Ladies and gentlemen, welcome to the Cognizant Technology Solutions First Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. I would now like to turn the conference over to Mr. Tyler Scott, Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. By now, you should have received a copy of the earnings release and the investor supplement for the company's first quarter 2025 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 the call today, we will reference certain non-GAAP financial measures that we believe provide useful information for our investors. Reconciliation of non-GAAP financial measures where appropriate to the corresponding GAAP measures can be found on 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 quarter one 2025 earnings call. We started the year strong, delivering revenue growth and adjusted operating margin ahead of our expectations. Our performance reflects the breadth and the strength of the portfolio we have built in recent years, along with continued sharp focus on our strategy and disciplined operational rigor. We are building a resilient and durable company, one that thrives in both slow and high-velocity markets as we can pursue the right opportunities to our clients as they navigate complex and uncertain times. Let me provide a brief summary of the key drivers of quarter one results. Then I'll update you on the current operating environment and our strategic progress. First quarter revenue grew by 8.2% year-over-year in constant currency to $5.1 billion. Growth was driven by our Belcan acquisition and organic growth in Health Sciences and Financial Services. Organically, constant currency revenue growth accelerated to 4% year-over-year compared to 2% in the fourth quarter. Importantly, I'm pleased to say our quarter one results puts us squarely in the winner’s circle, an ambition we articulated last month at our Investor Day. While we are encouraged by our progress, it's consistency and sustained momentum that will define winning performance. Looking more closely at our revenue. Health Sciences led the way, up over 11% year-over-year in constant currency. Growth was again broad-based across payer, provider and life sciences, as recently won large deals more than offset discretionary spending pressures. Our Financial Services segment grew for the third consecutive quarter, up 6.5% year-over-year in constant currency, and acceleration from the fourth quarter. We saw healthy discretionary spending as clients continue to invest in cloud and data modernization and in building foundations for AI-led innovation. On a trailing 12-month basis, bookings grew 3% over the prior year, providing a healthy backlog to support our outlook for this year. We had four large deals in the first quarter, including a mega deal valued at more than $500 million TCV from large deals was up mid-single-digits year-over-year. Adjusted operating margin of 15.5% improved by 40 basis points year-over-year, putting us on track to achieve our full year guidance of 20 to 40 basis points of expansion. Voluntary attrition ticked down 10 basis points and headcount remained nearly flat from last quarter. Adjusted EPS grew 10% year-over-year, our sixth consecutive quarter of year-over-year growth. We are pleased with our strong first quarter performance. But as you know, the macro environment changed sharply in early April and continues to evolve in real time. As our clients navigate this period of elevated uncertainty, they're partnering with us to re-baseline the cost of technology deployment. And we continue to see opportunities related to productivity, efficiency and cost takeout. The capabilities we have built around productivity, including our AI platform investments puts us in a strong position to win in this environment. In fact, several recent large deals were driven by clients' desires for efficiency and savings and the pipeline for these opportunities remains strong. Additionally, the steps we have taken in recent years aimed at developing leadership and talent, strengthening our operational discipline, rebooting our innovation engine have reinvigorated the company, positioning us ahead of the curve while building resilience and durability. As we highlighted at our Investor Day, we're investing heavily in AI-powered software-led engineering at the intersection of digital and physical worlds, making products intelligent, connected and autonomous. We are now integrating all our existing expertise in embedded software and IoT with recently acquired capabilities from our M&A in autonomous technologies, chip to cloud engineering and Belcan in the aerospace industry into a world-class engineering capability for our clients. The future of IT services will be powered by the double-engine transformation of AI technologies, both for hyper productivity and innovation-led opportunities. Consistent with our heritage, we sense these opportunities early, and we've been investing in building these capabilities, training, partnerships and platforms at a pace we believe has been ahead of our peers since 2023. The scaling laws of AI continue to accelerate computing efficiency, cost reductions and accessibility, unlocking use cases at a rapid pace and making the outputs more accurate and cheaper. Looking across Cognizant, we now have approximately 1,400 early GenAI engagements compared to 1,200 at the end of the fourth quarter. As I've noted in prior discussions, we see the development of AI playing out in three distinct vectors. In the near term, we see Vector 1, which is focused on AI-led productivity as an opportunity for enterprises to address the estimated $2 trillion of technical debt on their balance sheets. In quarter one, AI-written code increased to more than 20% for us and is a pioneering opportunity for our developer communities. Sharing this AI-led hyper productivity has been among the key differentiators for us in originating large deals led by productivity and lowering technology deployment costs. Vector 2 involves industrializing AI. We believe every company needs unique plumbing to successfully adopt AI by localizing, customizing and integrating AI into enterprise technology landscapes. In addition to our efforts with hyperscaler partners like Microsoft, AWS and Google and enterprise software providers like ServiceNow and Salesforce, among others, in the first quarter, we deepened our partnership with NVIDIA. Our work together will be aimed at accelerating the cross-industry adoption of AI technology in five key areas: enterprise AI agents, industry-specific large language models, digital twins for smart manufacturing, foundational infrastructure for AI and Cognizant's Neuro AI platform for integration of NVIDIA AI technology and orchestration across the enterprise technology stack. And thirdly, we expect the evolving Vector 3 opportunity of agentification will be the largest as it has the potential to unlock many new labor pools and to create a significant multiplier effect on total addressable spend. We are seeing early agentification experiments from our clients in financial services, retail and healthcare. To illustrate an example, working with Google LLM models, our teams have developed more than 20 agentic solutions addressing many of healthcare's most pressing challenges. Our work touches efficiency, customer experience, clinical decisioning and regulation. It spans across prior authorization, appeals and grievances, member portals, fraud and auto adjudication among other areas. In this space, we have secured pilot engagements and are focusing on transitioning them to scaled deployments. With the help of our AI labs, we are significantly strengthening our Neuro suite of platforms, which allows our clients to embrace AI on an accelerated path. As an example, just recently, we achieved a groundbreaking milestone in LLM uncertainty estimation. This patent-pending technology allows us to set uncertainty thresholds on LLM outputs to manage hallucinations and on a case-by-case basis, fallback to rules-based code for human intervention, making multi-agent systems safer and more consistent. This work adds to our 50-plus existing patents in AI. Stepping back to look at GenAI over the long term, we see the market opportunities simultaneously powering both productivity and innovation, and the three AI vectors reinforcing one another. As I mentioned at the start of my comments, winning requires consistency. Our consistent execution on our strategic priorities over the past two years has driven our pivot from stabilization to growth, with our first quarter performance serving as a strong proof point. As we look ahead, we believe winning also demands industry depth, execution excellence and an evolution of how we operate. As we discussed at our Investor Day, we have evolved our three strategic imperatives to the following: amplifying talent, scaling innovation and accelerating growth. Let me share some recent client wins and business developments within the context of our strategic imperatives. First, with amplifying talent, we are strengthening our talent pipeline with skills needed for the AI era. As you heard us talk about during Investor Day, we are upskilling our workforce at scale, leveraging AI to meet demand faster and identifying talent pools to address new areas unlocked by AI. Last month, we announced plans to establish a 14-acre immersive learning center in Chennai, India, where we aim to train 100,000 individuals annually in advanced AI technologies. In India, we continue to expand into smaller cities. We expect to inaugurate the latest one, GIFT City, Ahmedabad, shortly. And over the last 18 months, our Synapse initiative has trained over 400,000 people across the world, putting us well on our way to a goal of training 1 million individuals. Second, we are scaling our innovation engine and expanding our domain expertise to drive transformation in key industries. For example, BlueBolt, our flagship grassroots innovation initiative is celebrating its two-year mark with over 385,000 ideas generated to date, of which 69,000 have been implemented with our clients. During the quarter with ServiceNow, we introduced an AI-powered solution tailored for mid-market banks that uses GenAI and smart automation to cut manual work, speed up resolutions and boost customer satisfaction. Earlier this month, we were honored to receive several awards at Google Cloud Next 2025, including Data and Analytics Global Partner of the Year for our work helping clients modernize their data ecosystems and Retail Industry Solutions Partner of the Year for our work developing a customer order management system leveraging AI for a top North American retailer. And during the quarter, we were named to Fortune's 2025 list of America's Most Innovative Companies for the third straight year. Finally, to accelerate growth, we are unlocking new opportunities by pairing our talent initiatives with bold innovation with a sharp focus on AI and embedded engineering. Let me share a few examples of our innovation in action. With pharmaceutical company Boehringer Ingelheim, we launched a cloud-based system called One Medicine Platform aimed at streamlining drug development and accelerating the delivery of innovative therapies by replacing over 20 legacy systems. In embedded engineering, we teamed with OMRON, a Japanese electrical equipment manufacturer, to engineer new products that integrate information technology and operational technology in manufacturing. We plan to take these solutions jointly to industrial and automotive clients with the goal of helping clients boost productivity, reduce operational losses and infuse AI-led insights. We also expanded our relationship with Manulife John Hancock Retirement. Our collaboration includes helping establish a new record-keeping system and enhancing their digital ecosystem, leveraging AI capabilities to simplify the retirement planning experience. Next, we continue to strengthen our global capability center, our GCC strategy. We are undertaking more engagements to support clients on the GCC journey, establishing new centers and equipping them with strategic AI tooling and platforms needed to drive operational strength. Just two weeks ago, we announced a new GCC with Citizens Financial that will be located on our Hyderabad campus. The GCC will serve as an innovation hub, enhancing Citizens’ enterprise technology, data and analytical capabilities. We will support the center with our Neuro and Flowsource AI platforms, delivering advanced services in cloud computing, data management and cybersecurity. As we discussed at our Investor Day, we view GCC as a growth opportunity for both clients and ourselves. Our differentiators in the GCC space include deep domain expertise in the industries we serve, our technology prowess and our capability strength in India and the United States. These partnerships reinforce our position as a trusted transformation partner and mark new growth opportunities. Finally, Belcan opened an aerospace and defense hub in Toulouse to better support global demand and local OEMs. I am also thrilled that Belcan was recently named GE Aerospace Supplier of the Year. In closing, amidst near-term uncertainty, we are proud of our strong all-around performance and momentum. We believe our early bets on AI combined with investments in practical tooling and distinctive strengths at the crossroads of design, technology-led engineering and operations positions us to lead in today's dynamic market. Employee and client metrics remain at a historic high and our operational rigor, cost discipline and the productivity-first mindset are helping expand our profitability while fueling continued investments into our future. We are confident in the portfolio we have built will drive sustained progress towards the growth targets we outlined at the Investor Day, including top-tier revenue growth, consistent margin expansion and the EPS growth outpacing revenue growth. And now I would like to turn the call over to Jatin.

Thank you, Ravi, and thank you all for joining us. We are pleased with our first quarter results, which demonstrate continued progress on our path to industry-leading growth. Despite an increasingly complex economic environment, we exceeded the high end of our revenue guidance range and expanded adjusted operating margin by 40 basis points year-over-year, driving adjusted EPS growth of 10%. Let's turn to the details of the quarter. First quarter revenue of $5.1 billion grew 8.2% year-over-year in constant currency, led by strong organic growth in Health Sciences and Financial Services. Revenue growth included approximately 400 basis points of inorganic contribution, primarily from Belcan. We did not see a significant impact on our business from the recent macroeconomic uncertainty during the first quarter. And we have not had any material customer cancellation during the quarter and through today. In April, we did begin to see some slowdown in client decision-making and discretionary spending. This has been more pronounced with select clients in certain segments, including health sciences and products and resources. We believe the impact has been isolated so far in the second quarter, and we are closely monitoring development for implications across our broader portfolio. On the positive side, demand in our Financial Services segment remains healthy. Despite the uncertainty, this environment is presenting opportunities as clients prioritize cost optimization, vendor consolidation and productivity to drive resiliency in their own business. We believe we are well positioned to capture this demand as clients seek end-to-end partners like Cognizant with capabilities that can help drive near-term cost savings while supporting their longer-term innovation and modernization agendas. Now, let me provide some color by segment. As Ravi mentioned, Health Sciences year-over-year growth was again broad-based. Our clients are carefully watching the potential impact from changes to government healthcare programs and are navigating rising costs. That said, our backlog remains healthy, and we believe we are well positioned long-term as a strategic partner to our clients as they navigate the near-term uncertainty. Financial Services has demonstrated resilience across capital markets, cards and payments, fintech and commercial banking clients, primarily in North America. Revenue accelerated from the fourth quarter, and we saw healthy discretionary spending. In Products and Resources, Q1 growth was driven by Belcan. Organically, the demand environment for this segment has been weak due to discretionary spending pressure. We see clients slowing their spending decisions and preparing for more direct impact from changes in tariff policies. We are building a pipeline of cost takeout and productivity-led deals to support our clients in moving forward in this environment. Communications, Media and Technology revenue was roughly flat sequentially as the discretionary demand here has been stable, but is not yet improving. That said, our pipeline for GenAI-led productivity and cost takeout deals remains healthy, and we are laser-focused on converting the pipeline to bookings. By geography, we saw year-over-year revenue growth in all regions, led by North America, which grew 10% year-over-year in constant currency, driven by Belcan and the ramp of large deals. We believe we are outperforming many of our peers on an organic basis and achieved top-tier revenue growth in the region in Q1. Europe grew 3% year-over-year in constant currency, driven by growth among life sciences and financial services clients, including UK public sector, which helped drive strong constant currency sequential growth of about 4% in the UK. We are encouraged by our momentum in Europe, which has been driven by new logos and a more focused sales strategy. The rest of the world increased about 7% year-over-year in constant currency. Growth was driven by recent large deals, particularly within communications, media and technology and financial services. Turning to bookings. First quarter bookings declined 7% year-over-year, driven by a decline in rest of the world region, which had $200 million plus deals in the prior year period. The mix of new and expansion bookings grew significantly year-over-year and represented more than 50% of our quarterly bookings. On a trailing 12-month basis, bookings grew 3% year-over-year to $26.7 billion and represented a 1.3x book-to-bill. Our pipeline continues to grow, particularly for large deals, and we have seen healthy demand in applications, AI and cybersecurity. Turning to margins. During the quarter, we sold an office complex in India for proceeds of $70 million and recorded a gain on transaction of $62 million. Excluding the positive impact of this transaction, adjusted operating margin was 15.5%. Year-over-year, margins improved by 40 basis points, primarily reflecting the net savings generated from our NextGen program and the benefit from the depreciation of the Indian rupee. This was partially offset by increased compensation costs. Utilization also increased to approximately 85%, driven by operational discipline. Now moving to cash flow and capital allocation. DSO of 81 days increased by three days from both the end of 2024 and the year-ago quarter, driven by business mix. This remains in line with the assumptions in our 2025 cash flow guidance. First quarter free cash flow was $393 million. This includes the $70 million from the sale of an office complex in India, which we plan to redeploy in India over the next several years, including for the development of a new 14-acre learning campus in Chennai that we announced earlier this month. During the quarter, we returned $364 million of capital to shareholders through share repurchases and dividends. In March, we repaid the $300 million outstanding under the credit facility, and we ended the quarter with cash and short-term investments of $2 billion or net cash of $1.4 billion. Now turning to our forward outlook. For the second quarter of 2025, we expect revenue to grow 5% to 6.5% year-over-year in constant currency. The remaining guidance items I will discuss are for the full year 2025. In 2025, we expect revenue to grow 3.5% to 6% in constant currency. Since we last gave guidance, we have seen certain foreign currencies strengthen considerably versus the US dollar. While our constant currency guidance is unchanged, our reported range has increased by approximately $200 million. As a reminder, our guidance is based on current foreign currency exchange rates. We continue to expect full year inorganic contribution of a little more than 250 basis points. The low-end of the revenue guidance assumes further deterioration in the demand environment. The midpoint incorporates the deterioration we have seen to date with offsets from pipeline conversion and the large deal TCV growth we saw in the first quarter. The high end assumes an improvement in the demand environment further supported by our large deals pipeline. As Ravi discussed, the dynamics are shifting in real time, and this guidance reflects the visibility we have today. Our adjusted operating margin guidance remains in the range of 15.5% to 15.7%, representing 20 to 40 basis points of expansion. Given the new realities of the macro environment, we expect growth opportunities will continue to be led by larger cost takeout and productivity-led bookings. Based on this dynamic, we now expect margin expansion will be driven primarily by cost discipline and SG&A operating leverage. That said, we remain focused on strengthening our operational rigor through AI-led efficiencies, pyramid optimization and automation to improve gross margin over the medium term. Our adjusted tax rate guidance is unchanged at 24% to 25%. Our EPS guidance of $4.98 to $5.14 compared to our prior range of $4.90 to $5.06, primarily reflecting the currency tailwind to revenue and a lower share count. This represents 5% to 8% growth. And we continue to expect free cash flow to represent more than 90% of net income. As we discussed at our Investor Day, we expect to return approximately $1.7 billion to shareholders in 2025, including $1.1 billion in share repurchases and $600 million in dividends. This reflects the incremental $500 million of share repurchases planned for this year that we announced on our Investor Day. We believe this strategy also gives us flexibility to pursue opportunistic M&A. Therefore, we now expect a weighted average diluted share count of about 491 million compared to 493 million previously. We expect to be active in the market repurchasing shares when our trading window opens. And we remain very confident in our long-term growth opportunities and our leadership team to consistently deliver on our strategy. With that, we will open the call for your questions.

And our first question comes from Tien-Tsin Huang with JPMorgan. Please go ahead with your question.

Thanks so much. Congrats on getting into the winner’s circle this quarter here so quickly. I wanted to ask about the bookings and pipeline, all the commentary that was really helpful. I'm just curious if there's any shift in the quality of bookings or growth projects being replaced by cost-cutting projects. It sounds like that's the case. Just not sure about the pacing of that and if maybe you'll see more awards come faster, for example, because of it? And any interesting trends on pricing and margin to win these larger deals?

Thank you, Tien-Tsin. This is Ravi. I’ll start and ask Jatin to add to this. We are clearly leading in productivity gains through AI and the benefits of lower deployment costs. Not only are we succeeding in the marketplace, but we are also generating new deals, which gives us the opportunity to solely source them. These are deals where we can consolidate if we have the trust and wallet share of our clients. This success is what makes our large deals stand out. In specific sectors like financial services, we are seeing a return of discretionary growth work. There was an expectation for financial services to experience a degree of deregulation that would increase discretionary spending, and that is indeed happening. For instance, in the first quarter of last year, we saw a year-on-year decline of 6.5% in financial services, whereas this year, we experienced 6.5% positive growth, all organic. This growth trend is already starting to take shape in the financial services sector, leading to more innovation-focused projects. The 1,400 AI projects I mentioned are beginning to show notable growth, particularly in financial services. In commercial healthcare, we are also witnessing significant innovation-led work from large enterprises. Furthermore, we recently announced a major deal, which we are thrilled about. In fact, the total contract value of our large deals exceeds that of last year. We have a few major deals in the pipeline for the second quarter, and I’m optimistic that finalizing these will support our growth trajectory. These are not just large deals, but mega deals valued at $500 million and above. Overall, we are feeling very encouraged by the promising pipeline of mega deals we have coming up.

I want to add to Ravi's remarks regarding pricing and margin expectations from large or mega deals. Your ability to secure these deals depends on three factors: the strength of your solution, your past execution on similar deals, and your ability to deliver productivity that aligns with the current environment and the potential of GenAI. We've consistently performed well in all three areas, so while pricing is a consideration, it's more about the quality of the solutions we provide and the level of AI-driven productivity we can incorporate. This has been a key factor. Although this can affect margins in the initial year, we now have a diverse portfolio. We have been involved in large deals for three years, and the ones we secured at the end of 2023 and the beginning of 2023 are performing at better margins than we anticipated. We manage this as a portfolio since the initial margins must be considered within the broader business context.

And if I may just add one other differentiator. The AI productivity, we are the only one, I mean in my peer group, which has actually called it out, and we are continuing to monitor it inside, and we are bold enough to tell our clients that this is productivity we can benefit with our client work. So, I mean that's an evolving flywheel, which we believe we are fiercely competitive in the market.

Thank you, both. That's interesting. Just as a quick follow-up. I think it's relevant just with the utilization moving up a little bit, just testing the productivity as well as the headcount question, is there more room for that to improve given that anything to consider as we're thinking about utilization and margin in the coming quarters? Thank you for the opportunity.

Yeah. Tien-Tsin, it's an interesting question. Look, we went from 82% utilization last year, same quarter, to 85% utilization. So it's a huge lift. Now, when you do good fulfillment, you also need to build capacity for the future. This year, we are going to hire freshers, a lot more because we want to size a pyramid. And when you get managed services work, our fixed price work over the last two years has gone up, managed services work has gone up. So we can actually start pyramid. But it also comes equally with an overhead of carrying higher bench at a lower cost and actually offshore. So I'm a big fan of intertwining this with AI productivity, utilization and rightsizing the pyramid. So that's the next big step we are going to take. AI productivity, utilization, I mean, utilization of experienced talent. There is a little bit of room. But once you feed freshers in, you need some room for utilization to tick up. So we're kind of playing on all three, and we're going to add freshers into the mix this year. So that's broadly how we are approaching our cost of human capital.

Thank you. And our next question comes from the line of Ramsey El-Assal with Barclays. Please proceed with your question.

Hi, thanks so much for taking my questions this evening. I wanted to ask about the April slowdown in decision-making that you're seeing. And I guess, in particular, the comment that Jatin made about seeing the impact is isolated in the second quarter. I'm just trying to understand the degree to which maybe you see it as particularly ring-fenced by a particular client or geography or some way to kind of make it feel like it's more temporarily bounded rather than something that could get worse?

Sure, Ramsey. The positive aspect is that Financial Services continues to show significant opportunities and strength. Communication, media, and technology are experiencing stable demand and are not affected. However, we do observe some caution in the health business, where customers are assessing the implications of final policies on their spending. The area most impacted is the products and resources business, which is directly affected by tariffs, whether in the manufacturing sector or the consumer and retail sectors. This reflects how different segments are affected in the U.S.

Okay. And acknowledging your exposure to US government work is really small. And I know you also called out that you haven't seen any contract terminations. Will Belcan kind of completely dodge the DOGE acts just given the critical nature of the offerings there? Or is there still any risk that you're seeing, again, acknowledging that it's a very small part of your business that you could see some contracts terminated on the government side? Thanks.

Yeah. So, Belcan mostly works on engineering and not on enabling technology. So, engineering is building things for the future. And in some ways, engineering has always been on the revenue side of the equation or building side of the equation versus enabling side. So that is one part. The second is the exposure to government is very little from and some of it is a little bit through the primes and contractors. It is primarily a lot of commercial aerospace work they do, which has no impact on us. So, so far, we have not seen any impact and the exposure they have is pretty small.

Thank you. And our next question comes from the line of Darrin Peller with Wolfe Research. Please proceed with your question.

Thank you for the update. Your organic constant currency growth seems to have significantly accelerated this quarter. Could you clarify whether this growth is primarily linked to large deals transitioning into revenue from the previous year, aside from the positive momentum you're experiencing in financial services? Also, how are we progressing with converting existing bookings into revenue? Lastly, what do you anticipate regarding the growth pace from an organic perspective for the remainder of the year?

A significant portion of our organic growth has come from healthcare, which spans from providers to life sciences. Financial Services has also experienced notable growth. In the last two years, we've secured 29 $100 million deals last year and 17 the year before. The end of the second year and the beginning of the third year typically show a substantial ramp-up in activity. This quarter, we saw strong performance across all three regions, particularly in Europe, and we had promising traction from the Telstra deal in Australia as we progress into the second year. Both large deals and smaller discretionary deals are returning in Financial Services, which I believe is a key mix for us. Internally, we've been tracking our Annual Contract Value (ACV), which has also increased year over year, alongside the size of our large deals. Our book-to-bill ratio is at 1.3 for the trailing 12 months, with a rise in net new contributions from our large deals this quarter, providing us with additional momentum. The two main industries are performing well, supporting our growth, and they seem to be less affected by broader economic conditions such as tariffs.

That's really helpful. Could you touch on the labor market conditions and what you're observing there? It seems like attrition was pretty flat quarter-over-quarter. Please help us understand your current position, including any aspects of wage inflation or changes in the environment. Thanks again. Nice job.

Yeah. We see stability on attrition. As you can see, it's actually down slightly. And we don't see any undue pressure of attrition and therefore, either impact on wage, which can rise up or any impact on our ability to deliver our projects to our customers. I think we are in a good spot, in a healthy spot. And between quarter four and quarter one, there is a continued stability on that.

Just to add to that, there's one other aspect which helps on our helps on our growth is fulfillment. We've had an extraordinary period of fulfillment. The number of people we can hire as an attractive employer, the percentage of offers, which get accepted and the percentage of people who are coming back, I've actually mentioned about it in my previous public earnings that we have a huge number of returners coming back, and we have a big pipe of it. That is helping us on fulfillment, which in turn is going to help in discretionary because discretionary is smaller projects with more experienced people. So in addition to a lower attrition flattish curve, we're also seeing good fulfillment.

Thank you. And our next question comes from the line of Jim Schneider with Goldman Sachs. Please proceed with your question.

Good afternoon, thanks for taking my question. I was wondering if you could maybe just give us a bit of a perspective on sort of your level of comfort. It seems like the current emphasis on cost takeout by your companies is really kind of playing to your strengths right now. Maybe give us a sense about, relative to your outlook for the year, how much backlog coverage do you have in the current revenue outlook for the year? And then maybe secondly, can you maybe talk a little bit about the gross margin trends? I think you talked about maybe not expecting so much of the margin improvement to come from gross margin, but rather from operating expenses. Maybe give us a little bit of color on if anything has changed with respect to the gross margin composition, whether that's due to the wage increases or something else? Thank you.

Certainly, Jim. When we consider our guidance for the year, we believe it is at the lower end, and that the environment would need to decline further for us to reach that point. The midpoint of our guidance reflects the impact we've observed so far, which is balanced out by the opportunities in our pipeline and the successes we've achieved in the first quarter. At the higher end of our guidance, we are banking on an improvement in the environment from where we currently stand in the third and fourth quarters. This outlines the range of scenarios we anticipate for the remainder of the year. We are optimistic about our backlog, as Ravi previously mentioned. Notably, our book-to-bill ratio over the past twelve months is 1.3, indicating strong health. We've also experienced a rise in net new or expansion deals, accounting for over 50% of our total bookings in the first quarter, which is another positive sign. This coverage reassures us as we align with the midpoint of our guidance. Regarding the gross margin, our discussion centered around the fact that in today's environment, our ability to secure superior pricing is limited. Therefore, maintaining cost discipline will be key to achieving our operating margin targets for the rest of the year. As Ravi highlighted earlier, there are three main factors affecting gross margin: utilization, productivity gains from GenAI, and adjustments through hiring recent college graduates. These will help us enhance our gross margin. Additionally, challenging environments like this present opportunities to reevaluate all cost factors in our G&A and continuously seek out savings. This approach will remain part of our strategy as we plan for our operating margin guidance in 2025.

I would like to provide a different perspective on the pipeline, building on what Jatin mentioned about the increase in ACV and the potential for large deals in the second quarter. We are seeing net new business surpassing renewals in our mix, which makes me very optimistic. One key factor is our significant improvement in acquiring new logos since I joined; I haven't witnessed such an impressive streak in this area. We feel confident not only about securing large deals but also about doing so with new logos. Additionally, we have 1,400 AI projects underway, many of which are driven by innovation, including small prototypes and proof of concepts. As discretionary spending begins to increase, and especially as we implement cost reductions, there is substantial downstream opportunity that we are well-positioned to capitalize on. We aim to build the company to thrive in both slow and fast growth environments. Currently, our focus is on cost reduction, vendor consolidation, and productivity. However, as our innovation efforts gain traction, particularly in financial services, we believe we are in an excellent position to take advantage of opportunities in other sectors as well.

Thank you.

Thank you. And our next question comes from the line of Bryan Keane with Deutsche Bank. Please proceed with your question.

Thank you for taking my questions. Congratulations on reaching the winner’s circle. Ravi, my question is about how sustainable this position is and what factors will contribute to maintaining it.

I want to clarify that one quarter is not enough to establish lasting success. Consistent performance over multiple quarters is key to being recognized among the top players. While we are proud of our achievements this quarter, I would only feel truly confident in our position once we demonstrate this level of performance consistently over time. We are optimistic about our current standing compared to our peers and how we are achieving wins. With favorable market conditions, particularly as the high-velocity market develops, we have the potential for even greater growth numbers. Right now, we are focused on relative organic growth, which we view as a solid foundation. I believe we can maintain this performance; it requires continuous effort and commitment. We have the capability to sustain our momentum. We have constructed a diverse portfolio and regard ourselves as an adaptable company operating across four service areas: tech services, BPO services, infrastructure-led cloud transformation, and engineering services. Previously, we weren't as diversified. Now, we have expanded beyond healthcare and financial services. With a new leader in manufacturing, we anticipate increased performance across different sectors. Our growth is not limited to North America, where we are currently a leading player; we intend to expand our presence globally. A broad-based portfolio allows us to keep our numbers stable, as success in one area can offset challenges in another. This strategic approach gives us confidence in our ability to sustain our performance over the coming quarters, and I am hopeful that we can affirm our position among the top players in the industry.

Sure. So the answer to your first question is yes. The environmental uncertainty that we saw in April has been factored into our quarter two guidance. And therefore, the numbers that you've described are directionally where they are. And we'll continue to see how we execute during the course of the quarter. To your second question, yes, absolutely. I think we have driven significant utilization improvement, which is from 80% to 85%. But let me just share a simple math. If you see compared to last year, our headcount, and now we are down 8,000 employees. And if I add back another 6,000 odd that came through Belcan, which is there in the numbers now, but were not present in the numbers for Q1 of '24, we are talking about approximately 14,000 employees lower now than what we had before, and we have delivered 4% organic growth with that many lower number of employees. And utilization is a part of it, 3%, but the total number is somewhere around 7% to 8%. So, remaining number has really come through a superior utilization of our resources in delivering the outcome, which has been growing.

Thank you. And our next and final question comes from Maggie Nolan from William Blair. Please proceed with your question.

Thank you. My question is about the pace of conversion. If the mix of business shifts more towards larger-scale cost takeout deals, do you feel confident that those can be signed and start contributing to revenue before the end of the calendar year? Or is there a possible pushout in revenue to next year?

Great question. This is an interesting topic. When clients express concerns about uncertainty in the environment, I’ve noticed that it often leads to more urgency in closing cost takeout deals. There have been some situations like this. The significant deals I mentioned are still in play but have rolled over to the next quarter. However, the concern about costs and productivity makes this a prime time for such initiatives. In a slowdown, there’s one way to approach cost takeout deals, and in a fast-moving market, there’s another. Currently, the market is uncertain, so in this scenario, it's crucial to obtain the best value. While in a slow market, you might avoid risks, in an uncertain market, you definitely want to secure the best deal. I believe there could be some fluctuations with these deals. However, an uncertain and complex environment is actually a favorable time for cost takeout focused on technology rather than labor, as there are limits to labor options left. It's really about leveraging technology. This is a time of dual transformations, particularly with AI. When the market gains momentum, we can pivot towards innovation, which is evident in the Financial Services sector right now. They've been in a lull regarding spending for two years, but that spend is returning, along with a sentiment shift toward deregulation, which benefits us. Overall, this is an opportune moment for executing cost takeout deals. While there may be some fluctuations in deal timing, I expect a realignment in technology deployment costs, and we aim to lead in this area.

Thank you. And then what are you seeing in the pricing environment from clients and conversations with clients as well as any competitive behaviors from peers? Thanks for taking my question.

Maggie, there is certainly a strong focus on pricing for large deals, but it largely depends on how well you can lower the total cost of ownership for customers when adopting a project or technology, rather than just negotiating standard rate cards. The more proficient you are at utilizing Vector 1 capabilities to integrate GenAI into your solutions and the overall structure of the deal, the better your pricing will be. This trend is evident in the market. As you can imagine, various technologies and capabilities exist, and we believe we have a significant advantage early on, as Ravi mentioned at the start of the call.

Okay. With that, I would now like to turn the call back to management for any closing remarks.

Thank you. Thank you so much for listening to us. And I look forward to more dialogue, and we're looking forward to the rest of the year. Thank you, again. Thanks for joining today.

And with that, this does conclude today's Cognizant Technology Solutions first quarter 2025 earnings conference call. You may now disconnect.