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 2, 2016

 

GENPACT LIMITED

(Exact name of registrant as specified in its charter)

 

 

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:

 

 

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On November 2, 2016, Genpact Limited (the “Company”) issued a press release announcing its financial results for the three months ended September 30, 2016.  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 June 30, 2016, 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.

(d) Exhibits:

 

 

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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.

 

 

 

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EXHIBIT INDEX

 

 

 

 

Exhibit 99.1

 

 

Genpact Reports Results for the Third Quarter of 2016

Revenues of $649 Million, Up 5% (~7% on a constant currency basis)¹

Global Client BPO Revenues of $445 Million, Up 13% (~15% on a constant currency basis)

Diluted EPS of $0.33, Up 5%; Adjusted Diluted EPS² of $0.37, Up 6%

NEW YORK, November 2, 2016 — Genpact Limited (NYSE: G), a global leader in digitally-powered business process management and services, today announced financial results for the third quarter ended September 30, 2016.

Key Financial Results – Third Quarter 2016

“In the third quarter, our Global Client BPO revenues significantly accelerated to 15% constant currency growth.  We saw recent deal wins ramp and our transformational digital and analytics services, led by our highly differentiated Lean Digital^SM approach, continued to gain traction and grew more than 20%,” said N.V. “Tiger” Tyagarajan, Genpact’s president and CEO. “The fundamentals of our underlying Global Client BPO business remain strong and our pivot to Lean Digital^SM is clearly differentiating us in the marketplace.  As we finish the year, we continue to see pressure in our ITO business as clients across our verticals are taking a very cautious approach towards discretionary IT spending.”

Revenue Details – Third Quarter 2016

 

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 Adjusted diluted earnings per share is a non-GAAP measure. A reconciliation of GAAP diluted earnings per share and adjusted diluted earnings per share is attached to this release.

³ Adjusted income from operations and adjusted income from operations margin are non-GAAP measures. A reconciliation of GAAP income from operations and adjusted income from operations and a reconciliation of GAAP income from operations margin and adjusted income from operations margin are attached to this release.

 

 

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During the nine months ended September 30, 2016, GE divested certain businesses that Genpact continues to serve.  Historically, we have reclassified revenues from these divested GE businesses as Global Client revenues in each fiscal quarter beginning on the date of divestiture.  However, beginning with 2016, we will reclassify such revenue as Global Client revenue only at the end of each fiscal year.  We believe that this change will allow us to provide a more consistent view of the trends underlying our Global Client and GE businesses. If we had reclassified the revenue from such GE-divested businesses during the third quarter, Global Client revenues for the quarter ended September 30, 2016 would have been $563 million and GE revenues would have been $85 million.

Cash Flow from Operations

Other Metrics as of September 30, 2016

2016 Outlook

Genpact now expects:

 

⁴ Adjusted income from operations margin is a non-GAAP measure.   A reconciliation of the outlook for GAAP income from operations margin and adjusted income from operations margin is attached to this release.

⁵ Adjusted diluted earnings per share is a non-GAAP measure.  A reconciliation of the outlook for GAAP diluted earnings per share and adjusted diluted earnings per share is attached to this release.   

 

 

 

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Conference Call to Discuss Financial Results

Genpact’s management will host an hour-long conference call beginning at 4:30 p.m. ET on November 2, 2016 to discuss the company’s performance for the third quarter of 2016. To participate, callers can dial +1 (877) 654-0173 from within the U.S. or +1 (281) 973-6289 from any other country. Thereafter, callers will be prompted to enter the participant code, 82507920.

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 the Genpact website 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 (NYSE: G) stands for “generating business impact.”  We are a global leader in digitally-powered business process management and services. We architect the Lean Digital^SM enterprise through our patented Smart Enterprise Processes (SEP^SM) framework that reimagines our clients’ operating models end-to-end, including the middle and back offices.  This creates Intelligent Operations^SM that we help design, transform, and run. The impact on our clients is a high return on transformation investments through growth, efficiency, and business agility. For two decades, first as a General Electric division and later as an independent company, we have been passionately serving our clients. Today, we generate impact for a few hundred strategic clients, including approximately one-fifth of the Fortune Global 500, and have grown to over 75,000 people in 25 countries, with key offices in New York City. The resulting business process and industry domain expertise and experience running complex operations are a unique heritage and focus that help us drive the best choices across technology, analytics, and organizational design. For additional 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 outsourcing and information technology services sectors, the risks and uncertainties arising from our past and future acquisitions, our ability to convert bookings to revenues, 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, foreign currency fluctuations, 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 undertakes no obligation to update any forward-looking statements that may be made from time to time by or on behalf of Genpact.

Contacts

 

 

 

 

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GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

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

 

 

 

 

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GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

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

 

 

 

 

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GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

 

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Reconciliation of 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:

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 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, amortization of related acquired intangibles, and amortization of acquired intangibles at the company’s formation in 2004 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 the amortization of acquired intangibles thereof, since July 2012 Genpact’s management has used 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 those of its competitors. For the same reasons, beginning in April 2016, Genpact’s management also excludes the impairment of acquired intangible assets from the financial statements it uses for internal management purposes.

Acquisition-related expenses are excluded in the period in which an acquisition is consummated. Genpact’s management also uses financial statements that exclude stock-based compensation expense. 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 such expenses allows investors to make additional comparisons between Genpact’s operating results and those of other companies. Additionally, in its calculations of such non-GAAP financial measures, Genpact’s management has adjusted certain gains or losses attributable to equity-method investments and non-controlling interests because management views these interests as part of its ongoing operations. For the purpose of calculating adjusted net income, the combined current and deferred tax effect is determined by multiplying each pre-tax adjustment by the applicable statutory income tax rate.

Genpact’s management provides information about revenues on a constant currency basis so that the revenues may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating period-to-period comparisons of our true business performance. Revenues on a constant currency basis are calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates adjusted for hedging gains/losses in such period.

Accordingly, Genpact believes that the presentation of adjusted income from operations, adjusted income from operations margin, adjusted net income, adjusted diluted earnings per share and revenues on a constant currency basis, 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 certain recurring costs, namely stock-based compensation and amortization of acquired intangibles. 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 and nine months ended September 30, 2015 and 2016:

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 

 

⁶ See “Reconciliation of Non-GAAP Financial Measures to GAAP Measures” above for a description of the amortization expenses included in this item.

 

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The following tables show the reconciliation of forward-looking adjusted financial measures from GAAP for the year ending December 31, 2016:

Reconciliation of Outlook for Adjusted Income from Operations Margin

(Unaudited)

 

 

Reconciliation of Outlook for Adjusted Diluted EPS⁷

(Unaudited)

(Per share data)

 

 

⁷ Due to rounding, the numbers presented in this table may not add up precisely to the totals provided.

 

 

Genpact Q3 2016 Earnings Presentation November 2, 2016 Ticker (NYSE: G) Exhibit 99.2

Forward-looking Statements These materials contain 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 outsourcing and information technology services sectors, the risks and uncertainties arising from our past and future acquisitions, our ability to convert bookings to revenues, 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, foreign currency fluctuations, 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 or on the Investor Relations section of our website, www.genpact.com. 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 undertakes no obligation to update any forward-looking statements that may be made from time to time by or on behalf of Genpact. Non-GAAP Financial Measures These materials also include measures defined by the SEC as non-GAAP financial measures. Genpact believes that these non-GAAP measures can provide useful supplemental information to investors regarding financial and business trends relating to its financial condition and results of operations when read in conjunction with the Company’s reported results. Reconciliations of these non-GAAP measures from GAAP are available in this presentation and in our earnings release dated November 2, 2016.

Q3 2016 – Key Financial Highlights Year-Over-Year Comparisons: Total revenue: +5% (~ +7% on constant currency basis)(1) Global Clients revenue: +8% (~ +10% on constant currency basis) Global Client BPO revenue: +13% (~ +15% on constant currency basis) GE revenue: -8% (~ -8% on constant currency basis) Adjusted income from operations(2) increased 7%, with a margin of 16.1% Adjusted diluted earnings per share(2) grew 6% YoY to $0.37 Global Client growth was broad-based across most of our target verticals and service lines, including: BFS, CPG, Life Sciences, Insurance and High Tech; and Finance & Accounting, Core Industry Vertical Operations and Transformation services Global Client ITO revenue continues to be impacted by lower levels of technology spending in the Investment Banking and Healthcare industries. Notes: 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. Adjusted income from operations and adjusted diluted EPS are non-GAAP measures. Q3 ‘16 GAAP income from operations margin was 13.4% and GAAP diluted EPS was $0.33.

Healthy Pipeline and Continued Momentum for Lean DigitalSM Our pipeline continues to grow across most of our targeted industry verticals, service lines and geographies Lean DigitalSM is helping clients’ operations transform to more agile and nimble business models M&A in chosen areas remain an investment priority to add digital and analytics capabilities

Total revenue growth at 5% (~7% on a constant currency basis) Q3 2016 Global Client revenue grew 8% (~10% on a constant currency basis) Global Client BPO revenues increased 13% (~15% on a constant currency basis) Global Client ITO revenues declined 9% Global Clients GE BPO ITO 5% YoY Growth% 8% (8)% 5% (8)% 9% YoY Growth% Q3 ‘15 Q3 ‘16 Q3 ‘15 Q3 ‘16 ($ in millions) ($ in millions) $618 $649 $649 $618 Q3 2016 Revenue Summary

Number of clients Notes: Relationship size = annual Genpact revenues from client relationships based on last four rolling quarters. Relationship Size(1) Client Relationships Remain Strong

Q3‘15 Q3’16                     YoY Revenue $617.8 $648.8 5.0% Cost of Revenue 375.8 392.4 4.4% Gross Profit 242.0 256.4 5.9% Gross Profit % of Revenue 39.2% 39.5% 30 bps SG&A $144.7 $157.0 8.5% SG&A % of Revenue 23.4% 24.2% 80 bps Adjusted Income from Operations(1) $97.1 $104.2 7.3% Adjusted Income from Operations Margin(1) 15.7% 16.1% 40 bps ($ in millions) Notes: Adjusted income from operations and adjusted income from operations margin are non-GAAP measures. Income from operations and the related margin were $87.3 million (14.1%) in Q3 ‘15 and $87.1 million (13.4%) in Q3 ’16. Q3 Adjusted Operating Income Margins Increased Due to Productivity and FX

EPS Year-over-Year Bridge Q3 ‘15 Q3 ‘16 Adjusted Net Income ($ millions) (3)76.978.2 Diluted Shares Outstanding (millions)(4)217.6209.4 31 3 FX Re-measurement loss in Q3’16 vs. gain in Q3’15 Q3 ‘15 GAAP EPS 33 (Cents per share) Net Adjustments(1) 35 4 Net Adjustments(1) Q3 ‘15 Adjusted EPS Q3 ‘16 Adjusted EPS(3) Q3 ‘16 GAAP EPS Higher Adjusted Income from Operations(3) 4 Increase Decrease Notes: Adjustments primarily include amortization and impairment of acquired intangible assets, acquisition-related expenses and stock-based compensation expenses. Net of shares issued, retired and dilution impact. Adjusted net income, adjusted income from operations and adjusted EPS are non-GAAP measures. Weighted average number of diluted shares outstanding. This includes the impact of 6.3 million shares repurchased in Q3’ 2016. - The above bridge reflects only significant variance items year-over-year and is illustrative and subject to rounding. - EPS = Diluted earnings per share 37 Lower taxes 2 Lower share count(2) 1 1 Higher Net Interest Expense 1

Q3 2016 cash from operations up $5 millions primarily driven by higher operating income Q3 ‘15 Q3 ‘16 Notes: 1) Cash and Liquid Assets = Cash and cash equivalents and short-term deposits. ($ in millions) Q3 ’15 Q2’16 Q3 ‘16 Days Sales Outstanding80 85 85 Cash and Liquid Assets ($ millions)(1) 468 407 419 Cash from Operations

FY 2016 Revenues ($B) 2.57 – 2.58 Adjusted Income from Operations - Margin(2) 15.5% Adjusted Diluted Earnings Per Share(1)(2) $1.42 - $1.43 Other Metrics Cash Flow from Operations (YoY Growth) ~6% Effective Tax Rate 20% - 21% Capital Expenditure (% of revenue) ~3% Full Year 2016 Outlook Notes: Adjusted diluted EPS estimate assumes: weighted average shares outstanding of approximately 210.9 million; $3.2 million favorable impact of balance sheet related foreign exchange gains or losses; and 2016 effective tax rate of 20 – 21%. Adjusted income from operations margin and adjusted diluted EPS are non-GAAP measures.

Annexure 1: Reconciliation of Adjusted Income from Operations – Q3 2016 Quarter ended September 30th, (USD, in thousands) 2015   2016 Income from operations $ 87,343 $ 87,124 Add: Stock-based compensation 6,195 4,828 Add: Amortization and impairment of acquired intangible assets (1) 6,015 6,519 Add: Acquisition-related expenses - 1,334 Add: Other income (expense), net 999 5,791 Less: Loss on equity-method investment activity, net (3,432) (2,117) Add: Net loss attributable to redeemable non-controlling interest - 734 Adjusted income from operations $ 97,120 $ 104,213 Adjusted income from operations margin 15.7% 16.1% Notes: Prior to July 2012, amortization expenses of acquired intangibles of significant acquisitions were excluded from the computation of adjusted income from operations. Since July 2012, amortization expenses of acquired intangibles of all acquisitions are excluded from such computation. Beginning April 2016, management also excludes the impairment of acquired intangible assets from such computation.

Annexure 2: Reconciliation of Adjusted Net Income – Q3 2016 (USD, in thousands, except per share data) Quarter ended September 30th, 2015   2016 Net income attributable to Genpact Limited shareholders $ 68,050   $ 68,779 Add: Stock-based compensation 6,195 4,828 Add: Amortization and impairment of acquired intangible assets (1) 6,015 6,519 Add: Acquisition-related expenses - 1,334 Less: Tax impact on stock-based compensation (1,489) (1,140) Less: Tax impact on amortization and impairment of acquired intangibles (1,873) (2,087) Less: Tax impact on acquisition-related expenses - (80) Adjusted net income $ 76,898 $ 78,153 Adjusted diluted earnings per share $ 0.35 $ 0.37 Notes: Prior to July 2012, amortization expenses of acquired intangibles of significant acquisitions were excluded from the computation of adjusted income from operations. Since July 2012, amortization expenses of acquired intangibles of all acquisitions are excluded from such computation. Beginning April 2016, management also excludes the impairment of acquired intangible assets from such computation.

Annexure 3: Reconciliation of Outlook for Adjusted Income from Operations Margin Year ending December 31st, 2016 Income from operations margin   13.4% Add: Estimated stock-based compensation 1.0% Add: Estimated amortization and impairment of acquired intangible assets   1.0% Add: Estimated acquisition-related expenses 0.1% Add: Estimated other income (expense), net   0.3% Less: Estimated loss on equity-method investment activity, net (0.4)% Add: Estimated net loss attributable to redeemable non-controlling interest   0.1% Adjusted income from operations margin 15.5%

Annexure 4: Reconciliation of Outlook for Adjusted Diluted EPS (Per share data) Year ending December 31st, 2016 Lower End Upper End Diluted EPS   1.25 1.26 Add: Estimated stock-based compensation 0.11 0.11 Add: Estimated amortization and impairment of acquired intangible assets   0.11 0.11 Add: Estimated acquisition-related expenses 0.01 0.01 Less: Estimated tax impact on stock-based compensation   (0.03) (0.03) Less: Estimated tax impact on amortization and impairment of acquired intangibles (0.04) (0.04) Less: Estimated tax impact on acquisition-related expenses   - - Adjusted diluted EPS 1.42 1.43 Note: Due to rounding, the numbers presented above may not add up precisely to the totals provided.

Thank you