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8-K - FORM 8-K - Genpact LTDd388538d8k.htm

Exhibit 99.1

 

 

LOGO

Genpact Reports Results for the Second Quarter of 2012

Announces Special Dividend of $2.24 Per Share

Second Quarter Revenues of $467.6 Million, Up 18%

Adjusted Income from Operations of $77.8 Million, Up 19%

Net Income of $61.1 Million, Up 57%

NEW YORK, August 1, 2012 — 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, 2012. Genpact also announced that it expects to pay a special cash dividend to all shareholders of $2.24 per common share, or approximately $500 million in total.

Key Financial Results – Second Quarter 2012

 

 

Revenues were $467.6 million, up 17.6% from $397.6 million in the second quarter of 2011, primarily driven by growth in revenues from Global Clients. Business process management and technology services revenues from Global Clients were up 19.8% and 38.4% respectively.

 

 

Net income attributable to Genpact Limited shareholders was $61.1 million, up 56.6% from $39.0 million in the second quarter of 2011; net income margin for the second quarter of 2012 was 13.1%, up from 9.8% in the second quarter of 2011.

 

 

Diluted earnings per common share were $0.27, up 55.4% from $0.17 in the second quarter of 2011.

 

 

Adjusted income from operations was $77.8 million, up 19.2% from $65.3 million in the second quarter of 2011.

 

 

Adjusted income from operations margin was 16.6%, up from 16.4% in the second quarter of 2011.

 

 

Adjusted diluted earnings per share were $0.32, up 46.0% from $0.22 in the second quarter of 2011.

N.V. “Tiger” Tyagarajan, Genpact’s president and CEO said, “Genpact had another great quarter, with strong growth in revenues, adjusted operating income, net income and EPS. In addition to the 17.6% year-over-year revenue growth, our revenues grew 7.4% sequentially. Revenue growth was broad based across all our geographies, including Europe, and all major service lines including finance and accounting. We established 35 new client relationships this quarter across all major industry groups, up from 26 in the second quarter of 2011. Our results continue the momentum we have had since the beginning of 2011.”

Revenues from Global Clients grew 24.0% over the second quarter of 2011. Revenues from Global Clients now represent approximately 73.0% of Genpact’s total revenues, with the remaining 27.0% of revenues, or $126.2 million, coming from GE. GE revenues increased 3.2% from the second quarter of 2011, adjusted for dispositions by GE.

As of June 30, 2012, 62 client relationships each contributed revenues of $5 million or more in the preceding twelve months, up from 56 such relationships as of June 30, 2011. As of June 30, 2012, ten client relationships each contributed revenues of $25 million or more in the preceding twelve months, up from eight such client relationships as of June 30, 2011.

Approximately 76.0% of Genpact’s revenues for the quarter came from business process management services, compared to 78.1% for the second quarter of 2011. Revenues from IT services were approximately 24.0% of total revenues for the second quarter of 2012, up from 21.9% for the second quarter of 2011.

Genpact generated $127.2 million of cash from operations in the second quarter of 2012, up from $60.9 million in the second quarter of 2011. Genpact had approximately $441.6 million in cash and cash equivalents and short term deposits as of June 30, 2012.

Year-to-Date Results

 

   

Revenues were $903.1 million, up 24.0% from $728.2 million for the six months ended June 30, 2011.

 

   

Net income attributable to Genpact Limited shareholders was $99.6 million, up 32.6% from $75.1 million for the six months ended June 30, 2011; net income margin was 11.0%, up from 10.3% for the six months ended June 30, 2011.

 

   

Diluted earnings per common share were $0.44, up 31.6% from $0.33 for the six months ended June 30, 2011.


   

Adjusted income from operations was $149.4 million, up 28.2% from $116.5 million for the six months ended June 30, 2011.

 

   

Adjusted income from operations margin was 16.5%, up from 16.0% for the six months ended June 30, 2011.

 

   

Adjusted diluted earnings per share were $0.53, up 32.1% from $0.40 for the six months ended June 30, 2011.

Genpact’s employee attrition rate for the six months ended June 30, 2012 was 24%, measured from day one of employment, down from 29% for the same period in 2011. Annualized revenue per employee for the six months ended June 30, 2012, was $33,400, compared to $34,500 for the six months ended June 30, 2011.

Special Dividend Announced

Genpact expects to pay a special cash dividend to all shareholders of $2.24 per common share, or approximately $500 million in the aggregate. The dividend will be funded through a combination of balance sheet cash and incremental debt expected to be raised from institutional lenders. Genpact expects to establish and announce the record date, ex-dividend date and payment date for the special dividend during August and to pay the dividend by the end of the third quarter. Declaration and payment of the dividend is subject to the receipt of financing by Genpact on satisfactory terms.

Tyagarajan commented, “The management team regularly reviews our capital structure with the Board of Directors. We generate substantial operating and free cash flow, have approximately $442 million of cash on our balance sheet and, taking into account the financial flexibility needed to continue to pursue acquisitions and organic growth initiatives, we concluded that a special dividend, funded in part by additional, modest leverage, would enhance shareholder value.”

2012 Outlook

Tyagarajan continued, “We have delivered a terrific first half of the year, despite some softness around discretionary spending. In an uncertain macro-environment, we continue to expect full-year revenues to be in a range of $1.86 – $1.90 billion, and adjusted operating income margin in a range 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 August 2, 2012 to discuss the company’s performance for the second quarter of fiscal 2012. To participate, callers can dial +1 800-299-8538 from within the U.S. or +1 617-786-2902 from any other country. Thereafter, callers will be prompted to enter the participant code, 79250959.

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 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 58,500+ professionals around the globe deliver services to its more than 600 clients from a network of 70 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 our ability to obtain the financing required to pay the special cash dividend and the terms of the financing, the likelihood and timing of the payment of the special cash dividend, 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   

US:

Gail Marold

   +1 (919) 345 3899
  

gail.marold@genpact.com

 

Steve Lipin/Sarah Lubman

+1 212-333-3810

 

Europe:

Elvis Moyo

elvis.moyo@uk.ogilvypr.com

+44 (0)20 7309 1212

 

Asia:

Cecily Liu

cecily.liu@ogilvy.com

+86 10 85206345


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 June 30,
2012
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 408,020       $ 436,310   

Accounts receivable, net

     258,498         427,576   

Accounts receivable from related party, net

     143,921         190   

Short term deposits

     —           5,249   

Deferred tax assets

     46,949         55,458   

Due from related party

     10         —     

Prepaid expenses and other current assets

     127,721         159,934   
  

 

 

    

 

 

 

Total current assets

   $ 985,119       $ 1,084,717   

Property, plant and equipment, net

     180,504         180,521   

Deferred tax assets

     91,880         112,271   

Investment in equity affiliates

     220         356   

Customer-related intangible assets, net

     85,987         88,316   

Marketing-related intangible assets, net

     24,240         23,015   

Other intangible assets, net

     3,061         2,961   

Goodwill

     925,339         922,160   

Other assets

     107,037         112,766   
  

 

 

    

 

 

 

Total assets

   $ 2,403,387       $ 2,527,083   
  

 

 

    

 

 

 


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 June 30,
2012
 

Liabilities and equity

    

Current liabilities

    

Short-term borrowings

   $ 252,000      $ 251,000   

Current portion of long-term debt

     29,012        29,173   

Current portion of capital lease obligations

     1,005        1,415   

Current portion of capital lease obligations payable to related party

     762        —     

Accounts payable

     20,951        13,848   

Income taxes payable

     20,118        50,844   

Deferred tax liabilities

     35        194   

Due to related party

     464        —     

Accrued expenses and other current liabilities

     337,481        355,103   
  

 

 

   

 

 

 

Total current liabilities

   $ 661,828      $ 701,577   

Long-term debt, less current portion

     73,930        59,300   

Capital lease obligations, less current portion

     846        1,928   

Capital lease obligations payable to related party, less current portion

     855        —     

Deferred tax liabilities

     1,905        3,251   

Due to related party

     9,154        —     

Other liabilities

     219,186        304,233   
  

 

 

   

 

 

 

Total liabilities

   $ 967,704      $ 1,070,289   
  

 

 

   

 

 

 

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 222,997,072 issued and outstanding as of December 31, 2011 and June 30, 2012, respectively

     2,222        2,228   

Additional paid-in capital

     1,146,203        1,165,819   

Retained earnings

     605,386        705,026   

Accumulated other comprehensive income (loss)

     (320,753     (419,458
  

 

 

   

 

 

 

Genpact Limited shareholders’ equity

     1,433,058        1,453,615   

Noncontrolling interest

     2,625        3,179   
  

 

 

   

 

 

 

Total equity

     1,435,683        1,456,794   

Commitments and contingencies

    
  

 

 

   

 

 

 

Total liabilities and equity

   $ 2,403,387      $ 2,527,083   
  

 

 

   

 

 

 


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,  
     2011     2012     2011     2012  

Net revenues

        

Net revenues from services - related party

   $ 122,783      $ 162      $ 235,744      $ 317   

Net revenues from services - others

     274,840        467,469        492,432        902,793   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenues

     397,623        467,631        728,176        903,110   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue

        

Services

     254,030        285,222        468,517        550,687   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     254,030        285,222        468,517        550,687   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

   $ 143,593      $ 182,409      $ 259,659      $ 352,423   

Operating expenses:

        

Selling, general and administrative expenses

     86,724        114,253        154,165        219,258   

Amortization of acquired intangible assets

     5,140        5,790        8,217        11,080   

Other operating (income) expense, net

     665        (801     (291     (1,513
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

   $ 51,064      $ 63,167      $ 97,568      $ 123,598   

Foreign exchange (gains) losses, net

     (1,130     (21,977     (2,697     (18,306

Other income (expense), net

     3,026        (699     6,124        (823
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 55,220      $ 84,445      $ 106,389      $ 141,081   

Equity-method investment activity, net

     134        13        267        26   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

   $ 55,086      $ 84,432      $ 106,122      $ 141,055   

Income tax expense

     14,357        21,633        27,479        38,000   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 40,729      $ 62,799      $ 78,643      $ 103,055   

Net income attributable to noncontrolling interest

     1,720        1,699        3,514        3,415   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Genpact Limited shareholders

   $ 39,009      $ 61,100      $ 75,129      $ 99,640   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to Genpact Limited common shareholders

     39,009        61,100        75,129        99,640   

Earnings per common share attributable to Genpact Limited common shareholders

        

Basic

   $ 0.18      $ 0.27      $ 0.34      $ 0.45   

Diluted

   $ 0.17      $ 0.27      $ 0.33      $ 0.44   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Basic

     221,297,842        223,182,251        221,153,301        222,996,243   

Diluted

     226,146,388        227,880,427        225,844,839        227,676,670   


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Six months ended June 30,  
     2011     2012  

Operating activities

    

Net income attributable to Genpact Limited shareholders

   $ 75,129      $ 99,640   

Net income attributable to noncontrolling interest

     3,514        3,415   
  

 

 

   

 

 

 

Net Income

   $ 78,643      $ 103,055   

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

    

Depreciation and amortization

     29,005        28,145   

Amortization of debt issue costs

     554        1,307   

Amortization of acquired intangible assets

     8,300        11,118   

Reserve for doubtful receivables

     1,853        (151

Reserve for mortgage loans

     —          107   

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

     (45     (18,962

Equity-method investment activity, net

     267        26   

Stock-based compensation expense

     8,559        17,243   

Deferred income taxes

     (2,579     (8,728

Others, net

     1,400        90   

Change in operating assets and liabilities:

    

Increase in accounts receivable

     (24,647     (16,791

Increase in other assets

     (33,122     (36,308

Decrease in accounts payable

     (2,374     (5,076

Decrease in accrued expenses and other current liabilities

     (13,506     (1,321

Increase in income taxes payable

     24,092        30,611   

Increase in other liabilities

     5,632        27,707   
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 82,032      $ 132,072   

Investing activities

    

Purchase of property, plant and equipment

     (12,106     (41,602

Proceeds from sale of property, plant and equipment

     479        283   

Investment in affiliates

     —          (205

Purchase of short term investments

     (129,458     —     

Proceeds from sale of short term investments

     206,443        —     

Short term deposits placed

     —          (26,493

Redemption of short term deposits

     —          20,410   

Payment for business acquisitions, net of cash acquired

     (561,075     (36,927
  

 

 

   

 

 

 

Net cash provided by (used for) investing activities

   $ (495,717   $ (84,534

Financing activities

    

Repayment of capital lease obligations

     (1,500     (1,162

Proceeds from long-term debt

     120,000        —     

Repayment of long-term debt

     (25,000     (15,000

Short-term borrowings, net

     252,000        (1,000

Proceeds from issuance of common shares under stock based compensation plans

     5,989        3,788   

Payment for net settlement of stock based awards

     —          (1,409

Direct cost incurred in relation to Debt

     (8,315     —     

Distribution to noncontrolling interest

     (3,196     (2,762
  

 

 

   

 

 

 

Net cash provided by (used for) financing activities

   $ 339,978      $ (17,545

Effect of exchange rate changes

     6,075        (1,703

Net increase (decrease) in cash and cash equivalents

     (73,707     29,993   

Cash and cash equivalents at the beginning of the period

     404,034        408,020   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 336,402      $ 436,310   
  

 

 

   

 

 

 

Supplementary information

    

Cash paid during the period for interest

   $ 1,509      $ 4,212   

Cash paid during the period for income taxes

   $ 23,498      $ 40,266   

Property, plant and equipment acquired under capital lease obligation

   $ 758      $ 1,178   


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, significant acquisition related expenses and amortization of acquired intangibles on such acquisitions and expenses related to change of shareholding and capital restructuring, 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, significant acquisition related expenses and amortization of acquired intangibles on such acquisitions and expenses related to change of shareholding and capital restructuring, 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 related to change of shareholding and capital restructuring, 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 and six months ended June 30, 2011 and 2012:

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 

     Three months ended June 30,     Six months ended June 30,  
     2011     2012     2011     2012  

Income from operations as per GAAP

   $ 51,064      $ 63,167      $ 97,568      $ 123,598   

Add: Amortization of acquired intangible assets resulting from Formation Accounting

     2,434        1,755        4,948        3,632   

Add: Amortization of acquired intangible assets relating to significant acquisitions

     2,049        2,627        2,049        5,254   

Add: Stock based compensation

     5,494        9,980        8,559        17,243   

Add: Significant acquisition related expenses

     4,739        —          5,619        —     

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

     —          1,687        —          2,487   

Add: Other income

     1,355        322        1,560        632   

Less: Equity-method investment activity, net

     (134     (13     (267     (26

Less: Net income attributable to noncontrolling interest

     (1,720     (1,699     (3,514     (3,415
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income from operations

   $ 65,281      $ 77,826      $ 116,522      $ 149,405   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 

     Three months ended June 30,     Six months ended June 30,  
     2011     2012     2011     2012  

Net income as per GAAP

   $ 39,009      $ 61,100      $ 75,129      $ 99,640   

Add: Amortization of acquired intangible assets resulting from Formation Accounting

     2,434        1,755        4,948        3,632   

Add: Amortization of acquired intangible assets relating to significant acquisitions

     2,049        2,627        2,049        5,254   

Add: Stock based compensation

     5,494        9,980        8,559        17,243   

Add: Significant acquisition related expenses

     4,739        —          5,619        —     

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

     —          1,687        —          2,487   

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

     (602     (366     (1,298     (833

Less: Tax impact on amortization of acquired intangibles resulting from significant acquisitions

     (695     (902     (695     (1,786

Less: Tax impact on stock based compensation

     (1,779     (3,059     (2,474     (5,033

Less: Tax impact on significant acquisition related expenses

     (1,269     —          (1,394     —     

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

     —          (182     —          (182
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 49,380      $ 72,640      $ 90,444      $ 120,422   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.22      $ 0.32      $ 0.40      $ 0.53   

Consultancy and legal fees relating to change of shareholding and capital restructuring amounting to $800 were omitted to be considered for the purposes of computing the adjusted income from operations and adjusted net income in the first quarter of 2012. Adjusted income from operations and adjusted net income for the first quarter of 2012 should have been $71,579 and $47,782, respectively, after considering the above expenses. Adjusted diluted earnings per share for the first quarter of 2012 remain the same at $0.21.