Genpact Limited (G) Earnings Call Transcript & Summary

Thanks, Tawanda. Good afternoon, everybody, and welcome to Genpact's call, where we'll be discussing the results we posted for the fourth quarter and the full year that closed on December 31st, 2020. Hopefully, you've had an opportunity to go through our earnings release, which went up on the IR section of our site, genpact.com. Joining us on today's call are Tiger Tyagarajan, our President and CEO, and Ed Fitzpatrick, our Chief Financial Officer. Here's how today's agenda looks. Tiger is going to give an overview of our results along with an update on where our strategic initiatives stand. Ed will take you through our financial performance in more detail and share our outlook for 2021. Then Tiger will return for some closing comments. After that, we'll take your questions. As Tawanda said a moment ago, we expect this call to run about an hour. A number of the matters we'll cover today are forward-looking and carry various risks, uncertainties, and other factors that might cause actual results to differ materially from what those forward-looking statements indicate. Those risks and uncertainties are laid out in our press release. Also, on today's call, we'll reference certain non-GAAP financial measures that, in our view, offer additional information to deepen understanding of how management sees the operating performance of our business. A reconciliation of those measures to GAAP is available in today's earnings release posted to the IR section of our website. With that, I'll hand the call over to Tiger.

Thank you, Roger. Good afternoon to all of you, and thanks for being with us for this call covering our fourth quarter and year-end results for 2020. We feel great about how the fourth quarter and the whole of 2020 turned out, particularly given how tough the macroeconomic backdrop was. What we achieved speaks to our nimbleness and our habit of welcoming change, which let us quickly address what clients needed and move successfully into different ways of operating. Thanks to the commitment of our employees around the world, our capacity to increase both revenue and profit demonstrates how resilient this business is. Digital transformation accelerated across every sector and reached new buying centers, expanding our total addressable market. That opens up many more opportunities for us to deliver sustainable, profitable growth over the long term. So to wrap up, for the full year 2020, revenue totaled $3.7 billion, up 6% in constant currency. Revenue from global clients was $3.3 billion, a 7% increase in constant currency. Our adjusted operating income margin reached 15.9%, which beat our expectations and equaled the 2019 pre-COVID-19 levels. Finally, adjusted diluted earnings per share were $2.12, up 3% from the previous year. Consumer goods, retail, life sciences, healthcare, high tech, and insurance drove our global client revenue growth. Meanwhile, the volume of new deals coming in throughout the year reached a record high, which produced pipeline growth of 20%+ compared with the prior year by the time the year closed. Over the course of 2020, total new bookings we signed exceeded $3 billion. As anticipated, the effect of the COVID-19 crisis meant total bookings landed below the levels of the previous year; we witnessed robust momentum in global client bookings during the fourth quarter as client decision cycles went back to more typical pre-COVID-19 patterns. As a result, the worldwide client agreements we closed during Q4 ended up being nearly triple what we booked in Q3, and they also came in over 20% above the global client bookings recorded in the fourth quarter of 2019. On its own, the fourth quarter saw us finalize six major deals, and those helped fuel that expansion. I'd like to walk you through a bit of detail regarding a handful of the big agreements we completed. To start, expanding on the strong partnership we've built with Walmart across North and Latin America, we're going to handle and overhaul the finance and accounting functions for Massmart, the African business that Walmart majority-owns; using digital tools and analytics, we'll establish entirely different methods of operating that back their plan for growth. Next, we're broadening our alliance and ties with a worldwide CPG network into Japan. Their finance and accounting, procurement, and supply chain functions will undergo swift change, which should strengthen customer connections and speed up launches of new products—helping the business grow, boost profitability, and get the most out of cash flow. We'll draw on transformation services as well as intelligent operations over the long haul. Last, for a company in high-tech distribution, following an initial consulting project, we're now set to push transformation throughout finance, supply chain, and procurement, using our digital Cora platform to deliver standardization, automation, and risk controls company-wide. As expected, bookings tied to GE fell during 2020, since the sizable GE agreements had been signed in 2018 and 2019. Our consulting, digital, and analytics operations make up what we call Transformation Services, and that group grew by more than 20% during 2020, climbing to account for over 30% of total global client revenue. Within Transformation Services, analytics kept expanding faster than any other engine all through 2020. Seeing that momentum in Transformation Services for a fourth year in a row feels great to me. Transformation Services was built into about 70% of the value of our global client bookings, and those kinds of deals are the fastest-growing piece of our pipeline. And as we've said before, a big portion of our Transformation Services business is annuity-based. During 2020, we made major additions to what Transformation Services could do, responding to stronger appetite for digital offerings that showed up in all industry verticals. Alongside the broader Intelligent Operations Services we provide from end to end, those large Transformation Services projects have strengthened ties with many strategic clients. Nothing demonstrates this better than the fact that sole source deals accounted for more than half of our bookings in 2020. Because these distinctive solutions struck a chord with clients, we grew the number of global client relationships generating yearly revenue beyond $5 million, moving from 121 up to 129; within that group, clients earning over $50 million annually went from nine to 11. As these connections deepen, our standing keeps growing as a dependable guide and forward-thinking partner to the C-suites and boards of the clients we serve — especially at this moment, when their need for direction is greatest. Over the last several quarters, we've pointed to five forces driving what we discuss with CXOs. The first is a sweeping migration from offline channels to online ones in every sector. The second is the virtualization of every technology service and every way solutions get delivered. The third is faster uptake of cloud-based offerings and solutions. The fourth is explosive expansion in real-time predictive analytics. And last, building on all of that, comes the shift toward human-centered design, which produces better experiences for customers, users, and employees alike. I'd like to walk through a couple of instances where we've moved quickly in response to these trends, which is creating value for our clients and adding momentum to our own growth. One involves a top personal fitness equipment company that's seeing enormous demand and expansion — for them, we're building and rolling out a supply chain solution for the future state that draws on data and predictive analytics, which shortens the cycle time for launching new products. Then there's LIVEKINDLY Collective, a group of plant-based food and media brands — with them, we're using cloud technology and predictive analytics to rethink operations from end to end, fuel competitive growth, and innovate together toward building a digital-first, data-led organization in the food industry. We're working with a range of healthcare and pharmaceutical customers on many different COVID-19-related efforts — for instance, creating a mobile app that gives people fast access to testing and results, and connecting our pharmacovigilance platform, which is powered by AI, so it can handle reports of adverse reactions to vaccines for the U.K. The MHRA, which is a regulator, is another party we're bringing in, since we're applying digital technology to speed up and sharpen vaccine clinical trial submissions. Looking at the expansion we achieved in 2020, which was the strongest in our sector, it's clear proof that this business holds up under strain and that what we offer isn't something clients can simply cut. This is a market that's growing with penetration still very low, and it has expanded further still given everything 2020 brought our way. Two distinct groups of clients are the main force behind this market growth. The first group is made up of current clients who are looking to speed up their transformation efforts, which means they work with us more on additional services and across a wider set of buying centers. The second group consists of new clients, who are far more willing now to enter partnerships so they can change, transform, and react to the five trends I named. During 2020, we brought on 11 new client logos worth more than $5 million, and every one of them was buying services like ours for the first time, even mature offerings such as finance and accounting. Our investment focus remains on key strategic domains — supply chain services, financial crimes and risk services, sales and commercial services, plus financial planning and analysis. In each of these, the momentum we're seeing is strong. When it comes to our longer-standing offerings, say finance and accounting or insurance underwriting and claims, we continue to sharpen our competitive advantage by accelerating how we combine domain expertise, digital capabilities, and data.

Like I said during our previous earnings call, we've intensified our focus on cloud service offerings, aiming to deliver domain-led as-a-service solutions across our primary areas of emphasis. The acquisitions we've made recently show just how committed we remain to expanding what we can do in the cloud. During Q4, we bought Something Digital, which strengthens what we can offer in digital commerce. Along with the powerful experience offerings that Rightpoint brings, our pipeline and bookings are expanding considerably, since a large number of our clients are entirely rethinking how their commercial and supply chain operations work, pushed forward by their move toward online commerce; we also just completed our purchase of Enquero, a top firm in data engineering and analytics, which improves our capacity to create fresh cloud-based data and analytics solutions for clients, and to carry out last-mile connections through digital technologies. We're already noticing the advantages through new joint deals entering the pipeline. Now, on to profitability. The speed at which we cut costs during Q2 of 2020, plus how we retrained and shifted talent onto new client projects, let us produce solid adjusted operating income margins, adjusted EPS, and cash flows despite a tough environment. Once Q4 arrived, we started ramping up spending on R&D, transformation services, and the front end. That positioned us to begin 2021 with the strong pipeline I just referred to. When we consider 2021 growth, three things are on our minds. First, as anticipated, a difficult year-over-year comparison for Q1 against pre-COVID-19 results. Second, the effect from clients in the sectors hit hardest, including hospitality, travel, leisure, and energy, which will weigh on the year-over-year comparison for the first half. Third, a recent situation where one of our banking and capital markets clients resized and restructured its asset management business. We acted as a genuine partner and reduced our operations for them, and going forward we'll have a more concentrated relationship, which is still very solid. Consequently, we anticipate our banking capital markets vertical will decline year-over-year; even so, we take encouragement from how our banking capital markets pipeline grew during the latter portion of 2020. Having fully weighed these factors, we still hold the belief that our global client revenue will return to double-digit growth by Q4 of 2021. The momentum in our bookings during Q4 of 2020 suggests we might reach that milestone sooner than that. Broadly speaking, we therefore anticipate delivering global client growth that matches or exceeds 2020 while also improving our adjusted operating income margin; with that said, I'll hand the call to Ed, who will walk you through our 2020 performance and 2021 outlook in detail.

Thanks, Tiger. Good afternoon, everyone. I'll go over what we delivered in the fourth quarter, then walk through the key points from our full-year results and share the outlook we have for 2021. Starting with the quarter. Total revenue came in at $951 million, which is a 1% increase from a year ago, on both an as-reported and constant currency basis, and that was a bit ahead of what we had anticipated. Sequentially, revenues were up roughly 2%. Global client revenue rose 4% from a year earlier, or 3% in constant currency terms, driven mostly by demand for transformation services across a number of the verticals we've chosen. Sequentially, global client revenues were up about 2%, again on stronger transformation services revenue. Keep in mind that global client revenue in the third quarter benefited from surge activity tied to a group of banking clients, which, as we expected, did not repeat in the fourth quarter. GE revenue fell, as anticipated, 16% from a year ago, reflecting the macroeconomic effect on their businesses along with the planned productivity commitments we talked about last quarter. On a sequential basis, GE revenue was down roughly 2%, a touch better than we had expected. Adjusted operating income margin came in at 15.5%, ahead of our expectations, mainly because revenues were higher than we expected. As we said on our previous earnings call, in the fourth quarter we started bringing investments in both R&D and sales and marketing back up toward more normalized levels, and we reinstated salary increases for our global workforce. On top of that, we had about $4 million of net other operating expenses in the fourth quarter, versus roughly a $4 million net gain in the prior quarter. That fourth quarter net other operating expense is mostly tied to an impairment charge on certain leased properties we no longer intend to occupy. Because of that, operating margins came down on a sequential basis. Gross margin was up 20 basis points from the prior quarter and 240 basis points from a year earlier, reaching 35.4%. The sequential gain came mostly from better utilization in transformation services. The year-over-year gain was also largely the result of higher transformation services utilization, plus an unusually low gross margin in last year's fourth quarter, which was mainly due to an impairment charge tied to a European wealth management platform. Adjusted EPS was $0.51, down $0.06 from a year ago. In the current quarter, we produced roughly $0.10 more in gross profits year-over-year. That improved gross profit got partly canceled out by other operating income, which came in $0.13 greater a year earlier — largely thanks to a gain tied to land monetization — plus a $0.03 hit from negative FX remeasurement. For the quarter, our effective tax rate landed at 25.2%, compared with 28.1% during the same period last year, driven by certain larger discrete items in the earlier year. Now let me share some detail on our full-year 2020 performance. Despite all the uncertainty around us, total revenue climbed 5% compared with the prior year, and 6% when measured in constant currency. Revenue from global clients represented 88% of total revenue and grew 7%, both as reported and in constant currency, finishing at the upper end of the outlook we gave for the full year. The results we posted were mainly fueled by our transformation services, which got a boost from robust expansion in analytics services. When it comes to GE, revenue fell 4% compared with a year earlier, mostly because of productivity commitments plus the macroeconomic effects on GE's businesses. For the entire year, adjusted operating income margin came in at 15.9%, matching what we saw the year before and beating the 15.7% figure we had projected for this year, mostly thanks to extra revenues brought in during the quarter. It makes us genuinely happy that we managed to keep growing and hold our operating margin steady throughout what was a very tough year. For the full year, our gross margin was 34.8%, which was the same as what we recorded the prior year. We managed to keep margins steady despite facing some challenges early in the year. Those included certain clients in our banking and capital markets vertical who at first were unwilling to sign off on work-from-home delivery, plus utilization problems in our transformation services that resulted from COVID-19's impact, particularly within consulting services. As a share of revenue, SG&A costs fell 130 basis points versus the prior year, driven primarily by cost containment steps we implemented during the year as well as lower travel spending due to COVID-19. Adjusted EPS was $2.12, up 3% from the prior year, compared with $2.05 in 2019. The $0.07 improvement was mostly driven by adjusted operating income that came in $0.11 higher, though that was partially counteracted by a $0.02 increase in net interest expense and $0.02 more in taxes. For the full year, our effective tax rate landed at 23%, slightly below the 23.7% we saw a year earlier, mainly because of the jurisdictional mix of income. Moving on to the balance sheet and cash flows: we ended the year with $680 million in cash and cash equivalents, an increase from $467 million at the end of the fourth quarter of 2019. Looking at our net debt-to-EBITDA ratio over the trailing four quarters, it was 1.5x, and that figure includes the effect of the Enquero acquisition we completed at the end of December. Our DSO figure landed at 82 days, better than the 86 days we posted a year ago, mostly because we shortened the billing cycle through an effort we launched in the earlier part of this year. With those improved DSOs plus stronger adjusted operating income compared with a year earlier, cash from operations reached $584 million this year versus $428 million last year, which works out to 36% growth. Another factor boosting our operating cash flow significantly beyond the usual 10% band was the beneficial working capital effect from this fourth quarter's revenue growth being lower compared to last year's rate. Looking ahead to 2021, we anticipate free cash flows will move back toward the 1:1 relationship with net income that our business has traditionally demonstrated, rather than the roughly 1.6:1 figure we saw this year. In terms of capital returned to shareholders, we distributed $82 million during the quarter and $211 million for the full year. Dividend payments amounted to $18 million in Q4, bringing the annual total to $74 million. On top of that, during the quarter we repurchased about 1.6 million shares. That came to $63 million altogether, an average weighted price of $38.94 a share. Looking at the whole year, 3.4 million shares were bought back, with $137 million spent, at a weighted average price of $40.16 per share. Then from the beginning of the year until February 5th, we picked up another 1 million shares for a total of $41 million, averaging $40.47 per share. Ever since the buyback program started in 2015, net outstanding shares are down 19%. Over that period, 41 million shares have been repurchased at an average price of about $27.46 each, totaling $1.1 billion. Thanks to the additional repurchase authority the board of directors recently approved, we now have about $595 million of authorized capacity left under the share repurchase program. The board also signed off on raising our quarterly dividend by 10%, bringing it to $0.1075 per share — equivalent to $0.43 annually. Every year since launching our dividend in Q1 of 2017, we have raised dividends per share by 10% or more. Last, I'd like to share our outlook for the full year 2021. Total revenues should land somewhere between $3.93 billion and $3.99 billion, which represents growth of 6%-7.5% year over year, or 5%-6.5% when measured on a constant currency basis.

For 2021, we expect the deals we've just closed to contribute around 200 basis points to the growth of the company as a whole. Back in 2020, those acquisitions accounted for approximately 250 basis points of growth. Turning to global clients, we're forecasting revenue growth somewhere between 8% and 10%, and on a constant currency basis that figure shifts to 7% to 9%. Let me take you through how we currently expect the timing to play out, so you can get a sense of how growth should develop over the course of the year. As has been true historically, we're looking at global client revenue declining by a low single digit percentage sequentially in the first quarter, then rising quarter by quarter for the remainder of the year. Q1 is going to be our toughest comparison against last year, since our performance in that quarter was exceptionally strong. Taking that into account, for the first quarter of 2021 we're looking at global client revenue growing 1%-2% versus a year ago. Then in Q2, we anticipate a sizable acceleration, getting up to high single digits, thanks to the sequential revenue gains we expect plus what COVID-19 did to revenue in last year's second quarter. The big contract we signed during Q4 of 2020 — that was the strongest bookings quarter we've ever recorded — plus a solid pipeline going into this year, makes us feel even more confident about getting back to double-digit global client revenue growth compared to last year by Q4, or possibly earlier. For GE, we're looking at a decline of roughly 10%-12%. Like we mentioned on the last call, we anticipate GE revenue will stay fairly level across the four quarters of 2021. And we expect to get back to our strategic goal of intentionally expanding adjusted operating margin, while striking the right balance between long-term profitable growth and the right level of investment. So for 2021, we're looking at adjusted operating income margin improving to around 16%, and the main driver there is better gross margin. We expect full-year gross margins to come up by about 50 basis points in 2021, even as we put more money into R&D and sales and marketing. Given the seasonality in our business, our current expectation for the first quarter of 2021 is an adjusted operating margin in that same 14%-15% range we've had for the past two years. As for our effective tax rate in 2021, we're expecting roughly 23.5%-24.5%, which is higher than the 23% we had in 2020. That's mainly because of special economic zones in India expiring. Looking ahead, we still anticipate that our effective tax rate will level off around the mid-20% mark, since the special economic zone expirations will taper off gradually. Based on the guidance I just shared, our projected adjusted earnings per share for the whole of 2021 falls somewhere between $2.26 and $2.29. That works out to growth of 7%-8% compared with last year, and it factors in roughly a $0.02 drag from the higher tax rate plus a $0.03 per-share hit from unfavorable FX stemming from the gains we booked in 2020. To arrive at these figures, we relied on our outstanding shares as of the close of 2020, modified to reflect buybacks finished through February 5th. We're projecting cash flow from operations to be roughly $450 million to $500 million, which works out to about 1.3x-1.4x net income, consistent with what we've seen historically. As I said before, that translates into free cash flow of around 1x-1.1x net income. For 2021, capital expenditures should come in at about 2%-2.5% of revenue. That figure is below our typical average because we anticipate some longer-term effect from a higher work from home mix. Also, given that our digital solution developments mostly shifted to agile methodologies over the course of 2020 and get expensed as incurred, we anticipate capital expenditures will stay below the levels from 2019 and earlier. We'll keep updating you on this estimate as 2021 and beyond unfold, though we do anticipate some decrease from our historical range of roughly 2.5%-3% moving forward; with that, I'll hand the call back to Tiger.

Thanks, Ed. In 2020, we met the moment head-on, moving swiftly to a globally distributed delivery approach while keeping productivity and service-level results intact. The strategic decisions we've made in recent years, combined with the essential nature of what we provide and our disciplined execution, fueled the industry-leading growth in global clients we achieved for the year, all while protecting margins. The upheaval brought on by COVID-19 is creating fresh opportunities for our distinctive domain-led transformation offerings and intelligent operations solutions that bring together digital automation and AI, plus data and analytics, all delivered through an excellent experience in the cloud. Industry analysts have acknowledged what we've accomplished, granting us 18 leadership position awards in 2020, and just recently, the research firm HFS ranked us number one in Finance and Accounting. By treating client challenges as matters of information and process, we can turn digital transformations into reality — linking data with domain-specific insights and generating real-time predictive analytics that accelerate decisions and actions. Everything here has broadened our total addressable market for 2021 and beyond. The year 2020 underscored even more how vital it is to serve all four stakeholder groups: clients, employees, investors, and our communities. For over 10+ years, we've made significant progress in fostering a diverse and inclusive workplace. It's long been our conviction that a diverse team produces the best solutions for our clients. Today, women make up over 40% of our global workforce, and women hold many positions on our senior leadership team along with 40% of our board seats. Throughout the year, we also made racial equity a top priority and pinpointed a range of actions to propel change, such as new programs aimed at drawing in, developing, and keeping outstanding racially diverse talent. Giving professional growth opportunities to our worldwide workforce has consistently ranked as a top priority for us. What we invested in our flexible digital learning platform, Genome, and our proprietary redeployment platform, Talent Match, delivered returns this year, as training hours grew 35% year-over-year to over 10 million hours, and over 10,000 employees were redeployed. Sustainability has become an ever-greater corporate priority for us. We're pursuing initiatives to shrink our carbon footprint, do away with non-essential single-use plastic, and make our operating facilities greener. Recognition has come our way for our sustainable sourcing practices, and for the third consecutive year, Frost & Sullivan and The Energy and Resources Institute selected Genpact as a leader in sustainability. Through many different programs, our global teams engage passionately with their communities. One illustration is our Feed a Million project, a volunteer effort that supplies meals to underprivileged communities around the world. We remain firmly dedicated to harnessing technology for the greater good, producing sustainable, meaningful transformation that forges resilient companies and communities; we take pride in being named the world's most ethical company by the Ethisphere Institute in 2019 and 2020. We'll keep giving you routine progress reports on our ESG work as we set formal targets for environmental, social, and governance programs, building on the sustainability report we've put out for 10 years now. To sum up, I'm extremely happy with how we did in 2020, a year when we increased both revenue and earnings despite a very tough macroeconomic backdrop. Our belief is that we're positioned well to get back to double-digit global client growth in the later portion of 2021 and to stay on the intentional course we've set of enhancing operating margins. An enlargement of our total addressable market is what we're seeing. More transformation services and intelligent operations solutions are being delivered to our clients, and we're engaging with a greater number of buying centers than at any point previously. Each of these things prepares us to carry on our long-term effort of achieving global client growth of annual double digit to low teens and producing adjusted operating income margin expansion. A great deal has been achieved, yet we're energized by what lies ahead as our clients keep transforming themselves and we serve as their trusted advisors. Having said that, I'll hand the call over to Roger.

Appreciate that, Tiger. At this point we want to begin the Q&A portion of the call and take whatever you'd like to ask. Tawanda, would you mind walking everyone through how to participate?

Thanks. Hello, Tiger. Hey there. Nice to get your update.

Hey, Ashwin. Thanks.

Hi. You both mentioned the phrase fourth quarter, if not sooner, when talking about when global client growth would arrive. What would make it happen earlier? Are you expecting a greater amount of discretionary work? Is it more a matter of turning the bookings you mentioned into revenue more quickly? Which factors are behind that?

Ashwin, we were extremely, extremely happy with how quickly decisions were made during the fourth quarter, and that produced the bookings we discussed. In our view, the fourth quarter shows what we'd describe as decision-making returning to normal. Our pipeline looks robust, and our inflows look robust. Should the momentum from Q4 carry on — and as you're aware, our bookings produce a revenue ramp-up over the following three or four quarters — then we expect that fourth quarter to arrive sooner. To address what you asked, the same momentum is still visible to us. Movement in the pipeline is still visible to us, since the pipeline exists, and from there the ramp-up begins. Naturally, transformation services remains a leading engine for us. Those cycles run shorter. I'd put it this way: we feel really good about the fourth quarter, and whereas last time Ed and I both pointed to the fourth quarter, what we're saying now is that it might come a bit before the fourth quarter too.

Understood. Alright, could you share additional specifics regarding Enquero? It appears to be a really strong company in big data visualization engineering. It looks like they have significant ties with Tableau and Anaplan. If you have any extra information about the merger, or any financial figures, that would be excellent.

I'll cover the capabilities side a bit, and then perhaps I'll hand it over to Ed regarding the financials. You touched on much of what this company is truly about and what made us enthusiastic; we have been familiar with them for close to 2 years at this point. We've collaborated with them previously, so the team is known to us, and we are known to them. We understand the value that the two of us jointly can deliver to a group of clients within the same verticals we both serve. That is what brought us together. As early as January, we are already witnessing combined offerings to shared clients in supply chain, in digital commerce, in the shift to online, involving platforms like Anaplan and Tableau and so forth that you mentioned. The reality that it's transferring data to the cloud and assisting clients in reaching the cloud and subsequently creating analytics on the cloud and visualization on the cloud, across the various technology platforms they possess, is the thrilling aspect, indeed.

Understood.

Regarding the numbers, we discussed this deal adding to earnings. It will boost them; Ashwin, it's mostly in line with how profitable we are; during year one, that lift will be somewhat smaller, though it still adds to earnings. While we carry out the integration, as one would anticipate, that initial year will be somewhat smaller, and afterward we'd expand from that point. Another point worth mentioning, I believe, is that I described the analytics business as among those growing fastest for us, and this simply reinforces that existing strength. I feel quite positive about this one.

Okay. Thank you both.

Thank you, Ashwin.

Thanks. It's good to learn about the advances your ESG program is achieving, so I appreciate you telling us about that.

I appreciate that.

I wanted to ask, could you put a number on the headwind coming from that banking and capital markets customer? And perhaps even more significant, what's your expectation for how the remaining business will do excluding that account?

Yeah. The banking capital markets client, I'd call it a highly unusual circumstance, and what caused it was their own rethink around restructuring their business, how they operate it, and so on. As any solid partner would — and this is something we've handled many times before — we sat down with them and reworked how we deliver. The effect on us, on the whole, would amount to 2 to 3 percentage points of growth where global clients are concerned. So once you set that aside, our global clients are actually expanding at a better rate than the one we just outlined. Every vertical is contributing strongly. Ed, anything you'd like to add?

That, Tiger, strikes me as the crucial point. My view is that banking capital markets will decline compared with a year earlier, and because of that, likely landing somewhere between 10% and 15%. As for everything else, you can work out the figures yourself — I feel quite confident about broad-based growth exceeding 10% across each of the verticals. It's nearly as if we've returned to Q1 of last year in every single business, with bank and capital markets being the exceptions. Just as Tiger mentioned during the call, I also feel good that we've reached a stage where, in bank and capital markets, we know what we know, and at this point we're building, correct? With any luck, we'll witness that improvement quarter by quarter, alongside growth, as we move through 2021 in bank and capital markets.

Maggie, to wrap things up, the money coming in during the later stretch of 2020 — and the resulting growth of the pipeline in banking capital markets — was genuinely strong. Everyone on the team feels genuinely positive about it.

Thank you, that's great. You've made many announcements about growing partnerships, such as the one with Massmart. You've also pointed to impressive additions of new client logos, and you're emphasizing a total addressable market that keeps getting bigger. I'd like to know, when you look ahead a couple of years, what portion of growth do you anticipate coming from the current client base compared with new logo additions, and does that differ from your historical experience?

I don't believe so, Maggie. This involves a bit of peering into a crystal ball, but I don't believe so. I'd point to three things that stand out. First, if you look at any client, it's quite evident to us that even after a relationship lasting 15 years, there are still things to be done, things the client wants, things we can offer. We're also continually building more capabilities of our own that matter to them. We keep growing alongside clients even beyond 15 years. That's the initial growth element I'd mention. That runway simply continues to widen. Second, whenever we bring on a new client, I mentioned 11 new logos. I specifically cited 11, not new logos overall, but new logos that hadn't outsourced previously. New logos in total will be a far larger figure, but new logos who've never outsourced before; those logos create the foundation for extremely long-term growth. I'm referring to a growth trajectory spanning five, 10 years. This has less to do with any shift in the proportion between existing clients or new clients, since that cadence remains unchanged; it's simply that the runway keeps getting longer and longer.

Alright, and thanks for the update.

Appreciate it, Maggie.

Hey, thanks for taking my question.

Hi, Puneet.

Could you walk us through some of the margin dynamics this year — the positives and negatives — such as subsidies, or anything margin-related tied to that banking contract that's set to wind down? Also, any other cost implications or cash usage items stemming from the recent Indian budget?

All right. I didn't catch that last part, but I'll address the first two, and then you can fill me in on the third. Let me begin with the banking side. We don't anticipate any effect on our margins overall, and our trajectory from 15.9%-16% still holds. We don't see that shifting the needle much — broadly in line with company margins. On the positives and negatives, the major one, as I think you all remember, is the other operating income line from last year and earlier periods — the export subsidy — which is no longer there. That export subsidy applied in 2018 and 2019. In the prior year, we had the land gain we'd discussed sitting in other income. That's gone now. We didn't have it this year; instead, it was essentially offset by strong gross profits. We expect that to carry forward into next year, along with SG&A leverage that keeps driving operating margins. That other operating income item — we don't anticipate it being at a significant level, or matching the figures we saw previously, as we move ahead. Those, I'd say, are the two biggest positives and negatives for the year. Anything else, Tiger?

No. Assuming I grasped what Puneet was asking, and after I give my response, Ed, if you're able to contribute something further, please do.

Absolutely.

Regarding India's budget, nothing stands out as significant for our sector in particular — nothing we'd highlight as either a benefit or a hit. Would you agree with that, Ed? Is that accurate?

That's fair.

Yep.

Understood. No, thanks. In light of the pandemic, what long-term shifts do you anticipate in how delivery is structured? Perhaps regarding on-site assistance needed for transitions, or staff splitting time between office and residence, or even providing services through a gig economy arrangement.

Puneet, my response to that would likely come in two parts. First, consider what took place during 2020: we moved roughly 8,000 to 10,000 individuals to remote work with nobody traveling to meet anybody anywhere. This involves knowledge transfer, as I mentioned, along with several new logos, fresh clients, and additional services. That proves it is achievable, and achievable at a high standard. Incidentally, this has been shown across the industry, not only by us. For me, that indicates that moving forward, a fairly substantial share of the model will operate this way, and that carries many implications regarding pace, regarding how intensely knowledge transfer can actually be carried out, and clearly regarding value. Second, when you face a scenario where for a year, all of our clients have teams operating from home in their operations and their business performing truly complex work, and all of our teams supporting them likewise operating from home, every obstacle of resistance asking, "From where is this work able to be performed?" Which previously tended to be part of the discussion in certain instances, has disappeared. I believe one factor behind the total addressable market increasing is that nobody argues anymore about which work can be performed from which location. The argument is really: what is the optimal approach to do it? Which technologies are best suited to deploy? What order should things follow? Who handles which tasks? Those are the discussions now. This represents a major shift. The dialogue around it has been entirely transformed by COVID-19.