Cognizant Technology Solutions Corp : Cognizant Announces First Quarter 2012 Results and Expanded Share Repurchase Program
05/07/2012| 06:05am US/Eastern
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TEANECK, N.J., May 7, 2012 /PRNewswire/ -- Cognizant Technology Solutions Corporation (NASDAQ: CTSH), a leading provider of information technology, consulting, and business process outsourcing services, today announced its first quarter 2012 financial results.
Highlights - First Quarter 2012
-- Quarterly revenue rose to $1.71 billion, up 24.8% from the year-ago
quarter and 2.9% sequentially.
-- Quarterly diluted EPS on a GAAP basis was $0.79, compared to $0.67 in
the year-ago quarter.
-- Quarterly diluted EPS on a non-GAAP basis, which excludes stock-based
compensation expense, was $0.86, compared to $0.71 in the year-ago
quarter.
-- GAAP and non-GAAP diluted EPS includes the impact of $0.02 in net
non-operating foreign currency exchange losses.
-- Net headcount addition for the quarter was approximately 2,800.
Revenue for the first quarter of 2012 rose to $1.71 billion, up 24.8% from $1.37 billion in the first quarter of 2011. GAAP net income was $243.7 million, or $0.79 per diluted share, compared to $208.3 million, or $0.67 per diluted share, in the first quarter of 2011. Diluted earnings per share on a non-GAAP basis was $0.86. GAAP operating margin for the quarter was 18.6%. Excluding stock-based compensation expense of $31.4 million, non-GAAP operating margin was 20.4%, slightly higher than the Company's targeted 19-20% range. Reconciliations of non-GAAP financial measures to GAAP operating results and diluted EPS are included at the end of this release.
"Due to a slower than anticipated acceleration in demand as we entered the second quarter, we are adopting a more conservative stance for the remainder of the year and revising our guidance to at least 20% revenue growth for 2012," said Francisco D'Souza, Chief Executive Officer of Cognizant. "We continue to believe that we have the right portfolio of services to sustain our industry leading growth and also meet the changing demands in the market as clients continue to grapple with their dual mandates of cost containment and innovation/business transformation."
"Our solid performance this quarter validates our strategy of continually reinvesting in our business to broaden and strengthen our service offerings," said Gordon Coburn, President. "We continue to have a healthy long-term outlook for the business. Our clients recognize that in Cognizant, they have a partner with a strong consulting oriented and industry focused front-end team combined with a best-in-class global delivery model."
2012 Outlook - Second Quarter and Full Year
The Company is providing the following guidance:
-- Second quarter 2012 revenue anticipated to be at least $1.79 billion.
-- Second quarter 2012 diluted EPS expected to be $0.80 on a GAAP basis and
$0.87 on a non-GAAP basis, which excludes estimated stock-based
compensation expense.
-- Fiscal 2012 revenue expected to be at least $7.34 billion, up at least
20% compared to 2011.
-- Fiscal 2012 diluted EPS expected to be at least $3.36 on a GAAP basis,
and $3.62 on a non-GAAP basis, which excludes estimated stock-based
compensation expense.
-- EPS guidance excludes any future non-operating foreign currency exchange
gain or loss.
"Similar to last year, we slightly exceeded our target operating margin during the first quarter - which positions us well to absorb our annual salary increases which will impact us during the second quarter, while maintaining operating margins within our target range for the year," said Karen McLoughlin, Chief Financial Officer. "In addition, we repurchased $43 million of shares under our share repurchase program during the quarter and expanded the program to $1 billion, reflecting confidence in our growth opportunities, our commitment to drive shareholder value, and our ability to generate strong cash flows."
Expansion of Share Repurchase Program
Today, the Company announced that its Board of Directors has authorized the expansion of its existing share repurchase program by $400 million, bringing the total authorization under the current repurchase program to $1 billion. To date, $423 million of shares have been repurchased under this program. In addition, Cognizant's Board has extended the expiration date for the repurchase program to December 31, 2013.
Repurchases under the program may be made in the open market or through privately negotiated transactions in accordance with applicable federal securities laws, including Rule 10b-18. The timing of repurchases and the exact number of shares of common stock to be purchased will be determined by the Company's management, in its discretion, and will depend upon market conditions and other factors. The repurchases will be funded using the Company's cash on hand and cash generated from operations. The program may be extended, suspended or discontinued at any time.
Conference Call
Cognizant will host a conference call May 7, 2012 at 8:00 a.m. (Eastern) to discuss the Company's first quarter 2012 results. To listen to the conference call, please dial (800) 374-0467 (domestic) and (706) 679-3288 (international) and provide the following conference ID number: 70589605.
The conference call will also be available live via the Internet by accessing the Cognizant website at www.cognizant.com. Please go to the website at least 15 minutes prior to the call to register and to download and install any necessary audio software.
For those who cannot access the live broadcast, a replay will be available by dialing (855) 859-2056 for domestic callers or (404) 537-3406 for international callers and entering 70589605 from a half hour after the end of the call until 11:59 p.m. (Eastern) on Monday, May 21, 2012. The replay will also be available at Cognizant's website www.cognizant.com for 60 days following the call.
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world's leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 140,500 employees as of March 31, 2012, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.
Forward-Looking Statements
This press release includes statements which may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Cognizant undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.
About Non-GAAP Financial Measures
To supplement the consolidated financial statements presented in accordance with GAAP, this press release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: non-GAAP operating margin and non-GAAP diluted earnings per share. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures, the financial statements prepared in accordance with GAAP and reconciliations of Cognizant's GAAP financial statements to such non-GAAP measures should be carefully evaluated.
We seek to manage the company to a targeted operating margin, excluding stock-based compensation costs, of 19% to 20% of revenues. Accordingly, we believe that non-GAAP operating margin and non-GAAP diluted earnings per share, excluding stock-based compensation costs, are meaningful measures for investors to evaluate our financial performance. For our internal management reporting and budgeting purposes, we use financial statements that do not include stock-based compensation expense for financial and operational decision making, to evaluate period-to-period comparisons and for making comparisons of our operating results to those of our competitors. Moreover, because of varying available valuation methodologies permitted under U.S. GAAP and the variety of award types that companies can use, we believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows investors to make additional comparisons between our operating results to those of other companies. Accordingly, we believe that the presentation of non-GAAP operating margin and non-GAAP diluted earnings per share, when read in conjunction with our reported GAAP results, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations.
A limitation of using non-GAAP operating margin and non-GAAP diluted earnings per share versus operating margin and diluted earnings per share calculated in accordance with GAAP is that non-GAAP operating margin and non-GAAP diluted earnings per share exclude costs, namely stock-based compensation, that are recurring. Stock-based compensation will continue to be for the foreseeable future a significant recurring expense in our business. In addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the usefulness of these non-GAAP financial measures as a comparative tool. We compensate for this limitation by providing specific information regarding the GAAP amounts excluded from non-GAAP operating margin and non-GAAP diluted earnings per share and evaluating such non-GAAP financial measures with financial measures calculated in accordance with GAAP.
- tables to follow -
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
---------
2012 2011
---- ----
Revenues $1,711,349 $1,371,253
Operating
expenses:
Cost of
revenues
(exclusive
of
depreciation
and 984,520 782,176
amortization
expense
shown
separately
below)
Selling,
general
and
administrative
expenses 374,178 296,330
Depreciation
and
amortization
expense 34,752 27,382
------ ------
Income
from
operations 317,899 265,365
------- -------
Other
income
(expense),
net:
Interest
income 11,072 8,937
Other,
net (6,694) 6,198
Total
other
income
(expense),
net 4,378 15,135
----- ------
Income
before
provision
for
income
taxes 322,277 280,500
Provision
for
income
taxes 78,626 72,173
Net
income $243,651 $208,327
======== ========
Basic
earnings
per
share $0.80 $0.69
===== =====
Diluted
earnings
per
share $0.79 $0.67
===== =====
Weighted
average
number
of
common
shares
outstanding
-Basic 303,428 304,041
======= =======
Weighted
average
number
of
common
shares
outstanding
-
Diluted 309,208 311,803
======= =======
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
(In thousands)
March 31, December 31,
--------- ------------
2012 2011
---- ----
Assets
Current
Assets
Cash and
cash
equivalents $1,328,535 $1,310,906
Short-
term
investments 1,162,660 1,121,358
Trade
accounts
receivable,
net of
allowances
of
$25,312
and
$24,658,
respectively 1,234,177 1,179,043
Unbilled
accounts
receivable 187,081 139,627
Deferred
income
tax
assets,
net 94,641 109,042
Other
current
assets 189,648 225,530
Total
Current
Assets 4,196,742 4,085,506
Property
and
equipment,
net 784,975 758,034
Goodwill 289,904 288,772
Intangible
assets,
net 93,421 97,616
Deferred
income
tax
assets,
net 164,074 164,192
Other
noncurrent
assets 139,009 113,813
Total
Assets $5,668,125 $5,507,933
========== ==========
Liabilities
and
Stockholders'
Equity
Current
Liabilities
Accounts
payable $109,983 $72,205
Deferred
revenue 107,817 105,713
Accrued
expenses
and other
current
liabilities 803,445 1,031,787
Total
Current
Liabilities 1,021,245 1,209,705
Deferred
income
tax
liabilities,
net 2,978 3,339
Other
noncurrent
liabilities 276,653 342,003
Total
Liabilities 1,300,876 1,555,047
--------- ---------
Stockholders'
Equity 4,367,249 3,952,886
--------- ---------
Total
Liabilities
and
Stockholders'
Equity $5,668,125 $5,507,933
========== ==========
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures (Unaudited)
(In thousands, except per share amounts)
Three Months Ended March 31, Three Months Ended March 31,
---------------------------- ----------------------------
2012 2012 2012 2011 2011 2011
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
---- ----------- -------- ---- ----------- --------
$317,899 $31,379 (a) $349,278 $265,365 $16,065 (b) $281,430
Income from
operations
18.6% 1.8% (a) 20.4% 19.4% 1.1% (b) 20.5%
Operating
margin
$0.79 $0.07 (c) $0.86 $0.67 $0.04 (c) $0.71
Diluted
earnings per
share
Notes:
(a) Adjustment to exclude stock-based compensation of $31,379 from income from operations of which $4,607 was reported in cost of revenues and $26,772 was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
(b) Adjustment to exclude stock-based compensation of $16,065 from income from operations of which $3,487 was reported in cost of revenues and $12,578 was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
(c) Adjustment to exclude the per share effect of stock-based compensation expense net of the related tax benefit.
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
Schedule of Supplemental Information (Unaudited)
(In thousands)
Three Months Ended March 31, 2012
---------------------------------
Growth %
-------
$ % of total Sequential Year
over
Year
--- ---------- ---------- ----
Revenue by Segment:
$694,724 40.6% 2.2% 21.9%
Financial Services
467,409 27.3% 2.3% 33.9%
Healthcare
334,794 19.6% 5.0% 22.0%
Manufacturing/Retail/Logistics
214,422 12.5% 3.1% 20.5%
Other
$1,711,349 2.9% 24.8%
Total Revenue
Revenue by Geography:
$1,360,724 79.5% 2.5% 27.2%
North America
180,336 10.5% 2.5% 10.7%
United Kingdom
103,589 6.1% 5.4% 11.4%
Rest of Europe
Europe - Total 283,925 16.6% 3.5% 11.0%
Rest of World 66,700 3.9% 7.2% 46.9%
Total Revenue $1,711,349 2.9% 24.8%
========== === ====
SOURCE Cognizant Technology Solutions Corporation
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