10-KPeriod: FY2012

COGNIZANT TECHNOLOGY SOLUTIONS CORP Annual Report, Year Ended Dec 31, 2012

Filed February 26, 2013For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported strong performance for the fiscal year ended December 31, 2012, with revenues increasing by 20% year-over-year to $7.35 billion and net income growing to $1.05 billion. This growth was driven by robust demand across all business segments, particularly Financial Services, Healthcare, and Manufacturing/Retail/Logistics. The company's global delivery model, expanded service offerings in areas like IT Infrastructure Services and Business Process Outsourcing (BPO), and increased penetration with existing and new clients were key growth drivers. Management highlighted continued customer focus on cost containment while simultaneously investing in innovation, a trend that plays to Cognizant's strengths. The company's strategic focus on reinvesting profits back into the business, expanding its geographic presence, and enhancing its service portfolio, including offerings around SMAC (Social, Mobile, Analytics, Cloud) technologies, positions it well for future growth. Despite slight pressure on operating margins due to strategic investments, the company maintained its target non-GAAP operating margin range, demonstrating operational efficiency. Cognizant ended the year with a solid financial position, including substantial cash reserves and a strong working capital balance.

Financial Highlights

48 data points
Beta

Revenue

$7.35B

Net Income

$1.05B

14.3% Net Margin

EPS (Diluted)

$1.72

Total Assets

$6.52B

Cash & Equivalents

$1.57B

Free Cash Flow

$838.12M

Financial Statements
Beta
Revenue$7.35B
SG&A Expenses$1.56B
Operating Income$1.36B
Interest Expense$0
Net Income$1.05B
EPS (Basic)$1.74
EPS (Diluted)$1.72
Shares Outstanding (Basic)602.58M
Shares Outstanding (Diluted)611.72M

Key Highlights

  • 1Revenue grew by 20% to $7.35 billion in 2012, driven by strong performance across all business segments.
  • 2Net income increased to $1.05 billion, with diluted earnings per share of $3.44.
  • 3The company expanded its client base, ending the year with 821 active clients, including 214 strategic clients.
  • 4Financial Services, Healthcare, and Manufacturing/Retail/Logistics segments showed significant revenue growth (20.5%, 19.3%, and 25.2%, respectively).
  • 5Operating margin remained strong at 18.5% (GAAP) and 20.0% (non-GAAP, excluding stock-based compensation), aligning with the company's target range.
  • 6Cognizant continues to invest in its global delivery capabilities, service offerings (including SMAC technologies), and talent base.
  • 7The company maintained a healthy balance sheet with $2.86 billion in cash, cash equivalents, and short-term investments.

Frequently Asked Questions

Cognizant's revenue growth in 2012 was primarily driven by strong performance across all business segments, increased customer spending on discretionary projects, expansion of its service offerings (especially IT Infrastructure Services and BPO), greater market acceptance of its global delivery model for cost reduction and innovation, and increased penetration with existing and new clients.

Cognizant maintained a strong operating margin of 18.5% (GAAP) and 20.0% (non-GAAP, excluding stock-based compensation), which is within its target range. The company strategically reinvested profits into areas like talent development, service expansion, and geographic presence, while also benefiting from economies of scale and favorable foreign currency movements (Indian Rupee depreciation against the US Dollar), partially offset by hedging losses.

Cognizant's strategy involves continued investment in its talent and new service offerings, partnering with existing customers to increase IT spend share, growing its presence in Europe, the Middle East, and Asia Pacific, expanding its strategic customer base, pursuing opportunistic acquisitions, maintaining operational discipline, and locating new development facilities in tax-incentivized areas.

While Cognizant serves 821 active clients, no single customer accounted for more than 10% of its consolidated revenues in 2012, 2011, or 2010. The top five customers represented 14.0% of revenues in 2012, indicating a relatively diversified revenue stream, although a significant portion of revenue comes from North America (79.4%).