Good day, ladies and gentlemen, and welcome to the First Quarter 2015 Genpact Limited Earnings Conference Call. My name is Chris, and I will be your conference moderator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Bharani Bobba, Head of Investor Relations at Genpact. Please proceed, sir.

Thank you, Chris. Welcome to Genpact's earnings call to discuss our results for the first quarter ended March 31, 2015. We hope you've had a chance to review our earnings release, which you'll also you find in the IR section of our website, genpact.com. With me in New York today are Tiger Tyagarajan, our President and Chief Executive Officer; and Ed Fitzpatrick, our Chief Financial Officer. Our agenda today is as follows: Tiger will provide an overview of our results and key highlights of the quarter; followed by Ed, who will discuss our financial performance in greater detail. Tiger will provide closing comments, and then we will take your questions. We expect the call to last about an hour. Some of the matters we will discuss in today's call are forward-looking. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those in such forward-looking statements. Such risks and uncertainties are set forth in our press release. In our call today, we'll refer to certain non-GAAP financial measures, which we believe provide additional information for investors and better reflect the way management views the operating performance of the business. You can find a reconciliation of those measures to GAAP in our earnings release in the IR section of our website. With that, let me turn the call over to Tiger.

Thanks, Bharani. Good afternoon, everyone, and thank you for joining us today. Genpact delivered strong financial results in the first quarter of 2015, highlighted by continued solid growth in Global Client revenues. We believe the year is off to a good start, with first quarter results tracking in line with our stated expectations for the full year. In the first quarter, total revenues increased 11% year-over-year and 13% in constant currency. Our Global Client revenues grew 13% year-over-year and 15% in constant currency. Growth in the first quarter was broad based across many of our target verticals, with CPG, Insurance, Life Sciences, Hi-Tech and Banking leading our Global Client revenue growth. And we also saw growth across most of our service lines, including finance and accounting, core vertical operations, analytics, consulting and risk services. GE revenues increased approximately 3%. Adjusted operating margins were in line with our expectations at 14.3%. We continued to make progress during the quarter on a number of fronts. First, our design and transformation services; second, our Systems of Engagement technology; and third, reimagining end-to-end processes in the context of data and technology. First, our design and transformation services are resonating in the market place. We are engaged in many more upfront design-and-transform consulting engagements than ever before. These services, which include reengineering, consulting and risk, are relevant in various types of client engagements and have been key in establishing a significant number of our new relationships. [Audio Gap] many of our wins this past quarter and over the last 12-plus months have been significantly differentiated through this. For example, across verticals, we are increasingly asked during the start of an annuity F&A relationship to analyze a client's internal controls, including design assessment. A component of our value proposition comes from a testing of company's internal…

Thank you, Tiger, and good afternoon, everyone. Today, I'll review our first quarter performance, followed by key highlights in the balance sheet and cash flows. We closed the first quarter of 2015 with revenues of $587 million, an increase of 11% year-over-year or 13% on a constant currency basis. Excluding Pharmalink, which we acquired in May 2014, revenue growth was 9% or 11% on a constant currency basis. First quarter revenues from Global Clients increased 13% year-over-year or 15% on a constant currency basis. Excluding Pharmalink, revenue growth was 11% or 13% on a constant currency basis. Within Global Clients, business process outsourcing revenues increased 19%. Our Global Client IT services revenues declined 4%, in line with our expectations. GE revenues increased 3%, which was better than we expected. In this quarter, our overall business process outsourcing revenues increased 16%. Our overall IT services revenues declined 3%. We continue to expand relationships with Global Clients across a range of our industry verticals. In the 12 months ending March 31, 2015, we grew the number of client relationships with annual revenues over $5 million to 94 from 81. This includes the client relationships with more than $15 million in annual revenue increasing to 30 from 26, and client relationships with more than $25 million in annual revenue increasing to 17 from 13. We now have 4 relationships, including GE, with more than $50 million in annual revenue. Adjusted income from operations for the quarter totaled $84 million compared to $86 million in the prior year. This represents a margin of 14.3% compared to 16.4% in the first quarter of 2014. This expected reduction was due to our planned investments in sales and marketing and capabilities made in the second half of 2014, partially offset by operating efficiencies and leverage from higher…

In summary, we are off to a good start in 2015, with growth rates in our BPO business accelerating and at the highest levels in 2 years. The 4 pillars of our growth strategy are clearly working for us. We believe we have the right strategy with the right areas of focus to increase our market share and drive growth in our underpenetrated markets. In today's rapidly changing world, our value proposition, built on our deep understanding of our clients' domain and process, is resonating and more relevant than ever. This is allowing us to combine advanced technologies, data science and analytics together with design and consulting in a meaningful way to add value to our clients. Our client engagements and wins are reflecting this design-and-transformation-led solution approach. I am very excited about the way our Systems of Engagement and information science big data platform is getting early deployment in many client engagements. In this changing world, our strength, heritage, DNA and the ability to embrace the new has positioned us very well. We continue to provide very relevant and highly differentiated services that are clearly resonating with the needs of our clients. I'll now hand the call back to Bharani.

Thank you, Tiger. We'd like to open up the call for Q&A at this time. Chris, can you please give the instructions?

[Operator Instructions] Our first question comes from the line of Edward Caso with Wells Fargo Securities.

Could you remind us of your capital deployment priorities here? And what leverage you may be willing to go to?

Sure, Ed. As we mentioned in February at the Investor Day, we talked about driving profitable growth really as the key for us moving forward here. So capital expenditures that support that growth for sure, first hand. Then from there, we are going to look at acquisitions that make sense for us, that fit into the verticals where we play that add to our strengths in that area. So M&A would be kind of second-order priority, if it has all the right qualities from a -- the right economic return, the right strategic fit, ability to integrate, et cetera. From there then, the share repurchase program comes into play. And as you know, we instituted the share repurchase program and got started with that in the quarter, as you heard us talk about, about $13 million executed before the end of the quarter. So that's the way that we're thinking about it. That mix may change over time. We may do a bit more M&A in a period, or a bit more share repurchase based upon the opportunities, but that's the way we're thinking about it.

And a willingness to step up your leverage or not?

Well sure. So what we talk about is leverage really being somewhere in the range -- somewhere between 1 and 2. I think right now we're kind of at the low end of that range. So as I talked about on the call, from a liquidity perspective, plenty of firepower for us to execute on the M&A front to the extent that, that -- those opportunities come to fruition as well as share repurchases, as we look at that as well. If we see opportunities to repurchase shares at attractive levels, we can also go faster there if the opportunity presents itself. So operating leverage really will be a factor of what we need, M&A as an example, we'll be able to step it up and we have plenty of powder to do that.

Yes. And just to add to that, given the cash flow nature of this business, clearly, that does provide the opportunity for the right acquisition opportunities that come up for us to lever up, there's no question.

Great. The other question is on the tax rate, it was particularly low this quarter. Are we -- but you didn't change the full year range. Should we assume that the rate's high in the next several quarters? Or should we assume that we're closer to 23% than 24% for the year?

I would say, it was a bit lower than we expected as well. Still keeping the range, Ed. As you know, it can fluctuate quarter-to-quarter with discrete items, and I don't think 2015 will be much different than years in the past where we'll have some lumpiness. So as I'm thinking about it, I'd still think somewhere in the 23% to 24% range. I wouldn't come off that just yet.

The next question comes from the line of Anil Doradla with William Blair. Anil K. Doradla - William Blair & Company L.L.C., Research Division: Tiger, I think a big-picture question and one to follow-up. When I look at the tone of many of your peers in the BPO industry, I'm noticing a distinctive kind of more bullish tone, more so over the last 3, 4 months. Now many positive things have been going on in the industry. Do you feel that the industry is at some kind of inflection point, where finally many large companies are realizing that this is the way to go? And while in the past people have been doing it, it's moving from the kind of the fringes to the mainstream?

I would start by saying, let's look at the world around us. And the world around us, we've always said this for some time now, has low growth, not high growth, and the world around us has volatility attached to that low growth environment. There is no question that the kind of things that we do for companies are things that the early adopters have been very successful. And therefore, a lot more companies are willing to more aggressively change, restructure. I would also argue that, at least in our case, we've done the right investments, we've built the right capabilities and we continue to do so in a changing world, again. And that includes new technology, bringing in new technology into process and domain capabilities and the ability to leverage data for insights, which is the other driver. Clients want insights to be created in today's world. And actually, our view has always been if you have clean processes that run well on great technology that is nimble and agile, your ability to leverage data to build insights is that much better. Anil K. Doradla - William Blair & Company L.L.C., Research Division: Switching gears a little bit now, the 75/20 split between kind of BPO and IT, do you feel that's the right balance given that you're taking on more and more complex projects, there might be a little more customization development? Or what do you think is the right balance between these 2?

So Anil, I -- we don't think about balance between those 2 that you just described, IT and BPO. We actually don't think about the world that way. We don't -- we report it, but that's not the way we determine our business plans. Our business plans are determined by what's the big problem for our clients in a particular industry that we are trying to solve and how can we bring together different capabilities, technology, analytical tools as well as deep process and domain understanding, to actually then solve that problem. More and more, our view is that disaggregating into different pieces is not the way the world is going to be. Anil K. Doradla - William Blair & Company L.L.C., Research Division: Okay. Great. If you don't mind me squeezing one final in. On the GE commentary, maybe the way I read it was you were definitely positive in the near term, but sounded a little cautious on the long term. Am I reading too much in between the lines or -- because in the past when new logos were recreated, you've come out well. So just wanted some clarification.

So Anil look, I mean, every time a GE disposition has happened, we have come out okay because we've built a new relationship. All am saying is, that is dependent so much on when, what kind, what nature of the transaction, none of which we can speculate on. So our job is to continue to be a great partner for GE and continue to find a way to build new relationships as those dispositions happen, which we will. I think being circumspect is probably the right way to think about it because it does provide opportunities and risks.

Our next question comes from the line of Puneet Jain with JPMorgan. Puneet Jain - JP Morgan Chase & Co, Research Division: So Tiger, on gain sharing contracts that you talked about, how comfortable clients are in signing some of those contracts? These contracts will align your goals for the clients, but should also result in more uncertainty for clients in terms of their spending. So do you see any pushback from clients when you go to them with these proposals?

Not really, Puneet, because -- and by the way, this is not the first time we are doing it. We have many, many contracts for many, many years where we have gained share in our contracts on productivity, we have gained share when we drive significant business impact that is well-defined between us and the client on specific projects. So the key discussion that comes exactly what is the pain area that is going to be solved and how do you measure it. And once that's defined up front, there's a gain. And part of that gain is what we share. So I don't think there is a lack of predictability as a result of which clients don't want to sign it, because after all, it's an upside that the client gets.

CFOs sometimes like those types of things. You weigh it with certainty versus not having to pay for anything if you don't get anything. Puneet Jain - JP Morgan Chase & Co, Research Division: Understood. And another question, if I can ask. Growth trend clearly appears to be improving and some of the investments that you have made, they appear to be yielding results. So near term, should we expect like investments in some of these areas, like in domain and analytics, continue to increase faster than revenue or near-term investments have peaked?

So Puneet, what we did in 2014 was step up from the trend line that we had on these types of spends, both on the front end as well as on building out some of these capabilities. That stepped-up trend line is what we think we'd like to continue as we go into the future. Obviously, we are very pleased with the investments we have been making and we continue to make, particularly of the type that you just described. And clearly, those are the ones that are resonating with clients. Puneet Jain - JP Morgan Chase & Co, Research Division: But the absolute dollar of those investments, that dollars number will continue to increase over the near term, but maybe below...

I'd say in the selling and marketing side, the spend should be relatively flat throughout the year, maybe some slight increase, but not -- you shouldn't see significant changes this year. And that's why we mentioned on the call that as we go through the year and sales increase, selling and marketing cost as a percentage of sales should come down and thus, operating margin should improve throughout the year, such that we get to 15% operating margin for the full year on the earnings.

Our next question comes from the line of George Tong with Piper Jaffray.

This is Adrian Paz on for George Tong. I was looking at -- I was wondering, on consulting services, are these services provided separate from contract revenue? And it sounds like these services are -- consulting has been trending positively. Can you discuss trends that you're seeing there?

Yes. They are separate from our annuity contract revenue for the most part. There are a few where actually we have these ongoing for long, long periods of time. And there are 3 or 4 of them that come up in terms of the types of things. When we run these processes, we know a lot of upstream opportunities to change and redesign and fix. And those are the types of services we've been offering for many years. We now have teams that actually go in, in advance and design new processes for the new world. And a lot of our clients want to be disruptive in their industry. And our job is to help them become disruptive in their industry. So these types of services, we think, are critical to actually continue to be able to make our clients disruptive. And then, once we execute those, the downstream flow of work that needs to get executed, automatically, very often, comes to us.

Great. And looking at IT services, it looks like that this service line has declined -- has been on a trend of declining revenues, or decelerating and then declining. And I was wondering what you're seeing there and maybe, are you shifting away from IT services more towards BPO?

So again, I think I answered the question earlier, which is, we don't have a specific shift either in one direction or the other. If you think about the world of IT and this is going to be no surprise, I think everybody has been talking about it, we would think about our world of IT as capital markets and the work we do in the capital market space, which includes the KYC JV that we have with Markit, et cetera, which we are very pleased with the way that's going. And then we have IT that -- or the work that we do across a range of our verticals. And I would segregate that into 2 parts because I think all our clients segregate all their IT into 2 parts: legacy IT, which our view is that legacy IT will always be slow growth because legacy IT clients want to reduce the spend there and dramatically increase the spend on new technology. So we are seeing significant growth on our side of new technology with a reduction on our legacy technology work that we do, which is only one part of our IT business. And that -- the reality is that, that legacy portion of our IT business is a small proportion of the total company, which actually allows us to be more nimble in attacking new areas.

Got it, got it. And is there a big margin differential between BPO and IT services?

Again, a lot of these are solutions. Some of them are solutions where the price is on a per transaction. Some of them are solutions where it is a bundled solution of technology and people, and then we get paid on the whole. So it's very difficult to start segregating margin on technology and margin on BPO. All I would say is, when you bring in new technology that has analytics and data science built into it, automatically, it is higher value for our clients, the business impact that, that drives is much higher. So it does come on better pricing.

Our next question comes from the line of Prasad Borra with Goldman Sachs.

A couple if I may. Probably, just to start off. Tiger, what's your latest view on consolidation happening in the IT services/BPO space? They're having a few deals like the Cognizant-TriZetto deal and also the recent IGate deal. And there are rumors of Genpact being interested in assets like IGate. Just wanted to understand, from a strategic point of view, when you think about BPO and IT Services, you did mention that this is a specific part of the market you are interested in, but would you be open to considering bigger deals and a bigger role in traditional IT services? And on the leverage aspect, I know you have mentioned that it's 1x to 2x, but if you can provide what's the stretch limit for you?

I'm sorry, I'm going to say again that we don't think about the world as specific IT and specific BPO. We think about the world as solutions in a specific industry vertical and we have choices we've made, and that's what we'd like to grow. In order to do that, if we find the right capability that we need to bring in versus build it ourselves, we'll look for those and we'll do those acquisitions. Those are the ones that we would do. I really don't want to comment on rumors because that's not the objective here. We will continue to look for acquisitions that brings in capabilities in the spaces that we want to operate in. If they have a technology component to it, that's great. If they have a process component to it, that's great. If they have a domain component to it, that's great. If they have analytical component to it, that's great.

And then on the leverage question, what I would tell you is staying kind of in the rating space where we are today, investment-grade level ratings, we think that's the appropriate level for us, given the long-term nature of our contracts with our customers. So that is important to us. So that range of 1x to 2x is meaningful. With that said, if there was an acquisition per se that would bring us slightly above the 2x range that I had mentioned for a quarter or 2, our plan would be to kind of get the levels back within that range over a near term such that we'd be able to maintain those ratings. As I said, that's important to us.

Okay. That's great. And probably on -- one of the points you guys mentioned around targeting clients and extending relationships beyond F&A. With regards to the upsell opportunities you have and with regards to feedback you are getting from clients, is the demand more for other solutions which have, again, headcount-related business? Or they are more non-linear products or revenue streams where you're seeing traction?

I would say it's all of the above. The reality is that there is still a lot of work that is associated with people who do that work. However, we have significant redesign and bringing in new technology that changes the way that work gets done itself, often eliminating the work, and that's part of the role that we play. And part of that sometimes gets paid as consulting that we talked about, part of that gets paid as a technology we bring, part of that is fixed price, all of which creates significant difference between headcount addition and revenue growth, which we are seeing and have been seeing for quite some time in terms of a trend.

Probably just last one on the margins. Just with regards to your second half margin ramp-up, is it a case of you guys preloading a lot of the sales and marketing investments and things becoming a bit easier in the second half? Or is it a case of ramp-up of some of the contracts, larger contracts which you have taken in 2014, and as those contracts -- the early investments get digested, you see a margin ramp?

Well, I guess it's a combination of both, right? We do expect revenues to ramp throughout the year, not altogether inconsistent with what you've seen historically, that we should ramp throughout the year. The difference this year versus last year is that the selling and marketing will not -- is not expected to ramp like it ramped last year. It should be relatively stable for the rest of the year such that those incremental revenues should flow through, driving operating margins up throughout the year such that on a full year average, it should be in and around that 15% that you heard us talk about.

Our next question comes from the line of Bryan Keane with Deutsche Bank.

This is Korey Marcello on for Bryan Keane. Just had 2 quick questions. First, in terms of the 2 large deals won this quarter, can you just talk a little bit more about them such as how long they took, how competitive the deals were and sort of what the pipeline looks like moving forward?

Yes. So both those deals, interestingly, were not comparative because we were already with the client. In one case, it was an expansion of an F&A relationship that went across multiple divisions and then went across the globe with the success of the first initial work that we did. And then the other one was moving from finance and accounting to the technology and IT services side. And therefore, in both cases, they were proactive, they were sole source, they were consulting, design-led, and they were propositions that we put on the table depend -- based on our knowledge of that domain, our knowledge of the client and what the client was going through.

Great. And then just in terms of the growth moving forward, what sort of gets us to that top end of the guidance? Is it more around the deals in the pipeline, the ramp of sort of the existing cross sell? Where is sort of the focus there?

It's, again, all of the above. As we go through the year, our short-cycle businesses, such as consulting, reengineering, risk services, analytics and IT, et cetera, wins that we get will add to revenue through the year. And then on long-cycle businesses that we have won, both last year as well as wins this year, will continue to ramp or will start ramping. All of those will create the ramp in revenue as we go through the year.

The euro appreciation in the last 24 hours doesn't hurt. If that can stick around, too, that would be a nice reduction of a pressure or a headwind, right?

Yes.

Our next question comes from the line of Keith Bachman with Bank of Montréal.

Ed, I wanted to ask a question of you and then a broader question. Just on the tactical side, if you could tell us or help us understand how the adjusted operating margin progresses in the June quarter versus the second half of the year? In other words if you're targeting 15%, is June still under that and then you get above that for the September, December quarters? If can just give us any context for the adjusted operating margins, say, for the June quarter?

I guess, I wouldn't give you any specific guidance other than kind of a -- where we are, kind of a straight line type of thing. To guide you other than straight line, I wouldn't be able to give you any specific guidance, other than we told you that the spending level should stay relatively constant. It's really just going to be the top line flow-through to grow. So I wouldn't want to give you any guidance more than that. I think -- I don't think there will be any big surprises, I guess, is what I would say. There should not be.

Okay. And then the currency hit in the March quarter, was it about where you expected? Or that the currency's move caused a little extra tension on the profitability line?

No. So the pretty significant move during the quarter was more -- and more than I think anybody expected, frankly. The euro move -- it was actually a global move, the euro was probably the biggest impact for us. But that's happened probably in the last 5 years, and moves like that happened maybe a couple of times because I remember them when they happen, because they usually hit the bottom line and then they hit the top line. But this is the second time I remember it in the last 5 years that it's moved so swiftly and so violently. But for us, it really was the balance sheet-related items that are unhedged that we typically don't hedge because it's prohibitively expensive to hedge them. So that bigger move was probably $6 million or $7 million in the quarter, was higher -- $0.01 higher than it was last year or $0.02 in the quarter, if you will, impact on our earnings. So that was higher than we expected. But even -- since that timeframe, since the quarter, I know some of that has reversed already with strengthening of other currencies against the dollar. So it hit us -- it hit a bunch of people probably pretty hard, hit us to the tune of a couple of cents, but some of that has reversed, most of that, really.

It was a couple of cents in the quarter and then the tax rate was a plus $0.01, so maybe you're still down a little bit [indiscernible]. Yes, okay.

Exactly.

The larger question is, you want to do signings, I know, infrequently, but could you give us at least anecdotal directional comments about how the broader signing landscape unfolded during the March quarter, either in TCV or just directionally? If you aggregate the signings, was it a positive signing quarter? As you think about what you're actually able to context or to conclude, rather; rather than just the few deals that you called out.

I don't think we'll be able to talk about specific numbers here. All I can say is -- the reality is bookings, as we said on our Investor Day, is a metric that makes sense only when you look over a reasonably long period of time. So a quarter's bookings is a wrong way we would assess our business. The win rate has been consistent. Our pipeline flow has been good and our big-deal momentum has been good, signified by the 2 deals that we talked about. So overall, we feel good about the quarter in the context of the year, and we think it's exactly on plan to the year that we are progressing on.

Keith, and just so that I could be a little more responsive on your first question on how margins would progress throughout the year, the one thing I would point you to is look at our growth from the last year or 2, right? So as you're modeling, we had lower growth first half last year; higher growth second half. You should expect that our growth rate this year would -- bear those in mind as you're going through and doing your outlook.

[Operator Instructions] Our next question comes from the line of Jason Kupferberg with Jefferies.

This is Amit Singh for Jason. So just to start off, I just wanted to get a sense for how much visibility at this point, considering all the bookings that you've had until this point in the year, how much visibility do you have towards your full year guidance right now?

We -- our visibility at this point in the year is actually exactly broadly similar to the -- what one would expect at the end of the first quarter of any of our normal years. So I would characterize our visibility right now as broadly similar to the way we would have expected it to be for our expectation of the revenue growth for the year.

And better than at the beginning of the year, right, because we're at quarter end, right?

Correct.

So we're making progress, visibility is pretty good, but we still have the rest of the year to get through, right?

Okay. Perfect. Are you -- I mean we are seeing more and more of these integrated deals in the market, which involve IT services, BPO, consulting, all these elements in it. And then Tiger, you spoke about that you look at M&A targets or anything in terms of capabilities. So if you want to go after these deals, I mean, where do you think right now maybe you could beef up your capabilities? So what I'm trying to get at is like if you're trying to look at M&A targets, I mean what capabilities do you think -- if you could prioritize them, what capabilities at the beginning would make more sense right now?

So my first response is, we are not seeing and we haven't seen for quite some time now legacy IT combined with process and all of that lumped together into one big deal. I think we haven't seen that in quite some time, and I don't think those are the deals that are happening. What is clearly happening is clients expect people like us and others to actually bring to them the ability to use disruptive new technology in order to be able to do all the things that we talked about. That's what we are seeing, and that's the type of solutions, bundled solutions, that we are seeing. It's not the legacy IT and infrastructure and all of that bundled with BPO. In terms of capabilities, it is completely a function of the specific service that we are talking about in the specific vertical that we think is a good capability to bring in and the choices between bringing it in versus building it. The Pharmalink acquisition that we did a year back, I think, is a great example of that, where in the Life Sciences vertical, which is one of our chosen verticals, we identified regulatory affairs as an important capability to have because we thought the market is moving and changing. And our clients were telling us that it is going to be one of those services that they would like people to provide. And we said instead building it from scratch, we'll acquire. So it is that specific. I don't think there's a generic answer I can give you.

Okay. Great. And then just one last quick one. Attrition rate has picked up a little bit, I mean if you compare it year-over-year or last quarter. Is there anything to read into it?

No, nothing to read into 1 quarter's attrition rate. These are things that happen, depending upon client changes, moving work from one location to another. We actually reduced the size of a couple of our locations because we increased the size of a couple of other locations. So there are lots of puts and takes there, nothing has to be read into that.

Yes, I think you heard us talk about a couple of things, too, productivity, and you heard me talk about G&A leverage, right? So all that factors into what you're seeing in the numbers that flow through.

And our attrition rate, as you probably know, is an all-inclusive attrition rate. It includes everything. So for example, what we call regrettable attrition, is steady.

And we have no further questions at this time. I will now turn the call back over to Mr. Bobba for any closing remarks.

Thank you for joining us on the call today, and we look forward to speaking with you next quarter.