Good day, ladies and gentlemen. Welcome to the 2023 First Quarter Genpact Limited Earnings Conference Call. My name is Gigi, 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 website. I would now like to turn the call over to Roger Sachs, Head of Investor Relations at Genpact. Please proceed.

Thank you, Gigi, and good afternoon, everybody, and welcome to our first quarter earnings call to discuss results for the period ended March 31, 2023. 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 an update on our strategic initiatives. Mike will then walk you through our financial performance for the quarter as well as provide our current thoughts and our outlook for the full year 2023. Tiger will then come back for some closing remarks, and then we will take your questions. We expect our 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 today’s call, 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 the 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 first quarter 2023 earnings call. Today, I’ll talk to you about our financial results for the first quarter of 2023 and about how we believe we are uniquely positioned to partner with our clients in leveraging generative AI, large language models or LLMs and broad AI and machine learning technologies. So first, our results for the first quarter were solid and reinforce the powerful interlinkage between our Data-Tech-AI and Digital Operations services that leads to many new opportunities to continue to create value for clients and growth for us. One of the most exciting was the record level of first quarter bookings we signed in the quarter and near-record pipeline we entered the second quarter with. In the first quarter of 2023, we delivered on a constant currency basis total revenue of $1.089 billion, up 4% year-over-year; Data-Tech-AI service revenue of $485 million, up 6% year-over-year; and Digital Operations services revenue of $604 million, up 3% year-over-year. Additionally, we delivered adjusted operating income margin of 16.4%, expanding 140 basis points year-over-year, and adjusted diluted earnings per share of $0.68, up 13% year-over-year. Over the last 60 days, I have had the opportunity to speak to a 150-plus C-suite executives of large global enterprises, and I’m hearing a consistent set of themes. They all face the reality of having to do more with less, so they remain focused on cost takeout and cash flow improvements. At the same time, they want to allocate resources to their most critical long-term transformational programs, including starting to think about ways to leverage generative AI, LLM and, more broadly, AI in their business. It is this backdrop against which we set the net new record for our first quarter bookings,…

Thank you, Tiger, and good afternoon, everybody. Today, I’ll review our first quarter results and provide you with an update for our full year 2023 financial outlook. Total revenue was $1.089 billion, up 2% year-over-year or 4% on a constant currency basis. Data-Tech-AI services revenue which represents 45% of total revenue, increased 4% year-over-year or 6% on a constant currency basis, largely driven by continued growth in our cloud-based data and analytics solutions across our focused areas, including supply chain, sales and commercial and risk services. Digital Operations services revenue, which represents 55% of total revenue, was flat year-over-year or up 3% on a constant currency basis, primarily due to deal ramps from existing and recent wins. From a vertical perspective, financial services increased 9% year-over-year, largely due to continued strong demand in our risk management services, leveraging data, analytics and AI. Consumer and Health Care declined 4% year-over-year, largely driven by lengthening large deal cycles, lower Data-Tech-AI services revenue and the impact from a recent divestiture of a business we had previously classified as held for sale in 2Q 2022. High Tech and Manufacturing increased 3%, primarily driven by new deal ramps, partly offset by a notable reduction in operational scope of a priority high-tech account. During the year, we grew the number of client relationships with annual revenue greater than $5 million from 150 to 175. Clients with more than $25 million in revenue increased from 31 to 36, including a recent expanded relationship that brings a number of clients with over $100 million in annual revenue from 3 to 5 in the same period last year. Adjusted operating income margin expanded 140 basis points year-over-year to 16.4%. This better-than-expected performance was largely due to timing of sales and marketing investments that we expect to pick up during…

Thank you, Mike. As we look at the way our 2023 has started and the momentum we see, it is clear that the capabilities we built organically and added inorganically over the years are even more relevant for our clients. Every new technology breakthrough that has become available has only increased the need for partners like us to help our clients leverage these technologies to add value to them at scale. We’ve already seen a greater urgency and desire in our clients and new targets to transition to new operating models, get their arms around their data that is clean, well defined and well understood, that then becomes capable of feeding these models to create outsized value. In summary, every one of the 150 plus clients I’ve met in the last 60 days expressed interest and intention to have Genpact be their partner in using and implementing AI and generative AI. We started our journey in AI with the acquisition of Rage in 2017, and that spurred a number of AI and machine learning services and solutions. Three, we view AI as both an opportunity for internal efficiency and margin enhancement and expansion of services to clients with an increasing TAM. Since the announcement of ChatGPT and other generative AI, our pipeline intensity have gone up. We’re already working with a number of real use cases with clients in our operations and their operations as well. That is why, despite some near-term pressures in the small portion of our advisory business that is more discretionary, overall demand for our services could not be more robust. I’m pleased to share that we recently published our 2022 Sustainability Report, which is available on our website, highlighting the ongoing progress we have made across our ESG initiatives that support our long-term financial targets. And at the same time, we are helping many of our clients make progress on their ESG goals using our solutions. With that, let me turn the call back to Roger.

Thank you, Tiger. We’re now ready to take your questions. Gigi, can I please ask you to give the instructions?

[Operator Instructions] Our first question comes from the line of Tien-Tsin Huang from JPMorgan.

Hey, thanks. Good afternoon to all. Tiger, it sounds like you’ve been talking to a lot of executives, which is great.

Thank you.

I wanted to – on the – yes, it’s a lot of talking. I think the – good for business. I think on the five large deals, I have to ask on that. So good color provided there. In terms of the ramp, I mean, it sounds like some of this will ramp in 2023. How long will it take to get to full ramp? Is there risk involved in some of these transitions? It sounds like there could be some rebadging and taking over some of the captives. So just trying to better understand the – both the impact on the P&L in the short-term as well as the risk that maybe comes with it. It sounds like great obviously overall.

Yes. No, thank you, Tien-Tsin. And yes, just a reaction to the 150 clients, that’s a lot of talking. I know. But the environment is such that it’s good to talk to get full insight as well as engage because everyone is trying to figure out answers. So to your question on the five deals, the deals are, in terms of structure, very similar to deals we’ve done before. A couple of them, specifically, I called out, do have material rebadge components. These are companies that have made strategic moves, where they say that, actually, we need a partner to help us, even though, earlier, we thought we don’t – we didn’t. We’ve done 25 plus of such rebadge deals in our history. And I would say, bar none, they have gone really, really well. No surprise because we taught ourselves out of GE. I guess, now, 18 years back, but that DNA still remains. So we don’t see risks associated with that. Obviously, these are complex deals, the ramps are complex, but we know this business. We know the way these use our structure. We’ve done this before. So there is nothing extraordinary in all of these. So we expect regular cadence to build up. Unfortunately, none of these deals really materially contributed to anything in the first quarter. We will start to ramp sometime in the second quarter, and actually, more into the second half of the year. In fact, some of them will tail up – I mean, the tail ramp will continue into the first half of next year, given that these are large and complex. So no, I mean, I think more to call out than that. We’re obviously very excited at the way quarter one went on that.

Okay. Great. And I think – I’m glad you went to the generative AI because I know we and my peers are all getting questions on it. How would you – Tiger, we talked about a lot of different tech trends and waves over the years. I know you mentioned RPA. Anything you would compare this to, this generative AI opportunity, to – relative to past waves, either in terms of scope or opportunity or just impact with enterprises as you see it so far?

I’ll start by saying it’s very, very exciting. I’m going to say something which I’ve said before in reasonably public forums, which is I always believe RPA was never going to be the ultimate answer. And I already believe that RPA is a very simple, easy solution at kind of at the bottom of the food chain. And we’ve always said that AI is at the top of the food chain. So this is AI. So this is what all of us in the industry, all of our clients and everyone who studied, worked, and knowledge building and the use of services, have been asking for and saying, one day, we will get there. Well, the breakthrough finally happened on language, so we are very excited. And actually, we started working on solutions with our clients in the fourth quarter because GPT 3.0 I know is available, and our people and our teams have been working on those. Our AI center of excellence worked on those. So it is different than RPA, but there are lots of similarities. I think it is important to understand that while the opportunity is huge and the value-creation opportunity is real, the challenge that every enterprise faces is, first of all, where do I start? What do I prioritize? And what value can I get? Which then determines where do I start. The second is whichever area you choose to start, because that’s the best value and you can get it fast, you better have your data lined up. And if you look at typical large enterprises that have been around for many, many years and are hugely successful, it’s the one thing that they have been on a journey on, and that journey continues. Every one of the five deals that we signed in the first quarter, every one of the deals in our pipeline that we are very thrilled about are all around helping our clients get their arms around data, which means standardize, consolidate, bring it all together, clean up the data. And that’s the journey. And who’s best positioned to do that? Companies like us. So I think this is a real opportunity and a tailwind for us, exactly what we saw in RPA. I remember 2016, late 2015, 2016, I think we all read really expert reports that said RPA will destroy BPO. And we – I remember we saying, no, RPA is going to expand TAM. That’s exactly what happened. We believe generative AI and broader AI is just a real opportunity to expand TAM and create value for our clients.

Thank you for share that, Tiger.

Thanks, Tien-Tsin.

Thank you. [Operator Instructions] Our next question comes from the line of Keith Bachman from BMO.

Hi, thank you. I’m going to follow Tien-Tsin. Tiger, you’ve always had thoughtful perspective over years and years and years. And your thesis here on generative AI is essentially that, while it makes each of your employees more productive, i.e., more efficient and based on the team FTE model or P x Q model on the people, it will hurt revenue growth, but you’ll capture incremental work to still lead to total growth, right? That’s just – and that’s been true for your whole approach to AI for a while. I wanted to drill in, though. As you think about that though, is – there is a couple of variables that I want to try to tease out as generative AI comes more to the forefront and the quality improves. But is there a risk of – that pricing gets further eroded in this process that may be different than other parts of AI are? Do you see it all – all the pressures as being similar?

So actually, Keith, great question. And by the way, the way you started the question, you made me feel old, but...

Well, that’s just me because I’m old, too, because I’ve listened to you for a while.

No, no, thank you for that. So good question, by the way. The way we think – two parts to the answer because there are two parts to the question. One, exactly to your point, we see – and we’ve seen this is not just with RPA, but it’s even moving to the cloud. And actually, if I go back, 15 years back, there was no RPA. We saw that with Lean and Six Sigma. You drive productivity, you take labor out, you therefore reduce the amount of work that needs to be done, you get more work. And we’ve always said that this industry, our industry and our services, continue to be underpenetrated. Now in the meanwhile, we’ve added new services in the same industry verticals and across our clients. So RPA, same story, while we have 8,000 bots that are running, the reality is that those same clients, in fact, I think if I do a regression analysis, which we’ve done, of where are those bots most effective? The most effective clients are those where we have the bots and we’ve grown with the client. So it’s like a – the two happen almost together because you’re clearly adding value to the client and then you are expanding the total addressable market and capturing more of that. When you do that, you get better pricing. And what is interesting, today, in our business model versus 2016 when the RPA wave started, is that our alternate commercial models, commercial models that are built on transaction-based or outcome-based or value-based pricing, which was very, very low in those days, is still only 13%, but is on a growth trajectory. We called out 20% for 2026. I wouldn’t be surprised if we actually break through that much earlier. The bookings for this quarter itself, indicates a 28% total TCV being alternate commercial models that – we’re going to get that. And when we get alternate commercial models, it’s a win-win. The client wins big time, and we do win as part of that, because that’s how total win-win gets created. So we expect, in this journey, margin to be accretive, which is part of the reason why Mike and I said in the long-term plan that that’s going to happen.

Right. Right. And so sorry, Tiger, just to drill down. This, you think, changes the nature – I mean, might your project work, so to speak, go up as a percent of your total revenue because of AI versus just doing time and materials?

I don’t think, Keith, I would describe it as project work. In fact, probably almost all the examples I gave, both in the deals as well as in the solutions, almost all of them are AI solutions that we’ve embedded into the services that we deliver. In some cases, it’s services that we’re already delivering. In which case, we go to the client, we put together a proposal and a solution, then we work together with the clients because sometimes we need data from them. Sometimes we already have the data because we run the operations. And then we embed that into our operations, deliver the value and get a piece of that value and then get more growth. However, at the same time, there are real opportunities that we do encounter where the client says, why don’t you also come in and do X, Y and Z in my operations using your AI technologies? We did that with RPA. Out of the 8,000 bots, I think about 1,500 of them are actually deployed with our clients. The other 6,500 are with us. So we see that happening in AI as well. I don’t think the ratio is going to change. I think the ratio is going to continue to be what it is. Because the real power of AI for us is when we go and make a big proposal on a big deal, it includes AI-driven solutions in it, just as today, it already includes RPA in it.

Got it. Got it. Okay, well, I respect my colleagues. I am going to see the floor. Many thanks, Tiger.

Thank you, Keith.

Thank you. [Operator Instructions] Our next question comes from the line of David Koning from Baird.

Yes. Thanks so much. Nice bookings this quarter.

Thank you, David. Thank you.

Yes, yes. And – can we just kind of go back through to – I know it sounds like you’re going to exit this year back at kind of the normal 10% plus run rate, but there is kind of this four-quarter period of more like mid-single digits. And I know that’s driven by a little lower in the Data-Tech-AI that started kind of Q4. So can you just kind of bridge between like the normal 10% plus growth in the business to why for four quarters as a mid-single digit? I mean, is it just one or two clients? Just – because really, the genesis of the question, just so we don’t worry that there is something getting a little bit disruptive in the business.

No. So I’ll start off, and then Mike can answer it. But I’ll just say even as we entered the year, when we started talking about the year in the first quarter this year, when we guided for the year, I think Mike and I have both said that the year is going to see a little difference between first half and second half because we expected first half to be higher growth – second half to be higher growth than the first half, given that the prior year, the comparison was going to be – comparison of the first half of 2022 was in the first second half of 2022. We had set that expectation. And as we entered the year, we also saw discretionary spend in advisory work, particularly related to things like digital marketing or experience and so on, come down in the fourth quarter, and we expected that to continue. And we planned for that, and that has rolled through. Mike also called out in his remarks the reduction in operations scope for one of the larger high-tech clients. That’s also got factored in, and that comes through fully – actually, most of it comes through in the first quarter, so it obviously comes through in the first half. The deals, the large deals, we actually expected, if you remember, to sign some of them in the last few days of fourth quarter. They got pushed out in the first quarter – into the first quarter. We did sign them, but we signed them towards the end of the first quarter. So now the ramp is really, for lack of any other word, a pretty significant ramp as we go through the year into the third and the fourth quarter. I’m going to have Mike answer that.

Yes. The only thing I’d add to that, as you alluded to, that reduction in scope of that client, which we did have in the forecast on our outlook that we provided earlier. What I would say is that when we do look at our business, we will continue just to look at it just on a 12-month, 18-month and 24-month rolling average, right? And then when you take into account these large deal wins, feel very comfortable. When all is said and done, we will be at that blended 10% rate over these 2 years. Again, we’ve always said some years will be a little better. Last year, it was 11% plus. This year, we’re estimating it to be a little shy of that. I think when you wait all of this out, it’s going to be back on trajectory to do even better than that.

Well, nice. So no, that’s great to hear. Good. And then, I guess, just the second question. It looks like just – there was a cash flow item just that you did divest that business, I think you mentioned in the prepared remarks. Can you say again how much – how big of an impact it is to revenue when you divested the business?

I’m sorry, one more time, I couldn’t hear you. Cash flow and?

Yes, I’m sorry. The divestiture, how much revenue impact does that have?

How much revenue? Yes, we’re not disclosing that, but it makes up a substantial amount of the delta between what our normal trajectory is in our growth rate and where we’re forecasting this year, if you want to kind of back your way into it.

Got it. Thank you.

So again, the other big put and take is, as Tiger alluded to, the timing of all this, right? Particularly, these large deal wins literally came at the end of the quarter. We anticipate them a little sooner. That large deal ramp down, so to speak, happened in the earlier part of the quarter. So in the end, it all washes through.

Got it. Thanks, guys. Appreciate it.

Thanks, David.

Thank you. [Operator Instructions] Your next question comes from the line of Maggie Nolan from William Blair.

Thanks. So you’ve obviously had some tracks in the large deals, but you also mentioned that you’re still seeing elongated large deal decision cycle. So I’m curious what your expectations are for the remainder of the year for deal sizes?

Yes. So Maggie, great question. We haven’t seen any downward trend in the large deal cycles. They have been elevated for a couple of quarters. They continue to be elevated at the moment. They are not increasing further. That’s the good news. I don’t want to crystal ball guess, so I don’t think I would expect it to rise up any further. Right now, I wouldn’t say it’s going to go down. But as everything settles down and people get into a cadence, as hopefully, things like inflation and supply chain gets a little bit more stable, I would expect some of that elevated cycle time comes down a little bit because it is elevated and has been elevated. We’ve assumed that, that continues through the year. We’ve not made any other assumptions.

Great. Thank you. And then on the outcome base, you put a target out there, I think, for 2026. What does it take internally in the business to drive towards that target? And then it sounds like maybe the opportunity there is that it would also be margin-accretive. Is that accurate?

Yes. The second part of the answer is a simple one, Maggie. Our history shows that every time we enter into a contract that has that component, and it could take various forms. It depends on the type of service, etcetera, we tend to really create win-win-win across the board. Everyone wins. In fact, the third win I talked about, if a client wins, we win. But actually, the talent that works on it, they get really excited because they actually see real value being created, etcetera. So it’s a real opportunity. We think, as we continue down that path, it’s always been a challenge to get our clients to agree to those types of commercial models. It’s taken time over the years to actually get a number of clients there. But these things have a way of gathering momentum. We believe that, that momentum is beginning to gather. And one of the drivers of that momentum are things like AI and generative AI. Because what happens when you do that is you are really looking for outsized value creation. And in that outsized value creation journey, you really need a true partnership between the client organization, the access to that data they have, the standardization of the data, and our domain expertise and process expertise and technology and digital expertise and analytical insights to bring all of that together to operationalize it and deliver value. We’ve seen that in insurance claims. We’ve seen that in insurance fraud. We’ve seen that in sourcing and procurement. We’ve seen that in order-to-cash. We’ve seen that in financial planning. We see that again and again and again. Customer service. We think there is a real opportunity in customer service. And one of the most interesting things about customer service is that we’re not a big player in customer service. So think about what we could do. We could disrupt the customer service market by actually building solutions and taking them to our clients across financial services, high tech and a number of other customer service arenas.

Thank you, Tiger.

Thanks, Maggie.

Thank you. [Operator Instructions] Our next question comes from the line of Ashwin Shirvaikar from Citi.

Thank you. Hi, Tiger, Mike. Good to speak with you guys. Let me start with bookings. Obviously, good bookings there has been mentioned a few times on the call here. The question I want to ask is with regards to revenue conversion, and not so much the proposed timing, but the confidence that, that timing will hold. Because what we’ve kind of seen in the industry is a number of companies are coming up with tiers of big crash bookings number and then it doesn’t really ramp at a historical or normal pace. So in terms of just sort of confidence levels with regards to that. And then the flip side of that question is, in general, what’s sort of flowing more smoothly in terms of revenue conversion for you? What type of things are getting pushed out from a functional perspective?

Yes. So the first part of the question, Ashwin – great to hear you, the first part of the question that you asked, I know the reference to large deal bookings and not converting into revenue that we’ve also heard based on public commentary in the industry. We haven’t seen that in our business. In fact, I have to go back into history to think about where it happened, and I would struggle to really come up with a meaningful material answer. And the reason for that is because our business is a little different. Our business is a little different. In fact, I guess, on this topic, it’s very different. When we talk about the kind of services we talk about, it is not something that you can go back and forth on. It is not something that you can take likely in terms of a decision. It is not, I am going to sign up a $200 million TCV deal, why don’t you start with $50 million, deliver it, then the next $50 million comes, then the next $50 million comes. Technology projects sometimes have that cadence. A number of our deals have technology embedded in the services, for sure. In fact, they have data tech AI, they have AI embedded, etcetera. But the deal is the service, and it includes announcing to the global team that the client has that the service ownership is changing. Part of the reason why some of these deals really take long is because you need CFO to obviously agree, then you need a supply chain leader, then you need the procurement leader. Most often, in fact, all five of these deals go to the Board of Directors, go to the CEO. And in fact, it requires a CEO meeting with me, for sure, if not, more people in my team. So, this is very different. So, I have – we have very high confidence level on the way these deals ramp. There will be a, give or take, a few weeks here, or months here. That’s not the issue. The issue is, is it going to materially change, it doesn’t materially change in our business.

We don’t have any really structural pauses on a nice to have, maybe we should just wait a quarter or two quarters and pause this project. That doesn’t happen just because of the materiality of what we are talking about.

Obviously, our trend, it goes without saying, delivery is important. If the midway through the journey we don’t deliver, our execution really stumbles, then, obviously, the client says, hey, wait. But that’s not something that – on these types of deals, we have not done – we haven’t allowed that to happen, and we wouldn’t allow that to happen, which is one of the good things about our journey, particularly in the last 1.5 years when we announced in June of last year our focus on priority accounts and the fact that these large deals are – majority of them are from the priority accounts. I think it makes a big difference because resource allocation, the right people, the leaders’ attention, all of that goes towards these. So, we don’t allow the bar to drop to the point where the customer delays. Of course, there are bumps on the road, but we don’t expect that to happen.

Right. No, that’s good to discuss and have out there that the buy-in from the client side is at very high level, which in and of itself also helps. My second question is on operating margin cadence. I think Mike, you had mentioned last time operating margins should improve through the course of the year, at least in 1Q, relative to our model. And I think relative to consensus, you are much better than expectations. So, is that a slower cadence upward now? And is it the same factors that you mentioned with regards to gross margins that sort of drive down to operating. It will kind of 16.4% on the low end, and it goes up to like 17%-something, but they average out at 16.8%, is that the idea? I know it’s sort of too long of a question, yes.

Yes. Let me answer the latter one first, absolutely. It will continues to expand throughout the year and average out to that 16.8% that we talked about. Keep in mind, there are some – always some lumpy items that particularly come through. We had some in the first quarter related to severance from that perspective. The interesting thing is our underlying gross margin will improve. However, when you kind of normalize for – we know most of these recent large deal wins, it’s going to be somewhat dilutive against that and get us basically flat for the year. So, if you kind of think about it, we will have the normal SG&A operating leverage against that, which will allow our margin to expand for that, but our reported gross margin should be relatively constant throughout the year. And again, that’s the kind of good gross margin dilution we are looking for. I have always talked about that because it’s all driven by these large deal wins that are dilutive to gross margin when you get them on. So, it’s kind of best case scenario for us and really sets us up really nicely for 2024.

Okay. Thank you, guys.

Thanks Ashwin.

Thank you. [Operator Instructions] Our next question comes from the line of Sam Salvas from Needham & Company.

Hi guys. It’s Sam on for Mayank. Thanks for taking the questions. Just a couple of quick ones for me. Could you guys talk a little bit more about those 17 new logo wins and maybe just break those down into how many of those were digital Ops focused versus in the data tech and AI bucket? And maybe what some of the verticals the majority of those wins were in?

Sam, how are you? Great question. I don’t have the exact numbers, but suffice to say that a majority of the 17 would be generative AI because that’s been the history of the last 3 years or 4 years, and that’s a great way to enter a client. If I look at the five large deal wins, all of them we had entered in the past through data tech AI. So, we already had entered through data tech AI. Those relationships were small at that time. We had classified them as priority accounts because we knew that we will find a way to grow them, and that’s exactly what happened. So, these 17 logos, predominantly data tech AI, which is why the average deal size is $6 million. Yes, it’s upwards of $3 million last year, but it’s still only $6 million TCV. The great thing about these kind of entries is that it sets us up. And if I remember the numbers I shared last quarter in the earnings call, 40% conversion into a meaningful relationship in a 2-year time frameand 55% conversion into a meaningful relationship in our 4-year timeframe. So, continuously winning these 15 to 20 new logos really fits us nicely. These are very distributed across our industry verticals, so I wouldn’t say that there is anything unique about it. The one unique thing, which is no surprise, is the 17 logos as compared to last year does not have as many or probably it doesn’t have any, fast-growth smaller companies that are growing at 100%, 200% a year. And you and I can both name many such enterprises in the technology space, in the high-tech space, etcetera. We probably don’t have many of those in those 17.

Got it. Yes. That’s helpful. Thanks for all that color. And then just a quick follow-up. Tiger, you mentioned a couple kind of AI-centric acquisitions you guys have made in the past. Is that something you guys would consider nowadays, or do you feel like your capabilities there are pretty solid right now?

No, Sam. We are always looking for the right acquisition. We have actually – we probably end up looking at almost every potential acquisition opportunity out there, including ones that our clients talk to us about, companies they are working with, whom they are very like, etcetera, etcetera. I think the – if you look at the AI journey and if you look at a number of examples I gave, I would argue that the challenge is not the technology itself. I think these technologies are going to be more and more available, almost democratized completely, everyone is going to have access to it. So, that’s not the issue. The real issue is not going to be if we acquire more technology. The issue is going to be, can clients really attack that data, so data engineering skills, data cleansing, those types of – data orchestration on the cloud. Technologies that help that, technologies that take loads on to the cloud and orchestrate workflow on the cloud that then have AI solutions that you can bolt on and build into them. Those are the type of acquisitions that I think continue to be on our radar screens. Those are the type of acquisitions that will be very accretive for our capabilities. And those that are acquisitions that we can take to our clients and add value. And of course, in terms of talent, I think our ability to continue to attract talent in the data science, AI, machine learning and engineering space, as well as training our existing large talent population with the Genome data bridge and tech bridge kind of programs that we have, we are very excited about being able to funnel the talent through both those forums.

Got it. Yes, that’s very helpful. Thanks guys.

Thanks Sam.

Thank you. [Operator Instructions] Our next question comes from the line of Bryan Keane from Deutsche Bank.

Hi guys. This is Nate Svensson on for Bryan. Obviously, great to hear about the large deal wins, but I wanted to ask a little bit about the shorter term advisory work that started to come down in 4Q and well through into the beginning of this year. So, I believe on the earnings call last quarter, talked about the potential for that sort of work to pick up in the back half of 2023. So, kind of wanted to square that with the severance costs from this quarter, which I believe I have heard that those are related to sort of headcount in the advisory space. So, I just want to see how well positioned do you think you are for a potential recovery in the shorter-cycle advisory work and sort of any help trying to size that potential to revenue acceleration once that deal work starts to come back and the macro starts to work a little better? Thanks.

Sure. We are able to pivot very quickly if and when that work does come back. In the guidance we put forth, we are not assuming any of that comes back. Still cautiously optimistic for the second half of the year that, that type of “discretionary work” that’s either in pause or on hold will come back. But again, in terms of our ability to ramp up to meet that demand, we will be there and we are in good shape to do that. We are redeploying those savings associated with the severance associated with that to continuously grow and support our other businesses.

Got it. That’s helpful. And then just my follow-up question, I wanted to ask about financial services. So, very strong revenue, up 9% in the quarter, so maybe you can talk about the profile of your financial services clients and the type of works that you are winning and completing there? And I guess, any change in the tenor of client conversations within financial services since we have started to see a bit of the regional banking crisis on hold starting back in March?

Yes. I will start off, and then, Mike, jump in. Our financial services client base is reasonably well diversified. Having said that, it doesn’t go down much at all to the smaller sub-regional type banks. We haven’t had a relationship with any of the banks that have had challenges in the recent past, and we don’t have much of a relationship to be material at all at the next year of smaller regional banks. Most of our relationships are with large money center banks, global, U.S., Canada, Europe, Australia, and very strong over multi-years, which is why we haven’t seen a direct flow-through impact from any of that in our business. What we have seen are two things. One, the discretionary slowdown in advisory work, etcetera, one of the places where that happened was in some of our banking clients, where the prioritization that the banks are doing is even sharper than ever before, including some of them actually pivoting the conversation to having to deal with higher volume of deposits. So, some of the work that we started getting recently were some of the larger banks getting more deposit flow, for obvious reasons, and then the fact that they have now got to deal with that larger volume and then orchestrating the capability quickly to be able to do that. And then the other thing that we are clearly seeing is the whole large deal environment in the banking space driven by, again, a desire to actually further standardize and simplify in order to then bring in technologies in areas where the bank have said, you guys focus on that, but I am going to focus on A, B and C, because those are also important to do, which is something that is important to call out because you – no enterprise can actually leverage these technologies as quickly as they want to across their footprint. So, the reason why they need partners is because they say they will do X portion of the work on something to do with customer marketing and dealing with their customer, segmentation, new product. And then we end up doing a bunch of other things, including customer service, maybe, maybe collections work, maybe receivables management for them, maybe fraud. And of course, risk is the big service line that has been on a growth path for us in the last 3 years, and that continues – that momentum continues.

Appreciate the color.

Thank you.

[Operator Instructions] Our next question comes from the line of Bryan Bergin from TD Cowen.

Good morning guys. Good afternoon. Thank you. I wanted to follow-up on the topic here with Gen AI. And just curious, Tiger, how soon do you reasonably believe a large mix of clients will actually have Gen AI models in production, just based on your prior experience with other ways of tech like RPA? Like how long does all this take? And we are all trying to cut through the hype, but trying to understand at what rate, let’s say, a third or more of your clients can actually get there with these models materially impacting their operations?

Yes. So, Bryan, thank you and great question. I called out help desk, customer service and research work as three examples where we are seeing, and it’s obvious, because we actually identified those and started talking to clients very, very early, and we are seeing conversations begin. Because those are areas where you do not necessarily, in all those cases, have to get into the deep data plumbing. You have got to get into some element, but not too much, in many cases, and you can start the journey, particularly in unregulated industries. The moment you get in regulated industries, customer service, you have to walk the path very carefully. You have got to create pilots. You have got to test those. InfoSec, Cyber, I mean, there is a whole lot of things that have to be done. So, the first thing is data. Therefore, to answer your question, we would expect many of the initial pilots to be broadly in, for example, those three areas. And I am talking about specifically generative AI. Remember, we are already using AI in many, many other places where we actually trawl through data and then build models that become prediction for the next best action. But those are database and machine learning-based AI technologies that actually we have deployed in many, many solutions. The second way I would answer the question is there is a Phase 2, where it takes much longer because you actually have to work with the client. And if you think about accounts payables, we do a lot of accounts payable work for a lot of our clients, supplier payments of bills. If you think about the way that gets orchestrated in a client environment, it happens in 100 countries, it happens across the business, it happens in…

Okay. Thank you for that detail. And my follow-up is on service line composition. So, I know in the past, you have offered certain business mix disposal, I believe with IA that you called that emerging services, roughly a quarter of the revenue. Can you provide any further quantification of mix across areas like F&A or customer service or content mod? And the other question is with certain types of services that Gen AI is more applicable to, we have been getting that question about the rough mix across vendors that would fall in these areas in language and content-related buckets versus other areas?

Yes. Emerging services, we called out last year at 25%, and we said that since that’s growing much faster than company rates, that percentage will keep increasing. And that is true because, as we said, emerging services grew up 9% in the first quarter, well above company average. So, we expect that 25% to have gone up and will continue to go up. The broad distribution of our services, we don’t have that cut out there. What I would say is, if I look at, let’s say, customer service and help desk on the phone, which we think is actually one of the biggest opportunities where you can have a co-pilot, you can have generative AI really help in those client – customer conversations. That’s less than 10% of our business. And which is why I said there is a real opportunity to actually create innovative solutions, working with our clients, and penetrate that space where we don’t have much penetration, which is a real opportunity. And if you look at finance and accounting, which is our largest and no surprise, that’s how we started. Those are long journeys given they are, as I said, hundreds of systems, hundreds of – thousands of locations, 100 countries. And often, data is the bottleneck. You have to get a hold of data.

Okay. Appreciate the color. Thanks guys.

Thank you, Bryan.

Thank you. [Operator Instructions] Our next question comes from the line of Surinder Thind from Jefferies LLC.

Thank you. So Mike, I would like to start with a question of where – since it started at the first question, which is – it’s around guidance here. So, when you were putting together your guide, the forecast here, can you talk about all the puts and takes in light of the conversations that the 150-plus that Tiger has had, the volatility that you have seen in the marketplace, where would there be risk in the guide at this point? In – is most of the work that you need to generate your guide or the revenues been already won at this point, given the long deal ramps and so forth, or how much more work do you need to actually win to get to hit your guide numbers?

Yes. So, it’s a good point. We talked about at the beginning of the quarter that we have to win roughly 30% or about $1.4 billion of new business, right, in any given period of time on a rolling basis. That’s still the case, right, from our perspective. We had a very good start to the year from a first quarter perspective. But what we do is the same process we do when we do our guidance for the year. We risk weight each one of the opportunities that we have, and we build it up from the bottoms up. So listen, it’s probably a little bit less risk than we had going into the year, particularly with the volume of bookings that we had and large deal wins. But we feel really good about it. And then we all feel really good about the extrapolation of what we – the pipeline and the bookings we have in terms of where they are going to carry us through 2024. So, not 100% [Technical Difficulty] Surinder, you may have two devices open maybe.

I am just on one single line here, so I am not sure where the echo is coming from.

And now it’s – now it’s gone. Thanks. Sorry about that.

Okay. I guess fair enough. And then I guess a related question in terms of just the numbers here. When we look across the industry, obviously, there has been some downward pressure on the usage of FTE resources. Can you talk about your exposure there? And in terms of the risk there, is it, there is further deterioration in employment within the U.S. or globally? And how you think about that risk? It just seems like you guys haven’t been impacted the way that maybe some others have that have been forced to kind of reduce their FTE usage at existing clients.

If don’t think what – so if you could just repeat the specific – impacted by what?

Employment, right? In terms of like – for example, as you provide customer support, right, at any given entity, if there was layoffs internally and they have a 20% less workforce, you would expect them to ask for fewer support resources, right? So, a reduction in the FTE usage from you guys. Any color there? It doesn’t seem like you guys have had a lot of sensitivity there, whereas maybe some of the other competitors...

No, we don’t. We think – actually, it’s a great question. I didn’t understand the question. We both now understood the question. It’s a fantastic question because it further – we haven’t had an impact. Because if you think about the kind of work we do, we do work where either you have to do it, there is no option. It doesn’t matter how big your company is. I am thinking about closing the books. It doesn’t matter as you grow, you still have to close the books, or you think about customer transactions, you think about supplier transactions, unless the business itself shrinks, which can happen, in which case, those types of transactions will shrink. And we have seen that before in the global financial crisis. We saw that with some clients in the pandemic, whether it was the hospitality client or an airline client. But our – we have – we don’t have – I guess we don’t have too many services at all that internally serve employees. And as the employee base reduces, our service reduces. We haven’t seen that. The one example that Mike called out, and I called out as well, is when the customer decides to actually reduce the scope of work itself, saying this is work we do for our customers, we actually don’t want to do this work for our customers anymore given the environment. And we saw the impact of that in one of the technology companies. Other than that, no, we haven’t seen the impact of that because I wouldn’t expect to see that in our business.

Got it. Thank you. That’s very helpful. That’s it for me.

Thank you, Surinder.

Thank you. I would now like to turn the conference back over to Roger Sachs for closing remarks.

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

Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.