Q2 2024 Genpact Ltd Earnings Call
Operator: I would now like to turn the call over to Krista Bessinger, Head of Investor Relations at Genpact. Please proceed.
Unknown Attendee: in the intercession towards the end of this conference call. As a reminder, this call is being recorded for replay purposes.
Towards the end of this conference call. As a reminder, this call is being recorded for replay purposes. The replay of this call will be archived and made available on the IR section of Jim tax website, I would now like to turn the call over to Krista Bessinger head of Investor Relations at Jim.
Unknown Attendee: The replay of this call will be archived and made available on the IR section of Genpact's website.
Krista Bessinger: I would now like to turn the call over to Krista Bessinger, Head of Investor Relations at Genpact. Please proceed.
Speaker Change: Please proceed.
Yes.
Krista Bessinger: Thank you, Michelle.
Krista Bessinger: Thank you, Michelle. Good afternoon, everyone, and welcome to Genpact's Q2 2024 earnings conference call. We hope you had a chance to read our earnings press release, which was posted in the investor relations section of our website, Genpact.com. And today we have with us BK Kalra, President and CEO, and Mike Weiner, Chief Financial Officer.
Krista Bessinger: Thank you Michelle good afternoon, everyone and welcome to Gentex Q2, 'twenty 'twenty four earnings conference call.
Krista Bessinger: Good afternoon, everyone. And welcome to Genpact. Q2, 2024 earnings conference call. We hope you had a chance to read our earnings press release, which was posted on the Investor Relations section of our website, Genpact.com.
Speaker Change: We hope you had a chance to read our earnings press release, which was posted on the Investor Relations section of our website Genpact Dot com.
Krista Bessinger: And today we have with us, B.K. Kahlra, President and CEO, and Mike Weiner, Chief Financial Officer.
Speaker Change: And today, we have with us BK, Kalra, President and CEO, and Mike Queener Chief Financial Officer.
Krista Bessinger: B.K. 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: 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 also note that during this call, we will make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time.
Speaker Change: D K 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: Please also note that during this call we will make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time. Actual results could differ materially due to a number of important risks and uncertainties, including the risk factors in our 10-K and 10-Q filings with the SEC.
Speaker Change: Please also note that during this call we will make forward looking statements, including statements about our business outlook strategies and long term goals.
Speaker Change: These comments are based on our plans predictions and expectations as of today, which may change over time.
Speaker Change: 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.
Krista Bessinger: Also, during this call, we will discuss certain non-GAAP financial measures. We have reconciled those to the most directly comparable gap financial measures in our earnings press release. These non-gap measures are not intended to be a substitute for our gap results.
Speaker Change: Also during this call we will discuss certain non-GAAP financial measures.
Speaker Change: We have reconciled those to the most directly comparable GAAP financial measures in our earnings press release.
Speaker Change: These non-GAAP measures are not intended to be a substitute for our GAAP results.
Krista Bessinger: And finally, this call in its entirety is being broadcast from our Investor Relations website, and an audio replay and transcript will be available on our website in a few hours.
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 transcript will be available on our website in a few hours. And with that, I'd like to turn it over to BK.
Speaker Change: And finally this call in its entirety is being webcast from our Investor Relations website, and an audio replay and transcript will be available on our website in a few hours.
B.K. Kahlra: And with that, I'd like to turn it over to B.K. Thank you, Christa. Hello, everyone. And thank you for joining us today. I am pleased to report another strong quarter as we continue to successfully deliver on our three plus one execution framework. Revenue in Q2 reached $1.18 billion, up 6% year-over-year, above the high end of our guidance range, with better than expected performance across both data and AI and digital operations. Gross margin of 35.4% and adjusted operating income margin of 16.9% also exceeded expectations, driven by operating efficiencies. We are on a right path, and momentum is building for context in FY 2023.
BK: And with that I'd like to turn it over to BK.
BK: Thank you Chris.
Balkrishan Kalra: Thank you, Krista. Hello, everyone, and thank you for joining us today. I am pleased to report another strong quarter as we continue to successfully deliver on our 3 plus 1 execution framework. Revenue in Q2 reached $1.18 billion, up 6% year over year, above the high end of our guidance range with better than expected performance across both data tech, AI, and digital operations. Gross Margin of 35.4% and Adjusted Operating Income Margin of 16.9% also exceeded expectations driven by operating efficiency.
BK Kalra: Hello, everyone and thank you for joining yesterday.
BK Kalra: I am pleased to report another strong quarter as we continued to successfully deliver on our three plus one execution framework.
Speaker Change: Revenue in Q2 reached $1.18 billion up 6% year over year.
BK Kalra: Above the high end of our guidance range with better than expected performance across both data.
BK Kalra: And digital operations.
BK Kalra: Gross margin of 35, 4%.
Speaker Change: And then just did.
BK: Income margin of 16, 9% also exceeded expectations driven by operating efficiencies.
Balkrishan Kalra: We are on the right path, and momentum is building. For context, in FY 2023, we grew revenue by roughly $100 million on an absolute basis. In 2024, we have already hit $100 million in incremental revenues in the first half of the year, with higher gross margin, all while continuing to invest in our top priority. Unwavering focus on our 3 plus 1 execution framework is accelerating growth, and we will continue to build our execution muscle in the second half of the year with a continued focus on One strong partnership and two comprehensive data tech AI solutions. 3.
Speaker Change: Have you I don't know if I bought it.
Speaker Change: Momentum is building.
Speaker Change: For context.
Speaker Change: Why it won't be it won't be pre reviewed roughly be.
B.K. Kahlra: We grew roughly the revenue by $100 million on an absolute basis. In 2024, we have already hit $100 million in incremental revenues in the first half of the year with higher gross margin, all while continuing to invest in our top priorities. Unwavering focus on our three plus one execution framework is accelerating growth. And we will continue to build our execution muscle in the second half of the year with a continued focus on one strong partnership.
Speaker Change: Revenue by $100 million on an absolute basis.
Speaker Change: Before we have already hit 100 million in incremental revenues in the first half.
Speaker Change: With higher gross margin.
Speaker Change: All while continuing to invest in all of our top priorities.
Speaker Change: I'm going to bring focus on our three plus one execution framework is accelerating growth.
Speaker Change: And we will continue to build our execution muscle in the second half of the year with a continued focus on.
Speaker Change: One strong partnerships do comprehensive data take AI solutions.
B.K. Kahlra: Two comprehensive data tech AI solutions, three are simplified go-to-market approaches, and our plus one that is leading Genpact as our best credential for AI-first innovation. Let me walk you through the key highlights on each. First on partnerships, we see a significant opportunity to accelerate revenue growth as we increase the strength of our partner relationships. To give you a sense, ID service and solution companies with mature partner operations typically generate 20 to 50% of their revenue from partners. For us, partner-related revenues was in low single digits in 2023. This represents a significant opportunity for Genpact. We started ramping our investments in our partnership organization at the beginning of this year, and at the end of second quarter, we have more than double the percentage of revenue generated by partners with line of sight to generate significantly more in future periods.
Speaker Change: A simplified go to market approach and our plus one that is leading genpact as are the best credential.
Balkrishan Kalra: A simplified go-to-market approach and our plus one that is leading Genpact as our best credential for AI-first innovation. Let me walk you through the key highlights of each. First on partnership. We see a significant opportunity to accelerate revenue growth as we increase the strength of our partner relationships. To give you a sense, IT service and solution companies with mature partner operations typically generate 20 to 50% of their revenue from partners. For us, partner-related revenues were in low single digits in 2023.
Speaker Change: Innovation.
Speaker Change: Let me walk you through the key highlights on each.
Speaker Change: First on partnerships.
Speaker Change: We see a significant opportunity to accelerate revenue growth.
Speaker Change: We increased the strength of our partner relationships.
Speaker Change: To give you a sense.
Speaker Change: Service and solution companies with mature partner operations, typically generate 20% to 50% of their revenue from partners.
Speaker Change: Our us partner related revenues more than low single digits.
Speaker Change: It can be pretty.
Balkrishan Kalra: This represents a significant opportunity for Genpact. We started ramping up our investments in our partnership organization at the beginning of this year, and at the end of the second quarter, we had more than doubled the percentage of revenue generated by partners with a line of sight to generate significantly more in future periods.
Speaker Change: This represents a significant opportunity for genpact.
Speaker Change: We started ramping our investments and our partnership organization at the beginning of this year and.
Speaker Change: And that would be end of second quarter, we have more than double the percentage of revenues generated by partners with line of sight to generate significantly more in future periods.
B.K. Kahlra: Growth to date has been driven by investing in a world-class leadership team, driving awareness, improving go-to-market activations, and scaling delivery capabilities with a number of hyperscaler partners, including Microsoft, AWS, GCP, and other key partners like ServiceNow, Salesforce, Databricks, to just name a few.
Balkrishan Kalra: Growth to date has been driven by investing in a world-class leadership team, driving awareness, improving go-to-market activations, and scaling delivery capabilities with a number of hyperscaler partners, including Microsoft, AWS, GCP, and other key partners like ServiceNow, Salesforce, Databricks, to just name a few. Second, on Data Tech AI, our focused go-to-market approach continues to drive accelerating revenue growth in Q2. JNAI has significantly expanded our total addressable market and is increasingly becoming a driver of our business, while the absolute numbers are still small. Gen AI bookings in the first half of 2024 are already up more than 10 times compared to the full year of 2023, with more than 95% of our Gen-AI bookings year to date contracted on a non-FTE basis.
Speaker Change: To me it has been driven by investing in World class leadership team.
Speaker Change: Driving awareness improving go to market activations and scaling delivery capabilities with a number of hyper scaler partners, including Microsoft AWS GCB and other key partners like service no Salesforce data breaks to just name a few.
B.K. Kahlra: Second, on data tech AI, our focus, go-to-market approach, continue to drive accelerating revenue growth in quarter two. Genie has significantly expanded our total addressable market, and is increasingly becoming a driver of our business. While the absolute numbers are still small, Genie AI bookings in the first half of 2024 are already up more than 10 times compared to the full year of 2020, with more than 95% of our Genie AI bookings year-to-date contracted on a non-FT basis. We also now have more than 80 Genie AI solutions in production environments with clients either deployed or going live.
Speaker Change: Second on data.
Speaker Change: Our focus go to market approach continued to drive accelerating revenue growth in quarter two.
Jamie: Jamie I has significantly expanded our total addressable market and is increasingly becoming a driver of our business.
Jamie: While the absolute numbers are still small.
Speaker Change: Jamie I bookings in the first half of candidate before are already up more than 10 times.
Speaker Change: Compared to full year off going little bit feet with more than 95% of our Jimmy I bookings year to date contracted on an FTE basis.
Balkrishan Kalra: We also now have more than 80 Gen-AI solutions in production environments with clients either deployed or going live. Embedding AI into enterprise systems is a significant undertaking. It requires weaving AI into the very fabric of an organization, cutting across data engineering, conversational interfaces, existing IT systems, and ultimately weaving AI into end-to-end business processes. This represents a significant opportunity for Genpact. We play a critical role in leveraging AI to drive business transformation for our clients because our deep domain expertise and the keystroke level are essential to the successful implementation of an AI-first end-to-end business processes in production environments. Let me give you a few examples.
Jamie: We also now have more than it would be Jamie I solutions in production environments with clients EBIT deployed are going live.
B.K. Kahlra: Embedding AI into enterprise systems is a significant undertaking. It requires weaving AI into the very fabric of an organization, cutting across data engineering, conversational interfaces, existing IT systems, and ultimately weaving AI into business processes. This represents a significant opportunity for GenPak. We play a critical role in leveraging AI to drive business transformation for our clients, because our deep domain expertise at the key stroke level is essential to the successful implementation of an AI first and two end business processes in production environments.
Jamie: Embedding AI into enterprise systems is a significant undertaking.
Speaker Change: Requires weaving AI into the very fabric off an organization.
Jamie: Cutting across data engineering conversational interfaces.
Speaker Change: Good thing IP systems, and ultimately weaving AI and do any business processes. This way.
Speaker Change: It presents a significant opportunity for genpact.
Speaker Change: We play a critical role in leveraging AI to drive business transformation for our clients because of our deep domain expertise and the keystroke level is essential.
Speaker Change: Through the successful implementation of an AI first end to end business processes in production environments.
B.K. Kahlra: Let me give you a few examples. A leading global provider of financial technology solutions has chosen GenPak to drive their business-wide transformation and increase scalability and efficiency through the use of Genie AI. Jai, this is one of the large deals that we sign in second quarter, and Genai is a significant part of the design. We are leveraging our banking domain, end-to-end process frameworks, and technology expertise, along with ServiceNow, to deliver our suite of AI solutions. These AI solutions are integrated with the client existing IT systems, leveraging large amount of unstructured data, to drive competitive advantage and growth.
Speaker Change: Let me give you a few examples.
Balkrishan Kalra: A leading global provider of financial technology solutions has chosen Genpact to drive their business-wide transformation and increase scalability and efficiency through the use of GenAI. This is one of the large deals that we signed in the second quarter, and JNAI is a significant part of the design. We are leveraging our banking domain, end-to-end process frameworks, and technology expertise, along with ServiceNow, to deliver a suite of AI solutions. These AI solutions are integrated with the client's existing IT systems, leveraging a large amount of unstructured data to drive competitive advantage and growth.
Speaker Change: Leading global provider of financial technology solution has chosen to genpact.
Speaker Change: Their business wide transformation and increased scalability and efficiency through the use of AI.
Speaker Change: This is why not be large deals that we signed in second quarter.
Speaker Change: And Jamie I, a significant part of the design.
Speaker Change: We are leveraging our banking domain and doing prostate frameworks.
Speaker Change: Technology expertise along with service now two delivered a suite of AI solutions.
Speaker Change: These AI solutions are integrated with the client existing IP systems, leveraging large amount of unstructured data.
Speaker Change: Drive competitive advantage and growth.
B.K. Kahlra: This implementation has a potential to serve as a template that can be replicated across industries. I have talked before about how our deep domain allows us to bridge the gap between out-of-the-box solutions and what clients need on the ground to transform their business processes with Genai. This case study is a perfect example of that.
Balkrishan Kalra: This implementation has the potential to serve as a template that can be replicated across industries. I have talked before about how our deep domain allows us to bridge the gap between out-of-the-box solutions and what clients need on the ground to transform their business processes with GenAI. This case study is a perfect example of that.
Speaker Change: This implementation has a potential to serve as a template that can be replicated across industries.
Jimmy: I have talked before about how our deep domain allows us to bridge the gap between out of the box solutions and what clients need on the ground to transform their business processes with Jimmy I.
Speaker Change: This case study is a perfect example of that.
B.K. Kahlra: Another example is the work we are doing with Mondalees, to address their need for up-skilling and shorter ramp times for new employees. Leveraging Genpact's Cora Knowledge Assist platform, to enable faster access to knowledge, insights, and standardized operating procedures. For example, with all the suit, here we are transforming their retail operations in the US and Australia by leveraging data, technology, and AI solutions to drive agility and cost leadership, ultimately creating an exceptional customer experience and driving competitive growth.
Balkrishan Kalra: Another example is the work we are doing with Mondelz to address their need for upskilling and shorter ramp times for new employees, leveraging Genpact's CORA Knowledge Assist Platform to enable faster access to knowledge, insights, and standardized operating procedures. Here, we are transforming their retail operations in the US and Australia by leveraging data, technology, and AI solutions to drive agility and cost leadership. Ultimately, creating an exceptional customer experience and driving competitive growth.
Wanda: Another example is the work we are doing with Wanda needs to address their need for Upskilling and shorter ramp times for new employees.
Speaker Change: Leveraging genpact Cora.
Speaker Change: Platform to enable faster access to knowledge insights and standardized operating procedures.
Speaker Change: For example, with all the suit.
Speaker Change: And we are transforming their retail operations in the U S and Australia by leveraging data technology, and AI solutions to drive agility and cost leadership.
Speaker Change: Ultimately, creating an exceptional customer experience and driving competitive group.
B.K. Kahlra: Our work for Amazon is another great example of AI. For Amazon, for their out-of-one-anti-device customer service in Europe, we have leveraged AI and Amazon Connect to create an end-to-end solution that integrates AI-powered chatbots and enables logistics management, a repair partner network, end-to-end tracking, and proactive customer notifications, all with minimal human interactions. These are just a few examples.
Balkrishan Kalra: Our work for Amazon is another great example of AI. For Amazon, for their out-of-warranty device customer service in Europe, we have leveraged AI and Amazon Connect to create an end-to-end solution that integrates AI-powered chatbots and enables logistics management, a repair partner network, end-to-end tracking, and proactive customer notifications, all with minimal human intervention. These are just a few examples. At the end of the day, clients choose us for five key reasons. Our deep domain data and AI expertise.
Speaker Change: One for Amazon is another Great example of AI for Amazon for their outdoor warning device customer service in Europe.
Speaker Change: <unk> leverage AI and Amazon connect to create an end to end solution that integrates AI powered chatbot.
Speaker Change: <unk> logistics management I prepared partner network end to end tracking and proactive customer notifications, all with minimal human interactions.
Speaker Change: These are just few examples.
B.K. Kahlra: At the end of the day, clients choose us for five key reasons. Our deep domain data and AI expertise, comprehensive solutions, accelerating partner ecosystem, client-centric approach, and innovative technology, including our pre-built AI accelerators. In a world increasingly driven by advanced technologies, these sense of more critical than ever, and enable us to deliver solutions that keep our clients ahead of the curve.
Speaker Change: We ended up the big clients choose us for five key reasons.
Speaker Change: Our deep domain daytime AIA expertise.
Balkrishan Kalra: Comprehensive Solutions. Accelerating Partner Ecosystem, client-centric approach, and innovative technology, including our prebuilt AI accelerators. In a world increasingly driven by advanced technologies, these trends are more critical than ever and enable us to deliver solutions that keep our clients ahead of the curve. Now, coming back to the third element in our 3 plus 1 execution framework, which is simplification.
Speaker Change: Comprehensive solutions.
Speaker Change: <unk> partner ecosystem.
Speaker Change: Client centric approach.
Speaker Change: And innovative technology, including our prebuilt AI accelerators.
Speaker Change: In a world increasingly driven by advanced technologies defense are more critical than ever and enable us to deliver solutions that keep our clients end up pick up.
B.K. Kahlra: Coming back to the third element in our three-plus-one execution framework, which is simplification, we continue to streamline our go-to-market approach so that we can scale more efficiently. As an example, we have standardized our rate cards across our data tech AI service offerings, and we are reducing complexity in our end-to-end sales process by automating workflows and adopting AI-contracting tools.
Balkrishan Kalra: We continue to streamline our go-to-market approach so that we can scale more efficiently. As an example, we have standardized our rate cards across our data tech AI service offerings. And we are reducing complexity in our end-to-end sales process by automating workflows and adopting AI contracting tools. And finally, leading with Genpact as our own best credential for AI-driven transformation, we hit a number of major milestones in the second quarter. I'll give you two specific examples.
Speaker Change: Coming back to the parent element in our three plus one execution framework, which is simplification.
Speaker Change: Continue to streamline our go to market approach, so that we can scale more efficient.
Speaker Change: As an example, we have standardized our rate cards across our data.
Speaker Change: With offerings.
Speaker Change: And we are reducing complexity in our end to end sales process by automating workflows and adopting AI contracting tools.
B.K. Kahlra: And finally, on leading with GenPact as our own best credential for AI-driven transformation, we hit a number of major milestones in the second quarter. I will give you two specific examples. First, we launched a new Cora AI Assistant for our global IT help desk. First, since launch, we have seen a 2X increase in user satisfaction and a 30% reduction in service desk staff. Our future roadmap includes core AI assistant for HR, finance, sourcing, and many other functions, and we aim for similar improvement across these functions. Second, AI Guru, our Gen AI Power Learning Coach, is making personalized learning recommendations for over 60,000 employees, increasing productivity and amplifying the collective knowledge of our internal experts.
Speaker Change: And finally on leming with Genpact as our own best credential for AI driven transformation.
Speaker Change: A number of major milestone in second quarter.
Speaker Change: I'll give you two specific examples.
Balkrishan Kalra: First, we launched a new Cora AI assistant for our global IT helpdesk. Since launch, we have seen a 2x increase in user satisfaction and a 30% reduction in service desk staff. Our future roadmap includes Cora AI Assistant for HR, Finance, Sourcing, and many other functions, and we aim for similar improvements across these functions. Second, AI Guru, our Gen AI Powered Learning Coach, is making personalized learning recommendations for over 60,000 employees, increasing productivity and amplifying the collective knowledge of our internal experts. And that gets me to the talent.
Speaker Change: First we launched a new go to our AI assistant for our global IP Helpdesk since launch we have seen our <unk>, increasing user satisfaction and a 30% reduction in service desktop.
Speaker Change: Our future roadmap includes quota.
Speaker Change: For HR finance sourcing.
Speaker Change: And many of the functions and we aim for a similar improvement across these functions.
Speaker Change: Second <unk> grew our Jimmy I, Paul we're learning coach.
Speaker Change: He is making personalized learning recommendations for over 60000 employees increasing productivity.
Speaker Change: Amplifying the collective knowledge of our internal experts.
B.K. Kahlra: And that gets me to the talent. Our employees are critical to our success, and we have made significant progress year-to-date, scaling our broader technology skills as part of our overall investment in data tech AI. On foundational Gen AI, we have more than 100,000 employees who are actively learning; 70,000 have completed entry-level training, and 18,000 have completed more advanced work. For Gen AI delivery capabilities, we have 3,000 AI practitioners across the company. And for applied AI leadership, we are making a significant change at the most senior levels in the company. 85% of senior leaders will have gone through certification from schools like MIT by end of 2024.
Speaker Change: And that gets me to the talent.
Balkrishan Kalra: Our employees are critical to our success, and we have made significant progress year to date, scaling our broader technology skills as part of our overall investment in data tech and AI. On foundational Gen-AI, we have more than 100,000 employees who are actively learning; 70,000 have completed entry-level training, and 18,000 have completed more advanced work. For Gen AI delivery capabilities, we have 3000 AI practitioners across the company. And for applied AI leadership, we are making a significant change at the most senior levels in the company. 85% of senior leaders will have gone through certification from schools like MIT by the end of 2024.
Speaker Change: Our employees are critical to our success and we have made significant progress year to date.
Speaker Change: Our broader technology skills.
Speaker Change: Part of our overall investment in data.
Jamie: One foundational Jamie I, we have more than 100000 employees, who are actively learning 70, probably gonna have completed entry level, claiming an 18000 have completed more advanced work.
Jimmy: Jimmy I delivery capability, we have feet housing AI practitioners across the company.
Jimmy: And for applied AI leadership, we are making a significant change at the most senior levels in the company.
Speaker Change: 85% of female leaders will have gone through certification from schools like I might be by end of can be done before.
Balkrishan Kalra: As we look ahead, we will continue to invest aggressively in our talent with a focus on the practical application of advanced technology. Now turning to guidance, with another quarter of better-than-expected results and strong performance in the first half, we are raising our revenue and EPS outlook for the full year. We are increasing our revenue guidance by 150 basis points, to 4 to 5% growth on an as reported basis, up from 2.5 to 3.5% previously. Similar to the last quarter, we are not assuming any improvement in the buying environment.
B.K. Kahlra: As we look ahead, we will continue to invest aggressively in our talent with a focus on practical application of advanced technologies.
Speaker Change: As we look ahead, we will continue to invest aggressively in our talent with a focus on practical application of advanced technologies.
B.K. Kahlra: Now turning to guidance, with another quarter of better-than-expected results and strong performance in the first half, we are raising our revenue and EPS outlook for the full year. We are increasing our revenue guidance by 150 basis points to 4 to 5% growth on an as-reported basis, up from 2.5 to 3.5% previously. Similar to the last quarter, we are not assuming any improvement in the buying environment. We are simply reflecting our improved execution in our full year outlook. Guidance for gross margin and AI margin for full year remains unchanged at 35.3% and 17%, respectively. As we continue to invest in our top priorities, partnerships, and advanced technologies in data tech AI to drive accelerating long-term growth.
Speaker Change: Now turning to guidance.
Speaker Change: With another quarter of better than expected results.
Speaker Change: And strong performance in the first half we are raising our revenue and EPS outlook for the full year.
Speaker Change: We are increasing our revenue guidance by 150 basis points too.
Speaker Change: Two 4% to 5% growth on as reported basis up from two five to three 5% previously.
Speaker Change: Similar to the last quarter.
Speaker Change: Not assuming any improvement in the buying environment, we are simply reflecting our improved execution in our full year outlook.
Balkrishan Kalra: We are simply reflecting our improved execution in our full year outlook. Guidance for gross margin and AY margin for full year remains unchanged at 35.3% and 17%, respectively, as we continue to invest in our top priorities, partnerships, and advanced technologies in data tech and AI to drive accelerating long-term growth. For the full year, we are also raising our outlook for adjusted diluted EPS to reflect the strong performance we achieved in the first half with a 14 cent increase at the midpoint of the range.
Speaker Change: Guidance for gross margin <unk> margin portfolio remains unchanged at 35, 3% and 17% respectively.
Speaker Change: As we continue to invest in our top priorities partnerships and advanced technologies and data to drive accelerating long term growth.
B.K. Kahlra: For the full year, we are also raising our outlook of adjusted diluted EPS to reflect the strong performance we achieved in the first half, with a 14 cent increase at the midpoint of the range.
Speaker Change: For the full year, we are also raising our outlook of adjusted diluted EPS.
Speaker Change: To reflect the strong performance, we achieved in the first half with a 14% increase at the midpoint of the range.
B.K. Kahlra: In closing, I would like to extend my heartfelt thanks to every one of our employees. Your dedication is delivering exceptional value to our clients and driving success and growth for GenPath. As we continue to innovate and expand, your commitment is the cornerstone of our achievement. Thank you, and we continue to sharpen our competitive edge and build an acceptor of GenPath.
Balkrishan Kalra: In closing, I would like to extend my heartfelt thanks to every one of our employees. Your dedication is delivering exceptional value to our clients and driving success and growth for Genpact. As we continue to innovate and expand, your commitment is the cornerstone of our achievement. Thank you, and we will continue to sharpen our competitive edge and build the next chapter of Genpact. With that, let me turn the call over to Mike. Thank you, BK, and good afternoon, everyone. I appreciate your time today as we review our financial performance for the second quarter.
Speaker Change: In closing I would like to extend my heartfelt. Thanks to every one of our employees.
Speaker Change: Your dedication is delivering exceptional value to our clients and driving success and growth for genpact.
Speaker Change: As we continue to innovate and expand your commitment is the cornerstone of our achievement. Thank you.
Speaker Change: And we continue to sharpen our competitive edge and build the next step it up genpact.
Mike Weiner: With that, let me turn the call over to Mike.
Speaker Change: That let me turn the call over to Mike.
Michael Weiner: Thank you, PK, and good afternoon, everyone. I appreciate your time today as we review our financial performance for the second quarter of 2024 and provide insights into our outlook for the third quarter and full year. I'm pleased to report Genpact delivered another strong quarter, including an all-time high income from operations of $170 million. We continue to build the foundational improvements needed to drive sustainable growth and efficiency. Our pipeline reached a record level in the second quarter, driven by a healthy mix of small, medium, and large deals.
Mike Weiner: Thank you, Pete. Good afternoon, everyone. I appreciate your time today as we review our financial performance in the second quarter of 2024, and provide insights into our outlook for the third quarter in full year. I'm pleased to report Genpact delivered another strong quarter, including an all-time high income from operations of 170 million. We continue to build the foundational improvements needed to drive sustainable growth on efficiencies. Our pipeline reached a record level in the second quarter, driven by a healthy mix of small, medium, and large deals. Generative AI contributed to our pipeline also doubled in the first half of 2024.
Mike Queener: Thank you Pete and good afternoon, everyone. I appreciate your time today as we review our financial performance in the second quarter of 2024 and provide insights into our outlook for the third quarter and full year I am pleased to report Genpact delivered another strong quarter, including an all time high income from operations of 170 million.
Speaker Change: We continue to build the foundational improvements needed to drive sustainable growth and efficiencies our pipeline reached a record level in the second quarter, driven by a healthy mix of small medium and large deals.
Michael Weiner: The ground of AI also contributed to our pipeline also doubled in the first half of 2024. All this sets us up well for future growth. During the quarter, we added 23 new logos, bringing our first half total to 53 new logos, a 29% increase year over year. We also booked four large deals in the quarter. Our win rate was 51%, while sole source deals accounted for approximately 45% of total bookings.
Speaker Change: Today I contributed to our pipeline also doubled in the first half of 2024 all of this sets us up well for future growth.
Mike Weiner: All this sets us up well for future growth. During the quarter, we added 23 new logos, bringing our first half total to 53 new logos, a 29% increase year-over-year. We also booked four large deals in the quarter. Our win rate was 51%, while sole source deals accounted for approximately 45% of total bookings. Highlighting our strong value proposition. We continue to deepen and broaden our client base. During the second quarter compared to the prior period, we expanded the number of client relationships generating annual revenue greater than 5 million from 180 to 185. We also increased the number of clients with annual revenue exceeding 25 million from 38 to 42.
Speaker Change: During the quarter, we added 23, new logos, bringing our first half total to 53, new logos, a 29% increase year over year. We also booked four large deals in the quarter.
Speaker Change: Our win rate was 51% while sole source deals accounted for approximately 45% of total bookings.
Michael Weiner: Highlighting our strong value proposition, we continue to deepen and broaden our client base. During the second quarter, compared to the prior period, we expanded the number of client relationships generating annual revenue greater than $5 million from $180 to $185. We also increased the number of clients with annual revenue exceeding $25 million from $38 to $42, while five of these clients generated more than $100 million in revenue. Now on to our income statement.
Speaker Change: Highlighting our strong value proposition, we continue to deepen and broaden our client base during the second quarter compared to the prior period, we expanded a number of client relationships generating annual revenue greater than $5 million from 180 to 185. We also increased the number of clients with annual revenue exceed.
Speaker Change: Adding 25 million from 38 to 42, while side that these clients generated more than $100 million in revenue.
Mike Weiner: While five of these clients generate more than 100 million in revenue.
Michael Weiner: Total revenue for the quarter was $1.176 billion, up 6% year-over-year as reported and 7% on a constant currency basis. This performance, which exceeded our expectations, is the result of renewed focus on driving results in data, tech, and AI and digital operations. Data Tech and AI represented roughly 46% of total revenue in the second quarter and grew 4% year over year on both a reported and constant currency basis. Growth is primarily driven by supply chain and risk management services.
Mike Weiner: Now, want to rank them statement. Total revenue for the quarter was 1.176 billion, up 6% year-over-year as reported, and 7% on a constant currency basis. This performance, which exceeded our expectations, is the result of renewed focus on driving results in data tech and AI and digital operations. Data tech and AI represents roughly 46% of total revenue in the second quarter and grew 4% year-over-year on both of the reported and constant currency basis. Growth was primarily driven by supply chain and risk management service lines. Digital operations revenue increased 9% year-over-year on both a reported and constant currency basis, primarily due to ramp-ups of large deals.
Speaker Change: Now onto our income statement.
Speaker Change: Revenue for the quarter was $1 176 billion up 6% year over year as reported and 7% on a constant currency basis, this performance, which exceeded our expectations. As a result of renewed focus on driving results in data Tech and AI and digital operations data Tech and Hey, I.
Speaker Change: Roughly 46% of total revenue in the second quarter and grew 4% over a year over year on both a reported and constant currency basis growth was primarily driven by supply chain and risk management service lines.
Michael Weiner: Digital operations revenue increased 9% year-over-year on both a reported and constant currency basis, primarily due to ramp-ups of large deals. Digital operations accounted for 54% of total revenue in the quarter. Revenue contributed from outcome and consumption-based deals, which excludes fixed-fee contracts, continues to expand compared to the prior year. It now comprises 20% of second quarter revenue, a milestone we achieved at the end of 2023. This recurring achievement demonstrates our commitment to meeting our long-term objectives.
Speaker Change: Digital operations revenue increased 9% year over year on both a reported and constant currency basis, primarily due to ramp ups of large deals digital operations accounted for 54% of total revenue in the quarter.
Mike Weiner: Digital operations accounted for 54% of total revenue in the quarter. Revenue contributed from outcome and consumption base deals, which excludes fixed fee contracts, continues to expand compared to prior year. It now comprises 20% of second quarter revenue. A milestone we achieved at the end of 2023. This recurring achievement demonstrates our commitments to meeting our long-term objectives. Expanding these deals enables us to drive profitable growth and enhance value to our clients. Revenue from priority accounts grew approximately 7% year-over-year and comprise 62% of total revenue. Now, want to grow 7% while revenue and financial services, as well as high tech manufacturing, increased approximately 6% year-over-year.
Speaker Change: Revenue contributed from outcome and consumption based deals, which excludes fixed fee contracts continue expand compared to prior year and now comprises 20% of second quarter revenue a milestone we achieved at the end of 2023.
Speaker Change: This recurring achievement demonstrates our commitments to meeting our long term objectives.
Michael Weiner: Expanding these deals enables us to drive profitable growth and enhance value for our clients. Revenue from priority accounts grew approximately 7% year over year and comprised 62% of total revenue. Now on to our three segments, all of which delivered strong results.
Speaker Change: Expanding these deals enables us to drive profitable growth and enhance value to our clients.
Speaker Change: Revenue from priority accounts grew approximately 7% year over year and comprised of 62% of total revenue.
Speaker Change: Now on to our three segments all of which delivered strong results revenue in consumer and health care grew 7% while revenue in financial services as well as high Tech manufacturing increased approximately 6% year over year. The primary revenue growth drivers of all three segments remain largely unchanged from the prior quarters with.
Michael Weiner: Revenue and consumer and health care grew 7%, while revenue and financial services, as well as high-tech manufacturing, increased approximately 6% year over year. The primary revenue growth drivers of all three segments remain largely unchanged from the prior quarters, reflecting stability and consistency in our business operation. Transitioning from top line performance to gross margin of 35.4%, up 10 basis points from the prior year quarter driven by operational leverage and modestly lower stock-based compensation, partly offset by our annual comp cycle.
Mike Weiner: The primary and revenue growth drivers of all three segments remain largely unchanged from the prior quarters. Reflecting stability and consistency in our business operations. Jones, transitioning from top line performance to gross margin of 35.4%, up 10 basis points from the prior year, quarter driven by operational leverage and modestly lower stock based compensation expense, partly offset by our annual comp cycle. Adjusted operating income margin was 16.9%, up 10 basis points year over year. 4% driven by higher operating leverage, some of which results from our ongoing simplification efforts, offset by increased investments. Our effective tax rate was 24.9%, up from 22.7% in the prior year quarter, which had a discrete tax benefit.
Speaker Change: <unk> stability and consistency in our business operations transitioning from topline performance to gross margin of 35, 4% up 10 basis points from the prior year quarter, driven by operational leverage and modestly lower stock based compensation expense, partly offset by our annual comp cycle.
Michael Weiner: Adjusted operating income margin was 16.9%, up 10 basis points year-over-year. SG&A's percentage of revenue declined 40 basis points year-over-year to 20.4%, driven by higher operating leverage, some of which results from our ongoing simplification efforts, offset by increased investments. Our effective tax rate was 24.9%, up from 22.7% in the prior year quarter, which had a discrete tax benefit.
Speaker Change: Adjusted operating income margin was 16, 9% up 10 basis points year over year.
Speaker Change: SG&A as a percentage of revenue declined 40 basis points year over year to 24% driven by higher operating leverage some of which results from our ongoing simplification efforts offset by increased investments our effective tax rate was 24, 9% up from 22, 7%.
Speaker Change: In the prior year quarter, which had a discrete tax benefit GAAP net income was $122 million, a 5% improvement year over year GAAP diluted EPS rose to 67.
Mike Weiner: Gap net income was 122 million, a 5% improvement year over year. Gap diluted EPS rose to 67 cents, a 6% increase year over year. Similarly, adjusted deluded EPS climbed to 79 cents, up 10% from last year, outpacing revenue growth. We continue to generate significant cash from operations; we delivered 209 million compared to 171 million in the prior year period. Moving on to our balance sheet, cash and cash equivalence were 914 million, up 491 million at the end of the same period last year. The cash increase is primarily due to proceeds from our recent bond issuance, which will be used to repay up and coming bond maturities.
Michael Weiner: Gap net income was $122 million, a 5% improvement year-over-year. Gap diluted EPS rose to $0.67, a 6% increase year-over-year. Similarly, adjusted diluted EPS climbed to $0.79, up 10% from last year, while outpacing revenue growth. We continue to generate significant cash from operations. We delivered $209 million compared to $171 million in the prior year period. Moving on to our balance sheet, cash and cash equivalents were $914 million, up $491 million at the end of the same period last year.
Speaker Change: A 6% increase year over year Similarly, adjusted diluted EPS climbed to 79.
Speaker Change: 10% from last year outpacing revenue growth.
Speaker Change: We continue to generate significant cash from operations, we delivered $209 million compared to $171 million in the prior year period.
Dave: Moving onto our balance sheet cash and cash equivalents were $914 million up $491 million at the end of the same period last year to cash increased primarily due to proceeds from our recent bond issuance, which will be used to repay up and coming bond maturities Dave.
Michael Weiner: The cash increase is primarily due to proceeds from our recent bond issuance, which will be used to repay up-and-coming bond maturity. Although day sales outstanding decreased by two days versus last quarter, we delivered a net debt to EBITDA ratio of 0.9 times for the quarter at the low end of our preferred range.
Mike Weiner: Day sales outstanding decreased by two days versus last quarter. We delivered net debt to EBIT ratio of 0.9 times to the quarter at the low end of our preferred range. This positioned us well for strategic investments in future growth opportunities. In the second quarter, we purchased approximately 1.9 million shares at an aggregate cost of $63 million. We also paid $27 million in dividends. Overall, we returned approximately $90 million to our shareholders in the second quarter alone. We remain committed to returning capital shareholders and allocating a minimum of 30% of operating cash flow to share repurchases, in addition to the 20% annual dividends.
Dave: Days sales outstanding decreased by two days versus last quarter, we delivered net debt to EBITDA ratio of 0.9 times for the quarter at the low end of our preferred range. This positions us well for strategic investments in future growth opportunities.
Michael Weiner: This positions us well for future investments in future growth opportunities. In the second quarter, we repurchased approximately 1.9 million shares at an aggregate cost of $63 million. We also paid $27 million in dividends. Overall, we returned approximately $90 million to our shareholders in the second quarter alone. We remain committed to returning capital to shareholders and allocating a minimum of 30% of operating cash flow to share repurchases, in addition to the 20% annual dividend. Attrition remains at historical lows at 23% for the second quarter, at 200 basis points under the same quarter, lower than the same quarter last year.
Speaker Change: In the second quarter, we repurchased approximately 1.9 million shares at an aggregate cost of $63 million. We also paid $27 million in dividends overall, we've returned approximately $90 million to our shareholders in the second quarter alone we.
Speaker Change: We remain committed to returning capital to shareholders and allocating a minimum of 30% of operating cash flow to share repurchases. In addition to the 20% annual.
Speaker Change: Dividends.
Mike Weiner: Attrition remains at historical lows at 23% for the second quarter, a 200 basis points under the same lower than the same quarter last year.
Speaker Change: <unk> remains at historical lows at 23% for the second quarter, a 200 basis points under the same core.
Speaker Change: Lower than the same quarter last year.
Mike Weiner: Moving on to our expectations for the third quarter, we got into total revenue in the range of 1.18 billion to 1.186 billion, a year-over-year growth of approximately 3.9% to 4.4% as reported. This comprised of digital operations and data tech and IO revenue growth of approximately 3.8% and 4.6% versus the prior year period, respectively, at the midpoint of the range as reported. Rose margin for the quarter is expected to be approximately 35.4%, consistent with prior quarter. Adjusted operating income margins is expected to be 17.2% as we can need to invest for long term growth.
Michael Weiner: Moving on to expectations for the third quarter, we got into total revenue in the range of $1.18 billion to $1.186 billion, a year-over-year growth of approximately 3.9% to 4.4% as reported. This included digital operations and data tech revenue growth of approximately 3.8 and 4.6 versus the prior year period, respectively, at the midpoint of the range as reported. Gross Margin for the quarter is expected to be approximately 35.4%, consistent with the prior quarter.
Speaker Change: Moving on to our expectations for the third quarter, we guided to total revenue in the range of $1. One 8 billion to $1. One 6 billion a year over year growth of approximately three 9% to four 4% as reported is comprised of digital operations in data Tech and IR.
Speaker Change: Revenue growth of approximately three eight and $4 six versus the prior year period, respectively at the midpoint of the range as reported.
Speaker Change: Gross margin for the quarter, it's expected to be approximately 35, 4% consistent with prior quarter. Adjusted operating income margin is expected to be 17, 2% as we continued to invest for long term growth for.
Michael Weiner: The Adjusted Operating Income Margin is expected to be 17.2% as we continue to invest for long-term growth. For the full year, we are raising our adjusted diluted EPS guide. We now project adjusted diluted EPS to be between $3.14 and $3.18. This represents a 14 cent increase at the midpoint of our previous guide and will mark the fourth consecutive year of delivering EPS growth that outpaces revenue. The year over year increase in EPS is driven by adjusted operating income of $0.14 and a $0.09 benefit from lower share.
Mike Weiner: For the full year, we are raising our adjusted diluted EPS guide. We now project adjusted diluted EPS to be between $3.14 and $3.18. This represents a 14 cent increase at the midpoint of our previous guide and will mark the fourth consecutive year of delivering EPS growth that outpaces revenue. 13. The year-of-year increase in EPS is driven by adjusted operating income of 14 cents and a 9-cent benefit from lower share count. The increases are forecastly partially upset by higher interest expense of 3 cents and expected tax rate impact of 1 cent. As BK mentioned, we are not anticipating more favorable market conditions as the year progresses.
Speaker Change: For the full year, we are raising our adjusted diluted EPS Guide, we now project adjusted diluted EPS to be between $3 14 and.
Speaker Change: And $3 18.
Speaker Change: This represents a 14% increase at the midpoint of our previous guide and will Mark the fourth consecutive year of delivering EPS growth that outpaces revenue.
Speaker Change: The year over year increase in EPS is driven by adjusted operating income of <unk> 14, and.
Speaker Change: And a <unk> <unk> benefit from lower share count the increases are forecast to be partially offset by higher interest expense of <unk> <unk> and expected tax rate impact of one as BK mentioned, we are not anticipating a more favorable market conditions as the year progresses, we're primarily incorporating the strong performance in the first.
Michael Weiner: The increases are forecast to be partially offset by higher interest expense of three cents and an expected tax rate impact of one cent. As BK mentioned, we are not anticipating more favorable market conditions as the year progresses.
Mike Weiner: We are primarily incorporating the strong performance in the first half into our projections for the full year. Specifically, we are now anticipating total revenue to be between 4.656 billion and 4.701 billion, representing a year-over-year growth of 4 to 5 percent, as reported. This positive adjustment reflects digital operations revenue growth of 5.2 percent and approximately 3.8 percent in data tech and AI revenue growth at the midpoint. We continue to expect full-year of growth from margin to be approximately 35.3 percent and an adjusted operating income margin of 17 percent. Highlighting our ability to maintain profitability while navigating an uncertain economic and business environment and investing in our business.
Michael Weiner: We are primarily incorporating the strong performance in the first half into our projections for the full year. Specifically, we are now anticipating total revenue between $4.656 billion and $4.701 billion, representing a year-over-year growth of 4% to 5%, as reported. This positive adjustment reflects digital operations revenue growth of 5.2% and approximately 3.8% in data tech and AI revenue growth at the midpoint. We continue to expect full-year gross margin to be approximately 35.3% and an adjusted operating income margin of 17%, highlighting our ability to maintain profitability while navigating an uncertain economic and business environment and investing in our business.
Speaker Change: Into our projections for the full year specifically.
Speaker Change: Specifically, we are now anticipating total revenue to be between $4 $65 6 billion and $4 seven year 1 billion, representing a year over year growth of 4% to 5% as reported this positive adjustment reflects digital operations revenue growth of five 2% and approximately three eight.
Speaker Change: In data Tech and AD revenue growth at the midpoint.
Speaker Change: We continue to expect full year gross margin to be approximately 35, 3% and adjusted operating income margin of 17% highlighting our ability to maintain profitability, while navigating uncertain economic and business environment and investing in our business.
Mike Weiner: We now anticipate to generate approximately $525 million in operating cash flow this year. In addition to our results driven focus, our strategic investments will bust client relationships and operating excellence, all positions us to navigate the dynamic market environment effectively. These efforts are designed to enhance shareholder value, drive sustainable growth, and generate long-term return source shareholders.
Michael Weiner: We now anticipate generating approximately $525 million in operating cash flow this year. In addition to our results-driven focus, our strategic investments, robust client relationships, and operating excellence all position us to navigate the dynamic market environment effectively. These efforts are designed to enhance shareholder value, drive sustainable growth, and generate long-term returns to our shareholders. Now, I'll turn the call back over to Krista. Thank you.
Speaker Change: We now anticipate to generate approximately $525 million and.
Speaker Change: And operating cash flow this year.
Speaker Change: In addition to a results driven focus our strategic investments robust client relationships and operating excellence all positions us to navigate the dynamic market environment effectively.
Speaker Change: These efforts are designed to enhance shareholder value drive sustainable growth and journey and generate long term returns to our shareholders.
Krista Bessinger: Now I'll turn the call back over to Krista. Thank you.
Speaker Change: Now I'll turn the call back over to Krista. Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Unknown Attendee: I operator, we're ready to go ahead and pull for questions. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your questions, please press star 11 again. Please stand by while we compile the Q&A roster.
Operator: Operator, we're ready to go ahead and pull for questions. Thank you.
Krista Bessinger: Hi, operator, we're ready to go ahead and poll for questions.
Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. And our first question comes from Maggie Nolan with William Blair. Your line is now open.
Speaker Change: Thank you Sir.
Speaker Change: A reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.
Maggie Nolan: And our first question comes from Maggie Nolan with William Blair. Your line is now open. Hi everyone.
Speaker Change: And our first question comes from Maggie Nolan with William Blair. Your line is now open.
Unknown Attendee: Hi, everyone. It's Kate on for Maggie.
B.K. Kahlra: It's Kate on Sir Maggie. Congrats on a nice quarter. My first question is I understand that you guys are not accounting for any improvement in client demand with the revised outlook. But can you provide any updates to somewhere overall client sentiment is right now and how it's evolved over the past quarter?
Speaker Change: Hi, everyone. It's Kate on for Maggie Congrats on a nice quarter.
Unknown Attendee: Congratulations on a nice quarter. My first question is, I understand that you guys are not accounting for any improvement in client demand with the revised outlook, but can you provide any updates just on where overall client sentiment is right now and how it's evolved over the past quarter?
Speaker Change: My first question I understand that you guys are not accounting for any improvement in client demand with that revised outlook, but can you provide any update just on where overall Craig. Thank you Matt is right now and how it's evolved.
Matt: Over the past quarter.
Mike Weiner: I'll take that. This is BK, so first of all, thanks so much. And what I can report on the client sentiment is that it has largely stayed the same as we have observed over the last six months, or I would say even over the last 12 months. So we haven't seen, as an example, in the discretionary spends, neither any improvement and yes, no deterioration either. And our clients continue to stay very cautious, very watchful, and continue to be almost in the same zone given all the uncertainties that surround them.
Balkrishan Kalra: I'll take that. This is BK. So first of all, thanks so much.
Speaker Change: I'll take that.
Speaker Change: So first of all thanks, so much.
Speaker Change: And what.
Speaker Change: What I can report on the clients and team members it has.
Balkrishan Kalra: And what I can report on client sentiment is that it has largely stayed the same, as we have observed over the last six months, or I would say even over the last 12 months. So we haven't seen, as an example, in discretionary spends, nor any improvement. And yes, no deterioration either. And clients continue to stay very cautious, very watchful, and continue to be almost in the same zone, given all the uncertainties that surround them.
Speaker Change: Largely the same as we have observed over the last six months. So I would say even over the last 12 months. So we haven't seen as an example in the discretionary spends me that any improvement.
Speaker Change: Yes, no deterioration either.
Speaker Change: Clients continue to stay very cautious really watchful.
Speaker Change: And continuing to be almost similar themes on.
Speaker Change: All the uncertainties that surround them.
Mike Weiner: Great, thank you because. And then my next question is, what's nice to hear about the continued increase in consumption and outcome-based deals? Has your long-term mindset changed at all, and on what that percentage could eventually get up to?
Unknown Attendee: Okay, great. Thank you, BK. Um, and then my next question is, it was nice to hear about the continued increase in consumption and outcome-based deals. Has your long-term mindset changed at all about what that percentage could eventually get up to?
Speaker Change: Okay, great. Thank you Bill.
Speaker Change: And then my next question.
Speaker Change: Nice to hear about the continued increase.
Speaker Change: Outcome HDL.
Speaker Change: A long term mindset changed at all on what that percentage could eventually get up to you.
Mike Weiner: Sure, this is Mike. I'll take that one. So, you're correct; we've already reached our goal that we put out ahead of schedule on that. While we don't have any concrete numbers to share today, you can expect that number to be notionally higher as we move forward in the year. But I think what's so important about it is, as we're approximately at 20% right now, is also to think about it; it's not just that it's helping us pivot this new economic model. But if we look back at that 20%, the margin on it continues to remain robust and above average.
Michael Weiner: Sure. This is Mike.
Speaker Change: Sure. This is Mike I'll take talent. So youre correct. We have already reached our goal that we put out.
Speaker Change: Head of schedule on that while we don't have any concrete numbers to share today, but you can expect that number to be notionally higher as we move forward in the year, but I think what's so important about it is as we're about smelly at 20% right. Now is also to think about it's not just that it is helping us pivot. This.
Michael Weiner: I'll take that one. So you're correct. We've already reached our goal that we put out ahead of schedule on that. While we don't have any concrete numbers to share today, you can expect that number to be notionally higher as we move forward in the year. But I think what's so important about it is, as we're approximately at 20% right now, to think about it's not just that it's helping us pivot this new economic model. But if we look back at that 20%, the margin on it continues to remain robust and above average. So more to come on that.
Speaker Change: This new economic model, but if we look back at that 20% margin on it continues to remain robust and above average so more to come on that.
Mike Weiner: So, more to come on that. Great, thank you, Mike and BK. Thank you.
Unknown Attendee: Great. Thank you, Michael B. Kay.
Speaker Change: Great. Thank you Mike.
Speaker Change: Thank you.
Brian Bergen: And the next question comes from Brian Bergen with TDCO, and your line is open. Hey guys, good afternoon. Thank you.
Operator: And the next question comes from Bryan Bergin with TD Cohen. Your line is open.
Speaker Change: And the next question comes from Bryan Bergin with TD Cowen Your line is open.
Unknown Attendee: Hey, guys, good afternoon. Thank you. Deacon, maybe, maybe a high-level question, you know, you've been in the role for six, six plus months now. Can you give some perspective on the initiatives that you think have worked really well here versus any of those that are moving slower? And just any areas of added emphasis for you as you're working through the second half of 24?
Bryan Bergin: Hey, guys. Good afternoon. Thank you.
B.K. Kahlra: Maybe a high-level question. You know, even in the role six plus months now, can you give some perspective on the initiatives that you think have worked really well here versus any of those that are moving slower? And just any area, you know, added areas of emphasis for you as you're working through the second half of 24. Absolutely, Brian, thanks. So, as we clearly articulated, Brian, that we are focused predominantly on these four initiatives, what we call as T plus one, which I am building through line across the company as well, along with all the colleagues in Zempact.
Bryan Bergin: You can maybe maybe a high level question you know you've been in there all six six plus months now can you give some perspective on the initiatives that you think it will work really well here versus any of those that are moving slower and just any area added areas of emphasis for you as you're working through the second half of 'twenty four.
Balkrishan Kalra: Absolutely, Bryan. Thanks.
Speaker Change: Absolutely Brian Thanks, So as well, we clearly articulated Brian.
Speaker Change: We are focused predominantly on these four initiatives, what we call it three plus one.
Balkrishan Kalra: So, as we clearly articulated, Bryan, that we are focused predominantly on these four initiatives, what we call 3 plus 1, which I am building through line across the company as well, along with all the colleagues in Genpact. And I would gladly say that all of these 3 plus 1 initiatives, be it plus 1 being Genpact, building Genpact as the best credential on the AI first journey, or in the three client-facing ones, the first one being partnership, the second one on data-tech AI, and the third, more simplified go-to-market motions.
Rich: Rich I am building through line across the company as well along with all of the colleagues and Genpact and what I would gladly say that all of these three plus one initiatives be it.
B.K. Kahlra: And what I would gladly say is that all of these three plus one initiatives, be it plus one being Zempact building Zempact as the best credential on AI first journey, or in the three client-facing ones, because one being partnership, the second one on data, the Ki, and third, more simplified go-to-market motions. All of them are progressing really well, and some are reflected already. What we have also done, Brian, is that it filled many initiatives, and that has helped us focus on these initiatives that are meaningfully better for our future as well as our present, and we are seeing results.
Speaker Change: That's why I'm being Genpact are building them back up the best credential on AI first journey.
Bryan Bergin: And the key client facing ones first one being partnership the second one on <unk> incurred more simplified go to market motions all of them are progressing really well and some are reflected already what we have also done Bryan filled many initiatives and that has helped us focus on.
Speaker Change: Do you have initiatives that are meaningfully.
Rich: Britta for our future as well.
Bryan Bergin: Our president and we have seen those <unk>.
B.K. Kahlra: Having said all of that, we are also leaning hard into innovation. Innovation represented by data in GNI, and we are at the early stages of that and more to come on that. Okay, understood.
Balkrishan Kalra: All of them are progressing really well, and some I have mentioned already. What we have also done, Bryan, is fill many initiatives, and that has helped us focus on these initiatives that are meaningfully better for our future, as well as our present, and we are seeing results. Having said all of that, we are also leaning hard into innovation, innovation represented by data and Gen-AI, and we are in the early stages of that, with more to come.
Bryan Bergin: Having said all of that we're also leaning hard into innovation innovation represented by <unk> and <unk>.
Speaker Change: In the early stages of that and more to come on that.
Balkrishan Kalra: Okay, understood. And then as it relates to digital operations, so a nice uptick here in 2Q, you know, that sequential uptick, as we compare that to the 3Q and the 4Q outlook, can you just maybe tease out if anything changes, the outlook flattens out a little bit, was there anything that happened in 2Q that allowed for that strong ramp? Anything one time or just more of the prudent approach you've demonstrated? It is more of a prudent approach.
Speaker Change: Okay understood and then as it relates to digital operation. So a nice uptick here in Q cube that sequential uptick as we compare that to <unk>.
Mike Weiner: And then, as it relates to digital operations, so a nice uptick here in two cube, you know, that's a sequential uptick. As we compare that to the three cube and the four cube outlook, you just maybe tease out if anything changes. Yeah, it looks flat and is out a little bit. Was there anything that happened in in two cube that allowed for that strong ramp, anything one time or just more so the prudent approach you've demonstrated? It is a more prudent approach, Brian. I think we continue to see earning off large deals into each quarter, actually on schedule, a little bit ahead of schedule.
Speaker Change: <unk> in the <unk> outlook can you just maybe tease out if anything changes outlook flattens out a little bit was there anything that happened in <unk> that allow for that strong ramp anything one time or just more so kind of a prudent approach we've demonstrated.
Balkrishan Kalra: It is a more prudent approach, Bryan. I think we continue to see earnings from large deals into each quarter, actually, on schedule, a little bit ahead of schedule. And I'm really pleased with that, really pleased with how all the cadences on various deals, even this year, be it small deals, medium deals, large deals. And we are also wanting to maintain a prudent approach as we go through the balance of the year.
Speaker Change: It is more prudent approach child, Brian I think we continue to see.
Speaker Change: Ingalls large deals into each quarter actually on schedule a little bit.
B.K. Kahlra: And really please, with that, really, please, with how all the key dancers on various deals, even this year, be small deals, medium deals, large deals. And we are also wanting to maintain a prudent approach, and we go through the balance of that.
Speaker Change: And I really piece, the bad really pleased with the hull.
Speaker Change: So all the cadences on radius deals even this year.
Speaker Change: Small deals medium deals large deals and it is going to be.
Speaker Change: Also wanting to maintain a prudent approach as we go through the balance of the year.
Unknown Attendee: All right, make sense. Thank you. Thank you, bud.
Speaker Change: Alright makes sense. Thank you.
Brian: Thank you Brian.
Robbie Bamberger: And our next question comes from Robbie Bamberger with Bayard. Your line is now open. Yeah, thanks for taking my question. So, in terms of the large deals, you noted at the end of 2023, can you maybe touch on how that large deal revenue is flowing through in 2024 and 2025? And maybe the puts and takes of the larger deals on EBIT and gross margins for 24?
Operator: And our next question comes from Robbie Bamberger with Baird. Your line is now open.
Rich: And our next question comes from Robbie Bamberger with Baird. Your line is now open.
Unknown Attendee: Yeah, thanks for taking my question. So in terms of the large deals you noted at the end of 2023, can you maybe touch on how that large deal revenue is flowing through in 2024 and 2025? And maybe the puts and takes of the larger deals on EBIT and gross margins for 2024?
Robbie Bamberger: Yes, thanks for taking my question.
Robbie Bamberger: So in terms of the large deals you noted at the end of 2023 can you maybe touch on how that large deal revenue is flowing through in 2024, and 2025 and maybe the puts and takes of the larger deals on EBIT and gross margins for 'twenty four.
Mike Weiner: Let me kick that off, and maybe VK, you can apply it on it. So in the second half of 2024, we had a notable amount of large deals that started to ramp that continued throughout the first two quarters of this year. I said, apologies, 2023 into 2024; those continued to perform very well. And we're at the point where they're ramping. Those deals typically come in at the beginning at a lower gross margin. And then they end up at a higher gross margin as they move through the pipeline and as they mature. Keep in mind our large deal for us typically can be about a five year in terms of their duration.
Michael Weiner: Let me kick it off, and maybe VK can comment on it. So in the second half of 2024, we had a notable amount of large deals that started to ramp that continued throughout the first two quarters of this year, I apologize, 2023 into 2024. Those continue to perform very well, and we're at the point where they're ramping. Those deals typically come in at the beginning at a lower gross margin and end up at a higher gross margin as they move through the pipeline and as they mature.
Speaker Change: So let me kick it off and maybe VK can opine on it so in the second half of 2024, we had a notable amount of large deals that started to ramp that continued throughout the first two quarters of this year I apologize 2023% to 2024.
VK: Those continue to perform very well and we're at the point, where theyre ramping those deals typically come in at the beginning had a lower gross margin and end up at a higher gross margin as they move through the pipeline and as they mature keep in mind, a large deal for us typically can be about a five year in terms of in terms of their duration. So if you think about.
Michael Weiner: Keep in mind, a large deal for us typically can be about five years in terms of terms of their duration. So if you think about our guide for the remaining piece of the year, it really does reflect that movement as we move forward.
B.K. Kahlra: So if you think about our guide for the remaining piece of the year, it really does reflect that movement as we move forward. Very well said, and I think I'm continuing with the momentum of overall Ruby. Perfect.
Rich: Our guide for the remaining piece of the year. It really does reflect that movement as we move forward.
Balkrishan Kalra: Very well said, and I think we'll continue with the momentum overall, Robby.
Speaker Change: Okay great.
Speaker Change: Continue the momentum.
Robbie Bamberger: Overall Robbie.
Unknown Attendee: And then in terms of the Gen-AI deals, you noted 95% of Gen-AI bookings are on a non-FTE basis. So can you maybe dive into the pricing of these non-FTE-based contracts that you have with clients? Are they higher-margin than normal contracts? Yeah, a number of these JNI deals.
Mike Weiner: And then, in terms of the Jenny I deals, you noted 95% of Jenny I bookings are on a non-FTE basis. So can you maybe dive into the pricing of these non-FTE based contracts that you have with clients? Are they higher margin than normal contracts? Yeah, number of the Jenny I deals are which is also reflected in the quarter end results that we just spoke about are non-FTE based. When we say non-FTE based, they are largely more based on outcomes outcomes, they generate for our clients and how we get paid for it. And most of our outcome deals are at a higher profitability, and that's what we are anchoring on the entire company on.
Robbie Bamberger: Perfect and then in terms of the journey ideals. You noted 95% of journey II bookings are on a non FTE basis. So can you maybe dive into the pricing of these non FTE based contracts that you have with clients are they higher margin than normal contracts.
Unknown Attendee: in the intercession towards the end of this conference call.
Unknown Attendee: As reminder, this call is being recorded for replay purposes. The replay of this call will be archived and made available on the IR section of Genpact's website.
Balkrishan Kalra: Yeah, a number of these Gen-AI deals, which is also reflected in the quarter-end results that we just spoke about, are non-FTE based. When we say non-FTE based, they are largely more based on outcomes, outcomes they generate for our clients and how we get paid for them. And most of our outcome deals are at higher profitability. And that's what we are anchoring the entire company on.
Krista Bessinger: I would now like to turn the call over to Krista Bessinger, Head of Investor Relations at Genpact. Please proceed. Thank you, Michelle. Good afternoon, everyone. And welcome to Genpact. Q2, 2024 earnings conference call. We hope you had a chance to read our earnings press release, which was posted on the Investor Relations section of our website, Genpact.com. And today we have with us, B.K.
Jamie: Yes number of farm be Jamie I'd deals are or which is also reflected in the quarter and to those that we just spoke about.
Speaker Change: Our non FTE based when we say non MTB about largely more based on outcomes outcomes data.
Krista Bessinger: Kahlra, President and CEO and Mike Weiner Chief Financial Officer. B.K, 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 also note that during this call we will make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions and expectations as of today, which may change over time.
Rich: For our clients and how we get paid for it.
Rich: Most of our all come to us.
Rich: At our higher profitability and that's what we are anchoring the entire company.
Mike Weiner: Great, thank you.
Speaker Change: Great. Thank you.
Unknown Attendee: Thank you very much.
Ravi: Thank you Ravi.
Surinder Thind: Our next question comes from my aunt. Can then, with need them, your line is open.
Operator: Our next question comes from Mayank Tandon with Needham. Your line is open.
<unk> Tandon: Our next question comes from <unk> Tandon with Needham Your line is open.
Unknown Attendee: Thank you. Good evening.
Surinder Thind: Thank you. A good evening. Bala, you mentioned that the Jenny I opportunity expands your time. So could you maybe just give us some sense of how it does it? Is it just opening up new avenues of growth that haven't been explored before by clients, just maybe a little bit more details around how it expands the time, and maybe it could quantify it too. Yeah, so I think quantification might be challenging at this early stages, but it's clearly what we see. Is increasing off our time beat in the bookings that we are seeing or even in our pipeline or a number of solutions that we are baking for clients as we speak.
<unk> Tandon: Thank you good evening, Bob you mentioned that the January opportunity expand your Tam. So could you maybe just give us some sense of how it does it is it just opening up new avenues of growth that havent been explored before by clients, just maybe a little bit more details around how we expand the Tam and maybe if you could quantify it too.
Krista Bessinger: Actual results could differ materially due to a number of important risks and uncertainties, including the risk factors in our 10K and 10Q filings with the SEC. Also during this call, we will discuss certain non-gap financial measures. We have reconciled those to the most directly comparable gap financial measures in our earnings press release. These non-gap measures are not intended to be a substitute for our gap results.
Balkrishan Kalra: Bala, you mentioned that the GNI opportunity expands your TAM. So could you maybe just give us some sense of how it does that? Is it just opening up new avenues of growth that haven't been explored before by clients? Just maybe a little bit more details around how it expands the TAM, and maybe if you could quantify it too.
Balkrishan Kalra: Yeah, so I think quantification might be challenging at this early stage, but it clearly shows that Mayank is increasing our time, be it in the bookings that we are seeing or even in our pipeline or number of solutions that we are making for clients as we speak. And it increases time for two or three reasons.
Speaker Change: Yeah, So I think quantification might be challenging at early stages, but clearly what we see.
Unknown Attendee: And finally, this call in its entirety is being broadcast from our Investor Relations website, and an audio replay and transcript will be available on our website in a few hours.
Speaker Change: Is increasing off our Tam be it in the bookings that we're seeing.
Speaker Change: Do you I mean, our pipeline R. R.
Speaker Change: Number of solutions that we are breaking for client side as we speak.
Balkrishan Kalra: And with that, I'd like to turn it over to B.K. Thank you, Christa. Hello, everyone. And thank you for joining us today. I am pleased to report another strong quarter as we continue to successfully deliver on our three plus one execution framework. Revenue in Q2 reached $1.18 billion up 6% year-over-year above the high end of our guidance range with better than expected performance across both data and AI and digital operations. Gross margin of 35.4% and adjusted operating income margin of 16.9% also exceeded expectations driven by operating efficiencies.
B.K. Kahlra: And it increases time because of two or three reasons. One, it also expands the scope of opportunity that we are talking about. Point number one, point number two given. Especially with Jenny, I and AI always existed at least for a decade, I would say. But with Jenny, I a lot of our clients have also woken up to this transformative opportunity, and therefore they are engaging while we are engaging with them in different buying centers. And given our intense clients and click approach, we get called in some of the areas where we were early or not getting called.
<unk> Tandon: And.
<unk> Tandon: It increases time, because off two or three reasons. One it also expands the scope of opportunity that we are talking about.
Balkrishan Kalra: One, it also expands the scope of the opportunity that we are talking about, point number one. Point number two, given, especially with Gen-AI, and AI has existed at least for a decade, I would say, but with Gen-AI, a lot of our clients have also woken up to this transformative opportunity. And therefore, they are engaging with us in different buying centers. And given our intense client-centric approach, we get calls in some of the areas where we were earlier not getting calls.
Speaker Change: Point number one point number two given especially.
Speaker Change: Especially with Jamie I am AI already existed at least for a decade and I would say.
Speaker Change: But Jamie I a lot of our clients have also.
Speaker Change: Up to this platform.
Speaker Change: Opportunity and therefore be engaging while we are engaging with them in defense.
Speaker Change: <unk> centers.
Speaker Change: Given our intense.
Speaker Change: <unk> client centric approach.
Speaker Change: We get call them somewhat behaviors are where we were earlier not getting caught up so those are obviously, adding two opportunities as well so our Tam in particular.
Balkrishan Kalra: So those are obviously adding to opportunities as well. So TAM in a particular client, as well as TAM in a particular opportunity within the client. And if you look at the example that I shared. In my prepared remarks in that financial services industry case, you know overall, the deal size is a large deal. When we call them large deals, it's greater than $50 million. It's much bigger than $50 million. The deal size, pre-Geneai or post-Geneai, is much bigger in TCEs.
B.K. Kahlra: So those are obviously adding to opportunities as well. So our time in a particular client, as well as time in a particular opportunity within the client. And if you look at the example that I shared. in my prepared remarks. In that financial services industry case, you know, overall, that deal size, it's a large deal when we call large deals greater than 50 million; it's much bigger than 50 million. The deal size of pre-GNII or opposed GNII is much bigger MTCB. I would just quickly add on, so I said in my remarks as well, our pipeline reached a record level in the second quarter, right?
Balkrishan Kalra: We are on a right path and momentum is building for context in FY 2023. We grew roughly the revenue by $100 million on an absolute basis. In 2024, we have already hit $100 million in incremental revenues in the first half of the year with higher gross margin, all while continuing to invest in our top priorities. Unwavering focus on our three plus one execution framework is accelerating growth. And we will continue to build our execution muscle in the second half of the year with a continued focus on one strong partnership. Two comprehensive data tech AI solutions, three are simplified go-to-market approach, and our plus one that is leading Genpact as our best credential for AI first innovation.
Speaker Change: <unk> as well as timing of particular opportunity with them declined.
Speaker Change: And if you look at the example that I shared.
Speaker Change: In my prepared remarks.
Speaker Change: Dell financial services industry case.
Speaker Change: Overall the deal.
Speaker Change: Deal size its a large deal.
Speaker Change: Equalize.
Speaker Change: $50 million is much bigger than $50 million, but do you save.
Jamie: Pre Jamie I our board.
Speaker Change: <unk> is a much bigger MPV.
Michael Weiner: I would just quickly add, as I said in my remarks as well, our pipeline reached a record level in the second quarter, right? So if you also think about the Gen-AI contribution to that, it has more than doubled in the six months of this year versus the full year next year. So we are seeing a net increase in our quality pipeline, which does support the notion that BK alluded to as a TAM enhancer for it.
Speaker Change: Just quickly add on so I said in my remarks, as well our pipeline reached a record level in the second quarter right. So if you also think about the <unk> contribution of that has more than doubled in the six months.
Mike Weiner: So we also think about the GNI contribution of that has more than doubled in the six months of the of this year versus the full year next year. So we are seeing a net increase in our quality pipeline, which does support the notion that BKO alluded to as a tam and answer to it. And then if you extrapolate upon that, it's BKO alluded to with outcome based deals and looking at the margin on that, being higher, we feel very positive about it as a net tam and answer and a net revenue and answer to our business on our franchise.
Speaker Change: Of this year versus the full year next year. So we are seeing a net increase in our.
BK Kalra: Our quality pipeline, which does supports the notion that BK alluded to has a tam enhancer to it and then if you extrapolate upon that as BK alluded to with outcome based deals and looking at the margin on that.
Michael Weiner: And then if you extrapolate from that, as BK alluded to, with outcome-based deals and look at the margin on that being higher, we feel very positive about it as a net TAM enhancer and a net revenue enhancer for our business and our franchise.
Balkrishan Kalra: Let me walk you through the key highlights on each. First on partnerships we see a significant opportunity to accelerate revenue growth as we increase the strength of our partner relationships. To give you a sense, ID service and solution companies with mature partner operations typically generate 20 to 50% of their revenue from partners. For us, partner related revenues was in low single digits in 2023. This represents a significant opportunity for Genpact. We started ramping our investments in our partnership organization at the beginning of this year, and at the end of second quarter, we have more than double the percentage of revenue generated by partners with line of sight to generate significantly more in future periods.
BK Kalra: Being higher we feel very positive about it as a net Tam enhancer and a net revenue enhancer to our business and our franchise.
Mike Weiner: That's helpful. But on margins, then, I would be curious, does this potentially create a nice tailwind for you and maybe helps you close the gap versus your peers that run at slightly higher adjusted EVIC margins. I think the general margin level has been high; teams low 20s. I think you have some more headroom to get there. Is this potentially a longer-term tailwind to close that gap? Two things. So potentially yes, right? But keep in mind as well that, you know, our adjusted operating income margin, right? Continues to maintain stable as we've taken fluid through the operating leverage that we have in our business and have made substantial investments into our franchise on a go-forward basis.
Unknown Attendee: That's helpful. But on margins, then I would be curious, does this potentially create a nice tailwind for you and maybe helps you close the gap versus your peers that run at slightly higher adjusted EBIT margins? I think the general margin level has been high teens, low 20s. I think you have some more headroom to get there. Is this potentially a longer-term tailwind to close that gap?
Speaker Change: That's helpful. But on margins then I would be curious does this potentially create a nice tailwind for you and maybe helps you close the gap versus your peers that Ron had slightly higher adjusted EBIT margins I think the general.
Ron: Margin level has been high teens low 20 that you have some more headroom to get there is this potentially a longer term tailwind to close that gap.
Michael Weiner: Two things. So potentially, yes, right. But keep in mind as well that, you know, our adjusted operating income margin, right, continues to remain stable as we've taken fluid through the operating leverage that we have in our business and have made substantial investments in our franchise on a go forward basis. Things BK alluded to earlier, including enhanced training, investments in partnerships, and all these things, we think are a pivotal part of our company to generate long-term sustainable growth. So we'll be doing that, at least for the foreseeable future this year, and that's reflected in our numbers. Great
Speaker Change: So potentially yes, Brent, but keep in mind as well that our adjusted operating income margin rate continues to remain stable as we've taken fluid through the operating leverage that we have in our business and have made substantial investments into our franchise on a go.
Balkrishan Kalra: Growth to date has been driven by investing in world-class leadership team, driving awareness, improving go-to-market activations, and scaling delivery capabilities with a number of hyperscaler partners, including Microsoft, AWS, GCP, and other key partners like ServiceNow, Salesforce, Databricks to just name a few. Second, on data tech AI, our focus, go-to-market approach, continue to drive accelerating revenue growth in quarter two. Genie has significantly expanded our total addressable market, and is increasingly becoming a driver of our business.
Mike Weiner: Things BKO alluded to earlier, including enhanced training, investments in partnerships, and all these things, we think are a pivotal part to our company to generate long-term sustainable growth. So we'll be doing that, at least for the foreseeable future this year, and that's reflected in our numbers.
Brent: Forward basis.
BK Kalra: BK alluded to earlier, including enhanced training.
Speaker Change: Investments in partnerships and all of these things we think are a pivotal part to our company to generate long term sustainable growth. So we will be doing that at least for the foreseeable future. This year and that's reflected in our numbers.
Unknown Attendee: Great, thank you for all that color, and congratulations on the quarter.
Unknown Attendee: Great. Thank you for all that color.
Speaker Change: Great. Thank you for all that color congrats on the quarter.
Unknown Attendee: We're out on the quarter.
Unknown Attendee: Thank you.
Speaker Change: Thank you.
Brian Keane: Our next question comes from Surrender Thin with Jeffries. Your line is open. Thank you.
Operator: Our next question comes from Surinder Thind with Jeffreys. Your line is open.
Speaker Change: And our next question comes from surrenders, Dan <unk> with Jefferies. Your line is open.
Unknown Attendee: Thank you. I'd like to start with a question about partnership revenue. It's quite surprising that your partnership revenue sourcing is quite low. Can you help us understand why the strategy was what it was? I'm giving it the difference between your peers is so significant, and how quickly do you think you can ultimately close that gap to get to where, maybe,
Speaker Change: Thank you.
Mike Weiner: I'd like to start with a question about the partnerships. It's quite surprising that your partnership revenue sourcing is quite low. Can you help us understand why the strategy was what it was given at the difference between your peers is so significant, and how quickly do you think you can ultimately close that gap to get to where maybe where your peers are? Yeah. So we are moving ahead now rapidly and therefore investing rapidly in the and given we were running many initiatives, as I also alluded to earlier in the commentary. It was generating reserves not fast enough, and that is what is changing. We are very pleased with the investments we have made, and given we had made many of these connections with various hyperscalers or other iconic partners.
Speaker Change: I'd like to start with a question about the partnerships.
Balkrishan Kalra: While the absolute numbers are still small, Genie AI bookings in the first half of 2024 are already up more than 10 times compared to full year of 2020, with more than 95% of our Genie AI bookings year-to-date contracted on non-FT basis. We also now have more than 80 Genie AI solutions in production environments with clients either deployed or going live. Embedding AI into enterprise systems is a significant undertaking. It requires weaving AI into the very fabric of an organization, cutting across data engineering, conversational interfaces, existing IT systems, and ultimately weaving AI into and business processes.
Speaker Change: It's quite surprising that your partnership revenue sourcing it is quite low can you help us understand.
Speaker Change: Why the strategy was what it was.
Speaker Change: Given that the difference between your peers is so significant and how quickly do you think you can ultimately close that gap to get to where it may be.
Speaker Change: Where your peers are.
Balkrishan Kalra: Yeah, so we are moving ahead now rapidly and, therefore, investing rapidly, Surinder. And given we were running many initiatives, as I also alluded to earlier in the commentary, it was generating results, but not fast enough. And that is what is changing.
Speaker Change: Yeah. So we are moving ahead rapidly.
Speaker Change: Therefore investing rapidly sawtimber.
Speaker Change: And.
Speaker Change: Given we were running many initiatives.
Speaker Change: I also alluded to earlier in the commentary.
Speaker Change: It was generating with those not fast enough.
Balkrishan Kalra: And we are very, very pleased with the investments we have made. And given we have made many of these connections with various hyperscalers or other iconic partners, we have been in a relationship with them for X number of years, but not in a focused manner. And now they see us more. We have a pretty strong leader and a very strong team, possibly one of the best teams in the industry that we have put up. And we are seeing early results, and we certainly want to close this gap fast.
Speaker Change: And that is what is changing.
Speaker Change: We are very very pleased with the investments we have made and given we had made.
Balkrishan Kalra: This represents a significant opportunity for GenPak. We play a critical role in leveraging AI to drive business transformation for our clients, because our deep domain expertise at the key stroke level is essential to the successful implementation of an AI first and two end business processes in production environments.
Speaker Change: Many of these connections.
Speaker Change: Radius Hyperscale as our other.
Speaker Change: Iconic partners.
B.K. Kahlra: We have been in a relationship with them for X number of years, but not in a focused manner, and now they see us more. We have a pretty strong leader and a very strong team, possibly one of the best teams in the industry that we have put up, and we are seeing early results. We certainly want to close this gap for us. Just any color on how quickly that can you are we talking about like a five-year journey, or is it something shorter? Just any color? Five years is a very long time. Surinder, we are not thinking five-year horizons but clearly want to get to double digits fast.
Speaker Change: We have been in relationship with them for X number of years.
Speaker Change: But not email focused manner analogous see us more and we have pretty strong leader and a very strong team, possibly one of the best team in the industry that we have put up.
Balkrishan Kalra: Let me give you a few examples. A leading global provider of financial technology solution has chosen GenPak to drive their business-wide transformation and increase scalability and efficiency through the use of Genie AI. Jai, this is one of the large deals that we sign in second quarter, and Genai is significant part of the design. We are leveraging our banking domain, end-to-end process frameworks, and technology expertise, along with service now, to deliver our suite of AI solutions.
Speaker Change: And we are seeing early results and we certainly want to close this gap fast.
Unknown Attendee: Just any color on how quickly that can happen, are we talking about like a five year journey, or is it something shorter, or just any?
Speaker Change: Just any color on how quickly that are we talking about like a five year journey or is it something shorter or just any.
Balkrishan Kalra: Five years is a very long time, Surinder. We are not thinking five-year horizons but clearly want to get to double-digits fast.
Speaker Change: Color.
Speaker Change: February.
Speaker Change: A long time.
Speaker Change: We are not thinking five year horizons.
Speaker Change: But.
Speaker Change: Clearly want to get to double digit.
Michael Weiner: I would also just quickly bring up as well... I think we can all agree nobody has better insight into what we call keystroke-level information and data that we have, as our clients and hyperscalers and other partners that we deal with continue to want to penetrate with their offerings. Nobody has a better domain-level experience in our chosen verticals than we do. So, net net, it's a win for Genpact. It's a win for our clients, right? And it's a win for our partners. So, we're putting a lot of effort and money into that, and we think we'll see results in the not too distant future.
Speaker Change: <unk>.
B.K. Kahlra: Yeah, I would also bring out. I would also just quickly bring on as well. I think we can all agree. We nobody has better insight into what we call key stroke level information and data that we have as our clients and hyperscalers and other partners that we deal with continue to want to penetrate with their offerings. Nobody has a better domain level experience in our chosen verticals, and we do so net net. It's a win for Genpact. It's a win for our clients, right? And it's a win for our partners. So we're putting a lot of effort and money towards that.
Speaker Change: Yeah fair enough and bring out I would also just quickly bring on as well.
Balkrishan Kalra: These AI solutions are integrated with the client existing IT systems, leveraging large amount of unstructured data, to drive competitive advantage and growth. This implementation has a potential to serve as a template that can be replicated across industries. I have talked before about how our deep domain allows us to bridge the gap between out-of-the-box solutions, and what clients need on the ground to transform their business processes with Genai. This case study is a perfect example of that.
Speaker Change: I think we can all agree nobody has better insight into what we call keystroke level information and data that we have.
Speaker Change: Our clients and Hyperscale and other partners that we deal with continue to want to penetrate with their offerings nobody has a better domain level experience in our chosen verticals and we do so net net it's a win for Genpact. It's a win for our clients right and it's a win for our partners. So we're putting a lot of.
Speaker Change: Effort and money towards that and we think we will see results in not too distant future.
Unknown Attendee: And we think we'll see results in that. And that's helpful.
Unknown Attendee: And then in terms of just the innovation pipeline, I think you alluded to some ideas. You said, you know, there's more coming. Conceptually, are you pushing towards building proprietary LLMs? Are you trying to build other pieces of software related to workflow? How should we think about what's coming down the pipeline? And I would say all of the above.
Speaker Change: That's helpful.
B.K. Kahlra: And then, in terms of just the innovation pipeline, I think you alluded to some ideas. You said, "you know, there's more coming." Conceptually, are you pushing towards like building proprietary LLMs? Are you trying to build other pieces of software related to work? How should we think about what's coming down the pipeline at this point?
Balkrishan Kalra: Another example is the work we are doing with Mondalees, to address their need for up-skilling and shorter ramp times for new employees. Leveraging Genpact's Cora Knowledge Assist platform, to enable faster access to knowledge, insights, and standardized operating procedures. For example, with all the suit, here we are transforming their retail operations in US and Australia by leveraging data, technology, and AI solutions to drive agility and cost leadership, ultimately creating an exceptional customer experience and driving competitive growth.
Speaker Change: And then in terms of just the innovation pipeline I think you alluded to some idea as you said there's more coming.
Speaker Change: Conceptually are you pushing towards like building proprietary our lambs are you trying to build other pieces of software related to workflow how should we think about what's coming down the pipeline at this point.
Balkrishan Kalra: And I would say all of the above and more. As an example, if you think we are one of the largest players in finance, and within finance, we are developing various LLMs, including for, let's say, accounts payable, and building many of what we are calling edge solutions internally, which are backed by many of the LLMs. So a number of those innovative ideas are taking shape as we speak.
B.K. Kahlra: And I would say all of the above and more as an example. If you think we are one of the largest players in finance, and within finance, we are developing various LLMs, including for let's say accounts payable, and building many of what we are calling Ed solutions internally, which are backed off by many of the LLMs. So a number of those innovation ideas are taking shape as we speak. Thank you. Thanks for the note.
Speaker Change: And I would say all of the above.
Speaker Change: And more as an example, if you think.
Speaker Change: We are one of the largest players in finance.
Speaker Change: Within finance.
Speaker Change: Developing <unk>, including for Lithia accounts payable.
Balkrishan Kalra: Our work for Amazon is another great example of AI. For Amazon, for their out-of-one-anti-device customer service in Europe, we have leveraged AI and Amazon Connect to create an end-to-end solution that integrates AI-powered chatbots and enables logistics management, a repair partner network, end-to-entracking, and proactive customer notifications, all with minimal human interactions. These are just few examples. At the end of the day, clients choose us for five key reasons. Our deep domain data and AI expertise, comprehensive solutions, accelerating partner ecosystem, client-centric approach, and innovative technology, including our pre-built AI accelerators.
Speaker Change: And.
Speaker Change: Building many of what we are calling at solutions internally.
Speaker Change: It's backed off by many of the LMS.
Speaker Change: So a number of those innovation ideas are taking shape as we speak.
Speaker Change: Thank you.
Linda: Thanks Linda.
Brian Keane: The next question comes from Brian Keane, the Deutsche Bank. Your line is open. Hi guys, solid results here. What did I ask about some of the GNI bookings? And I think you said 95% of those bookings are on the non-FTE base. I know you're really not generating much revenue yet from GNI, but out of those contracts' price, you know, competitively versus the marketplace. And how do you know if you know on renewals and other deals if you'll be generating the same types of revenue you're generating that was typically on an FTE base? Yeah, Brian, a number of these, one we have we report soul source as well. A number of these are soul source opportunities too, but even in a competitive environment, it is a lot of for this.
Operator: The next question comes from Bryan Keane with Deutsche Bank. Your line is open.
Linda: The next question comes from Bryan Keane with Deutsche Bank. Your line is open.
Unknown Attendee: Hi guys, solid results here. I wanted to ask about some of the GEN-AI bookings. And I think you said 95% of those bookings are on a non-FTE basis. I know you're really not generating much revenue yet from Gen-AI, but how do those contracts price competitively versus the marketplace? And how do you know if, you know, on renewals and other deals, if you'll be generating the same types of revenue you generate that was typically on an FTE basis?
Bryan Keane: Hi, guys solid results here I wanted to ask about some of the <unk> bookings.
Speaker Change: And I think you said, 95% of those bookings are on a non FTE basis.
Speaker Change: Youre really not generating much revenue yet from Gen AI, but some of those contracts price.
Speaker Change: Patent internally versus the marketplace.
Speaker Change: And how do you know if you can on renewals and other deals that can be generating the same types of revenue you're generating that was typically on an FTE basis.
Balkrishan Kalra: In a world increasingly driven by advanced technologies, these sense of more critical than ever, and enable us to deliver solutions that keep our clients ahead of the curve. Coming back to the third element in our three-plus-one execution framework, which is simplification, we continue to streamline our go-to-market approach so that we can scale more efficiently. As an example, we have standardized our rate cards across our data tech AI service offerings, and we are reducing complexity in our end-to-end sales process by automating workflows and adopting AI-contracting tools. And finally, on leading with GenPact as our own best credential for AI driven transformation, we hit a number of major milestone in second quarter.
Balkrishan Kalra: Yeah, Bryan, a number of these. One we have, we report sole source as well. A number of these are sole source opportunities, too, but in a competitive environment. It is a lot of work for this. It is part of an embedded solution. That JMEI is an integral part of, and as we are moving and pushing the agenda more on a non-FD basis. A lot of these solutions are therefore now with these technologies, which are a number of them are IP, the number of them are, you know, partner solutions. We are centered on what are the outcomes that they are achieving for our clients and how that cadence of outcomes then also flows to us. And what we are seeing is early good results. PK, I've managed to quickly bridge it.
Bryan Keane: Yeah.
Speaker Change: Brian a number of these.
Speaker Change: One we have Mi reported sole source as well a number of these are sole source opportunities do but even in a competitive environment.
Speaker Change: It is a lot of it is part of embedded solution.
Mike Weiner: It is part of an embedded solution. That GNI is an integral part of. And as we are moving and pushing the agenda more on non-FTE basis, a lot of these solutions are therefore now with these technologies, which are a number of them are IP, the number of them are, you know, partner solutions. You know, we are. Centered on what are the outcomes that they are achieving for our clients and how that cadence of outcome then also flows to us. And now what we are seeing is early good results. Peter mentioned quickly bridge upon that. Well, Jenny I is net new and a frothy level of discussion.
Bryan Keane: And then Jamie I is integral part off.
Speaker Change: And as we are moving and pushing the agenda mod on non FTE basis.
Speaker Change: A lot of these solutions.
Speaker Change: <unk> are therefore now with these technologies, which are a number of them are IBM and number of them are.
Balkrishan Kalra: I will give you two specific examples.
Bryan Keane: Partner solutions.
Balkrishan Kalra: First, we launched a new Cora AI assistant for our global IT help desk. First, since launch, we have seen a 2X increase in user satisfaction, and a 30% reduction in service desk staff. Our future roadmap includes core AI assistant for HR, finance, sourcing, and many other functions, and we aim for similar improvement across these functions.
Bryan Keane: We are.
Bryan Keane: Centered on what are the outcomes that they are achieving for our clients.
Bryan Keane: Saw that the cadence of our come back also flows to us.
Bryan Keane: And what we are seeing is early good results.
Michael Weiner: PK, I'm going to just quickly bridge that gap. Well, Gen AI is net new and a frothy level of discussion. AI is not new to us, as well as other enhancements and productivity tools, right? It seems to be a big focus of it. We are not able to, or have not been able to generate the efficiencies and profitability for our clients and for ourselves without utilizing tools. So this will continue to evolve over time. It is a net new technology, but it's really an enhancement or evolution of what we've done in terms of using technologies to drive outcomes.
Jenny: You mentioned quickly bridge upon that Jenny is net new in a frothy levels.
Speaker Change: The level of discussion.
Mike Weiner: AI is not new to us, as well as other enhancements and productivity tools, right? Seems to be a big focus of it. We are not able or have not been able to generate the efficiencies and profitability for our clients and for ourselves without utilizing tools. So this will continue to evolve over time.
Speaker Change: It's not news to us as well as other enhancements in productivity tools right. It seems to be a big focus of it we are not able or have not been able to generate the efficiencies and profitability of <unk> and for our clients and for ourselves without utilizing totals. So this will continue to evolve over time. It is a net new tech.
Balkrishan Kalra: Second, AI Guru, our Gen AI Power Learning Coach is making personalized learning recommendations for over 60,000 employees, increasing productivity, and amplifying the collective knowledge of our internal experts. And that gets me to the talent. Our employees are critical to our success, and we have made significant progress year-to-date, scaling our broader technology skills, as part of our overall investment in data tech AI. On foundational Gen AI, we have more than 100,000 employees who are actively learning, 70,000 have completed entry-level training, and 18,000 have completed more advanced work.
Unknown Attendee: It is a net new technology, but it's really an enhancement or an evolution of what we've done in terms of using technologies to drive outcomes. Got it, got it.
Bryan Keane: <unk>, but it is really an enhancement or an evolution of what we've done in terms of using technology to drive the outcomes.
Bryan Keane: Got it got it.
Unknown Attendee: Unknown Speaker And then just to follow up, maybe I can ask the guidance question a little bit differently, you know, since the growth rate was so strong in the second quarter, what would cause the growth rate to decelerate? You know, the way you guys guided us to because it just seems like the momentum you have, especially with the partnerships, we're going to see similar growth rates, if not better, in the third quarter and not a deceleration. Yeah, I think I'll start this one.
Mike Weiner: And then just to follow up, maybe I can ask the guidance question a little bit differently. Since the growth rate was so strong in the second quarter, what would cause the growth rate to decelerate the way you guys guided to? Because it just seems like the momentum you have, especially with the partnerships, we are going to see similar growth rates, if not better, in the third quarter and not the deceleration. Yeah, I think I'll start this one. I think it really first starts with a consistent business environment. Keep in mind about two, excuse me, three quarters of our business is a new ties.
Speaker Change: And then just a follow up maybe I can ask the guidance question, a little bit differently since the growth rate was so strong in second quarter.
Speaker Change: What caused the growth rate to decelerate.
Speaker Change: The way you guys guided soon because it just seems like the momentum you have especially with the partnerships, we're going to see similar growth rates, if not better in the third quarter and not the deceleration.
Balkrishan Kalra: For Gen AI delivery capabilities, we have 3000 AI practitioners across the company. And for applied AI leadership, we are making a significant change at the most senior levels in the company. 85% of senior leaders will have gone through certification from schools like MIT by end of 2024. As we look ahead, we will continue to invest aggressively in our talent with a focus on practical application of advanced technologies.
Michael Weiner: Yeah, I think I'll start this one. I think it really starts with a, you know, a consistent business environment. You know, keep in mind about two, excuse me, three quarters of our business is annuitized. So we have a very good view into that. The other 25% cohort of our business tends to be shorter-duration deals that we have to earn and win throughout the year. Right?
Speaker Change: Yes, I think I'll start this one I think it really first starts with it.
Bryan Keane: Now.
Speaker Change: Our consistent business environment.
Speaker Change: Keep in mind about two excuse me three quarters of our business is in <unk>. So we have a very good view into that the other 25% cohort of our business tends to be shorter duration deals that we have to earn and win throughout the year. So we're just not anticipating any real change in the macro business.
Mike Weiner: So we have a very good view into that. The other 25% cohort of our business tends to be shorter duration deals that we have to earn in win throughout the year. So we're just not anticipating any real change in the macro business environment. We remain food and in terms of our guide. In addition to it, yes, we had strong growth in the first half of the year, particularly off of better execution, namely in a lot of those large deals, which in many cases we're lapping each other. So we'll continue to monitor the business environment. But again, we remain prudent in how we think about it for the next two quarters.
Michael Weiner: So we're just not anticipating any real change in the macro business environment. We remain prudent in terms of our guidance. In addition to that, yes, we had some, we had strong growth in the first half of the year, particularly due to better execution, namely, and a lot of those large deals, which in many cases, we're lapping each other. So we'll, we'll continue to monitor the business environment, but again, we remain prudent in how we think about it for the next two quarters.
Balkrishan Kalra: Now turning to guidance, with another quarter of better than expected results, and strong performance in the first half, we are raising our revenue and EPS outlook for the full year. We are increasing our revenue guidance by 150 basis points to 4 to 5% growth on as reported basis up from 2.5 to 3.5% previously. Similar to the last quarter, we are not assuming any improvement in the buying environment. We are simply reflecting our improved execution in our full year outlook.
Speaker Change: Environment, and we remain prudent in terms of our guide in addition to it is yes. We had some we had strong growth in the first half of the year, particularly off of better execution, namely in a lot of those large deals which in many case, we lapping each other so we will continue to monitor the business environment, but again, we remain prudent in.
Speaker Change: How we think about it for the next few quarters.
Unknown Attendee: Got it. Thanks, guys. Thank you.
Unknown Attendee: Got it. Thanks, guys. Thank you. The next question comes from Sean Kennedy.
Speaker Change: Got it thanks guys.
Speaker Change: Thank you.
Sean Kennedy: The next question comes from Sean Kennedy with the Mizzouho. Your line has been. Hi, good evening. Congrats on the results. So I was wondering about the go-to-market approach on focusing on data tech AI and Gen AI solutions. So how does your team sell these solutions into your customer base? And did you change the sales incentives to help achieve these results? Yes, sales incentives change shot. And we continue to iterate and improve on that as well as we go along. And typically what we have is offering hub. So there are series of offerings that we have developed based on the client set and the needs and the competencies that we have.
Operator: The next question comes from Sean Kennedy with Mizuho. Your line is open.
Speaker Change: The next question comes from Sean Kennedy with Mizuho. Your line is open.
Balkrishan Kalra: Guidance for gross margin and AI margin for full year remains unchanged at 35.3% and 17% respectively. As we continue to invest in our top priorities, partnerships and advanced technologies in data tech AI to drive accelerating long-term growth. For the full year, we are also raising our outlook of adjusted deluded EPS to reflect the strong performance we achieved in the first half with a 14 cent increase at the midpoint of the range.
Speaker Change: Okay.
Sean Kennedy: Hi, good evening and congrats on the results.
Sean Kennedy: So I was wondering about the go to market approach on focusing on data Tech AI and <unk> AI solutions.
Speaker Change: How does your team sell these solutions into your customer base and did you change the sales incentives to help achieve these results.
Balkrishan Kalra: Yes, sales incentives change, Sean. And we continue to iterate and improve on that as we go along. And typically, what we have is offering hubs. So there are a series of offerings that we have developed based on the client set, and the needs, and the competencies that we have. And these offerings are, many of them are just Genpact offerings or also on the, you know, marketplace of our partners. And then, depending upon active sales motion in all of the clients that we operate in, now, you know, depending upon the needs, there is an active activation of these offerings that happens in different client situations. And from a simplification standpoint, we've also set up certain rituals and rigor that are driving accountability and agility in the organization.
Speaker Change: Yes.
Speaker Change: Dave.
Speaker Change: Sean.
Dave: We continue to iterate and improve on that as well as we go along.
Speaker Change: And typically.
Speaker Change: Typically what we have is offering hub. So did our Cvs offerings that we have developed based on the client's hit and the meads and the competencies that we have and we use offerings.
Balkrishan Kalra: In closing, I would like to extend my heartfelt thanks to every one of our employees. Your dedication is delivering exceptional value to our clients and driving success and growth for GenPath. As we continue to innovate and expand, your commitment is the cornerstone of our achievement. Thank you, and we continue to sharpen our competitive edge and build an acceptor of GenPath.
B.K. Kahlra: And these offerings are many of them are just impact offerings or also on the marketplace of our partners. And then, depending upon active sales motion in all of the clients that we operate in. Jain, you know, depending upon the needs, you know, there is an active activation of these offerings that happen in different client situations. And there is, from a simplification standpoint, we've also set up certain rituals and rigor, you know, that is driving accountability and agility in the organization. Thank you.
Speaker Change: And many of them are just jampacked offerings also OMB.
Speaker Change: Place of our partners and then depending upon active sales motion in all of the clients that we operate in.
Speaker Change: No.
Michael Weiner: With that, let me turn the call over to Mike. Thank you, Pete. Good afternoon, everyone. I appreciate your time today as we review our financial performance in the second quarter of 2024, and provide insights into our outlook for the third quarter in full year. I'm pleased to report Genpact delivered another strong quarter, including an all-time high income from operations of 170 million. We continue to build the foundational improvements needed to drive sustainable growth on efficiencies.
Speaker Change: Depending upon the needs the active activation of these offerings that happen in the same client situations.
Speaker Change: And that is up from a simplification standpoint, we've also set up certain rituals and vigor.
Speaker Change: That is driving accountability and agility in the organization.
Speaker Change: Got it.
Speaker Change: Thank you.
Unknown Attendee: Thanks, Sean.
Sean Kennedy: Thanks, Sean.
Keith Bachman: And our next question comes from Keith Bachman with BMO. Your line is open. Hi, good afternoon, good evening.
Operator: And our next question comes from Keith Bachman with BMO. Your line is open.
Speaker Change: And our next question comes from Keith Bachman with BMO. Your line is open.
Michael Weiner: Our pipeline reached a record level in the second quarter, driven by a healthy mix of small, medium, and large deals. Generative AI contributed to our pipeline also doubled in the first half of 2024. All this sets us up well for future growth. During the quarter, we added 23 new logos, bringing our first half total to 53 new logos, a 29% increase year-over-year. We also booked four large deals in the quarter. Our win rate was 51%, while sole source deals accounted for approximately 45% of total bookings.
Unknown Attendee: Hi, good afternoon. Good evening.
Unknown Attendee: Guys, I wanted to ask first of all, how would you characterize pricing in the first half of calendar year 24 versus the same time last year? One of your competitors, a big competitor, is just the pricing is much higher across the DPO landscape. How would you characterize that?
Keith Bachman: Hi, good afternoon, good evening.
Mike Weiner: Guys, I wanted to ask first how would you characterize pricing in the first half of calendar 24 versus the same time last year? Let me just compare those big competitors with just the pricing is much more across the PTO in case how would you say that? Yeah, thanks for that question. If Mike, we've heard that before, right? So we've thought about it. We have had year-over-year in sequential. I think we're alluding to in terms of pricing, particularly in our digital operations business, right? Keep in mind, half of it is predominantly a sole source, and half is not, is been relatively consistent.
Keith Bachman: Guys I wanted to ask first on how would you characterize pricing in the first half.
Speaker Change: Calendar year Q4 versus the same time.
Speaker Change: Last year, one of your competitors Big competitors suggested pricing is much more aircraft.
Speaker Change: Second.
Speaker Change: Okay, so that would be helpful.
Michael Weiner: Yeah, thanks for that question. It's Mike.
Speaker Change: Yes, Thanks for that question, it's Mike.
Speaker Change: You've heard that before Brian So we've thought about it we have had year over year and sequentially. I think you are alluding to in terms of pricing, particularly in our digital operations business right keep in mind half of it is predominantly a sole source and half is not.
Michael Weiner: Highlighting our strong value proposition. We continue to deepen and broaden our client base. During the second quarter compared to the prior period, we expanded the number of client relationships generating annual revenue greater than 5 million from 180 to 185. We also increased the number of clients with annual revenue exceeding 25 million from 38 to 42. While five of these clients generate more than 100 million in revenue.
Michael Weiner: We've heard that before, right? So we've thought about it. We have had year over year in sequential, I think we're alluding to in terms of pricing, particularly in our digital operations business, right? Keep in mind, half of it is predominantly a sole source, and half is not. It has been relatively consistent. We haven't seen anything irrational that's really gone on in pricing. And so it's hard for us to comment on others. No, I think you're right. It's a reasonably competitive environment, but we haven't seen any irrational behavior in the marketplace.
Speaker Change: It's been relatively consistent we haven't seen anything irrational, that's really gone on in pricing.
Mike Weiner: We haven't seen anything irrational that's really gone on in pricing. And so I, it's hard for us to comment on others began to use. No, I think you're right. It's a reasonably competitive environment, but we haven't seen any irrational behavior in the market this.
Speaker Change: And so I, it's hard for us to comment on others began it is okay.
Brian: Hi, Thank you.
Brian: Reasonably competitive environment, but we haven't seen any irrational behavior in the marketplace.
Unknown Attendee: Okay, related to that, would you be willing to provide what percent of your business is services-related or customer-facing? What percent of that in total? Now, call center business would be a part of that, but I'm talking DX more broadly. How much of your service-related business do you have?
Mike Weiner: Okay, related to that. If you can be willing to survive, what's your phone your business face services related or customer facing? What percent of that in total now call center business would be a part of that, but I'm talking DX more. How much do you have a service-related business? Yeah, so in the past we've talked about that in terms of I think you're asking about customer service-related business, that type of work. We have aggregated up in the many in what we do for a lot of our customers and a lot of different flavors, and you take that argue revenue.
Michael Weiner: Now, want to rank them statement. Total revenue for the quarter was 1.176 billion up, 6% year-over-year as reported, and 7% on a constant currency basis. This performance, which exceeded our expectations, is the result of renewed focus on driving results in data tech and AI and digital operations. Data tech and AI represents roughly 46% of total revenue in the second quarter and grew 4% year-over-year on both of the reported and constant currency basis.
Speaker Change: Okay, so related to that.
Speaker Change: Drilling survive what for your phone your businesses.
Speaker Change: Services for logos are customer facing.
Speaker Change: What percent of that in total that call center business would be a part of that but I'm talking Dx more broadly how much do you have a surplus.
Speaker Change: Related business.
Michael Weiner: So in the past, we've talked about that in terms of, I think you're asking about customer service-related businesses, that type of work. We have aggregated up what we do for a lot of our customers in a lot of different flavors, and you take that aggregate revenue, it's less than 10% of
Speaker Change: Yes, so in the past we've talked about that in terms of I think you're asking a customer service related business that type of work, we have aggregated up and in many and in what we do for a lot of our customers and rely on different flavors and you take that aggregate revenue.
Michael Weiner: Growth was primarily driven by supply chain and risk management service lines. Digital operations revenue increased 9% year-over-year on both a reported and constant currency basis, primarily due to ramp-ups of large deals. Digital operations accounted for 54% of total revenue in the quarter. Revenue contributed from outcome and consumption base deals, which excludes fixed fee contracts, continues to expand compared to prior year. It now comprises 20% of second quarter revenue. A milestone we achieved at the end of 2023.
Mike Weiner: It's less than 10% of our business.
Speaker Change: It's less than 10% of our business.
Unknown Attendee: Yeah, very much. Last question for me, then, a quickie is, you know, IBM and Accenture have said that Gen-AI is great growth for everybody in the industry, but it's not additive to customer demand in that, you know, in order to pursue these projects, it's coming at us, it's sourced from some other area, if you will.
Speaker Change: Yes fair enough our revenue picture.
Mike Weiner: Yeah, yeah, last question for me, then a quick he is. You know, I do in the McCenture has said that Gen AI, you know, great growth for everybody in industry, but it's not additive to customer demand. And in that, you know, in order to pursue these projects, it's coming out of source from some other area. You know, it sounds like you guys have a different view of that. But I just wanted to try to clarify because, like he clearly said, you put this added into the pool, but I just wanted to make sure I heard that correctly.
Michael Weiner: It sounds like you guys have a different view of that. But I just wanted to try to clarify, because Mikey clearly said you think it's additive to the pool. But I just wanted to make sure I heard that correctly. Okay.
Speaker Change: Yes last question for me then it took years.
Speaker Change: Hi, gentlemen, Accenture has said that.
Speaker Change: Jenny.
Speaker Change: Great growth for everybody in the industry, but it's not additive to customer demand.
Speaker Change: In order to pursue these projects that's coming at us at source in some other areas of the world. It sounds like you guys have a different view of that.
Speaker Change: But I just wanted to try to clarify because like you call. It says it was additive to the call, but I just wanted to make sure I heard that correctly.
Michael Weiner: This recurring achievement demonstrates our commitments to meeting our long-term objectives. Expanding these deals enables us to drive profitable growth and enhance value to our clients. Revenue from priority accounts grew approximately 7% year-over-year and comprise of 62% of total revenue. Now, want to grow 7% while revenue and financial services as well as high tech manufacturing increased approximately 6% year-over-year. The primary and revenue growth drivers of all three segments remain largely unchanged from the prior quarters.
Unknown Attendee: Yeah, you're hearing that; you're hearing it correctly. Again, it's hard for us to comment on other companies in terms of what their native mix of business is. But when we look clearly at our pipeline, at our very defined definition of what generative AI is, we are seeing it as a net enhancer to our pipeline. So, you know, when BK talks about TAM on this being a driver of our sustainable growth in the future, as opposed to a trade-off, we're just not seeing that. We're just not seeing that.
Mike Weiner: Yeah, you're hearing that you're hearing that correctly. Again, it's hard for us to comment on other companies in terms of what their native mix of businesses, but we look clearly at our pipeline. At our very defined definition of what Jared AI is, we're seeing it as a net enhancer to our pipeline. So, you know, when BK talks about we view the TAM on this being a driver of our sustainable growth in the future, as opposed to a trade off, we're just not seeing that.
Speaker Change: Yes, you are hearing that youre hearing that correctly again, it's hard for us to comment on other companies in terms of what their native mix of businesses, but we look clearly at our pipeline and our very defined definition of what Jared I as we're seeing it as a net enhancer to our pipeline.
BK Kalra: So when BK talks about we view the Tam on that as being a driver of our sustainable growth in the future as opposed to a trade off we're just not seeing that.
Unknown Attendee: Okay, many thanks guys. Cheers. Thank you, Keith.
Unknown Attendee: Okay, many thanks, guys. Cheers. Thank you, Keith. As reminder, to ask a question, please press store 1-1 on your telephone.
Speaker Change: Okay. Many thanks guys.
Keith Bachman: Thank you Keith.
Operator: As a reminder, to ask a question, please press star 11 on your telephone. I have no further questions at this time. I would now like to turn the call back to the company for closing remarks.
Michael Weiner: Reflecting stability and consistency in our business operations. Jones, Transitioning from top line performance to gross margin of 35.4% up to 10 basis points from the prior year, quarter driven by operational leverage and modestly lower stock based compensation expense, partly offset by our annual comp cycle, adjusted operating income margin was 16.9% up 10 basis points year over year. 4% driven by higher operating leverage, some of which results from our ongoing simplification efforts, offset by increased investments.
Speaker Change: Reminder, to ask a question. Please press star one on your telephone.
B.K. Kahlra: I show no for the questions at this time. I would now like to turn the call back to the company for closing remarks.
Speaker Change: I show no further questions at this time I would now like to turn the call back to the company for closing remarks.
B.K. Kahlra: Thank you, thank you, Michelle. Quarter two was another strong quarter for Genpact. As we look ahead, we will continue to drive improving execution, leveraging our C-plus-1 framework and lean into innovation. We will innovate by leveraging GenAI and other advanced technologies to deliver superior value for clients and drive productivity for Genpact.
Balkrishan Kalra: Thank you. Thank you, Michelle.
Speaker Change: Thank you thank you Michelle.
Speaker Change: Quarter, two was another strong quarter for the impact as we look ahead.
Operator: Quarter two was another strong quarter for Genpact. As we look ahead, we will continue to drive improving execution, leveraging our 3 plus 1 framework, and lean into innovation. We will innovate by leveraging Gen AI and other advanced technologies to deliver superior value for clients and drive productivity for Genpact. I also want to take this opportunity to thank all of our clients for choosing Genpact and all the shareholders for ongoing support. We look forward to speaking with you again next quarter. Thank you.
Speaker Change: We'll continue to drive improving execution, leveraging our T plus one framework and lean into innovation.
Speaker Change: We really know me by leveraging Jimmy I am, although Nebraska technologies to deliver superior value for clients and drive productivity for Genpact.
Michael Weiner: Our effective tax rate was 24.9% up from 22.7% in the prior year, quarter, which had a discrete tax benefit. Gap net income was 122 million, a 5% improvement year over year, Gap deluded EPS rose to 67 cents, a 6% increase year over year. Similarly, adjusted deluded EPS climbed to 79 cents, up 10% from last year, outpacing revenue growth. We continue to generate significant cash from operations, we delivered 209 million compared to 171 million in the prior year period.
Unknown Attendee: I also want to take this opportunity to thank all of our clients for choosing Genpact and all the shareholders for ongoing support. We look forward to speaking with you again next quarter. Thank you.
Speaker Change: I also want to take this opportunity to thank all of our clients for choosing genpact and all the shareholders for ongoing support.
Speaker Change: We look forward to speaking with you again next quarter. Thank you.
Unknown Attendee: This concludes today's conference call. Thank you for participating. You may.
This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: Yes.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Michael Weiner: Moving on to our balance sheet, cash and cash equivalence were 914 million, up 491 million at the end of the same period last year. The cash increase is primarily due to proceeds from our recent bond issuance, which will be used to repay up and coming bond maturities. Day sales outstanding decreased by two days versus last quarter. We delivered net debt to EBIT ratio of 0.9 times to the quarter at the low end of our preferred range.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Michael Weiner: This positioned us well for strategic investments in future growth opportunities. In the second quarter, we were purchased approximately 1.9 million shares at an aggregate cost of $63 million. We also paid $27 million in dividends. Overall, we returned approximately $90 million to our shareholders in the second quarter alone. We remain committed to returning capital share holders and allocating a minimum of 30% of operating cash flow to share repurchases in addition to the 20% annual dividends. Attrition remains at historical lows at 23% for the second quarter, a 200 basis points under the same lower than the same quarter last year.
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: So.
Speaker Change: Hum.
Speaker Change: [music].
Michael Weiner: Moving on to our expectations for the third quarter, we got into total revenue in the range of 1.18 billion to 1.186 billion, a year over year growth of approximately 3.9% to 4.4% as reported. This comprised of digital operations and data tech and IO revenue growth of approximately 3.8% and 4.6% versus the prior year period respectively at the midpoint of the range as reported. Rose margin for the quarter is expected to be approximately 35.4% consistent with prior quarter.
Michael Weiner: Adjusted operating income margins is expected to be 17.2% as we can need to invest for long term growth. For the full year, we are raising our adjusted deluded EPS guide. We now project adjusted deluded EPS to be between $3.14 and $3.18. This represents a 14 cent increase at the midpoint of our previous guide and will mark the fourth consecutive year of delivering EPS growth that outpaces revenue. 13. The year-of-year increase in EPS is driven by adjusted operating income of 14 cents and a 9-cent benefit from lower share count.
Michael Weiner: The increases are forecastly partially upset by higher interest expense of 3 cents and expected tax rate impact of 1 cents. As BK mentioned, we are not anticipating a more favorable market conditions as the year progresses. We are primarily incorporating the strong performance in the first half into our projections for the full year. Specifically, we are now anticipating total revenue to be between 4.656 billion and 4.701 billion, representing a year-over-year growth of 4 to 5 percent as reported.
Michael Weiner: This positive adjustment reflects digital operations revenue growth of 5.2 percent and approximately 3.8 percent in data tech and AI revenue growth at the midpoint. We continue to expect full-year of growth from margin to be approximately 35.3 percent and an adjusted operating income margin of 17 percent. Highlighting our ability to maintain profitability while navigating uncertain economic and business environment and investing in our business. We now anticipate to generate approximately $525 million in operating cash flow this year.
Michael Weiner: In addition to our results driven focus, our strategic investments will bust client relationships and operating excellence, all positions us to navigate the dynamic market environment effectively. These efforts are designed to enhance shareholder value, drive sustainable growth, and generate long-term return source shareholders.
Krista Bessinger: Now I'll turn the call back over to Krista. Thank you.
Unknown Attendee: I operator, we're ready to go ahead and pull for questions. Thank you.
Unknown Attendee: As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your questions, please press star 11 again. Please stand by while we compile the Q&A roster.
Margaret Nolan: And our first question comes from Maggie Nolan with William Blair. Your line is now open. Hi everyone. It's Kate on Sir Maggie. Congrats on a nice quarter. My first question is I understand that you guys are not accounting for any improvement in client demand with the revised outlook. But can you provide any updates to somewhere overall client sentiment is right now and how it's evolved over the past quarter? I'll take that, this is BK, so first of all, thanks so much.
Margaret Nolan: And what I can report on the client sentiment that it has largely stayed the same as we have observed over the last six months or I would say even over the last 12 months. So we haven't seen as an example in the discretionary spends neither any improvement and yes, no deterioration either. And our clients continue to stay very cautious, very watchful and continue to be almost in the same zone given all the uncertainties that surround them.
Michael Weiner: Great, thank you because. And then my next question is, what's nice to hear about the continued increase in consumption and outcome-based deals? Has your long-term mindset changed at all and on what that percentage could eventually get up to?
Michael Weiner: Sure, this is Mike, I'll take that one. So, you're correct, we've already reached our goal that we put out ahead of schedule on that.
Michael Weiner: While we don't have any concrete numbers to share today, but you can expect that number to be notionally higher as we move forward in the year. But I think what's so important about it is, as we're approximately at 20% right now, is also to think about it, it's not just that it's helping us pivot this new economic model. But if we look back at that 20%, the margin on it continues to remain robust and above average.
Margaret Nolan: So, more to come on that. Great, thank you, Mike and BK. Thank you.
Brian Bergen: And the next question comes from Brian Bergen with TDCO, and your line is open. Hey guys, good afternoon, thank you.
Balkrishan Kalra: Maybe a high-level question, you know, even in the role six plus months now, can you give some perspective on the initiatives that you think have worked really well here versus any of those that are moving slower? And just any area, you know, added areas of emphasis for you as you're working through the second half of 24. Absolutely, Brian, thanks. So, as we clearly articulated Brian that we are focused predominantly on these four initiatives, what we call as T plus one, which I am building through line across the company as well, along with all the colleagues in Zempact.
Balkrishan Kalra: And what I would gladly say that all of these three plus one initiatives be it plus one being Zempact building Zempact as the best credential on AI first journey, or in the three client-facing ones, because one being partnership, the second one on data, the Ki and third, more simplified go-to-market motions. All of them are progressing really well and some are reflected already. What we have also done, Brian, that filled many initiatives, and that has helped us focus on these initiatives that are meaningfully better for our future as well as our present and we are seeing results.
Balkrishan Kalra: Having said all of that, we are also leaning hard into innovation. Innovation represented by data in GNI, and we are at the early stages of that and more to come on that. Okay, understood. And then as it relates to digital operations, so a nice uptick here in two cube, you know, that's sequential uptick. As we compare that to the three cube and the four cube outlook, you just maybe tease out if anything changes.
Balkrishan Kalra: Yeah, it looks flat and is out a little bit. Was there anything that happened in in two cube that allowed for that strong ramp, anything one time or just more so kind of the prudent approach you've demonstrated? It is more prudent approach, Brian. I think we continue to see earning off large deals into each quarter, actually on schedule a little bit ahead of schedule. And really please, with that, really, please, with how all the key dancers on various deals, even this year, be small deals, medium deals, large deals. And we are also wanting to maintain a prudent approach and we go through the balance of that.
Unknown Attendee: All right, make sense. Thank you. Thank you, bud.
Robbie Bamberger: And our next question comes from Robbie Bamberger with Bayard. Your line is now open. Yeah, thanks for taking my question. So in terms of the large deals, you noted at the end of 2023, can you maybe touch on how that large deal revenue is flowing through in 2024 and 2025? And maybe the puts and takes of the larger deals on EBIT and gross margins for 24?
Michael Weiner: Let me kick that off and maybe VK, you can apply it on it. So in the second half of 2024, we had a notable amount of large deals that started to ramp that continued throughout the first two quarters of this year. I said, apologies, 2023 into 2024, those continued to perform very well. And we're at the point where they're ramping. Those deals typically come in at the beginning at a lower gross margin.
Michael Weiner: And then the end up at a higher gross margin as they move through the pipeline and as they mature, keep in mind our large deal for us typically can be about a five year in terms of in terms of their duration. So if you think about our guide for the remaining piece of the year, it really does reflect that movement as we move forward. Very well said, and I think I'm continuing with the momentum of overall ruby. Perfect.
Michael Weiner: And then in terms of the Jenny I deals, you noted 95% of Jenny I bookings are on a non-FTE basis. So can you maybe dive into the pricing of these non-FTE based contracts that you have with clients? Are they higher margin than normal contracts? Yeah, number of the Jenny I deals are which is also reflected in the quarter end results that we just spoke about are non-FTE based. When we say non-FTE based, they are largely more based on outcomes outcomes, they generate for our clients and how we get paid for it. And most of our outcome deals are at a higher profitability, and that's what we are anchoring on the entire company on. Great, thank you.
Unknown Attendee: Thank you very much.
Unknown Attendee: Our next question comes from my aunt can then with need them your line is open.
Balkrishan Kalra: Thank you a good evening. Bala, you mentioned that the Jenny I opportunity expands your time. So could you maybe just give us some sense of how it does it? Is it just opening up new avenues of growth that haven't been explored before by clients just maybe a little bit more details around how it expands the time and maybe it could quantify it too. Yeah, so I think quantification might be challenging at this early stages, but it's clearly what we see.
Balkrishan Kalra: Is increasing off our time beat in the bookings that we are seeing or even in our pipeline or a number of solutions that we are baking for clients as we speak. And it increases time because of two or three reasons. One, it also expands the scope of opportunity that we are talking about point number one point number two given. Especially with Jenny, I and AI always existed at least for a decade, I would say.
Balkrishan Kalra: But with Jenny, I a lot of our clients have also woken up to this transformative opportunity and therefore they are engaging while we are engaging with them in different buying centers. And given our intense clients and click approach, we get called in some of the areas where we were early or not getting called. So those are obviously adding to opportunities as well. So our time in a particular client as well as time in a particular opportunity within the client.
Balkrishan Kalra: And if you look at the example that I shared, in my prepared remarks. In that financial services industry case, you know, overall, that deal size, it's a large deal when we call large deals greater than 50 million, it's much bigger than 50 million. The deal size of pre-GNII or opposed GNII is much bigger MTCB. I would just quickly add on, so I said in my remarks as well, our pipeline reached a record level in the second quarter, right?
Balkrishan Kalra: So we also think about the GNI contribution of that has more than doubled in the six months of the of this year versus the full year next year. So we are seeing a net increase in our our quality pipeline, which does support the notion that BKO alluded to as a tam and answer to it. And then if you extrapolate upon that, it's BKO alluded to with outcome based deals and looking at the margin on that, being higher, we feel very positive about it as a net tam and answer and a net revenue and answer to our business on our franchise.
Michael Weiner: That's helpful. But on margins, then, I would be curious, does this potentially create a nice tailwind for you and maybe helps you close the gap versus your peers that run at slightly higher adjusted evic margins. I think the general margin level has been high teams low 20s. I think you have some more headroom to get there. Is this potentially a longer term tailwind to close that gap? Two things. So potentially yes, right?
Michael Weiner: But keep in mind as well that, you know, our our adjusted operating income margin, right? Continues to maintain stable as we've taken fluid through the operating leverage that we have in our business and have made substantial investments into our our franchise on a go-forward basis. Things BKO alluded to earlier, including enhanced training, investments in partnerships and all these things, we think are a pivotal part to our company to generate long term sustainable growth. So we'll be doing that, at least for the foreseeable future this year, and that's reflected in our numbers.
Unknown Attendee: Great. Thank you for all that color.
Unknown Attendee: We're out on the quarter. Thank you.
Surinder Thind: Our next question comes from Surrender Thin with Jeffries. Your line is open. Thank you.
Balkrishan Kalra: I'd like to start with a question about the partnerships. It's quite surprising that your partnership revenue sourcing is quite low. Can you help us understand why the strategy was what it was given at the difference between your peers is so significant and how quickly do you think you can ultimately close that gap to get to where maybe where your peers are? Yeah. So we are moving ahead now rapidly and therefore investing rapidly in the and given we were running many initiatives as I also alluded to earlier in the commentary.
Balkrishan Kalra: It was generating reserves not fast enough and that is what is changing and we are very pleased with the investments we have made and given we had made many of these connections with various hyperscalers or other iconic partners. We have been in relationship with them for X number of years but not in a focused manner and now they see us more. We have a pretty strong leader and a very strong team, possibly one of the best team in the industry that we have put up and we are seeing early results and we certainly want to close this gap for us.
Balkrishan Kalra: Just any color on how quickly that can you are we talking about like a five-year journey or is it something shorter just any color? Five years is a very long time. Surinder, we are not thinking five-year horizons but clearly want to get to double digit fast. Yeah, I would also bring out. I would also just quickly bring on as well. I think we can all agree. We nobody has better insight into what we call key stroke level information and data that we have as our clients and hyperscalers and other partners that we deal with continue to want to penetrate with their offerings.
Balkrishan Kalra: Nobody has a better domain level experience in our chosen verticals and we do so net net. It's a win for Genpact. It's a win for our clients, right? And it's a win for our partners. So we're putting a lot of effort and money towards that. And we think we'll see results in that. And that's helpful.
Balkrishan Kalra: And then in terms of just the innovation pipeline, I think you alluded to some ideas. You said, you know, there's more coming. Conceptually, are you pushing towards like building proprietary LLMs? Are you trying to build other pieces of software related to work? How should we think about what's coming down the pipeline at this point? And I would say all of the above and more as an example, if you think we are one of the largest players in finance and within finance, we are developing various LLMs, including for let's say accounts payable and building many of what we are calling Ed solutions internally, which are backed off by many of the LLMs. So a number of those innovation ideas are taking shape as we speak. Thank you. Thanks for the note.
Brian Keane: The next question comes from Brian Keane, the Deutsche Bank. Your line is open. Hi guys, solid results here. What did I ask about some of the the GNI bookings? And I think you said 95% of those bookings are on the non FTE base. I know you're really not generating much revenue yet from GNI, but out of those contracts price, you know, competitively versus the marketplace. And how do you know if you know on renewals and other deals if you'll be generating the same types of revenue you're generating that was typically on an FTE base?
Brian Keane: Yeah, Brian, a number of these, one we have we report soul source as well, a number of these are soul source opportunities too, but even in a competitive environment, it is a lot of for this. It is part of embedded solution. That GNI is integral part of. And as we are moving and pushing the agenda more on non FTE basis, a lot of these solutions are therefore now with these technologies, which are a number of them are IP, the number of them are, you know, partner solutions.
Brian Keane: You know, we are. Centered on what are the outcomes that they are achieving for our clients and how that cadence of outcome then also flows to us. And now what we are seeing is early good results. Peter mentioned quickly bridge upon that. Well, Jenny I is net new and a frothy level of discussion. AI is not new to us as well as other enhancements and productivity tools, right? Seems to be a big focus of it.
Brian Keane: We are not able or have not been able to generate the efficiencies and profitability and for our clients and for ourselves without utilizing tools. So this will continue to evolve over time. It is a net new technology, but it's really an enhancement or an evolution of what we've done in terms of using technologies to drive outcomes. Got it, got it.
Michael Weiner: And then just to follow up, maybe I can ask the guidance question a little bit differently. Since the growth rate was so strong in second quarter, what would cause the growth rate to decelerate the way you guys guided to because it just seems like the momentum you have, especially with the partnerships, we are going to see similar growth rates if not better in the third quarter and not the deceleration. Yeah, I think I'll start this one.
Michael Weiner: I think it really first starts with a consistent business environment. Keep in mind about two, excuse me, three quarters of our business is a new ties. So we have a very good view into that. The other 25% cohort of our business tends to be shorter duration deals that we have to earn in win throughout the year. So we're just not anticipating any real change in the macro business environment. We remain food and in terms of our guide.
Michael Weiner: In addition to it, yes, we had strong growth in the first half of the year, particularly off of better execution, namely in a lot of those large deals, which in many cases we're lapping each other. So we'll continue to monitor the business environment. But again, we remain prudent in how we think about it for the next two quarters. Got it. Thanks, guys. Thank you.
Sean Kennedy: The next question comes from Sean Kennedy with the Mizzouho. Your line has been.
Balkrishan Kalra: Hi, good evening. Congrats on the results. So I was wondering about the go-to-market approach on focusing on data tech AI and Gen AI solutions. So how does your team sell these solutions into your customer base? And did you change the sales incentives to help achieve these results? Yes, sales incentives change shot. And we continue to iterate and improve on that as well as we go along. And typically what we have is offering hub.
Balkrishan Kalra: So there are series of offerings that we have developed based on the client set and the needs and the competencies that we have. And these offerings are many of them are just impact offerings or also on the marketplace of our partners. And then depending upon active sales motion in all of the clients that we operate in. Jain, you know, depending upon the needs, you know, there is a active activation of these offerings that happen in different client situations. And there is from a simplification standpoint, we've also set up certain rituals and rigor, you know, that is driving accountability and agility in the organization.
Unknown Attendee: Thank you. Thanks, Sean.
Keith Bachman: And our next question comes from Keith Bachman with BMO. Your line is open. Hi, good afternoon, good evening.
Michael Weiner: Guys, I wanted to ask first on how would you characterize pricing in the first half of calendar 24 versus the same time last year? Let me just compare those big competitors with just the pricing is much more across the PTO in case how would you say that? Yeah, thanks for that question, if Mike, we've heard that before, right? So we've thought about it. We have had year over year in sequential. I think we're alluding to in terms of pricing, particularly in our digital operations business, right?
Michael Weiner: Keep in mind, half of it is predominantly a sole source and half is not is been relatively consistent. We haven't seen anything irrational that's really gone on in pricing. And so I it's hard for us to comment on others began to use. No, I think you're right. It's a reasonably competitive environment, but we haven't seen any irrational behavior in the market this.
Michael Weiner: Okay, related to that. If you can be willing to survive, what's your phone your business face services related or customer facing? What percent of that in total now call center business would be a part of that, but I'm talking DX more. How much do you have a service related business? Yeah, so in the past we've talked about that in terms of I think you're asking about customer service related business, that type of work. We have aggregated up in the many in what we do for a lot of our customers and a lot of different flavors, and you take that argue revenue. It's less than 10% of our business.
Michael Weiner: Yeah, yeah, last question for me, then a quick he is. You know, I do in the McCenture has said that Gen AI, you know, great growth for everybody in industry, but it's not additive to customer demand. And in that, you know, in order to pursue these projects, it's coming out of source from some other area, you know, it sounds like you guys have a different view of that. But I just wanted to try to clarify because like he clearly said you put this added into the pool, but I just wanted to make sure I heard that correctly.
Michael Weiner: Yeah, you're hearing that you're hearing that correctly again, it's hard for us to comment on other companies in terms of what their native mix of businesses, but we look clearly at our pipeline. At our very defined definition of what Jared AI is, we're seeing it as a net enhancer to our pipeline. So, you know, when BK talks about we view the tam on this being a driver of our sustainable growth in the future, as opposed to a trade off, we're just not seeing that.
Unknown Attendee: Okay, many thanks, guys. Cheers. Thank you, Keith. As Reminder, to ask a question, please press store 1-1 on your telephone.
Balkrishan Kalra: I show no for the questions at this time, I would now like to turn the call back to the company for closing remarks. Thank you, thank you, Michelle, quarter two was another strong quarter for Genpact. As we look ahead, we will continue to drive improving execution, leveraging our C-plus-1 framework and lean into innovation. We will innovate by leveraging Genai and other advanced technologies to deliver superior value for clients and drive productivity for Genpact. I also want to take this opportunity to thank all of our clients for choosing Genpact and all the shareholders for ongoing support. We look forward to speaking with you again next quarter. Thank you.
Unknown Attendee: This concludes today's conference call. Thank you for participating. You may