Good day, ladies and gentlemen. Welcome to the 2020 Fourth Quarter and Full Year Genpact Limited Earnings Conference Call. My name is Towanda and I will 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 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 Web site. I would now like to turn the call over to Roger Sachs, Head of Investor Relations at Genpact. Sir, please proceed.

Thank you, Towanda, and good afternoon, everybody, and welcome to Genpact's call to discuss our results for the fourth quarter and full year ended December 31, 2020. We hope you had a chance to review our earnings release, which was posted to the IR section of our Web site, genpact.com. Speakers on today's call are Tiger Tyagarajan, our President and CEO; and Ed Fitzpatrick, our Chief Financial Officer. Today's agenda will be as follows. Tiger will provide an overview of our results and update on our strategic initiatives. Ed will then walk you through our financial performance in greater detail and provide our outlook for 2021. Tiger will then come back for some closing comments. Then we will take your questions. As Towanda just mentioned we expect the call to last approximately an hour. Some of the matters we will discuss in today's call are forward-looking and 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 addition, 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 Web site. 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 fourth quarter and year end earnings call. We are very pleased with our fourth quarter and full year 2020 results, especially in the face of the challenging macroeconomic environment. Our performance reflects our agility and culture of embracing change that allowed us to rapidly meet client's needs and successfully pivot to new ways of working. Led by the dedication of our global workforce, our ability to grow our top and bottom-line is a testament to the resiliency of our business. The acceleration of digital transformation into new buying centers across all industries has expanded our total addressable market, providing us with many more opportunities to drive sustainable and profitable long-term growth. In summary, for the full year 2020 we delivered total revenue of $3.7 billion up 6% on a constant currency basis. Global Client revenue of $3.3 billion up 7% on a constant currency basis; adjusted operating income margin of 15.9% ahead of our expectations and in line with pre-COVID levels in 2019 and finally adjusted diluted earnings per share of $2.12 up 3% year-over-year. Our Global Client revenue growth was led by consumer goods, retail, life sciences, health care, high tech and insurance. At the same time, inflows of new deals during the year hit an all time high, leading to 20% plus year-over-year pipeline growth by the end of the year. During 2020, we signed total new bookings of more than $3 billion. As we had expected, the impact of COVID-19 crisis lead to total bookings coming in lower than last year levels. However, we saw strong momentum in Global Client bookings in the fourth quarter as client decision cycles returned to more normalized pre-COVID levels. As a result, Global Client deals…

Thank you, Tiger, and good afternoon, everyone. Today I'll review our fourth quarter results and then discuss highlights of our full year performance and provide our financial outlook for 2021. Beginning with our fourth quarter results, total revenue was $951 million up 1% year-over-year both on an as reported and constant currency basis a bit higher than we were anticipating. Revenues increased sequentially by approximately 2%, Global Client revenue increased 4% year-over-year, or 3% on a constant currency basis, largely driven by demand for transformation services across many of our chosen verticals. Global Client revenues grew approximately 2% sequentially, also due to higher transformation services revenue. As a reminder, Global Client revenue in the third quarter includes the benefit of surge activity related to a set of banking clients as expected, did not recur during the fourth quarter. GE revenue declined as expected 16% year-over-year, due to the macroeconomic impact on their businesses and planned productivity commitments we discussed last quarter. GE revenue declined approximately 2% sequentially, slightly better than we expected. Adjusted operating income margin was 15.5% better than we expected, primarily due to higher than expected revenues. As we discussed on our last earnings call, we began to dial up investments in the fourth quarter in both R&D, as well as sales and marketing to more normalized levels and we restarted salary increases for our global workforce. Additionally, we incurred approximately 4 million of net other operating expenses during the fourth quarter compared to an approximate 4 million net gain last quarter. The fourth quarter net other operating expense is primarily related to an impairment charge for certain leased properties we no longer plan to occupy as a result, operating margins were lower sequentially. Gross margin improved by 20 basis points sequentially and 240 basis points year-over-year to…

Thank you, Ed. During 2020, we rose to the challenge and quickly adopted a distributed global delivery model without sacrificing productivity or service level performance. Our strategic choices made over the last few years. The non-discretionary nature of our services and our strong execution drove our industry leading global plan growth for the year while preserving margins. The disruption caused by COVID-19 is opening new doors for our unique domain lead transformation services and intelligent operations solutions that incorporate digital automation and AI, data and analytics, all wrapped in a great experience and delivered in the cloud. Our achievements have been recognized by industry analysts with 18 leadership position awards in 2020 and most recently being ranked number one in financial accounting by industry research from HFS. Viewing client challenges as information and process problems, we are able to make digital transformations real by connecting data to domain specific insights, deriving real-time predictive analytics that speed up decisions and actions all of this has expanded our total addressable market for 2021 and beyond. 2020 further reinforced the importance of serving all four of our stakeholders, clients, employees, investors and our communities. Over the last 10 plus years, we have made great strides in promoting a diverse and inclusive workplace. We have long held the belief that our diverse team builds the best solutions for our clients. Women now represent more than 40% of our global workforce, with many of our senior leadership team and 40% of our board seats being held by women. During the year, we also elevated racial equity as a high priority and identified various actions to drive change, including new programs to attract, build and retain great racially diverse talent. Providing professional growth opportunities to our global workforce has always been a top priority for us.…

Thank you, Tiger. We would now like to open up our call for your questions Towanda can you please provide the instructions.

[Operator Instructions] Our first question comes from the line of Ashwin Shirvaikar with Citi.

So both of you used the phrase fourth quarter if not sooner, in describing the timing of Global Client growth. So what would drive this sooner? Are you looking for a higher level of discretionary work, is this just more about converting the bookings that you talked about revenues with greater velocity, what are some of the factors that drive that?

So Ashwin we are very, very pleased with the velocity of decision-making that we saw in the fourth quarter, which led to the bookings that we talked about. And we think fourth quarter is a demonstration of what we would call back to normal decision-making. Our outline is strong, our inflows are strong. So if the momentum that we saw in Q4 continues and that our bookings lead to a ramp up in revenue as we go through the next three or four quarters, we see that fourth quarter being pulled forward. So, to answer your question, we continue to see the same momentum, we continue to see the movement in the pipeline, because the pipeline is there and that then starts ramping up. And of course, transformation services continue to be a lead engine for us. Those are shorter cycles. So I would say, we feel very good about the fourth quarter. And unlike the last time, when both Ed and I said fourth quarter, we're now saying it could be a little earlier than fourth quarter as well.

Got it. Okay. And then could you provide more details on Enquero that seems like a very solid data visualization engineering company seems to have meaningful Tableau and Anaplan relationships, any incremental info you can provide on the combination, any financial metrics would be great.

So I'll talk a little bit about the capabilities itself and maybe I'll turn to Ed on the financials. But, you captured a lot of what the company really stands for and got us excited. We've known the company for almost two years now. We've worked with them in the past. So we know the team, they've known us, we know the value that the two of us together can bring to a set of clients in the same verticals that we serve and they serve. And that's what got us together. And already in the month of January, we are seeing joint propositions to common clients in the area of supply chain, in the area of digital commerce, in the area of moving to online, around the platform such as Anaplan and Tableau and so on that you already called out. So the fact that it's moving data to the cloud and helping clients access the cloud and then build analytics on the cloud and visualization on the cloud across disparate technology platforms that they have is the exciting part here.

On the financial side, we talked about it being accretive, it is going to be accretive, it largely aligned with our profitability Ashwin, first year will be a little bit less but still accretive as we do the integration, as you might expect the first year will be a little bit less and then we grow from there. I guess the other thing just to add is, I talked about the analytics business being kind of one of our fastest growing and just add strength to that strength. So feel really good about this one.

Our next question comes from the line of Maggie Nolan with William Blair.

Nice to hear about the progress you're making in your ESG initiatives, thanks for sharing that. Can you quantify the headwind from the banking and capital markets client or maybe more importantly, how do you expect the rest of the business to perform outside of that account?

Yes. So I would say the banking capital markets clients, the client is a very unique situation. And it was driven by their reevaluation of their business restructuring, the way they run it, et cetera. And like any good partner and we've done this so many times in the past, we came to the table, we restructured our operations, the impact on our business, overall would be two to three percentage points of growth on the Global Client side. And therefore, if you take that out, Global Client is growing, even better than what we just described, and all the verticals are pumping in. Ed, you want to add to that?

I think that was the key comment, Tiger, I think banking, capital markets will be down year-over-year, probably, as a result of that, probably in the 10% to 15% slot. So the rest of the businesses, you can do the math, you feel really good about comprehensive growth over 10% in all the verticals. So it's almost like we're back to Q1 last year in every business except bank and capital markets, but as Tiger said, on the call, also feel good that we're kind of at the point where we really don't know what banking capital markets that we're building. So hopefully, we'll see that progress sequentially with growth, as well as we go through 2021 in banking and capital markets.

And I can just refresh on the inflows in the latter part of 2020 and therefore, the build up of the pipeline in banking and capital markets was really good so all of us in the team feel really good about that.

And then, you've had a lot of successful announcements about expanding relationships, like the Massmart announcement. But you've also highlighted strong new client logo additions and you're highlighting in a growing total addressable markets. So I'm wondering, as you look over the next couple of years, how much growth do you expect to come from kind of that existing client base versus new logo additions? And is that different from what you've seen in the past?

I don't think so, Maggie, and this is a little bit crystal ball gazing, but I don't think so, I would say three things are noticeable. Number one, is, if you take any client, it's very clear to us that even after 15 years of our relationship, there is still things to be done, that the client wants that we can bring to the table because we are also adding more and more capabilities to ourselves that are relevant for them. So we continue to grow with client even after 15 years. So that's the first element of growth that I'd talk about. And that runway just keeps expanding. Number two, when we add a new client and I talked about 11 new logos, but I called out 11 not new logos, the new logos that haven't outsourced before, new logos will be a much bigger number, the new logos that were never outsourced before. And those logos set the stage for very long-term growth. And I'm talking about 5 to 10 year growth trajectory. So this is less about any change in proportion from existing clients or new clients because that cadence hasn't changed. It's just the fact that our runway is just getting longer and longer.

Our next question comes from Puneet Jain with JPMorgan.

Can you share some margins, percentage for this year, like subsidies or any margin considerations as it relates to the banking contract that's going to ramp down and any other cost or use of cash considerations from the recent Indian budget?

Okay. I missed the last one, I'll cover the first two and then you can tell me the third piece of it. I'll start with the banking piece, we don't expect impact on overall margins and our progression from 59% to 60% holds true. We don't expect that to move the needle largely consistent with company margins. And then, I think the big give and take is, as you all probably recall, is the other operating income item last year in prior periods, the export subsidy which went away, the export subsidy was 2018 and 2019. Last year, we had the gain on the land that we had talked about and other income that went away. We didn't have that this year. This year we replaced, yes, that was effectively replaced by gross profits being strong. We expect that to continue going in the next year as well as SG&A leverage continuing to drive operating margin. So that piece, that other operating income item, we don't expect that to be at a big level that we've seen in the past going forward. Those are the two biggest give and takes in the year. Anything else, Tiger, anything else?

No. If I've understood Puneet's question, and once I answer it, Ed, if you can add to that, if you can. I think on the Indian budget, I don't think there is anything material as it relates specifically to our industry that, we would call out on either the positive or the impact side. Is that true, Ed? Is that fair?

That's fair.

And what do you expect for long-term changes in the delivery model as a result of supply and demand? Maybe in terms of on site support required during transitions, are employees working from offices versus home or even delivering services from gig economy model?

So Puneet, I think I would answer your question in probably two ways. One, if you look at what happened in 2020; we've transitioned remotely without anyone visiting anyone anywhere about 8 to 10,000 people. And this is knowledge transfer, as I said, a number of new logos, new clients, new services and that is a demonstration that can be done. And it can be done really well. By the way, the industry has demonstrated, there's not just us. And to me, that means that going forward that will be a pretty significant portion of the model. And that has a lot of ramifications in terms of speed, in terms of -- actually the intensity with which you can do knowledge transfer, as well as obviously value. The second is, when you have a situation where for a year, every one of our clients has teams working from home in their operations and in their business, doing really complex work. And every one of our teams serving them also working from home, all barriers of resistance, saying where can this work be done from which often used to be the conversation in some cases, is gone. One of the reasons why I think the total addressable market goes up is that there is no debate about which work can be done from where. The debate is actually, what is the best way to do it. What are the best technologies to apply? What is the sequence? Who does what? Those are the conversations. This is a big change and COVID-19 has completely changed that dialogue.

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

I have two questions. The two questions I have is, first, you mentioned that the bookings were up 20% year-over-year in Q4. That's terrific outcome. But I was wondering, and I was wondering if you could talk a little bit about the book-to-bill and how you see, is there any changes on how you see that work filtering into the P&L or revenues? Is there any elongation of fulfillment or is anything unusual that should be happening there? What I'm really trying to just understand is the 20% is a pretty good number. You talked about Q1 being very -- looking robust as well. Just trying to understand how much risk or tension on either side of the revenue guidance you have provided through more near term work. And then I have a follow up if I could.

Yes, Keith, we don't look at book-to-bill. It's not that relevant in our long cycle, multi-year annuity contracts that we sign certainly on intelligent operations and as I said, on our material portion of transformation services as well. So back-to-bill is not a good -- it is not something that we track and measure and drive. What I would say is that as we got out of December into January, after a pretty record booking quarter, there is no real difference between the way that booking would convert into revenue, the ramp up et cetera. Then one would normally expect, there is nothing unique about it. So I would say, normal cadence, normal growth trajectory, we just have to go through Q1, which has a comparison of Q1 of last year. And then it will just climb itself up, Ed, you want to add to that.

Yes. I think one of the questions relates to visibility too. So coming into the year visibility is a consistent, feel good 70%, 75%, bookings, backlog of revenue to be delivered and that's good. And then in terms of booking growth required, we'll expect to see bookings come up often easier compared to a year, but not a level that we're uncomfortable with in a revenue range that we gave you. So pretty good, based upon the trends that revenue range is a good one.

Okay, fair enough. Then, Tiger, my follow on question is for you, you mentioned a few times that your TAM has expanded, was hoping that you could flush that out and just really explain why you think the TAM has expanded and particularly where you think that serves the interest of Genpact? In other words, as the TAM expands, where do you think you're really key opportunities are within that? Thank you.

Great question, Keith. So I'll start by saying when I say TAM is expanded, I'm only referring to areas that are relevant for us. So the definition of TAM that I would have is, the industries we serve, the services that we are focused on. That's our definition of TAM and that's our TAM. There's lots of other TAM that I'm sure is there. But that's not a focus for us. That TAM has expanded for a variety of reasons, some that are independent of COVID-19, and some because of COVID-19 and some accelerated through COVID-19. So, three things. One, our investments in a set of chosen service lines and this is a choice that we made about three years back, four years back, supply chain services, financial claim services, financial planning and analysis services and sales and commercial services, deliberately chosen as a follow on from our strength and finance and accounting and procurement. And then vertical services, like underwriting and insurance and claims and insurance and so on. Those services we knew was the right batch to make and we have started investing in those both organically, as well as, as an example Barkawi acquisition in supply chain inorganically. Those have really played through as we went through 2020. If you look at all four of those, all four of those have become even more important for clients to think about reimagining each of those services. So that's one. Two, the digital technology investments and analytics investments that we've done, including the experience investment of Rightpoint, again, have become even more relevant when you're talking about an acceleration of digital transformation that every one of our clients are going through. And the third is really the market and the market is basically the one that I answered Puneet's question, which is, gone are the days when someone would say, finance and accounting, transactional work, yes, I think Genpact, you can do it. And you can do it really well. Financial planning and analysis, very high-end analytics work in finance or in supply chain. It's too cold to us and it should be done next door to me. And it should be done by my people. Those barriers have really collapsed. And digital technology is actually the other reason why it's collapsing. Because if you want a client to undertake a significant acceleration of digital technology transformation, they need partners and they need partners that connect the dots between finance, order management, sales and commercial supply chain to accelerate their journey to online. And those three are expanding the market for us.

Our next question comes from the line of Bryan Bergin with Cowen.

I think this is Zack Ajzenman in for Bryan. On the pipeline, could you maybe provide a little more color on the sustainability of the lift in large deal demand? And also, in terms of the mix early stage deals were started as a greater than normal mix last quarter? Can you maybe provide an update on the pipeline mix as it stands today?

Both great questions Zack, really good questions. And I'm going to start off and then I'll have Ed add to that. So the mix of large deals has come back to what I would call normalized levels, after being a little slower in the second quarter in the pipeline. The addition in the second quarter was muted, as you would expect, was muted in the first half of the third quarter as well, but has come back and now we are in the pipeline similar ratios of large deals that we've always seen for more than 2.5 years now and we expect that to continue, we don't see any change in that, particularly given the earlier discussion on expansion of time, the acceleration of digital transformation and so on. And as far as early deals versus late stage deals, the ratio does have probably a tad higher early stage deals then normalize but it's a question of maybe one more quarter and it will there. Ed, do you want to add to that.

Yes. I think we talked about the late stage deals being pretty nice mix for that third quarter going into fourth and we looked like we got a lot of those different hurdles, given the booking numbers that we saw. As we were looking at the mix earlier this week, it varies a little bit by vertical, but it looks pretty good. It looks in terms -- is kind of reverted to the [mean] [ph], if you will in terms of early and late. In one or two, it's more early than usual but that's a good thing, right, because we are refocused on places like banking as an example. So I think in that regard, it feels pretty good. And we were joking earlier this week too on the percentage of large deals. My view is that that continues to increase as customers get more comfortable as they do more complex deals, the only way that's going to come down from the current level, in my view over time, if we raise the level of what we consider to be a large deal from 50 to 75 or 100. I think that's trending in the right way.

Got it. And then just one follow up on guidance, what was the level of prudence in formulating the 2021outlook? And we asked that in the context, that there turned out to be consistently stronger performance across 2020 and mid what was arguably, more uncertainty.

I think our methodology is consistent. I think 2020 was a crazy year. I think everybody out of the gate after the first quarter and we came out faster than we had expected. And then everybody took a step back and said, okay, we have to reassess what we can do growth obviously was not as great as we expected. But as we reset the bar revenue is the stability of our business showing true. And we were able to kind of meet or exceed as we went forward, after kind of stepping away from giving guidance in the second quarter. So I think we've reverted again there to the norm of using the same processes on unsold percentages, pipeline backlog and business-by-business bottoms up. So similar process, the range is consistent and top and bottom-line. So we're going back to the way we think it should be. Now, we're not -- the world hasn't fully returned to BAU, we were talking about -- earlier this week, as well as the team. But it's gotten more so back to kind of the way we'd expect it to be. And our guidance doesn't contemplate another hit, if you will, or a significant change in the environment but it's continuing knock on wood down the favorable improving path that we talked about getting in Q3 that we wanted to see. I think that's all I had, Tiger anything more to add to that?

No. I would just -- it doesn't contemplate any significant change in current environment, but at the same time, it doesn't contemplate any other shock have really been administered as well.

[Operator Instructions] Our next question comes from the line of Mayank Tandon with Needham.

Most of my questions have been answered. But Tiger I was just curious, have you noticed, given the effect from the pandemic, and you talked about the acceleration in transformation services? Are contracts being structured differently now versus pre-COVID level especially asked in the context of outcome based pricing? Is that becoming more pervasive now, across your client base?

Mayank, actually it's a great question. I would start by saying we've been pushing that agenda significantly for many years now. So it would be fair to say that therefore, even 2020, even before the pandemic, those numbers of outcome based transaction pricing based, non-FTE based contracts were higher than before. Having said that, it still had a long way to go, COVID-19 has that accelerated. I wouldn't say necessarily its COVID-19 or the pandemic that has accelerated outcome based pricing; I would say when you enter the realm of supply chain, order management, when you enter the realm of financial planning analysis, when you enter the realm of impacting the front-end of the customer driving growth for the customer. The opportunity to actually do outcome based pricing just goes up. It's no longer about cost. It's no longer about labor arbitrage and cost of input. It's much more about the value you can drive. And therefore, those contracts have a greater opportunity to actually have outcome based elements in them. And that's what we're seeing. It's got less to do with the fundamental, it's got more to do with the nature of the work that is now being done by us in our pipeline, and that's still going to be a journey. It's not that overnight, our book is going to become an outcome based book. But that journey continues.

Got it. And then, given the mix of business and also some of the cost items that might not come back, given the hybrid nature of the work environment maybe potentially for less sales, travel, et cetera. Do you think structurally margins could be better than what you would have thought pre-COVID? And again, I'm not looking for short-term guidance, but just maybe more structural long-term margin outlook.

So Mayank, I think that's a great question, but I think I would and I've said this before, in I think one of the prior earnings call. I would be very, very careful. And we've done the math we've had discussions, significant discussions and modeling inside as well as with clients. And we've seen clients themselves model their own businesses on the basis of the fact that you should not assume that a remote work from home environment and you don't require an infrastructure and a facility reduces costs. Because first of all, I think it would drive the wrong decision. And secondly, I think we do ourselves a disservice in many aspects. When we do remote work, I think infosec requirements, privacy and security requirements have to go up and does go up and all of us are careful about making sure we do those investments. Second, just because workforce is distributed doesn't mean you don't need incremental culture building exercises, bringing teams together, all of those are going to be more than ever before needed, mental health issues to watch for stress, et cetera, when people do work from home. I don't think it's that simple an answer of saying real estate cost goes away. Therefore, more marginal travel goes away. When travel is replaced by virtual you got to substitute a whole bunch of things by doing, many more meetings, many more conversations. I don't think it's as simple math of one gets eliminated therefore costs becomes better.

I'm not showing any further questions in the queue. I would now like to turn the call back over to Roger for closing remarks.

Thank you, everybody, for joining our call today and we look forward to speaking with you again next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.