Cognizant Technology Solutions' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Cognizant Technology Solutions (CTSH)

Q4 2011 Earnings Call

February 08, 2012 8:00 am ET


David Nelson -

Francisco D'Souza - Chief Executive Officer, President and Director

Gordon J. Coburn - Chief Operating Officer, Chief Financial Officer, Principal Accounting Officer and Treasurer

Karen McLoughlin -


Rod Bourgeois - Sanford C. Bernstein & Co., LLC., Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Darrin D. Peller - Barclays Capital, Research Division

Arvind A. Ramnani - UBS Investment Bank, Research Division

Edward S. Caso - Wells Fargo Securities, LLC, Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Mayank Tandon - Needham & Company, LLC, Research Division

Moshe Katri - Cowen and Company, LLC, Research Division

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division



Ladies and gentlemen, welcome to the Cognizant Technology Solutions Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to David Nelson, Vice President, Investor Relations and Treasury at Cognizant.

David Nelson

Thank you, operator, and good morning, everyone. By now, you should have received a copy of the earnings release for the company's fourth quarter 2011 results. If you have not, a copy is available on our website, The speakers we have on today's call are Francisco D'Souza, Chief Executive Officer; and Gordon Coburn, President, both of which are slightly under the weather, recovering from colds. And we're also delighted to have with us Karen McLoughlin, our new 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 risks and uncertainties as described in the company's earnings release and other filings with the SEC.

I would now like to turn the call over to Francisco D'Souza. Please go ahead, Francisco.

Francisco D'Souza

Thank you, David, and good morning, everyone. Thanks for joining us today. This morning, I'm joined by Gordon Coburn, our newly appointed President; and Karen McLoughlin, our newly appointed CFO. As we announced this morning, Gordon and Karen have taken expanded roles within Cognizant, which I will talk about shortly. I'm pleased to announce the solid fourth quarter results for Cognizant that kept very strong 2011 performance. Our revenue grew nearly 4% sequentially, and nearly 27% over the year-ago quarter to $1.66 billion. This brings full year revenue to $6.12 billion, more than 33% growth over 2010, once again demonstrating the strength of our value proposition, the depth of our client relationship, and the exceptional execution of our strategy.

As I look back on 2011, I'm proud of Cognizant's many accomplishments. First, we continue to have track record of industry-leading growth. 33% growth is all the more significant when considered against the backdrop of an economy that was more volatile than we expected at this time last year. Europe grew slower than expected during the back half of 2011, but demand throughout other geographies remain solid, fueling strong annual results, and reinforcing confidence in our approach and our value proposition.

Second, we strengthened our client relationships by delivering on our unique value proposition that bears intimate domain expert client teams with a robust seamless global delivery network. Throughout 2011, we added 317 new clients and increased the number of strategic clients by 25 to 191, the largest increase in our history. Strong results from our recently concluded third-party annual customer satisfaction survey showed that clients continued to see high levels of service quality even as we scale. And perhaps most significantly, 13 accounts contributed more than $100 million in 2011 revenue, illustrating the depth of our client relationships.

Third, we, again, hired and retained an outsized share of the talent marketplace. We grew our team by more than 33,000 this year and closed the fourth quarter with an attrition rate just over 10%, amongst the lowest in our industry. The fact that associates see Cognizant as a great place to work and to build long-term careers is reflected in record-high satisfaction scores from our third-party annual employee survey. Fourth, we stayed true to our reinvestment strategy by maintaining stable operating margins, and reinvesting in the business. Our approach of distributing investments across 3 horizons strengthened an already robust services portfolio. As a result, we are well-aligned to help clients with the dual mandates of simultaneously reducing costs and innovating for growth and competitiveness.

Within our Horizon 1 services, offerings such as application development and maintenance, testing and packaged application services, our emphasis has been on driving ever-greater levels of productivity for clients through best-in-class methodologies and a more aggressive move to variable pricing models, so-called managed services. We also continue to strengthen our offerings with tuck-under acquisitions such as Zaffera, which bolsters our SAP capabilities.

Within our Horizon 2 offerings, we have achieved critical mass across consulting or CBC, Business Process Outsourcing or BPO and IT Infrastructure Services or ITIS. Our focus is now on scaling them across industries and clients. Our business consulting ranks have grown to over 2,900 consultants that are increasingly working with senior members of the CXO suite to deliver large-scale, end-to-end transformational programs.

Within BPO, we executed on our strategy of focusing on vertical processes that require deep domain and functional knowledge, and then benefit from the integration of consulting, IT and BPO services. This included enhancing our mortgage processing capabilities through our acquisition of CoreLogic's India operations. And within ITIS, we continue to win and manage a growing pipeline of large deals, launching one of the biggest projects in practice history with a European investment bank and beginning an end-to-end infrastructure outsourcing program for a retailer with more than 1,000 facilities in over 75 cities.

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