Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Shishir Verma – Head, IR

Pramod Bhasin – President and CEO

Vivek Gour – CFO

Analysts

Huang Tien-Tsin – JP Morgan

Tim Fox – Deutsche Bank

Joseph Foresi – Janney Montgomery Scott

Rahul Bhangare – William Blair & Company

Ashwin Shirvaikar – Citigroup

Karl Keirstead – Kaufman Brothers

Mitali Ghosh – Bank of America/Merrill Lynch

Ed Caso – Wells Fargo Securities

Jason Kupferberg – UBS

Bryan Keane – Credit Suisse

Matt McCormack – BGB Securities

Genpact Limited (G) Q4 2009 Earnings Call Transcript February 5, 2009 8:00 AM ET

Operator

Good day, ladies and gentlemen and welcome to the fourth quarter 2009 Genpact Limited earnings conference call. My name is Heather, and I'll be your operator 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. (Operator instructions) I would now like to turn the presentation over to our host for today’s call Mr. Shishir Verma, Head of Investor Relations. Please proceed.

Shishir Verma

Thank you, Heather. Welcome to Genpact's earnings call to discuss our results for the fourth quarter and full year ended December 31, 2009. My name is Shishir Verma, Head of Investor Relations, and with me, I have Pramod Bhasin, our President and Chief Executive Officer; Tiger Tyagarajan, Genpact's Chief Operating Officer; and Vivek Gour, our Chief Financial Officer. We hope you've had an ample opportunity to review our earnings release. If not, you will find it on our website at genpact.com.

Our agenda today is as follows. Pramod will begin with an overview of our results and provide a perspective on the current environment. Vivek will then take you through our financial performance in greater detail. Finally, Pramod will make a few closing remarks, after which Tiger, Pramod, and Vivek will be available to take your questions. We expect the call to last about an hour. Please note that 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 include, but are not limited to, general economic conditions and those factors set forth in our press release and discussed under the `Risk Factors` section of our annual report on Form 10-K and other SEC filings.

Genpact assumes no obligation to update the information presented on this conference call. In our call today, we will refer to certain non-GAAP financial measures, which we believe provide additional information for investors and better reflect the way management views the operating performance of the business. You can find a reconciliation of those measures to GAAP, as well as related information in our news release on the `Investor Relations` section of our website, genpact.com. Please also refer to the investor fact sheet on the front page of the IR section of our website for further details on our quarter results. This includes, among other things, geographic, industry vertical, and BPM and ITO revenue details.

Please note that based on investor feedback, beginning this quarter we have incorporated more information that we hope you will find useful.

With that, let me turn the call over to Pramod.

Pramod Bhasin

Thanks, Shishir, and good morning everyone. Thank you for joining us on our call today. Our results for the year and the fourth quarter of 2009 were very good in light of the global economy. We had a terrific close to the year and our outlook for 2010 is positive. This view is backed by a particularly strong pipeline with increased demand across all industry verticals and geographies.

Our win rates have increased since the first half of 2009, as we continue to demonstrate Genpact’s super business model and differentiated capabilities. Since our last earnings call, we’ve made terrific momentum for 2010. We announced a number of strategic deals, including Walgreens, AstraZeneca and Max New York Life. We launched Smart Enterprise Processes or SEP. SEP is based on work done in our process innovation lab, where we have leveraged our database of over 200 million transactions and 3000 different processes, covering a wide range of industries and geographies to map, analyze and build into end processes at a granular level.

SEP reinforces our thought leadership and is a key competitive advantage for Genpact that has already helped us win new clients. We extended our long-term contract with GE through 2016, which positions us well to grow with GE for many years to come. And lastly we acquired Symphony Marketing Solutions, which adds to our capabilities in analytics, and will help drive future growth, particularly in the under penetrated verticals such as retail, consumer packaged goods and pharmaceuticals.

At the end of 2009, we also marked the fifth anniversary of our becoming an independent company. Over that time we have built strong strategy of 669 million, diversified Global Client growth engine with more than 400 clients, while continuing to grow our GE business and significantly expanding our margins by almost 300 basis points.

In 2009, Genpact delivered strong growth in revenues, operating income, margins and cash flow. Here are the highlights. Full-year revenues of 1.12 billion grew by 7.6% or 10% in constant currency from 2008, demonstrating the resilience of our business model, growth in existing clients and the recurring nondiscretionary nature of the work we do. Fourth quarter revenues grew 5% year-over-year to $297 million and 4% sequentially as momentum from Q3 carried through into the fourth quarter, deletion flow and our ITO business improved.

Global Clients drove growth throughout 2009. Full-year adjusted operating income increased by 12% to 199 million despite the headwinds, which included volume reductions, pricing pressures and the adverse effects of foreign exchange earlier in the year. This increase in adjusted operating income also included investments for growth, primarily in the second half of 2009, which we have discussed in earlier calls.

Adjusted operating income margins for the full year increased 63 basis points to 17.8% compared to 17.1% in 2008, and within our guidance range of 17.5% to 18%. We achieved this through productivity improvements and disciplined management of our costs. During the last call, we told you that we will make one-time investments for future growth in the fourth quarter. The cost discipline that we started at the end of 2008 and continued through the first half of 2009 allows us to do this.

These investments resulted in an anticipated decline of 7% in adjusted operating income in the fourth quarter compared to the prior year quarter. Without these onetime investments, our adjusted operating income margin for the fourth quarter would have been 21.5% versus 20.8% in the previous year quarter. Vivek will provide more detail on the financial results in his comments.

Global Clients were again the clear growth driver in 2009. Global Client revenue increased 16% for the full year or 19% in constant currency with Global Client business process management growing at 23%. This growth was led by strong demand in banking and financial services and other vertical markets such as technology, hospitality and media. GE revenues declined 3% in 2009 primarily due to softness in ITO.

However, fourth quarter GE revenues grew 5% sequentially to $117 million, including increases of 5% and 9% sequentially in GE business process management and GE ITO respectively. GE revenue accounted for approximately 40% of our total, both for the year and in the fourth quarter, with Global Client’s revenues accounting for the balance 60% compared to 55% in 2008.

We continued to win major new clients in the fourth quarter and during 2009. Throughout the fourth quarter and in the second half of 2009, our win rates increased as we saw companies striving to achieve competitiveness and make decisions, including with respect to larger deals. Genpact has been selected as a key strategic partner for some of the largest and most recognized brand names globally, because of our deep domain expertise, differentiated capabilities and geographic presence.

We won 52 deals in total last year, including two of the largest F&A deals in 2009. Contributing to these wins was our launch of SEP, which further differentiates Genpact from the competition, and demonstrates our thought leadership. We strongly believe that SEP will lead the way forward as a competitive advantage for Genpact.

Smart Enterprise Processes represents an approach that is unique to us, consistent with our DNA and very hard to replicate by our competitors. Our new clients have told us that SEP with the ability to deliver, substantially improve financial performance by breaking down organization silos, and making business processes truly effective has already helped us in our recent big wins, including Walgreens, AstraZeneca, SABMiller.

Our diversified geographic delivery capability, including an expanded US presence also supported our recent wins, including delivery centers in Illinois for Walgreens, South Africa for SABMiller, and Philippines for financial services. We also extended our long-term contract with GE by three years. This extension represents a win-win for Genpact and for GE. It underscores our longstanding position as GE’s preferred business process management provider and continue our right of first opportunity to provide all new BPM services for GE.

The extension of course, involved price and productivity discussions as you would expect from GE or any other client. GE has always been a challenging client, but at the same time especially open to creative ideas and welcomes innovative solutions to business challenges. This plays well to our strength, and makes us a better competitor. We have a terrific long-term relationship with GE, which we will continue to build and grow, providing an expanding list of solutions such as finance and accounting, procurement, analytics, customer service and IT to more than 40 different individual client business units within GE.

Since the beginning of our relationship, we have delivered substantial productivity gains to GE each and every year, and we expect to continue to do so in the future. In the last year, even while GE has been rebalancing its financial services portfolio, we have grown the other GE businesses such as GE Energy, aviation and health care. The strength of our relationship positions us well to grow with GE for many years.

Our pipeline is at an all-time high and continues to reflect momentum in the size and quality of deals. It signals increasing optimism and positions us well for 2010. Since the beginning of 2009, our pipeline has increased 29% in terms of total contract value, average deal sizes are higher and our win rates are at record levels. We see a significant opportunity for both mining and hunting in the pipeline with the hunting pipeline two times the level of a year ago.

These pipeline growths are reflected broadly in almost all industries including BFSI, retail and growth areas such as health care. In new markets such as small and mid-sized clubs and up to $5 million in revenue, a new product offerings such as SEP, and in new geographic areas, including India to India, China to China as well as Europe, where we have recently invested significantly in highly talented and experienced business development resources.

We have increased our Europe pipeline 75% in terms of TCV [ph] and our India to India pipeline by over 100% since the first quarter of 2009. Our investments are producing results, and we expect that trend to continue in 2010.

Earlier this week, we announced that Genpact acquired Symphony Marketing Solutions, a leading provider of analytic and data management services with expertise in the retail pharmaceutical and consumer package goods verticals. Coupled with Genpact’s global delivery, scale and process expertise, we now have a great expanding opportunity to expand our retail, consumer packaged goods and pharmaceutical verticals for both analytics and BPM services, which we believe are significantly under penetrated.

SMS' largest existing client is Information Resources Inc. or IRI, one of the world's leading providers of enterprise market information solution and services. The transaction includes the new HR and SA with IRI. We paid $34 million for SMS and expected to be creative to earnings per share by year-end.

As I said earlier, over the last five years Genpact has built from scratch its $669 million Global Client business that grew at 101% (inaudible) and is now 60% of our total revenue. This unparalleled growth level penetrates the sustainability of our business model, including the nondiscretionary nature of the work we are doing, and our ability to build, grow and diversify our client portfolio. We are unique in how we look at business process management, and our clients recognize this and reward us for it.

Since 2005, we have transformed from a captive unit to 1.1 billion New York Stock Exchange listed public company. Over this period, we have also improved margins by almost 300 basis points from 14.9% in 2005 to 17.8% in 2009. Our growth came from adding more than 400 new clients from one of the most prominent global companies. Over the same period, we have also more than doubled the number of our operating centers and geographic presence, while significantly improving our attrition rates, revenue per FTE [ph] and client satisfaction rates.

Based on this history, the strength of our pipeline, and our win rate, we're very confident in our outlook for the future, assuming that the US economy continues its slow recovery. Specifically, our 2010 guidance is as follows. We expect revenue growth to be in the range of 14% to 17%. This includes Global Client revenue growth in the mid to high 20s and flat revenue for GE.

We expect GE to represent approximately 33% to 35% of our revenues in 2010. This range also incorporates approximately 2% incremental growth from the acquisition of Symphony Marketing Solutions that we talked about earlier. Our ability to drive this level of industry-leading Global Client growth is indicative of our unique end-to-end view and expertise in managing business processes. We expect growth to be driven by our BFSI, pharmaceutical, health care and business services verticals.

We also expect continued strength in finance and accounting, procurement and supply chain, re-engineering and analytics with a boost from the roll out of SEP. We expect adjusted operating income margins to be in the range of 17% to 18%. This reflects the impact of revenue growth in the near term and also provides us the flexibility to make further investments if we consider that appropriate. We will, of course, also continue our long-standing practice of focus and discipline cost management.

Now I will turn the call over to Vivek, and following that I will have a few closing remarks before we open the call to your questions.

Vivek Gour

Thank you, Pramod, and good morning. Today I will first speak about our fourth quarter performance and then review the full year results in detail, followed by a summary of our key highlights on our balance sheet and cash flow.

In the fourth quarter of 2009, our net revenue was $297 million, an increase of 5% year-over-year and 4% sequentially. Our Global Client revenue growth continued to be strong at 13% year-over-year. Sequentially in the fourth quarter, Global Clients grew by 4%.

Revenues from GE, adjusted for this position stood at $117 million, up 5% sequentially, which was the highest sequential growth of any quarter in 2009 for GE. This growth of GE came from business process management of 5% and 9% growth sequentially from the IT side of the business. GE revenues on the whole declined 5% year-over-year for the same quarter primarily due to tighter controls on IT discretionary spending.

Genpact grew its revenues by both expanding existing client relationships and winning new ones. For the full year, substantially all of our revenue came from existing client relationships, meaning those we have had for a year or more. In 2009, as well as in the fourth quarter approximately half our growth came from expanding these existing client relationships with the balance of our growth coming from new clients.

The number of clients accounting for $2 million or more in annual revenue increased to 62 in the fourth quarter, up from 49 in the prior year quarter. This demonstrates our ability to serve our clients well and drive demand for the breadth of our service portfolio. In the fourth quarter, our adjusted operating income stood at $55 million. This represented an adjusted operating income margin of 18.4% compared to 20.8% in the same quarter last year, and 18.9% in the third quarter of 2009.

In the previous earnings call, I had mentioned about certain planned investments that we will be making in the fourth quarter of ‘09 for fuelling our new growth of 2010 and strengthening our position for 2011. It included one-time investments on $9 million on account of hiring 10 senior country-specific DD [ph] resources spread across UK, Germany, France, the Nordic region of Europe, United States and Japan. We also invested significantly in the development of Smart Enterprise Processes, which was launched in the fourth quarter and in specific marketing efforts to develop our India to India and our China to China business.

In this $9 million, we also invested in certain specific one-time software digitization projects to improve the efficiency of our internal processes. All of this was a deliberate strategy to set us up for growth, brand strengthening and include efficiency. But for the one-time investments on margins – but for the one-time investment, our margin for the fourth quarter would have been 21.5% versus 20.8% in the same quarter last year.

On a full-year basis, our revenue grew 7.6% over 2008 to $1.12 billion. On a constant currency basis, our revenue grew by 10% year-over-year. Our portfolio continues to be balanced with a client base diversified across industries, products and geographies. 2009 growth was driven by Global Clients, which grew by 16% adjusted for disposition and now accounts for 669 million of our revenues representing 60% of Genpact’s total revenues versus 55% last year.

The GE revenues adjusted for dispositions declined by 3%. GE BPO decline was restricted to just 1%, despite seeing severe balance sheet contradictions of GE Capital through the year. The GE decline was primarily led by the GE ITO decline of 9% due to the tight controls on discretionary spend mentioned earlier. In 2009, 60% of our growth came from the banking and financial services sector, 32% came from the services sector such as web solutions, hospitality and telecommunications and the rest came from manufacturing clients.

When viewed in terms of horizontals, finance and accounting continues to be our strongest offering and has contributed to around 50% of the growth in 2009. We believe that just as IT services and then later customer care, were major waves of offshore services spending, financial account is now emerging as the major new wave of offshore spending. We are one of the leading companies in the world capitalizing on this trend. A highly recurring, high margin offering, finance and accounts today accounts for approximately one third of our revenues and continues to grow rapidly.

In other areas where we grew significantly were customer services, collections, supply chain and re-engineering. Our gross profit for 2009 stood at $447 million, representing a margin of 39.9%. This was a 6% increase from the $422 million in 2008. The gross profit margin for 2008 stood at 40.5%. We believe our gross profit margin was excellent, given the market environment and the operational productivity that we have been able to drive.

Our SG&A expenses for 2009 stood at $265 million, representing 23.7% of revenue compared to 24.5% in ‘08. This improvement of 80 basis points was driven through productivity measures in our G&A spend such as support function, bench and other managed expense. These improvements have enabled us to invest in new growth initiatives that we spoke of earlier.

Our adjusted operating income improved from 178 million in 2008 to 199 million in 2009, representing a 12% growth. Our margins improved from 17.1% in ‘08 to 17.8% in 2009. This was primarily driven by cost productivities in the way we utilize our people resources as well as operational leavers across IT, infrastructure and other managed spend.

Our tax expense for 2009 was $25 million compared to $9 million in 2008. This represents an effective tax rate of 17%, up from 7% in ‘08. This is at the lower end of the 17% to 19% guidance, which we issued at the beginning of 2009. The year-over-year increase in our tax rate was due to the expiry of our Indian tax holiday for our major site at Hyderabad. In 2008, we also had certain non-recurring one-time tax benefits that had lowered our tax rates in that year. For 2010, we expect our effective tax rate to be in the range of 20% to 22%.

Our earnings before taxes stood at $153 million versus $134 million in 2008. This increase of 14% was driven primarily by improvements in our operating income. Due to the increase in tax rate, our net income grew at a relatively slower pace. Our net income grew from 125 million in ’08 to 127 million in ‘09, which is an increase of 2%.

Our diluted earnings per share stood at $0.58 compared to $0.57 in ‘08. Turning to our balance sheet at year-end, we had approximately 431 million of cash and liquid assets, which were available in the form of deposits in banks, investments in US Treasury bills and short-term deposits in blue-chip companies. We also have access to undrawn credit lines of approximately $145 million.

Our days sales outstanding stood at 77 days, up from 73 days in 2008, but an improvement from the 79 days in the third quarter of ‘09. Cash flow from operations before cash taxes in 2009 was $226 million compared to $249 million in 2008. This change was primarily due to increase in our working capital requirements.

The gross capital expenditure for 2009 totaled 64 million, representing 5.7% of revenues. This amount was invested in new sites like Guatemala, South Africa, Philippines, Romania, Morocco, and in SEZs in India. We also used our capital expenditure to invest in technology platforms, digitization projects, and upgrade of old sites and infrastructure.

In 2010, we expect our capital expenditure to be in the range of 5% to 5.5% of revenue. During the year, we have repaid debt of $25 million in short-term debt and $30 million of long-term debt as per our repayment schedule. I feel very confident about the future of our company, keeping in view the healthy pipeline and the strong financial results.

I will now turn the call over to Pramod for his closing comments.

Pramod Bhasin

Thank you Vivek. In closing, Genpact has a strong business model, a unique leadership position in our industry and a great future. This is based on favorable demographic trends, the increasing acceptance of the globalization of services, low penetration of the market and expansion into many new growth areas. Our prospects for growth are driven by strong fundamentals and an undiluted intense focus on managing business processes to drive greater impact for our clients.

Our pipeline in this growth is broad-based across industries, products and services and geographies and also reflect the caliber of our Global Clients, and our ability to mining them for future growth. With the addition of our unique SEZ approach, we continue to demonstrate both top leadership and the ability to deliver greater effectiveness and value for our clients. With our recent investments in business development and geographic expansion, we have increased our pipelines to record levels, entered new vertical markets and broadened our ability to deliver our increasing product portfolio to clients wherever they choose.

We are building on our history and solid track record of growth and improved profitability that reinforces our confidence in the future. With that, I would now like to open the floor to questions.

Question-and-Answer Session

Operator

(Operator instructions) And your first question comes from the line of Tien-Tsin Huang from JP Morgan. Please proceed.

Huang Tien-Tsin - JP Morgan

Hi, thanks so much. I wanted to – thanks for all the detail. I just wanted to dig in to the GE contract extension a little bit, Pramod. Can you give us a sense of the magnitude of the price concession you agreed to, and I guess on the profit side do you foresee profit growth for at least you know, the next couple of years out of GE or it is something better than the 5. Thank you.

Pramod Bhasin

Yes, I hope you'll forgive me for not giving the exact numbers, et cetera just competitively and so-and-so, of course, it doesn't help us terribly, but you know, frankly the negotiations were good. The price concessions we discussed come in many ways. You know, ultimately we talked to them a lot about reducing their cost of operation rather than just price, and we have delivered productivity to GE for, you know, now starting from '97, '98 onwards virtually every year.

We do that in a number of ways. We do that for driving productivity in terms of just efficiency, greater expertise, you know, using lesser people for the same work, using technology, using other solutions. All of those have continued as you would expect on par. Not worse, not better but it has worked within the parameters that we have. It's also reflected clearly in the guidance that we have. Over time absolutely, I mean there are a number of business models, for instance, that we keep working on, number of areas that we focus on particularly as we think about taking SEP to GE, taking gain sharing for GE, finding ways to you know, finding ways to do a lot more to make changes and shift utilization absolutely. Our expectations have always been and remain that in the medium to long-term we will be able to continue our margin expansion, and certainly all the negotiations were within our margin expectation.

Huang Tien-Tsin - JP Morgan

Good. Okay. It is good to know. Thank you. Lastly, just on some of the new wins, you know, obviously some good ones like Walgreens, I'm just curious about you know, the conversion or the timing of the backlog conversion, now that we are in the new calendar year, how should we expect that to ramp in the aggregate over the course of 2010.

Pramod Bhasin

Thanks. You know, we've had a lot of great wins, and the pipeline remains very strong.

Huang Tien-Tsin - JP Morgan

Right.

Pramod Bhasin

Conversions are still not totally at the pace they were at two or three years ago, but they are getting are. So they are improving all the time. So I think you know, that's why there maybe a little bit of a lag in 2010 but not much, and during 2010 it was catch up. So I think you're going to see conversions back to old – to the same levels of the same timing and speed that we used to have earlier. I also think frankly you know, my sense is – not going beyond that, my sense is that companies need to become competitive. The kind of work we do is becoming increasingly accepted, and therefore we are seeing a much larger number of companies. In terms of share, number of companies have pipeline. The number has gone up very significantly.

So I think those things are all pointing to a pretty strong future. We've had a lot of deals. They will convert, these are big deals, these are complex deals, we are delighted to win them, you know, and I think they will take some time to convert, but the speed is catching up and I think we'll soon be back to, I believe we'll soon be back, unless the economy does something strange or substantial which we don't expect today.

Huang Tien-Tsin - JP Morgan

Okay, maybe just another one. Just in general about, you know, what's going on in the captive world. Are you seeing more opportunities there to acquire some of the captives, and has your appetite change there at all. And I will stop there, thanks a lot.

Pramod Bhasin

Our appetite hasn't changed, but I don't think we're seeing much, quite honestly or if we are, you know, it is quite small stuff. I'm not sure that the big captive are really going to go there. If we do see – you know, in action on a couple of smaller ones in the past, and I think that's the kind of action we'll continue to see. Our appetite remains pretty good. Our appetite remains pretty good on that.

Huang Tien-Tsin - JP Morgan

Perfect. Thank you.

Operator

And your next question is from the line of Tim Fox with Deutsche Bank. Please proceed.

Tim Fox - Deutsche Bank

Hi. Thanks. Good evening.

Pramod Bhasin

Good evening Tim.

Tim Fox - Deutsche Bank

My first question, a follow-up to Tien-Tsin's about the ramp across the year, could you talk a little bit about whether this sort of early the weakness in the early part of '09 is going to cause a little bit more of a backend loading than you normally see from a revenue perspective across the quarters in 2010?

Pramod Bhasin

Vivek.

Vivek Gour

Tim, Vivek here. On a year-over-year growth our, you know, we're going to be on a slightly slower start for the first quarter, but the following three quarters of the year pretty much will have the same kind of year-over-year growth for the rest of the year to sort of stay within our guidance.

Tim Fox - Deutsche Bank

Okay, perfect, and yes, obviously business has started to pickup materially here in the past couple of quarters, and I'm just wondering, maybe Pramod you could talk about, you mentioned win rates are improving, you talked about investment in Europe. Can you talk about what really has changed in the environment in the past six months that gives you confidence heading into 2010, and what if anything you think could get in the way of your real positive guidance here?

Pramod Bhasin

Sure. I think what's changed Tim, in the time of recession, ironically when a company should be speeding up, they actually slow down decision-making, right because they are restructuring. They are going through that changes, they try to figure out which businesses to keep, management and people are thinking about their own skin and things, do I have a job or not. I think that phase is over. So the worst is over. I think the worst is over. Companies are thinking, we need to become competitive, and therefore we need to make decisions and that is beginning to happen, one.

Two, very clearly in my view there is a – the larger number of deals in the pipeline and larger TCV [ph] pipeline really reflective of the fact that more people are now looking at this and saying, hi, this is a very good way for us to cut cost. So, you're seeing a lot of new entrants into the pipeline that we didn't see a year and a half, two years ago. I think that's two. I think three, we are very differentiated. Our win rates are coming because of Smart Enterprise Processes, our end-to-end view. We have a unique view. We are thought leaders in this space, and every discussion I have with a CEO or a CEO level executive are around Smart Enterprise Processes, inevitably leads to ongoing discussions with them about okay, how do we manage it.

It's a new way to think about how you manage processes within any business. And lastly, I would say, what might change. You know, a major double-dip might change. We anticipate a slow recovery, not a fast recovery at all. I don't think anybody is expecting that. We think Europe may lag a little bit behind that, but as long as that is the case, we will be fine. On a big double-dip or a huge increase in – a major increase in unemployment. Those are the things that may cause us trouble.

Tim Fox - Deutsche Bank

That's very helpful. Lastly just a quick one on SMS. Any cost around the margin structure there, and possibly improving margins as you scale up that business, thanks.

Pramod Bhasin

I think we are very happy with the margins. They are certainly at least as good and we believe over time can be better. Frankly, we are going to invest in growth initially. You know, this is a growth play. This is not a margin play for us, you know, given the size of the company. It can help us get into verticals, frankly the retail verticals or for instance, pharmaceutical like Walgreens that we have just done is hardly penetrated. There are not many of them here, and it represents a huge market. So we are very excited by it, and we're going to focus on growth. We have enough other places where we can take cost out to make sure we need margin expectations.

Tim Fox - Deutsche Bank

Great. Thanks and congratulations.

Pramod Bhasin

Thank you.

Operator

And your next question is from the line of Joseph Foresi with Janney Montgomery Scott. Please proceed.

Joseph Foresi - Janney Montgomery Scott

Hi guys.

Pramod Bhasin

Hi.

Joseph Foresi - Janney Montgomery Scott

I think, my first question here is just maybe a little bit more color on GE, now that you have gone through this extension. I think you talked about price discounts. Can you give us any color on the order of magnitude or the price discounts, and how you view those and then secondly, you know, obviously minimum volume commitments are coming down, you know, going forward. Maybe you could just talk a little bit about you know, what that means with your relationship?

Pramod Bhasin

Gour.

Vivek Gour

You know, I think we were negotiating. So the minimum volume discounts, commitments I would talk about at the end have no more meaning than it was in a negotiation. Please note that most of these documents we do, you know, hundreds of SOW [ph], they all expire at various times. The notion of unit volume commitments coming down really only applies to the commitment, but yes probably they are coming. We have been working on for ten years, we see no reason why they would go away.

So I don't think that really has – in our view certainly has any major relevance of any kind at all. Obviously, at some point in time, GE doesn’t want to have that commitment hanging out there forever. It is up, but I think you know, given our track record with them we feel very comfortable that this is perfectly reasonable, and we have been working on process for them for ten years. These are non-discretionary processes. These are not things you can cut off. And I think as GE grows, they'll stop – cutting back in growing. We'll continue to grow.

Remember also that there is a lot of other processes not covered under these minimum volume commitments, which we do today anyway, and that you know, the minimum volume commitment we have for them today is exceeded vastly by their current revenues we do with GE. So I'm not sure that minimum volume commitment today, has as much relevance as it did, when we first signed the deal with GE, when it was really important. I think on pricing again without going into the specifics, it wasn't – it was no more on that than we would expect and what we've seen in the market.

Generally, what we have seen you know, in the past it reflected our old results. We feel very comfortable with it. We feel very comfortable with our relationship going forward and that we'll be able to manage our pricing better as well. I think the key point we would make is productivity. We give GE a lot of productivity and have done that for 10 years. We believe we can continue to do that. We have specific areas, where we believe we can show them even greater productivity, which will help them reduce their cost well above what might ever be you know, is simple pricing negotiation, and it would help us improve our margins as well. There are lots of things like shift utilization, working from home, building factories for various products et cetera, which we haven’t even begun to unleash and talk about, not just with GE, with other customers. Long answer, my apologies, but I just think it is important we get that right.

Joseph Foresi - Janney Montgomery Scott

Sure, thanks. Just kind of moving on to margins, it looks like the margin profile for next year is going to be the same as this year. I think in the past you guys have talked about maybe a 1% margin improvement you know, on an annual basis. Maybe could you just talk about why margins are going to stay sort of in check for next year?

Pramod Bhasin

Mainly because of the additional growth we are piling in right now. That is one, and two, you know, we've made a lot of investments in BD and marketing. We think that is what is reflected in our current pipeline, for instance. We think that is what will drive even higher growth in the medium to long term, we hope and believe. And consequently that's really a reflection on what we are seeing next year in margins. While leaving ourselves some room on flexibility to make more investments that's why you see the number at 17% to 18%.

You know, we're coming in at 17.8% now, but we're leaving out ourselves a little buffer and room for investment. Over time, absolutely we still continue to hold the view that we would be able to improve margin. I'm not sure we have said one percentage point at any time, but I think we – I mean, that's what we've delivered in the past, but I think we continue to believe that we can probably take it up, 50 basis points or so every year as we go forward. SEP is a big game changer in that again. You know, what we get out of SEP is a different form of pricing, pricing through gain sharing, pricing for project, pricing for outcome, and in many cases we believe the margins are back will be substantially higher than margins on our basic business.

Joseph Foresi - Janney Montgomery Scott

And one last quick one here. You gave a range on the revenue side. What gets to the top end of the range and what puts you at the low-end, and thank you guys.

Pramod Bhasin

Sure. I think, you know, the top end, we have a strong pipeline and now we have good visibility as you know, into our revenues. I think it's really the answer to the face of economic recovery more than anything else. You know, are there going to be more deletions, if someone is going to pop up and say well, we want to close this down because our business is still hurting too badly. Is there – you know, does the recovery stall a little bit. That's really all that causing us to expand the range. There is nothing more interesting about it or nothing more definitive about why that range is between 14 to 17.

Joseph Foresi - Janney Montgomery Scott

Thank you.

Pramod Bhasin

Thanks.

Operator

And your next question is from the line of Rahul Bhangare with William Blair & Company. Please proceed.

Rahul Bhangare - William Blair & Company

This is Rahul Bhangare for (inaudible). I was just wondering, what are your expectations for wage inflation and attrition, and maybe some of your headcount plans?

Pramod Bhasin

Wage inflation, we do expect it to be higher than it was certainly this year, but it should be around 6% to 7% overall. We tend always to be below industry level, and we're very comfortable with that. Attrition levels should pick up a little bit, attrition levels are probably going to be 20% to 22% at this point in time. I'm sorry, was there another question you had also asked along with that?

Rahul Bhangare - William Blair & Company

Hiring plans?

Pramod Bhasin

Hiring will be you know, around 9000 to 10,000 people worldwide.

Rahul Bhangare - William Blair & Company

Okay, and then one more, I noticed that you sort of had flat growth in terms of clients contributing greater than $25 million. I was just wondering when can we see that number ramp-up.

Pramod Bhasin

I think we've got a ton of flags driving into the $5 million to $25 million bucket. We should probably segment that a little more, and we will. I think you know, frankly that $25 million number and above would have increased, except we did have a hiccup during the recession. You know, one client or two clients certainly or one client, you know, would have done better and couldn't because of the circumstances surrounding their industry. Certainly, next year I think you can expect and year after you can expect that number to keep going up.

Rahul Bhangare - William Blair & Company

Okay, that's all. Thanks.

Pramod Bhasin

Thanks.

Operator

And your next question is from the line of Ashwin Shirvaikar of Citigroup. Please proceed.

Ashwin Shirvaikar - Citigroup

Hi Pramod. Hi Vivek.

Pramod Bhasin

Hi, Ashwin.

Ashwin Shirvaikar - Citigroup

My first question is, if you can sort of segment the expected 2010 growth, what do you expect to come from new clients, existing clients. I guess you already broke out the acquisitions 2%.

Pramod Bhasin

I'm sorry. Ashwin, I couldn't hear you too well.

Ashwin Shirvaikar - Citigroup

Yes, I was wondering if you could segment the 2010 growth. What part comes from new clients, what part comes on existing clients, and I guess the acquisition is 2% just to confirm.

Pramod Bhasin

Yes. The acquisition adds two percentage points to growth. The stuff that comes from old clients versus new clients will be roughly 70-30, I believe. Vivek, will fly through the numbers.

Vivek Gour

70-30.

Pramod Bhasin

That 70% will be existing clients or expansion mining, 30% will be new clients.

Ashwin Shirvaikar - Citigroup

Okay. So I guess I just wanted to go back to the profit growth question or margin growth question. Am I mistaken in the assumption that growth that comes from existing clients should be more profitable and, you know, kind of wondering what's holding margin growth back here. I understand the point about SG&A investment, but you already made them in 2009 right.

Pramod Bhasin

Absolutely. We did make them in 2009. So, you know, a lot of those stuff will continue into 2010, but hiring cost and things like which were onetime cost, won’t. The margin fees is purely around, you know, new client growth and the face of that growth, and as I said earlier, keeping some flexibility if we again want to invest a lot more in marketing or branding or something like that. So it's giving up that flexibility and that's really what's happening.

And in some new deals, it's really being driven by the fact that they love more new deals happening and that's why we're keeping it at the 17% to 18% as a buffer. We'll see. You know, as the year goes on if you're doing better, we will continue to be focused on managing our cost. We will continue to focus on new operating models at various areas, and as we go forward, you know, we'll be able to update this for you, and then we'll also be making decisions on how much we actually want to spend or not spend.

Ashwin Shirvaikar - Citigroup

Okay. That's good. And one question then on cash flow expectations, if you've could break that out and should cash flow growth be roughly in line with the revenue growth given flattish margins.

Pramod Bhasin

Yes, you should expect cash flow growth to be exactly in line with revenue growth because, you know, we are improving the efficiencies of our collection as well as our capital spend.

Ashwin Shirvaikar - Citigroup

Okay, well couple of, I guess, growth questions. What is the assumption for stock-based compensation, and then the tax rate that you mentioned, Vivek, is that a cash tax rate on an accrual tax rate?

Vivek Gour

That's an accrual tax rate, and the stock-based compensation will be about $25 million to $27 million in '10.

Ashwin Shirvaikar - Citigroup

Okay, and then Pramod, one last question for you. Obviously, you know, India is the biggest node that you have so to speak in India or you know, what is now fairly healthy global network, do you see any other part of the world sort of growing insignificance over the others where you know, maybe it's Mexico, maybe it's some part of Eastern Europe that you see you know, two years down the road, two years down the road be you know, more significant than the others. How do you think over that?

Pramod Bhasin

I think China remains a great opportunity. I think, Brazil, Latin America is something we're looking at, and overall Americas will be very, very important. Philippines is doing very well for us also. But I would say China, Latin America, India is a great opportunity. Our pipeline is growing 100%. We're delighted with the business here. You know, we are in South Africa. Now we are going increasingly into countries. So you know, what can we do within South Africa et cetera is also important.

Ashwin Shirvaikar - Citigroup

Okay, got it. Thank you.

Pramod Bhasin

Thanks.

Operator

And your next question is from the line of Karl Keirstead with Kaufman Brothers. Please proceed.

Karl Keirstead - Kaufman Brothers

Hi. Thanks for taking my question. It is about the free cash flow, you know, the free cash flow generation for Genpact was always quite a bit above 100% of the earnings, and then that shifted in '09 where free cash dropped about 25%, and in response to the prior question, if free cash grows at the pace of revenue growth, it's still going to be tracking well below what your earnings is, and I'm wondering what's going on here is, is Genpact you know, absorbing some of the working capital cost to get some clients live, and I'm wondering when will free cash exceed earnings. Will it be in 2011, a little color might be helpful, thanks?

Vivek Gour

The free cash flow is lower because of the larger working capital requirements and that's primarily driven by the fact that in early 2009, we had changed some of our credit terms primarily for GE and a few other key customers. Also, with the large growth we are driving in 2009, 2010, our transition costs are going to go up, and the way some of our transition recoveries are structured is also going to increase our working capital requirements because many of the new contracts that have been signed like Walgreens and AstraZeneca are actually very large contracts, which will continue to grow all the way into 2011 and 2012, but the investment for that has to be made right away. So, those are the two big things that are driving it. I would expect free cash flow to start growing at the same rate as earnings sometime by the second half of 2011, maybe second quarter of 2011 at the earliest.

Karl Keirstead - Kaufman Brothers

Okay, that's helpful.

Vivek Gour

But they will grow in line with revenues in 2010.

Karl Keirstead - Kaufman Brothers

Okay, great. And then another question below the margin line, would just be on the tax rate. If I heard you correctly, you mentioned 2010, 20% to 22%, I feel like in prior conversations Vivek you said, something more like 18% to 20%. So I'm wondering is your – did your view change here, and what should we anticipate for 2011, thanks.

Vivek Gour

Now, 2011 would be too far to judge and to give guidance on right now, but basically we've done our homework in terms of the split between the SEZs and the old STPI regimes in India as well as, you know, our geographical mix of where we provide our production, and so the strong results are also changing constantly, and that's reflected in the 20% to 22% range that we've given.

Karl Keirstead - Kaufman Brothers

Okay, and then if I could sneak in one more. Just on GE, your guidance is for flat GE revenues in 2010, but, you know, just to push a little bit on this, you have to absorb a price concession. On a reported basis GE revenues were down 8% in 2009. They're clearly, you know, shrinking their operations and getting leaner. So, maybe you could help us get comfortable with a flat revenue assumption for 2010, thanks.

Pramod Bhasin

Yes, the pricing assumptions, you know, are please, if I may just again reemphasize our mix of productivity we deliver, where we can really give them, reduce their cost of operations without necessarily damaging our margin, as well as some price, but, you know, it's factored in. I mean, it is no more or less than many other customer, one. Two, GE has been going through a rebalancing of its portfolio. That will come to an end. You know, that is going to end, and as you may or may not know, you know the whole GE financial services portfolio are being rebalanced, companies have been sold, assets have been sold, and that would come to an end, and they will go back to a growth mode.

And the GE industrial businesses are where we play and where we play very strongly. If you look into sequential growth we have shown in the fourth quarter, as well as in the third quarter for GE, I think you'll see that it's pretty strong. And that is what gives us confidence. Our knowledge of GE is also very good. So that's why it gives us confidence that we know where to go and get that growth, which areas are likely to grow, and that the worst is over in terms of having to rebalance and restructure.

Karl Keirstead - Kaufman Brothers

Okay. That's all very helpful. Thanks very much.

Pramod Bhasin

Thank you.

Operator

And your next question is from the line of Mitali Ghosh with Bank of America/Merrill Lynch. Please proceed.

Mitali Ghosh - Bank of America/Merrill Lynch

Yes, hi. Good evening and congratulations. I just wanted to understand the mix of revenue that we saw this quarter between GE and Global Client. Was that different from your expectations when you entered the quarter and you know, what did you sort of see changing through the quarter?

Pramod Bhasin

No, in fact the mix was absolutely right. We had anticipated in the last earnings call that you know, GE revenues would decline further versus the prior year, and that's exactly what happened. They only block point was that the IT business came back probably a little better than we expected than we had assumed in the beginning of the quarter, but otherwise broadly it was the same.

Mitali Ghosh - Bank of America/Merrill Lynch

Okay, and secondly, you know, all the deals that, the large deals that you won recently, if you could comment a bit about you know, what you saw in terms of pricing dynamics and you know, what the competitive dynamics were like?

Pramod Bhasin

Gour.

Vivek Gour

You know, these were very large deals, very prestigious deals. Some of them were the biggest deals in 2009. Pricing dynamics were very competitive. Lots of people were lining for these deals, but again one pricing is broadly stabilized, I believe in global client markets across the board in my opinion, but equally and we were competing with all the global majors here. But equally you know, one, why pressing here to stop, we're very used to this phenomena. This is exactly how we started off. This was exactly how, you know, we built our entire business in '05, '06, '07 when pricing right out of the back was low, but our whole aim with these lines is to continue to expand over time, which improves our profitability and we've demonstrated that client after client after client.

As we look at things like SEP, as we look at things like business process management, which we are unique in, we are the only guys focused on that. So while we were competing with many other majors, I think we won because we were unique and despite what the IT guys say, you know, these are different business, which require different skills and expertise, and you know, SEP is a real vision that we bought into, say we are the only guys who can help them define what our best in class process looks like, and how to get them there.

Not just look like, but how to get them there. So what pricing was competitive – we were very, very happy that we won these deals, because I think we've been able to demonstrate over the years that we can start with a smaller base, and then slowly grow up our profitability, productivity, as well as the types of services we sell to them. Sorry for the long-winded answer.

Mitali Ghosh - Bank of America/Merrill Lynch

No, that's very useful. But just in terms of the competitor mix, you know, are you seeing much more of the Indian integrated IT and BPO players in the, you know, final thought of shortlist?

Pramod Bhasin

You know, in the bigger deals frankly no. We see them coming into the fray, but they often get knocked out. I suspect that won't last. They are very good. These people they, you know, as long as they know what they're doing. They are tough competitors, and I'm sure in the cross-sell process, especially when it deals with their customers, they are very good and they are strong. But today, frankly no. Our biggest competitors remain Accenture, IBM, Capgemini, ACS for instance in some cases. We've seen the others, but frankly don't see enough of them or see them in the earlier occasion.

And buyers want to know, you know, are you distinctive at doing finance and accounting processes? You know, are you an IT guy doing, you know 2% finance and accounting processes.

Mitali Ghosh - Bank of America/Merrill Lynch

Right, right, and then just one question, you know, Vivek in the past you've discussed the game sharing contracts that you know, you're trying to push through more and more. You know, any sort of update on that, how that is going that initiative?

Vivek Gour

Yes, I think that initiative is going extremely well, and it is growing faster than our overall revenue. I think which is a reflection of the value our customers apply to it, and what the price they're willing to pay for it.

Mitali Ghosh - Bank of America/Merrill Lynch

Right, okay. Thanks.

Vivek Gour

There are growing significantly faster than our revenue.

Mitali Ghosh - Bank of America/Merrill Lynch

Sure. Thanks a lot.

Pramod Bhasin

Thank you very much.

Operator

And your next question is from the line of Ed Caso with Wells Fargo Securities. Please proceed.

Ed Caso - Wells Fargo Securities

Hi, good morning, good evening. Couple of –

Pramod Bhasin

Hi Ed.

Ed Caso - Wells Fargo Securities

Couple of detailed things first. DSOs total for GE and for the global business?

Pramod Bhasin

Yes, DSOs for GE will be in the low, low 80s. DSO for Global Client will be in the low 70s, overall will be mid to high 70s.

Ed Caso - Wells Fargo Securities

And what were the numbers in the fourth quarter?

Pramod Bhasin

In the fourth quarter, our average was 77, GE was about 82, Global Client was about 71.

Ed Caso - Wells Fargo Securities

Okay, and the constant currency growth rate year-over-year in Q4 please?

Pramod Bhasin

Year-over-year constant currency growth was 10%.

Ed Caso - Wells Fargo Securities

My bigger question here is on sales cycles. I heard a lot of discussion about doubling of pipelines and much more enthusiasm and optimism on the economy and so forth, but can you give us a sense, have you seen it yet or is your enthusiasm still more in the pipeline than in actual business getting closer?

Pramod Bhasin

No, actual business is getting closed. That's what we refer to when we say about the big deals, which we have won and signed. Some of the transitions are still a little slower than they used to be two years ago, primarily because clients need more time right now in the new environment to drive this kind of a change, but I think the size of the deals has increased and the number of clients we have in the pipeline has improved substantially.

Ed Caso - Wells Fargo Securities

Last question, acquisitions, how active are you going to be. Are you still looking at this point and what sort of leverage would you be comfortable with?

Pramod Bhasin

Well, we're still looking at acquisitions. We got a lot of cash in our balance sheet fortunately. You know, we are going to be you know, we would be very conservative on leverage frankly. It is not a business, which takes kindly to leverage and nor do our customers take kindly to leverage. So we would be very conservative about that. If I may just say this for everyone, please don't believe everything what you read in the papers. The Economic Times in India is particularly prone to putting our name next to any potential deal they can ever find or think about. So it causes up a lot of hassle, because a lot of people call up and say is this true, is this true, and you know, obviously what we say is we can't comment on rumors, et cetera. But – and that's what we will say.

But anyway, I think that is the problem, but you know we're very conservative. We will continue to look for acquisitions that give us domain, product knowledge, bring us into a new vertical, introduce us to a new industry, which has good management teams. Absolutely, we will continue to look for those.

Ed Caso - Wells Fargo Securities

Great, thank you. And guess you are not going to buy Accenture this week. So, I will take that off the list.

Pramod Bhasin

I am sorry.

Ed Caso - Wells Fargo Securities

I assume you are not going to buy Accenture this week, so I will take that off the list. Thanks.

Pramod Bhasin

Well said.

Operator

And your next question is from the line of Jason Kupferberg with UBS. Please proceed.

Jason Kupferberg - UBS

Thanks guys. So wanted to start with a question on the 2010 revenue growth guidance of 14% to 17%, how would you break that apart between volumes and pricing roughly?

Pramod Bhasin

Well, pricing would be down in that by sort of low to mid – low percentage – low single-digit percentage points, and the rest of it would be new volume.

Jason Kupferberg - UBS

Okay, so is that pricing dynamic pretty similar to ‘09 as far as the low single-digit compression?

Pramod Bhasin

Yes.

Jason Kupferberg - UBS

Okay, and…

Vivek Gour

And it flows through ‘09.

Jason Kupferberg - UBS

Right, right. My next point being that the pricing situation from your vantage point is kind of stable in an overall context?

Pramod Bhasin

Yes.

Jason Kupferberg - UBS

Okay.

Pramod Bhasin

Absolutely.

Jason Kupferberg - UBS

The Walgreens and AstraZeneca deals, when do those get to full run rate from a revenue contribution standpoint?

Pramod Bhasin

That will be a while, frankly because they are so big. You know, frankly these are multi-year projects. It will be a couple of years at least. Now we get significant revenue starting in ‘10, but the ramp ups and the length of the contract, and the size of the contract are very significant. So these will go on increasing, I would anticipate for the next 2 to 3 years. They will continue to grow.

Jason Kupferberg - UBS

And then from a capacity perspective…

Pramod Bhasin

… mining that we are able to do with those clients to actually go to them, and show them what else we can do apart from looking at new areas.

Jason Kupferberg - UBS

Understood, and from a capacity perspective, I know you talked about CapEx 5% to 5.5% of revenue, but if we think about where your development centers might expand going forward. I know you talked about some regions that seem relatively interesting kind of beyond India, are those the same regions where we might see new development centers come online?

Pramod Bhasin

Yes, you will see new development centers across the world. Now, how we finance them. We do lease, we do buy. What we do, I think all of that remains open to question, but I think this is all within the realms of normal operations. You know, because we have been obviously opening new centers, whether it is in India or in other countries right the way through.

Jason Kupferberg - UBS

And last one from me, the analytics business now with the acquisition, obviously you are investing more there, so how big is your analytics business now with that acquisition and how large could that become over time as a percent of your total revenue?

Pramod Bhasin

You know, over time – today it is about – it is going to be about 10% of our business. Over time, absolutely it could become 15%, 20% of the business. We like it to be, because it is also lead entry point for us very often into a new client, and it is also something that as part of our Smart Enterprise Processes, it is an essential tool that we use. Analytics which go into cost control, expense control, expenses, marketing et cetera. The analytics provide us the insight to make the processes more effective. So it is a very key element of our business. We think we are one of the largest in this area in India already. And of course this new acquisition will help us get us into an extremely valuable new vertical on the retail side.

Jason Kupferberg - UBS

Okay. Thanks for the color.

Pramod Bhasin

Thanks.

Operator

And your next question is from the line of Bryan Keane with Credit Suisse. Please proceed.

Bryan Keane - Credit Suisse

Hi, just a couple of clarifications. Traditionally we have seen a seasonally slow start to the first quarter in revenue. So just trying to figure out, if we should expect a slight increase sequentially, flat sequentially or down in both GE and non-GE when we look at 1Q10?

Vivek Gour

Yep, it will be a slight drop sequentially between Q4 to Q1, which is exactly in line with the seasonality trends we have had in the last three years we have been public.

Bryan Keane - Credit Suisse

Okay, I'm just remind us the seasonality there is because most of the projects that get completed at the end of the year get finished, and you got to start ramping up again?

Pramod Bhasin

That is how I'm reading it.

Bryan Keane - Credit Suisse

Okay, and then just on the pricing question. You know, pricing to be down low-single digits, what is the outlook long term on pricing, do we ever get to an environment, you know where we see flat that you see price increases or should we always expect in this model to see price declines?

Pramod Bhasin

Our initial contracts, we should see pricing to be flat. But I just want to mention that all our contracts have price inflation and adjustment, upward adjustment built into typically the third, the fourth or the fifth year, and we have been very diligent in exercising those clauses, and driving those price increases as per our contractual rights across all our customers. So initial prices are still flat, but you need to keep in mind that we have price increases coming in contractually every year from some client or the other.

Bryan Keane - Credit Suisse

So in a more normalized environment, we should expect pricing to actually have a slight increase bias?

Pramod Bhasin

(inaudible) yes, absolutely.

Bryan Keane - Credit Suisse

Okay. That is all I had thanks.

Pramod Bhasin

Thanks.

Operator

And your next question is from the line of Matt McCormack with BGB Securities. Please proceed.

Matt McCormack - BGB Securities

Yeah, my question is you talked about your record pipeline, your record win rate, I was wondering if you could speak to, you know, the criteria that would make you, I guess, turn down or walk away from a deal, and if you are seeing any kind of rational behavior currently in the marketplace?

Pramod Bhasin

I think, you know I think one, it depends on who you are competing with, being able to compete with a global major helps, because they tend not to do anything terribly silly. I think clearly on pricing, clients are driving much harder than they used to. Now it has stabilized but ‘09, certainly we saw very hard pricing decisions and lots of pressure from customers.

Terms and conditions, you know, terms and conditions have changed. I mean there are things we don't do. We don't do BLP [ph], we don’t do hand-over [ph] people. We don’t do lots of termination clauses, where they can walk away. We expect protection for FX, we expect protection for pricing forecast. So I think it is a composite of all of these, which sometimes you tell us, hey, this deal is not worth chasing, and there is no point being there, liability clauses, which are onerous. So there are lots of things like that, which have – we're not seeing at this time, I wouldn't say we are seeing unreasonable behavior.

Matt McCormack - BGB Securities

Okay, and then in terms of your assumptions, you’ve said that you are expecting a slow recovery. I guess how quickly will you know if things change, you know, how often do you get updates from your clients or just if you could talk about the visibility and kind of what you look for to see if things are improving are going to deteriorate?

Pramod Bhasin

You know, from our clients we are in touch. I mean obviously not daily, but frankly we are in touch on an extremely constant basis. We are in the point, where we see transactional volume very fast. You know, if volumes and credit cards are buying – commercial finance or other areas, when auto sales go up or down, we seem them straightaway. So our ability to monitor that and track that, and think about what that means is very strong.

Matt McCormack - BGB Securities

Okay, great. Thank you.

Pramod Bhasin

Thanks a lot.

Operator

As we have run out of time for the question-and-answer session, I would now like to turn the call back over to management for closing remarks.

Pramod Bhasin

Thank you Heather.

Shishir Verma

Let me thank everyone for joining us on the call today. In this environment, we are very pleased with your financial results and our overall growth achieved to date. Our clients will likely continue to face challenges in the near term as they look to prioritize their business goals and objectives. But we are confident in our people and our business model to help our clients achieve even greater heights. If you have any questions, please do not hesitate to reach out to me. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Genpact Limited Q4 2009 Earnings Call Transcript
This Transcript
All Transcripts