Scot Hoffman - Financial Dynamics Francisco D’Souza - President, CEO Gordon Coburn – CFO, COO Analysts: Ed Caso - Wachovia Joseph Vafy - Jefferies & Co. Ashwin Shirvaikar - Citigroup Brain Keane - Prudential Abby Gami - Banc of America Andrew Steinerman - Bear Stearns Adam Frisch - UBS Julio Quinteros - Goldman Sachs

At this time I would like to welcome everyone to the Cognizant Technology Solutions fourth quarter and full year 2006 earnings conference call. (Operator Instructions) Thank you. Now I’d like to turn the conference over to Mr. Scot Hoffman of Financial Dynamics. Please go ahead, sir.

Thank you, operator and good morning, everyone. By now you should have received a copy of the company’s fourth quarter 2006 earnings release. If you have not, please call our office at 212-850-5600, and we’ll be sure to get a copy sent to you. The speakers we have on the call today are Francisco D’Souza, President and Chief Executive Officer; and Gordon Coburn, Chief Financial and Operating Officer of Cognizant Technology Solutions. 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 that are described in the company’s earnings release and other filings with the SEC. I would now like to turn the call over to Francisco. Please go ahead, Francisco.

What if there was a way to promote your company to a perfectly targeted group of potential customers, partners, acquirers and investors? What if you could tailor your pitch to them at the moment of maximum interest? And what if you could do this for a no-brainer price?:

Company sponsors partner's transcript: Company sponsors competitor's transcript: Issuer-sponsored research firm sponsors client's transcript:

IR firm sponsors transcript of micro-cap company: Consulting company sponsors company's transcript in sector of interest: Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details. Francisco D’Souza: Thank you, Scot and good morning everyone. Thank you for joining us today for Cognizant’s fourth quarter and full year 2006 earnings call. We are very pleased with our record fourth quarter and full year 2006 results, which marked another year of exceptional growth for Cognizant. This morning I will discuss the drivers of our growth and highlight the investments we are making in the business to capitalize on the strong demand in the market that we expect will take us to over $2 billion in revenue in 2007. I will be joined on today’s call by our Chief Financial Officer and Operating Officer, Gordan Coburn, who will take you through our numbers in greater detail, and also by our Vice Chairman, Lakshmi Narayanan. Before we get started, I would like to thank Lakshmi for his tremendous leadership of Cognizant as CEO over the last three years, as Cognizant has grown into a top-tier leader in the global IT services industry. Lakshmi has been a great mentor to me personally and I look forward to working closely with him in his new role as Vice Chairman as we continue to shape the future of the company. As you know, Venetia Kontogouris has stepped down from our Board effective January 1st. I would also like to thank her for her invaluable counsel and service to the company as a Board member for the past nine years. We benefited considerably from our insight and guidance and we wish her much success. Moving on to the company’s performance. Let me start by highlighting some of the significant milestones the company achieved in the fourth quarter. We surpassed $1 billion in annual revenue by great lengths, exceeding our internal forecast by recording more than $1.4 billion in revenue for 2006, an increase of 61% from full year 2005. Gordon will discuss our financial results in detail later in the call. Our financial success is coupled with the tremendous growth of our company around the world. We continue to aggressively expand our talent base, adding 4,500 net employees in the quarter and finishing the year with 38,850 employees. This marks 60% employee growth in the past year at the forefront of the industry and a tremendous achievement that speaks to Cognizant’s stature as an employer of choice in the global IT services industry. Adding to the list of achievements in the fourth quarter, our software development and delivery center in Coimbatore, India was successfully appraised at Maturity Level 5 of the latest version 1.2 of CMMi. This achievement underscores Cognizant’s commitment to delivering the highest levels of quality in every location to which we expand globally. But perhaps one of the most significant recognitions for the company during 2006 came in November when Cognizant was selected to join the prestigious S&P 500 index comprised of 500 leading companies across the major industries of the US economy. The achievements I have named are only a few of the significant accomplishments of Cognizant’s talented employees around the world who dedicate themselves to helping our customers strengthen their businesses, and who have made Cognizant a top-tier offshore outsourcing company and a leader in the global IT services industry. As we reflect on our performance in 2006, our record results were driven by the solid return on our strategic investments. Our major priorities for 2006 included: First, building market-leading positions in key industry verticals; Second, enhancing our ability to capitalize on the growing number of more sophisticated client engagements; Third, substantially accelerating our penetration in Europe; Fourth, broadening our service offerings, particularly in SAP, IT infrastructure services and business-processing outsourcing; and, Finally ensuring that we have the management team and human capital in place to meet our growth goals. I’m pleased to report that we made significant progress in each of these areas, and I would like to touch on some of these in more detail. We continue to see strong growth across all our industry verticals resulting from our investments in building deep domain expertise. Our financial services vertical added several strategic clients in the fourth quarter and grew 10% sequentially and 54% year-over-year. We have built a leadership position in the financial services industry stemming from our deep domain expertise across nine sub verticals. These range from consumer lending, online banking, asset and wealth management to investment banking. We apply specialized consulting expertise, fundamental understanding of critical business and our core technology skills to capture greater wallet share of our financial services and insurance client IT spending, while helping them fundamentally strengthen their businesses. I would like to focus on our healthcare and life sciences, and information services media and entertainment verticals, which illustrate the depth and breadth of the industry and domain expertise across the country. In healthcare and life sciences, we further strengthened our leadership position during the quarter, posting 23% sequential growth and 99% growth compared to the fourth quarter of 2005.We expanded our footprint in the industry, and are now working with eight out of the top global life sciences organizations. We also added several healthcare insurance payer clients to our impressive and growing list of healthcare clients. The entire healthcare industry remains under intense pressure to find new ways to reduce the cost of healthcare in the United States and simultaneously respond to rapidly changing government regulations. This trend represents a major growth opportunity for Cognizant, and we continue to invest in building solutions that help our customers address these industry challenges. For example, an area that’s significantly impacts healthcare costs is claims payment fraud and errors. Our claims audit solution framework addresses these issues in manual claim audit processing and reduces turnaround time thereby minimizing payment errors. Another significant issue the industry faces and is impacting the cost of healthcare is the 46 million Americans who have no health insurance. In an effort to provide them with quality care, new health insurance plans and cost sharing mechanisms are emerging. We have helped one of our clients with a comprehensive systems upgrade to support a new state mandate for covering the uninsured population. In our Information Services Media and Entertainment practice, which we call IME, has performed exceptionally well in the last year almost doubling in size. We serve five of the top companies across the publishing broadcasting entertainment and advertising industry segments. We currently have over 2,000 associates providing a full range of services for our clients from traditional applications outsourcing and development to newer offerings like IT infrastructure services and business processing outsourcing. Our history in the IME industry dates back to the founding of Cognizant over 13 years ago with the initial work we did for the Dunn and Bradstreet group of companies. Our growth today in IME is being driven by opportunities arising out of continued industry consolidation and the proliferation of digital media. What’s interesting to note is that we have build our strength in this industry vertical by applying the same repeatable strategic formula that has driven the success of some of our market-leading businesses such as financial services and life sciences: First, we have invested in building out our domain knowledge through focused teams concentrating on solutions in areas such as rich media distribution, digital assets and rights management. Secondly, we have brought in senior-level talent from the information services, media and entertainment industry, and hired MBA talent from top tier institutions to broaden our domain consulting capabilities, which is now evident in our associated domain consultant ratio of 40:1. Finally, we are building an incubating internal knowledge repositories and investing significantly in offerings for specific business processes within media and entertainment such as royalty statement generation and online advertising campaign management. We were also pleased with our performance in Europe during the fourth quarter, where our business continues to show significant growth. In December Ordina, one of the fastest growing and largest IT services providers in the Netherlands and Benelux announced the signature of a letter of intent under which Ordina and Cognizant will collaborate in providing a broad range of technical designs, software development and testing services to Rabobank Group. Rabobank is the largest banking group in the Netherlands, Cognizant has been working with Rabobank since 2003 as a result of our acquisition of Infopulse. This win illustrates the result of our focus on building a major presence in Europe. We also recently announce a five-year, multi-million dollar agreement with consumer goods giant, Kimberly-Clark Corporation; a major win for Cognizant in our manufacturing retail and logistics vertical. Kimberly-Clark selected Cognizant as its preferred IT applications outsourcing partner because of our strong global delivery track record, high standards of customer satisfaction, and the cultural fit embodied by our integrated onsite offshore platform. This win is significant on multiple levels. First, Kimberly-Clark has asked Cognizant to provide a full range of applications outsourcing services across a number of geographies in North America, Europe, India and Latin America, making Kimberly-Clark a key global client from the outset of our relationship. Secondly, it illustrates the strength of our ERP practice and ability to translate our investments in SAP, in particular, in to significant client engagements for Cognizant. Cognizant will be supporting a range of processes at Kimberly-Clark from strategic planning, supply chain management and execution, to sourcing, data exchange and compliance, sales and marketing, and customer management. Thirdly, this win underscores the role that we are playing for clients in helping them capture cost savings from outsourcing while also enabling high levels of flexibility and other benefits that contribute to our clients’ growth agenda. In essence, we are working side-by-side with Kimberly-Clark to drive its IT transformation agenda, currently one of the company’s key priorities. Finally, the fact we were awarded this engagement against stiff competition from the largest global and offshore competitors, and in an sales cycle which was lead by a third-party intermediary demonstrates our ability to selectively participate successfully in the growing number of large sophisticated client engagements. During the fourth quarter, we saw a reversal of the attrition trend we experienced in the previous quarter. Attrition in the fourth quarter declined to 17% from 20% during the third quarter. For the year, attrition increased from 15.2% in 2005 to 15.7%. Attrition is an issue that our entire industry is facing. In an effort to return attrition to normalized levels, we are implementing a wide range of initiatives to ensure that our employees have world-class opportunities to develop their talent and careers within Cognizant. As we move forward in 2007, we are very confident in the future success of the company as we continue to execute on our demonstrably successful strategy. As a result of our steady investments in the business, the foundation is already firmly in place to fuel our success in 2007 and beyond. We enter 2007 with a strong set of customer relationships including a roster of 87 strategic customers, which we believe represent a significant growth opportunity. We have a solid management team that has proven its ability to rapidly scale our business across multiple geographies and industry verticals, and finally we begin the year with the human capital in place necessary to execute on our strategy in 2007. We will maintain our focus on achieving long-term industry-leading growth while ensuring that we continue to maintain the superior levels of client satisfaction, which has become a hallmark of Cognizant. As we enter 2007, our strategic priorities are: First, continued globalization of our business both in the demand and supply markets; Second, investing in HR and employee development initiatives to attract, cultivate, and retain the best talent around the world; Third, investing to attain and maintain market-leading positions in each of the industry segments we serve by expanding our industry expertise, solution frameworks, and leadership; Fourth, continuing to deepen our technology services in our horizontal lines of service; and, Finally building a strong brand for Cognizant across the globe both in our supply and demand markets. Let me elaborate on these points. We have continued to expand our European business by focusing on building out our infrastructure by country to meet the growing demands for our services. We built regional management teams and distributed Cognizant veterans from around the world to further develop our European infrastructure and focus on the unique needs of customers in each country to more actively serve our existing customers and address the long-term opportunity Europe represent for Cognizant. Expanding our infrastructure in China continues to be an area of long-term focus and strategic investment for the company. We have made great strides in China over the last year and plan to sustain this momentum for 2007. We currently have a strong local management team in place and 290 associates. As of December 2006, over 93% of our team is comprised of people recruited from within China, consistent with our philosophy of being local in the key geographies around the world in which we operate. Our Chinese team is currently serving more than a dozen clients, most of whom are from the US, which demonstrates our ability to serve global clients from China, not just customers in the Asia Pacific region. Our growing team has already demonstrated the ability to deliver a full range of horizontal service offerings from application development and maintenance to testing to clients across our industry vertical practices. Furthermore, during 2006 we launched a campus hiring program in China, an important milestone for the company, which is critical to our ability to scale any global delivery solution. Our first batch of new hires from top tier Chinese universities began training in January and we have accepted offers for another 100 campus hires who will join us over the course of 2007. We intend to continue our steady investment in our infrastructure and expect to capitalize on the long-term growth opportunity that China represents as we expand Cognizant around the globe. In 2007, we will continue to make the necessary investments to secure access to quality talent in India to meet demand as we grow the company. During the fourth quarter, we began operations in the South Indian city of Kochi, which adds an eighth city to our footprint across India and underscores our commitment to diversifying our business and expanding our talent pool. Cognizant now has operations in all four southern states of India. The state of Tamil Nadu, where the cities of Chennai and Coimbatore are located. The state of Karnataka, where the city of Bangalore is located. The state of Andhra Pradesh, where the city of Hyderabad is located, and the state of Kerala, where the city of Kochi is located. In addition to expanding our footprint in order to tap regional talent pools, we are also working to expand the employable pool of talent in India and to help college students transition smoothly from the academic to the corporate world. In an effort to increase the employable pool of graduates, the government, NASSCOM, and companies like Cognizant are creating so-called finishing schools which, if successful, have the goal of increasing the employable pool of students by 20% to 25%. We have partnered with 3Edge Solutions in an innovative pilot project, which we will hope scale in the future. 3Edge Solutions, an IT finishing school founded by IT industry veterans who have deep experience in recruitment and human capital development will focus on students who, despite being technically talented, need improvement in soft skill areas such as communications, presentation, and team work before they can be considered for employment within the Tier 1 IT services firms such as Cognizant. 3Edge Solutions will recruit these students based on their academic performance, problem-solving skills and ability and provide eight to 11 weeks of intensive training with significant emphasis on developing soft skills while augmenting their technical and analytic skills with industry-standard tools, methodologies, and framework. Cognizant is working with 3Edge Solutions to tailor the curriculum to the needs of the industry and will only hire those students that meet our rigorous standards in all respects. This is an early-stage initiative which we hope over time will increase the available pool of talent in the industry. Another program that we scaled up during 2006 aimed to help students transition smoothly from the academic to the corporate world. Through our in-campus program, we provide training to students for whom we have made job offers during their fourth year of their academic study. In the Indian context, companies make job offers to students at the end of their third year of their four-year degree program. During the final year of their study on weekends or after-class hours, Cognizant conducts specific foundational level programs like Software Engineering and Data Base Management and select soft skills programs like communication skills and working in teams. This program is conducted across campuses all over India and already covers a significant number of new campus hires. As I mentioned earlier, we are encouraged by the progress we have made towards becoming a provider of choice in each of the industry verticals we serve, and are pleased with the industry recognition we have won as a result of our performance. For example, most recently in achieving the No. 5 ranking in the outsourcing category of Consumer Goods Technology Magazine Reader’s Choice awards, behind only HP, IBM, Accenture, and EDS. Our investments in 2007 will continue to build depth and presence across our industry segments. We have developed a repeatable approach patterned after the success in our financial services vertical, where we have combined our domain knowledge with our technology expertise to build a strong global consulting group of domain experts and MBAs; 400 consultants from leading financial institutions, systems integration firms, and top business schools around the world, tightly integrated with our global delivery organization. We have applied this approach to rapidly build scale and creditability in our life sciences and information, media and entertainment verticals, and believe we can replicate the success across all of our verticals, as we focus on expanding our talent base of domain experts and MBAs, building solution frameworks and reusable intellectual property to solve industry-specific business problem and applying a vertical lens on our technology and horizontal services offerings. Creating technology solutions that strengthen our clients’ business is at the core of Cognizant’s service offerings. Central to our success is our ability to stay at the forefront of major technology trends, such as the emergence of service-oriented architecture or SOA that have significant impact on our client’s businesses. Flexible IT systems are playing a much bigger role in the overall success of business and many companies are turning to service-oriented architecture to drive innovation and become more flexible to meet competitive demands. SOA has the potential to transform an enterprise to be extremely agile and bring tighter IT and business alignment. Cognizant’s vision of SOA encompasses people, process and technology. Our global technology office, in collaboration with our industry groups and horizontals, has created a multi-disciplinary team to focus on SOA in order to help our clients through complete end-to-end SOA adoption. Through our service maturity model for enterprise framework, we are able to assess and categorize an organization’s maturity in managing the life cycle of business and IT services. We have invested in building our industry-specific SOA business reference architecture, software code frameworks and a strong team of SOA designers, our technology and delivery expertise together with expert business domain knowledge help realize our customers enterprise SOA vision, and enable greater business agility. We have a number of major SOA initiatives underway across our client base, and we expect that by the end of 2008, over 70% of our development and complex integration projects will be based on the SOA paradigm. Overall, we are pleased with our performance of the fourth quarter and full year and confident in our growth strategy for 2007. Now I’ll turn the call over to Gordon to walk you through our financials in greater detail.

Thank you Francisco, and good morning to everyone. I would like to provide some additional information on 2006 fourth quarter, and then discuss our financial expectations for the first quarter as well as full year 2007. Revenue for the fourth quarter very significantly exceeded our prior guidance and expectations due to strength in health care, life sciences, and Europe, and a general year-end surge in discretionary spending. Quarterly revenue grew 12% sequentially and 65% year over year. The fourth quarter sequential growth was our highest since 1998. For full year 2006, revenue was up 61% compared to 2005, also our strongest full year growth since 1998. Throughout 2006, we continued to see healthy volume growth across a broad range of services and industries. During the fourth quarter, our financial services segment, which includes our practices in insurance, banking, and transaction processing, grew by over $70 million year over year and represented 47% of revenue for the quarter. Healthcare grew over $53 million and represented 25% of revenues. Retail, manufacturing and logistics grew by over $17 million, representing approximately 14% of revenues for the quarter. The remaining 14% of our revenues came primarily from other service-oriented businesses including telecom, media, and new technology, which grew by over $26 million compared to the fourth quarter of 2005. During the quarter, financial services grew 54% year over year and 10% sequentially; healthcare grew 99% year over year and 23% sequentially. Growth in our healthcare segment was driven by numerous life sciences clients we have recently won and are now ramping up, as well as expansion of the work we are doing for our health care payer clients. Retail, manufacturing and logistics grew 42% year-over-year and 3% sequentially and our other segment grew 81% year-over-year and 14% sequentially. For the full year, financial services grew 54%, healthcare grew 88%; retail, manufacturing and logistics grew 37%, and our other segment grew 75%. For the quarter and the full year, application management represented 51% of revenues and application development was 49%. Both services continued to grow significantly in Q4. On a quarterly sequential basis, management grew 11% and development grew 15%, reflecting the strong demand environment for our entire service offerings. For the full year, management grew 60% and development 61%. During the quarter, 86% of our revenues came from clients in North America, Europe was 13% of total revenue, the remaining 1% of revenues came from our Asian market. Our European business grew 17% sequentially and 98% year over year for the quarter as we continued to invest in that region. For the full year, Europe grew 77% to 13% of revenue from 12% of revenue in 2005. We added over 90 new customers during the fourth quarter, both our traditional profile customers/clients as well as smaller clients related to our recent acquisition. We closed the year with an active customer base of close to 400. During the quarter, the number of accounts which we considered to be strategic and have the potential to become significant revenue sources for us in the future increased by five, bringing our total number of strategic clients to 87. We ended work for approximately 30 clients during the quarter, almost all of which were very small clients. Turning to costs, on a GAAP basis cost of revenues exclusive of depreciation and amortization, increased 71% for the quarter as compared to the fourth quarter 2005. Fourth quarter cost of revenues included approximately $3.5 million of equity-based compensation expense. The increase in cost of revenues is due to additional technical staff both on-site and offshore required to support our revenue growth. We increased our technical staff by close to 4,200 during the quarter and ended the quarter with approximately 36,400 technical staff. This is a net increase of almost 13,700 technical staff on December 31, 2005. For the full year, cost of revenues exclusive of depreciation and amortization increased 64% compared to 2005. Full year cost of revenues included approximately $13.4 million of equity-based compensation expense. Fourth quarter SG&A, including depreciation and amortization, was $115.5 million on a GAAP basis, up from $69.9 million in fourth quarter of 2005. GAAP SG&A expense for Q4 of 2006 included approximately $4.6 million of equity-based compensation expense. For the full year 2006, SG&A, including deprecation, amortization was $377.4 million, an increase of 65% compared to 2005. Full year SG&A included approximately $16.5 million of equity-based compensation expense. GAAP operating income for the quarter increased 50% to $76.4 million from $51 million in the fourth quarter of 2005. On a non-GAAP basis, which excludes the impact of $8.1 million of equity-based compensation expense, operating income for the fourth quarter was $84.4 million, up 65% from 2005. Our GAAP operating margin was 18% for the quarter and our non-GAAP operating margin for the quarter was 19.9% in line with our target range of 19% to 20%. Interest income for the fourth quarter increased to $5.5 million, compared to $2.9 million for the fourth quarter of 2005. Interest income increased due to the higher global cash and short-term investment balances, as well as an increase in short-term interest rates. We had a $400,000 foreign exchange gain during the quarter. Our GAAP tax rate for the fourth quarter was 15.5% bringing our full year tax rate to 16.2%, slightly favorable to our prior expectations. Turning to the balance sheet, our balance sheet remained very healthy. We finished the year with over $648 million of cash and short-term investments, up over $224 million from the beginning of 2006 and up over $112 million from September 30 2006. During the fourth quarter, operating activities generated approximately $118.5 million of cash. Financing activities, primarily the exercise of stock options, generated approximately $24.5 million of cash. These amounts were partially offset by approximately $33.5 million of capital expenditures. In addition, we generated approximately $1.4 million of cash due to currency translation adjustments. For the full year, operating activities generated approximately $252.9 million of cash. Financing activities, primarily the exercise of stock options, generated approximately $51.4 million. These amounts were partially offset by approximately $104.7 million of capital expenditures and $15 million for the acquisition of ANet. In additional, we generated approximately $5.6 million of cash due to currency translation adjustments. Due to the timing of construction payments, our 2006 capital expenditures were about $15 million less than projected. For 2007 we expect to spend approximately $180 million on capital expenditures, the substantial majority of which is related to the construction and equipment of additional development centers to support our growth. Our collection of trade receivables during the quarter rebounded beyond our expectations. Based on our $298.5 million balance on December 31, we finished the quarter with a DSO including unbilled receivables of 65 days compared to 63 days in the same period in 2005, and down from 72 days in the third quarter of 2006. During Q4, excluding unbilled receivables, our DSO were approximately 56 days. The quality of our receivables portfolio remains very strong. Our unbilled receivables balance was approximately $39.3 million at the end of the fourth quarter, up about $16.5 million from December 31, 2005 and down $3.5 million from Q3 of 2006. Approximately 60% of our December 31st unbilled balance was billed in January. During the fourth quarter, overall 24.7% of our revenue came from fixed-price contracts, up from 24.2% in the third quarter of 2006, and down from 25.7% in the fourth quarter of 2005. When we look at the mix by solution type during the fourth quarter, 31% of our development revenue and 19% of our maintenance revenue came from fixed-price contracts. For the full year, 24.9% of our revenue came from fixed-price contracts. Turning to headcount, at the end of the fourth quarter our worldwide headcount including both technical professionals and support staff totaled approximately 38,850. This represents a net increase of almost 4,500 people during the quarter and over 14,500 people for the full year of 2006. Slightly more than 50% of our Q4 hires were recent college graduates who will enter our training program, and the remainder were lateral hires of experienced IT professionals. For the full year approximately or slightly more than half of our hires were recent college graduates. As discussed during our call last November, we had experienced a spike in attrition during the third quarter of 2006. As Francisco discussed earlier, during the fourth quarter we experienced a downward sequential trend in attrition from 20% annualized to 17%. On a full year basis total attrition was 15.7%, slightly above 2005’s level of 15.2%. Our detailed analysis of attrition patterns for the last two quarters indicate there was no single reason for the increase in attrition, and as we have discussed in the past, this is an industry-wide trend. Given these two facts, we recently launched a global initiative which will continue through 2007 and beyond to ensure that our employees receive the rewards, recognition, and personal and professional growth opportunities across their entire life cycle with Cognizant. We believe that this initiative, as it is rolled out, will help enable Cognizant to remain an employer of choice and to attract and retain the best talent throughout the world. The initiative, which we call ‘Here at Cognizant You Grow’, focuses on four themes that we believe are critical to delivering a strong career experience to each of our employees across the globe. These themes are being global, harnessing innovation, leading hyper growth and cultivating a Cognizant ecosystem. The funding for this initiative including any compensation changes that we determine are needed to ensure that we provide market-competitive compensation is already built in to our guidance. Once this initiative is fully rolled out, we believe it will help differentiate Cognizant as an employer of choice in the marketplace. On-site utilization declined slightly in the fourth quarter to around 86%, due to seasonality. Offshore utilization, excluding recent college graduates who were in our training program during the quarter, was approximately 75%. Including trainees, offshore utilization was approximately 58% for the quarter. We had over 5,000 unbilled people in our training program at the end of the quarter. I would now like to comment on our growth expectations for the first quarter of 2007, as well as full year. The investments we are making are producing results. It is allowing us to differentiate ourselves from the marketplace both in terms of winning and growing new clients and expanding our service offerings. In addition, our client and employee satisfaction levels remain at a level for which we are proud. This has resulted in stronger than expected results in Q4 and provides us with a strong foundation of growth in 2007. For the first quarter of 2007, we are projecting revenues of approximately $448 million. This represents roughly 6% sequential growth and 57% year-over-year growth. Due to the unusual strength of our revenue performance during the fourth quarter of 2006, it makes for Q1 being a tough comparable on a sequential basis, yet on a year-over-year basis it represents performance near the high end of our comfort zone. We continue to have significant revenue visibility due to our high level of recurrent revenue and long-term nature of our relationships. In fact, today, we have customer commitments for well over 90% of our first quarter revenue guidance. For the full year 2007, based on the strong demand environment for offshore services and our favorable experience with ramp-up rates, we are pleased to provide initial guidance of at least $2.04 billion. This represents growth of at least 43% and an increase of more than $615 million compared to 2006. As has been typical in past years, we expect the majority of our growth in 2007 will come from the ramp-up of clients we have won over the past few years. During 2007, we intend to closely monitor our spending and expect our operating margin to remain in the range of 19% to 20% before the impact of equity-based compensation, in line with our historic margin level goals. As stated on previous occasions, please note our operating margin targets exclude the impact of equity-based compensation. With this expected level of revenue growth and our expected operating margins, we are currently comfortable with our ability to deliver in Q1 GAAP EPS of $0.47 and non-GAAP EPS of $0.42, excluding equity-based compensation of $0.05. This guidance includes the anticipation of Q1 share count of approximately 152.6 million shares, a tax rate of 16.2%, and an operating margin in the upper half of our guidance range, excluding the cost of equity-based compensation. For the full year 2007, based on current business trends, we currently expect GAAP EPS to be at least $2.10 and full year non-GAAP EPS to be at least $2.31, excluding equity-based compensation expense of $0.21. This guidance includes the anticipation of a full year share count of approximately 154.1 million shares. Now we would like to open the call for questions.

(Operator Instructions) Your first question comes from Ed Caso - Wachovia. Ed Caso - Wachovia: Good morning and congratulations. I have a sense that your operating margin year-over-year is guided a little bit lower, and I was curious how much that was the swing in foreign exchange, how much might be a comp issue potentially outside of India, how much is conservatism and how much is something I didn’t ask? Gordon Coburn: I would put it, almost all, on something you didn’t ask: our long-term strategy, one that we followed for many years has been to be in a 19% to 20% operating range, excluding options expensing. This year we ended up at 20.3%, so we were above our range. We don't view that as a good thing for the business. We want to continue to invest very heavily for the long-term revenue growth and differentiate ourselves in our market, so our goal is to get back into our range for 2007. Now, also included in that is we have to cover things such as the rupee depreciation that we experienced and wage inflation and that's all built into that, but the underlying premise is we want to be back in our range and reinvest heavily back in to the business. Ed Caso - Wachovia: Just a quick follow-up, on the domestic, the U.S., and European wages, what is happening there? Is the growth rate accelerating or not? Gordon Coburn: We certainly expect there to be continued wage inflation in 2007. As you know we give our raises April 1st. We are still in the process of finalizing the exact size of the increases. The increases we give will ensure we remain an employer of choice in India. Our budget and our guidance assumed that the wage increases, particularly for India, are higher than what we gave in 2006 but we have not finalized the numbers yet. Ed Caso - Wachovia: Thank you. Operator: Your next question comes from Joseph Vafy - Jefferies & Co. Joseph Vafy - Jefferies: Great results. I was wondering if we could talk a little bit about the Europe business and the bank deal. Would you expect to see more of these types of strategic relationships popping up with maybe some of these European and maybe other multinational IT firms where maybe those firms don't have a good footprint in India, and they might be looking around to partner? Francisco D’Souza: I think on a selective basis, where it makes sense for both parties, you'll see us entering in to these kind of arrangements. In the case of the Ordina and the Rabobank situation, there was a specific requirement there for staff transfer from Rabobank over to Ordina and so it made logical sense for us to partner there in the Netherlands because we don't have the size and scale in the Netherlands to undertake the magnitude of staff transfer that was involved in that particular case. In situations like that where there's a good reason, you'll see us do those selectively more and more. Joseph Vafy - Jefferies: To follow up on that, it sounds like selectively that might be the strategy, but overall, the real strategy here is to bid and to go after business as much as you can alone, even in environments that might be a little different than what you might be used to in your current book of business? Francisco D’Souza: Clearly, we are committed, as I said, to building out our local management teams across Europe and in fact across the world, and our strategy has always been to essentially be local in the countries in which we operate. Hire teams locally in countries that can adapt to the changing requirements and essentially modify the Cognizant model for the local needs in each market. So our goal is to definitely build out local teams, local presence and bid on customers directly. Joseph Vafy - Jefferies: You said you had 5,000 unbilled people in the training program. How many of those do you expect to become billable here in the first quarter? Gordon Coburn: Joe, they obviously phase. We hire trainees throughout the year, obviously Q3 and Q4 are big quarters for the trainees. Typically they become billable about six months after they join, so they'll get phased in throughout Q1 and Q2. Joseph Vafy - Jefferies: Thanks, I'll turn it over. Operator: Your next question comes from the line of Ashwin Shirvaikar - Citigroup. Ashwin Shirvaikar - Citigroup: Fabulous results. Could you talk about how many people you can hire and train each quarter, including the impact of new areas like testing and BPO, not just ADM? To what extent will you need to hire laterally for '07? Gordon Coburn: Our basic strategy is, obviously as you know, there is a long lead time with college hires so we put out a significant number of college offers and then depending on where growth ends up we fill in with additional lateral hires. You saw that this year, obviously we grew much faster than expected coming in to the year, so as a result the mix between college and laterals wasn't quite as high on the college side as we would have projected. It is one of the things each week we continue to evaluate and we speed up and slow down the lateral hiring as necessary to build off of the base of college kids that we recruit. For college recruiting, we're in very good shape. We recruit at an expanding number of universities. Our brand has become very well recognized. So we continue to feel very good about our ability to recruit off campus. Ashwin Shirvaikar - Citigroup: Can you comment on the new areas like testing in BPO and ERP? What are your hiring needs there? Is it different training? Gordon Coburn: Certainly for things like ERP there's a longer training cycle. BPO, there's such a wide range of activities, sometimes the training is short, sometimes it's more involved. Testing would be pretty similar to our normal training patterns. Ashwin Shirvaikar - Citigroup: Any comments on pricing before I turn it over? Gordon Coburn: Pricing, our average realized rate was up about 1.5% for 2006 right in line with what we expected when we began the year. For 2007 we expect our average realized rate to increase at a slightly faster pace, which is in line with the expectations we had as the started the budget process. You know, is it going to be dramatically faster? No, but we think it will be slightly higher than what we experienced in 2006. The expected change that we believe will be able to achieve in our average realized rates for 2007 also reflects the fact that not all of our clients are eligible for rate increases during the year so you only get the increase on part of your client base and that we believe will average out to a realized change of about 2%.

Your next question comes from Brian Keane - Prudential. Brian Keane – Prudential: I just wanted to follow up on that. Is that being helped by the mix of business change or are you seeing actual increases on like-for-like renewals and new deals? Gordon Coburn: This is primarily the like-for-like renewals plus the new deals ramping up. The business mix changes, I think, is going both directions, so it kind of nets out. Brian Keane – Prudential: Are you seeing better pricing in renewals that than you have over the last 12 months, more recently? Gordon Coburn: On average, yes. Obviously it's a scattergram. Some no, some much better, but on average certainly, it's slightly better-- the adjective ‘slightly’ in there-- slightly better than '05 and '06. Brian Keane – Prudential: Can you quantify the positives and negatives of FX in the fourth quarter? Also, the tax rate it looks like going to stay pretty low -- just some thoughts about that going forward. Gordon Coburn: Certainly, In the fourth quarter, the rupee moved on average by about 3% that cost us, everything else being held equal, about 60 basis points. Now obviously, that didn't all flow through because we have lots of other levers. Brian Keane – Prudential: Back on the rupee, there was also a 400,000 gain, right? Gordon Coburn: That was in operating margin, we have always had some gains and losses below the line and that has to do with our primarily our rupee cash balances and inter company balances, and that could go either way depending on whether that balance is positive or negative on a particular quarter, so that's when it always bounces around, not dramatically, but that's much harder to predict. On the tax rate we came in 10 basis points for the year lower than we had expected, and that was primarily the result of stronger than expected Q4 revenue. For 2007, we're assuming that the tax rate remains constant at 16.2%. Brian Keane – Prudential: Congratulations. Operator: Your next question comes from the line of Abby Gami - Banc of America. Abby Gami - Banc of America: Your utilize rate offshore including trainees of 58% remained, I think, consistent sequentially, but maybe a little higher than it has been recently. Do you still want to target a number more to the mid 50s or lower 50s or are you trending that number slightly up now? Gordon Coburn: I don't think strategically we're trying to move it a whole lot one way or the other. The reality is it's going to bounce around a bit. In 2004 and 2005 strategically we were bringing it down because we wanted to make sure as we expanded our services, and we saw healthy growth, we wanted to make sure we had qualified people available for our clients when they needed them. We think at the levels were at now we are able to provide that so you'll have some seasonality that will bounce around, but we're not trying to move it one way or the other. Abby Gami - Banc of America: Other than due to seasonality, are there any other trigger points that would change your strategy around your utilization rates, such as slowing industry growth or anything you want to see that will make you change that rate? Gordon Coburn: Certainly, and who knows when this will happen, but eventually obviously the growth rates slows and in a much slower growth environment you would not have to carry as deep of bench on a percentage basis. Abby Gami - Banc of America: Thanks very much. Operator: Your next question comes from the line of Andrew Steinerman - Bear Stearns. Andrew Steinerman - Bear Stearns: Hi, Gordon, just a quick clarification. When you say surge of discretionary spending in fourth quarter and then you called out tough comp sequential in first quarter, do you think that fourth quarter strong revenues in anyway robbed from first quarter? Gordon Coburn: We're trying to figure that out a little bit, it is always a little tough to tell. Clearly there was some budget flush in the fourth quarter which often makes the comps tougher. Andrew Steinerman - Bear Stearns: Any client concentrations right now? Gordon Coburn: We continue to move in a positive direction, the top five clients were a little over 28%, top ten clients were about 38.5% and I think you'll continue to see those ratios come down just as we get bigger. Andrew Steinerman - Bear Stearns: You don't have any 10% clients, right? Gordon Coburn: No 10% clients. Andrew Steinerman - Bear Stearns: Excellent, thanks very much. Operator: Your next question from the line of Adam Frisch – UBS. Adam Frisch - UBS: Thanks, good morning. Gordon that green bag still has some magic left in it, right? Everything has pretty much been asked, but the second half increase in utilization, how much of that was by design and how much of that was from timing when people moved in and out of training classes? Gordon Coburn: I say it's not by design; it's a combination of you have some seasonality because of vacations in the fourth quarter. You have some seasonality when people are hired but I think, Abby asked, are we trying strategically trying to move utilization one way or the other, the answer is no to that. Francisco D’Souza: I think it's also important to note that it is tied to growth, we grew fast so that's we ate into the bench a little bit -- that's why we maintain the bench; so you expect to see as we grow we hit a surge in the fourth quarter-- our bench is essentially a rapid response force, we can respond quickly and that's why you saw utilization go up a little bit. Adam Frisch - UBS: Just to follow-up on Abby's question, we shouldn't take that as a sense of some of the leverages being eased out of the system, so to speak? Francisco D’Souza: No. No. Not at all. Adam Frisch - UBS: Do you expect the sources of headcount growth to remain in the same in '07 as in '06? I am speaking in terms of college versus laterals. Gordon Coburn: Let me hit the college versus lateral and maybe Francisco can comment for the college, and give a little more color on that. For 2006 our target was to have a bit higher percentage of people be college recruits. Obviously what happened was revenue growth was much stronger than we anticipated so we went on to the market for lateral hiring so a lot of it will depend on where in the end revenue settles down. But certainly we would like to increase the college percentage a little bit, because it dipped a bit lower than normal in 2006. Francisco D’Souza: I think it is worth noting that as I said in my comments that we're doing a couple of different things to try to improve the employable talent pool, so we're investing in so-called finishing schools, or working together with finishing schools, in this case 3Edge Solutions is our pilot and the goal there is to see this over a sustained long period of time, we can actually improve the employable of students in India. As many of you know, there is a large talent pool in India of engineering graduates of which estimates that only 20%, 25% are actually employable by tier 1 IT services firms. So we feel like over time if we can improve that then that will open up a source of talent that in the past we have not had access to. The other thing we have been doing in addition to starting our campus recruiting program in China, in Q4 as I mentioned is that we're also looking very selectively in certain lines of our business to the possibility of hiring so-called science graduates in India, and we are using science graduates for some of our lines of service where an engineering graduate degree is not necessary. Adam Frisch - UBS: Okay, thanks for that color. My last question is, if we look back on '06 and '07, two of the bigger catalysts that were small but became much more meaningful looking into '07 and even into '08, what do you think are going to be the bigger contributors to growth, just from a growth rate perspective not necessarily from the dollar perspective? The things that are on the horizon that could be your next legs of growth, whether it be different service lines or geographies? Francisco D’Souza: I think the ones I would call out are from a service line perspective, certainly we see a lot of interest in IT infrastructure services. That's an area that we are investing in. As you know we did the acquisition of ANet last year, and we continue to see interest from across our customer base there; it's a very large market opportunity. We are also seeing strong growth and traction in our ERP practice, particularly in SAP. As I mentioned, the win we had in the fourth quarter at Kimberly-Clark was validation of the investment that we're making in the SAP space as a big part of the Kimberly-Clark opportunity is SAP related. Finally Europe which we continue to see, from a geography perspective, strength in Europe. So I think are the three that I would call out. ERP particularly, SAP, our IT infrastructure business, and our business in Europe. Adam Frisch - UBS: Just to follow up on the ITO, how many people do you have on that now, where do you expect it to grow, what kind of growth is it experiencing? Gordon Coburn: We don't break out the specific number, but the business is growing at a very healthy pace. The ANet acquisition we did really gave us that platform the creditability a very good management team; so were starting to have real success in both winning new clients and cross-selling in to our existing clients, so we think 2007 will be a very important year for ITIS, the way 2006 was for testing and some other things. We have the pieces in place now for it. Adam Frisch - UBS: Great. Thanks, guys. Gordon Coburn: Operator, I think we have time for one more question. Operator: Your last question comes from the Julio Quinteros - Goldman Sachs. Julio Quinteros - Goldman Sachs: Real quickly, if I could go back to your comments around fixed price, Gordon, did you talk about what percentage you actually thought fixed price could go to in the next couple of years? Is there some kind of target we should be looking at there? Gordon Coburn: In the end we are going to go to wherever our customers want to go. One of the things we offer is to be very flexible. I have been surprised that it hasn't gone up as a percentage of revenue. We actual wanted it too. But I think what is happening is customers want to get going really fast with us, and they are very comfortable with us, so rather than spending the time to fix bids and the whole thing, they are saying lets get started on a time and material basis and maybe we will flip it over later. So, I think over time some of this stuff will flip over, which would be fine with us. If I was betting I would bet it will increase slowly, but not quickly, but in the end we can do what is right for the customer. Julio Quinteros - Goldman Sachs: Over the last couple of days, we have been hearing a lot about outcome-based pricing opportunities for some of your competitors. Are you guys seeing any of those types of options sort of percolating up and clients probably looking at some of this where you guys could share in some of the risk and the reward with the clients? Gordon Coburn: I think you are going to continue to see a broader range of pricing methodologies; obviously you have traditional T&M, you have the traditional fixed price, clearly in infrastructure management you are going have transaction-based and unit-based pricing. BPO obviously transaction-based pricing. I think you will start to see some things that have risk sharing, particularly around productivity gains. Yes, I think you have some of that. Obviously we go into this stuff with our eyes open to make sure we are doing the right thing for our shareholders but it's in the end, will we put some skin in the game? Absolutely, yes. We have no problem with that. Julio Quinteros - Goldman Sachs: Are you doing any of that, though, on the outcomes basis? Gordon Coburn: It's negligible. Julio Quinteros - Goldman Sachs: One of the other things that came out for some of the other players over the December quarter results was sort of asset-based solutions, product-lead strategies, and it seemed like for at least a few of the guys that this was an area of focus, in particular as you look at breaking the linearity of the model, in particular. Can you talk about where you guys sort of see that happening I mean I understand you have frameworks methodologies, et cetera, and there might be some specific software components that you guys use, but is there any thinking or direction in terms of where you want to be with regards to possible license-type sales? Francisco D’Souza: I think you hit it in the question. Really, our focus is on building our industry practices through building out solution frameworks to solve specific industry problems, and when we talk about frameworks, we are talking about, as you said, an approach, a methodology, a template; but also very often code and reusable components that we can take to clients to help solve that particular problem more quickly. When that happens, obviously we're careful to make sure that we retain the right to our framework and our software, so that this remains our intellectual property. Beyond that, we look at it as a solution accelerator, we look at it as a way to, in some respects, break linearity but really for us to be much more relevant in terms of our ability to address clients problems far more quickly. Julio Quinteros - Goldman Sachs: But not specifically as a software license sale with initial licensing fees or anything along those lines? Francisco D’Souza: No, but again as I said we will retain IP ownership in our framework to our intellectual property. Julio Quinteros - Goldman Sachs: Sure. Lastly, Latin America, can you talk a little bit about your strategy there? I have heard you talk about Europe and Asia, but where does Latin America fall out for you guys as a priority? Francisco D’Souza: We are currently evaluating our options in Latin America. We have had a small presence in some of the countries of Latin America, largely delivering services as part of larger global deals for clients, so where we have to serve our clients across multiple countries there has often been a Latin American component to that. Latin America is a thrust area for us in 2007. It's something that we're focused on currently. We are evaluating what we want to do in the markets and we're looking at the markets both from a demand side and also from a supply side. We think there's a good talent pool in Latin America. I hope that in the next quarter or two, we'll have more details to share with you on specific plans in Latin America. Julio Quinteros - Goldman Sachs: Great. Thank you, guys. Francisco D’Souza: Thank you all again for joining our call today. In conclusion, we're very pleased with our financial and operating performance in the fourth quarter and for the full year 2006. We continue to be very confident in our business strategy and the platform we have in place to take the company forward through the next phase of our growth as we move forward in 2007. We look forward to talking with you next quarter.

Company sponsors partner's transcript: Company sponsors competitor's transcript: Issuer-sponsored research firm sponsors client's transcript:

IR firm sponsors transcript of micro-cap company: Consulting company sponsors company's transcript in sector of interest: Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details.