10-QPeriod: Q1 FY2014

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 8, 2014For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported strong financial results for the first quarter of 2014. Revenue increased by 19.9% year-over-year to $2.42 billion, driven by broad-based growth across all business segments and geographic regions, with notable strength in Europe and the Rest of World. Net income saw a significant jump of 22.8% to $348.9 million, resulting in diluted earnings per share of $0.57, up from $0.47 in the prior year. The company's operating margin also improved to 19.0% from 18.1%, benefiting from revenue growth outpacing headcount increases and favorable foreign currency exchange rates, partially offset by higher compensation costs. Cognizant maintained a healthy liquidity position with $3.86 billion in cash, cash equivalents, and short-term investments, and continued its share repurchase program. The company reiterated its positive outlook, focusing on continued investment in talent and services, deepening client relationships, expanding in high-growth regions, and opportunistic acquisitions.

Financial Highlights

47 data points
Beta

Revenue

$2.42B

Net Income

$348.90M

14.4% Net Margin

EPS (Diluted)

$0.57

Total Assets

$8.28B

Cash & Equivalents

$1.94B

Free Cash Flow

$114.00M

Financial Statements
Beta
Revenue$2.42B
SG&A Expenses$485.40M
Operating Income$460.00M
Interest Expense$0
Net Income$348.90M
EPS (Basic)$0.57
EPS (Diluted)$0.57
Shares Outstanding (Basic)607.70M
Shares Outstanding (Diluted)612.90M

Key Highlights

  • 1Revenue grew by an impressive 19.9% year-over-year, reaching $2.42 billion.
  • 2Net income increased by 22.8% to $348.9 million, with diluted EPS rising to $0.57 from $0.47.
  • 3Operating margin improved from 18.1% to 19.0%, driven by revenue growth outpacing headcount and favorable FX rates.
  • 4Strong growth observed in Europe (+35.0%) and Rest of World (+28.4%) markets, alongside sustained performance in North America (+16.1%).
  • 5Active client count grew to 1,223 from approximately 1,000 in the prior year's first quarter.
  • 6The company declared a two-for-one stock split effective March 7, 2014.
  • 7Cash, cash equivalents, and short-term investments remained robust at $3.86 billion, with no near-term liquidity concerns.

Frequently Asked Questions

Cognizant's revenue increased by 19.9% to $2.42 billion in Q1 2014 compared to Q1 2013. Key drivers included strong performance across all business segments and geographic markets, increased customer spending on discretionary projects, expansion of service offerings, and growing demand for global IT and business process services.

Profitability improved in Q1 2014. Net income rose 22.8% to $348.9 million, and diluted EPS increased to $0.57 from $0.47. The operating margin also expanded to 19.0% from 18.1% in the prior year, supported by revenue growth exceeding headcount growth and favorable foreign currency exchange rates.

Cognizant maintained a strong liquidity position with $3.86 billion in cash, cash equivalents, and short-term investments at the end of Q1 2014, with no anticipated near-term liquidity issues. The company continues to utilize its cash for operational expansion, new service development, acquisitions, and stock repurchases. A significant portion of cash is held by foreign subsidiaries, which are intended to be indefinitely reinvested abroad.

Yes, Cognizant's Board of Directors declared a two-for-one stock split of its Class A common stock, which was paid on March 7, 2014. The financial statements have been retroactively adjusted to reflect this stock split.