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8-K - FORM 8-K - Genpact LTDd344274d8k.htm

Exhibit 99.1

 

 

LOGO

Genpact Reports Results for the First Quarter of 2012

First Quarter Revenues of $435.5 million, Up 32%

Adjusted Income from Operations of $70.8 million, Up 38%

NEW YORK, May 1, 2012 — Genpact Limited (NYSE: G), a global leader in business process and technology management, today announced financial results for the first quarter ended March 31, 2012.

Key Financial Results – First Quarter 2012

 

 

Revenues were $435.5 million, up 31.7% from $330.6 million in the first quarter of 2011. Revenues from Global Clients were up 46.6%, and business process management revenues from Global Clients were up 20.2%.

 

 

Net income attributable to Genpact Limited shareholders was $38.5 million, up 6.7% from $36.1 million in the first quarter of 2011; net income margin for the first quarter of 2012 was 8.9%, compared to 10.9% in the first quarter of 2011.

 

 

Diluted earnings per common share were $0.17, up 5.8% from $0.16 per share in the first quarter of 2011.

 

 

Adjusted income from operations was $70.8 million, up 38.1% from $51.2 million in the first quarter of 2011.

 

 

Adjusted income from operations margin was 16.3%, up from 15.5% in the first quarter of 2011.

 

 

Adjusted diluted earnings per share were $0.21, up 13.4% from $0.18 in the first quarter of 2011.

N.V. “Tiger” Tyagarajan, Genpact's president and CEO said, “Genpact had a great first quarter, with more than 30% growth in both revenues and adjusted operating income. The market environment overall is stable, with increasing interest in long-term, transformative business process management engagements. We are seeing continued strong demand for our Smart Decision Services offerings and accelerating demand for our IT services. Our pipeline remains healthy reflecting both the investments we have been making in the front end and the slow recovery in the global markets.”

Revenues from Global Clients grew 46.6% over the first quarter of 2011. Business process management revenues from Global Clients grew by 20.2% and were led by 61.4% growth in Smart Decision Services, which is comprised of Genpact’s reengineering, analytics, business consulting and enterprise risk consulting businesses.

Revenues from Global Clients represented approximately 73.4% of Genpact's total revenues, with the remaining 26.6% of revenues, or $115.9 million, coming from GE. GE revenues increased 3.0% from the first quarter of 2011, adjusted for dispositions by GE.

As of March 31, 2012, 57 client relationships each contributed revenues of $5 million or more in the preceding twelve months, up from 45 such relationships as of March 31, 2011. As of March 31, 2012, 10 client relationships each contributed revenues of $25 million or more in the preceding twelve months, up from 5 such client relationships as of March 31, 2011.

Approximately 75.8% of Genpact's revenues for the quarter came from business process management services, compared to 87.2% for the first quarter of 2011. Revenues from IT services were approximately 24.2% of total revenues for the first quarter of 2012, up from 12.8% for the first quarter of 2011.

Genpact generated $4.9 million of cash from operations in the first quarter of 2012, compared to $21.1 million in the first quarter of 2011. The year-over-year decline reflects increased working capital requirements and cash tax payments in the first quarter of 2012. Genpact had approximately $412 million in cash and cash equivalents and short term deposits as of March 31, 2012.

As of March 31, 2012, Genpact had approximately 56,500 employees worldwide, up from approximately 45,500 as of March 31, 2011. Genpact's employee attrition rate for the quarter was 23%, measured from day one of employment, down from 29% for the same period in 2011. Annualized revenue per employee for the three months ended March 31, 2012 was $32,200, up from $30,700 for the three months ended March 31, 2011.


2012 Outlook

Tyagarajan continued, “We continue to expect Genpact full year revenues of $1.84 – $1.88 billion, before the addition of at least $24 million from the Accounting Plaza acquisition. As a result, our current outlook for the year is revenues of $1.86 – $1.90 billion, and adjusted operating income margin of 16% – 16.5%.

Conference Call to Discuss Financial Results

Genpact management will host an hour-long conference call beginning at 8:00 a.m. ET on May 2, 2012 to discuss the company’s performance for the first quarter of fiscal 2012. To participate, callers can dial 1 866-362-4820 from within the U.S. or 1-617-597-5345 from any other country. Thereafter, callers will be prompted to enter the participant code, 88451561. 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 will also be made available on Genpact’s website.

About Genpact

Genpact Limited (NYSE: G), a global leader in business process and technology management services, leverages the power of smarter processes, smarter analytics and smarter technology to help its clients drive intelligence across the 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 56,000+ professionals around the globe deliver services to its more than 600 clients from a network of 64 delivery centers across 17 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 and uncertainties 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

   Shishir Verma
   +1 (646) 624 5912
   shishir.verma@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,
2011
     As of March 31,
2012
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 408,020       $ 405,897   

Accounts receivable, net

     258,498         445,884   

Accounts receivable from related party, net

     143,921         175   

Short term deposits

     —           5,889   

Short term deposits with related party

     —           137   

Deferred tax assets

     46,949         40,938   

Due from related party

     10         —     

Prepaid expenses and other current assets

     127,721         146,563   
  

 

 

    

 

 

 

Total current assets

   $ 985,119       $ 1,045,483   

Property, plant and equipment, net

     180,504         188,545   

Deferred tax assets

     91,880         77,745   

Investment in equity affiliates

     220         413   

Customer-related intangible assets, net

     85,987         81,727   

Marketing-related intangible assets, net

     24,240         23,575   

Other intangible assets, net

     3,061         3,011   

Goodwill

     925,339         940,964   

Other assets

     107,037         114,780   
  

 

 

    

 

 

 

Total assets

   $ 2,403,387       $ 2,476,243   
  

 

 

    

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

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

 

     As of December 31,
2011
    As of March 31,
2012
 

Liabilities and equity

    

Current liabilities

    

Short-term borrowings

   $ 252,000      $ 251,000   

Current portion of long-term debt

     29,012        29,093   

Current portion of capital lease obligations

     1,005        1,656   

Current portion of capital lease obligations payable to related party

     762        —     

Accounts payable

     20,951        19,075   

Income taxes payable

     20,118        24,475   

Deferred tax liabilities

     35        35   

Due to related party

     464        —     

Accrued expenses and other current liabilities

     337,481        284,913   
  

 

 

   

 

 

 

Total current liabilities

   $ 661,828      $ 610,247   

Long-term debt, less current portion

     73,930        74,127   

Capital lease obligations, less current portion

     846        1,820   

Capital lease obligations payable to related party, less current portion

     855        —     

Deferred tax liabilities

     1,905        1,468   

Due to related party

     9,154        —     

Other liabilities

     219,186        216,977   
  

 

 

   

 

 

 

Total liabilities

   $ 967,704      $ 904,639   
  

 

 

   

 

 

 

Shareholders’ equity

    

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

     —          —     

Common shares, $0.01 par value, 500,000,000 authorized, 222,347,968 and 222,691,633 issued and outstanding as of December 31, 2011 and March 31, 2012, respectively

     2,222        2,226   

Additional paid-in capital

     1,146,203        1,155,396   

Retained earnings

     605,386        643,926   

Accumulated other comprehensive income (loss)

     (320,753     (233,070
  

 

 

   

 

 

 

Genpact Limited shareholders’ equity

     1,433,058        1,568,478   

Noncontrolling interest

     2,625        3,126   
  

 

 

   

 

 

 

Total equity

     1,435,683        1,571,604   

Commitments and contingencies

    
  

 

 

   

 

 

 

Total liabilities and equity

   $ 2,403,387      $ 2,476,243   
  

 

 

   

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

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

 

     Three months ended March 31,  
     2011     2012  

Net revenues

    

Net revenues from services—related party

   $ 112,961      $ 155   

Net revenues from services—others

     217,592        435,324   
  

 

 

   

 

 

 

Total net revenues

     330,553        435,479   
  

 

 

   

 

 

 

Cost of revenue

    

Services

     214,487        265,465   
  

 

 

   

 

 

 

Total cost of revenue

     214,487        265,465   
  

 

 

   

 

 

 

Gross profit

   $ 116,066      $ 170,014   

Operating expenses:

    

Selling, general and administrative expenses

     67,441        105,005   

Amortization of acquired intangible assets

     3,077        5,290   

Other operating (income) expense, net

     (956     (712
  

 

 

   

 

 

 

Income from operations

   $ 46,504      $ 60,431   

Foreign exchange (gains) losses, net

     (1,567     3,671   

Other income (expense), net

     3,097        (124
  

 

 

   

 

 

 

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

   $ 51,168      $ 56,636   

Equity-method investment activity, net

     133        13   
  

 

 

   

 

 

 

Income before income tax expense

   $ 51,035      $ 56,623   

Income tax expense

     13,122        16,367   
  

 

 

   

 

 

 

Net Income

   $ 37,913      $ 40,256   

Net income attributable to noncontrolling interest

     1,794        1,716   
  

 

 

   

 

 

 

Net income attributable to Genpact Limited shareholders

   $ 36,119      $ 38,540   

Net income available to Genpact Limited common shareholders

     36,119        38,540   

Earnings per common share attributable to Genpact Limited common shareholders

    

Basic

   $ 0.16      $ 0.17   

Diluted

   $ 0.16      $ 0.17   
  

 

 

   

 

 

 

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

    

Basic

     221,008,760        222,810,236   

Diluted

     225,543,290        227,472,915   


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Three months ended March 31,  
     2011     2012  

Operating activities

    

Net income attributable to Genpact Limited shareholders

   $ 36,119      $ 38,540   

Net income attributable to noncontrolling interest

     1,794        1,716   
  

 

 

   

 

 

 

Net income

   $ 37,913      $ 40,256   
  

 

 

   

 

 

 

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

    

Depreciation and amortization

     14,003        14,154   

Amortization of debt issue costs

     58        666   

Amortization of acquired intangible assets

     3,119        5,310   

Reserve for doubtful receivables

     871        456   

Reserve for mortgage loans

     —          20   

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

     (1,020     1,167   

Equity-method investment activity, net

     133        13   

Stock-based compensation expense

     3,065        7,263   

Deferred income taxes

     (249     (2,676

Others, net

     (48     (11

Change in operating assets and liabilities:

    

Increase in accounts receivable

     (673     (41,794

Increase in other assets

     (14,644     (17,524

Decrease in accounts payable

     (1,340     (1,982

Decrease in accrued expenses and other current liabilities

     (28,224     (36,501

Increase in income taxes payable

     8,459        3,592   

(Decrease) Increase in other liabilities

     (327     32,501   
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 21,096      $ 4,910   
  

 

 

   

 

 

 

Investing activities

    

Purchase of property, plant and equipment

     (6,187     (21,916

Proceeds from sale of property, plant and equipment

     219        174   

Investment in affiliates

     —          (205

Purchase of short term investments

     (129,473     —     

Proceeds from sale of short term investments

     76,973        —     

Short term deposits placed

     —          (26,303

Redemption of short term deposits

     —          20,277   

Payment for business acquisitions, net of cash acquired

     (1,564     —     
  

 

 

   

 

 

 

Net cash used for investing activities

   $ (60,032   $ (27,973
  

 

 

   

 

 

 

Financing activities

    

Repayment of capital lease obligations

     (681     (610

Repayment of long-term debt

     (12,500     —     

Short-term borrowings, net

     —          (1,000

Proceeds from issuance of common shares under stock based compensation plans

     779        2,347   

Distribution to noncontrolling interest

     (1,497     (1,252
  

 

 

   

 

 

 

Net cash used for financing activities

   $ (13,899   $ (515
  

 

 

   

 

 

 

Effect of exchange rate changes

     567        21,455   

Net decrease in cash and cash equivalents

     (52,835     (23,578

Cash and cash equivalents at the beginning of the period

     404,034        408,020   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 351,766      $ 405,897   
  

 

 

   

 

 

 

Supplementary information

    

Cash paid during the period for interest

   $ 318      $ 2,113   

Cash paid during the period for income taxes

   $ 14,705      $ 26,203   

Property, plant and equipment acquired under capital lease obligation

   $ 207      $ 488   


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: non-GAAP 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.

For its internal management reporting and budgeting purposes, Genpact's management uses financial statements that do not include stock-based compensation expense, amortization of acquired intangibles at formation in 2004, expenses associated with the Company's March 2010 secondary offering and significant acquisition related expenses and amortization of acquired intangibles on such acquisitions, for financial and operational decision-making, to evaluate period-to-period comparisons or for making comparisons of Genpact's operating results to that of its competitors. Moreover, 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 financial statements that do not include stock-based compensation allows investors to make additional comparisons between Genpact's operating results to those of other companies. In addition, Genpact's management believes that providing non-GAAP financial measures that exclude amortization of acquired intangibles, expenses of the secondary offering and significant acquisition related expenses and amortization of acquired intangibles on such acquisitions, allows investors to make additional comparisons between Genpact's operating results to those of other companies. The Company also believes that it is unreasonably difficult to provide its financial outlook in accordance with GAAP for a number of reasons including, without limitation, the Company's inability to predict its future stock-based compensation expense under ASC 718, the amortization of intangibles associated with further acquisitions, significant acquisition related expenses and expenses of the secondary offering, if any. Accordingly, Genpact believes that the presentation of non-GAAP 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 non-GAAP adjusted income from operations and adjusted net income versus income from operations and net income attributable to shareholders of Genpact Limited calculated in accordance with GAAP is that non-GAAP adjusted income from operations and adjusted net income excludes costs, namely, stock-based compensation, that are recurring. Stock-based compensation has been and will continue to be a significant recurring expense in Genpact's business for the foreseeable future. Management compensates for this limitation by providing specific information regarding the GAAP amounts excluded from non-GAAP adjusted income from operations and adjusted net income and evaluating such non-GAAP financial measures with financial measures calculated in accordance with GAAP.


The following tables show the reconciliation of these adjusted financial measures from GAAP for the three months ended March 31, 2011 and 2012:

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 

     Three months ended March 31,  
     2011     2012  

Income from operations as per GAAP

   $ 46,504      $ 60,431   

Add: Amortization of acquired intangible assets resulting from Formation Accounting

     2,514        1,877   

Add: Amortization of acquired intangible assets relating to significant acquisitions

     —          2,627   

Add: Significant acquisition related expenses

     880        —     

Add: Stock based compensation

     3,065        7,263   

Add: Other income

     205        310   

Less: Equity-method investment activity, net

     (133     (13

Less: Net income attributable to noncontrolling interest

     (1,794     (1,716
  

 

 

   

 

 

 

Adjusted income from operations

   $ 51,241      $ 70,779   
  

 

 

   

 

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 

     Three months ended March 31,  
     2011     2012  

Net income as per GAAP

   $ 36,119      $ 38,540   

Add: Amortization of acquired intangible assets resulting from Formation Accounting

     2,514        1,877   

Add: Amortization of acquired intangible assets relating to significant acquisitions

     —          2,627   

Add: Stock based compensation

     3,065        7,263   

Add: Significant acquisition related expenses

     880        —     

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

     (696     (467

Less: Tax impact on amortization of acquired intangibles relating to significant acquisitions

     —          (884

Less: Tax impact on significant acquisition related expenses

     (125     —     

Less: Tax impact on stock based compensation

     (695     (1,974
  

 

 

   

 

 

 

Adjusted net income

   $ 41,062      $ 46,982   
  

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.18      $ 0.21