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Gurgaon, Haryana, India and New York, United States
Genpact Limited (NYSE: G), which manages business processes for companies around the world, announced financial results for the fourth quarter and full year ended December 31, 2007.
Key Financial Results - Full Year 2007
-- Revenues were $822.7 million in 2007, up 34.2% from 2006. Organic growth, or revenues excluding acquisitions, was 27.7%.
-- Adjusted income from operations was $131.9 million in 2007, up 38.5% from 2006.
-- 2007 adjusted income from operations margin increased by 50 basis points to 16.0% from 15.5% in 2006.
-- Net income was $56.4 million for the year, up 41.9% from $39.8 million in 2006; 2007 net income margin increased slightly to 6.9% from 6.5% in 2006.
Key Financial Results - Fourth Quarter 2007
-- Fourth quarter revenues were $231.6 million, up 30.3% from the fourth quarter of 2006, and up 8.0% from the third quarter of 2007.
-- Adjusted income from operations for the fourth quarter increased 54.2% to $43.3 million as compared to the fourth quarter of 2006 and 18.0% from the third quarter of 2007.
-- Adjusted income from operations margin was 18.7% for the fourth quarter, up from 15.8% in the fourth quarter of 2006 and up from 17.1% in the third quarter of 2007.
-- Net income for the fourth quarter was $31.2 million, up 109.5% from the fourth quarter of 2006 and up 91.0% from the third quarter of 2007; net income margin for the fourth quarter increased to 13.5% from 8.4% in the fourth quarter of 2006.
Growth with Global Clients and GE
Pramod Bhasin, Genpact's President and CEO said, "2007 was an outstanding year for Genpact. We achieved a number of milestones while delivering strong operational and financial performance that exceeded our targets for the year. We transitioned to a publicly-traded company listed on the New York Stock Exchange. Demand for our services remains strong, as clients look to Genpact to provide value for their businesses, including in the current economic environment. Revenues were up 34% for the year, driven by growth with existing Global Clients as well as growth with GE that exceeded plan. We also saw increasing demand for services from our delivery centers in Europe and China, as we continue to diversify and drive growth across key geographic markets."
Revenues from clients other than GE, which we refer to as Global Clients revenues, grew 114.9% over 2006 (organic growth was 91.1%), driven by our ability to grow with our existing clients across the spectrum of our diverse services and solutions. In addition, we added a number of clients from a wide range of industries and geographies in 2007, with whom we believe we can grow substantially in the longer term. Among these new additions are:
-- A leading global vehicle rental company, operating in over 125 countries across six continents
-- One of the world's premier hotel and hospitality companies with properties in over 40 countries
-- An insurance and financial services company providing financial protection, wealth accumulation and income management products
-- A leading global financial management and advisory company
-- A global manufacturer of audio, video communications and information technology products for consumer and professional markets
-- A major North American automotive components manufacturer
-- A leading global internet portal and brand
Our growth with GE in 2007 exceeded our targets. GE revenues for 2007 grew 11.0% over 2006, prior to adjustments for dispositions by GE of businesses that we continue to serve, exceeding our targets for 2007. Bhasin remarked, "We continue to have strong and growing relationships with GE businesses. In addition, GE is supportive of our growth with Global Clients and continues to serve as a strong reference."
Revenue per employee in 2007 increased to $28,200 from $26,400 in 2006 reflecting a combination of higher value and higher revenue work we are doing for clients, as well as our ability to improve pricing.
As of December 31, 2007, Genpact had 32,700 employees worldwide, an increase from 26,100 at the end of 2006. Our attrition rate for the entire year, measured from day one (not six months or post training), was 30% compared to 32% in 2006. Our attrition would be 22% if measured post six months as many in the industry do.
Diversified Business Model
Genpact's clients are in a diverse range of industries. Approximately 44% of our 2007 revenues came from banking, financial services and insurance clients. Approximately one-quarter of those revenues came from insurance clients, with the remainder distributed among consumer, commercial and investment banks and asset management clients. About 42% of 2007 revenues came from manufacturing clients, which include aircraft, infrastructure, automotive, healthcare and pharmaceuticals businesses. Our remaining revenues for 2007 came from clients providing healthcare, transportation and logistics, media and entertainment and hospitality services.
Among the many services and solutions we provide to our clients, in 2007, the mix between business process services and IT services revenues has remained fairly constant at approximately 76% and 24% of revenues, respectively. While we do not manage our business by service offerings, finance and accounting represented roughly 40% of our revenues. Supply chain and procurement services, together with analytics, combined to contribute more than 13% of revenues. On the IT side, the share between our IT services and software offerings is approximately even.
Bhasin added, "Our model of growing with existing clients positions us well. The strength of our client relationships and the diverse group of leading companies that work with us provide a strong foundation for growth. Our global delivery capabilities and our focus on operating excellence combined with the depth of our Six Sigma, Lean and Re-engineering talent enable us to drive end-to-end value for our clients. In 2007, more than 90% of our growth came from existing clients. We expect 80-85% of our growth in 2008 to come from existing clients."
In 2007, 18 client relationships each accounted for $5 million or more of our annual revenues, up from seven in 2006. Of those, three client relationships each accounted for $25 million or more of our annual 2007 revenues. We believe that several of the remaining 15 clients accounting for $5 million of more of 2007 revenues, as well as some of our newer clients, can each grow to $25 million or more in annual revenues over the long term.
Improving Profitability
For 2007 we improved our adjusted operating income margin by 50 basis points to 16.0% from 15.5% in 2006. Significantly, we accomplished this while continuing to invest for growth and incurring additional expenses as a public company. Our revenue growth with existing clients provided the scale necessary to enhance management of our operating costs by optimizing utilization of our investments in infrastructure, IT and telecom, controlling wage inflation, moving to Tier 2 cities, and increasing supervisory spans - all to drive efficiency and productivity.
We generated $150 million of cash from operations in 2007 up from $37 million in 2006, primarily due to higher profits and better working capital management.
2008
Bhasin continued, "We had a strong fourth quarter and a terrific 2007. We anticipate that our recognized value proposition will enable us to drive growth throughout the year and achieve our financial goals. We are actively engaging our clients in discussions and continuously enhancing our service offerings to help them navigate the current environment. For 2008, our focus will continue to be on expanding our existing client relationships. In addition, we are pushing a number of initiatives to provide end-to-end solutions that address client needs, such as our "Cash is King" solution, that helps companies maximize cash flow and decrease working capital needs. Finally, we will continue to use our deep pool of Six Sigma and Lean trained teams to lead re-engineering projects and to drive process excellence."
"For the full year 2008, we expect organic revenue growth in the range of 25-27%. We also expect adjusted operating income margin to improve slightly by 10-30 bps to 16.1-16.3%. We are committed to the long-term growth and stability of our business and to consistently generating value for our shareholders," Bhasin concluded.
Impact of 2007 Taxes on Net Income
As noted for prior periods in 2007, net income in 2007 reflects the impact of increased taxes resulting from the partial expiration of Genpact's current tax holiday in India starting on March 31, 2007. However, during the fourth quarter of 2007, we received a favorable tax ruling relating to a potential Hungarian minimum tax, thereby eliminating a previously booked reserve of $10.1 million in 2007 which was reversed in the fourth quarter of 2007.
During our earnings call for the third quarter of 2007, we indicated that as a result of an internal restructuring and consequent change in tax status of one of our legal entities we were required to recalculate certain of our existing deferred tax assets and liabilities at U.S. Federal and state tax rates which we estimated would produce a one-time, non-cash charge for deferred tax liability of approximately $22 million to $29 million, due principally to unrealized gains on certain rupee-dollar hedges.
The recalculation process involved a detailed and complex analysis of the tax implications of the restructuring and change in entity tax status, and the unrealized taxable gains and consequent deferred tax liability are much less than estimated earlier. In addition, calculation of certain other deferred tax assets arising out of the restructuring and change in entity tax status resulted in a credit to the income statement for the fourth quarter of 2007. The net effect of these calculations resulted in a one-time, non-cash benefit to the 2007 income statement of $1.3 million.
Conference Call
Genpact management will host a conference call at 8:00 a.m. (Eastern) on March 20, 2008 to discuss the company's performance for the fourth quarter and full year ended December 31, 2007. To participate, callers can dial 1-800-510-9834 from within the U.S. or 1-617-614-3669 from any other country. Thereafter, callers need to enter the participant passcode which is 74392416.
For those who cannot participate in the call, a replay and Podcast will be available on our website, www.genpact.com, after the end of the call. A transcript of the call will also be made available on our website.
About Genpact
Genpact manages business processes for companies around the world. The company 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, the Philippines, the Netherlands, Romania, Spain and the United States. For more info: 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 the risks and uncertainties arising from our past and future acquisitions, slowdown in the economies and sectors in which our clients operate, a slowdown in the BPO and IT Services sectors, 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 the Company's Registration Statement in Form S-1. 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, the company believes that these forward-looking statements are based on reasonable assumptions, you are cautioned not to pay undue reliance on these forward-looking statements, which reflect management's current analysis of future events. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share data)
As of December 31, As of December 31,
2006 2007
------------------ ------------------
Assets
--------------------------------
Current assets
Cash and cash equivalents $ 35,430 $ 279,306
Accounts receivable, net 43,854 99,354
Accounts receivable from a
significant shareholder, net 97,397 93,307
Short term deposits with a
significant shareholder 1,010 35,079
Deferred tax assets 1,144 9,683
Due from a significant
shareholder 10,236 8,977
Prepaid expenses and other
current assets 53,829 146,155
------------------ ------------------
Total current assets 242,900 671,861
Property, plant and equipment,
net 157,976 195,660
Deferred tax assets 1,549 2,196
Investment in equity affiliate -- 197
Customer-related intangible
assets, net 119,680 99,257
Other intangible assets, net 11,908 10,375
Goodwill 493,452 601,120
Other assets 53,827 162,800
------------------ ------------------
Total assets $ 1,081,292 $ 1,743,466
================== ==================
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share data)
As of December 31, As of December 31,
2006 2007
------------------ ------------------
Liabilities and stockholders'
equity
--------------------------------
Current liabilities
Short-term borrowings $ 83,000 $ -
Current portion of long-term
debt 19,383 19,816
Current portion of long-term
debt from a significant
shareholder 1,131 1,125
Current portion of capital
lease obligations 64 38
Current portion of capital
lease obligations payable to
a significant shareholder 1,686 1,826
Accounts payable 9,230 12,446
Income taxes payable 1,617 7,035
Deferred tax liabilities 1,858 20,561
Due to a significant
shareholder 8,928 8,930
Accrued expenses and other
current liabilities 136,949 199,663
------------------ ------------------
Total current liabilities $ 263,846 $ 271,440
Long-term debt, less current
portion 118,657 100,041
Long-term debt from a
significant shareholder, less
current portion 3,865 2,740
Capital lease obligations, less
current portion -- 137
Capital lease obligations
payable to a significant
shareholder, less current
portion 3,067 2,969
Deferred tax liabilities 20,481 40,738
Due to a significant shareholder 7,019 8,341
Other liabilities 39,662 63,265
------------------ ------------------
Total liabilities $ 456,597 $ 489,671
------------------ ------------------
Minority interest -- 3,066
Stockholders' equity
2% Cumulative Series A
convertible preferred stock,
3,077,868 and 0 authorized,
issued and outstanding,
$208,577 and $0 aggregate
liquidation value as of
December 31, 2006 and 2007,
respectively 95,414 --
5% Cumulative Series B
convertible preferred stock,
3,017,868 and 0 authorized,
issued and outstanding,
$216,502 and $0 aggregate
liquidation value as of
December 31, 2006 and 2007,
respectively 93,554 --
Preferred stock, $0.01 par
value, 250,000,000 shares
authorized, none issued -- --
Common stock, $0.01 par value,
71,390,738 and 500,000,000
authorized, 71,390,738 and
212,101,874 shares issued and
outstanding as of December 31,
2006 and 2007, respectively 714 2,121
Additional paid-in capital 494,325 1,000,179
Retained earnings 5,978 26,469
Accumulated other comprehensive
income (loss) (15,295) 221,960
Treasury stock, 3,628,130 and 0
common stock, and 59,000 and 0
2% Cumulative Series A
convertible preferred stock as
of December 31, 2006 and 2007,
respectively (49,995) --
------------------ ------------------
Total stockholders' equity 624,695 1,250,729
Commitments and contingencies -- --
------------------ ------------------
Total liabilities, minority
interest and stockholders'
equity $ 1,081,292 $ 1,743,466
================== ==================
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share data)
Year ended December 31,
------------------------------
2005 2006 2007
--------- --------- ---------
Net revenues
Net revenues from services -
significant shareholder $449,672 $453,305 $481,033
Net revenues from services - others 42,222 158,282 340,158
Other revenues - 1,460 1,493
--------- --------- ---------
Total net revenues 491,894 613,047 822,684
--------- --------- ---------
Cost of revenue
Services 303,963 359,791 514,330
Others - 1,090 1,133
--------- --------- ---------
Total cost of revenue 303,963 360,881 515,463
--------- --------- ---------
Gross profit 187,931 252,166 307,221
Operating expenses:
Selling, general and administrative
expenses 117,469 159,203 231,320
Amortization of acquired intangible
assets 47,010 41,715 36,938
Foreign exchange (gains) losses, net 12,784 13,021 (43,577)
Other operating income (6,185) (4,930) (4,264)
--------- --------- ---------
Income from operations $ 16,853 $ 43,157 $ 86,804
Other income (expense), net (6,146) (9,235) (5,196)
--------- --------- ---------
Income before share of equity in
(earnings)/loss of affiliate, minority
interest and income taxes 10,707 33,922 81,608
Equity in loss of affiliate -- -- 255
Minority interest -- -- 8,387
Income taxes expense (benefit) (6,397) (5,850) 16,543
--------- --------- ---------
Net Income $ 17,104 $ 39,772 $ 56,423
========= ========= =========
GENPACT LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share data)
Three months period ended,
---------------------------------------------
March 31, June 30, September 30, December 31,
2007 2007 2007 2007
--------- -------- ------------- ------------
(unaudited)
Statement of income
data:
Total net revenues $ 175,981 $200,492 $ 214,562 $ 231,649
Cost of revenue 109,885 128,513 133,090 143,974
Gross profit 66,096 71,979 81,472 87,675
Income from operations 10,572 19,581 25,551 31,101
Income before share of
equity in earnings/loss
of affiliate, minority
interest and income
taxes 6,991 16,083 24,932 33,602
Net income $ 1,846 $ 7,093 $ 16,323 $ 31,161
Three months period ended,
---------------------------------------------
March 31, June 30, September 30, December 31,
2006 2006 2006 2006
--------- -------- ------------- ------------
(unaudited)
Statement of income
data:
Total net revenues $ 131,897 $140,956 $ 162,386 $ 177,808
Cost of revenue 77,986 85,753 93,511 103,631
Gross profit 53,911 55,203 68,875 74,177
Income from operations 4,195 7,408 15,000 16,555
Income before share of
equity in earnings/loss
of affiliate, minority
interest and income
taxes 3,640 4,778 10,770 14,734
Net income $ 5,068 $ 7,022 $ 12,805 $ 14,877
Reconciliation of Adjusted Income from Operations
(Unaudited)
(In thousands)
Year Ended Quarter Ended
December 31, December 31,
----------------- -----------------
2006 2007 2006 2007
------- --------- -------- --------
Income from operations as per GAAP $43,157 $ 86,804 $16,555 $31,101
Add: Amortization of acquired
intangible assets resulting from
Formation Accounting 42,738 35,764 9,990 8,595
Add: Additional depreciation due
to fair value adjustment
resulting from Formation
Accounting 2,056 2,056 514 514
Add: Stock based compensation 4,501 13,021 917 4,112
Add: FBT Impact on Stock based
compensation recovered from
employees 507 507
Add: Gain / (loss) on interest
rate swaps 1,648 (41) (50) (131)
Add: Other income 1,070 2,383 156 1,352
Less: Equity in loss of affiliate -- (255) -- (114)
Less: Minority interest -- (8,387) -- (2,633)
------- --------- -------- --------
Adjusted income from operations $95,170 $131,852 $28,082 $43,303
======= ========= ======== ========
Source: Business Wire (Business Wire India)
Press release presented here is sourced from the Source mentioned above and is provided on as-is basis. Please contact the Company / Source directly for any further information in regard to this release. This website will be unable to assist you in regard to the accuracy or correctness of information in this release.
