Good day, ladies and gentlemen. Welcome to the 2022 Second Quarter Genpact Limited Earnings Conference Call. My name is Lisa and I will be your conference moderator for today. [Operator Instructions] 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. I would now like to turn the call over to Roger Sachs, Head of Investor Relations at Genpact. Please proceed.

Thank you, Lisa, and good afternoon, everybody, and welcome to our earnings call to discuss our second quarter results for period ended June 30, 2022. We hope you had a chance to review our earnings release, which was posted to the IR section of our website, genpact.com. Speakers on today’s call are Tiger Tyagarajan, our President and CEO; and Mike Weiner, our Chief Financial Officer. Today’s agenda will be as follows: Tiger will provide an overview of our results and update you on our strategic initiatives, Mike will then walk you through our financial performance for the quarter as well as provide our current thoughts on our outlook for the full year 2022. Tiger will then come back for some closing comments, and then we will take your questions. And as usual, we expect the call to last about 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 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 second quarter 2022 earnings call. I hope all of you had the opportunity to attend our Investor and Analyst Day in New York City this past June, or had a chance to listen to the archived webcast available on the Investor Relations section of our website. Our results for the second quarter reinforce the strategic plan we laid out for the next several years. We are pleased that the momentum we saw coming out of 2021 has continued through the first half of the year. As we had expected, strong demand for our Data-Tech-AI services was the primary driver of our 12% constant currency year-over-year top-line growth for the quarter while Digital Operations services delivered steady performance. Our priority accounts grew 17% and represented 65% of total revenue. In a challenging macro environment, our adjusted operating margin expanded 190 basis points on the back of several strategic actions that align to our long term plan and build agility for the future. Specifically, during the second quarter of 2022, we delivered total revenue of $1.089 billion, up 12% on a constant currency basis. Data-Tech-AI services revenue of $489 million, up 22% on a constant currency basis; Digital Operations services revenue of $601 million, up 5% on a constant currency basis; adjusted operating income margin of 16.9% expanding 190 basis points from the first quarter; and adjusted diluted earnings per share of $0.70 cents, up 6% year-over-year. Every company continues to grapple with numerous challenges including 40-year higher inflation, rising energy costs, ongoing supply chain disruption, and high levels of talent attrition. In response, clients are engaging with us to navigate the short term and build resilience for the long term, particularly in areas such as supply…

Thank you, Tiger. Good afternoon, everyone. Today I'll review our second quarter results and provide an update on our full year 2022 financial outlook. Total revenue was $1.089 billion, up 10% year-over-year, or 12% on a constant currency basis and in line with our expectations. Data-Tech-AI services revenue, which represents 45% of total revenue increased 20% year-over-year, or 22% on a constant currency basis, largely driven by our cloud based data solutions across notable focus areas including supply chain, sales and commercial and risk. Digital Operations services revenue, which represents 55% of total revenue increased 3% year-over-year or 5% on a constant currency basis, primarily due to deal rounds from recent wins. From a vertical perspective, financial services increased 17% year-over-year, largely due to fintech and digital banks, where we're helping them navigate various regulatory challenges and scale their operations as well as continued demand for our risk services with traditional banks. Consumer and healthcare increased 9% year-over-year, largely driven by sales in commercial and supply chain engagement versus a very strong prior year growth rate. And our high tech and manufacturing increased 13% largely driven by supply chain finance and accounting engagements with both new and existing clients. Adjusted operating income margin was 16.9%, down to 100 basis points from the second quarter of last year, but expanded 190 basis points sequentially. Our performance the second quarter included the positive impact of classification of certain non-strategic assets as held for sale that Tiger referred to earlier, given our intention to divest a small business. Additionally, adjusted operating income margin during the quarter benefited from growth related to operating leverage and the impact of our cost containment initiatives resulting in lower SG&A. As a reminder, our higher than normal adjusted operating income margin level during the second quarter of 2021…

Thank you, Mike. Our first-half performance highlights the resilience of our business model, our durable competitive advantage and the relevance of our services in the market. This is evidenced by our continued strong bookings and expanding pipeline of opportunities. The intimacy we have built with our clients, particularly across the C-suite, beyond just the CFO and CIO, gives a deep insight into what is happening in their businesses and industries, allowing us to pick up signals and take early action to drive value for them. This is particularly relevant in an environment where deal cycle times are shortening, and clients are looking for rapid payback to their investments. Our ability to combine our deep expertise across industry and domain with our strength in operationalizing insights to actions that lead to tangible outcomes, sets us apart as a strategic partner that can help clients navigate the challenges they face today, and build resilience for the future. We continue to be recognized by leading industry analysts firms and partners for the capabilities we have built and invested in. For example, by IDC for our proprietary and unique data and analytics certification program DataBridge as the largest upskilling data program of its kind in the world with more than 58,000 employees trained; by Everest Group as a leader in its 2022 supply chain management services, advanced analytics and insight services, as well as Financial Crime and Compliance Operations PEAK Matrix; by ServiceNow, as its 2022 Financial Services Global Partner of the Year; by HFS recognizing our experienced business Rightpoint in the Winner's Circle of its Top 10 Employee Experience Services, 2022 and #1 for outstanding voice of customer; and finally by Microsoft, naming Rightpoint, as it's 2022 US Partner of the Year for Employee Experience, and runner up for its Worldwide Partner of…

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

Yes, thank you. [Operator instructions] The first question is coming from Milan. I'm sorry, Maggie Nolan of William Blair. Please go ahead.

Thank you. Tiger, you made a comment on client decision cycle times trending down. And I believe you’ve said that in the recent past as well. I'm curious, is that showing up disproportionately in either the Data-Tech-AI or Digital Ops segment?

Maggie, I - no actually it's showing up equally in both Data-Tech-AI as well as Digital Operations. And, interestingly, it's showing up both in large deals as well as obviously, in small and medium deals. One would expect it to be faster cycle in smaller deals and medium sized deals, but it's also showing up in larger deals. And I guess, I mean, the simple reason for that is, our clients are very focused these days, no surprise. Cost is back as a big agenda item. And they want payback of their investments very quickly. So I'm a little not surprised. But we've seen this trend for - consistently for about four quarters.

Okay, great. And then can you give us a little more information on what is the nature of the business that you're divesting? And why it's non-strategic? And then just to clarify, I believe you said 10% of rev is kind of non-strategic revenue. Is that inclusive of this business or incremental to the business you've already flagged to divest?

Yeah, I think the last - I’ll take the last part of the questions that includes this business, but what we're really talking about is specific business that that has an asset. So for me, Mike, you can also the specifics around the business itself.

Yeah, we're not really disclosing the specifics around the business itself. So this is a business we've invested in, we built for a number of years and we think it's in a good position right now to be in better hands, and we're able to continue to fund it and invest in the business on a go forward basis. And we look to hopefully consummate a deal in the not too distant future from that perspective, and provided some financial information in our press release on the size of the deal. And again, if you want to think about it from, as your first question was, it said about 10% of our business, we're over $4 billion business - that's about $400 million, and this is about $21 million. So it's a very, very small business for us.

Okay, and is the remainder of that $400 million being actively evaluated?

No, no, no. No, that’s a great question. The remaining pieces out there -

Of that $400 million being actively evaluated?

No, no, no, no. There a great question. The remaining piece of that $400 million is continuing to be managed and invested in appropriately. Again, this was a sub-segment of that $400 million that was specifically tied to a freestanding assets - a freestanding business. That we're, I think we're in a good place right now to monetize, as it fits in line with our future strategy.

Got it. Thanks for taking my questions.

Thanks Maggie.

Thank you.

Next question comes from Brad Clark of BMO. Please go ahead.

Hi, thank you for taking my question. I wanted to dive in on the pricing comment. You mentioned some benefit to the gross margin line. Could you just provide some color and commentary on how those conversations are progressing with clients? And if you're able to quantify any impact that pricing is having to benefit both growth and operating margins? Appreciate any color on that. Thank you.

Brad, we - when we when we thought about the overall pricing environment and the inflationary environment for the year, we had factored in some element of price increases in conversation with our clients. And we had actually factored that in and it's going as per our expectations. The key to understand here is that these take time. These are against long term annuity contracts that we have. And the real discussion that we have with our clients is, how do we create a win-win situation by driving more value? Often it's increasing the scope. It's sometimes finding opportunities to drive automation and change and analytics and insights that drive incremental value in the outcomes that get delivered and getting paid for those outcomes. So there are a variety of ways we do this, because it's always in partnership with our clients. So it takes time and we're very pleased with the way it's progressing through the years, so far. Brad, did we lose you?

No, you didn’t. Thank you.

Okay. The next question?

The next question is coming from Ashwin Shirvaikar of Citi. Please go ahead.

Thank you. And Tiger, Mike, good to hear from you.

Yeah, Ashwin, hi.

I guess my first question is, and you mentioned this at the Investor Day and of course repeated it today, the nature of demand is changing with more focus on cost. Could you sort of review how you expect that to affect your new segments in terms of demand, if you could kind of go through that?

Good question, Ashwin. I would say, both segments, the Data-Tech-AI services as well as Digital Operations services, have enough ammunition to help our clients navigate cost improvement and cost takeout situations. And we are therefore seeing the tailwind of demand come through with cost being the agenda on both types of services. Having said that, one of the incremental advantages of Data-Tech-AI services is that it also tackles risk, it also tackles sales and commercial, particularly, for example, the example I gave around tech businesses that are trying to convert themselves from an asset based business into a consumption based business. If you can think about tech businesses trying to do that, that's a big change. You're talking about renewal cycles, you're talking about, how do I get to the customer at the right time? How do I make sure that my churn rate drops in an environment where I'm not getting new growth? So that field is in commercial services and that's very significant growth agenda in our Data-Tech-AI. And then of course, supply chain, there is no question that one of the biggest conversations we are having amongst all our services is supply chain services across a range of manufacturing, consumer goods, life sciences, technology customers. So I would say cost is an agenda on both. Data-Tech-AI services have an incremental lot - lots of other things that sit there and allow even more growth to happen.

Got it, thank you. And then just a modeling question as we look to incorporate the new segment in our models, 3Q, 4Q, anything to look out for either from a seasonality perspective or any other perspectives from a modeling perspective, anything to watch out for these two particular segments? Should they stay in that? One of them in the 5%, 6% range and the other in the upper teens, low 20s?

Yeah, I think that's probably a fair way to answer. The last portion [indiscernible] create an opportunity to look at it. We disclosed the last 10 quarters of the bifurcation of our revenue that way. So you can look at the historical patterns as well.

Okay. Got it, thanks.

Thanks, Ashwin. You can go to the next question.

[Operator Instruction] The next question comes from Jared Levine of Cowen.

Hi, yeah, this is Jared on for Brian. With GE, I understand that you're not breaking it out. But is that account performing in line with how you expect it to in the first half of this year and any change in your second half view there?

We're not really addressing GE specifically, as we move forward, as Tiger alluded to, it's less than 9% of our business. But no nothing is changed from the - what we've communicated earlier, we bifurcated GE versus global client. So from that perspective, no.

And the way to think about GE is, it’s incorporated within our manufacturing and high tech segment that we report. And as Mike referred to in his prepared remarks, that segment grew in the quarter 13%. So we've had a good overall growth in that segment, and GE is now incorporated into that segment as one of our clients.

Yeah. Okay, great. And then in terms of wage inflation, has that improved at all following that stabilization you saw in 1Q?

Yeah, I think the best way to answer that is its stable. It has remained stable. Has it improved? Meaning is inflation down? The answer is no, it hasn't. But it's not gone up which is a good news. The typical skills and cohorts where we have seen the most pressure are the usual suspects that we talked about last time as well, which is, digital technologies, data science, data analytics, specific supply chain services from technology services, all the usual areas where our clients, and everyone has a lot of demand going on. You can go to the next question, please.

[Operator Instruction] There are no more questions in the queue. Okay.

Okay. Well, thank you very much for joining us today. And look forward to speaking to you again next quarter. Thanks so much.

Thank you for your time. This concludes today's conference. You may all disconnect.