10-QPeriod: Q2 FY2009

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 7, 2009For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported strong financial performance for the second quarter and the first half of 2009, demonstrating significant revenue and net income growth compared to the prior year. Revenue increased by 13.3% for the quarter and 14.6% for the first six months, driven by robust demand across key segments like Healthcare and Manufacturing/Retail/Logistics, and strong performance in North America. The company's operating margin also saw improvement, reaching 19.5% for the quarter and 19.0% for the half-year, benefiting from operating efficiencies and favorable foreign currency movements. Despite the challenging global economic environment, Cognizant maintained healthy liquidity with substantial cash and cash equivalents. The company highlighted continued investment in its offshore development centers and expansion of service offerings to meet evolving client needs. Management remains focused on strategic growth initiatives, including expanding in Europe and Asia Pacific, and growing its Business Process Outsourcing (BPO) and infrastructure management practices. The company also provided positive outlook regarding its customer base expansion and its strategy to increase market share in key regions.

Financial Highlights

44 data points
Beta

Revenue

$776.59M

Net Income

$141.25M

18.2% Net Margin

EPS (Diluted)

$0.23

Total Assets

$2.67B

Cash & Equivalents

$860.38M

Free Cash Flow

$141.71M

Financial Statements
Beta
Revenue$776.59M
SG&A Expenses$170.00M
Operating Income$151.67M
Net Income$141.25M
EPS (Basic)$0.24
EPS (Diluted)$0.23
Shares Outstanding (Basic)584.67M
Shares Outstanding (Diluted)598.54M

Key Highlights

  • 1Revenue increased by 13.3% to $776.6 million for Q2 2009 and by 14.6% to $1.52 billion for the first six months of 2009, year-over-year.
  • 2Net income grew by 36.0% to $141.3 million for Q2 2009 and by 23.7% to $254.4 million for the first six months of 2009, year-over-year.
  • 3Diluted EPS increased to $0.47 for Q2 2009 and $0.85 for the first six months of 2009, up from $0.35 and $0.69 in the prior year periods.
  • 4Operating margin improved to 19.5% in Q2 2009 and 19.0% in the first six months of 2009, compared to 17.5% and 17.4% respectively in the prior year.
  • 5Cash and cash equivalents and short-term investments totaled $983.2 million as of June 30, 2009, indicating strong liquidity.
  • 6The company ended the quarter with 569 active clients, up from 520 a year prior, with strategic clients increasing to 134.
  • 7Strong growth was observed in the Healthcare (24.2% Q2, 21.5% YTD) and Manufacturing/Retail/Logistics (23.9% Q2, 25.0% YTD) segments.

Frequently Asked Questions

For the three months ended June 30, 2009, Cognizant reported revenue of $776.6 million, an increase of 13.3% year-over-year, and net income of $141.3 million, a 36.0% increase. For the six months ended June 30, 2009, revenue was $1.52 billion, up 14.6%, and net income was $254.4 million, up 23.7%.

The Healthcare segment showed strong growth with revenue increasing by 24.2% in Q2 and 21.5% year-to-date. The Manufacturing/Retail/Logistics segment also performed well, with revenue up 23.9% in Q2 and 25.0% year-to-date. The Financial Services segment saw a more modest 5.9% revenue increase in Q2 and 9.5% year-to-date.

Cognizant maintained a strong liquidity position, with cash and cash equivalents and short-term investments totaling $983.2 million as of June 30, 2009. The company reported working capital of $1,373.8 million, indicating no near-term liquidity concerns. Net cash provided by operating activities was $226.3 million for the first six months of 2009.

Cognizant highlighted several risks, including dependence on clients in the US and Europe, potential adverse effects from economic downturns, competition in the IT services market, foreign currency fluctuations (particularly the Indian Rupee), potential for intellectual property infringement claims, and upcoming expiration of tax holidays in India which could increase their effective income tax rate significantly.