Genpact (NYSE:G), which manages business processes for companies around the world, today announced financial results for the third quarter ended September 30, 2007.
Key Third Quarter Financial Results
- Third quarter revenues were $214.6 million, up 32% from the third quarter of 2006, and up 7% from the second quarter of 2007, driven primarily by Global Client revenue growth
- Net income for the third quarter was $16.3 million, up 27% from the third quarter of 2006 and up 130% from the second quarter of 2007; net income margin for the third quarter decreased slightly to 7.6% from 7.9% in the third quarter of 2006, primarily due to certain tax charges and increased from 3.5% in the second quarter of 2007
- Adjusted income from operations for the third quarter increased 42.1% to $36.7 million as compared to the third quarter of 2006 and 21.0% from the second quarter of 2007
- Adjusted income from operations margin was 17.1% for the third quarter, up from 15.9% in the third quarter of 2006 and up from 15.1% in the second quarter of 2007
Global Client revenues grew 78.6% this quarter compared to the third quarter of 2006. Revenues from GE increased 10.6% this quarter compared to the third quarter of 2006. Global Clients represented 43% of total revenues for the quarter.
Year to date revenue growth has come fairly evenly from Genpact's banking, financial services and insurance clients and its manufacturing clients, each group contributing approximately 45% of net revenues. In addition, the mix between business process services and IT services offered by Genpact has remained fairly constant at approximately 75% and 25% of net revenues, respectively.
Pramod Bhasin, Genpact's President and CEO said, "Clients seeking to benefit from our focus on operational excellence and continuous improvement based on our deep Six Sigma, Lean and re-engineering expertise have driven our growth."
Bhasin added, "Our results reflect the strength of client demand, especially from Global Clients, driving our delivery center growth in India where we continue to expand in both Tier 1 and Tier 2 cities, and growth in Europe and Asia-Pacific where multi-national clients require support in multiple locations and many languages. Approximately 75% of our revenues for the year-to-date are coming from our India operations. Net revenues have also grown at a faster rate than personnel costs, after eliminating the impact of foreign exchange movements which have been hedged, demonstrating the leverage we have been able to drive in our operations."
Genpact had 31,700 employees worldwide as of September 30th, an 8% increase from the second quarter of 2007. Year-to-date global attrition has been reduced to 29% from 30% as of the second quarter and 32% for 2006.
The strength of demand for Genpact's business solutions in the third quarter was evidenced by the addition of new clients including:
- 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, accumulation and income management products
- A leading global manufacturer of audio, video, communications, and information technology products for the consumer and professional markets
- A global leader in information technology that enables and secures global commerce with consumers and businesses
Adjusted net income was $27.8 million for the quarter. As noted for prior periods in 2007, net income and adjusted net income in the third quarter reflect the impact of increased taxes resulting from the partial expiration of Genpact's current tax holiday in India starting on March 31, 2007 as well as the continued impact of a Hungarian statutory tax. The Hungarian statutory tax has been eliminated for future periods as the result of a restructuring of Genpact's legal entities. The Hungarian statutory tax was approximately $10 million for the nine months ended September 30, 2007.
Despite the mortgage and credit market turmoil in the United States, there has been no significant adverse impact on Genpact's overall results. Genpact's mortgage services business has seen a small revenue decline as processing volume has diminished from clients but revenues from its mortgage services business do not impact Genpact's overall performance and has been more than offset by growth in other areas.
In the fourth quarter of 2007, as a consequence of Genpact's restructuring of its legal entities noted above, Genpact will be required to recompute certain of its existing deferred tax assets and liabilities. The results of this recomputation will be reflected in the fourth quarter and are anticipated to produce a one-time, non-cash tax provision of approximately $22 million to $29 million due principally to unrealized gains on certain rupee-dollar hedges. This one-time, non-cash tax provision in the fourth quarter will be reversed over the remaining 24-30 month terms of the hedges and is not expected to adversely affect financial performance in 2008 and other future periods.
As a result of the strength of the demand it is seeing from its clients, Genpact is increasing its revenue guidance for the year from an increase of 28-30% to an increase of 30-32% from its year-end 2006 results and expects the adjusted income from operations margin to remain relatively constant.Download the document now 93 kb (PDF File)