UK.
in India. The legislation currently being considered in India relates to the regulation of cross-border transfers of sensitive personal information and has potentially broad-reaching implications in the backdrop of cloud computing. Given the size and scope of our operations in India, the costs of compliance with Indian data privacy laws, and any fines or penalties for breaches thereof, could be significant and could have a material adverse effect on our business, financial condition and results of operations. As privacy laws and regulations around the world continue to evolve, these changes and others could adversely affect our business operations, websites and mobile applications that are accessed by residents in the applicable countries.
We could be liable to our clients or others for damages, subject to criminal liability, fines or penalties, and our reputation could be damaged, if our information systems are breached or confidential or sensitive client or employee data is compromised.
We are often required to collect, process and store proprietary, personally identifying or other sensitive or confidential client data in the operation of our business or in connection with the services we provide under our contracts, including, for example, names, address, social security numbers, personal health information, credit card account numbers, payment history records, and checking and savings account numbers. In addition, we collect and store data regarding our employees and contractors. As a result, we are subject to numerous data protection and privacy laws and regulations designed to protect this information in the countries in which we operate as well as the countries of residence of the persons whose data we process. Data may be accessed or modified improperly as a result of theft, error or malfeasance by our employees, contractors or other third parties, and others may attempt to fraudulently induce our employees, clients or other third parties into disclosing sensitive information such as user names, passwords or other information in order to gain access to our data or IT systems or our clients', contractors’ or other third parties' data or IT systems. If any person, including any of our current or former employees or contractors, negligently disregards or intentionally breaches our or our clients’ established controls with respect to sensitive data or if we do not adapt to changes in data protection legislation, we could be subject to significant litigation, monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions.
In addition, the products, services and software that we provide to our clients may contain or introduce cybersecurity threats or vulnerabilities to our clients’ information technology networks, intentionally or unintentionally. Our clients may maintain their own proprietary, sensitive, or confidential information that could be compromised in a cybersecurity attack, or their systems may be disabled or disrupted as a result of such an attack. Our clients, regulators, or other third parties may attempt to hold us liable, through contractual indemnification clauses or directly, for any such losses or damages resulting from such an attack.
The threat of incursion into our information systems and technology infrastructure
security, even if nothing has actually been attempted or occurred, could also adversely impact our brand and reputation and materially affect our business.
In addition, we might not be able to prevent others from using our data and proprietary information to compete with us. Existing trade secret, copyright and trademark laws offer only limited protection. In addition, the laws of some foreign countries may not protect our data and proprietary information. For example, doing business in certain jurisdictions poses risks, including but not limited to theft of intellectual property and data and potentially different treatment of foreign owned intellectual property rights and data than that owned or developed in such jurisdictions. If we have to resort to legal proceedings to enforce our rights, the proceedings could be burdensome, protracted and expensive and could involve a high degree of risk and be unsuccessful.
Our clients, suppliers, subcontractors, and other third parties with whom we do business, including in particular cloud service providers and software vendors, generally face similar cybersecurity threats, and in some cases we must rely on the safeguards adopted by these parties. We may also be liable to our clients or others for damages caused by disclosure of confidential information or system failures. Many of our contracts do not limit our potential liability for breaches of confidentiality. We may also be subject to civil actions and criminal prosecution by governments or government agencies for breaches relating to such data. Our insurance coverage or indemnification protections for breaches or mismanagement of such data may not be adequate to cover all costs related to data loss, cybersecurity attacks, or disruptions resulting from such events, or they may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims against us and our insurers may disclaim coverage as to any future claims. The impact of these cybersecurity attacks, data losses, and other security breaches cannot be predicted, but any such attack, loss or breach could disrupt our operations, or the operations of our clients, suppliers, subcontractors, or other third parties. Incidents of this type could require significant management attention and resources, could result in the loss of business, regulatory enforcement and financial liability, and could harm our reputation among our clients and the public, any of which could have a material adverse impact on our financial condition, results of operation, or liquidity.
While we have developed and implemented security measures and internal controls designed to prevent, detect and respond to cyber and other security threats and incidents, such measures cannot ensure security and may not be successful in preventing future security breaches. We are subject to regular incursion attempts from a variety of sources, and we have experienced data security incidents such as inadvertent or unauthorized disclosures of data, including as a result of phishing or malware, and other unauthorized access to or use of our systems or those of third parties. To date such incidents have not had a material impact on our operations or financial results; however, there is no assurance that such impacts will not be material in the future.
Tax matters may have an adverse effect on our operations, effective tax rate and financial condition.
We are subject to income taxes in the United States and in numerous foreign jurisdictions, notably in India where we have substantial operations. Our provision for income taxes, actual tax expense and cash tax liability could be adversely affected by a variety of factors including, but not limited to, lower income before taxes generated in countries with lower tax rates; higher income generated in countries with higher tax rates; changes in tax laws and regulations or in applicable income tax treaties; changes in accounting principles or interpretations thereof or in the valuation of deferred tax assets and liabilities; the possible disappearance or expiration of certain tax concessions that we have enjoyed in prior years; and adverse outcomes of tax examinations and pending tax-related litigation. Any of these factors could have a material adverse effect on our operations, effective tax rate and financial condition.
We are subject to examination of our income tax returns by the U.S. Internal Revenue Service and tax authorities around the world, notably in India where we have substantial operations, and there can be no assurance that negative outcomes from those examinations or any appeals therefrom will not adversely affect our provision for income taxes and cash tax liability, which in turn could have a material adverse effect on our operations, effective tax rate and financial condition. For example, the Government of India has appealed a 2011 ruling by the Delhi High Court that Genpact India Private Limited (one of our subsidiaries) cannot be held to be a representative assessee of GE in connection with an assertion that GE
has tax liability in India by reason of a 2004 transfer of shares of our predecessor company. We believe that, if the Government of India is successful in its appeal, GE would be obligated to indemnify us for any resulting tax, though there can be no assurance as to the outcome of this matter.
In addition, the Government of India issued assessment orders to us in 2014, 2015 and 2016 seeking to assess tax on certain transactions that occurred in 2009, 2010 and 2013. We do not believe that the transactions should be subject to tax in India under applicable law, including due to the relief provided under the Mauritius-India treaty, and have accordingly filed appeals. Our appeal in respect of tax year 2010 has been resolved in our favor. We have received demands for potential tax claims resulting from assessments related to tax years 2009 and 2013 in an aggregate amount of $158 million, including interest. To date, we have paid a total of $23 million toward these demands to the Indian tax authority under protest, and may be required to pay the remainder of the demands pending resolution of the matter. There is no assurance that we will prevail in this matter or similar transactions, including where we have relied on the Mauritius-India treaty, and a final determination of tax in the amounts claimed could have a material adverse effect on our operations, effective tax rate and financial condition.
More generally, the Indian tax authorities may claim that Indian tax is owed with respect to certain of our transactions, such as our acquisitions (including our subsidiaries organized under Indian law or owning assets located in India), internal reorganizations and the sale of our shares in public offerings or otherwise by our existing significant shareholders, in which indirect transfers of Indian subsidiaries or assets are involved. Those authorities may seek to impose tax on us directly or as a withholding agent or representative assessee of the seller in these or other transactions.
Furthermore, there is growing pressure in many jurisdictions, including the United States, and from multinational organizations such as the Organization for Economic Cooperation and Development (OECD) and the EU to amend existing international tax rules in order to render them more responsive to current global business practices. For example, the OECD has published a package of measures for reform of the international tax rules as a product of its Base Erosion and Profit Shifting (BEPS) initiative, which was endorsed by the G20 finance ministers. Many of the initiatives in the BEPS package require amendments to the domestic tax legislation of various jurisdictions. Separately, the EU is asserting that a number of country-specific favorable tax regimes and rulings in certain member states may violate, or have violated, EU law, and may require rebates of some or all of the associated tax benefits to be paid by benefitted taxpayers in particular cases. In 2016, the EU adopted the Anti-Tax Avoidance Directive which requires EU member states to implement measures to prohibit tax avoidance practices beginning January 1, 2019.
In addition, in December 2017, the Tax Cuts and Jobs Act was passed by the U.S. Congress and signed into law by President Trump, bringing about far-ranging changes to the existing corporate tax system. This legislation establishes a territorial-style system for taxing foreign-source income of multinational corporations and, among other items and with varying effective dates, includes changes to U.S. federal tax rates, an additional minimum tax measured in part by “base erosion payments” involving certain members of affiliated groups, significant additional limitations on the deductibility of interest, the modification of constructive ownership rules used to determine the status of certain non-U.S. companies as “controlled foreign corporations,” and changes to the rules governing taxable and tax-free cross-border transfers of intangible property. Many of the provisions in this legislation are unclear or incomplete in their application. While this legislation has not so far had a material overall impact on our effective tax rate or business practices and operations, it is possible that our tax liability may materially increase in the future as a result of this legislation. Other legislative and regulatory proposals may also affect our tax position or our business practices and operations, depending on whether and in what form they may ultimately take effect. See Item 1A—“Risk Factors—Risks Related to our Business—Future legislation or executive action in the United States and other jurisdictions could significantly affect the ability or willingness of our clients and prospective clients to utilize our services.”
Although we monitor these developments, it is very difficult to assess to what extent recent changes and other proposals, if enacted, may be implemented in the United States and other jurisdictions in which we conduct our business or may impact the way in which we conduct our business or our effective tax rate due to their unpredictability and interdependency. As these and other tax laws and related regulations and practices change, those changes could have a material adverse effect on our operations, effective tax rate and financial condition.
If the transfer pricing arrangements we have among our subsidiaries are determined to be inappropriate, our tax liability may increase.
We have transfer pricing arrangements among our subsidiaries in relation to various aspects of our business, including operations, financing, marketing, sales and delivery functions. U.S. and Indian transfer pricing regulations, as well as regulations applicable in other countries in which we operate, require that any international transaction involving associated enterprises be on arm’s-length terms. We consider the transactions among our subsidiaries to be substantially on arm’s-length terms. If, however, a tax authority in any jurisdiction reviews any of our tax returns and determines that the transfer prices and terms we have applied are not appropriate, or that other income of our affiliates should be taxed in that jurisdiction, we may incur increased tax liability, including accrued interest and penalties, which would cause our tax expense to increase, possibly materially, thereby reducing our profitability and cash flows, which in turn could have a material adverse effect on our operations, effective tax rate and financial condition.
GE accountshistorically accounted for a significant portion of our revenues and any material loss of business from, or change in our relationshipfailure to maintain relationships with, GE and former GE businesses could have a material adverse effect on our business, results of operations and financial condition.
We expect that our business with GE will continue to come from a variety of GE’s businesses and that, in general, GE’s decisions to use our services will continue to be made by a number of people within GE. Therefore, although some decisions may be made centrally at GE, we expect that the total level of business we receive will continue to depend on the decisions of the various operating managers of such businesses. Finally, there can be no assurance that GE will not establish its own business unit to provide English-language business process services from low-wage countries or otherwise compete with us. Any of the foregoing events could have a material adverse effect on our business, results of operations and financial condition.
Aour clients operate. In addition, a number of other factors could adversely affect our ability to do business in the United States or Europe, which could in turn have a material adverse effect on our business, results of operations and financial condition. For example, the United Kingdom’s negotiations with the EU over Brexit and ongoing
uncertainty within the UK Government and Parliament sustains the possibility of the United Kingdom leaving the EU on March 29, 2019 without a withdrawal agreement and associated transition period in place, which is likely to cause significant market and economic disruption.
Brexit has created, and continues to create, political and economic uncertainty about the future relationship between the United KingdomUK and the EU and as to whether any other European countries may similarly seek to exit the EU. We have operations in the United KingdomUK and a number of countries in the EU and our global operations serve clients with operations in these regions, and as a result our business, financial condition and results of operations may be impacted by such uncertainty and by the terms of the United Kingdom’s pendingUK’s withdrawal from the EU.
Furthermore, any
Any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition.
Our partnerships, alliances and relationships with third-party suppliers and contractors and other third parties with whom we do business expose us to a variety of risks that could have a material adverse effect on our business.
Our partnerships and alliances and our relationships with a variety of third parties, including suppliers, contractors and others, expose us to a variety of risks that could have a material adverse effect on our business, and we may not be successful in mitigating such risks. Our operations depend on our ability to anticipate our needs for products and services, as well as our suppliers’ ability to deliver sufficient quantities and quality of products and services at reasonable prices and in time for us to meet
commitments for the delivery of our own services. In addition, we must adequately address quality issues associated with our services, including with respect to any third-party components to our services. Any performance failure on the part of our partners or the third parties with whom we do business could delay our performance of client deliverables, which could deprive us of potential revenue. Additionally, our partners, third-party suppliers and contractors and other third parties with whom we do business may not be able to comply with current good business practices or applicable laws or regulatory requirements. Our failure, or the failure of such third parties, to comply with applicable laws and regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties and criminal prosecutions, any of which could significantly and adversely affect our business.
We may have limited control over the amount and timing of resources that our partners and third parties with whom we do business dedicate to their arrangements with us. Our ability to generate revenues from these arrangements will depend on our partners’ or other third parties’ desire and ability to successfully perform the functions assigned to them in these arrangements. Further, certain of our suppliers, partners and other contractors may decide to discontinue conducting business with us.
In addition, we are a party to a number of license agreements with third parties and expect to enter into additional licenses in the future. Our existing licenses impose, and we expect that future licenses will impose, various obligations and restrictions on us. If we fail to comply with these obligations and restrictions, the licensor may have the right to terminate the license, in which event we might not be able to market any product or service that is covered by these agreements, which could materially adversely affect our business. Termination of these license agreements or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms, or cause us to lose rights in important intellectual property or technology.
Any of the foregoing may prevent us from working with our partners or third parties with whom we do business and could subject us to losses, affect our ability to bring products and services to market, cause us to fail to satisfy our client obligations and harm our reputation.
We may fail to attract and retain enough qualified employees to support our operations.
Our industry relies on large numbers of skilled employees and our success depends on our ability to attract, train and retain a sufficient number of qualified employees. Historically, high employee attrition has been common in our industry. See Item 1—“Business—Our people.” In 2018, our attrition rate for all employees who were employed for a day or more was approximately 28%. We cannot assure you that we will be able to reduce our level of attrition or even maintain our attrition rate at the 2018 level. If our attrition rate increases, our operating efficiency and productivity may decrease.
Competition for qualified employees, particularly in India and China, remains high and we expect such competition to continue. We compete for employees not only with other companies in our industry but also with companies in other industries, such as software services, engineering services and financial services companies. In many locations in which we operate, there is a limited pool of employees who have the skills and training needed to do our work. If our business continues to grow, the number of people we will need to hire will increase. We will also need to increase our hiring if we are not able to maintain our attrition rate through innovative recruiting and retention policies. Significant competition for employees could have an adverse effect on our ability to expand our business and service our clients, as well as cause us to incur greater personnel expenses and training costs.
Wage increases in the countries in which we have operations may prevent us from sustaining our competitive advantage and may reduce our profit margin.
Salaries and related benefits of our employees are our most significant costs. Most of our employees are based in India and other countries in which wage levels have historically been significantly lower than wage levels in the United States and Western Europe for comparably skilled professionals, which has been one of our competitive advantages. However, wage levels for comparably skilled employees in most of the countries in which we operate have increased and further increases are expected at a faster rate than in the United States and Western Europe because of, among other reasons, faster economic growth, increased competition for skilled employees and increased demand for business process services. We will
lose this competitive advantage to the extent that we are not able to control or share wage increases with our clients. Sharing wage increases may cause our clients to be less willing to utilize our services. In addition, wage increases may reduce our margins. We will attempt to control such costs by our efforts to add capacity in locations where we consider wage levels of skilled personnel to be satisfactory, but we may not be successful in doing so. We may need to increase our wage levels significantly and rapidly in order to attract the quantity and quality of employees that are necessary for us to remain competitive, which may have a material adverse effect on our business, results of operations and financial condition. In addition, a recent judicial decision in India that we are still evaluating could increase the amount we will be required to pay to or for the benefit of our employees in India. Further, if this decision is implemented with retrospective application, the amount of the payments that we are required to make at that time to or for the benefit of our employees could be substantial and could have a material adverse effect on our business, results of operations and financial condition. We have also increased, and expect to further increase, the number of employees we have in the United States from the levels than we have had historically, and this could have a negative effect on our profit margin.
Currency exchange rate fluctuations in various currencies in which we do business, especially the Indian rupee, the euro and the U.S. dollar, could have a material adverse effect on our business, results of operations and financial condition.
may also require us to meet certain other legal requirements as a condition to obtaining or maintaining entry or work visas. Countries where our clients may be located, including the United States, may through legislation or regulation restrict the number of visas or entry permits available. In general, immigration laws are subject to legislative change and varying standards of application and enforcement due to political forces, economic conditions, terrorist attacks or other events. In addition, there is currently uncertainty with respect to immigration laws and standards in the United States due to legislation introduced in Congress and policy changes suggested and adopted by as the administration of the current U.S. President has pursued legislation and memberspolicy changes to reform U.S. immigration laws and to reverse some immigration policies of his administration. Current U.S. efforts to reduce the number of first-time and renewal H-1B and H-4 visascould result in fewer employees eligible to work for us inprior administration. In recent years, the United States under those programs, as could executive actions that prohibit citizenshas broadly prohibited immigrant visas of applicants from, or imposed travel bans on travelers from, several designated countries, from emigrating to and/or working in the United States. It and it is not currently known what, if any, other such visa or travel restrictions might be proposed in the future or how they would be implemented or enforced.
redemption occurs prior to, in the case of the 2022 notes, March 1, 2022, in the case of the 2024 notes, November 1, 2024 and, in the case of the 2026 notes, March 10, 2026, a specified “make-whole” premium. The 2022 notes, 2024 notes and 2026 notes are our senior unsecured obligations and rank equally with all our other senior unsecured indebtedness outstanding from time to time.
Central banks around the world,substantially.
obligations, or exposure under our interest rate derivative transactions.
Our profitability will suffer if we are not able to price appropriately, maintain asset utilization levels and control our costs.
Our profitability is largely a function of the efficiency with which we utilize our assets, and in particular our people and delivery centers, and the pricing that we are able to obtain for our services. Our utilization rates are affected by a number of factors, including our ability to transition employees from completed projects to new assignments, hire and assimilate new employees, forecast demand for our services and thereby maintain an appropriate headcount in each of our geographies and workforce and manage attrition, and our need to devote time and resources to training, professional development and other typically non-chargeable activities. The prices we are able to charge for our services are affected by a number of factors, including our clients’ perceptions of our ability to add value through our services, competition, introduction of new services or products by us or our competitors, our ability to accurately
estimate, attain and sustain revenues from client engagements, margins and cash flows over increasingly longer contract periods and general economic and political conditions. Therefore, if we are unable to price appropriately or manage our asset utilization levels, there could be a material adverse effect on our business, results of operations and financial condition. Our profitability is also a function of our ability to control our costs and improve our efficiency. As we increase the number of our employees and grow our business, we may not be able to manage the significantly larger and more geographically diverse workforce that may result and our profitability may not improve. New taxes may also be imposed on our services such as sales taxes or service taxes which could affect our competitiveness as well as our profitability. Additionally, we may fail to appropriately estimate our costs in agreeing to provide new or novel services with unique pricing arrangements or service delivery requirements.
operating results may be significantly below the expectations of public market analysts and investors. In such an event, the price of our common shares would likely be materially and adversely affected.
We enter into long-term contracts and fixed price contracts with our clients. Our failure to price these contracts correctly may negatively affect our profitability.
The pricing of our services is usually included in SOWs entered into with our clients, many of which are for terms of two to five years. In certain cases, we have committed to pricing over this period with only limited sharing of risk regarding inflation and currency exchange rates. In addition, we are obligated under some of our contracts to deliver productivity benefits to our clients. If we fail to estimate accurately future wage inflation rates, currency exchange rates or our costs, or if we fail to accurately estimate the productivity benefits we can achieve under a contract, it could have a material adverse effect on our business, results of operations and financial condition.
A portion of our SOWs are currently billed on a fixed price basis rather than on a time and materials basis. We may increase the number of fixed price contracts we perform in the future. Any failure to accurately estimate the resources or time required to complete a fixed price engagement or to maintain the required quality levels or any unexpected increase in the cost to us of employees, office space or technology could expose us to risks associated with cost overruns and could have a material adverse effect on our business, results of operations and financial conditions.
We may be subject to claims and lawsuits for substantial damages by our clients arising out of disruptions to their businesses or our inadequate performance of services.
We depend in large part on our relationships with clients and our reputation for high-quality services to generate revenue and secure future engagements. Most of our service contracts with clients contain service level and performance requirements, including requirements relating to the quality of our services. Failure to consistently meet service requirements of a client or errors made by our employees in the course of delivering services to our clients could disrupt the client’s business and result in a reduction in our revenues, clients terminating their business relationships with us and/or a claim for damages against us. Additionally, we could incur liability if a process we manage for a client were to result in internal control failures or impair our client’s ability to comply with its own internal control requirements. We are also subject to actual and potential claims, lawsuits, investigations and proceedings outside of errors and omissions claims.
Under our MSAs with our clients, our liability for breach of our obligations is generally limited to actual damages suffered by the client and is typically capped at the greater of an agreed amount or the fees paid or payable to us under the relevant agreement. These limitations and caps on liability may be unenforceable or otherwise may not protect us from liability for damages. In addition, certain liabilities, such as claims of third parties for which we may be required to indemnify our clients or liability for breaches of confidentiality, are generally not limited under those agreements. Our MSAs are governed by laws of multiple jurisdictions, therefore the interpretation of such provisions, and the availability of defenses to us, may vary, which may contribute to the uncertainty as to the scope of our potential liability. Although we have commercial general liability insurance coverage, the coverage may not continue to be available on acceptable terms or in sufficient amounts to cover one or more large claims and our insurers may disclaim coverage as to any future claims.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or changes in our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have a material adverse effect on our reputation, business, results of operations and financial condition. It is also possible that future results of operations or cash flows for any particular quarterly or annual period could be materially adversely affected by an unfavorable resolution of these matters. In addition, these matters divert management and personnel resources away from operating our business. Even if we do not experience significant monetary costs, there may be adverse publicity associated with these matters that could result in reputational harm, either to us directly or to the industries or geographies we operate in, that may materially adversely affect our business, client or employee relationships. Further, defending against these claims can involve potentially significant costs, including legal defense costs.
If we are unable to collect our receivables, or unbilled services, our results of operations, financial condition and cash flows could be adversely affected.
Some of our contracts with clients require that we bear the cost of any sales or withholding taxes or unreimbursed value-added taxes imposed on payments made under those contracts. While the imposition of these taxes is generally minimized under our contracts, changes in law or the interpretation thereof and changes in our internal structure may result in the imposition of these taxes and a reduction in our net revenues.
captives of potential clients, software services companies that also provide business process services and accounting firms that also provide consulting or outsourcing services.
In addition, our financial performance and the market price of our common shares may be adversely affected by general economic conditions and economic and fiscal policy in India, including changes in exchange rates and controls, interest rates and taxation policies, as well as social stability and political, economic or diplomatic developments affecting India in the future. In particular, India has experienced significant economic growth over the last several years, but faces major challenges in sustaining that growth in the years ahead. These challenges include the need for substantial infrastructure development and improving access to healthcare and education. Recent economic reform efforts have been disruptive and may increase the level of economic uncertainty in India. Our ability to recruit, train and retain qualified employees, develop and operate our delivery centers, and attract and retain clients could be adversely affected if India does not successfully meet these challenges.
Our delivery centers are at risk of damage from natural disasters and other disruptions.
Our delivery centers and our data and voice communications may be damaged or disrupted as a result of natural disasters such as earthquakes, floods, heavy rains, epidemics, tsunamis and cyclones, technical disruptions such as electricity or infrastructure breakdowns, including damage to telecommunications cables, computer glitches and electronic viruses or human-caused events such as protests, riots, labor unrest and cyberattacks. Such events may lead to the disruption of information systems and telecommunication services for sustained periods. They also may make it difficult or impossible for employees to reach our business locations. Damage or destruction that interrupts our provision of services could adversely affect our reputation, our relationships with our clients, our leadership team’s ability to administer and supervise our business or it may cause us to incur substantial additional expenditure to repair or replace damaged equipment or delivery centers. We may also be liable to our clients for disruption in service resulting from such damage or destruction. While we currently have commercial liability insurance, our insurance coverage may not be sufficient. Furthermore, we may be unable to secure such insurance coverage at premiums acceptable to us in the future or at all. Prolonged disruption of our services would also entitle our clients to terminate their contracts with us. Any of the above factors may adversely affect our business, results of operations and financial condition.
situation in the region. In addition, in 2020 and 2021, there was a series of conflicts between India and China along their shared border, and although both countries are making efforts to de-escalate these conflicts, there can be no assurance that tensions in the area will diminish in the near future. Such military activity or terrorist attacks in the future could influence the Indian economy by disrupting communications and making travel more difficult. Resulting political tensions could create a greater perception that investments in companies with Indian operations involve a high degree of risk, and that there is a risk of disruption of services provided by companies with Indian operations, which could have a material adverse effect on our share price and/or the market for our services. Furthermore, if India or bordering countries were to become engaged in armed hostilities, particularly hostilities that were protracted or involved the threat or use of nuclear weapons, we might not be able to continue our operations. We generally do not have insurance for losses and interruptions caused by terrorist attacks, military conflicts and wars.
Our principal shareholders exercise significant influence over us, and their interests in our business may be different from yours.
A significant percentage of our issued and outstanding common shares are currently beneficially owned by affiliates of Bain Capital. Following a recent offering in February 2019, Bain Capital (through its affiliates) beneficially owned approximately 17% of our outstanding common shares as of February 15, 2019. Our shareholder agreement with Bain Capital and its co-investors provides that Bain Capital has the right to designate for nomination four directors to our board, so long as it maintains certain minimum
shareholding thresholds, and the shareholders party to the agreement have agreed to vote their shares for the election of such persons. The number of directors that Bain Capital is entitled to designate for nomination is reduced if its ownership of our common shares declines below certain levels and such right ceases if such ownership falls below 7.5% of our outstanding common shares, and also may be increased in certain circumstances. Following the February 2019 offering, given the size of its shareholding, the number of directors that Bain Capital is entitled to designate for nomination pursuant to our shareholder agreement was reduced to two.
These shareholders can exercise significant influence over our business policies and affairs and all matters requiring a shareholders’ vote, including the composition of our board of directors, the adoption of amendments to our certificate of incorporation and bye-laws, the approval of mergers or sales of substantially all of our assets, our dividend policy and our capital structure and financing. This concentration of ownership also may delay, defer or even prevent a change in control of our company and may make some transactions more difficult or impossible without the support of these shareholders, even if such transactions are beneficial to other shareholders. The interests of these shareholders may conflict with your interests. Bain Capital currently holds interests in companies that compete with us and it may, from to time, make significant investments in companies that could compete with us. In addition, pursuant to our shareholder agreement and to the extent permitted by applicable law, our directors who are affiliated with Bain Capital are not required to present to us corporate opportunities (e.g., acquisitions or new potential clients) of which they become aware. So long as Bain Capital owns a significant amount of our equity it will be able to strongly influence our decisions.
We may become subject to taxation as a result of our incorporation in Bermuda or place of management, which wouldcould have a material adverse effect on our business, results of operations and financial condition.
The introduction of economic
Following assessment by, or the COCG, which included Bermuda was included in a list of jurisdictions which are required by the European UnionEU to address concerns of the COCGCOCG’s concerns relating to the demonstration of economic substance. On December 31, 2018,substance, the Bermuda Government implemented legislation which brought certain substance requirements into force with effect from January 1,in 2019 for newly-incorporated entities, and with effect from July 1, 2019 for currently existingBermuda entities. The introduction ofPursuant to the economic substance regimerequirements, core income generating activities carried out by Bermuda companies must be undertaken in BermudaBermuda. To satisfy these requirements, we may present difficulties for us. There is not yet any guidance on what would constitute “adequate substance” under the newly-implemented legislation.be required to conduct additional activities in Bermuda. The new substance requirements could be difficult to manage in a short timeframe for implementationor implement, and compliance with the requirements could be difficult or costly and could have a material adverse effect on us or our operations.
We may not be able to realize the entire book value of goodwill and other intangible assets from acquisitions.
Risks Related to our Shares
Future
Sales of substantial amounts of our common shares or other securities by us could also dilute our employees and other shareholders, orshareholders’ interests, lower the possibility of such sales, may adversely affect themarket price of our common shares and impedeimpair our ability to raise capital through the issuancesale of equity securities. Following an offering in February 2019, Bain Capital (through its affiliates) and its co-investors beneficially owned approximately 20% of our outstanding common shares as of February 15, 2019. Subject to certain restrictions set forth in our shareholder agreement with Bain Capital and its co-investors, such shareholders are able to sell their common shares in the public market from time to time without registering them, subject to certain limitations on the timing, amount and method of those sales imposed by Rule 144 under the Securities Act of 1933, as amended.
Pursuant to our shareholder agreement, Bain Capital has the right, subject to certain conditions and with certain exceptions, to require us to file registration statements covering all of the common shares it owns or to include those common shares in registration statements that we may file for ourselves or for another holder of our common shares. Following their registration and sale under the applicable registration statement, those shares will become freely tradable. By exercising their registration rights and selling a large number of common shares, these holders could cause the price of our common shares to decline. In addition, the perception in the public markets that sales by them might occur could also adversely affect the market price of our common shares.
Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of Bermuda companies generally do not have the right to take action against directors or officers of the company except in limited circumstances. Directors of a Bermuda company must, in exercising their powers and performing their duties, act honestly and in good faith with a view to the best interests of the company, exercising the care and skill that a reasonably prudent person would exercise in comparable circumstances. Directors have a duty not to put themselves in a position in which their duties to the company and their personal interests may conflict and also are under a duty to disclose any personal interest in any material contract or arrangement with the company or any of its subsidiaries. If a director of a Bermuda company is found to have breached his or her duties to that company, he may be held personally liable to the company in respect of that breach of duty. A director may be liable jointly and severally with other directors if it is shown that the director knowingly engaged in fraud or dishonesty (with such unlimited liability as the courts shall direct). In cases not involving fraud or dishonesty, the liability of the director will be determined by the Supreme Court of Bermuda or other Bermuda court (with such liability as the Bermuda court thinks just) who may take into account the percentage of •actual or anticipated fluctuations in our quarterly and annual operating results; •changes in financial estimates by securities research analysts; •changes in the economic performance or market valuations of other companies engaged in providing business process and information technology services; •loss of one or more significant clients; •addition or loss of executive officers or key employees; •regulatory developments in our target markets affecting us, our clients or our competitors; •announcements of technological developments; •limited liquidity in our trading market; •sales or expected sales of additional common shares, either by us, our employees, or any of our shareholders, or purchases or expected purchases of common shares, including by us under existing or future share repurchase programs, which purchases are at the discretion of our board of directors and may not continue in the future; •actions or announcements by activist shareholders or others. In addition, securities markets generally and from time to time experience significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may have a material adverse effect on the market price of our common shares. 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 Genpact 94.83 95.43 88.84 103.05 126.57 Peer Group 99.40 97.20 98.92 105.85 118.51 S&P 500 101.81 107.14 108.34 113.69 114.77 6/30/15 9/30/15 12/31/15 3/31/16 6/30/16 Genpact 116.11 128.52 135.98 148.01 146.11 Peer Group 115.18 122.45 120.05 131.66 126.87 S&P 500 115.09 107.68 115.26 116.82 119.68 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 Genpact 130.38 132.50 135.11 152.19 157.55 Peer Group 118.79 119.27 124.55 129.62 138.52 S&P 500 124.29 129.05 136.88 141.10 147.42 12/31/17 3/31/18 6/30/18 9/30/18 12/31/18 Genpact 174.26 176.05 159.62 169.31 149.70 Peer Group 149.16 155.19 162.33 167.81 146.03 S&P 500 157.22 156.03 161.38 173.83 150.33 Period Total Number of Shares Purchased Average Price Paid per Share ($) Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Program ($) October 1-October 31, 2018 — — — 327,997,960 November 1-November 30, 2018 806,310 29.71 806,310 304,041,985 December 1-December 31, 2018 — — — 304,041,985 Year ended December 31, 2014 2015 2016 2017 2018 (dollars and share count in millions, except per share data) Statement of income data: Total net revenues $ 2,279.4 $ 2,461.0 $ 2,570.8 $ 2,736.9 $ 3,000.8 Income from operations $ 294.0 $ 334.2 $ 341.2 $ 331.3 $ 348.2 Net income available to Genpact Limited common shareholders $ 192.0 $ 239.8 $ 269.7 $ 263.1 $ 282.0 Earnings per common share Basic $ 0.87 $ 1.11 $ 1.30 $ 1.36 $ 1.48 Diluted $ 0.85 $ 1.09 $ 1.28 $ 1.34 $ 1.45 Weighted average number of common shares used in computing earnings per common share Basic 220.8 216.6 206.9 193.9 190.7 Diluted 225.2 219.1 210.1 197.0 194.0 Cash dividend per common share $ — $ — $ — $ 0.24 $ 0.30 As of December 31, 2014 2015 2016 2017 2018 (dollars in millions) Balance sheet data: Cash and cash equivalents $ 461.8 $ 450.9 $ 422.6 $ 504.5 $ 368.4 Total assets 2,742.5 2,793.5 2,885.9 3,449.6 3,529.4 Long-term debt, including current portion 653.6 776.5 737.3 1,045.9 1,009.1 Genpact Limited shareholders’ equity $ 1,285.1 $ 1,304.4 $ 1,286.6 $ 1,424.0 $ 1,404.2 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Percentage of Total Net Revenues Year ended December 31, 2016 2017 2018 Top five clients 24.3 % 20.3 % 21.9 % Top ten clients 33.3 % 29.2 % 31.5 % Top fifteen clients 39.7 % 35.9 % 37.9 % Top twenty clients 44.4 % 40.9 % 42.8 % $38.7 million. appropriate allocation basis. client or a set of processes. Travel and living expenses are included in cost of revenue if the personnel expense for the employee incurring such expense is included in cost of revenue. credit losses. Interest income (expense), were indemnified by GE. rate after March 31, 2021. pricing terms. If, however, a tax authority in any jurisdiction reviews any of our tax returns and determines that the transfer prices we have applied are not appropriate, or that other income of our affiliates should be taxed in that jurisdiction, we may incur increased tax liability, including accrued interest and penalties, which would cause our tax expense to increase, possibly materially, thereby reducing our profitability and cash flows. On mid-size Intelligent Operations engagements. All costs we incur prior to signing a contract with a price and deducted from revenue. Timing of revenue recognition may differ from the timing of invoicing. If we receive payment in respect of services prior to the rendered. given period technology and (ii) compensation and related benefits for employees who are directly associated with the project. We also evaluate potential exposures related to tax contingencies or claims made by tax authorities in various jurisdictions and determine if a reserve is required. A reserve is recorded if we believe that a loss is more likely than not to occur and the amount can be reasonably estimated. Any such reserves are based on estimates and are subject to changing facts and circumstances considering the progress of ongoing audits, case law and new legislation. We believe that the reserves we have established are adequate. year ended December 31, 2019, including a year-to-year comparison between 2020 and 2019, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2020. Percentage Change Year ended December 31, Increase/(Decrease) 2016 2017 2018 2017 vs. 2016 2018 vs. 2017 (dollars in millions) Net revenues—GE* $ 357.9 $ 269.2 $ 268.2 (24.8 ) % (0.4 ) % Net revenues—Global Clients* 2,212.9 2,467.7 2,732.6 11.5 % 10.7 % Total net revenues 2,570.8 2,736.9 3,000.8 6.5 % 9.6 % Cost of revenue 1,554.3 1,681.4 1,921.8 8.2 % 14.3 % Gross profit 1,016.4 1,055.5 1,079.0 3.8 % 2.2 % Gross profit margin 39.5 % 38.6 % 36.0 % Operating expenses Selling, general and administrative expenses 653.0 689.5 693.9 5.6 % 0.6 % Amortization of acquired intangible assets 27.2 36.4 38.9 34.0 % 6.7 % Other operating (income) expense, net (4.9) (1.7) (1.8) (66.4 ) % 11.1 % Income from operations 341.2 331.3 348.2 (2.9 ) % 5.1 % Income from operations as a percentage of net revenues 13.3 % 12.1 % 11.6 % Foreign exchange gains (losses), net 2.6 2.0 15.2 (24.1 ) % 663.5 % Interest income (expense), net (16.2 ) (31.7 ) (37.1 ) 96.1 % 17.0 % Other income (expense), net 9.7 23.6 35.8 143.4 % 51.6 % Income before equity-method investment activity, net and income tax expense 337.3 325.1 362.0 (3.6 ) % 11.4 % Equity-method investment activity, net (7.7) (4.5) (0.0) (41.0 ) % (99.7 ) % Income before income tax expense 329.6 320.6 362.0 (2.7 ) % 12.9 % Income tax expense 62.1 59.7 80.8 (3.8 ) % 35.2 % Net income 267.5 260.8 281.3 (2.5 ) % 7.8 % Net loss attributable to redeemable non-controlling interest 2.1 2.3 0.8 6.2 % (66.5 ) % Net income attributable to Genpact Limited common shareholders $ 269.7 $ 263.1 $ 282.0 (2.4 ) % 7.2 % Net income attributable to Genpact Limited common shareholders as a percentage of net revenues 10.5 % 9.6 % 9.4 % 2020 Percentage Change Year ended December 31, Increase/ (Decrease) 2017 2018 2018 vs. 2017 (dollars in millions) Global Clients: BPO services $ 2,089.2 $ 2,345.0 12.2 % IT services 378.5 387.6 2.4 Total net revenues from Global Clients $ 2,467.7 $ 2,732.6 10.7 % GE: BPO services 175.1 157.8 (9.9 ) % IT services 94.1 110.4 17.3 Total net revenues from GE $ 269.2 $ 268.2 (0.4 ) % Total net revenues from BPO services 2,264.3 2,502.8 10.5 Total net revenues from IT services 472.6 498.0 5.4 Total net revenues $ 2,736.9 $ 3,000.8 9.6 % 2021. macroeconomic environment. Net revenues from Year ended December 31, As a Percentage of Total Net Revenues 2017 2018 2017 2018 (dollars in millions) Personnel expenses $ 1,153.5 $ 1,322.7 42.1 % 44.1 % Operational expenses 481.0 543.0 17.6 18.1 Depreciation and amortization 46.9 56.1 1.7 1.9 Cost of revenue $ 1,681.4 $ 1,921.8 61.4 % 64.0 % Gross margin 38.6 % 36.0 % Year ended December 31, As a Percentage of Total Net Revenues 2017 2018 2017 2018 (dollars in millions) Personnel expenses $ 501.1 $ 518.9 18.3 % 17.3 % Operational expenses 178.6 166.4 6.5 5.5 Depreciation and amortization 9.8 8.5 0.4 0.3 Selling, general and administrative expenses $ 689.5 $ 693.9 25.2 % 23.1 % Year ended December 31, Percentage Change Increase/(Decrease) 2017 2018 2018 vs. 2017 (dollars in millions) Other operating (income) expense $ (7.3 ) $ (0.5 ) (93.7 ) % Provision for impairment of intangible assets and property, plant and equipment 9.3 4.3 (54.2 ) Change in the fair value of earn-out consideration, deferred consideration (relating to business acquisitions) (3.7) (5.7) 53.0 Other operating (income) expense, net $ (1.7 ) $ (1.8 ) 11.1 % Other operating (income) expense, net as a percentage of total net revenues (0.1 )% (0.1 )% 2020. Year ended December 31, Percentage Change Increase/(Decrease) 2017 2018 2018 vs. 2017 (dollars in millions) Interest income $ 8.2 $ 11.4 39.2 % Interest expense (39.9 ) (48.5 ) 21.5 Interest income (expense), net $ (31.7 ) $ (37.1 ) 17.0 % Interest income (expense), net as a percentage of total net revenues (1.2 ) % (1.2 ) % 2021. Percentage Change Year ended December 31, Increase/(Decrease) 2017 2018 2018 vs. 2017 (dollars in millions) Government incentives $ 26.9 $ 36.1 34.3 % Other income/(expense) (3.3) (0.3) (89.7 ) Other income (expense), net $ 23.6 $ 35.8 51.6 % Other income (expense), net as a percentage of total net revenues 0.9 % 1.2 % Income tax expense. Our income tax expense increased from Percentage Change Year ended December 31, Increase/ (Decrease) 2016 2017 2017 vs. 2016 (dollars in millions) Global Clients: BPO services $ 1,825.4 $ 2,089.2 14.5 % IT services 387.4 378.5 (2.3 ) Total net revenues from Global Clients $ 2,212.9 $ 2,467.7 11.5 % GE: BPO services 258.0 175.1 (32.1 ) % IT services 99.9 94.1 (5.8 ) Total net revenues from GE $ 357.9 $ 269.2 (24.8 ) % Total net revenues from BPO services 2,083.4 2,264.3 8.7 Total net revenues from IT services 487.3 472.6 (3.0 ) Total net revenues $ 2,570.8 $ 2,736.9 6.5 % Year ended December 31, As a Percentage of Total Net Revenues 2016 2017 2016 2017 (dollars in millions) Personnel expenses $ 1,061.1 $ 1,153.5 41.3 % 42.1 % Operational expenses 446.9 481.0 17.4 17.6 Depreciation and amortization 46.3 46.9 1.8 1.7 Cost of revenue $ 1,554.3 $ 1,681.4 60.5 % 61.4 % Gross margin 39.5 % 38.6 % Year ended December 31, As a Percentage of Total Net Revenues 2016 2017 2016 2017 (dollars in millions) Personnel expenses $ 469.9 $ 501.1 18.3 % 18.3 % Operational expenses 174.1 178.6 6.8 6.5 Depreciation and amortization 9.0 9.8 0.4 0.4 Selling, general and administrative expenses $ 653.0 $ 689.5 25.4 % 25.2 % % Year ended December 31, Percentage Change Increase/(Decrease) 2016 2017 2016 vs. 2017 (dollars in millions) Other operating (income) expense $ (1.3 ) $ (7.3 ) 474.8 % Provision for impairment of intangible assets and property, plant and equipment 11.2 9.3 (16.8 ) Change in the fair value of earn-out consideration, deferred consideration (relating to business acquisitions) (14.9 ) (3.7 ) (75.1 ) Other operating (income) expense, net $ (4.9 ) $ (1.7 ) (66.4 ) % Other operating (income) expense, net as a percentage of total net revenues (0.2 )% (0.1 )% Year ended December 31, Percentage Change Increase/(Decrease) 2016 2017 2017 vs. 2016 (dollars in millions) Interest income $ 7.2 $ 8.2 12.9 % Interest expense (23.4 ) (39.9 ) 70.4 Interest income (expense), net $ (16.2 ) $ (31.7 ) 96.1 % Interest income (expense), net as a percentage of total net revenues (0.6 ) % (1.2 ) % Percentage Change Year ended December 31, Increase/(Decrease) 2016 2017 2017 vs. 2016 (dollars in millions) Government incentives $ — $ 26.9 100.0 % Other income/(expense) 9.7 (3.3) (134.0 ) Other income (expense), net $ 9.7 $ 23.6 143.4 % Other income (expense), net as a percentage of total net revenues 0.4 % 0.9 % Schedules.” 2021 •Short-term borrowings •Prepaid expenses, other current assets, contract cost assets and other assets •Net accounts receivable increased by •Goodwill and intangible assets The decrease in operating lease right-of-use assets is due to the amortization of right-of-use assets, partially offset by additions and modifications in 2021. •Net deferred tax assets decreased by As of December 31, As of December 31, Percentage Change Increase/(Decrease) 2017 2018 2018 vs. 2017 (dollars in millions) Cash and cash equivalents $ 504.5 $ 368.4 (27.0 ) % Short-term borrowings 170.0 295.0 73.5 Long-term debt due within one year 39.2 33.5 (14.6 ) Long-term debt other than the current portion 1,006.7 975.6 (3.1 ) Genpact Limited total shareholders’ equity $ 1,424.0 $ 1,404.2 (1.4 ) % All repurchased shares have been retired. existing capabilities, including building digital solutions. Year ended, December 31, Percentage Change Increase/(Decrease) 2017 2018 2018 vs. 2017 (dollars in millions) Net cash provided by (used for) Operating activities $ 359.1 $ 339.5 (5.4) % Investing activities (362.0) (276.1) (23.7 ) Financing activities 47.2 (135.2) (386.5 ) Net increase (decrease) in cash and cash equivalents $ 44.3 $ (71.7 ) (262.0 ) % lower depreciation and amortization expense and lower deferred tax benefits in 2021 compared to 2020. Cash flows from financing activities. Our net cash used for financing activities was 2020. facility) respectively, constituted funded drawdown, and Total Less than 1 year 1-3 years 3-5 years After 5 years (dollars in millions) Long-term indebtedness $ 1,107.3 $ 58.6 $ 117.3 $ 931.4 $ — — Principal payments 1,009.1 33.5 67.0 908.6 — — Interest payments* 98.2 25.1 50.3 22.8 — Short-term borrowings 298.0 298.0 — — — — Principal payments 295.0 295.0 — — — — Interest payments** 3.0 3.0 — — — Capital leases 4.2 1.7 2.0 0.5 — — Principal payments 3.5 1.8 1.4 0.3 — — Interest payments 0.7 (0.1 ) 0.6 0.2 — Operating leases 264.3 45.9 80.6 55.5 82.3 Purchase obligations 40.3 29.9 10.4 — — Capital commitments net of advances 4.9 4.9 — — — Earn-out consideration 17.5 17.3 0.2 — — — Reporting date fair value 17.1 16.9 0.2 — — — Interest 0.4 0.4 — — — Other liabilities 59.1 32.2 20.6 6.3 — Total contractual obligations $ 1,795.6 $ 488.5 $ 231.1 $ 993.7 $ 82.3 Estimates.” from our foreign currency revenues, expenses, receivables and payables. Based on the results of our European operations for fiscal expense. effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. F-4. 3.2 4.1 4.2 4.3 4.4 31.2* 32.1* 32.2* Inline XBRL Taxonomy Extension Schema Inline XBRL Taxonomy Extension Calculation Linkbase Inline XBRL Taxonomy Extension Definition Linkbase Inline XBRL Taxonomy Extension Label Linkbase Inline XBRL Taxonomy Extension Presentation Linkbase F-2 Assurance and Consulting Services LLP Hoodoo Digital, LLC. necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Notes As of December 31, 2017 As of December 31, 2018 Assets Current assets Cash and cash equivalents 4 $ 504,468 $ 368,396 Accounts receivable, net 5 693,085 774,184 Prepaid expenses and other current assets 8 236,342 212,477 Total current assets $ 1,433,895 $ 1,355,057 Property, plant and equipment, net 9 207,030 212,715 Deferred tax assets 25 76,929 74,566 Investment in equity affiliates 28 886 836 Intangible assets, net 10 131,590 177,087 Goodwill 10 1,337,122 1,393,832 Contract cost assets 27 — 160,193 Other assets 11 262,169 155,159 Total assets $ 3,449,621 $ 3,529,445 Liabilities and equity Current liabilities Short-term borrowings 15 $ 170,000 $ 295,000 Current portion of long-term debt 14 39,226 33,483 Accounts payable 15,050 42,584 Income taxes payable 25 30,026 33,895 Accrued expenses and other current liabilities 13 584,482 571,350 Total current liabilities $ 838,784 $ 976,312 Long-term debt, less current portion 14 1,006,687 975,645 Deferred tax liabilities 25 6,747 8,080 Other liabilities 16 168,609 165,226 Total liabilities $ 2,020,827 $ 2,125,263 Redeemable non-controlling interest 4,750 — Shareholders' equity Preferred shares, $0.01 par value, 250,000,000 authorized, none issued — — Common shares, $0.01 par value, 500,000,000 authorized, 192,825,207 and 189,346,101 issued and outstanding as of December 31, 2017 and December 31, 2018, respectively 1,924 1,888 Additional paid-in capital 1,421,368 1,471,301 Retained earnings 355,982 438,453 Accumulated other comprehensive income (loss) (355,230 ) (507,460 ) Total equity $ 1,424,044 $ 1,404,182 Commitments and contingencies 30 Total liabilities, redeemable non-controlling interest and equity $ 3,449,621 $ 3,529,445 Year ended December 31, Notes 2016 (1) 2017 (1) 2018 Net revenues 26 $ 2,570,756 $ 2,736,929 $ 3,000,790 Cost of revenue 21, 28 1,554,340 1,681,438 1,921,768 Gross profit $ 1,016,416 $ 1,055,491 $ 1,079,022 Operating expenses: Selling, general and administrative expenses 22, 28 652,967 689,461 693,865 Amortization of acquired intangible assets 10 27,183 36,412 38,850 Other operating (income) expense, net 23 (4,940 ) (1,661 ) (1,845 ) Income from operations $ 341,206 $ 331,279 $ 348,152 Foreign exchange gains (losses), net 2,630 1,996 15,239 Interest income (expense), net 24 (16,184 ) (31,735 ) (37,119 ) Other income (expense), net 29 9,691 23,586 35,761 Income before equity-method investment activity, net and income tax expense $ 337,343 $ 325,126 $ 362,033 Equity-method investment activity, net (7,698 ) (4,543 ) (12 ) Income before income tax expense $ 329,645 $ 320,583 $ 362,021 Income tax expense 25 62,098 59,742 80,763 Net income $ 267,547 $ 260,841 $ 281,258 Net loss attributable to redeemable non-controlling interest 2,137 2,270 761 Net income attributable to Genpact Limited shareholders $ 269,684 $ 263,111 $ 282,019 Net income available to Genpact Limited common shareholders $ 269,684 $ 263,111 $ 282,019 Earnings per common share attributable to Genpact Limited common shareholders 20 Basic $ 1.30 $ 1.36 $ 1.48 Diluted $ 1.28 $ 1.34 $ 1.45 Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders 20 Basic 206,861,536 193,864,755 190,674,740 Diluted 210,126,023 197,049,552 193,980,038 (1)Cost of revenue, selling, general and administrative expenses, other income (expense) and income from operations for the year ended December 31, 2016 and 2017 have been restated due to the adoption of ASU No. 2017-07 with effect from January 1, 2018. The impact of such restatement is not material to the Company’s consolidated results of operations, cash flows, financial position and disclosures. Year ended December 31, 2016 2017 2018 Genpact Limited Shareholders Redeemable Non-controlling interest Genpact Limited Shareholders Redeemable Non- controlling interest Genpact Limited Shareholders Redeemable Non- controlling interest Net income (loss) $ 269,684 $ (2,137 ) $ 263,111 $ (2,270 ) $ 282,019 $ (761 ) Other comprehensive income: Currency translation adjustments (46,340 ) 104 93,871 (341 ) (109,656 ) (424 ) Net income (loss) on cash flow hedging derivatives, net of taxes (Note 7) 43,742 — 12,611 — (46,293 ) — Retirement benefits, net of taxes (4,042 ) — (3,787 ) — 1,454 — Other comprehensive income (loss) (6,640 ) 104 102,695 (341 ) (154,495 ) (424 ) Comprehensive income (loss) $ 263,044 $ (2,033 ) $ 365,806 $ (2,611 ) $ 127,524 $ (1,185 ) Genpact Limited Shareholders Common shares No. of Shares Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Equity Redeemable non-controlling interest Balance as of January 1, 2016 211,472,312 $ 2,111 $ 1,342,022 $ 411,508 $ (451,285 ) $ 1,304,356 $ — Issuance of common shares on exercise of options (Note 18) 994,155 10 14,886 - - 14,896 — Issuance of common shares under the employee stock purchase plan (Note 18) 146,685 1 3,331 — — 3,332 — Net settlement on vesting of restricted share units (Note 18) 121,682 1 (884 ) — — (883 ) — Stock repurchased and retired (Note19) (13,940,782 ) (139 ) — (345,061 ) — (345,200 ) — Deferred tax assets recognized on early adoption of ASU 2016-09 (Note 25) — — — 24,912 — 24,912 — Expenses related to stock purchase (Note 19) - - - (279 ) — (279 ) — Stock-based compensation expense (Note 18) - - 25,113 - - 25,113 — Acquisition of redeemable non controlling interest — — — — — — 3,910 Change in fair value of redeemable non-controlling interest — — — (2,643 ) — (2,643 ) 2,643 Comprehensive income: Net income - - - 269,684 - 269,684 (2,137 ) Other comprehensive income (loss) - - - - (6,640 ) (6,640 ) 104 Balance as of December 31, 2016 198,794,052 $ 1,984 $ 1,384,468 $ 358,121 $ (457,925 ) $ 1,286,648 $ 4,520 Genpact Limited Shareholders Accumulated Common shares Other Redeemable No. of Shares Amount Additional Paid- in Capital Retained Earnings Comprehensive Income (Loss) Total Equity non-controlling interest Balance as of January 1, 2017 198,794,052 $ 1,984 $ 1,384,468 $ 358,121 $ (457,925 ) $ 1,286,648 $ 4,520 Issuance of common shares on exercise of options (Note 18) 743,045 7 10,765 — — 10,772 — Issuance of common shares under the employee stock purchase plan (Note 18) 190,435 2 4,754 — — 4,756 — Net settlement on vesting of restricted share units (Note 18) 103,220 1 (358 ) — — (357 ) — Net settlement on vesting of performance units (Note 18) 731,701 7 (9,946 ) — — (9,939 ) — Stock repurchased and retired (Note 19) (7,737,246 ) (77 ) (4,000 ) (215,707 ) — (219,784 ) — Expenses related to stock repurchase (Note 19) — — — (16 ) — (16 ) — Stock-based compensation expense (Note 18) — — 35,685 — — 35,685 — Change in fair value of redeemable non-controlling interest — — — (2,841 ) — (2,841 ) 2,841 Comprehensive income (loss): Net income (loss) — — — 263,111 — 263,111 (2,270 ) Other comprehensive income (loss) — — — — 102,695 102,695 (341 ) Dividend (Note 19 ) — — — (46,686 ) — (46,686 ) — Balance as of December 31, 2017 192,825,207 $ 1,924 $ 1,421,368 $ 355,982 $ (355,230 ) $ 1,424,044 $ 4,750 Genpact Limited Shareholders Accumulated Common shares Other Redeemable No. of Shares Amount Additional Paid- in Capital Retained Earnings Comprehensive Income (Loss) Total Equity non-controlling interest Balance as of January 1, 2018, as previously reported 192,825,207 $ 1,924 $ 1,421,368 $ 355,982 $ (355,230 ) $ 1,424,044 $ 4,750 Adoption of ASU 2014-09 (Note 2(c)) — — — 17,924 — 17,924 — Adjusted balance as of January 1, 2018 192,825,207 $ 1,924 $ 1,421,368 $ 373,906 $ (355,230 ) $ 1,441,968 $ 4,750 Adoption of ASU 2018-02 (Note 7, 25) — — — (2,265 ) 2,265 — — Issuance of common shares on exercise of options (Note 18) 441,076 4 7,254 — — 7,258 — Issuance of common shares under the employee stock purchase plan (Note 18) 245,467 2 6,774 — — 6,776 — Net settlement on vesting of restricted share units (Note 18) 227,560 2 (2,651 ) — — (2,649 ) — Net settlement on vesting of performance units (Note 18) 691,958 7 (13,277 ) — — (13,270 ) — Stock repurchased and retired (Note 19) (5,085,167 ) (51 ) 4,000 (158,007 ) — (154,058 ) — Expenses related to stock repurchase (Note 19) — — — (98 ) — (98 ) — Stock-based compensation expense (Note 18) — — 48,998 — — 48,998 — Payment for purchase of redeemable non-controlling interest — — (1,165 ) — — (1,165 ) (3,565 ) Comprehensive income (loss): Net income (loss) — — — 282,019 — 282,019 (761 ) Other comprehensive income (loss) — — — — (154,495 ) (154,495 ) (424 ) Dividend (Note 19) — — — (57,102 ) — (57,102 ) — Balance as of December 31, 2018 189,346,101 $ 1,888 $ 1,471,301 $ 438,453 $ (507,460 ) $ 1,404,182 $ — Year ended December 31, 2016 2017 2018 Operating activities Net income attributable to Genpact Limited shareholders $ 269,684 $ 263,111 $ 282,019 Net loss attributable to redeemable non-controlling interest (2,137 ) (2,270 ) (761 ) Net income $ 267,547 $ 260,841 $ 281,258 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 54,553 58,503 64,868 Amortization of debt issuance costs (including loss on extinguishment of debt) 1,531 1,884 3,975 Amortization of acquired intangible assets 27,183 36,412 38,850 Write-down of intangible assets and property, plant and equipment 11,195 9,311 4,265 Reserve for doubtful receivables 7,282 9,819 1,857 Unrealized loss (gain) on revaluation of foreign currency asset/liability 1,717 (11,830 ) 3,352 Equity-method investment activity, net 7,698 4,543 12 Stock-based compensation expense 25,113 35,685 48,998 Deferred income taxes 30,454 (10,391 ) 6,054 Loss (gain) on divestiture (5,214 ) 5,668 — Others, net (41 ) (4,785 ) 1,317 Change in operating assets and liabilities: Increase in accounts receivable (48,612 ) (57,267 ) (76,894 ) Increase in prepaid expenses, other current assets, contract cost assets and other assets (62,852 ) (28,381 ) (76,392 ) Increase (decrease) in accounts payable (463 ) (2,155 ) 26,401 Increase in accrued expenses, other current liabilities and other liabilities 27,977 46,581 5,993 Increase in income taxes payable 704 4,640 5,597 Net cash provided by operating activities $ 345,772 $ 359,078 $ 339,511 Investing activities Purchase of property, plant and equipment (81,926 ) (57,231 ) (84,978 ) Payment for acquired/internally generated intangible assets (including intangibles under development) (6,846 ) (16,441 ) (75,439 ) Proceeds from sale of property, plant and equipment 547 1,738 668 Investment in equity affiliates (9,620 ) (496 ) — Payment for business acquisitions, net of cash acquired (45,162 ) (284,822 ) (111,571 ) Proceeds from divestiture of business, net of cash divested 17,242 (4,738 ) — Payment for purchase of redeemable non-controlling interest — — (4,730 ) Net cash used for investing activities $ (125,765 ) $ (361,990 ) $ (276,050 ) Financing activities Repayment of capital lease obligations (1,793 ) (2,708 ) (2,395 ) Payment of debt issuance costs — (2,630 ) (4,293 ) Proceeds from long-term debt — 350,000 129,186 Repayment of long-term debt (40,000 ) (40,000 ) (166,186 ) Proceeds from short-term borrowings 200,000 295,000 250,000 Repayment of short-term borrowings (61,500 ) (285,000 ) (125,000 ) Proceeds from issuance of common shares under stock-based compensation plans 18,228 15,528 14,034 Payment for net settlement of stock-based awards (769 ) (10,296 ) (15,919 ) Payment of earn-out/deferred consideration (1,485 ) (6,219 ) (3,356 ) Dividend paid — (46,686 ) (57,102 ) Payment for stock repurchased and retired (345,200 ) (219,784 ) (154,058 ) Payment for expenses related to stock repurchase (279 ) (16 ) (98 ) Net cash provided by/(used for) financing activities $ (232,798 ) $ 47,189 $ (135,187 ) Effect of exchange rate changes (15,493 ) 37,568 (64,346 ) Net increase (decrease) in cash and cash equivalents (12,791 ) 44,277 (71,726 ) Cash and cash equivalents at the beginning of the period 450,907 422,623 504,468 Cash and cash equivalents at the end of the period $ 422,623 $ 504,468 $ 368,396 Supplementary information Cash paid during the period for interest (including interest rate swaps ) $ 19,530 $ 27,915 $ 41,484 Cash paid during the period for income taxes $ 46,731 $ 66,238 $ 81,411 Property, plant and equipment acquired under capital lease obligations $ 2,206 $ 2,318 $ 2,031 periods Consolidated Balance Sheet As of December 31, 2018 As reported Adjustments Balances without adoption of Topic 606 Assets Current assets Cash and cash equivalents $ 368,396 $ 368,396 Accounts receivable, net 774,184 774,184 Prepaid expenses and other current assets (a, c) 212,477 56,594 269,071 Total current assets $ 1,355,057 56,594 $ 1,411,651 Property, plant and equipment, net 212,715 212,715 Deferred tax assets (b) 74,566 5,984 80,550 Investment in equity affiliates 836 836 Intangible assets, net 177,087 177,087 Goodwill 1,393,832 1,393,832 Contract cost assets (a, b) 160,193 (160,193 ) - Other assets (a, c) 155,159 107,133 262,292 Total assets $ 3,529,445 9,518 $ 3,538,963 Liabilities and equity Current liabilities Short-term borrowings 295,000 295,000 Current portion of long-term debt 33,483 33,483 Accounts payable 42,584 42,584 Income taxes payable 33,895 33,895 Accrued expenses and other current liabilities (c) 571,350 10,289 581,639 Total current liabilities $ 976,312 10,289 $ 986,601 Long-term debt, less current portion 975,645 975,645 Deferred tax liabilities 8,080 8,080 Other liabilities (c) 165,226 19,136 184,362 Total liabilities $ 2,125,263 29,425 $ 2,154,688 Redeemable non-controlling interest - - Shareholders' equity Preferred shares, $0.01 par value, 250,000,000 authorized, none issued - - Common shares, $0.01 par value, 500,000,000 authorized,192,825,207 and 189,346,101 issued and outstanding as of December 31, 2017 and December 31, 2018, respectively 1,888 1,888 Additional paid-in capital 1,471,301 1,471,301 Retained earnings (b) 438,453 (19,907 ) 418,546 Accumulated other comprehensive income (loss) (507,460 ) (507,460 ) Total equity $ 1,404,182 (19,907 ) $ 1,384,275 Commitments and contingencies Total liabilities, redeemable non-controlling interest and equity $ 3,529,445 9,518 $ 3,538,963 (a) As a result of its adoption of ASC 606, the Company has reclassified deferred transition costs from “Prepaid expenses and other current assets” amounting to $48,704 and “Other assets” amounting to $85,598 to “Contract cost assets” amounting to $134,302. (b) The cumulative impact of the adoption of ASC 606 resulted in a $160,193 increase in "Contract cost assets," which includes the reclassification of $134,302 (refer to note a in the table above) and a closing balance of $25,891 related to sales incentive programs, with a corresponding impact on retained earnings of $ 19,907 and on deferred tax assets of $5,984 which has been offset against deferred tax assets. (c) As a result of its adoption of ASC 606, the company has offset contract assets amounting to $7,890 under “Prepaid expenses and other current assets” and $21,535 under “Other assets” against contract liabilities amounting $10,289 under “Accrued expenses and other current liabilities” and $19,136 under “Other liabilities” related to the same customer contract. Consolidated Statement of Income Year ended December 31,2018 As reported Adjustments Balances without adoption of Topic 606 Net revenues $ 3,000,790 $ 3,000,790 Cost of revenue 1,921,768 1,921,768 Gross profit $ 1,079,022 — $ 1,079,022 Operating expenses: Selling, general and administrative expenses (e) 693,865 2,664 696,529 Amortization of acquired intangible assets 38,850 38,850 Other operating (income) expense, net (1,845 ) (1,845 ) Income from operations $ 348,152 (2,664 ) $ 345,488 Foreign exchange gains (losses), net 15,239 15,239 Interest income (expense), net (37,119 ) (37,119 ) Other income (expense), net 35,761 35,761 Income before equity-method investment activity, net and income tax expense $ 362,033 (2,664 ) $ 359,369 Equity-method investment activity, net (12 ) — (12 ) Income before income tax expense $ 362,021 (2,664 ) $ 359,357 Income tax expense (benefit) 80,763 (681 ) 80,082 Net income $ 281,258 (1,983 ) $ 279,275 Net loss (income) attributable to non-controlling interest 761 — 761 Net income attributable to Genpact Limited shareholders $ 282,019 (1,983 ) $ 280,036 (e) During the year ended December 31, 2018, the Company amortized $14,788 in contract costs related to obtaining a contract. Following the adoption of ASC 606, the Company capitalized such costs in an amount of $17,452 resulting in a net adjustment of $2,664 with a corresponding impact on income tax benefit of $681. Consolidated Statement of Cash flow Year ended December 31, 2018 As reported Adjustments Balances without adoption of Topic 606 Operating activities Net income attributable to Genpact Limited shareholders (f) $ 282,019 (1,983 ) $ 280,036 Net loss attributable to redeemable non-controlling interest (761 ) (761 ) Net income (f) $ 281,258 (1,983 ) $ 279,275 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 64,868 64,868 Amortization of debt issuance costs (including loss on extinguishment of debt) 3,975 3,975 Amortization of acquired intangible assets 38,850 38,850 Write-down of intangible assets and property, plant and equipment 4,265 4,265 Reserve for doubtful receivables 1,857 1,857 Unrealized loss (gain) on revaluation of foreign currency asset/liability 3,352 3,352 Equity-method investment activity, net 12 12 Stock-based compensation expense 48,998 48,998 Deferred income taxes (f) 6,054 (681 ) 5,373 Others, net 1,317 1,317 Change in operating assets and liabilities: Increase in accounts receivable (76,894 ) (76,894 ) Increase in prepaid expenses, other current assets, contract cost assets and other assets (f, g) (76,392 ) (5,413 ) (81,805 ) Increase in accounts payable 26,401 26,401 Increase in accrued expenses, other current liabilities and other liabilities (g) 5,993 8,077 14,070 Increase in income taxes payable 5,597 5,597 Net cash provided by operating activities $ 339,511 — $ 339,511 Investing activities Purchase of property, plant and equipment (84,978 ) (84,978 ) Payment for internally generated intangible assets (including intangibles under development) (75,439 ) (75,439 ) Proceeds from sale of property, plant and equipment 668 668 Payment for business acquisitions, net of cash acquired (111,571 ) (111,571 ) Payment for redeemable non-controlling interest (4,730 ) (4,730 ) Net cash used for investing activities $ (276,050 ) — $ (276,050 ) Financing activities Repayment of capital lease obligations (2,395 ) (2,395 ) Payment of debt issuance and refinancing costs (4,293 ) (4,293 ) Proceeds from long term debt 129,186 129,186 Repayment of long-term debt (166,186 ) (166,186 ) Proceeds from short-term borrowings 250,000 250,000 Repayment of short-term borrowings (125,000 ) (125,000 ) Proceeds from issuance of common shares under stock-based compensation plans 14,034 14,034 Payment for net settlement of stock-based awards (15,919 ) (15,919 ) Payment of earn-out/deferred consideration (3,356 ) (3,356 ) Dividend paid (57,102 ) (57,102 ) Payment for stock repurchased and retired (154,058 ) (154,058 ) Payment for expenses related to stock repurchase (98 ) (98 ) Net cash used for financing activities $ (135,187 ) — $ (135,187 ) Effect of exchange rate changes (64,346 ) (64,346 ) Net increase (decrease) in cash and cash equivalents (71,726 ) (71,726 ) Cash and cash equivalents at the beginning of the period 504,468 504,468 Cash and cash equivalents at the end of the period $ 368,396 — $ 368,396 (f) During the year ended December 31, 2018, the Company amortized $14,788 in contract costs related to obtaining a contract. Following the adoption of ASC 606, the Company capitalized such costs in an amount of $17,452, resulting in a net adjustment of $2,664 and a tax impact of $(681) which is further adjusted by note (g) below. (g) Following the adoption of ASC 606, the Company offset certain contract assets against contract liabilities related to the same client contract in an amount of $8,077. administrative expenses. Marketing-related intangible assets Technology-related intangible assets income. derivative instrument. restructuring standards: share count) Hoodoo Digital, LLC Company's strategy to fuse experience and process innovation to help clients drive end-to-end digital transformation. Hoodoo Digital’s expertise with Adobe Experience Manager and other Adobe applications expands the Company's existing capabilities to provide clients with an end-to-end solution that integrates digital content, e-commerce, data analytics, and marketing operations. Company’s existing operations. through cloud technologies and advanced data analytics. Company’s existing operations. SomethingDigital.Com LLC Company’s capabilities into Magento Commerce, which powers Adobe Commerce Cloud, and Shopify Plus, a cloud-based e-commerce platform for high volume merchants. Company’s existing operations. As of December 31, 2017 2018 Cash and other bank balances $ 504,468 $ 368,396 Total $ 504,468 $ 368,396 Year ended December 31, 2016 2017 2018 Opening balance as of January 1 $ 11,530 $ 15,519 $ 23,660 Additions due to acquisitions — 235 — Additions charged/reversal released to cost and expense 7,282 �� 9,819 1,857 Deductions/effect of exchange rate fluctuations (3,293 ) (1,913 ) (1,557 ) Closing balance $ 15,519 $ 23,660 $ 23,960 value measurements As of December 31, 2017 Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets Derivative instruments (Note a, c) $ 73,098 $ — $ 73,098 $ — Total $ 73,098 $ — $ 73,098 $ — Liabilities Earn out consideration (Note b, d) $ 24,732 $ — $ — $ 24,732 Derivative instruments (Note b, c) $ 18,188 $ — $ 18,188 $ — Total $ 42,920 $ — $ 18,188 $ 24,732 Redeemable non-controlling interest (Note e) $ 4,750 $ — $ — $ 4,750 As of December 31 2018 Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets Derivative instruments (Note a, c) $ 44,099 $ — $ 44,099 $ — Deferred compensation plan assets (a, f) 1,613 — — 1,613 Total $ 45,712 $ — $ 44,099 $ 1,613 Liabilities Earn-out consideration (Note b, d) $ 17,073 $ — $ — $ 17,073 Derivative instruments (Note b, c) 35,245 — 35,245 — Deferred compensation plan liability (b, g) 1,582 — — 1,582 Total $ 53,900 $ — $ 35,245 $ 18,655 Year ended December 31, 2017 2018 Opening balance $ 22,435 $ 24,732 Earn-out consideration payable in connection with acquisitions 10,720 — Payments made on earn-out consideration (7,239 ) (3,356 ) Change in fair value of earn out consideration (Note a) (3,695 ) (5,655 ) Others (Note b) 2,511 1,352 Ending balance $ 24,732 $ 17,073 Year ended December 31, 2017 2018 Opening balance $ — $ — Redemptions — — Additions — 1,669 Change in fair value of deferred compensation plan assets (note a) — (56 ) Closing balance $ — $ 1,613 Year ended December 31, 2017 2018 Opening balance $ — $ — Redemptions — — Additions — 1669 Change in fair value of deferred compensation plan liabilities (note a) — (87 ) Closing balance $ — $ 1,582 (a)Changes in administrative expenses” in the consolidated statements of income. Notional principal amounts (note a) Balance sheet exposure asset (liability) (note b) As of December 31, 2017 As of December 31, 2018 As of December 31, 2017 As of December 31, 2018 Foreign exchange forward contracts denominated in: United States Dollars (sell) Indian Rupees (buy) $ 1,289,400 $ 1,439,000 $ 54,398 $ (3,643 ) United States Dollars (sell) Mexican Peso (buy) 9,000 — (441 ) — United States Dollars (sell) Philippines Peso (buy) 76,650 55,800 69 (1,510 ) Euro (sell) United States Dollars (buy) 170,542 136,412 (2,069 ) 4,804 Pound Sterling (buy) United States Dollars (sell) 24,041 128 253 (128 ) Euro (sell) Romanian Leu (buy) 35,826 41,198 (892 ) (299 ) Japanese Yen (sell) Chinese Renminbi (buy) 60,768 40,568 1,918 (2,195 ) Pound Sterling (sell) United States Dollars (buy) 80,871 27,517 (2,478 ) 495 Australian Dollars (sell) United States Dollars (buy) 136,092 89,780 (5,180 ) 3,548 Interest rate swaps (floating to fixed) 432,117 507,425 9,332 7,782 54,910 8,854 Cash flow hedges Non-designated As of December 31, 2017 As of December 31, 2018 As of December 31, 2017 As of December 31, 2018 Assets Prepaid expenses and other current assets $ 43,557 $ 23,038 $ 4,635 $ 11,490 Other assets $ 24,906 $ 9,571 $ — $ — Liabilities Accrued expenses and other current liabilities $ 10,092 $ 15,148 $ 254 $ 225 Other liabilities $ 7,842 $ 19,872 $ — $ — Year ended December 31, 2016 2017 2018 Before-Tax amount Tax (Expense) or Benefit Net of tax Amount Before-Tax amount Tax (Expense) or Benefit Net of tax Amount Before-Tax amount Tax (Expense) or Benefit Net of tax Amount Opening balance $ (30,090 ) $ 9,830 $ (20,260 ) $ 37,461 $ (13,979 ) $ 23,482 $ 50,529 $ (14,436 ) $ 36,093 Adoption of ASU 2018-02 (refer to note 25) — — — — — — — 2,265 2,265 Net gains (losses) reclassified into statement of income on completion of hedged transactions (Note (a)) (6,799 ) 409 (6,390 ) 54,494 (17,725 ) 36,769 9,336 (1,073 ) 8,263 Changes in fair value of effective portion of outstanding derivatives, net 60,752 (23,400 ) 37,352 67,562 (18,182 ) 49,380 (43,604 ) 5,574 (38,030 ) Gain (loss) on cash flow hedging derivatives, net 67,551 (23,809 ) 43,742 13,068 (457 ) 12,611 (52,940 ) 6,647 (46,293 ) Closing balance $ 37,461 $ (13,979 ) $ 23,482 $ 50,529 $ (14,436 ) $ 36,093 $ (2,411 ) $ (5,524 ) $ (7,935 ) Amount of Gain (Loss) Location of Gain (Loss) Amount of Gain (Loss) reclassified Derivatives in recognized in OCI on reclassified from OCI into Statement of Income Cash Flow Derivatives (Effective Portion) from OCI into (Effective Portion) Hedging Year ended December 31, Statement of Income Year ended December 31, Relationships 2016 2017 2018 (Effective Portion) 2016 2017 2018 Forward foreign exchange contracts $ 54,664 $ 66,037 $ (45,840 ) Revenue $ 12,859 $ 5,858 $ (716 ) Interest rate swaps 6,088 1,525 2,236 Cost of revenue (14,223 ) 37,849 4,723 Selling, general and administrative expenses $ (3,765 ) 10,849 1,543 Interest expense (1,670 ) (62 ) 3,786 $ 60,752 $ 67,562 $ (43,604 ) $ (6,799 ) $ 54,494 $ 9,336 Amount of Gain (Loss) recognized in Statement of Income on Derivatives Year ended December 31, Derivatives not designated as hedging instruments Location of Gain (Loss) recognized in Statement of Income on Derivatives 2016 2017 2018 Foreign exchange gains (losses), net $ 2,921 $ 16,696 $ (6,240 ) $ 2,921 $ 16,696 $ (6,240 ) As of December 31, 2017 2018 Advance income and non-income taxes $ 51,832 $ 58,701 Deferred transition costs 62,029 — Contract asset (Note 27) — 22,472 Customer acquisition cost 19,327 — Prepaid expenses 16,944 25,996 Derivative instruments 48,192 34,528 Employee advances 5,014 3,772 Deposits 4,719 2,758 Advances to suppliers 2,705 1,998 Others 25,580 62,252 $ 236,342 $ 212,477 As of December 31, 2017 2018 Land $ 10,209 $ 9,401 Buildings 46,007 43,078 Furniture and fixtures 43,091 47,206 Computer equipment and servers 210,725 210,239 Plant, machinery and equipment 92,981 88,937 Computer software 137,459 138,824 Leasehold improvements 102,072 105,965 Vehicles 6,418 5,309 Capital work in progress 17,069 11,795 Property, plant and equipment, gross $ 666,031 $ 660,754 Less: Accumulated depreciation and amortization (459,001 ) (448,039 ) Property, plant and equipment, net $ 207,030 $ 212,715 As of December 31, 2017 2018 Opening balance $ 1,069,408 $ 1,337,122 Goodwill relating to acquisitions consummated during the period 229,745 91,936 Impact of measurement period adjustments (106 ) 816 Effect of exchange rate fluctuations 38,075 (36,042 ) Closing balance $ 1,337,122 $ 1,393,832 As of December 31, 2017 2018 India $ 735,596 $ 794,902 China 60,171 59,319 Europe 41,775 40,033 Americas 57,021 57,021 IT services 442,559 442,557 $ 1,337,122 $ 1,393,832 As of December 31, 2017 As of December 31,2018 Gross carrying amount Accumulated amortization & Impairment Net Gross carrying amount Accumulated amortization & Impairment Net Customer-related intangible assets $ 369,173 $ 293,029 $ 76,144 $ 368,558 $ 306,582 $ 61,976 Marketing-related intangible assets 52,443 39,212 13,231 54,714 46,591 8,123 Technology-related intangible assets 54,189 28,278 25,911 76,790 33,976 42,814 Other intangible assets 3,081 2,314 767 1,204 1,077 127 Intangible assets under development 15,537 - 15,537 64,047 - 64,047 494,423 362,833 $ 131,590 $ 565,313 $ 388,226 $ 177,087 2019, 2020 and 2021: 2019 $ 36,395 2020 34,949 2021 20,814 2022 10,957 2023 and beyond 9,925 $ 113,040 As of December 31, 2017 2018 Customer acquisition cost $ 37,017 — Contract asset (Note 27) — 22,563 Advance income and non-income taxes 63,474 62,942 Deferred transition costs 77,255 — Deposits 32,174 25,984 Derivative instruments 24,906 9,571 Prepaid expenses 2,849 5,052 Accounts Receivable due after one year 1,624 4,099 Others 22,870 24,948 $ 262,169 $ 155,159 12. Leases As of December 31: 2019 $ 64,099 2020 58,434 2021 53,170 2022 47,976 2023 38,862 2024 and beyond 147,765 Total minimum lease payments $ 410,306 2021 are summarized below: As of December 31, 2017 2018 Accrued expenses $ 204,997 $ 179,843 Accrued employee cost 204,506 210,251 Earn-out consideration 14,928 16,875 Statutory liabilities 36,283 42,728 Retirement benefits 21,074 22,921 Derivative instruments 10,346 15,373 Advance from customers 25,476 — Contract liabilities (Note 27) — 64,744 Deferred transition revenue 52,233 — Other liabilities 13,093 16,807 Capital lease obligations 1,546 1,808 $ 584,482 $ 571,350 financial covenants described above that are contained in the amended credit agreement. Year ended Amount 2019 $ 33,483 2020 33,509 2021 33,537 2022 33,564 2023 526,748 Total $ 660,841 As of December 31, 2017 2018 Accrued employee cost $ 14,020 $ 6,341 Earn-out consideration 9,804 198 Retirement benefits 40,520 50,370 Derivative instruments 7,842 19,872 Advance from customers 790 — Contract liabilities (Note 27) — 53,796 Deferred transition revenue 70,900 — Others 22,069 32,935 Capital lease obligations 2,664 1,714 $ 168,609 $ 165,226 The plan contributions are further invested into insurer managed funds. As of December 31, 2017 2018 Change in benefit obligation Projected benefit obligation at the beginning of the year $ 45,283 $ 58,094 Service cost 7,735 7,833 Actuarial loss (gain) 4,493 470 Interest cost 3,252 3,822 Liabilities assumed on acquisition — 503 Benefits paid (5,367 ) (6,277 ) Special termination benefit 57 — Plan amendments — 995 Effect of exchange rate changes 2,641 (3,992 ) Projected benefit obligation at the end of the year $ 58,094 $ 61,448 Change in fair value of plan assets Fair value of plan assets at the beginning of the year $ 30,871 $ 45,560 Employer contributions 15,176 1,573 Actual gain on plan assets 2,746 1,929 Actuarial gain/(loss) 11 (9 ) Benefits paid (5,301 ) (6,228 ) Effect of exchange rate changes 2,057 (3,142 ) Fair value of plan assets at the end of the year $ 45,560 $ 39,683 As of December 31, 2017 2018 Net actuarial loss $ (12,228 ) $ (11,037 ) Net Prior Service Credit / (Cost) — (967 ) Deferred tax assets 2,221 3,451 Other comprehensive income, net $ (10,007 ) $ (8,553 ) 2018 Net actuarial loss $ (951 ) Amortization of net actuarial loss 1,202 Deferred income taxes 1,407 Net prior service credit/(cost) (944 ) Effect of exchange rate changes 740 Other comprehensive income (loss), net $ 1,454 Year ended December 31, 2016 2017 2018 Service costs $ 5,661 $ 7,735 $ 7,833 Interest costs 2,585 3,252 3,822 Amortization of actuarial loss (113 ) 1,177 806 Expected return on plan assets (2,043 ) (2,412 ) (2,435 ) One time cost — 209 — Special termination benefits — 426 — Net defined benefit plan costs $ 6,090 $ 10,387 $ 10,026 plans. As of December 31, 2017 2018 Discount rate 7.40% - 7.60% 8.30% - 8.40% Rate of increase in compensation per annum 5.20%-11.00% 5.20%-11.00% Year ended December 31, 2016 2017 2018 Discount rate 8.30% - 8.45% 7.10% - 7.5% 7.40% - 7.60% Rate of increase in compensation per annum 5.20% - 11.00% 5.20% - 11.00% 5.20% - 11.00% Expected long term rate of return on plan assets per annum 7.50% 7.50% 7.50% As of December 31, 2017 2018 Discount rate 7.60 % 9.25 % Rate of increase in compensation per annum 5.50 % 5.50 % Year ended December 31, 2016 2017 2018 Discount rate 6.50 % 6.80 % 7.60 % Rate of increase in compensation per annum 5.50 % 5.50 % 5.50 % Expected long term rate of return on plan assets per annum 0.00 % 0.00 % 0.00 % As of December 31, 2017 2018 Discount rate 0.113%-0.789% 0.076%-0.269% Rate of increase in compensation per annum 0.00% - 3.55% 0.00% Year ended December 31, 2016 2017 2018 Discount rate 0.24% - 1.30% 0.08% - 1.30% 0.113%-0.789% Rate of increase in compensation per annum 0.00% - 3.55% 0.00% - 3.55% 0.00% - 3.55% Expected long term rate of return on plan assets per annum 0.00% - 3.77% 0.00% - 3.09% 0-1.84% Total As of December 31, 2018 Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Asset category Equity $ 7 $ 7 $ — $ — Cash 381 381 — — Fixed income securities (Note a) 36,499 3,345 33,154 — Other securities (Note b) 2,796 2,381 415 — Total $ 39,683 $ 6,114 $ 33,569 $ — Total As of December 31, 2017 Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Asset category Cash $ 472 $ 472 $ — $ — Fixed income securities (Note a) 42,328 3,419 38,909 — Other securities (Note b) 2,760 2,437 323 — Total $ 45,560 $ 6,328 $ 39,232 $ — remaining portion in equity securities. Year ending December 31, 2019 $ 9,983 2020 10,454 2021 10,686 2022 10,877 2023 11,193 2024 - 2028 53,112 $ 106,305 2021. Year ended December 31, 2016 2017 2018 India $ 19,074 $ 22,242 $ 23,877 U.S. 10,379 11,147 13,454 U.K. 6,593 7,823 9,619 China 15,512 15,950 17,625 Other regions 4,684 4,059 4,604 Total $ 56,242 $ 61,221 $ 69,179 date. 2016 2017 2018 Dividend yield — 0.97% 0.95%-1.01% Expected life (in months) 84 84 84 Risk-free rate of interest for expected life 1.42% - 1.56% 2.25% 2.67%-2.93% Volatility 25.60% - 27.22% 24.28% 22.55-22.73% Year ended December 31, 2016 Shares arising out of options Weighted average exercise price Weighted average remaining contractual life (years) Aggregate intrinsic value Outstanding as of January 1, 2016 5,986,845 $ 16.99 5.8 $ — Granted 860,000 26.80 — — Forfeited (145,000 ) 17.77 — — Expired — — — — Exercised (994,155 ) 14.98 — 10,982 Outstanding as of December 31, 2016 5,707,690 $ 18.65 5.8 $ 34,641 Vested as of December 31, 2016 and expected to vest thereafter (Note a) 5,457,701 $ 18.42 5.8 $ 34,150 Vested and exercisable as of December 31, 2016 2,746,191 $ 15.62 4.0 $ 23,960 Weighted average grant-date fair value of options granted during the period $ 8.50 Year ended December 31, 2017 Shares arising out of options Weighted average exercise price Weighted average remaining contractual life (years) Aggregate intrinsic value Outstanding as of January 1, 2017 5,707,690 $ 18.65 5.8 $ — Granted 250,000 24.74 — — Forfeited (80,000 ) 20.63 — — Expired — — — — Exercised (743,045 ) 14.50 — 8,512 Outstanding as of December 31, 2017 5,134,645 $ 19.52 5.6 $ 62,743 Vested as of December 31, 2017 and expected to vest thereafter (Note a) 4,988,875 $ 19.36 5.6 $ 61,779 Vested and exercisable as of December 31, 2017 2,203,146 $ 16.17 4.1 $ 34,303 Weighted average grant-date fair value of options granted during the period $ 6.62 Year ended December 31, 2018 Shares arising out of options Weighted average exercise price Weighted average remaining contractual life (years) Aggregate intrinsic value Outstanding as of January 1, 2018 5,134,645 $ 19.52 5.6 $ — Granted 2,638,106 30.47 — — Forfeited (70,000 ) 27.65 — — Expired — — — — Exercised (441,076 ) 16.46 — 6,731 Outstanding as of December 31, 2018 7,261,675 $ 23.61 6.4 $ 34,143 Vested as of December 31, 2018 and expected to vest thereafter (Note a) 7,107,605 $ 23.50 6.4 $ 33,997 Vested and exercisable as of December 31, 2018 3,313,570 $ 17.69 3.7 $ 30,806 Weighted average grant-date fair value of options granted during the period $ 8.32 Cash received by the Company upon the exercise of stock options during the years ended December 31, 2019, 2020 and 2021 amounted to Year ended December 31, 2016 Number of Restricted Share Units Weighted Average Grant Date Fair Value Outstanding as of January 1, 2016 157,390 $ 17.67 Granted 95,553 25.49 Vested (Note b) (133,903 ) 20.66 Forfeited (1,135 ) 14.18 Outstanding as of December 31, 2016 117,905 $ 20.65 Expected to vest (Note a) 107,366 Year ended December 31, 2017 Number of Restricted Share Units Weighted Average Grant Date Fair Value Outstanding as of January 1, 2017 117,905 $ 20.65 Granted 1,533,836 26.36 Vested (Note c) (45,248 ) 18.31 Forfeited (1,242 ) 25.53 Outstanding as of December 31, 2017 1605,251 $ 26.17 Expected to vest (Note a) 1,371,567 Year ended December 31, 2018 Number of Restricted Share Units Weighted Average Grant Date Fair Value Outstanding as of January 1, 2018 1,605,251 $ 26.17 Granted 484,427 30.13 Vested (Note d) (358,697 ) 25.53 Forfeited (201,982 ) 27.09 Outstanding as of December 31, 2018 1,528,999 $ 27.45 Expected to vest (Note a) 1,360,048 Year ended December 31, 2016 Number of Performance Units Weighted Average Grant Date Fair Value Maximum Shares Eligible to Receive Outstanding as of January 1, 2016 2,499,322 $ 19.95 2,499,322 Granted 1,518,374 27.93 3,343,335 Vested — — — Forfeited (252,842 ) 21.88 (325,817 ) Adjustment upon final determination of level of performance goal achievement (Note b) 7,274 22.72 Adjustment upon final determination of level of performance goal achievement (Note b) 7,274 Outstanding as of December 31, 2016 3,772,128 $ 23.04 5,524,114 Expected to vest (Note a) 2,226,489 Year ended December 31, 2017 Number of Performance Units Weighted Average Grant Date Fair Value Maximum Shares Eligible to Receive Outstanding as of January 1, 2017 3,772,128 $ 23.04 5,524,114 Granted 1,811,292 25.22 3,622,584 Vested (Note c) (1,136,047 ) 16.78 (1,136,047 ) Forfeited (Note d) (1,583,913 ) 27.57 (1,627,313 ) Adjustment upon final determination of level of performance goal achievement (Note e) 37,480 25.22 Adjustment upon final determination of level of performance goal achievement (Note f) (3,482,398 ) Outstanding as of December 31, 2017 2,900,940 $ 24.40 2,900,940 Expected to vest (Note a) 2,657,685 Year ended December 31, 2018 Number of Performance Units Weighted Average Grant Date Fair Value Maximum Shares Eligible to Receive Outstanding as of January 1, 2018 2,900,940 $ 24.40 2,900,940 Granted 1,682,740 30.62 3,365,480 Vested (Note g) (1,087,751 ) 22.73 (1,087,751) Forfeited (258,237 ) 26.03 (305,737 ) Adjustment upon final determination of level of performance goal achievement (Note h) 474,800 30.68 Adjustment upon final determination of level of performance goal achievement (Note i) (1,160,530) Outstanding as of December 31, 2018 3,712,402 $ 28.40 3,712,402 Expected to vest (Note a) 3,261,069 Year ended December 31, 2016 2017 2018 Net income available to Genpact Limited common shareholders $ 269,684 $ 263,111 $ 282,019 Weighted average number of common shares used in computing basic earnings per common share 206,861,536 193,864,755 190,674,740 Dilutive effect of stock-based awards 3,264,487 3,184,797 3,305,298 Weighted average number of common shares used in computing dilutive earnings per common share 210,126,023 197,049,552 193,980,038 Earnings per common share attributable to Genpact Limited common shareholders Basic $ 1.30 $ 1.36 $ 1.48 Diluted $ 1.28 $ 1.34 $ 1.45 Year ended December 31, 2016 2017 2018 Personnel expenses $ 1,061,134 $ 1,153,479 $ 1,322,651 Operational expenses 446,922 481,012 543,006 Depreciation and amortization 46,284 46,947 56,111 $ 1,554,340 $ 1,681,438 $ 1,921,768 Year ended December 31, 2016 2017 2018 Personnel expenses $ 469,894 $ 501,059 $ 518,897 Operational expenses 174,060 178,573 166,437 Depreciation and amortization 9,013 9,829 8,531 $ 652,967 $ 689,461 $ 693,865 Year ended December 31, 2016 2017 2018 Other operating (income) expense $ (1,266 ) $ (7,277 ) $ (455 ) Provision for impairment of intangible assets and property, plant and equipment 11,195 9,311 4,265 Change in fair value of earn-out consideration and deferred consideration (relating to business acquisitions) (14,869 ) (3,695 ) (5,655 ) Other operating (income) expense, net $ (4,940 ) $ (1,661 ) $ (1,845 ) Year ended December 31, 2016 2017 2018 Interest income $ 7,247 $ 8,182 $ 11,388 Interest expense (23,431 ) (39,917 ) (48,507 ) Interest income (expense), net $ (16,184 ) $ (31,735 ) $ (37,119 ) Year ended December 31, 2016 2017 2018 Income from continuing operations $ 62,098 $ 59,742 $ 80,763 Other comprehensive income: Unrealized gains (losses) on cash flow hedges 23,809 457 (6,647 ) Retirement benefits (1,885 ) 670 (1,407 ) Retained earnings: Deferred tax benefit recognized on early adoption of ASU 2016-09 (24,912 ) — — Reclassification from AOCI on early adoption of ASU 2018-02 — — 2,265 Deferred tax expense recognized on adoption of ASU 2014-09 — — 5,303 Accumulated other comprehensive income: Reclassification to retained earnings on early adoption of ASU 2018-02 — — (2,265 ) Year ended December 31, 2016 2017 2018 Domestic (U.S.) $ 44,110 $ 8,440 $ 49,986 Foreign (Non-U.S.) 285,535 312,143 312,035 Income before income tax expense $ 329,645 $ 320,583 $ 362,021 Year ended December 31, 2016 2017 2018 Current tax expense : Domestic (U.S. federal) $ 78 $ 3,380 $ 6,466 Domestic (U.S. state) 1,069 1,268 3,508 Foreign (Non-U.S.) 30,497 65,485 64,735 $ 31,644 $ 70,133 $ 74,709 Deferred tax expense (benefit) : Domestic (U.S. federal) $ 11,379 $ 3,549 $ 6,577 Domestic (U.S. state) (459 ) (2,809 ) (1,176 ) Foreign (Non-U.S.) 19,534 (11,131 ) 653 $ 30,454 $ (10,391 ) $ 6,054 Total income tax expense (benefit) $ 62,098 $ 59,742 $ 80,763 Year ended December 31, 2016 2017 2018 Income before income tax expense $ 329,645 $ 320,583 $ 362,021 Statutory tax rates 35 % 35 % 21 % Computed expected income tax expense 115,376 112,204 76,024 Increase (decrease) in income taxes resulting from: Foreign tax rate differential (18,574 ) (25,224 ) 23,373 Tax benefit from tax holiday (32,893 ) (35,814 ) (24,968 ) Non-deductible expenses 4,559 3,985 3,245 Effect of change in tax rates 353 2,778 (147 ) Change in valuation allowance (4,830 ) 9,041 27,826 Unrecognized tax benefits (627 ) 1,611 3,008 Other* (1,266 ) (8,839 ) (27,598 ) Reported income tax expense (benefit) $ 62,098 $ 59,742 $ 80,763 *Following the transfer/closure of certain affiliated entities, deferred tax liabilities recorded against the outside basis difference were reversed amounting to $0, $9,600, $18,510 during the year ended December 31, 2016, 2017 and 2018. It was not more likely than not that the resulting net deferred tax asset would be realized. Therefore, a full valuation allowance was established to offset the reduction in deferred tax liabilities. 2021. 2021. As of December 31, 2017 2018 Deferred tax assets Net operating loss carryforwards $ 55,500 $ 64,013 Accrued liabilities and other expenses 41,177 36,812 Provision for doubtful debts 10,509 9,650 Property, plant & equipment and leased assets 6,179 7,904 Unrealized losses on cash flow hedges, net 275 672 Share-based compensation 19,789 18,236 Retirement benefits 5,817 7,559 Contract liabilities 22,948 3,150 Tax credit carryforwards 35,322 22,409 Other 6,662 8,885 Gross deferred tax assets $ 204,178 $ 179,290 Less: Valuation allowance (24,549 ) (51,986 ) Total deferred tax assets $ 179,629 $ 127,304 Deferred tax liabilities Intangible assets $ 23,545 $ 17,975 Property, plant and equipment 1,131 5,493 Deferred cost 33,816 2,725 Investments in foreign subsidiaries not indefinitely reinvested 18,949 4,835 Unrealized gains on cash flow hedges, net 14,711 8,990 Goodwill 7,145 12,957 Other 10,150 7,843 Total deferred tax liabilities $ 109,447 $ 60,818 Net deferred tax asset $ 70,182 $ 66,486 As of December 31, Classified as 2017 2018 Deferred tax assets Non-current $ 76,929 $ 74,566 Deferred tax liabilities Non-current 6,747 8,080 $ 70,182 $ 66,486 Year ended December 31, 2016 2017 2018 Opening valuation allowance $ 20,091 $ 14,746 $ 24,549 Reduction during the year (7,299 ) (3,957 ) (2,307 ) Addition during the year 1,954 13,760 29,744 Closing valuation allowance $ 14,746 $ 24,549 $ 51,986 a full valuation allowance has been recorded to reduce the deferred tax balances. Accordingly, this internal restructuring did not have any impact on the Company’s income tax expense. US – Federal Europe Others Year ending December 31, 2020 $ — 2952 $ — 2021 — 1,121 2,347 2022 — 5,904 105 2023 — 6,639 1,426 2024 — 771 7,748 2025 — 27,147 8,520 2026 — 234 1,396 2027 — 856 5,071 2028 — 34 2,716 2029 — — 672 2034 — 18,820 — 2035 340 8,838 — 2036 477 — — 2037 7252 — — 2038 — — 640 $ 8,069 $ 73,316 $ 30,641 2040. Year ending December 31, Amount 2023 355 2024 2,819 2025 8,395 2026 5,728 2027 1,250 2028 3,862 $ 22,409 Company. In the quarter ended March 31, 2016 2017 2018 Opening balance at January 1 $ 26,357 $ 23,467 $ 26,060 Increase related to prior year tax positions, including recorded in acquisition accounting 370 2,582 1,851 Decrease related to prior year tax positions (1,506 ) (1,398 ) (153 ) Decrease related to divesture of business (345 ) — — Decrease related to prior year tax position due to lapse of applicable statute of limitation (2,122 ) (1,019 ) (1,841 ) Increase related to current year tax positions, including recorded in acquisition accounting 3,225 1,661 2,408 Decrease related to settlements with tax authorities (2,000 ) — — Effect of exchange rate changes (512 ) 767 (1,603 ) Closing balance at December 31 $ 23,467 $ 26,060 $ 26,722 related to income taxes. Year ended December 31, 2016 2017 2018 GE $ 357,894 $ 269,217 $ 268,210 Global Clients 2,212,862 2,467,712 2,732,580 Total net revenues $ 2,570,756 $ 2,736,929 $ 3,000,790 Year ended December 31, 2016 2017 2018 Business process outsourcing $ 2,083,450 $ 2,264,335 $ 2,502,806 Information technology services 487,306 472,594 497,984 Total net revenues $ 2,570,756 $ 2,736,929 $ 3,000,790 Year ended December 31, 2016 2017 2018 Banking, financial services and insurance $ 1,021,609 $ 1,090,134 $ 1,099,189 Consumer goods, retail, life sciences and healthcare 769,432 832,088 891,640 High tech, manufacturing and services 779,715 814,707 1,009,961 Total net revenues $ 2,570,756 $ 2,736,929 $ 3,000,790 Company’s HMS segment comprised 14.0%, 12.0% Year ended December 31, 2016 2017 2018 India $ 1,804,113 $ 1,712,783 $ 1,739,455 Asia, other than India 249,839 286,338 327,462 North and Latin America 282,434 455,059 641,716 Europe 234,370 282,749 292,157 Total net revenues $ 2,570,756 $ 2,736,929 $ 3,000,790 As of December 31, 2017 2018 India $ 125,490 $ 130,824 Asia, other than India 15,899 14,866 Americas 38,438 46,763 Europe 27,203 20,262 Total $ 207,030 $ 212,715 credit losses and Note 11 for deferred billings. As of December 31, 2018 Particulars Advance from customers Deferred transition revenue Opening balance $ 26,266 $ 101,785 Impact of opening balance offset — $ 21,348 Gross opening balance $ 26,266 $ 123,133 Additions 33,328 67,838 Effect of business combinations 273 75 Revenue recognized (32,091 ) (68,697 ) Currency translation adjustments (1,063 ) (1,097 ) Gross closing balance $ 26,713 $ 121,252 Impact of closing balance offset with contract asset (3,821 ) (25,604 ) Closing balance (Note a) $ 22,892 $ 95,648 Particulars Total Less than 1 year 1-3 years 3-5 years After 5 years Transaction price allocated to remaining performance obligations $ 95,670 41,830 40,128 12,619 1,093 share count) Particulars As of December 31,2018 Opening balance $ 43,366 Impact of opening balance offset 21,348 Gross opening balance $ 64,714 Additions 48,216 Reduction in revenue recognized (38,470 ) Gross closing balance $ 74,460 Impact of closing balance offset with contract liability (29,425 ) Closing balance (Note b) $ 45,035 As of December 31, 2018 Particulars Sales incentive programs Transition activities Opening balance $ 23,227 $ 139,284 Closing balance 25,891 134,302 Amortization 14,788 70,775 Year ended December 31, 2016 2017 2018 Government incentives $ - $ 26,882 $ 36,099 Other income/(expense) 9,691 (3,296 ) (338 ) Other Income (expense), net $ 9,691 $ 23,586 $ 35,761 Three months ended Year ended March 31, 2018 June 30, 2018 September 30, 2018 December 31, 2018 December 31, 2018 Total net revenues $ 688,912 $ 728,561 $ 747,978 $ 835,339 $ 3,000,790 Gross profit $ 244,588 $ 265,663 $ 266,566 $ 302,205 $ 1,079,022 Income from operations $ 63,761 $ 79,522 $ 94,028 $ 110,841 $ 348,152 Income before equity-method investment activity, net and income tax expense $ 76,009 $ 81,668 $ 97,724 $ 106,632 $ 362,033 Net income $ 63,934 $ 64,574 $ 73,603 $ 79,147 $ 281,258 Net (income) loss attributable to redeemable non-controlling interest $ 761 $ - $ - $ - $ 761 Net income attributable to Genpact Limited common shareholders $ 64,695 $ 64,574 $ 73,603 $ 79,147 $ 282,019 Earnings per common share attributable to Genpact Limited common shareholders Basic $ 0.34 $ 0.34 $ 0.39 $ 0.42 $ 1.48 Diluted $ 0.33 $ 0.33 $ 0.38 $ 0.41 $ 1.45 Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders Basic 192,816,626 190,132,664 190,024,924 189,724,744 190,674,740 Diluted 196,288,569 193,365,974 193,115,769 193,149,836 193,980,038 Three months ended Year ended March 31, 2017 June 30, 2017 September 30, 2017 December 31, 2017 December 31, 2017 Total net revenues $ 622,995 $ 670,697 $ 708,824 $ 734,413 $ 2,736,929 Gross profit $ 239,658 $ 256,189 $ 280,034 $ 279,610 $ 1,055,491 Income from operations $ 79,096 $ 80,959 $ 97,919 $ 73,305 $ 331,279 Income before equity-method investment activity, net and income tax expense $ 69,243 $ 84,582 $ 89,742 $ 81,559 $ 325,126 Net income $ 52,440 $ 69,102 $ 73,161 $ 66,138 $ 260,841 Net (income) loss attributable to redeemable non-controlling interest $ 898 $ (156 ) $ 584 $ 944 $ 2,270 Net income attributable to Genpact Limited common shareholders $ 53,338 $ 68,946 $ 73,745 $ 67,082 $ 263,111 Earnings per common share attributable to Genpact Limited common shareholders Basic $ 0.27 $ 0.36 $ 0.38 $ 0.35 $ 1.36 Diluted $ 0.26 $ 0.36 $ 0.38 $ 0.34 $ 1.34 Weighted average number of common shares used in computing earnings per common share attributable to Genpact Limited common shareholders Basic 199,069,528 191,469,593 192,124,366 192,795,534 193,864,755 Diluted 202,655,937 193,732,406 194,947,699 196,862,168 197,049,552 As of December 31, 2018 Issuer/ Subsidiary Parent/ Guarantor Non- Guarantor Subsidiaries Eliminations Consolidated Assets Current assets Cash and cash equivalents $ 12,797 $ 2,505 $ 353,094 $ — $ 368,396 Accounts receivable intercompany, net 89,958 — — (89,958 ) — Accounts receivable, net — — 774,184 — 774,184 Intercompany loans 447,578 1,300 1,835,608 (2,284,486 ) — Intercompany other receivable 33,224 52,783 117,537 (203,544 ) — Prepaid expenses and other current assets 2,242 1,278 208,957 — 212,477 Total current assets $ 585,799 $ 57,866 $ 3,289,380 $ (2,577,988 ) $ 1,355,057 Property, plant and equipment, Net 388 — 212,327 — 212,715 Intercompany loans 100,000 — 500,000 (600,000 ) — Deferred tax assets — — 74,566 — 74,566 Investment in subsidiaries 548,654 3,073,467 557,089 (4,179,210 ) — Investment in equity affiliates — — 836 — 836 Investment in debentures/bonds, intercompany 571,919 50,393 — (622,312 ) — Intercompany other receivable — 83,169 — (83,169 ) — Intangible assets, net — — 177,087 — 177,087 Goodwill — — 1,393,832 — 1,393,832 Contract cost assets — — 160,193 — 160,193 Other assets 682 — 154,477 — 155,159 Total assets $ 1,807,442 $ 3,264,895 $ 6,519,787 $ (8,062,679 ) $ 3,529,445 Liabilities and equity Current liabilities Short-term borrowings $ 100,000 $ — $ 195,000 $ — $ 295,000 Intercompany loans 128,572 1,849,537 306,377 (2,284,486 ) — Current portion of long-term debt 4,961 — 28,522 — 33,483 Accounts payable 1,636 520 40,428 — 42,584 Intercompany accounts payable — — 89,958 (89,958 ) — Income taxes payable — — 33,895 — 33,895 Intercompany other payable 47,844 70,973 84,727 (203,544 ) — Accrued expenses and other current liabilities 5,248 5,157 560,945 — 571,350 Total current liabilities $ 288,261 $ 1,926,187 $ 1,339,852 $ (2,577,988 ) $ 976,312 Long-term debt, less current portion 440,665 — 534,980 — 975,645 Deferred tax liabilities — — 8,080 — 8,080 Intercompany other payable — — 83,169 (83,169 ) — Non-current intercompany loans payable 500,000 — 722,312 (1,222,312 ) — Other liabilities 197 154 164,875 — 165,226 Total liabilities $ 1,229,123 $ 1,926,341 $ 2,853,268 $ (3,883,469 ) $ 2,125,263 Redeemable non-controlling interest — — — — — Shareholders' equity 578,319 1,338,554 3,666,519 (4,179,210 ) 1,404,182 Commitments and contingencies — — — — — Total liabilities, redeemable non-controlling interest and equity $ 1,807,442 $ 3,264,895 $ 6,519,787 $ (8,062,679 ) $ 3,529,445 As of December 31, 2017 Issuer/ Subsidiary Parent/ Guarantor Non- Guarantor Subsidiaries Eliminations Consolidated Assets Current assets Cash and cash equivalents $ 4,507 $ 2,136 $ 497,825 $ — $ 504,468 Accounts receivable intercompany, net 82,935 — — (82,935 ) — Accounts receivable, net — — 693,085 — 693,085 Intercompany loans 194,854 — 1,620,537 (1,815,391 ) — Intercompany other receivable 25,343 82,631 89,189 (197,163 ) — Prepaid expenses and other current assets 311 1,276 234,755 — 236,342 Total current assets $ 307,950 $ 86,043 $ 3,135,391 $ (2,095,489 ) $ 1,433,895 Property, plant and equipment, net 391 — 206,639 — 207,030 Intercompany loans — — 500,000 (500,000 ) — Deferred tax assets — — 76,929 — 76,929 Investment in subsidiaries 426,410 2,864,386 529,179 (3,819,975 ) — Investment in equity affiliates — — 886 — �� 886 Investment in debentures, intercompany 717,909 — — (717,909 ) — Intercompany other receivable — 49,761 — (49,761 ) — Intangible assets, net — — 131,590 — 131,590 Goodwill — — 1,337,122 — 1,337,122 Other assets — — 262,169 — 262,169 Total assets $ 1,452,660 $ 3,000,190 $ 6,179,905 $ (7,183,134 ) $ 3,449,621 Liabilities and equity Current liabilities Short-term borrowings $ — $ — $ 170,000 $ — $ 170,000 Intercompany loans 38,000 1,597,537 179,854 (1,815,391 ) — Current portion of long-term debt — — 39,226 — 39,226 Accounts payable 103 58 14,889 — 15,050 Intercompany accounts payable — — 82,935 (82,935 ) — Income taxes payable 885 — 29,141 — 30,026 Intercompany other payable 29,526 59,266 108,371 (197,163 ) — Accrued expenses and other current liabilities 5,995 2,390 576,097 — 584,482 Total current liabilities $ 74,509 $ 1,659,251 $ 1,200,513 $ (2,095,489 ) $ 838,784 Long-term debt, less current portion 347,761 — 658,926 — 1,006,687 Deferred tax liabilities — — 6,747 — 6,747 Intercompany other payable — — 49,761 (49,761 ) — Non-current intercompany loans payable 500,000 — 717,909 (1,217,909 ) — Other liabilities 1,211 153 167,245 — 168,609 Total liabilities $ 923,481 $ 1,659,404 $ 2,801,101 $ (3,363,159 ) $ 2,020,827 Redeemable non-controlling interest — — 4750 — 4750 Shareholders' equity 529,179 1,340,786 3,374,054 (3,819,975 ) 1,424,044 Commitments and contingencies Total liabilities, redeemable non-controlling interest and equity $ 1,452,660 $ 3,000,190 $ 6,179,905 $ (7,183,134 ) $ 3,449,621 year ended December 31, 2018 Issuer/ Subsidiary Parent/ Guarantor Non- Guarantor Subsidiaries Eliminations Consolidated Net revenues $ 50,356 $ — $ 3,000,790 $ (50,356 ) $ 3,000,790 Cost of revenue — 5,188 1,916,580 — 1,921,768 Gross profit $ 50,356 $ (5,188 ) $ 1,084,210 $ (50,356 ) $ 1,079,022 Operating expenses: Selling, general and administrative expenses 11,324 23,703 709,260 (50,422 ) 693,865 Amortization of acquired intangible assets 48 — 38,802 — 38,850 Other operating (income) expense, net (17,599 ) — 15,754 — (1,845 ) Income (loss) from operations $ 56,583 $ (28,891 ) $ 320,394 $ 66 $ 348,152 Foreign exchange gains (losses), net 449 845 13,945 — 15,239 Interest income (expense), net (16,504 ) — (20,615 ) — (37,119 ) Intercompany interest income (expense), net 77,857 (19,279 ) (58,578 ) — — Other income (expense), net — — 35,761 — 35,761 Income (loss) before equity-method investment activity, net and income tax expense $ 118,385 $ (47,325 ) $ 290,907 $ 66 $ 362,033 Gain (loss) on equity-method investment activity, net 62,501 346,960 123,291 (532,764 ) (12 ) Income before income tax expense $ 180,886 $ 299,635 $ 414,198 $ (532,698 ) $ 362,021 Income tax expense 6,124 — 74,639 — 80,763 Net income $ 174,762 $ 299,635 $ 339,559 $ (532,698 ) $ 281,258 Net loss attributable to redeemable non-controlling interest — 761 — 761 Net income attributable to Genpact Limited shareholders $ 174,762 $ 299,635 $ 340,320 $ (532,698 ) $ 282,019 Year ended December 31, 2017 Issuer/ Subsidiary Parent/ Guarantor Non- Guarantor Subsidiaries Eliminations Consolidated Net revenues $ 46,722 $ — $ 2,736,929 $ (46,722 ) $ 2,736,929 Cost of revenue — — 1,681,438 — 1,681,438 Gross profit $ 46,722 $ — $ 1,055,491 $ (46,722 ) $ 1,055,491 Operating expenses: Selling, general and administrative expenses 9,859 21,076 728,145 (69,619 ) 689,461 Amortization of acquired intangible assets — — 36,412 — 36,412 Other operating (income) expense, net (3,412 ) — 1,751 — (1,661 ) Income (loss) from operations $ 40,275 $ (21,076 ) $ 289,183 $ 22,897 $ 331,279 Foreign exchange gains (losses), net 3,312 2 (1,318 ) — 1,996 Interest income (expense), net (11,375 ) — (20,360 ) — (31,735 ) Intercompany interest income (expense), net 47,547 (10,148 ) (37,399 ) — — Other income (expense), net 18,391 — 5,195 — 23,586 Income (loss) before equity-method investment activity, net and income tax expense $ 98,150 $ (31,222 ) $ 235,301 $ 22,897 $ 325,126 Gain (loss) on equity-method investment activity, net (15,058 ) 294,333 75,657 (359,475 ) (4,543 ) Income before income tax expense $ 83,092 $ 263,111 $ 310,958 $ (336,578 ) $ 320,583 Income tax expense 7,435 — 52,307 — 59,742 Net income $ 75,657 $ 263,111 $ 258,651 $ (336,578 ) $ 260,841 Net loss attributable to redeemable non-controlling interest — — 2,270 — 2,270 Net income attributable to Genpact Limited shareholders $ 75,657 $ 263,111 $ 260,921 $ (336,578 ) $ 263,111 Year ended December 31, 2016 Issuer/ Subsidiary Parent/ Guarantor Non- Guarantor Subsidiaries Eliminations Consolidated Net revenues $ 39,518 $ — $ 2,570,756 $ (39,518 ) $ 2,570,756 Cost of revenue — — 1,554,340 — 1,554,340 Gross profit $ 39,518 $ — $ 1,016,416 $ (39,518 ) $ 1,016,416 Operating expenses: Selling, general and administrative expenses 9,499 12,772 672,680 (41,984 ) 652,967 Amortization of acquired intangible assets — — 27,183 — 27,183 Other operating (income) expense, net (4,043 ) (500 ) (397 ) — (4,940 ) Income (loss) from operations $ 34,062 $ (12,272 ) $ 316,950 $ 2,466 $ 341,206 Foreign exchange gains (losses), net (1,633 ) 57 4,206 — 2,630 Interest income (expense), net (1,358 ) — (14,826 ) — (16,184 ) Intercompany interest income (expense), net 81,359 - (81,359 ) — — Other income (expense), net (829 ) (3,390 ) 13,910 — 9,691 Income (loss) before equity-method investment activity, net and income tax expense $ 111,601 $ (15,605 ) $ 238,881 $ 2,466 $ 337,343 Gain (loss) on equity-method investment activity, net 29,969 285,289 133,186 (456,142 ) (7,698 ) Income before income tax expense $ 141,570 $ 269,684 $ 372,067 $ (453,676 ) $ 329,645 Income tax expense 8,384 — 53,714 — 62,098 Net income $ 133,186 $ 269,684 $ 318,353 $ (453,676 ) $ 267,547 Net loss attributable to redeemable non-controlling interest — — 2,137 — 2,137 Net income attributable to Genpact Limited shareholders $ 133,186 $ 269,684 $ 320,490 $ (453,676 ) $ 269,684 Year ended December 31, 2017 Issuer/ Subsidiary Parent/ Guarantor Non-Guarantor Subsidiaries Eliminations Genpact Limited Shareholders Redeemable Non-controlling interest Net income (loss) $ 75,657 $ 263,111 $ 260,921 $ (336,578 ) $ 263,111 $ (2,270 ) Other comprehensive income: Currency translation adjustments 74,716 93,871 93,871 (168,587 ) 93,871 (341 ) Net income (loss) on cash flow hedging derivatives, net of taxes (Note 7) 9,788 12,611 12,611 (22,399 ) 12,611 - Retirement benefits, net of taxes 475 (3,787 ) (3,787 ) 3,312 (3,787 ) - Other comprehensive income (loss) 84,979 102,695 102,695 (187,674 ) 102,695 (341 ) Comprehensive income (loss) $ 160,636 $ 365,806 $ 363,616 $ (524,252 ) $ 365,806 $ (2,611 ) Year ended December 31, 2016 Issuer/ Subsidiary Parent/ Guarantor Non-Guarantor Subsidiaries Eliminations Genpact Limited Shareholders Redeemable Non-controlling interest Net income (loss) $ 133,186 $ 269,684 $ 320,490 $ (453,676 ) $ 269,684 $ (2,137 ) Other comprehensive income: Currency translation adjustments (31,679 ) (46,340 ) (46,340 ) 78,019 (46,340 ) 104 Net income (loss) on cash flow hedging derivatives, net of taxes (Note 7) 42,016 43,742 43,742 (85,758 ) 43,742 - Retirement benefits, net of taxes (717 ) (4,042 ) (4,042 ) 4,759 (4,042 ) - Other comprehensive income (loss) 9,620 (6,640 ) (6,640 ) (2,980 ) (6,640 ) 104 Comprehensive income (loss) $ 142,806 $ 263,044 $ 313,850 $ (456,656 ) $ 263,044 $ (2,033 ) Year ended December 31, 2018 Issuer/ Subsidiary Parent/ Guarantor Non- Guarantor Subsidiaries Eliminations Consolidated Operating activities Net cash (used for)/provided by operating activities $ (266,889 ) $ 11,905 $ 25,399 $ 569,096 $ 339,511 Investing activities Purchase of property, plant and equipment — — (84,978 ) — (84,978 ) Payment for acquired/internally generated intangible assets (including intangibles under development) — — (75,439 ) — (75,439 ) Proceeds from sale of property, plant and equipment — — 668 — 668 Investment in equity affiliates — — - — - Investment in subsidiaries (97,730 ) — - 97,730 - Dividend received - — - - - Proceeds from redemption of debentures/(payments) for issuance of bonds, intercompany 91,760 (50,393 ) - (41,368 ) - Payment for business acquisitions, net of cash acquired — — (111,571 ) — (111,571 ) Payment for purchase of redeemable non-controlling interest — — (4,730 ) — (4,730 ) Net cash (used for)/provided by investing activities $ (5,970 ) $ (50,393 ) (276,050 ) $ 56,362 $ (276,050 ) Financing activities Repayment of capital lease obligations — — (2,395 ) — (2,395 ) Payment of debt issuance costs — — (4,293 ) — (4,293 ) Proceeds from long-term debt 100,000 — 29,186 — 129,186 Repayment of long-term debt (2,450 ) — (163,736 ) — (166,186 ) Proceeds from short-term borrowings 100,000 — 150,000 — 250,000 Repayment of Short-term borrowings — — (125,000 ) — (125,000 ) Proceeds from intercompany loans 172,047 308,500 334,320 (814,867 ) — Repayment of intercompany loans (81,479 ) (56,500 ) (107,792 ) 245,771 — Proceeds from issuance of common shares under stock-based compensation plans — 14,034 — — 14,034 Proceeds from issuance of common shares — — 113,954 (113,954 ) — Payment for net settlement of stock-based awards — (15,919 ) — — (15,919 ) Payment of earn-out/deferred consideration (1,797 ) — (1,559 ) — (3,356 ) Dividend paid — (57,102 ) (16,224 ) 16,224 (57,102 ) Payment for stock repurchased and retired — (154,058 ) — — (154,058 ) Payment for expenses related to stock repurchase — (98 ) — — (98 ) Payment for redemption of debentures/(proceeds) from issuance of bonds, intercompany — — (41,366 ) 41,366 — Net cash (used for)/provided by financing activities $ 286,321 $ 38,857 $ 165,095 $ (625,460 ) $ (135,187 ) Effect of exchange rate changes (5,172 ) — (59,174 ) — (64,346 ) Net increase (decrease) in cash and cash equivalents 13,462 369 (85,557 ) — (71,726 ) Cash and cash equivalents at the beginning of the period 4,507 2,136 497,825 — 504,468 Cash and cash equivalents at the end of the period $ 12,797 $ 2,505 $ 353,094 $ — $ 368,396 Condensed Consolidating Cash Flow Year ended December 31, 2017 Issuer/ Subsidiary Parent/ Guarantor Non- Guarantor Subsidiaries Eliminations Consolidated Operating activities Net cash (used for)/provided by operating activities $ (315,877 ) $ (8,345 ) $ 511,847 $ 171,453 $ 359,078 Investing activities Purchase of property, plant and equipment — — (57,231 ) — (57,231 ) Payment for acquired/internally generated intangible assets (including intangibles under development) — — (16,441 ) — (16,441 ) Proceeds from sale of property, plant and equipment — — 1,738 — 1,738 Investment in equity affiliates (523 ) — 27 — (496 ) Investment in subsidiaries (3,638 ) — 51,127 (47,489 ) — Payment for business acquisitions, net of cash acquired — — (284,822 ) — (284,822 ) Proceeds from divestiture of business, net of cash divested — — (4,738 ) — (4,738 ) Net cash (used for)/provided by investing activities $ (4,161 ) $ — $ (310,340 ) $ (47,489 ) $ (361,990 ) Financing activities Repayment of capital lease obligations — — (2,708 ) — (2,708 ) Payment of debt issuance costs (2,630 ) — — — (2,630 ) Proceeds from long-term debt 350,000 — — — 350,000 Repayment of long-term debt — — (40,000 ) — (40,000 ) Proceeds from short-term borrowings — — 295,000 — 295,000 Repayment of short-term borrowings — — (285,000 ) — (285,000 ) Proceeds from intercompany loans — 263,886 — (263,886 ) — Repayment of intercompany loans (35,000 ) — (80,328 ) 115,328 — Proceeds from issuance of common shares under stock-based compensation plans — 15,528 — — 15,528 Payment for net settlement of stock-based awards — (10,296 ) — — (10,296 ) Payment of earn-out/deferred consideration — — (6,219 ) — (6,219 ) Dividend paid — (46,686 ) — — (46,686 ) Payment for stock repurchased and retired — (219,784 ) — — (219,784 ) Payment for expenses related to stock repurchase — (16 ) — — (16 ) Change in amounts due from/ due to consolidated affiliates — — (24,594 ) 24,594 — Excess tax benefit on stock-based compensation — — — — — Net cash (used for)/provided by financing activities $ 312,370 $ 2,632 $ (143,849 ) $ (123,964 ) $ 47,189 Effect of exchange rate changes 960 — 36,608 — 37,568 Net increase (decrease) in cash and cash equivalents (7,668 ) (5,713 ) 57,658 — 44,277 Cash and cash equivalents at the beginning of the period 11,215 7,849 403,559 — 422,623 Cash and cash equivalents at the end of the period $ 4,507 $ 2,136 $ 497,825 $ — $ 504,468 Year ended December 31, 2016 Issuer/ Subsidiary Parent/ Guarantor Non- Guarantor Subsidiaries Eliminations Consolidated Operating activities Net cash (used for)/provided by operating activities $ (42,212 ) $ 25,592 $ (66,519 ) $ 428,911 $ 345,772 Investing activities Purchase of property, plant and equipment (625 ) — (81,301 ) — (81,926 ) Payment for acquired/internally generated intangible assets (including intangibles under development) — — (6,846 ) — (6,846 ) Proceeds from sale of property, plant and equipment — — 547 — 547 Investment in equity affiliates (5,884 ) — (3,736 ) — (9,620 ) Investment in subsidiaries (53,619 ) — (8,101 ) 61,720 — Payment for business acquisitions, net of cash acquired — — (45,162 ) — (45,162 ) Proceeds from divestiture of business, net of cash divested — — 17,242 — 17,242 Net cash (used for)/provided by investing activities $ (60,128 ) $ — $ (127,357 ) $ 61,720 $ (125,765 ) Financing activities Repayment of capital lease obligations — — (1,793 ) — (1,793 ) Repayment of long-term debt — — (40,000 ) — (40,000 ) Proceeds from short-term borrowings — — 200,000 — 200,000 Repayment of short-term borrowings — — (61,500 ) — (61,500 ) Proceeds from intercompany loans 73,000 303,000 50,445 (426,445 ) — Repayment of intercompany loans — — — — — Proceeds from issuance of common shares under stock-based compensation plans — 18,228 — — 18,228 Proceeds from issuance of common shares 40,000 — — (40,000 ) — Payment for net settlement of stock-based awards — (769 ) — — (769 ) Payment of earn-out/deferred consideration — — (1,485 ) — (1,485 ) Payment for stock purchased and retired — (345,200 ) 24,186 (24,186 ) (345,200 ) Payment for expenses related to stock purchase — (279 ) — — (279 ) Net cash (used for)/provided by financing activities $ 113,000 $ (25,020 ) $ 169,853 $ (490,631 ) $ (232,798 ) Effect of exchange rate changes (361 ) — (15,132 ) — (15,493 ) Net increase (decrease) in cash and cash equivalents 10,660 572 (24,023 ) — (12,791 ) Cash and cash equivalents at the beginning of the period 916 7,277 442,714 — 450,907 Cash and cash equivalents at the end of the period $ 11,215 $ 7,849 $ 403,559 $ — $ 422,623 stockshare price are:terrorist attacks or natural disasters or other such events impacting countries where we or our clients have operations; and1722 countries. Our only material properties are our premises in India at Phase V, Gurgaon, which comprises approximately 212,531 square feet, and Uppal, Hyderabad which comprises approximately 449,286 square feet, both of which we own. We have a mixture of owned and leased properties and substantially all of our leased properties are leased under long-term leases with varying expiration dates. We believe that our properties and facilities are suitable and adequate for our present purposes and are well-maintained.2019,2022, there were 1537 holders of record of our common shares.(capitalization(market capitalization weighted) and a peer group of companies for the period from January 1, 20142017 to December 31, 2018.2021. The selected peer group for the period presented is comprised of six companies that we believe are our closest reporting issuer competitors: Accenture plc, Cognizant Technology Solutions Corp., ExlService Holdings, Inc., Infosys Technologies Limited, Wipro Technologies Limited, and WNS (Holdings) Limited. The returns of the component entities of our peer group index are weighted according to the market capitalization of each company as of the beginningend of each period for which a return is presented. The returns assume that $100 was invested on December 31, 20132016 and that all dividends were reinvested. The performance shown in the graph and table below is historical and should not be considered indicative of future price performance.
3/31/17 6/30/17 9/30/17 12/31/17 3/31/18 Genpact 101.98 114.88 118.93 131.54 132.90 Peer Group 104.37 108.70 116.16 125.50 130.75 S&P 500 106.07 109.34 114.24 121.83 120.91 6/30/18 9/30/18 12/31/18 3/31/19 6/30/19 Genpact 120.48 127.79 112.97 147.63 160.21 Peer Group 137.02 141.49 122.83 145.50 147.77 S&P 500 125.06 134.70 116.49 132.39 138.09 9/30/19 12/31/19 3/31/20 6/30/20 9/30/20 Genpact 163.32 178.11 123.64 155.04 165.78 Peer Group 149.17 155.87 121.56 153.24 179.79 S&P 500 140.43 153.17 123.15 148.45 161.71 12/31/20 03/31/21 06/30/21 09/30/21 12/31/21 Genpact 176.46 183.16 194.78 204.13 228.54 Peer Group 213.04 226.24 244.62 264.69 324.41 S&P 500 181.35 192.55 209.01 210.23 233.41 2018,2021, our board of directors approved a 25%10% increase in our quarterly cash dividend to $0.075$0.1075 per common share, representing a plannedan annual dividend of $0.30$0.43 per common share. In 2018,2021, dividends were declared in February, May, July and October and paid in March, June, September and December. In February 2019,2022, our board of directors approved an approximately 13%a 16% increase in our quarterly cash dividend to $0.085$0.125 per common share, representing a planned annual dividend of $0.34$0.50 per common share for 2019.2022. Any future dividends will be at the discretion of the board of directors and subject to Bermuda and other applicable laws.20182021 was as follows:Period Total Number of Shares
PurchasedWeighted Average Price Paid per
Share ($)Total Number of Shares
Purchased as
Part of Publicly
Announced Plan or ProgramApproximate Dollar Value of Shares that May Yet Be
Purchased Under the
Plan or Program ($)October 1-October 31, 2021 — — — 489,846,383 November 1-November 30, 2021 1,083,646 50.76 1,083,646 434,844,870 December 1-December 31, 2021 1,901,507 50.45 1,901,507 338,910,814 Total 2,985,153 50.56 2,985,153 2017,2021, our board of directors authorized a $500 million increase to our existing $750 million$1.25 billion share repurchase program, first announced in February 2015, bringing the total authorization under our existing program to $1.25$1.75 billion. This repurchase program does not obligate us to acquire any specific number of shares and does not specify an expiration date. All shares repurchased under the plan have been cancelled. See Note 19—“Capital stock” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” for additional information.Selected Financial DataThe table below presents selected historical financial data.We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Financial data as of December 31, 2017 and 2018 and for the three-year period ended December 31, 2018 have been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Financial data as of December 31, 2014, 2015 and 2016 and for the years ended December 31, 2014 and 2015 have been derived from our audited consolidated financial statements not included in this Annual Report on Form 10-K.You should read the selected financial data below together with the financial statements included herein and Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”Overview2018Global Leadership Council continues to coordinate and oversee our actions in response to the COVID-19 pandemic, including business continuity planning, monitoring our revenue and profitability, developing transformation service offerings to address new and developing client needs, and evaluating and adapting our human resource policies. We believe this coordinated effort will maximize our flexibility and allow us to quickly implement any necessary protocols for devising solutions to the problems we and our clients are facing or may face in the future in relation to the pandemic.$3.001$4.0 billion, an increase of 10%8.4% year-over-year, or 9%7.2% on a constant currency1 basis. See “Net Revenues” below for an explanation of how we calculate net revenue growth on a constant currency basis, which is a non-GAAP financial measure.2016, 20172020 and 2018:2021:Percentage of Total Net Revenues Year ended December 31, 2020 2021 Top five clients 29.0 % 24.3 % Top ten clients 38.5 % 33.6 % Top fifteen clients 45.1 % 39.8 % Top twenty clients 49.9 % 44.3 % marketing.”There are a variety of aspects tomarketing” for additional information. pricing of contracts. Under some of our MSAs, we are able to share a limited amount of inflation and currency exchange risk for engagements lasting longer than 12 months. Many of our MSAs also provide that, under transaction-based and fixed-price SOWs, we are entitled to retain a portion of certain productivity benefits we achieve. However, some of our MSAs and SOWs require certain minimum productivity benefits to be passed on to our clients. Once an MSA and the related SOWs are signed and production of services commences, our revenues and expenses increase as services are ramped up to the agreed upon level. In many cases, we may have opportunities to increase our profit margins over the life of an MSA or SOW, driven by a number of factors. Our revenues include gains or losses arising upon the maturity of qualified cash flow hedges.notice.notice, subject to early termination charges where applicable. GE is not obligated to provide us with any exclusivity or opportunity to work on GE projects and GE is not required to purchase a minimum amount of services from us.accountshas historically accounted for a significant portion of our revenues and any material loss of business from, or change in our relationshipfailure to maintain relationships with, GE and former GE businesses could have a material adverse effect on our business, results of operations and financial condition.”GEGlobal Clients and net revenues from Global Clients.GE. Net revenues from Global Clients consist of revenues from services provided to alllessmore of the outstanding equity interest. If GE ceases to own at least 20% of a business we serve and that business enters into a new agreement with us, we reclassify the revenues from such business as Global Client revenues following the divestiture. Prior to 2016, wereclassified revenues from these divested GE businesses as Global Client revenues in each fiscal quarter beginning on the date of divestiture. However, beginning with 2016, we reclassify such revenue as Global Client revenue only at the end of each fiscal year. We believe that this allows us to provide a more consistent view of quarterly trends underlying our Global Client and GE businesses. After reclassifying $69.7 million of revenues from businesses that GE divested in 2016, our 2016 revenues from Global Clients and GE were $2,212.9 million and $357.9 million, respectively. The impact of the reclassification of revenue from divested GE businesses to Global Client revenue was immaterial in 2017 and 20182020, while the impact of such reclassifications in 2021 was immaterial.In 2016, we also reclassified revenue from our 2016 acquisitions of Endeavour Software Technologies Private Limited and PNMSoft Ltd. as revenue from BPO services rather than revenue from IT services to better align with the digital business process client solutions derived from these businesses. After reclassifying $12.4 million of revenues from these acquisitions, our 2016 revenues from BPO and IT services were $2,083.4 million and $487.3 million, respectively.recruitingrecruitment 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 based onusing an employee’s function.recruitingrecruitment policies, utilizing continuous training techniques, emphasizing promotion opportunities and maintaining an attractive work atmosphere and company culture.locations,offices or delivery centers, we try to expand into cities where competition for personnel and wage levels may be lower than in more developed cities. In addition, under some of our contracts we have the ability tocan share with our clients a portion of any increase in costs due to inflation. Nevertheless, despite these steps, we expect general increases in wage levels in the future, which could adversely affect our margins. A significant increase in attrition rates would also increase our recruitingrecruitment and training costs and decrease our operating efficiency, productivity and profit margins. Increased attrition rates or increased pricing may also cause some clients to be less willing to use our services. See Item 1A—“Risk Factors—Wage increases in the countries in whichwhere we have operations may prevent us from sustaining our competitive advantage andoperate may reduce our profit margin.” These expenses include gains or losses that arise upon the maturity of qualified cash flow hedges.declines.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.corporateand other support personnel in enabling functions, such as human resources, finance, legal, marketing, sales and sales-related personnel,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(which represent the costs of third-party legal, tax, accounting and other advisors,advisors), investments in research and development, digital technology, advanced automation and robotics, and an allowance for doubtful receivables. These expenses include gains or losses that arise upon the maturity of qualified cash flow hedges.net.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, andas well as certain operating losses resulting from the impairmentwrite-down of operating lease right-of-use assets, property, plant and equipment and intangible assets.net.net. Foreign exchange gains (losses), net, primarily consistconsists of gains or losses on the re-measurement of non-functional currency assets and liabilities. In addition, it includes gains or losses from derivative contracts entered into to offset the impact of the re-measurement of non-functional currency assets and liabilities. It also includes the realized and unrealized gains or losses on derivative contracts that do not qualify for hedge accounting.consolidated financial statementsConsolidated Financial Statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules’’ and Item 7A—“Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk.”Approximately 20182021 revenues were earned in U.S. dollars. We also received payments in euros, U.K. pounds sterling, Australian dollars, Chinese renminbi, Japanese yen and Indian rupees. Our costs are primarily incurred in Indian rupees, as well as in U.S. dollars, U.K. pounds sterling, Romanian lei, 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, Australian dollar, Philippine peso, Hungarian forint, Chinese renminbi, 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.net.net. Interest income (expense), net consists primarily of interest expense on indebtedness, including resulting from interest rate swaps capitaland 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 LIBOR and the floor rate under our term loan and make payments based on a fixed rate.the gain or loss on the divestitures of certain businesses and certain government incentives received by our subsidiaries.Net loss (income) attributable to redeemable non-controlling interest. Non-controlling interest primarily refers to the loss associated with the redeemable non-controlling interestsubsidiaries, changes in the operationsfair value of SSE,assets in our deferred compensation plan, and settlement of certain pre-GE divestiture related tax liabilities for which we acquired in the first quarter of 2016. We purchased the remainder of the outstanding equity interest in SSE in the first quarter of 2018. See Note 3—“Business acquisitions and divestiture” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” Equity-method investment activity, net. Equity-method investment activity, net primarily represents our share of loss in a non-consolidated affiliate that we divested on June 30, 2017.ourthe jurisdiction of our organization, the geographical sources of our earnings and the tax rates in those countries, the tax relief and incentives available to us, the financing and tax planning strategies employed by us, changes in tax laws or the interpretation thereof, and movements in our tax reserves, if any. This holiday is available only for new business operationsare conducted at qualifying SEZ locations and isallows companies to elect to pay reduced tax rate on all of their income provided they do not available to operations formed by splitting up or reconstructing existing operations or transferring existing plant and equipment (beyond prescribed limits) to new locations. During the last ten years, we established new delivery centers that we believe are eligible for the SEZ benefits. However, we cannot forecast what percentagetake advantage of our operations or income in India will in the future be eligible for SEZ benefits, as this will depend on how much of our business can be conducted at the qualifying locations and how much of that business can be considered to meet the restrictive conditions described above.Our tax expense will increase as a result of the expiration of ourany tax holidays and our after-tax profitability will be materiallyor other exemptions. In response to this law, we have ceased taking advantage of tax holidays in order to benefit from the reduced unless we can obtain comparable benefits under new legislation or otherwise reduce our tax liability.from whichwhere we deliver services may assert that certain of our clients have a “permanent establishment” in such jurisdictions by reason of the activities we perform on their behalf, particularly those clients that exercise control over or have substantial dependency on our services. Such an assertion could affect the size and scope of the services requested by such clients in the future. Kenya, Latvia, Malaysia, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Portugal, Romania, Singapore, Slovakia, South Africa, 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.In 2009, onewashas been extended through December 31, 2018,2023, 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, Malaysia and the Philippines and Israel.Philippines. These tax concessions will expire over the next few years, possibly increasing our overall tax rate.Through the period ended December 30, 2004, weWe have an indemnity from GE for any additional taxes attributable to periods prior to December 30, 2004.carry-forwardscarry forwards and other deferred tax assets and credits may be affected if our profitability deteriorates or if new legislation is introduced that changes carry-overcarry-forward or crediting rules. Additionally, reductions in enacted tax rates may affect the value of our deferred tax assets and our tax expense.August 30, 2018,December 31, 2021, we acquired 100% of the outstanding equity/partnershiplimited liability company interests in Barkawi Management Consultants GmbH & Co. KG,Hoodoo Digital, LLC, a GermanUtah limited partnership, and certain affiliated entities in the United States, Germany and Austria (collectively referred to as “Barkawi”)liability company, for total purchase consideration of $101.3$66.6 million. This amount includesrepresents cash consideration of $95.6$64.3 million, net of cash acquired of $5.7$2.3 million. This acquisition enhancesfurthers our supply chain management consulting capabilities.strategy to fuse experience and process innovation to help clients drive end-to-end digital transformation. Hoodoo’s expertise with Adobe Experience Manager and other Adobe applications complements our existing end-to-end client solution that seamlessly integrates digital content, ecommerce, data analytics, and marketing operations. Goodwill arising from the acquisition amountedamounting to $81.3$44.2 million which has been allocated toamong our Indiathree reporting unitunits as follows: Banking, Capital Markets and Insurance ("BCMI") in the amount of $4.2 million, Consumer Goods, Retail, Life Sciences and Healthcare ("CGRLH") in the amount of $7.0 million and High Tech, Manufacturing and Services ("HMS") in the amount of $33.0 million, using a relative fair value allocation method. Goodwill arising from this acquisition is partially deductible for income tax purposes. The goodwillpurposes and represents primarily the acquired consulting expertise, operating synergies and other benefits expected to result from combining the acquired operations with those of our existing operations.On July 3, 2018, we acquired 100% of the outstanding equity interest in Commonwealth Informatics Inc. (“Commonwealth”), a Massachusetts corporation, for preliminary purchase consideration of $17.6 million. This amount includes cash consideration of $16.1 million, net of cash acquired of $1.5 million, and preliminary adjustments for working capital and indebtedness. This acquisition enhances our signal management and pharmacovigilance capabilities for clients in the life sciences industry. Goodwill arising from the acquisition amounted to $11.2 million, which has been allocated to our India reporting unit and is deductible for tax purposes. The goodwill represents primarily the acquired capabilities, operating synergies and other benefits expected to result from combining the acquired operations with our existing operations.January 8, 2016, we acquired 51% of the outstanding equity interest in Strategic Sourcing Excellence LLC (“SSE”), a Delaware limited liability company, for total consideration of $14.5 million. This amount includes the fair value of earn-out consideration and cash consideration of $2.6 million, adjusted for working capital, transaction expenses, indebtedness and measurement period adjustments, which did not have a significant impact on our consolidated statements of income, balance sheets or cash flows in the periods in which the adjustments were made. This acquisition strengthens our procurement consulting, transformation and strategic sourcing capabilities. The equity purchase agreement between us and the selling equity holders provides for contingent earn-out consideration of up to $20.0 million, payable by us to the selling equity holders based on the performance of SSE following closing relative to the thresholds specified in the earn-out calculation. Up to $9.8 million of the total potential earn-out consideration, representing the selling equity holders’ redeemable, non-controlling 49% interest in SSE, was payable by us to the selling equity holders only if either the put or call option, each as described below, was exercised. Goodwill arising from the acquisition amounted to $14.4 million, which has been allocated to our India reporting unit and is deductible for tax purposes. The goodwill represents future economic benefits we expect to derive from our expanded presence in the sourcing and procurement consulting domains, operating synergies and other anticipated benefits of combining the acquired operations with our existing operations. The equity purchase agreement granted us a call option to purchase the remaining 49% equity interest in SSE, which option we had the right to exercise between January 1, 2018 and JanuaryDecember 31, 2018. As we did not exercise our call option during such period, the selling equity holders exercised their put option on March 1, 2018 in accordance with the terms of the equity purchase agreement to require us to purchase their 49% interest in SSE for $3.0 million. We also paid the selling equity holders $1.8 million in earn-out consideration in the first quarter of 2018.On September 5, 2017,2020, we acquired 100% of the outstanding equity interestinterests in TandemSeven, Inc. (“TandemSeven”),Enquero Inc, a MassachusettsCalifornia corporation, and certain affiliated entities in India, the Netherlands and Canada (collectively referred to as “Enquero”) for total purchase consideration of $35.6$148.8 million. This amount includesrepresents cash consideration of $31.8$137.2 million, net of cash acquired of $3.9 million,$11.6 million. This acquisition increased the scale and an adjustment for working capitaldepth of our data and indebtedness. TandemSeven’s focus on improving the design of customer experiences complementsanalytics capabilities and enhanced our existing capabilities aimed at transforming clients’ processes end-to-end.ability to accelerate our clients' digital transformation journeys through cloud technologies and advanced data analytics. Goodwill arising from the acquisition amountedamounting to $25.2$87.9 million which has been allocated toamong our Indiathree reporting unitunits as follows: BCMI in the amount of $2.6 million, CGRLH in the amount of $22.5 million and HMS in the amount of $62.7 million, using a relative fair value allocation method. The goodwill arising from this acquisition is not deductible for income tax purposes. The goodwill represents primarily the acquired expertise, operating synergiescapabilities and other benefits expected to result from combining the acquired operations with our existing operations.May 3, 2017,October 5, 2020, we acquired 100% of the outstanding equity interest in each of BrightClaim LLC, a Delaware equity/limited liability company BrightServeinterests in SomethingDigital.Com LLC, a GeorgiaNew York limited liability company, National Vendor LLC, a Delaware limited liability company, and BrightClaim Blocker, Inc., a Delaware corporation (collectively referred to as “BrightClaim”). Thefor total purchase consideration for the acquisition of BrightClaim was $56.5$57.5 million. This amount includesrepresents cash consideration of $52.4$56.1 million, net of cash acquired of $4.0 million, adjusted for working capital, net debt, transaction expenses$1.4 million. This acquisition supported our strategy to integrate experience and measurement period adjustments which did not have a significant impactprocess innovation to help clients on their digital transformation journeys and expanded on our consolidated statements of income, balance sheets or cash flows in the applicable adjustment periods. Thisexisting experience capabilities to support end-to-end digital commerce solutions, both business-to-business and business-to-consumer. Additionally, this acquisition enhancesexpanded our breadthcapabilities into Magento Commerce, which powers Adobe Commerce Cloud, and depth of service offeringsShopify Plus, a cloud-based-ecommerce platform for clients in the insurance industry.high-volume merchants. Goodwill arising from the acquisition amountedamounting to $42.6$36.9 million which has been allocated toamong two of our India reporting unitunits as follows: CGRLH in the amount of $30.4 million and HMS in the amount of $6.5 million, using a relative fair value allocation method. Of the total goodwill arising from this acquisition, $35.1 million is partially deductible for tax purposes. The goodwill represents primarily the capabilities, operating synergies and other benefits expected to be derived from combining the acquired operations with our existing operations.On April 13, 2017, we acquired 100% of the outstanding equity interest in RAGE Frameworks, Inc. (“RAGE”), a Delaware corporation, for total purchase consideration of $125.3 million. This amount includes cash consideration of $124.1 million, net of cash acquired of $1.6 million, and an adjustment for working capital and indebtedness. This acquisition enhances our digital and artificial intelligence capabilities by adding knowledge-based automation technology and services. Goodwill arising from the acquisition amounted to $105.5 million, which has been allocated to our India reporting unit and is not deductible forincome tax purposes. The goodwill represents primarily the acquired digital and artificial intelligence capabilities operating synergies and other benefits expected to be derived from combining the acquired operations with our existing operations.During 2017, we also completed five individually immaterial business acquisition transactions, namely the acquisition of a supply chain management delivery center in the U.S. (“U.S. Delivery Center”), the purchase of all of the outstanding equity interest in OnSource, LLC (“OnSource”), the purchase of the IT business of Birlasoft (“Birlasoft”), the purchase of the image processing business of Fiserv Solutions of Australia Pty Ltd. (“Fiserv”) and the purchase of all of the outstanding equity interest in Lease Dimensions, Inc. (“Lease Dimensions”). The aggregate total consideration to consummate these acquisitions was $87.6 million. This aggregate amount includes the fair value of contingent earn-out consideration, cash consideration of $76.6 million, net of cash acquired of $0.3 million, and adjustments for closing date working capital, indebtedness, value transfer, seller transaction expenses and certain employee-related liabilities.The U.S. Delivery Center acquisition enhances our supply chain management capabilities for clients in the consumer packaged goods industry. The OnSource acquisition brings incremental digital capabilities to our insurance service offerings. The Birlasoft transaction expands our end-to-end capabilities for clients in the healthcare and aviation industries. The Fiserv transaction strengthens our financial services portfolio and expands our Australia footprint. The Lease Dimensions acquisition enhances our capabilities in commercial lending and leasing.The purchase agreement for the acquisition of the U.S. Delivery Center provides for contingent earn-out consideration ranging from $0 to $10.0 million, payable by us to the seller based on the achievement of certain milestones relative to the thresholds specified in the earn-out calculation. The purchase agreement for the Lease Dimensions acquisition provides for contingent earn-out consideration ranging from $0 to $3.0 million, payable by us to the sellers based on the performance of the business following closing relative to the thresholds specified in the earn-out calculation.Goodwill arising from these acquisitions amounted to $56.5 million. This goodwill represents primarily the capabilities, operating synergies and other benefits expected to result from combining the acquired operations with our existing operations. The following table sets forth, with respect to eachfive acquisitions,outstanding equity/limited liability company interests in Rightpoint Consulting, LLC, an Illinois limited liability company, and certain affiliated entities in the United States and India (collectively referred to as “Rightpoint”) for total purchase consideration of $270.7 million. This amount includes cash consideration of $268.2 million, net of cash acquired of $2.5 million. This acquisition expanded our capabilities in improving customer experience and strengthened our reputation as a thought leader in this space. The securities purchase agreement provided certain of the selling equity holders the option to elect to either (a) receive 100% consideration in cash at the closing date for their limited liability company interests and vested options or (b) “roll over” and retain 25% of their Rightpoint limited liability company interests and vested options and receive consideration in cash at closing for the remaining 75% of their Rightpoint limited liability company interests and vested options. Certain selling equity holders elected to receive deferred, variable earnout consideration with an estimated value of $21.5 million over the three-year rollover period, which is included in the purchase consideration. The amount of deferred consideration ultimately payable to the rollover sellers will be based on the future revenue multiple of the acquired business. Goodwill arising from the acquisition date,amounting to $177.2 million has been allocated among our three reporting units as follows: BCMI in the amount of $17.0 million, CGRLH in the amount of $43.0 million and HMS in the amount of $117.2 million, using a relative fair value allocation method. Of the total goodwill reporting unitarising from this acquisition, $91.9 million is deductible for income tax purposes. The goodwill primarily represents the acquired capabilities and goodwill deductibility for tax purposes:AcquisitionAcquisition dateGoodwill reporting unitTax deductibility of goodwillU.S. Delivery CenterOctober 16, 2017IndiaDeductibleOnSourceJuly 18, 2017IndiaDeductibleBirlasoftJuly 18, 2017IT ServicesDeductibleFiservMay 11, 2017IndiaNon-deductibleLease DimensionsFebruary 15, 2017AmericasNon-deductibleDivestitureIn November 2017, we completedother benefits expected to result from combining the sale of a portion ofacquired operations with our legacy IT support business in Europe. Net proceeds from the sale of this business were $0. As a result of this divestiture, we recorded a loss of $5.7 million under “other income (expense)” in our consolidated statement of income.Secondary OfferingsOn August 18, 2017, we completed a secondary offering of our common shares, pursuant to which certain of our shareholders affiliated with Bain Capital Investors, LLC, namely Glory Investments A Limited and its affiliated assignees, together with their co-investor, GIC Private Limited (the “Selling Shareholders”), sold 10.0 million common shares at a price of $28.72 per share in an underwritten public offering. All of the common shares were sold by the Selling Shareholders and, as a result, we did not receive any of the proceeds from the offering.On November 20, 2017, we completed an additional secondary offering of our common shares pursuant to which the Selling Shareholders sold 10.0 million common shares at a price of $30.26 per share in an underwritten public offering. All of the common shares were sold by the Selling Shareholders and, as a result, we did not receive any of the proceeds from the offering.On February 15, 2019, we completed an additional secondary offering of our common shares pursuant to which the Selling Shareholders sold 10.0 million common shares at a price of $32.215 pershare in an underwritten public offering. All of the common shares were sold by the Selling Shareholders and, as a result, we did not receive any of the proceeds from the offering. renewals, extensions and changes to existing client contracts to the extent that such contracts represent incremental future business.revenue. In determining total contract value for this purpose, we assume the minimum volume to which the client has committed. However, forcommitted or make a conservative projection where the client has not made a minimum volume commitment. New bookings attributable to large deals that havemay exclude a total contract value in excess of $200 million and include employees transferring to us from a client, we include as new bookings for any given year only that portion of the total contract value which relatesabove certain thresholds if the services are subject to services performed in connection with employee transfers that are initiated during that year.certain contingencies, such as the establishment of new delivery centers or regulatory or other approvals. Regular renewals of contracts with no change in scope, which we consider business as usual, are not countedincluded as new bookings. We provide information regarding our new bookings because we believe doing so provides useful trend information regarding changes in the volume of our new business over time and may be a useful metric as an indicator of future revenue growth potential. New bookings is also used by management to measure our sales force productivity.20182021 were approximately $3.9$3.7 billion, up 40% from approximately $2.8compared to $3.1 billion in 2017. The overall increase2020. Bookings increased both in newour Transformation Services and Intelligent Operations services. GE bookings isdeclined in 2021 compared to 2020 primarily due to strong growtha reduction in our transformation services bookings and new sales of digitally-enabled services in our BPO business. We attribute this growthrelated to strategic investments in our digital and analytics capabilities, domain expertise, our people and our brand, together with a focus on growth opportunities in a specific set of industry verticals and service lines.the signing of a small number of large contracts. The types of services clients are demanding, the duration of the contract and the pace and level of theirclient spending may impact the conversion of new bookings to revenues. For example, business process outsourcing, or BPO,Intelligent Operations bookings, which are typically for multi-year contracts, generally convert to revenue over a longer period of time compared to information technology outsourcing bookings,transformation services, which are often for short-term,may include shorter cycle, project-based work.client.customer. It is not unusual for us to spend twelve to eighteen months or more from the time we begin actively soliciting a new clientcustomer until we begin to recognize revenues.clientcustomer are expensed as incurred, except for any incremental and direct costs incurred for acquiring the contracts, such as certain sales commissions to employees or third parties, which are classified as contract cost assets and are amortized over the expected period of benefit. Contract acquisition fees or other upfront fees paid to a clientcustomer are classified as contract assets which are amortized over the expected period of benefit and recorded as an adjustment to the transaction price.clientcustomer contracts sometimes also include incentive payments received for discrete benefits delivered or promised to be delivered to clientscustomers or service level agreements that could result in credits or refunds to the clients.customer. Revenues relating to such arrangements are accounted for as variable consideration when the amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur.We recognize upfront revenueRevenue from distinct perpetual licenses is recognized at the point in time when the softwarelicense is made available to the client.customer. Revenue from distinct, non-cancellable, subscription-based licenses is recognized at the point in time itwhen the license is transferred to the client.customer. Revenue from any associated maintenance or ongoing support services is recognized ratably over the term of the contract. For a combined software license/services performance obligation, revenue is recognized over the period that the services are performed.to a lesser extent, fixed-price contracts. When services are priced on a time-and-materials basis, we charge the clientcustomer based on full-time equivalent, or FTE, rates for the personnel who will directly perform the services. The FTE rates are determined on a periodic basis, vary by category of service delivery personnel and are set at levels to reflect all of our costs, including the cost of supervisory personnel, the allocable portion of other costs, and a margin. In some cases, time-and-materials contracts are based on hourly rates of the personnel providing the services. We recognize revenues when the promised services are delivered to customers for an amount that reflects the consideration to which we expect to be entitled in exchange for those services. We accrue for revenue and unbilled receivables for services rendered between the last billing date and the balance sheet date.clientscustomers are charged a fixed fee per transaction, with the fee per transaction sometimes linked to the total number of transactions processed. Some of our contracts give the clientcustomer the option to prospectively change from a time-and-materials model to a transaction-based pricing model. Revenues from services rendered under time-and-material and transaction-based contracts are recognized as the services are provided.(effort or cost(cost expended) method has been used to measure progress towards completion as there is a direct relationship between input and productivity.the satisfaction of a performance obligation. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates.time a contract is signed,delivery of services, we recognize the payment as an advance from a client.the customer, and it is classified as contract liability. When the related contract is signed,services are performed, the advance becomesis transferred to revenue to the extent the services are rendered and price is fixed or determinable.clientscustomers that include promises to transfer multiple products and services, (b) determining the standalone selling price for each distinct performance obligation and (c) estimating credits or refunds to our clientscustomers resulting from incentive payments received for discrete benefits delivered to clientscustomers or under service level agreements. In instances where a standalone selling price for a performance obligation is not directly observable, we use information that may include market conditions and other observable inputs. We estimate credit or refund amounts at contract inception and adjust them at the end of each reporting period as additional information becomes available only to the extent that it is probable that a significant reversal of any incremental revenue will not occur.Accounts receivable. Our accounts receivable include amounts Changes in these estimates may impact revenue for services that we have performed but for which we have not received payment. Accounts receivable are recorded at the invoiced or to-be-invoiced amount and do not bear interest. We typically follow a 30-day billing cycle and, as such, at any point in time we may have accrued up to 30 days of revenues that have not been billed. We maintain an allowance for doubtful accounts for estimated losses inherent in our accounts receivable portfolio. In establishing the required allowance, we consider current market conditions and our clients’ financial condition, the amount of receivables in dispute, and the current receivables’ aging and current payment patterns of the client. We do not have any off-balance-sheet credit exposure related to our clients.20182020 and December 31, 2017.review for impairmenttest our intangible assets with defined useful livesfor 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 amountamounts of the assets to the sum of future undiscounted cash flows expected to be generated by the asset.assets. When determining the fair value of our intangible assets, we utilize various assumptions, including discountDerivative instruments and hedging activities. We enter into forward foreign exchange contracts to mitigate foreign exchange risk on intercompany transactions and forecasted transactions denominated in foreign currencies, and we enter into interest rate swaps to mitigate interest rate fluctuation risk on our indebtedness. Most of these transactions meet the criteria for hedge accounting as cash flow hedges under FASB guidance on Derivatives and Hedging.With respect to derivatives designated as cash flow hedges, we formally document all relationships between hedging instruments and hedged items, as well as our risk management objectives and strategy for undertaking various hedge transactions. In addition, we formally assess, both at the inception of a hedge and on a quarterly basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If we determine that a derivative or a portion thereof is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we prospectively discontinue hedge accounting with respect to that derivative.We recognize derivative instruments and hedging activities as either assets or liabilities in our consolidated balance sheets and measure them at fair value. Changes in the fair values of these hedges are deferred and recorded as a component of other comprehensive income (losses), net of tax, until the hedged transactions occur and are recognized in the Consolidated Statements of Income along with the underlying hedged item and disclosed as a part of “Total net revenues,” “Cost of revenue”, “Selling, general and administrative expenses,” and “Interest expense” as applicable.We value our derivatives based on market observable inputs, including both forward and spot prices for currencies. Derivative assets and liabilities included in Level 2 of the fair value hierarchy primarily represent foreign currency forward contracts. The quotes are taken from independent sources and databases.areand tax credits carried forward, if any. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or tax status is recognized in the statement of income in the period that includes the enactment date or the filing or approval date of the tax status change. Deferred tax assets are recognized in full, subject to a valuation allowance that reduces the amount recognized to that which is more likely than not to be realized. In assessing the likelihood of realization, we consider estimates of future taxable income.Employee benefit plans. We record annual costs relatingdefined benefit plans based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return on plan assets, future compensation increases and attrition rates. We review these assumptions on an annual basis and modifyrounding, the assumptions based on current rates and trends when it is appropriate to do so. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors.Stock-based compensation expense. We recognize and measure compensation expense for all stock-based awards based on the grant date fair value. For option awards, grant date fair value is determined under the option pricing model (Black-Scholes-Merton model) and, for stock-based awards other than option awards, grant date fair value is determined on the basis of the fair market value of the Company’s shares on the grant date of such awards. Determining the fair value of stock-based awards requires estimates and assumptions, including estimates of the period the stock awards will be outstanding before they are exercised, future volatilitynumbers presented in the pricetables included in this Item 7—“Management’s Discussion and Analysis of our common shares,Financial Condition and Results of Operations” may not add up precisely to the numbertotals provided.stock-based awards that are likely to be forfeited. The Black-Scholes-Merton option pricing model also involves the useOperations additional key assumptions, including dividend yield and risk-free interest rate. For performance share units, we are required to estimate the most probable outcome of the performance conditions in order to determine the stock-based compensation cost to be recorded over the vesting period. We periodically assess the reasonableness of our assumptions and update our estimates as required. If actual results differ significantly from our estimates, stock-based compensation expense and our results of operations could be materially affected.Government incentives. We recognize government incentives in the income statement under “other income (expense), net” Incentives are recognized in the income statement when there is reasonable assurance that we will comply with the conditions for their receipt and a reasonable expectation that the funds will be received. In certain circumstances, the receipt of an incentive may not be subject to any condition or requirement to incur further costs, in which case the incentive is recognized in the income statement in the period in which it becomes receivable. In the event that it becomes likely that we will be required to repay an incentive that has already been recognized, we make a provision for the estimated liability.Operations2016, 20172020 and 2018.2021:Year ended December 31, Percentage change increase/ (decrease) 2021 vs. 2020 2020 2021 Net revenues—Global Clients Net revenues—Global Clients $ 3,250.5 $ 3,646.0 12.2 % Net revenues—GE Net revenues—GE $ 458.9 $ 376.2 (18.0) % Total net revenues $ 3,709.4 $ 4,022.2 8.4 % Cost of revenue 2,418.1 2,590.3 7.1 % Gross profit $ 1,291.2 $ 1,432.0 10.9 % Gross profit margin 34.8% 35.6% Operating expenses Selling, general and administrative expenses 789.8 865.7 9.6 % Amortization of acquired intangible assets 43.3 58.4 34.8 % Other operating (income) expense, net 19.3 (1.2) (106.2) % Income from operations $ 438.7 $ 509.0 16.0 % Income from operations as a percentage of net revenues 11.8% 12.7% Foreign exchange gains (losses), net 7.5 12.7 69.3 % Interest income (expense), net (49.0) (51.4) 5.1 % Other income (expense), net 3.2 12.9 298.2 % Income before income tax expense $ 400.5 $ 483.1 20.6 % Income tax expense 92.2 113.7 23.3 % Net income $ 308.3 $ 369.4 19.8 % Net income as a percentage of net revenues Net income as a percentage of net revenues 8.3% 9.2% *As described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Classification of Certain Net Revenues,” net revenues from certain businesses in which GE ceased to be a 20% shareholder are reclassified from GE net revenues to Global Client net revenues only at the end of each fiscal year. Net revenues from GE in the year ended December 31, 2016, after excluding net revenues from such divested GE businesses, decreased by 8.2% compared to the year ended December 31, 2015. Net revenues from GE in the year ended December 31, 2017, after excluding net revenues from such divested GE businesses, decreased by 18.5% compared to the year ended December 31, 2016. There was no significant impact on net revenues from GE in the year ended December 31, 2018 as a result of excluding net revenues from such divested GE businesses.20182021 Compared to the Fiscal Year Ended December 31, 2017$3,000.8$4,022.2 million in 2018,2021, up $263.9$312.8 million, or 9.6%8.4%, from $2,736.9$3,709.4 million in 2017.2020. The growth in our net revenues was primarily driven by an increase in BPO services – including ourGlobal Clients, led by both transformation services – deliveredand intelligent operations engagements, with double-digital growth across most of our verticals.Our net revenues from GE declined in 2021 compared to 2020, largely due to committed productivity and a reduction in GE’s discretionary expenditures resulting from the macroeconomic environment, as well as GE’s divestitures of certain businesses that as of January 1, 2021 are included in our Global Clients, and incremental revenue from acquisitions completed in 2017 and 2018. Client portfolio.theAustralian dollar and U.K. pound sterling Japanese yen and the Indian rupee against the U.S. dollar, our net revenues grew 9%7.2% in 2021 compared to 2017.2020 on a constant currency2 basis. Revenue growth on a constant currency2 basis is a non-GAAP measure. We provide information about our revenue growth on a constant currency2 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 currency2 basis are calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates and adjusted for hedging gains/losses.79,900103,100 in 20182021 from approximately 75,50096,700 in 2017.2020.Year ended December 31, Percentage change increase/ (decrease) 2021 vs. 2020 2020 2021 (dollars in millions) Net revenues—Global Clients $ 3,250.5 $ 3,646.0 12.2 % Net revenues—GE $ 458.9 $ 376.2 (18.0) % Total net revenues $ 3,709.4 $ 4,022.2 8.4 % 20182021 were $2,732.6$3,646.0 million, up $264.9$395.5 million, or 10.7%12.2%, from $2,467.7$3,250.5 million in 2017.2020. This increase was primarily driven by double-digital growth in severalacross most of our verticals including high tech, healthcare, consumer goodswithin our CGRLH and insurance.HMS segments, led by both transformation services and intelligent operations engagements, partially offset by the impact of a restructured relationship with one of our banking and capital markets clients. Global Client revenue also included the impact of GE's divestitures of certain businesses that as of January 1, 2021 are included in our Global Client portfolio. As a percentage of total net revenues, net revenues from Global Clients increased from 90.2%87.6% in 20172020 to 91.1%90.6% in 2018.2018 were $268.2 million,2021, down $1.0$82.7 million, or 0.4%18.0%, from 2017. The decrease2020, largely due to committed productivity and a reduction in GE’s discretionary expenditures resulting from the macroeconomic environment, as well as the impact of $38.7 million in revenues in 2021 from certain GE-divested businesses that as of January 1, 2021 are included in Global Client revenue.Year ended December 31, Percentage change increase/ (decrease) 2021 vs. 2020 2020 2021 (dollars in millions) BCMI $ 1,079.2 $ 1,016.8 (5.8) % CGRLH 1,264.7 1,509.5 19.4 % HMS 1,388.8 1,479.2 6.5 % Others (23.3) 16.7 171.8 % Total net revenues $ 3,709.4 $ 4,022.2 8.4 % attributablea 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.declinecontract with a large client in services delivered to certain GE businessesour banking and capital markets vertical during the fourth quarter of 2020, partially offset by higher revenues from clients in 2018our insurance vertical. Revenues from our BCMI segment increased sequentially in the last three quarters of 2021. Net revenues in our CGRLH segment increased 19.4% in 2021 compared to 2017. Prior to 2016,2020, primarily driven by an increase in both our transformation services and intelligent operations engagements, including the ramp-up of several large relationships as well as revenue from Enquero and SomethingDigital.Com LLC, which we reclassifiedacquired in the fourth quarter of 2020. Net revenues from GE-divested businesses as Global Clientour HMS segment increased 6.5% in 2021 compared to 2020, primarily driven by an increase in revenues in each fiscal quarter beginning on the dates of divestiture. However, beginning with 2016, we reclassify such revenue as Global Client revenue only at the end of each fiscal year. We believe that this allows us to provide a more consistent view of quarterly trends underlying ourfrom Global Clients largely related to transformation services and GE businesses. There was no significant impact on netramp-ups of new deals, as well as incremental revenue from Enquero, partially offset by lower revenues from GE in our manufacturing and services vertical due to committed productivity and a reduction in GE’s discretionary expenditures resulting from the year ended December 31, 2018 as a result of excluding net revenues from such divested GE businesses.BPO services in 2018 were $2,502.8 million, up $238.5 million, or 10.5%, from $2,264.3 million in 2017. This increase was primarily attributable to an increase in services delivered to our Global Clients, including transformation services. Net revenues from IT services were $498.0 million in 2018, up $25.4 million, or 5.4%, from $472.6 million in 2017.Net revenues from BPO services as a percentage of total net revenues increased to 83.4% in 2018 from 82.7% in 2017 with a corresponding decline"Others" in the percentage of total net revenues attributable to IT services.Cost of revenue and gross margin. The following table sets forthabove primarily represents the components of our cost of revenue and the resulting gross margin:Cost of revenue was $1,921.8 million in 2018, up $240.3 million, or 14.3%, from $1,681.4 million in 2017. Wage inflation, increases in our operational headcount, including in the number of onshore personnel – in particular for transformation services delivery – the unfavorable impact of foreign exchange onfluctuations, which is not allocated to our expenditures in certain currencies, primarily the Indian rupee, and higher stock-based compensation expense contributed to the increase in cost of revenue in 2018 compared to 2017. Fluctuations in foreign exchange rates result in gains and losses on our foreign currency hedges and a translation impact when we convert our non-U.S. dollar income statement items to the U.S. dollar, oursegments for management’s internal reporting currency. These increases were partially offset by improved operational efficiencies in 2018 compared to 2017.Our gross margin decreased from 38.6% in 2017 to 36.0% in 2018 primarily due to the factors described above.Personnel expenses. Personnel expenses as a percentage of total net revenues increased from 42.1% in 2017 to 44.1% in 2018. Personnel expenses were $1,322.7 million, up $169.2 million, or 14.7%, from $1,153.5 million in 2017. The impact of wage inflation, an approximately 2,800-person, or 4.3%, increase in our operational headcount, including an increase in the number of onshore personnel – in particular for transformation services delivery – and the unfavorable impact of foreign exchange contributed to higher personnel expenses in 2018 compared to 2017. Higher stock-based compensation expense also resulted in higher personnel expenses in 2018 compared to 2017.Operational expenses. Operational expenses as a percentage of total net revenues increased from 17.6% in 2017 to 18.1% in 2018. Operational expenses were $543.0 million, up $62.0 million, or 12.9%, from 2017 primarily due to higher travel and onshore infrastructure expenses and the unfavorable impact of foreign exchange. The increase in operational expenses was partially offset by improved operational efficiencies and lower IT expenses.Depreciation and amortization expenses. Depreciation and amortization expenses as a percentage of total net revenues were 1.9% in 2018, compared to 1.7% in 2017. Depreciation and amortization expenses as a component of cost of revenue were $56.1 million in 2018, up $9.2 million, or 19.5%, from $46.9 million in 2017. This increase was primarily due to the expansion of certain existing facilities.Selling, general and administrative expenses. The following table sets forth the components of our selling, general and administrative, or SG&A, expenses:SG&A expenses as a percentage of total net revenues decreased from 25.2% in 2017 to 23.1% in 2018. SG&A expenses were $693.9 million, up $4.4 million, or 0.6%, from 2017. Higher stock-based compensation expenses, an increase in our sales headcount and the unfavorable impact of foreign exchange on our expenses in certain currencies, primarily the Indian rupee, all contributed to higher SG&A expenses in 2018 compared to 2017. These increases were largely offset by cost efficiencies resulting from focused cost optimization initiatives across all support functions, related operating leverage and a lower reserve for doubtful receivables in 2018 compared to 2017. Our sales and marketing expenses as a percentage of total net revenues was approximately 6.8% in 2018, compared to 7.0% in 2017.Personnel expenses. Personnel expenses as a percentage of total net revenues decreased from 18.3% in 2017 to 17.3% in 2018. Personnel expenses as a component of SG&A expenses were $518.9 million, up $17.8 million, or 3.6%, from $501.1 million in 2017. This increase is primarily due to wage inflation and the unfavorable impact of foreign exchange. Higher stock-based compensation expense also resulted in higher personnel expenses in 2018 compared to 2017. These increases were largely offset by the cost efficiencies described above in 2018.Operational expenses. Operational expenses as a component of SG&A expenses were $166.4 million, down $12.1 million, or 6.8%, from $178.6 million in 2017. Operational expenses as a percentage of total net revenues decreased from 6.5% in 2017 to 5.5% in 2018. The decrease in operational expenses was primarily due to a lower reserve for doubtful receivables and the cost efficiencies described above, including lower travel and infrastructure expenses in 2018 compared to 2017, and was partially offset by the unfavorable impact of foreign exchange in 2018 compared to 2017.Depreciation and amortization. Depreciation and amortization expenses as a percentage of total net revenues were 0.3% in 2018, compared to 0.4% in 2017. Depreciation and amortization expenses as a component of SG&A expenses were $8.5 million, down $1.3 million, or 13.2%, from $9.8 million in 2017.Amortization of acquired intangibles. Non-cash charges on account of the amortization of acquired intangibles were $38.9 million in 2018, up $2.4 million, or 6.7%, from $36.4 million in 2017. This increase is primarily due to the amortization of intangibles acquired during 2017 and 2018, partially offset by a reduction in amortization as a result of the expiration of the lives of intangibles acquired in prior periods.Other operating (income) expense, net. The following table sets forth the components of other operating (income) expense, net:Other operating income, net of expenses, was $1.8 million in 2018, up $0.2 million from $1.7 million in 2017. We recorded a gain of $7.3 million in other operating income in 2017, primarily due to a gain on the sale of certain real property and as a result of the reversal of certain provisions, compared to a gain of $0.5 million in 2018. We also recorded a gain of $3.7 million in 2017 due to changes in the fair value of earn-out consideration payable in connection with certain acquisitions, compared to a gain of $5.7 million in 2018. Additionally, we recorded a $4.3 million charge in 2018 compared to a $9.3 million charge in 2017 relating to certain computer software and technology-related intangible assets, whichcharge we discuss inpurposes. 9—24—“Property, plant and equipment, net” and Note 10—“Goodwill and intangible assets” Segment reporting” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”decreasedincreased from 12.1%11.8% in 20172020 to 11.6%12.7% in 2018.2021. Income from operations was $348.2$509.0 million in 2021, up 5.1%16.0%, or $16.9$70.3 million, from $331.3$438.7 million in 2017.$15.2$12.7 million in 2018,2021, compared to a $2.0$7.5 million gain in 2017.2020. The gaingains in 20182021 resulted primarily from the depreciation of the Indian rupee against the U.S. dollar.dollar and gains from fair value hedges. The gaingains in 20172020 resulted primarily from the appreciationdepreciation of the euro and Australian dollarIndian rupee against the U.S. dollar.The following table sets forth the componentsOur interest expense (net of interest income (expense), net:Our net interest expenseincome) was $37.1$51.4 million in 2018,2021, up $5.4$2.4 million from $31.7$49.0 million in 2017,2020, primarily due to an $8.6a $2.0 million increase in interest expense related to our $350 million aggregate principal amount of 1.750% senior notes issued in March 2021. This increase was partially offset by a $3.2 million increase in interest income. The increase in interest expense is primarily due to (i) $3.2 million increase in interestlower outstanding amount on the senior notes we issued in March 2017, (ii) an increase in LIBOR, resulting in higher interest expense on theour term loan, underlower drawdown of our LIBOR-linkedrevolving credit facility and a lower average London Interbank Offered Rate ("LIBOR")-based rate on our revolving credit facility and term loan, partially offset by gainshigher losses on interest rate swaps in 20182021 compared to losses in 2017,2020, which we discuss in the section titled “Liquidity and Capital Resources—Financial Condition” below, and (iii) higher drawdown on our revolving credit facility in 2018 compared to 2017.below. Our interest income increaseddecreased by $3.2$0.4 million in 20182021 compared to 2017,2020, primarily due to higher account balanceslower interest income in India where we earn higher interest rates on our deposits than in other jurisdictions where we have deposits.2021 compared to 2020. The weighted average rate of interest on our debt, including the net impact of interest rate swaps, increaseddecreased from 2.8%3.0% in 20172020 to 3.2%2.9% in 2018.The following table sets forth the components ofOur other income (expense), net:Our net(net of expense) was $12.9 million in 2021, up $9.7 million from $3.2 million in 2020. The increase in other income was $35.8 millionprimarily attributable to export subsidies received in 2018, up $12.2 million from $23.6 millionIndia, settlement of certain pre-GE divestiture related tax liabilities for which we were indemnified by GE, and higher gains on the fair value of assets in 2017. This increase is primarily due to the recording of higher incomeour deferred compensation plan in connection with an export subsidy in 20182021 compared to 2017. This subsidy was introduced under the Foreign Trade Policy of India to encourage the export of specified services from India and is currently available for eligible export services through March 31, 2019. In 2017, we recorded a loss of $5.2 million on the divestiture of a non-strategic portion of our legacy IT support business in Europe. No such loss was recorded in 2018.Equity-method investment activity, net. Equity-method investment activity, net in 2017 primarily represents our share of loss in a non-consolidated affiliate that we divested on June 30, 2017.$59.7$92.2 million in 20172020 to $80.8$113.7 million in 2018 due to higher pre-tax income and an increase in our2021. Our effective tax rate, or ETR. Our ETR, was 22.3%23.5% in 2018,2021, up from 18.5%23.0% in 2017.2020. The increase in our ETR is primarily due to recordingcertain discrete items recorded in 2021, partially offset by interest received on income tax refunds during 2021.increase inacquisition is consummated, (iv) foreign exchange (gain)/loss, (v) restructuring expenses, (vi) interest (income) expense, and (vii) income tax expense, as a result of an internal restructuring, certain special economic zone units in India becoming partially taxable, and a change in the jurisdictional mix ofwe believe that our income, offset by the tax benefits recorded on employment-related tax deductions in India and the impact of certain provisions under the U.S. Tax Cut and Jobs Act (the “Tax Act”).Net income attributable to redeemable non-controlling interest. Non-controlling interest primarily refers to the loss associated with the redeemable non-controlling interest in the operations of SSE, in which we acquired a controlling interest in 2016. We purchased the remaining share of the outstanding equity interest in SSE in the first quarter of 2018. Seeresults after taking into account these adjustments more accurately reflect our ongoing operations. For additional information, see Note 3—24—“Business acquisitions and divestiture” Segment reporting” Net income attributable to Genpact Limited common shareholders. As a result offoregoing factors, net income attributable to our common shareholders as a percentage of net revenues decreased from 9.6% in 2017 to 9.4% in 2018. Net income attributable to our common shareholders increased by $18.9 million from $263.1 million in 2017 to $282.0 million in 2018. the Fiscal Year Ended December 31, 2016Net revenues. Our net revenues were $2,736.9 million in 2017, up $166.2 million, or 6.5%, from $2,570.8 million in 2016. The growth in our net revenues was primarily driven by an increase in BPO services – including our transformation services – delivered to our Global Clients, and incremental revenue from acquisitions. Adjusted for foreign exchange, primarily the impact of changes in the values of the U.K. pound sterling, euroCOVID-19 pandemic on our then current and Australian dollar against the U.S. dollar, our netexpected revenues, grew 7% compared to 2016. We provide information about our revenue growth onwe recorded a constant currency basis so that our revenue may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating period-to-period comparisons of our business performance. Total net revenue growth on a constant currency basis is calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates and hedging gains/losses.Our average headcount increased to approximately 75,500 in 2017 from approximately 74,600 in 2016.Net revenues from Global Clients in 2017 were $2,467.7 up $254.8 million, or 11.5%, from $2,212.9 million in 2016. This increase wasrestructuring charge primarily driven by growth in several verticals, including banking and financial services, consumer product goods, life sciences, insurance and high tech. As a percentage of total net revenues, net revenues from Global Clients increased from 86.1% in 2016 to 90.2% in 2017.Net revenues from GE in 2017 were $269.2 million, down $88.7 million, or 24.8%, from 2016. The decline in net revenues from GE was largely due to GE’s dispositions of GE Capital businesses in 2016. Prior to 2016, we reclassified revenues from GE-divested businesses as Global Client revenues in each fiscal quarter beginning on the dates of divestiture. However, beginning with 2016, we reclassify such revenue as Global Client revenue only at the end of each fiscal year. We believe that this change allows us to provide a more consistent view of quarterly trends underlying our Global Client and GE businesses.After reclassifying $69.7 million of revenues from businesses that GE divested in 2016, our 2016 revenues from Global Clients and GE were $2,212.9 million and $357.9 million, respectively. Duerelated to the sustained growth in our net revenuesabandonment of leased office premises and employee severance charges. This restructuring charge was excluded from Global Clients, net revenues from GE now comprise less than 10% of our total net revenues. Net revenues from GE declined as a percentage of our total net revenues from 13.9% in 2016 to 9.8% in 2017. If all 2016 revenue reclassifications had occurred on January 1, 2016, revenue from GE would have decreased 18.7%AOI during the year over year. If GE pursues further divestitures of businesses we serve, we expect that our revenues from GE will continue to be volatile inended December 31, future. See Item 1A—“Risk Factors—GE accounts for a significant portion of our revenues and any material loss of business from, or change in our relationship with, GE or GE’s businesses could have a material adverse effect on our business, results of operations and financial condition.”Net revenues from BPO services in 2017 were $2,264.3 million, up $180.9 million, or 8.7%, from $2,083.4 million in 2016. This increase is primarily attributable to an increase in services delivered to our Global Clients, particularly finance and accounting services, core industry vertical operations services andtransformation services. Net revenues from IT services were $472.6 million in 2017, down $14.7 million, or 3.0%, from $487.3 million in 2016 due to a decline in IT services engagements for Global Clients in the investment banking and healthcare industries.Net revenues from BPO services as a percentage of total net revenues increased to 82.7% in 2017 from 81.0% in 2016 with a corresponding decline in the percentage of total net revenues attributable to IT services.Cost of revenue and gross marginyear ended December 31, The following table sets forth the components of our cost of revenue and the resulting gross margin:Cost of revenue was $1,681.4 million in 2017, up $127.1 million, or 8.2%, from 2016. Incremental expenses from acquisitions, wage inflation, increases in our operational headcount, an increase in the number of onshore personnel, and higher stock-based compensation expense to support growth in 2017 compared to 2016 contributed to the increase in cost of revenue. These increases were partially offset by improved operational efficiencies, a decrease in IT and travel expenses, and the favorable impact of foreign exchange on our expenditures in certain currencies, primarily the Indian rupee and U.K. pound sterling. Fluctuations in foreign exchange rates result in gains and losses on our foreign currency hedges and a translation impact when we convert our non-U.S. dollar income statement items to the U.S. dollar, our reporting currency.Our gross margin decreased from 39.5% in 2016 to 38.6% in 2017 primarily due to the factors described above.Personnel expenses. Personnel expenses as a percentage of total net revenues increased marginally from 41.3% in 2016 to 42.1% in 2017. Personnel expenses were $1,153.5 million, up $92.3 million, or 8.7%, from $1,061.1 million in 2016. The impact of wage inflation, higher stock-based compensation expense, incremental expenses from acquisitions and an approximately 2,500-person, or 4.0%, increase in our operational headcount resulted in higher personnel expenses in 2017 compared to 2016. These increases were partially offset by the favorable impact of foreign exchange and improved operational efficiencies.Operational expenses. Operational expenses as a percentage of total net revenues increased from 17.4% in 2016 to 17.6% in 2017. Operational expenses were $481.0 million, up $34.1 million, or 7.6%, from 2016 primarily due to incremental expenses from acquisitions. The increase in operational expenses was partially offset by improved operational efficiencies, lower travel and IT expenses and the favorable impact of foreign exchange.Depreciation and amortization expenses. Depreciation and amortization expenses as a percentage of total net revenues were 1.7%, compared to 1.8% in 2016. Depreciation and amortization expenses as a component of cost of revenue were $46.9 million, up $0.66 million, or 1.4%, from 2016. This marginal increase was primarily due to the expansion of certain existing facilities in India, partially offset by the favorable impact of foreign exchange.Selling, general and administrative expenses. The following table sets forth the components of our selling, general and administrative, or SG&A, expenses:SG&A expenses as a percentage of total net revenues decreased from 25.4% in 2016 to 25.2% in 2017. SG&A expenses were $689.5 million, up $36.5 million, or 5.6%, from 2016. Incremental expenses from acquisitions, higher personnel expenses, higher stock-based compensation expenses, an increase in fees paid for professional services to support growth, and an increase in marketing expenditures related to a branding update all contributed to higher SG&A expenses in 2017 compared to 2016. These increases were partially offset by lower travel expenses and the favorable impact of foreign exchange on our expenditures in certain currencies, primarily the Indian rupee and U.K. pound sterling. Our sales and marketing expenses as a percentage of total net revenues in 2017 decreased marginally compared to 2016.Personnel expenses. Personnel expenses as a percentage of total net revenues were 18.3% in 2017, unchanged from 2016. Personnel expenses as a component of SG&A expenses were $501.1 million, up $31.2 million, or 6.6%, from 2016. Wage inflation, incremental expenses from acquisitions and higher stock-based compensation expenses resulted in higher personnel costs as a component of SG&A expenses in 2017 compared to 2016. These increases were partially offset by the favorable impact of foreign exchange.Operational expenses. Operational expenses as a component of SG&A expenses were $178.6 million, up $4.5 million, or 2.6%, compared to 2016. This increase is primarily due to incremental expenses from acquisitions, a higher reserve for doubtful receivables, incremental expenses from acquisitions, an increase in fees paid for professional services and an increase in marketing expenditures related to a branding update. These increases were partially offset by lower travel expenses and favorable foreign exchange. Operational expenses as a percentage of total net revenues decreased marginally from 6.8% in 2016 to 6.5% in 2017.Depreciation and amortization. Depreciation and amortization expenses as a percentage of total net revenues were 0.4% in 2017, unchanged from 2016. Depreciation and amortization expenses as a component of SG&A expenses were $9.8 million, up $0.8 million, or 9.1%, from 2016.Amortization of acquired intangibles. Non-cash charges on account of the amortization of acquired intangibles were $36.4 million in 2017, up $9.2 million, or 34%, from 2016. This increase is primarily due to the amortization of intangibles acquired during 2017.Other operating (income) expense, net. The following table sets forth the components of other operating (income) expense, net:Other operating income, net of expenses, was $1.7 million in 2017, down $3.3 million from $4.9 million in 2016. This decrease was primarily due to a $3.7 million gain in 2017 compared to a $14.9 million gain in 2016 due to changes in the fair value of earn-out consideration payable in connection with certain acquisitions. We also recorded $7.3 million in other operating income in 2017, primarily due to a gain on the sale of rights to certain real property and as a result of the reversal of certain liabilities, compared to $1.3 million in other operating income in 2016. Additionally, we recorded a $9.3 million write-down of intangible assets in 2017, compared to an $11.2 million write-down of a software intangible asset in 2016, which are discussed inFor additional information, see Note 10—28—“Goodwill and intangible assets” Restructuring” Schedules” for additional information.Income from operations. As a resultSchedules.”the foregoing factors, income from operations as a percentage of total net revenues decreased from 13.3% in 2016 to 12.1% in 2017. Income from operations was $331.3 million, down $9.9 million from $341.2 million in 2016.Foreign exchange gains (losses), net. We recorded a net foreign exchange gain of $2.0 million in 2017, compared to a $2.6 million gain in 2016, primarily dueAOI to the re-measurement of non-functional currency assetsmost directly comparable GAAP measure for the years ended December 31, 2020 and liabilities and related foreign exchange contracts. The gain in 2017 resulted primarily from the appreciation of the euro and Australian dollar against the U.S. dollar, and the gain in 2016 resulted primarily from the depreciation of the Indian rupee and U.K. pound sterling against the U.S. dollar.Interest income (expense), net. 2021:Year ended December 31, 2020 2021 (dollars in millions) Net income $ 308.3 $ 369.4 Foreign exchange (gains) losses, net (7.5) (12.7) Interest (income) expense, net 49.0 51.4 Income tax expense 92.2 113.7 Stock-based compensation 74.0 82.0 Amortization and impairment of acquired intangible assets 43.6 57.6 Acquisition-related expenses 2.7 1.2 Restructuring expenses 26.5 — Adjusted income from operations $ 588.8 $ 662.7 componentsyears ended December 31, 2020 and 2021:Year ended December 31, Percentage change increase/ (decrease) 2021 vs. 2020 2020 2021 (dollars in millions) BCMI $ 132.9 $ 126.9 (4.5) % CGRLH 197.2 250.8 27.2 % HMS 244.2 272.8 11.7 % Others 14.5 12.2 (15.9) % interest income (expense), net:Our net interest expense was $31.7our BCMI segment decreased to $126.9 million in 2017, up $15.6 million2021 from $16.2$132.9 million in 2016,2020, largely as a result of the impact of restructuring a contract with a large client in our banking and capital markets vertical during the fourth quarter of 2020, partially offset by higher revenues in our insurance vertical. AOI of our CGRLH segment increased to $250.8 million in 2021 from $197.2 million in 2020, primarily driven by higher revenues in both our transformation services and intelligent operations, including revenue from Enquero and SomethingDigital.Com LLC acquired in the fourth quarter of 2020, partially offset by increased hiring costs related to new deals and higher medical costs.a $16.5 million increaseincreased leverage driven by revenue growth from Global Clients in interest expenseour HMS segment, which also included revenue from Enquero acquired in 2017 compared to 2016. The $16.5 million increase in interest expense is primarily due to (i) $9.9 million in interest on the senior notes we issued in March 2017, (ii) an increase in LIBOR, resulting infourth quarter of 2020, and higher interest expense on the term loan under ourLIBOR-linked credit facility,utilization of resources, partially offset by gains on interest rate swapshigher medical costs and lower revenues from GE in 2017 comparedour manufacturing and services vertical due to 2016, which we discusscommitted productivity and a reduction in GE’s discretionary expenditures resulting from the macroeconomic environment. AOI for “Others” in the section titled “Liquidity and Capital Resources—Financial Condition” below, and (iii) higher drawdown on our revolving credit facility in 2017 compared to 2016. Our interest income increased by $0.9 million in 2017 compared to 2016, primarily due to higher average account balances in India, where we earn higher interest rates on our deposits than in other jurisdictions where we have deposits. The weighted average rate of interest on our indebtedness increased from 2.2% in 2016 to 2.8% in 2017.Other income (expense), net. The following table sets forth the components of other income (expense), net:Our net other income was $23.6 million in 2017, up $13.9 million from $9.7 million in 2016. This increase is primarily due to a subsidy received by one of our subsidiaries in India in 2017, partially offset by a $5.7 million provision for an expected loss on the divestiture of a non-strategic portion of our legacy IT support business in Europe in 2017 and a $5.2 million gain on the divestiture of our cloud-hosted technology platform for the rural banking sector in India in 2016.Equity-method investment activity, net. Equity-method investment activity, net in 2017above primarily represents our $4.5 million sharethe impact of loss, compared to our $7.7 million shareforeign exchange fluctuations, adjustment of loss in 2016, in a former non-consolidated affiliate that ceased to be a non-consolidating affiliate in June 2017.Income tax expense. Our income tax expense decreased marginally from $62.1 million in 2016 to $59.7 million in 2017 due to lower pre-tax income. Our effective tax rate,allowances for credit losses and over- or ETR, was 18.5% in 2017, marginally down from 18.7% in 2016. The decrease in our ETR is primarily due to certain discrete items, including the reversalunder-absorption of a valuation allowance and a change in the jurisdictional mixoverheads, none of our income, which was largely offset by the partial expiration of tax holidays applicable to certain of our SEZ units in India.Net income attributable to redeemable non-controlling interest. Redeemable non-controlling interest primarily refers to the loss associated with the non-controlling interest in the operations of SSE, in which we acquired a controlling interest in 2016 and which is discussed inallocated to any individual segment for management's internal reporting purposes. See Note 3—24—“Business acquisitions and divestiture”Segment reporting” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” for additional information.Net income attributable to Genpact Limited common shareholders. As a result of the foregoing factors, net income attributable to our common shareholders as a percentage of net revenues decreased from 10.5% in 2016 to 9.6% in 2017. Net income attributable to our common shareholders decreased by $6.6 million from $269.7 million in 2016 to $263.1 million in 2017.IT projects, transformation services, analytics and analytics servicesIT projects increases in the fourth quarter as our clients utilize the balance of their budgets for the year. In addition, contracts for long-term IT Services and BPOintelligent operations engagements are often signed in the first and second quarters as clients begin new budget cycles. Volumes under such contracts then increase in the latter part of the year as engagements ramp up. Additionally, demand for certain services, such as collections and transaction processing, is often greater in the second half of the year as our clients’ volumes in such areas increase.The tables in Note 31—“Quarterly financial data” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” present unaudited quarterly financial information for each of our last eight fiscal quarters on a historical basis. We believe the quarterly information set forth therein contains all adjustments necessary to fairly present such information. The comparison of our results for the first quarter of 2018 with the fourth quarter of 2017 reflects the seasonal trends described above. The results for any interim period are not necessarily indicative of the results that may be expected for the full year.201820182021 compared to December 31, 2017:2020:increaseddecreased by $125.0$250.0 millionOurincreased, primarily as a resultusing the proceeds of the drawdownissuance of $125.0 million (net of repayments) on our revolving credit facility to meet short-term internal funding requirements.1.750% senior notes in a registered offering in 2021. See Note 15—“Short-term borrowings” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” for additional information.increaseddecreased by $29.3$41.7 millionincreasedecrease in prepaid expenses, other current assets, contract cost assets and prepaid expensesother assets is primarily due to the capitalizationlower tax payments and higher tax refunds received, recovery of certain sales incentives as contract cost assetsa deal bonus and severance costs as a result of our adoptionthe impact of ASC 606. Refer torestructuring a client contract, and a reduction in finance lease right-of-use assets. The decrease was partially offset by higher deferred billings, and an increase in contract cost assets. See Note 3—25—“Summary of significant accounting policies” and Note 27— “ContractNet revenues—Contract balances” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” for additional information. The balance of the increase is primarily the result of an export subsidy expected to be received by one of our subsidiaries in India and prepaid expenses mainly related to IT licenses and employee group insurance, partially offset by lower client acquisition costs, the impact of mark-to-market gains on derivative financial instruments and fluctuations in foreign exchange, primarily the depreciation of the Indian rupee against the U.S. dollar.$81.1$6.7 million2018, partially2021, offset by an improvement in ourimproved days sales outstanding.increaseddecreased by $102.2$31.8 million$56.7$35.3 million, primarily due to goodwill arising outthe acquisition of our 2018 acquisitions, and wasHoodoo Digital, LLC in the fourth quarter of 2021, partially offset by the impact of foreign exchange rate fluctuations. Our intangible assets increaseddecreased by $45.5$67.1 million primarily due an increase in intangible assets under developmentto amortization and intangible assets arising out of our 2018 acquisitions, partiallyimpairment expenses, offset by amortization expenses and the write-down in 2018acquisition of a group of assets including computer software and technology-related intangible assets.Hoodoo Digital, LLC. See Note 10—“Goodwill and intangible assets, net”assets” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”$11.0$2.5 millionhigheran increase in expense and employee related accruals, partially offset by the payment of statutory liabilities (payroll taxes) that were deferred in 2020 as permitted by the Coronavirus Aid, Relief and Economic Security Act, and lower mark-to-market losses on derivative financial instruments, accounts payable and employee-related accrualsinstruments.2018, partiallylong-term debt is due to the issuance of $350 million aggregate principal amount of 1.750% senior notes in a registered offering in 2021, offset by the impactprincipal repayments of fluctuations in foreign exchange, primarily the depreciation of the Indian rupee against the U.S. dollar.
$34.0 million on our term loan.In August 2018, we amended our existing credit facility through a new credit facility. As a result of the amendment, we extinguished the outstanding term loan under the prior facility of $129.2 million and obtained additional funding of $129.2 million, resulting in no change to the outstanding principal of the term loan under the amended facility. For additional information, see Note 14—“Long-term debt” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” We also made principal repayments totaling $37.0 million on our long-term debt in 2018.$1.1$2.8 million$1.1$2.8 million. See Note 25—23—“Income taxes” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”20172020 and 20182021 is presented below:As of December 31, As of December 31, Percentage Change
increase/(decrease)2020 2021 2021 vs. 2020 (dollars in millions) Cash and cash equivalents $ 680.4 $ 899.5 32.2 % Short-term borrowings 250.0 — (100.0) % Long-term debt due within one year 33.5 383.4 NM* Long-term debt other than the current portion 1,307.4 1,272.5 (2.7) % Genpact Limited total shareholders’ equity $ 1,834.2 $ 1,897.1 3.4 % 2018, $363.62021, $875.9 million of our $368.4$899.5 million in cash and cash equivalents was held by our foreign (non-Bermuda) subsidiaries. $131.6$3.5 million of this cash is held by foreign subsidiaries for which we expect to incur and have accrued a deferred tax liability on the repatriation of $25.0$9.6 million of retained earnings. $232.0$872.4 million of the cash and cash equivalents is either held as retained earnings by foreign subsidiaries in jurisdictions where no tax is expected to be imposed upon repatriation of retained earnings or is being indefinitely reinvested.2017,2020, our board of directors approved a dividend program under which we paid a regular15% increase in our quarterly cash dividend of $0.06 from $0.085 per common share to holders of our$0.0975 per common shares,share, representing an annual dividend of $0.24$0.39 per common share for 2020, up from $0.34 per share in 2017.2019. On each of March 28, 2017,18, 2020, June 28, 2017,26, 2020, September 21, 201723, 2020 and December 20, 2017,23, 2020, we paid dividends of $0.06$0.0975 per share, amounting to $12.0$18.5 million, $11.6$18.6 million, $11.6$18.6 million and $11.6$18.4 million in the aggregate, to shareholders of record as of March 9, 2020, June 11, 2020, September 11, 2020 and December 9, 2020, respectively.2017,2021, June 12, 2017,11, 2021, September 8, 201710, 2021, and December 8, 2017,10, 2021, respectively.2018,2022, our board of directors approved a 25%16% increase in our quarterly cash dividend to $0.075from $0.1075 per common share representing an annual dividend of $0.30 per common share. On each of March 21, 2018, June 20, 2018, September 19, 2018 and December 19, 2018, we paid dividends of $0.075 per share, amounting to $14.4 million, $14.2 million, $14.3 million and $14.2 million in the aggregate, to shareholders of record as of March 9, 2018, June 8, 2018, September 10, 2018 and December 10, 2018, respectively.In February 2019, our board of directors approved an approximately 13% increase in our quarterly cash dividend to $0.085$0.125 per common share, representing a planned annual dividend of $0.34$0.50 per common share for 2019.2022, up from $0.43 per share in 2021. Any future dividends will be at the discretion of theour board of directors and subject to Bermuda and other applicable laws.As of December 31, 2016, our board of directors had authorized repurchases of up to $750.0 million in value of our common shares under our share repurchase program first announced in February 2015. On February 10, 2017, our board of directors approved up to an additional $500.0 million in share repurchases, bringing theto $1,250.0 million.is $1,750.0 million, of which $338.9 million remained available as of December 31, 2021. Since the date our share repurchase program was initially authorized in 2015, we have repurchased 29,538,14047,387,077 of our common shares at ana weighted average price of $25.25$29.78 per share.On March 29,share, for an aggregate purchase price of $1,411.1 million. we entered into an accelerated share repurchase or ASR, agreement with Morgan Stanley & Co. LLC to repurchase an aggregate of $200.0 million of our common shares. We received an initial delivery of 6,578,947 common shares on March 30, 2017, an additional delivery of 350,006 common shares on December 29, 2017 and a final delivery of 163,975 common shares on January 17, 2018 upon final settlement of the transaction. program.20182020 and December 31, 2017,2021, we also purchased 4,921,192 repurchased 3,412,293 and 808,2936,577,562 of our common shares, respectively, on the open market at a weighted average price of $31.30$40.16 and $24.48 $45.32per share, respectively, for an aggregate cash amountpurchase price of $154.1$137.0 million and $19.8$298.1 million, respectively.infor the next twelve months and the foreseeable future our cash from operations, cash reserves and debt capacity will be sufficient to finance our operations, our growth and expansion plans, dividend payments and additional share repurchases we may make under our share repurchase program. However, there is no assurance that the impacts we have experienced to date, and any future impact we may experience, from the COVID-19 pandemic will not have an adverse effect on our cash flows. In addition, we may raise additional funds through public or private debt or equity financings. Our working capital needs are primarily to finance our payroll and other administrative and information technology expenses in advance of the receipt of accounts receivable. Our primary capital requirements include opening new delivery centers, expanding relatedexisting operations to support our growth, and financing acquisitions, and enhancing capabilities.Year ended December 31, Percentage change increase/ (decrease) 2021 vs. 2020 2020 2021 (dollars in millions) Net cash provided by (used for) Operating activities $ 584.3 $ 694.3 18.8 % Investing activities (266.4) (122.7) (53.9) % Financing activities (92.0) (332.9) 261.8 % Net increase in cash and cash equivalents Net increase in cash and cash equivalents $ 225.9 $ 238.7 5.7 % $339.5$694.3 million in 2018,2021, compared to $359.1$584.3 million in 2017.2020. This decrease isincrease was primarily due to a $78.7(i) $61.2 million increase in net changeincome in our2021 compared to 2020, and (ii) a $70.8 million benefit due to a decrease in net operating assets driven by lower tax payments and higher tax refunds received in 2021 compared to 2020, higher expense accruals, and a reduction in customer acquisition costs in 2021 compared to 2020, partially offset by higher payments toward statutory liabilities (payroll taxes) that were deferred in 2020 as permitted by the Coronavirus Aid, Relief and Economic Security Act, and higher investments in accounts receivable in 2021 compared to 2020. The increase was offset by a $22.0 million decrease in non-cash expenses, primarily due to lower write-downs of operating lease right-of-use assets, intangible assets and property, plant and equipment, and a lower unrealized loss on the revaluation of foreign currency assets and liabilities in 20182021 compared to 2017, mainly driven by an increase in accounts receivable due to higher revenues in 2018, higher interest and tax payments, and receivables recorded in 2018 in connection with an export subsidy which will be realized in the future,2020, partially offset by higher net income.$276.1$122.7 million in 2018, down $85.9 million from $362.02021, compared to $266.4 million in 2017. We made2020. This change is primarily due to payments of $111.6 million in the aggregate related to acquisitions completedthat were $114.6 million lower in 2018 compared to2021 than in 2020, and payments of $284.8 million in 2017. Payments for acquired/internally generated intangible assets and purchases of property, plant and equipment (net of salessale proceeds) and acquired/internally generated intangible assets that were $87.8$28.9 million higherlower in 20182021 than in 2017. This increase includes an advance paid to acquire certain software platforms to be used for client service delivery.2020.$135.2$332.9 million in 2018,2021, compared to net cash generated from financing activities of $47.2$92.0 million in 2017. In March 2017, we issued $350.02020. This change was primarily due to (i) higher payments for share repurchases (including expenses related to repurchases) amounting to $298.2 million aggregate principal amount of 3.70% senior notes in a private offering. We made principal repayments totaling $37.0 million on our long-term debt in 20182021 compared to $40.0$137.1 million in 2017. We received2020, (ii) higher dividend payments in 2021, amounting to $80.5 million compared to $74.2 million in 2020, and (iii) an $80.0 million reduction in proceeds from short-term borrowings (net of $250.0 million and $295.0 millionrepayment) in 2018 and 2017, respectively. Of the short-term borrowings, we also repaid $125.0 million and $285.0 million in 2018 and 2017, respectively. For additional information, see Notes 14 —“Long-term debt” and 15 —“Short-term borrowings”2021 compared to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” Additionally, payments in connection with2020, partially offset by proceeds from the issuance of common shares under our stock-based compensation plans, (net of proceeds) were $1.9amounting to $35.1 million in 20182021 compared to net proceeds of $5.2$25.1 million in 2017. Payments related to earn-out or deferred consideration were $2.9 million lower in 2018 than in 2017. In 2018, we paid cash dividends in an aggregate amount of $57.1 million compared to $46.7 million in 2017. Payments for share repurchases (including related expenses) were $154.2 million in 2018 compared to $219.8 million in 2017. In August 2018, we amended our existing credit facility through a new credit facility. As a result of the amendment, we paid $4.3 million in expenses, extinguished $129.2 million of the outstanding term loan under the 2015 Facility and obtained additional funding of $129.2 million from a different lender, resulting in no change to the outstanding principal of the term loan under the amended facility. For additional information, see Note 14—“Long-term debt” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”Facility)In June 2015, we refinanced our 2012 credit facility through a new credit facility comprised of a term loan of $800 million and a revolving credit facility of $350 million, or the 2015 Facility.In August 2018, we amended the 2015 Facility. The amended facility is comprised of a $680.0 million term loan, which represents the outstanding balance under the 2015 facility as of the date of amendment, and a $500.0 million revolving credit facility. The amended facility expires on August 8, 2023. The amendment did not result in a substantial modification of $550.8 million of the outstanding term loan under the 2015 Facility. Further, as a result of the amendment, we extinguished $129.2 million of the outstanding term loan under the 2015 Facility and obtained additional funding of $129.2 million from a different lender, resulting in no change to the outstanding principal of the term loan under the amended facility. In connection with the amendment, we expensed $2.0 million, representing partial acceleration of the amortization of the existing unamortized debt issuance costs and an additional fee paid to our lenders related to the term loan.theour revolving facility increased from $350.0is $500.0 million, to $500.0 million.which we obtained through an amendment of our existing credit agreement on August 9, 2018. The remaining unamortized costs and an additional third party fee paid in connection with the amendment will beis being amortized over the term of the amended facility, which expires on August 8, 2023. For additional information, see Note 14—“Long-term debt” and Note 15—“Short-term borrowings” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”compared to a margin of 1.50% under the 2015 facility, or a base rate plus an applicable margin equal to 0.375% per annum, compared to a margin of 0.50% under the 2015 facility, in each case subject to adjustment based on our creditdebt ratings assignedprovided by Standard & Poor’s Rating Services and Moody’s Investors Service, Inc. Based on our election and current credit rating, the applicable interest rate is equal to LIBOR plus 1.375% per annum. The unutilized amount on the revolving facility bore a commitment fee of 0.20% per annum. The amended credit agreement restricts certain payments, including dividend payments, if there is an event of default under the credit agreement or if we are not, or after making the payment would not be, in compliance with certain financial covenants contained in the amended credit agreement. These covenants require us to maintain a net debt to EBITDA leverage ratio of below 3x and an interest coverage ratio of more than 3x. During the year ended December 31, 2021, we are in compliance with the terms of the credit agreement, including all of the financial covenants therein. Our retained earnings are not subject to any restrictions on availability to make dividend payments to shareholders, subject to compliance with the financial covenants described above that are contained in the amended credit agreement.20172020 and December 31, 2018,2021, our outstanding term loan, net of debt amortization expense of $1.8$1.2 million and $2.2$0.7 million, respectively, was $698.2$593.9 million and $660.8$560.3 million, respectively.20172020 and December 31, 2018,2021, the limitslimit available under such facilities were $15.1was $14.3 million and $14.3$24.7 million, respectively, of which $7.9$7.8 million and $7.4$5.8 million, respectively, was utilized, constituting non-funded drawdown. As of December 31, 20172020 and December 31, 2018,2021, a total of $171.0$252.3 million and $297.1,$2.0 million, respectively, of our revolving credit facility was utilized, of which $170.0$250.0 million and $295.0$0 million,$1.0$2.3 million and $2.1$2.0 million, respectively, constituted non-funded drawdown.2018,2021, we were party to interest rate swaps covering a total notional amount of $507.4$460.1 million. Under our swap agreements, the rate that we pay to banks in exchange for LIBOR ranges between 0.88%0.38% and 2.65%.In March 2017, we$350.0$350 million aggregate principal amount of 3.70% senior notes in March 2017 (the “2017 Senior Notes”) and $400 million aggregate principal amount of 3.375% senior notes in November 2019 (the “2019 Senior Notes”). The 2017 Senior Notes and the 2019 Senior Notes are fully guaranteed by the Company and Genpact USA, Inc. ("Genpact USA"), a private offering, resulting in cash proceedswholly-owned subsidiary of approximately $348.5 million and an underwriting fee of approximately $1.5 million. In addition, there were other debt issuance related costs of $1.2 million.the Company. The total debt issuance cost of $2.6 million and $2.9 million incurred in connection with the offering of2017 Senior Notes and the notes is2019 Senior Notes offerings, respectively, are being amortized over the liferespective lives of the notes as additional interest expense. As of December 31, 20172020 and December 31, 2018,2021, the amount outstanding under the notes,2017 Senior Notes, net of debt amortization expense of $2.2$0.7 million and $1.7$0.1 million, respectively, was $347.8$349.3 million and 348.3$349.9 million, respectively, which is payable on April 1, 2022 when2022. As of December 31, 2020 and 2021, the amount outstanding under the 2019 Senior Notes, net of debt amortization expense of $2.3 million and $1.7 million, was $397.7 million and $398.3 million, respectively, which is payable on December 1, 2024.mature. In(the "2021 Senior Notes"), resulting in cash proceeds of approximately $348.1 million, net of an underwriting commission of $1.4 million and a discount of $0.5 million. Other debt issuance costs incurred in connection with the offering we entered into a registration rights agreementof the 2021 Senior Notes amounted to $1.1 million. The 2021 Senior Notes are fully guaranteed by the Company. The total debt issuance cost of $3.0 million incurred in connection with the initial purchasers2021 Senior Notes offerings is being amortized over the lives of the outstanding unregistered notes pursuant to which we agreed to complete an exchange offer within 455 days after the date of the private offering upon terms identical in all material respects to the terms of the outstanding unregistered notes, except that the transfer restrictions, registration rights andas additional interest provisions applicable toexpense. As of December 31, 2021, the amount outstanding unregistered notes would not apply to the exchange notes. On July 24, 2018, the unregistered notes exchange offer was completed and all outstanding unregistered notes were exchanged for freely tradable notes registered under the Securities Act2021 Senior Notes, net of 1933, as amended. debt amortization expense of $2.6 million, was $347.4 million, which is payable on April 10, 2026.14 and 15—14—“Long-term debt” and “Short-term15—“Short-term borrowings” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”ASU 2011-08, the Company hasASC 350, Intangibles-Goodwill and Other, we have an option to perform an assessment of qualitative factors, such asincluding but not limited to macro-economic conditions, industry and market considerations, overall financial performance, business plans and expected future cash flows, to determine whether events or circumstances exist which lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.ASU 2011-08,ASC 350, we concluded that as of December 31, 20182020 and December 31, 2017,2021, the fair values of all of our reporting units are likely to be higher than their respective carrying values.contracts and certain operating leases.contracts. For additional information, see Item 1A—“Risk Factors—Currency exchange rate fluctuations in various currencies in which we do business, especially the Indian rupee, the euro and the U.S. dollar, could have a material adverse effect on our business, results of operations and financial condition,” the section titled “Contractual Obligations” below,condition" and Note 7—“Derivative financial instruments” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”The following table sets forthtotal future contractual obligations asconsolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”2018:
2021, the outstanding balance for each of the 2017 Senior Notes, the 2019 Senior Notes and the 2021 Senior Notes (collectively, the "Senior Notes") was $349.9 million, $398.3 million and $347.4 million, respectively. Each series of Senior Notes is fully and unconditionally guaranteed by the Company. The 2017 Senior Notes and the 2019 Senior Notes are also fully and unconditionally guaranteed by Genpact USA. Our other subsidiaries do not guarantee the Senior Notes (such subsidiaries are referred to as the “non-Guarantors”).*Our interest payments on long-term debt are calculated based on our current debt rating at a rate equal to LIBOR plus a margin of 1.375% per annum as of December 31, 2018, which excludes the impact of interest rate swaps. Interest payments on long-term debt also include interest on our senior notes due in 2022 at a rate of 3.70% per annum, which is not based on LIBOR.
The Company (with respect to all series of Senior Notes) and Genpact USA (with respect to the 2017 Senior Notes and the 2019 Senior Notes) have fully and unconditionally guaranteed (i) that the payment of the principal, premium, if any, and interest on the Senior Notes shall be promptly paid in full when due, whether at stated maturity of the Senior Notes, by acceleration, redemption or otherwise, and that the payment of interest on the overdue principal and interest on the Senior Notes, if any, if lawful, and all other obligations of the applicable issuer or issuers of the Senior Notes, respectively, to the holders of the Senior Notes or the trustee under the Senior Notes shall be promptly paid in full or performed, and (ii) in case of any extension of time of payment or renewal of any Senior Notes or any of such other obligations, that the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. With respect to the 2017 Senior Notes and the 2019 Senior Notes, failing payment by Genpact Luxembourg when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Company and Genpact USA shall be obligated to pay the same immediately. With respect to the 2021 Senior Notes, failing payment by Genpact Luxembourg or Genpact USA when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Company shall be obligated to pay the same immediately. The Company and Genpact USA have agreed that the guarantees described above are guarantees of payment of the Senior Notes and not guarantees of collection.**Our interest payments on short-term debt are calculated based on our current debt rating at a rate equal to LIBOR plus a margin of 1.375% per annum as of December 31, 2018 and our expectation for the repayment of such debtSummarized Statements of Income Year ended
December 31, 2020Year ended
December 31, 2021(dollars in millions) Net revenues $ 206.5 $ 214.2 Gross profit 206.5 214.2 Net income 762.7 102.7 Year ended
December 31, 2020Year ended
December 31, 2021(dollars in millions) Royalty income $ 69.5 $ 4.4 Revenue from services 137.0 209.8 Interest income (expense), net 46.7 33.0 Other cost, net 11.2 17.7 Gain on sale of intellectual property 650.0 — Summarized Balance Sheets As of
December 31, 2020As of
December 31, 2021(dollars in millions) Assets Current assets $ 2,073.7 $ 2,257.8 Non-current assets 711.7 457.5 Liabilities Current liabilities $ 3,491.9 $ 3,758.5 Non-current liabilities 1,825.3 1,777.6 As of
December 31, 2020As of
December 31, 2021(dollars in millions) Assets Current assets Accounts receivable, net $ 280.8 $ 211.3 Loans receivable 1,324.5 1,535.5 Others 396.5 410.1 Non-current assets Investment in debentures/bonds $ 501.2 $ 296.1 Loans receivable — — Others 64.2 31.5 Liabilities Current liabilities Loans payable $ 2,357.9 $ 2,431.2 Others 823.4 914.0 Non-Current liabilities Loans payable $ 500.0 $ 500.0 Operations”—“Operations—Critical Accounting Policies and Estimates” in this Annual Report on Form 10-K.Recently issued accounting pronouncementsSchedules” in this Annual Report on Form 10-K.(approximately 76%(76% in fiscal 2018)2021) is received in U.S. dollars. We also receive revenues in Japanese yen, euros, U.K. pounds sterling, Australian dollars Chinese renminbi, and Indian rupees. Our expenses are primarily in Indian rupees and we also incur expenses in U.S. dollars, U.K. pounds sterling, Romanian lei, Chinese renminbi, euros and the currencies of the other countries in which we have operations. Our exchange rate risk arises2018,2021, and excluding any hedging arrangements that we had in place during that period, a 5.0%10.0% appreciation or depreciation of the Euroeuro against the U.S. dollar would have increased or decreased, as applicable, our revenues in fiscal 20182021 by approximately $5$12.0 million. Similarly, excluding any hedging arrangements that we had in place during that period, a 5.0%10.0% depreciation of the Indian rupee against the U.S. dollar would have decreased our expenses incurred and paid in Indian rupees in fiscal 20182021 by approximately $38$111.0 million. Conversely, a 5.0%10.0% appreciation of the Indian rupee against the U.S. dollar would have increased our expenses incurred and paid in rupees in fiscal 20182021 by approximately $42$91.0 million.IndiaRomania limit the duration and amount of such arrangements. We may not be able to purchase contracts adequate to insulate us from Indian rupee-U.S. dollar, and Chinese renminbi-Japanese yen, Chinese renminbi-U.S dollar, Philippine peso-U.S. dollar, and Romanian leu-euro foreign exchange currency risks. In addition, any such contracts may not perform adequately as hedging mechanisms. See Item 7—“7 —“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Foreign exchange gains (losses), net.”2018,2021, we had $1304.1$1,655.9 million of indebtedness, comprised of (a) $955.8$560.3 million of indebtednessindebtedness under our credit facility, comprised of a long-term loan of $660.8$561.0 million, net of $2.2$0.7 million in unamortized debt issuance expenses, and a revolving loan of $295 million, and (b) $348.3$349.9 million in indebtedness under our 3.70% senior notes issued in March 2017 Senior Notes, net of $0.1 million in unamortized bond issuance expenses, (c) $398.3 million in indebtedness under our 2019 Senior Notes, net of $1.7 million in unamortized bond issuance expenses, and (d) $347.4 million in indebtedness under our 2021 Senior Notes, net of $2.6 million in unamortized bond issuance expenses. Interest on indebtedness under our credit facility is variable based on LIBOR, and we are subject to market risk from changes in interest rates. Borrowings under our term loancredit facility bear interest at floating rates based on LIBOR, but in no event less than the floor rate of 0.0% plus an applicable margin. See Item 1A—"Risk Factors"—"We may be unable to service our debt or obtain additional financing on competitive terms.” Based on our indebtedness, as of December 31, 2018, a 1%2% change in interest rates, including the impact on the cost of our interest rate swaps, would have had an approximately $5.2a $3.4 million impact on our net interest expense in fiscal 2018.2021. Additionally, the interest raterates on our 3.70% senior notes isSenior Notes are subject to adjustment based on the ratings assigned by Moody’s and S&P to the notes from time to time. A decline in such ratings could result in an increase of up to 2% in the rate of interest on the notes.Senior Notes. For fiscal 2018,2021, such an increase would have had an impact of up to $7.0$20.4 million on our net interest expense2018,2021, we were party to interest rate swaps covering a total notional amount of $507.4$460.1 million. Under our swap agreements, the rate that we pay to banks in exchange for LIBOR ranges between 0.88%0.38% and 2.65%.2018,2021, we had accounts receivable, including long-term accounts receivable,deferred billings, net of provisionsallowance for doubtful receivables,credit losses, of $778.3$932.1 million. $84.4 $74.2 million of this amount was owed by GE, and the balance, or $693.9$857.9 million, was owed by Global Clients. No single Global Client owed more than 10% of our accounts receivable balance as of December 31, 2018.Schedules” of this Annual Report on Form 10-K.Schedules.”AccountantsAccountants on Accounting and Financial Disclosure(“or the Exchange Act”)Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.overOver Financial Reporting2018.2018,the year 2021, we acquired Barkawi Management Consultants GmbH & Co. KG and certain related entities and Commonwealth Informatics Inc.,Hoodoo Digital, LLC, and management excluded from its assessment of the2018 Barkawi Management Consultants GmbH & Co. KG and certain related entities and Commonwealth Informatics Inc.’s2021, Hoodoo Digital, LLC's internal control over financial reporting associated with total assets of $132.9 million$68,445 thousand (of which $107.4 million represent$62,816 thousand represents goodwill and intangible assets included within the scope of the assessment) and total revenues of $22.2 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2018.F-3.20182021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.“Executive Officers”“Information about our executive officers” in Part I of this Annual Report on Form 10-K. The other information required by this Item will be included in our Proxy Statement for the 20192022 Annual General Meeting of Shareholders under the captions “Director Nominees,” “Corporate Governance,” and “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance,Reports,” which will be filed with the SEC no later than 120 days after the close of the fiscal year ended December 31, 20182021 and is incorporated by reference in this report.20192022 Annual General Meeting of Shareholders under the caption “Information about Executive and Director“Executive Officer Compensation,” which will be filed with the SEC no later than 120 days after the close of the fiscal year ended December 31, 20182021 and is incorporated by reference in this report.20192022 Annual General Meeting of Shareholders under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans,” which will be filed with the SEC no later than 120 days after the close of the fiscal year ended December 31, 20182021 and is incorporated by reference in this report.20192022 Annual General Meeting of Shareholders under the captions “Certain Relationships and Related Party Transactions” and “Director Independence,” which will be filed with the SEC no later than 120 days after the close of the fiscal year ended December 31, 20182021 and is incorporated by reference in this report.AccountingAccountant Fees and Services20192022 Annual General Meeting of Shareholders under the caption “Independent Registered Public Accounting Firm Fees and Other Matters,” which will be filed with the SEC no later than 120 days after the close of the fiscal year ended December 31, 20182021 and is incorporated by reference in this report.(a)Documents filed as part of this Annual Report on Form 10-K:
(a)Documents filed as part of this Annual Report on Form 10-K:1.Consolidated Financial Statementspages F-4pages F-6 through F-85 hereof.F-67 hereof.
2.Financial Statement Schedules2.Financial Statement Schedules3.Exhibit Index:ExhibitNumber DescriptionExhibit
Number Description 3.1 4.5 ExhibitNumber Description 4.11 10.2† 10.2† 10.3† 10.4† 10.5†* 10.6†* 10.7†* 10.8† 10.9†* 10.10†* 10.11†* 10.12†Exhibit
NumberDescription 10.11† 10.12† 10.13† 10.14† 10.13† 10.14† 10.17† 10.15 10.16ExhibitNumber Description 10.19† 10.20† 10.21† 10.18† 10.19† 10.20† 10.21† 10.22 10.23 10.24† 10.25+ 10.26*Exhibit
NumberDescription 21.1* 21.1* 23.1* 23.1* 24.1*ExhibitNumber Description 31.1* 101.INS101.INS* Inline XBRL Instance Document (1)– the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.101.SCHDocument (1)101.CALDocument (1)101.DEFDocument (1)101.LABDocument (1)101.PREDocument (1)*Filed with this Annual Report on Form 10-K.104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed with this Annual Report on Form 10-K.+Confidential treatment has been requested for portions of this exhibit. Confidential materials have been omitted and filed separately with the Securities and Exchange Commission.†Indicates a management contract or compensatory plan, contract or arrangement in which any director or executive officer participates.(1)Attached as Exhibit 101^ Portions of this exhibit have been omitted pursuant to this report are the following documents formattedItem 601(b)(10)(iv) of Regulation S-K.XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2017 and December 31, 2018, (ii) Consolidated Statements of Income for the years ended December 31, 2016, December 31, 2017 and December 31, 2018, (iii) Consolidated Statement of Comprehensive Income (Loss) for the years ended December 31, 2016, December 31, 2017 and December 31, 2018, (iv) Consolidated Statement of Equity and Redeemable Non-controlling Interest for the years ended December 31, 2016, December 31, 2017 and December 31, 2018, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2016, December 31, 2017 and December 31, 2018, and (vi) Notes to Consolidated Financial Statements.GENPACT LIMITED By: /s/ N.V. TYAGARAJAN N.V. Tyagarajan President and Chief Executive Officer Signature Title /s/ N.V. TYAGARAJAN President, Chief Executive Officer and Director (Principal Executive Officer) N.V. Tyagarajan /s/ MICHAEL WEINER Chief Financial Officer (Principal Financial and Accounting Officer) Michael Weiner /s/ AJAY AGRAWAL Director Ajay Agrawal /s/ STACEY CARTWRIGHT Director Stacey Cartwright /s/ LAURA CONIGLIARO Director Laura Conigliaro /s/ TAMARA FRANKLIN Director Tamara Franklin /s/ CAROL LINDSTROM Director Carol Lindstrom /s/ JAMES MADDEN Director James Madden /s/ CECELIA MORKEN Director CeCelia Morken /s/ MARK NUNNELLY Director Mark Nunnelly /s/ BRIAN STEVENS Director Brian Stevens /s/ MARK VERDI Director Mark Verdi Page No.Page No. F-5F-6F-7F-8F-11F-12RegisteredRegistered Public Accounting FirmshareholdersShareholders and boardBoard of directorsDirectors
Genpact Limited:(“Genpact Limited” or the “Company”)(the Company) as of December 31, 20182021 and 2017,2020, the related consolidated statements of income, comprehensive income (loss), equity, and cash flows for each of the years in the three‑year period ended December 31, 2018, 2021,and the related notes (collectively, the “consolidatedconsolidated financial statements”)statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2018,2021, in conformity with U.S. generally accepted accounting principles.(“PCAOB”)(PCAOB), the Company’s internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 01, 20192022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.Gurugram, Haryana,20192022shareholdersShareholders and boardBoard of directorsDirectors
Genpact Limited:subsidiaries (“Genpact Limited” or the “Company”)subsidiaries' (the Company) internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.(“PCAOB”)(PCAOB), the consolidated balance sheets of the Company as of December 31, 20182021 and 2017,2020, the related consolidated statements of income, comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2018,2021, and the related notes (collectively, the “consolidatedconsolidated financial statements”)statements), and our report dated March 01, 2019 expressed2022 expressed an unqualified opinion on those consolidated financial statements.Barkawi Management Consultants GmbH & Co. KG and certain related entities, and Commonwealth Informatics Inc.,Hoodoo Digital, LLC during December 31, 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018, Barkawi Management Consultants GmbH & Co. KG and certain related entities and Commonwealth Informatics Inc.’s2021, Hoodoo Digital, LLC’s internal control over financial reporting associated with total assets of $132,908 thousands$68,445 thousand (of which $107,351 thousands represent$62,816 thousand represents goodwill and intangible assets included within the scope of the assessment) and total revenues of $22,207 thousands included in the consolidated financial statements of the Company as of and for the year ended December 31, 2018.2021. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Barkawi Management Consultants GmbH & Co. KG and certain related entities and Commonwealth Informatics Inc.Gurugram, Haryana, Assurance and Consulting Services LLP2019Notes As of December 31, 2020 As of December 31, 2021 Assets Current assets Cash and cash equivalents 4 $ 680,440 $ 899,458 Accounts receivable, net of allowance for credit losses of $27,707 and $24,329 as of December 31, 2020 and 2021, respectively Accounts receivable, net of allowance for credit losses of $27,707 and $24,329 as of December 31, 2020 and 2021, respectively 5 881,020 887,742 Prepaid expenses and other current assets 8 187,408 134,441 Total current assets $ 1,748,868 $ 1,921,641 Property, plant and equipment, net 9 231,122 215,089 Operating lease right-of-use assets Operating lease right-of-use assets 304,714 270,603 Deferred tax assets 23 106,674 106,322 Intangible assets, net 10 236,732 169,635 Goodwill 10 1,695,688 1,731,027 Contract cost assets 25 225,897 238,794 Other assets, net of allowance for credit losses of $3,134 and $3,711 as of December 31, 2020 and 2021, respectively Other assets, net of allowance for credit losses of $3,134 and $3,711 as of December 31, 2020 and 2021, respectively 11 323,818 322,158 Total assets $ 4,873,513 $ 4,975,269 Liabilities and equity Current liabilities Short-term borrowings 15 $ 250,000 $ — Current portion of long-term debt 14 33,537 383,433 Accounts payable 13,910 24,984 Income taxes payable 23 41,941 47,353 Accrued expenses and other current liabilities 13 806,769 791,440 Operating leases liability Operating leases liability 56,479 61,591 Total current liabilities $ 1,202,636 $ 1,308,801 Long-term debt, less current portion 14 1,307,371 1,272,476 Operating leases liability Operating leases liability 289,363 247,707 Deferred tax liabilities 23 1,516 3,942 Other liabilities 16 238,398 245,210 Total liabilities $ 3,039,284 $ 3,078,136 Shareholders' equity Preferred shares, $0.01 par value, 250,000,000 authorized, none issued — — Common shares, $0.01 par value, 500,000,000 authorized, 189,045,661 and 185,336,357 issued and outstanding as of December 31, 2020 and 2021, respectively Common shares, $0.01 par value, 500,000,000 authorized, 189,045,661 and 185,336,357 issued and outstanding as of December 31, 2020 and 2021, respectively 1,885 1,847 Additional paid-in capital 1,636,026 1,717,165 Retained earnings 741,658 732,474 Accumulated other comprehensive income (loss) (545,340) (554,353) Total equity $ 1,834,229 $ 1,897,133 Commitments and contingencies 27 0 0 Total liabilities and equity Total liabilities and equity $ 4,873,513 $ 4,975,269 StatementsYear ended December 31, Notes 2019 2020 2021 Net revenues 24, 25 3,520,543 3,709,377 4,022,211 Cost of revenue 2,294,688 2,418,137 2,590,252 Gross profit $ 1,225,855 $ 1,291,240 $ 1,431,959 Operating expenses: Selling, general and administrative expenses 794,901 789,849 865,715 Amortization of acquired intangible assets 10 32,612 43,343 58,448 Other operating (income) expense, net 21 (31,034) 19,331 (1,203) Income from operations $ 429,376 $ 438,717 $ 508,999 Foreign exchange gains (losses), net 7,729 7,482 12,669 Interest income (expense), net 22 (43,458) (48,960) (51,434) Other income (expense), net 26 5,786 3,238 12,895 Income before equity-method investment activity, net and income tax expense $ 399,433 $ 400,477 $ 483,129 Equity-method investment activity, net (16) — — Income before income tax expense $ 399,417 $ 400,477 $ 483,129 Income tax expense 23 94,536 92,201 113,681 Net income $ 304,881 $ 308,276 $ 369,448 Earnings per common share Earnings per common share 20 Basic $ 1.60 $ 1.62 $ 1.97 Diluted $ 1.56 $ 1.57 $ 1.91 Weighted average number of common shares used in computing earnings per common share Weighted average number of common shares used in computing earnings per common share 20 Basic 190,074,475 190,396,780 187,802,219 Diluted 195,160,855 195,780,971 192,961,841 Year ended December 31, 2019 2020 2021 Net income (loss) $ 304,881 $ 308,276 $ 369,448 Other comprehensive income: Currency translation adjustments (20,297) (7,871) (39,725) Net income (loss) on cash flow hedging derivatives, net of taxes (Note 7) 2,343 (3,468) 23,124 Retirement benefits, net of taxes (6,542) (2,045) 7,588 Other comprehensive income (loss) (24,496) (13,384) (9,013) Comprehensive income (loss) $ 280,385 $ 294,892 $ 360,435 and Redeemable Non-controlling InterestCommon shares No. of Shares Amount Additional
Paid-in CapitalRetained
EarningsAccumulated Other
Comprehensive
Income (Loss)Total
EquityBalance as of January 1, 2019 189,346,101 $ 1,888 $ 1,471,301 $ 438,453 $ (507,460) $ 1,404,182 Issuance of common shares on exercise of options (Note 18) 697,531 7 10,683 — — 10,690 Issuance of common shares under the employee stock purchase plan (Note 18) 264,440 3 8,977 — — 8,980 Net settlement on vesting of restricted share units (Note 18) 574,112 6 (4,271) — — (4,265) Net settlement on vesting of performance units (Note 18) 2,151 — — — — — Stock repurchased and retired (Note 19) (766,154) (8) — (29,992) — (30,000) Expenses related to stock repurchase (Note 19) — — — (15) — (15) Stock-based compensation expense (Note 18) — — 83,885 — — 83,885 Comprehensive income (loss): Net income (loss) — — — 304,881 — 304,881 Other comprehensive income (loss) — — — — (24,496) (24,496) Dividend ($0.34 per common share, Note 19) — — — (64,671) — (64,671) Balance as of December 31, 2019 190,118,181 $ 1,896 $ 1,570,575 $ 648,656 $ (531,956) $ 1,689,171 and Redeemable Non-controlling InterestCommon shares No. of
SharesAmount Additional
Paid-in CapitalRetained
EarningsAccumulated Other
Comprehensive
Income (Loss)Total
EquityBalance as of January 1, 2020 190,118,181 $ 1,896 $ 1,570,575 $ 648,656 $ (531,956) $ 1,689,171 Transition period adjustment pursuant to ASC 326,net of tax — — — (3,984) — (3,984) Adjusted Balance as of January 1, 2020 190,118,181 $ 1,896 $ 1,570,575 $ 644,672 $ (531,956) $ 1,685,187 Issuance of common shares on exercise of options (Note 18) 692,634 7 14,055 — — 14,062 Issuance of common shares under the employee stock purchase plan (Note 18) 315,245 3 11,070 — — 11,073 Net settlement on vesting of restricted share units (Note 18) 429,362 4 (7,846) — — (7,842) Net settlement on vesting of performance units (Note 18) 902,532 9 (25,836) — — (25,827) Stock repurchased and retired (Note 19) (3,412,293) (34) — (137,010) — (137,044) Expenses related to stock repurchase (Note 19) — — — (68) — (68) Stock-based compensation expense (Note 18) — — 74,008 — — 74,008 Comprehensive income (loss): Net income (loss) — — — 308,276 — 308,276 Other comprehensive income (loss) — — — — (13,384) (13,384) Dividend ($0.39 per common share, Note 19) — — — (74,212) — (74,212) Balance as of December 31, 2020 189,045,661 $ 1,885 $ 1,636,026 $ 741,658 $ (545,340) $ 1,834,229 and Redeemable Non-controlling InterestCommon shares No. of
SharesAmount Additional Paid-
in CapitalRetained
EarningsAccumulated Other Comprehensive
Income (Loss)Total
EquityBalance as of January 1, 2021 Balance as of January 1, 2021 189,045,661 1,885 1,636,026 741,658 (545,340) 1,834,229 Issuance of common shares on exercise of options (Note 18) 1,145,125 11 23,157 — — 23,168 Issuance of common shares under the employee stock purchase plan (Note 18) 285,657 3 11,880 — — 11,883 Net settlement on vesting of restricted share units (Note 18) 335,036 3 (7,559) — — (7,556) Net settlement on vesting of performance units (Note 18) 1,102,440 11 (28,301) — — (28,290) Stock repurchased and retired (Note 19) (6,577,562) (66) — (298,021) — (298,087) Expense related to stock repurchase (Note 19) Expense related to stock repurchase (Note 19) — — — (132) — (132) Stock-based compensation expense (Note 18) — — 81,968 — — 81,968 Others Others — — (6) — — (6) Comprehensive income (loss): Net income (loss) — — — 369,448 — 369,448 Other comprehensive income (loss) — — — — (9,013) (9,013) Dividend ($0.43 per common share, Note 19) Dividend ($0.43 per common share, Note 19) — — — (80,479) — (80,479) Balance as of December 31, 2021 Balance as of December 31, 2021 185,336,357 1,847 1,717,165 732,474 (554,353) 1,897,133 Year ended December 31, 2019 2020 2021 Operating activities Net income $ 304,881 $ 308,276 $ 369,448 Adjustments to reconcile net income to net cash provided by operating activities: Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 96,101 116,499 109,124 Amortization of debt issuance costs (including loss on extinguishment of debt) 1,779 2,248 2,678 Amortization of acquired intangible assets 32,612 43,343 58,448 Write-down of intangible assets and property, plant and equipment 3,511 14,083 915 Reserve for doubtful receivables/allowance for credit losses Reserve for doubtful receivables/allowance for credit losses 7,443 5,707 1,487 Unrealized loss (gain) on revaluation of foreign currency asset/liability (5,171) 9,578 (8,304) Stock-based compensation expense 83,885 74,008 81,968 Deferred tax benefit Deferred tax benefit (16,315) (22,587) (9,263) Write-down of operating lease right-of-use assets and other assets Write-down of operating lease right-of-use assets and other assets — 18,084 — Gain on exchange of non-monetary asset Gain on exchange of non-monetary asset (31,380) — — Others, net (2,213) (1,291) 623 Change in operating assets and liabilities: (Increase) decrease in accounts receivable (Increase) decrease in accounts receivable (121,983) 42,505 (11,803) (Increase) decrease in prepaid expenses, other current assets, contract cost assets, operating lease right-of-use assets and other assets (Increase) decrease in prepaid expenses, other current assets, contract cost assets, operating lease right-of-use assets and other assets (69,813) (99,852) 83,432 Increase (decrease) in accounts payable (21,375) (12,480) 11,740 Increase (decrease) in accrued expenses, other current liabilities, operating lease liabilities and other liability Increase (decrease) in accrued expenses, other current liabilities, operating lease liabilities and other liability 157,580 87,180 (2,057) Increase (decrease) in income taxes payable Increase (decrease) in income taxes payable 8,346 (993) 5,845 Net cash provided by operating activities $ 427,888 $ 584,308 $ 694,281 Investing activities Purchase of property, plant and equipment (74,927) (70,170) (53,341) Payment for internally generated intangible assets (including intangibles under development) Payment for internally generated intangible assets (including intangibles under development) (33,834) (10,201) (3,907) Proceeds from sale of property, plant and equipment and intangibles assets Proceeds from sale of property, plant and equipment and intangibles assets 1,750 607 6,384 Proceeds from sale of equity affiliates Proceeds from sale of equity affiliates 2,168 — — Payment for business acquisitions, net of cash acquired (252,276) (186,633) (72,025) Proceed from sale of investment Proceed from sale of investment — — $ 142 Net cash used for investing activities $ (357,119) $ (266,397) $ (122,747) Financing activities Repayment of finance lease obligations Repayment of finance lease obligations (7,380) (10,567) (13,926) Payment of debt issuance costs (2,317) (620) (3,029) Proceeds from long-term debt 400,000 — 350,000 Repayment of long-term debt (34,000) (34,000) (34,002) Proceeds from short-term borrowings 400,000 610,000 — Repayment of short-term borrowings (625,000) (430,000) (250,000) Proceeds from issuance of common shares under stock-based compensation plans 19,670 25,135 35,051 Payment for net settlement of stock-based awards (3,850) (34,083) (35,717) Payment of earn-out consideration Payment of earn-out consideration (12,790) (6,552) (2,556) Dividend paid (64,671) (74,212) (80,479) Payment for stock repurchased and retired (including expenses related to stock repurchase) Payment for stock repurchased and retired (including expenses related to stock repurchase) (30,015) (137,112) (298,219) Others Others — — (6) Net cash provided by/ (used for) financing activities Net cash provided by/ (used for) financing activities $ 39,647 $ (92,011) $ (332,883) Effect of exchange rate changes (11,716) (12,556) (19,633) Net increase in cash and cash equivalents Net increase in cash and cash equivalents 110,416 225,900 238,651 Cash and cash equivalents at the beginning of the period 368,396 467,096 680,440 Cash and cash equivalents at the end of the period $ 467,096 $ 680,440 $ 899,458 Supplementary information Cash paid during the period for interest (including interest rate swaps) Cash paid during the period for interest (including interest rate swaps) $ 45,084 $ 49,101 $ 46,348 Cash paid during the period for income taxes, net of refunds Cash paid during the period for income taxes, net of refunds $ 104,217 $ 193,946 $ 31,761 Property, plant and equipment acquired under finance lease obligations Property, plant and equipment acquired under finance lease obligations $ 5,008 $ 29,526 $ 286 Non-cash transaction: Gain on exchange of non-monetary asset Non-cash transaction: Gain on exchange of non-monetary asset $ (31,380) $ — $ — 87,000109,600 employees serving clients in key industry verticals from more than 2530 countries.. and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-K. The accompanying consolidated financial statements reflect all adjustments that management considers necessary for a fair presentation of the results of operations for these periods.inon consolidation.Non-controlling interest in subsidiaries that is redeemable outside of the Company’s control for cash or other assets is reflected in the mezzanine section between liabilities and equity in the consolidated balance sheets at the redeemable value, which approximates fair value. Redeemable non-controlling interest is adjusted to its fair value at each balance sheet date. Any resulting increases or decreases in the estimated redemption amount are affected by corresponding charges to additional paid-in capital. The share of non-controlling interest in subsidiary earnings is reflected in net loss (income) attributable to redeemable non-controlling interest in the consolidated statements of income.intangiblesintangible assets and goodwill, revenue recognition, reservesallowance for doubtful receivables,credit losses, valuation allowances for deferred tax assets, the valuation of derivative financial instruments, the measurement of lease liabilities and right-of-use ("ROU") assets, measurements of stock-based compensation, assets and obligations related to employee benefits, the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, variable consideration, other obligations for revenue recognition, income tax uncertainties and other contingencies. Management believes that the estimates used in the preparation of the consolidated financial statements are reasonable.reasonable, and management has made assumptions about the possible effects of the ongoing COVID-19 pandemic on critical and significant accounting estimates. Although these estimates and assumptions are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. Any changes in estimates are adjusted prospectively in the Company’s consolidated financial statements. Changes in accounting policiesExcept as described below, the Company has applied accounting policies consistently to all periods presented in these consolidated financial statements. The Company adopted Accounting standard codification (ASC) Topic 606, Revenue from Contracts with Customers (“Topic 606”), effective January 1, 2018. The revenue accounting policy followed by the company before its adoption of Topic 606 is described below.2. Summary of significant accounting policies (Continued)The Company derives its revenue primarily from business process outsourcing and information technology services, which are provided on a time-and-material, transaction or fixed-price basis. The Company recognizes revenue when persuasive evidence of an arrangement exists, the sales price is fixed or determinable, services have been rendered and collectability is reasonably assured. Revenues from services rendered under time-and-materials and transaction-based contracts are recognized as the services are provided. The Company’s fixed-price contracts include contracts for application development, maintenance and support services. Revenues from these contracts are recognized ratably over the term of the agreement. The Company accrues for revenue and unbilled receivables for the services rendered between the last billing date and the balance sheet date.Customer contracts can also include incentive payments received for discrete benefits delivered to clients. Revenues relating to such incentive payments are recorded when the contingency is satisfied and the Company concludes the amounts are earned.Revenue from fixed-price contracts for the development of software and related services is recognized in accordance with the percentage-of-completion method. Guidance has been drawn from Financial Accounting Standards Board (“FASB”) guidance on Software—Revenue Recognition to account for revenue from fixed-price arrangements for software development and related services in conformity with FASB guidance on Revenue Recognition—Construction—Type and Production-Type Contracts. The input (effort or cost expended) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates.The Company has deferred the revenue and costs attributable to certain process transition activities with respect to its customers where such activities do not represent the culmination of a separate earnings process. Such revenue and costs are subsequently recognized ratably over the period in which the related services are performed. Further, the deferred costs are limited to the amount of the deferred revenues.Revenues are reported net of value-added tax, business tax and applicable discounts and allowances. Reimbursements of out-of-pocket expenses received from clients have been included as part of revenues.The Company enters into multiple-element revenue arrangements in which a client may purchase a combination of its services. Revenue from multiple-element arrangements is recognized, for each element, based on (1) the attainment of the delivery criterion; (2) its fair value, which is determined using the selling price hierarchy of vendor-specific objective evidence (“VSOE”) of fair value, third-party evidence or best estimated selling price, as applicable, and (3) its allocated selling price, which is based on the relative sales price method.The Company has changed its accounting policy for revenue recognition as detailed below. The Company applied Topic 606 using the modified retrospective method, which involves recognizing the cumulative effect of initially applying Topic 606 as an adjustment to the Company’s opening equity balance as of January 1, 2018. Therefore, comparative information has not been adjusted and continues to be reported under Topic 605. As a result of the Company’s adoption of this new standard, certain sales incentive programs meet the requirements for capitalization. Such costs are amortized over the period of expected benefit rather than being expensed as incurred as was the Company’s prior practice. The cumulative impact of the adoption of this standardF-13GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)resulted in an increase in retained earnings of $17,924 as of January 1, 2018 with a corresponding impact on contract cost assets of $23,227 and deferred tax liabilities of $5,303. As of January 1, 2018, contract assets and contract liabilities of $21,348 relating to the same customer contracts have been offset against each other.(d) Revenue recognition (effective January 1, 2018)The Company derives its revenue primarily from business process outsourcing and information technology services, which are provided primarily on a time-and-material, transaction or fixed-price basis. The Company recognizes revenue when the promised services are delivered to customers for an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. Revenues from services rendered under time-and-material and transaction-based contracts are recognized as the services are provided. The Company’s fixed-price contracts include contracts for application development, maintenance and support services. Revenues from these contracts are recognized ratably over the term of the agreement. The Company accrues for revenue and unbilled receivables for services rendered between the last billing date and the balance sheet date.The Company’s customer contracts sometimes also include incentive payments received for discrete benefits delivered or promised to be delivered to clients or service level agreements that could result in credits or refunds to the client. Revenues relating to such arrangements are accounted for as variable consideration when the amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur.The Company records deferred revenue attributable to certain process transition activities where such activities do not represent separate performance obligations. Revenues relating to such transition activities are classified under contract liabilities and subsequently recognized ratably over the period in which the related services are performed. Costs relating to such transition activities are fulfillment costs which are directly related to the contract and result in the generation or enhancement of resources. Such costs are expected to be recoverable under the contract and are therefore classified as contract cost assets and recognized ratably over the estimated expected period of benefit under cost of revenue.Revenues are reported net of value-added tax, business tax and applicable discounts and allowances. Reimbursements of out-of-pocket expenses received from clients have been included as part of revenues.Revenue for performance obligations that are satisfied over time is recognized in accordance with the methods prescribed for measuring progress. The input (effort or cost expended) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates.The Company enters into multiple-element revenue arrangements in which a client may purchase a combination of products or services. Revenue from multiple-element arrangements is recognized, for each element, based on an allocation of the transaction price to each performance obligation on a relative standalone basis.Certain contracts may include offerings such as sale of licenses, which may be perpetual or subscription-based. Revenue from distinct perpetual licenses is recognized upfront at the point in time when the software is made available to the customer. Revenue from distinct subscription-based licenses is recognized at the point in time it is transferred to the client. Revenue from any associated maintenance or ongoing support services is recognized ratably over the term of the contract. For a combined software license/services performance obligation, revenue is recognized over the period that the services are performed.F-14GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)All incremental and direct costs incurred for acquiring contracts, such as certain sales commissions, are classified as contract cost assets. Such costs are amortized over the expected period of benefit and recorded under selling, general and administrative expenses.Other upfront fees paid to clients are classified as contract assets. Such costs are amortized over the expected period of benefit and recorded as an adjustment to the transaction price and subtracted from revenue.Timing of revenue recognition may differ from the timing of invoicing. If a payment is received in respect of services prior to the delivery of services, the payment is recognized as an advance from clients and classified as a contract liability. Contract assets and contract liabilities relating to the same client contract are offset against each other and presented on a net basis in the consolidated financial statements. See note 27 for information and related disclosures regarding contract balances.Significant judgementsThe Company often enters into contracts with clients that include promises to transfer multiple products and services to the client. Determining whether products and services are considered distinct performance obligations that should be accounted for separately rather than together may require significant judgment.Judgment is also required to determine the standalone selling price for each distinct performance obligation. In instances where the standalone selling price is not directly observable, it is determined using information that may include market conditions and other observable inputs.Client contracts sometimes include incentive payments received for discrete benefits delivered to clients or service level agreements that could result in credits or refunds to the client. Such amounts are estimated at contract inception and are adjusted at the end of each reporting period as additional information becomes available only to the extent that it is probable that a significant reversal of any incremental revenue will not occur.F-15GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)Impact on consolidated financial statementsThe following tables summarize the impact of the Company’s adoption of Topic 606 on its consolidated financial statements for the year ended December 31, 2018.F-16GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)F-17GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)F-18GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)(e) Accounts receivableAccounts receivable are recorded at the invoiced or to be invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and clients’ financial conditions, the amount of receivables in dispute, and the current receivables’ aging and current payment patterns. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its clients.(f) Cash and cash equivalentsCash and cash equivalents consist of cash and bank balances and all highly liquid investments purchased with an original maturity of three months or less.(g) Short-term investmentsAll liquid investments with an original maturity greater than 90 days but less than one year are considered to be short-term investments. Marketable short-term investments are classified and accounted for as available-for-sale investments. Available-for-sale investments are reported at fair value with changes in unrealized gains and losses recorded as a separate component of other comprehensive income (loss) until realized. Realized gains and losses on investments are determined based on the specific identification method and are included in “Other income (expense), net.” The Company does not hold these investments for speculative purposes.(h) Property, plant and equipment, netProperty, plant and equipment are stated at cost less accumulated depreciation and amortization. Expenditures for replacements and improvements are capitalized, whereas the costs of maintenance and repairs are charged to earnings as incurred. The Company depreciates and amortizes all property, plant and equipment using the straight-line method over the following estimated economic useful lives of the assets:YearsBuildings40Furniture and fixtures4Computer equipment and servers4Plant, machinery and equipment4Computer software4-7Leasehold improvementsLesser of lease periodor 10 YearsVehicles3-4The Company capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use when both the preliminary project stage is completed and it is probable that the software will be used as intended. Capitalized software costs include only (i) external direct costs of materials and services utilized in developing or obtaining computer software, (ii) compensation and related benefits for employees who are directly associated with the software project, and (iii) interest costs incurred while developing internal-use computer software.F-19GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)Capitalized computer software costs are included in property, plant and equipment on the Company’s balance sheet and amortized on a straight-line basis when placed into service over the estimated useful lives of the software. Advances paid towards acquisition of property, plant and equipment outstanding as of each balance sheet date and the cost of property, plant and equipment not put to use before such date are disclosed under “Capital work in progress.”(i) Business combinations, goodwill and other intangible assetsASCAccounting Standard Codification ("ASC") Topic 805, Business Combinations, by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Contingent consideration is included within the acquisition cost and is recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is remeasuredre-measured to fair value as of each reporting date until the contingency is resolved. Changes in fair value are recognized in earnings. All assets and liabilities of the acquired businesses, including goodwill, are assigned to reporting units. Acquisition-related costs are expensed as incurred under Selling, Generalselling, general and Administrative Expenses.including technology acquired / developed individually or with a group of other assets or in a business combination and developed internally are carried at cost less accumulated amortization and accumulated impairment loss based on their estimated useful lives as follows:Customer-related intangible assets 1 1-14-9 years 1 1-10-8 years 2 2-8-10 years Other intangible assets3-5 yearsConsolidated Statementsconsolidated statements of Income.F-20GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)technologytechnology-related development costs incurred in connection with developing or obtaining software or technology for sale/lease to customers when the initial design phase is completed and commercial and technological feasibility has been established. Any development cost incurred before technological feasibility is established is expensed as incurred as research and development costs. Technological feasibility is established upon completion of a detailed design program or, in its absence, completion of a working model. Capitalized software and technology costs include only (i) external direct costs of materials and services utilized in developing or obtaining software and technology and (ii) compensation and related benefits for employees who are directly associated with the project.towardtowards the acquisition of intangible assets outstanding as of each balance sheet date are disclosed under “intangible assets under development.”Years Buildings 40 Furniture and fixtures 4 Computer equipment and servers 4 Plant, machinery and equipment 4 Computer software 4 - 7 Leasehold improvements Vehicles 3 - 4 softwaresoftware. technology.(j)equipment outstanding as of each balance sheet date and the cost of property, plant and equipment not put to use before such date are disclosed under “Capital work in progress.”(k)F-21GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)(l)purchasesenters into forward foreign exchange contracts to mitigate the risk of changes in foreign exchange rates on intercompany transactions and forecasted transactions denominated in foreign currencies and interest rate swaps to mitigate interest rate fluctuation risk on its indebtedness.derivative.(m)F-22GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)AOCIaccumulated other comprehensive income (“AOCI”) upon recognition of these AOCI items in the Company’sconsolidated statement of income.(n)On January 1, 2018, the Company adopted ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. turnoverattrition rates. The Company reviews its assumptions on an annual or quarterly basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in other comprehensive income (loss) and amortized to net periodic cost over future periods using the corridor method. The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions.(o) (p)(Black-Scholes-Merton)(Black-Scholes-Merton model) and for stock based awards other than option awards, grant date fair value is determined on the basis of the fair market value of a Company common share on the date of grant of such awards. The fair value determined at the grant date is expensed over the vesting period of the stock-based awards. The Company recognizes compensation expense for stock-based awards net of estimated forfeitures. Stock-based compensation recognized in the consolidated statements of income is based on awards ultimately expected to vest. As a result, the expense has been reduced for estimated forfeitures.F-23GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)(q) Accelerated Share RepurchaseThe Company entered into an accelerated share repurchase (“ASR”) agreement in 2017 with a third-party financial institution to repurchase shares of the Company’s common stock. Under the ASR agreement, the Company paid an upfront amount to the financial institution and received an initial delivery of shares. Upon an interim delivery and settlement of the ASR agreement, the financial institution delivered additional shares to the Company, with the final number of shares delivered determined by reference to the volume-weighted average price of the Company’s common shares over the term of the agreement, less an agreed-upon discount. The transactions were accounted for as equity transactions. All shares repurchased under the ASR agreement were retired. The number of weighted average common shares outstanding used by the Company for purposes of calculating basic and diluted earnings per share was reduced as of the date of delivery of the common shares.(r)statementstatements of income under “other income (expense), net.” Incentives are recognized in the consolidated statements of income statement when there is reasonableprobable assurance that the Company will comply with the conditions for their receipt and a reasonable expectation that the funds will be received. In certain circumstances, the receipt of an incentive may not be subject to any condition or requirement to incur further costs, in which case the incentive is recognized in the consolidated statement of income statement for the period in which it becomes receivable. In the event that it becomes likely that the Company will be required to repay an incentive that has already been recognized, the Company makes a provision for the estimated liability.(s)instrumentsStatementsconcentrationshare count)credit riskFinancial instruments that potentially subject the Company to concentration of credit risk are reflected principally in cash and cash equivalents, derivative financial instruments and accounts receivable. The Company places its cash and cash equivalents and derivative financial instruments with corporations and banks with high investment grade ratings, limits the amount of credit exposure with any one corporation or bank and conducts ongoing evaluations of the creditworthiness of the corporations and banks with which it does business. To reduce its credit risk on accounts receivable, the Company conducts ongoing credit evaluations of its clients. GE accounted for 11% of the Company’s receivables as of both December 31, 2017 and 2018. GE accounted for 14%, 10% and 9% of the Company’s revenues in the years ended December 31, 2016, 2017 and 2018, respectively.(t)significant accounting policies (Continued)(u)(v)Restructuringdebt.F-24GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)(w)debt.company’sCompany’s consolidated financial statements. following recently released accounting standard has been adopted by the Company:In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting. The new standard contains several amendments that will simplify the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The changes in the new standard eliminate the requirement for excess tax benefits to be recognized in additional paid-in capital and tax deficiencies recognized either in income tax expense or in additional paid-in capital. In the quarter ended December 31, 2016, the Company elected to early adopt ASU 2016-09 effective January 1, 2016 and applied ASU 2016-09 using a modified retrospective approach. The treatment of forfeitures has not changed as the Company is electing to continue its current process of estimating the number of forfeitures. With the early adoption of ASU 2016-09, the Company has elected to present the cash flow statement on a prospective transition method and no prior periods have been adjusted.The Company adopted ASC Topic 606, Revenue from Contracts with Customers, with a date of initial application of January 1, 2018 using the modified retrospective method. The cumulative impact of the adoption of this standard is described in section (c) above.In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The new standard provides guidance to “allow a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.” The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years, and the guidance may be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal income tax rate in the Tax Cuts and Jobs Act is recognized. Early adoption is permitted. On January 1, 2018, the Company elected the early adoption of ASU 2018-02, which was adopted at the beginning of the period and no prior periods have been adjusted.In addition, the following recently released accounting standards have been adopted by the Company. Adoption of these standards did not have a material impact on the Company’s consolidated results of operations, cash flows, financial position or disclosures:Effective January 1, 2016, the Company adopted FASB ASU 2015-01 (Topic 225): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”). Such items are defined as transactions or events that are both unusual in nature and infrequent in occurrence, and, currently, are required to be presented separately in the income statement, net of income tax, after income from continuing operations. The changes eliminate the concept of an extraordinary item and, therefore, the presentation of such items will no longer be required. Notwithstanding this change, the Company will still be required to present and disclose a transaction or event that is both unusual in nature and infrequent in occurrence in the notes to the consolidated financial statements.Effective January 1, 2016, the Company adopted FASB ASU 2015-16 (Topic 805), Business Combinations (“ASU 2015-16”), which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. The guidance requires that the acquirer shall recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.F-25GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)Effective January 1, 2016, the Company adopted FASB ASU 2015-02. In February 2015, the FASB issued ASU No. 2015-02, Amendment to the Consolidation Analysis, which specifies changes to the analysis that an entity must perform to determine whether it should consolidate certain types of legal entities. These changes (i) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidation analysis of reporting entities that are involved with variable interest entities, particularly those that have fee arrangements and related party relationships, and (iv) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds.Effective January 1, 2017, the Company adopted FASB ASU 2016-06, Derivatives and Hedging (Topic 815). The amendments in this update clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this update is required to assess the embedded call (put) options solely in accordance with a four-step decision sequence.Effective January 1, 2017, the Company early adopted FASB ASU 2016-15, "Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments." The new guidance is intended to reduce diversity in how certain transactions are classified in the statement of cash flows.Effective January 1, 2018, the Company adopted FASB ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The new guidance revises the definition of a business. The definition of a business affects many areas of accounting (e.g., acquisitions, disposals, goodwill impairment, consolidation).Effective January 1, 2018, the Company adopted FASB ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory.” The new guidance eliminates the exception for deferment of tax recognition until the transferred asset is sold to a third party or otherwise recovered through use for all intra-entity sales of assets other than inventory.Effective January 1, 2018, the Company adopted FASB ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The ASU requires entities to (1) disaggregate the current service-cost component from the other components of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if that subtotal is presented. In addition, theASU requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines.The following recently released accounting standards have not yet been adopted by the Company:In February 2016, FASB established Topic 842, “Leases”, by issuing ASU No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The ASU requires extensive qualitative and quantitative disclosures, including with respect to significant judgments made by management. Subsequently, the FASB issued ASU No. 2017-13, in September 2017, ASU No. 2018-01, in January 2018, ASU No. 2018-10, in July 2018, ASU No. 2018-11, in July 2018, ASU No. 2018-20, in December 2018 which amends and clarifies ASU 2016-02. The ASU will be effective for the Company beginning January 1, 2019, including interim periods in the fiscal year 2019. Early adoption is permitted. The Company will use a modified retrospective adoption approach using a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption with the effective date as its date of initial application on January 1, 2019, in its first reporting on adoption.The Company has concluded its assessment of adopting ASU No. 2016-02 and expects that this standard will have a material effect on its financial statements. The assessment included reviewing existing leases and service contracts, which may include embedded leases. The Company is in the process of making necessary changes to its policies, processes, and internal controls as well as system enhancements to generate the information necessary for the new disclosures. The most significant effects of this new standard on the Company relate to (1) the recognition of new ROU (“Right of Use”) assets and lease liabilities on its balance sheet for various real estate operating leases and (2) providing significant new disclosures about its leasing activities.F-26GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2. Summary of significant accounting policies (Continued)The Company has elected the “package of practical expedients,” which allows the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company has also elected the practical expedient to not separate lease and non-lease components for all of its leases. As a result of adoption of the ASU, the Company will recognize additional liabilities ranging from $320,000 to $340,000, with corresponding ROU assets ranging from $300,000 to $320,000 based on the present value of the remaining minimum rental payments under current leasing standards for existing leases.isrequires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings. The ASU became effective for the Company beginning January 1, 2020, including interim periods in fiscal year 2020. Subsequently,2018-19, in November 2018 which amends and clarifies some parts of ASU 2016-13.Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated results of operations, cash flows, financial position and disclosures.In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging.” The amendment expands an entity’s ability to do hedge accounting to non-financial and financial risk components and requires changes in fair value of hedging instruments to be presented in the same income statement line as the hedged item. The ASU also amends the presentation and disclosure requirements for the effect of hedge accounting. Subsequently, the FASB issued ASU No. 2018-16 in October 2018 which includes the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) rate as a benchmark interest rate for hedge accounting purposes. These ASUs are effective for the Company beginning January 1, 2019, including interim periods in the fiscal year 2019. The Company does not expect the adoption of this update to have a material impact on its consolidated results of operations, cash flows, financial position or disclosures.In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.2019-05, “Financial Instruments—Credit Losses (Topic 326).” The ASU modifiesprovides final guidance that allows entities to make an irrevocable one-time election upon adoption of the disclosure requirements with respectnew credit losses standard to measure financial assets at amortized cost (except held-to-maturity securities) using the fair value measurements.option. The ASU is effective for the Company beginning January 1, 2020, including interim periods in fiscal year 2020. Early adoption is permitted. isadopted ASU 2016-13, ASU 2019-05 and ASU 2019-11 beginning January 1, 2020, including interim periods in the process of assessingfiscal year 2020. The Company assessed the impact of this ASUthese ASUs and concluded that they do not have a material impact on its consolidated results of operations, cash flows, financial position or disclosures.disclosures.August 2018,April 2019, the FASB issued ASU No. 2018-14, “Disclosure Framework—Changes2019-04, “Codification Improvements to the Disclosure Requirements for Defined Benefit Plans.Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The ASU modifiesprovides additional guidance on the recognition of credit losses and addresses partial-term fair value hedges, fair value hedge basis adjustments and certain transition requirements, among other things. The ASU also addresses the scope of the guidance on the requirement for re-measurement under ASC 820 when using the measurement alternative, certain disclosure requirements with respect to defined benefit pension plans.and which foreign currency-denominated equity securities must be re-measured at historical exchange rates. The ASU is effective for the Company beginning January 1, 2020, including interim periods in fiscal year 2020. The Company assessed the impact of this ASU and concluded that it does not have any material impact on its consolidated results of operations, cash flows, financial position or disclosures.August 2018,October 2021, the FASB issued ASU No. 2018-15, “Customer’s Accounting for Implementation Costs Incurred2021-08, “Business Combination.” This ASU requires acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a Cloud Computing Arrangement That isbusiness combination and improve comparability for both the recognition and measurement of acquired revenue contracts at the date of and after a Service Contract.” The ASU modifies the capitalization requirements with respect to implementation costs incurred by the customerbusiness combination and revenue contracts not acquired in a hosting arrangement that is a service contract.business combination. The ASU is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning January 1, 2020.December 15, 2022. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated results of operations, cash flows, financial position and disclosures.(w) ReclassificationCertain reclassifications have been made in the consolidated financial statements of prior periods to conform to the classification used in the current period. The impact of such reclassifications on the consolidated financial statements is not material.F-27GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count) and divestitureA. Certain acquisitionsBarkawi Management Consultants GmbH & Co. KG and certain related entitiesAugust 30, 2018,December 31, 2021, the Company acquired 100% of the outstanding equity/partnershiplimited liability company interests in Barkawi Management Consultants GmbH & Co. KG,Hoodoo Digital, LLC, a GermanUtah limited partnership, and certain affiliated entities in the United States, Germany and Austria (collectively referred to as “Barkawi”)liability company, for total purchase consideration of $101,307.$66,592. This amount includesrepresents cash consideration of $95,625,$64,310, net of cash acquired of $5,682.$2,283. The total purchase consideration paid by the Company to the sellers on the closing date was $100,969,$67,695, resulting in a payablerecoverable of $338, which is outstanding$1,102 as of December 31, 2018. During the quarter ended December 31, 2018, the Company recorded certain measurement period adjustments. These adjustments did not have a significant impact on the Company’s consolidated statements of income, balance sheets or cash flows.2021. The Company is evaluating adjustments related to certain tax positions,income and other taxes, which, when determined, may result in the recognition of additional assets andor liabilities as of the acquisition date. The measurement period will not exceed one year from the acquisition date. This acquisition enhancesfurthers the Company’s supply chain management consulting capabilities.thethis acquisition, of Barkawi, the Company recorded $10,200$16,200 in customer-related intangibles and $1,800$2,400 in marketing-related intangibles which have a weighted average amortization period of threefive years. Goodwill arising from the acquisition amountedamounting to $81,250, which includes measurement period adjustments and$44,216 has been allocated using a relative fair value allocation method to each of the Company’s reporting segments as follows: to the Company’s India reporting unitBanking, Capital Markets and Insurance ("BCMI") segment in the amount of $4,167, to the Consumer Goods, Retail, Life Sciences and Healthcare ("CGRLH") segment in the amount of $7,032 and to the High Tech, Manufacturing and Services ("HMS") segment in the amount of $33,017. Goodwill arising from this acquisition is partially deductible for income tax purposes. The goodwill represents primarily the consulting expertise, operating synergiesacquired capabilities and other benefits expected to result from combining the acquired operations with those of the Company.$1,842$1,177 have been included in selling, general and administrative expenses as incurred. In connection with the transaction,acquisition, the Company also acquired certain assets with a value of $17,314,$5,629 and assumed certain liabilities amounting to $10,149$1,852. The agreement with the sellers provides a full indemnity to the Company for all pre-closing income and non-income tax liabilities up to a maximum of the purchase consideration, including interest and penalties thereon. The Company would not be financially or materially affected by any liabilities that may arise from such exposures.a net deferred taxan indemnification asset of $892.$278 based on the information that was available at the date of the acquisition, which is included in the assets taken over by the Company. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.Commonwealth InformaticsEnquero, Inc.July 3, 2018,December 31, 2020, the Company acquired 100% of the outstanding equity interestinterests in Commonwealth InformaticsEnquero, Inc. (“Commonwealth”), a MassachusettsCalifornia corporation, and certain affiliated entities in India, the Netherlands and Canada (collectively referred to as “Enquero”) for preliminarytotal purchase consideration of $17,599.$148,797. This amount includesrepresents cash consideration of $16,123,$137,166, net of cash acquired of $1,477, and preliminary adjustments for working capital and indebtedness. As of December 31, 2018, the$11,631. The total purchase consideration paid by the Company to the sellers on the closing date was $17,333, resulting in a payable$141,938. No portion of $266. The Companythe purchase consideration is evaluating certain tax positions, which, when determined, may result in the recognition of additional assets and liabilitiesoutstanding as of the acquisition date. The measurement period will not exceed one year from the acquisition date.December 31, 2021. This acquisition enhancesincreased the scale and depth of the Company’s signal managementdata and pharmacovigilanceanalytics capabilities forand enhanced the Company’s ability to accelerate the digital transformation journeys of its clients in the life sciences industry.thethis acquisition, of Commonwealth, the Company recorded $2,200$49,000 in customer-related intangibles, $9,500 in marketing-related intangibles and $2,600$1,400 in technology-related intangible assets,intangibles, which have a weighted average amortization period of four years. Goodwill arising from the acquisition amountedamounting to $11,248, which$87,874 has been allocated using a relative fair value allocation method to each of the Company’s reporting segments as follows: to the Company’s India reporting unitBCMI segment in the amount of $2,594, to the CGRLH segment in the amount of $22,548 and to the HMS segment in the amount of $62,732. The goodwill arising from this acquisition is not deductible for income tax purposes. The goodwill represents primarily the acquired capabilities operating synergies and other benefits expected to result from combining the acquired operations with those of the Company.$521$1,590 have been included in selling, general and administrative expenses as incurred. In connection with the transaction,acquisition, the Company also acquired certain assets with a value of $2,583 and$32,879, assumed certain liabilities amounting to $1,032.$17,232 and recognized a net deferred tax liability of $14,343. The agreement with the sellers provides a full indemnity to the Company for all pre-closing income and non-income tax liabilities up to a maximum of the purchase consideration, including interest and penalties thereon. The Company would not be financially or materially affected by any liabilities that may arise from such exposures.F-28and divestiture (Continued)Strategic Sourcing Excellence LimitedJanuary 8, 2016,October 5, 2020, the Company acquired 51%100% of the outstanding equity interest in Strategic Sourcing Excellence LLC (“SSE”), a Delaware equity/limited liability company.company interests in SomethingDigital.Com LLC, a New York limited liability company, for total purchase consideration of $57,451. This amount represents cash consideration of $56,073, net of cash acquired of $1,378. The total purchase consideration paid by the Company to the selling equity holders for the acquired interest in SSE was $14,541. This amount includes the fair value of earn-out consideration, cash consideration of $2,550, adjusted for working capital, transaction expenses, indebtedness and measurement period adjustments which did not have a significant impactsellers on the Company’ consolidated statementsclosing date was $57,704, resulting in a recoverable of income, balance sheets or cash flows$253, which was received in the adjustment periods. The equity purchase agreement between the Company and the selling equity holders of SSE also provided for contingent earn-out consideration of up to $20,000, payable by the Company to the selling equity holders based on the future performance of the acquired business relative to the thresholds specified in the earn-out calculation. Up to $9,800 of the total potential earn-out consideration, representing the selling equity holders’ redeemable, non-controlling 49% interest in SSE, was payable only if either the put or call option, each as described below, was exercised. This acquisition enhanced the Company’s sourcing and procurement consulting domain expertise.The equity purchase agreement granted the Company a call option to purchase the remaining 49% equity interest in SSE, which the Company had the right to exercise between January 1, 2018 and January 31, 2018. As the Company did not exercise its call option during such period, the selling equity holders exercised their put option on March 1, 2018 in accordance with the terms of the equity purchase agreement to require the Company to purchase their 49% interest in SSE for $2,950. The Company also paid $1,780 in earn-out consideration to the selling equity holders during the three months ended March 31, 2018. The amount paid in excess of carrying amount has been recorded in additional paid-in capital.Acquisition-related costs of $164 have been included in selling, general and administrative expenses as incurred. Through this transaction, the Company acquired assets with a value of $412 and assumed liabilities amounting to $617. The results of operations of the acquired business, the fair value of the acquired assets and assumed liabilities, and redeemable non-controlling interest are included in2021.Consolidated Financial Statements with effect fromstrategy to integrate experience and process innovation to help clients on their digital transformation journeys and expanded on the date ofCompany’s existing experience capabilities to support end-to-end digital commerce solutions, both business-to-business and business-to-consumer. Additionally, this acquisition expanded the acquisition.the transaction,this acquisition, the Company recorded $300 in customer-related intangible assets with an amortization period of five years. Goodwill arising from the acquisition amounted to $14,445, which has been allocated to the Company’s India reporting unit and is deductible for tax purposes. The goodwill represents future economic benefits the Company expects to derive from its expanded presence in the sourcing and procurement consulting domains, operating synergies and other anticipated benefits of combining the acquired operations with those of the Company.(d) TandemSeven, Inc.On September 5, 2017, the Company acquired 100% of the outstanding equity interest in TandemSeven, Inc. (“TandemSeven”), a Massachusetts corporation, for total purchase consideration of $35,637. This amount includes cash consideration of $31,784, net of cash acquired of $3,853, and an adjustment for working capital and indebtedness. During the quarter ended March 31, 2018, the Company recorded certain measurement period adjustments. These adjustments did not have a significant impact on the Company’s consolidated statements of income, balance sheets or cash flows. TandemSeven’s focus on improving the design of customer experiences complements the Company’s existing capabilities aimed at transforming clients’ processes end-to-end. In connection with the acquisition of TandemSeven, the Company recorded $2,000$11,900 in customer-related intangibles $1,700and $3,500 in marketing-related intangibles and $800 in technology-related intangible assets, which have a weighted average amortization period of twofour years. Goodwill arising from the acquisition amountedamounting to $25,227, which$36,926 has been allocated using a relative fair value allocation method to 2 of the Company’s reporting segments as follows: to the Company’s India reporting unitCGRLH segment in the amount of $30,373 and to the HMS segment in the amount of $6,553. Of the total goodwill arising from this acquisition, $35,084 is deductible for income tax purposes.design expertise, operating synergiescapabilities and other benefits expected to result from combining the acquired operations with those of the Company.$932$1,060 have been included in selling, general and administrative expenses as incurred. In connection with the transaction,acquisition, the Company also acquired certain assets with a value of $7,378,$9,538, assumed certain liabilities amounting to $1,207$4,494 and recognized a net deferred tax liabilityasset of $260.$81. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.F-29and divestiture (Continued)(e) BrightClaim LLC and associated companiesOn May 3, 2017, the Company acquired 100% of the outstanding equity interest in each of BrightClaim LLC, a Delaware limited liability company, BrightServe LLC, a Georgia limited liability company, National Vendor LLC, a Delaware limited liability company, and BrightClaim Blocker, Inc., a Delaware corporation (collectively referred to as “BrightClaim”) for total purchase consideration of $56,461. This amount includes cash consideration of $52,395, net of cash acquired of $4,002, adjusted for working capital, net debt, transaction expenses and measurement period adjustments which did not have a significant impact on the Company’ consolidated statements of income, balance sheets or cash flows in the period of adjustments. This acquisition enhanced the Company’s breadth and depth of service offerings for clients in the insurance industry.thethis acquisition, of BrightClaim, the Company recorded $8,000$46,000 in customer-related intangibles $3,200and $29,000 in marketing related intangibles, $2,200 in technology-related intangibles and $200 in othermarketing-related intangibles which have a weighted average amortization period of fourfive years. Goodwill arising from the acquisition amountedamounting to $42,638, which$177,181 has been allocated using a relative fair value allocation method to each of the Company’s reporting segments as follows: to the Company’s India reporting unitBCMI segment in the amount of $16,983, to the CGRLH segment in the amount of $42,993 and to the HMS segment in the amount of $117,205. Of the total goodwill arising from this acquisition, $91,929 is partially deductible for income tax purposes. The goodwill represents primarily the acquired capabilities operating synergies and other benefits expected to result from combining the acquired operations with those of the Company.$1,563$7,385 have been included in selling, general and administrative expenses as incurred. In connection with the transaction,acquisition, the Company also acquired certain assets with a value of $10,367,$39,140, assumed certain liabilities amounting to $7,415,$22,295 and recognized a net deferred tax liability of $2,728.$1,643. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.(f) RAGE Frameworks, Inc.On April 13, 2017, the Company acquired 100%As of December 31, 2020 2021 Cash and other bank balances $ 680,440 $ 899,458 Total $ 680,440 $ 899,458 outstanding equity interestCompany’s allowance for credit losses:Year ended December 31, 2019 2020 2021 Opening balance as of January 1 $ 23,960 $ 29,969 $ 27,707 Transition period adjustment on accounts receivables (through retained earnings) pursuant to adoption of ASC 326 — 4,185 — Adjusted balance as of January 1 23,960 34,154 27,707 Additions due to acquisitions 1,004 200 — Additions charged/reversal released to cost and expense, net 7,443 3,307 910 Deductions/effect of exchange rate fluctuations (2,438) (9,954) (4,288) Closing balance $ 29,969 $ 27,707 $ 24,329 RAGE Frameworks, Inc. (“RAGE”), a Delaware corporation, for total considerationnet accounts receivable balances of $125,329. This amount includes cash consideration$881,020 and $887,742 as of $124,149, net of cash acquired of $1,605, and an adjustment for working capital and indebtedness. During the quarters ended December 31, 20172020 and June 30, 2018, the Company recorded certain measurement period adjustments. These measurement period adjustments did not have a significant impact on the Company’s consolidated statements of income, balance sheets or cash flows. This acquisition enhances the Company’s digital and artificial intelligence capabilities by adding knowledge-based automation technology and services.In connection with the acquisition of RAGE, the Company recorded $1,600 in customer-related intangibles, $600 in marketing-related intangibles, $12,400 in technology-related intangible assets and $100 in other intangible assets, which have a weighted average amortization period of seven years. Goodwill arising from the acquisition amounted to $105,451, which has been allocated to the Company’s India reporting unit and is not deductible for tax purposes. The goodwill represents primarily the acquired digital and artificial intelligence capabilities, operating synergies and other benefits expected to result from combining the acquired operations with those of the Company.Acquisition-related costs of $881 have been included in selling, general and administrative expenses as incurred. In connection with the transaction, the Company also acquired certain assets with a value of $13,836 and assumed certain liabilities amounting to $9,752. The Company also recognized a net deferred tax asset of $1,094. The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.F-303. Business acquisitions and divestiture (Continued)(g) Other acquisitions in 2017In 2017, the Company also completed five individually immaterial business acquisition transactions, namely the acquisition of a supply chain management delivery center in the U.S. (“U.S. Delivery Center”), the purchase of all of the outstanding equity interest in OnSource, LLC (“OnSource”), the purchase of the IT business of Birlasoft (“Birlasoft”), the purchase of the image processing business of Fiserv Solutions of Australia Pty Ltd. (“Fiserv”) and the purchase of all of the outstanding equity interest in Lease Dimensions, Inc. (“Lease Dimensions”). The aggregate total consideration the Company paid to consummate these acquisitions was $87,586. This aggregate amount includes the fair value of contingent earn-out consideration, cash consideration of $76,612, net of cash acquired of $254, and adjustments for closing date working capital, indebtedness, value transfer, seller transaction expenses and certain employee-related liabilities. In addition, this amount reflects measurement period adjustments related to the Birlasoft and Fiserv transactions. These adjustments did not have a significant impact on the Company’s consolidated statements of income, balance sheets or cash flows in the periods in which they were made.The U.S. Delivery Center acquisition enhanced the Company’s supply chain management capabilities for its clients in the consumer packaged goods industry. The OnSource acquisition brought incremental digital capabilities to the Company’s insurance service offerings. The Birlasoft transaction expanded the Company’s end-to-end capabilities for its clients in the healthcare and aviation industries. The Fiserv transaction strengthened the Company’s financial services portfolio and expanded its Australia footprint. The Lease Dimensions acquisition enhanced the Company’s capabilities in commercial lending and leasing.The purchase agreement for the acquisition of the U.S. Delivery Center provides for contingent earn-out consideration ranging from $0 to $10,000, payable by the Company to the seller based on the achievement of certain milestones relative to the thresholds specified in the earn-out calculation. The purchase agreement for the Lease Dimensions acquisition provides for contingent earn-out consideration ranging from $0 to $3,000, payable by the Company to the sellers based on the future performance of the business relative to the thresholds specified in the earn-out calculation.In connection with these transactions, the Company recorded $33,494 in customer-related intangibles, $1,936 in marketing-related intangibles, $2,956 in technology-related intangibles and $100 in other intangibles, which have a weighted average amortization period of five years. Goodwill arising from these acquisitions amounted to $56,521. The goodwill represents primarily the capabilities, operating synergies and other benefits expected to result from combining the acquired operations with those of the Company.The following table sets forth, with respect to each of the five acquisitions, the acquisition date, goodwill reporting unit and the tax deductibility of the goodwill:AcquisitionAcquisition dateGoodwill reporting unitTax deductibility - goodwillU.S. Delivery CenterOctober 16, 2017IndiaDeductibleOnSourceJuly 18, 2017IndiaDeductibleBirlasoftJuly 18, 2017IT ServicesDeductibleFiservMay 11, 2017IndiaNon-deductibleLease DimensionsFebruary 15, 2017AmericasNon-deductibleAcquisition-related costs for these acquisitions, amounting to $2,369 in the aggregate, have been included in selling, general and administrative expenses as incurred. Through these transactions, the Company acquired assets with a value of $10,387, assumed liabilities amounting to $11,239, and recognized a net deferred tax liability of $6,570. The results of operations of the acquired businesses and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the respective dates of the acquisitions.F-31GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)3. Business acquisitions and divestiture (Continued)B. Divestiture(a) A portion of IT support business in EuropeIn November 2017, the Company completed the sale of a portion of its legacy IT support business in Europe (the “Business”). Sale proceeds were $0. During the year ended December 31, 2017, the Business recorded net revenues of $4,546 and a net loss of $9,706.The Company recorded a loss of $5,668 in its consolidated statement of income in connection with the sale of the Business, calculated as follows:Net sale proceeds$ —Net assets of the business, including the translation impact thereof5,569Selling expenses99Loss on divestiture included in other income (expense), net$ 5,6684. Cash and cash equivalents5. Accounts receivable, net of reserve for doubtful receivablesThe following table provides details of the Company’s reserve for doubtful receivables:Accounts receivable were $716,745 and $798,144 , and reserves for doubtful receivables were $23,660 and $23,960, resulting in net accounts receivable balances of $693,085 and $774,184 as of December 31, 2017 and 2018, respectively. In addition, accounts receivable due after one year amounting to $1,624 and $4,099 as of December 31, 2017 and 2018, respectively, are included under other assets in the consolidated balance sheets.Accounts receivable from related parties were $36 and $99 as of December 31, 2017 and 2018, respectively. There are no doubtful receivables in amounts due from related parties.F-32GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)20172020 and 2018:
2021:(a)Included in “prepaid expenses and other current assets” and “other assets” in the consolidated balance sheets.(b)Included in “accrued expenses and other current liabilities” and “other liabilities” in the consolidated balance sheets.As of December 31, 2020 Fair Value Measurements at Reporting Date Using Quoted Prices in
Active Markets for
Identical AssetsSignificant Other
Observable
InputsSignificant Other
Unobservable
InputsTotal (Level 1) (Level 2) (Level 3) Assets Derivative instruments (Note a, c) $ 27,709 $ — $ 27,709 $ — Deferred compensation plan assets (Note a, e) 26,832 — — 26,832 Total $ 54,541 $ — $ 27,709 $ 26,832 Liabilities Earn-out consideration (Note b, d) $ 8,272 $ — $ — $ 8,272 Derivative instruments (Note b, c) 40,981 — 40,981 — Deferred compensation plan liability (Note b, f) 26,390 — — 26,390 Total $ 75,643 $ — $ 40,981 $ 34,662 (c)The Company values its derivative instruments based on market observable inputs, including both forward and spot prices for the relevant currencies and interest rate indices for relevant interest rates. The quotes are taken from an independent market database.(d)The fair value of earn-out consideration, calculated as the present value of expected future payments to be made to the sellers of acquired businesses, was derived by estimating the future financial performance of the acquired businesses using the earn-out formula and performance targets specified in each purchase agreement and adjusting the result to reflect the Company’s estimate of the likelihood of achievement of such targets. Given the significance of the unobservable inputs, the valuations are classified in level 3 of the fair value hierarchy.As of December 31, 2021 Fair Value Measurements at Reporting Date Using Quoted Prices in
Active Markets for
Identical AssetsSignificant Other
Observable
InputsSignificant Other
Unobservable
InputsTotal (Level 1) (Level 2) (Level 3) Assets Derivative instruments (Note a, c) $ 34,070 $ — $ 34,070 $ — Deferred compensation plan assets (a, e) 38,584 — — 38,584 Total $ 72,654 $ — $ 34,070 $ 38,584 Liabilities Earn-out consideration (Note b, d) $ 5,406 $ — $ — $ 5,406 Derivative instruments (Note b, c) 15,254 — 15,254 — Deferred compensation plan liability (b, f) 38,007 — — 38,007 Total $ 58,667 $ — $ 15,254 $ 43,413
(a)Derivative assets are included in “prepaid expenses and other current assets” and “other assets;” deferred compensation plan assets are included in “other assets” in the consolidated balance sheets.(e)The Company’s estimate of the fair value of redeemable non-controlling interest as of December 31, 2017 is based on unobservable inputs considering the assumptions that market participants would make in pricing the obligation. Given the significance of the unobservable inputs, the valuation was classified in level 3 of the fair value hierarchy. Refer to Note 3—Business Acquisitions.
(b)Included in “accrued expenses and other current liabilities” and “other liabilities” in the consolidated balance sheets.(f)Deferred compensation plan assets consist of life insurance policies held under a Rabbi Trust. Assets held in the Rabbi Trust are valued based on the cash surrender value of the insurance contract, which is determined based on the fair value of the underlying assets included in the insurance portfolio and are therefore classified within level 3 of the valuation hierarchy.F-33Value Measurementsvalue measurements (Continued)(g)The fair value of the deferred compensation plan liability is derived based on the fair value of the underlying assets in the insurance policies and is therefore classified within level 3 of the valuation hierarchy. 20172020 and 2018:
2021:(a)Changes in the fair value of earn-out consideration are reported in “other operating (income) expense, net” in the consolidated statements of income.(b)Interest expense is included in “interest income (expense), net” and the impact of changes in foreign exchange is reported in “foreign exchange gains (losses), net” in the consolidated statements of income. The cumulative translation adjustment is reported as a component of “other comprehensive income (loss).”Year ended December 31, 2020 2021 Opening balance $ 22,184 $ 8,272 Payments made on earn-out consideration (Note a) (6,552) (2,556) Change in fair value of earn-out consideration (Note b) (7,790) (750) Others (Note c) 430 440 Closing balance $ 8,272 $ 5,406 20172020 and 2018:2021:Year ended December 31, 2020 2021 Opening balance $ 11,208 $ 26,832 Additions (net of redemption) 11,460 7,523 Change in fair value of deferred compensation plan assets (Note a) 4,164 4,229 Closing balance $ 26,832 $ 38,584
(a)Changes in the fair value of plan assets are reported in “other income (expense), net” in the consolidated statements of income.(a)Changes in the fair value of plan assets are reported in “other income (expense), net” in the consolidated statements of income.20172020 and 2018:2021:Year ended December 31, 2020 2021 Opening balance $ 10,943 $ 26,390 Additions (net of redemption) 11,327 7,523 Change in fair value of deferred compensation plan liabilities (Note a) 4,120 4,094 Closing balance $ 26,390 $ 38,007 (a) the fair value of deferred compensation liabilities are reported in “selling, general and administrative expenses” in the consolidated statements of income.F-34GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share datafair value of deferred compensation liabilities are reported in “selling, general and share count)flows.flows and interest rates. The Company has established risk management policies, including the use of derivative financial instruments to hedge foreign currency assets and liabilities, and foreign currency denominated forecasted cash flows and interest rate risks.risk. These derivative financial instruments are largely deliverable and non-deliverable forward foreign exchange contracts, treasury rate locks and interest rate swaps. The Company enters into these contracts with counterparties that are banks or other financial institutions, and the Company considers the risk of non-performance by such counterparties not to be material. The forward foreign exchange contracts and interest rate swaps mature over periodsduring a period of up to 6048 months and the forecasted transactions are expected to occur during the same periods.(a)Notional amounts are key elements of derivative financial instrument agreements but do not represent the amount exchanged by counterparties and do not measure the Company’s exposure to credit, foreign exchange, interest rate or other market risks. However, the amounts exchanged are based on the notional amounts and other provisions of the underlying derivative financial instrument agreements.(b)Balance sheet exposure is denominated in U.S. dollars and denotes the mark-to-market impact of the derivative financial instruments on the reporting date.Notional principal amounts
(note a)Balance sheet exposure asset
(liability) (note b)As of December 31, 2020 As of December 31, 2021 As of December 31, 2020 As of December 31, 2021 Foreign exchange forward contracts denominated in: United States Dollars (sell) Indian Rupees (buy) $ 1,150,000 $ 1,348,600 $ 15,207 $ 26,247 United States Dollars (sell) Mexican Peso (buy) 17,500 23,750 716 140 United States Dollars (sell) Philippines Peso (buy) 67,200 75,600 1,332 (2,215) Euro (sell) United States Dollars (buy) 96,651 120,994 (5,659) 2,634 Singapore Dollars (buy) United States Dollars (sell) 10,153 3,655 66 65 Euro (sell) Romanian Leu (buy) 29,489 47,506 (22) (233) Japanese Yen (sell) Chinese Renminbi (buy) 19,230 10,440 473 202 United States Dollars (sell) Chinese Renminbi (buy) — 45,000 — 120 Pound Sterling (sell) United States Dollars (buy) — 49,031 — 545 United States Dollars (sell) Hungarian Font (buy) 30,000 39,000 904 (2,174) Hungarian Font (Sell) Euro (buy) 10,444 2,828 61 (17) Australian Dollars (sell) Indian Rupees (buy) 140,525 97,053 (7,670) 1,234 Interest rate swaps (floating to fixed) 488,022 460,135 (18,680) (7,732) $ (13,272) $ 18,816 and interest rate swaps and treasury rate locks as cash flow hedges. Foreign exchange forward contracts are entered into to cover the effects of future exchange rate variability on forecasted revenue and purchases of services, and interest rate swaps and treasury rate locks are entered into to cover interest rate fluctuation risk. In addition to this program, the Company uses derivative instruments that are not accounted for as hedges under the FASB guidance in order to hedge foreign exchange risks related to balance sheet items, such as receivables and intercompany borrowings, that are denominated in currencies other than the Company’s underlying functional currency.F-35GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)Cash flow hedges Non-designated As of December 31, 2020 As of December 31, 2021 As of December 31, 2020 As of December 31, 2021 Assets Prepaid expenses and other current assets $ 16,188 $ 16,064 $ 5,357 $ 3,130 Other assets $ 6,164 $ 14,876 $ — $ — Liabilities Accrued expenses and other current liabilities $ 16,387 $ 11,408 $ 3,785 $ 1,090 Other liabilities $ 16,886 $ 2,756 $ 3,923 $ — Year ended December 31, 2019 2020 2021 Before-Tax amount Tax (Expense) or Benefit Net of tax Amount Before-Tax
amountTax (Expense) or Benefit Net of tax Amount Before-Tax
amountTax (Expense) or Benefit Net of tax Amount Opening balance $ (2,411) $ (5,524) $ (7,935) $ (4,126) $ (1,466) $ (5,592) $ (10,921) $ 1,861 $ (9,060) Net gains (losses) reclassified into statement of income on completion of hedged transactions Net gains (losses) reclassified into statement of income on completion of hedged transactions 19,401 (7,212) 12,189 (6,171) 605 (5,566) 7,628 (1,836) 5,792 Changes in fair value of effective portion of outstanding derivatives, net 17,686 (3,154) 14,532 (12,966) 3,932 (9,034) 36,017 (7,101) 28,916 Gain (loss) on cash flow hedging derivatives, net (1,715) 4,058 2,343 (6,795) 3,327 (3,468) 28,389 (5,265) 23,124 Closing balance $ (4,126) $ (1,466) $ (5,592) $ (10,921) $ 1,861 $ (9,060) $ 17,468 $ (3,404) $ 14,064 Note (a) The tax (expense) benefit includes the effect of novating certain hedging instruments as part of an intercompany transfer. F-36GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)7. Derivative financial instruments (Continued)Derivatives in
Cash Flow
Hedging
RelationshipsAmount of Gain (Loss)
recognized in OCI on
Derivatives (Effective Portion)Location of Gain (Loss)
reclassified
from OCI into
Statement of Income
(Effective Portion)Amount of Gain (Loss) reclassified
from OCI into Statement of Income
(Effective Portion)Year ended December 31, Year ended December 31, 2019 2020 2021 2019 2020 2021 Forward foreign
exchange contracts$ 24,581 $ 6,933 $ 32,270 Revenue $ 6,782 $ 4,432 $ 1,354 Interest rate swaps (6,895) (19,899) 2,931 Cost of revenue 6,435 (4,553) 11,155 Treasury rate lock — — 816 Selling, general and administrative expenses 1,732 (1,266) 3,012 Interest expense 4,452 (4,784) (7,893) $ 17,686 $ (12,966) $ 36,017 $ 19,401 $ (6,171) $ 7,628 related torecognized in the statement of income on the ineffective portion of derivatives and excluded from effectiveness testing for the periods shown.Non-designatedyears ended December 31, 2019, 2020 and 2021, respectively. Derivatives not designated as hedging instruments Location of Gain (Loss) recognized in Statement of Income on Derivatives Amount of Gain (Loss) recognized in Statement of Income on Derivatives Derivatives not designated as hedging instruments Year ended December 31, 2019 2020 2021 Forward foreign exchange contracts (Note a) Foreign exchange gains (losses), net $ 4,299 $ (8,055) $ 12,116 Forward foreign exchange contracts (Note b) Forward foreign exchange contracts (Note b) Foreign exchange gains (losses), net — 3,963 — $ 4,299 $ (4,092) $ 12,116 (a)These forward foreign exchange contracts were entered into to hedge fluctuations in foreign exchange rates for recognized balance sheet items, such as receivables and intercompany borrowings, and were not originally designated as hedges under FASB guidance on derivatives and hedging. Realized gains (losses) and changes in the fair value of these derivatives are recorded in foreign exchange gains (losses), net in the consolidated statements of income.As of December 31, 2020 2021 Advance income and non-income taxes $ 73,008 $ 28,075 Contract asset (Note 25) Contract asset (Note 25) 9,035 8,506 Prepaid expenses 32,375 38,528 Derivative instruments 21,545 19,194 Employee advances 2,636 2,797 Deposits 8,774 5,839 Advances to suppliers 2,716 804 Others 37,319 30,698 Total Total $ 187,408 $ 134,441 F-37As of December 31, 2020 2021 Land $ 5,792 $ 7,292 Buildings 41,622 41,282 Furniture and fixtures 52,610 52,901 Computer equipment and servers 270,376 309,551 Plant, machinery and equipment 109,722 108,527 Computer software 141,417 138,343 Leasehold improvements 126,761 114,747 Vehicles 152 162 Capital work in progress 44,011 45,647 Property, plant and equipment, gross $ 792,463 $ 818,452 Less: Accumulated depreciation, amortization and impairment Less: Accumulated depreciation, amortization and impairment (561,341) (603,363) Property, plant and equipment, net $ 231,122 $ 215,089 2016, 20172019, 2020 and 20182021 was $45,826, $44,909$53,332, $67,662 and $49,518,$62,159, respectively. SoftwareComputer software amortization for the years ended December 31, 2016, 20172019, 2020 and 2018 amounted to $9,471, $11,4152021 was $14,167, $9,421 and $12,317,5,842, respectively.$744, $(1,712)$(267), $213 and $(231)$(430) for the years ended December 31, 2016, 20172019, 2020 and 2018,2021, respectively.Property, plant and equipment, net include assets held under capital lease arrangements amounting$3,302 and $2,343 as of December 31, 2017 and December 31, 2018, respectively. Depreciation expense in respect of these assets was $1,564, $1,682 and $1,395 forcomputer software during the years ended December 31, 2016, 20172020 and 2018, respectively.During the year ended December 31, 2018, the Company tested for recoverability a group of assets, comprised of computer software and technology-related intangible assets,2021 as a result of a downward revision to the forecasted cash flows to be generated by this group of assets. Based on the results of its testing, the Company determined that the carrying value of the group of assets exceeded the estimated undiscounted cash flows and the Company recorded a $4,265 write-down to reduce the carrying value to its fair value. The Company used the income approach to determine the fair value of the group of assets for the purpose of calculating the charge. This write-down has been recordeddescribed in other operating (income) expenses, net in the consolidated statement of income and has been allocated to computer software and technology-related intangible assets, amounting to $1,200 and $3,065, respectively.During the year ended December 31, 2017, the Company tested for recoverability a group of assets, comprised of computer software and a technology-related intangible asset, as a result of a downward revision to the forecasted cash flows to be generated by this group of assets. Based on the results of its testing, the Company determined that the carrying value of the group of assets exceeded the estimated undiscounted cash flows and the Company recorded an $8,000 write-down to reduce the carrying value to its fair value. The Company used the income approach to determine the fair value of the group of assets for the purpose of calculating the charge. This write-down has been recorded in other operating (income) expenses, net in the consolidated statement of income and has been allocated to computer software and technology-related intangible assets, amounting to $5,760 and $2,240, respectively.F-38GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)20172020 and 2018:2021:As of December 31, 2020 2021 Opening balance $ 1,574,466 $ 1,695,688 Goodwill relating to acquisitions consummated during the period 123,595 44,216 Impact of measurement period adjustments (5,653) 1,205 Effect of exchange rate fluctuations 3,280 (10,082) Closing balance $ 1,695,688 $ 1,731,027 Goodwill has been allocated tofollowingchanges in goodwill by reporting units, which represent different business units of the Company, as follows:Inunit for the year ended December 31, 20182020:BCMI CGRLH HMS Total Opening balance $ 417,213 $ 555,130 $ 602,123 $ 1,574,466 Goodwill relating to acquisitions consummated during the period 2,559 52,612 68,424 123,595 Impact of measurement period adjustments (542) (1,372) (3,739) (5,653) Effect of exchange rate fluctuations 942 1,204 1,134 3,280 Closing balance $ 420,172 $ 607,574 $ 667,942 $ 1,695,688 2017,2021:BCMI CGRLH HMS Total Opening balance $ 420,172 $ 607,574 $ 667,942 $ 1,695,688 Goodwill relating to acquisitions consummated during the period 4,167 7,032 33,017 44,216 Impact of measurement period adjustments 35 309 861 1,205 Effect of exchange rate fluctuations (3,117) (3,795) (3,170) (10,082) Closing balance $ 421,257 $ 611,120 $ 698,650 $ 1,731,027 ASU 2011-08,ASC 350, Intangibles-Goodwill and Other, the Company performed an assessment of qualitative factors to determine whether events or circumstances exist that may lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on such assessment, as atof December 31, 20182020 and December 31, 2017,2021, the Company concluded that it is not more likely than not that the fair values of any of the Company’s reporting units are less than their carrying amounts.is $120,617was $296,046 and $187,546$326,795 as of December 31, 20172020 and 2018,2021, respectively.acquired either individually or with a group of other assets or in a business combination are as follows:As of December 31, 2020 As of December 31, 2021 Gross carrying amount Accumulated amortization & Impairment Net Gross carrying amount Accumulated amortization & Impairment Net Customer-related intangible assets $ 478,189 $ 359,652 $ 118,537 $ 489,974 $ 394,688 $ 95,286 Marketing-related intangible assets 96,561 61,154 35,407 98,870 76,663 22,207 Technology-related intangible assets 152,293 90,866 61,427 171,772 119,630 52,142 Intangible assets under development 23,864 2,503 21,361 — — — Total Total $ 750,907 $ 514,175 $ 236,732 $ 760,616 $ 590,981 $ 169,635 F-39GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)10. Goodwill and intangible assets (Continued)Consolidated Statementsconsolidated statements of Incomeincome under amortization of acquired intangible assets for the years ended December 31, 2016, 20172019, 2020 and 20182021 were $27,183, $36,412$32,612, $43,343 and $38,850,$58,448, respectively.technology-related internally developedinternally-developed and other intangible assets disclosed in the consolidated statements of income under “costcost of revenue”revenue and “selling,selling, general and administrative expense”expenses for the years ended December 31, 2016, 20172019, 2020 and 20182021 were $0, $452$18,957, $27,290 and $2,807,$24,987, respectively.$0, $(15)$(76), $74 and $5$(157) for the years ended December 31, 2016, 20172019, 2020 and 2018,2021, respectively.The Company recorded write-downs to technology-related intangible assets during20172019, 2020 and 2018, as described in note 9.During the year ended December 31, 2017,2021, the Company tested afor recoverability certain customer-related and technology-related intangible asset for recoverabilityassets, including those under development, and certain property, plant and equipment, as a result of the termination of a client contract. Based on the results of such testing, the Company recorded a $1,311 write-down to reduce the amount of the asset’s total carrying value. The Company used the income approach to determine the fair value of the intangible asset for the purpose of calculating the resulting charge. This write-down has been recorded in other operating (income) expenses, netchanges in the consolidated statement of income. During the year ended December 31, 2017, the Company also recorded a write-downCompany’s investment strategy and market trends which led to a technology-related intangible asset as described in note 9.During the year ended December 31, 2016, the Company tested an intangible software asset for recoverability as a result of a downward revisiondecision to the forecasted cash flows to be generated by the intangible asset. The Company previously recorded a charge to this asset in the third quarter of 2015.cease certain service offerings. Based on the results of its testing, the Company determined that the carrying value of certain assets tested were not recoverable and the intangible asset exceeded its estimated undiscounted cash flows by $10,324 andCompany recorded an additional write-down to further reducecomplete write-downs of the carrying value by this amount. The Company used the income approachvalues of these assets amounting to determine the fair value of the intangible asset$3,511, $14,083 and $915 for the purpose of calculating the charge. This write-down hadyears ended December 31, 2019, 2020 and 2021, respectively. These write-downs have been recorded in other“other operating (income) expenses, netexpense, net” in the consolidated statementstatements of income. DuringyearConsolidated Financial Statements2016, the Company also tested a customer-related intangible asset for recoverability as a result of the termination of a client contract. Based on results of such testing, the Company recorded an $871 write-down in the amount of the asset’s total carrying value. The Company used the income approach to determine the fair value of the intangible asset for the purpose of calculating the resulting charge. This write-down had been recorded in other operating (income) expenses, net in the consolidated statement of income.Year ended December 31, 2019 2020 2021 Technology related intangibles $ 3,511 $ 5,179 $ 205 Customer related intangibles — 938 — Total Intangibles $ 3,511 $ 6,117 $ 205 Property, plant and equipment $ — $ 7,966 $ 710 Total Property, plant and equipment $ — $ 7,966 $ 710 Grand Total $ 3,511 $ 14,083 $ 915 For the year ending December 31: 2022 $ 63,620 2023 48,718 2024 32,938 2025 19,527 2026 and beyond 4,832 Total $ 169,635 F-40As of December 31, 2020 2021 Contract asset (Note 25) $ 6,770 $ 5,235 Advance income and non-income taxes 155,035 124,219 Deposits 32,058 28,463 Derivative instruments 6,164 14,876 Prepaid expenses 5,176 5,979 Deferred billings, net* 25,357 44,360 Right of use (ROU) assets finance lease 50,083 34,284 Others 43,175 64,742 Total $ 323,818 $ 322,158 and plants, machinery and equipment from various lessors under capital lease arrangements which are not material to the consolidated financial statements.The Company conducts its operations using facilities under non-cancellable operatinglessors. Certain lease agreements that expire at various dates. Future minimuminclude options to terminate or extend the leases for up to 10 years. The lease payments under these agreements are as follows:Rental expenses in agreements with rent holidaysThe components of lease cost for operating and scheduled rent increases are recorded on a straight-line basis over the applicable lease term. Rent expenses under cancellable and non-cancellable operatingfinance leases were $50,827, $59,484 and $66,110 for the years ended December 31, 2016, 20172019, 2020 and 2018, respectively.Year ended December 31, 2019 Year ended December 31, 2020 Year ended December 31, 2021 Finance lease cost: Amortization of ROU assets (Note a) 9,302 12,483 15,549 Interest on lease liabilities (Note b) 2,997 2,454 2,538 Operating lease cost (Note c) 74,436 88,596 81,637 Short-term lease cost (Note c) 438 1,643 1,057 Variable lease cost (Note c) 4,052 5,347 5,307 Total lease cost $ 91,225 $ 110,523 $ 106,088 rental expensesoperating lease cost set out above includeincludes the effect of the reclassification of foreign exchange (gains) losses related to the effective portion of foreign currency derivative contracts amounting to $598, $(1,533)$(105), $161 and $(195)$(333) for the years ended December 31, 2016, 20172019, 2020 and 2018,2021, respectively.F-41Year ended December 31, 2019 Year ended December 31, 2020 Year ended December 31, 2021 Weighted-average remaining lease term—finance leases 3.9 years 3.1 years 2.34 years Weighted-average remaining lease term—operating leases 6.77 years 6.42 years 5.76 years Weighted-average discount rate—finance leases 9.20 % 6.61 % 5.70 % Weighted-average discount rate—operating leases 6.87 % 7.28 % 6.98 % Year ended December 31, 2019 Year ended December 31, 2020 Year ended December 31, 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ 2,859 $ 2,898 $ 2,592 Operating cash flows from operating leases $ 72,645 $ 92,010 $ 80,159 Financing cash flows from finance leases $ 7,380 $ 10,567 $ 13,926 Period range Finance lease Operating lease 2022 $ 20,008 $ 80,226 2023 10,178 73,374 2024 5,105 62,132 2025 2,062 64,383 2026 34 37,131 Thereafter — 66,004 Total lease payments $ 37,387 $ 383,250 Less: Imputed interest 2,541 73,952 Total lease liabilities $ 34,846 $ 309,298 Period range Finance lease Operating lease 2021 $ 19,584 $ 78,148 2022 17,165 75,288 2023 10,081 66,790 2024 3,876 56,013 2025 1,000 43,696 Thereafter — 117,580 Total lease payments $ 51,706 $ 437,515 Less: Imputed interest 2,682 91,673 Total lease liabilities $ 49,024 $ 345,842 As of December 31, 2020 2021 Accrued expenses $ 150,390 $ 162,054 Accrued employee cost 286,399 307,777 Earn-out consideration 2,651 2,501 Statutory liabilities 104,768 67,948 Retirement benefits 1,967 1,746 Compensated absences Compensated absences 28,635 26,596 Derivative instruments 20,172 12,498 Contract liabilities (Note 25) Contract liabilities (Note 25) 154,717 160,602 Finance lease liability Finance lease liability 18,066 18,549 Others Others 39,004 31,169 Total Total $ 806,769 $ 791,440 In August 2018, the Company amended its 2015 credit facility (“the 2015 Facility”), which was comprised of an $800,000 term loan and a $350,000 revolving credit facility. The amended facility (the “2018 Facility”) is comprised of a $680,000 term loan, which represents the outstanding balance under the 2015 Facility as of the date of amendment, and a $500,000 revolving credit facility. The 2018 Facility expires on August 8, 2023. The amendment did not result in a substantial modification of $550,814 of the outstanding term loan under the 2015 Facility. Further, as a result of the amendment, the Company extinguished the outstanding term loan under the 2015 Facility of $129,186 and obtained additional funding of $129,186, resulting in no change to the outstanding principal of the term loan under the 2018 Facility. In connection with the amendment, the Company expensed $2,029, representing partial acceleration of the amortization of the existing unamortized debt issuance costs and an additional fee paid to the Company’s lenders related to the term loan. The overall borrowing capacity under the revolving credit facility increased from $350,000 to $500,000. The amendment of the revolving credit facility resulted in accelerated amortization of $82 relating to existing unamortized debt issuance cost. The remaining unamortized costs and an additional third party fee paid in connection with the amendment will be amortized over the term of the amended facility, which will expire on August 8, 2023. . Facility bear interest at a rate equal to, at the election of the Company, either LIBOR plus an applicable margin equal to 1.375% per annum compared to a margin of 1.50% under the 2015 facility, or a base rate plus an applicable margin equal to 0.375% per annum, compared to a margin of 0.50% under the 2015 facility, in each case subject to adjustment based on the Company’s debt ratings provided by Standard & Poor’s Rating Services and Moody’s Investors Service, Inc. Based on the Company’s election and current credit rating, the applicable interest rate is equal to LIBOR plus 1.375% per annum. The amended credit agreement containsrestricts certain customarypayments, including dividend payments, if there is an event of default under the credit agreement or if the Company is not, or after making the payment would not be, in compliance with certain financial covenants includingcontained in the amended credit agreement. These covenants require the Company to maintain a maximumnet debt to EBITDA leverage covenantratio of below 3x and a minimuman interest coverage ratio.ratio of more than 3x. During the year ended December 31, 2018,2021, the Company was in compliance with the terms of the credit agreement, including all of the financial covenants.F-42GENPACT LIMITED AND ITS SUBSIDIARIESNotescovenants therein. The Company’s retained earnings are not subject to any restrictions on availability to make dividend payments to shareholders, subject to compliance with the Consolidated Financial Statements(In thousands, except per share data and share count)14. Long-term debt (Continued)20172020 and December 31, 2018,2021, the amount outstanding under the term loan, net of debt amortization expense of $1,848$1,150 and $2,158,$687, respectively, was $698,152$593,850 and $660,841,$560,313, respectively.20172020 and December 31, 2018,2021, the term loan bore interest at a rate equal to LIBOR plus a margin of 1.50% per annum and 1.375% per annum, respectively.annum. Indebtedness under the 2018 Facilityamended facility is unsecured. The amount outstanding on the term loan as of December 31, 20182021 requires quarterly payments of $8,500, and the balance of the loan is due and payable upon the maturity of the term loan on AugAugust 8, 2023.2018,2021, net of debt amortization expense, is as follows:Year ended Amount 2022 33,564 2023 526,749 Total $ 560,313 March 2017, thousands, except per share data and share count).r.l. (the “Issuer”) r.l., a wholly ownedwholly-owned subsidiary of the Company, issued $350,000 aggregate principal amount of 3.70% senior notes in a private offering, resultingMarch 2017 (the “2017 Senior Notes”) and $400,000 aggregate principal amount of 3.375% senior notes in cash proceeds of approximately $348,519, net of an underwriting fee of $1,481.November 2019 (the “2019 Senior Notes”). The issuance was2017 Senior Notes and 2019 Senior Notes are fully guaranteed by the Company. In connection with the offering, the Company incurred otherThe total debt issuance costs of $1,161.$2,642 and $2,937 incurred in connection with the 2017 Senior Notes and 2019 Senior Notes offerings, respectively, are being amortized over the lives of the respective notes as an$2,642$3,032 incurred in connection with the 2021 Senior Notes is being amortized over the life of the notes2021 Senior Notes as additional interest expense. As of December 31, 2017 and December 31, 2018,2021, the amount outstanding under the notes,2021 Senior Notes, net of debt amortization expense of $2,239 and $1,713,$2,571, was $347,761 and $348,287 respectively,$347,429, which is payable on April 1, 2022. 10, 2026.Issuer will payCompany pays interest on (i) the notes2017 Senior Notes semi-annually in arrears on April 1 and October 1 of each year, (ii) the 2019 Senior Notes semi-annually in arrears on June 1 and December 1 of each year, and (iii) the 2021 Senior Notes semi-annually in arrears on April 10 and October 10 of each year, ending on the maturity datedates of April 1, 2022.2022, December 1, 2024 and April 10, 2026, respectively. The Company, at its option, may redeem the notesSenior Notes at any time in whole or in part, at a redemption price equal to (i) 100% of the principal amount of the notes redeemed, together with accrued and unpaid interest on the redeemed amount, and (ii) if the notes are redeemed prior to, in the case of the 2017 Senior Notes, March 1, 2022, in the case of the 2019 Senior Notes, November 1, 2024, and in the case of the 2021 Senior Notes, March 10, 2026, a specified “make-whole” premium. The notesSenior Notes are subject to certain customary covenants, including limitations on the ability of the Company and certain of its subsidiaries to incur debt secured by liens, engage in certain sale and leaseback transactions and consolidate, merge, convey or transfer their assets and duringsubstantially as an entirety. During the year ended December 31, 2018,2021, the Company and its applicable subsidiaries were in compliance with the covenants. Upon certain change of control transactions, the Issuerapplicable issuer or issuers will be required to make an offer to repurchase the notesSenior Notes at a price equal to 101% of the aggregate principal amount of such notes,the Senior Notes, plus accrued and unpaid interest. The interest rate payable on the notesSenior Notes is subject to adjustment if the credit rating of the notesSenior Notes is downgraded, up to a maximum increase of 2.0%. In connection with the 3.70% senior notes private offering, the Issuer and the Company entered into a registration rights agreement with the initial purchasersoutstanding unregistered notes pursuant to which the Issuer and the Company agreed to complete an exchange offer within 455 days after the date of the private offering upon terms identical in all material respects to the terms of the outstanding unregistered notes, except that the transfer restrictions, registration rights and additional interest provisions applicable to the outstanding unregistered notes would not apply to the exchange notes. On July 24, 2018, the unregistered notes exchange offer was completed and all outstanding unregistered notes were exchanged for freely tradable notes registered under the Securities Act of 1933,Company’s long-term debt is as amended. F-43As of December 31, 2020 2021 Credit facility, net of debt amortization expenses $ 593,850 $ 560,313 3.70% 2017 Senior Notes, net of debt amortization expenses 349,342 349,869 3.375% 2019 Senior Notes, net of debt amortization expenses 397,716 398,298 1.750% 2021 Senior Notes, net of debt amortization expenses $ — $ 347,429 Total $ 1,340,908 $ 1,655,909 Current portion 33,537 383,433 Non-current portion 1,307,371 1,272,476 Total $ 1,340,908 $ 1,655,909 (a)Fund-based and non-fund-based credit facilities with banks, which are available for operational requirements in the form of overdrafts, letters of credit, guarantees and short-term loans. As of December 31, 2017 and December 31, 2018, the limits available were $15,064 and $14,281, respectively, of which $7,900 and $7,389 was utilized, constituting non-funded drawdown.
(a)Fund-based and non-fund-based credit facilities with banks, which are available for operational requirements in the form of overdrafts, letters of credit, guarantees and short-term loans. As of December 31, 2020 and 2021, the limits available were $14,311 and $24,727, respectively, of which $7,809 and $5,848, respectively, was utilized, constituting non-funded drawdown.(b)A fund-based and non-fund based revolving credit facility of $500,000 which the Company obtained through an amendment of its existing credit agreement on August 9, 2018, as described in note 14. Prior to the amendment, the Company’s revolving credit facility was $350,000. The amended credit facility expires on August 8, 2023. The funded drawdown amount under the Company’s revolving facilities bore interest at a rate equal to LIBOR plus a margin of 1.50% as of December 31, 2017 compared to a rate equal to LIBOR plus a margin of 1.375% as of December 31, 2018. The unutilized amount on the revolving facilities bore a commitment fee of 0.25% as of December 31, 2017 compared to a commitment fee of 0.20% as of December 31, 2018. As of December 31, 2017 and December 31, 2018, a total of $170,978 and $297,098 respectively, was utilized, of which $170,000 and $295,000, respectively, constituted funded drawdown and $978 and $2,098, respectively, constituted non-funded drawdown. The Company’s amended credit agreement contains certain customary covenants, including a maximum leverage covenant and a minimum interest coverage ratio. During the year ended December 31, 2018, the Company was in compliance with the financial covenants of the credit agreement. As of December 31, 2020 2021 Accrued employee cost 19,797 15,790 Earn-out consideration 5,621 2,905 Retirement benefits 11,947 11,993 Compensated absences 47,656 52,023 Derivative instruments 20,809 2,756 Contract liabilities (Note 25) 68,760 80,222 Finance lease liability 30,958 16,297 Others 32,850 63,224 Total $ 238,398 $ 245,210 F-44GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)schemesprograms covering its employees.2016, 20172019, 2020 and 2018,2021, all of the plan assets were primarily invested in debt securities.JapanPhilippines Plan and the PhilippinesJapan Plan are calculated on an actuarial basis. Company contributions in respect of these plans are made to insurer-managed funds or to a trust. The trust contributions are further invested in government bonds.F-45GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)20172020 and 2018.2021.As of December 31, 2020 2021 Change in benefit obligation Projected benefit obligation at the beginning of the year $ 80,561 $ 97,660 Service cost 11,897 14,546 Actuarial loss (Gain) Actuarial loss (Gain) 6,843 (10,436) Interest cost 5,297 5,497 Liabilities assumed on acquisition/ transfer of employees Liabilities assumed on acquisition/ transfer of employees 180 — Benefits paid (6,388) (9,162) Settlements Settlements — (4,328) Curtailments Curtailments — (181) Effect of exchange rate changes (730) (1,814) Projected benefit obligation at the end of the year $ 97,660 $ 91,782 Change in fair value of plan assets Fair value of plan assets at the beginning of the year $ 70,900 $ 93,809 Employer contributions 24,523 12,907 Actual gain on plan assets 5,370 4,831 Benefits paid (6,287) (9,162) Settlements Settlements — (3,495) Effect of exchange rate changes (697) (1,915) Fair value of plan assets at the end of the year $ 93,809 $ 96,975 Funded status, end of year Funded status, end of year $ (3,851) $ 5,193 Amounts recognized in the consolidated balance sheets Amounts recognized in the consolidated balance sheets Non-current assets (recorded under other assets-others) Non-current assets (recorded under other assets-others) $ 10,063 $ 18,932 Current liabilities (recorded under accrued expenses and other current liabilities-retirement benefits) Current liabilities (recorded under accrued expenses and other current liabilities-retirement benefits) (1,967) (1,746) Non-current liabilities (recorded under other liabilities- retirement benefits) Non-current liabilities (recorded under other liabilities- retirement benefits) (11,947) (11,993) Funded status, end of year Funded status, end of year $ (3,851) $ 5,193 20172019, 2020 and 20182021 were as follows:As of December 31, 2019 2020 2021 Net actuarial loss $ (21,490) $ (24,669) $ (13,399) Net prior service credit / (cost) (717) (477) (300) Deferred tax benefits 6,171 7,065 3,206 Other comprehensive income (loss), net $ (16,036) $ (18,081) $ (10,493) 20182020 and 2021 were as follows:As of December 31, 2020 2021 Net Actuarial (Loss) Gain Net Actuarial (Loss) Gain $ (5,891) $ 9,019 Amortization of net actuarial loss 2,242 1,379 Deferred tax (expense) benefits Deferred tax (expense) benefits 894 (3,859) Net prior service credit / (cost) Net prior service credit / (cost) 219 170 Curtailment Curtailment — 181 Settlements Settlements — 519 Effect of exchange rate changes 491 179 Other comprehensive income (loss), net $ (2,045) $ 7,588 F-46As of December 31, 2020 2021 Accumulated benefit obligation $ 15,441 $ 12,496 Fair value of plan assets at the end of the year $ 5,446 $ 3,161 As of December 31, 2020 2021 Projected benefit obligation $ 23,090 $ 18,806 Fair value of plan assets at the end of the year $ 9,176 $ 5,067 2016, 20172019, 2020 and 20182021 include the following components:Year ended December 31, 2019 2020 2021 Service costs $ 8,915 $ 11,897 $ 14,546 Interest costs 4,667 5,297 5,497 Amortization of actuarial loss 1,384 2,461 1,549 Expected return on plan assets (2,605) (4,589) (6,239) One-time cost One-time cost 202 — — Settlements Settlements — — 519 Net defined benefit plan costs $ 12,563 $ 15,066 $ 15,872 amountCompany estimates that it will pay approximately $9,733 in “other comprehensive loss” that is expectedfiscal 2022 related to be recognized as a component of net periodiccontributions to defined benefit cost over the next fiscal year is $1,116.20172020 and 20182021 are presented below:As of December 31, 2020 2021 Discount rate 4.45 % - 5.90% 5.25 % - 6.45% Rate of increase in compensation per annum 5.20 % - 9.00% 4.60 % - 8.00% 2016, 20172019, 2020 and 20182021 are presented below:Year ended December 31, 2019 2020 2021 Discount rate 8.30 % - 8.40 % 6.80 % - 7.35 % 4.45% - 5.90% Rate of increase in compensation per annum 5.20 % - 11.00 % 5.20 % - 11.50 % 5.20% - 9.00% Expected long term rate of return on plan assets per annum 7.50% 7.50% 7.00% - 7.50% 20172020 and 20182021 are presented below:As of December 31, 2020 2021 Discount rate 7.20 % 8.20 % Rate of increase in compensation per annum 5.50 % 5.50 % 2016, 20172019, 2020 and 20182021 are presented below:Year ended December 31, 2019 2020 2021 Discount rate 9.40 % 7.60 % 7.20 % Rate of increase in compensation per annum 5.50 % 5.50 % 5.50 % F-47As of December 31, 2020 2021 Discount rate 5.26 % 7.67% Rate of increase in compensation per annum 5.00 % 3.00% - 6.00% Year ended December 31, 2019 2020 2021 Discount rate 7.53 % 5.22 % 5.26 % Rate of increase in compensation per annum 6.00 % 6.00 % 5.00 % Expected long-term rate of return on plan assets per annum 1.00 % 2.40 % 2.00 % 20172020 and 20182021 are presented below:As of December 31, 2020 2021 Discount rate 0.17% — 0.41% 0.14% — 0.81% Rate of increase in compensation per annum 0.00% 0.00% 2016, 20172019, 2020 and 20182021 are presented below:Year ended December 31, 2019 2020 2021 Discount rate 0.076 % - 0.269 % 0.094% - 0.271% 0.17 % - 0.41% Rate of increase in compensation per annum 0.00 % 0.00 % 0.00% Expected long term rate of return on plan assets per annum 0.00 % - 1.77 % 0.00% - 1.77% 1.77 % - 3.12% 20172020 and 20182021 by asset category are as follows:(a)Includes investments in funds that invest 100% of their assets in fixed income securities such as money market instruments, government securities and public and private bonds.(b)As of December 31, 2020 Fair Value Measurements at Reporting Date Using Quoted Prices in
Active Markets for
Identical AssetsSignificant Other
Observable
InputsSignificant Other
Unobservable
InputsTotal (Level 1) (Level 2) (Level 3) Asset Category Cash 21,707 21,707 — — Fixed income securities (Note a) 63,444 — 63,444 — Other securities (Note b) 8,658 — 8,658 — Total $ 93,809 $ 21,707 $ 72,102 $ — As of December 31, 2021 Fair Value Measurements at Reporting Date Using Quoted Prices in
Active Markets for
Identical AssetsSignificant Other
Observable
InputsSignificant Other
Unobservable
InputsTotal (Level 1) (Level 2) (Level 3) Asset Category Cash 14,059 14,059 — — Fixed income securities (Note a) 80,612 — 80,612 — Other securities (Note b) 2,304 — 2,304 — Total $ 96,975 $ 14,059 $ 82,916 $ — the remaining portion in equity securities.F-48GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)17. Employee benefit plans (Continued)Year ending December 31, 2022 $ 12,938 2023 13,353 2024 14,310 2025 15,182 2026 16,250 2027 - 2031 83,964 $ 155,997 2018.2016, 20172019, 2020 and 2018,2021, the Company contributed the following amounts to defined contribution plans in various jurisdictions:Year ended December 31, 2019 2020 2021 India $ 29,729 $ 30,396 $ 37,508 U.S. 19,401 19,491 21,496 U.K. 19,260 18,643 19,874 China 18,816 16,436 24,988 Other regions 8,538 11,481 15,516 Total $ 95,744 $ 96,447 $ 119,382 Deferred compensation plan assets consist of life insurance policies. In December 2018,However, no such contributions have been made by the Company transferred these policies to a Rabbi Trust, which now holds the assets under the Plan.will beare credited or debited with notional investment gains and losses equal to the experienceperformance of selected hypothetical investment funds offered under the Plan and elected by the participant. The securities are classified as trading securities because they are held for resale in anticipation of short-term fluctuations in market prices. The trading securities are stated at fair value. F-49GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)$0$26,390 and $1,582$38,007 as of December 31, 20172020 and December 31, 2018,2021, respectively, and is included in “accrued expenses and other current liabilities” and “other liabilities” in the consolidated balance sheets. In connection with the administration of the Plan, the Company has purchased company-owned life insurance policies insuring the lives of certain employees. The cash surrender value of these policies was $0$26,832 and $1,613$38,584 as of December 31, 20172020 and December 31, 2018,2021, respectively. The cash surrender value of these insurance policies is included in “other assets” in the consolidated balance sheets. During the years ended December 31, 20172019, 2020 and 2018,2021, the change in the fair value of Plan assets was $0$1,296, $4,164 and $(56),$4,229, respectively, which is included in “other income (expense), net,” in the consolidated statements of income. During the yearyears ended December 31, 20172019, 2020 and 2018,2021, the change in the fair value of deferred compensation liabilities was $0$1,062, $4,120 and $(87),$4,094, respectively, which is included in “selling, general and administrative expenses.”issued optionsgranted stock-based awards under the Genpact Limited 2007 Omnibus Incentive Compensation Plan (the “2007 Omnibus Plan”) and the Genpact Limited 2017 Omnibus Incentive Compensation Plan (the “2017 Omnibus Plan”) to eligible persons, including employees, directors and certain other persons associated with the Company.Under the 2007 Omnibus Plan, shares underlying options forfeited, expired, terminated or cancelled under any of the Company’s predecessor plans were added to the number of shares otherwise available for grant under the 2007 Omnibus Plan. The 2007 Omnibus Plan was amended and restated on April 11, 2012 to increase the number of common shares authorized for issuance by 5,593,200 shares to 15,000,000 shares.During the year ended December 31, 2012, the number of common shares authorized for issuance under the 2007 Omnibus Plan was increased by 8,858,823 shares as a result of a one-time adjustment to outstanding unvested share awards in connection with a special dividend payment.Genpact Limited 2017 Omnibus Incentive Compensation Plan, (the “2017 Omnibus Plan”), pursuant to which 15,000,000 Company common shares are available for issuance. The 2017 Omnibus Plan was amended and restated on April 5, 2019 to increase the number of common shares authorized for issuance by 8,000,000 shares to 23,000,000 shares. No grants may be made under the 2007 Omnibus Plan after the date of adoption of the 2017 Omnibus Plan. Grants that were outstanding under the 2007 Omnibus Plan as of the Company’s adoption of the 2017 Omnibus Plan, remain subject to the terms of the 2007 Omnibus Plan.2016, 20172019, 2020 and 2018,2021, were $24,686, $35,112$82,802, $72,709 and $48,196,$80,548, respectively, and have been allocated to cost of revenue and selling, general, and administrative expenses.fourthree to five years unless otherwise specified otherwise in the applicable award agreement. The Company recognizes such compensation cost over the vesting period of the option.F-50GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count) (Continued)Compensation cost is determined at the date of grant by estimating the fair value of an option using the Black-Scholes option-pricing model.2016, 20172019, 2020 and 2018:2021:2019 2020 2021 Dividend yield 0.82% — 1.08% 0.89% 0.84% — 1.08% Expected life (in months) 84 84 84 Risk-free rate of interest for expected life 1.56% — 2.63% 1.50% 1.12% — 1.37% Volatility 21.00% — 21.38% 20.96% 26.05% — 26.18% $0.06$0.0975 and $0.075$0.1075 per share in each quarter of fiscal 20172020 and 2018,2021, respectively.2016, 20172019, 2020 and 20182021 is set out below:Year ended December 31, 2019 Shares arising
out of optionsWeighted
average
exercise priceWeighted average
remaining
contractual life (years)Aggregate
intrinsic
valueOutstanding as of January 1, 2019 Outstanding as of January 1, 2019 7,261,675 23.61 6.4 — Granted 1,881,068 28.50 — — Forfeited (85,000) 29.91 — — Expired — — — — Exercised (697,531) 15.33 — 18,724 Outstanding as of December 31, 2019 Outstanding as of December 31, 2019 8,360,212 25.33 6.5 $ 140,760 Vested as of December 31, 2019 and expected to vest
thereafter (Note a)Vested as of December 31, 2019 and expected to vest
thereafter (Note a)8,006,985 25.18 6.5 $ 136,017 Vested and exercisable as of December 31, 2019 Vested and exercisable as of December 31, 2019 3,111,039 19.16 3.4 $ 71,584 Weighted average grant-date fair value of options granted during the period $ 6.98 F-51Year ended December 31, 2020 Shares arising
out of optionsWeighted
average
exercise priceWeighted average
remaining
contractual life (years)Aggregate
intrinsic
valueOutstanding as of January 1, 2020 8,360,212 $ 25.33 6.5 — Granted 431,924 43.94 — — Forfeited (752,261) 30.09 — — Expired — — — — Exercised (692,634) 20.30 — 11,813 Outstanding as of December 31, 2020 7,347,241 $ 26.41 5.7 $ 110,925 Vested as of December 31, 2020 and expected to vest thereafter (Note a) 7,132,162 $ 26.26 5.7 $ 108,671 Vested and exercisable as of December 31, 2020 2,713,405 $ 19.40 2.6 $ 59,593 Weighted average grant-date fair value of options granted during the period $ 9.72 Year Ended December 31, 2021 Shares arising
out of optionsWeighted
average
exercise priceWeighted average
remaining
contractual life (years)Aggregate
intrinsic
valueOutstanding as of January 1, 2021 7,347,241 $ 26.41 5.7 — Granted 1,831,180 43.98 — — Forfeited (25,000) 31.50 — — Expired — — — — Exercised (1,145,125) 20.23 — 30,463 Outstanding as of December 31, 2021 8,008,296 $ 31.30 6.1 $ 174,428 Vested as of December 31, 2021 and expected to vest thereafter (Note a) 7,422,919 $ 30.51 6.1 $ 167,551 Vested and exercisable as of December 31, 2021 3,117,333 $ 24.17 3.4 $ 90,117 Weighted average grant-date fair value of options granted during the period $ 11.35 (a)Options expected to vest reflect an estimated forfeiture rate.$13,564, $14,896$10,690, $14,062 and $10,772.$23,168, respectively. Tax benefits from the exercise of stock options during the years ended December 31, 2016, 20172019, 2020 and 20182021 were $1,548$2,966, $7,381 and $2,016 and $2,473$6,927 (including excess tax benefits of $1,004, $1,723$2,743, $7,310 and $2,131)$4,191), respectively.Income tax benefits recognized in relation to stock-based compensation charges, excluding excess tax benefits, during the years ended December 31, 2016, 2017 and 2018 were $6,446, $9,600 and $11,783, respectively.2018,2021, the total remaining unrecognized stock-based compensation cost for options expected to vest amounted to $21,925$24,199 which will be recognized over the weighted average remaining requisite vesting period of 4.03.2 years.one1 common share. The fair value of each RSU is the market price of one1 common share of the Company on the date of grant. The RSUs granted to date have graded vesting schedules of three months to four years. The compensation expense is recognized on a straight-line basis over the vesting term.F-52GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2016, 20172019, 2020 and 20182021 is set out below:(a)RSUs expected to vest reflect an estimated forfeiture rate.(b)Vested RSUs were net settled by issuing 29,719 shares (net of minimum statutory tax withholding). 86,517 RSUs vested in the year ended December 31, 2016. 17,802 common shares underlying 34,035 of such RSUs were issued in 2017 after withholding shares to the extent of minimum statutory withholding taxes. 52,482 RSUs vested in the year ended December 31, 2016, in respect of which 52,055 shares were issued in 2018 after withholding shares to the extent of minimum statutory withholding taxes. Year ended December 31, 2019 Number of
Restricted Share UnitsWeighted
Average Grant Date Fair ValueOutstanding as of January 1, 2019 1,528,999 $ 27.45 Granted 470,939 37.58 Vested (Note b) (672,025) 26.84 Forfeited (66,207) 30.43 Outstanding as of December 31, 2019 1,261,706 $ 31.41 Expected to vest (Note a) 1,149,286 (c)Vested RSUs were net settled by issuing 32,395 shares (net of minimum statutory tax withholding).(d)261,260 RSUs that vested during the period were net settled upon vesting by issuing 175,505 shares (net of minimum statutory tax withholding). 52,875 and 44,562 RSUs vested in the year ended December 31, 2017 and December 31, 2018 respectively, shares in respect of which will be issuable in 2019 after withholding shares to the extent of minimum statutory withholding taxes.Year ended December 31, 2020 Number of
Restricted
Share UnitsWeighted
Average
Grant Date Fair ValueOutstanding as of January 1, 2020 1,261,706 $ 31.41 Granted 296,332 40.40 Vested (Note c) (640,212) 28.28 Forfeited (57,518) 37.35 Outstanding as of December 31, 2020 860,308 $ 36.44 Expected to vest (Note a) 762,877 53,546Year ended December 31, 2021 Number of
Restricted
Share UnitsWeighted
Average
Grant Date Fair ValueOutstanding as of January 1, 2021 860,308 $ 36.44 Granted 466,702 44.00 Vested (Note d) (501,273) 34.41 Forfeited (66,230) 38.02 Outstanding as of December 31, 2021 759,507 $ 42.29 Expected to vest (Note a) 654,594 2015, 53,0232020, shares in respect of which werewill be issued in 20172022 after withholding shares to the extent of minimum statutory withholding taxes.92,6922014,2021, shares in respect of which 91,963 shares werewill be issued in 20162022 after withholding shares to the extent of minimum statutory withholding taxes.F-53GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2018,2021, the total remaining unrecognized stock-based compensation cost related to RSUs amounted to $24,946,$18,045, which will be recognized over the weighted average remaining requisite vesting period of 2.3 years.one1 common share at a future date based on the Company’s performance against specified targets. PUs granted to date have vesting schedules of six months to three years. The fair value of each PU is the market price of one1 common share of the Company on the date of grant and assumes that performance targets will be achieved. PUs granted under the plan are subject to cliff vesting. The compensation expense for such awards is recognized on a straight-line basis over the vesting terms.term. During the performance period, the Company’s estimate of the number of shares to be issued is adjusted upward or downward based upon the probability of achievement of the performance targets. The ultimate number of shares issued and the related compensation cost recognized is based on a comparison of the final performance metrics to the specified targets.2016, 20172019, 2020 and 20182021 is set out below:Year ended December 31, 2019 Number of
Performance UnitsWeighted Average
Grant Date
Fair ValueMaximum Shares
Eligible to ReceiveOutstanding as of January 1, 2019 3,712,402 $ 28.40 3,712,402 Granted 1,579,109 34.68 3,158,218 Vested (Note b) (3,276) 27.47 (3,276) Forfeited (248,031) 29.04 (278,755) Adjustment upon final determination of level of performance goal achievement (Note c) 1,018,260 34.72 Adjustment upon final determination of level of performance goal achievement (Note d) (530,125) Outstanding as of December 31, 2019 6,058,464 $ 31.07 6,058,464 Expected to vest (Note a) 5,507,640 F-54Year ended December 31, 2020 Number of
Performance UnitsWeighted Average
Grant Date
Fair ValueMaximum Shares
Eligible to ReceiveOutstanding as of January 1, 2020 6,058,464 $ 31.07 6,058,464 Granted 1,253,766 42.49 2,507,532 Vested (Note e) (1,496,377) 25.21 (1,496,377) Forfeited (539,670) 33.77 (560,867) Adjustment upon final determination of level of performance goal achievement (Note f) (399,987) 42.60 Adjustment upon final determination of level of performance goal achievement (Note g) (1,632,556) Outstanding as of December 31, 2020 4,876,196 $ 34.56 4,876,196 Expected to vest (Note a) 4,573,356 Year ended December 31, 2021 Number of
Performance UnitsWeighted Average
Grant Date
Fair ValueMaximum Shares
Eligible to ReceiveOutstanding as of January 1, 2021 4,876,196 $ 34.56 4,876,196 Granted 1,340,877 44.06 2,681,754 Vested (Note h) (1,784,140) 30.66 (1,784,140) Forfeited (258,258) 39.97 (320,098) Adjustment upon final determination of level of performance goal achievement (Note i) 408,480 43.99 Adjustment upon final determination of level of performance goal achievement (Note j) (870,557) Outstanding as of December 31, 2021 4,583,155 $ 39.40 4,583,155 Expected to vest (Note a) 4,263,803 (a)PUs expected to vest are based on the probable achievement of the performance targets after considering an estimated forfeiture rate.(b)Represents an adjustment made(b)PUs that vested in 2019 were net settled upon vesting by issuing 2,151 shares (net of minimum statutory tax withholding). March 2016 to the number of shares underlying the PUs granted in 2015 upon certification of the level of achievement of the performance targets for such awards.F-55GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)18. Stock-based compensation (Continued)(c)Vested PUs were net settled upon vesting by issuing 731,701 shares (net of minimum statutory tax withholding).(d) Includes 1,443,624 target shares underlyingexpected to vest as a result of achievement of higher-than-target performance for PUs granted in 2016 which were forfeited for failure2019 partially offset by an adjustment made in March 2019 to achieve allthe number of shares subject to the PUs granted in 2018 upon certification of the thresholdlevel of achievement of the performance targets underunderlying such awards.(e)Represents a 2.7% increase in the number of target shares as a result of achievement of higher-than-target performance for certain PUs granted in 2017, partially offset by a 12.5% reduction as a result of achievement of lower-than-target performance for certain PUs granted in 2017.
(d)Represents the difference between the maximum number of shares achievable and the number of shares expected to vest under the PU awards granted in 2019 based on the level of achievement of the performance goals. Also includes an adjustment made in March 2019 to the number of shares subject to the PUs granted in 2018 upon certification of the level of achievement of the performance targets underlying such awards.(f)Represents the difference between the maximum number of shares achievable and the number of shares expected to vest under the PU awards granted in 2017 based on the level of achievement of the performance goals. Also includes the difference between the maximum number of shares achievable and the number of shares eligible to vest under the PU awards granted in 2016, which were forfeited for failure to achieve all of the threshold performance targets under such awards.
(e)Vested PUs in the year 2020 were net settled upon vesting by issuing 902,532 shares (net of minimum statutory tax withholding).(g)Vested PUs were net settled upon vesting by issuing 691,958 shares (net of minimum statutory tax withholding).
(f)Represents a 32.98% decrease in the number of target shares expected to vest as a result of achievement of lower-than-target performance for PUs granted in 2020, partially offset by an adjustment made in March 2020 to the number of shares subject to the PUs granted in 2019 upon certification of the level of achievement of the performance targets underlying such awards.(h)Represents a 28.77% increase in the number of target shares expected to vest as a result of achievement of higher-than-target performance for PUs granted in 2018 partially offset by an adjustment made in March 2018 to the number of shares subject to the PUs granted in 2017 upon certification of the level of achievement of the performance targets underlying such awards.
(g)Represents the difference between the maximum number of shares achievable and the number of shares expected to vest under the PU awards granted in 2020 based on the level of achievement of the performance goals. Also includes an adjustment made in March 2020 to the number of shares subject to the PUs granted in 2019 upon certification of the level of achievement of the performance targets underlying such awards.(i)Represents the difference between the maximum number of shares achievable and the number of shares expected to vest under the PU awards granted in 2018 based on the level of achievement of the performance goals. Also includes an adjustment made in March 2018 to the number of shares subject to the PUs granted in 2017 upon certification of the level of achievement of the performance targets underlying such awards. 2018,2021, the total remaining unrecognized stock-based compensation cost related to PUs amounted to $55,985,$58,752, which will be recognized over the weightedweighed average remaining requisite vesting period of 1.8 years.2016, 20172019, 2020 and 2018, 146,685, 190,4352021, 264,440, 315,245 and 245,467285,657 common shares, respectively, were issued under the ESPP.2016, 20172019, 2020 and 20182021 was $428, $573$1,083, $1,299 and $802,$1,420, respectively, and has been allocated to cost of revenue and selling, general, and administrative expenses.F-56GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)20172020 and 20182021 consisted of 500 million common shares with a par value of $0.01 per share, and 250 million preferred shares with a par value of $0.01 per share. There were 192,825,207189,045,661 and 189,346,101185,336,357 common shares, and no preferred shares, issued and outstanding as of December 31, 20172020 and 2018,2021, respectively.one1 vote per share. Upon the liquidation, dissolution or winding up of the Company, common shareholders are entitled to receive a ratable share of the available net assets of the Company after payment of all debts and other liabilities. The common shares have no preemptive, subscription, redemption or conversion rights.AsDecember 31, 2016,Directors of the Company’s board of directorsCompany (the “Board”) hadhas authorized the Company to repurchaserepurchases of up to $750,000 in value of the Company’s common shares under its share repurchase program first announced in February 2015. On February 10, 2017 the Board approved up to an additional $500,000 in share repurchases, bringing the total authorization$1,750,000 under the Company’s existing program to $1,250,000. share repurchase program. The Company’s share repurchase program does not obligate it to acquire any specific number of shares. Under the program, shares may be purchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.On March 29, 2017, the Company entered into an accelerated share repurchase (“ASR”) agreement with Morgan Stanley & Co. LLC (the “Dealer”) to repurchase Company common shares for an aggregate purchase price of $200,000. Pursuant to the ASR agreement, as amended in November 2017, the Company paid the aggregate purchase price to the Dealer upfront and received an initial delivery of 6,578,947 common shares on March 30, 2017, an additional delivery of 350,006 common shares on December 29, 2017 and a final delivery of 163,975 common shares on January 17, 2018 upon final settlement of the transaction. The weighted average price per share of the common shares delivered was $28.20. The Company’s purchase of its common shares under the ASR has been recorded as a reduction in retained earnings. All repurchased shares have been retired.The final number of common shares repurchased by the Company under the ASR agreement was based on the volume-weighted average share price of the Company’s common shares during the term of the transaction, less a discount and subject to adjustments pursuant to the terms of the ASR agreement.The ASR agreement contains customary provisions, including, among other things, with respect to mechanisms to determine the number of shares or the amount of cash that will be delivered at settlement, the required timing of delivery upon settlement, specific circumstances under which adjustments may be made to the repurchase transaction, and specific circumstances under which the repurchase transaction may be canceled prior to the scheduled maturity.20182019, 2020 and December 31, 2017,2021, the Company also purchased 4,921,192repurchased 766,154, 3,412,293 and 808,2936,577,562 of its common shares, respectively, on the open market at a weighted average price of $31.30$39.16, $40.16 and $24.48$45.32 per share, respectively, for an aggregate cash amount of $154,058$30,000, $137,044 and $19,784,$298,087, respectively. All repurchased shares have been retired.F-57GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)yearyears ended December 31, 2016,2019, December 31, 20172020 and December 31, 2018, $279, $162021, $15, $68 and $98,$132, respectively, was deducted from retained earnings in direct costs related to share repurchases.Dividend2017,7, 2019, the Company’s boardCompany announced that its Board of directorsDirectors had approved a dividend program under which the Company paid a regular13% increase in its quarterly cash dividend of $0.06to $0.085 per share, to holders of its common shares,up from $0.075 per share in 2018, representing an annual dividend of $0.24$0.34 per share.common share, up from $0.30 per share in 2018, payable to holders of the Company’s common shares. On March 28, 2017,20, 2019, June 28, 2017,21, 2019, September 21, 2017,20, 2019 and December 20, 201718, 2019, the Company paid dividends of $0.06$0.085 per share, amounting to $11,957, $11,558, $11,581$16,119, $16,188, $16,208 and $11,590$16,156 in the aggregate, to shareholders of record as of March 8, 2019, June 12, 2019, September 11, 2019 and December 9, 2019, respectively.2017,2021, June 12, 2017, September 8, 2017 and December 8, 2017, respectively.On February 12, 2018, the Company announced that its Board of Directors had approved a 25% increase in its quarterly cash dividend to $0.075 per share, up from $0.06 per share in 2017, representing an annual dividend of $0.30 per common share, up from $0.24 per share in 2017, payable to holders of the Company’s common shares. On March 21, 2018, June 20, 2018, September 19, 2018 and December 19, 2018, the Company paid dividends of $0.075 per share, amounting to $14,408, $14,240, $14,253 and $14,201 in the aggregate, to shareholders of record as of March 9, 2018, June 8, 2018,11, 2021, September 10, 20182021 and December 10, 2018,2021, respectively.Earningsearnings per Share.share. Basic and diluted earnings per common share give effect to the change in the number of Company common shares outstanding. The calculation of basic earnings per common share wasis determined by dividing net income available to common shareholders by the weighted average number of common shares outstanding.outstanding during the respective periods. The potentially dilutive shares, consisting of outstanding options on common shares, restricted share units, common shares to be issued under the ESPP and performance units, have been included in the computation of diluted net earnings per share and the number of weighted average shares outstanding, except where the result would be anti-dilutive.781,215, 1,007,4801,809,069, 1,182,572 and 2,410,2301,663,219 for the years ended December 31, 2016, 20172019, 2020 and 2018,2021, respectively.Year ended December 31, 2019 2020 2021 Net income Net income $ 304,881 $ 308,276 $ 369,448 Weighted average number of common shares used in computing basic earnings per common share 190,074,475 190,396,780 187,802,219 Dilutive effect of stock-based awards 5,086,380 5,384,191 5,159,622 Weighted average number of common shares used in computing dilutive earnings per common share 195,160,855 195,780,971 192,961,841 Earnings per common share Earnings per common share Basic $ 1.60 $ 1.62 $ 1.97 Diluted $ 1.56 $ 1.57 $ 1.91 F-58 Cost of revenueCost of revenue consists of the following:22. Selling, general and administrative expensesSelling, general and administrative expenses consist of the following:23. Other operating (income) expense, netYear ended December 31, 2019 2020 2021 Write-down of intangible assets and property, plant and equipment* $ 3,511 $ 14,083 $ 915 Write-down of operating lease right-of-use assets and other assets** — 18,084 — Change in fair value of earn out consideration and deferred consideration (relating to business acquisitions) — (7,790) (750) Other operating (income) expense# (34,545) (5,046) (1,368) Other operating (income) expense, net $ (31,034) $ 19,331 $ (1,203) 24.Year ended December 31, 2019 2020 2021 Interest income $ 7,321 $ 7,284 $ 6,878 Interest expense (50,779) (56,244) (58,312) Interest income (expense), net $ (43,458) $ (48,960) $ (51,434) F-59GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)25.2016, 20172019, 2020 and 20182021 is allocated as follows:Year ended December 31, 2019 2020 2021 Income from continuing operations $ 94,536 $ 92,201 $ 113,681 Other comprehensive income: Unrealized gains (losses) on cash flow hedges (4,058) (3,327) 5,265 Retirement benefits (2,720) (894) 3,859 Retained earnings: Deferred tax benefit recognized on adoption of ASU 2016-13 Deferred tax benefit recognized on adoption of ASU 2016-13 — (935) — Year ended December 31, 2019 2020 2021 Domestic (U.S.) $ 27,783 $ 122,497 $ 126,107 Foreign (other than U.S.) Foreign (other than U.S.) 371,634 277,980 357,022 Income before income tax expense $ 399,417 $ 400,477 $ 483,129 Year ended December 31, 2019 2020 2021 Current tax expense: Current tax expense: Domestic (U.S. federal) $ 2,854 $ 23,668 $ 34,538 Domestic (U.S. state) 3,908 10,765 5,605 Foreign (other than U.S.) Foreign (other than U.S.) 104,089 80,355 82,801 $ 110,851 $ 114,788 $ 122,944 Deferred tax expense (benefit): Deferred tax expense (benefit): Domestic (U.S. federal) $ 2,669 $ (7,329) $ (6,039) Domestic (U.S. state) (1,679) (3,770) 232 Foreign (other than U.S.) Foreign (other than U.S.) (17,305) (11,488) (3,456) $ (16,315) $ (22,587) $ (9,263) Total income tax expense (benefit) $ 94,536 $ 92,201 $ 113,681 F-60GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)for the year ended December 31, 2018 and 35% for the years ended December 31, 2017 and 2016 to income before income taxes as a result of the following:Year ended December 31, 2019 2020 2021 Income before income tax expense $ 399,417 $ 400,477 $ 483,129 Statutory tax rates 21 % 21 % 21 % Computed expected income tax expense 83,878 84,100 101,457 Increase (decrease) in income taxes resulting from: Foreign tax rate differential 31,121 15,456 10,747 Tax benefit from tax holiday (21,393) (16,063) (3,159) True-up of prior years tax liability True-up of prior years tax liability (3,568) (3,420) 7,590 Interest income on income tax refund Interest income on income tax refund — — (7,780) Non-deductible expenses 2,152 372 1,755 Effect of change in tax rates 6,497 453 1,740 Change in valuation allowance 10,515 142,733 6,244 Unrecognized tax benefits 5,502 3,228 (327) Employment related tax incentive Employment related tax incentive (5,239) — (3,930) Internal restructuring Internal restructuring — (129,688) — State income taxes State income taxes 2,229 6,995 5,837 Excess tax benefit on share-based compensation Excess tax benefit on share-based compensation (2,743) (7,310) (7,773) Others* Others* (14,415) (4,655) 1,280 Reported income tax expense (benefit) $ 94,536 $ 92,201 $ 113,681 tencertain units eligible for a tax holiday as a special economic zone ("SEZ") unit in respect of 100% of the export profits it generates for a period of 5 years from commencement, 50% of such profits for the next 5 years (year 6 to year 10 from commencement) and 50% of the profits for an additional period of 5 years (year 11 to year 15 from commencement), subject to the satisfaction of certain capital investment requirements.forin order to benefit from the Company’s existing special economic zone units will begin to expire onreduced tax rate under the new tax regime after March 31, 2022 and will have fully expired on March 31, 2030, assuming the Company satisfies the capital investment requirements.$0.19, $0.18$0.11, $0.08 and $0.13,$0.02, respectively, for the years ended December 31, 2016, 20172019, 2020 and 2018. The effect of the tax holiday on diluted earnings per share was $0.18, $0.18 and $0.13, respectively, for the years ended December 31, 2016, 2017 and 2018.F-61GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)20172020 and 20182021 are as follows:As of December 31, 2020 2021 Deferred tax assets Net operating loss carry forwards $ 37,278 $ 37,593 Accrued expenses and other liabilities 70,634 70,802 Allowance for credit losses 9,930 9,000 Property, plant & equipment, net 3,387 4,079 Lease liabilities 59,823 50,091 Share-based compensation 35,424 31,147 Intangible assets, net 165,347 168,737 Retirement benefits 14,761 9,721 Contract liabilities 6,080 8,012 Tax credit carry forwards 8,692 15,724 Others 14,619 10,277 Total deferred tax assets $ 425,975 $ 415,183 Less: Valuation allowance (206,011) (212,192) Total deferred tax assets, net of valuation allowance $ 219,964 $ 202,991 Deferred tax liabilities Intangible assets, net $ 21,884 $ 6,598 Property, plant and equipment, net 3,700 1,907 Right-of use lease assets 48,816 40,733 Earn-out liabilities 6,189 5,368 Retirement benefits 6,579 3,404 Investments in foreign subsidiaries not indefinitely reinvested 2,726 1,708 Derivative instruments 2,810 6,153 Goodwill 18,649 29,229 Others 3,453 5,511 Total deferred tax liabilities $ 114,806 $ 100,611 Net of deferred tax assets and liabilities $ 105,158 $ 102,380 As of December 31, Classified as 2020 2021 Deferred tax assets non-current $ 106,674 $ 106,322 Deferred tax liabilities non-current 1,516 3,942 $ 105,158 $ 102,380 2016, 20172019, 2020 and 20182021 is as follows:Year ended December 31, 2019 2020 2021 Opening valuation allowance $ 51,986 $ 62,628 $ 206,011 Reduction during the year (4,240) (35,662) (1,206) Addition during the year 14,882 179,045 7,387 Closing valuation allowance $ 62,628 $ 206,011 $ 212,192 F-62GENPACT LIMITED AND ITS SUBSIDIARIESNotesConsolidated Financial Statements(In thousands, except per share dataLuxembourg taxable income arising from such transfer. The tax benefits resulting from the step-up of the tax basis of the intangibles transferred are not expected to be realized and share count)theseits deductible differences and carry forwards, net of the existing valuation allowances as of December 31, 2018.2021. The amount of the Company’s deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforwardcarry forward period are reduced.In 2016, one of the Company’s subsidiaries filed amended tax returns with respect to prior years, resulting in revised assessments, higher taxable income and the utilization of operating loss carryforwards. The use of operating loss carryforwards resulted in the complete reversal of the subsidiary’s remaining valuation allowance of $3,377. On January 1, 2016, the Company elected the early adoption of ASU 2016-09, which was applied using a modified retrospective approach. Accordingly, excess tax benefits relating to the exercise of stock options prior to December 31, 2015 amounting to $24,912 were recorded through retained earnings. 20162019, 2020 and 2017 and 2018,2021, the Company recognized net excess tax benefits on share-based compensation of $1,004, $1,723$2,743, $7,310 and $2,131$7,773, respectively, in income tax expense attributable to continuing operations.2018,2021, the Company’s deferred tax assets related to net operating loss carryforwardscarry forwards of $276,040$145,525 amounted to $59,153$34,459 (excluding state net operating losses). Net operating losses of subsidiaries in the United Kingdom, Singapore, Malaysia, Australia, Brazil, Israel, South Africa, Hong Kong, Germany, Austria, the United States (for 2018) and Luxembourg (for 2016 and prior years) amounted to $164,014 $47,025 and can be carried forward for an indefinite period.F-63taxoperating loss carryforwardscarry forwards expire as set forth in the table below:Europe Others Year ending December 31, 2022 $ 57 $ — 2023 310 1,039 2024 567 2,225 2025 1,772 2 2026 38 19 2028 — 94 2029 — 185 2034 18,820 — 2035 7,357 — 2036 63,374 — 2041 2041 — 2,641 $ 92,295 $ 6,205 Hungary, Poland, the Netherlands, the Czech Republic, the Netherlands, Slovakia, Latvia, Luxembourg Latvia and Portugal, while “Others” includes net operating losses of subsidiaries in Mexico, Japan, the Philippines, China India, New Zealand and Canada.2018, 2021, the Company had additional deferred tax assets for U.S. state and local tax loss carryforwardscarry forwards amounting to $4,859 $3,134 with varying expiration periods, most of which are between 20192022 and 2037. 2018,2021, the companyCompany had a total foreign tax credit carryforwardcarry forward of $22,409,$15,724 for subsidiaries in the United States and India which will expire as set forth in the table below:Year ending December 31, Amount 2028 6,378 2029 2,554 2030 2,665 2031 3,803 2035 121 2041 203 $ 15,724 Withhasdoes not accruedaccrue any income, distribution or withholding taxes that would arise if the undistributedsuch earnings of the Company’s foreign (non-Bermuda) subsidiaries which cannot be repatriated in a tax-free manner were repatriated. Due to the Company’s changing corporate structure, the various methods that are available to repatriate earnings, and uncertainty relative to the applicable taxes at the time of repatriation, it is not practicable to determine the amount of tax that would be imposed upon repatriation. If undistributed earnings are repatriated in the future, or are no longer deemed to be indefinitely reinvested, the companyCompany will accrue the applicable amount of taxes associated with such earnings at that time.F-642018, $363,5602021, $875,924 of the Company’s $368,396$899,458 in cash and cash equivalents was held by the Company’s foreign (non-Bermuda) subsidiaries. $131,617$3,481 of this cash is held by foreign subsidiaries for which the Company expects to incur and has accrued a deferred tax liability on the repatriation of $25,043$9,628 of retained earnings. $231,943$872,443 of the Company’s cash and cash equivalents is either held as retained earnings by foreign subsidiaries in jurisdictions where no tax is expected to be imposed upon repatriation of the retained earnings of such foreign subsidiaries or is being indefinitely reinvested.On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that affect 2017. The Tax Act also establishes new tax laws that will affect 2018 and subsequent years, including a reduction in the U.S. federal corporate income tax rate from 35% to 21%.On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740, Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.As a result of the reduction in the federal corporate income tax rate, the Company has revalued its net deferred tax assets, excluding tax credits to the extent affected by changes in the law as of December 31, 2017. Based on this revaluation, the Company has recorded a net income tax expense of $3,182 to reduce its net deferred tax asset balance, which was recorded as additional income tax expense for the year ended December 31, 2017. The Company completed its accounting for the transition tax liability under the Tax Act during the third quarter of 2018 without any impact on income tax expense. There is no material change in the estimates as of September 30, 2018 based on the final calculation of the earnings and profit pool of the Company’s controlled foreign corporations based on the Company’s U.S. tax returns.accumulated other comprehensive income (loss) (“AOCI”).AsOCI.December 31, 2017, due to a reduction inexpected credit losses for financial assets held by the U.S. federal corporate income tax rate under the Tax Act from 35% to 21%, the Company revalued its net deferred tax assets, including deferred tax liabilities recorded through AOCI. Based on this revaluation, the Company recorded an income tax benefit of $2,265 relating to derivatives, reducing its net deferred tax liability balance, which was recorded as an income tax benefit in continuing operations for the year ended December 31, 2017.2018,2020, the Company elected to early adoptadopted this ASU, 2018-02, effective January 1, 2018,2020, and made an election to reclassify the stranded incomeaccordingly recorded deferred tax effectsassets of the Tax Act from AOCI to retained earnings for all items of AOCI. The Company has elected to adopt the new guidance at the beginning of the period, and no prior periods have been adjusted. Accordingly, a stranded tax effect in AOCI of $2,265 resulting from the Tax Act has been adjusted$935 through retained earnings.F-65GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)2016, 20172020 and 2018:2021:2020 2021 Opening Balance at January 1 $ 31,029 $ 34,300 Increase related to prior year tax positions, including recorded in acquisition accounting 2,875 2,992 Decrease related to prior year tax positions (1,309) (455) Decrease related to prior year tax positions due to lapse of applicable statute of limitation (287) (455) Increase related to current year tax positions, including recorded in acquisition accounting 2,454 1,385 Decrease related to settlements with taxing authorities (317) (11,170) Effect of exchange rate changes (145) (946) Closing Balance at December 31 $ 34,300 $ 25,651 2016, 20172020 and 2018,2021, the Company had unrecognized tax benefits amounting to $22,469, $24,877$34,300 and $25,485,$25,651, respectively, which, if recognized, would impact the effective tax rate.2016, 20172020 and 2018,2021, the Company had accrued $3,856, $4,614$6,369 and $5,081,$2,842, respectively, in interest and $900 and $628, respectively, for penalties relating to unrecognized tax benefits.2016, 20172019, 2020 and 2018,2021, the Company recognized $367, $758$826, $662 and $467,$(13,851), respectively, including exchange rate differences, in interest on unrecognized tax benefits. As of December 31, 2016, 2017 and 2018, the company had accrued $977, $1,033 and $995, respectively, for penalties.non-U.S. taxother U.S. taxing authorities, the Company estimates that it is reasonably possible that the total amount of its unrecognized tax benefits will vary. However, the Company does not expect significant changes within the next twelve months other than depending on the progress of tax matters or examinations with various taxtaxing authorities, which are difficult to predict.non-U.S.other U.S. income tax auditsexaminations by taxing authorities for years prior to 2015.2017. The Company’s subsidiaries in India and China are open to examination by relevant taxing authorities for tax years beginning on or after April 1, 20112012 and January 1, 2008,2011, respectively. The Company regularly reviews the likelihood of additional tax assessments and adjusts its reservesunrecognized tax benefits as additional information or events require.26.Chief Operation Decision Maker (CODM)CODM, reviews operating segment revenue, which is a GAAP measure, and operating segment adjusted income from operations, which is a non-GAAP measure. The Company does not allocate and therefore the CODM does not evaluate foreign exchange gain/(losses), reviews financial information preparedinterest income/(expense), restructuring expenses, acquisition-related expenses, stock-based compensation, amortization and impairment of intangible assets and income taxes by segment. The Company’s operating assets and liabilities pertain to multiple segments. The Company manages assets and liabilities on a consolidatedtotal Company basis, accompaniednot by disaggregatedoperating segment, and therefore information about revenueassets, liabilities and capital expenditures by operating segment are not presented to the CODM and are not reviewed by the CODM.operating income by identified business units. The identified business units are organizedfrom operations for operational reasons and represent either services-based, customer-based, industry-based or geography-based units. There is significant overlap between the manner in which the business units are organized. Additionally, the composition and organizationeach of the business unitsCompany’s segments for the year ended December 31, 2019 were as follows:Reportable segments BCMI CGRLH HMS Total Reportable segments Others*** Total Revenues, net 1,078,844 1,107,534 1,348,635 3,535,013 (14,470) 3,520,543 Adjusted income from operations 115,998 161,515 238,129 515,642 43,199 558,841 Stock-based compensation (83,885) Amortization and impairment of acquired intangible assets (other than included above) (31,458) Acquisition-related expenses (8,352) Foreign exchange gains (losses), net 7,729 Interest income (expense), net (43,458) Income tax expense (94,536) Net income 304,881 fluidnot allocated to the Company’s segments for management’s internal reporting purposes. Adjusted income from operations for “Others” primarily represents gains related to a transfer of land, government incentives and the structure changes regularly in responseimpact of foreign exchange fluctuations, which are not allocated to growththe Company’s segments for management’s internal reporting purposes.the overall business, acquisitions and changesa contract cost asset relating to a wealth management platform used in the reporting structure, clients, services, industries served, and delivery centers.Based on an overall evaluation of all facts and circumstances, and after combining operating segments with similar economic characteristicsCompany’s BCMI segment that comply with other aggregation criteria specifiedthe Company no longer plans to leverage beyond its current scope. If this charge had been recorded in the FASB guidance onBCMI segment reporting,in the Company has determined that it operates asyear ended December 31, 2019, AOI for the Company’s BCMI segment in 2019 would have been $105,474, with a single reportable segment.F-66Net revenuesReportable segments BCMI CGRLH HMS Total Reportable segments Others** Total Revenues, net 1,079,193 1,264,654 1,388,826 3,732,673 (23,296) 3,709,377 Adjusted income from 0perations 132,939 197,197 244,166 574,302 14,506 588,808 Stock-based compensation (74,008) Amortization and impairment of acquired intangible assets (other than included above) (43,648) Acquisition-related expenses (2,650) Foreign exchange gains (losses), net 7,482 Interest income (expense), net (48,960) Restructuring expenses (refer (a) below and Note 28) (26,547) Income tax expense (92,201) Net income 308,276 customer typethe chief operating decision maker. Accordingly, such expenses are included in our segment reporting as “unallocated costs.”Reportable segments BCMI CGRLH HMS Total Reportable segments Others* Total Revenues, net 1,016,786 1,509,534 1,479,153 4,005,473 16,738 4,022,211 Adjusted income from operations 126,972 250,765 272,754 650,491 12,189 662,680 Stock-based compensation (81,968) Amortization and impairment of acquired intangible assets (other than included above) (57,641) Acquisition-related expenses (1,177) Foreign exchange gains (losses), net 12,669 Interest income (expense), net (51,434) Income tax expense (113,681) Net income 369,448 Net revenues by service typeas follows:not allocated to the Company’s segments for management’s internal reporting purposes.clients based on the industry serviced are as follows:The Company has reclassified the disaggregation of its revenue to reflect how the Company groups its clients into key industry verticals. Revenue from prior periods is also presented based on the classifications useda single customer in the current period.Year ended December 31, 2019 2020 2021 India $ 1,890,897 $ 1,851,347 $ 2,022,123 Asia, other than India 356,726 461,839 536,595 North and Latin America 863,748 1,007,635 1,011,759 Europe 409,172 388,556 451,734 Total net revenues $ 3,520,543 $ 3,709,377 $ 4,022,211 Revenues from GE comprised 14%, 10% and 9% of the Company’s consolidated total net revenues in 2016, 2017 and 2018, respectively. No other customer accounted for 10% or more of the Company’s consolidated total net revenues during these periods.As of December 31, 2020 2021 India $ 157,129 $ 142,237 Asia, other than India 16,790 16,315 North and Latin America North and Latin America 44,934 36,973 Europe 12,269 19,564 Total $ 231,122 $ 215,089 F-67Year ended December 31, 2019 2020 2021 Global Clients $ 3,042,452 $ 3,250,527 $ 3,646,007 GE 478,091 458,850 376,204 Total net revenues $ 3,520,543 $ 3,709,377 $ 4,022,211 Refer to noteSee Note 5 for details on the Company’s accounts receivable and reserveallowance for doubtful receivables.liabilities:balances:As of December 31, 2020 2021 Contract assets (Note a) $ 15,805 $ 13,741 Contract liabilities (Note b) 0 0 Deferred transition revenue $ 130,804 $ 155,077 Advance from customers $ 92,673 $ 85,747 (a) Included in "accrued expenses and other current liabilities" and "other liabilities"(a) Included in "prepaid expenses and other current assets" and "other assets" in the consolidated balance sheet.2018:2021:Particulars Total Less than 1 year 1-3 years 3-5 years After 5 years Transaction price allocated to remaining performance obligations $ 240,824 $ 160,606 $ 64,184 $ 13,924 $ 2,110 The Company has appliedpractical expedient related to contract durationConsolidated Financial Statementshas not disclosed information about remaining performance obligations that have original expected durations of one year or less.As of December 31, 2020 As of December 31, 2021 Particulars Sales incentive programs Transition activities Sales incentive programs Transition activities Opening balance $ 35,366 $ 170,132 $ 33,390 $ 192,507 Closing balance 33,390 192,507 32,296 206,498 Amortization 19,960 68,770 22,227 79,779 (b) Included in "prepaid expenses and other current assets" and "other assets" in the consolidated balance sheet.F-68GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share dataYear ended December 31, 2019 2020 2021 Government incentives $ 3,976 $ — $ — Other income (expense) 1,810 3,238 12,895 Other Income (expense), net $ 5,786 $ 3,238 $ 12,895 share count)27. Contract balances (Continued)The following table provides details of the company’s contract cost assets:28. Related party transactionsThe Company has entered into related party transactions with its non-consolidating affiliates. The Company has also entered into related party transactions with a significant shareholder and its affiliates.The Company’s related party transactions can be categorized as follows:Revenue from servicesIn the years ended December 31, 2016, 2017, and 2018, the Company recognized net revenues of $335, $398 and $714, respectively, from a client that is also a significant shareholder of the Company.In the years ended December 31, 2016 and 2017, the Company recognized net revenues of $8,077 and $5,400, respectively, from a client that was a non-consolidating affiliate of the Company. As of June 30, 2017, this non-consolidated affiliate ceased to be a related party.Cost of revenue from servicesThe Company purchases certain services from its non-consolidating affiliates, mainly relating to training and recruitment, the costs of which are included in cost of revenue. For the years ended December 31, 2016, 2017 and 2018, cost of revenue includes an amount of $2,067, $2,043 and $1,094, respectively, attributable to the cost of such services provided by the Company’s non-consolidating affiliates.Selling, general and administrative expensesThe Company purchases certain services from its non-consolidating affiliates, mainly relating to training and recruitment, the costs of which are included in selling, general and administrative expenses. For the years ended December 31, 2016, 2017 and 2018, selling, general and administrative expenses include an amount of $291, $315 and $191, respectively, attributable to the cost of such services provided by the Company’s non-consolidating affiliates.During the years ended December 31, 2016, 2017 and 2018, the Company engaged a significant shareholder of the Company to provide services to the Company at a cost of $58, $57 and $30, respectively. Investment in equity affiliatesDuring the year ended December 31, 2017, the Company invested $496 in its non-consolidating affiliates.During the year ended December 31, 2017, the Company recorded a charge of $2,849 related to an investment in one of its non-consolidating affiliates. This charge has been included in equity-method investment activity, net in the Company’s consolidated statement of income. 20172020 and 2018, the Company’s investments in its non-consolidating affiliates amounted to $886 and $836, respectively.OthersDuring the years ended December 31, 2016 and 2017, the Company entered into transactions with one of its non-consolidating affiliates for certain cost reimbursements amounting to $1,162 and $477, respectively.During the year ended December 31, 2017, the Company entered into transactions with a client that is a significant shareholder of the Company for certain cost reimbursements amounting to $127.F-69GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)28. Related party transactions (Continued)During the year ended December 31, 2017, the Company made a payment of $3,847 to one of its non-consolidating affiliates under a tax-sharing arrangement in the U.K. This amount represents a portion of the non-consolidated affiliate’s net operating losses surrendered to the Company under the tax sharing arrangement for the years 2015 and 2016. As of June 30, 2017 this non-consolidating affiliate ceased to be a related party.29. Other Income (expense), net30. Commitments and contingenciesCapital commitmentsAs of December 31, 2017 and 2018,2021, the Company has committed to spend $8,314$5,128 and $4,859,$13,317, respectively, under agreements to purchase property, plant and equipment. This amount is net of capital advances paid in respect of such purchases.$8,879$10,156 and $9,487$7,865 as of December 31, 20172020 and 2018,2021, respectively. Bank guarantees are generally provided to government agencies and excise and customs authorities for the purposes of maintaining a bonded warehouse. These guarantees may be revoked by the government agencies if they suffer any losses or damages through the breach of any of the covenants contained in the agreements governing such guarantees.Thebusiness process delivery centers in IndiaIndian subsidiaries are 100% export-oriented units orestablished as Software Technology Parks of India units or Special Economic Zone (“STPI”SEZ”) units under the STPI guidelinesrelevant regulations issued by the Government of India. These units are exempt from customs central exciseand other duties and levies on imported and indigenous capital goods, stores and spares. SEZ units are also exempt from the Goods and Services Tax (“GST”) that was introduced in India in 2017. The Company has undertaken to pay customtaxes and duties, service taxes, levies, and liquidated damages payable, if any, in respect of imported and indigenous capital goods, stores, spares and sparesservices consumed duty free,duty-free, in the event that certain terms and conditions are not fulfilled.F-70data (unaudited)impact have not yet been published. The Company will evaluate the impact of the Code on the Company in its financial statements for the period in which the Code becomes effective and the related rules are published.F-7132.29. Subsequent EventsDividendOn7, 2019,24, 2022 at a weighted average price of $47.09 per share for an aggregate cash amount of $68,000.has approved a 13%16% increase in its quarterly cash dividend, representing a planned annual dividend of $0.34$0.50 per common share, increased from $0.30$0.43 per common share in 2018.2021. The Board of Directors also declared a dividend for the first quarter of 20192022 of $0.085$0.125 per common share, which will be paid on or about March 20, 201923, 2022 to shareholders of record as of the close of business on March 8, 2019.10, 2022. The declaration of any future dividends will be at the discretion of the Board of Directors and subject to Bermuda and other applicable laws.Secondary offeringOn February 15, 2019, the Company completed an additional secondary offering of its common shares pursuant to which certain of our shareholders affiliated with Bain Capital Investors, LLC, namely Glory Investments A Limited and its affiliated assignees, together with their co-investor, GIC Private Limited (the “Selling Shareholders”), sold 10.0 million common shares at a price of $32.215 per share in an underwritten public offering. All of the common shares were sold by the Selling Shareholders and, as a result, the Company did not receive any of the proceeds from the offering. F-72GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)33. Guarantor financial informationIn March 2017, Genpact Luxembourg S.à r.l. (the “Issuer”), a subsidiary of the Company, issued $350,000 aggregate principal amount of 3.70% senior notes in a private offering. See Note 14 for additional information. The issuance is fully and unconditionally guaranteed by the Company. The Company has prepared the following condensed consolidating financial statements, which set forth consolidated financial statements of the Issuer, the Company as parent guarantor and the non-guarantor subsidiaries of the Company, as well as intercompany elimination adjustments relating to intercompany transactions. Investments in subsidiaries have been accounted for using the equity method.F-73GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)F-74GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)F-75GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)F-76GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)F-77GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)F-78GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)F-79GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)F-80GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)F-81GENPACT LIMITED AND ITS SUBSIDIARIESNotes to the Consolidated Financial Statements(In thousands, except per share data and share count)Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.GENPACT LIMITEDBy:/s/ N.V. TyagarajanN.V. TyagarajanPresident and Chief Executive OfficerDate: March 1, 2019Each person whose signature appears below hereby constitutes and appoints each of Heather D. White and Thomas D. Scholtes, as his or her true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting to said attorneys-in-fact and agents, and each of them, full power and authority to perform any other act on behalf of the undersigned required to be done in connection therewith.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ N.V. TyagarajanPresident, Chief Executive Officer and Director (Principal Executive Officer)March 1, 2019N.V. Tyagarajan/s/ Edward J. FitzpatrickChief Financial Officer (Principal Financial and Accounting Officer)March 1, 2019Edward J. Fitzpatrick/s/ Robert G. ScottDirectorMarch 1, 2019Robert G. Scott/s/ Ajay AgrawalDirectorMarch 1, 2019Ajay Agrawal/s/ Amit ChandraDirectorMarch 1, 2019Amit Chandra/s/ Laura ConigliaroDirectorMarch 1, 2019Laura Conigliaro/s/ David HumphreyDirectorMarch 1, 2019David Humphrey/s/ Carol LindstromDirectorMarch 1, 2019Carol Lindstrom/s/ James C. MaddenDirectorMarch 1, 2019James C. Madden/s/ Alex MandlDirectorMarch 1, 2019Alex Mandl/s/ CeCelia MorkenDirectorMarch 1, 2019CeCelia Morken/s/ Mark NunnellyDirectorMarch 1, 2019Mark Nunnelly/s/ Mark VerdiDirectorMarch 1, 2019Mark Verdi78