Genpact Reports Second Quarter 2019 Results
"I am very excited that the momentum we saw coming out of 2018 has continued throughout the first half of 2019. Large deal ramps, ongoing Transformation Services wins, and outstanding execution by our teams led to another quarter of strong performance from both Global Clients and GE. We delivered our highest year-over-year revenue growth rate since the first quarter of 2012," said "Tiger" Tyagarajan,
Key Financial Results – Second Quarter 2019
- Total revenue was
$882 million , up 21% year-over-year (up ~22% on a constant currency basis). - Income from operations was
$106 million , up 34% year-over-year, with a corresponding margin of 12%. Adjusted income from operations was$136 million , up 24% year-over-year, with a corresponding margin of 15.4%.3 - Diluted earnings per share were $0.38, up 15% year-over-year, and adjusted diluted earnings per share were
$0.49 , up 20% year-over-year.
Revenue Details – Second Quarter 2019
- Total BPO revenue was
$743 million , up 23% year-over-year, representing approximately 84% of total revenues. - Total IT revenue was
$139 million , up 13% year-over-year, representing approximately 16% of total revenues.
Global Clients
- Revenue from Global Clients was
$760 million 4,up 15% year-over-year (up ~16% on a constant currency basis), representing approximately 86% of total revenues. - Global Client BPO revenue was
$659 million , up 16% year-over-year (up ~17% on a constant currency basis). - Global Client IT revenue was
$101 million , up 7% year-over-year.
GE
- Revenue from GE was
$121 million 4, up 86% year-over-year, representing approximately 14% of total revenues. - GE BPO revenue was
$84 million , up 125% year-over-year. - GE IT revenue was
$38 million , up 34% year-over-year.
Cash Flow from Operations
- Cash generated from operations was
$126 million in the second quarter of 2019, compared to$77 million during the second quarter of 2018.
2019 Outlook
- Total revenue for the full-year 2019 of
$3.46 to $3.5 b illion, up 15% to 17%, or 16% to 18% on a constant currency basis. This is an increase from the prior range of$3.33 to $3.39 billion , up 11% to 13%, or 12% to 14% on a constant currency basis. - Global Client revenue growth in the range of 9.5% to 11%, or 10.5% to 12% on a constant currency basis, up from the prior range of 9% to 10.5%, or 10% to 11.5% on a constant currency basis.
- Adjusted diluted EPS5 of
$2.00 to $2.02 , up from the prior range of$1.96 to $2.00 .
- Adjusted income from operations margin6 of approximately 16.0%.
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 or information technology services sectors, our ability to develop and successfully execute our business strategies, 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, political, economic or business conditions in countries in which we operate, including the uncertainty relating to the pending withdrawal of the
Contacts
Investors |
Roger Sachs, CFA |
|
+1 (203) 808-6725 |
||
Media |
Danielle D'Angelo +1 (914) 336-7951 |
GENPACT LIMITED AND ITS SUBSIDIARIES |
||||||||
Consolidated Balance Sheets (Unaudited) (In thousands, except per share data and share count) |
||||||||
As of December 31, |
As of June 30, |
|||||||
2018 |
2019 |
|||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
368,396 |
$ |
378,030 |
||||
Accounts receivable, net |
774,184 |
856,602 |
||||||
Prepaid expenses and other current assets |
212,477 |
225,163 |
||||||
Total current assets |
$ |
1,355,057 |
$ |
1,459,795 |
||||
Property, plant and equipment, net |
212,715 |
211,244 |
||||||
Operating lease right-of-use assets |
— |
297,068 |
||||||
Deferred tax assets |
74,566 |
78,807 |
||||||
Investment in equity affiliates |
836 |
842 |
||||||
Intangible assets, net |
177,087 |
165,751 |
||||||
Goodwill |
1,393,832 |
1,400,257 |
||||||
Contract cost assets |
160,193 |
192,178 |
||||||
Other assets |
155,159 |
206,815 |
||||||
Total assets |
$ |
3,529,445 |
$ |
4,012,757 |
||||
Liabilities and equity |
||||||||
Current liabilities |
||||||||
Short-term borrowings |
$ |
295,000 |
$ |
290,000 |
||||
Current portion of long-term debt |
33,483 |
33,498 |
||||||
Accounts payable |
42,584 |
24,398 |
||||||
Income taxes payable |
33,895 |
64,818 |
||||||
Accrued expenses and other current liabilities |
571,350 |
545,012 |
||||||
Operating leases liability |
— |
45,425 |
||||||
Total current liabilities |
$ |
976,312 |
$ |
1,003,151 |
||||
Long-term debt, less current portion |
975,645 |
959,151 |
||||||
Operating leases liability |
— |
279,927 |
||||||
Deferred tax liabilities |
8,080 |
8,332 |
||||||
Other liabilities |
165,226 |
178,826 |
||||||
Total liabilities |
$ |
2,125,263 |
$ |
2,429,387 |
||||
Shareholders' equity |
||||||||
Preferred shares, $0.01 par value, 250,000,000 authorized, none issued |
— |
— |
||||||
Common shares, $0.01 par value, 500,000,000 authorized, 189,346,101 |
1,888 |
1,899 |
||||||
Additional paid-in capital |
1,471,301 |
1,520,025 |
||||||
Retained earnings |
438,453 |
540,709 |
||||||
Accumulated other comprehensive income (loss) |
(507,460) |
(479,263) |
||||||
Total equity |
$ |
1,404,182 |
$ |
1,583,370 |
||||
Total liabilities and equity |
$ |
3,529,445 |
$ |
4,012,757 |
GENPACT LIMITED AND ITS SUBSIDIARIES |
||||||||||||||||
Consolidated Statements of Income (Unaudited) (In thousands, except per share data and share count) |
||||||||||||||||
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2018 |
2019 |
2018 |
2019 |
|||||||||||||
Net revenues |
$ |
728,561 |
$ |
881,799 |
$ |
1,417,473 |
$ |
1,691,005 |
||||||||
Cost of revenue |
462,898 |
571,244 |
907,222 |
1,090,381 |
||||||||||||
Gross profit |
$ |
265,663 |
$ |
310,555 |
$ |
510,251 |
$ |
600,624 |
||||||||
Operating expenses: |
||||||||||||||||
Selling, general and administrative expenses |
176,166 |
196,312 |
347,275 |
387,714 |
||||||||||||
Amortization of acquired intangible assets |
9,826 |
8,096 |
19,762 |
16,605 |
||||||||||||
Other operating (income) expense, net |
149 |
(55) |
(69) |
31 |
||||||||||||
Income from operations |
$ |
79,522 |
$ |
106,202 |
$ |
143,283 |
$ |
196,274 |
||||||||
Foreign exchange gains (losses), net |
2,805 |
351 |
7,603 |
(3,081) |
||||||||||||
Interest income (expense), net |
(10,407) |
(12,143) |
(18,507) |
(23,266) |
||||||||||||
Other income (expense), net |
9,748 |
560 |
25,298 |
4,363 |
||||||||||||
Income before equity-method investment activity, net and income tax expense |
$ |
81,668 |
$ |
94,970 |
$ |
157,677 |
$ |
174,290 |
||||||||
Equity-method investment activity, net |
(15) |
(15) |
(15) |
(11) |
||||||||||||
Income before income tax expense |
$ |
81,653 |
$ |
94,955 |
$ |
157,662 |
$ |
174,279 |
||||||||
Income tax expense |
17,079 |
21,233 |
29,154 |
39,716 |
||||||||||||
Net income |
$ |
64,574 |
$ |
73,722 |
$ |
128,508 |
$ |
134,563 |
||||||||
Net income attributable to redeemable non-controlling interest |
— |
— |
761 |
— |
||||||||||||
Net income attributable to Genpact Limited shareholders |
$ |
64,574 |
$ |
73,722 |
$ |
129,269 |
$ |
134,563 |
||||||||
Net income available to Genpact Limited common shareholders |
$ |
64,574 |
$ |
73,722 |
$ |
129,269 |
$ |
134,563 |
||||||||
Earnings per common share attributable to Genpact Limited common shareholders |
||||||||||||||||
Basic |
$ |
0.34 |
$ |
0.39 |
$ |
0.68 |
$ |
0.71 |
||||||||
Diluted |
$ |
0.33 |
$ |
0.38 |
$ |
0.66 |
$ |
0.69 |
||||||||
Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders |
||||||||||||||||
Basic |
190,132,664 |
190,163,359 |
191,474,645 |
189,807,602 |
||||||||||||
Diluted |
193,365,974 |
194,766,047 |
194,827,272 |
194,080,127 |
GENPACT LIMITED AND ITS SUBSIDIARIES |
||||||||
Consolidated Statements of Cash Flows (Unaudited) (In thousands) |
||||||||
Six months ended June 30, |
||||||||
2018 |
2019 |
|||||||
Operating activities |
||||||||
Net income attributable to Genpact Limited shareholders |
$ |
129,269 |
$ |
134,563 |
||||
Net loss attributable to redeemable non-controlling interest |
(761) |
— |
||||||
Net income |
$ |
128,508 |
$ |
134,563 |
||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
31,613 |
45,708 |
||||||
Amortization of debt issuance costs (including loss on extinguishment of debt) |
979 |
864 |
||||||
Amortization of acquired intangible assets |
19,762 |
16,605 |
||||||
Write-down of intangible assets and property, plant and equipment |
850 |
3,511 |
||||||
Reserve for doubtful receivables |
1,347 |
4,881 |
||||||
Unrealized loss (gain) on revaluation of foreign currency asset/liability |
(7,350) |
3,107 |
||||||
Equity-method investment activity, net |
15 |
11 |
||||||
Stock-based compensation expense |
18,724 |
39,987 |
||||||
Deferred income taxes |
(4,194) |
(4,242) |
||||||
Others, net |
294 |
(4,087) |
||||||
Change in operating assets and liabilities: |
||||||||
Increase in accounts receivable |
(4,548) |
(86,329) |
||||||
Increase in prepaid expenses, other current assets, contract cost assets |
(71,559) |
(68,115) |
||||||
Increase (decrease) in accounts payable |
6,289 |
(17,407) |
||||||
Increase (decrease) in accrued expenses, other current liabilities, |
(96,965) |
23,730 |
||||||
Increase in income taxes payable |
25,719 |
28,255 |
||||||
Net cash provided by operating activities |
$ |
49,484 |
$ |
121,042 |
||||
Investing activities |
||||||||
Purchase of property, plant and equipment |
(37,703) |
(30,392) |
||||||
Payment for internally generated intangible assets (including intangibles under development) |
(11,544) |
(16,501) |
||||||
Proceeds from sale of property, plant and equipment |
309 |
1,562 |
||||||
Payment for business acquisitions, net of cash acquired |
(728) |
(6,305) |
||||||
Payment for purchase of redeemable non-controlling interest |
(4,730) |
— |
||||||
Net cash used for investing activities |
$ |
(54,396) |
$ |
(51,636) |
||||
Financing activities |
||||||||
Repayment of capital /finance lease obligations |
(1,108) |
(4,102) |
||||||
Repayment of long-term debt |
(20,000) |
(17,000) |
||||||
Proceeds from short-term borrowings |
105,000 |
50,000 |
||||||
Repayment of short-term borrowings |
(60,000) |
(55,000) |
||||||
Proceeds from issuance of common shares under stock-based compensation plans |
9,388 |
11,477 |
||||||
Payment for net settlement of stock-based awards |
(14,229) |
(2,729) |
||||||
Payment of earn-out/deferred consideration |
(1,476) |
(10,470) |
||||||
Dividend paid |
(28,648) |
(32,307) |
||||||
Payment for stock repurchased and retired |
(130,103) |
— |
||||||
Payment for expenses related to stock repurchase |
(82) |
— |
||||||
Net cash used for financing activities |
$ |
(141,258) |
$ |
(60,131) |
||||
Effect of exchange rate changes |
(24,395) |
359 |
||||||
Net increase (decrease) in cash and cash equivalents |
(146,170) |
9,275 |
||||||
Cash and cash equivalents at the beginning of the period |
504,468 |
368,396 |
||||||
Cash and cash equivalents at the end of the period |
$ |
333,903 |
$ |
378,030 |
||||
Supplementary information |
||||||||
Cash paid during the period for interest |
$ |
21,808 |
$ |
23,384 |
||||
Cash paid during the period for income taxes |
$ |
34,809 |
$ |
37,060 |
||||
Property, plant and equipment acquired under capital/finance lease obligations |
$ |
668 |
$ |
7,188 |
Non-GAAP Financial Measures to GAAP Measures
To supplement the consolidated financial statements presented in accordance with GAAP, this press release includes the following non-GAAP financial measures:
- Adjusted income from operations 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 to the most directly comparable GAAP measures for the three and six months ended
Reconciliation of Income from Operations/Margin to Adjusted Income from Operations/Margin (Unaudited) (In thousands) |
||||||||||||||||
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2018 |
2019 |
2018 |
2019 |
|||||||||||||
Income from operations |
$ |
79,522 |
$ |
106,202 |
$ |
143,283 |
$ |
196,274 |
||||||||
Add: Stock-based compensation |
10,937 |
21,525 |
18,724 |
39,987 |
||||||||||||
Add: Amortization of acquired intangible assets |
9,431 |
7,773 |
18,971 |
15,977 |
||||||||||||
Add: Acquisition-related expenses |
— |
— |
— |
967 |
||||||||||||
Add: Other income (expense), net |
9,748 |
560 |
25,298 |
4,363 |
||||||||||||
Less: Equity-method investment activity, net |
(15) |
(15) |
(15) |
(11) |
||||||||||||
Add: Net loss (income) attributable to redeemable non-controlling interest |
— |
— |
761 |
— |
||||||||||||
Adjusted income from operations |
$ |
109,623 |
$ |
136,045 |
$ |
207,022 |
$ |
257,557 |
||||||||
Income from operations margin |
10.9 |
% |
12.0 |
% |
10.1 |
% |
11.6 |
% |
||||||||
Adjusted income from operations margin |
15.0 |
% |
15.4 |
% |
14.6 |
% |
15.2 |
% |
Reconciliation of Diluted EPS to Adjusted Diluted EPS7 (Unaudited) (Per share data) |
||||||||||||||||
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2018 |
2019 |
2018 |
2019 |
|||||||||||||
Diluted EPS |
$ |
0.33 |
$ |
0.38 |
$ |
0.66 |
$ |
0.69 |
||||||||
Add: Stock-based compensation |
0.06 |
0.11 |
0.10 |
0.21 |
||||||||||||
Add: Amortization of acquired intangible assets |
0.05 |
0.04 |
0.10 |
0.08 |
||||||||||||
Add: Acquisition-related expenses |
— |
— |
— |
— |
||||||||||||
Less: Tax impact on stock-based compensation |
(0.01) |
(0.03) |
(0.03) |
(0.05) |
||||||||||||
Less: Tax impact on amortization of acquired intangibles |
(0.01) |
(0.01) |
(0.02) |
(0.02) |
||||||||||||
Less: Tax impact on acquisition-related expenses |
— |
— |
— |
— |
||||||||||||
Adjusted diluted EPS |
$ |
0.41 |
$ |
0.49 |
$ |
0.80 |
$ |
0.92 |
The following tables show the reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP measures for the year ending
Reconciliation of Outlook for Income from Operations Margin to Adjusted Income from Operations Margin (Unaudited) |
||||
Year ending December 31, 2019 |
||||
Income from operations margin |
12.2 |
% |
||
Add: Estimated stock-based compensation |
2.4 |
% |
||
Add: Estimated amortization of acquired intangible assets |
0.8 |
% |
||
Add: Estimated acquisition-related expenses |
0.1 |
% |
||
Add: Estimated other income (expense), net |
0.5 |
% |
||
Less: Estimated equity-method investment activity, net |
— |
|||
Adjusted income from operations margin |
16.0 |
% |
Reconciliation of Outlook for Diluted EPS to Adjusted Diluted EPS (Unaudited) (Per share data) |
||||||||
Year ending December 31, 2019 |
||||||||
Lower |
Upper |
|||||||
Diluted EPS |
$ |
1.54 |
$ |
1.56 |
||||
Add: Estimated stock-based compensation |
0.42 |
0.42 |
||||||
Add: Estimated amortization of acquired intangible assets |
0.15 |
0.15 |
||||||
Add: Estimated acquisition-related expenses |
0.02 |
0.02 |
||||||
Less: Estimated tax impact on stock-based compensation |
(0.09) |
(0.09) |
||||||
Less: Estimated tax impact on amortization of acquired intangibles |
(0.04) |
(0.04) |
||||||
Less: Estimated tax impact on acquisition-related expenses |
— |
— |
||||||
Adjusted diluted EPS |
$ |
2.00 |
$ |
2.02 |
_________________________
1Revenue 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.
2Adjusted diluted earnings per share is a non-GAAP measure. A reconciliation of GAAP diluted earnings per share to adjusted diluted earnings per share is attached to this release.
3Adjusted income from operations and adjusted income from operations margin are non-GAAP measures. Reconciliations of GAAP income from operations to adjusted income from operations and GAAP income from operations margin to adjusted income from operations margin are attached to this release.
4During the six months ended
5Adjusted diluted earnings per share is a non-GAAP measure. A reconciliation of the outlook for GAAP diluted earnings per share to adjusted diluted earnings per share is attached to this release.
6 Adjusted income from operations margin is a non-GAAP measure. A reconciliation of the outlook for GAAP income from operations margin to adjusted income from operations margin is attached to this release.
7Due to rounding, the numbers presented in this table may not add up precisely to the totals provided.
View original content to download multimedia:http://www.prnewswire.com/news-releases/genpact-reports-second-quarter-2019-results-300898271.html
SOURCE