Genpact Limited (G) Earnings Call Transcript & Summary

Appreciate that, RJ, and hello everyone on this afternoon — glad you could join Genpact's call about the results we posted for Q1, which closed on March 31, 2021. Hopefully you've already looked at our earnings release; it's up in the IR area of genpact.com. Joining us today are Tiger Tyagarajan, who serves as President and CEO, along with Ed Fitzpatrick, our Chief Financial Officer. Here's how we'll run today's agenda. First, Tiger gives a rundown of how we performed plus the latest on our strategic initiatives. After that, Ed takes you through the quarter's financials and shares a few views regarding what we expect for 2021. After that, Tiger will return to wrap things up, and following that we'll open the line for your questions. We anticipate the whole call running roughly sixty minutes. A portion of what we cover today looks ahead, and it carries various risks, uncertainties, and other elements that might make the actual outcome diverge materially from what those forward-looking statements suggest. You can find those risks and uncertainties laid out in our press release. Also, on today's call we'll cite a few non-GAAP financial measures, which in our view supply extra detail that improves your grasp of how management assesses the operating performance of our business. Today's earnings release, which is up in the investor relations area of our site, includes a reconciliation of those measures to GAAP. With that said, I'll hand things over to Tiger.

Thanks, Roger. Hello, everyone, and I appreciate you being with us this afternoon for the earnings call covering our first quarter of 2021. The year got off to a solid beginning, as Q1 revenue, adjusted operating income margin, adjusted diluted EPS, and cash flow all came in above what we had anticipated. I'm happy about the momentum that continues building throughout our business. Enterprises increasingly need to take advantage of digital technologies and cloud-based analytics, which is driving significant demand for what we offer. More and more, we're working with clients on broad, holistic transformations aimed at reimagining their business models and redesigning how they operate. Such operations span numerous functions and buying centers, which unlocks fresh portions of our growing addressable market. To move quickly through our Q1 2021 results: total revenue came to $946 million, a 1% increase on a constant currency basis; global client revenue was $853 million, rising 5% on a constant currency basis; adjusted operating income margin reached 17.2%, which is 250 basis points higher year-over-year; and adjusted diluted earnings per share were $0.59, an 11% gain year-over-year. Before diving into specifics, I'd like to give an update regarding COVID-19 in India, where we run substantial operations. Since the pandemic began, we've said that two key pillars guide every decision we make; the first is the health, safety and well-being of our employees worldwide; the second is keeping services running for our clients. Although our in-office presence across the two regions was quite limited, most of those employees have now returned to working from home. I take great pride in how passionate and dedicated our teams are in supporting their colleagues through this crisis. They keep working tirelessly to serve our clients, while at the same time doing all they can to help affected colleagues and their families. We're also grateful for the tremendous support from our clients as we join forces to get through this challenging period; we've arranged drive-through testing for employees and their families, plus an employee hotline that assists with questions and offers access to medical attention and resources. Insurance coverage and financial aid have been boosted for the associate population hit hardest. We've put provisions in place so employees can receive vaccines at our cost once they're available. Around the world, we provide 24/7 counseling hotlines for mental health support for our teams, access to an education and wellness app, and an online community with resources for parents. Now, back to how we performed. Throughout Q1, client demand stayed quite healthy, continuing the momentum from Q4 of last year. Our pipeline hit yet another all-time high, fueled by new inflows that include a number of large, complex transformational deals combining multiple services like finance and accounting through supply chain, or sales and commercial operations. We're pleased with our overall win rates, which underscore our differentiation and competitive deals. Sole-source deals kept representing over half of our inflows, pipeline and bookings in the quarter. We saw strong performance from Global Clients, spread widely across nearly every vertical we target. Consumer goods and retail, life sciences and health care, and high tech all posted double-digit growth. Banking and capital markets stood out as the one exception, hit by the restructuring of our relationship with a banking capital markets client, something we talked about during the prior quarter. I'm especially happy with how Global Clients performed on the top line, considering the tough comparison against our strong first quarter of 2020, the last period before COVID-19 brought its challenges. With such a solid start to the year, we feel confident about hitting our full year outlook. GE fell 24%, as expected, reflecting productivity gains delivered plus lower IT project spending amid this uncertain macro environment. That decrease also reflects the effect of GE divestitures that now sit within our Global Client portfolio. Transformation Services, which covers consulting, analytics and digital, rose roughly 20%, helped by the contribution from our recent Enquero acquisition, and it now accounts for over 30% of total Global Client revenue. Transformation Services keeps bringing in new deal wins, with consulting, digital and analytics woven systematically into over 70% of our pipeline; we see a widening opportunity to meet our clients' rapidly shifting needs through innovative solutions built on cloud architecture along with data and analytics. A couple of illustrations: for a food company, we apply our AI and machine learning solution to produce more accurate, real-time demand forecasts, drawing on traditional and nontraditional data sources kept in the cloud, after rethinking the whole planning process. For a global banking client, we are designing, building and deploying a digital cloud-native commercial loan solution on AWS, drawing on our deep knowledge of the commercial lending and syndication business and processes. The bank aims to disrupt this market with far faster decisions and funding times, plus a superior customer experience that should ultimately win them market share. Many of our transformation services engagements lead to considerably bigger intelligent operations deals, as clients pursue change to gain an edge in their shifting markets. Across the last four years, roughly 25% of our Global Client accounts that began with a small transformation services engagement, a relationship worth less than $1 million, have since grown into larger relationships exceeding $5 million, with some naturally becoming even bigger. Many of our engagements use alternate commercial models, not merely input or people cost-based ones. We ended the quarter with over 40% of total revenue coming from newer constructs, including outcome-based pricing and fixed price models, compared with 30% in 2017. The standout of the quarter was analytics growth within our transformation services portfolio. First quarter Global Client Analytics revenue climbed more than 30%, and we expect that momentum to carry through the year. Analytics has turned into the largest piece of our transformation services operation, thanks to the substantial expansion it has seen across the last several years. Over the past 2 years or so, we've sharpened our emphasis and our offerings, applying data and analytics to generate insights and actions across a wide range of services, including supply chain, sales and commercial, and financial crimes and risks. Demand keeps building because clients in industry after industry want to tap data and predictive insights on a 10 digital layer in the cloud to address problems and produce outcomes. With the backing of what we recently bought — Enquero, Something Digital and Rightpoint — we're now crafting and deploying fresh cloud-based data and analytics solutions that speed up clients' transformation journeys. A few illustrations: for a global media and entertainment business, we're building a cloud enterprise platform that merges siloed in-house data with third-party consumer data so analytics can run at scale, which allows insights into consumer preferences, produces behavior recommendations and enhances the buying experience — all of it aimed at generating new revenue streams and growth across every one of its channels; for a major insurance carrier, we're applying AI and machine learning to work through claims and litigation expense data so we can predict exposure to large new claims, which meaningfully cuts payouts and lessens future underwriting risks.

During the earnings call we held three months ago, I noted that we compete in an expanding sector that is still substantially underpenetrated, with digital transformation pushing organizations in every industry to reinvent themselves and opening up fresh possibilities. The strategic bets we've placed over time allow us to guide customers along their paths, which widens our pipeline and produces additional bookings. This enlargement of our total addressable market comes mostly from two categories of customers. First, current customers seeking to speed up their transformation efforts, which results in bigger engagements for us that bring in offerings and purchasing hubs extending past the CFO and the CIO to include the COO, the Chief Risk Officer and the Chief Supply Chain Officer; and second, brand-new customers who are willing to consider partnerships for the first time in order to alter and transform themselves amid this new worldwide landscape. Two notable figures illustrating this pattern are Global Clients generating yearly revenue of $50 million or more, which rose to 11%, compared with 10% in the equivalent period a year earlier. And the revenue we earn from that group of customers climbed at over twice the rate of Global Client growth. Next, customers whose yearly revenues reach $5 million or above went up to 132 from 128; this encompassed numerous first-time purchasers of the kinds of services we deliver; we are witnessing lasting shifts in how companies adjust to the new normal operating environment; they no longer depend solely on conventional KPIs and frameworks to propel performance, including sales levels, process optimization and efficiency gained from automation, or on operating within inflexible business models tied to industries. Boards and C-suites have reordered their priorities and are putting money into creating operating models that disrupt industries, built around our measures such as customer empathy and delight. We think these elements offer an extended runway of sustainable low double-digit to low-teen growth for Global Clients. Our robust first quarter results show our resilient business model, targeted strategies and top-tier execution all coming together in the marketplace. We keep reinforcing our strengths and grow ever more pertinent to customers by resolving issues created when disruption hits industry value chains. We think our agility lets us swiftly deliver fresh, innovative transformation solutions to the market, drawing on digital and analytics. This has bolstered our standing as a trusted adviser, setting us apart from rivals and driving our ongoing growth even when conditions are tough; having said that, I'll now hand the call over to Ed so he can walk through our second quarter results in detail.

Thanks, Tiger, and good afternoon to all of you. In today's remarks, I'll go over how we performed in the first quarter, and I'll also share where we currently stand on our financial outlook for the whole of 2021. We brought in total revenue of $946 million, which is a 2.5% increase compared with a year earlier, or 1% when measured in constant currency. That top-line expansion exceeded what we had expected, and the main reason was stronger results than forecast in our Global Client businesses. Global Client revenue makes up 90% of the total, and it grew 6% versus the prior year, or 5% in constant currency terms, including a contribution of roughly one point from revenue tied to certain divested GE businesses that became part of Global Client revenue on January 1st, 2021. If you strip out that revenue, Global Client revenue still would have risen 5% year-over-year, or 4% in constant currency, which is ahead of what we had modeled, mostly because transformation services did better than expected, with analytics growth leading the way. GE revenue fell 24% from a year earlier, a decline attributable to productivity commitments, the macroeconomic pressure on GE's businesses, and the effect of certain divested businesses that are now reported within Global Client revenue. Once you set aside the effect of revenues from those divested businesses, GE revenue was down 16% for the quarter. I'll get into the full year outlook a bit later; however, on a comparable basis, our earlier full year outlook for GE revenue remains unchanged. Adjusted operating income margin came in at 17.2%, which is 250 basis points above the first quarter of last year. The increase compared with a year earlier was driven primarily by a better gross margin, less travel spending than anticipated because of COVID-19, and improved operating leverage. As a reminder, during 2020's first quarter, our adjusted operating income margin was hurt by lower utilization stemming from work-from-home capacity restrictions that were subsequently removed, plus charges related to a write-down in the valuation of our India retirement fund. For the quarter, gross margin came in at 36.5%, compared with 34.5% during the same period last year. That 200 basis point gain was mostly attributable to higher utilization overall, with Transformation Services leading the way, as well as stronger productivity improvements. On top of that, the prior year number was below its typical level because of the COVID-19-related charges I referred to earlier. We still anticipate that the full year gross margin level will be at least 50 basis points better than a year ago. SG&A expenses, measured as a percentage of revenue, were 20 basis points lower year-over-year, mostly because travel costs came in below expectations due to COVID-19, with sales and marketing investments partially offsetting that. Adjusted EPS came to $0.59, an 11% increase versus a year ago, when it was $0.53 in 2020. That $0.06 gain was mainly the result of operating income that was $0.10 higher, roughly 20% up year-over-year, plus a $0.01 benefit from a reduced share count, partly offset by a $0.04 smaller year-over-year FX remeasurement gain. As a reminder, in last year's first quarter we booked a $15 million FX remeasurement gain, while this quarter it was a $3 million gain. Higher taxes also dragged things down by $0.01. Our effective tax rate stood at 24.1%, compared with 22.5% a year ago. That rise mostly came from tax benefits running out, along with larger one-time benefits recorded a year ago. Now moving to cash flows and the balance sheet. During Q1, our operations generated $77 million in cash, compared with $19 million consumed in the same quarter last year, driven by higher adjusted operating income along with better DSOs and working capital levels that were generally lower. It's worth noting that the 2020 first-quarter cash flow from operations included a one-time tax payment related to an India tax issue from an earlier period. DSOs landed at 84 days, an improvement over the 89 days recorded a year prior, largely attributable to a shorter billing cycle and faster collections. We finished with $644 million in cash and cash equivalents, compared with $680 million as of December 31, 2020. Free cash flow came in at $63 million, helped by money raised from the recent bond issuance, but that gain was then reduced by a $259 million bond repayment, $134 million spent on share repurchases, and $20 million related to the dividend payment during the quarter. During the quarter, we capitalized on the favorable interest rate conditions and brought a new $350 million bond to market with an appealing 1.75% coupon rate. We intend to pay off the $350 million bond that's currently outstanding. Its coupon is 3.7%, and it comes due in April 2022. We're keeping a close eye on how the market is moving so that we can pick the best moment to make that repayment. Once those 2022 bonds are gone, we anticipate saving roughly $7 million in interest each year, which comes from the difference in rates between the two bonds. Over the trailing four quarters, our net debt-to-EBITDA ratio stood at 1.67 times, and that figure includes the effect of the new $350 million bond offering. During this quarter, our stock was trading at what we saw as an appealing valuation, so we bought back roughly 3.3 million shares — nearly 2% of those outstanding. That came to $134 million in total, with an average price of $40.68 per share. When we ran our intrinsic value numbers, they pointed to a significant gap between that value and where our stock was trading. Because we had enough capital on hand in the quarter, we increased our buyback activity to match, and we managed to do that while our net debt-to-EBITDA stayed under 1.7 times. Altogether, since the buyback program began in 2015, we've repurchased 44 million shares, paying an average of about $28.28 each, which adds up to $1.2 billion. So far, those buybacks have delivered about a 16% yearly return. We still have roughly $503 million in authorized capacity left under the share repurchase program. Our priorities for allocating capital haven't shifted. Organic growth remains the first place we'll put money, though we also have a healthy pipeline for M&A, and we'll stay diligent about hunting for businesses that would make us stronger in the service lines we've chosen. And whenever we're holding capital, we still believe that repurchasing shares—particularly if the price stands out as highly attractive relative to the intrinsic value we perceive in the company—constitutes an investment that adds a great deal of value. When we think about what's coming for the business, it makes total sense to examine past results as an indicator of future growth. Specifically, our free cash flow grew at a compound annual rate in the mid-teens over both the last five and 10 calendar year spans. Looking ahead, we expect to keep generating strong double-digit plus cash flows, in line with our broader medium to long-term growth expectations. As we mentioned, we'll continue assessing our share price, comparing it to our own valuation, and take advantage of any mispricings. Let me now turn to our current view of the full year outlook. We still think total revenues are going to come in somewhere from $3.93 billion to $3.99 billion, and that works out to 5% to 6.5% growth in constant currency compared with last year. The start has been solid, and we're pleased about it — we believe we're in a stronger spot now to reach the topline outlook we set for the full year. Of course, we're keeping a close eye on how COVID-19 is playing out in India, and so far we've continued to serve our clients, which is possible because of the incredible work of our teams around the world and the partnerships we have with our clients, who have given us a level of support that's been out of the ordinary.

Regarding Global Clients, our current projection is for revenue growth of 9% to 11%, or 8% to 10% in constant currency terms. That figure accounts for roughly one point of contribution from revenue tied to certain GE divested businesses, which is now part of Global Client revenue. If you take out that revenue, Global Client revenue is anticipated to rise 8% to 10% for the year, or 7% to 9% on a constant currency basis, matching the guidance we gave three months ago. Looking at the second quarter, we anticipate a significant acceleration in Global Client revenue's year-over-year growth, reaching high single-digits, driven by the momentum we're observing in our business and the top-line effect from COVID-19 during last year's second quarter. Assuming low single-digit sequential growth in the third and fourth quarters, we remain confident that we're positioned well to get back to double-digit Global Client year-over-year growth by the fourth quarter, or possibly earlier. GE revenues should fall about 20% compared with last year. When you exclude the impact of roughly $40 million in revenue from GE divested businesses, GE revenues for the entire year should decrease 10% to 12%, consistent with the earlier outlook we provided this year. Because of the robust adjusted operating margin we achieved in the first quarter, we think we're in an even stronger position to grow our full-year adjusted operating margin to 16%. We still anticipate increasing our R&D and sales and marketing investments, including travel, as we move through the rest of 2021, alongside the sequential revenue growth we expect. Based on this outlook, we project adjusted diluted earnings per share for full year 2021 to land between $2.27 and $2.30, which is $0.01 higher than our previous range of $2.26 to $2.29, reflecting a $3 million FX remeasurement gain recorded in the first quarter. Before handing things to Tiger, I'd like to note how delighted we are that we were just added to the S&P 400 MidCap Index, which is a great validation of the company's fundamental performance. With that, I'll pass the call to Tiger.

Thank you, Ed. The year has gotten off to a strong beginning for us. What sets us apart in the marketplace is our culture of welcoming change, reinforcing processes, and an unrelenting commitment to client results. Looking ahead, we will create value for our clients by harnessing digital and analytics to produce predictive insights. Because we combine our analytics strengths with deep expertise in our domains, we are positioned well to achieve our long-term growth trajectory. Sustained investment in helping our employees learn and develop rapidly evolving skills has been one of our pillars of success. During the quarter, we combined Genome, which is our online learning platform, with Talent Match, our platform for redeploying talent, and this let us pinpoint, retrain, and move another 2,000 team members into fresh positions, resulting in improved utilization as well as better retention of talent. To give you one example, we rolled out not long ago a certification program in data and analytics that we own, available to each and every one of our team members, enabling them to develop the skills needed to draw essential insights out of the enormous operating data sets we hold. We have seen an overwhelming reaction to this program — close to one-third of our workforce around the world is signed up at present — and that shows how much our people want to keep learning and how committed they are to it, which we think helps give us an edge over competitors. Our strong approach to bringing people in, helping them get up to speed, and teaching new skills has let us continue attracting excellent workers who want to be part of what we're building, and to capture the many opportunities we see down the road. During the past year, our worldwide organization has grown by over 20,000 people, and we just went past the 100,000 mark for staff around the world. We take our dedication to ESG very seriously and plan to share updates on a consistent basis about what we're doing and how far we've come. Sustainability has long been something we pursue without wavering, through efforts focused on diversity and inclusion, our impact on the climate, backing the places where we operate, and governance that is transparent — all of which help us reach our financial targets over the long haul and deliver benefits to those communities. In addition to everything we're doing in India, we're also playing a leading role in helping the US economy reopen both safely and effectively, and to do so more quickly. We just shared news of a fresh partnership involving the COVID Collaborative and the Creative Destruction Lab rapid Screening consortium, through which the US Rapid Action Consortium is being launched. The aim of this group is to join forces with a wide-ranging ecosystem made up of top private sector companies, specialists, and organizations, so that safe and affordable rapid COVID-19 testing gets adopted more quickly, which should make it easier for businesses to bring employees back into the office without putting them at risk. Throughout the COVID-19 crisis, our teams have shown remarkable determination and adaptability, and our collaboration with clients has been outstanding — I couldn't be prouder. I have every confidence that, together, we'll make it past this latest situation in India. One more thing before wrapping up: I want to extend a warm welcome to Tammy Franklin, the newest addition to Genpact's Board of Directors, whose record of spearheading digital transformation at many organizations is truly impressive. All of us are delighted to have her deep expertise contributing to these strategic conversations, and the broad range of skills represented on our Board brings me great satisfaction. With that, I'll turn things back over to Roger.

Appreciate that, Tiger. At this point we want to turn things over so you can ask us whatever you'd like. RJ, would you mind sharing the instructions?

Hi. Good afternoon. Thank you.

Hi, Bryan.

Hi. I'd like to begin by focusing on the factors behind the outlook. So how should we reconcile the robust 1Q results, which exceeded plan, with the decision to maintain the outlook? Is it simply because we're at an early point in the year? Are you factoring in pandemic-related items for operations within India? Is there any pull-forward effect we should know about? Could you help us connect those two things?

Let me just say, Bryan, your opening remark hit the mark. It's only the first quarter, and I'm really pleased with how strong it was. So the whole story supports feeling good about the full year. But one quarter is all it is. Nothing has been included for the COVID-19 impact in India. Our operations, our delivery to clients, the partnership with clients, despite clearly higher absenteeism caused by both COVID-19 among our people and the effect on families, obviously means we collaborate very closely with our clients to keep delivering our services. So nothing related to that impact has had to be built into our outlook. It's simply that only one quarter has passed.

All right. And then you mentioned that the pipeline is at record levels. Could you discuss how decisions are being made, as well as the timing of deal ramp-ups? Has that shifted compared with 3 months ago?

No, Bryan. It appears to be proceeding as planned, both regarding how quickly decisions get made and the anticipated ramp and how long the ramp run takes. One must factor in that these are frequently — especially the bigger deals are complicated, obviously spanning multiple geographies, and also involving multiple buy centers with connected services. I mentioned finance and accounting tied to supply chain, and at times tied to sales operations. And so, when you pursue a connected large deal of that sort, ramping up requires time; that has nothing to do with the pandemic.

It’s okay. Thank you.

Thanks, Bryan.

Thanks for that. Good evening, everyone. Hey, Tiger, Ed, and Roger — congratulations on the quarter.

Thanks, Mayank.

I'd like to begin by getting a bit more detail about the revenue momentum you're observing. Your data sheet isn't in front of me right now. So I'd really appreciate some insight into which verticals did better than you anticipated. Are there any weak areas you're noticing inside that vertical portfolio? So any additional detail on the revenue breakdown you're seeing across your verticals and regions would be great. Thank you.

I'll begin, and after that, Ed can chime in. I want to — regarding our prepared remarks, Mayank, we're experiencing fairly widespread strong growth performance throughout all our verticals except banking capital markets, which I'll address on its own, but every vertical apart from banking capital markets. Actually, consumables retail, life sciences and health care and high tech, all reached double digits. And as for banking capital markets, we recorded a decline compared with last year's first quarter. But that matched what we had anticipated. Since, if you recall, during the prior quarter we mentioned that one of our banking capital markets clients in the asset management business was restructuring, resizing their whole business, and consequently our contract as well. And we had prepared for this. When we went into the quarter, we understood that's precisely what would occur and it was carried out precisely as we had planned. What we're observing in the banking capital markets business is a greater inflow into a new pipeline. Pipeline is expanding quite well. So as we close out the year, we anticipate banking capital markets will actually be very strong. Ed, would you like to chime in?

Tiger, I'd say you're right on target. Consumer goods life science, in my view, keeps expanding and continues expanding rapidly, which is excellent, and high tech too, inside HMS, is expanding at a solid pace. Broadly speaking, I'm happy with every vertical except the single one Tiger brought up; therefore the widespread character of the growth across the board leaves us feeling quite positive.

Understood. Then, only as a brief second question. Ed, regarding margins, since the first quarter was so much stronger than expected, what are the positive and negative factors that will affect margins across the remaining three quarters to reach that 16% figure you referenced? Given how well the year has begun, one might assume you could actually do better than that. So it would help if you could identify the different elements that could impact margins. Thanks.

I'll address the outlook or our thinking for the entire year. As Tiger noted, we're very pleased to have started the way we did; that's excellent; we feel more confident about the full year. So that's a good starting point. Regarding the first year exceeding expectations — first quarter, pardon me, exceeding expectations. We referenced Transformation Services, which is performing better. And analytics inside Transformation Services, truly higher-level services at an attractive margin rate. So mix contributed to it, and that's positive. Can that persist? Certainly, but do we anticipate it persisting through the remainder of the year? We decided that wouldn't be appropriate right now. So we want to observe how that unfolds. And then other items will return; we will keep investing. We will invest — travel will return; it appears to be at a slower pace than everyone anticipates, especially considering what's occurring globally. But I do believe we will be increasing R&D. We'll be increasing, selling and marketing and investments through the rest of the year. So mix is one factor — being early in the year is another factor. And then a portion of the investments we will increase through the rest of the year accounts for the remainder. Tiger, anything further to add?

No. No I think you hit it. That was good, yes.

Great. Thank you so much.

Thanks, Mayank.

Hi there, thanks a lot. I trust everyone at the company is doing okay coming out of India. On that point, I wanted to follow up — Tiger, I believe you said there's been some absenteeism, though operations haven't taken a hit so far. Does that also affect deal flow, given people may be waiting to see how delivery plays out, or do you have backup plans to serve from other sites if the situation worsens, heaven forbid?

No, Tien-Tsin, I really appreciate your kind words. Thank you. Let me begin by noting that absenteeism is clearly above what we'd normally see from standard leave, vacation, and so on. A few points are worth keeping in mind. First, our delivery presence across India is spread quite well among the Delhi, Gurgaon National Capital Region, Bangalore, Hyderabad, Calcutta, Jaipur, Bombay, Pune. What that spread means given the present pandemic conditions in India is that not every city is simultaneously seeing absenteeism climb because of the on-the-ground COVID-19 situation. As it moves from one city to the next, we've managed to shift volume somewhat among those locations and also bring our European centers and our US centers into the mix, since our worldwide delivery footprint is nicely balanced — really well balanced — compared with roughly 7, 8 years ago. And certainly, it's fair to say our clients have been incredibly supportive in how they've collaborated with our teams, reprioritizing one of the key SLAs, because our aim here, as I mentioned, is to strike a balance and ensure our employees' and their families' safety and health are completely looked after while we keep delivering the services we must; so, so far we feel really good. Regarding new business and transitions, we actually have a transition underway right now. I've seen no impact, and we don't anticipate any impact as long as we keep our services going, which at this moment we're confident we can do.

Alright, that's good to know. Appreciate it, Tiger.

Thank you, Tien-Tsin.

Yes. Hi guys, nice job.

Thank you, Dave.

And I suppose just a few things. To start with, gross margins came in very strong, rising 200 bps during this quarter. The prior quarter was quite impressive as well. Based on how you provided guidance, you could essentially see flat gross margins versus a year ago across the remaining part of the year and still reach your guidance. Is there a particular cadence you have in mind? For instance, will Q2 remain up versus a year ago while Q3 and Q4 come in down versus a year ago? Just consider that all three of those recent quarters were fairly flat versus a year ago. And maybe, I believe you sort of went over the reason, but perhaps walk through that once more a little.

Yes. Should we achieve 36 points of gross margin over the rest of the year, which is roughly what we provided as guidance for the entire year, gross margins will land just above 36%, and both Tiger and I believe we should be capable of pushing 36% and ideally more. But once more, it's early on, so we won't get ahead of ourselves. Thus, we're simply assuming the mix isn't quite as favorable and that certain expenses do begin to ramp up somewhat, among them travel, with some of that falling under cost of revenue. So, we'll watch how it unfolds; but the first quarter, the favorable mix, somewhat reduced spending, and then simply being earlier in the year, not wanting to get ahead of ourselves, is how we're approaching it, Dave.

Also, Dave, there's another point I want to mention: during Q1, Transformation Services stood out as a particularly robust part of our operations, and analytics within it performed exceptionally well, so utilization across both Transformation Services and Analytics was extremely high. This contributed to our gross margin and our adjusted operating income margin alike. We're paying close attention to this, since it's obvious that our clients care deeply about harnessing data, harnessing the cloud, and harnessing data hosted on the cloud to generate insights and become far more flexible and responsive when making choices about running their companies and operations — a stark contrast to how things looked merely 2 or 3 years ago. Taken together, this bodes quite favorably for gross margin and adjusted operating income margin over the long term in our business.

Yeah, understood. Appreciate the response. Then, turning to my second point, if I recall correctly, you completed that acquisition during Q1 — Enquero, I believe. Did that factor into the guidance you originally provided? And roughly speaking, how large was it — I mean, it appeared to be a fairly significant deal, with a price tag of $200 million or so. Approximately what revenue will it contribute this year?

As we mentioned, it contributes roughly 200 basis points to growth for the year, slightly below what Rightpoint contributed a year ago.

Yeah, that's right — oh, my apologies.