CORRECTING and REPLACING Genpact Limited Reports Third Quarter 2007 Results
Third Quarter Revenues Grow 32%, Adjusted Income from Operations
Increases 42%
GURGAON, India & NEW YORK--(BUSINESS WIRE)--Nov. 13, 2007--In BW6537 issued Nov. 12, 2007: Please replace the release with the following corrected version due to multiple revisions.
The corrected release reads:GENPACT LIMITED REPORTS THIRD QUARTER 2007 RESULTS
Third Quarter Revenues Grow 32%, Adjusted Income from Operations Increases 42%
Genpact Limited (NYSE:G), which manages business processes for companies around the world, today announced financial results for the third quarter ended September 30, 2007.
Key Third Quarter Financial Results- Third quarter revenues were $214.6 million, up 32% from the third quarter of 2006, and up 7% from the second quarter of 2007, driven primarily by Global Client revenue growth
- Net income for the third quarter was $16.3 million, up 27% from the third quarter of 2006 and up 130% from the second quarter of 2007; net income margin for the third quarter decreased slightly to 7.6% from 7.9% in the third quarter of 2006, primarily due to certain tax charges and increased from 3.5% in the second quarter of 2007
- Adjusted income from operations for the third quarter increased 42.1% to $36.7 million as compared to the third quarter of 2006 and 21.0% from the second quarter of 2007
- Adjusted income from operations margin was 17.1% for the third quarter, up from 15.9% in the third quarter of 2006 and up from 15.1% in the second quarter of 2007
Global Client revenues grew 78.6% this quarter compared to the third quarter of 2006. Revenues from GE increased 10.6% this quarter compared to the third quarter of 2006. Global Clients represented 43% of total revenues for the quarter.
Year to date revenue growth has come fairly evenly from Genpact's banking, financial services and insurance clients and its manufacturing clients, each group contributing approximately 45% of net revenues. In addition, the mix between business process services and IT services offered by Genpact has remained fairly constant at approximately 75% and 25% of net revenues, respectively.
Pramod Bhasin, Genpact's President and CEO said, "Clients seeking to benefit from our focus on operational excellence and continuous improvement based on our deep Six Sigma, Lean and re-engineering expertise have driven our growth."
Bhasin added, "Our results reflect the strength of client demand, especially from Global Clients, driving our delivery center growth in India where we continue to expand in both Tier 1 and Tier 2 cities, and growth in Europe and Asia-Pacific where multi-national clients require support in multiple locations and many languages. Approximately 75% of our revenues for the year-to-date are coming from our India operations. Net revenues have also grown at a faster rate than personnel costs, after eliminating the impact of foreign exchange movements which have been hedged, demonstrating the leverage we have been able to drive in our operations."
Genpact had 31,700 employees worldwide as of September 30th, an 8% increase from the second quarter of 2007. Year-to-date global attrition has been reduced to 29% from 30% as of the second quarter and 32% for 2006.
The strength of demand for Genpact's business solutions in the third quarter was evidenced by the addition of new clients including:
- One of the world's premier hotel and hospitality companies with properties in over 40 countries
- An insurance and financial services company, providing financial protection, accumulation and income management products
- A leading global manufacturer of audio, video, communications, and information technology products for the consumer and professional markets
- A global leader in information technology that enables and secures global commerce with consumers and businesses
Adjusted net income was $27.8 million for the quarter. As noted for prior periods in 2007, net income and adjusted net income in the third quarter reflect the impact of increased taxes resulting from the partial expiration of Genpact's current tax holiday in India starting on March 31, 2007 as well as the continued impact of a Hungarian statutory tax. The Hungarian statutory tax has been eliminated for future periods as the result of a restructuring of Genpact's legal entities. The Hungarian statutory tax was approximately $10 million for the nine months ended September 30, 2007.
Despite the mortgage and credit market turmoil in the United States, there has been no significant adverse impact on Genpact's overall results. Genpact's mortgage services business has seen a small revenue decline as processing volume has diminished from clients but revenues from its mortgage services business do not impact Genpact's overall performance and has been more than offset by growth in other areas.
In the fourth quarter of 2007, as a consequence of Genpact's restructuring of its legal entities noted above, Genpact will be required to recompute certain of its existing deferred tax assets and liabilities. The results of this recomputation will be reflected in the fourth quarter and are anticipated to produce a one-time, non-cash tax provision of approximately $22 million to $29 million due principally to unrealized gains on certain rupee-dollar hedges. This one-time, non-cash tax provision in the fourth quarter will be reversed over the remaining 24-30 month terms of the hedges and is not expected to adversely affect financial performance in 2008 and other future periods.
As a result of the strength of the demand it is seeing from its clients, Genpact is increasing its revenue guidance for the year from an increase of 28-30% to an increase of 30-32% from its year-end 2006 results and expects the adjusted income from operations margin to remain relatively constant.
Conference Call
Genpact management will host a conference call at 7:00 a.m. (Eastern) on November 13, 2007 to discuss the company's performance for the quarter. To participate, callers can dial 1 (800) 659-1942 from within the U.S. or 1 (617) 614-2710 from any other country. Thereafter, callers need to enter the participant passcode which is 71206421.
For those who cannot participate in the call, a replay and Podcast will be available on our website, www.genpact.com, after the end of the call. A transcript of the call will also be made available on our website.
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 LIMITED
Consolidated Balance Sheets
(Unaudited)
(In thousands of U.S. Dollars, except share and per share data)
As of December As of September
31, 2006 30, 2007
--------------- ---------------
Assets
--------------------------------------
Current assets
Cash and cash equivalents $ 35,430 $ 252,828
Accounts receivable, net 43,854 99,321
Accounts receivable from a
significant shareholder, net 97,397 95,243
Short term deposits with a
significant shareholder 1,010 22,074
Deferred income taxes 1,144 1,157
Due from a significant shareholder 10,236 5,397
Prepaid expenses and other current
assets 53,829 144,703
--------------- ---------------
Total current assets 242,900 620,723
Property, plant and equipment, net 157,976 177,973
Deferred income taxes 1,549 452
Investment in equity affiliate -- 323
Customer-related intangible assets,
net 119,680 105,283
Other intangible assets, net 11,908 10,738
Goodwill 493,452 573,144
Other assets 53,827 161,842
--------------- ---------------
Total assets $ 1,081,292 $ 1,650,478
=============== ===============
GENPACT LIMITED
Consolidated Balance Sheets
(Unaudited)
(In thousands of U.S. Dollars, except share and per share data)
As of December As of September
31, 2006 30, 2007
--------------- ---------------
Liabilities and stockholders' equity
-------------------------------------
Current liabilities
Short-term borrowings $ 83,000 $ 500
Current portion of long-term debt 19,383 19,436
Current portion of long-term debt
from a significant shareholder 1,131 1,483
Current portion of capital lease
obligations 64 45
Current portion of capital lease
obligations payable to a
significant shareholder 1,686 1,833
Accounts payable 9,230 15,332
Income taxes payable 1,617 14,663
Deferred income taxes 1,858 13,428
Due to a significant shareholder 8,928 10,561
Accrued expenses and other current
liabilities 136,949 170,939
--------------- ---------------
Total current liabilities 263,846 248,220
Long-term debt, less current portion 118,657 104,074
Long-term debt from a significant
shareholder, less current portion 3,865 3,962
Capital lease obligations, less
current portion -- 97
Capital lease obligations payable to
a significant shareholder, less
current portion 3,067 2,943
Deferred income taxes 20,481 37,634
Due to a significant shareholder 7,019 8,535
Other liabilities 39,662 57,474
--------------- ---------------
Total liabilities 456,597 462,939
--------------- ---------------
Minority interest -- 4,209
Stockholders' equity
2% Cumulative Series A convertible
preferred stock, 3,077,868 and nil
authorized, issued and outstanding,
and $208,577 and $nil aggregate
liquidation value as of December 31,
2006 and September 30, 2007,
respectively 95,414 --
5% Cumulative Series B convertible
preferred stock, 3,017,868 and nil
authorized, issued and outstanding,
and $216,501 and $nil aggregate
liquidation value as of December 31,
2006 and September 30, 2007,
respectively 93,554 --
Common shares, $0.01 par value,
71,390,738 and 500,000,000
authorized and 71,390,738 and
211,775,892 shares issued and
outstanding as of December 31, 2006,
and September 30, 2007, respectively 714 2,117
Additional paid-in capital 494,325 994,128
Retained earnings 5,978 (4,692)
Accumulated other comprehensive
income (loss) (15,295) 191,777
Treasury stock, 20,056 common share
and 59,000 2% cumulative Series A
convertible preferred stock and nil
common share and cumulative Series A
preferred stock as of December 31,
2006 and September 30, 2007,
respectively (49,995) --
--------------- ---------------
Total stockholders' equity 624,695 1,183,330
Commitments and contingencies
--------------- ---------------
Total liabilities, minority interest
and stockholders' equity $ 1,081,292 $ 1,650,478
=============== ===============
GENPACT LIMITED
Consolidated Statements of Income
(Unaudited)
(In thousands of U.S. Dollars, except share and per share data)
Three months ended Nine months ended
------------------------- -------------------------
September September September September
30, 30, 30, 30,
2006 2007 2006 2007
----------- ------------ ----------- ------------
Net revenues
Net revenues
from services
- significant
shareholder $ 111,047 $ 122,862 $ 330,358 $ 367,852
Net revenues
from services
- others 50,853 91,590 104,395 221,691
Other revenues 486 110 486 1,492
----------- ------------ ----------- ------------
Total net
revenues 162,386 214,562 435,239 591,035
----------- ------------ ----------- ------------
Cost of revenue
Services 93,148 132,991 256,887 370,356
Others 363 99 363 1,133
----------- ------------ ----------- ------------
Total cost of
revenue 93,511 133,090 257,250 371,489
----------- ------------ ----------- ------------
Gross profit 68,875 81,472 177,989 219,546
Operating
expenses:
Selling,
general and
administrative
expenses 40,813 62,849 113,839 167,002
Amortization of
acquired
intangible
assets 10,200 9,358 31,917 27,987
Foreign
exchange
(gains)
losses, net 4,235 (15,476) 8,756 (28,613)
Other operating
income (1,373) (810) (3,126) (2,533)
----------- ------------ ----------- ------------
Income from
operations 15,000 25,551 26,603 55,703
Other income
(expense), net (4,230) (619) (7,415) (7,697)
----------- ------------ ----------- ------------
Income before
share of equity
in loss of
affiliate,
minority
interest and
income taxes 10,770 24,932 19,188 48,006
Equity in loss of
affiliate -- 61 -- 141
Minority interest -- 2,062 -- 5,754
Income taxes
expense
(benefit) (2,035) 6,486 (5,707) 16,849
----------- ------------ ----------- ------------
Net Income $ 12,805 $ 16,323 $ 24,895 $ 25,262
=========== ============ =========== ============
Net earnings /
(loss) per
common share -
Basic $ (0.02) $ 0.07 $ (0.10) $ (0.13)
Diluted $ (0.02) $ 0.07 $ (0.10) $ (0.13)
=========== ============ =========== ============
Weighted average
number of common
shares used in
computing
earnings /
(loss) per
common share -
Basic 71,274,600 186,839,059 71,274,600 108,173,821
Diluted 71,274,600 195,698,132 71,274,600 108,173,821
=========== ============ =========== ============
Pro forma net
earnings per
common share -
Basic $ 0.08 $ 0.13
Diluted $ 0.08 $ 0.12
============ ============
Weighted average
number of pro
forma common
shares used in
computing net
earnings per
common share -
Basic 204,071,501 193,458,458
Diluted 212,930,586 202,584,315
Reconciliation of Adjusted 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: non-GAAP Adjusted income from operations and Adjusted net income. These non-GAAP 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 measures used by other companies. In addition, these non-GAAP measures, the financial statements prepared in accordance with GAAP and reconciliations of Genpact's GAAP financial statements to such non-GAAP measures 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 non-GAAP financial measures that exclude 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). Accordingly, Genpact believes that the presentation of non-GAAP Adjusted income from operations and Adjusted net income, 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 Adjusted income from operations and Adjusted net income versus income from operations and net income calculated in accordance with GAAP is that non-GAAP Adjusted income from operations and Adjusted net income exclude costs, including stock-based compensation and amortization of acquired intangibles at formation, 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 Adjusted income from operations and Adjusted net income and evaluating such non-GAAP financial measures with financial measures calculated in accordance with GAAP.
The following tables show the reconciliation of these adjusted financial measures from GAAP for the three months and nine months ended September 30, 2007 and September 30, 2006:
Reconciliation of Adjusted Income from Operations
(Unaudited)
(In thousands of U.S. Dollars, except share and per share data)
Quarter Ended, Nine Months Ended,
-------------------- -------------------
September September September September
30, 2006 30, 2007 30, 2006 30, 2007
--------- --------- --------- ---------
Income from operations as
per GAAP $ 15,000 $ 25,551 $ 26,603 $ 55,703
Add: Amortization of
acquired intangible assets
resulting from Formation
Accounting 10,439 8,654 32,748 27,169
Add: Additional
depreciation due to fair
value adjustment resulting
from Formation Accounting 514 514 1,542 1,542
Add: Stock based
compensation 1,105 3,678 3,584 8,909
Add: Gain / (loss) on
interest rate swaps (1,519) (189) 1,048 90
Add: Other income 293 620 1,564 1,031
Less: Equity in
(earnings)/loss of
affiliate - (61) - (141)
Less: Minority interest - (2,062) - (5,754)
--------- --------- --------- ---------
Adjusted income from
operations $ 25,832 $ 36,705 $ 67,089 $ 88,549
========= ========= ========= =========
Reconciliation of Adjusted Net Income
(Unaudited)
(In thousands of U.S. Dollars, except share and per share data)
Quarter Ended, Nine Months Ended,
------------------- -------------------
September September September September
30, 2006 30, 2007 30, 2006 30, 2007
--------- --------- --------- ---------
Net income as per GAAP $ 12,805 $ 16,323 $ 24,895 $ 25,262
Add: Amortization of acquired
intangible assets resulting
from Formation Accounting 10,439 8,654 32,748 27,169
Add: Additional depreciation
due to fair value adjustment
resulting from Formation
Accounting 514 514 1,542 1,542
Add: Stock based compensation 1,105 3,678 3,584 8,909
Less: Tax Impact on
amortization of acquired
intangibles resulting from
Formation Accounting (960) (1,369) (2,880) (3,010)
--------- --------- --------- ---------
Adjusted net income $ 23,903 $ 27,800 $ 59,889 $ 59,872
========= ========= ========= =========
Diluted adjusted Earnings per
share $ 0.13 $ 0.30
CONTACT: Genpact LimitedInvestors:
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
