Cognizant Reports Fourth Quarter and Full Year 2013 Results Annual revenue of $8.84 billion, up 20% year-over-year;

Provides guidance for 2014 revenue growth of at least 16.5%;

Announces two-for-one stock split

TEANECK, N.J., Feb. 5, 2014 /PRNewswire/ -- Cognizant Technology Solutions Corporation (NASDAQ: CTSH), a leading provider of information technology, consulting, and business process outsourcing services, today announced its fourth quarter and full year 2013 financial results.

Highlights – Fourth Quarter 2013

  • Quarterly revenue rose to $2.355 billion, up 20.9% from the year-ago quarter and 2.2% sequentially.
  • Quarterly diluted EPS on a GAAP basis was $1.06, compared to $0.92 in the year-ago quarter.
  • Quarterly diluted EPS on a non-GAAP basis, which excludes stock-based compensation expense and acquisition-related charges, was $1.15, compared to $0.99 in the year-ago quarter.
  • Net headcount addition for the quarter was approximately 5,000; year-end headcount was approximately 171,400.

Revenue for the fourth quarter of 2013 rose to $2.355 billion, up 20.9% from $1.948 billion in the fourth quarter of 2012. GAAP net income was $324.3 million, or $1.06 per diluted share, compared to $278.8 million, or $0.92 per diluted share, in the fourth quarter of 2012. Diluted EPS on a non-GAAP basis was $1.15, compared to $0.99 in the fourth quarter of 2012. GAAP operating margin for the quarter was 19.0%. Non-GAAP operating margin was 20.7%, higher than the Company's targeted 19-20% range. Reconciliations of non-GAAP financial measures to GAAP operating results and diluted EPS are included at the end of this release.

"We are pleased to once again deliver industry-leading revenue growth in 2013," said Francisco D'Souza, Chief Executive Officer of Cognizant. "As we celebrate our 20 year anniversary, I would like to thank our clients who have placed their faith in us, our associates for their wonderful contribution to our growth and success, and our other stakeholders who have played a critical role in our accomplishments. Our strategy through these twenty years has been to challenge the status quo and constantly reinvent for the future, thus positioning us to help our clients build stronger businesses. We believe that we are well positioned to continue to do so in 2014 and beyond."

"Our growth during 2013 was broad-based across our industries, geographies and service lines," said Gordon Coburn, President of Cognizant. "This strong growth was fueled by our clients' on-going drive to 'run better' for more efficient and productive operations and to 'run different' to create the capabilities and business models they need for future success. Our strong portfolio of services coupled with our focus on new technologies and platform-based delivery models will help clients drive meaningful change as businesses become increasingly technology intensive. We anticipate that the healthy demand environment we witnessed in 2013 will continue into 2014 and we are well positioned to capture it."

Highlights – Full Year 2013

  • Revenue increased to $8.843 billion, up 20.4% from 2012.
  • Diluted EPS on a GAAP basis was $4.03, compared to $3.44 in 2012.
  • Diluted EPS on a non-GAAP basis, which excludes stock-based compensation expense and acquisition-related charges, was $4.38, compared to $3.74 in 2012.
  • GAAP and non-GAAP diluted EPS includes the impact of $0.15 in net non-operating foreign currency exchange losses.

Revenue for 2013 increased to $8.843 billion, up 20.4% from $7.346 billion for 2012. GAAP net income was $1.23 billion, or $4.03 per diluted share, compared to $1.05 billion, or $3.44 per diluted share, for 2012.  Diluted EPS on a non-GAAP basis was $4.38. GAAP operating margin was 19.0%.  Non-GAAP operating margin was 20.6%, higher than the company's targeted 19-20% range. Reconciliations of these non-GAAP financial measures to GAAP operating results and diluted EPS are included in the table at the end of this release.

Two-for-One Stock Split

The Board of Directors of Cognizant has declared a two-for-one stock split on its Class A common stock in the form of a 100% stock dividend. Stockholders of record as of February 21, 2014 will be entitled to one additional share of Class A common stock for each share held on the record date. The stock dividend distribution is expected to occur on or about March 7, 2014, and it is anticipated that the Company's Class A common stock will begin trading on a post-split basis the business day following the distribution date. The consolidated financial statements that accompany this press release do not reflect this stock split. All applicable references to the number of outstanding common shares and per share information have not been adjusted to reflect this stock split.

First Quarter & Full Year 2014 Outlook

Starting in 2014, our reported non-GAAP diluted EPS will exclude net non-operating foreign currency exchange gains or losses, as well as stock-based compensation expense and acquisition-related charges. This change is not reflected in our reported 2013 quarterly or annual results above, but is reflected in our 2014 non-GAAP guidance below.

The Company is providing the following guidance:

  • First quarter 2014 revenue anticipated to be at least $2.42 billion.
  • First quarter 2014 diluted EPS on a non-GAAP basis is expected to be $1.18 (prior to impact of upcoming stock split).
  • Full year 2014 revenue expected to be at least $10.3 billion, up at least 16.5% compared to 2013.
  • Full year 2014 diluted EPS on a non-GAAP basis expected to be at least $5.02 (prior to impact of upcoming stock split).

"The stock split underscores our confidence in the strength of the business model and in our prospects for 2014 and beyond," said Karen McLoughlin, Chief Financial Officer. "We further strengthened our balance sheet during 2013, allowing us to continue to support our industry-leading growth, by investing in service line capabilities, industry expertise, new technologies, new delivery platforms, and expanded geographical reach."

Conference Call

Cognizant will host a conference call February 5, 2014 at 8:00 a.m. (Eastern) to discuss the Company's quarterly and full year 2013 results. To listen to the conference call, please dial (877) 810-9510   (domestically) and (201) 493-6778 (internationally) 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 13574087 from two hours after the end of the call until 11:59 p.m. (Eastern) on Wednesday, February 19, 2014. 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 171,400 employees as of December 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 operating margin and non-GAAP diluted earnings per share ("non-GAAP diluted EPS"). 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 GAAP financial measures to the corresponding non-GAAP measures should be carefully evaluated. With respect to our expectations in the "First Quarter & Full Year 2014 Outlook" section above, reconciliation of non-GAAP diluted EPS guidance to GAAP diluted EPS cannot be provided without unreasonable efforts on a forward-looking basis due to the high variability and low visibility with respect to net non-operating foreign currency exchange gains or losses which are excluded from the non-GAAP diluted EPS. 

Historically, we sought to manage the company to a targeted operating margin, excluding stock-based compensation costs, of 19% to 20% of revenues.  In 2013, we continued to manage the company to the same targeted operating margin, but excluded acquisition-related charges, in addition to 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. In 2014, our non-GAAP diluted earnings per share will also exclude net non-operating foreign currency exchange gains or losses.  Management believes providing investors with an operating view consistent with how it manages 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 measures 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 provides a meaningful measure for investors to evaluate our financial performance.  Accordingly, we believe that the presentation of 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 acquisition-related charges, including amortization of purchased intangibles.  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 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.

- tables to follow -










COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)










(In thousands, except per share data)





















Three Months Ended


Twelve Months Ended



December 31,


December 31,



2013


2012


2013


2012










Revenues


$2,355,488


$1,948,215


$8,843,189


$7,346,472










Operating expenses:









Cost of revenues (exclusive of depreciation and      

amortization expense shown separately below)


1,411,155


1,150,934


5,265,469


4,278,241

Selling, general and administrative expenses


450,503


401,746


1,727,609


1,557,646

Depreciation and amortization expense


45,989


39,282


172,201


149,089

Income from operations


447,841


356,253


1,677,910


1,361,496










Other income (expense), net:









Interest income


11,873


11,417


48,896


44,514

Other, net


(8,575)


(1,826)


(38,889)


(18,414)

Total other income (expense), net


3,298


9,591


10,007


26,100










Income before provision for income taxes


451,139


365,844


1,687,917


1,387,596










Provision for income taxes


126,807


87,065


459,339


336,333










Net income


$    324,332


$    278,779


$1,228,578


$1,051,263










Basic earnings per share


$           1.07


$           0.93


$           4.07


$           3.49










Diluted earnings per share


$           1.06


$           0.92


$           4.03


$           3.44










Weighted average number of common  









  shares outstanding - Basic


302,873


300,452


302,007


301,291










Weighted average number of common 









  shares outstanding - Diluted


305,428


303,777


304,831


305,861










 






COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)

(In thousands)


















December 31,


December 31,



2013


2012






Assets










Current Assets










  Cash and cash equivalents 


$          2,213,006


$          1,570,077






  Short-term investments 


1,534,467


1,293,681






  Trade accounts receivable, net of allowances of $26,824





  and $25,816, respectively


1,648,785


1,345,661






  Unbilled accounts receivable


226,487


183,085






  Deferred income tax assets, net


256,230


201,894






  Other current assets


268,907


219,896






           Total Current Assets


6,147,882


4,814,294






Property and equipment, net


1,081,164


971,486






Goodwill


444,236


309,185






Intangible assets, net


131,274


87,475






Deferred income tax assets, net


221,345


178,824






Other noncurrent assets


183,013


160,307






Total Assets


$          8,208,914


$          6,521,571






Liabilities and Stockholders' Equity










Current Liabilities










Accounts payable


$             113,394


$             108,707






Deferred revenue


182,893


149,696






Accrued expenses and other current liabilities


1,478,221


1,118,927






       Total Current Liabilities


1,774,508


1,377,330






Deferred income tax liabilities, net


21,170


2,777






Other noncurrent liabilities


277,445


287,081






Total Liabilities


2,073,123


1,667,188






Stockholders' Equity


6,135,791


4,854,383






Total Liabilities and Stockholders' Equity


$          8,208,914


$          6,521,571






 











COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

Reconciliations of Non-GAAP Financial Measures (Unaudited)

(In thousands, except per share amounts)





















Three Months Ended December 31,


Twelve Months Ended December 31,



2013


2012


2013


2012










GAAP income from operations


$          447,841


$         356,253


$      1,677,910


$      1,361,496










Add: Stock-based compensation expense (a)


32,447


27,444


118,800


107,355










Add: Acquisition-related charges (b)


6,316


5,445


24,002


15,871










Non-GAAP income from operations


$          486,604


$         389,142


$      1,820,712


$      1,484,722



















GAAP operating margin


19.0%


18.3%


19.0%


18.5%










Effect of above adjustments


1.7%


1.7%


1.6%


1.7%










Non-GAAP operating margin


20.7%


20.0%


20.6%


20.2%



















GAAP diluted earnings per share


$                 1.06


$                0.92


$                 4.03


$                 3.44










Effect of above adjustments, net of tax


0.09


0.07


0.35


0.30










Non-GAAP diluted earnings per share


$                 1.15


$                0.99


$                 4.38


$                 3.74











Notes: 
(a)  For the three months ended December 31, 2013, the $32,447 adjustment to exclude stock-based compensation from income from operations includes $5,537, which was reported in cost of revenues and $26,910, which was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.  

 

For the three months ended December 31, 2012, the $27,444 adjustment to exclude stock-based compensation from income from operations includes $4,120, which was reported in cost of revenues and $23,324, which was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.

 

For the twelve months ended December 31, 2013, the $118,800 adjustment to exclude stock-based compensation from income from operations includes $19,107, which was reported in cost of revenues and $99,693, which was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.

 

For the twelve months ended December 31, 2012, the $107,355 adjustment to exclude stock-based compensation from income from operations includes $16,773, which was reported in cost of revenues and $90,582, which was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.

 

(b) Adjustments to exclude acquisition-related charges, including the following when applicable: amortization of acquired intangible assets, external deal costs, acquisition-related retention payments, changes to contingent consideration, integration costs 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 measures.


 

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

Schedule of Supplemental Information (Unaudited)

(In thousands)













Three Months Ended December 31, 2013





Growth %




$


% of total


Sequential


Year over Year


Revenue by Segment:










Financial Services


$ 997,146


42.3%


4.5%


22.3%


Healthcare


613,286


26.0%


2.2%


22.6%


Manufacturing/Retail/Logistics


490,243


20.8%


-0.1%


20.0%


Other


254,813


10.8%


-2.3%


13.7%


Total Revenue


$ 2,355,488




2.2%


20.9%












Revenue by Geography:










North America


$ 1,817,401


77.2%


1.9%


18.3%


United Kingdom


245,929


10.4%


-0.2%


19.3%


Rest of Europe


183,136


7.8%


8.8%


52.4%


Europe - Total


429,065


18.2%


3.5%


31.5%


Rest of World


109,022


4.6%


1.0%


26.6%


Total Revenue


$ 2,355,488




2.2%


20.9%


































Twelve Months Ended December 31, 2013







Growth %




$


% of total




Year over Year


Revenue by Segment:










Financial Services


$ 3,717,573


42.0%




22.5%


Healthcare


2,264,826


25.6%




17.1%


Manufacturing/Retail/Logistics


1,868,305


21.1%




24.7%


Other


992,485


11.2%




13.1%


Total Revenue


$ 8,843,189






20.4%












Revenue by Geography:










North America


$ 6,860,067


77.6%




17.5%


United Kingdom


942,579


10.7%




23.2%


Rest of Europe


636,626


7.2%




47.9%


Europe - Total


1,579,205


17.9%




32.1%


Rest of World


403,917


4.6%




28.3%


Total Revenue


$ 8,843,189






20.4%
































SOURCE Cognizant Technology Solutions Corporation



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