Genpact Reports Second Quarter 2022 Results

Total revenue of $1.089 billion, Up 10% (12% on a constant currency basis)^1,2 
Data-Tech-AI services revenue of $489 million, Up 20% (22% on a constant currency basis)^1,2 
Digital Operations services revenue of $601 million, Up 3% (5% on a constant currency basis)¹ 
Diluted EPS of $0.38, Down 28%; Adjusted Diluted EPS³ of $0.70, Up 6%

NEW YORK, Aug. 4, 2022  /PRNewswire/ -- Genpact Limited (NYSE: G), a global professional services firm focused on delivering digital transformation, today announced financial results for the second quarter ended June 30, 2022.

"We are pleased that the momentum we saw coming out of 2021 has continued through the first half of the year.  As we had expected, strong demand for our Data-Tech-AI services was the primary driver of our 12% constant currency year-over-year top line growth for the quarter, while Digital Operations services delivered steady performance," said "Tiger" Tyagarajan, Genpact's president and CEO.  "Our priority accounts grew 17% and represented 65% of total revenue.  In a challenging macro environment, we expanded our adjusted operating income margin 190 basis points sequentially on the back of several strategic actions that align to our long-term plan and build agility for the future."

Key Financial Highlights – Second Quarter 2022

• Total revenue was $1.089 billion, up 10% year-over-year (12% on a constant currency basis).^1,2
• Revenue from Data-Tech-AI services was $489 million, up 20% year-over-year (22% on a constant currency basis),^1,2 representing 45% of total revenue.
• Revenue from Digital Operations services was $601 million, up 3% year-over-year (5% on a constant currency basis),¹ representing 55% of total revenue.
• Net income was $72 million, down 30% year-over-year, with a corresponding margin of 6.6%.
• Income from operations was $110 million, down 20% year-over-year, with a corresponding margin of 10.1%. Adjusted income from operations was $183 million, up 3% year-over-year, with a corresponding margin of 16.9%.^4,5
• Diluted earnings per share was $0.38, down 28% year-over-year, and adjusted diluted earnings per share³ was $0.70, up 6% year-over-year.
• Income from operations and diluted earnings per share include a $39 million restructuring charge related to lease impairment charges and employee severance costs as well as a $7 million loss related to a business designated as held for sale. These items are excluded from adjusted income from operations⁴ and adjusted diluted earnings per share.³
• Cash generated from operations was $102 million, compared to $161 million in the second quarter of 2021.
• Genpact repurchased approximately 1.8 million of its common shares during the quarter for total consideration of approximately $76 million at an average price per share of $42.00.

Full Year 2022 Outlook

Genpact now expects:

• Total revenue in the range of $4.32 billion to $4.37 billion, up 7.5% to 9.0%, or 9.5% to 11.0% on a constant currency basis,¹ compared to the prior full-year outlook in the range of $4.325 billion to $4.4 billion, up 8.0% to 9.0%, or 9.0% to 11.0% on a constant currency basis.¹ This full-year revenue outlook now assumes an additional adverse impact of $21 million from foreign currency (at current exchange rates) compared to the prior outlook and includes expected full-year revenue of approximately $28 million associated with a business designated as held for sale.
• Adjusted income from operations margin⁶ at the high end of the prior outlook of 16.0% to 16.5%.
• Adjusted diluted EPS⁷ in the range of $2.68 to $2.74, compared to the prior outlook in the range of $2.60 to $2.76.

Conference Call to Discuss Financial Results

Genpact's management will host an hour-long conference call beginning at 4:30 p.m. ET on August 4, 2022 to discuss the company's performance for the second quarter ended June 30, 2022.  Those who wish to participate can register here to receive a dial-in number and unique PIN to access the call seamlessly. It is recommended callers join 10 minutes prior to the start of the event (although you may register and dial in at any time during the call).  A live webcast of the call will also be made available on the Genpact Investor Relations website at https://www.genpact.com/investors. For those who cannot join the call live, a replay will be archived on the Genpact website after the end of the call. A transcript of the call will also be made available on the website.

About Genpact

Genpact (NYSE: G) is a global professional services firm that makes business transformation real. Led by our purpose -- the relentless pursuit of a world that works better for people -- we drive digital-led innovation and digitally enabled intelligent operations for our clients. Guided by our experience reinventing and running thousands of processes for hundreds of clients, many of them Global Fortune 500 companies, we drive real-world transformation at scale. We think with design, dream in digital, and solve problems with data and analytics. Combining our expertise in end-to-end operations and our AI-based platform, Genpact Cora, we focus on the details – all 100,000+ of us. From New York to New Delhi, and more than 30 countries in between, we connect every dot, reimagine every process, and reinvent the ways companies work. We know that reimagining each step from start to finish creates better business outcomes. Whatever it is, we'll be there with you – accelerating digital transformation to create bold, lasting results – because transformation happens here.

Safe Harbor

This press release contains certain statements concerning our future growth prospects, including our outlook for 2022, financial results and other 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 the impact of the invasion of Ukraine by Russia and the related sanctions and other measures being implemented or imposed in response thereto, as well as any potential expansion or escalation of the conflict or its economic disruption beyond its current scope, general inflationary pressures and our ability to share increased costs with our clients, wage increases in locations in which we have operations, our ability to attract and retain skilled professionals, our ability to effectively price our services and maintain pricing and employee utilization rates, the impact of the COVID-19 pandemic on our business and on our employees, clients, partners and suppliers, a slowdown in the economies and sectors in which our clients operate, a slowdown in the business process outsourcing or information technology services sectors, our ability to develop and successfully execute our business strategies, 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, changes in tax rates and tax legislation and other laws and regulations, risks and uncertainties regarding fluctuations in our earnings, foreign currency fluctuations, general economic conditions affecting our industry, political, economic or business conditions in countries in which we operate, including the withdrawal of the United Kingdom from the European Union, commonly known as Brexit, 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 and Quarterly Reports on Form 10-Q. 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.

Contacts

Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with GAAP, this press release includes the following non-GAAP financial measures:

• Adjusted income from operations;
• Adjusted income from operations margin;
• Adjusted diluted earnings per share; and
• Revenue growth on a constant currency basis.

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. Accordingly, 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, amortization of related acquired intangibles, and amortization of acquired intangibles recorded at the company's formation in 2004 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 acquisitions of varying scale and size, and the difficulty in predicting expenses relating to acquisitions and the amortization of acquired intangibles thereof, since July 2012 Genpact's management has used 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 those of its competitors. For the same reasons, since April 2016 Genpact's management has excluded the impairment of acquired intangible assets from the financial statements it uses for internal management purposes. Acquisition-related expenses are excluded in the period in which an acquisition is consummated. Genpact's management also uses financial statements that exclude stock-based compensation expense. 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.

During the second quarter of 2022, Genpact (a) initiated restructuring measures and, as a result, recorded a charge related to i) right-of-use lease assets and other assets related to certain abandoned leased office properties and ii) employee severance costs resulting from a focused reduction in Genpact's workforce and (b) approved a plan to divest a business that is no longer deemed strategic.  Given the specialized nature of this business, we anticipate completing a transaction over the next twelve months, and therefore, we have classified the revenues and expenses related to this business as held for sale.  Genpact's management believes that excluding such restructuring charges and the revenues and expenses attributable to the business held for sale in calculating its non-GAAP financial measures provides useful information to both management and investors regarding the Company's financial performance and underlying business trends. Additionally, in its calculations of non-GAAP financial measures, Genpact's management has adjusted foreign exchange gains and losses, interest income and expense and income tax expenses from GAAP net income, and other income and expenses, and certain gains, losses and impairment charges attributable to equity-method investments from GAAP income from operations, because management believes that the Company's results after taking into account these adjustments more accurately reflect the Company's ongoing operations. In its calculations of adjusted diluted earnings per share, Genpact's management adds back adjusted stock-based compensation expense, amortization and impairment of acquired intangible assets, acquisition-related expenses and the related tax impact of such adjustments from GAAP diluted earnings per share. For the purpose of calculating adjusted diluted earnings per share, the combined current and deferred tax effect is determined by multiplying each pre-tax adjustment by the applicable statutory income tax rate.

Genpact's management provides information about revenues on a constant currency basis so that the revenues may be viewed without the impact of foreign currency exchange rate fluctuations compared to prior fiscal periods, thereby facilitating period-to-period comparisons of the Company's true business performance. Revenue growth on a constant currency basis is calculated by restating current-period activity using the prior fiscal period's foreign currency exchange rates adjusted for hedging gains/losses in such period.

Accordingly, Genpact believes that the presentation of adjusted income from operations, adjusted income from operations margin, adjusted diluted earnings per share and revenue growth on a constant currency basis, 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 income from operations margin versus income from operations, income from operations margin, net income and net income margin calculated in accordance with GAAP is that these non-GAAP financial measures exclude certain recurring costs and certain other charges, namely stock-based compensation expense and amortization and impairment of acquired intangible assets. Management compensates for this limitation by providing specific information on the GAAP amounts excluded from adjusted income from operations and adjusted income from operations margin.

The following tables show the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures for the three months and six months ended June 30, 2021 and 2022:

The following tables show the reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP measures for the year ending December 31, 2022:

SOURCE Genpact