g-8k_20190807.htm

 

 

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): August 7, 2019

 

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.)

Victoria Place, 5th Floor, 31 Victoria Street

Hamilton HM 10, Bermuda

(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (441) 294-8000

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common shares, par value $0.01 per share

G

New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 


 

Item 2.02

Results of Operations and Financial Condition.

On August 7, 2019, Genpact Limited (the “Company”) issued a press release announcing its financial results for the three months ended June 30, 2019.  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, is incorporated herein by reference.

The information in this report (including Exhibit 99.1) 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 on the conference call.  A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in the attached press release.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits:

 

Exhibit 99.1

  

Press release dated August 7, 2019

 


 

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: August 7, 2019

 

By:

 

/s/ Heather D. White

 

 

Name:

 

Heather D. White

 

 

Title:

 

Senior Vice President, General Counsel and Secretary

 

 

g-ex991_7.htm

Exhibit 99.1

Genpact Reports Second Quarter 2019 Results

Revenues of $882 Million, Up 21% (~22% on a constant currency basis)1

Global Client BPO Revenues of $659 Million, Up 16% (~17% on a constant currency basis)

Diluted EPS of $0.38, up 15%; Adjusted Diluted EPS2 of $0.49, up 20%

NEW YORK, August 7, 2019 — Genpact Limited (NYSE: G), a global professional services firm focused on delivering digital transformation, today announced financial results for the second quarter ended June 30, 2019.

 

“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, Genpact’s president and CEO.  The need for enterprises to leverage new digital technologies is creating increased demand for our Transformation Services which brings digital, analytics, and consulting solutions together. Transformation Services drives our digitally embedded managed service operations, which we call intelligent operations, and this provides further opportunities for Transformation Services, creating a virtuous cycle.  As a result, our inflows and pipeline are growing in an expanding total addressable market.”

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 Company

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.

 

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 to 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. 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.

 


 

Global Clients

Revenue from Global Clients was $760 million4, 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 million4, 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

Genpact now expects:

Total revenue for the full-year 2019 of $3.46 to $3.5 billion, 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.

Genpact continues to expect:

Adjusted income from operations margin6 of approximately 16.0%.

Conference Call to Discuss Financial Results

Genpact’s management will host an hour-long conference call beginning at 4:30 p.m. ET on August 7, 2019 to discuss the company’s performance for the second quarter ended June 30, 2019. To participate, callers can dial +1 (877) 654-0173 from within the U.S. or +1 (281) 973-6289 from any other country. Callers will be prompted to enter the conference ID, 6880006.

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 Genpact website after the end of the call. A transcript of the call will also be made available on the website.

 

 

4 

During the six months ended June 30, 2019, GE divested certain businesses that Genpact continues to serve. We will reclassify such revenue as Global Client revenue at the end of the fiscal year. If we had reclassified the revenue from such GE-divested businesses during the second quarter, Global Client revenues for the quarter ended June 30, 2019 would have been $763 million and GE revenues would have been $119 million.

5 

Adjusted 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.

 


 

About Genpact

Genpact (NYSE: G) is a global professional services firm that makes business transformation real. We drive digital-led innovation and digitally-enabled intelligent operations for our clients, guided by our experience running thousands of processes primarily for Global Fortune 500 companies. We think with design, dream in digital, and solve problems with data and analytics.  Combining our expertise in end-to-end operations and our AI-based platform, Genpact Cora, we focus on the details – all 90,000+ of us. From New York to New Delhi and more than 30 countries in between, we connect every dot, reimagine every process, and reinvent companies’ ways of working. We know that reimagining each step from start to finish creates better business outcomes. Whatever it is, we’ll be there with you – accelerating digital transformation to create bold, lasting results – because transformation happens here.

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 United Kingdom from the European Union, commonly known as Brexit, 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

 

Investors

  

Roger Sachs, CFA

 

  

+1 (203) 808-6725

 

  

roger.sachs@genpact.com

 

 

Media

  

Danielle D’Angelo

+1 (914) 336-7951

danielle.dangelo@genpact.com

 

 


 

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

   and 190,486,041 issued and outstanding as of December 31, 2018 and

   June 30, 2019, respectively

 

 

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

   operating lease right-of-use assets and other assets

 

 

(71,559

)

 

 

(68,115

)

Increase (decrease) in accounts payable

 

 

6,289

 

 

 

(17,407

)

Increase (decrease) in accrued expenses, other current liabilities,

   operating lease liabilities and other 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 Genpact’s GAAP financial statements to such non-GAAP financial measures should be carefully evaluated.

 

Prior to July 2012, Genpact’s management used financial information 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 information 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, since April 2016 Genpact’s management has excluded the impairment of acquired intangible assets from the financial information it uses for internal management reporting purposes. Acquisition-related expenses are excluded in the period in which an acquisition is consummated.

 

Genpact’s management also uses financial information that exclude stock-based compensation expense. Due to 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 other income and expenses, certain gains, losses and impairment charges attributable to equity-method investments, and gains or losses attributable to non-controlling interests because management believes that the Company’s results after taking into account these adjustments more accurately reflect the Company’s ongoing operations. For the purpose of calculating adjusted diluted earnings per share, 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 compared to prior fiscal periods, thereby facilitating period-to-period comparisons of the Company’s true business performance. Revenue growth on a constant currency basis 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.

Accordingly, Genpact believes that the presentation of adjusted income from operations, adjusted income from operations margin, adjusted diluted earnings per share and revenue growth 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 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 June 30, 2018 and 2019:

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

 

 

 

7 

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

 


The following tables show the reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP measures for the year ending December 31, 2019:

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