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EX-99.2 - EX-99.2 - Genpact LTDd580368dex992.htm

Exhibit 99.1

 

LOGO

Genpact Reports Results for the Second Quarter of 2013

Revenues of $534.8 Million, Up 14.4%

Adjusted Income from Operations of $89.2 Million, Up 14.6%

Cash Flow from Operations of $76.1 Million

NEW YORK, August 6, 2013 – Genpact Limited (NYSE: G), a global leader in business process management and technology services, today announced financial results for the second quarter ended June 30, 2013.

Key Financial Results – Second Quarter 2013

 

 

Revenues were $534.8 million, up 14.4% from $467.6 million in the second quarter of 2012. Revenues from Global Clients were up 19.8%, and business process management revenues from Global Clients were up 18.1%.

 

 

Income from operations was $78.0 million, up 23.5% from $63.2 million in the second quarter of 2012.

 

 

Net income attributable to Genpact Limited shareholders was $63.9 million, up 4.5% from $61.1 million in the second quarter of 2012. Net income margin for the second quarter of 2013 was 11.9%, compared to 13.1% in the second quarter of 2012.

 

 

Diluted earnings per common share were $0.27, unchanged from the second quarter of 2012.

 

 

Adjusted income from operations was $89.2 million, up 14.6% from $77.8 million in the second quarter of 2012.

 

 

Adjusted income from operations margin was 16.7%, up from 16.6% in the second quarter of 2012.

 

 

Adjusted diluted earnings per share were $0.32, unchanged from the second quarter of 2012.

N.V. ‘Tiger’ Tyagarajan, Genpact’s president and CEO said, “Continuing our momentum in 2013, in the second quarter Genpact delivered strong growth in revenues and adjusted operating income, as well as solid cash flows from operations. Our results demonstrate that the key elements of our growth strategy are resonating with the marketplace. With an increasingly targeted focus on the most promising industry verticals and solutions that integrate process, technology and analytics, we are unlocking innovation, driving client loyalty and strengthening our foundation for long-term sustainable growth.”

Revenues from Global Clients grew 19.8% over the second quarter of 2012. Business process management revenues from Global Clients grew by 18.1%, led by growth in Banking and Financial Services, Consumer Packaged Goods, Life Sciences and Healthcare and Business Services. Revenues from Global Clients represented approximately 77.3% of Genpact’s total revenues, or $413.2 million, with the remaining 22.7% of revenues, or $121.6 million, coming from GE. GE revenues decreased 0.9% from the second quarter of 2012, adjusted for dispositions by GE of businesses that Genpact continues to serve.

In the 12 months ending June 30, 2013, 55 client relationships each contributed revenues of $5 – $15 million, up from 41 such relationships as of June 30, 2012, 14 client relationships each contributed revenues of $15 – $25 million, up from 11 such relationships as of June 30, 2012 and 12 client relationships each contributed revenues of $25 million or more, up from 10 such client relationships as of June 30, 2012.

75.1% of Genpact’s revenues for the quarter came from business process management services, compared to 76.5% in the second quarter of 2012. Revenues from IT services were 24.9% of total revenues for the quarter, up from 23.5% in the second quarter of 2012.


Genpact generated $76.1 million of cash from operations in the quarter, compared to $127.2 million (including approximately $45 million from an up-front client payment) in the second quarter of 2012. Genpact had approximately $535.9 million in cash and cash equivalents and short term deposits as of June 30, 2013.

As of June 30, 2013, Genpact had approximately 60,200 employees worldwide, up from approximately 58,600 as of June 30, 2012. Genpact’s employee attrition rate for the quarter was approximately 27%, measured from the first day of employment, compared to 25% for the same period in 2012. Annualized revenue per employee for the quarter was $36,700, up from $33,900 for the three months ended June 30, 2012.

Year-to-Date Results

 

 

Revenues were $1.039 billion, up 15.0% from $903.1 million for the six months ended June 30, 2012.

 

 

Income from operations was $151.9 million, up 22.9% from $123.6 million in the six months ended June 30, 2012.

 

 

Net income attributable to Genpact Limited shareholders was $110.6 million, up from $99.6 million for the six months ended June 30, 2012; net income margin was 10.6%, compared to 11.0% for the six months ended June 30, 2012.

 

 

Diluted earnings per common share were $0.47, up from $0.44 for the six months ended June 30, 2012.

 

 

Adjusted income from operations was $171.9 million, up 15.1% from $149.4 million for the six months ended June 30, 2012.

 

 

Adjusted income from operations margin was 16.6%, up from 16.5% for the six months ended June 30, 2012.

 

 

Adjusted diluted earnings per share were $0.55, up from $0.53 for the six months ended June 30, 2012.

Genpact’s employee attrition rate for the six months ended June 30, 2013 was 25%, measured from the first day of employment, compared to 24% for the same period in 2012. Annualized revenue per employee for the six months ended June 30, 2013 was $35,600, up from $33,400 for the six months ended June 30, 2012.

2013 Outlook

Tyagarajan continued, “The macro environment continues to be mixed: challenging for some industries and geographies, improving in others. Our pipeline is healthy and stable, with a significant uptick in larger, transformative deals. Large, transformational engagements are where we want to be, but they are complex and do have a longer decision cycle time. As a result of these longer cycle times, together with more subdued GE revenues, we now expect revenues for the full year 2013 to be in the lower half of our range of $2.15 – $2.20 billion. We continue to expect adjusted operating income margin in a range of 15.8% – 16.3%.”

Conference Call to Discuss Financial Results

Genpact management will host an hour-long conference call beginning at 4:30 p.m. ET on August 6, 2013 to discuss the company’s performance for the second quarter of 2013. To participate, callers can dial +1 877 703-6104 from within the U.S. or +1 857 244-7303 from any other country. Thereafter, callers will be prompted to enter the participant code, 90030810.

A live webcast of the call including slides with our comments will also be made available on the Genpact Investor Relations website at http://investors.genpact.com. For those who cannot participate in the call, a replay and podcast will be available on Genpact’s website, www.genpact.com, after the end of the call. A transcript of the call as well as the presentation slides will also be made available on the website.

About Genpact

Genpact Limited (NYSE: G), a global leader in business process management and technology services, leverages the power of smarter processes, smarter analytics and smarter technology to help its clients drive intelligence across their enterprise. Genpact’s Smart Enterprise Processes (SEPSM) framework, its unique science of process combined with deep domain expertise in multiple industry verticals, leads to superior business outcomes. Genpact’s Smart Decision Services deliver valuable business insights to its clients through targeted analytics, reengineering expertise, and advanced risk management. Making technology more intelligent by embedding it with process and data insights, Genpact also offers a wide range of technology services. Driven by a passion for process innovation and operational excellence built on its Lean and Six Sigma DNA and the legacy of serving GE for more than 15 years, the company’s 60,000+ professionals around the globe deliver services to its more than 700 clients from a network of 68 delivery centers across 18 countries supporting more than 30 languages. For more information, visit www.genpact.com.


Safe Harbor

This press release contains certain statements concerning our future growth prospects and forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those in such forward-looking statements. These risks, uncertainties and other factors include but are not limited to a slowdown in the economies and sectors in which our clients operate, a slowdown in the business process management and information technology services sectors, the risks and uncertainties arising from our past and future acquisitions, our ability to manage growth, factors which may impact our cost advantage, wage increases, changes in tax rates and tax legislation, our ability to attract and retain skilled professionals, risks and uncertainties regarding fluctuations in our earnings, general economic conditions affecting our industry as well as other risks detailed in our reports filed with the U.S. Securities and Exchange Commission, including Genpact’s Annual Report on Form 10-K. These filings are available at www.sec.gov. Genpact may from time to time make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. Although Genpact believes that these forward-looking statements are based on reasonable assumptions, you are cautioned not to put undue reliance on these forward-looking statements, which reflect management’s current analysis of future events and should not be relied upon as representing management’s expectations or beliefs as of any date subsequent to the time they are made. Genpact does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of Genpact.

Contact

 

Investors    Bharani Bobba
   +1 (646) 624-5951
   bharani.bobba@genpact.com
Media   

Gail Marold

+1 (919) 345-3899

gail.marold@genpact.com


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share data and share count)

 

     As of December 31,      As of June 30,  
     2012      2013  

Assets

     

Current assets

     

Cash and cash equivalents

   $ 459,228       $ 519,127   

Accounts receivable, net

     451,960         474,702   

Accounts receivable from related party, net

     29         63   

Short term deposits

     18,292         16,791   

Deferred tax assets

     48,489         53,774   

Prepaid expenses and other current assets

     150,769         178,159   
  

 

 

    

 

 

 

Total current assets

   $ 1,128,767       $ 1,242,616   

Property, plant and equipment, net

     200,362         180,606   

Deferred tax assets

     91,383         96,187   

Investment in equity affiliates

     416         334   

Customer-related intangible assets, net

     84,748         83,190   

Marketing-related intangible assets, net

     21,585         22,136   

Other intangible assets, net

     6,054         6,461   

Goodwill

     956,064         962,933   

Other assets

     116,548         105,866   
  

 

 

    

 

 

 

Total assets

   $ 2,605,927       $     2,700,329   
  

 

 

    

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share data and share count)

 

     As of December 31,     As of June 30,  
     2012     2013  

Liabilities and equity

    

Current liabilities

    

Short-term borrowings

   $ 80,000      $ 115,000   

Current portion of long-term debt

     4,982        4,250   

Current portion of capital lease obligations

     1,301        1,379   

Accounts payable

     18,652        13,915   

Income taxes payable

     22,304        41,065   

Deferred tax liabilities

     538        379   

Accrued expenses and other current liabilities

     390,041        386,026   
  

 

 

   

 

 

 

Total current liabilities

   $ 517,818      $ 562,014   

Long-term debt, less current portion

     656,879        655,726   

Capital lease obligations, less current portion

     2,533        2,784   

Deferred tax liabilities

     6,068        6,046   

Other liabilities

     250,848        277,137   
  

 

 

   

 

 

 

Total liabilities

   $ 1,434,146      $ 1,503,707   
  

 

 

   

 

 

 

Shareholders’ equity

    

Preferred shares, $0.01 par value, 250,000,000 authorized, none issued

     —          —     

Common shares, $0.01 par value, 500,000,000 authorized, 225,480,172 and 229,513,754 issued and outstanding as of December 31, 2012 and June 30, 2013, respectively

     2,253        2,294   

Additional paid-in capital

     1,202,448        1,238,983   

Retained earnings

     281,982        392,595   

Accumulated other comprehensive income (loss)

     (318,272     (439,458
  

 

 

   

 

 

 

Genpact Limited shareholders’ equity

     1,168,411        1,194,414   

Noncontrolling interest

     3,370        2,208   
  

 

 

   

 

 

 

Total equity

     1,171,781        1,196,622   

Commitments and contingencies

     —          —     
  

 

 

   

 

 

 

Total liabilities and equity

   $ 2,605,927      $     2,700,329   
  

 

 

   

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data and share count)

 

     Three months ended June 30,     Six months ended June 30,  
     2012     2013     2012     2013  

Net revenues

        

Net revenues from services - others

   $ 467,469      $ 534,614      $ 902,793      $ 1,038,271   

Net revenues from services - related party

     162        190        317        381   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenues

     467,631        534,804        903,110        1,038,652   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue

        

Services

     285,222        332,714        550,687        644,440   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     285,222        332,714        550,687        644,440   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

   $ 182,409      $ 202,090      $ 352,423      $ 394,212   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling, general and administrative expenses

     114,253        118,403        219,258        231,627   

Amortization of acquired intangible assets

     5,790        6,185        11,080        11,736   

Other operating (income) expense, net

     (801     (486     (1,513     (1,088
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

   $ 63,167      $ 77,988      $ 123,598      $ 151,937   
  

 

 

   

 

 

   

 

 

   

 

 

 

Foreign exchange (gains) losses, net

     (21,977     (17,184     (18,306     (13,802

Other income (expense), net

     (699     (10,539     (823     (15,650
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before Equity-method investment activity, net and income tax expense

   $ 84,445      $ 84,633      $ 141,081      $ 150,089   
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity-method investment activity, net

     13        (63     26        (107
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

   $ 84,432      $ 84,696      $ 141,055      $ 150,196   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

     21,633        19,234        38,000        36,482   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 62,799      $ 65,462      $ 103,055      $ 113,714   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to noncontrolling interest

     1,699        1,586        3,415        3,101   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Genpact Limited shareholders

   $ 61,100      $ 63,876      $ 99,640      $ 110,613   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to Genpact Limited common shareholders

     61,100        63,876        99,640        110,613   

Earnings per common share attributable to Genpact Limited common shareholders

        

Basic

   $ 0.27      $ 0.28      $ 0.45      $ 0.48   

Diluted

   $ 0.27      $ 0.27      $ 0.44      $ 0.47   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders

        

Basic

     223,182,251        229,237,503        222,996,243        228,232,364   

Diluted

     227,880,427        235,329,303        227,676,670        234,475,027   


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Six months ended June 30,  
     2012     2013  

Operating activities

    

Net income attributable to Genpact Limited shareholders

   $ 99,640      $ 110,613   

Net income attributable to noncontrolling interest

     3,415        3,101   
  

 

 

   

 

 

 

Net income

   $ 103,055      $ 113,714   
  

 

 

   

 

 

 

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

    

Depreciation and amortization

     28,145        27,318   

Amortization of debt issue costs (including loss on extinguishment of debt)

     1,307        4,392   

Amortization of acquired intangible assets

     11,118        11,736   

Reserve for doubtful receivables

     (151     5,070   

Reserve for mortgage loans

     107        —     

Unrealized (gain) loss on revaluation of foreign currency asset/liability

     (18,962     (14,067

Equity-method investment activity, net

     26        (107

Stock-based compensation expense

     17,243        16,619   

Deferred income taxes

     (8,728     1,589   

Others, net

     90        6,087   

Change in operating assets and liabilities:

    

Increase in accounts receivable

     (16,791     (25,492

Increase in other assets

     (36,308     (25,385

Decrease in accounts payable

     (5,076     (3,060

Decrease in accrued expenses and other current liabilities

     (1,321     (33,809

Increase in income taxes payable

     30,611        18,826   

Increase in other liabilities

     27,707        4,244   
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 132,072      $ 107,675   
  

 

 

   

 

 

 

Investing activities

    

Purchase of property, plant and equipment

     (41,602     (25,635

Proceeds from sale of property, plant and equipment

     283        283   

Investment in affiliates

     (205     —     

Short term deposits placed

     (26,493     (36,769

Redemption of short term deposits

     20,410        36,769   

Payment for business acquisitions, net of cash acquired

     (36,927     (46,134

Proceeds from divestiture of business, net of cash divested

     —          (1,049
  

 

 

   

 

 

 

Net cash used for investing activities

   $ (84,534   $ (72,535
  

 

 

   

 

 

 

Financing activities

    

Repayment of capital lease obligations

     (1,162     (874

Proceeds from long-term debt

     —          121,410   

Repayment of long-term debt

     (15,000     (119,723

Proceeds from Short-term borrowings

     —          35,000   

Repayment of Short-term borrowings

     (1,000     —     

Proceeds from issuance of common shares under stock based compensation plans

     3,788        27,478   

Payment for net settlement of stock based awards

     (1,409     (7,521

Payment of Earn-out consideration

     —          (2,993

Cost incurred in relation to debt amendment and refinancing

     —          (7,908

Distribution to noncontrolling interest

     (2,762     (3,242
  

 

 

   

 

 

 

Net cash provided by (used for) financing activities

   $ (17,545   $ 41,627   
  

 

 

   

 

 

 

Effect of exchange rate changes

     (1,703     (16,868

Net increase in cash and cash equivalents

     29,993        76,767   

Cash and cash equivalents at the beginning of the period

     408,020        459,228   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 436,310      $ 519,127   
  

 

 

   

 

 

 

Supplementary information

    

Cash paid during the period for interest

   $ 4,212      $ 18,474   

Cash paid during the period for income taxes

   $ 40,266      $ 38,909   

Property, plant and equipment acquired under capital lease obligation

   $ 1,178      $ 1,385   


Reconciliation of Adjusted Non-GAAP Financial Measures to GAAP Measures

To supplement the consolidated financial statements presented in accordance with GAAP, this press release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures:

 

   

Adjusted income from operations;

 

   

Adjusted net income attributable to shareholders of Genpact Limited, or adjusted net income; and

 

   

Adjusted diluted earnings per share attributable to shareholders of Genpact Limited, or adjusted diluted earnings per share.

These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures, the financial statements prepared in accordance with GAAP and the reconciliations of Genpact’s GAAP financial statements to such non-GAAP measures should be carefully evaluated.

Prior to July 2012, Genpact’s management used financial statements that excluded significant acquisition related expenses and amortization of related acquired intangibles for its internal management reporting, budgeting and decision making purposes including comparing Genpact’s operating results to that of its competitors. However, considering Genpact’s frequent acquisitions of varying scale and size, and the difficulty in predicting expenses relating to acquisitions and amortization of acquired intangibles thereof, since July 2012 Genpact’s management uses financial statements that exclude all acquisition related expenses and amortization of acquired intangibles for its internal management reporting, budgeting and decision making purposes including comparing Genpact’s operating results to that of its competitors.

Additionally, Genpact’s management uses financial statements that exclude stock-based compensation expense, amortization of acquired intangibles at formation in 2004 and expenses related to the change of shareholding and capital restructuring in 2012. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use when adopting ASC 718 “Compensation-Stock Compensation,” Genpact’s management believes that providing non-GAAP financial measures that exclude all of the above expenses allows investors to make additional comparisons between Genpact’s operating results and those of other companies. Genpact also believes that it is unreasonably difficult to provide its financial outlook in accordance with GAAP for a number of reasons including, without limitation, its inability to predict its stock-based compensation expense under ASC 718, the amortization of intangibles associated with further acquisitions and acquisition related expenses, if any. Accordingly, Genpact believes that the presentation of adjusted income from operations and adjusted net income, when read in conjunction with the Company’s reported results, can provide useful supplemental information to investors and management regarding financial and business trends relating to its financial condition and results of operations.

A limitation of using adjusted income from operations and adjusted net income versus income from operations and net income calculated in accordance with GAAP is that these non-GAAP financial measures exclude a recurring cost, namely stock-based compensation. Management compensates for this limitation by providing specific information on the GAAP amounts excluded from adjusted income from operations and adjusted net income.


The following tables show the reconciliation of these adjusted financial measures from GAAP for the three and six months ended June 30, 2012 and 2013:

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 

     Three months ended June 30,     Six months ended June 30,  
     2012     2013     2012     2013  

Income from operations as per GAAP

   $ 63,167      $ 77,988      $ 123,598      $ 151,937   

Add: Amortization of acquired intangible assets resulting from Formation Accounting

     1,755        767        3,632        1,572   

Add: Amortization of acquired intangible assets relating to acquisitions

     2,627        4,087        5,254        7,498   

Add: Consultancy and legal fees relating to change of shareholding and capital restructuring

     1,687        —          2,487        —     

Add: Stock based compensation

     9,980        10,093        17,243        16,619   

Less: Provision for loss on divestitures

     —          (2,945     —          (3,661

Add: Other income (expense)

     322        709        632        979   

Add Gain (Loss) on Equity-method investment activity, net

     (13     63        (26     107   

Less: Net income attributable to noncontrolling interest

     (1,699     (1,586     (3,415     (3,101
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income from operations

   $ 77,826      $ 89,176      $ 149,405      $ 171,950   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 

     Three months ended June 30,     Six months ended June 30,  
     2012     2013     2012     2013  

Net income as per GAAP

   $ 61,100      $ 63,876      $ 99,640      $ 110,613   

Add: Amortization of acquired intangible assets resulting from Formation Accounting

     1,755        767        3,632        1,572   

Add: Amortization of acquired intangible assets relating to acquisitions

     2,627        4,087        5,254        7,498   

Add: Consultancy and legal fees relating to change of shareholding and capital restructuring

     1,687        —          2,487        —     

Add: Stock based compensation

     9,980        10,093        17,243        16,619   

Less: Tax impact on amortization of acquired intangibles resulting from Formation Accounting

     (366     (158     (833     (299

Less: Tax impact on amortization of acquired intangibles relating from acquisitions

     (902     (1,394     (1,786     (2,556

Less: Tax impact on stock based compensation

     (3,059     (2,605     (5,033     (4,295

Less: Tax impact on consultancy and legal fees relating to change of shareholding and capital restructuring

     (182     —          (182     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 72,640      $ 74,666      $ 120,422      $ 129,152   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.32      $ 0.32      $ 0.53      $ 0.55