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CTSH Cognizant Technology Solutions

Participants
Katie Royce Head of Investor Relations
Brian Humphries Chief Executive Officer
Karen McLoughlin Chief Financial Officer
Lisa Ellis MoffettNathanson
Tien-Tsin Huang JPMorgan
Brian Essex Morgan Stanley
Keith Bachman BMO Capital Markets
Bryan Keane Deutsche Bank
Jim Schneider Goldman Sachs
Rod Bourgeois DeepDive Equity
Darrin Peller Wolfe Research
Bryan Bergin Cowen
Call transcript
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Operator

Ladies and gentlemen, welcome to the Cognizant Technology Solutions First Quarter Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Katie Royce, Head of Investor Relations. Please go ahead Ms. Royce. Please go ahead Ms. Royce.

Katie Royce

good copy By for of first XXXX and have you the Rob, quarter a received the results. you, afternoon, now, everyone. should company's Thank earnings release

website copy call today's Brian Financial Humphries, and available a Officer. have Officer; are: not, Executive McLoughlin, have speakers we you on If our Karen cognizant.com. Chief The on is Chief

to contain call Before with the comments of statements. you that and of are the we some some subject begin, may other the I as risks would like earnings your the statements These and filings responses on release SEC. and forward-looking described remind today's questions company's to to the made in uncertainties

information will certain be of today, during Reconciliations release measures appropriate for non-GAAP the call financial Additionally, filings measures, useful the the in non-GAAP and can our reference measures our other corresponding GAAP with where investors. that we earnings financial company's to found provide we believe SEC.

to address shortly take before of into Obviously I other look afternoon our this Brian, communication Before are going materials we let release inadvertent We wanted this one Please aware understand go you that, ahead, Brian. we Humphries. market there to We that we some like know to are me a pass and now was I'd that to issue. what here. undertake a happened over call of Brian to simply and issue With closed. the let will review. turn the

Brian Humphries

operations. associates other Since conducted of I And across that busy the the confirmed. than leadership from my my heart initial Well, I continents met long I've Cognizant CEO. earnings of tell point to person. in I've our Cognizant's, regions. I'm two listen partners. to service deep of our clients our have I'm at ago, observations Cognizant to with call getting reasons I've I've company global enthusiasm we to you, all our I'll opportunity pleased more join executive you a been into industries, the you thank the role to five lead directly in traveled dozen talked and can and about and of team dives first to and lines weeks and forward. first leading today my moving excited three nearly great is share for into had company's the strongly on good been Katie company everybody. companies. hundreds the That afternoon, admired quarter into have technology vantage the later disappointing call. a performance. some said, This as

lot to believe of constant In earnings QX shortfall. get the We billion. currency and short $X.X have to capable I guidance back our a X.X% resulted in work seize of is company year-over-year achieving front in of to opportunity fell to of to This grew market our do in us. revenue this what an

in growth the resulted Healthcare weak softness slowing Healthcare, and flat line year-over-year was constant Banking in contribution growth currency top and performance Solutions. Financial Our which in excluding Bolder Services of in from a

among quarter. in-sourcing behind business Offsetting Technology. Media two segments; as we in factors Services execution Healthcare, you Karen Cognizant-specific in as few reflects weakness Communications, today's are well the a through midst and our Healthcare Our the revenue that I'll spending the in let to Financial integration, that merger including and the performance and double-digit and in both of need this of of issues Financial growth and external get clients pullback large clients in take strong details delivered Later Resources we Services call, Products major other us.

once this business to as foundation I I've ever. know and are partners clients our want capabilities is the centricity with as stress that spent to time to I attest the and for a resourcefulness, winning disappointing passion meeting of decades This past it's desire break. face in of success. their weeks, hard and be the face notwithstanding as First, met to and the create, kind observations: robust. customer to strong spirit win. can is reviewing of commercial three associates enough market clients, business incredible offer our to want of and I five weeks hard true. solid Beforehand to to QX Having culture derives over attribute with over the it five is last opportunity Their becomes is spirit to from -- innovation hundreds the core but Cognizant, it cultural also

and must better. can do we know we Second,

financial consistent and to expectations of we the months. the loss delivering weakness a first top follows XX line that recognize that with the third, over We revenue we are XX performance to also that set past momentum aligns committed And communicate. quarter

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we our how not India but our only firsthand drive important our strategy. saw and I that delivery teams can valued teams competitive our a growth. India, digital customer for advantage, bring in be our clients. to deliver, accelerate we solutions prized to trip innovation a and also efficient recent my This are to During develop engagements, Through must ensure but asset more customer also to life capabilities is

growth, clarity fit set As and are of getting we change responsibilities roles for management, about and communication critical.

their We about will connection clear that associates between our understand go-forward healthy line making role a of and everyone priorities the in ensure that all cost this and momentum happen. is structure our and top

to can expect we what growth satisfaction. CEO the I a ensuring dynamics, will For the doing market new control related fully to deliver dig teams. maximizing you part our I'm while behavior, I steady client focused investments state, right a prioritizing approach on believe collaboration and of to clients, I Karen engagement focus to into our margin co-creating teams and customer and cross-selling accretion non-investment up-selling the get balance our example, customer buying Meanwhile points understand solutions accelerate meantime, rigorous business I competitive every of and would sales growth. Once on we structures That and will the want simultaneously. in points and within in customer do. strategy, existing innovative levels aside the delivery to acquisition, costs, pain and

our opportunities. already unturned, and on a no These leave areas series streams including: structure, streams to review organizational focus our work of launched work to I've stone intend I margin As and that verticals among ensure and to clear that assess culture performance-oriented. drives service, and role rights clarity of our decision empowered both regions accountability a and to model lines a is growth

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and Finally management, at focused rigorous and talent our and people culture, everything, have and the leadership acknowledging emphasizing streams data-driven planning development. leadership succession heart on work we of are attraction

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to Executive as of and I'm with want structure, know in Chairman Raj end into Board D'Souza of backfill of want of will can you Vice to communicate quicker and the costs, this business Frank our to President. planning role that my Vice role. transition be deeply move out agility. organizational and our greater I and so has Mehta arrival Chairman take the the stepped layers down at moved flatten to also we with engaged June. not speed As

strategic Services, and President to Digital view I've And to represents improve accelerating Malcolm to responsibilities make customer Prasad the President Malcolm to as as performance will a career, and Global head a new of for banking I'm continue immediately which revenue, bring and in Banking on segment. responsibilities Services to Frank banking Business. just in our asked of led will passion, maintain Cognizant's this a basis. interim will launch digital Consulting Financial significant all Financial our we XX% appointed Banking the also of an of I've our addition interim he mentality Prasad position. focus our his Cognizant sharpening our direct our existing assume With his growth of partnership business in the new business. in the and centricity, annual and Earlier to that his Industries existing role. critical confident difference and the management his addition EVP Chintamaneni a in Therefore of to Prasad business search mind

Finally to like would the call market opportunity. significant briefly I on to touch before Karen, turning Cognizant's

me threat. the opportunity as large opportunity things drew cross-sell and where lines in service. that for a and of and to industries We as we digitization creates industry relationships our recognize they of rates a strong significant positions leadership client across One and digital of is can our market. an both built many addressable Cognizant clients, verticals upsell us The

success. to X/X North on with basis, outside opportunity that the opportunity will markets and accounting solutions base. America We and services an I of of have and believe huge of for capture diversify double just have our ensure over total we execution we down And our there's to our currently on portfolio opportunity right a strategy revenues. further client to a growth the market global geographical

We process need and impact by this have and over six capabilities industry core one form Softvision; across more platform the opportunities Internet modernization; These the focusing engineering on six have Cognizant's intelligent of strategy I AI clients been digital about create our verticals. core enabled will enthusiastic automation; businesses. and Things. solutions; and added digital advent experiences. really list, to become investments which The customer where expand of To our of of are: IoT significant analytics; digital interactive our XG vastly capabilities that I'm advanced the capabilities fully capability,

IoT ample in partnership be all our see of help and estimate world, extend in we these which As dollars. margin portfolio we be our hundreds we billions offerings to of of our IoT digital profiles combined growth market strong need successful in of the that areas to offer for build and a ecosystem. headroom We a out opportunity customers

long-term identify on to no progress update quarters. opportunities ensure is is to will Cognizant our so short, operations, aim we in we As for efficiency forward an digitize coming success. is these improvements be for well in to giving unturned all ensuring profitability. mission the partnerships in legacy My investments, our own we our my in operations. positioned after prioritizing and I get you growth, look can our opportunities investing stone we leave that ultra-efficient In that and

strategy and centricity a associates solid engaged client committed have to executing we this We and are incredible strategy. fully

Karen view as as With year how it's who Okay. ahead. to that pleasure it financial a Karen? the operational you and will both an update performance my on to give we on well over see our turn

Karen McLoughlin

Thank everyone. you, afternoon, Brian, good and

most the significant of total however in in accounts over quarter the saw Digital the of an the or as be While second deterioration performance slower-than-expected expected, and to led X.X% we currency. QX driver of growth a to continues X/X revenue. started a revenue our $X.XX quarter now of half billion, of X.X% constant in which for year-over-year increase our

to expectation Financial verticals, and primarily currency was whereas the both during saw while our top driven the In Healthcare. growth slowed approach driven clients, at regional the than In several our to of year-over-year particularly a softness five executive what pipeline. spend the were America, that with process the the of deals communicated continue North banking banking insurance, at Services as Consistent insurance. a flat under Day QX transitions other year the in spend pressure. several November, banking larger our latter at more show slower largest clients by clients our part the three continue beginning two at see we was to to in Investor in of underperformance but we growth of our the industry activity. conservative quarter Financial the good constant by including of also growth at remains underway clients and M&A few quarter, mentioned Services by of we banks Brian in in with clients, impacted decision-making some Moving banking our were around

which a fees and our financial We Temenos regulatory, as banking post-trade banking the solutions MeritSoft, and and in previously offerings And announced for institutions platforms second shared based operate strategy platform in capital transform progress in tax, quarter. to processing clients and expected through the a payables with three the acquisition operations recent Finnish for made on platform have with core however platform the the receivables market furthering billing. partnership software began and of

However for a growth seeing spend with sector half of the their in second the moderating we in banking cautiousness are some the around levels year business. in outlook of

large currency. vertical payer to on which our Moving at our involved slower-than-expected well Healthcare growth impact as the year-over-year of as revenue. largely the The which in several in client. of to result large accelerated was negatively Healthcare mergers, clients grew we Within a party X.X% movement rampdown continued clients constant of some subcontractor a work also were in to account continued third captive a to an of

and new trends the some finalize contract quarter on of these expect of to their before second these integration deteriorate the likely as execution We continue negotiations plans. clients in embarking

those our last several the pressure of consolidation growth rates years, periods. heightened seen Over we've creating organic periods on industry in during Healthcare

the be has that of revenue this that handful can While clients resulted integration from typically associated M&A with the work over large a follows period. meaningful, recognize we volatility

platform As as provider into acceleration TMG, time we Sciences contribute broad-based consistent quarter over mix of growth. by broaden to our for client offerings should above-company average client as diversification base within space, Healthcare contributing saw developed such expanding as the new growth. care more the Life well the clients in through our contracts

currency. and manufacturing shared growth saw in We constant well, handful large well momentum in platforms We energy and trials. on are retail hospitality, and currency fourth Building constant and saw clinical transformation another traction deals relationships for retail industry-specific seeing goods, during quarter. growth of in good showing as Products some as quarter, a smaller and with consumer of such the the enterprise our XX.X% logistics we quarter despite year-over-year resources that the our as portal the investigator strong travel had utilities. momentum double-digit bankruptcies to continued in perform in across

engineering for digital and clients. IoT services in analytics interactive solutions and across and to continue see strength We cloud increased demand

Within and by year-over-year technology communications, Media growth XX.X% media driven constant was Communications, the and strong software primarily quarter clients Our driven their communications involved clients another clients within by growth digital consolidation. double-digit Technology offset currency industry platform and by delivered with of in growth had segment modern media slower transformation companies, by to Technology solutions. with to media for in sector. driven content entertainment growth digital partially services our primarily accelerate and

Continental double-digit our in The outside basis, see saw constant geos. X.X% in in we remain Now Asia continued banking and to the be constant moving On Europe saw we a Results by XX.X% negatively telecom on did some pressure larger logos. few the grew quarter. while of currency. currency grew our Services weakness in the year-over-year Financial good industry impacted of of newer clients. of a of world growth from three Pacific constant rest banking to segments larger Europe relationships Life In growth strength the currency. our several Europe, in year-over-year in Sciences under in

of While opportunity North America significant the market we a and remains us in other for parts growing tremendous growth for see world.

investments in Europe given of future a organic which for have We inorganic and us number growth. strong have a Continental foundation made

drive to particularly and expect now investments growth to we in focus our Shifting international forward, Europe. Going on an greater even increase margins.

EPS margin $X.XX GAAP respectively. and and Our were XX.X%

and related of extending obligations Supreme ruling of which impacted an negatively of by to by margin defined the and altered employees it income. historical such statutory contribution of a Court cover India the were accrual GAAP million additional of certain EPS portions a Our employers employee's $XXX understanding interpreting obligations to recent

accrual application Our Supreme and of Court the ruling. periods assumes retroactive prior covers

in significant discussed be basis. release, the However whether to is should Indian as on our and liability tables calculated financial apply as the government retroactive will how the there further the earnings a ruling to uncertainty

amount ultimate the such company's of from materially obligation be the different As accrued. the may amount

As from the headcount the XXXX adjusted promotions additions continued contribution. full contribution we was in and XX% the fourth and the absorption the had followed periods Adjusted QX. the required this in typical year increases future to which wage India approximately realignment portion the also our and and of charges This and margins be will our a employer increased. QX, margin excludes million quarter. of for operating $XX to and the QX of projection. result was were contributions of remainder In than in $XXX ruling, result the company incremental million accrual are related incremental employees this our of change $X.XX spend to related obligation EPS seasonality lower defined of

and filings segment. our due for which debt XX EPS quarter negatively margins a by XX lower-than-expected operating impacted to $X.XX. by by costs our operating basis outpacing bankruptcy related to revenue negatively in and This by increase and growth margins growth points an in debt few bad anticipated bad margin operating Our Products points the primarily adjusted quarter in impacted related the clients, EPS expense Resources by the basis was expectations below and headcount to expense $X.XX

For margins in with expectations, below half the the improve structure align remain the expectations. to our remainder to as second cost XXXX, of our of previous but expect we year revised we revenue

optimization, and business of discussed more at improved we cost Investor November, unit Day our opportunity parts during cost to remains steps higher There to in additional as while much areas and we to our enhance of structure back simplify As of overhead improve can is pyramid structure do have utilization a levels such through sustaining delivery. hard we margins taken our take levers. look pricing the there

a digital annualized people QX, talent shift higher-value but to and with From continue Additionally elevated. to our at services perspective, attrition remains a support flat is XX% will as rate such margins.

focus on workforce our to strategy continue We and overall management.

annual in payments. stock to largely the program due $XXX quarter from short-term the healthy. XX, December to and $X.X This Turning under early $XXX is our investments, of very repurchase XXXX. funding million down of repurchases the program launched the share billion finished bonus $XXX of and including sheet with which remains repurchase balance decrease We cash accelerated million the March million share

generated Indian flow short-term quarter. includes Department. with related million. amounts the our restricted These We dispute reminder, balance a short-term of of the are ongoing cash investments $XXX investment in free As Tax million to Income the restricted $XXX

of flow free Following was timing bonus the QX pattern, cash by typical our payouts. impacted in seasonal the

historical which in billed three impacted an of which XX% by balance QX, is an days million had XXXX of of compared $XXX unbilled approximately we Additionally We free DSO the norms. flow cash unbilled and line in included in increase uptick negatively with to receivables. our QX April

million of on end balance no Our the there balance revolver. and outstanding was $XXX at outstanding the debt the was quarter

to now During repurchased share million outlook like for diluted the million shares to quarter, for comment XXX XXXX. year quarter. we our approximately the and X.X I and count on QX would the decreased full first shares our

Services, to within rates full year. For XX full foreign the a in including of one range currency. of year-over-year to XXXX, constant as the of growth X.X% translates revised current Insurance as and to our slower exchange well revenue Healthcare. the reflects range year more in the basis grow we guidance negative Based this assumptions in growth quarter X.X% as X.X% a outlook muted for of exchange the X.X% expect on points Financial reflecting to well as Banking This for

XXXX quarter. X.X% negative of translates to exchange assumption For of expect to to on current to X.X% points of constant revenue the for basis rates range exchange of in X.X% in second in for quarter growth a Based the currency. range we deliver X.X% XXX growth the reflecting foreign second the our this

For we is of XXXX, grew in XX% last than $X.XX. approximately for adjusted guidance margin which full the EPS range result quarters. expect the to deliver year reduction two to the be the revenue in faster headcount operating and our $X.XX of The primarily adjusted operating margins to

contribution and tax defined adjustments. digital cost actions we will to losses, year development accrual and the also any excludes position anticipates XX% operating will of will and range adjusted items revenue our better to above with EPS, the XXX continue and that align margins growth While solutions in to the realignment expectations, marketplace. adjusted XX%. This in XX% while gains guidance million a obligation the currency in non-operating of the structure tax count charges incremental take quarter, our we talent take to invest other we In of further provided effects cost at unusual we that rate Guidance net approximately approximately expect perspective be foreign implement. with a several full exchange in share second related months to QX line shares alignment and of the for the revised India our

shifts immigration the guidance such does environment the Our areas not tax. including from in and impact as for also account regulatory

approximately of will target repurchases. of balanced utilize repurchases and to QX we In share more full reduce approach of XX% dividends than for count flow cash to annually average part capital intend the that our year share free by As X%. global for allocation, executed our share our we

shareholders declared In record a QX cash the business dividend addition May at $X.XX of of on for XX. close Board the of has share per

Additionally we intend to two global acquisitions cash approximately utilize free of closed thus have acquisitions in XX% and on far XXXX. flow

capabilities, We for enhance and footprint to continue Brian. With look to our our digital enriching that strategy expanding acquisitions of I longer-term over that, will geographic call our enhancing back our vertical expertise. the turn

Brian Humphries

thank Karen. Well, you,

Before recognize saying close again, great the company. we let take delighted and colleagues to me lead to back to we My how your I basics to to this our questions by do work XXX,XXX once am to have strengthen get I that execution. opportunity and Cognizant have

achieving. our up through sleeves capable to I tenaciously of Cognizant ensure know We is kind produce that will and results of roll follow we on strategy the our

and of the all Lisa clients to Operator dedicated all the with to are Instructions] phase for are The with from to that, and lines operator And of spurring line to proceed we open success. the and digital first I'll question is ask Ellis [Operator question. the Please with MoffettNathanson. our advancing We next your pivot committed Cognizant's your questions. growth

Lisa Ellis

with working I look and Hi welcome forward Brian. guys good to afternoon you.

Brian Humphries>

you. Thank

Lisa Ellis

you given looking but envision can the a this to envision some shifts period next transition, Can tough want and in make XX you there an you more doing the like in X be on clearly of Are you. you've you months -- for you know Any, in so, thoughts? that's five can to you've just want Thank pretty organization map bit a aggressively? where like? ground I you changes immediate early Like or things landed going you weeks you just to to you how investing little said give already out us for are just focus? been for faster sense might

Brian Humphries

the three Yes, ultimately spent I'm been going and prioritizing across have partners. but my five And that my a how the reviews, so. spending our associates The the the of understanding have to costs get market but to do relevant trade-offs I and investments ultimately I great view the to things to we're will clients an of costs going that same doing view my be spend with there. we investments news And do time view, time potential and opportunity. be growth. back to and to spending great same business time last I thing. and exciting time weeks be But From is over don't between continue is with will costs one continents extent the point thing, have to forward. I to is happy and growth

have be for fit We growth. to

feel order engine So was have secret free we the to of so growth to need in to sauce to really that in restart for do invest in Cognizant. the order invest we in need investment. up I a that dollars growth, we to And to certain Lisa, extent

really associates our spirit. well. but have to getting basics opportunity the investments, doing winning we right, We have cost back go have and great the making There's to embracing digital who a there, a engaged very out structure

in of plans in etcetera. etcetera, I right structural commission terms get And be to be we we think overlooked can will If do sales decision in a strategy all position rights, well. sometimes basics this and those companies to execute of our

Operator

you. Thank

question. question the Huang Tien-Tsin from with your JPMorgan. with Please line next Our proceed of comes

Tien-Tsin Huang

out Brian, late and at they carry strategy understanding Investor CEO comments. was when the Day that I they that out the would laid for to Thank year. ultimately that you the selected you, ask thoughtful last our thanks the Board wanted

seen margin longer-term So relevant? you you've again what you've and given the described what still based on Or what goals growth are learned in observed? company's changes and XQ are results required and

Brian Humphries

into to ahead. of me of as learning really weeks comment are on as I I'm curve opportunity still Of associates over obviously of I'm Well, I which winning so And a that market on I with have plan the as spirit in the for a is be on tenure, a surrounded We to potential. knowledge them said really can them that's I you have be in five will is in candidate there years say course be smart based the well broad and commercial to the said delighted that is time. I'm to very to and much a a do help client-centric by huge why? industry and imagine. our steep about lot here optimistic to question my can't is base What Board sought people asset going answer our taken. leaning success. I'm years execute a what

as execute. in within C harder set the like a opportunity to who largest most stack in as indeed CIO opportunity at have obviously as have is open easy our Karen the and that other we to gives digital digital segments well to embrace spend in our new Now penetrate to one of strong articulate what's hand an relationships Cognizant up-sell further base, the but their go our after to and markets. we to installed and customers And better verticals and leverage we growth touched within What's also to easy and of companies suite customers cross-sell have the successful rest us notably or ambitions.

to in is comment really You early clarification your good be all better business leverage clearly rights. be our the in and should constraint the a responsibility to what in answer line started. a matrix, touching empowerment of company ultimately run with how D sales explore that of you degree matrix to have roles some asked are What's versus CIO from decision the me the needs relationships of work streams empowered every the more which too to that portion quarters. digital terms and at into let indeed that critical and of look offerings. I’ve into if clarity the And we that shift but look commission has have important question But basics where are deeper goes and as better to will our obviously cross-sell and And not and portion the of basics are business, upon it shift optimization these will accountability. There the me course to to after it's our by theory leveraging companies and in verticals rest to opportunity the to at customer of all of rapid indirectly Teams so marketing of or we address segmentation, of important clear be to some we as will responsibilities a me expands COO in defined. core right of must I want well for change? be and outer a the in C-suite the delivery of I indeed the the as just the and the accounts-based CMO, transformation growth advisory position between really on CEO CIO Too and saying markets. we some me and horizontals down to and to under the the I'll the need and Maybe get a model. the to able always we matrix. get plans, also his

I'm a the up as themselves rolling you learn have a clients priorities learning in short play week I've little to lot get imagine they to and my but spending business. passing the I'm will with sleeves can in and my a informing I huge got smarter, every role going team look with With forward. time So

Operator

The with question. your with is Brian Essex Morgan proceed of you. Stanley. from question line Please Thank next the

Brian Essex

if of understand I could half progress bit us issue? like and that wrap around help for as and maybe from than fatter able arms wondering pipeline -- little bit wondering this regional side? on Hi, you Financial we the the taking back a our America Banking good the softness you Or the sounds and to softer the a Karen a if more bit through I it a temporary in Brian of Services is be little particularly with to the banking there what a clients? the question. year? things might North anticipated afternoon, I was of kind either year you might was where came kind little are guess you be thank color or And get and

Karen McLoughlin

I'll Sure. Karen. Brian it's take that.

certainly last under we two the as several five year in the think, banking top top saw of I have year. the nice quarters, talked pressure that this into clients been So recovery we've for about and and continues five

we see any the the seen in said change really of as haven't in those my But regional we of We on profile call comments clients. the some did, their clients behavior. or pullback banking

our we’ve about small regional quarter. some ours. the saw before acquisition finalized deals spending, so at of client, are of a in little as of the do that was was M&A the we talked general some and to number in industry. between basis not clients of a any particularly well, getting tend across pullbacks integration softness acquisitions pullback of some but it the We always as other see material are as Some happening when clients there were there bit closed on individual both clients of when a sides But

already see a into we've significant I into a half don't happening in seen recovery banking with of think But see further five got expect three point do the significant in this we it beyond deterioration to market. expect But clients, it's of to the neither back the it. what's a was bit year. we big the say of I early but move broader little quarter we as at what to surprise the as the

Operator

Keith proceed Please The next question BMO Markets. Bachman of from with comes question. your the with line Capital

Keith Bachman

short much. I which than were time. of is magnitude's larger lowering thank don't you've been start there period I the surprise, Brian a Hi, with certainly and but very for think estimates, to you a we I a indicated you're And you to as want as candidly bit thinking. you this wanted --

wanted part that fresh just little does me at level are one of leaning words, from for free flow XX% the cash doing Accenture second poses, to of a Cognizant a would your time of assessments look reasonable some rates the to in and of the friends I other you cash well-served in flow And free that give that be to perhaps would comfort are at kind the on that things. the bit suggest question a your bit banks of that troubled get using had would as And set other spot. so least surprise you that the is M&A some things that more firms. targets, I estimates attached by think acquisitions. And at is And a enough the gravity your taking given

saw it from And so advance were made previous would me. statements Cognizant? of be away cause if question to Cognizant corollary willing to part you the of flex opportunities that the some for That's advance would that you the

Brian Humphries

Well, thank Keith. you,

in to Let execute framework in inherent strategy. a with in because is Look capital time, I like first our the is -- no to not M&A, I'm people we're to that. our on We continue of my a do very ongoing Board generally. been is there lever shareholders level an Keith, will to ensure it our very a strategy. explicitly clear this capital you allocation on me say imagine to start more means previously that change At a has be continue allocation is I will of for disclosed our question maximizing you balance question basis strong to the will M&A in M&A our sheet. framework. execute evaluate it strategy, and and mind a moment have well can value Directors and a

as be line Karen I'm immediately and of I to to on of major tuck-in and trend, to a invest have was get results definition, trend and can. the integration. forward as ownership that April an have will business I'm the be I've we we we're So, value which Xst, At shareholder in By and think arrived putting cyclical and question Back on of versus moment, to historically them the I business opposed and is understanding an weeks, I look to acquisitions we latter five with do acquisitions been not as come factor actually to ambition. our so can below those what trying focused relates working that and factor? know revenue the a quarter that all needs quarter. me I'm to can closed favorable a contextualized strategic And more the to clean part beyond the sponsorship to obviously on at happened the margins, in against that. to what should acquisitions anything we knows clear out means drive to the versus work enable to me here to secular drive that the Cognizant-specific part strategy I to your further growth to sight what we have the best use against. ensure is everybody health And those line our creation. down end able in I first there pleased decompose try focused in a of guidance a looking to long-term we done external execute been with need started

that's say. at as this moment time, much I in can as So,

Karen McLoughlin

think if I comments Brian's Keith acquisitions. just and add could allocation I on And to capital

a XX% deploy would was buybacks dividends, recall you'll M&A, needed very other and our for free we we Investor for on of Day framework or XX% what flow and a at outlined and As average we on sheet if we that continue But year, average acquisitions for to both cash XX% given in the excess investments. capacity with then balance a goes time India. strong cash to for debt have appropriate

Operator

from next comes proceed The question. of question line Keane Bryan Please Deutsche with your the Bank. with

Bryan Keane

on guys down Hi, being million up $XXX income to good gave basis afternoon. margins the just XXX I points. first in I'm you of by quarter, $XXX was ended X, understand so op versus know and guidance the February trying million miss

going basis to year. margin expansion So we -- and know were this Margins points. be about XXX I up talked

Now they're basis points. going be XXX to down

to about I'm knew for raises the up make it. to margin doesn't already. happened trying headcount the for shortfall you So quarter expansion revenue and sure I'm just in put what the And just

trying So I'm Thanks. to just reconcile the differences?

Karen McLoughlin

Yes.

did was anticipated it's know it have to once year full hard you you So the tend the to certainly I on give QX not QX And revenue up this way you to sense but of think is and the hiring, that shortfall have as year. growth average. we the biggest gave piece need down the about to then support does Bryan clearly can guidance, people guidance while think revenue the in board when our the the pull below we margin And QX ramped margin hiring -- beginning in for quarterly the that. that be we the you

we slightly so through went the margin And year be ramp as a had adjusted able expectations were be build as revenue the would XX% continued and we to below expected as my deploy seasonality and was there while margins we of operating of And that our own will there the see, I’ve part a this you'll in the we a margins, that little as I QX early said be of that different year. had think XXXX. bit comments headcount what to on in bought

quarter, So we margins QX have QX, into QX be then and in can but we'll now, margin board align structure in get given the to and on ramp -- and QX of as same. our adjusted pullback and revenue. similarly cost with margins we see line that be the will back the the roughly will operating better be tends but strongest QX we QX the revenue QX to the margins headcount

Operator

Thank you.

comes of Sachs. Schneider line with proceed Jim question from Please your question. the next with Our Goldman

Jim Schneider

initial told for do words, a on they've month clients if in Can the you there's your understanding your over accelerate business, that Good maybe and Banking, at going about is bit potentially little about the just beyond my philosophically talk revenue could Healthcare just potentially aggressive issues revenue growth business the between Brian. the give you pricing? go -- margins, believe trade-off -- talk And actually conditions kind you thoughts being had you a if at don't Maybe you direct welcome more of question you've on believe re-accelerate can revenue we you on different? other respect maybe to the by were And could that you afternoon. more to of taking now? company are with how could growth? right clients their all for temporal growth company. what you about that with In willingness back Thanks to conversations with example pricing

Brian Humphries

Yes.

seen just terms where it's think stand, a new. and across that elasticity within I our of openly our also our in notion on legacy we continents is the say clients of on good and of to in I client working customers what Cognizant, lot management. on. have teams quite tried and those continues brand, understand are I've feedback spend in the notion of very those three and business of theme. consistent Services aware digital a run in on I've we meetings delivery soliciting do-or-die on the side also everywhere brings that And project very approached stand but Financial in question obviously would in clients the and inherent And I not pressure and position kind for, the same else all fully the vein their disruption of way. clearly firms consistently on are what

with competitive legacy new. as are market highly a they in competitors well So as

find And also free participate our investments dollars if so security, down legacy, up investments to up message digital enable better will. for them free in have the get to for you very but to in in is, world, ways the we dollars to often innovation,

we would always not where traditionally So played. it's there is but spend,

will that strength into It's skill grow we as get digital COOs, the it You And our to the more nature CEOs? leave? to them? CIOs something collateral NPS then the we to? to efficient really customer It's fundamentally better more that for become course follow-up? to of is to continue And optimize into logos in, new opportunities Digital happen. almost sets? sponsors those strong world. portfolio, How required the am how nature our all grow relationships, How we also with we and our of confident making if business time, global being we flex XX% The Who longer-term in growth. the as turn project-based of How for buttress to to our so we skills we Healthcare, we our right contracts have Cognizant and but we time door? How us, the two-thirds task be element. will things and and front their businesses in moment we growth, over But it. positioning have to brings us juggle ourselves business we broadly, that opportunities. it's to to and contracts right with we around. that in as talk North able What and course, that a get with, the opportunity we to to invest important as growth those get have as quarter. important which we of enable talk Business Financial CMO, too. is that muscles advisory more this At I of name deliver accelerated with well fact work at lot in And, further leverage with markets, important in an the is our an in of from grew Winning simultaneously business, our of margins do. is better a possible first and steady-state, so to America in those of Services the get legacy growth complications contracts

Operator

the question line Bourgeois Please next your with Equity. with you. is of DeepDive Thank The question. Rod proceed from

Rod Bourgeois

were I the perspective. that the it fresh seem set had and and seem by does been nice that want have awkwardly recently. back it Day management, mean, to financial Analyst where Hey, targets the welcome, outgoing were those Hey, targets I to does just Brian, to timed. related go that the we

playing inquire, wanted prospects One And to occur. the he these having to will you've of risk change has plan on, the targets role context pipeline just the that any going he period? transition that for there is process extended when CEO so couple Is forecasting about staying forward? that was Frank to there is the that an were and ultimately helm? come I a so rating the eminently in be clarity So on things. for of out in as issued process the a has or going And changed two, for to financial

created was the people of wrestling I now think now with with that lot a that. awkwardness especially are

process the going the guidance of and Frank for forecasting there And a approach plan and the changed? role has forward? is assumptions So

Brian Humphries

Well, near and work role will let with him me basis in question spend available time and and I capacity, process With latter Frank with me. with transition as first to use. transition start who's thereafter, with but counselor and can period as and dear a expectations the Executive regards to gentleman And non-operational I've opportunity short needed the of from around really the will for reach delighted I the hold sure comment my the months the or understand into somebody in for that out been nothing the be Board. or I been of earnings. get next And consistency the and heart. the EVP him. to He’s and of QX Investor to a have clear on can't me months CEO hasn't guidance I'm within guidance the on he same almost clear I to choose daily the role counsel It's past. forecasting something as Day to three He's to for that, two an stage obviously I vein. next a at gone guidance, and very the this Chairman importance setting It's that Vice to we to move meet

budget will process. an not process work rigor get our forecasting, and to but annual to in We forecasting continue just

happen bonuses the based leadership set from budget. day, But bottom we set we a cost the end accounts. basis, monthly on at of the up and structure on Forecasts annual a

inherent just to forecasting sure of we against predictability want not we make So and enter as year. the we're against also rigorous, guidance, plan but a

Rod Bourgeois

you. Thank

Operator

with the question Wolfe Peller comes Darrin question. Research. your next from line Please proceed of The with

Darrin Peller

revenue million to love magnitude outlook, the I revenue when dissect $XXX handful guess, shortfall revenue of much million And at it just I'd Maybe of, guys. pace of just say been granularity and a is faster can guys. you more a we think that if really of versus I thanks, hear Hey, broad-based? Listen of how this to a mean, growth large revenue rate. of you're legacy what your $XXX us you as to now. clients? seeing not to get is the I initial of give much on little digital here, didn't then, enough really, offset, digital if that's Thanks, you How sort decelerating – is

Karen McLoughlin

So, Karen. Darrin, it's

so – of it's end year, it what It towards my that digital, about there. revenue now. grew the said a-third low significant XX%, – the running so we've consistent of no changes low So in last XXs, but real comments with was where above so was

Operator

you. Thank

line Cowen. question. the of Our final your question is Bryan Please from proceed Bergin with with

Bryan Bergin

you. I Thank on ask wanted to Healthcare. Hi.

and understand of here, clients. ramping I'm potentially With ramping, the that's in discuss then the the underlying the independent political outlook insurance corner a what the and your do to here? segment ramp captive of spending cycles down. health show also managed-care you're can that account of conversations with you turn to around expect you rhetoric independent can And really, starting behavior trying seeing in when also

Karen McLoughlin

Karen. It's

the seen we've the activity merger I that behavior Healthcare. to was – primarily in acquisition don't I So we really related saw think in QX and

the where ours. companies the of been have going the and in four we captive some anything large more might that to broader see At I So we think, quarter. be had clients sluggishness But the regulatory then, Healthcare. maybe as majority know, add QX those the during as the we that client months. mergers deterioration, all in a did And of situations Brian some some one saw move we environment to said, happening those well. that we were color it's for All I'll about ask of that And where rest was very year. there to pullbacks accelerate this last into as two versus point, and of large expect with the client-specific few

Brian Humphries

on excluding is and been Well, different slow. positive XX% a from starting care as very thanks, health In business, of it's strong would M&A, bifurcates. and double-digit, had it we grew has position the first and some payer certainly Well, strength. story Life Karen. I the a GDP we've Obviously, all, nature, said. care about nation's a say, of of we're health still been Sciences

received very on much in but agenda, we so hours I was the disappointing So business companies I've do we yet and which have we opportunity. cost their and understand, transformation them opportunities, embracing largest had some last are digital about better. to CIOs to optimize savings the need clear. of quarter, we've the few get the to the to need of spent with Cognizant optimize message your three under Help Healthcare In And of and very run Healthcare days, results where course, open world. run they this

And sure so assets for us years. to in customer those historically new in customers very role get business had satisfaction and his our prior bear now strong in opportunities – we offer make where after his to growing Malcolm in bring and and we've

Karen McLoughlin

today's Thank for that joining and And concludes with all for questions. you call. that, your

Brian Humphries

Thank you.

Operator

teleconference. today's Thank you for joining

disconnect your may this now at participation. your And lines You thank time. you for