10-QPeriod: Q1 FY2012

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 9, 2012For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation reported a strong first quarter for 2012, with revenues growing 24.8% year-over-year to $1.71 billion. This growth was driven by broad-based performance across all business segments, continued penetration in the European market, and increased customer spending on discretionary IT projects. Net income rose 17.0% to $243.7 million, with diluted EPS increasing to $0.79. The company also saw an increase in its active client base and strategic clients, while its top customers' revenue contribution slightly decreased as a percentage of total revenue, indicating a healthier client diversification. The company maintained a solid operating margin of 18.6% (20.4% excluding stock-based compensation), slightly below the prior year's 19.4% due to increased compensation and benefits costs, partially offset by a favorable Indian Rupee to U.S. Dollar exchange rate. Cognizant continues to invest in talent and service offerings, anticipating continued demand for cost-saving IT solutions alongside innovation investments from clients. Liquidity remains strong with $2.49 billion in cash, cash equivalents, and short-term investments.

Financial Highlights

45 data points
Beta

Revenue

$1.71B

Net Income

$243.65M

14.2% Net Margin

EPS (Diluted)

$0.40

Total Assets

$5.67B

Cash & Equivalents

$1.33B

Free Cash Flow

$41.31M

Financial Statements
Beta
Revenue$1.71B
SG&A Expenses$374.18M
Operating Income$317.90M
Net Income$243.65M
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)606.86M
Shares Outstanding (Diluted)618.42M

Key Highlights

  • 1Revenue increased by 24.8% to $1.71 billion in Q1 2012 compared to Q1 2011.
  • 2Net income grew by 17.0% to $243.7 million, with diluted EPS reaching $0.79.
  • 3Operating margin was 18.6%, with non-GAAP operating margin (excluding stock-based compensation) at 20.4%.
  • 4Strong growth observed across all business segments, with Healthcare showing the highest increase at 33.9%.
  • 5The number of active clients increased to 805, up from 714 in the prior year.
  • 6Cash, cash equivalents, and short-term investments stood at $2.49 billion as of March 31, 2012.
  • 7The company repurchased $42.7 million of its Class A common stock during the quarter.

Frequently Asked Questions

Cognizant's revenue growth was driven by strong performance across all business segments, increased customer demand for IT solutions and business process outsourcing, continued penetration in the European market, and expansion of service offerings which allowed for cross-selling opportunities.

Net income increased by 17.0% year-over-year. While the reported operating margin slightly decreased from 19.4% to 18.6%, this was primarily due to higher compensation and benefits costs, which were partially offset by favorable foreign currency exchange rates. The non-GAAP operating margin, excluding stock-based compensation, remained strong at 20.4%.

Cognizant maintains a strong liquidity position, with cash, cash equivalents, and short-term investments totaling $2.49 billion as of March 31, 2012. The company reported working capital of $3.18 billion and no third-party debt, indicating no anticipated near-term liquidity issues.

Cognizant manages its foreign currency risk primarily through hedging strategies. It uses foreign exchange forward contracts to hedge against fluctuations in the Indian Rupee, which impacts a portion of its costs. The company also manages its net monetary asset exposure in foreign subsidiaries.