genpact 2018 investor and analyst day - seeking alpha

Genpact 2018 Investor and Analyst dayMarch 15, 2018

These materials contain certain statements concerning our future growth prospects and forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These 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. These risks, uncertainties and other factors include but are not limited to a slowdown in the economies and sectors in which our clients operate, a slowdown in the business process outsourcing and information technology services sectors, the risks and uncertainties arising from our past and future acquisitions, our ability to convert bookings to revenues, our ability to manage growth, factors which may impact our cost advantage, wage increases, changes in tax rates and tax legislation, our ability to attract and retain skilled professionals, risks and uncertainties regarding fluctuations in our earnings, foreign currency fluctuations, general economic conditions affecting our industry as well as other risks detailed in our reports filed with the U.S. Securities and Exchange Commission, including Genpact’s Annual Report on Form 10-K for the year ended December 31, 2017. These filings are available at www.sec.gov or on the Investor Relations section of our website, www.genpact.com. Genpact may from time to time make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. Although Genpact believes that these forward-looking statements are based on reasonable assumptions, you are cautioned not to put undue reliance on these forward-looking statements, which reflect management’s current analysis of future events and should not be relied upon as representing management’s expectations or beliefs as of any date subsequent to the time they are made. Genpact undertakes no obligation to update any forward-looking statements that may be made from time to time by or on behalf of Genpact.

Non-GAAP Financial MeasuresThese materials also include measures defined by the SEC as non-GAAP financial measures. Genpact believes that these non-GAAP measures can provide useful supplemental information to investors regarding financial and business trends relating to its financial condition and results of operations when read in conjunction with the Company’s reported results. Reconciliations of these non-GAAP measures from GAAP are available in the annexures at the end of this presentation and in our earnings release dated February 12, 2018.

Forward-looking Statements

® 2018 Copyright Genpact. All Rights Reserved.

AI and digital are changing our world

President & CEO

TIGERTYAGARAJAN

AI predicts equipment repairs over 10 years, improves revenue by over $300 M


Client onboarding takes 1 hour vs. 20 days; Banking with a digital KYC


Real time access to SKU level insights improved revenue for a CPG company by $200 M


Eliminating unnecessary auto repairs in the auto insurance business using AI in claims saves $800 M


Keeping patients safe. AI-based pharmacovigilance tracks, anticipates, and reports adverse drug events


Experiment and fail fast to innovate

Companies are embracing change to become agile

Design flexible business models

Nurture diverse teams to uncover new solutions

Promote curiosity, collaboration and change

Partner for speed and learning

Build deep business knowledge and context


These could turn business models on their heads…

Apply then approve Approve then apply

Online retail

Commerciallending

Shop then ship Ship then shop


Action

0 1 0 00 0 1 01 1 0 0

Data

Feedback

Judgement

Prediction

Learning

Using AI for real-time prediction

Business models will change completely

New competitionAll industries will be

affected

Outcome

Source: Prof. Ajay Agarwal, University of Toronto and NBER


Digitalis not just about

technology

It’s abouttransforming

how you do business

Note: Revenue figures shown for 2016 are prior to the reclassification of GE revenue to Global Clients.

But companies struggle to scale digital

They need the right partners for the journey

Reimaginecustomer

experience

Digital -analyticssolutions

Deep domain -process

expertise

• Agility

• Co-innovation

• Design thinking

• Domain depth


Genpact is a critical partner

Sharp

digital capabilities

Sharp

digital capabilities

Deep analytics

capabilities

Deep analytics

capabilities

We’ve delivered $30 B in

client outcomes

Leader in independent

analyst surveys

Leader in independent

analyst surveys

20 years of industry

knowledge

20 years of industry

knowledge

High customer references

69% NPS

High customer references

69% NPS

Proprietary process

frameworksSEPSM, Lean DigitalSM


We are focusedon select industry verticals Capital

markets

Insurance

Consumer goods, Retail

Life sciences, Healthcare

Industrial manufacturing, Services

Hi-tech

Banking


And chosen service lines with deep end-to-end capabilities and insights

Enterprise

Finance and Accounting

Source to Pay - Procurement

Supply Chain Services

Risk Management Services

Non Exhaustive

Industry-specific

BFS

Customer Onboarding

Commercial Lending/ Leasing

Customer Experience

Insurance

Claims

Underwriting Services

CPG

Order Management

Supply Chain Services

Pharma

Regulatory Affairs

Patient Safety

Non Exhaustive


Digital CentersPalo Alto, Boston, Tel Aviv,

Delhi and Bangalore

700+ clients

70+ delivery centers in 16 countries

~78,000 employees

Expanding digital centers


We have a history of being disruptive

Global delivery

Continuous improvement

(Lean/Six Sigma)

End-to-end benchmarks

(SEPSM)

Digital SEPSM and digital assets

(Lean Digital SM)

Digital transformation Including AI

Efficiency

2000-2005 2005-2009 2015-20172011-2015 2018

Effectiveness

Transformation

With deep process and industry knowledge


Synergistic routes to market drive value for clients

Strategic and targeted acquisitions performing well

Genpact Cora unlocks opportunities

Attracting great new talent, new skills, new culture

Repositioning our brand

Unlocking our under penetrated markets


Driving digitally-led innovation and solutions with domain and process expertise

Transformation Services

Synergistic routes to market drive value for clients

Intelligent Operations

Global Client BPO Revenue expected to grow at 12-14% in 2018*

Designing, transforming, and running operations with digital and analytics

75-80% of global client revenue 20-25% of global client revenue

Note: Revenue growth on a constant currency basis is a non GAAP Measure.


Specific domain expertise

Commercial Lending

Patient safety Digital Claims

Insurance Claims

Chosen digital capability

Ambient Computing Customer Experience

Dynamic workflow Artificial Intelligence

Strategic and targeted acquisitions performing well


Unleashing the power of Genpact Cora


We unlock opportunities with

Modularity

Open API

Command and Control


Our acquisitions enhance Genpact Cora


Jay Scanlan

Head of Global Growth Ecosystems

Kaushik Bhaskar

Head of ProductEngineering

Ashish Khanna

COO for CPG, Retail, Life Sciences

Rupal Gadhia

Head of Communications & Brand

We are attracting great talent for fresh perspectives


@ Londonex-McKinsey

@ Palo Altoex-IBM

@ Gurgaonex-Accenture

@ Bostonex-Interbrand

@Palo Alto

Vikram Mahidhar

RAGEAI

Michelle Palomera

Tandem Seven Design Thinking

Consulting

Brad Gallien

November Research GroupPharmacovigilance Product

Acquisitions adding great new leadership

Gal Horvitz

PNMSoftCora SeQuence


@ Boston@ Tel Aviv@Boston

We are upskilling our talent at scale

Artificial Intelligence

Development Program

450 applicants

vying for AI capability training

Robotic Process

Automation

90% trained

on Lean Digital

Chief Science Officer Protégé

Program

50+ data scientists and

6,000+analytics

professionals

Design Thinking

1,100+practitioners

trained

Education@Work

200+courses available

to enhance expertise


Repositioning our brand in digital transformation

Putting clients atthe center

Creatingexperiences

Elevating theIndustry

conversation

Transformation Services accelerates new client wins and scales existing clients

71% 80% 44% 51%

29% 34%

% of Global ClientRevenue

% of Global Client Revenue

2013 2017

Revenue > $5 M

2013 2017

Revenue > $15 M

2013 2017

Revenue > $25 M

12

19

25

40

77

125


A different company that you still recognize


Driving shareholder valueCFO

EDFITZPATRICK

Executing on our financial goals to drive shareholder value . . .

Total revenue

Global Clients’ BPO as % of total revenue

Transformation Services as % of Global Clients’ revenue

Adjusted operating income margin*

Adjusted EPS*

Market capitalization**

Outstanding shares

2014

~$2,279 M

~61%

~14%

15.1%

~$1.03

$3.3 B

~219 M

2017

~$2,737 M

~76%

~20%

15.7%

~$1.62

$6.1 B

~193 M/down 14%

Adjusted operating Income margin and adjusted EPS are non-GAAP measures. See Annexures 1 and 2 for a reconciliation of these measure to the corresponding GAAP measures** Market capitalization as of 2/7/2014 and 12/31/2017


1,813

2,001

2,239

2,467

2014 2015 2016 2017

. . . Solid P&L financial performance across the board

Global Client Revenue ($ M) Global Client BPO Revenue ($ M)

Notes:1.Revenue figures shown for 2016 have been adjusted with the annualized impact of 2016 GE Divestures. The reclassification of revenue related to certain divested GE businesses as Global Client revenue for 2017 was

immaterial. 2.Adjusted operating margin and adjusted diluted EPS are non-GAAP measures.

Adjusted EPS ($)Adjusted Operating Income Margin

1,381

1,578

1,851

2,089

2014 2015 2016 2017

15.1%

15.3%

15.5%

15.7%

2014 2015 2016 2017

1.03

1.26

1.46

1.62

2014 2015 2016 2017


Our growth model

Transformation Services driving top line growth

G&A leverage expanding adjusted operating margin

Adjusted EPS growing at a multiple of revenue growth

Revenue Growth

Operating Leverage

Expanding AOI Margin

Capital Allocation

Adj. EPS Growth

Note: Adjusted operating margin and adjusted diluted EPS are non-GAAP measures.


Revenue growth, led by global clients…

Total Revenue

58% 47% 40% 38% 30% 26% 23% 20% 19% 14% 10%

42%53% 60%

62%

70%

74%77%

80%81%

87%90%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

GE Global Client

$823

$1,601

$1,902$2,132

$2,279$2,461 $2,571

$1,041 $1,120$1,259

$ M

$2,737

$823

$1,601

$1,902$2,132

$2,279$2,461 $2,571

$1,041 $1,120$1,259

$2,737

Revenue Growth

Operating Leverage


Capital Allocation

Adj. EPS Growth

Note: 2016 revenue has been adjusted with annualized impact of 2016 GE divestures. The reclassification of revenue related to certain divested GE businesses as Global Client revenue for 2017 was immaterial


…With transformation services leading the way

Global Client Transformation Services ($ M)

0

300

600

2014 2015 2016 2017

Transformation Services Revenue

Revenue Growth

Operating Leverage


Capital Allocation

Adj. EPS Growth

Note: Adjusted operating margin and adjusted diluted EPS are non-GAAP measures.


G&A leverage funding investments that grow our business . . .

Expenses as a % of revenue*

16.5% 16.0%14.6% 14.7% 14.2%

4.7%

6.6% 6.9% 7.1% 7.0%

1.5% 2.0% 2.4% 2.7% 2.8%

2013 2014 2015 2016 2017 2018E

S&M Spend

G&A

R&D Spend

2018 Illustrative

Revenue Growth

Operating Leverage


Capital Allocation

Adj. EPS Growth

Note: *Figures exclude stock based compensation and non-recurring acquisition related expenses. Certain expenses have also been reclassified from Capability Spend to Other G&A to better reflect expense categories


Revenue Growth

Operating Leverage


Capital Allocation

Adj. EPS Growth

. . . And deliberate margin expansion

Adjusted Operating Income Margin

15.1%15.3%

15.5%15.7% 15.8%

2014 2015 2016 2017 2018 Outlook*

Note: Adjusted operating Income margin and adjusted EPS are non-GAAP measures. See Annexures 1 and 2 for a reconciliation of these measure to the corresponding GAAP measures* Estimated


Revenue Growth

Operating Leverage


Capital Allocation

Adj. EPS Growth

Components of EPS growth

$1.03

$1.62

$0.29 $0.06$0.04

$0.20

Adj. EPS 2014 Adj. Operating IncomeGrowth

Taxes Interest & FX Share Repurchases Adj. EPS 2017

Note: Adjusted Operating Income and Adjusted diluted EPS are non-GAAP measures.


Delivered meaningful EPS growth

Earnings leverage (2014 -2017 CAGR)

6%

16%

Total Revenue Adjusted EPS

2.6X

Revenue Growth

Operating Leverage


Capital Allocation

Adj. EPS Growth

Note: Adjusted diluted EPS is a non-GAAP measure.


Driving strong cash flow

($ M)

209265 257 285

6362 89 74

272

327346 359

2014 2015 2016 2017

Free Cash Flow Capex Operating Cash Flow

Capex at ~3% of Revenues; FCF @ ~100% of Net Income (or 1:1)


Maintaining a strong balance sheet while funding investments

Cash Balance and Debt ($ M)

Investment grade credit rating

Flexibility to pursue growth opportunities – Target Net debt/EBITDA Ratio 1.0x - 2.0x

Invested ~$480 M in strategic M&A since 2014

Returned ~$1.1 B through share repurchase and ~$47 M through dividends

Shares (M) ~219 ~211 ~199 ~193

M&A Activity (M) ~$131 ~$21 ~$45 ~$285

(802) (802) (899)(1,216)

462 451423

504

0.9x

0.8x

1.1x

1.6x

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0(1,700)

(1,400)

(1,100)

(800)

(500)

(200)

100

400

700

2014 2015 2016 2017

Debt (closing) Cash (closing) Net debt/EBITDA (12 Months Rolling)

Net Debt/EBITDA

$ M


Investments to build capabilities driving organic growth1

M&A to add digital, analytics and domain capabilities2

Return capital to shareholders3

Sales & Marketing up ~50% (% of revenue)

Research & Development up ~90% (% of revenue)

Capital Expenditures ~$285 M

Share repurchases: ~$1.1 B , annualized return of ~17%(1)

Reduced outstanding shares by ~14%

Increased annual dividend 25% to $0.30 in 2018

2014 - 2017

Note: (1) Annual Rate of Return calculated with closing G share price as of 12/31/2017

Clearly defined and disciplined capital allocation priorities drive shareholder value

M&A activity: ~ $480 M

Fiserv’s Australian Item

Processing Business


$571 $504

($306)

($470)

($1,144)

$1,304

$549

0

400

800

1,200

1,600

2,000

FY 14 Cash OperatingCash Flow

Capex,Investment &

Others

M&A (Net) Debt Financing Buyback &Dividend

FY 17 Cash

$ M

Effectively generating, investing and managing capital


$31.88

10

15

20

25

30

35

40

G S

ha

re

pr

ice

($

)57%

67%

126%

0%

70%

140%

TS

R

DJIA S&P 500 Genpact

Industry Leading Global Client BPO Revenue Growth

Leveragable Business Model

Strong cash flows and Capital

Stewardship

Our strategy and execution – driving shareholder value

Total Shareholder Return (since 2014)*

*Stock price as of March 14th 2018. Total shareholder returns since the announcement of our focused growth strategy (on February 7th, 2014).


2014 2017

Financial outlook

2018 Outlook Medium-term

Total Revenue Growth* 7.0% to 9.5% High single to low double digit

Global Client* 9% to 11% Double digit to low teens

Global Client BPO* ~12%-14% Low to mid teens

GE* (8)% to (10)% +/-2%

Adjusted Operating Income Margins**

~15.8%Leverage provides flexibility for margin

improvement and ability to invest

Tax Rate 21%-22% Low to mid 20’s

Adjusted Earnings Per Share** $1.70 to $1.74 Expected above revenue growth

**Adjusted income from operations margin, adjusted diluted EPS and revenue growth on a constant currency basis are non-GAAP measures. See Annexures 1 and 2 for a reconciliation of these measure to the corresponding GAAP measures. Adjusted EPS estimate assumes no impact to balance sheet related foreign exchange gains or losses.


Uniquely positioned in a highly attractive industry

Large, underpenetrated market with a long runway for growth

Macro uncertainties driving global need for business transformation

Transformation Services is a key growth driver

Sticky long term annuity revenue

Strong cash generation and balance sheet provides financial flexibility

Driving investments with ROIC greater than WACC


Annexures

Annexure 1: Reconciliation Of Adjusted Income From Operations – FY 2017

Year ended December 31st

(USD, in thousands) 2016 2017

Income from operations $ 340,777 $ 328,627

Add: Stock-based compensation 25,113 35,685

Add: Amortization and impairment of acquired intangible assets 25,023 35,467

Add: Acquisition-related expenses 1,956 5,886

Add: Other income, net 10,120 26,238

Less: Equity-method investment activity, net (7,698) (4,543)

Add: Net loss attributable to redeemable non-controlling interest 2,137 2,270

Adjusted income from operations $ 397,428 $ 429,630

Adjusted income from operations margin 15.5% 15.7%


Annexure 2: Reconciliation Of Adjusted Diluted EPS – FY 2017

Year ended December 31st

(USD, per share data) 2016 2017

Diluted EPS $ 1.28 $ 1.34

Add: Stock-based compensation 0.12 0.18

Add: Amortization and impairment of acquired intangible assets 0.12 0.18

Add: Acquisition-related expenses 0.01 0.03

Less: Tax impact on stock-based compensation (0.03) (0.05)

Less: Tax impact on amortization and impairment of acquired intangibles (0.04) (0.06)

Less: Tax impact on acquisition-related expenses - -

Adjusted diluted EPS $ 1.46 $ 1.62


Annexure 3: Reconciliation Of Outlook For Adjusted Income From Operations Margin

Year ending

December 31st, 2018

Income from operations margin 12.4%

Add: Estimated stock-based compensation 1.4%

Add: Estimated amortization of acquired intangible assets 1.3%

Add: Estimated acquisition-related expenses 0.1%

Add: Estimated other income (expense), net 0.6%

Less: Estimated equity-method investment activity, net -

Adjusted income from operations margin 15.8%


Annexure 4: Reconciliation Of Outlook For Adjusted Diluted EPS

Year ending December 31st, 2018

(Per share data) Lower Upper

Diluted EPS $ 1.39 $ 1.43

Add: Estimated stock-based compensation 0.23 0.23

Add: Estimated Amortization of acquired intangible assets 0.21 0.21

Add: Estimated Acquisition-related expenses 0.01 0.01

Less: Estimated Tax impact on stock-based compensation (0.06) (0.06)

Less: Estimated Tax impact on amortization of acquired intangibles (0.07) (0.07)

Less: Estimated Tax impact on acquisition-related expenses - -

Adjusted diluted EPS $ 1.70 $ 1.74

Note: Due to rounding, the numbers presented above may not add up precisely to the totals provided.


genpact 2018 investor and analyst day - seeking alpha

Documents