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 13, 2007

 

 

GENPACT LIMITED

(Exact name of registrant as specified in its charter)

 

Bermuda

 

333-142875

 

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, 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:

 

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

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

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

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

 

 

 



 

Item 2.02.   Results of Operations and Financial Condition.

 

On November 13, 2007, Genpact Limited issued a press release with respect to earnings for the quarter ended September 30, 2007. Genpact is furnishing this 8-K pursuant to item 2.02, “Results of Operations and Financial Condition.” A copy of this press release, attached hereto as Exhibit 99.1, is incorporated herein by reference.

 

Item 9.01.   Financial Statements and Exhibits.

 

(d) Exhibits:

 

Exhibit 99.1

 

Press release dated November 13, 2007

 

 

 



 

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 13, 2007

 

 

 

 

 

 

 

By:

     /s/ Victor Guaglianone

 

 

Name:

Victor Guaglianone

 

Title:

Senior Vice President
and General Counsel

 

 



 

EXHIBIT INDEX

 

 

Exhibit

 

Description

 


99.1

 


Press release dated November 13, 2007

 

 

 

 


Exhibit 99.1

 

Genpact Limited Reports Third Quarter 2007 Results

 

Third Quarter Revenues Grow 32%,

Adjusted Income from Operations Increases 42%

 

Gurgaon, India and New York, NY, November 13, 2007 — Genpact Limited  (NYSE: G), which manages business processes for companies around the world, today announced financial results for the third quarter ended September 30, 2007.

 

Key Third Quarter Financial Results

 

                  Third quarter revenues were $214.6 million, up 32% from the third quarter of 2006, and up 7% from the second quarter of 2007, driven primarily by Global Client revenue growth

                  Net income for the third quarter was $16.3 million, up 27% from the third quarter of 2006 and up 130% from the second quarter of 2007; net income margin for the third quarter decreased slightly to 7.6% from 7.9% in the third quarter of 2006, primarily due to certain tax charges and increased from 3.5% in the second quarter of 2007

                  Adjusted income from operations for the third quarter increased 42.1% to $36.7 million as compared to the third quarter of 2006 and 21.0% from the second quarter of 2007

                  Adjusted income from operations margin was 17.1% for the third quarter, up from  15.9% in the third quarter of 2006 and up from 15.1% in the second quarter of 2007

 

Global Client revenues grew 78.6% this quarter compared to the third quarter of 2006.  Revenues from GE increased 10.6% this quarter compared to the third quarter of 2006.  Global Clients represented 43% of total revenues for the quarter.

 

Year to date revenue growth has come fairly evenly from Genpact’s banking, financial services and insurance clients and its manufacturing clients, each group contributing approximately 45% of net revenues.  In addition, the mix between business process services and IT services offered by Genpact has remained fairly constant at approximately 75% and 25% of net revenues, respectively.

 

Pramod Bhasin, Genpact’s President and CEO said, “Clients seeking to benefit from our focus on operational excellence and continuous improvement based on our deep Six Sigma, Lean and re-engineering expertise have driven our growth.”

 

Bhasin added, “Our results reflect the strength of client demand, especially from Global Clients.  We are seeing strong growth in Europe and Asia-Pacific from multi-national clients who require support in multiple locations and languages.  Approximately 75% of our revenues for the year to date are coming from our India operations, where we continue to expand in both Tier 1 and Tier 2 cities.  Net revenues have also grown at a faster rate than personnel costs, after eliminating the impact of foreign exchange movements which have been hedged, demonstrating the leverage we have been able to drive in our operations.”

 



 

Genpact had 31,700 employees worldwide as of September 30th, an 8% increase from the second quarter of 2007.  Year-to-date global attrition has been reduced to 29% from 30% as of the second quarter and 32% for 2006.

 

The strength of demand for Genpact’s business solutions in the third quarter was evidenced by the addition of new clients including:

 

                  One of the world’s premier hotel and hospitality companies with properties in over 40 countries

                  An insurance and financial services company, providing financial protection, accumulation and income management products

                  A leading global manufacturer of audio, video, communications, and information technology products for the consumer and professional markets

                  A global leader in information technology that enables and secures global commerce with consumers and businesses

 

Adjusted net income was $27.8 million for the quarter.   As noted for prior periods in 2007, net income and adjusted net income in the third quarter reflect the impact of increased taxes resulting from the partial expiration of Genpact’s current tax holiday in India starting on March 31, 2007 as well as the continued impact of a Hungarian statutory tax.  The Hungarian statutory tax has been eliminated for future periods as the result of a restructuring of Genpact’s legal entities.  The Hungarian statutory tax was approximately $10 million for the nine months ended September 30, 2007.

 

Despite the mortgage and credit market turmoil in the United States, there has been no significant adverse impact on Genpact’s overall results. Genpact’s mortgage services business has seen a small revenue decline as processing volume has diminished from clients but revenues from its mortgage services business do not impact Genpact’s overall performance and has been more than offset by growth in other areas.

 

In the fourth quarter of 2007, as a consequence of Genpact’s restructuring of its legal entities noted above, Genpact will be required to recompute certain of its existing deferred tax assets and liabilities.  The results of this recomputation will be reflected in the fourth quarter and are anticipated to produce a one-time, non-cash tax provision of approximately $22 million to $29 million due principally to unrealized gains on certain rupee-dollar hedges.  This one-time, non-cash tax provision in the fourth quarter will be reversed over the remaining 24-30 month terms of the hedges and is not expected to adversely affect financial performance in 2008 and other future periods.

 

As a result of the strength of the demand it is seeing from its clients, Genpact is increasing its revenue guidance for the year from an increase of 28-30% to an increase of 30-32% from its year-end 2006 results and expects the adjusted income from operations margin to remain relatively constant.

 



 

Conference Call

 

Genpact management will host a conference call at 7:00 a.m. (Eastern) on November 13, 2007 to discuss the company’s performance for the quarter. To participate, callers can dial 1 (800) 659-1942 from within the U.S. or 1 (617) 614-2710 from any other country. Thereafter, callers need to enter the participant passcode which is 71206421.

For those who cannot participate in the call, a replay and Podcast will be available on our website, www.genpact.com, after the end of the call. A transcript of the call will also be made available on our website.

 

About Genpact

 

Genpact manages business processes for companies around the world. The company combines process expertise, information technology and analytical capabilities with operational insight and experience in diverse industries to provide a wide range of services using its global delivery platform. Genpact helps companies improve the ways in which they do business by applying Six Sigma and Lean principles plus technology to continuously improve their business processes. Genpact operates service delivery centers in India, China, Hungary, Mexico, the Philippines, the Netherlands, Romania, Spain and the United States.  For more info: www.genpact.com.

 

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 and uncertainties include but are not limited to the risks and uncertainties arising from our past and future acquisitions, slowdown in the economies and sectors in which our clients operate, a slowdown in the BPO and IT Services sectors, our ability to manage growth, factors which may impact our cost advantage, wage increases, 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 the Company’s Registration Statement in Form S-1.  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, the company believes that these forward-looking statements are based on reasonable assumptions, you are cautioned not to pay undue reliance on these forward-looking statements, which reflect management’s current analysis of future events.  The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.

 



 

Contact

 

Investors

 

Roanak Desai

 

 

 

 

+91 (124) 402-2716

 

 

 

 

roanak.desai@genpact.com

 

 

 

 

 

 

 

Media

 

David Jensen

 

Anita Trehan

 

 

+1 (203) 252 8562

 

+91 (124) 402 2726

 

 

david.jensen@genpact.com

 

anita.trehan@genpact.com

 



 

GENPACT LIMITED

Consolidated Balance Sheets

(Unaudited)

 (In thousands of U.S. Dollars, except share and per share data)

 

 

 

As of December
31, 2006

 

As of September
30, 2007

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

35,430

 

$

252,828

 

Accounts receivable, net

 

43,854

 

99,321

 

Accounts receivable from a significant shareholder, net

 

97,397

 

95,243

 

Short term deposits with a significant shareholder

 

1,010

 

22,074

 

Deferred income taxes

 

1,144

 

1,157

 

Due from a significant shareholder

 

10,236

 

5,397

 

Prepaid expenses and other current assets

 

53,829

 

144,703

 

Total current assets

 

242,900

 

620,723

 

 

 

 

 

 

 

Property, plant and equipment, net

 

157,976

 

177,973

 

Deferred income taxes

 

1,549

 

452

 

Investment in equity affiliate

 

 

323

 

Customer-related intangible assets, net

 

119,680

 

105,283

 

Other intangible assets, net

 

11,908

 

10,738

 

Goodwill

 

493,452

 

573,144

 

Other assets

 

53,827

 

161,842

 

Total assets

 

$

1,081,292

 

$

1,650,478

 

 



 

GENPACT LIMITED

Consolidated Balance Sheets

(Unaudited)

(In thousands of U.S. Dollars, except share and per share data)

 

 

 

As of December
31, 2006

 

As of September
30, 2007

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Short-term borrowings

 

$

83,000

 

$

500

 

Current portion of long-term debt

 

19,383

 

19,436

 

Current portion of long-term debt from a significant shareholder

 

1,131

 

1,483

 

Current portion of capital lease obligations

 

64

 

45

 

Current portion of capital lease obligations payable to a significant shareholder

 

1,686

 

1,833

 

Accounts payable

 

9,230

 

15,332

 

Income taxes payable

 

1,617

 

14,663

 

Deferred income taxes

 

1,858

 

13,428

 

Due to a significant shareholder

 

8,928

 

10,561

 

Accrued expenses and other current liabilities

 

136,949

 

170,939

 

Total current liabilities

 

263,846

 

248,220

 

 

 

 

 

 

 

Long-term debt, less current portion

 

118,657

 

104,074

 

Long-term debt from a significant shareholder, less current portion

 

3,865

 

3,962

 

Capital lease obligations, less current portion

 

 

97

 

Capital lease obligations payable to a significant shareholder, less current portion

 

3,067

 

2,943

 

Deferred income taxes

 

20,481

 

37,634

 

Due to a significant shareholder

 

7,019

 

8,535

 

Other liabilities

 

39,662

 

57,474

 

Total liabilities

 

456,597

 

462,939

 

 

 

 

 

 

 

Minority interest

 

 

4,209

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

2% Cumulative Series A convertible preferred stock, 3,077,868 and nil authorized, issued and outstanding, and $208,577 and $nil aggregate liquidation value as of December 31, 2006 and September 30, 2007, respectively

 

95,414

 

 

5% Cumulative Series B convertible preferred stock, 3,017,868 and nil authorized, issued and outstanding, and $216,502 and $nil aggregate liquidation value as of December 31, 2006 and September 30, 2007, respectively

 

93,554

 

 

250,000 authorized, nil issued and outstanding preferred stock, $0.01 par value as of September 30, 2207. Common shares, $0.01 par value, 71,390,738 and 500,000,000 authorized and 71,390,738 and 211,775,892 shares issued and outstanding as of December 31, 2006, and September 30, 2007, respectively;

 

714

 

2,117

 

Additional paid-in capital

 

494,325

 

994,128

 

Retained earnings (deficit)

 

5,978

 

(4,692

)

Accumulated other comprehensive income (loss)

 

(15,295

)

191,777

 

Treasury stock, 20,056 common share and 59,000 2% cumulative Series A convertible preferred stock and nil common share and cumulative Series A preferred stock as of December 31, 2006 and September 30, 2007, respectively;

 

(49,995

)

 

Total stockholders’ equity

 

624,695

 

1,183,330

 

Commitments and contingencies

 

 

 

 

 

Total liabilities, minority interest and stockholders’ equity

 

$

1,081,292

 

$

1,650,478

 

 



 

GENPACT LIMITED

Consolidated Statements of Income

(Unaudited)

(In thousands of U.S. Dollars, except share and per share data)

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,
2006

 

September 30,
2007

 

September 30,
2006

 

September 30,
2007

 

Net revenues

 

 

 

 

 

 

 

 

 

Net revenues from services - significant shareholder

 

$

111,047

 

$

122,862

 

$

330,358

 

$

367,852

 

Net revenues from services - others

 

50,853

 

91,590

 

104,395

 

221,691

 

Other revenues

 

486

 

110

 

486

 

1,492

 

Total net revenues

 

162,386

 

214,562

 

435,239

 

591,035

 

Cost of revenue

 

 

 

 

 

 

 

 

 

Services

 

93,148

 

132,991

 

256,887

 

370,356

 

Others

 

363

 

99

 

363

 

1,133

 

Total cost of revenue

 

93,511

 

133,090

 

257,250

 

371,489

 

Gross profit

 

68,875

 

81,472

 

177,989

 

219,546

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

40,813

 

62,849

 

113,839

 

167,002

 

Amortization of acquired intangible assets

 

10,200

 

9,358

 

31,917

 

27,987

 

Foreign exchange (gains) losses, net

 

4,235

 

(15,476

)

8,756

 

(28,613

)

Other operating income

 

(1,373

)

(810

)

(3,126

)

(2,533

)

Income from operations

 

15,000

 

25,551

 

26,603

 

55,703

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

(4,230

)

(619

)

(7,415

)

(7,697

)

 

 

 

 

 

 

 

 

 

 

Income before share of equity in loss of affiliate, minority interest and income taxes

 

10,770

 

24,932

 

19,188

 

48,006

 

 

 

 

 

 

 

 

 

 

 

Equity in loss of affiliate

 

 

61

 

 

141

 

 

 

 

 

 

 

 

 

 

 

Minority interest

 

 

2,062

 

 

5,754

 

 

 

 

 

 

 

 

 

 

 

Income taxes expense (benefit)

 

(2,035

)

6,486

 

(5,707

)

16,849

 

Net Income

 

$

12,805

 

$

16,323

 

$

24,895

 

$

25,262

 

 

 

 

 

 

 

 

 

 

 

Net earnings / (loss) per common share -

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.02

)

$

0.07

 

$

(0.10

)

$

(0.13

)

Diluted

 

$

(0.02

)

$

0.07

 

$

(0.10

)

$

(0.13

)

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares used in computing earnings (loss) per common share -

 

 

 

 

 

 

 

 

 

Basic

 

71,274,600

 

186,839,059

 

71,274,600

 

108,173,821

 

Diluted

 

71,274,600

 

195,698,132

 

71,274,600

 

108,173,821

 

 

 

 

 

 

 

 

 

 

 

Pro forma net earnings per common share -

 

 

 

 

 

 

 

 

 

Basic

 

 

 

$

0.08

 

 

 

$

0.13

 

Diluted

 

 

 

$

0.08

 

 

 

$

0.12

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of pro forma common shares used in computing net earnings per common share -

 

 

 

 

 

 

 

 

 

Basic

 

 

 

204,071,513

 

 

 

193,458,458

 

Diluted

 

 

 

212,930,586

 

 

 

202,584,315

 

 

 



 

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 Securities and Exchange Commission as non-GAAP financial measures: non-GAAP Adjusted income from operations and Adjusted net income. 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 reconciliations of Genpact’s GAAP financial statements to such non-GAAP measures should be carefully evaluated.

For its internal management reporting and budgeting purposes, Genpact’s management uses financial statements that do not include stock-based compensation expense related to employee stock options, amortization of acquired intangibles at formation and additional depreciation due to mark-to-market adjustment at formation for financial and operational decision-making, to evaluate period-to-period comparisons or for making comparisons of Genpact’s operating results to that of its competitors. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use when adopting FAS 123(R), Genpact’s management believes that providing non-GAAP financial measures that exclude stock-based compensation, amortization of acquired intangibles and additional depreciation due to mark-to-market adjustment at formation allows investors to make additional comparisons between Genpact’s operating results to those of other companies. The Company also believes that it is unreasonably difficult to provide its financial outlook in accordance with GAAP for a number of reasons including, without limitation, the Company’s inability to predict its future stock-based compensation expense under FAS 123(R).  Accordingly, Genpact believes that the presentation of non-GAAP 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 non-GAAP Adjusted income from operations and Adjusted net income versus income from operations and net income calculated in accordance with GAAP is that non-GAAP Adjusted income from operations and Adjusted net income exclude costs, including, stock-based compensation and amortization of acquired intangibles at formation, that are recurring. Stock-based compensation has been and will continue to be a significant recurring expense in Genpact’s business for the foreseeable future. Management compensates for this limitation by providing specific information regarding the GAAP amounts excluded from non-GAAP Adjusted income from operations and Adjusted net income and evaluating such non-GAAP financial measures with financial measures calculated in accordance with GAAP.

 

The following tables show the reconciliation of these adjusted financial measures from GAAP for the three months and nine months ended September 30, 2007 and September 30, 2006:

 

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands of U.S. Dollars, except share and per share data)

 

 

 

Quarter Ended,

 

Nine Months Ended,

 

 

 

September 30,
2006

 

September 30,
2007

 

September 30,
2006

 

September 30,
2007

 

 

 

 

 

 

 

 

 

 

 

Income from operations as per GAAP

 

$

15,000

 

$

25,551

 

$

26,603

 

$

55,703

 

Add: Amortization of acquired intangible assets resulting from Formation Accounting

 

10,439

 

8,654

 

32,748

 

27,169

 

Add: Additional depreciation due to fair value adjustment resulting from Formation Accounting

 

514

 

514

 

1,542

 

1,542

 

Add: Stock based compensation

 

1,105

 

3,678

 

3,584

 

8,909

 

Add: Gain / (loss) on interest rate swaps

 

(1,519

)

(189

)

1,048

 

90

 

Add: Other income

 

293

 

620

 

1,564

 

1,031

 

Less: Equity in (earnings)/loss of affiliate

 

 

(61

)

 

(141

)

Less: Minority interest

 

 

(2,062

)

 

(5,754

)

Adjusted income from operations

 

$

25,832

 

$

36,705

 

$

67,089

 

$

88,549

 

 

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands of U.S. Dollars, except share and per share data)

 

 

 

 

 

Quarter Ended,

 

Nine Months Ended,

 

 

 

September 30,
2006

 

September 30,
2007

 

September 30,
2006

 

September 30,
2007

 

 

 

 

 

 

 

 

 

 

 

Net income as per GAAP

 

$

12,805

 

$

16,323

 

$

24,895

 

$

25,262

 

Add: Amortization of acquired intangible assets resulting from Formation Accounting

 

10,439

 

8,654

 

32,748

 

27,169

 

Add: Additional depreciation due to fair value adjustment resulting from Formation Accounting

 

514

 

514

 

1,542

 

1,542

 

Add: Stock based compensation

 

1,105

 

3,678

 

3,584

 

8,909

 

Less: Tax Impact on amortization of acquired intangibles resulting from Formation Accounting

 

(960

)

(1,369

)

(2,880

)

(3,010

)

Adjusted net income

 

$

23,903

 

$

27,800

 

$

59,889

 

$

59,872

 

 

 

 

 

 

 

 

 

 

 

Diluted adjusted Earnings per share

 

 

 

$

0.13

 

 

 

$

0.30