10-KPeriod: FY2007

COGNIZANT TECHNOLOGY SOLUTIONS CORP Annual Report, Year Ended Dec 31, 2007

Filed February 28, 2008For Securities:CTSH

Summary

Cognizant Technology Solutions Corp. (CTSH) reported strong revenue growth of 49.9% in 2007, reaching $2.14 billion, driven by increased market acceptance of its offshore IT services, expansion into European markets, and robust performance across its key industry segments: Financial Services (47% of revenue), Healthcare (24%), and Manufacturing/Retail/Logistics (15%). The company's effective on-site/offshore business model continues to be a significant competitive advantage, enabling cost-efficiency and broad service delivery capabilities. Despite pressures from Indian rupee appreciation and wage inflation, Cognizant maintained its operating margins and demonstrated solid net income growth to $350.1 million. The company is strategically investing in capacity expansion, particularly in India, and has acquired marketRx to bolster its data analytics and life sciences capabilities, positioning itself for continued growth in the IT services sector.

Financial Highlights

26 data points
Beta

Revenue

$2.14B

Net Income

$350.13M

16.4% Net Margin

EPS (Diluted)

$0.57

Cash & Equivalents

$339.85M

Free Cash Flow

$161.85M

Financial Statements
Beta
Revenue$2.14B
SG&A Expenses$494.10M
Operating Income$381.52M
Net Income$350.13M
EPS (Basic)$0.61
EPS (Diluted)$0.57
Shares Outstanding (Basic)576.31M
Shares Outstanding (Diluted)607.19M

Key Highlights

  • 1Significant revenue growth of 49.9% in 2007, reaching $2.14 billion, indicating strong market demand for IT services.
  • 2Financial Services remains the largest revenue segment (47%), followed by Healthcare (24%), demonstrating industry diversification.
  • 3European market penetration is rapidly increasing, with revenue growth of 86.5% in 2007, highlighting geographic expansion success.
  • 4The company maintained operating margins around 18-20% (excluding certain costs), showcasing effective cost management and operational efficiency.
  • 5Net income grew to $350.1 million in 2007, reflecting strong profitability on increased revenues.
  • 6Strategic investments are being made in expanding offshore IT development centers in India and through the acquisition of marketRx.
  • 7Cognizant continues to leverage its integrated on-site/offshore business model as a key differentiator in a competitive market.

Frequently Asked Questions

Cognizant's revenue growth in 2007 was driven by several factors including increased market acceptance of its on-site/offshore delivery model, significant expansion in the European market (86.5% growth), strong performance across its core industry segments (Financial Services, Healthcare, Manufacturing/Retail/Logistics), an expanding portfolio of services, and increased penetration at existing customers, with 96.2% of 2007 revenues coming from clients retained from 2006.

The appreciation of the Indian Rupee against the US Dollar in 2007 negatively impacted operating margins by approximately 2.1 percentage points. Additionally, ongoing wage inflation in India, while partially offset by productivity gains and cost management, also put pressure on costs. The company mitigated these pressures through increased global utilization rates, reduced discretionary spending, and operational efficiencies.

Cognizant's strategy involves continued investment in expanding its offshore IT development centers, particularly in India, with significant capital expenditures planned. They also focus on developing new service lines and strengthening capabilities in areas like data analytics through strategic acquisitions, such as marketRx. Geographic expansion, especially in Europe, and deepening client relationships remain key priorities.

The integrated on-site/offshore business model is central to Cognizant's competitive advantage. It allows the company to combine the client relationship and account management aspects handled by on-site teams with the cost-effective, high-quality development and delivery capabilities of its offshore centers, primarily in India. This model enables rapid project completion, cost savings, and flexibility in service delivery.