10-KPeriod: FY2008

COGNIZANT TECHNOLOGY SOLUTIONS CORP Annual Report, Year Ended Dec 31, 2008

Filed March 2, 2009For Securities:CTSH

Summary

Cognizant Technology Solutions Corp. (CTSH) filed its 2008 Annual Report (10-K) on March 2, 2009, detailing its robust performance in the IT consulting and technology services sector. The company highlights strong revenue growth driven by its integrated on-site/offshore business model, serving Global 2000 companies across key industries such as Financial Services, Healthcare, and Manufacturing/Retail/Logistics. Despite a challenging macroeconomic environment in late 2008, Cognizant demonstrated resilience, with revenues increasing by 31.9% to $2.82 billion. The company's strategic focus on expanding service offerings, deepening client relationships, and enhancing its global delivery capabilities positions it for continued success. Key areas of focus for investors include Cognizant's diversified revenue streams across multiple industries, its significant international presence (especially in India for delivery), and its strong emphasis on talent development and process efficiency. While the company navigates global economic headwinds and currency fluctuations, its strong financial position, consistent revenue growth, and strategic investments in infrastructure and services signal a stable outlook. The report also addresses potential risks, including competition, regulatory changes, and the reliance on skilled labor, which the company actively manages through its business strategies.

Financial Highlights

46 data points
Beta

Revenue

$2.82B

Net Income

$430.85M

15.3% Net Margin

EPS (Diluted)

$0.72

Total Assets

$2.37B

Cash & Equivalents

$735.07M

Free Cash Flow

$260.30M

Financial Statements
Beta
Revenue$2.82B
SG&A Expenses$652.02M
Operating Income$516.67M
Net Income$430.85M
EPS (Basic)$0.74
EPS (Diluted)$0.72
Shares Outstanding (Basic)580.24M
Shares Outstanding (Diluted)597.88M

Key Highlights

  • 1Robust Revenue Growth: Total revenues for 2008 reached $2.82 billion, a 31.9% increase from $2.14 billion in 2007, showcasing strong market demand for its services.
  • 2Diversified Business Segments: The company operates across four key segments: Financial Services (45.6% of revenue), Healthcare (24.4%), Manufacturing/Retail/Logistics (15.8%), and Other (14.2%), indicating a well-diversified client base and reduced reliance on any single industry.
  • 3Global Delivery Model: Cognizant's integrated on-site/offshore model, with a significant workforce in India, allows for cost-effective, high-quality IT services and positions it well in the competitive global market.
  • 4Strong Customer Relationships: The company emphasizes long-term customer relationships, with approximately 95% of 2008 revenues coming from customers who were already clients in 2007, highlighting high customer retention.
  • 5Strategic Investments: Cognizant continues to invest in expanding its IT development centers, enhancing its service offerings (including BPO and infrastructure management), and developing new technologies to meet evolving client needs.
  • 6Financial Strength: As of December 31, 2008, the company reported $762.6 million in cash and cash equivalents and short-term investments, with no third-party debt, indicating a strong liquidity position.
  • 7Resilience in a Challenging Economy: Despite the slowing global economy and financial services sector weakness, the company managed to grow revenues and maintain operating margins, partly due to strategic actions and favorable currency movements (Indian Rupee depreciation).

Frequently Asked Questions

Cognizant's primary business model is an integrated on-site/offshore delivery model. This combines on-site technical and account management teams with dedicated development centers primarily in India, China, the United States, Argentina, and Hungary. This model allows Cognizant to offer a wide range of IT consulting, technology, and outsourcing services to Global 2000 companies at competitive costs, ensuring seamless project execution and client engagement.

In 2008, Cognizant's revenue growth was driven by strong performance across all business segments, increased penetration in the European market, expansion of its service offerings, deeper engagement with existing customers, and the growing market acceptance of the global delivery model for IT services and business process outsourcing.

Cognizant manages its operations in India through its extensive IT development centers and a large, skilled workforce. While the offshore model provides cost advantages, risks include potential increases in wage costs, intense competition for talent, regulatory changes in India, and geopolitical uncertainties. The company actively addresses these by investing in talent development, process improvements, and by strategically locating new facilities, including in Special Economic Zones (SEZs).

Cognizant has historically not paid cash dividends, as it intends to reinvest its earnings to finance business growth. The company also authorized a $50.0 million stock repurchase program in December 2008, indicating a strategy to return value to shareholders through opportunistic share buybacks when market conditions are favorable.