Genpact Reports Results for 2011 Full Year and Fourth Quarter
NEW YORK, Feb. 6, 2012 /PRNewswire/ -- Genpact Limited (NYSE: G), a global leader in business process and technology management, today announced financial results for the fourth quarter and full-year ended December 31, 2011.
Key Financial Results - Full-Year 2011
-- Revenues were $1.60 billion, up 27.1% from $1.26 billion in 2010.
-- Net income attributable to Genpact Limited shareholders was $184.3
million, up 29.6% from $142.2 million in 2010; net income margin for
2011 was 11.5%, up from 11.3% in 2010.
-- The effective tax rate was 27.7%, up from 19.4% in 2010.
-- Diluted earnings per common share were $0.81, up from $0.63 per share in
2010.
-- Adjusted income from operations increased 29.8% to $264.5 million, up
from $203.7 million in 2010.
-- Adjusted income from operations margin was 16.5%, up from 16.2% in 2010.
-- Adjusted diluted earnings per share were $0.98, up from $0.74 in 2010.
Key Financial Results - Fourth Quarter 2011
-- Revenues were $442.7 million, up 29.6% from $341.5 million in the fourth
quarter of 2010.
-- Net income attributable to Genpact Limited shareholders was $61.1
million, up 32.8% from $46.0 million in the fourth quarter of 2010; net
income margin for the fourth quarter of 2011 was 13.8%, up from 13.5% in
the fourth quarter of 2010.
-- Diluted earnings per common share were $0.27, up from $0.20 per share in
the fourth quarter of 2010.
-- Adjusted income from operations totaled $77.1 million, up from $63.7
million in the fourth quarter of 2010.
-- Adjusted income from operations margin was 17.4%, compared to 18.7% in
the fourth quarter of 2010.
-- Adjusted diluted earnings per share were $0.32, up from $0.23 in the
fourth quarter of 2010.
N.V. 'Tiger' Tyagarajan, Genpact's President and CEO said, "We had a great 2011 and finished the year with a very strong fourth quarter. Genpact delivered growth in revenues, adjusted operating income and margin, as well as EPS for the year. We also generated record cash flows. In 2011, we took a number of actions that have more sharply defined who we are and how we add value to our clients. For example, we expanded and refocused our front-end teams by key industry verticals to better serve clients' needs, we now have half of our leadership team closer to clients which reflects our global footprint, we accelerated investment in new products and services, and we added substantial domain expertise through acquisitions. Genpact won a record 107 new logos during the year and expanded relationships with existing clients across all size-of-engagement categories. The number of clients in the category from $1 million to $5 million of annual revenues grew the fastest, to 121 from 64 at the end of 2010. This combination of new logo wins, expansion of existing client relationships, and strengthened domain capabilities gives us a tremendous runway for future growth."
Revenues from Global Clients grew 42.7% for the full year 2011 and 46.9% in the fourth quarter. Business process management revenues from Global Clients grew by 23.4% for the full year, and 20.5% in the fourth quarter and were led by growth in Smart Decision Services of 52.4% for the full year and 54.8% for the fourth quarter. Revenues from Global Clients represented approximately 69.8% of Genpact's total revenues in 2011, with the remaining 30.2% of revenues coming from GE. GE revenues increased 1.6% for the full year 2011 and were relatively unchanged in the fourth quarter.
As of the end of 2011, 56 client relationships each contributed revenues of $5 million or more in the last twelve months, up from 44 such relationships as of December 31, 2010. As of the end of 2011, nine client relationships each contributed revenues of $25 million or more in the last twelve months, up from three such client relationships as of December 31, 2010.
Approximately 78.2% of Genpact's revenues for the full year 2011 and 75.4% for the fourth quarter came from business process management services, compared to 86.1% for 2010 and 86.9% for the fourth quarter of 2010. Revenues from IT services represented approximately 21.8% of total revenues for full year 2011 and 24.6% for the fourth quarter, up from 13.9% for 2010 and 13.1% for the fourth quarter of 2010.
Genpact generated $266.6 million of cash from operations in 2011 and $89.5 million in the fourth quarter of 2011, up from $163.1 million of cash from operations in 2010 and $85.1 million in the fourth quarter of 2010, primarily due to increased cash earnings and to some non-recurring items. Genpact had approximately $408.0 million in cash and cash equivalents as of December 31, 2011.
As of December 31, 2011, Genpact had approximately 55,400 employees worldwide, an increase from approximately 43,900 at the end of 2010. The attrition rate for the entire year, measured from day one, was 30%, down from 31% in 2010. Revenue per employee in 2011 was $34,100, up from $31,100 in 2010.
2012 Outlook
Tyagarajan continued, "Our relationships with existing clients are strong and expanding, our pipeline is healthy and client decision cycle times appear to be stable. With our widely diversified portfolio of services across key industries and geographies, we are well positioned to adapt to evolving client needs in a sharply differentiated way. In an environment where our clients are facing ongoing macro-economic uncertainty and volatility, we expect annual revenues for 2012 between $1.84 billion and $1.88 billion. As we have discussed previously, we will continue to invest for growth and expect adjusted income from operations margin in 2012 of 16% to 16.5%."
Conference Call to Discuss Financial Results
Genpact management will host an hour-long conference call beginning at 8:00 a.m. EST on February 7, 2011 to discuss the company's performance for the periods ended December 31, 2011. To participate, callers can dial +1 (866)271-0675 from within the U.S. or +1 (617)213-8892 from any other country. Thereafter, callers will be prompted to enter the participant code, 95682579.
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 and technology management services, has developed a science behind superior business processes. Genpact's unique process thought leadership captured in its Smart Enterprise Processes (SEP(SM)) framework, combined with deep domain expertise in multiple industry verticals, delivers better business outcomes across the enterprise, rather than simply providing efficiency gains within a single function. Genpact's Smart Decision Services deliver business insights to its clients through targeted analytics, reengineering expertise, and advanced risk management. Genpact makes technology more intelligent by embedding it with these process and data insights in addition to providing a wide range of technology services. Built on a legacy of serving GE for more than 14 years, Genpact enables companies worldwide to make smarter decisions, helping them drive revenue growth, compete more successfully, mitigate risk effectively, and improve operating margins and working capital. Driven by a passion for process and operational excellence based on its Lean and Six Sigma DNA, the company's 55,000+ professionals around the globe deliver world-class business process and technology management services everyday to its more than 600 clients - from a network of 57 delivery centers across 16 countries supporting more than 25 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 and uncertainties include but are not limited to 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, 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: Gail Marold
+1 (919) 345 3899
gail.marold@genpact.com
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share data)
As of December 31,
------------------
2010 2011
---- ----
Assets
Current assets
Cash and cash equivalents $404,034 $408,020
Short term investments 76,985 -
Accounts receivable, net 174,654 258,498
Accounts receivable from related
party, net 131,271 143,921
Deferred tax assets 21,985 46,949
Due from related party 3 10
Prepaid expenses and other
current assets 126,848 127,721
------- -------
Total current assets $935,780 $985,119
Property, plant and equipment,
net 197,166 180,504
Deferred tax assets 35,099 91,880
Investment in equity affiliates 1,913 220
Customer-related intangible
assets, net 33,296 85,987
Marketing-related intangible
assets, net - 24,240
Other intangible assets, net 51 3,061
Goodwill 570,153 925,339
Other assets 120,003 107,037
Total assets $1,893,461 $2,403,387
---------- ----------
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share data)
As of December 31,
------------------
2010 2011
---- ----
Liabilities and equity
Current liabilities
Short-term borrowings $ - $252,000
Current portion of long-term
debt 24,950 29,012
Current portion of capital lease
obligations 702 1,005
Current portion of capital lease
obligations payable to related
party 1,188 762
Accounts payable 12,206 20,951
Income taxes payable 8,064 20,118
Deferred tax liabilities 489 35
Due to related party 4,030 464
Accrued expenses and other
current liabilities 270,919 337,481
------- -------
Total current liabilities $322,548 $661,828
Long-term debt, less current
portion - 73,930
Capital lease obligations, less
current portion 741 846
Capital lease obligations
payable to related party, less
current portion 1,748 855
Deferred tax liabilities 2,953 1,905
Due to related party 10,683 9,154
Other liabilities 73,546 219,186
------ -------
Total liabilities $412,219 $967,704
-------- --------
Shareholders' equity
Preferred shares, $0.01 par
value, 250,000,000 authorized,
none issued - -
Common shares, $0.01 par value,
500,000,000 authorized,
220,916,960 and 222,347,968
issued and outstanding as of
December 31, 2010 and 2011,
respectively 2,208 2,222
Additional paid-in capital 1,105,610 1,146,203
Retained earnings 421,092 605,386
Accumulated other comprehensive
income (loss) (50,238) (320,753)
------- --------
Genpact Limited shareholders'
equity $1,478,672 $1,433,058
Noncontrolling interest 2,570 2,625
----- -----
Total equity $1,481,242 $1,435,683
Commitments and contingencies
Total liabilities and equity $1,893,461 $2,403,387
---------- ----------
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Year ended December 31,
-----------------------
2009 2010 2011
---- ---- ----
Net revenues
Net revenues from services -related
party $451,338 $479,231 $484,464
Net revenues from services - others 668,733 779,732 1,115,972
------- ------- ---------
Total net revenues 1,120,071 1,258,963 1,600,436
--------- --------- ---------
Cost of revenue
Services 672,624 788,522 1,004,899
------- ------- ---------
Total cost of revenue 672,624 788,522 1,004,899
------- ------- ---------
Gross profit $447,447 $470,441 $595,537
Operating expenses:
Selling, general and administrative
expenses 265,392 282,102 357,959
Amortization of acquired intangible
assets 25,969 15,959 19,974
Other operating (income) expense, net (6,094) (5,484) 1,360
------ ------ -----
Income from operations $162,180 $177,864 $216,244
Foreign exchange (gains) losses, net 5,493 (1,137) (35,099)
Other income (expense), net 4,437 5,246 10,716
----- ----- ------
Income before Equity-method investment
activity, net and income tax expense $161,124 $184,247 $262,059
Equity-method investment activity, net 700 1,013 327
--- ----- ---
Income before income tax expense $160,424 $183,234 $261,732
Income tax expense 25,466 34,203 70,656
------ ------ ------
Net Income $134,958 $149,031 $191,076
Net income attributable to
noncontrolling interest 7,657 6,850 6,782
----- ----- -----
Net income attributable to Genpact
Limited shareholders $127,301 $142,181 $184,294
-------- -------- --------
Net income available to Genpact Limited
common shareholders $127,301 $142,181 $184,294
Earnings per common share attributable to Genpact
Limited common shareholders
Basic $0.59 $0.65 $0.83
Diluted $0.58 $0.63 $0.81
----- ----- -----
Weighted average number of common shares
used in computing earnings per common
share attributable to Genpact Limited
common shareholders
Basic 215,503,749 219,310,327 221,567,502
Diluted 220,066,345 224,838,529 226,354,403
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Year ended December 31,
-----------------------
2009 2010 2011
---- ---- ----
Operating activities
Net income attributable to Genpact Limited
shareholders $127,301 $142,181 $184,294
Net income attributable to noncontrolling
interest 7,657 6,850 6,782
----- ----- -----
Net income $134,958 $149,031 $191,076
Adjustments to reconcile net income to net
cash provided by (used for) operating
activities:
Depreciation and amortization 53,047 57,881 58,357
Amortization of debt issue costs 561 385 1,952
Amortization of acquired intangible assets 26,540 16,275 20,132
Reserve (release) for doubtful receivables 1,614 (1,334) 6,298
Reserve for /(writeback of) mortgage loans (1,022) 12 52
Gain on business acquisition - (247) -
Unrealized (gain) loss on revaluation of
foreign currency asset/liability (166) (284) (18,276)
Equity-method investment activity, net 700 1,013 327
Stock-based compensation expense 19,285 17,514 27,767
Deferred income taxes (20,740) (5,400) (7,981)
Others, net 206 181 5,322
Change in operating assets and liabilities:
Increase in accounts receivable (21,980) (50,414) (46,314)
Increase in other assets (32,005) (25,932) (10,461)
(Decrease) increase in accounts payable 4,214 (2,631) 6,800
(Decrease) increase in accrued expenses and
other current liabilities (11,155) (2,560) 27,517
(Decrease) increase in income taxes payable (563) 6,447 10,345
(Decrease) increase in other liabilities 4,675 3,161 (6,301)
----- ----- ------
Net cash provided by operating activities $158,169 $163,098 $266,612
-------- -------- --------
Investing activities
Purchase of property, plant and equipment (52,540) (55,171) (35,776)
Proceeds from sale of property, plant and
equipment 1,147 1,239 916
Investment in affiliates (296) (2,324) -
Purchase of short term investments (246,914) (107,324) (129,458)
Proceeds from sale of short term
investments 255,778 162,940 206,443
Short term deposits placed with related
party (111,049) (6,530) -
Redemption of short term deposits with
related party 160,405 16,325 -
Payment for business acquisitions, net of
cash acquired (20,196) (42,575) (577,233)
------- ------- --------
Net cash used in investing activities $(13,665) $(33,420) $(535,108)
-------- -------- ---------
Financing activities
Repayment of capital lease obligations (2,603) (4,861) (2,821)
Proceeds from long-term debt - - 120,000
Repayment of long-term debt (30,000) (45,000) (40,000)
Short-term borrowings, net (24,820) (165) 252,000
Proceeds from issuance of common shares
under stock based compensation plans 13,743 24,826 12,840
Direct cost incurred in relation to debt - - (9,115)
Distribution to noncontrolling interest (7,866) (7,065) (6,805)
------ ------ ------
Net cash provided by (used for) financing
activities $(51,546) $(32,265) $326,099
-------- -------- --------
Effect of exchange rate changes 11,726 17,887 (53,617)
Net increase in cash and cash equivalents 92,958 97,413 57,603
Cash and cash equivalents at the beginning
of the period 184,050 288,734 404,034
------- ------- -------
Cash and cash equivalents at the end of the
period $288,734 $404,034 $408,020
-------- -------- --------
Supplementary information
Cash paid during the period for interest $4,274 $1,617 $5,026
Cash paid during the period for income
taxes $67,561 $40,466 $65,688
Property, plant and equipment acquired
under capital lease obligation $1,558 $1,968 $1,787
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
Three months period ended,
March 31, June 30, September 30, December 31,
2011 2011 2011 2011
(dollars in millions)
Statement of
income data:
Total net revenues $330.6 $397.6 $429.6 $442.7
Cost of revenue 214.5 254.0 268.3 268.1
Gross profit 116.1 143.6 161.3 174.6
Income from
operations 46.5 51.1 56.7 61.9
Income before
equity-method
investment
activity, net and
income tax
expense 51.2 55.2 68.6 87.0
Net income
attributable to
Genpact Limited
shareholders $36.1 $39.0 $48.0 $61.1
Three months period ended,
March 31, June 30, September 30, December 31,
2010 2010 2010 2010
(dollars in millions)
Statement of
income data:
Total net revenues $288.2 $307.6 $321.6 $341.5
Cost of revenue 176.7 191.1 204.8 215.9
Gross profit 111.5 116.5 116.7 125.6
Income from
operations 37.3 38.3 42.4 59.9
Income before
equity-method
investment
activity, net and
income tax
expense 37.8 34.3 49.2 63.0
Net income
attributable to
Genpact Limited
shareholders $28.2 $27.8 $40.1 $46.0
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, expenses associated with the Company's March 2010 secondary offering and significant acquisition related expenses and amortization of acquired intangibles on such acquisitions, 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, expenses of the secondary offering and significant acquisition related expenses and amortization of acquired intangibles on such acquisitions, 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 of the secondary offering, 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 months and year ended December 31, 2010 and 2011:
Reconciliation of Adjusted Income from Operations
(Unaudited)(In thousands)
Year ended December 31, Quarter ended December 31,
----------------------- --------------------------
2010 2011 2010 2011
---- ---- ---- ----
Income from
operations as per
GAAP $177,864 $216,244 $59,885 $61,928
Add: Amortization of
acquired intangible
assets resulting
from Formation
Accounting 13,240 9,354 3,123 2,079
Add: Amortization of
acquired intangible
assets relating to
significant
acquisitions - 7,865 - 2,949
Add: Significant
acquisition related
expenses - 5,619 - -
Add: Stock based
compensation 17,514 27,767 2,551 10,055
Add: Other income 2,978 4,793 500 1,781
Less: Equity-method
investment
activity, net
(excluding non-
cash gain on re-
measurement of
equity holding in
HPP) (1,013) (344) (304) (38)
Less: Net income
attributable to non
controlling
interest (6,850) (6,782) (2,053) (1,611)
------ ------ ------ ------
Adjusted income from
operations $203,733 $264,516 $63,702 $77,143
======== ======== ======= =======
Reconciliation of Adjusted Net Income
(Unaudited) (In thousands, except per share data)
Year ended December 31, Quarter ended December 31,
----------------------- --------------------------
2010 2011 2010 2011
---- ---- ---- ----
Net income as per
GAAP $142,181 $184,294 46,029 $61,120
Add: Amortization
of acquired
intangible assets
resulting from
Formation
Accounting 13,240 9,354 3,123 2,079
Add: Amortization
of acquired
intangible assets
relating to
significant
acquisitions - 7,865 - 2,949
Add: Significant
acquisition
related expenses - 5,619 - -
Add: Stock based
compensation 17,514 27,767 2,551 10,055
Add: Secondary
offering expenses 591 - - - -
Less: Tax impact on
amortization of
acquired
intangibles
resulting from
Formation
Accounting (3,836) (2,250) (838) (412)
Less: Tax impact on
amortization of
acquired
intangibles
resulting from
significant
acquisitions - (2,674) - (1,004)
Less: Tax impact on
significant
acquisition
related expenses - (1,435) - (41)
Less: Tax impact on
stock based
compensation (3,872) (7,800) (35) (2,743)
Adjusted net income $165,818 $220,740 $50,830 $72,003
======== ======== ======= =======
Adjusted diluted
earnings per share $0.74 $0.98 $0.23 $0.32
SOURCE Genpact Limited