Cognizant Technology Solutions Corporation

Ladies and gentlemen, welcome to the Cognizant Technology Solutions third quarter 2024 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 and answer session. If you'd like to ask a question at that time, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd 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 start key. I'd like to turn the conference over to our host, Mr. Tower Scott, Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. By now, you should have received a copy of the earnings release and investor supplement for the company's third quarter 2024 results. If you have not, copies are available on our website, cognizant.com. Speakers we have on today's call are Ravi Kumar, Chief Executive Officer, and Jatin Dalal, 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 now like to turn the call over to Ravi. Please go ahead.

Thank you, Tyler, and good afternoon, everyone. Thank you for joining the third quarter 2024 earnings call. We are pleased with our third quarter results, which delivered revenue and earnings growth while expanding adjusted margins sequentially and represented strong execution of our strategic priorities to accelerate growth, become an employer of choice in our industry and modernize operations. We are seeing a gradual rebound of spend cycles and gaining wallet share in financial services. while our historical strength in health sciences is driving differentiation and growth. Meanwhile, our significant traction with large deals and AI-led revenue opportunities, investments in talent, and our steadfast focus on operational rigor together led to a strong all-round performance. Let me begin with a quick summary of our results before an update on our strategic priorities. Third quarter revenue was at the high end of our constant currency guidance range. Revenue of $5 billion grew 3.5% sequentially in constant currency, including approximately 150 basis points of inorganic contribution from our recently completed acquisitions. Year-over-year revenue grew by approximately 2.7% in constant currency, including approximately 200 basis points of inorganic contribution. Adjusted operating margin of 15.3% improved sequentially, driven by strong cost discipline, despite investments in Belcan and a partial quarter impact from our annual merit cycle. Adjusted EPS grew approximately 7% year-over-year, our fourth consecutive quarter of year-over-year growth, bringing our year-to-date EPS growth to approximately 5%. Now, let me provide an update on the progress we made against our strategic priorities. First, accelerating growth. Our improving momentum was driven in the quarter by growth in our two largest segments, health sciences and financial services and contribution from our recently completed acquisitions. Health sciences increased 7.6% year-over-year in constant currency backed by our strong differentiated offerings. Financial services returned to year-over-year growth driven by strong execution and partial return of discretionary spending. And we maintained our large deal momentum, signing six deals, each with a total contract value of $100 million or more. Year to date, we signed 19 such deals compared to 17 during all of 2023. We are excited about the all-round sustained momentum in large deals across industries and service lines. I'm particularly pleased with the traction we are getting in digital engineering infrastructure and cloud services. We believe in order to sustain this momentum, we must remain at the forefront of our client's innovation agenda, where today AI is at the top of the list. Our heritage of deep engineering and strong domain expertise, intimate client relationships, and flexible operating model has allowed us to quickly respond to this opportunity. We have rapidly developed practical tools to help our clients accelerate AI adoption while also applying it to ourselves as we aim to significantly accelerate our own productivity. AI is a profound shift, what I call a double engine transformation because it offers Cognizant the chance to disrupt ourselves as much as it does for our clients. Consistent with our heritage, we spotted the AI opportunity early and in mid-2023 announced plans to invest $1 billion into AI-led initiatives, platforms, and capabilities. Let me share some examples beginning with our platforms where our clients are co-creating with us. The foundation of our AI strategy is powered by the Cognizant Data and Intelligence Toolkit, which we utilize to increase speed, reduce cost, and improve the predictability of our clients' data modernization journeys. Today, we have over 225 project implementations supporting over 120 clients. And our Flow Source platform, which is a developer workbench that is integrating human and AI effort to improve productivity. Today, we are in various phases of testing and adoption with more than 150 clients. Using AI tooling, we are generating 150,000 lines of accepted code per month. That means an annualized basis, 2 million lines of code are accepted by our developers into the projects to deliver to our clients. It's a great example of how AI is enabling hyper productivity as we share this productivity gains with clients and lower the cost of technology deployment. Our Neuro IT Ops platform, launched in late 2023, is also supporting 150 clients in various phases of testing and adoption. It enables end-to-end AI-driven automation for IT operations, bringing ops and infrastructure in a single pane of glass. As an example, we are leveraging both our Neuro IT Ops and Flow Source platforms together in a strategic project for DIRECTV to modernize its technology infrastructure and enhance its operational capabilities. NeuroID Ops is helping DirecTV increase efficiency and resiliency through intelligent detection and automated IT issue resolution. And FlowSource is scaling GenAI across DirecTV's software development lifecycle, promoting innovation through faster time to market, increased collaboration, and greater transparency. We recently introduced two new additions to our NeuroSuite. Our enhanced neuro-AI platform incorporates multi-agent orchestration, aims to help enterprises by simplifying problem identification, data generation, and AI model creation, and improving decision-making and revenue opportunities. Clients like Gilead Sciences have praised its approach, while others like Bayer have tested several foundational capabilities now available on the platform. These enhancements aim to help our clients to navigate complex decision-making scenarios effectively. Second, Cognizant Neuro Cybersecurity offers AI-enabled enterprise security orchestration for enhanced cyber resilience and risk management. This tool is designed to help improve cybersecurity resilience by integrating and orchestrating point cybersecurity solutions across the enterprise. We've also infused AI through our TriZero product suite, helping improve end-user productivity by at least 30%. Looking across our enterprise, we now have more than 1,000 Gen AI early engagements compared to about 750 at the end of the second quarter. We're seeing significant traction in four categories of use cases, starting with tech for tech or applying AI to software development cycles, which had the highest velocity, followed by customer and employee experience, content aggregation, and early use cases in content generation. We see broad-based demand across industries, including fraud detection, credit risk assessment, and regulatory compliance in financial services, drug discovery, medical imaging, and transcription in healthcare, and design optimization and predictive maintenance in manufacturing. Partnerships and strategic acquisitions are also important levers in our strategy to accelerate growth. First, an update on our partnerships. I'm excited about our recently announced relationship with Palo Alto Networks, through which we will deliver AI-driven cybersecurity capabilities and services for enterprises across industries. We see significant opportunities to leverage AI to keep pace with evolving cybersecurity threats and improve overall levels of security. Just last week, ServiceNow announced that Cognizant will be the first system integrator to bring its new workflow data fabric product to market. giving our joint customers the capability to integrate AI agents and real-time data orchestration layers that can be tightly integrated to their digital workflows. We also announced an expansion of our NVIDIA partnership, bringing together our capabilities with NVIDIA's Rapids, part of the NVIDIA AI software platform to enhance our data modernization offering. Together, we aim to help clients transition to GPU-based infrastructure and to accelerate the implementation of exciting new GenII use cases. And earlier this week, we strengthened our partnership with Amazon Web Services by signing a strategic collaboration agreement with plans to deliver advanced technology solutions and cloud computing services focused on enhancing smart manufacturing capabilities for global enterprises across multiple industries. Turning to our strategic acquisitions, ThirdEra acquired earlier this year, positioned as one of the world's largest ServiceNow partners and as a leader in AI-driven automation and enterprise workflow solutions. And our acquisition of Belkan has significantly broadened our access to the $190 billion ER&D services market, which is projected to outpace the legacy IT services market through 2026. Additionally, it has notably increased our footprint in the aerospace and defense industries with an attractive blue chip client base. I'm happy to report that our commercial integration is progressing well. We've already seen early pipeline opportunities and identified the potential for new joint offerings in areas such as model-based systems engineering where Belkan has significant expertise. We believe these actions to accelerate growth are resonating in the market. Let me share a few additional highlights of the value we are bringing to our customers across industries. Within financial services, we continue to see traction from the changes and investments we have made over the last 20 months. We are bringing the breadth and depth of our capabilities to every opportunity. For example, we are supporting citizen banks' ongoing cloud transformation journey. We have collaborated with citizens to revamp their fraud management capabilities with a new in-house system. And we are helping citizens elevate their customer banking experience with a modernized system that streamlines dispute resolution. In the UK, we continue to see success winning in the public sector. During the third quarter, we expanded our relationships with the UK Valuation Office Agency of His Majesty's Revenue and Customs. This was one of a greater than $100 million contract signed in the quarter. Under the agreement, we'll provide UK government with property valuations and advice needed to support taxation and benefits. And clients are still looking to drive productivity and underwrite future innovation. For example, we won a significant $200 million deal in the third quarter with a long-standing global technology client to transform the customer support operations using GenAI. This was a vendor consolidation opportunity where we leveraged GenAI to streamline operations, improve agent productivity, and reduce costs. A differentiated AI-led approach, which included elements of outcome-based pricing, allowed us to displace the incumbent. Now moving on to our next strategic priority of becoming the employer of choice in our industry. We believe our investments in talent are bearing fruit as well. We're adding more access to learning and upskilling, notably through AI, in an effort to boost mobility and demonstrate that we are an organization where our employees can grow. A grassroots innovation initiative, Blue Bolt, continues to build traction with more than 300,000 ideas, of which 40,000 ideas mostly related to AI are being presented to clients. Employee engagement scores stayed strong, trailing 12 months' voluntary attrition for tech services is at 14.6%, near multi-year lows, and we were recently named for the second straight year to Forbes' list of world's best employers. Our Synapse program, which aims to provide technology training to nearly 1 million people worldwide, is another great example of a deep commitment to learning. I was delighted when Fortune named us as the number seven in the world on its prestigious Change the World list while recognizing the impact of Synapse. Just last week, we were named number 10 on Newsweek's list of America's most reliable companies. This recognition, based on the independent survey of more than 1,700 decision-makers, highlights our exceptional reliability in delivering services to our clients. We are confident that our expanded breadth of portfolio of services, strengthened by our domain capabilities, talent and partner ecosystem is more resilient and healthier than when I joined Cognizant nearly two years ago. And I believe we are in a strong position to capture the growing and developing AI opportunity for ourselves and our clients. In closing, A few weeks ago, we brought together over 200 clients to our America's Discovery event in Austin, Texas, to showcase the strength of our AI platforms, capabilities, and offerings. The event's buzz and enthusiasm was incredible. We were excited about the early momentum of large deals with AI-powered productivity and numerous initial projects. Our belief is the AI productivity wave will evolve from task automation to business process to business model transformation leading to new products and revenue streams and faster innovation cycles, a flywheel of new opportunities to tap into. I want to thank all our employees globally for their commitment to our clients and their work to strengthen our capabilities for the future. With that, I will turn the call over to Jatin, who will cover the details of the quarter and progress against our third strategic priority of modernizing operations.