Genpact Limited revenue increased on 9.6% and EBITDA Margin decreased slightly on 0.51 pp from 15.6% to 15.1%
02/07/2019 • About Genpact Limited (
$G) • By InTwits
Genpact Limited reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is relatively stable: 15.1% in 2018 vs. 15.6% in 2017 vs. 16.4% in 2014
- Genpact Limited has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.7%. At the same time it's in pair with industry average of 13.3%
- CAPEX is quite volatile: $39m in 2018, $27m in 2017, $16m in 2016, $17m in 2015, $18m in 2014
- In the last 5 years the company invested considerably less than D&A: $349m vs. $443m
- The company has highly profitable business model: ROIC is 13.1%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.1x while industry average is 2.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 9.6%. Revenue growth showed acceleration in 18Q4 - it increased 13.7% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 1.7 pp from 29.6% to 27.9% in 2018. During the last 5 years EBITDA Margin topped in 2015 at 16.9% and was declining since that time.
Gross Margin decreased on 2.6 pp from 38.6% to 36.0% in 2018. SG&A as a % of Revenue decreased on 2.1 pp from 25.2% to 23.1% in 2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. During the last 5 years SBC as a % of Revenue bottomed in 2015 at 0.75% and was growing since that time.
Net Income margin showed almost no change in 2018. During the last 5 years Net Income margin topped in 2016 at 10.5% and was declining since that time. The efficient tax rate was 22.3% in 2018 while the average for the last five years was 20.5%.
Investments (CAPEX, working capital and M&A)
Genpact Limited's CAPEX/Revenue was 2.8% in 2018. The company's CAPEX/Revenue showed almost no change from 2015 to 2018. It's average level of CAPEX/Revenue for the last three years was 2.7%.
Accounts receivable as a % of Revenue showed almost no change in 2018. Accounts payable as a % of Revenue increased slightly on 1.3 pp from 0.90% to 2.2% in 2018.
Genpact Limited has spent
$112m on M&A in 2018 which accounts for 3.7% of revenue.
Return on investment
The company operates at good ROIC (13.1%) and ROE (19.9%). ROIC decreased slightly on 0.77 pp from 13.8% to 13.1% in 2018. ROE increased slightly on 0.53 pp from 19.4% to 19.9% in 2018. During 2014-2018 ROIC topped in 2015 at 16.3% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.1x and Debt / EBITDA is 2.9x. Net Debt / EBITDA jumped on 0.4x from 1.7x to 2.1x in 2018. Debt increased on 7.3% while cash dropped on 27.0%. Net Debt/EBITDA grew at 0.3x per annum in 2014-2018.
Genpact Limited has good short term financial stability: Interest coverage ratio (ICR) is 7.2x. Genpact Limited has no short term refinancing risk: cash is higher than short term debt (112.2%).
Average interest expence charged on company's debt was 3.7% in 2018.
Valuation and dividends
The company's trades at EV/EBITDA 15.7x and P/E 21.9x.
The company paid 20.2% of Net Income as dividends in 2018.
Management team
Genpact Limited's CEO N V Tyagarajan "Tiger" is a founder and has spent 8 years with the company. CEO total compensation was
$22,299,191 in 2018 which included
$699,692 salary. Genpact Limited's CFO is Edward J Fitzpatrick "Ed". Edward J Fitzpatrick "Ed" has 5 years tenure at the company.
Insider ownership is 1.0%. Insider ownership didn't change in 2018.
At the end of financial year the company had 87,000 employees. The number of employees surged on 11.5%. Average revenue per employee in 2018 was
$34,492 and it decreased slightly on 1.7%.
Financial and operational results
FY ended 12/31/2018
Genpact Limited ($G) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 2,279 | 2,461 | 2,571 | 2,737 | 3,001 | 9.6% |
| Gross Profit | 901 | 967 | 1,016 | 1,055 | 1,079 | 2.2% |
| SG&A | 586 | 608 | 653 | 689 | 694 | 0.6% |
| EBITDA | 374 | 417 | 423 | 426 | 452 | 6.0% |
| EBIT | 294 | 334 | 341 | 331 | 348 | 5.1% |
| Interest expence | 34 | 30 | 23 | 40 | 49 | 21.5% |
| Tax | 57 | 62 | 62 | 60 | 81 | 35.2% |
| Net Income | 192 | 240 | 270 | 263 | 282 | 7.2% |
| Stock Based Compensation | 28 | 18 | 25 | 36 | 49 | 37.3% |
Balance Sheet
|
|---|
| Cash | 462 | 451 | 423 | 504 | 368 | -27.0% |
| Accounts Receivable | 526 | 590 | 615 | 693 | 774 | 11.7% |
| Accounts Payable | 16 | 10 | 10 | 15 | 43 | 183.0% |
| Short Term Debt | 141 | 61 | 199 | 209 | 328 | 57.0% |
| Long Term Debt | 652 | 737 | 698 | 1,007 | 976 | -3.1% |
Cash flow
|
|---|
| Capex | 63 | 62 | 82 | 57 | 85 | 48.5% |
| Dividends | | | | 47 | 57 | 21.3% |
| Acquisitions | 131 | 21 | 45 | 285 | 112 | -60.8% |
Ratios
|
|---|
| Revenue growth | 6.9% | 8.0% | 4.5% | 6.5% | 9.6% | |
| EBITDA growth | -3.2% | 11.6% | 1.4% | 0.8% | 6.0% | |
|
|---|
| Gross Margin | 39.5% | 39.3% | 39.5% | 38.6% | 36.0% | -2.6% |
| EBITDA Margin | 16.4% | 16.9% | 16.5% | 15.6% | 15.1% | -0.5% |
| EBIT Margin | 12.9% | 13.6% | 13.3% | 12.1% | 11.6% | -0.5% |
| SG&A, % of revenue | 25.7% | 24.7% | 25.4% | 25.2% | 23.1% | -2.1% |
| SBC, % of revenue | 1.2% | 0.7% | 1.0% | 1.3% | 1.6% | 0.3% |
| Net Income Margin | 8.4% | 9.7% | 10.5% | 9.6% | 9.4% | -0.2% |
| CAPEX, % of revenue | 2.7% | 2.5% | 3.2% | 2.1% | 2.8% | 0.7% |
|
|---|
| ROIC | 14.7% | 16.3% | 16.2% | 13.8% | 13.1% | -0.8% |
| ROE | 14.7% | 18.5% | 20.8% | 19.4% | 19.9% | 0.5% |
| Net Debt/EBITDA | 0.9x | 0.8x | 1.1x | 1.7x | 2.1x | 0.4x |
| Interest expence / Average debt | 4.3% | 3.8% | 2.8% | 3.8% | 3.7% | -0.1% |
People
|
|---|
| Insider ownership | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% | 0.0% |
| Employees | 67,900 | 72,000 | 75,000 | 78,000 | 87,000 | 11.5% |
| Revenue/Employee, th. $ | 34 | 34 | 34 | 35 | 34 | -1.7% |
Genpact Limited ($G) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 689 | 729 | 748 | 835 | | 10.6% | 8.6% | 5.5% | 13.7% |
| EBITDA | 90 | 105 | 119 | 138 | | -10.9% | 2.5% | -3.0% | 37.6% |
| Net Income | 65 | 65 | 74 | 79 | | 21.3% | -6.3% | -0.2% | 18.0% |
Balance Sheet
|
|---|
| Cash | 424 | 334 | 401 | 368 | | 9.3% | -24.3% | -8.8% | -27.0% |
| Short Term Debt | 314 | 254 | 363 | 328 | | 479.9% | 4.1% | 82.4% | 57.0% |
| Long Term Debt | 997 | 987 | 984 | 976 | | -3.7% | -3.8% | -3.2% | -3.1% |
Ratios
|
|---|
| Gross Margin | 35.5% | 36.5% | 35.6% | 36.2% | | -3.0% | -1.7% | -3.9% | -1.9% |
| EBITDA Margin | 13.0% | 14.4% | 16.0% | 16.5% | | -3.1% | -0.9% | -1.4% | 2.9% |
| Net Income Margin | 9.4% | 8.9% | 9.8% | 9.5% | | 0.8% | -1.4% | -0.6% | 0.3% |
Peers in Data Processing & Outsourced S
Below you can find Genpact Limited benchmarking vs. other companies in Data Processing & Outsourced S industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.0% | 7.7% | 11.8% | 7.4% |
|---|
| Genpact Limited ($G) | | 8.0% | 4.5% | 6.5% | 9.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (44 companies) | 38.4% | 39.6% | 39.2% | 39.5% | 41.0% |
|---|
| Genpact Limited ($G) | 39.5% | 39.3% | 39.5% | 38.6% | 36.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.6% | 21.2% | 21.3% | 21.1% | 19.4% |
|---|
| Genpact Limited ($G) | 16.4% | 16.9% | 16.5% | 15.6% | 15.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.2% |
|---|
| Genpact Limited ($G) | 2.7% | 2.5% | 3.2% | 2.1% | 2.8% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| |
|---|
| Median (62 companies) | 13.3% | 12.8% | 11.1% | 10.6% | 10.2% |
|---|
| Genpact Limited ($G) | 14.7% | 16.3% | 16.2% | 13.8% | 13.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.4x | 0.5x | 1.6x | 2.3x | 2.2x |
|---|
| Genpact Limited ($G) | 0.9x | 0.8x | 1.1x | 1.7x | 2.1x |
