Ladies and gentlemen, welcome to the Cognizant Technology Solutions Third Quarter 2022 Earnings Conference Call. [Operator Instructions]. Thank you. I would now like to turn the conference over to Mr. Tyler Scott, Vice President, Investor Relations. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. By now, you should have received a copy of the earnings release and investor supplement for the company's third quarter 2022 results. If you have not, copies are available on our website, cognizant.com. The speakers we have on today's call are Brian Humphries, Chief Executive Officer; and Jan Siegmund, Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. Additionally, during our call today, we will reference certain non-GAAP financial measures that we believe provide useful information for our investors. Reconciliations of non-GAAP financial measures where appropriate to the corresponding GAAP measures can be found in the company's earnings release and other filings with the SEC. With that, I'd like to now turn the call over to Brian Humphries. Please go ahead, Brian.

Thank you, Tyler. Good afternoon, everyone. Third quarter revenue was $4.9 billion, up 5.6% year-over-year in constant currency, short of our expectations. Adjusted operating margin grew 90 basis points sequentially and 60 basis points year-over-year to 16.4% of revenue. While a non-certain macroeconomic backdrop impacted bookings and revenue, the primary driver of the revenue shortfall relates to a reduction in U.S. onshore billable resources in recent quarters, following a period of elevated attrition, a reduction in visa travel and a COVID-induced shift in the near and offshore delivery centers. Financial impact of this headcount reduction is magnified given this is our highest revenue and margin dollar per head population. To reverse this trend, we have already initiated a series of action that are intended to increase U.S. onshore billable resources, including enhanced focus on lateral hires and subcontractors, accelerated visa travel and targeted compensation programs. While these actions are gaining traction, it is somewhat slower than previously anticipated. We, therefore, expect these headwinds to continue in the fourth quarter, ahead of clear progress in Q1. Let me now turn your attention to global third quarter voluntary attrition, which was a little higher than expected in the quarter. Voluntary attrition fell 2 points sequentially to 29% on an annualized basis and fell 3 points sequentially on a trailing 12-month basis. We've taken extensive actions to increase employee engagement and reduce attrition over the past year. These initiatives, coupled with an uncertain macroeconomic backdrop, have led to reduced daily resignations, a leading indicator of voluntary attrition across the globe in the last 4 months. We expect sequential reductions in voluntary attrition to be more meaningful in the fourth quarter. To maintain positive momentum on resignations, we are continuing our comprehensive effort to attract, retain and rally employees. We remain focused on our…

Thank you, Brian, and good afternoon, everyone. Q3 revenue was below our guidance range, driven primarily by lower billable headcount in North America. Higher-than-expected attrition, coupled with strong competition for talent in North America, made it challenging for us to maintain required staffing levels to meet our revenue forecast. An uncertain macroeconomic backdrop led to pockets of bookings and revenue weaknesses in certain industries. The weaker-than-expected revenue performance was offset by commercial discipline, the benefit from the depreciation of the Indian rupee and SG&A leverage, which resulted in sequential and year-over-year operating margin expansion. Now moving on to the details for the quarter. Q3 revenue was $4.9 billion, representing an increase of 2.4% year-over-year or 5.6% in constant currency. Year-over-year growth includes approximately 40 basis points of growth from our acquisitions and a negative 60 basis points impact from the sale of Samlink completed at the beginning of this year. In Q3, digital revenue as reported grew 7% year-over-year or 11% at constant currency. Digital represented approximately 51% of total revenue for the quarter, up 2 points from the prior year period. Our slower digital revenue growth reflected the expected lower inorganic contribution we discussed last quarter and the lower billable headcount in North America mentioned earlier. These factors and softening demand environment also contributed to a bookings performance below our expectations. Q3 bookings declined 2% year-over-year and represented an in-period book-to-bill of approximately 1x. This resulted in a trailing 12-month bookings of $23.1 million and a book-to-bill of approximately 1.2x, unchanged from Q2. Brian has already taken us through the segment performance, but I will spend a minute discussing several trends we are seeing emerge across our 2 largest segments. Within Financial Services, banking revenue growth slowed this quarter. This portfolio has a higher mix of time and material…

[Operator Instructions]. And the first question comes from the line of Lisa Ellis with MoffettNathanson.

I'll start on the attrition point that you've raised that seems to, I guess, be at the root cause of some of the challenges you're having both on revenue and on bookings. In the past, you've focused a lot on the initiatives you're undertaking in India related to attrition and haven't spent as much time on the dynamics of what's going on in North America. Can you just elaborate a bit on what exactly is happening in North America? Is this recent? Have you pinpointed like specifically what's causing the elevated attrition and maybe elaborate a bit on the time frame and the steps you're taking to address it?

Lisa, it's Brian. So look, at a global level, I would say we're doing similar things in North America as we're doing in India. Clearly, on a weighted basis, India had the biggest impact on our attrition historically. So we put inordinate efforts and war rooms in place over there. And frankly, in India as well as in North America and our international business in Europe and Asia, we have seen resignations come down pretty much for 4 to 5 months in a row now. So those efforts are kicking in, and those efforts are broad-based, including the obvious compensation elements. And as we announced, we just announced our second merit increase in 6 months. But on top of comp, there's merit, there is a career path progression, promotion process overall, learning and development initiatives, et cetera. And so the North America efforts are somewhat similar to what we're doing globally. I think in North America, we've gone through a pretty material visa, I would say, a process in the last 3 years as we reduce our visa dependency. But obviously, in a tough market environment where digital scales are at a premium, we've been suffering attrition in North America, and by definition, obviously going out as fast as we can to recruit talent simultaneously. And those factors, coupled with what's effectively happened across the industry and ours, was no different. A shift to nearshore and offshore during COVID has led us to have a, I would say, suboptimal level of onshore billable resources in North America, and it catches up quickly with you because of the order of magnitude of the difference in terms of revenue and margin dollar per head in North America versus in India. So it's a question of rebalancing that. We have major initiatives underway, operational rigor behind it. We had hoped to make more progress in the quarter. It's a little slower than we anticipated, but we're putting a lot of effort behind that to correct it. And it's all of the factors we mentioned above. At a global level, we're expecting, I would say, significant voluntary attrition reductions now going into the fourth quarter. The goodness of the last 4 months will kick in, in Q4.

Got it. Okay. Okay. And then I know last quarter, you had commented on kind of the relationship between the attrition challenges and bookings, and you were taking some actions to sort of address the bookings issues or kind of that linkage. I think you're having challenges that some of your salespeople perhaps were concerned they wouldn't be able to staff a project or something. And so we're delaying it or -- right? So -- but then I guess it persisted into this quarter. So can you just also -- yes.

Yes. Look, I mean, let me start with the facts first on bookings. They were down 2% year-over-year, a little below what we had hoped for the quarter, to be honest. It is important, I'd say, to recognize the tough comparison in the second half of last year with 20% plus bookings growth. So that leads to even an in-quarter bookings book-to-bill of 1.0, and on a trailing 12-month basis, still at 1.2. So healthy enough, although, frankly, we lost some deals in the quarter that slipped out quarters. And that's, I think, somewhat indicative of an uncertain macroeconomic demand environment. We've seen lengthening purchase cycles and clients being a little bit more judicious in their approval of expenses. But Lisa, specific then to the impact of attrition, by definition, as people were dialoguing with clients around price increases, which has been one of our success stories, helping margin as well as addressing fulfillment challenges, it's made the commercial team somewhat hesitant, I think, to go to full mild to get the commercial momentum as strong as it needs to be in terms of increasing pipeline and accelerating bookings. The good news now is we're quite vocal with our team in terms of what we're seeing from a resignation point of view, and therefore, what they should be anticipating in Q4 in terms of attrition levels, which, as I said, will be meaningfully down from Q3 voluntary attrition levels. So I think we're starting now to get confidence in the commercial team that the effort we put in place around attrition and resignations will kick in. Of course, this is happening in a period where, as I said on the call, we're a little more concerned now than we were 3 months ago in terms of the macro demand environment. So that's probably been a bigger impact on bookings this quarter than previously, the whole concern amongst the C-suite as they're scrutinizing their spends, and it's not clear to me that we'll see a budget flush at the end of this year, and we'll certainly anticipate furloughs at the end of this year relative to last year. So it remains to be seen, and we factor that into our guidance.

Our next question is from the line of Rod Bourgeois with DeepDive Equity.

Yes, guys. So you have 4% constant currency growth in North America and essentially 10% outside of North America. So I wanted to ask how you feel about your progress and outlook in ramping your international revenue presence and also ask if your efforts in doing that are detracting from your efforts in North America or perhaps it's just that your talent challenges are more pronounced in North America, but some color on that would be really helpful.

No. I'll start with the international business, which we expect very good things in the coming years there. We've refreshed some leadership over there. We've added with the senior [indiscernible] of the people we've recruited, we've added M&A to complement their capabilities. And examples of that include the U.K., Germany and Australia. And I've spent a large part of the last year going around the world, and I'm pretty optimistic around our potential internationally. So we're optimistic, but I don't think it's really taken away from the North America focus. In North America, Canada there has been a shift more to offshore and nearshore. We're building out capabilities in Canada. But candidly, a shiftwards India has happened -- our net headcount has materially increased in India on a year-over-year basis, and we have to -- we get the balance right. Three years ago, we were over visa-dependent in North America. We've been pretty disciplined around that as we are trying to land that at the right level. Candidly, what's been happening in the COVID world is that consulates internationally are just not functioning at the same capacity as before. So we've gone a little bit too far in that. That's actually a good news, by the way, in terms of reversing that for our attrition because that has hurt our attrition in the last 2, 3 years as people saw that opportunity be less available than previously, but now that we're turning that tap on a little bit to rebalance subject to the capacity of consulates that will not only help onshore headcount, but actually help morale and I believe attrition in India as well. So I think the U.S. onshore situation is independent of the international positivity that I have, and I'm very optimistic around our potential there in the years to come.

Great. And let me ask a follow-up about the cloud services market. We definitely see some changes happening in that market. So I just wanted to ask about what you're seeing in that market, particularly your competitive position there, and to what extent some of the recent macro challenges are having an impact in cloud or maybe not so much. It'd be great to hear some thoughts on the cloud market.

Well, first of all, I'll actually call out Prasad Sankaran, who joined us yesterday. He's got a very strong background in cloud as well. So he and I spent a great deal of time talking about where that market is going. And ironically, in the client Advisory Board last week, it was a great topic of discussion amongst [indiscernible] clients, too. . I would say our position with some of the packaged application players like Salesforce, Workday is stronger than it's been for many, many years. And so we feel good about the progress there. And yesterday's announcements of OneSource Virtual, we'll continue to strengthen our Workday practice. Vis-a-vis the hyperscalers, it's kind of interesting. I'm seeing clients clearly accelerate their path to the cloud. Within the same vein, Rod, I see a growing dialogue amongst clients around how to optimize your position in the cloud as in lifting and shifting your current suite of applications [indiscernible] refactoring or another way transforming ahead of the transition. It doesn't necessarily always give them the efficiencies that they would have anticipated. So there's more dialogue around how to optimize your cloud journey. And so what you'll see us do and continue to do is stand up capabilities and resources behind that, both in the cloud practice as well as in our consulting business as we anticipate cloud modernization journeys or tech more generally, you'll see us add more advisory capabilities there as well.

Our next question is from the line of Ashwin Shirvaikar with Citi.

Could you talk about what you're seeing in digital especially since you mentioned slowing discretionary spend? Is that more of a company-specific positional thing because other companies have spoken to have not yet mentioned anything specific with regards to digital specifically slowing down?

So look, the first thing on a broader macroeconomic environment, I'd say it's difficult to be conclusive or dogmatic at this moment in time. It's certainly what we determine uncertain macroeconomic environment. And the outlook is a little more concerning now than it was 3 months ago if you go back to my comments back then. We are seeing spend being reduced in lower priority projects or those with longer ROI periods. And even discretionary cloud projects, as I referenced in my prepared remarks, are selectively being reduced. So we still have a lot of confidence in our digital capabilities. Our portfolio is now 51%, digital up 2 points year-over-year. But some of the challenges we talked about, the macro demand picture as well as the U.S. onshore situation are equally applicable to this. And then as you know, yesterday's announcement of acquisition -- the first acquisition we've done this year. So we haven't had the tailwind in our digital momentum that we had last year from the series of acquisitions that we did. That being said, as Jan pointed out, we are committed to our framework of extending our portfolio in line with our digital strategy, and we have a series of deals in the pipeline as we speak. So I'd expect that ultimately over time to get back in a more normal course for us. But I don't believe that all digital projects will be immune from the current economic climate.

And maybe in addition, Ashwin, to give you a little bit more the framework on the M&A side, our full year guidance assumes approximately 100 basis points of contribution from M&A, approximately half of what we typically see. So if you multiply that types of share of digital revenues, you'll see there is an impact on just mathematically on the lack of M&A fueling digital growth. And then aside from the demand -- market demand that Brian mentioned, obviously, in North America, we are also affected by our fulfillment challenges that we experienced in the quarter, which proportionately affected our non-digital business as well as our digital business. So it's a combination of all these factors together.

Got it. Got it. And what does this lower exit growth rate for the year means in terms of achieving sort of your medium-term targets? And I completely appreciate the high level of macro uncertainty that we have, but any granular thoughts how you're planning for next year would be greatly helpful.

Yes. So that somehow I thought the question would come up. So number one is we feel our growth framework that we discussed with you in basically pretty much a year ago -- a little bit more than a year ago, it's still intact overall. Maybe a few pointers, the growth framework sees our revenue growth, which you're referring to, really in light of a CAGR over the 3-year time horizon. So it's a compounding growth. And obviously, we didn't quite anticipate at that point the economic uncertainty that we're facing today, but we think the framework from our perspective is intact. And then we will give guidance, obviously, for next year in our fourth quarter earnings call in January.

The next question is from the line of Bryan Keane with Deutsche Bank.

Just on the fulfillment challenges. I know that kind of was an issue last quarter, and it seems like it got pushed into this quarter. And then it's caused you to miss the guidance, that and maybe the economy a little bit. Just trying to figure out, is the fourth quarter -- how comfortable are you with those numbers? Or could we still have some of these fulfillment issues lingering that could push us into lowering expectations again?

Yes. Maybe I'll start with it, and then I'll let Brian jump on top of it. If we think about the mix, as Brian mentioned and as we talked on our call, had a number of factors in it in fulfillment as fairly logical. So we misjudged or we had a little bit -- a faster improvement in the third quarter of our attrition anticipated. And so about that, that miss attrition improvement made about 1/3 of our miss relative to our expectations. And then we have a number of initiatives in place to accelerate the hiring and inflow, in particular, in North America of initiatives. And that represents approximately also 1/3 of our miss to revenue guidance. And here, we obviously saw the North American challenge to grow our headcount and initiatives in place from funding our -- and ensuring we have full capacity of hiring in place to focusing on the full fledge of resources available to us, including the utilization of subcontractors and accelerating visa travel and increasing employee referral product. So we have a set of initiatives in place. These initiatives have shown initial momentum, but they were scaling slower than we anticipated. So we have now our trajectory, and we think we have appropriately risk-adjusted our new revenue guidance. So we're keenly interested to meet our own expectations in it. And so yes, we have assumed an improvement in attrition levels that we can see. But we also see now the trajectories of some of these initiatives clearer than we had in the third quarter.

Yes. And just to build on that, the resignations visibility we have, of course, differs in India versus North America because the notification period in India is slightly different. But I mentioned on last quarter's earnings call had July resignations have come down, and through August and September, it was a different plateau for those 3 months vis-a-vis the prior 6 months. Certainly, if you look at India and indeed in North America and Europe, and in the first month of this quarter, it's continued to be low, in fact, lower than the prior 3 months. So we feel, Bryan, at this stage, very, very confident about that. And as Jan rightly pointed out, we wanted to give guidance that we want to make sure we can hit. So we're in the right zone.

Got it. And then did the fulfillment challenges, especially in North America, will that be fixed by the time we get into the first quarter? Or could it linger into the first half of the year?

We're aiming. As I said on the -- in my prepared remarks, we're working through that as quickly as we can, and we aim to make progress in Q4, but I think it'll still be a headwind in Q4. We hope by the time we come out of Q4, and we'll clearly give you an update on that in next quarter's earnings call, we hope to walk into Q1 with clear progress by the time we get through Q1.

Next question is from the line of Bryan Bergin with Cowen.

This is [indiscernible] on for Brian. Another one on the fulfillment issues. Could you give us some real-time insight into the nature of conversations that you're having with clients here? And kind of just thinking about all the rebranding and repositioning that the company has done in recent years, what are you doing to reassure clients that you are a digital transformation partner of choice?

We actually see different stories, to be honest, Brian, across different industries in terms of our evolution towards digital, even banking where we are, let's say, more heavily exposed to time and materials. We have been able to increase our digital mix, and we've got some good proof points with certain clients. But more fundamentally, the journey we've been on is to extend the portfolio, which we've been successfully doing in recent years, and yesterday's announcement is another example of that. To try to complement that portfolio then with a client-facing team that is more consultative in nature as anybody who's overseen a sales force and knows that is a multiyear journey. So we're en route, but it takes time to get there. To complement then that more consultative sales force with a more industry-aligned consulting business, and so that's the space we should continue to watch in Cognizant because we will invest behind that, and we've got strong leaders in the capacity these days and then just to make sure that there's increasing brand awareness around the capabilities we have and references and case studies that we can showcase. Last week in the Client Advisory Board was a very good example of certain clients not really been truly aware of the extent of our portfolio. So we have [Technical Difficulty] ourself. But I would say brand awareness of the company is up. Digital awareness is increasing, but it's a multiyear journey, and we're in the middle of all of that. And it starts with our client-facing teams and our delivery capabilities and our partnerships. And I certainly see in dialogue, with some of our key packaged application partners like Salesforce and SAP, growing recognition that we are getting stronger. But as ever, a few years ago, we were quite low in terms of digital mix, and we've been working our way back up to 50%, which we're pleased to cross, but there's more work to do.

Got it. That's helpful. And just a follow-up. The forward-looking attrition commentary is encouraging. You've been vocal about the new normal for attrition being higher than pre-COVID levels. Perhaps you can share updated views here and the time line for when [indiscernible] is more in a steady state mode as it relates to attrition.

I think it's very hard to really be precise on that, Bryan. There's just so much going on in today's world. We've gone through a period of pretty significant disconnect between demand supply on key labor -- key digital skills. We're going through a hybrid work environment as a society where, arguably, people are less entrenched or engaged with companies as they work remotely. And now we've gone through a very different scenario that the economy is uncertain, slowing. And people are -- recruiters have been laid off across the globe. We're seeing in certain companies, people are being laid off. And so the market is suddenly perhaps less hot than it was previously. And that can also have an immediate impact on attrition trends and voluntary resignations in particular. So we will see where water find its own level over time. I'm encouraged by our specific actions that we've taken. Jan and I have also built that into our financial plan. So we have, notwithstanding a slowing, I would say, labor markets, we know that we want to invest on a sustainable basis in our employees in the years to come, and we factored that into our multiyear financial framework, and that will help increase our relative compensation vis-a-vis peers. And simultaneously, we're doing everything we can around training and development and career path and employee value proposition. So I'm not sure when it normalizes to a new norm. I still believe there will be a new norm, and we won't go back to historical levels. And I think as a society at large, we'll probably see attrition slow across the industry in Q4 and beyond. But time will tell.

Our next question is from the line of James Faucette with Morgan Stanley.

In terms of skills and looking at kind of -- as that relates to fulfillment, where are you seeing the most challenges in terms of finding the appropriate people and getting them into your fulfillment capabilities right now? And how are you thinking about the pyramid itself as it relates to solving for that? And I'm just wondering how that then impacts the you think about financial guidance? Kind of a complicated question, but hopefully, that's clear.

Yes. I mean there's -- it's actually quite nuanced because, first of all, our headcount has materially increased year-over-year, but most of the increase has been in India. So by definition, then you have different bill rates. Within India, the lower levels of our pyramid are actually a fatter for lack of a better word than they were in the last few years. And that's because if you go back this year, we'll bring in about 40,000 graduates, 45,000 last year, 33,000 the year before, about 17,000 the year, less than 10,000. We had been too narrow as a period previously. We've done a good job, I think, addressing that. And that afforded us the opportunity to have more upward momentum in the company, which is one of the many factors that has helped us actually drive margin expansion year-over-year and sequentially in both Q2 and Q3. And -- but James, the fundamental element in terms of the demand supply economic imbalance and key digital scales was heavily related to skills related to all hyperscalers, things like Salesforce, [indiscernible] full stack engineers. I mean they've been probably the hottest parts of the market and there's been very irrational behavior, I would argue, over the last 18 months in terms of comp increases that went in, in glove with that. That's where we've seen the hottest challenges. In terms of the absolute attrition, it's fundamentally been in India and at the lower levels of the pyramid.

Got it. Got it. And then I guess kind of a somewhat related question, but looking more specifically at the P&L and margin impact, can you help talk us through the impacts and mechanics of merit cycle changes? Are those accelerating? Are they going to be permanent? I guess should we expect 2 cycles a year? And just trying to make sure that we're contemplating that -- how that flows through the actual P&L appropriately.

Yes. That's maybe for me to answer. So effectively, our acceleration of our typical merit cycle that we're just experiencing in the fourth quarter and moving it up to the second quarter has really -- a main reason for it is to better align our HR processes, evaluation processes and reward processes together. So it is a benefit from a talent management perspective to have our merit increase in the second quarter. So that's really a very important driver of it. And second important driver is obviously because we're accelerating the second -- this merit cycle by 2 quarters, we will incur a onetime shift of compensation by -- to our merit increase by 2 quarters forward. And that's going to be a onetime effect only because we're staying with an annual merit increase process. So in 2024, the normal cycle will be 4 quarters later again in the second quarter of the year. So we are capturing basically, I think, here an opportunity to improve our talent management processes, but also allows -- which also allows us to drive a faster compensation increase to our associates, which we think is timely because we really do want to be focused on attrition, and we anticipate that, that will have a positive impact on attrition, even though hard to measure, but we think it will send a positive signal of our commitment to our associates to be competitive on compensation and benefits.

The next question is from the line of Tien-Tsin Huang with JPMorgan..

Just thinking about the knock-on effects of the fatter pyramid plus the attrition. Just -- is there an impact there on your ability to capture price or even be competitive on pursuing new work bookings, that sort of thing? Just trying to understand sort of the collateral impact because you're seeing some of that.

So what we -- maybe I'll talk a little bit about our overall maybe gross margin development, kind of what you're focusing on, Tien-Tsin, here is we did see, obviously, a decline, but I think the relative performance overall compared to the [indiscernible] has been relatively good. And so a few factors I want to point out. When we talk about pricing, I think we need to kind of -- in particular, now that we have been added for a little while, think about them as a regular contractual increase, pricing increases with our clients, but also a discipline to price our business appropriately in the market. And with both of these things, we have seen slow start in the fiscal year. And now we have seen steady improvement and compounding impact of those initiatives. So that has been getting better and has helped us on the relative gross margin performance. Also, the shift to the -- in our pyramid has been positive. We have been able to, to a large degree, offset the impact of comp and benefit increases by streamlining our pyramid and focusing on a slimmer permit, as mentioned, and that paired this promotion opportunities, which are positive, our associates, I think, we'll have over the next couple of years, as that is still scaling and maturing, a positive impact on how we price and how we win deals. So we're feeling, I think, good -- well, we're feeling good about the improvements we're making of how we manage the business opportunities. It's a thoughtful process. It allows us actually also to make our strategic best moving forward. I think our margin profile is in good shape, and that should offer us opportunities to make our strategic bets where we want to go and grow faster revenues on a much more solid base than we are today.

Yes. The only thing I would add there, Tien-Tsin, is I don't think we were doing anything except correcting what was an overly narrow pyramid back in the day. And on the contrary, I think because we had somewhat canceled the college intake in prior years, it led us having folks further up the pyramid doing work at lower billable rates than were optimal. So I think what we've done in India is appropriate, and it's more in line with industry rates based on the dialogue I have with those from other companies. Where we have to do a better job on campus and college graduates, I think, is both onshore in Europe and Asia as well as in North America, where we are not adequately getting after the market opportunity there. It's -- obviously, there is a war on talent still. So we have to look at vocational colleges and not just the classic places as well, and that's an area of focus we'll have. Fortunately, with Ravi coming on board in North America, he has run a play there previously, which we will obviously aim to replicate over here. And that can help our pyramid. But generally, I feel good about our skills in our pyramid. I think we corrected something that was mis-skewed. And I don't want anybody to get off the call worried about our skill set in our pyramid where we've got very talented employees, and I feel good about that.

Just quickly, if you don't mind, a quick follow-up, just on the capital allocation front. I have to ask a capital allocation question. Just with the buyback of the authorization here, just your appetite to back stock. I know you talked about the acquisition you just announced. But just thinking about buyback here at this point in the cycle.

Yes. For this fiscal year, we gave you basically our anticipated number of $1.2 billion. And you see over the last few quarters as we have been lacking M&A activities that we basically redirected excess cash to return to our shareholders. That's the general philosophy that we've been following with no intent to build up cash on our balance sheet. And so that flexibility is in the model. We are seeing a good pipeline, though, of our M&A activity. So it's -- this we announced the deal, but compared to last quarter, we really moved the needle forward on our business development activity with very talented team. And we see also, I think, a little bit more realistic behavior in the market relative to acquisition opportunities. So I think for us, the goal would be to get back to normal to the capital allocation framework that we have been talking about for a long time. It's going to be the mindset for us going forward.

Next question is from the line of Darrin Peller with Wolfe Research.

Can we maybe go into a little bit more detail on the vertical specifically and just help us understand -- maybe starting with Financial Services, but any other one you think makes sense. Really, what you believe is the driving for some of the change in outlook, whether it's, number one, macro and just pure simple demand and bookings; number two, headcount -- your billable headcount available; and number three, is there anything else that's maybe, like, either tech stack or capability or competitive dynamics? I'm just really trying to parse out what's driving the story and what can be improved on your own doing versus macro.

Yes. Look, it's a good question. I mean I'll start with the 2 bigger ones, Financial Services, which is about 31% of the company. It grew about 1.6 points in constant currency, but that was impacted by the exit of the Samlink business, which was previously disclosed to the tune of 180 basis points to normalize, let's say, 3.4 points of growth. And that's the low industry. We've got a lot of work to do there, as we've cited previously. . There is a slowdown in certain segments there we've touched upon in the prepared remarks, the mortgage segment in particular. I'm also seeing some of the C-suite there talking about, let's say, tightening their belts as they go into the fourth quarter and beyond. So I think that will be a tougher sector for others as well. But fundamentally, our bigger issue there that we're evolving from, it's not just the folks we have in front of those clients, but also how the clients think of us. We've very often trained them to think of us as a provider of resources. I'm pleased to say that our digital mix in Financial Services is improving, and our staff -- or time and material mix is not improving enough yet. So we have to get that balance right in the period to come. Insurance, we're doing better than banking, and that's obviously in banking area we've got to go fix. In Health Services, we feel very good about our position on a relative basis or a competitive basis in both payer provider as well as life sciences. That's one of our core franchises, I would say, as a company. The business grew about 5.5% in constant currency year-over-year. It's 29% of our business. So it's catching up on Financial Services overall. We've had good momentum in the [indiscernible] business in the last few years. So I feel pretty good about our relative position there. And then if I talk about the other 2 portions of the business where we have actually historically in the last 2 years, 3 years, been growing double digits, CMT is a good success story of ours. We've had good client acquisition there, good constant currency growth. Products and Resources, I think we have a lot of room to continue to do well there because our penetration of large accounts is lower there than it is as an example in life sciences, or indeed, the payer business where we are heavily penetrated into the major players. So that's kind of how I think about the framework. The factors we touched upon today, elevated attrition across the industry and Cognizant, within that permeated across all industry segments, and indeed, the U.S. onshore situation permeated across all as well. So nothing specific to either of those.

All right. Just one quick follow-up on the margin side. It did come in well. And I mean your guidance is relatively unchanged also for margin. So just thinking about that in terms of going forward a little more than just the fourth quarter, it would seem that if wage inflation calms down a bit, you should be able to maintain that level. Is that a fair assumption?

The -- well, I have to say and answer in the third quarter, we gave guidance in the fourth quarter. But I did mention that we feel our overall framework -- our multiyear framework is intact, and that didn't refer only to the revenue, but it refers also to our margin expectations. So that's kind of as far as I want to go for today. We -- when you analyze the results on the margin, I think it's important to consider a number of factors. We have driven the margin expansion by having SG&A control and discipline. So it helped us to drive and leverage that SG&A as the company grew. We had also meaningful support from the depreciation of the rupee in our business. And then I talked already about the impact that our actions had on gross margin. Gross margin was under pressure, but I think we had a lot of activity that moderated at what could have been a bigger effect on gross margin even. So you heard me in the third quarter and continue -- and second quarter and now continues in the third quarter, we feel we have a relatively -- we have a good process in place to balance that business out. So our focus is to maintain that discipline, obviously, and then really accelerate revenue growth. That is the main focus that we're driving on because that's our biggest opportunity and use this -- the margin profile as a great foundation for that.

Thank you. This will conclude today's Q&A portion of the call.

Great. Thank you all for joining. Look forward to catching up next quarter.

This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.