10-QPeriod: Q2 FY2012

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 6, 2012For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported strong financial performance for the second quarter and first half of 2012, demonstrating robust revenue growth and improved net income. Revenue for the three months ended June 30, 2012, increased by 20.9% year-over-year to $1.795 billion, driven by broad-based growth across all business segments, increased customer spending on discretionary projects, and expanded service offerings. Net income also saw a significant rise of 21.1% to $251.9 million, translating to diluted EPS of $0.82. The company highlighted strong demand for its IT solutions and business process outsourcing services, reflected in an increased active client base and a growing number of strategic clients. Despite global economic uncertainties, Cognizant maintained its operating margin within its targeted range, supported by favorable foreign currency movements partially offset by hedging losses and ongoing investments in business growth. The company maintained a strong liquidity position with substantial cash and short-term investments, and continued its commitment to returning capital to shareholders through a robust share repurchase program.

Financial Highlights

45 data points
Beta

Revenue

$1.80B

Net Income

$251.93M

14.0% Net Margin

EPS (Diluted)

$0.41

Total Assets

$5.65B

Cash & Equivalents

$1.05B

Free Cash Flow

$245.78M

Financial Statements
Beta
Revenue$1.80B
SG&A Expenses$396.77M
Operating Income$331.96M
Net Income$251.93M
EPS (Basic)$0.41
EPS (Diluted)$0.41
Shares Outstanding (Basic)604.45M
Shares Outstanding (Diluted)614.65M

Key Highlights

  • 1Revenue grew 20.9% year-over-year to $1.795 billion for the three months ended June 30, 2012.
  • 2Net income increased by 21.1% to $251.9 million for the three months ended June 30, 2012.
  • 3Diluted earnings per share (EPS) were $0.82 for the quarter, up from $0.67 in the prior year period.
  • 4The company reported strong performance across all business segments, with Healthcare showing the highest revenue growth at 25.3%.
  • 5The active client base increased to 815, up from 721 in the prior year, and the number of strategic clients grew to 202.
  • 6Operating margin was 18.5% for the quarter, consistent with the prior year's 18.2%.
  • 7The company repurchased $358.3 million of its common stock during the quarter, demonstrating a commitment to capital return.

Frequently Asked Questions

Cognizant's revenue growth was driven by strong performance across all its business segments, increased customer spending on discretionary development projects, expansion of service offerings, deeper penetration at existing customers, and continued market demand for global IT services and business process outsourcing.

The company managed its operating margin by benefiting from the depreciation of the Indian rupee against the U.S. dollar, partially offset by the impact of cash flow hedge losses. They also continued to invest in business growth and focused on operational discipline to manage costs.

Cognizant maintained a strong liquidity position with significant cash and short-term investments. During the quarter, the company actively engaged in its share repurchase program, buying back $358.3 million of its Class A common stock, indicating a commitment to returning capital to shareholders.

Cognizant plans to continue investing in its talent and new service offerings, partner with existing customers for innovative solutions to increase their IT spend, focus on growth in Europe, the Middle East, and Asia Pacific, increase its strategic customer base, and opportunistically pursue acquisitions that enhance service delivery, expand geographic presence, or enter new technology areas.