[audio distortion] d ay three of the TMC conference is a happy day for me, when it's day three, because it's the last day. Always grateful to have all these great companies and executives come. Of course, my name is Tien-Tsin Huang. I follow the IT services sector at JPMorgan. Of course, we've got Cognizant with us. It's always great to have the Cognizant team join us. We'll do a fireside chat with us from Cognizant, Jatin Dalal, CFO, as well as Tyler Scott, who does an amazing job in investor relations. A gain, I'll kick off with these questions. Happy to take questions from the audience, also from the portal, so feel free to use that. Welcome, t hank you both for being here. I know how busy you are. Thank you. Very happy to be here. Yeah. Thanks for the opportunity. Of course. Let's get right into it. Jatin, for you, a little over a year into the job. I'd love to hear from you, of course, what findings have you had here? Not that you've been, w hat have you learned? What's been better than expected? What's been a little bit different? Of course, some of the changes that you've been, given your past experience, w hat's worked? Thank you, Tien- Tsin. I would say many things which I thought are present in Cognizant, which I saw from outside as a competitor, were really present. It was not something unusual to discover. They were present at a far greater scale than I had imagined from outside. I think to start with, the first thing is just the culture of customer centricity, which was always or which has been referred to in the past, but it is very, very deep. It is very, very part of the DNA of the organization, be it the sales team, delivery team, architecture team, so on and so forth. That is one. The second is the will and keenness to win is very, very deep in this organization. I mean, I feel very, very good when we go out on a pursuit, our ability to understand client ecosystem, build a very, very high-quality architecture of a deal and then see through on the other side, not because of price, but because of all that we bring on the table. Third is the infrastructure that Cognizant has built over the years in terms of IP. TriZetto I think is a spectacular asset to have with them. Neuro platform that we have built over the last few years is a clear differentiation when I build a deal. These are the few things which have really positively resonated with me as an outsider who came from outside and started working, and how I can leverage all of that to create organizational success. That's great. Thanks for going through that. It's consistent with what we've heard. Just maybe digging into the quarter, you just reported it not too long ago. The biggest takeaway for us is, you're back in the winner's circle, something that was a goal that was set out by Ravi. What would you attribute that to? Of course, there's a question of sustainability and this work to achieve that. What would you attribute the return to winner's circle? As we mentioned on the earnings call, this is the first quarter. Really, if at all it's just a realization that, yes, we can do it and we are there. Nothing is proven until we do it for a few quarters in a row consistently, a couple of years, three years in a row. What has worked for us is a few things. One is, we have rebuilt the virtuous cycle of winning large deals, executing well. That gives us a right to win the next large deal. Also, it gives us the periphery discretionary spend that we can go after in a large deal, because it's very natural for customers to give you an additional 10% when you're already doing 90%. That virtuous cycle, we started in 2022. In 2023, we won 17 deals. In 2024, we won 24 deals. Even in this quarter one, we did four large deals, one of which was mega deals. All of that has worked well. In fact, Tien-Tsin, I'm happy to share that on the earnings call, we spoke about a few large deals in pipeline as we think about the rest of the year. Between the earnings call and this morning, we have signed another mega deal. Great. There is that virtuous cycle of winning, executing well, and therefore building the right to win the next one I think has been the biggest contributor. No, that's great to hear. Thank you for the update. I think maybe just talking about the state of spending and discretionary spending, you mentioned it. It's great that the large deals have been happening for some time, but the short-term project work has been somewhat delayed. What's happening on the ground, especially post-liberation day? Anything noticeable in terms of change or surprise? You know the environment remains fairly uncertain. The areas which have gotten impacted the most are the ones which are associated with manufacturing and supply chain. Therefore, you have manufacturing sector, consumer products, retail, to an extent, even travel and hospitality. All of them are impacted a little more. Beyond just tariffs, there are government priorities which are impacting sectors like health, which we spoke about in our earnings call, has certainly looked slightly different from the beginning of April compared to where it was in quarter one and t hat we'll have to watch very carefully. The discretionary spend is good and is sustaining well in the BFSI segment. That is a sort of a good part of the overall picture that we see. That's the current color on how the environment is impacting the client preferences. Yeah. No, that's fair. I've talked to you and your peers and some of the private companies, just debating this long down cycle or tough cycle of spending on the discretionary side really since late 2022. It raises the question of, is it cyclical or is it secular? As you've examined it, Jatin and Tyler, is there any observations or new color you would share on that debate? I don't see a different trend. There is a trend of a secular discretionary demand that comes through the sector. If you see between 2014 and 2019, you will see a particular sector growth, which is led by the addition of work which is coming into the sector. That number has changed between 2020 and 2025. The reason being that it got bundled up very, very sharply in the early part of the five-year cycle post-COVID. Two years, we had a bonanza of discretionary spend and then it tapered off quite a bit. I don't see that a living and breathing organization which wants to capture new opportunity of technology and to make itself more efficient, more customer- ready, build better products through better engineering, can stay out of a secular investment on technology per se. I feel now we are at a cusp of having two great years and two tough years, and now getting back to that secularism that we always used to enjoy as an industry. All right, g ood. Back to the large deals, which you've done a lot of, and you just mentioned you won another large deal, mega deal. Can you give us a little bit more on the nature of those deals? Is it more about cost cutting? Is it large transformations? Is it cloud work? What more can you tell us, a ny common themes? Sure. Y ou know, a large deal by design, has two big streamlines. One is that of transformation and really doing something big, ambitious, and sort of organization- changing for the customer. Second is really go out and see that you're spending $100. You know, if I considered everything, I create a certain amount of synergy between the pockets of applications, operations, and infrastructure and give you overlay AI productivity on that, and give you far better economic outcome than what you would receive otherwise. Now, we have signed, we spoke about the deal that we won in quarter one, the mega deal. T hat first mega deal was really swim lane one. The one that I just spoke about is swim lane two, which is really going out and saying, you know, let me do this for you far more effectively and far more efficiently than it has been done before. In that process, I have considered some spend, which was in-house, which was with other partners and that's what we have built. Okay, g ood to know. With you as CFO, when we think about these large deals, you have to manage the risk, of course the pricing, the delivery. Is there a concern or consideration around dependency on these large deals, and the ramp rates and the timing of all that? How do you manage the maturity of these large deals as they come through, recognizing that the short-term work is on pause? Yeah, absolutely. I think even within large deal, you have to see what is incremental and what is most securing your spend, which is, you're already doing 80%-90% of the work, but this secures you in a very different way. It has a large component of renewal. The one that I just spoke about has a larger component of renewal. It is more security in an otherwise uncertain environment. I have a better sense of a more stronger backlog in the second half of the year versus [audio distortion]. Whereas the first one was all new, and therefore it will directly add on the top of the revenue. Now, to your specific question around dependency on large deals, the way the sector works is, it goes through alternative cycles of large deals and discretionary spend at mass across the sectors and then again large deals otherwise. The companies, historically, that do well, and you can go back and check, are the ones that are able to manage the transition well between two sectors. The best way to do this in times like this, is to keep on winning large deals and have a strong backlog. When discretionary comes, it sits on the top of that backlog. You then go out much faster and better than the companies which are not winning large deals in the current context. They get the benefit only of the discretionary spend which is coming out. You have to build that base and then put the discretionary on top. That is how we are trying to do this. This is nothing very specific to Cognizant, but if you see the successful companies in the sector, they manage this transition very well. Yeah. Which reminds me a little bit of, Jatin, of a question of ACV. I think you did talk a little bit about ACV. I know when you think about large deals, extends duration, extends TCV, but any update on ACV, since I have you? Yeah, absolutely. ACV is another important construct because it's a balance on large deal. Large deal numbers look very good, but if they are not resulting in next 18 months' incremental revenue, it's a challenge. We look at both closely. So far, we are doing well on the trailing 12 months' basis on ACV growth as well. It is not only winning large deals, but we are now at a point that after nearly 18-24 months of large deals, whatever we are winning is not just creating a longer-term revenue certainty. It is also adding to the incremental revenue I can generate in the next 12 months. That's a cycle that, when you layer large deal over large deal, that's where your ACV starts growing. Okay. O ne more on the larger deals, and bringing in margin and AI a little bit. Just as you execute these deals and you sign them and agree to the terms, I mean, I'm assuming you're assuming some efficiency baked in from whether it be AI or productivity or changes in pyramid, what have you. How do you manage that risk of delivery understanding, especially if AI is changing so quickly that you don't face cost overruns or challenges in delivery contract execution? Sure. All of us who have been in the sector for more than two decades understand that every large deal, not just now, but maybe five years back, came with that promise of technology and that promise of technology that you can do things more efficiently fourth year from now than what you can. Thankfully, that cycle always plays out. It has got a little bit more accentuated or accelerated because of AI. Therefore, the customer expectation is also greater. If I could sign a deal earlier with a particular level of productivity baked in or signed for on day one, and I had to go back and work on it, that quantum has certainly risen versus where it was before. That confidence of technology remaining ahead of the curve has played out for, I would say the last 30 years in the industry. I feel good that we should be able to do it. Also, we also see ourselves vis-à-vis others in the sector, from whatever we can decipher a nd deals, when you're competing on deals, it gives you a reality check on some of that. We think we are ahead in terms of understanding what Gen AI as an opportunity can do for us, and what we have to do to then percolate it down in the organization to execute on it. I feel good of course, but it's not just a trust. We have a monthly view of what we call as bid versus did, and we are very regimental about it. Where we see risk, we really double down. We have teams which go in when we think that something is not moving as fast as it should be. Okay, g ood. Just staying with Gen AI, I think I've always respected Cognizant and how you framed the opportunity around Gen AI, around the three vectors. I can read it if you want, but I'm curious to hear the way you attack it and how you should encourage us to evaluate your success there. Absolutely. Just to recap, the vector one is really around productivity and the hyperproductivity that AI can deliver. Vector two is making organizations ready for AI, which is re-looking at their data structures, re-looking at their internal systems and processes to make them ready to leverage AI. The third vector is really going and doing and applying agents where we we've traditionally not done IT work, which is the vector three opportunity. That is what is a big, big exciting pool of work that we can do eventually. Right now, as we speak, the one which is really at core of what we are doing is vector onel because all large deals are being constructed on a productivity promise of AI. It is not commoditized, and therefore, it's a big differentiation for the players who are able to do it better than the others. The second vector, which was around opportunities in cloud, opportunity in analytics and data, we saw a big upsurge between October, November, December, January, February. From March, we have seen more stability on that. We have not seen it going up as well as we did in those four months, but it is not falling off either. I think that demand is waiting on sidelines due to environmental reasons, and it could start coming back once there is more stability. The third, which we are really excited about, and that is where the role of system integrator will transform from making sure that for example, two databases of two different competitors are working seamlessly, was our original job as a system integrator. Y ou say, okay, two SaaS applications should work seamlessly for organization success. That was our sort of role of SI, n ow it will be different. It would be looking at an agentic workforce of application one and agentic workforce of application two, and how as a system integrator, you can work and create a multi-agentic system or system for our customer, where you work with customer to create orchestrator agents. That is the role of SI as it is getting transformed from where we were five to 10 years back to what could be an opportunity in future. Also, going the areas that we have not gone before. We have spoken about a lot of operational work, that we today do not get direct access to or do not work because they are not classically outsourced. There are two small pieces within the organization which cannot be outsourced. Everything is up for grabs when you can say, I can deploy an agent to do this. You don't have to worry about moving that work from Boston to Canada or to another place, Philippines or India. I could deploy an agent to do that for you. That is a very different, exciting phase, which we are confident at some point the industry will start hitting. Certainly, Cognizant is very keen to do that. Yeah. On the agentic side, and you mentioned this is SI's role on that, I mean, I think we're hearing it a lot. I know Puneet has talked about it a lot, right? Services as a software, as a theme. Agentic has been a theme at the conference. Just help us understand Cognizant's right to win there, especially versus software players or the pure play AI players that might want to own that and control that as well. Absolutely. Let me say that there will be a role that will be played by the pure- play AI organizations. There will be a role played by agentic forces of individual SaaS players. There will be a role of somebody looking across the spectrum of work and looking at how I can stitch an answer together. That is where the SI will come together. I'll give you an example that we use within Cognizant, which is, when an employee leaves an organization, we typically do a settlement for that employee. I'm sure all of you have seen that that is a fairly complex process because you need to go to 15 different departments, from payroll to IT, to security, to legal, et c, before you can do that. Almost every department has deployed a system, and maybe in future, agentic workforce managing that process. You need somebody to orchestrate an answer for the employee across those five different agentic workforces which are operating in five different systems. That is where we have been able to deploy successfully. We have demonstrated case studies around it internally that we use. That is where I see our role. I mean, I do not think we are going to win at the cost of a pure- play AI mega organization. There is a role for system integrator that we see. The reason we can win within this space is, it has to have a deep applications and operations knowledge. As you know, Cognizant is largest among all the players in applications and operations that we compete. Of course, there are players which are bigger than us, but if you really see for our dissection of $20 billion for the percent of revenue that comes from applications and BPO operations, we have the largest chunk. That gives us comfort that we will not be left behind in this opportunity. In fact, we'll lead this opportunity. Okay, g ood. One more question, then I'll open it up, so b e ready to ask questions. J ust on the workforce side and the impact on the employee base from all of this, I'll ask you more on the positive front, which is, do you have the personnel to do this new work that's evolving so quickly? Is there a retraining that's required? Is your cost of doing business going to be higher for some period? How do you see that, Jatin? Yeah. I think it's part of the investment in AI that we'll have to make, that we give opportunity to every associate to add to the skill set that they have. I think it's very easy to make it a zero-one outcome saying, an AI opportunity ready resource and AI opportunity not ready resource. I don't think that's right. The right answer is, somebody who's already very deep in domain and applications also is AI- ready is a one plus one to our customer. I don't want to look down on anything that we are doing today, because that's a sort of base on which we need to build further. You can't replace that overnight, and you should not. It would be counterproductive. We are very committed and conscious that that investment needs to happen. We have spoken about that investments earlier. We had on last count, more than 230,000 of our employees well-trained on some of these techniques, not only our customer-facing employees, but also all employees, functional employees, et cetera. How do we leverage this opportunity which is in front of us? The good part about the IT services industry is that a typical employee is also very conscious about her or his external marketability, and they have their own aspirations to work with Apple, to work with Google, to work with Meta, to work with whoever else, right? Therefore, they also invest that discretionary effort after work, over the weekend, to be ready. It is not an effort where there is no openness or willingness. Actually, there is a lot of keenness to learn, and you provide resources and you fly with that. Right, t here's motivation. There's motivation. To get better. Okay, t hank you. Happy to take questions, if any. Otherwise, I can keep going. Yeah, [Brian or Puneet]. I'd like to ask about discretionary spend. Like you talked about, how the large deals, discretionary, they alternate, and whenever discretionary comes back, you'll be ready. What gives you confidence that whenever clients are ready to spend on small projects, discretionary projects, Cognizant will be there? Y ou talked about BFSI maybe. Maybe give us an example that gives that confidence. Sure. As you can see in BFSI, which is largely discretionary business, we were -6% growth four quarters back. We are +6% growth after that. We have turned this number, and there is no inorganic sitting there. The Belcan acquisition that we did had no BFSI component. This is purely organic. That' s a data point of success. I will also tell you what lies behind. Lies behind is a very, very structured demand fulfillment view that we look at every morning. I am not exaggerating. I canceled this morning's call because I was speaking here. Every morning we see it. I know which pocket I have not fulfilled, something that I should have fulfilled yesterday night. We are very, very hard. We have next 45 days requirement view, and hiring view and the people coming off from projects and making available. This is deep science and daily rigor beyond just getting systems ready, and believing you are ready. It is just checking yourself every day, can you run that 10 km every morning or not? You are ready if you do. If you do not, you are not ready. That is how we see it. Maybe one other, Puneet, that I think is an interesting data point is, as we've seen over the last couple of quarters, one of our fastest growing service lines internally has been digital engineering, right? We had our leader, Prasad, speaking at our Investor Day. That's completely [audio distortion]. That is completely discretionary work and short-term in nature. That's roughly a $2 billion business for us that's been growing, I think versus market rates, I would say above what public competitors are doing. That gives us a lot of confidence that we have the portfolio and the capabilities to come in and win this discretionary work. Now, of course, the environment has dramatically changed in the last couple of months and quarters, but that is something that we think is sustainable, certainly through the first half of this year and I think gives us a lot of confidence. That also happens to be one of the service lines where we are applying our platform solutions and AI-led productivity flow source, as the easy example, right? Our software development lifecycle tooling for developers. We're driving productivity. We're delivering it for customers. It is manifesting itself in actually more spending with the customers and driving faster growth. I think it's one of our strongest examples of where we actually see that playing out in the portfolio. Thank you so much for taking our questions, gentlemen. Longer-term follow-up on Puneet's question. Could you talk to us about your right to win in the third vector, agentifying the enterprise? Thank you. Right to win in the third vector? [Agentification]. Yeah. You Yeah. You all have articulated the vision, I think, better than almost anybody, particularly probably at investor day. It is a new area, but why are you all the ones who will help enterprises agentify? No, sure. I think this is an opportunity where every segment of technology organizations will leverage. If I'm a SaaS player, I'm not going to rely on my workflow anymore. I'm just going to build a whole lot of agents around my workflow. That's going to be reality. If I'm a large company like Microsoft or Google, this is an opportunity of a lifetime on agentification. Therefore, I'm going to create horizontal agents that can be leveraged for any work. Similarly, there will be a play for system integrator. I think the role for system integrator or the opportunity for us is to go after the pools of work that are hitherto not addressed by us, as I spoke before. We feel we are well placed because we have a large application and BPO business, which is sort of the core at which you can pick up this work and execute on. If you're on infrastructure side, for example, it is a little difficult because you have to traverse the distance of understanding the process. I f you understand process through application workflows and operations work that you're doing, you're right in the middle of that agentification operation view. Thank you. Any other questions? Happy to take them. Don't be shy. All right, l et's close it out. We have five minutes left. I know we talked a lot about revenue. Let's quickly do a little bit more on margin. It's just a basic one for you, Jatin. Just thinking coming in from Wipro and landing here, why is 10-30 basis points the right expansion target for the company? It is because we are making two promises. Number one is we want to get to that winner's circle consistently every quarter. We are not that if you look at the last few years. O ne of the things we have done very well is we have been balanced between our ambition to expand margin, and our need to invest in business to get that growth back. It has to be a good calibration of, continue to invest, stay ahead in the game. For example, I think our GenAI lab or GenAI pool of talent, I think is probably a significantly greater investment than many others. We need to invest, but we do not feel good about where our margins are right now and I think we have an opportunity to go up. We will have a moderate expansion every year, even as we continue to systematically work towards improving our growth trajectory and consistently be in the winner's circle. Yeah. I know you've done the Belcan deal from an M&A standpoint. We trust Cognizant, of course on the revenue side to do what you need to do. Do you have any constraints on doing the M&A you'd like to do, given the margin framework that you've laid out for us? I mean, we consider that a little bit as part of the investment. Of course, a deal like Belcan has large valuative impact. For example, we spoke about 50 basis points last year, and that adds because it was only five months last year, four and a half months, and now you have eight months or seven months to think about. Yes, I would say it's not a constraint, but it is something that we have to be watchful about that we don't get carried away one way or the other on our margin ambition, or our M&A ambition in some form. I think M&A is going to be a mainstay for us from a part in the strategy. It does not mean we will do many large deals or Belcan -like deals, but there are clearly pockets where we are behind the curve in terms of our market presence, our presence in a particular capability or skill set, and that we will need to continue to fulfill. You would see us investing on that, and the framework that therefore we have laid out considers that also as part of the overall investment that I spoke about. Okay, g ood. W e covered a lot. I guess we're out of time, I know, but just to close it out. F or both of you, beyond revenue growth and margins, always the stuff that we stress and sweat over, what other KPIs do you think are important for us to track Cognizant's emergence and improvement, and execution against this transformation, staying in the winner's circle and earning a higher valuation? Okay, i t's a great question. Thank you for asking this. Our business is really getting two pillars, right? Customer satisfaction and employee satisfaction, i f we can get these two things well, even revenue growth and margin is sort of step two of that. I think we have done a very good job of managing both in the last two, two and a half years, where we are no longer losing customers, which was the challenge which Ravi faced when he joined. In fact, we spoke on the earnings, we haven't had any major rundowns since the beginning of the year, even in an environment like this. That should hopefully continue. Employee satisfaction is also key because every time, an [audio distortion] employee also leaves an impression on remaining employees, saying maybe somewhere else is a better place to work than Cognizant. It creates a [fuel]. A lso cost-wise, every time somebody goes out and I have to replace a similar capability resource, I have to add 20%-30% of the cost in India or in the U.S., maybe 10%-15%. There is a cost issue around it. If we can manage this as an external observer, if you see us doing well on this too, I think a lot will automatically follow. Perfect. No, it's important to manage both sides of the equation. I'm glad you answered it that way. Jatin, Tyler, thank you for the time. Always great to catch up, always. Thank you very much. Thank you for listening in, and thank you for the opportunity. Thank you.