10-QPeriod: Q1 FY2022

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q1 Ended Mar 31, 2022

Filed May 5, 2022For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) reported solid revenue growth in the first quarter of 2022, with revenues increasing by 9.7% year-over-year to $4.83 billion. This growth was primarily driven by strong performance in the Communications, Media & Technology and Products & Resources segments, and was further bolstered by recent acquisitions contributing 2.2% to the overall revenue increase. The company's strategic focus on digital services, including IoT, digital engineering, data, and cloud, continues to align with client demands for digital transformation. Despite revenue growth, operating margin saw a slight decrease of 20 basis points to 15.0% year-over-year. This was attributed to increased compensation costs for delivery personnel and higher attrition rates, which the company is actively managing. Diluted Earnings Per Share (EPS) showed positive growth, increasing by 12.6% to $1.07. The company generated strong operating cash flow, underscoring its financial health and ability to fund operations and investments.

Financial Highlights

50 data points
Beta

Revenue

$4.83B

Net Income

$563.00M

11.7% Net Margin

EPS (Diluted)

$1.07

Total Assets

$17.43B

Cash & Equivalents

$2.19B

Free Cash Flow

$186.00M

Financial Statements
Beta
Revenue$4.83B
SG&A Expenses$862.00M
Operating Income$724.00M
Interest Expense$2.00M
Net Income$563.00M
EPS (Basic)$1.07
EPS (Diluted)$1.07
Shares Outstanding (Basic)524.00M
Shares Outstanding (Diluted)525.00M

Key Highlights

  • 1Total revenues increased by 9.7% to $4.83 billion in Q1 2022 compared to Q1 2021, with a 10.9% increase on a constant currency basis.
  • 2Acquisitions contributed 220 basis points to revenue growth, highlighting the company's inorganic growth strategy.
  • 3Diluted Earnings Per Share (EPS) grew by 12.6% to $1.07, demonstrating improved profitability on a per-share basis.
  • 4Operating margin slightly decreased by 20 basis points to 15.0%, primarily due to increased compensation costs and higher attrition rates.
  • 5Net cash provided by operating activities significantly increased to $306 million from $181 million in the prior year's comparable period.
  • 6The Communications, Media and Technology segment experienced the highest revenue growth at 18.1% (19.9% in constant currency).
  • 7The company repurchased $444 million of its Class A common stock during the quarter, reflecting its commitment to returning capital to shareholders.

Frequently Asked Questions

Cognizant's revenue grew by 9.7% year-over-year to $4.83 billion in the first quarter of 2022. This growth was driven by strong demand for digital services across various segments, particularly Communications, Media & Technology and Products & Resources. Recent acquisitions also contributed significantly to this growth.

The operating margin decreased slightly by 20 basis points to 15.0%. This was primarily due to increased compensation costs for delivery personnel and higher employee attrition rates, which offset gains from delivery efficiencies and currency fluctuations.

Cognizant acknowledged high attrition rates, which were 30.8% on an annualized basis in Q1 2022, and stated that it is investing in recruitment, talent management, and employee engagement. However, the company expects attrition to remain elevated and anticipates continued increases in compensation costs, which may not be fully recovered through pricing adjustments.

Cognizant sees continued strong client focus on digital transformation, with increasing demand for services in areas like IoT, digital engineering, data, and cloud. The company expects this trend to continue driving revenue growth, particularly for its digital services portfolio, while non-digital services may face ongoing pricing pressure due to client cost optimization efforts.