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CTSH · Cognizant Technology Solutions

28 filings

10-K

CTSH 10-K Annual Reports

Cognizant Technology Solutions - 28 annual reports

Filing record · 2016–202610-K1110-Q338-K105

2025
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2025
Cognizant (CTSH) closed 2025 with revenue of $21.1 billion, up 7.0% from $19.7 billion in 2024 (6.4% in constant currency), with Belcan contributing about 260 basis points of that growth. GAAP operating margin rose 140 basis points to 16.1%, and Adjusted Operating Margin rose 50 basis points to 15.8%, helped by NextGen program savings, operational efficiencies and favorable FX, partly offset by higher compensation costs and Belcan dilution. Net income was essentially flat at $2.23 billion, and GAAP diluted EPS rose only $0.05 to $4.56 because of a one-time, non-cash $390 million tax charge from the OBBBA's repeal of the R&E capitalization requirement. Adjusted Diluted EPS rose 11.2% to $5.28. Cash generation was strong. Operating cash flow reached $2.88 billion and free cash flow was $2.67 billion, up from $1.83 billion. The company returned capital through $1.38 billion of buybacks and $610 million of dividends, repaid the $300 million revolver balance, and carries a $1.92 billion remaining repurchase authorization. Management plans to deploy about 50% of free cash flow toward acquisitions and 50% toward shareholder returns. Subsequent events include the January 2026 acquisition of 3Cloud, an Azure and AI services provider, for $733 million in escrow, and a quarterly dividend increase to $0.33 per share. Key risks for investors include AI-driven pressure on traditional services demand and pricing, as well as the company's exposure to large legal and tax matters. A Central District of California class action over bench terminations could yield significant individual damages, though the company has not accrued for it. The ITD tax dispute totals roughly $367 million on the 2016 transaction plus the 2013 matter, and the company has recorded no reserve for either. The India Defined Contribution Obligation remains uncertain. Voluntary attrition improved to 13.9% from 15.9%, and headcount rose to about 351,600.
Feb 12, 2026
2024
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2024
Cognizant (CTSH) closed 2024 with revenue of $19.74 billion, up 2.0% year over year (1.9% in constant currency), with roughly 200 basis points of that growth contributed by acquisitions, mainly Belcan and Thirdera. Growth was led by Health Sciences (+4.5%) and offset by softness in Financial Services (-1.0%) and, in pockets, Products and Resources and CMT. GAAP operating margin rose 80 basis points to 14.7% and Adjusted operating margin rose 20 basis points to 15.3%, helped by NextGen restructuring savings and favorable FX, partly offset by merit-driven compensation costs and acquisition dilution. GAAP diluted EPS was $4.51 (+7.1%) and Adjusted diluted EPS was $4.75 (+4.4%). Cash generation weakened: operating cash flow fell to $2.12 billion from $2.33 billion, largely because of a $360 million payment tied to the India tax (ITD) dispute, and free cash flow declined to $1.83 billion from $2.01 billion. The company spent $1.6 billion on acquisitions, funded in part by a $600 million revolver draw (with $300 million repaid by year-end), and returned capital through $600 million in dividends and $605 million in buybacks. Cognizant ended the year with $2.24 billion in cash and short-term investments, $1.55 billion in revolver availability, and a stated capital allocation target of about 50% of free cash flow to acquisitions and 50% to shareholder returns. Key risks flagged include discretionary spending softness among clients, AI-driven substitution of some traditional services (and the pricing pressure that comes with it), visa and immigration restrictions affecting a large share of US staff, the India tax disputes (roughly $386 million for the 2016 transaction plus the 2013 matter), the Syntel trade-secret appeal and the retrial of the Cognizant bench-termination discrimination class action, and the potential retroactive application of the India Defined Contribution Obligation. Management has completed the NextGen program at a cumulative cost of $363 million and expects the Belcan deal to modestly dilute 2025 operating margin.
Feb 12, 2025
2023
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2023
Cognizant (CTSH) reported FY2023 revenue of $19.35 billion, down 0.4% year over year (down 0.3% in constant currency), as weakness in Financial Services, particularly banking, offset growth in Communications, Media and Technology, Products and Resources, and Health Sciences. Recently completed acquisitions contributed 110 basis points to growth. GAAP operating income fell 9.4% to $2.69 billion, with GAAP operating margin of 13.9% versus 15.3% in 2022. The decline was driven largely by $229 million of restructuring charges tied to the NextGen cost-optimization program, which the company expects to total roughly $300 million, with about $70 million in 2024. Excluding those charges, adjusted operating margin was 15.1%, down 20 basis points, and adjusted diluted EPS rose 3.4% to $4.55. GAAP diluted EPS fell 4.5% to $4.21. Cash generation remained solid, with operating cash flow of $2.33 billion and free cash flow of $2.01 billion, though both declined as income tax payments rose. The company returned capital through $1.16 per share in dividends (with the quarterly rate increased to $0.30 for 2024) and repurchases, and it ended the year with $2.6 billion in cash and short-term investments against $0.65 billion in term loan debt. Headcount fell to about 347,700 from 355,300, and voluntary attrition dropped sharply to 13.8% from 25.6%. Management's capital allocation framework targets roughly 50% of free cash flow for acquisitions, 25% for buybacks and 25% for dividends. Key risks for investors include the ongoing ITD tax dispute, under which CTS India was required to deposit about $355 million in January 2024, and the potential for AI to displace some services revenue. Management also flagged discretionary client spending pressure, particularly in North America, and the uncertain retroactive application of India's Defined Contribution Obligation, which could result in liabilities above the $117 million previously accrued. Subsequent to year-end, the company agreed to acquire Thirdera for a preliminary $430 million.
Feb 14, 2024
2022
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2022
Cognizant (CTSH) closed fiscal 2022 with revenue of $19.43 billion, up 5.0% year over year (7.5% in constant currency), with acquisitions adding about 100 basis points and the Samlink divestiture subtracting about 60 basis points. GAAP operating income rose 5.0% to $2.97 billion, and operating margin held flat at 15.3%. Diluted EPS was $4.41, up 8.9%, while adjusted diluted EPS was $4.40, up 6.8%. Net income reached $2.29 billion. The main headwinds were elevated employee attrition (31.7% for the full year, though the Q4 annualized rate fell to 25.3% from 34.6%) and higher delivery compensation costs. Partial offsets included pricing gains, delivery efficiencies, and a weaker Indian rupee. A 30 basis point impairment on a Health Sciences contract also weighed on margins. Cash generation was solid, with operating cash flow of $2.57 billion and free cash flow of $2.24 billion. Cognizant returned capital through $1.42 billion of buybacks and $564 million of dividends. The board raised the quarterly dividend to $0.29 per share from $0.27, and about $2.8 billion remains under the $11.5 billion repurchase authorization. The balance sheet is conservative: cash and short-term investments total $2.5 billion, debt is roughly $650 million, and the company refinanced its credit facilities in October 2022 with a maturity extended to 2027. Subsequent events include the OneSource Virtual acquisition ($103 million) and a pending Mobica acquisition (about $335 million), which signal continued inorganic growth. Key risks for investors include ongoing talent-market pressure on margins, client concentration in the United States and Europe, a pending Indian tax dispute with the ITD over 2013 and 2016 share repurchases (roughly $400 million of tax claimed on the 2016 transaction, with no reserve recorded), and a potential retroactive liability tied to India's Defined Contribution ruling, which is partly accrued. Management expects Q1 2023 attrition to come in below the full-year 2022 rate.
Feb 15, 2023
2021
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2021
Cognizant (CTSH) closed 2021 with revenue of $18.51 billion, up 11.1% from $16.65 billion in 2020 (10.0% in constant currency). Acquisitions contributed about 320 basis points of that growth, and the company completed seven acquisitions during the year. GAAP operating margin expanded 260 bps to 15.3%, and adjusted operating margin rose 100 bps to 15.4%, helped by savings from the 2020 Fit for Growth cost program and lower travel costs. GAAP diluted EPS was $4.05, up 57.6%, and adjusted diluted EPS was $4.12, up 20.5%. The gap between GAAP and adjusted EPS narrowed largely because 2020 included restructuring, COVID-related and Indian earnings tax charges that did not recur. The main headwind was elevated employee attrition, which reached 30.8% for the full year and 34.6% annualized in Q4, versus 20.6% in 2020. Management expects this pressure to persist through 2022, with rising compensation costs that may not be fully recovered through pricing. Management also flagged continued pricing pressure on non-digital legacy services in Financial Services. Cognizant ended the year with about 330,600 employees, and free cash flow fell to $2.2 billion from $2.9 billion, reflecting deferred tax payments and higher incentive payouts. The company retains a strong balance sheet, with $2.7 billion in cash and short-term investments, and it returned $1.3 billion through buybacks and dividends. Remaining risks include the unresolved Indian tax disputes with the ITD, a $443 million assessment on the 2016 share repurchase, and a $570 million Syntel judgment that is on appeal and not yet recorded as a gain. For investors, the filing shows a return to healthy growth and margin recovery, with the key questions being whether attrition and wage inflation can be offset by pricing and productivity, and how the Healthcare, Products & Resources and CMT segments sustain their momentum.
Feb 16, 2022
2020
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2020
Cognizant (CTSH) reported a mixed 2020 as the COVID-19 pandemic, a Maze ransomware attack, and its Fit for Growth restructuring weighed on results. Revenue declined 0.8% to $16.65 billion (-0.7% in constant currency), with Financial Services down 4.2% and Healthcare (+3.3%) and Communications, Media and Technology (+1.4%) growing. GAAP operating margin fell to 12.7% from 14.6%, and adjusted operating margin to 14.4% from 16.6%. GAAP net income dropped 24.4% to $1.39 billion, and diluted EPS fell to $2.57 from $3.29 (adjusted diluted EPS $3.42 vs. $3.99). The decline was driven partly by a $140 million tax charge on accumulated Indian earnings and a $118 million revenue hit from a proposed exit of a large European financial services engagement. Cash generation and capital return remained strong. Operating cash flow rose to $3.30 billion from $2.50 billion, and the company returned $2.03 billion to shareholders through buybacks and dividends. It ended the year with $2.72 billion in cash and short-term investments, a $9.5 billion repurchase authorization ($2.8 billion remaining), and a dividend increase to $0.24 per quarter. Post-year-end, the company agreed to or completed several acquisitions (Linium, Servian, Magenic) totaling roughly $565 million in preliminary purchase price. Key investor considerations include a pending $854 million jury verdict in Cognizant's favor against Syntel (not recorded until realizable, as appeal is expected), unresolved Indian tax disputes with the ITD, ongoing securities class action litigation tied to the former FCPA investigation, and continued reliance on the Indian rupee cost base and H-1B visa workforce. Management guided to roughly $530 million in annualized savings from the Fit for Growth Plan in 2021.
Feb 12, 2021
2019
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2019
Cognizant (CTSH) closed 2019 with revenue of $16.78 billion, up 4.1% (5.2% in constant currency), but operating profit fell sharply. Income from operations declined 12.4% to $2.45 billion, and operating margin compressed from 17.4% to 14.6%. Diluted EPS dropped 8.6% to $3.29, and net income fell 12.3% to $1.84 billion. Management attributed the margin decline to delivery personnel costs outpacing revenue growth, dilution from recent acquisitions, contract renegotiations with merged healthcare clients, and a 'Customer Dispute.' Adjusted diluted EPS was $3.99, down 0.7%, which excludes restructuring, a $117 million India Defined Contribution Obligation accrual, and an equity-investment impairment. management is launching a multi-year '2020 Fit for Growth Plan' to accelerate growth and cut costs. It targets $500-550 million in annualized gross savings, against $100-150 million of expected 2020 charges. The plan also exits certain content-related work, which management estimates will reduce 2020 revenue by $180-200 million. Management is also reinvesting in sales, marketing, digital capabilities (IoT, AI, digital engineering, cloud), and acquisitions. Capital return remained substantial: $2.6 billion went to shareholders in 2019, and the board raised the buyback authorization to $7.5 billion and the quarterly dividend by 10%, to $0.22. Investors should weigh several overhangs. The company holds about $2.4 billion of cash in India, and $414 million of it is restricted in an ongoing tax dispute with India's Income Tax Department. Revenue depends heavily on North America (about 76% of 2019 revenue). Pending matters include the retroactive India Defined Contribution Obligation, FCPA-related securities litigation, and changes to US immigration policy that affect the visa-dependent workforce.
Feb 14, 2020
2018
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2018
Cognizant (CTSH) closed 2018 with revenue of $16.125 billion, up 8.9% year over year (8.5% in constant currency), and GAAP income from operations of $2.801 billion, a 17.4% operating margin versus 16.8% in 2017. Net income rose 39.7% to $2.101 billion, but the comparison is flattered by the 2017 one-time $617 million Tax Reform charge, which pushed that year's effective tax rate to 43.4%. The 2018 effective rate fell to 25.0%. Diluted EPS was $3.60 versus $2.53. Growth was broad: Healthcare (+9.5%), Products and Resources (+12.3%) and Communications, Media and Technology (+17.4%) led, while Financial Services lagged at +3.7% as banking clients shifted spend toward captives and digital transformation. Europe grew 18.3%, North America (76% of revenue) grew 7.4%, and the company completed five acquisitions for about $1.1 billion. Capital allocation and balance-sheet items matter for investors. Cognizant returned $3.7 billion to shareholders over 2017-2018, above its $3.4 billion target, and shares outstanding fell from 588 million to 577 million. Free cash flow was $2.215 billion, and the new plan directs about 50% of free cash flow to dividends and buybacks and about 25% to acquisitions. The $5.5 billion repurchase authorization runs through 2020, with $2.5 billion remaining. Cash and short-term investments were $4.5 billion, but $423 million is restricted by an Indian tax dispute, and $2.7 billion sits offshore. The main overhangs are the Indian Income Tax Department dispute, which asserts about $475 million plus related claims for two share repurchase transactions and has no reserve recorded. Also significant are the ongoing securities class action and derivative suits tied to the FCPA investigation, which was resolved in February 2019 for about $28 million. Management also flagged rising attrition (20.8% annual turnover), tighter U.S. visa rules, and a Brexit-related drag. The filing was issued alongside a CEO transition, with Brian Humphries replacing Francisco D'Souza effective April 1, 2019.
Feb 19, 2019
2017
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2017
Cognizant (CTSH) reported FY2017 revenue of $14.81 billion, up 9.8% year over year, with GAAP income from operations of $2.48 billion (16.8% margin, down from 17.0%) and non-GAAP operating margin of 19.7%, up from 19.5%. Growth was broad-based: Communications, Media and Technology grew 17.7%, Products and Resources 14.3%, Healthcare 10.1%, and Financial Services 5.0%. Management is targeting a 22% non-GAAP operating margin in 2019 through a realignment program that cost $72 million in 2017, with more realignment costs possible in 2018. GAAP diluted EPS fell slightly to $2.53 from $2.55, and net income declined 3.2% to $1.50 billion. The drop was driven by a one-time provisional $617 million net tax charge from the U.S. Tax Cuts and Jobs Act, which lifted the effective tax rate to 43.4%. Excluding that charge and other adjustments, non-GAAP diluted EPS rose 11.2% to $3.77. Management expects a 24%-26% effective tax rate for 2018-2020, and the Tax Act's transition tax is payable over eight years. Capital returns are a major theme. The company is executing a $3.4 billion return plan through 2018, which included $1.8 billion of accelerated share repurchases and $265 million of dividends in 2017. The quarterly dividend was raised to $0.20 in February 2018, and roughly $1.7 billion remains under the buyback authorization. Offsetting these positives, the 10-K discloses an ongoing FCPA internal investigation (about $6 million in questionable payments in India), related DOJ and SEC inquiries, and consolidated securities class action and derivative suits with no accrual recorded, plus a material weakness identified in 2016 that was remediated as of year-end 2017.
Feb 27, 2018
2016
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2016
Cognizant (CTSH) ended 2016 with revenues of $13.49 billion, up 8.6% year over year, and GAAP net income of $1.55 billion, down 4.4%, with diluted EPS of $2.55 versus $2.65 in 2015. The earnings decline was driven mainly by a $238 million incremental tax expense tied to the May 2016 India Cash Remittance, which repatriated about $1.0 billion of cash to the U.S. Excluding that charge and other items, non-GAAP diluted EPS rose to $3.39 from $3.07. GAAP operating margin slipped to 17.0% from 17.3%, and non-GAAP operating margin slipped to 19.5% from 19.7%, as compensation costs and professional service costs outpaced revenue growth. The filing is dominated by governance and legal risk. The company disclosed an internal investigation into roughly $6 million of possibly improper payments tied to Company-owned facilities in India (2010–2015), a voluntary notification to the DOJ and SEC, multiple securities class actions and shareholder derivative suits, and a material weakness in internal control over financial reporting attributed to an ineffective tone at the top. PwC issued an adverse opinion on internal control, though it issued an unqualified opinion on the financial statements. The company also incurred $27 million of FCPA-related costs in 2016 and expects more in 2017 and beyond, and it cannot yet estimate potential losses. The capital return plan is the key forward-looking item: $3.4 billion returned over 2017–2018 through a $1.5 billion accelerated buyback, a $0.15 quarterly dividend starting in Q2 2017, and $1.2 billion of open-market repurchases, with a target of 22% non-GAAP operating margin by 2019. Funding will rely partly on new borrowing, and the credit agreement carries a debt-to-equity covenant of 0.40 to 1.00. Balance-sheet capacity is solid, with $5.2 billion of cash and short-term investments against $878 million of total debt, but roughly $4.0 billion of cash sits outside the U.S.
Mar 1, 2017
2015
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2015
Cognizant (CTSH) closed fiscal 2015 with revenue of $12.42 billion, up 21.0% year over year, and net income of $1.62 billion, up 12.8%. Diluted EPS was $2.65 on a GAAP basis and $3.07 on a non-GAAP basis. Growth was driven in large part by the November 2014 TriZetto acquisition, which contributed about $724.5 million in 2015 versus $80.6 million in 2014 and accounted for roughly 30% of year-over-year revenue growth. Organic growth remained solid, with consulting and technology services up 31.8% and outsourcing up 8.9%, and the shift toward project-based digital and transformational work continued. Profitability was mixed. GAAP operating margin fell to 17.3% from 18.4%, and non-GAAP operating margin fell to 19.7% from 20.2%. Management attributed the decline to higher compensation and benefit costs, including incentive pay, and to amortization from recent acquisitions. A weaker Indian rupee offset part of the pressure, adding about 98 basis points to operating margin. Headcount rose to about 221,700, and annualized turnover was 19.1%. Client concentration remains moderate: the top ten customers were 18.6% of revenue, and 98.4% of revenue came from clients who were already customers at the end of 2014. The balance sheet is strong, with $4.95 billion in cash and short-term investments against $1.29 billion of debt, leaving the company in a net cash position. Operating cash flow was $2.15 billion. Share repurchases totaled $460 million in 2015, with $437.9 million left under the $2.0 billion authorization, and the company pays no dividend. Key risks include reliance on India for most delivery staff and currency exposure, the possibility of anti-outsourcing and immigration legislation, Indian SEZ tax-holiday phase-outs, and the fact that most client contracts are short-term and terminable on short notice.
Feb 25, 2016
2014
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2014
Cognizant (CTSH) closed 2014 with revenue of $10.26 billion, up 16.1% from $8.84 billion in 2013, and GAAP diluted EPS of $2.35 (non-GAAP $2.60). Growth was broad-based across all four industry segments, with Other (+20.3%) and Healthcare (+18.7%) leading, while Financial Services (41.8% of revenue) grew 15.3%. GAAP operating margin compressed to 18.4% from 19.0%, driven by higher compensation costs, subcontractor expense, and investment in growth, partially offset by a weaker rupee. Net income rose 17.2% to $1.44 billion. The defining event of the year was the November 2014 acquisition of TriZetto, a healthcare IT software and services provider, for approximately $2.63 billion net of cash acquired. It was funded with $1.8 billion of cash on hand and a $1.0 billion term loan, with a $750 million revolver (of which $650 million was drawn at year-end). Total debt rose to about $1.64 billion from zero, creating a leverage covenant (debt-to-equity no more than 0.40x) that investors should monitor. TriZetto contributed only $80.6 million of 2014 revenue, so its earnings impact is still largely ahead, and goodwill rose to $2.41 billion from $0.44 billion. Cash generation remains strong, with operating cash flow of $1.47 billion and cash, equivalents, and short-term investments of $3.77 billion at year-end, though $3.43 billion of that is held outside the U.S. The company has never paid a cash dividend, and it repurchased roughly $248 million of stock during 2014, with $814 million remaining under its authorization. Key risks include India wage inflation, rupee volatility (a $2.46 billion notional hedge book with a $102.6 million net unrealized loss), anti-outsourcing and immigration legislation, and concentration in financial services and healthcare.
Feb 27, 2015
2013
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2013
Cognizant Technology Solutions (CTSH) closed fiscal 2013 with revenue of $8,843.2 million, up 20.4% from $7,346.5 million in 2012, and net income of $1,228.6 million, up 16.9%. GAAP diluted EPS was $4.03 versus $3.44, and non-GAAP diluted EPS was $4.38 versus $3.74. GAAP operating margin improved to 19.0% from 18.5%, and non-GAAP operating margin (excluding stock-based compensation and acquisition-related charges) rose to 20.6% from 20.2%. Growth was broad-based: Financial Services (42.0% of revenue) grew 22.5%, Manufacturing/Retail/Logistics grew 24.7%, Healthcare grew 17.1%, and Europe grew 32.1%. Active clients rose to about 1,197 from 821, and strategic clients to 243. Management said it reinvests profits above a 19% to 20% non-GAAP operating margin into the business. The balance sheet is strong, with $3.75 billion of cash, cash equivalents and short-term investments, no third-party debt, and working capital of $4.37 billion. Stockholders' equity reached $6.14 billion. Operating cash flow was $1.42 billion. However, $2.51 billion of cash is held outside the U.S., and the company has indefinitely reinvested foreign earnings. Free cash flow was also reduced by heavy India facility investment and $179 million of buybacks, with $502 million remaining under the repurchase authorization. Key risks for investors include concentration in North America (77.6% of revenue) and in the financial services sector, heavy dependence on India-based talent and rupee exposure (cash flow hedges carry a $354.9 million net unrealized loss), U.S. immigration and anti-outsourcing legislation, and fixed-price contracts (34.0% of revenue). The company also has a pending two-for-one stock split, declared February 4, 2014, with distribution expected around March 7, 2014.
Feb 25, 2014
2012
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2012
Cognizant Technology Solutions (CTSH) closed 2012 with revenue of $7,346.5 million, up 20.0% from $6,121.2 million in 2011, and net income of $1,051.3 million, or $3.44 per diluted share, up from $2.85. Growth was broad-based across segments: Financial Services rose 20.5% to $3,035.4 million, Healthcare 19.3% to $1,934.9 million, Manufacturing/Retail/Logistics 25.2% to $1,498.7 million, and Other 12.0% to $877.5 million. North America grew 21.5% and represented 79.4% of revenue. Management says demand is driven by a shift toward global delivery models, discretionary project spending, and expansion of IT infrastructure and BPO services. Profitability held steady. GAAP operating margin was 18.5% versus 18.6% in 2011, and non-GAAP operating margin excluding stock-based compensation was 20.0%, in line with the company's historical 19% to 20% target range. Management attributed the slight margin dip to growth investments, partly offset by a weaker Indian rupee and cash flow hedge losses. The company is also investing heavily in India real estate, with about $400 million planned for 2013 capital expenditures. The balance sheet is strong. Cash, cash equivalents and short-term investments totaled $2,863.8 million, the company has no third-party debt, and it repurchased about $486 million of stock in 2012 (cash flow statement shows $520.8 million). Operating cash flow was $1,172.6 million. Key risks include concentration in Financial Services (41.3% of revenue) and North America, rising Indian wage costs, H-1B and L-1 visa restrictions, anti-outsourcing legislation, and foreign exchange exposure. The company also carries a net unrealized loss of $296.6 million on its rupee hedges, which is a mark-to-market figure and not an operating loss.
Feb 26, 2013
2011
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2011
Cognizant Technology Solutions (CTSH) closed 2011 with a strong year of growth and profitability. Revenue rose 33.3% to $6.12 billion (from $4.59 billion), and net income climbed 20.5% to $883.6 million, or $2.85 per diluted share. Income from operations grew 31.9% to $1.14 billion, with the operating margin slipping modestly to 18.6% from 18.8%. Excluding stock-based compensation of about $90.2 million, the operating margin was 20.0%, in line with management's targeted 19% to 20% range. Growth was broad-based across all four segments, led by Manufacturing/Retail/Logistics (+40.9%) and Healthcare (+37.8%), with Europe up 28.3%. Roughly 97% of 2011 revenue came from customers who were already clients at the end of 2010. The main headwind to earnings was taxes. The effective tax rate rose from 16.5% to 24.4% because the Indian Software Technology Park tax holiday expired on March 31, 2011, and the Minimum Alternative Tax now applies to Indian profits. Management expects this to keep pressuring margins, and the company also flagged rising Indian wage costs and rupee volatility. Foreign exchange hedges are a large item on the balance sheet: the net unrealized loss on cash flow hedges reached about $385.6 million at year-end, driven by rupee depreciation in late 2011, which pushed accumulated other comprehensive loss to $(325.4) million. Those hedges are a risk to watch, though they are mark-to-market and do not reflect operating cash losses. The balance sheet remains very strong, with $2.43 billion in cash and short-term investments, no third-party debt, and working capital of $2.88 billion. Operating cash flow was $875 million and capital expenditures were $288 million, with about $370 million planned for 2012. Share repurchases were $374 million in 2011, and the authorization was raised to $600 million. Management did not declare cash dividends and said it intends to retain earnings to fund growth.
Feb 27, 2012
2010
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2010
Cognizant Technology Solutions (CTSH) closed fiscal 2010 with a very strong year: revenue rose 40.1% to $4,592.4 million from $3,278.7 million, and net income increased 37.1% to $733.5 million, or $2.37 per diluted share. Growth was broad-based across all four vertical segments, with Manufacturing/Retail/Logistics up 50.4%, Other up 39.1%, Financial Services up 38.2% and Healthcare up 36.8%. Revenue from European customers rose 41.0% to $855.6 million, with the UK up 58.2%. Total headcount reached roughly 104,000, up about 25,600 in the year, and active clients grew to approximately 712 from 589. Profitability was steady rather than expanding. Income from operations reached $861.9 million, but operating margin slipped slightly to 18.8% from 18.9%. Management attributed the pressure to Indian rupee appreciation, which cut operating margin by about 157 basis points, along with higher compensation costs. Excluding stock-based compensation, the operating margin was 20.0%, within the company's stated 19% to 20% target range. Net foreign exchange results turned to a loss of $9.9 million, versus a gain in 2009, and the effective tax rate edged up to 16.5%. The balance sheet is conservative. Cash and short-term investments totaled $2,226.4 million, the company carried no third-party debt, and working capital was $2,587.5 million. Operating cash flow was $764.7 million. Investors should weigh several forward risks disclosed in the filing: the expiration of Indian software technology park tax holidays on March 31, 2011, which will raise the effective tax rate; continued wage inflation in India; a planned roughly $500 million India facilities program through 2014; and ongoing U.S. anti-outsourcing and H-1B visa policy risk. Management expects about $285 million of 2011 capital expenditures.
Feb 23, 2011
2009
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2009
Cognizant Technology Solutions (CTSH) closed fiscal 2009 with revenue of $3,278.7 million, up 16.4% from $2,816.3 million in 2008, and net income of $535.0 million, or $1.78 per diluted share, versus $1.44 a year earlier. Income from operations rose 19.7% to $618.5 million, and the operating margin widened to 18.9% from 18.3%. Excluding stock-based compensation and Indian fringe benefit tax, the margin was 20.3%, slightly above the company's historical 19% to 20% target range. Management attributed much of the margin gain to a depreciation of the Indian rupee against the U.S. dollar, which added roughly 255 basis points, along with revenue growth outpacing headcount growth. Growth was broad-based across the four vertical segments. Healthcare and Manufacturing/Retail/Logistics each grew 25% or more, while Financial Services, the largest segment at 42.9% of revenue, grew 9.5% as the financial services crisis constrained demand. North American revenue grew 16.4%, European revenue grew 12.1%, and Asia revenue grew 65.9%, although North America still generated about 79% of total revenue. The company ended the year with roughly 589 active clients, 78,400 employees, and no third-party debt. Cash and short-term investments totaled $1,399.3 million, and working capital was $1,661.0 million. Key risks for investors include the company's heavy reliance on India, where most of its technical staff are located, and the scheduled expiration of Indian software tax holidays on March 31, 2011, after which management expects its effective tax rate to rise significantly. Other concerns include potential U.S. anti-outsourcing legislation, H-1B and L-1 visa restrictions, and about $151 million of auction-rate securities that remain illiquid. Those holdings are partly backstopped by a UBS put right exercisable from June 2010 to July 2012. Management expects 2010 capital expenditures of about $180 million and plans to keep reinvesting profits above its historical margin target.
Feb 25, 2010
2008
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2008
Cognizant Technology Solutions (CTSH) closed fiscal 2008 with strong top-line and earnings growth despite a deteriorating macro backdrop. Revenue rose 31.9% to $2,816.3 million (from $2,135.6 million), and diluted EPS reached $1.44 versus $1.15 in 2007. Operating margin improved to 18.3% from 17.9%, and on a non-GAAP basis (excluding stock-based compensation and Indian fringe benefit tax) it was 20.2%, slightly above the company's targeted 19%-20% range. Growth was broad-based: all four segments grew at least 28%, European revenue rose 57.8%, and the customer count reached about 565. Net cash from operations was $429.7 million, and the company held $762.6 million in cash and short-term investments with no third-party debt. The filing also flags meaningful risks heading into 2009. Management expects a slowing global economy, continued weakness in financial services (45.6% of revenue), and pressure on discretionary application development spending, partly offset by demand for cost-containment work such as maintenance, infrastructure management and BPO. Fourth-quarter sequential trends in financial services softened. Other risk areas include Indian wage inflation, rupee volatility (a 1% move in the rupee moves operating margin about 25 basis points), a pending U.S. Department of Labor H-1B investigation, and the expiration of Indian STP tax holidays by March 31, 2010, which management expects to raise the effective tax rate significantly from 2010. Balance sheet items warrant attention. Roughly $189.2 million of investments are auction-rate securities with failed auctions. These are partly protected by a $168.5 million UBS put (the "UBS Right") exercisable from June 2010 to July 2012, and the company recorded a $29.1 million pre-tax loss and a $28.2 million gain related to this transaction. The company also authorized a $50 million share repurchase program in December 2008 but made no repurchases in the fourth quarter. Management plans to spend roughly $175 million on capital expenditures in 2009, and the stock fell sharply during 2008, with the closing range in Q4 at $14.38 to $22.69.
Mar 2, 2009
2007
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2007
Cognizant Technology Solutions (CTSH) closed 2007 with strong top-line and earnings growth. Revenue rose 49.9% to $2,135.6 million from $1,424.3 million, and net income increased 50.4% to $350.1 million, or $1.15 per diluted share (after a 2-for-1 stock split in October 2007). Growth was broad-based: European revenue grew 86.5% to $342.9 million, Healthcare and Manufacturing/Retail/Logistics each grew roughly 52%, and about 96% of 2007 revenue came from clients that were already customers at the end of 2006. Client count rose to roughly 500 from 400, and headcount reached about 55,400, up 16,600 year over year. Margins were the main pressure point. Operating margin fell to 17.9% from 18.2% in 2006 and 20.1% in 2005. Management attributes the decline mainly to Indian rupee appreciation (about 210 basis points of headwind in 2007), wage inflation in India, stock-based compensation under SFAS 123R, and the new Indian fringe benefit tax on equity awards. Excluding stock compensation and the fringe benefit tax, operating margin was 19.8%, within the company's stated 19%–20% target range. Management expects to keep reinvesting profits above that range into the business in 2008, so investors should expect margins to stay near this level rather than expand. The balance sheet is conservative: no third-party debt, $670.4 million in cash and short-term investments, and $901.5 million of working capital. Two watch items stand out. First, $282.8 million of short-term investments are auction-rate municipal securities, and $71.1 million of auctions failed in mid-February 2008, so that cash is temporarily illiquid. Second, the company faces significant India-linked risk, including the phase-out of India tax holidays by March 2009, a U.S. Department of Labor H-1B investigation, and roughly $330 million planned for India facility expansion through 2009. Capital spending is expected to reach about $250 million in 2008.
Feb 28, 2008
2006
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2006
Cognizant Technology Solutions (CTSH) closed fiscal 2006 with revenue of $1,424.3 million, up 60.8% from $885.8 million in 2005, and net income of $232.8 million, or $1.55 per diluted share. Growth was broad-based: the Financial Services segment contributed about 48% of revenue and grew 54.2%, Healthcare grew 87.9%, Manufacturing/Retail/Logistics grew 37.5%, and the Other segment grew 75.3%. Clients rose to roughly 400 from 250, and 96% of 2006 revenue came from customers that were already clients at the end of 2005. European revenue grew about 77% to $183.9 million, though it remains a small share of the total at roughly 13%. Profitability was mixed. Operating margin fell to 18.2% from 20.1%, mainly because of $29.9 million of stock-based compensation expense following the adoption of SFAS 123R. Excluding that charge, operating margin was 20.3%, slightly above management's historic 19%–20% target range. Management said it will keep reinvesting margin above that range into sales, delivery capacity, and training, so investors should expect margins to stay closer to the target band than to the adjusted 2006 level. The 2005 net income figure also included a one-time $12.4 million tax benefit from repatriating $60 million of Indian earnings, which flatters the year-over-year comparison. The balance sheet is strong: cash and short-term investments total $648.2 million, there is no third-party debt, and working capital is $790.9 million. The company is also spending heavily on capacity, with a planned investment of about $200 million through 2008 in fully owned India development centers, against $57.7 million of existing capital commitments. Key risks include wage inflation in India, rupee appreciation, H-1B and L-1 visa restrictions, short-term client contracts, concentration in India, and the IMS Health distribution-agreement tax indemnities. The top five customers still represent 29% of revenue.
Feb 16, 2007
2005
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2005
Cognizant Technology Solutions (CTSH) closed fiscal 2005 with revenue of $885.8 million, up 51.0% from $586.7 million in 2004, and net income of $166.3 million, or $1.13 per diluted share. Excluding a one-time $12.4 million tax benefit tied to repatriating $60 million of Indian earnings under the American Jobs Creation Act, net income was $153.9 million, or $1.05 per diluted share. Operating margin held steady at about 20.1% (versus 20.0% in 2004), and gross margin was 45.8%. Growth was broad-based: Financial Services grew about 52% and Healthcare about 51%, and roughly 91% of 2005 revenue came from clients already using the company at the end of 2004. The balance sheet is conservative. Cash and short-term investments totaled $424.0 million, the company carried no third-party debt, and working capital reached $507.7 million. Investors should weigh several items against that strength. Revenue is concentrated, with the top five customers at 34% and the top ten at 46% of revenue, and about 87% of revenue comes from U.S. customers. Operations are concentrated in India, where wage inflation, tax-holiday phase-out by March 2009, and potential anti-outsourcing or H-1B/L-1 visa restrictions are key risks. The company also plans to spend roughly $140 million on new India development centers, and it will begin expensing stock options under SFAS 123R in 2006, which management expects to reduce 2006 net income by slightly more than the approximately $18 million pro forma expense recorded in 2005. Overall, the filing shows a high-growth offshore IT services provider with strong margins, a clean balance sheet, and a steady expansion in headcount and capacity. The main investor debates center on how durable the growth is given customer concentration, the sustainability of Indian wage and tax advantages, and the earnings drag from expensing options beginning in 2006.
Mar 15, 2006
2004
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2004
Cognizant Technology Solutions (CTSH) closed fiscal 2004 with a strong year of growth and profitability. Total revenue rose 59.3% to $586.7 million from $368.2 million in 2003, and net income more than tripled to $100.2 million, or $0.70 per diluted share, up from $0.42. Income from operations grew 62.7% to $117.6 million, and the operating margin expanded modestly to 20.0% from 19.6%, within management's targeted 19-20% range. Growth was broad-based: active clients rose to 233 from 153, and over 90% of revenue came from customers with one or more years of relationship. Financial services was the largest segment at 49.5% of revenue, with healthcare at 19.8%, retail/manufacturing/logistics at 18.0%, and other at 12.7%. The balance sheet is debt-free and liquid. Cash, cash equivalents and short-term deposits totaled $314.8 million, working capital was $338.9 million, and operating cash flow was $127.3 million. Stockholders' equity reached $453.5 million. The company is expanding its offshore footprint with over 900,000 square feet of new fully-owned development centers in India, budgeted at roughly $76 million, and it closed its Limerick, Ireland center. Key investor considerations include heavy concentration in India (most technical staff and development centers are there), exposure to U.S. immigration rules affecting H-1B and L-1 visas, potential anti-outsourcing legislation, rising Indian wage costs, and customer concentration, with the top five clients accounting for 38% of revenue and JPMorgan Chase for 13.7%. Management also flagged that the American Jobs Creation Act could allow repatriation of $0 to $500 million of Indian earnings in 2005, and that adoption of SFAS 123(R) from July 2005 is expected to significantly reduce future reported earnings.
Mar 16, 2005
2003
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2003
Cognizant Technology Solutions (CTSH) reported a strong fiscal 2003 in its first 10-K following its February 2003 split-off from IMS Health, which had previously owned 55.3% of the company and 92.5% of its voting power. Total revenue rose 60.7% to $368.2 million from $229.1 million, driven by growth in application maintenance and development services, with North America contributing 88% of revenue. Net income increased 66% to $57.4 million, or $0.84 per diluted share, though gross margin contracted from 46.4% to 45.8%, mainly due to rupee appreciation against the dollar. Operating margin held near 19.6%, in line with the company's stated 19–20% target. Cash rose to $194.2 million and the company carries no significant third-party debt, giving it ample liquidity to fund a planned $42.5 million expansion of its Indian development centers. The filing also highlights meaningful risk concentration. Operations and most technical staff are based in India, exposing the company to Indian political and economic developments, wage inflation, and the April 2004 Indian elections. U.S. immigration rules (H-1B cap reached, tighter L-1 processing) and potential anti-outsourcing legislation could constrain staffing, and the company has not hedged currency exposure. JP Morgan Chase accounted for 10.1% of revenue, and the top five customers for 36%. Investors should also note contingent legacy liabilities from the 1996 Dun & Bradstreet/Cognizant Corporation split-up, including a pending Information Resources antitrust suit seeking more than $350 million before trebling, along with indemnification obligations tied to the IMS Health exchange offer. Overall, the filing presents a company with accelerating growth, expanding margins at the net level from a lower effective tax rate (20.6% versus 23.4%), and a strong balance sheet, offset by concentrated offshore operations, labor-market and regulatory exposure, and legacy contingent liabilities that remain relevant to valuation.
Mar 12, 2004
2002
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2002
Cognizant Technology Solutions (CTSH) closed 2002 with strong top- and bottom-line growth. Total revenues rose 28.9% to $229.1 million from $177.8 million, and net income climbed 56% to $34.6 million, or $1.63 per diluted share. Income from operations grew 26.9% to $45.2 million, though operating margin slipped slightly to 19.7% from 20.0% because of higher incentive compensation. The headline improvement in net margin to 15.1% (from 12.5%) was driven mainly by a lower effective tax rate of 23.4%, versus 37.4% in 2001, following a change in intent to reinvest Indian earnings rather than repatriate them. Investors should note that a portion of the earnings benefit reflects this tax change, which is tied to the company's ongoing international expansion and carries repatriation risk if management's intent changes. The balance sheet strengthened considerably, with cash and equivalents of $126.2 million, no significant third-party debt, and stockholders' equity up to $165.5 million. Operating cash flow was $56.7 million. Growth was supported by the June 2002 UnitedHealthcare Ireland asset purchase and the October 2002 Silverline practice transfer, and the company expanded its India development capacity, with a remaining $28.8 million capital commitment. Revenue concentration remains a consideration: IMS Health accounted for about 9% of revenue, and the top ten customers for 54%. The filing also documents a major governance shift. IMS Health distributed its entire 55.3% stake (all Class B shares, 92.5% of voting power) in a February 13, 2003 exchange offer, and the Class B shares then converted to Class A. Cognizant is now widely held and no longer controlled by a single parent. New anti-takeover provisions were adopted, including a classified board, an 80% supermajority requirement for certain charter amendments, and a stockholder rights plan. The company also announced a 3-for-1 stock split payable April 1, 2003.
Mar 14, 2003
2001
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2001
Cognizant Technology Solutions (CTSH) reported strong fiscal 2001 results, with total revenue rising 29.7% to $177.8 million from $137.0 million, and net income climbing 25.3% to $22.2 million from $17.7 million. Growth was driven primarily by application management (up 42.9%) and application development and integration (up 18.8%). Gross margin improved modestly to 48.9% from 48.6%, helped by a shift toward higher-margin fixed-bid contracts and a lower incentive compensation accrual. Operating income rose 36.3% to $35.6 million, with operating margin expanding to 20.0% from 19.1%. Diluted EPS was $1.09, up from $0.87. The balance sheet is conservative. Cash and equivalents reached $85.0 million, the company reports no significant third-party debt, and working capital stood at $95.6 million. Operating cash flow was $32.1 million, while capital expenditures of $15.0 million went largely to expanding offshore development centers in India. Management plans roughly $35.6 million of total India center spending, funded internally. Investors should weigh several risks. IMS Health owns 58.3% of the economic interest and about 93.3% of the voting power through Class B shares, which limits minority shareholder influence. Customer concentration is significant, with the top ten customers at 53.0% of revenue, though this declined from 59.1% in 2000. Fixed-bid contracts, which carry cost-overrun risk, rose to 23.9% of revenue. The company also took a $2.0 million impairment on its Questra investment, and the September 11 attacks affected travel-industry customers, about 5% of revenue.
Mar 11, 2002
2000
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 2000
Cognizant Technology Solutions (CTSH) closed fiscal 2000 with strong top-line and profit growth. Total revenues rose 54.1% to $137.0 million from $88.9 million in 1999, driven by application development/integration and application management work for unaffiliated third-party clients, partly offset by a collapse in Year 2000 remediation revenue (down to 0.4% of revenue from 15.6%). Gross margin edged up to 48.6% from 48.1%, operating income grew 57% to $26.1 million (19.1% margin), and net income rose 57% to $17.7 million, or $0.87 diluted EPS. The balance sheet strengthened, with cash of $62.0 million, no significant third-party debt, and stockholders' equity of $66.1 million, up from $45.5 million. The key investor considerations are concentration and control. IMS Health owns about 60.5% of the economic interest and roughly 93.9% of the voting power through its Class B shares, which limits minority shareholder influence. Revenue concentration is also significant: the top ten customers accounted for 59.1% of 2000 revenue, though no third party exceeded 10% of revenue in 2000, down from prior years. The company's delivery model depends on a workforce of roughly 2,400 offshore staff in India, and it carries exposure to rupee and wage inflation, talent retention, and fixed-price contract risk, since cost overruns fall on Cognizant. The filing also notes a shift from affiliated to unaffiliated customers, which rose to 89.6% of revenue in 2000, a meaningful sign of independence from the parent. From an investment perspective, the filing shows a high-growth, cash-generative offshore IT services provider with improving margins and a solid balance sheet. Investors would weigh that against the parent's dominant control, customer concentration, and the company's reliance on sustaining demand for application management and development as Y2K-related work fades.
Mar 15, 2001
1999
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 1999
Cognizant Technology Solutions (CTSH) reported strong fiscal 1999 results in this 10-K, with total revenues rising 51.7% to $88.9 million from $58.6 million in 1998. Growth was driven by application development, integration, and application management work, which more than offset a sharp decline in Year 2000 compliance revenue (down about 46% to roughly 15.6% of revenue). Profitability improved meaningfully: gross margin expanded to 48.1% from 45.5%, operating margin rose to 18.7% from 15.2%, and net income grew 86% to $11.2 million, or $1.16 diluted EPS. The company's revenue base also diversified, with unaffiliated third-party customers rising to 83.3% of revenue from 76.8% in 1998, although IMS Health still held about 61% of the equity and roughly 94% of the voting power and two customers exceeded 10% of revenue each. The balance sheet is conservative, with $42.6 million in cash, no significant third-party debt, and working capital of $43.5 million, following the 1998 IPO. Operating cash flow reached $18.6 million in 1999. Delivery is anchored by about 2,000 technical staff in eight Indian development centers, which underpin the company's cost advantage. Key risks for investors include customer concentration (top five customers were 57.3% of revenue), the dominance of IMS Health's voting control, reliance on a shrinking Year 2000 business line, a tight talent market, and exposure to Indian regulatory and tax-holiday changes. The company also announced a 2-for-1 stock split payable March 16, 2000, which the filing says will be reflected in restated per-share amounts going forward.
Mar 7, 2000
1998
Cognizant Technology Solutions Annual Report, Year Ended Dec 31, 1998
Cognizant Technology Solutions (CTSH) reported strong results for fiscal 1998 in its first annual report following its June 1998 IPO. Revenue grew 136.8% to $58.6 million (from $24.7 million), driven by Year 2000 compliance work ($44.1% of revenue) and a rapidly growing base of unaffiliated customers, which rose to 76.8% of revenue from 56.2% in 1997. Gross margin expanded to 45.5% from 42.0%, operating income rose 319% to $8.9 million, and net income reached $6.0 million, or $0.73 diluted EPS. The balance sheet was transformed by the IPO, which raised roughly $22.4 million in net proceeds, leaving cash of $28.4 million, stockholders' equity of $32.6 million, and no significant third-party debt. Investors should weigh several risks. IMS Health controls about 94.2% of the combined voting power through its high-vote Class B stock, which limits minority shareholders' influence. Revenue is concentrated: the top five non-IMS customers generated 43.7% of 1998 revenue, and a single related-party customer accounted for 23.2%. Management explicitly warns that Year 2000 demand may fade after 2000 and that it must generate new business from Y2K clients. The company also faces a trademark challenge from Cognizant Design Group over the name "Cognizant" and has most of its development staff in India, creating currency, regulatory, and talent-retention exposure. The stock traded between $7 and $33.50 during the fourth quarter following the IPO, indicating high volatility.
Mar 19, 1999