Genpact Management Discusses Q2 2012 Results - Earnings Call Transcript

Genpact (G)

Q2 2012 Earnings Call

August 02, 2012 8:00 am ET


Shishir Verma - Vice President of Investor Relations

N. V. Tyagarajan - Chief Executive Officer, President And Director

Mohit Bhatia - Chief Financial Officer and Principal Accounting Officer


Joseph D. Foresi - Janney Montgomery Scott LLC, Research Division

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Edward S. Caso - Wells Fargo Securities, LLC, Research Division

Rahul Bhangare

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Kunal Doctor



Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 Genpact Limited Earnings Conference Call. My name is Deanna, and I'll be the operator for today. [Operator Instructions] As a reminder today's conference is being recorded for replay purposes. I would like to turn the call over to your host, Mr. Shishir Verma, Head of Investor Relations. Please go ahead, sir.

Shishir Verma

Thank you, operator. Welcome to Genpact's earning call to discuss our results for the second quarter ended June 30, 2012. With me, I have Tiger Tyagarajan, our President and Chief Executive Officer; and Mohit Bhatia, our Chief Financial Officer.

We hope you have had a chance to review our earnings release, as well as the second announcement regarding a significant transaction involving current investors. Our agenda for today as follows. Tiger will begin with an overview of our results and the context of our long-term strategy with a perspective on the current environment, as well as our announced special dividend and the investor transaction, followed by Mohit who will discuss our financial performance in greater detail. And then Tiger will have some closing comments. Finally, Tiger and Mohit will be available to take your questions. We expect the call to last about an hour.

Please note that some of the matters we will discuss in today's call are forward looking. These forward-looking 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. Such risks and uncertainties include, but are not limited to, general economic conditions and those factors set forth in our press release and discussed under the Risk Factors section of our annual report on Form 10-K and other SEC filings. Genpact assumes no obligation to update the information presented on this conference call.

In our call today, we will refer to certain non-GAAP financial measures, which we believe provide additional information for investors and better reflect the way management views the operating performance of the business. You can find a reconciliation of those measures to GAAP, as well as related information in our news release, on the Investor Relations section of our website, Please also refer to the Investor Fact Sheet on the front page of the IR section of our website for further details on our quarter results.

With that, let me turn over the call to Tiger

N. V. Tyagarajan

Thank you, Shishir. Good morning, good afternoon and good evening, everyone, and thank you for joining us on our call today. Genpact had another great quarter in 2012 with Q2 results representing strong growth in revenues, adjusted operating income and EPS on a year-over-year basis. Overall revenues grew by 18%, led by Global Clients which increased 24% from quarter 2 of last year, with growth across all geographies, including Europe. Both overall revenues and Global Client revenues also increased approximately 7% sequentially.

We grew growth in both Business Process Management and IT services. BPM services for Global Clients grew at a healthy 20% compared to quarter 2 of 2011, reflecting strong client demand for traditional annuity services, such as financial accounting and Smart Decision Services. IT Services for Global Clients grew at a robust 38% from quarter 2 of 2011, reflecting the strategic and organizational changes we have made in the IT business since late 2010, which are resonating with clients.

We established 35 new client relationships this quarter across all major industry groups, up from 26 in quarter 2 of 2011. We continue to expand relationships with existing clients in key growth verticals, such as CPG, BFSI and manufacturing. Clients representing between $1 million and $5 million in annual revenues increased to 120 from 103 in quarter 2 of 2011, which provides a good runway for future growth. These results were in line with our expectations and continue the momentum we've had since the beginning of 2011.

We have evolved our growth strategy over time. Let me discuss our results in the context of the 5 key elements of the strategy with some recent examples. First, guide global enterprises to best in class through our proprietary Smart Enterprise Process framework that delivers improved outcomes for them. Clients tell us that they are looking for partners to help them migrate their businesses to a more variable cost structure, find innovative solutions to help them balance the challenges of lower growth in developed economies, while simultaneously capturing higher growth in emerging markets and drive a comprehensive agenda of transformation to achieve all of these.

In each of these cases, Genpact's key differentiator as a partner is our ability to deliver better outcomes and effectiveness, not just in the services we manage for the client but across the client's entire delivery footprint. All this leads to deeper client relationships over time and a much bigger impact for them.

As an example, in the second quarter, we won an engagement with a large global financial services clients, where we will apply our proprietary SEP framework to create best-in-class processes as part of their IT infrastructure transformation project. SEP will generate a roadmap that will allow the client to leverage their $1.3 billion total IT spend for higher impact. This engagement includes a significant gain-share component.

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