10-KPeriod: FY2010

COGNIZANT TECHNOLOGY SOLUTIONS CORP Annual Report, Year Ended Dec 31, 2010

Filed February 23, 2011For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) filed its 2010 annual report on Form 10-K on February 23, 2011. The company reported strong revenue growth of 40.1% year-over-year, reaching $4.59 billion, driven by increased demand for its IT consulting, technology services, and business process outsourcing. This growth was broad-based across all its business segments, with notable expansion in the Healthcare and Manufacturing/Retail/Logistics sectors. Net income saw a significant increase of 37.1% to $733.5 million, or $2.37 per diluted share. The company's effective tax rate was 16.5%. CTSH highlighted its continued focus on expanding its global delivery model, client relationships, and service offerings. The company maintained a strong financial position with substantial cash reserves and working capital, while also investing heavily in infrastructure and talent to support future growth. Despite potential risks related to global economic conditions, currency fluctuations, and competition, Cognizant demonstrated resilience and a positive outlook for continued expansion.

Financial Highlights

45 data points
Beta

Revenue

$4.59B

Net Income

$733.54M

16.0% Net Margin

EPS (Diluted)

$1.19

Total Assets

$4.58B

Cash & Equivalents

$1.54B

Free Cash Flow

$579.14M

Financial Statements
Beta
Revenue$4.59B
SG&A Expenses$972.09M
Operating Income$861.85M
Net Income$733.54M
EPS (Basic)$1.22
EPS (Diluted)$1.19
Shares Outstanding (Basic)601.56M
Shares Outstanding (Diluted)618.27M

Key Highlights

  • 1Strong Revenue Growth: Total revenues increased by 40.1% to $4.59 billion in 2010, up from $3.28 billion in 2009, indicating robust demand for its services.
  • 2Significant Net Income Increase: Net income rose by 37.1% to $733.5 million ($2.37 per diluted share) in 2010, compared to $535.0 million ($1.78 per diluted share) in 2009.
  • 3Diversified Revenue Streams: The company's business is diversified across four key segments: Financial Services (42.4% of revenue), Healthcare (25.6%), Manufacturing/Retail/Logistics (18.5%), and Other (13.5%), with growth observed across all segments.
  • 4Global Delivery Model Success: Cognizant's integrated global sourcing model, leveraging on-site and offshore teams, continues to be a key driver of its competitive advantage and client satisfaction.
  • 5Expansion in Europe: Significant revenue growth was reported in the European market, particularly in the UK, highlighting successful international expansion efforts.
  • 6Robust Financial Position: The company ended the year with substantial cash and cash equivalents ($2.23 billion) and positive working capital ($2.59 billion), indicating strong liquidity.
  • 7Strategic Client Growth: Cognizant expanded its client base, ending the year with 712 active clients, and increased its number of strategic clients to 166.

Frequently Asked Questions

Cognizant's revenue growth of 40.1% in 2010 was driven by several factors, including strong performance across all business segments, increased demand for its services in the post-acquisition integration and discretionary development project areas, expansion of service offerings, deeper penetration with existing customers, and the overall growing market acceptance of the global delivery model for IT and business process outsourcing.

Profitability saw a significant improvement, with net income increasing by 37.1% to $733.5 million. The operating margin was 18.8% (or 20.0% excluding stock-based compensation), consistent with the company's targeted range. This was achieved despite increased compensation costs and foreign currency fluctuations, managed through efficiency gains and strategic investments.

Key risks and challenges identified include the company's significant reliance on operations in India, potential adverse impacts from global economic conditions and currency fluctuations (particularly the Indian Rupee), intense competition in the IT services market, evolving legal and regulatory environments, immigration restrictions, and the potential for disruptions due to geopolitical events or natural disasters.

Cognizant's growth strategy focuses on further developing long-term customer relationships, expanding its service offerings and solutions (especially in areas like Infrastructure Management and BPO/KPO), enhancing its proprietary processes and tools, expanding its geographic presence (particularly in Europe, the Middle East, and Asia Pacific), being an employer of choice, and pursuing selective strategic acquisitions and alliances.