Genpact Limited

Good day, ladies and gentlemen. Welcome to the 2020 fourth quarter and four-year GENPAC Limited Earnings Conference Call. My name is Tawanda, 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 GENPAC's website. I would now like to turn the call over to Roger Sachs, Head of Investor Relations at GenPAC. Sir, please proceed.

Thank you, Tawanda, and good afternoon, everyone, and welcome to GenPAC's call to discuss our results for the fourth quarter and full year ended December 31, 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 Tyagarajan, our President and CEO, and Ed Fitzpatrick, our Chief Financial Officer. Today's agenda will be as follows. Chaga will provide an overview of our results and update on our strategic initiatives. Ed will then walk you through our financial performance in greater detail and provide our outlook for 2021. Chaga will then come back for some closing comments, and then we will take your questions. And as Tawanda just mentioned, we expect the call to last roughly an hour. Some of the matters we will discuss in today's call are forward-looking, and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those in such forward-looking statements. Such risks and uncertainties are set forth in our press release. In addition, during our call today, we will refer to certain non-GAAP financial measures that we believe provide additional information to enhance the understanding of the way management views the operating performance of our business. You can find a reconciliation of these measures to GAAP in today's earnings release, posted to the IR section of our website. And with that, let me turn the call over to Tiger.

Thank you, Roger. Good afternoon, everyone. And thank you for joining us today for our 2020 fourth quarter and year-end earnings call. We are very pleased with our fourth quarter and full year 2020 results, especially in the face of the challenging macroeconomic environment. Our performance reflects our agility and culture of embracing change that allowed us to rapidly meet client needs and successfully pivot to new ways of working. Led by the dedication of our global workforce, our ability to grow our top and bottom line is a testament to the resiliency of our business. The acceleration of digital transformation into new buying centers across all industries has expanded our total addressable market, providing us with many more opportunities to drive sustainable and profitable long-term growth. In summary, for the full year 2020, we delivered total revenue of 3.7 billion, up 6% on a constant currency basis. Global client revenue of 3.3 billion, up 7% on a constant currency basis. Adjusted operating income margin of 15.9% ahead of our expectations and in line with pre-COVID levels in 2019. And finally, adjusted diluted earnings per share of $2.12, up 3% year over year. Our global client revenue growth was led by consumer goods, retail, life sciences, healthcare, high tech and insurance. At the same time, inflows of new deals during the year hit an all time high leading to 20% plus year over year pipeline growth by the end of the year. During 2020, we signed total new bookings of more than $3 billion. As we had expected, the impact of COVID-19 crisis led to total bookings coming in lower than last year levels. However, we saw strong momentum in global client bookings in the fourth quarter as client decision cycles returned to more normalized pre-COVID levels. As a result, global client deals signed in the fourth quarter were almost three times above our third quarter bookings and were more than 20% above quarter four 2019 global client bookings. We signed six large deals in the fourth quarter alone, which helped fuel this growth. Let me give you some color on a few of these large deals we signed. First, building on our successful relationship with Walmart in North and Latin America, we will manage and transform finance and accounting for their majority owned African operations, Massmart. We will leverage digital technology and analytics to create completely new ways of working to support their growth strategy. Second, expanding our partnership and relationship with a global CPG ecosystem into Japan, we will rapidly transform their finance and accounting, procurement, and supply chain operations to drive better customer relationships and accelerate new product introductions to grow the business, drive profitability, and maximize cash flow leveraging both transformation services and intelligent operations for the long term. And finally, for a high-tech distribution company, after conducting an initial consulting engagement, we will now drive transformation across finance, supply chain, and procurement, leveraging our digital CORA platform to bring standardization, automation, and risk controls across the organization. As expected, GE bookings declined in 2020 due to the large GE deals we signed in 2018 and 2019. Transformation services made up of our consulting, digital, and analytics businesses grew more than 20% during 2020 and expanded to over 30% of total global client revenue. Analytics continued to be the fastest growing transformation services engine throughout 2020. I'm excited about the momentum we saw for the fourth consecutive year in Transformation Services. Approximately 70% of the value of global client bookings had Transformation Services embedded in them. And these types of deals make up the fastest growing segment of our pipeline. As we said before, a good portion of our Transformation Services business is also annuity based. During 2020, we significantly expanded our transformation services offerings to meet the accelerated demand for digital solutions that we've seen across all industry verticals. Coupled with our broader end-to-end intelligent operations services, our large transformation services engagements have expanded our relationships with many of our strategic clients. The best demonstration of this is that more than 50% of our bookings were from sole source deals in 2020. These differentiated solutions that have gained traction with our clients allowed us to grow the number of global client relationships with annual revenues over $5 million from 121 to 129. This included clients with more than $50 million in annual revenue growing from 9 to 11. As we expand these relationships, we continue to build our reputation as a trusted advisor and thought leader to the C-suite and boards of our clients. especially now when they are seeking guidance the most. As we called out over the last few quarters, we see five trends driving our CXO conversations. 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 finally, the above, the move to human-centered design that creates superior experiences for customers, users, and employees. Let me share a few examples of how our agile response to these trends is allowing us to drive value for our clients and further fuel our growth. For a leading provider of personal fitness equipment experiencing tremendous product demand and growth, we are designing and deploying a future state supply chain solution, leveraging data and predictive analytics, reducing cycle time for new product introductions. For LiveKindly, a collective of plant-based food and media brands, we are leveraging cloud technology and predictive analytics to reimagine end-to-end operations, drive competitive growth, and co-innovate to create a digital-first data-led organization in the food industry. For various healthcare and pharma clients, we are partnering on a variety of initiatives related to COVID-19, such as building a mobile app that allows rapid access to tests and results, integrating our AI-based pharmacovigilance platform to process adverse vaccine reactions for the UK regulator MHRA, and leveraging digital technologies to increase the speed and accuracy of clinical trial submissions for vaccines. Our industry-leading 2020 growth clearly demonstrates the resilience of our business and the non-discretionary nature of our services. We are in a growth market that is highly underpenetrated and that has further expanded in response to the challenges of 2020. This market expansion is primarily driven by the changing needs of two different sets of clients. First, Existing clients who want to accelerate their transformation journey, leading to increased engagement with us on more services and in more buying centers than before. And second, new clients who are now much more open to partnerships in order to change, transform, and respond to the five trends I called out. In 2020, we added 11 new client logos greater than $5 million, all of whom are first-time buyers for our kinds of services including mature services like finance and accounting. We continue to drive investments in strategic areas like supply chain services, financial crimes and risk services, sales and commercial services, and financial planning and analysis. And we are seeing great traction in all of them. In our more mature service lines, such as finance and accounting and insurance underwriting and claims, we continue to deepen our advantage by accelerating the fusion of domain, digital, and data. As I mentioned last quarter, we have doubled down on our cloud service offerings to bring domain-led Azure service solutions in our key focus areas. Our recent acquisitions demonstrate our continued commitment to build out our capabilities in the cloud. In the fourth quarter, we acquired something digital, bolstering our digital commerce capabilities. Combined with the strength of RightPoint's experience offerings, We are seeing our pipeline and bookings grow meaningfully, as many of our clients completely re-imagined their commercial and supply chain operations, driven by their journey to online commerce. We also recently closed the acquisition of Enquero, an industry-leading data engineering and analytics firm, enhancing our ability to develop new cloud-based data and analytics solutions for clients, as well as execute on last mile connections using digital technologies. We're already seeing the benefits in new joint deals in the pipeline. Turning to profitability. The agility with which we restructured our costs during the second quarter of 2020 and re-skilled and redeployed talent for new client work allowed us to deliver strong adjusted operating income margins, adjusted EPS, and cash flows in a challenging environment. By the time we reached the fourth quarter, we began dialing up our investments in R&D, transmission services, and the front end. This has allowed us to enter 2021 with the robust pipeline I spoke about. As we look at growth in 2021, we are mindful of three factors. First, as expected, a tough year-over-year first quarter pre-COVID comparison. Second, the impact from clients in the hardest hit industries, such as hospitality, travel, leisure, and energy, that will affect the year-over-year comparison of the first half. And third, One of our banking and capital markets clients recently resized and restructured their asset management business. We responded as a true partner and scaled down our operations for them. And now we'll have a more focused relationship, which remains very strong. As a result, we expect our banking capital markets vertical to be down year over year. We are, however, encouraged by the expansion of our banking capital markets pipeline during the latter part of 2020. Even after fully considering these factors, we continue to believe our global client revenue will come back to double digit growth by the time we hit the fourth quarter of 2021. Our bookings momentum in the fourth quarter of 2020 indicates that we could possibly hit that milestone even earlier. At a high level, we are therefore expecting to deliver global client growth that is in line or better than 2020 and drive an improvement to our adjusted operating income margin. With that, let me turn the call over to Ed, who will take you through our 2020 performance and 2021 outlook in detail.