10-QPeriod: Q1 FY2009

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 8, 2009For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported strong performance for the first quarter of 2009, showcasing a robust increase in revenue and net income compared to the same period in 2008. Revenue grew by 16.0% to $745.9 million, driven by strong performance across all business segments, increased penetration in the European market, and expansion of service offerings. Net income rose to $113.1 million, or $0.38 per diluted share, up from $101.9 million, or $0.34 per diluted share, in the prior year. The company highlighted operational efficiencies and the favorable impact of the Indian rupee's depreciation against the U.S. dollar as key contributors to an improved operating margin. Despite a challenging macroeconomic environment, Cognizant demonstrated resilience by adding new clients and increasing penetration with existing ones. The company ended the quarter with 560 active clients, up from 505 in the prior year. Management expressed confidence in the company's liquidity and ability to fund future operations and growth initiatives, including potential acquisitions, capital expenditures for expansion, and stock repurchases. The report also noted progress in expanding development centers in India and efforts to mitigate foreign currency risks through hedging strategies.

Financial Highlights

24 data points
Beta

Revenue

$745.86M

Net Income

$113.13M

15.2% Net Margin

EPS (Diluted)

$0.19

Cash & Equivalents

$758.57M

Free Cash Flow

$54.62M

Financial Statements
Beta
Revenue$745.86M
SG&A Expenses$166.87M
Operating Income$138.13M
Net Income$113.13M
EPS (Basic)$0.20
EPS (Diluted)$0.19
Shares Outstanding (Basic)583.23M
Shares Outstanding (Diluted)595.99M

Key Highlights

  • 1Revenue increased by 16.0% to $745.9 million in Q1 2009 compared to Q1 2008.
  • 2Net income grew by 11.1% to $113.1 million ($0.38 per diluted share) in Q1 2009 compared to $101.9 million ($0.34 per diluted share) in Q1 2008.
  • 3Operating margin improved to 18.5% from 17.4% in the prior year, with non-GAAP operating margin reaching 20.2%.
  • 4The company added 55 new active clients, bringing the total to 560 by the end of Q1 2009.
  • 5Strong revenue growth was observed across all business segments, with Financial Services and Healthcare showing significant increases.
  • 6Cognizant ended the quarter with $808.6 million in cash and cash equivalents and short-term investments, indicating strong liquidity.
  • 7The company is strategically investing in its India real estate development program, planning for significant new facility construction.

Frequently Asked Questions

Cognizant reported a 16.0% increase in revenue to $745.9 million for the first quarter of 2009, compared to $643.1 million in the same period of 2008. Net income also rose by 11.1% to $113.1 million, or $0.38 per diluted share, from $101.9 million, or $0.34 per diluted share, in the prior year.

The operating margin increased to 18.5% in Q1 2009 from 17.4% in Q1 2008. Key drivers for this improvement included operational efficiencies resulting from revenue growth outpacing headcount growth, and the favorable impact of the Indian rupee's depreciation against the U.S. dollar. Excluding stock-based compensation and Indian fringe benefit tax, the non-GAAP operating margin was 20.2%.

Cognizant maintained a strong liquidity position, ending the quarter with $808.6 million in cash and cash equivalents and short-term investments. The company reported working capital of $1,185.1 million and does not anticipate any near-term liquidity issues, with ample resources to fund operations and growth initiatives.

Cognizant's growth strategies include expanding its business in Europe and Asia Pacific, increasing penetration at existing customers, expanding its Business Process Outsourcing (BPO) and infrastructure management practices, and aggressively increasing its customer base. The company is also investing in its India real estate development program, with plans for significant new IT development center construction.