Genpact Limited

Good day, ladies and gentlemen. Welcome to the 2024 Second Quarter GEMPAC 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 this conference call. As a reminder, this call is being recorded for replay purposes. The replay of this 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 Krista Bessinger, head of investor relations at GENPAC. Please proceed.

Thank you, Michelle. Good afternoon, everyone, and welcome to GENPAC's Q2 2024 earnings conference call. We hope you had a chance to read our earnings press release, which was posted on the investor relations section of our website, GEMPAC.com. And 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 also 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 as we continue to successfully deliver on our 3 plus 1 execution framework. Revenue in Q2 reached $1.18 billion, up 6% year over year, above the high end of our guidance range with better than expected performance across both data tech AI and digital operations. Gross margin of 35.4% and adjusted operating income margin of 16.9% also exceeded expectations driven by operating efficiencies. We are on the right path and momentum is building. For context, in FY 2023, we grew roughly the revenue by $100 million on an absolute basis. In 2024, We have already hit 100 million in incremental revenues in the first half of the year with higher gross margin, all while continuing to invest in our top priorities. Unwavering focus on our 3 plus 1 execution framework is accelerating growth, and we will continue to build our execution muscle in the second half of the year with a continued focus on, one, strong partnerships, Two, comprehensive data tech AI solutions. Three, a simplified go-to-market approach. And our plus one, that is leading Genpact as our best credential for AI-first innovation. Let me walk you through the key highlights on each. First on partnerships. We see a significant opportunity to accelerate revenue growth as we increase the strength of our partner relationships. To give you a sense, IT service and solution companies with mature partner operations typically generate 20 to 50% of their revenue from partners. For us, partner-related revenues was in low single digits in 2023. This represents a significant opportunity for Genpact. We started ramping our investments in our partnership organization at the beginning of this year. And at the end of second quarter, we have more than double the percentage of revenue generated by partners with line of sight to generate significantly more in future periods. Growth to date has been driven by investing in world-class leadership team, driving awareness, improving go-to-market activations, and scaling delivery capabilities with a number of hyperscaler partners, including Microsoft, AWS, GCP, and other key partners like ServiceNow, Salesforce, Databricks, to just name a few. Second, on Data Tech AI, our focused go-to-market approach continued to drive accelerating revenue growth in quarter two. GenAI has significantly expanded our total addressable market and is increasingly becoming a driver of our business. While the absolute numbers are still small, GenAI bookings in the first half of 2024 are already up more than 10 times compared to full year of 2023, with more than 95% of our GenAI bookings year to date contracted on non-FTE basis. We also now have more than 80 GenAI solutions in production environments with clients either deployed or going live. Embedding AI into enterprise systems is a significant undertaking. It requires weaving AI into the very fabric of an organization, cutting across data engineering, conversational interfaces, existing IT systems, and ultimately weaving AI in end-to-end business processes. This represents a significant opportunity for GenPact. We play a critical role in leveraging AI to drive business transformation for our clients because our deep domain expertise at the keystroke level is essential to the successful implementation of an AI-first end-to-end business processes in production environments. Let me give you a few examples. A leading global provider of financial technology solution has chosen Genpak to drive their business-wide transformation and increase scalability and efficiency through the use of GenAI. This is one of the large deals that we signed in second quarter, and GenAI is a significant part of the design. We are leveraging our banking domain, end-to-end process frameworks, and technology expertise, along with ServiceNow, to deliver a suite of AI solutions. These AI solutions are integrated with the client existing IT systems, leveraging large amount of unstructured data to drive competitive advantage and growth. This implementation has the potential to serve as a template that can be replicated across industries. I have talked before about how our deep domain allows us to bridge the gap between out of the box solutions and what clients need on the ground to transform their business processes with GenAI. This case study is a perfect example of that. Another example is the work we are doing with Mondelez to address their need for upskilling and shorter ramp times for new employees. Leveraging GenPack's CORA knowledge assist platform to enable faster access to knowledge, insights, and standardized operating procedures. Or for example, with Aldi Sued. Here we are transforming their retail operations in US and Australia by leveraging data, technology, and AI solutions to drive agility and cost leadership, ultimately creating an exceptional customer experience and driving competitive growth. Our work for Amazon is another great example of AI. For Amazon, for their out-of-warranty device customer service in Europe, we have leveraged AI and Amazon Connect to create an end-to-end solution that integrates AI-powered chatbots and enables logistics management, a repair partner network, end-to-end tracking, and proactive customer notifications, all with minimal human interactions. These are just a few examples. At the end of the day, clients choose us for five key reasons. Our deep domain experience, data and AI expertise, comprehensive solutions, accelerating partner ecosystem, client-centric approach, and innovative technology, including our pre-built AI accelerators. In a world increasingly driven by advanced technologies, these trends are more critical than ever and enable us to deliver solutions that keep our clients ahead of the curve. Coming back to the third element in our 3 plus 1 execution framework, which is simplification, we continue to streamline our go-to-market approach so that we can scale more efficiently. As an example, we have standardized our rate cards across our data tech AI service offerings, and we are reducing complexity in our end-to-end sales process by automating workflows and adopting AI contracting tools. And finally, on leading with Genpact as our own best credential for AI-driven transformation, we hit a number of major milestones in second quarter. I'll give you two specific examples. First, we launched a new Quora AI Assistant for our global IT help desk. Since launch, we have seen a 2x increase in user satisfaction and a 30% reduction in service desk staff. Our future roadmap includes Cora AI Assistant for HR, finance, sourcing, and many other functions, and we aim for similar improvement across these functions. Second, AI Guru, our GenAI-powered learning coach, is making personalized learning recommendations for over 60,000 employees, increasing productivity and amplifying the collective knowledge of our internal experts. And that gets me to the talent. Our employees are critical to our success, and we have made significant progress year-to-date, scaling our broader technology skills as part of our overall investment in Data Tech AI. On foundational Gen AI, we have more than 100,000 employees who are actively learning, 70,000 have completed entry-level training, and 18,000 have completed more advanced work. For GenAI delivery capabilities, we have 3,000 AI practitioners across the company. And for applied AI leadership, we are making a significant change at the most senior levels in the company. 85% of senior leaders will have gone through certification from schools like MIT by end of 2024. As we look ahead, We will continue to invest aggressively in our talent with a focus on practical application of advanced technologies. Now turning to guidance. With another quarter of better than expected results and strong performance in the first half, we are raising our revenue and EPS outlook for the full year. We are increasing our revenue guidance by 150 basis points to 4 to 5% growth on as reported basis up from 2.5 to 3.5% previously. Similar to the last quarter, we are not assuming any improvement in the buying environment. We are simply reflecting our improved execution in our full year outlook. Guidance for gross margin and AOI margin for full year remains unchanged at 35.3%. and 17% respectively, as we continue to invest in our top priorities, partnerships, and advanced technologies in data tech AI to drive accelerating long-term growth. For the full year, we are also raising our outlook of adjusted diluted EPS to reflect the strong performance we achieved in the first half with a $0.14 increase at the midpoint of the range. In closing, I would like to extend my heartfelt thanks to every one of our employees. Your dedication is delivering exceptional value to our clients and driving success and growth for Genpact. As we continue to innovate and expand, your commitment is the cornerstone of our achievement. Thank you. And we continue to sharpen our competitive edge and build the next chapter of Genpact. With that, let me turn the call over to Mike.