Cognizant Technology Solutions Corporation

Ladies and gentlemen, welcome to the Cognizant Technology Solutions Q1 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question session. If you would like to ask a question at that time, please press star 1 on your telephone keypad. A confirmation symbol indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. I would now like to turn this conference over to Mr. Tyler Scott, Vice President, Investor Relations. Please go ahead, sir. You may begin the presentation.

Thank you, Operator, and good afternoon, everyone. By now, you should have received a copy of the earnings release and the investor supplement for the company's first quarter 2022 results. If you have not, copies are available on our website, cognizant.com. The speakers we have on today's call are Brian Humphries, Chief Executive Officer, and Jan Siegmund, Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risk and uncertainties as described in the company's earnings release and other filings with the SEC. Additionally, during our call today, We will reference certain non-GAAP financial measures that we believe provide useful information for our investors. Reconciliations of non-GAAP financial measures, where appropriate to the corresponding GAAP measures, can be found in the company's earnings release and other filings with the SEC. With that, I'd like to turn the call over to Brian Humphreys. Please go ahead, Brian.

Thank you, Tyler. Good afternoon, everyone. Thanks to our talented employees, we delivered on our first quarter commitments in what continues to be an intensely competitive global labor market. First quarter revenue was $4.8 billion, up 10.9% year over year in constant currency, above the midpoint of our first quarter guidance of 10.2% to 11.2% growth. Growth was led by digital, which grew 20% year over year and now represents 50% of our revenues. We had another exceptional quarter in digital business operations, which continues to meaningfully outgrow the BPO markets, reflecting momentum in intelligent process automation and digital native clients. First quarter operating margin was 15%, down slightly sequentially, as expected, reflecting seasonality. First quarter bookings growth of 4% was in line with our expectations, following exceptional bookings growth in the fourth quarter. On a trading 12-month basis, we have a robust book-to-bill ratio, of greater than 1.2 times revenue, reflecting bookings of over $23 billion. Given a healthy pipeline, we anticipate bookings growth acceleration in the second quarter and for the full year. Over the last three months, I've met employees, partners, and clients across four continents. While the global economic environment is uncertain, based on these interactions, I remain optimistic about IT services industry demand for the foreseeable future. Clients are making the shift to digital operating models to become more agile, automated, and innovative. They know that it's the only way to deliver customer-centric user experiences and hyper-personalization to simplify complex workflows and to build a modern operating infrastructure that's scalable and resilient. Our strategic repositioning enables us to engage more deeply with clients, helping them to succeed, and support our growth trajectory. Our capabilities are in strong demand as digital becomes mainstream. Ultimately, I believe that our scale in India, complemented by our growing global delivery network, will differentiate us as clients seek talent and business stability. Meanwhile, the labor market continues to be challenging with industry-wide elevated attrition, demand supply imbalances, and inflationary pressure. I'd like to thank our teams across the globe for their leadership, patience, and engagement as we navigate these challenges and execute against our client commitments. Today, more than ever, employees demand that we invest not just in total rewards, including compensation, but also in the end-to-end employee experience, their skilling and career advancement. Cognizant has always been known for our investment in our people. And in the last year, we've built in this legacy with accelerated skilling and enhancements to our promotion framework. First quarter, voluntary attrition fell five points to 26% on an annualized basis, or 29% on a training 12-month basis. While we made sequential progress reducing voluntary attrition for the second consecutive quarter, we anticipate attrition will remain elevated for the full year and will increase in the second quarter, reflecting seasonality. To mitigate labor cost increases and the investments we are making in our people, we continue to execute against a series of measures, including our automation agenda, pyramid and shoring optimization, and indeed pricing. Turning to the industry segments in financial services, our ongoing recovery continued with growth of 6% year-over-year in cost and currency, reflecting the sale of our Samling subsidiary in February. We continue to make progress repositioning the business towards higher growth and higher value services and solutions with a more focused client set. We expect to pace recovery in banking and insurance to continue with strong demand for digital transformation. One client whose digital transformation journey we've been supporting is Avian Amaro Clearing Bank. We are transforming the bank's IT landscape into a hybrid cloud platform with a focus on security and regulatory compliance. We'll be implementing an end-to-end secure, scalable, and compliant infrastructure as a service model in support of the bank's IT modernization agenda. In healthcare, revenue grew 9% year-over-year in constant currency with particularly strong growth in life sciences. Our investments to modernize the Trizetta product portfolio, which includes the integration of AI and machine learning capabilities, continue to pay off. Our clients are responding to our commitment to deliver next-generation platform solutions that help them offer patients real-time insights and personalized care. We're keeping our products cutting edge, building new solutions across the value chain, and capitalizing on the opportunity at the intersection of health and digital in areas such as virtual care and telehealth. During the first quarter, we announced our collaboration with Microsoft to deliver a new digital health solution designed to improve medical care. Leveraging Microsoft Cloud for Healthcare, our new solution is the first of several planned offerings that combine remote patient monitoring and virtual health, using products like smartwatches, blood pressure monitors, and glucose meters to collect and communicate patient health data to providers. Wellmark, Blue Cross and Blue Shield, a leading health insurer with more than 2 million members, is a great example of how we're partnering with AWS to drive digital transformation. Wellmark aims to improve the experience of their stakeholders by accelerating cloud migration and data modernization, all while strengthening their information security. In products and resources, we continue to see excellent growth in client success across travel and hospitality, and in manufacturing, logistics, energy, and utilities. Automation is top of mind for clients like Pacific Gas and Electric, which sought our help to realize their vision for a new digital productivity center of excellence that aims to reduce manual efforts, simplify their automation tools, and provide agile and scalable solutions for their business and IT users. To that end, our IPA team helped deploy Microsoft Power Platform and simplified our tool sets with Cognizant Nero, a recently announced intelligent automation fabric. PG&E is now well on its way to saving a million hours of work