CTSH - Earnings call transcript Q1 2020 | Cognizant Technology Solutions Corporation

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Operator

Ladies and gentlemen, welcome to the Cognizant Technology Solutions First Quarter 2020 Earnings Conference Call. [Operator Instructions] Thank you.

And I will now turn the conference over to Katie Royce, Global Head of Investor Relations at Cognizant. Please go ahead.

Katie Royce

Thank you and good afternoon.

have supplement copy quarter for should release the XXXX you investor and the now received of a earnings results. By Company's first

website have you not, are on If copies our available cognizant.com.

Karen call we speakers Humphries, Officer; Officer. have today's McLoughlin, The are Financial Chief on Chief Brian Executive and

risks Before we forward-looking to responses the remind earnings in subject your may contain like would These described you the statements of to the some begin, filings some uncertainties on made of I statements. the are and comments release today's with to as that and call and questions SEC. the Company's other

appropriate Additionally, that the can measures, found we we today, our the corresponding will in measures useful be earnings release the provide with non-GAAP where information filings for financial non-GAAP during and to our believe SEC. of other investors. GAAP reference call Reconciliations Company's certain measures, financial

Brian ahead, that, now over like to turn call the go Humphries. to With Please I'd Brian.

Brian Humphries

good afternoon, Thank you, everybody. Katie, and

several of Today, quarter XXXX to you update. COVID-XX, environment. review and the on attack first our topics and April Maze as of react the and These an will sheet strength include an we update business we on our to to the a results, on Xth have our ransomware follow-on balance a a with discussion liquidity, update discuss how demand new

Let’s start results. first with quarter

currency billion. X% of the includes bring This up constant $X.X through will a points to was in services content details certain exit you year-over-year business. from Karen of basis X.X% the grew Non-GAAP quarter. Revenue year-over-year. the $X.XX, XX EPS

on not this updates, have with I do solid illustrate progress full with program agenda a start COVID-XX data normally that making initiative, over I the state this been do perspective progress share. past we've been the I’m executing commercial and to want we we year. pleased transformation that call ransomware against and to that some want today's had to some While given

our basis, basis XX-month hundreds On win a rate points. of trailing up is

embraced lines, geographies. in contracts XXXX. First represents industries deals lose qualified best of and Notwithstanding how includes double speaks quarter robust growth. client-centricity. sense our and to that clients QX COVID-XX sight grew embraced broad-based well total solid growth strong our with the XX%-plus growth have want to I renewed had growing have pipeline not prior backdrop earnings since these versus teams especially we year our our quarterly period. It of Cognizant’s leading and year-over-year that service larger This to do in was performance all responded also where and us momentum awarded strategy focus digit how Qualified indicators pipeline speaks our across have This on strength competitiveness. its ransomware, reflect quarterly to

severe on having know, now a as COVID-XX, is society Turning which, you the and to impact world. across economic humanitarian

As the continuity of and safety our we own clients. navigate our maintaining pandemic, our this while service health for top of priority associates remains

dimensions, COVID-XX that and the is services is fulfillment two perspective on industry Our demand. IT affecting

fulfillment. with start Let's

management majority continuity of and the of fulfillment the our client start a for Thanks our first and delivery a our in to considerations. our and the April. diligence environment early reflecting ensure we work-from-home to rapidly slowed vast March challenges across to of and a were in of our These strong quarter, people, professionalism execution are challenges meaningfully continuity clients After March, the associates crisis able business service and plans, security include shifting IT, the revenue to centers.

received this, I to notes work numerous our the from testament clients of have recognizing a teams. As

way, world I this to our testing want the While bumps happen. circumstances teams this were make was speed a the acknowledge around in extra gargantuan task some there went the who and mile to along

our on a moment in ransomware impact attack return and particular on efforts our in will to enablement. systems I work-from-home I the internal fulfillment IT when its cover

COVID-XX demand on more The impact is multidimensional. pandemic of

a the the uncertainty, were great period company, we of by expect companies across globe. While economic a will and in we as be human felt impacts

industries Smaller will hardest, sheet And suffer. businesses demand all will with felt will be throughout weak will impacted. balance such hit those be certain quicker. the markets, as and will particularly materializes, recovery impact be industries and While a when The XXXX. liquidity U.S., certain rebound

Xth rate projects our cancellations and and indicated some April As we've in furloughs, extended of select terms requests from payment discretionary our concessions seen on spending delays and update, clients. for

outlook mix. meaningfully has business the we been XXXX storm, we that While weather given our for confident our will altered, are nevertheless

For and XX% less and exposed the Financial business retail including hardest hospitality, automotive. travel, International to of some are of example, industries, our more is Services in since than Healthcare, we hit markets, smaller represent global which exposed clients be XX% we slowly, our business. primarily more to resilient than companies. rebound are XXXX just of believe And, we tend more which to will

We great also and in our strength have sheet confidence liquidity. balance the of

this to prudent be this nonetheless More accelerate in confidence capabilities. in to will our us allows invest bolster M&A strategy that later. and our economic backdrop, we uncertain on While

core refined have normal. to to accelerate to innovation, more elastic relevant and than become the more Clients and their digital new are secular These and agile modernize our trends and generally, broadly, transformation. of their accelerate modernization looking the adoption reimagine uncertainty, strategy business, IT businesses accelerate. More data clients us make major their cloud shockwaves business in as the spurred pandemic face for modernization, More will ever. play ways trends for such

our and the year macro to momentum while will environment. well allow basis that challenging a on competitiveness digital short, us sheet, given will of regardless mix, and growing confident a industry, In compete COVID-XX, we’re our relative geographic be our our segment customer imperatives balance XXXX in our

attack, attack. which the bringing help announced now and cybersecurity mobilizing team, security of we teams by expertise to our We April. entire Maze leading us the and respond ransomware turn immediately on the drawing Let's responded experts in and in leadership our IT investigate to to

start, decided the we clients. with From agencies. to communicate enforcement transparently and law appropriate contacted also forthrightly We our

security client and our executive by individual conference we experts our to calls calls organization, two April. conducted hundreds held in team, cybersecurity client In addition of

client Retaining of is trust paramount importance.

and the to incident. company forensic and over-communicating contend or of proactively the data that actors. of Indicators how Compromise namely on use a defend to erred attacks so We this knew working with we details what against of IOC, potentially external called activity provided mitigate or from can clients were we side malicious we identify So,

the Earlier this week, of in attack. we clients, confirmed containment our third call with conference the ransomware

important we two our reasons. While ransomware this milestone, will attack results impact nevertheless have for to QX pleased the negatively are reached

we April. disabling both, been First, the as the work-from-home attack encrypted supporting work-from-home further and them, proactively other systems offline. enablement such and system some of internal expected to laptops systems, our disruption that capabilities effectively included provisioning VDI took our our in select of This increase have

wake the these of the a on to books. cost clients Second, to staffing time, of opted in our was our ransomware some of access period suspend their yet networks. attack, projects the impacted for therefore Billing remained

With contend, now Further, the we’ve constraints equipment provisioning. with and less automated ordered physically substantially ransomware attack India state respective now in distribution in work-from-home per previously restored now directives, we’re VDI enabled. latest laptop the

networks. that addressing have the ransomware our containment the to following their suspended of meaningfully in progressed we have the addition, of concerns access clients attack, In

expect to the month. substantially by end We the complete of this

vast impact and the in the be of attack majority ransomware quarter. margin from the to revenue We expect second

through quarters. will ensue However, ongoing subsequent costs remediation

a impact will quarterly basis financial disclose to appropriate on to you We ensure visibility. the

industries. frequent all becoming are too attacks Ransomware across

We opportunity and approach are using our strengthen as to this experience an refresh security. to

guide top inform applying and security and our leveraging us learned experts already in strategy. harden will environments what help external security for We’re further priority we to we’ve a to the Cybersecurity continue security our ahead. be and our years strengthen are to further long-term

you’ll April we withdrew recall, COVID-XX update business As Xth, our during for guidance XXXX. on

true attention the year call fact with to will to that the fact draw that nobody I acceleration. assumptions light the can in how These of your support assumptions the revenue current pass to cost macro the we I Karen, longer predict Before no growth environment persist. long built want to entered hold

great our structure. are on including own uncertainty levels deal many with a we So, cost of faced

to take increases we digital challenging nuance decided protecting to on-boarding promotions hires. aim by leadership approach we Having business come aim our overhead, the approximately salary significantly costs entry-level through Meanwhile, decrease continuing including non-commercial continuing other commercial as team, employee hires. a invest the and to corporate to pyramid and lateral delayed, XX,XXX We out in and by to build and travel, skills, XXXX team relocations were correct to when XXXX. marketing a a developing

the today’s Services from backdrop, COVID-XX their third and the to adequately companies that impacted by packages, interests demand-supply extended Against traditional feel imbalances of employees any Consequently, to exit benefit do coverage impacted habitually end we right policies bench market through not rely on industry may quarter. employees. policies reflect demand. the bench associate address of medical size so-called base

balance Karen After updates some the and take before the sheet, cost liquidity closing will Q&A. provide that, we initiatives. and to quarter of through our take now provide I’ll remarks you details return on

Karen McLoughlin

Thank good everyone. you, Brian, and afternoon,

First constant $X.X grew on the January the March. COVID, starting impact across of of in exit certain initial X.X% impact saw negative year-over-year including strong or quarter to services. in the business fulfillment the revenue content-related from middle currency, X.X% and momentum impact side, particularly billion of XX the basis-point business a in February the We of with

and addition digital changes the it a we services platform certain of approximately of Based and the of to definition by also definition digital work. certain was percentage Substantive first the aligned look include content digital better our revenue year-over-year. the a XX% total as fresh quarter at the During took have solutions first quarter, this our on definition, removal and for to imperatives. approximately of revenue, revenue, new XX% grew

year-over-year across banking, where to Moving accounts, Europe provided and the strong performance of Samlink rates constant was be deal the regional global growth capital the particularly and banks currency. in X.X% of driven growth markets verticals attributable Financial in in in by America. persisted Weakness to insurance. Services North all industry including will

low in performance grew which sciences Healthcare continued life double impact vertical, we by headwinds as the growth Europe. Healthcare, in to digits North in on business America, our declined was strong Within highlighted QX. in the digit revenue led X.X%, to XXXX, single in Moving

signings meaningful contributor mentioned Healthcare in that overall Brian bookings comments. contract his to strength in a the were However, in

and segment restrictions consumer X.X% and the experienced Products consumer softness earliest travel by and retail and goods, of travel travel and and of hospitality, goods revenue this given retail traffic and in lack in of within XX% Resources and manufacturing, impact partially offset industry, retailers. growth driven Roughly hospitality. of foot the have which COVID-XX, by logistics within and represents was

America, Technology the X.X%, continued, transformation from in Media North services. Communications, communications and media cloud grew core clients for in momentum demand where late by strength and in an and services increase in in driven led XXXX by modernization

theme and parks. a expect entertainment with to However, meaningful clients vertical particularly we exposed year, TV this this studios, to see deceleration cable

to Although points. our total growth continued decelerated exit by negative million from of of XXX approximately segment content basis our impact to CMT performance, growth decision technology a This $XX portions outpace our services Company to due impacted certain business.

Moving adjusted XX.X%, and $X.XX. $X.XX, In EPS our margin. which and operating onto respectively. charges, excludes EPS COVID-related restructuring was QX, and were and margin, Adjusted operating XX.X% GAAP diluted margin was our diluted

charges salary we adjustment in $X related $XX $X which quarter, employees total the and in the previously certain the COVID-related to April included of that to expected onetime million million the gave in were India Philippines. million announced

XXXX. improved margin given contribution defined of accrual QX GAAP year-over-year, the in Our India

million rapid as prior adjusted the excludes from investments well in the down of this by higher hiring, XX from resulting rupee. as an in $XX points sales approximately challenges, from our favorable operating offset year in March, revenue impact home. safely increased our compensation employee as However, basis incentive-based items the base year-over-year $XX was work and million as caused savings such COVID-related impact to the were shift margin, to period, costs movement lower T&E by in fulfillment These which

we actions $XX million since million run over QX, for quarter, this have During annualized In as growth charges our designed aligned $XXX program the the on Growth Based inception, the to rate against strategy. we is we taken which with continued of in to fund achieved plan. structure incurred cost savings. part of execute our long-term and improve Fit investments XXXX the plan,

the Fit of continued of we of as quarter. Growth million the for million subset business, the $XX part for of our exit in content Additionally, the of plan, charges services a accounting $XX

several the We expected the quarters be to this to work the occur to of with exiting over XXXX. the down of ramped next expect continue work majority ramp-down

an approximately on total, unchanged. million estimated In impact a annualized year-over-year million revenue $XXX our $XXX of In negative we expect is $XX to million. basis to revenue impact QX, of

Communications, a content As segment. is reminder, and Technology business within the services the Media

the managing and to some we how like about uncertain costs would talking incident. related Now, COVID I trajectory the in ransomware to light business revenue and are an time spend of increased

cost certain the environment we had we associated further and new costs with attacks aligned revenue structure. requires which ransomware assumptions the to make COVID-XX to XXXX, us demand our The demand anticipated reality and and the of Entering remediating adjustments.

of trajectory and recovery scenarios prepared and over demand be remains costs manage various to accordingly. the for the uncertain, Since we coming must quarters

separately, team, weeks term, and a including remaining spent India Philippines, $XX action work-from-home will certain As environments for which one-time the leadership continue there for costs employees near the implementing the be related have several we the discussing In scenarios $XX April in those other the establish to employees. and identify million adjustment million of in last plans. we cost to the salary to will COVID-related

costs to the workplace our is ratio reality. the costs social is It to exit team amid near prepared employees from new continuity-related of environment be not equipping safely new existing periods. and employees to part prepare norms to facilities more there permanent also distancing home a this to we incremental to Additionally, lockdown retrofitting will in lower the costs. work These be leadership only business as likely other density return include could term basis, as but planning a contemplate accommodate and on a future that certain

near-term we first variable on our As costs. about is mitigation focus think efforts, addressing

people-based benefits cost employee-related make plus including over total a business. our are We compensation of XX% And up subcontractors structure. and costs

costs immigration-related promotion both reduced as T&E, prudently and people spend We events non-people-related through costs, ratcheting reduced and deferring on down managing are mix, wage subcontractor variable marketing, annual our recruiting increases such certain relocation, and actions cost, and cycles.

We freezing across hiring lateral are functions. all

other QX plan India will outstanding and honor to positions and offers. hiring QX. the Deferring we our in continue date to However, of all with start move trainee sales forward our timing from key accepted

school be schedules continue will India. on this across to and dependent However, lockdowns

another managing lower revenue believe trajectory. way I utilization with we a will more that is closely align

naturally with digital scenario, the when employees seen the have we In As emerges. in development you the attrition reduction support to will of further accelerate skills business near voluntary will by imagine, might to levels compounded in align key utilization client to what lead This, which demand an in believe necessary a decline we weeks. term. expect we imperatives, aligned recent recovery with this will a than we demand, significant when lower is in our economic

aware are are not or there we who to unutilized for time, we become employees are same the likely At foresee will whom that be do those opportunities.

the treating As and transition. always, which providing employees these their ease environment fairness current health we with in financial are to dignity, also extended committed benefits to will include and other

the decline these benefits, realignment demand Accordingly, size we and net associated clearer. and the as additional now to the we XXXX. between now versus of XXXX enhanced charges to environment will third headcount incur unfold quarter, expect with in these of becomes timing expect end and The charges

plan, by still not experienced which of majority material Fit COVID. from is Growth We for delays result run It $XXX complete expect to the critical far actions savings million the year this the in million middle savings thus be any to of continue annualized $XXX in this in XXXX XXXX. over our environment $XXX and of to execute gross also gross has rate to million and in of

$XXX We to continue range. be to $XXX million in million expect the charges to

to the sheet. turning balance Now,

December balance March long-term been of approximately deposits short-term XXst which This on restricted investments India, billion, to investment excludes million now stood Our up balance $XXX as in cash XXst. our $X.X approximately sheet. reclassified $XXX dispute million and our as the tax from has related of at balance

down This our flexibility brought balance billion. facility debt on $X.X on strengthened March $X.XX revolving by to XXXX. billion our further outstanding financial XX, credit We drawing our

share have to our healthy invest. us M&A preserving be run paused environment very we the our on feel will in Additionally, as we balance that Overall, activity our targeted while continuing focus repurchase and business is flexibility to needed the and liquidity. current the provides sheet

benefited lower of quarter. which free million $XXX quarter. flow collections DSO first several XX We improved in X large in On compensation, year-over-year, reflecting flow accounts. incentive-based basis, generated from a also paid the improved out days from was days cash free of year-over-year the cash

quarter, a cash restructuring a offset certain mostly favorable million was charges outflow this resulted in result negotiations. by of although In addition, as the onetime approximately $XX items in contract

the we anticipate in significantly as XXXX payment an We short do have terms increase DSO certain of remainder period. clients, for in for industries, a extended granted impacted defined

protecting opportunities both, clients times relationship and us serves partnership. the flow we our well overall drive in As At will to in own the in pursue have cash our by also same cost efficiencies. we downturns, trouble prior continue time, vendor to standing are seen reviewing and of

As visibility full feel we do call on year April in update business QX guidance. either XXXX or is not our it appropriate limited we our the offer during Xth, discussed given to markets,

able While disruption economic impacts we the certainty we of operating any predict the are with of to with from following not are the length assumptions. business the COVID-XX, or depth

term. demand that the highly First remains uncertain environment volatile near and the in

expect focus critical projects be core see systems be remainder We this without near to Discretionary delayed. quick and those but operations. term significantly the client or in quarter a payback also we their the We expect second the the year. of on to challenging enable infrastructure will

for to back to challenges normalcy at year-over-year slow We transition XXXX. a and expect least continue, currently are through planning QX

do collectively media across demand impacted the travel, we revenue, be will expect of XX% industries. over other We and retail, also hospitality, our entertainment, automotive, broad total most a anticipate slowdown in which are energy just and but

mentioned, work-from-home the impacted schedule. April Brian As enablement negatively ransomware attack our in

attack, of QX and be As impacted. both will result negatively ransomware this revenue margins a our

largely the corresponding be margin be million by of will to million anticipate impact the resolved $XX to to anticipate of we for While range the impact we do the $XX middle quarter. issue and in quarter, that revenue the revenue related this the

expect remediation consulting Additionally, certain we associated costs and and the incur service of restoration the with to other legal, breach. investigation,

and the to QX. majority the are ransomware While we costs services attack likely will moving our results that financial quickly complete continue is impact have it beyond restored negatively our to related to we of investigation, the

we already below have actions. on operating year, to the of we that our from margins in lag attack. of XX% provided on have address to begun and taking While a is any action sequentially adjusted lowest across a We remain the which to the impact given Therefore, combined XX% the timing these savings costs quarter the range there anticipate decline the Company, the basis. COVID-XX adjusted we and of February withdrawn will guidance, since QX be our full-year margin expect ransomware

to quarter are So, part made progresses. we COVID-XX progress negatively alignment making, wrap new not updates we XXXX further for with continued have seen Fit with up, the Growth also total our signings. the first of rates while forward and have very-pleased look resources sales ransomware progress the but you program impact for and in as will we providing contract with the the to traction the our we performance, financial cost hiring attack are win and We just year

the I back that, to discuss further our in world. turn to Brian call a over will With post-COVID plan recovery

Brian Humphries

Karen. you, Thank

Cognizant again has the associates a XXX,XXX unwavering financial once weeks. clients talented Let flexibility, selflessness proved strength client-centricity on recent earned that me enduring trust wrap that up in who of built by determination great is and saying and and

digital customer our of our and a geographic growing sheet, momentum are imperatives given be competitiveness on regardless compete in enable macro basis, and confident challenging and industry, we to that will segment will our relative us the year well environment. balance a XXXX mix COVID-XX, a While our

from about norms e-banking, world. design, e-commerce, talking won't hasting remote new world highly and post-COVID to personal mobile, and will education virtual but trends The digital workflow, telemedicine. We teleworking rather and to everything to be just create

battleground than to cloud our backdrop, in with engineering, digital digital AI ever. win and relevant IoT this become and Against the strategy analytics, more

cloud of this We world's On opportunity Solutions, in to to by our With will use position neat an Collaborative consultancies. a in the large, and establishing market. accelerate continue the M&A Collaborative its workday agreement strategy. Solutions to announced largest ecosystem, execution workday will expand acquire our leading we rich fast-growing expertise in one the of practice Tuesday,

brings especially the in building skills differentiates capabilities compliments competitors. out the our we've pure-play force key Cognizant sales Indian practice. to acquisition in us acquisition The been and market, against The also

lot always We’ve so our come client-centricity Through through on we’ve our sustained execute this year. this, our our far strategy. determination a and focus to

Our increased quarter the solution vigor momentum is clients. and strategy, that our in resonating affirms our our portfolio, renewed well commercial first with

confident the and emerge While have ransomware will attack strongly the these from I’m COVID-XX recent that been Cognizant setback, challenges. a

other Of course, the and this be our help know seen our the at enough will of quite I one believe it's how succeed. here it that come keep what world on and different will will shared pandemic sense eventually will our of today. of the stronger. culture teamwork business purpose. that in no this certainly deep-seated through vast the DNA to only are we result side challenge fade, and rise from to long may, We'll the been collaboration is long Cognizant from our strong that scale I've what last, I've crisis knows out clients and surmount during Company’s period, direct spirit our associates the Come the

operator, we questions. can that, with the call open for And

Operator

[Operator you. Instructions] Thank

with question. is with first of Please coming question line your Lisa the The MoffettNathanson. Ellis proceed from

Lisa Ellis

thanks guys, the quarter. afternoon, sales those Brian, voices. hear first the Good to your of and Hi. on for metrics good some in visibility

XX% in You increase total highlighted contracts awarded. the

difference You've driving changes you made this are far this this Cognizant. Cognizant's a types lines go-to-market highlight been model along there joined since or where to or And seeing? are point? particular have of project particular Thank you. number journey? you're early making at service you traction you're changes seeing what Can traction this you on How

Brian Humphries

Yes. Hi, Lisa.

you shifted a of more sophisticated we of significant model, year, is this this. of changes QX RAD compensation. But, a because And to in how before lot compensation a the clients included compensation away into It needed kicked a from best resegmentation last point really a was from fixed year. actually model, made of a to in it we the go-to-market which comp deploy work So, view against or in very become versus resources hunt, part logos. deploy partners, much extensive to that also who us And top of relationships of on are and/or of new to to resources we through required It We're to commercial which our hiring et new of currently process farm in resources, could supporting build with methodology course, been out XXX-revenue-generating need XX% that, a ecosystem. could determine pricers, have look, amount included accounts that. you're that about lawyers, different include trying which cetera. variable sales of

But, let's overlook as fact not the well.

I for tried North in in starting industry XX% really And of significant across We've bookings markets, in actually had our XXXX. the as broad-based on all well We've international Just quarter term America first the the the the the month as on is momentum important. is I hone since like our a in the time growth for back global we which the that the April, getting myself. to And made leadership team, insurance, growth really We've growth, say, It even that's also quarter. back first segments, into period industries strength albeit the across leadership we've some that client-centricity on into markets. at But, focused notion banking, continued quarter. our has getting that was healthcare, we D&A not Company of client-centricity what our larger with saw been core of in Company led would focused now. changes. is robust actually fundamentally into tap very, first vigor momentum something doing the the very and was strongest to in to that some believe very of

and line up a view, And had third robust And from also business systems excess line, technology operations. our was of service in XX% digital service our of and then, point digital growth.

And digital about feel I our the offerings. good by really way

have strong really now capabilities in cloud. We

Sales force build in this capabilities us practice and year, and sales last partners, a companies very workday more the hand of a workday Cognizant's the recently which is seen And tend in is Collaborative year-over-year the force future that the acquisitions clients important have series platinum growing for Solutions, to of with week, embraced Cognizant. You've alignment go XX% strong establishment well. three that that into in and as rate glove obviously XX%, we a behind feel are growth out cloud.

about So, the momentum very I feel we're good very, making. commercial the and progress

But, And other the on of then we changed are hit side. that. in as with call, with could my going come as COVID-XX, anybody and deal to from March. business month we're deal well-positioned course, the we're -- given I with said growth the trajectory will stronger as the out on our mix of Now, which fundamentally perspective it,

Operator

the Edward Our proceed next line question is Wells of from with Caso your Fargo. question. Please you’re

Edward Caso

Thank you. us give you a ransomware the I color could more wondering Hi. if on was attack. bit little

this talked slowed appear? first TCV momentum? So, favorable that of it Has the awards line did QX. And when Was credit takedown Thanks. of in you down -- about that? great the related to what sort

Brian Humphries

Yes. Brian. This is

in where gives ransomware were month of two week us enablement. to the to as attack. line sheet, with nothing you down, do was attack last prior one this. and had ransomware strong and three containment. already what We we indicated, the the work-from-home with collections we with it credit or the So, credits us very-strong faced Karen’s drawdown were The then saw in the acknowledged trying to we hit have had calls balance a and a clients, as shut we And as of quarter. optionality. This know, April line happening, therefore simply We

ransomware. to it's frankly, do So, with nothing

authorities. the abundance month of to our cybersecurity effectively ransomware was May including early business the as I which our in systems as ransomware work-from-home leading QX and meaningful internal ransomware. network. that But, encrypted, as and working contained an growth our impact caution impact isolate of have on believe federal an we some and certain -- partners, our of latter had of of any given disabled in day as of been from working indeed candidly part momentum. don't virus TCV impacted the course well The opted, of some independent had had with Mandiant the have Certainly, themselves attack enablement April internally and the clients had by just night we

We are on daily now this in basis, clients are a better up. again cleaning than a position

So, felt think from that and of a revenue be will I view. margin point

For the majority in most will part, QX. the be felt vast

be that. Thereafter, we [ph] will I imagine where half

will and money framework. further in beyond QX, That said, strengthen we security to spend QX our continue to

impact continue revenue QX, more the in bit is will little the rest year. So impact margin through of cost a

being three by But, calls conference nobody calls, indeed a to team by think these well is security ransomware ransomware chose doing in And truly this and believe wants transparent anybody Mandiant, client the Ed, we attack. and I period be hundreds handled as can manage forthright of it I one our with this possibly throughout attack don't how with impervious tried we executive We difference to to as is to And as the and circumstances. clients be but it, it. dealt and professionally by maturely. very and client-centric as [ph] having we personally you the team as deliberately could. manage

Operator

with is question Bryan of your question. Our Cowen. proceed line Bergin from with next the Please

Bryan Bergin

stabilization are appetite can two just to you. I well. weeks any the afternoon. ask Thank forward? I on any types that comment Good And early Really, versus doing over programs spending behavior. in of wanted hope and you're And verticals seeing moving on of the mid-April? the semblance what last just you're client all yet? you in

Brian Humphries

from Budgets, Certainly, some any being don't per downwards I others. se. more industries. my Bryan. hit be throughout will industries perspective, there's than wear revised all Hey, stabilization think

by to work, anything for I environment. education, paybacks But, fuel you engineering Digital projects, delayed. continue. virtual SaaS think, The today's of name say, to capabilities. digital a people continues. would continues, of is remains Virtual course mind healthcare, those is I top it, some short-term banking, the of definition, in shift deemed discretionary that remains priority. e-commerce, But being

have requests not for seen We rate amount. meaningful concessions, but a some et furloughs, cetera,

remarks, the pretty as we healthy on shape say, opportunities exited referenced there, qualified would I the basis captive are substantial pipeline still And of and in in QX, I actually same seeing prepared as vein, we month reasonably even now looked including after a opportunities. some March. my

opportunistic very here. being are So, we

making in offerings sure we fine new today. tune of are that take to We norm the we're our advantage

continue foreseeable that. are my continue, behind firmly modernization, into have includes growth work and of into market data up our applications cloud, digital that the future. generally squarely area if not the to And and lined the We perspective will course, which SaaS imperatives, And push accelerate core modernization. of streams where we from indeed, including

we lot are, feel at call obviously clients think environment difficult this and not I But, positioned. in particularly of being it's time. So, There's a visibility cautious. moment well

Operator

your of question. next from Morgan. the line with Tien-tsin The with is JP proceed Please question Huang

Tien-tsin Huang

success. win then but I up Lisa’s the question. like and on just up. A Obviously, given you seeing sole share it in investments be have the sole follow-up uptick the follow-up pipeline, sales Are deals piece is bigger to sounds could your a sales? signing in source the question, maybe a against an sourced

still you going Just or on pretty pause, Brian, curious it like, still Should expect just, on you. everything M&A? a that. the Thank sounds appetite is are with given M&A your And then active there. we

Brian Humphries

see renewals very-strong opportunity to had that's renew intentional I think strong for they the we've looking satisfaction, well ever, which to as basis and always But, clients of of value are wants and for we to strong some has been very client or executive where night. will source tender. we bid engagement, up on frankly say and sleep lot of also don't at deliveries And se, year. course the over a the without been those extract but sole money quite last have being contracts per I seen a a

with partners and So, they honor work deliver well. their commitments who to want

our good our generally, about momentum and feeling however, the field competitive in I’m positioning.

I are said. win as rates improving, Our

or If line, last service speak But, vertical this. be quite year. bookings one about was in wouldn't so adamant I themselves. for we've one contracts as progress I made it tremendous the feel Our genuinely that

From an backed supportive a I’m of the who be we're to very fortunate Board project by M&A perspective, are undergoing.

a defined made We M&A September. in by blessed strategy. defined transactions have been year last strategy against the that a Board was clearly have we The the that last have

we as squarely balance conduct and integrate feel that to want conduct We aligned albeit comfortable But, our right well continue have We will solely I to M&A sheet. and successfully. fit confidence leadership say, position. manner. that prudent collections transactions, we to that transactions continue we strategy have a as monitor to our place our in them we in to will obviously and And monitor are liquidity the will very team current our in

Operator

line Bachman is question Keith your question. the proceed next of The from with of BMO. Please

Keith Bachman

XXXX. was least in Thank My clear little Hi. a margins puts absence good a March. It you some couple of question with quarters, and want is, for to on are. what seems over COVID next congratulations I dig context in path bit takes very much. around of that and associated the And, good very the a Brian, Cognizant at pretty on the

taken be be I particular? results? be be the in of out listed can with way would you areas in charges a it. think the number of remediation, words, mentioned if about of think -- of savings comments, about so about should advent were sounds to like to is Part Brian, that amount just might think since And those wondered things incremental to dollar for sales quarters other would incremental including costs journey non-GAAP those that's margins Cognizant Karen as we two next where how just those In that is, those the the malware cost cost about item? other will on but at is a for associated GAAP new margins savings. mean, that You the COVID, invest, we B of mentioned. incremental that you non-GAAP situation, will turn? the on reps be the And any just the thinking least try I

Brian Humphries

We're kick the can it Karen. you. So, okay, and today. not obviously maybe in, Keith, off if Karen jump location Keith, then same I'll in thank it’s

that I quarter I strong. that with course, First to then, expectations. was were to COVID. February arrived March track did momentum we of feel relative we particularly And a all, felt have exited very have Street do on building of January strong and Wall QX. we were as

because the will But with and a ahead. notice. came ultimate As because a four in attest, obviously like the lockdown Karen continuity hours. Obviously change first in four-hour decision to we where triggered foremost dynamics of plan weeks countries had business was We India relatively fulfillment India, had abrupt.

desktops -- fulfill to we're cetera. like VDI, we many capabilities scrambling So, companies, or laptops imagine services encrypted et via or I remote work-from-home

COVID, hurt few only compounded And of to were Similarly, that a fulfillment weeks had first then yet such us as So work-from-home ransomware some point attack enabled last of functioning. from of that view. used capabilities no slowed and servers, longer we that's have and ability April and were some encrypted add weeks dealing in laptops provision of you few the itself the systems out weeks, to we because that which the had work-from-home took May the again, would a have in revenue. not tools but also actually costs, with of our but prior the enable further of the we we and automate

clients for reengage. want And we time time perfect costs disconnect storm those in as such had clients soon keep that malware, So, a you the again, their to which period to reengage yet still the we on as network of you who have as contained to you had of ready without you're the permit skillets you revenue. until when top from

the of margins is cost course you So, and that. bit Karen storm imbalance. what future. then take skills, as I in a to so-called in then, perfect protect out like the you no-regrets any mitigate want I want give reflect you'll find And will demand-supply think, think have hurt revenue, we will skills tell costs to will we course to details. of try digital you, more little course, adjust QX, Karen And But therefore of ultimately of had to our we to and foreseeable what the without that to

Karen McLoughlin

Keith. and Sure. Thanks, thanks, Brian,

that that our will non-GAAP. asked, margins the our In we question the costs of continue Those not non-GAAP the adjusting our out year. GAAP stay be both and ransomware terms through of they as will rest of in you

will, unusual like. those a We the will try that as however, to investors past transactions, we've quarterly some so other on cost that see basis, if what large they're call with meaningful, looks done in out

can are where said of happen And so the around about take we so on as country not to cost the see margin such side, sites, aren't in work a to March. Brian and late quickly and because worry we there things and as and they're as of the to people that gets others, very relocating or doesn't move started people happened which like or things obviously, we eliminated T&E forth, Obviously, cost and number other moving forth. at physically clients' immigration at have benefits don't are

we the all in of shut mentioned of remarks, to we that we while as honor most offers then, outstanding our for accepted, prepared continue And much the down my part, been have, hiring. will have

costs what is what that we've And obviously business, in I rates. along this about, utilization resources go so, as to is the it recruiting with and there away that. happens of as to your But, depends your slowdown, obviously, talked a think, revenue cause revenue when

digital future. think across for run it modify they to the the and clients time we want clearly so protect up. opportunity accordingly we'll utilization work that that obviously, talked hit to deliver fulfillment, for had with the the make we use we where continue headcounts enhance and And business below recently be challenges unlikely our onto they this want with can some foreseeable resources, should certainly, adjustments to to And the have as such back comes sure hold about, organization. think with continue then, more Company. short-term, through things Brian that we those make the certainly to early-April then to ransomware, services and as the levels not develop As we we skills But this with to is will that skills to are digital COVID and late-March, that

will Fit of throughout be would track QX the the Growth of on we issues of And plan. for expect with lowest the will previously XX% in February. XX% As we year. back expect for in the and to below year. the we we margins the quarters do we be because each guided the had that year said, will for don't to margin But, the range think be the ransomware remain with to We quarter our range

already, between we'll the XXXX. the through have the year good as on of and go into set made move annual first quarter progress begin $XXX up this first million to rest for through have track the We and QX $XXX as and to of year we generated over the savings we quarter be million ourselves

Brian Humphries

And faced more invest the would creation. ransomware felt have certainly will least at commercial Just And business momentum on the execute those, a point, saying shareholder which liquidity say, on this then think the in we since. this the the like very suffered given environment COVID-XX. remains well come balance to because was given given story Company a I playbook leaner we're we to the pivot a our been And a at cost come year, strongly. we’ll to with our which on to the would and the sure momentum, out of that an a In we a attack, back much then, towards track. Fit differentiating micro sheet, well, trying our we're structure, say, is of environment a with and dealt I'd basis And and growth will the making story unlock to. event, go even can be is Growth with on meantime. The given cost as strategy for through consistent we the we've much out what to refined we of I that of value back well storm relative I with continue of going mix, we build, last absence and Hopefully, this which can the commercial story was then, though macro for track. course between conclude very have started versus investment,

Operator

your Bourgeois with is with Equity Rod line question. DeepDive The of question proceed Please from the Research. next

Rod Bourgeois

XXXX We this has is you strong. of place payer life So, grow while for the the subsegment your entered vertical the has a a could Healthcare in vertical. a subsegment thinking while, while that better be been of payers weak subsegment time been actually first Healthcare good to your sciences the in

COVID for I'd are or to better question my you that murky. growth is a making color secular on can. Thanks. you see maybe opportunities you in were any like So, now basis, if beyond immediate for relative and to on ask subsegment better looking more crisis the seeing But, payer is, that starting opportunities the

Brian Humphries

point been Look, the frankly the of the By also bookings the in April well. from first had area. see into year-over-year particularly we have a area, triple-digit growth. also way, wins payer of had in seen And a view, to I've even Healthcare an pleased outstanding month on quarter we as but growth in basis direct the we provider

Healthcare. turn of compares the we feels it because year QX, And the starting we anniversary tougher we were consolidation that in know, corner that to So, once will last as a industry. to you me we of in some hit hit the

But, our made continue our good So, we do, still to feel have we of though pencils have progress. on as course, I sharpen very to strategy. work to

engaged, and that's growing seem leadership very team a have with we to We clients. major our momentum have

Rod Bourgeois

you. Thank

Brian Humphries

Okay.

we question. that more will one take with think I

Operator

That Thank you, of from Stanley. line the James with Morgan is Faucette Brian.

Unidentified Analyst

being seeing This the that a discretionary what's work considered dimensionalize I work? that's Hey. James. in canceled you're for type what I the squeezing of here. about on off Thanks seeing versus is you the now? can Jonathan want me ask of Are being is to But, work on work your know type that's difference help deferred. being in discretionary to lines, for service table. relative you

Brian Humphries

discretionary we pushed. being receptivity And actually good we our as momentum, But, of about very feel have digital Collaborative in to had we've week's good engineering Solutions. at client, or long called out being nuanced; it’s things tend be critical that's have anything so time, client highly payback, that Look, but some not it’s moment I I cloud seen certainly business, momentum. great pushed this that's a said in would to this by change acquisition announced is say requests our

And ultimately agile, in a strikes, So, I elements more and take of perspective, will market that much try modern in virtual, mobile, the as think a modern that advantage a the forward have perspective how that you that really been on years secular the they moving to trends basis. data my about believe to of world go try over accelerate clients I and much a a personal accumulated the to have to of have core to individuals. we're infrastructure, terms from the the fact have think more a truly truly

Okay.

the hour. with think of that top at I we’re the

for was COVID-XX ransomware we've So, future. earnings like the and also lens implications, attack thank a call, with results, little and the joining. just upon that I'd talk about dealt I the know we into to complex a did how touched the only we it you not because QX

it brings deal things. but managed our want pipeline us uncertainty, I COVID is is strategy. our COVID-XX. well. you're up believe as on security client we're just incur great more is on that on we by The help and we QX Ransomware rates, in corner evidenced revenue primarily and and mix will indeed Fundamentally, than least, last we would may. forthright. to residual an numbers. I once bookings, to will by true as as no-regret strategy will been clients in but There by ever XX% to out our that that win competitiveness now of business and our saying our position, competitive We've our harden some of since show that XXX% it a what believe good had as We with We've absolute contained. client-centricity feel our And strengthen by impact we growing executing I XXXX. Yes, expect and QX. the come resonates is transparent. regrettable. And though growth, relative it the in got evidenced than we a our as basis were momentum following focused feedback. seeing spend. truly is accelerate sound, evidenced costs I QX we've margin highest is have attack been It up continue and that be and greater not is through we're wrap

you joining us. I'd like to So, thank with for that,

Operator

Thank XXXX you. call. Solutions This concludes Technology quarter first conference today's Cognizant earnings

You disconnect. now may

Cognizant Technology Solutions (CTSH) 7 May 202020 Q1 Earnings call transcript