UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period ended ~~September 30, 2022~~March 31, 2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from to

Commission file number: 001-33626

GENPACT LIMITED

(Exact name of registrant as specified in its charter)


Bermuda						98-0533350
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

Canon's Court

22 Victoria Street

Hamilton HM 12

Bermuda

(441) 298-3300

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, par value $0.01 per share	G	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of ~~November 3, 2022,~~May 4, 2023, there were ~~183,258,135~~184,151,153 common shares, par value $0.01 per share, of the registrant issued and outstanding.

TABLE OF CONTENTS


		Item No.		Page No.		Item No.		Page No.

PART I	PART I		Financial Information		PART I		Financial Information
		1.	Unaudited Consolidated Financial Statements			1.	Unaudited Consolidated Financial Statements
			Consolidated Balance Sheets as of December 31, 2021 and Septembe r 3 0 , 2022	3			Consolidated Balance Sheets as of December 31, 2022 and March 31, 2023	3
			Consolidated Statements of Income for the three a nd nine months ended September 3 0 , 2021 and 2022	4			Consolidated Statements of Income for the three months ended March 31, 2022 and 2023	4
			Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 3 0 , 2021 and 2022	5			Consolidated Statements of Comprehensive Income (Loss) for the three months ended Ma r ch 3 1 , 202 2 and 202 3	5
			Consolidated Statements of Equity for the three and nine months ended Septemb e r 3 0 , 2021 and 2022	6			Consolidated Statements of Equity for the three months ended M arch 3 1 , 202 2 and 202 3	6
			Consolidated Statements of Cash Flows for the nine months ended September 3 0 , 2021 and 2022	10			Consolidated Statements of Cash Flows for the thre e months ended March 3 1 , 202 2 and 202 3	8
			Notes to the Consolidated Financial Statements	11			Notes to the Consolidated Financial Statements	9
		2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50		2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
		3.	Quantitative and Qualitative Disclosures About Market Risk	71		3.	Quantitative and Qualitative Disclosures About Market Risk	59
		4.	Controls and Procedures	72		4.	Controls and Procedures	60

PART II	PART II		Other Information		PART II		Other Information
		1.	Legal Proceedings	73		1.	Legal Proceedings	61
		1A.	Risk Factors	73		1A.	Risk Factors	61
		2.	Unregistered Sales of Equity Securities and Use of Proceeds	73		2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
		6.	Exhibits	74		6.	Exhibits	65

SIGNATURES	SIGNATURES			75	SIGNATURES			66

PART I - FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share data and share count)


		Notes	As of December 31, 2021		As of September 30, 2022			Notes	As of December 31, 2022		As of March 31, 2023
Assets	Assets						Assets
Current assets	Current assets						Current assets
Cash and cash equivalents	Cash and cash equivalents		$	899,458	$	518,680	Cash and cash equivalents		$	646,765	$	552,281
Accounts receivable, net of allowance for credit losses of $24,329 and $20,437 as of December 31, 2021 and September 30, 2022, respectively		4	887,742		994,250
Accounts receivable, net of allowance for credit losses of $20,442 and $23,203 as of December 31, 2022 and March 31, 2023, respectively							Accounts receivable, net of allowance for credit losses of $20,442 and $23,203 as of December 31, 2022 and March 31, 2023, respectively	4	994,755		1,005,394
Prepaid expenses and other current assets	Prepaid expenses and other current assets	7	134,441		229,825		Prepaid expenses and other current assets	7	137,972		175,882
Assets of business held for sale		8	$	—	$	15,621
Total current assets	Total current assets		$	1,921,641	$	1,758,376	Total current assets		$	1,779,492	$	1,733,557

Property, plant and equipment, net	Property, plant and equipment, net	9	215,089		180,379		Property, plant and equipment, net	9	180,758		179,255
Operating lease right-of-use assets	Operating lease right-of-use assets		270,603		191,371		Operating lease right-of-use assets		198,366		188,024
Deferred tax assets	Deferred tax assets	23	106,322		111,932		Deferred tax assets	23	135,483		130,902
Intangible assets, net	Intangible assets, net	10	169,635		101,226		Intangible assets, net	10	89,715		80,044
Goodwill	Goodwill	10	1,731,027		1,680,932		Goodwill	10	1,684,196		1,687,486
Contract cost assets	Contract cost assets	20	238,794		218,137		Contract cost assets	20	216,670		202,546
Other assets, net of allowance for credit losses of $3,711 and $3,198 as of December 31, 2021 and September 30, 2022, respectively			322,158		294,319
Other assets, net of allowance for credit losses of $3,198 and $3,198 as of December 31, 2022 and March 31, 2023, respectively							Other assets, net of allowance for credit losses of $3,198 and $3,198 as of December 31, 2022 and March 31, 2023, respectively		304,134		304,031
Total assets	Total assets		$	4,975,269	$	4,536,672	Total assets		$	4,588,814	$	4,505,845

Liabilities and equity	Liabilities and equity						Liabilities and equity
Current liabilities	Current liabilities						Current liabilities
Short-term borrowings	Short-term borrowings	11	$	—	$	200,000	Short-term borrowings	11	$	151,000	$	180,000
Current portion of long-term debt	Current portion of long-term debt	12	383,433		535,142		Current portion of long-term debt	12	26,136		26,140
Accounts payable	Accounts payable		24,984		27,925		Accounts payable		35,809		22,713
Income taxes payable	Income taxes payable	23	47,353		107,172		Income taxes payable	23	45,306		64,094
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	13	791,440		700,484		Accrued expenses and other current liabilities	13	791,007		598,378
Operating leases liability	Operating leases liability		61,591		53,976		Operating leases liability		54,063		53,199
Liabilities of business held for sale		8	$	—	$	8,410
Total current liabilities	Total current liabilities		$	1,308,801	$	1,633,109	Total current liabilities		$	1,103,321	$	944,524

Long-term debt, less current portion	Long-term debt, less current portion	12	1,272,476		746,613		Long-term debt, less current portion	12	1,249,153		1,242,908
Operating leases liability	Operating leases liability		247,707		186,057		Operating leases liability		190,398		178,544
Deferred tax liabilities	Deferred tax liabilities	23	3,942		3,634		Deferred tax liabilities	23	4,176		4,486
Other liabilities	Other liabilities	14	245,210		235,413		Other liabilities	14	215,608		210,050
Total liabilities	Total liabilities		$	3,078,136	$	2,804,826	Total liabilities		$	2,762,656	$	2,580,512

Shareholders' equity	Shareholders' equity						Shareholders' equity
Preferred shares, $0.01 par value, 250,000,000 authorized, none issued	Preferred shares, $0.01 par value, 250,000,000 authorized, none issued		—		—		Preferred shares, $0.01 par value, 250,000,000 authorized, none issued		—		—
Common shares, $0.01 par value, 500,000,000 authorized, $185,336,357 and 183,008,135 issued and outstanding as of December 31, 2021 and September 30, 2022, respectively			1,847		1,825
Common shares, $0.01 par value, 500,000,000 authorized, 182,924,416 and 183,729,110 issued and outstanding as of December 31, 2022 and March 31, 2023, respectively							Common shares, $0.01 par value, 500,000,000 authorized, 182,924,416 and 183,729,110 issued and outstanding as of December 31, 2022 and March 31, 2023, respectively		1,823		1,831
Additional paid-in capital	Additional paid-in capital		1,717,165		1,740,271		Additional paid-in capital		1,777,453		1,794,779
Retained earnings	Retained earnings		732,474		745,172		Retained earnings		780,007		830,846
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)		(554,353)		(755,422)		Accumulated other comprehensive income (loss)		(733,125)		(702,123)
Total equity	Total equity		$	1,897,133	$	1,731,846	Total equity		$	1,826,158	$	1,925,333
Commitments and contingencies	Commitments and contingencies	24					Commitments and contingencies	24
Total liabilities and equity	Total liabilities and equity		$	4,975,269	$	4,536,672	Total liabilities and equity		$	4,588,814	$	4,505,845

See accompanying notes to the Consolidated Financial Statements.

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data and share count)


			Three months ended September 30,				Nine months ended September 30,						Three months ended March 31,
		Notes	2021		2022		2021		2022			Notes	2022		2023
Net revenues	Net revenues	20	$	1,015,737	$	1,111,037	$	2,949,934	$	3,268,627	Net revenues	20	$	1,068,443	$	1,089,319
Cost of revenue	Cost of revenue		653,686		717,219		1,887,596		2,117,437		Cost of revenue		685,962		719,078
Gross profit	Gross profit		$	362,051	$	393,818	$	1,062,338	$	1,151,190	Gross profit		$	382,481	$	370,241
Operating expenses:	Operating expenses:										Operating expenses:
Selling, general and administrative expenses	Selling, general and administrative expenses		215,957		231,436		620,857		701,828		Selling, general and administrative expenses		237,296		216,485
Amortization of acquired intangible assets	Amortization of acquired intangible assets	10	13,898		10,604		44,624		32,805		Amortization of acquired intangible assets	10	11,306		8,255
Other operating (income) expense, net	Other operating (income) expense, net	21	(93)		20,937		(217)		42,157		Other operating (income) expense, net	21	3		389
Income from operations	Income from operations		$	132,289	$	130,841	$	397,074	$	374,400	Income from operations		$	133,876	$	145,112
Foreign exchange gains (losses), net	Foreign exchange gains (losses), net		2,733		3,867		11,529		9,312		Foreign exchange gains (losses), net		4,303		(1,040)
Interest income (expense), net	Interest income (expense), net	22	(12,765)		(13,399)		(38,198)		(36,691)		Interest income (expense), net	22	(12,088)		(9,627)
Other income (expense), net	Other income (expense), net		1,480		(235)		8,966		(4,902)		Other income (expense), net		(409)		4,030
Income before income tax expense	Income before income tax expense		$	123,737	$	121,074	$	379,371	$	342,119	Income before income tax expense		$	125,682	$	138,475
Income tax expense	Income tax expense	23	21,351		25,231		83,008		78,427		Income tax expense	23	29,503		32,374
Net income	Net income		$	102,386	$	95,843	$	296,363	$	263,692	Net income		$	96,179	$	106,101
Earnings per common share	Earnings per common share	18									Earnings per common share	18
Basic	Basic		$	0.55	$	0.52	$	1.58	$	1.43	Basic		$	0.52	$	0.58
Diluted	Diluted		$	0.53	$	0.51	$	1.54	$	1.40	Diluted		$	0.51	$	0.57
Weighted average number of common shares used in computing earnings per common share	Weighted average number of common shares used in computing earnings per common share	18									Weighted average number of common shares used in computing earnings per common share	18
Basic	Basic		187,856,026		183,312,013		187,945,234		184,456,047		Basic		185,637,776		183,795,404
Diluted	Diluted		193,159,929		187,399,204		192,885,252		188,274,420		Diluted		189,558,404		187,586,277

See accompanying notes to the Consolidated Financial Statements.

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands)


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2021		2022		2021		2022			2022		2023
Net income (loss)		$	102,386	$	95,843	$	296,363	$	263,692
Net income										Net income	$	96,179	$	106,101
Other comprehensive income:	Other comprehensive income:									Other comprehensive income:
Currency translation adjustments	Currency translation adjustments	(9,043)		(71,092)		(36,721)		(179,933)		Currency translation adjustments	(27,429)		16,994
Net income (loss) on cash flow hedging derivatives, net of taxes (Note 6)	Net income (loss) on cash flow hedging derivatives, net of taxes (Note 6)	7,789		(14,198)		10,321		(23,056)		Net income (loss) on cash flow hedging derivatives, net of taxes (Note 6)	2,873		13,091
Retirement benefits, net of taxes	Retirement benefits, net of taxes	497		374		2,128		1,920		Retirement benefits, net of taxes	1,101		917
Other comprehensive income (loss)	Other comprehensive income (loss)	(757)		(84,916)		(24,272)		(201,069)		Other comprehensive income (loss)	(23,455)		31,002
Comprehensive income (loss)		$	101,629	$	10,927	$	272,091	$	62,623
Comprehensive income										Comprehensive income	$	72,724	$	137,103

See accompanying notes to the Consolidated Financial Statements.

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Equity

For the three months ended ~~September 30, 2021~~March 31, 2022

(Unaudited)

(In thousands, except share count)


		Common shares							Accumulated Other Comprehensive Income (Loss)									Common shares										Accumulated Other Comprehensive Income (Loss)
		No. of Shares	Amount		Additional Paid-in Capital		Retained Earnings				Total Equity				No. of Shares				Amount			Additional Paid-in Capital			Retained Earnings					Total Equity
Balance as of July 1, 2021		187,350,298	$	1,869	$	1,657,756	$	748,199			$	(568,855)				$	1,838,969
Issuance of common shares on exercise of options (Note 16)		511,813	5		11,732		—		—				11,737
Balance as of January 1, 2022																Balance as of January 1, 2022		185,336,357		$	1,847		$	1,717,165		$	732,474	$	(554,353)		$	1,897,133
Issuance of common shares under the employee stock purchase plan (Note 16)	Issuance of common shares under the employee stock purchase plan (Note 16)	60,374	1		2,818		—		—				2,819			Issuance of common shares under the employee stock purchase plan (Note 16)		87,646		1			3,299			—		—			3,300
Net settlement on vesting of restricted share units (Note 16)	Net settlement on vesting of restricted share units (Note 16)	134,086	1		(3,535)		—		—				(3,534)			Net settlement on vesting of restricted share units (Note 16)		54,942		1			(1)			—		—			—
Net settlement on vesting of performance units (Note 16)																Net settlement on vesting of performance units (Note 16)		1,224,003		12			(41,859)			—		—			(41,847)
Stock repurchased and retired (Note 17)																Stock repurchased and retired (Note 17)		(1,630,533)		(16)			—			(75,983)		—			(75,999)
Expenses related to stock purchase (Note 17)																Expenses related to stock purchase (Note 17)		—		—			—			(33)		—			(33)
Stock-based compensation expense (Note 16)	Stock-based compensation expense (Note 16)	—	—		21,485		—		—				21,485			Stock-based compensation expense (Note 16)		—		—			15,250			—		—			15,250
Others		—	—		(6)		—		—				(6)
Comprehensive income (loss):	Comprehensive income (loss):															Comprehensive income (loss):
Net income (loss)	Net income (loss)	—	—		—		102,386		—				102,386			Net income (loss)		—		—			—			96,179		—			96,179
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		(757)				(757)			Other comprehensive income (loss)		—		—			—			—		(23,455)			(23,455)
Dividend ($0.1075 per common share, Note 17)		—	—		—		(20,213)		—				(20,213)
Balance as of September 30, 2021		188,056,571	$	1,876	$	1,690,250	$	830,372	$	(569,612)			$	1,952,886
Dividend ($0.1250 per common share, Note 17)																Dividend ($0.1250 per common share, Note 17)		—		—			—			(23,134)		—			(23,134)
Balance as of March 31, 2022																Balance as of March 31, 2022		185,072,415		$	1,845		$	1,693,854		$	729,503	$	(577,808)		$	1,847,394

See accompanying notes to the Consolidated Financial Statements.

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Equity

For the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2023

(Unaudited)

(In thousands, except share count)

Common shares Accumulated Other
Comprehensive
Income (Loss)
No. of
Shares Amount Additional
Paid-in Capital Retained
Earnings Total
Equity
Balance as of January 1, 2021 189,045,661 $ 1,885 $ 1,636,026 $ 741,658 $ (545,340) $ 1,834,229
Issuance of common shares on exercise of options (Note 16) 1,020,125 11 20,902 — — 20,913
Issuance of common shares under the employee stock purchase plan (Note 16) 216,378 2 8,871 — — 8,873
Net settlement on vesting of restricted share units (Note 16) 264,376 3 (5,845) — — (5,842)
Net settlement on vesting of performance units (Note 16) 1,102,440 11 (28,302) — — (28,291)
Stock repurchased and retired (Note 17) (3,592,409) (36) — (147,116) — (147,152)
Expenses related to stock purchase (Note 17) — — — (72) — (72)
Stock-based compensation expense (Note 16) — — 58,604 — — 58,604
Others — — (6) — — (6)
Comprehensive income (loss):
Net income (loss) — — — 296,363 — 296,363
Other comprehensive income (loss) — — — — (24,272) (24,272)
Dividend ($0.3225 per common share, Note 17) — — — (60,461) — (60,461)
Balance as of September 30, 2021 188,056,571 $ 1,876 $ 1,690,250 $ 830,372 $ (569,612) $ 1,952,886

~~GENPACT LIMITED AND ITS SUBSIDIARIES~~

~~Consolidated Statements of Equity~~

~~For the three months ended September 30, 2022~~

~~(Unaudited)~~

~~(In thousands, except share count)~~

Common shares Accumulated Other
Comprehensive
Income (Loss)
No. of
Shares Amount Additional
Paid-in Capital Retained
Earnings Total
Equity
Balance as of July 1, 2022 183,483,736 $ 1,830 $ 1,716,895 $ 702,219 $ (670,506) $ 1,750,438
Issuance of common shares on exercise of options (Note 16) 60,000 — 1,573 — — 1,573
Issuance of common shares under the employee stock purchase plan (Note 16) 71,499 1 3,022 — — 3,023
Net settlement on vesting of restricted share units (Note 16) 19,992 — (421) — — (421)
Stock repurchased and retired (Note 17) (627,092) (6) — (30,005) — (30,011)
Expenses related to stock purchase (Note 17) — — — (12) — (12)
Stock-based compensation expense (Note 16) — — 19,202 — — 19,202
Comprehensive income (loss):
Net income (loss) — — — 95,843 — 95,843
Other comprehensive income (loss) — — — — (84,916) (84,916)
Dividend ($0.1250 per common share, Note 17) — — — (22,873) — (22,873)
Balance as of September 30, 2022 183,008,135 $ 1,825 $ 1,740,271 $ 745,172 $ (755,422) $ 1,731,846

~~See accompanying notes to the Consolidated Financial Statements.~~

~~GENPACT LIMITED AND ITS SUBSIDIARIES~~

~~Consolidated Statements of Equity~~

~~For the nine months ended September 30, 2022~~

~~(Unaudited)~~

~~(In thousands, except share count)~~


		Common shares							Accumulated Other Comprehensive Income (Loss)									Common shares										Accumulated Other Comprehensive Income (Loss)
		No. of Shares	Amount		Additional Paid-in Capital		Retained Earnings				Total Equity						No. of Shares		Amount			Additional Paid-in Capital			Retained Earnings					Total Equity
Balance as of January 1, 2022		185,336,357	$	1,847	$	1,717,165	$	732,474			$	(554,353)			$	1,897,133
Balance as of January 1, 2023															Balance as of January 1, 2023			182,924,416		$	1,823		$	1,777,453		$	780,007	$	(733,125)		$	1,826,158
Issuance of common shares on exercise of options (Note 16)	Issuance of common shares on exercise of options (Note 16)	110,000	1		2,955		—		—				2,956		Issuance of common shares on exercise of options (Note 16)			642,280		6			12,797			—		—			12,803
Issuance of common shares under the employee stock purchase plan (Note 16)	Issuance of common shares under the employee stock purchase plan (Note 16)	253,377	3		10,083		—		—				10,086		Issuance of common shares under the employee stock purchase plan (Note 16)			72,645		1			3,120			—		—			3,121
Net settlement on vesting of restricted share units (Note 16)	Net settlement on vesting of restricted share units (Note 16)	74,934	1		(422)		—		—				(421)		Net settlement on vesting of restricted share units (Note 16)			309,531		3			(7,286)			—		—			(7,283)
Net settlement on vesting of performance units (Note 16)	Net settlement on vesting of performance units (Note 16)	1,300,511	13		(44,404)		—		—				(44,391)		Net settlement on vesting of performance units (Note 16)			410,843		4			(11,009)			—		—			(11,005)
Stock repurchased and retired (Note 17)	Stock repurchased and retired (Note 17)	(4,067,044)	(40)		—		(181,971)		—				(182,011)		Stock repurchased and retired (Note 17)			(630,605)		(6)			—			(29,994)		—			(30,000)
Expenses related to stock purchase (Note 17)	Expenses related to stock purchase (Note 17)	—	—		—		(81)		—				(81)		Expenses related to stock purchase (Note 17)			—		—			—			(13)		—			(13)
Stock-based compensation expense (Note 16)	Stock-based compensation expense (Note 16)	—	—		54,894		—		—				54,894		Stock-based compensation expense (Note 16)			—		—			19,704			—		—			19,704
Comprehensive income (loss):	Comprehensive income (loss):														Comprehensive income (loss):
Net income (loss)	Net income (loss)	—	—		—		263,692		—				263,692		Net income (loss)			—		—			—			106,101		—			106,101
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		(201,069)				(201,069)		Other comprehensive income (loss)			—		—			—			—		31,002			31,002
Dividend ($0.3750 per common share, Note 17)		—	—		—		(68,942)		—				(68,942)
Balance as of September 30, 2022		183,008,135	$	1,825	$	1,740,271	$	745,172	$	(755,422)			$	1,731,846
Dividend ($0.1375 per common share, Note 17)															Dividend ($0.1375 per common share, Note 17)			—		—			—			(25,255)		—			(25,255)
Balance as of March 31, 2023															Balance as of March 31, 2023			183,729,110		$	1,831		$	1,794,779		$	830,846	$	(702,123)		$	1,925,333

See accompanying notes to the Consolidated Financial Statements.

GENPACT LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


		Nine months ended September 30,					Three months ended March 31,
		2021		2022			2022		2023
Operating activities	Operating activities					Operating activities
Net income	Net income	$	296,363	$	263,692	Net income	$	96,179	$	106,101
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash used for operating activities:						Adjustments to reconcile net income to net cash used for operating activities:
Depreciation and amortization	Depreciation and amortization	82,344		68,169		Depreciation and amortization	24,847		18,757
Amortization of debt issuance costs	Amortization of debt issuance costs	1,969		1,825		Amortization of debt issuance costs	690		487
Amortization of acquired intangible assets	Amortization of acquired intangible assets	44,624		32,805		Amortization of acquired intangible assets	11,306		8,255
Write-down of intangible assets and property, plant and equipment		915		1,377
Impairment charge on intangible assets and goodwill held-for-sale		—		21,426
Allowance for credit losses		2,412		1,045
Unrealized (gain)/ loss on revaluation of foreign currency asset/liability		(4,252)		2,150
Loss on the sale of the business classified as held for sale (refer to Note 8)						Loss on the sale of the business classified as held for sale (refer to Note 8)	—		802
Allowance for credit losses/(gains)						Allowance for credit losses/(gains)	(463)		3,324
Unrealized gain on revaluation of foreign currency assets/liabilities						Unrealized gain on revaluation of foreign currency assets/liabilities	(4,599)		(2,994)
Stock-based compensation expense	Stock-based compensation expense	58,604		54,894		Stock-based compensation expense	15,250		19,704
Deferred tax benefit		(6,236)		(7,655)
Write-down of operating right-of-use assets and other assets		—		20,307
Deferred tax expense						Deferred tax expense	4,914		1,710
Others, net	Others, net	806		323		Others, net	19		454
Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:
Increase in accounts receivable	Increase in accounts receivable	(78,626)		(121,038)		Increase in accounts receivable	(83,548)		(17,794)
(Increase) decrease in prepaid expenses, other current assets, contract cost assets, operating lease right-of-use assets and other assets		43,071		(57,940)
Increase in accounts payable		11,138		6,755
Increase in prepaid expenses, other current assets, contract cost assets, operating lease right-of-use assets and other assets						Increase in prepaid expenses, other current assets, contract cost assets, operating lease right-of-use assets and other assets	(4,120)		(11,424)
Decrease in accounts payable						Decrease in accounts payable	(2,010)		(13,261)
Decrease in accrued expenses, other current liabilities, operating leases liabilities and other liabilities	Decrease in accrued expenses, other current liabilities, operating leases liabilities and other liabilities	(74,085)		(132,524)		Decrease in accrued expenses, other current liabilities, operating leases liabilities and other liabilities	(179,186)		(167,217)
Increase in income taxes payable	Increase in income taxes payable	68,430		58,431		Increase in income taxes payable	6,440		19,032
Net cash provided by operating activities		$	447,477	$	214,042
Net cash used for operating activities						Net cash used for operating activities	$	(114,281)	$	(34,064)
Investing activities	Investing activities					Investing activities
Purchase of property, plant and equipment	Purchase of property, plant and equipment	(31,385)		(35,312)		Purchase of property, plant and equipment	(16,744)		(12,578)
Payment for internally generated intangible assets (including intangibles under development)	Payment for internally generated intangible assets (including intangibles under development)	(3,907)		(2,972)		Payment for internally generated intangible assets (including intangibles under development)	(1,065)		(828)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	4,511		58		Proceeds from sale of property, plant and equipment	43		9
(Payment)/ refund for business acquisitions, net of cash acquired		(6,613)		973
Proceed from sale of investment		142		—
Payment for business acquisitions, net of cash acquired						Payment for business acquisitions, net of cash acquired	—		(682)
Payment for divestiture of the business classified as held for sale						Payment for divestiture of the business classified as held for sale	—		(19,510)
Net cash used for investing activities	Net cash used for investing activities	$	(37,252)	$	(37,253)	Net cash used for investing activities	$	(17,766)	$	(33,589)
Financing activities	Financing activities					Financing activities
Repayment of finance lease obligations	Repayment of finance lease obligations	(8,659)		(10,305)		Repayment of finance lease obligations	(2,292)		(3,705)
Payment of debt issuance costs		(3,018)		—
Proceeds from long-term debt		350,000		—
Repayment of long-term debt	Repayment of long-term debt	(25,500)		(375,500)		Repayment of long-term debt	(8,500)		(6,625)
Proceeds from short-term borrowings	Proceeds from short-term borrowings	—		250,000		Proceeds from short-term borrowings	250,000		75,000
Repayment of short-term borrowings	Repayment of short-term borrowings	(250,000)		(50,000)		Repayment of short-term borrowings	—		(46,000)
Proceeds from issuance of common shares under stock-based compensation plans	Proceeds from issuance of common shares under stock-based compensation plans	29,786		13,042		Proceeds from issuance of common shares under stock-based compensation plans	3,300		15,924
Payment for net settlement of stock-based awards	Payment for net settlement of stock-based awards	(33,467)		(44,942)		Payment for net settlement of stock-based awards	(41,889)		(18,172)
Payment of earn-out consideration	Payment of earn-out consideration	(2,556)		(2,437)		Payment of earn-out consideration	—		(2,399)
Dividend paid	Dividend paid	(60,461)		(68,942)		Dividend paid	(23,134)		(25,255)
Payment for stock repurchased and retired (including expenses related to stock repurchase)	Payment for stock repurchased and retired (including expenses related to stock repurchase)	(147,224)		(182,092)		Payment for stock repurchased and retired (including expenses related to stock repurchase)	(76,032)		(30,013)
Others		(6)		—
Net cash used for financing activities		$	(151,105)	$	(471,176)
Net cash provided by/(used for) financing activities						Net cash provided by/(used for) financing activities	$	101,453	$	(41,245)
Effect of exchange rate changes	Effect of exchange rate changes	(17,085)		(86,391)		Effect of exchange rate changes	(7,104)		14,414
Net increase/(decrease) in cash and cash equivalents		259,120		(294,387)
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(30,594)		(108,898)
Cash and cash equivalents at the beginning of the period	Cash and cash equivalents at the beginning of the period	680,440		899,458		Cash and cash equivalents at the beginning of the period	899,458		646,765
Cash and cash equivalents at the end of the period	Cash and cash equivalents at the end of the period	$	922,475	$	518,680	Cash and cash equivalents at the end of the period	$	861,760	$	552,281
Supplementary information	Supplementary information					Supplementary information
Cash paid during the period for interest	Cash paid during the period for interest	$	25,715	$	30,430	Cash paid during the period for interest	$	1,893	$	6,112
Cash paid during the period for income taxes, net of refund	Cash paid during the period for income taxes, net of refund	$	38,040	$	114,343	Cash paid during the period for income taxes, net of refund	$	28,580	$	23,001

See accompanying notes to the Consolidated Financial Statements.

108

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

1. Organization

The Company is a global professional services firm that drives digitally-led innovation and runs digitally-enabled intelligent operations for its clients, guided by its experience running thousands of processes for hundreds of Fortune Global 500 clients. The Company has over ~~117,700~~119,100 employees serving clients in key industry verticals from more than 3035 countries.

2. Summary of significant accounting policies

(a) Basis of preparation and principles of consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, they do not include certain information and note disclosures required by generally accepted accounting principles for annual financial reporting and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. The accompanying consolidated financial statements reflect all adjustments that management considers necessary for a fair presentation of the results of operations for these periods.

The accompanying financial statements have been prepared on a consolidated basis and reflect the financial statements of Genpact Limited, a Bermuda company, and all of its subsidiaries that are more than 50% owned and controlled. When the Company does not have a controlling interest in an entity but exerts significant influence over the entity, the Company applies the equity method of accounting. All intercompany transactions and balances are eliminated in consolidation.

(b) Use of estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment, intangible assets and goodwill, revenue recognition, allowance for credit losses, valuation allowances for deferred tax assets, the valuation of derivative financial instruments, the measurement of lease liabilities and right-of-use (“ROU”) assets, measurements of stock-based compensation, assets and obligations related to employee benefits, the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, variable consideration, other obligations for revenue recognition, income tax uncertainties and other contingencies. Management believes that the estimates used in the preparation of the consolidated financial statements are reasonable, and management has made assumptions about the possible effects of the ongoing COVID-19 pandemic on critical and significant accounting estimates. Although these estimates and assumptions are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. Any changes in estimates are adjusted prospectively in the Company’s consolidated financial statements.

The Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standard Codification (“ASC”) Topic 805, Business Combinations, by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Contingent consideration is included within the acquisition cost and is recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is re-measured to fair value as of each reporting date until the contingency is resolved. Changes in fair value are recognized in earnings. All assets and liabilities of the acquired businesses, including goodwill, are assigned to reporting units. Acquisition-related costs are expensed as incurred under selling, general and administrative expenses.

119

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

2. Summary of significant accounting policies (Continued)

Goodwill represents the cost of acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased. Goodwill is not amortized but is tested for impairment at least on an annual basis on December 31, based on a number of factors, including operating results, business plans and future cash flows. The Company performs an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the assessment of events or circumstances, the Company performs a quantitative assessment of goodwill impairment if it determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, based on the quantitative impairment analysis, the carrying value of the goodwill of a reporting unit exceeds the fair value of such goodwill, an impairment loss is recognized in an amount equal to the excess. In addition, the Company performs a qualitative assessment of goodwill impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. See Note 10 for information and related disclosures.

Intangible assets acquired individually or with a group of other assets or in a business combination and developed internally are carried at cost less accumulated amortization and accumulated impairment loss based on their estimated useful lives as follows:


Customer-related intangible assets	1	-	9 years
Marketing-related intangible assets	1	-	8 years
Technology-related intangible assets	2	-	10 years

Intangible assets are amortized over their estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized.

In business combinations where the fair value of identifiable tangible and intangible net assets purchased exceeds the cost of the acquired business, the Company recognizes the resulting gain under “Other operating (income) expense, net” in the consolidated statements of income.

The Company also capitalizes certain software and technology-related development costs incurred in connection with developing or obtaining software or technology for sale/lease to customers when the initial design phase is completed and commercial and technological feasibility has been established. Any development cost incurred before technological feasibility is established is expensed as incurred as research and development costs. Technological feasibility is established upon completion of a detailed design program or, in its absence, completion of a working model. Capitalized software and technology costs include only (i) external direct costs of materials and services utilized in developing or obtaining software and technology and (ii) compensation and related benefits for employees who are directly associated with the project.

Costs incurred in connection with developing or obtaining software or technology for sale/lease to customers which are under development and not put to use are disclosed under “intangible assets under development.” Advances paid towards the acquisition of intangible assets outstanding as of each balance sheet date are disclosed under “intangible assets under development.”

Capitalized software and technology costs are included in intangible assets under technology-related intangible assets on the Company’s balance sheet and are amortized on a straight-line basis when placed into service over the estimated useful lives of the software and technology.

The Company evaluates the remaining useful life of intangible assets that are being amortized at each reporting period wherever events and circumstances warrant a revision to the remaining period of amortization, and the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life.

1210

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

2. Summary of significant accounting policies (Continued)

(d) Financial instruments and concentration of credit risk

Financial instruments that potentially subject the Company to concentration of credit risk are reflected principally in cash and cash equivalents, derivative financial instruments and accounts receivable. The Company places its cash and cash equivalents and derivative financial instruments with corporations and banks with high investment grade ratings, limits the amount of credit exposure with any one corporation or bank and conducts ongoing evaluations of the creditworthiness of the corporations and banks with which it does business. To reduce its credit risk on accounts receivable, the Company conducts ongoing credit evaluations of its customers.

(e) Accounts receivable

Accounts receivable are recorded at the invoiced or to be invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for current expected credit losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses which are adjusted to current market conditions and a reasonable and supportable forecast. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The Company uses revolving accounts receivable-based facilities in the normal course of business as part of managing its cash flows. The Company accounts for receivables sold under these facilities as a sale of financial assets pursuant to ASC 860 “Transfers and Servicing” and de-recognizes these receivables, as well as the related allowances, from its balance sheets. Generally, the fair value of accounts receivable sold approximates their book value due to their short-term nature, and any gains or losses on the sale of these receivables are recorded at the time of transfer and included under "interest income (expense), net" in the Company’s consolidated statements of income.

(f) Revenue Recognition

The Company derives its revenue primarily from business process management services, including analytics, consulting and related digital solutions and information technology services, which are provided primarily on a time-and-material, transaction or fixed-price basis. The Company recognizes revenue upon the transfer of control of promised services to its customers in an amount that reflects the consideration the Company expects to receive in exchange for those services. Revenues from services rendered under time-and-materials and transaction-based contracts are recognized as the services are provided. The Company’s fixed-price contracts include contracts for customization of applications, maintenance and support services. Revenues from these contracts are recognized ratably over the term of the agreement. The Company accrues for revenue and unbilled receivables for services rendered between the last billing date and the balance sheet date.

The Company’s contracts with its customers also include incentive payments received for discrete benefits delivered or promised to be delivered to the customer or service level agreements that could result in credits or refunds to the customer. Revenues relating to such arrangements are accounted for as variable consideration when the amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur.

The Company records deferred revenue attributable to certain process transition activities where such activities do not represent separate performance obligations. Revenues relating to such transition activities are classified under contract liabilities and subsequently recognized ratably over the period in which the related services are performed. Costs relating to such transition activities are fulfillment costs which are directly related to the contract and result in the generation or enhancement of resources. Such costs are expected to be recoverable under the contract and are therefore classified as contract cost assets and recognized ratably over the estimated expected period of benefit under cost of revenue.

1311

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

2. Summary of significant accounting policies (Continued)

Revenues are reported net of value-added tax, business tax and applicable discounts and allowances. Reimbursements of out-of-pocket expenses received from customers have been included as part of revenues.

Revenue for performance obligations that are satisfied over time is recognized in accordance with the methods prescribed for measuring progress. The input (cost expended) method has been used to measure progress towards completion as there is a direct relationship between input and the satisfaction of a performance obligation. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates.

The Company enters into multiple-element revenue arrangements in which a customer may purchase a combination of products or services. The Company determines whether each product or service promised to a customer is capable of being distinct, and is distinct in the context of the contract. If not, the promised products or services are combined and accounted for as a single performance obligation. In the event of a multiple-element revenue arrangement, the Company allocates the arrangement consideration to separately identifiable performance obligations based on their relative stand-alone selling prices.

Certain contracts may include offerings such as sale of licenses, which may be perpetual or subscription-based. Revenue from distinct perpetual licenses is recognized upfront at the point in time when the software is made available to the customer. Revenue from distinct, non-cancellable, subscription-based licenses is recognized at the point in time it is transferred to the customer. Revenue from any associated maintenance or ongoing support services is recognized ratably over the term of the contract. For a combined software license/services performance obligation, revenue is recognized over the period that the services are performed.

All incremental and direct costs incurred for acquiring contracts, such as certain sales commissions, are classified as contract cost assets. Such costs are amortized over the expected period of benefit and recorded under selling, general and administrative expenses.

Other upfront fees paid to customers are classified as contract assets. Such fees are amortized over the expected period of benefit and recorded as an adjustment to the transaction price and deducted from revenue.

Timing of revenue recognition may differ from the timing of invoicing. If a payment is received in respect of services prior to the delivery of services, the payment is recognized as an advance from the customer and classified as a contract liability. Contract assets and contract liabilities relating to the same customer contract are offset against each other and presented on a net basis in the consolidated financial statements.

Significant judgements

The Company often enters into contracts with its customers that include promises to transfer multiple products and services to the customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately rather than together may require significant judgement.

Judgement is also required to determine the standalone selling price for each distinct performance obligation. In instances where the standalone selling price is not directly observable, it is determined using information that may include market conditions and other observable inputs.

Customer contracts sometimes include incentive payments received for discrete benefits delivered to the customer or service level agreements that could result in credits or refunds to the customer. Such amounts are estimated at contract inception and are adjusted at the end of each reporting period as additional information becomes available only to the extent that it is probable that a significant reversal of any incremental revenue will not occur.

1412

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

2. Summary of significant accounting policies (Continued)

(g) Leases

At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on whether: (1) the contract involves the use of a distinct identified asset, (2) the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term of the contract, and (3) the Company has the right to direct the use of the asset. At the inception of a lease, the consideration in the contract is allocated to each lease component based on its relative standalone price to determine the lease payments.

Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: (1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful life of the asset or (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of the above criteria.

For all leases at the lease commencement date, a ROU asset and a lease liability are recognized. The lease liability represents the present value of the lease payments under the lease. Lease liabilities are initially measured at the present value of the lease payments not yet paid, discounted using the discount rate for the lease at the lease commencement. The lease liabilities are subsequently measured on an amortized cost basis. The lease liability is adjusted to reflect interest on the liability and the lease payments made during the period. Interest on the lease liability is determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability.

The ROU asset represents the right to use the leased asset for the lease term. The ROU asset for each lease initially includes the amount of the initial measurement of the lease liability adjusted for any lease payments made to the lessor at or before the commencement date, accrued lease liabilities and any lease incentives received or any initial direct costs incurred by the Company.

The ROU asset of finance leases is subsequently measured at cost, less accumulated amortization and any accumulated impairment losses. The ROU asset of operating leases is subsequently measured from the carrying amount of the lease liability at the end of each reporting period, and is equal to the carrying amount of lease liabilities adjusted for (1) unamortized initial direct costs, (2) prepaid/(accrued) lease payments and (3) the unamortized balance of lease incentives received.

The carrying value of ROU assets is reviewed for impairment, similar to long-lived assets, whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

The Company has elected to not separate lease and non-lease components for all of its leases and to use the recognition exemptions for lease contracts that, at commencement date, have a lease term of 12 months or less and do not contain a purchase option (“short-term leases”).

Significant judgements

The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. Under certain of its leases, the Company has a renewal and termination option to lease assets for additional terms between one and ten years. The Company applies judgement in evaluating whether it is reasonably certain to exercise the option to renew or terminate the lease. The Company considers all relevant factors that create an economic incentive for it to exercise the renewal or termination option. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within the Company’s control and affects its ability to exercise (or not to exercise) the option to renew or terminate.

1513

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

2. Summary of significant accounting policies (Continued)

The Company has applied an incremental borrowing rate for the purpose of computing lease liabilities based on the remaining lease term and the rates prevailing in the jurisdictions where leases were executed.

(h) Cost of revenue

Cost of revenue primarily consists of salaries and benefits (including stock-based compensation), recruitment, training and related costs of employees who are directly responsible for the performance of services for customers, their supervisors and certain support personnel who may be dedicated to a particular client or a set of processes. It also includes operational expenses, which consist of facilities maintenance expenses, travel and living expenses, rent, IT expenses, and consulting and certain other expenses. Consulting charges represent the cost of consultants and contract resources with specialized skills who are directly responsible for the performance of services for clients and travel and other billable costs related to the Company’s clients. It also includes depreciation of property, plant and equipment, and amortization of intangible and ROU assets which are directly related to providing services that generate revenue.

(i) Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses consist of expenses relating to salaries and benefits (including stock-based compensation) as well as costs related to recruitment, training and retention of senior management and other support personnel in enabling functions such as human resources, finance, legal, marketing, sales and sales support, and other support personnel. The operational costs component of SG&A expenses also includes travel and living costs for such personnel. SG&A expenses also include acquisition-related costs, legal and professional fees (which represent the costs of third party legal, tax, accounting and other advisors), investment in research and development, digital technology, advanced automation and robotics, and an allowance for credit losses. It also includes depreciation of property, plant and equipment, and amortization of intangibles and ROU assets other than those included in cost of revenue.

(j) Credit losses

An allowance for credit losses is recognized for all debt instruments other than those held at fair value through profit or loss. The Company pools its accounts receivable (other than deferred billings) based on similar risk characteristics in estimating expected credit losses. Credit losses for accounts receivable are based on the roll-rate method, and the Company recognizes a loss allowance based on lifetime expected credit losses at each reporting date. The Company has established a provision matrix based on historical credit loss experience, adjusted for forward-looking factors and the economic environment. The Company believes the most relevant forward-looking factors are economic environment, gross domestic product, inflation rates and unemployment rates for each of the countries in which the Company or its customers operate, and accordingly the Company adjusts historical loss rates based on expected changes in these factors. At every reporting date, observed historical default rates are updated to reflect changes in the Company’s forward-looking estimates.

Credit losses for other financial assets and deferred billings are based on the discounted cash flow (“DCF”) method. Under the DCF method, the allowance for credit losses reflects the difference between the contractual cash flows due in accordance with the contract and the present value of the cash flows expected to be collected. The expected cash flows are discounted at the effective interest rate of the financial asset. Such allowances are based on the credit losses expected to arise over the life of the asset which includes consideration of prepayments based on the Company’s expectation as of the balance sheet date.

A financial asset is written off when it is deemed uncollectible and there is no reasonable expectation of recovering the contractual cash flows. Expected recoveries of amounts previously written off, not to exceed the aggregate amounts previously written off, are included in determining the allowance at each reporting period.

Credit losses are presented as a credit loss expense within “Selling, general and administrative expenses.” Subsequent recoveries of amounts previously written off are credited against the same line item.

1614

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

2. Summary of significant accounting policies (Continued)

(k) ~~Reclassification~~

Certain reclassifications have been made in the consolidated financial statements of prior periods to conform to the classification used in the current period. The impact of such reclassifications on the consolidated financial statements is not material.

~~(l)~~ Impairment of long-lived assets

Long-lived assets, including certain intangible assets, to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Such assets are required to be tested for impairment if the carrying amount of the assets is higher than the future undiscounted net cash flows expected to be generated by the assets. The impairment amount to be recognized is measured as the amount by which the carrying value of the assets exceeds their fair value. The Company determines fair value by using a discounted cash flow approach.

~~(m)~~ (l) Assets held for sale

A long-lived asset (or a disposal group for a long-lived asset comprising a group of assets and related liabilities) is classified as held for sale if it is highly probable that the asset will be recovered through sale rather than continuing use.

The Company records assets held for sale at the lower of its carrying value or fair value less costs to sell. The following criteria are used to determine if a business is held for sale: (i) management, having the authority to approve a sale, commits to a plan to sell; (ii) the business is available for immediate sale in its present condition; (iii) an active program to locate a buyer and a plan to sell the business have been initiated; (iv) the sale of the business is probable within one year; (v) the business is being actively marketed for sale at a reasonable price relative to its fair value; and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made.

In determining the fair value of the assets less costs to sell, the Company considers factors including current sales prices for comparable assets, discounted cash flow projections, third party valuation and any indicative offers. The Company’s assumptions about fair value require significant judgment because the current market is highly sensitive to changes in economic conditions. The Company estimates the fair values of assets held for sale based on current market conditions and assumptions made by management, which may differ from actual results and may result in impairments if market conditions deteriorate.

Any impairment loss on the initial classification and subsequent measurement is recognized as an expense. Any subsequent increase in fair value less costs to sell (not exceeding the accumulated impairment loss that has been previously recognized) is recognized in the income statement.

When assets are classified as held for sale, the Company does not record any depreciation and amortization for the respective property, plant and equipment and intangibles.

(m) Reclassification

(n) Recently issued accounting pronouncements

The authoritative bodies release standards and guidance which are assessed by management for impact on the Company’s consolidated financial statements.

The following recently released accounting standard has not yet been adopted by the Company:

In ~~November 2021,~~March 2023, the FASB issued ASU No. ~~2021-10, “Government Assistance.~~2023-01, “Leases (Topic 842)”. This ASU ~~improves financial reporting by requiring disclosures~~requires a lessee in a common-control lease arrangement to amortize leasehold improvements that ~~increase~~it owns over the ~~transparency~~improvements’ useful life to the common control group, regardless of ~~transactions with governments. The ASU is effective for~~ the ~~Company for annual periods, beginning December 15, 2021. Early adoption is permitted. The Company is in~~lease term, if the ~~process~~lessee continues to control the use of ~~assessing~~ the ~~impact of this ASU on its consolidated results of operations, cash flows, financial position and disclosures.~~underlying asset through a lease.

1715

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

2. Summary of significant accounting policies (Continued)

The ASU is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated results of operations, cash flows, financial position and disclosures.

3. Business acquisitions

(a) Hoodoo Digital, LLC

On December 31, 2021, the Company acquired 100% of the outstanding equity/limited liability company interests in Hoodoo Digital, LLC, a Utah limited liability company, for total purchase consideration of ~~$66,722.~~$66,721. This amount represents cash ~~consideration~~consideration of $64,439, net of cash acquired of $2,283. The total purchase consideration paid by the Company to the sellers on the closing date was $67,695, resulting in a recoverable of $973 on the closing date, which was subsequently recovered. The Company ~~has~~ made measurement period adjustments of $1,688 related to taxes during the year ended December 31, 2022. The Company paid $682 to the sellers in the first quarter of 2023, and ~~this amount was~~no portion of the purchase consideration is outstanding as of ~~September 30, 2022. The Company is evaluating adjustments related to certain income and othe~~r taxes, which, when determined, may result in the recognition of additional assets or liabilities as of the acquisition date. The measurement period will not exceed one year from the acquisition date.March 31, 2023. This acquisition ~~furthers~~furthered the ~~Company's~~Company’s strategy to fuse experience and process innovation to help clients drive end-to-end digital transformation. Hoodoo Digital’s expertise with Adobe Experience Manager and other Adobe applications ~~expands~~expanded the ~~Company's~~Company’s existing capabilities to provide clients with an end-to-end solution that integrates digital content, e-commerce, data analytics, and marketing operations.

In connection with this acquisition, the Company recorded $16,200 in customer-related intangibles and $2,400 in marketing-related intangibles which have a weighted average amortization period of five years. Goodwill arising from the acquisition amounting to $46,033 has been allocated using a relative fair value allocation method to each of the Company’s reporting segments as follows: to the Financial Services segment in the amount of $4,338, to the Consumer and Healthcare segment in the amount of $7,321 and to the High Tech and Manufacturing segment in the amount of $34,374.

Goodwill arising from this acquisition is deductible for income tax purposes. The goodwill represents primarily the acquired capabilities and other benefits expected to result from combining the acquired operations with the Company’s existing operations.

Acquisition-related costs of $1,177 have been included in selling, general and administrative expenses as incurred. In connection with the acquisition, the Company also acquired certain assets with a value of $5,629 and assumed certain liabilities amounting to $1,852. The agreement with the sellers provides a full indemnity to the Company for all pre-closing income and non-income tax liabilities up to a maximum of the purchase consideration, including interest and penalties thereon. The Company would not be financially or materially affected by any liabilities that may arise from such exposures.

Accordingly, the Company recognized an indemnification asset of $278 based on the information that was available at the date of the acquisition, which is included in the assets taken over by the Company. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.

~~(b) Enquero Inc~~

On December 31, 2020, the Company acquired 100% of the outstanding equity interests in Enquero Inc, a California corporation, and certain affiliated entities in India, the Netherlands and Canada (collectively referred to as “Enquero”) for total purchase consideration of $148,797. This amount represents cash consideration of $137,166, net of cash acquired of $11,631. The total purchase consideration paid by the Company to the sellers on the closing date was $141,938. No portion of the purchase consideration is outstanding as of September 30, 2022. This acquisition increased the scale and depth of the Company’s data and analytics capabilities and enhanced the Company’s ability to accelerate the digital transformation journeys of its clients through cloud technologies and advanced data analytics.

~~GENPACT LIMITED AND ITS SUBSIDIARIES~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~

~~(In thousands, except per share data and share count)~~

~~3. Business acquisitions (Continued)~~

In connection with this acquisition, the Company recorded $49,000 in customer-related intangibles, $9,500 in marketing-related intangibles and $1,400 in technology-related intangibles, which have a weighted average amortization period of four years. Goodwill arising from the acquisition amounting to $87,874 has been allocated using a relative fair value allocation method to each of the Company’s reporting segments as follows: to the Financial Services segment in the amount of $2,594, to the Consumer and Healthcare segment in the amount of $22,548 and to the High Tech and Manufacturing segment in the amount of $62,732. The goodwill arising from this acquisition is not deductible for income tax purposes. The goodwill represents primarily the acquired capabilities and other benefits expected to result from combining the acquired operations with the Company’s existing operations.

Acquisition-related costs of $1,590 have been included in selling, general and administrative expenses as incurred. In connection with the transaction, the Company also acquired certain assets with a value of $32,879, assumed certain liabilities amounting to $17,232 and recognized a net deferred tax liability of $14,343. The agreement with the sellers provides a full indemnity to the Company for all pre-closing income and non-income tax liabilities up to a maximum of the purchase consideration, including interest and penalties thereon. The Company would not be financially or materially affected by any liabilities that may arise from such exposures.

Accordingly, the Company recognized an indemnification asset of $5,968 based on the information that was available at the date of the acquisition, which is included in the assets taken over by the Company. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.

~~(c) SomethingDigital.Com LLC~~

On October 5, 2020, the Company acquired 100% of the outstanding equity/limited liability company interests in SomethingDigital.Com LLC, a New York limited liability company, for total purchase consideration of $57,451. This amount represents cash consideration of $56,073, net of cash acquired of $1,378. The total purchase consideration paid by the Company to the sellers on the closing date was $57,704, resulting in a recoverable of $253. No portion of the purchase consideration is outstanding as of September 30, 2022.

This acquisition supported the Company’s strategy to integrate experience and process innovation to help clients on their digital transformation journeys and expanded on the Company’s existing experience capabilities to support end-to-end digital commerce solutions, both business-to-business and business-to-consumer. Additionally, this acquisition expanded the Company’s capabilities into Magento Commerce, which powers Adobe Commerce Cloud, and Shopify Plus, a cloud-based e-commerce platform for high volume merchants.

~~In connection with this acquisitio~~n, the Company recorded $11,900 in customer-related intangibles and $3,500 in marketing-related intangibles which have a weighted average amortization period of four years. Goodwill arising from the acquisition amounting to $36,926 has been allocated using a relative fair value allocation method to two of the Company’s reporting segments as follows: to the Consumer and Healthcare segment in the amount of $30,373 and to the High Tech and Manufacturing segment in the amount of $6,553. Of the total goodwill arising from this acquisition, $35,084 is deductible for income tax purposes.

~~The goodwill represents primarily the acquired capabilities and other benefits expected to result from combining the acquired operations with those of the Company’s existing operations.~~

Acquisition-related costs of $1,060 have been included in selling, general and administrative expenses as incurred. In connection with the transaction, the Company also acquired certain assets with a value of $9,538, assumed certain liabilities amounting to $4,494 and recognized a net deferred tax asset of $81. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.

~~GENPACT LIMITED AND ITS SUBSIDIARIES~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~

~~(In thousands, except per share data and share count)~~

~~3. Business acquisitions (Continued)~~

~~(d) Rightpoint Consulting, LLC~~

On November 12, 2019, the Company acquired 100% of the outstanding equity/limited liability company interests in Rightpoint Consulting, LLC, an Illinois limited liability company, and certain affiliated entities in the United States and India (collectively referred to as “Rightpoint”) for total purchase consideration of $270,669. This amount includes cash consideration of $268,170, net of cash acquired of $2,499. The total purchase consideration paid by the Company to the sellers on the closing date was $248,470, resulting in a payable of $22,199. $2,517 of the total purchase consideration remains payable as of September 30, 2022. This acquisition expanded the Company’s capabilities in improving customer experience.

The securities purchase agreement between the Company and the selling equity holders of Rightpoint provided certain of the selling equity holders the option to elect to either (a) receive 100% consideration in cash at the closing date for their limited liability company interests and vested options or (b) “roll over” and retain 25% of their Rightpoint limited liability company interests and vested options for a three-year rollover period and receive cash consideration at closing for the remaining 75% of their Rightpoint limited liability company interests and vested options. Certain selling equity holders elected to receive deferred, variable earn-out consideration with an estimated value of $21,500 over the rollover period of three years.

The amount of deferred earn-out consideration ultimately payable by the Company to the selling equity holders of Rightpoint will be based on the future revenue multiple of the acquired business. Additionally, under the purchase agreement the selling equity holders are obligated to sell their rollover interests to the Company. Accordingly, the Company has obtained control over 100% of the outstanding equity/limited liability company interests of Rightpoint as of ~~November 12, 2019. See Note 5, “Fair value measurements,” for additional details.~~

In connection with this acquisition, the Company recorded $46,000 in customer-related intangibles and $29,000 in marketing-related intangibles which have a weighted average amortization period of five years. Goodwill arising from the acquisition amounting to $177,181 has been allocated using a relative fair value allocation method to each of the Company’s reporting segments as follows: to the Financial Services segment in the amount of $16,983, to the Consumer and Healthcare segment in the amount of $42,993 and to the High Tech and Manufacturing segment in the amount of $117,205. Of the total goodwill arising from this acquisition, $91,929 is deductible for income tax purposes. The goodwill represents primarily the acquired capabilities and other benefits expected to result from combining the acquired operations with those of the Company.

Acquisition-related costs of $7,385 have been included in selling, general and administrative expenses as incurred. In connection with the transaction, the Company also acquired certain assets with a value of $39,140, assumed certain liabilities amounting to $22,295 and recognized a net deferred tax liability of $1,643. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.

4. Accounts receivable, net of allowance for credit losses

The following table provides details of the Company’s allowance for credit losses on accounts receivable:


		Year ended December 31, 2021		Nine months ended September 30, 2022			Year ended December 31, 2022		Three months ended March 31, 2023
Opening balance as of January 1	Opening balance as of January 1	$	27,707	$	24,329	Opening balance as of January 1	$	24,329	$	20,442
Additions charged/reversal released to cost and expense		910		1,558
Additions (net), charged to income statement						Additions (net), charged to income statement	2,096		3,324
Deductions/effect of exchange rate fluctuations	Deductions/effect of exchange rate fluctuations	(4,288)		(5,450)		Deductions/effect of exchange rate fluctuations	(5,983)		(563)
Closing balance	Closing balance	$	24,329	$	20,437	Closing balance	$	20,442	$	23,203

2016

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

4. Accounts receivable, net of allowance for credit losses ~~(Continued)~~(continued)

Accounts receivable were ~~$912,071~~$1,015,197 and ~~$1,014,687,~~$1,028,597, and allowances for credit losses were ~~$24,329~~$20,442 and ~~$20,437,~~$23,203, resulting in net accounts receivable balances of ~~$887,742~~$994,755 and ~~$994,250~~$1,005,394 as of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, respectively. As of ~~September 30,~~December 31, 2022 and March 31, 2023, the Company reclassified accounts receivable amounting to ~~$4,653~~$2,341 and $0, respectively, as assets held for sale. See Note 8 for additional information.

In addition, deferred billings were ~~$48,071~~$64,735 and ~~$59,103~~$72,299 and allowances for credit losses on deferred billings were ~~$3,711~~$3,198 and $3,198, resulting in net deferred billings balances of ~~$44,360~~$61,537 and ~~$55,905~~$69,101 as of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, respectively.

During the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022,~~2023, the Company recorded a release of ~~$541~~$439 and ~~$513,~~$0, respectively, to ~~cost and expense~~the income statement on account of credit losses on deferred billings. Deferred billings, net of related allowances for credit losses, are included under “other assets” in the ~~Company's~~Company’s consolidated balance sheet as of December 31, ~~2021~~2022 and ~~September 30, 2022.~~March 31, 2023.

The Company has a revolving accounts receivable-based facility of $100,000 permitting it to sell accounts receivable to banks on a non-recourse basis in the ordinary course of business. The aggregate maximum capacity utilized by the Company at any time during the period ended December 31, ~~2021~~2022 and ~~September 30, 2022~~March 31, 2023 was ~~$7,053~~$33,030 and ~~$67,439,~~$42,906, respectively. The principal amount outstanding against this facility as of December 31, ~~2021~~2022 and ~~September 30, 2022~~March 31, 2023 was $0$33,030 and ~~$27,302,~~$42,906, respectively. The cost of factoring such accounts receivable during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2022~~2023 was ~~$29~~$35 and ~~$146, respectively, and $40 and $304,~~$461, respectively. Gains or losses on the sales are recorded at the time of transfer of the accounts receivable and are included under "interest income (expense), net" in the ~~Company's~~Company’s consolidated statements of income.

5. Fair value measurements

The Company measures certain financial assets and liabilities, including derivative instruments, at fair value on a recurring basis. The fair value measurements of these financial assets and liabilities were determined using the following inputs as of December 31, ~~2021~~2022 and ~~September 30, 2022:~~March 31, 2023:


		As of December 31, 2021									As of December 31, 2022
		Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
		Total		(Level 1)		(Level 2)		(Level 3)			Total		(Level 1)		(Level 2)		(Level 3)
Assets	Assets									Assets
Derivative instruments (Note a, c)	Derivative instruments (Note a, c)	$	34,070	$	—	$	34,070	$	—	Derivative instruments (Note a, c)	$	21,687	$	—	$	21,687	$	—
Deferred compensation plan assets (Note a, e)	Deferred compensation plan assets (Note a, e)	38,584		—		—		38,584		Deferred compensation plan assets (Note a, e)	40,261		—		—		40,261
Total	Total	$	72,654	$	—	$	34,070	$	38,584	Total	$	61,948	$	—	$	21,687	$	40,261
Liabilities	Liabilities									Liabilities
Earn-out consideration (Note b, d)	Earn-out consideration (Note b, d)	$	5,406	$	—	$	—	$	5,406	Earn-out consideration (Note b, d)	$	2,517	$	—	$	—	$	2,517
Derivative instruments (Note b, c)	Derivative instruments (Note b, c)	15,254		—		15,254		—		Derivative instruments (Note b, c)	38,817		—		38,817		—
Deferred compensation plan liability (Note b, f)	Deferred compensation plan liability (Note b, f)	38,007		—		—		38,007		Deferred compensation plan liability (Note b, f)	39,654		—		—		39,654
Total	Total	$	58,667	$	—	$	15,254	$	43,413	Total	$	80,988	$	—	$	38,817	$	42,171

2117

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

5. Fair value measurements (Continued)


		As of September 30, 2022									As of March 31, 2023
		Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
		Total		(Level 1)		(Level 2)		(Level 3)			Total		(Level 1)		(Level 2)		(Level 3)
Assets	Assets									Assets
Derivative instruments (Note a, c)	Derivative instruments (Note a, c)	$	35,625	$	—	$	35,625	$	—	Derivative instruments (Note a, c)	$	31,576	$	—	$	31,576	$	—
Deferred compensation plan assets (Note a, e)	Deferred compensation plan assets (Note a, e)	37,183		—		—		37,183		Deferred compensation plan assets (Note a, e)	44,745		—		—		44,745
Total	Total	$	72,808	$	—	$	35,625	$	37,183	Total	$	76,321	$	—	$	31,576	$	44,745
Liabilities	Liabilities									Liabilities
Earn-out consideration (Note b, d)	Earn-out consideration (Note b, d)	$	2,517	$	—	$	—	$	2,517	Earn-out consideration (Note b, d)	$	—	$	—	$	—	$	—
Derivative instruments (Note b, c)	Derivative instruments (Note b, c)	59,199		—		59,199		—		Derivative instruments (Note b, c)	15,323		—		15,323		—
Deferred compensation plan liability (Note b, f)	Deferred compensation plan liability (Note b, f)	36,583		—		—		36,583		Deferred compensation plan liability (Note b, f)	44,095		—		—		44,095
Total	Total	$	98,299	$	—	$	59,199	$	39,100	Total	$	59,418	$	—	$	15,323	$	44,095

(a)Derivative assets are included in “prepaid expenses and other current assets” and “other assets.” Deferred compensation plan assets are included in “other assets” in the consolidated balance sheets.

(b)Included in “accrued expenses and other current liabilities” and “other liabilities” in the consolidated balance sheets.

(c)The Company values its derivative instruments based on market observable inputs, including both forward and spot prices for the relevant currencies and interest rate indices for relevant interest rates. The quotes are taken from an independent market database.

(d)The fair value of earn-out consideration, calculated as the present value of expected future payments to be made to the sellers of acquired businesses, was derived by estimating the future financial performance of the acquired businesses using the earn-out formula and performance targets specified in each purchase agreement and adjusting the result to reflect the Company’s estimate of the likelihood of achievement of such targets. Given the significance of the unobservable inputs, the valuations are classified in level 3 of the fair value hierarchy.

(e)Deferred compensation plan assets consist of life insurance policies held under a Rabbi Trust. Assets held in the Rabbi Trust are valued based on the cash surrender value of the insurance contract, which is determined based on the fair value of the underlying assets included in the insurance portfolio and are therefore classified within level 3 of the fair value hierarchy.

(f)The fair value of the deferred compensation plan liability is derived based on the fair value of the underlying assets in the insurance policies and is therefore classified within level 3 of the fair value hierarchy.

2218

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

5. Fair value measurements (Continued)

The following table provides a roll-forward of the fair value of earn-out consideration categorized as level 3 in the fair value hierarchy for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2022:~~2023:

Three months ended September 30, Nine months ended September 30,
2021 2022 2021 2022
Opening balance $ 5,716 $ 5,406 $ 8,272 $ 5,406
Payments made on earn-out consideration (Note a) — (2,437) (2,556) (2,437)
Change in fair value of earn-out consideration (Note b) $ — $ (452) $ — $ (452)
Others (Note c) 440 $ — 440 $ —
Closing balance $ 6,156 $ 2,517 $ 6,156 $ 2,517


	Three months ended March 31,
	2022		2023
Opening balance	$	5,406	$	2,517
Payments made on earn-out consideration	—		(2,399)
Change in fair value of earn-out consideration (Note a)	$	—	$	(118)
Closing balance	$	5,406	$	—

(a)Includes an interest payment on earn-out consideration in excess of the acquisition date fair value, which is included in “cash flows from operating activities,” amounting to $440 for the three and nine months ended September 30, 2021 and $0 for the three and nine months ended September 30, 2022.

~~(b)~~Changes in the fair value of earn-out consideration are reported in “other operating (income) expense, net” in the consolidated statements of income.

~~(c)~~“Others” is comprised of interest expense included in “interest income (expense), net” and the impact of changes in foreign exchange reported in “foreign exchange gains (losses), net” in the consolidated statements of income. This also includes a cumulative translation adjustment reported as a component of “other comprehensive income (loss).”

The following table provides a roll-forward of the fair value of deferred compensation plan assets categorized as level 3 in the fair value hierarchy for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2022:~~2023:


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2021		2022		2021		2022			2022		2023
Opening balance	Opening balance	$	35,533	$	38,422	$	26,832	$	38,584	Opening balance	$	38,584	$	40,261
Additions (net of redemption)	Additions (net of redemption)	857		725		6,816		8,610		Additions (net of redemption)	7,088		2,098
Change in fair value of deferred compensation plan assets (Note a)	Change in fair value of deferred compensation plan assets (Note a)	(84)		(1,964)		2,658		(10,011)		Change in fair value of deferred compensation plan assets (Note a)	(2,352)		2,386
Closing balance	Closing balance	$	36,306	$	37,183	$	36,306	$	37,183	Closing balance	$	43,320	$	44,745

(a)Changes in the fair value of plan assets are reported in “other income (expense), net” in the consolidated statements of income.

The following table provides a roll-forward of the fair value of deferred compensation liabilities categorized as level 3 in the fair value hierarchy for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2022:~~2023:

Three months ended September 30, Nine months ended September 30,
2021 2022 2021 2022
Opening balance $ 35,034 $ 37,833 $ 26,390 $ 38,007
Additions (net of redemption) 840 727 6,799 8,611
Change in fair value of deferred compensation plan liabilities (Note a) (159) (1,977) 2,526 (10,035)
Closing balance $ 35,715 $ 36,583 $ 35,715 $ 36,583

~~GENPACT LIMITED AND ITS SUBSIDIARIES~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~

~~(In thousands, except per share data and share count)~~

~~5. Fair value measurements (Continued)~~


	Three months ended March 31,
	2022		2023
Opening balance	$	38,007	$	39,654
Additions (net of redemption)	6,913		2,098
Change in fair value of deferred compensation plan liabilities (Note a)	(2,366)		2,343
Closing balance	$	42,554	$	44,095

(a)Changes in the fair value of deferred compensation plan liabilities are reported in “selling, general and administrative expenses” in the consolidated statements of income.

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

6. Derivative financial instruments

The Company is exposed to the risk of rate fluctuations on its foreign currency assets and liabilities and on foreign currency denominated forecasted cash flows and interest rates. The Company has established risk management policies, including the use of derivative financial instruments to hedge foreign currency assets and liabilities, foreign currency denominated forecasted cash flows and interest rate risk. These derivative financial instruments consist of deliverable and non-deliverable forward foreign exchange contracts, treasury rate locks and interest rate swaps. The Company enters into these contracts with counterparties that are banks or other financial institutions, and the Company considers the risk of non-performance by such counterparties not to be material. The forward foreign exchange contracts and interest rate swaps mature during a period of up to 5145 months and the forecasted transactions are expected to occur during the same period.

The following table presents the aggregate notional principal amounts of outstanding derivative financial instruments together with the related balance sheet exposure:


		Notional principal amounts (Note a)				Balance sheet exposure asset (liability) (Note b)					Notional principal amounts (Note a)				Balance sheet exposure asset (liability) (Note b)
		As of December 31, 2021		As of September 30, 2022		As of December 31, 2021		As of September 30, 2022			As of December 31, 2022		As of March 31, 2023		As of December 31, 2022		As of March 31, 2023
Foreign exchange forward contracts denominated in:	Foreign exchange forward contracts denominated in:									Foreign exchange forward contracts denominated in:
United States Dollars (sell) Indian Rupees (buy)	United States Dollars (sell) Indian Rupees (buy)	$	1,348,600	$	1,617,900	$	26,247	$	(42,942)	United States Dollars (sell) Indian Rupees (buy)	$	1,587,500	$	1,489,500	$	(25,581)	$	(1,524)
United States Dollars (sell) Mexican Peso (buy)	United States Dollars (sell) Mexican Peso (buy)	23,750		31,000		140		484		United States Dollars (sell) Mexican Peso (buy)	24,000		29,250		1,079		3,194
United States Dollars (sell) Philippines Peso (buy)	United States Dollars (sell) Philippines Peso (buy)	75,600		78,600		(2,215)		(6,548)		United States Dollars (sell) Philippines Peso (buy)	79,200		78,900		(828)		1,220
Euro (sell) United States Dollars (buy)	Euro (sell) United States Dollars (buy)	120,994		104,785		2,634		12,786		Euro (sell) United States Dollars (buy)	182,163		173,384		480		(1,793)
Singapore Dollars (buy) United States Dollars (sell)	Singapore Dollars (buy) United States Dollars (sell)	3,655		48,736		65		(1,140)		Singapore Dollars (buy) United States Dollars (sell)	50,956		50,956		166		763
Euro (sell) Romanian Leu (buy)	Euro (sell) Romanian Leu (buy)	47,506		42,726		(233)		380		Euro (sell) Romanian Leu (buy)	51,115		39,254		848		1,312
Japanese Yen (sell) Chinese Renminbi (buy)	Japanese Yen (sell) Chinese Renminbi (buy)	10,440		3,124		202		394		Japanese Yen (sell) Chinese Renminbi (buy)	8,185		27,385		(327)		248
United States Dollars (sell) Chinese Renminbi (buy)	United States Dollars (sell) Chinese Renminbi (buy)	45,000		11,250		120		(872)		United States Dollars (sell) Chinese Renminbi (buy)	41,000		31,500		605		473
Pound Sterling (sell) United States Dollars (buy)	Pound Sterling (sell) United States Dollars (buy)	49,031		29,917		545		4,291		Pound Sterling (sell) United States Dollars (buy)	32,594		26,342		1,113		581
United States Dollars (sell) Hungarian Font (buy)	United States Dollars (sell) Hungarian Font (buy)	39,000		22,500		(2,174)		(3,238)		United States Dollars (sell) Hungarian Font (buy)	12,000		15,000		828		1,980
Hungarian Font (Sell) Euro (buy)		2,828		—		(17)		—
Australian Dollars (sell) Indian Rupees (buy)	Australian Dollars (sell) Indian Rupees (buy)	97,053		74,719		1,234		4,699		Australian Dollars (sell) Indian Rupees (buy)	87,513		85,495		(452)		2,458
USD (Sell) Polish Zloty (buy)		—		24,000		—		(2,515)
Japanese Yen (sell) US Dollar (buy)		—		10,000		—		808
Israel Shekel (sell) US Dollar (buy)		—		3,000		—		107
South African Rand (sell) US Dollar (buy)		—		15,000		—		764
United States Dollars (Sell) Polish Zloty (buy)										United States Dollars (Sell) Polish Zloty (buy)	24,000		21,000		1,372		1,416
Japanese Yen (sell) United States Dollars (buy)										Japanese Yen (sell) United States Dollars (buy)	10,000		10,000		(1,134)		(202)
Israeli Shekel (sell) United States Dollars (buy)										Israeli Shekel (sell) United States Dollars (buy)	3,000		3,000		3		164
South African Rand (sell) United States Dollars (buy)										South African Rand (sell) United States Dollars (buy)	21,000		21,000		(1,652)		1,177
United States Dollars (Sell) Brazilian Real (buy)										United States Dollars (Sell) Brazilian Real (buy)	—		4,000		—		38
United States Dollars (Sell) Costa Rica Colon (buy)										United States Dollars (Sell) Costa Rica Colon (buy)	—		4,000		—		69
Interest rate swaps (floating to fixed)	Interest rate swaps (floating to fixed)	460,135		439,220		(7,732)		8,968		Interest rate swaps (floating to fixed)	432,248		425,276		6,350		4,679
						$	18,816	$	(23,574)						$	(17,130)	$	16,253

(a)Notional amounts are key elements of derivative financial instrument agreements but do not represent the amount exchanged by counterparties and do not measure the Company’s exposure to credit, foreign exchange, interest rate or market risks. However, the amounts exchanged are based on the notional amounts and other provisions of the underlying derivative financial instrument agreements. Notional amounts are denominated in U.S. dollars.

(b)Balance sheet exposure is denominated in U.S. dollars and denotes the mark-to-market impact of the derivative financial instruments on the reporting date.

2420

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

6. Derivative financial instruments (Continued)

FASB guidance on derivatives and hedging requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. In accordance with the FASB guidance on derivatives and hedging, the Company designates foreign exchange forward contracts, interest rate swaps and treasury rate locks as cash flow hedges. Foreign exchange forward contracts are entered into to cover the effects of future exchange rate variability on forecasted revenues and purchases of services, and interest rate swaps and treasury rate locks are entered into to cover interest rate fluctuation risk. In addition to this program, the Company uses derivative instruments that are not accounted for as hedges under the FASB guidance in order to hedge foreign exchange risks related to balance sheet items, such as receivables and intercompany borrowings, that are denominated in currencies other than the Company’s underlying functional currency.

The fair value of the Company’s derivative instruments and their location in the Company’s financial statements are summarized in the table below:


		Cash flow hedges				Non-designated					Cash flow hedges				Non-designated
		As of December 31, 2021		As of September 30, 2022		As of December 31, 2021		As of September 30, 2022			As of December 31, 2022		As of March 31, 2023		As of December 31, 2022		As of March 31, 2023
Assets	Assets									Assets
Prepaid expenses and other current assets	Prepaid expenses and other current assets	$	16,064	$	27,363	$	3,130	$	2,727	Prepaid expenses and other current assets	$	17,531	$	20,041	$	2,151	$	8,476
Other assets	Other assets	$	14,876	$	5,524	$	—	$	11	Other assets	$	2,005	$	3,059	$	—	$	—

Liabilities	Liabilities									Liabilities
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	11,408	$	32,150	$	1,090	$	16,971	Accrued expenses and other current liabilities	$	23,662	$	12,157	$	11,495	$	1,110
Other liabilities	Other liabilities	$	2,756	$	10,078	$	—	$	—	Other liabilities	$	3,660	$	2,056	$	—	$	—

Cash flow hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain (loss) on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction is recognized in the consolidated statements of income. Gains (losses) on the derivatives, representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, are recognized in earnings as incurred.

The Company executed a treasury rate lock agreement for $350,000 in connection with future interest payments to be made on its senior notes issued by Genpact Luxembourg S.à r.l. (“Genpact Luxembourg”) and Genpact USA, Inc. (“Genpact USA”), both wholly-owned subsidiaries of the Company, in March 2021 (the “2021 Senior Notes”), and the treasury rate lock was designated as a cash flow hedge. The treasury rate lock agreement was terminated on March 23, 2021 and a deferred gain was recorded in accumulated other comprehensive income and is being amortized to interest expense over the life of the 2021 Senior Notes. The remaining gain to be amortized related to the treasury rate lock agreement as of ~~September 30, 2022~~March 31, 2023 was ~~$571.~~$490.

2521

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

6. Derivative financial instruments (Continued)

In connection with cash flow hedges, the gains (losses) recorded as a component of other comprehensive income (loss) (“OCI”), and the related tax effects are summarized below:

Three months ended September 30,
2021 2022
Before
tax
Amount Tax
(Expense)
or Benefit Net of
tax
Amount Before
tax
Amount Tax
(Expense)
or Benefit Net of
tax
Amount
Opening balance $ (7,883) $ 1,355 $ (6,528) $ 8,284 $ (3,078) $ 5,206
Net gains (losses) reclassified into statement of
income on completion of hedged transactions 2,443 (526) 1,917 (2,274) (153) (2,427)
Changes in fair value of effective portion of
outstanding derivatives, net 11,984 (2,278) 9,706 (19,328) 2,703 (16,625)
Gain (loss) on cash flow hedging derivatives, net 9,541 (1,752) 7,789 (17,054) 2,856 (14,198)
Closing balance $ 1,658 $ (397) $ 1,261 $ (8,770) $ (222) $ (8,992)


		Nine months ended September 30,													Three months ended March 31,
		2021						2022							2022						2023
		Before tax Amount		Tax (Expense) or Benefit		Net of tax Amount		Before tax Amount		Tax (Expense) or Benefit		Net of tax Amount			Before tax Amount		Tax (Expense) or Benefit		Net of tax Amount		Before tax Amount		Tax (Expense) or Benefit		Net of tax Amount
Opening balance	Opening balance	$	(10,921)	$	1,861	$	(9,060)	$	17,468	$	(3,404)	$	14,064	Opening balance	$	17,468	$	(3,404)	$	14,064	$	(7,255)	$	1,543	$	(5,712)
Net gains (losses) reclassified into statement of income on completion of hedged transactions	Net gains (losses) reclassified into statement of income on completion of hedged transactions	6,361		(1,463)		4,898		(2,551)		(423)		(2,974)		Net gains (losses) reclassified into statement of income on completion of hedged transactions	648		(151)		497		2,191		(538)		1,653
Changes in fair value of effective portion of outstanding derivatives, net	Changes in fair value of effective portion of outstanding derivatives, net	18,940		(3,721)		15,219		(28,789)		2,759		(26,030)		Changes in fair value of effective portion of outstanding derivatives, net	4,239		(869)		3,370		18,824		(4,079)		14,744
Gain (loss) on cash flow hedging derivatives, net	Gain (loss) on cash flow hedging derivatives, net	12,579		(2,258)		10,321		(26,238)		3,182		(23,056)		Gain (loss) on cash flow hedging derivatives, net	3,591		(718)		2,873		16,633		(3,541)		13,091
Closing balance	Closing balance	$	1,658	$	(397)	$	1,261	$	(8,770)	$	(222)	$	(8,992)	Closing balance	$	21,059	$	(4,122)	$	16,937	$	9,378	$	(1,998)	$	7,379

The gains or losses recognized in other comprehensive income (loss) and their effects on financial performance are summarized below:


Derivatives in Cash Flow Hedging Relationships	Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) recognized in OCI on Derivatives (Effective Portion)								Location of Gain (Loss) reclassified from OCI into Statement of Income (Effective Portion)	Amount of Gain (Loss) reclassified from OCI into Statement of Income (Effective Portion)								Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) recognized in OCI on Derivatives (Effective Portion)				Location of Gain (Loss) reclassified from OCI into Statement of Income (Effective Portion)	Amount of Gain (Loss) reclassified from OCI into Statement of Income (Effective Portion)
		Three months ended September 30,				Nine months ended September 30,					Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,					Three months ended March 31,
		2021		2022		2021		2022			2021		2022		2021		2022			2022		2023			2022		2023
Forward foreign exchange contracts	Forward foreign exchange contracts	$	12,175	$	(22,264)	$	17,457	$	(42,948)	Revenue	$	416	$	1,089	$	515	$	2,269	Forward foreign exchange contracts	$	(2,592)	$	17,375	Revenue	$	296	$	635
Interest rate swaps	Interest rate swaps	$	(191)	$	2,936	$	667	$	14,159	Cost of revenue	3,160		(3,334)		9,288		(2,284)		Interest rate swaps	$	6,831	$	1,449	Cost of revenue	1,654		(1,413)
Treasury rate lock		$	—	$	—	$	816	$	—	Selling, general and administrative expenses	849		(566)		2,513		(116)
										Interest expense	(1,982)		537		(5,955)		(2,420)							Selling, general and administrative expenses	551		(191)
		$	11,984	$	(19,328)	$	18,940	$	(28,789)		$	2,443	$	(2,274)	$	6,361	$	(2,551)						Interest expense	(1,853)		3,160
																				$	4,239	$	18,824		$	648	$	2,191

There were no gains (losses) recognized in the statement of income on the ineffective portion of derivatives and excluded from effectiveness testingfor the three months ended March 31, 2022 and 2023, respectively.

Non-designated Hedges


		Amount of Gain (Loss) recognized in Statement of Income on Derivatives
		Three months ended March 31,
Derivatives not designated as hedging instruments	Location of Gain (Loss) recognized in Statement of Income on Derivatives	2022		2023
Forward foreign exchange contracts (Note a)	Foreign exchange gains (losses), net	$	(3,522)	$	7,851
		$	(3,522)	$	7,851

2622

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

6. Derivative financial instruments (Continued)

~~There were no gains (losses) recognized in the statement of income on the ineffective portion of derivatives and excluded from effectiveness testingfor the three and nine months ended September 30, 2021 and 2022, respectively.~~

~~Non-designated Hedges~~

Amount of Gain (Loss) recognized in Statement of Income on Derivatives
Three months ended September 30, Nine months ended September 30,
Derivatives not designated as hedging instruments Location of Gain (Loss) recognized in Statement of Income on Derivatives 2021 2022 2021 2022
Forward foreign exchange contracts (Note a) Foreign exchange gains (losses), net $ 3,938 $ (12,705) $ 8,775 $ (29,649)
$ 3,938 $ (12,705) $ 8,775 $ (29,649)

(a)These forward foreign exchange contracts were entered into to hedge fluctuations in foreign exchange rates for recognized balance sheet items such as receivables and intercompany borrowings, and were not originally designated as hedges under FASB guidance on derivatives and hedging. Realized gains (losses) and changes in the fair value of these derivatives are recorded in foreign exchange gains (losses), net in the consolidated statements of income.

In connection with the COVID-19 pandemic, the Company has reevaluated its hedging arrangements. The Company has considered the effect of changes, if any, in both counterparty credit risk and the Company’s own non-performance risk while assessing hedge effectiveness and measuring hedge ineffectiveness. The Company believes that its hedges continue to be effective after taking into account the expected impact of the COVID-19 pandemic on the Company’s hedged transactions.

7. Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following:


		As of December 31, 2021		As of September 30, 2022			As of December 31, 2022		As of March 31, 2023
Advance income and non-income taxes	Advance income and non-income taxes	$	28,075	$	110,908	Advance income and non-income taxes	$	38,382	$	52,873
Contract asset (Note 20)	Contract asset (Note 20)	8,506		14,506		Contract asset (Note 20)	11,613		10,773
Prepaid expenses	Prepaid expenses	38,528		44,341		Prepaid expenses	39,952		46,307
Derivative instruments	Derivative instruments	19,194		30,090		Derivative instruments	19,682		28,517
Employee advances	Employee advances	2,797		3,199		Employee advances	3,299		3,394
Deposits	Deposits	5,839		4,970		Deposits	5,372		3,330
Advances to suppliers	Advances to suppliers	804		797		Advances to suppliers	953		749
Others	Others	30,698		21,014		Others	18,719		29,939
		$	134,441	$	229,825
Total						Total	$	137,972	$	175,882

As of ~~September 30,~~December 31, 2022 and March 31, 2023, the Company reclassified certain prepaid expenses and other current assets amounting to ~~$1,200 to~~$901 and $0, respectively, as assets held for sale. See Note 8 for additional information.

8. Assets and liabilities held for sale

During the year ended December 31, 2022, the Company took actions to realign its portfolio to focus on services it believes have the greatest opportunities for growth, and deprioritized assets that no longer fit with its long-term strategy. Pursuant to a plan approved by management in the second quarter of 2022, the Company identified and divested a business (the “Business”) that was part of the Company's Consumer and Healthcare segment.

The transaction to divest the Business included the sale of 100% of the issued and outstanding shares of capital stock of an entity pursuant to a stock purchase agreement, which was completed in December 2022. It also included the sale of certain assets and liabilities pursuant to an asset purchase agreement signed during the fourth quarter of 2022. The sale of such assets was completed in February 2023.

Pursuant to the stock purchase agreement related to the sale of the Business, the Company is entitled to a potential earn-out of up to $10,600, contingent upon the Business signing contracts with certain clients and invoicing them during 2023. The Company has determined that the likelihood of achieving these events is uncertain, and accordingly, the Company has opted to record the earn-out if and when the consideration is determined to be realizable.

Pursuant to the asset purchase agreement related to the sale of the Business which was signed in 2022, the Company now holds 1.5% fixed rate unsecured loan notes amounting to $18,001 issued by the purchasers. These notes and interest thereon become receivable by the Company upon a future share sale, disposal or listing by the buyer group or early voluntary repayment of these notes at the discretion of the buyer group. The Company deems the likelihood of recovery of principal and interest on these notes to be remote and not in the control of the Company. Accordingly, the Company did not record a value for these notes. The Company's obligation to transfer $18,001 to the purchasers in exchange for these notes was satisfied in February 2023 upon the closing of the transaction.

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

8. Assets and liabilities held for sale (Continued)

~~The Company is taking actions to realign its portfolio to focus on emerging solutions where it sees~~During the ~~greatest opportunities for growth, and deprioritizing assets that no longer fit with its long-term strategy. Pursuant to a plan approved by management in the second~~first quarter of ~~2022,~~2023, the Company ~~is in the process of divesting a business that comprises part of the Company's Consumer and Healthcare segment.~~

~~It is the Company’s intention to complete~~completed the sale of ~~this business within~~ the ~~twelve months following~~Business which resulted in the ~~end~~net payout of $2,091, and a loss of $802 on the sale of the ~~second quarter of 2022. Accordingly, the Company~~business classified ~~this business~~ as held for sale ~~during the second quarter of 2022.~~

~~As a result, the Company classified $37,047 of assets (before recording~~in addition to an impairment charge of ~~$21,426) and $8,410~~$32,575 recorded in the year ended December 31, 2022. No such loss was recorded in the first quarter of ~~liabilities~~2022. The loss on the sale of business classified as held for sale ~~as of September 30, 2022.~~

During the three and nine months ended September 30, 2022, the Company recorded a non-cash impairment charge of $21,426 to adjust the carrying amount of assets to their fair value. Of the total impairment charge of $21,426, $19,801 pertains to intangible assets and $1,625 pertains to goodwill. The impairment loss has been recorded in "other operating (income) expense, net" in the Company's consolidated statement of income. See Note10 21 for additional information.

~~The components of assets and liabilities of the business classified as held for sale (after recording an impairment charge) in the consolidated balance sheet consist of the following:~~


	~~As of September 30, 2022~~
~~Accounts receivable~~	$	~~4,653~~
~~Prepaid expense and other current assets~~	~~1,200~~
~~Property, plant and equipment, net~~	18
~~Intangible assets, net~~	~~6,370~~
~~Contract cost assets~~	~~1,417~~
~~Other assets~~	~~1,963~~
~~Assets of business held for sale~~	$	~~15,621~~

~~Accounts payable~~	$	~~410~~
~~Accrued expenses and other current liabilities~~	~~7,141~~
~~Other liabilities~~	~~859~~
~~Liabilities of business held for sale~~	$	~~8,410~~

9. Property, plant and equipment, net

The following table provides the gross and net amount of property, plant and equipment:


		As of December 31, 2021		As of September 30, 2022			As of December 31, 2022		As of March 31, 2023
Property, plant and equipment, gross	Property, plant and equipment, gross	$	818,452	$	754,762	Property, plant and equipment, gross	$	766,365	$	770,830
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(603,363)		(574,383)		Less: Accumulated depreciation and amortization	(585,607)		(591,575)
Property, plant and equipment, net	Property, plant and equipment, net	$	215,089	$	180,379	Property, plant and equipment, net	$	180,758	$	179,255

Depreciation expense on property, plant and equipment for the ~~nine months ended September 30, 2021 and 2022 was $46,305 and $42,102, respectively, and for the~~ three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022~~2023 was ~~$14,131~~$14,530 and ~~$13,442,~~$12,717, respectively. Computer software amortization for the ~~nine months ended September 30, 2021 and 2022 was $4,469 and $3,874, respectively, and for the~~ three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022~~2023 was ~~$1,461~~$1,317 and ~~$1,192,~~$689, respectively. ~~The Company recorded a write-down to certain property, plant and equipment during the three and nine months ended September 30, 2021 and 2022, as described in Note 10.~~

~~GENPACT LIMITED AND ITS SUBSIDIARIES~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~

~~(In thousands, except per share data and share count)~~

~~9. Property, plant and equipment, net (Continued)~~

As of September 30, 2022, the Company reclassified certain property, plant and equipment with a gross carrying value and accumulated depreciation of $368 and $350, respectively, to assets held for sale. See Note 8 for additional information.

10. Goodwill and intangible assets

The following table presents the changes in goodwill for the year ended December 31, ~~2021~~2022 and ~~nine~~the three months ended ~~September 30, 2022:~~March 31, 2023:


		For the year ended December 31, 2021	For the nine months ended September 30, 2022		For the year ended December 31, 2022	For the three months ended March 31, 2023
Opening balance	Opening balance	1,695,688	1,731,027	Opening balance	1,731,027	1,684,196
Goodwill relating to acquisitions consummated during the period		44,216	—
Impact of measurement period adjustments	Impact of measurement period adjustments	1,205	1,817	Impact of measurement period adjustments	1,817	—
Reclassified as held for sale		—	(1,625)
Classified as held for sale				Classified as held for sale	(1,625)	—
Effect of exchange rate fluctuations	Effect of exchange rate fluctuations	(10,082)	(50,287)	Effect of exchange rate fluctuations	(47,023)	3,290
Closing balance	Closing balance	1,731,027	1,680,932	Closing balance	1,684,196	1,687,486

The following table presents the changes in goodwill by reporting unit for the year ended December 31, ~~2021:~~2022:


		Financial Services	Consumer and Healthcare	High Tech and Manufacturing	Total		Financial Services	Consumer and Healthcare	High Tech and Manufacturing	Total
Opening balance	Opening balance	420,172	607,574	667,942	1,695,688	Opening balance	421,257	611,120	698,650	1,731,027
Goodwill relating to acquisitions consummated during the period		4,167	7,032	33,017	44,216
Impact of measurement period adjustments	Impact of measurement period adjustments	35	309	861	1,205	Impact of measurement period adjustments	171	289	1,357	1,817
Classified as held for sale						Classified as held for sale	—	(1,625)	—	(1,625)
Effect of exchange rate fluctuations	Effect of exchange rate fluctuations	(3,117)	(3,795)	(3,170)	(10,082)	Effect of exchange rate fluctuations	(12,692)	(16,877)	(17,454)	(47,023)
Closing balance	Closing balance	421,257	611,120	698,650	1,731,027	Closing balance	408,736	592,907	682,553	1,684,196

~~The following table presents the changes in goodwill by reporting unit for the nine months ended September 30, 2022:~~

Financial Services Consumer and Healthcare High Tech and Manufacturing Total
Opening balance 421,257 611,120 698,650 1,731,027
Impact of measurement period adjustments 171 289 1,357 1,817
Reclassified as held for sale — (1,625) — (1,625)
Effect of exchange rate fluctuations (13,796) (18,143) (18,348) (50,287)
Closing balance 407,632 591,641 681,659 1,680,932

~~As of September 30, 2022, the Company reclassified goodwill (before impairment) amounting to~~ ~~$1,625 attributable to its Consumer and Healthcare segment as assets held for sale. See Note 8 for additional information.~~

~~The total amount of goodwill deductible for tax purposes was $326,795 and $305,244 (including goodwill reclassified as held for sale) as of December 31, 2021 and September 30, 2022, respectively.~~

2924

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

10. Goodwill and intangible assets (Continued)

The following table presents the changes in goodwill by reporting unit for the three months ended March 31, 2023:


	Financial Services	Consumer and Healthcare	High Tech and Manufacturing	Total
Opening balance	408,736	592,907	682,553	1,684,196
Effect of exchange rate fluctuations	864	1,171	1,255	3,290
Closing balance	409,600	594,078	683,808	1,687,486

As of December 31, 2022 and March 31, 2023, the Company reclassified goodwill (before impairment) amounting to $1,625 and $0, respectively, attributable to its Consumer and Healthcare segment as assets held for sale. See Note 8 for additional information.

The total amount of goodwill deductible for tax purposes was $291,377 and $284,288 as of December 31, 2022 and March 31, 2023, respectively.

The Company’s intangible assets are as follows:


		As of December 31, 2021						As of September 30, 2022							As of December 31, 2022						As of March 31, 2023
		Gross carrying amount		Accumulated amortization & Impairment		Net		Gross carrying amount		Accumulated amortization & Impairment		Net			Gross carrying amount		Accumulated amortization & Impairment		Net		Gross carrying amount		Accumulated amortization & Impairment		Net
Customer-related intangible assets	Customer-related intangible assets	$	489,974	$	394,688	$	95,286	$	471,875	$	402,357	$	69,518	Customer-related intangible assets	$	473,997	$	411,706	$	62,291	$	474,994	$	419,169	$	55,825
Marketing-related intangible assets	Marketing-related intangible assets	98,870		76,663		22,207		97,710		81,215		16,495		Marketing-related intangible assets	97,831		83,253		14,578		97,878		84,641		13,237
Technology-related intangible assets	Technology-related intangible assets	171,772		119,630		52,142		125,497		110,284		15,213		Technology-related intangible assets	126,406		113,560		12,846		127,101		116,119		10,982
		$	760,616	$	590,981	$	169,635	$	695,082	$	593,856	$	101,226		$	698,234	$	608,519	$	89,715	$	699,973	$	619,929	$	80,044

As of ~~September 30,~~December 31, 2022 and March 31, 2023, the Company reclassified certain intangible assets ~~(before impairment)~~ with a gross carrying value of $40,538 and $0, respectively, and accumulated amortization of ~~$50,432~~$16,989 and ~~$24,261,~~$0, respectively, to assets held for sale. See Note 8 for additional information.

Amortization expenses for intangible assets acquired as part of a business combination and disclosed in the consolidated statements of income under amortization of acquired intangible assets for the ~~nine months ended September 30, 2021 and 2022 were $44,624 and $32,805, respectively, and for the~~ three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022~~2023 were ~~$13,898~~$11,306 and ~~$10,604,~~$8,255, respectively.

Amortization expenses for internally-developed and other intangible assets disclosed in the consolidated statements of income under cost of revenue and selling, general and administrative expenses for the ~~nine months ended September 30, 2021 and 2022 were $18,841 and $12,264, respectively, and for the~~ three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022~~2023 were ~~$6,919~~$5,276 and ~~$2,595,~~$2,251, respectively.

During the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2022,~~2023, the Company tested ~~for~~the recoverability ~~certain customer-related and technology-related intangible assets,~~of intangibles, including those under development, goodwill and ~~certain~~ property, plant and equipment, including those held for sale (see Note 8 for additional information), as a result of changes in ~~market trends and~~ the Company’s investment strategy ~~including the Company's decisions to cease certain service offerings.~~and market trends. Based on the results of ~~this~~its testing, the Company ~~determined~~concluded that it is not more likely than not that the ~~carrying~~fair values of ~~the~~any of such assets ~~tested were not recoverable, and the Company~~are less than their carrying amounts. Accordingly, no impairment loss was recorded ~~complete write-downs of the carrying values of these assets amounting to $915 and $1,377 for the nine months ended September 30, 2021 and 2022, respectively, and zero for~~in the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022, respectively. These write-downs have been recorded in “other operating (income) expense, net” in the consolidated statement of income.~~2023.

3025

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

~~10. Goodwill and intangible assets (Continued)~~

The summary below presents the impairment charges (on intangibles and goodwill) and write-downs (on property, plant and equipment) recorded for various categories of assets during the three and nine months ended September 30, 2021 and September 30, 2022:

Three months ended September 30, Nine months ended September 30,
2021 2022 2021 2022
Technology related intangibles $ — $ 19,116 $ 205 $ 19,116
Customer related intangibles — 685 — 685
Goodwill — 1,625 — 1,625
Total intangibles and goodwill $ — $ 21,426 $ 205 $ 21,426
Property, plant and equipment $ — $ — $ 710 $ 1,377
Total property, plant and equipment $ — $ — $ 710 $ 1,377
Total impairment and write-down $ — $ 21,426 $ 915 $ 22,803

11. Short-term borrowings

The Company has the following borrowing facilities:

a.Fund-based and non-fund-based credit facilities with banks, which are available for operational requirements in the form of overdrafts, letters of credit, guarantees and short-term loans. As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the limits available were ~~$24,727~~$22,882 and ~~$22,869,~~$22,891, respectively, of which ~~$5,848~~$5,392 and ~~$5,025,~~$8,169, respectively, was utilized, constituting non-funded drawdown.

b.A fund-based and non-fund based revolving credit facility of ~~$500,000,~~$650,000, which the Company obtained ~~through~~by entering into an ~~amendment of its existing~~amended and restated credit agreement (the "2022 Credit Agreement") with Genpact USA., Inc., a wholly-owned subsidiary of the Company (“Genpact USA”), Genpact Global Holdings (Bermuda) Limited (“GGH”) and Genpact Luxembourg S.a.r.l., a wholly-owned subsidiary of the Company (“Genpact Luxembourg”, and together with Genpact USA and GGH, the “Borrowers”), as borrowers, Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, swingline lender and issuing bank, and the lenders and other parties thereto on ~~August 9, 2018.~~December 13, 2022. The ~~amended~~term loan and revolving credit facility expires on August 8, 2023. The Company is in the process of refinancing its credit facility, and is currently in negotiation with various financial institutions, and the refinancing is expected to close in the fourth quarter of 2022. The funded drawdown amount under the ~~Company’s revolving facilities bore~~2022 Credit Agreement expire on December 13, 2027.

c.Borrowings under the 2022 Credit Agreement bear interest at a rate equal to, ~~LIBOR~~at the election of the Company, either Adjusted Term SOFR (which is the rate per annum equal to (a) Term SOFR (the forward-looking secured overnight financing rate) plus (b) a Term SOFR Adjustment of 0.10% per annum, but in no case lower than 0.0%) plus an applicable margin ofequal to 1.375% ~~as of December 31, 2021 and September 30, 2022.~~per annum or a base rate plus an applicable margin equal to 0.375% per annum. The unutilized amount on the revolving ~~facilities~~credit facility under the 2022 Credit Agreement bore a commitment fee of 0.20% as of December 31, ~~2021~~2022 and ~~September 30, 2022.~~March 31, 2023. As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, a total of ~~$2,017~~$153,658 and ~~$202,658,~~$182,658, respectively, was utilized, of which $0$151,000 and ~~$200,000,~~$180,000, respectively, constituted funded drawdown and ~~$2,017~~$2,658 and $2,658, respectively, constituted non-funded drawdown. The ~~Company’s amended credit agreement~~2022 Credit Agreement contains certain customary covenants, including a maximum leverage covenant and a minimum interest coverage ratio. During the period ended December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the Company was in compliance with the financial covenants of the ~~credit agreement.~~2022 Credit Agreement.

12. Long-term debt

~~Borrowings under~~In December 2022, the ~~Company's~~Company amended its existing credit facility ~~which was~~under its amended and restated credit agreement entered into in August 2018 ~~bear interest at~~(the "2018 Credit Agreement”), which was comprised of a ~~rate equal to, at~~$680,000 term loan and a $500,000 revolving credit facility, and entered into the ~~election~~2022 Credit Agreement, which is comprised of a $530,000 term loan and a $650,000 revolving credit facility. The 2022 Credit Agreement, which is guaranteed by the Company and certain of its subsidiaries, replaces the 2018 Credit Agreement. The obligations under the 2022 Credit Agreement are unsecured.

The outstanding balance of the term loan under the 2018 Credit Agreement as of the date of the 2022 Credit Agreement was $527,000. The revolving credit facility and the term loan have a term of five years and expire on December 13, 2027. The 2022 Credit Agreement did not result in a substantial modification of $290,870 of the outstanding term loan under the 2018 Credit Agreement. Further, as a result of the 2022 Credit Agreement, the Company ~~either LIBOR plus~~extinguished $236,130 of funding arrangements for the outstanding term loan under the 2018 Credit Agreement and obtained funding from new lenders of $239,130, resulting in outstanding principal of $530,000 of the term loan under the 2022 Credit Agreement.

In connection with the 2022 Credit Agreement, the Company expensed $126, representing partial acceleration of the amortization of the existing unamortized debt issuance costs and an ~~applicable margin equal~~additional fee paid to ~~1.375% per annum or a base rate plus an applicable margin equal to 0.375% per annum, in each case subject to adjustment based on~~ the Company’s ~~debt ratings provided by Standard & Poor’s Rating Services and Moody’s Investors Service, Inc. Based on~~lenders related to the ~~Company’s election and current credit rating, the applicable interest rate is equal to LIBOR plus 1.375% per annum.~~term loan. The ~~amended credit agreement restricts certain payments, including dividend payments, if there is an event of default~~overall borrowing capacity under the ~~amended~~revolving credit ~~agreement or if~~facility increased from $500,000 under the 2018 Credit Agreement to $650,000 under the 2022 Credit Agreement. In connection with the 2022 Credit Agreement, the Company ~~is not, or after making~~expensed $93 relating to existing unamortized debt issuance cost. The remaining unamortized costs and an additional third-party fee paid in connection with the ~~payment would not~~2022 Credit Agreement will be ~~in compliance with certain financial covenants contained in~~amortized over the term of the amended credit agreement. These covenants require the Company to maintain a net debt to EBITDA leverage ratio of below 3x and an interest coverage ratio of more than 3x. During the period ended September 30, 2022, the Company was in compliance with the terms of the credit agreement, including all of the financial covenants therein.facility.

3126

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

12. Long-term debt (Continued)

Borrowings under the 2022 Credit Agreement bear interest at a rate equal to, at the election of the Company, either Adjusted Term SOFR (which is the rate per annum equal to (a) Term SOFR (the forward-looking secured overnight financing rate) plus (b) a Term SOFR Adjustment of 0.10% per annum, but in no case lower than 0.00%) plus an applicable margin equal to 1.375% per annum or a base rate plus an applicable margin equal to 0.375% per annum, in each case subject to adjustment based on the Borrowers' debt ratings provided by Standard & Poor’s Rating Services and Moody’s Investors Service, Inc. (the "Debt Ratings"). The revolving credit commitments under the 2022 Credit Agreement are subject to a commitment fee equal to 0.20% per annum, subject to adjustment based on the Debt Ratings. The commitment fee accrues on the actual daily amount by which the aggregate revolving commitments exceed the sum of outstanding revolving loans and letter of credit obligations.

The 2022 Credit Agreement restricts certain payments, including dividend payments, if there is an event of default under the 2022 Credit Agreement or if the Company is not, or after making the payment would not be, in compliance with certain financial covenants contained in the 2022 Credit Agreement. These covenants require the Company to maintain a net debt to EBITDA leverage ratio of less than 3x and an interest coverage ratio of more than 3x. During the period ended March 31, 2023, the Company was in compliance with the terms of the 2022 Credit Agreement, including all of the financial covenants therein. The Company’s retained earnings are not subject to any restrictions on availability to make dividend payments to shareholders, subject to compliance with the financial covenants described above that are contained in the ~~amended credit~~

~~agreement.~~2022 Credit Agreement.

As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the amount outstanding under the Company's term loan, ~~under the amended credit agreement,~~ net of debt amortization expense of ~~$687~~$1,622 and ~~$358,~~$1,530, was ~~$560,313~~$528,378 and ~~$535,142,~~$521,845, respectively. ~~As of December 31, 2021 and September 30, 2022, the term loan bore interest at a rate equal to LIBOR plus a margin of 1.375% per annum.~~

Indebtedness under the ~~amended credit facility~~2022 Credit Agreement is unsecured. The amount outstanding on the term loan as of ~~September 30, 2022~~March 31, 2023 requires quarterly payments of ~~$8,500,~~$6,625, and the balance of the loan is due and payable upon the maturity of the term loan on August 8, 2023. The Company is in the process of refinancing its credit facility, and is currently in negotiation with various financial institutions, and the refinancing is expected to close in the fourth quarter of 2022. December 13, 2027.

The maturity profile of the term loan outstanding as of ~~September 30, 2022,~~March 31, 2023, net of debt amortization expense, is as follows:


Year ended	Year ended	Amount		Year ended	Amount
2022		8,393
2023	2023	526,749		2023	19,603
2024				2024	26,153
2025				2025	26,173
2026				2026	26,192
2027				2027	423,724
Total	Total	$	535,142	Total	$	521,845

Genpact Luxembourg ~~S.à r.l., a wholly-owned subsidiary of the Company,~~ issued $400,000 aggregate principal amount of 3.375% senior notes in November 2019 (the “2019 Senior Notes”). The 2019 Senior Notes are fully guaranteed by the Company. The total debt issuance cost of $2,937 incurred in connection with the 2019 Senior Notes offering is being amortized over the life of the 2019 Senior Notes as an additional interest expense. As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the amount outstanding under the 2019 Senior Notes, net of debt amortization expense of ~~$1,702~~$1,119 and ~~$1,266,~~$975, was ~~$398,298~~$398,881 and ~~$398,734,~~$399,025, respectively, which is payable on December 1, 2024.

In March 2021, Genpact Luxembourg ~~S.à r.l.~~ and Genpact USA ~~Inc., both wholly-owned subsidiaries of the Company,~~ co-issued $350,000 aggregate principal amount of 1.750% senior notes (the “2021 Senior Notes,” and together with the 2019 Senior Notes, the “Senior Notes”). The 2021 Senior Notes are fully guaranteed by the Company. The total debt issuance cost of $3,032 incurred in connection with the 2021 Senior Notes is being amortized over the life of the 2021 Senior Notes as additional interest expense. As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the amount outstanding under the 2021 Senior Notes, net of debt amortization expense of ~~$2,571~~$1,970 and $~~2,121,~~1,822, respectively, was ~~$347,429~~$348,030 and $~~347,879~~348,178, respectively, which is payable on April 10, 2026.

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

12. Long-term debt (Continued)

The Company pays interest on (i) the 2019 Senior Notes semi-annually in arrears on June 1 and December 1 of each year, and (ii) the 2021 Senior Notes semi-annually in arrears on April 10 and October 10 of each year, ending on the maturity dates of December 1, 2024 and April 10, 2026, respectively. The Company, at its option, may redeem the Senior Notes at any time in whole or in part, at a redemption price equal to (i) 100% of the principal amount of the notes redeemed, together with accrued and unpaid interest on the redeemed amount, and (ii) if the notes are redeemed prior to, in the case of the 2019 Senior Notes, November 1, 2024, and in the case of the 2021 Senior Notes, March 10, 2026, a specified “make-whole” premium. The Senior Notes are subject to certain customary covenants, including limitations on the ability of the Company and certain of its subsidiaries to incur debt secured by liens, engage in certain sale and leaseback transactions and consolidate, merge, convey or transfer their assets substantially as an entirety. During the period ended ~~September 30, 2022,~~March 31, 2023, the Company and its applicable subsidiaries were in compliance with the covenants. Upon certain change of control transactions, the applicable issuer or issuers will be required to make an offer to repurchase the Senior Notes at a price equal to 101% of the aggregate principal amount of the Senior Notes, plus accrued and unpaid interest. The interest rate payable on the Senior Notes is subject to adjustment if the credit rating of the Senior Notes is downgraded, up to a maximum increase of 2.0%.

~~GENPACT LIMITED AND ITS SUBSIDIARIES~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~

~~(In thousands, except per share data and share count)~~

~~12. Long-term debt (Continued)~~

A summary of the Company’s long-term debt is as follows:


		As of December 31, 2021		As of September 30, 2022			As of December 31, 2022		As of March 31, 2023
Credit facility, net of amortization expenses	Credit facility, net of amortization expenses	$	560,313	$	535,142	Credit facility, net of amortization expenses	$	528,378	$	521,845
3.70% 2017 Senior Notes, net of debt amortization expenses		349,869		—
3.375% 2019 Senior Notes, net of debt amortization expenses	3.375% 2019 Senior Notes, net of debt amortization expenses	398,298		398,734		3.375% 2019 Senior Notes, net of debt amortization expenses	398,881		399,025
1.750% 2021 Senior Notes, net of debt amortization expenses	1.750% 2021 Senior Notes, net of debt amortization expenses	347,429		347,879		1.750% 2021 Senior Notes, net of debt amortization expenses	348,030		348,178
Total	Total	$	1,655,909	$	1,281,755	Total	$	1,275,289	$	1,269,048
Current portion	Current portion	383,433		535,142		Current portion	26,136		26,140
Non-current portion	Non-current portion	1,272,476		746,613		Non-current portion	1,249,153		1,242,908
Total	Total	$	1,655,909	$	1,281,755	Total	$	1,275,289	$	1,269,048

13. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following:


		As of December 31, 2021		As of September 30, 2022			As of December 31, 2022		As of March 31, 2023
Accrued expenses	Accrued expenses	$	162,054	$	129,877	Accrued expenses	$	126,680	$	129,224
Accrued employee cost	Accrued employee cost	307,777		230,013		Accrued employee cost	293,934		132,602
Earn-out consideration	Earn-out consideration	2,501		2,517		Earn-out consideration	2,517		—
Statutory liabilities	Statutory liabilities	67,948		69,857		Statutory liabilities	82,912		95,555
Retirement benefits	Retirement benefits	1,746		1,657		Retirement benefits	1,725		1,787
Compensated absences	Compensated absences	26,596		24,505		Compensated absences	25,101		29,113
Derivative instruments	Derivative instruments	12,498		49,121		Derivative instruments	35,157		13,267
Contract liabilities (Note 20)	Contract liabilities (Note 20)	160,602		144,441		Contract liabilities (Note 20)	160,625		147,260
Finance leases liability	Finance leases liability	18,549		13,321		Finance leases liability	15,585		13,527
Other liabilities	Other liabilities	31,169		35,175		Other liabilities	46,771		36,043
		$	791,440	$	700,484		$	791,007	$	598,378

As ~~September 30,~~of December 31, 2022 and March 31, 2023, the Company reclassified certain accrued expenses and other current liabilities amounting to ~~$7,141~~$1,147 and $0, respectively, to liabilities held for sale. See Note 8 for additional information.

3328

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

14. Other liabilities

Other liabilities consist of the following:

As of December 31, 2021 As of September 30, 2022
Accrued employee cost $ 15,790 $ 20,647
Earn-out consideration 2,905 —
Retirement benefits 11,993 11,987
Compensated absences 52,023 46,293
Derivative instruments 2,756 10,078
Contract liabilities (Note 20) 80,222 63,868
Finance leases liability 16,297 11,897
Others 63,224 70,643
$ 245,210 $ 235,413


	As of December 31, 2022		As of March 31, 2023
Accrued employee cost	$	14,120	$	13,168
Retirement benefits	10,694		10,594
Compensated absences	43,474		45,843
Derivative instruments	3,660		2,056
Contract liabilities (Note 20)	56,157		52,138
Finance leases liability	11,802		9,503
Others	75,701		76,748
	$	215,608	$	210,050

As ~~September 30,~~of December 31, 2022 and March 31, 2023, the Company reclassified certain other liabilities amounting to ~~$859~~$141 and $0, respectively, to liabilities held for sale. See Note 8 for additional information.

15. Employee benefit plans

The Company has employee benefit plans in the form of certain statutory and other programs covering its employees.

Defined benefit plans

In accordance with Indian law, the Company maintains a defined benefit retirement plan covering substantially all of its Indian employees. In accordance with Mexican law, the Company provides termination benefits to all of its Mexican employees. In addition, certain of the Company’s subsidiaries in the Philippines, Israel and Japan sponsor defined benefit retirement programs.

Net defined benefit plan costs for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2022~~2023 include the following components:


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2021		2022		2021		2022			2022		2023
Service costs	Service costs	$	3,454	$	3,505	$	10,528	$	10,804	Service costs	$	3,683	$	3,760
Interest costs	Interest costs	1,363		1,424		4,135		4,394		Interest costs	1,478		1,736
Amortization of actuarial loss	Amortization of actuarial loss	558		178		1,704		550		Amortization of actuarial loss	339		167
Expected return on plan assets	Expected return on plan assets	(1,534)		(1,457)		(4,605)		(4,502)		Expected return on plan assets	(1,536)		(1,261)
Net defined benefit plan costs	Net defined benefit plan costs	$	3,841	$	3,650	$	11,762	$	11,246	Net defined benefit plan costs	$	3,964	$	4,402

3429

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

15. Employee benefit plans (Continued)

Defined contribution plans

During the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2022,~~2023, the Company contributed the following amounts to defined contribution plans in various jurisdictions:


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2021		2022		2021		2022			2022		2023
India	India	$	9,637	$	11,015	$	27,445	$	32,629	India	$	10,740	$	11,151
U.S.	U.S.	5,020		5,060		15,508		16,968		U.S.	6,415		5,457
U.K.	U.K.	4,301		4,676		12,074		16,398		U.K.	6,137		5,960
China	China	6,362		6,772		18,433		20,003		China	6,793		6,851
Other regions	Other regions	3,913		4,351		11,155		13,728		Other regions	4,775		5,261
Total	Total	$	29,233	$	31,874	$	84,615	$	99,726	Total	$	34,860	$	34,680

Deferred compensation plan

On July 1, 2018, Genpact LLC, a wholly-owned subsidiary of the Company, adopted an executive deferred compensation plan (the “Plan”). The Plan provides a select group of U.S.-based members of Company management with the opportunity to defer from 1% to 80% of their base salary and from 1% to 100% of their qualifying bonus compensation (or such other minimums or maximums as determined by the Plan administrator from time to time) pursuant to the terms of the Plan. Participant deferrals are 100% vested at all times. The Plan also allows for discretionary supplemental employer contributions by the Company, in its sole discretion, which will be subject to a two-year vesting schedule (50% vesting on the one-year anniversary of approval of the contribution and 50% vesting on the second year anniversary of approval of the contribution) or such other vesting schedule as determined by the Company. However, no such contribution has been made by the Company to date.

The Plan also provides an option for participants to elect to receive deferred compensation and earnings thereon on either fixed date(s) no earlier than 2 years following the applicable Plan year (or end of the applicable performance period for performance-based bonus compensation) or following a separation from service, in each case either in a lump sum or in annual installments over a term of up to 15 years. Participants can elect to change or re-defer their rights to receive the deferred compensation until the 10th anniversary following their separation from service, subject to fulfillment of certain conditions. Each Plan participant’s compensation deferrals are credited or debited with notional investment gains and losses equal to the performance of selected hypothetical investment funds offered under the Plan and elected by the participant.

The Company has investments in funds held in Company-owned life insurance policies which are held in a Rabbi Trust that are classified as trading securities. Management determines the appropriate classification of the securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. ~~The securities are classified as trading securities because they are held for resale in anticipation of short-term fluctuations in market prices. The trading securities are stated at fair value.~~

The liability for the deferred compensation plan was ~~$38,007~~$39,654 and ~~$36,583~~$44,095 as of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, respectively, and is included in “accrued expenses and other current liabilities” and “other liabilities” in the consolidated balance sheets.

In connection with the administration of the Plan, the Company has purchased Company-owned life insurance policies insuring the lives of certain employees. The cash surrender value of these policies was ~~$38,584~~$40,261 and ~~$37,183~~$44,745 as of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, respectively. The cash surrender value of these insurance policies is included in “other assets” in the consolidated balance sheets.

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

15. Employee benefit plans (Continued)

During the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022,~~2023, the change in the fair value of Plan assets was ~~$2,658~~$(2,352) and ~~$(10,011), respectively, and for the three months ended September 30, 2021 and 2022, the change in the fair value of Plan assets was $(84) and $(1,964),~~$2,386, respectively, which is included in “other income (expense), net,” in the consolidated statements of income. During the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022,~~2023, the change in the fair value of deferred compensation liabilities was ~~$2,526~~$(2,366) and ~~$(10,035), respectively, and for the the three months ended September 30, 2021 and 2022, the change in the fair value of deferred compensation liabilities was $(159) and $(1,977),~~$2,343, respectively, which is included in “selling, general and administrative expenses.”

16. Stock-based compensation

The Company has issued options under the Genpact Limited 2007 Omnibus Incentive Compensation Plan (the “2007 Omnibus Plan”) and the Genpact Limited 2017 Omnibus Incentive Compensation Plan (the “2017 Omnibus Plan”) to eligible persons, including employees, directors and certain other persons associated with the Company.

Under the 2007 Omnibus Plan, shares underlying options forfeited, expired, terminated or cancelled under any of the Company’s predecessor plans were added to the number of shares otherwise available for grant under the 2007 Omnibus Plan. The 2007 Omnibus Plan was amended and restated on April 11, 2012 to increase the number of common shares authorized for issuance by 5,593,200 shares to 15,000,000 shares. Further, during the year ended December 31, 2012, the number of common shares authorized for issuance under the 2007 Omnibus Plan was increased by 8,858,823 shares as a result of a one-time adjustment to outstanding unvested share awards in connection with a special dividend payment.

On May 9, 2017, the Company’s shareholders approved the adoption of the 2017 Omnibus Plan, pursuant to which 15,000,000 Company common shares are available for issuance. The 2017 Omnibus Plan was amended and restated on April 5, 2019 and April 5, 2022 to increase the number of common shares authorized for issuance by 8,000,000 shares to 23,000,000 shares and by 3,500,000 shares to 26,500,000 shares, respectively. No grants may be made under the 2007 Omnibus Plan after the date of adoption of the 2017 Omnibus Plan. Grants that were outstanding under the 2007 Omnibus Plan as of the date of Company’s adoption of the 2017 Omnibus Plan remain subject to the terms of the 2007 Omnibus Plan.

Stock-based compensation costs relating to the foregoing plans during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~September 30, 2022~~March 31, 2023 were ~~$57,554~~$14,759 and $~~53,712, respectively, and for the three months ended September 30, 2021 and September 30, 2022 were $21,150 and $18,873,~~19,341, respectively. These costs have been allocated to “cost of revenue” and “selling, general and administrative expenses.”

Stock options

All options granted under the 2007 and 2017 Omnibus Plans are exercisable into common shares of the Company, have a contractual period of ten years and vest over three to five years unless specified otherwise in the applicable award agreement. The Company recognizes compensation cost over the vesting period of the option.

Compensation cost is determined at the date of grant by estimating the fair value of an option using the Black-Scholes option-pricing model.

The following table shows the significant assumptions used in determining the fair value of options granted in the ~~nine~~three months ended ~~September 30, 2021 and September 30,~~March 31, 2022. No options were granted in the three months ended March 31, 2023.

The Company granted options covering ~~1,831,180~~475,695 common shares in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

Nine months ended September 30, 2021 Nine months ended September 30, 2022
Dividend yield 0.84 % — 1.08% 0.96 %
Expected life (in months) 84 84
Risk-free rate of interest 1.12 % — 1.37% 1.71 %
Volatility 26.05 % — 26.18% 26.29 %


	Three months ended March 31, 2022
Dividend yield	0.96	%
Expected life (in months)	84
Risk-free rate of interest	1.71	%
Volatility	26.29	%

3631

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

16. Stock-based compensation (Continued)

A summary of stock option activity during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 is set out below:


		Nine Months Ended September 30, 2022					Three Months Ended March 31, 2023
		Shares arising out of options	Weighted average exercise price	Weighted average remaining contractual life (years)	Aggregate intrinsic value		Shares arising out of options	Weighted average exercise price	Weighted average remaining contractual life (years)	Aggregate intrinsic value
Outstanding as of January 1, 2022		8,008,296	31.30	6.1	—
Outstanding as of January 1, 2023						Outstanding as of January 1, 2023	7,748,114	33.27	5.6	—
Granted	Granted	475,695	52.12	—	—	Granted	—	—	—	—
Forfeited	Forfeited	(70,841)	41.46	—	—	Forfeited	(319,646)	41.06	—	—
Expired	Expired	—	—	—	—	Expired	—	—	—	—
Exercised	Exercised	(110,000)	26.87	—	1,789	Exercised	(642,280)	19.94	—	16,882
Outstanding as of September 30, 2022		8,303,150	32.46	5.5	100,968
Vested as of September 30, 2022 and expected to vest thereafter (Note a)		7,783,195	31.70	5.5	99,577
Vested and exercisable as of September 30, 2022		3,766,735	24.73	3.3	71,706
Outstanding as of March 31, 2023						Outstanding as of March 31, 2023	6,786,188	34.17	5.7	85,463
Vested as of March 31, 2023 and expected to vest thereafter (Note a)						Vested as of March 31, 2023 and expected to vest thereafter (Note a)	6,418,998	33.58	5.7	84,183
Vested and exercisable as of March 31, 2023						Vested and exercisable as of March 31, 2023	2,785,379	28.04	4.0	50,636
Weighted average grant date fair value of grants during the period	Weighted average grant date fair value of grants during the period	14.19				Weighted average grant date fair value of grants during the period	—

(a)Options expected to vest reflect an estimated forfeiture rate.

As of ~~September 30, 2022,~~March 31, 2023, the total remaining unrecognized stock-based compensation cost for options expected to vest amounted to ~~$21,073,~~$15,573, which will be recognized over the weighted average remaining requisite vesting period of ~~3.0~~2.8 years.

Restricted share units

The Company has granted restricted share units (“RSUs”) under the 2007 and 2017 Omnibus Plans. Each RSU represents the right to receive one common share. The fair value of each RSU is the market price of one common share of the Company on the date of the grant. The RSUs granted to date have graded vesting schedules of three months to four years. The compensation expense is recognized on a straight-line basis over the vesting term. A summary of RSU activity during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 is set out below:


		Nine Months Ended September 30, 2022			Three Months Ended March 31, 2023
		Number of Restricted Share Units	Weighted Average Grant Date Fair Value		Number of Restricted Share Units	Weighted Average Grant Date Fair Value
Outstanding as of January 1, 2022		759,507	42.29
Outstanding as of January 1, 2023				Outstanding as of January 1, 2023	579,622	42.97
Granted	Granted	206,280	45.66	Granted	857,354	43.69
Vested (Note a)	Vested (Note a)	(28,866)	47.63	Vested (Note a)	(225,979)	40.49
Forfeited	Forfeited	(54,200)	42.49	Forfeited	(37,254)	42.28
Outstanding as of September 30, 2022		882,721	42.89
Outstanding as of March 31, 2023				Outstanding as of March 31, 2023	1,173,743	44.00
Expected to vest (Note b)	Expected to vest (Note b)	803,557		Expected to vest (Note b)	1,023,390

(a)~~28,866~~225,979 RSUs vested during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 in respect of which ~~19,992~~149,158 shares (net of minimum statutory tax withholding) were issued during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

(b)The number of RSUs expected to vest reflects the application of an estimated forfeiture rate.

3732

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

16. Stock-based compensation (Continued)

~~49,513~~199,297 RSUs vested in the year ended December 31, ~~2020,~~2022, in respect of which ~~49,446~~120,858 shares were issued during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 after withholding shares to the extent ~~required to satisfy~~of minimum statutory withholding ~~obligations.~~taxes.

~~7,863~~39,633 RSUs vested in the year ended December 31, 2021, in respect of which ~~5,496~~39,515 shares were issued during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 after withholding shares to the extent ~~required to satisfy~~of minimum statutory withholding ~~obligations.~~taxes.

As of ~~September 30, 2022,~~March 31, 2023, the total remaining unrecognized stock-based compensation cost related to RSUs amounted to ~~$15,478,~~$39,942, which will be recognized over the weighted average remaining requisite vesting period of ~~2.0~~2.6 years.

Performance units

The Company also grants stock awards in the form of performance units (“PUs”) and has granted PUs under both the 2007 and 2017 Omnibus Plans.

Each PU represents the right to receive one common share at a future date based on the Company’s performance against specified targets. PUs granted to date have vesting schedules of approximately six months to three years. PUs granted under the plans are subject to cliff vesting. The compensation expense for such awards is recognized on a straight-line basis over the vesting terms.

For PUs granted prior to 2023, the fair value of each PU is the market price of one common share of the Company on the date of grant and assumes that performance targets will be achieved. For PUs ~~granted under the plans are subject to cliff vesting. The compensation expense for such awards is recognized on~~that have a ~~straight-line basis over the vesting terms. During the~~ performance period of one year, the Company’s estimate of the number of shares to be issued is adjusted upward or downward based upon the probability of achievement of the performance targets. The ultimate number of shares issued and the related compensation cost recognized is based on a comparison of the final performance metrics to the specified targets.

For the PUs granted in 2023, the Company made certain amendments to the vesting conditions. For PUs granted in 2023, the performance period increased to three years from one year for PUs granted prior to 2023. Further, the number of PUs granted in 2023 that will ultimately vest will be modified, subject to certain conditions and limitations, based on the Company’s total shareholder return (“TSR”) relative to the TSR of the companies included as of January 1, 2023 in the S&P 400 Midcap Index (the “Peer Group”) over the three-year performance period for the 2023 PUs.

The grant date fair value for PUs granted in 2023 is determined using a Monte Carlo simulation model. This model simulates a range of possible future stock prices and estimates the probabilities of the potential payouts. This model also incorporates the following assumptions:

•The historical volatility for the companies in the Peer Group was measured using the most recent three-year period.

•The risk-free interest rate is based on the U.S. Treasury rate assumption commensurate with the three-year performance period.

•For determining the TSR of the Company and the companies in the Peer Group, dividends will be assumed to have been reinvested in the stock of the issuing entities on a continuous basis.

•The correlation coefficients used to model the way in which each entity tends to move in relation to each other are based upon the price data used to calculate historical volatility.

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

16. Stock-based compensation (Continued)

The fair value of each 2023 PU granted to employees was estimated on the date of grant using the following valuation assumptions:


	Three months ended March 31, 2023
Dividend yield	1.28	%
Expected life (years)	2.8
Risk-free rate for expected life	3.81	%
Volatility for expected life	24.71	%

A summary of PU activity during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 is set out below:


		Nine Months Ended September 30, 2022				Three Months Ended March 31, 2023
		Number of Performance Units	Weighted Average Grant Date Fair Value	Maximum Shares Eligible to Receive		Number of Performance Units	Weighted Average Grant Date Fair Value	Maximum Shares Eligible to Receive
Outstanding as of January 1, 2022		4,583,155	39.40	4,583,155
Outstanding as of January 1, 2023					Outstanding as of January 1, 2023	3,570,951	44.07	3,570,951
Granted	Granted	1,590,794	44.50	3,181,588	Granted	960,181	44.20	2,304,434
Vested (Note a)	Vested (Note a)	(2,161,789)	34.61	(2,161,789)	Vested (Note a)	(645,308)	42.52	(645,308)
Forfeited	Forfeited	(445,773)	43.46	(577,995)	Forfeited	(145,972)	43.61	(145,972)
Adjustment upon final determination of level of performance goal achievement (Note b)	Adjustment upon final determination of level of performance goal achievement (Note b)	28,325	44.01	28,325	Adjustment upon final determination of level of performance goal achievement (Note b)	96,668	44.50	96,668
Outstanding as of September 30, 2022		3,594,712	44.07	5,053,284
Outstanding as of March 31, 2023					Outstanding as of March 31, 2023	3,836,520	44.39	5,180,773
Expected to vest (Note c)	Expected to vest (Note c)	3,063,863			Expected to vest (Note c)	3,356,908

(a)~~2,161,789~~645,308 PUs ~~that~~ vested during the ~~period were net settled upon vesting by issuing 1,300,511~~three months ended March 31, 2023, in respect of which 410,843 shares (net of minimum statutory tax withholding). were issued during the three months ended March 31, 2023.

(b)Represents an adjustment made in March ~~2022~~2023 to the number of shares subject to the PUs granted in ~~2021~~2022 upon certification of the level of achievement of the performance targets underlying such awards.

(c)The number of PUs expected to vest reflects the application of an estimated forfeiture rate.

As of ~~September 30, 2022,~~March 31, 2023, the total remaining unrecognized stock-based compensation cost related to PUs amounted to ~~$72,523,~~$88,750, which will be recognized over the weighted average remaining requisite vesting period of ~~1.8~~2.0 years.

3834

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

16. Stock-based compensation (Continued)

Employee Stock Purchase Plan (ESPP)

On May 1, 2008, the Company adopted the Genpact Limited U.S. Employee Stock Purchase Plan and the Genpact Limited International Employee Stock Purchase Plan (together, the “ESPP”). In April 2018, these plans were amended and restated, and their terms were extended to August 31, 2028.

The ESPP allows eligible employees to purchase the Company’s common shares through payroll deductions at 90% of the closing price of the Company’s common shares on the last business day of each purchase interval. The dollar amount of common shares purchased under the ESPP may not exceed 15% of the participating employee’s base salary, subject to a cap of $25 per employee per calendar year. With effect from September 1, 2009, the offering periods commence on the first business day in March, June, September and December of each year and end on the last business day of the subsequent May, August, November and February. 4,200,000 common shares have been reserved for issuance in the aggregate over the term of the ESPP.

During the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022, 216,378~~2023, 87,646 and ~~253,377~~72,645 common shares, respectively, were issued under the ESPP.

The ESPP is considered compensatory under the FASB guidance on Compensation-Stock Compensation.

The compensation expense for the ESPP is recognized in accordance with the FASB guidance on Compensation-Stock Compensation. The compensation expense for the ESPP during the ~~nine months ended September 30, 2021 and 2022 was $1,050 and $1,182, respectively, and for the~~ three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022~~2023 was ~~$335~~$491 and ~~$329,~~$363, respectively, and has been allocated to cost of revenue and selling, general and administrative ~~expense.~~expenses.

17. Capital stock

Share repurchases

The Board of Directors of the Company (the “Board”) has authorized repurchases of up to ~~$1,750,000~~$2,250,000 under the Company’s existing share repurchase ~~program.~~program, including $500,000 approved during the first quarter of 2023. Under the program, shares may be purchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

During the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022,~~2023, the Company repurchased ~~3,592,409~~1,630,533 and ~~4,067,044~~630,605 of its common shares, respectively, on the open market at a weighted average price of ~~$40.96~~$46.61 and ~~$44.75~~$47.57 per share, respectively, for an aggregate cash amount of ~~$147,152~~$75,999 and ~~$182,012,~~$30,000, respectively. All repurchased shares have been retired.

The Company records repurchases of its common shares on the settlement date of each transaction. Shares purchased and retired are deducted to the extent of their par value from common stock and from retained earnings for the excess over par value. Direct costs incurred to acquire the shares are included in the total cost of the shares purchased. For the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022,~~2023, retained earnings were reduced by the direct costs related to share repurchases of ~~$72~~$33 and ~~$81,~~$13, respectively.

$~~156,899~~594,924 remained available for share repurchases under the Company’s existing share repurchase program as of ~~September 30, 2022.~~March 31, 2023. This repurchase program does not obligate the Company to acquire any specific number of shares and does not specify an expiration date.

3935

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

17. Capital stock (Continued)

Dividend

On February 9, 2021, the Company announced that its Board had approved a 10% increase in its quarterly cash dividend to $0.1075 per share, up from $0.0975 per share in 2020, representing an annual dividend of $0.43 per common share, up from $0.39 per share in 2020, payable to holders of the Company’s common shares. On March 19, 2021, June 23, 2021 and September 24, 2021, the Company paid a dividend of $0.1075 per share, amounting to $20,115, $20,133 and $20,213 in the aggregate, to shareholders of record as of March 10, 2021, June 11, 2021 and September 10, 2021, respectively.

~~On February~~ 10, 2022, the Company announced that its Board had approved a 16% increase in its quarterly cash dividend to $0.125 per share, up from $0.1075 per share in 2021, representing ~~a planned~~an annual dividend of $0.50 per common share, up from $0.43 per share in 2021, payable to holders of the Company’s common shares. On March 23, 2022, ~~June 24, 2022 and September 23, 2022,~~ the Company paid a dividend of $0.125 per share, amounting to $23,134 ~~$22,935 and $22,873~~ in the aggregate, to shareholders of record as of March 10, 2022.

On February 9, 2023, the Company announced that its Board had approved a 10% increase in its quarterly cash dividend to $0.1375 per share, up from $0.125 per share in 2022, ~~June~~representing a planned annual dividend of $0.55 per common share, up from $0.50 per share in 2022, payable to holders of the Company’s common shares. On March 24, 2023, the Company paid a dividend of $0.1375 per share, amounting to $25,255 in the aggregate, to shareholders of record as of March 10, ~~2022 and September 9, 2022, respectively.~~2023.

18. Earnings per share

The Company calculates earnings per share in accordance with FASB guidance on earnings per share. Basic and diluted earnings per common share give effect to the change in the number of Company common shares outstanding. The calculation of basic earnings per common share is determined by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the respective periods. The potentially dilutive shares, consisting of outstanding options on common shares, restricted share units, common shares to be issued under the ESPP and performance units, have been included in the computation of diluted net earnings per share and the number of weighted average shares outstanding, except where the result would be anti-dilutive.

The number of shares subject to stock awards outstanding but not included in the computation of diluted earnings per common share because their effect was anti-dilutive is ~~1,698,735~~2,738,799 and ~~2,757,114 for the nine months ended September 30, 2021 and 2022, respectively, and 1,556,671 and 2,667,958~~1,860,417 for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022,~~2023, respectively.


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2021		2022		2021		2022			2022		2023
Net income	Net income	$	102,386	$	95,843	$	296,363	$	263,692	Net income	$	96,179	$	106,101
Weighted average number of common shares used in computing basic earnings per common share	Weighted average number of common shares used in computing basic earnings per common share	187,856,026		183,312,013		187,945,234		184,456,047		Weighted average number of common shares used in computing basic earnings per common share	185,637,776		183,795,404
Dilutive effect of stock-based awards	Dilutive effect of stock-based awards	5,303,903		4,087,191		4,940,018		3,818,373		Dilutive effect of stock-based awards	3,920,628		3,790,873
Weighted average number of common shares used in computing dilutive earnings per common share	Weighted average number of common shares used in computing dilutive earnings per common share	193,159,929		187,399,204		192,885,252		188,274,420		Weighted average number of common shares used in computing dilutive earnings per common share	189,558,404		187,586,277
Earnings per common share	Earnings per common share									Earnings per common share
Basic	Basic	$	0.55	$	0.52	$	1.58	$	1.43	Basic	$	0.52	$	0.58
Diluted	Diluted	$	0.53	$	0.51	$	1.54	$	1.40	Diluted	$	0.51	$	0.57

4036

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

19. Segment reporting

The Company manages various types of business process and ~~transformation~~information technology services in an integrated manner for clients in various industries and geographic locations. The Company's operating segments are significant strategic business units that align its products and services with how it manages its business, approaches key markets and interacts with its clients.

During the second quarter of 2022, the Company renamed its three reportable segments. Beginning in the second quarter of 2022, the Company's: (1) Banking, Capital Markets and Insurance segment ~~has been~~was renamed the Financial Services segment; (2) Consumer Goods, Retail, Life Sciences and Healthcare segment ~~has been~~was renamed the Consumer and Healthcare segment; and (3) High Tech, Manufacturing and Services segment ~~has been~~was renamed the High Tech and Manufacturing segment.

The Company’s Chief Executive Officer, who has been identified as the Chief Operating Decision Maker ("CODM"), reviews operating segment revenue, which is a GAAP measure, and ~~operating segment~~ adjusted income from operations ("AOI"), which is a non-GAAP measure. The Company does not allocate, and therefore the CODM does not evaluate, stock-based compensation expenses, amortization and impairment of acquired intangible assets, foreign exchange gain/(losses) (other than those included in income from operations), interest income/(expense), restructuring expenses, acquisition related expenses, any losses or gains from businesses held for sale, including impairment charges, other income/(expense), or income taxes by segment. The Company’s operating assets and liabilities pertain to multiple segments. The Company manages assets and liabilities on a total company basis, not by operating segment, and therefore asset and liabilities information and capital expenditures by operating segment are not presented to the CODM and are not reviewed by the CODM.

The CODM continues to review ~~the~~ operating segment revenue, which is a GAAP measure, and ~~operating segment~~ adjusted income from operations, which is a non-GAAP measure.

Revenues and adjusted income from operations for each of the Company’s segments for the three months ended ~~September 30, 2021~~March 31, 2022 were as follows:


		Net revenues					Net revenues
		Data-Tech-AI	Digital operations	Total	AOI		Data-Tech-AI	Digital operations	Total	AOI
Financial Services	Financial Services	107,683	150,838	258,521	32,514	Financial Services	119,709	154,693	274,402	26,450
Consumer and Healthcare	Consumer and Healthcare	168,801	219,268	388,069	63,681	Consumer and Healthcare	180,634	220,986	401,620	55,305
High Tech and Manufacturing	High Tech and Manufacturing	151,770	214,971	366,741	68,263	High Tech and Manufacturing	166,403	226,018	392,421	70,095
Total reportable segment		428,254	585,077	1,013,331	164,458
Net revenues						Net revenues	466,746	601,697	1,068,443
Others#	Others#	554	1,852	2,406	4,484	Others#				8,169
Total		428,808	586,929	1,015,737	168,942
Total AOI						Total AOI				160,019
Stock-based compensation	Stock-based compensation				(21,485)	Stock-based compensation				(15,250)
Amortization and impairment of acquired intangible assets (other than included above)	Amortization and impairment of acquired intangible assets (other than included above)				(13,688)	Amortization and impairment of acquired intangible assets (other than included above)				(11,302)
Foreign exchange gains (losses), net	Foreign exchange gains (losses), net				2,733	Foreign exchange gains (losses), net				4,303
Interest income (expense), net	Interest income (expense), net				(12,765)	Interest income (expense), net				(12,088)
Income tax expense	Income tax expense				(21,351)	Income tax expense				(29,503)
Net income	Net income				102,386	Net income				96,179

~~#Revenues, net for “Others” primarily represents~~# With effect from January 1, 2023, the ~~impact of foreign exchange fluctuations, which is not~~Company has modified the items that are allocated to the ~~Company’s~~Company's reportable segments for ~~management’s internal reporting purposes. Adjusted~~the purpose of evaluating segment performance, and the Company now allocates by segment certain foreign exchange gains/(losses) (to the extent included in income from operations) and unallocated resource costs. Segment results after such allocation are reviewed by the CODM to evaluate segment performance. Prior to January 1, 2023, the CODM evaluated the performance of reportable segment revenue and adjusted income from operations ~~for “Others” primarily represents~~after excluding these items, which were previously included under "Others." Accordingly, the ~~impact~~Company has recast the segment revenue and adjusted income from operations of ~~over-absorption of overhead and foreign exchange fluctuations, which are not allocated to the Company’s~~its reportable segments for ~~management’s internal reporting purposes.~~

the three months ended March 31, 2022 to present comparable segment information.

4137

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

19. Segment reporting (Continued)

Adjusted income from operations for “Others” primarily represents the impact of certain under or over-absorption of overhead, and allowance for credit losses, which are not allocated to the Company’s segments for management’s internal reporting purposes.

Revenues and adjusted income from operations for each of the Company’s segments for the three months ended ~~September 30, 2022~~March 31, 2023 were as follows:


		Net revenues					Net revenues
		Data-Tech-AI	Digital operations	Total	AOI		Data-Tech-AI	Digital operations	Total	AOI
Financial Services	Financial Services	137,629	166,216	303,845	41,008	Financial Services	127,243	171,244	298,487	45,577
Consumer and Healthcare	Consumer and Healthcare	194,154	218,695	412,849	49,598	Consumer and Healthcare	177,832	207,785	385,617	56,331
High Tech and Manufacturing	High Tech and Manufacturing	188,455	236,837	425,292	69,553	High Tech and Manufacturing	180,158	225,057	405,215	64,291
Total reportable segment		520,238	621,748	1,141,986	160,159
Net revenues						Net revenues	485,233	604,086	1,089,319
Business held for sale (refer to Note (a) below and Note 8)						Business held for sale (refer to Note (a) below and Note 8)			(490)	1,201
Net revenues (excluding business held for sale - refer to Note (a) below and Note 8)						Net revenues (excluding business held for sale - refer to Note (a) below and Note 8)			1,088,829
Others*	Others*	(10,508)	(20,441)	(30,949)	21,591	Others*				11,592
Total		509,730	601,307	1,111,037	181,750
Business held for sale (refer to Note (a) below and Note 8)				(3,932)	7,069
Total (excluding business held for sale - refer to Note (a) below and Note 8)				1,107,105	188,819
Total AOI						Total AOI				178,992
Stock-based compensation	Stock-based compensation				(19,202)	Stock-based compensation				(19,704)
Amortization and impairment of acquired intangible assets (other than included above)	Amortization and impairment of acquired intangible assets (other than included above)				(10,516)	Amortization and impairment of acquired intangible assets (other than included above)				(8,143)
Foreign exchange gains (losses), net	Foreign exchange gains (losses), net				3,867	Foreign exchange gains (losses), net				(1,040)
Interest income (expense), net	Interest income (expense), net				(13,399)	Interest income (expense), net				(9,627)
Business held for sale (refer to Note (a) below and Note 8)					(7,069)
Impairment charge on assets classified as held for sale (refer to Note (a) below and Note 8)					(21,426)
Operating loss from the business classified as held for sale (refer to Note (a) below and Note 8)						Operating loss from the business classified as held for sale (refer to Note (a) below and Note 8)				(1,201)
Loss on the sale of business classified as held for sale (refer to Note (a) below and Note 8)						Loss on the sale of business classified as held for sale (refer to Note (a) below and Note 8)				(802)
Income tax expense	Income tax expense				(25,231)	Income tax expense				(32,374)
Net income	Net income				95,843	Net income				106,101

(a) During the second quarter of 2022, the Company's management approved a plan to divest a business that ~~comprises~~comprised part of the Company's Consumer and Healthcare segment. The revenues and associated operating losses attributable to this business, including ~~an impairment charge~~a loss on the sale of business recorded in the ~~third~~ quarter ~~of 2022, attributable to this business~~ended March 31, 2023, have been excluded from the computation of adjusted operating income margin with effect from April 1, 2022, as management believes that excluding these items provides useful information about the Company's financial performance and underlying business trends.

*~~Revenues, net for “Others” primarily represents~~With effect from January 1, 2023, the ~~impact of foreign exchange fluctuations, which is not~~Company has modified the items that are allocated to the ~~Company’s~~Company's reportable segments for ~~management’s internal reporting purposes.~~the purpose of evaluating segment performance, and the Company now allocates by segment certain foreign exchange gains/(losses) (to the extent included in income from operations) and unallocated resource costs. Segment results after such allocation are reviewed by the CODM to evaluate segment performance. Prior to January 1, 2023, the CODM evaluated the performance of reportable segment revenue and adjusted income from operations after excluding these items, which were previously included under "Others." Adjusted income from operations for “Others” primarily represents the impact of ~~under-absorption~~certain under or over-absorption of overhead, ~~unallocated~~and allowance for credit losses, ~~and foreign exchange fluctuations, which are not allocated to the Company’s segments for management’s internal reporting purposes.~~

~~GENPACT LIMITED AND ITS SUBSIDIARIES~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~

~~(In thousands, except per share data and share count)~~

~~19. Segment reporting (Continued)~~

~~Revenues and adjusted income from operations for each of the Company’s segments for the nine months ended September 30, 2021 were as follows:~~

Net revenues
Data-Tech-AI Digital operations Total AOI
Financial Services 293,207 457,383 750,590 98,972
Consumer and Healthcare 476,822 624,361 1,101,183 184,647
High Tech and Manufacturing 434,143 647,623 1,081,766 203,915
Total reportable segment 1,204,172 1,729,367 2,933,539 487,534
Others## 4,340 12,055 16,395 21,087
Total 1,208,512 1,741,422 2,949,934 508,621
Stock-based compensation (58,604)
Amortization and impairment of acquired intangible assets (other than included above) (43,977)
Foreign exchange gains (losses), net 11,529
Interest income (expense), net (38,198)
Income tax expense (83,008)
Net income 296,363

##Revenues, net for “Others” primarily represents the impact of foreign exchange fluctuations, which is not allocated to the Company’s segments for management’s internal reporting purposes. Adjusted income from operations for “Others” primarily represents the impact of over-absorption of overhead and foreign exchange fluctuations, which are not allocated to the Company’s segments for management’s internal reporting purposes.

~~GENPACT LIMITED AND ITS SUBSIDIARIES~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~

~~(In thousands, except per share data and share count)~~

~~19. Segment reporting (Continued)~~

~~Revenues and adjusted income from operations for each of the Company’s segments for the nine months ended September 30, 2022 were as follows:~~

Net revenues
Data-Tech-AI Digital operations Total AOI
Financial Services 391,485 481,116 872,601 102,747
Consumer and Healthcare 560,561 662,721 1,223,282 158,290
High Tech and Manufacturing 530,975 694,725 1,225,700 207,850
Total reportable segment 1,483,021 1,838,562 3,321,583 468,887
Others** (18,002) (34,954) (52,956) 48,455
Total 1,465,019 1,803,608 3,268,627 517,342
Business held for sale (refer to Note (b) below and Note 8) (8,843) 14,291
Total (excluding business held for sale - refer to Note (b) below and Note 8) 3,259,784 531,633
Stock-based compensation (54,894)
Amortization and impairment of acquired intangible assets (other than included above) (32,709)
Foreign exchange gains (losses), net 9,312
Interest income (expense), net (36,691)
Business held for sale (refer to Note (b) below and Note 8) (14,291)
Impairment charge on assets classified as held for sale (refer to Note (b) below and Note 8) (21,426)
Restructuring expenses (refer to Note (c) below and Note 25) (38,815)
Income tax expense (78,427)
Net income 263,692

(b) During the second quarter of 2022, the Company's management approved a plan to divest a business that comprises part of the Company's Consumer and Healthcare segment. The revenues and associated losses, including an impairment charge recorded in the third quarter of 2022, attributable to this business have been excluded from the computation of adjusted operating income margin with effect from April 1, 2022, as management believes that excluding these items ~~provides useful information about the Company's financial performance and underlying business trends.~~

(c) The Company does not allocate these charges to individual segments in internal management reports used by the CODM. Accordingly, such expenses are included in the Company's segment reporting as “unallocated costs.”

**Revenues, net for “Others” primarily represents the impact of foreign exchange fluctuations, which is not allocated to the Company’s segments for management’s internal reporting purposes. Adjusted income from operations for “Others” primarily represents the impact of under-absorption of overhead, unallocated allowance for credit losses and foreign exchange fluctuations, which are not allocated to the Company’s segments for management’s internal reporting purposes.

4438

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

20. Net revenues

Disaggregation of revenue

In the following table, the Company’s revenue is disaggregated by the nature of services provided:


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2021		2022		2021		2022			2022		2023
Data-Tech-AI	Data-Tech-AI	$	428,808	$	509,730	$	1,208,512	$	1,465,019	Data-Tech-AI	$	466,746	$	485,233
Digital Operations	Digital Operations	586,929		601,307		1,741,422		1,803,608		Digital Operations	601,697		604,086
Total net revenues		$	1,015,737	$	1,111,037	$	2,949,934	$	3,268,627
Net revenues										Net revenues	$	1,068,443	$	1,089,319

All three of the Company's segments include revenue from both Data-Tech-AI and Digital Operations. See Note 19 for additional information.

During the second quarter of 2022, the Company's management modified the manner in which it disaggregates revenue for reporting and internal tracking purposes, and the Company now reports revenue disaggregated by the nature of services provided to the client, namely either Data-Tech-AI or Digital Operations. Prior to the second quarter of 2022, the Company disaggregated its revenue as revenue from the General Electric Company (GE) or revenue from Global Clients (other than GE).

The Company has evaluated the impact of the COVID-19 pandemic on the Company’s net revenues for the three and nine months ended September 30, 2021 and 2022, respectively, to ensure that revenue is recognized after considering all impacts to the extent currently known. Impacts observed include constraints on the Company’s ability to render services, whether due to full or partial shutdowns of the Company’s facilities or travel restrictions, penalties relating to breaches of service level agreements, and contract terminations or contract performance delays initiated by clients. The Company’s net revenues for the three and nine months ended September 30, 2021 were lower than expected before the onset of the pandemic, primarily due to delays in obtaining client approvals to shift to a virtual, work-from-home operating environment, whether as a result of regulatory constraints or due to privacy or security concerns. The COVID-19 pandemic did not have a significant impact on the Company’s net revenues for the three and nine months ended September 30, 2022.

~~Due to the nature of the pandemic, the Company will continue to monitor developments to identify significant uncertainties relating to revenue in future periods.~~

Contract balances

Accounts receivable include amounts for services that the Company has performed but for which payment has not been received. The Company typically follows a 30-day billing cycle and, as such, at any point in time may have accrued up to 30 days of revenues that have not been billed. The Company has determined that in instances where the timing of revenue recognition differs from the timing of invoicing, the related contracts generally do not include a significant financing component. Refer to Note 4 for details on the Company’s accounts receivable and allowance for credit losses.

The following table shows the details of the Company’s contract balances:


		As of December 31, 2021		As of September 30, 2022			As of December 31, 2022		As of March 31, 2023
Contract assets (Note a)	Contract assets (Note a)	$	13,741	$	18,646	Contract assets (Note a)	$	18,347	$	16,127
Contract liabilities (Note b)	Contract liabilities (Note b)					Contract liabilities (Note b)
Deferred transition revenue	Deferred transition revenue	$	155,077	$	136,845	Deferred transition revenue	$	128,726	$	118,110
Advance from customers	Advance from customers	$	85,747	$	71,464	Advance from customers	$	88,056	$	81,288

(a)Included in "prepaid expenses and other current assets" and "other assets" in the consolidated balance sheet.

(b)Included in "accrued expenses and other current liabilities" and "other liabilities" in the consolidated balance sheet.

As of December 31, 2022 and March 31, 2023, the Company reclassified certain contract assets amounting to $2,168 and $0, respectively, and contract liabilities amounting to $649 and $0, respectively, as assets and liabilities held for sale. See Note 8 for additional information.

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

20. Net revenues (Continued)

~~(b)Included in "accrued expenses and other current liabilities" and "other liabilities" in the consolidated balance sheet.~~

As of September 30, 2022, the Company reclassified certain contract assets and contract liabilities of $2,270 and $2,038, respectively, to assets and liabilities held for sale. See Note 8 for additional information.

Contract assets represent the contract acquisition fees or other upfront fees paid to a customer. Such costs are amortized over the expected period of benefit and recorded as an adjustment to the transaction price and deducted from revenue. The Company’s assessment did not indicate any significant impairment losses on its contract assets for the periods presented.

Contract liabilities include that portion of revenue for which payments have been received in advance from customers. The Company also defers revenues attributable to certain process transition activities for which costs have been capitalized by the Company as contract fulfillment costs. Consideration received from customers, if any, relating to such transition activities is also included as part of contract liabilities. The contract liabilities are included within “Accrued expenses and other current liabilities” and “Other liabilities” in the unaudited consolidated balance sheets. The revenues are recognized as (or when) the performance obligation is fulfilled under the contract with the customer.

Changes in the Company’s contract asset and liability balances during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2022~~2023 were a result of normal business activity and not materially impacted by any other factors.

~~Revenue~~The amount of revenue recognized during the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022~~2023 that was included in the Company's contract liabilities balance at the beginning of the period was ~~$60,756~~$46,625 and ~~$63,762, respectively.~~

~~Revenue recognized during the nine months ended September 30, 2021 and 2022 that was included in the Company's contract liabilities balance at the beginning of the period was $128,628 and $129,046,~~$71,504, respectively.

The following table includes estimated revenue expected to be recognized in the future related to remaining performance obligations as of ~~September 30, 2022:~~March 31, 2023:


Particulars	Particulars	Total		Less than 1 year		1-3 years		3-5 years		After 5 years		Particulars	Total		Less than 1 year		1-3 years		3-5 years		After 5 years
Transaction price allocated to remaining performance obligations	Transaction price allocated to remaining performance obligations	$	208,309	$	144,441	$	52,277	$	10,494	$	1,097	Transaction price allocated to remaining performance obligations	$	199,398	$	147,260	$	42,666	$	8,951	$	521
Transaction price allocated to remaining performance obligations relating to business held for sale		$	2,038	$	2,038	$	—	$	—	$	—

The following table provides details of the Company’s contract cost assets:


		Three months ended September 30,								Nine months ended September 30,									Three months ended March 31,
		2021				2022				2021				2022					2022				2023
Particulars	Particulars	Sales incentive programs		Transition activities		Sales incentive programs		Transition activities		Sales incentive programs		Transition activities		Sales incentive programs		Transition activities		Particulars	Sales incentive programs		Transition activities		Sales incentive programs		Transition activities
Opening balance	Opening balance	$	31,559	$	210,747	$	29,186	$	198,401	$	33,390	$	192,507	$	32,296	$	206,498	Opening balance	$	32,296	$	206,498	$	34,805	$	181,865
Closing balance	Closing balance	31,058		209,320		28,718		189,419		31,058		209,320		28,718		189,419		Closing balance	30,833		203,939		36,231		166,315
Amortization	Amortization	5,041		23,028		6,632		23,767		14,576		58,644		19,220		66,180		Amortization	6,340		20,538		7,074		23,980

As of ~~September 30,~~December 31, 2022 and March 31, 2023, the Company reclassified certain contract cost assets amounting to ~~$1,417~~$1,247 and $0, respectively, to assets ~~and liabilities~~ held for sale. See Note 8 for additional information.

4640

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

21. Other operating (income) expense, net

Three months ended September 30, Nine months ended September 30,
2021 2022 2021 2022
Write-down of intangible assets and property, plant and equipment $ — $ — $ 915 $ 1,377
Write-down of operating right-of-use assets and other assets* — — — 20,307
Impairment charge on intangible assets and goodwill held-for-sale — 21,426 — 21,426
Other operating income (93) (489) (1,132) (953)
Other operating (income) expense, net $ (93) $ 20,937 $ (217) $ 42,157


	Three months ended March 31,
	2022		2023
Loss on the sale of business classified as held for sale (refer to Note 8)	—		802
Other operating (income) expense	3		(413)
Other operating (income) expense, net	$	3	$	389

*See Notes 10 and 25 for additional information about other operating (income) expense, net for the three and nine months ended September 30, 2022.

22. Interest income (expense), net


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2021		2022		2021		2022			2022		2023
Interest income	Interest income	$	2,068	$	1,440	$	4,544	$	4,042	Interest income	$	1,918	$	4,926
Interest expense	Interest expense	(14,833)		(14,839)		(42,742)		(40,733)		Interest expense	(14,006)		(14,553)
Interest income (expense), net	Interest income (expense), net	$	(12,765)	$	(13,399)	$	(38,198)	$	(36,691)	Interest income (expense), net	$	(12,088)	$	(9,627)

23. Income taxes

The Company determines its tax provision for interim periods using an estimate of its annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if its estimated tax rate changes, the Company makes a cumulative adjustment.

The Company’s effective tax rate (“ETR”) was 20.8% for the three months ended September 30, 2022, up from 17.3% for the three months ended September 30, 2021. The increase in the Company’s ETR in the three months ended September 30, 2022 is primarily due to a lower mix of benefits recorded in the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

The following table summarizes activities related to the Company’s unrecognized tax benefits for uncertain tax positions for the ~~nine~~three months ended ~~September 30, 2022~~:March 31, 2023:


	~~Nine~~Three months ended ~~September 30, 2022~~March 31, 2023
Opening balance at January 1	$	~~25,651~~25,430
Increase related to prior year tax positions, including recorded in acquisition accounting	16
~~Decrease related to prior year tax positions~~	~~(1,678)~~187
Decrease related to prior year tax positions due to lapse of applicable statute of limitation	~~(84)~~(65)
Decrease related to settlements with taxing authorities	(170)
Effect of exchange rate changes	~~(1,232)~~86
Closing balance at ~~September 30~~March 31	$	~~22,673~~25,468

As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the Company had unrecognized tax benefits amounting to ~~25,651~~$25,430 and ~~$22,673,~~$25,468, respectively, which, if recognized, would impact the Company’s effective tax rate.

As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the Company had accrued ~~$2,842~~$2,871 and ~~$2,904,~~$2,995, respectively, in interest and ~~$628~~$374 and ~~$528,~~$376, respectively, for penalties relating to unrecognized tax benefits.

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

23. Income taxes (Continued)

During the year ended December 31, ~~2021~~2022 and the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company recognized approximately ~~$(13,851)~~$(2,583) and ~~$(664),~~$34, respectively, in interest related to income taxes.

24. Commitments and contingencies

Capital commitments

As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the Company has committed to spend ~~$13,317~~$17,972 and ~~$22,403,~~$14,170, respectively, under agreements to purchase property, plant and equipment. This amount is net of capital advances paid in respect of these purchases.

Bank guarantees

The Company has outstanding bank guarantees and letters of credit amounting to ~~$7,865~~$8,050 and ~~$7,683~~$10,827 as of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, respectively. Bank guarantees are generally provided to government agencies and excise and customs authorities for the purpose of maintaining a bonded warehouse. These guarantees may be revoked if the government agencies suffer any losses or damages through the breach of any of the covenants contained in the agreements governing such guarantees.

Other commitments

Certain units of the Company’s Indian subsidiaries are established as Software Technology Parks of India units or Special Economic Zone (“SEZ”) units under the relevant regulations issued by the Government of India. These units are exempt from customs and other duties on imported and indigenous capital goods, stores and spares. SEZ units are also exempt from the Goods and Services Tax (“GST”) that was introduced in India in 2017. The Company has undertaken to pay taxes and duties, if any, in respect of capital goods, stores, spares and services consumed duty-free, in the event that certain terms and conditions are not fulfilled.

Contingency

(a) In February 2019, there was a judicial pronouncement in India with respect to defined contribution benefit payments interpreting certain statutory defined contribution obligations of employees and employers. It is not currently clear whether the interpretation set out in the pronouncement has retrospective application. If applied retrospectively, the interpretation would result in an increase in contributions payable by the Company for past periods for certain of its India-based employees. There are numerous interpretative challenges concerning the retrospective application of the judgment. Due to such challenges and a lack of interpretive guidance and based on legal advice the Company has obtained on the matter, it is currently impracticable to reliably estimate the timing and amount of any payments the Company may be required to make. Accordingly, the Company plans to obtain further clarity and will evaluate the amount of a potential provision, if any.

(b) The Indian taxing authorities (“ITA”) have initiated proceedings to examine the availability of a tax exemption claimed by the Company in respect of exports of services and related refunds under the Indian Goods and Services Tax (“GST”) ~~tax~~ regime and the previous service tax regime. In the second quarter of 2020, the ITA began to challenge or reject the Company’s Indian GST and service tax refunds in certain Indian states. In total, refunds of ~~$28,535~~$28,325 have been denied or challenged by the ITA. Additional refunds may be denied. ~~The Company is pursuing appeals of the denied refunds before relevant appellate authorities.~~ The Company had requested these refunds pursuant to the tax exemption available for exports under the previous service tax regime as well as the current GST regime in respect of services performed by the Company in India for affiliates and clients outside of India. In denying the refunds, the ITA have taken the position that the services provided are local services, which interpretation, if correct, would make the service tax and GST exemption on exports unavailable to the Company in respect of such services. Additional potentially material challenges and assessments may result from ongoing proceedings related to service tax recovery. The Government of India has issued an administrative circular which supports the Company’s position. Further, in the fourth quarter of 2022, the Punjab and Haryana High Court ruled in favor of the Company ~~believes~~in respect of this issue. The ITA may appeal the High Court's ruling before the Supreme Court of India. During the first quarter of 2023, the Company's appeals relating to refund rejections of $23,035 were decided in the Company's favor by a tax appellate authority, which has ordered the ITA to process the Company's GST refunds pursuant to the High Court's earlier ruling. The Company continues to believe that the denial of the refunds claimed pursuant to the service tax and GST exemption is incorrect and that the risk that the liability will materialize is remote. The Government of India has issued an administrative circular which supports the Company’s position, and the Company believes that the appellate authorities will reverse the previous orders denying refunds owed to the Company. Accordingly, no reserve has been provided as of ~~September 30, 2022.~~March 31, 2023.

4842

GENPACT LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except per share data and share count)

24. Commitments and contingencies (Continued)

(c) The ITA have ~~also~~ issued assessment orders to certain subsidiaries of the Company seeking to assess income tax on certain transactions that occurred in 2013 and 2015. The Company has received demands for potential tax claims related to these orders in an aggregate amount of ~~$209,042,~~$210,413, including interest through the date of the orders. This amount excludes penalties or interest accrued since the date of the orders. The Company is pursuing appeals before the relevant appellate authorities in respect of these orders. The Income Tax Appellate Tribunal of India (the “Tribunal”) has accepted the legal arguments made by the Company and ruled in favor of the Company in relation to ~~demands~~a demand of ~~$100,589,~~$99,849 and the corresponding assessment order has been cancelled. The ITA may appeal the Tribunal's ruling before a higher court. Similarly, in respect of the transaction undertaken in 2015, the ITA has attempted to revise a previously closed assessment. During 2022, the Tribunal ruled in favor of the Company denying the ITA's ability to revise the assessment, and the ITA have recently appealed this ruling before the Delhi High Court. In January 2023, notwithstanding the Tribunal’s decision in the Company's favor, the tax authorities issued a revised assessment order to the Company, and in March 2023, this assessment order was struck down by the Tribunal. The ITA may appeal this most recent decision of the Tribunal before the Delhi High Court. Based on ~~its evaluation of~~ the ~~facts underlying the transactions and legal advice received on the matter,~~foregoing, the Company believes that it is more likely than not that the Company’s position will ultimately prevail in respect of these transactions. Accordingly, no reserve has been provided as of ~~September 30, 2022.~~March 31, 2023.

(d) In September 2020, the Indian Parliament approved new labor codes including the Code on Social Security, 2020 (the “Code”), which will impact the Company’s contributions to its defined ~~contribution and defined~~ benefit plans for employees based in India. The ~~date the changes will take effect is~~Code has not yet ~~known~~been made effective and the rules for ~~quantifying~~different states are in the ~~financial impact have not yet been published.~~process of being framed. The Company will evaluate the impact of the Code on the Company in its financial statements for the period in which the Code becomes effective and the related rules are published.

25. ~~Restructuring~~

The Company has implemented a flexible, hybrid global delivery model in line with the Company's long-term strategy that incorporates a mix of offshore, onshore, near shore, and remote working. As a result, the Company determined that certain leases and employee roles were no longer needed.

Accordingly, in the second quarter of 2022, the Company recorded a $38,815 restructuring charge relating to the abandonment of leased office premises and an employee severance charge. Of the total charge of $38,815, $21,684 was a non-cash charge (including $1,377 related to writing down of certain property, plant and equipment) recorded as other operating expense, which pertains to the abandonment of various leased office premises. The Company also recorded a severance charge of $17,131 in personnel expenses. The Company has sought out one or more third parties to sublease certain office premises from the Company, wherever applicable, instead of abandoning them. However, the Company has not been successful in such attempts, and the Company believes it is unlikely that it will be able to sublease such premises in the foreseeable future. No restructuring costs were incurred related to this restructuring plan in the third quarter of 2022.

~~26.~~ Subsequent events

Dividend

On ~~October 13, 2022,~~May 4, 2023, the Company announced that its Board of Directors has declared a dividend for the ~~fourth~~first quarter of ~~2022~~2023 of ~~$0.125~~$0.1375 per common share, which is payable on ~~December 23, 2022~~June 26, 2023 to shareholders of record as of the close of business on ~~December~~June 9, ~~2022.~~2023. The declaration of any future dividends will be at the discretion of the Board of Directors and subject to Bermuda and other applicable laws.

4943

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is meant to provide material information relevant to an assessment of the financial condition and results of operations of our Company, including an evaluation of the amounts and uncertainties of cash flows from operations and from outside sources, so as to allow investors to better view our Company from management’s perspective. The following discussion should be read in conjunction with our consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~ 2022and with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. In addition to historical information, this discussion includes forward-looking statements and information that involves risks, uncertainties and assumptions, including but not limited to those listed below and under “Risk Factors” in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Special Note Regarding Forward-Looking Statements

We have made statements in this Quarterly Report on Form 10-Q (the “Quarterly Report”) in, among other sections, Part I, Item 2—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are forward-looking statements. In some cases, you can identify these statements by forward-looking terms such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “could,” “may,” “shall,” “will,” “would” and variations of such words and similar expressions, or the negative of such words or similar expressions. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, which in some cases may be based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks outlined in Part II, Item 1A—"Risk Factors" in this Quarterly Report on Form 10-Q and Part I, Item 1A—“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. For a discussion of risks of which we are aware in relation to the COVID-19 pandemic, see “Our business and results of operations have been adversely impacted and may in the future be adversely impacted by the COVID-19 pandemic" under Part I, Item 1A—"Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. Many of the risks, uncertainties and other factors identified below have been, and may continue to be, amplified by the COVID-19 pandemic.

Forward-looking statements we may make include, but are not limited to, statements relating to:

•our ability to retain existing clients and contracts;

•our ability to win new clients and engagements;

•~~our rate of employee attrition;~~

•the expected value of the statements of work under our master service agreements;

•our beliefs about future trends in our market;

•political, economic or business conditions in countries where we have operations or where our clients operate, ~~including the withdrawal of the United Kingdom, or the U.K., from the European Union, or the EU, commonly known as Brexit, and uncertainty about the future relationship between the U.K. and the EU,~~ and heightened economic uncertainty and ~~political uncertainty within and among other EU member states;~~geopolitical tensions;

•expected spending by existing and prospective clients on ~~business process outsourcing, information technology and digital transformation~~the types of services ~~by clients;~~we provide;

•foreign currency exchange rates;

•~~the impact of inflation on our and our clients' business operations;~~

•our ability to convert bookings to revenue;

•our rate of employee attrition;

•our effective tax rate; and

•competition in our industry.

Factors that may cause actual results to differ from expected results include, among others:

•~~the invasion of Ukraine by Russia~~our ability to effectively price our services and ~~the related sanctions~~maintain our pricing and ~~other measures being implemented or imposed in response thereto, or any potential expansion or escalation of the conflict or its economic disruption beyond its current scope;~~employee and asset utilization rates;

•~~general inflationary pressures and our ability to share increased costs with our clients;~~

•~~wage~~ increases in ~~countries~~wages in locations where we have operations;

•our ability to hire and retain enough qualified employees to support our operations;

•general inflationary pressures and our ability to ~~effectively price~~share increased costs with our ~~services and maintain pricing and employee utilization rates;~~

•~~the impact of the COVID-19 pandemic on our business, results of operations and financial condition;~~clients;

•our ability to develop and successfully execute our business strategies;

•our ability to comply with data protection laws and regulations and to maintain the security and confidentiality of personal and other sensitive data of our clients, employees or others;

•telecommunications or technology disruptions or breaches, natural or other disasters, or medical epidemics or pandemics, including the COVID-19 pandemic;

•deterioration in the global economic environment and its impact on our clients, including the bankruptcy of our clients;

•our dependence on favorable policies and tax laws that may be changed or amended in a manner adverse to us or be unavailable to us in the future, including as a result of tax policy changes in India, and our ability to effectively execute our tax planning strategies;

•technological innovation, including AI technology and future uses of generative AI and large language models, and our ability to invest in new technologies and adapt to industry developments at sufficient speed and scale;

•our dependence on revenues derived from clients in the United States and Europe and clients that operate in certain industries, such as the financial services ~~industry;~~and high tech industries;

•the ongoing conflict between Russia and Ukraine, including any escalation in the conflict, and future actions that may be taken by the United States and other countries in response;

•our ability to successfully consummate or integrate strategic acquisitions or execute divestitures;

•our ability to attract and retain clients and to develop and maintain client relationships on attractive terms;

•our ability to service our defined contribution and benefit plan payment obligations;

•clarification as to the possible retrospective application of a judicial pronouncement in India regarding our defined contribution and benefit plan payment obligations;

•our relationship with the General Electric Company, or GE, and our ability to maintain relationships with former GE businesses;

•financing terms, including ~~but not limited to, changes in the London Interbank Offered Rate, or LIBOR, including the pending global phase-out of LIBOR, the development of alternative rates, including~~ the Secured Overnight Financing Rate ("SOFR") and changes to our credit ratings;

•our ability to meet our corporate funding needs, pay dividends ~~renegotiate our term loan~~ and service debt, including our ability to comply with the restrictions that apply to our indebtedness that may limit our business activities and investment opportunities;

•our ability to successfully implement our new enterprise resource planning system;

•our ability to grow our business and effectively manage growth and international operations while maintaining effective internal controls;

•restrictions on visas for our employees traveling to North America and Europe;

•fluctuations in currency exchange rates between the currencies in which we transact business;

•our ability to retain senior management;

•the selling cycle for our client relationships;

•legislation in the United States or elsewhere that restricts or adversely affects demand for ~~business process outsourcing, information technology and digital transformation~~our services offshore;

•increasing competition in our industry;

•our ability to protect our intellectual property and the intellectual property of others;

•~~deterioration in the global economic environment and its impact on our clients, including the bankruptcy of our clients;~~

•regulatory, legislative and judicial developments, including the withdrawal of governmental fiscal incentives;

•the international nature of our business;

•~~technological innovation;~~

•our ability to derive revenues from new service ~~offerings and acquisitions;~~offerings; and

•unionization of any of our employees.

Although we believe the expectations reflected in the forward-looking statements are reasonable at the time they are made, we cannot guarantee future results, level of activity, performance or achievements. Achievement of future results is subject to risks, uncertainties, and potentially inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements. We undertake no obligation to update any of these forward-looking statements after the date of this filing to conform our prior statements to actual results or revised expectations. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-K, Form 10-Q and Form 8-K reports to the Securities and Exchange Commission (the “SEC”).

~~Continued~~Macroeconomic environment

Our results of operations are affected by economic conditions, including macroeconomic conditions, the overall inflationary environment and levels of business confidence. In the first quarter of 2023, there was significant economic and geopolitical uncertainty in many markets around the world, including with respect to wage inflation, the possibility of slowing global economic growth and increased volatility in foreign currency exchange rates, which impacted and may continue to impact our business.

The ongoing conflict between Russia and Ukraine and actions taken by the United States and other countries in response thereto, including the imposition of ~~COVID-19~~sanctions, have contributed to supply chain disruption and inflation, regional instability and geopolitical tensions. While we do not have any operations in Russia or Ukraine, it is difficult to anticipate the future impacts of any of the foregoing on our business or our clients’ businesses. To date, we do not believe Russia’s ongoing military action in Ukraine and ~~results of~~governmental actions in response thereto have had a material impact on our business, financial position or operations, but we continue to monitor the situation closely.

The COVID-19 pandemic also continues to impact the global economy and the markets in which we operate. In the ~~nine months ended September 30, 2022,~~first quarter of 2023, the pandemic ~~had an insignificant~~did not have a significant impact on our results. ~~Our Global Leadership Council continues to coordinate and oversee our actions in response to the COVID-19 pandemic.~~

We will continue to assess the impact of the COVID-19 pandemic on the Company and respond accordingly. ~~The ultimate impact of COVID-19 on our business and the industry in which we operate remains unknown and unpredictable.~~ Our past results may not be indicative of our future performance, and our financial results in future periods, including but not limited to net revenues, income from operations, income from operations margin, net income, ~~and~~ earnings per share, and cash flow from operations may differ materially from historical trends. The extent of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including but not limited to the duration and severity of the pandemic; future variants or subvariants of the COVID-19 virus and the severity of such variants or subvariants; rates of vaccination and the availability and effectiveness of vaccines, including booster shots, and treatments for COVID-19 globally; the macroeconomic impact of the spread of the virus, including the possibility of prolonged decreases in spending on the types of services we provide, deterioration of our clients’ credit, or reduced economic activity; and related government stimulus measures. We are currently unable to predict the full impact that the COVID-19 pandemic will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including with respect to the factors listed above. In addition, some of our expenses are less variable in nature and do not closely correlate with revenues, which may lead to a decrease in our profitability.

~~Impact of Russia’s Military Action in Ukraine on our Business~~

In February 2022, Russian forces launched significant military action against Ukraine, which has resulted in conflict and disruptions in the region. In response to this action taken by Russia, the United States, the United Kingdom and the

European Union governments, among others, have imposed various sanctions and export-control measures, including comprehensive financial sanctions, targeted at Russia or designated individuals and entities with business interests and/or government connections to Russia or those involved in Russian military activities. Governments have also enhanced export controls and trade sanctions targeting Russia’s import of goods. In the event these geopolitical tensions fail to improve or deteriorate, additional governmental sanctions and measures may be enacted.

It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions. The invasion and retaliatory actions taken by the United States and other countries in respect thereof, as well as any counter measures or retaliatory actions by Russia in response, have in certain cases caused and are likely to continue to cause supply chain disruption and inflation, regional instability, geopolitical shifts and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. While we do not have any operations in Russia or Ukraine, it is difficult to anticipate the impact of any of the foregoing on our business or our clients' businesses, and the conflict and actions taken in response to the conflict could increase our costs, disrupt our supply chain, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition and results of operations. To date, we do not believe Russia’s military action in Ukraine and governmental actions in response thereto have had a material impact on our business, financial position or operations. We continue to monitor the situation closely.

For additional information about the risks we face in relation to the COVID-19 pandemic and Russia's invasion of Ukraine, see Part I, Item 1A—“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Overview

We are a global professional services firm that makes business transformation real. We drive digital-led innovation and run digitally-enabled intelligent operations for our clients, guided by our experience running thousands of processes for hundreds of Fortune Global 500 clients. We have over ~~117,700~~119,100 employees serving clients in key industry verticals from more than 3035 countries. Our registered office is located at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.

In the quarter ended ~~September 30, 2022,~~March 31, 2023, we recorded net revenues of ~~$1,111.0~~$1,089.3 million, of which ~~$509.7~~$485.2 million, or ~~45.9%~~44.5%, was from Data-Tech-AI services, with the remaining ~~601.3~~604.1 million, or ~~54.1%~~55.5%, from Digital Operations services.

Certain Acquisitions

On December 31, 2021, we acquired 100% of the outstanding equity/limited liability company interests in Hoodoo Digital, LLC, a Utah limited liability company, for total purchase consideration of $66.7 million. This amount represents cash consideration of $64.4 million, net of cash acquired of $2.3 million. This acquisition ~~furthers~~furthered our strategy to fuse experience and process innovation to help clients drive end-to-end digital transformation. Hoodoo’s expertise with Adobe Experience Manager and other Adobe applications complements our existing end-to-end client solution that seamlessly integrates digital content, e-commerce, data analytics, and marketing operations. Goodwill arising from the acquisition amounting to $46.0 million has been allocated among our three reporting units as follows: Financial Services in the amount of $4.3 million, Consumer and Healthcare in the amount of $7.3 million and High Tech and Manufacturing in the amount of $34.4 million, using a relative fair value allocation method. Goodwill arising from this acquisition is deductible for income tax purposes and represents primarily the acquired capabilities and other benefits expected to result from combining the acquired operations with our existing operations.

On December 31, 2020, we acquired 100% of the outstanding equity interests in Enquero Inc, a California corporation, and certain affiliated entities in India, the Netherlands and Canada (collectively referred to as “Enquero”) for total purchase consideration of $148.8 million. This amount represents cash consideration of $137.2 million, net of cash acquired of $11.6 million. This acquisition increased the scale and depth of our data and analytics capabilities, enhancing our ability to accelerate the digital transformation journeys of our clients through cloud technologies and advanced data analytics. Goodwill arising from the acquisition amounting to $87.9 million has been allocated among our three reporting units as follows: Financial Services in the amount of $2.6 million, Consumer and Healthcare in the amount of $22.5 million and High Tech and Manufacturing in the amount of $62.7 million, using a relative fair value allocation method. Goodwill arising from this acquisition is not deductible for income tax purposes and represents primarily the acquired capabilities and other benefits expected to result from combining the ~~acquired operations with our existing operations.~~

On October 5, 2020, we acquired 100% of the outstanding equity/limited liability company interests in SomethingDigital.Com LLC, a New York limited liability company, for total purchase consideration of $57.5 million. This amount represents cash consideration of $56.1 million, net of cash acquired of $1.4 million. This acquisition supported our strategy to integrate experience and process innovation to help clients on their digital transformation journeys and

expanded on our existing experience capabilities to support end-to-end digital commerce solutions, both business-to-business and business-to-consumer. Additionally, this acquisition expanded our capabilities into Magento Commerce, which powers Adobe Commerce Cloud, and Shopify Plus, a cloud-based-ecommerce platform for high-volume merchants. Goodwill arising from the acquisition amounting to $36.9 million has been allocated among two of our reporting units as follows: Consumer and Healthcare in the amount of $30.4 million and High Tech and Manufacturing in the amount of $6.6 million, using a relative fair value allocation method. Of the total goodwill arising from this acquisition, $35.1 million is deductible for income tax purposes. The goodwill represents primarily the acquired capabilities and other benefits expected to result from combining the acquired operations with our existing operations.

On November 12, 2019, we acquired 100% of the outstanding equity/limited liability company interests in Rightpoint Consulting, LLC, an Illinois limited liability company, and certain affiliated entities in the United States and India (collectively referred to as “Rightpoint”) for total purchase consideration of $270.7 million. This amount includes cash consideration of $268.2 million, net of cash acquired of $2.5 million. This acquisition expanded our capabilities in improving customer experience and strengthens our reputation as a thought leader in this space. The securities purchase agreement provided certain of the selling equity holders the option to elect to either (a) receive 100% consideration in cash at the closing date for their limited liability company interests and vested options or (b) “roll over” and retain 25% of their Rightpoint limited liability company interests and vested options and receive consideration in cash at closing for the remaining 75% of their Rightpoint limited liability company interests and vested options. Certain selling equity holders elected to receive deferred, variable earnout consideration with an estimated value of $21.5 million over the three-year rollover period, which is included in the purchase consideration. The amount of deferred consideration ultimately payable to the rollover sellers will be based on the future revenue multiple of the acquired business. Goodwill arising from the acquisition amounting to $177.2 million has been allocated among our three reporting units as follows: Financial Services in the amount of $17.0 million, Consumer and Healthcare in the amount of $43.0 million and High Tech and Manufacturing in the amount of $117.2 million, using a relative fair value allocation method. Of the total goodwill arising from this acquisition, $91.9 million is deductible for income tax purposes. The goodwill prim~~arily represents the acquired capabilities and other benefits expected to result from combining the acquired operations with our existing operations.~~

Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, see Note 2—“Summary of significant accounting policies” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above, as well as Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and Note 2—“Summary of significant accounting policies” under Part IV, Item 15—“Exhibits and Financial Statement Schedules” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. ~~These~~There have been no material changes to our critical accounting policies and estimates during the ~~nine~~three months ended ~~September 30,~~March 31, ~~2022~~2023 from those described in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Due to rounding, the numbers presented in the tables included in this “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” may not add up precisely to the totals provided.

5447

Results of Operations

The following table sets forth certain data from our consolidated statements of income for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2022.~~2023.


														Percentage Change Increase/(Decrease)											Percentage Change Increase/(Decrease)
		Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,		Nine months ended September 30,			Three months ended March 31,						Three months ended March 31,
		2021			2022			2021			2022			2022 vs. 2021		2022 vs. 2021			2022			2023			2023 vs. 2022
		(dollars in millions)																	(dollars in millions)
Data-Tech-AI	Data-Tech-AI	$	428.8		$	509.7		$	1,208.5		$	1,465.0		18.9	%	21.2	%	Data-Tech-AI	$	466.7		$	485.2		4.0	%
Digital Operations	Digital Operations	586.9			601.3			1,741.4			1,803.6			2.4	%	3.6	%	Digital Operations	601.7			604.1			0.4	%
Total net revenues		$	1,015.7		$	1,111.0		$	2,949.9		$	3,268.6		9.4	%	10.8	%
Net revenues																		Net revenues	$	1,068.4		$	1,089.3		2.0	%
Cost of revenue	Cost of revenue	653.7			717.2			1,887.6			2,117.4			9.7	%	12.2	%	Cost of revenue	686.0			719.1			4.8	%
Gross profit	Gross profit	362.1			393.8			1,062.3			1,151.2			8.8	%	8.4	%	Gross profit	382.5			370.2			(3.2)	%
Gross profit margin	Gross profit margin	35.6		%	35.4		%	36.0		%	35.2		%					Gross profit margin	35.8		%	34.0		%
Operating expenses	Operating expenses																	Operating expenses
Selling, general and administrative expenses	Selling, general and administrative expenses	216.0			231.4			620.9			701.8			7.2	%	13.0	%	Selling, general and administrative expenses	237.3			216.5			(8.8)	%
Amortization of acquired intangible assets	Amortization of acquired intangible assets	13.9			10.6			44.6			32.8			(23.7)	%	(26.5)	%	Amortization of acquired intangible assets	11.3			8.3			(27.0)	%
Other operating (income) expense, net	Other operating (income) expense, net	(0.1)			20.9			(0.2)			42.2			NM*		NM*		Other operating (income) expense, net	0.0			0.4			NM*
Income from operations	Income from operations	132.3			130.8			397.1			374.4			(1.1)	%	(5.7)	%	Income from operations	133.9			145.1			8.4	%
Income from operations as a percentage of net revenues	Income from operations as a percentage of net revenues	13.0		%	11.8		%	13.5		%	11.5		%					Income from operations as a percentage of net revenues	12.5		%	13.3		%
Foreign exchange gains (losses), net	Foreign exchange gains (losses), net	2.7			3.9			11.5			9.3			41.5	%	(19.2)	%	Foreign exchange gains (losses), net	4.3			(1.0)			(124.2)	%
Interest income (expense), net	Interest income (expense), net	(12.8)			(13.4)			(38.2)			(36.7)			5.0	%	(3.9)	%	Interest income (expense), net	(12.1)			(9.6)			(20.4)	%
Other income (expense), net	Other income (expense), net	1.5			(0.2)			9.0			(4.9)			(115.9)	%	(154.7)	%	Other income (expense), net	(0.4)			4.0			(1085.3)	%
Income before income tax expense	Income before income tax expense	123.7			121.1			379.4			342.1			(2.2)	%	(9.8)	%	Income before income tax expense	125.7			138.5			10.2	%
Income tax expense	Income tax expense	21.4			25.2			83.0			78.4			18.2	%	(5.5)	%	Income tax expense	29.5			32.4			9.7	%
Net income	Net income	$	102.4		$	95.8		$	296.4		$	263.7		(6.4)	%	(11.0)	%	Net income	$	96.2		$	106.1		10.3	%
Net income as a percentage of net revenues	Net income as a percentage of net revenues	10.1		%	8.6		%	10.0		%	8.1		%					Net income as a percentage of net revenues	9.0		%	9.7		%

*Not Meaningful

5548

Three Months Ended ~~September 30,~~March 31, ~~2022~~2023 Compared to the Three Months Ended ~~September 30,~~March 31, ~~2021~~2022

Net revenues. Our net revenues were ~~$1,111.0~~$1,089.3 million in the ~~third~~first quarter of ~~2022,~~2023, up ~~$95.3~~$20.9 million, or ~~9.4%~~2.0%, from ~~$1,015.7~~$1,068.4 million in the ~~third~~first quarter of ~~2021.~~2022. The growth in our net revenues was primarily driven by ~~strong~~ongoing demand for our Data-Tech-AI services, as well as continued steady performance in our Digital Operations services.

Adjusted for foreign exchange, primarily the impact of changes in the ~~value~~values of the Japanese yen, Australian dollar, euro, Indian rupee and U.K. pound sterling against the U.S. dollar, our net revenues grew ~~12.3%~~ 3.8% in the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021~~2022 on a constant currency1 basis. We provide information about our revenue growth on a constant currency1 basis so that our revenue may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating period-to-period comparisons of our business performance. Total net revenues on a constant currency1 basis are calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates and adjusted for hedging gains/losses.

Our average headcount increased by ~~10.5%~~4.8% to approximately ~~116,400~~119,000 in the ~~third~~first quarter of ~~2022~~2023 from approximately ~~105,300~~113,500 in the ~~third~~first quarter of ~~2021.~~2022.


		Three months ended September 30,				Percentage Change Increase/(Decrease)			Three months ended March 31,				Percentage Change Increase/(Decrease)
		2021		2022		2022 vs. 2021			2022		2023		2023 vs. 2022
		(dollars in millions)							(dollars in millions)
Data-Tech-AI	Data-Tech-AI	$	428.8	$	509.7	18.9	%	Data-Tech-AI	$	466.7	$	485.2	4.0	%
Digital Operations	Digital Operations	586.9		601.3		2.4	%	Digital Operations	601.7		604.1		0.4	%
Total net revenues		$	1,015.7	$	1,111.0	9.4	%
Net revenues								Net revenues	$	1,068.4	$	1,089.3	2.0	%

Net revenues from Data-Tech-AI services in the ~~third~~first quarter of ~~2022~~2023 were ~~$509.7~~$485.2 million, up ~~$80.9~~$18.5 million, or ~~18.9%~~4.0%, from ~~$428.8~~$466.7 million in the ~~third~~first quarter of ~~2021.~~2022. This increase was largely driven by continued growth in our cloud-based data ~~solutions~~ and analytics solutions across our focus areas of supply chain management, sales and commercial, and risk management in the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021.~~2022.

Net revenues from Digital Operations services in the ~~third~~first quarter of ~~2022~~2023 were ~~$601.3~~$604.1 million, up ~~$14.4~~$2.4 million, or ~~2.4%~~0.4%, from ~~$586.9~~$601.7 million in the ~~third~~first quarter of ~~2021,~~2022, primarily due to deal ramp-ups from existing contracts and recent wins.

Revenues by segment were as follows:


		Three months ended September 30,				Percentage Change Increase/(Decrease)			Three months ended March 31,				Percentage Change Increase/(Decrease)
		2021		2022		2022 vs. 2021			2022		2023		2023 vs. 2022
		(dollars in millions)							(dollars in millions)
Financial Services	Financial Services	$	258.5	$	303.8	17.5	%	Financial Services	$	274.4	$	298.5	8.8	%
Consumer and Healthcare	Consumer and Healthcare	388.1		412.8		6.4	%	Consumer and Healthcare	401.6		385.6		(4.0)	%
High Tech and Manufacturing	High Tech and Manufacturing	366.7		425.3		16.0	%	High Tech and Manufacturing	392.4		405.2		3.3	%
Total reportable segment		1,013.3		1,142.0		12.7	%
Others		2.4		(30.9)		NM*
Net revenues		1,015.7		1,111.0		9.4	%
Net revenue								Net revenue	1,068.4		1,089.3		2.0	%
Business held for sale	Business held for sale	—		(3.9)		(100.0)	%	Business held for sale	—		(0.5)		(100.0)	%
Net revenues (excluding business held for sale)	Net revenues (excluding business held for sale)	$	1,015.7	$	1,107.1	9.0	%	Net revenues (excluding business held for sale)	$	1,068.4	$	1,088.8	1.9	%

*Not Meaningful

1 Revenue growth on a constant currency basis is a non-GAAP measure and is calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates adjusted for hedging gains/losses in such period.

5649

Net revenues from our Financial Services segment increased by ~~17.5%~~ 8.8% in the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021,~~2022, largely due to continued strong demand ~~for our risk management services~~ from both traditional banks and other financial services clients ~~leveraging~~for our risk management services, which leverage data and analytics. Net revenues ~~fro~~mfrom our Consumer and Healthcare segment ~~increased~~decreased by ~~6.4%~~4.0% in the ~~third~~first quarter of 2023 compared to the first quarter of 2022, ~~compared to the third quarter of 2021,~~ largely driven by lengthening large deal cycles, lower Data-Tech-AI services ~~sales~~revenue and ~~commercial services and supply chain management engagements,~~the impact of our recent divestiture of the business that was previously classified as ~~well as revenues from Hoodoo Digital, LLC, which we acquired in the fourth quarter of 2021.~~held for sale. Net revenues from our High Tech and Manufacturing segment increased by ~~16.0%~~3.3% in the ~~third~~first quarter of 2023 compared to the first quarter of 2022, ~~compared to the third quarter of 2021,~~ largely driven by ~~sales and commercial services, supply chain management services and finance and accounting engagements with both~~ new ~~and existing clients, as well as revenues from Hoodoo Digital, LLC, which we acquired~~deal ramp-ups, partially offset by a change in the ~~fourth quarter of 2021. Net revenues from "Others" in the table above primarily~~ ~~represents the impact of foreign exchange fluctuations, which is not allocated to our segments~~deal scope for ~~management’s internal reporting purposes.~~ a large client. Net revenues from "Business held for sale" in the table above represents revenues from athe business classified as held for sale with effect from April 1, 2022 as part of a series of actions we ~~are taking~~took in 2022 to focus our business on emerging solutions where we see the greatest opportunities for growth and to deprioritize assets that no longer fit with our long-term strategy. For additional information, see Note 8—“Assets and liabilities held for sale” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

With effect from January 1, 2023, we have modified the items that are allocated to the Company's reportable segments for the purpose of evaluating segment performance, and we now allocate by segment certain foreign exchange gains/(losses)(to the extent included in income from operations) and unallocated resource costs. Segment results after such allocation are reviewed by the Chief Operating Decision Maker ("CODM") to evaluate segment performance. Prior to January 1, 2023, the CODM evaluated the performance of reportable segment revenue after excluding these items, which were previously included under "Others." Accordingly, we have recast the segment revenue of our reportable segments for the three months ended March 31, 2022 to present comparable segment information. For additional information, see Note 19—“Segment reporting” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

Cost of revenue. Cost of revenue was ~~$717.2~~$719.1 million in the ~~third~~first quarter of ~~2022,~~2023, up ~~$63.5~~$33.1 million, or ~~9.7%~~4.8%, from ~~$653.7~~$686.0 million in the ~~third~~first quarter of ~~2021.~~2022. The increase in cost of revenue in the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021~~2022 was primarily due to (i) an increase in our operational headcount to support revenue growth, (ii) higher talent replacement costs as well as wage inflation, ~~and~~ (iii) higher travel related ~~expenses.~~expenses, and (iv) a higher than normal severance expense recorded in the first quarter of 2023. This increase was partially offset by a decrease in consulting expense, and depreciation and amortization ~~expenses~~expense in the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021.~~2022.

Gross margin. Our gross margin decreased from ~~35.6%~~35.8% in the ~~third~~first quarter of ~~2021~~2022 to ~~35.4%~~34.0% in the ~~third~~first quarter of ~~2022~~2023. The decrease in gross margin was primarily due to higher ~~personnel expenses, higher~~ talent replacement costs, higher wage inflation, ~~and~~ higher travel related expenses, and a higher severance expense recorded in the first quarter of 2023. This increase in costs was partially offset by ~~a decrease in~~lower depreciation and amortization ~~expenses~~expense, higher gains on foreign currency exchange and increased productivity due to improved utilization of our Data-Tech-AI resources in the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021.~~2022.

Selling, general and administrative ~~expenses~~ (SG&A). expenses. SG&A expenses as a percentage of total net revenues decreased from ~~21.3%~~22.2% in the ~~third~~first quarter of 2022 to 19.9% in the first quarter of ~~2021 to 20.8%~~2023. SG&A expenses were $216.5 million in the ~~third~~first quarter of 2023, down $20.8 million, or (8.8)%, from $237.3 million in the first quarter of 2022. ~~SG&A expenses were $231.4 million in the third quarter of 2022, up $15.5 million, or 7.2%, from the third quarter of 2021.~~ The ~~increase~~decrease in SG&A expenses was primarily due to ~~higher~~the timing of our sales and marketing ~~expenses,~~and research and development investments, which we expect to ramp up during the remainder of 2023, as well as general operating leverage in the first quarter of 2023 compared to the first quarter of 2022, partially offset by an increase in ~~research and development costs related to cloud-based offerings and other prioritized service lines, increased~~ travel related ~~expenses and increased staffing as well as wage inflation in the~~ ~~third~~ ~~quarter of 2022 compared to the~~ ~~third~~ ~~quarter of 2021, partially offset by operating leverage.~~expenses.

Amortization of acquired intangibles. Amortization of acquired intangibles was ~~$10.6~~$8.3 million in the ~~third~~first quarter of ~~2022,~~2023, down ~~$3.3~~$3.1 million, or ~~23.7%~~27.0%, from $11.3 million in the ~~third~~first quarter of ~~2021.~~2022. This decrease was primarily due to the completion of useful lives of intangibles acquired in prior ~~periods, partially offset by amortization expense related to Hoodoo Digital, LLC, which we acquired in the fourth quarter of~~ ~~2021~~.periods.

Other operating (income) expense, net. Other operating expense (net of income) was ~~$20.9~~$0.4 million in the ~~third~~first quarter of ~~2022,~~2023, compared to other operating income (net of expense) of ~~$0.1~~$0.0 million in the ~~third~~first quarter of ~~2021.~~2022. The change in other operating income/expense was primarily due to ~~an impairment charge~~the loss of ~~$21.4~~$0.8 million incurred on the sale of the business in the ~~third~~first quarter of ~~2022 related to assets~~2023 previously classified as held for sale, while no ~~corresponding charge~~such loss was recorded in the ~~third~~first quarter of ~~2021.~~2022. For additional information, see Note 8—“Assets and liabilities held for sale” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

Income from operations. As a result of the foregoing factors, income from operations as a percentage of total net revenues ~~decreased~~increased from ~~13.0%~~12.5% in the ~~third~~first quarter of ~~2021~~2022 to ~~11.8%~~13.3% in the ~~third~~first quarter of ~~2022.~~2023. Income from operations ~~decreased~~increased by ~~$1.4~~$11.2 million from ~~$132.3~~$133.9 million in the ~~third~~first quarter of ~~2021~~2022 to ~~$130.8~~$145.1 million in the ~~third~~first quarter of ~~2022,~~2023, primarily due to ~~higher~~lower SG&A expenses and ~~an impairment charge on assets classified as held for sale, as discussed above, partially offset by~~ lower amortization of acquired intangible assets, partially offset by higher cost of revenue in the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021. For additional information, see Note 8—“Assets and liabilities held for sale” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.~~2022.

Foreign exchange gains (losses), net. We recorded a net foreign exchange ~~gain~~loss of ~~$3.9~~$1.0 million in the ~~third~~first quarter of ~~2022~~2023 compared to ~~$2.7~~the net foreign exchange gain of $4.3 million in the ~~third~~first quarter of ~~2021.~~2022.

The loss in the first quarter of 2023 resulted primarily from the appreciation of the Costa Rican colon against the U.S. dollar. The gain in the ~~third~~first quarter of 2022 resulted primarily from the depreciation of the Indian rupee against the U.S. dollar. ~~The gain in the third quarter of 2021 resulted primarily from~~

~~gains on fair value hedges, partially offset by losses on remeasurement resulting from the appreciation of the Indian rupee against the U.S. dollar during the third quarter of 2021.~~

Interest income (expense), net. Our interest expense (net of interest income) was ~~$13.4~~$9.6 million in the ~~third~~first quarter of 2023, down $2.5 million from $12.1 million in the first quarter of 2022, ~~up $0.6~~primarily due to a $3.0 million increase in interest income, partially offset by a $0.5 million increase in interest expense. Our interest income increased from ~~$12.8~~$1.9 million in the ~~third~~first quarter of ~~2021. Our~~2022 to $4.9 million in the first quarter of 2023 primarily due to higher interest rates in the first quarter of 2023 compared to the first quarter of 2022. The increase in interest expense was ~~flat at $14.8 million~~largely due to (i) a higher drawdown of our revolving credit facility and a higher average benchmark-based rate on our revolving credit facility and term loan, partially offset by higher gains on interest rate swaps in the ~~third quarters~~first quarter of ~~both~~2023 compared to the first quarter of 2022, ~~and 2021. Our interest income decreased from $2.1 million~~which we discuss in the ~~third~~section titled “Liquidity and Capital Resources—Financial Condition” below, and (ii) higher interest expense related to receivables sold under our revolving accounts receivable-based facilities in the first quarter of ~~2021 to $1.4 million~~2023. This increase in interest expense was partially offset by the impact of the repayment in the ~~third~~second quarter of ~~2022. This decrease was primarily due to lower interest income~~2022 of our $350 million aggregate principal amount of 3.70% senior notes, which were issued in ~~India.~~ March 2017. The weighted average rate of interest on our debt, including the net impact of interest rate swaps, increased from 2.9% in the ~~third~~first quarter of ~~2021~~2022 to ~~3.0%~~3.3% in the ~~third~~first quarter of ~~2022.~~2023.

Other income (expense), net. Our other income (net of expense) was $4.0 million in the first quarter of 2023 compared to other expense (net of income) ~~was $0.2~~of $0.4 million in the ~~third~~first quarter of ~~2022 compared to other income (net of expense) of $1.5 million in the third quarter of 2021.~~2022. This change was primarily due to gains on changes in the fair value of assets in our deferred compensation plan in the first quarter of 2023 compared to losses on changes in the fair value of assets in our deferred compensation plan in the ~~third~~first quarter of ~~2022 compared to gains on changes in the fair value of assets in our deferred compensation plan the third quarter of 2021.~~2022.

IIncome tax expense~~ncome tax expense.~~. Our income tax expense was ~~$25.2~~$32.4 million in the ~~third~~first quarter of 2023, up from $29.5 million in the first quarter of 2022, ~~up from $21.4 million in the third quarter of 2021,~~due to higher pre-tax income, representing an effective tax rate (“ETR”) of ~~20.8%~~23.4% in the ~~third~~first quarter of ~~2022, up from 17.3% in~~2023, largely consistent with the ~~third~~first quarter of ~~2021. The increase in our ETR was primarily due to a lower mix of benefits recorded in the third quarter of 2022 compared to the third quarter of 2021.~~2022.

Net income. As a result of the foregoing factors, net income as a percentage of total net revenues was ~~8.6%~~9.7% in the ~~third~~first quarter of 2023, up from 9.0% in the first quarter of 2022. Net income increased from $96.2 million in the first quarter of 2022 ~~down from 10.1% in the third quarter~~ ~~of 2021. Net income decreased from $102.4~~to $106.1 million in the ~~third~~first quarter of ~~2021 to $95.8 million in the third quarter of 2022,~~2023, primarily due to ~~an impairment charge on assets classified as held for sale, as discussed above.~~higher income from operations and higher interest income in the first quarter of 2023 compared to the first quarter of 2022. ~~For additional information, see Note 8—“Assets and liabilities held for sale” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.~~The increase in net income is offset by a net foreign exchange loss in the first quarter of 2023 compared to a net foreign exchange gain in the first quarter of 2022.

Adjusted income from operations. Adjusted income from operations (“AOI”) increased by ~~$19.9~~$19.0 million from ~~$168.9~~$160.0 million in the ~~third~~first quarter of ~~2021~~2022 to ~~$188.8~~$179.0 million in the ~~third~~first quarter of ~~2022.~~2023. Our AOI margin increased from ~~16.6%~~15.0% in the ~~third quarter of 2021 to 17.1% in the third~~first quarter of 2022 to 16.4% in the first quarter of 2023, largely due to ~~growth-related~~the timing of our sales and marketing and research and development investments, which we expect to ramp up during the remainder of 2023, as well as general operating leverage ~~and the impact of our recent cost containment initiatives, partially offset by higher sales and marketing expenses and travel~~ ~~related expenses~~in the ~~third~~first quarter of ~~2022 compared to the third quarter of 2021. In calculating our~~2023. AOI and associated AOI margin for the ~~third~~first quarter of 2022 ~~we adjusted total net revenues to exclude revenues of $3.9 million~~also included the loss from the business designated as held for ~~sale.~~sale that was sold in the first quarter of 2023, while such loss was excluded from our AOI margin in the first quarter of 2023.

AOI is a non-GAAP measure and is not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. We believe that presenting AOI together with our reported results can provide useful supplemental information to our investors and management regarding financial and business trends relating to our financial condition and results of operations. A limitation of using AOI versus net income calculated in accordance with GAAP is that AOI excludes certain recurring costs and certain other charges, namely stock-based compensation and amortization of acquired intangibles. We compensate for this limitation by providing specific information on the GAAP amounts excluded from AOI.

We calculate AOI as net income, excluding (i) stock-based compensation, (ii) amortization and impairment of acquired intangible assets, (iii) acquisition-related expenses excluded in the period in which an acquisition is consummated, (iv) foreign exchange (gains)/losses, (v) any loss or gain from businesses held for sale, including impairment charges, (vi) restructuring expenses, (vii) interest (income) expense, and (viii) income tax expense, as we believe that our results after taking into account these adjustments more accurately reflect our ongoing operations. For additional information, see Note 19—“Segment reporting” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

During the second quarter of 2022, management approved a plan to divest a business ~~within~~that was a part of our Consumer and Healthcare ~~segment. It is our intention to complete~~segment, which divestiture was completed in the ~~sale~~first quarter of ~~this business by June~~ 2023. As a result, we ~~have~~ classified the assets and liabilities of this business as held for sale and have recorded net revenues and an operating loss of $0.5 million and $1.2 million, respectively, for the first quarter of 2023.

dWe also recorded a loss of ~~$3.9 million and $7.1 million, respectively, for the third quarter of 2022. We also recorded an impairment charge of $21.4~~$0.8 million in the ~~third~~first quarter of ~~2022~~2023 on ~~assets~~the sale of the business previously classified as held for sale. The operating loss and ~~impairment charge~~loss on the sale of the business previously classified as held for sale were excluded from AOI in the ~~third~~first quarter of ~~2022.~~2023. There ~~was~~were no corresponding ~~loss or impairment charge~~losses in the ~~third~~first quarter of ~~2021,~~2022, as this business was not designated as held for sale during such period. For additional information, see Note 8— "Assets and liabilities held for sale" and Note 19—“Segment reporting” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

The following table shows the reconciliation of AOI to net income, the most directly comparable GAAP measure, for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022:~~2023:


		Three months ended September 30,					Three months ended March 31,
		2021		2022			2022		2023
		(dollars in millions)					(dollars in millions)
Net income	Net income	$	102.4	$	95.8	Net income	$	96.2	$	106.1
Foreign exchange (gains) losses, net	Foreign exchange (gains) losses, net	(2.7)		(3.9)		Foreign exchange (gains) losses, net	(4.3)		1.0
Interest (income) expense, net	Interest (income) expense, net	12.8		13.4		Interest (income) expense, net	12.1		9.6
Income tax expense	Income tax expense	21.4		25.2		Income tax expense	29.5		32.4
Stock-based compensation	Stock-based compensation	21.5		19.2		Stock-based compensation	15.3		19.7
Amortization and impairment of acquired intangible assets	Amortization and impairment of acquired intangible assets	13.7		10.5		Amortization and impairment of acquired intangible assets	11.3		8.1
Loss relating to business held for sale		—		7.1
Impairment charge on assets classified as held for sale		—		21.4
Operating loss from the business classified as held for sale						Operating loss from the business classified as held for sale	—		1.2
Loss on the sale of business classified as held for sale						Loss on the sale of business classified as held for sale	—		0.8
Adjusted income from operations	Adjusted income from operations	$	168.9	$	188.8	Adjusted income from operations	$	160.0	$	179.0

The following table sets forth our AOI by segment for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2022:~~2023:

Three months ended
September 30,
Percentage Change Increase/(Decrease)
2021 2022 2022 vs. 2021
(dollars in millions)
Financial Services $ 32.5 $ 41.0 26.1 %
Consumer and Healthcare 63.7 49.6 (22.1) %
High Tech and Manufacturing 68.3 69.6 1.9 %
Total reportable segment 164.5 160.2 (2.6) %
Others 4.5 21.6 NM*
Total 168.9 181.8 7.6 %
Loss relating to business held for sale — 7.1 100.0 %
Adjusted income from operations $ 168.9 $ 188.8 11.8 %

*Not Meaningful


	Three months ended March 31,				Percentage Change Increase/(Decrease)
	2022		2023		2023 vs. 2022
	(dollars in millions)
Financial Services	$	26.5	$	45.6	72.2	%
Consumer and Healthcare	55.3		56.3		1.9	%
High Tech and Manufacturing	70.1		64.3		(8.3)	%
Others	8.2		11.6		41.9	%
Operating loss from the business classified as held for sale	—		1.2		100.0	%
Adjusted income from operations	$	160.0	$	179.0	11.9	%

AOI of our Financial Services segment increased to ~~$41.0~~$45.6 million in the ~~third~~first quarter of ~~2022~~2023 from ~~$32.5~~$26.5 million in the ~~third~~first quarter of ~~2021,~~2022, primarily due to higher revenues, ~~and~~ improved efficiency ~~partially offset by higher talent replacement costs as well as wage inflation.~~and an additional benefit from the allocation of foreign currency gains. Additionally, in the first quarter of 2022 we made certain investments in additional resources for new deals. AOI of our Consumer and Healthcare segment ~~decreased~~increased to ~~$49.6~~$56.3 million in the ~~third~~first quarter of 2023 from $55.3 million in the first quarter of 2022, ~~from $63.7 million in the third quarter of 2021,~~ largely due to ~~higher sales costs,~~the exclusion from the segment AOI of the operating loss from the business classified as held for sale in the first quarter of 2023, compared to the inclusion of such loss in the segment AOI in the first quarter of 2022 and an additional benefit from the allocation of foreign currency gains, partially offset by wage inflation and higher talent replacement ~~costs and the impact of wage inflation, partially offset by higher revenues.~~costs. AOI of our High Tech and Manufacturing segment ~~increased~~decreased to ~~$69.6~~$64.3 million in the ~~third~~first quarter of 2023 from $70.1 million in the first quarter of 2022, ~~from $68.3 million in the third quarter of 2021,~~ primarily driven by ~~higher revenues,~~lower growth in revenue from digital operations services and investments made in certain client deals, partially offset by higher ~~talent replacement costs as well as wage inflation.~~revenues, improved efficiency and an additional benefit from the allocation of foreign currency gains. With effect from January 1, 2023, we modified the items that are allocated to the Company's reportable segments for the purpose of evaluating segment performance, and we now allocate by segment certain foreign exchange gains/(losses) (to the extent included in income from operations)and unallocated resource costs. Segment results after such allocation are reviewed by the CODM to evaluate segment performance.

Prior to January 1, 2023, the CODM evaluated the performance of reportable segment adjusted income from operations after excluding these items, which were previously included under "Others." Accordingly, we have recast the segment adjusted income from operations of our reportable segments for the three months ended March 31, 2022 to present comparable segment information. AOI for “Others” in the table above primarily represents the impact of ~~foreign exchange fluctuations, adjustment~~certain under or over-absorption of ~~allowances~~overhead, and allowance for credit losses, ~~and over- or under-absorption of overheads, none of~~ which isare not allocated to ~~any individual segment~~our segments for ~~management's~~management’s internal reporting purposes. ~~AOI for "Business held for sale" in the table above primarily represents the loss attributable to a business classified as held for sale.~~ See Note 19—“Segment reporting” and Note 8—"Assets and liabilities held for sale" under P~~art I, Item 1— “Unaudited Consolidated Financial Statements” above.~~

~~Nine months ended September 30, 2022 Compared to the Nine months ended September 30, 2021~~

~~Net revenues.~~ Our net revenues were $3,268.6 million in the nine months ended September 30, 2022, up $318.7 million, or 10.8%, from $2,949.9 million in the nine months ended September 30, 2021. The growth in our net revenues was from both Data-Tech-AI and Digital Operations services.

Adjusted for foreign exchange, primarily the impact of changes in the value of the Japanese yen, Australian dollar, euro and U.K. pound sterling against the U.S. dollar, our net revenues grew 12.9% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 on a constant currency2 ~~basis. Revenue growth on a constant currency~~2 ~~basis is a non-GAAP measure. We provide information about our revenue growth on a constant currency~~2 basis so that our revenue may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating period-to-period comparisons of our business performance. Total net revenues on a constant currency2 ~~basis are calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates and adjusted for hedging gains/losses.~~

~~Our average headcount increased by 13.1% to approximately 114,800 in the nine months ended September 30, 2022 from approximately 101,500 in the nine months ended September 30, 2021.~~

Nine months ended September 30, Percentage Change
Increase/(Decrease)
2021 2022 2022 vs. 2021
(dollars in millions)
Data-Tech-AI $ 1,208.5 $ 1,465.0 21.2 %
Digital Operations 1,741.4 1,803.6 3.6 %
Total net revenues $ 2,949.9 $ 3,268.6 10.8 %

~~Net revenues from~~ ~~Data-Tech-AI~~ services in the nine months ended September 30, 2022 were $1,465.0 million, up $256.5 million, or 21.2%, from $1,208.5 million in the nine months ended September 30, 2021. This increase was largely driven by continued growth in our cloud-based data solutions across our focus areas of supply chain management, sales and commercial, and risk management in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Net revenues from Digital Operations services in the nine months ended September 30, 2022 were $1,803.6 million, up $62.2 million, or 3.6%, from $1,741.4 million in the nine months ended September 30, 2021, primarily due to increased deal ramp-ups from existing contracts and new wins.

2Revenue growth on a constant currency basis is a non-GAAP measure and is calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates adjusted for hedging gains/losses in such period.

~~Revenues by segment were as follows:~~

Nine months ended September 30, Percentage Change
Increase/(Decrease)
2021 2022 2022 vs. 2021
(dollars in millions)
Financial Services $ 750.6 $ 872.6 16.3 %
Consumer and Healthcare 1,101.2 1,223.3 11.1 %
High Tech and Manufacturing 1,081.8 1,225.7 13.3 %
Total reportable segment 2,933.5 3,321.6 13.2 %
Others 16.4 (53.0) NM*
Net revenues 2,949.9 3,268.6 10.8 %
Business held for sale — (8.8) (100.0) %
Net revenues (excluding business held for sale) $ 2,949.9 $ 3,259.8 10.5 %

*Not Meaningful

~~Net revenues from our~~ ~~Financial Services~~ segment increased by 16.3% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, largely due to continued strong demand for our risk management services from both traditional banks and other financial services clients, leveraging data and analytics. ~~Net revenues from our~~ Consumer and Healthcare segment increased by 11.1% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, largely driven by sales and commercial services and supply chain management engagements as well as revenues from Hoodoo Digital, LLC, which we acquired in the fourth quarter of 2021. Ne~~t revenues from our~~ High Tech and Manufacturing segment increased by 13.3% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, largely driven by supply chain management and finance and accounting engagements with both new and existing clients, as well as revenues from Hoodoo Digital, LLC, which we acquired in the fourth quarter of 2021. Net revenues from “Others” primarily represents the impact of foreign exchange fluctuations, which is not allocated to our segments for management’s internal reporting purposes. Net revenues from "Business held for sale" in the table above represents revenues from a business classified as held for sale with effect from April 1, 2022 as part of a series of actions we are taking to focus our business on emerging solutions where we see the greatest opportunities for growth and to deprioritize assets that no longer fit with our long-term strategy. For additional information, see Note 8—“Assets and liabilities held for sale” and Note 19—“Segment reporting” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

~~Cost of revenue.~~ ~~Cost of~~ revenue was $2,117.4 million in the nine months ended September 30, 2022, up $229.8 million, or 12.2%, from $1,887.6 million in the nine months ended September 30, 2021. The increase in our cost of revenue in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to (i) an increase in our operational headcount to support revenue growth, (ii) higher talent replacement cost as well as wage inflation, and (iii) higher travel related expenses. This increase was partially offset by (i) lower depreciation and amortization expense, (ii) lower facilities maintenance expenses and (iii) lower communication expenses. We also recorded an employee severance charge as part of the restructuring we undertook in the nine months ended September 30, 2022, while no corresponding charge was recorded in the nine months ended September 30, 2021. For additional information, see Note 25—“Restructuring” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

~~Gross margin.~~ Our gross margin decreased from 36.0% in the nine months ended September 30, 2021 to 35.2% in the nine months ended September 30, 2022. Excluding the impact of an employee severance charge of $8.4 million, gross margin was 35.5% in the nine months ended September 30, 2022. The decrease in gross margin, excluding the impact of an employee severance charge, was primarily due to higher personnel expenses, higher talent replacement costs and wage inflation, and higher travel related expenses in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

~~Selling, general and administrative expenses (SG&A).~~ ~~SG&A expenses as a percentage of total net revenues increased from 21.0% in the nine months ended September 30, 2021 to 21.5% in the nine months ended September 30, 2022.~~ ~~Excluding the impact of an employee severance charge of $8.7 million, SG&A expenses as a percentage of total net revenues were 21.2% in the~~ ~~nine months ended September 30, 2022. SG&A expenses were $701.8 million in the nine months ended September 30, 2022, up $81.0 million from $620.9 million in the nine months ended September 30, 2021.~~

~~The increase in SG&A expenses, excluding the impact of an employee severance charge, was primarily due to~~ ~~higher sales and marketing expenses, increased~~ ~~investments~~ to support increased revenues, an increase in research and development costs related to cloud-based offerings and other prioritized service lines, travel related expenses and increased staffing, as well as wage inflation in the ~~nine months ended September 30, 2022~~ ~~compared to the~~ ~~nine months ended September 30, 2021, partially offset by operational leverage.~~

~~Amortization of acquired intangibles.~~ Amortization of acquired intangibles was $32.8 million in the nine months ended September 30, 2022, down $11.8 million, or 26.5%, from the nine months ended September 30, 2021. This decrease was primarily due to the completion of the useful lives of intangibles acquired in prior periods, partially offset by amortization expense related to Hoodoo Digital, LLC, which we acquired in the fourth quarter of ~~2021~~.

~~Other operating (income) expense, net.~~ Other operating expense (net of income) was $42.2 million in the nine months ended September 30, 2022 compared to other operating income (net of expense) of $0.2 million in the nine months ended September 30, 2021. The change in other operating expense/income was due to a $20.3 million write-down related to the abandonment of various office premises and a $1.4 million write-down related to tangible assets, both of which were taken as part of a restructuring in the nine months ended September 30, 2022. We also recorded an impairment charge of $21.4 million in the nine months ended September 30, 2022 related to assets classified as held for sale, while no corresponding charges were recorded in the nine months ended September 30, 2021. For additional information, see Note 8—“Assets and liabilities held for sale” and Note 25—“Restructuring” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

~~Income from operations.~~ As a result of the foregoing factors, income from operations as a percentage of total net revenues decreased from 13.5% in the nine months ended September 30, 2021 to 11.5% in the nine months ended September 30, 2022. Income from operations decreased by $22.7 million from $397.1 million in the nine months ended September 30, 2021 to $374.4 million in the nine months ended September 30, 2022, primarily due to an impairment charge on assets classified as held for sale and the restructuring discussed above. For additional information, see Note 8—“Assets and liabilities held for sale” and Note 25—“Restructuring” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

~~Foreign exchange gains (losses), net.~~ We recorded a net foreign exchange gain of $9.3 million in the nine months ended September 30, 2022, compared to $11.5 million in the nine months ended September 30, 2021. The gain in each of the nine month periods ended September 30, 2022 and 2021 resulted primarily from the depreciation of the Indian rupee against the U.S. dollar.

~~Interest income (expense), net~~. Our interest expense (net of interest income) was $36.7 million in the nine months ended September 30, 2022, down $1.5 million from $38.2 million in the nine months ended September 30, 2021, primarily due to a $2.0 million decrease in interest expense, offset by a $0.5 million decrease in interest income. The decrease in interest expense was largely due to the repayment of our $350 million aggregate principal amount of 3.70% senior notes issued in March 2017, partially offset by a higher outstanding balance and higher average London Interbank Offered Rate ("LIBOR")-based rate on our revolving credit facility in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, which we discuss in the section titled “Liquidity and Capital Resources—Financial Condition” below. The weighted average rate of interest on our debt, including the net impact of interest rate swaps, was 2.9% in each of the nine months ended September 30, 2022 and 2021.

~~Other income (expense), net.~~ Our other expense (net of income) was $4.9 million in the nine months ended September 30, 2022 compared to other income (net of expense) of $9.0 million in the nine months ended September 30, 2021. This change was largely attributable to losses on changes in the fair value of assets in our deferred compensation plan in the nine months ended September 30, 2022 compared to gains on changes in the fair value of assets in our deferred compensation plan in the nine months ended September 30, 2021 and the settlement of certain pre-GE divestiture related tax liabilities in the nine months ended September 30, 2021, for which we were indemnified by GE.

~~Income tax expense.~~ Our income tax expense was $78.4 million in the nine months ended September 30, 2022, down from $83.0 million in the nine months ended September 30, 2021, due to lower pre-tax income, representing an ETR of 22.9% in the nine months ended September 30, 2022, up from 21.9% in the nine months ended September 30, 2021. The increase in our ETR was primarily due to a lower mix of benefits recorded in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

~~Net income~~. As a result of the foregoing factors, net income as a percentage of total net revenues was 8.1% in the nine months ended September 30, 2022, down from 10.0% in the nine months ended September 30, 2021. Net income decreased by $32.7 million from $296.4 million in the nine months ended September 30, 2021 to $263.7 million in the nine months ended September 30, 2022, primarily due to lower gross margins, an impairment charge on assets classified

as held for sale and the restructuring discussed above. For additional information, see note 8—“Assets and liabilities held for sale” and Note 25—“Restructuring” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

~~Adjusted income from operations~~. Adjusted income from operations (“AOI”) increased by $23.0 million from $508.6 million in the nine months ended September 30, 2021 to $531.6 million in the nine months ended September 30, 2022. Our AOI margin decreased to 16.3% in the nine months ended September 30, 2022 from 17.2% in the nine months ended September 30, 2021. The decrease in AOI margin was due to lower gross margins, higher sales and marketing expenses, an increase in investments in research and development related to cloud-based offerings and other prioritized service lines and increased travel related expenses in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. In calculating our AOI margin for the nine months ended September 30, 2022, we adjusted total net revenues to exclude revenues of ~~$8.8 million~~ ~~from the business designated as held for sale.~~

We calculate AOI as net income, excluding (i) stock-based compensation, (ii) amortization and impairment of acquired intangible assets, (iii) acquisition-related expenses excluded in the period in which an acquisition is consummated, (iv) foreign exchange (gain)/loss, (v) restructuring expenses, (vi) any loss or gain on businesses held for sale, including impairment charges, (vii) interest (income) expense, and (viii) income tax expense, as we believe that our results after taking into account these adjustments more accurately reflect our ongoing operations. For additional information, see Note 19—“Segment reporting” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

~~During the~~ ~~nine months ended September 30, 2022~~, we carried out certain restructuring activities in line with our long-term strategy to implement a flexible, hybrid global delivery model that incorporates a mix of offshore, onshore, near shore, and remote working. As a result, we determined that certain leases and employee roles were unnecessary. Accordingly, we took a restructuring charge of $38.8 million, which was excluded from AOI in the ~~nine months ended September 30, 2022. No corresponding charge was recorded in the~~ ~~nine months ended September 30, 2021. For additional information, see Note 25—“Restructuring” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.~~

~~During the~~ ~~nine months ended September 30, 2022, management approved a plan to divest a business within our Consumer and Healthcare~~ ~~segment. It is our intention to complete the sale of this business by June 2023.~~ ~~As a result, we have classified the assets and liabilities of this business as held for sale and have recorded net revenues and loss of $8.8 million and $14.3 million, respectively, for the~~ ~~nine months ended September 30, 2022. We also recorded an impairment charge of $21.4 million on assets classified as held for sale for the~~ ~~nine months ended September 30, 2022.~~ ~~The loss and impairment charge were excluded from AOI in the~~ ~~nine months ended September 30, 2022, and there were no corresponding loss and impairment charge to exclude in the~~ ~~nine months ended September 30, 2021~~, as this business was not designated as held for sale during such period. For additional information, see Note 8—"Assets and liabilities held for sale" and Note 19—“Segment reporting” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

~~The following table shows the reconciliation of AOI to net income, the most directly comparable GAAP measure for the nine months ended September 30, 2021 and 2022:~~

Nine months ended September 30,
2021 2022
(dollars in millions)
Net income $ 296.4 $ 263.7
Foreign exchange (gains) losses, net (11.5) (9.3)
Interest (income) expense, net 38.2 36.7
Income tax expense 83.0 78.4
Stock-based compensation 58.6 54.9
Amortization and impairment of acquired intangible assets 44.0 32.7
Restructuring expense — 38.8
Loss relating to business held for sale — 14.3
Impairment charge on assets classified as held for sale — 21.4
Adjusted income from operations $ 508.6 $ 531.6

~~The~~ ~~following table sets forth our AOI by segment for the nine months ended September 30, 2021 and 2022:~~

Nine months ended September 30, Percentage Change
Increase/(Decrease)
2021 2022 2022 vs. 2021
(dollars in millions)
Financial Services $ 99.0 $ 102.7 3.8 %
Consumer and Healthcare 184.6 158.3 (14.3) %
High Tech and Manufacturing 203.9 207.9 1.9 %
Total reportable segment 487.5 468.9 (3.8) %
Others 21.1 48.5 129.8 %
Total 508.6 517.3 1.7 %
Loss relating to business held for sale — 14.3 100.0 %
Adjusted income from operations $ 508.6 $ 531.6 4.5 %

AOI of our Financial Services segment increased to $102.7 million in the nine months ended September 30, 2022 from $99.0 million in the nine months ended September 30, 2021, primarily due to higher revenues and improved efficiency, partially offset by higher talent replacement costs as well as wage inflation in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. AOI of our Consumer and Healthcare segment decreased from $184.6 million in the nine months ended September 30, 2021 to $158.3 million in the nine months ended September 30, 2022, largely due to higher sales costs, higher talent replacement costs and the impact of wage inflation, partially offset by higher revenues in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. AOI of our High Tech and Manufacturing segment increased to $207.9 million in the nine months ended September 30, 2022 from $203.9 million in the nine months ended September 30, 2021 due to higher revenues, partially offset by higher talent replacement costs as well as wage inflation. AOI for “Others” in the table above primarily represents the impact of foreign exchange fluctuations, adjustment of allowances for credit losses and over- or under-absorption of overheads, none of which is allocated to any individual segment for management's internal reporting purposes. AOI for "Business held for sale" in the table above primarily represents the loss attributable to a business classified as held for sale. See Note 8—"Assets and liabilities held for sale" and Note 19—“Segment reporting” under Part I, Item 1— “Unaudited Consolidated Financial Statements” above.

Liquidity and Capital Resources

Overview

Information about our financial position as of December 31, ~~2021~~2022 and ~~September 30, 2022~~March 31, 2023 is presented below:


		As of December 31, 2021		As of September 30, 2022		Percentage Change Increase/(Decrease)			As of December 31, 2022		As of March 31, 2023		Percentage Change Increase/(Decrease)
		(dollars in millions)				2022 vs. 2021			(dollars in millions)				2023 vs. 2022
Cash and cash equivalents	Cash and cash equivalents	$	899.5	$	518.7	(42.3)	%	Cash and cash equivalents	$	646.8	$	552.3	(14.6)	%
Short-term borrowings	Short-term borrowings	—		200.0		NM*		Short-term borrowings	151.0		180.0		19.2	%
Long-term debt due within one year	Long-term debt due within one year	383.4		535.1		39.6	%	Long-term debt due within one year	26.1		26.1		—	%
Long-term debt other than the current portion	Long-term debt other than the current portion	1,272.5		746.6		(41.3)	%	Long-term debt other than the current portion	1,249.2		1,242.9		(0.5)	%
Genpact Limited total shareholders’ equity	Genpact Limited total shareholders’ equity	$	1,897.1	$	1,731.8	(8.7)	%	Genpact Limited total shareholders’ equity	$	1,826.2	$	1,925.3	5.4	%

*Not Meaningful

Financial Condition

We have historically financed our operations and our expansion, including acquisitions, with cash from operations and borrowing facilities.

On February 9, 2021, our board of directors approved a 10% increase in our quarterly cash dividend to $0.1075 per share, up from $0.0975 per share in 2020, representing an annual dividend of $0.43 per common share, up from $0.39 per share in 2020, payable to holders of our common shares. On March 19, 2021, June 23, 2021 and September 24, 2021, we paid a dividend of $0.1075 per share, amounting to $20.1 million, $20.1 million and $20.2 million in the aggregate, to shareholders of record as of March 10, 2021, June 11, 2021 and September 10, 2021, respectively.

~~On February~~ 10, 2022, our board of directors approved a 16% increase in our quarterly cash dividend to $0.125 per share, up from $0.1075 per share in 2021, representing ~~a planned~~an annual dividend of $0.50 per common share, up from $0.43 per share in 2021, payable to holders of our common shares. On March 23, 2022, ~~June 24, 2022 and September 23, 2022,~~ we paid a dividend of $0.125 per share, amounting to $23.1 million ~~$22.9 million and $22.9~~in the aggregate, to shareholders of record as of March 10, 2022.

On February 9, 2023, our board of directors approved a 10% increase in our quarterly cash dividend to $0.1375 per share, up from $0.125 per share in 2022, representing a planned annual dividend of $0.55 per common share, up from $0.50 per common share in 2022, payable to holders of our common shares. On March 24, 2023, we paid a dividend of $0.1375 per share, amounting to $25.3 million in the aggregate, to shareholders of record as of March 10, ~~2022, June 10, 2022 and September 9, 2022, respectively.~~2023.

As of ~~September 30, 2022, $514.5~~March 31, 2023, $549.6 million of our ~~$518.7~~$552.3 million in cash and cash equivalents was held by our foreign (non-Bermuda) subsidiaries. ~~$3.3~~$4.3 million of this cash was held by foreign subsidiaries for which we expect to incur and have accrued a deferred tax liability on the repatriation of ~~$9.6~~$9.5 million of retained earnings. ~~$511.2~~$545.3 million of the cash and cash equivalents is held by foreign subsidiaries in jurisdictions where no tax is expected to be imposed upon repatriation of retained earnings or is being indefinitely reinvested.

The total authorization under our existing share repurchase program is ~~$1,750.0~~$2,250.0 million, of which ~~$156.9~~$594.9 million remained available as of ~~September 30, 2022.~~March 31, 2023. Since our share repurchase program was initially authorized in 2015, we have repurchased ~~51,454,121~~52,794,887 of our common shares at an average price of ~~$30.96~~$31.35 per share, for an aggregate purchase price of ~~$1,593.1~~$1,655.1 million.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we repurchased ~~4,067,044~~630,605 of our common shares on the open market at a weighted average price of ~~$44.75~~$47.57 per share for an aggregate cash amount of ~~$182.0~~$30.0 million. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we repurchased ~~3,592,409~~1,630,533 of our common shares on the open market at a weighted average price of ~~$40.96~~$46.61 per share for an aggregate cash amount of ~~$147.2~~$76.0 million. All repurchased shares have been retired.

For additional information, see Note 17—“Capital stock” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

We expect that for the next twelve months and for the foreseeable future our cash from operations, cash reserves and debt capacity will be sufficient to finance our operations, our growth and expansion plans, dividend payments and additional share repurchases we may make under our share repurchase program. ~~However, there is no assurance that the~~

~~impacts of the COVID-19 pandemic we have experienced to date, and any future impact we may experience, will not have an adverse effect on our cash flows.~~ In addition, we may raise additional funds through public or private debt or equity financing. Our working capital needs are primarily to finance our payroll and other administrative and information technology expenses in advance of the receipt of accounts receivable. Our primary capital requirements include opening new delivery centers, expanding existing operations to support our growth, financing acquisitions and enhancing capabilities, including building certain digital solutions.

Cash flows from operating, investing and financing activities, as reflected in our consolidated statements of cash flows, are summarized in the following table:


		Nine months ended September 30,				Percentage Change Increase/(Decrease)			Three months ended March 31,				Percentage Change Increase/(Decrease)
		2021		2022		2022 vs. 2021			2022		2023		2023 vs. 2022
		(dollars in millions)							(dollars in millions)
Net cash provided by/ (used for):
Net cash provided by/(used for):								Net cash provided by/(used for):
Operating activities	Operating activities	$	447.5	$	214.0	(52.2)	%	Operating activities	$	(114.3)	$	(34.1)	(70.2)	%
Investing activities	Investing activities	(37.3)		(37.3)		—	%	Investing activities	(17.8)		(33.6)		89.1	%
Financing activities	Financing activities	(151.1)		(471.2)		211.8	%	Financing activities	101.5		(41.2)		(140.7)	%
Net increase/(decrease) in cash and cash equivalents	Net increase/(decrease) in cash and cash equivalents	$	259.1	$	(294.4)	(213.6)	%	Net increase/(decrease) in cash and cash equivalents	$	(30.6)	$	(108.9)	255.9	%

Cash flows ~~provided by~~used for operating activities. Net cash ~~provided~~used by operating activities was ~~$214.0~~$34.1 million in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$447.5~~$114.3 million in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The decrease in cash ~~provided by~~used for operating activities was primarily due to (i) a ~~$216.2~~$9.9 million increase in net income in the three months ended March 31, 2023 compared to the three months ended March 31, 2022 and (ii) a $71.8 million decrease in operating assets and liabilities driven by ~~increased investment~~lower investments in accounts receivable ~~higher~~in the three months ended March 31, 2023 compared to the three months ended March 31, 2022, lower tax ~~payments (net of tax refunds), and higher employee~~ and vendor related payments, partially offset by advance payments of statutory employee-related contributions in India in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the ~~nine~~three months ended ~~September 30, 2021 and (ii) a $32.7 million~~March 31, 2022. This decrease in ~~net income in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease~~cash used for operating activities was offset by a $16.0 million increase in non-cash expense, primarily due to (i) a $20.3 million write-down of operating lease right-of-use assets and other assets as part of our restructuring and (ii) a $21.4 million impairment charge on assets classified as held for sale, partially offset by a ~~$26.1~~$1.5 million reduction in ~~depreciation and amortization~~non-cash expense in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

Cash flows used for investing activities. Our net cash used for investing activities was ~~flat at $37.3~~$33.6 million in ~~both~~ the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to $17.8 million in the three months ended March 31, 2022. Cash used for the business previously classified as held for sale was $19.5 million and ~~2021.~~cash used for business combinations was $0.7 million in the three months ended March 31, 2023, while we made no corresponding payments in 2022. Cash used for payments (net of sales proceeds) for the purchase of property, plant and equipment and acquired/internally generated intangible assets was ~~$7.5~~$4.4 million ~~higher~~lower in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 than in the ~~nine~~three months ended ~~September 30, 2021. Cash used for business combinations was $6.6 million in the nine months ended September 30, 2021, compared to a refund of $0.1 million in the nine months September 30,~~March 31, 2022.

Cash flows provided by/used for financing activities. Our net cash used for financing activities was ~~$471.2~~$41.2 million in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$151.1~~cash generated from financing activities of $101.5 million in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. This change was primarily due to (i) the ~~repayment of borrowings (net of proceeds) of $175.5 million in the nine months ended September 30, 2022 compared to~~lower proceeds from borrowings (net of repayment) ~~of $74.5~~, amounting to $22.4 million in the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2023 compared to $241.5 million in the three months ended March 31, 2022, (ii) ~~an increase~~higher dividend payments, amounting to $25.3 million in the three months ended March 31, 2023 compared to $23.1 million in the three months ended March 31, 2022, (iii) a payment of earn-out consideration amounting to $2.4 million in the three months ended March 31, 2023 with no corresponding payment in the three months ended March 31, 2022, (iv) a decrease in payments for the net settlement of stock-based awards, amounting to ~~$44.9~~$18.2 million in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$33.5~~$41.9 million in the ~~nine~~three months ended ~~September 30, 2021, (iii) a decrease in proceeds from the issuance of common shares under our stock-based compensation plans, amounting to $13.0 million in the nine months ended September 30,~~March 31, 2022, compared to $29.8 million in the nine months ended September 30, 2021, (iv) higher dividend payments, amounting to $68.9 million in the nine months ended September 30, 2022 compared to $60.5 million in the nine months ended September 30, 2021, and (v) ~~higher~~lower payments for stock purchased and retired (including payments of expenses related to stock repurchase activity), amounting to ~~$182.1~~$30.0 million in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$147.2~~$76.0 million in the ~~nine~~three months ended ~~September 30, 2021.~~

March 31, 2022, and (vi) an increase in proceeds from the issuance of common shares under our stock-based compensation plans, amounting to $15.9 million in the three months ended March 31, 2023 compared to $3.3 million in the three months ended March 31, 2022.

6654

Financing Arrangements

In December 2022, we entered into an amended and restated credit agreement (the "2022 Credit Agreement") with Genpact USA, Inc. (“Genpact USA”), Genpact Global Holdings (Bermuda) Limited (“GGH”) and Genpact Luxembourg S.à r.l. (“Genpact Luxembourg”, and together with Genpact USA and GGH, the “Borrowers”), as borrowers, Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, swingline lender and issuing bank, and the lenders and other parties thereto, which consists of a $530.0 million term loan and a $650.0 million revolving credit facility. An additional third-party fee paid in connection with the 2022 Credit Agreement is being amortized over the term of the term loan and revolving credit facility, which expire on December 13, 2027. In connection with our entry into the 2022 Credit Agreement, we terminated our existing credit facility under our amended and restated credit agreement entered into in August 2018 (the “2018 Credit Agreement”) with the Borrowers, as borrowers, Wells Fargo, as administrative agent, and the lenders and other financial institutions party thereto, which was comprised of a $680.0 million term loan and a $500.0 million revolving credit facility. The 2022 Credit Agreement replaces the 2018 Credit Agreement.

The 2022 Credit Agreement is guaranteed by us and certain of our subsidiaries. The obligations under the 2022 Credit Agreement are unsecured.

The outstanding balance of the term loan under the 2018 Credit Agreement as of the date of the 2022 Credit Agreement was $527.0 million. The term loan and the revolving credit facility under the 2022 Credit Agreement have a term of five years and expire on December 13, 2027. The 2022 Credit Agreement did not result in a substantial modification of $290.9 million of the outstanding term loan under the 2018 Credit Agreement. As a result of the 2022 Credit Agreement, we extinguished $236.1 million of funding arrangements for the outstanding term loan under the 2018 Credit Agreement and obtained funding from new lenders of $239.1 million, resulting in outstanding principal of $530.0 million of the term loan under the 2022 Credit Agreement. In connection with the 2022 Credit Agreement, we expensed $0.1 million, representing partial acceleration of the amortization of the existing unamortized debt issuance costs and an additional fee paid to our lenders related to the term loan under the 2022 Credit Agreement. The overall borrowing capacity under the revolving credit facility under the 2022 Credit Agreement is $650.0 million, an increase from $500.0 million under the 2018 Credit Agreement. In connection with the 2022 Credit Agreement, we expensed $0.1 million relating to existing unamortized debt issuance cost. The remaining unamortized costs and an additional third-party fee paid in connection with the 2022 Credit Agreement will be amortized over the term of the facility, which will expire on December 13, 2027.

Borrowings under the 2022 Credit Agreement bear interest at a rate equal to, at our election, either Adjusted Term SOFR (which is the rate per annum equal to (a) Term SOFR (the forward-looking secured overnight financing rate) plus (b) a Term SOFR Adjustment of 0.10% per annum, but in no case lower than 0.00%) plus an applicable margin equal to 1.375% per annum or a base rate plus an applicable margin equal to 0.375% per annum, in each case subject to adjustment based on the Borrowers' debt ratings provided by Standard & Poor’s Rating Services and Moody’s Investors Service, Inc. from time to time (the "Debt Ratings"). The revolving credit commitments under the 2022 Credit Agreement are subject to a commitment fee equal to 0.20% per annum, subject to adjustment based on the Debt Ratings. The commitment fee accrues on the actual daily amount by which the aggregate revolving commitments exceed the sum of outstanding revolving loans and letter of credit obligations.

The 2022 Credit Agreement restricts certain payments, including dividend payments, if there is an event of default under the 2022 Credit Agreement or if we are not, or after making the payment would not be, in compliance with certain financial covenants contained in the 2022 Credit Agreement. These covenants require us to maintain a net debt to EBITDA leverage ratio of less than 3x and an interest coverage ratio of more than 3x. During the period ended March 31, 2023, we were in compliance with the terms of the 2022 Credit Agreement, including all of the financial covenants therein. Our retained earnings are not subject to any restrictions on availability to make dividend payments to shareholders, subject to compliance with the financial covenants described above that are contained in the 2022 Credit Agreement.

As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, our outstanding term loan, net of debt amortization expense of ~~$0.7~~$1.6 million and ~~$0.4~~$1.5 million, respectively, was ~~$560.3~~$528.4 million and ~~$535.1~~$521.8 million, respectively. We also have fund-based and non-fund based credit facilities with banks, which are available for operational requirements in the form of overdrafts, letters of credit, guarantees and short-term loans. As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the limits available under such facilities were ~~$24.7~~$22.9 million and $22.9 million, respectively, of which ~~$5.8~~$5.4 million and ~~$5.0~~$8.2 million, respectively, was utilized, constituting non-funded drawdown. As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, a total of ~~$2.0~~$153.7 million and ~~$202.7~~$182.7 million, respectively, of our revolving credit facility was utilized, of which $0$151.0 million and ~~$200.0~~$180.0 million, respectively, constituted funded drawdown and ~~$2.0~~$2.7 million and $2.7 million, respectively, constituted non-funded drawdown. Our outstanding term loan and revolving credit facility expire on ~~August 8, 2023.~~ December 13, 2027.

We ~~are in~~manage a portion of our interest rate risk related to floating rate indebtedness by entering into interest rate swaps under which we receive floating rate payments based on the ~~process~~greater of ~~refinancing~~Term SOFR and the floor rate under our

term loan and ~~revolving credit facility, and are currently in negotiation with various financial institutions and expect~~make payments based on a fixed rate. As of March 31, 2023, we were party to ~~close the refinancing in the fourth quarter of 2022.~~

~~Genpact Luxembourg S.à r.l. (“Genpact Luxembourg”),~~interest rate swaps covering a ~~wholly-owned subsidiary of the Company, issued $350 million aggregate principal~~total notional amount of ~~3.70% senior notes~~$425 million. Under these swap agreements, the rate that we pay to banks in ~~March 2017 (the “2017 Senior Notes”). The 2017 Senior Notes were fully guaranteed by the Company~~exchange for Term SOFR ranges between 0.15% and Genpact USA, Inc. The total debt issuance cost of $2.6 million incurred in connection with the 2017 Senior Notes offering was amortized over the life of the notes as additional interest expense. As of December 31, 2021 and September 30, 2022, the amount outstanding under the 2017 Senior Notes, net of debt amortization expense of $0.1 million and $0 million, respectively, was $349.9 million and $0 million, respectively. On April 1, 2022, the maturity date of 2017 Senior Notes, the 2017 Senior Notes were fully repaid.2.58%.

Genpact Luxembourg issued $400 million aggregate principal amount of 3.375% senior notes in November 2019 (the “2019 Senior Notes”). The 2019 Senior Notes are fully guaranteed by the Company and Genpact USA, Inc. The total debt issuance cost of $2.9 million incurred in connection with the 2019 Senior Notes offering is being amortized over the life of the notes as additional interest expense. As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the amount outstanding under the 2019 Senior Notes, net of debt amortization expense of ~~$1.7~~$1.1 million and ~~$1.3~~$1.0 million, was ~~$398.3~~$398.9 million and ~~$398.7~~$399.0 million, respectively, which is payable on December 1, 2024.

Genpact Luxembourg and Genpact USA, ~~Inc. ("Genpact USA"),~~ both wholly-owned subsidiaries of the Company, co-issued $350 million aggregate principal amount of 1.750% senior notes in March 2021 (the "2021 Senior Notes"). The 2021 Senior Notes are fully guaranteed by the Company. The total debt issuance cost of $3.0 million incurred in connection with the 2021 Senior Notes offering is being amortized over the life of the notes as additional interest expense. As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, the amount outstanding under the 2021 Senior Notes, net of debt amortization expense of ~~$2.6~~$2.0 million and $~~2.1~~1.8 million, respectively, was ~~$347.4~~$348.0 million and $~~347.9~~348.2 million, respectively, which is payable on April 10, 2026.

We pay interest on (i) the 2019 Senior Notes semi-annually in arrears on June 1 and December 1 of each year, and (ii) the 2021 Senior Notes semi-annually in arrears on April 10 and October 10 of each year, ending on the maturity dates of December 1, 2024 and April 10, 2026, respectively.

For additional information, see Notes 11 and 12—“Short-term borrowings” and “Long-term debt” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

We use a revolving accounts receivable-based facility for managing our cash flows. As part of this arrangement, accounts receivable sold under this facility are de-recognized upon sale along with the related allowances, if any. As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, we have a revolving accounts receivable-based facility of $100.0 million permitting us to sell accounts receivable to banks on a non-recourse basis in the ordinary course of business. The aggregate maximum capacity utilized at any time during the period ended December 31, ~~2021~~2022 and ~~September 30, 2022~~March 31, 2023 was ~~$7.1~~$33.0 million and ~~$67.4~~$42.9 million, respectively. The principal amount outstanding against this facility as of December 31, ~~2021~~2022 and ~~September 30, 2022~~March 31, 2023 was $0$33 million and ~~$27.3~~$42.9 million, respectively. The cost of factoring accounts receivable sold under this facility during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2022~~2023 was $0$0.0 million and ~~$0.1 million, respectively, and $0 million and $0.3~~$0.5 million, respectively.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist of foreign exchange contracts. For additional information, see Part I, Item 1A—“Risk Factors”—“Currency exchange rate fluctuations in various currencies in which we do business, especially the Indian rupee, the euro and the U.S. dollar, could have a material adverse effect on our business, results of operations and financial condition” in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, and Note 6— "Derivative financial instruments" under Part I, Item 1—“Unaudited Consolidated Financial Statements” above.

Other Liquidity and Capital Resources Information

As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, we have purchase commitments, net of capital advances, of ~~$13.3~~$18.0 million and ~~$22.4~~$14.2 million, respectively, to be paid in respect of such purchases over the next year. For additional information, see Note 24—“Commitments and contingencies” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above and Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations”—“Other Liquidity and Capital Resources Information” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

As of December 31, ~~2021~~2022 and ~~September 30, 2022,~~March 31, 2023, we have operating and finance lease commitments of ~~$420.6~~$330.1 million and ~~$329.6~~ $309.0 million, respectively, to be paid over the lease terms. For additional information, see Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations”—“Other Liquidity and Capital Resources Information” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

6856

Supplemental Guarantor Financial Information

As discussed in Note 12, “Long-term debt,” under Part I, Item 1—“Unaudited Consolidated Financial Statements” above, Genpact Luxembourg ~~a wholly-owned subsidiary of the Company,~~ issued the 2019 Senior Notes, and Genpact Luxembourg and Genpact USA co-issued the 2021 Senior Notes. As of ~~September 30, 2022,~~March 31, 2023, the outstanding balance for the 2019 Senior Notes and the 2021 Senior Notes (collectively, the "Senior Notes") was ~~$398.7~~$399.0 million and ~~$347.9~~$348.2 million, respectively. Each series of Senior Notes is fully and unconditionally guaranteed by the Company. The 2019 Senior Notes are fully and unconditionally guaranteed by Genpact USA. Our other subsidiaries do not guarantee the Senior Notes (such subsidiaries are referred to as the “non-Guarantors”).

The Company (with respect to ~~all~~both series of Senior Notes) and Genpact USA (with respect to the 2019 Senior Notes) have fully and unconditionally guaranteed (i) that the payment of the principal, premium, if any, and interest on the Senior Notes shall be promptly paid in full when due, whether at stated maturity of the Senior Notes, by acceleration, redemption or otherwise, and that the payment of interest on the overdue principal and interest on the Senior Notes, if any, if lawful, and all other obligations of the applicable issuer or issuers of the Senior Notes, respectively, to the holders of the Senior Notes or the trustee under the Senior Notes shall be promptly paid in full or performed, and (ii) in case of any extension of time of payment or renewal of any Senior Notes or any of such other obligations, that the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. With respect to the 2019 Senior Notes, failing payment by Genpact Luxembourg when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Company and Genpact USA shall be obligated to pay the same immediately. With respect to the 2021 Senior Notes, failing payment by Genpact Luxembourg or Genpact USA when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Company shall be obligated to pay the same immediately. The Company and Genpact USA have agreed that the guarantees described above are guarantees of payment of the Senior Notes and not guarantees of collection.

The following tables present summarized financial information for Genpact Luxembourg, Genpact USA and the Company (collectively, the “Debt Issuers and Guarantors”) on a combined basis after elimination of (i) intercompany transactions and balances among the Debt Issuers and Guarantors and (ii) equity in earnings from and investments in the non-Guarantors.


Summarized Statements of Income	Summarized Statements of Income	Year ended December 31, 2021		Nine months ended September 30, 2022		Summarized Statements of Income	Year ended December 31, 2022		Three months ended March 31, 2023
		(dollars in millions)					(dollars in millions)
Net revenues	Net revenues	$	214.2	$	109.5	Net revenues	$	141.3	$	43.1
Gross profit	Gross profit	214.2		109.5		Gross profit	141.3		43.1
Net income	Net income	102.7		52.7		Net income	72.3		22.9

Below is a summary of transactions with non-Guarantors included in the summarized statement of income above:


		Year ended December 31, 2021		Nine months ended September 30, 2022			Year ended December 31, 2022		Three months ended March 31, 2023
		(dollars in millions)					(dollars in millions)
Royalty income	Royalty income	$	4.4	$	—	Royalty income	$	—	$	—
Revenue from services	Revenue from services	209.8		109.5		Revenue from services	141.3		43.1
Interest income (expense), net	Interest income (expense), net	33.0		15.9		Interest income (expense), net	36.9		12.0
Other cost, net		17.7		(1.6)
Other income /(expense), net						Other income /(expense), net	25.2		(1.9)

6957


Summarized Balance Sheets	Summarized Balance Sheets	As of December 31, 2021		As of September 30, 2022		Summarized Balance Sheets	Year ended December 31, 2022		Three months ended March 31, 2023
		(dollars in millions)					(dollars in millions)
Assets	Assets					Assets
Current assets	Current assets	$	2,257.8	$	2,154.9	Current assets	$	2,181.4	$	2,303.5
Non-current assets	Non-current assets	457.5		172.2		Non-current assets	178.3		216.3

Liabilities	Liabilities					Liabilities
Current liabilities	Current liabilities	$	3,758.5	$	4,104.9	Current liabilities	$	3,639.6	$	3,758.4
Non-current liabilities	Non-current liabilities	1,777.6		1,246.8		Non-current liabilities	1,749.2		1,743.1

Below is a summary of the balances with non-Guarantors included in the summarized balance sheets above:


		As of December 31, 2021		As of September 30, 2022			Year ended December 31, 2022		Three months ended March 31, 2023
		(dollars in millions)					(dollars in millions)
Assets	Assets					Assets
Current assets	Current assets					Current assets
Accounts receivable, net	Accounts receivable, net	$	211.3	$	42.8	Accounts receivable, net	$	62.1	$	39.9
Loans receivable	Loans receivable	1,535.5		1,460.5		Loans receivable	1,420.3		1,555.4
Investment in debentures/bonds	Investment in debentures/bonds	—		196.1		Investment in debentures/bonds	193.3		194.6
Others	Others	410.1		395.8		Others	453.1		477.9

Non-current assets	Non-current assets					Non-current assets
Investment in debentures/bonds	Investment in debentures/bonds	$	296.1	$	—	Investment in debentures/bonds	$	—	$	—
Others	Others	31.5		70.4		Others	79.5		42.5

Liabilities	Liabilities					Liabilities
Current liabilities	Current liabilities					Current liabilities
Loans payable	Loans payable	$	2,431.2	$	2,767.6	Loans payable	$	2,805.8	$	2,787.6
Others	Others	914.0		582.3		Others	620.2		739.1

Non-Current liabilities	Non-Current liabilities					Non-Current liabilities
Loans payable	Loans payable	$	500.0	$	500.0	Loans payable	$	500.0	$	500.0

The Senior Notes and the related guarantees rank pari passu in right of payment with all senior and unsecured debt of the Debt Issuers and Guarantors and rank senior in right of payment to all of the Debt Issuers’ and Guarantors’ future subordinated debt. The Senior Notes are effectively subordinated to all of the Debt Issuers’ and Guarantors’ existing and future secured debt to the extent of the value of the assets securing such debt. The Senior Notes are structurally subordinated to all of the existing and future debt and other liabilities of the ~~non-Guarantors,~~Guarantors subsidiaries (other than the Issuer), including the liabilities of certain subsidiaries pursuant to our senior credit facility. The non-Guarantors are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due under the Senior Notes or to make the funds available to pay those amounts, whether by dividend, distribution, loan or other payment. ~~Any right that~~If the Debt Issuers and Guarantors have any right to receive any assets of any of the non-Guarantors upon the insolvency, liquidation, reorganization, dissolution or other winding-up of any non-Guarantor, all of that non-Guarantor’s creditors (including trade creditors) would be entitled to payment in full out of that non-Guarantor’s assets before the holders of the Senior Notes would be entitled to any payment. Claims of holders of the Senior Notes are structurally subordinated to the liabilities of certain non-Guarantors pursuant to their liabilities under our senior credit facility.

7058

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, see Note 2(n)—“Recently issued accounting pronouncements” under Item 1—“Unaudited Consolidated Financial Statements” above and Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations”—“Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to interest rate risk arising from changes in interest rates on the floating rate indebtedness under our term loan and revolving credit facility and the Senior Notes. Borrowings under our term loan and revolving credit facility bear interest at floating rates based on ~~LIBOR,~~Term SOFR, but in no event less than the floor rate of 0.0% plus an applicable margin. The interest rate on our Senior Notes is subject to adjustment based on the ratings assigned to our debt by Moody’s Investors Service, Inc. and Standard & Poor’s Rating Services, Inc. from time to time. A decline in such ratings could result in an increase of up to 2% in the rate of interest on the Senior Notes. Accordingly, fluctuations in market interest rates or a decline in ratings may increase or decrease our interest expense which would, in turn, increase or decrease our net income and cash flow.

We manage a portion of our interest rate risk related to floating rate indebtedness by entering into interest rate swaps under which we receive floating rate payments based on the greater of ~~LIBOR~~SOFR and the floor rate under our term loan and make payments based on a fixed rate. As of ~~September 30, 2022,~~March 31, 2023, we were party to interest rate swaps covering a total notional amount of ~~$439~~$425 million. Under these swap agreements, the rate that we pay to banks in exchange for ~~LIBOR~~Term SOFR ranges between ~~0.38%~~0.15% and ~~2.65%~~2.58%.

We executed a treasury rate lock agreement covering $350 million in connection with future interest payments to be made on our 2021 Senior Notes, and the treasury rate lock agreement was designated as a cash flow hedge. The treasury rate lock agreement was terminated on March 23, 2021, and a deferred gain was recorded in accumulated other comprehensive income and is being amortized to interest expense over the life of the 2021 Senior Notes. The remaining gain to be amortized related to the treasury rate lock agreement as of ~~September 30, 2022~~March 31, 2023 was ~~$0.6~~$0.5 million.

For a discussion of our market risk associated with foreign currency risk, interest rate risk and credit risk, see Part II, Item 7A—“Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~.2022.

7159

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are the Company’s controls and other procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarterly period ended ~~September 30, 2022~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

7260

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There are no legal proceedings pending against us that we believe are likely to have a material adverse effect on our business, results of operations and financial condition.

Item 1A. Risk Factors

We have disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 the risk factors that materially affect our business, financial condition or results of operations. You should carefully consider the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022, the risk factors set forth below and the other information that appears elsewhere in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and in this Quarterly Report on Form 10-Q. You should be aware that these risk factors and other information may not describe every risk facing our Company. Additional risks and uncertainties not currently known to us may also materially adversely affect our business, financial condition and/or results of operations.

Changes in our tax rates or tax provisions, adverse tax audits and other proceedings, or changes in tax laws or their interpretation or enforcement could have an adverse effect on our business, results of operations, effective tax rate and financial condition.

We are subject to income taxes in the United States and in numerous foreign jurisdictions, notably in India where we have substantial operations. Our provision for income taxes, actual tax expense and tax liability could be adversely affected by a variety of factors, including lower income before taxes generated in countries with lower tax rates, higher income generated in countries with higher tax rates, changes in tax laws and regulations or in the interpretation or enforcement of such laws and regulations, changes in applicable income tax treaties, changes in accounting principles or interpretations thereof or in the valuation of deferred tax assets and liabilities, the elimination or expiration of certain tax concessions, exemptions or holidays that had reduced our tax liability, and adverse outcomes of tax examinations or tax-related litigation, including a determination by any tax authority that our transfer prices are not appropriate or that our intercompany transactions should be characterized differently than we have characterized them. Changes in tax laws, treaties or regulations impacting our business, and their interpretation and enforcement, have become more unpredictable in recent years and could result in unexpected and unfavorable outcomes. Additionally, changes in tax laws proposed by the Biden administration, if enacted, could negatively impact our effective tax rate. Any of these factors could have a material adverse effect on our business, results of operations, effective tax rate and financial condition.

We are subject to examination of our income tax returns by the U.S. Internal Revenue Service and tax authorities around the world, notably in India where we have substantial operations. Tax authorities have disagreed in the past, and may in the future disagree, with our tax positions, and particularly in India are increasingly taking aggressive stances opposing the tax positions we take, including with respect to our intercompany transactions. Negative outcomes from those examinations or any appeals therefrom may adversely affect our provision for income taxes and tax liability, and the amounts we are ultimately required to pay could be materially different from the amounts we anticipated, which in turn could have a material adverse effect on our business, results of operations, effective tax rate and financial condition.

We are currently subject to several tax audits by the Indian tax authorities (“ITA”) related to intercompany transactions that occurred in 2009, 2013 and 2015. In each of 2014, 2016, 2019 and 2022, the ITA issued assessment orders seeking to impose tax on us in relation to such transactions. We have received demands for potential tax claims related to these orders in an aggregate amount of $229 million (converted from Indian rupees and including interest through the date of the orders). We do not believe that any of the transactions giving rise to these demands were subject to tax in India under applicable law. To date, we have received favorable orders from appellate judicial authorities in India relating to $120 million of the $229 million demanded in the assessment orders, and we continue to defend against the remaining $109 million in demands. Additionally, in the first quarter of 2023, the ITA issued an assessment order seeking to impose tax on us of $865 million (converted from Indian rupees and including interest through the date of the order) in relation to a 2015 internal restructuring transaction involving our Indian subsidiaries. We believe this assessment is without merit and not enforceable under applicable law. In March 2023, the tax appellate authority in India struck down the 2023 assessment order because it was issued in violation of a prior judicial decision on the matter. The ITA may appeal this ruling.

We have appealed all of the outstanding orders from the ITA and have not provided a reserve for the related exposures, which would be material. Although we have received favorable orders as to certain of the ITA’s demands, and have appealed others, we may ultimately not prevail in some or all of these matters. In the event we do not prevail in these matters, the total amounts owed in connection with these demands would be material and subject to additional interest accrued over the period since the demands were made, and the amount of this additional interest also would be material.

A final determination of tax in the amounts claimed by the ITA would likely have a material adverse effect on our business, results of operations, effective tax rate and financial condition. See Note 24—“Commitments and contingencies” to our consolidated financial statements under Part I, Item 1—“Unaudited Consolidated Financial Statements” for additional information relating to these matters.

Additionally, in 2012, the Government of India appealed a 2011 ruling by the Delhi High Court that Genpact India Private Limited (one of our subsidiaries) cannot be held to be a representative assessee of GE in connection with an assertion that GE has tax liability in India by reason of a 2004 transfer of shares of our predecessor company. We believe that, if the Government of India is successful in its appeal, GE would be obligated to indemnify us for any resulting tax, though there can be no assurance as to the outcome of this matter.

Effective July 1, 2017, a Goods and Services Tax (“GST”) was introduced in India, replacing an existing service tax regime and multiple similar indirect taxes. The implementation of the GST continues to evolve, with the Government of India introducing regular amendments and issuing clarifications. In the second quarter of 2020, the ITA began challenging certain of our GST and service tax refunds in certain Indian states. We had requested these refunds pursuant to the tax exemption available for exports under service tax and GST regimes in respect of services performed by us in India for affiliates and clients outside of India. The ITA have also initiated proceedings to examine the availability of the tax exemption claimed in respect of export of services under the service tax regime that preceded the current GST regime. In denying the refunds and initiating these proceedings, the ITA has taken the position that the services we provide are local services, which interpretation, if correct, would make the service tax and GST exemptions we have claimed on exports unavailable to us in respect of such services. We believe that the denial of the service tax and GST exemptions is incorrect, and we have filed appeals before relevant appellate authorities. The Government of India has issued a clarification which supports our position and in the fourth quarter of 2022, the Punjab and Haryana High Court ruled in our favor in respect of our appeal of the ITA’s refund denial related to one period. Our appeals of the refund rejections for some of the other periods have recently been decided with directions to follow the High Court's order, while others are still pending at the administrative level, which we believe should also be decided on similar lines. Nonetheless, the ITA may appeal the order of the High Court to the Supreme Court of India and there can be no assurance that we will ultimately prevail in this matter. If it is finally determined that we do not qualify for the service tax and GST exemptions on the services we provide in India for clients located outside of India, we could be subject to additional tax on all of such services at a rate of 18%. The imposition of this additional tax on a significant percentage of the services we perform or have performed in India would likely have a material adverse effect on our profitability and cash flows and could also have a material adverse effect on our business, financial condition and results of operations.

Furthermore, there is growing pressure in many jurisdictions, including the United States, and from multinational organizations such as the Organization for Economic Cooperation and Development, or the OECD, and the EU to amend existing international tax rules in order to render them more responsive to current global business practices. For example, the OECD has published a package of measures for reform of the international tax rules as a product of its Base Erosion and Profit Shifting, or the BEPS, initiative, which was endorsed by the G20 finance ministers. The new global tax framework is a two-pillar plan. The plan proposes the reallocation of global profits of large multinational companies to market jurisdictions, as well as the introduction of a global minimum tax. Many of the package’s proposed measures require amendments to the domestic tax legislation of various jurisdictions. Separately, the EU is asserting that a number of country-specific favorable tax regimes and rulings in certain member states may violate, or have violated, EU law, and may require rebates of some or all of the associated tax benefits to be paid by benefited taxpayers in particular cases. The EU recently proposed and adopted Anti-Tax Avoidance Directives which require EU member states to implement measures to prohibit tax avoidance practices.

In addition, in December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) became law in the U.S., bringing about far-ranging changes to the existing corporate tax system. The Tax Act requires complex computations not previously required. As regulations and guidance evolve with respect to the Tax Act, our results may differ from previous estimates and our tax liabilities may materially increase. See “Recent and future legislation and executive action in the United States and other jurisdictions could significantly affect the ability or willingness of our clients and prospective clients to utilize our services” below in this “Risk Factors” section.

The global tax environment is increasingly complex and uncertain. Although we monitor these developments, it is very difficult to assess to what extent changes and other proposals, if enacted, may be implemented in India, the United States and other jurisdictions in which we conduct our business or may impact the way in which we conduct our business or our effective tax rate due to their unpredictability and interdependency. As these and other tax laws and related regulations and practices change, those changes could have a material adverse effect on our business, results of operations, effective tax rate and financial condition.

Our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions, and a significant reduction in such demand or an inability to respond to the evolving technological environment could materially affect our results of operations.

Our revenue and profitability depend on the demand for our services and solutions with favorable margins, which could be negatively affected by numerous factors, many of which are beyond our control and unrelated to our work product. Our success depends, in part, on our ability to continue to develop and implement services and solutions that anticipate and respond to rapid and continuing changes in technology and offerings to serve the evolving needs of our clients. Examples of areas of significant change include digital- and cloud-related offerings, which are continually evolving as developments such as AI, generative AI and large language model programs, automation, Internet of Things and as-a-service solutions are commercialized. Technological developments such as these may materially affect the cost and use of technology by our clients and, in the case of as-a-service solutions, could affect the nature of how we generate revenue. Some of these technologies and others that may emerge, have reduced and replaced some of our historical services and solutions and may continue to do so in the future. This has caused, and may in the future cause, clients to delay or discontinue spending under existing contracts and engagements and to delay entering into new contracts while they evaluate new technologies. Such delays can negatively impact our results of operations if the pace and level of spending on new technologies is not sufficient to make up any shortfall. The future of generative AI and the uses of large language models and how they will impact our business and our industry and on what timeframe are not currently known and the impact of new technologies on our financial performance and operations could be material.

Additionally, in recent years, as a result of a number of factors, including changing client preferences, an increase in Data-Tech-AI services and economic pressures that can cause delays or reductions in client purchasing decisions, the percentage of our revenues from consulting and other short-cycle engagements has increased. The increased share of our revenues derived from these engagements makes business forecasting more complex given that they are for services that are more discretionary and non-recurring than our traditional services. Our contracts for consulting and other short-cycle engagements typically permit our clients to terminate the agreement with less notice than is required under our longer-term contracts for our Digital Operations services and without paying termination fees. Our failure to properly manage these shorter-cycle engagements could adversely affect our business, growth strategy and results of operations.

Developments in the industries we serve, which may be rapid, also could shift demand to new services and solutions. If, as a result of new technologies or changes in the industries we serve, our clients demand new services and solutions, we may be less competitive in these new areas or need to make significant investment to meet that demand. Our growth strategy focuses on responding to these types of developments by driving innovation that will enable us to expand our business into new growth areas. If we do not sufficiently invest in new technology and adapt to industry developments, or evolve and expand our business at sufficient speed and scale, or if we do not make the right strategic investments to respond to these developments and successfully drive innovation, our services and solutions, results of operations, and ability to develop and maintain a competitive advantage and to execute on our growth strategy could be negatively affected.

Companies in the industries we serve sometimes seek to achieve economies of scale and other synergies by combining with or acquiring other companies. If one of our current clients merges or consolidates with a company that relies on another provider for the services and solutions we offer, we may lose work from that client or lose the opportunity to gain additional work if we are not successful in generating new opportunities from the merger or consolidation.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Use of Proceeds

None.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

Share repurchase activity during the three months ended ~~September 30, 2022~~March 31, 2023 was as follows:

Period Total Number of Shares
Purchased Weighted Average Price Paid per
Share ($) Total Number of Shares
Purchased as
Part of Publicly
Announced Plan or Program Approximate Dollar Value of Shares that May Yet Be
Purchased Under the
Plan or Program ($)
July 1-July 31, 2022 — — — 186,910,219
August 1-August 31, 2022 627,092 47.86 627,092 156,899,039
September 1-September 30, 2022 — — — 156,899,039
Total 627,092 47.86 627,092


Period	Total Number of Shares Purchased	Weighted Average Price Paid per Share ($)	Total Number of Shares Purchased as Part of Publicly Announced Plan or Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Program ($)
January 1-January 31, 2023	—	—	—	124,923,971
February 1-February 28, 2023	250,404	47.85	250,404	612,941,047
March 1-March 31, 2023	380,201	47.39	380,201	594,924,017
Total	630,605	47.57	630,605

~~Since~~In February ~~2017,~~2023, our ~~Board~~board of ~~Directors has~~directors authorized ~~repurchases of up~~a $500 million increase to our existing $1.75 billion share repurchase program, first announced in February 2015, bringing the total authorization under our existing ~~share repurchase program.~~ program to $2.25 billion.This repurchase program does not obligate us to acquire any specific number of shares and does not specify an expiration date. All shares repurchased under the plan have been retired. For additional information, see Note 17—“Capital stock” under Part I, Item 1— “Unaudited Consolidated Financial Statements” above.

7364

Item 6. Exhibits


Exhibit Number						Description

3.1						Memorandum of Association of the Registrant (incorporated by reference to Exhibit 3.1 to Amendment No. 2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-142875) filed with the SEC on July 16, 2007).

3.2						Bye-laws of the Registrant (incorporated by reference to Exhibit 3.3 to Amendment No. 4 of the Registrant’s Registration Statement on Form S-1 (File No. 333-142875) filed with the SEC on August 1, 2007).

22.1						List of Issuers and Guarantor Subsidiaries (incorporated by reference to Exhibit 22.1 to the Registrant’s Registration Statement on Form S-3ASR (File No. 333-265204) filed with the SEC on May 25, 2022).

10.1†*						Form of 2023 Restricted Share Unit Issuance Agreement for executive officers under the Genpact Limited 2017 Omnibus Incentive Compensation Plan.

10.2†*						Form of 2023 Performance Share Award Agreement for executive officers under the Genpact Limited 2017 Omnibus Incentive Compensation Plan.

31.1*						Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*						Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*						Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*						Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*						Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*						Inline XBRL Taxonomy Extension Schema Document

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed or furnished with this Quarterly Report on Form 10-Q.

† Indicates a management contract or compensatory plan, contract or arrangement in which any director or executive officer participates.

7465

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~November 9, 2022~~May 10, 2023

GENPACT LIMITED


By:						/s/ N.V. Tyagarajan
						N.V. Tyagarajan
						Chief Executive Officer

By:						/s/ Michael Weiner
						Michael Weiner
						Chief Financial Officer

7566


	Nine months ended September 30, 2021				Nine months ended September 30, 2022
Dividend yield	0.84	%	—	1.08%	0.96	%
Expected life (in months)				84	84
Risk-free rate of interest	1.12	%	—	1.37%	1.71	%
Volatility	26.05	%	—	26.18%	26.29	%