Genpact Limited

Good day, ladies and gentlemen. Welcome to the 2020 third quarter GINPAC Limited Earnings Conference Call. My name is Michelle, 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 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 GINPAC's website. I would now like to turn the call over to Roger Sachs, Head of Investor Relations at GenPAC. Sir, please go ahead.

Thank you, Michelle, and good afternoon, everybody, and welcome to GenPAC's third quarter earnings call to discuss our results for the quarter ended September 30th, 2020. We hope you had a chance to review our earnings release, which was posted to the IR section of our website, genpac.com. Speakers on today's call are Tiger T. Agarajan, 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 an update on our strategic initiatives. Ed will then walk you through our financial performance for the quarter, as well as provide our updated outlook for 2020. Tiger will then come back for some closing comments, and 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 our business. Measures to Gap 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 third quarter earnings call. Our better than expected third quarter results continue to demonstrate the resiliency of our business providing essential non-discretionary services and solutions. We are partnering even more closely with our clients to reimagine and transform their operating and overall business models to deal with the new normal, driving growth in our digital transformation services. Our existing strategic relationships are expanding and new logo wins have accelerated through the quarter. We continue to invest in capabilities in the growing experience economy, including our recent acquisition of something digital that builds on our ability to deliver end-to-end digital commerce solutions at scale with customer experience being front and center. We have realigned our costs and discretionary expenses to deliver our margin performance for the quarter. All of this has been on the foundation of tremendous execution by our global teams. Specifically during the quarter, total revenue was $936 million, up 5% on a constant currency basis. Global client revenue was $824 million, up 7% on a constant currency basis. We also delivered adjusted operating income margin of 17.1% compared to 16% during the third quarter last year, and adjusted diluted earnings per share of 56 cents. Global client revenue growth was broad-based, led by our consumer with retail, life sciences, healthcare, high-tech, and insurance verticals. With less than 10% of our global client revenue coming from the industries hardest hit by the crisis, approximately 90% of our global client portfolio grew at an almost double-digit rate year-over-year during the quarter. The current business environment remains highly uncertain. Facing this reality, clients are focused on pursuing digital transformations. This is opening up many new opportunities for us since clients now more than ever need partners to help them design agile business models to not only overcome new challenges, but also position them to compete more effectively in today and tomorrow's world. This has led to a healthy pipeline fueled by new inflows with an increasing mix of large, complex transformation deals that interlink multiple areas. For example, finance and accounting with supply chain and sales operations, or financial risk and crime with customer service and collections in banking. In many of these engagements, we are reimagining processes connected to multiple buying centers, driving holistic change throughout an entire organization. We continue to see five trends that are part of every CXO conversation. First, a significant shift from offline to online across every industry. Second, the 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, the move to human-centered design that creates superior experiences for customers, users, and employees. These trends are driving demand for our transformation services solutions, which include consulting, digital analytics, and the right point experience business, representing approximately 30% of global client revenue that grew at more than 20%. Analytics, once again, was a key contributor to our transformation services growth, and is deeply connected to services in our focus areas, such as supply chain, financial crime, and financial planning and analysis. These transformation services solutions are relevant to our clients today and help drive the change they need to improve both short and long-term outcomes in their businesses. Let me share a few examples. From a leading personal care products company, we improved sales forecasting accuracy by more than 40%, and enhance demand fulfillment to drive growth through predictive insights from relevant social media digital data combined with traditional inventory data. For multiple clients, we leverage AI, RPA, and proprietary risk algorithms in our new post-payment audit solution to minimize and recover overpayments to suppliers. For our healthcare client, we use our deep understanding of our clients' domain and technology to run 200 applications on a cloud-based platform, which includes AI and machine learning-driven models that process huge amounts of unstructured data to produce insights to drive better healthcare. One of the most exciting updates I want to share is our recent launch of Genpact Cora consumer banking solutions. These solutions use AI and advanced analytics to drive superior customer service interactions through multiple channels, including calls, emails, and chats. The solutions also automate many parts of the end-to-end customer collections process, resulting in faster and more convenient resolution of delinquencies, driving customer satisfaction up and losses down for banks. Last quarter, we had referred to the elongation of decision cycle times particularly for large deals that are more complex in nature. As some of these deals mature in the pipeline, we are seeing decision-making return to normal. Just in the last few weeks, we have been awarded three large deals, as well as several medium-sized deals, where we see a great path to an expanded scope over time. We're also seeing great momentum with new logo wins. Year-to-date, the contract value of new logo wins is up more than 80%. This demonstrates the demand for our new solutions, particularly in transformation services, which has historically led to subsequent conversion to longer-term annuity-based intelligent operations engagements that expand these relationships. While cumulative bookings are still lower than last year, we are encouraged that pipeline conversions are now picking up. At the same time, our pipeline remains at near-record levels with a greater than normal bias towards early stage deals. If you combine this with a healthy number of maturing deals in the pipeline, we believe we are well positioned to return to double digit global client revenue growth rates by the fourth quarter of next year, as I had shared last quarter. Additionally, the need of our clients in every industry vertical to accelerate change in their businesses, which is also expanding our total addressable market gives us confidence in returning to double-digit to low-teens growth for global clients over the medium-term horizon. Our focused strategies, investments, and expanding partner ecosystem continue to prove increasingly relevant for our clients as they deal with challenges in the business environment. Four areas that are particularly relevant and in demand today are cloud solutions and services, supply chain services, financial crimes and risk, and end-to-end digital commerce services. Let me give you some cover on these. First, we have doubled down on our cloud solutions and services, helping our clients develop and implement strategies using our deep domain and operations expertise to more effectively re-platform solutions to the cloud. In all our core areas of strength, we are helping clients implement their cloud strategies at speed and scale. Just this quarter, we have reorganized our cloud solutions and services under a new cloud leader to help scale our offerings in the marketplace. As an example, for a global asset management firm, we built an analytics ecosystem and developed a visualization interface on the cloud, providing field sales reps with a 360-degree view of their clients, enabling them to provide superior customer engagement that drives retention and growth for them. Second, We are seeing great momentum in supply chain services with our pipeline up more than 30% since 2019. The dramatic shift to online combined with rapidly changing consumer preferences have driven clients to build significant agility in their end-to-end supply chains. Not only is there a need for much more better demand forecasting, planning, and fulfillment, but the current environment has required businesses to re-evaluate supply diversification and risk as well. For example, for a global CPG company, we have completely redesigned the end-to-end information flow from sales and orders to manufacturing, fulfillment, and cash. We redeployed robotic process automation and utilized advanced predictive analytics to develop new models to optimize supply chain network planning, which drove improved order fulfillment and customer satisfaction. we are seeing the increasing importance for our clients to address fraud and financial crimes beyond just financial institutions to almost every industry as digital commerce becomes more pervasive. With deep domain risk expertise, our team of industry experts and data scientists are developing other service solutions in the areas of fraud, anti-money laundering, and transaction monitoring to address these growing needs. For example, For a global bank, we improved the accuracy of their financial crime detection models using AI and machine learning to enhance regulatory compliance and customer experience. And fourth, in the shift to online and growth in digital commerce, we're also helping clients connect supply chain planning, order fulfillment, and online payment solutions to deliver great digital experiences. With the acquisition of the experience consulting firm Tandem7, Followed by our acquisition of digital consultancy firm, RightPoint, we enhanced our capabilities in customer experience, commerce, and mobile application development. With the recent acquisition of Something Digital, we have added significant capabilities in digital commerce. The powerful combination of Something Digital's front-end design capabilities with RightPoint's experience innovation embedded with Genpak's deep domain and operations experience in the middle and back office enhances our already strong ability to bring end-to-end digital commerce solutions to the marketplace. In a world where a work-from-anywhere model is a necessity for many organizations, we have seen clients not only adapt but embrace this change. Our own delivery models were disrupted, and through early and decisive actions, we successfully transitioned over 90,000-plus global workforce to a remote work-from-home model maintaining productivity, and service level performance. This is no longer a short-term business continuity solution, but a more meaningful long-term flexible delivery model. We envision the future of work to be a hybrid of offshore, onshore, nearshore, and remote working, based on the type of service, client needs, employee preferences, and regulatory considerations. This just opens up many more degrees of freedom in business models. We continue to take a very deliberate approach to returning to offices across our global operating footprint. Our decision framework has always been based on the dual objectives of ensuring the health and safety of our global teams and continuity of service for our clients. Currently, less than 10% of our workforce has returned to the office, most of them in China. I'm very proud of the unwavering commitment our global teams have demonstrated to help our clients navigate the extraordinary challenges of these past several months. The resiliency of our business model has been pressure tested through these times. Not only have we come back to full delivery capacity, won new deals, including new logos, and taken new solutions to market that have helped us grow our transmission services revenue at more than 20%, But we've also energized our inflows, leading to a historically high pipeline that gives us confidence that we will continue to drive future bookings and top line growth. With this better visibility, we've started to reinvest in sales and marketing and R&D to capture the many long-term opportunities ahead of us. We also lifted the freeze on compensation increases that we put in place earlier in the year, recognizing the tremendous efforts of our employees. I'm incredibly pleased with our year-to-date performance and that we are now raising our 2020 full-year top line adjusted operating income margin and adjusted EPS outlook. With that, let me turn the call over to Ed.