Ladies and gentlemen, welcome to the Cognizant Technology Solutions' Fourth Quarter 2024 Earnings Conference Call. All lines have been muted to minimize background noise. After the speakers finish their remarks, we will open the floor for questions. Now, I would like to turn the conference over to Mr. Tyler Scott, Vice President of Investor Relations. Please proceed, sir.

Thank you, operator, and good afternoon, everyone. By now, you should have received a copy of the earnings release and investor supplement for the company's fourth quarter and full year 2024 results. If you have not, copies are available on our website, cognizant.com. The speakers we have on today's call are Ravi Kumar, Chief Executive Officer; and Jatin Dalal, Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. Additionally, during our call today, we will reference certain non-GAAP financial measures that we believe provide useful information for our investors. Reconciliations of non-GAAP financial measures where appropriate to the corresponding GAAP measures can be found in the company's earnings release and other filings with the SEC. With that, I'd now like to turn the call over to Ravi. Please go ahead.

Thank you, Tyler, and good afternoon, everyone. Thank you for joining our fourth quarter and full year 2024 earnings call. I joined Cognizant two years ago, drawn by its heritage and unique DNA, along with its extraordinary ability to sense, incubate, and scale new technologies for global enterprises, often ahead of peers and clients. We set out to harness these trends and reclaim our place in the winner circle. I'm pleased to report solid progress in 2024. We successfully pivoted from stabilization to growth, building momentum throughout the year. Q4 marked a high point for year-over-year revenue growth, large deal signings, and bookings. Operationally, we completed our NextGen program, delivering savings reflected in our adjusted operating margin and strengthening our ability to make strategic investments and drive profitable growth. Our 2024 results reflect the strong execution of our strategic priorities, accelerating growth, becoming an employer of choice, and modernizing operations. Our North Star remains returning to the winner circle with top-quartile revenue growth, while steadily expanding our margins over time. Let's take a moment to reflect on 2024, starting with our growth initiatives, which gained momentum through large deals, platform enhancements, new and strengthened partnerships, and strategic acquisitions. With respect to platforms, our AI labs made significant advancements with our AI capabilities and offerings in 2024. We introduced Flowsource for full stack engineering, Neuro Edge for real time AI, Neuro Cybersecurity for AI-enabled proactive defense, and Neuro AI Multi-Agent accelerator for AI agent development. We also added multi-agent orchestration capabilities to our Neuro AI platform and we debuted our AI-powered Cognizant moment to help clients reimagine client experiences. In 2024, we expanded the breadth and depth of our global alliances' ecosystem and we added two strategic acquisitions to our portfolio, Thirdera and Belcan. Thirdera made us one of ServiceNow's largest partners, and in the first quarter of 2025, ServiceNow elevated us to globally lead status, the highest level of partnership recognition within their ecosystem. Belcan significantly strengthens our opportunity in the $190 billion ER&D market. We believe our integration is on track. We recently completed Phase 1 of the integration focused on commercial integration for clients outside of aerospace and defense. And in the fourth quarter, we signed a multi-year deal valued at several hundred million dollars with an aerospace client. Finally, one last note about our efforts to accelerate revenue. Our NPS client satisfaction scores improved to a historic high in 2024. Turning to our second strategic priority of becoming an employer of choice. Developing and strengthening our associates is key to our future. We drove AI reskilling at scale, sustained high employee engagement scores, and maintained low voluntary attrition. I'm also pleased to share we have 13,000 current employees who have returned to Cognizant. These metrics combined with our rising NPS scores are evidence of the high correlation between happy employees and happy clients. Our grassroots innovation initiative, BlueBolt, continues to generate tangible ideas for clients. Our associates doubled the number of ideas in 2024, submitting nearly 240,000 of which 47,000 were implemented by clients. Our Synapse program equipped more than 400,000 people with skills for future work opportunities, well on our way to a goal of 1 million workers. Our work in 2024 earned prestigious recognition, including Forbes World's Best Employers, Newsweek's America's Most Reliable Companies, and ranking number seven on Fortune's Change the World list. Turning to our third strategic priority, we took several steps during the year to simplify and modernize our operations. For example, completing our NextGen cost program helped drive sequential adjusted operating margin performance throughout the year, while supporting our growth investments. We optimized and diversified our infrastructure in part by directing our India expansion into smaller cities in India. You have heard me call AI a double engine of transformation because it offers Cognizant the opportunity to accelerate our own progress as much as it does for clients. We are rapidly applying AI across the organization to strengthen our operating agility, while at the same time quickly sharing our learnings with clients. We have identified more than 200 internal AI use cases, applying AI across three major dimensions: associate experience and productivity; enabling business operations; and to improve our technology and security landscape. These will remain important priorities in 2025. Now let me turn to some highlights from the quarter. We finished the year on a strong note with accelerating momentum as we delivered another quarter of improved year-over-year organic revenue growth and expanded our adjusted operating margin sequentially ahead of our expectations. Revenue was $5.1 billion, up 6.7% year-over-year in constant currency. Performance included the contribution of Belcan and improved organic growth, driven again by our two largest segments, Health Sciences and Financial Services. Organic revenue growth was fueled by recently won deals and improved discretionary spending primarily in financial services. We signed 10 large deals in Q4, up from seven a year ago, reflecting strong momentum across service lines and industries, including digital engineering, financial services, and cloud services. This brought our large deal total to 29 in 2024 compared to 17 in 2023. Health Sciences led with over 10% revenue growth. This included continued strength in TriZetto, our differentiated software platform that is used to process about two-thirds of US healthcare claims. As a recent example, we entered an agreement in 2024 to enhance healthcare operations for Blue Shield of California with our TriZetto Facets platform as a service solution. Our Financial Services segment delivered another quarter of year-over-year growth, supported by increased demand for cloud, data, and modernization services. Adjusted operating margin improved sequentially to 15.7%, driving full-year performance that exceeded our expectations while we continue to make investments in AI and M&A. Taking a step back, we believe our expanding Gen AI capabilities are gaining momentum in the marketplace. For example, we now have over 1,200 early Gen AI engagements compared to 1,000 at the end of the third quarter. We see demand for AI services expanding across industries as use cases proliferate. This includes productive analytics for patient outcomes, drug discovery, and virtual health assistance in healthcare, credit scoring and analysis, customer service automation, and fraud detection in financial services, productive maintenance, quality control, and supply-chain optimization in manufacturing, content personalization, and targeted advertising in media, just to name a few. Another great application of our AI capabilities is Stores 360, recently launched for the retail industry with our strategic partner ServiceNow. Stores 360 aims to help retailers streamline store operations, enhance employee productivity, and improve their customer experience with integrated, automated, and predictive Gen AI capabilities. We are already seeing early interest and excitement. We also signed a five-year agreement with Toyota during the quarter to infuse Gen AI across its software development cycles by leveraging hyper-automation AI and process reengineering. It is a great example of proactive solutioning, allowing us to deliver significant productivity for the customer that can be redeployed to cover new services under an extended contract tenure. And we renewed our strategic partnership with McDonald's to streamline operations and support its delivery of exceptional customer experiences. Our multi-year agreement aims to transform McDonald's legacy infrastructure into modern cloud-based systems using our Neuro IT operations and Skygrade platforms to improve system observability, reliability, and agility. Lastly, we expanded our partnership with Gilead Sciences. Our collaboration will engage our expertise in machine learning and Gen AI with an agentic framework to improve productivity and generate cost savings. Our new agreement accelerates Gilead's digital transformation, allowing Gilead to focus on its core mission of discovering and delivering critical medicines. And we are also seeing traction with global capability centers or GCCs. Earlier this year, we were notified that we won a new strategic partnership with a leading insurance provider to establish the GCC in India. We will work to enhance their operational efficiency, accelerate digital transformation, and expand their global talent footprint, leveraging our deep expertise in building and scaling GCCs. This partnership reinforces our position as a trusted transformation partner and marks a significant milestone in our continued growth in the GCC space. These are just a few recent examples illustrating how our innovative solutions and strategic partnerships powered by cutting-edge technologies are delivering significant value to our clients in addition to helping accelerate our commercial momentum. As we think about AI-enabled enterprise landscapes, I'm very excited about the role Cognizant can play in reimagining businesses, reshaping operating models, co-creating new products and services, and redefining work, workforces, and the workplaces of our clients. The recent advances in democratizing foundation models are efficiently diffusing value to the front end of the AI value chain. We can play a big role for our clients in unlocking newer efficiency and innovation value levers and we think it will be a force multiplier. We believe our industry domain strength in the intersection of design, deep engineering, and operations will allow us to stay differentiated and be a front-runner as we see a proliferation of AI-led services. We see the AI-enabled opportunity playing out in three distinct vectors with the first already here. First, the most mainstream use case of AI is tech for tech for its application in software development cycles with the help of code assist platforms. We have our own developer workbench on the Flowsource platform. In the fourth quarter, we estimated that 20% of our code accepted by developers was generated by AI, allowing us to do more for less and unleash a wave of hyper-productivity. Our belief is with this level of hyper-productivity, there will be an opportunity for partners like us to help clients unlock the estimated trillions of dollars of technical debt, find viable ways to modernize legacy systems and applications, automate infrastructure and operations, and eliminate the backlog of workloads. The Vector 2 opportunity will be about modernizing the data and cloud foundation for integrating AI into enterprise landscapes. We believe this opportunity will require building last mile infrastructure related to domain-specific cognitive and reasoning frameworks, explainability and traceability, agentification, and multi-agent orchestration and platforms. It also involves ensuring that AI's use is ethical and responsible and the output is optimized for accuracy and costs. Our belief is that this process of agentification will drive significant innovation cycles, leading to new AI-enabled products and services work that is being advanced by our AI labs. Finally, Vector 3 is about untapped and newer service pools that we believe will be unlocked by agentification. Our view is that, software may no longer be mainly a tool for organizing work, but can become the worker itself, capable of understanding, executing, and improving services traditionally delivered by humans. We expect the most transformative applications of AI will be those that collaborate with human teams with the potential to unlock new and previously unimaginable categories of work. We see a future where a system of agents can inject autonomous capabilities to our clients' expansive business operations budgets rather than their technology budgets alone. Early use case opportunities for many of our clients are to agentify horizontal business functions like sales and marketing, human resources functions, and customer service, as well as vertical functions like clinical operations, retail operations, and connected care to name a few. I will close by saying our 2024 accomplishments have strengthened Cognizant operationally and strategically by broadening our portfolio while increasing our agility. We believe we are now transitioning from a phase of stabilization to a phase of growth. Our early investments in AI, practical tooling, thought leadership, and unique capabilities at the intersection of design, tech-led engineering, and operations gives us confidence that we have the right to win in this dynamically changing IT services market. We believe we are well-positioned to capitalize on the growth opportunities ahead and confident that our strategic focus will help us deliver improved revenue growth to get us back to the winner's circle and gradual margin expansion over time. Before I turn to Jatin to review our financials in greater depth, I would like to thank our clients and partners for their trust and our associates worldwide for their steadfast dedication and daily drive to deliver. We look forward to updating you in more detail at our March 25th Investor Day in New York. With that, I'll turn the call over to Jatin.

Thank you, Ravi, and thank you all for joining us. Our fourth quarter results underscore the progress we have made against our strategic priorities to improve commercial momentum and enhance operational excellence. Fourth quarter revenue of $5.1 billion grew 6.7% year-over-year in constant currency at the high end of our guidance range. Organic revenue growth was driven by Health Sciences, which grew more than 10% year-over-year, and financial services, which grew approximately 3%. Our acquisitions of Thirdera and Belcan have supported our entry into new end markets with attractive long-term growth profiles. Fourth quarter revenue included approximately 450 basis points of year-over-year growth from these acquisitions. For the full year, revenue of $19.7 billion increased 1.9% year-over-year in constant currency and included approximately 200 basis points of growth from Thirdera and Belcan. We were very pleased with our fourth quarter adjusted operating margin of 15.7%. This performance driven by completion of our NextGen program and our rigorous actions to strengthen operations drove full year adjusted operating margin of 15.3%. This was 20 basis points ahead of our guidance. This also represents 20 basis points of margin expansion year-over-year, net of significant investments we have made to accelerate growth, such as Belcan and our AI platforms. Now let's turn to the details of the quarter. By segment, Health Sciences saw broad-based strength across payer, provider, and life sciences end markets. Clients continue to prioritize cost optimization, cloud migration, and legacy modernization projects, which are helping to more than offset the muted discretionary spending environment. Within financial services, growth was balanced with positive trends across capital markets, cards and payments, fintech, and commercial banking clients. We saw a further albeit gradual pickup in discretionary spending. In North America, we are seeing an improved pipeline of opportunities for transformation and modernization projects across both insurance and select areas of banking and financial services clients. In addition, we have continued to see healthy growth in Canada, driven by the recent new bookings. Products & Resources or P&R growth was driven by Belcan. As we noted last quarter, the segment has been pressured by cautious discretionary environment across end markets. This includes automotive, aerospace, manufacturing, and logistics, among others. We signed three large deals in this segment in the fourth quarter. Despite the near-term pressure, we are excited about the opportunities we see across P&R, where the convergence of information technology and operational technology is rapidly accelerating. Communication, media, and technology performance was consistent with last quarter as clients remain focused on cost optimization and discretionary spending budgets have been pressured. From a geographic perspective, growth was led by North America, which increased more than 8% year-over-year. Health Sciences, Belcan, and banking and financial services all supported the growth. Europe grew by about 1% year-over-year. By segment, strength in Health Sciences and Financial Services were offset by softness in products and resources. Lastly, the rest of the world increased about 4% year-over-year. This reflected solid growth across most segments. Now turning to bookings. Fourth quarter bookings increased 11% year-over-year, driven by large deals. On a trailing 12-month basis, bookings grew 3% year-over-year and represented a 1.4 times book-to-bill. Trends in smaller deals improved, which supported a low-to-mid-single-digit increase in our trailing 12 month annual contract value, both sequentially and year-over-year. Turning to expenses, quarter four marked the end of the NextGen program and we incurred about $49 million of costs related to the program in the quarter. Excluding the impact of these costs, adjusted operating margin was 15.7%, significantly above our expectations. Year-over-year, margin declined by 40 basis points, primarily reflecting the impact of Belcan and increased compensation costs. This was partially offset by savings from NextGen, high utilization, and favorable currency exchange rates. We are pleased to be exiting the year with an improved cost base and more resilient operating model. Now moving to cash flow and capital allocation. Fourth quarter free cash flow was $837 million. This brought full year free cash flow to $1.8 billion or 82% of our net income. This is in line with our guidance. As a reminder, free cash flow was negatively impacted by the previously disclosed impact from a $360 million payment made to Indian tax authorities in relation to our ongoing dispute of a 2016 tax matter. We ended the year with cash and short-term investments of $2.2 billion or net cash of $1.3 billion. DSO of 78 days decreased by three days from third quarter and increased by one day versus the prior year. For the full year, we returned $1.2 billion of capital to shareholders through share repurchases and dividends, including $300 million in the fourth quarter and we invested $1.6 billion into strategic acquisitions. Turning to our forward outlook now. Before I start, I would like to reiterate that our strategy is built around driving long-term EPS growth through revenue growth and modest operating margin expansion, which we believe will support enduring shareholder value creation. For the first quarter of 2025, we expect revenue to grow 5.6% to 7.1% year-over-year or 6.5% to 8% in constant currency. Sequentially, this represents a range of negative 0.5% to positive 1% growth on a constant currency basis. For the full year 2025, we expect revenue to increase 2.6% to 5.1% or 3.5% to 6% in constant currency. Details of revenue in dollars are available in our press release and supplement. We expect Belcan will contribute a little more than 250 basis points of growth in 2025, with a greater contribution in the first half of the year compared with the second half. As a reminder, we closed the acquisition of Belcan at the end of August 2024 and it contributed approximately $300 million to our 2024 revenue. For the full year, we expect adjusted operating margins will be 15.5% to 15.7%. This represents 20 to 40 basis points of expansion of our strong performance in 2024. Over time, we expect our growing adoption of automation and AI to drive better productivity and higher margins. We remind you that in the first quarter, seasonality typically drives a modest sequential margin decline. We expect our full year adjusted tax rate to be between 24% and 25%. Some of you may have noticed that we are no longer providing net interest income guidance. We made this change to align our guidance metrics more closely with the industry. For the full year, we expect our net interest income will decline modestly given lower cash balances exiting the year. This leads to full year 2025 earnings per share guidance of $4.90 to $5.06. This represents 3% to 7% growth compared to our 2024 adjusted EPS. This growth includes more than 2 percentage points of expected headwind from unfavorable foreign currency exchange rates impacting reported revenue and other below-the-line items, including slightly higher tax rates. For the full year, we expect free cash flow will represent more than 90% of the net income. In 2025, we do not expect material changes to our capital allocation strategy. We plan to balance the return of capital to shareholders with inorganic growth investments that strengthen our capabilities and support our growth ambition. For the full year, we expect to return approximately $1.2 billion to shareholders, including about $600 million in share repurchases and the remainder towards our regular quarterly dividends. We expect a weighted average dilutive share count of about $493 million for 2025. And during the year, we plan to repay the $300 million outstanding under our credit facility.

Thank you. We'll now start the question-and-answer session. Our first question comes from Bryan Bergin with TD Cowen. Please go ahead with your question.

Hi, good afternoon. Thank you. I want to start with bookings here. So you're excited with building momentum on the larger deal front. Do you feel like you're reaching a rhythm now where you'll have more consistent quarterly bookings performance? Ravi, maybe talk about go-to-market and just a large deal edging now versus where you've been as you've gone through 2024?

Yes, thank you for that question. Yes, I mean we've got some phenomenal momentum on large deals. We did 29 of them, $100 million plus in 2024 versus 17 in 2023. So, there are multiple things which I believe are going to help us in 2025. First, we have a tail velocity of deal-making. Second, we have a book-to-bill now of 1.4%. The third, I would say is the small deals are starting to come back. So we are excited about it because it has monetization in the same year. In fact, our ACV numbers, we track that internally are higher than before, which gives me, again, great confidence that it's a combination of ACV and TCV. We also do a bid versus bid inside the company and we are looking pretty good. On the deals we signed in 2024, the deals we signed in 2023, we are executing to a pretty good track. So, I would say we are now in a rhythm. We are accessing the deals well. Our win rates are significantly higher. It's a spread, in fact, over the two years, we have moved from application services to infrastructure services to now engineering services, which is a combination of the organic engineering strength we had and the stuff we got from Belcan. We also got a breadth of the industries from healthcare to financial services to products and resources to now progressively moving from Americas to other parts of the world. So, this is a great rhythm for us, good tail velocity to getting into 2025 and it is a very good spread. So, it is resilient and sustainable for the future.

Okay. That's good to hear. And then a follow-up on just the growth outlook as you built the plan here, the organic growth plan for 2025, can you comment on potentially how some of these industries unfold relative to what you saw in 2024 as it relates to healthcare versus financial solutions versus a P&R and commuter tech?

Our growth is now very broad-based and robust. In healthcare, we've achieved a 10% year-over-year growth, which is impressive given our solid foundation. The growth spans payers, providers, and life sciences. In financial services, we've established a consistent rhythm of year-over-year growth since last year. We're excited to see discretionary spending returning in financial services, and we're effectively capturing that. Our strengthened capabilities in communications and technology, developed over the past two years, are performing well. Retail and consumer goods are also doing well, and we have made significant strides in manufacturing due to our Belcan capabilities. Overall, we're experiencing comprehensive organic growth. While the Americas is a key market leading our initiatives, international markets are beginning to play a significant role in this growth. Our first-quarter guidance is strong, especially considering that this quarter usually sees seasonal weakness. The midpoint of our guidance range remains positive, driven by momentum from the previous quarter and the ongoing growth momentum.

Our next question is from Jason Kupferberg with Bank of America. Please proceed with your question.

Good morning, guys or good afternoon, I should say. Thanks for taking the question. I wanted to just start on the organic growth for the year. It looks like we're targeting 1% to 3.5% organic constant currency. The midpoint of that, I guess, would be pretty consistent with how you exited 2024 on the same basis. So I'm just wondering, in terms of acceleration, it sounds like there's more discretionary spending going on and you have some bookings momentum exiting the year. So, it doesn't seem like we've built much acceleration into the guide on an underlying basis, but is that just conservatism, or are there other considerations there?

Yes, it's the beginning of the year, and we will gain clearer visibility into the second half over the next few weeks. We hope to see continued positivity in the second half, which would make reaching the upper end of our range feasible. I've structured my outlook by considering the momentum from the first half of the year, which aligns with the middle of our guidance range. We're optimistic about maintaining our current positive momentum, especially as discretionary spending begins to recover. As our visibility improves, we will strive to outperform expectations. In the past four quarters, we reached the upper end of our guidance range consistently, including the most recent quarter. Overall, I am feeling more hopeful about the future compared to where we were a quarter ago.

Okay. That's very helpful. And I know you touched on agentic AI earlier. Wondering if clients are starting to talk more about it? And what's Cognizant doing to invest to prepare for that opportunity? And then just any views on how DeepSeek could ultimately impact the IT services industry? Thank you.

Yes, I spoke in detail a few minutes ago. I see this in three areas. The first area is writing code. I strongly believe that using machines to assist humans in writing code will lead to increased productivity. We will address billions of dollars in legacy technology challenges in corporate environments, and we are witnessing this in our current deals. One of the reasons we are securing large contracts is that productivity is a key component, and our early investments are paying off because the productivity expectations among providers differ significantly. We have completed over 29 plus 17 deals in the last two years, largely driven by AI-led productivity improvements. We are enthusiastic about the efficiency this brings. The second area is innovation and growth. Our clients are beginning to invest in us. We currently have 1,200 projects in progress, focusing on substantial cloud migrations, data modernization, and last-mile infrastructure. We provide platforms to assist our clients, which enhances our retention and speeds up their journey, making the transition to agentification more predictable. We actually have our own agentification platform that serves as an orchestration layer. If you have existing software with agents, this can connect those software pools. If you lack an agentification layer, it can function as one. We believe we are significantly ahead of most competitors, and this represents a tremendous opportunity. Additionally, we are unlocking new areas of spending that we hadn't previously addressed, such as connected care, retail operations, and drug discovery. Now, we are identifying opportunities that extend beyond just the CIO, reaching across all business operations. This means the potential work available to us has multiplied compared to what it was before, giving me confidence that this is a significant advantage for companies like ours. Regarding DeepSeek, it has effectively democratized and commoditized a backend layer, specifically foundation models. Consequently, a significant amount of investment will flow towards the frontend, expediting the adoption of AI within enterprise environments. As this occurs, we will be heavily engaged in supporting our clients. The DeepSeek opportunity marks a pivotal moment in transferring value from the backend to the frontend.

Thank you, Ravi.

Thank you. Our next question is from Surinder Thind with Jefferies. Please proceed with your question.

Thank you, Ravi, just kind of building up on the last part, if you think about the proprietary solutions that you're building within the AI landscape and all of the changing demand, can you provide a bit more color there in terms of the sustainability of those types of solutions that you're building? Or is this one of those things where, as you go to a client, you build a solution and then somebody follows you really quickly? I just wanted to better understand that the shifting model of, before it was all about services, but now we're injecting what sounds like a bit more of a software there into the solution itself, and if that's sustainable?

Thank you, Surinder. At the London Conference, I began discussing our progress, and we've made significant strides since then. The software layer we've developed, which I refer to as fast software, provides essential tools for our clients to accelerate their progress, bridge gaps, or create micro industry vertical templates that existing software lacks. This approach is reminiscent of how enterprise software was developed in the past and illustrates how technological advancements have altered the role of system integrators. Ultimately, this is beneficial for our clients. For instance, our platform Flowsource acts as an orchestration layer over code assist platforms like GitHub. We created this layer because we recognized the need for a developer workbench that can synchronize the efforts of machine-written code and human-written code to enhance productivity. While some existing platforms may eventually replicate this functionality, by that time, we will be tackling more complex challenges. The gaps we face today will persist, and it will be the responsibility of system integrators to address those, with some eventually becoming products. As these solutions are productized, we will shift our focus to new problem-solving initiatives. There is a necessary balance between output efficiency and cost efficiency to make AI enterprise-grade. Some optimizations will occur automatically through software, while others will not. Therefore, the role of system integrators is continuously evolving. The heavy lifting will persist, but I'm exploring further into new service pools that we haven't previously engaged. For example, in the sales and marketing function, we typically deal with structured data in existing software. However, if we tap into unstructured data during the sales cycle—such as chat messages, emails, and meeting minutes from salespeople—we can gauge a company's sales momentum, converting that data into value. This represents a previously untapped labor pool where either the work wasn't captured or new tasks remain unaddressed. I see this as a significant opportunity for companies, not just in terms of technology spending but also in operations where we can identify and establish service pools. We believe our expertise in deep engineering, operations, and industry knowledge positions us well to exploit this opportunity. This is no longer a theoretical concept; we are actively implementing real-life projects for our clients, and I've shared some examples in my earlier remarks.

That's helpful. Looking ahead, considering the large deals you've signed, the ramp, and the managed services wins, is that where we should expect most of the growth to come from in 2025 while we anticipate an improvement in discretionary spending on the consulting side? How should we view the two segments and the extent of integration between consulting and managed services in relation to the large deals?

Yes. I believe the nature of the work is shifting a bit between 2024 and 2025. In 2024, the growth was primarily driven by large deals and the associated volumes. However, as we move into 2025, particularly after the fourth quarter, we have noticed some improvement in annual contract value, indicating that we are starting to see a return of discretionary spending. Consequently, the growth in 2025 will feature a mix of short-term projects along with the volumes generated from large contracts and deals.

Especially in financial services where there is more discretionary. In fact, Surinder, I just mentioned earlier that our ACV numbers have significantly jumped in quarter four, which is an indication of not just large deals, but also smaller deals coming back.

Thank you. Our next question is from Jonathan Lee with Guggenheim Securities. Please proceed with your question.

Great. Thanks for taking our questions. Tremendous to see the margin outperformance here, can you unpack what drove that, especially with softer utilization and perhaps some benefits? And what incremental levers could you see into calendar 2025?

Sure. While the utilization appears lower in the fourth quarter, we are executing effectively on the ground. This situation somewhat underrepresents the operational improvements we have achieved over the past year. One major factor contributing to this is also evident in our gross margin performance. We have definitely seen a boost in profitability from our NextGen program, which is another significant contributor to our overall performance in 2024, particularly for the fourth quarter.

Overall, our operational rigor has significantly improved in the last two years, and we have room for growth. We are continuously refining our processes, enhancing productivity through AI, and sharing those benefits with our clients while ensuring some accrues to us. Our NextGen program, which we initiated in 2023, is already showing positive results that will carry into 2024 and 2025, and we are very excited about that. The large deals we planned for have not only met expectations but have also contributed to margin growth. We have executed these large deals exceptionally well and are very pleased with our margin results and the potential for 2025. Additionally, we have engaged in mergers and acquisitions, accepting the margin dilution as we heavily invest in AI. We are committed to contributing to margin growth and finding ways to expand while continuing our investments to stay ahead of our competitors.

Thanks for that detail there. And to support your growth in 2025, can you talk through how you're thinking about pace of hiring and perhaps geographic mix of talent base given Belcan as a new dynamic there?

Sure. So we continue to hire as we need for our growth and certainly, it's a cycle that you will see panning out in 2025 also. Probably from Q1 and onwards, you should start seeing the addition of headcount versus what you've seen in previous few quarters. Overall, we are well-placed in every geography from availability of talent from a bench standpoint as well as our capacity to hire as we need in each of the geographies. So, we feel quite good as we enter 2025 from a supply equation standpoint.

Our next question is from James Faucette with Morgan Stanley. Please proceed with your question.

Thanks. I appreciate all the detail and color here today. I just wanted to ask a quick follow-up question on Belcan. I think if I heard you correctly that you expect that it will contribute roughly 200 basis points in 2025. Does that include both the inorganic and the organic period after August? And I guess as part of that in your growth assumptions, are you building in any other inorganic contribution from maybe deals that haven't been announced or closed yet?

Yes, sure. The 250 basis points I mentioned in my opening remarks is mainly for the additional eight months of revenue we expect from Belcan in 2025. We have not included any additional inorganic contributions in that 250 basis points.

That's great. Thank you for that clarification. I'm pleased to see that your messaging has been very clear, and we've noticed a consistent improvement, particularly with discretionary spending. It's encouraging to hear that large deals are also on the rise as we approach the end of the year. I realize it may be early in the budgeting processes for a definitive outlook, but have you observed any budget flush engagements or bookings similar to what you've seen in previous years? What's your early assessment of growth for most budgets? It seems quite positive, but is that a universal trend? Thank you.

Yes. The mood is very favorable for business. People are anticipating upcoming regulations, creating a pro-business environment. The uncertainty around us is beginning to settle, resulting in less global uncertainty, which will likely benefit innovation and discretionary work. In financial services, I'm very satisfied with our position, as this is where most discretionary discussions are occurring. We are pleased with our progress and how we are capitalizing on new opportunities. Clients are asking us to assist in establishing global capability centers, leveraging our strengths in setting up ID shops for clients in a build-operate-transfer model. There are numerous opportunities to explore. With the rise of AI in enterprises, the focus on data and cloud migration is reigniting that journey. The significant work required for data modernization and cloud migration presents a unique opportunity for us. We have transformed as a company over the past two years. We now have a diverse landscape of services, ranging from experience application services, BPO operations to engineering, and we have expanded into multiple verticals beyond just financial services and healthcare. I am optimistic about our growth compared to where we were a year ago or even a quarter ago.

That's great color. Appreciate that, Ravi.

Thank you. Our next question is from Tien-Tsin Huang with J.P. Morgan. Please proceed with your question.

Hi, thanks so much. Just to build on James' question, you mentioned the GCCs here, Ravi. Can you expand on what that means for Cognizant in general, if that is a new theme that you see emerging? And does this change the balance of trade between in-sourcing and outsourcing? Just trying to understand how to read into that and how Cognizant is going to see that. Thank you.

Cognizant has a significant role in various aspects of the GCCs, with one-third of the tech professional services in offshoring locations like India coming from these centers. They are direct buyers of services, which is important. Many companies lack access to this particular labor market, so our strong presence in India allows us to assist them in building, operating, and ultimately transferring services. For instance, last year I signed a public deal for a build, operate, transform, and transfer project, where we established the system, managed it, integrated AI tools, and then handed it over. We will also support them with AI resources over the next few years. Additionally, we offer micro-services that allow companies to focus on their core activities while we handle non-core functions. Many companies are reorganizing their technology and business process operations, with operations increasingly being offshored or nearshored, presenting new spending opportunities. Regarding engineering, companies, such as automotive firms, may outsource HR and CRM software but will likely want to retain control over core engineering processes like the software that runs their vehicles. We can provide robust engineering support to help them build their own core capabilities. We have several opportunities in progress, including a recent collaboration with an insurer that we are excited about.

Yes. That's really interesting and thoughtful. Always appreciate your comments. Just have to ask you, Ravi, as you're talking to clients and you've talked about a lot of themes here, how would you characterize just overall budget and client decision-making with all this news flow that's happening? You got tariffs and immigration and tax, all this stuff, how would you characterize that?

Yes, technology is a fascinating area. When everything is expanding, technology helps drive that growth, and during uncertain times, it can enhance efficiency. This means you can gain advantages in both scenarios with technology. I've observed this in different contexts. As a company, we are flexible enough to focus on both aspects. In a weak market, efficient operations become crucial, while a strong market demands innovation. I believe AI can cater to both needs. That's why I've identified this opportunity across those three dimensions, as I see potential on both fronts, making it quite exciting. The visibility of budgets is significantly improved compared to last year. While it's not fully operational yet, we're in a far better position than we were last year, and I expect to see more developments as the year progresses.

Thank you so much. Always appreciate it.

Thank you. Our next question is from Jim Schneider with Goldman Sachs. Please proceed with your question.

Hi, thanks for taking my question. This is [indiscernible] standing in for Jim Schneider. I would like to know your thoughts on the differences in consumer behavior between the UK and Continental Europe. Is this change influenced more by geopolitical factors, or do you believe it is a result of competition among industries like banking and industrial? Thank you.

Yes. Continental Europe still presents unique first-time outsourcing opportunities, which involve not just offshoring but also other forms of outsourcing. In fact, Continental Europe has one of the highest numbers of Global Capability Centers. This opportunity is at a very different stage of evolution compared to the US and the UK. Some industries are quite advanced, while others are just beginning to explore these options. The UK is a more mature market for us; we have a significant presence in financial services, public sector, consumer, and communications there. Therefore, the UK is ahead in terms of outsourcing, offshoring, and efficiency cycles. However, in Continental Europe, if we continue to make the right investments—something we have been doing for the past two years—we can unlock much more potential than before. Our business volume from Europe and Asia-Pacific remains significantly lower than that from the US when compared to our peers. This indicates a substantial opportunity for us to expand and become more competitive in those regions.

I just want to add a point on UK versus Europe. I think UK has really started to show a lot of momentum in the second half of 2024 than what we saw before. The current quarter, there is a delta between UK and Europe and that's more led by a fact that one of our CMT customers renewed a contract in US versus UK, so there is some movement of revenue between geographies, but otherwise, we continue to see good momentum in UK.

Thank you.

Thank you. This concludes our question-and-answer session. I would now like to hand the floor back over to management for any closing comments.

All right. Great. Well, thank you all for joining us tonight, and we look forward to talking to you next quarter.

Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.