Good morning. Welcome to the Cognizant Technology Solutions first quarter 2009 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. (Operator instructions) Please limit your question to one per person. Thank you. I would now like to turn the conference over to David Nelson, Vice President of Investor Relations at Cognizant. Please go ahead, sir.

Thank you, and good morning. By now, you should have received the copy of the company's fist quarter 2009 earnings release. If you have not, a copy is available on our Web site cognizant.com. The speakers we have on today’s call are Francisco D’Souza, President and Chief Executive Officer; and, Gordon Coburn, Chief Financial and Operating Officer of Cognizant Technology Solution. 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. I would now like to turn the call over to Francisco D’Souza, President of the company. Please go ahead. Francisco D’Souza: Thanks, David, and good morning, everyone. Thank you for joining Gordon and me today for Cognizant’s first quarter 2009 earnings call. We're pleased to report strong performance during the first quarter, which exceeded our expectations. This is especially noteworthy in this difficult economic environment. That Cognizant continues to outperform the industry and key competitors demonstrate the relevance of our business model with a hybrid approach of strong client facing strategic teams and a robust delivery capability and value-added services. I’m also pleased to report that during the quarter, we climbed the Fortune 1000 list, where we now ranked 716th amongst US companies based on revenue, an improvement of 143 positions over last year. I would like to take this opportunity to thank all of our Cognizant employees across the world that have worked so hard to help us achieve both these accomplishments, the Fortune recognition, and the business model that has yielded the quarter. During this call I’ll give a quick overview of our results, ahead…

Thank you, Francisco, and good morning to everyone. I’d like to provide some additional information on the first quarter and then discuss our financial expectations for the second quarter as well as full year 2009. Revenue for the first quarter exceeded our prior guidance due to better than anticipated performance by several of our segments. Quarterly revenue declined 1% sequentially but grew 16% year-over-year. During the first quarter our financial services segment, which includes our practices in insurance banking and transaction processing, grew by $30 million – $39 million year-over-year and represented 44.4% of revenue for the quarter. Healthcare grew by almost $30 million and represented 25.4% of revenues. Retail manufacturing and logistics grew by $25.6 million, representing 16.5% of revenues for the quarter. The remaining 13.7% of our revenues came primarily from other service-oriented industries of communications, media, and high technology, which grew by over $8.5 million compared to Q1 of last year. For the quarter, application management represented 55% of revenues and application development was 45%. Application management grew 24% year-over-year at four tenths of a percent sequentially. Development grew 7.5% year-over-year and was down 2.6% sequentially. The continued strength in application management, we believe, was driven by clients seeking to optimize efficiency on non-discretionary spending items due to budget concerns. As Francisco mentioned, during the quarter almost 80% of revenues came from clients in North America. Europe was approximately 18% of revenue and just over 2% came from Asia Pacific, Middle East and South America. Our European business was flat sequentially and grew 12% year-over-year for the quarter and that includes a significant impact of currency both for the quarter and the year. European revenue growth was negatively impacted in the first quarter versus Q4 2009 by approximately $5.4 million due to the significant depreciation for the…

Thank you. (Operator instructions) Your first question comes from Tien-Tsin Huang with JP Morgan.

Hi, Tien-Tsin. How are you? Tien-Tsin Huang – JP Morgan: Hey, Gordon. Thanks. Nice quarter for sure. I just want to ask about the outlook given the strong start. Actually the second quarter growth expectation is pretty consistent with what you suggested in the past. Any change in the visibility in the second half? Just trying to balance your comments with your historical seasonal pattern. Anything we should consider as we recast our second half outlook?

Yes. We’re assuming that the economy stays weak, that hopefully things will stabilize. But we are not any assuming any rebound in the economy in the second half of the year. And therefore, when you look at our guidance, you’ll see that essentially we’re expecting quite modest revenue growth sequentially for the remainder of the year, and I think that, in line with expectations, the economy remains weak. Tien-Tsin Huang – JP Morgan: Do you give specific interest income expectation for the quarter? I just want to sneak that last housekeeping question in.

Sure. You know, for the year at this point, I think it’s probably somewhere around $13 million, and ramps up a little bit. So probably $3.2 million, $3.3 million for Q2, which is obviously down substantially from last year, but we just – our money was all invested very short term and we’ve gone corporate in the last 30 days on that. But as I mentioned, we – that short fall in interest income, we’re comfortable, covering by taking our margins up slightly from what we’ve planned. Operator, next call or question?

Thank you. Your next question comes from Moshe Katri with Cowen & Company. Moshe Katri – Cowen & Company: Thanks. Nice quarter, Gordon and Francisco. I wanted to go just briefly in some of the demand metrics that will specifically focus on self-cycled, project-ramp decision making,. Any change from the previous quarter? And then you can talk about this by vertical, are you still comfortable with the previous guidance for Q2? Or were you expecting a drop in financial services to be offset by strengths from other verticals? Thanks.

Moshe, it’s Frank. A couple of things I’ll say. I don’t think we’ve seen significant changes from last quarter in terms of the earlier metrics you talked about, self-cycled, continue to be right around where they were last quarter. They’ve not elongated certainly since that time. As I said in my comments, we did see that during Q1, the majority of budgets were finalized. But at this point, even though budgets in many cases are lower or flat from last year, that spending is starting to happen now. Albeit at a, in some cases, at a more reduced level. So that creates a little bit of momentum going into the second quarter–

And on your question of our expectations from financial services in Q2, think they’re playing out the way – exactly the way we expected. That in Q1, financial services is down materially, and we’re expecting stability but not growth in Q2. So what’s happening is outside of financial services, we experienced a stable, tough environment in Q1. We expect that to continue, and in – within financial services, we expect simply there to be a stable environment. Moshe Katri – Cowen & Company: Okay. Good. The final question, you didn’t say anything about pricings for the quarter. Can you talk about pricing in general? Thanks.

Yes, once you got – things are playing out pretty much the way we’d expected. Pricing was down a little bit in Q1, part of it was driven by the weakness of the European currency, and part of it was driven by some softness in financial services as well as deals getting bigger. So we’re down a little bit, but we’re right in line with what we’re expecting. Moshe Katri – Cowen & Company: Thanks. Nice quarter.

Thank you. Your next question comes from Joseph Foresi with Janney Montgomery. Francisco D’Souza: Hi, Joe.

Hi, Joe. Joseph Foresi – Janney Montgomery: Hi, guys. Again, nice job here. I was wondering if maybe you could comment a little bit. If you look at the June quarter, it’s obviously pointing up for you, guys. But versus the peer group, the rest of the peer group is guided just slightly down from the quarter. Maybe you can’t give us a lot of insight into the peer group, or maybe you could just address what you think is kind of driving your business versus them.

You know, Joe, it’s a lot of the stuff I talked about during my comments. And then I think that clients are going through – yes, we are in an extraordinarily tough economic environment. But at the same time, our clients are going through very significant periods of secular change and they realize that they need to continue to invest through this. Just as we are, as a company. And our clients are doing the same thing. And so while there’s a lot of scrutiny around where clients are spending, spending hasn’t disappeared entirely. So the game has become one of who can be on the ground, who can be closer to the customers, who has the right set of domain expertise, industry expertise, and relevant experience to be able to capture those types of opportunities as they emerge. Because those opportunities are out there. It’s just a question of having the feet on the street and the right sets of tools in your tool kit to be able to capture those. And we think that we’ve made investments over many, many years which align perfectly with the kind of challenges and structural changes that our clients are going through right now. And that’s why we really think that we’re poised well to grow both in the second quarter, and then continue to grow through the rest of the year. Joseph Foresi – Janney Montgomery: Okay. And just a second question here. You’ve obviously done a little better than expected this quarter and your guidance calls for – is above the street for next quarter. I know you didn’t raise full year numbers, but you’ve kept the verbiage at least. Are you still comfortable, obviously with that type of verbiage? And is there any conservatism on your part having better than expected numbers this quarter and perhaps better next quarter on the annual guidance?

Sure. Joe, this is Gordon. The conservatism is we’re assuming there’s no rebound in the economy. We’re assuming that the economy stays weak for the remainder of the year. Obviously if there’s a big rebound in the second half the year, I think we would benefit from that. But you know, we’re not seeing signs of that at this point. So we think keeping guidance where it is, at the – at least 10% is appropriate, if given our belief that the economy is going to stay weak. Joseph Foresi – Janney Montgomery: Thanks, guys.

Thank you. Your next question comes from Rob Burgess with AllianceBernstein. Rob Burgess – AllianceBernstein: Let me inquire a little bit about the margin. Can you give us an idea of whether your margin – you’re confident in your margin outlook for the year? Is it any different today than it was three months ago? I think we’ve given some of the concerns about pricing that’s out there and so on. It would be great to get an update on your confidence in your margin outlook?

I don’t think our – the confidence has changed. Confidence was high two or three months ago when we gave our initial guidance, but confidence continues to be high. I think the favorite question this year is, "What happens with the economy, and therefore revenue?" We have enough levers in our business to – that we remain quite comfortable with our margin targets. But let me be clear. We overshot a little bit in Q1. That we don’t want to do. Obviously, March came in a little stronger than we expected. So I won’t be very firm, we fully expect to be back in our range in Q2 and for the full year. Rob Burgess – AllianceBernstein: All right. Well, that leads you to the second part of my question. Since you exceeded the range in Q2 on margin, which was nice because you offset the non-operating issues that you had, does that make you invest more aggressively next quarter in Q2 where you incur additional expenses and investments, and maybe put you to the lower end of your margin guidance range for Q2? Is that the plan?

I think the answer is yes, we are investing. And we will continue to invest. But I don’t think that results in us being at the lower end of our margin range. I had this modeled kind of in the middle of the range. Rob Burgess – AllianceBernstein: Okay. All right. Great. And then as far as the outlook for the off shore market, I think there’s probably a difference between the outlook for the economy and the demand in the overall off shore market. And I guess what’s happening here is, your competitors are guiding the negative sequential growth for the June quarter, and then assuming better growth in the second half. Do you guys think it’s logical that the offshore market based on what you’ve seen in the pipeline would look better from a demand perspective in the second half than it does right now? You’re clearly gaining chairs, so you don’t need as much of a rebound in the market to help your growth. But would you – do you think it’s logical that other firms might be assuming that the off shore market gets better as the year progresses? Does that make sense to you?

Yes, let me try to address that. We are being conservative in our outlook for the full year. We, as Gordon said, are not assuming that there's a material change for the better or for the worse in the economic outlook through 2009. I think if that assumption were to be tested in one direction or the other there could be an impact on the second half of the year. Short of that, I'm not sure that I see any particular reason why demand for off shoring specifically, as opposed to transformational services and so on and so forth, would be stronger, let's say in the third quarter than it is in the second quarter. At this point, from what I'm seeing with customers, customers have largely got their budgets approved. They're starting to spend. We saw that in the month of March as budgets started to get approved. And we're factoring that in some of the guidance in – our guidance for Q2 reflects that spending. So I'm not sure that there's a particular catalyst in Q3 that results in incremental momentum over what we've seen in Q2. Rob Burgess – AllianceBernstein: But you would agree that there's less fallout in the more discretionary services that are out there? So you have less of a discretionary services headwind, so to speak, today versus when you entered the beginning of the year?

Yes.

Yes. I think that's true. It's already hit us. And now it's kind of stable at the lower level.

Exactly. Rob Burgess – AllianceBernstein: All right. Very helpful, guys. Excellent. Thanks.

Thank you. Your next question comes from Karl Keirstead with Kaufman Brothers. Karl Keirstead – Kaufman Brothers: Hi, good morning. Thanks for taking my call. Gordon, I have a question about how the material rupee depreciation affects your margins? In Q1 they were up about 70 basis points year-over-year on a non-GAAP basis. Yet the margin lift from the rupee depreciation is material. And as I think through this, are you investing an upside in the business? Or is there any concept where perhaps you're passing on some of this dollar denominated cost reduction to your clients in order to maintain those relationships and enhance bookings? Maybe you could comment on how you're dealing with that? Thanks.

Sure. On a year-over-year basis – remember I absorbed meaningful wage increases in the middle of the year, which is when the rupee really started to kick in. And obviously pricing – as we previously discussed, pricing was not up in 2008, and is down slightly in Q2. Plus we had the headwind of the European currencies, which hurts us with off shore margin. So the benefit of the Indian rupee was largely absorbed by those items. And we further accelerated some investment spending where, as Francisco mentioned, we believe the reason why we are obviously delivering a very different message than many others in the industry is because of this decision we made to heavily invest in the business, and maintain fairly constant operating margins and invest for the long term. It's working. Karl Keirstead – Kaufman Brothers: Okay. Great. And if I might sneak another one, most of your rivals are also indicating that their end clients businesses are stabilizing but they're not yet talking about any kind of actual recovery and signed bookings. I'm wondering if you could comment on what Cognizant is seeing? Are you seeing actual bookings pick up yet? Or is it still a little too early?

I think that the way I would answer that – Karl, it’s Frank, is that what we're seeing is that clients' budgets are finalized. So once the budget is finalized – and many cases budgets are lower than they were in 2008, in many cases they're flat. In a few cases budgets are up, but those are probably the minority. Once the budgets are finalized at whatever level, we are then able to go back to the client and work with them on their spending plans for those budgets. We didn't have that in the first part of the year. In January and February is quite as – largely budgets were not finalized it became more difficult for us to have those conversations. In March we were able to do that. So clearly, we're starting to see some pick up in terms of those conversations. And that's translating into additional revenue in March and also to Q2.

And Karl, it's very important to note that even in Q1, financial services was clearly weak. Outside financial services, even in Q1 the business was okay. So when we look at Q2, where we're expecting to go to a couple points of sequential growth rather than one point of decline, all that it takes, mathematically, to do that is just stability in financial services. We don't need this big surge in the rest of the business. Karl Keirstead – Kaufman Brothers: Okay. Very helpful color. Thank you both.

Thanks, Karl.

Thank you. Your next question comes from Julio Quinteros with Goldman Sachs. Julio Quinteros – Goldman Sachs: Hey. Great, guys. Francisco, just one quick question on the headcount that you guys had on the consulting side. It sounded like you said something like 1,700 consultants. I look at the percentage of headcount – that that is as a percentage of your, sort of, total employee base, it's still running. I think it looks like less than 2%, something along those lines. How much hire do you think that that needs to go to, to really put you on a more competitive sort of playing field more with the multinational types, the Capgemini's, the Accenture's of the world, as opposed to, sort of continuing the fight against the pure play Indian IT guys?

Yes. I think Julio, really in consulting we're not focused there on building large scale, but on really high quality consulting services. So it's not a business that I necessarily measure in terms of absolute or growth in headcount. It's a business that I measure more qualitatively in terms of the quality of the transformational work that we're doing. I would say that in certain sectors in industry verticals, particularly in the places where we've done acquisitions like SVT and Southern [ph], and in the places where we've built it organically over many years like in financial services, I put our consulting services up there with the best in the world. In other places, we have work to do. As a percentage of total headcount I don't see it changing materially. Maybe it goes up to 3% of total headcount. But like I said I'm much more focused there on the quality of the services we're delivering and the transformational nature of the work we're doing there. Julio Quinteros – Goldman Sachs: Got it. And just one follow report, any sense on under what scenarios you could see an acceleration to 15% or higher growth? I guess I'm coming back to Gordon. Some comments that you made at our tech conference where you basically commented that you first adjusted out what your field is expecting from a growth perspective. And I guess now that we've seen the first half of the year in terms of what you're projecting to, how do you get to better than 10% growth if the back half of the year would have to imply something like almost 9% sequential growth? Is that scenario realistic relative to the field expectations at this point?

I think that scenario would only be realistic if you had a very significant rebound in the global economy, and some of it based on the (inaudible) that is a highly unlikely scenario. Julio Quinteros – Goldman Sachs: Okay. Thanks, guys. Good luck.

Thank you.

Next.

Thank you. Your next question comes from Glenn Greene with Oppenheimer. Glenn Greene – Oppenheimer: Hey, guys. Gordon, just a follow up on the pricing commentary. It's sort of been striking in the cycle as your commentary on the pricing relative to your peers, and I don't know if it’s a definitional communication issue. But just wanted to get a little bit more color on how you're really seeing the pricing environment sort of delineating what you're seeing on the rate card on shore, off shore, and maybe volume discounts, what not. But why is your rhetoric so much different from your peers?

Yes. It's an interesting question. I'm not sure it is. I think, in particular, one of our peers was sending out rather mixed messages. But as people clarified their messages it seems like everyone's talking about they're expecting pricing this year to be down in the low single digits, which I think is accurate. Will there be an account once in a while that change by more than that? Yes. But for across the board, no. I think that would be unlikely. So I actually think it's more semantics than anything else. And I think, realistically, pricing will be down for the year a couple points. Glenn Greene – Oppenheimer: Okay. This is all really mainly coming from the customer side as opposed to a competitive dynamic?

Yes. The two are related. And see, that's one item, it's also you have a mixed shift of what was application management, which can have lower rates because of the nature of the services and development there. There are a lot of pieces in there. Glenn Greene – Oppenheimer: Okay. Just quickly, what were the drivers of the upside revenue performance in the quarter, especially the $10 million, $11 million upside?

It wasn't one – the way to think about it, we didn't have any shoes that dropped. I built in there that something was going to go wrong. And things kind of came in as we expected without – without that piece of bad news, which, quite often in this economy, is surprising. I would expect some more cancellations or bankruptcies here or there, but it kind of went right for us. Glenn Greene – Oppenheimer: So was BFI – BFSI essentially on target with what you expect or was that sort of an upside performance?

It declined a little bit less than we expect – BFSI, BFS declined for the quarter, declined a little bit less than we expected. But I would not focus just on BFS or BFSI. I think across the board, as they came in slightly better than expected. Obviously now more, by a whole lot by the size of the business. Glenn Greene – Oppenheimer: Okay. Great. Thank you.

I think we have time for one more.

Thank you. Your next question comes from Bryan Keane with Credit Suisse. Francisco D’Souza: Hey, Bryan. Bryan Keane – Credit Suisse: Hi, good morning. Francisco, I know you were talking about some stabilization in the quarter. Are there certain verticals or geographies that are more stable than others or is that a pretty sweeping comment that you can say across pretty much everything in the groups?

I think that, as a general statement, I would say that we saw stability across a broad section of the portfolio. If you drill down into sub-verticals I think that we're continuing to see some – I would say financial services are stable, but we don't see, as Gordon pointed out, I don't think we're going to see, we're not expecting to see, growth on a sequential basis through the rest of this year. Our technology business continues to be a challenge. But in most of the other segments they're sort of chugging along. And we expect to see growth, modest growth, throughout the rest of the year. Bryan Keane – Credit Suisse: And what about geography there between US and Europe?

On a constant dollar basis, and once again, we try to focus on report rather than constant dollars. On a constant dollar basis, Europe was okay in the first quarter. It grew 4% sequentially, constant dollar. But is there – is the economy impacting Europe as well as the US? Yes, certainly, especially in the UK where there's a lot of financial services. Bryan Keane – Credit Suisse: Okay. And just a final question, how are new client contracts ramping? And is it fair to say you're gaining wallet share in the budgets of your existing strategic clients?

On the first question, I would say the ramp ups are generally progressing the way we expected them to progress, particularly with the hunting licenses. As you know, a lot of the customers we win are these hunting licenses. Those take their time to ramp up, and it's often difficult to predict with a great degree of accuracy how fast and how aggressively they're going to ramp up. Clients have different sets of – different propensity to change. And that impacts our ability to ramp up and the time with which we can ramp up. And I think – overall, I think the ramp ups are going the way we would have expected them to go. Bryan Keane – Credit Suisse: But you’re not seeing a lot of delays in the ramp?

Nothing unusual beyond the normal delays you expect given the economic environment, let me put it that way. There were delays that were caused by the budget cycle that I've talked about. Those impacted new clients and existing clients–

What is happening, Bryan, as the expectation of the rate of ramp is a little bit different. It’s quite healthy on the application management side, but obviously certain development stuff is not ramping as quickly because there's less development work getting done. Bryan Keane – Credit Suisse: Okay. And then just how about the gaining wallet share of the budgets of the strategic clients?

Yes. I mean clearly, we’ve talked about this for some quarters now, Bryan. There has been a clear trend towards vendor consolidation within our clients. We're gaining share from smaller Second Tier players. That's been a trend that’s been going on for some quarters now and that’s accelerated. And I would say that even relative to some of the Tier Ones, we're holding our own and gaining share in many clients.

Thanks, Bryan. Bryan Keane – Credit Suisse: All right. Thanks. And congratulations on a superior quarter.

Thank you.

So let me just close by thanking everyone for joining us on the call today. Just to finish up, I'd like to say that we're pleased with our financial performance during the first quarter of 2009, which is ahead of our guidance. We maintained industry leading growth despite the downturn, which validates the strength of our business model and our strategy. We look forward to talking to you again next quarter.

This concludes today's conference call. You may now disconnect.