Attached files

file filename
8-K - FORM 8-K - Genpact LTDd37535d8k.htm
EX-99.2 - EX-99.2 - Genpact LTDd37535dex992.htm

Exhibit 99.1

 

LOGO

Genpact Reports Results for the Second Quarter of 2015

Revenues of $609.5 Million, Up 9% (11% on a constant currency basis)

Adjusted Income from Operations of $100.6 Million, Up 15%

NEW YORK, August 4, 2015 — Genpact Limited (NYSE: G), a global leader in designing, transforming and running intelligent business operations, today announced financial results for the second quarter ended June 30, 2015.

Key Financial Results – Second Quarter 2015

 

  Total revenue was $609.5 million, up 9% year over year (up 11% on a constant currency basis).

 

  Income from operations was $89.4 million, up 22% year over year.

 

  Adjusted income from operations was $100.6 million, up 15% year over year, with a margin of 16.5%, compared to $87.6 million with a margin of 15.6% in the second quarter of 2014.

 

  Diluted earnings per share were $0.28, up 28% year over year, and adjusted diluted earnings per share were $0.32, up 21% year over year.

 

  Genpact repurchased approximately 3.0 million of its common shares for a total of $68.1 million under its $250 million share repurchase program. Year to date, Genpact has repurchased approximately 3.6 million of its common shares for a total of $81.4 million.

“We are very pleased with our second quarter results. Despite significant foreign exchange headwinds, our outlook for full year revenues remains unchanged, driven by solid Global Client growth,” said N.V. “Tiger” Tyagarajan, Genpact’s president and CEO. “Recent trends in the marketplace are forcing companies to rethink the way they do business, causing them to leverage new business models and be more disruptive in their industries. This provides us with a terrific opportunity to work with clients through their transformation journeys, as our best-in-class process and domain expertise, combined with our ability to leverage cloud-based component technologies and insights from data and analytics, enables us to develop innovative solutions for them.”

Revenue Details - Second Quarter 2015

 

  Revenue from Global Clients was $495.0 million, up 12% year over year, representing 81% of total revenues.

 

  Revenue from GE was $114.5 million, down 4% year over year, representing 19% of total revenues.

 

  Total BPO revenue was $481.2 million, up 13% year over year, representing 79% of total revenues.

 

  Global Client BPO revenue was $391.0 million, up 18% year over year.

 

  GE BPO revenue was $90.3 million, down 3% year over year.

 

  Total IT revenue was $128.3 million, down 6% year over year, representing 21% of total revenues.

 

  Global Client IT revenue was $104.0 million, down 5% year over year.

 

  GE IT revenue was $24.3 million, down 11% year over year.

 

  Annualized revenue per employee for the quarter was $36,600, up from $35,600 in the second quarter of 2014.


Cash Flow From Operations

 

  Cash from operations was $90.3 million in the second quarter of 2015, up 15% from $78.8 million in the second quarter of 2014.

Client Relationships as of June 30, 2015

 

  For the 12-month period ended June 30, 2015, the number of client relationships generating annual revenue over $5 million increased to 102 from 85 as of June 30, 2014. This includes client relationships with more than $15 million in annual revenue increasing to 31 from 27, client relationships with more than $25 million in annual revenue increasing to 17 from 14, and client relationships with more than $50 million in annual revenue increasing to 4 from 3.

Employee Statistics as of June 30, 2015

 

  Genpact had approximately 69,800 employees worldwide, up from approximately 66,900 as of June 30, 2014.

 

  Genpact’s employee attrition rate for the quarter was approximately 29%, measured from the first day of employment, compared to 26% for the same period in 2014.

New $1.15 Billion Five-Year Credit Facility

 

  On June 30, 2015, Genpact entered into a five-year, $1.15 billion credit facility consisting of an $800 million term loan and a $350 million revolving credit facility. Proceeds from this financing were largely used to repay all amounts outstanding under Genpact’s prior $925 million credit facility. Borrowings under the new facility will be available at prevailing base or LIBOR rates and an applicable margin, with anticipated savings of 125 and 100 basis points on the new term loan and revolver, respectively, compared to the rates on our prior facility.

 

  Genpact incurred a $10.1 million, or $0.03 per share, charge during the second quarter of 2015 related to the write-off of upfront fees for our previous facility.

2015 Outlook

Genpact expects:

 

  Total revenue to be in the range of $2.46 to $2.50 billion.

 

  Adjusted income from operations margin to be in the range of 15.0% to 15.2%, compared to an initial outlook of approximately 15%.

Conference Call to Discuss Financial Results

Genpact’s management will host an hour-long conference call beginning at 4:30 p.m. ET on August 4, 2015 to discuss the company’s performance for the second quarter of 2015. To participate, callers can dial +1 (877) 299-4454 from within the U.S. or +1 (617) 597-5447 from any other country. Thereafter, callers will be prompted to enter the participant code, 86868714.

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 the Genpact website 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 (NYSE: G) stands for “generating business impact.” We design, transform, and run intelligent business operations including those that are complex and specific to a set of chosen industries. The result is advanced operating models that assist our clients in becoming more competitive by supporting their growth and managing cost, risk, and compliance across a range of functions such as finance and procurement, financial services account servicing, claims management, regulatory affairs, and industrial asset optimization. Our Smart Enterprise Processes (SEPSM) proprietary framework helps companies reimagine how they operate by integrating effective Systems of EngagementTM, core IT, and Data-to-Action AnalyticsSM. Our hundreds of long-term clients include more than one-fourth of the Fortune Global 500. We have grown to over 70,000 people in 25 countries, with key management and a corporate office in New York City. Our global critical mass doesn’t dilute our flexible and collaborative approach, and our management team still drives client partnerships personally. We believe we are able to generate impact quickly because of our business domain expertise and experience running complex operations, driving our focus on what works and making transformation sustainable. Clients attribute much of our success to our unique history: behind our passion for process and operational excellence is the Lean and Six Sigma heritage of a former General Electric division that has served GE businesses for more than 16 years. For additional 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 outsourcing and information technology services sectors, the risks and uncertainties arising from our past and future acquisitions, our ability to convert bookings to revenues, 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 undertakes no obligation to update any forward-looking statements that may be made from time to time by or on behalf of Genpact.

Contact

 

Investors

   Roger Sachs, CFA
   +1 (203) 808-6725
   roger.sachs@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,
2014
     As of June 30,
2015
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 461,788       $ 441,755   

Accounts receivable, net

     525,754         553,566   

Deferred tax assets

     45,486         37,223   

Prepaid expenses and other current assets

     155,480         188,898   
  

 

 

    

 

 

 

Total current assets

   $ 1,188,508       $ 1,221,442   

Property, plant and equipment, net

     175,936         169,631   

Deferred tax assets

     59,135         67,709   

Investment in equity affiliates

     494         9,202   

Intangible assets, net

     114,544         115,757   

Goodwill

     1,057,214         1,054,028   

Other assets

     146,706         149,677   
  

 

 

    

 

 

 

Total assets

   $ 2,742,537       $ 2,787,446   
  

 

 

    

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

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

 

     As of December 31,
2014
    As of June 30,
2015
 

Liabilities and equity

    

Current liabilities

    

Short-term borrowings

   $ 135,000      $ 21,500   

Current portion of long-term debt

     4,288        39,111   

Current portion of capital lease obligations

     1,443        1,399   

Accounts payable

     15,544        15,485   

Income taxes payable

     13,586        47,383   

Deferred tax liabilities

     1,239        1,392   

Accrued expenses and other current liabilities

     451,014        406,203   
  

 

 

   

 

 

 

Total current liabilities

   $ 622,114      $ 532,473   

Long-term debt, less current portion

     649,314        756,902   

Capital lease obligations, less current portion

     2,660        2,465   

Deferred tax liabilities

     6,671        5,590   

Other liabilities

     176,642        170,079   
  

 

 

   

 

 

 

Total liabilities

   $ 1,457,401      $ 1,467,509   
  

 

 

   

 

 

 

Shareholders’ equity

    

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

     —          —     

Common shares, $0.01 par value, 500,000,000 authorized, 218,684,205 and 216,832,795

issued and outstanding as of December 31, 2014 and June 30, 2015, respectively

     2,184        2,165   

Additional paid-in capital

     1,296,730        1,314,530   

Retained earnings

     398,706        424,624   

Accumulated other comprehensive income (loss)

     (412,484     (421,382
  

 

 

   

 

 

 

Genpact Limited shareholders’ equity

   $ 1,285,136      $ 1,319,937   

Noncontrolling interest

     —          —     
  

 

 

   

 

 

 

Total equity

   $ 1,285,136      $ 1,319,937   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 2,742,537      $ 2,787,446   
  

 

 

   

 

 

 


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,  
     2014     2015     2014     2015  

Net revenues

        

Net revenues from services

   $ 561,611      $ 609,532      $ 1,089,801      $ 1,196,685   

Cost of revenue

        

Services

     340,125        366,304        664,414        723,780   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

$ 221,486    $ 243,228    $ 425,387    $ 472,905   

Operating expenses:

Selling, general and administrative expenses

  142,715      149,230      265,213      297,978   

Amortization of acquired intangible assets

  6,610      7,315      12,628      14,656   

Other operating (income) expense, net

  (890   (2,670   (2,752   (3,132
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

$ 73,051    $ 89,353    $ 150,298    $ 163,403   

Foreign exchange (gains) losses, net

  3,829      (7,433   7,422      112   

Other income (expense), net

  (6,505   (16,541   (13,038   (25,108
  

 

 

   

 

 

   

 

 

   

 

 

 

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

$ 62,717    $ 80,245    $ 129,838    $ 138,183   

Loss (gain) on equity-method investment activity, net

  (34   2,340      (54   4,563   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

$ 62,751    $ 77,905    $ 129,892    $ 133,620   

Income tax expense

  13,851      15,204      30,139      26,266   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 48,900    $ 62,701    $ 99,753    $ 107,354   

Net income (loss) attributable to noncontrolling interest

  (84   —        156      —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Genpact Limited shareholders

$ 48,984    $ 62,701    $ 99,597    $ 107,354   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to Genpact Limited common shareholders

$ 48,984    $ 62,701    $ 99,597    $ 107,354   

Earnings per common share attributable to Genpact Limited common shareholders

Basic

$ 0.23    $ 0.29    $ 0.44    $ 0.49   

Diluted

$ 0.22    $ 0.28    $ 0.43    $ 0.48   

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

Basic

  217,541,960      218,525,149      224,817,938      219,208,922   

Diluted

  221,509,867      220,962,306      229,392,759      221,654,703   


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Six months ended June 30,  
     2014     2015  

Operating activities

    

Net income attributable to Genpact Limited shareholders

   $ 99,597      $ 107,354   

Net income attributable to noncontrolling interest

     156        —     
  

 

 

   

 

 

 

Net income

$ 99,753    $ 107,354   
  

 

 

   

 

 

 

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

Depreciation and amortization

  24,994      26,811   

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

  1,610      12,759   

Amortization of acquired intangible assets

  12,628      14,656   

Reserve for doubtful receivables

  1,719      1,266   

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

  (807   3,397   

Equity-method investment activity, net

  (54   4,563   

Stock-based compensation expense

  11,879      11,314   

Deferred income taxes

  (322   (8,242

Others, net

  895      (87

Change in operating assets and liabilities:

Increase in accounts receivable

  (15,110   (34,451

Increase in other assets

  (37,870   (32,423

Increase (Decrease) in accounts payable

  (5,222   1,165   

Decrease in other liabilities

  (19,966   (27,678

Increase in income taxes payable

  18,939      34,176   
  

 

 

   

 

 

 

Net cash provided by operating activities

$ 93,066    $ 114,580   
  

 

 

   

 

 

 

Investing activities

Purchase of property, plant and equipment

  (29,657   (30,172

Proceeds from sale of property, plant and equipment

  129      784   

Investment in equity affiliates

  —        (9,924

Payment for business acquisitions, net of cash acquired

  (123,701   (17,718
  

 

 

   

 

 

 

Net cash used for investing activities

$ (153,229 $ (57,030
  

 

 

   

 

 

 

Financing activities

Repayment of capital lease obligations

  (896   (1,091

Payment of debt issuance and refinancing costs

  —        (6,584

Proceeds from long-term debt

  —        800,000   

Repayment of long-term debt

  (3,375   (664,875

Proceeds from short-term borrowings

  195,000      1,451,500   

Repayment of short-term borrowings

  (20,000   (1,565,000

Proceeds from issuance of common shares under stock-based compensation plans

  8,329      7,509   

Payment for net settlement of stock-based awards

  (14,345   (6,532

Payment of earn-out consideration

  —        (126

Distribution to noncontrolling interest

  (1,371   —     

Payment for stock purchased and retired

  (302,625   (81,399

Payment for expenses related to stock purchase

  (2,543   (73
  

 

 

   

 

 

 

Net cash used for financing activities

$ (141,826 $ (66,671
  

 

 

   

 

 

 

Effect of exchange rate changes

  7,515      (10,912

Net decrease in cash and cash equivalents

  (201,989   (9,121

Cash and cash equivalents at the beginning of the period

  571,276      461,788   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

$ 376,802    $ 441,755   
  

 

 

   

 

 

 

Supplementary information

Cash paid during the period for interest

$ 12,828    $ 14,671   

Cash paid during the period for income taxes

$ 37,176    $ 24,706   

Property, plant and equipment acquired under capital lease

$ 1,305    $ 876   


Reconciliation of 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 financial 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 financial measures used by other companies. In addition, these non-GAAP financial measures, the financial statements prepared in accordance with GAAP and the reconciliations of Genpact’s GAAP financial statements to such non-GAAP financial measures should be carefully evaluated.

Prior to July 2012, Genpact’s management used financial statements that excluded significant acquisition-related expenses, amortization of related acquired intangibles, and amortization of acquired intangibles at the Company’s formation in 2004 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. Acquisition-related expenses are excluded in the period in which an acquisition is consummated.

Additionally, Genpact’s management uses financial statements that exclude stock-based compensation expense. 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 such 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. 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, 2014 and 2015:

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 

     Three months ended June 30,     Six months ended June 30  
     2014      2015     2014     2015  

Income from operations per GAAP

   $ 73,051       $ 89,353      $ 150,298      $ 163,403   

Add: Stock-based compensation

     6,906         6,654        11,879        11,314   

Add: Amortization of acquired intangible assets

     5,010         6,120        9,501        12,232   

Add: Acquisition-related expenses

     1,977         —          1,977        798   

Add: Other income, net, excluding net interest

     517         811        386        1,269   

Add/Less: Gain (loss) on equity-method investment activity, net

     34         (2,340     54        (4,563

Less: Net loss (income) attributable to noncontrolling interest

     84         —          (156     —     
  

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted income from operations

$ 87,579    $ 100,598    $ 173,939    $ 184,453   
  

 

 

    

 

 

   

 

 

   

 

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 

     Three months ended June 30,     Six months ended June 30,  
     2014     2015     2014     2015  

Net income attributable to Genpact Limited shareholders per GAAP

   $ 48,984      $ 62,701      $ 99,597      $ 107,354   

Add: Stock-based compensation

     6,906        6,654        11,879        11,314   

Add: Amortization of acquired intangible assets

     5,010        6,120        9,501        12,232   

Add: Acquisition-related expenses

     1,977        —          1,977        798   

Less: Tax impact on stock-based compensation

     (1,751     (1,864     (3,056     (3,017

Less: Tax impact on amortization of acquired intangibles

     (1,631     (1,909     (3,107     (3,819

Less: Tax impact on acquisition-related expenses

     (53            (53     (229
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

$ 59,442    $ 71,702    $ 116,738    $ 124,633   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

$ 0.27    $ 0.32    $ 0.51    $ 0.56