Cognizant Technology : Citi’s 2020 Global Technology Virtual Conference

Corrected Transcript

09-Sep-2020

Cognizant Technology Solutions Corp.

(CTSH)

Citi Global Technology Conference

	Total Pages: 14
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Cognizant Technology Solutions Corp. (CTSH)	Corrected Transcript
Citi Global Technology Conference	09-Sep-2020

CORPORATE PARTICIPANTS

Brian J. Humphries

Chief Executive Officer & Director, Cognizant Technology Solutions Corp.

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OTHER PARTICIPANTS

Ashwin Vassant Shirvaikar

Analyst, Citigroup Global Markets, Inc. (Broker)

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MANAGEMENT DISCUSSION SECTION

Ashwin Vassant Shirvaikar

Analyst, Citigroup Global Markets, Inc. (Broker)

Think we can start. Brian, are you there?

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Brian J. Humphries

Chief Executive Officer & Director, Cognizant Technology Solutions Corp.

Yeah. Good morning.

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Ashwin Vassant Shirvaikar

Analyst, Citigroup Global Markets, Inc. (Broker)

Okay. Good morning. Good morning and thank you for doing this. So, let's just kick off. Everyone, thanks for being on. I'm Ashwin Shirvaikar. I'm Citi's payments processors and IT services analyst and the covering analyst for Cognizant, which is next up on the agenda. From Cognizant, we are fortunate to have Brian Humphries, CEO, and a very busy CEO, [ph] at that (00:00:39) with all these acquisitions and stuff that you've been doing that we hope to get into.

One quick logistical comment during the course of this if you have a burning question that you want me to ask, just email, there should be an email list, my email, as well as Ryan Potter on my team. His email should appear on the screen, you can just email the questions to us and we will try and incorporate them into our questions stream. With that, let's kick off.

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Cognizant Technology Solutions Corp. (CTSH)	Corrected Transcript
Citi Global Technology Conference	09-Sep-2020

QUESTION AND ANSWER SECTION

Ashwin Vassant Shirvaikar

Analyst, Citigroup Global Markets, Inc. (Broker)

Q

Brian, thank you very much for doing this. Let me start off with a year ago when we spoke at this conference, you had just announced the transformation office, it was a few months old, fit for growth initiative had just been announced. Can you talk through the main elements of the plan, where have you done well, where has performance either been lacking or you've just not got to it. And what's next on the agenda?

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Brian J. Humphries

Chief Executive Officer & Director, Cognizant Technology Solutions Corp.

A

Yeah. So, well, first of all, thanks for having me. Yes, it's been a very busy 16 months. And last April or May we announced the transformation office and there were six elements of that. First of all, strategically who are we, what are we trying to become, what do we need to accelerate, are there elements of the portfolio we should exit including. As an example, we took the decision to exit content moderation. Strategically, of course, we decided to double down on accelerating our digital portfolio. And then we've done a lot of M&A, to your point.

The second piece related to commercial transformation, that involved better leveraging the partnership ecosystem, changing our customer segmentation model, upgrading our client partners who are at the tip of the spear for us, changing the sales force compensation and, indeed, adding 500 revenue generating resources. And all of that was with a view to kickstarting the revenue growth story. That needed to be fueled by investments and in order to get investments into commercial transformation we needed to find efficiencies. There were two areas that we look towards. One was delivery transformation which was a lot around pyramid automation, et cetera. And then the second piece was fit for growth, which was a lot around restructuring program and making sure that we have the right systems, tools and capabilities and cost structure to invest in growth and to be cost competitive. And then we had a work stream around our structure and, of course, a work stream around talent and culture. And I was running all of that, Ashwin, as soon as you can imagine change management was essential because this is a knowledge-based business.

So, one year on or a little bit beyond that, where are we? Look, I feel really pleased with the progress we've made. We had a lot of balls in the air in the first year. And in addition to that, we had a series of leadership changes and then we had some exogenous events that came into play, both a global pandemic as well as a ransomware attack on Cognizant, and I really feel as though we've made great progress against it. Our people scores, now we do an annual people engagement survey and we've just completed that in the last two months. We're at multi-year highs and actually above the industry benchmarks which is, of course, a very good data point for us knowing that we needed to win over the hearts and minds of employees as we are doing this.

In terms of execution, the transformation office I feel is 100% on track. There are certain things where of course, with COVID, the cost structure we have to go deeper because revenue as an industry, instead of growing 5%, 6%, was assumed to decline 5% or 6%, so, a 12-point swing. And accordingly, CFOs and CEOs need to change their cost structure in light of that. And as you know, we're regaining share again and becoming much more competitive. But maybe I should also illustrate that elements here sometimes take multiple years to get right. Let me compare and contrast a few things.

The commercial transformation required about six months of work around customer segmentation and sales compensation models and then we implemented this on January 1. The restructuring program was also

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Cognizant Technology Solutions Corp. (CTSH)	Corrected Transcript
Citi Global Technology Conference	09-Sep-2020

implemented in Q3 2019. So, those are quick things to get done. However, at the end of every year, you will also continue to tweak sales compensation and you'll continue to upgrade your client partner teams. And that's the same as the talent or cultural elements. It is a series of years before you ultimately optimize your talent pyramid. So, Ashwin, if I take you, we put you in a role, you excel, we promote you again, if you excel again two years later we put you in a bigger role. If you take [ph] somebody called Brian (00:05:39) and put him in a role and he fails and you remove him from that role, put him in another role, if they fail twice, you should probably remove them from the company [indiscernible] (00:05:47) you have multiple placements and promotions that take time to flow through the system before you truly understand who your top talent is in various circumstances. So, good progress. Certain things triggered, everything well underway, but certain things will take longer to play out than others.

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Ashwin Vassant Shirvaikar

Analyst, Citigroup Global Markets, Inc. (Broker)

Q

Right, right. And then the last part of that was, does fit for growth itself, as a program, does it evolve? What's next on the agenda? Is there a fit for growth 2.0 so to speak?

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Brian J. Humphries

Chief Executive Officer & Director, Cognizant Technology Solutions Corp.

A

Well, listen, I think we're very much focused now on our clients and executing our strategy. I think it's important for any company to optimize their cost structure and keep it efficient and lean, but in the same way and as I always said I like to differentiate between a cost and an investment. So, right now our focus is on executing our strategy and of course we've been dealing with COVID just as the rest of the industry has. As long as we stay focused on our strategy and our clients, in my mind we will grow faster.

We've got three major initiatives underway which are not mutually exclusive with the transformation office. They are linked inherently to the actions we talked about already. One is to accelerate digital. As you saw, bookings are strong year-to-date for the first half of the year up almost 50%; revenue growth, up 15%; revenue mix now at 42% of the company. But accelerating digital is much more to the slide, it's all around talent, it's about portfolio capabilities we have, it's about organic investments as well as inorganic investments. It's around brand attributes. So, a very comprehensive program behind that.

Second major program around globalizing Cognizant which goes well beyond our revenue mix. Today, 75%-plus of our revenue is in North America. We naturally want to penetrate global markets more aggressively. We have two little coverage in those overseas markets. Therefore, it creates a huge opportunity for us because we are not saturated in those markets. Globalizing Cognizant also means a more global brand, a more global and diverse leadership team, as well as from a delivery point of view, much more of a global delivery network and we've made some appointments and announcements on that in recent months.

And then the third major theme that we're working on all within the construct of executing against our strategy is increasing our relevance to clients. That is a lot about continuing to fine-tune our understanding of the pain points by C-suite, by industry. It's a lot about continuing to evolve our solution portfolio to address those pain points and our partnership ecosystem to enable us to go-to-market jointly. But it's also about us evolving from rate card type work to more selling a Cognizant offering that aligns to a client need or a client desired outcome. And if we get all of those things right, our relevance to clients will be greater even than it has been historically.

Brand is permeating all of this. We've done a lot of work, Ashwin, in our brand in recent months. We've broken down our brand attributes. It's kind of interesting, we're neither perceived as an American company nor an Indian company nor a global company. And that's why you're going to see us roll out a pretty comprehensive injection of

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