News

Genpact Limited (G) Q4 2023 Earnings Call Transcript

Genpact Limited (G)

Q4 2023 Earnings Conference Call

Company Participants

Roger Sachs - Vice President, Investor Relations

Tiger Tyagarajan - Outgoing President and CEO

BK Kalra - Incoming President and CEO

Mike Weiner - Chief Financial Officer

Conference Call Participants

Puneet Jain - JPMorgan

Keith Bachman - BMO

Maggie Nolan - William Blair

Ashwin Shirvaikar - Citigroup

Bryan Bergin - TD Cowen

Sean Kennedy - Mizuho

Moshe Katri - Wedbush Securities

Surinder Thind - Jefferies LLC

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the 2023 Fourth Quarter Genpact 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. 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 Roger Sachs, Vice President of Investor Relations at Genpact. Please proceed.

Roger Sachs

Thank you, Michelle, and good afternoon, everybody. And welcome to Genpact’s fourth quarter and full year 2023 earnings conference call. We hope you’ve had a chance to read our earnings press release posted on the IR section of our website, genpact.com.

Today we have with us Tiger Tyagarajan, our outgoing President and CEO; BK Kalra, our incoming President and CEO; and Mike Weiner, our Chief Financial Officer. Tiger will start with a high level overview of our performance for the full year 2023. BK will then speak to our strategic priorities and outlook. And finally, Mike will cover our financial performance and outlook in greater detail before opening the floor to 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. Our actual results could differ materially due to a number of important risks and uncertainties, including the risk factors in our 10-K and our 10-Q filings with the SEC.

And 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. An audio replay and transcript will be available on our website in a few hours.

And with that, let me turn the call over to Tiger.

Tiger Tyagarajan

And I was on mute. Thank you, Roger. Good evening, everyone, and thank you for joining us today for our fourth quarter and full year 2023 earnings call. I will start with a brief overview of our 2023 financial results and then hand the call over to our incoming CEO, BK, to take you through our strategic priorities and outlook for 2024.

For the full year 2023, we delivered total revenue of $4.48 billion, up 2% year-over-year and 3% on a constant currency basis, driven by Data Tech AI services revenue of $1.99 billion, up 2% on both an as-reported and constant currency basis, and Digital Operations services revenue of $2.48 billion, up 3% year-over-year as-reported or 4% on a constant currency basis.

Gross margins of 35.1%, which was flat year-over-year, income from operations margin of 14.1%, up 260 basis points year-over-year and adjusted operating income margin of 17%, up 50 basis points year-over-year. And diluted earnings per share of $3.41, up 81% year-over-year and adjusted diluted earnings per share of $2.98, up 9% year-over-year.

Bookings for the full year reached $4.9 billion, up a strong 26% on a year-over-year basis, as we signed a record 14 new large deals, each with total contract value greater than $50 million. Inflows remained healthy, resulting in a high-quality pipeline that reached near-record levels as we exited the year. Win rates increased to 60% versus 51% in the prior year and we added 91 new logos. Sole sourced deals represented 40% of bookings below our typical 50% level, reflecting the much higher number of large deal wins, which tend to be more competitive.

Throughout the year, we made progress on our key initiatives for 2023. First, revenue from priority accounts grew 4% year-over-year and expanded to 63% of total revenue.

Second, we strengthened and expanded relationships with key cloud technology partners to co-innovate and develop joint IP solutions.

Third, we opened and scaled three new operating centers in Tier 3 cities in India.

Fourth, we continued to drive non-FTE commercial models, with non-FTE deals reaching 20% of total revenue in the fourth quarter and 17% of total revenue for the full year.

Fifth, investments in our large deal team generated the strong bookings and pipeline that I described earlier.

And finally, for the fourth consecutive year, our global workforce completed approximately 10 million training hours on Genome, our on-demand learning platform.

Finally, before I turn the call over to BK, I want to take a moment to reflect on Genpact’s major accomplishments during these last 12 years. During that time, we grew total revenue at a compounded annual growth rate of 9%, driven by a number of important strategic pivots, including our decision to double down on a chosen set of industry verticals, services and geographic markets; our decision to extend beyond business process management with significant investments in Data Tech and AI; and finally, our move over the last five years to the middle and front office with our emerging service lines in supply chain, risk and sales and commercial services.

All of our success would not be possible without the tireless efforts of the Genpact team. Their constant passion and focus on driving client outcomes and value and their insatiable curiosity and desire to learn, has become our cultural foundation and has been a source of endless inspiration for me. It is my daily interaction with them that I’ll miss the most as I transition to the next phase of my journey.

With regard to BK, our Board could not have picked a better person to be Genpact’s next CEO. His deep understanding of our business, the trust and relationships he has built with our clients, and his strategic leadership with a strong bias for technology and AI has been a key driver of our success, driving the significant expansion of our consumer healthcare and financial services verticals that collectively generated $2.8 billion in revenue in 2023. I am very excited to see him lead this next evolution of Genpact.

And finally, I want to sincerely thank our Board for being such great stewards of the company through multiple cycles and on so many occasions, being my and my team’s guide and mentor.

With that, let me turn the call over to BK.

BK Kalra

Thank you, Tiger, and good afternoon, everyone. Let me start by saying that I am excited and humbled to lead our 125,000 talented people around the world that make up Genpact. I have seen firsthand the incredible dedication of the Genpact team and the significant value we add to our clients, designing, implementing and running mission-critical operations for some of the world’s biggest brands.

In preparation for stepping into the CEO role, I have been carefully assessing our senior leadership team and the strategic priorities we must pursue to put us on path towards accelerating growth.

As I reflect on 2023, there is no doubt that a macroeconomic environment challenges us and the industry as a whole. I am very proud of the team and the long-term accomplishments outlined a moment ago.

But I must also say that we must improve our execution to reach our full potential. Digital Operations and Data Tech AI together represent a $750 billion market, growing at high single-digit growth rate, well above the 3% constant currency growth we delivered in 2023. My number one goal as CEO is to make sure that we realize our full potential.

As a longstanding member of the Genpact team, I have a clear point of view about where we can improve execution. We need to sharpen our focus and drive simplification to increase speed and accountability throughout the organization.

In 2024, we will be laser-focused on changing the conversation we are having with clients by bringing more data and technology to bear to deliver more holistic and growth-oriented solutions.

We will also drive simplification to increase speed and accountability. Let me give you a couple examples. First, we have simplified our sales and go-to-market leadership structure, moving from highly matrixed organization to 12-unit leaders that mirror our client organization and roll it into three vertical segments we report externally.

Second, we have unified Data Tech, and AI under one leader, which matches how clients operate and buy. Both of these changes will increase speed and accountability, driving improved sales execution in 2024, particularly in Data Tech AI.

In my first 100 days, I am prioritizing, A, spending more time with clients as we partner with them to shape the future, theirs and ours, by leveraging Data Technology and AI first principles. I have already met a number of our clients since the announcement and I am committed to meeting with 100-plus clients in my first 100 days to further inform our strategy.

B, continuing to build our senior leadership team. We have made a number of important additions to our leadership team in the last few months across operations, finance, marketing and I am committed to continually identify and fill gaps quickly. Reaching our full potential will require maximizing our talent and driving greater accountability across the organization.

And C, strengthening our partner relationships to deliver holistic solutions. I believe we are in a unique position to further leverage our domain and industry expertise, access to Data and CXO relationships to deliver improved performance for clients and thereby improve revenue growth and profitability for Genpact.

I want to be clear that doing business as usual, just doing what we have done in the past, only slightly better, is not acceptable. That said, improving execution will not happen overnight. It will take time and investment.

In 2024, we plan to invest in two key areas, partnerships and AI first. I mentioned partnership a moment ago and we will continue to invest in deepening our relationships with various platform providers, broad and specialized, as well as with enterprise application and cloud workflow technology partners.

Second, we are moving quickly to embed AI in all our solutions that we bring to market and investing to make our internal operations AI first as well. For the first time, we have appointed a chief technology and transformation officer who will lead the charge on embedding AI in our internal operations.

With regards to gen AI, we continue to make rapid progress. Last year, we had more than 3,000 client conversations, more than 80,000 Genpact team members enrolled in AI training programs, the launch of our first AI innovation center in London, and more than 50 gen AI use cases in testing and 30 gen AI solutions in production environment with clients, either deployed or going live.

Turning now to our 2024 outlook, and Mike will go through more details, but I would like to provide a high level overview up front. First on revenue, 2024 will be a year of building as we strengthen our foundation for future growth. Therefore, we are setting our revenue guidance for the full year at 2% to 3% year-over-year growth on as-reported basis.

On profitability, we expect to keep gross margin and AOI margins roughly flat in 2024 at 35% and 17%, respectively. With regard to any revenue upside we are able to achieve over the course of the year, our bias will be to reinvest a portion of the upside back into the business to drive future revenue growth.

Before I hand it over to Mike, I want to say a few words about Tiger. We have been exceptionally fortunate to have Tiger lead us for the past 12 years. He shaped the company to be one of the world’s leaders in domains like finance and accounting, procurement and supply chain to name a few....

Read the full article on Seeking Alpha

]]>

© www.conferencecalltranscripts.org 2020 | Terms of Service