Q3 2023 Genpact Ltd Earnings Call
Good day, ladies and gentlemen, welcome to the 'twenty two 'twenty three third quarter Genpact Limited earnings Conference call. My name is Judy 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.
Minder This call is being recorded for replay purposes.
Replay of the call will be archived and made available on the IR section of Genpact Sweat site I would now like to turn the call over to Roger Sachs head of Investor Relations at Genpact. Please proceed.
Thank you Debbie good afternoon, everybody welcome to our third quarter earnings call.
As a result.
Speakers on today's call are rising.
Horizon, President and CEO, Mike <unk>, our Chief Financial Officer.
All right.
Yeah.
These agenda will be as follows.
I will provide an overview of our results update you on our strategic initiatives.
Jay will follow with a few brief introductory comments.
I will walk you through our financial performance for the quarter.
But you are cheap.
Mike is talking about and take your questions.
The call to last about.
Some of the matters, we will discuss in today's call.
King.
A number of risks uncertainties and other factors that could cause actual results to differ materially.
Such forward looking statements such risks and uncertainties set forth.
In our press release.
In addition, during todays call well refer to certain non-GAAP financial measures that we believe provide additional information.
I understand the management team.
You can find a reconciliation of these measures to GAAP earnings.
Our earnings release posted to the IR section of our website.
I'm just trying to Oliver.
Thank you Roger.
Everyone and thank you for joining us today for our third quarter.
Earnings call.
I know you've all seen the exciting news that we get.
A dropbox next CEO.
That was my retirement in February of credit grade four.
I will share more about this announcement and became a shout. If you want but first let's review the quarter.
At a high level, we saw increasing pressure in short cycle advisory and other project work in quarter three.
We remain sharply focused on large comps by some deals that product cost reductions.
The doctor that garnered revenue being below our expectations.
However, bookings remained strong and I'll pass to grow at least 25% are great Green Street.
Additionally, we continue to make significant progress in the year.
We're going to talk about any or have you moved into life altering environments with Ali demonstrated results.
This is leading to many new inflows.
I was prepared to ambac.
Tomorrow's Internet operations.
Turning to our performance in more detail, we delivered on a constant currency basis.
Revenue of 1.14 billion up 2% year over year.
They don't take it I'd, probably say is revenue of 500 million down 2% year over year and Theres good operational services revenue of $636 million.
6% year over year.
We also delivered adjusted operating income margin of 17, 2% up 10 basis points year over year.
Our diluted earnings per share of 76 cents.
One perfect that are way up.
Our third quarter revenue grew less than expected.
We saw ongoing pressure in short cycle projects and advisory work.
By three things.
One you want smaller deals converted.
Joe longer decision cycle times for those smart meters and three <unk>.
Lower demand for smaller Tech do you look at our financial services and consumer health care verticals.
These challenges were predominantly first then I'll go to that Guy talked about.
Why do we design and <unk> solutions.
Transform our clients businesses.
However, our recent large deal wins are ramping up on schedule.
Helped drive solid football with the target collaboration services wherever it digitally transform and run our clients' operations.
Given our year to date performance lower than normal visibility enterprise discretionary spending.
No expectation of seeing a typical seasonal year end lift from budget flush spending we are resetting our full year 'twenty Carnegie revenue outlook.
We expect full year topline growth of approximately two 5% year over year on a constant currency basis compared to our expectation.
Perfect.
And growth.
Michael.
Greg I guess on the computer outlook.
Despite the challenging macro environment demand long term annuity based services remains very healthy.
If you heard about continued robust surplus our high quality pipeline once again reached a record level.
Believe our deep domain and process and data expertise combined with our experience building developing and refining our AI capabilities over the last seven years.
So if a unique competitive advantage in these times with the rise of Jennie O.
This has led to many new deal inflows year to date a minute wait journey.
We signed two new large deals during the quarter. Following the 11, we signed in the first half pick up.
Win rates in the period were approximately 55% above historical levels and roughly half of our wins continue to be sole sourced.
We also added 32, new logos during the quarter a bounce back from the first half would be helpful.
With anticipated growth in bookings for the go on ongoing expansion of our pipeline. We continue to believe that we are well positioned for accelerating growth in 2024 compared to our adjusted outlook for 'twenty greatly.
Hello <unk>.
Limited visibility into our short cycle revenue.
Currently do not have the same level of confidence in forecasting a return to double digit growth in 2024 hours.
In our prior quarter update.
We will provide a more detailed 2024 lockup during our yearend earnings call in early February.
Turning to our five key strategic initiatives, we continue to make progress on all of them in quarter. Three first revenue from a project costs grew 6% year over year during the quarter and expanded to approximately 64% of our total revenue.
Our investments in these clients are paying off as approximately 70% of our yoga direct bookings.
That's a high priority accounts.
We continue to expect this portfolio to grow faster than the company average over the long term.
Second we continue to deepen our partnerships with cloud technology players.
As we call it in a way and create joint IP solutions.
Three examples.
We expanded our partnership with AWS integrating their background generic capabilities without proprietary cloud based financial crime solution.
This solution will be deployed into production.
And actually institutions to drive for Fisher nut efficiency.
We are investigating and preventing financial Greg.
We grew our team and certifications and jet AI machine learning and data of generic although that's not a news flash solutions listed on the Google cloud platform marketplace.
And finally, our kind of lead partner of service now we are enhancing our cloud based solutions that automate procurement and sourcing supply chain and insurance processes just to name a few.
Cloud initiative, we are continuing to invest in new operating factor either tier three cities in India, where we expanded our talent base and footprint.
These new hubs not only offer a cost benefit but also access to diverse talent pools with lower tertiary.
Fourth we continue to drive outcome or transaction based commercial model, which represented 16% of our revenue in the third quarter.
And finally, our recent investments in large deal team continue to generate great results, both in bookings and pipeline.
As expected our attrition level for the third quarter was 25% consistent with the first half, but yeah I was significantly lower than the current fixed per carton during the same period last year.
Adjusting for involuntary attrition of employees with less than three months of service architectural Greg was even lower at 21%.
Let me now update you on the rapid progress, we're making with Jennie O.
I'm more confident than ever that this is a huge opportunity for us.
We have three focus areas first we're using jr to disrupt less penetrated areas for us.
It opened a new service models for example, customer care SBA debt sales and commercial operations.
Second we are prioritizing servicer wherever you are.
Laclede up for example, the finance and accounting financial crimes and risk of assessed our supply chain right journey, our acts as a catalyst to drive a step function improvement in outcomes.
And third we are implementing jetty are internally across our only child training knowledge management on top of our develop advances helping to drive speed margin improvement and employee and user experience.
We currently have more than 90 specific journey, our conditions that are undergoing rigorous testing.
With clients.
Got it teams.
We have begun to shift our focus from building proof of concepts and pilots.
<unk> solutions in life production environments with about 10, either deployed onto watch what's going on.
To date, we've hired nearly 2000 client conversations helping to generate journey, our roadmaps, which specific use cases and related execution box.
One I already shared the financial crime solution deployed on Amazon bedrock here on the call. Let me now check two more examples that are on a rapid path to production.
For a global Entertainment company, we've integrated AI into mining and sentiment analysis of that customer chalk data different led to a 40% reduction in resources for Hanmi Jive feedback.
As well as a significant increase in first time Revolution.
Writing ideal responses to service agents to solve customer issues.
For a leading financial institution, we integrated journey on.
I think Jamie and machine learning models into their loan review process.
I'm thinking a three times increase in volume processed this transformation with enhancing client satisfaction and driving business growth.
While we are still in the early days Jenny I embedded solutions enable clients to quickly achieve outcomes either.
No doubt, we believe it will help accelerate the trend towards greater use of alternative commercial pricing models.
Somebody who is leading to a greater decoupling of revenue growth from employee growth over the long term.
Our ability to Upskill, our employees at scale combined with our deep domain expertise represents a competitive advantage for us.
Our clients unlock the benefits of getting a.
We now have more than 90000 team members and growing and our air training programs with almost 47000, having completed various levels of certifications.
We have also created an internal AI playground.
Our employees can experiment with multiple large language models to help drive journey. Our adoption currently more than 60000 employees are using this platform.
Our progress was recently recognized by the leading industry analyst firm Hff's.
Where we are in the highest ranking in their inaugural generator enterprise services Horizon report.
Now, let me come back to the CEO succession plan, we announced today.
Yeah, it's been an incredible journey for me they didn't get back over the last 12 plus years.
The world around Us has changed dramatically in that time <unk> successfully transform along with it.
Our tremendous Barcelona professional respectful weekend.
It's been a true partner for me for years and helped shape and execute the various parts of the company.
You know, what our business, our clients and our teams better than anyone and embodies the very best of who we are agenda.
So, let's take a hands on approach to strategic and operational leadership will be a guiding force as it becomes our next CEO.
Really importantly, we've built a great leadership team that can make the whole transition seamless.
For me I plan to stay actively involved and a member of the board and we'll of course work very closely with PK, great charter, a smooth and successful transition.
With that I'd like to turn it over to <unk> for a few additional remarks.
Thank you Tiger.
Considering that there is no honor to be selected.
Next.
And on behalf of clients impacted.
Perfect.
Thank you.
Sure.
Many of you know I've been with Genpact, it's early days.
I look forward to leading this talented team and building on the strong foundation, but if I go ahead of established.
I am excited to step into the CEO role early next year.
Over the next several months.
Every aspect of the business and spending time listening to our clients employees partners and investors.
Focus for us right now.
Got it.
Alright.
I'm confident that the headwinds are temporary.
We expect to see our top line improvement going forward.
We participate in under penetrated and high growth market.
Unfavorable dedication of our global team.
We are extremely well positioned to create sustainable long term growth for all our key stakeholders.
With that let me turn the call over to Mike would be part of it.
Thank you BK and good afternoon, everyone. Today I'll review, our third quarter results and to provide you with our latest thinking regarding our full year 2023 outlook total revenue of $1. One $3 6 billion was up 2% year over year calls as a reporting and is a constant currency basis data and check in AI services revenue, which represent.
44% of total revenue declined 2% both on an as reported and a constant currency basis. This performance was below our expectations largely due to incremental pressure related to short cycle discretionary tech spending that escalated during September for Gulf, where financial services, and consumer and health care verticals.
Digital operation services revenue, which represents 56% of total revenue increased 6% year over year, both on an as reported basis and a constant currency basis, reflecting on.
<unk> deal ramps related to recent large booking wins from a vertical perspective financial services increased 6% year over year, largely due to large deal ramps, partly offset by clients lower than expected discretionary tech spending.
Consumer and health care declined 2% year over year, largely due to pressure on short cycle growth oriented digital marketing projects and discretionary tech spending as well as the impact from the recent divestiture of our business. We had previously classified as held for sale last year high Tech and manufacturing increased 4% year over year.
Primarily driven by ramp ups related to recent new logo wins, partly offset by the impact of reduction of scope of a priority high Tech client mentioned earlier in the year.
Despite our disappointing third quarter topline performance during the 12 month period ending September 32023, we grew the number of client relationships with annual revenue greater than $5 million from 158 to 182. Additionally, clients with annual revenue greater than $25 million expanded from 34%.
38, and clients more than 100 million increase from three to five.
Adjusted operating income margin was 17, 2% up 10 basis points year over year.
And 40 basis points sequentially, largely due to higher gross margins and general operated and operational efficiencies as a reminder, our performance in the third quarter last year included the positive impact from the business designated as held for sale last year that has been divested.
Gross margins in the third quarter expanded 10 basis points year over year, primarily reflecting cost management actions implemented earlier in the year sequentially gross margins improved 20 basis points, largely driven by better utilization and greater mix of digital operations revenue offset by the impact of ramping up of recent large.
<unk> wins.
SG&A as a percentage of revenue improved 60 basis points, both year over year and sequentially, reaching approximately 20% year over year improvement was largely due to the absence of expenses related to non strategic business that was divested offsetting the higher investment in sales and marketing and research.
Search and development in the third quarter of 2023.
Sequential improvement from second quarter was primarily due to operating leverage.
Our effective tax rate was 24, 1% compared to 28% last year largely due to changes in our jurisdictional mix of income and a recent increase in UK statutory income tax rates. Adjusted EPS was <unk> 76 up 1% year over year from 75 cents during the third quarter of last year.
The increase was primarily driven by higher adjusted operating income of <unk>, the positive impact from lower outstanding share count of <unk>, partly offset by <unk> <unk> impact from year over year increase in our effective tax rate turning.
Turning to cash flow and balance sheet.
During the quarter, we generated $162 million of cash from operations compared to $226 million. During the same period last year. The decline was driven by sequential increase in our dsos in the third quarter related to delayed collect delayed collections on certain accounts, where cash was received in early October on a year over.
Year basis, DSO has expanded by three days to 84 days, we now expect the end of year to be at a similar level, our net debt to EBITDA ratio. The last four rolling quarters was one one times capital expenditures as a percentage of revenue equated to approximately one 3%.
Now let me provide you with our latest thinking regarding our full year outlook as discussed earlier, we saw clients become more cautious on discretionary project spending during the third quarter. This translated into lower levels of short cycle project revenue than we had anticipated at the same time, we remain focused on prioritizing large transformational deals driven by cost.
Things had efficiency gains this dynamic resulted in less near term revenue as bookings remained skewed towards large deals where revenue is recognized over a multiyear period.
As a result, we now expect revenue for full year 2023 to be approximately $4 45 billion, representing a year over year growth of two 5% on a constant currency basis.
And now anticipate our full year adjusted operating income margin to expand by 50 basis points year over year to 17%. This is up from our prior outlook of 16, 8%.
The increase was primarily driven by the greater mix of digital operations revenue in our revised top line outlook as well as lower investment in data Tech and services revenue growth for the remainder of the year.
We expect that our recent large deal bookings to contribute a higher revenue in the fourth quarter compared to the third quarter given that many of these deals have initial onshore delivery. We continue to expect full year 2023 gross margin to be relatively flat to slightly down as compared to last year.
King into account our year to date tax expense, we now expect full year 2023 effective tax rate to be at the lower end of our 24% to 25% range.
Given the given the updated outlook, we now expect adjusted earnings per share for the full year 2023 to be approximately $2 89, representing a year over year growth of 6% due to the anticipated dsos and lower expected adjusted operating income we now expect to generate full year cash flow from operations of approximately 407.
$5 million compared to our prior outlook of approximately $500 million.
We now expect capital expenditures as a percentage of total revenue to be at the low end of our of our 115% to 2% range full year.
As Tiger discussed given our limited visibility and short cycle revenue, we do not have the same level of confidence in calling for double digit growth in 2024, as we did when we spoke to you last quarter.
We continue to believe we are well positioned for accelerating growth in 2024.
Over the next several weeks, we will be finalizing our forecast and provide you with specific 2024 guidance during our year end earnings call in early February with that said, let me turn the call back to Roger.
Thank you, Mike we'd now like to open up our call for your questions.
Please provide the instructions.
As a reminder to ask a question Chris.
Star one one on your telephone.
Thank you.
And wait for your name to be announced to withdraw your question. Please press star one again.
These standby, while we compile the Q&A roster one moment for our first question.
And our first question comes from Tien Tsin Huang of Jpmorgan.
Thank you Tiger, it's been an amazing run so it's weird to hear that.
End of an era here come February but congrats on that news and of course congrats to BK.
Thank you Mike.
Yes, well I'm sure, we'll get a chance to speak again, I guess this quarter as well but.
Let's get into the business for a second here just thinking about this.
The comments around short cycle as well as large deals it's been a pretty common theme.
Tiger.
Been hearing throughout this.
This resort season, so maybe can you talk a little bit about.
ACB versus <unk> been trying to understand that dynamic better for a lot of the companies would love to hear your thoughts on that because it sounds like the backlog is strong.
But the short cycle work is it isn't filling out so that must be having an impact on the level of bookings that convert this year in year, so anything to walk us through that dynamic.
So first of all thank you and your question and the answer itself.
It's exactly the dynamic that we're seeing.
Very strong long cycle annuity deals with Martin <unk>.
Typically I viewed R&R business that ranges in the order of magnitude of three so striking about three are Tom's on the average product of four years and then on the short cycle.
About three months six months nine months, one year et cetera, and those short short term projects are the ones that have been challenge that people heard that across the industrial factory about book dynamics across the industry.
What then happens is we see that 25%.
<unk> bookings growth that we talked about which sets the stage nicely, particularly for digital operations, but also far.
Dave I think you talked about half of it or the Guy is long cycle in nature, it's statutory Nike for the long haul.
The short term book.
Bookings that don't get done immediately translates to impact on revenue not coming through for the year and that's the dynamic we're seeing Mike going out of it you wanted to add to that is that if you actually play out when you just said tiger with regard to about 25% projected year over year bookings growth.
And how it manifests itself in the financials for the third quarter and how we're thinking about the fourth quarter as well our digital operations business grew 6% or expand expect them to continue to grow which the vast majority of the large deals was reflected in there as well as as you said earlier about half of the day.
<unk> II businesses. There. So it is a tale of two cities as you kicked off the discussion with incredibly strong transformational large deal wins that make up the vast majority of the pipeline with some shorter near term non annuity data tech and AI pressure that we're seeing in the third and projected into the fourth quarter.
Great no. Thanks for thanks for going through that so it's just my quick follow up then.
So no budget flush assumed this year makes sense.
I heard the comments around <unk> 24 in the acceleration in 'twenty five but what are you looking for or is there anything that you can do to maybe catalyze the.
The short cycle work.
Short of pricing.
I imagine changing over the calendar year, sometimes helps but at this stage, it's probably too early to call is there anything that can be done on your side to maybe catalyze that.
Yes, and the way, we're kind of thinking about it without getting a specific numbers today with regard to 2024 and how we're thinking about entering the year. There's a key there's a number of key variables. We think about in our business obviously the basis of it with the digital operations business growing strong will act as a fundamental base.
Base for us with these large deal signings we had.
Both the including the two we had this particular quarter, but really the variable variability. It really comes from our data Tech and AI business and we talked about earlier.
Can you just point the pipeline in data Tech and I. It remains incredibly strong and growing so that means there is huge demand there large deals that I mentioned earlier also having data check in AI component into it we'll continue to ramp up through next year, but specifically what can we do and what are we seeing right now so there's a huge.
Opportunity associated with generative AI, specifically, while we didn't see the budget Flushing that we traditionally see in the third and particularly into the fourth quarter. We are not hearing any degradation in terms of Germany, and AI budgets going into next year. So when you think about it those dollars are what we're going to go after with <unk>.
Our huge focus and investment on that engineering solutions, I think that's going to be.
A nice tailwind for us as we go to help us through particularly on the data Tech and AI to help drive our growth next year above the level that we had this year certainly.
Finally to what Mike said in terms of some of the specific actions. We've already taken we now have a journey I set of offerings.
On the back of the 19th.
Projects and pilots that I talked about of which 10 are into getting closer and closer to production more than 200 and full production.
The more that progresses, the more we get into replication more and as you can imagine Jennie O. The conversation that if you can replicate on stock.
Rolling off those solutions it gets locked up pretty quickly. So we expect that to be a tailwind.
Second generative I itself.
Thanks for the question.
Our clients are still whether they have all the data lined up and that's what Mike's comment on data engineering is a big one we expect data engineering to be one of the tailwind in our P&L as we compete because the airlines yeah. Those specific actions we are doing in terms of resource allocation into the specific buying centers industrial verticals.
At geographies, where have we seen the most uplift.
Thanks for walking through that.
Thanks Richard.
Thank you one moment for our next question.
Yes.
Our next question comes from David Koning of Baird.
Okay.
David Your line is open.
Please check your mute.
Yeah.
Please rejoin using the call me feature.
One moment for our next question.
Okay.
Okay.
Our next question comes from Maggie Nolan of William Blair.
Yeah.
Thank you.
I was hoping you could comment a little bit it's great to have you regularly provide kind of that non FTE.
Percentage that you've been giving can you give us a little bit of color on the traction of that non FTE work within your high priority accounts and al.
Brad you know that.
Is it being adopted within those particular accounts.
So Michael it's a great question.
At the total revenue level on a non FTE.
Commercial models or the penetration of 16% as you heard in my remarks.
And as you remember we have said that over the long term great. Thanks horizon, we'd like to get that to at least 40% on last quarter.
Very good that there is a very high probability that we'll get there faster because our bookings seems to be tracking in terms of its penetration of ultra cultural volumes are down about 16%, which is great and therefore accretive.
Within priority accounts.
So that penetration of non FTE pricing models, it's higher than the company average the exact number I wouldn't be able to get right away, but it is it is tracking higher than the company average and the reason is very simple.
Often in the <unk>.
Smaller relationships you don't have enough.
Combined scale.
To be able to drive the kind of non FTE pricing on value based pricing that you can when you do financial accounting with order management with supply chain and when you put all that together our ability to drive real value for clients is tremendous and we participate in that value creation.
Thank you and then on the margins do you anticipate that this current dynamic with the short cycle work versus the longer term kind of cost optimization projects.
And to have an impact on gross margin or operating margin can come in over the next couple of quarters.
Well.
There are two separate dynamics that are going on associated with our gross margin as you know when we have these large deal ramp ups, particularly when we take onshore delivery and move into offshore tends to have a dilutive effect on the business in the near term and it gets accretive from a gross margin perspective.
The countervailing view on that as well is that our data tech and AI gross margins. When we have slower revenue growth disproportionately benefit us on a gross margin basis. So with that said in our projections going into next year with the recovery in data Tech and AI I think they'd be relatively flat on a go forward basis with us to counter.
Are things going in different directions.
Got it thank you and congrats CAGR in BK on your announcements.
Thank you Bonnie.
Thank you one moment for our next question.
And our next question comes from Ashwin <unk> of Citi.
Okay.
Okay.
Hey, guys.
Hi, guys. Congratulations on the on the long run and it's been a pleasure working with you.
VK congratulations.
Very well deserved.
And look forward to working with you.
Doug Arthur.
Yeah, I guess the question.
If you look at data and digital ops right.
Okay.
<unk>.
Okay.
The digital ops business.
Still I would imagine even without.
Yes.
Without sort of a budget flush and without things like that should still be sequentially growing most quarters great.
And so that would imply kind of a data tech AI can shrinks to the.
I don't know 475 to 485 kind of range.
For December.
So when I kind of think of the carryforward from bad debt.
Hey, just wanted to try to get better color on the.
The less not quite double digit kind of comment is that is that more of a mid single digit type of comment.
For better or worse, or what kind of visibility do you have by line any thoughts there.
So let me.
Let me kick off.
Two things to really unpack there. So your sequential observation third quarter into fourth quarter regarding digital operations is a 100% correct. Both on a notional dollar basis and our year over year percentage basis also off of a tough fourth quarter comp from that perspective, so correct by definition, our data Tech and AI. This is a big week going into the <unk>.
Fourth quarter, Okay. So with that said in the full ramp up that you're going to build on some of the other comments, we said earlier with the full ramp up of the digital operations business that we have on the large deals with one through the year that will provide a nice base for next year.
Now if you then think about our digital our data tech and AI business with some of the drivers that we're talking about particularly that regarding generative AI right and being able to utilize some of those budgeted numbers that are out there, particularly again with the data engineering solutions that we're offering we think that's going to help propel our data tech and AI business.
So at the end of the day logic would dictate that next year will be somewhere between our full year 2023 guidance, but less.
Less than our initial double digit view that we had then so after ultimately see where it goes will provide additional information about that in early February.
But the obviously the other thing that we have to think about the variable out there that's creating a little less visibility than a normal as the macroeconomic environment does it remained stable does it improve the deteriorate right.
The one other thing that I would add ashwin. The one other thing that I would add to what Mike said Ashwin our digital operations.
Going into the third quarter Akshay, probably even go ahead, Greg finishing off the second quarter going into the third quarter debate discussion that we all have was.
Confidence in the ramp of the wins that we had as we go through quarter, three and quarter four and one of the most pleasing aspects of our business is that ramp how exactly that.
What we had expected our digital operations. So even in this environment. We are really confident not just with your comment that it's a natural thing to come through but even though our risk associated with those types of ramped reps.
So it's actually really really solid.
Right and that's sort of where I was going to go go next is with regards to the.
The expectations there.
<unk> had.
Sure.
To confirm you're not necessarily seeing.
Delays with regards to <unk>.
The bedroom type deals.
What types of deals and decision, making are you seen delays with I mean, I know the broad classification is short cycle discretionary but.
If you can be more granular.
In regards to.
<unk>.
What are you seeing.
Bye bye by vertical by geography.
Any any details that would be excellent.
Yes, I'll take the easy one is because I guess the whole industry would be seeing this and you would agree with that because you'll probably see more of it.
The peer group.
Technology project work.
Teams are allocators, let's say the financial services firms banks.
As those projects get completed.
The question of what's the next project comes up and if the leaders in the firm decide that actually we don't want to know.
Any more money on the next set of projects. So instead of spending X million dollars when spandex divided by two.
That means that.
Products, new products don't comment to utilize the same set of people who bring the expertise of both the domain et cetera, It's a really tough decisions on that and predict because the woman that happened we move those teams integrate projects with other people.
Those people don't sit idle.
But everyone in banking a number of people in.
And.
The retail consumer goods and manufacturing are clearly taking those decisions have been taken those decisions. That's one example, another would be in the front end.
Improvement.
Marketing experience improvement all digital marketing.
Some of those are coming on the radar.
Radar and under the lens of is this really need it.
Is that payback immediate two questions that get asked.
You have to get to the end of the Gulf budget Flushing not available et cetera. So those are two examples.
I'll give you examples where we're not seeing that at all supply chain grid.
Good example of where we are not seeing any degradation.
I need to improve our supply chain I think you'll get a diversification of our supply chain driven by macro factors.
One would be get get my data already projecting out two examples where we are not seeing any degradation.
I would just quickly add to that too tiger that our pipeline associated with that type of work has not reduced its actually increase the quality of the pipeline increases. So that's going to be again, a nice driver for us as we go into 2024, and we work hard on converting that pipeline into revenue.
Okay. Thank you.
One moment for our next question next question.
Our next question comes from Bryan Bergin of TD Cowen.
Hi, guys. Thank you Tiger and good working with you congratulations on retirement BK congrats on the promotion here.
My first one is a clarification. So I just want to be crystal clear the digital ops. It sounds like Theres really nothing change your you feel good about the ramp so as we as you were thinking about what you would grow in 2000 and for just to be clear is there any change on how you are feeling about the business I understand that the DTA business has flattened out here, but just on the digital ops to start.
No what we said in the first and second quarter and are less has played out exactly.
I would add Ashwin asked a moment ago visari degradation in terms of visual operations projected ramp.
Worked out quite well and that's really as I talked about earlier, we will continue to provide the base for fourth quarter and into next year, we've seen no degradation.
Okay very good and then just on the margin expansion, so I was able to offset that.
Mitch aspect of this but as you're kind of leaning in to reduce costs can you just talk about how you're balancing efficiency here versus the need for growth investments.
Yes, we're not it's very simply we're not pulling away from growth investments in my prepared comments I tried to articulate we're not pulling away from sales and marketing investments for Orange is theres not theres natural efficiencies in our business, particularly in a down cycle, particularly data second half that's small that small cohort of work that we do but.
We're not we're not pulling from those investments for the future.
Alright, thank you.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
One moment for our next question.
Yeah.
And our next question comes from <unk> Tandon of Needham <unk> Company.
Great. Thanks, Hey, guys. This is Sam on for Mike today, Thanks for taking the questions.
Just a quick one from me.
<unk> 32, new logos this quarter was good to see.
Could you guys talk about which verticals had the strongest new logo additions this quarter.
Sure.
I'll remind you that actually nicely distributed across all our verticals.
And we are very pleased with the App.
What I call in my prepared remarks, a bounce back.
If you remember the first half of the year.
Have come down versus the prior CFO quarters.
Reason for that one was a reduction in some of the smaller faster growing technology companies that we saw withdraw for all good reasons that we all know in the first half.
Gartner placed rather larger clients.
All verticals on interest really across Geos as well, whether it's Europe Asia or North America.
Got it okay. Thanks, guys.
Thank you.
Thank you I'm showing no further questions at this time I would now like to turn it back to Roger Sachs for closing remarks.
Thanks, everybody for joining us today, and we look forward to speaking.
See you again in early February.
This concludes today's conference call. Thank you for participating and you may now disconnect.
Sure.
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