10-QPeriod: Q3 FY2009

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 6, 2009For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation reported strong financial performance for the nine months ended September 30, 2009, demonstrating robust revenue and net income growth year-over-year. Revenue increased by 15.2% to $2.38 billion, and net income grew by 22.7% to $391 million. This growth was driven by increased demand for IT services and business process outsourcing, particularly in the Healthcare and Manufacturing/Retail/Logistics segments, and strong performance in North America. The company highlighted its expanding service offerings and increased client penetration as key growth drivers. The company maintained a healthy operating margin, even as it continued to invest in business growth, talent development, and geographic expansion. Despite a challenging macroeconomic environment, Cognizant showcased resilience and strategic execution. The company also highlighted its strong liquidity position with over $1.18 billion in cash and short-term investments, indicating financial stability and the capacity to fund ongoing operations and future growth initiatives.

Financial Highlights

46 data points
Beta

Revenue

$853.49M

Net Income

$136.57M

16.0% Net Margin

EPS (Diluted)

$0.23

Total Assets

$2.98B

Cash & Equivalents

$992.93M

Free Cash Flow

$176.47M

Financial Statements
Beta
Revenue$853.49M
SG&A Expenses$193.81M
Operating Income$161.78M
Net Income$136.57M
EPS (Basic)$0.23
EPS (Diluted)$0.23
Shares Outstanding (Basic)587.33M
Shares Outstanding (Diluted)605.16M

Key Highlights

  • 1Revenue increased by 16.2% to $853.5 million for the three months ended September 30, 2009, compared to the prior year period.
  • 2Net income for the three months ended September 30, 2009, rose by 21.0% to $136.6 million, with diluted EPS growing from $0.38 to $0.45.
  • 3The Healthcare and Manufacturing/Retail/Logistics segments showed significant revenue growth of 30.0% and 27.1% respectively in the third quarter.
  • 4North America continued to be a strong market, with revenue growth of 15.7% for the quarter.
  • 5The company maintained a healthy operating margin of 19.0% for the quarter, with non-GAAP operating margin at 20.2%.
  • 6Cash and cash equivalents and short-term investments stood at $1,182.7 million as of September 30, 2009, indicating strong liquidity.
  • 7The company successfully managed its cost structure, with revenue growth outpacing headcount growth and benefiting from the depreciation of the Indian Rupee.

Frequently Asked Questions

Cognizant's revenue growth was driven by strong performance in its Healthcare and Manufacturing/Retail/Logistics business segments, robust revenue growth in North America, expansion of its service offerings, increased penetration at existing customers, and the continued expansion of the global market for IT services and business process outsourcing.

Despite investments in growth and a challenging macroeconomic environment, Cognizant maintained a healthy operating margin of 19.0% for the quarter. Excluding stock-based compensation and fringe benefit tax, the non-GAAP operating margin was 20.2%. The company benefited from the depreciation of the Indian Rupee and operational efficiencies, which helped offset increased compensation costs and growth investments.

As of September 30, 2009, Cognizant had strong liquidity with $1,182.7 million in cash and cash equivalents and short-term investments. The company plans to use this cash for expansion of existing operations, development of new service lines, potential acquisitions, stock repurchases, and general corporate purposes including working capital.

A substantial portion of Cognizant's assets and operations are located in India. Risks include regulatory, economic, and political uncertainties in India, potential foreign currency exchange rate fluctuations, and the possibility of changes in Indian government policies or tax incentives. The company is also subject to risks associated with international operations generally, such as enforcing intellectual property rights and complying with diverse foreign laws.