GENPACT LIMITED Key Financial Results - Third Quarter 2014
-- Revenues were $588.1 million, up 9.9% from $534.9 million in the third
quarter of 2013. Revenues from Global Clients were up 12.9%, and
business process outsourcing (BPO) revenues from Global Clients were up
15.8%. Excluding the revenues from the Pharmalink acquisition completed
in the second quarter, total revenues were up 7.8% and revenues from
Global Clients were up 10.1%.
-- Income from operations was $72.9 million, compared to $86.0 million in
the third quarter of 2013.
-- Adjusted income from operations was $88.5 million, compared to $95.0
million in the third quarter of 2013.
-- Margins from adjusted income from operations were 15.0%, compared to
17.8% in the third quarter of 2013.
-- Net income attributable to Genpact Limited shareholders was $46.7
million, compared to $70.3 million in the third quarter of 2013.
-- Diluted earnings per common share were $0.21, compared to $0.30 in the
third quarter of 2013.
-- Adjusted diluted earnings per share were $0.26, compared to $0.33 in the
third quarter of 2013.
N.V. 'Tiger' Tyagarajan, Genpact's president and CEO said, "We had a strong third quarter, with Global Client revenues resuming double-digit growth. We continued the disciplined execution of our strategy by focusing our resources and investments in our chosen verticals, geographies and service lines. We are ahead of our planned investments in client-facing teams and domain-led capability builds. We have also improved productivity in our client-facing teams, which is reflected in bookings momentum and improved win rates."
Revenues from Global Clients represented approximately 80% of Genpact's total revenues, or
In the 12 months ending
76.0% of Genpact's revenues for the quarter came from BPO services, up from 75.1% in the third quarter of 2013. Revenues from IT services were 24.0% of total revenues for the quarter, compared to 24.9% in the third quarter of 2013.
Genpact generated
As of
Year-to-Date Results
-- Revenues were $1.678 billion, up 6.6% from $1.574 billion for the nine
months ended September 30, 2013.
-- Income from operations was $223.2 million, compared to $237.9 million in
the nine months ended September 30, 2013.
-- Adjusted income from operations was $262.4 million, compared to $267.0
million for the nine months ended September 30, 2013.
-- Margins from adjusted income from operations were 15.6%, compared to
17.0% for the nine months ended September 30, 2013.
-- Net income attributable to Genpact Limited shareholders was $146.3
million, compared to $180.9 million for the nine months ended September
30, 2013.
-- Diluted earnings per common share were $0.65, compared to $0.77 for the
nine months ended September 30, 2013.
-- Adjusted diluted earnings per share were $0.77, compared to $0.88 for
the nine months ended September 30, 2013.
Genpact's employee attrition rate for the nine months ended
2014 Outlook
Tyagarajan continued, "Our growth strategy is beginning to generate results and we now expect 2014 revenues to be at the high end of the previously announced range of
Conference Call to Discuss Financial Results
Genpact management will host an hour-long conference call beginning at
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 (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 foster growth 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 (SEP(SM)) proprietary framework integrates effective technology and data-driven insight into the fabric of enterprise processes to help our clients be more competitive. Our hundreds of long-term clients include more than one-fourth of the Fortune Global 500. We have rapidly grown to over 67,500 people in 25 countries with key management and corporate offices in
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, 2013
As of
September 30, 2014
Assets
Current assets
Cash and cash equivalents
$
571,276
$
399,199
Accounts receivable, net
505,117
533,793
Short term deposits
--
25,000
Deferred tax assets
60,638
44,382
Prepaid expenses and other current assets
139,113
203,684
Total current assets
$
1,276,144
$
1,206,058
Property, plant and equipment, net
173,204
176,173
Deferred tax assets
89,305
61,933
Investment in equity affiliates
384
471
Intangible assets, net
99,116
114,925
Goodwill
953,849
1,055,978
Other assets
97,365
123,846
Total assets
$
2,689,367
$
2,739,384
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
September 30, 2014
Liabilities and equity
Current liabilities
Short-term borrowings
$
--
$
165,000
Current portion of long-term debt
4,263
4,281
Current portion of capital lease obligations
1,405
1,540
Accounts payable
18,412
17,215
Income taxes payable
15,007
56,339
Deferred tax liabilities
614
586
Accrued expenses and other current liabilities
421,992
426,532
Total current liabilities
$
461,693
$
671,493
Long-term debt, less current portion
653,601
650,383
Capital lease obligations, less current portion
2,657
2,844
Deferred tax liabilities
4,464
4,832
Other liabilities
242,884
161,301
Total liabilities
$
1,365,299
$
1,490,853
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 216,580,092 issued and outstanding as of December 31, 2013 and September 30, 2014, respectively
2,310
2,162
Additional paid-in capital
1,268,344
1,286,886
Retained earnings
511,699
352,954
Accumulated other comprehensive income (loss)
(459,614)
(393,471)
Genpact Limited shareholders' equity
$
1,322,739
$
1,248,531
Noncontrolling interest
1,329
--
Total equity
$
1,324,068
$
1,248,531
Total liabilities and equity
$
2,689,367
$
2,739,384
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,
2013
2014
2013
2014
Net revenues
Net revenues from services
$
534,886
$
588,107
$
1,573,538
$
1,677,908
Cost of revenue
Services
329,289
354,475
973,729
1,018,889
Gross profit
$
205,597
$
233,632
$
599,809
$
659,019
Operating expenses:
Selling, general and administrative expenses
117,005
153,148
348,632
418,361
Amortization of acquired intangible assets
5,867
7,989
17,603
20,617
Other operating (income) expense, net
(3,232)
(372)
(4,320)
(3,124)
Income from operations
$
85,957
$
72,867
$
237,894
$
223,165
Foreign exchange (gains) losses, net
(10,817)
4,671
(24,619)
12,093
Other income (expense), net
(3,454)
(6,439)
(19,104)
(19,477)
Income before equity-method investment activity, net and income tax expense
$
93,320
$
61,757
$
243,409
$
191,595
Equity-method investment activity, net
(32)
(33)
(139)
(87)
Income before income tax expense
$
93,352
$
61,790
$
243,548
$
191,682
Income tax expense
21,921
15,124
58,403
45,263
Net Income
$
71,431
$
46,666
$
185,145
$
146,419
Net income attributable to noncontrolling interest
1,169
13
4,270
169
Net income attributable to Genpact Limited shareholders
$
70,262
$
46,653
$
180,875
$
146,250
Net income available to Genpact Limited common shareholders
$
70,262
$
46,653
$
180,875
$
146,250
Earnings per common share attributable to Genpact Limited common shareholders
Basic
$
0.31
$
0.22
$
0.79
$
0.66
Diluted
$
0.30
$
0.21
$
0.77
$
0.65
Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders
Basic
230,057,508
216,472,908
228,840,746
222,036,262
Diluted
236,336,924
220,535,530
235,095,660
226,440,350
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine months ended September 30,
2013
2014
Operating activities
Net income attributable to Genpact Limited shareholders
$
180,875
$
146,250
Net income attributable to noncontrolling interest
4,270
169
Net income
$
185,145
$
146,419
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization
40,270
37,784
Amortization of debt issue costs (including loss on extinguishment of debt)
5,215
2,425
Amortization of acquired intangible assets
17,603
20,617
Reserve for doubtful receivables
8,919
2,322
Unrealized (gain) loss on revaluation of foreign currency asset/liability
(5,646)
4,873
Equity-method investment activity, net
(139)
(87)
Stock-based compensation expense
21,931
20,153
Deferred income taxes
4,194
(6,583)
Others, net
5,872
1,133
Change in operating assets and liabilities:
Increase in accounts receivable
(30,613)
(24,328)
Increase in other assets
(35,014)
(65,973)
Decrease in accounts payable
(797)
(5,563)
Increase (Decrease) in other liabilities
(20,826)
5,125
Increase in income taxes payable
37,103
40,486
Net cash provided by operating activities
$
233,217
$
178,803
Investing activities
Purchase of property, plant and equipment
(37,061)
(48,192)
Proceeds from sale of property, plant and equipment
2,996
550
Short term deposits placed
(55,259)
(25,000)
Redemption of short term deposits
51,955
--
Payment for business acquisitions, net of cash acquired
(49,235)
(123,701)
Proceeds from divestiture of business, net of cash divested
(1,049)
--
Net cash used for investing activities
$
(87,653)
$
(196,343)
Financing activities
Repayment of capital lease obligations
(1,284)
(1,525)
Proceeds from long-term debt
121,410
--
Repayment of long-term debt
(121,410)
(5,062)
Proceeds from Short-term borrowings
35,000
195,000
Repayment of Short-term borrowings
(115,000)
(30,000)
Proceeds from issuance of common shares under stock-based compensation plans
35,389
11,866
Payment for net settlement of stock based awards
(7,599)
(15,174)
Payment of earn-out and deferred consideration
(3,868)
(1,088)
Cost incurred in relation to debt amendment and refinancing
(8,104)
--
Distribution to noncontrolling interest
(4,614)
(1,487)
Expenses related to stock purchase
--
(2,543)
Stock purchased and retired
--
(302,625)
Net cash used for financing activities
$
(70,080)
$
(152,638)
Effect of exchange rate changes
(53,214)
(1,899)
Net increase (decrease) in cash and cash equivalents
75,484
(170,178)
Cash and cash equivalents at the beginning of the period
459,228
571,276
Cash and cash equivalents at the end of the period
$
481,498
$
399,199
Supplementary information
Cash paid during the period for interest
$
25,484
$
20,152
Cash paid during the period for income taxes
$
52,805
$
64,176
Property, plant and equipment acquired under capital lease obligation
$
1,933
$
1,840
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
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 and nine months ended
Reconciliation of Adjusted Income from Operations
(Unaudited)
(In thousands)
Three months ended September 30,
Nine months ended September 30,
2013
2014
2013
2014
Income from operations per GAAP
$
85,957
$
72,867
$
237,894
$
223,165
Add: Amortization of acquired intangible assets resulting from acquisitions and Formation Accounting
4,568
6,386
13,637
15,886
Add: Acquisition related expenses
--
--
--
1,977
Add: Stock-based compensation
5,312
8,274
21,931
20,153
Add: Other income
184
950
1,163
1,336
Add/Less: Provision (created) reversed for loss on Divestitures
141
--
(3,520)
--
Add: Gain on Equity-method investment activity, net
32
33
139
87
Less: Net income attributable to noncontrolling interest
(1,169)
(13)
(4,270)
(169)
Adjusted income from operations
$
95,025
$
88,497
$
266,974
$
262,435
Reconciliation of Adjusted Net Income
(Unaudited)
(In thousands, except per share data)
Three months ended September 30,
Nine months ended September 30,
2013
2014
2013
2014
Net income per GAAP
$
70,262
$
46,653
$
180,875
$
146,250
Add: Amortization of acquired intangible assets resulting from acquisitions and Formation Accounting
4,568
6,386
13,637
15,886
Add: Acquisition related expenses
--
--
--
1,977
Add: Stock-based compensation
5,312
8,274
21,931
20,153
Less: Tax impact on amortization of acquired intangibles resulting from acquisitions and Formation Accounting
(1,433)
(2,050)
(4,288)
(5,157)
Less: Tax Impact on acquisition related expenses
--
--
--
(53)
Less: Tax Impact on stock-based compensation
(1,458)
(2,150)
(5,753)
(5,206)
Adjusted net income
$
77,251
$
57,113
$
206,402
$
173,850
Adjusted diluted earnings per share
$
0.33
$
0.26
$
0.88
$
0.77
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SOURCE Genpact Limited
