Genpact Reports First Quarter 2018 Results
"We had a strong start to the year, highlighted by double-digit growth in a number of our chosen verticals and service lines, leading to mid-teen Global Client BPO revenue growth on a constant currency basis," said "Tiger" Tyagarajan,
Key Financial Results – First Quarter 2018
- Total revenue was
$689 million , up 11% year-over-year (up ~9% on a constant currency basis). - Income from operations was
$64 million , down 19% year-over-year, with a corresponding margin of 9.3%. Adjusted income from operations was$97 million , up 11% year-over-year, with a corresponding margin of 14.1%.3 - Diluted earnings per share were
$0.33 , up 25% year-over-year, and adjusted diluted earnings per share were$0.39 , up 27% year-over-year. The current quarter diluted earnings per share includes a$0.02 foreign currency gain resulting from balance sheet re-measurement. Genpact repurchased approximately 3.2 million of its common shares during the quarter for total consideration of$100 million at an average price per share of$31.44 .
Revenue Details – First Quarter 2018
- Revenue from Global Clients was
$631 million , up 14% year-over-year (up ~12% on a constant currency basis), representing approximately 92% of total revenues. - Revenue from GE was
$58 million , down 16% year-over-year, representing approximately 8% of total revenues. - Total BPO revenue was
$574 million , up 12% year-over-year, representing approximately 83% of total revenues. - Global Client BPO revenue was
$540 million , up 17% year-over-year (up ~15% on a constant currency basis). - GE BPO revenue was
$34 million , down 31% year-over-year. - Total IT revenue was
$115 million , up 3% year-over-year, representing approximately 17% of total revenues. - Global Client IT revenue was
$91 million , down 1% year-over-year. - GE IT revenue was
$24 million , up 19% year-over-year.
Cash Flow from Operations
Genpact utilized$27 million of cash in operations in the first quarter of 2018, compared to generating$31 million in cash from operations during the first quarter of 2017.
2018 Outlook
- Total revenue for the full year 2018 of
$2.93 to $3.0 billion . - Global Client revenue growth in the range of 9% to 11%, both on an as-reported and constant currency basis.
- Adjusted income from operations margin4 of approximately 15.8%.
Genpact now expects:- Adjusted diluted EPS5 to increase to
$1.72 to $1.76 , from our prior outlook of$1.70 to $1.74 .
Conference Call to Discuss Financial Results
A live webcast of the call will also be made available on the Genpact Investor Relations website at http://investors.genpact.com. For those who cannot join the call live, a replay will be archived on the
About
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 and other laws and regulations, 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
Contacts |
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Investors |
Roger Sachs, CFA |
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+1 (203) 808-6725 |
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Media |
Gail Marold +1 (919) 345-3899 |
GENPACT LIMITED AND ITS SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (In thousands, except per share data and share count) |
|||||||
As of December 31, |
As of March 31, |
||||||
2017 |
2018 |
||||||
Assets |
|||||||
Current assets |
|||||||
Cash and cash equivalents |
$ |
504,468 |
$ |
424,226 |
|||
Accounts receivable, net |
693,085 |
703,066 |
|||||
Prepaid expenses and other current assets |
236,342 |
199,208 |
|||||
Total current assets |
$ |
1,433,895 |
$ |
1,326,500 |
|||
Property, plant and equipment, net |
207,030 |
205,035 |
|||||
Deferred tax assets |
76,929 |
81,734 |
|||||
Investment in equity affiliates |
886 |
919 |
|||||
Intangible assets, net |
131,590 |
125,781 |
|||||
Goodwill |
1,337,122 |
1,337,051 |
|||||
Contract cost assets |
— |
162,435 |
|||||
Other assets |
262,169 |
157,672 |
|||||
Total assets |
$ |
3,449,621 |
$ |
3,397,127 |
|||
Liabilities and equity |
|||||||
Current liabilities |
|||||||
Short-term borrowings |
$ |
170,000 |
$ |
275,000 |
|||
Current portion of long-term debt |
39,226 |
39,237 |
|||||
Accounts payable |
15,050 |
13,811 |
|||||
Income taxes payable |
30,026 |
40,026 |
|||||
Accrued expenses and other current liabilities |
584,482 |
503,116 |
|||||
Total current liabilities |
$ |
838,784 |
$ |
871,190 |
|||
Long-term debt, less current portion |
1,006,687 |
996,999 |
|||||
Deferred tax liabilities |
6,747 |
7,083 |
|||||
Other liabilities |
168,609 |
155,858 |
|||||
Total liabilities |
$ |
2,020,827 |
$ |
2,031,130 |
|||
Redeemable non-controlling interest |
4,750 |
— |
|||||
Shareholders' equity |
|||||||
Preferred shares, $0.01 par value, 250,000,000 authorized, none issued |
— |
— |
|||||
Common shares, $0.01 par value, 500,000,000 authorized, 192,825,207 |
1,924 |
1,903 |
|||||
Additional paid-in capital |
1,421,368 |
1,422,897 |
|||||
Retained earnings |
355,982 |
321,916 |
|||||
Accumulated other comprehensive income (loss) |
(355,230) |
(380,719) |
|||||
Total equity |
$ |
1,424,044 |
$ |
1,365,997 |
|||
Total liabilities, redeemable non-controlling interest and equity |
$ |
3,449,621 |
$ |
3,397,127 |
GENPACT LIMITED AND ITS SUBSIDIARIES Consolidated Statements of Income (Unaudited) (In thousands, except per share data and share count) |
|||||||
Three months ended March 31, |
|||||||
2017 |
2018 |
||||||
Net revenues |
$ |
622,995 |
$ |
688,912 |
|||
Cost of revenue |
383,337 |
444,324 |
|||||
Gross profit |
$ |
239,658 |
$ |
244,588 |
|||
Operating expenses: |
|||||||
Selling, general and administrative expenses |
160,858 |
171,109 |
|||||
Amortization of acquired intangible assets |
7,242 |
9,936 |
|||||
Other operating (income) expense, net |
(7,538) |
(218) |
|||||
Income from operations |
$ |
79,096 |
$ |
63,761 |
|||
Foreign exchange gains (losses), net |
(4,913) |
4,798 |
|||||
Interest income (expense), net |
(5,493) |
(8,100) |
|||||
Other income (expense), net |
553 |
15,550 |
|||||
Income before equity-method investment activity, net and income tax expense |
$ |
69,243 |
$ |
76,009 |
|||
Equity-method investment activity, net |
(4,558) |
— |
|||||
Income before income tax expense |
$ |
64,685 |
$ |
76,009 |
|||
Income tax expense |
12,245 |
12,075 |
|||||
Net income |
$ |
52,440 |
$ |
63,934 |
|||
Net loss attributable to redeemable non-controlling interest |
898 |
761 |
|||||
Net income attributable to Genpact Limited shareholders |
$ |
53,338 |
$ |
64,695 |
|||
Net income available to Genpact Limited common shareholders |
$ |
53,338 |
$ |
64,695 |
|||
Earnings per common share attributable to Genpact Limited common shareholders |
|||||||
Basic |
$ |
0.27 |
$ |
0.34 |
|||
Diluted |
$ |
0.26 |
$ |
0.33 |
|||
Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders |
|||||||
Basic |
199,069,528 |
192,816,626 |
|||||
Diluted |
202,655,937 |
196,288,569 |
GENPACT LIMITED AND ITS SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (In thousands) |
|||||||
Three months ended March 31, |
|||||||
2017 |
2018 |
||||||
Operating activities |
|||||||
Net income attributable to Genpact Limited shareholders |
$ |
53,338 |
$ |
64,695 |
|||
Net loss attributable to redeemable non-controlling interest |
(898) |
(761) |
|||||
Net income |
$ |
52,440 |
$ |
63,934 |
|||
Adjustments to reconcile net income to net cash provided by (used for) operating activities: |
|||||||
Depreciation and amortization |
14,139 |
15,836 |
|||||
Amortization of debt issuance costs |
375 |
488 |
|||||
Amortization of acquired intangible assets |
7,242 |
9,936 |
|||||
Reserve for doubtful receivables |
— |
(103) |
|||||
Unrealized loss (gain) on revaluation of foreign currency asset/liability |
8,757 |
(8,525) |
|||||
Equity-method investment activity, net |
4,558 |
— |
|||||
Stock-based compensation expense |
4,986 |
7,787 |
|||||
Deferred income taxes |
(2,890) |
(4,625) |
|||||
Others, net |
(4,301) |
(28) |
|||||
Change in operating assets and liabilities: |
|||||||
Decrease (increase) in accounts receivable |
19,649 |
(6,025) |
|||||
Increase in prepaid expenses, other current assets, contract cost assets and |
(12,025) |
(37,008) |
|||||
Decrease in accounts payable |
(928) |
(1,224) |
|||||
Decrease in accrued expenses, other current liabilities and other liabilities |
(69,131) |
(77,734) |
|||||
Increase in income taxes payable |
8,157 |
9,969 |
|||||
Net cash provided by/(used for) operating activities |
$ |
31,028 |
$ |
(27,322) |
|||
Investing activities |
|||||||
Purchase of property, plant and equipment |
(17,084) |
(18,706) |
|||||
Payment for internally generated intangible assets |
(2,614) |
(4,365) |
|||||
Proceeds from sale of property, plant and equipment |
389 |
144 |
|||||
Investment in equity affiliates |
(467) |
— |
|||||
Payment for business acquisitions, net of cash acquired |
(9,237) |
— |
|||||
Payment for purchase of redeemable non-controlling interest |
— |
(4,730) |
|||||
Net cash used for investing activities |
$ |
(29,013) |
$ |
(27,657) |
|||
Financing activities |
|||||||
Repayment of capital lease obligations |
(494) |
(537) |
|||||
Payment of debt issuance costs |
(1,481) |
— |
|||||
Proceeds from long-term debt |
350,000 |
— |
|||||
Repayment of long-term debt |
(10,000) |
(10,000) |
|||||
Proceeds from short-term borrowings |
40,000 |
105,000 |
|||||
Repayment of short-term borrowings |
(185,000) |
— |
|||||
Proceeds from issuance of common shares under stock-based compensation plans |
7,761 |
4,202 |
|||||
Payment for net settlement of stock-based awards |
(9,939) |
(13,284) |
|||||
Payment of earn-out/deferred consideration |
(1,097) |
(1,476) |
|||||
Dividend paid |
(11,957) |
(14,408) |
|||||
Payment for stock purchased and retired |
(219,784) |
(95,984) |
|||||
Payment for expenses related to stock purchase |
(16) |
(60) |
|||||
Net cash used for financing activities |
$ |
(42,007) |
$ |
(26,547) |
|||
Effect of exchange rate changes |
5,555 |
1,284 |
|||||
Net increase (decrease) in cash and cash equivalents |
(39,992) |
(81,526) |
|||||
Cash and cash equivalents at the beginning of the period |
422,623 |
504,468 |
|||||
Cash and cash equivalents at the end of the period |
$ |
388,186 |
$ |
424,226 |
|||
Supplementary information |
|||||||
Cash paid during the period for interest |
$ |
5,324 |
$ |
13,194 |
|||
Cash paid during the period for income taxes |
$ |
16,426 |
$ |
24,157 |
|||
Property, plant and equipment acquired under capital lease obligations |
$ |
576 |
$ |
297 |
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
- Adjusted income from operations attributable to shareholders of
Genpact Limited , or adjusted income from operations; - Adjusted income from operations margin;
- Adjusted diluted earnings per share attributable to shareholders of
Genpact Limited , or adjusted diluted earnings per share; and - Revenue growth on a constant currency basis.
These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. Accordingly, these non-GAAP financial measures, the financial statements prepared in accordance with GAAP and the reconciliations of
Prior to
Accordingly,
A limitation of using adjusted income from operations and adjusted income from operations margin versus income from operations and income from operations 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 and amortization and impairment of acquired intangibles. 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 from GAAP for the three months ended
Reconciliation of Adjusted Income from Operations and Adjusted Income from Operations Margin (Unaudited) (In thousands) |
||||||||
Three months ended March 31, |
||||||||
2017 |
2018 |
|||||||
Income from operations |
$ |
79,096 |
$ |
63,761 |
||||
Add: Stock-based compensation |
4,986 |
7,787 |
||||||
Add: Amortization of acquired intangible assets |
6,709 |
9,540 |
||||||
Add: Acquisition-related expenses |
422 |
— |
||||||
Add: Other income (expense), net |
553 |
15,550 |
||||||
Less: Equity-method investment activity, net |
(4,558) |
— |
||||||
Add: Net loss attributable to redeemable non-controlling interest |
898 |
761 |
||||||
Adjusted income from operations |
$ |
88,106 |
$ |
97,399 |
||||
Adjusted income from operations margin |
14.1 |
% |
14.1 |
% |
Reconciliation of Adjusted Diluted EPS6 (Unaudited) (Per share data) |
|||||||
Three months ended March 31, |
|||||||
2017 |
2018 |
||||||
Diluted EPS |
$ |
0.26 |
$ |
0.33 |
|||
Add: Stock-based compensation |
0.02 |
0.04 |
|||||
Add: Amortization of acquired intangible assets |
0.03 |
0.05 |
|||||
Add: Acquisition-related expenses |
— |
— |
|||||
Less: Tax impact on stock-based compensation |
(0.01) |
(0.02) |
|||||
Less: Tax impact on amortization of acquired intangibles |
(0.01) |
(0.01) |
|||||
Less: Tax impact on acquisition-related expenses |
— |
— |
|||||
Adjusted diluted EPS |
$ |
0.31 |
$ |
0.39 |
The following tables show the reconciliation of forward-looking non-GAAP financial measures from GAAP for the year ending
Reconciliation of Outlook for Adjusted Income from Operations Margin (Unaudited) |
||||
Year ending |
||||
Income from operations margin |
12.2 |
% |
||
Add: Estimated stock-based compensation |
1.6 |
% |
||
Add: Estimated amortization of acquired intangible assets |
1.2 |
% |
||
Add: Estimated acquisition-related expenses |
0.1 |
% |
||
Add: Estimated other income (expense), net |
0.7 |
% |
||
Less: Estimated equity-method investment activity, net |
— |
|||
Adjusted income from operations margin |
15.8 |
% |
Reconciliation of Outlook for Adjusted Diluted EPS7 (Unaudited) (Per share data) |
|||||||
Year ending December 31, 2018 |
|||||||
Lower |
Upper |
||||||
Diluted EPS |
$ |
1.41 |
$ |
1.45 |
|||
Add: Estimated stock-based compensation |
0.24 |
0.24 |
|||||
Add: Estimated amortization of acquired intangible assets |
0.19 |
0.19 |
|||||
Add: Estimated acquisition-related expenses |
0.01 |
0.01 |
|||||
Less: Estimated tax impact on stock-based compensation |
(0.08) |
(0.08) |
|||||
Less: Estimated tax impact on amortization of acquired intangibles |
(0.06) |
(0.06) |
|||||
Less: Estimated tax impact on acquisition-related expenses |
— |
— |
|||||
Adjusted diluted EPS |
$ |
1.72 |
$ |
1.76 |
1 |
Revenue growth on a constant currency basis is a non-GAAP measure and is calculated by restating current-period activity using the prior fiscal period's foreign currency exchange rates adjusted for hedging gains/losses in such period. |
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2 |
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. |
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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. |
||
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. |
||
6 |
Due to rounding, the numbers presented in this table may not add up precisely to the totals provided. |
||
7 |
Due to rounding, the numbers presented in this table may not add up precisely to the totals provided. |
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