2014

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, Nov. 6, 2013 /PRNewswire/ -- 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.

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

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

 

SOURCE Genpact Limited



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