Good day, ladies and gentlemen. Welcome to the 2024 Third Quarter Genpact Limited Earnings Conference Call. My name is Cherrie, 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 website. I would now like to turn the call over to Krista Bessinger, Head of Investor Relations at Genpact. Please proceed.

Thank you, Cherrie. Good afternoon, everyone, and welcome to Genpact's Q3 2024 earnings conference call. We hope you've had a chance to read our earnings press release posted on the Investor Relations section of our website, genpact.com. Today, we have with us BK Kalra, President and CEO; and Mike Weiner, Chief Financial Officer. BK will start with a high-level overview of the quarter and then Mike will cover our financial performance in greater detail before we take your questions. Please note that during this call, we will make forward-looking statements, including statements about our business outlook, strategies and long-term goals. These comments are based on our plans, predictions and expectations as of today, which may change over time. Actual results could differ materially due to a number of important risks and uncertainties, including the risk factors in our 10-K and 10-Q filings with the SEC. Also during this call, we will discuss certain non-GAAP financial measures. We have reconciled those to the most directly comparable GAAP financial measures in our earnings press release. These non-GAAP measures are not intended to be a substitute for our GAAP results. And finally, this call in its entirety is being webcast from our Investor Relations website and an audio replay and transcript will be available on our website in a few hours. And with that, I'd like to turn it over to BK.

Thank you, Krista. Hello, everyone, and thank you for joining us today. I am pleased to report another strong quarter with accelerating revenue growth and continued market share gains. Revenue reached $1.21 billion, up 7% year-over-year above the high-end of our guidance range with accelerating growth driven by Data-Tech-AI and healthy supporting growth from Digital Operations. Gross margin of 5.6% and adjusted operating income margin of 17.6% also exceeded our expectations as we invest to drive growth, while also delivering operating efficiency. We talk a lot about execution here at Genpact and we are equally focused on innovation. Both are delivering results. I'll give you some color on innovation and how it is leading to accelerating growth. We are now on track to deliver 6% revenue growth in 2024 at the midpoint, up from 2% in 2023 with adjusted EPS expected to grow faster than revenue for the fourth year in a row. Relentless execution on our 3+1 Framework is delivering results and we will continue to build our execution and innovation muscle with a sharp focus on partnerships, comprehensive Data-Tech-AI solutions, simplification and the plus one in our 3+1 Framework, which is about establishing Genpact as our own best credential for AI-led transformation. Let me walk you through the key highlights on each. First, on partnerships, we continue to see a meaningful opportunity to accelerate revenue growth as we increase the strength of our partner relationships. We started ramping investments in our partnership organization at the beginning of the year and continue to make meaningful progress. We have made a number of important announcements since our last earnings call. I'll highlight a couple of recent ones. The first is our proprietary Finance Data Hub powered by Databricks data intelligence platform. This AI-led solution provides CFOs and their teams with…

Thanks, BK. And good afternoon, everyone. Thank you for joining us as we review our third quarter results and provide insights into how we're positioned for the remainder of the year. We demonstrated broad-based strength in the third quarter, achieving 7% revenue growth, 12% adjusted diluted EPS growth and accelerating cash flow generation. Our pipeline remains at record levels, reflecting a balanced mix of deal sizes. We achieved win rates of 43% for the quarter with sole-sourced deals accounting for approximately 42% of total bookings. We also added 21 new logos and won three large deals in the quarter. As a reminder, large deals are $50 million or greater in total contract value. Our footprint is expanding. The number of clients generating more than $5 million in annual revenue grew to an all-time high of $188 million in this quarter. We also increased the number of clients contributing more than $25 million in revenue to $43 million, with five clients generating over $100 million annually, reflecting the importance of solutions in driving their success. Turning to the income statement. Total revenue was $1.211 billion, a year-over-year increase of approximately 7% on both an as-reported and constant-currency basis. This strong performance underscores our disciplined execution. Data, Tech and AI revenue was $569 million, representing a 9% year-over-year increase in both reported and constant currency terms. Growth was driven by all components of Data, Tech and AI, which is 47% of total revenue for the quarter. Digital Operations revenue was $642 million, growing at 5% on an as-reported and constant-currency basis, primarily continued new deal additions. Digital Operations contributed 53% of total revenue in the quarter. Revenue from outcome and consumption-based deals, excluding fixed-fee contracts, comprised 20% of total revenue, up 17% from a year ago. While priority accounts contributed 62% of…

Great. Thank you, Mike and, Mikai - Cherrie, we're ready to take questions.

[Operator Instructions] Our first question, that will come from the line of Bryan Bergin with TD Cowen. Your line is open.

Yes, it's actually Jared Levine on for Brian tonight. Over the last 90 days, has there been any improvement in the short-cycle projects in advisory work? It was good to see that strong DTA growth, but just curious if that benefited it?

Yes. I think overall it is - can you hear me okay?

Yes.

Okay. So there has been overall, I think strong execution that is driving this result. I think we continue to see stable business environment, but stronger execution is helping us deliver better results.

BK let me quickly just add on to that. If you're referring to our DTA component of our growth, right, we're continuing to execute really well on advanced technologies, led solutions that also are involving a lot of generative AI and AI-related initiatives. So we're pretty pleased with our performance this quarter within Data, Tech and AI.

Okay, great. And then can you provide an update on your progress on expanding partnership source revenue? Who are your most important partnerships currently and which are the fastest-growing?

Yes. I think the way to think about it is, you know, think of hyperscalers, so be it in AWS or Microsoft or Google, as you can imagine, they continue to be strong partners for us or people like ServiceNow, Salesforce, and then very specific domain-led solutions where we bring in a number of these partners. And in each of these partners, the differentiation is we are building our proprietary solutions on the top, which can act as a multiplier effect as we continue to enhance developments and bring in our operational keystroke knowledge and keystroke understanding in these domain solutions for our clients.

Yes. Let me just quickly add on to that. If you -- if you think of partnerships and how much revenues contributed to the business from partnerships, it's still relatively low compared to the industry as a whole. So our investments in partnerships and the ones BK alluded to a moment or so ago are really driving a lot of revenue for us currently, and we'll see how it goes going forward. Sorry, I cut you off.

Great. Thank you.

Thank you. One moment for our next question. And that will come from the line of Maggie Nolan with William Blair. Your line is open.

Hi, It's Kate on for Maggie. Congrats on the nice results today. My first question is, what parts of the Data-Tech-AI business do you feel like are resonating the most with clients right now that's really driving that accelerated growth?

It is all parts of the Data-Tech-AI and I would not say that there is only AI or GenAI, yes, that is certainly helping us. But with that, any of the GenAI conversation is not complete without data. And then obviously, it is the underlying technology and the various applications and our understanding there and how those applications need to evolve. So it is more holistic approach in Data-Tech-AI, point number one. Point number two, I think in all of our Digital Operations, I do not know of any, you know, large deal or even medium-sized deal, which we bring to our clients' attention and execute and book without Data-Tech-AI. In each of these Digital Operations deals, our Data-Tech-AI is always a significant or a pretty strong component and both of those attributes are changing our game in Data-Tech-AI.

Okay, great. Thank you, BK. And then just going off of that a little bit, during the AIJ that you held, are you starting to get the sense that customers are getting a little bit more comfortable with the generative AI technology as time progresses?

Yes. I would still say it is early days, but clearly a lot more adoption is happening. Clearly, there is a change from just the interest or proof-of-concept to more putting the solution in production environments. And what was a quite endearing for us that we had a number of our clients on the stage and operators in our clients who were talking about how it is generating meaningful value and that is always a little bit more credible because other clients are listening to those stories and how that replicability can happen. So yes, it is making a pretty good progress. I would still say it's early days.

Okay, great. Thank you, guys. Congrats on the quarter.

Thank you.

Thank you. One moment for our next question. And that will come from the line of Robbie Bamberger with Baird. Your line is open.

Yes, thanks for taking my question. So if we think about Q4, it implies about 6% year-over-year organic constant FX growth. Is that sort of a good starting point if we think about 2025 growth expectations or any one-off that we should be thinking about as we look into next year?

Let me kick it off and hand it over to you, BK. So when you think about our business, right, I think you're referring to the guide for the fourth quarter and also for the full year, which does represent that 6% and 7% growth that we're projecting for the fourth quarter, if you kind of back into it from there. We'll provide formal guidance when we give our -- but we'll need three months from now. But we continue to see a stable buying environment that we'll be moving off of. Again, it was a good year for us. So be -- a stronger comp to grow off of there. But again, we feel pretty good about where we are for the fourth quarter and also for the full year.

Yes. I think what I would add, look, as Mike just said, certainly feel great about the progress on execution, how we are layering innovation. But I must also say, that we are just beginning. And yes, we are a small company, but we are a large company too. And while we are heads down in execution, it'll take -- it's still early days. And yes, you know, we have a gift of delivering well this year, so that gets us to tougher comps. But we will give you a more specific guide in another 90 days for 2025, but feel really good as to where we stand. And yes, it is still a stable buying environment and we will see as to how our clients look at in early January and we'll give you more specific guide as we meet another 60, 90 days.

Awesome. Thank you. And then in terms of just outcome-based pricing, I remember last quarter you noted about 20% was outcome-based. Can you give an update on what percent is outcome-based now in Q3? And then I guess what's causing this acceleration is GenAI, I think you noted last quarter talking about how GenAI -type deals will be more outcome-based than on materials. Maybe just thinking about that dynamic.

Sure. So you're starting at the second part of your question, that will absolutely drive more outcome-based alternative commercial model solutions. We had about 20% of our total revenue attributed to that classification of revenue. But it's important to look at, while it's relatively flat sequentially, 20%, it's up from 17% a year -- a year-ago. So we're quite bullish on that. And we're also quite bullish on the industry itself, continue to pivot to these alternative commercial models, particularly as generative AI point-based solutions and solutions in total continue to gain traction.

Awesome. Thank you.

Thank you.

Thank you. One moment for our next question. And that will come from the line of Surinder Thind with Jefferies. Your line is open.

Thank you. BK, can you maybe provide a bit more color around your commentary that you're at this point expecting a larger TAM for these set of services? Just any color on how you think about that? Is it just there's a lot more breadth of services or that you can look at from a client perspective or is it just a broader range of technologies that you plan on working with, how should we think about that?

Yes. I think how we are observing in our pipeline, Surinder, is, yes, increase in the scope of activity because certain attributes which were possibly our clients were not thinking, I think GenAI has expanded that scope. Even in the certain conversations that we were having, the -- GenAI is helping us bring more end-to-end solutions to bear, point number one. Point number two, then, you know, a s I reflected also for AI Day, a number of our clients are engaging us for bringing domain-led AI solutions, which they were not earlier thinking about and they are also standalone as well as embedded solutions. So that is increasing the total addressable market as well. And then data was always at the sidebars and data has become a main actor conversation. And because none of the AI, GenAI, you know while all the clients understood it, but now it is very real. And therefore data-led conversations and we have pretty strong franchise in data and analytics and that is helping us grow the Data-Tech franchise. So it is more holistic approach that we are seeing in the pipeline is what we are sharing with you.

That's helpful. And then when we think about the acceleration in the growth that you're seeing in what I think you're describing as a relatively stable demand environment. Any color around maybe why now? I understand or I hear you on the execution part of it, but is it that you feel like you've built certain proprietary solutions that you can take to the clients that are perhaps mature enough from an AI perspective or offered perspective where it's differentiated or are clients just a bit more willing to you know, maybe open up the budget a little bit more if they see something that's interesting. I'm just trying to understand the magnitude of the improvement that you're seeing and how we should think about that on a go forward basis.

What I will go back to, Surinder is our 3+1 Framework. And in that execution as well as innovation, I think both of those elements in a stable demand environment is helping us deliver better. So when I say three-plus one, including partnership, is it becoming a more stronger muscle and we are still at early days. It is clearly showing results and that's what we are sharing with you and a lot of that is sitting in Data-Tech-AI. Similarly, in the Data-Tech-AI as our second pivot within our second key initiative in three plus one, there be data, be it the AI, be it advanced technologies that we are bringing us in our solutions is helping us accelerate. And a lot of our clients find it really endearing that we are driving this transformation on ourselves doing plus one and that was also quite intriguing now for our clients at AI Day because we shared a number of these two areas where we have the entire control of data, we have the entire control of infrastructure and how we are accelerating that journey and that is still early days beginning to act as an inspiration for our clients.

Thank you.

Thank you. One moment for our next question that will come from the line of Bradley Clark with BMO Capital Markets. Your line is open.

Hi, thanks for taking my question. You've been mentioning sort of stable business demand for a number of quarters. At least turning a calendar year, what signs are you looking for your customers that could perhaps suggest a budget influx and early signs of an improved business environment?

Yes. So let me kick that off. What we're seeing from our side, I think what you're alluding to, are we seeing any signs in our definition of what a stable business environment is of budget flushes going through the remainder of the year and potentially into next year as people redo or refine their budgets. We have not seen that and nor are we assuming that in our guidance now. Listen, it -- early days as we finish up the third quarter to actually enter into the fourth quarter. We'll provide additional guidance that -- for next year when we meet in a quarter or so, but we hope to have some additional color from our clients as they really refocus on what they're going to be doing for 2025.

Okay. Thank you. And then just as a quick follow-up. The percentage of sole for deals ticked down slightly. And sort of off the back of that, I wanted to just see what the sort of pricing environment has been like if there have been any changes perhaps if there's been any sourcing of more competitive pricing, especially around generative AI projects? Thank you.

So I didn't hear the first part of your question. I'll answer the second part and maybe you can repeat it for us. Our pricing environment has remained relatively constant. We haven't seen anybody do anybody doing anything kind of dramatically different. So I'd say it's a stable pricing environment. But I didn't hear the first part of your question, I apologize.

Yes, the first part of the question, I just noticed that sole-source deals, I think was 42% this quarter versus 45% last quarter. And I just was wondering if that tied into any sort of change in the pricing dynamics, but appears that you're saying.

No, I wouldn't read much into that. Again, they're going to be lumpy in nature on sole-sourced deals. When you look at things like disproportionately on larger deals are not sole-sourced versus you know, the sole-source deals are typically on the smaller side. So there's nothing really to read into that on a quarterly basis. They're lumpy.

Thank you. Thank you.

[Operator Instructions] One moment for our next question that will come from the line of Puneet Jain with JPMorgan. Your line is open. Puneet, if you are on-mute, please unmute your line. Again Puneet, if your line is on mute, please open up your line.

I think, Cherrie, he might be in transit. So he may not be available to pick up.

Okay. I'm showing no further questions in the queue at this time. I would like to turn the call back over to management for any closing remarks.

Thank you, Cherrie. And before we sign off, I just want to say thanks to all of our clients for choosing Genpact and to all of our shareholders for their ongoing support. We are excited to keep innovating and we look forward to talking to you again next quarter. Thank you.

Thank you for participating. This concludes today's program. You may now disconnect.