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EX-99.2 - EX-99.2 - Genpact LTDd864834dex992.htm

Exhibit 99.1

 

LOGO

Genpact Reports Results for 2014 Full Year and Fourth Quarter

FY ‘14 Revenues of $2.279 Billion, Up 6.9% for FY ‘14 and Up 7.7% for 4Q ‘14

FY ‘14 Adjusted Income from Operations Margin of 15.1%

FY ‘14 Cash Flow from Operations of $271.8 Million

NEW YORK, February 4, 2015 Genpact Limited (NYSE: G), a global leader in designing, transforming, and running intelligent business operations, today announced financial results for the fourth quarter and full year ended December 31, 2014.

Key Financial Results – Full Year 2014

 

  Revenues were $2.279 billion, up 6.9%, from $2.132 billion in 2013.

 

  Income from operations was $294.0 million, compared to $309.5 million in 2013.

 

  Adjusted income from operations was $344.2 million with a margin of 15.1%, compared to $352.6 million with a margin of 16.5% in 2013.

 

  Net income attributable to Genpact Limited shareholders was $192.0 million, compared to $229.7 million in 2013.

 

  Diluted earnings per common share were $0.85, compared to $0.97 in 2013.

 

  Adjusted diluted earnings per share were $1.03, compared to $1.13 in 2013.

 

  The effective tax rate was 23.0%, compared to 23.6% in 2013.

 

  New bookings were $2.156 billion, up from $1.440 billion in 2013.1

Key Financial Results – Fourth Quarter 2014

 

  Revenues were $601.5 million, up 7.7%, from $558.5 million in the fourth quarter of 2013.

 

  Income from operations was $70.9 million, compared to $71.6 million in the fourth quarter of 2013.

 

  Adjusted income from operations was $81.8 million with a margin of 13.6%, compared to $85.7 million with a margin of 15.3% in the fourth quarter of 2013.

 

  Net income attributable to Genpact Limited shareholders was $45.8 million, compared to $48.8 million in the fourth quarter of 2013.

 

  Diluted earnings per common share were $0.21, unchanged from the fourth quarter of 2013.

 

  Adjusted diluted earnings per share were $0.26, compared to $0.25 in the fourth quarter of 2013.

 

1  New bookings means the total contract value of new contracts, and certain renewals, extensions and changes to existing contracts. Regular renewals of contracts with no change in scope are not counted as new bookings.


N.V. ‘Tiger’ Tyagarajan, Genpact’s president and CEO, said, “We are pleased with Genpact’s 2014 results. We delivered on our stated financial expectations and made significant progress executing on our growth strategy including completing all of our planned investments for the year. We have made disciplined investments in our targeted verticals, service lines and geographies that have positioned us well to capture new growth opportunities, as our clients and the industries in which they operate continue to be transformed and reinvented.”

For the full year 2014, revenues on a constant currency basis grew 7.9%. Excluding the Pharmalink Consulting acquisition, revenues were up 5.7%, or 6.7% on a constant currency basis. For the fourth quarter, revenues on a constant currency basis grew 9.2%. Excluding revenues from the Pharmalink Consulting acquisition, fourth quarter revenues were up 5.6%, or 7.1% on a constant currency basis.

Revenues from Global Clients represented approximately 79.6% of Genpact’s total revenues, or $1.813 billion, in 2014, with the remaining approximately 20.4% of revenues, or $466.1 million, coming from GE. GE revenues decreased 2.4% compared to 2013, adjusted for dispositions by GE of businesses that Genpact continues to serve as Global Clients. Revenues from Global Clients grew 9.6% for the full year 2014 and 11.4% in the fourth quarter, led by growth in the consumer product goods, insurance, capital markets and infrastructure, manufacturing and services verticals. BPO revenues from Global Clients grew by 11.9% for the full year 2014 and 16.3% in the fourth quarter.

In the 12 months ending December 31, 2014, Genpact grew the number of client relationships with annual revenues over $5 million to 89 from 78 as of December 31, 2013. This includes client relationships with more than $15 million in annual revenue increasing to 32 from 26, client relationships with more than $25 million in annual revenue increasing to 16 from 13 and client relationships with more than $50 million in annual revenue increasing to 4 from 3.

76.2% of Genpact’s revenues for the full year 2014 and 77.7% for the fourth quarter came from BPO services, up from 75.4% for 2013 and 75.3% for the fourth quarter of 2013. Revenues from IT services were 23.8% of total revenues for the full year 2014 and 22.3% for the fourth quarter, compared to 24.6% for 2013 and 24.7% for the fourth quarter of 2013.

Genpact generated $271.8 million of cash from operations in 2014 and $93.0 million in the fourth quarter, compared to $311.6 million in 2013 and $78.4 million the fourth quarter of 2013. Genpact had approximately $462 million in cash and cash equivalents as of December 31, 2014.

As of December 31, 2014, Genpact had approximately 67,900 employees worldwide, up from approximately 63,600 as of December 31, 2013. Genpact’s employee attrition rate for 2014 was 25%, measured from the first day of employment, unchanged from 2013. Revenue per employee in 2014 was $35,900, compared to $36,000 in 2013.

2015 Outlook

Tyagarajan continued, “There is a disruptive trend sweeping across industries requiring companies to integrate new technology and find new ways to use data and insights as a competitive advantage. Our strategy is focused on building domain-led solutions that are responsive to this trend. We believe we are on the right path to further differentiate Genpact and increase our competitiveness and are excited by the momentum in our business as we begin 2015. We expect revenues for 2015 to be in the range of $2.46 to $2.50 billion. We expect 2015 adjusted operating income margins to be approximately 15.0%.”

Conference Call to Discuss Financial Results

Genpact management will host an hour-long conference call beginning at 4:30 p.m. ET on February 4, 2015 to discuss the company’s performance for the fourth quarter and full year of 2014. To participate, callers can dial +1 (866) 515-2908 from within the U.S. or +1 (617) 399-5122 from any other country. Thereafter, callers will be prompted to enter the participant code, 30884368.

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 Limited (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 make our clients more competitive as they help them grow and manage 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 EngagementSM, 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 67,000 people in 25 countries with key management and corporate offices in New York City, but our global critical mass doesn’t dilute our flexible and collaborative approach and our management team still drives client partnerships personally. We generate impact faster because of our unparalleled experience running complex operations and business domain expertise, driving our focus on what works and making transformation sustainable. Our 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 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 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    Bharani Bobba
   +1 (203) 300-9230
   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,
2013
     As of December 31,
2014
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 571,276       $ 461,788   

Accounts receivable, net

     505,117         525,754   

Deferred tax assets

     60,638         45,486   

Prepaid expenses and other current assets

     139,113         155,480   
  

 

 

    

 

 

 

Total current assets

   $ 1,276,144       $ 1,188,508   

Property, plant and equipment, net

     173,204         175,936   

Deferred tax assets

     89,305         59,135   

Investment in equity affiliates

     384         494   

Intangible assets, net

     99,116         114,544   

Goodwill

     953,849         1,057,214   

Other assets

     97,365         146,706   
  

 

 

    

 

 

 

Total assets

   $ 2,689,367       $ 2,742,537   
  

 

 

    

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

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

 

     As of December 31,
2013
    As of December 31,
2014
 

Liabilities and equity

    

Current liabilities

    

Short-term borrowings

   $ —        $ 135,000   

Current portion of long-term debt

     4,263        4,288   

Current portion of capital lease obligations

     1,405        1,443   

Accounts payable

     18,412        15,544   

Income taxes payable

     15,007        13,586   

Deferred tax liabilities

     614        1,239   

Accrued expenses and other current liabilities

     421,992        451,014   
  

 

 

   

 

 

 

Total current liabilities

   $ 461,693      $ 622,114   

Long-term debt, less current portion

     653,601        649,314   

Capital lease obligations, less current portion

     2,657        2,660   

Deferred tax liabilities

     4,464        6,671   

Other liabilities

     242,884        176,642   
  

 

 

   

 

 

 

Total liabilities

   $ 1,365,299      $ 1,457,401   
  

 

 

   

 

 

 

Shareholders’ equity

    

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

     —          —     

Common shares, $0.01 par value, 500,000,000 authorized, 231,262,576 and 218,684,205 issued and outstanding as of December 31, 2013 and December 31, 2014, respectively

     2,310        2,184   

Additional paid-in capital

     1,268,344        1,296,730   

Retained earnings

     511,699        398,706   

Accumulated other comprehensive income (loss)

     (459,614     (412,484
  

 

 

   

 

 

 

Genpact Limited shareholders’ equity

   $ 1,322,739      $ 1,285,136   

Noncontrolling interest

     1,329        —     
  

 

 

   

 

 

 

Total equity

   $ 1,324,068      $ 1,285,136   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 2,689,367      $ 2,742,537   
  

 

 

   

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

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

 

     Year ended December 31,  
     2012     2013     2014  

Net revenues

      

Net revenues from services

   $ 1,901,971      $ 2,131,997      $ 2,279,438   
  

 

 

   

 

 

   

 

 

 

Cost of revenue

      

Services

     1,157,766        1,319,571        1,378,088   
  

 

 

   

 

 

   

 

 

 

Gross profit

   $ 744,205      $ 812,426      $ 901,350   

Operating expenses:

      

Selling, general and administrative expenses

     456,611        484,810        585,646   

Amortization of acquired intangible assets

     23,233        23,645        28,543   

Other operating (income) expense, net

     16        (5,556     (6,870
  

 

 

   

 

 

   

 

 

 

Income from operations

   $ 264,345      $ 309,527      $ 294,031   

Foreign exchange (gains) losses, net

     (13,146     (20,763     12,363   

Other income (expense), net

     (14,499     (24,308     (27,283
  

 

 

   

 

 

   

 

 

 

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

   $ 262,992      $ 305,982      $ 254,385   

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

     (17     (169     4,795   
  

 

 

   

 

 

   

 

 

 

Income before income tax expense

   $ 263,009      $ 306,151      $ 249,590   

Income tax expense

     78,419        71,100        57,419   
  

 

 

   

 

 

   

 

 

 

Net Income

   $ 184,590      $ 235,051      $ 192,171   

Net income attributable to noncontrolling interest

     6,374        5,334        169   
  

 

 

   

 

 

   

 

 

 

Net income attributable to Genpact Limited shareholders

   $ 178,216      $ 229,717      $ 192,002   
  

 

 

   

 

 

   

 

 

 

Net income available to Genpact Limited common shareholders

   $ 178,216      $ 229,717      $ 192,002   

Earnings per common share attributable to Genpact Limited common shareholders

      

Basic

   $ 0.80      $ 1.00      $ 0.87   

Diluted

   $ 0.78      $ 0.97      $ 0.85   

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

      

Basic

     223,696,567        229,348,411        220,847,098   

Diluted

     229,532,516        235,754,267        225,168,665   


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Year ended December 31,  
     2012     2013     2014  

Operating activities

      

Net income attributable to Genpact Limited shareholders

   $ 178,216      $ 229,717      $ 192,002   

Net income attributable to noncontrolling interest

     6,374        5,334        169   
  

 

 

   

 

 

   

 

 

 

Net income

$ 184,590    $ 235,051    $ 192,171   
  

 

 

   

 

 

   

 

 

 

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

Depreciation and amortization

  56,089      52,815      51,064   

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

  8,079      6,035      3,240   

Amortization of acquired intangible assets

  23,305      23,645      28,543   

Reserve for doubtful receivables

  3,878      11,420      3,107   

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

  (13,700   (6,251   9,419   

Equity-method investment activity, net

  (17   (169   4,795   

Stock-based compensation expense

  32,152      31,129      28,065   

Deferred income taxes

  (10,028   (1,116   (12,252

Others, net

  6,579      5,939      1,291   

Change in operating assets and liabilities:

Increase in accounts receivable

  (36,171   (60,817   (24,088

Decrease (Increase) in other assets

  (20,525   9,377      (31,657

Increase (Decrease) in accounts payable

  (4,380   1,785      (7,268

Increase in other liabilities

  79,034      9,316      27,500   

Increase (Decrease) in income taxes payable

  1,775      (6,555   (2,092
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

$ 310,660    $ 311,604    $ 271,838   
  

 

 

   

 

 

   

 

 

 

Investing activities

Purchase of property, plant and equipment

  (83,337   (48,879   (62,577

Proceeds from sale of property, plant and equipment

  500      3,442      564   

Investment in equity affiliates

  (205   —        —     

Short term deposits placed

  (43,978   (55,001   (25,000

Redemption of short term deposits

  25,638      69,249      25,000   

Payment for business acquisitions, net of cash acquired

  (55,901   (49,235   (130,809

Proceeds from divestiture of business, net of cash divested

  —        1,982      —     
  

 

 

   

 

 

   

 

 

 

Net cash used for investing activities

$ (157,283 $ (78,442 $ (192,822
  

 

 

   

 

 

   

 

 

 

Financing activities

Repayment of capital lease obligations

  (2,279   (1,803   (2,095

Proceeds from long-term debt

  675,000      121,410      —     

Repayment of long-term debt

  (106,688   (123,098   (6,750

Proceeds from Short-term borrowings

  80,000      275,000      195,000   

Repayment of Short-term borrowings

  (253,004   (355,000   (60,000

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

  26,227      45,859      30,144   

Payment for net settlement of stock based awards

  (2,103   (9,315   (25,975

Payment of earn-out and deferred consideration

  (587   (3,868   (1,088

Cost incurred in relation to debt amendment and refinancing

  (15,266   (8,104   —     

Distribution to noncontrolling interest

  (5,760   (6,423   (1,487

Expenses related to stock purchase

  —        —        (2,543

Stock purchased and retired

  —        —        (302,625

Dividend Paid

  (501,620   —        —     
  

 

 

   

 

 

   

 

 

 

Net cash used for financing activities

$ (106,080 $ (65,342 $ (177,419
  

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes

  3,911      (55,772   (11,085

Net increase (decrease) in cash and cash equivalents

  47,297      167,820      (98,403

Cash and cash equivalents at the beginning of the period

  408,020      459,228      571,276   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

$ 459,228    $ 571,276    $ 461,788   
  

 

 

   

 

 

   

 

 

 

Supplementary information

Cash paid during the period for interest

$ 14,061    $ 30,788    $ 27,175   

Cash paid during the period for income taxes

$ 91,825    $ 71,857    $ 83,803   

Property, plant and equipment acquired under capital lease obligation

$ 2,699    $ 2,342    $ 2,176   


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 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 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. 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 and amortization of acquired intangibles at formation in 2004. 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 months and year ended December 31, 2013 and 2014:

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 

     Year ended December 31,     Three months ended December 31,  
     2013     2014     2013     2014  

Income from operations per GAAP

   $ 309,527      $ 294,031      $ 71,633      $ 70,866   

Add: Stock-based compensation

     31,129        28,065        9,198        7,912   

Add: Amortization of acquired intangible assets

     18,321        22,233        4,685        6,347   

Add: Acquisition related expenses

     —          2,772        —          795   

Add/Less: Other income (expense), net, excluding net interest

     (1,168     2,112        1,190        776   

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

     169        (4,795     30        (4,882

Less: Net income attributable to noncontrolling interest

     (5,334     (169     (1,064     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income from operations

   $ 352,644      $ 344,249      $ 85,672      $ 81,814   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 

     Year ended December 31,     Three months ended December 31,  
     2013     2014     2013     2014  

Net income attributable to Genpact Limited shareholders per GAAP

   $ 229,717      $ 192,002      $ 48,842      $ 45,752   

Add: Stock-based compensation

     31,129        28,065        9,198        7,912   

Add: Amortization of acquired intangible assets

     18,321        22,233        4,685        6,347   

Add: Acquisition related expenses

     —          2,772        —          795   

Less: Tax impact on stock-based compensation

     (6,913     (6,366     (1,160     (1,160

Less: Tax impact on amortization of acquired intangibles

     (6,373     (7,154     (2,085     (1,997

Less: Tax impact on acquisition related expenses

     —          (184     —          (131
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 265,881      $ 231,368      $ 59,480      $ 57,518   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 1.13      $ 1.03      $ 0.25      $ 0.26