8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 7, 2017

GENPACT LIMITED

(Exact name of registrant as specified in its charter)

Bermuda	001-33626	98-0533350
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

Canon's Court, 22 Victoria Street

Hamilton HM 12, Bermuda

(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (441) 295-2244

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐  

Item 2.02 Results of Operations and Financial Condition.

On November 7, 2017, Genpact Limited (the “Company”) issued a press release announcing its financial results for the three months ended September 30, 2017.  The Company is furnishing this Form 8-K pursuant to Item 2.02, “Results of Operations and Financial Condition.” A copy of the press release, attached hereto as Exhibit 99.1, is incorporated herein by reference.

The information in this report (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

The Company is making reference to non-GAAP financial information in the press release and on the conference call.  A reconciliation of the non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits:

Exhibit 99.1 Press release dated November 7, 2017

EXHIBIT INDEX

Exhibit	Description
99.1	Press release dated November 7, 2017

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	GENPACT LIMITED
Date: November 7, 2017	By:	/s/ Heather D. White
	Name:	Heather D. White
	Title:	Senior Vice President

EX-99.1

Exhibit 99.1

Genpact Reports Results for the Third Quarter of 2017

Revenues of $709 Million, Up 9% (~10% on a constant currency basis)¹

Global Client BPO Revenues of $541 Million, Up 14% (~15% on a constant currency basis)²

Diluted EPS of $0.38, Up 15%; Adjusted Diluted EPS³ of $0.46, Up 23%

NEW YORK, November 7, 2017 — Genpact Limited (NYSE: G), a global professional services firm focused on delivering digital transformation, today announced financial results for the third quarter ended September 30, 2017.

“Our strong third quarter Global Client BPO constant currency revenue growth of 15% continued to fuel our momentum for the year and was balanced across most of our chosen industry verticals. Transformation services, comprised of consulting, digital and analytics, grew more than 25% for Global Clients,” said N.V. ‘Tiger’ Tyagarajan, Genpact’s president and CEO. “We are gaining traction in our key service lines as clients are increasingly looking for transformative solutions incorporating deep expertise in domain, process, and digital technologies. The Genpact Cora^TM Automation to AI platform, coupled with the enhanced capabilities from our targeted acquisitions in AI, design thinking, mobility, cloud-based intelligent workflow technologies and deep domain expertise, are all resonating really well in the market.  I am also excited by the positive response to our relaunch of the Genpact brand with the tagline, ‘Transformation happens here.’”   

Key Financial Results – Third Quarter 2017

• Total revenue was $708.8 million, up 9% year-over-year (up ~10% on a constant currency basis).  

• Income from operations was $97.5 million, up 11.9% year-over-year, with a corresponding margin of 13.7%.  Adjusted income from operations was $115.9 million, up 11.3% year-over-year, with a corresponding margin of 16.4%.⁴

• Diluted earnings per share were $0.38, up 15% year-over-year, and adjusted diluted earnings per share were $0.46, up 23% year-over-year. Diluted earnings per share includes a $0.02 foreign currency gain resulting from balance sheet re-measurement.

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  Global Client BPO revenue growth rates have been adjusted to assume that the GE revenue reclassifications we undertook at the end of fiscal 2016 occurred on January 1, 2016.  On an unadjusted basis, Global Client BPO revenue was up 15% (~16% on a constant currency basis). See the information under the heading “Revenue Details – Third Quarter 2017.”

³  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.

⁴  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.

Revenue Details – Third Quarter 2017⁵

• Revenue from Global Clients was $637 million, up 13% year-over-year (up ~14% on a constant currency basis), representing approximately 90% of total revenues. If all 2016 GE revenue reclassifications had occurred on January 1, 2016, revenue from Global Clients would have increased 12% year-over-year (or ~13% on a constant currency basis).

• Revenue from GE was $72 million, down 15% year-over-year, representing approximately 10% of total revenues. If all 2016 GE revenue reclassifications had occurred on January 1, 2016, revenue from GE would have decreased 12% year-over-year.

• Total BPO revenue was $583 million, up 10% year-over-year, representing approximately 82% of total revenues.  

• Global Client BPO revenue was $541 million, up 15% year-over-year (up ~16% on a constant currency basis). If all 2016 GE revenue reclassifications had occurred on January 1, 2016, BPO revenue from Global Clients would have increased 14% year-over-year (or 15% on a constant currency basis).

• GE BPO revenue was $43 million, down 30% year-over-year. If all 2016 GE revenue reclassifications had occurred on January 1, 2016, GE BPO revenue would have decreased 26% year-over-year.

• Total IT revenue was $126 million, up 6% year-over-year, representing approximately 18% of total revenues.

• Global Client IT revenue was $96 million, up 2% year-over-year.

• GE IT revenue was $30 million, up 21% year-over-year.

Cash Flow from Operations

• Cash generated from operations was $148 million in the third quarter of 2017 compared to $150 million in the third quarter of 2016.

2017 Outlook

• Total revenue for the full year 2017 is now expected to be $2.72 to $2.73 billion (including an assumed adverse foreign exchange impact of $15 million, all of which is reflected in Global Client revenue), representing growth of approximately 6%, or 7% on a constant currency basis.

• Global Client revenue is now expected to grow approximately 9%, or 10% on a constant currency basis.

• Adjusted income from operations margin⁶ is expected to be approximately 15.7%.

• Adjusted diluted EPS⁷ is now expectedto be $1.59 to $1.60.

Conference Call to Discuss Financial Results

Genpact’s management will host an hour-long conference call beginning at 4:30 p.m. ET on November 7, 2017 to discuss the company’s performance for the third quarter of 2017. 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 conference ID, 93773556.

A live webcast of the call 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 will be available on the Genpact website after the end of the call. A transcript of the call will also be made available on the website.

⁵  At the end of each fiscal year, we reclassify revenue related to certain divested GE businesses as Global Client revenue as of the dates of divestiture.  Additionally, at the end of 2016, we reclassified revenue from our acquisitions of Endeavour Software Technologies Pvt. Ltd. and PNMSoft Ltd. from IT services to BPO revenue effective as of the date of the acquisitions.  The impact of these reclassifications is reflected in the revenue resultsand growth rates presented under this heading.  In order to provide a consistent view of the trends underlying our business, we are also presenting under this heading revenue results and growth rates adjusted to assume that the 2016 GE reclassifications occurred on January 1, 2016.

⁶  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.

⁷  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.

About Genpact

Genpact (NYSE: G) is a global professional services firm that makes business transformation real. We drive digital-led innovation and digitally-enabled intelligent operations for our clients, guided by our experience running thousands of processes for hundreds of Global Fortune 500 companies. We think with design, dream in digital, and solve problems with data and analytics. We obsess over operations and focus on the details – all 77,000+ of us. From New York to New Delhi and more than 20 countries in between, Genpact has the end-to-end expertise to connect every dot, reimagine every process, and reinvent companies’ ways of working. We know that rethinking each step from start to finish will create better business outcomes. Whatever it is, we’ll be there with you – putting data and digital to work to create bold, lasting results – because transformation happens here.

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 September 30,
	2016			2017
Assets
Current assets
Cash and cash equivalents	$	422,623		$	440,055
Accounts receivable, net		615,265			670,692
Prepaid expenses and other current assets		189,149			243,867
Total current assets	$	1,227,037		$	1,354,614
Property, plant and equipment, net		193,218			205,623
Deferred tax assets		70,143			75,273
Investment in equity affiliates		4,800		833
Intangible assets, net		78,946			138,215
Goodwill		1,069,408			1,315,312
Other assets		242,328			260,021
Total assets	$	2,885,880		$	3,349,891
Liabilities and equity
Current liabilities
Short-term borrowings	$	160,000		$	160,000
Current portion of long-term debt		39,181			39,224
Accounts payable		9,768			16,858
Income taxes payable		24,159			66,328
Accrued expenses and other current liabilities		498,247			540,743
Total current liabilities	$	731,355		$	823,153
Long-term debt, less current portion		698,152			1,016,371
Deferred tax liabilities		2,415			7,210
Other liabilities		162,790			184,965
Total liabilities	$	1,594,712		$	2,031,699
Redeemable non-controlling interest		4,520			3,839
Shareholders’ equity
Preferred shares, $0.01 par value, 250,000,000 authorized, none issued	—			—
Common shares, $0.01 par value, 500,000,000 authorized, 198,794,052 and    193,033,898 issued and outstanding as of December 31, 2016 and September 30,    2017, respectively		1,984			1,926
Additional paid-in capital		1,384,468			1,369,392
Retained earnings		358,121			338,349
Accumulated other comprehensive income (loss)		(457,925	)		(395,314	)
Total equity	$	1,286,648		$	1,314,353
Total liabilities, redeemable non-controlling interest and equity	$	2,885,880		$	3,349,891

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,
	20168			2017			20168			2017
Net revenues	$	648,783		$	708,824		$	1,889,009		$	2,002,516
Cost of revenue		392,432			429,191			1,149,035			1,227,821
Gross profit	$	256,351		$	279,633		$	739,974		$	774,695
Operating expenses:
Selling, general and administrative expenses		156,969			172,095			482,315			500,854
Amortization of acquired intangible assets		7,126			10,151			19,764			25,780
Other operating (income) expense, net		5,132			(64	)		(4,791	)		(8,517	)
Income from operations	$	87,124		$	97,451		$	242,686		$	256,578
Foreign exchange gains (losses), net		(654	)		5,045			3,156			2.045
Interest income (expense), net		(4,901	)		(8,724	)		(11,172	)		(24,067	)
Other income (expense), net	5,791				(4,030	)		7,172			9,011
Income before equity-method investment activity, net and income tax expense	$	87,360		$	89,742		$	241,842		$	243,567
Equity-method investment activity, net		(2,117	)		—			(6,336	)		(4,567	)
Income before income tax expense	$	85,243		$	89,742		$	235,506		$	239,000
Income tax expense		17,055			16,581			44,026			44,297
Net income	$	68,188		$	73,161		$	191,480		$	194,703
Net loss attributable to redeemable non-controlling interest	734				584			1,905		1,326
Net income attributable to Genpact Limited shareholders	$	68,922		$	73,745		$	193,385		$	196,029
Net income available to Genpact Limited common shareholders	$	68,922		$	73,745		$	193,385		$	196,029
Earnings per common share attributable to Genpact Limited common shareholders
Basic	$	0.33		$	0.38		$	0. 93		$	1.01
Diluted	$	0.33		$	0.38		$	0.91		$	0.99
Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders
Basic		206,146,007			192,124,366			209,034,741			194,221,162
Diluted		209,376,683			194,947,699			212,357,594			197,112,014

⁸  Income taxes, net income and basic and diluted net income per common share for the three and nine months ended September 30, 2016 have been restated due to the adoption of ASU No. 2016-09 in 2016 with effect from January 1, 2016.

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Nine months ended September 30,
	20169		2017
Operating activities
Net income attributable to Genpact Limited shareholders	$	193,385	$	196,029
Net loss attributable to redeemable non-controlling interest	(1,905)		(1,326)
Net income	$	191,480	$	194,703
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization	40,366		42,271
Amortization of debt issuance costs	1,150		1,382
Amortization of acquired intangible assets	19,764		25,780
Intangible assets write-down	11,195		—
Reserve for doubtful receivables	7,307		4,871
Unrealized loss (gain) on revaluation of foreign currency asset/liability	1,304		(9,296)
Equity-method investment activity, net	6,336		4,567
Stock-based compensation expense	18,344		22,402
Deferred income taxes	20,729		(4,589)
Gain on divestiture		(5,214)		—
Provision for expected loss on divestiture		—		5,195
Others, net	29		(5,261)
Change in operating assets and liabilities:
Increase in accounts receivable	(33,760)		(30,687)
Increase in prepaid expenses, other current assets and other assets	(64,252)		(56,230)
Decrease in accounts payable	(397)		(462)
Increase/(decrease) in accrued expenses, other current liabilities and other liabilities	(14,797)		27,723
Increase in income taxes payable	36,420		41,324
Net cash provided by operating activities	$	236,004	$	263,693
Investing activities
Purchase of property, plant and equipment and intangibles	(64,441)		(56,460)
Proceeds from sale of property, plant and equipment	334		1,648
Investment in equity affiliates	(7,519)		(496)
Payment for business acquisitions, net of cash acquired	(41,558)		(277,549)
Proceeds from divestiture of business, net of cash divested	17,582		—
Net cash used for investing activities	$	(95,602)	$	(332,857)
Financing activities
Repayment of capital lease obligations	(1,344)		(2,199)
Payment of debt issuance costs	—		(1,481)
Proceeds from long-term debt		—		350,000
Repayment of long-term debt	(30,000)		(30,000)
Proceeds from short-term borrowings	155,000		275,000
Repayment of short-term borrowings	(61,500)		(275,000)
Proceeds from issuance of common shares under stock-based compensation plans	12,808		12,834
Payment for net settlement of stock-based awards	(461)		(10,296)
Payment of earn-out/deferred consideration	(1,406)		(6,219)
Dividend paid		—		(35,096)
Payment for stock purchased and retired	(242,552)		(219,784)
Payment for expenses related to stock purchase	(192)		(16)
Net cash provided by (used for) financing activities	$	(169,647)	$	57,743
Effect of exchange rate changes	(2,570)		28,853
Net increase (decrease) in cash and cash equivalents	(29,245)		(11,421)
Cash and cash equivalents at the beginning of the period	450,907		422,623
Cash and cash equivalents at the end of the period	$	419,092	$	440,055
Supplementary information
Cash paid during the period for interest	$	13,267	$	23,414
Cash paid during the period for income taxes	$	40,294	$	46,935
Property, plant and equipment acquired under capital lease obligations	$	1,667	$	1,944

⁹  Income taxes, net income and cash flows for the nine months ended September 30, 2016 have been restated due to the adoption of ASU No. 2016-09 in 2016 with effect from January 1, 2016.

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, since April 2016 Genpact’s management has excluded the impairment of acquired intangible assets from the financial statements it uses for internal management purposes. Acquisition-related expenses are excluded in the period in which an acquisition is consummated.

Genpact’s management also uses financial statements that exclude stock-based compensation expense. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use when adopting ASC 718 “Compensation-Stock Compensation,” Genpact’s management believes that providing non-GAAP financial measures that exclude such expenses allows investors to make additional comparisons between Genpact’s operating results and those of other companies. Additionally, in its calculations of such non-GAAP financial measures, Genpact’s management has adjusted other income and expenses, certain gains, losses and impairment charges attributable to equity-method investments, and gains or losses attributable to non-controlling interests because management views these interests as part of its ongoing 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 the revenues may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating 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 income from operations margin calculated in accordance with GAAP is that these non-GAAP financial measures exclude 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 three and nine months ended September 30, 2016 and 2017:

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

(Unaudited)

(In thousands)

	Three months ended September 30,						Nine months ended September 30,
	2016			2017			2016			2017
Income from operations	$	87,124		$	97,451		$	242,686		$	256,578
Add: Stock-based compensation		4,828			10,051			18,344			22,402
Add: Amortization of acquired intangible assets		6,519			9,520			18,207			24,077
Add: Acquisition-related expenses	1,334				2,364		1,836				5,755
Add: Other income (expense), net	5,791				(4,030	)		7,172			9,011
Less: Equity-method investment activity, net		(2,117	)		—			(6,336	)		(4,567	)
Add: Net loss attributable to redeemable non-controlling interest	734				584			1,905		1,326
Adjusted income from operations	$	104,213		$	115,940		$	283,814		$	314,582
Adjusted income from operations margin		16.1	%		16.4	%		15.2	%		15.7	%

Reconciliation of Adjusted Diluted EPS¹⁰

(Unaudited)

(Per share data) 

	Three months ended September 30,						Nine months ended September 30,
	2016			2017			2016			2017
Diluted EPS	$	0.33		$	0.38		$	0.91		$	0.99
Add: Stock-based compensation	0.02			0.05			0.09			0.11
Add: Amortization of acquired intangible assets	0.03			0.05			0.09			0.12
Add: Acquisition-related expenses	0.01			0.01			0.01			0.03
Less: Tax impact on stock-based compensation		(0.01	)		(0.02	)		(0.02	)		(0.03	)
Less: Tax impact on amortization of acquired intangibles		(0.01	)		(0.02	)		(0.03	)		(0.04	)
Less: Tax impact on acquisition-related expenses	—			—			—			—
Adjusted diluted EPS	$	0.37		$	0.46		$	1.04		$	1.19

¹⁰  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 Margin¹¹

(Unaudited)

	Year ending December 31, 2017
Income from operations margin		12.9	%
Add: Estimated stock-based compensation		1.2	%
Add: Estimated amortization of acquired intangible assets		1.2	%
Add: Estimated acquisition-related expenses		0.2	%
Add: Estimated other income (expense), net		0.4	%
Less: Estimated equity-method investment activity, net		(0.2	)%
Adjusted income from operations margin		15.7	%

Reconciliation of Outlook for Adjusted Diluted EPS¹¹

(Unaudited)

(Per share data)

	Year ending December 31, 2017
	Lower			Upper
Diluted EPS	$	1.33		$	1.34
Add: Estimated stock-based compensation	0.17			0.17
Add: Estimated amortization of acquired intangible assets	0.17			0.17
Add: Estimated acquisition-related expenses	0.03			0.03
Less: Estimated tax impact on stock-based compensation		(0.05	)		(0.05	)
Less: Estimated tax impact on amortization of acquired intangibles		(0.05	)		(0.05	)
Less: Estimated tax impact on acquisition-related expenses	—			—
Adjusted diluted EPS	$	1.59		$	1.60

¹¹  Due to rounding, the numbers presented in this table may not add up precisely to the totals provided.