Cognizant Technology Solutions Class A Earnings Call Nuggets: Sequential Revenue Growth and Immigration Reform
Cognizant Technology Solutions Corporation Class A (NASDAQ:CTSH) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Sequential Revenue Growth
Bryan Keane – Deutsche Bank: Just real quick question, normally 2Q and 3Q sequential growth are pretty similar in terms of revenue, but it looks like you’ve been backing out the SourceNet acquisition you are expecting a soft or sequential revenue growth from the spike of – looks like about 6% organic in 2Q. I guess is anything behind that or is that just conservatism? Just related to that, the headcount growth wasn’t as high as we expected sequentially. Should we expect to spike back up in headcount growth and was that just impacted by the attrition rate?
Gordon Coburn – President: Brian, it’s Gordon. Q2 generally should be our strongest quarter sequentially and the reason why Q1 tends to be muted because you don’t get a whole lot of discretionary spend in the first half of the quarter. So in Q2, you get the full quarter impact of the new budget cycle and then obviously that continues in Q3, but you don’t get as big a sequential boost. That is more pronounced in the years where discretionary spending is the driver of growth, which obviously it is this year. Headcount is playing out exactly as we wanted. We are actually very pleased. If you recall, we hired a lot of people at the end of last year to settle ourselves up well for growth this year, took utilization down a bit in Q1, and then clearly we said, we want to take utilization back up and that’s exactly what we did. So we have great control over our hiring and we are executing our plan of taking utilization up as the year goes on. We don’t give specific hiring targets for the remainder of the year, but certainly we think there is a little bit more room for utilization, though Q2 was sort of the big jump in utilization.
Sara Gubins – Bank of America: I am wondering for immigration reform if you are seeing any discussion with clients about it, if there are any delays in their decision making or the kinds of questions that they are asking? Also, you have talked about clients being ready to lobby on your behalf. Has that begun now that the Senate bill is passed?
Gordon Coburn – President: Sure, Sarah. So with clients – first of all, let me be very clear about this. There has been absolutely no change whatsoever in decision making as a result of immigration. The number of questions that we’ve received from clients have been few and far between; where clients ask questions, we’ve been going out and meeting with them, but the number of questions have been quite small and the discussion is more around, hey, how do you think legislation will play out and typically in those discussions will come up, are there things that the customers (as) we as a Company can do. Generally, the CIO won’t have the authorization to go do it themselves, but what we’re seeing, they are certainly open to reaching out to their Washington offices. Clients are getting involved, some directly and some through trade organizations, but it’s a fairly small number which is appropriate at this time, what’s voice for Q1 is to voice their opinion.