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Exhibit 99.1

 

LOGO

Genpact Reports Results for the Third Quarter of 2013

Revenues of $534.9 Million, Up 8.9%

Adjusted Income from Operations of $95.0 Million, Up 19.2%

Cash Flow from Operations of $125.5 Million, Up 62.2%

NEW YORK, November 6, 2013 – Genpact Limited (NYSE: G), a global leader in transforming and running business processes and operations, today announced financial results for the third quarter ended September 30, 2013.

Key Financial Results – Third Quarter 2013

 

  Revenues were $534.9 million, up 8.9% from $491.2 million in the third quarter of 2012. Revenues from Global Clients were up 12.7%, and business process management revenues from Global Clients were up 10.4%.

 

  Income from operations was $86.0 million, up 22.9% from $70.0 million in the third quarter of 2012.

 

  Net income attributable to Genpact Limited shareholders was $70.3 million, up 179.1% from $25.2 million in the third quarter of 2012. Net income margin for the third quarter of 2013 was 13.1%, up from 5.1% in the third quarter of 2012.

 

  Diluted earnings per common share were $0.30, up from $0.11 in the third quarter of 2012.

 

  Adjusted income from operations was $95.0 million, up 19.2% from $79.7 million in the third quarter of 2012.

 

  Adjusted income from operations margin was 17.8%, up from 16.2% in the third quarter of 2012.

 

  Adjusted diluted earnings per share were $0.33, up from $0.18 in the third quarter of 2012.

N.V. ‘Tiger’ Tyagarajan, Genpact’s president and CEO, said, “In the third quarter, Genpact revenues, adjusted operating income, adjusted operating income margin and cash flows from operations all increased year-over-year. Revenue growth was below our expectations. The three main drivers behind our lower than expected revenues were: foreign exchange headwinds impacting our non-U.S. dollar revenues significantly more than anticipated, continued reduction in our mortgage originations business related to softness in refinancing volumes in the U.S., and an increase in the value and proportion of large deals in our pipeline. Although conversion to revenue in large, transformative deals takes significantly longer, these engagements are where we want to be and where the depth of our operational capabilities and benchmarks add the most value to our clients.”

Revenues from Global Clients grew 12.7% over the third quarter of 2012. Business process management revenues from Global Clients grew by 10.4%, led by growth in the Insurance, Hi-Tech, Consumer Packaged Goods, Retail and Life Sciences verticals. Revenues from Global Clients represented approximately 77.9% of Genpact’s total revenues, or $416.9 million, with the remaining 22.1% of revenues, or $118.0 million, coming from GE. GE revenues decreased 2.7% from the third quarter of 2012, adjusted for dispositions by GE of businesses that Genpact continues to serve.

In the 12 months ending September 30, 2013, 52 client relationships each contributed revenues of $5 – $15 million, up from 42 such relationships as of September 30, 2012, 13 client relationships each contributed revenues of $15 – $25 million, up from 11 such relationships as of September 30, 2012 and 12 client relationships each contributed revenues of $25 million or more, up from 11 such client relationships as of September 30, 2012.

75.1% of Genpact’s revenues for the quarter came from business process management services, compared to 76.6% in the third quarter of 2012. Revenues from IT services were 24.9% of total revenues for the quarter, up from 23.4% in the third quarter of 2012.


Genpact generated $125.5 million of cash from operations in the quarter, up from $77.4 million in the third quarter of 2012. Genpact had approximately $499.0 million in cash and cash equivalents and short term deposits as of September 30, 2013.

As of September 30, 2013, Genpact had approximately 62,200 employees worldwide, up from approximately 60,800 as of September 30, 2012. Genpact’s employee attrition rate for the quarter was approximately 25%, measured from the first day of employment, down from 26% for the same period in 2012. Annualized revenue per employee for the quarter was $36,200, up from $34,100 for the three months ended September 30, 2012.

Year-to-Date Results

 

  Revenues were $1.574 billion, up 12.9% from $1.394 billion for the nine months ended September 30, 2012.

 

  Income from operations was $237.9 million, up 22.9% from $193.6 million in the nine months ended September 30, 2012.

 

  Net income attributable to Genpact Limited shareholders was $180.9 million, up from $124.8 million for the nine months ended September 30, 2012; net income margin was 11.5%, up from 9.0% for the nine months ended September 30, 2012.

 

  Diluted earnings per common share were $0.77, up from $0.55 for the nine months ended September 30, 2012.

 

  Adjusted income from operations was $267.0 million, up 16.5% from $229.2 million for the nine months ended September 30, 2012.

 

  Adjusted income from operations margin was 17.0%, up from 16.4% for the nine months ended September 30, 2012.

 

  Adjusted diluted earnings per share were $0.88, up from $0.71 for the nine months ended September 30, 2012.

Genpact’s employee attrition rate for the nine months ended September 30, 2013 was approximately 25%, measured from the first day of employment, unchanged from the same period in 2012. Annualized revenue per employee for the nine months ended September 30, 2013 was $35,800, up from $33,700 for the nine months ended September 30, 2012.

2013 Outlook

Tyagarajan continued, “As a result of lower than expected revenues and improved margins, we are reducing our revenue guidance and increasing our margin guidance. For the full year 2013, we now expect revenues to be in a range of $2.12 – $2.13 billion and adjusted operating income margin to be in a range of 16.5% – 16.8%. Looking ahead, we continue to believe our addressable market is large and under-penetrated. In order to capture a larger share of this market, we are targeting specific industry verticals, service lines and geographies where our offerings are truly differentiated and our ability to generate business impact is the greatest.”

Conference Call to Discuss Financial Results

Genpact management will host an hour-long conference call beginning at 4:30 p.m. ET on November 6, 2013 to discuss the company’s performance for the third quarter of 2013. To participate, callers can dial +1 (800) 706-7749 from within the U.S. or +1 (617) 614-3474 from any other country. Thereafter, callers will be prompted to enter the participant code, 93048934.

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) is a global leader in transforming and running business processes and operations, including those that are complex and industry-specific. Our mission is to help clients become more competitive by making their enterprises more intelligent through becoming more adaptive, innovative, globally effective and connected to their own clients. Genpact stands for Generating Impact – visible in tighter cost management as well as better management of risk, regulations and growth for hundreds of long-term clients including more than 100 of the Fortune Global 500. Our approach is distinctive – we offer an unbiased, agile combination of smarter processes, crystallized in our Smart Enterprise Processes (SEPSM) proprietary framework, along with analytics and technology, which limits upfront investments and enhances future adaptability. We have global critical mass – 60,000+ employees in 24 countries with key management and corporate offices in New York City – while remaining flexible and collaborative, and a management team that drives client partnerships personally. Our history is unique – behind our single-minded 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 15 years. 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, 2012
     As of
September 30, 2013
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 459,228       $ 481,498   

Accounts receivable, net

     451,960         476,997   

Accounts receivable from related party, net

     29         63   

Short term deposits

     18,292         17,505   

Deferred tax assets

     48,489         61,654   

Prepaid expenses and other current assets

     150,769         179,402   
  

 

 

    

 

 

 

Total current assets

   $ 1,128,767       $ 1,217,119   

Property, plant and equipment, net

     200,362         168,374   

Deferred tax assets

     91,383         102,878   

Investment in equity affiliates

     416         349   

Customer-related intangible assets, net

     84,748         79,250   

Marketing-related intangible assets, net

     21,585         20,628   

Other intangible assets, net

     6,054         7,054   

Goodwill

     956,064         950,424   

Other assets

     116,548         98,059   
  

 

 

    

 

 

 

Total assets

   $ 2,605,927       $ 2,644,135   
  

 

 

    

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

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

 

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

Liabilities and equity

    

Current liabilities

    

Short-term borrowings

   $ 80,000      $ —     

Current portion of long-term debt

     4,982        4,256   

Current portion of capital lease obligations

     1,301        1,384   

Accounts payable

     18,652        15,281   

Income taxes payable

     22,304        58,936   

Deferred tax liabilities

     538        384   

Accrued expenses and other current liabilities

     390,041        401,476   
  

 

 

   

 

 

 

Total current liabilities

   $ 517,818      $ 481,717   

Long-term debt, less current portion

     656,879        654,664   

Capital lease obligations, less current portion

     2,533        2,736   

Deferred tax liabilities

     6,068        5,539   

Other liabilities

     250,848        297,955   
  

 

 

   

 

 

 

Total liabilities

   $ 1,434,146      $ 1,442,611   
  

 

 

   

 

 

 

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 230,147,557 issued and outstanding as of December 31, 2012 and September 30, 2013, respectively

     2,253        2,300   

Additional paid-in capital

     1,202,448        1,252,122   

Retained earnings

     281,982        462,857   

Accumulated other comprehensive income (loss)

     (318,272     (517,791
  

 

 

   

 

 

 

Genpact Limited shareholders’ equity

   $ 1,168,411      $ 1,199,488   

Noncontrolling interest

     3,370        2,036   
  

 

 

   

 

 

 

Total equity

   $ 1,171,781      $ 1,201,524   

Total liabilities and equity

   $ 2,605,927      $ 2,644,135   
  

 

 

   

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

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

 

     Three months ended September 30,     Nine months ended September 30,  
     2012     2013     2012     2013  

Net revenues

        

Net revenues from services - others

   $ 490,987      $ 534,696      $ 1,393,780      $ 1,572,967   

Net revenues from services - related party

     170        190        487        571   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenues

     491,157        534,886        1,394,267        1,573,538   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue

        

Services

     297,253        329,289        847,940        973,729   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     297,253        329,289        847,940        973,729   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

   $ 193,904      $ 205,597      $ 546,327      $ 599,809   

Operating expenses:

        

Selling, general and administrative expenses

     118,536        117,005        337,794        348,632   

Amortization of acquired intangible assets

     6,014        5,867        17,094        17,603   

Other operating (income) expense, net

     (598     (3,232     (2,111     (4,320
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

   $ 69,952      $ 85,957      $ 193,550      $ 237,894   

Foreign exchange (gains) losses, net

     13,220        (10,817     (5,086     (24,619

Other income (expense), net

     (14,932     (3,454     (15,755     (19,104
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 41,800      $ 93,320      $ 182,881      $ 243,409   

Equity-method investment activity, net

     (50     (32     (24     (139
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

   $ 41,850      $ 93,352      $ 182,905      $ 243,548   

Income tax expense

     15,239        21,921        53,239        58,403   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 26,611      $ 71,431      $ 129,666      $ 185,145   

Net income attributable to noncontrolling interest

     1,436        1,169        4,851        4,270   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Genpact Limited shareholders

   $ 25,175      $ 70,262      $ 124,815      $ 180,875   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to Genpact Limited common shareholders

   $ 25,175      $ 70,262      $ 124,815      $ 180,875   

Earnings per common share attributable to Genpact Limited common shareholders

        

Basic

   $ 0.11      $ 0.31      $ 0.56      $ 0.79   

Diluted

   $ 0.11      $ 0.30      $ 0.55      $ 0.77   

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

        

Basic

     223,876,035        230,057,508        223,289,507        228,840,746   

Diluted

     230,195,834        236,336,924        228,516,391        235,095,660   


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Nine months ended September 30,  
     2012     2013  

Operating activities

    

Net income attributable to Genpact Limited shareholders

   $ 124,815      $ 180,875   

Net income attributable to noncontrolling interest

     4,851        4,270   
  

 

 

   

 

 

 

Net income

   $ 129,666      $ 185,145   
  

 

 

   

 

 

 

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

    

Depreciation and amortization

     41,609        40,270   

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

     7,468        5,215   

Amortization of acquired intangible assets

     17,149        17,603   

Reserve for doubtful receivables

     2,780        8,919   

Reserve for mortgage loans

     107        —     

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

     (1,307     (5,646

Equity-method investment activity, net

     (24     (139

Stock-based compensation expense

     22,856        21,931   

Deferred income taxes

     (9,297     4,194   

Others, net

     2,287        5,872   

Change in operating assets and liabilities:

    

Increase in accounts receivable

     (45,209     (30,613

Increase in other assets

     (64,645     (35,014

Decrease in accounts payable

     (3,876     (797

Increase (Decrease) in accrued expenses and other current liabilities

     29,994        (24,601

Increase in income taxes payable

     45,688        37,103   

Increase in other liabilities

     34,226        3,775   
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 209,472      $ 233,217   
  

 

 

   

 

 

 

Investing activities

    

Purchase of property, plant and equipment

     (60,141     (37,061

Proceeds from sale of property, plant and equipment

     374        2,996   

Investment in affiliates

     (205     —     

Short term deposits placed

     (25,638     (55,259

Redemption of short term deposits

     25,638        51,955   

Payment for business acquisitions, net of cash acquired

     (53,931     (49,235

Proceeds from divestiture of business, net of cash divested

     —          (1,049
  

 

 

   

 

 

 

Net cash used for investing activities

   $ (113,903   $ (87,653
  

 

 

   

 

 

 

Financing activities

    

Repayment of capital lease obligations

     (1,684     (1,284

Proceeds from long-term debt

     675,000        121,410   

Repayment of long-term debt

     (105,000     (121,410

Proceeds from Short-term borrowings

     80,000        35,000   

Repayment of Short-term borrowings

     (252,350     (115,000

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

     19,684        35,389   

Payment for net settlement of stock-based awards

     (1,746     (7,599

Payment of earn-out consideration

     (587     (3,868

Cost incurred in relation to Debt amendment and refinancing

     (14,438     (8,104

Distribution to noncontrolling interest

     (3,961     (4,614

Dividend paid

     (501,620     —     
  

 

 

   

 

 

 

Net cash used for financing activities

   $ (106,702   $ (70,080
  

 

 

   

 

 

 

Effect of exchange rate changes

     (2,384     (53,214

Net increase (decrease) in cash and cash equivalents

     (11,133     75,484   

Cash and cash equivalents at the beginning of the period

     408,020        459,228   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 394,503      $ 481,498   
  

 

 

   

 

 

 

Supplementary information

    

Cash paid during the period for interest

   $ 5,785      $ 25,484   

Cash paid during the period for income taxes

   $ 65,708      $ 52,805   

Property, plant and equipment acquired under capital lease obligation

   $ 1,955      $ 1,933   


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.

In addition to the above, Genpact’s management uses financial statements that exclude stock-based compensation expense, amortization of acquired intangibles at formation in 2004, expenses related to change of shareholding and capital restructuring (excluding expenses related to the credit facility) and withholding taxes relating to remittance of funds between subsidiaries to partly fund the payment of the special cash dividend in respect of capital restructuring. 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, acquisition related expenses and expenses related to change of shareholding and capital restructuring (excluding expenses related to the credit facility) and withholding taxes relating to remittance of funds between subsidiaries to partly fund the payment of the special cash dividend in respect of capital restructuring, 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 nine months ended September 30, 2012 and 2013:

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 

     Three months ended September 30,     Nine months ended September 30,  
     2012     2013     2012     2013  

Income from operations as per GAAP

   $ 69,952      $ 85,957      $ 193,550      $ 237,894   

Add: Amortization of acquired intangible assets resulting from Formation Accounting

     1,621        711        5,253        2,282   

Add: Amortization of acquired intangible assets relating to acquisitions

     2,694        3,857        7,948        11,355   

Add: Acquisition related expenses

     298        —          298        —     

Add: Consultancy and legal fees relating to change of shareholding and capital restructuring (excluding expenses related to the credit facility)

     7,318        —          9,805        —     

Add: Stock-based compensation

     5,613        5,312        22,856        21,931   

Less: Provision (created) reversed for loss on divestitures

     —          141        —          (3,520

Add: Other income (expense)

     (6,365     184        (5,733     1,163   

Add: Gain on Equity-method investment activity, net

     50        32        24        139   

Less: Net income attributable to noncontrolling interest

     (1,436     (1,169     (4,851     (4,270
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income from operations

   $ 79,745      $ 95,025      $ 229,150      $ 266,974   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 

     Three months ended September 30,     Nine months ended September 30,  
     2012     2013     2012     2013  

Net income as per GAAP

   $ 25,175      $ 70,262      $ 124,815      $ 180,875   

Add: Amortization of acquired intangible assets resulting from Formation Accounting

     1,621        711        5,253        2,282   

Add: Amortization of acquired intangible assets relating to acquisitions

     2,694        3,857        7,948        11,355   

Add: Consultancy and legal fees relating to change of shareholding and capital restructuring (excluding expenses related to the credit facility)

     7,318        —          9,805        —     

Add: Stock-based compensation

     5,613        5,312        22,856        21,931   

Add: Acquisition related expenses

     298        —          298        —     

Add: Withholding taxes relating to remittance of funds between subsidiaries to partly fund the payment of special cash dividend in respect of capital restructuring

     2,300        —          2,300        —     

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

     (357     (114     (1,190     (413

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

     (893     (1,319     (2,679     (3,875

Less: Tax impact on acquisition related expenses

     (75     —          (75     —     

Less: Tax impact on stock-based compensation

     (1,971     (1,458     (7,004     (5,753

Less: Tax impact on consultancy and legal fees relating to change of shareholding and capital restructuring (excluding expenses related to the credit facility)

     —          —          (182     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 41,723      $ 77,251      $ 162,145      $ 206,402   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.18      $ 0.33      $ 0.71      $ 0.88