Roger Sachs - Vice President-Investor Relations N. V. Tyagarajan - President, Chief Executive Officer & Director Edward J. Fitzpatrick - Chief Financial Officer & Senior Vice President.

Michael Reid - Cantor Fitzgerald Tien-Tsin Huang - JPMorgan Securities LLC George K. F. Tong - Piper Jaffray & Co. (Broker) Edward S. Caso - Wells Fargo Securities LLC Frank C. Atkins - SunTrust Robinson Humphrey, Inc. David J. Koning - Robert W. Baird & Co., Inc. (Broker) Keith Frances Bachman - BMO Capital Markets (United States).

Good day, ladies and gentlemen, and welcome to the First Quarter 2016 Genpact Limited Earnings Conference Call. My name is Nicole, and I'll be your conference moderator for today. At this time, all participants are in a listen-only mode, and we will conduct a question-and-answer session towards the end of this conference.

We will expect the call to conclude in an hour. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Roger Sachs, Head of Investor Relations at Genpact. Please proceed, sir..

Great, thank you, Nicole. Good morning, everyone, and welcome to Genpact's First Quarter Earnings Call to discuss our results for the quarter ended March 31, 2016. We hope you had a chance to review our earnings release, which was posted to the IR section of our website, genpact.com.

With me today are Tiger Tyagarajan, our President and Chief Executive Officer; and Ed Fitzpatrick, our Chief Financial Officer, both joining from London, which is necessitating the early start to this call. Our agenda today is as follows.

Tiger will provide a high level overview of our results as well as update you on some of our strategic initiatives. Ed will then discuss our financial performance in greater detail. Tiger will then come back with some closing comments, and after we will take your questions. As Nicole just said earlier, we expect the call to last about an hour.

Some of the matters we will discuss in today's call are forward-looking. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those in such forward-looking statements. Such risks and uncertainties are set forth in our press release.

In addition, during our call today, we will refer to certain non-GAAP financial measures, 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 these measures to GAAP in our earnings release in the IR section of our website.

And with that, let me turn the call over to Tiger..

one, we bring to the table a sharp understanding of their business and competitive context steeped in domain; two, we have deep domain subject matter experts, data scientists, digital experts and process redesign engineers who come together to build cutting edge solutions; three, we have invested in our front-end and have the right level and caliber of people who can effectively articulate our value proposition and engage and excite C-level executives to help partner in driving change; and finally four, we continue to maintain our strong reputation as one of the best execution cultures in the industry and have very high Net Promoter Scores with clients.

Often these transformative engagements are being lead by our consulting, digital, data analytics and process reengineering teams that act as the tip of the spear, bringing in design thinking and architecting Lean Digital journeys for our clients.

Our patented Smart Enterprise Process or SEP frameworks, which incorporate a number of our digital assets, enable these transformations by providing roadmaps for enterprise-wide redesigned end-to-end processes. All of this helps clients become disruptive in their industries.

Let me share a few exciting examples of transformation engagements using our Lean Digital approach. First, we are working with a leading global bank to completely reimagine the way they run their credit card business.

This includes their customer onboarding, fraud management, and a multi-channel customer service processes to name a few, using design thinking and intense cross-functional Lean engagement, we will be implementing a highly digitized and reimagined set of processes to deliver significantly better outcomes leveraging data both inside and outside the bank to deliver actionable real-time insights to drive decisions.

Once completed, we expect this transformation will completely change the way this part of this bank operates. In another example, we worked with a large global pharmaceutical client to reimagine their operations in a more agile and flexible way.

We enabled them to manage data collection more efficiently in an environment where regulatory industry dynamics are constantly changing, by installing our Intelligent Process Insights Engine, our IPIE solution, one of our new digital assets.

Incorporating deep industry domain and process expertise, IPIE brings together relevant internal and external data, providing the client with critical real-time insights to support brand launches and track key performance indicators that were previously unavailable.

This is a great example where our digital asset helped transform a critical part of client's data operation without disrupting their existing IT infrastructure. We continued our momentum of converting and winning big deals.

During the first quarter, we signed another large transformational deal where we expanded an existing client relationship with a leading CPG client by doubling our financial accounting footprint with them both in terms of scope and geographic coverage.

Genpact was chosen to facilitate the integration and transformation of their end-to-end finance processes including order-to-cash. Our delivery excellence, together with domain expertise and an innovative digital solution, clearly drove the win.

I also want to discuss a couple of other new deals we recently won that are smaller than our large deal threshold, but represent strategic engagements highlighting our strong competitive position in the marketplace.

First, we won an engagement with another leading CPG client to transform and run their North America financial accounting operations as well as their customer-facing order management operations.

Our depth of expertise in order management and the CPG vertical, combined with leading edge digital solutions that will dramatically transform the way the whole order-to-cash process and its integration to supply chain works, helped us win this one.

Next, I want to highlight an exciting new engagement with NFU Mutual, a leading provider of insurance, pensions and investment products in the UK. Utilizing our OpenWealth end-to-end wealth management platform and services, their teams will be able to focus more time on growing and enhancing client relationships.

The powerful combination of our strong platform and domain expertise positions us well to support NFU Mutual's growth strategies. And we look forward to helping them offer innovative services for their customers and advisors. Our pipeline continues to be healthy across our targeted industry verticals, service lines and geographies.

Inflows are up as our win rates continue to be at the steady high levels they've been in the recent past. All of our investment over the last two years have positioned us extremely well to win larger complex transformational engagements, now with digital and analytics deeply embedded in them.

With that, let me turn the call over to Ed for a more detailed review of our first quarter results..

Thank you, Tiger, and good morning, everyone. Today, I'll review our first quarter performance followed by key highlights in our balance sheet and operating cash flow. We generated total revenues of $610 million in the first quarter, an increase of 4% year-over-year or 6% on a constant currency basis.

First quarter revenues from global clients, which represents 82% of total revenue, increased 6% year-over-year or 9% on a constant currency basis. Within Global Clients core business process outsourcing revenues increased 9% or 12% on a constant currency basis. Our Global Clients IT services revenues declined 5%.

GE revenues, representing 18% of total revenue, decreased 5% during the quarter. I want to highlight a change beginning this quarter and going forward in the way that we report the classifications of GE related revenues for divestitures.

As we previously discussed, GE will be divesting a significant portion of its GE Capital businesses this year that we continue to serve. Historically, we reclassified the revenue from divested GE businesses as Global Client revenues at the end of each quarter when a transaction occurred.

However, we will now reclassify this revenue with Global Client revenue at the end of each fiscal year. We believe this change will allow us to provide a more consistent view of the year-over-year growth trends underlying our Global Clients and GE businesses, especially during years when significant GE divestitures occur.

During the quarter, overall business process outsourcing revenues, which represent 80% of total revenues, increased 6% year-over-year. IT Services revenue declined 4%. We continued to expand relationships with global clients across a range of our targeted industry verticals.

In the 12-month period ending March 31 2016, we grew the number of client relationships with annual revenues over $5 million to 105, from 94. This includes client relationships with more than $15 million in annual revenue increasing to 34, from 30; and client relationships with more than $25 million in annual revenue increasing to 18, from 17.

We have four relationships, including GE, with more than $50 million in annual revenue. Adjusted income from operations for the quarter totaled $85 million, representing a margin of 14% as expected due to investments in sales and marketing as well as capabilities.

We expect adjusted operating margin to expand as revenues increased throughout the year at a faster pace than our planned investment ramp. We continue to expect our adjusted operating margins to be higher in the second half of the year relative to the first half, due to higher revenue growth.

Gross margin for the quarter was 38.8%, compared to 39.1% last year. SG&A expenses totaled $160 million, compared to $149 million in the first quarter of last year. Our sales and marketing expense as a percentage of revenue this quarter was approximately 7.3%, flat with the same period last year.

Total G&A expense as a percentage of sales increased by approximately 100 basis points year-over-year; largely driven by investments in domain expertise as well as digital analytics capabilities. Our adjusted EPS for the first quarter was $0.31 per share, compared to $0.24 per share last year.

Year-over-year increase of $0.07 per share was primarily driven by lower net interest expense and lower foreign exchange re-measurement losses, each representing approximately $0.02, as well as benefits from higher operating income, a lower effective tax rate and share repurchases, representing approximately $0.01 each.

In February, we announced an increase to our share repurchase program at $250 million, bringing the total authorization to $500 million. During the first quarter, we repurchased approximately 1.4 million shares at a weighted average price of $24.35, for total purchases of $33 million.

Since we launched this program in the first quarter of 2015, we've repurchased 11.2 million shares at a weighted average price of $23.16, for total purchases to-date of $260 million. Our effective tax rate for the first quarter was approximately 17%, down from 20% in the first quarter of last year.

The decrease in the effective tax rate reflects changes in our jurisdictional mix of income as well as certain reductions in country specific tax reserves. I'll now turn to our balance sheet.

Our cash and liquid assets total approximately $430 million, down from $451 million at the end of the fourth quarter of 2015, largely due to $33 million used during the quarter for share repurchases as well as higher accounts receivable balances.

With undrawn debt capacity of $267 million and existing cash balances, we continue to have ample flexibility to pursue growth opportunities. Our net-debt-to-EBITDA ratio for the last four flowing quarters was approximately 1.0.

Our days sales outstanding was 89 days, up eight days from the first quarter of 2015, primarily due to the impact from the ramp of large deals that resulted in higher transition-related deferred revenue and extended timelines to issue billings related to certain large complex deals.

These are purely timing issues and we expect this increase in our DSO this quarter to be recovered through the balance of the year. Turning to operating cash flows. We utilized $12 million of cash from operations during the quarter, compared to generating $24 million in the first quarter last year.

The decline is largely due to the impact of longer receivable days, as well as timing impacts associated with certain tax payments. As you noted in prior years, first quarter cash flows are typically the lowest during the year due to payout of annual employee bonuses.

Capital expenditures as a percentage of revenue were 3% in the first quarter of 2016. Finally, our full year outlook for 2016. We continue to expect total revenues to be between $2.62 billion and $2.66 billion, which includes an assumed adverse foreign exchange impact of approximately $35 million or 140 basis points at today's exchange rates.

We continue to expect our adjusted operating margins to be approximately 15.5%, and we would expect those margins to ramp during the year as our investments are absorbed by higher revenues as we progress throughout 2016. We expect our effective tax rate to be approximately 20% to 21%, similar to 2015.

We continue to expect our cash flow from operations to grow approximately 6% to 8% and adjusted earnings per share to be between $1.40 and $1.42.

This now assumes weighted average shares outstanding of approximately $214.2 million that includes 1.4 million shares bought during the first quarter, as well as the adverse impacts of approximately $1 million related to foreign exchange losses on balance sheet related items in the first quarter.

With that I'll hand it over to Tiger for his closing comments..

Thank you, Ed. As discussed in March at our Investor Day, I believe we are better positioned today than we have ever been to serve the needs of our clients, particularly in a world that is changing dramatically, driven by the pace of technology change and where disruption is the new normal.

The investments we've made over the past two years in sales and capabilities are paying off. As we position ourselves around our highly differentiated Lean Digital approach to drive disruptive transformations for our clients.

As a result, we are being invited to more and more CXO-led transformational conversations as the unique combination of deep domain and Lean Digital with our focused choices on our targeted verticals and service lines is resonating deeply in the marketplace.

These transformational engagements bring together our consulting and analytics practices with new digital tools and platforms and these generated about 20% of our total revenue. These services represent one of the fastest-growing areas of our business and are the driving force behind our industry-leading Global Client constant currency growth rates.

I'm excited to mention that we recently added CeCe Morken to our board. CeCe who currently serves in a senior leadership role at Intuit is a recognized leader in design thinking methodologies for technology products and solutions.

She also brings significant experience in financial accounting new digital technologies and customer centric business models, which fits well with our focus on reimagining our clients' operating models. We are fortunate to have added someone of CeCe's caliber and background to our board, and we're looking forward to her guidance and insights.

With that, I would like to open our call for your questions..

Our first question comes from the line of Joseph Foresi of Cantor Fitzgerald. Your line is now open..

Hi. Thanks, guys. This is actually Mike Reid on for Joe. Thanks for taking the call. Just a couple of quick questions.

Could you go on further detail maybe about if there will be any trajectory changes in the Global Client and GE growth regarding the change of the divesture methodology?.

We don't expect it to be material. As we looked at it, we thought it was a more appropriate way to look at the year-over-year growth and effectively having a year just to compare the year-over-year comparisons.

And for the full year, we'll continue to provide the actual GE revenues, so that you know that number, so that we can determine the total as a percentage of total revenue. And for the full year, it's probably 10 basis points or less impacting the growth rate of each.

So not really material, but didn't think it was appropriate to keep changing every quarter as the divestures took place..

Certainly. Okay.

And then one more question on IT with it being down, is there any change in the way maybe we should look at that? Or any changes going on there?.

So, let me take that one, Mike. We've always said that our IT business has really three large components to it. One is the capital markets investment banking vertical and the technology work that we do for investment banks.

And those, as I said in my remarks, have faced the pressure that investment banks have been facing fourth quarter and the first quarter. And that pressure has led them to cut back on discretionary spend, which obviously impacts a range of providers into that space.

What I must tell you is that it also means that long-term, the same investment banks will have to rethink their business models, re-imagine their processes, all positioning people like us and other people like us to actually partner with them on changing those business models, including infiltrating digital technologies into a number of their solutions and creating platforms and utilities.

So that's one segment. The second segment is GE and as GE continues its divestiture of the GE Capital businesses and cuts back on new technology spends in the GE Capital businesses that it's divesting, that obviously flows through into our technology business that we've offered GE.

However, on the industrial side of GE, I think we're extremely well positioned, including some of the conversations and work that we're beginning to do on the new Predix platform that GE is working on for its Internet of Things.

And the third segment I would call out is our Global Clients IT, particularly the part that focuses on platforms and domain led technology.

And if I can pick one example, the commercial lending platforms that we work with in order to bring commercial lending origination and servicing platforms and then with all the services that we do for commercial lending and leasing wrapped around it. It's one of the leading offerings in the marketplace from our perspective.

It's hugely differentiated and that's an example where our domain expertise allows us to win on the technology side and that part of the technology business is growing actually faster than our overall company growth.

So as technology landscape transforms itself from old legacy to new digital, I think our positioning with domain as the lead and Lean Digital as our approach actually positions us very well going into the future on the technology side of the house..

Okay....

And, Mike, one added – one other clarification for (25:24), when we guided the growth rates for both GE and GC at the beginning of the year, it didn't take into consideration the transitions that would take place from GC to GC because we didn't know the timing of them, so appropriately so we didn't guide to it, so that's another reason why we thought it was appropriate to make this classification change..

Okay. Great. Thanks both of you for the additional color on that. Thanks..

Thanks, Mike..

Thanks, Mike..

Thank you. Our next question comes from the line of Tien-Tsin Huang of JPMorgan. Your line is now open..

Okay, thank you. I guess just a follow-up.

Tiger, you talking about the capital markets investment banks makes sense, how about pricing on the ITS side, just to round that business line?.

Interesting, Tien-Tsin, and I would answer that in two ways. If you look at legacy again, the old technology run-the-bank or run-the-operations kind of work, there is obviously continued competitive pressure, including obviously people wanting to spend less on that side of the house.

And then you look at that spend going towards digital and our focus is digital technologies that are focused on the middle and back office. Pricing is not the reason why someone wins or loses. It's actually capability. It's capability around those digital – specific digital technologies.

It's bundling those digital technologies with process and domain in that specific space. So, broadly my answer to technology is legacy technology behaving differently from digital.

And the second part of the answer which is around investment banks is clearly pressure around pricing, for sure; pressure around consolidation of work; and pressure around cutting back on discretionary spend; all three happening in the investment banking world..

Makes sense. I mean, good to hear, Tiger, you're having a lot of C-level conversations as you said, sounds like a quite bit.

How about actually the backlog, still confidence in the signed deals ramping in a timely way?.

Yeah. Yeah, Tien-Tsin, all our ramps are broadly going per plan. The more complex the deal, the more global the deal, the more change oriented at the front-end the deal involves.

And if you think about a broad large deal that includes, let's say, 70 countries, consolidation, changing the domain and process led change, infiltrating digital technologies and making people and leaders, particularly the mid-management level in our clients change, that means that change requires time.

All of those have been the basis on which these ramps have been planned and they are going broadly as per plan. There are always puts and takes in these, but it's going as planned. These are slow ramps in many cases..

Okay. Good to know. Last one from me, just maybe for Ed, just trying to reconcile the guidance. I know thematically – no reason to really change guidance so early in the year, that's been the theme this earnings season.

But given what's changed from an FX standpoint, again, can you run through that one more time? And then I know that you guys have been buying back stock, what's the assumption around buybacks in the guidance? Thank you..

So on the top line, we had an FX impact last quarter of about 42%. That's come down to about 35%. And it's moving every day. And with that, it effectively gets lost in the rounding in our top-line guidance. So, no change there, $2.62 to $2.66 is appropriate.

On the share repurchase, we repurchased about 1.4 million of shares, but if you recall, we'll update that each quarter as and when we buy shares back. But there was an offset of that due to the balance sheet FX remeasurement loss of $1 million. So the effect of that rounds to less than a half a penny.

So, no impact and no change to the overall EPS guidance either..

Great. Thanks for that..

Thanks, Tien-Tsin (29:27)..

Thank you. Our next question comes from the line of George Tong of Piper Jaffray. Your line is now open..

Hi. Thanks. Good morning.

Can you describe the traction you're seeing with your tip-of-the-spear approach in terms of being able to deepen the client relationship after winning an initial new Lean Digital engagement?.

yes, I'd like to find a way to engage with Genpact or someone like us to outsource, leverage global delivery, drive continuous improvement, et cetera, et cetera.

These days a number of those conversations – and the larger, the more real this is, starts at the top of the house, starts in the C-Suite and starts with how do we bring in and leverage a range of digital technologies? In doing that, obviously you have to consolidate; you cannot bring in digital technologies unless you consolidate.

And in doing so, you have to Lean out those processes, make them more agile, try and find a way to standardize them, and you do all of that in the context of bringing them together.

And you do all of that in the context often of moving a number of them to our operations and, in some cases, moving some of them to our clients' captive shared services organizations. And when you do that, you approach them end-to-end because your objective here is to drive dramatic improvement in outcomes.

So, the starting of this is often having a series of design thinking workshops, where you start with what is the answer you're going for, and the answer may not be the best-in-class. The answer would be such a dramatic improvement that best-in-class actually doesn't matter.

And then you work backwards in terms of process change lead by domain, infiltration of new technologies and digital and then starting that journey. So it involves multiple stakeholders. It involves the C-Suite. It involves big change. Therefore, it becomes a C-Suite conversation.

And I think for that one reason alone, I think our C-Suite conversations have just gone up, just in the last 100 days as I described..

Got it.

And then can you discuss how trends are evolving so far this year in terms of your inflows, win rates and retention rates?.

I would say all three trending steady versus our previous year. Inflows higher than last year, but one would expect that to be the case. Win rate steady and retention rates as good as we've always had it.

And I just want to go back to your earlier question, the one other thing that's different about Lean Digital and the conversation starting at the C-Suite is that it's actually less about cost alone, less about efficiency alone, it's actually often about customer satisfaction, customer delight, market share capture, revenue growth, building insights from the data.

And in order to do that you got to bring in digital, and you got to change the process, and then you build insights and analytics and bring those tools as well. So it has a significant flavor around top-line growth, market share, pricing power for our clients..

Got it. Thank you..

Thanks, George..

Thank you. Our next question comes from the line of Edward Caso of Wells Fargo. Your line is now open..

Good morning or good afternoon, I guess.

My question is on your assets, you indicated you had about 40 digital assets heading towards 100 by year-end, how big an investment is that? Is it something that you have to continuously put money in to keep them sort of up-to-date? And do they potentially help your margins? Or do they just act to offset margin pressure elsewhere? Thanks..

A great question, so let me start by saying that these digital assets are actually a combination of our understanding of a specific domain with a specific either pain point that a number of clients in a specific industry in a specific service want to solve for or an opportunity that they want to leverage.

That pain point solution incorporates our understanding of their process and domain and bringing in digital tools and then leveraging of that data for our clients to build insights, et cetera. And typically those digital assets would mean very destructive change in a positive way. An example, I just want to take one example in order to make the point.

One of the digital assets that we pull together is third-party risk management for suppliers for our clients.

As you can imagine, given the financial accounting work we do for our clients and the procurement work we do for our clients, we have very good visibility, over 15-plus years, over a range of industries globally over suppliers and their landscape. And we know their behavior. We know their payments. We know how they work, et cetera, et cetera.

Pulling that together into an asset that you can deploy in one of those solutions which allows our clients to look at their 10,000 suppliers and define how they go from 10,000 to maybe 3,000.

Defining which 3,000 they pick, defining how do you manage the risk of those 3,000 suppliers given the regulatory environment in almost every industry around supplier management, the global footprint of those suppliers. And this is not just risk around credit. It's around risk around payment. It's risk around new technologies.

It's risk around employment practices. It's a whole amount of data that one collects, data that is available to our client, but data that is available outside our client as well. And when you pull that data from both inside and outside the company, allow digital platforms to actually pull analytics together, that then offers that to our client.

It does mean that those solutions are so disruptive that which we do have the ability to drive more value for our clients and therefore capture more price in that solution for our client.

Having said that, obviously, it takes out labor because a lot of these digital technologies their attempt here is to take out labor in order to drive that disruption. So it's a combination of far more efficient disruptive solution that drives huge value; that over the long-term should allow us to raise margins.

Some of that will go back into investing into these same tools because these tools will be constantly refreshed with new technologies that keep coming and that's the world we are in..

And just mathematically, in terms of what we've invested, you know that's where we've been dialing up in the research and development for lack of a better term, the capability ramp was eight quarters ago less than half of what it is today. So, that's where we've been ramping it up as a percentage of sales.

That's being offset by the G&A leveraging you heard us talk about. So that ramp has happened to the extent of where does that investment level stop as percentage of sales? So, no, I don't know that we'd expect that level of steep increase that we've already seen to continue, but we definitely have ramped up as a level – as a percentage of sales..

My other question is on employee attrition, which is – it's a very good number, it's better than a year ago and, I believe, if I remember right, you're more conservative in the way that you present the data. Why are you better, in some cases 10 points better? Is it geography? Is it more transaction versus voice? I mean, everybody loves the CEO.

I mean, what is that brings that number down?.

So, I – Ed, thank you for the question. You bring up a great point, Ed. It is one of the most important things in our business. Our business is about leveraging intellectual capital. Our business is about leveraging domain and expertise.

You build domain and expertise by having people who've spent time in an industry vertical, in a specific service, in a solution, who understand that specific situation. We have always tried it ourselves on our leadership development HR practices, and we continue to do an outstanding job in that front and we continue to invest there.

We think it's extremely important for us to continue to do that. We provide incredible career opportunities, and we know how to progress people through a range of career options. Let me take the Lean Digital examples.

The fact that we are able to pick probably the brightest 500 people who have incredible expertise and then train them on digital, and then add to that another 500 people with great digital expertise from the outside ecosystem and bring them into the company. That combination is what delivers the power of what we deliver.

People see that inside the company. People see that it makes a difference to their careers. They love the value they desire for their clients. And you made a great point around the value of the work we do.

As we continue to keep growing up the value chain, the 26% growth in transformative Lean Digital-led type services in analytics consulting, obviously, makes a huge difference as people see that. They see the ability to move into those careers. We provide those opportunities. We invest a lot in people and training.

All of those allows us to do what we do. Part of our Net Promoter Score, which has always been one of the hallmarks of what we deliver to our clients is driven by that attrition number. So we watch it very closely. It's not owned by HR alone. It's owned by our leaders.

So we feel very proud of that, so thanks for pointing that out and it's got nothing to do with the CEO..

Just a quick follow-up, the dot-com business in India is just exploding here, and we're hearing other companies losing top talent to the that opportunity as they all chase their riches, are you challenged at all by the sort of phenomenon going on in India right now?.

So I think to say that we are not challenged would probably be wrong because we are in that ecosystem. That ecosystem in India, for example, has always had a war for talent. Various industries have been growing and one of those that's been doing very well in the recent past is the dot-com e-commerce space.

Having said that, if we look at a broad cross section of our leadership, we haven't lost talent that we didn't want to lose. And it probably relates to the earlier point I was making. The other one is people find our ecosystem to allow entrepreneurship within the company to flower.

If you think about what we now created in the Valley around our Lean Digital Innovation Center in Palo Alto that we just inaugurated at the beginning of last week, we now have people who are working with technology companies, start-ups in the Valley, bringing those digital tools, conducting design workshops at leadership level with our clients.

Those are opportunities that are great opportunities for leaders to try when they enjoy the work we do. So, we haven't lost people at the leadership level. We don't expect to lose people, but the environment is a war for talent, so we should never take our eye off that ball..

Great. Thank you..

Thanks, Ed..

Thank you. Our next question comes from the line of Frank Atkins of SunTrust. Your line is now open..

Hi. Thanks for taking my question.

Want to ask where you stand in terms of sales force capacity right now? And expectations you may have looking forward around increased productivity on some of those investments you've made?.

So, I'll start by saying that our sales force capacity is obviously much bigger than it was a couple of years back, and you know, we've been on an investment journey. Our sales productivity for the first quarter is tracking exactly as we had planned, which is higher than last year, as you would expect it to be.

And we will continue to drive that agenda as we go through the year. We will continue to add sales force capacity as we continue to grow the business. We've now reached a level of sales force capacity that we think allows us to add that in a steady-state manner as revenue growth. We took a step-function add over the last two-and-a-half years.

That step-function is completed. Obviously, we will continue to find the right people to move into the right accounts and the right verticals in the right geographies. We obviously watch performance, and we know exactly how to watch performance, both leading indicators as well as final performance of our sales force.

And we churn sales force, as you would expect based on performance. But we feel very good about that whole sales force journey so far as well as the productivity we are driving through that sales force..

Okay, great.

And as my follow-up, on the GE partnership relationship, as we see the company allocate more resources to GE Digital, which is Predix as well as some other capabilities, can you talk about the opportunities that relationship there may have with GE Digital as that continues to grow?.

It's a great question and that's where we see opportunities as we go through – actually, we have seen so far and as we go into the future with GE.

As GE becomes less of a financial services business and predominantly more of an industrial business, as that industrial business gets driven more by digital and digital technologies and software, with the pivot on Internet of Things, which Predix being the platform around which that pivot and investment is happening, we are a very significant partner in that journey.

We are one of the chosen partners working with the GE Digital team, with the Predix team. In fact, in the last few months, we've actually built new solutions on that platform for GE as well as for other industrial clients. And that's where we see the opportunity.

It fits in very nicely with our Infrastructure, Manufacturing, Services business, which is a very significant vertical for us. We are deeply embedded in the GE service lines and specific verticals. We understand the domain really well.

And as GE continues to undertake that journey, our belief and in all our conversations with the GE stakeholders, they belief clearly is that understanding the domain positions us really well to actually build those solutions out, make them successful, drive the learnings, improve those solutions, not just for GE, but for a number of other large industrial companies in the world..

All right. Great. Thank you very much..

Thank you..

Thank you. Our next question comes from the line of Dave Koning of Baird. Your line is now open..

Yeah. Hey, guys. Nice job..

Thank you, Dave..

Yeah, yeah. And I guess I've got kind of a two-part question. On the one hand, the revenue this quarter, GE was a little better than we expected, we thought it was going to be a little tough quarter. But GE was a little better and the core was a little slower. It was one the – actually one of the slower growth quarters in the last several years.

But on the other hand, you've got growth expected the rest of the year. I think sequential growth, you're expecting kind of 5% or 6% on average through the rest of the year, which would be one of the best years of the last seven years or eight years to be able to do that.

So, I'm wondering we've had a tougher quarter in the core BPM business in Q1, but we're set up for some of the best growth, best sequential growth you've had in years. And I'm just trying to put that all in the context.

I'm wondering if you can kind of do that?.

Yes. It's really largely – it is timing and it largely aligns with the way we planned it at the beginning of the year when we initially gave you the guidance. So, it's not going to be a straight forward or linear type of year.

As I mentioned on the last call, it's going to – growth is going to look more like 2014 growth rates, largely because of the year-over-year compares. First half growth rates for Q1 and Q2 effectively half of what they were in the second year or less than half what they are in the second part of the year.

That's kind of the way we planned it this year as well. That first half will be somewhat muted. Growth rates in the second half we are expecting larger growth. So, you're not even really seeing step-up Q2.

Q2 largely in line with what we're seeing in Q1 in terms of growth rates in the second half is where we expect to see the increase in revenues, as you saw in 2014. So, that's the way we're seeing it largely in line, and we need to get after it next Q..

And is that because of a change in seasonal patterns of buying and kind of how maybe clients have changed? Or is it just that the timing of when you signed a lot deals over the course of the last few quarters just lined up so that there's a huge ramp period kind of Q3, just you end up starting to get a lot of that coming on?.

I mean, it's a combination of timing of deals that we signed and are signing recently and expect to sign as we go throughout the year, as well as the way that revenues flowed in the prior year as well. If you remember last year growth rate, we talked about a tough compare to Q1.

Last year's growth rates were high in the first half and low in the second half. And I think as a result of that year-over-year comparison that's why you're seeing that, coupled with the timing of deals we're expected to sign..

Yeah, and the last point I would make is, Dave, our business as I have said is not a quarter-by-quarter business.

It is much more of a long-cycle business, barring some technology projects that we do obviously and consulting work that we do and analytics projects to the extent they are projects, that's where we don't have long-term annuity contracts, but otherwise these are long-cycle businesses.

So to some extent I would also add the flavor of that quarter and quarter-by-quarter is not the way we think about the business. And as we look at the balance of the year and the full year, we feel good about the range that we've given..

Gotcha. Okay. No, that's helpful. And then the second thing just looking at the cash flow statement in the press release, there was about a $5 million intangible asset write-down.

Was that just one of the acquisitions you've done? And maybe what was that from?.

That was related to – it was a similar item that we had in the third quarter related to the mortgage platform. We are seeing success in the mortgage business, but very specifically related to this platform looking at the net future value and present value of those cash flows of that particular platform, we took a write-down.

It was related to a prior acquisition, so now that write-down was largely offset by the reduction in the earnout related to that acquisition, so that effectively was a net of zero for the quarter..

Gotcha. And obviously, it's immaterial. I mean, it didn't move your guidance or anything like – it sounds like a pretty small, small thing..

No, that's right, that's right..

Gotcha. Great. Well, thank you..

Thanks, Dave..

Thank you. Our next question comes from the line Keith Bachman of BMO. Your line is now open..

Hi, thank you. Ed, I wanted to come back to the DSO, it obviously was up a decent amount.

I know you said it was timing, but could you elaborate a little bit on what were some of the timing issues? And more importantly, how does that cascade lower as you get to the year? Where should we be thinking about that ends up through the year?.

Yeah, there are a couple items that I mention in the prepared remarks. One of them relates to the ramp-up of large deals that we've signed recently where we ramp up and we incur some upfront costs to get amortized. The revenue gets recognized over the period of a contract.

So although the costs are incurred upfront and hit cash flow, you don't get the revenue benefit of that in the same period, so it gets deferred. So that was close to two days related to that ramp. Another couple of days roughly associated with other large complex deals that took longer, and they take longer to prepare the bills.

As an example, a very large – one of the examples is a very large cost-plus deal where a very significant amount of detail is required to be able to bill that amount, so that takes longer to bill and that caused the timing. Those two both we expect to effectively get mitigated as we go throughout the rest of the year..

Okay. My follow-up question is on the ramp. Your guidance is consistent with what you said I think at Analyst Day, a little bit of FX maybe noise in there and also on the last call. Yet I still think investors are struggling with the ramp.

If you think about exit run rates, particularly for the Global Clients revenue, the current quarter you did 9% year-over-year growth in constant currency, which was I think a little bit lower than investors were assuming, even given that ramp. As you exit the year, you're presumably going to be in double digits.

Is that the way investors should be thinking about the sustainable growth rate of the Global Client business is well in the double digits as we look out over the next couple years?.

That's certainly our expectation. So the timing can be interesting with the year-over-year comparisons as you know, Keith, but our expectation is that we guided 12.5% to 14% on a constant currency basis. Our expectation is we should be in that range, assuming we continue to execute and drive the bookings that you've heard us talk about.

We got to continue drive increased bookings to drive that and sustain that double-digit plus type of growth rate. And that's certainly our expectation, nothing's changed. You heard Tiger talk about feeling good about our positioning, feeling good about the inflows, win rates and the sustained level of customers.

So I think that's – there's no change there..

Okay. And GE as was mentioned one of the previous questions, it seems a little bit better, negative 5%. At Analyst Day, it seemed like you guys were feeling a little bit better about the opportunities associated with GE. I know it's probably even hard to define what GE revenues are these days.

But as you exit the year, where are you thinking that the GE business will be in terms of growth rates?.

So, let me answer a piece of it and Tiger will chime in as well. I think – remember on the GE piece, we said that it all wouldn't happen, every piece of revenue wouldn't drop off in the beginning of the year. So, the year-over-year down is expected to get worse as we go throughout the year.

But I did say that a piece of it, a big chunk of it would happen this quarter – starting with this quarter and that's why we were down I think it was roughly 5%, which is higher than what you've historically seen. So, I think that piece will get worse as we get throughout the rest of the year. And Tiger, you wanted to say something as well..

Yeah. So, the way I would think about the GE business is as we go through the year, we are actually in the first quarter of few extra projects that came through, actually related a little bit to the divestiture itself that allowed us to deliver at slightly better than the plan.

But as we go through the year, I think it'll come back to the 8% to 10% range negative that we talked about.

The best way to think about the GE business would be, when all the divestitures are complete, when we have basically started reporting those GE businesses because they've been sold to other global clients as part of Global Clients, then what's left with GE would be predominantly the industrial businesses and what is called as the GE finance operations and business and it's connected to those industrial businesses.

Those businesses will have really three drivers of growth. As the industrial businesses of GE continue to grow, I think it automatically positions us well to be part of that growth. As GE continues to integrate an acquisition like Alstom or other acquisitions that they may do in the future, that positions us well.

And then to the question on the digital, and the Internet of Things, and software and Predix, I think we're very well positioned to be part of that growth. So as we look at the future, I think the industrial businesses of GE put us in a good position of getting back to, I would say, low-single-digit growth in the GE world..

Okay. Great. All right. That's it from me. Thanks, gentlemen..

Thanks, Keith..

Thanks, Keith..

Thank you. We have no questions at this time. I'll now turn the call back over to Mr. Sachs, for any closing remarks..

Great. Thank you, Nicole, and thanks, everybody, for joining us today. And we look forward to speaking with you again next quarter..

Ladies and gentlemen, that concludes today's conference. Thank you so much for your participation. You may now disconnect. Have a great day..