10-KPeriod: FY2013

COGNIZANT TECHNOLOGY SOLUTIONS CORP Annual Report, Year Ended Dec 31, 2013

Filed February 25, 2014For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported strong financial performance for the fiscal year ended December 31, 2013, with revenues reaching $8.84 billion, a 20.4% increase year-over-year. Net income also saw a significant rise to $1.23 billion, resulting in diluted earnings per share of $4.03. This growth was fueled by robust performance across all business segments, particularly Financial Services and Manufacturing/Retail/Logistics, and expansion in international markets like Europe and Asia Pacific. The company's strategic focus on a global delivery model, diversified service offerings, and increased client penetration appears to be driving sustainable growth and meeting the dual demands of cost efficiency and innovation for its clients. The company maintains a healthy financial position with substantial cash reserves and working capital, indicating strong liquidity. Cognizant continues to invest in its talent base and expand its service offerings, including Social, Mobile, Analytics, and Cloud (SMAC) services, to meet evolving market demands. Strategic acquisitions in Europe further strengthened its market presence and service capabilities. Despite a competitive IT services landscape, Cognizant's business strategy, focused on reinvestment in growth areas and long-term client relationships, positions it well for continued success.

Financial Highlights

49 data points
Beta

Revenue

$8.84B

Net Income

$1.23B

13.9% Net Margin

EPS (Diluted)

$2.02

Total Assets

$8.13B

Cash & Equivalents

$2.21B

Free Cash Flow

$1.16B

Financial Statements
Beta
Revenue$8.84B
SG&A Expenses$1.73B
Operating Income$1.68B
Interest Expense$0
Net Income$1.23B
EPS (Basic)$2.03
EPS (Diluted)$2.02
Shares Outstanding (Basic)604.00M
Shares Outstanding (Diluted)609.70M

Key Highlights

  • 1Revenue increased by 20.4% to $8.84 billion in 2013.
  • 2Net income grew to $1.23 billion, with diluted EPS of $4.03.
  • 3Strong revenue growth observed across all four business segments, with Manufacturing/Retail/Logistics and Financial Services showing particular strength.
  • 4Significant revenue expansion in Europe (32.1% growth) and Rest of World markets (28.3% growth).
  • 5The company ended the year with 1,197 active clients, including 243 strategic clients.
  • 6Operating margin improved to 19.0% from 18.5% in the previous year.
  • 7Cognizant has a strong liquidity position with $3.75 billion in cash, cash equivalents, and short-term investments.

Frequently Asked Questions

Cognizant's revenue growth in 2013 was driven by strong performance across all business segments, particularly Financial Services and Manufacturing/Retail/Logistics. The company also saw significant growth in European and Asia Pacific markets, increased customer spending on discretionary projects, expansion of its service offerings (including Consulting, IT IS, and BPS), and deeper penetration with existing and strategic clients. The broader market acceptance of global delivery models for IT and business process services also contributed.

Cognizant's profitability improved in 2013. Income from operations increased by 23.2% to $1.68 billion, and the operating margin rose to 19.0% from 18.5% in 2012. This improvement was attributed to revenue growth outpacing headcount increases, and the favorable impact of the depreciation of the Indian Rupee against the US Dollar. These factors were partially offset by increases in compensation and benefit costs.

Cognizant plans to continue investing in its talent base and new service offerings, focusing on helping clients achieve both cost savings and innovation. The company aims to increase its share of clients' overall IT spend by providing innovative solutions and expanding its business in Europe, the Middle East, Asia Pacific, and Latin America. It will also focus on growing its strategic customer base and opportunistically pursuing acquisitions that enhance service delivery, expand geographic reach, or enter new technology areas. Operational discipline and cost management remain key priorities, along with continued investment in tax-advantaged development center locations.

Key risks identified include the complexities and uncertainties of global operations, particularly in India (e.g., regulatory, economic, political instability, currency fluctuations). Other significant risks include intense competition, potential impacts of anti-outsourcing legislation, immigration restrictions affecting workforce mobility, economic downturns in key markets like North America and Europe, dependency on a few large customers, and potential liability from security breaches or contract failures. The company also highlighted the importance of managing intellectual property and adapting to rapid technological evolution.