10-QPeriod: Q3 FY2001

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 13, 2001For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported strong financial performance for the nine months ended September 30, 2001. Revenue grew by 39.9% year-over-year to $134.3 million, driven primarily by an increase in application management services. Net income also saw a significant rise, up 40.6% to $17.5 million, resulting in diluted EPS of $0.86. The company maintains a healthy balance sheet with $79.8 million in cash and cash equivalents and no significant third-party debt, indicating robust liquidity and financial stability. The company is strategically expanding its offshore development capabilities, particularly in India, with significant capital commitments for facility expansion. While acknowledging the impact of the September 11th events on its travel industry clients (approximately 5% of revenue), management anticipates short-term logistical delays but no change in clients' India-based strategies. CTSH continues to demonstrate operational efficiency, with gross profit margins slightly improving and operating income growing faster than revenue, reflecting effective cost containment and a strategic shift towards higher-margin fixed-bid contracts.

Key Highlights

  • 1Revenue grew 39.9% year-over-year to $134.3 million for the nine months ended September 30, 2001.
  • 2Net income increased by 40.6% to $17.5 million for the nine months ended September 30, 2001.
  • 3Diluted earnings per share (EPS) were $0.86 for the nine months ended September 30, 2001, up from $0.61 in the prior year.
  • 4The company ended the period with $79.8 million in cash and cash equivalents, demonstrating strong liquidity.
  • 5Gross profit margin improved slightly to 48.7% for the nine months ended September 30, 2001, from 48.5% in the prior year, driven by fixed-bid contracts and cost containment.
  • 6Operating income increased by 45.7% year-over-year to $26.6 million for the nine months ended September 30, 2001, outperforming revenue growth.
  • 7Significant capital commitments are in place for expanding offshore development centers in India.

Frequently Asked Questions

Cognizant experienced substantial growth. Revenue increased by 39.9% to $134.3 million, and net income grew by 40.6% to $17.5 million. Diluted EPS rose to $0.86 from $0.61.

The company maintains a strong liquidity position, with cash and cash equivalents totaling $79.8 million as of September 30, 2001. They also have no significant third-party debt.

North America remains the largest segment, contributing $115.7 million in revenue. However, Asia saw a significant percentage increase in revenue, and Europe also showed growth. Overall, operating income increased by 45.7% for the nine-month period.

The company noted that the tragic events of September 11, 2001, have significantly impacted their travel industry customers (approximately 5% of revenue) and may cause short-term logistical delays. However, there is no indication that these events have altered customers' strategies for doing business in India.