Gurgaon/New York, Mar 20 (ANI/Business Wire India): 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 per cent 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 per cnet), 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 said, "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.
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.
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 added.