EX-99.1 2 d766600dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Genpact Reports Results for the Second Quarter of 2014

Revenues of $561.6 Million, Up 5.0%

Adjusted Income from Operations of $87.6 Million

Cash Flow from Operations of $78.8 Million

NEW YORK, July 31, 2014 — Genpact Limited (NYSE: G), a global leader in designing, transforming and running business processes and operations, today announced financial results for the second quarter ended June 30, 2014.

Key Financial Results – Second Quarter 2014

 

    Revenues were $561.6 million, up 5.0% from $534.8 million in the second quarter of 2013. Revenues from Global Clients were up 6.8%, and business process outsourcing (BPO) revenues from Global Clients were up 8.7%.

 

    Income from operations was $73.1 million compared to $78.0 million in the second quarter of 2013.

 

    Adjusted income from operations was $87.6 million, compared to $89.2 million in the second quarter of 2013.

 

    Adjusted income from operations margin was 15.6%, compared to 16.7% in the second quarter of 2013.

 

    Net income attributable to Genpact Limited shareholders was $49.0 million compared to $63.9 million in the second quarter of 2013.

 

    Diluted earnings per common share were $0.22, compared to $0.27 in the second quarter of 2013.

 

    Adjusted diluted earnings per share were $0.27, compared to $0.32 in the second quarter of 2013.

N.V. ‘Tiger’ Tyagarajan, Genpact’s president and CEO said, “Genpact delivered solid results in the second quarter of 2014. Our revenue growth and adjusted operating income and net income levels are all tracking in line with our expectations. We are being disciplined in executing our strategy, with a particular emphasis on investments in our chosen verticals, geographies and service lines. Our increased focus has resulted in signing two large deals this past quarter in our chosen areas. Additionally, in line with our capital allocation objectives, we purchased $303 million of our shares during the quarter, at $17.50 per share.”

Revenues from Global Clients grew 6.8% over the second quarter of 2013. BPO revenues from Global Clients grew by 8.7%, led by growth in the consumer packaged goods, life sciences, insurance and capital markets verticals. Revenues from Global Clients represented approximately 78.7% of Genpact’s total revenues, or $441.8 million, with the remaining 21.3% of revenues, or $119.8 million, coming from GE. GE revenues decreased 1.2% from the second quarter of 2013, adjusted for dispositions by GE of businesses that Genpact continues to serve as Global Clients.

In the 12 months ending June 30, 2014, Genpact grew client relationships with revenues over $5 million to 85 from 81 as of June 30, 2013. This includes client relationships with more than $15 million in annual revenue increasing from 26 to 27, and client relationships with more than $25 million in annual revenue increasing from 12 to 14.


75.6% of Genpact’s revenues for the quarter came from BPO services, up from 75.1% in the second quarter of 2013. Revenues from IT services were 24.4% of total revenues for the quarter, compared to 24.9% in the second quarter of 2013.

Genpact generated $78.8 million of cash from operations in the quarter, up from $76.1 million in the second quarter of 2013. Genpact had approximately $376.8 million in cash and cash equivalents as of June 30, 2014.

As of June 30, 2014, Genpact had approximately 66,900 employees worldwide, up from approximately 60,200 as of June 30, 2013. Genpact’s employee attrition rate for the quarter was approximately 26%, measured from the first day of employment, down from 27% for the same period in 2013. Annualized revenue per employee for the quarter was $35,600, compared to $36,700 for the three months ended June 30, 2013.

Year-to-Date Results

 

    Revenues were $1.090 billion, up 4.9% from $1.039 billion for the six months ended June 30, 2013.

 

    Income from operations was $150.3 million, compared to $151.9 million in the six months ended June 30, 2013.

 

    Adjusted income from operations was $173.9 million, up from $171.9 million for the six months ended June 30, 2013.

 

    Adjusted income from operations margin was 16.0%, compared to 16.6% for the six months ended June 30, 2013.

 

    Net income attributable to Genpact Limited shareholders was $99.6 million, compared to $110.6 million for the six months ended June 30, 2013.

 

    Diluted earnings per common share were $0.43, compared to $0.47 for the six months ended June 30, 2013.

 

    Adjusted diluted earnings per share were $0.51, compared to $0.55 for the six months ended June 30, 2013.

Genpact’s employee attrition rate for the six months ended June 30, 2014 was 24%, measured from the first day of employment, down from 25% for the same period in 2013. Annualized revenue per employee for the six months ended June 30, 2014 was $34,900, compared to $35,600 for the six months ended June 30, 2013.

2014 Outlook

Tyagarajan continued, “In the second quarter, we closed our announced acquisition in the life sciences regulatory affairs space. Including revenues from that business, we now expect 2014 revenues of $2.24 to $2.28 billion. Our expectation for adjusted operating income margin continues to be a range of 15.0 – 15.5%. I am excited about the investments we have made and continue to make in our client facing teams, which are beginning to translate into a new level of transformative discussions with existing and prospective clients. We are well positioned to meet our objective of investing at least 6% of our revenues in sales and marketing for the full year.”

Conference Call to Discuss Financial Results

Genpact management will host an hour-long conference call beginning at 4:30 p.m. ET on July 31, 2014 to discuss the company’s performance for the second quarter of 2014. To participate, callers can dial +1 (877) 703-6108 from within the U.S. or +1 (857) 244-7307 from any other country. Thereafter, callers will be prompted to enter the participant code, 33057174.

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 designing, 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 – 66,000+ employees in 25 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 16 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 (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 June 30,    
2014
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 571,276       $ 376,802   

Accounts receivable, net

     504,714         531,093   

Accounts receivable from related party, net

     403         24   

Deferred tax assets

     60,638         44,118   

Prepaid expenses and other current assets

     139,113         189,018   
  

 

 

    

 

 

 

Total current assets

   $ 1,276,144       $ 1,141,055   

Property, plant and equipment, net

     173,204         176,282   

Deferred tax assets

     89,305         65,866   

Investment in equity affiliates

     384         450   

Intangible assets, net

     99,116         122,395   

Goodwill

     953,849         1,072,070   

Other assets

     97,365         110,062   
  

 

 

    

 

 

 

Total assets

   $ 2,689,367       $ 2,688,180   
  

 

 

    

 

 

 


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 June 30,    
2014
 

Liabilities and equity

    

Current liabilities

    

Short-term borrowings

   $      $ 175,000   

Current portion of long-term debt

     4,263        4,275   

Current portion of capital lease obligations

     1,405        1,575   

Accounts payable

     18,412        17,490   

Income taxes payable

     15,007        35,148   

Deferred tax liabilities

     614        616   

Accrued expenses and other current liabilities

     421,992        406,143   
  

 

 

   

 

 

 

Total current liabilities

   $ 461,693      $ 640,247   

Long-term debt, less current portion

     653,601        651,451   

Capital lease obligations, less current portion

     2,657        2,993   

Deferred tax liabilities

     4,464        5,431   

Other liabilities

     242,884        182,253   
  

 

 

   

 

 

 

Total liabilities

   $ 1,365,299      $ 1,482,375   
  

 

 

   

 

 

 

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 216,314,379 issued and outstanding as of December 31, 2013 and June 30, 2014, respectively

     2,310        2,160   

Additional paid-in capital

     1,268,344        1,275,127   

Retained earnings

     511,699        306,301   

Accumulated other comprehensive income (loss)

     (459,614     (377,887
  

 

 

   

 

 

 

Genpact Limited shareholders’ equity

   $ 1,322,739      $ 1,205,701   

Noncontrolling interest

     1,329        104   
  

 

 

   

 

 

 

Total equity

   $ 1,324,068      $ 1,205,805   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 2,689,367      $ 2,688,180   
  

 

 

   

 

 

 


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

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

 

     Three months ended June 30,     Six months ended June 30,  
     2013     2014     2013     2014  

Net revenues

        

Net revenues from services – others

   $ 534,614      $ 561,540      $ 1,038,271      $ 1,089,659   

Net revenues from services – related party

     190        71        381        142   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenues

     534,804        561,611        1,038,652        1,089,801   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue

        

Services

     332,714        340,125        644,440        664,414   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     332,714        340,125        644,440        664,414   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

   $ 202,090      $ 221,486      $ 394,212      $ 425,387   

Operating expenses:

        

Selling, general and administrative expenses

     118,403        142,715        231,627        265,213   

Amortization of acquired intangible assets

     6,185        6,610        11,736        12,628   

Other operating (income) expense, net

     (486     (890     (1,088     (2,752
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

   $ 77,988      $ 73,051      $ 151,937      $ 150,298   

Foreign exchange (gains) losses, net

     (17,184     3,829        (13,802     7,422   

Other income (expense), net

     (10,539     (6,505     (15,650     (13,038
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 84,633      $ 62,717      $ 150,089      $ 129,838   

Equity-method investment activity, net

     (63     (34     (107     (54
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

   $ 84,696      $ 62,751      $ 150,196      $ 129,892   

Income tax expense

     19,234        13,851        36,482        30,139   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 65,462      $ 48,900      $ 113,714      $ 99,753   

Net income attributable to noncontrolling interest

     1,586        (84     3,101        156   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Genpact Limited shareholders

   $ 63,876      $ 48,984      $ 110,613      $ 99,597   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to Genpact Limited common shareholders

   $ 63,876      $ 48,984      $ 110,613      $ 99,597   

Earnings per common share attributable to Genpact Limited common shareholders

        

Basic

   $ 0.28      $ 0.23      $ 0.48      $ 0.44   

Diluted

   $ 0.27      $ 0.22      $ 0.47      $ 0.43   

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

        

Basic

     229,237,503        217,541,960        228,232,364        224,817,938   

Diluted

     235,329,303        221,509,867        234,475,027        229,392,759   


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Six months ended June 30,  
     2013     2014  

Operating activities

    

Net income attributable to Genpact Limited shareholders

   $ 110,613      $ 99,597   

Net income attributable to noncontrolling interest

     3,101        156   
  

 

 

   

 

 

 

Net income

   $ 113,714      $ 99,753   
  

 

 

   

 

 

 

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

    

Depreciation and amortization

     27,318        24,994   

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

     4,392        1,610   

Amortization of acquired intangible assets

     11,736        12,628   

Reserve for doubtful receivables

     5,070        1,719   

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

     (14,067     (807

Equity-method investment activity, net

     (107     (54

Stock-based compensation expense

     16,619        11,879   

Deferred income taxes

     1,589        (322

Others, net

     6,087        895   

Change in operating assets and liabilities:

    

Increase in accounts receivable

     (25,492     (15,110

Increase in other assets

     (25,385     (37,870

Decrease in accounts payable

     (3,060     (5,222

Decrease in accrued expenses and other current liabilities

     (33,809     (7,788

Increase in income taxes payable

     18,826        18,939   

Increase (Decrease) in other liabilities

     4,244        (12,178
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 107,675      $ 93,066   
  

 

 

   

 

 

 

Investing activities

    

Purchase of property, plant and equipment

     (25,635     (29,657

Proceeds from sale of property, plant and equipment

     283        129   

Short term deposits placed

     (36,769       

Redemption of short term deposits

     36,769          

Payment for business acquisitions, net of cash acquired

     (46,134     (123,701

Proceeds from divestiture of business, net of cash divested

     (1,049       
  

 

 

   

 

 

 

Net cash used for investing activities

   $ (72,535   $ (153,229
  

 

 

   

 

 

 

Financing activities

    

Repayment of capital lease obligations

     (874     (896

Proceeds from long-term debt

     121,410          

Repayment of long-term debt

     (119,723     (3,375

Proceeds from Short-term borrowings

     35,000        195,000   

Repayment of Short-term borrowings

            (20,000

Proceeds from issuance of common shares under stock based compensation plans

     27,478        8,329   

Payment for net settlement of stock-based awards

     (7,521     (14,345

Payment of earn-out consideration

     (2,993       

Cost incurred in relation to debt amendment and refinancing

     (7,908       

Distribution to noncontrolling interest

     (3,242     (1,371

Expenses related to stock purchase

            (2,543

Stock purchased and retired

            (302,625
  

 

 

   

 

 

 

Net cash provided by (used for) financing activities

   $ 41,627      $ (141,826
  

 

 

   

 

 

 

Effect of exchange rate changes

     (16,868     7,515   

Net increase (decrease) in cash and cash equivalents

     76,767        (201,989

Cash and cash equivalents at the beginning of the period

     459,228        571,276   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 519,127      $ 376,802   
  

 

 

   

 

 

 

Supplementary information

    

Cash paid during the period for interest

   $ 18,474      $ 12,828   

Cash paid during the period for income taxes

   $ 38,909      $ 37,176   

Property, plant and equipment acquired under capital lease obligation

   $ 1,385      $ 1,305   


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. Acquisition related expenses are excluded in the period in which an acquisition is consummated.

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 and six months ended June 30, 2013 and 2014:

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 

     Three months ended
June 30,
     Six months ended
June 30,
 
     2013     2014      2013     2014  

Income from operations per GAAP

   $ 77,988      $ 73,051       $ 151,937      $ 150,298   

Add: Amortization of acquired intangible assets resulting from Formation Accounting and acquisitions

     4,854        5,010         9,070        9,501   

Add: Acquisition related expenses

            1,977                1,977   

Add: Stock based compensation

     10,093        6,906         16,619        11,879   

Add: Other income (expense)

     709        517         979        386   

Less: Provision for loss on Divestitures

     (2,945             (3,661       

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

     63        34         107        54   

Less/Add: Net (income) loss attributable to noncontrolling interest

     (1,586     84         (3,101     (156
  

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted income from operations

   $ 89,176      $ 87,579       $ 171,950      $ 173,939   
  

 

 

   

 

 

    

 

 

   

 

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2013     2014     2013     2014  

Net income per GAAP

   $ 63,876      $ 48,984      $ 110,613      $ 99,597   

Add: Amortization of acquired intangible assets resulting from Formation Accounting and acquisitions

     4,854        5,010        9,070        9,501   

Add: Acquisition related expenses

            1,977               1,977   

Add: Stock based compensation

     10,093        6,906        16,619        11,879   

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

     (1,552     (1,631     (2,855     (3,107

Less: Tax impact on acquisition related expenses

            (53            (53

Less: Tax impact on stock based compensation

     (2,605     (1,751     (4,295     (3,056
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 74,666      $ 59,442      $ 129,152      $ 116,738   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.32      $ 0.27      $ 0.55      $ 0.51