# Genpact LTD (G) FY 2021 MD&A Verbatim Item 7 Management's Discussion and Analysis from Genpact LTD's 10-K for fiscal year 2021. SEC filing source: https://www.sec.gov/Archives/edgar/data/1398659/000139865922000009/g-20211231.htm Accession: 0001398659-22-000009 Filing date: 2022-03-01 Report date: 2021-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/G/ All MD&A years: /company/G/mda/ Next year: /company/G/mda/fy2022/ (FY 2022) Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis is meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and uncertainties of cash flows from operations and from outside sources, so as to allow investors to better view our company from management’s perspective. The following discussion should be read in conjunction with our audited consolidated financial statements and the related notes that appear elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion includes forward-looking information that involves risks and assumptions, which could cause actual results to differ materially from management’s expectations. See “Special Note Regarding Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K. Continued impact of COVID-19 on our business and results of operations The COVID-19 pandemic continues to impact the global economy and the markets in which we operate. For the year ended December 31, 2021, the pandemic had a modest negative impact on our results and may continue to have an impact on us in future periods. This section provides a brief overview of how we are responding to known and anticipated impacts of the COVID-19 pandemic on our business, financial condition, and results of operations. While many of our employees globally continue to work from home, we have reopened our offices, in some instances on a limited and voluntary basis, where circumstances have enabled us to do so. In these circumstances we have implemented additional health and safety measures consistent with government recommendations and/or requirements to help ensure employee safety. These measures include health screening, social distancing, contact tracing, enhanced cleaning procedures, and testing and vaccination requirements. During the year, governments began easing COVID-19 restrictions, which contributed to a resurgence of COVID-19 cases and the spread of COVID-19 variants. The availability of vaccines (and vaccine boosters) continues to increase around the world, albeit with slower than anticipated rollouts and challenges in certain countries. Our Global 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. As the COVID-19 pandemic evolves, we will continue to assess its impact on the Company and respond accordingly. The ultimate impact of COVID-19 on our business and the industry in which we operate remains unknown and unpredictable. Our past results may not be indicative of our future performance, and our financial results in future periods, including but not limited to net revenues, income from operations, income from operations margin, net income and earnings per share, may differ materially from historical trends. The extent of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including but not limited to the duration and severity of the pandemic; future variants of the COVID-19 virus and the severity of such variants; rates of vaccination and the availability and effectiveness of vaccines, including booster shots, and treatments for COVID-19 globally; the macroeconomic impact of the spread of the virus; and related government stimulus measures. We are currently unable to predict the full impact that the COVID-19 pandemic will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures and the related macroeconomic impacts. For example, to the extent the pandemic continues to disrupt economic activity globally, we, like other businesses, will not be immune from its effects, and our business, results of operations and financial condition may be adversely affected, possibly materially, by prolonged decreases in spending on the types of services we provide, deterioration of our clients’ credit, or reduced economic activities. In addition, some of our expenses are less variable in nature and do not closely correlate with revenues, which may lead to a decrease in our profitability. For additional information about the risks we face in relation to the COVID-19 pandemic, see Part I, Item 1A—“Risk Factors.” 43 Overview Our 2021 revenues were $4.0 billion, an increase of 8.4% year-over-year, or 7.2% on a constant currency1 basis. Net Revenues Revenue by top clients.    The table below sets forth the percentage of our total net revenues derived from our largest clients, including the General Electric Company, or GE, in the years ended December 31, 2020 and 2021: [[GREPCENT_TABLE]] [["","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","%"]] [[/GREPCENT_TABLE]] We earn revenues pursuant to contracts that generally take the form of a master service agreement, or MSA, which is a framework agreement that is then supplemented by statements of work, or SOWs. Our MSAs specify the general terms applicable to the services we will provide. Our MSAs are generally for terms of three to seven years, although they may also have an indefinite term or be for terms of less than three years. In most cases they do not specify pricing terms or obligate the client to purchase a particular amount of services. We then enter into SOWs under an MSA, which specify particular services to be provided and the pricing terms. Most of our revenues are from SOWs with terms of two to five years. We typically have multiple SOWs under any given MSA, and the terms of our SOWs vary depending on the nature of the services to be provided. We seek to develop long-term relationships with our clients. We believe that these relationships best serve our clients as they create opportunities for us to provide a variety of services using the full range of our capabilities and to deliver continuous process improvement. New business proposals are reviewed in line with our strategy to target specific industry verticals and geographical markets. We begin each year with a set of named accounts, including prospective clients with operations in our target areas, and all opportunities during the year are reviewed by business leaders from the applicable industry vertical, operations personnel, and members of our finance team. In this way, we try to ensure that contract terms meet our pricing, cash and service objectives. See Item 1—“Business—Sales and marketing” for additional information. Many factors affect how we price our contracts. Under some of our MSAs, we are able to share a limited amount of inflation and currency exchange risk for engagements lasting longer than 12 months. Many of our MSAs also provide that, under transaction-based and fixed-price SOWs, we are entitled to retain a portion of certain productivity benefits we achieve. However, some of our MSAs and SOWs require certain minimum productivity benefits to be passed on to our clients. Once an MSA and the related SOWs are signed and production of services commences, our revenues and expenses increase as services are ramped up to the agreed upon level. In many cases, we may have opportunities to increase our profit margins over the life of an MSA or SOW, driven by a number of factors. Our revenues include gains or losses arising upon the maturity of qualified cash flow hedges. Under our services agreements with GE, GE has the right to terminate the MSA or any SOW in whole or in part for any reason by providing us with a short period of advance 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. Although some decisions about our services may be made centrally at GE, the total level of business we receive from GE generally depends on the decisions of the various operating managers of the GE businesses we serve. Because our business from GE is derived from a variety of businesses within GE, our exposure to GE is diversified in terms of industry risk. See Item 1A—“Risk Factors—GE has historically accounted for a significant portion of our revenues and any material loss of business from, or our failure to maintain relationships with, GE and former GE businesses could have a material adverse effect on our business, results of operations and financial condition.” Classification of certain net revenues.   We classify our net revenues in two categories: net revenues from Global Clients and net revenues from GE. Net revenues from Global Clients consist of revenues from services provided to all 1 Revenue growth on a constant currency basis is a non-GAAP measure and is calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates adjusted for hedging gains/losses in such period. 44 clients other than GE and the companies in which GE owns 20% or more 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 from the date of divestiture. The impact of the reclassification of revenue from divested GE businesses to Global Client revenue was immaterial in 2020, while the impact of such reclassifications in 2021 was $38.7 million. In many cases, we have continued to perform services for GE-divested businesses following their divestiture by GE even though they were not obligated by the GE MSA to continue to use our services. In such cases, we have either entered into new MSAs with respect to such businesses following their divestiture by GE or agreed with such businesses to continue to work pursuant to the terms agreed to by GE. We are currently undertaking efforts, and plan to continue efforts, to procure engagements with the businesses that GE divests as part of its GE Capital divestitures. Expenses.    Personnel expenses are a major component of both our cost of revenue and our selling, general and administrative expenses. Personnel expenses include salaries and benefits (including stock-based compensation) as well as costs related to recruitment and training. Personnel expenses are allocated between cost of revenue and selling, general and administrative expenses based on the classification of the employee. Stock-based compensation and depreciation and amortization expense are allocated between cost of revenue and selling, general and administrative expenses using an appropriate allocation basis. Our industry is labor-intensive. Wage levels in the countries in which our delivery centers are located have historically increased on a year-over-year basis. We attempt to address the impact of wage increases, and pressures to increase wages, in a number of ways, which include seeking to control entry-level wages, managing our attrition rate, delivering productivity and “right-skilling,” which refers to ensuring that positions are not filled by overqualified employees. We try to control increases in entry-level wages by implementing innovative recruitment policies, utilizing continuous training techniques, emphasizing promotion opportunities and maintaining an attractive work atmosphere and culture. In planning capacity expansion, we look for locations that help us ensure global delivery capability while helping us control average salary levels. In India and in other countries where we may open multiple offices or delivery centers, we try to expand into cities where competition for personnel and wage levels may be lower than in more developed cities. In addition, under some of our contracts we can share with our clients a portion of any increase in costs due to inflation. Nevertheless, despite these steps, we expect general increases in wage levels in the future, which could adversely affect our margins. A significant increase in attrition rates would also increase our recruitment and training costs and decrease our operating efficiency, productivity and profit margins. Increased attrition rates or increased pricing may also cause some clients to be less willing to use our services. See Item 1A—“Risk Factors—Wage increases in the countries where we operate may reduce our profit margin.” Our operational expenses include facilities maintenance expenses, travel and living expenses, IT expenses, and consulting and certain other expenses. Consulting charges, consisting of the cost of consultants and contract employees with specialized skills who are directly responsible for the performance of services for clients, are included in cost of revenue. Facilities maintenance expenses and certain other expenses are allocated between cost of revenue and selling, general and administrative expenses based on the employee’s function. Cost of revenue.    The principal component of cost of revenue is personnel expenses. We include in cost of revenue all personnel expenses for employees who are directly responsible for the performance of services for clients, their supervisors and certain support personnel who may be dedicated to a particular client or a set of processes. Travel and living expenses are included in cost of revenue if the personnel expense for the employee incurring such expense is included in cost of revenue. The ratio of cost of revenue to revenues for any particular SOW or for all SOWs under an MSA is typically higher in the early periods of the contract or client relationship than in later periods. This is because the number of supervisory and direct support personnel relative to the number of employees who are performing services 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. Selling, general and administrative expenses.    Our selling, general and administrative, or SG&A, expenses are primarily comprised of personnel expenses for senior management and other support personnel in enabling functions, such as human resources, finance, legal, marketing, sales and sales support, and other non-billable support personnel. The operational costs component of SG&A expenses also includes travel and living costs for such personnel. Additionally, the operational costs component of SG&A expenses includes acquisition related costs, legal and professional fees (which represent the costs of third-party legal, tax, accounting and other advisors), investments in research and development, digital technology, advanced automation and robotics, and an allowance for credit losses. Amortization of acquired intangible assets.    Amortization of acquired intangible assets consists of amortization expenses relating to intangible assets acquired through acquisitions. 45 Other operating (income) expense, net.    Other operating (income) expense, net primarily consists of the impact of the change in the fair value of earn-out consideration and deferred consideration relating to business acquisitions, as well as certain operating losses resulting from the write-down of operating lease right-of-use assets, property, plant and equipment and intangible assets. Foreign exchange gains (losses), net.    Foreign exchange gains (losses), net, primarily consists of gains or losses on the re-measurement of non-functional currency assets and liabilities. In addition, it includes gains or losses from derivative contracts entered into to offset the impact of the re-measurement of non-functional currency assets and liabilities. It also includes the realized and unrealized gains or losses on derivative contracts that do not qualify for hedge accounting. We also enter into derivative contracts to offset the impact of the re-measurement of non-functional currency expenditures and income. The gains or losses on derivative contracts that qualify for hedge accounting are deferred and included under other comprehensive income (loss) until the derivative contracts mature, at which time the gains or losses on such cash flow hedges are classified as net revenues, cost of revenue or selling, general and administrative expenses based on the underlying risk being hedged. See Note 2—“Summary of significant accounting policies” to our Consolidated Financial Statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules’’ and Item 7A—“Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk.” 76% of our fiscal 2021 revenues were earned in U.S. dollars. We also received payments in euros, U.K. pounds sterling, Australian dollars, Japanese yen and Indian rupees. Our costs are primarily incurred in 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, 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. Interest income (expense), net.  Interest income (expense), net consists primarily of interest expense on indebtedness, including resulting from interest rate swaps and a treasury rate lock agreement, finance lease obligations, interest adjustments relating to earn-out consideration in connection with certain acquisitions, certain items related to debt restructuring, and interest income on certain deposits. We manage a portion of our interest rate risk related to floating rate indebtedness by entering into interest rate swaps under which we receive floating rate payments based on the greater of LIBOR and the floor rate under our term loan and make payments based on a fixed rate. Other income (expense), net.   Other income (expense), net primarily includes certain government incentives received by our subsidiaries, changes in the fair value of assets in our deferred compensation plan, and settlement of certain pre-GE divestiture related tax liabilities for which we were indemnified by GE. Income taxes.   We are incorporated in Bermuda and have operations in many countries. Our effective tax rate has historically varied and will continue to vary from year to year based on the tax rate in the jurisdiction of our organization, the geographical sources of our earnings and the tax rates in those countries, the tax relief and incentives available to us, the financing and tax planning strategies employed by us, changes in tax laws or the interpretation thereof, and movements in our tax reserves, if any. Bermuda taxes.    We are organized in Bermuda. Bermuda does not impose any income tax on us. Indian taxes.   Indian SEZ legislation provides for a 15-year tax holiday scheme for operations established in designated special economic zones, or SEZs. Under the SEZ legislation, qualifying operations are eligible for a deduction from taxable income equal to (i) 100% of their profits or gains derived from the export of services for a period of five years from the commencement of operations; (ii) 50% of such profits or gains for the next five years; and (iii) 50% of such profits or gains for an additional period of five years, subject to the creation of a “Special Economic Zone Re-investment Reserve Account,” to be utilized only for acquiring new plant or machinery or for other business purposes, not including the distribution of dividends. 46 The Indian government enacted a law in 2019 that allows companies to elect to pay reduced tax rate on all of their income provided they do not take advantage of any tax holidays or other exemptions. In response to this law, we have ceased taking advantage of tax holidays in order to benefit from the reduced tax rate after March 31, 2021. Additionally, the governments of foreign jurisdictions where we deliver services may assert that certain of our clients have a “permanent establishment” in such jurisdictions by reason of the activities we perform on their behalf, particularly those clients that exercise control over or have substantial dependency on our services. Such an assertion could affect the size and scope of the services requested by such clients in the future. Transfer pricing.    We have transfer pricing arrangements among our subsidiaries involved in various aspects of our business, including operations, marketing, sales and delivery functions. U.S., U.K., and Indian transfer pricing regulations, as well as the regulations applicable in the other countries in which we operate, require that any international transaction involving affiliated enterprises be made on arm’s-length terms. We consider the transactions among our subsidiaries to be substantially on arm’s-length pricing terms. If, however, a tax authority in any jurisdiction reviews any of our tax returns and determines that the transfer prices we have applied are not appropriate, or that other income of our affiliates should be taxed in that jurisdiction, we may incur increased tax liability, including accrued interest and penalties, which would cause our tax expense to increase, possibly materially, thereby reducing our profitability and cash flows. Other taxes.    We have operating subsidiaries or branches in other countries, including Australia, Brazil, Canada, China, Costa Rica, the Czech Republic, Egypt, Germany, Guatemala, Hungary, Ireland, Israel, Japan, Malaysia, Mexico, the Netherlands, the Philippines, Poland, Portugal, Romania, Singapore, 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. One of our subsidiaries in China obtained a ruling from the Government of China certifying it to be a Technologically Advanced Service Enterprise. As a result, that subsidiary was subject to a lower corporate income tax rate of 15%, initially for a three-year period that began in 2009, which has been extended through December 31, 2023, subject to the fulfillment of certain conditions. Our delivery centers also enjoy corporate tax holidays or concessional tax rates in certain other jurisdictions, including Costa Rica, Israel, Malaysia and the Philippines. These tax concessions will expire over the next few years, possibly increasing our overall tax rate. Our ability to repatriate surplus earnings from our foreign subsidiaries in a tax-efficient manner is dependent upon interpretations of local laws, possible changes in such laws and the renegotiation of existing double tax avoidance treaties. Changes to any of these may adversely affect our overall tax rate. Tax audits.    Our tax liabilities may also increase, including due to accrued interest and penalties, if the applicable income tax authorities in any jurisdiction, during the course of any audits, were to disagree with any of our tax return positions. We have an indemnity from GE for any additional taxes attributable to periods prior to December 30, 2004. Tax losses and other deferred tax assets.    Our ability to utilize our tax loss carry forwards and other deferred tax assets and credits may be affected if our profitability deteriorates or if new legislation is introduced that changes carry-forward or crediting rules. Additionally, reductions in enacted tax rates may affect the value of our deferred tax assets and our tax expense. 47 Certain Acquisitions From time to time we may make acquisitions or engage in other strategic transactions if suitable opportunities arise, and we may use cash, securities, other assets or a combination thereof as consideration. On December 31, 2021, we acquired 100% of the outstanding equity/limited liability company interests in Hoodoo Digital, LLC, a Utah limited liability company, for total purchase consideration of $66.6 million. This amount represents cash consideration of $64.3 million, net of cash acquired of $2.3 million. This acquisition furthers our strategy to fuse experience and process innovation to help clients drive end-to-end digital transformation. Hoodoo’s expertise with Adobe Experience Manager and other Adobe applications complements our existing end-to-end client solution that seamlessly integrates digital content, ecommerce, data analytics, and marketing operations. Goodwill arising from the acquisition amounting to $44.2 million has been allocated among our three reporting units 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 deductible for income tax purposes and represents primarily the acquired capabilities and other benefits expected to result from combining the acquired operations with our existing operations. On December 31, 2020, we acquired 100% of the outstanding equity interests in Enquero Inc, a California corporation, and certain affiliated entities in India, the Netherlands and Canada (collectively referred to as “Enquero”) for total purchase consideration of $148.8 million. This amount represents cash consideration of $137.2 million, net of cash acquired of $11.6 million. This acquisition increased the scale and depth of our data and analytics capabilities and enhanced our ability to accelerate our clients' digital transformation journeys through cloud technologies and advanced data analytics. Goodwill arising from the acquisition amounting to $87.9 million has been allocated among our three reporting units as follows: 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 capabilities and other benefits expected to result from combining the acquired operations with our existing operations. On October 5, 2020, we acquired 100% of the outstanding equity/limited liability company interests in SomethingDigital.Com LLC, a New York limited liability company, for total purchase consideration of $57.5 million. This amount represents cash consideration of $56.1 million, net of cash acquired of $1.4 million. This acquisition supported our strategy to integrate experience and process innovation to help clients on their digital transformation journeys and expanded on our existing experience capabilities to support end-to-end digital commerce solutions, both business-to-business and business-to-consumer. Additionally, this acquisition expanded our capabilities into Magento Commerce, which powers Adobe Commerce Cloud, and Shopify Plus, a cloud-based-ecommerce platform for high-volume merchants. Goodwill arising from the acquisition amounting to $36.9 million has been allocated among two of our reporting units as follows: 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 deductible for income tax purposes. The goodwill represents primarily the acquired capabilities and other benefits expected to result from combining the acquired operations with our existing operations. On November 12, 2019, we acquired 100% of the outstanding equity/limited liability company interests in Rightpoint Consulting, LLC, an Illinois limited liability company, and certain affiliated entities in the United States and India (collectively referred to as “Rightpoint”) for total purchase consideration of $270.7 million. This amount includes cash consideration of $268.2 million, net of cash acquired of $2.5 million. This acquisition expanded our capabilities in improving customer experience and 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 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 arising from this acquisition, $91.9 million is deductible for income tax purposes. The goodwill primarily represents the acquired capabilities and other benefits expected to result from combining the acquired operations with our existing operations. 48 New Bookings New bookings is an operating or other statistical measure. We define new bookings as the total contract value of new client contracts and certain changes to existing client contracts to the extent that such contracts represent incremental future revenue. In determining total contract value for this purpose, we assume the minimum volume to which the client has committed or make a conservative projection where the client has not made a minimum volume commitment. New bookings attributable to large deals may exclude a portion of the total contract value above certain thresholds if the services are subject to 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 included as new bookings. We provide information regarding our new bookings because we believe doing so provides useful trend information regarding changes in the volume of our new business and may be a useful metric as an indicator of future revenue growth potential. New bookings is also used by management to measure our sales force productivity. New bookings in 2021 were $3.7 billion, compared to $3.1 billion in 2020. Bookings increased both in our Transformation Services and Intelligent Operations services. GE bookings declined in 2021 compared to 2020 primarily due to a reduction in bookings related to mid-size Intelligent Operations engagements. New bookings can vary significantly year to year depending in part on the timing of signing of large contracts. The types of services clients are demanding, the duration of the contract and the pace and level of client spending may impact the conversion of new bookings to revenues. For example, Intelligent Operations bookings, which are typically multi-year contracts, generally convert to revenue over a longer period of time compared to transformation services, which may include shorter cycle, project-based work. Information regarding our new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. The calculation of new bookings involves estimates and judgments. There are no third-party standards or requirements governing the calculation of new bookings. We do not update our new bookings for material subsequent terminations or reductions related to new bookings originally recorded in prior fiscal years. New bookings are recorded using then-existing foreign currency exchange rates and are not subsequently adjusted for foreign currency exchange rate fluctuations. Our revenues recognized each year will vary from the new bookings value since new bookings is a snapshot measurement of a portion of the total client contract value at a given time. 49 Critical Accounting Policies and Estimates A summary of our significant accounting policies is included in Note 2—“Summary of significant accounting policies” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if changes in the estimate that are reasonably possible could materially impact the financial statements or require a higher degree of judgment than others in their application. We base our estimates on historical experience, contractual commitments and on various other assumptions that we believe to be reasonable under the circumstances and at the time they are made. We believe the following critical accounting policies require a higher level of management judgment and estimates than others in preparing the consolidated financial statements. Management believes that the estimates used in the preparation of the consolidated financial statements are reasonable. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. Revenue recognition.    We typically face a long selling cycle in securing a new customer. It is not unusual for us to spend twelve to eighteen months or more from the time we begin actively soliciting a new customer until we begin to recognize revenues. All costs we incur prior to signing a contract with a customer 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 customer are classified as contract assets which are amortized over the expected period of benefit and recorded as an adjustment to the transaction price and deducted from revenue. Once a contract is signed, we defer revenues from the transition of services to our delivery centers, as well as the related cost of revenue 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. Our customer contracts sometimes also include incentive payments received for discrete benefits delivered or promised to be delivered to customers or service level agreements that could result in credits or refunds to the customer. Revenues relating to such arrangements are accounted for as variable consideration when the amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur. We include offerings such as sale of licenses in certain contracts, which may be perpetual or subscription-based. Revenue from distinct perpetual licenses is recognized at the point in time when the license is made available to the customer. Revenue from distinct, non-cancellable, subscription-based licenses is recognized at the point in time when the license is transferred to the customer. Revenue from any associated maintenance or ongoing support services is recognized ratably over the term of the contract. For a combined software license/services performance obligation, revenue is recognized over the period that the services are performed. We price our services under a variety of arrangements, including time and materials, transaction-based and fixed-price contracts. When services are priced on a time-and-materials basis, we charge the customer 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. In transaction-based pricing, customers 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 customer 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. In the case of fixed-price contracts, including those for application development, maintenance and support services, revenues are recognized ratably over the terms of the contracts. 50 We sometimes enter into multiple-element revenue arrangements in which a customer may purchase a combination of our products and 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. Revenue for performance obligations that are satisfied over time is recognized in accordance with the methods prescribed for measuring progress. The input (cost expended) method has been used to measure progress towards completion as there is a direct relationship between input and the satisfaction of a performance obligation. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. Timing of revenue recognition may differ from the timing of invoicing. If we receive payment in respect of services prior to the delivery of services, we recognize the payment as an advance from the customer, and it is classified as contract liability. When the related services are performed, the advance is transferred to revenue to the extent the services are rendered. Significant judgements involved include (a) determining whether services are considered distinct performance obligations that should be accounted for separately rather than together where we enter into contracts with customers 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 customers resulting from incentive payments received for discrete benefits delivered to customers 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. Changes in these estimates may impact revenue for any given period. Business combinations.    The application of business combination accounting requires the use of significant estimates and assumptions. We account for business combinations using the acquisition method of accounting, 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. The measurement of purchase price, including future contingent consideration, if any, and its allocation, requires significant estimates in determining the fair values of assets acquired and liabilities assumed, including with respect to intangible assets and deferred and contingent consideration. Significant estimates and assumptions we may make include, but are not limited to, the timing and amount of future revenue and cash flows based on, among other things, anticipated growth rates, customer attrition rates, and the discount rate reflecting the risk inherent in future cash flows. In addition, uncertain tax positions and tax-related valuation allowances assumed in connection with business combinations are initially estimated as of the acquisition date, and we reevaluate these items quarterly with any adjustments to our preliminary estimates being recorded to goodwill within the measurement period (up to one year from the acquisition date). Goodwill and other intangible assets.    Goodwill represents the cost of acquired businesses in excess of the fair value of the identifiable tangible and intangible net assets purchased. Goodwill is tested for impairment at least on an annual basis on December 31, or as circumstances warrant based on a number of factors, including operating results, business plans and future cash flows. We perform an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on our assessment of events or circumstances, we perform a quantitative assessment of goodwill impairment if it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the results of our assessments of qualitative factors, we determined that the fair values of all of our reporting units are likely to be higher than their respective carrying amounts as of December 31, 2020 and 2021. We capitalize certain software and technology 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) the external direct costs of materials and services utilized in developing or obtaining software and technology and (ii) compensation and related benefits for employees who are directly associated with the project. We test our intangible assets for impairment whenever events occur or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether we have incurred an impairment loss requires comparing the carrying amounts of the assets to the sum of future undiscounted cash flows expected to be generated by the assets. When determining the fair value of our intangible assets, we utilize various assumptions, including discount 51 rates, estimated growth rates, economic trends and projections of future cash flows. These projections also take into account factors such as the expected impact of new client contracts, expanded or new business from existing clients, efficiency initiatives, and the maturity of the markets in which each of our businesses operates. We generally categorize intangible assets acquired individually or with a group of other assets or in a business combination as customer-related, marketing-related, technology-related, and other intangible assets. See Note 2—“Summary of significant accounting policies—Business combinations, goodwill and other intangible assets” and Note 10—“Goodwill and intangible assets” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules’’ for more information about how we value our intangible assets. Actual results may vary, and may cause significant adjustments to the valuation of our assets in the future. Income taxes.    We account for income taxes using the asset and liability method. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases and for all operating losses and tax credits carried forward, if any. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or tax status is recognized in the statement of income in the period that includes the enactment date or the filing or approval date of the tax status change. Deferred tax assets are recognized in full, subject to a valuation allowance that reduces the amount recognized to that which is more likely than not to be realized. In assessing the likelihood of realization, we consider estimates of future taxable income. In the case of an entity that benefits from a corporate tax holiday, deferred tax assets or liabilities for existing temporary differences are recorded only to the extent such temporary differences are expected to reverse after the expiration of the tax holiday. We also evaluate potential exposures related to tax contingencies or claims made by tax authorities in various jurisdictions and determine if a reserve is required. A reserve is recorded if we believe that a loss is more likely than not to occur and the amount can be reasonably estimated. Any such reserves are based on estimates and are subject to changing facts and circumstances considering the progress of ongoing audits, case law and new legislation. We believe that the reserves we have established are adequate. We apply a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining, based on the technical merits, that the position is more likely than not to be sustained upon examination. The second step is to measure the tax benefit as the largest amount of the tax benefit that is greater than 50% likely of being realized upon settlement. We also include interest and penalties related to unrecognized tax benefits within our provision for income tax expense. We generally plan to indefinitely reinvest the undistributed earnings of foreign subsidiaries, except for those earnings that can be repatriated in a tax-free manner. Accordingly, we do not currently accrue any material income, distribution or withholding taxes that would arise if such earnings were repatriated. Due to rounding, the numbers presented in the tables included in this Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” may not add up precisely to the totals provided. 52 Results of Operations For a discussion of our results of operations for the 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. The following table sets forth certain data from our income statement for the years ended December 31, 2020 and 2021: [[GREPCENT_TABLE]] [["","Year ended December 31,","","Percentage change increase/ (decrease) 2021 vs. 2020"],["","2020","","2021"],["Net revenues\u2014Global Clients","$","3,250.5","","","$","3,646.0","","","12.2","%"],["Net revenues\u2014GE","$","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","8.3%","","9.2%"]] [[/GREPCENT_TABLE]] 53 Fiscal Year Ended December 31, 2021 Compared to the Fiscal Year Ended December 31, 2020 Net revenues.    Our net revenues were $4,022.2 million in 2021, up $312.8 million, or 8.4%, from $3,709.4 million in 2020. The growth in our net revenues was primarily driven by Global Clients, led by both transformation services and intelligent operations engagements, with double-digital growth across most of our verticals. Our net revenues from GE declined in 2021 compared to 2020, largely due to committed productivity and a reduction in GE’s discretionary expenditures resulting from the macroeconomic environment, as well as GE’s divestitures of certain businesses that as of January 1, 2021 are included in our Global Client portfolio. Adjusted for foreign exchange, primarily the impact of changes in the values of the euro, Australian dollar and U.K. pound sterling against the U.S. dollar, our net revenues grew 7.2% in 2021 compared to 2020 on a constant currency2 basis. Revenue growth on a constant currency2 basis is a non-GAAP measure. We provide information about our revenue growth on a constant currency2 basis so that our revenue may be viewed without the impact of foreign currency exchange rate fluctuations compared to prior fiscal periods, thereby facilitating period-to-period comparisons of our business performance. Total net revenues on a constant currency2 basis are calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates and adjusted for hedging gains/losses. Our average headcount increased to approximately 103,100 in 2021 from approximately 96,700 in 2020. [[GREPCENT_TABLE]] [["","Year ended December 31,","","Percentage change increase/ (decrease) 2021 vs. 2020"],["","2020","","2021"],["","(dollars in millions)"],["Net revenues\u2014Global Clients","$","3,250.5","","","$","3,646.0","","","12.2","%"],["Net revenues\u2014GE","$","458.9","","","$","376.2","","","(18.0)","%"],["Total net revenues","$","3,709.4","","","$","4,022.2","","","8.4","%"]] [[/GREPCENT_TABLE]] Net revenues from Global Clients in 2021 were $3,646.0 million, up $395.5 million, or 12.2%, from $3,250.5 million in 2020. This increase was primarily driven by double-digital growth across most of our verticals within our CGRLH and 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 87.6% in 2020 to 90.6% in 2021. Net revenues from GE were $376.2 million in 2021, down $82.7 million, or 18.0%, from 2020, largely due to committed productivity and a reduction in GE’s discretionary expenditures resulting from the macroeconomic environment, as well as the impact of $38.7 million in revenues in 2021 from certain GE-divested businesses that as of January 1, 2021 are included in Global Client revenue. Revenues by segment were as follows: [[GREPCENT_TABLE]] [["","Year ended December 31,","","Percentage change increase/ (decrease) 2021 vs. 2020"],["","2020","","2021"],["","(dollars in millions)"],["BCMI","$","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","%"]] [[/GREPCENT_TABLE]] 2 Revenue growth on a constant currency basis is a non-GAAP measure and is calculated by restating current-period activity using the prior fiscal period’s foreign currency exchange rates adjusted for hedging gains/losses in such period. 54 Net revenues from our BCMI segment decreased 5.8% in 2021 compared to 2020, largely due to the impact of the restructuring of a contract with a large client in our banking and capital markets vertical during the fourth quarter of 2020, partially offset by higher revenues from clients in our 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 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 acquired in the fourth quarter of 2020. Net revenues from our HMS segment increased 6.5% in 2021 compared to 2020, primarily driven by an increase in revenues from Global Clients largely related to transformation services and ramp-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 macroeconomic environment. Net revenues from "Others" in the table above primarily represents the impact of foreign exchange fluctuations, which is not allocated to our segments for management’s internal reporting purposes. For additional information, see Note 24—“Segment reporting” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” Cost of revenue.  Cost of revenue was $2,590.3 million in 2021, up $172.2 million, or 7.1%, from $2,418.1 million in 2020. The increase in our cost of revenue in 2021 compared to 2020 was primarily due to (i) an increase in our operational headcount supporting revenue growth, including in the number of onshore personnel related to large deals and transformation services delivery as well as from the acquisition of SomethingDigital.Com LLC and Enquero in the fourth quarter of 2020, (ii) wage inflation, (iii) increased hiring costs related to new deals and other growth initiatives, and (iv) higher expenses associated with increased medical costs. This increase was partially offset by (i) improved utilization of resources, (ii) a decrease in travel costs due to the ongoing COVID-19 pandemic, and (iii) a decrease in depreciation expense in 2021 compared to 2020. We also recorded a non-recurring charge related to retirement fund assets in India and a restructuring charge related to employee severance in 2020, while no corresponding charge was recorded in 2021. For additional information, see Note 28—“Restructuring” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” Gross margin. Our gross margin increased from 34.8% in 2020 to 35.6% in 2021, primarily driven by an increase in the share of our revenue derived from our transformation services and reflecting digitization-led productivity as well as lower depreciation cost and lower travel costs due to the ongoing COVID-19 pandemic in 2021 compared to 2020, partially offset by higher expenses associated with medical costs, and an increase in hiring costs related to new deals and other growth opportunities. We also recorded a non-recurring charge related to retirement fund assets in India and a restructuring charge related to employee severance in 2020, while no corresponding charges were recorded in 2021. Selling, general and administrative (SG&A) expenses. SG&A expenses as a percentage of total net revenues increased from 21.3% in 2020 to 21.5% in 2021. SG&A expenses were $865.7 million in 2021, up $75.9 million, or 9.6%, from $789.8 million in 2020. This increase was primarily due to higher staffing to support increased revenues, higher medical costs, higher planned research and development investments in cloud-based offerings and other prioritized service lines, higher marketing expenses, and wage inflation in 2021 compared to 2020, partially offset by lower depreciation expense. We also recorded a non-recurring employee severance charge as part of our restructuring in 2020, while no corresponding charge was recorded in 2021. Amortization of acquired intangibles.   Amortization of acquired intangibles was $58.4 million in 2021, up $15.1 million, or 34.8%, from $43.3 million in 2020. This increase is primarily due to higher amortization expense related to the acquisitions of Enquero and SomethingDigital.Com LLC in the fourth quarter of 2020. Other operating (income) expense, net.   Other operating income (net of expense) was $1.2 million in 2021, compared to other operating expense (net of income) of $19.3 million in 2020. This reduction was primarily due to a non-recurring impairment charge of $31.2 million related to the abandonment of certain leased office premises and tangible and intangible assets, primarily technology-and customer-related, partially offset by a $7.8 million decrease in the fair value of earn-out liabilities recorded in 2020, while no similar significant charges or earn-out adjustments were recorded in 2021. For additional information, see Note 28—“Restructuring” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” Income from operations.    As a result of the foregoing factors, income from operations as a percentage of total net revenues increased from 11.8% in 2020 to 12.7% in 2021. Income from operations was $509.0 million in 2021, up 16.0%, or $70.3 million, from $438.7 million in 2020. Foreign exchange gains (losses), net.   We recorded a net foreign exchange gain of $12.7 million in 2021, compared to $7.5 million in 2020. The gains in 2021 resulted primarily from the depreciation of the Indian rupee against the U.S. dollar and gains from fair value hedges. The gains in 2020 resulted primarily from the depreciation of the Indian rupee against the U.S. dollar. 55 Interest income (expense), net.   Our interest expense (net of interest income) was $51.4 million in 2021, up $2.4 million from $49.0 million in 2020, primarily due to a $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 lower outstanding amount on our term loan, lower drawdown of our revolving credit facility and a lower average London Interbank Offered Rate ("LIBOR")-based rate on our revolving credit facility and term loan, partially offset by higher losses on interest rate swaps in 2021 compared to 2020, which we discuss in the section titled “Liquidity and Capital Resources—Financial Condition” below. Our interest income decreased by $0.4 million in 2021 compared to 2020, primarily due to lower interest income in India in 2021 compared to 2020. The weighted average rate of interest on our debt, including the net impact of interest rate swaps, decreased from 3.0% in 2020 to 2.9% in 2021. Other income (expense), net. Our other income (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 primarily attributable to export subsidies received in India, 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 our deferred compensation plan in 2021 compared to 2020. Income tax expense. Our income tax expense increased from $92.2 million in 2020 to $113.7 million in 2021. Our effective tax rate, or ETR, was 23.5% in 2021, up from 23.0% in 2020. The increase in our ETR is primarily due to certain discrete items recorded in 2021, partially offset by interest received on income tax refunds during 2021. Net income.  As a result of the foregoing factors, net income as a percentage of net revenues was 9.2% in 2021, up from 8.3% in 2020. Net income increased by $61.1 million from $308.3 million in 2020 to $369.4 million in 2021. Adjusted income from operations. Adjusted income from operations, or AOI, increased by $73.9 million from $588.8 million in 2020 to $662.7 million in 2021. Our AOI margin increased from 15.9% in 2020 to 16.5% in 2021. This increase was primarily due to higher revenues, gross margin, and operating leverage in 2021 compared to 2020, partially offset by wage inflation, higher planned research and development investments in cloud-based offerings and other prioritized service lines, and higher medical costs in 2021 compared to 2020. AOI is a non-GAAP measure and is not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. We believe that presenting AOI together with our reported results can provide useful supplemental information to our investors and management regarding financial and business trends relating to our financial condition and results of operations. A limitation of using AOI versus net income calculated in accordance with GAAP is that AOI excludes certain recurring costs and certain other charges, namely stock-based compensation and amortization of acquired intangibles. We compensate for this limitation by providing specific information on the GAAP amounts excluded from AOI. We calculate AOI as net income, excluding (i) stock-based compensation, (ii) amortization and impairment of acquired intangible assets, (iii) acquisition-related expenses excluded in the period in which an acquisition is consummated, (iv) foreign exchange (gain)/loss, (v) restructuring expenses, (vi) interest (income) expense, and (vii) income tax expense, as we believe that our results after taking into account these adjustments more accurately reflect our ongoing operations. For additional information, see Note 24—“Segment reporting” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” During the year ended December 31, 2020, due to the impact of the COVID-19 pandemic on our then current and expected revenues, we recorded a $26.5 million restructuring charge primarily related to the abandonment of leased office premises and employee severance charges. This restructuring charge was excluded from AOI during the year ended December 31, 2020, and no corresponding charge was recorded during the year ended December 31, 2021. For additional information, see Note 28—“Restructuring” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” 56 The following table shows the reconciliation of AOI to the most directly comparable GAAP measure for the years ended December 31, 2020 and 2021:  [[GREPCENT_TABLE]] [["","Year ended December 31,"],["","2020","","2021"],["","(dollars in millions)"],["Net income","$","308.3","","","$","369.4"],["Foreign exchange (gains) losses, net","(7.5)","","","(12.7)"],["Interest (income) expense, net","49.0","","","51.4"],["Income tax expense","92.2","","","113.7"],["Stock-based compensation","74.0","","","82.0"],["Amortization and impairment of acquired intangible assets","43.6","","","57.6"],["Acquisition-related expenses","2.7","","","1.2"],["Restructuring expenses","26.5","","","\u2014"],["Adjusted income from operations","$","588.8","","","$","662.7"]] [[/GREPCENT_TABLE]] The following table sets forth our AOI by reportable business segment for the years ended December 31, 2020 and 2021:  [[GREPCENT_TABLE]] [["","Year ended December 31,","","Percentage change increase/ (decrease) 2021 vs. 2020"],["","2020","","2021"],["","(dollars in millions)"],["BCMI","$","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)","%"]] [[/GREPCENT_TABLE]] AOI of our BCMI segment decreased to $126.9 million in 2021 from $132.9 million in 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. AOI of our HMS segment increased to $272.8 million in 2021 from $244.2 million in 2020, primarily due to increased leverage driven by revenue growth from Global Clients in our HMS segment, which also included revenue from Enquero acquired in the fourth quarter of 2020, and higher utilization of resources, partially offset by higher medical costs and 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 macroeconomic environment. AOI for “Others” in the table above primarily represents the impact of foreign exchange fluctuations, adjustment of allowances for credit losses and over- or under-absorption of overheads, none of which is allocated to any individual segment for management's internal reporting purposes. See Note 24—“Segment reporting” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” Seasonality Our financial results may vary from period to period. Our revenues are typically higher in the third and fourth quarters than in other quarters, as a result of several factors. We generally find that demand for short-term transformation services, analytics and IT projects increases in the fourth quarter as our clients utilize the balance of their budgets for the year. In addition, contracts for long-term intelligent 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. 57 Statement of financial position Key changes in our financial position during 2021 Following are the significant changes in our financial position as of December 31, 2021 compared to December 31, 2020: •Short-term borrowings decreased by $250.0 million The decrease is due to the repayment of $250.0 million in short-term borrowings using the proceeds of the issuance of our 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. •Prepaid expenses, other current assets, contract cost assets and other assets decreased by $41.7 million The decrease in prepaid expenses, other current assets, contract cost assets and other assets is primarily due to lower tax payments and higher tax refunds received, recovery of a deal bonus and severance costs as a result of the impact of restructuring 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 25—“Net revenues—Contract balances” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” for additional information. •Net accounts receivable increased by $6.7 million The increase in our accounts receivable is primarily due to increased revenues in 2021, offset by improved days sales outstanding. •Goodwill and intangible assets decreased by $31.8 million Goodwill increased by $35.3 million, primarily due to the acquisition of Hoodoo Digital, LLC in the fourth quarter of 2021, partially offset by exchange rate fluctuations. Our intangible assets decreased by $67.1 million due to amortization and impairment expenses, offset by the acquisition of Hoodoo Digital, LLC. See Note 10—“Goodwill and intangible assets” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” •Operating lease right-of-use assets decreased by $34.1 million 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. •Operating lease liability decreased by $36.5 million The decrease in operating lease liability is due to lease payments, partially offset by additions and modifications in 2021. •Accounts payable, accrued expenses, other current liabilities and other liabilities increased by $2.5 million The increase in accounts payable, accrued expenses, other current liabilities and other liabilities is primarily due to an 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. •Long-term debt increased by $315.0 million The increase in long-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 principal repayments of $34.0 million on our term loan. For additional information, see Note 14—“Long-term debt” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” •Net deferred tax assets decreased by $2.8 million Our net deferred tax assets decreased by $2.8 million. See Note 23—“Income taxes” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” 58 Liquidity and Capital Resources Overview Information about our financial position as of December 31, 2020 and 2021 is presented below: [[GREPCENT_TABLE]] [["","As of December 31,","","As of December 31,","","Percentage Change increase/(decrease)"],["","2020","","2021","","2021 vs. 2020"],["","(dollars in millions)"],["Cash and cash equivalents","$","680.4","","","$","899.5","","","32.2","%"],["Short-term borrowings","250.0","","","\u2014","","","(100.0)","%"],["Long-term debt due within one year","33.5","","","383.4","","","NM*"],["Long-term debt other than the current portion","1,307.4","","","1,272.5","","","(2.7)","%"],["Genpact Limited total shareholders\u2019 equity","$","1,834.2","","","$","1,897.1","","","3.4","%"]] [[/GREPCENT_TABLE]] *Not Meaningful Financial Condition We have historically financed our operations and our expansion, including acquisitions, with cash from operations and borrowing facilities. As of December 31, 2021, $875.9 million of our $899.5 million in cash and cash equivalents was held by our foreign (non-Bermuda) subsidiaries. $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 $9.6 million of retained earnings. $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 or is being indefinitely reinvested. In February 2020, our board of directors approved a 15% increase in our quarterly cash dividend from $0.085 per common share to $0.0975 per common share, representing an annual dividend of $0.39 per common share for 2020, up from $0.34 per share in 2019. On each of March 18, 2020, June 26, 2020, September 23, 2020 and December 23, 2020, we paid dividends of $0.0975 per share, amounting to $18.5 million, $18.6 million, $18.6 million and $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. In February 2021, our board of directors approved a 10% increase in our quarterly cash dividend from $0.0975 per common share to $0.1075 per common share, representing an annual dividend of $0.43 per common share for 2021, up from $0.39 per share in 2020. On each of March 19, 2021, June 23, 2021, September 24, 2021 and December 22, 2021, we paid dividends of $0.1075 per share, amounting to $20.1 million, $20.1 million, $20.2 million, and $20.0 million in the aggregate, to shareholders of record as of March 10, 2021, June 11, 2021, September 10, 2021, and December 10, 2021, respectively. In February 2022, our board of directors approved a 16% increase in our quarterly cash dividend from $0.1075 per common share to $0.125 per common share, representing a planned annual dividend of $0.50 per common share for 2022, up from $0.43 per share in 2021. Any future dividends will be at the discretion of our board of directors and subject to Bermuda and other applicable laws. The total authorization under our existing share repurchase program is $1,750.0 million, of which $338.9 million remained available as of December 31, 2021. Since our share repurchase program was initially authorized in 2015, we have repurchased 47,387,077 of our common shares at a weighted average price of $29.78 per share, for an aggregate purchase price of $1,411.1 million. This amount includes shares repurchased under our 2017 accelerated share repurchase program. During the years ended December 31, 2020 and 2021, we repurchased 3,412,293 and 6,577,562 of our common shares, respectively, on the open market at a weighted average price of $40.16 and $45.32 per share, respectively, for an aggregate purchase price of $137.0 million and $298.1 million, respectively. All repurchased shares have been retired. For additional information, see Note 19—“Capital stock” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” 59 We expect that for the next twelve months and the foreseeable future our cash from operations, cash reserves and debt capacity will be sufficient to finance our operations, our growth and expansion plans, dividend payments and additional share repurchases we may make under our share repurchase program. However, there is no assurance that the impacts we have experienced to date, and any future impact we may experience, from the COVID-19 pandemic will not have an adverse effect on our cash flows. In addition, we may raise additional funds through public or private debt or equity financings. Our working capital needs are primarily to finance our payroll and other administrative and information technology expenses in advance of the receipt of accounts receivable. Our primary capital requirements include opening new delivery centers, expanding existing operations to support our growth, financing acquisitions, and enhancing existing capabilities, including building digital solutions. Cash flows from operating, investing and financing activities, as reflected in our consolidated statements of cash flows, are summarized in the following table: [[GREPCENT_TABLE]] [["","Year ended December 31,","","Percentage change increase/ (decrease) 2021 vs. 2020"],["","2020","","2021"],["","(dollars in millions)"],["Net cash provided by (used for)"],["Operating activities","$","584.3","","","$","694.3","","","18.8","%"],["Investing activities","(266.4)","","","(122.7)","","","(53.9)","%"],["Financing activities","(92.0)","","","(332.9)","","","261.8","%"],["Net increase in cash and cash equivalents","$","225.9","","","$","238.7","","","5.7","%"]] [[/GREPCENT_TABLE]] Cash flows from operating activities.    Net cash provided by operating activities was $694.3 million in 2021, compared to $584.3 million in 2020. This increase was primarily due to a (i) $61.2 million increase in net income in 2021 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 2021 compared to 2020, partially offset by lower depreciation and amortization expense and lower deferred tax benefits in 2021 compared to 2020. Cash flows from investing activities.   Our net cash used for investing activities was $122.7 million in 2021, compared to $266.4 million in 2020. This change is primarily due to payments related to acquisitions that were $114.6 million lower in 2021 than in 2020, and payments for property, plant and equipment (net of sale proceeds) and acquired/internally generated intangible assets that were $28.9 million lower in 2021 than in 2020. Cash flows from financing activities.  Our net cash used for financing activities was $332.9 million in 2021, compared to $92.0 million in 2020. This change was primarily due to (i) higher payments for share repurchases (including expenses related to repurchases) amounting to $298.2 million in 2021 compared to $137.1 million in 2020, (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 borrowings (net of repayment) in 2021 compared to 2020, partially offset by proceeds from the issuance of common shares under our stock-based compensation plans, amounting to $35.1 million in 2021 compared to $25.1 million in 2020. 60 Financing Arrangements (Credit facility) The overall borrowing capacity under our revolving facility is $500.0 million, which we obtained through an amendment of our existing credit agreement on August 9, 2018. The unamortized costs and an additional third party fee paid in connection with the amendment is being amortized over the term of the amended facility, which expires on August 8, 2023. Borrowings under the amended facility bear interest at a rate equal to, at our election, either LIBOR plus an applicable margin equal to 1.375% per annum or a base rate plus an applicable margin equal to 0.375% per annum, in each case subject to adjustment based on our debt ratings provided 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. As of December 31, 2020 and 2021, our outstanding term loan, net of debt amortization expense of $1.2 million and $0.7 million, respectively, was $593.9 million and $560.3 million, respectively. We also have fund-based and non-fund based credit facilities with banks, which are available for operational requirements in the form of overdrafts, letters of credit, guarantees and short-term loans. As of December 31, 2020 and 2021, the limit available under such facilities was $14.3 million and $24.7 million, respectively, of which $7.8 million and $5.8 million, respectively, was utilized, constituting non-funded drawdown. As of December 31, 2020 and 2021, a total of $252.3 million and $2.0 million, respectively, of our revolving credit facility was utilized, of which $250.0 million and $0 million, respectively, constituted funded drawdown, and $2.3 million and $2.0 million, respectively, constituted non-funded drawdown. We have entered 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. As of December 31, 2021, we were party to interest rate swaps covering a total notional amount of $460.1 million. Under our swap agreements, the rate that we pay to banks in exchange for LIBOR ranges between 0.38% and 2.65%. Genpact Luxembourg S.à r.l. (“Genpact Luxembourg”), a wholly-owned subsidiary of the Company, issued $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 wholly-owned subsidiary of the Company. The total debt issuance cost of $2.6 million and $2.9 million incurred in connection with the 2017 Senior Notes and the 2019 Senior Notes offerings, respectively, are being amortized over the respective lives of the notes as additional interest expense. As of December 31, 2020 and 2021, the amount outstanding under the 2017 Senior Notes, net of debt amortization expense of $0.7 million and $0.1 million, respectively, was $349.3 million and $349.9 million, respectively, which is payable on April 1, 2022. 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. In March 2021, Genpact Luxembourg and Genpact USA co-issued $350 million aggregate principal amount of 1.750% senior notes (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 of 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 2021 Senior Notes offerings is being amortized over the lives of the notes as additional interest expense. As of December 31, 2021, the amount outstanding under the 2021 Senior Notes, net of debt amortization expense of $2.6 million, was $347.4 million, which is payable on April 10, 2026. For additional information, see Notes 14—“Long-term debt” and 15—“Short-term borrowings” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” 61 Goodwill Impairment Testing Goodwill of a reporting unit is tested for impairment at least annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. In accordance with ASC 350, Intangibles-Goodwill and Other, we have an option to perform an assessment of qualitative factors, including but not limited to macro-economic conditions, industry and market considerations, overall financial performance, business plans and expected future cash flows, to determine whether events or circumstances exist which lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on our assessment of such qualitative factors, in accordance with ASC 350, we concluded that as of December 31, 2020 and 2021, the fair values of all of our reporting units are likely to be higher than their respective carrying values. Off-Balance Sheet Arrangements Our off-balance sheet arrangements consist of foreign exchange contracts. For additional information, see Item 1A—“Risk Factors—Currency exchange rate fluctuations in various currencies in which we do business, especially the Indian rupee, the euro and the U.S. dollar, could have a material adverse effect on our business, results of operations and financial condition" and Note 7—“Derivative financial instruments” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” Other Liquidity and Capital Resources Information We have purchase commitments, net of capital advances paid in respect of such purchases, of $13.3 million which will be paid over the next year. For additional information, see Note 27—“Commitments and contingencies” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” We also have operating and finance lease commitments of $420.6 million to be paid over the lease term. For additional information, see Note 12—“Leases” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.” 62 Supplemental Guarantor Financial Information As discussed in Note 14, “Long-term debt,” to our consolidated financial statements under Part IV, Item 15- "Exhibit and Financial Statement Schedules," Genpact Luxembourg issued the 2017 Senior Notes and the 2019 Senior Notes, and Genpact Luxembourg and Genpact USA co-issued the 2021 Senior Notes. As of December 31, 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”). 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. The following tables present summarized financial information for Genpact Luxembourg, Genpact USA and the Company (collectively, the “Debt Issuers and Guarantors”) on a combined basis after elimination of (i) intercompany transactions and balances among the Debt Issuers and Guarantors and (ii) equity in earnings from and investments in the non-Guarantors. [[GREPCENT_TABLE]] [["Summarized Statements of Income","","Year ended December 31, 2020","","Year ended December 31, 2021"],["","","(dollars in millions)"],["Net revenues","","$","206.5","","","$","214.2"],["Gross profit","","206.5","","214.2"],["Net income","","762.7","","102.7"]] [[/GREPCENT_TABLE]] Below is a summary of transactions with non-Guarantors included in the summarized statement of income above: [[GREPCENT_TABLE]] [["","","Year ended December 31, 2020","","Year ended December 31, 2021"],["","","(dollars in millions)"],["Royalty income","","$","69.5","","","$","4.4"],["Revenue from services","","137.0","","209.8"],["Interest income (expense), net","","46.7","","33.0"],["Other cost, net","","11.2","","17.7"],["Gain on sale of intellectual property","","650.0","","\u2014"]] [[/GREPCENT_TABLE]] 63 [[GREPCENT_TABLE]] [["Summarized Balance Sheets","","As of December 31, 2020","","As of December 31, 2021"],["","","(dollars in millions)"],["Assets"],["Current assets","","$","2,073.7","","","$","2,257.8"],["Non-current assets","","711.7","","457.5"],["Liabilities"],["Current liabilities","","$","3,491.9","","","$","3,758.5"],["Non-current liabilities","","1,825.3","","1,777.6"]] [[/GREPCENT_TABLE]] Below is a summary of the balances with non-Guarantors included in the summarized balance sheets above: [[GREPCENT_TABLE]] [["","","As of December 31, 2020","","As of December 31, 2021"],["","","(dollars in millions)"],["Assets"],["Current assets"],["Accounts receivable, net","","$","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","","","$","296.1"],["Loans receivable","","\u2014","","\u2014"],["Others","","64.2","","31.5"],["Liabilities"],["Current liabilities"],["Loans payable","","$","2,357.9","","","$","2,431.2"],["Others","","823.4","","914.0"],["Non-Current liabilities"],["Loans payable","","$","500.0","","","$","500.0"]] [[/GREPCENT_TABLE]] The Senior Notes and the related guarantees rank pari passu in right of payment with all senior and unsecured debt of the Issuer and the Guarantor and rank senior in right of payment to all of the Issuer’s and the Guarantor’s future subordinated debt. The Senior Notes are effectively subordinated to all of the Issuer’s and the Guarantor’s existing and future secured debt to the extent of the value of the assets securing such debt. The Senior Notes are structurally subordinated to all of the existing and future debt and other liabilities of the Guarantor’s subsidiaries (other than the Issuer), including the liabilities of certain subsidiaries pursuant to our senior credit facility. The non-Guarantors are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due under the Senior Notes or to make the funds available to pay those amounts, whether by dividend, distribution, loan or other payment. If the Issuer or the Guarantor have any right to receive any assets of any of the non-Guarantors upon the insolvency, liquidation, reorganization, dissolution or other winding-up of any non-Guarantor, all of that non-Guarantor’s creditors (including trade creditors) would be entitled to payment in full out of that non-Guarantor’s assets before the holders of the Senior Notes would be entitled to any payment. Claims of holders of the Senior Notes are structurally subordinated to the liabilities of certain non-Guarantors pursuant to their liabilities under our senior credit facility. 64 Recent Accounting Pronouncements Recently adopted accounting pronouncements For a description of recently adopted accounting pronouncements, see Note 2—“Summary of significant accounting policies—Recently issued accounting pronouncements” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules” and Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” For a description of recently issued accounting pronouncements, see Note 2—“Summary of significant accounting policies—Recently issued accounting pronouncements” to our consolidated financial statements under Part IV, Item 15—“Exhibits and Financial Statement Schedules.”