Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
Malta House, 36-38 Piccadilly, London |
W1J 0DP | |
(Addresses of principal executive offices) |
(Zip codes) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
par value 10 Jersey pence per share |
| ☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
| Emerging growth company | ||||||
| • | worldwide economic and business conditions; |
| • | our dependence on a limited number of clients in a limited number of industries; |
| • | currency fluctuations among the Indian rupee, the pound sterling, the US dollar, the Australian dollar, the Euro, the South African rand and the Philippine peso; |
| • | political or economic instability in the jurisdictions where we have operations; |
| • | regulatory, legislative and judicial developments; |
| • | increasing competition in the business process management (“BPM”) industry; |
| • | technological innovation; |
| • | our liability arising from cybersecurity attacks, fraud or unauthorized disclosure of sensitive or confidential client and customer data; |
| • | telecommunications or technology disruptions; |
| • | our ability to attract and retain clients; |
| • | negative public reaction in the US or the UK to offshore outsourcing; |
| • | our ability to collect our receivables from, or bill our unbilled services to, our clients; |
| • | 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; |
| • | our ability to manage the impact of climate change on our business; and |
| • | volatility of our share price. |
As at |
||||||||||||
Notes |
September 30, 2024 |
March 31, 2024 |
||||||||||
| ASSETS |
||||||||||||
| Current assets: |
||||||||||||
| Cash and cash equivalents |
5 | $ | $ | |||||||||
| Investments |
||||||||||||
| Accounts receivable, net |
6 | |||||||||||
| Unbilled revenue |
6 | |||||||||||
| Funds held for clients |
5 | |||||||||||
| Derivative assets |
11 | |||||||||||
| Contract assets |
14 | |||||||||||
| Prepaid expense and other current assets |
||||||||||||
| |
|
|
|
|||||||||
| Total current assets |
||||||||||||
| Goodwill |
||||||||||||
| Other intangible assets, net |
||||||||||||
| Property and equipment, net |
||||||||||||
| Operating lease right-of-use |
7 | |||||||||||
| Derivative assets |
11 | |||||||||||
| Deferred tax assets |
18 | |||||||||||
| Investments |
||||||||||||
| Contract assets |
14 | |||||||||||
| Other assets |
||||||||||||
| |
|
|
|
|||||||||
| TOTAL ASSETS |
$ |
$ |
||||||||||
| |
|
|
|
|||||||||
| LIABILITIES AND EQUITY |
||||||||||||
| Current liabilities: |
||||||||||||
| Accounts payables |
$ | $ | ||||||||||
| Provisions and accrued expenses |
||||||||||||
| Derivative liabilities |
11 | |||||||||||
| Pension and other employee obligations |
12 | |||||||||||
| Short-term borrowings |
9 | |||||||||||
| Current portion of long-term debt |
9 | |||||||||||
| Contract liabilities |
14 | |||||||||||
| Income taxes payable |
18 | |||||||||||
| Operating lease liabilities |
7 | |||||||||||
| Other liabilities |
||||||||||||
| |
|
|
|
|||||||||
| Total current liabilities |
||||||||||||
| Derivative liabilities |
11 | |||||||||||
| Pension and other employee obligations, less current portion |
12 | |||||||||||
| Long-term debt, less current portion |
9 | |||||||||||
| Contract liabilities |
14 | |||||||||||
| Operating lease liabilities, less current portion |
7 | |||||||||||
| Other liabilities, less current portion |
||||||||||||
| Deferred tax liabilities |
18 | |||||||||||
| |
|
|
|
|||||||||
| TOTAL LIABILITIES |
$ |
$ |
||||||||||
| |
|
|
|
|||||||||
| Commitments and contingencies |
21 |
|||||||||||
| Shareholders’ equity: |
||||||||||||
| Share capital (ordinary shares $ |
13 | |||||||||||
| Additional paid-in capital |
||||||||||||
| Retained earnings |
||||||||||||
| Other reserves, net |
||||||||||||
| Accumulated other comprehensive loss |
8 | ( |
) | ( |
)) | |||||||
| |
|
|
|
|||||||||
| Total shareholder’s equity, including shares held in treasury |
||||||||||||
| |
|
|
|
|||||||||
| Less: |
( |
) | ||||||||||
| |
|
|
|
|||||||||
| Total shareholders’ equity |
$ |
$ |
||||||||||
| |
|
|
|
|||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ |
$ |
||||||||||
| |
|
|
|
|||||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||||||
Notes |
2024 |
2023 |
2024 |
2023 |
||||||||||||||||
Revenue |
14 | $ | $ | $ | $ | |||||||||||||||
Cost of revenue (1) |
||||||||||||||||||||
Gross profit |
||||||||||||||||||||
Operating expenses: |
||||||||||||||||||||
Selling and marketing expenses |
||||||||||||||||||||
General and administrative expenses |
||||||||||||||||||||
Foreign exchange loss/(gain), net |
( |
) | ( |
) | ||||||||||||||||
Amortization of intangible assets |
||||||||||||||||||||
Operating income |
||||||||||||||||||||
Other income, net |
16 | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||
Interest expense |
15 | |||||||||||||||||||
Income before income taxes |
||||||||||||||||||||
Income tax expense |
18 | |||||||||||||||||||
Net income |
$ |
$ |
$ |
$ |
||||||||||||||||
Earnings per share |
19 | |||||||||||||||||||
Basic |
$ | $ | $ | $ | ||||||||||||||||
Diluted |
$ | $ | $ | $ | ||||||||||||||||
Weighted average number of shares used in computing earnings per share |
19 | |||||||||||||||||||
Basic |
||||||||||||||||||||
Diluted |
||||||||||||||||||||
(1) |
Exclusive of amortization expense |
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Net income |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive income/(loss), net of taxes |
||||||||||||||||
| (Loss)/gain on retirement benefits |
( |
) | ( |
) | ( |
) | ||||||||||
| Foreign currency translation gain/(loss) |
( |
) | ( |
) | ||||||||||||
| (losses)/Gains on cash flow hedges |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total other comprehensive income/(loss), net of taxes |
$ |
$ |
( |
) |
$ |
$ |
( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total comprehensive income |
$ |
$ |
$ |
$ |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Share capital |
Treasury shares |
|||||||||||||||||||||||||||||||||||
Number |
Par value |
Additional Paid-in Capital |
Retained earnings |
Other reserves* |
Number |
Amount |
Accumulated Other Comprehensive Income/(Loss) |
Total Equity |
||||||||||||||||||||||||||||
Balance as at July 1, 2023 |
$ | |
$ | $ | $ | |
$ | |
$ | ( |
) | $ | |
|||||||||||||||||||||||
Shares issued for exercised options and RSUs (Refer Note 17) |
( |
) | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Purchase of treasury shares |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Share-based compensation expense (Refer Note 17) |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Transfer from other reserves on utilization |
— | — | — | ( |
) | — | — | — | — | |||||||||||||||||||||||||||
Net income |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance as at September 30, 2023 |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
|||||||||||||||||||||||||||
Share capital |
Treasury shares |
|||||||||||||||||||||||||||||||||||
Number |
Par value |
Additional Paid-in Capital |
Retained earnings |
Other reserves* |
Number |
Amount |
Accumulated Other Comprehensive Income/(Loss) |
Total Equity |
||||||||||||||||||||||||||||
Balance as at July 1, 2024 |
$ | |
$ | $ | $ | |
$ ( |
) | $ ( |
) | $ | |
||||||||||||||||||||||||
Shares issued for exercised options and RSUs (Refer Note 17) |
( |
) | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Purchase of treasury shares (Refer Note 19) |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||||
Share-based compensation expense (Refer Note 17) |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Transfer from other reserves on utilization |
— | — | — | ( |
) | — | — | — | — | |||||||||||||||||||||||||||
Net income |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Balance as at September 30, 2024 |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
|||||||||||||||||||||||||
Share capital |
Treasury shares |
|||||||||||||||||||||||||||||||||||
Number |
Par value |
Additional Paid-in Capital |
Retained earnings |
Other reserves* |
Number |
Amount |
Accumulated Other Comprehensive Income/(Loss) |
Total Equity |
||||||||||||||||||||||||||||
Balance as at April 1, 2023 |
$ | |
$ | $ | $ | |
$ | |
$ | ( |
) | $ | |
|||||||||||||||||||||||
Shares issued for exercised options and RSUs (Refer Note 17) |
( |
) | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Purchase of treasury shares (Refer Note 13) |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||||
Cancellation of treasury shares (Refer Note 13) |
( |
) | ( |
) | ( |
) | — | — | ( |
) | — | — | ||||||||||||||||||||||||
Share-based compensation expense (Refer Note 17) |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Transfer from other reserves on utilization |
— | — | — | ( |
) | — | — | — | — | |||||||||||||||||||||||||||
Net income |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance as at September 30, 2023 |
$ |
$ |
$ | $ |
$ |
$ |
( |
) |
$ |
|||||||||||||||||||||||||||
Share capital |
Treasury shares |
|||||||||||||||||||||||||||||||||||
Number |
Par value |
Additional Paid-in Capital |
Retained earnings |
Other reserves* |
Number |
Amount |
Accumulated Other Comprehensive Income/(Loss) |
Total Equity |
||||||||||||||||||||||||||||
Balance as at April 1, 2024 |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | ( |
) | $ | |
|||||||||||||||||||||
Shares issued for exercised options and RSUs (Refer Note 17) |
( |
) | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Purchase of treasury shares (Refer Note 13) |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||||
Share-based compensation expense (Refer Note 17) |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Transfer from other reserves on utilization |
— | — | — | ( |
) | — | — | — | — | |||||||||||||||||||||||||||
Net income |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Balance as at September 30, 2024 |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
|||||||||||||||||||||||||
| * | Other reserves include the Special Economic Zone Re-Investment Reserve created out of the profits of eligible Special Economic Zones (“SEZ”) units in terms of the provisions of the Indian Income-tax Act, 1961. Further, these provisions require the reserve to be utilized by the Company for acquiring new plant and machinery for the purpose of its business (Refer Note 18). |
Six months ended September 30, |
||||||||
2024 |
2023 |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
||||||||
Share-based compensation expense |
||||||||
Amortization of debt issuance cost |
||||||||
Allowance for expected credit losses (“ECL”) |
||||||||
Unrealized foreign currency exchange loss/(gain), net |
( |
) | ||||||
Income from mutual funds |
( |
) | ( |
) | ||||
Fair-value changes on contingent consideration |
( |
) | ( |
) | ||||
(Gain) on sale of property and equipment |
( |
) | ( |
) | ||||
Deferred tax benefit |
( |
) | ( |
) | ||||
Unrealized loss/(gain) on derivative instruments |
( |
) | ||||||
Reduction in carrying amount of operating lease right-of-use assets |
||||||||
Changes in operating assets and liabilities, net of effects of acquisitions: |
||||||||
Account receivables and unbilled revenue |
( |
) | ( |
) | ||||
Other assets |
( |
) | ( |
) | ||||
Account payables |
( |
) | ( |
) | ||||
Contract liabilities |
||||||||
Other liabilities |
( |
) | ( |
) | ||||
Operating lease liabilities |
( |
) | ( |
) | ||||
Income taxes payable |
( |
) | ||||||
Net cash provided by operating activities |
||||||||
Cash flows from investing activities: |
||||||||
Proceeds from working capital adjustment on acquisition of Vuram |
||||||||
Proceeds from working capital adjustment on acquisition of Smartcube |
||||||||
Deferred consideration paid towards acquisition of MOLIPS |
( |
) | ||||||
Payment for property and equipment and intangible Assets |
( |
) | ( |
) | ||||
Proceeds from sale of property and equipment |
||||||||
Investment in fixed deposits |
( |
) | ( |
) | ||||
Proceeds from maturity of fixed deposits |
||||||||
Mutual funds sold, net (short-term) |
||||||||
Net cash provided by/(used in) investing activitie s |
( |
) | ||||||
Cash flows from financing activities: |
||||||||
Payment for repurchase of shares |
( |
) | ( |
) | ||||
Repayment of long-term debt |
( |
) | ( |
) | ||||
Proceeds from long-term debt |
||||||||
Contingent consideration paid towards acquisition of Optibuy |
( |
) | ||||||
Transaction charges on cancellation of treasury shares |
( |
) | ||||||
Proceeds from short-term borrowings |
||||||||
Repayment of short-term borrowings |
( |
) | ( |
) | ||||
Payment of debt issuance cost |
( |
) | ||||||
Net cash used in financing activit ies |
( |
) |
( |
) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash* |
( |
) | ||||||
Net change in cash, cash equivalents and restricted cash |
( |
) | ||||||
Cash, cash equivalents and restricted cash at the beginning of the period |
||||||||
Cash, cash equivalents and restricted cash at the end of the period |
$ |
$ |
||||||
Supplemental cash flow information: |
||||||||
Cash paid for interest |
( |
) | ( |
) | ||||
Cash (paid)/refunded for income taxes |
( |
) | ( |
) | ||||
Supplemental disclosure of non-cash investing and financing activities: |
||||||||
(i) Liability towards property and equipment and intangible assets purchased on credit |
$ | $ | ||||||
(ii) Lease liabilities arising from obtaining operating lease right-of-use |
||||||||
| * | Restricted cash represents funds held for clients. |
a. |
Basis of preparation and consolidation |
b. |
Use of estimates |
c. |
Business combinations |
d. |
Functional and presentation currency |
e. |
Foreign currency transactions and translation |
i. |
Transactions in foreign currency |
ii. |
Foreign operations |
f. |
Derivative financial instruments and hedge accounting |
i. |
Cash flow hedges |
ii. |
Offsetting of financial instruments |
iii. |
Fair value of financial instruments |
iv. |
Impairment of non-derivative financial assets |
g. |
Equity and share capital |
h. |
Cash and cash equivalents |
i. |
Investments |
i. |
Mutual funds |
ii. |
Investments in fixed deposits |
j. |
Funds held for clients |
k. |
Property and equipment |
Asset description |
Asset life (in years) |
|||
Buildings |
||||
Computers and software |
||||
Furniture, fixtures and office equipment |
||||
Vehicles |
||||
Leasehold improvements |
||||
l. |
Goodwill |
m. |
Intangible assets |
Asset description |
Weighted average amortization period (in months) |
|||
Customer contracts |
||||
Customer relationships |
||||
Covenant not-to-compete |
||||
Trade names |
||||
Technology |
||||
Software |
||||
Service mark |
||||
n. |
Impairment of intangible assets and goodwill |
o. |
Employee benefits |
i. |
Defined contribution plans |
ii. |
Defined benefit plan |
iii. |
Compensated absences |
p. |
Share-based payments |
q. |
Provisions and accrued expenses |
r. |
Revenue recognition |
| a) | 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 outsourced; |
| b) | 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); |
| c) | subscription arrangements, which typically involve billings based on per member per month, based on contractually agreed rates; |
| d) | fixed-price arrangements, which typically involve billings based on achievements of pre-defined deliverables or milestones; |
| e) | 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, improvement in working capital, increase in collections or a reduction in operating expenses); or |
| f) | other pricing arrangements, including cost-plus arrangements, which typically involve billing the contractually agreed direct and indirect costs and a fee based on the number of employees deployed under the arrangement. |
| a) | the Company has the primary responsibility for providing the services, |
| b) | the Company negotiates labor rates with repair centers, and |
| c) | the Company is responsible for timely and satisfactory completion of repairs. |
s. |
Leases |
t. |
Interest expense |
u. |
Income taxes |
i. |
Current income tax |
ii. |
Deferred income tax |
v. |
Earnings per share |
w. |
Government grants |
x . |
Concentration of credit risk |
| i. | In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU: |
| • | modifies the disclosure or presentation requirements of a variety of Topics in the Codification. Certain of the amendments represent clarifications to or technical corrections of the current requirements. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. |
| • | should be applied prospectively. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. |
| ii. | In November 2023, FASB issued ASU No. 2023-07, Segment Reporting (“Accounting Standards Codification (“ASC”) Topic 280”): Improvements to Reportable Segment Disclosures. This ASU: |
| • | improves reportable segment disclosure requirements on an annual and interim basis for all public entities by requiring disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. |
| • | allows, in addition to the measure that is most consistent with US GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. |
| iii. | In December 2023, FASB issued ASU No. 2023-09, Income Taxes (“ASC Topic 740”), Improvements to Income Tax Disclosures. This ASU: |
| • | expands disclosures relating to the entity’s income tax rate reconciliation, income taxes paid and certain other disclosures related to income taxes. |
| iv. | In March 2024, FASB issued ASU No. 2024-01, Compensation-Stock Compensation (“ASC Topic 718”). This ASU: |
| • | clarifies how to evaluate whether profits interest and similar awards given to employees and non-employees are within the scope of share-based payment arrangement under ASC 718. |
| v. | In March 2024, FASB issued ASU No. 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements. This ASU: |
| • | contains amendments to the ASC that remove references to various FASB Concepts Statements. |
a) |
The Smart Cube Limited |
Amount |
||||
Cash |
$ | |||
Accounts receivables |
||||
Unbilled revenue |
||||
Prepaid expense and other current assets |
||||
Property and equipment |
||||
Operating lease right-of-use |
||||
Other intangible assets |
||||
- Customer relationships |
||||
- Customer contracts |
||||
- Covenant not-to-compete |
||||
- Software |
||||
Non-current assets |
||||
Deferred tax assets |
||||
Current liabilities |
( |
) | ||
Non-current liabilities |
( |
) | ||
Operating lease liabilities |
( |
) | ||
Deferred tax liabilities |
( |
) | ||
Net assets acquired |
||||
Less: Purchase consideration |
( |
) | ||
Goodwill on acquisition |
$ |
|||
b) |
OptiBuy sp. z.o.o. |
Amount |
||||
Cash |
$ | |||
Accounts receivables |
||||
Unbilled revenue |
||||
Prepaid expense and other current assets |
||||
Property and equipment |
||||
Operating lease right-of-use |
||||
Other intangible assets |
||||
- Customer relationships |
||||
- Customer contracts |
||||
- Covenant not-to-compete |
||||
- Software |
||||
Non-current assets |
||||
Deferred tax assets |
||||
Current liabilities |
( |
) | ||
Non-current liabilities |
( |
) | ||
Operating lease liabilities |
( |
) | ||
Deferred tax liabilities |
( |
) | ||
Net assets acquired |
||||
Less: Purchase consideration |
( |
) | ||
Goodwill on acquisition |
$ |
|||
c) |
Vuram Technology Solutions Private Limited |
Amount |
||||
Cash |
$ | |||
Investments |
||||
Accounts receivables |
||||
Unbilled revenue |
||||
Prepaid expense and other current assets |
||||
Property and equipment |
||||
Operating lease right-of-use |
||||
Other intangible assets |
||||
- Customer relationships |
||||
- Customer contracts |
||||
- Covenant not-to-compete |
||||
- Software & Trade name |
||||
Non-current assets |
||||
Deferred tax assets |
||||
Current liabilities |
( |
) | ||
Non-current liabilities |
( |
) | ||
Operating lease liabilities |
( |
) | ||
Deferred tax liabilities |
( |
) | ||
Net assets acquired |
||||
Less: Purchase consideration |
( |
) | ||
Goodwill on acquisition |
$ |
|||
As at |
||||||||
September 30, |
March 31, |
|||||||
2024 |
2024 |
|||||||
Cash and bank balances |
$ | $ | ||||||
Short-term deposits with banks |
||||||||
Funds held for clients - Restricted cash |
||||||||
Total |
$ |
$ |
||||||
As at |
||||||||
September 30, 2024 |
March 31, 2024 |
|||||||
Account receivables and unbilled revenue |
$ | $ | ||||||
Less: Allowances for ECL |
( |
) | ( |
) | ||||
Total |
$ |
$ |
||||||
Three months ended September 30, |
Six months ended September 30, |
Year ended March 31, |
||||||||||||||||||
2024 |
2023 |
2024 |
2023 |
2024 |
||||||||||||||||
Balance at the beginning of the period |
$ | $ | $ | $ | $ | |||||||||||||||
Charged to consolidated statement of income |
||||||||||||||||||||
Write-offs, net of collections |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Reversals |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Translation adjustment |
( |
) | ( |
) | ||||||||||||||||
Balance at the end of the period |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
7. |
Leases |
As at |
||||||||
September 30, 2024 |
March 31, 2024 |
|||||||
Operating lease |
||||||||
Operating lease right-of-use-asset |
$ | $ |
||||||
Operating lease liabilities - Current |
$ | $ | ||||||
Operating lease liabilities - Non current |
||||||||
Total operating lease liabilities |
$ |
$ |
||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Operating lease cost |
$ | $ | $ | $ | ||||||||||||
Short-term lease cost |
||||||||||||||||
Variable lease cost |
||||||||||||||||
Total lease cost |
$ |
$ |
$ |
$ |
||||||||||||
Six months ended September 30, |
||||||||
2024 |
2023 |
|||||||
Cash payments for amounts included in the measurement of lease liabilities : |
||||||||
Operating cash outflows for operating leases |
$ | $ | ||||||
Right-of-use liabilities-net |
||||||||
Weighted average remaining lease term (in years) |
||||||||
Weighted average discount rate |
||||||||
Period range |
Operating lease |
|||
Oct 1, 2024 to March 31, 2025 |
$ |
|||
2026 |
||||
2027 |
||||
2028 |
||||
2029 |
||||
Thereafter |
||||
Total lease payments |
$ |
|||
Less: imputed interest |
$ | |||
Total operating lease liabilities |
$ |
|||
Period range |
Operating lease |
|||
2025 |
$ |
|||
2026 |
||||
2027 |
||||
2028 |
||||
2029 |
||||
Thereafter |
||||
Total lease payments |
$ |
|||
Less: imputed interest |
$ | |||
Total operating lease liabilities |
$ |
|||
8. |
Accumulated other comprehensive loss |
Currency translation adjustments |
Unrealized gain/(loss) on cash flow hedges |
Retirement benefits |
Total |
|||||||||||||
Balance as at April 1, 2024 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
Gains / (losses) recognized during the period |
( |
) | ||||||||||||||
Reclassification to net income |
||||||||||||||||
Income tax effects |
( |
) | ||||||||||||||
Accumulated other comprehensive loss as at September 30, 2024 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
Balance as at April 1, 2023 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
Gains / (losses) recognized during the period |
( |
) | ( |
) | ( |
) | ||||||||||
Reclassification to net income |
||||||||||||||||
Income tax effects |
( |
) | ( |
) | ||||||||||||
Accumulated other comprehensive loss as at September 30, 2023 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
9. |
Loans and borrowings |
As at |
||||||||||||||||
Currency |
Interest rate |
Final maturity (financial year) |
September 30, 2024 |
March 31, 2024 |
||||||||||||
US dollars |
$ | |||||||||||||||
US dollars |
||||||||||||||||
Sterling Pound |
||||||||||||||||
Total |
||||||||||||||||
Less: Debt issuance cost |
( |
) | ( |
) | ||||||||||||
Total |
||||||||||||||||
Current portion of long-term debt |
$ | $ | ||||||||||||||
Long-term debt |
$ | $ | ||||||||||||||
Amount |
||||
October 1, 2024 to March 31, 2025 |
$ | |||
2026 |
||||
2027 |
||||
2028 |
||||
2029 |
||||
2030 |
||||
Total |
$ |
|||
10. |
Fair value measurements |
Fair value measurement at reporting date using |
||||||||||||||||
Description |
September 30, 2024 |
Quoted prices in active markets for identical assets (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
||||||||||||
Assets |
||||||||||||||||
Foreign exchange contracts |
$ | $ | $ | $ | ||||||||||||
Investments in mutual funds |
||||||||||||||||
Total assets |
$ |
$ |
$ |
$ |
||||||||||||
Liabilities |
||||||||||||||||
Foreign exchange contracts |
$ | $ | $ | $ | ||||||||||||
Contingent consideration |
||||||||||||||||
Others |
||||||||||||||||
Total liabilities |
$ |
$ |
$ |
$ |
||||||||||||
Fair value measurement at reporting date using |
||||||||||||||||
Description |
March 31, 2024 |
Quoted prices in active markets for identical assets (Level 1) |
Significant other Observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
||||||||||||
Assets |
||||||||||||||||
Foreign exchange contracts |
$ | $ | $ | $ | ||||||||||||
Investments in mutual funds |
||||||||||||||||
Total assets |
$ |
$ |
$ |
$ |
||||||||||||
Liabilities |
||||||||||||||||
Foreign exchange contracts |
$ | $ | $ | $ | ||||||||||||
Contingent consideration |
||||||||||||||||
Total liabilities |
$ |
$ |
$ |
$ |
||||||||||||
As at |
||||||||
September 30, 2024 |
March 31, 2024 |
|||||||
Balance at the beginning of the Period |
$ | $ | ||||||
Interest expense recognized in the consolidated statement of income |
||||||||
Gain recognized in the consolidated statement of income (Refer Note 4(a), 4(b), 4(c)) |
( |
) | ( |
) | ||||
Translation |
( |
) | ||||||
Balance at the end of the period |
$ |
$ |
||||||
11. |
Derivatives and hedge accounting |
As at |
||||||||
September 30, 2024 |
March 31, 2024 |
|||||||
Forward contracts (Sell) |
||||||||
In US dollars |
$ | $ | ||||||
In Pound Sterling |
||||||||
In Euro |
||||||||
In Australian dollars |
||||||||
Others |
||||||||
$ |
$ |
|||||||
Option contracts (Sell) |
||||||||
In US dollars |
$ | $ | ||||||
In Pound Sterling |
||||||||
In Euro |
||||||||
In Australian dollars |
||||||||
$ |
$ |
|||||||
Derivatives in cash flow hedging relationships |
Derivatives not designated as hedging instruments |
|||||||||||||||
As at |
As at |
|||||||||||||||
September 30, 2024 |
March 31, 2024 |
September 30, 2024 |
March 31, 2024 |
|||||||||||||
Assets: |
||||||||||||||||
Derivative assets |
$ | $ | $ | $ | ||||||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities |
||||||||||||||||
$ |
( |
) |
$ |
$ |
$ |
( |
) | |||||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Revenue |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Foreign exchange gain/(loss), net |
( |
) | ||||||||||||||
Income tax related to amounts reclassified into consolidated statement of income |
||||||||||||||||
Total |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Derivative financial instruments: |
||||||||||||||||
Unrealized gain/(loss) recognized in OCI |
||||||||||||||||
Derivatives in cash flow hedging relationships |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
Gain/(loss) recognized in consolidated statements of income |
||||||||||||||||
Derivatives not designated as hedging instruments |
( |
) | ( |
) | ||||||||||||
Total |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||||
| Description of types of financial assets |
Gross amounts of recognized financial assets |
Gross amounts of recognized financial liabilities offset in the statement of financial position |
Net amounts of financial assets presented in the statement of financial position |
Related amount not set off in financial instruments |
||||||||||||||||||||
Financial Instruments |
Cash collateral received |
Net Amount |
||||||||||||||||||||||
| Derivative assets |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Description of types of financial liabilities |
Gross amounts of recognized financial liabilities |
Gross amounts of recognized financial assets offset in the statement of financial position |
Net amounts of financial liabilities presented in the statement of financial position |
Related amount not set off in financial instruments |
||||||||||||||||||||
Financial Instruments |
Cash collateral pledged |
Net Amount |
||||||||||||||||||||||
| Derivative liabilities |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Description of types of financial assets |
Gross amounts of recognized financial assets |
Gross amounts of recognized financial liabilities offset in the statement of financial position |
Net amounts of financial assets presented in the statement of financial position |
Related amount not set off in financial instruments |
||||||||||||||||||||
Financial Instruments |
Cash collateral received |
Net Amount |
||||||||||||||||||||||
| Derivative assets |
$ | $ | |
$ | $ | ( |
) | $ | |
$ | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Description of types of financial liabilities |
Gross amounts of recognized financial liabilities |
Gross amounts of recognized financial assets offset in the statement of financial position |
Net amounts of financial liabilities presented in the statement of financial position |
Related amount not set off in financial instruments |
||||||||||||||||||||
Financial instruments |
Cash collateral pledged |
Net Amount |
||||||||||||||||||||||
| Derivative liabilities |
$ | $ | |
$ | $ | ( |
) | $ | |
$ | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
As at |
||||||||
September 30, 2024 |
March 31, 2024 |
|||||||
Current: |
||||||||
Salaries and bonus |
$ | $ | ||||||
Pension |
||||||||
Withholding taxes on salary and statutory payables |
||||||||
Total |
$ |
$ |
||||||
Non-current: |
||||||||
Pension and other obligations |
$ | $ | ||||||
Total |
$ |
$ |
||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Salaries and bonus |
$ | $ | $ | $ | ||||||||||||
Employee benefit plans: |
||||||||||||||||
Defined contribution plan |
||||||||||||||||
Defined benefit plan |
||||||||||||||||
Share-based compensation expense (Refer Note 17) |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Service cost |
$ | $ | $ | $ | ||||||||||||
Interest cost |
||||||||||||||||
Expected return on plan assets |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Amortization of prior service credit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Amortization of actuarial loss, gross of tax |
||||||||||||||||
Net gratuity cost |
$ |
$ |
$ |
$ |
||||||||||||
As at |
||||||||
September 30, 2024 |
March 31, 2024 |
|||||||
Net actuarial (gain) /loss |
$ | $ |
||||||
Net prior service cost/(credit) |
( |
) | ( |
) | ||||
Accumulated Other comprehensive income/(loss), excluding tax effects |
$ |
$ |
||||||
13. |
Share capital |
14. |
Revenue |
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Industry-specific |
$ | $ | $ | $ | ||||||||||||
Finance and accounting |
||||||||||||||||
Customer experience services |
||||||||||||||||
Research and analytics |
||||||||||||||||
Others |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Insurance |
$ | $ | $ | $ | ||||||||||||
Travel and leisure |
||||||||||||||||
Healthcare |
||||||||||||||||
Diversified businesses including manufacturing, retail, CPG, media and entertainment, and telecom |
||||||||||||||||
Shipping and logistics |
||||||||||||||||
Banking and financial services |
||||||||||||||||
Hi-tech and professional services |
||||||||||||||||
Utilities |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Full-time-equivalent |
$ | $ | $ | $ | ||||||||||||
Transaction |
||||||||||||||||
Subscription |
||||||||||||||||
Fixed price |
||||||||||||||||
Others |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
As at September 30, 2024 |
||||||||||||||||
Sales Commission |
Transition activities |
Upfront payment / Others |
Total |
|||||||||||||
| Opening balance |
$ | $ | $ | $ | ||||||||||||
| Additions during the period |
||||||||||||||||
| Amortization during the period |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Impairment loss recognized during the period |
( |
) | ( |
) | ||||||||||||
| Translation adjustments |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Closing balance |
$ |
$ |
$ |
$ |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
As at March 31, 2024 |
||||||||||||||||
Sales Commission |
Transition activities |
Upfront payment / Others |
Total |
|||||||||||||
| Opening balance |
$ | $ | $ | $ | ||||||||||||
| Additions during the period |
||||||||||||||||
| Amortization during the period |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Impairment loss recognized during the period |
( |
) | ( |
) | ||||||||||||
| Translation adjustments |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Closing balance |
$ |
$ |
$ |
$ |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
As at |
||||||||
September 30, 2024 |
March 31, 2024 |
|||||||
| Current: |
||||||||
| Payments in advance of services |
$ | $ | ||||||
| Advance billings |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Total |
$ |
$ |
||||||
| |
|
|
|
|||||
| Non-current: |
||||||||
| Payments in advance of services |
$ | $ | ||||||
| Advance billings |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Total |
$ |
$ |
||||||
| |
|
|
|
|||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Payments in advance of services |
$ | $ | $ | $ | ||||||||||||
| Advance billings |
||||||||||||||||
| Others |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
$ |
$ |
$ |
$ |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
As at September 30, 2024 |
||||||||||||||||||||
Less than |
More than |
Total |
||||||||||||||||||
Transaction price allocated to remaining performance obligations |
$ | $ | $ | $ | |
$ | ||||||||||||||
As at March 31, 2024 |
||||||||||||||||||||
Less than |
s |
More than |
Total |
|||||||||||||||||
Transaction price allocated to remaining performance obligations |
$ | $ | $ | $ | $ | |||||||||||||||
| (i) | contracts with an original expected length of one year or less; and |
| (ii) | contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed. |
15. |
Interest expense |
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Interest expense |
$ | $ | $ | $ | ||||||||||||
Others |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
16. |
Other income, net |
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Net gain arising on financial assets |
$ | $ | $ | $ | ||||||||||||
Interest income |
||||||||||||||||
Changes in FV of contingent consideration |
||||||||||||||||
Others, net |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
17. |
Share-based payments |
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Share-based compensation expense |
$ |
$ |
$ |
$ |
||||||||||||
Income tax benefit (including excess tax benefit) related to share-based compensation expense |
||||||||||||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Domestic |
$ | ( |
) | $( |
) | $ | ( |
) | $ | ( |
) | |||||
| Foreign |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Profit before income taxes |
$ |
$ |
$ |
$ |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Current taxes |
||||||||||||||||
| Domestic taxes |
$ | $ | $ | $ | ||||||||||||
| Foreign taxes |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
$ |
$ |
$ |
$ |
|||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Deferred taxes |
||||||||||||||||
| Domestic taxes |
||||||||||||||||
| Foreign taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
( |
) |
( |
) |
( |
) |
( |
) | |||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Income tax expense |
$ |
$ |
$ |
$ |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Current taxes |
$ | $ | $ | $ | ||||||||||||
| Deferred taxes: |
||||||||||||||||
| Unrealized (loss)/gain on cash flow hedging derivatives |
( |
) | ( |
) | ||||||||||||
| Retirement benefits |
( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total income tax (benefit)/ expense recognized directly in other comprehensive income |
( |
) |
( |
) |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
As at |
||||||||
September 30, 2024 |
March 31, 2024 |
|||||||
Opening Balance |
$ |
$ |
||||||
Increase/(Decrease) related to prior period tax positions |
( |
) | ||||||
Translation adjustments |
( |
) | ( |
) | ||||
Closing Balance |
$ | $ | ||||||
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Numerator: |
||||||||||||||||
Net income |
$ | $ | $ | $ | ||||||||||||
Denominator: |
||||||||||||||||
Basic weighted average number of shares outstanding |
||||||||||||||||
Dilutive impact of equivalent share-based options and RSUs |
||||||||||||||||
Diluted weighted average number of shares outstanding |
||||||||||||||||
Earnings per share |
||||||||||||||||
Basic |
||||||||||||||||
Diluted |
||||||||||||||||
Weighted average potentially dilutive shares considered anti- dilutive and not included in computing diluted earnings per share |
||||||||||||||||
| • | Banking/Financial Services, and Insurance (“BFSI”), |
| • | Travel, Shipping/Logistics, and Utilities (“TSLU’’), |
| • | Manufacturing/Retail/Consumer, Hi-tech/Professional Services, and Procurement (“MRHP”), and |
| • | Healthcare/Life Sciences (“HCLS”) |
TSLU |
MRHP |
HCLS |
BFSI |
Reconciling item (3) |
Total |
|||||||||||||||||||
Revenue from external customers |
||||||||||||||||||||||||
Segment Revenue |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Payments to repair centers |
|
|
|
|
||||||||||||||||||||
Revenue less repair payments (non-GAAP) |
( |
) |
||||||||||||||||||||||
Adjusted cost of revenue (1) (2) |
||||||||||||||||||||||||
Segment gross profit |
( |
) |
||||||||||||||||||||||
Other costs |
||||||||||||||||||||||||
Other income, net |
( |
) | ||||||||||||||||||||||
Interest expense |
||||||||||||||||||||||||
Amortization of intangible assets |
||||||||||||||||||||||||
Share-based compensation expense |
||||||||||||||||||||||||
Income- tax expense |
||||||||||||||||||||||||
Net income |
$ |
|||||||||||||||||||||||
(1) |
Excludes share-based compensation expense. |
(2) |
Adjusted cost of revenue under reconciling items includes inter and intra segment eliminations and unallocated expenses. |
(3) |
Revenue under reconciling items includes inter and intra segment eliminations and impact of foreign exchange fluctuations. |
TSLU |
MRHP |
HCLS |
BFSI |
Reconciling item (3) |
Total |
|||||||||||||||||||
Revenue from external customers |
||||||||||||||||||||||||
Segment Revenue |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Payments to repair centers |
|
|
|
|
||||||||||||||||||||
Revenue less repair payments (non-GAAP) |
( |
) |
||||||||||||||||||||||
Adjusted cost of revenue (1) (2) |
( |
) | ||||||||||||||||||||||
Segment gross profit |
( |
) |
||||||||||||||||||||||
Other costs |
||||||||||||||||||||||||
Other income, net |
( |
) | ||||||||||||||||||||||
Interest expense |
||||||||||||||||||||||||
Amortization of intangible assets |
||||||||||||||||||||||||
Share-based compensation expense |
||||||||||||||||||||||||
Income- tax expense |
||||||||||||||||||||||||
Net income |
$ |
|||||||||||||||||||||||
(1) |
Excludes share-based compensation expense. |
(2) |
Adjusted cost of revenue under reconciling items includes inter and intra segment eliminations and unallocated expenses. |
(3) |
Revenue under reconciling items includes inter and intra segment eliminations and impact of foreign exchange fluctuations. |
TSLU |
MRHP |
HCLS |
BFSI |
Reconciling item (3) |
Total |
|||||||||||||||||||
Revenue from external customers |
||||||||||||||||||||||||
Segment Revenue |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Payments to repair centers |
|
|
|
|||||||||||||||||||||
Revenue less repair payments (non-GAAP) |
( |
) |
||||||||||||||||||||||
Adjusted cost of revenue (1) (2) |
||||||||||||||||||||||||
Segment gross profit |
( |
) |
||||||||||||||||||||||
Other costs |
||||||||||||||||||||||||
Other income, net |
( |
) | ||||||||||||||||||||||
Interest expense |
||||||||||||||||||||||||
Amortization of intangible assets |
||||||||||||||||||||||||
Share-based compensation expense |
||||||||||||||||||||||||
Income- tax expense |
||||||||||||||||||||||||
Net income |
$ |
|||||||||||||||||||||||
(1) |
Excludes share-based compensation expense. |
(2) |
Adjusted cost of revenue under reconciling items includes inter and intra segment eliminations and unallocated expenses. |
(3) |
Revenue under reconciling items includes inter and intra segment eliminations and impact of foreign exchange fluctuations. |
TSLU |
MRHP |
HCLS |
BFSI |
Reconciling item (3) |
Total |
|||||||||||||||||||
Revenue from external customers |
||||||||||||||||||||||||
Segment Revenue |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Payments to repair centers |
|
|
|
|
||||||||||||||||||||
Revenue less repair payments (non-GAAP) |
( |
) |
||||||||||||||||||||||
Adjusted cost of revenue (1) (2) |
||||||||||||||||||||||||
Segment gross profit |
( |
) |
||||||||||||||||||||||
Other costs |
||||||||||||||||||||||||
Other income, net |
( |
) | ||||||||||||||||||||||
Interest expense |
||||||||||||||||||||||||
Amortization of intangible assets |
||||||||||||||||||||||||
Share-based compensation expense |
||||||||||||||||||||||||
Income- tax expense |
||||||||||||||||||||||||
Net income |
$ |
|||||||||||||||||||||||
(1) |
Excludes share-based compensation expense. |
(2) |
Adjusted cost of revenue under reconciling items includes inter and intra segment eliminations and unallocated expenses. |
(3) |
Revenue under reconciling items includes inter and intra segment eliminations and impact of foreign exchange fluctuations. |
Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Jersey, Channel Islands |
$ | $ | $ | $ | ||||||||||||
North America (primarily the US) |
||||||||||||||||
UK |
||||||||||||||||
Europe (excluding the UK) |
||||||||||||||||
Australia |
||||||||||||||||
South Africa |
||||||||||||||||
Rest of world |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
As at |
||||||||
September 30, 2024 |
March 31, 2024 |
|||||||
Jersey, Channel Islands |
$ | $ | ||||||
India |
||||||||
Philippines |
||||||||
South Africa |
||||||||
North America |
||||||||
UK |
||||||||
Rest of the world |
||||||||
Total |
$ |
$ |
||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with our unaudited 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, 2024. Some of the statements in the following discussion are forward-looking statements. See “Special note regarding forward-looking statements.”
Overview
We are a leading provider of global digital-led Business Process Management (BPM) solutions, 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 which are located in Canada, China, Costa Rica, India, Malaysia, 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, improvements to their processes, global delivery capabilities, analytics and an understanding of their business.
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 portfolio of services includes 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 finance and accounting, customer experience services, 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 BPM 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 TSLU segment 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 September 30, |
Six months ended September 30, |
|||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| Revenue |
$ | 322.6 | $ | 333.9 | $ | 645.7 | $ | 660.4 | ||||||||
1
Our revenue is generated primarily from providing BPM services. We have four reportable segments for financial statement reporting purposes — BFSI, TSLU, MRHP and HCLS. In our BFSI segment, we provide “repair services”. For “repair services”, 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(r) to our consolidated financial statements included elsewhere in this report. Since we wholly subcontract the repairs to the repair centers, we evaluate the financial performance of our BFSI segment 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 “repair services” reflects more accurately the value addition of the BPM 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.
Revenue less repair payments is a non-GAAP financial measure which is calculated as (a) revenue less (b) in our BFSI segment, payments to repair centers for “repair services” 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 September 30, |
Six months ended September 30, |
|||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| Revenue |
$ | 322.6 | $ | 333.9 | $ | 645.7 | $ | 660.4 | ||||||||
| Less: Payments to repair centers(1) |
(11.9 | ) | (8.9 | ) | (22.6 | ) | (17.9 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Revenue less repair payments (non-GAAP) |
$ | 310.7 | $ | 325.0 | $ | 623.1 | $ | 642.5 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Note:
| (1) | Consists of payments to repair centers in our BFSI segment for “repair services” where we act as the principal in our dealings with the third party repair centers and our clients. |
2
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 period’s 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, the Australian dollar, the Euro and the South African rand. 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 September 30, |
Six months ended September 30, |
|||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| Revenue less repair payments (non-GAAP) |
$ | 310.7 | $ | 325.0 | $ | 623.1 | $ | 642.5 | ||||||||
| Exchange rate impact |
1.3 | 4.1 | 2.2 | 5.6 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Constant currency revenue less repair payments (non-GAAP) |
$ | 312.0 | $ | 329.1 | $ | 625.3 | $ | 648.1 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Global Economic Conditions
As we have operations in 13 countries and service clients across multiple geographic regions, our business, financial performance and results of operations depend significantly on worldwide macroeconomic and geo-political conditions. Recent economic conditions and geo-political developments have been and continue to be challenging for global economies and could materially and adversely affect our business and financial performance.
Economic factors, such as recessionary economic cycles, inflation, rising interest rates, fluctuations in foreign exchange rates, monetary tightening and volatility in the financial markets, have impacted, and may continue to impact, our business, financial condition and results of operations. The current global economic uncertainty and the possibility of continued turbulence or uncertainty in the European, US, Asian and international financial markets and economies have adversely affected, and may continue to adversely affect, our and our clients’ liquidity and financial condition. High levels of inflation in the various geographies where we operate have resulted in increased supply costs, which in turn have impacted pricing and consumer demand. Rising interest rates, coupled with illiquid credit markets and wider credit spreads, may increase our cost of borrowing and cause credit to become more limited, which could have a material adverse effect on not only on our financial condition, liquidity and cash flows, but also on our clients’ ability to use credit to purchase our services or to make timely payments to us. In addition, as a result of high debt levels, a number of countries have required and may continue to require additional financial support, sovereign credit ratings have declined and may continue to decline, and there may be default on the sovereign debt obligations of certain countries. Uncertainties remain regarding future central bank and other economic policies in the US and EU. Such adverse macroeconomic conditions economic conditions may further lead to increased volatility in the currency and financial markets globally. For example, the recent appreciation of the pound sterling may have an unpredictable impact on our company in a number of ways, including the conversion of our operating results into our reporting currency, the US dollar. For further information, see “Part I — Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — Currency fluctuations among the Indian rupee, the pound sterling, the US dollar, the Australian dollar, the Euro, the South African rand and the Philippine peso could have a material adverse effect on our results of operations” of our annual report on Form 20-F for our fiscal year ended March 31, 2024. In addition, volatility in the financial markets could have a material impact on our share price. We cannot predict the trajectory of the recent economic slowdown or any subsequent economic recovery. If adverse macroeconomic conditions continue for a prolonged period of time or even worsen, our business, financial condition and results of operations will be adversely affected.
3
Government policies or objectives pursued by countries in which we do business could potentially impact the demand for our services in certain countries. Changes in trade policies, increases in tariffs, the imposition of retaliatory tariffs, including those implemented by the United States, China and Europe and legislation requiring greater oversight of supply chains, may have a material adverse effect on global economic conditions and the stability of global financial markets and may reduce international trade.
Geopolitical crises, such as war, political instability and terrorist attacks, could disrupt our operations. The conflict between Russia and Ukraine and the conflict in Israel have led and could lead to significant market and other disruptions, including significant volatility in commodity prices, supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage. In particular, we have operations in Poland and Romania, which border Ukraine and have been materially and adversely affected by inflation, particularly increases in energy and food prices, resulting from disrupted supplies from Russia and Ukraine. In addition, as a result of the ongoing military conflict, there has been a growing number of migrants in Poland and Romania. Such an influx of migrants could further exacerbate inflation in these two countries, thereby resulting in an upward pressure on wages, which could have a material adverse effect on our operations in these two countries. The length, impact and outcome of the ongoing military conflict in Ukraine are highly unpredictable. If the conflict continues or extends beyond Ukraine, it would continue to have a significant impact on the global economy and our operations in Poland and Romania.
4
Additionally, major political events, including the UK’s withdrawal from the EU in January 2020, commonly referred to as “Brexit,” has also created uncertainty for businesses such as ours that operate in these markets. While the UK and the EU have ratified a trade and cooperation agreement to govern their relationship after Brexit, the agreement merely sets forth a framework in many respects and requires additional bilateral negotiations between the UK and the EU as both parties continue to work on the rules for implementation. Significant political and economic uncertainty remains about how the precise terms of the relationship between the parties will differ from the terms before withdrawal. Such terms could adversely affect the economic conditions in affected markets as well as the stability of the global financial markets, which in turn have had and may continue to have a material adverse effect on global economic conditions and financial markets, and may significantly reduce global market liquidity, restrict the ability of key market participants to operate in certain financial markets or restrict our access to capital. 26.8% of our revenues and 24.1% of our revenue less repair payments (non-GAAP) in the six months ended September 30, 2024 and 24.2% of our revenues and 21.9% of our revenue less repair payments (non-GAAP) in fiscal 2024 were denominated in pound sterling. The extent and duration of the decline in the value of the pound sterling to the US dollar and other currencies is unknown at this time. A long-term reduction in the value of the pound sterling as a result of Brexit or otherwise could adversely impact our earnings growth rate and profitability. Although we believe that our hedging program is effective, there is no assurance that it will protect us against fluctuations in foreign currency exchange rates.
In addition to the pound sterling, a weakening of the rate of exchange for the US dollar or, to a lesser extent, the Australian dollar or the Euro (in which our revenue is principally denominated) against the Indian rupee, or to a lesser extent, the Philippine peso or the South African rand (in which a significant portion of our costs are denominated) would also adversely affect our results.
Fluctuations between the Indian rupee, the Philippine peso, the pound sterling, the South African rand, the Euro, or the Australian dollar, 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 Indian rupee, the Philippine peso, the pound sterling, the South African rand, the Euro, and the Australian dollar, 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 Indian rupee depreciated against the US dollar by an average of 1.4%, and the Philippine peso depreciated against the US dollar by an average of 2.2% for the three months ended September 30, 2024 as compared to the average exchange rates for the three months ended September 30, 2023, while the pound sterling appreciated against the US dollar by an average of 2.8%, the Euro appreciated against the US dollar by an average of 1.0% and the Australian dollar appreciated against the US dollar by an average of 2.3% for the three months ended September 30, 2024 as compared to the average exchange rates for the three months ended September 30, 2023.
The depreciation of the Indian rupee and the appreciation of the pound sterling, the Euro and the Australian dollar against the US dollar, for the three months ended September 30, 2024 as compared to the average exchange rates for the three months ended September 30, 2023, positively impacted our results of operations during that period.
5
Revenue
Our revenue is categorized by client, industry, service type, geographic and contract type diversity, as the analysis below indicates.
Revenue by Top Clients
For the three months ended September 30, 2024 and 2023, 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 September 30, | Three months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Top client |
6.7 | % | 4.6 | % | 7.0 | % | 4.7 | % | ||||||||
| Top five clients |
21.2 | % | 20.9 | % | 22.0 | % | 21.4 | % | ||||||||
| Top ten clients |
30.3 | % | 31.9 | % | 30.1 | % | 32.5 | % | ||||||||
| Top twenty clients |
42.2 | % | 45.5 | % | 42.0 | % | 45.7 | % | ||||||||
For the six months ended September 30, 2024 and 2023, 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) |
|||||||||||||||
| Six months ended September 30, | Six months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Top client |
6.3 | % | 4.5 | % | 6.5 | % | 4.6 | % | ||||||||
| Top five clients |
20.6 | % | 21.1 | % | 21.4 | % | 21.7 | % | ||||||||
| Top ten clients |
30.4 | % | 32.5 | % | 30.5 | % | 33.2 | % | ||||||||
| Top twenty clients |
42.8 | % | 46.0 | % | 42.7 | % | 46.4 | % | ||||||||
6
Revenue by SBUs
For the three months ended September 30, 2024 and 2023, the percentage of revenue and revenue less repair payments (non-GAAP) that we derived from our SBUs 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 September 30, | Three months ended September 30, | |||||||||||||||
| Strategic Business Unit | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| BFSI |
38.5 | % | 34.3 | % | 36.1 | % | 32.5 | % | ||||||||
| TSLU |
30.3 | % | 30.8 | % | 31.4 | % | 31.6 | % | ||||||||
| MRHP |
24.4 | % | 24.2 | % | 25.3 | % | 24.9 | % | ||||||||
| HCLS |
9.2 | % | 13.0 | % | 9.6 | % | 13.4 | % | ||||||||
| Reconciling item (1) |
(2.4 | )% | (2.3 | )% | (2.4 | )% | (2.4 | )% | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Note:
| (1) | Revenue under reconciling items includes inter and intra segment eliminations and impact of foreign exchange fluctuations. |
For the six months ended September 30, 2024 and 2023, the percentage of revenue and revenue less repair payments (non-GAAP) that we derived from our SBUs 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) |
|||||||||||||||
| Six months ended September 30, | Six months ended September 30, | |||||||||||||||
| Strategic Business Unit | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| BFSI |
37.6 | % | 34.0 | % | 35.3 | % | 32.2 | % | ||||||||
| TSLU |
29.6 | % | 31.0 | % | 30.7 | % | 31.9 | % | ||||||||
| MRHP |
24.1 | % | 24.5 | % | 25.0 | % | 25.2 | % | ||||||||
| HCLS |
11.0 | % | 12.8 | % | 11.4 | % | 13.1 | % | ||||||||
| Reconciling item (1) |
(2.3 | )% | (2.3 | )% | (2.4 | )% | (2.4 | )% | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Note:
| (1) | Revenue under reconciling items includes inter and intra segment eliminations and impact of foreign exchange fluctuations. |
7
Certain services that we provide to our clients are subject to the seasonality of our clients’ business. Accordingly, we typically see an increase in transaction related services within the TSLU segment during holiday seasons, such as during the US summer holidays (our fiscal second quarter); an increase in insurance-related business in the BFSI segment 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 consumer product business in the MRHP segment 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 September 30, 2024 and 2023, 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 September 30, | Three months ended September 30, | |||||||||||||||
| Service Type | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Industry-specific |
41.4 | % | 40.0 | % | 39.1 | % | 38.3 | % | ||||||||
| Finance and accounting |
20.7 | % | 21.9 | % | 21.5 | % | 22.5 | % | ||||||||
| Customer experience services |
19.2 | % | 20.4 | % | 19.9 | % | 21.0 | % | ||||||||
| Research and analytics |
13.4 | % | 12.3 | % | 13.9 | % | 12.7 | % | ||||||||
| Others (1) |
5.3 | % | 5.4 | % | 5.6 | % | 5.5 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Notes:
| (1) | Others includes revenue from technology services, legal services, and human resource outsourcing services. |
For the six months ended September 30, 2024 and 2023, 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) |
|||||||||||||||
| Six months ended September 30, | Six months ended September 30, | |||||||||||||||
| Service Type | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Industry-specific |
42.3 | % | 40.1 | % | 40.3 | % | 38.4 | % | ||||||||
| Finance and accounting |
20.4 | % | 22.2 | % | 21.1 | % | 22.8 | % | ||||||||
| Customer experience services |
19.1 | % | 20.3 | % | 19.8 | % | 20.9 | % | ||||||||
| Research and analytics |
13.0 | % | 12.2 | % | 13.4 | % | 12.5 | % | ||||||||
| Others (1) |
5.2 | % | 5.2 | % | 5.4 | % | 5.4 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Note:
| (1) | Others includes revenue from technology services, legal services, and human resource outsourcing services. |
8
Revenue by Geography
For the three months ended September 30, 2024 and 2023, 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 September 30, | Three months ended September 30, | |||||||||||||||
| Geography | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| North America (primarily the US) |
42.8 | % | 47.4 | % | 44.4 | % | 48.7 | % | ||||||||
| UK |
30.7 | % | 27.6 | % | 28.1 | % | 25.6 | % | ||||||||
| Australia |
8.5 | % | 6.5 | % | 8.9 | % | 6.6 | % | ||||||||
| Europe (excluding the UK) |
7.9 | % | 8.2 | % | 8.2 | % | 8.5 | % | ||||||||
| South Africa |
1.0 | % | 1.0 | % | 1.0 | % | 1.1 | % | ||||||||
| Rest of world |
9.1 | % | 9.3 | % | 9.4 | % | 9.5 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
For the six months ended September 30, 2024 and 2023, 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) |
|||||||||||||||
| Six months ended September 30, | Six months ended September 30, | |||||||||||||||
| Geography | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| North America (primarily the US) |
44.3 | % | 47.8 | % | 45.9 | % | 49.2 | % | ||||||||
| UK |
30.1 | % | 27.5 | % | 27.6 | % | 25.5 | % | ||||||||
| Australia |
7.9 | % | 6.4 | % | 8.2 | % | 6.6 | % | ||||||||
| Europe (excluding the UK) |
7.7 | % | 8.3 | % | 8.0 | % | 8.6 | % | ||||||||
| South Africa |
0.9 | % | 1.1 | % | 1.0 | % | 1.1 | % | ||||||||
| Rest of world |
9.1 | % | 8.9 | % | 9.3 | % | 9.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
9
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 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.
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 outsourced; |
| 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) | subscription arrangements, which typically involve billings based on per member per month, based on contractually agreed rates; |
| 4) | fixed-price arrangements, which typically involve billings based on achievements of pre-defined deliverables or milestones; |
| 5) | 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 |
| 6) | other pricing arrangements, including cost-plus arrangements, which typically involve billing the contractually agreed direct and indirect costs and a fee based on the number of employees deployed under the arrangement. |
Apart from the above-mentioned pricing methods, a small portion of our revenue is comprised of 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 I — Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — If our pricing structures do not accurately anticipate the cost and complexity of performing our work, our profitability may be negatively affected.” of our annual report on Form 20-F for our fiscal year ended March 31, 2024.
10
Revenue by Contract Type
For the three months ended September 30, 2024 and 2023, 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 September 30, | Three months ended September 30, | |||||||||||||||
| Contract Type | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Full-time-equivalent |
75.2 | % | 70.5 | % | 78.1 | % | 72.4 | % | ||||||||
| Transaction |
15.4 | % | 13.8 | % | 12.1 | % | 11.5 | % | ||||||||
| Fixed price |
5.9 | % | 5.6 | % | 6.1 | % | 5.7 | % | ||||||||
| Subscription |
0.9 | % | 5.4 | % | 0.9 | % | 5.5 | % | ||||||||
| Others(1) |
2.6 | % | 4.7 | % | 2.8 | % | 4.9 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Note:
| (1) | Others includes revenue from “outcome-based arrangements”, which typically involve billings based on the business result achieved by our clients through our services (such as reduction in days sales outstanding, an improvement in working capital, an increase in collections and a reduction in operating expenses). |
For the six months ended September 30, 2024 and 2023, 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) |
|||||||||||||||
| Six months ended September 30, | Six months ended September 30, | |||||||||||||||
| Contract Type | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Full-time-equivalent |
73.8 | % | 70.6 | % | 76.5 | % | 72.6 | % | ||||||||
| Transaction |
15.1 | % | 14.0 | % | 12.0 | % | 11.6 | % | ||||||||
| Fixed price |
5.2 | % | 5.3 | % | 5.4 | % | 5.4 | % | ||||||||
| Subscription |
2.9 | % | 5.3 | % | 3.0 | % | 5.5 | % | ||||||||
| Others(1) |
3.0 | % | 4.8 | % | 3.1 | % | 4.9 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Note:
| (1) | Others includes revenue from “outcome-based arrangements”, which typically involve billings based on the business result achieved by our clients through our services (such as reduction in days sales outstanding, an improvement in working capital, an increase in collections and a reduction in operating expenses). |
11
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, payments to repair centers, facilities costs, depreciation, legal and professional costs, and travel expenses. 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 the 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. See “[Part I — Item 4. Information on the Company — B. Business Overview — Human Capital]” of our annual report on Form 20-F for our fiscal year ended March 31, 2024. Regulatory developments may, however, result in wage increases in India and increase our cost of revenue.
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. 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.
Selling and Marketing Expenses
Our selling and marketing expenses comprise of primarily employee costs for sales and marketing personnel, share-based compensation expense, brand building expenses, legal and professional fees, travel expenses, and other general expenses relating to selling and marketing.
General and Administrative Expenses
Our general and administrative expenses comprise of primarily employee costs for senior management and other support personnel, share-based compensation expense, legal and professional fees, travel expenses, and other general expenses not related to cost of revenue and selling and marketing. It includes acquisition related expenses and benefits, including transaction costs, integration expenses and employment-linked earn-out as part of deferred consideration. It also includes costs related to our transition to US GAAP reporting and to voluntarily filing on US domestic issuer forms with SEC.
12
Foreign Exchange Loss / (Gain), Net
Foreign exchange loss / (gain), net include:
| • | marked to market gains or losses on derivative instruments that do not qualify for “hedge” accounting and are deemed ineffective; |
| • | realized foreign currency exchange gains or losses on settlement of transactions in foreign currency and derivative instruments; and |
| • | unrealized foreign currency exchange gains or losses on revaluation of other assets and liabilities. |
Amortization of Intangible Assets
Amortization of intangible assets is primarily associated with our acquisitions of Denali Sourcing Services Inc. (“Denali”) in January 2017, MTS HealthHelp Inc. and its subsidiaries (“HealthHelp”) in March 2017, Vuram in July 2022, The Smart Cube in December 2022, OptiBuy in December 2022 and amortization of intangible assets associated with business transfers a large insurance company in October 2022. It also includes amortization of software acquired in the normal course of business and developed in-house.
Other Income, Net
Other income, net comprises interest income, income from investments, income from acquisition related contingent consideration, gain or loss on sale of assets, amortization of actuarial (gain)/loss on defined benefit obligations and other miscellaneous income and expenses.
Finance Expense
Finance expense primarily relates to interest charges payable on our term loans and short-term borrowings, transaction costs, interest expense on defined benefit obligations and changes in the fair value of contingent consideration relating to our acquisitions.
13
Operating Data
Our profit margin is largely a function of our asset utilization and the rates we are able to recover for our services. One of the most significant components of our asset utilization is our headcount and our built up seats. Generally, an increase in our headcount and built up seats will increase our costs.
The following table presents certain operating data as at the dates indicated:
| September 30, 2024 |
June 30, 2024 |
March 31, 2024 |
December 31, 2023 |
September 30, 2023 |
June 30, 2023 |
March 31, 2023 |
||||||||||||||||||||||
| Total head count |
62,951 | 60,513 | 60,125 | 60,652 | 59,873 | 59,871 | 59,755 | |||||||||||||||||||||
| Built up seats(1) |
43,108 | 41,676 | 41,599 | 40,658 | 39,775 | 38,945 | 37,222 | |||||||||||||||||||||
Notes:
| (1) | “Built up seats” refers to the total number of production seats (excluding support functions like finance, human resources, administration and seats dedicated for business continuity planning) that are set up in any premises. |
The service delivery capacities of our remote-working employees may not be equivalent to their normal capacities when working in our delivery centers. We are averaging 72% “work from office” during the three months ended September 30, 2024.
Our built up seats increased by 8.4% from 39,775 as at September 30, 2023 to 43,108 as at September 30, 2024 due to expansion of our facilities in Gurgaon and Vizag in India, Malaysia, South Africa and the Philippines, partially offset by the surrender of our facilities in Romania, Poland and in Noida in India. Our total headcount increased by 5.1% from 59,873 as at September 30, 2023 to 62,951 as at September 30, 2024.
Critical Accounting Policies and Estimates
For a description of our critical accounting policies and estimates, refer to “Note 2. Summary of significant accounting policies” of our unaudited consolidated financial statements in Part I of this report.
For further details on our segment reporting, refer to “Note 20 –Segment reporting” of our unaudited consolidated financial statements in Part I of this report.
14
Results of Operations
The following table sets forth certain financial information as a percentage of revenue and revenue less repair payments (non-GAAP) for the periods indicated:
| As a percentage of | As a percentage of | |||||||||||||||||||||||||||||||
| Revenue | Revenue less repair payments (non-GAAP) |
Revenue | Revenue less repair payments (non-GAAP) |
|||||||||||||||||||||||||||||
| Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||
| Cost of revenue |
64.3 | % | 63.9 | % | 62.9 | % | 62.9 | % | 64.5 | % | 64.7 | % | 63.2 | % | 63.7 | % | ||||||||||||||||
| Gross profit |
35.7 | % | 36.1 | % | 37.1 | % | 37.1 | % | 35.5 | % | 35.3 | % | 36.8 | % | 36.3 | % | ||||||||||||||||
| Operating expenses: |
||||||||||||||||||||||||||||||||
| Selling and marketing expenses |
6.6 | % | 5.6 | % | 6.9 | % | 5.8 | % | 6.6 | % | 5.9 | % | 6.9 | % | 6.0 | % | ||||||||||||||||
| General and administrative expenses |
14.0 | % | 13.9 | % | 14.6 | % | 14.3 | % | 14.1 | % | 14.1 | % | 14.6 | % | 14.5 | % | ||||||||||||||||
| Foreign exchange loss/(gain), net |
0.1 | % | 0.0 | % | 0.1 | % | 0.0 | % | 0.2 | % | (0.3 | )% | 0.2 | % | (0.3 | )% | ||||||||||||||||
| Impairment of intangible assets |
0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||||||||
| Amortization of intangible assets |
2.2 | % | 2.6 | % | 2.3 | % | 2.7 | % | 2.2 | % | 2.6 | % | 2.2 | % | 2.7 | % | ||||||||||||||||
| Operating profit |
12.8 | % | 14.0 | % | 13.3 | % | 14.4 | % | 12.4 | % | 12.8 | % | 12.8 | % | 13.2 | % | ||||||||||||||||
| Other income, net |
(2.7 | )% | (7.7 | )% | (2.8 | )% | (7.9 | )% | (1.9 | )% | (4.6 | )% | (2.0 | )% | (4.7 | )% | ||||||||||||||||
| Finance expense |
1.8 | % | 1.2 | % | 1.9 | % | 1.3 | % | 1.6 | % | 1.2 | % | 1.6 | % | 1.2 | % | ||||||||||||||||
| Income tax expense |
0.7 | % | 2.6 | % | 0.7 | % | 2.7 | % | 1.8 | % | 2.4 | % | 1.8 | % | 2.5 | % | ||||||||||||||||
| Profit after tax |
13.0 | % | 17.8 | % | 13.5 | % | 18.3 | % | 11.0 | % | 13.8 | % | 11.3 | % | 14.2 | % | ||||||||||||||||
The following table reconciles revenue (a GAAP financial measure) to revenue less repair payments (a non-GAAP financial measure) and sets forth payments to repair centers and revenue less repair payments (non-GAAP) as a percentage of revenue for the periods indicated:
| Three months ended September 30, | Six months ended September 30, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||
| (US dollars in millions) | (US dollars in millions) | |||||||||||||||||||||||||||||||
| Revenue |
$ | 322.6 | $ | 333.9 | 100.0 | % | 100.0 | % | $ | 645.7 | $ | 660.4 | 100 | % | 100.0 | % | ||||||||||||||||
| Less: Payments to repair centers |
11.9 | 8.9 | 3.7 | % | 2.7 | % | 22.6 | 17.9 | 3.5 | % | 2.7 | % | ||||||||||||||||||||
|
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|
|
|||||||||||||||||
| Revenue less repair payments (non-GAAP) |
$ | 310.7 | $ | 325.0 | 96.3 | % | 97.3 | % | $ | 623.1 | $ | 642.5 | 96.5 | % | 97.3 | % | ||||||||||||||||
|
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|||||||||||||||||
15
The following table presents our results of operations for the periods indicated:
| Three months ended September 30, |
Six months ended September 30, |
|||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| Revenue |
$ | 322.6 | $ | 333.9 | $ | 645.7 | $ | 660.4 | ||||||||
| Cost of revenue |
207.3 | 213.3 | 416.7 | 427.2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Gross profit |
115.3 | 120.6 | 229.0 | 233.2 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling and marketing expenses |
21.3 | 18.8 | 42.9 | 38.7 | ||||||||||||
| General and administrative expenses |
45.3 | 46.5 | 90.9 | 93.4 | ||||||||||||
| Foreign exchange loss/(gain), net |
0.4 | (0.0 | ) | 1.4 | (0.9 | ) | ||||||||||
| Impairment of intangible assets |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
| Amortization of intangible assets |
7.0 | 8.7 | 13.9 | 17.4 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating profit |
41.3 | 46.7 | 79.9 | 84.6 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other income, net |
(8.6 | ) | (25.6 | ) | (12.4 | ) | (30.4 | ) | ||||||||
| Finance expense |
5.8 | 4.1 | 10.2 | 7.7 | ||||||||||||
|
|
|
|
|
|
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|
|
|||||||||
| Profit before income taxes |
44.1 | 68.2 | 82.1 | 107.2 | ||||||||||||
| Income tax expense |
2.3 | 8.8 | 11.4 | 15.8 | ||||||||||||
|
|
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|
|
|||||||||
| Profit after tax |
$ | 41.8 | $ | 59.4 | $ | 70.7 | $ | 91.4 | ||||||||
|
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|
|||||||||
Results for the three months ended September 30, 2024 compared to the three months ended September 30, 2023
Revenue
The following table sets forth our revenue and percentage change in revenue for the periods indicated:
| Three months ended September 30, | ||||||||||||||||
| 2024 | 2023 | Change | % Change | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| Revenue |
$ | 322.6 | $ | 333.9 | $ | (11.3 | ) | (3.4 | )% | |||||||
The decrease in revenue of $11.3 million was primarily attributable to the loss of a large Healthcare client, lower volumes in the online travel segment, the offshore delivery transition of a large internet customer and reductions in discretionary project work, resulting in a decrease in revenue from existing clients of $27.5 million. The decrease was partially offset by revenue from new clients of $16.1 million, an appreciation of the pound sterling, the Australian dollar, the Euro and the South African rand by an average of 2.8%, 2.3%, 1.0% and 3.6% respectively, against the US dollar for the three months ended September 30, 2024 as compared to the respective average exchange rates for the three months ended September 30, 2023. The decrease in revenue was primarily attributable to lower revenues in our HCLS, TSLU and MRHP segments, partially offset by higher revenues in our BFSI segment.
16
Revenue by Geography
The following table sets forth the composition of our revenue based on the location of our clients in our key geographies for the periods indicated:
| Revenue | As a percentage of Revenue |
|||||||||||||||
| Three months ended September 30, | ||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| North America (primarily the US) |
$ | 138.0 | $ | 158.1 | 42.8 | % | 47.4 | % | ||||||||
| UK |
99.1 | 92.2 | 30.7 | % | 27.6 | % | ||||||||||
| Australia |
27.5 | 21.6 | 8.5 | % | 6.5 | % | ||||||||||
| Europe (excluding the UK) |
25.6 | 27.5 | 7.9 | % | 8.2 | % | ||||||||||
| South Africa |
3.2 | 3.5 | 1.0 | % | 1.0 | % | ||||||||||
| Rest of world |
29.2 | 31.0 | 9.1 | % | 9.3 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 322.6 | $ | 333.9 | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The decrease in revenue in the North America (primarily the US) region was primarily attributable to lower revenues in our HCLS, TSLU and MRHP segments, partially offset by higher revenues in our BFSI segment.
The increase in revenue from the UK region was primarily attributable to higher revenues in our TSLU, MRHP and HCLS segments and an appreciation of the pound sterling against the US dollar by an average of 2.8% for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023, partially offset by lower revenues from our BFSI segment.
The increase in revenue from the Australia region was primarily attributable to higher revenues in our BFSI, HCLS and TSLU segments and an appreciation of the Australian dollar against the US dollar by an average of 2.3% for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023, partially offset by lower revenues in our MRHP segment.
The decrease in revenue from the Europe (excluding the UK) region was primarily attributable to lower revenues in all our segments, partially offset by an appreciation of the Euro against the US dollar by an average of 1.0% for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023.
The decrease in revenue from the South Africa region was primarily attributable to lower revenues in our TSLU segment, partially offset by higher revenue in our MRHP and BFSI segments and an appreciation of the South African rand against the US dollar by an average of 3.6% for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023.
The decrease in revenue from the rest of world region was primarily attributable to lower revenues in our HCLS, MRHP and TSLU segments, partially offset by higher revenues from our BFSI segment.
Revenue Less Repair Payments (non-GAAP)
The following table sets forth our revenue less repair payments (non-GAAP) and percentage change in revenue less repair payments (non-GAAP) for the periods indicated:
| Three months ended September 30, | ||||||||||||||||
| 2024 | 2023 | Change | % Change | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| Revenue less repair payments (non-GAAP) |
$ | 310.7 | $ | 325.0 | $ | (14.3 | ) | (4.4 | )% | |||||||
The decrease in revenue less repair payments (non-GAAP) of $14.3 million was primarily attributable to the loss of a large Healthcare client, lower volumes in the online travel segment, the offshore delivery transition of a large internet customer and reductions in discretionary project work, resulting a decrease in revenue less repair payments (non-GAAP) from existing clients of $30.5 million. The decrease was partially offset by revenue less repair payments (non-GAAP) from new clients of $16.1 million, an appreciation of the pound sterling, the Australian dollar, the Euro and the South African rand by an average of 2.8%, 2.3%, 1.0% and 3.6% respectively, against the US dollar for the three months ended September 30, 2024 as compared to the respective average exchange rates for the three months ended September 30, 2023. The decrease in revenue less repair payments (non-GAAP) was primarily attributable to lower revenue less repair payments (non-GAAP) in our HCLS, TSLU and MRHP segments, partially offset by higher revenue less repair payments (non-GAAP) in our BFSI segment.
17
Revenue Less Repair Payments (non-GAAP) by Geography
The following table sets forth the composition of our revenue less repair payments (non-GAAP) based on the location of our clients in our key geographies for the periods indicated:
| Revenue less repair payments (non-GAAP) |
As a percentage of revenue less repair payments (non-GAAP) |
|||||||||||||||
| Three months ended September 30, | ||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| North America (primarily the US) |
$ | 138.0 | $ | 158.1 | 44.4 | % | 48.7 | % | ||||||||
| UK |
87.2 | 83.3 | 28.1 | % | 25.6 | % | ||||||||||
| Australia |
27.5 | 21.6 | 8.9 | % | 6.6 | % | ||||||||||
| Europe (excluding the UK) |
25.6 | 27.5 | 8.2 | % | 8.5 | % | ||||||||||
| South Africa |
3.2 | 3.5 | 1.0 | % | 1.1 | % | ||||||||||
| Rest of world |
29.2 | 31.0 | 9.4 | % | 9.5 | % | ||||||||||
|
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|
|
|
|
|
|
|||||||||
| Total |
$ | 310.7 | $ | 325.0 | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The decrease in revenue less repair payments (non-GAAP) in the North America (primarily the US) region was primarily attributable to lower revenue less repair payments (non-GAAP) in our HCLS, TSLU and MRHP segments, partially offset by higher revenue less repair payments (non-GAAP) in our BFSI segment.
The increase in revenue less repair payments (non-GAAP) from the UK region was primarily attributable to higher revenue less repair payments (non-GAAP) in our TSLU, MRHP and HCLS segments and an appreciation of the pound sterling against the US dollar by an average of 2.8% for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023, partially offset by lower revenue less repair payments (non-GAAP) from our BFSI segment.
The increase in revenue less repair payments (non-GAAP) from the Australia region was primarily attributable to higher revenue less repair payments (non-GAAP) in our BFSI, HCLS and TSLU segments and an appreciation of the Australian dollar against the US dollar by an average of 2.3% for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023, partially offset by lower revenue less repair payments (non-GAAP) in our MRHP segment.
The decrease in revenue less repair payments (non-GAAP) from the Europe (excluding the UK) region was primarily attributable to lower revenue less repair payments (non-GAAP) in all our segments, partially offset by an appreciation of the Euro against the US dollar by an average of 1.0% for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023.
The decrease in revenue less repair payments (non-GAAP) from the South Africa region was primarily attributable to lower revenue less repair payments (non-GAAP) in our TSLU segment, partially offset by higher revenue less repair payments (non-GAAP) in our MRHP and BFSI segments and an appreciation of the South African rand against the US dollar by an average of 3.6% for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023.
The decrease in revenue less repair payments (non-GAAP) from the rest of world region was primarily attributable to lower revenue less repair payments (non-GAAP) in our HCLS, MRHP and TSLU segments, partially offset by higher revenue less repair payments (non-GAAP) from our BFSI segment.
18
Cost of Revenue
The following table sets forth the composition of our cost of revenue for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Employee costs |
$ | 146.6 | $ | 156.8 | $ | (10.2 | ) | |||||
| Repair payments |
11.9 | 8.9 | 3.0 | |||||||||
| Facilities costs |
32.4 | 31.3 | 1.2 | |||||||||
| Depreciation |
6.8 | 5.9 | 0.9 | |||||||||
| Legal and professional costs |
2.7 | 2.7 | (0.0 | ) | ||||||||
| Travel costs |
2.6 | 2.5 | 0.1 | |||||||||
| Other costs |
4.3 | 5.2 | (0.9 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of revenue |
$ | 207.3 | $ | 213.3 | $ | 6.0 | ||||||
|
|
|
|
|
|
|
|||||||
| As a percentage of revenue |
64.3 | % | 63.9 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
62.9 | % | 62.9 | % | ||||||||
The decrease in cost of revenue was primarily due to lower employee costs on account of change in revenue mix, lower share-based compensation and a depreciation of the Indian rupees and the Philippine peso against the US dollar by an average of 1.4% and 2.2% respectively for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023, which decreased our cost of revenue by approximately $2.0 million. The decrease was partially offset by increase in repair payments, higher facilities running costs due to capacity expansion and an increase in facilities utilization (as the number of employees working in the office increased) and higher depreciation cost due to higher fixed assets and an appreciation of the South Africa rand against the US dollar by an average of 3.6% for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023, which increased our cost of revenue by approximately $0.5 million.
Gross Profit
The following table sets forth our gross profit for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Gross profit |
$ | 115.3 | $ | 120.6 | $ | (5.3 | ) | |||||
| As a percentage of revenue |
35.7 | % | 36.1 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
37.1 | % | 37.1 | % | ||||||||
Gross profit as a percentage of revenue was lower for three months ended September 30, 2024 as compared to three months ended September 30, 2023, primarily due to lower revenues and higher cost of revenue as a percentage of revenue as discussed above.
Gross profit as a percentage of revenue less repair payments (non-GAAP) was similar for three months ended September 30, 2024 as compared to three months ended September 30, 2023.
For further information, see note (1) to the table presenting certain operating data in “— Operating Data” above.
19
Selling and Marketing Expenses
The following table sets forth the composition of our selling and marketing expenses for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Employee costs |
$ | 16.7 | $ | 14.6 | $ | 2.1 | ||||||
| Other costs |
4.6 | 4.2 | 0.5 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total selling and marketing expenses |
$ | 21.3 | $ | 18.8 | $ | 2.6 | ||||||
|
|
|
|
|
|
|
|||||||
| As a percentage of revenue |
6.6 | % | 5.6 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
6.9 | % | 5.8 | % | ||||||||
The increase in our selling and marketing expenses was primarily attributable to an increase in employee cost primarily due to increase in the number of sales personnel and an appreciation of the pound sterling against the US dollar by an average of 2.8% for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023, which increased our selling and marketing expenses by approximately $0.2 million.
General and Administrative Expenses
The following table sets forth the composition of our general and administrative expenses for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Employee costs |
$ | 34.7 | $ | 37.4 | $ | (2.7 | ) | |||||
| Other costs |
10.6 | 9.1 | 1.5 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total general and administrative expenses |
$ | 45.3 | $ | 46.5 | $ | (1.2 | ) | |||||
|
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|
|
|
|
|
|||||||
| As a percentage of revenue |
14.0 | % | 13.9 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
14.6 | % | 14.3 | % | ||||||||
The decrease in general and administrative expenses was primarily attributable to lower share-based compensation and a depreciation of the Indian rupee by 1.4% against the US dollar for the three months ended September 30, 2024 as compared to the average exchange rate for the three months ended September 30, 2023, which reduced our general and administrative expenses by approximately $0.2 million. The increase was partially offset by higher other costs due to higher legal and professional fees.
Foreign Exchange Gain, Net
The following table sets forth our foreign exchange gain, net for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Foreign exchange loss / (gain), net |
$ | 0.4 | $ | (0.0 | ) | $ | 0.4 | |||||
We recorded foreign exchange loss of $0.4 million in the three months ended September 30, 2024, primarily on account of a revaluation loss of $0.4 million as compared to a foreign exchange gain of $0.0 million in the three months ended September 30, 2023, primarily on account of a revaluation gain of $0.0 million.
20
Amortization of Intangible Assets
The following table sets forth our amortization of intangible assets for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Amortization of intangible assets |
$ | 7.0 | $ | 8.7 | $ | (1.7 | ) | |||||
The decrease in amortization of intangible assets was primarily attributable lower amortization of intangibles as we had booked an impairment charge to the customer relationship intangible related to our large HCLS client termination in fiscal 2024 and lower amortization of intangible assets associated with our acquisition of Vuram, The Smart Cube and OptiBuy.
Operating Profit
The following table sets forth our operating profit for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Operating profit |
$ | 41.3 | $ | 46.7 | $ | (5.4 | ) | |||||
| As a percentage of revenue |
12.8 | % | 14.0 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
13.3 | % | 14.4 | % | ||||||||
Operating profit as a percentage of revenue for the three months ended September 30, 2024 was lower due to lower revenues, lower gross profit as a percentage of revenue, higher general and administrative expenses and selling and marketing expenses each as a percentage of revenue as explained earlier, partially offset by lower amortization of intangible assets as a percentage of revenue, in the three months ended September 30, 2024.
Operating profit as a percentage of revenue less repair payments (non-GAAP) for the three months ended September 30, 2024 was lower due to higher general and administrative expenses and selling and marketing expenses each as a percentage of revenue less repair payments (non-GAAP) as explained earlier, partially offset by lower amortization of intangible assets as a percentage of revenue less repair payments (non-GAAP), in the three months ended September 30, 2024.
Other Income, Net
The following table sets forth our other income, net for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Other income, net |
$ | (8.6 | ) | $ | (25.6 | ) | $ | 17.0 | ||||
Other income, net was lower primarily due to the write back of the contingent consideration related to our acquisition of Vuram, which we acquired in July 2022 in the three months ended September 30, 2023. The decrease was partially offset by write back of the contingent consideration related to our acquisition of OptiBuy, which we acquired in December 2022 in the three months ended September 30, 2024.
21
Finance Expense
The following table sets forth our finance expense for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Finance expense |
$ | 5.8 | $ | 4.1 | $ | 1.7 | ||||||
Finance expense increased primarily due to interest on long-term loan taken for general corporate purpose.
Income Tax Expense
The following table sets forth our income tax expense for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Income tax expense |
$ | 2.3 | $ | 8.8 | $ | (6.5 | ) | |||||
The decrease in income tax expense was primarily due to one-time tax benefit associated with the reversal of a deferred tax liability on intangibles offset by higher effective tax rate as a result of a change in the profit mix among geographies with higher taxable profits in jurisdictions with higher tax rates for the three months ended September 30, 2024.
Profit After Tax
The following table sets forth our profit after tax for the periods indicated:
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Profit after tax |
$ | 41.8 | $ | 59.4 | $ | (17.7 | ) | |||||
| As a percentage of revenue |
13.0 | % | 17.8 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
13.5 | % | 18.3 | % | ||||||||
The decrease in profit after tax as a percentage of revenue as well as a percentage of revenue less repair payments (non-GAAP) was primarily on account lower other income, net, higher finance expense and lower operating profit as a percentage of revenue as well as a percentage of revenue less repair payments (non-GAAP) as explained above, partially offset by lower income tax expense.
22
Results for the six months ended September 30, 2024 compared to the six months ended September 30, 2023
Revenue
The following table sets forth our revenue and percentage change in revenue for the periods indicated:
| Six months ended September 30, | ||||||||||||||||
| 2024 | 2023 | Change | % Change | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| Revenue |
$ | 645.7 | $ | 660.4 | $ | (14.7 | ) | (2.2 | )% | |||||||
The decrease in revenue of $14.7 million was primarily attributable to the loss of a large Healthcare client, lower volumes in the online travel segment, the offshore delivery transition of a large internet customer and reductions in discretionary project work, resulting in a decrease in revenue from existing clients of $31.2 million. The decrease was partially offset by an appreciation of the pound sterling, the Australian dollar and the South African rand by an average of 1.8%, 0.3% and 1.9% respectively, against the US dollar for the six months ended September 30, 2024 as compared to the respective average exchange rates for the six months ended September 30, 2023, lower hedging loss on our revenue of $2.2 million for the six months ended September 30, 2024 as compared to a loss of $3.1 million for the six months ended September 30, 2023 and revenue from new clients of $15.6 million. The decrease in revenue was primarily attributable to lower revenues in our TSLU, HCLS and MRHP segments, partially offset by higher revenue in our BFSI segment.
23
Revenue by Geography
The following table sets forth the composition of our revenue based on the location of our clients in our key geographies for the periods indicated:
| Revenue | As a percentage of Revenue |
|||||||||||||||
| Six months ended September 30, | ||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| North America (primarily the US) |
$ | 286.3 | $ | 315.9 | 44.3 | % | 47.8 | % | ||||||||
| UK |
194.5 | 181.9 | 30.1 | % | 27.5 | % | ||||||||||
| Australia |
51.2 | 42.3 | 7.9 | % | 6.4 | % | ||||||||||
| Europe (excluding the UK) |
49.7 | 55.1 | 7.7 | % | 8.3 | % | ||||||||||
| South Africa |
6.1 | 7.0 | 0.9 | % | 1.1 | % | ||||||||||
| Rest of world |
58.0 | 58.3 | 9.1 | % | 8.9 | % | ||||||||||
|
|
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|
|
|
|
|
|
|||||||||
| Total |
$ | 645.7 | $ | 660.4 | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
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The decrease in revenue in the North America (primarily the US) region was primarily attributable to lower revenues in our TSLU, HCLS and MRHP segments, partially offset by higher revenues in our BFSI segment.
The increase in revenue from the UK region was primarily attributable to higher revenues in TSLU, MRHP and HCLS segments and an appreciation of the pound sterling against the US dollar by an average of 1.8% for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023, partially offset by lower revenues in our BFSI segment.
The increase in revenue from the Australia region was primarily attributable to higher revenues in our BFSI, HCLS and TSLU segments and an appreciation of the Australian dollar against the US dollar by an average of 0.3% for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023, partially offset by lower revenues in our MRHP segment.
The decrease in revenue from the Europe (excluding the UK) region was primarily attributable to lower revenues in our TSLU, MRHP and BFSI segments and a depreciation of the Euro against the US dollar by an average of 0.1% for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023, partially offset by higher revenue in our HCLS segment.
The decrease in revenue from the South Africa region was primarily attributable to lower revenues in our TSLU and BFSI segments, partially offset by an appreciation of the South African rand against the US dollar by an average of 1.9% for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023 and higher revenue in our MRHP segment.
The increase in revenue from the rest of world region was primarily attributable to higher revenues in our BFSI and TSLU segments, partially offset by lower revenues from our HCLS and MRHP segments.
Revenue Less Repair Payments (non-GAAP)
The following table sets forth our revenue less repair payments (non-GAAP) and percentage change in revenue less repair payments (non-GAAP) for the periods indicated:
| Six months ended September 30, | ||||||||||||||||
| 2024 | 2023 | Change | % Change | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| Revenue less repair payments (non-GAAP) |
$ | 623.1 | $ | 642.5 | $ | (19.3 | ) | (3.0 | )% | |||||||
The decrease in revenue less repair payments (non-GAAP) of $19.3 million was primarily attributable to the loss of a large Healthcare client, lower volumes in the online travel segment, the offshore delivery transition of a large internet customer and reductions in discretionary project work, resulting in a decrease in revenue from existing clients of $35.8 million. The decrease was partially offset by an appreciation of the pound sterling, the Australian dollar and the South African rand by an average of 1.8%, 0.3% and 1.9% respectively, against the US dollar for the six months ended September 30, 2024 as compared to the respective average exchange rates for the six months ended September 30, 2023, lower hedging loss on our revenue less repair payments (non-GAAP) of $2.2 million for the six months ended September 30, 2024 as compared to a loss of $3.1 million for the six months ended September 30, 2023 and revenue less repair payments (non-GAAP) from new clients of $15.6 million. The decrease in revenue less repair payments (non-GAAP) was primarily attributable to lower revenue less repair payments (non-GAAP) in our TSLU, HCLS and MRHP segments, partially offset by higher revenue less repair payments (non-GAAP) in our BFSI segment.
24
Revenue Less Repair Payments (non-GAAP) by Geography
The following table sets forth the composition of our revenue less repair payments (non-GAAP) based on the location of our clients in our key geographies for the periods indicated:
| Revenue less repair payments (non-GAAP) |
As a percentage of revenue less repair payments (non-GAAP) |
|||||||||||||||
| Six months ended September 30, | ||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (US dollars in millions) | ||||||||||||||||
| North America (primarily the US) |
$ | 286.3 | $ | 315.9 | 45.9 | % | 49.2 | % | ||||||||
| UK |
171.9 | 163.9 | 27.6 | % | 25.5 | % | ||||||||||
| Australia |
51.2 | 42.3 | 8.2 | % | 6.6 | % | ||||||||||
| Europe (excluding the UK) |
49.7 | 55.1 | 8.0 | % | 8.6 | % | ||||||||||
| South Africa |
6.1 | 7.0 | 1.0 | % | 1.1 | % | ||||||||||
| Rest of world |
58.0 | 58.3 | 9.3 | % | 9.0 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 623.1 | $ | 642.5 | 100.0 | % | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The decrease in revenue less repair payments (non-GAAP) in the North America (primarily the US) region was primarily attributable to lower revenue less repair payments (non-GAAP) in our TSLU, HCLS and MRHP segments, partially offset by higher revenue less repair payments (non-GAAP) in our BFSI segment.
The increase in revenue less repair payments (non-GAAP) from the UK region was primarily attributable to higher revenue less repair payments (non-GAAP) in TSLU, MRHP and HCLS segments and an appreciation of the pound sterling against the US dollar by an average of 1.8% for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023, partially offset by lower revenue less repair payments (non-GAAP) in our BFSI segment.
The increase in revenue less repair payments (non-GAAP) from the Australia region was primarily attributable to higher revenue less repair payments (non-GAAP) in our BFSI, HCLS and TSLU segments and an appreciation of the Australian dollar against the US dollar by an average of 0.3% for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023, partially offset by lower revenue less repair payments (non-GAAP) in our MRHP segment.
The decrease in revenue less repair payments (non-GAAP) from the Europe (excluding the UK) region was primarily attributable to lower revenue less repair payments (non-GAAP) in our TSLU, MRHP and BFSI segments and a depreciation of the Euro against the US dollar by an average of 0.1% for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023, partially offset by higher revenue less repair payments (non-GAAP) in our HCLS segment.
The decrease in revenue less repair payments (non-GAAP) from the South Africa region was primarily attributable to lower revenue less repair payments (non-GAAP) in our TSLU and BFSI segments, partially offset by an appreciation of the South African rand against the US dollar by an average of 1.9% for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023 and higher revenue less repair payments (non-GAAP) in our MRHP segment.
The increase in revenue less repair payments (non-GAAP) from the rest of world region was primarily attributable to higher revenue less repair payments (non-GAAP) in our BFSI and TSLU segments, partially offset by lower revenue less repair payments (non-GAAP) from our HCLS and MRHP segments.
25
Cost of Revenue
The following table sets forth the composition of our cost of revenue for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Employee costs |
$ | 298.1 | $ | 315.6 | $ | (17.5 | ) | |||||
| Repair payments |
22.6 | 17.9 | 4.7 | |||||||||
| Facilities costs |
63.6 | 62.0 | 1.6 | |||||||||
| Depreciation |
13.6 | 11.5 | 2.1 | |||||||||
| Legal and professional costs |
5.2 | 5.8 | (0.6 | ) | ||||||||
| Travel costs |
4.9 | 4.3 | 0.6 | |||||||||
| Other costs |
8.8 | 10.1 | (1.3 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of revenue |
$ | 416.7 | $ | 427.2 | $ | (10.5 | ) | |||||
|
|
|
|
|
|
|
|||||||
| As a percentage of revenue |
64.5 | % | 64.7 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
63.2 | % | 63.7 | % | ||||||||
The decrease in cost of revenue was primarily due to lower share-based compensation and lower employee costs on account of change in revenue mix, lower legal and professional costs and a depreciation of the Indian rupees and the Philippine peso against the US dollar by an average of 1.4% and 3.1% respectively for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023, which decreased our cost of revenue by approximately $4.6 million. The decrease was partially offset by increase in repair payments, higher facilities running costs due to capacity expansion and an increase in facilities utilization (as the number of employees working in the office increased), higher depreciation cost due to higher fixed assets and additional facilities and higher travel costs.
Gross Profit
The following table sets forth our gross profit for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Gross profit |
$ | 229.0 | $ | 233.2 | $ | (4.2 | ) | |||||
| As a percentage of revenue |
35.5 | % | 35.3 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
36.8 | % | 36.3 | % | ||||||||
Gross profit as a percentage of revenue was higher for six months ended September 30, 2024 as compared to six months ended September 30, 2023, primarily due to lower cost of revenue as a percentage of revenue as discussed above.
Gross profit as a percentage of revenue less repair payments (non-GAAP) was higher for six months ended September 30, 2024 as compared to six months ended September 30, 2023, primarily due to lower cost of revenue as a percentage of revenue less repair payments (non-GAAP) as discussed above.
26
Selling and Marketing Expenses
The following table sets forth the composition of our selling and marketing expenses for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Employee costs |
$ | 33.0 | $ | 30.8 | $ | 2.2 | ||||||
| Other costs |
9.9 | 8.0 | 1.9 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total selling and marketing expenses |
$ | 42.8 | $ | 38.7 | $ | 4.2 | ||||||
|
|
|
|
|
|
|
|||||||
| As a percentage of revenue |
6.6 | % | 5.9 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
6.9 | % | 6.0 | % | ||||||||
The increase in our selling and marketing expenses was primarily attributable to an increase in employee cost primarily due to increase in the number of sales and an appreciation of the pound sterling against the US dollar by an average of 1.8% for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023, which increased our selling and marketing expenses by approximately $0.2 million. The increase was partially offset by lower share-based based compensation.
General and Administrative Expenses
The following table sets forth the composition of our general and administrative expenses for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Employee costs |
$ | 68.1 | $ | 73.7 | $ | (5.6 | ) | |||||
| Other costs |
22.8 | 19.7 | 3.1 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total general and administrative expenses |
$ | 90.9 | $ | 93.4 | $ | (2.4 | ) | |||||
|
|
|
|
|
|
|
|||||||
| As a percentage of revenue |
14.1 | % | 14.1 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
14.6 | % | 14.5 | % | ||||||||
The decrease in general and administrative expenses was primarily attributable to lower share-based compensation and lower employment-linked earn-out as part of deferred consideration related to our acquisitions and a depreciation of the Indian rupee by 1.4% against the US dollar for the six months ended September 30, 2024 as compared to the average exchange rate for the six months ended September 30, 2023, which reduced our general and administrative expenses by approximately $0.5 million. The increase was partially offset by higher other costs due to higher legal and professional fees and higher travel cost.
Foreign Exchange Gain, Net
The following table sets forth our foreign exchange gain, net for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Foreign exchange loss / (gain), net |
$ | 1.4 | $ | (0.9 | ) | $ | 2.3 | |||||
We recorded foreign exchange loss of $1.4 million in the six months ended September 30, 2024, primarily on account of a revaluation loss of $1.1 million and de-designation of hedges of $0.3 million as compared to a foreign exchange gain of $0.9 million in the six months ended September 30, 2023, primarily on account of a revaluation gain of $0.9 million.
27
Amortization of Intangible Assets
The following table sets forth our amortization of intangible assets for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Amortization of intangible assets |
$ | 13.9 | $ | 17.4 | $ | (3.5 | ) | |||||
The decrease in amortization of intangible assets was primarily attributable lower amortization of intangibles as we had booked an impairment charge to the customer relationship intangible related to our large HCLS client termination in fiscal 2024 and lower amortization of intangible assets associated with our acquisition of Vuram, The Smart Cube and OptiBuy.
Operating Profit
The following table sets forth our operating profit for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Operating profit |
$ | 79.9 | $ | 84.6 | $ | (4.7 | ) | |||||
| As a percentage of revenue |
12.4 | % | 12.8 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
12.8 | % | 13.2 | % | ||||||||
Operating profit as a percentage of revenue for the six months ended September 30, 2024 was lower due to higher selling and marketing expenses and foreign exchange gain (net) each as a percentage of revenue, partially offset by higher gross profit as a percentage of revenue and lower amortization of intangible assets as a percentage of revenue as explained earlier.
Operating profit as a percentage of revenue less repair payments (non-GAAP) for the six months ended September 30, 2024 was lower due to higher selling and marketing expenses and foreign exchange gain (net) each as a percentage of revenue less repair payments (non-GAAP), partially offset by higher gross profit as a percentage of revenue less repair payments (non-GAAP) and lower amortization of intangible assets as a percentage of revenue less repair payments (non-GAAP) as explained earlier.
Other Income, Net
The following table sets forth our other income, net for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Other income, net |
$ | (12.4 | ) | $ | (30.4 | ) | $ | 17.9 | ||||
Other income, net was lower primarily due to the write back of the contingent consideration related to our acquisition of Vuram, which we acquired in July 2022 in the six months ended September 30, 2023. The decrease was partially offset by write back of the contingent consideration related to our acquisition of OptiBuy, which we acquired in December 2022 in the six months ended September 30, 2024.
28
Finance Expense
The following table sets forth our finance expense for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Finance expense |
$ | 10.2 | $ | 7.7 | $ | 2.5 | ||||||
Finance expense increased primarily due to interest on long-term loan taken for general corporate purpose.
Income Tax Expense
The following table sets forth our income tax expense for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Income tax expense |
$ | 11.4 | $ | 15.8 | $ | (4.4 | ) | |||||
The decrease in income tax expense was primarily due to one-time tax benefit associated with the reversal of a deferred tax liability on intangibles offset by higher effective tax rate as a result of a change in the profit mix among geographies with higher taxable profits in jurisdictions with higher tax rates for the six months ended September 30, 2024.
Profit After Tax
The following table sets forth our profit after tax for the periods indicated:
| Six months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (US dollars in millions) | ||||||||||||
| Profit after tax |
$ | 70.7 | $ | 91.4 | $ | (20.7 | ) | |||||
| As a percentage of revenue |
11.0 | % | 13.8 | % | ||||||||
| As a percentage of revenue less repair payments (non-GAAP) |
11.3 | % | 14.2 | % | ||||||||
The decrease in profit after tax as a percentage of revenue as well as a percentage of revenue less repair payments (non-GAAP) was primarily on account lower other income, net, higher finance expense and lower operating profit as a percentage of revenue as well as a percentage of revenue less repair payments (non-GAAP) as explained above, partially offset by lower income tax expense.
29
Liquidity and Capital Resources
Our capital requirements are principally for the establishment of operating facilities to support our growth and acquisitions, to fund our debt repayment obligations, to fund our acquisitions and to fund the repurchase of shares under our share repurchase programs, as described in further detail below, see “Part II. Other Information — Item 2. Unregistered Sales of Equity Securities and Use of Proceeds — Share Repurchase.” Our sources of liquidity include cash and cash equivalents and cash flow from operations, supplemented by equity and debt financing and bank credit lines, as required.
As at September 30, 2024, we had cash and cash equivalents of $221.5 million which were primarily held in Indian Rupee, South African rand, pound sterling, US dollars, Sri Lankan rupee and the Philippine pesos. We typically seek to invest our available cash on hand in bank deposits and money market instruments. Our investments include primarily bank deposits, marketable securities and mutual funds which totaled $157.3 million as at September 30, 2024.
As at September 30, 2024, we had $262.8 million debt outstanding, as discussed below.
In July 2022, WNS (Mauritius) Limited obtained a term loan facility of $80.0 million from The Hongkong and Shanghai Banking Corporation Limited, Hong Kong and Citibank N.A., Hong Kong Branch for general corporate purposes. The loan bears interest at a rate equivalent to the SOFR plus a margin of 1.20% per annum. WNS (Mauritius) Limited’s obligations under the term loan are guaranteed by WNS. The term loan is secured by a pledge of shares of WNS (Mauritius) Limited held by WNS. The facility agreement for the term loan contains certain covenants, including restrictive covenants relating to our indebtedness and financial covenants relating to our EBITDA to debt service ratio and total net borrowings to EBITDA ratio, each as defined in the facility agreement. The loan matures in July 2027 and the principal is repayable in 10 semi-annual installments of $8.0 million each. On January 9, 2023, July 11, 2023, January 11, 2024 and July 11, 2024, we made a scheduled repayment of $8.0 million each.
In June 2024, the Company obtained a term loan facility of $100,000 from The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch and JP Morgan Chase Bank N.A., Singapore Branch for general corporate purposes. The loan bears interest at a rate equivalent to the SOFR plus a margin of 1.15% per annum. WNS (Mauritius) Limited’s obligations under the term loan are guaranteed by WNS. The term loan is secured by a pledge of shares of WNS (Mauritius) Limited held by WNS. The facility agreement for the term loan contains certain covenants, including restrictive covenants relating to our indebtedness and financial covenants relating to our EBITDA to debt service ratio and total net borrowings to EBITDA ratio, each as defined in the facility agreement. The loan matures in June 2029 and the principal is repayable in 10 semi-annual installments of $10.0 million each.
In December 2022, WNS UK obtained a term loan facility of £83.0 million ($111.0 million based on the exchange rate on September 30, 2024) from The Hongkong and Shanghai Banking Corporation Limited, Hong Kong and Citibank N.A., UK Branch to fund our acquisition of The Smart Cube. The loan bears interest at a rate equivalent to SONIA plus a margin of 1.25% per annum. WNS UK’s obligations under the term loan are guaranteed by WNS. The term loan is secured by a pledge of shares of WNS (Mauritius) Limited held by WNS. The facility agreement for the term loan contains certain covenants, including restrictive covenants relating to our indebtedness and financial covenants relating to our EBITDA to debt service ratio and total net borrowings to EBITDA ratio, each as defined in the facility agreement. The loan matures in December 2027 and the principal is repayable in 10 semi-annual installments of £8.3 million each. On June 16, 2023, December 18, 2023 and June 18, 2024, we made a scheduled repayment of £8.3 million each.
30
As at September 30, 2024, we also had available lines of credit amounting to $139.8 million, and $38.0 million were drawn under these lines of credit, as discussed below. These limits can be utilized in accordance with the agreed terms and prevailing interest rates at the time of borrowing.
| • | As at September 30, 2024, our Indian subsidiary, WNS Global, had an unsecured line of credit of ₹840 million ($10.0 million based on the exchange rate on September 30, 2024) from The Hongkong and Shanghai Banking Corporation Limited, ₹600 million ($7.2 million based on the exchange rate on September 30, 2024) from JP Morgan Chase Bank, N.A., ₹800 million ($9.5 million based on the exchange rate on September 30, 2024) from Citibank N.A., ₹750 million ($9.0 million based on the exchange rate on September 30, 2024) from Axis Bank, ₹600 million ($7.2 million based on the exchange rate on September 30, 2024) from DBS Bank, ₹600 million ($7.2 million based on the exchange rate on September 30, 2024) from HDFC Bank, ₹600 million ($7.2 million based on the exchange rate on September 30, 2024) from ICICI Bank and ₹600 million ($7.2 million based on the exchange rate on September 30, 2024) from Standard Chartered Bank for working capital purposes. Interest on these lines of credit would be determined on the date of the borrowing. These lines of credit generally can be withdrawn by the relevant lender at any time. As at September 30, 2024, an aggregate of $9.0 million was utilized under lines of credit from The Hongkong and Shanghai Banking Corporation Limited, bearing interest at SOFR plus a margin of 0.80% and an aggregate of $9.0 million was utilized under lines of credit from Citibank N.A., bearing interest at SOFR plus a margin of 0.75%. |
| • | As at September 30, 2024 WNS UK had a working capital facility of £14.0 million ($18.7 million based on the exchange rate on September 30, 2024) from HSBC Bank plc. The working capital facility bears interest at Bank of England base rate plus a margin of 2.00% per annum. Interest is payable on a quarterly basis. The facility is subject to conditions to drawdown and can be withdrawn by the lender at any time by notice to the borrower. As at September 30, 2024, there was no outstanding amount under this facility. |
31
| • | As at September 30, 2024 our South African subsidiary, WNS Global Services SA (Pty) Ltd., had an unsecured line of credit of ZAR 30.0 million ($1.7 million based on the exchange rate on September 30, 2024) from The HSBC Bank plc. for working capital purposes. This facility bears interest at prime rate less a margin of 2.25% per annum. This line of credit can be withdrawn by the lender at any time. As at September 30, 2024, there was no outstanding amount under this facility. |
| • | As at September 30, 2024, WNS North America Inc., had an unsecured line of credit of $40.0 million from The HSBC Bank plc. for working capital purposes. This facility bears interest at prime rate or SOFR plus a margin of 1.65% per annum. This line of credit can be withdrawn by the lender at any time. As at September 30, 2024, $20.0 million was utilized under this facility. |
| • | As at September 30, 2024, WNS Global Services Philippines Inc. had an unsecured line of credit of $15.0 million from The HSBC Bank plc. for working capital purposes. This line of credit can be withdrawn by the lender at any time. As at September 30, 2024, there was no outstanding amount under this facility. |
As at September 30, 2024, bank guarantees amounting to $1.0 million were provided on behalf of certain of our subsidiaries to regulatory authorities and other third parties.
Based on our current level of operations, we expect that our anticipated cash generated from operating activities, cash and cash equivalents on hand, and use of existing credit facilities will be sufficient to fund our estimated capital expenditures, share repurchases and working capital needs for the next 12 months. However, if our lines of credit were to become unavailable for any reason, we would require additional financing to fund our capital expenditures, share repurchases and working capital needs. We currently expect our capital expenditures needs in fiscal 2025 to be approximately $65.0 million. The geographical distribution, timing and volume of our capital expenditures in the future will depend on new client contracts we may enter or the expansion of our business under our existing client contracts. Our capital expenditure in the six months ended September 30, 2024 amounted to $23.4 million and our capital commitments (net of capital advances) as at September 30, 2024 were $8.4 million.
Further, under the current uncertain economic and business conditions as discussed under “— Global Economic Conditions” above, there can be no assurance that our business activity would be maintained at the expected level to generate the anticipated cash flows from operations. If the current market conditions deteriorate, we may experience a decrease in demand for our services, resulting in our cash flows from operations to be lower than anticipated. If our cash flows from operations are lower than anticipated, including as a result of the ongoing uncertainty in the market conditions or otherwise, we may need to obtain additional financing to meet our debt repayment obligations and pursue certain of our expansion plans. Further, we may in the future make further acquisitions. If we have significant growth through acquisitions or require additional operating facilities beyond those currently planned to service new client contracts, we may also need to obtain additional financing. We believe in maintaining maximum flexibility when it comes to financing our business. We regularly evaluate our current and future financing needs. Depending on market conditions, we may access the capital markets to strengthen our capital position and provide us with additional liquidity for general corporate purposes, which may include capital expenditures, acquisitions, refinancing of indebtedness and working capital. If current market conditions deteriorate, we may not be able to obtain additional financing on favorable terms or at all. An inability to pursue additional opportunities will have a material adverse effect on our ability to maintain our desired level of revenue growth in future periods.
32
The following table shows our cash flows for the six months ended September 30, 2024 and September 30, 2023:
| Six months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| (US dollars in millions) | ||||||||
| Net cash provided by operating activities |
$ | 65.0 | $ | 72.4 | ||||
| Net cash (used in)/provided by investing activities |
$ | 11.0 | $ | (8.9 | ) | |||
| Net cash provided by/(used in) financing activities |
$ | (70.6 | ) | $ | (96.6 | ) | ||
Cash Flows from Operating Activities
Net cash provided by operating activities decreased to $65.0 million for the six months ended September 30, 2024 from $72.4 million for the six months ended September 30, 2023. The decrease in net cash provided by operating activities was attributable to a decrease in profit as adjusted for non-cash and other items by $12.0 million; partially offset by a decrease in cash outflow towards working capital requirements by $7.4 million.
Profit after tax as adjusted for non-cash and other items primarily comprised the following: (i) profit after tax of $70.7 million for the six months ended September 30, 2024 as compared to $91.4 million for the six months ended September 30, 2023; (ii) unrealized gain on derivative instruments of $7.0 million for the six months ended September 30, 2024 as compared to unrealized loss on derivative instruments $4.1 million for the six months ended September 30, 2023; (iii) share-based compensation expense of $19.5 million for the six months ended September 30, 2024 as compared to $29.6 million for the six months ended September 30, 2023; (iv) depreciation and amortization expense of $27.8 million for the six months ended September 30, 2024 as compared to $29.2 million for the six months ended September 30, 2023; (v) income from mutual funds of $5.6 million for the six months ended September 30, 2024 as compared to $5.0 million for the six months ended September 30, 2023; (vi) allowances for expected credit losses of $0.9 million for the six months ended September 30, 2024 as compared to $0.2 million for the six months ended September 30, 2023; (vii) reduction in the carrying amount of operating lease right-of-use assets of $14.4 million for the six months ended September 30, 2024 as compared to $12.1 million for the six months ended September 30, 2023; (viii) income tax benefit (deferred tax) of $6.5 million for the six months ended September 30, 2024 as compared to $10.4 million for the six months ended September 30, 2023; (ix) unrealized exchange loss of $3.4 million for the six months ended September 30, 2024 as compared to unrealized exchange gain of $3.9 million for the six months ended September 30, 2023; and (x) reversal of contingent consideration of $4.4 million for the six months ended September 31, 2024 as compared to $21.9 million for the six months ended September 31, 2023.
Cash outflow on account of working capital changes amounted to $48.3 million for the six months ended September 30, 2024 as compared to $53.0 million for the six months ended September 30, 2023. This was primarily on account of a decrease in cash outflow from accounts receivables and unbilled revenue by $19.0 million, a decrease in cash outflow towards current liabilities by $6.4 million; partially offset by a decrease in cash inflow from income tax payable by $13.7 million, an increase in cash outflow towards operating lease liabilities by $3.5 million, an increase in cash outflow from other assets by $2.5 million, an increase in cash outflow towards accounts payables by $0.8 million; and an increase in cash inflow from contract liabilities by $0.2 million.
33
Cash Flows from Investing Activities
Net cash provided by investing activities was $11.0 million for the six months ended September 30, 2024 as compared to net cash used in investing activities of $8.9 million for the six months ended September 30, 2023. This was primarily on account of a cash outflow of $23.4 million towards purchase of property, plant and equipment (comprising leasehold improvements, furniture and fixtures, office equipment and information technology equipment) and intangible assets (comprising computer software) for the six months ended September 30, 2024 as compared to $33.6 million for the six months ended September 30, 2023; a net cash inflow (maturity of fixed deposits, net of placements) from our fixed deposit investments of $9.1 million for the six months ended September 30, 2024 as compared to net cash outflow (placement of fixed deposits, net of maturities) towards our fixed deposit investments of $0.3 million for the six months ended September 30, 2024; a net cash inflow of proceeds from redemption of investment in mutual funds of $25.1 million for the six months ended September 30, 2024 as compared to proceeds from redemption of investment in mutual funds of $23.9 million for the six months ended September 30, 2023.
Cash Flows from Financing Activities
Net cash used in financing activities decreased to $70.6 million for the six months ended September 30, 2024 as compared to $96.6 million for the six months ended September 30, 2023. This was primarily on account of a cash inflow due to proceeds from long term debt (net of repayment of $18.5 million) of $81.5 million for the six months ended September 30, 2024 as compared to a cash outflow due to repayment of long term debt of $18.6 million for the six months ended September 30, 2023; a cash outflow of $nil towards contingent consideration paid towards acquisitions for the six months ended September 30, 2024 as compared to $2.2 million for the six months ended September 30, 2023; partially offset by a net cash outflow towards repayment of short term line of credit of $2.0 million (net of availment of $62.0 million) for the six months ended September 30, 2024 as compared to availment of short term line of credit of $9.9 million (net of repayment of $30.0 million) for the six months ended September 30, 2023, a cash outflow due to payment of debt issuance cost of $0.4 million for the six months ended September 30, 2024 as compared to $nil for the six months ended September 30, 2023; and a cash outflow of $149.7 million towards share repurchases for the six months ended September 30, 2024 as compared to $85.6 million for the six months ended September 30, 2023.
34
Tax Assessment Orders
Transfer pricing regulations to which we are subject require that any international transaction among the WNS group enterprises be on arm’s-length terms. We believe that the international transactions among the WNS group enterprises are on arm’s-length terms. If, however, the applicable tax authorities determine that the transactions among the WNS group enterprises do not meet arm’s-length criteria, we may incur increased tax liability, including accrued interest and penalties. This would cause our tax expense to increase, possibly materially, thereby reducing our profitability and cash flows. We have signed an advance pricing agreement with the Government of India providing for the agreement on transfer pricing matters over certain transactions covered thereunder for a period of five years starting from April 2018. We have filed an application with the Government of India for the renewal of the advance pricing agreement on similar terms for another five years starting from April 2023. The applicable tax authorities may also disallow deductions or tax holiday benefits claimed by us and assess additional taxable income on us in connection with their review of our tax returns.
From time to time, we receive orders of assessment from the Indian tax authorities assessing additional taxable income on us and/or our subsidiaries in connection with their review of our tax returns. We currently have orders of assessment for fiscal 2003 through fiscal 2020 pending before various appellate authorities. These orders assess additional taxable income that could in the aggregate give rise to an estimated ₹302.6 million ($3.6 million based on the exchange rate on September 30, 2024) in additional taxes, including interest of ₹51.9 million ($0.6 million based on the exchange rate on September 30, 2024).
35
The following sets forth the details of these orders of assessment:
| Entity |
Amount demanded (including interest) |
Interest on amount Demanded |
||||||||||||||
| (₹ and US dollars in millions) | ||||||||||||||||
| WNS Global Services Private Limited |
₹ | 222.0 | $ | (2.3 | )(1) | ₹ | 31.0 | $ | (0.3 | )(1) | ||||||
| WNS Business Consulting Services Private Limited |
₹ | 1.0 | $ | (0.1 | )(1) | ₹ | — | $ | — | |||||||
| Permanent establishment of WNS North America Inc and WNS Global Services UK Limited in India |
₹ | 79.6 | $ | (1.2 | )(1) | ₹ | 20.9 | $ | (0.3 | )(1) | ||||||
| Total |
₹ | 302.6 | $ | (3.6 | )(1) | ₹ | 51.9 | $ | (0.6 | )(1) | ||||||
Note:
| (1) | Based on the exchange rate as at September 30, 2024. |
The aforementioned orders of assessment allege that the transfer prices we applied to certain of the international transactions between WNS Global or WNS BCS (each of which is one of our Indian subsidiaries), as the case may be, and our other wholly-owned subsidiaries named above were not on arm’s-length terms, disallow a tax holiday benefit claimed by us, deny the set off of brought forward business losses and unabsorbed depreciation, disallow certain expenses and payments claimed as tax deductible by WNS Global or WNS BCS, as the case may be. As at September 30, 2024, we have provided a tax reserve of ₹774.3 million ($9.2 million based on the exchange rate on September 30, 2024) primarily on account of the Indian tax authorities’ denying the set-off of brought forward business losses and unabsorbed depreciation. We have appealed against these orders of assessment before higher appellate authorities.
In addition, we currently have orders of assessment pertaining to similar issues that have been decided in our favor by appellate authorities, vacating tax demands of ₹6,785.0 million ($81.0 million based on the exchange rate on September 30, 2024) in additional taxes, including interest of ₹2,417.5 million ($28.8 million based on the exchange rate on September 30, 2024). The income tax authorities have filed or may file appeals against these orders at higher appellate authorities.
In case of disputes, the Indian tax authorities may require us to deposit with them all or a portion of the disputed amounts pending resolution of the matters on appeal. Any amount paid by us as deposits will be refunded to us with interest if we succeed in our appeals. We have deposited ₹904.1 million ($10.8 million based on the exchange rate on September 30, 2024) of the disputed amount with the tax authorities and may be required to deposit the remaining portion of the disputed amount with the tax authorities pending final resolution of the respective matters.
As at September 30, 2024, corporate tax returns for fiscal year 2021 and thereafter remain subject to examination by tax authorities in India.
After consultation with our Indian tax advisors and based on the facts of these cases, legal opinions from counsel on certain matters, the nature of the tax authorities’ disallowances and the orders from appellate authorities deciding similar issues in our favor in respect of assessment orders for earlier fiscal years, we believe these orders are unlikely to be sustained at the higher appellate authorities and we intend to vigorously dispute the orders of assessment.
In addition, we currently have orders of assessment outstanding for various years pertaining to pre-acquisition period of Smart Cube India Private Limited acquired in fiscal 2023, which assess additional taxable income that could in the aggregate give rise to an estimated ₹84.0 million ($1.0 million based on the exchange rate on September 30, 2024) in additional taxes, including interest of ₹45.8 million ($0.6 million based on the exchange rate on September 30, 2024). These orders of assessment disallow tax holiday benefit claimed by these acquired entities. These acquired entities have appealed against these orders of assessment before higher appellate authorities.
36
We have received orders of assessment from the value-added tax (“VAT”), service tax and goods and services tax (“GST”) authorities, demanding payment of ₹12,190.9 million ($12.2 million based on the exchange rate on September 30, 2024) towards VAT, service tax and GST for the period April 1, 2014 to March 31, 2021. The tax authorities have rejected input tax credit on certain types of input services. Based on consultations with our tax advisors, we believe these orders of assessments will more likely than not be vacated by the higher appellate authorities and we intend to dispute the orders of assessments.
In 2016, we also received an assessment order from the Sri Lankan Tax Authority, demanding payment of LKR 25.2 million ($0.1 million based on the exchange rate on September 30, 2024) in connection with the review of our tax return for fiscal year 2012. The assessment order challenges the tax exemption that we have claimed for export business. We have filed an appeal against the assessment order with the Sri Lankan Supreme Court in this regard. Based on consultations with our tax advisors, we believe this order of assessment will more likely than not be vacated.
No assurance can be given, however, that we will prevail in our tax disputes. If we do not prevail, payment of additional taxes, interest and penalties may adversely affect our results of operations, financial condition and cash flows. There can also be no assurance that we will not receive similar or additional orders of assessment in the future.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
General
Market risk is attributable to all market sensitive financial instruments including foreign currency receivables and payables. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments.
Our exposure to market risk is primarily a function of our revenue generating activities and any future borrowings in foreign currency. The objective of market risk management is to avoid excessive exposure of our earnings to losses. Most of our exposure to market risk arises from our revenue and expenses that are denominated in different currencies.
The following risk management discussion and the estimated amounts generated from analytical techniques are forward-looking statements of market risk assuming certain market conditions. Our actual results in the future may differ materially from these projected results due to actual developments in the global financial markets.
Risk Management Procedures
We manage market risk through our treasury operations. Our senior management and our Board of Directors approve our treasury operations’ objectives and policies. The activities of our treasury operations include management of cash resources, implementation of hedging strategies for foreign currency exposures, implementation of borrowing strategies and monitoring compliance with market risk limits and policies. Our Foreign Exchange Committee, comprising the Director of the Board, our Group Chief Executive Officer and our Group Chief Financial Officer, is the approving authority for all our hedging transactions.
Components of Market Risk
Exchange Rate Risk
Our exposure to market risk arises principally from exchange rate risk. Although substantially all of our revenue less repair payments (non-GAAP) is denominated in pound sterling and US dollars, approximately 47.1% of our expenses (net of payments to repair centers made as part of our BFSI segment) for the six months ended September 30, 2024, were incurred and paid in Indian rupees. The exchange rates between each of the pound sterling, the Indian rupee, the Australian dollar, the South African rand and the Philippine peso, 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.
38
Our exchange rate risk primarily arises from our foreign currency-denominated receivables. Based upon our level of operations for the six months ended September 30, 2024, a sensitivity analysis shows that a 10% appreciation or depreciation in the pound sterling against the US dollar would have increased or decreased revenue by approximately $17.5 million and increased or decreased revenue less repair payments (non-GAAP) by approximately $15.3 million for the six months ended September 30, 2024, a 10% appreciation or depreciation in the Australian dollar against the US dollar would have increased or decreased revenue and revenue less repair payments (non-GAAP) by approximately $4.6 million for the six months ended September 30, 2024, and a 10% appreciation or depreciation in the South African rand against the US dollar would have increased or decreased revenue and revenue less repair payments (non-GAAP) by approximately $0.5 million for the six months ended September 30, 2024. Similarly, a 10% appreciation or depreciation in the Indian rupee against the US dollar would have increased or decreased our expenses incurred and paid in Indian rupee for the six months ended September 30, 2024 by approximately $26.3 million, a 10% appreciation or depreciation in the South African rand against the US dollar would have increased or decreased our expenses incurred and paid in South African rand for the six months ended September 30, 2024 by approximately $3.9 million and a 10% appreciation or depreciation in the Philippine peso against the US dollar would have increased or decreased our expenses incurred and paid in Philippine peso for the six months ended September 30, 2024 by approximately $6.1 million.
To protect against foreign exchange gains or losses on forecasted revenue and inter-company revenue, we have instituted a foreign currency cash flow hedging program. We hedge a part of our forecasted revenue and inter-company revenue denominated in foreign currencies with forward contracts and options.
Interest Rate Risk
Our exposure to interest rate risk arises from our borrowings that have a floating rate of interest, which is linked to various benchmark interest rates, including SOFR and SONIA. We manage this risk by maintaining an appropriate mix of fixed and floating rate borrowings and through the use of interest rate swap contracts. The costs of floating rate borrowings may be affected by fluctuations in the interest rates. As at September 30, 2024, we had not entered into any interest rate swap contract.
We monitor our positions and do not anticipate non-performance by the counterparties. We intend to selectively use interest rate swaps, options and other derivative instruments to manage our exposure to interest rate movements. These exposures are reviewed by appropriate levels of management on a periodic basis. We do not enter into hedging agreements for speculative purposes.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required under the Exchange Act, management evaluated, with the participation of our Group Chief Executive Officer and Group Chief Financial Officer, the effectiveness of our disclosure controls and procedures as at the end of the period covered by this quarterly report. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Group Chief Executive Officer and Group Chief Financial Officer, as appropriate to allow timely decisions regarding our required disclosure.
Based on the foregoing, our Group Chief Executive Officer and Group Chief Financial Officer concluded that, as at the end of the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
Management has evaluated, with the participation of our Group Chief Executive Officer and Group Chief Financial Officer, whether any changes in our internal control over financial reporting that occurred during the period covered by this quarterly report have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, management has concluded that there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarterly period ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
40
| Period |
No. of shares purchased |
Average price paid per share (in $) |
Total number of shares purchased as part of publicly announced plans or programs |
Approximate US dollar value (in thousands) of shares that may yet be repurchased under the program (assuming purchase price of $100 per share) |
||||||||||||
| July 1 to July 31, 2024 |
856,269 |
55.81 |
856,269 |
160,000 |
||||||||||||
| August 1 to August 31, 2024 |
300,000 |
58.84 |
300,000 |
130,000 |
||||||||||||
| September 1 to September 30, 2024 |
— |
— |
— |
130,000 |
||||||||||||
| Total |
1,156,269 |
56.60 |
1,156,269 |
130,000 |
||||||||||||
| * | Filed or furnished with this Quarterly Report on Form 10-Q. |
WNS (HOLDINGS) LIMITED | ||
| By: | /s/ Arijit Sen | |
| Name: | Arijit Sen | |
| Title: | Group Chief Financial Officer (Principal Financial and Accounting Officer and Authorized Signatory) | |
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Keshav R. Murugesh, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of WNS (Holdings) Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the company and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the Audit Committee of the company’s Board of Directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: October 30, 2024
| By: | /s/ Keshav R. Murugesh | |
| Name: | Keshav R. Murugesh | |
| Title: | Group Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Arijit Sen, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of WNS (Holdings) Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the company and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the Audit Committee of the company’s Board of Directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: October 30, 2024
| By: | /s/ Arijit Sen | |
| Name: | Arijit Sen | |
| Title: | Group Chief Financial Officer (Principal Financial and Accounting Officer and Authorized Signatory) |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of WNS (Holdings) Limited (the “Company”) hereby certifies, to such officer’s knowledge, that:
| (i) | the accompanying quarterly report on Form 10-Q of the Company for the quarter ended September 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
| (ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: October 30, 2024
| By: | /s/ Keshav R. Murugesh | |
| Name: | Keshav R. Murugesh | |
| Title: | Group Chief Executive Officer |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being “filed” either as part of the Report or as a separate disclosure statement, and is not to be incorporated by reference into the Report or any other filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. The foregoing certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of WNS (Holdings) Limited (the “Company”) hereby certifies, to such officer’s knowledge, that:
| (i) | the accompanying quarterly report on Form 10-Q of the Company for the quarter ended September 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
| (ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: October 30, 2024
| By: | /s/ Arijit Sen | |
| Name: | Arijit Sen | |
| Title: | Group Chief Financial Officer (Principal Financial and Accounting Officer and Authorized Signatory) |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being “filed” either as part of the Report or as a separate disclosure statement, and is not to be incorporated by reference into the Report or any other filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. The foregoing certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.