What Led WNS (Holdings) Limited (NYSE: WNS) Stock Trade Lower?

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WNS (Holdings) Limited (NYSE: WNS) stock fell over 4% on 16th October, 2020 (as of 11:07 am GMT-4 ; Source: Google finance) after the company in the second quarter of FY 21 has reported 1.6% fall in the revenue to $222.6 million, versus Q2 of last year but a 7.1% increase from the previous quarter. Year-over-year, fiscal Q2 revenue got affected by the COVID-19 pandemic including lower volume requirements from certain clients and service delivery constraints resulting from the transition to a “work from home” delivery model.  Sequentially, revenue improvement was due to improved service delivery capability, client expansions, and currency movements net of hedging which partially offset lower volumes with certain clients relating to COVID-19. The company delivered profit for the fiscal second quarter of $29.2 million, as compared to $28.7 million in Q2 of last year and $14.8 million in the previous quarter. WNS has ended the second quarter with $366.5 million in cash and investments and $25.1 million of debt. In the second quarter, the company generated $56.7 million in cash from operations and incurred $6.5 million in capital expenditures. The company also made scheduled debt payments of $8.4 million. Second quarter days sales outstanding were 34 days, as compared to 29 days reported in Q2 of last year and 39 days in the previous quarter.  The year-over-year increase in DSO is due to payment delays and payment term concessions relating to COVID-19.

Moreover, in the fiscal second quarter, the company closed eight new logos and expanded 17 existing relationships, while the pipeline sides deal flow and contract signings are robust. The company is seeing some delays in the conversion of large-sized deals into revenue.

For fiscal 2021, the company expects revenue less repair payments to be in the range of $830 million and $854 million, down from $896 million in fiscal 2020.  The guidance assumes an average GBP to USD exchange rate of 1.29 for the remainder of fiscal 2021. Adjusted net income is expected to be in the range of $121 million and $129 million versus $161 million in fiscal 2020.  The forecast assumes an average USD to INR exchange rate of 73.50 for the remainder of fiscal 2021. Based on a diluted share count of 52.0 million shares, the company expects fiscal 2021 adjusted diluted earnings per ADS to be in the range of $2.33 to $2.48 versus $3.10 in fiscal 2020.

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