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Last updated on May 22, 2013 at 14:09 EDT

Genpact Reports Results for 2012 Full Year and Fourth Quarter

February 7, 2013

NEW YORK, Feb. 7, 2013 /PRNewswire/ — Genpact Limited (NYSE: G), a global leader in business process management and technology services, today announced financial results for the fourth quarter and full year ended December 31, 2012.

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Key Financial Results – Full-Year 2012

  • Revenues were $1.9 billion, up 18.8% from $1.6 billion in 2011.
  • Net income attributable to Genpact Limited shareholders was $178.2 million, compared to $184.3 million in 2011; net income margin for 2012 was 9.4%, compared to 11.5% in 2011.
  • The effective tax rate was 30.6%, up from 27.7% in 2011.
  • Diluted earnings per common share were $0.78, compared to $0.81 per share in 2011.
  • Adjusted income from operations increased 18.4% to $313.1 million, up from $264.5 million in 2011.
  • Adjusted income from operations margin was 16.5%, unchanged from 2011.
  • Adjusted diluted earnings per share were $0.96, compared to $0.98 in 2011.

Key Financial Results – Fourth Quarter 2012

  • Revenues were $507.7 million, up 14.7% from $442.7 million in the fourth quarter of 2011.
  • Net income attributable to Genpact Limited shareholders was $53.4 million, compared to $61.1 million in the fourth quarter of 2011; net income margin for the fourth quarter of 2012 was 10.5%, compared to 13.8% in the fourth quarter of 2011.
  • Diluted earnings per common share were $0.23, compared to $0.27 per share in the fourth quarter of 2011.
  • Adjusted income from operations totaled $83.9 million, up from $77.1 million in the fourth quarter of 2011.
  • Adjusted income from operations margin was 16.5%, compared to 17.4% in the fourth quarter of 2011.
  • Adjusted diluted earnings per share were $0.25, compared to $0.32 in the fourth quarter of 2011.

N.V. ‘Tiger’ Tyagarajan, Genpact’s president and CEO said, “Our results in the fourth quarter and full year 2012 demonstrated strong client demand and profitable growth. In 2012, we delivered robust growth in revenues and adjusted operating income. In addition, we expanded and strengthened our capabilities across our enterprise services offerings, industry vertical markets and geographies with both investment initiatives and acquisitions. We also provided our shareholders a substantial return of capital in the form of a $502 million special cash dividend. All of these accomplishments build upon our solid foundation and position us to take advantage of the large market opportunity available to us and long runway to drive sustained growth in revenues and cash flows.”

Revenues from Global Clients grew 25.8% for the full year 2012 and 19.2% in the fourth quarter. Business process management revenues from Global Clients grew 21.3% for the full year, and 21.1% in the fourth quarter and were led by growth in Smart Decision Services of 31.3% for the full year and 21.0% for the fourth quarter. Revenues from Global Clients represented approximately 73.9% of Genpact’s total revenues in 2012, with the remaining 26.1% of revenues coming from GE. GE revenues increased 2.8% for the full year 2012 and 3.1% in the fourth quarter.

As of the end of 2012, 65 client relationships each contributed revenues of $5 million or more in the last 12 months, up from 56 such relationships as of December 31, 2011. As of the end of 2012, 11 client relationships each contributed revenues of $25 million or more in the last 12 months, up from nine such client relationships as of December 31, 2011.

Approximately 76.6% of Genpact’s revenues for the full year 2012 and 76.8% for the fourth quarter came from business process management services, compared to 78.8% for 2011 and 75.9% for the fourth quarter of 2011. Revenues from IT services represented approximately 23.4% of total revenues for the full year 2012 and 23.2% for the fourth quarter, compared to 21.2% for 2011 and 24.1% for the fourth quarter of 2011.

Genpact generated $310.7 million of cash from operations in 2012 and $101.2 million in the fourth quarter of 2012, up from $266.6 million of cash from operations in 2011 and $89.5 million in the fourth quarter of 2011, primarily due to better working capital management resulting from lower days sales outstanding in the fourth quarter. Genpact had approximately $477.5 million in cash and cash equivalents and short-term deposits as of December 31, 2012.

In the third quarter of 2012, Genpact paid a special cash dividend of $2.24 per share, for an aggregate amount of approximately $502 million, to holders of Genpact common shares and facilitated the sale of approximately 26% of its outstanding shares to Bain Capital Partners from its original sponsors. The special dividend was funded through a combination of surplus cash on Genpact’s balance sheet and a portion of the proceeds of borrowings under a new $925 million senior credit facility. The costs and expenses associated with the above transactions are reflected in Genpact’s results for 2012, and adversely impacted net income for the year.

As of December 31, 2012, Genpact had approximately 60,200 employees worldwide, an increase from approximately 55,400 at the end of 2011. The attrition rate for the entire year, measured from day one, was 25%, down from 30% in 2011. Revenue per employee in 2012 was $34,000, compared to $34,100 in 2011.

2013 Outlook

Tyagarajan continued, “We remain cautious, as are many of our clients, about the global economy in the near term, even as we see signs of improvement, and we are bullish on the long term. For the full year 2013, we expect revenues to be in a range of $2.15 – $2.20 billion, and adjusted operating income margin in a range of 15.8% – 16.3%. This guidance reflects the revenue contribution and slight margin dilution for the year resulting from the recently-announced acquisition of JAWOOD. Without the anticipated impact of JAWOOD, we would have expected 2013 adjusted operating income margin to be in a range of 16.0% to 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 February 8, 2013 to discuss the company’s performance for the periods ended December 31, 2012. To participate, callers can dial 1-866-713-8395 from within the U.S. or +1 (617) 597-5309 from any other country. Thereafter, callers will be prompted to enter the participant code, 90489804.

A live webcast of this event 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 Genpact website after the end of the call. A transcript of the call will also be made available via the 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 (SEP(SM)) 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 60,000+ professionals around the globe deliver services to its more than 600 clients from a network of 70 delivery centers across 20 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 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: Bharani Bobba
                                         +1 (203) 300-9230
               bharani.bobba@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 and share count)

                                    As of December 31,                   As of December
                                                                         31,
                                                  2011                             2012
                                                  ----                             ----
    Assets
    Current assets
    Cash
     and
     cash
     equivalents                                              $408,020                    $459,228
     Accounts
     receivable,
     net                                       258,498                          451,960
     Accounts
     receivable
     from
     related
     party,
     net                                       143,921                               29
    Short
     term
     deposits                                        -                           18,292
     Deferred
     tax
     assets                                     46,949                           48,489
    Due
     from
     related
     party                                          10                                -
     Prepaid
     expenses
     and
     other
     current
     assets                                    127,721                          150,769
                                               -------                          -------
    Total
     current
     assets                                                   $985,119                  $1,128,767

     Property,
     plant
     and
     equipment,
     net                                       180,504                          200,362
     Deferred
     tax
     assets                                     91,880                           91,383
     Investment
     in
     equity
     affiliates                                    220                              416
     Customer-
     related
     intangible
     assets,
     net                                        85,987                           84,748
     Marketing-
     related
     intangible
     assets,
     net                                        24,240                           21,585
    Other
     intangible
     assets,
     net                                         3,061                            6,054
    Goodwill                                   925,339                          956,064
    Other
     assets                                    107,037                          116,548
                                               -------                          -------
    Total
     assets                                                 $2,403,387                  $2,605,927
                                                            ==========                  ==========

                                               GENPACT LIMITED AND ITS SUBSIDIARIES
                                                   Consolidated Balance Sheets
                                                           (Unaudited)
                                      (In thousands, except per share data and share count)

                                                            As of December 31,                 As of December 31,
                                                                          2011                               2012
                                                                          ----                               ----
    Liabilities and equity
    Current liabilities
    Short-term borrowings                                                             $252,000                        $80,000
    Current portion of long-term debt                                   29,012                              4,982
    Current portion of capital lease
     obligations                                                         1,005                              1,301
    Current portion of capital lease
     obligations payable to related party                                  762                                  -
    Accounts payable                                                    20,951                             18,652
    Income taxes payable                                                20,118                             22,304
    Deferred tax liabilities                                                35                                538
    Due to related party                                                   464                                  -
    Accrued expenses and other current
     liabilities                                                       337,481                            390,041
                                                                       -------                            -------
    Total current liabilities                                                         $661,828                       $517,818
    Long-term debt, less current portion                                73,930                            656,879
    Capital lease obligations, less current
     portion                                                               846                              2,533
    Capital lease obligations payable to
     related party, less current portion                                   855                                  -
    Deferred tax liabilities                                             1,905                              6,068
    Due to related party                                                 9,154                                  -
    Other liabilities                                                  219,186                            250,848
                                                                       -------                            -------
    Total liabilities                                                                 $967,704                     $1,434,146
                                                                                      --------                     ----------
    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 225,480,172 issued and outstanding
     as of December 31, 2011 and 2012,
     respectively                                                        2,222                              2,253
    Additional paid-in capital                                       1,146,203                          1,202,448
    Retained earnings                                                  605,386                            281,982
    Accumulated other comprehensive income
     (loss)                                                           (320,753)                          (318,272)
                                                                      --------                           --------
    Genpact Limited shareholders' equity                             1,433,058                          1,168,411
    Noncontrolling interest                                              2,625                              3,370
    Total equity                                                     1,435,683                          1,171,781
    Commitments and contingencies
    Total liabilities and equity                                                    $2,403,387                     $2,605,927
                                                                                    ==========                     ==========

                                                GENPACT LIMITED AND ITS SUBSIDIARIES
                                                 Consolidated Statements of Income
                                                            (Unaudited)
                                       (In thousands, except per share data and share count)

                                                             Year Ended December 31
                                                         2010                    2011                   2012
                                                         ----                    ----                   ----
    Net revenues
    Net revenues from services -
     related party                                              $479,231                            $484,464      $550
    Net revenues from services -
     others                                           779,732               1,115,972              1,901,421
                                                      -------               ---------              ---------
    Total net revenues                              1,258,963               1,600,436              1,901,971
    Cost of revenue
    Services                                          788,522               1,004,899              1,157,766
                                                      -------               ---------              ---------
    Total cost of revenue                             788,522               1,004,899              1,157,766
                                                      -------               ---------              ---------
    Gross profit                                                $470,441                            $595,537  $744,205
    Operating expenses:
    Selling, general and
     administrative expenses                          282,102                 357,959                456,611
    Amortization of acquired
     intangible assets                                 15,959                  19,974                 23,233
    Other operating (income)
     expense, net                                      (5,484)                  1,360                     16
                                                       ------                   -----                    ---
    Income from operations                                      $177,864                            $216,244  $264,345
    Foreign exchange (gains)
     losses, net                                       (1,137)                (35,099)               (13,146)
    Other income (expense), net                         5,246                  10,716                (14,499)
                                                        -----                  ------                -------
    Income before Equity-method
     investment activity, net and
     income tax expense                                         $184,247                            $262,059  $262,992
    Equity-method investment
     activity, net                                      1,013                     327                    (17)
                                                        -----                     ---                    ---
    Income before income tax
     expense                                                    $183,234                            $261,732  $263,009
    Income tax expense                                 34,203                  70,656                 78,419
                                                       ------                  ------                 ------
    Net Income                                                  $149,031                            $191,076  $184,590
    Net income attributable to
     noncontrolling interest                            6,850                   6,782                  6,374
                                                        -----                   -----                  -----
    Net income attributable to
     Genpact Limited shareholders                               $142,181                            $184,294  $178,216
    Net income available to
     Genpact Limited common
     shareholders                                     142,181                 184,294                178,216
    Earnings per common share attributable to
     Genpact Limited common shareholders
    Basic                                                          $0.65                               $0.83     $0.80
    Diluted                                                        $0.63                               $0.81     $0.78
    Dividend per share                                      $          -                       $           -     $2.24
                                                          ===        ===                     ===         ===     =====
    Weighted average number of common shares
     used in computing earnings per common
     share attributable to Genpact Limited
     common shareholders
    Basic                                         219,310,327             221,567,502            223,696,567
    Diluted                                       224,838,529             226,354,403            229,532,516

                                                GENPACT LIMITED AND ITS SUBSIDIARIES
                                               Consolidated Statements of Cash Flows
                                                            (Unaudited)
                                                           (In thousands)

                                                                   Year ended December 31,
                                                        2010                  2011              2012
                                                        ----                  ----              ----
    Operating activities
    Net income attributable to
     Genpact Limited shareholders                              $142,181                     $184,294                $178,216
    Net income attributable to
     noncontrolling interest                           6,850                 6,782             6,374
                                                       -----                 -----             -----
    Net Income                                                 $149,031                     $191,076                $184,590
    Adjustments to reconcile net income to net
     cash provided by (used for) operating
     activities:
    Depreciation and amortization                     57,881                58,357                       56,089
    Amortization of debt issue
     costs                                               385                 1,952                        8,079
    Amortization of acquired
     intangible assets                                16,275                20,132                       23,305
    Reserve (release) for
     doubtful receivables                             (1,334)                6,298                        3,878
    Reserve for mortgage loans                            12                    52                          108
    Gain on business acquisition                        (247)                    -                               -
    Unrealized (gain) loss on
     revaluation of foreign
     currency asset/liability                           (284)              (18,276)                     (13,700)
    Equity-method investment
     activity, net                                     1,013                   327                          (17)
    Stock-based compensation
     expense                                          17,514                27,767                       32,152
    Deferred income taxes                             (5,400)               (7,981)                     (10,028)
    Others, net                                          181                 5,322                        6,471
    Change in operating assets and
     liabilities:
    Increase in accounts
     receivable                                      (50,414)              (46,314)                     (36,171)
    Increase in other assets                         (25,932)              (10,461)                     (20,525)
    Increase/(Decrease) in
     accounts payable                                 (2,631)                6,800                       (4,380)
    Increase/(Decrease) in
     accrued expenses and other
     current liabilities                              (2,560)               27,517                       38,478
    Increase in income taxes
     payable                                           6,447                10,345                        1,775
    Increase/(Decrease) in other
     liabilities                                       3,161                (6,301)                      40,556
                                                       -----                ------                       ------
    Net cash provided by
     operating activities                                      $163,098                     $266,612                $310,660
                                                               --------                     --------                --------
    Investing activities
    Purchase of property, plant
     and equipment                                   (55,171)              (35,776)                     (83,337)
    Proceeds from sale of
     property, plant and
     equipment                                         1,239                   916                          500
    Investment in affiliates                          (2,324)                    -                         (205)
    Purchase of short term
     investments                                    (107,324)            (129,458)                               -
    Proceeds from sale of short
     term investments                                162,940               206,443                               -
    Short term deposits placed                        (6,530)                    -                      (43,978)
    Redemption of short term
     deposits                                         16,325                     -                       25,638
    Payment for business
     acquisitions, net of cash
     acquired                                        (42,575)            (577,233)                      (56,488)
                                                     -------              --------                      -------
    Net cash used for investing
     activities                                                $(33,420)                   $(535,108)              $(157,870)

    Financing activities
    Repayment of capital lease
     obligations                                      (4,861)               (2,821)                      (2,279)
    Proceeds from long-term debt                           -               120,000                      675,000
    Repayment of long-term debt                      (45,000)              (40,000)                   (106,688)
    Proceeds from Short-term
     borrowings                                            -               260,000                       80,000
    Repayment of Short-term
     borrowings                                         (165)               (8,000)                   (253,004)
    Proceeds from issuance of
     common shares under stock
     based compensation plans                         24,826                12,840                       26,227
    Payment for net settlement of
     stock based awards                                    -                     -                       (2,103)
    Dividend paid                                          -                     -                    (501,620)
    Direct cost incurred in
     relation to Debt                                      -                (9,115)                     (15,266)
    Distribution to
     noncontrolling interest                          (7,065)               (6,805)                      (5,760)
                                                      ------                ------
    Net cash provided by (used
     for) financing activities                                 $(32,265)                    $326,099               $(105,493)

    Effect of exchange rate
     changes                                          17,887               (53,617)                       3,911
    Net increase  in cash and
     cash equivalents                                 97,413                57,603                       47,297
    Cash and cash equivalents at
     the beginning of  the period                    288,734               404,034                      408,020
                                                     -------               -------
    Cash and cash equivalents at
     the end of the period                                     $404,034                     $408,020                 459,228
                                                               ========                     ========                 =======
    Supplementary information
    Cash paid during the period
     for interest                                                $1,617                       $5,026                  14,061
    Cash paid during the period
     for income taxes                                           $40,466                      $65,688                  91,825
    Property, plant and equipment
     acquired under capital lease
     obligation                                                  $1,968                       $1,787                   2,699

                                                                 GENPACT LIMITED AND ITS SUBSIDIARIES
                                                                  Consolidated Statements of Income
                                                                             (Unaudited)

                                                        Three months ended
                                                       ------------------
                                           March 31,                        June 30, 2012             September 30, 2012        December 31, 2012
                                                       2012
                                                       ----
                                                      (dollars in millions)
    Statement of income data:
    Total net revenues                               $435.5                             $467.6                           $491.2                   $507.7
    Cost of revenue                                   265.5                              285.2                            297.3                    309.8
    Gross profit                                      170.0                              182.4                            193.9                    197.9
    Income from operations                             60.4                               63.2                             70.0                     70.8
    Income before Equity method investment
     activity, net and income tax expense              56.6                               84.4                             41.8                     80.1
    Net income attributable to Genpact
     Limited common shareholders                      $38.5                              $61.1                            $25.2                    $53.4

                                                                                                                                                                              Three months ended
                                                                                                                                                                              ------------------
                                                                                                                                                             March 31,                                       June                                   September                                                       December
                                                                                                                                                                2011                                          30,                                    30,                                                           31,
                                                                                                                                                                                                             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

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 historically used financial statements that did not include 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.

As a result of frequent acquisitions of varying scale and size, it is difficult to predict the expenses related to acquisitions and amortization of the acquired intangibles on acquisitions. Therefore, with effect from July 1, 2012, for its internal management reporting and budgeting purposes, management considers using financial statements that do not include expenses related to all acquisitions and amortization of acquired intangibles on 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.

Besides this, for its internal management reporting and budgeting purposes, management uses financial statements that do not include stock-based compensation expense, amortization of acquired intangibles at formation in 2004, expenses related to change of shareholding and capital restructuring, net of recovery from the selling shareholders, affiliates of General Atlantic LLC and Oak Hill Capital Management LLC, or GA/OH (excluding expenses related to the new credit facility) and withholding taxes relating to remittance of funds between subsidiaries to partly fund the payment of the special cash dividend in respect of 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 and those of other companies. In addition, Genpact’s management believes that providing non-GAAP financial measures that exclude amortization of acquired intangibles, expenses related to all acquisitions and amortization of acquired intangibles on acquisitions, expenses related to change of shareholding and capital restructuring, net of recovery from GA/OH (excluding expenses related to the new credit facility) and withholding taxes relating to remittance of funds between subsidiaries to partly fund the payment of the special cash dividend in respect of capital restructuring, allows investors to make additional comparisons between Genpact’s operating results and those of other companies. Genpact also believes that it is unreasonably difficult to provide its financial outlook in accordance with GAAP for a number of reasons including, without limitation, its inability to predict its future stock-based compensation expense under ASC 718, the amortization of intangibles associated with further acquisitions, acquisition related expenses, expenses related to change of shareholding and capital restructuring, net of recovery from GA/OH (excluding expenses related to new credit facility), and withholding taxes relating to remittance of funds between subsidiaries to partly fund the payment of the special cash dividend in respect of 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 for the foreseeable future to be a significant recurring expense in Genpact’s business. 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, 2011 and 2012:

                                  Reconciliation of Adjusted Income from Operations
                                                     (Unaudited)
                                                    (In thousands)

                           Year ended December 31,                       Quarter ended December 31,
                           -----------------------                       --------------------------
                                 2011                 2012                   2011                 2012
                                 ----                 ----                   ----                 ----
    Income from
     operations as per
     GAAP                               $216,244                         $264,345                       $61,928  $70,795
    Add: Amortization
     of acquired
     intangible assets
     resulting from
     Formation
     Accounting                 9,354                6,845                  2,079                1,592
    Add: Amortization
     of acquired
     intangible assets
     relating to
     acquisitions               7,865               10,739                  2,949                2,791
    Add: Stock based
     compensation              27,767               32,152                 10,055                9,296
    Add: Acquisition
     related expenses           5,619                  298                      -                    -
    Add: Other income
     (expense)                  4,793                1,615                  1,781                7,348
    Add: Consultancy,
     legal and banker  and
     fees relating to  administrative
     capital           expenses
     restructuring
     (excluding
     expenses related
     to the new credit
     facility), as
     recorded under
     selling, general               -                3,237                      -                   39
    Add: Consultancy,
     legal and banker  (expense)
     fees relating to
     change of
     shareholding
     (excluding
     expenses related
     to the new credit
     facility), as
     recorded under
     other income                   -               17,227                      -               10,620
    Less: Recovery
     from selling      facility), as
     shareholder of    recorded under
     consultancy,      other income
     legal and banker  (expense)
     fees relating to
     change of
     shareholding
     (excluding
     expenses related
     to the new credit              -             (17,000)                      -              (17,000)
    Less: Equity-
     method investment
     activity, net               (344)                  17                    (38)                           (7)
    Less: Net income
     attributable to
     noncontrolling
     interest                  (6,782)              (6,374)                (1,611)              (1,523)
                               ------               ------                 ------               ------
    Adjusted income
     from operations                    $264,516                         $313,101                       $77,143  $83,951
                                        ========                         ========                       =======  =======

                                        Reconciliation of Adjusted Net Income
                                                     (Unaudited)
                                        (In thousands, except per share data)

                           Year ended December 31,                       Quarter ended December 31,
                           -----------------------                       --------------------------
                                 2011                 2012                   2011                 2012
                                 ----                 ----                   ----                 ----
    Net income as per
     GAAP                               $184,294                         $178,216                       $61,120 $53,401
    Add: Amortization
     of acquired
     intangible assets
     resulting from
     Formation
     Accounting                 9,354                6,845                  2,079                1,592
    Add: Amortization
     of acquired
     intangible assets
     relating to
     acquisitions               7,865               10,739                  2,949                2,791
    Add: Stock based
     compensation              27,767               32,152                 10,055                9,296
    Add: Acquisition
     related expenses           5,619                  298                      -                    -
    Add: Consultancy,
     legal and banker  and
     fees relating to  administrative
     capital           expenses
     restructuring
     (excluding
     expenses related
     to the new credit
     facility), as
     recorded under
     selling, general               -                3,237                      -                   39
    Add: Consultancy,
     legal and banker  (expense)
     fees relating to
     change of
     shareholding
     (excluding
     expenses related
     to the new credit
     facility), as
     recorded under
     other income                   -               17,227                      -               10,620
    Less: Recovery
     from selling      facility), as
     shareholder of    recorded under
     consultancy,      other income
     legal and banker  (expense)
     fees relating to
     change of
     shareholding
     (excluding
     expenses related
     to the new credit              -             (17,000)                      -              (17,000)
    Add: Withholding
     taxes relating to restructuring
     remittance of
     funds between
     subsidiaries to
     partly fund the
     payment of
     special cash
     dividend in
     respect of
     capital                        -                2,300                      -                    -
    Less: Tax impact
     on amortization
     of acquired
     intangibles
     resulting from
     Formation
     Accounting                (2,250)              (1,564)                  (412)                (374)
    Less: Tax impact
     on amortization
     of acquired
     intangibles
     resulting from
     acquisitions              (2,674)              (3,650)                (1,004)                (971)
    Less: Tax impact
     on stock based
     compensation              (7,800)              (8,032)                (2,743)              (1,028)
    Less: Tax impact
     on acquisition
     related expenses          (1,435)                 (75)                   (41)                   -
    Less: Tax impact
     on consultancy
     and legal fees
     relating to
     capital
     restructuring
     (excluding
     expenses related
     to the new credit
     facility)                      -                 (194)                     -                  (12)
                                  ---                 ----                    ---                  ---
    Adjusted net
     income                             $220,740                         $220,499                       $72,003 $58,354
                                        ========                         ========                       ======= =======
    Adjusted diluted
     earnings per
     share                                 $0.98                            $0.96                         $0.32   $0.25

SOURCE Genpact Limited


Source: PR Newswire