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Genpact Ltd
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Good day, ladies and gentlemen, and welcome to the Second Quarter 2019 Genpact Limited Earnings Conference Call. My name is Dornida, and I will be your conference moderator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference call.
We expect the call to conclude at about an hour. As a reminder, this call is being recorded for replay purposes. The replay of the call will be archived and made available on the Investor Relations section of Genpact’s website.
I would now like to turn the call over to Roger Sachs, Head of Investor Relations at Genpact. Please proceed, sir.
Thank you, Dorinda, and good afternoon, everybody, and welcome to Genpact’s second quarter earnings call to discuss our results for the quarter ended June 30, 2019. We hope you had a chance to review our earnings release, which was posted to the IR section of our website, genpact.com.
Joining the call from London is Tiger Tyagarajan, our President and Chief Executive Officer; and with me in New York is Ed Fitzpatrick, our Chief Financial Officer. Our agenda for today will be as follows: Tiger will provide a high-level overview of our second quarter results and update you on our strategy. Ed will then discuss our financial performance in greater details and provide an update on our outlook for the year. Tiger will then come back for some closing comments and then we’ll take your questions. And as Dorinda just noted, we expect the call to last for about an hour.
Some of the matters we will discuss in today’s call are forward-looking. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those in such forward-looking statements. Such risks and uncertainties are set forth in our press release.
In addition, during our call today, we will refer to certain non-GAAP financial measures. We believe these non-GAAP measures provide additional information to enhance the understanding of the way management views the operating performance of our business. You can find a reconciliation of these measures to GAAP in today’s earnings release posted to the IR section of our website.
And with that, let me turn the call over to Tiger.
Hey, Roger. Good afternoon, everyone, and thank you for joining us today for our 2019 second quarter earnings call. I'm speaking to you from London today where I'm here attending a set of client meetings.
I am very excited that the momentum we saw coming out of 2018 has continued throughout the first half of 2019, large deal ramps, ongoing transformation services wins and outstanding execution by our teams led to another quarter of strong performance from both global clients and G.
We delivered our highest year-over-year revenue growth rate since the first quarter of 2012. What is more gratifying is that we drove even stronger growth in our adjusted operating income, adjusted EPS and operating cash flow.
The need for enterprises to leverage new digital technologies is creating increased demand for our transformation services, which brings digital, analytics and consulting solutions together. Transformation services drives up fully embedded managed services operations which we call intelligent operations and this provides further opportunities for transformation services, creating a virtuous cycle.
As a result, our stronger [Technical Difficulty] pipeline have grown in an expected total addressable market. We believe there are four clear reasons for this. One, corporate leadership teams who resist a change are increasingly looking to leverage new advanced technologies to reinvent their business models or risk being disruptive.
Two, companies are increasingly looking for transformation partners instead of trying to do it all themselves. Three, a number of clients are now wanting to engage in much larger scope, given the potential benefit of transformation journeys. And four, to meet the fast pace of change, the - suite have accelerated the speed of decision making even in complex large transformational deals.
Specifically in the second quarter on a constant currency basis, total revenue increased 22%, global client revenue increased 16% and global client BPO revenue increased 17%. We also delivered adjusted operating income margin of 15.4%, up 40 basis points both year-over-year and sequentially and adjusted EPS of $0.49, up 20% year-over-year.
We have been saying for some time that we expect total client revenue to grow at a double-digit pace over the long-term. We also expect our global client BPO revenue to grow at a low double-digit to mid teen rate. Our results over the last several years demonstrate our ability to consistently generate these types of growth rates.
We are seeing our inflows - benefit from a quick decision to focus on a set of chosen verticals, service lines and geographic market, as well as the pivot to transformation services.
Investments in digital, analytics, domain and process, along with experienced client facing leaders all concentrated on our focused choices has enabled us to compete really well in our large and highly under penetrated market.
We are winning more deals than ever before, resulting in a revenue growth rate that we believe is outpacing that of expanding overall market. The three most important reasons why clients choose us over competition are, one, our demonstrated leadership as a transformational partner for complex change journeys on the back of end to end digital and analytics solutions that deliver superior outcome.
Two, our deep understanding of industry vertical domain, combined with our granular understanding of processes, using Lean Six Sigma principles, this coupled with leveraging advanced digital technologies, such as AI machine learning, user and customer experience design thinking, as well as RPA drives tangible value for us.
And three, our maniacal clients focus with great attention to details, top tier execution and exceptional classes, which is all reflect very high net promoter scores. The success of our strategy and execution is reflected in ongoing strong momentum we are seeing in the business.
Transformation services is embedded in approximately 70% of new deals, up from the 50% range during the first half of 2018. Sole-source deals continue to account for roughly half of our bookings. Our strong second quarter global client performance was led by growth in our consumer goods retail, high tech and banking capital markets verticals.
Transformation services had another impressive quarter with year-over-year growth in excess of 35%. Analytics within translation services was a key contributor, led by engineering, bundled with domain specific AI and machine learning capabilities to produce predictive insights that then drive actions and outcomes for clients.
GE continues to perform very well against expectations, driven by the large deal when late last year and continued new services and project work that began last quarter. At the same time our total IT business, with sharper strategic class, once again delivered solid quarterly performance.
Our solutions continue to leverage advanced digital technologies, resulting in changes to commercial models away from traditional FTE based pricing. New commercial models now represent more than 40% of total revenue, increasing from the low 30% range just over two years ago.
The capabilities we have added over the last three years through our missions and AI machine learning, cloud based workflow technologies and consulting and user and customer experience journeys are all fueling our deal wins. The integration of all our acquired companies within our teams have been successful, enabling us to go to market with full end to end transformative solutions.
This is allowing us to compete better and to win larger and more complex deals, reflected in even higher win rates than the very strong levels we've been experiencing. Incorporating these capabilities into Genpact Cora, our automation to AI platform, we are delivering significant value to the market by offering completely redesigned trusted solutions that appeal to both new and existing clients.
For example, leveraging enhanced cloud-based workflow capabilities from our acquisition of PNMsoft, which we now call Cora SeQuence. allowed us to develop a solution for a leading healthcare information services company which automates and stacks many manually intensive processes used to request full orders for healthcare information from thousands of healthcare providers and peers. This Cora implementation that manages more than a quarter of a billion transactions a year can now be leveraged for cutting-edge analytics that is hugely value creating in the healthcare industry.
In another example, using Natural Language Understanding technology from Rage Frameworks acquisition helped us develop up unique Cora trade pay solution for CPG retail clients to better [Technical Difficulty] end to end trade promotions, a major problem area in that industry.
And finally, for a leading global financial institution we jointly designed a world class new age operations for their retail credit card business, leveraging design thinking concept and customer journey mapping capabilities from our andemSeven acquisition, our objective was to provide industry-leading customer experience, driving new card members and higher card up.
Our acquisition of the supply chain consulting firm Bhargavi [ph] late last year has led to a fivefold increase in the pipeline supply chain services and its positioned for a huge multi year growth trajectory.
Over the last 18 months, we have had wins with iconic companies in each of our chosen industry verticals that have elevated our brand. Three good examples include our strategic partnerships with GE, Wal-Mart and Bridgewater. These relationships are leading to a heightened level of inbox C-suite and boardroom calls, as more and more companies want to explore engaging with us to transform their business operations.
The ramp of our recent marquee deals are on target, which is especially satisfying given these are highly complex engagements. This performance positions us well for growth. As an example, given our strong execution and co-innovation that is helping Wal-Mart transform its finance and accounting operations in Bentonville, we are expanding our partnership. Yesterday we announced the exciting news that we will now transform their Latin America end to end finance and accounting operations, with a new delivery center opening in Costa Rica, as well as a new analytics focused digital innovation hub in Guadalajara, Mexico. We are increasing our footprint in Latin America where we see many opportunities to serve our global clients.
As a result of strong inflows, our robust pipeline continues to expand to a record. Moving forward, we will continue to reallocate to focus our investments in the area we see the biggest opportunities to deliver attractive profitable growth over the long term. This is even more important in today's world of digital that requires us to be more agile and nimble.
With that, I’ll turn the call over to Ed.
Thanks, Tiger. And good afternoon everyone. It seems like we had some audible issues with Tiger's microphone there. So we'll make sure after the call that we review the script and get you the words that may have been muted during certain time.
Turning to turning to my prepared remarks. Today I'll review our second quarter results, as well as provide an update on our full year financial outlook for 2019. During the quarter, we generated total revenue of $882 million, an increase of 21% year-over-year or 22% percent on a constant currency basis.
Overall business process outsourcing revenues, which represent approximately 84% of our total revenues increased 23% year-over-year. Total IT services revenue grew 13%.
Global Client revenues were $760 million, approximately 86% of total revenue and increased 15% or 16% on a constant currency basis. Within Global Client, BPO revenue grew 16% or 17% on a constant currency basis, largely driven by recent large deal ramps and growth in transformation services.
For the second consecutive quarter transformation services grew north of 35% and was approximately 27% of total global client revenue. It should be noted, that some portion of this growth is expected to occur a bit later in the year.
Global client IP services revenue was up 7% year-over-year. Revenue from G.E. was a $121 million, up 86% year-over-year, driven by incremental scope of work and a faster than expected ramp related to the new large deal we signed late last year, as well as transformation services work related to supply chain services.
Adjusted income from operations for the quarter grew 24% to $136 million and our adjusted operating margin expanded to 15.4%, a 40 basis point improvement versus the prior year. This performance was driven by strong top line growth and our continued focus on SG&A leverage which more than offset the $10 million decline in export subsidy income this quarter versus the prior year.
Gross margin for the quarter was 35.2% compared to 36.5% during the same period last year and 35.8% in the first quarter, largely due to dilution from recent large deals with significant onshore delivery. The solution is aligned with our full year outlook as we forecasted the quarterly phasing of these deals. We continue to expect gross margin for the full year to be relatively flat with a level reported in 2018.
Total SG&A expenses were $196 million compared $176 million in the same quarter of last year, as a percent percentage SG&A expenses declined year-over-year by almost 200 basis points despite absorbing approximately 70 basis points related to incremental stock-based compensation. This performance was driven by significant operating leverage, as well as expected savings from functional efficiency initiatives.
Adjusted EPS for the first quarter was $0.49 compared to $0.41 last year. The $0.08 increase was driven by higher operating income of $0.11 offset by $0.01 each related to lower foreign exchange balance sheet re-measurement gains, a higher effective tax rate and higher net interest expense.
Our effective tax rate during the second quarter was approximately 22% compared to 21% last year. The increase is primarily due to the expiration of special economic zone benefits in India and aligns with our full year outlook. During the quarter, we returned approximately $60 million - $60 million to shareholders by our quarterly dividend of $0.085 per share.
Now let me turn to our cash flows and balance sheet. During the second quarter, we generated $126 million of cash from operations compared to $77 million last year. The incremental cash flows were driven by higher operating income and expected payments related to India export subsidy.
DSOs improved from 87 days - improved to 87 days from 93 during the first quarter. We continue to expect our DSOs to improve throughout the balance of the year ending in the low 80 day range by the fourth quarter.
Our cash and cash equivalents were $378 million compared to $334 million at the end of the second quarter of 2018. Our net debt to EBITDA ratio for the last four rolling quarters was 1.07. With undrawn debt capacity of $208 million and existing cash balances, we continue to have ample liquidity to pursue growth opportunities and execute in our capital allocation strategy. Capital expenditures as a percentage of revenue was 3.3% in the second quarter of 2019 compared to 3.9% during the second quarter of last year.
Let me now update you on our full year 2019 outlook. Given our strong year-to-date topline performance and better visibility into the balance of the year, we now expect total revenue to be between $3.46 billion and $3.5 billion, representing year-over-year growth of 15% to 17% or 16% to 18% on a constant currency basis, up from our prior outlook of 11% to 13% or 12% to 14% constant currency.
For Global Clients, we now expect full year revenue growth to be in the range of 10.5% to 12% on a constant currency basis from our prior 10% to 11.5% range. We now expect global client BPO to grow 11.5% to 13% constant currency, up from the prior 11% to 12.5% range.
With strong bookings growth in 2018, record pipeline levels and increasing total addressable market, we remain optimistic in our ability to generate double-digit global client growth over the long term.
Given our strong year-to-date GE performance and the incremental scope of work related to the new large deal we signed late last year, we now expect full year revenue from GE to grow approximately 70% year-over-year compared to our prior outlook of 35% growth.
We continue to expect adjusted operating margins to be approximately 16% for the full year with continued margin improvement during the second half of the year. We now expect full year adjusted earnings per share in the range of $2 to $2.02, up from the prior range of a $1.96 to $2 range.
With that, let me turn the call back over to Tiger for his closing comments.
Thank you, Ed. These are exciting times for Genpact. Our strategic choices, our investments and capabilities, our strength in the front end, our pivot to transformation services [Technical Difficulty] replicable digital and analytic solutions are all paying off.
In addition, the iconic clients we have recently added are significantly elevating our profile in the market. All of this is driving strong profitable growth for both global client GE and has earned us the right to compete for and win maga deals.
At the heart of our ability to serve clients with excellence as a dedication on 90,000 plus global team members and one of the best leadership teams in the industry, we also just added David EdoHyde [ph] to the leadership team as our new transformations [Technical Difficulty]
It is our culture of continuous learning that we believe is our differentiated winning secret sauce. We are now in the 10th month of a new program called Genome, designed specifically to excite our workforce, to keep learning by providing the right tools and methods to up-skill them, with relevant digital transformation and other professional skills at scale. This re-skilling will help Genpact in many ways in the future, so as an organization we are always ready to meet the changing needs of outlines.
With that, let me turn the call back over to Roger.
Thank you, Tiger. We’d now like open our call for your questions. Dorindo, can you please provide the instruction.
Thank you. [Operator Instructions] Our first question is from Bryan Bergin from Cowen. Your line is open.
Hi, guys. Thank you. I wanted to ask on the large client, you've had great success with here Wal-Mart, seems like you've had multiple expansions of the account and such quick traction at that account is impressive. Is it there something different in this relationship or is – you know, Tiger head your commentary about faster decision making in large deals, but can you replicate the success that you're seeing at Wal-Mart? What are your thoughts on that.
So I’ll just expand the Bryan, the question to be beyond - beyond the one client. I think there are three things that are very clear. One, decision making is much faster, even though scope and complexity is much larger in many, many of these journeys, number one.
Number two is the ability to drive value faster is better, just because now we are leveraging digital technologies, analytical tools and that delivers value in faster cycles. And third, I think we still have to practise close on our execution capabilities, be it operating execution or digital execution. That strength has been the bulk of our strength for a long, long time. But the first two, I think our differences in the marketplace that clearly is playing out.
Okay. Makes sense. And then I wanted to dig on gross margin, you had comments there on the large deal ramps, the investments there. Can you give us a sense on some of the moving parts within gross margin, whether you can quantify the last two rounds, whether FX was a large factor? And you mentioned year-on-year is going to be flat. How should we be thinking about gross margin potential beyond ’19, is it - any other impediments to driving it higher from here?
Bryan, largely align with what we thought, we knew would be a bit below the 36 in the first half and our expectations be slightly above, you know, the math would tell you to be flat year-over-year, you probably need to be about 36.5 for the second half of the year which is what we had planned. So as we ramp we are expecting it to be a bit better second half such that the full year ought to be roughly flat.
And a dilution in the quarter really relates to the large deal ramps and the one that we talked about that executed at the end of the second – sorry, the first quarter ramp with two months versus just one in the first quarter, so that was the majority of that differential.
And Bryan, just to - just to add to what Ed said. You know, we do run the company from an adjusted operating income and EPS perspective and we must understand that that as we drive this growth, as a lot of that growth includes onshore and offshore delivery, a lot of that has digital and transformation agendas built into them.
I would say our overarching objective is to drive profitable growth at the adjusted operating income and EPS level and then all the puts and takes that Ed explained on the gross margin side plays out.
Okay. Thanks for the color.
Thanks, Bryan.
Our next question comes from Mayank Tandon from Needham & Company. Your line is open.
Thank you. Good evening. And congrats Tiger and Ed. Just a few questions from my side. First, could you comment on – I mean, you talked about the transformation side, but could you talk about maybe automation specifically. What is the percentage of deals that are impacted by automation? And do you see this as a threat or opportunity going forward. What is the economic profile of such deals versus your core BPM offerings?
I think it's pretty clear that automation is a benefit that we are leveraging to the hilt. 75% of our deals have digital and analytics and transmitted services embedded in them. So obviously 75% of them have automation embedded in them. And the differentiation for the customer, the differentiation in terms of driving value, driving that value faster all comes from these digital technologies and bringing them to life.
So we clearly have always seen it as an opportunity. We've never seen it as a threat and we've embraced it through a combination of building our own capabilities, as well as acquisitions and bringing in a whole set of new leaders who brought new thinking and new abilities to the table.
And that's what's playing out. So we think very clearly that that's the way it will continue to play out and our total addressable market has also we believe drawn gone up, because more clients on the table, more saying I want to partner and more saying I want a bigger scope, faster, every one of those play to maturity increasing.
Got it. And then just related Tiger, in terms of obviously given the shift of those type of work, what is the gating factor. I mean, I would imagine it's probably hiring the talent to be able to work on these type of digital/slash analytics engagements. So maybe if you could comment on just the war for talent out there in the market and how you're competing with your peers in that regard?
That is a great question Mayank. I would start by saying, it's always been a war for talent. Our business is about talent, that's never changed and it's not just to learn analytics and that talent. Our secret sauce is marrying that talent with a deep understanding of the customer, the domain and the process, the Lean and Six Sigma skills. It's the combination that makes us very different. The ability to drive that conversation and combination.
The war for talent continues and I think we are really well positioned in that war for talent both in our global delivery locations, as well as in our markets locations, such as well, I am in London or in the US or in Japan or in Australia, just picking those four markets or some of the most recent wins we've had in Canada.
One of the reasons why I think we are able to attract that talent, we are finding is the ability to actually build solutions that can be deployed and that generate value, rather than being a solution that remains in a conference room. And that's what understanding domain and industry brings to the table. And of course, building iconic brands helps. These are brand names that people are attracted by. So we feel very good about our ability to attract talent and have them join the team and combined with the talent we've always had.
Great. Thank you. Appreciate the color.
Thank you.
Our next question comes from Ashwin Shirvaikar from Citi. Your line is open.
Hi, Tiger. Hi, Ed. Thanks and congratulations on the quarter.
Thank you, Ashwin.
I wanted to start by kind of pulling together a few of the comments made you know, faster decision making, ramping more deals, they have a greater transformation component more than analytics. So as you pull this together, how does your approach to delivery change broadly speaking, if you can comment on that.
Actually, its great question Ashwin and I’ll start by saying, one change - many changes, one of them would be the combination of onshore and offshore is pretty real in almost every one of these large transformational deal. So that's one change. So it's not just global offshore delivery.
Number two is the criticality and the complexity of some of the work is you know, one, two or three notches higher. So obviously the talent and capability that you need and the depth of skills needed and knowledge needed is higher.
The third is implementations have a fast cycle and has special component to them. So in the world of just operations it was just deliver what was promised and deliver it 100% of the time accurately to you know experimenting whether it's AI for example, where sometimes you can start with 60% accuracy and 40% exceptions. And over time, AI learned and you move towards the 90% mark.
How quickly can you get there determines success for the client and obviously by definition success for us. So at the core it still comes back to focus on the customer, always doing what's right for the customer, measuring and metrics at a granular level all of which is not new for us. That's our strength. It's always been.
Got it. Understood. Thank you for that. One thing, I mean this is the second quarter in a row. Obviously you guys have delivered [indiscernible] like this. Based on what you're saying, it seems as though, you know strong results ought to continue, then I can look at you know you haven't done a buyback in the first half, Can you explain that. I mean, all as equal I would expect you guys would be doing a buyback, would be you know investing in the stock itself if possible. So what - is there something you can comment on this?
So I’ll have Ed…
Go ahead, yeah.
Yeah, I’ll have Ed talk about capital allocation. But let me first talk about you know, the last couple of quarters and the acceleration we've seen, we actually started seeing the acceleration towards the latter part of last year. Ashwin, if you remember I used the phrase tipping point in the February earnings call, referring to the fourth quarter of last year and that tipping point was in reference to the iconic brands that we had started journeys with, the big news that we had won, the coming together of our choices, our investments and our front end team.
And the way the market was changing in terms of the decision making cycle, as well as people who would not otherwise wanting to partner at size, scale and scope. We started seeing that tipping point. I think what's playing up is that tipping point.
So by definition therefore we feel that this is a journey that the world is going to undertake for quite some time and we are well positioned to be part of that journey and capture that value. Ed, so you want to talk about capital allocation, the two are pretty different questions by the way.
But just to complete the thought. Really, no surprise there Ashwin as you know, we've talked about the investment grade being important so net debt to EBITDA levels were a bit elevated levels for the last few quarters because of the acquisition we had done late in the third quarter of last year. So that was - that's really the rationale.
We're now down to a - back to a point where you know the dry powder if you will at 1.7 churns and you heard me say in my prepared remarks that you know we have the capital to do what we need to do going forward, whether that’s M&A, share repurchase or other. So I think we're back to a point where you know we feel comfortable that the dry powder to do – want to do.
Absolutely. Got it. Thank you, guys.
Thanks, Ashwin.
Our next question comes from Edward Caso from Wells Fargo. Your line is open.
Hi. Thanks. Congrats here. Just try to get a sense if you're gaining share. I think clearly the market has shifted and your position to capture what appears to be strongly improving market. But do you have any sense whether you're gaining share and maybe generically what kind of firms you might be gaining it from? Thank you.
That is - that's a great question. You know, I wish I could answer it with specificity and preciseness that we all would like. We think we are gaining share. We believe we are and that belief comes from really two high level data points. One is industry growth rates. We seem to be above industrial growth rate.
And second, we seem to be above growth rates of a number of the firms that we typically compete with. So put those two together, we would think that we are gaining share, in the chosen areas and only in those chosen areas.
We have chosen verticals, chosen geographies and chosen services. We do not deviate from those. If there are – if the growth happening outside of those then we don't touch those at all. So that - I would say in our chosen area, I think we are gaining share.
We tend to compete with the same - with the same competitive set. So I don't think the competitive set has changed. I would argue in the last three or four years it's remained pretty much the same, depending on the service and depending on industry verticals.
So my other question is around the growth rate in global clients, very strong first half. But given the full year guide it assumes a deceleration in the global client. Is that the math with the IT piece, is that the math on how the large contracts roll in, sort of help me why there's sort of a softer growth outlook in H2? Thanks.
Yeah. So Ed, I'll start by saying that you know, it's actually all three of the above and you name, one is, we've had an acceleration in transformation services. Some of that is acceleration of some of the big deals that got activated in the first half which had embedded transformation services, we got the benefit of that some of that, some of that will not happen in the second half.
The second is, if you do a year to year comparison on the second half, we have a higher comparison in the third and fourth quarter of last year. And the ramps have been very, very clear in the first half and some of that benefit we've already got in the first half. Ed, you want to add more color to that.
No, I think that's good Tiger. The year-over-year comparisons get tougher as you get - as you go through last year, right. So Q3 got better and Q4 was much better, right. So Q4 is probably the toughest compare of all the quarters last year.
But at the end of the day you know we've gotten to a different level in terms of total revenues are up $75 million from Q1 to Q2 and then you know in our worst case scenario in our outlook we’re up slightly or flattish which is still pretty nice growth year over year for the second half, and obviously for the full year.
Great. Thank you.
Thanks, Ed.
Thanks, Ed.
Our next question comes from Tien-Tsin Huang from JPMorgan. Your line is open.
Thanks. Good afternoon. Obviously happy to see really big upside on the revenue. So I guess I was curious your ability to staff up to service dispersed in revenue, I was kind of surprised how quickly you're able to do that. Anything you mentioned or call out in this regard?
Your point is absolutely valid. Obviously we have the benefit of pretty good visibility you know - why the speedy decision making cycle it still has visibility because its still a long cycle business. We do have some visibility, that visibility helps.
Two, you know we have always prided ourselves on our ability to attract the right talent. We now have a global delivery footprint that is 20 plus countries. These are not concentrated in one place.
And third is in some of these deals, not all of them, but in some of them we were actually taken over the operations of our client, that allows us to create some step functions in talent. And by the way this talent is actually one of the reasons why we actually went and did that because these are some of the best talent that you can find, a little bit connected to the earlier question on how do you get great talent, when you get great talent from a Bridgewater or a Walmart or a GE, I think that's a great opportunity that we leverage. So I would say all of that is helping us.
Yes Tiger, I would add that, when you had the question last time and the beauty of this is that we're getting terrific talent here and we'll double down it, right.
That all make sense and with the rebadging, so I'm just curious from a - you know obviously we get the guidance and what implies in the second half. But I'm just curious from a business development standpoint having these reference wins as you've called out in your precedent and saying the using the tipping point words, I'm curious as we roll into 20 with GE and these other dynamics, Has your thinking changed here in terms of your ability to replenish the pipeline and the backlog and visibility and all that – and all that good stuff, if you follow my question Tiger?
Yeah. So I’ll say our pipeline is stronger as I said, actually one of the strongest we've had. Our inflows are strong, which is strong in spite of the growth we've had in revenue this year, as well the bookings momentum we had at the end of last year. And we reiterated the fact that first half and global client growth exactly matches and is just around the point for global client, as well as global client BPO are long term growth trajectory.
We think that's still valid, because the under penetration is so real, the total addressable market has in fact grown and our position around transformation services allows us to that market. So I would say all of that augurs well for the future. Obviously I think it's still too early to talk about exactly the numbers for 2020, but we feel very good about the strength of the pipeline and the strength of the inflows.
And I think if you're - not talking about acceleration of growth, but you know which can happen, but I think the total addressable market that it is not only shrinking, we think it's expanding based upon what we're seeing and now its - that's what we said but a long term we see this global client growth rate being in that double-digit range. So that's encouraging.
Terrific. Well done. Thank you.
Thank you, Tien-Tsin
Our next question comes from Maggie Nolan from William Blair. Your line is open.
Hi. So I wanted to ask about some of the digital hubs that you've been creating as you announced some of these large deals and the expansion of these deals. At this point in time I know they're a little bit newer, but at this point time have you been able to start to see any traction in terms of servicing other clients or even new clients out of those hubs and I'm just wondering what we're seeing at some of the accounts that may not be these you know big brand names that we're hearing so much about on the call and in the press releases?
No, great question Maggie, thanks. So a lot of the digital analytics hubs that we talked about are those that are intersection of a set of visual technologies in an industry. So if you take Stanford in Connecticut where we announced the Bridgewater financial services digital hub, that is a great attraction for similar clients to actually say why would we leverage our black talent base, those solutions for themselves.
If we look at Bentonville as an example of the consumer goods retail space and finance supply chain auto management in that area and some of the digital technologies and co-innovation that happens there, particularly as we continue to refresh the talent – new talent and our partnership with Northwest Arkansas University, then production from other consumer goods companies and other retailers to take a look at it and say that they'd like to leverage those same places.
So we've been very precise in our digital hubs and innovation center being those which create specific solutions that are relevant for a specific industry in a specific service arena.
The most recent one we announced yesterday in Guadalajara, Mexico is pretty interesting around digital and analytics, again the intersection of being a consumer goods space, that can solve a number of those industries in that space.
So we feel very good about those being attractive for other people who then land there. Obviously though decision cycles they have to come there, and take a look at it and then they have decide their decision cycles. But that's one of the reasons we are very excited about these iconic brands.
Very good. And then you talked a little bit in the prepared remarks about seeing more deal wins than ever before. Is there any additional information that you can give us there in terms of quantifying it, breaking out additional detail, whether it's large deals or however you'd like to break out.
And then also interested in kind of understanding how much of it is inbound. You did mention in the prepared remarks that you're seeing more in the way of inbound just due to some of the brand awareness that these large clients has brought? Thank you.
So Maggie, in terms inbound deal, I don't think we'll be able to give any specific metrics. It's just way, way more than that it's ever been. And remember we compete in the marketplace where some of our competitors have been around much longer and are much bigger than us and they are much more well-known. And these are the recent spate wins allows us to be known more.
As it relates to the – Maggie, just remind me…
Any more color on the new deal wins. Maggie we've talk about the other thing I'll add color to and Tiger you can add, and I think there was a question before about market share. You know the other data point we're seeing we don't give a number, but we've always been happy with our win rate and those numbers over the past two or three quarters have even been better, right. So just another indication that we were - we have good traction and gaining traction if you will. So feel good about that.
All right. Thank you. Congrats.
[Operator Instructions] We do have question from Robby Bamberger from Baird. Your line is open.
Yeah. Thanks for taking my question. Regarding transformation revenues in Q2 how much should you expect and how much of this [indiscernible] and then how much should we expect for the rest of the year?
Yeah. So on transformation services revenue you know, as I said in my prepared remarks there were some of that that we did expect to happen in the second half of the year to get put forward. In the quarter of that 70 plus million incremental that we saw sequentially, we probably got somewhere in the $10 million to $15 million range and a big chunk of that in the large deals that we have talked about and a big chunk of that in global client. So that's part of the phenomena that you know yielded a bit better Q2 than even we expect it which is great.
And for the balance of the year, TS [ph] will still be growing at a faster clip than total company growth, so feel good about that. But again remember as we talked earlier the year over year prepared to get a bit harder in Q3 and in particular in Q4, but again still be growing at that clip probably. As I look back at it you know around 20% plus growth rate in the second half is still pretty robust.
Yeah, thanks. And then with regarding acquisitions, what was the contribution of the quarter. And then I guess what's expected for the year for Commonwealth [indiscernible]
I think we don't talk quarters, but for the full year it's a little over a percent for total revenue. I think we talked about that earlier in earlier in the year, no change.
Okay, perfect. Oh yeah. Yeah. With regard to the revenue beat as well, I guess why aren't we seeing more margin expansion and it is all being spent away on marketing and G&A. I guess to keep the growth engine going or and then ramp of course as well. And then essentially would just flex the margins and slower year or how is the margin progression going?
Really no change there and are in our outlook. Yeah the 60% operating margin is kind of the number we targeted and again it's been - it's been that deliberate improvement that we've been driving for the past several years, so no change in strategy. We will continue to invest in the business to drive that profitable growth. So we like the deliberate progression there. And so far so good, halfway through the year. Tiger anything else on that.
No. And you know our business we've always said when you ramp you start at a lower margin and then you climb margin through the cycle of the lifecycle of the relationship. That ramp in these complex deals probably takes longer than normal ramp and has more fuel consumption in the early days. So this is exactly what we expected. So nothing here that is unexpected and in the margin profile as we go through this.
And with that said flowing through the income to the operating margin dollars obviously flowing through and why you saw it pick up in the EPS numbers?
Perfect, thanks.
I'm showing no further questions at this time. I now like to turn the call back over to Roger Sachs for closing remarks.
Roger Sachs
Thank you everybody for joining us on the call today. And we look forward to speaking with you again next quarter.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may disconnect and have a wonderful day.