Cognizant Announces Record First Quarter 2013 Results First quarter revenue up 3.7% sequentially and 18.1% year-over-year

Reaffirms full-year revenue guidance of at least 17% growth

Expands stock repurchase program by $500 million to $1.5 billion

TEANECK, N.J., May 8, 2013 /PRNewswire/ -- Cognizant Technology Solutions Corporation (NASDAQ: CTSH), a leading provider of information technology, consulting, and business process outsourcing services, today announced its first quarter 2013 financial results.

Highlights – First Quarter 2013

  • Quarterly revenue rose to $2.02 billion, up 18.1% from the year-ago quarter and 3.7% sequentially.
  • Quarterly diluted EPS on a GAAP basis was $0.93, compared to $0.79 in the year-ago quarter.
  • Quarterly diluted EPS on a non-GAAP basis was $1.02, compared to $0.88 in the year-ago quarter.*
  • Net headcount addition for the quarter was approximately 6,000.

*As previously announced, starting in 2013, reported non-GAAP financial measures exclude acquisition-related charges, in addition to stock-based compensation expense. 2012 non-GAAP measures have been adjusted to reflect this change.

Revenue for the first quarter of 2013 rose to $2.02 billion, up 18.1% from $1.71 billion in the first quarter of 2012. GAAP net income was $284.2 million, or $0.93 per diluted share, compared to $243.7 million, or $0.79 per diluted share, in the first quarter of 2012. Diluted earnings per share on a non-GAAP basis was $1.02. GAAP operating margin for the quarter was 18.1%. The non-GAAP operating margin was 19.9%, at the high end of the Company's target range of 19-20%. Reconciliations of non-GAAP financial measures to GAAP operating results and diluted EPS are included at the end of this release.

"Our performance during the first quarter was strong, and we are encouraged by the healthy demand for our broad range of services," said Francisco D'Souza, Chief Executive Officer. "We continue to make solid progress developing emerging offerings in new markets, new SMAC technologies, and new non-linear solutions and services. I'm particularly pleased with the recent launch of our portfolio of Cognizant BusinessCloudSM solutions that enable clients to quickly deploy a range of business and best-in-class IT solutions and to forgo costly capital outlays and lengthy implementation timelines."

"Our long-term re-investment in our business and the strength and depth of our client relationships give us the confidence to deliver continued industry-leading revenue growth," said Gordon Coburn, President. "We are well positioned to help clients run better by driving greater efficiency and effectiveness, while simultaneously helping them to run different by innovating and transforming their businesses for the future."

2013 Outlook – Second Quarter and Full Year

The Company is providing the following guidance:

  • Second quarter 2013 revenue anticipated to be at least $2.13 billion.
  • Second quarter 2013 diluted EPS expected to be $0.97 on a GAAP basis and $1.06 on a non-GAAP basis.
  • Fiscal 2013 revenue expected to be at least $8.60 billion, up at least 17% compared to 2012.
  • Fiscal 2013 diluted EPS expected to be at least $3.95 on a GAAP basis, and $4.31 on a non-GAAP basis.
  • EPS guidance excludes any future non-operating foreign currency exchange gain or loss.  

"Our financial model continues to allow us to deliver solid top-line growth with stable margins, while investing in our next generation of services to spur long-term strength," said Karen McLoughlin, Chief Financial Officer. "In addition, we have repurchased $74 million worth of shares year-to-date under our stock repurchase program and, as announced today, have expanded the program to $1.5 billion, reflecting our ability to generate strong cash flows, confidence in our business, and our commitment to drive shareholder value."

Expansion of Stock Repurchase Program

The Company also announced that its Board of Directors approved an expansion of its stock repurchase program. The Board of Directors increased the stock repurchase program by $500 million, from $1 billion to $1.5 billion, and extended the term of the program to December 31, 2014. To date, the Company has repurchased $940 million of its shares under this program.

The Company is authorized to repurchase shares under the program through open market purchases, including under a trading plan adopted pursuant to Rule 10b5-1, or through privately negotiated transactions, in accordance with applicable federal securities laws. The timing of repurchases and the exact number of shares to be purchased will be determined by the Company's management, in its discretion, or pursuant to a Rule 10b5-1 trading plan, and will depend upon market conditions and other factors. The repurchases will be funded using the Company's cash on hand and cash generated from operations. The program may be extended, suspended or discontinued at any time.

Conference Call
Cognizant will host a conference call on May 8, 2013 at 8:00 a.m. (Eastern) to discuss the Company's First Quarter 2013 results. To listen to the conference call, please dial (877) 810-9510 (domestic) and (201) 493-6778 (international) and provide the following conference passcode: Cognizant Call.

The conference call will also be available live via the Internet by accessing the Cognizant website at www.cognizant.com. Please go to the website at least 15 minutes prior to the call to register and to download and install any necessary audio software.

For those who cannot access the live broadcast, a replay will be available by dialing (877) 660-6853 for domestic callers or (201) 612-7415 for international callers and entering 411972 from two hours after the end of the call until 11:59 p.m. (Eastern) on Wednesday, May 22, 2013. The replay will also be available at Cognizant's website www.cognizant.com for 60 days following the call.

About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world's leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 162,700 employees as of March 31, 2013, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.   

Forward-Looking Statements
This press release includes statements which may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Cognizant undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

About Non-GAAP Financial Measures
To supplement our financial results presented in accordance with GAAP, this press release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: non-GAAP income from operations, non-GAAP operating margin and non-GAAP diluted earnings per share. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of Cognizant's non-GAAP financial measures to the corresponding GAAP measures should be carefully evaluated.

Historically, we sought to manage the company to a targeted operating margin, excluding stock-based compensation costs, of 19% to 20% of revenues.  Beginning with 2013, we continue to seek to manage the company to the same targeted operating margin, but we now also exclude acquisition-related charges, in addition to excluding stock-based compensation expense, in setting our internal operating targets.  Acquisition-related charges include, when applicable, amortization of purchased intangible assets included in the depreciation and amortization expense line on our condensed consolidated statements of operations, external deal costs, acquisition-related retention bonuses, integration costs, changes in the fair value of contingent consideration liabilities, charges for impairment of acquired intangible assets and other acquisition-related costs.  Our 2012 non-GAAP measures have been adjusted to reflect this change. We believe providing investors with an operating view consistent with how we manage the company provides enhanced transparency into the operating results of the company.  For our internal management reporting and budgeting purposes, we use non-GAAP financial information that does not include stock-based compensation expense and acquisition-related charges for financial and operational decision making, to evaluate period-to-period comparisons and for making comparisons of our operating results to those of our competitors. Therefore, it is our belief that the use of non-GAAP financial measures excluding these costs provides a meaningful measure for investors to evaluate our financial performance.  Accordingly, we believe that the presentation of non-GAAP income from operations, non-GAAP operating margin and non-GAAP diluted earnings per share, when read in conjunction with our reported GAAP results, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations.

A limitation of using non-GAAP measures versus financial measures calculated in accordance with GAAP is that non-GAAP measures do not reflect all of the amounts associated with our operating results as determined in accordance with GAAP and exclude costs that are recurring, namely stock-based compensation and certain acquisition-related charges.  In addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the usefulness of these non-GAAP financial measures as a comparative tool. We compensate for this limitation by providing specific information regarding the GAAP amounts excluded from non-GAAP income from operations, non-GAAP operating margin and non-GAAP diluted earnings per share to allow investors to evaluate such non-GAAP financial measures with financial measures calculated in accordance with GAAP.

 

 

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)







(In thousands, except per share data)















Three Months Ended




March 31,




2013


2012








Revenues


$2,020,738


$1,711,349








Operating expenses:






Cost of revenues (exclusive of depreciation and 

amortization expense shown separately below)


1,199,965


984,520


Selling, general and administrative expenses


413,204


374,178


Depreciation and amortization expense


41,662


34,752


Income from operations


365,907


317,899








Other income (expense), net:






Interest income


13,247


11,072


Other, net


(1,971)


(6,694)


Total other income (expense), net


11,276


4,378








Income before provision for income taxes


377,183


322,277








Provision for income taxes


92,974


78,626








Net income


$    284,209


$    243,651








Basic earnings per share


$           0.94


$           0.80








Diluted earnings per share


$           0.93


$           0.79








Weighted average number of common  






  shares outstanding - Basic


301,854


303,428








Weighted average number of common 






  shares outstanding - Diluted


305,176


309,208








 

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION


CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)


(In thousands)

























March 31,



December 31,




2013



2012









Assets














Current Assets














  Cash and cash equivalents 


$          1,474,860



$          1,570,077









  Short-term investments 


1,269,586



1,293,681









  Trade accounts receivable, net of allowances of $27,394







  and $25,816, respectively


1,495,996



1,345,661









  Unbilled accounts receivable


206,338



183,085









  Deferred income tax assets, net


183,496



201,894









  Other current assets


206,364



219,896









           Total Current Assets


4,836,640



4,814,294









Property and equipment, net


1,008,198



971,486









Goodwill


407,349



309,185









Intangible assets, net


122,501



87,475









Deferred income tax assets, net


164,967



178,824









Other noncurrent assets


169,647



160,307









Total Assets


$          6,709,302



$          6,521,571









Liabilities and Stockholders' Equity














Current Liabilities














Accounts payable


$             132,501



$             108,707









Deferred revenue


138,204



149,696









Accrued expenses and other current liabilities


955,138



1,118,927









       Total Current Liabilities


1,225,843



1,377,330









Deferred income tax liabilities, net


14,841



2,777









Other noncurrent liabilities


252,684



287,081









Total Liabilities


1,493,368



1,667,188









Stockholders' Equity


5,215,934



4,854,383









Total Liabilities and Stockholders' Equity


$          6,709,302



$          6,521,571









 


COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures (Unaudited)

(In thousands, except per share amounts)

















Three Months Ended March 31,





2013


2012










GAAP income from operations


$          365,907


$         317,899










Add: Stock-based compensation expense (a)

29,093


31,379










Add: Acquisition-related charges (b)


6,654


6,320










Non-GAAP income from operations


$          401,654


$         355,598

















GAAP operating margin


18.1%


18.6%










Effect of above adjustments


1.8%


2.2%










Non-GAAP operating margin


19.9%


20.8%

















GAAP diluted earnings per share


$                 0.93


$                0.79










Effect of above adjustments, net of tax


0.09


0.09










Non-GAAP diluted earnings per share


$                 1.02


$                0.88

















Notes: 


(a)  For the three months ended March 31, 2013,  the $29,093 adjustment to exclude stock-based compensation from income from operations includes $4,547, which was reported in cost of revenues and $24,546, which was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations. 


For the three months ended March 31, 2012,  the $31,379 adjustment to exclude stock-based compensation from income from operations includes $4,607, which was reported in cost of revenues and $26,772, which was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations. 


(b) Adjustment to exclude acquisition-related charges includes the following, when applicable: amortization of acquired intangible assets included in the depreciation and amortization line on our consolidated statements of operations, external deal costs, acquisition-related retention bonuses, integration costs, changes in the fair value of contingent consideration liabilities, charges for impairment of acquired intangible assets and other acquisition-related costs.


The above tables serves to reconcile the Non-GAAP financial measures to comparable GAAP measures. Please refer to the "About Non-GAAP Financial Measures" section of our press release for further information on the use of these Non-GAAP financial measures.

 

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

Schedule of Supplemental Information (Unaudited)

(In thousands)














Three Months Ended March 31, 2013






Growth %





$

% of total


Sequential 


Year over Year



Revenue by Segment:










Financial Services 


$         855,341

42.3%


4.9%


23.1%



Healthcare 


510,019

25.2%


2.0%


9.1%



Manufacturing/Retail/Logistics 


425,846

21.1%


4.2%


27.2%



Other 


229,532

11.4%


2.5%


7.0%



Total Revenue


$      2,020,738



3.7%


18.1%













Revenue by Geography:










North America


$      1,582,191

78.3%


3.0%


16.3%



  United Kingdom


216,408

10.7%


5.0%


20.0%



  Rest of Europe


131,848

6.5%


9.7%


27.3%



Europe - Total


348,256

17.2%


6.7%


22.7%



Rest of World


90,291

4.5%


4.8%


35.4%



Total Revenue


$      2,020,738



3.7%


18.1%










































 

SOURCE Cognizant Technology Solutions Corporation



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