Genpact Limited (G) Earnings Call Transcript & Summary

Thanks, Catherine, and hello to everyone joining us for this call about our results for Q4 and the full year that closed on December 31st, 2021. We hope you’ve had a moment to look at the earnings release published on the investor relations area of genpact.com. On the call today we have Tiger Tyagarajan, our President and CEO, along with Mike Weiner, our Chief Financial Officer. Here’s how we’ll proceed. Tiger will start with a summary of our performance and progress on our key strategic priorities. Mike will then take you through the details of our financial results and share guidance for 2022. After that, Tiger will return with a few concluding thoughts, and then we’ll open it up for your questions. We anticipate the call will last about an hour. A number of the topics we’ll cover today are forward-looking and subject to risks, uncertainties, and other factors that may cause actual outcomes to be materially different from what those statements imply. Those risks and uncertainties are described in our press release. Also, during this call we’ll mention certain non-GAAP financial measures that we think offer useful context for understanding how management evaluates the operating results of the business. You can locate a reconciliation of those measures to GAAP in today’s earnings release on the IR section of our website. With that, I’ll hand things over to Tiger.

Thanks, Roger. Hello, everyone, and I appreciate you being with us this afternoon for the call covering our fourth quarter and year-end 2021 results. Our full year 2021 financial performance has us quite pleased, since revenue, adjusted diluted EPS, and cash flow all came in ahead of what we had expected. We keep making strategic investments aimed at long-term growth, while also achieving a significant widening of our adjusted operating income margin. For a fourth year in a row, the analytics, digital, and consulting businesses — which together form transformation services — drove our global client growth. Looking toward 2022 and past it, we anticipate additional expansion into many buying centers at our clients, with cloud, SaaS, and data analytics-led solutions generating still more value for them. In the fourth quarter of 2021, total revenues reached $1.1 billion, a 13% increase on a constant currency basis. Global client revenue came to $979 million, rising 16% on a constant currency basis. Adjusted operating income margin was 14.4%, and adjusted diluted earnings per share were $0.54. Across the full year 2021, total revenue reached $4 billion, rising 7% on a constant currency basis. Global client revenue was $3.6 billion, an 11% increase on a constant currency basis. Adjusted operating income margin came to 16.5%, a 60 basis point expansion compared with the prior year, while adjusted diluted earnings per share were $2.45, 16% higher than the year before. Our global client revenue rose 11% for the year. This result came mainly from transformation services, which expanded 33%, including the effect of the Enquero acquisition, improving from 21% in 2020, and now accounts for 36% of total global client revenue, compared with 30% in 2020. Intelligent operations rose 3% and made up 64% of total global client revenue; we recorded double-digit growth across the majority of our verticals, among them consumer goods and retail, life sciences and healthcare, high-tech, and manufacturing and services. As we noted last year, banking and capital markets results were affected by the restructured relationship with a client that downsized its asset management business at the close of 2020. We expect that impact to fully roll off by the second quarter. As anticipated, revenue from GE businesses fell 18% for the full year 2021. Our relationship with GE remains strong, and we believe its announced separation into three independent companies will create opportunities for us to win new work supporting the spin-off. All through the year, we observed digital transformation accelerating further across every industry. Businesses are seeking to innovate quickly to serve their end customers in fresh ways, driven by the move to virtualization and rising expectations around user and customer experience. Our clients are using disruptive technologies and predictive analytics to generate actionable insights that produce better outcomes, helping them build a competitive advantage in their markets. Bookings sped up in line with these trends, with total new bookings for 2021 reaching $3.7 billion, a solid 20% increase over 2020. Beyond growth in inflows and pipeline, our win rate for 2021 was 52%, rising from 47% in 2020. Deals that have already been sold still make up roughly 50% of our bookings. Bookings from global clients rose 21% compared with 2020 levels, and they were 12% higher than what we saw in 2019 before the pandemic. We also saw growth in large deal bookings, signing 9 new engagements during the year with a total contract value above $50 million spread across our industry verticals. Every one of those except a single deal began with analytics, consulting, and digital engagements, which shows that when a client relationship starts with transformation services, it frequently produces substantial growth afterward; during 2021, we brought in 97 new client logos, an increase from 72 in 2020. These new logos each carry an initial average booking of about $3 million; we're enthusiastic about these new relationships because they let us expand alongside these clients going forward. Transformation services accounted for 45% of our total global client bookings, compared with 36% in 2020. In 2021, roughly 2/3 of new accounts that began with a standalone transformation services engagement, whether short term or annuity-based, resulted in a follow-on booking, including intelligent operations deals, which are annuity based by their nature. Nearly 50% of transformation services bookings are longer term annuity engagements, which gives us very good visibility into future revenue. Our results in 2021 came from our continued focus on a chosen set of industry verticals and services with large addressable markets, along with our strength in data and analytics. We think the sharp focus we maintain delivers the depth in industry and process knowledge required to drive deeper value for clients. While we keep seeing growth in finance and accounting, our original strategic focus area, we're witnessing very strong momentum in newer growth areas like sales and commercial, supply chain management, financial crimes and risk, and financial planning analysis. The combined target addressable market across these areas is more than double what finance and accounting alone offers, and they are far less penetrated. In all of these areas, we've built considerable expertise both through organic and inorganic investments and by leveraging a growing partnership ecosystem; these grew more than 43% in quarter four and 36% for 2021; our pipeline of new opportunities in these services has remained very healthy and continues to grow. What sets us apart in the market is our capacity to organize and orchestrate data and to develop cloud-based analytics solutions with industry and process depth. Analytics is the fastest growing piece of our global client transformation services portfolio, expanding 58% in 2021 versus 29% in 2020, and it now represents about half of total global client transformation services. We help clients take complex data sets and derive actionable insights that produce meaningful business outcomes beyond cost and productivity alone; for instance, preventing fraud, improving pricing, reducing losses, improving sales targeting, and improving customer satisfaction and retention. I'll walk through a few illustrations of work that can be scaled up substantially, where we're creating real value for clients. Take a life sciences firm — we're reworking how its worldwide supply chain functions operate as that company transitions to the cloud. Drawing on our extensive sector knowledge, our job is to verify the customer's data and sharpen its processes, which boosts precision in demand and supply planning as well as forecasting, while also lifting product fulfillment and trade compliance. With several insurance carriers, we're applying AI and machine learning to examine photos of damaged vehicles so auto claims can be estimated in real time, paired with a cloud-based, end-to-end workflow offering on Microsoft Azure that generates and routes fresh claims cases automatically. Cycle time on claims has fallen sharply as a result, which lifts customer satisfaction and retention and simultaneously cuts down on fraud. At a major aerospace manufacturer, we're bringing together our deep process knowledge and digital skills to overhaul the receivables function using the order-to-cash SaaS platform from HighRadius. That lets our clients bring down their DSOs and free up cash more quickly to fund strategic initiatives. Pushing further into the marketing and sales sides of our clients' organizations, during the prior quarter we bought Hoodoo Digital, strengthening the digital content abilities of our Rightpoint experience team. Today we give clients a complete, end-to-end offering that ties together digital content, e-commerce, and marketing operations in a seamless way, producing sharper insights and fueling growth.

When it comes to entering new buying centers such as sales and commercial, the deals we've made to acquire companies have worked well for us, and they've also helped us expand our transformation services and intelligent operations work. In the same way, buying Enquero added to the strong organic growth we've seen in data and analytics. On top of that, these deals have strengthened our talent in those fields. Now I want to discuss where we stand competitively when it comes to talent around the world. We brought on roughly 42,000 new colleagues during 2021, which shows how strong the Genpact brand is even though the competition for talent is fierce; we keep putting money into learning and development for our people so they gain the essential skills the future demands and can build their careers; for a second year running, our workforce worldwide finished more than 10 million training hours using Genome, our online on-demand learning platform. As a result, roughly 10,000 employees received training in cloud basics, around 25,000 were trained and tested in Lean Six Sigma, and over 52,000 earned certification in data and analytics. Beyond that, 14,000 employees who had just been reskilled moved into new roles thanks to our Talent Match platform. Reskilling combined with redeployment gives us an edge in this tough talent market. Attrition came in at 33% for the fourth quarter, unchanged from the third quarter. Because we can reskill, redeploy, and hire at scale, we keep serving our clients well and turning new opportunities into business. As we look at 2022, my belief is that we're positioned well to carry forward the momentum in global client revenue from last year, when growth returned to double digits and came in ahead of what we had initially expected. With market demand for our services running strong, which is expanding our relationships with existing clients, and with new client logos joining our portfolio, we anticipate global client revenue growth of 9% to 12% on a constant currency basis. A recovery in our banking and capital markets vertical, where traction has been great, is part of that. Let me spend a minute commenting on how quickly the world has shifted since our last conversation in early November. Across every industry, inflationary pressures have risen in a way we've never seen, something yesterday's U.S. economic data confirmed. We're taking on higher expenses tied to today's inflationary climate, among them rising labor costs, even as we keep investing in growth. To illustrate, we closed a spate of new deals as the year ended, which meant hiring ahead of schedule to support those deals as they ramp up, including onshore in multiple geographies. As for travel, levels are heading back toward normal, since our teams have started meeting with clients face to face on a regular basis once again. Thanks to the strength of our bookings, including new client logos, and our capacity to manage costs carefully while revenue ramps up throughout 2022, our fully adjusted operating income margin should land between 16% and 15.5%; with that, I'll hand the call to Mike.

Thanks, Tiger, and good morning to all of you. I'll start by going over what we delivered in the fourth quarter, then walk through the standout items from our performance across the full year, and finally share what we expect for 2022. Let's begin with the fourth quarter. Total revenue came in at $1.1 billion, which is a 13% rise versus a year ago, both as reported and in constant currency terms. Global client revenue, accounting for 91% of total revenue, was up 16% year-over-year, again both as reported and on a constant currency basis. The main factor behind this was continued momentum in our transformation services, which expanded beyond our expectations of more than 45%. Within the quarter's total global client revenue growth, roughly one point came from revenue tied to certain divested GE businesses that we started counting in the global client portfolio on January 1st, 2021. Throughout the quarter, we kept growing the scale of our global client relationships. To illustrate, over the 12-month period that ended December 31st, 2021, the count of global client relationships generating annual revenue above $5 million rose from 129 to 144. That figure covers clients with more than $25 million in annual revenue, which went up from 23 to 32, and 11 of those exceeded $50 million in annual revenue, unchanged from last year. Revenue from GE Businesses fell 14% year-over-year, which was better than we had anticipated, mostly because of short cycle project work during the quarter. If you set aside the effect of revenue tied to divested businesses, revenue from GE Businesses would have been down 6% for the quarter. As we expected, adjusted operating income margin dropped sequentially to 14.4%, largely the result of greater investment activity in sales and marketing and research and development, more travel expense, a higher level of transaction costs connected to recent deal wins, and a significant uptick in wage inflation late in the fourth quarter. Gross margins for the quarter fell 110 basis points sequentially to 34.5%, mostly because of investments tied to deal ramp-ups and backing for new deal activity. Adjusted EPS reached $0.54, an increase of $0.06 versus a year earlier compared to $0.51 in 2020; this $0.03 increase was mostly attributable to higher adjusted operating income of $0.02, a foreign exchange remeasurement gain of $0.02, and the impact of lower share count of $0.01, partially offset by higher interest expense and higher taxes together to equate to $0.02. Our effective tax rate stood at 29.6% versus 25.3% a year ago, owing to return to provision adjustments realized in the fourth quarter of 2021, along with certain non-recurring discrete items in the fourth quarter of 2020. Now let me give you some color on how we performed across all of 2021. Total revenue rose 8% year-over-year, or 7% on a constant currency basis. Global client revenue, representing 91% of total revenue, grew 12% year-over-year, or 11% on a constant currency basis. This performance, which came in better than expected, was largely powered by transformation services. For the entire year, our total global client revenue got a lift of roughly 1% from business tied to some divested GE units that we started counting in that global client portfolio on January 1st, 2021. Revenue tied to those GE businesses fell 18% versus the prior year, largely because of earlier productivity commitments and the broader macroeconomic backdrop. As anticipated, our adjusted operating income margin widened by 60 basis points from a year earlier, reaching 16.5%, mostly thanks to stronger gross margins and reduced travel spending. For the full year, gross margin widened 80 basis points, hitting 35.6%, a touch better than we had projected, driven by a richer revenue mix toward transformation services and by digital-led productivity gains. Late in the fourth quarter, we began seeing mounting inflationary pressure from general wage increases, medical and insurance costs, plus rising hiring expenses tied to newly signed deals and other growth opportunities. Those higher costs, combined with onshore deals ramping up across the coming few quarters, should hit our first quarter gross margin disproportionately. We look for gross margin to strengthen across the rest of the year, helped by operating leverage and a growing share of higher margin transformation services revenue. SG&A, measured against revenue, rose 20 basis points from a year earlier as we increase investments to seize long-term growth opportunities. Adjusted EPS came in at $2.45, a 16% gain versus a year ago and compared with $2.12 in 2020. That $0.33 improvement came mostly from higher adjusted operating income of $0.29, the effect of a lower share count of $0.03, and a foreign exchange remeasurement gain of $0.02, partially offset by higher net interest expense of $0.01. Our effective tax rate for the full year was 23.5%, versus 23% a year earlier, mainly because special economic zones expired. Now on to the balance sheet and cash flow. At year-end, cash and cash equivalents came to $899 million, up from $680 million at the close of fourth quarter 2020. Our net debt to EBITDA ratio stood at 1.1x, which includes the effect of Hoodoo Digital, which we recently announced and which closed in December. Days sales outstanding got better, reaching 74 days, compared with 82 days a year ago. That improvement came mostly from shorter billing cycle times, better collection processes overall, and the benefit of more short-cycled revenue booked in the fourth quarter; we anticipate DSOs landing in the high 70 range during 2022; we produced a record level of cash from operations, $694 million, a 19% increase versus a year ago; that better-than-expected result came mostly from higher operating income and a more favorable working capital position tied to improved days outstanding and lower cash taxes. In the quarter, we returned $171 million and $379 million of capital to shareholders, respectively. That figure includes dividend payments of $20 million in the fourth quarter and $80 million for the full year. Additionally, during the quarter, we bought back 3 million shares, spending $151 million, which worked out to a weighted average price of $50.56. For the entire year, we repurchased 6.6 million shares at a cost of $298 million, with a weighted average price of $45.32. So far in 2022, we've bought back another 0.5 million shares for a total of $28 million, at an average price of $52.44. When it comes to allocating capital to drive long-term shareholder value, here's our approach. First, we're putting money into the business to back organic long-term growth initiatives. Second, we'll keep pursuing strategic M&A to deepen our domain and operational expertise in the verticals we've chosen. And finally, we're dedicated to giving capital back to shareholders via quarterly dividends; as for share repurchases, because we generate strong cash flow, we anticipate moving to a more regular rhythm of buybacks, with at least 30% of our cash flow from operations set aside for purchases across the full year. Capital expenditures as a percentage of revenue comes to 1.3% for full year 2021; that's versus 2.1% during 2020; it came in a bit below our expected range of 1.5%-2% of revenue. Lastly, I want to give you an outlook for 2022. We anticipate total revenue landing between $4.3 billion and $4.4 billion, which represents year-over-year growth of 7%-9%, or 8%-10% on a constant currency basis. For global clients, we expect revenue growth between 8%-11%, or 9%-12% on a constant currency basis. Revenue from GE businesses is expected to decline 5%.

Given the latest figures, inflation is climbing at a pace we have not seen in decades, so our planning assumes that higher wages and other rising expenses will persist through the rest of 2022. We are offsetting part of these cost increases through price changes, commercial arrangements tied to results rather than inputs such as FTEs, and an emphasis on cost rationalization, but our ability to see the full-year effect of these inflationary forces is constrained, just as it is for the broader market. As a result, we now project our adjusted operating income margin for all of 2022 to land between 16% and 16.5%. That reflects a market-driven revision. Once we gain clearer visibility as the year progresses, we expect to narrow that band, and we believe pricing along with other measures will lessen the current inflation impact. We still think margins will grow over the medium term in keeping with our strategy. Our effective tax rate for 2022 is projected to be 23.5% to 24.5%, an increase from 23% in 2021. We are forecasting adjusted earnings per share for full-year 2022 of $2.53 to $2.71. That equals annual growth of 3% to 11% and includes a $0.02 benefit from lower expected net interest expense and a $0.02 benefit from a reduced anticipated share count, partly offset by a $0.03 drag from higher taxes and a negative currency effect of $0.05 per share tied to an approximate $13 million gain booked last year. We are projecting cash flow from operations of roughly $600 million, versus $694 million for full-year 2021. We expect free cash flow to come in around 1.2 to 1.3 times net income, above our historical ratio of 1 to 1. Capital expenditures as a share of revenue are expected to be approximately 1.5% to 2.0% in 2022, reflecting a higher level of infrastructure investment related to 2021, more employees returning to offices under our hybrid delivery approach, and ongoing spending on digital solutions. Our board has approved a 16% dividend increase to $0.125 per quarter, or $0.50 annually. The dividend has grown at a 16% compound annual rate since we initiated payments in the first quarter of 2017. Finally, let me give some context on how revenue and adjusted operating income margin should trend in the first quarter. We continue to expect a mid-single-digit sequential fall in global client first-quarter revenue because of the usual seasonal pattern in our business, with quarter-over-quarter growth expected to accelerate afterward. In addition, we currently anticipate adjusted operating income margin will follow our pre-COVID seasonal shape, starting low in the first quarter and then expanding each quarter through the year. Based on that historical pattern, we currently see adjusted operating income margin for the quarter coming in at the low 14% range. With that, I will hand the call back to Tiger.

Thanks, Mike. If we take stock of the environment we're operating in, COVID-19 is still hanging around, digital is at the top of the agenda for CXOs and boards, analytics now sits front and center, and competition for talent has gotten fiercer. Against that background, it makes sense that we're gaining momentum in our inflows, pipeline, and bookings across these five areas. First, transformation that spans the entire supply chain, along with consumer goods, semiconductors, and industrial manufacturing more broadly. Second, financial crime, regulatory compliance, and transaction monitoring — not just at banks and financial institutions, but also among newer fintechs plus payment and e-commerce platforms. Third, experience and analytics-driven transformation of sales and commercial functions at our B2B clients, especially by harnessing fresh digital and data-driven marketing capabilities. Fourth, shifting data into the cloud and coordinating it with technologies so we can produce predictive, actionable insights, applying analytics to achieve better outcomes. Last, creating value and driving transformation as big enterprises worldwide pursue portfolio moves that result in spinoffs, divestitures, M&A, and IPOs. We think we're positioned well to grow in these areas, since we keep drawing on our deep industry and process knowledge, our data and analytics expertise, and our digital capabilities to generate value for clients that goes past cost and productivity alone. Even with inflation where it is, we keep putting money into the capabilities required to fuel growth and margin expansion over the long term. In a world that grows more complex by the day, helping clients steer through today's difficulties and build resilience for what's ahead strengthens our long-term client relationships. In the same way, making sure we retain the best talent to support those relationships — particularly in a talent market this tight — is a crucial differentiator; we keep refining our talent management practices, spanning things such as employee engagement, training and development, and fostering a more inclusive environment for employees and tribes. Our dedication to a more diverse and inclusive workplace earned recognition once more in January, when we were included in Bloomberg's 2022 Gender-Equality Index. Employee wellness, along with their health and safety through this drawn-out pandemic, remains a top priority. Our dedication to serving the communities where we operate stayed strong, with tens of thousands of passionate employees taking part in our corporate social responsibility initiatives across the year, producing meaningful outcomes — for instance, 30 million meals provided for the hungry around the world; we remain excited about the progress on our ongoing ESG commitments. We're even more excited about the work we're doing to assist clients with their own ESG agendas, yet another area of value generation beyond cost and productivity for them and their stakeholders. We genuinely believe that generating value for all our stakeholders — clients, employees, communities, and shareholders — is essential to our long-term success. Just as we did in responding to the pandemic, we keep tackling new challenges such as the inflationary environment through that same lens. Our strong 2021 results wouldn't have been achievable without the unwavering commitment of our more than 100,000 employees worldwide. When we think about what comes after 2022, the steps we're taking on pricing, plus ongoing expansion in services that carry greater value-added—analytics, digital, and consulting among them—along with commercial models built on value, give us more confidence that we'll return to the higher margin path we've targeted, using 16.5% as the baseline. Even though 2022 has already brought a fresh set of difficulties for the globe, I have faith in our capacity to handle them and in where we stand to reach our objectives for growth and profitability over the long term. So with that, I'll hand the call back over to Roger.

Alright, thanks, Tiger. At this point, we want to begin the Q&A portion of the call and take your questions. Catherine, would you mind giving the instructions?

Hi. Thanks so much. Good morning, everyone. Good bookings results here. I was curious, given your prepared remarks, Tiger, just with this inflationary market obviously for everyone, it's a theme from this earnings season. Is that good for Genpact? I mean, I would imagine that, you know, the selling environment, that should actually bode well for Genpact. I'd love your thoughts in general, and do you see a shift beyond the secular between short-term projects as well as longer term, bigger projects given what's happening with inflation?

No, Tien-tsin, thank you, and great question by the way, and it's something that we have thought through deeply, as well as watched the environment. One, in this environment, it's very clear that every one of our clients is facing the same challenge that everyone else is facing, which is a need for talent. A need for talent to drive all the transformation agenda that they have on the table. Probably an acceleration of that agenda, and therefore an even more need for talent. There is no question that that provides what one could call a tailwind to partner with people like us, both on transformation services as well as on intelligent operations. The other thing that we are seeing is some of our most recent wins at the end of the back end of the fourth quarter had cycle times that were shorter than before, and more importantly, a ramp ask from our clients that is much faster than we've seen before. I think that's a reflection of the kind of environment we are in. I believe that this environment does provide that opportunity, particularly to digitize operations, to automate operations, to use better forecasting using data in a volatile environment, all of those play out.

Yeah. No, that's excellent. That was a really thorough response. Thanks. Just a quick follow-up from me — acknowledging what you said about gross margin and your pricing, what about the back book when it comes to pricing? Do you see any chance to adjust the back book from a pricing perspective? I get that you made some front book remarks. Thank you.

Yeah, only to make it clear, Tien-Tsin that-

Understood, regarding the business you already have. What exactly are you referring to when you say back book?

Yes, my apologies.

Yeah, your existing business.

No, that's not.

Excuse me. Yeah.

Yeah. Tien-Tsin, as you’re aware, the intelligent operations part of our company — which represents over 65% of what we do — runs on long-term agreements. Those agreements generally include clauses that adjust for inflation. Depending on the specific deal, we are entitled to those adjustments at set intervals, and they keep flowing through. What we’re seeing now is not what those contracts originally anticipated. We have begun discussions with clients, and since this situation affects everybody, it becomes a conversation where both sides sit down together. Ultimately, the outcome will depend on how much additional value we can create, how much further we can jointly push digitization and automation, and that should produce a result that benefits both parties. Returning to what you asked about the back book: we are working through it in a structured way, and we expect to continue doing so methodically. As you’d expect, that requires time and involves a delay, which is part of why Mike mentioned in his prepared comments that inflation pressures arrive first, while pricing becomes a longer-term conversation that unfolds over the course of the year.

That's great.

Yeah, I'd like to just.

Thanks.

Sure, so, you know, we've seen a few wins on that front already. I want to stress it's still early — it's February 11th as we speak, correct? And we're still in a really active conversation with our customers on this topic.

Understood. Thank you.

Thanks, Tien-Tsin.

Yes. Thank you. I wanted to build on that point. Could you discuss — you brought up the margin outlook for 2022; the range is broader and clearly there's some pressure in there. Are additional factors involved, or do you believe the variation is truly a result of wage pressure when it comes to that 16%-15.5%?

Sure. Yeah, that's right. Wage pressure is really the sole thing driving it, correct? And that's also why we're estimating our offset to that wage pressure — that's the reason the range is so wide, given the higher pricing we're securing on our current contracts, right? Standard COLA-based adjustments, right, indexed at certain intervals, plus what we referred to just a minute or so back — current contracts and attempting to achieve rate there. All of those factors combined. Again, this hyperinflationary environment we find ourselves in at present is the only cause behind all of it. One thing to note is that since we last spoke, and as Tiger mentioned, in early November, circumstances have shifted extremely quickly regarding, as you've heard from numerous companies across our industry and beyond, inflationary pressures. When we considered our guidance for this particular year, right, we're examining not only information as of the end of December 31st, we're examining information once more as of early February. We're observing our daily hirings, and we're extrapolating that going forward; that's the reason the range is as large as it is for us, based on historical patterns.

All right, and so my next question ties into that point. Rivals that have made similar moves operate under a different model — names like Infy, Cognizant, or Accenture — and they've discussed rising wages. I believe this is plain for everyone to see, so nobody's shocked, and yet they appear more capable of soaking it up. Is the reason, in your view, a distinct way of doing business, or is it simply that your data is fresher? Bear in mind that Cognizant reported only 14 days ago too. I'm merely attempting to grasp why Genpact is folding wage inflation into its margin goals for CY 2022 to a greater degree than several other larger IT service providers. That's all from me. Thanks.

Yeah. I'm not in a position to discuss other rivals, correct? A chunk of what you'd need about competitors is tied to details that might well be stale, correct? Certain pieces, as you noted, are present. But at the core, a number of those rivals run their operations differently from how we run ours, correct? Take the typical duration of an agreement. I'm not sure, Tiger, whether you'd like to chime in on that.

No. What we're taking as a given, Keith, is that the current situation stays as it is; we aren't assuming anything about any shift regarding when this period of inflation is going to come down. I mean, honestly, making that kind of prediction isn't something we're able to do. That present environment has been adopted as the foundation for how we see 2022 and for the steps we've outlined, covering both our own cost structure and, you know, conversations with clients about shifting toward higher value-added services that we keep pursuing with analytics — all of that has been factored in. To arrive at our estimate of where we believe the margin range will land, as you can imagine, in the past, the recent past, we've consistently provided a single point margin figure for the year. This marks the first time in many years that we're offering a range.

Correct.

That mirrors the reality of the environment we currently occupy.

Okay. Thank you, Tiger.

Thanks, Keith.

Yeah. Hi, everyone. Thanks. Great fourth quarter. So, I suppose my.

Thanks, Dave.

Yeah. Yeah, thanks for having me. So I suppose what I want to ask — when we consider that throughout, you know, basically the prior year and even earlier, you kept mentioning getting back to 10% plus global client, and now there's a bit of a divide, since you're referring to 9%-11% for this year. But I suppose that's somewhat lower, and I realize Hoodoo, I believe, contributes perhaps 0.5% or so to global client revenue growth, plus maybe the capacity to reprice somewhat in a demand environment that appears likely stronger than usual. Could you perhaps discuss a bit why revenue growth isn't somewhat stronger.

No, excellent question. You know, the like-for-like comparison would essentially indicate that our organic growth is increasing. On a constant currency basis, we are stating that our global client growth is going to be 9%-12%. You're correct, Hoodoo is small, so it doesn't add that much into total growth. So the bulk of that is organic. You know, we think that that's a solid increase over what organic growth for 2021 has been. As we explained, that total growth for global clients in 2021, where we had said at the start of the year that perhaps by the fourth quarter we'll reach double digits, we actually reached double digits far sooner. We are in a long cycle business, as you know, and we actually feel really good that this brings us closer and closer to what we've always said is our long-term trajectory, which is global client growth of double-digit to low teens, and this lands in that zip code. I think we feel really, really good about this, as well as the fact that we've had strength in our global client bookings that we called out.

Yeah. Thanks. Perhaps a fast follow-up on — I believe, did you say something regarding 16.5% adjusted margin being kind of the starting point to expand from as we head into the out year? Is that so? Did I hear that correctly?

Yes, that's right. Well, essentially, the way to view it is this: the world is experiencing something quite unique — let's describe it as a 3-decade or 4-decade, first time inflationary environment. The world needs time to adapt to that, and so do we; we strongly believe in our secular margin trajectory. I think our moves related to value-based pricing, our moves related to digital and analytics, with businesses expanding far faster than the overall company, all those new service lines delivering so much more value to the client, once again, drawing on data and analytics — I think every one of those gives us confidence that we will stay on that long-term secular trajectory, which under normal circumstances, and we discussed this on the last earnings call, would take a base of 16.5. The only thing is there's an aberration we're flagging for 2022, and we'll return to that same trajectory.

Gotcha. Thanks, guys.

Thank you, Dave.

Hi, this is Ted, filling in for Maggie. Appreciate you letting us ask. Sounds like there have been some investments made on the sales side, so I want to dig into that a bit. Like, what does the sales force look like today in terms of size? And how does that stack up against where things stood before the pandemic? Also, I suppose, how has the makeup of that sales force shifted because of the investments you're putting in?

That's a terrific question. You know, on the whole, the size of our sales organization keeps moving in step with how the business has expanded. If you look at the entire cost base across our front end teams, I'd say the bigger question is actually the one you raised about who these people are and how they're composed. You've got a mix — some handle big client relationships, then there are the global relationship managers handling the tier below that; others go out and establish brand new relationships. Those are what we refer to as 97 accounts that we open, let's call them hunters. Then we have a fairly sizable team, now sitting within transformation services, who operate far more as consultants, far more in the transformation services space. What change is the customer attempting to bring about, and in what way do we take part in assisting the client to bring that change about? It's a far wider ecosystem, one that brings together our worldwide sales group along with our consulting lead partners, and that mix collaborates extensively with our clients while concentrating on the top line.

Okay, that's useful. For my next question, I wanted to ask about those higher value services you mentioned, Tiger — things like supply chain, financial crimes, and so on. When you look at bookings, can you give us some kind of framework for thinking about what percentage of bookings, or of the business, sits in those higher value services, and where do you see that going over the longer term?

I'll cover a few of the metrics we've already given in the prepared remarks. Transformation services account for 50% of our bookings — or 45% of our bookings. A big chunk of that is what shows up in those new service lines I referenced, which, by the way, we've now been focused on for more than 3 years, and every one of them is analytics and digital heavy. Take financial planning and analysis, take supply chain, sales and commercial, financial crimes and risk — those 4 service lines have a great deal of analytics and a great deal of digital built into them. They're expanding at the rates we cited, both on the bookings side and on the revenue side. I also mentioned that the total addressable market for those 4 service lines is well over 2 times the market you'd think of in financial accounting, which has been our strategic focus area for 20 years now. All of that is a very good sign for our growth trajectory. One last point: a number of these are tightly interconnected. Consider financial planning and analysis, which extends into the CFO's office, and from there, using data and analytics, you extend into the sorts of improvements that sales and commercial can drive, that supply chain can drive, that order fulfillment can drive. That's one of the strengths we have as we expand within a client once we begin working with a client and add value for them.

Got it. Thank you very much.

Thank you.

Hello, and good morning. Thanks. Tiger, I’d like to start by exploring the growth into additional buying centers that you brought up. Could you go a bit deeper, beginning with how large finance and accounting revenue is for you compared with the other categories you named, such as sales, commercial, and the rest? Also, in those new areas, do you need to approach go-to-market activities differently, since they may be less developed when it comes to outsourcing than finance and accounting is?

That's a really good question, Bryan. To start with, you know, we don't provide particular figures that we disclose regarding finance and accounting as its own distinct service line, yet it represents 30% plus of our total business and of our total book. It keeps expanding at, clearly, a far slower rate than transformation services, though it keeps expanding. The more significant thing you raised is about the character of how we begin working within those new buying centers. You correctly noted that a lot of them are less mature, they are less penetrated, and so frequently it begins with transformation services; it begins with whether we can design a new operating model? It begins with, you know, the illustration of the aerospace company that we mentioned, assist in improving receivables. And to accomplish that, a technology SaaS platform is needed that gets executed, where their salespeople must change how they engage with their customers. That's a gain not only for DSOs, but also for how they handle their own time and free up sales capacity. Much of it then comes down to far more data-intensive selling, far more analytics-intensive selling and solution, far more digital-intensive selling and solution, which explains why much of that overlaps considerably with transformation services.

All right, that’s useful. I’m just trying to break down the growth picture a bit—could you take us back to what the asset management client drag was during 2021? And how much of that is still somewhat of a growth obstacle in 2022? Just to make sure it’s clear, within the 2022 outlook, the inorganic contribution—anything you can share on that?