Genpact Reports Results for the Third Quarter of 2015
Key Financial Results – Third Quarter 2015
- Total revenue was
$617.8 million , up 5% year over year (up ~7% on a constant currency basis). - Income from operations was
$87.3 million , up 20% year over year. - Adjusted income from operations was
$97.1 million , up 10% year over year, with a margin of 15.7%. - Diluted earnings per share were
$0.31 , up 48% year over year, and adjusted diluted earnings per share were$0.35 , up 36% year over year. Genpact repurchased approximately 3.5 million of its common shares for a total of$78 million under its$250 million share repurchase program. As ofSeptember 30 ,Genpact has repurchased approximately 7.1 million of its common shares in 2015 for a total of$159 million .
"
Revenue Details – Third Quarter 2015
- Revenue from Global Clients was
$503 million , up 7% year over year (up ~10% on a constant currency basis), representing approximately 81% of total revenues. - Revenue from GE was
$115 million , down 2% year over year, representing approximately 19% of total revenues. - Total BPO revenue was
$484 million , up 8% year over year, representing approximately 78% of total revenues. - Global Client BPO revenue was
$396 million , up 10% year over year (up ~14% on a constant currency basis). - GE BPO revenue was
$88 million , unchanged from the third quarter of 2014. - Total IT revenue was
$134 million , down 5% year over year, representing approximately 22% of total revenues. - Global Client IT revenue was
$108 million , down 4% year over year. - GE IT revenue was
$27 million , down 9% year over year. - Annualized revenue per employee for the quarter was
$36,600 , up from$36,200 in the third quarter of 2014.
Cash Flow from Operations
- Cash from operations was
$139 million in the third quarter of 2015, up 62% from$86 million in the third quarter of 2014.
Client Relationships as of
- For the 12-month period ended
September 30, 2015 , the number of client relationships generating annual revenue over$5 million increased to 103 from 88 as ofSeptember 30, 2014 . This includes client relationships with more than$15 million in annual revenue increasing to 34 from 30, and client relationships with more than$25 million in annual revenue increasing to 16 from 15.
Employee Statistics as of
Genpact had approximately 70,800 employees worldwide, up from approximately 67,500 as ofSeptember 30, 2014 .Genpact's employee attrition rate for the quarter was approximately 29%, measured from the first day of employment, compared to 27% for the same period in 2014.
2015 Outlook
- Total revenues of approximately
$2.46 billion (representing year-over-year growth of ~10% on a constant currency basis) compared to the prior range of$2.46 billion to $2.50 billion . The full-year revenue outlook now assumes an additional$16 million of adverse effects from foreign currency (at current exchange rates) compared to the outlook given at the beginning of the year. - Adjusted income from operations margin to be in the range of 15.1% to 15.3%, compared to the prior range of 15.0% to 15.2%.
Conference Call to Discuss Financial Results
A live webcast of the call including slides with our comments will also be made available on the Genpact Investor Relations website at http://investors.genpact.com. For those who cannot participate in the call, a replay and podcast will be available on the
About
Safe Harbor
This press release contains certain statements concerning our future growth prospects and forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those in such forward-looking statements. These risks, uncertainties and other factors include but are not limited to a slowdown in the economies and sectors in which our clients operate, a slowdown in the business process outsourcing and information technology services sectors, 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, 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 as well as other risks detailed in our reports filed with the
Contact |
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Investors |
Roger Sachs, CFA |
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+1 (203) 808-6725 |
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Media |
Gail Marold +1 (919) 345-3899 |
GENPACT LIMITED AND ITS SUBSIDIARIES |
|||||
Consolidated Balance Sheets (Unaudited) (In thousands, except per share data and share count) |
|||||
As of December 31, |
As of September 30, |
||||
2014 |
2015 |
||||
Assets |
|||||
Current assets |
|||||
Cash and cash equivalents |
$ |
461,788 |
$ |
467,504 |
|
Accounts receivable, net |
525,754 |
549,438 |
|||
Deferred tax assets |
45,486 |
35,529 |
|||
Prepaid expenses and other current assets |
155,480 |
183,048 |
|||
Total current assets |
$ |
1,188,508 |
$ |
1,235,519 |
|
Property, plant and equipment, net |
175,936 |
163,848 |
|||
Deferred tax assets |
59,135 |
75,587 |
|||
Investment in equity affiliates |
494 |
5,747 |
|||
Intangible assets, net |
114,544 |
102,933 |
|||
Goodwill |
1,057,214 |
1,042,539 |
|||
Other assets |
146,706 |
162,832 |
|||
Total assets |
$ |
2,742,537 |
$ |
2,789,005 |
GENPACT LIMITED AND ITS SUBSIDIARIES |
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Consolidated Balance Sheets (Unaudited) (In thousands, except per share data and share count) |
|||||
As of December 31, |
As of September 30, |
||||
2014 |
2015 |
||||
Liabilities and equity |
|||||
Current liabilities |
|||||
Short-term borrowings |
$ |
135,000 |
$ |
21,500 |
|
Current portion of long-term debt |
4,288 |
39,122 |
|||
Accounts payable |
15,544 |
15,288 |
|||
Income taxes payable |
13,586 |
71,852 |
|||
Deferred tax liabilities |
1,239 |
1,394 |
|||
Accrued expenses and other current liabilities |
452,457 |
436,825 |
|||
Total current liabilities |
$ |
622,114 |
$ |
585,981 |
|
Long-term debt, less current portion |
649,314 |
747,118 |
|||
Deferred tax liabilities |
6,671 |
6,266 |
|||
Other liabilities |
179,302 |
168,289 |
|||
Total liabilities |
$ |
1,457,401 |
$ |
1,507,654 |
|
Shareholders' equity |
|||||
Preferred shares, $0.01 par value, 250,000,000 authorized, none issued |
— |
— |
|||
Common shares, $0.01 par value, 500,000,000 authorized, 218,684,205 and 213,612,787 issued and outstanding as of December 31, 2014 and September 30, 2015, respectively |
2,184 |
2,133 |
|||
Additional paid-in capital |
1,296,730 |
1,322,959 |
|||
Retained earnings |
398,706 |
415,003 |
|||
Accumulated other comprehensive income (loss) |
(412,484) |
(458,744) |
|||
Genpact Limited shareholders' equity |
$ |
1,285,136 |
$ |
1,281,351 |
|
Non-controlling interest |
— |
— |
|||
Total equity |
$ |
1,285,136 |
$ |
1,281,351 |
|
Total liabilities and equity |
$ |
2,742,537 |
$ |
2,789,005 |
GENPACT LIMITED AND ITS SUBSIDIARIES |
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Consolidated Statements of Income (Unaudited) (In thousands, except per share data and share count) |
|||||||||||
Three months ended September 30, |
Nine months ended September 30, |
||||||||||
2014 |
2015 |
2014 |
2015 |
||||||||
Net revenues |
|||||||||||
Net revenues from services |
$ |
588,107 |
$ |
617,831 |
$ |
1,677,908 |
$ |
1,814,516 |
|||
Cost of revenue |
|||||||||||
Services |
354,475 |
375,830 |
1,018,889 |
1,099,610 |
|||||||
Gross profit |
$ |
233,632 |
$ |
242,001 |
$ |
659,019 |
$ |
714,906 |
|||
Operating expenses: |
|||||||||||
Selling, general and administrative expenses |
153,148 |
144,723 |
418,361 |
442,701 |
|||||||
Amortization of acquired intangible assets |
7,989 |
7,219 |
20,617 |
21,875 |
|||||||
Other operating (income) expense, net |
(372) |
2,716 |
(3,124) |
(416) |
|||||||
Income from operations |
$ |
72,867 |
$ |
87,343 |
$ |
223,165 |
$ |
250,746 |
|||
Foreign exchange (gains) losses, net |
4,671 |
(4,210) |
12,093 |
(4,098) |
|||||||
Other income (expense), net |
(6,439) |
(1,868) |
(19,477) |
(26,976) |
|||||||
Income before equity-method investment activity, net and income tax expense |
$ |
61,757 |
$ |
89,685 |
$ |
191,595 |
$ |
227,868 |
|||
Loss (gain) on equity-method investment activity, net |
(33) |
3,432 |
(87) |
7,995 |
|||||||
Income before income tax expense |
$ |
61,790 |
$ |
86,253 |
$ |
191,682 |
$ |
219,873 |
|||
Income tax expense |
15,124 |
18,203 |
45,263 |
44,469 |
|||||||
Net income |
$ |
46,666 |
$ |
68,050 |
$ |
146,419 |
$ |
175,404 |
|||
Net income attributable to non-controlling interest |
13 |
— |
169 |
— |
|||||||
Net income attributable to Genpact Limited shareholders |
$ |
46,653 |
$ |
68,050 |
$ |
146,250 |
$ |
175,404 |
|||
Net income available to Genpact Limited common shareholders |
$ |
46,653 |
$ |
68,050 |
$ |
146,250 |
$ |
175,404 |
|||
Earnings per common share attributable to Genpact Limited common shareholders |
|||||||||||
Basic |
$ |
0.22 |
$ |
0.32 |
$ |
0.66 |
$ |
0.80 |
|||
Diluted |
$ |
0.21 |
$ |
0.31 |
$ |
0.65 |
$ |
0.80 |
|||
Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders |
|||||||||||
Basic |
216,472,908 |
215,311,322 |
222,036,262 |
217,909,722 |
|||||||
Diluted |
220,535,530 |
217,595,704 |
226,440,350 |
220,301,712 |
GENPACT LIMITED AND ITS SUBSIDIARIES |
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Consolidated Statements of Cash Flows (Unaudited) (In thousands) |
|||||
Nine months ended September 30, |
|||||
2014 |
2015 |
||||
Operating activities |
|||||
Net income attributable to Genpact Limited shareholders |
$ |
146,250 |
$ |
175,404 |
|
Net income attributable to non-controlling interest |
169 |
— |
|||
Net income |
$ |
146,419 |
$ |
175,404 |
|
Adjustments to reconcile net income to net cash provided by (used for) operating activities: |
|||||
Depreciation and amortization |
37,784 |
40,185 |
|||
Amortization of debt issuance costs (including loss on extinguishment of debt) |
2,425 |
13,154 |
|||
Amortization of acquired intangible assets |
20,617 |
21,875 |
|||
Charge on intangible assets |
— |
10,714 |
|||
Reserve for doubtful receivables |
2,322 |
1,493 |
|||
Unrealized (gain) loss on revaluation of foreign currency asset/liability |
4,873 |
(6,320) |
|||
Equity-method investment activity, net |
(87) |
7,995 |
|||
Stock-based compensation expense |
20,153 |
17,509 |
|||
Deferred income taxes |
(6,583) |
(15,958) |
|||
Others, net |
1,133 |
(275) |
|||
Change in operating assets and liabilities: |
|||||
Increase in accounts receivable |
(24,328) |
(34,282) |
|||
Increase in prepaid expenses and other current assets and other assets |
(65,973) |
(46,157) |
|||
Increases (decrease) in accounts payable |
(5,563) |
1,255 |
|||
Increase in accrued expenses and other current liabilities and other liabilities |
5,125 |
6,952 |
|||
Increase in income taxes payable |
40,486 |
60,036 |
|||
Net cash provided by operating activities |
$ |
178,803 |
$ |
253,580 |
|
Investing activities |
|||||
Purchase of property, plant and equipment |
(48,192) |
(44,880) |
|||
Proceeds from sale of property, plant and equipment |
550 |
1,353 |
|||
Investment in equity affiliates |
— |
(13,520) |
|||
Short term deposits placed |
(25,000) |
— |
|||
Payment for business acquisitions, net of cash acquired |
(123,701) |
(21,363) |
|||
Net cash used for investing activities |
$ |
(196,343) |
$ |
(78,410) |
|
Financing activities |
|||||
Repayment of capital lease obligations |
(1,525) |
(1,645) |
|||
Payment of debt issuance and refinancing costs |
— |
(6,584) |
|||
Proceeds from long-term debt |
— |
800,000 |
|||
Repayment of long-term debt |
(5,062) |
(674,875) |
|||
Proceeds from short-term borrowings |
195,000 |
1,451,500 |
|||
Repayment of short-term borrowings |
(30,000) |
(1,565,000) |
|||
Proceeds from issuance of common shares under stock-based compensation plans |
11,866 |
10,040 |
|||
Payment for net settlement of stock-based awards |
(15,174) |
(6,826) |
|||
Payment of earn-out consideration |
(1,088) |
(230) |
|||
Distribution to non-controlling interest |
(1,487) |
— |
|||
Payment for stock purchased and retired |
(302,625) |
(159,036) |
|||
Payment for expenses related to stock purchase |
(2,543) |
(142) |
|||
Net cash used for financing activities |
$ |
(152,638) |
$ |
(152,798) |
|
Effect of exchange rate changes |
(1,899) |
(16,656) |
|||
Net increase (decrease) in cash and cash equivalents |
(170,178) |
22,372 |
|||
Cash and cash equivalents at the beginning of the period |
571,276 |
461,788 |
|||
Cash and cash equivalents at the end of the period |
$ |
399,199 |
$ |
467,504 |
|
Supplementary information |
|||||
Cash paid during the period for interest |
$ |
20,152 |
$ |
17,304 |
|
Cash paid during the period for income taxes |
$ |
64,176 |
$ |
38,735 |
|
Property, plant and equipment acquired under capital lease obligation |
$ |
1,840 |
$ |
1,362 |
Reconciliation of 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
- Adjusted income from operations;
- Adjusted net income attributable to shareholders of
Genpact Limited , or adjusted net income; and - Adjusted diluted earnings per share attributable to shareholders of
Genpact Limited , or adjusted diluted earnings per share.
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. In addition, these non-GAAP financial measures, the financial statements prepared in accordance with GAAP and the reconciliations of
Prior to
Additionally,
A limitation of using adjusted income from operations and adjusted net income versus income from operations and net income calculated in accordance with GAAP is that these non-GAAP financial measures exclude a recurring cost, namely stock-based compensation. Management compensates for this limitation by providing specific information on the GAAP amounts excluded from adjusted income from operations and adjusted net income.
The following tables show the reconciliation of these adjusted financial measures from GAAP for the three and nine months ended
Reconciliation of Adjusted Income from Operations (Unaudited) (In thousands) |
||||||||||||
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||
2014 |
2015 |
2014 |
2015 |
|||||||||
Income from operations per GAAP |
$ |
72,867 |
$ |
87,343 |
$ |
223,165 |
$ |
250,746 |
||||
Add: Stock-based compensation |
8,274 |
6,195 |
20,153 |
17,509 |
||||||||
Add: Amortization of acquired intangible assets |
6,386 |
6,015 |
15,886 |
18,247 |
||||||||
Add: Acquisition-related expenses |
— |
— |
1,977 |
798 |
||||||||
Add: Other income, net, excluding net interest |
950 |
999 |
1,336 |
2,268 |
||||||||
Add/Less: Gain (loss) on equity-method investment activity, net |
33 |
(3,432) |
87 |
(7,995) |
||||||||
Less: Net income attributable to non-controlling interest |
(13) |
— |
(169) |
— |
||||||||
Adjusted income from operations |
$ |
88,497 |
$ |
97,120 |
$ |
262,435 |
$ |
281,573 |
Reconciliation of Adjusted Net Income (Unaudited) (In thousands, except per share data) |
|||||||||||
Three months ended September 30, |
Nine months ended September 30, |
||||||||||
2014 |
2015 |
2014 |
2015 |
||||||||
Net income attributable to Genpact Limited shareholders per GAAP |
$ |
46,653 |
$ |
68,050 |
$ |
146,250 |
$ |
175,404 |
|||
Add: Stock-based compensation |
8,274 |
6,195 |
20,153 |
17,509 |
|||||||
Add: Amortization of acquired intangible assets |
6,386 |
6,015 |
15,886 |
18,247 |
|||||||
Add: Acquisition-related expenses |
— |
— |
1,977 |
798 |
|||||||
Less: Tax impact on stock-based compensation |
(2,150) |
(1,489) |
(5,206) |
(4,506) |
|||||||
Less: Tax impact on amortization of acquired intangibles |
(2,050) |
(1,873) |
(5,157) |
(5,692) |
|||||||
Less: Tax impact on acquisition-related expenses |
— |
— |
(53) |
(229) |
|||||||
Adjusted net income |
$ |
57,113 |
$ |
76,898 |
$ |
173,850 |
$ |
201,531 |
|||
Adjusted diluted earnings per share |
$ |
0.26 |
$ |
0.35 |
$ |
0.77 |
$ |
0.91 |
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