Genpact Limited

Good day, ladies and gentlemen. Welcome to the 2020 second quarter GENPAC limited earnings conference call. My name is Victor, and I'll be your conference moderator for today. At this time, all participants are on a listen-only mode. We will conduct a question and answer session towards the end of the 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 GENPAC's website. I would like to turn the call over to Roger Sachs, Head of Investor Relations at Genpak. Please proceed.

Thank you, Victor, and good afternoon, everybody, and welcome to Genpak's second quarter earnings call to discuss our results for the quarter ended June 30, 2020. We hope you've had a chance to review our earnings release, which was posted to the IR section of our website, genpak.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 you on our strategic initiatives. Ed will then walk you through our financial performance for the quarter, as well as provide our new outlook for 2020. Tiger will then come back for some closing comments, and then we will take your questions. We expect the call to last about an hour. Some of the matters we will discuss in today's call are forward-looking, These forward-looking statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those in such forward-looking statements. Such risks and uncertainties are set forth in our press release. 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 those measures to GAAP in today's earnings release posted to the IR section of our website. And with that, let me turn the call over to Tiger.

Thank you, Roger. Good afternoon, everyone, and thank you for joining us today for our 2020 second quarter earnings call. Our second quarter results were much stronger than expected in the light of the unprecedented environment the world is facing. Our performance was driven by incredibly strong execution by our teams on many fronts, as well as the resilience of our business model and the strategic choices we have made over many years. The four biggest drivers of these results are, first, reaching 99% plus work enablement for our global delivery teams across both intelligent operations and transformation services. Second, Continuing to win new client relationships in both intelligent operations and transformation services through global lockdowns. Third, rapidly bringing new solutions to market, leveraging both existing and new capabilities as we help our clients pivot their business models through accelerated digital transformation. And fourth, swiftly and decisively optimizing our operating and SG&A cost base while continuing to invest in new areas relevant for our clients in the world of the future. The amazing dedication of our more than 96,000-person global team as we transition to remote virtual work and the continued high-quality delivery of services to our clients makes me very proud and has strengthened our trusted advisor position with boards and C-suites. Specifically during the second quarter, total revenue was $900 million, up 3% on a constant currency basis. Global client revenue grew 4% on a constant currency basis. We also delivered adjusted operating income margin of 16.2%, up 80 basis points year over year, and adjusted diluted earnings per share of 52 cents, up 6% year over year. The first half of this year has more than amply demonstrated the strength and resilience of our strategic choices in industry verticals and the predominantly non-discretionary nature of the solutions and services we provide for our clients. Our exposure to the hardest hit industries is limited. In addition, a substantial portion of our business is annuity based, even in our transformation services business. Our client-facing relationship teams and our transformation services teams, working in a completely virtual environment, have been able to take to market several digital and cloud-enabled solutions that we have been deploying over the last couple of years. This has led to continued new deal inflows, a buildup of our pipeline to an all-time high, and new logo wins. The consumer goods retail, insurance, and high-tech verticals led the way with double-digit growth. Anticipated pressure in our banking and capital markets vertical eased as we secured additional client approvals through the quarter to enable work from home for processes managing highly sensitive customer information. Transformation services that includes consulting, digital analytics, and the right point experience business grew in the mid-teens, demonstrating the increased importance of digital transformation to our clients in these times. We also brought solutions to our clients for cash and working capital optimization, supply chain redesign, reducing payment fraud and banking, implementing cloud-based automation and insurance underwriting, among many others, all in a rapid, agile fashion. Transformation Services now accounts for approximately 30% of our global client revenue. At the same time, our CEO and C-suite discussions have gone up almost five times, allowing us to understand their strategic imperatives in these times and create new sole source opportunities, both with existing relationships and new logos. The highly collaborative way we transition to work from home and the continued delivery of our service level metrics productivity, and continuous innovation have given us the strongest seat at the table in many client existing relationships. We see five big trends that are here to stay for our clients across industries. First, a significant shift from offline to online. Second, virtualization of all technology services and solution delivery. Third, an accelerated consumption of cloud-based services and solutions. Fourth, an exponential growth in real-time predictive analytics. And fifth, all the above with a human-centered design of process and collaboration experience. These trends play well to our focus over the last few years on partnering with clients on their digital transformation journeys. These transformations have seen a dramatic compression from what typically used to be a five-year horizon to 18-month horizons. A key area of increased investment is our cloud service offerings. We believe successful digital transformations leveraging cloud-based solutions require three competencies that we are investing in. Deep domain knowledge to drive the functional design and configuration of new business architecture. Second, transformation services that help discover, plan, change, manage, and programmatically drive cloud projects across all four assets in a company, people, process, data, and technology. And finally, the ability to bring together the building blocks of services on a cloud backbone in an agile way. We are partnering with top cloud providers to bring these cloud-based solutions in all our high priority areas. such as financial accounting, supply chain management, banking operations, and insurance operations, to name a few. For example, for a large industrial client, we are reimagining their cash collections process to reduce errors in payments and improve regulatory compliance by replatforming their collections application to Amazon Web Services in order to drive improved cash flows. A second area of heightened focus and investment is digital commerce, where we are working with clients in both the B2B and B2C markets. As the world's shift from offline to online accelerates, our clients need to reimagine their business models by redesigning their core operating processes, as well as front-end design and experience. In the world of digital commerce, seamless flow of data, payments, and products are vital to deliver great customer experience. We are uniquely positioned to help them connect that reimagined front end with a redesigned supply chain management, order management, and end-to-end finance processes. This gives us a differentiated advantage to help clients succeed in their pivot to online. For example, for a leading CPG company that is dramatically scaling its digital commerce business, We are redesigning its entire middle and back office stack and processes and connecting it to new front-end platforms. We are leveraging AI and predictive insights to reimagine supply chain operations, trade promotions, and cash collections to reduce leakage and improve user experience. All of this has led to an expanding pipeline, including many large deals. The pace of progress through various stages of the pipeline for many of these large deals has become slower, but overall aging remains in line with historical trends, and we are seeing increased deal activity and inflows. We signed several new deals in the second quarter and are gaining share with both new and existing clients. We expanded our longstanding partnership with Walgreens Boots Alliance, who selected us as a long-term partner to help improve its finance capabilities, costs, and controls. Leveraging our deep domain process expertise in retail and healthcare, as well as AI, automation, and analytic solutions powered by Genpak Cora, our digital business platform. We will work together to standardize finance processes, provide faster, smarter access to data, and unlock savings to drive innovation through Walgreens, Boots, Alliance, and help drive improved business outcomes. We were also selected by a global bank to deliver marketing operations and campaign management with our data and analytics capabilities. Additionally, we are supporting a large scale-up in collections across multiple geographies for that bank. We now have with this bank a deep and diverse relationship with solutions spanning customer service, collections, core operations, credit and risk, data quality and governance, lending, and marketing operations. We believe speed and agility are key drivers of success that enable us to quickly respond to changes in the marketplace and bring innovative solutions to our clients. This allowed our teams to successfully transition to a primarily work-from-home model, update our smart enterprise process SEP frameworks with new protocols to run services virtually, and provide clients with detailed playbooks on how to adjust their processes for the work-from-home environment. It also enabled us to develop several new solutions over the last few months, contextualized to our chosen industries and focused on specific outcomes for our clients. Let me share a few examples. For many of our clients, our forecasting as a service solution with AI and machine learning leverages non-traditional client data and other external data sets to forecast key business metrics such as revenue, cash, and inventory in a world where traditional forecasting methods based solely on historical trends are no longer reliable. For a large industrial manufacturing company, using an AI and machine learning-aided buying process and a cloud-based automated solution for procurement to improve user experience, increase visibility, and drive spend reduction. For clients across multiple industries leveraging AI and machine learning to detect duplicate and fraudulent claims in areas with high volumes and limited visibility. The strength of these solutions fueled our mid-teens growth in transformation services even in these times. These highly focused engagements often set the stage for future long-term annuity engagements. We believe in this virtualized world, a work-from-anywhere model that offers the flexible mix of home and office delivery will become the norm. Our service delivery models will include onshore, nearshore, offshore, and work-from-home based on client processes, regulatory constraints, and employee preferences. This provides unconstrained access to talent pools across the globe, fortifies business resilience and continuity, and can improve both employee and customer experience. We're already piloting a permanent work-from-anywhere model in select geographies with plans to potentially leverage this globally. Throughout the last several months, our proprietary platform, TalentMatch, has allowed us to identify talent available for redeployment from one part of our business to another as the needs of our clients change. Combined with our reskilling platform, Genome, this bolsters our ability to scale the work from anywhere model and improves our employee utilization globally. We have also adjusted our cost base for the lower growth expectations for this year by taking actions to further improve our utilization levels and optimize our real estate footprint providing us with the flexibility to balance our short-term needs with the ability to invest in long-term growth opportunities. The timing of a large-scale return to office remains unknown given the various epidemic stages of COVID-19 across the geographies we operate in. With the health, safety, and overall welfare of our global workforce as a top priority, we are prepared to continue to deliver services for our clients and innovate for them in a predominantly work-from-home model. Any return to office will be implemented in a slow and deliberate manner with social distancing, temperature screening, and other protocols in place. The essential nature of the services we deliver for our clients play a key role in global commerce and positions us well to handle the high levels of uncertainty in the macro environment. clients want a strategic partner with a broad delivery global delivery footprint to diversify their operations and help them undertake an accelerated digital transformation journey that allows their business model to adjust to the new normal what the last several months have shown us is that our deep domain depth and process expertise as well as our investments in digital transformation services help us maintain a strong competitive advantage All of this would not be possible without the disciplined efforts of our leadership teams that constantly move with speed and agility, pivot to the new, and drive our values and culture deep into the organization. With that, let me turn the call over to Ed.