Genpact LTD

Previous wording

Our results of operations are affected by various economic and macroeconomic conditions, including the inflationary environment, high interest rates, numerous geopolitical risks and levels of overall business confidence. Throughout 2023, continued economic and geopolitical uncertainty in many markets around the world, including with respect to slowing global economic growth, monetary policy and continued volatility in foreign currency exchange rates, impacted and may continue to impact our business.

Current wording

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.

Previous wording

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 between Hamas and Israel, 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 are closely monitoring the situation. To date, we do not believe the conflicts between Russia and Ukraine and Hamas and Israel, 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 the situation.

Current wording

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.

Previous wording

Our 2023 revenues were $4.5 billion, an increase of 2.4% year-over-year, or 3.1% on a constant currency 1 basis.

Current wording

Our 2024 net revenues were $4.8 billion, an increase of 6.5% year-over-year, or 6.7% on a constant currency 1 basis.

Previous wording

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, 2022 and 2023:

Current wording

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:

Previous wording

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. 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.

Current wording

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.

Previous wording

Classification of certain net revenues. We classify our net revenues in two categories based on the nature of services rendered: Data-Tech-AI services and Digital Operations services.

Current wording

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

Previous wording

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 classification of the employee. Stock-based compensation and depreciation and amortization expense are allocated between cost of revenue and selling, general and administrative expenses using an appropriate allocation basis.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

The ratio of cost of revenue to revenues for any particular SOW or for all SOWs under an MSA 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.

Current wording

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.

Previous wording

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), investments in research and development, digital technology, advanced automation and robotics, and an allowance for credit losses.

Current wording

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.

Previous wording

Other operating (income) expense, net. Other operating (income) expense, net primarily consists of the impact of the change in the fair value of earn-out consideration and deferred consideration relating to business acquisitions, as well as 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 and gains on termination of leases.

Current wording

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.

Previous wording

77% of our fiscal 2023 revenues were earned in U.S. dollars. We also received payments in euros, U.K. pounds sterling, Australian dollars, Japanese yen and Indian rupees. Our costs are primarily incurred in U.S. dollars, as well as in Indian rupees, U.K. pounds sterling, Romanian leu, Chinese renminbi, euros 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, 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.

Current wording

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.

Previous wording

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, interest adjustments relating to earn-out consideration in connection with certain acquisitions, 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 London Interbank Offered Rate ("LIBOR") or Term Secured Overnight Financing Rate (“SOFR”), as applicable, and the floor rate under our term loan and make payments based on a fixed rate.

Current wording

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.

Previous wording

Other income (expense), net. Other income (expense), net primarily includes certain government incentives received by our subsidiaries and changes in the fair value of assets in our deferred compensation plan.

Current wording

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.

Previous wording

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 will become 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.

Current wording

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.

Previous wording

Other taxes. We have operating subsidiaries or branches in several countries, including Argentina, Australia, Brazil, Bulgaria, Canada, China, Costa Rica, the Czech Republic, Egypt, Germany, Guatemala, Hungary, India, Ireland, Israel, Japan, Malaysia, Mexico, the Netherlands, the Philippines, Poland, Portugal, Romania, Singapore, 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.

Current wording

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.

Previous wording

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 was subject to a lower corporate income tax rate of 15% through December 31, 2023, 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 and the Philippines. These tax concessions will expire over the next few years, possibly increasing our overall tax rate.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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, 2022 and 2023.

Current wording

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.

Previous wording

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—Business combinations, goodwill and other intangible assets” and Note 10—“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.

Current wording

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.

Previous wording

Net revenues. Our net revenues were $4,476.9 million in 2023, up $105.7 million, or 2.4%, from $4,371.2 million in 2022. Growth in our net revenues was driven by both Data-Tech-AI and Digital Operations services.

Current wording

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.

Previous wording

Adjusted for foreign exchange, primarily the impact of changes in the values of Japanese yen, Australian dollar, Indian Rupee and South African rand against the U.S. dollar, our net revenues grew 3.1% in 2023 compared to 2022 on a constant currency 2 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 compared to prior fiscal periods, thereby facilitating period-to-period comparisons of our business performance. Total net revenues on a constant currency 2 basis are calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates and adjusted for hedging gains/losses.

Current wording

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 currency 3 basis. Revenue growth on a constant currency 3 basis is a non-GAAP measure. We provide information about our revenue growth on a constant currency 3 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 currency 3 basis are calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates and adjusted for hedging gains/losses.

Previous wording

Our average headcount increased to approximately 123,400 in 2023 from approximately 115,800 in 2022.

Current wording

Our average headcount increased to approximately 135,400 in 2024 from approximately 123,400 in 2023.

Previous wording

Net revenues from Digital Operations services in 2023 were $2,483.8 million, up $72.5 million, or 3.0%, from $2,411.3 million in 2022, primarily due to ramp-ups from certain new large deals and existing contracts.

Current wording

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.

Previous wording

Net revenues from our Financial Services segment increased by 5.7% in 2023 compared to 2022, largely due to continued demand for our underwriting and risk management services in our insurance vertical, which leverage data and analytics, as well as our digital solutions involving automation of back-office processes, partially offset by a decline in client spending on short-cycle discretionary technology projects. Net revenues from our Consumer and Healthcare segment decreased by 1.4% in 2023 compared to 2022, largely driven by lower Data-Tech-AI services revenue in 2023 compared to 2022, and the impact of the recent divestiture of the business that we had previously classified as held for sale, which was completed in February 2023. Net revenues from our High Tech and Manufacturing segment increased by 3.9% in 2023 compared to 2022, largely driven by revenues from recently signed large deals, continued ramp-ups of existing client relationships and client demand for our supply chain management and sales and commercial engagements, partially offset by a change in the deal scope for a large client in early 2023. Net revenues from "Business held for sale" in the table above represent revenues from a business we had previously 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 previously classified as held for sale was completed in the first quarter of 2023.

Current wording

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.”

Previous wording

2 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.

Current wording

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.

Previous wording

Cost of revenue. Cost of revenue was $2,906.2 million in 2023, up $71.4 million, or 2.5%, from $2,834.8 million in 2022. The increase in our cost of revenue in 2023 compared to 2022 was primarily due to (i) an increase in our operational headcount to support revenue growth, (ii) wage inflation, and (iii) higher travel related expenses. This increase was partially offset by (i) lower depreciation and amortization expense, (ii) lower contractor expenses, and (iii) an employee severance charge of $8.4 million as part of the restructuring we undertook in 2022, while no corresponding charge was recorded in 2023. For additional information, see Note 27—“Restructuring” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

Current wording

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.

Previous wording

Amortization of acquired intangibles. Amortization of acquired intangibles was $31.5 million in 2023, down $11.2 million, or 26.3%, from $42.7 million in 2022. This decrease was primarily due to the completion of useful lives of intangibles acquired in prior periods.

Current wording

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.

Previous wording

Other operating (income) expense, net. Other operating income (net of expense) was $4.7 million in 2023, compared to other operating expense (net of income) of $53.2 million in 2022. This change was primarily due to (i) a gain of $4.9 million on the termination of an abandoned lease in 2023 with no corresponding gain recorded in 2022, (ii) 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 we undertook in 2022, and (iii) an impairment charge of $32.6 million in 2022 related to assets previously classified as held for sale, while no corresponding charge was recorded in 2023. For additional information, see Note 8—“Assets and liabilities held for sale” and Note 27—“Restructuring”to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

Current wording

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.”

Previous wording

Income from operations. As a result of the foregoing factors, income from operations as a percentage of total net revenues increased from 11.5% in 2022 to 14.1% in 2023. Income from operations increased by $128.7 million from $502.2 million in 2022 to $630.9 million in 2023, primarily due to an increase in gross margin and lower selling, general and administrative expenses in 2023, an impairment charge on assets previously classified as held for sale and the restructuring undertaken in 2022, as discussed above.

Current wording

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.

Previous wording

Foreign exchange gains (losses), net. We recorded a net foreign exchange gain of $4.3 million in 2023, compared to $15.4 million in 2022. The gains in both the years resulted primarily from the depreciation of the Indian rupee against the U.S. dollar.

Current wording

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.

Previous wording

Our interest income increased from $5.9 million in 2022 to $18.4 million in 2023 due to higher interest rates on deposits in 2023 compared to 2022. The increase in interest expense was largely due to (i) a higher average benchmark-based rate on our term loan, partially offset by lower volume and higher gains on interest rate swaps taken to hedge interest rate exposure under our term loan in 2023 compared to 2022, which we discuss in the 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 2023 compared to 2022. This increase was partially offset bylower interest expense in 2023 compared to 2022 due to the repayment in April 2022 of our $350 million aggregate principal amount of 3.70% senior notes issued in March 2017. The weighted average rate of interest on our debt, including the net impact of interest rate swaps, increased from 3.0% in 2022 to 3.7% in 2023.

Current wording

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.

Previous wording

Other income (expense), net. Our other income (net of expense) was $15.0 million in 2023, compared to other expense (net of income) of $0.1 million in 2022. This change was primarily due to a gain on changes in the fair value of assets in our deferred compensation plan in 2023 compared to a loss on changes in the fair value of assets in our deferred compensation plan in 2022.

Current wording

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.

Previous wording

Income tax expense/(benefit). Our income tax expense was $111.8 million in 2022, compared to an income tax benefit of $29.0 million in 2023. Our effective tax rate ("ETR") was (4.8%) in 2023 and 24.0% in 2022. The change in our ETR in 2023 was primarily due to the recording of a non-recurring tax benefit of $169.9 million on an intra-entity transfer of certain intellectual property rights from certain non-US subsidiaries to certain wholly-owned US subsidiaries in an effort to better align with our business operations.

Current wording

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.

Previous wording

Net income. As a result of the foregoing factors, net income as a percentage of net revenues was 14.1% in 2023, up from 8.1% in 2022. Net income increased by $277.9.0 million from $353.4 million in 2022 to $631.3 million in 2023, primarily due to a decrease in income tax expense due to a non-recurring tax benefit in 2023 and a change in other operating income during 2023.

Current wording

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.

Previous wording

Adjusted income from operations. Adjusted income from operations ("AOI"), increased by $44.7 million from $718.2 million in 2022 to $762.9 million in 2023. Our AOI margin increased from 16.5% in 2022 to 17.0% in 2023, primarily driven by cost efficiencies and operating leverage in 2023 compared to 2022. In calculating our AOI margin for 2023 and 2022, we adjusted total net revenues to exclude net revenues of $0.5 million in 2023 and $12.0 million in 2022 from the business previously classified as held for sale.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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(other than those included in income from operations), (v) restructuring (income) expense, (vi) any loss or gain on businesses held for sale, including impairment charges, (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. For additional information, see Note 24—“Segment reporting”to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

Current wording

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.”

Previous wording

During the year ended December 31, 2022, management approved a plan to divest a business within our Consumer and Healthcare segment. We classified the assets and liabilities of this business as held for sale and recorded net revenues of $12.0 million and $0.5 million in 2022 and 2023, respectively, and losses of $24.8 million and $1.2 million in 2022 and 2023, respectively. We also recorded an impairment charge of $32.6 million on assets previously classified as held for sale in 2022. The sale of this business was completed in the first quarter of 2023, resulting in a loss of $0.8 million in 2023. The related loss and impairment charge were excluded from AOI.

Current wording

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.”

Previous wording

AOI for "Business held for sale" in the table above primarily represents the loss attributable to a business previously classified as held for sale. See Note 8—"Assets and liabilities held for sale" and Note 24—“Segment reporting” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

Current wording

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.”