Good day, ladies and gentlemen. Welcome to the 2020 First Quarter Genpact Limited Earnings Conference Call. My name is Bridgette, and I’ll be your conference moderator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference call. As a reminder, this conference call is being recorded for replay purposes. The replay of the call will be archived and made available on the IR section of Genpact’s website. I would now like to turn the call over to Roger Sachs, Head of Investor Relations at Genpact. Please proceed.

Thank you, Bridgette, and good afternoon, everybody, and welcome to Genpact’s first quarter earnings call to discuss our results for the quarter ended March 31, 2020. We hope you had a chance to review our earnings release, which was posted to the IR section of our website, genpact.com. The speakers on our call today are Tiger Tyagarajan, our President and CEO, who is joining from his home in New York City; and Ed Fitzpatrick, our Chief Financial Officer, joining from his home in Pennsylvania. We’ve a lot to cover during today’s call, including Genpact’s response to the COVID-19 crisis, our positioning for a path to longer-term growth, a review of our financial performance. We will also provide some color related to our expectations for our second quarter results. Our prepared remarks will be somewhat longer than usual, but we will provide extra time to answer all of your questions. As a reminder, 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. Additionally, during our call today, we will refer to certain non-GAAP financial measures that we believe provide additional information to enhance the understanding of the way management views the operating performance of our business. You can find a reconciliation of these measures to GAAP in today’s earnings release posted to the IR section of our website. And with that, let me turn the call over to Tiger.

Thank you, Roger. Good afternoon, everyone, and thank you for joining us today for our 2020 first quarter earnings call. I’m extremely proud of the passion and dedication of the Genpact team around the globe who have worked tirelessly to support our clients, deliver phenomenal service, and help communities, and each in these unprecedented times. The COVID-19 crisis has disrupted personal lives, businesses and economies around the world in a very short period of time. Today, I will start with a quick review of our first quarter results, and then share an update on our response so far to COVID-19. I will then discuss the status of our delivery to clients, learnings from our journey to work-from-home, and the impact we are seeing on our clients and their industries. I will also cover the new opportunities we are seeing in the market, why we are well-positioned to win these opportunities, and how our strategic focus over many years, and particularly over the last five, allows us to be resilient in these times, and sets a clear path forward for longer-term growth in the post-COVID-19 world. Despite the challenges the world faced starting in the second half of March, we had strong first quarter results, demonstrating a continuation of the momentum we saw throughout 2019. All of our industry verticals, consumer goods, retail, life sciences, healthcare, banking and capital markets, insurance, high tech, and industrial manufacturing and services grew nicely. Transformation Services was once again the leading engine with particular strength in analytics, and significant new traction in our cloud services. Specifically, total revenue was $923 million, up 14% on a constant currency basis, and Global Clients revenue increased 15% on a constant currency basis. We also delivered adjusted operating income margin of 14.7%, and adjusted diluted EPS of $0.53, up…

Thank you, Tiger, and good afternoon, everyone. Total revenue for the first quarter was $923 million, up 14% year-over-year both on an as reported as well as on a constant currency basis. We saw broad momentum in our business and revenues exceeded our expectations despite some late headwinds driven by COVID-19. As Tiger mentioned earlier, the impact from the COVID virus onset only impacted the last few weeks of the first quarter. Due to the comprehensive and rapid global shutdowns, we lost approximately $7 million of revenue in those last two weeks. The majority of this was related to the shift in delivery capabilities to a virtual operating environment, including certain clients in banking initially limiting work-from-home execution. Global Client revenue, which represented 87% of total revenue, increased 14% year-over-year or 15% on a constant currency basis, largely driven by broad growth across our portfolio. Transformation Services continued to lead the way with strong contributions from our analytics and digital solutions. During the quarter, we continued to expand the size of a number of our Global Client relationships. With the 12-month period ended March 31, 2020, we grew the number of Global Client relationships with annual revenues over $15 million to 52 from 49. This included clients with more than $50 million in annual revenue growing to 10 from 8. GE revenue increased 12% year-over-year, in line with our expectations. Adjusted operating income margin was 14.7%, compared to 15% during the same period last year. Leverage from strong revenue growth and cost efficiency initiatives we drove during the quarter were partially offset by the impact of COVID-19 disruption. The disruption included unutilized intelligent operations resources resulting from limits placed on our ability to work from home that I mentioned earlier, as well as charges associated with an India retirement fund…

Thank you, Ed. As we look beyond these unprecedented and uncertain times, we expect to see permanent changes to the way the world is run. In order to succeed in this new normal, businesses will need to find new ways to lead, build resilience, connect across ecosystems, and adapt to a changing workforce environment. We believe our culture of embracing change, our entrepreneurial spirit, our passionate can-do attitude, and our focus on client outcomes will be a huge differentiator in the market, and is one of the key reasons we win. With a more than 20-year track record of operational excellence, we have developed strong relationships across an enviable client portfolio, including many of the world’s leading brands. We believe our agility and responsiveness and innovative ideas have strengthened our position as a trusted advisor with many of our key relationships. We’re already seeing this in the quality of our conversations, thinking through their change agendas with them, and how we can partner with them on execution. There are five ways we think the world of business will change as a result of learnings coming out of this crisis: first, a significant shift from offline to online in every industry; second, virtualization of all technology, services and solution delivery; third, an accelerated consumption of cloud-based services and solutions; fourth, an exponential growth in real-time predictive analytics; and all of the above with a human-centered design of process and collaboration experience. With our ability to access talent no longer constrained by geographical boundaries, we will be able to find the right people for the right client and the right process, not only from the outside, but within Genpact as well. Today, our employees are able to reskill and prepare themselves for future opportunities using our internal learning platform, Genome. This allows…

Thank you, Tiger. We’d now like to open our call for your questions. Bridgette, would you please provide the instructions?

[Operator Instructions] Our first question comes from Ashwin Shirvaikar with Citi. Your line is open.

Thank you. Hi, Tiger. Hi, Ed.

Hi, Ashwin.

Hey. So, appreciate the commentary, and hope you guys are doing well.

Yeah. Thank you.

I guess I want to start with – when I compare your 1Q performance plus the $7 million that you mentioned for let’s call it efficiency-type losses related to lockdown, it’s certainly a very modest sequential decline from 4Q, which is actually quite good relative to even a normal sequential pattern, let alone one affected by a pandemic. So first of all, what’s driving this? Are there one-off projects in here? I want to make sure there aren’t onetime revenues or pull-forwards of some kind, and could you also talk about the inorganic contribution?

Yeah. So, I’ll start off, Ashwin, by saying that we did have a really good first quarter. Every one of our verticals delivered. Transformation Services delivered, and that included Rightpoint. And we were really off to a really good start for the year in the first quarter, and then of course COVID-19, the last two weeks and we talked about that. So, I have to say that we did have a really good first quarter. There’re no one-timers sitting in there. Ed?

Yeah. I think the – one thing that was noteworthy to me as we’re going through it, I had to check it a couple of times, but it was every sub-vertical saw nice growth during the quarter. So, it was probably the most pervasive growth quarter that we’ve had. Typically, we’ll call out the one that grew more strongly than others, and it was a pretty pervasive growth quarter. So, yeah, it was – we thought it would be good, and it was even better than we expected, which is great, but for the headwinds, and everybody started to see towards that latter part of March.

Okay. Got it. So basically, you had a really good start. The revenue trend you mentioned going from 1Q to 2Q, and you mentioned the cost actions you’re taking, could you size those? Are they let’s call it roughly in that $15 million, $17 million per quarter type range benefit so that maybe you could be in the ballpark for what one would consider normalized margins maybe? Any kind of sizing, timing impact, cash versus noncash would be helpful.

Tiger, let me start, and you can – then you can add. We’re going to kind of refrain from giving a lot of guidance, but I think your question is fair. I think as we’ve looked at the – Q2 is going to be a meaningful drop. And I think the actions that we’ve taken, I think, are appropriate primarily as it relates to, hey, what’s the right utilization levels to shoot for when we know a lot of this. As things recover, we’ll be coming back. A big chunk of what we’re losing, too, is the approval to work from home for many clients, which we expect will come back. So, Q2, as you heard me say, we think that will be some of the local input. We have done – taken the right actions, we think, such that, going forward, even at a lower level, if we’re at that level, you will – you would expect to see operating margins improve a bit because we’ve brought utilization levels up to a point where given the size that we – that we’re seeing for Q2 if things kind of stay there for a period of time, maybe actions that we’re taking – that we’ve taken now at the beginning of the second quarter will help Q3 and Q4 such that by the end, I don’t know if we get back to the levels that we thought right away, we do think, long term, that does happen. But we’ll be able to resize the organization for the long term to get back to the levels that we talked about. It’s just harder to do in a quarter, even two quarters. But I do suspect by the time we get to the fourth quarter that the action we’ve taken will flow through. Tiger, anything to add to that?

No, I’ll just say, Ashwin, that we are very clear that we would like to make sure that we balance actions that actually delivers to the financial performance in the short run with making sure that we continue to build strength and muscle as the world changes, and our clients’ requirements change, so that we actually are in a position to deliver value to them in that changed world. And I feel really good that that balance is being struck well because our client requirements are beginning to change, and we’re seeing some of the benefits of that.

Got it. By the way, I should have mentioned in the beginning, I appreciate the good work you guys are doing in your community.

Thank you. And your next question comes from the line of David Koning with Baird. Your line is open.

Yeah. Hey, guys. Impressive quarter. Good to catch up with you. A – NallicheriTyagarajan: Thank you, David. Q – David Koning : Yeah. And I guess... A – Ed Fitzpatrick : Hey, David. Q – David Koning: ...a little bit on Ashwin’s question, too. If we think of the sequential decline, it kind of implies $75 million to $90 million or so. How much of that is just that $7 million loss of some of the banking clients, obviously, [indiscernible] information? How much of it is just that $7 million being kind of amortized over the whole quarter? Is that like half of the decline, which will just come right back when people can work again? A – NallicheriTyagarajan: Yeah. I would say... A – Ed Fitzpatrick : It’s a... A – NallicheriTyagarajan: ...that’s a great question. Yeah, that’s a great question, David. I would say about 40% would – one would characterize as supply-driven. And if you think about the $7 million of the first quarter, that’s all supply-driven, the transition to work-from-home, et cetera. And then the other 60% is demand-driven. And I would count that as two things: one, the slowdown in decision-making on large deals, and the embedded Transformation Services in those large deals; and then the second one is of the new Transformation Services and the pace at which that comes in also slowing down. We are ready for a lot of new services and new solutions into Transformation Services. But in terms of just sheer volume, that obviously has slowed down as people basically are dealing with this new world of disruption. That’s the ratio of the impact of the quarter. Q – David Koning : Okay. Got it. That’s really helpful. And then, I guess, just Rightpoint, obviously, a pretty big acquisition for…

Thank you. And our next question comes from the line of Tien-Tsin Huang with JPMorgan. Your line is open. Q – Tien-Tsin Huang : Hey. Thanks so much. I actually got disconnected, so forgive me if this was addressed already, but when you commented on the existing pipeline slowing, I think you also mentioned that a new pipeline created by the pandemic was picking up. So, I’m curious if the qualified pipeline or bookings as you define it, how that looks now versus pre-COVID? Any way to frame that? I know timing, of course, will matter, but just curious about the size if that makes sense. A – NallicheriTyagarajan: Yeah. So, Tien-Tsin, again very good question. I’ll start off by saying that quarter by quarter, bookings is a very nebulous number to look at because it’s so episodic, and so lumpy. Obviously with the slowdown in the pipeline on large deals, those large deal bookings have slowed down, and one would expect for those bookings to be slower than normal, and that does impact the total booking number. In the meanwhile, we have seen new deals enter the pipeline, and those because they are so specific about today’s economy and the challenges and opportunities that client sees today, those tend to accelerate through the pipeline. Obviously, the balance between the two determines the overall booking. Obviously, it’s not balanced because the slowdown is bigger than the new pipeline coming in, which is why you are seeing a decline in revenue in the second quarter. So obviously, that’ll have an impact and that’ll show through in bookings as we go through the balance of the year. And then in Transformation Services, we’re seeing a lot of new traction being built on some of the new solutions we’ve taken to market as…

Thank you. And our next question comes from the line of Maggie Nolan with William Blair. Your line is open. Q – Unidentified Speaker: Hey. This is [ph] Ted on for Maggie. Thanks for taking our question. Just wanted to ask real quickly how you’re balancing client requests for discounts and – with account profitability, things like payment terms and push-outs. I know you discussed that you are seeing some, but maybe if you could just touch on kind of that balance with the client requests. A – NallicheriTyagarajan: Yeah. I would say, clearly, these are times when it is important to keep total value that you’re creating for clients in mind, and make sure that you are focused on solving for their challenges and opportunities. If that requires flexibility, that’s exactly what we are really good at. When we went through the global financial crisis many years ago, that’s exactly what we did with a certain set of industries. We are doing the same thing with a number of other industries here. And that allows us to create new opportunities, allows us to bring new technologies to actually drive that productivity for our clients, and generate value for them. So, it’s not necessarily just price concessions straight out of the gate, it’s actually creating value. And we’re also seeing traction in value-creation deals where we get paid based on value creation. Ed, do you want to add anything to that? A – Ed Fitzpatrick : Just a couple of things. I think it’s been a handful of places where we’ve had conversations about terms, but I think the terms we gave are reasonable and fair. As you know, our working capital is accounts receivable, right, we pay payroll for the most part. So, not a lot of room for us to extend terms, if you will. And those have been a bit minimal. And then, just to kind of add a little bit to what Tiger was saying, typically what we are doing is making the clients’ operations even more efficient and effective, and saving money versus their existing run rate. So, we’re taking – we are actually helping them become more efficient and cost effective. So, it’s kind of the discount what we’re already kind of giving them cost reductions on, we’re not having a lot of those conversations because they know we’re taking cost out. So, it’s a – to get a – a bit of a different dynamic. But here and there as Tiger said with the relationships if they’re in a tougher spot, we’re absolutely working with our clients, as you’d expect.

Okay. That’s very helpful. And then in terms of the 95% of your coverage that’s currently being delivered with the biggest gap being in BFSI, is there a point where you maybe expect demand to be the limiting factor rather than the supply constraint. Maybe if you can kind of just talk about in the next quarter here maybe what you saw in April and May about how those different supply/demand trend are progressing? It would be helpful. A – NallicheriTyagarajan: Yeah. Absent any new macro change based on what we know and what all of us know, I would say going forward, we have a good handle on the impact driven by supply. It’s really now demand and the pace at which both our regular intelligence operations deal demand continues to progress in our pipeline, which as Ed pointed out is at pretty record levels, and Transformation Services that pipeline progresses, and new Transformation Services deals enter the pipeline. So, it’s all demand. A – Ed Fitzpatrick : Yeah. I think it speaks to the type of service that we’re offering too is not discretionary in nature. It’s, hey, what happens to this demand, does it go away, it doesn’t go away. So, in terms of customer service, as customer service levels we’re seeing, our clients are seeing customer service level decline, backlog growing to levels that aren’t acceptable. So, at a certain point, yeah, this has to come back, right, the work has to get done. So, it’s – we do think it’s a temporary demand decline as opposed to a change in dynamic.

All right. Thank you.

Thank you. Our next question comes from the line of Edward Caso with Wells Fargo. Your line is open. Q – Ed Caso: Hi. Good evening. Great quarter here. A – NallicheriTyagarajan: Thank you, Edward. Q – Ed Caso : I’m curious about your ability to get work back in the facilities, challenges in India and the Philippines and elsewhere. Are you allowed to get back in, and when and if you can get back in, do you – will that resolve some of your capital markets challenges? And then maybe longer term, there’s hope to reduce square footage, but at the same time, you have to socially distance more. So, are you spending money now to retrofit your facilities? Thanks. A – NallicheriTyagarajan: Yeah. So, Ed, great question. We do have – as you would imagine, we are – we have created, and are creating playbooks of moving back work to office. It’ll be a very deliberate systematic move back to office as location by location, city by city, jurisdiction by jurisdiction opens up with various stages of opening up. We will prioritize work that currently we are unable to do in a work-from-home environment in order to bring that back to office first. That is going to be a very staged, gradual uptick as jurisdictions open up. We can’t predict exactly when that’s going to happen. As we prioritized, bringing back work that we today can’t deliver, we’ll bring that back. We do believe that longer term, a proportion of the work will actually remain to be done virtually. That’s our view. I think work will, over time, depending on the type of work will, have a certain proportion that will be done virtually. It’ll allow us to access new talent. It’ll allow us to drive better performance…

Thank you. Our next question comes from the line of Bryan Bergin with Cowen. Your line is open. Q – Bryan Bergin : Hi. Good afternoon. Hope everybody is doing well. A – NallicheriTyagarajan: Hi, Bryan. Thank you. Yes, we are. A – Ed Fitzpatrick : Hey, Bryan. A – NallicheriTyagarajan: Thank you. I hope you are, too. Q – Bryan Bergin : Thank you. I wanted to ask here within this 2Q view that you’ve provided, can you just give us a sense whether you see Global Client and GE being similar in their trajectory or dramatically different. A – Ed Fitzpatrick : I don’t think [indiscernible] we need to go there yet... A – NallicheriTyagarajan: Yeah. A – Ed Fitzpatrick: ...with the breakout. I think we we’ll provide more color on that as we get into the second – suffice it to say both are experiencing a decline in growth... A – NallicheriTyagarajan: Yeah. A – Ed Fitzpatrick: ...that we’ve seen before. I don’t want to get into the percentages of one versus the other at this point, if that’s okay for now. A – NallicheriTyagarajan: Yeah. I would just say that given my color on supply being 40%, demand being 60%, and the other color that on supply, a lot of the supply was banking capital markets related. You can see that in the end, I think it’ll broadly work out to not that different a trajectory between Global Clients and GE. A – Ed Fitzpatrick : And Bryan... Q – Bryan Bergin : Thank you. A – Ed Fitzpatrick: ...to kind of – from Q1 to Q2, the growth rate in GE would be coming down, right, just because of the timing of the work that we brought in from GE last year. So, the growth…

Our next question comes from the line of Bryan Keane with Deutsche Bank. Your line is open. Q – Bryan Keane: Hi, guys. Thanks for taking my questions. I guess, just first, if I look at the month of... A – NallicheriTyagarajan: Hi, Bryan. Q – Bryan Keane: ...look at the month of April, is it down 3% to 5% constant currency and you’re expecting that to streamline or does it drop or get stronger? I just don’t know the trajectory of the revenues maybe by month. A – Ed Fitzpatrick : Yeah. In my prepared remarks, I’ve talked a little bit about the timing. We did say we – primarily with respect to approvals from customers, we received some approvals in April and some in May. So, the trajectory is a bit better, and we have visibility that April should – sorry, May should be better than April, and given the timing of some of those approvals, that we think June will be a bit better than April and May. So, didn’t give detailed color on the orders of magnitude, but the situation has improved a bit throughout the year, and it should progress throughout the rest of the quarter. Q – Bryan Keane : And I guess what I’m thinking about, Tiger, is what does that recovery look like? I mean, I guess this is the major question everybody’s trying to figure out, but does it come back quickly, and we get to more normalized levels in third quarter or fourth quarter? Just how long does it take to get back that demand since it’s dropped off here but hopefully, the market feels like, it’s feeling like it might be a quicker recovery. Just trying to get your thoughts on how you think about that. A – NallicheriTyagarajan:…

And our next question comes from the line of Mayank Tandon with Needham. Your line is open. Q – Kyle Peterson : Hey. Good evening. It’s actually Kyle Peterson on for Mayank. Thanks for taking the question. Just want to get a little bit more color on delivery capacity. I think you guys have mentioned the approvals and that capacity seems to have been increasing in April, May. Do you think – as things [indiscernible], do you think there’s hope that you might be able to squeeze it a bit higher than that 95% or do you think that last 5% is really going to be dependent on being able to have some of these COVID concerns ease a little and get some people back in some of your facilities? A – Ed Fitzpatrick : Well, a big percentage of it really is our – is the approvals from customers, right? That’s the biggest disconnect as Tiger mentioned and I mentioned them on our prepared remarks. So, we’re starting to get some of those, and that’s the piece that we said is improving. So, that’s – it’s really getting the approvals from customers. If we get all of them to approve, we’re very high-90%, maybe 1% or 2% left is not capable for work-from-home. So, we’re – it’s really those approvals that we need to get. And then, the demand plus or minus is going to be Transformation Services-related, right, and how does that proceed as we progress throughout the balance of the quarter. A – NallicheriTyagarajan: But it would be fair to... Q – Kyle Peterson : [indiscernible] A – NallicheriTyagarajan: But it’ll be fair to assume that given the amount of time that we’ve been working at this, we are getting close to the edge of what I…

Thank you. And I’m not showing any further questions. I’ll now turn the call back over to Roger Sachs for closing remarks.

Thanks, Bridgette. And thank you, everybody, for joining us on our call today, and look forward to speaking with you again next quarter.

Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.