10-KPeriod: FY2023

COGNIZANT TECHNOLOGY SOLUTIONS CORP Annual Report, Year Ended Dec 31, 2023

Filed February 14, 2024For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported a slight revenue decline of 0.4% year-over-year for fiscal year 2023, reaching $19.35 billion. This was primarily driven by a weakening in the Financial Services segment, though partially offset by growth in Communications, Media and Technology (CMT), Products and Resources (P&R), and Health Sciences (HS) segments. The company is actively pursuing a strategy focused on six key initiatives, including capturing the AI opportunity, expanding internationally, and strengthening digital capabilities. Cognizant is also undergoing a 'NextGen' program to simplify its operating model and optimize functions, which resulted in $229 million of restructuring charges in 2023, with an additional $70 million expected in 2024. Despite the revenue dip, the company saw a significant improvement in employee retention, with voluntary attrition decreasing from 25.6% in 2022 to 13.8% in 2023. Cognizant is investing in upskilling its workforce, particularly in digital skills like AI, GenAI, IoT, and cloud. The company continued its capital return strategy, paying quarterly dividends and repurchasing shares, while also pursuing strategic acquisitions to bolster its capabilities.

Financial Highlights

51 data points
Beta

Revenue

$19.35B

Net Income

$2.13B

11.0% Net Margin

EPS (Diluted)

$4.21

Total Assets

$18.48B

Cash & Equivalents

$2.62B

Free Cash Flow

$2.01B

Financial Statements
Beta
Revenue$19.35B
SG&A Expenses$3.25B
Operating Income$2.69B
Interest Expense$41.00M
Net Income$2.13B
EPS (Basic)$4.21
EPS (Diluted)$4.21
Shares Outstanding (Basic)505.00M
Shares Outstanding (Diluted)505.00M

Key Highlights

  • 1Revenue decreased slightly by 0.4% to $19.35 billion in 2023, impacted by softness in the Financial Services sector, partially offset by growth in other segments.
  • 2The company is executing a 'NextGen' program to simplify its operating model and optimize functions, incurring $229 million in restructuring costs in 2023, with an estimated $70 million remaining for 2024.
  • 3Employee voluntary attrition significantly improved, dropping from 25.6% in 2022 to 13.8% in 2023, reflecting successful talent retention strategies.
  • 4Cognizant is investing heavily in upskilling its workforce, with over 265,000 employees acquiring new skills in 2023, particularly in areas like AI and GenAI.
  • 5The company's capital allocation includes continued quarterly dividend payments and share repurchases, reinforcing its commitment to returning value to shareholders.
  • 6Acquisitions remain a part of the strategy, with two completed in 2023 to enhance capabilities in key digital areas or industries.

Frequently Asked Questions

Cognizant's revenue in 2023 saw a slight decline of 0.4% primarily due to reduced demand for discretionary work, particularly impacting the Financial Services segment. However, this was partially offset by growth in the Communications, Media and Technology (CMT), Products and Resources (P&R), and Health Sciences (HS) segments. The company also benefited from contributions from recent acquisitions.

The 'NextGen' program is an initiative launched in mid-2023 to simplify Cognizant's operating model, optimize corporate functions, and consolidate office space. This program resulted in $229 million of employee separation and facility exit costs in 2023, with an additional $70 million anticipated in 2024. The program aims to generate savings to fund future investments.

Cognizant has made significant strides in improving employee retention, with voluntary attrition falling from 25.6% in 2022 to 13.8% in 2023. The company is actively investing in employee development, with over 265,000 employees acquiring new skills in 2023, focusing on digital transformation areas like AI, GenAI, cloud, and IoT. This focus on talent is a key component of their strategy to remain competitive.

Cognizant follows a capital allocation framework that aims to deploy approximately 50% of its free cash flow towards acquisitions, 25% towards share repurchases, and 25% towards dividend payments. The company paid quarterly dividends of $0.29 per share in 2023 and continues to assess its capital deployment strategies based on market conditions and strategic priorities.