Genpact Reports Full Year and Fourth Quarter 2017 Results

NEW YORK, Feb. 12, 2018 /PRNewswire/ -- Genpact Limited (NYSE: G), a global professional services firm focused on delivering digital transformation, today announced financial results for the fourth quarter and full year ended December 31, 2017.

"We are very pleased with our full year 2017 results.  We grew Global Client BPO revenues 14% on a constant currency basis and generated double-digit adjusted EPS growth," said "Tiger" Tyagarajan, Genpact's president and CEO.  "The strategic investments we are making in digital, domain, and talent drove 25% growth in transformation services revenues from our Global Clients.  We will remain sharply focused on a specific set of industry verticals and service lines, and continue to use the increasing power of our Genpact Cora platform to unleash opportunities for our clients."

Key Financial Results – Full Year 2017

• Total revenue was $2.74 billion, up 6% year-over-year (up ~7% on a constant currency basis).
• Income from operations was $328.6 million, down 4% year-over-year, with a corresponding margin of 12.0%. Adjusted income from operations was $429.6 million, up 8% year-over-year, with a corresponding margin of 15.7%.⁴
• Diluted earnings per share were $1.34, up 4% year-over-year, and adjusted diluted earnings per share were $1.62, up 11% year-over-year.
• New bookings were approximately $2.80 billion, up 5% from $2.65 billion in 2016.⁵
• Genpact repurchased approximately 7.7 million of its common shares in 2017 for a total of $216 million at an average price per share of $27.89.

Key Financial Results – Fourth Quarter 2017

• Total revenue was $734 million, up 8% year-over-year (up ~7% on a constant currency basis).
• Income from operations was $72 million, down 27% year-over-year, with a corresponding margin of 9.8%. Adjusted income from operations was $115 million, up 1% year-over-year, with a corresponding margin of 15.7%.
• Diluted earnings per share were $0.34, down 9% year-over-year, and adjusted diluted earnings per share were $0.43, down 2.0% year-over-year.

Revenue Details – Full Year 2017⁶

• Revenue from Global Clients was $2.47 billion, up 11% year-over-year (up ~12% on a constant currency basis), representing approximately 90% of total revenues. If all 2016 GE revenue reclassifications had occurred on January 1, 2016, revenue from Global Clients would have increased 10% year-over-year (or ~11% on a constant currency basis). 
• Revenue from GE was $270 million, down 25% year-over-year, representing approximately 10% of total revenues. If all 2016 GE revenue reclassifications had occurred on January 1, 2016, revenue from GE would have decreased 19% year-over-year.
• Total BPO revenue was $2.3 billion, up 9% year-over-year, representing approximately 83% of total revenues.
• Global Client BPO revenue was $2.09 billion, up 14% year-over-year (up ~15% on a constant currency basis). If all 2016 GE revenue reclassifications had occurred on January 1, 2016, BPO revenue from Global Clients would have increased 13% year-over-year (or 14% on a constant currency basis).
• GE BPO revenue was $176 million, down 32% year-over-year. If all 2016 GE revenue reclassifications had occurred on January 1, 2016, GE BPO revenue would have decreased 24% year-over-year.
• Total IT revenue was $473 million, down 3% year-over-year, representing approximately 17% of total revenues.
• Global Client IT revenue was $379 million, down 2% year-over-year.
• GE IT revenue was $94 million, down 6% year-over-year.

Revenue Detail – Fourth Quarter 2017

• Revenue from Global Clients was $669 million, up 12% year-over-year (up ~11% on a constant currency basis), representing approximately 91% of total revenues. If all 2016 GE revenue reclassifications had occurred on January 1, 2016, revenue from Global Clients would have increased 11% year-over-year (or ~11% on a constant currency basis).
• Revenue from GE was $65 million, down 20% year-over-year, representing approximately 9% of total revenues. If all 2016 GE revenue reclassifications had occurred on January 1, 2016, revenue from GE would have decreased 20% year-over-year.
• Total BPO revenue was $614 million, up 11% year-over-year, representing approximately 84% of total revenues.
• Global Client BPO revenue was $575 million, up 15% year-over-year (up ~15% on a constant currency basis). If all 2016 GE revenue reclassifications had occurred on January 1, 2016, BPO revenue from Global Clients would have increased 15% year-over-year (or 15% on a constant currency basis).
• GE BPO revenue was $39 million, down 30% year-over-year. If all 2016 GE revenue reclassifications had occurred on January 1, 2016, GE BPO revenue would have decreased 30% year-over-year.
• Total IT revenue was $121 million, down 6% year-over-year, representing approximately 16% of total revenues.
• Global Client IT revenue was $94 million, down 8% year-over-year.
• GE IT revenue was $26 million, up 2% year-over-year.

Cash Flow from Operations

• Cash generated from operations was $359 million in the full year 2017, up 4% from the full year 2016.

2018 Outlook

Genpact expects:

• Total revenue for the full year 2018 to be $2.93 to $3.0 billion.
• Global Client revenue growth to be in the range of 9% to 11%, both on an as-reported and constant currency basis.
• Adjusted income from operations margin⁷ of approximately 15.8%.
• Adjusted diluted EPS⁸ of $1.70 to $1.74.

Conference Call to Discuss Financial Results

Genpact's management will host an hour-long conference call beginning at 4:30 p.m. ET on February 12, 2018 to discuss the company's performance for the fourth quarter and full year ended December 31, 2017. To participate, callers can dial +1 (877) 654-0173 from within the U.S. or +1 (281) 973-6289 from any other country. Thereafter, callers will be prompted to enter the conference ID, 6994337.

A live webcast of the call will also be made available on the Genpact Investor Relations website at http://investors.genpact.com. For those who cannot join the call live, a replay will be archived on the Genpact website after the end of the call. A transcript of the call will also be made available on the website.

About Genpact

Genpact (NYSE: G) is a global professional services firm that makes business transformation real. We drive digital-led innovation and digitally-enabled intelligent operations for our clients, guided by our experience running thousands of processes for hundreds of Global Fortune 500 companies. We think with design, dream in digital, and solve problems with data and analytics. We obsess over operations and focus on the details – all 78,000+ of us. From New York to New Delhi and more than 20 countries in between, Genpact has the end-to-end expertise to connect every dot, reimagine every process, and reinvent companies' ways of working. We know that rethinking each step from start to finish will create better business outcomes. Whatever it is, we'll be there with you – putting data and digital to work to create bold, lasting results – because transformation happens here.

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 outsourcing and information technology services sectors, the risks and uncertainties arising from our past and future acquisitions, our ability to convert bookings to revenues, our ability to manage growth, factors which may impact our cost advantage, wage increases, changes in  tax rates and tax legislation and other laws and regulations, our ability to attract and retain skilled professionals, risks and uncertainties regarding fluctuations in our earnings, foreign currency fluctuations, 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 undertakes no obligation to update any forward-looking statements that may be made from time to time by or on behalf of Genpact.

Contacts

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:

• Adjusted income from operations attributable to shareholders of Genpact Limited, or adjusted income from operations;
• Adjusted income from operations margin;
• Adjusted diluted earnings per share attributable to shareholders of Genpact Limited, or adjusted diluted earnings per share; and
• Revenue growth on a constant currency basis.

These non-GAAP financial 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 financial measures used by other companies. Accordingly, these non-GAAP financial measures, the financial statements prepared in accordance with GAAP and the reconciliations of Genpact's GAAP financial statements to such non-GAAP financial measures should be carefully evaluated.

Prior to July 2012, Genpact's management used financial statements that excluded significant acquisition-related expenses, amortization of related acquired intangibles, and amortization of acquired intangibles at the company's formation in 2004 for its internal management reporting, budgeting and decision making purposes, including comparing Genpact's operating results to that of its competitors. However, considering Genpact's frequent acquisitions of varying scale and size, and the difficulty in predicting expenses relating to acquisitions and the amortization of acquired intangibles thereof, since July 2012 Genpact's management has used financial statements that exclude all acquisition-related expenses and amortization of acquired intangibles for its internal management reporting, budgeting and decision-making purposes, including comparing Genpact's operating results to those of its competitors. For the same reasons, since April 2016 Genpact's management has excluded the impairment of acquired intangible assets from the financial statements it uses for internal management purposes. Acquisition-related expenses are excluded in the period in which an acquisition is consummated.

Genpact's management also uses financial statements that exclude stock-based compensation expense. 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 non-GAAP financial measures that exclude such expenses allows investors to make additional comparisons between Genpact's operating results and those of other companies. Additionally, in its calculations of such non-GAAP financial measures, Genpact's management has adjusted other income and expenses, certain gains, losses and impairment charges attributable to equity-method investments, and gains or losses attributable to non-controlling interests because management views these interests as part of its ongoing operations. For the purpose of calculating adjusted diluted earnings per share, the combined current and deferred tax effect is determined by multiplying each pre-tax adjustment by the applicable statutory income tax rate.

Genpact's management provides information about revenues on a constant currency basis so that the revenues may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating period-to-period comparisons of our true business performance. Revenue growth on a constant currency basis is calculated by restating current-period activity using the prior fiscal period's foreign currency exchange rates adjusted for hedging gains/losses in such period.

Accordingly, Genpact believes that the presentation of adjusted income from operations, adjusted income from operations margin, adjusted diluted earnings per share and revenue growth on a constant currency basis, 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 adjusted income from operations and adjusted income from operations margin versus income from operations and income from operations margin calculated in accordance with GAAP is that these non-GAAP financial measures exclude certain recurring costs and certain other charges, namely stock-based compensation and amortization and impairment of acquired intangibles. Management compensates for this limitation by providing specific information on the GAAP amounts excluded from adjusted income from operations and adjusted income from operations margin.

The following tables show the reconciliation of these Non-GAAP financial measures from GAAP for the year and three months ended December 31, 2016 and 2017:

The following tables show the reconciliation of forward-looking Non-GAAP financial measures from GAAP for the year ending December 31, 2018:

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SOURCE Genpact Limited