Ladies and gentlemen, welcome to the Cognizant Technology Solutions Second Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to turn the conference over to David Nelson, Vice President-Investor Relations and Treasurer at Cognizant. Please go ahead, sir.

Thank you, operator, and good morning, everyone. By now you should have received a copy of the earnings release for the company's second quarter 2016 results. If you have not, a copy is available on our website, cognizant.com. In addition to the traditional speakers on our earnings calls, Francisco D'Souza, Chief Executive Officer; Gordon Coburn, President; and Karen McLoughlin, Chief Financial Officer, we are delighted that Raj Mehta, CEO, IT Services, will join our calls beginning with this quarter. Raj is a long time key executive at Cognizant who leads our industries, geographies and delivery operations on a global basis. Adding Raj to the call will enable us to provide you with additional color on our operations and business opportunities. 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 risk 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.

Thanks, David, and good morning, everyone. Thanks for joining us today. Our Q2 revenue was $3.37 billion, up 5.2% from Q1 and 9.2% from a year-ago and was within our guided range of $3.34 billion to $3.40 billion. Against the backdrop of a challenging macroeconomic environment and market environment and a slow start to the year, we executed well last quarter and we continue to gain market share. The quarterly sequential dollar growth was one of the strongest in our history, as we added incremental revenues of almost $170 million. This performance represented broad-based growth across service lines, geographies and industries. As we had anticipated after a slow start in Q1, our financial services and healthcare segments turned in positive sequential growth in Q2. As we enter the second half of the year, we see certain macroeconomic factors as well as some softness in clients' discretionary spending that'll affect our revenue growth primarily from financial services and healthcare clients. Additionally, we anticipate a further negative revenue impact of approximately $40 million for the second half of the year due to the weakening of the pound sterling following the Brexit vote. For these reasons, we're revising our full-year revenue growth guidance to a range of $13.47 billion to $13.60 billion, while maintaining our full-year non-GAAP EPS guidance within a range of $3.32 to $3.44. Gordon, Raj and Karen will expand more on the cyclical weakness that we are facing in the short-term. As you listen to their comments, I'd like to emphasize that the medium-term to long-term fundamentals of our business are strong. We continue to see significant market opportunity; and more importantly, gain market share. Digital transformation continues to be a strong driver for demand as clients look for new solutions that allow them to defend their businesses against digital…

Thank you, Frank, and good morning to everyone. I'd like to start by providing some additional context on the specific short-term headwinds that are leading us to revise this year's revenue guidance. First, as we indicated on our last two earnings calls, discretionary spending in the banking sector remained soft, weighed down by macroeconomic concerns and a prolonged low interest rate environment. While we did see a return to healthy sequential growth in the second quarter, we expect banking discretionary spending during the second half of 2006 (sic) [2016] to be slower than we anticipated three months ago. Complicating the situation, of course, is the uncertainty arising from the Brexit vote in the UK. Economic growth forecasts and short-term to medium-term interest rate projections have generally been revised down since the vote. Given this new development, we see the banking sector being more cautious in spending over the near-term, and therefore, we believe it is prudent to err on the side of caution in banking and financial services revenue planning for the remainder of this year. Second, the sharp weakening of the pound sterling will have a negative impact on our second quarter revenue of approximately $40 million, assuming the currency holds at current levels. As you know, the pound sterling has seen a 12% depreciation since the Brexit vote. Third, as we indicated to you at the beginning of this year, consolidation within the U.S. healthcare industry has impacted the revenue growth of our healthcare practice. Given the status of the M&A regulatory approval process, we anticipate that project spending will continue to slow for clients involved in these consolidations for the remainder of the year. Finally, we're also seeing customer pullback on discretionary spending in other pockets of our business. For example, some clients within our information services…

Thank you, Gordon, and good morning, everyone. I'm delighted to be here today and look forward to interacting more with the investment community going forward. Let me now provide some additional color on our performance across industries and geographies. Our banking and financial services segment was up 5.1% sequentially and 8.1% year-over-year. As expected, banking and financial services returned to positive sequential growth in Q2. Due to the increased macroeconomic uncertainty and the prolonged low interest rate environment, we expect spending within banking to be sluggish during the second half of 2016 and revenue for our BFS segment to be up slightly sequentially for Q3 and Q4. Within our insurance practice, demand remains solid, particularly for solutions which help transform the claims and underwriting processes and deliver greater efficiencies, increasingly through managed services or other outcome-based arrangements. In addition, we've seen an increasing demand for solutions which help clients rationalize and transform their infrastructure landscape. Our healthcare segment, which consists of payer, provider, pharmaceutical, biotech and medical device clients grew 4.9% sequentially and 6.9% year-over-year. The industry consolidation among several largest U.S. payers continues to weigh on our healthcare payer practice. However, we remain optimistic about the long-term opportunities within the payer segment, as the industry embarks on a fundamental change in the business model. This is driven by the Affordable Care Act, and changing regulatory environment, consumerization of healthcare, and an increased focus on medical cost. In this rapidly changing environment, it is critical that payers have solutions in place that can both drive efficiencies and adapt to ongoing regulatory and technological changes. We're able to offer clients such solutions through our combined TriZetto software with Cognizant services. Last quarter, we spoke about a large healthcare deal that we launched with EmblemHealth, leveraging the TriZetto platform. This program continues…

Thank you, Raj, and good morning, everyone. Second quarter revenue of $3.37 billion was within our guided range and represented sequential growth of almost $170 million, or 5.2% sequentially. Revenue increased by 9.2% year-over-year, including a negative currency impact of $25 million or 80 basis points. Non-GAAP operating margin, which excludes stock-based compensation expense and acquisition-related expenses was 20.3%, slightly above our target range of 19% to 20%. This positions us well to absorb our compensation increases which will take effect during the third quarter. Non-GAAP EPS of $0.87 was also above our guidance range of $0.80 to $0.82 due to a slightly lower tax rate and stronger operating margins. During the quarter, we executed a one-time remittance of cash from India to the U.S. and to other international markets. This will provide additional financial flexibility in funding our strategic investments to drive long-term growth for Cognizant. Let me provide you some additional color on this transaction. In May, our India subsidiary received approval to repurchase stock worth $2.8 billion from certain of its shareholders, which are non-Indian Cognizant entities. This repurchase resulted in a one-time remittance of $1 billion to the U.S. net of taxes, with the other $1.6 billion to other non-India overseas locations. This buyback also resulted in a one-time tax impact of $190 million in the second quarter with approximately $24 million incremental tax impact expected in each of the third and fourth quarters this year. The tax impact of this transaction had a $0.31 per share impact on our Q2 GAAP EPS, but was excluded from our non-GAAP EPS calculation due to the non-recurring nature of this transaction. Consulting and technology services and outsourcing services represented 57.5% and 42.5% of revenue respectfully for the quarter. Consulting and technology services grew 4.6% sequentially and 9.3% year-over-year.…

Thank you. We will now be conducting a question-and-answer session. In the interest of time, we ask that you limit yourself to one question only. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Tien-tsin Huang with JPMorgan. Please proceed with your question.

Thank you. The prepared remarks were helpful, but just wanted to ask about the outlook. I guess not surprised with the lower revenue outlook but it's the second cut here this year. What I wanted to ask, is the business just getting harder to predict for maybe secular reasons, or is the macro just getting really tough on some of your larger clients? Just trying to understand the secular versus the cyclical side of things.

Tien-tsin, it's Gordon. It's a bit both. Certainly the macroeconomic environment has gotten tougher to predict, both – certainly the UK vote and not necessarily the direct impact but the indirect impact of a more sustained lower interest rate environment, was certainly a surprise to us and it would have been tough to predict, and it was a surprise to our banking and insurance clients, and you're seeing the impact on that. So that sort of thing is tough to predict. Obviously some of the uncertainty around the U.S. elections creates some uncertainty. In terms of structural things for us, the business, when you think about digital and so forth tends to be more – a little bit more project-oriented. But those are swings we go back and forth on. So, I wouldn't argue that there's any long-term structural change in the ability to predict the business. Short-term, there is a bit.

Got it. Yeah – no, certainly, a lot of surprises going on. Just as a quick follow-up, just the repatriation of cash, is the priority there to buy back stock, or are there some larger acquisitions maybe you want to do in the U.S. or Europe?

So, Tien-tsin, this is Karen. So, I mean I think as we've talked about, we do want to ramp up the volume of M&A, not necessarily large-scale deals, but certainly more transactions. And you've seen that with Idea Couture and our investment in ReD and so forth this year. So certainly, we will look to deploy that cash effectively, looking to use it to invest in growth for the business.

And on share repurchases, as we said historically, our target is to maintain share neutrality. But we are also opportunistic depending on valuation of the stock.

Thanks for the update.

Operator?

Our next question comes from the line of Bryan Keane with Deutsche Bank. Please proceed with your question.

Hi, guys. Karen, I know recently at some conferences, you stated that Cognizant is likely only to grow organically a max $1.5 billion in any given year. So, I guess that limits your top line growth rate as Cognizant gets larger. So trying to figure out what else you guys can do to grow EPS. Is it time to expand operating margins? Because essentially, I mean – we're only going to grow EPS at about 10% at top line so looking to grow that level, and then as we get larger, it's only going to get smaller. So, what are we going to offset that to be able to grow EPS? Is it margins or buybacks or what else can we do?

So, Bryan, I think what we've been saying is, if you look historically, right, we've been averaging roughly $1.5 billion over the last several years. And that's true, if you look at all large services organizations, right. There aren't many organizations that have grown organically, consistently, more than $1.5 billion a year. Now that's not to say that there won't be years where you can and that's not to say that organizations can't do that. We've sort of been referring to what we've done historically. And particularly as people try to think about long-term growth rates and percentage growth, which obviously comes down over time due to the law of large numbers. I think, certainly we will look to continue to drive growth both organically and inorganically. As we've said, we clearly look to increase the volume of M&A transactions that we're doing. We continue to believe there's significant opportunity in the market for us to grow and continue to take market share. And certainly, at this point, we believe that the 19% to 20% non-GAAP operating margin that we've historically provided will continue to be an appropriate range for us. It gives us the flexibility to continue to grow the business, while maintaining a strong financial performance.

Hey, Bryan, it's Frank. I'll just add to that and say that, I don't think there's anything inherent or magical about a $1.5 billion number, particularly given the structure and dynamics of our industry. If you think about our industry, it's highly fragmented. Nobody has a dominant market share. The ability to take share from each other, and not to mention the fact that technology overall in the economy is playing a much larger role, I think the growth opportunities are significant. So, I think you should look at the $1.5 billion as in the historical context, but I wouldn't necessarily use that as a rate limiter for our growth going forward.

Okay. Frank, and just as a follow-up, you mentioned that you guys are taking share, but if I look at your growth rates for 2016, they do appear lower than peers. So, just want to make sure what you mean by that comment. Is that a going-forward comment, or is that something else you guys are looking at that says you guys are taking share? Thanks so much.

I think it's important when you look at the taking share comment, to look at a couple things. First of all, over a long period of time, I think we have been taking share and if you look at the long-term trajectory as we continue to invest in the business, we create disproportionately larger growth opportunities for ourselves, which allows us to take share. I think looking at percentage growth rates is only one part of the equation, because that doesn't adjust for size of organization. I think a very interesting number to look at in that context is incremental dollars added. If you look for example, this quarter, we added close to $170 million of incremental revenue in the quarter. And so if you, in a sense, think about that as being a proxy for market share gain, I think it tells the story that supports our thesis, that we can continue to grow and take market share ahead of competition by investing in the business.

Operator?

Our next question comes from the line of Ashwin Shirvaikar with Citigroup. Please proceed with your questions.

Hey, Frank, Gordon, Karen, and welcome to the call, Raj. I want to talk about healthcare and the EmblemHealth deal that you announced, do you need additional regulatory approval to continue to ramp that? And I recall you had mentioned another similar deal in your pipeline. So, can you provide insight into that, as well as other deals that you may be looking at, in terms of forward growth trajectory?

Ashwin, it's Gordon. Happy to answer both those questions. In terms of regulatory approvals, Emblem's really best positioned to discuss regulatory requirements for their business; but from our perspective, for the work we're doing for them, we've obtained all the necessary approvals to move ahead with our work. When we look more broadly at healthcare and end-to-end solutions, we're seeing a lot of interest in the market. And the reason why is, health plans are under tremendous pressure right now to keep rate reductions as low as possible. And we can really help them with that, with regulatory compliance, with not having to make investments on their own. So, we're seeing increasing interest as we roll out our healthcare platform-based solutions. We talked about the two big deals this year, one of them obviously we just discussed. The other one continues to move along. I think in terms of when it will close, that's probably towards the very end of the year. But since we talked last three months ago and I look at the pipeline of activities, that continues to increase very nicely, obviously that will be revenue for next year. But as we just recently sat down and did a review of our healthcare strategy and we concluded – we really have identified a market with the need in it, based on the changing dynamics in the industry and based on the unique capabilities that Cognizant has with a combination of the leading healthcare administration platform and just incredible domain expertise and technical expertise, so we feel really good about healthcare over the medium-term to long-term. Obviously, there are specific payers in the M&A process that are a headwind in the short-term.

And with regards to financial services, how much of your commentary has to do with specific dialog that you're having with your clients, that says that demand will be down versus your peers that demand could be down? And then is pricing a part of this discussion, as well?

Yeah. Hi, Ashwin. This is Raj here. Look, financial services was, obviously, we had a good quarter in Q2, but we've guided for a slower growth in Q3 and Q4. And part of that is, as we discussed right, some of the low interest rate environment of Brexit, so we do have many of our larger clients looking at in terms of how do we continue to drive efficiency and optimization? So, I think it's actually a great opportunity for us, because it allows us to look at a greater percentage of the portfolio for our financial services accounts. It takes time to put all of these pieces together, but we think long-term that's a good opportunity for us to continue to drive synergies. But, more importantly, in the financial services sector, we're seeing great traction right now in digital, especially around customer experience and the data analytics behind that. In addition to that, many of our clients now are looking at the private cloud and we're helping many of these large financial services customers in that effort. So, longer-term, we're seeing good traction there.

And Ashwin, I would just say that, to your question about speculation versus certainty, you have to remember that our model is, our people are on the ground with our clients in financial services and in all the other sectors every day, we have people on the ground, at the client sites day-in and day-out. And so, the feedback we tend to get, tends to be relatively real-time and it tends to be relatively or rather it tends to be based on real conversations and real feedback we're getting from clients as opposed to hypothesis.

Our next question comes from the line of Darrin Peller with Barclays. Please proceed with your question.

Thanks, guys. Given just the relatively high exposure to the financials and healthcare verticals, where it looks like most of the macro deceleration is coming from, and I guess sector-specific. When considering just an overview of your overall assets, is there anything that Frank or Gordon, you can say you point to strategically that may be able to help reduce volatility associated with year-over-year revenue in any given quarter?

I think, Darrin, what I would say is, it's a great question. I would say that we continue to – I would say, if you look at the medium-term, the playbook is to really build out the three broad areas that I spoke about. Digital is a macro theme that I think has a lot of wind under its wings, I think we'll continue to invest organically and inorganically. The platforms business that I spoke about, we think there's a tremendous potential to take the success we've seen in healthcare to all of our other industries – all of the other industry groups that we serve. I would say that, the TriZetto experience has been ahead of anything that we would have imagined it to be. We've ramped up TriZetto faster than we anticipated when we did the acquisition and I think that gives us a sense of confidence that the model works, that we can execute against the model. So, there's opportunities to take that to other industries. And then, of course, the third area is so-called neXgen IT, where – as Raj said, we continue to feel like there's opportunities for us as our clients face tough macro environments for us to continue to optimize and bring new ways and innovative ways for them to be more efficient in how they run IT. So, that's where I think our focus is in the medium-term. If you look out over the very long run, clearly our objective is to continue to build out in the non-healthcare and financial services parts of the economy. So, if you look at our manufacturing and logistics business, that's been doing well. We'll continue to invest there both inorganically and organically, and I would say, over the very long run this business needs to have a reasonable representation of our revenue coming from the sources of global GDP. And so, we have to continue to shift the business model, but obviously that's not something that happens overnight. That's a five-year to 10-year journey.

And Darrin, it's Gordon. Let me just add one more thought on that around platforms. As we ramp up our platform business, both within healthcare and into other industries, remember most of that, we're going to be bringing to market as a service, and this is core transactional work. So that over time will become a nice recurring revenue stream as it builds up. So, that's clearly part of our strategy as well.

Our next question comes from the line of Brian Essex with Morgan Stanley. Please proceed with your question.

Good morning, and thank you for taking the question. I was wondering if I could follow on to Tien-tsin's question regarding the repatriation of cash and prioritization of usage. Could you comment a little bit on M&A pipeline, and what that might look like? Certainly, we've seen the deals in the quarter and they seem to manage the limited cash in the U.S. And maybe as a follow-on to that, how much cash does this repatriation put into the U.S. as a percentage of total?

Let me have Karen comment on how much cash in the U.S. And then, let's spend a few minutes talking about M&A pipeline and strategy.

Yeah. So, Brian, the repatriation resulted in $1 billion net of tax coming back to the U.S. And as you remember, we at the end of Q1 had $300 million, $400 million in the U.S. that was available for operating needs.

And from an acquisition perspective, our strategy remains consistent. We look at acquisitions for industry expertise, we look at acquisitions for geographic footprints and we look at acquisitions for service line and technology capability. We have a healthy pipeline of opportunities in the digital space. These will tend to be smaller tuck-under acquisitions. We also have a nice pipeline of opportunities in the consulting space across industries as well as strength in our geographic footprint, particularly in Europe. So, what I think you'll see is, you'll see a pickup in the pace of acquisitions; but I want to be clear, these continue to be small tuck-in acquisitions. We're getting really good at integrating these and capturing the value from acquisitions. We really have that down to a science now. So, we've expanded the team in these areas, but the core Cognizant growth will continue to be organic. But when we look at where acquisitions can supplement our capabilities to make us stronger in the market, we'll clearly do that. And the final thing just to comment on is platform acquisitions. There – we'll look at those absolutely. We did the TriZetto acquisition almost two years ago. And platforms – certainly you have to make sure if you're going to do a platform acquisition you get enough that you have a base to build off of. So, those probably won't be as consistent or steady, but we'll certainly look at opportunities because we know in particular areas we want to be a leader in platforms. Now some of that will be, we build it ourselves; some of it is, we'll partner with customers and take their systems and commercialize them and some like TriZetto will be, we'll go out and buy a leader in the market. So, you'll see all that happen, but certainly in the tuck-unders, you'll see a pickup in the pace.

Our next question comes from the line of Lisa Ellis with Sanford Bernstein. Please proceed with your question.

Hi. Good morning, guys. The choppiness in the top line growth rate inevitably brings back in the more secular concerns around compression in IT services. So can you just describe, as you're having these strategic discussions with clients around the transformation they're trying to drive in their business, what are the implications for their overall IT budgets? Like up, down? And then also the component of budgets that they're expecting to be spending on services, like third-party services?

Hey, Lisa. It's Frank. Let me try to take a crack at that. Look, I think we've seen no evidence that IT budgets overall are coming down. If anything, I would characterize IT budgets as flat to moderately up over time. There may – in some clients, as we've said in our prepared comments, there might be sort of short-term pressure, discretionary spending gets put off because of something going on in the macro. But as a big picture, I don't see any evidence that says that budgets are down. I would characterize them as flat to up. I think if you look inside of that and unpack it a little bit, there is a shift going on. We are seeing the clients looking to be more efficient, drive better total cost of ownership on what I consider to be the run-the-business kind of activities, so that they can redeploy them into the change-the-business or digital or cloud kinds of activities. I think that that shift benefits IT services firms, frankly. When you look at the landscape on digital, the technology landscape in digital is very fragmented. There are no clear leaders in digital right now in the technology landscape from an underlying stack standpoint, and so that requires almost every digital deployment to be – requires it to have very heavy integration kinds of work. And so, when you look at the digital landscape, there's a tremendous amount of work that needs to be done both from an upfront strategy, design, human sciences standpoint to envision the future with the client; but then equally importantly on the downstream, build, integrate, test, deploy. All of that creates tremendous opportunities for services firms. So, I think that net-net, there's a shift going on. Budgets aren't shrinking meaningfully. There's a shift going on inside of budgets, and I think firms that have capabilities on both sides, the what we've been calling run-the-business and change-the-business or run-better, run-different sides of the business really stand to benefit from that migration.

Our next question comes from the line of Keith Bachman with Bank of Montreal. Please proceed with your question.

Hi. I would like to direct this question to Gordon, if I could. Gordon, and the question really surrounds run rate. This year, pursuant to guidance, you're guiding revenues to increase $1.1 billion to $1.2 billion, just rough numbers. Current Street estimates for 2017 are increasing by almost $1.7 billion. And given the issues that you've identified surrounding healthcare, and unclear when those deals may or may not clear, and investment banking, I was wondering if you'd like to give any anecdotal or at least directional comment related to a $1.7 billion bogey. And the context is, it's occurred in the last few years where we've crossed over new year and sell-side estimates have proved to be too high. So, I just wanted to hear any – given the current issues that you see surrounding the business, would you like to give any directional comment, at least related to 2017, and current Street estimates?

Keith, thanks for the question. It's just too early to know 2017. What are the things that'll influence revenue next year? Certainly, what happens with healthcare M&A, that's one piece. What happens with the interest rate environment for our financial services clients will be very important, because financial services clients know they have to spend a lot on innovation, but are under tremendous cost pressure right now; and that's both in insurance and banking. The pace of which we actually close these new end-to-end services deals will be important, and all those can be big drivers or big variables in revenue growth for next year. It's just too early to know. I think the election will have some impact, general macroeconomic trends and then some regulatory stuff. But as we've all mentioned, when we look at the medium-term and long-term prospects for the business, we remain very bullish. The strategy of looking to front, middle and back office and really building up our capabilities to serve clients across all three of those dimensions, I think is going to position us very well. But what will both overall macro spending look like and a couple specific customers' things look like for us for next year, just too early to know. Obviously, as we get more color, we'll share it with the investment community.

Our next question comes from the line of Jim Schneider with Goldman Sachs. Please proceed with your question.

Good morning. Thanks for taking my question. I was wondering if you could maybe comment on your overall head count plans. You added a little over 11,000 this quarter, and it was a relatively strong head count add last quarter as well. Can you maybe talk about what you expect that to do for the remainder of the year? And just broadly speaking, what it reflects in terms of your pipeline of longer-term business? Thank you.

Sure. So, utilization came down a little bit in the first quarter. That was intentional, we added, I forget, 10,000, 11,000 people in Q1 as well, even though revenue was down, because we wanted to position ourselves to make sure as client demand shifts a little bit, we have the capabilities as we finish up retraining our workforce. Certainly head count additions will slow in the back half of the year from the front half. We don't give specific head count guidance, but our goal would be to keep utilization in the ballpark that it currently is. And certainly that gives us enough bench capacity for potential ramp-ups and certainly for positioning ourselves for next year. You get a little bit of seasonality quarter-to-quarter, just because of the timing of bringing college kids in and so forth. But the way I think about it is, we're managing utilization to be fairly constant with where it currently is.

Our next question comes from the line of Bryan Bergin with Cowen. Please proceed with your question.

Hi. Thanks for taking my question. Just want to kind of expand on the other vertical pullback that you cited within information services. Is that broad-based or more limited to a handful of clients? Thanks.

Yeah. Hi, Bryan. This is Raj. So, it's limited to a handful of clients. Basically, some of those clients reevaluating in terms of some of the discretionary spend that they have. We feel still very optimistic about those clients, because we're having broader conversations in terms of, how do we look at the broader platform and to continue to drive some of the cost optimization that they need. But overall, the industry for us is still quite bullish for us.

Our next question comes from the line of Jason Kupferberg with Jefferies. Please proceed with your question.

Hi, guys. This is Amit Singh for Jason. Just on the cash repatriation, considering the historic low interest rates that are going on right now, why repatriate cash and pay taxes on it, versus just raising debt over here? And also just related to that, sort of the timing of the repatriation. If you look at your full-year guidance, I don't think you're modeling a lot of share buyback, considering too what you were expecting last quarter, so a lot of M&A, should we expect that to happen over the next couple of quarters, using most of the cash that you repatriated?

So, Amit, this is Karen. The repatriation was a one-time opportunity. There was an opportunity that closed as of June 1, so we had a time limit as to when we were able to do that and we wanted to obviously take advantage of that opportunity to repatriate cash in a relatively tax-effective way. From India, as you know, it's typically very expensive to do that and we don't get many opportunities, so we certainly want to take advantage of that. And I think as we've mentioned, the guidance assumes that we maintain essentially share neutrality which has been our stated position recently. Obviously, if there are opportunistic opportunities to buy back shares, we will take advantage of that. But clearly, we look to use that cash net additional flexibility to drive investment in the business, both organic and inorganic.

And it's also important to remember, the question has been focused on cash brought back to the U.S. Additional cash was also brought back to non-India locations, which is more advantageous for us, both in terms of efficiently doing non-U.S. acquisitions and if there's ever any sort of repatriation holiday in the future.

Thank you. Ladies and gentlemen...

And, operator, this will – operator, this will be the last question.

Due to time constraints, our final question will come from the line of Joseph Foresi with Cantor Fitzgerald. Please proceed with your question.

Hi. I was wondering, could you talk about in this particular quarter, the breakdown of the revision of guidance between some of those concerns that are out in the market, which include obviously healthcare, the banking sector and discretionary spending. Because it seems like the FX was maybe a minor part, and then I've got just one follow-up.

Sure. As we said, the FX impact of the revision guidance was $40 million of the change. When you look at the other pieces, it overlaps a bit, right. Certainly, the single biggest impact was our financial services segment. Whether it's the Brexit vote or the general macroeconomic environment, it's tough to parse that and the low interest rate environment, but certainly our forecast changed the most in that sector. And after that, the next one would be healthcare with some of the regulatory approval issues that are going on right now for M&A. And then the little things are out there. The other thing we wanted to make sure is that when we adjust the guidance, we learned a little bit last quarter, you don't want to keep adjusting, so we want to make sure we adjusted it enough that we're well positioned for any additional surprises that may happen because of uncertainty around the elections, Brexit and so forth, so we want to be conservative when we cut, so we cut just once, or at least just this one additional time.

Got it. And then just as you look at kind of heading into 2017 and beyond, I guess the question for investors are, how much of this is a short-term 2016 phenomenon versus what we've seen over the last couple of years with the changes in the way that you've given guidance, and now, of course, today's cut. So, maybe you could just talk about your outlook briefly heading into next year, and help us understand how this is a short-term thing versus a long-term?

Hey, Joe. It's Frank. Maybe I'll try to take that. And I'll answer it – obviously, as Gordon said earlier to one of the earlier questions, it's premature for us to comment specifically on 2017; but what I will say is that, we continue to remain very optimistic about the fundamentals of the industry and of our business. From an industry standpoint, as I said many times, the key I think factor to look at is that the world is becoming more technology-intensive not less technology-intensive. Across the industries we serve and also industries where we are less present, more energy and attention is being focused on technology than ever before. Technology has become not just a way of driving efficiency and operational effectiveness for businesses, but it's become a core to most clients' ability to differentiate, to grow revenue and to survive in the marketplace. So, given that backdrop, we feel that there's a tremendous opportunity for IT services, in general, and for Cognizant, in particular. Given the tremendous investments that we've been making. We feel that the investments that we've made in digital on the frontend, process and platforms in the middle office, and our next-generation IT services in the backend, really position us well. And I'll just finish by saying that we feel that the portfolio of businesses that we have, whether you look at the industry portfolio or the exposure we have in different geographies of the world, represent some of the most progressive and advanced users of digital technologies. And so, we feel that the fundamentals remain strong as we look to the medium-term.

So on that note, I'd like to thank all of you for joining us today. Thank you very much for your questions. And as always, we all look forward to speaking with you again next quarter.

This concludes today's Cognizant Technology Solutions second quarter 2016 earnings conference call. You may now disconnect your lines.