Genpact Reports Results for the Third Quarter of 2012

Third Quarter Revenues of $491.2 Million, Up 14%

Adjusted Income from Operations of $79.7 Million, Up 13%

Oct 31, 2012, 16:01 ET from Genpact Limited

NEW YORK, Oct. 31, 2012 /PRNewswire/ -- Genpact Limited (NYSE: G), a global leader in business process management and technology services, today announced financial results for the third quarter ended September 30, 2012.

(Logo:  http://photos.prnewswire.com/prnh/20120501/NY98560LOGO )

Key Financial Results – Third Quarter 2012

  • Revenues were $491.2 million, up 14.3% from $429.6 million in the third quarter of 2011.  Revenues from Global Clients were up 19.3%, and business process management revenues from Global Clients were up 24.4%.
  • Net income attributable to Genpact Limited shareholders was $25.2 million, compared to $48.0 million in the third quarter of 2011. Net income margin for the third quarter of 2012 was 5.1%, compared to 11.2% in the third quarter of 2011. Third quarter 2012 net income and margin reflected the impact of a foreign exchange re-measurement loss as well as expenses related to: the special cash dividend; associated debt refinancing and withholding taxes; and the sale of shares by Genpact's original sponsors.
  • Diluted earnings per common share were $0.11, compared to $0.21 per share in the third quarter of 2011. Third quarter 2012 diluted earnings per common share reflected the impact of a foreign exchange re-measurement loss as well as expenses related to: the special cash dividend; associated debt refinancing and withholding taxes; and the sale of shares by Genpact's original sponsors.
  • Adjusted income from operations was $79.7 million, up 12.6% from $70.9 million in the third quarter of 2011.
  • Adjusted income from operations margin was 16.2%, compared to 16.5% in the third quarter of 2011.
  • Adjusted diluted earnings per share were $0.18, compared to $0.26 in the third quarter of 2011. The adjusted diluted earnings per share was after accounting for (1) a $0.05 foreign exchange re-measurement loss in the third quarter of 2012 compared to a $0.03 gain in the third quarter of 2011 and (2) a $0.02 impact for incremental expenses related to the company's debt refinancing in the third quarter of 2012.

N.V. 'Tiger' Tyagarajan, Genpact's president and CEO said, "Genpact continues to deliver solid financial results, with strong growth in revenues and adjusted operating income.  Revenues increased 14.3% year-over-year and 5.0% sequentially to $491 million.  Adjusted income from operations grew 12.6%.  We returned capital to shareholders in the third quarter in the form of a special cash dividend of $2.24 per share, and facilitated the sale of shares by our original sponsors.  We believe both of these events are extremely positive for shareholders."  

Revenues from Global Clients grew 19.3% over the third quarter of 2011. Business process management revenues from Global Clients grew by 24.4%, led by 28.6% 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 74.5% of Genpact's total revenues, with the remaining 25.5% of revenues, or $125.3 million, coming from GE. GE revenues increased 1.9% from the third quarter of 2011.

As of September 30, 2012, 189 client relationships each contributed revenues of $1 million or more in the preceding twelve months, up from 172 such relationships as of September 30, 2011. As of September 30, 2012, 11 client relationships each contributed revenues of $25 million or more in the preceding 12 months, up from eight such client relationships as of September 30, 2011.

Approximately 76.1% of Genpact's revenues for the quarter came from business process management services, up from 74.3% for the third quarter of 2011.  Revenues from IT services were approximately 23.9% of total revenues for the third quarter of 2012, compared to 25.7% for the third quarter of 2011.

Genpact generated $77.4 million of cash from operations in the third quarter of 2012, compared to $95.1 million in the third quarter of 2011. Genpact had approximately $394.5 million in cash and cash equivalents as of September 30, 2012.

Year-to-Date Results

  • Revenues were $1.394 billion, up 20.4% from $1.158 billion for the nine months ended September 30, 2011.
  • Net income attributable to Genpact Limited shareholders was $124.8 million, compared to $123.2 million for the nine months ended September 30, 2011; net income margin was 9.0%, compared to 10.6% for the nine months ended September 30, 2011.
  • Diluted earnings per common share were $0.55, compared to $0.54 for the nine months ended September 30, 2011.
  • Adjusted income from operations was $229.2 million, up 22.3% from $187.4 million for the nine months ended September 30, 2011.
  • Adjusted income from operations margin was 16.4%, up from 16.2% for the nine months ended September 30, 2011.
  • Adjusted diluted earnings per share were $0.71, compared to $0.66 for the nine months ended September 30, 2011.

As of September 30, 2012, Genpact had approximately 60,800 employees worldwide, an increase from approximately 53,600 as of September 30, 2011. Genpact's employee attrition rate for the nine months ended September 30, 2012 was 25%, measured from day one of employment, down from 30% for the same period in 2011. Annualized revenue per employee for the nine months ended September 30, 2012 was $33,700 compared to $34,300 for the nine months ended September 30, 2011.

2012 Outlook

Tyagarajan continued, "Genpact helps clients weather economic storms as they continue to face volatility and uncertainty that is forcing them to better control costs, develop more competitive insights, drive growth and even re-think their business models.  Like our clients, we remain cautious about the global economy in the near term and thus we continue to expect Genpact full-year revenues of $1.86$1.90 billion, and adjusted operating income margin of 16.0% – 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 November 1, 2012 to discuss the company's performance for the third quarter of fiscal 2012. To participate, callers can dial +1 800-901-5241 from within the U.S. or +1 617-786-2963 from any other country. Thereafter, callers will be prompted to enter the participant code, 43481102. 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 60,500+ professionals around the globe deliver services to its more than 600 clients from a network of 74 delivery centers across 20 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 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 (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,

As of September 30,

2011

2012

Assets

Current assets

Cash and cash equivalents

$

408,020

$

394,503

Accounts receivable, net

258,498

462,893

Accounts receivable from related party, net

143,921

221

Deferred tax assets

46,949

45,639

Due from related party

10

-

Prepaid expenses and other current assets

127,721

205,710

Total current assets

$

985,119

$

1,108,966

Property, plant and equipment, net

180,504

197,929

Deferred tax assets

91,880

82,826

Investment in equity affiliates

220

440

Customer-related intangible assets, net

85,987

89,936

Marketing-related intangible assets, net

24,240

22,375

Other intangible assets, net

3,061

6,510

Goodwill

925,339

966,612

Other assets

107,037

123,075

Total assets

$

2,403,387

$

2,598,669

 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

 (Unaudited)

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

As of December 31,

As of September 30,

2011

2012

Liabilities and equity

Current liabilities

Short-term borrowings

$

252,000

$

80,691

Current portion of long-term debt

29,012

4,977

Current portion of capital lease obligations

1,005

1,414

Current portion of capital lease obligations payable to related party

762

-

Accounts payable

20,951

18,723

Income taxes payable

20,118

66,772

Deferred tax liabilities

35

567

Due to related party

464

-

Accrued expenses and other current liabilities

337,481

375,976

Total current liabilities

$

661,828

$

549,120

Long-term debt, less current portion

73,930

658,122

Capital lease obligations, less current portion

846

2,341

Capital lease obligations payable to related party, less current portion

855

-

Deferred tax liabilities

1,905

5,095

Due to related party

9,154

-

Other liabilities

219,186

230,393

Total liabilities

$

967,704

$

1,445,071

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 224,116,751 issued and outstanding as of December 31, 2011 and September 30, 2012, respectively

2,222

2,240

Additional paid-in capital

1,146,203

1,186,979

Retained earnings

605,386

228,581

Accumulated other comprehensive income (loss)

(320,753)

(267,461)

Genpact Limited shareholders' equity

1,433,058

1,150,339

Noncontrolling interest

2,625

3,259

Total equity

1,435,683

1,153,598

Commitments and contingencies

Total liabilities and equity

$

2,403,387

$

2,598,669

 

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,

2011

2012

2011

2012

Net revenues

Net revenues from services - related party

$

123,290

$

170

$

359,035

$

487

Net revenues from services - others

306,275

490,987

798,707

1,393,780

Total net revenues

429,565

491,157

1,157,742

1,394,267

Cost of revenue

Services

268,312

297,253

736,830

847,940

Total cost of revenue

268,312

297,253

736,830

847,940

Gross profit

$

161,253

$

193,904

$

420,912

$

546,327

Operating expenses:

Selling, general and administrative expenses

95,868

118,536

250,033

337,794

Amortization of acquired intangible assets

5,754

6,014

13,971

17,094

Other operating (income) expense, net

2,883

(598)

2,592

(2,111)

Income from operations

$

56,748

$

69,952

$

154,316

$

193,550

Foreign exchange (gains) losses, net

(9,736)

13,220

(12,433)

(5,086)

Other income (expense), net

2,147

(14,932)

8,271

(15,755)

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

$

68,631

$

41,800

$

175,020

$

182,881

Equity-method investment activity, net

21

(50)

289

(24)

Income before income tax expense

$

68,610

$

41,850

$

174,731

$

182,905

Income tax expense

18,907

15,239

46,386

53,239

Net Income

$

49,703

$

26,611

$

128,345

$

129,666

Net income attributable to noncontrolling interest

1,657

1,436

5,171

4,851

Net income attributable to Genpact Limited shareholders

$

48,046

$

25,175

$

123,174

$

124,815

Net income available to Genpact Limited common shareholders

48,046

25,175

123,174

124,815

Earnings per common share attributable to Genpact Limited common shareholders

Basic

$

0.22

$

0.11

$

0.56

$

0.56

Diluted

$

0.21

$

0.11

$

0.54

$

0.55

Dividend per share

$

-

$

2.24

$

-

$

2.24

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

Basic

221,771,264

223,876,035

221,359,288

223,289,507

Diluted

226,772,299

230,195,834

226,153,992

228,516,391

 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

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

Nine months ended September 30,

2011

2012

Operating activities

Net income attributable to Genpact Limited shareholders

$

123,174

$

124,815

Net income attributable to noncontrolling interest

5,171

4,851

Net Income

$

128,345

$

129,666

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

Depreciation and amortization

44,552

41,609

Amortization of debt issue costs

1,264

7,468

Amortization of acquired intangible assets

14,094

17,149

Reserve (release) for doubtful receivables

5,944

2,780

Reserve for mortgage loans

-

107

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

(6,397)

(1,307)

Equity-method investment activity, net

289

(24)

Stock-based compensation expense

17,712

22,856

Deferred income taxes

(3,722)

(9,297)

Others, net

5,320

2,287

Change in operating assets and liabilities:

Increase in accounts receivable

(36,568)

(45,209)

Increase in other assets

(48,564)

(64,645)

Decrease in accounts payable

(2,152)

(3,876)

Increase in accrued expenses and other current liabilities

10,274

29,994

Increase in income taxes payable

42,886

45,688

Increase in other liabilities

3,807

34,226

Net cash provided by operating activities

$

177,084

$

209,472

Investing activities

Purchase of property, plant and equipment

(22,263)

(60,141)

Proceeds from sale of property, plant and equipment

687

374

Investment in affiliates

-

(205)

Purchase of short term investments

(129,458)

-

Proceeds from sale of short term investments

206,443

-

Short term deposits placed

-

(25,638)

Redemption of short term deposits

-

25,638

Payment for business acquisitions, net of cash acquired

(561,767)

(54,518)

Net cash used for investing activities

$

(506,358)

$

(114,490)

Financing activities

Repayment of capital lease obligations

(2,027)

(1,684)

Proceeds from long-term debt

120,000

675,000

Repayment of long-term debt

(25,000)

(105,000)

Proceeds from Short-term borrowings

260,000

80,000

Repayment of Short-term borrowings

(8,000)

(252,350)

Proceeds from issuance of common shares under stock based compensation plans

10,614

19,684

Payment for net settlement of stock based awards

-

(1,746)

Dividend paid

-

(501,620)

Direct cost incurred in relation to Debt

(9,115)

(14,438)

Distribution to noncontrolling interest

(4,680)

(3,961)

Net cash provided by (used for) financing activities

$

341,792

$

(106,115)

Effect of exchange rate changes

(7,487)

(2,384)

Net increase (decrease) in cash and cash equivalents

12,518

(11,133)

Cash and cash equivalents at the beginning of the period

404,034

408,020

Cash and cash equivalents at the end of the period

$

409,065

$

394,503

Supplementary information

Cash paid during the period for interest

$

4,036

$

5,785

Cash paid during the period for income taxes

$

42,212

$

65,708

Property, plant and equipment acquired under capital lease obligation

$

1,438

$

1,955

 

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 historically used financial statements that did not include 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.

As a result of frequent acquisitions of varying scale and size, it is difficult to predict the expenses related to acquisitions and amortization of the acquired intangibles on acquisitions. Therefore, with effect from July 1, 2012, for its internal management reporting and budgeting purposes, management considers using financial statements that do not include expenses related to all acquisitions and amortization of acquired intangibles on 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.

Besides this, for its internal management reporting and budgeting purposes, management uses financial statements that do not include 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 new 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, 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 related to all acquisitions and amortization of acquired intangibles on acquisitions, expenses related to change of shareholding and capital restructuring (excluding expenses related to the  new 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, allows investors to make additional comparisons between Genpact's operating results to 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 future stock-based compensation expense under ASC 718, the amortization of intangibles associated with further acquisitions, acquisition related expenses, expenses related to change of shareholding and capital restructuring (excluding expenses related to new 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 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 nine months ended September 30, 2011 and 2012:

 

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

Three months ended September 30,

Nine months ended September 30,

2011

2012

2011

2012

Income from operations as per GAAP

$

56,748

$

69,952

$

154,316

$

193,550

Add: Amortization of acquired intangible assets resulting from Formation Accounting

2,327

1,621

7,275

5,253

Add: Amortization of acquired intangible assets relating to  acquisitions

2,867

2,694

4,916

7,948

Add: Stock based compensation

9,153

5,613

17,712

22,856

Add: Acquisition related expenses

-

298

5,619

298

Add: Other income (expense)

1,452

(6,365)

3,012

(5,733)

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

-

7,318

-

9,805

Less: Equity-method investment activity, net

(38)

50

(306)

24

Less: Net income attributable to noncontrolling interest

(1,657)

(1,436)

(5,171)

(4,851)

Adjusted income from operations

$

70,852

$

79,745

$

187,373

$

229,150

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

Three months ended September 30,

Nine months ended September 30,

2011

2012

2011

2012

Net income as per GAAP

$

48,046

$

25,175

$

123,174

$

124,815

Add: Amortization of acquired intangible assets resulting from Formation Accounting

2,327

1,621

7,275

5,253

Add: Amortization of acquired intangible assets relating to  acquisitions

2,867

2,694

4,916

7,948

Add: Stock based compensation

9,153

5,613

17,712

22,856

Add: Acquisition related expenses

-

298

5,619

298

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

-

7,318

-

9,805

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

(540)

(357)

(1,838)

(1,190)

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

(975)

(893)

(1,670)

(2,679)

Less: Tax impact on stock based compensation

(2,583)

(1,971)

(5,057)

(7,004)

Less: Tax impact on acquisition related expenses

-

(75)

(1,394)

(75)

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

-

-

-

(182)

Adjusted net income

$

58,295

$

41,723

$

148,737

$

162,145

Adjusted diluted earnings per share

$

0.26

$

0.18

$

0.66

$

0.71

 

SOURCE Genpact Limited



RELATED LINKS

http://www.genpact.com