Genpact Ltd. Q3 FY2024 earnings call

• Revenue reached $1.21 billion, up 7% year-over-year above guidance range, with Data-Tech-AI driving acceleration and Digital Operations supporting growth.
• Gross margin 35.6%, adjusted operating income margin 17.6%.
• Partnerships: Made investments and announced initiatives like proprietary Finance Data Hub and GenAI competency in AWS consulting services.
• Data-Tech-AI: Revenue up 9%, GenAI bookings up quarter-over-quarter, ~130 GenAI solutions in production, and client success stories from Mondelez, Penske, Liberty Mutual, etc.
• Simplification: Streamlined operations like cash-to-collection and accounts payable processes for improved efficiency.
• AI-led transformation: Scout AI agents available to employees, with over 20 in production, and developed own agent development life cycle.

Total revenue reached $1.211 billion, up 7% year-over-year. Data-Tech-AI revenue was $569 million, a 9% year-over-year increase, representing 47% of total revenue. Digital Operations revenue was $642 million, growing 5% year-over-year, accounting for 53% of total revenue. Revenue from outcome and consumption-based deals (excluding fixed-fee contracts) comprised 20% of total revenue, up 17% from the prior year. Priority accounts contributed 62% of total revenue with ~4% year-over-year growth. Consumer and healthcare revenue grew ~8%, while high-tech, manufacturing, and financial services were up ~6%.

• Raised full-year revenue guidance to 6% midpoint from 4.5% previously.
• Increased gross and adjusted operating income margin guidance by 10 basis points each.
• Adjusted EPS outlook raised to $3.24.
• Fourth quarter revenue expected to be $1.222 billion to $1.233 billion, with Data-Tech and AI growth at 9% midpoint and Digital Operations at 5.4% midpoint.
• Full-year revenue projected $4.740 billion to $4.751 billion, representing 6% growth midpoint.

• Actual results could differ materially due to important risks and uncertainties, including those in 10-K and 10-Q filings with the SEC.
• Uncertainties related to market conditions, technology adoption, and competitive landscape may impact business performance.

Q: Over the last 90 days, has there been any improvement in the short-cycle projects in advisory work?

A: Overall strong execution is driving results, with stable business environment but stronger execution helping deliver better results.

Q: Update on progress on expanding partnership source revenue and most important partnerships?

A: Hyperscalers like AWS, Microsoft, Google, and domain-led partners are key, with proprietary solutions built on top acting as multiplier. Revenues from partnerships still relatively low but investments are driving growth.

Q: What parts of the Data-Tech-AI business are resonating most with clients?

A: Holistic approach in Data-Tech-AI, with GenAI and data being integral, and Data-Tech-AI being a significant component in Digital Operations deals.

Q: Sense of customers getting more comfortable with generative AI technology?

A: Early days but more adoption happening, with clients engaging on stage sharing meaningful value from solutions.

Q: Q4 growth and 2025 guidance?

A: Q4 implies ~6% organic constant FX growth, with stable buying environment and stronger comps, and more specific guidance to be provided in 90 days for 2025.

Q: Update on outcome-based pricing?

A: ~20% of total revenue is outcome-based, up from 17% year-ago, with generative AI driving more outcome-based alternative commercial models.

Q: Color on larger TAM for services?

A: GenAI expanding scope of activity, bringing more end-to-end solutions and domain-led AI solutions, with data being a main actor conversation.

Q: Signs of budget influx and business environment?

A: Not seen budget flushes yet, with stable pricing environment and sole-sourced deals being lumpy and not indicating major pricing changes.