments (non-GAAP) may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation.

 

     Three months ended June 30,  
     2017      2016  
     (US dollars in millions)  

Revenue less repair payments (non-GAAP)

   $ 175.3      $ 140.8  

Exchange rate impact

     (3.4 )      (6.0 )

Constant currency revenue less repair payments (non-GAAP)

   $ 171.9      $ 134.8  

Global Economic Conditions

Global economic conditions continue to show signs of turbulence. Although some key indicators of sustainable economic growth show signs of improvement, volatility in the domestic politics of major markets may lead to changes in the institutional framework of the international economy. In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national referendum. The referendum was advisory, and the terms of any withdrawal are subject to a negotiation period that could last at least two years after the government of the United Kingdom formally initiated a withdrawal process on March 29, 2017, putting the United Kingdom on track to leave the European Union by April 2019. The referendum has created significant uncertainty about the future relationship between the United Kingdom and the European Union, including with respect to the laws and regulations that will apply as the United Kingdom determines which European Union-derived laws to replace or replicate in the event of a withdrawal. The referendum has also given rise to calls for the governments of other European Union member states to consider withdrawal. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations. China continues to have room for economic growth, but such growth opportunities remain subject to political developments and uncertainties in the regulatory framework of the economy. In the US, economic growth is tempered by continuing concerns over the failure to achieve a long term solution to the issues of government spending, the increasing US national debt, and their negative impact on the US economy as well as concerns over potential increases in cost of borrowing and reduction in availability of credit as the US Federal Reserve begins raising interest rates. The policies that may be pursued by the presidential administration in the US (such as the border adjustment tax under consideration) have added further uncertainty to the global economy, and the prevailing political climate may lead to more protectionist policies. Globally, countries may require additional financial support, sovereign credit ratings may continue to decline, and there may be defaults on sovereign debt obligations of certain countries. Any of these may increase the cost of borrowing and cause credit to become more limited. Further, there continue to be signs of economic weakness, such as relatively high levels of unemployment, in major markets including Europe. Continuing conflicts and instability in various regions around the world may lead to additional acts of terrorism and armed conflict around the world. The ongoing refugee crisis in Europe, North Africa and the Middle East may contribute to political and economic instability in those regions. A resurgence of isolationist and/or protectionist policies in North America, Europe and Asia may curtail global economic growth.

These economic conditions may affect our business in a number of ways. The general level of economic activity, such as decreases in business and consumer spending, could result in a decrease in demand for our services, thus reducing our revenue. The cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Continued turbulence or uncertainty in the European, US, Asian and international financial markets and economies may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our customers. If these market conditions continue or worsen, they may limit our ability to access financing or increase our cost of financing to meet liquidity needs, and affect the ability of our customers to use credit to purchase our services or to make timely payments to us, resulting in adverse effects on our financial condition and results of operations.

 

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Furthermore, a weakening of the rate of exchange for the pound sterling, the US dollar or, to a lesser extent, the Australian dollar or the South African rand (in which our revenue is principally denominated) against the Indian rupee, or to a lesser extent, the South African rand (in which a significant portion of our costs are denominated) would also adversely affect our results. Fluctuations between the pound sterling, the Indian rupee, the Australian dollar or the South African rand, on the one hand, and the US dollar, on the other hand, also expose us to translation risk when transactions denominated in these currencies are translated into US dollars, our reporting currency. The exchange rates between each of the pound sterling, the Indian rupee, the Australian dollar and South African rand, on the one hand, and the US dollar, on the other hand, have changed substantially in recent years and may fluctuate substantially in the future. For example, the pound sterling depreciated against the US dollar by an average of 10.9%, the Indian rupee appreciated against the US dollar by an average of 3.7%, the Australian dollar appreciated against the US dollar by an average of 0.7%, and the South African rand appreciated by an average of 12.4% against the US dollar, for the three months ended June 30, 2017 as compared to the average exchange rate for the three months ended June 30, 2016. The depreciation of the pound sterling against the US dollar, and the appreciation of the Indian rupee and the South African rand against the US dollar for the three months ended June 30, 2017 negatively impacted our results of operations whereas the appreciation of the Australian dollar against the US dollar positively impacted our results of operations during that period.

Uncertainty about current global economic conditions could also continue to increase the volatility of our share price. We cannot predict the timing or duration of an economic slowdown or the timing or strength of a subsequent economic recovery generally or in our targeted industries, including the travel and leisure and insurance industries. If macroeconomic conditions worsen or current global economic conditions continue for a prolonged period of time, we are not able to predict the impact that such worsening conditions will have on our targeted industries in general, and our results of operations specifically.

Revenue

We generate revenue by providing business process management services to our clients. The following table shows our revenue (a GAAP financial measure) and revenue less repair payments (a non-GAAP financial measure) for the periods indicated:

 

     Three months ended
June 30,
     Change  
     (US dollars in millions)                
     2017      2016      $      %  

Revenue

   $ 180.1      $ 148.0        32.1        21.7 %

Revenue less repair payments (non-GAAP)

   $ 175.3      $ 140.8        34.5        24.5 %

Our revenue is characterized by client, industry, service type, geographic and contract type diversity, as the analysis below indicates.

Revenue by Top Clients

For the three months ended June 30, 2017 and 2016, the percentage of revenue and revenue less repair payments (non-GAAP) that we derived from our largest clients were in the proportions set forth in the following table:

 

     As a percentage of revenue     As a percentage of revenue less
repair payments (non-GAAP)
 
     Three months ended June 30,     Three months ended June 30,  
     2017     2016     2017     2016  

Top client

     7.6 %     10.1 %     7.8 %     10.7 %

Top five clients

     30.8 %     32.7 %     31.6 %     34.4 %

Top ten clients

     44.3 %     44.6 %     45.5 %     46.9 %

Top twenty clients

     55.9 %     57.8 %     57.4 %     60.3 %

 

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Revenue by Industry

For financial statement reporting purposes, we aggregate our operating segments, except for the WNS Auto Claims BPM (which we market under the WNS Assistance brand) as it does not meet the aggregation criteria under IFRS. See “— Results by Reportable Segment.”

We organize our company into the following industry-focused business units to provide more specialized focus on each of these industries: insurance; travel and leisure; diversified businesses including manufacturing, retail, CPG, media and entertainment, and telecom; healthcare; utilities; consulting and professional services; banking and financial services; and shipping and logistics.

For the three months ended June 30, 2017 and 2016, our revenue and revenue less repair payments (non-GAAP) were diversified across our industry-focused business units in the proportions set forth in the following table:

 

     As a percentage of revenue     As a percentage of revenue less
repair payments (non-GAAP)
 
     Three months ended June 30,     Three months ended June 30,  

Business Unit

   2017     2016     2017     2016  

Insurance

     26.1 %     30.4 %     24.1 %     26.9 %

Travel and leisure

     18.7 %     21.0 %     19.2 %     22.1 %

Diversified businesses including
manufacturing, retail, CPG, media and entertainment, and telecom

     17.4 %     17.3 %     17.9 %     18.2 %

Healthcare

     14.6 %     6.0 %     15.0 %     6.2 %

Utilities

     9.2 %     9.4 %     9.4 %     9.9 %

Consulting and professional services

     5.4 %     7.5 %     5.6 %     7.9 %

Banking and financial services

     4.6 %     4.3 %     4.7 %     4.5 %

Shipping and logistics

     3.9 %     4.1 %     4.1 %     4.3 %
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0 %     100.0 %     100.0 %     100.0 %
  

 

 

   

 

 

   

 

 

   

 

 

 

Certain services that we provide to our clients are subject to the seasonality of our clients’ business. Accordingly, we see an increase in transaction related services within the travel and leisure industry during holiday seasons, such as during the US summer holidays (our fiscal second quarter); an increase in business in the insurance industry during the beginning and end of the fiscal year (our fiscal first and last quarters) and during the US peak winter season (our fiscal third quarter); and an increase in business in the consumer product industry during the US festive season towards the end of the calendar year when new product launches and campaigns typically happen (our fiscal third quarter).

Revenue by Service Type

For the three months ended June 30, 2017 and 2016, our revenue and revenue less repair payments (non-GAAP) were diversified across service types in the proportions set forth in the following table:

 

     As a percentage of revenue     As a percentage of revenue less
repair payments (non-GAAP)
 
     Three months ended June 30,     Three months ended June 30,  

Service Type

   2017     2016     2017     2016  

Industry-specific

     34.1 %     28.2 %     35.0 %     29.7 %

Customer interaction services

     25.8 %     27.6 %     26.5 %     29.0 %

Finance and accounting

     20.8 %     20.2 %     21.4 %     21.2 %

Research and analytics

     11.8 %     12.4 %     12.1 %     13.0 %

Auto claims

     5.2 %     8.8 %     2.6 %     4.1 %

Others(1)

     2.3 %     2.8 %     2.3 %     3.0 %
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0 %     100.0 %     100.0 %     100.0 %
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

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Note:

 

1) Others includes revenue from technology services, legal services, and human resource outsourcing services.

Revenue by Geography

For the three months ended June 30, 2017 and 2016, our revenue and revenue less repair payments (non-GAAP) were derived from the following geographies (based on the location of our clients) in the proportions set forth below in the following table:

 

     As a percentage of revenue     As a percentage of revenue less
repair payments (non-GAAP)
 
     Three months ended June 30,     Three months ended June 30,  

Geography

   2017     2016     2017     2016  

North America (primarily the US)

     40.6 %     30.5 %     41.7 %     32.1 %

UK

     36.7 %     44.5 %     34.9 %     41.6 %

Australia

     7.5 %     7.2 %     7.7 %     7.5 %

South Africa

     5.8 %     6.4 %     6.0 %     6.7 %

Europe (excluding the UK)

     5.5 %     6.3 %     5.6 %     6.7 %

Rest of the world

     3.9 %     5.1 %     4.0 %     5.4 %
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0 %     100.0 %     100.0 %     100.0 %
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Revenue by Location of Delivery Centers

For the three months ended June 30, 2017 and 2016, our revenue and revenue less repair payments (non-GAAP) were derived from the following geographies (based on the location of our delivery centers) in the proportions set forth in the following table:

 

     As a percentage of revenue     As a percentage of revenue less
repair payments (non-GAAP)
 
     Three months ended June 30,     Three months ended June 30,  

Location of Delivery Center

   2017     2016     2017     2016  

India

     49.1 %     58.8 %     50.5 %     61.8 %

United States

     17.8 %     2.7 %     18.3 %     2.8 %

Philippines

     10.6 %     10.0 %     10.9 %     10.5 %

South Africa

     9.5 %     10.7 %     9.8 %     11.3 %

UK

     7.1 %     10.4 %     4.5 %     5.8 %

Sri Lanka

     2.1 %     2.6 %     2.1 %     2.8 %

Romania

     1.3 %     2.0 %     1.4 %     2.1 %

China

     1.0 %     1.2 %     1.1 %     1.3 %

Poland

     0.9 %     0.9 %     0.9 %     0.9 %

Costa Rica

     0.6 %     0.7 %     0.6 %     0.7 %
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0 %     100.0 %     100.0 %     100.0 %
  

 

 

   

 

 

   

 

 

   

 

 

 

Our Contracts

We provide our services under contracts with our clients, which typically range from three to five years, with some being rolling contracts with no end dates. Typically, these contracts can be terminated by our clients with or without cause and with short notice periods. However, we tend to have long-term relationships with our clients given the complex and comprehensive nature of the business processes executed by us, coupled with the switching costs and risks associated with relocating these processes in-house or to other service providers.

Each client contract has different terms and conditions based on the scope of services to be delivered and the requirements of that client. Occasionally, we may incur significant costs on certain contracts in the early stages of implementation, with the expectation that these costs will be recouped over the life of the contract to achieve our targeted returns. Each client contract has corresponding service level agreements that define certain operational metrics based on which our performance is measured. Some of our contracts specify penalties or damages payable by us in the event of failure to meet certain key service level standards within an agreed upon time frame.

When we are engaged by a client, we typically transfer that client’s processes to our delivery centers over a two to six month period. This transfer process is subject to a number of potential delays. Therefore, we may not recognize significant revenue until several months after commencing a client engagement.

 

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In the WNS Global BPM segment, we charge for our services based on the following pricing models:

 

  1) per full-time equivalent arrangements, which typically involve billings based on the number of full-time employees (or equivalent) deployed on the execution of the business process managed;

 

  2) per transaction arrangements, which typically involve billings based on the number of transactions processed (such as the number of e-mail responses, or airline coupons or insurance claims processed);

 

  3) fixed-price arrangements, which typically involve billings based on achievements of pre-defined deliverables or milestones;

 

  4) outcome-based arrangements, which typically involve billings based on the business result achieved by our clients through our service efforts (such as measured based on a reduction in days sales outstanding, an improvement in working capital, an increase in collections or a reduction in operating expenses); or

 

  5) other pricing arrangements, including cost-plus arrangements, which typically involve billing the contractually agreed direct and indirect costs, a fee based on the number of employees deployed under the arrangement and subscription revenues recognized on per member per month based on contractually agreed rates.

Apart from the above-mentioned pricing methods, a small portion of our revenue comprises reimbursements of out-of-pocket expenses incurred by us in providing services to our clients.

Outcome-based arrangements are examples of non-linear pricing models where revenues from platforms and solutions and the services we provide are linked to usage or savings by clients rather than the efforts deployed to provide these services. We intend to focus on increasing our service offerings that are based on non-linear pricing models that allow us to price our services based on the value we deliver to our clients rather than the headcount deployed to deliver the services to them. We believe that non-linear pricing models help us to grow our revenue without increasing our headcount. Accordingly, we expect increased use of non-linear pricing models to result in higher revenue per employee and improved margins. Non-linear revenues may be subject to short-term pressure on margins, however, as initiatives in developing the products and services take time to deliver. Moreover, in outcome-based arrangements, we bear the risk of failure to achieve clients’ business objectives in connection with these projects. For more information, see “Part III — Risk Factors — If our pricing structures do not accurately anticipate the cost and complexity of performing our work, our profitability may be negatively affected.”

In our WNS Auto Claims BPM segment, we earn revenue from claims handling and repair management services. For claims handling, we charge on a per claim basis or a fixed fee per vehicle over a contract period. For automobile repair management services, where we arrange for the repairs through a network of repair centers that we have established, we invoice the client for the amount of the repair. When we direct a vehicle to a specific repair center, we receive a referral fee from that repair center. We also provide a consolidated suite of services towards accident management including credit hire and credit repair for “non-fault” repairs business. Effective July 1, 2015, our subsidiary WNS Legal Assistance LLP, commenced providing legal services in relation to personal injury claims.

Revenue by Contract Type

For the three months ended June 30, 2017 and 2016, our revenue and revenue less repair payments (non-GAAP) were diversified by contract type in the proportions set forth in the following table:

 

     As a percentage of revenue     As a percentage of revenue less
repair payments (non-GAAP)
 
     Three months ended June 30,     Three months ended June 30,  

Contract Type

   2017     2016     2017     2016  

Full-time-equivalent

     62.7 %     72.8 %     64.4 %     76.5 %

Transaction

     19.0 %     18.7 %     16.7 %     14.6 %

Fixed price

     4.9 %     3.3 %     5.1 %     3.4 %

Outcome-based

     0.2 %     0.3 %     0.2 %     0.3 %

Others

     13.2 %     4.9 %     13.6 %     5.2 %
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0 %     100.0 %     100.0 %     100.0 %
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Expenses

The majority of our expenses consist of cost of revenue and operating expenses. The key components of our cost of revenue are employee costs, facilities costs, payments to repair centers, depreciation, travel expenses, and legal and professional costs. Our operating expenses include selling and marketing expenses, general and administrative expenses, foreign exchange gains and losses and amortization of intangible assets. Our non-operating expenses include finance expenses as well as other expenses recorded under “other income, net.”

Cost of Revenue

Employee costs represent the largest component of cost of revenue. In addition to employee salaries, employee costs include costs related to recruitment, training and retention and share-based compensation expense. Historically, our employee costs have increased primarily due to increases in number of employees to support our growth and, to a lesser extent, to recruit, train and retain employees. Salary levels in India and our ability to efficiently manage and retain our employees significantly influence our cost of revenue. Regulatory developments may still result in wage increases in India and increase our cost of revenue. For example, in December 2015, the Government of India amended the India Payment of Bonus Act, which mandated increased employee bonus amounts for certain wage categories, effective retroactively from April 1, 2014. See “Part I — Item 4. Information on the Company — B. Business Overview — Human Capital” of our annual report on Form 20-F for the fiscal year ended March 31, 2017.

Our WNS Auto Claims BPM segment includes repair management services, where we arrange for automobile repairs through a network of third party repair centers. This cost is primarily driven by the volume of accidents and the amount of the repair costs related to such accidents. It also includes incremental and direct costs incurred to contract with claimants by WNS Legal Assistance LLP.

Our facilities costs comprise lease rentals, utilities cost, facilities management and telecommunication network cost. Most of our leases for our facilities are long-term agreements and have escalation clauses which provide for increases in rent at periodic intervals commencing between three and five years from the start of the lease. Most of these agreements have clauses that have fixed escalation of lease rentals.

We create capacity in our operational infrastructure ahead of anticipated demand as it takes six to nine months to build up a new site. Hence, our cost of revenue as a percentage of revenue may be higher during periods in which we carry such additional capacity.

Once we are engaged by a client in a new contract, we normally have a transition period to transfer the client’s processes to our delivery centers and accordingly incur costs related to such transfer. Therefore, our cost of revenue in relation to our revenue may be higher until the transfer phase is completed, which may last for two to six months.

Selling and Marketing Expenses

Our selling and marketing expenses primarily comprise employee costs for sales and marketing personnel, travel expenses, legal and professional fees, share-based compensation e