10-KPeriod: FY2018

COGNIZANT TECHNOLOGY SOLUTIONS CORP Annual Report, Year Ended Dec 31, 2018

Filed February 19, 2019For Securities:CTSH

Summary

Cognizant Technology Solutions Corp's 2018 10-K filing highlights a company experiencing steady revenue growth, driven by its focus on digital services and solutions across its four key industry segments: Financial Services, Healthcare, Products and Resources, and Communications, Media and Technology. The company demonstrated an increase in revenue to $16.125 billion in 2018, up from $14.810 billion in 2017, reflecting an 8.9% year-over-year growth. This growth was supported by strategic acquisitions and investments in digital capabilities and talent. Cognizant also focused on margin enhancement, with operating margin increasing to 17.4% in 2018 from 16.8% in 2017, attributed to operational efficiencies and currency tailwinds. The company is actively returning capital to shareholders through dividends and share repurchases, with a new plan to deploy approximately 50% of free cash flow towards these initiatives. Despite strong performance, Cognizant faces risks including economic and political uncertainties, intense competition, cybersecurity threats, and the need to attract and retain skilled talent. The filing also discloses ongoing legal and regulatory matters, including a dispute with the Indian Income Tax Department and a resolution with the DOJ and SEC regarding FCPA investigations, which resulted in a $28 million payment.

Financial Highlights

48 data points
Beta

Revenue

$16.13B

Net Income

$2.10B

13.0% Net Margin

EPS (Diluted)

$3.60

Total Assets

$15.85B

Cash & Equivalents

$1.16B

Free Cash Flow

$2.21B

Financial Statements
Beta
Revenue$16.13B
SG&A Expenses$3.01B
Operating Income$2.80B
Interest Expense$27.00M
Net Income$2.10B
EPS (Basic)$3.61
EPS (Diluted)$3.60
Shares Outstanding (Basic)582.00M
Shares Outstanding (Diluted)584.00M

Key Highlights

  • 1Revenue grew by 8.9% to $16.125 billion in 2018, up from $14.810 billion in 2017, driven by digital services and solutions.
  • 2Operating margin improved to 17.4% in 2018, compared to 16.8% in 2017, reflecting successful margin enhancement initiatives.
  • 3The company completed five strategic acquisitions in 2018 to expand digital capabilities and industry coverage.
  • 4Cognizant returned $3.7 billion to shareholders through dividends and share repurchases over the 2017-2018 period, with a new plan to deploy 50% of free cash flow for capital returns.
  • 5The Communications, Media and Technology segment showed the strongest growth at 17.4% in 2018.
  • 6North America remains the largest market, accounting for 76.2% of total 2018 revenues.
  • 7The company resolved FCPA investigations with the DOJ and SEC, agreeing to pay approximately $28 million.

Frequently Asked Questions

Cognizant operates across four industry-based business segments: Financial Services, Healthcare, Products and Resources, and Communications, Media and Technology. In 2018, the Communications, Media and Technology segment experienced the strongest revenue growth at 17.4%. The Financial Services segment grew by 3.7%, Healthcare by 9.5%, and Products and Resources by 12.3%.

Cognizant has a strong commitment to returning capital to shareholders. Over the two years ending December 31, 2018, the company returned $3.7 billion through share repurchases and dividend payments. Moving forward, its new capital return plan aims to deploy approximately 50% of global free cash flow towards dividends and share repurchases, and 25% towards acquisitions.

Cognizant faces several risks, including adverse economic and political conditions globally, intense competition in the IT services market, the need to attract and retain skilled professionals, cybersecurity threats, and compliance with evolving legal and regulatory requirements. The company also noted ongoing legal matters, including a dispute with the Indian Income Tax Department and a recent resolution of FCPA investigations.

Cognizant's growth strategy involves continued investment in its digital capabilities, extensive training and re-skilling of its workforce, and expansion of its local presence. It also plans to pursue strategic acquisitions, joint ventures, and alliances to enhance its service offerings and geographic coverage. The company aims to drive organic growth by partnering with existing customers and expanding its service offerings, particularly in digital and consulting services.