10-QPeriod: Q1 FY2023

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 4, 2023For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation reported its first-quarter 2023 financial results, showing a slight revenue decrease of 0.3% year-over-year to $4.812 billion, or a 1.5% increase on a constant currency basis. This marginal decline was attributed to a slowdown in the banking sector impacting the Financial Services segment and weakness in retail within the Products and Resources segment, though partially offset by growth in Health Sciences and Communications, Media, and Technology. Net income for the quarter was $580 million, an increase of 3.0% from the prior year, resulting in diluted Earnings Per Share (EPS) of $1.14, up from $1.07. The company highlighted improved operating cash flow and a reduction in voluntary attrition. Looking ahead, Cognizant announced a "NextGen" program aimed at simplifying its operating model, optimizing corporate functions, and consolidating office space, which is expected to incur approximately $400 million in charges over 2023 and 2024.

Financial Highlights

50 data points
Beta

Revenue

$4.81B

Net Income

$580.00M

12.1% Net Margin

EPS (Diluted)

$1.14

Total Assets

$18.15B

Cash & Equivalents

$2.46B

Free Cash Flow

$631.00M

Financial Statements
Beta
Revenue$4.81B
SG&A Expenses$835.00M
Operating Income$702.00M
Interest Expense$9.00M
Net Income$580.00M
EPS (Basic)$1.14
EPS (Diluted)$1.14
Shares Outstanding (Basic)509.00M
Shares Outstanding (Diluted)509.00M

Key Highlights

  • 1Revenue for Q1 2023 was $4.812 billion, a slight decrease of 0.3% compared to Q1 2022, but a 1.5% increase on a constant currency basis.
  • 2Net income increased by 3.0% to $580 million, with diluted EPS rising to $1.14 from $1.07 in the prior year.
  • 3Operating margin decreased to 14.6% from 15.0%, impacted by increased compensation costs for delivery personnel, though partially offset by foreign currency benefits.
  • 4The company repurchased $200 million of its Class A common stock during the quarter under its ongoing stock repurchase program.
  • 5Voluntary attrition for Tech Services decreased to 23% for the trailing twelve months ended March 31, 2023, down from 30% in the prior year.
  • 6Cognizant announced the "NextGen" program aimed at simplification and cost optimization, anticipating approximately $400 million in charges over 2023-2024, impacting around 3,500 employees.
  • 7Acquisitions made in Q1 2023 contributed 100 basis points to overall revenue growth, primarily benefiting the Products and Resources segment.

Frequently Asked Questions

Cognizant's revenue for the first quarter of 2023 was $4.812 billion, a slight decrease of 0.3% compared to the same period in 2022. However, on a constant currency basis, revenue grew by 1.5%, indicating resilience in underlying demand despite foreign exchange headwinds.

Net income increased by 3.0% to $580 million, and diluted Earnings Per Share (EPS) rose to $1.14 from $1.07 in the prior year. However, the operating margin saw a slight decrease to 14.6% from 15.0%, primarily due to increased compensation costs for delivery personnel.

The 'NextGen' program is a strategic initiative by Cognizant to simplify its operating model, optimize corporate functions, and consolidate office space. The company anticipates this program will incur approximately $400 million in charges, with an estimated $350 million in 2023 and $50 million in 2024, impacting around 3,500 employees.

Cognizant reported a decrease in voluntary attrition for its Tech Services segment to 23% for the trailing twelve months ended March 31, 2023, down from 30% in the prior year. The company also announced the NextGen program, which aims to streamline operations and improve efficiency through restructuring and workforce adjustments.