Genpact Reports Second Quarter 2007 Results
Second Quarter Revenues Grow 42%
GURGAON, India & NEW YORK--(BUSINESS WIRE)--Aug. 21, 2007--Genpact Limited (NYSE: G), which manages business processes for companies around the world, today announced results for the second quarter ended June 30, 2007.
HighlightsResults for the Second Quarter ended June 30, 2007
- Second quarter revenues were $200.5 million, up 42% from second quarter 2006 and 14% from first quarter 2007
- Second quarter net income was $7.1 million, up 1% from second quarter 2006 and 284% from first quarter 2007; Net income margin was 4%, down from 5% in second quarter 2006 due to global taxes which are now being eliminated as a result of changes in the holding structure post-IPO
- Cash EBIT for the second quarter was $30.3 million, up 35% from second quarter 2006 and 41% from first quarter 2007. Cash EBIT margin was at 15.1%, vs. 16.0% in second quarter 2006 and 12.2% in first quarter 2007.
This summary includes Cash EBIT a non-GAAP financial measure which is reconciled to GAAP at the end of this release.
Results for the First Half ended June 30, 2007- Revenues were $376.5 million for the first half of 2007, up 38% from the first half of 2006
- Net income was $8.9 million for the first half of 2007, down 26% from the corresponding half last year due to global taxes which are now being eliminated as a result of changes in the holding structure post-IPO
- Cash EBIT was $51.8 million for the first half of 2007, up 26% from the corresponding half last year. Cash EBIT margin was 13.8% for the first half of 2007 as compared to 15.1% for the first half of 2006
Global Clients revenues grew at 144% in the second quarter as compared to the second quarter of 2006; Global Clients revenues for the first half of 2007 grew at 146% as compared to the first half of 2006. For the first half of 2007, Global Clients represent 35% of total revenues. The second quarter saw strong, accelerated revenue growth from GE at 13% as compared to the second quarter of 2006. For the first half of 2007 GE revenues grew at 12% as compared to the first half of 2006.
As of June 30th headcount grew 9% from the first quarter of 2007 to 29,400 and 13% from December 31, 2006.
Genpact saw increasing demand for its business solutions during the first half of 2007 with significant new clients added:
- Major automotive components manufacturer in North America
- Leading financial management & advisory company
- Global industrial automation, transportation and controls group in the UK
- US-based leading IT hardware and network computing company
- Leading global internet brand
- Leading information services company in the human resources, retail and transportation markets
Pramod Bhasin, Genpact's President and CEO said, "Our journey as a public company commences with reporting strong financial performance this quarter. The increasing globalization of the world economy as well as a growing shortage of labor in developed markets helped the global BPO and IT Services industry continue to show strong growth. Sophisticated clients are seeking the benefits of Genpact's unrelenting focus on operational excellence and continuous process improvement to drive business impact."
Bhasin continued, "We saw particularly strong growth in our operations in Europe as well as Asia Pacific, especially China, showing the strength of our global delivery network. In Europe we have announced a second operations site in Romania. We are also expanding our Asia Pacific presence with our operations in the Philippines and a second operations site in China."
The following financial statements are for Genpact Global Holdings SICAR S.a.r.l. which was our parent entity as of June 30, 2007. On July 13, 2007, prior to our initial public offering, we entered into a transaction in which Genpact Limited became our parent company.
Conference Call
Genpact will host a conference call beginning at 8 am EDT on Tuesday, August 21, 2007, to discuss the company's quarterly results and operating performance. To participate, callers can dial 1-866-831-6162 (toll free) from within the US or 1-617-213-8852 from any other country. The participant passcode is 77981151. A replay will be made available online at www.genpact.com from two hours after the end of the call for a period of 12 months.
About Genpact
Genpact manages business processes for companies around the world. The company combines process expertise, information technology and analytical capabilities with operational insight and experience in diverse industries to provide a wide range of services using its global delivery platform. Genpact helps companies improve the ways in which they do business by applying Six Sigma and Lean principles plus technology to continuously improve their business processes. Genpact operates service delivery centers in India, China, Hungary, Mexico, the Philippines, the Netherlands, Romania, Spain and the United States. For more info: 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 and uncertainties include but are not limited to the risks and uncertainties arising from our past and future acquisitions, slowdown in the economies and sectors in which our clients operate, a slowdown in the BPO and IT Services sectors, our ability to manage growth, factors which may impact our cost advantage, wage increases, our ability to attract and retain skilled professionals, risks and uncertainties regarding fluctuations in our earnings, general economic conditions affecting our industry as well as other risks detailed in our reports filed with the U.S. Securities and Exchange Commission, including the Company's Registration Statement in Form S-1. 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, the company believes that these forward-looking statements are based on reasonable assumptions, you are cautioned not to pay undue reliance on these forward-looking statements, which reflect management's current analysis of future events. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.
GENPACT GLOBAL HOLDINGS SICAR S.a.r.l.
Consolidated Balance Sheets (Unaudited)
(In thousands of U.S. Dollars, except share and per share data)
As of June 30, As of December 31,
2007 2006
-------------- ------------------
Assets
------------------------------------
Current assets
Cash and cash equivalents $ 49,024 $ 35,430
Accounts receivable, net 78,701 43854
Accounts receivable from a
significant shareholder, net 84,254 97,397
Inter-corporate deposits with a
significant shareholder 12,786 1,010
Deferred income taxes 1,156 1,144
Due from a significant shareholder 5,460 10,236
Prepaid expenses and other current
assets 129,873 53,829
-------------- ------------------
Total current assets 361,254 242,900
Property, plant and equipment, net 167,231 157,976
Deferred income taxes 1,044 1,549
Investment in equity affiliate 375 -
Customer-related intangible assets,
net 114,170 119,680
Other intangible assets, net 11,291 11,908
Goodwill 570,777 493,452
Other assets 123,089 53,827
-------------- ------------------
Total assets $1,349,231 $1,081,292
-------------- ------------------
GENPACT GLOBAL HOLDINGS SICAR S.a.r.l.
Consolidated Balance Sheets (Unaudited)
(In thousands of U.S. Dollars, except share and per share data)
As of June 30, As of December
2007 31, 2006
-------------- --------------
Liabilities and stockholders' equity
----------------------------------------
Current liabilities
Short-term borrowings $ 97,675 $ 83,000
Current portion of long-term debt 19,418 19,383
Current portion of long-term debt from a
significant shareholder 1,937 1,131
Current portion of capital lease
obligations 21 64
Current portion of capital lease
obligations payable to a significant
shareholder 1,742 1,686
Accounts payable 19,064 9,230
Income taxes payable 9,983 1,617
Deferred income taxes 2,222 1,858
Due to a significant shareholder 10,212 8,928
Accrued expenses and other current
liabilities 146,343 136,949
-------------- --------------
Total current liabilities $ 308,617 $ 263,846
Long-term debt, less current portion 108,940 118,657
Long-term debt from a significant
shareholder, less current portion 3,873 3,865
Capital lease obligations, less current
portion 231 -
Capital lease obligations payable to a
significant
shareholder, less current portion 2,873 3,067
Deferred income taxes 37,653 20,481
Due to a significant shareholder 8,067 7,019
Other liabilities 45,366 39,662
-------------- --------------
Total liabilities $ 515,620 $ 456,597
-------------- --------------
Minority interest 4,048 -
Pro Form
Stockholders'
equity as of
June 30,2007
--------------
(unaudited)
Stockholders' equity
2% Cumulative Series A
convertible preferred
stock, 3,077,346 and
3,077,868 authorized,
issued and outstanding,
and $211,521 and
$208,577 aggregate
liquidation value as of
June 30, 2007 and
December 31, 2006,
respectively; none pro
forma 95,398 95,414
5% Cumulative Series B
convertible preferred
stock, 3,017,346 and
3,017,868 authorized,
issued and outstanding,
and $222,566 and
$216,502 aggregate
liquidation value as of
June 30, 2007 and
December 31, 2006,
respectively; none
shares pro forma 93,538 93,554
Common stock, $31 par
value, 384,790 and
394,642 shares
authorized, issued and
outstanding as of June
30, 2007 and December
31, 2006, respectively;
191,994,384 shares pro
forma 1,920 11,928 12,234
Additional paid-in
capital 706,613 507,669 482,805
Retained earnings
(accumulated deficit) (18,546) (18,546) 5,978
Accumulated other
comprehensive income
(loss) 152,907 152,907 (15,295)
Treasury stock, 850 and
20,056 common stock and
59,000 2% Cumulative
Series A convertible
preferred stock as of
June 30, 2007 and
December 31, 2006,
respectively; 1,276,068
shares pro forma (13,331) (13,331) (49,995)
-------------- -------------- --------------
Total stockholders'
equity 829,563 829,563 624,695
Commitments and
contingencies
-------------- --------------
Total liabilities,
minority interest and
stockholders' equity $ 1,349,231 $ 1,081,292
-------------- --------------
GENPACT GLOBAL HOLDINGS SICAR S.a.r.l.
Consolidated Statements of Income
(Unaudited)
(In thousands of U.S. Dollars, except share and per share data)
Three months ended Six months ended
----------------------- -----------------------
June 30, June 30,
June 30, 2007 2006 June 30, 2007 2006
------------- --------- ------------- ---------
Net revenues
Net revenues from
services -
significant
shareholder $ 124,218 $109,662 $ 244,990 $219,311
Net revenues from
services - other 75,847 31,294 130,101 53,542
Other revenues 427 - 1,382 -
------------- --------- ------------- ---------
Total net revenues 200,492 140,956 376,473 272,853
------------- --------- ------------- ---------
Cost of revenue
Services 128,248 85,753 237,398 163,739
Others 299 - 1,034 -
------------- --------- ------------- ---------
Total cost of
revenue 128,547 85,753 238,432 163,739
------------- --------- ------------- ---------
Gross profit 71,945 55,203 138,041 109,114
Operating expenses:
Selling, general and
administrative
expenses 55,565 37,025 104,120 73,129
Amortization of
acquired intangible
assets 9,437 10,569 18,629 21,614
Foreign exchange
(gains) losses, net (11,478) 826 (13,137) 4,521
Other operating
income (1,160) (625) (1,723) (1,753)
------------- --------- ------------- ---------
Income from operations 19,580 7,408 30,152 11,603
Other income (expense)
net (3,498) (2,630) (7,078) (3,185)
------------- --------- ------------- ---------
Income before share of
equity in
(earnings)/loss of
affiliate, minority
interest and income
taxes 16,082 4,778 23,074 8,418
Equity in
(earnings)/loss of
affiliate 7 - 80 -
Minority interest 2,788 - 3,692 -
Income taxes expense
(benefit) 6,195 (2,244) 10,363 (3,672)
------------- --------- ------------- ---------
Net income $ 7,093 $ 7,022 $ 8,939 $ 12,090
============= ========= ============= =========
Net loss per common
share - basic and
diluted ($31.02) ($9.11) ($69.93) ($15.27)
Weighted average
number of common
shares used in
computing net loss
per common share
basic and diluted 383,980 394,000 380,548 394,000
Proforma earnings per
common share -
Basic $ 0.04 $ 0.05
Diluted $ 0.04 $ 0.05
Weighted average
number of proforma
common shares used in
computing earnings
per common share ---
Basic 188,693,573 188,072,728
Diluted 197,698,302 197,216,435
Reconciliation of Adjusted 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: non-GAAP Cash EBIT. This non-GAAP measure is 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 measures used by other companies. In addition, this non-GAAP measure, the financial statements prepared in accordance with GAAP and reconciliations of Genpact's GAAP financial statements to such non-GAAP measure should be carefully evaluated.
For its internal management reporting and budgeting purposes, Genpact's management uses financial statements that do not include stock-based compensation expense related to employee stock options, amortization of acquired intangibles at formation and additional depreciation due to mark-to-market adjustment at formation for financial and operational decision-making, to evaluate period-to-period comparisons or for making comparisons of Genpact's operating results to that of its competitors. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use when adopting FAS 123(R), Genpact's management believes that providing a non-GAAP financial measure that excludes stock-based compensation, amortization of acquired intangibles and additional depreciation due to mark-to-market adjustment at formation allows investors to make additional comparisons between Genpact's operating results to those of other companies. The Company also believes that it is unreasonably difficult to provide its financial outlook in accordance with GAAP for a number of reasons including, without limitation, the Company's inability to predict its future stock-based compensation expense under FAS 123(R) and the amortization of intangibles associated with further acquisitions, if any. Accordingly,Genpact believes that the presentation of non-GAAP Cash EBIT, 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 non-GAAP Cash EBIT versus net income calculated in accordance with GAAP is that non-GAAP Cash EBIT exclude costs, namely, stock-based compensation, that are recurring. Stock-based compensation has been and will continue to be a significant recurring expense in Genpact's business for the foreseeable future. Management compensates for this limitation by providing specific information regarding the GAAP amounts excluded from non-GAAP Cash EBIT and evaluating such non-GAAP financial measure with financial measures calculated in accordance with GAAP.
The following table shows the reconciliation of this adjusted financial measure from GAAP for the three months and six months ended June 30, 2007 and June 30, 2006:
Reconciliation of Cash EBIT
(Unaudited)
(In thousands of U.S. Dollars, except share and per share data)
Three Months Ended Six Months Ended
-----------------------------------
Jun-07 Jun-06 Jun-07 Jun-06
Income from Operations $19,580 $ 7,408 $30,152 $11,603
Add : Amortization of acquired
intangibles at formation 9,281 10,909 18,515 22,309
Add : Additional Depreciation due
to Mark to Market adjustment at
information 514 514 1,028 1,028
Add : Stock based Compensation 3,296 1,307 5,231 2,479
Add : Gain/(loss) on interest rate
swaps 15 1,456 (20) 2,567
Add : Other Income 434 899 709 1,271
Less : Equity in (earnings)/loss
of affiliate 7 - 80 -
Less : Minority Interest 2,788 - 3,692 -
-----------------------------------
Cash EBIT $30,325 $22,493 $51,843 $41,257
CONTACT: Genpact Limited Investors:
Roanak Desai, +91 124-402-2716
roanak.desai@genpact.com
or
Media:
David Jensen, +1 203-252-8562
david.jensen@genpact.com
or
Anita Trehan, +91 124-402-2726
anita.trehan@genpact.com
SOURCE: Genpact Limited
