Genpact LTD (G) FY 2024 MD&A

Item 7.      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 audited consolidated financial statements and the related notes that appear elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion includes forward-looking information that involves risks and assumptions, which could cause actual results to differ materially from management’s expectations. See “Special Note Regarding Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K.

Macroeconomic environment

Our results of operations are affected by economic conditions, including the overall inflationary environment and levels of business confidence. Throughout 2024, continued economic and geopolitical uncertainty in many markets around the world, including with respect to monetary policy and slowing global economic growth, impacted our business and may continue to impact our business in the future.

The ongoing conflict between Russia and Ukraine and actions taken by the United States and other countries in response, including the imposition of sanctions, as well as the ongoing conflict in the Middle East, have contributed to and may continue to exacerbate supply chain disruption and inflation, regional instability and geopolitical tensions. While we do not have operations in Russia or Ukraine, it is difficult to anticipate the future impacts of the Russia-Ukraine conflict on our business or our clients’ businesses. We have limited operations in Israel and continue to closely monitor the situation in the Middle East. To date, we do not believe the conflicts in Ukraine or the Middle East, or the economic or political impacts of these conflicts, have had a material impact on our business, financial position or operations, but we continue to monitor both conflicts.

For additional information about the risks we face, see Part I, Item 1A—“Risk Factors.”

Overview

We are a global advanced technology services and solutions company. Powered by our mix of deep industry expertise, operational excellence, and advanced technology, we help companies reimagine finance and risk, supply chain and other core industry operations. We have over 140,000 employees serving clients from more than 35 countries.

Our 2024 net revenues were $4.8 billion, an increase of 6.5% year-over-year, or 6.7% on a constant currency1 basis.

Net Revenues

Revenue by top clients.    The table below sets forth the percentage of our total net revenues derived from our largest clients in the years ended December 31, 2023 and 2024:

We earn revenues pursuant to contracts that generally take the form of a master service agreement ("MSA"), which is a framework agreement that is then supplemented by statements of work ("SOWs"). Our MSAs specify the general terms applicable to the services we will provide. Our MSAs are generally for terms of three to seven years, although they may also have an indefinite term or be for terms of less than three years. In most cases they do not specify pricing terms or obligate the client to purchase a particular amount of services. We then enter into SOWs under an MSA, which specify particular services to be provided and the pricing terms. Most of our revenues are from SOWs with terms of two to five years. We typically have multiple SOWs under any given MSA, and the terms of our SOWs vary depending on the nature of the services to be provided. We seek to develop long-term relationships with our clients.

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.

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We believe that these relationships best serve our clients as they create opportunities for us to provide a variety of services using the full range of our capabilities and to deliver continuous process improvement.

New business proposals are reviewed in line with our strategy to target specific industry verticals and geographical markets. We begin each year with a set of named accounts, including prospective clients with operations in our target areas, and all opportunities during the year are reviewed by business leaders from the applicable industry vertical, operations, and finance teams. In this way, we try to ensure that contract terms meet our pricing, cash and service objectives. See Item 1—“Business—Sales and marketing” for additional information.

Many factors affect how we price our contracts. Under some of our MSAs, we are able to share a limited amount of inflation and currency exchange risk for engagements lasting longer than 12 months. Many of our MSAs also provide that, under transaction-based and fixed-price SOWs, we are entitled to retain a portion of certain productivity benefits we achieve. However, some of our MSAs and SOWs require certain minimum productivity benefits to be passed on to our clients. Once an MSA and the related SOWs are signed and production of services commences, our revenues and expenses increase as services are ramped up to the agreed upon level. In many cases, we may have opportunities to increase our profit margins over the life of an MSA or SOW, driven by a number of factors. Our revenues include gains or losses arising upon the maturity of qualified cash flow hedges.

Disaggregation of net revenues.  We disaggregate our net revenues as Data-Tech-AI and Digital Operations based on the nature of services rendered.

Expenses.  Personnel expenses are a major component of both our cost of revenue and our selling, general and administrative expenses. Personnel expenses include salaries and benefits (including stock-based compensation) as well as costs related to recruitment and training. Personnel expenses are allocated between cost of revenue and selling, general and administrative expenses based on the allocation of the employee. Depreciation and amortization expense are allocated between cost of revenue and selling, general and administrative expenses using an appropriate allocation basis.

Our industry is labor-intensive. Wage levels in the countries in which our delivery centers are located have historically increased on a year-over-year basis. We attempt to address the impact of wage increases, and pressures to increase wages, in a number of ways, which include seeking to control entry-level wages, managing attrition, delivering productivity and “right-skilling,” which refers to ensuring that positions are not filled by overqualified employees. We try to control increases in entry-level wages by implementing innovative recruitment policies, utilizing continuous training techniques, emphasizing promotion opportunities and maintaining an attractive work atmosphere and culture.

In planning capacity expansion, we look for locations that help us ensure global delivery capability while helping us control average salary levels. In India and in other countries where we may open multiple offices or delivery centers, we try to expand into cities where competition for personnel and wage levels may be lower than in more developed cities. In addition, under some of our contracts we can share with our clients a portion of any increase in costs due to inflation. Nevertheless, despite these steps, we expect general increases in wage levels in the future, which could adversely affect our margins. A significant increase in attrition rates would also increase our recruitment and training costs and decrease our operating efficiency, productivity and profit margins. Increased attrition rates or increased pricing may also cause some clients to be less willing to use our services. See Item 1A—“Risk Factors—Wage increases in the countries where we operate may reduce our profit margin.”

Our operational expenses include facilities maintenance expenses, travel and living expenses, IT expenses, and consulting and certain other expenses. Consulting charges, consisting of the cost of consultants and contract employees with specialized skills who are directly responsible for the performance of services for clients, are included in cost of revenue. Facilities maintenance expenses and certain other expenses are allocated between cost of revenue and selling, general and administrative expenses based on the employee’s function.

Cost of revenue.    The principal component of cost of revenue is personnel expenses. We include in cost of revenue all personnel expenses for employees who are directly responsible for the performance of services for clients, their supervisors and certain support personnel who may be dedicated to a particular client or a set of processes. Travel and living expenses are included in cost of revenue if the personnel expense for the employee incurring such expense is included in cost of revenue.

The ratio of cost of revenue to revenues for any particular SOW or for all SOWs under an MSA, which generally has a longer term ranging from two to five years, is typically higher in the early periods of the contract or client relationship than in later periods. This is because the number of supervisory and direct support personnel relative to the number of employees who are performing services typically declines in later periods of the contract. It is also because we may retain a portion of the benefit of productivity increases realized over time.

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Selling, general and administrative expenses.  Our selling, general and administrative ("SG&A") expenses are primarily comprised of personnel expenses for senior management and other support personnel in enabling functions, such as human resources, finance, legal, marketing, sales and sales support, and other non-billable support personnel. The operational costs component of SG&A expenses also includes travel and living costs for such personnel. Additionally, the operational costs component of SG&A expenses includes acquisition related costs, legal and professional fees (which represent the costs of third-party legal, tax, accounting and other advisors), strategic investments in research and development, digital technology, advanced automation and robotics, and an allowance for credit losses.

Amortization of acquired intangible assets.   Amortization of acquired intangible assets consists of amortization expenses relating to intangible assets acquired through acquisitions.

Other operating (income) expense, net.    Other operating (income) expense, net primarily consists of the impact of certain operating losses resulting from the write-down of operating lease right-of-use assets, other assets, property, plant and equipment and intangible assets, impairment charges and losses on the sale of assets classified as held for sale, gains on lease terminations, the waiver of a vendor liability and a gain on the redemption of a loan note associated with the sale of a business classified as held for sale.

Foreign exchange gains (losses), net.   Foreign exchange gains (losses), net primarily consists of gains or losses on the re-measurement of non-functional currency assets and liabilities. In addition, it includes gains or losses from derivative contracts entered into to offset the impact of the re-measurement of non-functional currency assets and liabilities. It also includes the realized and unrealized gains or losses on derivative contracts that do not qualify for hedge accounting.

We also enter into derivative contracts to offset the impact of the re-measurement of non-functional currency expenditures and income. The gains or losses on derivative contracts that qualify for hedge accounting, which are cash flow hedges, are deferred and included under other comprehensive income (loss) until the derivative contracts mature, at which time the gains or losses on such cash flow hedges are classified as net revenues, cost of revenue or selling, general and administrative expenses based on the underlying risk being hedged. See Note 2—“Summary of significant accounting policies” to our Consolidated Financial Statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules’’ and Item 7A—“Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk.”

76% of our fiscal 2024 net revenues were earned in U.S. dollars. We also received payments in euros, UK pounds sterling, Australian dollars, Indian rupees and Japanese yen. Our costs are primarily incurred in U.S. dollars, as well as in Indian rupees, Romanian leu, Chinese renminbi, U.K. pounds sterling, Philippine pesos and the currencies of the other countries in which we have operations. While some of our contracts provide for limited sharing of the risk of inflation and fluctuations in currency exchange rates, we bear a substantial portion of this risk, and therefore our operating results could be negatively affected by adverse changes in wage inflation rates and foreign currency exchange rates. See our discussion of wage inflation under “Expenses” above. We enter into forward currency contracts, which are generally designed to qualify for hedge accounting, in order to hedge most of our net cost currency exposure between the U.S. dollar and the Indian rupee and Mexican peso, between the Australian dollar and the Indian rupee, and between the euro and the Romanian leu, and our revenue currency exposure between the U.S. dollar and the U.K. pound sterling, Philippine peso, Hungarian forint, Chinese renminbi, Malaysian ringgit, Polish zloty and the euro, and between the Chinese renminbi and the Japanese yen. However, our ability to hedge such risks is limited by local law, the liquidity of the market for such hedges and other practical considerations. Thus, our results of operations may be adversely affected if we are not able to enter into the desired hedging arrangements or if our hedging strategies are not successful. See Note 2—“Summary of significant accounting policies” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” for additional information.

Interest income (expense), net.  Interest income (expense), net consists primarily of interest expense on indebtedness, including resulting from interest rate swaps and a treasury rate lock agreement, finance lease obligations, certain items related to debt restructuring, and interest income on certain deposits. 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 Term Secured Overnight Financing Rate (“SOFR”) and the floor rate under our term loan and make payments based on a fixed rate.

Other income (expense), net.  Other income (expense), net primarily includes certain government incentives received by our subsidiaries, gains (losses) on the sale/disposal of property, plant and equipment and changes in the fair value of assets in our deferred compensation plan.

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Income taxes.  We are incorporated in Bermuda and have operations in many countries. Our effective tax rate has historically varied and will continue to vary from year to year based on the tax rate in the jurisdiction of our organization, the geographical sources of our earnings and the tax rates in those countries, the tax relief and incentives available to us, the financing and tax planning strategies employed by us, changes in tax laws or the interpretation thereof, and movements in our tax reserves, if any.

Bermuda taxes.  We are organized in Bermuda. Bermuda does not currently impose any income tax on us. On December 27, 2023, the government of Bermuda passed legislation introducing a corporate income tax of 15%, which became effective on January 1, 2025. As a result of this new legislation, we recorded a deferred tax asset on net operating losses, which was fully offset by a valuation allowance.

Transfer pricing.  We have transfer pricing arrangements among our subsidiaries involved in various aspects of our business, including operations, marketing, sales and delivery functions. U.S., U.K., and Indian transfer pricing regulations, as well as the regulations applicable in the other countries in which we operate, require that any international transaction involving affiliated enterprises be made on arm’s-length terms. We consider the transactions among our subsidiaries to be substantially on arm’s-length pricing terms. If, however, a tax authority in any jurisdiction reviews any of our tax returns and determines that the transfer prices we have applied are not appropriate, or that other income of our affiliates should be taxed in that jurisdiction, we may incur increased tax liability, including accrued interest and penalties, which would cause our tax expense to increase, possibly materially, thereby reducing our profitability and cash flows.

Other taxes.  We have operating subsidiaries or branches in several countries, including Argentina, Australia, Brazil, Bulgaria, Canada, China, Colombia, Costa Rica, the Czech Republic, Egypt, Germany, Guatemala, Hungary, India, Ireland, Israel, Japan, Malaysia, Mexico, the Netherlands, the Philippines, Poland, Portugal, Romania, Singapore, Slovakia, South Africa, Thailand, Turkey, the United Kingdom and the United States, as well as sales and marketing subsidiaries in certain jurisdictions, including the United States and the United Kingdom, which are subject to tax in such jurisdictions.

One of our subsidiaries in China obtained a ruling from the Government of China certifying it to be a Technologically Advanced Service Enterprise. As a result, that subsidiary is subject to a lower corporate income tax rate of 15% through December 31, 2026, subject to the fulfillment of certain conditions. Our delivery centers also enjoy corporate tax holidays or concessional tax rates in certain other jurisdictions, including Costa Rica, Israel, Malaysia, the Philippines and Poland. These tax concessions will expire over the next few years, possibly increasing our overall tax rate.

The governments of foreign jurisdictions where we deliver services may assert that certain of our clients have a “permanent establishment” in such jurisdictions by reason of the activities we perform on their behalf, particularly those clients that exercise control over or have substantial dependency on our services. Such an assertion could affect the size and scope of the services requested by such clients in the future.

Our ability to repatriate surplus earnings from our foreign subsidiaries in a tax-efficient manner is dependent upon interpretations of local laws and applicable double taxation treaties. Possible changes in such laws and the renegotiation of existing double tax avoidance treaties may adversely affect our overall tax rate.

Tax audits.    Our tax liabilities may also increase, including due to accrued interest and penalties, if the applicable income tax authorities in any jurisdiction, during the course of any audits, were to disagree with any of our tax return positions. We have an indemnity from GE for any additional taxes attributable to periods prior to December 30, 2004.

Tax losses and other deferred tax assets.    Our ability to utilize our tax loss carry forwards and other deferred tax assets and credits may be affected if our profitability deteriorates or if new legislation is introduced that changes carry-forward or crediting rules. Additionally, reductions in enacted tax rates may affect the value of our deferred tax assets and our tax expense.

New Bookings

New bookings is an operating or other statistical measure. We define new bookings as the total contract value of new client contracts and certain changes to existing client contracts to the extent that such contracts represent incremental future revenue. In determining total contract value for this purpose, we assume the volume to which the client has committed or make a conservative projection where the client has not made a volume commitment. New bookings attributable to deals may exclude a portion of the total contract value if the services are subject to certain contingencies, such as regulatory or other approvals. Regular renewals of contracts with no change in scope, which we consider business as usual, are not included as new bookings. We provide information regarding our new bookings because we believe doing so provides useful trend information regarding changes in the volume of our new business and may be a useful metric as an indicator of future revenue growth potential. Our management also uses new bookings to measure our sales force productivity.

Prior to 2024, new bookings of contracts with longer than five-year terms were limited to the total contract value of the initial five-year term. In 2024, Genpact updated its definition of new bookings to eliminate the five-year limitation.

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New bookings in 2024 and 2023 in accordance with the updated definition were $5.7 billion and $5.0 billion, respectively, and new bookings for 2024 and 2023 in accordance with the prior definition were $5.4 billion and $4.9 billion, respectively.

New bookings can vary significantly year to year depending in part on the timing of signing of large contracts. The types of services clients are demanding, the duration of the contract and the pace and level of client spending may impact the conversion of new bookings to revenues. For example, bookings for our Digital Operations services, which are typically provided under multi-year contracts, generally convert to revenue over a longer period of time than do bookings for our Data-Tech-AI services, which often include shorter cycle, project-based work.

Information regarding our new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. The calculation of new bookings involves estimates and judgments. There are no third-party standards or requirements governing the calculation of new bookings. We do not update our new bookings for material subsequent terminations or reductions related to new bookings originally recorded in prior fiscal years. New bookings are recorded using then-existing foreign currency exchange rates and are not subsequently adjusted for foreign currency exchange rate fluctuations. Our revenues recognized each year will vary from the new bookings value since new bookings is a snapshot measurement of a portion of the total client contract value at a given time.

Critical Accounting Policies and Estimates

A summary of our significant accounting policies is included in Note 2—“Summary of significant accounting policies” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if changes in the estimate that are reasonably possible could materially impact the financial statements or require a higher degree of judgment than others in their application. We base our estimates on historical experience, contractual commitments and on various other assumptions that we believe to be reasonable under the circumstances and at the time they are made. We believe the following critical accounting policies require a higher level of management judgment and estimates than others in preparing the consolidated financial statements. Management believes that the estimates used in the preparation of the consolidated financial statements are reasonable. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates.

Goodwill and other intangible assets.   Goodwill represents the cost of acquired businesses in excess of the fair value of the identifiable tangible and intangible net assets purchased. Goodwill is tested for impairment at least on an annual basis on December 31, or as circumstances warrant based on a number of factors, including operating results, business plans and future cash flows. We perform 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 our assessment of events or circumstances, we perform a quantitative assessment of goodwill impairment if it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the results of our assessments of qualitative factors, we determined that the fair values of all of our reporting units are likely to be higher than their respective carrying amounts as of December 31, 2023 and 2024.

During the year ended December 31, 2022, we took actions to realign our portfolio to focus on services we believe have the greatest opportunities for growth, and deprioritized assets that no longer fit with our long-term strategy. As such, during 2022, we identified and divested a business that was part of our Consumer and Healthcare segment and classified certain technology-related intangible assets and goodwill as held for sale. We tested these assets for impairment and determined that the carrying values were not recoverable and accordingly recorded an impairment charge to adjust the carrying amount of these assets to their fair value. The impairment charge was recorded in “other operating (income) expense, net.” During 2023, the sale of these assets was completed and we recorded a loss on the sale in "other operating (income) expense, net." See Note 7—“Assets and liabilities held for sale” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” for additional information.

We capitalize certain software and technology development costs incurred in connection with developing or obtaining software or technology for sale 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) the 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.

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We test our intangible assets for impairment whenever events occur or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether we have incurred an impairment loss requires comparing the carrying amounts of the assets to the sum of future undiscounted cash flows expected to be generated by the assets. When determining the fair value of our intangible assets, we utilize various assumptions, including discount rates, estimated growth rates, economic trends and projections of future cash flows. These projections also take into account factors such as the expected impact of new client contracts, expanded or new business from existing clients, efficiency initiatives, and the maturity of the markets in which each of our businesses operates. We generally categorize intangible assets acquired individually or with a group of other assets or in a business combination as customer-related, marketing-related, technology-related, and other intangible assets. See Note 2—“Summary of significant accounting policies—Goodwill and other intangible assets” and Note 9—“Goodwill and intangible assets” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules’’ for more information about how we value our intangible assets. Actual results may vary, and may cause significant adjustments to the valuation of our assets in the future.

Income taxes.    We calculate and provide for income taxes in each of the tax jurisdictions in which we operate. We account for income taxes using the asset and liability method. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases and for all operating losses and tax credits carried forward, if any. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or tax status is recognized in the statement of income in the period that includes the enactment date or the filing or approval date of the tax status change. Deferred tax assets are recognized in full, subject to a valuation allowance that reduces the amount recognized to that which is more likely than not to be realized. In assessing the likelihood of realization, we consider estimates of future taxable income.

In the case of an entity that benefits from a corporate tax holiday, deferred tax assets or liabilities for existing temporary differences are recorded only to the extent such temporary differences are expected to reverse after the expiration of the tax holiday. We also evaluate potential exposures related to tax contingencies or claims made by tax authorities in various jurisdictions and determine if a reserve is required. A reserve is recorded if we believe that a loss is more likely than not to occur and the amount can be reasonably estimated. Any such reserves are based on estimates and are subject to changing facts and circumstances considering the progress of ongoing audits, case law and new legislation. We believe that the reserves we have established are adequate.

We apply a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining, based on the technical merits, that the position is more likely than not to be sustained upon examination. The second step is to measure the tax benefit as the largest amount of the tax benefit that is greater than 50% likely of being realized upon settlement. We also include interest and penalties related to unrecognized tax benefits within our provision for income tax expense.

We generally plan to indefinitely reinvest the undistributed earnings of foreign subsidiaries, except for those earnings that can be repatriated in a tax-free manner. Accordingly, we do not currently accrue any material income, distribution or withholding taxes that would arise if such earnings were repatriated.

Due to rounding, the numbers presented in the tables included in this Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” may not add up precisely to the totals provided.

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Results of Operations

For a discussion of our results of operations for the year ended December 31, 2022, including a year-to-year comparison between 2023 and 2022, refer to Part II, Item 7, "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, 2023.

The following table sets forth certain data from our income statement for the years ended December 31, 2023 and 2024:

*Not Meaningful

2 We disaggregate our revenue as revenue from either Digital Operations services or Data-Tech-AI services based on the nature of the services provided. During the first quarter of 2024, we realigned as Data-Tech-AI services certain services that had previously been designated as Digital Operations services based on the nature of work performed and the mode of delivery for these particular services, which have evolved over time. Accordingly, we have updated the classification of revenue derived from Digital Operations services and Data-Tech-AI services for the year ended December 31, 2023 to present comparable information. For additional information, see Note 24—“Net revenues” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

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Fiscal Year Ended December 31, 2024 Compared to the Fiscal Year Ended December 31, 2023

Net revenues.    Our net revenues were $4,767.1 million in 2024, up $290.3 million, or 6.5%, from $4,476.9 million in 2023. Growth in our net revenues was driven by both Data-Tech-AI and Digital Operations services.

Adjusted for foreign exchange, primarily the impact of changes in the values of the Japanese yen, Argentine peso, Chinese yuan and Indian rupee against the U.S. dollar, our net revenues grew 6.7% in 2024 compared to 2023 on a constant currency3 basis. Revenue growth on a constant currency3 basis is a non-GAAP measure. We provide information about our revenue growth on a constant currency3 basis so that our revenue may be viewed without the impact of foreign currency exchange rate fluctuations compared to prior fiscal periods, thereby facilitating period-to-period comparisons of our business performance. Total net revenues on a constant currency3 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 to approximately 135,400 in 2024 from approximately 123,400 in 2023.

Net revenues from Data-Tech-AI services in 2024 were $2,233.9 million, up $144.4 million, or 6.9%, from $2,089.5 million in 2023. This increase was driven by strong demand for data and technology solutions embedded in our finance and accounting, supply chain and risk management services in 2024 compared to 2023.

Net revenues from Digital Operations services in 2024 were $2,533.3 million, up $145.9 million, or 6.1%, from $2,387.4 million in 2023, primarily driven by ramp-ups of services from recently signed large deals.

Revenues by segment were as follows:

*Not Meaningful

Net revenues from our Financial Services segment increased by 5.2% in 2024 compared to 2023, primarily driven by an increase in risk management and underwriting services from recently signed large deals. Net revenues from our Consumer and Healthcare segment increased by 7.8% in 2024 compared to 2023, primarily driven by an increase in finance and accounting and supply chain services as well as ramp-ups of services from large deals. Net revenues from our High Tech and Manufacturing segment increased by 6.2% in 2024 compared to 2023, primarily driven by an increase in finance and accounting and supply chain services from recently signed deals as well as ramp-ups of services from large deals signed in 2023. Net revenues from "Business held for sale" in the table above represent revenues from a business we had classified as held for sale with effect from April 1, 2022 as part of a series of actions we 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. The sale of the business we had classified as held for sale was completed in 2023. For additional information, see Note 7—“Assets and liabilities held for sale” and Note 23—“Segment reporting” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

3 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.

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Cost of revenue.  Cost of revenue was $3,077.1 million in 2024, up $170.9 million, or 5.9%, from $2,906.2 million in 2023. The increase in our cost of revenue in 2024 compared to 2023 was primarily due to (i) an increase in our operational headcount to support revenue growth, (ii) wage inflation, (iii) higher infrastructure expenses and (iv) increased spending on professional services. This increase was partially offset by (i) lower depreciation and amortization expense, (ii) lower stock-based compensation expense and (iii) lower travel related expenses in 2024 compared to 2023.

Gross margin. Our gross margin increased from 35.1% in 2023 to 35.5% in 2024. The increase in gross margin was primarily due to improved operating leverage in 2024 compared to 2023.

Selling, general and administrative (SG&A) expenses. SG&A expenses as a percentage of total net revenues were 20.3% in 2024 and 20.4% 2023. SG&A expenses were $967.1 million in 2024, up $54.0 million, or 5.9%, from $913.1 million in 2023. The increase in SG&A expenses was primarily due to increased strategic investments in partnerships, alliances, and other sales and marketing capabilities, a higher allowance for credit losses, higher travel related expenses and wage inflation in 2024 compared to 2023. This increase was partially offset by lower stock-based compensation expense and improved G&A cost management in 2024 compared to 2023.

Amortization of acquired intangible assets.   Amortization of acquired intangible assets was $26.5 million in 2024, down $5.0 million, or 15.9%, from $31.5 million in 2023. This decrease was primarily due to the completion of useful lives of intangibles acquired in prior periods.

Other operating (income) expense, net. Other operating income (net of expense) was $5.6 million in 2024, compared to $4.7 million in 2023. This change was primarily due to the receipt of $1.5 million upon the redemption of a loan note associated with the sale of a business classified as held for sale and the waiver by a vendor of a liability in 2024. Additionally, a gain of $4.9 million was recorded in 2023 upon the successful termination of a lease that was abandoned as part of a restructuring we undertook in 2022. For additional information, see Note 7—“Assets and liabilities held for sale” and Note 26—“Restructuring” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

Income from operations.    As a result of the foregoing factors, income from operations as a percentage of total net revenues increased from 14.1% in 2023 to 14.7% in 2024. Income from operations increased by $71.2 million from $630.9 million in 2023 to $702.1 million in 2024, primarily due to a higher gross margin, partially offset by an increase in SG&A expenses in 2024 compared to 2023.

Foreign exchange gains (losses), net.   We recorded a net foreign exchange gain of $2.9 million in 2024, compared to $4.3 million in 2023. The gains in both years 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 $47.2 million in 2024, down $0.7 million from $47.9 million in 2023, reflecting the net impact of a $13.9 million increase in interest income in 2024 compared to 2023 and an offsetting $13.2 million increase in interest expense in 2024 compared to 2023. Our interest income increased from $18.4 million in 2023 to $32.3 million in 2024 due to higher cash balances in 2024 compared to 2023. The increase in interest expense was largely due to incremental interest expense on the senior notes issued in June 2024, 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, increased from 3.7% in 2023 to 4.5% in 2024.

Other income (expense), net. Our other income (net of expense) was $19.0 million in 2024, compared to $15.0 million in 2023. This change was primarily driven by a gain on the sale of land and higher sublease income in 2024 compared to 2023.

Income tax expense/(benefit). Our income tax expense was $163.2 million in 2024, compared to an income tax benefit of $29.0 million in 2023. Our effective tax rate ("ETR") was 24.1% in 2024 and (4.8%) in 2023. The negative ETR in 2023 was primarily due to recording a non-recurring tax benefit of $169.9 million on an intercompany transfer of certain intellectual property rights from certain of our non-US subsidiaries to certain wholly-owned US subsidiaries.

Net income.  As a result of the foregoing factors, net income as a percentage of net revenues was 10.8% in 2024, down from 14.1% in 2023. Net income decreased by $117.6 million from $631.3 million in 2023 to $513.7 million in 2024, primarily due to a non-recurring tax benefit in 2023, partially offset by higher income from operations in 2024 compared to 2023.

Adjusted income from operations. Adjusted income from operations ("AOI") increased by $51.0 million from $762.9 million in 2023 to $813.9 million in 2024. Our AOI margin increased from 17.0% in 2023 to 17.1% in 2024, primarily driven by cost efficiencies and operating leverage in 2024 compared to 2023. In calculating our AOI margin for 2023, we adjusted total net revenues to exclude net revenues of $0.5 million in 2023 from the business classified as held for sale.

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AOI and AOI margin are non-GAAP measures and are not based on any comprehensive set of accounting rules or principles. They should not be considered as 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 alongside our reported results offers 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) foreign exchange gains/(losses), net, (iv) restructuring (income) expense, (v) the operating loss from the business classified as held for sale, (vi) losses on the sale of businesses classified as held for sale, (vii) interest (income) expense, and (viii) income tax expense/(benefit), as we believe that our results after taking into account these adjustments more accurately reflect our ongoing operations. To calculate AOI margin, we divided AOI (as calculated above) by net revenue, excluding revenue from the business classified as held for sale. For additional information, see Note 23—“Segment reporting” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

During the second quarter of 2022, management approved a plan to divest a business (the "Business") that was part of our Consumer and Healthcare segment. The divestiture was completed in 2023. As a result, we classified the assets and liabilities of the Business as held for sale and recorded net revenues of $0.5 million and a loss of $1.2 million in 2023. Accordingly, there was no revenue or operating loss in 2024 from the Business. We also recorded a loss of $0.8 million in 2023 on the sale of the Business. For additional information, see Note 7—“Assets and liabilities held for sale” and Note 23—“Segment reporting” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

The following table shows the reconciliation of AOI to the most directly comparable GAAP measure for the years ended December 31, 2023 and 2024:

The following table sets forth our AOI by reportable business segment for the years ended December 31, 2023 and 2024:

*Not Meaningful

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AOI of our Financial Services segment increased to $215.9 million in 2024 from $193.4 million in 2023, primarily due to higher revenues and improved operating efficiency in 2024 compared to 2023. AOI of our Consumer and Healthcare segment increased to $293.1 million in 2024 from $242.5 million in 2023, largely driven by higher revenue from large deal ramp-ups and improved efficiencies in 2024 compared to 2023. AOI of our High Tech and Manufacturing segment increased to $319.4 million in 2024 from $297.9 million in 2023, primarily driven by higher revenues and the reduction in scope of a low margin account in 2023.

AOI for “Unallocated corporate expenses” in the table above primarily represents the 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 "Loss relating to business held for sale" in the table above primarily represents the loss attributable to a business classified as held for sale. See Note 7—"Assets and liabilities held for sale" and Note 23—“Segment reporting” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

Seasonality

Our financial results may vary from period to period. Our revenues are typically higher in the third and fourth quarters than in other quarters, as a result of several factors. We generally find that demand for short-term Data-Tech-AI services, including analytics and IT projects, increases in the fourth quarter as our clients utilize the balance of their budgets for the year. Additionally, demand for certain services, such as collections and transaction processing, is often greater in the second half of the year as our clients’ volumes in such areas increase.

Statement of financial position

Key changes in our financial position during 2024

Following are the significant changes in our financial position as of December 31, 2024 compared to December 31, 2023:

•Short-term borrowings decreased by $10.0 million

The decrease in our short-term debt is primarily due to lower utilization of the funded drawdown of the credit facility under the 2022 Credit Agreement (as defined below). For additional information, see Note 14—“Short-term borrowings” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” for additional information.

•Prepaid expenses, other current assets, contract cost assets and other assets increased by $66.5 million

The increase in prepaid expenses, other current assets, contract cost assets and other assets is primarily due to higher deferred billings, higher contract assets (net of amortization), higher vendor advances for employee related liabilities and higher prepaid expenses. The increase was partially offset by a decrease in contract cost assets, higher refunds of Indian Goods and Services Tax payments and the adjustment of advance tax towards the settlement of income taxes payable. For additional information, see Note 6—“Prepaid expenses and other current assets,” Note 10—“Other assets” and Note 24—“Net revenues—Contract balances” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” for additional information.

•Accounts receivable, net increased by $82.3 million

The increase in our accounts receivable is primarily due to higher revenue in 2024 compared to 2023, partially offset by lower days sales outstanding in 2024 compared to 2023.

•Goodwill and intangible assets decreased by $40.1 million

Goodwill decreased by $14.0 million, primarily due to the effect of exchange rate fluctuations. Our intangible assets decreased by $26.1 million due to the amortization of intangible assets. For additional information, see Note 9—“Goodwill and intangible assets” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

•Operating lease right-of-use assets decreased by $4.0 million

The decrease in operating lease right-of-use assets is due to amortization, partially offset by assets recognized due to new leases/lease renewals entered into in 2024. For additional information, see Note 11—“Leases” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

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•Operating lease liability decreased by $12.1 million

The decrease in operating lease liability is due to lease payments made in 2024, partially offset by additions and modifications in 2024.

•Accounts payable, accrued expenses, other current liabilities and other liabilities increased by $96.6 million

The increase in accounts payable, accrued expenses, other current liabilities and other liabilities is primarily due to an increase in accounts payable, expense related accruals, higher mark-to-market losses on derivative financial instruments and employee related accruals in 2024 compared to 2023. This increase was partially offset by a decrease in contract liabilities in 2024 compared to 2023.

•Long-term debt decreased by $35.5 million

The decrease in long-term debt is primarily due to the repayment of our 2019 Senior Notes (as defined below) in 2024 and installment payments made on our term loan in 2024, largely offset by proceeds from the 2024 Senior Notes (as defined below) issued in 2024. For additional information, see Note 13—“Long-term debt” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

•Net deferred tax assets decreased by $33.6 million

Our net deferred tax assets decreased by $33.6 million in 2024 compared to 2023. For additional information, see Note 22—“Income taxes” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

Liquidity and Capital Resources

Overview

Information about our financial position as of December 31, 2023 and 2024 is presented below:

*Not Meaningful

Financial Condition

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

As of December 31, 2024, $636.2 million of our $648.2 million in cash and cash equivalents was held by our non-Bermuda subsidiaries. $186.8 million of this cash is held by subsidiaries for which we expect to incur and have accrued a deferred tax liability on the repatriation of $117.5 million of retained earnings. $248.8 million of the cash and cash equivalents is held by foreign subsidiaries in jurisdictions where no tax is expected to be imposed upon repatriation. The remaining $200.6 million in cash and cash equivalents held by subsidiaries is being indefinitely reinvested.

On February 9, 2023, our board of directors approved a 10% increase in our quarterly cash dividend from $0.125 per common share to $0.1375 per common share, representing an annual dividend of $0.55 per common share for 2023, up from $0.50 per common share in 2022. On March 24, 2023, June 26, 2023, September 26, 2023 and December 22, 2023, we paid dividends of $0.1375 per share, amounting to $25.3 million, $25.0 million, $24.9 million and $24.8 million in the aggregate, to shareholders of record as of March 10, 2023, June 9, 2023, September 8, 2023, and December 8, 2023, respectively.

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On February 8, 2024, our board of directors approved an 11% increase in our quarterly cash dividend from $0.1375 per common share to $0.1525 per common share, representing an annual dividend of $0.61 per common share for 2024, up from $0.55 per common share in 2023. On March 26, 2024, June 26, 2024, September 25, 2024 and December 23, 2024 we paid dividends of $0.1525 per share, amounting to $27.5 million, $27.3 million, $26.9 million and $26.7 million in the aggregate, to shareholders of record as of March 11, 2023, June 10, 2024, September 11, 2024 and December 9, 2024, respectively.

On February 7, 2025, our board of directors approved an 11% increase in our quarterly cash dividend from $0.1525 per common share to $0.17 per common share, representing a planned annual dividend of $0.68 per common share for 2025, up from $0.61 per common share in 2024. Any future dividends will be at the discretion of our board of directors and subject to Bermuda and other applicable laws.

As of December 31, 2024, the total authorization under our existing share repurchase program was $2,250.0 million, of which $147.0 million remained available as of December 31, 2024. Since our share repurchase program was initially authorized in 2015, we have repurchased 64,769,625 of our common shares at a weighted average price of $32.47 per share, for an aggregate purchase price of $2,103.0 million. This amount includes shares repurchased under our 2017 accelerated share repurchase program.

During the years ended December 31, 2023 and 2024, we repurchased 6,013,793 and 6,591,550 of our common shares, respectively, on the open market at a weighted average price of 37.48 and 38.31 per share, respectively, for an aggregate purchase price of $225.4 million and $252.5 million, respectively. All repurchased shares have been retired.

For additional information, see Note 18—“Capital stock” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

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. 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:

Cash flows from operating activities.    Net cash provided by operating activities was $615.4 million in 2024, up from $490.8 million in 2023. This increase in cash provided by operating activities was primarily driven by (i) a $160.1 million increase in non-cash expense, primarily due to an increase in deferred tax expense and an increase in allowances for credit losses, partially offset by lower stock-based compensation expense, a decrease in depreciation and amortization expense and a higher unrealized gain on the revaluation of foreign currency assets/liabilities in 2024 compared to 2023, and (ii) an $82.1 million decrease in operating assets and liabilities, which was primarily driven by lower tax payments, lower investment in accounts receivable and higher refunds of Indian Goods and Services Tax payments, partially offset by higher vendor advances for employee related payments in 2024 compared to 2023. This increase was partially offset by a $117.6 million decrease in net income in 2024 compared to 2023.

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Cash flows used for investing activities.   Our net cash used for investing activities was $106.0 million in 2024, compared to $78.9 million in 2023. Cash used for payments (net of sales proceeds) for the purchase of property, plant and equipment and internally generated intangible assets was $23.8 million higher in 2024 than in 2023. Additionally, we invested $23.4 million in short-term investments (term deposits) in 2024 but made no similar investments in 2023. Cash used for the divestiture of a business classified as held for sale was $19.5 million, and cash used for business combinations was $0.7 million in 2023, while no corresponding payments were made in 2024. For additional information, see Note 7—“Assets and liabilities held for sale” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

Cash flows used for financing activities.  Our net cash used for financing activities was $424.8 million in 2024, compared to $483.0 million in 2023. This change was primarily due to (i) lower repayment of borrowings (net of proceeds), including finance lease obligations, amounting to $58.6 million in 2024 compared to $173.0 million in 2023 and (ii) a $2.4 million payment of earn-out consideration in 2023 with no corresponding payment in 2024. This increase in cash flow from financing activities was partially offset by (i) lower proceeds from the issuance of common shares under our stock-based compensation plans of $17.2 million in 2024 compared to $39.5 million in 2023, (ii) higher payments for stock repurchased and retired (including payments of expenses and taxes related to stock repurchase activity) of $252.7 million in 2024 compared to $225.5 million 2023, (iii) higher dividend payments, amounting to $108.5 million in 2024 compared to $100.0 million in 2023, and (iv) higher payments for the net settlement of stock-based awards, amounting to $22.3 million in 2024 compared to $21.5 million in 2023.

Financing Arrangements (Credit facility)

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 replaced 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.

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 below 3x and an interest coverage ratio of more than 3x. During the year ended December 31, 2024, 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, 2023 and 2024, our outstanding term loan, net of debt amortization expense of $1.3 million and $0.9 million, respectively, was $508.9 million and $476.1 million, respectively.

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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, 2023 and 2024, the limit available under such facilities was $23.3 million and $22.4 million, respectively, of which $9.3 million and $8.5 million, respectively, was utilized, constituting non-funded drawdown. As of December 31, 2023 and 2024, a total of $11.6 million and $1.5 million, respectively, of our revolving credit facility was utilized, of which $10.0 million and $0.0 million, respectively, constituted funded drawdown, and $1.6 million and $1.5 million, respectively, constituted non-funded drawdown.

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 Term SOFR and the floor rate under our term loan and make payments based on a fixed rate. As of December 31, 2024, we were party to interest rate swaps covering a total notional amount of $234.4 million. Under these swap agreements, the rate that we pay to banks in exchange for Term SOFR ranges between 4.25% and 4.72%.

Genpact Luxembourg issued $400 million aggregate principal amount of 3.375% senior notes in November 2019 (the “2019 Senior Notes”). The 2019 Senior Notes were fully guaranteed by the Company and Genpact USA. The total debt issuance cost of $2.9 million incurred in connection with the 2019 Senior Notes offering was amortized over the life of the notes as additional interest expense. As of December 31, 2023 and 2024, the amount outstanding under the 2019 Senior Notes, net of debt amortization expense of $0.5 million and $0 million, was $399.5 million and $0 million, respectively. The 2019 Senior Notes matured on December 1, 2024 and were fully repaid.

Genpact Luxembourg and Genpact USA 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, 2023 and 2024, the amount outstanding under the 2021 Senior Notes, net of debt amortization expense of $1.4 million and $0.8 million, respectively, was $348.6 million and $349.2 million, respectively, which is payable on April 10, 2026.

In June 2024, Genpact Luxembourg and Genpact USA co-issued $400 million aggregate principal amount of 6.000% senior notes (the "2024 Senior Notes"). The 2024 Senior Notes are fully guaranteed by the Company. The total debt issuance cost of $4.4 million incurred in connection with the 2024 Senior Notes offering is being amortized over the life of the notes as additional interest expense. As of December 31, 2024, the amount outstanding under the 2024 Senior Notes, net of debt amortization expense of $3.9 million, was $396.1 million, which is payable on June 4, 2029.

We pay interest on (i) the 2021 Senior Notes semi-annually in arrears on April 10 and October 10 of each year and (ii) the 2024 Senior Notes semi-annually in arrears on June 4 and December 4 of each year ending on the maturity dates of April 10, 2026 and June 4, 2029, respectively. We paid interest on the 2019 Senior Notes semi-annually in arrears on June 1 and December 1 of each year through December 1, 2024, when they matured and were fully repaid.

For additional information, see Notes 13—“Long-term debt” and 14—“Short-term borrowings” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

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, 2023 and 2024, we have a revolving accounts receivable-based facility of $75.0 million and $60.0 million, respectively, 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, 2023 and 2024 was $51.4 million and $55.9 million, respectively. The principal amount outstanding against this facility as of December 31, 2023 and 2024 was $51.3 million and $26.6 million, respectively. The cost of factoring accounts receivable sold under this facility during the years ended December 31, 2023 and 2024 was $2.0 million and $2.3 million, respectively.

We also have arrangements with financial institutions that manage the accounts payable program for certain of our large clients. We sell certain accounts receivable pertaining to such clients to these financial institutions on a non-recourse basis. There is no cap on the value of accounts receivable that can be sold under these arrangements. We used these arrangements to sell accounts receivable amounting to $324.4 million and $270.2 million during the years ended December 31, 2023 and December 31, 2024, respectively, which also represents the maximum utilization under these arrangements in each such year. The cost of factoring such accounts receivable during the years ended December 31, 2022 and 2023 was $7.9 million and $6.0 million, respectively.

For additional information, see Note 3—“Accounts receivable, net of allowance for credit losses” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

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Goodwill Impairment Testing

Goodwill of a reporting unit is tested for impairment at least annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. In accordance with ASC 350, Intangibles-Goodwill and Other, we have an option to perform an assessment of qualitative factors, including but not limited to macro-economic conditions, industry and market considerations, overall financial performance, business plans and expected future cash flows, to determine whether events or circumstances exist which lead 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 our assessment of such qualitative factors, in accordance with ASC 350, we concluded that as of December 31, 2023 and 2024, the fair values of all of our reporting units are likely to be higher than their respective carrying values.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist of foreign exchange contracts. For additional information, see 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" and Note 5—“Derivative financial instruments” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

Other Liquidity and Capital Resources Information

As of December 31, 2023 and 2024, we have purchase commitments, net of capital advances paid in respect of such purchases, of $16.0 million and $25.3 million, respectively. For additional information, see Note 25—“Commitments and contingencies” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

As of December 31, 2023 and 2024, we also have operating and finance lease commitments of $287.5 million and $276.2 million, respectively, to be paid over the remaining lease terms. For additional information, see Note 11—“Leases” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

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Supplemental Guarantor Financial Information

As discussed in Note 13, “Long-term debt,” to our consolidated financial statements under Part IV, Item 15- "Exhibits and Financial Statement Schedules," Genpact Luxembourg and Genpact USA co-issued the 2021 Senior Notes and the 2024 Senior Notes. As of December 31, 2024, the outstanding balance for the 2021 Senior Notes and the 2024 Senior Notes (collectively, the "Senior Notes") was $349.2 million and $396.1 million, respectively. Each series of Senior Notes is fully and unconditionally guaranteed by the Company. Our other subsidiaries (such subsidiaries are referred to as the “non-Guarantors”) do not guarantee either series of outstanding Senior Notes. Genpact USA fully guaranteed the 2019 Senior Notes. During the year ended December 31, 2024, the Company repaid the 2019 Senior Notes in the amount of $400.0 million at their maturity.

The Company (with respect to both series of Senior Notes) has 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. 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 has 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.

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

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

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 the Guarantors and rank senior in right of payment to all of the Debt Issuer’s and the Guarantor’s future subordinated debt. The Senior Notes are effectively subordinated to all of the Debt Issuer’s and the Guarantor’s 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 Guarantor’s 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. If the Debt Issuers or the 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.

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Recent Accounting Pronouncements

Recently adopted accounting pronouncements

For a description of recently adopted accounting pronouncements, see Note 2—“Summary of significant accounting policies—Recently issued accounting pronouncements” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” and Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.”

For a description of recently issued accounting pronouncements, see Note 2—“Summary of significant accounting policies—Recently issued accounting pronouncements” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”