Cognizant Reports Second Quarter 2009 Results
-Revenue for the quarter up 13% year-over-year and 4% sequentially -Raises guidance for FY2009 Revenue and EPS
Cognizant Technology Solutions Corporation (NASDAQ: CTSH), a leading provider of information technology, consulting and business process outsourcing services, today announced its second quarter 2009 financial results.
Highlights - Second Quarter 2009
-- Quarterly revenue rose to $776.6 million, up 13% from the year-ago
quarter and up 4% sequentially.
-- Quarterly diluted EPS on a GAAP basis was $0.47, compared to $0.35 in
the year-ago quarter.
-- Quarterly diluted EPS on a non-GAAP basis, which excludes stock-based
compensation and stock-based Indian fringe benefit tax expense, was
$0.50, compared to $0.39 in the year-ago quarter.
-- GAAP and non-GAAP diluted EPS includes the positive impact of $0.04 in
non-operating foreign currency exchange gains.
Revenue for the second quarter of 2009 rose to $776.6 million, up 13% from $685.4 million in the second quarter of 2008. GAAP net income was $141.3 million, or $0.47 per diluted share, compared to $103.9 million, or $0.35 per diluted share, in the second quarter of 2008. Diluted earnings per share on a non-GAAP basis was $0.50. GAAP operating margin for the quarter was 19.5%. Excluding stock based compensation expense of $8.4 million and stock-based Indian fringe benefit tax expense of $1.3 million, non-GAAP operating margin was 20.8%, above the Company's targeted 19-20% range. Earnings for the quarter included $14.1 million of pre-tax non-operating foreign currency exchange gains (net of hedge losses), or $0.04 per share, primarily resulting from favorable fluctuations in the European currencies and Indian Rupee during the period. Reconciliations of non-GAAP financial measures to GAAP operating results and diluted EPS are included at the end of this release.
"Despite a fluid economic environment, we posted industry-leading revenue growth this quarter, which demonstrates the resilience of our business model and our ability to adapt to evolving client needs," said Francisco D'Souza, President and CEO of Cognizant. "Large corporations are seeking us out to streamline global delivery, rationalize costs and create new business capabilities that significantly advance their business objectives over the short-, medium- and long-term. I am pleased that during the quarter we further solidified our leadership position in multiple industries, expanded our range of services, specifically in engineering services and industrial automation, and deepened our presence in emerging geographies such as Asia Pacific and the Middle East."
Mr. D'Souza continued: "Based on the strength of our second quarter results, we're increasing our 2009 revenue growth guidance from at least 10% to at least 11.5%. We are convinced that technology will play an integral role in the global economic recovery, and Cognizant is well positioned to capitalize on the unfolding cyclical and secular opportunities."
2009 Outlook - Third Quarter & Full Year
The Company is providing the following guidance:
-- Third quarter 2009 revenue anticipated to be at least $800 million.
-- Third quarter 2009 diluted EPS is expected to be $0.40 on a GAAP basis
and $0.44 on a non-GAAP basis, which excludes $0.04 of estimated
stock-based compensation expense.
-- Fiscal 2009 revenue expected to be at least $3.14 billion, up at least
11.5% compared to 2008.
-- Fiscal 2009 diluted EPS expected to be at least $1.66 on a GAAP basis,
and at least $1.80 on a non-GAAP basis, which excludes $0.14 of
estimated stock-based compensation and stock-based Indian fringe
benefit tax expense.
-- The proposed India Government Budget for the current fiscal year
includes abolition of the stock-based Fringe Benefit Tax effective
April 1, 2009. The budget has been approved by the Parliament and is
awaiting signature of the President. EPS guidance assumes the
elimination of the stock-based Fringe Benefit Tax passes into law
during the third quarter.
-- Due to continued volatility in the currency markets, EPS guidance
excludes any future non-operating foreign currency exchange gain or
loss.
"We had an excellent second quarter during which we saw healthy demand and increased revenue, while maintaining our discipline of operational excellence and reinvesting in our business to enhance our competitiveness longer-term," said Gordon Coburn, Chief Financial and Operating Officer. "The resilience of our business model, backed by our strategic decision of reinvestment, helps us provide increasing value to our customers while nurturing those trusted relationships. In addition, we strengthened our balance sheet significantly with our cash, and short- and long-term investments increasing by approximately $175 million during the quarter to a total of $1.14 billion."
Conference Call
Cognizant will host a conference call August 4, at 9:00 a.m. (ET) to discuss the Company's quarterly results. To listen to the call, please dial (800) 374-0467 domestically or (706) 679-3288 internationally and provide the conference ID number: 20632230. The call will also be broadcast live via the Internet at Cognizant's web site, www.cognizant.com. Please go to the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software. A replay will be made available on the web site at www.cognizant.com or by calling (800) 642-1687 for domestic callers and (706) 645-9291 for international callers and entering "20632230" from two hours after the end of the call until 11:59 p.m. (ET) on Wednesday, August 12, 2009. The replay will also be available at Cognizant's web site www.cognizant.com for thirty days following the call.
About Cognizant Technology Solutions
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting and business process outsourcing services. Cognizant's single-minded passion is to dedicate our global technology and innovation know-how, our industry expertise and worldwide resources to working together with clients to make their businesses stronger. With over 50 global delivery centers and 64,000 employees as of June 30, 2009, we combine a unique onsite/offshore delivery model infused by a distinct culture of customer satisfaction. A member of the NASDAQ-100 Index and S&P 500 Index, Cognizant is a Forbes Global 2000 company and a member of the Fortune 1000 and is ranked among the top information technology companies in BusinessWeek's Hot Growth and Top 50 Performers listings. Visit us online at www.cognizant.com.
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 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 the consolidated financial statements 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. 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, the financial statements prepared in accordance with GAAP and reconciliations of Cognizant's GAAP financial statements to such non-GAAP measures should be carefully evaluated.
We seek to manage the company to a targeted operating margin, excluding stock-based compensation costs and stock-based Indian fringe benefit tax expense, of 19% to 20% of revenues. Accordingly, we believe that non-GAAP operating margin and non-GAAP diluted earnings per share, excluding stock-based compensation costs and stock-based Indian fringe benefit tax expense, are meaningful measures for investors to evaluate our financial performance. For our internal management reporting and budgeting purposes, we use financial statements that do not include stock-based compensation expense and stock-based Indian fringe benefit tax expense 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. Moreover, because of varying available valuation methodologies and the variety of award types that companies can use under FAS 123R, we believe that providing non-GAAP financial measures that exclude stock-based compensation allows investors to make additional comparisons between our operating results to those of other companies. 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 operating margin and non-GAAP diluted earnings per share versus operating margin and diluted earnings per share calculated in accordance with GAAP is that non-GAAP operating margin and non-GAAP diluted earnings per share exclude costs, namely, stock-based compensation expense that is recurring, and stock-based Indian fringe benefit tax expense which is expected to be abolished during the third quarter of 2009. Stock-based compensation will continue to be for the foreseeable future a significant recurring expense in our business. 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 and evaluating 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 amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------- ---------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues $776,592 $685,427 $1,522,454 $1,328,533
Operating expenses:
Cost of revenues
(exclusive of
depreciation and
amortization expense
shown separately below) 433,340 380,867 853,048 747,132
Selling, general and
administrative expenses 170,003 167,105 336,875 315,958
Depreciation and
amortization expense 21,579 17,777 42,731 34,070
------ ------ ------ ------
Income from operations 151,670 119,678 289,800 231,373
------- ------- ------- -------
Other income
(expense), net:
Interest income 2,622 4,864 5,092 11,084
Other income /
(expense), net 14,874 (485) 9,763 3,469
------ ---- ----- -----
Total other income /
(expense), net 17,496 4,379 14,855 14,553
------ ----- ------ ------
Income before provision
for income taxes 169,166 124,057 304,655 245,926
Provision for
income taxes 27,911 20,201 50,268 40,197
Net income $141,255 $103,856 $254,387 $205,729
======== ======== ======== ========
Basic earnings per share $0.48 $0.36 $0.87 $0.71
===== ===== ===== =====
Diluted earnings
per share $0.47 $0.35 $0.85 $0.69
===== ===== ===== =====
Weighted average
number of common
shares outstanding 292,337 289,709 291,975 288,940
======= ======= ======= =======
Weighted average
number of common
and dilutive shares
outstanding 299,272 299,332 298,633 299,192
======= ======= ======= =======
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
(In thousands)
June 30, December 31,
-------- ------------
2009 2008
---- ----
Assets
Current Assets
Cash and cash equivalents $860,377 $735,066
Short-term investments 122,795 27,513
Trade accounts receivable, net of
allowances of $14,037
and $13,441, respectively 553,067 517,481
Unbilled accounts receivable 82,849 62,158
Deferred income tax assets, net 45,362 48,315
Other current assets 99,224 77,586
--------- ---------
Total Current Assets 1,763,674 1,468,119
Property and equipment, net 446,926 455,254
Long-term investments 160,782 161,693
Goodwill 154,196 154,035
Other intangible assets, net 45,858 47,790
Deferred income tax assets, net 58,919 52,816
Other assets 42,932 34,853
---------- ----------
Total Assets $2,673,287 $2,374,560
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $45,739 $39,970
Deferred revenue 32,107 38,123
Accrued expenses and other liabilities 312,012 309,484
------- -------
Total Current Liabilities 389,858 387,577
Deferred income tax liabilities, net 624 7,294
Other noncurrent liabilities 15,108 14,111
------- -------
Total Liabilities 405,590 408,982
------- -------
Stockholders' Equity 2,267,697 1,965,578
--------- ---------
Total Liabilities and Stockholders' Equity $2,673,287 $2,374,560
========== ==========
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Measures
(In thousands, except per share amounts)
Three Months Ended June 30, Three Months Ended June 30,
---------------------------- ---------------------------
2009 2008
2009 Adjust- 2009 2008 Adjust- 2008
GAAP ments Non-GAAP GAAP ments Non-GAAP
---- ----- -------- ---- ----- --------
Income
from
operations $151,670 $9,653(a) $161,323 $119,678 $16,379(c) $136,057
======== ====== ======== ======== ======= ========
Operating
margin 19.5% 1.3%(a) 20.8% 17.5% 2.3%(c) 19.8%
===== ==== ===== ===== ==== =====
Diluted
earnings
per share $0.47 $0.03(e) $0.50 $0.35 $0.04(e) $0.39
===== ===== ===== ===== ===== =====
Six Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
2009 2008
2009 Adjust- 2009 2008 Adjust- 2008
GAAP ments Non-GAAP GAAP ments Non-GAAP
---- ----- -------- ---- ----- --------
Income
from
operations $289,800 $22,361(b) $312,161 $231,373 $30,280(d) $261,653
======== ======= ======== ======== ======= ========
Operating
margin 19.0% 1.5%(b) 20.5% 17.4% 2.3%(d) 19.7%
===== ==== ===== ===== ==== =====
Diluted
earnings
per share $0.85 $0.06(e) $0.91 $0.69 $0.08(e) $0.77
===== ===== ===== ===== ===== =====
Notes:
(a) Adjustment to exclude stock-based compensation of $8,386 and
stock-based Indian fringe benefit tax expense of $1,267 from income
from operations of which $4,140 was reported in cost of revenues and
$5,513 was reported in selling, general and administrative expenses
in our unaudited condensed consolidated statements of operations.
(b) Adjustment to exclude stock-based compensation of $20,149 and
stock-based Indian fringe benefit tax expense of $2,212 from income
from operations of which $8,588 was reported in cost of revenues and
$13,773 was reported in selling, general and administrative expenses
in our unaudited condensed consolidated statements of operations.
(c) Adjustment to exclude stock-based compensation of $10,464 and
stock-based Indian fringe benefit tax expense of $5,915 from income
from operations of which $6,817 was reported in cost of revenues and
$9,562 was reported in selling, general and administrative expenses
in our unaudited condensed consolidated statements of operations.
(d) Adjustment to exclude stock-based compensation of $23,448 and
stock-based Indian fringe benefit tax expense of $6,832 from income
from operations of which $12,763 was reported in cost of revenues and
$17,517 was reported in selling, general and administrative expenses
in our unaudited condensed consolidated statements of operations.
(e) Adjustment to exclude the per share effect of stock-based
compensation expense net of the related tax benefit and stock-based
Indian fringe benefit tax expense. The stock-based Indian fringe
benefit tax expense is a nondeductible expense since the cost is
recovered from employees.
First Call Analyst:
FCMN Contact:
SOURCE: Cognizant Technology Solutions Corporation
CONTACT: David Nelson, Vice President, Investor Relations,
+1-201-498-8840, david.nelson@cognizant.com; or Press: Brian Maddox or Hannah
Sloane, hannah.sloane@fd.com, both of FD, +1-212-850-5600
Web Site: http://www.cognizant.com/
Financial