Ladies and gentlemen, welcome to the Cognizant Technology Solutions Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to David Nelson, Vice President, Investor Relations and Treasury at Cognizant.

Thank you, operator, and good morning, everyone. By now, you should have received a copy of the earnings release for the company's fourth quarter 2011 results. If you have not, a copy is available on our website, cognizant.com. The speakers we have on today's call are Francisco D'Souza, Chief Executive Officer; and Gordon Coburn, President, both of which are slightly under the weather, recovering from colds. And we're also delighted to have with us Karen McLoughlin, our new 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. I would now like to turn the call over to Francisco D'Souza. Please go ahead, Francisco.

Thank you, David, and good morning, everyone. Thanks for joining us today. This morning, I'm joined by Gordon Coburn, our newly appointed President; and Karen McLoughlin, our newly appointed CFO. As we announced this morning, Gordon and Karen have taken expanded roles within Cognizant, which I will talk about shortly. I'm pleased to announce solid fourth quarter results for Cognizant that capped very strong 2011 performance. Our revenue grew nearly 4% sequentially and nearly 27% over the year-ago quarter to $1.66 billion. This brings full year revenue to $6.12 billion, more than 33% growth over 2010, once again demonstrating the strength of our value proposition, the depth of our client relationships and the exceptional execution of our strategy. As I look back on 2011, I'm proud of Cognizant's many accomplishments. First, we continued our track record of industry-leading growth. 33% growth is all the more significant when considered against the backdrop of an economy that was more volatile than we expected at this time last year. Europe grew slower than expected during the back half of 2011, but demand throughout other geographies remained solid, fueling strong annual results and reinforcing confidence in our approach and our value proposition. Second, we strengthened our client relationships by delivering on our unique value proposition that pairs intimate domain expert client teams with a robust seamless global delivery network. Throughout 2011, we added 317 new clients and increased the number of strategic clients by 25 to 191, the largest increase in our history. Strong results from our recently concluded third-party annual customer satisfaction survey showed that clients continue to see high levels of service quality even as we scale. And perhaps most significantly, 13 accounts contributed more than $100 million in 2011 revenue, illustrating the depth of our client relationships. Third, we, again, hired…

Thank you, Francisco, and good morning to everyone. 2011 was a great year for us. We grew over 33%, while maintaining stable margins and a healthy balance sheet. While we did not see any budget flush in Q4, we saw broad-based growth across industries and service lines through the quarter. During the fourth quarter, we experienced continued growth in our financial services segment, which includes our practices in insurance, banking and transaction processing. This segment grew 3.7% on a sequential basis and 22.6% year-over-year. It represented 40.9% of revenue for the quarter. For the full year, this segment grew over 29%. Q4 growth within financial services was driven by ongoing traction for IT infrastructure services and high-end BPO services such as securities processing, mortgage operations and underwriting and claims processing and continued ramp-up in regulatory work including initial development assignments in addition to consulting. Healthcare continued its growth during the quarter with 6.3% sequential growth and 34.7% year-over-year. This segment represented 27.5% of revenues. For the full year, healthcare grew almost 38%. The continued solid growth within this segment was driven by reform-related work including ICD-10 and consumerization of health plans, ramp-up of pharmacy benefit, management providers and initial traction in Horizon 3 offerings such as business process as a service, cloud-based CRM and mobile technology. Retail manufacturing and logistics continued its growth during the quarter and grew 2.8% sequentially and 30.9% year-over-year. It represented 19.2% of revenues. For the full year, this segment grew over 40%. Demand within this segment was driven by ramp-up of transformation projects and large strategic accounts as well as growing demand for services such as e-commerce integration. The remaining 12.5% of revenue came primarily from other service-oriented industries of communications, entertainment, media and high technology, which as a group, grew 1.3% sequentially and 20.1%…

Thank you, Gordon, and good morning, everyone. I am very excited about the opportunity to serve as Cognizant's new CFO and look forward to meeting many of you over the coming months through our investor Outreach programs. I would now like to comment on our growth expectations for Q1 and for the full year 2012. For the first quarter of 2012, we are projecting revenue of at least $1.7 billion. For the full year 2012, we expect to continue delivering industry-leading revenue growth. Based on current conditions and client indications, we are projecting revenue of at least $7.53 billion, which represents full year growth of at least 23%. During Q1 and for the full year, we expect to operate within our target operating margin range of 19% to 20%, excluding the impact of stock-based compensation expense. Therefore, we are currently comfortable with our ability to deliver in Q1 GAAP EPS of $0.79 and non-GAAP EPS of $0.85, which excludes estimated stock-based compensation expense of $0.06. This guidance anticipates a Q1 share count of approximately 310 million shares and a tax rate of approximately 25%. Our guidance excludes any nonoperating FX gains or losses. For the full year 2012, we expect our GAAP EPS to be at least $3.43 and our full year non-GAAP EPS to be at least $3.69, excluding $0.26 of estimated full year stock-based compensation expense. This guidance anticipates a full year share count of approximately 312 million shares and a tax rate of approximately 25%. It also excludes any nonoperating FX gains or losses. Now we would like to open the call for questions. Operator?

[Operator Instructions] Your first question comes from the line of Rod Bourgeois with Sanford C. Bernstein and Company. Rod Bourgeois - Sanford C. Bernstein & Co., LLC., Research Division: I wanted to ask about the demand environment in Europe and some of the challenges you guys apparently had late in the year in Europe. When you look at the results of some of your large competitors in India, TCS, Infosys and HCL, they all showed quarter-to-quarter growth rates in Europe of late that were actually above North America. So it seems to imply that European companies are moving to offshore outsourcing, given the need for more austerity in that region. Are you seeing that as a boost to your demand, but with that boost potentially being offset by cuts in discretionary spending? Is that the situation that you're seeing in Europe? And can you elaborate on that?

Rod, it's Frank here. Thanks for the question, and certainly, Europe continued to show -- Q4 was impacted by short-term volatility in Europe, but I think you put your finger on the trend we're seeing. What we're seeing in general in Europe is that there's a mix shift going on as clients come under economic pressure. The discretionary spending is coming under pressure there, pushing projects out a little bit but, at the same time, shifting emphasis to a more cost-containment-type of initiatives around our more traditional outsourcing and managed services types of services. So as that mix shift continues and we shift the pipeline from discretionary spending more to the outsourcing or managed services types of engagement, we expect that in the coming quarters, there will be some continued volatility in our European results, and we've baked that into our 2012 guidance. So we are not assuming any recovery from here in our European results in our 2012 guidance. Rod Bourgeois - Sanford C. Bernstein & Co., LLC., Research Division: Okay, so on the discretionary spending side in Europe, are you seeing any encouraging signs early in 2012 that discretionary spending is somewhat recovering? Or are you still worried that there's more downside on that front? And then if you -- just to help a little bit, I mean, when you look at our your 2012 guidance, can you help us understand what type of growth assumption you have for Europe versus the rest of the world?

Let me comment on what we're seeing with discretionary spending, and then I'll ask Gordon to talk a little bit about our assumptions for Europe and guidance. On discretionary spending in Europe, particularly, we don't see -- we are seeing some discretionary spending delays with clients. We -- I don't think there's a tremendous amount of downside from where we are right now to discretionary spending. But I think discretionary spending will continue to be lumpy for at least for the coming 2 quarters in Europe as that mix shift continues to play out from discretionary spending moving more towards outsourcing.

Sure, and let me just follow up on that. Rod, our guidance assumes continued healthy growth in North America. Q4 was great. We grew over 6% sequentially in North America. Obviously, Europe was weak. Our 2012 guidance assumes that Europe stays weak. We're not betting on a rebound in revenue for us. So I view it as that we expect North America to be healthy and Europe to be stable at a weak level.

Your next question comes from the line of Julio Quinteros with Goldman Sachs.

So congratulations to everybody on the moves here on the promotions. I just wanted to start off, I guess, to the BFSI expectations. As you think about that vertical and all of the puts and takes that are kind of going on, but maybe just frame the same commentary question about your expectations for BFSI as a vertical as you move into 2012, application development spending versus application management spending.

Yes, BFSI looks okay for 2012. We expect it to have good growth, certainly, not company average, given its deeper penetration rates of lower large numbers, but we expect it to be quite respectable. I think it will be more weighted towards health in North America than Europe. No question about that. But when I look at BFSI overall, we're feeling okay about it.

And just in the AD spending versus the apps management or outsourcing spending?

That, I think, will be balanced. Our guidance assumes that there's a shift more towards maintenance, and as in similar years, we always want to be conservative on our expectations for development in a volatile economy. So our guidance assumes that maintenance is stronger than development.

Your next question comes from Darrin Peller with Barclays Capital.

Would you mind touching on just what you're seeing around market share and how many bids are actually coming out there in Europe in particular? I mean, I know there was a question earlier around some of the trends on discretionary. But maybe on the outsourcing side, you're saying you're expecting a shift towards more on the maintenance projects. Do you expect to continue to gain share in that area?

We do. When we look at our pipeline around the world, North America and Europe, obviously, being our largest markets, we don't have any significant concern about the size and health of our pipeline. We continue to see a strong, healthy pipeline of opportunities, both with new clients and with existing clients. As I said, during my prepared comments, our European new customer wins were healthy during the fourth quarter. We saw 14 new clients in the quarter in Europe. So we feel pretty good about both the health of our pipeline and our continued ability to take share from competition as we execute on what we think of as our differentiated approach broadly. But particularly, in Europe, where having strong local teams in the countries particularly in the continent, that's very important for local language and cultural issues.

Okay, so just to kind of -- when you think about the actual opportunity from an outsourcing standpoint in Europe, given the shift you're seeing, I mean, I guess, do you see there's enough there to really offset any shift away from discretionary so that your revenue can be pretty strong or at least as strong as you're expecting in guidance? Or do you need to see some discretionary spend increase? Or is the discretionary spend increase all upside from your 23% guidance?

Let me just give you sort of the macro picture, and then I'll ask Gordon, again, to comment specifically on the guidance topics. At the macro level, Europe is probably less penetrated from an outsourcing standpoint than from a discretionary spending standpoint. Historically, in Europe, over the last, let's say, decade or so, European customers have tended to outsource development in discretionary spending first and have not taken the more traditional application outsourcing or other kinds of managed services to an offer of global delivery model. So from an opportunity standpoint, I think that the opportunity in outsourcing in Europe is actually very, very large. And we're starting to see clients now turning their sights as they come under pressure to that opportunity and moving some of those types of activities to a global delivery model. In some countries in Europe, that shift takes a little bit of time because some of the European regulations and laws make that shift a little bit more tricky, particularly, the labor laws, and so it takes a little bit of time to work through those issues. But overall, I'm very optimistic about the opportunity and the trend we're seeing in outsourcing in Europe.

Let me just add to that a little bit because this is really an important point. Over the past 15 years, every economic downturn served as a catalyst to expand our addressable market, but there's a timing. There's a timing lag, and I think the timing lag may be a little bit more significant in Europe due to some of the labor and cultural issues. And that's why in our guidance for 2011, we assumed we don't see the benefit of that catalyst. But when we look at -- maybe if we get lucky, we start to see it late in the year, but we're not counting on it. But when we look over time, it's very clear to us that the economic challenges that the European community is facing right now is leading to an openness to global sourcing, and we are clearly a player in that. It's just a question of how quickly does it kick in and ramp up.

Your next question comes from Arvind Ramnani with UBS.

Just wanted to find out, did Q4 turn out as you were expecting to play out when you provided guidance? Or was December weaker than you were expecting? The month of December, was that weaker than what you were anticipating?

The end result came pretty close to where we were expecting. At the conferences in late November, early December, we were being very clear, there's no budget flush. If I parse it out a little bit, North America was a little stronger than I expected. Europe was a little bit weaker, but the net outcome was within a tolerance level in the ballpark that we were expecting.

Great. And within BFSI, can you provide some color on specific areas in terms of kind of demand such as investment banking, retail banking, risk management and regulation because the segment of [ph] BFSI, there’s probably kind of different areas of strength and weakness?

Sure. So I think the one area where you're seeing a general trend towards weakness is in the pure-play investment banks and the investment banking divisions of the multinationals. Once you go beyond that, demand's actually reasonably healthy.

Your next question comes from Edward Caso with Wells Fargo Securities.

I was hoping you could talk a little bit about the attrition number being at an amazingly low 10% and what that implies, whether that's a signal of superior execution or really is an indication of a slowing demand outlook because it is coming down at the other Tier 1 firms as well.

Yes, Ed, this is an issue we've spent a lot of time looking at because we were surprised at how favorable Q4 attrition was, and I think the answer is it's a little of both. So overall, the industry has come down a bit, but we're running with -- once you kind of normalize how everyone counts it, we're running with about as big a gap between us and the rest of the field as we've ever had. So I think part of it is just supply catching up with demand, and some of that is everyone shifting back towards the college hiring. But then I think what's unique to Cognizant is our growth rate. We promoted a far more significant percentage of our population in 2011 quite simply because we were growing faster. So people are seeing that their career growths can be more positively impacted at Cognizant. So I think it's a little of both, part the market, but I think the bigger part of is what's specifically happening at Cognizant.

The other question is the rupee has moved sort of against the dollar here. It's strengthening against the dollar so far this year, suggesting sort of a negative item in the other income line. Is that baked into your assumptions for the Q1 EPS? Or do you have a 0 number in the below line FX impact?

Yes, so let's break it into 2 pieces. For operating expenses, the cash flow hedges, which is a big part of our hedges, that is reflected in operating income. We actually had a loss in Q4. Obviously, that loss will either be smaller swing to a positive in Q1. So the movement in the rupee does not have a particularly significant impact on our operating margin because we're so heavily hedged. We're by far the most heavily hedged in the industry. It does generate some gains and losses below the line, but those tend not to be material. And as I mentioned, our guidance assumes that there is no FX gain or loss below the line, but our guidance does include the cash flow hedges which show up above the line.

Your next question comes from Bryan Keane with Deutsche Bank.

Just looking at the 2012 guidance, it looks like a little north of 2% sequential revenue guidance for 1Q '12, which is a little bit of a slower start, but that's pretty seasonal. And then followed by a significant sequential growth of probably something in the order of at least 7% in 2Q and maybe even in 3Q. Just wanted to get your thoughts on the visibility and the ramp-up that's probably likely to happen in 2Q and 3Q.

Yes, so Bryan, I think you're thinking about it absolutely correctly, and you said the key thing. This is a normal pattern. If I look at last year, we jumped from about 4% growth up to 8% growth between Q1 and Q2, and it stayed about 8% for Q3. So to have Q2 be substantially stronger than Q1 is a normal pattern. Let me explain why. Clients tend to finish their budget cycles in early February, which means January tends to be weak because they don't release the new budget dollars. And what you see is a pattern. January weak, February is modest and March tends to be good, and then, obviously, you have the full quarter impact in the second quarter. So this -- when we look at reaching the 23% growth, this, I would view as a very normal pattern.

Okay, but it doesn't feel like just as a result of that ramp. It doesn't feel like there's a lot of upside maybe compared to the last few years for the full year outlook just to hit the at least 23%?

Sure. So to exceed the 23%, that really will be driven by discretionary spending, and we've been conservative on our assumptions, and we've been very conservative on our just assumptions for Europe, obviously. But even in North America, we've been conservative about our assumptions for discretionary spending. So that's one that'll play out or not play out as the year goes on. And as you know, discretionary spending is one. If it happens, it can ramp-up fairly quickly, but we certainly don't want to get ahead of ourselves on discretionary spending because we don't have the visibility on that yet, simply due to the economy.

Your next question comes from Mayank Tandon with Needham & Company. Mayank Tandon - Needham & Company, LLC, Research Division: Frank and Gordon, just one question on sort of the budgeting cycle. As you talk to your customers both here in the U.S. and in Europe, maybe just talk a little bit about the allocation of the budgets between the regulatory and compliance opportunity versus mobility and cloud, which I believe is your Horizon 3 offering, and then the traditional application maintenance business.

So a couple of points of color, Mayank, around budgets. First of all, as I said during the comments, we see this year as being a completely normal budget cycle. We're not seeing either in the U.S. or in North -- in Europe, excuse me, any significant delays in clients' budget cycles. So we view that at the start as being positive. When we look at the magnitude of budgets, overall, we're starting to see -- we expect them to be flat with a slight upward bias, particularly, in North America. So again, we consider that to be good. In terms of the composition of budgets, a few things. First of all, the share shift that we've been seeing for a long time of budgets increasingly towards the global delivery model continues. We're starting to see that, as I said, in Europe on the traditional IT outsourcing application maintenance side of the business, and we are continuing to see it around the world in operations budgets as clients start to look at Business Process Outsourcing more seriously from a global delivery model and, of course, from the IT infrastructures side of the business as well in the ITIS side of our business. So the share shift continues towards the global delivery model. In terms of the Horizon 3 offerings, as I said, many of our clients are starting to do what I would consider to be pilots or early deployments of Horizon 3-type of services, whether those are mobile or social or cloud or advanced analytics types of things, but we don't expect those to be significant revenue drivers for 2012 or beyond -- excuse me, for 2012. There'll be revenue drivers beyond that. The reason is that these are still relatively small clients who are dipping their toe in the water. But for 2012, while I expect to see a lot of activity in those areas, I don't think they're going to be significant revenue drivers. Mayank Tandon - Needham & Company, LLC, Research Division: And what about the regulatory and compliance work?

I think regulatory and compliance work, it really depends on industries. Our 2 biggest industries, financial services and healthcare, continue to see a fair degree of impact from regulatory compliance. I think, in particular, we, in healthcare, we see a-- we've seen for some quarters now quite a lot of work relating to ICD-10, 5010 remediation, those types of things, and I think we'll continue to see some of that going into 2012 in healthcare. In financial services, I think it's still a little early to tell. We're starting to see the consulting work that we did with clients around the impact of regulations starting to translate into some work, but my expectations right now for revenue from regulatory compliance work and financial services is modest for 2012. That may change as we get more certainty around the regulations themselves, but at this point, we're making modest assumptions.

Your next question comes from Moshe Katri with Cowen and Company.

Just a question about Europe again. This is the second consecutive year where we're starting the year with Europe kind of weak. As Rod said earlier in the call, some of your competitors showed some very strong numbers coming out of Europe. I think it will be helpful maybe if you can talk about whether we're having some issues with a number of legacy customers that are having some performance issues internally that's impacting their ability to spend on discretionary work or not, or maybe there's an execution issue on the sales side as well. I think that will be helpful if you can talk about this a little bit.

Let me try and put some color around this. I think we were disappointed with our results in Europe over the course of this year. We saw more volatility than we expected coming into 2011. During 2011, we saw more volatility than we expected coming into 2011. If you pare it back, I think there are a couple of different elements to it and may -- that sort of are overlaying each other. In the early half -- in the early part, let's say, the first half of last year, we were impacted by the ramp down of some M&A projects that we spoke to you about over a few quarters last year in a couple of the financial services institutions that we serve in Europe, and those -- in particular, in one client, which was a very large ramp-down situation. So that impacted our results. As we came into the back half of last year, what we saw was that with particularly with financial services clients, but to some extent with -- even with our life sciences clients. As the economic volatility in Europe became more intense, we did see cuts in discretionary spending. We saw our clients pull back a little bit. And as I said, we saw the start of that mix shift from discretionary spending over to more outsourcing or managed services types of work. We also saw, as I briefly mentioned in my script, a little bit of a shift of work with our large multinational, particularly, financial services clients of work outside of Europe. So clients shifted their base of operations from Europe largely to Asia Pacific when that happened in order to address some of the talent shortages issues in Europe. And so when we report that, we report that as Asia Pacific revenue to you, not as European revenue in those situations when that happens. So I think that was the second trend. We've looked at this in a lot of detail. I don't think we have fundamental execution issues in Europe. Clearly, we continue to build out some parts of Europe and continue to build out the front-end capability that I've talked about. But in the major markets of Europe, I think we're well-positioned. I think our teams on the ground are strong. Our pipeline is strong, and our win rates are good. So I think that beyond the build-out that we're continuing to do in places like the Nordics and so on, where we continue to invest, our presence is smaller in some of those countries, and we need a little bit more investment to beef those up. In the major markets, I think we're strong, and we continue to compete well.

And Moshe, very importantly, in 2011, obviously, when we were early in the year, we were expecting a rebound in Europe in the back half of the year, and that was baked into our guidance. Fortunately, North America really stepped up, and it covered the fact that Europe did not happen. As we look to 2012, we are not expecting a rebound in the back half of the year for Europe. If it happens, great, but we learned our lesson a bit last year. We realized it's a volatile economy, so we’re taking a fairly conservative view of Europe coming into this year.

Just as a follow-up, Gordon. Some of your customer -- some of your peers, actually, have indicated that they've seen ramp-up delays in discretionary work in North America during the December quarter, actually, also during the March quarter. Is that something that's kind of relevant here for Cognizant? Is this something that's kind of maybe you can comment on that as well?

We grew 6.1% sequentially in Q4. That exceeded our expectations. It was huge. North America is very healthy for us.

Your next question comes from Tien-Tsin Huang with JPMorgan Chase. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: Congrats, everyone, on the new roles. I'll say that upfront. I just wanted to ask, Frank, I guess the acquisition pipeline and your appetite, I suppose, should we expect the same kind of deals as we saw in 2011? Or maybe something bigger to accelerate Horizon 3 because, I mean, I asked because there's a lot of cash on hand, so trying to get a sense of how loose you might be with that money this year.

I think you'll see our overall approach to acquisitions continuing to be as it's been in the past. We're focused on the tuck-in acquisitions. They work very, very nicely for us. We like that approach to doing acquisitions, to accelerate particular parts of the business. Of course, as we get bigger, as we've said in the past, our definition of what constitutes a tuck-in also gets larger. So in absolute terms, you might see us doing tuck-ins that are a little bit bigger than what we've done in the past. We're focused principally on the same areas that we have in the past, broadly looking at acquisitions that will accelerate our entry into new geographies, deepen our penetration in the industries that we serve. And then the third area would be acquisitions that will bring us into a new service line or deepen our penetration in an existing service line. I expect that in that third category, the new services, we would do acquisitions focused on the Horizon 3 services. So we're looking at areas like mobility, cloud, big data, analytics and so on, enterprise, social, and also acquisitions that have nonlinear characteristics to them. So this is, as I said, something that I personally plan to focus a lot of my attention on during 2012. And I think it's fair to say that we're taking a close look at acquisition opportunities in those areas. Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: All right, good. Maybe just a quick business question. Just been hearing themes like vendor consolidation, obviously, changes in pricing or overall economics. What are your expectations in those areas, pricing, vendor consolidation in 2012?

I'm sorry. Can you repeat that question? Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division: Sorry, Gordon. We've been hearing some vendor consolidations coming back in vogue with some of the clients. So how do you think you'll fare in that, historically, that's been favorable to you? And then secondarily, just pricing on the back of vendor consolidation, how do you expect pricing to change this year?

So historically, vendor consolidation has been very good for us, and I think that's a trend that will continue. Customers more and more are seeing the value of strong offshore delivery with a competitive price point combined with very deep domain knowledge. And you saw that in the number of accounts that we had that were north of $100 million. We got up to 13 accounts. We grew it by 30%, so we're feeling very good about vendor consolidation. Pricing, obviously, will not be as robust as 2011, as we've said, on the last couple of calls because coming into 2011, everyone was eligible. Clearly, not everyone is eligible now. So yes, I view pricing as stable with an upward bias, but I would not want to set expectations that it will be average price across all clients will be anywhere close to where it is. And with that, I see we're a little over 9:00, so let me turn it back over to Francisco.

Thanks, Gordon. I think we'll wrap up here. Thank you, everyone, for joining us, and thank you, Gordon and Karen. Congratulations to both of you in your new roles. I'm excited to work closely with our expanded leadership team as we continue to drive our long-term strategy of industry-leading growth. Thank you all for joining us this morning.

Thank you. This concludes today's conference. You may now disconnect.