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Genpact Reports Results for the Second Quarter of 2012; Announces Special Dividend of $2.24 Per Share
Aug 01, 2012 (04:08 PM EDT)


Second Quarter Revenues of $467.6 Million, Up 18%

Adjusted Income from Operations of $77.8 Million, Up 19%

Net Income of $61.1 Million, Up 57%

NEW YORK, Aug. 1, 2012 /PRNewswire/ -- Genpact Limited (NYSE: G), a global leader in business process management and technology services, today announced financial results for the second quarter ended June 30, 2012.  Genpact also announced that it expects to pay a special cash dividend to all shareholders of $2.24 per common share, or approximately $500 million in total. 

(Logo: http://photos.prnewswire.com/prnh/20120501/NY98560LOGO )

Key Financial Results – Second Quarter 2012

  • Revenues were $467.6 million, up 17.6% from $397.6 million in the second quarter of 2011, primarily driven by growth in revenues from Global Clients. Business process management and technology services revenues from Global Clients were up 19.8% and 38.4% respectively. 
  • Net income attributable to Genpact Limited shareholders was $61.1 million, up 56.6% from $39.0 million in the second quarter of 2011; net income margin for the second quarter of 2012 was 13.1%, up from 9.8% in the second quarter of 2011.
  • Diluted earnings per common share were $0.27, up 55.4% from $0.17 in the second quarter of 2011.
  • Adjusted income from operations was $77.8 million, up 19.2% from $65.3 million in the second quarter of 2011.
  • Adjusted income from operations margin was 16.6%, up from 16.4% in the second quarter of 2011.
  • Adjusted diluted earnings per share were $0.32, up 46.0% from $0.22 in the second quarter of 2011.
N.V. "Tiger" Tyagarajan, Genpact's president and CEO said,

"Genpact had another great quarter, with strong growth in revenues, adjusted operating income, net income and EPS.  In addition to the 17.6% year-over-year revenue growth, our revenues grew 7.4% sequentially. Revenue growth was broad based across all our geographies, including Europe, and all major service lines including finance and accounting.  We established 35 new client relationships this quarter across all major industry groups, up from 26 in the second quarter of 2011. Our results continue the momentum we have had since the beginning of 2011."

Revenues from Global Clients grew 24.0% over the second quarter of 2011. Revenues from Global Clients now represent approximately 73.0% of Genpact's total revenues, with the remaining 27.0% of revenues, or $126.2 million, coming from GE. GE revenues increased 3.2% from the second quarter of 2011, adjusted for dispositions by GE.

As of June 30, 2012, 62 client relationships each contributed revenues of $5 million or more in the preceding twelve months, up from 56 such relationships as of June 30, 2011. As of June 30, 2012, ten client relationships each contributed revenues of $25 million or more in the preceding twelve months, up from eight such client relationships as of June 30, 2011.

Approximately 76.0% of Genpact's revenues for the quarter came from business process management services, compared to 78.1% for the second quarter of 2011.  Revenues from IT services were approximately 24.0% of total revenues for the second quarter of 2012, up from 21.9% for the second quarter of 2011.

Genpact generated $127.2 million of cash from operations in the second quarter of 2012, up from $60.9 million in the second quarter of 2011. Genpact had approximately $441.6 million in cash and cash equivalents and short term deposits as of June 30, 2012.

Year-to-Date Results

  • Revenues were $903.1 million, up 24.0% from $728.2 million for the six months ended June 30, 2011.
  • Net income attributable to Genpact Limited shareholders was $99.6 million, up 32.6% from $75.1 million for the six months ended June 30, 2011; net income margin was 11.0%, up from 10.3% for the six months ended June 30, 2011.
  • Diluted earnings per common share were $0.44, up 31.6% from $0.33 for the six months ended June 30, 2011.
  • Adjusted income from operations was $149.4 million, up 28.2% from $116.5 million for the six months ended June 30, 2011.
  • Adjusted income from operations margin was 16.5%, up from 16.0% for the six months ended June 30, 2011.
  • Adjusted diluted earnings per share were $0.53, up 32.1% from $0.40 for the six months ended June 30, 2011.

Genpact's employee attrition rate for the six months ended June 30, 2012 was 24%, measured from day one of employment, down from 29% for the same period in 2011. Annualized revenue per employee for the six months ended June 30, 2012, was $33,400, compared to $34,500 for the six months ended June 30, 2011.

Special Dividend Announced

Genpact expects to pay a special cash dividend to all shareholders of $2.24 per common share, or approximately $500 million in the aggregate. The dividend will be funded through a combination of balance sheet cash and incremental debt expected to be raised from institutional lenders. Genpact expects to establish and announce the record date, ex-dividend date and payment date for the special dividend during August and to pay the dividend by the end of the third quarter. Declaration and payment of the dividend is subject to the receipt of financing by Genpact on satisfactory terms.

Tyagarajan commented, "The management team regularly reviews our capital structure with the Board of Directors.  We generate substantial operating and free cash flow, have approximately $442 million of cash on our balance sheet and, taking into account the financial flexibility needed to continue to pursue acquisitions and organic growth initiatives, we concluded that a special dividend, funded in part by additional, modest leverage, would enhance shareholder value."

2012 Outlook

Tyagarajan continued, "We have delivered a terrific first half of the year, despite some softness around discretionary spending. In an uncertain macro-environment, we continue to expect full-year revenues to be in a range of $1.86$1.90 billion, and adjusted operating income margin in a range of 16% – 16.5%."

Conference Call to Discuss Financial Results

Genpact management will host an hour-long conference call beginning at 8:00 a.m. ET on August 2, 2012 to discuss the company's performance for the second quarter of fiscal 2012. To participate, callers can dial +1 800-299-8538 from within the U.S. or +1 617-786-2902 from any other country. Thereafter, callers will be prompted to enter the participant code, 79250959.

For those who cannot participate in the call, a replay and podcast will be available on Genpact's website, www.genpact.com, after the end of the call. A transcript of the call will also be made available on Genpact's website.

About Genpact

Genpact Limited (NYSE: G), a global leader in business process management and technology services, leverages the power of smarter processes, smarter analytics and smarter technology to help its clients drive intelligence across their enterprise.  Genpact's Smart Enterprise Processes (SEPSM) framework, its unique science of process combined with deep domain expertise in multiple industry verticals, leads to superior business outcomes. Genpact's Smart Decision Services deliver valuable business insights to its clients through targeted analytics, reengineering expertise, and advanced risk management. Making technology more intelligent by embedding it with process and data insights, Genpact also offers a wide range of technology services.  Driven by a passion for process innovation and operational excellence built on its Lean and Six Sigma DNA and the legacy of serving GE for more than 15 years, the company's 58,500+ professionals around the globe deliver services to its more than 600 clients from a network of 70 delivery centers across 18 countries supporting more than 30 languages. For more information, visit 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, uncertainties and other factors include but are not limited to our ability to obtain the financing required to pay the special cash dividend and the terms of the financing, the likelihood and timing of the payment of the special cash dividend, a slowdown in the economies and sectors in which our clients operate, a slowdown in the business process management and information technology services sectors, the risks and uncertainties arising from our past and future acquisitions, 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, 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 Genpact's Annual Report on Form 10-K. These filings are available at www.sec.gov. Genpact may from time to time make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. Although Genpact believes that these forward-looking statements are based on reasonable assumptions, you are cautioned not to put undue reliance on these forward-looking statements, which reflect management's current analysis of future events and should not be relied upon as representing management's expectations or beliefs as of any date subsequent to the time they are made. Genpact does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of Genpact.

Contact




Investors


Shishir Verma



+1 (646) 624-5912



shishir.verma@genpact.com




Media


US:



Gail Marold



+1 (919) 345-3899



gail.marold@genpact.com

 

Steve Lipin/Sarah Lubman

+1 (212) 333-3810 

 

Europe:

Elvis Moyo
+44 (0)20 7309 1212

elvis.moyo@uk.ogilvypr.com

Asia:

Cecily Liu
+86 10 85206345

cecily.liu@ogilvy.com




 

 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share data and share count)

 


As of December 31,


As of June 30,


2011


2012

Assets




Current assets




Cash and cash equivalents

$

408,020


$

436,310

Accounts receivable, net

258,498


427,576

Accounts receivable from related party, net

143,921


190

Short term deposits

-


5,249

Deferred tax assets

46,949


55,458

Due from related party

10


-

Prepaid expenses and other current assets

127,721


159,934

Total current assets

$

985,119


$

1,084,717





Property, plant and equipment, net

180,504


180,521

Deferred tax assets

91,880


112,271

Investment in equity affiliates

220


356

Customer-related intangible assets, net

85,987


88,316

Marketing-related intangible assets, net

24,240


23,015

Other intangible assets, net

3,061


2,961

Goodwill

925,339


922,160

Other assets

107,037


112,766

Total assets

$

2,403,387


$

2,527,083

 

 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share data and share count)

 


As of December 31,


As of June 30,


2011


2012

Liabilities and equity




Current liabilities




Short-term borrowings

$

252,000


$

251,000

Current portion of long-term debt

29,012


29,173

Current portion of capital lease obligations

1,005


1,415

Current portion of capital lease obligations payable to related party

762


-

Accounts payable

20,951


13,848

Income taxes payable

20,118


50,844

Deferred tax liabilities

35


194

Due to related party

464


-

Accrued expenses and other current liabilities

337,481


355,103

Total current liabilities

$

661,828


$

701,577

Long-term debt, less current portion

73,930


59,300

Capital lease obligations, less current portion

846


1,928

Capital lease obligations payable to related party, less current portion

855


-

Deferred tax liabilities

1,905


3,251

Due to related party

9,154


-

Other liabilities

219,186


304,233

Total liabilities

$

967,704


$

1,070,289





Shareholders' equity




Preferred shares, $0.01 par value, 250,000,000 authorized, none issued

-


-

Common shares, $0.01 par value, 500,000,000 authorized, 222,347,968

and 222,997,072 issued and outstanding as of December 31, 2011 and

 June 30, 2012, respectively

2,222


2,228

Additional paid-in capital

1,146,203


1,165,819

Retained earnings

605,386


705,026

Accumulated other comprehensive income (loss)

(320,753)


(419,458)

Genpact Limited shareholders' equity

1,433,058


1,453,615

Noncontrolling interest

2,625


3,179

Total equity

1,435,683


1,456,794

Commitments and contingencies




Total liabilities and equity

$

2,403,387


$

2,527,083

 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data and share count)

 


Three months ended June 30,


Six months ended June 30,


2011


2012


2011


2012

Net revenues








Net revenues from services - related party

$

122,783


$

162


$

235,744


$

317

Net revenues from services - others

274,840


467,469


492,432


902,793

Total net revenues

397,623


467,631


728,176


903,110

Cost of revenue








Services

254,030


285,222


468,517


550,687

Total cost of revenue

254,030


285,222


468,517


550,687

Gross profit

$

143,593


$

182,409


$

259,659


$

352,423

Operating expenses:








Selling, general and administrative expenses

86,724


114,253


154,165


219,258

Amortization of acquired intangible assets

5,140


5,790


8,217


11,080

Other operating (income) expense, net

665


(801)


(291)


(1,513)

Income from operations

$

51,064


$

63,167


$

97,568


$

123,598

Foreign exchange (gains) losses, net

(1,130)


(21,977)


(2,697)


(18,306)

Other income (expense), net

3,026


(699)


6,124


(823)

Income before Equity-method investment activity,

net and income tax expense

$

55,220


$

84,445


$

106,389


$

141,081

Equity-method investment activity, net

134


13


267


26

Income before income tax expense

$

55,086


$

84,432


$

106,122


$

141,055

Income tax expense

14,357


21,633


27,479


38,000

Net Income

$

40,729


$

62,799


$

78,643


$

103,055

Net income attributable to noncontrolling interest

1,720


1,699


3,514


3,415

Net income attributable to Genpact Limited shareholders

$

39,009


$

61,100


$

75,129


$

99,640









Net income available to Genpact Limited common shareholders

39,009


61,100


75,129


99,640

Earnings per common share attributable to Genpact Limited

common shareholders








Basic

$

0.18


$

0.27


$

0.34


$

0.45

Diluted

$

0.17


$

0.27


$

0.33


$

0.44









Weighted average number of common shares used in

computing earnings per common share attributable to

Genpact Limited common shareholders








Basic

221,297,842


223,182,251


221,153,301


222,996,243

Diluted

226,146,388


227,880,427


225,844,839


227,676,670

 

 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 


Six months ended June 30,


2011


2012

Operating activities




Net income attributable to Genpact Limited shareholders

$

75,129


$

99,640

Net income attributable to noncontrolling interest

3,514


3,415

Net Income

$

78,643


$

103,055

Adjustments to reconcile net income to net cash provided by

(used for) operating activities:




Depreciation and amortization

29,005


28,145

Amortization of debt issue costs

554


1,307

Amortization of acquired intangible assets

8,300


11,118

Reserve  for doubtful receivables

1,853


(151)

Reserve for mortgage loans

-


107

Unrealized (gain) loss on revaluation of foreign currency

asset/liability

(45)


(18,962)

Equity-method investment activity, net

267


26

Stock-based compensation expense

8,559


17,243

Deferred income taxes

(2,579)


(8,728)

Others, net

1,400


90

Change in operating assets and liabilities:




Increase in accounts receivable

(24,647)


(16,791)

Increase in other assets

(33,122)


(36,308)

Decrease in accounts payable

(2,374)


(5,076)

Decrease in accrued expenses and other current liabilities

(13,506)


(1,321)

Increase in income taxes payable

24,092


30,611

Increase in other liabilities

5,632


27,707

Net cash provided by operating activities

$

82,032


$

132,072

Investing activities




Purchase of property, plant and equipment

(12,106)


(41,602)

Proceeds from sale of property, plant and equipment

479


283

Investment in affiliates

-


(205)

Purchase of short term investments

(129,458)


-

Proceeds from sale of short term investments

206,443


-

Short term deposits placed

-


(26,493)

Redemption of short term deposits

-


20,410

Payment for business acquisitions, net of cash acquired

(561,075)


(36,927)

Net cash provided by (used for) investing activities

$

(495,717)


$

(84,534)

Financing activities




Repayment of capital lease obligations

(1,500)


(1,162)

Proceeds from long-term debt

120,000


-

Repayment of long-term debt

(25,000)


(15,000)

Short-term borrowings, net

252,000


(1,000)

Proceeds from issuance of  common shares under

stock based compensation plans

5,989


3,788

Payment for net settlement of stock based awards

-


(1,409)

Direct cost incurred in relation to Debt

(8,315)


-

Distribution to noncontrolling interest

(3,196)


(2,762)

Net cash provided by (used for) financing activities

$

339,978


$

(17,545)

Effect of exchange rate changes

6,075


(1,703)

Net increase (decrease) in cash and cash equivalents

(73,707)


29,993

Cash and cash equivalents at the beginning of  the period

404,034


408,020

Cash and cash equivalents at the end of the period

$

336,402


$

436,310

Supplementary information




Cash paid during the period for interest

$

1,509


$

4,212

Cash paid during the period for income taxes

$

23,498


$

40,266

Property, plant and equipment acquired under capital

lease obligation

$

758


$

1,178

 

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 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 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, amortization of acquired intangibles at formation in 2004, significant acquisition related expenses and amortization of acquired intangibles on such acquisitions and expenses related to change of shareholding and capital restructuring, 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 ASC 718 "Compensation-Stock Compensation", 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, significant acquisition related expenses and amortization of acquired intangibles on such acquisitions and expenses related to change of shareholding and capital restructuring, 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 ASC 718, the amortization of intangibles associated with further acquisitions, significant acquisition related expenses and expenses related to change of shareholding and capital restructuring, 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.

A limitation of using non-GAAP adjusted income from operations and adjusted net income versus income from operations and net income attributable to shareholders of Genpact Limited 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.

 

The following tables show the reconciliation of these adjusted financial measures from GAAP for the three and six months ended June 30, 2011 and 2012:

 

 

Reconciliation of Adjusted Income from Operations

(Unaudited)

(In thousands)

 


Three months ended June 30,


Six months ended June 30,


2011


2012


2011


2012

Income from operations as per GAAP

$

51,064


$

63,167


$

97,568


$

123,598

Add: Amortization of acquired intangible assets resulting

from Formation Accounting

2,434


1,755


4,948


3,632

Add: Amortization of acquired intangible assets relating

to significant acquisitions

2,049


2,627


2,049


5,254

Add: Stock based compensation

5,494


9,980


8,559


17,243

Add: Significant acquisition related expenses

4,739


-


5,619


-

Add: Consultancy and legal fees relating to change of

 shareholding and capital restructuring

-


1,687


-


2,487

Add: Other income

1,355


322


1,560


632

Less: Equity-method investment activity, net

(134)


(13)


(267)


(26)

Less: Net income attributable to noncontrolling interest

(1,720)


(1,699)


(3,514)


(3,415)

Adjusted income from operations

$

65,281


$

77,826


$

116,522


$

149,405

 

 

Reconciliation of Adjusted Net Income

(Unaudited)

(In thousands, except per share data)

 


Three months ended June 30,


Six months ended June 30,


2011


2012


2011


2012

Net income as per GAAP

$

39,009


$

61,100


$

75,129


$

99,640

Add: Amortization of acquired intangible assets

resulting from Formation Accounting

2,434


1,755


4,948


3,632

Add: Amortization of acquired intangible assets

relating to significant acquisitions

2,049


2,627


2,049


5,254

Add: Stock based compensation

5,494


9,980


8,559


17,243

Add: Significant acquisition related expenses

4,739


-


5,619


-

Add: Consultancy and legal fees relating to change

of shareholding and capital restructuring

-


1,687


-


2,487

Less: Tax impact on amortization of acquired intangibles

resulting from Formation Accounting

(602)


(366)


(1,298)


(833)

Less: Tax impact on amortization of acquired intangibles

 resulting from significant acquisitions

(695)


(902)


(695)


(1,786)

Less: Tax impact on stock based compensation

(1,779)


(3,059)


(2,474)


(5,033)

Less: Tax impact on significant acquisition

related expenses

(1,269)


-


(1,394)


-

Less: Tax impact on consultancy and legal fees

relating to change of shareholding and capital restructuring

-


(182)


-


(182)

Adjusted net income

$

49,380


$

72,640


$

90,444


$

120,422

Adjusted diluted earnings per share

$

0.22


$

0.32


$

0.40


$

0.53

 

Consultancy and legal fees relating to change of shareholding and capital restructuring amounting to $800 were omitted to be considered for the purposes of computing the adjusted income from operations and adjusted net income in the first quarter of 2012. Adjusted income from operations and adjusted net income for the first quarter of 2012 should have been $71,579 and $47,782, respectively, after considering the above expenses. Adjusted diluted earnings per share for the first quarter of 2012 remain the same at $0.21.

 

 

SOURCE Genpact Limited