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): May 5, 2014

 

 

GENPACT LIMITED

(Exact name of registrant as specified in its charter)

 

 

 

Bermuda		001-33626		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 12, 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:

 

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

 

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

 

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

 

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

 

 

 

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Item 2.02

Results of Operations and Financial Condition.

On May 5, 2014, Genpact Limited (the “Company”) issued a press release announcing its financial results for the three months ended March 31, 2014. The Company is furnishing this Form 8-K pursuant to Item 2.02, “Results of Operations and Financial Condition.” A copy of the press release, attached hereto as Exhibit 99.1, and a slide presentation to be presented during the conference call to discuss the Company’s financial results for the three months ended March 31, 2014, attached hereto as Exhibit 99.2, are incorporated herein by reference.

The information in this report (including Exhibits 99.1 and 99.2) is being furnished pursuant to Item 2.02 and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

The Company is making reference to non-GAAP financial information in the press release and slide presentation and on the conference call. A reconciliation of the non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release and slide presentation.

 

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits:

 

Exhibit 99.1		Press release dated May 5, 2014
Exhibit 99.2		Slide presentation to be presented during the conference call to discuss the Company’s financial results for the three months ended March 31, 2014

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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: May 5, 2014						By:		/s/ Heather White
						Name:		Heather White
						Title:		Senior Vice President

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EXHIBIT INDEX

 

Exhibit		Description
99.1		Press release dated May 5, 2014
99.2		Slide presentation to be presented during the conference call to discuss the Company’s financial results for the three months ended March 31, 2014

Exhibit 99.1

 

Genpact Reports Results for the First Quarter of 2014

Revenues of $528.2 Million, Up 4.8%

Net Income of $50.6 Million, Up 8.3%

Adjusted Income from Operations of $86.4 Million, Up 4.3%

NEW YORK, May 5, 2014 — Genpact Limited (NYSE: G), a global leader in transforming and running business processes and operations, today announced financial results for the first quarter ended March 31, 2014.

Key Financial Results – First Quarter 2014

 

•

Revenues were $528.2 million, up 4.8% from $503.8 million in the first quarter of 2013. Revenues from Global Clients were up 7.1%, and business process management revenues from Global Clients were up 6.2%.

 

•

Income from operations was $77.2 million, up 4.5% from $73.9 million in the first quarter of 2013.

 

•

Net income attributable to Genpact Limited shareholders was $50.6 million, up 8.3% from $46.7 million in the first quarter of 2013. Net income margin for the first quarter of 2014 was 9.6%, up from 9.3% in the first quarter of 2013.

 

•

Diluted earnings per common share were $0.21, up from $0.20 per share in the first quarter of 2013.

 

•

Adjusted income from operations was $86.4 million, up 4.3% from $82.8 million in the first quarter of 2013.

 

•

Adjusted income from operations margin was 16.4%, unchanged from the first quarter of 2013.

 

•

Adjusted diluted earnings per share were $0.24, up from $0.23 in the first quarter of 2013.

N.V. ‘Tiger’ Tyagarajan, Genpact’s president and CEO, said, “In the first quarter of 2014, Genpact delivered growth in revenues, adjusted income from operations, net income and earnings per share. The year is off to a good start as we execute on our growth strategy. During the quarter, we closed a large, new transformative engagement with an existing client that also adds capabilities in a targeted vertical, consumer packaged goods. More recently, we agreed to acquire Pharmalink Consulting, which will add new domain expertise in the regulatory affairs space of life sciences, and announced a strategic partnership with Oliver Wyman, a global leader in risk consulting, to build and take to market new end-to-end risk solutions for the increasingly regulated financial services vertical.”

Revenues from Global Clients grew 7.1% over the first quarter of 2013. Business process management revenues from Global Clients grew by 6.2%, led by growth in the capital markets, consumer packaged goods, life sciences and healthcare verticals. Revenues from Global Clients represented approximately 79.1% of Genpact’s total revenues, or $418.0 million, with the remaining 20.9% of revenues, or $110.2 million, coming from GE. GE revenues declined 3.1% from the first quarter of 2013, adjusted for dispositions by GE of businesses that Genpact continues to serve as Global Clients.

In the 12 months ending March 31, 2014, 81 client relationships each contributed more than $5 million in annual revenue, up from 75 such relationships as of March 31, 2013. This includes client relationships with more than $15 million in annual revenue increasing from 24 to 26, and client relationships with more than $25 million in annual revenue increasing from 12 to 13.

75.3% of Genpact’s revenues for the quarter came from business process management services, compared to 76.2% in the first quarter of 2013. Revenues from IT services accounted for 24.7% of total revenues for the quarter, up from 23.8% in the first quarter of 2013.

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Genpact generated approximately $14.2 million of cash from operations in the quarter, compared to $31.5 million in the first quarter of 2013. Genpact had approximately $567.3 million in cash and cash equivalents as of March 31, 2014. Subsequent to the quarter, on April 8, 2014, we purchased $303 million in value of our common shares, or approximately 17.3 million shares, at a price of $17.50 per share.

As of March 31, 2014, Genpact had approximately 64,900 employees worldwide, an increase from approximately 60,200 as of March 31, 2013. Genpact’s employee attrition rate for the quarter was approximately 22%, measured from the first day of employment, down from 24% for the same period in 2013. Annualized revenue per employee for the quarter was $33,800, compared to $34,500 for the quarter ended March 31, 2013.

2014 Outlook

Tyagarajan added, “2014 is a pivotal year for Genpact as we position ourselves for accelerated long-term growth. Our pipeline continues to be healthy, with good inflows of larger, transformative deals, as we continue to invest in client-facing teams and domain experts. We continue to expect 2014 revenues of $2.22 to $2.26 billion and adjusted income from operations margin in a range of 15.0 – 15.5%. Our guidance excludes our recent agreement to acquire Pharmalink Consulting, which we expect to close by mid-year.”

Conference Call to Discuss Financial Results

Genpact management will host an hour-long conference call beginning at 4:30 p.m. ET on May 5, 2014 to discuss the company’s performance for the quarter ended March 31, 2014. To participate, callers can dial +1 (866) 318-8619 from within the U.S. or +1 (617) 399-5138 from any other country. Thereafter, callers will be prompted to enter the participant code, 72990759.

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 Genpact’s website, www.genpact.com, 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 Limited (NYSE: G) is a global leader in transforming and running business processes and operations, including those that are complex and industry-specific. Our mission is to help clients become more competitive by making their enterprises more intelligent through becoming more adaptive, innovative, globally effective and connected to their own clients. Genpact stands for Generating Impact – visible in tighter cost management as well as better management of risk, regulations and growth for hundreds of long-term clients including more than 100 of the Fortune Global 500. Our approach is distinctive – we offer an unbiased, agile combination of smarter processes, crystallized in our Smart Enterprise Processes (SEP^SM) proprietary framework, along with analytics and technology, which limits upfront investments and enhances future adaptability. We have global critical mass – 64,000+ employees in 24 countries with key management and corporate offices in New York City – while remaining flexible and collaborative, and a management team that drives client partnerships personally. Our history is unique – behind our single-minded 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 15 years. For more information, visit 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, 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 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 does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of Genpact.

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Contact

 

Investors		Bharani Bobba
		+1 (646) 624-5951
		bharani.bobba@genpact.com
Media		Gail Marold
		+1 (919) 345-3899
		gail.marold@genpact.com

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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, 2013				As of March 31, 2014
Assets
Current assets
Cash and cash equivalents		$	571,276			$	567,266
Accounts receivable, net			504,714				513,145
Accounts receivable from related party, net			403				71
Deferred tax assets			60,638				52,564
Prepaid expenses and other current assets			139,113				170,434
Total current assets		$	1,276,144			$	1,303,480
Property, plant and equipment, net			173,204				170,308
Deferred tax assets			89,305				76,048
Investment in equity affiliates			384				418
Intangible assets, net			99,116				97,326
Goodwill			953,849				964,088
Other assets			97,365				91,898
Total assets		$	2,689,367			$	2,703,566

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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, 2013				As of March 31, 2014
Liabilities and equity
Current liabilities
Current portion of long-term debt		$	4,263			$	4,269
Current portion of capital lease obligations			1,405				1,475
Accounts payable			18,412				18,447
Income taxes payable			15,007				22,267
Deferred tax liabilities			614				561
Accrued expenses and other current liabilities			421,992				378,416
Total current liabilities		$	461,693			$	425,435
Long-term debt, less current portion			653,601				652,523
Capital lease obligations, less current portion			2,657				2,752
Deferred tax liabilities			4,464				4,421
Other liabilities			242,884				189,343
Total liabilities		$	1,365,299			$	1,274,474
Shareholders’ equity
Preferred shares, $0.01 par value, 250,000,000 authorized, none issued			—				—
Common shares, $0.01 par value, 500,000,000 authorized, 231,262,576 and 233,347,651 issued and outstanding as of December 31, 2013 and March 31, 2014, respectively			2,310				2,331
Additional paid-in capital			1,268,344				1,266,733
Retained earnings			511,699				562,312
Accumulated other comprehensive income (loss)			(459,614	)			(402,949	)
Genpact Limited shareholders’ equity		$	1,322,739			$	1,428,427
Noncontrolling interest			1,329				665
Total equity		$	1,324,068			$	1,429,092
Total liabilities and equity		$	2,689,367			$	2,703,566

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GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data and share count)

 

		Three months ended March 31,
		2013				2014
Net revenues
Net revenues from services - others		$	503,657			$	528,119
Net revenues from services - related party			191				71
Total net revenues			503,848				528,190
Cost of revenue
Services			311,726				324,289
Total cost of revenue			311,726				324,289
Gross profit		$	192,122			$	203,901
Operating expenses:
Selling, general and administrative expenses			113,224				122,498
Amortization of acquired intangible assets			5,551				6,018
Other operating (income) expense, net			(602	)			(1,862	)
Income from operations		$	73,949			$	77,247
Foreign exchange (gains) losses, net			3,382				3,593
Other income (expense), net			(5,111	)			(6,533	)
Income before equity-method investment activity, net and income tax expense		$	65,456			$	67,121
Equity-method investment activity, net			(44	)			(20	)
Income before income tax expense		$	65,500			$	67,141
Income tax expense			17,248				16,288
Net Income		$	48,252			$	50,853
Net income attributable to noncontrolling interest			1,515				240
Net income attributable to Genpact Limited shareholders		$	46,737			$	50,613
Net income available to Genpact Limited common shareholders		$	46,737			$	50,613
Earnings per common share attributable to Genpact Limited common shareholders
Basic		$	0.21			$	0.22
Diluted		$	0.20			$	0.21
Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders
Basic			227,227,226				232,093,917
Diluted			233,620,751				237,275,651

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GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

		Three months ended March 31,
		2013				2014
Operating activities
Net income attributable to Genpact Limited shareholders		$	46,737			$	50,613
Net income attributable to noncontrolling interest			1,515				240
Net income		$	48,252			$	50,853
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization			13,579				12,341
Amortization of debt issue costs (including loss on extinguishment of debt)			596				801
Amortization of acquired intangible assets			5,551				6,018
Reserve for doubtful receivables			3,450				197
Unrealized (gain) loss on revaluation of foreign currency asset/liability			(733	)			3,295
Equity-method investment activity, net			(44	)			(20	)
Stock-based compensation expense			6,526				4,973
Deferred income taxes			254				123
Others, net			52				741
Change in operating assets and liabilities:
Increase in accounts receivable			(8,582	)			(7,901	)
Increase in other assets			(7,301	)			(16,968	)
Increase (Decrease) in accounts payable			(1,782	)			124
Decrease in accrued expenses and other current liabilities			(42,953	)			(34,779	)
Increase in income taxes payable			3,426				7,194
Increase (Decrease) in other liabilities			11,257				(12,751	)
Net cash provided by operating activities		$	31,548			$	14,241
Investing activities
Purchase of property, plant and equipment			(14,623	)			(14,530	)
Proceeds from sale of property, plant and equipment			135				103
Short term deposits placed			(18,675	)			—
Redemption of short term deposits			18,675				—
Payment for business acquisitions, net of cash acquired			(46,134	)			—
Proceeds from divestiture of business, net of cash divested			(1,049	)			—
Net cash used for investing activities		$	(61,671	)		$	(14,427	)
Financing activities
Repayment of capital lease obligations			(461	)			(502	)
Repayment of long-term debt			(1,687	)			(1,687	)
Proceeds from Short-term borrowings			35,000				—
Proceeds from issuance of common shares under stock-based compensation plans			16,060				6,061
Payment for net settlement of stock-based awards			(3,136	)			(8,099	)
Payment of earn-out consideration			(85	)			—
Distribution to noncontrolling interest			(1,816	)			(899	)
Net cash provided by (used for) financing activities		$	43,875			$	(5,126	)
Effect of exchange rate changes			1,593				1,302
Net increase (decrease) in cash and cash equivalents			13,752				(5,312	)
Cash and cash equivalents at the beginning of the period			459,228				571,276
Cash and cash equivalents at the end of the period		$	474,573			$	567,266
Supplementary information
Cash paid during the period for interest		$	8,016			$	6,143
Cash paid during the period for income taxes		$	25,363			$	21,907
Property, plant and equipment acquired under capital lease obligation		$	787			$	534

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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:

 

•

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 and amortization of related acquired intangibles 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.

Additionally, Genpact’s management uses financial statements that exclude stock-based compensation expense and amortization of acquired intangibles at formation in 2004. 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 the above 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.

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The following tables show the reconciliation of these adjusted financial measures from GAAP for the three months ended March 31, 2013 and 2014:

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 

		Three months ended March 31,
		2013				2014
Income from operations per GAAP		$	73,949			$	77,247
Add: Amortization of acquired intangible assets resulting from Formation Accounting			804				507
Add: Amortization of acquired intangible assets relating to acquisitions			3,410				3,984
Add: Stock-based compensation			6,526				4,973
Add: Other income (expense)			(447	)			(131	)
Add: Gain (Loss) on Equity-method investment activity, net			44				20
Less: Net income attributable to noncontrolling interest			(1,515	)			(240	)
Adjusted income from operations		$	82,771			$	86,360

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 

		Three months ended March 31,
		2013				2014
Net income per GAAP		$	46,737			$	50,613
Add: Amortization of acquired intangible assets resulting from Formation Accounting			804				507
Add: Amortization of acquired intangible assets relating to acquisitions			3,410				3,984
Add: Stock-based compensation			6,526				4,973
Less: Tax impact on amortization of acquired intangibles resulting from Formation Accounting			(141	)			(101	)
Less: Tax impact on amortization of acquired intangibles relating to acquisitions			(1,162	)			(1,375	)
Less: Tax Impact on stock-based compensation			(1,690	)			(1,305	)
Adjusted net income		$	54,484			$	57,296
Adjusted diluted earnings per share		$	0.23			$	0.24

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