Genpact Reports Financial Results for the Second Quarter of 2008
Key Financial Results - Second Quarter 2008
-- Revenues were $253.6 million, up 26% from the second quarter of 2007.
-- Net income was $24.8 million, up 250% from $7.1 million in the second quarter of 2007; net income margin for the second quarter of 2008 was 9.8%, up from 3.5% in the second quarter of 2007.
-- Earnings per common share were $0.11, up from a loss of $0.17 per share in the second quarter of 2007.
-- Adjusted income from operations increased 40% to $41.8 million compared to the second quarter of 2007.
-- Adjusted income from operations margin was 16.5%, up from 14.9% in the second quarter of 2007.
-- Adjusted diluted earnings per share were $0.18, up from $0.10 in the second quarter of 2007.
Pramod Bhasin, Genpact's President and CEO said, "Our excellent second quarter results continue our track record of strong growth and delivering on our commitments. Given our results to date and our expectations for the remainder of the year, we are increasing our full year revenue guidance and our guidance on adjusted income from operations margin. We expect revenues for the full year to grow organically by 26-28% from $823 million in 2007. As a result of increased internal efficiencies, a shift towards higher value work and improved pricing for the value we deliver, we now expect our adjusted income from operations margin to improve by 80 to 100 basis points to between 17.1% and 17.3% in 2008 from 16.3% in 2007. Genpact's Six Sigma, process and technology expertise are driving market penetration and sustainable, superior growth as we create value for our clients and all our key stakeholders."
Global Client revenues increased 68% over the second quarter of 2007 (growth with existing clients, or organic growth, was 75%), driven by Genpact's ability to expand its existing client relationships and build new ones.
Genpact continues to expand its client base. Among new additions are:
-- a large office products company;
-- a global leader in healthcare, lighting and consumer lifestyle products;
-- a leading UK-based financial services group providing a wide range of banking and financial services; and
-- a global financial services company operating in automotive finance, real estate finance, insurance and commercial finance businesses.
GE revenues for the second quarter of 2008 grew 1% over the second quarter of 2007. Organic GE revenue growth was 9% this quarter. This excludes revenues from businesses divested by GE in 2007, all of which Genpact continues to serve and whose revenues are now included in Global Client revenues.
As of the end of the second quarter of 2008, 25 clients each accounted for $5 million or more of Genpact's revenues in the last twelve months. Of those, four clients each accounted for $25 million or more of Genpact's revenues in the last twelve months.
Among the many services and solutions Genpact provides to its clients, the mix between business process services and IT services revenues remained relatively steady in the second quarter of 2008, with business process services contributing approximately 79% of revenues in the second quarter of 2008 up from 76% for the full year 2007.
Genpact generated $48 million of cash from operations in the second quarter of 2008, up from $44 million in the second quarter of 2007.
Year-to-Date Results
-- Revenues were $488.2 million, up 30% from the first half of 2007.
-- Net income was $44.5 million, up 398% from $8.9 million in the first half of 2007; net income margin for the first half of 2008 was 9.1%, up from 2.4% in the first half of 2007.
-- Earnings per common share were $0.20, up from a loss of $0.39 per share in the first half of 2007.
-- Adjusted income from operations increased 37% to $70.2 million compared to the first half of 2007.
-- Adjusted income from operations margin was 14.4%, up from 13.6% in the first half of 2007.
-- Adjusted diluted earnings per share were $0.32, up from $0.16 in the first half of 2007.
Annualized revenue per employee in the first half of 2008 was approximately $29,700, an increase from approximately $28,200 for the full year of 2007. As of June 30, 2008, Genpact had more than 35,500 employees worldwide. Genpact's attrition rate for the first half of 2008, measured from day one of employment, was 25% compared to 30% in 2007. Genpact's attrition rate would be 19% if measured after six months of employment as many of Genpact's competitors do.
Revised Presentation of the Income Statement
In order to more clearly reflect Genpact's costs, including the impact of its long-term foreign exchange hedging strategy, Genpact has reclassified its foreign exchange gains or losses from a separate line item forming part of income from operations to selling, general and administrative expenses, cost of revenue or net revenues, as applicable. The residual foreign exchange gains or losses, primarily relating to the re-measurement of foreign currency assets or liabilities, mainly accounts receivable, are now shown on the income statement below income from operations. This reclassification does not affect net income or earnings per share. The financial data contained in this press release reflect such reclassification.
Conference Call to Discuss Financial Results
Genpact management will host a conference call at 8 a.m. (Eastern Daylight Time) on August 6, 2008 to discuss the Company's performance for the periods ended June 30, 2008. To participate, callers can dial 1 (866) 800-8652 from within the U.S. or 1 (617) 614-2705 from any other country. Thereafter, callers need to enter the participant passcode, which is 39842521.
Conference Call to Discuss Revised Presentation of Income Statement
Genpact management will host a second conference call at 9.30 a.m. (Eastern Daylight Time) on August 6, 2008 to discuss the revised presentation of the Company's income statement. To participate, callers can dial 1 (866) 800-8652 from within the U.S. or 1 (617) 614-2705 from any other country. Thereafter, callers need to enter the participant passcode, which is 39842521.
For those who cannot participate in the calls, a replay and podcast will be available on our website, www.genpact.com, after the end of the calls. A transcript of both calls will also be made available on our website.
About Genpact
Genpact is a leader in the globalization of services and a pioneer in managing 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 information, see our website at: 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 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 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 and its Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
As of December 31, As of June 30,
2007 2008
------------------ --------------
Assets
Current assets
Cash and cash equivalents $ 279,306 $ 297,978
Accounts receivable, net 99,354 131,377
Accounts receivable from a
significant shareholder, net 93,307 89,993
Short term deposits with a
significant shareholder 35,079 25,602
Deferred tax assets 9,683 8,956
Due from a significant
shareholder 8,977 6,084
Prepaid expenses and other
current assets 146,155 130,650
------------------ --------------
Total current assets 671,861 690,640
Property, plant and equipment,
net 195,660 177,959
Deferred tax assets 2,196 58,580
Investment in equity affiliate 197 760
Customer-related intangible
assets, net 99,257 77,390
Other intangible assets, net 10,375 7,491
Goodwill 601,120 588,741
Other assets 162,800 79,858
------------------ --------------
Total assets $ 1,743,466 $ 1,681,419
================== ==============
Genpact Limited and its Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
As of December 31, As of June 30,
2007 2008
------------------ --------------
Liabilities and shareholders' equity
------------------------------------
Current liabilities
Current portion of long-term debt $ 19,816 $ 19,872
Current portion of long-term debt
from a significant shareholder 1,125 1,231
Current portion of capital lease
obligations 38 40
Current portion of capital lease
obligations payable to a
significant shareholder 1,826 1,666
Accounts payable 12,446 11,110
Income taxes payable 7,035 21,372
Deferred tax liabilities 20,561 6,206
Due to a significant shareholder 8,930 8,736
Accrued expenses and other current
liabilities 197,298 244,821
------------------ --------------
Total current liabilities $ 269,075 $ 315,054
Long-term debt, less current portion 100,041 90,090
Long-term debt from a significant
shareholder, less current portion 2,740 2,352
Capital lease obligations, less
current portion 137 120
Capital lease obligations payable to
a significant shareholder, less
current portion 2,969 2,503
Deferred tax liabilities 40,738 12,626
Due to a significant shareholder 8,341 6,525
Other liabilities 65,630 192,197
------------------ --------------
Total liabilities $ 489,671 $ 621,467
------------------ --------------
Minority interest 3,066 2,841
Shareholders' equity
Preferred shares, $0.01 par value,
250,000,000 authorized, none issued -- --
Common shares, $0.01 par value,
500,000,000 authorized, 212,101,874
and 213,861,157 issued and
outstanding as of December 31, 2007
and June 30, 2008, respectively 2,121 2,139
Additional paid-in capital 1,000,179 1,017,344
Retained earnings 26,469 70,979
Accumulated other comprehensive
income (loss) 221,960 (33,351)
------------------ --------------
Total shareholders' equity 1,250,729 1,057,111
Commitments and contingencies -- --
------------------ --------------
Total liabilities, minority interest
and shareholders' equity $ 1,743,466 $ 1,681,419
------------------ --------------
Genpact Limited and its Subsidiaries
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2007 2008 2007 2008
---------- ----------- ---------- -----------
Net revenues
Net revenues from
services --
significant
shareholder $ 124,218 $ 125,851 $ 244,990 $ 240,174
Net revenues from
services -- others 76,041 127,721 130,473 248,008
Other revenues 427 4 1,382 20
---------- ----------- ---------- -----------
Total net revenues 200,686 253,576 376,845 488,202
---------- ----------- ---------- -----------
Cost of revenue
Services 120,444 147,092 228,566 293,173
Others 299 - 1,034 -
---------- ----------- ---------- -----------
Total cost of
revenue 120,743 147,092 229,600 293,173
---------- ----------- ---------- -----------
Gross profit 79,943 106,484 147,245 195,029
Operating expenses:
Selling, general and
administrative
expenses 52,516 66,632 100,644 128,769
Amortization of
acquired intangible
assets 9,437 9,601 18,629 19,825
Other operating
(income) losses, net (1,160) 1,073 (1,723) (64)
---------- ----------- ---------- -----------
Income from operations $ 19,150 $ 29,178 $ 29,695 $ 46,499
Foreign exchange (gains)
losses, net (431) 883 (457) (5,833)
Other income (expense),
net (3,498) 3,148 (7,078) 5,022
---------- ----------- ---------- -----------
Income before share of
equity in (earnings)
loss of affiliate,
minority interest and
income tax expense 16,083 31,443 23,074 57,354
Equity in loss of
affiliate 7 110 80 319
Minority interest 2,788 3,141 3,692 5,982
Income tax expense 6,195 3,376 10,363 6,543
---------- ----------- ---------- -----------
Net Income $ 7,093 $ 24,816 $ 8,939 $ 44,510
========== =========== ========== ===========
Net income (loss)
available to common
shareholders (11,913) 24,816 (26,613) 44,510
Earnings (loss) per
common share -
Basic $ (0.17) $ 0.12 $ (0.39) $ 0.21
Diluted $ (0.17) $ 0.11 $ (0.39) $ 0.20
========== =========== ========== ===========
Weighted average number
of common shares used
in computing earnings
(loss) per common share
-
Basic 69,462,052 213,001,442 68,841,133 212,599,543
Diluted 69,462,052 218,863,648 68,841,133 218,151,069
Genpact Limited and its Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six months ended
June 30,
-------------------------
2007 2008
------------ ------------
Operating activities
Net income $ 8,939 $ 44,510
Adjustments to reconcile net income to net
cash provided by (used for) operating
activities:
Depreciation and amortization 22,509 28,952
Amortization of debt issue costs 318 332
Amortization of acquired intangible assets 19,155 20,325
Loss on sale of property, plant and
equipment, net 40 2,228
Provision for doubtful receivables 1,675 2,022
Provision for mortgage loans - 580
Unrealized (gain) loss on revaluation of
foreign currency asset, liability 1,647 (2,684)
Equity in loss of affiliate 80 319
Minority interest 3,692 5,982
Share-based compensation expense 5,231 8,309
Deferred income taxes (1,799) (9,932)
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (14,883) (30,341)
Decrease (increase) in other assets (462) (16,380)
(Decrease) increase in accounts payable 3,818 (1,164)
(Decrease) increase in accrued expenses
and other current liabilities (8,514) (3,856)
(Decrease) increase in income taxes
payable 7,741 14,220
(Decrease) increase in other liabilities 3,608 5,959
------------ ------------
Net cash provided by operating activities $ 52,795 $ 69,381
------------ ------------
Investing activities
Purchase of property, plant and equipment (23,289) (31,921)
Proceeds from sale of property, plant and
equipment 1,156 3,790
Investment in affiliates (455) (883)
Short term deposits placed (73,561) (122,673)
Redemption of short term deposits 62,313 129,627
Payment for business acquisition, net of
cash acquired (14,771) -
------------ ------------
Net cash used in investing activities $ (48,607) $ (22,060)
------------ ------------
Financing activities
Repayment of capital lease obligations (1,381) (1,356)
Proceeds from long-term debt 1,525 -
Repayment of long-term debt (10,711) (10,458)
Short-term borrowings, net 14,675 -
Repurchase of common shares and preferred
stock (1,995) -
Deferred IPO cost (1,492) -
Proceeds from issuance of common shares on
exercise of options 1,225 8,874
Payment to minority shareholders (2,104) (5,631)
------------ ------------
Net cash (used) by financing activities $ (258) $ (8,571)
------------ ------------
Effect of exchange rate changes 9,664 (20,078)
Net increase (decrease) in cash and cash
equivalents 3,930 38,750
Cash and cash equivalents at the beginning
of the period 35,430 279,306
------------ ------------
Cash and cash equivalents at the end of the
period $ 49,024 $ 297,978
============ ============
Supplementary information
Cash paid during the period for interest $ 7,318 $ 3,404
Cash paid during the period for income taxes $ 4,337 $ 12,937
Property, plant and equipment acquired under
capital lease obligation $ 930 $ 1,057
Shares issued for business acquisition $ 23,265 $ -
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, adjusted net income, adjusted earnings per share and pro forma earnings per share. 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 the 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 in 2004 and additional depreciation due to mark-to-market adjustment at formation in 2004 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 financial statements that do not include stock-based compensation allows investors to make additional comparisons between Genpact's operating results to those of other companies. In addition, Genpact's management believes that providing non-GAAP financial measures that exclude 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 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.
In addition, for its internal management reporting for 2007, Genpact's management used adjusted earnings per share and pro forma earnings per share that do not include impact of the undistributed earnings to preferred stock, preferred dividend and beneficial interest on conversion of preferred stock dividend and assumes the preferred stock was converted to common shares. As of July 13, 2007, prior to the IPO, all the preferred stock has been converted to common shares. Accordingly, the Company believes that to evaluate period to period comparisons, the presentation of non-GAAP adjusted earnings per share and pro forma earnings per share 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 excludes 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 adjusted income from operations and adjusted net income and evaluating such non-GAAP financial measures with financial measures calculated in accordance with GAAP.
During the second quarter of 2008, Genpact has reclassified its foreign exchange gains or losses from a separate line item in order to more clearly reflect Genpact's costs, including the impact of its long-term foreign exchange hedging strategy. This reclassification affects income from operations and consequently affects adjusted income from operations. This reclassification does not affect adjusted net income or adjusted earnings per share.
The following tables show the reconciliation of the adjusted financial measures from GAAP on a reclassified basis for the periods ended June 30, 2008:
Reconciliation of Adjusted Income from Operations
(Unaudited)
(In thousands)
Quarter Ended June 30, Six months Ended June 30,
---------------------- -------------------------
2007 2008 2007 2008
----------- ---------- ------------ ------------
Income from
operations as per
GAAP (reclassified
basis) $ 19,150 $ 29,178 $ 29,695 $ 46,499
Add: Amortization
of acquired
intangible assets
resulting from
Formation
Accounting 9,281 9,297 18,515 19,257
Add: Additional
depreciation due
to fair value
adjustment
resulting from
Formation
Accounting 514 14 1,028 28
Add: Share based
compensation 3,296 4,382 5,231 8,309
Add: FBT impact on
share based
compensation
recovered from
employees -- 1,453 -- 1,553
Add: Gain (loss) on
interest rate
swaps 15 - (20) (283)
Add: Other income 434 737 710 1173
Less: Equity in
loss of affiliate (7) (110) (80) (319)
Less: Minority
interest (2,788) (3,141) (3,692) (5,982)
----------- ---------- ------------ ------------
Adjusted income from
operations $ 29,895 $ 41,810 $ 51,387 $ 70,235
=========== ========== ============ ============
Reconciliation of Adjusted Net Income
(Unaudited)
(In thousands, except per share data)
Quarter Ended June 30, Six months Ended June 30,
---------------------- -------------------------
2007 2008 2007 2008
----------- ---------- ------------ ------------
Net income as per
GAAP $ 7,093 $ 24,816 $ 8,939 $ 44,510
Add: Amortization
of acquired
intangible assets
resulting from
Formation
Accounting 9,281 9,297 18,515 19,257
Add: Additional
depreciation due
to fair value
adjustment
resulting from
Formation
Accounting 514 14 1,028 28
Add: Share based
compensation 3,296 4,382 5,231 8,309
Add: FBT impact on
share based
compensation
recovered from
employees -- 1,453 -- 1,553
Less: Tax impact on
amortization of
acquired
intangibles
resulting from
Formation
Accounting (1,284) (1,640) (1,736) (3,464)
----------- ---------- ------------ ------------
Adjusted net income $ 18,900 $ 38,322 $ 31,977 $ 70,193
=========== ========== ============ ============
Diluted adjusted
earnings per share $ 0.10 $ 0.18 $ 0.16 $ 0.32
Reconciliation of Pro Forma Earnings Per Share
(Unaudited)
(In thousands, except per share data)
Quarter Ended June 30, Six months Ended June 30,
----------------------- -------------------------
2007 2008 2007 2008
----------- ----------- ------------- -----------
Net income (loss)
available to common
shareholders as per
GAAP $ (11,913) $ 24,816 $ (26,613) $ 44,510
Add: preferred
dividend 3,677 -- 7,116 --
Add: undistributed
earnings to
preferred stock 2,088 -- 2,088 --
Add: beneficial
interest on
conversion of
preferred stock
dividend 13,241 -- 26,348 --
Pro forma net income
available to common
shareholders $ 7,093 $ 24,816 $ 8,939 $ 44,510
Diluted pro forma
earnings per share $ 0.04 $ 0.11 $ 0.05 $ 0.20
Weighted average
number of common
shares used in
computing dilutive
earnings (loss) per
common share as per
GAAP 69,462,052 218,863,648 68,841,133 218,151,069
Pro forma dilutive
effect of stock
options 9,004,729 -- 9,143,707 --
Add: Impact of
preferred stock
converted into
common stock (a) 119,231,521 -- 119,231,595 --
----------- ----------- ------------- -----------
Weighted average
number of adjusted
common shares used
in computing
adjusted and pro
forma dilutive
earnings (loss) per
common share 197,698,302 218,863,648 197,216,435 218,151,069
----------- ----------- ------------- -----------
(a) Pro forma earnings per share give effect to Genpact's 2007
reorganization of legal entities as if it occurred on January 1,
2007. In Genpact's 2007 reorganization, the shareholders of
Genpact Global Holdings exchanged their preferred and common
shares of Genpact Global Holdings for common shares of Genpact
Limited.
Statements of Income on a Historical and Reclassified Basis
(Q1 2006 - Q2 2008)
Historical Basis
----------------------------------------------------------------------
Genpact Limited and its Subsidiaries
(Table A)
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Quarter Ended
----------------------------
March 31, 2008 June 30, 2008
-------------- -------------
Net revenues
Net revenues from services -
significant shareholder $ 114,323 $ 125,929
Net revenues from services - others 120,094 127,800
Other revenues 17 4
-------------- -------------
Total net revenues 234,434 253,733
-------------- -------------
Cost of revenue
Services 157,599 153,165
Others - -
-------------- -------------
Total cost of revenue 157,599 153,165
-------------- -------------
Gross profit 76,835 100,568
Operating expenses:
Selling, general and administrative
expenses 66,089 68,818
Amortization of acquired intangible
assets 10,224 9,601
Foreign exchange (gains) losses, net (22,377) (7,219)
Other operating income (1,138) 1,073
-------------- -------------
Income from operations 24,037 28,295
Other income (expense), net 1,874 3,148
-------------- -------------
Income before share of equity in
(earnings) loss of affiliate, minority
interest and income taxes 25,911 31,443
Equity in loss of affiliate 210 110
Minority interest 2,842 3,141
Income tax expense (benefit) 3,166 3,376
-------------- -------------
Net Income $ 19,693 $ 24,816
============== =============
Reclassified Basis
----------------------------------------------------------------------
Genpact Limited and its Subsidiaries
(Table B)
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Quarter Ended
----------------------------
March 31, 2008 June 30, 2008
-------------- -------------
Net revenues
Net revenues from services --
significant shareholder $ 114,417 $ 125,851
Net revenues from services -- others 120,192 127,721
Other revenues 17 4
-------------- -------------
Total net revenues 234,626 253,576
-------------- -------------
Cost of revenue
Services 146,082 147,092
Others - -
-------------- -------------
Total cost of revenue 146,082 147,092
-------------- -------------
Gross profit 88,544 106,484
Operating expenses:
Selling, general and administrative
expenses 62,136 66,632
Amortization of acquired intangible
assets 10,224 9,601
Other operating income (1,138) 1,073
-------------- -------------
Income from operations $ 17,322 $ 29,178
Foreign exchange (gains) losses, net (6,715) 883
Other income (expense), net 1,874 3,148
-------------- -------------
Income before share of equity in
(earnings) loss of affiliate, minority
interest and income tax expense 25,911 31,443
Equity in loss of affiliate 210 110
Minority interest 2,842 3,141
Income tax expense 3,166 3,376
-------------- -------------
Net Income $ 19,693 $ 24,816
============== =============
Genpact Limited and its Subsidiaries
(Table C)
Allocation of Reclassified Items
(Unaudited)
(In thousands, except per share data)
Quarter Ended
----------------------------
March 31, 2008 June 30, 2008
-------------- -------------
Foreign exchange (gains) losses, net as
reported on historical basis (22,377) (7,219)
----------------------------------------------------------------------
Allocation of reclassified items:
Increase (decrease) in net revenue 192 (157)
Decrease in cost of revenue 11,517 6,073
Decrease in selling, general and
administrative expenses 3,953 2,186
----------------------------------------------------------------------
Total 15,662 8,102
----------------------------------------------------------------------
Foreign exchange (gains) losses, net as
reported on reclassified basis (1) (6,715) 883
(1) Reclassified below income from operations.
Reclassified Basis
----------------------------------------------------------------------
Reconciliation of Adjusted Income from Operations
(Table D)
(Unaudited)
(In thousands, except per share data)
Quarter Ended
----------------------------
March 31, 2008 June 30, 2008
-------------- -------------
Income from operations as per GAAP
(reclassified basis) $ 17,322 $ 29,178
Add: Amortization of acquired
intangible assets resulting from
Formation Accounting 9,960 9,297
Add: Additional depreciation due to
fair value adjustment resulting from
Formation Accounting 14 14
Add: Share based compensation 3,927 4,382
Add: FBT impact on share based
compensation recovered from employees 100 1,453
Add: Gain (loss) on interest rate swaps (283) --
Add: Other income 435 737
Less: Equity in loss of affiliate (210) (110)
Less: Minority interest (2,842) (3,141)
-------------- -------------
Adjusted income from operations $ 28,423 $ 41,810
============== =============
Historical Basis
----------------------------------------------------------------------
Genpact Limited and its Subsidiaries
(Table E)
Consolidated Statements of Income
(In thousands, except per share data)
Year ended December 31,
-----------------------
2006 2007
----------- -----------
Net revenues
Net revenues from services -- significant
shareholder $ 453,305 $ 481,033
Net revenues from services -- others 158,282 340,158
Other revenues 1,460 1,493
----------- -----------
Total net revenues 613,047 822,684
----------- -----------
Cost of revenue
Services 359,791 514,330
Others 1,090 1,133
----------- -----------
Total cost of revenue 360,881 515,463
----------- -----------
Gross profit 252,166 307,221
Operating expenses:
Selling, general and administrative expenses 159,203 231,320
Amortization of acquired intangible assets 41,715 36,938
Foreign exchange (gains) losses, net 13,021 (43,577)
Other operating income (4,930) (4,264)
----------- -----------
Income from operations $ 43,157 $ 86,804
Other income (expense), net (9,235) (5,196)
----------- -----------
Income before share of equity in (earnings)
loss of affiliate, minority interest and
income taxes 33,922 81,608
Equity in loss of affiliate -- 255
Minority interest -- 8,387
Income tax expense (benefit) (5,850) 16,543
Net Income $ 39,772 $ 56,423
=========== ===========
Reclassified Basis
----------------------------------------------------------------------
Genpact Limited and its Subsidiaries
(Table F)
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Year ended December 31,
------------------------
2006 2007
------------ -----------
Net revenues
Net revenues from services -- significant
shareholder $ 453,305 $ 481,350
Net revenues from services -- others 158,282 340,328
Other revenues 1,460 1,493
------------ -----------
Total net revenues 613,047 823,171
------------ -----------
Cost of revenue
Services 368,088 481,805
Others 1,090 1,133
------------ -----------
Total cost of revenue 369,178 482,938
------------ -----------
Gross profit 243,869 340,233
Operating expenses:
Selling, general and administrative
expenses 162,019 218,237
Amortization of acquired intangible assets 41,715 36,938
Other operating income (4,930) (4,264)
------------ -----------
Income from operations $ 45,065 $ 89,322
Foreign exchange (gains) losses, net 1,908 2,518
Other income (expense), net (9,235) (5,196)
------------ -----------
Income before share of equity in (earnings)
loss of affiliate, minority interest and
income tax expense 33,922 81,608
Equity in loss of affiliate - 255
Minority interest - 8,387
Income tax expense (benefit) (5,850) 16,543
------------ -----------
Net Income $ 39,772 $ 56,423
============ ===========
Genpact Limited and its Subsidiaries
(Table G)
Allocation of Reclassified Items
(Unaudited)
(In thousands, except per share data)
Year ended December 31,
----------------------------
2006 2007
-------------- -------------
Foreign exchange (gains) losses, net as
reported on historical basis 13,021 (43,577)
----------------------------------------------------------------------
Allocation of reclassified items:
Increase in net revenues - 487
Decrease (increase) in cost of revenue (8,297) 32,525
Decrease (increase) in selling, general
and administrative expenses (2,816) 13,083
----------------------------------------------------------------------
Total (11,113) 46,095
----------------------------------------------------------------------
Foreign exchange (gains) losses, net as
reported on reclassified basis (1) 1,908 2,518
(1) Reclassified below income from operations.
Reclassified Basis
----------------------------------------------------------------------
Reconciliation of Adjusted Income from Operations
(Table H)
(Unaudited)
(In thousands, except per share data)
Year Ended December 31,
------------------------
2006 2007
------------ -----------
Income from operations as per GAAP
(reclassified basis) $ 45,065 $ 89,322
Add: Amortization of acquired intangible
assets resulting from Formation Accounting 42,738 35,764
Add: Additional depreciation due to fair
value adjustment resulting from Formation
Accounting 2,056 2,056
Add: Stock based compensation 4,501 13,021
Add: FBT Impact on Stock based compensation
recovered from employees 507
Add: Gain / (loss) on interest rate swaps 1,394 (41)
Add: Other income 1,324 2,383
Less: Equity in loss of affiliate -- (255)
Less: Minority interest -- (8,387)
------------ -----------
Adjusted income from operations $ 97,078 $ 134,370
============ ===========
Historical Basis
----------------------------------------------------------------------
Genpact Limited and its Subsidiaries
(Table I)
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Quarter Ended
------------------------------------------------
March 31, June 30, September 30, December 31,
2007 2007 2007 2007
---------- ---------- ------------- ------------
Net revenues
Net revenues from
services -
significant
shareholder $ 120,772 $ 124,218 $ 122,862 $ 113,181
Net revenues from
services - others 54,255 75,847 91,590 118,466
Other revenues 955 427 110 1
---------- ---------- ------------- ------------
Total net
revenues 175,982 200,492 214,562 231,648
---------- ---------- ------------- ------------
Cost of revenue
Services 109,150 128,248 132,991 143,941
Others 735 299 99 -
---------- ---------- ------------- ------------
Total cost of
revenue 109,885 128,547 133,090 143,941
---------- ---------- ------------- ------------
Gross profit 66,097 71,945 81,472 87,707
Operating expenses:
Selling, general
and administrative
expenses 48,554 55,565 62,849 64,352
Amortization of
acquired
intangible assets 9,192 9,437 9,358 8,951
Foreign exchange
(gains) losses,
net (1,660) (11,478) (15,476) (14,963)
Other operating
income (563) (1,160) (810) (1,731)
---------- ---------- ------------- ------------
Income from
operations 10,574 19,581 25,551 31,098
Other income
(expense), net (3,580) (3,498) (619) 2,501
---------- ---------- ------------- ------------
Income before share
of equity in
(earnings) loss of
affiliate, minority
interest and income
taxes 6,994 16,083 24,932 33,599
Equity in loss of
affiliate 73 7 61 114
Minority interest 904 2,788 2,062 2,633
Income tax expense
(benefit) 4,169 6,195 6,486 (307)
---------- ---------- ------------- ------------
Net Income $ 1,848 $ 7,093 $ 16,323 $ 31,159
========== ========== ============= ============
Reclassified Basis
----------------------------------------------------------------------
Genpact Limited and its Subsidiaries
(Table J)
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Quarter Ended
------------------------------------------------
March 31, June 30, September 30, December 31,
2007 2007 2007 2007
---------- ---------- ------------- ------------
Net revenues
Net revenues from
services --
significant
shareholder $ 120,895 $ 124,338 $ 122,981 $ 113,136
Net revenues from
services -- others 54,310 75,921 91,678 118,419
Other revenues 955 427 110 1
---------- ---------- ------------- ------------
Total net
revenues 176,160 200,686 214,769 231,556
---------- ---------- ------------- ------------
Cost of revenue
Services 108,123 120,444 122,564 130,674
Others 735 299 99 --
---------- ---------- ------------- ------------
Total cost of
revenue 108,858 120,743 122,663 130,674
---------- ---------- ------------- ------------
Gross profit 67,302 79,943 92,106 100,882
Operating expenses:
Selling, general
and administrative
expenses 48,126 52,516 59,035 58,560
Amortization of
acquired
intangible assets 9,192 9,437 9,358 8,951
Other operating
income (563) (1,160) (810) (1,731)
---------- ---------- ------------- ------------
Income from
operations $ 10,547 $ 19,150 $ 24,523 $ 35,102
Foreign exchange
(gains) losses, net (27) (431) (1,028) 4,004
Other income
(expense), net (3,580) (3,498) (619) 2,501
---------- ---------- ------------- ------------
Income before share
of equity in
(earnings) loss of
affiliate, minority
interest and income
tax expense 6,994 16,083 24,932 33,599
Equity in loss of
affiliate 73 7 61 114
Minority interest 904 2,788 2,062 2,633
Income tax expense
(benefit) 4,169 6,195 6,486 (307)
---------- ---------- ------------- ------------
Net Income $ 1,848 $ 7,093 $ 16,323 $ 31,159
========== ========== ============= ============
Genpact Limited and its Subsidiaries
(Table K)
Allocation of Reclassified Items
(Unaudited)
(In thousands, except per share data)
Quarter Ended
---------------------------------------------
March 31, June 30, September 30, December 31,
2007 2007 2007 2007
--------- -------- ------------- ------------
Foreign exchange (gains)
losses, net as reported
on historical basis (1,660) (11,478) (15,476) (14,963)
----------------------------------------------------------------------
Allocation of
reclassified items:
Increase (decrease) in
net revenue 178 194 207 (92)
Decrease in cost of
revenue 1,027 7,804 10,427 13,267
Decrease in selling,
general and
administrative
expenses 428 3,049 3,814 5,792
----------------------------------------------------------------------
Total 1,633 11,047 14,448 18,967
----------------------------------------------------------------------
Foreign exchange
(gains) losses, net
as reported on
reclassified basis
(1) (27) (431) (1,028) 4,004
(1) Reclassified below income from operations.
Reclassified Basis
----------------------------------------------------------------------
Reconciliation of Adjusted Income from Operations
(Table L)
(Unaudited)
(In thousands, except per share data)
Quarter Ended
---------------------------------------------
March 31, June 30, September 30, December 31,
2007 2007 2007 2007
--------- -------- ------------- ------------
Income from operations
as per GAAP $ 10,547 $ 19,150 $ 24,523 $ 35,102
Add: Amortization of
acquired intangible
assets resulting from
Formation Accounting 9,234 9,281 8,654 8,595
Add: Additional
depreciation due to
fair value adjustment
resulting from
Formation Accounting 514 514 514 514
Add: Share based
compensation 1,935 3,296 3,678 4,112
Add: FBT impact on
share based
compensation
recovered from
employees -- -- -- 507
Add: Gain (loss) on
interest rate swaps (35) 15 (189) (131)
Add: Other income 276 434 620 1,352
Less: Equity in loss
of affiliate (73) (7) (61) (114)
Less: Minority
interest (904) (2,788) (2,062) (2,633)
--------- -------- ------------- ------------
Adjusted income from
operations $ 21,494 $ 29,895 $ 35,677 $ 47,304
========= ======== ============= ============
Historical Basis
----------------------------------------------------------------------
Genpact Limited and its Subsidiaries
(Table M)
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Quarter ended
March 31, June 30, September December 31,
2006 2006 30, 2006 2006
---------- ---------- ---------- ------------
Net revenues
Net revenues from
services --
significant
shareholder $ 109,650 $ 109,662 $ 111,047 $ 122,946
Net revenues from
services -- others 22,246 31,294 50,853 53,889
Other revenues -- -- 486 974
---------- ---------- ---------- ------------
Total net revenues 131,896 140,956 162,386 177,809
---------- ---------- ---------- ------------
Cost of revenue
Services 77,986 85,753 93,148 102,904
Others -- -- 363 727
---------- ---------- ---------- ------------
Total cost of revenue 77,986 85,753 93,511 103,631
---------- ---------- ---------- ------------
Gross profit 53,910 55,203 68,875 74,178
Operating expenses:
Selling, general and
administrative
expenses 36,104 37,025 40,813 45,261
Amortization of
acquired intangible
assets 11,045 10,569 10,200 9,901
Foreign exchange
(gains) losses, net 3,695 826 4,235 4,265
Other operating income (1,128) (625) (1,373) (1,804)
---------- ---------- ---------- ------------
Income from operations $ 4,194 $ 7,408 $ 15,000 $ 16,555
Other income (expense),
net (554) (2,630) (4,230) (1,821)
---------- ---------- ---------- ------------
Income before share of
equity in (earnings)
loss of affiliate,
minority interest and
income taxes 3,640 4,778 10,770 14,734
Equity in loss of
affiliate -- -- -- --
Minority interest -- -- -- --
Income tax expense
(benefit) (1,428) (2,244) (2,035) (143)
---------- ---------- ---------- ------------
Net Income $ 5,068 $ 7,022 $ 12,805 $ 14,877
========== ========== ========== ============
Reclassified Basis
----------------------------------------------------------------------
Genpact Limited and its Subsidiaries
(Table N)
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Quarter ended
March 31, September 30, December 31,
2006 June 30, 2006 2006 2006
--------- ------------- ------------- ------------
Net revenues
Net revenues from
services --
significant
shareholder $ 109,650 $ 109,662 $ 111,047 $ 122,946
Net revenues from
services --
others 22,246 31,294 50,853 53,889
Other revenues -- -- 486 974
--------- ------------- ------------- ------------
Total net
revenues 131,896 140,956 162,386 177,809
--------- ------------- ------------- ------------
Cost of revenue
Services 78,667 88,496 96,505 104,420
Others -- -- 363 727
--------- ------------- ------------- ------------
Total cost of
revenue 78,667 88,496 96,868 105,147
--------- ------------- ------------- ------------
Gross profit 53,229 52,460 65,518 72,662
Operating expenses:
Selling, general
and
administrative
expenses 36,344 37,990 41,996 45,689
Amortization of
acquired
intangible
assets 11,045 10,569 10,200 9,901
Other operating
income (1,128) (625) (1,373) (1,804)
--------- ------------- ------------- ------------
Income from
operations $ 6,968 $ 4,526 $ 14,695 $ 18,876
Foreign exchange
(gains) losses,
net 2,774 (2,882) (305) 2,321
Other income
(expense), net (554) (2,630) (4,230) (1,821)
--------- ------------- ------------- ------------
Income before share
of equity in
(earnings) loss of
affiliate,
minority interest
and income tax
expense 3,640 4,778 10,770 14,734
Equity in loss of
affiliate -- -- -- --
Minority interest -- -- -- --
Income taxes
expense (benefit) (1,428) (2,244) (2,035) (143)
--------- ------------- ------------- ------------
Net Income $ 5,068 $ 7,022 $ 12,805 $ 14,877
========= ============= ============= ============
Genpact Limited and its Subsidiaries
(Table O)
Allocation of Reclassified Items
(Unaudited)
(In thousands, except per share data)
Quarter ended
March 31, June 30, September 30, December
2006 2006 2006 31, 2006
---------- --------- ------------- --------
Foreign exchange (gains)
losses, net as reported
on historical basis 3,695 826 4,235 4,265
----------------------------------------------------------------------
Allocation of reclassified
items:
Increase in cost of
revenue 681 2,743 3,357 1,516
Increase in selling,
general and
administrative expenses 240 965 1,183 428
----------------------------------------------------------------------
Total 921 3,708 4,540 1,943
----------------------------------------------------------------------
Foreign exchange (gains)
losses, net as reported
on reclassified basis
(1) 2,774 (2,882) (305) 2,321
(1) Reclassified below income from operations.
Reclassified Basis
----------------------------------------------------------------------
Reconciliation of Adjusted Income from Operations
(Table P)
(Unaudited)
(In thousands)
Quarter Ended,
September 30, December 31,
March 31, 2006 June 30, 2006 2006 2006
-------------- ------------- ------------- ------------
Income from
operations as
per GAAP
(reclassified
basis) $ 6,968 $ 4,526 $ 14,695 $ 18,876
Add:
Amortization
of acquired
intangible
assets
resulting
from
Formation
Accounting 11,400 10,909 10,439 9,990
Add:
Additional
depreciation
due to fair
value
adjustment
resulting
from
Formation
Accounting 514 514 514 514
Add: Stock
based
compensation 1,172 1,307 1,105 917
Add: FBT
Impact on
Stock based
compensation
recovered
from
employees -- -- -- --
Add: Gain /
(loss) on
interest
rate swaps 1,171 1,584 (1,311) (50)
Add: Other
income 312 771 85 156
Less: Equity
in loss of
affiliate -- -- -- --
Less:
Minority
interest -- -- -- --
-------------- ------------- ------------- ------------
Adjusted
income from
operations $ 21,537 $ 19,611 $ 25,527 $ 30,403
============== ============= ============= ============
SOURCE: Genpact Limited
Genpact LimitedInvestors:
Roanak Desai
+91 (124) 402-2716
roanak.desai@genpact.com
or
Media:
Anita Trehan
+91 (124) 402 2726
anita.trehan@genpact.com
