Cognizant Technology Solutions Corporation Q4 2009 Earnings Call Transcript

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Cognizant Technology Solutions Corporation (CTSH)

Q4 2009 Earnings Call Transcript

February 9, 2009 8:00 am ET

Executives

David Nelson – VP, IR and Treasury

Francisco D'Souza – President and CEO

Gordon Coburn – CFO and COO

Analysts

Tien-Tsin Huang – J.P. Morgan

Julio Quinteros – Goldman Sachs

Ashwin Shirvaikar – Citigroup

Adam Frisch – Morgan Stanley

Bryan Keane – Credit Suisse

Karl Keirstead – Kaufman Brothers

Rob Bourgeois – Sanford C. Bernstein & Company

Presentation

Operator

Ladies and Gentlemen, welcome to the Cognizant Technology Solutions fourth quarter 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. I would now like to turn the conference over to David Nelson, Vice President of Investor Relations and Treasury. Please go ahead, sir.

David Nelson

Thank you, operator and good morning everyone. By now you should have received a copy of the company's fourth quarter 2009 earnings release. If you have not, a copy is available on our website. The speakers we have on today's call are Francisco D'Souza, President and Chief Executive Officer and Gordon Coburn, Chief Operating Officer of Cognizant Technology.

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

Francisco D’Souza

Thanks, David and good morning from the NASDAQ in Times Square. Thank you for joining us today as we discuss our fourth quarter and full-year results for 2009. I'm delighted to report a strong quarter and year. Gordon will address financial and operating metrics later in call but let me offer you a few highlights.

During the quarter, we generated almost $903 million in revenue, up 6% sequentially and 20% on the year. Annual revenue rose 16.4% to close to $3.3 billion. Both during the quarter and on a full year basis, our growth was broad based with strength across our services and industries.

As I review our performance in 2009, it's gratifying to note that our strategy of staying even closer to our customers than ever before and investing back into the business for long-term success has paid off. We are clearly a stronger company today than when we entered the economic crisis.

During the downturn, we kept our eye on our long-term value drivers and maintained our program of concentrated investment. We invested in our people to gain a share from the talent marketplace as evidenced in the strong hiring in the last two quarters. We strengthened our existing service offerings and launched newer ones. We expanded our geographies, capitalized on some great acquisition opportunities and drove synergistic long-term alliances and relationships.

As a result, we're a much stronger organization financially with over $1.5 billion of cash, short and long term investments on our balance sheet and no debt. We're also a stronger firm competitively in our client relationships which continually deepen as evidenced by our financial results, our conversations with clients, our competitive win rates and our strong customer satisfaction results.

Some of the most notable areas of continued investment in the firm are our people, service offerings, alliances and new geographies. Last year, we added more than 16,700 people bringing our year-end headcount to over 78, 400. Even with that we boosted our full year utilization.

We recruited new talent across the globe and in all areas of our business. This includes about 140 people added to our client partner and account management team. As I said before, we believe we have one of the strongest client facing teams in the industry which has resulted in excellent client relationships and client satisfaction and has lead to a stronger channel to the market. Our biggest investment is in our talent and across the business in 2009 we attracted some exceptional people from campuses and from the lateral market.

As I reflect on our portfolio of services, I note that newer services like infrastructure management which we refer to as ITIS and BPO or KPO have now achieved critical mass, are growing nicely and are contributing to our financial results. These represent large market opportunities for us going forward.

We recently launched a new service offering in the area of engineering and manufacturing solutions or EMS through our relationship with Invensys. As I've told you before, this relationship opens up an entirely new market which will help us expand into core engineering, manufacturing and industrial automation solutions and penetrate industries that are now embracing global sourcing such as chemical and petrochemical companies in the process manufacturing space.

In corporate development activities, we're deploying capital in focused M&A opportunities and we're forging strategic alliances. Last year, we concluded more M&A and alliance deals than in the previous three years combined. For each of these link ups has reinforced a fast growing area of our business. For example, in addition to our Invensys relationship, which I've already touched on, we acquired Active Intelligence, a systems integration company specializing in Oracle retail solutions portfolio.

Integrating Active Intelligence's capabilities has solidified Cognizant's position as a leading provider of global services to the retail industry. With SAP in May, we announced a global services partnership underscoring our commitment to innovative SAP solutions in line with our vision of enabling businesses to meet the challenges of the new and changing global economy.

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