Cognizant(US:CTSH)2022-07-27 23:44Financial Data and Key Metrics Changes - Second quarter revenue was $4.9 billion, up 9.5% year-over-year in constant currency, with operating margin at 15.5%, up 50 basis points sequentially [6][21] - Digital revenue grew 13% year-over-year, representing approximately 50% of total revenue, up 3 points from the prior year [21][26] - Second quarter bookings declined 3% year-over-year, with a trailing 12-month book-to-bill ratio of approximately 1.2x [15][22] Business Line Data and Key Metrics Changes - Financial Services revenue grew 5.1% year-over-year, impacted negatively by the exit of Samlink [7][23] - Health Sciences revenue increased 7.6% year-over-year, driven by pharmaceutical clients and the TriZetto product portfolio [9][23] - Products and Resources revenue grew 11.6% year-over-year, supported by automotive, logistics, retail, and consumer goods clients [10][23] - Communications, Media, and Technology revenue grew 19.5% year-over-year, driven by technology clients and new client acquisitions [11][24] Market Data and Key Metrics Changes - North America revenue grew 9% year-over-year, led by CMT and Life Sciences clients [25] - Global growth markets, including all revenue outside North America, grew approximately 12% year-over-year [25] - The UK market grew 25%, with strong double-digit growth in financial services [25] Company Strategy and Development Direction - The company announced an organizational evolution to simplify its model and enhance end-to-end accountability across integrated practices [12] - The focus remains on becoming a preeminent technology services partner to the Global 2000 C-suite while driving profitable growth [19][20] - The company is prioritizing digital transformation and addressing labor market dynamics, including attrition and inflationary pressures [14][18] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about IT services growth prospects in the medium to long term despite macro demand uncertainties [14] - The company is focused on improving employee engagement and retention to navigate labor market challenges [18][19] - Management expects to improve bookings growth in the upcoming quarters, with a healthy pipeline supporting revenue growth [15][22] Other Important Information - The company repurchased 4 million shares for $300 million and returned $141 million to shareholders through dividends [27] - Full-year revenue guidance was revised to a range of $19.7 billion to $19.9 billion, reflecting a growth of 6.3% to 7.3% [30] Q&A Session Summary Question: Revenue challenges and supply issues - Management indicated that revenue challenges are more related to demand-supply balance rather than macroeconomic factors [36][38] Question: Pricing environment consistency - The pricing environment remains consistent, with opportunities for price increases in digital services [40][41] Question: Bookings shortfall quantification - Bookings were below expectations due to resource fulfillment focus and pricing discussions impacting sales momentum [43][45] Question: Attrition versus hiring challenges - Attrition is currently a significant challenge, but management is optimistic about improving retention through various initiatives [46][49] Question: Competitive environment and strategy - The company maintains a balanced strategy focusing on revenue growth and margin expansion, differentiating itself from peers [60][62] Question: Financial services demand trends - No major concerns in demand trends within financial services, with strong performance in commercial banking and insurance [69][71] Question: M&A environment and pipeline slowdown - The slowdown in M&A activity is attributed to timing delays and differing valuation expectations between buyers and sellers [78] Question: Supply-demand imbalance clarification - The supply-demand imbalance is influenced by increased intake of college graduates and localized skill shortages, particularly in North America [80]