10-QPeriod: Q2 FY2019

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 1, 2019For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported revenues of $4.141 billion for the second quarter of 2019, a 3.4% increase year-over-year, or 4.7% on a constant currency basis. Net income for the quarter was $509 million, a 11.6% increase from the prior year. Despite revenue growth, income from operations saw a decline of 7.6% due to increased costs related to delivery personnel and contract renegotiations. The company returned $1.153 billion to stockholders in Q2 2019 through share repurchases and dividend payments. Management highlighted ongoing investments in digital capabilities, talent, and strategic acquisitions as key priorities for future growth. However, the company also faces business considerations including demand impacted by macroeconomic factors, regulatory uncertainties in healthcare, and ongoing realignment initiatives, including executive transition costs.

Financial Highlights

48 data points
Beta

Revenue

$4.14B

Net Income

$509.00M

12.3% Net Margin

EPS (Diluted)

$0.90

Total Assets

$15.52B

Cash & Equivalents

$1.66B

Free Cash Flow

$479.00M

Financial Statements
Beta
Revenue$4.14B
SG&A Expenses$719.00M
Operating Income$619.00M
Interest Expense$6.00M
Net Income$509.00M
EPS (Basic)$0.90
EPS (Diluted)$0.90
Shares Outstanding (Basic)564.00M
Shares Outstanding (Diluted)564.00M

Key Highlights

  • 1Revenue for Q2 2019 increased by 3.4% to $4.141 billion, or 4.7% on a constant currency basis.
  • 2Net income rose by 11.6% to $509 million, while diluted EPS grew to $0.90 from $0.78 year-over-year.
  • 3Income from operations decreased by 7.6% to $619 million due to increased delivery personnel costs and contract renegotiations, particularly impacting the Healthcare segment.
  • 4The company repurchased $1.037 billion of its stock and paid $116 million in dividends during Q2 2019, returning a total of $1.153 billion to shareholders.
  • 5The Communications, Media and Technology segment showed strong growth (12.2% reported, 14.1% constant currency), alongside Products and Resources (10.4% reported, 12.3% constant currency).
  • 6Realignment charges, including executive transition and employee separation costs, amounted to $49 million in Q2 2019.
  • 7Cash and cash equivalents, including short-term investments, stood at $4.663 billion as of June 30, 2019, with $429 million restricted due to a dispute with the Indian Income Tax Department.

Frequently Asked Questions

Cognizant reported a 3.4% year-over-year increase in revenue for Q2 2019, reaching $4.141 billion. Net income also grew by 11.6% to $509 million. However, income from operations declined by 7.6% due to increased operating costs.

The Communications, Media and Technology segment experienced the strongest growth, up 12.2% (14.1% in constant currency), followed by the Products and Resources segment, which grew 10.4% (12.3% in constant currency). The Healthcare segment saw a slight decline, while Financial Services remained relatively flat.

In Q2 2019, Cognizant returned $1.153 billion to shareholders through $1.037 billion in share repurchases and $116 million in dividend payments. The company continues to invest in digital capabilities, talent, and strategic acquisitions.

The company is involved in an ongoing dispute with the Indian Income Tax Department concerning a 2016 share repurchase transaction. Additionally, there are ongoing securities class action and shareholder derivative lawsuits related to past alleged FCPA violations. The company believes it has paid all applicable taxes and is defending these matters vigorously, but the ultimate outcomes remain uncertain.