Cognizant partnered with Max Life to form an innovation and development center in Chennai

Cognizant hosted its Q2’23 earnings call on Aug 2, 2023. Select highlights:

• Q2 revenue was $4.9 billion, at the high end of the guidance range, showing a modest year-over-year decline of 40 basis points or essentially flat in constant currency.
• Sequential revenue growth was more than 1%.
• Adjusted operating margin was 14.2%, and adjusted EPS was $1.10.
• Bookings growth was strong, up 17% year-over-year, with a record trailing 12 months bookings of $26.4 billion, resulting in a book-to-bill ratio of 1.4x.
• Around 30% of Q2 bookings were large deals, with 5 of them exceeding $100 million each.
• Bookings were a balanced mix of renewals, extensions, and new opportunities.
• Trailing 12 months voluntary attrition for the tech services business declined to 19.9%, down 3 percentage points sequentially and 11 percentage points year-over-year.
• Revenue decline in the Financial Services segment was due to a soft market and continuing weakness in discretionary spending.
• The company is responding by transitioning more existing work in the Financial Services sector towards managed services to address cost takeout and productivity initiatives.
• The company is also focusing on engaging with fintech companies and strengthening capabilities for capturing discretionary spending on transformation work when it returns.
• Cognizant is supporting S&P Global’s configure price quote system modernization, the world’s largest CPQ implementation on Salesforce.
• They are collaborating with Axis Max Life to establish an innovation and development center in Chennai to accelerate their digital transformation.
• Cognizant offers a flexible client-centric operating model to assist clients across industries in cost reduction, vendor consolidation, and achieving technology and operational efficiencies, leading to opportunities for large deals.
• They help clients develop digital platforms for delivering personalized experiences to their customers and incorporating technology into their products and services.
• Cognizant extended its partnership with Gilead Sciences, providing services valued at $800 million over the next 5 years, including managing global IT infrastructure and leading digital transformation initiatives to enhance the client experience and accelerate time to market for products.
• GenAI and intelligent automation are applied to improve Gilead’s customer service experience and enhance manufacturing efficiencies.
• Cognizant is designing genAI offerings for industry-specific solutions and productivity enablement across various themes.
• Applications include transforming code processes, improving the customer and employee experience, product innovation, software and coding, and knowledge management.
• They are using genAI to speed up the research process for a large healthcare product company by authoring scientific content using GPT models to summarize and generate content from unstructured and structured data.
• For a top 20 P&C insurer, Cognizant helped frame their genAI strategy and build a genAI-based digital virtual assistant to analyze complex claims submissions, resulting in improved operational efficiency and reduced claim costs.
• Cognizant signed a multiyear agreement with Nuance Communications to scale resources for Nuance’s Dragon Ambient eXperience operations, which focuses on conversational and ambient clinical intelligence.
• Q2 revenue was $4.9 billion, with a sequential increase of over 1% and a year-over-year decline of 40 basis points, essentially flat in constant currency. Year-over-year growth includes about 130 basis points from recent acquisitions.
• Bookings growth in the quarter was driven by larger deals with longer durations, leading to improved forward visibility.
• Softness in smaller, shorter duration contracts continued due to weaker discretionary spending, impacting revenue growth conversion.
• Within Financial Services, revenues declined 5%, reflecting a softer demand environment and weak discretionary spending.
• Health Sciences revenue grew 2%, driven by strong demand for integrated software solutions from health care clients.
• Products and Resources revenue grew 4%, benefiting from recent acquisitions and increased demand from automotive and travel sectors.
• Communications, Media, and Technology revenue declined 40 basis points due to softness in technology and communications and media clients, but growth is expected to improve in Q3 due to recent new bookings.
• North America revenue declined 2%, while global growth markets (GGM) outside North America grew approximately 5%, led by Europe.
• Adjusted operating margin was 14.2%, impacted by costs related to the NextGen program, an increase in compensation cost, and other factors.
  Q2 diluted GAAP EPS was $0.91, and adjusted EPS was $1.10, with an effective tax rate of 21.1% and an adjusted tax rate of 21.7%.