Press Release


Genpact Reports Results for the Second Quarter of 2015

Revenues of $609.5 Million, Up 9% (11% on a constant currency basis) Adjusted Income from Operations of $100.6 Million, Up 15%

NEW YORK, Aug. 4, 2015 - Genpact Limited (NYSE: G), a global leader in designing, transforming, and running intelligent business operations, today announced financial results for the second quarter ended June 30, 2015.

Key Financial Results – Second Quarter 2015

  • Total revenue was $609.5 million, up 9% year over year (up 11% on a constant currency basis).
  • Income from operations was $89.4 million, up 22% year over year.
  • Adjusted income from operations was $100.6 million, up 15% year over year, with a margin of 16.5%, compared to $87.6 million with a margin of 15.6% in the second quarter of 2014.
  • Diluted earnings per share were $0.28, up 28% year over year, and adjusted diluted earnings per share were $0.32, up 21% year over year.
  • Genpact repurchased approximately 3.0 million of its common shares for a total of $68.1 million under its $250 million share repurchase program. Year to date, Genpact has repurchased approximately 3.6 million of its common shares for a total of $81.4 million.

"We are very pleased with our second quarter results. Despite significant foreign exchange headwinds, our outlook for full year revenues remains unchanged, driven by solid Global Client growth," said N.V. "Tiger" Tyagarajan, Genpact's president and CEO. "Recent trends in the marketplace are forcing companies to rethink the way they do business, causing them to leverage new business models and be more disruptive in their industries. This provides us with a terrific opportunity to work with clients through their transformation journeys, as our best-in-class process and domain expertise, combined with our ability to leverage cloud-based component technologies and insights from data and analytics, enables us to develop innovative solutions for them."

Revenue Details - Second Quarter 2015

  • Revenue from Global Clients was $495.0 million, up 12% year over year, representing 81% of total revenues.
  • Revenue from GE was $114.5 million, down 4% year over year, representing 19% of total revenues.
  • Total BPO revenue was $481.2 million, up 13% year over year, representing 79% of total revenues.
  • Global Client BPO revenue was $391.0 million, up 18% year over year.
  • GE BPO revenue was $90.3 million, down 3% year over year.
  • Total IT revenue was $128.3 million, down 6% year over year, representing 21% of total revenues.
  • Global Client IT revenue was $104.0 million, down 5% year over year.
  • GE IT revenue was $24.3 million, down 11% year over year.
  • Annualized revenue per employee for the quarter was $36,600, up from $35,600 in the second quarter of 2014.

Cash Flow From Operations

  • Cash from operations was $90.3 million in the second quarter of 2015, up 15% from $78.8 million in the second quarter of 2014.

Client Relationships as of June 30, 2015

  • For the 12-month period ended June 30, 2015, the number of client relationships generating annual revenue over $5 million increased to 102 from 85 as of June 30, 2014. This includes client relationships with more than $15 million in annual revenue increasing to 31 from 27, client relationships with more than $25 million in annual revenue increasing to 17 from 14, and client relationships with more than $50 million in annual revenue increasing to 4 from 3.

Employee Statistics as of June 30, 2015

  • Genpact had approximately 69,800 employees worldwide, up from approximately 66,900 as of June 30, 2014.
  • Genpact's employee attrition rate for the quarter was approximately 29%, measured from the first day of employment, compared to 26% for the same period in 2014.

New $1.15 Billion Five-Year Credit Facility

  • On June 30, 2015, Genpact entered into a five-year, $1.15 billion credit facility consisting of an $800 million term loan and a $350 million revolving credit facility. Proceeds from this financing were largely used to repay all amounts outstanding under Genpact's prior $925 million credit facility. Borrowings under the new facility will be available at prevailing base or LIBOR rates and an applicable margin, with anticipated savings of 125 and 100 basis points on the new term loan and revolver, respectively, compared to the rates on our prior facility.
  • Genpact incurred a $10.1 million, or $0.03 per share, charge during the second quarter of 2015 related to the write-off of upfront fees for our previous facility.

2015 Outlook

Genpact expects:

  • Total revenue to be in the range of $2.46 to $2.50 billion.
  • Adjusted income from operations margin to be in the range of 15.0% to 15.2%, compared to an initial outlook of approximately 15%.

Conference Call to Discuss Financial Results

Genpact's management will host an hour-long conference call beginning at 4:30 p.m. ET on August 4, 2015 to discuss the company's performance for the second quarter of 2015. To participate, callers can dial +1 (877) 299-4454 from within the U.S. or +1 (617) 597-5447 from any other country. Thereafter, callers will be prompted to enter the participant code, 86868714.

A live webcast of the call including slides with our comments will also be made available on the Genpact Investor Relations website at http://investors.genpact.com. For those who cannot participate in the call, a replay and podcast will be available on the Genpact website after the end of the call. A transcript of the call as well as the presentation slides will also be made available on the website.

About Genpact

Genpact (NYSE: G) stands for "generating business impact." We design, transform, and run intelligent business operations including those that are complex and specific to a set of chosen industries. The result is advanced operating models that assist our clients in becoming more competitive by supporting their growth and managing cost, risk, and compliance across a range of functions such as finance and procurement, financial services account servicing, claims management, regulatory affairs, and industrial asset optimization. Our Smart Enterprise Processes (SEPSM) proprietary framework helps companies reimagine how they operate by integrating effective Systems of Engagement™, core IT, and Data-to-Action AnalyticsSM. Our hundreds of long-term clients include more than one-fourth of the Fortune Global 500. We have grown to over 70,000 people in 25 countries, with key management and a corporate office in New York City. Our global critical mass doesn't dilute our flexible and collaborative approach, and our management team still drives client partnerships personally. We believe we are able to generate impact quickly because of our business domain expertise and experience running complex operations, driving our focus on what works and making transformation sustainable. Clients attribute much of our success to our unique history: behind our 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.

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, 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. For additional information, visit Follow Genpact on Twitter, Facebook, LinkedIn, and YouTube.

For more information:

Roger Sachs, CFA
(Investors)

roger.sachs@genpact.com

+1 203-808-6725

Gail Marold
(Genpact Media Relations)

gail.marold@genpact.com

+1 919-345-3899


GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share data and share count)



As of December 31,


As of June 30,


2014


2015

Assets





Current assets




Cash and cash equivalents

$

461,788


$

441,755

Accounts receivable, net

525,754


553,566

Deferred tax assets

45,486


37,223

Prepaid expenses and other current assets

155,480


188,898

Total current assets

$

1,188,508


$

1,221,442

Property, plant and equipment, net

175,936


169,631

Deferred tax assets

59,135


67,709

Investment in equity affiliates

494


9,202

Intangible assets, net

114,544


115,757

Goodwill

1,057,214


1,054,028

Other assets

146,706


149,677

Total assets

$

2,742,537


$

2,787,446


GENPACT LIMITED AND ITS SUBSIDIARIES


Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share data and share count)



As of December 31,


As of June 30,


2014


2015

Liabilities and equity




Current liabilities




Short-term borrowings

$

135,000


$

21,500

Current portion of long-term debt

4,288


39,111

Current portion of capital lease obligations


1,443



1,399

Accounts payable

15,544


15,485

Income taxes payable


13,586



47,383

Deferred tax liabilities

1,239


1,392

Accrued expenses and other current liabilities


451,014



406,203

Total current liabilities

$

622,114


$

532,473

Long-term debt, less current portion


649,314



756,902

Capital lease obligations, less current portion

2,660


2,465

Deferred tax liabilities


6,671



5,590

Other liabilities

176,642


170,079

Total liabilities

$

1,457,401


$

1,467,509

Shareholders' equity




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


Common shares, $0.01 par value, 500,000,000 authorized, 218,684,205 and 216,832,795 issued and outstanding as of December 31, 2014 and June 30, 2015, respectively

2,184


2,165

Additional paid-in capital


1,296,730



1,314,530

Retained earnings

398,706


424,624

Accumulated other comprehensive income (loss)


(412,484)



(421,382)

Genpact Limited shareholders' equity

$

1,285,136


$

1,319,937

Noncontrolling interest


Total equity

$

1,285,136


$

1,319,937

Total liabilities and equity

$

2,742,537


$

2,787,446

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,


2014


2015


2014


2015

Net revenues








Net revenues from services

$

561,611


$

609,532


$

1,089,801


$

1,196,685

Cost of revenue








Services

340,125


366,304


664,414


723,780

Gross profit

$

221,486


$

243,228


$

425,387


$

472,905

Operating expenses:








Selling, general and administrative expenses

142,715


149,230


265,213


297,978

Amortization of acquired intangible assets

6,610


7,315


12,628


14,656

Other operating (income) expense, net

(890)


(2,670)


(2,752)


(3,132)

Income from operations

$

73,051


$

89,353


$

150,298


$

163,403

Foreign exchange (gains) losses, net

3,829


(7,433)


7,422


112

Other income (expense), net

(6,505)


(16,541)


(13,038)


(25,108)

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

$

62,717


$

80,245


$

129,838


$

138,183

Loss (gain) on equity-method investment activity, net

(34)


2,340


(54)



4,563

Income before income tax expense

$

62,751


$

77,905


$

129,892


$

133,620

Income tax expense

13,851


15,204


30,139


26,266

Net income

$

48,900


$

62,701


$

99,753


$

107,354

Net income (loss) attributable to noncontrolling interest

(84)



156


Net income attributable to Genpact Limited shareholders

$

48,984


$

62,701


$

99,597


$

107,354

Net income available to Genpact Limited common shareholders

$

48,984


$

62,701


$

99,597


$

107,354

Earnings per common share attributable to Genpact Limited common shareholders










Basic

$

0.23


$

0.29


$

0.44


$

0.49

Diluted

$

0.22


$

0.28


$

0.43


$

0.48

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










Basic

217,541,960


218,525,149



224,817,938



219,208,922

Diluted

221,509,867


220,962,306



229,392,759



221,654,703

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)



Six months ended June 30,


2014


2015

Operating activities




Net income attributable to Genpact Limited shareholders

$

99,597


$

107,354

Net income attributable to noncontrolling interest


156



Net income

$

99,753


$

107,354

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




Depreciation and amortization

24,994


26,811

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

1,610


12,759

Amortization of acquired intangible assets

12,628


14,656

Reserve for doubtful receivables

1,719


1,266

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

(807)


3,397

Equity-method investment activity, net

(54)


4,563

Stock-based compensation expense

11,879


11,314

Deferred income taxes

(322)


(8,242)

Others, net

895


(87)

Change in operating assets and liabilities:




Increase in accounts receivable

(15,110)


(34,451)

Increase in other assets

(37,870)


(32,423)

Increase (Decrease) in accounts payable

(5,222)


1,165

Decrease in other liabilities

(19,966)


(27,678)

Increase in income taxes payable

18,939


34,176

Net cash provided by operating activities

$

93,066


$

114,580





Investing activities




Purchase of property, plant and equipment

(29,657)


(30,172)

Proceeds from sale of property, plant and equipment

129


784

Investment in equity affiliates


(9,924)

Payment for business acquisitions, net of cash acquired

(123,701)


(17,718)

Net cash used for investing activities

$

(153,229)


$

(57,030)

Financing activities




Repayment of capital lease obligations

(896)


(1,091)

Payment of debt issuance and refinancing costs


(6,584)

Proceeds from long-term debt


800,000

Repayment of long-term debt

(3,375)


(664,875)

Proceeds from short-term borrowings

195,000


1,451,500

Repayment of short-term borrowings

(20,000)


(1,565,000)

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

8,329


7,509

Payment for net settlement of stock-based awards

(14,345)


(6,532)

Payment of earn-out consideration


(126)

Distribution to noncontrolling interest

(1,371)


Payment for stock purchased and retired

(302,625)


(81,399)

Payment for expenses related to stock purchase

(2,543)


(73)

Net cash used for financing activities

$

(141,826)


$

(66,671)

Effect of exchange rate changes

7,515


(10,912)

Net decrease in cash and cash equivalents

(201,989)


(9,121)

Cash and cash equivalents at the beginning of the period

571,276


461,788

Cash and cash equivalents at the end of the period

$

376,802


$

441,755

Supplementary information




Cash paid during the period for interest

$

12,828


$

14,671

Cash paid during the period for income taxes

$

37,176


$

24,706

Property, plant and equipment acquired under capital lease

$

1,305


$

876

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;
  • 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, 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 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. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use when adopting ASC 718 "Compensation-Stock Compensation," Genpact's management believes that providing non-GAAP financial measures that exclude such expenses allows investors to make additional comparisons between Genpact's operating results and those of other companies. Genpact also believes that it is unreasonably difficult to provide its financial outlook in accordance with GAAP for a number of reasons, including, without limitation, its inability to predict its stock-based compensation expense under ASC 718, the amortization of intangibles associated with further acquisitions and acquisition-related expenses. Accordingly, Genpact believes that the presentation of adjusted income from operations and adjusted net income, when read in conjunction with the Company's reported results, can provide useful supplemental information to investors and management regarding financial and business trends relating to its financial condition and results of operations.

A limitation of using adjusted income from operations and adjusted net income versus income from operations and net income calculated in accordance with GAAP is that these non-GAAP financial measures exclude a recurring cost, namely stock-based compensation. Management compensates for this limitation by providing specific information on the GAAP amounts excluded from adjusted income from operations and adjusted net income.

The following tables show the reconciliation of these adjusted financial measures from GAAP for the three and six months ended June 30, 2014 and 2015:

Reconciliation of Adjusted Income from Operations
(Unaudited)
(In thousands)



Three months ended June 30,



Six months ended June 30


2014


2015



2014



2015

Income from operations per GAAP

$

73,051


$

89,353


$

150,298


$

163,403

Add: Stock-based compensation

6,906


6,654


11,879


11,314

Add: Amortization of acquired intangible assets

5,010


6,120


9,501


12,232

Add: Acquisition-related expenses

1,977



1,977


798

Add: Other income, net, excluding net interest

517


811


386


1,269

Add/Less: Gain (loss) on equity-method investment activity, net

34


(2,340)


54


(4,563)

Less: Net loss (income) attributable to noncontrolling interest

84



(156)


Adjusted income from operations

$

87,579


$

100,598


$

173,939


$

184,453



Reconciliation of Adjusted Net Income
(Unaudited)
(In thousands, except per share data)



Three months ended June 30,



Six months ended June 30,


2014


2015


2014


2015

Net income attributable to Genpact Limited shareholders per GAAP

$

48,984


$

62,701


$

99,597


$

107,354

Add: Stock-based compensation

6,906


6,654


11,879


11,314

Add: Amortization of acquired intangible assets

5,010


6,120


9,501


12,232

Add: Acquisition-related expenses

1,977



1,977


798

Less: Tax impact on stock-based compensation

(1,751)


(1,864)


(3,056)


(3,017)

Less: Tax impact on amortization of acquired intangibles

(1,631)


(1,909)


(3,107)


(3,819)

Less: Tax impact on acquisition-related expenses

(53)



(53)


(229)

Adjusted net income

$

59,442


$

71,702


$

116,738


$

124,633

Adjusted diluted earnings per share

$

0.27


$

0.32


$

0.51


$

0.56

Ready to
Explore?