10-Q 1 g-10q_20190331.htm 10-Q g-10q_20190331.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period ended March 31, 2019

Or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from              to             

Commission file number: 001-33626

 

GENPACT LIMITED

(Exact name of registrant as specified in its charter)

 

 

Bermuda

 

98-0533350

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

Canon’s Court

22 Victoria Street

Hamilton HM 12

Bermuda

(441) 294-8000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common shares, par value $0.01 per share

G

New York Stock Exchange

 

As of May 2, 2019, there were 189,973,506 common shares, par value $0.01 per share, of the registrant issued and outstanding.

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

Item No.

 

 

 

Page No.

 

 

 

 

 

PART I

 

 

 

Financial Information

 

 

 

 

1.

 

Unaudited Consolidated Financial Statements

 

 

 

 

 

 

Consolidated Balance Sheets as of December 31, 2018 and March 31, 2019

 

1

 

 

 

 

Consolidated Statements of Income for the three months ended March 31, 2018 and 2019

 

2

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2018 and 2019

 

3

 

 

 

 

Consolidated Statements of Equity and Redeemable Non-controlling Interest for the three months ended March 31, 2018 and 2019

 

4

 

 

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2019

 

6

 

 

 

 

Notes to the Consolidated Financial Statements

 

7

 

 

2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

52

 

 

3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

64

 

 

4.

 

Controls and Procedures

 

64

 

 

 

 

 

 

 

PART II

 

 

 

Other Information

 

 

 

 

1.

 

Legal Proceedings

 

65

 

 

1A.

 

Risk Factors

 

65

 

 

2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

65

 

 

6.

 

Exhibits

 

66

 

 

 

 

 

 

 

SIGNATURES

 

67

 

 

 

 


 

 


 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share data and share count)

 

 

 

Notes

 

As of December 31,  2018

 

 

As of March 31,

2019

 

Assets

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

4

 

$

368,396

 

 

$

325,377

 

Accounts receivable, net

 

5

 

 

774,184

 

 

 

838,992

 

Prepaid expenses and other current assets

 

8

 

 

212,477

 

 

 

230,175

 

Total current assets

 

 

 

$

1,355,057

 

 

$

1,394,544

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

9

 

 

212,715

 

 

 

206,820

 

Operating lease right-of-use assets

 

 

 

 

 

 

 

266,947

 

Deferred tax assets

 

24

 

 

74,566

 

 

 

78,607

 

Investment in equity affiliates

 

25

 

 

836

 

 

 

852

 

Intangible assets, net

 

10

 

 

177,087

 

 

 

173,472

 

Goodwill

 

10

 

 

1,393,832

 

 

 

1,400,212

 

Contract cost assets

 

19

 

 

160,193

 

 

 

180,803

 

Other assets

 

 

 

 

155,159

 

 

 

202,557

 

Total assets

 

 

 

$

3,529,445

 

 

$

3,904,814

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

11

 

$

295,000

 

 

$

320,000

 

Current portion of long-term debt

 

12

 

 

33,483

 

 

 

34,016

 

Accounts payable

 

 

 

 

42,584

 

 

 

29,494

 

Income taxes payable

 

24

 

 

33,895

 

 

 

49,929

 

Accrued expenses and other current liabilities

 

13

 

 

571,350

 

 

 

536,048

 

Operating leases liability

 

 

 

 

-

 

 

 

42,294

 

Total current liabilities

 

 

 

$

976,312

 

 

$

1,011,781

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current portion

 

12

 

 

975,645

 

 

 

966,873

 

Operating leases liability

 

 

 

 

-

 

 

 

251,712

 

Deferred tax liabilities

 

24

 

 

8,080

 

 

 

8,409

 

Other liabilities

 

14

 

 

165,226

 

 

 

170,870

 

Total liabilities

 

 

 

$

2,125,263

 

 

$

2,409,645

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

Preferred shares, $0.01 par value, 250,000,000 authorized, none issued

 

 

 

 

 

 

 

 

Common shares, $0.01 par value, 500,000,000 authorized, 189,346,101 and  189,659,709 issued and outstanding as of December 31, 2018 and March 31, 2019, respectively

 

 

 

 

1,888

 

 

 

1,891

 

Additional paid-in capital

 

 

 

 

1,471,301

 

 

 

1,493,706

 

Retained earnings

 

 

 

 

438,453

 

 

 

483,175

 

Accumulated other comprehensive income (loss)

 

 

 

 

(507,460

)

 

 

(483,603

)

Total equity

 

 

 

$

1,404,182

 

 

$

1,495,169

 

Commitments and contingencies

 

27

 

 

 

 

 

 

 

 

Total liabilities and equity

 

 

 

$

3,529,445

 

 

$

3,904,814

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the Consolidated Financial Statements.

1


 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data and share count)

 

 

 

Three months ended March 31,

 

 

Notes

2018

 

 

2019

 

Net revenues

19,25

$

688,912

 

 

$

809,206

 

Cost of revenue

20, 25

 

444,324

 

 

 

519,137

 

Gross profit

 

$

244,588

 

 

$

290,069

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

21,25

 

171,109

 

 

 

191,402

 

Amortization of acquired intangible assets

10

 

9,936

 

 

 

8,509

 

Other operating (income) expense, net

22

 

(218

)

 

 

86

 

Income from operations

 

$

63,761

 

 

$

90,072

 

Foreign exchange gains (losses), net

 

 

4,798

 

 

 

(3,432

)

Interest income (expense), net

23

 

(8,100

)

 

 

(11,123

)

Other income (expense), net

26

 

15,550

 

 

 

3,803

 

Income before equity-method investment activity, net and income tax expense

 

$

76,009

 

 

$

79,320

 

Equity-method investment activity, net

 

 

-

 

 

 

4

 

Income before income tax expense

 

$

76,009

 

 

$

79,324

 

Income tax expense

24

 

12,075

 

 

 

18,483

 

Net income

 

$

63,934

 

 

$

60,841

 

Net loss attributable to redeemable non-controlling interest

 

 

761

 

 

 

-

 

Net income attributable to Genpact Limited shareholders

 

$

64,695

 

 

$

60,841

 

Net income available to Genpact Limited common shareholders

 

$

64,695

 

 

$

60,841

 

Earnings per common share attributable to Genpact Limited common shareholders

18

 

 

 

 

 

 

 

Basic

 

$

0.34

 

 

$

0.32

 

Diluted

 

$

0.33

 

 

$

0.31

 

Weighted average number of common shares used  in computing earnings per common share attributable to Genpact Limited common shareholders

18

 

 

 

 

 

 

 

Basic

 

 

192,816,626

 

 

 

189,451,845

 

Diluted

 

 

196,288,569

 

 

 

193,394,208

 

 

See accompanying notes to the Consolidated Financial Statements.

2


 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands, except per share data and share count)

 

 

Three months ended March 31,

 

 

2018

 

 

2019

 

 

Genpact

Limited

Shareholders

 

 

Redeemable

Non-

controlling

interest

 

 

Genpact

Limited

Shareholders

 

Net income (loss)

$

64,695

 

 

$

(761

)

 

$

60,841

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

(9,335

)

 

 

(424

)

 

 

10,491

 

Net income (loss) on cash flow hedging derivatives, net of taxes (Note 7)

 

(18,932

)

 

 

 

 

 

13,156

 

Retirement benefits, net of taxes

 

513

 

 

 

 

 

 

210

 

Other comprehensive income (loss)

 

(27,754

)

 

 

(424

)

 

 

23,857

 

Comprehensive income (loss)

$

36,941

 

 

$

(1,185

)

 

$

84,698

 

 

See accompanying notes to the Consolidated Financial Statements.

3


 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Equity and Redeemable Non-controlling Interest

(Unaudited)

(In thousands, except share count)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

Redeemable

 

 

 

No. of Shares

 

 

Amount

 

 

Additional Paid-

in Capital

 

 

Retained

Earnings

 

 

Comprehensive

Income (Loss)

 

 

Total

Equity

 

 

non-controlling

interest

 

Balance as of January 1, 2018

 

 

192,825,207

 

 

$

1,924

 

 

$

1,421,368

 

 

$

355,982

 

 

$

(355,230

)

 

$

1,424,044

 

 

$

4,750

 

Adoption of ASU 2014-09

 

 

 

 

 

 

 

 

 

 

 

17,924

 

 

 

 

 

 

17,924

 

 

 

 

Adjusted balance as of January 1, 2018

 

 

192,825,207

 

 

 

1,924

 

 

 

1,421,368

 

 

 

373,906

 

 

 

(355,230

)

 

 

1,441,968

 

 

 

4,750

 

Adoption of ASU 2018-02 (Note 7)

 

 

 

 

 

 

 

 

 

 

 

(2,265

)

 

 

2,265

 

 

 

 

 

 

 

Issuance of common shares on  exercise of options (Note 16)

 

 

161,837

 

 

 

2

 

 

 

2,549

 

 

 

 

 

-

 

 

 

2,551

 

 

-

 

Issuance of common shares under the employee stock purchase plan (Note 16)

 

 

58,476

 

 

 

1

 

 

 

1,650

 

 

 

 

 

 

 

 

 

1,651

 

 

 

 

Net settlement on vesting of restricted share units (Note 16)

 

 

55,631

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

-

 

 

 

 

Net settlement on vesting of performance units (Note 16)

 

 

691,958

 

 

 

7

 

 

 

(13,291

)

 

 

 

 

 

 

 

 

(13,284

)

 

 

 

Stock repurchased and retired (Note 17)

 

 

(3,179,974

)

 

 

(32

)

 

 

4,000

 

 

 

(99,952

)

 

 

 

 

 

(95,984

)

 

 

 

Expenses related to stock repurchase (Note 17)

 

 

 

 

 

 

 

 

 

 

 

(60

)

 

 

 

 

 

(60

)

 

 

 

Stock-based compensation expense (Note 16)

 

 

 

 

 

 

 

 

7,787

 

 

 

 

 

 

 

 

 

7,787

 

 

-

 

Acquisition of redeemable non- controlling interest

 

 

 

 

 

 

 

 

(1,165

)

 

 

 

 

 

 

 

 

(1,165

)

 

 

(3,565

)

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

64,695

 

 

 

 

 

 

64,695

 

 

 

(761

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,754

)

 

 

(27,754

)

 

 

(424

)

Dividend ($0.075 per common share, Note 17)

 

 

 

 

 

 

 

 

 

 

 

(14,408

)

 

 

 

 

 

(14,408

)

 

 

 

Balance as of  March 31, 2018

 

 

190,613,135

 

 

$

1,903

 

 

$

1,422,897

 

 

$

321,916

 

 

$

(380,719

)

 

$

1,365,997

 

 

$

 

 

See accompanying notes to the Consolidated Financial Statements.

4


 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Equity and Redeemable Non-controlling Interest

(Unaudited)

(In thousands, except share count)

 

 

 

No. of

Shares

 

 

Amount

 

 

Additional Paid-

in Capital

 

 

Retained

Earnings

 

 

Comprehensive

Income (Loss)

 

 

Total

Equity

 

Balance as of January 1, 2019

 

 

189,346,101

 

 

$

1,888

 

 

$

1,471,301

 

 

$

438,453

 

 

$

(507,460

)

 

$

1,404,182

 

Issuance of common shares on exercise of options (Note 16)

 

 

135,535

 

 

 

1

 

 

 

2,658

 

 

 

 

 

 

 

 

 

2,659

 

Issuance of common shares under the employee stock purchase plan (Note 16)

 

 

64,869

 

 

 

1

 

 

 

1,939

 

 

 

 

 

 

 

 

 

1,940

 

Net settlement on vesting of restricted share units (Note 16)

 

 

113,204

 

 

 

1

 

 

 

(653

)

 

 

 

 

 

 

 

 

(652

)

Net settlement on vesting of performance units (Note 16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock repurchased and retired (Note 17)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses related to stock repurchase (Note 17)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense (Note 16)

 

 

 

 

 

 

 

 

18,461

 

 

 

 

 

 

 

 

 

18,461

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

60,841

 

 

 

 

 

 

60,841

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,857

 

 

 

23,857

 

Dividend ($0.085 per common share, Note 17)

 

 

 

 

 

 

 

 

 

 

 

(16,119

)

 

 

 

 

 

(16,119

)

Balance as of  March 31, 2019

 

 

189,659,709

 

 

$

1,891

 

 

$

1,493,706

 

 

$

483,175

 

 

$

(483,603

)

 

$

1,495,169

 

 

See accompanying notes to the Consolidated Financial Statements.

5


 

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Three months ended March 31,

 

 

 

 

2018

 

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net income attributable to Genpact Limited shareholders

 

$

64,695

 

 

$

60,841

 

Net loss attributable to redeemable non-controlling interest

 

 

(761

)

 

 

 

Net income

 

$

63,934

 

 

$

60,841

 

Adjustments to reconcile net income to net cash provided by  (used for) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

15,836

 

 

 

21,919

 

Amortization of debt issuance costs (including loss on extinguishment of debt)

 

 

488

 

 

 

443

 

Amortization of acquired intangible assets

 

 

9,936

 

 

 

8,509

 

Reserve for doubtful receivables

 

 

(103

)

 

 

2,026

 

Unrealized loss (gain) on revaluation of foreign currency asset/liability

 

 

(8,525

)

 

 

257

 

Equity-method investment activity, net

 

 

 

 

 

(4

)

Stock-based compensation expense

 

 

7,787

 

 

 

18,461

 

Deferred income taxes

 

 

(4,625

)

 

 

(5,522

)

Others, net

 

 

(28

)

 

 

(504

)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Increase in accounts receivable

 

 

(6,025

)

 

 

(64,763

)

Increase in prepaid expenses, other current assets, contract cost assets, operating lease right-of-use assets and other assets

 

 

(37,008

)

 

 

(36,220

)

Decrease in accounts payable

 

 

(1,224

)

 

 

(12,189

)

Decrease in accrued expenses, other current liabilities, operating lease liabilities and other liabilities

 

 

(77,734

)

 

 

(12,087

)

Increase in income taxes payable

 

 

9,969

 

 

 

13,417

 

Net cash used for operating activities

 

$

(27,322

)

 

$

(5,416

)

Investing activities

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(18,706

)

 

 

(14,072

)

Payment for internally generated intangible assets (including intangibles under development)

 

 

(4,365

)

 

 

(7,914

)

Proceeds from sale of property, plant and equipment

 

 

144

 

 

 

1,478

 

Payment for business acquisitions, net of cash acquired

 

 

 

 

 

(6,305

)

Payment for purchase of redeemable non-controlling interest

 

 

(4,730

)

 

 

 

Net cash used for investing activities

 

$

(27,657

)

 

$

(26,813

)

Financing activities

 

 

 

 

 

 

 

 

Repayment of capital/finance lease obligations

 

 

(537

)

 

 

(1,780

)

Repayment of long-term debt

 

 

(10,000

)

 

 

(8,500

)

Proceeds from short-term borrowings

 

 

105,000

 

 

 

50,000

 

Repayment of short-term borrowings

 

 

 

 

 

(25,000

)

Proceeds from issuance of common shares under stock-based compensation plans

 

 

4,202

 

 

 

4,599

 

Payment for net settlement of stock-based awards

 

 

(13,284

)

 

 

(652

)

Payment of earn-out/deferred consideration

 

 

(1,476

)

 

 

(8,400

)

Dividend paid

 

 

(14,408

)

 

 

(16,119

)

Payment for stock repurchased and retired

 

 

(95,984

)

 

 

 

Payment for expenses related to stock repurchase

 

 

(60

)

 

 

 

Net cash used for financing activities

 

$

(26,547

)

 

$

(5,852

)

Effect of exchange rate changes

 

 

1,284

 

 

 

(4,938

)

Net increase (decrease) in cash and cash equivalents

 

 

(81,526

)

 

 

(38,081

)

Cash and cash equivalents at the beginning of the period

 

 

504,468

 

 

 

368,396

 

Cash and cash equivalents at the end of the period

 

$

424,226

 

 

$

325,377

 

Supplementary information

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

13,194

 

 

$

8,486

 

Cash paid during the period for income taxes

 

$

24,157

 

 

 

19,286

 

Property, plant and equipment acquired under capital lease obligations

 

$

297

 

 

$

-

 

 

See accompanying notes to the Consolidated Financial Statements.

 

 

6


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

 

1. Organization

The Company is a global professional services firm that drives digitally-led innovation and runs digitally-enabled intelligent operations for its clients, guided by its experience running thousands of processes for hundreds of Fortune Global 500 clients.  The Company has over 87,000 employees serving clients in key industry verticals from more than 25 countries. 

 

2. Summary of significant accounting policies

 

(a) Basis of preparation and principles of consolidation

 

The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Accordingly, they do not include certain information and note disclosures required by generally accepted accounting principles for annual financial reporting and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

The unaudited interim consolidated financial statements reflect all adjustments that management considers necessary for a fair presentation of the results of operations for these periods. The results of operations for interim periods are not necessarily indicative of results for the full year.

 

The accompanying unaudited interim consolidated financial statements have been prepared on a consolidated basis and reflect the financial statements of Genpact Limited, a Bermuda company, and all of its subsidiaries that are more than 50% owned and controlled. When the Company does not have a controlling interest in an entity but exerts significant influence on the entity, the Company applies the equity method of accounting. All intercompany transactions and balances are eliminated in consolidation.

 

Non-controlling interest in subsidiaries that is redeemable outside of the Company’s control for cash or other assets is reflected in the mezzanine section between liabilities and equity in the consolidated balance sheets at the redeemable value, which approximates fair value. Redeemable non-controlling interest is adjusted to its fair value at each balance sheet date. Any resulting increases or decreases in the estimated redemption amount are affected by corresponding changes to additional paid-in capital. The Company’s share of non-controlling interest in subsidiary earnings is reflected in net loss (income) attributable to redeemable non-controlling interest in the consolidated statements of income.

 

(b) Use of estimates

 

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment, intangibles and goodwill, revenue recognition, reserves for doubtful receivables, valuation allowances for deferred tax assets, valuations of derivative financial instruments, the measurement of lease liabilities and right-of-use (ROU) assets, measurements of stock-based compensation, assets and obligations related to employee benefits, the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, variable consideration, other obligations for revenue recognition, income tax uncertainties and other contingencies.

7


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

2. Summary of significant accounting policies (Continued)

 

Management believes that the estimates used in the preparation of the consolidated financial statements are reasonable. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. Any changes in estimates are adjusted prospectively in the Company’s consolidated financial statements.

 

(c) Business combinations, goodwill and other intangible assets

 

The Company accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations, by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Contingent consideration is included within the acquisition cost and is recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is remeasured to fair value as of each reporting date until the contingency is resolved. Changes in fair value are recognized in earnings. All assets and liabilities of the acquired businesses, including goodwill, are assigned to reporting units. Acquisition-related costs are expensed as incurred under selling, general and administrative expenses.

 

Goodwill represents the cost of acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased. Goodwill is not amortized but is tested for impairment at least on an annual basis on December 31, based on a number of factors, including operating results, business plans and future cash flows. The Company performs an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the assessment of events or circumstances, the Company performs a quantitative assessment of goodwill impairment if it determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, based on the quantitative impairment analysis, the carrying value of the goodwill of a reporting unit exceeds the fair value of such goodwill, an impairment loss is recognized in an amount equal to the excess. In addition, the Company performs a qualitative assessment of goodwill impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. See Note 10 for information and related disclosures.

 

Intangible assets acquired individually or with a group of other assets or in a business combination and developed internally are carried at cost less accumulated amortization based on their estimated useful lives as follows:

 

Customer-related intangible assets

 

1-14 years

Marketing-related intangible assets

 

1-10 years

Technology-related intangible assets

 

2-8 years

Other intangible assets

 

3-5 years

 

 

8


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

2. Summary of significant accounting policies (Continued)

Intangible assets are amortized over their estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized.

In business combinations where the fair value of identifiable tangible and intangible net assets purchased exceeds the cost of the acquired business, the Company recognizes the resulting gain under “Other operating (income) expense, net” in the consolidated statements of income.

 

(d) Financial instruments and concentration of credit risk

 

Financial instruments that potentially subject the Company to concentration of credit risk are reflected principally in cash and cash equivalents, derivative financial instruments and accounts receivable. The Company places its cash and cash equivalents and derivative financial instruments with corporations and banks with high investment grade ratings, limits the amount of credit exposure with any one corporation or bank and conducts ongoing evaluations of the creditworthiness of the corporations and banks with which it does business. To reduce its credit risk on accounts receivable, the Company conducts ongoing credit evaluations of its clients. GE accounted for 11% and 14% of receivables as of December 31, 2018 and March 31, 2019, respectively. GE accounted for 8% and 13% of total revenue for the three month periods ended March 31, 2018 and 2019, respectively.   

 

(e) Accounts receivable

 

Accounts receivable are recorded at the invoiced or to be invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and clients’ financial condition, the amount of receivables in dispute, and the current receivables’ aging and current payment patterns. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its clients.

 

(f) Revenue Recognition

 

The Company derives its revenue primarily from business process outsourcing and information technology services, which are provided primarily on a time-and-material, transaction or fixed-price basis. The Company recognizes revenue when the promised services are delivered to customers for an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. Revenues from services rendered under time-and-material and transaction-based contracts are recognized as the services are provided. The Company’s fixed-price contracts include contracts for application development, maintenance and support services. Revenues from these contracts are recognized ratably over the term of the agreement. The Company accrues for revenue and unbilled receivables for services rendered between the last billing date and the balance sheet date.

 

The Company’s customer contracts sometimes also include incentive payments received for discrete benefits delivered or promised to be delivered to clients or service level agreements that could result in credits or refunds to the client. Revenues relating to such arrangements are accounted for as variable consideration when the amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur.

 

9


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

2. Summary of significant accounting policies (Continued)

 

The Company records deferred revenue attributable to certain process transition activities where such activities do not represent separate performance obligations. Revenues relating to such transition activities are classified under contract liabilities and subsequently recognized ratably over the period in which the related services are performed. Costs relating to such transition activities are fulfillment costs which are directly related to the contract and result in the generation or enhancement of resources. Such costs are expected to be recoverable under the contract and are therefore classified as contract cost assets and recognized ratably over the estimated expected period of benefit under cost of revenue.

 

Revenues are reported net of value-added tax, business tax and applicable discounts and allowances. Reimbursements of out-of-pocket expenses received from clients have been included as part of revenues.

 

Revenue for performance obligations that are satisfied over time is recognized in accordance with the methods prescribed for measuring progress. The input (effort or cost expended) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates.

 

The Company enters into multiple-element revenue arrangements in which a client may purchase a combination of products or services. Revenue from multiple-element arrangements is recognized, for each element, based on an allocation of the transaction price to each performance obligation on a relative standalone basis.

 

Certain contracts may include offerings such as sale of licenses, which may be perpetual or subscription-based. Revenue from distinct perpetual licenses is recognized upfront at the point in time when the software is made available to the client. Revenue from distinct subscription based licenses is recognized at the point in time it is transferred to the client. Revenue from any associated maintenance or ongoing support services is recognized ratably over the term of the contract. For a combined software license/services performance obligation, revenue is recognized over the period that the services are performed.

 

All incremental and direct costs incurred for acquiring contracts, such as certain sales commissions, are classified as contract cost assets. Such costs are amortized over the expected period of benefit and recorded under selling, general and administrative expenses.

 

Other upfront fees paid to clients are classified as contract assets. Such costs are amortized over the expected period of benefit and recorded as an adjustment to the transaction price and subtracted from revenue.

 

Timing of revenue recognition may differ from the timing of invoicing. If a payment is received in respect of services prior to the delivery of services, the payment is recognized as an advance from a client and classified as a contract liability. Contract assets and contract liabilities relating to the same client contract are offset against each other and presented on a net basis in the consolidated financial statements.

 

Significant judgements

 

The Company often enters into contracts with clients that include promises to transfer multiple products and services to the client. Determining whether products and services are considered distinct performance obligations that should be accounted for separately rather than together may require significant judgment.

 

Judgment is also required to determine the standalone selling price for each distinct performance obligation. In instances where the standalone selling price is not directly observable, it is determined using information that may include market conditions and other observable inputs.

 

10


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

2. Summary of significant accounting policies (Continued)

 

Client contracts sometimes include incentive payments received for discrete benefits delivered to clients or service level agreements that could result in credits or refunds to the client. Such amounts are estimated at contract inception and are adjusted at the end of each reporting period as additional information becomes available only to the extent that it is probable that a significant reversal of any incremental revenue will not occur.

 

(g) Changes in accounting policies

 

Except as described below, the Company has applied accounting policies consistently to all periods presented in these consolidated financial statements. The Company adopted Accounting Standards Codification Topic 842, Leases (“Topic 842”), effective January 1, 2019. The Company applied Topic 842 using the modified retrospective adoption approach, which involves recognizing new right-of-use (“ROU”) assets and lease liabilities in its statement of financial position for various operating leases. Therefore, comparative information has not been adjusted and continues to be reported under ASC Topic 840.

 

As a result of the Company’s adoption of this new standard, all leases are classified as either operating leases or finance leases and are recorded on the balance sheet. The accounting for finance leases (capital leases under ASC 840) is substantially unchanged. The Company has elected the “package of practical expedients,” which allows the Company not to reassess, under the new standard, its prior conclusions about lease identification, lease classification and initial direct costs. The Company has also elected the practical expedients to not separate lease and non-lease components for all of its leases and to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (“short-term leases”). As of January 1, 2019, the date of the Company’s initial application of ASC 842, the Company recognized its lease liabilities measured as the present value of lease payments not yet paid, discounted using the discount rate for the lease as of the date of initial application. The right-of-use asset for each existing lease as of the date of initial application includes an initial measurement of the lease liability adjusted for any lease payments made to the lessor at or before the date of initial application, accrued lease payments and any lease incentives received or any initial direct costs incurred by the Company as of the date of initial application. As a result of adoption of the ASC 842, the Company recognized additional lease liabilities of $328,978, and ROU assets of $309,687.

 

 

Leases (effective January 1, 2019)

 

At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term of the contract, and (3) whether the Company has the right to direct the use of the asset. At the inception of a lease, the consideration in the contract is allocated to each lease component based on its relative standalone price to determine the lease payments. Leases entered into prior to January 1, 2019 have been accounted for under ASC 840 and were not reassessed.

 

Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: (1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful life of the asset or (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of the above criteria.

 

For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The lease liability represents the present value of the lease payments under the lease. Lease liabilities are initially measured at the present value of the lease payments not yet paid, discounted using the discount rate for the lease at lease commencement. The lease liabilities are subsequently measured on an amortized cost basis. The lease liability is adjusted to reflect interest on the liability and the lease payments made during the period. Interest on the lease liability is determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability.

11


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

2. Summary of significant accounting policies (Continued)

 

The ROU asset represents the right to use the leased asset for the lease term. The ROU asset for each lease initially includes the amount of the initial measurement of the lease liability adjusted for any lease payments made to the lessor at or before the commencement date, accrued lease liabilities and any lease incentives received or any initial direct costs incurred by the Company.

 

The ROU asset of finance leases is subsequently measured at cost, less accumulated amortization and any accumulated impairment losses. The ROU asset of operating leases is subsequently measured from the carrying amount of the lease liability at the end of each reporting period, and is therefore equal to the carrying amount of lease liabilities adjusted for (1) unamortized initial direct costs, (2) prepaid/(accrued) lease payments and (3) the unamortized balance of lease incentives received.

 

Leases with a lease term of 12 months or less from the commencement date that do not contain a purchase option are recognized as an expense on a straight-line basis over the lease term.

 

Significant judgements

 

The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

 

Under certain of its leases, the Company has a renewal and termination option to lease assets for additional terms between one and five years. The Company applies judgement in evaluating whether it is reasonably certain to exercise the option to renew or terminate the lease. The Company considers all relevant factors that create an economic incentive for it to exercise the renewal or termination option. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within the Company’s control and affects its ability to exercise (or not to exercise) the option to renew or terminate.

 

The company has applied an incremental borrowing rate for the purpose of computing lease liabilities based on the rate prevailing in different geographies. Upon the Company’s adoption of ASC 842, the Company applied an incremental borrowing rate to leases existing as of January 1, 2019, the date of initial application.

 

Impact on consolidated financial statements

12


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

2. Summary of significant accounting policies (Continued)

 

The following tables summarize the impact of the Company’s adoption of Topic 842 on its consolidated financial statements as of January 1, 2019. 

 

 

 

As reported December 31, 2018

Adoption of ASC 842 Increase (Decrease)

Balance as of January 1, 2019

Prepaid expenses and other current assets

 

212,477

(3,529)1

208,948

Operating lease right-of-use assets

 

-

273,732

 

273,732

 

Other assets: finance lease right-of-use assets

 

-

35,9556

35,955

Other assets

 

155,159

(5,126)3

150,033

Property, plant and equipment, net

 

212,715

(2,343)2

210,372

 

 

 

 

 

Accrued expenses and other current liabilities

 

571,350

(1,123)4

570,227

Operating leases liability (current)

 

-

42,200

42,200

Operating leases liability (non-current)

 

-

258,378

258,378

Other liabilities

 

165,226

(767)5

164,459

 

 

 

 

 

 

 

1.

Includes prepaid rent amounting to $3,160 and leasehold land amounting to $369, which have been reclassified to operating lease right-of-use assets and finance lease right-of-use assets, respectively.

 

2.

Represents vehicles recognized as capital leases under ASC 840 and reclassified as a finance lease right-of-use asset.

 

3.

Includes prepaid rent amounting to $284 and leasehold land amounting to $4,842, which have been reclassified to operating lease right-of-use assets and finance lease right-of-use assets, respectively.

 

4.

Includes accrued lease liabilities of $4,562 adjusted with operating lease right-of-use assets offset by additional current portion of finance lease liabilities of $3,439 recognized upon the adoption of ASC 842.

 

5.

Includes accrued lease liabilities of $25,728 adjusted with operating lease right-of-use assets offset by additional finance lease liabilities of $24,961 recognized upon the adoption of ASC 842.

 

6.

The balance is included in “other assets” in the consolidated balance sheet.

 


13


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

Summary of significant accounting policies (Continued)

 

(h) Recently issued accounting pronouncements

 

The authoritative bodies release standards and guidance which are assessed by management for their impact on the Company’s consolidated financial statements.

 

The Company has adopted the following recently released accounting standards:

 

The Company adopted ASC Topic 606, Revenue from Contracts with Customers, with a date of initial application of January 1, 2018 using the modified retrospective method and the revenue recognition significant accounting policy is outlined in section (f) above.

 

The Company adopted ASC Topic 842, Leases, with a date of initial application of January 1, 2019 using the modified retrospective approach. The cumulative impact of the adoption of this standard has been described in section (g) above.

 

In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvement. The new standard contains several amendments to clarify the codification more generally and/or to correct unintended application of guidance. The changes in the new standard eliminate the requirement for transition disclosures related to Topic 250-10-50-3. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those years. Early application is permitted. In the quarter ended March 31, 2019, the Company adopted ASU 2019-01 effective January 1, 2019 and no prior periods have been adjusted.

 

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging.” The amendment expands an entity’s ability to hedge accounting to non-financial and financial risk components and requires changes in the fair value of hedging instruments to be presented in the same income statement line as a hedged item. The ASU also amends the presentation and disclosure requirements for the effect of hedge accounting. The ASU must be adopted using a modified retrospective approach with a cumulative effect adjustment recorded to the opening balance of retained earnings as of the initial application date. The ASU is effective for the Company beginning January 1, 2019, including interim periods in the fiscal year 2019. On January 1, 2019, the Company assessed the impact of this ASU and concluded that it does not have any impact on its consolidated results of operations, cash flows, financial position and disclosures.

 

In addition, the following recently released accounting standards have not yet been adopted by the Company.

 

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of credit losses on financial instruments.” The ASU requires measurement and recognition of expected credit losses for financial assets held by the Company. The ASU is effective for the Company beginning January 1, 2020, including interim periods in fiscal year 2020. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated results of operations, cash flows, financial position and disclosures.

 

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The ASU modifies the disclosure requirements with respect to fair value measurements. The ASU is effective for the Company beginning January 1, 2020, including interim periods in fiscal year 2020. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated results of operations, cash flows, financial position and disclosures.

 

In August 2018, the FASB issued ASU No. 2018-14, “Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” The ASU modifies the disclosure requirements with respect to defined benefit pension plans. The ASU is effective for the Company beginning January 1, 2021. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated results of operations, cash flows, financial position and disclosures.

 

14


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

2. Summary of significant accounting policies (Continued)

 

In August 2018, the FASB issued ASU No. 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” The ASU modifies the capitalization requirements with respect to implementation costs incurred by the customer in a hosting arrangement that is a service contract. The ASU is effective for the Company beginning January 1, 2020. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated results of operations, cash flows, financial position and disclosures.

 

(i) Reclassification

 

Certain reclassifications have been made in the consolidated financial statements of prior periods to conform to the classification used in the current period. The impact of such reclassifications on the consolidated financial statements is not material.

3. Business acquisitions

 

A. Certain acquisitions

 

(a) riskCanvas Holdings, LLC

 

On January 7, 2019, the Company acquired 100% of outstanding equity interests in riskCanvas Holdings, LLC, a Delaware limited liability company, for total purchase consideration of $5,747. This amount includes cash consideration of $5,700, net of adjustment for working capital. No portion of the total consideration, payable in cash, was unpaid as of March 31, 2019. This acquisition expands the Company’s services in the areas of financial institution fraud, anti-money laundering and financial transaction surveillance and enhances its consulting capabilities for clients in the financial services industry.

 

In connection with this acquisition, the Company recorded $1,700 in customer-related intangibles, $1,400 in software-related intangibles and $100 in restrictive covenants. Goodwill arising from the acquisition amounted to $2,547, which has been allocated to the Company’s India reporting unit and is deductible for tax purposes. The goodwill represents primarily the acquired capabilities, operating synergies and other benefits expected to result from combining the acquired operations with those of the Company.

 

Acquisition-related costs of $967 have been included in selling, general and administrative expenses as incurred. In connection with the transaction, the Company also acquired certain assets with a value of $660 and assumed certain liabilities amounting to $707. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.   

 

(b) Barkawi Management Consultants GmbH & Co. KG and certain related entities

 

On August 30, 2018, the Company acquired 100% of the outstanding equity/partnership interests in Barkawi Management Consultants GmbH & Co. KG, a German limited partnership, and certain affiliated entities in the United States, Germany and Austria (collectively referred to as “Barkawi”) for total purchase consideration of $101,307. This amount includes cash consideration of $95,625, net of cash acquired of $5,682. The total purchase consideration paid by the Company was $100,969, resulting in a payable of $338, which is outstanding as of March 31, 2019. The Company is evaluating adjustments related to certain tax positions, which, when determined, may result in the recognition of additional assets and liabilities as of the acquisition date. The measurement period will not exceed one year from the acquisition date. This acquisition enhances the Company’s supply chain management consulting capabilities.

 

15


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

3. Business acquisitions (Continued)

 

In connection with the acquisition of Barkawi, the Company recorded $10,200 in customer-related intangibles and $1,800 in marketing-related intangibles, which have a weighted average amortization period of three years. Goodwill arising from the acquisition amounted to $81,250, which has been allocated to the Company’s India reporting unit and is partially deductible for tax purposes. The goodwill represents primarily the consulting expertise, operating synergies and other benefits expected to result from combining the acquired operations with those of the Company.

 

Acquisition-related costs of $1,842 have been included in selling, general and administrative expenses as incurred. In connection with the transaction, the Company also acquired certain assets with a value of $17,314, assumed certain liabilities amounting to $10,149 and recognized a net deferred tax asset of $892. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.

 

(c) Commonwealth Informatics Inc.

 

On July 3, 2018, the Company acquired 100% of the outstanding equity interest in Commonwealth Informatics Inc. (“Commonwealth”), a Massachusetts corporation, for preliminary purchase consideration of $17,938. This amount includes cash consideration of $16,123, net of cash acquired of $1,477, and preliminary adjustments for working capital and indebtedness. As of March 31, 2019, the total consideration paid by the Company to the sellers was $17,333, resulting in a payable of $605. During the three months ended March 31, 2019, the Company recorded certain measurement period adjustments. The Company is evaluating certain tax positions, which, when determined, may result in the recognition of additional assets and liabilities as of the acquisition date. The measurement period will not exceed one year from the acquisition date. This acquisition enhances the Company’s signal management and pharmacovigilance capabilities for clients in the life sciences industry.

 

In connection with the acquisition of Commonwealth, the Company recorded $2,200 in customer-related intangibles and $2,600 in technology-related intangible assets, which have a weighted average amortization period of four years.

 

Goodwill arising from the acquisition amounted to $11,587, which has been allocated to the Company’s India reporting unit and is deductible for tax purposes. The goodwill represents primarily the acquired capabilities, operating synergies and other benefits expected to result from combining the acquired operations with those of the Company.

 

Acquisition-related costs of $521 have been included in selling, general and administrative expenses as incurred. In connection with the transaction, the Company also acquired certain assets with a value of $2,583 and assumed certain liabilities amounting to $1,032. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.

 

16


GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

 

4. Cash and cash equivalents

 

 

 

As of 

December 31,

 

 

As of 

March 31,

 

 

 

2018

 

 

2019

 

Cash and other bank balances

 

 

368,396

 

 

 

325,377

 

Total

 

$

368,396

 

 

$

325,377

 

 

5. Accounts receivable, net of reserve for doubtful receivables

The following table provides details of the Company’s reserve for doubtful receivables:

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2018

 

 

Three months

ended March 31, 2019

 

Opening balance as of January 1

 

$

23,660

 

 

$

23,960

 

Additions charged/reversal released to cost and expense

 

 

1,857

 

 

 

2,026

 

Deductions/effect of exchange rate fluctuations

 

 

(1,557

)

 

 

(85

)

Closing balance

 

$

23,960

 

 

$

25,901