Genpact Reports Results for the Third Quarter of 2013
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Key Financial Results – Third Quarter 2013
- Revenues were
$534.9 million , up 8.9% from$491.2 million in the third quarter of 2012. Revenues from Global Clients were up 12.7%, and business process management revenues from Global Clients were up 10.4%. - Income from operations was
$86.0 million , up 22.9% from$70.0 million in the third quarter of 2012. - Net income attributable to
Genpact Limited shareholders was$70.3 million , up 179.1% from$25.2 million in the third quarter of 2012. Net income margin for the third quarter of 2013 was 13.1%, up from 5.1% in the third quarter of 2012. - Diluted earnings per common share were
$0.30 , up from$0.11 in the third quarter of 2012. - Adjusted income from operations was
$95.0 million , up 19.2% from$79.7 million in the third quarter of 2012. - Adjusted income from operations margin was 17.8%, up from 16.2% in the third quarter of 2012.
- Adjusted diluted earnings per share were
$0.33 , up from$0.18 in the third quarter of 2012.
N.V. 'Tiger' Tyagarajan,
Revenues from Global Clients grew 12.7% over the third quarter of 2012. Business process management revenues from Global Clients grew by 10.4%, led by growth in the Insurance, Hi-Tech, Consumer Packaged Goods, Retail and Life Sciences verticals. Revenues from Global Clients represented approximately 77.9% of
In the 12 months ending
75.1% of
As of
Year-to-Date Results
- Revenues were
$1.574 billion , up 12.9% from$1.394 billion for the nine months endedSeptember 30, 2012 . - Income from operations was
$237.9 million , up 22.9% from$193.6 million in the nine months endedSeptember 30, 2012 . - Net income attributable to
Genpact Limited shareholders was$180.9 million , up from$124.8 million for the nine months endedSeptember 30, 2012 ; net income margin was 11.5%, up from 9.0% for the nine months endedSeptember 30, 2012 . - Diluted earnings per common share were
$0.77 , up from$0.55 for the nine months endedSeptember 30, 2012 . - Adjusted income from operations was
$267.0 million , up 16.5% from$229.2 million for the nine months endedSeptember 30, 2012 . - Adjusted income from operations margin was 17.0%, up from 16.4% for the nine months ended
September 30, 2012 . - Adjusted diluted earnings per share were
$0.88 , up from$0.71 for the nine months endedSeptember 30, 2012 .
2013 Outlook
Tyagarajan continued, "As a result of lower than expected revenues and improved margins, we are reducing our revenue guidance and increasing our margin guidance. For the full year 2013, we now expect revenues to be in a range of
Conference Call to Discuss Financial Results
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
About
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
Contact |
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Investors |
Bharani Bobba |
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+1 (646) 624-5951 |
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Media |
Gail Marold |
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+1 (919) 345-3899 |
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GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Balance Sheets (Unaudited) (In thousands, except per share data and share count) |
||||||
As of December 31, 2012 |
As of September 30, 2013 |
|||||
Assets |
||||||
Current assets |
||||||
Cash and cash equivalents |
$ |
459,228 |
$ |
481,498 |
||
Accounts receivable, net |
451,960 |
476,997 |
||||
Accounts receivable from related party, net |
29 |
63 |
||||
Short term deposits |
18,292 |
17,505 |
||||
Deferred tax assets |
48,489 |
61,654 |
||||
Prepaid expenses and other current assets |
150,769 |
179,402 |
||||
Total current assets |
$ |
1,128,767 |
$ |
1,217,119 |
||
Property, plant and equipment, net |
200,362 |
168,374 |
||||
Deferred tax assets |
91,383 |
102,878 |
||||
Investment in equity affiliates |
416 |
349 |
||||
Customer-related intangible assets, net |
84,748 |
79,250 |
||||
Marketing-related intangible assets, net |
21,585 |
20,628 |
||||
Other intangible assets, net |
6,054 |
7,054 |
||||
Goodwill |
956,064 |
950,424 |
||||
Other assets |
116,548 |
98,059 |
||||
Total assets |
$ |
2,605,927 |
$ |
2,644,135 |
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Balance Sheets (Unaudited) (In thousands, except per share data and share count) |
||||||
As of December 31, 2012 |
As of September 30, 2013 |
|||||
Liabilities and equity |
||||||
Current liabilities |
||||||
Short-term borrowings |
$ |
80,000 |
$ |
— |
||
Current portion of long-term debt |
4,982 |
4,256 |
||||
Current portion of capital lease obligations |
1,301 |
1,384 |
||||
Accounts payable |
18,652 |
15,281 |
||||
Income taxes payable |
22,304 |
58,936 |
||||
Deferred tax liabilities |
538 |
384 |
||||
Accrued expenses and other current liabilities |
390,041 |
401,476 |
||||
Total current liabilities |
$ |
517,818 |
$ |
481,717 |
||
Long-term debt, less current portion |
656,879 |
654,664 |
||||
Capital lease obligations, less current portion |
2,533 |
2,736 |
||||
Deferred tax liabilities |
6,068 |
5,539 |
||||
Other liabilities |
250,848 |
297,955 |
||||
Total liabilities |
$ |
1,434,146 |
$ |
1,442,611 |
||
Shareholders' equity |
||||||
Preferred shares, $0.01 par value, 250,000,000 authorized, none issued |
— |
— |
||||
Common shares, $0.01 par value, 500,000,000 authorized, 225,480,172 and 230,147,557 issued and outstanding as of December 31, 2012 and September 30, 2013, respectively |
2,253 |
2,300 |
||||
Additional paid-in capital |
1,202,448 |
1,252,122 |
||||
Retained earnings |
281,982 |
462,857 |
||||
Accumulated other comprehensive income (loss) |
(318,272) |
(517,791) |
||||
Genpact Limited shareholders' equity |
$ |
1,168,411 |
$ |
1,199,488 |
||
Noncontrolling interest |
3,370 |
2,036 |
||||
Total equity |
$ |
1,171,781 |
$ |
1,201,524 |
||
Total liabilities and equity |
$ |
2,605,927 |
$ |
2,644,135 |
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, |
||||||||||
2012 |
2013 |
2012 |
2013 |
||||||||
Net revenues |
|||||||||||
Net revenues from services - others |
$ |
490,987 |
$ |
534,696 |
$ |
1,393,780 |
$ |
1,572,967 |
|||
Net revenues from services - related party |
170 |
190 |
487 |
571 |
|||||||
Total net revenues |
491,157 |
534,886 |
1,394,267 |
1,573,538 |
|||||||
Cost of revenue |
|||||||||||
Services |
297,253 |
329,289 |
847,940 |
973,729 |
|||||||
Total cost of revenue |
297,253 |
329,289 |
847,940 |
973,729 |
|||||||
Gross profit |
$ |
193,904 |
$ |
205,597 |
$ |
546,327 |
$ |
599,809 |
|||
Operating expenses: |
|||||||||||
Selling, general and administrative expenses |
118,536 |
117,005 |
337,794 |
348,632 |
|||||||
Amortization of acquired intangible assets |
6,014 |
5,867 |
17,094 |
17,603 |
|||||||
Other operating (income) expense, net |
(598) |
(3,232) |
(2,111) |
(4,320) |
|||||||
Income from operations |
$ |
69,952 |
$ |
85,957 |
$ |
193,550 |
$ |
237,894 |
|||
Foreign exchange (gains) losses, net |
13,220 |
(10,817) |
(5,086) |
(24,619) |
|||||||
Other income (expense), net |
(14,932) |
(3,454) |
(15,755) |
(19,104) |
|||||||
Income before Equity-method investment activity, net and income tax expense |
$ |
41,800 |
$ |
93,320 |
$ |
182,881 |
$ |
243,409 |
|||
Equity-method investment activity, net |
(50) |
(32) |
(24) |
(139) |
|||||||
Income before income tax expense |
$ |
41,850 |
$ |
93,352 |
$ |
182,905 |
$ |
243,548 |
|||
Income tax expense |
15,239 |
21,921 |
53,239 |
58,403 |
|||||||
Net Income |
$ |
26,611 |
$ |
71,431 |
$ |
129,666 |
$ |
185,145 |
|||
Net income attributable to noncontrolling interest |
1,436 |
1,169 |
4,851 |
4,270 |
|||||||
Net income attributable to Genpact Limited shareholders |
$ |
25,175 |
$ |
70,262 |
$ |
124,815 |
$ |
180,875 |
|||
Net income available to Genpact Limited common shareholders |
$ |
25,175 |
$ |
70,262 |
$ |
124,815 |
$ |
180,875 |
|||
Earnings per common share attributable to Genpact Limited common shareholders |
|||||||||||
Basic |
$ |
0.11 |
$ |
0.31 |
$ |
0.56 |
$ |
0.79 |
|||
Diluted |
$ |
0.11 |
$ |
0.30 |
$ |
0.55 |
$ |
0.77 |
|||
Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders |
|||||||||||
Basic |
223,876,035 |
230,057,508 |
223,289,507 |
228,840,746 |
|||||||
Diluted |
230,195,834 |
236,336,924 |
228,516,391 |
235,095,660 |
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) (In thousands) |
|||||
Nine months ended September 30, |
|||||
2012 |
2013 |
||||
Operating activities |
|||||
Net income attributable to Genpact Limited shareholders |
$ |
124,815 |
$ |
180,875 |
|
Net income attributable to noncontrolling interest |
4,851 |
4,270 |
|||
Net income |
$ |
129,666 |
$ |
185,145 |
|
Adjustments to reconcile net income to net cash provided by (used for) operating activities: |
|||||
Depreciation and amortization |
41,609 |
40,270 |
|||
Amortization of debt issue costs (including loss on extinguishment of debt) |
7,468 |
5,215 |
|||
Amortization of acquired intangible assets |
17,149 |
17,603 |
|||
Reserve for doubtful receivables |
2,780 |
8,919 |
|||
Reserve for mortgage loans |
107 |
— |
|||
Unrealized (gain) loss on revaluation of foreign currency asset/liability |
(1,307) |
(5,646) |
|||
Equity-method investment activity, net |
(24) |
(139) |
|||
Stock-based compensation expense |
22,856 |
21,931 |
|||
Deferred income taxes |
(9,297) |
4,194 |
|||
Others, net |
2,287 |
5,872 |
|||
Change in operating assets and liabilities: |
|||||
Increase in accounts receivable |
(45,209) |
(30,613) |
|||
Increase in other assets |
(64,645) |
(35,014) |
|||
Decrease in accounts payable |
(3,876) |
(797) |
|||
Increase (Decrease) in accrued expenses and other current liabilities |
29,994 |
(24,601) |
|||
Increase in income taxes payable |
45,688 |
37,103 |
|||
Increase in other liabilities |
34,226 |
3,775 |
|||
Net cash provided by operating activities |
$ |
209,472 |
$ |
233,217 |
|
Investing activities |
|||||
Purchase of property, plant and equipment |
(60,141) |
(37,061) |
|||
Proceeds from sale of property, plant and equipment |
374 |
2,996 |
|||
Investment in affiliates |
(205) |
— |
|||
Short term deposits placed |
(25,638) |
(55,259) |
|||
Redemption of short term deposits |
25,638 |
51,955 |
|||
Payment for business acquisitions, net of cash acquired |
(53,931) |
(49,235) |
|||
Proceeds from divestiture of business, net of cash divested |
— |
(1,049) |
|||
Net cash used for investing activities |
$ |
(113,903) |
$ |
(87,653) |
|
Financing activities |
|||||
Repayment of capital lease obligations |
(1,684) |
(1,284) |
|||
Proceeds from long-term debt |
675,000 |
121,410 |
|||
Repayment of long-term debt |
(105,000) |
(121,410) |
|||
Proceeds from Short-term borrowings |
80,000 |
35,000 |
|||
Repayment of Short-term borrowings |
(252,350) |
(115,000) |
|||
Proceeds from issuance of common shares under stock-based compensation plans |
19,684 |
35,389 |
|||
Payment for net settlement of stock-based awards |
(1,746) |
(7,599) |
|||
Payment of earn-out consideration |
(587) |
(3,868) |
|||
Cost incurred in relation to Debt amendment and refinancing |
(14,438) |
(8,104) |
|||
Distribution to noncontrolling interest |
(3,961) |
(4,614) |
|||
Dividend paid |
(501,620) |
— |
|||
Net cash used for financing activities |
$ |
(106,702) |
$ |
(70,080) |
|
Effect of exchange rate changes |
(2,384) |
(53,214) |
|||
Net increase (decrease) in cash and cash equivalents |
(11,133) |
75,484 |
|||
Cash and cash equivalents at the beginning of the period |
408,020 |
459,228 |
|||
Cash and cash equivalents at the end of the period |
$ |
394,503 |
$ |
481,498 |
|
Supplementary information |
|||||
Cash paid during the period for interest |
$ |
5,785 |
$ |
25,484 |
|
Cash paid during the period for income taxes |
$ |
65,708 |
$ |
52,805 |
|
Property, plant and equipment acquired under capital lease obligation |
$ |
1,955 |
$ |
1,933 |
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
- 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 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 measures used by other companies. In addition, these non-GAAP measures, the financial statements prepared in accordance with GAAP and the reconciliations of
Prior to
In addition to the above,
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 nine months ended September 30, 2012 and 2013:
Reconciliation of Adjusted Income from Operations (Unaudited) (In thousands) |
|||||||||
Three months ended September 30, |
Nine months ended September 30, |
||||||||
2012 |
2013 |
2012 |
2013 |
||||||
Income from operations as per GAAP |
$ |
69,952 |
$ |
85,957 |
$ |
193,550 |
$ |
237,894 |
|
Add: Amortization of acquired intangible assets resulting from Formation Accounting |
1,621 |
711 |
5,253 |
2,282 |
|||||
Add: Amortization of acquired intangible assets relating to acquisitions |
2,694 |
3,857 |
7,948 |
11,355 |
|||||
Add: Acquisition related expenses |
298 |
— |
298 |
— |
|||||
Add: Consultancy and legal fees relating to change of shareholding and capital restructuring (excluding expenses related to the credit facility) |
7,318 |
— |
9,805 |
— |
|||||
Add: Stock-based compensation |
5,613 |
5,312 |
22,856 |
21,931 |
|||||
Less: Provision (created) reversed for loss on divestitures |
— |
141 |
— |
(3,520) |
|||||
Add: Other income (expense) |
(6,365) |
184 |
(5,733) |
1,163 |
|||||
Add: Gain on Equity-method investment activity, net |
50 |
32 |
24 |
139 |
|||||
Less: Net income attributable to noncontrolling interest |
(1,436) |
(1,169) |
(4,851) |
(4,270) |
|||||
Adjusted income from operations |
$ |
79,745 |
$ |
95,025 |
$ |
229,150 |
$ |
266,974 |
Reconciliation of Adjusted Net Income (Unaudited) (In thousands, except per share data) |
|||||||||
Three months ended September 30, |
Nine months ended September 30, |
||||||||
2012 |
2013 |
2012 |
2013 |
||||||
Net income as per GAAP |
$ |
25,175 |
$ |
70,262 |
$ |
124,815 |
$ |
180,875 |
|
Add: Amortization of acquired intangible assets resulting from Formation Accounting |
1,621 |
711 |
5,253 |
2,282 |
|||||
Add: Amortization of acquired intangible assets relating to acquisitions |
2,694 |
3,857 |
7,948 |
11,355 |
|||||
Add: Consultancy and legal fees relating to change of shareholding and capital restructuring (excluding expenses related to the credit facility) |
7,318 |
— |
9,805 |
— |
|||||
Add: Stock-based compensation |
5,613 |
5,312 |
22,856 |
21,931 |
|||||
Add: Acquisition related expenses |
298 |
— |
298 |
— |
|||||
Add: Withholding taxes relating to remittance of funds between subsidiaries to partly fund the payment of special cash dividend in respect of capital restructuring |
2,300 |
— |
2,300 |
— |
|||||
Less: Tax impact on amortization of acquired intangibles resulting from Formation Accounting |
(357) |
(114) |
(1,190) |
(413) |
|||||
Less: Tax impact on amortization of acquired intangibles relating from acquisitions |
(893) |
(1,319) |
(2,679) |
(3,875) |
|||||
Less: Tax impact on acquisition related expenses |
(75) |
— |
(75) |
— |
|||||
Less: Tax impact on stock-based compensation |
(1,971) |
(1,458) |
(7,004) |
(5,753) |
|||||
Less: Tax impact on consultancy and legal fees relating to change of shareholding and capital restructuring (excluding expenses related to the credit facility) |
— |
— |
(182) |
— |
|||||
Adjusted net income |
$ |
41,723 |
$ |
77,251 |
$ |
162,145 |
$ |
206,402 |
|
Adjusted diluted earnings per share |
$ |
0.18 |
$ |
0.33 |
$ |
0.71 |
$ |
0.88 |
SOURCE