Genpact Reports Second Quarter 2022 Results
Total revenue of
Data-Tech-AI services revenue of
Digital Operations services revenue of
Diluted EPS of
"We are pleased that the momentum we saw coming out of 2021 has continued through the first half of the year. As we had expected, strong demand for our Data-Tech-AI services was the primary driver of our 12% constant currency year-over-year top line growth for the quarter, while Digital Operations services delivered steady performance," said "Tiger" Tyagarajan,
Key Financial Highlights – Second Quarter 2022
- Total revenue was
$1.089 billion , up 10% year-over-year (12% on a constant currency basis).1,2 - Revenue from Data-Tech-AI services was
$489 million , up 20% year-over-year (22% on a constant currency basis),1,2 representing 45% of total revenue. - Revenue from Digital Operations services was
$601 million , up 3% year-over-year (5% on a constant currency basis),1 representing 55% of total revenue. - Net income was
$72 million , down 30% year-over-year, with a corresponding margin of 6.6%. - Income from operations was
$110 million , down 20% year-over-year, with a corresponding margin of 10.1%. Adjusted income from operations was$183 million , up 3% year-over-year, with a corresponding margin of 16.9%.4,5 - Diluted earnings per share was
$0.38 , down 28% year-over-year, and adjusted diluted earnings per share3 was$0.70 , up 6% year-over-year. - Income from operations and diluted earnings per share include a
$39 million restructuring charge related to lease impairment charges and employee severance costs as well as a$7 million loss related to a business designated as held for sale. These items are excluded from adjusted income from operations4 and adjusted diluted earnings per share.3 - Cash generated from operations was
$102 million , compared to$161 million in the second quarter of 2021. Genpact repurchased approximately 1.8 million of its common shares during the quarter for total consideration of approximately$76 million at an average price per share of$42.00 .
Full Year 2022 Outlook
- Total revenue in the range of
$4.32 billion to$4.37 billion , up 7.5% to 9.0%, or 9.5% to 11.0% on a constant currency basis,1 compared to the prior full-year outlook in the range of$4.325 billion to$4.4 billion , up 8.0% to 9.0%, or 9.0% to 11.0% on a constant currency basis.1 This full-year revenue outlook now assumes an additional adverse impact of$21 million from foreign currency (at current exchange rates) compared to the prior outlook and includes expected full-year revenue of approximately$28 million associated with a business designated as held for sale. - Adjusted income from operations margin6 at the high end of the prior outlook of 16.0% to 16.5%.
- Adjusted diluted EPS7 in the range of
$2.68 to$2.74 , compared to the prior outlook in the range of$2.60 to$2.76 .
Conference Call to Discuss Financial Results
About
Safe Harbor
This press release contains certain statements concerning our future growth prospects, including our outlook for 2022, financial results and other forward-looking statements, as defined in the safe harbor provisions of the
Contacts
Investors |
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+1 (203) 808-6725 |
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Media |
+1 (718) 561-9843 |
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 2022 |
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Assets |
||||
Current assets |
||||
Cash and cash equivalents |
$ 899,458 |
$ 460,376 |
||
Accounts receivable, net of allowance for credit losses of |
887,742 |
1,014,285 |
||
Prepaid expenses and other current assets |
134,441 |
195,281 |
||
Assets of business held for sale |
— |
49,358 |
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Total current assets |
$ 1,921,641 |
$ 1,719,300 |
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Property, plant and equipment, net |
215,089 |
189,070 |
||
Operating lease right-of-use assets |
270,603 |
208,123 |
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Deferred tax assets |
106,322 |
102,761 |
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Intangible assets, net |
169,635 |
113,574 |
||
|
1,731,027 |
1,687,147 |
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Contract cost assets |
238,794 |
227,587 |
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Other assets, net of allowance for credit losses of |
322,158 |
292,818 |
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Total assets |
$ 4,975,269 |
$ 4,540,380 |
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Liabilities and equity |
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Current liabilities |
||||
Short-term borrowings |
$ — |
$ 250,000 |
||
Current portion of long-term debt |
383,433 |
33,577 |
||
Accounts payable |
24,984 |
26,964 |
||
Income taxes payable |
47,353 |
76,018 |
||
Accrued expenses and other current liabilities |
791,440 |
640,744 |
||
Operating leases liability |
61,591 |
54,047 |
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Liabilities of business held for sale |
— |
9,939 |
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Total current liabilities |
$ 1,308,801 |
$ 1,091,289 |
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Long-term debt, less current portion |
1,272,476 |
1,256,270 |
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Operating leases liability |
247,707 |
204,609 |
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Deferred tax liabilities |
3,942 |
3,687 |
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Other liabilities |
245,210 |
234,087 |
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Total liabilities |
$ 3,078,136 |
$ 2,789,942 |
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Shareholders' equity |
||||
Preferred shares, |
— |
— |
||
Common shares, |
1,847 |
1,830 |
||
Additional paid-in capital |
1,717,165 |
1,716,895 |
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Retained earnings |
732,474 |
702,219 |
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Accumulated other comprehensive income (loss) |
(554,353) |
(670,506) |
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Total equity |
$ 1,897,133 |
$ 1,750,438 |
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Total liabilities and equity |
$ 4,975,269 |
$ 4,540,380 |
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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2021 |
2022 |
2021 |
2022 |
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Net revenues |
$ 988,126 |
$ 1,089,147 |
$ 1,934,197 |
$ 2,157,590 |
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Cost of revenue |
632,982 |
714,256 |
1,233,910 |
1,400,218 |
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Gross profit |
$ 355,144 |
$ 374,891 |
$ 700,287 |
$ 757,372 |
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Operating expenses: |
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Selling, general and administrative expenses |
204,168 |
233,096 |
404,900 |
470,392 |
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Amortization of acquired intangible assets |
14,550 |
10,895 |
30,726 |
22,201 |
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Other operating (income) expense, net |
(477) |
21,217 |
(124) |
21,220 |
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Income from operations |
$ 136,903 |
$ 109,683 |
$ 264,785 |
$ 243,559 |
||||
Foreign exchange gains (losses), net |
5,503 |
1,142 |
8,796 |
5,445 |
||||
Interest income (expense), net |
(13,091) |
(11,204) |
(25,433) |
(23,292) |
||||
Other income (expense), net |
6,094 |
(4,258) |
7,486 |
(4,667) |
||||
Income before income tax expense |
$ 135,409 |
$ 95,363 |
$ 255,634 |
$ 221,045 |
||||
Income tax expense |
32,705 |
23,693 |
61,657 |
53,196 |
||||
Net income |
$ 102,704 |
$ 71,670 |
$ 193,977 |
$ 167,849 |
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Earnings per common share |
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Basic |
$ 0.55 |
$ 0.39 |
$ 1.03 |
$ 0.91 |
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Diluted |
$ 0.53 |
$ 0.38 |
$ 1.01 |
$ 0.89 |
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Weighted average number of common shares |
||||||||
Basic |
187,329,564 |
184,418,350 |
187,989,838 |
185,028,063 |
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Diluted |
192,282,570 |
187,865,653 |
192,747,914 |
188,712,029 |
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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2021 |
2022 |
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Operating activities |
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Net income |
$ 193,977 |
$ 167,849 |
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Adjustments to reconcile net income to net cash (used for)/ provided by operating activities: |
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Depreciation and amortization |
55,824 |
47,869 |
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Amortization of debt issuance costs |
1,260 |
1,256 |
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Amortization of acquired intangible assets |
30,726 |
22,201 |
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Write-down of intangible assets and property, plant and equipment |
915 |
1,377 |
||
Allowance for credit losses |
2,208 |
482 |
||
Unrealized gain on revaluation of foreign currency asset/liability |
(5,614) |
(3,685) |
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Stock-based compensation expense |
37,119 |
35,692 |
||
Deferred tax expense (benefit) |
(2,792) |
552 |
||
Write-down of operating right-of-use assets and other assets |
— |
20,307 |
||
Others, net |
346 |
321 |
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Change in operating assets and liabilities: |
||||
Increase in accounts receivable |
(40,746) |
(139,653) |
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(Increase) decrease in prepaid expenses, other current assets, contract cost assets, operating lease |
11,055 |
(28,935) |
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Increase in accounts payable |
11,365 |
5,246 |
||
Decrease in accrued expenses, other current liabilities, operating lease liabilities and other liabilities |
(102,273) |
(171,405) |
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Increase in income taxes payable |
44,395 |
28,578 |
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Net cash (used for)/ provided by operating activities |
$ 237,765 |
$ (11,948) |
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Investing activities |
||||
Purchase of property, plant and equipment |
(19,305) |
(26,943) |
||
Payment for internally generated intangible assets (including intangibles under development) |
(3,775) |
(2,126) |
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Proceeds from sale of property, plant and equipment |
690 |
43 |
||
Payment for business acquisitions, net of cash acquired |
(6,613) |
— |
||
Net cash used for investing activities |
$ (29,003) |
$ (29,026) |
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Financing activities |
||||
Repayment of finance lease obligations |
(5,739) |
(6,018) |
||
Payment of debt issuance costs |
(2,053) |
— |
||
Proceeds from long-term debt |
350,000 |
— |
||
Repayment of long-term debt |
(17,000) |
(367,000) |
||
Proceeds from short-term borrowings |
— |
250,000 |
||
Repayment of short-term borrowings |
(250,000) |
— |
||
Proceeds from issuance of common shares under stock-based compensation plans |
14,757 |
8,446 |
||
Payment for net settlement of stock-based awards |
(30,401) |
(44,521) |
||
Payment of earn-out consideration |
(2,556) |
— |
||
Dividend paid |
(40,248) |
(46,069) |
||
Payment for stock repurchased and retired (including expenses related to stock repurchase) |
(147,224) |
(152,069) |
||
Net cash used for financing activities |
$ (130,464) |
$ (357,231) |
||
Effect of exchange rate changes |
(6,158) |
(40,877) |
||
Net increase /(decrease) in cash and cash equivalents |
78,298 |
(398,205) |
||
Cash and cash equivalents at the beginning of the period |
680,440 |
899,458 |
||
Cash and cash equivalents at the end of the period |
$ 752,580 |
$ 460,376 |
||
Supplementary information |
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Cash paid during the period for interest |
$ 21,522 |
$ 23,168 |
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Cash paid during the period for income taxes, net of refund |
$ 40,643 |
$ 78,592 |
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
During the second quarter of 2022,
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 months and six months ended
Reconciliation of Net Income/Margin to Adjusted Income from Operations/Margin |
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(In thousands) |
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Three months ended |
Six months ended |
|||||||
2021 |
2022 |
2021 |
2022 |
|||||
Net income |
$ 102,704 |
$ 71,670 |
$ 193,977 |
$ 167,849 |
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Foreign exchange (gains) losses, net |
(5,503) |
(1,142) |
(8,796) |
(5,445) |
||||
Interest (income) expense, net |
13,091 |
11,204 |
25,433 |
23,292 |
||||
Income tax expense |
32,705 |
23,693 |
61,657 |
53,196 |
||||
Stock-based compensation expense |
19,689 |
20,442 |
37,119 |
35,692 |
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Amortization and impairment of acquired intangible assets |
14,337 |
10,891 |
30,289 |
22,193 |
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Restructuring expenses |
— |
38,815 |
— |
38,815 |
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Loss relating to business held for sale |
— |
7,222 |
— |
7,222 |
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Adjusted income from operations |
$ 177,023 |
$ 182,795 |
$ 339,679 |
$ 342,814 |
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Net income margin |
10.4 % |
6.6 % |
10.0 % |
7.8 % |
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Adjusted income from operations margin |
17.9 % |
16.9 % |
17.6 % |
15.9 % |
||||
Reconciliation of Income from Operations/Margin to Adjusted Income from Operations/Margin |
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(In thousands) |
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Three months ended |
Six months ended |
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2021 |
2022 |
2021 |
2022 |
|||||
Income from operations |
$ 136,903 |
$ 109,683 |
$ 264,785 |
$ 243,559 |
||||
Stock-based compensation expense |
19,689 |
20,442 |
37,119 |
35,692 |
||||
Amortization and impairment of acquired intangible assets |
14,337 |
10,891 |
30,289 |
22,193 |
||||
Other income (expense), net |
6,094 |
(4,258) |
7,486 |
(4,667) |
||||
Restructuring expenses |
— |
38,815 |
— |
38,815 |
||||
Loss relating to business held for sale |
— |
7,222 |
— |
7,222 |
||||
Adjusted income from operations |
$ 177,023 |
$ 182,795 |
$ 339,679 |
$ 342,814 |
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Income from operations margin |
13.9 % |
10.1 % |
13.7 % |
11.3 % |
||||
Adjusted income from operations margin |
17.9 % |
16.9 % |
17.6 % |
15.9 % |
||||
Reconciliation of Diluted EPS to Adjusted Diluted EPS8 |
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(Per share data) |
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Three months ended |
Six months ended |
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2021 |
2022 |
2021 |
2022 |
|||||
Diluted EPS |
$ 0.53 |
$ 0.38 |
$ 1.01 |
$ 0.89 |
||||
Stock-based compensation expense |
0.10 |
0.11 |
0.19 |
0.19 |
||||
Amortization and impairment of acquired intangible assets |
0.07 |
0.06 |
0.16 |
0.12 |
||||
Restructuring expenses |
— |
0.21 |
— |
0.21 |
||||
Loss relating to business held for sale |
— |
0.04 |
— |
0.04 |
||||
Tax impact on stock-based compensation expense |
(0.03) |
(0.02) |
(0.06) |
(0.06) |
||||
Tax impact on amortization and impairment of acquired intangible |
(0.02) |
(0.01) |
(0.04) |
(0.03) |
||||
Tax impact on restructuring expenses |
— |
(0.05) |
— |
(0.05) |
||||
Tax impact on loss relating to business held for sale |
— |
(0.01) |
— |
(0.01) |
||||
Adjusted diluted EPS |
$ 0.66 |
$ 0.70 |
$ 1.26 |
$ 1.30 |
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 Margin9 |
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Year ending |
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Net income margin |
8.7 % |
|
Estimated foreign exchange (gains) losses, net |
(0.1) % |
|
Estimated interest (income) expense, net |
1.0 % |
|
Estimated income tax expense |
2.7 % |
|
Estimated stock-based compensation expense |
1.8 % |
|
Estimated amortization and impairment of acquired intangible assets |
1.0 % |
|
Estimated restructuring expense |
0.9 % |
|
Estimated loss relating to business held for sale |
0.5 % |
|
Adjusted income from operations margin |
16.5 % |
Reconciliation of Outlook for Income from Operations Margin to Adjusted Income from |
||
Year ending |
||
Income from operations margin |
12.4 % |
|
Estimated stock-based compensation expense |
1.8 % |
|
Estimated amortization and impairment of acquired intangible assets |
1.0 % |
|
Estimated other income (expense), net |
(0.1) % |
|
Estimated restructuring expense |
0.9 % |
|
Estimated loss relating to business held for sale |
0.5 % |
|
Adjusted income from operations margin |
16.5 % |
Reconciliation of Outlook for Diluted EPS to Adjusted Diluted EPS9 |
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(Per share data) |
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Year ending |
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Lower |
Upper |
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Diluted EPS |
$ 1.97 |
$ 2.03 |
||
Estimated stock-based compensation expense |
0.42 |
0.42 |
||
Estimated amortization and impairment of acquired intangible assets |
0.23 |
0.23 |
||
Estimated restructuring expense |
0.21 |
0.21 |
||
Estimated loss relating to business held for sale |
0.10 |
0.10 |
||
Estimated tax impact on stock-based compensation expense |
(0.12) |
(0.12) |
||
Estimated tax impact on amortization and impairment of acquired intangible assets |
(0.06) |
(0.06) |
||
Estimated tax impact on restructuring expense |
(0.05) |
(0.05) |
||
Estimated tax impact on loss relating to business held for sale |
(0.03) |
(0.03) |
||
Adjusted diluted EPS |
$ 2.68 |
$ 2.74 |
Disaggregation of revenue by nature of service |
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Three months ended |
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(In thousands) |
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|
|
|
|
|
|
|
|
|
|
|
Data-Tech-AI |
$ 340,028 |
$ 333,270 |
$ 350,905 |
$ 359,757 |
$ 373,241 |
$ 406,462 |
$ 428,809 |
$ 483,782 |
$ 466,746 |
$ 488,543 |
Digital Operations |
$ 583,163 |
$ 566,824 |
$ 584,619 |
$ 590,811 |
$ 572,830 |
$ 581,663 |
$ 586,929 |
$ 588,495 |
$ 601,697 |
$ 600,604 |
Total |
$ 923,191 |
|
|
$ 950,568 |
$ 946,071 |
$ 988,125 |
$ 1,015,738 |
$ 1,072,277 |
|
$ 1,089,147 |
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 Total revenue and revenue from Data-Tech-AI includes |
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. |
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. |
5 Adjusted income from operations margin is derived by adjusting total revenue to exclude |
6 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. |
7 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. |
8 Due to rounding, the numbers presented in this table may not add up precisely to the totals provided. |
9 Due to rounding, the numbers presented in this table may not add up precisely to the totals provided. |
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