Genpact Reports Second Quarter 2021 Results
"Our second quarter performance saw Global Client revenue return to double-digit growth earlier than we anticipated. Driven by accelerated momentum in Transformation Services, particularly in Analytics, and the strength of our Intelligent Operations business, we exceeded our expectations on the top line, bottom line, and cash flow," said "Tiger" Tyagarajan,
Key Financial Results – Second Quarter 2021
- Total revenue was
$988 million , up 10% year-over-year (7% on a constant currency basis)1. - Revenue from Global Clients was
$893 million , up 14%2 year-over-year (11% on a constant currency basis)1,2 representing 90% of total revenue, including$10 million of revenue from certainGE -divested businesses that is now included in Global Client revenue. Excluding the revenue from suchGE -divested businesses, revenue from Global Clients increased 13% year over year (10% on a constant currency basis)1. - Revenue from
GE was$95 million , down 19% year-over-year, representing 10% of total revenue. This excludes$10 million of revenue from certainGE -divested businesses that is now included as Global Client revenue. If the revenue from theseGE -divested businesses had been counted asGE revenue in the second quarter of 2021, revenue fromGE would have decreased 10% year-over-year. - Net income was
$103 million , up 65% year-over-year, with a corresponding margin of 10.4%. - Income from operations was
$137 million , up 52% year-over-year, with a corresponding margin of 13.9%. Adjusted income from operations was$177 million , up 22% year-over-year, with a corresponding margin of 17.9%.4 - Diluted earnings per share was
$0.53 , up 66% year-over-year, and adjusted diluted earnings per share3 was$0.66 , up 27% year-over-year. - Cash generated from operations was
$161 million , compared to$192 million during the second quarter of 2020.
Full Year 2021 Outlook
- Total revenue for the full year of
$3.96 to$4.0 billion , up 7.0% to 8.0%, or 5.5% to 6.5% on a constant currency basis,1 increased from the prior full-year outlook of$3.93 to$3.99 billion , up 6.0% to 7.5%, or 5.0% to 6.5% on a constant currency basis.1 - Global Client revenue growth in the range of 10.5% to 11.5%, or 9% to 10% on a constant currency basis,1 increased from the prior outlook of 9.0% to 11.0%, or 8.0% to 10.0% on a constant currency basis.1
- Adjusted income from operations margin5 of approximately 16.5%, increased from the prior outlook of approximately 16.0%.
- Adjusted diluted EPS6 of
$2.36 to$2.39 , increased from the prior outlook of$2.27 to$2.30 .
Conference Call to Discuss Financial Results
About
Safe Harbor
This press release contains certain statements concerning our future growth prospects, including our outlook for 2021, financial results and other forward-looking statements, as defined in the safe harbor provisions of the
Contacts |
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Investors |
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+1 (203) 808-6725 |
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Media |
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+1 (217) 260-5041 |
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GENPACT LIMITED AND ITS SUBSIDIARIES |
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Consolidated Balance Sheets |
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(Unaudited) |
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(In thousands, except per share data and share count) |
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As of |
As of |
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Assets |
|||||
Current assets |
|||||
Cash and cash equivalents |
$ |
680,440 |
$ |
752,580 |
|
Accounts receivable, net of allowance for credit losses of |
881,020 |
916,366 |
|||
Prepaid expenses and other current assets |
187,408 |
213,163 |
|||
Total current assets |
$ |
1,748,868 |
$ |
1,882,109 |
|
Property, plant and equipment, net |
231,122 |
205,361 |
|||
Operating lease right-of-use assets |
304,714 |
290,770 |
|||
Deferred tax assets |
106,674 |
107,529 |
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Intangible assets, net |
236,732 |
196,099 |
|||
|
1,695,688 |
1,687,363 |
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Contract cost assets |
225,897 |
242,306 |
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Other assets, net of allowance for credit losses of |
323,818 |
287,054 |
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Total assets |
$ |
4,873,513 |
$ |
4,898,591 |
|
Liabilities and equity |
|||||
Current liabilities |
|||||
Short-term borrowings |
$ |
250,000 |
$ |
— |
|
Current portion of long-term debt |
33,537 |
383,154 |
|||
Accounts payable |
13,910 |
25,194 |
|||
Income taxes payable |
41,941 |
85,525 |
|||
Accrued expenses and other current liabilities |
806,769 |
688,502 |
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Operating leases liability |
56,479 |
58,337 |
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Total current liabilities |
$ |
1,202,636 |
$ |
1,240,712 |
|
Long-term debt, less current portion |
1,307,371 |
1,288,663 |
|||
Operating leases liability |
289,363 |
273,581 |
|||
Deferred tax liabilities |
1,516 |
1,349 |
|||
Other liabilities |
238,398 |
255,317 |
|||
Total liabilities |
$ |
3,039,284 |
$ |
3,059,622 |
|
Shareholders' equity |
|||||
Preferred shares, |
— |
— |
|||
Common shares, |
1,885 |
1,869 |
|||
Additional paid-in capital |
1,636,026 |
1,657,756 |
|||
Retained earnings |
741,658 |
748,199 |
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Accumulated other comprehensive income (loss) |
(545,340) |
(568,855) |
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Total equity |
$ |
1,834,229 |
$ |
1,838,969 |
|
Total liabilities and equity |
$ |
4,873,513 |
$ |
4,898,591 |
GENPACT LIMITED AND ITS SUBSIDIARIES |
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Consolidated Statements of Income |
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(Unaudited) |
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(In thousands, except per share data and share count) |
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Three months ended |
Six months ended |
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2020 |
2021 |
2020 |
2021 |
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Net revenues |
$ |
900,094 |
$ |
988,126 |
$ |
1,823,286 |
$ |
1,934,197 |
||||||||
Cost of revenue |
593,892 |
632,982 |
1,198,663 |
1,233,910 |
||||||||||||
Gross profit |
$ |
306,202 |
$ |
355,144 |
$ |
624,623 |
$ |
700,287 |
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Operating expenses: |
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Selling, general and administrative expenses |
186,312 |
204,168 |
383,654 |
404,900 |
||||||||||||
Amortization of acquired intangible assets |
10,697 |
14,550 |
21,438 |
30,726 |
||||||||||||
Other operating (income) expense, net |
18,829 |
(477) |
18,509 |
(124) |
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Income from operations |
$ |
90,364 |
$ |
136,903 |
$ |
201,022 |
$ |
264,785 |
||||||||
Foreign exchange gains (losses), net |
(518) |
5,503 |
14,013 |
8,796 |
||||||||||||
Interest income (expense), net |
(13,619) |
(13,091) |
(25,315) |
(25,433) |
||||||||||||
Other income (expense), net |
2,920 |
6,094 |
(14) |
7,486 |
||||||||||||
Income before income tax expense |
$ |
79,147 |
$ |
135,409 |
$ |
189,706 |
$ |
255,634 |
||||||||
Income tax expense |
16,986 |
32,705 |
41,847 |
61,657 |
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Net income |
$ |
62,161 |
$ |
102,704 |
$ |
147,859 |
$ |
193,977 |
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Earnings per common share |
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Basic |
$ |
0.33 |
$ |
0.55 |
$ |
0.78 |
$ |
1.03 |
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Diluted |
$ |
0.32 |
$ |
0.53 |
$ |
0.76 |
$ |
1.01 |
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Weighted average number of common shares used in computing earnings per common share |
||||||||||||||||
Basic |
190,541,148 |
187,329,564 |
190,583,953 |
187,989,838 |
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Diluted |
195,112,549 |
192,282,570 |
195,822,531 |
192,747,914 |
GENPACT LIMITED AND ITS SUBSIDIARIES |
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Consolidated Statements of Cash Flows |
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(Unaudited) |
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(In thousands) |
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Six months ended |
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2020 |
2021 |
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Operating activities |
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Net income |
$ |
147,859 |
$ |
193,977 |
|||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
58,165 |
55,824 |
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Amortization of debt issuance costs |
1,121 |
1,260 |
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Amortization of acquired intangible assets |
21,438 |
30,726 |
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Write-down of intangible assets and property, plant and equipment |
9,973 |
915 |
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Allowance for credit losses |
1,055 |
2,208 |
|||||
Unrealized loss (gain) on revaluation of foreign currency asset/liability |
4,085 |
(5,614) |
|||||
Stock-based compensation expense |
36,331 |
37,119 |
|||||
Deferred tax benefit |
(3,416) |
(2,792) |
|||||
Write-down of operating lease right-of-use assets and other assets |
10,244 |
— |
|||||
Others, net |
(1,297) |
346 |
|||||
Change in operating assets and liabilities: |
|||||||
(Increase) decrease in accounts receivable |
38,783 |
(40,746) |
|||||
(Increase) decrease in prepaid expenses, other current assets, contract cost assets, operating lease right-of-use assets and other assets |
(137,605) |
11,055 |
|||||
Increase (decrease) in accounts payable |
(4,418) |
11,365 |
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(Decrease) in accrued expenses, other current liabilities, operating lease liabilities and other liabilities |
(32,371) |
(102,273) |
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Increase in income taxes payable |
23,112 |
44,395 |
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Net cash provided by operating activities |
$ |
173,059 |
$ |
237,765 |
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Investing activities |
|||||||
Purchase of property, plant and equipment |
(33,127) |
(19,305) |
|||||
Payment for internally generated intangible assets (including intangibles under development) |
(6,449) |
(3,775) |
|||||
Proceeds from sale of property, plant and equipment |
388 |
690 |
|||||
Payment for business acquisitions, net of cash acquired |
— |
(6,613) |
|||||
Net cash (used for) investing activities |
$ |
(39,188) |
$ |
(29,003) |
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Financing activities |
|||||||
Repayment of finance lease obligations |
(4,065) |
(5,739) |
|||||
Payment of debt issuance costs |
(620) |
(2,053) |
|||||
Proceeds from long-term debt |
— |
350,000 |
|||||
Repayment of long-term debt |
(17,000) |
(17,000) |
|||||
Proceeds from short-term borrowings |
455,000 |
— |
|||||
Repayment of short-term borrowings |
(30,000) |
(250,000) |
|||||
Proceeds from issuance of common shares under stock-based compensation plans |
12,420 |
14,757 |
|||||
Payment for net settlement of stock-based awards |
(29,414) |
(30,401) |
|||||
Payment of earn-out consideration |
— |
(2,556) |
|||||
Dividend paid |
(37,138) |
(40,248) |
|||||
Payment for stock repurchased and retired (including expenses related to stock repurchase) |
(45,021) |
(147,224) |
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Net cash provided by (used for) financing activities |
$ |
304,162 |
$ |
(130,464) |
|||
Effect of exchange rate changes |
(37,766) |
(6,158) |
|||||
Net increase in cash and cash equivalents |
438,033 |
78,298 |
|||||
Cash and cash equivalents at the beginning of the period |
467,096 |
680,440 |
|||||
Cash and cash equivalents at the end of the period |
$ |
867,363 |
$ |
752,580 |
|||
Supplementary information |
|||||||
Cash paid during the period for interest |
$ |
24,397 |
$ |
21,522 |
|||
Cash paid during the period for income taxes, net of refund |
$ |
95,834 |
$ |
40,643 |
Non-GAAP Financial Measures
To supplement the consolidated financial statements presented in accordance with GAAP, this press release includes the following non-GAAP financial measures:
- Adjusted income from operations;
- Adjusted income from operations margin;
- Adjusted diluted earnings per share; and
- Revenue growth 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
Prior to
Accordingly,
A limitation of using adjusted income from operations and adjusted income from operations margin versus income from operations, income from operations margin, net income and net income margin calculated in accordance with GAAP is that these non-GAAP financial measures exclude certain recurring costs and certain other charges, namely stock-based compensation expense and amortization and impairment of acquired intangible assets. 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 non-GAAP financial measures to the most directly comparable GAAP measures for the three and six months ended
Reconciliation of Net income/Margin to Adjusted Income from Operations/Margin |
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(In thousands) |
|||||||||||
Three months ended |
Six months ended |
||||||||||
2020 |
2021 |
2020 |
2021 |
||||||||
Net income |
$ |
62,161 |
$ |
102,704 |
$ |
147,859 |
$ |
193,977 |
|||
Foreign exchange (gains) losses, net |
518 |
(5,503) |
(14,013) |
(8,796) |
|||||||
Interest (income) expense, net |
13,619 |
13,091 |
25,315 |
25,433 |
|||||||
Income tax expense |
16,986 |
32,705 |
41,847 |
61,657 |
|||||||
Stock-based compensation expense |
18,844 |
19,689 |
36,331 |
37,119 |
|||||||
Amortization and impairment of acquired intangible assets |
11,709 |
14,337 |
22,223 |
30,289 |
|||||||
Restructuring expenses |
21,658 |
— |
21,658 |
— |
|||||||
Adjusted income from operations |
$ |
145,495 |
$ |
177,023 |
$ |
281,220 |
$ |
339,679 |
|||
Net income margin |
6.9% |
10.4% |
8.1% |
10.0% |
|||||||
Adjusted income from operations margin |
16.2% |
17.9% |
15.4% |
17.6% |
Reconciliation of Income from Operations/Margin to Adjusted Income from Operations/Margin |
|||||||||||
(In thousands) |
|||||||||||
Three months ended |
Six months ended |
||||||||||
2020 |
2021 |
2020 |
2021 |
||||||||
Income from operations |
$ |
90,364 |
$ |
136,903 |
$ |
201,022 |
$ |
264,785 |
|||
Stock-based compensation |
18,844 |
19,689 |
36,331 |
37,119 |
|||||||
Amortization and impairment of acquired intangible assets |
11,709 |
14,337 |
22,223 |
30,289 |
|||||||
Other income (expense), net |
2,920 |
6,094 |
(14) |
7,486 |
|||||||
Restructuring expenses |
21,658 |
— |
21,658 |
— |
|||||||
Adjusted income from operations |
$ |
145,495 |
$ |
177,023 |
$ |
281,220 |
$ |
339,679 |
|||
Income from operations margin |
10.0% |
13.9% |
11.0% |
13.7% |
|||||||
Adjusted income from operations margin |
16.2% |
17.9% |
15.4% |
17.6% |
Reconciliation of Diluted EPS to Adjusted Diluted EPS7 |
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(Per share data) |
|||||||||||
Three months ended |
Six months ended |
||||||||||
2020 |
2021 |
2020 |
2021 |
||||||||
Diluted EPS |
$ |
0.32 |
$ |
0.53 |
$ |
0.76 |
$ |
1.01 |
|||
Stock-based compensation |
0.10 |
0.10 |
0.19 |
0.19 |
|||||||
Amortization and impairment of acquired intangible assets |
0.06 |
0.07 |
0.11 |
0.16 |
|||||||
Restructuring expenses |
0.11 |
— |
0.11 |
— |
|||||||
Tax impact on stock-based compensation |
(0.02) |
(0.03) |
(0.06) |
(0.06) |
|||||||
Tax impact on amortization and impairment of acquired intangibles |
(0.02) |
(0.02) |
(0.03) |
(0.04) |
|||||||
Tax impact on restructuring expenses |
(0.03) |
— |
(0.03) |
— |
|||||||
Adjusted diluted EPS |
$ |
0.52 |
$ |
0.66 |
$ |
1.05 |
$ |
1.26 |
The following tables show the reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP measures for the year ending
Reconciliation of Outlook for Net income Margin to Adjusted Income from Operations Margin8 |
||||
Year ending |
||||
Net income margin |
9.1 |
% |
||
Estimated foreign exchange (gains) losses, net |
(0.2) |
% |
||
Estimated interest (income) expense, net |
1.2 |
% |
||
Estimated income tax expense |
3.0 |
% |
||
Estimated stock-based compensation expense |
2.0 |
% |
||
Estimated amortization and impairment of acquired intangible assets |
1.4 |
% |
||
Adjusted income from operations margin |
16.5 |
% |
Reconciliation of Outlook for Income from Operations Margin to Adjusted Income from |
||||
Operations Margin8 |
||||
Year ending |
||||
Income from operations margin |
12.9 |
% |
||
Estimated stock-based compensation expense |
2.0 |
% |
||
Estimated amortization and impairment of acquired intangible assets |
1.4 |
% |
||
Estimated other income (expense), net |
0.2 |
% |
||
Adjusted income from operations margin |
16.5 |
% |
Reconciliation of Outlook for Diluted EPS to Adjusted Diluted EPS8 |
||||||||
(Per share data) |
||||||||
Year ending |
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Lower |
Upper |
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Diluted EPS |
$ |
1.85 |
1.88 |
|||||
Estimated stock-based compensation expense |
0.41 |
0.41 |
||||||
Estimated amortization and impairment of acquired intangible assets |
0.30 |
0.30 |
||||||
Estimated tax impact on stock-based compensation expense |
(0.12) |
(0.12) |
||||||
Estimated tax impact on amortization and impairment of acquired intangible assets |
(0.08) |
(0.08) |
||||||
Adjusted diluted EPS |
$ |
2.36 |
2.39 |
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. |
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2 Global Client revenue for the second quarter of 2021 includes revenue from certain businesses divested by |
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3 Adjusted diluted earnings per share is a non-GAAP measure. A reconciliation of GAAP diluted earnings per share to adjusted diluted earnings per share is attached to this release. |
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4 Adjusted income from operations and adjusted income from operations margin are non-GAAP measures. Reconciliations of each of GAAP income from operations and GAAP net income to adjusted income from operations and GAAP income from operations margin and GAAP net income margin to adjusted income from operations margin are attached to this release. |
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5 Adjusted income from operations margin is a non-GAAP measure. A reconciliation of the outlook for each of GAAP income from operations margin and GAAP net income margin to adjusted income from operations margin is attached to this release. |
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6 Adjusted diluted earnings per share is a non-GAAP measure. A reconciliation of the outlook for GAAP diluted earnings per share to adjusted diluted earnings per share is attached to this release. |
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7 Due to rounding, the numbers presented in this table may not add up precisely to the totals provided. |
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8 Due to rounding, the numbers presented in this table may not add up precisely to the totals provided. |
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