Welcome to the first quarter 2008 Genpact Limited earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Roanak Desai, Head of Investor Relations and Corporate Development.

Welcome to Genpact’s earnings call discussing our results for the first quarter ending March 31, 2008. As the operator mentioned, I’m Roanak Desai, Head of Corporate Development and Investor Relations. With me are Pramod Bhasin, our President and Chief Executive Officer, and Vivek Gour, our Chief Financial Officer. We hope you’ve had an opportunity to review our press release. Please allow me to outline the agenda for today’s call. Pramod will begin with an overview of our results. Vivek will take you through our financial performance, including the income statement and balance sheet. We’ll then close the presentation and take questions. Please note that some of the matters we’ll 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 today’s 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. During our call today we’ll refer to certain non-GAAP financial measures which we believe provide useful information for investors. You can find reconciliation of those measures to GAAP as well as related information on our press release on the Investor Relations section of our website at genpact.com. With that, let me turn the call over to Pramod Bhasin, Genpact’s President and CEO.

We had an excellent first quarter. Our revenues grew 33% from the first quarter of 2007 to $234 million. We continue to see strong demand for our services and solutions as most of what we do for our clients is essential to their business. We continue to watch the business environment carefully. We are seeing some changes in behavior including some postponements particularly in the IT area as well as some accelerations. We have been deepening our relationships with our clients with an increasing focus on driving greater efficiencies for them through process re-engineering, Six Sigma and Lean. Our core strength in driving process efficiencies positions us very well in this environment. We continue to expect 2008 annual revenues to increase 25% to 27% from $823 million in 2007 and our adjusted income from operations margins to improve by 10 to 30 basis points from 16% in 2007. In the first quarter of 2008, we grew our revenue per employee to $29,000, a 3% increase from $28,200 in 2007. This increase reflects a combination of higher-revenue work and our ability to improve pricing. Our total headcount increased to 34,300 people globally. GE revenues grew 1% from the first quarter of 2007 excluding revenues from businesses that GE divested. When GE’s ownership stake in our business dropped below 20%, we include revenues for that business as Global Client revenues rather than GE revenues. We understand that there may be some confusion about how we look at GE revenues, so Vivek will explain this in more detail in a few minutes. Global Client revenues grew 121% from the first quarter of 2007 driven by our ability to expand our relationships with existing clients and develop new ones. We continue to win new deals and expand our client base as mentioned in our…

We exceeded our financial targets for the first quarter. As Pramod mentioned, we had revenues of $234 million representing a 33% growth over the first quarter of 2007. Our organic growth rate for the first quarter was 29% over the same period last year. Our adjusted income from operations was $35 million up from $22 million in the first quarter of 2007. This represents a 63% increase. The margin here was 15% in 2008, up from 12.2% in the first quarter of 2007. Consistent with normal seasonality in our business, the margin decreased from 18.7% in the fourth quarter of 2007. As Pramod mentioned, Global Client revenues increased by 121% from $54 million to $120 million. This included organic growth of Global Client of 113% in 2008 versus the first quarter of 2007. The first quarter of 2008 was the first time that revenues from Global Client represented 51% of our total revenue, with revenues from GE compromising 49%. Before I get into cost of revenues and SG&A, I will take a moment to discuss our foreign exchange gains. Several of you have asked questions on the foreign exchange gains. We recognize this is complex and want to share more information to help you understand our costs better. Last year, in 2007 almost 100% of our FX gains were related to long-term hedges against our estimated cost line. The gains on these hedges should be considered integral to our operation as that is how we measure and drive the business. This quarter of the $22.4 million in foreign exchange gain, approximately $15.7 million is linked to our long-term cost hedges. This $15.7 million serves as an offset to increase in cost of revenue and SG&A due to appreciation of local currencies like the rupee. Accordingly, approximately $11.1 million of the…

I’d like to now open up the floor for questions.

(Operator Instructions) Your first question comes from Joseph Foresi - Janney Montgomery Scott.

There’s been some change in the GE relationship. They’ve left your Board and you moved up the date for the shares to be potentially sold into the market. Why don’t you give us an update on how you view those changes and what effects they could potentially have on that business stream?

GE has left the Board at this point in time for reasons that only they can address and that things that we can’t comment on. We really don’t see any difference in the chain. You may remember we have now set up a Commercial Council with them which is attended by the same people who used to be on the Board where we discuss the overall GE relationship. We’ve known them very well for many, many years. A large part of our management team is ex-GEs, so our knowledge of GE and our connects with the individual business levels are very, very strong. And GE does operate as many different businesses and, therefore, we have always had to sell into them at the different business and process owner level. And while we clearly get support from the key people who earlier used to sit on the Board and now sit on the Commercial Council, those relationships remain very strong. GE will remain a financial investor in the company and will do what obviously they want to do with the investment. But we do not see any issues whatsoever as they have come off the Board.

On the hedging side, if the currency was to move, let’s say, depreciate rapidly in a quarter, how would you compensate for that on the adjusted operating line? I know it’s to mitigate the risk, but let’s say you hedge incorrectly or it goes against you in a rapid fashion in a quarter, how do we compensate for that on the operating line?

So let me take an extreme example that if the rupee went to, say, 50 rupees to a dollar, we would have a hedge loss sitting in our FX gains and losses line. But we would have an exactly compensating decline in our SG&A and cost of revenue line because the actual cost of production and the actual SG&A in rupee terms or yuan terms would have dropped. So the task of the hedges is to be able to peg our cost line well ahead into the future so that we can price our long-term contracts with a very high degree of surety. The aim of the hedges is not to make a speculative gain and it is to protect us regardless of whether the currency appreciates or depreciates.

How would you be able to drop SG&A that quickly? I’m not understanding how quick the response could be from the company.

The SG&A, for example, is being incurred in currencies all across the world. The fact that the dollar has appreciated against all those currencies that we hedge in would automatically mean that when we consolidate our book, a 100 rupees or a 100 yuan spent on SG&A would get recorded as $90 and not as $110.

It wouldn’t drop SG&A cost per se. It’s the translation impact of the SG&A cost which would show up as a drop in those costs which would be offset by the loss on foreign exchange.

I know that you maintained your guidance. As you look at the shifting business, maybe the movement to more BPO and some of what’s going in IT services, maybe you can give us some color on why you remain conservative with a strong quarter.

Well, I think we are very pleased with the quarter obviously. But the economic environment is uncertain and I would say perhaps unpredictable. And therefore, at this point time, we’d certainly like to remain conservative. We’re seeing good traction. We’re seeing great growth in existing customers. All of those things are happening, but it is a natural caution that we feel that this environment deserves, Joe. There’s nothing more than that.

Your next question comes from Tien-Tsin Huang - JP Morgan.

Pramod, can you be a little more specific on your comments about the changes you’re seeing in the IT area? Where are you seeing the postponements and where are you seeing the pickup?

Yes. I should say we’ve seen postponements in the IT area, but we’ve also seen a larger number of even on the BPO side, deals for instance, going cold or getting dropped. We’ve certainly seen cycle times increasing from perhaps three to six months to 9 to 12 months at this time. At the same time, we are has seeing greater demand for re-engineering, greater demand for faster, higher impact transitions of work. And so right now, they are offsetting each other. I think the difference also becomes that when you’re working with existing customers who know you and trust you and with whom you have great creditability, they will move faster. I think for some new customers who are putting their toe in the water for the first time, they may decide not to make the investment that is necessary in the first year to embark down this road. So it is a mixed bag out there. Although the overall trend is something we’re very happy with. You had two or three of the questions specifically. There are probably more cold deals that go forward once they start up and they may come back on the table. If not this year, they may come back next year. That’s hopeful.

It is. But the projects among your existing clients, its sound like that’s ramping very, very well. Did I read that correctly?

Yes. Existing clients are ramping very well.

So any comment about just the timing of when some of the ones starting to go cold? Because we’re starting to hear towards to the end of March, early April, some change in some activity there. Maybe can you be a little bit more specific on the timing of when some of these things happened?

Over the last, I would say last three months, last three months we’ve been seeing it that, a number of deals that we have been involved in and, of course, everybody else is also involved in have gone or sometimes people have said, look we’re going to stay in-house right now or they’ll say, we will do less. So, in addition to going cold, the size of the deals have been restructured. So I think all of those things are happening and it’s really over the last three months. We’ve seen it, we had three months, maybe five months, and I think it’ll continue.

On the ITO side for GE, how is that tracking to plan? Any change there?

I think that will be slower. I think GE will cut its costs, as you would expect, in this year, given their own results, etc. So I think we may see less spending from GE. I think they’ve been clear about announcing those things. But, again, I would mention there are many other areas where we believe we can penetrate deeper into GE and what we’re doing is, strongly embellishing our relationships across the board, not just with GE but with all Global Clients. So we’re getting much closer to our clients, we’re spending much more time with them, we’re talking to them about what their needs are, we’re trying to understand where they’re hurting the most and how we can help. And I think that is really helping us at this point in time because we’re being able to get in and penetrate much deeper in many, many other areas.

But the GE guidance is still mid-single digit off of the base that you clarified?

Yes. It’ll be low to mid-single digits is where we have guided and we will stay there.

On the tax rate, we got the ‘08 number. How about ‘09 and the longer term?

Tien-Tsin, a longer term, I think at least for ‘09 and ‘010, our tax rates would creep up a little bit to the $20, $21 million mark, a 20%, 21% level. Beyond that is difficult to predict at this stage because it’ll depend upon how fast we get our SEZs clutched in. But this is the guidance for ‘09 and ‘010. And we are evaluating the recent STPI notice that came from the Indian Government extending it by one year. It will provide some benefits to us for some of our later sites.

Your next question comes from Rod Bourgeois - Bernstein.

Are there meaningful segments in your sales pipeline that are being helped by the weaker economy that you think will help your growth outlook over the next few quarters?

I wouldn’t, Rod, say they are meaning segments that are easy to identify. So I think the split is more by clients that are familiar with this, which have done this and who have already embarked on the entire outsourcing initiative, versus clients who may be trying it new and the segmentation is more being driven in that fashion. So people who are coming to it new are saying, we’re going to have to put some investment down, we’re going to have to distract management to do this for a period of time. And therefore, let’s make sure that, one, the payback we get is very, very clear, very good. We can do this quickly and fast or let’s put it on hold till next year. With existing customers where you have deep relationship with, the transition times are far lesser and you can get into a good discussion with them about where their pain areas are. Can we help them with cash flow, can we help them with working capital. Can we help them in taking cost out? I think those will move faster and are moving faster. So let me try and explain a little more because I appreciate your question. But even in banking and financial services, what we’re seeing is some terrific acceleration with some of our key banking, financial services customers. And, at the same time, when we talk to new customers, their total share of what they want to do may have shrunk in their perspective and they may be going out to the smaller contract than they might have done nine months ago.

And I know one of the thing that you have spoken about doing in order to address that situation is offering solutions that provide a quick payback for the client. And I’m wondering whether those efforts are seeing a lot of traction and helping you engage with clients during this time or whether those efforts are only helping in isolated areas?

No. It’s definitely helping, Rod. I think our reengineering efforts are getting terrific reception, now doubling the amount to a huge amount of revenues for us in this year although all of it drops straight through to the bottom line. But on the reengineering side, we are seeing a terrific traction with lots of our key customers such as Wachovia, etc. And I think that will continue. We are continuing to ramp up our efforts in those areas. I think also on analytics, we’re going to see, I think, good traction because that’s the projects that companies are looking for where we can help them save costs. We’re also constantly coming out with new ideas. We’re going out to other customers and saying, “Looked we’ve analyzed your cost base, we have the data. Let us show you a way in which you can trim that down by 5% to 10%.” We’re doing analysis around what they’re selling, the products they’re selling. How they can cross-sell more, how they can increase their pipeline of sales. We are doing analysis around “Cash is King”, how do we help you improve it. So these projects are working and driving not just higher revenues, albeit these are small certainly helping margin, but it’s most importantly helping us get our foot in the door and get great traction with these customers.

Clearly the environment that we’re in is altering the mix of deals that you’re able to sign. Is that mix shift that’s being created by the weaker economy generally positive or generally negative for Genpact? And then the specific thing there you mentioned that you’re getting more traction with existing clients in the sales pipeline. And I’m speculating that might actually be good for your margin mix shift because it’s more profitable to sell to clients that you know. Is that an accurate way to look at what’s happening here?

Yes, it is, Rod. It’s helpful to our margins. The mix shift is working for us. I think even for new businesses, we are going in a lot with our reengineering capability. So we are going into new clients now and saying, “Why don’t we help you drive process efficiencies in your shop right now?” And again, that helps us. In terms of deals, we’re actually seeing larger deals in many cases. We’re seeing larger deals which we are signing up. And we’re seeing very certain momentum so companies that are doing it are actually pushing harder for it because they’re saying we need to see the results faster. So long run, it is very positive for us because of the traction it gives us. It gets us a foot in the door, which is extremely important for us at this point of time. It makes us a better partner with customers and it gives us room to increase penetration in the next year and the year after.

Your next question comes from Edward Caso - Wachovia.

If I calculated it right I have the tax rate at 12.2% in the first quarter and I think you guided 18% to 20%. Do I have that right?

Yes, you have that right.

And can you give some color why it was lower this quarter?

March is the year-end for the Indian financial system and some of our facilities in India will get off the older tax-free regime of STPI from April onward. And that’s going to be affecting the tax rate. Plus China is looking at increasing the tax rate on businesses like ours from 15% to 25% in a graded fashion and that’s also clutching in now.

It looks like your amortization went up significantly, sequentially. What does that relate to?

No. Our amortization has not increased sequentially. It remains in the ballpark area of $9 million.

I had it going from $8.9 up to $10.2 million, about a million. It looked like a higher rate than it had been? Maybe you could explain.

That is the impact of foreign exchange movement which has a nominal impact on amortization especially if, on the last day of the quarter, the rupee or the yuan depreciates significantly for a day and that’s what happened this time. But the approximate range per quarter for this year for amortization is $9.5 million, which is roughly what it was last year.

Can you give us a sense how many clients now that you view are mature? I know you listed ones that are over certain revenue levels. But how many of your base, it’s roughly 35 to 40 clients, how many of those or you view as prime mature clients that help you weather the storm?

Ed, I don’t have the precise breakdown here. But I would tell you that I believe 15 to 20 customers who we’re very comfortable. Now many others will drop out, some others will change. Their own business cycles will change. So we don’t really think about that. We measure it client by client and that’s what we focus on, but I think the list is very healthy at this time. We’re very comfortable that we have great traction with many of them and there are a great number of clients also in our pipeline, in our hopper, which adds to diversity. I think, equally, either point I would make is our India-to-India business, our China-for-China business is beginning to see some traction as we go forward. Therefore, there is lots irons in the fire which are producing very good results at this time

Can you just indicate for us what level of new client sales do you need to make your guidance for this year and then also, maybe relative to a month ago or to this period last year, is your visibility lower, similar, higher, whatever into your guidance?

Our visibility is good, the same as last year, and we are probably around the same point we were last year in terms of visibility to our revenues. Because, I think, if you go back to what we’ve always said, we have visibility and 80% to 85% of our growth comes from existing customers, so it gives us very good visibility going forward and we’re able to track it. Now, can some of that change, of course. It always does. It has every year since we’ve been running this business and it will, going forward. But we have strong visibility and we’re probably at the same point where we were last year versus this year.

Your next question comes from Dave Koning - Baird.

Based on your pipeline, and I know you can see out quite a ways, should we expect growth to continue for several quarters and probably into ‘09 now, invest 25-plus percent range all through ‘08 and ‘09?

Our long-term guidance has been around that area, Dave, and that’s where we’re staying with it right now. Obviously, as events shape, as there’s greater certainty in the economy, we’ll feel better about different numbers. But, right now, that’s where we are.

And then as we look out through the quarters of ‘08, should we think both on Global Client revenue, should we think of a pretty linear pattern of 10% plus sequential growth, maybe 10% to 12% sequential growth per quarter? And then on the gross margin side, should we think of 100 basis points of margin improvement sequentially each quarter?

Dave, with all due respect, we don’t really look at our numbers on a quarterly basis. It’s a long-cycle business, we don’t manage for quarters, things can easily accelerate or move back and forth quarter-to-quarter, and that will happen. There is a general cyclicality in our business which we see, which is reflected in the first quarter that, because a lot of projects, etc., run off in the fourth quarter of each year as companies shut down on their budgets and people don’t want to transition over the year end. I think you will see a general cyclicality which means that growth between first quarter and fourth quarter isn’t going to be strong or has often not been very strong and it’ll be cyclical. Otherwise, we really don’t think about it on a quarterly basis. Obviously, Roanak and Vivek can have discussions with you offline on some of these points, but we really stay with the longer-term nature of our business.

Your next question comes from Ashwin Shirvaikar – Citigroup.

Your commentary on BPO demand, it’s quite different from what I hear from smaller or perhaps more focused BPO companies. Now is that a function of your approach where you’re looking for multi-year commitment to transformation whereas maybe some of these other companies are looking for smaller, more focused contracts?

I think it is a function of our approach. Our approach is that we will grow with key customers over a long-term period by building a very strong partnership. It is also a function and I believe this very strongly, of the pedigree of our customers. So if you look at our client list and you look at all the public names, the names that we have been able to make public with their permission, these are very large companies with enormous potential for growth within them. Typically, we start with them small in financing and accounting or supplying chain and we broaden the base of our work. So typically, with any customer, if you look at even on the banking-financial services side, you will see a lot of customers growing at 100% this year and potentially 100% next year. So you see I think it is a function of what we did. It is also a function of process reengineering and process excellence skills we bring. That’s what companies are looking for right now. They’re saying, look, take costs out for us, make us more efficient, share the pain with us because this is a time when we really need these skills. And I think our skills play very well to that and our strategy of growing with mining existing, major customers I think is really working extremely well in this scenario. Last one I would mention is breadth and depth of services. So, I think many others may not have that breadth and depth. So we can go from financial and accounting into field service operations, into supply chain, into IT software business, into IT help desk. I think that range also help us penetrate in many, many different areas within the company.

You’re still guiding higher margins this year in spite of very significant non-GE growth, which is quite impressive on both the those comps, but how much of that is the impact of SG&A leverage of what you’re doing at clients like Wachovia and so on versus the revenue mix shift because you do have the higher revenue per employee?

I would suggest that actually it’s two pieces, one part is SG&A leverage. I won’t get into half because we don’t have the numbers here. We haven’t analyzed it that way. But one part will be SG&A revenue. The other part is pricing. We are getting good pricing and price increases. So I think you’re going to see the impact of some of that rolling through.

Since early 2007 when GE eliminated the internal financial benefits they give to their managers to sign up with you, have you seen any change in this especially in an uncertain environment at GE?

Yes, I won’t comment on what GE does or doesn’t do internally. Obviously, that’s up to them. No, we haven’t. Our relationships are strong. Our growth last year with them was well ahead of plan. We came in at 10% versus what we had said would be mid single-digits. I think a lot of it is our ability to build deep relationships and show them that we can really drive outstanding process efficiencies and productivity. I think as we continue to do that, we will continue to see good traction. Now GE will cut back on costs in the current environment in certain areas that we are ready for, we engage with them at all levels where we raise the ante internally, tremendously on connecting with customers, communicating with them, sitting across the table with them, understanding what they want, and that’s really paying off. And so our entire organization is very formally engaged in communicating what we do, thinking about what they want, and making sure that we change course as necessary. And I think that’s working out extremely well.

So that is why you still expect the low-to-mid single digit GE growth.

Yes.

The 18% to 20% tax rate, is that cash or accrual?

That would be accrual.

And what’s your cash tax rate?

We haven’t calculated it. I don’t have the number offhand.

Your next question comes from Bryan Keane - Credit Suisse.

When you’re talking about postponements in cold deals, is there a distinction there between BPO and IT?

No, I don’t think so. I think we’re seeing it in both areas. I think we’re seeing postponement and cold deals in both areas. For us, and the reason I hesitated for a minute is for us, of course, BPO deals will always be more. It’s a larger part of our business, so more BPO deals, from our perspective, will be cold versus IT. But that’s just a factor of our business mix as opposed to what’s necessarily happening in the market. What we are seeing though is, on the BPO side, there is also acceleration which is not something we’re seeing on the IT side.

Because I’m trying to reconcile your comments there yet you’re reiterating guidance. Because it would seem like the environment has changed a little bit, but yet you still feel good about the guidance, so just trying to reconcile the two.

We’re staying with the guidance because as I said, there are some postponement delays, but I think it’s a very important point to make. There are also a lot of accelerations, a lot of accelerations, that’s why we’re delighted with our current quarter results and that’s why we’re staying with our guidance. We’re also, just to reiterate the point, our growth is from existing customers. We have great visibility. A lot of that growth will accelerate and we are accelerating that vigorously with our customers and we’re still winning our fair share of new deals as we go forward. And therefore, we’re very comfortable staying with the guidance. I do want to emphasize the point that, yes, there are some deals going forward and all of that. But there’s a lot of traction and acceleration with existing customers, with new customer, who want to move faster on the re-engineering side, on the project side, on driving efficiencies, on new products that we are selling on the India-to-India business, on the China-to-China business. So I think there are multiple things going on and, generally, we feel pretty good.

And then is there a distinction between verticals or are some weaker than others?

I think on the new clients, so existing clients, no. I think existing clients, in fact, our strongest vertical continues to be banking-financial services and insurance which is doing very well. We’re very pleased with the results there. As we think about the pipeline going forward, we really haven’t seen a significant shift in one vertical versus the other. I think it’s more client-specific depending on what situation they’re in, what restructuring they may be going through, and how familiar they are and willing to make the first year investment in this initiative.

Vivek, I think it’s the restatement of GE, the base year is $457 for ‘07 and, if you have it there, do you have the, the four quarters restated for ‘07, so we can put in our models?

That would be information we wouldn’t be sharing, but the opening run rate for 1 of January ‘08 is $457.

Your next question comes from Jason Kupferberg - UBS.

Can you clarify exactly what the guidance is for ‘08 because I thought earlier in, I think, response to a question it was mentioned low to mid-single digits. I think the press release says mid-single digits. Not to split hairs, but can you just clarify what it is?

With GE you mean? Yes, it will be, the press release says mid-single digits. We’ll stay with that.

Can you talk about some of the specific factors that give you the confidence that you’ll see the acceleration from 1% in Q1 to the levels you’ll need to see to hit mid-single digits for the full year? Are there specific areas within GE that you expect to see pickup, understanding that in the near term, as you mentioned, they may actually be cutting back in some areas?

Yes. I think we’re seeing increasing opportunity as we engage with them. They’ve got terrific businesses in infrastructure and healthcare and other areas. We’re deeply engaged with them. We’re actually being able to, not just with GE but with other clients, what we’re being able to do is come out with very specific products and services that we believe will help them today. So if they’re focused on cost and cutting cost in a certain area, that’s, again, that’s the discussion we have with the Commercial Council and say, let’s look across GE. Is there one pocket of costs that we can attack across all businesses? We also work with individual businesses and say, are their costs in operations, are their costs in repairs, are their costs in supply chain that we can take out. And while our penetration is high in GE, the fact is GE has 300,000 employees around the world. It keeps acquiring new businesses, which we engage in as GE Commercial Finance and many other entities acquire new business, we typically are the ones who are able to help them get in there. And the last thing I would just point out is from a cyclicality perspective, first quarter with GE is always low because projects run off in the fourth quarter with GE and then they’ll take a short while to kick off and start up.

So it’s fair to say you have to adapt on the fly a little bit as GE’s own business changes and their needs evolve, you have to bring some new ideas to the table to make sure you get to those growth rates.

Absolutely, but we do that with every client. It’s not a GE-specific thing. We do that with every customer. It’s what we pride ourselves at. We think we’re outstanding at it and I think our deep relationships have allowed us to do that. So that’s how we got to the 10% growth rate last year. We’re really deeply embedded with them, went to them with new ideas, and we do customer roundtables every year. And the key theme every customer comes back to us through the roundtable is, they always come back and say, “Come to us with your ideas. That’s what we’re looking for. You are the experts in these areas. You’ve got to come to us and tell us what you can do for us.” And I think we’re sharpening that every time. I wish we were a lot better than we are at it because I think there’s enormous room. But competitively, I think we’re the best at it and I think we do it in a way that is helpful to the customers. And I think its part of the nature of our business that we will always have to be very conscious of what’s the pain because there’s no point in going to a GE business which is going through cost pressure and talk to them about revenue growth at that time. If we can help them take costs down, that’s what we’ve got to focus on. Next year, it could be, help me go-to-market faster. Year after, it could be, help me with cash flow. We must understand those agendas and initiatives within any company let alone not just GE and be responsive to it.

Can you just help us understand maybe the incremental change in customer behavior that you’ve seen since the last earnings call which was six or seven weeks ago? Because I know you mentioned that some of these delays and cold deals are something that you’ve seen for the last three to five months or so. But I just wanted to try and hone in on what the incremental change may have been since the last earnings call so we can get a sense of how things are actually playing out.

Yes. I think there isn’t a dramatic incremental change, I think some of these things, as we said at the last time also, I think, if memory serves me right, I think we’d said cycle times are longer. We’d said deal sizes are sometimes getting smaller and I think the smaller deals sizes are a little bit of a reflection of postponing perhaps a part of a deal or a part of an initiative and then going ahead only with that part which they have the investment dollars for or where they’re more certain of the payback. So we haven’t seen an incrementally, all I would tell you is that, from our perspective with existing clients, our traction is terrific and it shows in the quarterly results. And that has, so along with some postponements, again, just to re-emphasize, there’s acceleration. And overall, on a balance, postponements versus acceleration, all I will tell you is our first quarter results reflect that and we are very pleased with how we are positioned with our customers for the rest of this year.

Your last question comes from Julio Quinteros - Goldman Sachs.

Yes, I just want to come back to the foreign currency items. I think, if I got this correctly, it sounded like of the $22.4 there was $6.7 million that you are treating as non-recurring or can you just walk back through that because it sounded like that component you want to strip out from the year-over-year changes when we contemplate the cost of revenue and the SG&A changes, is that correct?

Yes, Julio, you’ve understood it perfectly. The $6.7 million is due to re-measurement of dollar assets that sit outside United States, 99% of these dollar assets are really accounts receivable. And that number of $6.7 will bob up and down every quarter and, as I mentioned, last year for most quarters it was a very, very marginal number hanging around in the $1 million plus or minus range. And it’s a function of direct movement from end-of-a-quarter to the end-of-a-quarter.

So if I strip that out and look at the year-over-year numbers then, excluding the $6.7 million, a year ago I believe the gross margin would have been 38.2% including hedging and this quarter we’re looking at 37.5%. On a year-over-year basis, why would the gross margin be trending down?

Yes. The gross margin has trended down because we took a one-time write-off of $3.3 million of software licenses which we are no longer going to be needing and we don’t want to keep them on our books unnecessarily. And that’s the primary driver in that movement. And you may want to add that back, but otherwise your numbers are perfectly right. The $6.7 million, we do not consider this a part of our operation. This is a strictly accounting US GAAP-related item, it’s a non-cash item and that’s why I decided to break it up for you on the call.

So, why wouldn’t you have stripped it out from the adjusted EPS number or I think the $6.7 add something like $0.03 of earnings so your $0.09 would look more like $0.06. If you net out against the $3.3, I’m just trying to understand what’s the actual number on a recurring earnings basis really should be, because that $0.09 feels a little bit inflated as well as that $0.15?

In the GAAP EPS has to be whatever Federal Accounting Standards require us to publish.

What about your adjusted numbers are?

We have to keep the adjusted EPS consistent with adjusted income from operations. Today it’s again tomorrow it might be a loss of $3 million and what we publish as adjusted EPS has to get signed off and audited by KPMG. We don’t want to keep redefining it every quarter.

And this concludes our question-and-answer session.

Thank you very much for joining the call as I said we are delighted with our results of this quarter and look forward to talking to you again at our next call for the second quarter. Thank you.