Q2 2019 Earnings Call
Good day, ladies and gentlemen, and welcome to the second quarter 2019, Jim pack.
Limited earnings Conference call. My name is during the and I will be your conference moderator for today.
At this time, all participants on a listen only mode.
We will conduct a question and answer session towards the end of this conference call.
We expect the call to conclude it about an hour as a reminder, this call is being recorded for replay purposes.
The replay of the call will be archived and made available on the Investor Relations section of juice packs website I would now like to turn the call over to Roger Sachs head of Investor Relations at Genpact. Please proceed sir.
Thank you Brenda and good afternoon, everybody and welcome to Genpact second quarter earnings call to discuss our results for the quarter ended June Thirtyth 2019.
We hope you had a chance to review our earnings release, which was posted to the IR section of our website Genpact dotcom, joining the call from London, If Tiger Tyagarajan, our President and Chief Executive Officer, and with me in New York is at 50, Patrick Our Chief Financial Officer.
I would gender for today will be as follows.
Hi, good will provide a high level overview of our second quarter results and update you on our strategy.
And Ed will then discuss our financial performance in greater detail and provide an update on our outlook for the year.
Tiger will then come back for some closing comments and then we'll take your questions. After Randy just noted we expect the call to last about an hour.
Some of the matters, we will discuss in today's call are forward looking these forward looking statements involve a number of risks uncertainties and other factors that could cause actual results to differ materially from those in such forward looking statements.
Such risks and uncertainties are set forth in our press release.
In addition, during our call today, we will refer to certain non-GAAP financial measures. We believe these non-GAAP metrics provide additional information to enhance the understanding of the way management views. The operating performance of our business you can find a reconciliation of these measures to GAAP in todays earnings release posted to the IR section of our website and with that let me turn the call over to Tiger.
Thank you Roger good afternoon, everyone and thank you for joining us today for our 2019 second quarter earnings call.
I'm speaking to you from London today, where I'm here and attending several client meetings.
I'm very excited that the momentum we saw coming off hopefully gene has continued throughout the first half of 2019.
Large deal Rom's ongoing transformation services wins and outstanding execution by our teams led to another quarter of strong performance from both global clients and GE.
We delivered our highest year over year revenue growth rate since the first quarter of 2012.
One of the most gratifying is that we draw even stronger growth in our adjusted operating income adjusted EPS and operating cash flow.
The need for enterprises to leverage new digital technologies is creating increased demand for our transformation services, which brings digital analytics and consulting solutions together.
Transformation services drives up fully embedded managed services operations, which we call intelligent operations.
And this provides further opportunities for transmission services, creating a virtuous cycle.
As a result.
Okay and pipeline in the next total addressable market.
We believe that hopefully our reasons for this one.
Corporate leadership teams will resist this change are increasingly looking to leverage new advanced technologies to reinvent their business models are risks being disrupted.
Two companies or even be looking for transformation partners entered on trying to do it all themselves.
Three a number of clients are now wanting to engage in much larger scope given the potential benefit of transformation journeys.
And for to meet the fast pace of change the C suite have accelerated the speed of decision, making even in complex large transformational deals.
Specifically in the second quarter on a constant currency basis total revenue increased 22%.
Global client revenue increased 16% and global client BPR revenue increased 17%.
We also delivered adjusted operating income margin of 15.4% up 40 basis points, both year over year and sequentially.
And adjusted EPS of 49 cents up 20% year over year.
We have been saying for some time that we expect total revenue to grow at a double digit pace over the long term.
We also expect our global client BPR revenue to grow at a low to mid teen rate.
Our results over the last several years demonstrate our ability to consistently generate these types of growth rates.
We are seeing our inflows and.
The benefit from our decision to focus on a set of chosen verticals service lines and geographic markets as well as the pivot to transformation services.
Investments in digital analytics domain and process, along with experienced client facing leaders.
All concentrated on our focus choices has enabled us to compete really well in our large and highly underpenetrated market.
We are winning more deals than ever before resulting in a revenue growth rate that we believe is outpacing that of expanding overall market.
The three most important reasons why clients choose us over competition are one our demonstrated leadership other transformational partner for complex changed journey on the back.
Off end to end digital and analytic solutions that deliver superior.
Through our deep understanding of industry vertical domain combined with our granular understanding of processes using lean six Sigma principles.
This coupled with leveraging advanced digital technologies, such as the AI machine learning user and customer experience design thinking as well as our VA drives tangible value for.
And three.
Our maniacal client focus with great attention to details top tier execution and exceptional club, which is already very high net promoter scores.
The success of our strategy and execution is reflected in ongoing strong momentum we are seeing in the business.
Transformation services is embedded in approximately 70.
Of new deals.
Up from the 50% range during the first half of 2018.
Sole source deals continue to account for roughly half of our bookings.
Our strong second quarter Global client performance was led by growth in our consumer goods retail hi, Tech and banking capital markets verticals.
Transformation services had another impressive quarter with year over year growth in excess of 35%.
Analytics within transmission services was a key contributor led engineering bundled with domain specific AI and machine learning capabilities to produce predictive insights that then drive actions and outcomes for clients.
GE continues to perform very well against expectations driven by the large deal win late last year and continued new services and project work that began last quarter.
At the same time, our total IP business, which sharper strategic.
Once again delivered solid quarterly performance.
Our solutions continue to leverage advanced digital technologies, resulting in changes to commercial models away from traditional FTD based pricing.
New commercial model now represent more than 40% of total revenue increasing from the low 30% range just over two years ago.
The capabilities, we have added over the last three years through our missions in AI machine learning cloud based work flow technologies, and consulting and user and customer experience journeys.
Our all fueling our deal wins.
The integration of all our acquired companies within our teams have been successful, enabling us to go to market with full end to end translator solutions.
This is allowing us to compete better and to win larger and more complex deals reflected an even higher win rates stand a very strong levels we've been experiencing.
Incorporating these capabilities into Genpact corridor, our automation to AI platform, we are delivering significant value to the market by offering completely redesigned disruptive solutions that appeal to both new and existing clients.
For example, leveraging enhanced cloud based workflow capabilities from our acquisition of PNM soft, which we now call core sequence allowed us to develop a solution for a leading healthcare information services company, which automates and stop many manually intensive processes used to request fill orders for healthcare information from thousands of healthcare providers and payers.
This quarter, our implementation that manages more than a quarter of a billion transactions a year can now be leveraged for cutting edge analytics that is hugely value, creating in the healthcare industry.
In another example, using natural language understanding technology from frameworks acquisition helped us develop our unique core not create pay solution for CPG retail clients to better end to end trade promotions, a major problem area in that industry.
And finally for a leading global financial institution, we jointly designed a world class new wage operations for their retail credit card business.
Leveraging the income.
And customer journey mapping capabilities from our tandem seven acquisition, our objective was to provide industry, leading customer experience driving new card members on higher cost.
Our acquisition of the supply chain consulting firm Barghouti late last year has led to a five fold increase in the pipeline hygiene services and is positioned for a huge multiyear growth trajectory.
Over the last 18 months, we had wins with iconic companies in each of our chosen industry verticals.
That have elevated our brand.
Three quick examples include our strategic partnerships with GE, Wal Mart and Bridgewater.
These relationships are leading to a heightened level of inbound fleet and boardroom calls as more and more companies want to explore engaging with us to transform their business operations.
The ramp up our recent marquee deals are on target, which is especially satisfying given these are highly complex engagements.
This performance positions us well for growth.
As an example, given our strong execution on core innovation that is helping Walmart transform its finance and accounting operations in Benton well, we are expanding our partnership yesterday, we announced the exciting news that we will now help transform the Latin America end to end finance and accounting operations.
With a new delivery center opening in Costa Rica, as well as our new analytics focus digital innovation hub in Guadalajara, Mexico.
We are increasing our footprint in Latin America, where we see many opportunities to serve our global clients.
As a result of strong inflows our robust pipeline continues to expand direct.
Moving forward, we will continue to reallocate so as to focus our investments in the area you see the biggest opportunities to deliver attractive profitable growth over the long term.
This is even more important in today's world of digital that requires us to be more agile and nimble.
With that ill turn the call over to Ed.
Thanks Tiger and good afternoon, everyone.
It seems like we had some autobytel issues with with Tigers.
Microphone there so we'll make sure after the call that that Weve reviewed read the script and get you towards that may have been muted during certain time.
Turning to turning to my prepared remarks today ill review, our second quarter results as well as provide an update on our full year financial outlook for 2019.
During the quarter, we generated total revenue of $882 million, an increase of 21% year over year were 22% on a constant currency basis.
Overall business process outsourcing revenues, which represent approximately 84% of our total revenues increased 23% year over year.
Total IP services revenue grew 13%.
Global client revenues were $760 million approximately 86% of total revenue increased 15% or 16% on a constant currency basis.
Within global client BPO revenue grew 16% or 17% on a constant currency basis, largely driven by recent large drams and growth and transformation services.
For the second consecutive quarter transformation services grew north of 35% and was approximately 27% of total global client revenue.
It should be noted that some portion of this growth is expected to occur a bit later in the year.
Global client it services revenue was up 7% year over year.
Revenue from GE was $121 million of 86% year over year, driven by incremental scope of work and a faster than expected ramp related to the new large deal. We signed late last year as well as transmission services work related to supply chain services.
Adjusted income from operations for the quarter grew 24% to $136 million and our adjusted operating margin expanded to 15.4%.
A 40 basis point improvement versus the prior year.
This performance was driven by strong topline growth.
And our continued focus on SGN, a leverage which more than offset the $10 million decline in export subsidy income this quarter versus the prior year.
Gross margin for the quarter was 35.2% compared to 36.5% during the same period last year and 35.8% in the first quarter.
Largely due to dilution from recent large deals with significant onshore delivery.
The dilution is aligned with our full year outlook as we forecasted the quarterly phasing of these deals.
We continue to expect gross margin for the full year to be relatively flat with the level reported in 2018.
Total operating expenses were $196 million compared to $176 million in the same quarter last year as a percent percentage of revenue as genie expenses decline year over year by almost 200 basis points. Despite absorbing approximately 770 basis points related to incremental stock based compensation.
This performance was driven by significant operating leverage as well as expected savings from functional efficiency initiatives.
Adjusted EPS for the first quarter was 49 cents compared to 41 cents last year.
The eight cent increase which in my higher operating income of 11 cents offsite offset by one cents each related to lower foreign exchange balance sheet remeasurement gains a higher effective tax rate and higher net interest expense.
Our effective tax rate during the second quarter was approximately 22% compared to 21% last year.
The increase is primarily due to the expiration of special economic zone benefits in India, and aligns with our full year outlook.
During the quarter, we returned approximately $16 million.
$60 million to shareholders by or quarterly dividend of 8.5 cents per share.
Now, let me turn to our cash flows and balance sheet.
During the second quarter, we generated 126 million of cash from operations compared to 77 million last year.
The incremental cash flows were driven by higher operating income and expected payments related to the Indy export subsidy.
Dsos improved from 87 days.
Improved to 87 days from 93 during the first quarter.
We continue to expect our dsos to improve throughout the balance of the year and even in the low 80 day range by the fourth quarter.
Our cash and cash equivalents were $378 million compared to 334 million at the end of the second quarter of 2018.
Our net debt to EBITDA ratio for the last four rolling quarters was 1.70.
With undrawn debt capacity of $208 million and existing cash balances, we continue to have ample liquidity to pursue growth opportunities.
And executing our capital allocation strategy.
Capital expenditures as a percentage of revenue was 3.3% second quarter of 2019 compared to 3.9% during the second quarter of last year.
Let me now have to update you on our full year 2019 outlook.
Given our strong year to date topline performance and better visibility into the balance of the year.
We now expect total revenue to be between 3.46 and 3.5 billion.
Representing year over year growth of 15% to 17%.
For 16% to 18% on a constant currency basis up from our prior outlook of 11% to 13% or 12% to 14% constant currency.
For global clients, we now expect full year revenue growth to be in the range of 10.5% to 12% on a constant currency basis from our prior 10% to 11.5% range.
We now expect global client BPO to grow 11.5% to 13% constant currency up from the prior 11% to 12.5% range.
With strong bookings bookings growth in 2018 record pipeline levels and increasing total addressable market, we remain optimistic in our ability to generate double digit global client growth over the long term.
Given our strong year to date, GE performance and incremental scope of work related to the new large deal. We signed late last year. We now expect full year revenue from GE to grow approximately 70% year over year compared to our prior outlook of 35% growth.
We continue to expect adjusted operating margins to be approximately 16% for the full year. We continued margin improvement during the second half of the year.
We now expect full year adjusted earnings per share in the range of $2 to $2 in two cents.
Up from the prior range of $1.96 to $2 range.
With that let me turn the call back over to Tiger for his closing comments.
Thank you Ed.
These are exciting times for Genpact.
Our strategic choices, our investments and capabilities.
Our strength in the front end, our pivot to transformation services and.
And replicable digital and analytic solutions are all paying off.
In addition, the iconic clients. We have recently added are significantly elevating our profile in the market.
All of this is driving strong profitable growth for both global GE and as earned our right to compete for and win megadeals.
At the heart of our ability to serve clients with excellence has their dedication not 90000, plus global team members and one of the best leadership teams in the industry.
We also just add it David I don't hide to the leadership team as our new transformations.
No.
It is our culture of continuous learning that we believe is our differentiated winning secret sauce.
We are now in that 10 months off a new program called genomes.
Designed specifically to excite our workforce to keep learning by providing the right tools and methods drops killed them with relevant digital transformation and other professional skills at scale.
This re skilling when how genpact in many ways in the future. So as an organization, we're always ready to meet the changing needs of our clients.
With that let me turn the call back over to Roger.
Thank you Tiger, we'd now like to open our call for your questions. Linda can you. Please provide the instructions.
Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your Touchtone telephone.
A question has been answered you were some assistance. Please press the pound key one moment please.
Okay.
Our first question is from.
Bryan Bergin from Cowen Your line is open.
Hi, guys. Thank you.
Well I wanted to ask on the large client you've had great success with here Walmart seems like you've had multiple expansions at the account and such quick traction at that account is impressive is is there something different in this relationship or is it I heard your commentary about faster decision, making and large deals with can you replicate the success that you're seeing at Walmart what are your thoughts on that.
So I just expand.
Brian the question to be beyond beyond the one client I think the three things that are very close to one decision making.
Is much faster.
Even though scope and complexity is much larger in many many of these journeys number one number two.
Is.
The ability to drive value faster is better.
Just because now we are leveraging digital technologies analytical tools.
And that delivers value in foster cycles, and Todd I think we still have to.
Those on our execution capabilities be it operating execution, our digital execution that strength has been the bulk of our strength for a long long time, but the first two I think our differences in the marketplace that clearly is playing out.
Okay makes sense.
And then I wanted to dig in on gross margin.
You had comments there on the large deal ramps the investments there can you give us a sense on some of the moving parts within gross margin, whether you can quantify the wash your hands, whether FX was a large factor and you mentioned year on year is going to be how should we be thinking about gross margin potentially beyond 19 is there any any other impediments to driving it higher from here.
No Brian largely aligned with what we thought we knew we'd be a bit below that 36 in the first half and our expectations be slightly above the math would tell you to be flat year over year, you probably need to be about 36, and a half for the second half of the year, which is what we had planned so as we ramp we are expecting it to be a bit better second half such that the full year ought to be roughly flat and the dilution in the quarter really relates to the large deal ramps and the one that we've talked about that executed at the end of the second.
Sorry, the first quarter ramp with two months versus just one in the <unk> in the first quarter. So that was the majority that differential.
And Brian just to just to add to what Ed said.
We do run the company.
From an adjusted operating income and EPS.
Perspective.
And we must understand that as we drive this growth.
As a lot of that growth includes onshore and offshore delivery.
As a lot of that has digital and transformation agenda is built into them.
I would say our overarching objective is to drive profitable growth at the adjusted operating income and EPS level.
And then ill know all the puts and takes that and explain on the gross margin side plays out.
Okay. Thanks for the color.
Thanks, Ron right.
Our next question comes from Lang Tandon from Needham and company.
Your line is open.
Thank you good evening, Congrats Tiger and Ed just a few questions from my side first.
Could you comment on I mean, you talked about the transformation side, but could you talk about maybe automation specifically what is the percentage of deals that are impacted by automation and do you see this as a threat or opportunity going forward what are the economic profile of such deals versus your core BPM offerings.
I think it's pretty clear that automation is a benefit.
We are leveraging to the helped.
75% of our deals have digital and analytics.
On translation services embedded in them, so obviously, 75% of them have automation embedded in them.
And their differentiation for the customers that differentiation in terms of driving value driving that value will foster all comes from these digital technologies and bring them to life.
So we clearly have always seen that as an opportunity we've never seen it on the track and Weve embraced it.
Through a combination of building our own capabilities as well as acquisitions and bringing in a whole set of new leaders, who brought new thinking and new capabilities to the table and that's what's playing out so.
We think very clearly that that's the way it will continue to play out and on our total addressable market has also we believe gone up because more clients on the table more saying I want to talk now and more saying I want to go bigger scope Fausto every one of those Plato.
But you really increasing.
Got it.
And then just related Tiger it terms of obviously given the shift of the type of work what is the gating factor I mean, I would imagine is probably hiring or the talent to be able to work on these type of digital slosh analytics engagements. So maybe if you could comment on just the war for talent out there in the market and how you're competing with your peers in that regard.
Well, that's a great question and I would start by saying.
It's always been a war for talent our business is about talent that's never changed.
And it's not just drilled on analytics on that talent.
Our secret sauce, admiring that talent with a deep understanding of the customer that domain on the process the lean and six Sigma skills. It's the combination that makes us very different.
The ability to drive the conversation.
In combination so the war for talent continues and I think we are.
Really well positioned in that war for talent, both in our global delivery locations as well as in our market locations such as that I'm in London or in the U.S. are in Japan or in Australia, just picking those four markets are some of the most recent wins we've had in Canada.
One of the reasons why I think we are able to attract top talent. We are finding is the ability to actually better solutions that can be deployed on that generate value rather than being.
A solution that remains in a conference room, and that's that's what understanding domain and industry brings to the table and across bidding iconic brands helps.
These are brand names that people are attracted by so we feel very good about our ability to attract talent and have them join the team and combined with the talent evolving.
Great. Thank you appreciate the color.
Thank you.
Our next question comes from Ashwin Shirvaikar from Citi. Your line is open.
Hi, Tiger Hi, Ed.
Thanks and God.
Any sense on the quarter.
Thank you Ashwin.
Hey, I wanted to start by kind of pulling together a few of the comments made faster decision, making camping more deals they have a greater transformation component mode and analytics. So as you pull this together how does your approach to.
Delivery.
Change broadly speaking.
If you can you can comment on on that.
Actually it's a great question Ashwin I just saying.
One change many changes one of them will be the combination of onshore and offshore is is pretty rare in almost every one of these large transformational deals. So thats one change so it's not just.
Global offshore delivery number two is the criticality and the complexity of some of the work is.
Wanting to three notches higher.
So obviously the talent and capabilities that you need on the depth of skills needed and knowledge needed as higher the third is.
Well implementations have.
Fast cycle and.
Action component to them so in the world of just operations.
It was just deliver a lot what was promised and delivered 100% of the time accurately too.
Experimenting whether it's AI for example, where sometimes you can start with 60% accuracy and 40% exceptions and over time.
Hey, I learned and you move towards the 90% Mark how quickly can you get there determine success for the client and obviously by definition success for us so.
At the core extend comes back to focus on the customer.
Always doing what's right for the customer measuring and metrics at a granular level all of which is not new for us that's our strength solidly.
Got it.
Understood. Thank you for that.
One thing I mean, this is the second quarter in there. So obviously you guys have.
Thats like this.
Based on what you are seeing it seems as though.
The strong results ought to continue.
None I can look at.
You haven't done a buyback in the first half.
Can you explain that I mean.
All else equal I would expect you guys will be doing a buyback would be.
Investing in in stock at Celtic possible. So what what is there something you can comment on that.
Hi, Ed.
Yes, yes that talk about capital allocation, but but let me first talk about.
Our our though the last couple of quarters and the acceleration we've seen we actually started seeing.
The acceleration towards the latter part of last year.
Ashwin, if you remember I used the phrase tipping point.
In the February earnings call.
Referring to the fourth quarter of last year and that tipping point was in reference to the iconic brands that we have started journeys with the big deals that we had won the coming together of our choices our investment on our front end team.
And the way the market was changing in terms of the decision making cycle as well as.
People, who would not otherwise no wanting to partner excise sketch to scale and scope.
We started seeing that sort of tipping point I think what's playing out is that tipping point. So by definition. Therefore, we feel that this is a journey that the world is going on today for quite some time and we are well positioned to be part of that journey on capture that value.
And now you want to you want to talk about capital allocation. The two are pretty different questions by the way.
No just to complete it thought it really no surprise there ashwin as you know we've talked about.
The investment grade being important for net debt to EBITDA levels were a bit elevated levels for the last few quarters because of the acquisition. We have done late in the third quarter.
Last year. So that was that's really the rationale we're now down to it back to a point, where the dry powder. If you will of 1.7 turns and you heard me say in my prepared remarks that we have to.
Capital do we need to do going forward, but thats M&A share repurchase or others. So I think we're back to a point, where we feel comfortable that your dry powder to do we want to do.
Absolutely got it thank you guys.
As our investors.
Our next question comes from Okay. So from Wells Fargo. Your line is open.
Hi, Thanks, Congrats here.
Just trying to get a sense, if youre gaining share I think to some clearly the market has shifted and your position to capture what appears to be strongly improving market, but do you have any sense, whether you're gaining share and maybe generically what kind of firms you might be gaining it from thank you.
And that is that's a great question.
I wish I could answer it with specificity and Preciseness that we all would like.
We think we are gaining share.
We believe we are.
And I believe comes from really too.
Hi level data points, one as industry growth rates, we seem to be above industry growth rates and second we seem to be about growth rates up a number of the farms that we typically compete with so put those two together.
We would think that we are.
Gaining share in their chosen areas.
And only industrial scenarios.
Well back at that we've chosen verticals chosen geographies and chosen services, we do not deviate from dose if there arent there growth happening outside of those then we don't touch those at all so that so I would say in our in our chosen areas I think we are getting share.
We tend to compete with the same with the same competitive set so I don't think the company.
Has changed I would argue in the last three or four years, it's remained pretty much the same.
Depending on the service and depending on the industry vertical.
So my other question is around the growth rate in global clients.
Yes, the very strong first half, but given the full year guide it assumes a deceleration in the global client is at the map with the key piece is that the math on how the large contracts roll and sort of help me why there's a sort of a softer growth outlook and h. too. Thanks, Yeah. So Tony So Ed I'll start by saying that.
You know we have it's actually all three of the above that you name. One is we've had an acceleration in transformation services. Some of that is acceleration of some of the big deal that got accelerated into the first half which had embedded translation services. We got the benefit of that some of that will not happen in the second half. The second is if you do a you already talked about it in on the second half we have.
Hi, our comparison point and the third and fourth quarter of last year.
And I know unopposed ramps have been.
Very very.
You know clear in the first half.
And some of that benefit we've already got in the first half.
Do you want to add more color to that.
No I think thats good tiger the year over year comparisons get tougher as you get as you go through last year right. So Q3 got better in Q4 was much better right. So Q4 is probably the toughest compare of all the quarters last year, but at the end of the day, we've gotten to a different level.
In terms of total revenues were up $75 million from Q1 to Q2 and then.
In our worst case scenario and our outlook for.
Up slightly or flattish, which is still pretty nice growth year over year.
For the second half and obviously for the full year.
Great. Thank you.
Thanks.
Our next question comes from Tim sent home from JP Morgan Your line is open.
Hey, Thanks, good afternoon.
Obviously happy to see really big upside on the revenue. So I guess I was curious your ability to staff up.
To service. This disbursed in revenue I was kind of surprised how quickly you're able to do that anything to mention or call out.
In this regard.
Vincent.
Yes your point is.
Absolutely valid.
Obviously, we have the benefit of.
Pretty good visibility and now you know why the speedy decision, making cycle, it's too high visibility because it's been a long cycle business. We do have some visibility that visibility helps to you know, we we have always prided ourselves on our ability to.
Attract the right talent, we now have a global delivery footprint that is 20 plus countries. These are not concentrated in one place and Florida is in some of these deals not all of them, but in some of them, we've actually taken over the operations of our client.
That allows us to create some step functions in talent and by the way. This talented actually one of the reasons why we actually went and did that because these are some of the best talent that you can find a little bit connectivity on your question on how do you get great talent.
When you get great talent from a Bridgewater on a Walmart or a GE I think thats a great great opportunity that we leverage so I would say to all of that and helping us.
Yes, I was going to add that when you add to that question last time at the beauty of this is that we're getting terrific talent areas and we'll double down right. So.
So you mentioned here.
Yes, so from a business now that make all makes sense and what the Rebadging. So I'm just curious from a.
Obviously, we get the guidance implies in the second half is that as well Im just just curious from a business development standpoint.
Having these reference wins as you've called out in your press sentencing to using the tipping point words I am curious as we roll into 20 with GE in these other.
You know dynamics has your thinking changed here in terms of your ability to replenish.
The pipeline and the backlog and visibility and all that.
Got it and all that good stuff if you follow my question Doug.
Yes, I would say our pipeline is strong as I said actually one of the strongest we've had our inflows are strong we just as strong in spite of the growth we've had.
In revenue this year as well as the bookings momentum we had.
At the end of last year.
And we we reiterated.
The fact that first half in global client growth.
Exactly matches and is just around the points.
For global client as one our global time be off our long term growth trajectory, we think thats still valid because the under penetration is still real the target total addressable market has in fact grown.
And our position around transmission services alone after that market. So I would say all of that augurs well for the future. Obviously I think it's still too early to talk about exactly the numbers for 20 greedy.
But we feel very good about the strength of the brand and the strength of the inflows.
And I think it period.
Not talking about acceleration of growth, but which can happen, but I think at the total addressable market that it is not only shrinking we think it's expanding based upon what we're seeing and now it's now it that's why we said for the long term, we see this global client growth rate being in that double digit range. So that.
That's that's encouraging.
Terrific well then thank you.
Thank goodness.
Our next question comes from Maggie Nolan from William Blair. Your line is open.
Hi, I wanted to ask about and some of the digital hubs that you've been creating as you announced some of these large deals and the expansion as the deals and.
At this point in time I know there are a little bit newer but at this point in time have you been able to start to see any traction in terms of servicing other clients or even new clients out of those hubs and I'm. Just wondering what were seeing at some of the accounts that may not be the.
You know big brand names that were hearing so much about on the call and in the press release.
No great question Maggie Thanks.
So a lot of their digital analytics hubs that we talked about are those that intersection of a set of digital technologies in an industry. So if you take Stamford in Connecticut, where we announced the Bridgewater all of financial services digital hub.
That is a great attraction for similar clients to actually say why wouldn't we leverage off that talent base those solutions for themselves.
If we look at.
Benton well as an example of the consumer goods retail space and finance supply chain order management on that area and some of the digital technologies and core innovation that happens there, particularly as we continue to refresh the data in new talent in our partnership with Northwest Arkansas University.
And then Rick action for other consumer goods companies and other retailers to take a look at it and say that they'd like to leverage those same places so we've been very precise.
In our digital hubs.
On innovation centers being those which creates specific solutions that are relevant for a specific industry specific service arena. The most recent run we announced yesterday in Guadalajara, Mexico is pretty interesting around digital and analytics again at the intersection of retail consumer goods space that can solve a number of those industries in that space. So we feel very good about those being attractive for other people, who then land there obviously don't decision cycles.
Now to come there to take a look at it and then they ever decide that old decision cycles.
Well, that's one of the reasons, we are very excited about these iconic brands.
Very good and then you talked a little bit in the prepared remarks about seeing more deal wins than ever before is there any additional information that you can give us there in terms of quantifying it breaking out additional detail, whether it's large deals or however, you'd like to break down and then also.
Interested in kind of understanding how much of that is inbound you did mention in the prepared remarks that you are seeing more in the way of inbound just give us some of that the brand awareness that these these large clients has brought thank you.
Yeah, I'm talking on terms of inbound did I don't think we'd be able to.
Given any specific metrics, it's just way way more than it than it's ever been.
And remember we compete in the marketplace, where some of our competitors are having around much longer and are much bigger than us and they are much much more well known.
And Andy These are the recent spate of wins allows us to be known more.
As it relates to.
Yes, I'd just remind me was.
And your anymore color on the new deal wins Mega we talk about the other thing I'll add color to Tiger you can add.
And I think the question before about market share. The other data point, we're seeing we don't give that number.
But we've always been happy with our win rate in those numbers of the past two or three quarters or even better right. So.
Just another indication that we were we have good traction and gaining traction if you will so feel good about that.
Hi, Thank you congrats.
Thanks, Mike.
Ladies and gentlemen, if you have a question at this time. Please press star one on your Touchtone telephone one moment. Please.
We do have a question from Robby them a bird from Baird. Your line is open.
Yeah. Thanks for taking my question.
Regarding our transformation revenues and in Q2, how much do you expect and how much of this be buy and then how much should we expect for the rest of the year.
Okay. So on net yeah, so on transformation services revenue.
I said in my prepared remark there was some of that that we did expect to happen in the second half of the year to get pulled forward in the quarter of that 70 plus million incremental that we saw sequentially, we probably got somewhere in the $10 million to $15 million range and a big chunk of adding in the large deals we have talked about it a big chunk of that in global client. So that's part of the phenomenon that you know.
Yielded a bit better Q2 than even we expected which is great.
And for the balance of the year, you know Ts will still be growing at a faster clip than total company growth. So feel good about that but again remember as we talked earlier that the year over year compares get a bit harder in Q3 in particular in Q4, but again still be growing at that clip probably Uh huh.
As I look back at it you know around the 20% plus growth rate in the second half that's still pretty robust.
Yeah. Thanks, and then with regard to acquisitions, what was the contribution to the quarter and then I guess, what's expected for the year for Commonwealth, While spark Hari and then Russ canvas.
I think we don't talk quarters, but for the full year, it's it's a little over 1% for total revenue.
I think we talked about that earlier in the earlier in the year.
No change.
Okay perfect.
Hi, how are you.
Good morning.
Yeah with regard to the.
The revenue beat as well.
I guess why aren't we seeing more margin expansion and is it all being I guess spend to weigh on marketing and Gionee I guess to keep the growth engine going or.
And then ramp ramp up cost as well and then essentially would just flex margins and slower years or how is the margin progression going.
Really no change there in our in our outlook and a 16% operating margin is kind of the number weve targeted and again, it's been it's been that delivered improving that we've been driving for the past several years. So no change in strategy, we will continue to invest in the business to drive that profitable growth.
So we like the deliberate progression there.
And so far so good.
Halfway through the year Tiger anything else on that.
No not on.
Our business, we've always said when you ramp.
Hi, Joe you use stock I don't know a margin and then you apply margin through through the cycle off the lifecycle of the relationship.
That that ramp.
India's complex deals probably takes longer than normal ramp and has more fuel consumption in the early days. So this is exactly what we expected. So no nothing you know that was unexpected and.
In the margin profile you know as we go through this.
And with that but with that said flowing through the income to operating income operating margin dollars, obviously showing through and why you saw a pick up the EPS numbers.
Perfect. Thanks.
Thanks Robby.
I'm showing no further questions at this time I would now like to turn the call back over to Mike Saks for closing remarks.
Thank you everybody for joining us on the call today, and we look forward to speaking with you again next quarter.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may disconnect and have a wonderful day.