(Source: Business Wire)
Genpact Limited (NYSE:G), a leader in the globalization of services and
technology and a pioneer in managing business processes for companies
around the world, today announced financial results for the third
quarter ended September 30, 2009.
Key Financial Results -- Third Quarter
2009
Revenues were $284.4 million, up 5.0% from $270.8 million in the third
quarter of 2008.
Net income attributable to Genpact Limited common shareholders was
$33.1 million, down 1.7% from $33.6 million in the third quarter of
2008; net income margin for the third quarter of 2009 was 11.6%, down
from 12.4% in the third quarter of 2008.
Diluted earnings per common share attributable to Genpact Limited
common shareholders were $0.15, consistent with the third quarter of
2008.
Adjusted income from operations increased 8.8% to $53.8 million,
compared to $49.5 million in the third quarter of 2008.
Adjusted income from operations margin was 18.9%, up from 18.3% in the
third quarter of 2008.
Adjusted diluted earnings per share attributable to Genpact Limited
common shareholders were $0.19, down from $0.21 in the third quarter
of 2008.
Pramod Bhasin, Genpact's President and CEO said, "Our results for the
third quarter of 2009 were solid and our outlook is positive. We grew
revenue, gross profit and adjusted income from operations margin, both
year-over-year and sequentially. We are encouraged by the strength and
expansion of our pipeline, some faster deal conversion times, higher win
rates and the caliber and scope of recent client wins. Pricing is still
competitive but appears to be stabilizing. We have been investing in
business development and have hired outstanding sales and account
management talent during this period. Our forward view is now more
optimistic than earlier this year though the pace and timing of economic
recovery remains somewhat uncertain."
Revenues from clients other than GE, which Genpact refers to as Global
Client revenues, grew 17.4% over the third quarter of 2008. Revenues
from Global Clients now represent approximately 60.8% of Genpact's total
revenues, with the remaining 39.2% of revenues coming from GE.GE
revenues decreased 4.2% from the third quarter of 2008, adjusted for
dispositions by GE.
Approximately 84.9% of Genpact's revenues for the quarter came from
business process services, up from 80.9% for the third quarter of 2008,
while revenues from IT services were approximately 15.1% of total
revenues for the third quarter of 2009, as compared to 19.1% for the
third quarter of 2008.
As of September 30, 2009, 36 client relationships each accounted for $5
million or more of Genpact's revenues in the last twelve months, up from
29 such relationships at the end of 2008. Of those, five client
relationships each accounted for $25 million or more of Genpact's
revenues in the last twelve months.
Genpact generated $55.7 million of cash from operations in the third
quarter of 2009, down from $58.6 million in the third quarter of 2008.
Genpact has a strong balance sheet, with approximately $399.1 million in
Cash and Cash Equivalents, Short Term Investments and Short Term
Deposits.
Year-to-Date Results
Revenues were $823.1 million, up 8.4% from $759.0 million for the nine
months ended September 30, 2008.
Net income attributable to Genpact Limited common shareholders was
$92.7 million, up 18.6% from $78.1 million for the nine months ended
September 30, 2008; net income margin was 11.3%, up from 10.3% for the
nine months ended September 30, 2008.
Diluted earnings per common share attributable to Genpact Limited
common shareholders were $0.42, up from $0.36 per share for the nine
months ended September 30, 2008.
Adjusted income from operations was $144.3 million, up 20.6% from
$119.7 million for the nine months ended September 30, 2008.
Adjusted income from operations margin was 17.5%, up from 15.8% for
the nine months ended September 30, 2008.
Adjusted diluted earnings per share attributable to Genpact Limited
common shareholders were $0.54, up from $0.53 for the nine months
ended September 30, 2008.
Annualized revenue per employee increased to approximately $30,900 for
the nine months ended September 30, 2009 from $30,300 in the nine months
September 30, 2008. As of September 30, 2009, Genpact had approximately
37,700 employees worldwide, an increase from 36,400 as of September 30,
2008. Genpact's employee attrition rate for the nine months ended
September 30, 2009, measured from day one of employment, was 23%, down
from 26% for the same period in 2008. Genpact's attrition rate would be
19% if measured after six months of employment, as many of Genpact's
competitors do.
Bhasin continued, "Our third-quarter results represent a terrific job by
our teams in aggressively driving growth, managing costs and delivering
value to our clients and shareholders. We are confirming our revenue
guidance of 6-9% revenue growth over 2008 and raising our adjusted
operating margin guidance to 17.5-18%. We see encouraging signs in the
market. Client demand is coming back, decision-making is improving and
our pipeline is strong."
Conference Call
Genpact management will host a conference call beginning at 8:00a.m.
EST on November 5, 2009 to discuss the company's performance for the
periods ended September 30, 2009. To participate, callers can dial 1
(866) 318-8612 from within the U.S. or 1 (617) 399-5131 from any other
country. Thereafter, callers will be prompted to enter the participant
passcode, which is 27676151.
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 is a leader in the globalization of services and technology and
a pioneer in managing business processes for companies around the world.
Genpact 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,
Morocco, the Philippines, Poland, the Netherlands, Romania, Spain, South
Africa, Guatemala 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 a slowdown in the economies and sectors
in which our clients operate, a slowdown in the BPO and IT 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, 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 Form10-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. Genpact does not
undertake to update any forward-looking statements that may be made from
time to time by or on behalf of Genpact.
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share data)
As of December 31, As of September 30,
2008 2009
Assets
Current assets
Cash and cash equivalents $ 184,050 $ 240,446
Short term investments 141,662 144,294
Accounts receivable, net 140,504 144,264
Accounts receivable from a significant shareholder, net 88,793 104,517
Short term deposits with a significant shareholder 59,332 14,393
Deferred tax assets 38,629 34,772
Due from a significant shareholder 1,428 523
Prepaid expenses and other current assets 89,936 128,495
Total current assets 744,334 811,704
Property, plant and equipment, net 174,266 178,381
Deferred tax assets 111,002 77,931
Investment in equity affiliates 970 667
Customer-related intangible assets, net 56,942 40,339
Other intangible assets, net 5,225 1,340
Goodwill 531,897 533,320
Other assets 71,690 71,069
Total assets $ 1,696,326 $ 1,714,751
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Exception caught in main.
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Three months ended September 30, Nine months ended September 30,
2008 2009 2008 2009
Net revenues
Net revenues from services - significant shareholder $ 123,504 $ 111,459 $ 363,678 $ 333,909
Net revenues from services - others 147,295 172,981 395,323 489,216
Total net revenues 270,799 284,440 759,001 823,125
Cost of revenue
Services 155,765 166,995 448,938 496,516
Total cost of revenue 155,765 166,995 448,938 496,516
Gross profit 115,034 117,445 310,063 326,609
Operating expenses:
Selling, general and administrative expenses 71,175 67,242 199,943 194,965
Amortization of acquired intangible assets 8,974 6,382 28,799 19,747
Other operating (income) expense, net (1,443) (1,092) (1,507) (3,970)
Income from operations $ 36,328 $ 44,913 $ 82,828 $ 115,867
Foreign exchange (gains) losses, net (1,557) 2,576 (7,390) 2,005
Other income (expense), net 3,263 305 8,284 3,448
Income before share of equity in (earnings) loss of affiliates and income tax expense 41,148 42,642 98,502 117,310
Equity in (gain) loss of affiliates (37) 161 282 596
Income tax expense 5,692 7,895 12,235 18,430
Net Income $ 35,493 $ 34,586 $ 85,985 $ 98,284
Net income attributable to noncontrolling interest 1,859 1,524 7,841 5,572
Net income attributable to Genpact Limited common shareholders $ 33,634 $ 33,062 $ 78,144 $ 92,712
Net income available to Genpact Limited common shareholders 33,634 33,062 78,144 92,712
Earnings per common share attributable to Genpact Limited common shareholders
Basic $ 0.16 $ 0.15 $ 0.37 $ 0.43
Diluted $ 0.15 $ 0.15 $ 0.36 $ 0.42
Weighted average number of common shares used in computing earnings (loss) per common share attributable to Genpact Limited common shareholders
Basic 214,182,308 215,794,607 213,127,131 215,136,984
Diluted 219,350,826 221,799,597 218,550,988 219,228,874
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GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine months ended September 30,
2008 2009
Operating activities
Net income attributable to Genpact Limited common shareholders $ 78,144 $ 92,712
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization 41,700 38,893
Amortization of debt issue costs 491 434
Amortization of acquired intangible assets 29,522 20,182
Loss (gain) on sale of property, plant and equipment, net 2,116 (178)
Provision for doubtful receivables 2,890 2,112
Provision for mortgage loans 542 -
Unrealized (gain) loss on revaluation of foreign currency asset/liability (2,405) 5,147
Equity in loss of affiliates 282 596
Noncontrolling interest 7,841 5,572
Share-based compensation expense 12,643 15,256
Deferred income taxes (13,926) (18,324)
Change in operating assets and liabilities:
Increase in accounts receivable (44,876) (18,858)
Increase in other assets (32,852) (45,711)
(Decrease) / increase in accounts payable (1,814) 4,243
(Decrease) / increase in accrued expenses and other current liabilities 16,116 (15,791)
Increase in income taxes payable 21,934 33,546
Increase in other liabilities 9,615 3,671
Net cash provided by operating activities $ 127,963 $ 123,502
Investing activities
Purchase of property, plant and equipment (45,935) (43,949)
Purchase of property, plant and equipment in an asset acquisition (7,015) -
Proceeds from sale of property, plant and equipment 6,219 2,026
Investment in affiliates (883) (296)
Purchase of short term investments - (197,419)
Proceeds from sale of short term investments - 194,822
Short term deposits placed with significant shareholder (193,171) (101,008)
Redemption of short term deposits with significant shareholder 203,108 144,880
Payment for business acquisition - (20,196)
Net cash used in investing activities $ (37,677) $ (21,140)
Financing activities
Repayment of capital lease obligations (2,273) (1,946)
Proceeds from long-term debt - -
Repayment of long-term debt (20,063) (20,000)
Repayment of short-term borrowings, net - (25,000)
Proceeds from issuance of common shares on exercise of options 13,044 7,736
Distribution to noncontrolling interest (8,864) (5,586)
Net cash provided (used) by financing activities $ (18,156) $ (44,796)
Effect of exchange rate changes (48,376) (1,170)
Net increase (decrease) in cash and cash equivalents 72,130 57,566
Cash and cash equivalents at the beginning of the period 279,306 184,050
Cash and cash equivalents at the end of the period $ 303,060 $ 240,446
Supplementary information
Cash paid during the period for interest $ 4,750 $ 3,652
Cash paid during the period for income taxes $ 27,377 $ 43,557
Property, plant and equipment acquired under capital lease obligation $ 3,571 $ 1,250
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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 common shareholders of Genpact Limited, or adjusted net
income, and diluted adjusted earnings per share attributable to common
shareholders of Genpact Limited, or diluted adjusted earnings per share.
These non-GAAP measures are not based on any comprehensive set of
accounting rulesor 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
share-based compensation expense (including fringe benefit tax thereon
for Indian employees, or FBT, which was abolished on August 18,
2009 with effect from April 1, 2009) and amortization of acquired
intangibles 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 ASC 718 "Compensation-Stock Compensation" (previously
referred to as SFAS No.123(R) "Share Based Payment"), Genpact's
management believes that providing financial statements that do not
include share-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 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
share-based compensation expense under ASC 718 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.
A limitation of using non-GAAP adjusted income from operations and
adjusted net income versus income from operations and net income
attributable to common shareholders of Genpact Limited calculated in
accordance with GAAP is that non-GAAP adjusted income from operations
and adjusted net income excludes costs, namely, share-based
compensation, that are recurring. Share-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 nine months ended September 30,
2008 and 2009:
Reconciliation of Adjusted Income from Operations
(Unaudited)
(In thousands)
Three months ended Nine months ended
September 30, September 30,
2008 2009 2008 2009
Income from operations as per GAAP $ 36,328 $ 44,913 $ 82,828 $ 115,867
Add: Amortization of acquired intangible assets resulting from Formation Accounting 8,649 6,000 27,906 18,661
Add: Share based compensation 4,334 5,825 12,643 15,256
Add: FBT impact on share based compensation recovered from employees 1,138 (1,086 ) 2,691 70
Add: Gain (loss) on interest rate swaps - - (283 ) -
Add: Other income 830 (158 ) 2,003 630
Less: Equity in gain (loss) of affiliates 37 (161 ) (282 ) (596 )
Less: Non controlling interest (1,859 ) (1,524 ) (7,841 ) (5,572 )
Adjusted income from operations $ 49,457 $ 53,809 $ 119,665 $ 144,316
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Reconciliation of Adjusted Net Income
(Unaudited)
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2008 2009 2008 2009
Net income as per GAAP $ 33,634 $ 33,062 $ 78,144 $ 92,712
Add: Amortization of acquired intangible assets resulting from Formation Accounting 8,649 6,000 27,906 18,661
Add: Share based compensation 4,334 5,825 12,643 15,256
Add: FBT impact on share based compensation recovered from employees 1,138 (1,086 ) 2,691 70
Less: Tax impact on amortization of acquired intangibles resulting from Formation Accounting (2,048 ) (1,242 ) (5,512 ) (4,409 )
Less: Tax impact on stock based compensation - (977 ) - (3,582 )
Adjusted net income $ 45,707 $ 41,582 $ 115,872 $ 118,708
Diluted adjusted earnings per share $ 0.21 $ 0.19 $ 0.53 $ 0.54
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