Good day, ladies and gentlemen. Welcome to the 2021 Second Quarter Genpact Limited Earnings Conference Call. My name is Wayne, and I will be your conference moderator for today. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference call. As a reminder, this call is being recorded for replay purposes. The replay of the call will be archived and made available on the IR section of Genpact's website. I would now like to turn the call over to Roger Sachs, Head of Investor Relations at Genpact. Please go ahead.

Thank you, Wayne, and good afternoon, everybody, and welcome to Genpact's second quarter call to discuss our results for the period ended June 30, 2021. We hope you had a chance to review our earnings release, which was posted to the IR section of our website, genpact.com. Speakers on today's call are Tiger Tyagarajan, our President and CEO; Ed Fitzpatrick, our outgoing Chief Financial Officer; and Mike Weiner, who is joining us as our new Chief Financial Officer, succeeding Ed, who will be transitioning to another leadership role within Genpact. Today's agenda will be as follows. Tiger will provide an overview of our results and update on our strategic initiatives. Ed will then walk you through our financial performance for the quarter as well as provide some thoughts on our outlook for 2021. Tiger will then come back for some closing comments, and then we'll take your questions. We expect our call will last about an hour. Some of the matters we will discuss in today's call are forward-looking and 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 that we believe 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 today's 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 second quarter 2021 earnings call. Our second quarter performance saw Global Client revenue return to double-digit growth earlier than we anticipated driven by accelerated momentum in Transformation Services, particularly in Analytics, and the strength of our Intelligent Operations business. We exceeded our expectations on the top line, bottom line cash flow. Our strategic investments and services such as supply chain, sales and commercial and financial crimes and risk are proving to be extremely relevant for our clients, opening many new opportunities to create value in areas beyond just cost and productivity. In the second quarter 2021, we delivered total revenue of $988 million, up 7% on a constant currency basis; Global Client revenue of $893 million, up 11% on a constant currency basis; adjusted operating income margin of 17.9%, expanding 170 basis points year-over-year; and adjusted diluted earnings per share of $0.66, up 27% year-over-year. Before reviewing the quarter in more detail, I want to welcome Mike Weiner, who has joined Genpact as our new CFO effective August 10, succeeding Ed Fitzpatrick, who will be staying on in a market-facing client advisory role. Mike comes to us with strong public company CFO experience and brings an extensive background in the finance function, working in many large global corporations. We expect Mike will make a significant contribution to the continued success of the company as we execute on our strategic growth agenda. We're very excited to have him on board. Mike is with us on the call today and will make a few comments later on. During the second wave of COVID-19 in India a few months back, we were able to adapt and maintain our delivery of services to clients, resulting in no material impact to our business. This was only possible because of the unwavering support of our clients, together with our geographically distributed operations across India, extensive global delivery footprint and ability to quickly redeploy talent across areas of our business. I'm happy to report that new cases among our India-based team have significantly declined. And we are aggressively driving a vaccination campaign in partnership with local hospitals, with vaccination clinics set up at many of our operating centers. To date, more than 60% of our India workforce has at least one dose of the vaccine. As we move into the second half of the year, the overall demand environment remains healthy as companies pursue digital transformations. The pipeline continues to include an increasing mix of new logos. Global Client revenue returned to double-digit growth in the quarter. This impressive performance was seen across most of our chosen industry verticals, including consumer goods and retail, life sciences and health care, high tech and manufacturing and services. As we had expected, banking and capital markets were impacted by the restructured relationship with one of our clients that resized its asset management business. However, we saw an expansion of our banking and capital markets pipeline, supported by opportunities in financial crimes and risk services. Transformation Services accounted for 35% of our Global Client revenue in the quarter and grew at over 30%, including the contribution from the Enquero acquisition. A good portion of our Transformation Service engagements continue to be annuity based. Transformation Services continues to be powered by our Analytics business that has grown at an increasing rate in each of the past three years. The combination of robust demand and our strategic investment has led to Analytics becoming the largest component of our Transformation Service business while we continue to also grow nicely across consulting and digital. Let me share some examples of our Transformation Service engagements and the value they are driving for our clients. For a global CPG company, changing their operating model and redesigning the user experience for its sales teams to significantly free up their capacity to drive higher growth and customer satisfaction. For an insurance company, using our AI-based cloud workflow solution, Cora, to orchestrate underwriting processes across the client's shared Microsoft Azure environment, leading to significantly faster underwriting times with better premium pricing, lower risk, and higher profitability. For a high-end consumer electronics company, leveraging our industry expertise and data, AI and machine learning-based analytics to improve demand and supply forecast accuracy. Integrating these forecasts with the planning and production processes resulted in a 20% improvement in order fulfillment, a 40% reduction in planning time, and a 15% lower inventory. For a global bank, bringing our data specialists and subject matter experts together to significantly improve their data covenants, leading to better timeliness and accuracy of their regulatory reporting. We have consistently seen that starting a new client relationship with Transformation Services leads to subsequent growth. Over the past 18 months, 60% of new accounts that started with a standalone Transformation Services engagement led to a follow-on booking, including longer-term annuity teams. Additionally, many of these engagements provide the opportunity to leverage new and more profitable commercial models beyond traditional FTE pricing. The share of our total revenue with alternative commercial models has been consistently increasing. Thematically, there are three competitive differentiators that are helping us win. First, our ability to orchestrate data and analytics in the cloud as it's becoming core to every client's transformation journey. Second, our deep expertise, linking services such as finance and accounting to supply chain or financial crimes and risk to banking operations or supply chain to sales and commercial operations. And finally, our focus on driving value for clients beyond just cost and productivity such as increased growth, lower receivables and inventory, or lower losses and fraud, in each case, linking client outcomes to commercial constructs. Our portfolio of services, investments in data and process models, and digital expertise are proving to be incredibly relevant for clients in this business environment. Four specific areas that we are seeing strong momentum include sales and commercial, supply chain management, financial crimes and risk and financial planning and analysis. Let me expand on each of these. Firstly, in our sales and commercial service line, bringing together cloud-based data and analytics and operations insights to drive revenue growth for our clients. For example, helping our high-tech clients focus on best opportunities to pursue with small and medium businesses. Second, in supply chain services, given the disruption in the semiconductor industry, helping improve demand and supply planning by leveraging data and analytics for many integrated device manufacturing companies, foundries, and Tier 1 chip manufacturers. Third, as digital commerce becomes pervasive and industry agnostic, we see an increased need for clients to address fraud and financial crimes. Our teams of industry experts and data scientists are developing and implementing as-a-service solutions on the cloud in the areas of fraud, anti-money laundering, know your customer, and transaction monitoring. And finally, SP&A is an area ripe for disruption. We are seeing significant opportunities to leverage our deep industry expertise, strength in finance and accounting and use of data and analytics in the cloud to provide agile forecasting and decision-making capabilities for our clients across customer, supply chain, marketing, and finance data. All these areas highlight that anything that drives growth for our clients represents high-growth opportunities for us. For example, we recently announced a new strategic relationship with Coca-Cola Beverages Africa to help them drive competitive growth, leveraging our deep process and domain depth in CPG and beverages. We are establishing a multifunction, digitally enabled shared services organization to centralize and automate finance, procurement, data management as well as other functions, creating intelligent operations that improve customer service and allow them to concentrate on their growth initiatives. We've always believed our people are our biggest competitive advantage. Therefore, attracting, building and retaining talent continues to be a top priority for us. In the quarter, we increased our net global employee base by more than 5,000 people. Over the years, we have earned a reputation as an organization known for building great careers. Our investments in the learning and development of our employees allow our talent to build critical new skills needed for the future. We leverage our scalable online learning platform, Genome, to reskill our workforce. Genome, in combination with our redeployment platform, Talent Match, has been an enormous success. And during the quarter, we redeployed 4,000 team members into new roles, providing them with new career opportunities. As we discussed last quarter, we have a unique certification program in data and analytics that enables our employees to generate critical insights from our vast operating data sets, ultimately allowing us to build unique data models in specific domain areas that bring tremendous client value. Sixty percent of our global workforce is currently enrolled in this program, with about 10,000 fully trained and tested by the end of the second quarter. Our strong second quarter results prove that the powerful combination of deep domain and process expertise, coupled with our strategic investments in digital analytics and experience, provides us with a competitive differentiation. We believe Transformation Services engagements drive better long-term partnerships with clients with better CXO connects, creating paths to different buying centers. This has led to more than half our bookings continuing to be driven by sole source deals. With our expanding addressable market, we are bringing more Transformation Services and Intelligent Operations solutions to our clients, setting the stage to continue our long-term journey of delivering annual double-digit to low teens Global Client growth and deliberate adjusted operating margin expansion. Based on our year-to-date performance, we are now raising our 2021 full-year top line adjusted operating income margin and adjusted diluted EPS outlook. With that, let me turn the call over to Ed for a detailed review of our second quarter results.

Thank you, Tiger, and good afternoon, everyone. Today, I'll go over our second-quarter results and share our latest perspectives on the full-year 2021 financial outlook. Total revenue reached $988 million, reflecting a 10% year-over-year increase or a 7% rise on a constant currency basis. As noted in the first quarter, our stronger-than-expected performance was driven by significant Global Client growth, especially in Analytics. Global Client revenue, which accounts for 90% of total revenue, grew by 14% year-over-year or 11% on a constant currency basis. This includes about a 1-point contribution from revenue associated with certain divested GE businesses that we integrated into our Global Client portfolio starting January 1, 2021. As mentioned earlier, we achieved double-digit growth in Global Client revenue ahead of earlier expectations, mainly due to robust performance in Transformation Services revenue, again led by Analytics growth. Throughout the quarter, we expanded our Global Client relationships, increasing the number of Global Client relationships with annual revenues exceeding $5 million from 132 to 136 within the 12 months ending June 30, 2021. This category included clients generating over $25 million annually, growing from 23 to 26. GE revenue fell 19% year-over-year as a result of our productivity commitments and the overall macroeconomic effects on GE's businesses. Excluding revenue from divested businesses, GE revenue would have dropped 10% in the quarter, which aligned with our expectations. The adjusted operating income margin was 17.9%, reflecting a 170 basis point increase from the same period a year ago. This improvement was driven by an expansion in gross margins, operational leverage, and persistently lower overall operating expenses, which included reduced travel-related costs. Gross margin for the quarter was 35.9%, compared to 34% in the previous year. This expansion of 190 basis points primarily resulted from a higher proportion of Transformation Services, particularly Analytics, and improved utilization, although offset partially by increased medical costs elevated in part due to COVID-19. It’s important to note that last year's gross margin was lower than anticipated due to reduced client billings caused by the transition to remote delivery early in the pandemic. SG&A expenses as a percentage of revenue held steady at 20.7%, consistent with last year's figures. We expect to increase our investments in sales and marketing and research and development during the second half of the year. Adjusted EPS was $0.66, representing a 27% increase year-over-year from $0.52 in 2020. This increase of $0.14 was primarily due to a $0.13 rise in operating income, a $0.02 foreign exchange remeasurement gain, and a $0.01 impact from a lower share count, partially offset by a $0.02 rise in taxes. Our effective tax rate was 24.2% versus 21.5% last year, mainly driven by a more favorable mix of jurisdictional income last year and reduced tax incentives in 2021, which aligned with our projections. Turning to cash flows and our balance sheet, we generated $161 million in cash from operations in the second quarter compared to $192 million in the same period last year. The decrease mainly reflects higher investment in working capital due to increased revenue growth this quarter compared to last year, when revenue performance was affected by COVID-19. Our days sales outstanding improved to 83 days from 87 days last year, primarily driven by reduced billing cycle times and better collection timing. Cash and cash equivalents stood at $753 million versus $644 million at the close of the first quarter of 2021. Our net debt-to-EBITDA ratio over the last four quarters was 1.4 times. With about $500 million in undrawn debt capacity and our existing cash, we maintain sufficient liquidity to explore growth opportunities and execute our capital allocation strategy. We have a solid M&A pipeline and remain focused on finding companies that can enhance our capabilities and service lines. As we've stated before, if capital is available, we will continue share repurchases, especially when valuations are attractive relative to our view of the firm's intrinsic value. During the quarter, we bought back about 300,000 shares for a total of $13 million at an average price of $44.15 per share. We also distributed $20 million as a cash dividend of $0.1075 per share in our regular quarterly dividend. Since starting our share buyback program in 2015, we have decreased our net outstanding shares by around 20%. During this time, we've repurchased 44 million shares at an average price of $28.38 per share, totaling $1.3 billion. We estimate the annual return on these purchases to be approximately 16%. By the end of the second quarter, we had about $490 million remaining under our share repurchase program. Capital expenditures as a percentage of revenue were below 1% in the second quarter, mainly due to reduced infrastructure spending as employees continue to work remotely. We expect to boost investments in the second half of the year as we ramp up deals signed late last year and as our global workforce gradually returns to the office. Given lower spending in the first half, we now anticipate capital expenditures for the full year to be at the lower end of our previous outlook of 2% to 2.5% of revenue. Now, let me provide an update on our full-year outlook. Thanks to our strong first half and improved visibility for the full year, we now project total revenues between $3.96 billion and $4 billion, reflecting year-over-year constant currency growth of 5.5% to 6%, compared to our prior estimate of 5% to 6.5%. For Global Clients, we expect revenue growth to be in the range of 10.5% to 11.5%, or 9% to 10% on a constant currency basis, better than our earlier outlook of 9% to 11%, or 8% to 10% on a constant currency basis. In the second half of the year, we expect Global Client revenue to grow at a single-digit rate sequentially during both the third and fourth quarters, with year-over-year growth in those quarters remaining in the low double-digit range. There is no change to our previous GE full-year outlook, which sees an approximate 20% decline year-over-year. Excluding the effect of around $40 million in revenue from GE-divested businesses, GE full-year revenue is expected to decline by 10% to 12%. Considering our adjusted operating income margin performance in the first half of the year, we are raising our full-year adjusted operating income margin outlook to around 16.5%, up from our previous expectation of approximately 16%. We anticipate our adjusted operating income margin for the second half to be lower than in the first half as we increase investments in sales and marketing and research and development to foster long-term growth, manage transition costs tied to deal ramps, and enhance travel-related activities. We also project our gross margin to improve by 70 to 75 basis points year-over-year, compared to our earlier expectation of a 50 basis point improvement. Given this revised outlook, we now estimate adjusted earnings per share for the full year 2021 to be between $2.36 and $2.39, a $0.09 increase from our previous estimate of $2.27 to $2.30, driven by expected higher gross and adjusted operating income margins, plus $0.01 linked to the FX remeasurement gain recorded this quarter. We have assumed an average share count of 193 million in our EPS estimate for the year. Additionally, due to our stronger-than-anticipated performance year-to-date, we now forecast our operating cash flow for the full year to be at least $500 million, compared to our previous range of $450 million to $500 million. When factoring in the newly anticipated lower level of capital expenditures for the year, we now expect free cash flow to be around 1.2 to 1.3 times net income, exceeding our historical level of about a 1 to 1 ratio. With that, I will now hand the call back to Tiger.

Thank you, Ed. Before I give my closing remarks, I'd like to once again welcome Mike Weiner to our team, and I'll hand over the call to him to make a few brief comments. Mike?

Thank you, Tiger. Having been on the other side of digital transformation journeys in the other businesses I was in, I'm excited to now be on this side, helping a wide range of clients undertake those journeys. I'm also thrilled to join the Genpact team and have become part of a company with excellent growth potential that owns a leading position in a large underpenetrated market. I'm enthused by the energy level I've seen from the global team. And I'm looking forward to partnering with everyone as we move forward on executing on our strategic initiatives to drive value for our stakeholders. I'm also looking forward to speaking with and hopefully, meeting with you all in person in the near term. Thank you, Tiger.

Thank you, Mike. We all look forward to your contributions in the months and years ahead. Our strong performance in the first half of 2021 reflects our agility and culture of embracing change, which continually allows us to move more rapidly to meet the evolving needs of our clients. Global Client revenue has recovered to double-digit growth. And we feel good about our positioning in the market and the opportunities ahead for both the balance of this year and over the medium and long term. I'm very pleased to share that this past week, we published our 2020 Sustainability Report, which is available on our website, improving our disclosure by moving from a once in two years to an annual reporting cadence. This increased frequency is aligned with our unwavering commitment to our initiatives around diversity, equity and inclusion, climate impact, governance and community support that help us achieve our long-term financial goals. I wanted to point out a few metrics to demonstrate our focus: global gender diversity of 41%, a 28% reduction in Scope 1 and Scope 2 emissions since 2016, learning completed by our employees in 2020 exceeding 10 million hours, and our global corporate social responsible initiatives impacted nearly 25 million lives. We were also recently named to the Forbes Best Employers for Women 2021 list, reflecting our efforts in our pursuit of an inclusive and gender-equitable workplace. Additionally, we were named to Fast Company's 100 Best Workplaces for Innovators. And our Pharmacovigilance team was named to their innovative team of the year list for the COVID-19 work we did with the UK Medicines and Healthcare Products Regulatory Agency. Before closing, I want to thank Ed for partnering with me as our CFO over these last seven years, during which he has successfully led the finance organization to support our profitable growth strategy and along the way, achieved many milestones. We are very fortunate to have Ed stay on to work closely with Mike to ensure a seamless transition and to take on his new client advisory role, in which he will leverage his extensive expertise as a CFO to benefit many of our strategic clients. With that, let me turn the call back over to Roger.

Thank you, Tiger. We would now like to open up our call for your questions. Wayne, can you please provide the instructions?

Your first question is from Tien-Tsin Huang of JPMorgan. Your line is now open.

All the best to you, Ed, in your next role. I'm sure it will be fun. I can't let you go without asking a question about margins for good measure. Regarding the gross margin, I understand you're planning to increase it a bit. I know you're achieving higher utilization, and I assume the transformation mix is beneficial as well. I'm just trying to understand what aspects of this are structural and sustainable versus what might be temporary as we consider the short and midterm outlook.

Yes. Year-to-date, we are performing slightly better than our target of 70-75%, as indicated by the numbers. We did experience a slight impact on gross margin this quarter due to healthcare costs associated with the global effects of the COVID pandemic. However, we believe that while we are currently doing better, we do not anticipate maintaining this elevated level for the rest of the year. We expect to achieve the 50 basis points improvement and, therefore, have raised our target for year-over-year improvement to 70 to 75 basis points. Additionally, we saw continued benefits in Transformation Services, especially in Analytics, during this quarter. The decrease we observed was not mainly due to that mix we discussed in the first quarter, which remains strong. The decline this quarter is more tied to healthcare-related expenses. I'm optimistic about this, but we do not expect this mix to persist throughout the year. We are seeing solid progress in Intelligent Operations as well, along with our productivity initiatives that enable us to pass benefits to our clients, helping to enhance our gross margin. Given all these factors, we anticipate an improvement for the remainder of the year, though it may not be as pronounced as what we experienced in the first half. We will see how things develop. Tiger, do you have anything else to add?

No, I think you covered it all. And Tien-Tsin, the only thing I would say is, clearly, the buoyancy that we've seen for three consecutive years in the Analytics business is playing out, and those are all high value-added services. And the other thing that I would say is as we continue to drive better than company average growth, Global Client growth in things like FP&A, supply chain, financial crime, sales and commercial, these are all, as I said, services that pivot to driving value beyond cost and productivity for our clients. And as we do that and connect those commercial to that value being driven, I can see us undertake a long-term journey on gross margins.

That's great to hear. I have a big picture question for you, Tiger. During this earnings season, demand appears to be strong in many areas, particularly on the digital side. How would you describe the demand environment compared to previous cycles? It's complicated coming out of the pandemic, but the digital transformation is very evident. How do you see it comparing to past cycles, and what do you think the long-term sustainability of this demand will be?

Clearly, Tien-Tsin, we definitely see longevity being lasting for quite some time because this is pretty secular in terms of the desire to embrace digital in order to unlock really two things. Cost and automation and all that is a given. But the two things that people are now trying to unlock is experience and insights in order to take decisions. And that's why analytics. And all of that is growth. So if you ask me, the big difference in what we are seeing now versus any cycles of the past is growth-driven agendas. And the second thing that I would say is very pervasive. And the third I would say is many more new clients, new logos who have not done this before. And that does pose one challenge, which we talked about in the past as well, which is those new relationships who have not done it before, and they are complex, large deals, sometimes take longer to close. But I see this as a secular change that is going to last.

Your next question is from Keith Bachman of Bank of Montreal. Your line is now open.

Yes. I had a couple to follow-on Tien-Tsin, if I could. Just on the last comment, Tiger, as you think about that large pipeline with new logos and perhaps lumpy deals to use different words, but is there a margin implication as you think about that over the next year or so as those large new deals, new clients come in? Is there anything on the margin side that we should be thinking about related to that type of pipeline?

Yes, let me start off. That's a good question, and then Ed will elaborate. I think "lumpy" is an accurate description. We've mentioned this before. The larger deals tend to be quite unpredictable, which makes quarter-to-quarter analysis less relevant for our business. When considering margins and growth, we need to think in terms of at least a year, if not longer. Part of what Ed mentioned about the second half of the year relates not only to investments in sales, marketing, and R&D, but also to the ramp-up periods. During the initial phases of these ramps, especially for the lumpier deals, there can be a margin drag that we have to overcome as we move into the following year. However, when we consider longer cycles of 12 to 18 months, these fluctuations tend to balance out, which is why we believe we are experiencing a fundamental shift in gross margins. Ed?

Yes. I believe, Keith, as you've observed, a couple of years ago, we had significant bookings from a few large sales. We managed to handle that without reducing margins. We continued to make progress on our operating margin improvement target of 10 to 20 basis points. Given the substantial leverage we can bring year over year, we've been able to manage the situation well. If we encounter so many large deals that we need to pull back, we will inform you, but that hasn't been necessary up to this point, and I doubt it will be. If it does happen, it might indicate that growth is reaching a new level because of those major deals. Overall, we’ve been able to navigate through even a particularly challenging year a couple of years ago.

And if I could just ask my follow-up before Roger throws me off is, Tiger, on the supply side, are you seeing constraints associated with either, A, availability, or B, cost to meet what you see is pretty strong demand?

No. I think, Keith, it will be fair to say that the war for talent is on back to prepandemic levels for sure. That's for sure. Our attrition numbers, which is a good metric to watch, is up versus last year, exactly as we had expected, but is at the lower end of the range that we were prepandemic. Having said that, if I now pass that into specific cohorts, let's pick data engineering. Let's pick cloud. Let's pick analytics, data science. I mean, these are very hot topics, as you know, in the marketplace. And when you have such red-hot topics in the marketplace of demand, you obviously have a very hot talent market, which is why for us, it's always been about not just hiring talent but actually building talent for the long term. And we are very good at that. We've done that for 20 years in different areas. And I just described one of the areas we talked about, which is analytics. We are in a very significant part of internally building very strong talent from our workforce on analytics. So back to your question, hot talent market, intense competition for talent. I think we have a good brand position. We have a good career path that we give people. We reskill people very well. So we feel good. We are at the lower end of the range that we used to be prepandemic, but there are hotspots that are very, very hot.

Your next question is from Dave Koning of Baird. Your line is now open.

Yes. So I guess, first of all, just looking at sequential growth was the best in two years or so, really one of your best sequential quarters in many years. And is any of that either related to some of the transformation deals being running kind of hot, some one-time benefits? Or is some of it just economic catch up with some of your clients? Or is this just sales momentum? Like maybe kind of go through what's driving all this?

Yes. I would say, Dave, that one quarter is not something that we would hang our hat on. Just in the nature of our business, it's a long-cycle business. It takes time to close a deal. It takes time to ramp a deal. So just looking at one quarter, sometimes it's a little bit of timing here or there. There's nothing unique that I would call out in the quarter that is so special that I would call out. Transformation Services is very good. Within that, Analytics was very, very good, one of the best Analytics quarters we've ever had, one of the best Analytics half years we've ever had. At the same time, consulting and digital also played very well. The other thing that played out was, and we are seeing this consistently every time we start with Transformation Services, it leads to follow-on work. And then subsequently, many of them do convert to Intelligent Operations, which are longer annuity deals. So I just think our focus, investments, the front-end sales team, the Transformation Services team, it's all come together nicely, and we hope to continue. Now I wouldn't single out the fact that it is the best quarter in two years and say, does that mean it's a new benchmark? I wouldn't necessarily go there, but it's just one quarter.

And I guess the second one, just on margins, Ed has done such a nice job for many years in a row, kind of 10, 20 bps a year. And this year is going to be well above that. Do we think of kind of the second half being a little more the sustainable number to grow off or the full year number to grow off? Like I guess I'm just wondering, are we running pretty high just for this year that next year just assume it's down a little bit just as we normalize attrition and other stuff? Or how should we think of that?

Yes, Dave. Looking at the first half results, they're really impressive, with a margin over 17%. That's fantastic. Obviously, our guidance for the second half anticipates an increase in investments. We may be slightly behind on some of those investments, but our plan is definitely to proceed with them to foster the sustainable growth that Tiger mentioned. We're aiming to sustain double-digit growth in GC over the medium to long term; it's not just a one-time event. From this viewpoint, we are committed to making those investments. However, Tiger has been quite clear that around 16.5% is the new baseline outlook we expect for the full year. We won't discuss 2022, but we also won’t state that our new baseline is any lower than 15% for the second half to achieve an average of 16.5%. So, 16.5% is the expected baseline, just to clarify.

Yes. And David, if you think about when we began the year, we said expect us to invest in sales and sales and marketing and R&D and expect that to happen through the year. The reality is that in our business, when you ramp costs up, the impact of that is most felt towards the latter part of the year. And on top of that, if you think about what happened in the second quarter around COVID-19 in India, that created challenges in our ability to ramp some of that sales and marketing R&D costs. Now we're going to continue that journey as we continue in the second half of the year. And therefore, the right way to think about it is the full-year margin as the margin to work off rather than the second half margin. But the second half margin is because of the first-half margin, a little bit of some of that sales and marketing and R&D has shifted.

Your next question is from Maggie Nolan of William Blair. Your line is now open.

This is Ted on for Maggie. Tiger, you mentioned at the beginning of the call that the pipeline has increased of new logos. So in terms of the composition of the pipeline, what proportion are first-time outsourcers? And how does that compare to prior to the pandemic or even just kind of over the last couple of years?

Yes. So I don't think we have those specific numbers. All I can say is that the last couple of quarters, we've called out that there are many more new logo, first-time outsourcers who have jumped into the frame. And in my prepared remarks, what I was trying to say is the pipeline continues to show that, and it continues to be the case. Again, I think it's a reflection of there is a rising tide that is lifting all companies in all industries to really say we need to change to grab the opportunity to transform, to leverage new technologies, to leverage data and analytics in order to drive growth as well as cost and productivity, et cetera, to actually fuel that growth. So I wouldn't call out anything different this quarter versus the last couple of quarters. It's just a continuation of what I've been saying, which is as compared to five years back, three years back, the number of first-time outsourcers is more than before.

And then one for follow-up, I wanted to ask about M&A. Are there certain capabilities that you're targeting in terms of just overall offerings that you'd like to add to the services portfolio?

Actually, it will be very nicely intersecting with some of the things that I called out in my prepared remarks. I mean, if you look at some of the services that are higher value add, more pivoted to driving client value beyond cost, let's take financial crimes and risk. Let's take, for example, sales and commercial supply chain, FP&A. I mean, those are the kind of areas from a service line perspective that would continue to be our areas of thinking about the right capabilities to add. And then when we think about analytics or digital, cloud, we've done two acquisitions in the last four years around experience. So we have a very strong experience team. We finished the acquisition of Enquero at the end of last year around data analytics and digital engineering on the cloud. And that's worked out to be a really, really great team to add to the company. So those kind of areas will continue to get our focus and attention, both from organic build as well as from M&A.

Your next question is from Ashwin Shirvaikar of Citi. Your line is now open.

Ed, great working with you, and Mike, welcome. I guess, Tiger, let me start with just building off of that last M&A question. The four areas you highlighted, it seems that each of them has benefited from a good-sized acquisition you did, whether it's Barkawi or Rightpoint or Enquero. Curious if that informs your view on future M&A in terms of do you feel the need to perhaps keep adding service lines, double down on what you have? Because I would imagine that there's plenty to be done even in these areas. Just consider something like supply chain given what's going on in the world, that's a huge opportunity. Can you talk a little bit about that? Will you perhaps even consider scaling up M&A as a driver of growth?

Yes. So Ashwin, great question. And I want to start by saying our first step in those journeys was a strategic decision that supply chain or financial crimes or data engineering, et cetera, are the right spaces for us at the right time to go into, to expand, to build capabilities and so on. So the first step in that journey is a choice that has nothing to do with M&A. It's got to do with which areas do we have the best opportunity to grow and to add value to clients and to expand and to create a differentiated value proposition. And then the decision gets to, okay, that's what we want to do. Then which ones do we build our own capabilities, which ones do we partner, and which capabilities do we actually acquire? So you then have three choices. Obviously, acquisitions, it's no surprise, it's probably the most capital intensive, obviously. At the same time, it actually gets you to the races faster. And all I'm trying to say is that we did not say now that we've got Barkawi, supply chain will be a big growth vector. We said supply chain is going to be one of our chosen areas. Therefore, let's look for something to fuel that, and we know exactly what we wanted. And then we found Barkawi, and that's been such a great home run. So the choice areas that we've had through our strategy exercise seem to have stood the test getting into the pandemic and through the pandemic. All the choices that are read out were choices that we made well before the pandemic. And you rightly pointed out, for example, supply chain is such a hot topic at the moment and is undergoing so much change. But there's so much more to do. Are there other new service lines that we should look at? We typically take one figure exercise at what new service lines to look at. Not every year do we need to add service lines. If we have enough runway in our existing service lines, then we feel very good about our existing service lines.

No, that's very useful. You mentioned that there are more first-time outsourcers than ever before. As you ramp this up, do you notice any changes in contract terms from your existing clients? Are the contract lengths different? Do they ramp up faster? Is there a higher proportion of shorter-term analytics-type work associated with these clients? What sets these first-time outsourcers apart? Also, I have a quick side question for Ed. Regarding the $6 million in other income, what was that?

Yes. So I don't think we have those specific numbers. All I can say is that the last couple of quarters, we've called out that there are many more new logo, first-time outsourcers who have jumped into the frame. And in my prepared remarks, what I was trying to say is the pipeline continues to show that, and it continues to be the case. Again, I think it's a reflection of there is a rising tide that is lifting all companies in all industries to really say we need to change to grab the opportunity to transform, to leverage new technologies, to leverage data and analytics in order to drive growth as well as cost and productivity, et cetera, to actually fuel that growth.

The other income this quarter included a variety of positive items. Typically, we have sublease income which contributes about $1 million each quarter. Additionally, the return on our deferred compensation plan has been favorable, adding a couple of million dollars, whereas it was negative in previous periods. There was also a recovery related to a tax item from before our acquisition by GE, which was reflected as an offset in our tax expense. These were the main components of the other income reported.

Your next question is from Bryan Bergin of Cowen. Your line is now open.

Mike, welcome. I wanted to follow up here on the margin outperformance. So just to clarify, was there any meaningful shift in the timing of some of the S&M and R&D expenditures relative to the plan that are now all pushed into the second half? And can you specify what some of those bigger items are that you're directing to? I'm curious, this is like scaling the sales force or if it's more like marketing events and things like that?

I will start off, and then Ed can add to it. Clearly, after experiencing three to four months of COVID-19 impact in India, some of our sales and R&D spending on resources had to be deferred to the end of the second quarter and into the third and fourth quarters. This was mainly a timing issue regarding hiring and onboarding, which did not occur as planned due to the COVID-19 situation in India. Beyond that, there's nothing significant to report. Most of the changes relate to enhancing our capabilities, aligning those capabilities with our customers, and developing specific services. This includes creating data models and benchmarks, which are important in several of our services and something clients look for from us. This focus on benchmarks is a reason we have been successful with our core service offerings. Ed, would you like to add anything?

Yes, we discussed this earlier. In the first half, we expected a quicker ramp-up. Therefore, there will be some catch-up in the second half, Bryan. As a result, we are very aware of run rates and how much of this will carry over into the next year. It will involve a mix of resources and other expenditures beyond just increasing our workforce.

No. I think, Bryan, it will be fair to say that the war for talent is on back to prepandemic levels for sure. That's for sure. Our attrition numbers, which is a good metric to watch, is up versus last year, exactly as we had expected, but is at the lower end of the range that we were prepandemic. Having said that, if I now pass that into specific cohorts, let's pick data engineering. Let's pick cloud. Let's pick analytics, data science. I mean, these are very hot topics, as you know, in the marketplace. And when you have such red-hot topics in the marketplace of demand, you obviously have a very hot talent market, which is why for us, it's always been about not just hiring talent but actually building talent for the long term. And we are very good at that. We've done that for 20 years in different areas. And I just described one of the areas we talked about, which is analytics. We are in a very significant part of internally building very strong talent from our workforce on analytics. So back to your question, hot talent market, intense competition for talent. I think we have a good brand position. We have a good career path that we give people. We reskill people very well. So we feel good. We are at the lower end of the range that we used to be prepandemic, but there are hotspots that are very, very hot.

Your next question is from Mayank Tandon at Needham. Your line is now open.

It's actually Kyle Peterson on for Mayank. I just wanted to touch on the demand environment, particularly kind of what you guys are seeing in different verticals? Are there any verticals that are jumping out as really kind of being fast adopters for you guys? I know you mentioned there's some restructuring with a large asset management client. But how is like demand in BFSI outside of that client right now?

Yes, outside of that client, actually, demand is good. As I mentioned in my prepared remarks, if you take that particular client out of the equation, our pipeline has grown very nicely. And one of the big drivers, not the only driver, is the whole financial crimes risk, KYC, AML, that whole ecosystem. We've got actually very good traction with fintechs as they scale. And clearly, one of the big areas when they scale that they need help in is the same area, which is financial crimes, risk, et cetera. And then when you see the intersection of online marketing and e-commerce and the traction that that's getting in the marketplace, the connection of that to payment platforms and the requirement of those people to build similar financial crimes risk kind of capabilities and bring that to bear, I think all of those are becoming big drivers of our growth engine, apart from the fact that almost every bank on earth is trying to figure out a way to make themselves more digital. And that's the other traction that we're getting. As banks more and more become digital, not just at the front end, but connecting that to the middle and back end, I think we are seeing really good traction in customer service, in portfolio management, in collections. And we have very good capabilities now that we're taking to them and solutions that incorporate AI-based, machine learning-based chat interactions, omnichannel interactions. And all of that is helping fill up the banking pipeline.

Your next question is from Bryan Keane of Deutsche Bank. Your line is now open.

I know we're running long here. So let me just ask one quick one. Tiger, when you look at the conversion rate of the pipeline, how do you measure how you guys are doing versus the market? I'm just thinking about market share gains because everybody is doing well on IT services, talking about digital and analytics. And that's doing well across the board. How do you know if you guys are getting your fair share?

Bryan, I mean you've asked a very tough question. It's very tough to figure out specific market shares in our industry, you know that. So the best way for us is to look at three or four things. In the verticals of our choice, are we seeing everything that comes to market in terms of an opportunity? Are we able to have the right conversations in clients that we already have access to? And are we able to create solutions that actually make it attractive for the client to often work with us in a sole-source manner? And then are we able to target clients that we have defined as a new account to target because we know that it's the right thing to do for that client? And then are we able to convince the client to work with us or work in a competitive environment where ultimately, we win? So that's one. Are we able to get to those clients, both existing and new clients? And the second is, in those competitive situations, how is our win rate working out? So those are the two things we track. And finally, we track cycle time and aging of the pipeline. And if I look at the last one, if we think about aging in the regular deal flow, that aging seems to be going at exactly the kind of rate that we've always seen prepandemic, et cetera. So it's actually pretty good. When you look at the larger deals, the aging there is back to what it was in some of the slower prepandemic time, but it's no worse than that. So it's a combination of are we in the conversations in our target clients and existing clients, is our win rate constant and steady? And what's the aging of our partners? Those are the kind of metrics that we look at. Unfortunately, there's no report that we can look at and say, 'This is our exact market share in our specific services and our specific verticals.'

And is there room for that win rate to go up in your eyes, Tiger, that your share you're getting?

So we have a pretty good win rate in many of the focus areas that we have. I would say the bigger opportunity continues to be how do we open new client conversations? How do we expand the buying centers? How do we connect the dots between the various services? And I talked about this that some of the best value these days get created when you connect those service lines, supply chain and finance, and when data crosses over is when some of the best value gets created for clients. So it's really that versus win rate. I think we have a pretty good win rate in most of these competitive situations.

And no further questions. I would like to turn the call over to the presenters for additional remarks.

Thank you, everybody, for joining us today. And as always, look forward to speaking with you next quarter. Thanks again.

This concludes today's conference call. Thank you for participating. You may now disconnect.