Cognizant Technology Solutions Corporation (CTSH)

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Cognizant Technology Solutions (CTSH)

Q4 2012 Earnings Call

February 07, 2013 8:00 am ET


David Nelson - Vice President of Investor Relations & Treasury

Francisco D'Souza - Chief Executive Officer and Director

Gordon J. Coburn - President

Karen McLoughlin - Chief Financial Officer and Principal Accounting Officer


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

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

Darrin D. Peller - Barclays Capital, Research Division

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

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

Georgios Mihalos - Crédit Suisse AG, Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

Paul B. Thomas - Goldman Sachs Group Inc., Research Division

Moshe Katri - Cowen and Company, LLC, Research Division

Glenn Greene - Oppenheimer & Co. Inc., Research Division

George A. Price - BB&T Capital Markets, Research Division



Ladies and gentlemen, welcome to the Cognizant Technology Solutions Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to David Nelson, Vice President, Investor Relations and Treasurer at Cognizant. Please go ahead, sir.

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 and full year 2012 results. If not, a copy is available on our website, cognizant.com. The speakers we have on today's call are Francisco D'Souza, Chief Executive Officer; Gordon Coburn, President; and Karen McLoughlin, 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 thank you for joining us today. This morning, Cognizant released strong fourth quarter results that capped another year of industry-leading performance. Revenue grew 3% sequentially and 17% over the year-ago quarter to $1.95 billion. This brings full year revenue to $7.35 billion or 20% growth over 2011.

As I look back on 2012, I'm proud of our results. Our continued track record of market-leading revenue growth and stable margins fueled further reinvestment in the deepest client relationships, the most robust portfolio of services and the strongest pool of talent we've ever had. We increased the number of strategic clients by 23 to 214, at the same time, raising the results of our annual third-party customer satisfaction survey to the highest level in 4 years.

One mark of the strength of our client relationships is that we finished the year with 16 clients, each contributing more than $100 million in annual revenues, and nearly 19,000 net new associates joined our team while we maintained attrition rates that are amongst the lowest in our industry. We recorded the highest employee satisfaction survey results in our history, and we're recognized as one of the happiest places to work.

I'd now like to turn to our expected financial performance in 2013 and give you some color around the significant market opportunity we see ahead of us. For the full year 2013, we expect to deliver at least $8.6 billion of revenue, which represents full year growth of at least 17%. Karen will provide you with full details of our expected 2013 financial performance shortly.

As we look to 2013, we see a market shift that is reaching a level of importance that I'd like to share with you. For several quarters, we've been speaking to you about the secular shifts in both the economy and with technology itself. These shifts are now forcing clients to reexamine how they operate, moving from merely incremental levels of performance efficiency to building new digital business capabilities.

For years, you have come to know us as helping our clients manage their businesses better in helping them run their operations better, faster and cheaper. However, in the context of today's secular business and technology changes, our clients are turning to us for more. In short, not only do they wish to run better, they now need to run different. In order to maintain their market leadership, our clients are increasingly turning to us to conceptualize, architect and implement new and increasingly different capabilities.

With each passing quarter, our clients' dual mandate of running better and running different comes into sharper focus. As a result, we continue to deepen our client relationships by challenging status quo, driving fundamental innovation and unleashing new potential across their organizations by uniquely addressing this dual mandate from one global platform.

In looking at the industries that we serve, this is a natural evolution of demand. After all, across financial services, healthcare, life sciences, retail, manufacturing, media, information services and high technology, the combination of economic shifts and technology transformation driven by the SMAC stack of social, mobile, analytics and cloud technologies is creating game-changing opportunities across the markets we serve.

These clients all continue to feel the ongoing pressure of cost containment and efficiency. However, in the past 2 years, the mandate to build new and different capabilities based on the back of SMAC technologies has continued to gain momentum. Thus, with these type of clients, the C-suite agenda is now a combination of run better and run different. It's in response to this dual mandate that we institutionalized our 3 Horizon model over a year ago. This approach has proven particularly effective to manage this demand, as Horizon 1 significantly helps clients to run better and Horizons 2 and 3 help clients to run different.

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