10-QPeriod: Q1 FY2013

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 9, 2013For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported strong financial results for the first quarter ended March 31, 2013. Revenue increased by 18.1% year-over-year to $2.02 billion, driven by broad-based growth across all business segments, particularly Manufacturing/Retail/Logistics and Financial Services, and continued penetration in international markets like Europe and Asia Pacific. Net income rose by 16.6% to $284.2 million, with diluted earnings per share increasing to $0.93 from $0.79 in the prior year. The company highlighted increased customer spending on discretionary projects and the expansion of its service offerings as key growth drivers. Cognizant also emphasized continued market acceptance of its global delivery model for IT services and business process outsourcing. The company repurchased $16.4 million of its common stock during the quarter and announced an expansion of its stock repurchase program. Operating margin was 18.1%, a slight decrease from 18.6% in the prior year, primarily due to ongoing investments in business growth and delivery capabilities. However, the company maintained its non-GAAP operating margin within its target range of 19-20%. Cognizant ended the quarter with a strong liquidity position, holding $2.74 billion in cash, cash equivalents, and short-term investments, with no near-term liquidity concerns.

Financial Highlights

45 data points
Beta

Revenue

$2.02B

Net Income

$284.21M

14.1% Net Margin

EPS (Diluted)

$0.47

Total Assets

$6.71B

Cash & Equivalents

$1.47B

Free Cash Flow

$1.28M

Financial Statements
Beta
Revenue$2.02B
SG&A Expenses$413.20M
Operating Income$365.91M
Net Income$284.21M
EPS (Basic)$0.47
EPS (Diluted)$0.47
Shares Outstanding (Basic)603.71M
Shares Outstanding (Diluted)610.35M

Key Highlights

  • 1Revenue increased 18.1% to $2.02 billion compared to Q1 2012, driven by strong performance in Financial Services and Manufacturing/Retail/Logistics segments.
  • 2Net income grew 16.6% to $284.2 million, with diluted EPS rising to $0.93 from $0.79 year-over-year.
  • 3Operating margin was 18.1%, with non-GAAP operating margin at 19.9%, reflecting ongoing investments in growth initiatives.
  • 4The company acquired six companies of the C1 Group for approximately $136.8 million to strengthen its presence in Germany and Switzerland.
  • 5Total active clients increased to approximately 1,000, up from 805 at the end of Q1 2012.
  • 6Cash, cash equivalents, and short-term investments stood at $2.74 billion, indicating a strong liquidity position.
  • 7The stock repurchase program was expanded by $500 million to $1.5 billion, with $16.4 million repurchased during the quarter.

Frequently Asked Questions

Cognizant's revenue growth was primarily driven by strong performance across all business segments, particularly Financial Services and Manufacturing/Retail/Logistics. Increased customer spending on discretionary projects, expansion of service offerings, and continued market acceptance of its global delivery model for IT services and business process outsourcing were also key factors.

Net income increased by 16.6% to $284.2 million, and diluted earnings per share rose to $0.93. While the GAAP operating margin slightly decreased to 18.1% from 18.6% in the prior year, this was attributed to strategic investments in business growth. The company's non-GAAP operating margin remained strong at 19.9%, within its target range.

Cognizant demonstrated a strong financial position with $2.74 billion in cash, cash equivalents, and short-term investments as of March 31, 2013. The company reported no anticipated near-term liquidity issues and had a working capital of $3.61 billion, indicating robust financial flexibility.

Yes, Cognizant completed the acquisition of six companies of the C1 Group on February 28, 2013, for approximately $136.8 million. This acquisition aimed to strengthen its local presence in Germany and Switzerland and expand its expertise in enterprise application services and high-end testing services.