EX-99.1 2 g-ex991_14.htm EX-99.1 g-ex991_14.htm

 

Exhibit 99.1

 

Genpact Reports Full Year and Fourth Quarter 2016 Results

FY ’16 Revenues of $2.57 Billion, Up 4% (~6% on a constant currency basis)1

FY ’16 Global Client BPO Revenues Up 11% (~13% on a constant currency basis)

Diluted EPS of $1.28, Up 17%; Adjusted Diluted EPS2 of $1.46, Up 16%

NEW YORK, February 10, 2017 — Genpact Limited (NYSE: G), a global leader in digitally-powered business process management and services, today announced financial results for the fourth quarter and full year ended December 31, 2016.

“We are pleased with our full year 2016 results, as we delivered strong Global Client BPO growth, expanded our adjusted operating margin and significantly grew our adjusted earnings per share,” said N.V. “Tiger” Tyagarajan, Genpact’s president and CEO. “With that said, we are seeing heightened levels of volatility and uncertainty in the global environment. Now more than ever, enterprises need to be nimble and react quickly to compete in their respective markets.  We believe our digital transformational services uniquely position us to drive value for clients.  These consulting, digital and analytics services now account for approximately 20% of our Global Client revenues and collectively are growing significantly above our Global Client revenue growth rate.”  

Key Financial Results – Full Year 2016

Total revenue was $2.57 billion, up 4% year over year (up ~6% on a constant currency basis).  

Income from operations was $340.8 million, up 2% year over year, with a corresponding margin of 13.3%.  Adjusted income from operations was $397.4 million, up 5% year over year, with a corresponding margin of 15.5%.3

Diluted earnings per share were $1.28, up 17% year over year, and adjusted diluted earnings per share were $1.46, up 16% year over year.

New bookings4 were approximately $2.65 billion, up 3% from $2.59 billion in 2015.

Genpact repurchased approximately 13.9 million of its common shares during 2016 for a total of $345 million at an average price per share of $24.76.

Key Financial Results – Fourth Quarter 2016

Total revenue was $682 million, up 5% year over year (up ~7% on a constant currency basis).

Income from operations was $98.1 million, up 17.6% year over year, with a corresponding margin of 14.4%. Adjusted income from operations was $113.6 million, up 19% year over year, with a corresponding margin of 16.7%.

 

1 

Revenue growth on a constant currency basis is a non-GAAP measure and 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.

2 

Adjusted diluted earnings per share is a non-GAAP measure. A reconciliation of GAAP diluted earnings per share and adjusted diluted earnings per share is attached to this release.

3 

Adjusted income from operations and adjusted income from operations margin are non-GAAP measures. A reconciliation of GAAP income from operations and adjusted income from operations and a reconciliation of GAAP income from operations margin and adjusted income from operations margin are attached to this release.

4 

New bookings represents the total contract value of new contracts and certain renewals, extensions and changes to existing contracts.  Regular renewals of contracts with no change in scope are not counted as new bookings.

 


 

Diluted earnings per share were $0.38, up 27% year over year, and adjusted diluted earnings per share were $0.43, up 24% year over year.

Genpact repurchased approximately 4.3 million of its common shares during the quarter for a total of $103 million at an average price per share of $23.73.

Revenue Details Full Year 2016

Revenue from Global Clients was $2.14 billion, up 7% year over year (up ~9% on a constant currency basis), representing approximately 83% of total revenues.5

Revenue from GE was $428 million, down 7% year over year, representing approximately 17% of total revenues.6

Total BPO revenue was $2.07 billion, up 7% year over year, representing approximately 81% of total revenues.

Global Client BPO revenue was $1.75 billion, up 11% year over year (up ~13% on a constant currency basis).

GE BPO revenue was $326 million, down 8% year-over-year.

Total IT revenue was $500 million, down 5% year over year, representing approximately 19% of total revenues.

Global Client IT revenue was $398 million, down 6% year over year.

GE IT revenue was $102 million, down 3% year over year.

Revenue Details Fourth Quarter 2016

Revenue from Global Clients was $576 million, up 9% year over year (up ~11% on a constant currency basis), representing approximately 85% of total revenues.

Revenue from GE was $106 million, down 10% year over year, representing approximately 15% of total revenues.

Total BPO revenue was $548 million, up 8% year over year, representing approximately 80% of total revenues.

Global Client BPO revenue was $469 million, up 12% year over year (up ~14% on a constant currency basis).

GE BPO revenue was $79 million, down 10% year over year.

Total IT revenue was $134 million, down 4% year over year, representing approximately 20% of total revenues.

Global Client IT revenue was $107 million, down 3% year over year.

GE IT revenue was $27 million, down 9% year over year.

Cash Flow from Operations

Cash from operations was $346 million in the full year 2016, up 6% from the full year 2015, and was $123 million in the fourth quarter of 2016, up 66% from $74 million in the fourth quarter of 2015.

 

5 

During the twelve months ended December 31, 2016, GE divested certain businesses that Genpact continues to serve.  We reclassify such revenue as Global Client revenue after the end of the fiscal year rather than at the end of the fiscal quarter in which the divestitures occurred.  For the year ended December 31, 2016, Global Client revenue would have been $2.21 billion if we had reclassified such revenues on a quarterly basis.

6 

During the twelve months ended December 31, 2016, GE divested certain businesses that Genpact continues to serve.  We reclassify such revenue as Global Client revenue after the end of the fiscal year rather than at the end of the fiscal quarter in which the divestitures occurred.  For the year ended December 31, 2016, GE revenue would have been $358 million if we had reclassified such revenues on a quarterly basis.

 


 

2017 Outlook7

Genpact expects:

Total revenue for 2017 to be $2.61 to $2.68 billion (including an assumed adverse foreign exchange impact of approximately $33 million, almost all of which is reflected in Global Client revenue), which represents a growth range of 2% to 4%, or 3% to 6% on a constant currency basis;

Global Client revenue growth to be in the range of 4% to 7%, or 5% to 8% on a constant currency basis;

Adjusted income from operations margin8 of approximately 15.7%; and

Adjusted diluted EPS9 of $1.53 to $1.57.

 

 

7 

During the twelve months ended December 31, 2016, GE divested certain businesses that Genpact continues to serve.  Attached to this release is a schedule depicting the reclassification of revenues attributable to divested GE businesses from GE to Global Client revenue as if the divestitures had occurred on January 1, 2016 as well as the reclassification of revenues from our 2016 acquisitions of Endeavour Software Technologies Private Limited and PNMSoft Ltd. as BPO rather than IT revenue.  The outlook for total 2017 revenue growth was determined using the reclassified numbers set forth on the schedule.  

8 

Adjusted income from operations margin is a non-GAAP measure.   A reconciliation of the outlook for GAAP income from operations margin and adjusted income from operations margin is attached to this release.

9 

Adjusted diluted earnings per share is a non-GAAP measure.  A reconciliation of the outlook for GAAP diluted earnings per share and adjusted diluted earnings per share is attached to this release.   

 

 


 

Conference Call to Discuss Financial Results

Genpact’s management will host an hour-long conference call beginning at 8:00 a.m. ET on February 10, 2017 to discuss the company’s performance for the fourth quarter and full year 2016. To participate, callers can dial +1 (877) 654-0173 from within the U.S. or +1 (281) 973-6289 from any other country. Thereafter, callers will be prompted to enter the participant code, 49151521.

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 are a global leader in digitally-powered business process management and services. We architect the Lean DigitalSM enterprise through our patented Smart Enterprise Processes (SEPSM) framework that reimagines our clients’ operating models end-to-end, including the middle and back offices.  This creates Intelligent OperationsSM that we help design, transform, and run. The impact on our clients is a high return on transformation investments through growth, efficiency, and business agility. For two decades, first as a General Electric division and later as an independent company, we have been passionately serving our clients. Today, we generate impact for a few hundred strategic clients, including approximately one-fifth of the Fortune Global 500, and have grown to over 75,000 people in 25 countries, with key offices in New York City. The resulting business process and industry domain expertise and experience running complex operations are a unique heritage and focus that help us drive the best choices across technology, analytics, and organizational design. For additional 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 outsourcing and information technology services sectors, 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, 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, foreign currency fluctuations, 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 undertakes no obligation to update any forward-looking statements that may be made from time to time by or on behalf of Genpact.

Contacts

 

Investors

  

Roger Sachs, CFA

 

  

+1 (203) 808-6725

 

  

roger.sachs@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,

 

 

As of December 31,

 

 

 

2015

 

 

2016

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

450,907

 

 

$

422,623

 

Accounts receivable, net

 

 

590,137

 

 

 

615,265

 

Prepaid expenses and other current assets

 

 

154,025

 

 

 

189,148

 

Total current assets

 

$

1,195,069

 

 

$

1,227,036

 

Property, plant and equipment, net

 

 

175,396

 

 

 

200,115

 

Deferred tax assets

 

 

99,395

 

 

 

70,143

 

Investment in equity affiliates

 

 

6,677

 

 

 

4,800

 

Intangible assets, net

 

 

98,601

 

 

 

72,049

 

Goodwill

 

 

1,038,346

 

 

 

1,069,408

 

Other assets

 

 

180,005

 

 

 

242,328

 

Total assets

 

$

2,793,489

 

 

$

2,885,879

 

Liabilities and equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

21,500

 

 

$

160,000

 

Current portion of long-term debt

 

 

39,134

 

 

 

39,181

 

Accounts payable

 

 

10,086

 

 

 

9,767

 

Income taxes payable

 

 

24,122

 

 

 

24,159

 

Accrued expenses and other current liabilities

 

 

499,638

 

 

 

498,247

 

Total current liabilities

 

$

594,480

 

 

$

731,354

 

Long-term debt, less current portion

 

 

737,332

 

 

 

698,152

 

Deferred tax liabilities

 

 

2,093

 

 

 

2,415

 

Other liabilities

 

 

155,228

 

 

 

162,790

 

Total liabilities

 

$

1,489,133

 

 

$

1,594,711

 

Redeemable non-controlling interest

 

 

 

 

 

4,520

 

Shareholders’ equity

 

 

 

 

 

 

 

 

Preferred shares, $0.01 par value, 250,000,000 authorized, none issued

 

 

 

 

 

 

Common shares, $0.01 par value, 500,000,000 authorized, 211,472,312 and 198,794,052 issued and outstanding as of December 31, 2015 and December 31, 2016, respectively

 

 

2,111

 

 

 

1,984

 

Additional paid-in capital

 

 

1,342,022

 

 

 

1,384,468

 

Retained earnings

 

 

411,508

 

 

 

358,121

 

Accumulated other comprehensive income (loss)

 

 

(451,285

)

 

 

(457,925

)

Total equity

 

$

1,304,356

 

 

$

1,286,648

 

Total liabilities, redeemable non-controlling interest and equity

 

$

2,793,489

 

 

$

2,885,879

 

 

 


 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

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

 

 

 

Three months ended December 31,

 

 

 

2014

 

 

2015

 

 

2016

 

Net revenues

 

$

601,530

 

 

$

646,528

 

 

$

681,747

 

Cost of revenue

 

 

359,199

 

 

 

393,937

 

 

 

405,672

 

Gross profit

 

$

242,331

 

 

$

252,591

 

 

$

276,075

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

167,285

 

 

 

165,413

 

 

 

170,714

 

Amortization of acquired intangible assets

 

 

7,926

 

 

 

6,638

 

 

 

7,419

 

Other operating (income) expense, net

 

 

(3,746

)

 

 

(2,906

)

 

 

(149

)

Income from operations

 

$

70,866

 

 

$

83,446

 

 

$

98,091

 

Foreign exchange gains (losses), net

 

 

(270

)

 

 

1,171

 

 

 

(526

)

Interest income (expense), net

 

 

(8,582

)

 

 

(2,023

)

 

 

(5,012

)

Other income (expense), net

 

 

776

 

 

 

2,092

 

 

 

2,948

 

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

 

$

62,790

 

 

$

84,686

 

 

$

95,501

 

Gain (loss) on equity-method investment activity, net

 

 

(4,882

)

 

 

(2,805

)

 

 

(1,362

)

Income before income tax expense

 

$

57,908

 

 

$

81,881

 

 

$

94,139

 

Income tax expense

 

 

12,156

 

 

 

17,468

 

 

 

17,262

 

Net income

 

$

45,752

 

 

$

64,413

 

 

$

76,877

 

Net loss (income) attributable to non-controlling interest/ redeemable non-controlling interest

 

 

 

 

 

 

 

 

232

 

Net income attributable to Genpact Limited shareholders

 

$

45,752

 

 

$

64,413

 

 

$

77,109

 

Net income available to Genpact Limited common shareholders

 

 

45,752

 

 

 

64,413

 

 

 

77,109

 

Earnings per common share attributable to Genpact Limited common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

0.20

 

 

 

0.30

 

 

 

0.38

 

Diluted

 

 

0.21

 

 

 

0.30

 

 

 

0.38

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

217,279,606

 

 

 

212,697,001

 

 

 

200,341,922

 

Diluted

 

 

221,353,612

 

 

 

215,675,065

 

 

 

203,431,310

 

 

 


 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

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

 

 

 

Year ended December 31,

 

 

 

2014

 

 

2015

 

 

2016

 

Net revenues

 

$

2,279,438

 

 

$

2,461,044

 

 

$

2,570,756

 

Cost of revenue

 

 

1,378,088

 

 

 

1,493,547

 

 

 

1,554,707

 

Gross profit

 

$

901,350

 

 

$

967,497

 

 

$

1,016,049

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

585,646

 

 

 

608,114

 

 

 

653,029

 

Amortization of acquired intangible assets

 

 

28,543

 

 

 

28,513

 

 

 

27,183

 

Other operating (income) expense, net

 

 

(6,870

)

 

 

(3,322

)

 

 

(4,940

)

Income from operations

 

$

294,031

 

 

$

334,192

 

 

$

340,777

 

Foreign exchange gains (losses), net

 

 

(12,363

)

 

 

5,269

 

 

 

2,630

 

Interest income (expense), net

 

 

(29,395

)

 

 

(31,267

)

 

 

(16,184

)

Other income (expense), net

 

 

2,112

 

 

 

4,360

 

 

 

10,120

 

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

 

$

254,385

 

 

$

312,554

 

 

$

337,343

 

Gain (loss) on equity-method investment activity, net

 

 

(4,795

)

 

 

(10,800

)

 

 

(7,698

)

Income before income tax expense

 

$

249,590

 

 

$

301,754

 

 

$

329,645

 

Income tax expense

 

 

57,419

 

 

 

61,937

 

 

 

62,098

 

Net income

 

$

192,171

 

 

$

239,817

 

 

$

267,547

 

Net loss (income) attributable to non-controlling interest/ redeemable non-controlling interest

 

 

(169

)

 

 

 

 

 

2,137

 

Net income attributable to Genpact Limited shareholders

 

$

192,002

 

 

$

239,817

 

 

$

269,684

 

Net income available to Genpact Limited common shareholders

 

$

192,002

 

 

$

239,817

 

 

$

269,684

 

Earnings per common share attributable to Genpact Limited common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.87

 

 

$

1.11

 

 

$

1.30

 

Diluted

 

$

0.85

 

 

$

1.09

 

 

$

1.28

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

220,847,098

 

 

 

216,606,542

 

 

 

206,861,536

 

Diluted

 

 

225,168,665

 

 

 

219,145,044

 

 

 

210,126,023

 

 

 

 


 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Year ended December 31,

 

 

 

2014

 

 

2015

 

 

2016

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Genpact Limited shareholders

 

$

192,002

 

 

$

239,817

 

 

$

269,684

 

Net  income (loss) attributable to non-controlling interest/redeemable non-controlling interest

 

 

169

 

 

 

 

 

 

(2,137

)

Net income

 

$

192,171

 

 

$

239,817

 

 

$

267,547

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

51,064

 

 

 

54,286

 

 

 

54,553

 

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

 

 

3,240

 

 

 

13,546

 

 

 

1,531

 

Amortization of acquired intangible assets

 

 

28,543

 

 

 

28,513

 

 

 

27,183

 

Intangible assets write-down

 

 

 

 

 

10,714

 

 

 

11,195

 

Reserve for doubtful receivables

 

 

3,107

 

 

 

2,449

 

 

 

7,282

 

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

 

 

9,419

 

 

 

(4,999

)

 

 

1,717

 

Equity-method investment activity, net

 

 

4,795

 

 

 

10,800

 

 

 

7,698

 

Excess tax benefit on stock-based compensation

 

 

 

 

 

(6,560

)

 

 

 

Stock-based compensation expense

 

 

28,065

 

 

 

24,976

 

 

 

25,113

 

Deferred income taxes

 

 

(12,252

)

 

 

(18,713

)

 

 

30,454

 

Gain on divestiture

 

 

 

 

 

 

 

 

(5,214

)

Others, net

 

 

1,291

 

 

 

(238

)

 

 

(41

)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Increase in accounts receivable

 

 

(24,088

)

 

 

(78,923

)

 

 

(48,612

)

Increase in prepaid expenses, other current assets and other assets

 

 

(31,657

)

 

 

(32,602

)

 

 

(62,852

)

Decrease in accounts payable

 

 

(7,268

)

 

 

(3,988

)

 

 

(463

)

Increase in accrued expenses, other current liabilities and other  liabilities

 

 

27,500

 

 

 

69,606

 

 

 

27,977

 

Increase (decrease) in income taxes payable

 

 

(2,092

)

 

 

18,757

 

 

 

704

 

Net cash provided by operating activities

 

$

271,838

 

 

$

327,441

 

 

$

345,772

 

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(62,577

)

 

 

(62,173

)

 

 

(88,772

)

Proceeds from sale of property, plant and equipment

 

 

564

 

 

 

1,486

 

 

 

547

 

Investment in equity affiliates

 

 

 

 

 

(18,423

)

 

 

(9,620

)

Short term deposits placed

 

 

(25,000

)

 

 

 

 

 

 

Redemption of short-term deposits

 

 

25,000

 

 

 

 

 

 

 

Payment for business acquisitions, net of cash acquired

 

 

(130,809

)

 

 

(21,363

)

 

 

(45,162

)

Proceeds from divestiture of business, net of cash divested

 

 

 

 

 

 

 

 

17,242

 

Net cash used for investing activities

 

$

(192,822

)

 

$

(100,473

)

 

$

(125,765

)

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Repayment of capital lease obligations

 

 

(2,095

)

 

 

(2,035

)

 

 

(1,793

)

Payment of debt issuance and refinancing costs

 

 

 

 

 

(6,584

)

 

 

 

Proceeds from long-term debt

 

 

 

 

 

800,000

 

 

 

 

Repayment of long-term debt

 

 

(6,750

)

 

 

(684,875

)

 

 

(40,000

)

Proceeds from short-term borrowings

 

 

195,000

 

 

 

1,451,500

 

 

 

200,000

 

Repayment of short-term borrowings

 

 

(60,000

)

 

 

(1,565,000

)

 

 

(61,500

)

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

 

 

30,144

 

 

 

16,088

 

 

 

18,228

 

Payment for net settlement of stock-based awards

 

 

(25,975

)

 

 

(7,194

)

 

 

(769

)

Payment of earn-out/deferred consideration

 

 

(1,088

)

 

 

(230

)

 

 

(1,485

)

Distribution to non-controlling interest

 

 

(1,487

)

 

 

 

 

 

 

Payment for stock purchased and retired

 

 

(302,625

)

 

 

(226,917

)

 

 

(345,200

)

Payment for expenses related to stock purchase

 

 

(2,543

)

 

 

(197

)

 

 

(279

)

Excess tax benefit on stock-based compensation

 

 

 

 

 

6,560

 

 

 

 

Net cash used for financing activities

 

$

(177,419

)

 

$

(218,884

)

 

$

(232,798

)

Effect of exchange rate changes

 

 

(11,085

)

 

 

(18,965

)

 

 

(15,493

)

Net increase (decrease) in cash and cash equivalents

 

 

(98,403

)

 

 

8,084

 

 

 

(12,791

)

Cash and cash equivalents at the beginning of the period

 

 

571,276

 

 

 

461,788

 

 

 

450,907

 

Cash and cash equivalents at the end of the period

 

$

461,788

 

 

$

450,907

 

 

$

422,623

 

Supplementary information

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

27,175

 

 

$

20,950

 

 

$

17,860

 

Cash paid during the period for income taxes

 

$

83,803

 

 

$

72,102

 

 

$

46,731

 

Property, plant and equipment acquired under capital lease obligations

 

$

2,176

 

 

$

1,656

 

 

$

2,206

 

 

 


 

Reconciliation of 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 attributable to shareholders of Genpact Limited, or adjusted income from operations;

 

Adjusted income from operations margin;

 

Adjusted diluted earnings per share attributable to shareholders of Genpact Limited, or adjusted diluted earnings per share; and

 

Net revenues 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 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 frequent 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, beginning in April 2016, Genpact’s management also excludes 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. Additionally, in its calculations of such non-GAAP financial measures, Genpact’s management has adjusted certain gains or losses attributable to equity-method investments because management views these interests as part of its ongoing operations and has excluded certain gains or losses attributable to redeemable non-controlling interest because management does not view these interests as part of its operations. 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 revenues may be viewed without the impact of foreign currency exchange rate fluctuations, thereby providing additional period-to-period comparisons of our true business performance. Revenues on a constant currency basis are 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 revenues 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 and adjusted income from operations margin calculated in accordance with GAAP is that this non-GAAP financial measure excludes certain recurring costs, namely stock-based compensation and amortization of acquired intangibles. 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 adjusted financial measures from GAAP for the year and three months ended December 31, 2015 and 2016:

Reconciliation of Adjusted Income from Operations and Adjusted Income from Operations Margin

(Unaudited)

(In thousands)

 

 

 

Year ended December 31,

 

 

Three months ended December 31,

 

 

 

2015

 

 

2016

 

 

2015

 

 

2016

 

Income from operations

 

$

334,192

 

 

$

340,777

 

 

$

83,446

 

 

$

98,091

 

Add: Stock-based compensation

 

 

24,976

 

 

 

25,113

 

 

 

7,467

 

 

 

6,769

 

Add: Amortization and impairment of acquired intangible assets10

 

 

23,671

 

 

 

25,023

 

 

 

5,424

 

 

 

6,816

 

Add: Acquisition-related expenses

 

 

798

 

 

 

1,956

 

 

 

 

 

 

120

 

Add: Other income, net

 

 

4,360

 

 

 

10,120

 

 

 

2,092

 

 

 

2,948

 

Less: Loss on equity-method investment activity, net

 

 

(10,800

)

 

 

(7,698

)

 

 

(2,805

)

 

 

(1,362

)

Add: Net loss (income) attributable to non-controlling interest/redeemable non-controlling interest

 

 

 

 

 

2,137

 

 

 

 

 

 

232

 

Adjusted income from operations

 

$

377,197

 

 

$

397,428

 

 

$

95,624

 

 

$

113,614

 

Adjusted income from operations margin

 

 

15.3

%

 

 

15.5

%

 

 

14.8

%

 

 

16.7

%

 

Reconciliation of Adjusted Diluted EPS11

(Unaudited)

(Per share data)

 

 

 

Year ended December 31,

 

 

Three months ended December 31,

 

 

 

2015

 

 

2016

 

 

2015

 

 

2016

 

Diluted EPS

 

$

1.09

 

 

$

1.28

 

 

$

0.30

 

 

$

0.38

 

Add: Stock-based compensation

 

 

0.11

 

 

 

0.12

 

 

 

0.03

 

 

 

0.03

 

Add: Amortization and impairment of acquired intangible assets7

 

 

0.11

 

 

 

0.12

 

 

 

0.03

 

 

 

0.03

 

Add: Acquisition-related expenses

 

 

 

 

 

0.01

 

 

 

 

 

 

 

Less: Tax impact on stock-based compensation

 

 

(0.03

)

 

 

(0.03

)

 

 

(0.01

)

 

 

(0.01

)

Less: Tax impact on amortization and impairment of acquired intangibles

 

 

(0.03

)

 

 

(0.04

)

 

 

(0.01

)

 

 

(0.01

)

Less: Tax impact on acquisition-related expenses

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted diluted EPS

 

$

1.26

 

 

$

1.46

 

 

$

0.34

 

 

$

0.43

 

 

 

10 

See “Reconciliation of Non-GAAP Financial Measures to GAAP Measures” above for a description of the amortization expenses included in this item.

11 

Due to rounding, the numbers presented in this table may not add up precisely to the totals provided.

 


 

The following tables show the reconciliation of forward-looking adjusted financial measures from GAAP for the year ending December 31, 2017:

Reconciliation of Outlook for Adjusted Income from Operations Margin

(Unaudited)

 

 

 

Year ending
December 31, 2017

Income from operations margin

 

 

    13.5%

Add: Estimated stock-based compensation

 

1.2%

Add: Estimated amortization and impairment of acquired intangible assets

 

0.9%

Add: Estimated acquisition-related expenses

 

Add: Estimated other income (expense), net

 

0.2%

Less: Estimated loss on equity-method investment activity, net

 

   (0.1)%

Adjusted income from operations margin

 

 

    15.7%

 

Reconciliation of Outlook for Adjusted Diluted EPS12

(Unaudited)

(Per share data)

 

 

Year ending December 31, 2017

 

Lower

 

Upper

Diluted EPS

$

1.32

 

$

1.36

Add: Estimated stock-based compensation

0.16

 

0.16

Add: Estimated amortization and impairment of acquired intangible assets

0.13

 

0.13

Add: Estimated acquisition-related expenses

 

Less: Estimated tax impact on stock-based compensation

(0.05)

 

(0.05)

Less: Estimated tax impact on amortization and impairment of acquired intangibles

(0.04)

 

(0.04)

Less: Estimated tax impact on acquisition-related expenses

 

Adjusted diluted EPS

$

1.53

 

$

1.57

 

 

 

 

12 

Due to rounding, the numbers presented in this table may not add up precisely to the totals provided.

 


 

Set forth below is a supplemental schedule depicting the reclassification of our 2016 revenue:

Unaudited

(In millions)

 

 

 

Quarter Ended March 31, 2016

 

Quarter Ended June 30, 2016

 

Quarter Ended September 30, 2016

 

Quarter Ended December 31, 2016

 

Year ended December 31, 2016

 

 

 

Revenue

 

Reclassified Revenue PNM & Endeavour*

 

Impact of GE Divestitures – Reclassified as of 1/1/2016

 

Reclassified

Revenue

 

Reported

Revenue

 

Reclassified Revenue – PNM & Endeavour*

 

Impact of GE Divestitures –  Reclassified as of 1/1/2016

 

Reclassified

Revenue

 

Revenue

 

Reclassified Revenue – PNM & Endeavour*

 

Impact of GE Divestitures – Reclassified as of 1/1/2016

 

Reclassified

Revenue

 

Reported

Revenue

 

Reclassified Revenue –  PNM & Endeavour*

 

Impact of GE Divestitures –  Reclassified as of 1/1/2016

 

Reclassified

Revenue

 

Revenue

 

Reclassified Revenue – PNM & Endeavour*

 

Impact of GE Divestitures–Reclassified as of 1/1/2016

 

Reclassified

Revenue

 

Total Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Client

 

$

502.3

 

 

 

 

$

24.1

 

$

526.4

 

$

521.4

 

 

 

$

23.6

 

$

545.0

 

$

543.2

 

 

 

 

$

23.9

 

$

567.0

 

$

576.2

 

 

 

 

$

24.3

 

$

600.5

 

$

2,143.1

 

 

 

$

95.8

 

$

2,238.9

 

GE

 

 

107.4

 

 

 

 

 

(24.1

)

 

83.3

 

 

109.1

 

 

 

 

(23.6

)

 

85.5

 

 

105.6

 

 

 

 

 

(23.9

)

 

81.8

 

 

105.5

 

 

 

 

 

(24.3

)

 

81.2

 

 

427.6

 

 

 

 

(95.8

)

 

331.8

 

Total Revenue

 

 

609.7

 

 

 

 

 

 

 

609.7

 

 

630.5

 

 

 

 

 

 

630.5

 

 

648.8

 

 

 

 

 

 

 

648.8

 

 

681.7

 

 

 

 

 

 

 

681.7

 

 

2,570.8

 

 

 

 

 

 

2,570.8

 

Total GC Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GC BPO Revenue

 

 

406.3

 

 

 

 

 

23.8

 

 

430.1

 

 

424.5

 

 

2.4

 

 

23.2

 

 

450.1

 

 

445.1

 

 

4.6

 

 

23.4

 

 

473.1

 

 

469.1

 

 

5.4

 

 

23.6

 

 

498.1

 

 

1,745.1

 

 

12.4

 

 

94.0

 

 

1,851.5

 

GC IT Revenue

 

 

96.0

 

 

 

 

 

0.2

 

 

96.3

 

 

96.9

 

 

(2.4

)

 

0.4

 

 

94.9

 

 

98.1

 

 

(4.6

)

 

0.4

 

 

93.9

 

 

107.1

 

 

(5.4

)

 

0.7

 

 

102.4

 

 

398.1

 

 

(12.4

)

 

1.8

 

 

387.5

 

Total GC Revenue

 

 

502.3

 

 

 

 

 

24.1

 

 

526.4

 

 

521.4

 

 

 

 

23.6

 

 

545.0

 

 

543.2

 

 

 

 

 

23.9

 

 

567.0

 

 

576.2

 

 

 

 

 

24.3

 

 

600.5

 

 

2,143.1

 

 

 

 

95.8

 

 

2,238.9

 

Total GE Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GE BPO Revenue

 

 

82.8

 

 

 

 

 

(23.8

)

 

59.0

 

 

83.5

 

 

 

 

 

(23.2

)

 

60.4

 

 

80.8

 

 

 

 

 

(23.4

)

 

57.4

 

 

78.8

 

 

 

 

 

(23.6

)

 

55.2

 

 

326.0

 

 

 

 

(94.0

)

 

232.0

 

GE IT Revenue

 

 

24.6

 

 

 

 

 

(0.2

)

 

24.3

 

 

25.6

 

 

 

 

 

(0.4

)

 

25.2

 

 

24.8

 

 

 

 

 

(0.4

)

 

24.3

 

 

26.7

 

 

 

 

 

(0.7

)

 

26.0

 

 

101.6

 

 

 

 

(1.8

)

 

99.8

 

Total GE Revenue

 

 

107.4

 

 

 

 

 

(24.1

)

 

83.3

 

 

109.1

 

 

 

 

 

(23.6

)

 

85.5

 

 

105.6

 

 

 

 

 

(23.9

)

 

81.8

 

 

105.5

 

 

 

 

 

(24.3

)

 

81.2

 

 

427.6

 

 

 

 

(95.8

)

 

331.8

 

Total Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total BPO Revenue

 

 

489.1

 

 

 

 

 

 

489.1

 

 

508.1

 

 

2.4

 

 

 

 

510.5

 

 

525.9

 

 

4.6

 

 

 

 

530.5

 

 

548.0

 

 

5.4

 

 

 

 

553.3

 

 

2,071.1

 

 

12.4

 

 

 

 

2,083.4

 

Total IT Revenue

 

 

120.6

 

 

 

 

 

 

120.6

 

 

122.5

 

 

(2.4

)

 

 

 

120.1

 

 

122.9

 

 

(4.6

)

 

 

 

118.3

 

 

133.8

 

 

(5.4

)

 

 

 

128.4

 

 

499.7

 

 

(12.4

)

 

 

 

487.3

 

Total Revenue

 

$

609.7

 

 

 

 

 

$

609.7

 

$

630.5

 

 

 

 

 

$

630.5

 

$

648.8

 

 

 

 

 

$

648.8

 

$

681.7

 

 

 

 

 

$

681.7

 

$

2,570.8

 

 

 

 

 

$

2,570.8

 

*

We reclassified revenue from our 2016 acquisitions of Endeavour Software Technologies Private Limited and PNMSoft Ltd. as BPO rather than IT revenue to better align with the digital business process client solutions derived from these businesses.