10-QPeriod: Q2 FY2023

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q2 Ended Jun 30, 2023

Filed August 3, 2023For Securities:CTSH

Summary

Cognizant Technology Solutions reported its second-quarter 2023 financial results, showing a slight revenue decline year-over-year, impacted by softness in its Financial Services and Communications, Media, and Technology segments, although this was partially offset by growth in Products and Resources and Health Sciences. The company initiated a significant "NextGen" program aimed at simplifying its operating model, optimizing corporate functions, and consolidating office space, which resulted in $117 million in restructuring charges for the quarter. This program is expected to incur approximately $350 million in total costs. Despite the revenue dip and restructuring expenses, Cognizant's adjusted diluted EPS saw a modest decrease, and the company maintained a strong cash position and significant capacity under its credit facilities, underscoring its financial resilience.

Financial Highlights

50 data points
Beta

Revenue

$4.89B

Net Income

$463.00M

9.5% Net Margin

EPS (Diluted)

$0.91

Total Assets

$17.97B

Cash & Equivalents

$2.06B

Free Cash Flow

-$32.00M

Financial Statements
Beta
Revenue$4.89B
SG&A Expenses$830.00M
Operating Income$577.00M
Interest Expense$10.00M
Net Income$463.00M
EPS (Basic)$0.92
EPS (Diluted)$0.91
Shares Outstanding (Basic)506.00M
Shares Outstanding (Diluted)507.00M

Key Highlights

  • 1Revenue for the second quarter of 2023 was $4.886 billion, a decrease of 0.4% (0.1% in constant currency) compared to the prior year, primarily due to weakness in Financial Services and Communications, Media, and Technology segments.
  • 2The company incurred $117 million in restructuring charges related to the "NextGen" program, which aims to simplify operations and optimize corporate functions.
  • 3Income from operations decreased by 24.1% to $577 million, while adjusted income from operations decreased by 8.7% to $694 million year-over-year.
  • 4Diluted EPS decreased by 18.0% to $0.91, with adjusted diluted EPS down 3.5% to $1.10.
  • 5Voluntary attrition rate (excluding specific practice) decreased to 19.9% for the trailing twelve months ended June 30, 2023, down from 31.1% in the prior year.
  • 6Cash and cash equivalents stood at $2.055 billion as of June 30, 2023.
  • 7The company repurchased $200 million of its Class A common stock during the quarter.

Frequently Asked Questions

The "NextGen" program is an initiative launched by Cognizant in the second quarter of 2023 to simplify its operating model, optimize corporate functions, and consolidate office space. This program resulted in $117 million of restructuring charges in Q2 2023, impacting GAAP operating income. The company expects total costs of approximately $350 million for this program.

Revenue for the second quarter of 2023 was $4.886 billion, a slight decrease of 0.4% (0.1% in constant currency) year-over-year. The decline was primarily driven by weaker performance in the Financial Services (specifically banking) and Communications, Media, and Technology segments. This was partially offset by growth in the Products and Resources and Health Sciences segments. Acquisitions contributed positively to revenue growth.

Cognizant reported a significant improvement in voluntary attrition, which decreased to 19.9% for the trailing twelve months ended June 30, 2023, compared to 31.1% in the prior year. This indicates better employee retention, which is crucial for a professional services company.

Cognizant maintained a strong liquidity position, with $2.055 billion in cash and cash equivalents as of June 30, 2023. The company also had approximately $2 billion in available capacity under its credit facilities. Net cash provided by operating activities was $765 million for the first six months of 2023. The company continues to return capital to shareholders through share repurchases, with $200 million repurchased in Q2 2023.