Q1 2024 Genpact Ltd Earnings Call
Michelle: Good day, ladies and gentlemen. Welcome to the 2024 4th Quarter Genpact Ltd. Earnings Conference Call. My name is Michelle, and I'll be your conference moderator for today. At this time, all participants are in a listen-only mode.
Okay.
Good day, ladies and gentlemen, welcome to the 2024 first quarter Genpact Limited earnings Conference call. My name is Michelle and I'll be your conference moderator for today.
Michelle: At this time, all participants are listen only mode.
Michelle: 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 IRS 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.
Michelle: 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.
Krista Bessinger: A replay of the call will be archived and made available on the IR section of <unk> website.
Michelle: I would now like to turn the call over to Krista Bessinger head of Investor Relations at Genpact. Please proceed.
Krista Bessinger: Thank you, Michelle. Hi, everyone, and welcome to Genpact's Q1 2024 Earnings Conference Call. We hope you've had a chance to read our earnings press release posted in 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.
Krista Bessinger: Thank you Michelle Hi, everyone and welcome to Genpact Q1, 2024 earnings Conference call.
Krista Bessinger: We hope you've had a chance to read our earnings press release posted on the Investor Relations section of our website Genpact Dot com.
Krista Bessinger: Today, we have with us BK, Kalra, President and CEO, and Mike Wiener Chief Financial Officer.
Krista Bessinger: 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 today's 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.
Balkrishan Kalra: 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.
Krista Bessinger: 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 with 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 a transcript will be available on our website in a few hours. And with that, I'd like to turn it over to BK.
Krista Bessinger: Please note that during today's call, we will make forward looking statements, including statements about our business outlook strategies and long term goals.
BK: These comments are based on our plans predictions and expectations as of today, which may change over time.
Krista Bessinger: 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 with the SEC.
BK: 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.
BK: These non-GAAP measures are not intended to be a substitute for our GAAP results.
BK: And finally this call in its entirety is being webcast from our Investor Relations website, and an audio replay and a transcript will be available on our website in a few hours.
Krista Bessinger: And with that I'd like to turn it over to BK.
BK: Thank you Chris.
BK: Hello, everyone.
Balkrishan Kalra: Thank you, Krista. Hello, everyone. And thank you for joining us today. I'll start with a brief overview of Q1 performance and our updated outlook, and then hand the call over to Mike to take you through our financial performance in more detail. Q1 was a solid start to the year, with total revenues of $1.13 billion, up 4% year-over-year. This was above the high end of our guidance range, driven by early signs of improving execution and better than expected performance across both digital operations and data tech AI. Gross margin of 35% also exceeded expectations, reflecting Operational Efficiencies and Better-than-Expected Revenue Performance. Adjusted Operating Income Margin was 16.1%, in line with guidance reflecting investments in our top priority.
BK: Thank you for joining us today.
BK: I'll start with a brief overview of Q1 performance.
Mike: Update and outlook.
Balkrishan Kalra: Then hand, the call over to Mike to take you through our financial performance in more detail.
Balkrishan Kalra: Q1 was a solid start to the year with total revenues of $1.13 billion.
Mike: 4% year over year.
Balkrishan Kalra: This was above the high end of our guidance range driven by early signs of improving execution.
Balkrishan Kalra: Better than expected performance across both digital operations and Dave I think AI.
Balkrishan Kalra: Gross margin of 35% also exceeded expectations.
Balkrishan Kalra: Reflecting operational efficiencies.
Balkrishan Kalra: Better than expected revenue performance.
Balkrishan Kalra: Adjusted operating income margin was 16, 1%.
Balkrishan Kalra: In line with guidance, reflecting investments in our top priorities.
Balkrishan Kalra: In Q1, as most of you know, we established our 3 plus 1 execution framework, and it is driving promising early results. 3 plus 1 consists of three client-facing initiatives, partnerships, data tech AI, and simplification, and One Internal Facing Initiative, Client Zero. This is about establishing Genpact as our own best credential for AI-led transformation. Let me walk you through each one of them. First on Partnerships. In the first quarter, we significantly strengthened our partnership team and achieved tier one partnership status, the highest level with AWS, Salesforce, and Adobe. We have also joined forces with Microsoft. By combining Genpact's leadership in finance and accounting with Azure OpenAI technology, we are transforming finance organizations to be best-in-class. Leveraging Data and AI Solutions
Balkrishan Kalra: In Q1 as most of you know we established our T plus one execution framework and it is driving promising early results.
Balkrishan Kalra: Plus one consists of three client facing initiatives partnerships.
Balkrishan Kalra: And simplification.
Balkrishan Kalra: One internal facing any shape it climbs needle.
Balkrishan Kalra: This is about establishing genpact as our own base credentials led transformation.
Balkrishan Kalra: Let me walk you through each one of them.
Balkrishan Kalra: Second, on Data Tech AI, we are aggressively driving go-to-market engagement across data engineering, analytics, and AI with specific focus on Gen AI. This resulted in a significant increase in client conversations in Q1, and contributed to better than expected Data Tech AI revenue. We are working with clients to integrate GenAI into their core business processes. Gen AI is also serving as a driver of foundational work as we help enterprises build the broader data and system architecture that is a prerequisite for success in the AI world. Genpact plays a critical role.
Balkrishan Kalra: First on partnerships.
Balkrishan Kalra: In the first quarter, we significantly strengthened our partnership team and achieved tier one partnership status the highest level.
Balkrishan Kalra: Salesforce and Adobe.
Balkrishan Kalra: We have also joined forces with Microsoft.
Balkrishan Kalra: By combining <unk> leadership in finance and accounting.
Balkrishan Kalra: We will open the AI technology, we are transforming finance organization to best in class.
Balkrishan Kalra: Leveraging data and AI solutions.
Balkrishan Kalra: Second one data.
Balkrishan Kalra: We are aggressively driving go to market engagement across data engineering analytics and AI.
Balkrishan Kalra: With specific focus on gaming.
Balkrishan Kalra: This led to a significant increase in client conversations in Q1.
Balkrishan Kalra: Contributed to better than expected revenue.
Balkrishan Kalra: We are working with clients to integrate and Jamie are into their core business processes.
Balkrishan Kalra: Jimmy I is also serving as a drag what are foundational work as we help enterprises building broader daytime system architecture that is a prerequisite to succeed him.
Balkrishan Kalra: We bridge the gap between off-the-shelf solutions delivered by platform providers, bringing domain understanding at a keystroke level. This helps clients install an AI-first, end-to-end business process with underlying data and systems in their production environment. Clients choose us for five key reasons. One, Deep Domain Expertise. 2.
Balkrishan Kalra: Genpact plays a critical role.
Balkrishan Kalra: The gap between off the shelf solutions.
Balkrishan Kalra: We delivered by platform provider.
Balkrishan Kalra: Bringing domain understanding at a keystroke level.
Balkrishan Kalra: This helps clients install an AI first end to end business process with underlying data and systems into their production environments.
Balkrishan Kalra: End-to-end capabilities from strategy and design all the way to delivery and transformation. 3, strong partner ecosystem for Client Centricity. And five, full stack data technology and AI stack, including our prebuilt accelerator, the Cora platform. Let me give you a few examples.
Balkrishan Kalra: Clients choose us.
Balkrishan Kalra: <unk> Tvs.
Balkrishan Kalra: One.
Balkrishan Kalra: The deep domain expertise.
Balkrishan Kalra: <unk> end to end capabilities from Saturday and design, all the way to delivery and transformation.
Balkrishan Kalra: C C.
Balkrishan Kalra: Strong partner ecosystem.
Balkrishan Kalra: For client Centricity.
Balkrishan Kalra: And five full stack data technology.
Balkrishan Kalra: I see.
Balkrishan Kalra: Stack, including our prebuilt accelerators, the Qunar platform.
Balkrishan Kalra: Nova Data Center, a provider of state-of-the-art data centers, is using our AI solution to improve the functionality, integration, and operational efficiency of their Boston Dynamics bot robot. Using natural language processing, hardware integration with open AI interfaces, these robots have been given features such as AI-powered anomaly detection, Facial Recognition, License Plate Monitoring, and the ability to have human-like interaction. These features will allow their robots to further enhance security capabilities and monitor critical infrastructure. Or, in the case of Volkswagen Financial Services, we have integrated GenAI into the production system. This enables agents to manage servicing requests with significant efficiency. The Gen-AI translation skills have already been launched across three countries in Europe and are rapidly expanding.
Speaker Change: Let me give you a few examples.
Balkrishan Kalra: No one data center upper wind at our state of the art data centers is using our AI solution to improve the functionality integration and operational efficiency.
Balkrishan Kalra: Boston dynamic spot roadblocks.
Balkrishan Kalra: Using natural language processing hardware integration with opening I interfaces.
Balkrishan Kalra: These robots have been given features such as AI powered anomaly detection.
Balkrishan Kalra: I appreciate your recognition license plate monitoring and the ability to have human life and correction.
Balkrishan Kalra: These features allow their robots to further enhance security capabilities and monitor critical infrastructure.
Balkrishan Kalra: Autumn gets off focused banking and financial services.
Balkrishan Kalra: <unk> integrated Jimmy I into the production system.
Balkrishan Kalra: This enables agents to manage so everything requests with significant efficiency.
Balkrishan Kalra: Jimmy I translation skills on already launched across key countries in Europe and rapidly expanding.
Balkrishan Kalra: This solution has significantly enhanced agents' ability to manage account changes, loan disbursements, and address customer complaints while delivering a more personalized experience and improving customer satisfaction. We are also building responsible AI centers of excellence for clients. And this is a significant focus for us. I'll give you a couple examples.
Balkrishan Kalra: This solution has significantly enhanced agent's ability to manage their comp changes loan disbursements.
Balkrishan Kalra: Customer complaints.
Balkrishan Kalra: While delivering more personalized experience and improve customer satisfaction.
Balkrishan Kalra: We are also building responsible AI centers of excellence for clients and this is a significant focus for us I'll give you a couple examples.
Balkrishan Kalra: The finance organization of a major IT company wanted to automate a range of operational finance activities. We run a portion of their finance and accounting and other operational processes. Taking a page from our own best practices, we established a responsible AI center of excellence for them, bringing functional domain depth, supplementing it with data engineering capabilities, and enabling AI deployment. It is helping them put various use cases in production at speed. We also established an AI center of excellence for a major life insurance company.
Balkrishan Kalra: The finance organization of our major IP company wanted to automate a range of operational finance activities.
Balkrishan Kalra: We ran a portion of their finance and accounting and other operational processes taking.
Balkrishan Kalra: Taking a page from our own best practices, we established a responsible AI center of excellence for them, bringing functional domain back simply my opinion data engineering capabilities and enabling AI deployment.
Balkrishan Kalra: It's helping them put radius used cases in production at steep.
Balkrishan Kalra: We also established an excellent.
Balkrishan Kalra: Excellent for a major life insurance company.
Balkrishan Kalra: For this client, we are building a platform that uses advanced AI techniques that stitches together historical information, product specifications, and future projections to enable a range of decisions. The first use case will drive the end-to-end automation of pricing and renewal decisions using AI with humans in the loop. These are just a few of the examples.
Balkrishan Kalra: For this client we are building a platform that uses advanced AI techniques.
Balkrishan Kalra: Together historical information.
Balkrishan Kalra: Specifications and future predictions to enable range of decisions. The first use case will drive end to end automation of pricing and renewal decisions using AI with human in the loop.
Balkrishan Kalra: While it is still very early days, we are seeing increased momentum in Gen AI-related revenues and bookings, and believe we are in a strong position to partner with enterprises to drive competitive advantage moving forward. Third, on simplification as part of 3 plus 1. We simplified our sales and go-to-market leadership structure in Q1, moving from a highly matrixed organization to 12 units, which mirrors our client organization. This is strengthening execution and accountability with standardized scorecards, internal management reporting, sales, and post-sales activity, all supported by a new governance structure that tracks key performance indicators at the unit level.
Balkrishan Kalra: These are just few of the examples.
Balkrishan Kalra: While it is still really early days, we are seeing increased momentum in Jamie I related revenues and bookings.
Balkrishan Kalra: And believe we are in a strong position to partner with enterprises to drive competitive advantage moving forward.
Balkrishan Kalra: Uh huh.
Balkrishan Kalra: On simplification as part of T plus one.
Balkrishan Kalra: We simplified our sales and go to market leadership structure in Q1, moving from highly matrix organization to coiled units, which mirrors. Our client organization. This is strengthening execution and accountability with standardized scorecards internal management reporting feel them both sales activity all.
Balkrishan Kalra: Supported by new governance structure that tracks key performance indicator at the unit level.
Balkrishan Kalra: We are now in the process of simplifying a number of additional key elements that will allow us to scale more efficiently. And finally, the plus one in our 3 plus 1 execution framework is client zero. This is the work we are doing to establish Genpact as our own best credential for AI-led transformation. We have identified and are moving forward with more than 50 internal use cases across IT, finance, HR, legal, sales, and marketing to drive growth.
Balkrishan Kalra: We are now in the process of simplifying a number of additional key elements that will allow us to scale more efficiently.
Balkrishan Kalra: Okay.
Balkrishan Kalra: And finally, the last one they're not cheap with him.
Balkrishan Kalra: Fee plus one execution framework as clients veto.
Balkrishan Kalra: This is the work we are doing to establish Genpact has our own best credential for AI led transformation.
Balkrishan Kalra: We have identified and are moving forward with more than 15, vanilla use cases across IP finance HR legal sales and marketing to drive growth.
Balkrishan Kalra: Improve client-employee satisfaction, reduce costs, and improve cash flow, all by leveraging the same AI tools we use on behalf of our clients. It's early days here as well, but we are excited by the progress we are making. Now turning to our guidance. Mike will go through the details, but I wanted to cover a few important points up front.
Balkrishan Kalra: Improve client employee satisfaction.
Balkrishan Kalra: Reduce cost and improve cash flow all by leveraging the same AI tools, we use on behalf of our clients.
Balkrishan Kalra: It's early days here as well, but we are excited by the progress we are making.
Speaker Change: Now turning to our guidance, Mike will go through the details, but I wanted to cover a few important points upfront.
Balkrishan Kalra: As I mentioned earlier, we are seeing early signs of improving execution with better than expected results for Q1. As a result, we are increasing our full-year revenue guidance by 50 basis points, to 2.5% to 3.5% growth on an as-reported basis, up from 2% to 3% previously. However, our outlook does not assume any improvement in the macro buying environment.
Balkrishan Kalra: As I mentioned earlier, we have seen early signs of improving execution with better than expected that those four quarter. One and then as noted we are increasing our full year revenue guidance by 50 basis points to two 5% to three 5% growth on a reported basis up from two 3% previously.
Balkrishan Kalra: Our outlook does not assume any improvement in the macro buying environment. We are simply flowing through the revenue upside from Q1 of approximately $20 million at midpoint of the range to the full year we.
Balkrishan Kalra: We are simply flowing through the revenue upside from Q1 of approximately 20 million at the midpoint of the range through the full year. We are also increasing our gross margin outlook for the full year by 30 basis points to 35.3%, up from 35% previously, reflecting our performance in Q1. Our AOI margin outlook remains unchanged at 17% for the full year, as we continue to invest in our top priorities, partnerships, and Gen AI, to drive accelerating long-term growth.
Balkrishan Kalra: We are also increasing our gross margin outlook for the full year by 30 basis points to 35, 3% up from 35% previously.
Balkrishan Kalra: <unk> outperformance in Q1.
Balkrishan Kalra: Our Oi margin outlook there.
Balkrishan Kalra: Changed at 17% for the full year.
Balkrishan Kalra: As we continue to invest in our top priorities partnerships and Jamie I.
Balkrishan Kalra: To drive accelerating long term growth in closing Q1 was a solid start to the year with revenue and gross margin above the high end of our guidance range, reflecting early signs of improving execution.
Balkrishan Kalra: In closing, Q1 was a solid start to the year with revenue and gross margin above the high end of our guidance range, reflecting early signs of improving execution. We are excited by the progress we are making and believe our 3 plus 1 execution framework will be a key ingredient in putting us on the path to reach our full potential. With that, let me turn the call over to Mike.
Mike: We are excited by the progress we are making.
Mike: And believe our T plus one execution framework will be key ingredient and putting us on path to reach our full potential.
Balkrishan Kalra: With that let me turn the call over to Mike.
Michael Hal Weiner: Thank you, BK, and good afternoon, everybody. Today, I'll review our first quarter results and then provide you with our thoughts on our second quarter and full year 2024 outlook. Beginning with our first quarter results, while we continue to experience pressure on our discretionary short-cycled work, demand for our long-term annuity-based services continues to be strong. Specifically, our pipeline achieved record levels fueled by strong inflows.
Mike: Thank you BJ and good afternoon, everyone. Today I'll review, our first quarter results and then provide you with our thoughts on our second quarter and full year 2024 outlook beginning with our first quarter results. While we continue to experience pressure in our discretionary short cycled work demand for our long term annuity based services continues to be strong.
Michael Hal Weiner: We booked three large deals in the quarter. While this was lower than the number in the first quarter of last year, our overall total booking level was near the level we booked in the same period last year. We also booked 30 new logos in the quarter with an average TCV of approximately $4.5 million, compared to 17 new logos with an average TCV of approximately $5.6 million last year. Sole source deals represented approximately 40% of bookings, and win rates remained elevated at 62%.
Michael Hal Weiner: Specifically, our pipeline achieved record levels fueled by strong inflows, we booked three large deals in the quarter. While this was lower than the number in the first quarter of last year. Our overall total bookings level was near the level. We booked in the same period last year. We also booked 30, new logos in the quarter with an average TCE rate.
Michael Hal Weiner: Approximately $4 5 million compared to 17, new logos with an average <unk> of approximately $5 6 million last year sole source deals represented approximately 40% of bookings and win rates remain elevated at 62%.
Michael Hal Weiner: Total revenue of $1.13 billion was up 4% year-over-year, both in an as-reported and constant currency basis. This performance was above our expectations, reflecting early signs of improved execution and better-than-expected performance across digital operations, data tech, and AI, and all segments. As noted in our press release, we made an enhancement to our Data Tech and AI and Digital Operations revenue breakout to more accurately reflect revenue from certain solutions. We have also provided historical comparison results in our press release and in our financial fact sheet, which were posted prior to the call. The results I will provide for Data Tech and AI and Digital Operations below will leverage the prior methodology so that you can accurately compare the results to the guide we provided on our year-end call.
Michael Hal Weiner: Revenue of 1.13 billion was up 4% year over year bolt on an as reported and constant currency basis. This performance was above our expectations, reflecting early signs of improved execution and better than expected performance across digital operations data tech in AI and all segments as.
Michael Hal Weiner: As noted in our press release, we made enhancements to our data tech and AI and digital operations revenue breakout for more accurate to more accurately reflect revenue from certain solutions. We have also provided historical comparison results in our press release and in our financial Factsheet, which were posted prior to the call. The results I will provide for.
Michael Hal Weiner: Data Tech and AI and digital operations below will leverage the prior methodology. So that you can accurately compare the results to the guide we provided on our year end call.
Michael Hal Weiner: Data Tech and AI Revenue, which represents 44% of total revenue, increased 3% year over year on an as reported in constant currency basis. Performance was largely driven by service lines in finance and accounting, supply chain, and risk. Digital operations revenue, which represents 56% of total revenue, increased 4% year-over-year on an as-reported basis and 5% on a constant currency basis, primarily reflecting deal ramps related to last year's large booking wins. Outcome and consumption-based models expanded to approximately 19% of first-quarter revenue, compared to 13% of total revenue in the first quarter last year.
Michael Hal Weiner: <unk> revenue, which represents 44% of total revenue increased 3% year over year on an as reported and constant currency basis.
Michael Hal Weiner: Performance was largely driven by service lines in finance and accounting supply chain and risk digital operations revenue, which represents 56% of total revenue increased 4% year over year on an as reported and 5% on a constant currency basis, primarily reflecting deal ramps related to last year's.
Michael Hal Weiner: A large booking wins outcome and consumption based models expanded to approximately 19% of first quarter revenue compared to 13% of total revenue in the first quarter last year revenue from priority accounts grew 4% year over year and remained at 63% of global revenue with 43% of <unk>.
Michael Hal Weiner: Revenue from priority accounts grew 4% year-over-year and remained at 63% of global revenue, with 43% of first-quarter bookings from priority accounts. From a segment perspective, financial services increased 3% year-over-year, primarily driven by a ramp of large deals and growth in financial crimes, partially offset by continuing pressure around client discretionary tax spend. Consumer and healthcare increased 5% year-over-year due to large deal ramps and growth in supply chain engagement. High tech and manufacturing increased 4% year over year, primarily driven by a ramp of new logos in both digital operations and data tech and AI, moderately offset by a partial de-scoping of a high tech priority client noted last year.
Michael Hal Weiner: First quarter bookings from priority accounts from a segment perspective financial services increased 3% year over year, primarily driven by a ramp of large deals and growth in financial crimes, partially offset by continued pressure around client discretionary tax spend consumer and health care increased 5% year over year due to the large deal.
Michael Hal Weiner: Ramps and growth in supply chain engagements high tech and manufacturing increased 4% year over year, primarily driven by ramp of new logos in both digital operations and data Tech and AI moderately offset by the partial D. Scoping of our high Tech priority client noted last year.
Michael Hal Weiner: Adjusted operating income margin was 16.1%, down 30 basis points year over year, primarily due to increased investments to support growth. Gross margin for the first quarter was 35%, up 100 basis points year over year, primarily driven by less upfront large deal investments and lower severance costs. As a reminder, severance costs were elevated last year from workforce reductions in our short-cycled advisory work.
Michael Hal Weiner: Adjusted operating income margin was 16, 1% down 30 basis points year over year, primarily due to increased investments to support growth gross margin for the first quarter was 35% up 100 basis points year over year, primarily driven by less upfront large deal investments and lower severance costs.
Michael Hal Weiner: As a reminder, severance costs were elevated last year from workforce reductions in our short cycled advisory work.
Michael Hal Weiner: SG&A's percentage of revenue increased 90 basis points year-over-year to 20.8%. The year-over-year increase was largely due to higher investments to support growth that I mentioned earlier. Note, we also had lower stock comp expense, which does not impact our adjusted operating income margin. Our effective tax rate was 25.2% compared to 23.4% during the same period last year.
Michael Hal Weiner: SG&A as a percentage of revenue increased 90 basis points year over year to 28% the year over year increase was largely due to higher investments to support growth that I mentioned earlier.
Michael Hal Weiner: We also had lower stock comp expense, which does not impact our adjusted operating income margin. Our effective tax rate was 25, 2% compared to 23, 4%. During the same period last year, primarily driven by lower tax deductions related to stock based compensation and the implementation of pillar two global minimum tax rates.
Michael Hal Weiner: Primarily driven by lower tax deductions related to stock-based compensation and the implementation of Pillar 2 global minimum tax rate, GAAP net income was $117 million, up 10% year-over-year. GAAP diluted EPS, the equivalent of $0.64, up 12% year-over-year. Adjusted diluted EPS of $0.73, up 7% year-over-year, and outpaced revenue growth for the quarter. The increase was primarily driven by the impact of a lower outstanding share count of $0.02, higher adjusted operating income of $0.01, and FX remeasurement gain compared to the same period last year of $0.01, and lower taxes of $0.01.
Michael Hal Weiner: GAAP net income was $117 million up 10% year over year GAAP diluted EPS equivalent of 64 up 12% year over year adjusted diluted EPS of <unk> 73 up 7% year over year and outpaced revenue growth for the quarter. The increase was primarily driven by.
Michael Hal Weiner: The impact of lower outstanding share count of <unk> higher adjusted operating income of one cent in FX remeasurement gain compared to the same period last year of <unk> and lower taxes of one set.
Michael Hal Weiner: Compared to the first quarter of 2023, we grew the number of relationships with annual revenue greater than 5 million from 175 to 187. Additionally, clients with annual revenue greater than 25 million expanded from 36 to 40, and clients with approximately 100 million in revenue remained at five.
Michael Hal Weiner: Compared to the first quarter of 2023, we grew the number of relationships with annual revenue greater than $5 million from 175 to 187. Additionally, clients with annual revenue greater than $25 million expanded from 36% to 40 and clients with approximately $100 million of revenue remained at five.
Michael Hal Weiner: Turning to cash flow and the balance sheet, during the quarter, we utilized $26 million of cash from operations, compared to utilizing $34 million during the same period last year. Days sales outstanding expanded to 91 days from 83 days in 2023 due to collection delays and higher payment terms in new accounts.
Michael Hal Weiner: Turning to cash on balance sheet during the quarter, we utilized $26 million of cash from operations compared to utilizing $34 million. During the same period last year days sales outstanding expanded to 91 days from 83 days in 2023 due to collection delays and higher payment terms in new accounts, the overall credit quality of our poor.
Michael Hal Weiner: The overall credit quality of our portfolio continues to be very strong. Cash and cash equivalents totaled $478 million compared to $584 million at the end of the fourth quarter of 2023, reflecting the return of $57 million to shareholders and the annual incentive compensation payout that occurred in the first quarter. At the end of the quarter, our net debt to EBITDA ratio for the prior four quarters was 1.1 times, in line with our preferred 1 to 2 times range.
Michael Hal Weiner: Polio continues to be very strong cash and cash equivalents totaled 700 $478 million compared to $584 million at the end of the fourth quarter of 2023, reflecting the return of $57 million to shareholders and annual incentive compensation payouts that occurred in the first quarter.
Michael Hal Weiner: At the end of the quarter, our net debt to EBITDA ratio for the prior four quarters was $1. One time in line with our preferred one to two times range with Undrawn debt capacity at our existing cash balances, we have ample flexibility to pursue growth opportunities and execute on our capital allocation strategy during the quarter, we repurchased approximately.
Michael Hal Weiner: With undrawn debt capacity and our existing cash balances, we have ample flexibility to pursue growth opportunities and execute on our capital allocation strategy. During the quarter, we repurchased approximately 865,000 shares at a total cost of $30 million and at a weighted average share price of $34.67 per share.
Michael Hal Weiner: <unk> 865000 shares at a total cost of $30 million and we're at a weighted average share price of $34 67 per share capital expenditures as a percentage of revenue equated to approximately one 8% in line with our expectations, we remain committed to returning capital to shareholders.
Michael Hal Weiner: Capital expenditures as a percentage of revenue equated to approximately 1.8%, in line with our expectations. We remain committed to returning capital to shareholders through a regular cadence of buybacks and quarterly dividends. We continue to plan to pay out approximately 50% of our operating cash flow to shareholders during the year, including a minimum of 30% of our cash flow from operations for share repurchases. Before I provide an update on our outlook, here are some quick stats on nutrition.
Michael Hal Weiner: Through a regular cadence of buybacks and quarterly dividends, we continue to plan to pay out approximately 50% of our operating cash flow to shareholders during the year, including a minimum of 30% of our cash flow from operations for share repurchases.
Michael Hal Weiner: I'll provide an update on our outlook for some quick stats on nutrition.
Michael Hal Weiner: Our attrition rate for the quarter was 23%, in line with fourth-quarter levels and the low end of our historic range. However, adjusted for involuntary attrition and employees with less than three months of service, our attrition rate was 17% during the quarter.
Michael Hal Weiner: Our attrition rate for the quarter was 23% in line with fourth quarter levels and the low end of our historic range adjusted for involuntary attrition and employees with less than three months of service our attrition was 17% during the quarter.
Michael Hal Weiner: Finally, let me update you on our full year 2024 outlook and our second quarter guidance. Genpact's outlook for the full year 2024 is as follows. Total revenue in the range of $4.59 billion to $4.63 billion represents year-over-year growth of approximately two and a half to three and a half percent, as reported, up from the prior guidance of two to three percent. This includes digital operations revenue growth of approximately 3.6 percent year-over-year and data tech and AI revenue growth of approximately 2.3 percent year-over-year at the midpoint of the range, as reported, compared to the previous midpoint of 3.1 percent and 1.7 percent, respectively, on an updated classification basis.
Speaker Change: Finally, let me update you on our full year 2020 for outlook and our second quarter guidance.
Michael Hal Weiner: <unk> outlook for full year 2024 is as follows total revenue in the range of $4 five 9 billion to $4 63 billion represents year over year growth of approximately two and a half to three 5% as reported up from the prior guidance of 2% to 3%. This includes digital operations revenue growth of approximately.
Michael Hal Weiner: <unk>, three 6% year over year and data Tech and AI revenue growth of approximately two 3% year over year at the midpoint of the range as reported compared to the previous midpoint of three 1% and one 7% respectively on an updated classification basis.
Michael Hal Weiner: Full year gross margin of approximately 35%, full year adjusted income from operations margin of approximately 17%, and full year adjusted EPS in the range of $3.01 to $3.04. This represents a year-over-year growth of 1% to 2% and includes higher adjusted operating income of $0.09, a positive impact related to a lower share count of $0.06, partially offset by the impact of a higher expected tax rate of $0.04, higher interest expense of $0.04, and the negative year-over-year FX impact of $0.02 due to the $4 million measurement gain recorded last year.
Michael Hal Weiner: Full year gross margin of approximately 35% full year adjusted income from operation margin of approximately 17% and full year adjusted EPS in the range of $3 one to $3 four.
Michael Hal Weiner: This represents a year over year growth of 1% to 2% and includes higher adjusted operating income up nine cents positive impact related to lower share count of <unk>, partially offset by the impact of higher expected tax rate of <unk> higher interest expense at <unk> and the negative year over year FX impact of <unk>.
Michael Hal Weiner: Due to the $4 million Remeasurement gain recorded last year.
Michael Hal Weiner: As we've communicated in the past, to the extent we're able to deliver revenue upside over the course of the year, our bias will be to reinvest a portion of that upside back in the business to drive future revenue growth. Our 2024 effective tax rate continues to be in the expected range of 24.5% compared to 23.4% reported for full year 2023. The increase reflects the implementation of new Pillar 2 global minimum tax rates as well as lower year-over-year tax benefits related to stock-based compensation.
Michael Hal Weiner: As we've communicated in the past to the extent, we're able to deliver revenue upside over the course of the year, our bias will be to reinvest a portion of that upside back into the business to drive future revenue growth.
Michael Hal Weiner: Our 2024 effective tax rate continues to be in the expected of 24, 5% compared to 23, 4% reported for full year 2023. The increase reflects the implementation of new pillar two global minimum tax rates as well was lower year over year tax benefits related to stock based.
Krista Bessinger: We continue to expect cash flow from operations to be approximately $500 million. Capital expenditures as a percentage of revenue continue to be expected to be approximately 1.5% to 2% in 2024, which includes investments related to internal system upgrades. Our outlook for the second quarter of 2024 is as follows. Total revenue in the range of $1.143 billion to $1.148 billion, representing a year-over-year growth of approximately 3.4% to 3.8%, as reported. This includes digital operations revenue growth of approximately 5.4% year-over-year and data tech and AI revenue growth of 1.6% year-over-year at the midpoint of the range as reported.
Michael Hal Weiner: We continue to expect cash flow from operations to be approximately $500 million capital.
Krista Bessinger: Capital expenditures as a percentage of revenue.
Krista Bessinger: Continues to continues to be expected to be approximately 1.5% to 2% in 2024, which includes investments related to internal system upgrades at our outlook for the second quarter 2024 is as follows total revenue in the range of $1 143 billion to $1 148 billion, representing a year over year growth.
Krista Bessinger: ASP of approximately three four to three 8% as reported this includes digital operations revenue growth of approximately five 4% year over year and data checking AI revenue growth of one 6% year over year at the midpoint of the range as reported.
Krista Bessinger: Gross margin is expected to be approximately 34.8%, down 20 basis points sequentially due to the alignment of our annual compensation refresh of employees in 2Q. Adjusted operating income margin is expected to be 16.5%. With that, I will turn the call back over to Krista.
Krista Bessinger: Gross margin is expected to be approximately 34, 8% down 20 basis points sequentially and the alignment of.
Krista Bessinger: Due to the alignment of our annual compensation refresh of employees in <unk> adjusted operating.
Krista Bessinger: Operating income margin is expected to be 16, 5% with that let me turn the call back over to Krista.
Krista Bessinger: Great, thank you, Mike. We would now like to open the call for questions. Michelle, could you please give the instructions? Thank you.
Krista Bessinger: Okay.
Krista Bessinger: Great. Thank you, Mike we would now like to open the call for questions. Michelle could you. Please give the instructions.
Puneet Jain: Thank you. If you would like to ask a question, please press Star 11. If your question has been answered and you would like to remove yourself from the queue, please press Star 11 again. One moment for questions. And our first question comes from Puneet Jain with J.P. Morgan. Your line is open.
Michelle: Thank you if you'd like to ask a question. Please press star one one.
Puneet Jain: If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Puneet Jain: One moment for questions.
Puneet Jain: And our first question comes from Puneet Jain with Jpmorgan. Your line is open.
Puneet Jain: Hi, This is neena on for Puneet congratulations on the results of course, it's still early but now that you guys are kind of seeing some of the benefits of your new strategies such as three three.
Puneet Jain: Three plus one payoff on the P&L. It is too soon to start thinking about longer term revenue targets.
Puneet Jain: I think we're currently modeling you guys are high single digits, but I know the previous target with closer to low double so just I appreciate any color here.
Michael Hal Weiner: Yeah, so it's Michael. Let me kick this off and I'll turn it over to BK. Right now, we're really focused on our execution in 2024. So at this point now, I think we're comfortable with the ranges we've provided for this year. And as we get additional clarity as we move forward in the year, we'll provide additional color on a going forward basis.
Puneet Jain: Yes, it's Michael May I'll kick this off and I'll turn it over to <unk> right now, we're really focused on our execution in 2024.
Michael Hal Weiner: So at this point now I think we're comfortable with the ranges we provided for this year and as we get additional clarity as we move forward in the year, we'll provide additional color on a go forward basis.
Balkrishan Kalra: Yeah, and if I may add, we don't see any change in the macro environment. And in our model, the macro environment is bigger than where it was in the back half of last year.
BK: Yeah, and if I may and we don't see any change in the macro environment.
Balkrishan Kalra: And.
Balkrishan Kalra: Our module and macro environment is more big Bang there it was the back half of last year.
Balkrishan Kalra: But we are in twos with our early execution, and we'll continue to update as we go along. Great. Thank you. Thank you. Our next question comes from Bradley Clark with BMO.
Balkrishan Kalra: But we had them towards with our.
Bradley Clark: Early execution, and we will continue to update as we go along.
Bradley Clark: Great. Thank you.
Balkrishan Kalra: and where you're seeing early traction with clients. So, Brad, I'll make three comments.
Bradley Clark: Thank you. Our next question comes from Bradley Clark with BMO. Your line is open.
Balkrishan Kalra: Thank you. Our next question comes from Bradley Clark with BMO. Your line is open.
Bradley Clark: Hi, This is Greg Clark on for Keith Bachman. Thanks for taking my question I wanted to hone in on the comment on the NII.
Bradley Clark: Client I think you said.
Speaker Change: Better than expected.
Bradley Clark: Okay bookings.
Bradley Clark: Bookings in the quarter is there any other color that you can provide to help shape.
Speaker Change: That's the debate.
Bradley Clark: Kim traction with clients.
Balkrishan Kalra: One, obviously, in these early days, not just for us, for our clients, or overall in the industry, but in these early days, we see a lot of interest from clients relative to many of the technology waves that we saw in the past. Point number two, I think we are therefore seeing enhanced conversations. And a number of those conversations convert into bookings and revenue, and a number of those conversations don't convert, they're just tears and excitement and, you know, possibilities that we can harness and that we need to kind of handhold our clients as we go along.
Bradley Clark: So granularity I would say a key comments.
Balkrishan Kalra: Obviously these are early days.
Balkrishan Kalra: Just for us for our clients our overall in being the screen, but in the early days.
Balkrishan Kalra: We see a lot of interest from clients relative to many of the technology ramps that we saw in the past.
Balkrishan Kalra: Point number two I think.
Balkrishan Kalra: We are.
Balkrishan Kalra: Seeing.
Balkrishan Kalra: Therefore, enhanced commutations and a number of those conversations converting to bookings and revenue and number of those conversations don't convert big disappear then excitement and now are you.
Balkrishan Kalra: One possibility is that.
Balkrishan Kalra: That became a hot mess M that we need to kind of a handful of clients.
Balkrishan Kalra: And last point, I think what we have seen in bookings and revenues is still a very, very small portion. So we have set up our systems to see that on a consistent basis. And as it solidifies, as it progresses, at some point in time, we will share more light on that.
Balkrishan Kalra: We go along.
Balkrishan Kalra: And last point I think what we have seen in booking and revenues is still a very very small portion so.
Balkrishan Kalra: So we have set up our systems to see.
Balkrishan Kalra: See that on a consistent basis.
Balkrishan Kalra: Solidifies.
Balkrishan Kalra: Progress is at some point in time, we will share more light on that yeah. I mean, just elaborate on those comments strength, while we're not providing any quantitative benefit quanta.
Unknown Executive: Yeah. PK, if I may just elaborate on some of those comments, right? While we're not providing any quantitative benefit to the question, I think it's very interesting, right? Today, we sit between the client and the hyper-scaling large enterprise technology companies, and the vast majority of all of our client conversations are, "How can we help in the middle of those two things?" And we think that's going to be a real driver for us for future growth.
Unknown Executive: The question I think it's very interesting, whereas today, we sit between the client and the Hyperscale and large enterprise technology companies and the vast majority of all of our client conversations are how can we help them in the middle of those two things and we think that's going to be a real driver for us for future growth.
Unknown Executive: Okay.
Speaker Change: Great. Thank you.
Margaret Marie Niesen Nolan: Thank you. Our next question comes from Maggie Nolan with William Blair. Your line is open.
Unknown Executive: Thank you. Our next question comes from Maggie Nolan with William Blair. Your line is open.
Margaret Marie Niesen Nolan: Hi, thank you. Can you explain for me in a little bit more detail where the outperformance came from in Q1? Is there anything about that that's one-time or non-recurring or timing considerations that we should keep in mind as we think about how Q2 might shape up in comparison to Q1?
Margaret Marie Niesen Nolan: Okay.
Margaret Marie Niesen Nolan: Hi, Thank you can you dissect for me and a little bit more detail, where the outperformance came from in Q1 is there anything about that that one time or nonrecurring or timing considerations that we should keep in mind as we think about how you might shape up in comparison to Q1.
Michael Hal Weiner: No, I think it's from that perspective. It's Mike answering the question. Hey Maggie, how are you? So in the first quarter, right, if you think about our business, our two revenue disaggregation units, our digital operations revenue, right, it was with better expected execution, particularly regarding the deal ramps of the large deals that we implemented in the third and fourth quarters of last year, and we continue to execute really well on that. As far as our data tech and AI business versus our expectations, project work, particularly in finance and accounting and supply chain, really drove a lot of that outperformance.
Margaret Marie Niesen Nolan: No I think it's from that perspective, it's Mike answering the question Hey, Maggie how are you.
Michael Hal Weiner: So in the first quarter, Ryan if you think about our business. Our two revenue disaggregation units, our digital operations revenue right. It was with better expected execution, particularly regarding the deal ramps of the large deals that we implemented in the third and fourth quarter of last year, and we continue to execute really well on that as far as our data tech and AI.
Michael Hal Weiner: <unk> versus our expectations project work, particularly in finance and accounting supply chain really drove a lot of that outperformance.
Balkrishan Kalra: And if I can add, Mike, look where it is all coming from in the early days. It is all about the C++1 framework, Maggie. So, take an example of partnerships. In partnerships, as one of the key attributes in C++1, we invested in really strong talent, including a leader and a team in there, and started engaging with technology partners. And as we see in more detail, the inflows are roughly 2.5 to 3x relative to the corresponding period last year.
Speaker Change: And if I can add my.
Balkrishan Kalra: Look.
Balkrishan Kalra: It is all coming primarily days is all about our T plus one framework Maggie.
Balkrishan Kalra: An example of partnerships and partnerships as one of the key attributes and three plus one.
Balkrishan Kalra: <unk> reinvested in.
Balkrishan Kalra: Really strong talent, including a leader in MMP members.
Balkrishan Kalra: Started engaging with a.
Balkrishan Kalra: Technology partners and what we see in <unk>.
Balkrishan Kalra: More detail on <unk>.
Balkrishan Kalra: Flows are roughly two and a half to three X.
Balkrishan Kalra: Relative to the corresponding period last year.
Balkrishan Kalra: Or if I go into, like Mike was saying, data tech and AI, how our employees are also embracing this pivot; there are more and more conversations happening with clients about data and AI. And some of it, you've already seen our results in data tech and AI. So clearly, the investments that we are making, and the pivot that we are embracing, are showing some early results as well as the cadence of governance and execution that we have put in place.
Balkrishan Kalra: Or if I go into like Micros, saying data take AI.
Balkrishan Kalra: How our employees are also embracing the spirit there are more and more conversations happening with the clients on <unk>.
Balkrishan Kalra: And some of it you already seem out of Arizona and Nevada. So.
Balkrishan Kalra: So clearly being restaurants that we are making the pivot that we are embracing is showing some really those as well.
Balkrishan Kalra: The cadence of fault governments and execution that we have put in place.
Margaret Marie Niesen Nolan: Thank you. That's great to hear. When you think about all those changes that you are making within the organization, now that some of that is underway, particularly on the sales team, can you talk a little bit about, you know, reception of those changes, and culture? Have there been any changes in voluntary attrition within the group? Thanks for taking my question.
Speaker Change: Thank you that's great to hear.
Margaret Marie Niesen Nolan: When you think about all of those changes that you are making within the organization now that some of that is underway.
Margaret Marie Niesen Nolan: Early on the sales team.
Margaret Marie Niesen Nolan: Can you talk a little bit about.
Margaret Marie Niesen Nolan: <unk> of those changes culture have there been any changes in voluntary attrition within the group.
Balkrishan Kalra: Yeah, thanks, Maggie. And what I can tell you is that, overall, there is a level of excitement in the team. Excitement because everybody is clamoring to deliver better results, point number one, and they see their efforts pay off, though I think we all are aware that they are a little bit more coming in from easier comps. I would say that Two, I think with these routines and rituals, and there are a few that are getting etched for now and in the future, those routines and rituals are yielding results, and a number of our colleagues are seeing the results of their hard work pay off.
Margaret Marie Niesen Nolan: For taking my question.
Speaker Change: Yeah. Thanks Maggie.
Balkrishan Kalra: And what I can tell you is that overall.
Balkrishan Kalra: There is a level of excitement in the team.
Balkrishan Kalra: Excitement because everybody is clamoring to deliver better results by number one member fee. We have efforts pay off though I think we all are aware that they are a little bit more coming in from easier comps I would pay back.
Balkrishan Kalra: Do I think we'd be beans, and withdrawals and there are a few who bring with them the tools that are getting <unk>.
Balkrishan Kalra: For now and in the future.
Balkrishan Kalra: Those were being the metro the building with those in a number of our colleagues.
Balkrishan Kalra: The results of their hard work pay off.
Balkrishan Kalra: So I would see that I would say that a lot of there's a lot of excitement.
Speaker Change: I can.
Balkrishan Kalra: So I would say that there's a lot of excitement that I can feel in a palpable manner. We also hired north of 50 leaders at a senior level in the last 90 days, or in the first quarter, more focused on data technology, AI, also in partnerships, and all of that support is enabling our existing staff to progress further with clients.
Balkrishan Kalra: In a particular manner, we also hired them nor talk with PD, though that a senior level.
Balkrishan Kalra: In last 90.
Balkrishan Kalra: 90 days not in first quarter and more focus on data and technology.
Balkrishan Kalra: So in partnerships and all of that support usually may bring all of our.
Balkrishan Kalra: Existing staff to progress further with clients.
Speaker Change: Thank you.
Ryan Potter: Thank you. Our next question comes from Ryan Potter with Citigroup. Your line is open.
Balkrishan Kalra: Thank you. Our next question comes from Ryan Potter with Citigroup. Your line is open.
Ryan Potter: Hey, thanks for taking my question. It was nice to see the solid execution and the return to sequential growth that's implied in the 2Q outlook you have here. I was wondering if you could comment on the visibility that you have into this 2Q outcome for the remainder of the year. Are you expecting sequential growth for the remainder of the year past 2Q? And what kind of assumptions have you made around things like discretionary spending, which I know sometimes can have more of an impact on data?
Ryan Potter: Hey, Thanks for taking my question. It was nice to see the solid execution and the return to sequential growth that's implied in the outlook out there.
Ryan Potter: I was wondering if you could comment on the visibility you have into that <unk> all come in the remainder of the year are you expecting sequential growth in the remainder of the year past with you and what kind of assumptions have you made around things like discretionary spending, which I know, sometimes it's todd won't impact on debt that can AI.
Michael Hal Weiner: Yeah, so this is Mike. Let me kind of kick that off, and I'll turn it over to BK. We're not really looking to provide additional color on really how we're seeing it out greater than this year in 2024. But what I'll talk about is really our second half in terms of what our guidance is really based on, particularly with regard to revenue, which I think you're alluding to. It's a prudent guide, to be completely frank with you, right?
Ryan Potter: Yeah. So this is Mike let me kind of kicked it off and I'll turn it over to <unk>.
Michael Hal Weiner: We're not really we're looking to provide additional color on really how we're seeing it out greater than this year in 2024, but what I'll talk about is really our second half in terms of what what our guidance is really based on particularly with regard to revenue, which I think you are alluding to.
Michael Hal Weiner: We have not anticipated any real change in the macro environment, particularly from the second half of 2023 and through first quarter 24, right? We have the large deals that we did flowing through, and yes, arguably off of a poorer comp, but that's really what's reflected in our second half revenue round. Yeah.
Michael Hal Weiner: It's a prudent guide to be completely Frank with you right. We have not anticipated any real change in the macro environment, particularly from the second half of 2023 and through the first quarter 'twenty four rent we have the large deals that we did flowing through.
Michael Hal Weiner: Yes, our arguably off of a poor comp, but that's really what's reflected in our second half revenue ramp.
Balkrishan Kalra: And I think the only add that I have, Ryan, is for the second quarter guide, clearly sitting on May 9th, we have better visibility into what will happen in the next 55 days. And on the second half, Mike, in any case, responded to that question.
Speaker Change: And I think the only add that I have Ryan is for the second quarter Guide.
Speaker Change: Clearly sitting on my mind, we have greater visibility to what will happen in mix.
Balkrishan Kalra: After five days.
Balkrishan Kalra: Hum.
Balkrishan Kalra: Okay.
Balkrishan Kalra: On the second half, Mike and maybe it gets responded to that question.
Ryan Potter: Got it. And then just quickly on productivity commitments from clients, can you provide some more color, I guess, on trends you've been seeing there? Like, has the macro or increased interest in AI led to higher levels of productivity than in the past in your core services?
Balkrishan Kalra: Got it and then just quickly on productivity commitments from clients to provide some more color I guess on trends you've been seeing there like has the macro or increased interest in.
Ryan Potter: The clients asking for higher and higher levels of productivity than in the past in your core services.
Balkrishan Kalra: So, there is a lot of interest from clients in AI, but there has not been any increase in productivity expectations that we see in all of our client conversations, in renewals, in new signings, and the reality is, Ryan, that we always baked in a lot of productivity based on AI tools. Now, yes, then AI is new. What we see is an interest from clients to learn more about the how. That certainly has changed, but not the quantitative side of how. Yeah, we've also seen that we talked about our prepared remarks.
Speaker Change: So there is a lot of interest from clients on the AI, but there has not been any increase.
Balkrishan Kalra: In productivity expectations on that we see in our all of our client conversations.
Balkrishan Kalra: Those are in new signings and.
Balkrishan Kalra: And reality is Ryan that we always break them.
Balkrishan Kalra: A lot of fall productivity based on AI tools.
Balkrishan Kalra: I knew what we see is interest from clients to learn more about the hull that Turkey has changed but not be quantitative excited on pulse.
Unknown Executive: We've also seen, and we talked about in our prepared remarks, a nice amount of growth in our turn-up commercial models, right, moving away from FTU-related pricing, which all supports the implementation of a lot of this new technology.
Balkrishan Kalra: And we've also seen and we've talked about in our prepared remarks, a nice amount of growth in alternative commercial models right moving away from FTE related pricing, which all supports the implementation of a lot of this new technology.
Speaker Change: Got it thanks.
Bryan C. Bergin: Thank you. Our next question comes from Brian Bergin with TD Cowan. Your line is open.
Unknown Executive: Yeah.
Unknown Executive: Thank you. Our next question comes from Bryan Bergin with TD Cowen Your line is open.
Bryan C. Bergin: Hey guys, good afternoon. Thank you.
Bryan C. Bergin: Hey, guys. Good afternoon. Thank you.
Bryan C. Bergin: I wanted to ask a follow up question on the go to market changes that Maggie specifically are the changes to your sales and go to market organizations are those fully implemented as you exited the first quarter or do you have incremental kind of changes that you're now pursuing in <unk> and as you go through the balance of this year.
Balkrishan Kalra: I wanted to ask a follow-up question on the go-to-market changes that Maggie had asked. Specifically, are the changes to your sales and go-to-market organizations fully implemented as you exited the first quarter? Or do you have the kind of changes that you're now pursuing in 2Q and as you go through the balance of this year?
Balkrishan Kalra: Thanks, Brian. So look, I think we have made a number of changes and we'll continue to evolve as we progress through the year, as 3 plus 1 takes hold, as well as we continue to engage with clients and learn more about their needs. So it's a continuous evolution, and there's nothing new. I think what we did was a surge of changes that we have driven, but fundamentally, and as an example, in simplification, we moved from a matrixed organization to a finite 12 units that truly faced declines and brought in a lot of decision making to those 12 units.
Speaker Change: Thanks, Brian So look I think we have made a number of changes and we will continue to evolve.
Balkrishan Kalra: As Oh.
Balkrishan Kalra: As we progress through the year as we added three plus one takes hold as well as a client as we continue to engage with clients and learn more on their needs.
Balkrishan Kalra: It's a continuous evolution and there's nothing new I think what we did was a third of changes.
Balkrishan Kalra: We have driven.
Balkrishan Kalra: No and as an example and simplification.
Balkrishan Kalra: The more program at fixed organization too finite 12 unit.
Balkrishan Kalra: Truly PSV claims and.
Balkrishan Kalra: <unk> brought in a lot of the fee I'm, making.
Balkrishan Kalra: And those changes happened in Q1. But there are, as we continue to progress, I think we will continue to improve it on the edges, as well as bringing in new talent that pushes the agenda of data and technology and AI further.
Balkrishan Kalra: Those 12 units.
Balkrishan Kalra: And and those changes are happening in Q1, but.
Balkrishan Kalra: But there are as we continue to progress I think we will continue to improve it on the edges.
Balkrishan Kalra: As well as bringing in new talent.
Balkrishan Kalra: What should be a dent on data and technology and AI further.
Unknown Executive: And thus far, the execution has been wonderful. We have had nice growth in terms of our inflows and our bookings, but more to come.
Unknown Executive: And thus far the execution has been a wonderful we had a nice growth in terms of our inflows and our bookings but more to come.
Bryan C. Bergin: Okay, very good on that. And then just pivoting to gross margin here. So first, a clarification on the 1Q. I thought I heard you say you had less large deal upfront investments. If I'm right about that, what does that do?
Speaker Change: Okay very good on that and then just pivoting to gross margin here. So just first a clarification on the <unk> I thought I heard you say you had less large deal upfront investments if I'm right on that what does that do to and then can you just talk about the drivers as you go through the balance of this year that the cadence of gross margin.
Bryan C. Bergin: And then can you just talk about the drivers as you go through the balance of this year, the cadence of gross margin? I understand you took the outlook for gross margin up a bit here for the year, but the 2Q downticks, I think, first before you build in a second half recovery. So just help us with the moving parts as you go through the year for gross margin. Sure.
Bryan C. Bergin: I understand you took the outlook for gross margin up a bit here for the year, but the Q2 down six I think first before you build in a second half recovery. So just help us with the moving parts as you go through the year for gross margin.
Michael Hal Weiner: Sure. So our gross margin, I believe, in the first quarter was up about 100 basis points, right? And I think what you're referring to is prior year comps with lower severance and less large deal investments than we had in the prior year, as well as lower stock expense that really drove that increase. And as far as we've increased our gross margin as we continue to move through the year, we're flowing through the revenue that we had in terms of better than expected revenue in the first quarter, and we have enhanced operating leverage, which we're flowing through in terms of the gross margin for the remaining part of the year in our guidance.
Speaker Change: Sure. So our gross margin I believe in the first quarter was up about 100 basis points right and I think what you're referring to its prior year comps with lower severance and less large deal investments than we had in the prior year as well as lower stock expense that really drove that increase.
Michael Hal Weiner: And as far as far as we have increased our gross margin as we continue to move through the year, we're flowing through the revenue that we had in terms of better than expected revenue in the first quarter and we have enhanced our operating leverage which are flowing through in terms of the gross margin for the remaining part of the year in our guide.
Speaker Change: Alright, thank you.
Brian Keane: Thank you. Our next question comes from Brian Keane with Deutsche Bank. Your line is open.
Michael Hal Weiner: Thank you. Our next question comes from Bryan Keane with Deutsche Bank. Your line is open.
Brian Keane: Hey guys, congrats on this solid execution here. I guess my question, BK, 62% win rate that seems elevated to me. What would you point to? Is it the pitch or go-to-market strategy that's pushing up the win rate?
Brian Keane: Hey, guys. Congrats on this solid execution here I guess my question BK, 62% win rates. It seems elevated to me what would you point to.
Brian Keane: Is it the pitch or go to market strategy, that's that's pushing up the win rates.
Balkrishan Kalra: Yeah, if you, thanks Brian, if you look at even last year, where we ended, win rates were in the range of 60%. And I completely agree with you that those are really high win rates. And what this is driven by are two factors.
Brian Keane: Yes.
Speaker Change: Brian If you look at even last year.
BK: Our win rates were in the range of 60% and I completely agree with you, but they are really higher win rates and what is driven by us.
BK: Two factors.
Balkrishan Kalra: One Oh, there is a lot all fall.
BK: Small view them medium sized deals, where we do a lot of sole source.
Balkrishan Kalra: One, there are a lot of small deals and medium-sized deals where we do a lot of. And that is helping us improve our win rates. And two, even though we have onboarded many clients, there are follow-on larger deals that we are doing, you know, and some of these follow-on deals that we do, they happen to be sole source, and therefore, our win rates improve because they have already seen the CA2 ratio; they have already seen the performance that we drive in the account.
BK: And all that.
Balkrishan Kalra: That is helping us improve our win rates.
Balkrishan Kalra: And do even then our as we have on boarded many clients. There are follow on larger deals that we are doing.
Balkrishan Kalra: These follow on deals that we do.
Balkrishan Kalra: Happen to be sole sourced and therefore, our win rates improve because we have already seen the C&I ratio. They have already seen the performance metric driving vehicle, having said that.
Balkrishan Kalra: Having said that, I would say that, yes, they are very high win rates, and I'd rather have a bigger pipe, and we have a record level of pipeline as I speak today. But, you know, it won't hurt to increase the pipeline further, and that's where our effort is. And even if some of the win rates go down, I'll be less bothered by that.
Balkrishan Kalra: I would tell you that.
Balkrishan Kalra: We are really high room rates and I'd, rather have a bigger pipe and we have a record level of pipeline as I speak today.
Balkrishan Kalra: But I.
Balkrishan Kalra: To increase the pipeline further and Thats, where a lot of effort.
Balkrishan Kalra: And even if some some of them are if it goes down I would be less bothered by that.
Brian Keane: Got it. And then my follow-up question is just looking, you've increased gross margin, but not operating margin, or just operating margin. You know, maybe what is the cause of that? And for the second quarter, the margin guide is 16 and a half, which is a little lower than we had in our model. So just thinking about the puts and takes there as well. Thanks.
Speaker Change: Got it and then my follow up is just look you increased gross margin, but not operating margin or adjusted operating margin.
Brian Keane: Maybe what is the cause of that in second quarter. The margin guide of 16, and a half is a little lower than we had in our model. So just thinking about the puts and takes there as well thanks.
Michael Hal Weiner: Yes, let me first address your first question really with regard to, yeah, I think what you're asking is our growth margin up, and we're holding our AOI relatively constant from our initial guide, right? So in our prepared remarks, to the extent we continue to execute on better revenue performance, what we're going to do is essentially focus on increasing our investments, our time investments in our business. So if you kind of think about the model on a go-forward basis, that's really driving this, you know, better revenue that we flowed through in the first quarter.
Speaker Change: Yes. So let me first address your first question really with regard to yes, I think what you're asking is our gross margin up and were holding our NOI relatively constant from our initial guide Brent So in our prepared remarks to the extent, we continue to execute on better revenue performance.
Michael Hal Weiner: We're going to do is essentially focused on increasing our investments are timed investments in our business. So if you kind of think about the model on a go forward basis, that's really driving this better revenue that we flowed through in the first quarter. We will have the operating leverage on growth that we have on a go forward basis and as clients zero for the <unk>.
Michael Hal Weiner: We'll have the operating leverage on growth that we have on a go-forward basis, and as client zero for the company, we continue to execute on our own efficiencies. What we're going to do with all three of those positives is we're going to deploy those back in the business and focus really on the journey of AI investments.
Michael Hal Weiner: Company, we continue to execute on our own efficiencies, what we're going to do with all three of those positive is we're going to deploy those back in the business and focus really on journey of AI investments.
Michael Hal Weiner: And then just a second order in particular. I'm sorry.
Michael Hal Weiner: And then just a second quarter in particular.
Michael Hal Weiner: I'm sorry, it's relatively the same. It's relatively the same thing for the second quarter. In terms of your question, why is it 16 and a half, right? I think it's really, I can't really comment on your model, but it really results in, if you look at our seasonal pattern, it's pretty much in line.
Michael Hal Weiner: Okay.
Speaker Change: I'm sorry.
Michael Hal Weiner: It's really it's relatively the same its relatively the same thing for the second quarter in terms of I think your question is while it why it's 16 and a half I think it's really I can't really comment on your model, but it really results and if you look at our seasonal pattern, it's pretty much in line.
Speaker Change: Got it.
Speaker Change: Thanks for the color.
Moshe Katri: Thank you. Our next question comes from Moshe Katri on Wedbush. Your line is open.
Speaker Change: Thank you Brian.
Moshe Katri: Thank you. Our next question comes from most of the category with Wedbush. Your line is open.
Moshe Katri: Thanks. Congratulations on strong execution. I have a couple.
Moshe Katri: Hey, Thanks, Congrats on strong execution.
Moshe Katri: Couple of <unk> first.
Moshe Katri: As the model continues to shift towards outcome based pricing for our what you call I guess non FTE based pricing how should we think about the.
Moshe Katri: The model at Genpact, Jay in terms of profitability, he head count et cetera, and then the follow up is more about the discretionary work.
Moshe Katri: Part of the revenue instead.
Moshe Katri: Instead of discretionary at Genpact, Thanks, a lot.
Moshe Katri: So let me kick it off and I'll hand, it over to <unk> right. So what we've seen thus far in terms of our alternative commercial or non FTE related pricing, we've actually seen the contrary in terms of the average margin on that work that we do is higher than the average of the company as a whole right.
Moshe Katri: First, as the model continues to shift towards outcome-based pricing, or what you call, I guess, non-SDE-based pricing, how should we think about the model at Genpact changing in terms of profitability, headcount, etc.? And then the follow-up is more about discretionary work. Which part of the revenue today is considered discretionary at Genpact? Thanks a lot.
Michael Hal Weiner: So, let me kick it off, then I'll hand it over to BK. Right? So what we've seen thus far in terms of our alternative commercial or non-FT related pricing, we've actually seen the contrary in terms of the average margin on that work that we do is higher than the average of the company as a whole, right? Yeah, and we continue to believe that there'll be an enhanced decoupling between revenue and FT-related costs. Yeah,
BK: And we continue to believe that there'll be an enhanced decoupling between revenue and an FTE related costs.
Balkrishan Kalra: Yeah. Exactly to the point that you're making, Mike, we are increasingly seeing that decoupling, and we are pushing that decoupling of FTE to revenue. And I would again say we are at the early stages of that, and we are putting certain architecture infrastructure in place to, over a period of time, build more momentum there. And clearly, more of our investments are also going, Moshe, into building IP and building repeatable assets that we can deploy over and above, say, the software of our partners. And we are again at the early stages of that. As more and more data and IP take hold, more disassociation of revenue with FT will happen, and that's where our focus is.
Balkrishan Kalra: Exactly to the point that you're making my call. We are increasingly seeing that decoupling and we're pushing that decoupling golf ball FTE to revenue and.
Balkrishan Kalra: I will begin with him yet in the early stages of that.
Balkrishan Kalra: And we are putting certain architected infrastructure in place to over a period of time build more momentum there.
Balkrishan Kalra: And clearly more all four of our investments have also going Moshe in building IP.
Balkrishan Kalra: And building repeatable assets that.
Balkrishan Kalra: We can deploy.
Balkrishan Kalra: Over and above the wall sales software off our.
Balkrishan Kalra: Partners.
Balkrishan Kalra: And we've got a game at early stages of that as more and more data and IP takes hold more differentiation.
Balkrishan Kalra: All of our revenue with FTE will happen and that's where all their neighbors.
Moshe Katri: And is this question IP for the blog post?
Balkrishan Kalra: The question I think for the business.
Moshe Katri: Say that again, your voice broke up here, Moshe.
Moshe Katri: Okay.
Speaker Change: So you better game your voice broke up here Moshe.
Moshe Katri: How about the discretionary part of it in general? Or the discretionary part? So I think and the question on discretionary is that what portion of our business is associated with discretionary? Just wanting to clarify because your voice is a little bit muffled. That's correct. Yes, that's correct.
Moshe Katri: The next question right.
Moshe Katri: In Germany, our discretionary part.
Moshe Katri: So and the question on distribution or is that what portion of our business is associated with discretionary and just wanted to clarify because their voices bluebird muscle that's correct yes.
Balkrishan Kalra: So we have in Data Tech AI, Moshe. What we have is also a lot of consulting and portions of projects that we do. Over 70% of our revenues are annuity. And so the bulk of our digital ops and a large portion and a significant portion, even in Data Tech AI, are annuity for us. They are long-term contracts. But as we think of the end-to-end capabilities, one of the reasons why clients buy from us is strategy design to run and transform.
Moshe Katri: Correct.
Moshe Katri: So we have in data.
Balkrishan Kalra: Tom will share what we have is also a law consulting.
Balkrishan Kalra: And.
Balkrishan Kalra: Portions of fall broadened the projects that we do.
Balkrishan Kalra: Over 70% of our revenues.
Balkrishan Kalra: <unk>.
Balkrishan Kalra: Community.
Balkrishan Kalra: So bulk of our digital ops and a large portion or a significant portion of it will indeed, I think AI is MEP for us they're long term contracts with E. As repaying call be end to end capabilities. One of the reasons why clients buy from US is Saturday design to run.
Balkrishan Kalra: That strategy and design portion of it has componentry which is tied to discretionary. And owing to better execution, our pipeline is looking better. But we don't see it is because budgets have been released. It is more because we are becoming more agile in the marketplace, if that answers the question.
Balkrishan Kalra: And then kras fall that strategy and design portion of it has complementary tied to discretionary.
Speaker Change: And out.
Balkrishan Kalra: To better execution, our pipeline is looking better, but we don't see it as because budgets have been really it is more because.
Balkrishan Kalra: It will be or at all.
Balkrishan Kalra: Becoming more agile in the marketplace if that answers the question.
Speaker Change: Thanks, Paul.
Surinder Singh Thind: Thank you. As a reminder, to ask a question, please press star 11. Our next question comes from Surinder Thind on behalf of Jeffreys. Your line is open.
Balkrishan Kalra: Thank you as a reminder to ask a question. Please press star one one.
Surinder Singh Thind: Our next question comes from Surinder <unk> with Jefferies. Your line is open.
Surinder Singh Thind: Thank you. Just to follow up on the non-FTE revenues and the mixed shifts over the past year. How should we think about that on a go forward basis? Because the shift is pretty significant in the past year. So were there a few projects, a few clients that drove that? And is this something that's gonna be maybe lumpy going forward? Or where do you kind of see the end game for this?
Surinder Singh Thind: Thank you just to follow up on the.
Surinder Singh Thind: Non FTE revenues and the mix shifts over the past year.
Surinder Singh Thind: Should we think about that on a go forward basis, because it shifted pretty significant in the past year sword. There are a few projects a few clients that drove that and is this something thats going to be may be lumpy go forward or where do you see the endgame for this.
Balkrishan Kalra: So I'll take that, and Mike, feel free to add. Look, Surinder, our endeavor is to push that agenda more, be it in large deals, and we have succeeded in a few large deals, or in renewals, or in smaller and medium-sized deals. And even if the entire large deal or a medium-sized deal is not on non-FTE, I think there are portions of it that we are inserting is point number one. Point number two, I already spoke about IP and data, and these are early days. So clearly, you know, where is the end game? It is too early to tell.
Speaker Change: So I'll take that and then Mike <unk>.
Balkrishan Kalra: It's within the hour.
Balkrishan Kalra: It's to push that agenda more.
Balkrishan Kalra: More beat in large deals and we have succeeded in few large deals.
Balkrishan Kalra: All aimed renewals.
Speaker Change: All in.
Balkrishan Kalra: Smaller and medium size deals and even if the entire large deal or a medium sized deal is not on.
Balkrishan Kalra: Non FTE I think there are portions of it that we are in 13.
Balkrishan Kalra: Point number one point number two I already spoke about.
Balkrishan Kalra: <unk> early days.
Balkrishan Kalra: So clearly our you know.
Balkrishan Kalra: Is the end game it is too early to tell.
Michael Hal Weiner: We are exceptionally clear that we want to break this association of FT with revenues and have revenue growth disproportionately relative to the FT headcount. And I think we are putting architectural and professional elements around that, and we'll continue to report progress. Mike?
Balkrishan Kalra: What we are exceptionally clear that we want to break this association of.
Mike: FB with revenues.
Mike: We have revenue grow disproportionately relative to the FTE headcount.
Michael Hal Weiner: And I think we are putting architectural protective elements around that and we will continue to report progress Mike, Yes, I'm, just kind of build on that right. So historically historically over the last two years I would say, we disproportionately saw on renewals our ability to get these models implemented but I think one of the interesting thing regarding jarrod generative AI conversational.
Surinder Singh Thind: I'll just kind of build on that, right? So historically, historically, over the last two years, I would say we disproportionately saw on renewals our ability to get these models implemented. But I think one of the interesting things regarding our generative AI conversations we're having with clients initially, they're much more receptible to moving to those models than they were historically. So the generative AI narrative, right, is acting as a catalyst for those discussions, as well as just our pivot to have more IP-related assets to drive that decoupling.
Surinder Singh Thind: <unk>, we're having with clients.
Surinder Singh Thind: Initially they are much more receptible to moving to those models than they were historically so the generative AI narrative right is acting as a catalyst for those discussions as well as just our pivot to have more IP related assets to have to drive that decoupling.
Surinder Singh Thind: Yes.
Michael Hal Weiner: And then when I think about just guidance in general, I look back on last year, and obviously, you know, the environment's been challenging. It's been hard to predict client behavior. Fast forward to this year; you guys are out executing the guy. What should I think about the overall quality of the guide or any methodology changes that you guys have made? Is it just you guys are being maybe a bit more conservative this year? Any color there would be helpful, or how have you been adjusting to maybe the lower levels of visibility in this environment? Yeah, so nothing has changed from what
Speaker Change: That's helpful.
Surinder Singh Thind: And then when I think about guide.
Michael Hal Weiner: Guidance in general I look back to last year and obviously.
Michael Hal Weiner: The environment has been challenging it's been hard to predict client behavior.
Michael Hal Weiner: Fast forward to this year you guys are out executing the guide.
Michael Hal Weiner: How should I think about the overall quality of the guide or any methodology changes that you guys have made is it just you guys are being maybe a bit more conservative this year.
Michael Hal Weiner: Any color there would be helpful or how you've been adapting to maybe to the lower levels of visibility in this environment.
Michael Hal Weiner: Yeah, so nothing has changed from what we told you about a quarter or so ago in terms of our methodology on a go-forward basis. Obviously, we get smarter every quarter that we go.
Speaker Change: Yeah. So nothing has changed from what we told you about a quarter or so ago with in terms of our met our methodology.
Michael Hal Weiner: On a go forward basis, obviously get smarter every quarter that we go listen I will say, it's prudent from that perspective, and that prudency really relates to our assessment that the macro environment, particularly that that affects some of our more discretionary shorter duration work will has not improved and our models from the second half of last.
Michael Hal Weiner: Listen, I will say it's prudent from that perspective, and that prudence really relates to our assessment that the macro environment, particularly as it affects some of our more discretionary shorter duration work, has not improved, right, in our models from the second half of last year through the first quarter of this year. To the extent that changes, yeah, potentially, we could see additional benefits from it. But for now, I think the prudent way to move forward is using the information that we have to the best of our ability and making a conservative view from that perspective.
Michael Hal Weiner: Through the first quarter of this year to the extent that changes where potentially we could see additional benefits to it but for now I think the prudent way to move forward is using the information that we have best of our ability and making a conservative view from that perspective.
Michael Hal Weiner: Keep in mind, as BK alluded to, over 70% of our business is somewhat annuitized, and we have very good visibility at any given point on how that's going to perform for the remaining piece of the year on a rolling 12-month basis. So it really comes down to that 25%, roughly, cohort of our business that's short-term discretionary in nature. And again, what we're doing is we're tying that to our assertion of where the macro business environment is going to be for that period of time. As it changes, we'll update our guidance accordingly. Thank you. Thank you. Our next question comes from Sean Kennedy with Mizuho. Your line is open.
Michael Hal Weiner: Keep in mind as BK alluded too in over 70% of our business somewhat in <unk> and we have very good visibility at any given point on how thats going to perform for the remaining piece of the year on a rolling 12 month basis. So it really comes down to that 25% roughly cohort of our business at short term discretionary in nature and again, what we're doing.
Sean Kennedy: As we're tying that to our assertion of where the macro business environment is going to be for that period of time as it changes, we'll update our guidance accordingly.
Sean Kennedy: Thank you.
Sean Kennedy: Thank you.
Michael Hal Weiner: Question comes from Sean Kennedy with Mizuho. Your line is open.
Sean Kennedy: Hi everyone, nice job on the quarter, and thank you for...
Sean Kennedy: Hi, everyone nice job on the quarter and thank you for taking my questions.
Sean Kennedy: Can you touch on how the demand environment for new business progressed throughout the quarter, both for the shorter duration discretionary deals and the larger ones as well it seems like the outperformance in the quarter was more genpact specific execution versus the macro and economic environment. Thank you.
Balkrishan Kalra: So Sean, what I would say is yes, I think the execution and early signs are good. However, I'll also say that our pipeline is at a record level across all the segments across data tech, AI, and across digital law. And now, we can also attribute a lot of that to our increased agility, again, acting more proactively with our partners and with technology partners. And we are getting more and more invitations from our technology partners as well.
Sean Kennedy: So Sean what I would say yes.
Balkrishan Kalra: The execution and early signs are good.
Balkrishan Kalra: However, I would also say that our.
Balkrishan Kalra: Pipeline is at a record level.
Balkrishan Kalra: Ross all the.
Balkrishan Kalra: No our segments across <unk> and across digital logs.
Balkrishan Kalra: And now we can also attribute a lot of that to our increased agility.
Balkrishan Kalra: Our game.
Balkrishan Kalra: Acting more proactively with our partnership with.
Balkrishan Kalra: Technology partners.
Balkrishan Kalra: And we are getting.
Balkrishan Kalra: More and more <unk> technology partner as well.
Balkrishan Kalra: As I speak to clients some odd even partners.
Balkrishan Kalra: Michael.
Balkrishan Kalra: As I speak to clients, or even partners, what Mike also enunciated earlier, that with an understanding of hands on the keyboard, and the assets in strategy and design, and how we run and transform, we are able to capture the knowledge at a very keystroke level, which a lot of technology partners coming top down are not able to.
Balkrishan Kalra: And earlier.
Sean Kennedy: You bet.
Balkrishan Kalra: <unk>.
Balkrishan Kalra: Understanding all fall hands on the keyboard.
Balkrishan Kalra: B assets Saturday and design and how.
Balkrishan Kalra: How we run them transform.
Balkrishan Kalra: While we are able to capture the knowledge that our very key stroke level rich.
Balkrishan Kalra: A lot of technology partners coming top down are not able to and back is that true.
Balkrishan Kalra: And that is the true, you know, execution that is needed by clients. And therefore, there's a reaffirmation, and we are seeing as we engage more actively with clients to reflect that in our pipeline. Now, I would again continue to maintain there are many ways in which we see where the macro environment is, where the budgets are. Have we seen any significant or any meaningful improvement there? The answer is no. It continues to be as it was in the second half of last year. So that is what is sitting in our current guide.
Balkrishan Kalra: You know execution that is needed by clients and therefore, the <unk> mission and we are seeing.
Balkrishan Kalra: As we engage more actively with the client on too.
Balkrishan Kalra: Reflect that thing up pipelines now.
Balkrishan Kalra: Again, continuing to maintain we have been in many ways in which we see will be able to be macro environment, where the budgets are have we seen any significant or any meaningful improvement. There. The answer is no. It continues to be as it was at.
Balkrishan Kalra: Second half of last year.
Balkrishan Kalra: That is what is sitting in a prudent guide.
Speaker Change: Great. Thank you good luck with the rest of the year.
Balkrishan Kalra: Yeah.
Michelle: Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to the company for closing remarks.
Speaker Change: Thank you I'm showing no further questions at this time I'd like to turn the call back over to the company for closing remarks.
Balkrishan Kalra: Well, thank you so much, Michelle. And what I would say is Q1 was a solid start to the year with revenues and gross margin above the high end of our guidance range. Early signs of improving execution, and we are excited with the progress we are making with our 3 plus 1 execution framework. And yes, we are pleased with the beat and flow, I would say, with the student guide. And I do want to take this opportunity to thank all of our employees for embracing the pivot, all of our clients for choosing Genpact, and all the shareholders for ongoing support. And I do want to thank you all, and we'll come back to you next quarter.
Speaker Change: Okay, well. Thank you so much Michelle and what I would say is Q1 was a solid start to the year with revenue of them gross margin above high end of our guidance range.
Balkrishan Kalra: Early signs of improving execution and we are excited with the progress we are making with our key plus one execution framework.
Balkrishan Kalra: Yes, we are pleased with the beacon flow I would say with this prudent guidance.
Balkrishan Kalra: And I do want to take this opportunity to paint all of our employees for embracing the pivot all of our clients solve for choosing the impact and all the shareholders for ongoing support.
Balkrishan Kalra: And I do want to thank you all and we'll come back to you next quarter.
Michelle: Thank you for your participation. This does conclude the program, and you may now disconnect. Good day.
Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect good day.
Michelle: Okay.
Michelle: [music].