Genpact Limited (G) Earnings Call Transcript & Summary

Thanks, Michelle, and good afternoon, everyone, and welcome to Genpact's call covering the fourth quarter and full year 2023 results. We trust you've had the opportunity to look at the earnings press release we posted on the IR section of genpact.com. Joining us today are Tiger Tyagarajan, our President and CEO, who is outgoing; BK Kalra, our incoming President and CEO; and Mike Weiner, our Chief Financial Officer. Tiger will begin with a high-level review of how we performed across the full year 2023, then BK will discuss our strategic priorities and outlook, and after that Mike will walk through our financial performance and outlook in more detail before we open the floor for your questions. Please also be aware that on this call, forward-looking statements will be made, including statements regarding our business outlook, strategies and long-term goals. These comments reflect our plans, predictions and expectations as of today, which may change over time. A number of important risks and uncertainties, including the risk factors in our 10-K and our 10-Q filings with the SEC, could cause our actual results to differ materially. And on this call, certain non-GAAP financial measures will be discussed. We have reconciled those to the most directly comparable GAAP financial measures in our earnings press release. These non-GAAP measures are not meant to serve as a substitute for our GAAP results. And finally, this call in its entirety is being webcast from our Investor Relations website, and an audio replay and transcript will be available on our website in a few hours; and with that, let me turn the call over to Tiger.

Apologies for having been muted earlier. Thanks, Roger. Hello, everyone, and I appreciate you being with us this evening for the call covering our fourth quarter and full year 2023 results. I'll begin with a quick look at how we performed financially in 2023, and after that I'll pass things to BK, our incoming CEO, who will walk you through our strategic priorities and what we expect in 2024. Across the whole of 2023, total revenue came in at $4.48 billion, which was up 2% versus the prior year and up 3% in constant currency, powered by Data-Tech-AI services revenue of $1.99 billion, rising 2% both as reported and in constant currency, along with Digital Operations services revenue of $2.48 billion, which grew 3% year-over-year as reported, or 4% in constant currency; gross margins were 35.1%, unchanged from the prior year; income from operations margin came to 14.1%, an increase of 260 basis points year-over-year; adjusted operating income margin was 17%, 50 basis points higher year-over-year; diluted earnings per share reached $3.41, growing 81% year-over-year; and adjusted diluted earnings per share were $2.98, up 9% year-over-year. Full-year bookings totaled $4.9 billion, a robust 26% increase year-over-year, as we signed a record 14 new large deals, each carrying total contract value above $50 million. Inflows stayed healthy, producing a high-quality pipeline that ended the year at near record levels. Win rates climbed to 60% from 51% a year earlier, and we brought in 91 new logos. Sole-source deals made up 40% of bookings, under our usual 50% level, which mirrors the considerably greater count of large deal wins, since those tend to involve more competition. Over the course of the year, we advanced on our main initiatives for 2023. To begin, revenue from priority accounts rose 4% year-over-year and grew to 63% of total revenue. Next, we deepened and broadened ties with key cloud technology partners in order to co-innovate and build joint IP solutions. Third, we launched and scaled 3 new operating centers located in Tier 3 cities across India. Fourth, we kept pushing non-FTE commercial models forward, and non-FTE deals accounted for 20% of total revenue in the fourth quarter and 17% of total revenue for the full year. Fifth, putting money into our large deal team produced the strong bookings and pipeline I mentioned before; and last, for a fourth year in a row, our global workforce logged roughly 10 million training hours on Genome, our on-demand learning platform. Lastly, before handing the call to BK, I'd like to pause and reflect on the major accomplishments Genpact achieved over these past 12 years. Over that period, our total revenue increased at a compound annual growth rate of 9%. That was fueled by several key strategic shifts. These included choosing to intensify our focus on a selected group of industry verticals, services and geographic markets; deciding to move past business process management, making substantial investments in data, tech and AI; and lastly, our shift across the last 5 years into the middle and front office, through our emerging service lines as well as supply chain risk and sales and commercial services. None of what we achieved could have happened without the relentless work of the Genpact team. Their unwavering enthusiasm and dedication to delivering client outcomes and value, plus a boundless curiosity and hunger to learn, has turned into the bedrock of our culture and has endlessly inspired me. As I move into the next chapter of my journey, the thing I will miss most is my day-to-day connection with them. As for BK, our Board truly could not have found a finer choice to serve as Genpact's next CEO. His thorough grasp of our business, the confidence and ties he has established with our clients, and his strategic guidance paired with a strong preference for technology and AI have been a crucial force behind our success, fueling the major growth of our consumer health care and financial services verticals, which together brought in $2.8 billion of revenue in 2023. Watching him steer Genpact through this next stage is something I am genuinely thrilled about. And lastly, I want to offer my heartfelt gratitude to our Board for serving as such outstanding stewards of the company across numerous cycles and, on countless occasions, acting as guide and mentor to me and my lead team. With that, I'll hand the call over to BK.

Thanks, Tiger, and good afternoon to all of you. To begin, I want to say that taking on the role of leading Genpact's 125,000 skilled employees worldwide fills me with both enthusiasm and humility. Watching the Genpact team up close, I've witnessed their remarkable commitment and the real value we bring to customers—crafting, building, and operating crucial functions for several of the globe's largest companies. While getting ready to assume the CEO position, I've been thoroughly evaluating our top leadership group and the strategic goals we need to chase in order to get ourselves moving faster on the growth track. Looking back at 2023, it's clear that difficult macroeconomic conditions tested both us and the broader industry. I feel immense pride in the team and in the long-term achievements just described, yet I also have to acknowledge that better execution on our part is necessary if we're to achieve everything we're capable of. Taken together, Digital Operations and Data-Tech-AI make up a market worth $750 billion, expanding at a high single-digit rate—far ahead of the 3% constant currency growth we posted in 2023. My top priority as CEO is ensuring we reach our maximum potential. Having been part of the Genpact team for a long time, I hold a distinct perspective on the areas where execution can get better. We must refine our priorities and push for simplification so that speed and accountability rise across the entire company. During 2024, we'll be intensely focused on transforming our dialogue with clients by applying more data and technology to provide more comprehensive, growth-focused solutions. We'll also pursue simplification to boost speed and accountability. Let me share a few illustrations. To start, we've streamlined the leadership structure for sales and go-to-market, shifting away from a heavily matrixed setup to 12 unit leaders aligned with our client organization, all consolidated into 3 vertical segments that we report externally. Next, we've brought data, tech, and AI together under a single leader, reflecting the way clients function and make purchases. These two moves will boost speed and accountability, enhancing sales execution in 2024, especially within Data-Tech-AI. Over my first 100 days, my priorities include, first, devoting more time to clients as we work alongside them to shape what lies ahead—for them and for us—by applying data, technology, and AI-first principles. Since the announcement, I've already connected with several clients, and I'm dedicated to engaging with 100-plus clients within my first 100 days to further shape our strategy. Second, I'll keep strengthening our senior leadership team. We've brought in several key people to our leadership team over the past few months in operations, finance, and marketing, and I'm dedicated to consistently spotting and closing gaps swiftly. Achieving our maximum potential demands that we get the most from our talent and foster greater accountability throughout the company. And third, reinforcing our partnerships to provide comprehensive solutions. In my view, our combination of domain knowledge, industry know-how, data access, and CXO connections puts us in a distinctive spot to drive better results for clients, and in turn stronger top-line expansion and earnings for Genpact. Let me be direct: carrying on exactly as before, merely refining what we've already done, won't cut it. Even so, execution gains won't come instantly. Time and money will be required. During 2024, we intend to put resources into 2 main priorities: partnerships and AI-first. I touched on partnerships earlier, and we'll keep putting money into strengthening ties with a range of platform providers, both broad and niche, plus partners in enterprise applications and cloud workflow technology. Next, we're acting fast to weave AI through every solution we take to market, while also spending to make our own operations AI-first. For the first time ever, we've named a Chief Technology and Transformation Officer, who will spearhead the effort to weave AI into how we run things internally. When it comes to GenAI, our momentum remains strong. During the prior year, we held over 3,000 conversations with clients, got more than 80,000 Genpact team members signed up for AI training programs, opened our first AI innovation center in London, and had over 50 GenAI use cases under testing plus 30 GenAI solutions in production with clients either deployed or going live. Now shifting to our 2024 outlook — Mike will walk through additional detail, though I'd like to give a top-level summary first. Starting with revenue: 2024 will be a year of building, as we shore up our base for upcoming growth, so our full-year revenue guidance sits at 2% to 3% growth versus last year on an as-reported basis. On profitability, we anticipate holding gross margin and AOI margins about level during 2024, at 35% and 17%, respectively. As for any revenue upside we manage to capture across the year, our inclination will be to plow a share of that upside back into the business to fuel future revenue growth. Before passing things to Mike, I'd like to offer a few remarks about Tiger. We've been incredibly lucky to have Tiger at the helm for the last 12 years. He molded this company into one of the world's leaders in domains such as finance and accounting, procurement and supply chain, among others. His dedication to clients has no equal and will forever serve as a beacon for everyone at Genpact, and his emphasis on scaling up our teams' capabilities through platforms such as Genome is truly motivating. On behalf of the entire Genpact family, I want to thank Tiger for his tremendous commitment and leadership. Lastly, let me close by expressing my confidence that we'll reach our full potential, delivering the revenue growth and profitability we know we're capable of. Even so, I want you to realize that I get it — what you do matters more than what you say. On that note, I'm eager to share further specifics and updates on how things are going with you in the quarters ahead. Having said that, I'll now hand the call to Mike.

Thanks, BK. And congratulations on stepping into the CEO role at Genpact. Having collaborated closely with you over a number of years, I've seen firsthand how strongly you focus on getting things done, your command of finance, and your ability to inspire teams. From where I sit, we're very fortunate that you're now at the helm. Today, I'll take you through how we performed in the fourth quarter, plus the main highlights from full year 2023. Then I'll lay out what we expect for 2024. Let's begin with Q4. Total revenue reached $1.15 billion, up 4% from the same period a year ago, on an as-reported basis and in constant currency alike. Revenue from Data-Tech-AI services, which represented 44% of the total, was up 3% against the prior year, or 2% in constant currency. That outcome was driven mostly by stronger demand for data and analytical service solutions in priority areas including supply chain and risk. Digital Operations services revenue, at 56% of the total, increased 5% year-over-year, or 4% in constant currency, largely a reflection of deal ramps that remained on track for recent large booking wins. Now for the verticals: financial services revenue was up 4% from last year, chiefly on large deal ramps, though continuing pressure on clients' discretionary tech spend partly offset that. Consumer and healthcare revenue increased 2% year-over-year, mostly from ramping finance and accounting and supply chain engagements, partly offset by pressure on discretionary tech spending and by the impact of the recent divestiture of a business that had been classified as held-for-sale last year. High tech and manufacturing revenue was up 6% versus a year ago, driven mainly by ramping new logos in finance and accounting engagements across both Digital Operations and Data-Tech-AI services, partly offset by reduced scope from a high-tech client in early 2023. Adjusted operating income came in at 17.7%, which is 70 basis points higher year-over-year, largely on a stronger gross margin and general operating leverage. Bear in mind that our Q4 results a year ago got a lift from businesses designated as held-for-sale that have since been divested. Gross margin in the fourth quarter expanded 70 basis points versus last year, mainly reflecting cost management actions taken early last year, better utilization, and a richer mix of Digital Operations revenue, offset by ramping recent large deal wins. SG&A, as a percentage of revenue, improved 80 basis points year-over-year, coming in at 20.7%. That year-over-year improvement was largely due to the absence of expenses tied to the nonstrategic business that was divested, along with overall operating leverage, offset by heavier investments in sales and marketing and in research and development during Q4 2023. Our effective tax rate was negative 83.8%, compared with 27.1% in the same period a year earlier, primarily because of a nonrecurring $170 million benefit tied to an intercompany transfer of certain intellectual property rights. Strip out that impact and our effective tax rate would have been 23.4%. GAAP net income came to $291 million, up 225% year-over-year. GAAP diluted EPS was $1.59, up 231% year-over-year. Those growth rates reflect the tax benefit I just mentioned. When you look at adjusted results, EPS was $0.82, up 17% from $0.70 in the fourth quarter a year ago. A number of things drove that improvement: adjusted operating income was $0.07 better, lower taxes gave us $0.05, a reduced share count contributed $0.02, and interest expense that declined added $0.01 — although a 2% headwind from softer FX remeasurement gains relative to the prior-year period partly offset those. Attrition in the fourth quarter was 23%, close to the low end of our historical range. If you exclude involuntary exits and people with less than 3 months of service, quarterly attrition was 19%. Now I'd like to give you some detail on how full year 2023 shaped up. Revenue was $4.48 billion, up 2% from a year before, and up 3% in constant currency. Data-Tech-AI services generated 45% of total revenue and grew 2%, both as reported and in constant currency. Digital Operations services made up 55% of total revenue and increased 3% year-over-year, or 4% in constant currency. During the year, our number of clients producing more than $5 million in annual revenue grew from 158 to 185. In addition, accounts billing over $25 million annually went from 39 to 34. Those above $100 million rose from 3 to 5. Gross margin for the year was flat versus 2022, in line with what we expected; the key cause was the impact of ramping new large deal wins, with a significant portion of onshore delivery that carries lower gross margin in the early years. Even with gross margin unchanged, our adjusted operating income margin expanded 50 basis points year-over-year, to 17%, largely driven by cost efficiencies and operating leverage. SG&A as a percentage of revenue declined 110 basis points to 20.4%, mostly because costs associated with the nonstrategic business we divested were gone, plus general operating leverage, though increased investment activity in the second half partly offset that. Our tax rate for the full year was negative 4.8%, down from 24% in 2022, primarily because of the one-time gain from the IP transfer I mentioned earlier. Excluding that transaction, our effective tax rate for full year 2023 would have been 23.4%. Thanks to this tax benefit, full year GAAP net income reached $631 million, up 79% year-over-year, while full year GAAP diluted EPS was $3.41, up 81% year-over-year. Adjusted EPS came to $2.98, 9% higher year-over-year versus $2.74 in 2022. That $0.24 gain was mainly due to adjusted operating income that was $0.18 higher, a lower share count worth $0.05, reduced net interest expense of $0.02, and a $0.4 benefit related to lower taxes, partly offset by FX remeasurement gains in 2023 that were $0.05 lower than in 2022. Now let's turn to cash flow and the balance sheet. At year-end, cash and cash equivalents totaled $584 million, compared with $647 million at the close of 2022's fourth quarter. Our total debt was reduced by $161 million, and as the year ended, our net debt-to-EBITDA ratio for the trailing 4 rolling quarters stood at 0.9x; with unused borrowing capacity plus cash already on hand, we have ample flexibility to pursue growth opportunities and execute our capital allocation strategy — reinvesting in the business, pursuing M&A, and returning capital to shareholders. A $0.4 benefit tied to lower taxes also helped. As non-FTE pricing models drew more interest and clients maintained cash management practices while interest rates remained elevated, days outstanding rose to 88 days, compared with 81 days in 2022. Credit quality throughout our portfolio overall is still quite solid. Despite those higher DSOs, we generated $491 million in cash from operations, surpassing our expectation for the year. Higher adjusted operating income drove most of that better-than-expected outcome. Capital expenditures equaled approximately 1.4% of revenue, in line with what we had forecast. During the fourth quarter and for all of 2023, we returned $100 million and $325 million of capital to shareholders, respectively. Included in that amount are dividend payments of $25 million in the fourth quarter and $100 million for the full year.

Additionally, during the quarter we bought back 2.2 million shares, spending $75 million in total, which works out to a weighted cost of $34.27 per share. For the entire year, we repurchased 6 million shares, with a total cost of $225 million and a weighted average price of $37.48. Through our buyback in 2023, our net share count outstanding went down by 3%, as we keep surpassing the expectations we originally set for the full year by capitalizing on the significant discount in our intrinsic value calculations. Lastly, let me give you some insight into our outlook. To begin, I should recognize that, as reflected in our press release, we have implemented a new guidance framework as we enter 2024. To put a finer point on it, our guidance now covers the complete year for both Digital Operations and Data-Tech-AI services revenue, and for the first quarter we're also giving guidance on total revenue, Digital Operations and Data-Tech-AI services revenue, gross margin, and adjusted operating income margin. Let me walk you through the details. Here's how Genpact sees the full year 2024 shaping up. We expect total revenue to land somewhere between $4.57 billion and $4.61 billion. That works out to roughly 2% to 3% growth compared with last year as reported, and 2.1% to 3.1% in constant currency terms. Within that range, at the midpoint and on a reported basis, Digital Operations services revenue is tracking at about 3% year-over-year, while Data-Tech-AI services revenue is tracking at about 1.9% year-over-year. On a constant currency basis, again at the midpoint, Digital Operations services revenue is running at roughly 3.1% year-over-year, and Data-Tech-AI services growth comes in at approximately 2.1% year-over-year. I would also like to point out that given our bookings mix and the timing tied to deal ramps, we anticipate year-over-year revenue will be greater in the second half of the year compared with the first half, which aligns with our historical patterns. For the entire year, we're looking at a gross margin around 35%, an adjusted operating income margin near 17%, and adjusted earnings per share somewhere between $3 and $3.03. That works out to growth of 1% to 2% versus last year. Within that figure, a reduced share count gives us a $0.06 benefit, while several factors push the other way: roughly $0.04 from anticipated higher taxes, another $0.04 tied to increased interest costs, and a $0.02 headwind from foreign exchange compared with a year ago, when we booked a $4 million remeasurement gain. On taxes, we anticipate an effective rate of 24.5%, up from the 23.4% we reported for full year 2023. Higher worldwide minimum tax rates kicked in, and on top of that, the benefit we got from stock-based compensation was smaller than it was a year ago — both of those things are behind this rise. Our projection for cash flow from operations sits at about $500 million. When it comes to capital expenditures measured against revenue, we're looking at roughly 1.5% to 2% for 2024, and that figure factors in spending on upgrades to our internal systems. Turning to the first quarter, our expectations are as follows: total revenue landing somewhere between $1.108 billion and $1.114 billion, which translates to around 1.75% to 2.25% growth compared with last year as reported, or 1.95% to 2.45% if you strip out currency effects. Looking at the middle of the guidance range we've provided, Digital Operations revenue is expected to increase by roughly 2.8% compared with last year, and Data-Tech-AI services should see growth of about 1% year-over-year. If we strip out currency effects and stay at the midpoint, the figures come to approximately 3% growth for Digital Operations services and about 1.3% for Data-Tech-AI services on a year-over-year basis. Turning to gross margin, our expectation is to enter the year at around 34.5% in Q1, with improvement thereafter as offshoring delivery advances, utilization gets better, and non-FTE pricing commercial models keep gaining traction. For adjusted operating income margin, we anticipate starting Q1 at approximately 16%, then rising progressively across the year in step with gross margin gains. We think the money going into partnerships and AI—the things BK brought up when he kicked off—will mostly be covered by savings we get from becoming more efficient. For the whole year, operating expenses in absolute dollars shouldn't go up much at all compared to last year. That said, like BK pointed out, if we end up bringing in more revenue than expected as the year goes on, we'd lean toward putting some of that extra back into the business so we can grow revenue down the road. And one more thing: we're still dedicated to giving capital back to shareholders, sticking with our usual pattern of buybacks and quarterly dividend payments. Right now, we figure roughly 30% of cash flow from operations will go toward repurchasing shares in 2024. On top of that, the Board of Directors gave the green light to raising our regular dividend by 11%, bringing it to $0.153 each quarter, which works out to $0.61 annually. Since we started paying dividends back in the first quarter of 2017, those payments have grown at a compounded rate of roughly 15%; assuming this activity plays out as expected, our plan is to hand 50% of operating cash flow over to shareholders this year. To wrap up, I have every confidence that the direction BK is taking — building greater focus, speed and accountability across the organization — will leave us well positioned to create long-term shareholder value. With that, I'll hand the call back to Roger.

Thanks, Mike. At this point we want to turn the call over to your questions. Michelle, could you please give the instructions?

Congratulations on the new position, BK. And Tiger, I really appreciate your vision and every conversation we've shared across the past — over 12 years, in fact. So I'd want to begin with the question regarding the guidance. When I look at what you've given for Q1 and for the entire year, and I examine those ranges, it seems you're not anticipating a sharp step-up from Q1 levels as the year progresses, in terms of the absolute dollar figure for revenue; so I'm aware you said this would be a year of buildup. Could you expand on those remarks? Would — do all those adjustments, such as the simplification, which all — it appears sensible, but do they affect revenue at all? What sort of trends do you anticipate for the remainder of the year?

Yes; so let me begin by discussing the guide as a whole, then I'll hand it to BK, in case he'd like to add some further detail, correct? So when we consider the guide, you're right about the 2% to 3%. I'd like to offer a bit more detail on our thinking here. I believe we adopted a cautious stance when putting that guide together, correct? What we did this year, we used a more thorough bottoms-up planning method at a highly granular level. The main shift in our assumptions is really about the macro. We presumed no improvement from the second half of 2023 when it comes to the macro. Having said that, we have some solid tailwinds entering the year at the 20% — 26%, I should say, growth in bookings, keeping in mind that growth in bookings arrives across a 3- to 5-year period. Regrettably, that gets offset by the weak macro we've observed, particularly affecting us in small deals. So when we extrapolate the — what we've witnessed in the second half of 2023, we aren't forecasting any recovery within the guide, correct? That's likewise offset by the usual productivity and changes in scope that have been incorporated into our guide; having said that, a better macro on execution, we can do better; and regarding your other point about, I believe you're inquiring about the cadence of the revenue earning it, we provided some general guidance in my comments that it will lean more toward the second half than the first half of the year. And what we're committed to do, we've given you the first quarter guide, we'll keep doing that on a quarterly basis as we move through the year. And if you'd like to add anything, BK?

Well, you put that nicely. Puneet, thank you very much. And I believe you brought up macro and execution, Mike. And what I'd say is, look, macro isn't something we control. We'll handle it as we move forward. Execution, that's on us, and that simplification remark you made, Puneet, as we carry it out, I do see additional potential. But at this point, we want to stay with this guidance, and we'll give you further color as we move forward.

Understood. That makes sense, and it's reasonable. Could you also give your perspective on the long-term guidance Genpact provided a few years back? My recollection is the earlier target involved reaching double-digit top line growth over the medium term. Does that remain achievable past this year?

I'll address that one. Here's how I'd frame it, Puneet. My unambiguous objective is for Genpact to reach its full potential. Within that full potential, do we think we're able to expand at market or better than market? Yes, we can; it requires better execution on our part, and that's where my attention is. As execution gets better, we can absolutely return to the broader tier of expanding at or above market rates. If your question is specifically whether we're committing to 2026, I'd say I'm still in the early stages of my time in this role, and as things move forward, we'll share more with you on that.

I've got a few things. During your prepared remarks, you brought up improving execution a few times, and I'm just trying to get a handle on it — I don't want to take away from anything you might share in future conversations or presentations — but which sorts of things do you believe need work when it comes to execution that could lead to better growth?

Excellent question, Keith. The way I look at it is, how do we make our foundation stronger? Our foundation is extremely high quality. A foundation of domain and data, a foundation of trusted client relationships, a foundation of global talent. And when I talk about execution, it's about how we strengthen and buttress it further. So consider clients as an example; we want to shift our conversation, and we are shifting it right now, to bring data and technology in so the conversation becomes more holistic and our solutions become far more holistic. Or if you look at it from our competency in data and domain, how do we bring in partner solutions, and that's where our investments are going, so that, once again, we're more focused on growth-oriented solutions and front-to-back solutions for our clients. And that's what execution means to me. Simplification is a core part of it, and we're driving fast changes as I step into this chair. And that is — my thesis is that it will boost our agility and accountability, and I'm already seeing early results from that; that's what I mean by execution.

All right. My next question on that topic is this: when it comes to either broadening the skill sets we already have or moving into fresh market openings, how do you view the role of M&A specifically? You brought up 50%, I believe, of free cash flow going toward capital allocation projects, but what's your thinking on how the nature or the strategy might shift when it comes to M&A? Or does it stay largely the same?

Thanks, Keith. Here's how I'd frame it. For us, M&A remains a central strategic lever. That's always been true, and it will stay true. When I think about M&A, and I want to tie it back to execution, I'd say we've performed fairly well when it comes to locating assets. Whether we can get better at execution on the integration side — that's the other dimension of execution. But does M&A form an integral piece of our strategy? The response is yes, yes, yes. And from an ROIC perspective, we'll stay disciplined, and as we do more and — we'll keep you updated along the way, Keith.

Beyond the financial rigor and all the other points BK just brought up, the primary item we're seeking is how we're adding new capabilities for the company through inorganic means; so if those capabilities, whether tied to GenAI or AI, emerge, we'll put capital to work there to expand on that — expand the franchise.

Could you go deeper on how the go-to-market approach has been streamlined, and what benefits you expect that to deliver for the company?

Absolutely, Maggie. Obviously, when you grow a business organically, you wind up steering the place along all sorts of axes. That's exactly what happened here; and since I arrived from within, I genuinely grasped both what clients see and what our own teams see regarding ways to boost responsiveness and ownership. So instead of several overlapping matrix structures, over the past 60 days we've realigned around 12 business units that match how clients are organized. To illustrate, consider aligning with consumer goods and retail firms, or aligning — we'd always done that, yet competing axes existed, and I believe we made things clearer for everyone and pointed the whole company toward serving clients while we develop our capabilities, while we develop data or AI capabilities. Further streamlining efforts will be shared later, but that's what streamlining means to me, which is precisely what you asked about.

Yeah, and let me jump in on that for a second. In the end, the goal behind all of it is to have speed and clarity so we can move faster and, honestly, push our revenue to grow at a quicker rate. Those opportunities exist.

That's useful. Now, turning specifically to the DTAI segment: was there any shift from 3Q to 4Q that made sequential growth possible? And how should we consider any possible change when it comes to 2024, and how did you factor that into the guidance?

Yes. Let me briefly address the sequential deal movement from 3Q to 4Q; we felt the effect of those new deals we mentioned. They ramped up as anticipated. In fact, they ramped a bit better than expected; that was counterbalanced by greater productivity and scope changes on work already underway, which is normal against our historical average, correct? As we head into our first quarter guide, the favorable effect of those new large deals is still present now in quarter 3 as they keep progressing on a year-over-year basis. But if you examine the vintage, or the historical vintage, of contracts already in place, we've brought on deal-related productivity for those existing contracts, which is standard in terms of timing, and that reduces some of that growth, along with the lack of the second half of 2023, which saw the largest — fewer large deals coming in, and that will hit us in the first half of the year. They come in unevenly, and DTAI simply experiences a seasonal low during the first quarter.

BK and Tiger, congratulations on making official those changes that the two of you told us about during the prior quarter. Perhaps I'll begin by asking about margins. Usually, we observe some degree of margin gain compared with a year earlier. You're essentially keeping things steady there. Does that represent a quite particular indication about a desire to put money into growth? Then the second portion of my margin inquiry is that you're beginning at 16%. In 1Q, what is causing that? And after that, what sort of margin progression ought we to anticipate?