Cognizant Technology Solutions Corporation (NASDAQ:CTSH) Q4 2022 Earnings Call Transcript

David Togut: Thanks so much. Congratulations, Ravi and Steve, it’s really good to hear your voice again. Could you, Jan, give us some guardrails around gross margins in 2023? Not looking for anything precise, but maybe just help us think through some of the headwinds and tailwinds. You had a number of wage increases in 2022. Obviously, attrition coming down helps a little bit, but could you help us think about, what the gross margin range might be this year?

Jan Siegmund: Well, that I cannot do. But I think I can give you a few, David. Good to hear your words as well. And I give you a few pointers that I think are kind of important for the modeling that we had prior disclosed. So the usual merit increase that puts negative pressure on our gross margin in the fourth quarter will now occur in the second quarter. So that will disturb a little bit our pattern of regular margin development throughout the year. If anything, I think, that second and third quarter traditionally our strongest margin patterns, and then we have the fourth quarter due to the marathon this will shift a little bit. But other than that, we are not really thinking that the general dynamic of our pattern of the year is going to shift in a very meaningful way.

So I think it’s like even our past performance, there’s no guarantee for future performance. But like when I think about our year, I think that the principal dynamics remain unchanged. We have seen €“ maybe at this one point I’m getting into 12 years I look at Tyler, but we have seen actually moderate to good success with our pricing initiatives. And so the contribution of our pricing initiative to gross margin in the fourth quarter was the highest. So we have really built quarter-after-quarter momentum, and it was 50% higher than all other quarters together. And so we’re entering with a little bit of pricing momentum, and then we have €“ that’s going to be partially offset or offset by our wage increases in the second quarter. And then, as you said, coming up with some sort of metric, which of how attrition is going to help us in revenue or fulfillment and some efficiencies is going to be then for the modeling.

That’s what we also undergo right now, David. So I really don’t have those numbers yet for you, and we’re planning to do the update in the second quarter then.

David Togut: Understood. Thanks so much.

Operator: Our next question comes from the line of Jason Kupferberg with Bank of America. Please proceed with your question.

Jason Kupferberg: Hey guys thanks for taking my call. Congrats to Steve and Ravi. Ravi, maybe just to start with you. I know you obviously need time to study the organization, develop your plan. But just at a high level, is your initial sense that Cognizant has more room to improve in terms of strategy or in terms of execution?