EX-99.1 2 d721073dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Genpact Reports Results for the First Quarter of 2014

Revenues of $528.2 Million, Up 4.8%

Net Income of $50.6 Million, Up 8.3%

Adjusted Income from Operations of $86.4 Million, Up 4.3%

NEW YORK, May 5, 2014 — Genpact Limited (NYSE: G), a global leader in transforming and running business processes and operations, today announced financial results for the first quarter ended March 31, 2014.

Key Financial Results – First Quarter 2014

 

    Revenues were $528.2 million, up 4.8% from $503.8 million in the first quarter of 2013. Revenues from Global Clients were up 7.1%, and business process management revenues from Global Clients were up 6.2%.

 

    Income from operations was $77.2 million, up 4.5% from $73.9 million in the first quarter of 2013.

 

    Net income attributable to Genpact Limited shareholders was $50.6 million, up 8.3% from $46.7 million in the first quarter of 2013. Net income margin for the first quarter of 2014 was 9.6%, up from 9.3% in the first quarter of 2013.

 

    Diluted earnings per common share were $0.21, up from $0.20 per share in the first quarter of 2013.

 

    Adjusted income from operations was $86.4 million, up 4.3% from $82.8 million in the first quarter of 2013.

 

    Adjusted income from operations margin was 16.4%, unchanged from the first quarter of 2013.

 

    Adjusted diluted earnings per share were $0.24, up from $0.23 in the first quarter of 2013.

N.V. ‘Tiger’ Tyagarajan, Genpact’s president and CEO, said, “In the first quarter of 2014, Genpact delivered growth in revenues, adjusted income from operations, net income and earnings per share. The year is off to a good start as we execute on our growth strategy. During the quarter, we closed a large, new transformative engagement with an existing client that also adds capabilities in a targeted vertical, consumer packaged goods. More recently, we agreed to acquire Pharmalink Consulting, which will add new domain expertise in the regulatory affairs space of life sciences, and announced a strategic partnership with Oliver Wyman, a global leader in risk consulting, to build and take to market new end-to-end risk solutions for the increasingly regulated financial services vertical.”

Revenues from Global Clients grew 7.1% over the first quarter of 2013. Business process management revenues from Global Clients grew by 6.2%, led by growth in the capital markets, consumer packaged goods, life sciences and healthcare verticals. Revenues from Global Clients represented approximately 79.1% of Genpact’s total revenues, or $418.0 million, with the remaining 20.9% of revenues, or $110.2 million, coming from GE. GE revenues declined 3.1% from the first quarter of 2013, adjusted for dispositions by GE of businesses that Genpact continues to serve as Global Clients.

In the 12 months ending March 31, 2014, 81 client relationships each contributed more than $5 million in annual revenue, up from 75 such relationships as of March 31, 2013. This includes client relationships with more than $15 million in annual revenue increasing from 24 to 26, and client relationships with more than $25 million in annual revenue increasing from 12 to 13.

75.3% of Genpact’s revenues for the quarter came from business process management services, compared to 76.2% in the first quarter of 2013. Revenues from IT services accounted for 24.7% of total revenues for the quarter, up from 23.8% in the first quarter of 2013.


Genpact generated approximately $14.2 million of cash from operations in the quarter, compared to $31.5 million in the first quarter of 2013. Genpact had approximately $567.3 million in cash and cash equivalents as of March 31, 2014. Subsequent to the quarter, on April 8, 2014, we purchased $303 million in value of our common shares, or approximately 17.3 million shares, at a price of $17.50 per share.

As of March 31, 2014, Genpact had approximately 64,900 employees worldwide, an increase from approximately 60,200 as of March 31, 2013. Genpact’s employee attrition rate for the quarter was approximately 22%, measured from the first day of employment, down from 24% for the same period in 2013. Annualized revenue per employee for the quarter was $33,800, compared to $34,500 for the quarter ended March 31, 2013.

2014 Outlook

Tyagarajan added, “2014 is a pivotal year for Genpact as we position ourselves for accelerated long-term growth. Our pipeline continues to be healthy, with good inflows of larger, transformative deals, as we continue to invest in client-facing teams and domain experts. We continue to expect 2014 revenues of $2.22 to $2.26 billion and adjusted income from operations margin in a range of 15.0 – 15.5%. Our guidance excludes our recent agreement to acquire Pharmalink Consulting, which we expect to close by mid-year.”

Conference Call to Discuss Financial Results

Genpact management will host an hour-long conference call beginning at 4:30 p.m. ET on May 5, 2014 to discuss the company’s performance for the quarter ended March 31, 2014. To participate, callers can dial +1 (866) 318-8619 from within the U.S. or +1 (617) 399-5138 from any other country. Thereafter, callers will be prompted to enter the participant code, 72990759.

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 – 64,000+ 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,
2013
     As of March 31,
2014
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 571,276       $ 567,266   

Accounts receivable, net

     504,714         513,145   

Accounts receivable from related party, net

     403         71   

Deferred tax assets

     60,638         52,564   

Prepaid expenses and other current assets

     139,113         170,434   
  

 

 

    

 

 

 

Total current assets

   $ 1,276,144       $ 1,303,480   

Property, plant and equipment, net

     173,204         170,308   

Deferred tax assets

     89,305         76,048   

Investment in equity affiliates

     384         418   

Intangible assets, net

     99,116         97,326   

Goodwill

     953,849         964,088   

Other assets

     97,365         91,898   
  

 

 

    

 

 

 

Total assets

   $ 2,689,367       $ 2,703,566   
  

 

 

    

 

 

 


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 March 31,
2014
 

Liabilities and equity

    

Current liabilities

    

Current portion of long-term debt

   $ 4,263      $ 4,269   

Current portion of capital lease obligations

     1,405        1,475   

Accounts payable

     18,412        18,447   

Income taxes payable

     15,007        22,267   

Deferred tax liabilities

     614        561   

Accrued expenses and other current liabilities

     421,992        378,416   
  

 

 

   

 

 

 

Total current liabilities

   $ 461,693      $ 425,435   

Long-term debt, less current portion

     653,601        652,523   

Capital lease obligations, less current portion

     2,657        2,752   

Deferred tax liabilities

     4,464        4,421   

Other liabilities

     242,884        189,343   
  

 

 

   

 

 

 

Total liabilities

   $ 1,365,299      $ 1,274,474   
  

 

 

   

 

 

 

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 233,347,651 issued and outstanding as of December 31, 2013 and March 31, 2014, respectively

     2,310        2,331   

Additional paid-in capital

     1,268,344        1,266,733   

Retained earnings

     511,699        562,312   

Accumulated other comprehensive income (loss)

     (459,614     (402,949
  

 

 

   

 

 

 

Genpact Limited shareholders’ equity

   $ 1,322,739      $ 1,428,427   

Noncontrolling interest

     1,329        665   
  

 

 

   

 

 

 

Total equity

   $ 1,324,068      $ 1,429,092   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 2,689,367      $ 2,703,566   
  

 

 

   

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

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

 

     Three months ended March 31,  
     2013     2014  

Net revenues

    

Net revenues from services - others

   $ 503,657      $ 528,119   

Net revenues from services - related party

     191        71   
  

 

 

   

 

 

 

Total net revenues

     503,848        528,190   
  

 

 

   

 

 

 

Cost of revenue

    

Services

     311,726        324,289   
  

 

 

   

 

 

 

Total cost of revenue

     311,726        324,289   
  

 

 

   

 

 

 

Gross profit

   $ 192,122      $ 203,901   

Operating expenses:

    

Selling, general and administrative expenses

     113,224        122,498   

Amortization of acquired intangible assets

     5,551        6,018   

Other operating (income) expense, net

     (602     (1,862
  

 

 

   

 

 

 

Income from operations

   $ 73,949      $ 77,247   

Foreign exchange (gains) losses, net

     3,382        3,593   

Other income (expense), net

     (5,111     (6,533
  

 

 

   

 

 

 

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

   $ 65,456      $ 67,121   

Equity-method investment activity, net

     (44     (20
  

 

 

   

 

 

 

Income before income tax expense

   $ 65,500      $ 67,141   

Income tax expense

     17,248        16,288   
  

 

 

   

 

 

 

Net Income

   $ 48,252      $ 50,853   

Net income attributable to noncontrolling interest

     1,515        240   
  

 

 

   

 

 

 

Net income attributable to Genpact Limited shareholders

   $ 46,737      $ 50,613   
  

 

 

   

 

 

 

Net income available to Genpact Limited common shareholders

   $ 46,737      $ 50,613   

Earnings per common share attributable to Genpact Limited common shareholders

    

Basic

   $ 0.21      $ 0.22   

Diluted

   $ 0.20      $ 0.21   
  

 

 

   

 

 

 

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

    

Basic

     227,227,226        232,093,917   

Diluted

     233,620,751        237,275,651   


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Three months ended March 31,  
     2013     2014  

Operating activities

    

Net income attributable to Genpact Limited shareholders

   $ 46,737      $ 50,613   

Net income attributable to noncontrolling interest

     1,515        240   
  

 

 

   

 

 

 

Net income

   $ 48,252      $ 50,853   
  

 

 

   

 

 

 

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

    

Depreciation and amortization

     13,579        12,341   

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

     596        801   

Amortization of acquired intangible assets

     5,551        6,018   

Reserve for doubtful receivables

     3,450        197   

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

     (733     3,295   

Equity-method investment activity, net

     (44     (20

Stock-based compensation expense

     6,526        4,973   

Deferred income taxes

     254        123   

Others, net

     52        741   

Change in operating assets and liabilities:

    

Increase in accounts receivable

     (8,582     (7,901

Increase in other assets

     (7,301     (16,968

Increase (Decrease) in accounts payable

     (1,782     124   

Decrease in accrued expenses and other current liabilities

     (42,953     (34,779

Increase in income taxes payable

     3,426        7,194   

Increase (Decrease) in other liabilities

     11,257        (12,751
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 31,548      $ 14,241   
  

 

 

   

 

 

 

Investing activities

    

Purchase of property, plant and equipment

     (14,623     (14,530

Proceeds from sale of property, plant and equipment

     135        103   

Short term deposits placed

     (18,675     —     

Redemption of short term deposits

     18,675        —     

Payment for business acquisitions, net of cash acquired

     (46,134     —     

Proceeds from divestiture of business, net of cash divested

     (1,049     —     
  

 

 

   

 

 

 

Net cash used for investing activities

   $ (61,671   $ (14,427
  

 

 

   

 

 

 

Financing activities

    

Repayment of capital lease obligations

     (461     (502

Repayment of long-term debt

     (1,687     (1,687

Proceeds from Short-term borrowings

     35,000        —     

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

     16,060        6,061   

Payment for net settlement of stock-based awards

     (3,136     (8,099

Payment of earn-out consideration

     (85     —     

Distribution to noncontrolling interest

     (1,816     (899
  

 

 

   

 

 

 

Net cash provided by (used for) financing activities

   $ 43,875      $ (5,126
  

 

 

   

 

 

 

Effect of exchange rate changes

     1,593        1,302   

Net increase (decrease) in cash and cash equivalents

     13,752        (5,312

Cash and cash equivalents at the beginning of the period

     459,228        571,276   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 474,573      $ 567,266   
  

 

 

   

 

 

 

Supplementary information

    

Cash paid during the period for interest

   $ 8,016      $ 6,143   

Cash paid during the period for income taxes

   $ 25,363      $ 21,907   

Property, plant and equipment acquired under capital lease obligation

   $ 787      $ 534   


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.

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 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 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 ended March 31, 2013 and 2014:

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 

     Three months ended March 31,  
     2013     2014  

Income from operations per GAAP

   $ 73,949      $ 77,247   

Add: Amortization of acquired intangible assets resulting from Formation Accounting

     804        507   

Add: Amortization of acquired intangible assets relating to acquisitions

     3,410        3,984   

Add: Stock-based compensation

     6,526        4,973   

Add: Other income (expense)

     (447     (131

Add: Gain (Loss) on Equity-method investment activity, net

     44        20   

Less: Net income attributable to noncontrolling interest

     (1,515     (240
  

 

 

   

 

 

 

Adjusted income from operations

   $ 82,771      $ 86,360   
  

 

 

   

 

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 

     Three months ended March 31,  
     2013     2014  

Net income per GAAP

   $ 46,737      $ 50,613   

Add: Amortization of acquired intangible assets resulting from Formation Accounting

     804        507   

Add: Amortization of acquired intangible assets relating to acquisitions

     3,410        3,984   

Add: Stock-based compensation

     6,526        4,973   

Less: Tax impact on amortization of acquired intangibles resulting from Formation Accounting

     (141     (101

Less: Tax impact on amortization of acquired intangibles relating to acquisitions

     (1,162     (1,375

Less: Tax Impact on stock-based compensation

     (1,690     (1,305
  

 

 

   

 

 

 

Adjusted net income

   $ 54,484      $ 57,296   
  

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.23      $ 0.24