Genpact Ltd. Q1 FY2025 earnings call

• Entered 2025 with strong momentum, delivering $1.215 billion in total revenues in Q1, up 8.3% year-over-year in constant currency, above guidance range. Gross margin and adjusted operating income margin exceeded expectations. Adjusted EPS grew 16% year-over-year to $0.84.
• Signed two large deals in Q1 with over 80% annuitized Data-Tech-AI revenue, reflecting pivot to data, AI, etc. But some large Digital Operations deals pushed out due to supply chain and tariff uncertainty. Pipeline at all-time high.
• 3+1 Execution Framework: Partner-related revenue up 80% year-over-year and over 10% quarter-over-quarter, reaching 10% of total revenues in Q1. Data-Tech-AI revenue up 12% year-over-year in constant currency, with over 215 Gen AI solutions in production. Simplification efforts reduced time to bill. Client Zero made progress with AI led efficiencies and as a sales tool.

Total revenues in Q1 were $1.215 billion, up 8.3% year-over-year in constant currency. Data-Tech-AI services represented 48% of total revenue, amounting to $582 million, an 11% increase year-over-year and 12% in constant currency, exceeding the high-end of the guide. Digital Operations revenue was $633 million, up 4% year-over-year, 5% in constant currency, accounting for 52% of total revenue. Revenue from priority accounts grew approximately 6% over the prior year and represented 62% of the total. Growth was balanced across segments led by High Tech and Manufacturing at 11%, followed by Financial Services at 7% and Consumer and Healthcare at 4%. Outcome and consumption based deals, excluding fixed fee contracts, accounted for 22% of first quarter revenue, up from 19% in the prior year.

• Widened guidance range due to increased uncertainty in certain industries from global trade changes. Lowered Digital Operations and Data-Tech-AI outlooks due to delayed large deals. Reaffirmed gross and adjusted operating income margin outlooks. Full year on as reported basis: net revenue expected in range of $4.862 billion to $5.005 billion, growth 2% to 5% respectively; adjusted diluted EPS between $3.41 and $3.52, 5.7% growth at midpoint. Second quarter net revenue expected between $1.210 billion and $1.233 billion, growth 2.8% to 4.8% at midpoint; adjusted diluted EPS $0.84 to $0.86.

• Softening macro environment. Some large deals pushed out in March and April due to supply chain and tariff related uncertainty. Uncertainty in global trade impacting certain end markets, affecting revenue timing and guidance.

Q: Good day, ladies and gentlemen, and welcome to the 2025 First Quarter Genpact Limited Earnings Conference Call. My name is Howard, and I will be your conference moderator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference call. As a reminder, this call is being recorded for replay purposes. The replay of the call will be archived and made available on the IR section of Genpact’s website. I would now like to turn the call over to Krista Bessinger, Head of Investor Relations at Genpact. Please proceed.

A: Thank you, Howard. Good afternoon, everyone, and welcome to Genpact’s Q1 2025 earnings conference call. We hope you’ve had a chance to read our earnings press release posted on the Investor Relations section of our website, genpact.com. Today, we have with us BK Kalra, President and CEO; and Mike Weiner, Chief Financial Officer. BK will start with a high-level overview of the quarter, and then Mike will cover our financial performance in greater detail before we take your questions. Please note that during this call, we will make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time. Actual results could differ materially due to a number of important risks and uncertainties, including the risk factors in our 10-K and 10-Q filings for the SEC. Also during this call, we will discuss certain non-GAAP financial measures. We have reconciled those to the most directly comparable GAAP financial measures in our earnings press release. These non-GAAP measures are not intended to be 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, I’d like to turn it over to BK.

Q: Hi, guys. Thanks for taking the question here. So, let’s start on growth and the revised outlook, particularly just in Digital Ops, the magnitude of the change in a short period of time is just a surprise. So can you just help us with the moving pieces here, dig in a little bit as it relates to those deals that I’ve gotten pushed out, how many we’re talking about? And then, as we think about it, as you go through the year, they’ve been delayed. But, are you relying on them to be signed at any point soon to account for the implied second half sequential pickup? Or have you basically just removed those out fully and you’re guiding to a little bit of growth on the existing base of business?

A: Hey, Bryan, it’s Mike. So, let me start that off, may BK could chime-in in a moment or so. So you’re correct in your assertion that Digital Operations, the vast majority of the reduction, if not all the reduction, is really driven by the delay in these large deals. Just a reminder, large deals are greater than $50 million. And these deals have been pushed out. We’re well in excess of that. So they had a meaningful impact, particularly in the business for the second half of the year, right? Our range does not incorporate that those deals will happen in a reasonable period of time. Again, a deal that is signed in late in the fourth quarter or in the fourth quarter will just not have the material revenue impact that it would have had based on our assumptions in the first quarter of the year, right? So, I think, from that perspective, we feel very good about the outlook and where we are. We hope to get those deals consummated as soon as possible. Again, none of them have been canceled. They’ve just simply been delayed. And, I think, what’s kind of interesting about it, when you double click on what those deals are, who they are, right, it’s interesting. They’re all within manufacturing, consumer goods, high tech hardware, right, and even look at a deeper level of it. And you look at the services underneath those, quite a few of them had to do with supply chain related work that we do, right, which really ties into the macro, which is what we’re seeing a greater level of uncertainty really related to tariff related industries, which, unfortunately, is impacting us disproportionately this quarter. I know BK would like to add on to that.

Q: Hi. Thank you. I wanted to follow-up on the large deals that were delayed. Are they showing any signs of pricing pressure given the changing environment?

A: No. Yeah. Okay. Go ahead, Mike.

A: Yeah. I’m sorry. We both said it. Absolutely not. Really, it has nothing to do with the composition of the deal, the scoping of the deal by any stretch like that, or the comparative pressure associated with it. It’s literally a timing effect on we anticipated these deals closing in the early part of the year, right? We still are looking forward to them closing towards the latter part of the year, but unfortunately because of the revenue cadence pattern of it, it’s disproportionately impacting our business growth rates for the year, and notably that’s in Digital Operations.

Q: Hey, guys. Thanks for taking my question. I just wanted to touch on what kind of deals are like being affected here, the deals that are getting pushed off. So, you guys mentioned that these are longer term in nature. Just kind of curious if these are more cost takeout deals and they’re still getting delayed or are these more discretionary, more transformational? Thanks.

A: So, a lot of these deals, Jacob, are in supply chains. So, for a large consumer goods company, there’s a big program that we’ve been running and now this is a large transaction in supply chain. This is much bigger than $50 million. And these are – I won’t say that they are just cost takeout. Obviously, any of these solutions have a significant productivity that comes in over a period of time, over a 5, 7-year period. But they always improve the outcomes too. So there’s always an efficiency and effectiveness level that gets deployed with all the solutions of, be it agentic or Gen AI or any of the other solutions. But it is a number of these deals are in these end markets that we refer to. And most of the deals that actually came in contention are in those markets and those deals continue to be in very active dialogue. It is just taking a little bit longer than our expectations to close.

Q: Hi, everyone, thanks for taking my question. Nice to hear that there were no deal cancellations and that Data-Tech-AI has remained strong year-to-date. So for Data-Tech-AI, can you provide more detail on the outlook for your different customer end markets?

A: So, yeah, I mean, the way we don’t really think about it from that perspective, right? We think about it when we talk about our Data-Tech-AI revenue disaggregation, we really split it between the deals that are greater than 12 months and less than 12 months, right? So, the larger deals that are greater than 12 months are really associated with these multi-year transformational deals, right, which performed exceptionally well, particularly in the first quarter, as BK alluded to. The two large deals that we closed had a larger proponent of Data-Tech-AI on there. We are sitting on a record pipeline, which we’re working aggressively on closing them down. And so, we’ve just taken a very conservative prudent approach on our forecasting on the shorter cycle retail type deals that we do that are sometimes more susceptible to discretionary buying behavior of our clients. And that’s really what’s reflected in our guide.

Q: Hey, thanks for taking my question. I wanted to follow-up on like all these questions on large deals, especially around 2Q guidance. Like the only issue is around large deals that are in pipelines. Like that shouldn’t have much impact on second quarter growth. So, are you also seeing like headwinds or some weakness in your existing customers or that beliefs that have already ramped up that will impact in second quarter?

A: No, I think we feel really good about our second quarter, right, in terms of where those numbers are irrelevant of those large deals as BK alluded to from that perspective. Again, what we’ve talked about, not just for large deals, but for also different size deals across both the revenue categorizations of the own Data-Tech-AI, are just much more prudent conservative view, right, and a greater level of uncertainty. And that’s really what’s reflected in our outlook. Now, that said, we are sitting here into the quarter. So, we feel really good about that, right? So, the way that I talked about it in my prepared remarks is to kind of think about our business and think about our 3.5% growth that we’re forecasting for the year. 3.5% growth, so arguably about $166 million for us. We took down 50% of that growth in the first quarter alone. We’re anticipating taking down $45 million, which is about 27% of that in the second quarter, which we feel really good about. So, if you think about it from that perspective, the second half of the year really has us projected to grow about $35 million or about 22%. So, it does give you some sense of how we’re thinking about the year and how we’re approaching, our pretty conservative guide really driven by a lot of the uncertainty out there.