TEANECK, N.J., July 29, 2020 /PRNewswire/ -- Cognizant
Technology Solutions Corporation (Nasdaq: CTSH), one of the world's
leading professional services companies, today announced its second
quarter 2020 financial results.
Highlights - Second Quarter 2020 as Compared to the Year-ago
Period
- Revenue of $4.0 billion, down
3.4% (2.5% in constant currency1) including a negative
210 basis points impact from the exit of certain content services
business and the ransomware attack
- GAAP operating margin was 11.7% vs. 14.9%
- Adjusted Operating Margin1 was 14.1%
vs.16.1%
- Net income was $361 million vs.
$509 million
- GAAP diluted EPS was $0.67 vs.
$0.90
- Adjusted Diluted EPS1 was $0.82 vs. $0.94
- First half 2020 bookings1 increased 14%
"I'm proud of our associates who maintained their focus on
clients in the quarter despite being faced with unprecedented
challenges," said Brian Humphries,
Chief Executive Officer. "We delivered a solid second quarter
performance whilst continuing to improve our competitiveness.
Against an uncertain economic backdrop, we remain steadfast in
investing in our clients and our associates, and in executing our
digital strategy to position Cognizant for accelerated
momentum."
Second Quarter 2020 Performance by Business Segment
Revenue across our business segments was negatively impacted by
the COVID-19 pandemic and the ransomware attack, primarily in the
month of April. Revenue and bookings improved sequentially through
May and June, with increased client demand in areas such as cloud
and enterprise application services, IT modernization and digital
engineering.
Financial Services (34.9% of revenues) revenue decreased
5.2% year-over-year, or 4.3% in constant currency, driven by
declines in both banking and insurance. North America saw mixed trends with relatively
better performance in banking, driven by regional banks. We
continue to see weakness across global banking accounts and capital
markets.
1 Constant currency revenue growth, Adjusted
Operating Margin and Adjusted Diluted Earnings Per Share ("Adjusted
Diluted EPS") are not measurements of financial performance
prepared in accordance with GAAP. Bookings is a performance metric
utilized by management. See "About Non-GAAP Financial Measures and
Performance Metrics" for more information and, where applicable,
reconciliations to the most directly comparable GAAP financial
measures at the end of this release.
Healthcare (28.9% of revenues) revenue grew 2.0%
year-over-year, or 2.2% in constant currency. Segment revenue
growth was driven by increases from life sciences clients,
specifically by revenues from our acquisition of Zenith. Revenue in
healthcare declined low single digits.
Products and Resources (21.7% of revenues) revenue
decreased 6.5% year-over-year, or 5.0% in constant currency. The
decline was driven by retail, consumer goods, travel and
hospitality clients that were particularly adversely affected by
the pandemic, partially offset by double-digit constant currency
growth in manufacturing, logistics, energy and utilities.
Communications, Media and Technology (14.5% of revenues)
revenue decreased 4.4% year-over-year, or 3.2% in constant
currency, driven by a negative 790 basis point impact from our 2019
strategic decision to exit certain content-related services.
Excluding that impact, Communications, Media and Technology
grew approximately 5% in constant currency. Communication and media
was flat, with the growth of certain communications clients offset
by weakness with entertainment clients exposed to studios, cable TV
and theme parks.
"We made progress against our cost structure initiative allowing
us to fund investments aligned to our long-term growth strategy and
delivered solid operating performance in a challenging
environment," said Karen McLoughlin,
Chief Financial Officer. "Strong free cash flow further
strengthened our balance sheet and provides us with ample financial
flexibility."
Full Year 2020 Outlook
The Company is providing the
following guidance:
- Full year 2020 revenue expected to be in the range of
$16.4-16.7 billion, or a decline on a
constant currency basis of 2.0-0.5%. This assumes an estimate of a
negative 20 basis points foreign exchange impact and a negative 110
basis points impact from the exit of certain content services
business
- Full year 2020 Adjusted Operating Margin2 expected
to be approximately 15%
- Full year 2020 Adjusted Diluted EPS2 expected to be
in the range of $3.48-3.58
Declaration of Quarterly Cash Dividend
The Company has declared a quarterly cash dividend of
$0.22 per share on Cognizant Class A
common stock for shareholders of record at the close of business on
August 21, 2020. This dividend will
be payable on August 31, 2020.
Conference Call
Cognizant will host a conference call
on July 29, 2020, at 5:00 p.m. (Eastern) to discuss the Company's
second quarter 2020 results. To listen to the conference call,
please dial (877) 810-9510 (domestically) or (201) 493-6778
(internationally) and provide the following conference passcode:
"Cognizant Call."
The conference call will also be available live on the Investor
Relations section of the Cognizant website at
http://investors.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. An earnings supplement will
also be available on the Cognizant website at the time of the
conference call.
2 A full reconciliation of Adjusted Operating Margin
and Adjusted Diluted EPS guidance to the corresponding GAAP
measures on a forward-looking basis cannot be provided without
unreasonable efforts, as we are unable to provide reconciling
information with respect to unusual items, net non-operating
foreign currency exchange gains or losses, and the tax effects of
these adjustments.
For those who cannot access the live broadcast, a replay will be
available. To listen to the replay, please dial (877) 660-6853
(domestically) or (201) 612-7415 (internationally) and enter
13706875 from two hours after the end of the call until
11:59 p.m. (Eastern) on Wednesday, August 12, 2020. The replay will also
be available at Cognizant's website www.cognizant.com for 60
days following the call.
About Cognizant
Cognizant (Nasdaq-100: CTSH) is one of the world's leading
professional services companies, transforming clients' business,
operating and technology models for the digital era. Our unique
industry-based, consultative approach helps clients envision, build
and run more innovative and efficient businesses. Headquartered in
the U.S., Cognizant is ranked 193 on the Fortune 500 and is
consistently listed among the most admired companies in the world.
Learn how Cognizant helps clients lead with digital at
www.cognizant.com or follow us @Cognizant.
Forward-Looking Statements
This press release
includes statements that 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. These statements
include, but are not limited to, express or implied forward-looking
statements relating to our expectations regarding the impact of the
COVID-19 pandemic on our business, the impact of the
ransomware attack on our clients, business, reputation and
financial results, opportunities in the marketplace, our cost
structure, investment in and growth of our business, our
realignment plans, the timing, cost and impact of the 2020 Fit for
Growth Plan, our and our clients' shift to digital solutions and
services and our anticipated financial performance. These
statements are neither promises nor guarantees, but are subject to
a variety of risks and uncertainties, many of which are beyond our
control, which could cause actual results to differ materially from
those contemplated in these forward-looking statements. Existing
and prospective investors are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the
date hereof. Factors that could cause actual results to
differ materially from those expressed or implied include general
economic conditions, legal, reputational and financial risks
resulting from cyberattacks, including the ransomware attack, the
impact of and effectiveness of business continuity plans during the
COVID-19 pandemic, changes in the regulatory environment, including
with respect to immigration and taxes, and the other factors
discussed in our most recent Annual Report on Form 10-K, as
updated by our most recent Quarterly Report on Form 10-Q,
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 and Performance
Metrics
To supplement our financial results presented in
accordance with GAAP, this press release includes references to the
following measures defined by the Securities and Exchange
Commission as non-GAAP financial measures: Adjusted Income From
Operations, Adjusted Operating Margin, Adjusted Diluted EPS, free
cash flow, net cash and constant currency revenue growth. These
non-GAAP financial 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 financial
measures used by other companies. In addition, these non-GAAP
financial measures should be read in conjunction with our financial
statements prepared in accordance with GAAP. The reconciliations of
our non-GAAP financial measures to the corresponding GAAP measures
should be carefully evaluated.
Our non-GAAP financial measures, Adjusted Operating Margin,
Adjusted Income From Operations and Adjusted Diluted EPS exclude
unusual items. Additionally, Adjusted Diluted EPS excludes net
non-operating foreign currency exchange gains or losses and the tax
impact of all the applicable adjustments. The income tax impact of
each item is calculated by applying the statutory rate and local
tax regulations in the jurisdiction in which the item was incurred.
Free cash flow is defined as cash flows from operating activities
net of purchases of property and equipment. Net cash is defined as
cash and cash equivalents and short-term investments less
short-term and long-term debt. Constant currency revenue growth is
defined as revenues for a given period restated at the comparative
period's foreign currency exchange rates measured against the
comparative period's reported revenues.
Management believes providing investors with an operating
view consistent with how we manage the Company provides enhanced
transparency into our operating results. For our internal
management reporting and budgeting purposes, we use various GAAP
and non-GAAP financial measures for financial and operational
decision-making, to evaluate period-to-period comparisons, to
determine portions of the compensation for our executive officers
and for making comparisons of our operating results to those of our
competitors. Therefore, it is our belief that the use of non-GAAP
financial measures excluding certain costs provides a meaningful
supplemental measure for investors to evaluate our financial
performance. Accordingly, we believe that the presentation of our
non-GAAP measures, 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 financial measures versus
financial measures calculated in accordance with GAAP is that
non-GAAP financial measures do not reflect all of the amounts
associated with our operating results as determined in accordance
with GAAP and may exclude costs that are recurring such as our net
non-operating foreign currency exchange gains or losses. 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 these limitations by providing specific information regarding
the GAAP amounts excluded from our non-GAAP financial measures to
allow investors to evaluate such non-GAAP financial
measures.
Bookings are defined as total contract value (or TCV) of new
contracts, including new contract sales as well as renewals and
expansions of existing contracts. Bookings can vary significantly
quarter to quarter depending in part on the timing of the signing
of a small number of large contracts. Measuring bookings involves
the use of estimates and judgments and there are no third-party
standards or requirements governing the calculation of bookings.
The extent and timing of conversion of bookings to revenues may be
impacted by, among other factors, the types of services and
solutions sold, contract duration, the pace of client spending,
actual volumes of services delivered as compared to the
volumes anticipated at the time of sale, and contract
modifications, including terminations, over the lifetime of a
contract. The majority of our contracts are terminable by the
client on short notice often without penalty, and some without
notice. We do not update our bookings for material subsequent
terminations or reductions related to bookings originally recorded
in prior year periods or foreign currency exchange rate
fluctuations. Information regarding our bookings is not comparable
to, nor should it be substituted for, an analysis of our reported
revenues. However, management believes that it is a key indicator
of potential future revenues and provides a useful indicator of the
volume of our business over time.
COGNIZANT
TECHNOLOGY SOLUTIONS CORPORATION CONSOLIDATED STATEMENTS
OF OPERATIONS (Unaudited) (in millions, except
per share data)
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenues
|
$
|
4,000
|
|
|
$
|
4,141
|
|
|
$
|
8,225
|
|
|
$
|
8,251
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and amortization expense
shown separately below)
|
2,615
|
|
|
2,629
|
|
|
5,362
|
|
|
5,204
|
|
Selling, general and
administrative expenses
|
711
|
|
|
719
|
|
|
1,422
|
|
|
1,590
|
|
Restructuring
charges
|
71
|
|
|
49
|
|
|
126
|
|
|
51
|
|
Depreciation and
amortization expense
|
136
|
|
|
125
|
|
|
269
|
|
|
248
|
|
Income from
operations
|
467
|
|
|
619
|
|
|
1,046
|
|
|
1,158
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
Interest
income
|
37
|
|
|
45
|
|
|
78
|
|
|
93
|
|
Interest
expense
|
(9)
|
|
|
(6)
|
|
|
(15)
|
|
|
(13)
|
|
Foreign currency
exchange gains (losses), net
|
(2)
|
|
|
16
|
|
|
(104)
|
|
|
18
|
|
Other, net
|
2
|
|
|
2
|
|
|
—
|
|
|
3
|
|
Total other income
(expense), net
|
28
|
|
|
57
|
|
|
(41)
|
|
|
101
|
|
Income before
provision for income taxes
|
495
|
|
|
676
|
|
|
1,005
|
|
|
1,259
|
|
Provision for income
taxes
|
(134)
|
|
|
(167)
|
|
|
(276)
|
|
|
(309)
|
|
Income (loss) from
equity method investment
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
Net income
|
$
|
361
|
|
|
$
|
509
|
|
|
$
|
728
|
|
|
$
|
950
|
|
Basic earnings per
share
|
$
|
0.67
|
|
|
$
|
0.90
|
|
|
$
|
1.34
|
|
|
$
|
1.67
|
|
Diluted earnings per
share
|
$
|
0.67
|
|
|
$
|
0.90
|
|
|
$
|
1.34
|
|
|
$
|
1.67
|
|
Weighted average
number of common shares outstanding - Basic
|
541
|
|
|
564
|
|
|
543
|
|
|
569
|
|
Dilutive effect of
shares issuable under stock-based compensation plans
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Weighted average
number of common shares outstanding - Diluted
|
541
|
|
|
564
|
|
|
544
|
|
|
570
|
|
COGNIZANT
TECHNOLOGY SOLUTIONS CORPORATION CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION (Unaudited) (in millions,
except par values)
|
|
|
June
30,
2020
|
|
December 31,
2019
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
4,422
|
|
|
$
|
2,645
|
|
Short-term
investments
|
160
|
|
|
779
|
|
Trade accounts
receivable, net
|
3,208
|
|
|
3,256
|
|
Other current
assets
|
741
|
|
|
931
|
|
Total current
assets
|
8,531
|
|
|
7,611
|
|
Property and
equipment, net
|
1,345
|
|
|
1,309
|
|
Operating lease
assets, net
|
1,002
|
|
|
926
|
|
Goodwill
|
4,391
|
|
|
3,979
|
|
Intangible assets,
net
|
1,026
|
|
|
1,041
|
|
Deferred income tax
assets, net
|
669
|
|
|
585
|
|
Long-term
investments
|
429
|
|
|
17
|
|
Other noncurrent
assets
|
823
|
|
|
736
|
|
Total
assets
|
$
|
18,216
|
|
|
$
|
16,204
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
359
|
|
|
$
|
239
|
|
Deferred
revenue
|
319
|
|
|
313
|
|
Short-term
debt
|
38
|
|
|
38
|
|
Operating lease
liabilities
|
206
|
|
|
202
|
|
Accrued expenses and
other current liabilities
|
2,290
|
|
|
2,191
|
|
Total current
liabilities
|
3,212
|
|
|
2,983
|
|
Deferred revenue,
noncurrent
|
46
|
|
|
23
|
|
Operating lease
liabilities, noncurrent
|
802
|
|
|
745
|
|
Deferred income tax
liabilities, net
|
28
|
|
|
35
|
|
Long-term
debt
|
2,421
|
|
|
700
|
|
Long-term income
taxes payable
|
428
|
|
|
478
|
|
Other noncurrent
liabilities
|
307
|
|
|
218
|
|
Total
liabilities
|
7,244
|
|
|
5,182
|
|
Stockholders'
equity:
|
|
|
|
Preferred stock,
$0.10 par value, 15.0 shares authorized, none issued
|
—
|
|
|
—
|
|
Class A common
stock, $0.01 par value, 1,000 shares authorized, 542 and 548 shares
issued
and outstanding as of June 30, 2020
and December 31, 2019, respectively
|
5
|
|
|
5
|
|
Additional paid-in
capital
|
83
|
|
|
33
|
|
Retained
earnings
|
11,072
|
|
|
11,022
|
|
Accumulated other
comprehensive income (loss)
|
(188)
|
|
|
(38)
|
|
Total stockholders'
equity
|
10,972
|
|
|
11,022
|
|
Total liabilities and
stockholders' equity
|
$
|
18,216
|
|
|
$
|
16,204
|
|
COGNIZANT
TECHNOLOGY SOLUTIONS CORPORATION Reconciliations of
Non-GAAP Financial Measures (Unaudited) (dollars
in millions, except per share amounts)
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
Guidance
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Full Year
2020
|
GAAP income from
operations
|
$
|
467
|
|
|
$
|
619
|
|
|
$
|
1,046
|
|
|
$
|
1,158
|
|
|
|
Realignment
charges(a)
|
12
|
|
|
49
|
|
|
32
|
|
|
51
|
|
|
|
2020 Fit for Growth
Plan restructuring charges(b)
|
59
|
|
|
—
|
|
|
94
|
|
|
—
|
|
|
|
COVID-19
charges(c)
|
25
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
|
Incremental accrual
related to the India Defined
Contribution
Obligation(d)
|
—
|
|
|
—
|
|
|
—
|
|
|
117
|
|
|
|
Adjusted Income From
Operations
|
$
|
563
|
|
|
$
|
668
|
|
|
$
|
1,203
|
|
|
$
|
1,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
margin
|
11.7
|
%
|
|
14.9
|
%
|
|
12.7
|
%
|
|
14.0
|
%
|
|
|
Realignment
charges
|
0.3
|
|
|
1.2
|
|
|
0.4
|
|
|
0.7
|
|
|
0.2%
|
2020 Fit for Growth
Plan restructuring charges
|
1.5
|
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
0.7% -
0.9%
|
COVID-19
charges
|
0.6
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.2% -
0.3%
|
Incremental accrual
related to the India Defined
Contribution Obligation
|
—
|
|
|
—
|
|
|
—
|
|
|
1.4
|
|
|
(d)
|
Adjusted Operating
Margin
|
14.1
|
%
|
|
16.1
|
%
|
|
14.6
|
%
|
|
16.1
|
%
|
|
approximately
15.0%
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted earnings
per share
|
$
|
0.67
|
|
|
$
|
0.90
|
|
|
$
|
1.34
|
|
|
$
|
1.67
|
|
|
|
Effect of above
adjustments, pre-tax
|
0.18
|
|
|
0.09
|
|
|
0.29
|
|
|
0.29
|
|
|
(a), (b), (c),
(d)
|
Non-operating foreign
currency exchange
(gains) losses,
pre-tax(e)
|
—
|
|
|
(0.03)
|
|
|
0.19
|
|
|
(0.03)
|
|
|
(e)
|
Tax effect of above
adjustments (f)
|
(0.03)
|
|
|
(0.02)
|
|
|
(0.04)
|
|
|
(0.08)
|
|
|
(a), (b), (c), (d),
(e)
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.82
|
|
|
$
|
0.94
|
|
|
$
|
1.78
|
|
|
$
|
1.85
|
|
|
$3.48 -
$3.58
|
|
|
Notes:
|
|
(a)
|
Realignment charges
include:
|
|
|
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(in
millions)
|
Executive transition
costs
|
$
|
—
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
22
|
|
Employee separation
costs
|
—
|
|
|
27
|
|
|
—
|
|
|
27
|
|
Employee retention
costs
|
9
|
|
|
—
|
|
|
15
|
|
|
—
|
|
Professional
fees
|
3
|
|
|
2
|
|
|
17
|
|
|
2
|
|
Total realignment
charges
|
$
|
12
|
|
|
$
|
49
|
|
|
$
|
32
|
|
|
$
|
51
|
|
Executive transition costs are costs associated with our CEO
transition and the departure of our President in 2019. The total
costs related to the realignment program are reported in
"Restructuring charges" in our unaudited consolidated statements of
operations. We do not expect to incur significant realignment
charges during the remainder of 2020. Our guidance anticipates
pre-tax charges in the range of $0.06
to $0.07 per diluted share for the
full year 2020. The tax effect of these charges is expected to be
approximately $0.02 per diluted share
for the full year 2020.
(b) 2020 Fit
for Growth Plan restructuring charges
include:
|
|
|
Three Months
Ended
June 30,
2020
|
|
Six Months
Ended
June 30,
2020
|
|
(in
millions)
|
Employee separation
costs
|
$
|
39
|
|
|
$
|
65
|
|
Employee retention
costs
|
1
|
|
|
5
|
|
Facility exit costs
and other charges
|
19
|
|
|
24
|
|
Total 2020 Fit For
Growth charges
|
$
|
59
|
|
|
$
|
94
|
|
|
|
|
These charges include
$8 million and $19 million for the three and six months ended June
30, 2020, respectively, of costs
incurred related to our exit from certain content-related services.
The total costs related to the restructuring are reported in
"Restructuring charges" in our unaudited consolidated statements of
operations. Our guidance anticipates pre-tax charges
in the range of $0.22 to $0.28 per diluted share for the full year
2020. The tax effect of these charges is expected to be in
the range of $0.06 to $0.07 per diluted share for the full year
2020.
|
|
|
(c)
|
During the
three and six months ended June 30, 2020, we incurred
costs in response to the COVID-19 pandemic including
a one-time bonus to our employees at the designation of associate
and below in both India and the Philippines, costs to enable
our employees to work remotely and provide medical staff and extra
cleaning services for our facilities, partially offset by
benefits
provided to us by certain jurisdictions in which we operate. Most
of the costs related to the pandemic are reported in "Cost of
revenues" in our unaudited consolidated statements of operations.
Our guidance anticipates pre-tax charges in the range of $0.07
to $0.09 per diluted share for the full year 2020. The tax effect
of these charges is expected to be approximately $0.02 per
diluted
share for the full year 2020.
|
|
|
(d)
|
During the first
quarter of 2019, a ruling of the Supreme Court of India
interpreting certain statutory defined contribution obligations
of employees and employers (the "India Defined Contribution
Obligation") altered historical understandings of such obligations,
extending
them to cover additional portions of the employee's income. As a
result, the ongoing contributions of our affected employees and
the
Company have increased. In the first quarter of 2019, we accrued
$117 million with respect to prior periods, assuming retroactive
application
of the Supreme Court's ruling. There is significant uncertainty as
to how the liability should be calculated as it is impacted by
multiple variables,
including the period of assessment, the application with respect to
certain current and former employees and whether interest and
penalties
may be assessed. Since the ruling, a variety of trade associations
and industry groups have advocated to the Indian
government, highlighting
the harm to the information technology sector, other industries and
job growth in India that would result from a retroactive
application of the ruling.
It is possible that the Indian government will review the matter
and there is a substantial question as to whether the Indian
government will apply
the Supreme Court's ruling on a retroactive basis. As such, the
ultimate amount of our obligation may be materially different from
the amount accrued.
The incremental accrual related to the India Defined Contribution
Obligation is reported in "Selling, general and administrative
expenses" in our
unaudited consolidated statement of operations.
|
|
|
(e)
|
Non-operating
foreign currency exchange gains and losses, inclusive of gains and
losses on related foreign exchange forward contracts not
designated as hedging instruments for accounting purposes, are
reported in "Foreign currency exchange gains (losses), net" in our
unaudited
consolidated statements of operations. Non-operating foreign
currency exchange gains and losses are subject to high variability
and low visibility
and therefore cannot be provided on a forward-looking basis without
unreasonable efforts.
|
|
|
(f)
|
Presented below are
the tax impacts of each of our non-GAAP adjustments to pre-tax
income:
|
|
Three Months
Ended
June 30
|
|
Six Months
Ended
June 30
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(in
millions)
|
|
(in
millions)
|
Non-GAAP income tax
benefit (expense) related to:
|
|
|
|
|
|
|
|
Realignment
charges
|
$
|
3
|
|
|
$
|
13
|
|
|
$
|
8
|
|
|
$
|
13
|
|
2020 Fit For Growth
plan restructuring charges
|
16
|
|
|
—
|
|
|
25
|
|
|
—
|
|
COVID-19
charges
|
6
|
|
|
—
|
|
|
8
|
|
|
—
|
|
Incremental accrual
related to the India Defined Contribution Obligation
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
Foreign currency
exchange gains and losses
|
(8)
|
|
|
—
|
|
|
(18)
|
|
|
1
|
|
The effective tax rate related to each of our non-GAAP
adjustments varies depending on the jurisdictions in which such
income and expenses are generated and the statutory rates
applicable in those jurisdictions.
Reconciliations of
net cash (in millions)
|
|
|
|
June 30,
2020
|
|
December 31,
2019
|
Cash and cash
equivalents
|
|
$
|
4,422
|
|
|
$
|
2,645
|
|
Short-term
investments(a)
|
|
160
|
|
|
779
|
|
Less:
|
|
|
|
|
Short-term
debt
|
|
38
|
|
|
38
|
|
Long-term
debt
|
|
2,421
|
|
|
700
|
|
Net cash
|
|
$
|
2,123
|
|
|
$
|
2,686
|
|
|
Notes:
|
|
(a)
|
As of
December 31, 2019, $414 million in restricted time deposits
were classified as short-term investments. As of June 30,
2020, the restricted deposits in the amount of $391 million were
reclassified to long-term investments and therefore are not
included in net cash as of that date.
|
The above tables serve to reconcile the Non-GAAP financial
measures to the most directly comparable GAAP measures. Please
refer to the "About Non-GAAP Financial Measures" section of our
press release for further information on the use of these Non-GAAP
measures.
COGNIZANT
TECHNOLOGY SOLUTIONS CORPORATION Schedule of Supplemental
Information (Unaudited) (dollars in
millions)
|
|
|
Three Months Ended
June 30, 2020
|
|
|
|
|
|
Year over
Year
|
|
$
|
|
% of
total
|
|
%
Change
|
|
Constant
Currency %
Change (a)
|
Revenues by
Segment:
|
|
|
|
|
|
|
|
Financial
Services
|
$
|
1,396
|
|
|
34.9
|
%
|
|
(5.2)
|
%
|
|
(4.3)
|
%
|
Healthcare
|
1,157
|
|
|
28.9
|
%
|
|
2.0
|
%
|
|
2.2
|
%
|
Products and
Resources
|
867
|
|
|
21.7
|
%
|
|
(6.5)
|
%
|
|
(5.0)
|
%
|
Communications, Media
and Technology
|
580
|
|
|
14.5
|
%
|
|
(4.4)
|
%
|
|
(3.2)
|
%
|
Total
Revenues
|
$
|
4,000
|
|
|
|
|
(3.4)
|
%
|
|
(2.5)
|
%
|
|
|
|
|
|
|
|
|
Revenues by
Geography:
|
|
|
|
|
|
|
|
North
America
|
$
|
3,006
|
|
|
75.2
|
%
|
|
(4.2)
|
%
|
|
(4.1)
|
%
|
United
Kingdom
|
314
|
|
|
7.9
|
%
|
|
(2.5)
|
%
|
|
0.2
|
%
|
Continental
Europe
|
419
|
|
|
10.5
|
%
|
|
(1.9)
|
%
|
|
0.2
|
%
|
Europe -
Total
|
733
|
|
|
18.3
|
%
|
|
(2.1)
|
%
|
|
0.2
|
%
|
Rest of
World
|
261
|
|
|
6.5
|
%
|
|
3.2
|
%
|
|
9.7
|
%
|
Total
Revenues
|
$
|
4,000
|
|
|
|
|
(3.4)
|
%
|
|
(2.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2020
|
|
|
|
|
|
Year over
Year
|
|
$
|
|
% of
total
|
|
%
Change
|
|
Constant
Currency %
Change (a)
|
Revenues by
Segment:
|
|
|
|
|
|
|
|
Financial
Services
|
$
|
2,847
|
|
|
34.6
|
%
|
|
(2.1)
|
%
|
|
(1.3)
|
%
|
Healthcare
|
2,351
|
|
|
28.6
|
%
|
|
2.3
|
%
|
|
2.4
|
%
|
Products and
Resources
|
1,821
|
|
|
22.1
|
%
|
|
(1.1)
|
%
|
|
0.1
|
%
|
Communications, Media
and Technology
|
1,206
|
|
|
14.7
|
%
|
|
0.3
|
%
|
|
1.5
|
%
|
Total
Revenues
|
$
|
8,225
|
|
|
|
|
(0.3)
|
%
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
Revenues by
Geography:
|
|
|
|
|
|
|
|
North
America
|
$
|
6,196
|
|
|
75.3
|
%
|
|
(1.1)
|
%
|
|
(1.0)
|
%
|
United
Kingdom
|
651
|
|
|
7.9
|
%
|
|
—
|
%
|
|
2.2
|
%
|
Continental
Europe
|
856
|
|
|
10.4
|
%
|
|
2.9
|
%
|
|
5.2
|
%
|
Europe -
Total
|
1,507
|
|
|
18.3
|
%
|
|
1.6
|
%
|
|
3.9
|
%
|
Rest of
World
|
522
|
|
|
6.4
|
%
|
|
3.2
|
%
|
|
8.6
|
%
|
Total
Revenues
|
$
|
8,225
|
|
|
|
|
(0.3)
|
%
|
|
0.5
|
%
|
Employee
Metrics:
|
|
June 30,
2020
|
|
June 30,
2019
|
Number of
employees
|
|
281,200
|
|
|
288,200
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
(a)
|
Constant currency
revenue growth is not a measurement of financial performance
prepared in accordance with GAAP. See
"About Non-GAAP Financial Measures" for more
information.
|
COGNIZANT
TECHNOLOGY SOLUTIONS CORPORATION CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) (in
millions)
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net income
|
$
|
361
|
|
|
$
|
509
|
|
|
$
|
728
|
|
|
$
|
950
|
|
Adjustments for
non-cash income and expenses
|
171
|
|
|
30
|
|
|
487
|
|
|
180
|
|
Changes in assets and
liabilities
|
447
|
|
|
36
|
|
|
261
|
|
|
(286)
|
|
Net cash provided by
operating activities
|
979
|
|
|
575
|
|
|
1,476
|
|
|
844
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
(93)
|
|
|
(96)
|
|
|
(205)
|
|
|
(202)
|
|
Net sales of
investments
|
237
|
|
|
1,398
|
|
|
163
|
|
|
2,057
|
|
Payments for business
combinations, net of cash acquired
|
(403)
|
|
|
(35)
|
|
|
(489)
|
|
|
(232)
|
|
Net cash (used in)
provided by investing activities
|
(259)
|
|
|
1,267
|
|
|
(531)
|
|
|
1,623
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Repurchases of common
stock
|
(74)
|
|
|
(1,054)
|
|
|
(585)
|
|
|
(1,825)
|
|
Repayment of term loan
borrowings and finance lease and earnout obligations
|
(12)
|
|
|
(7)
|
|
|
(25)
|
|
|
(9)
|
|
Borrowings under the
revolving credit facility
|
—
|
|
|
—
|
|
|
1,740
|
|
|
—
|
|
Dividends
paid
|
(121)
|
|
|
(116)
|
|
|
(242)
|
|
|
(232)
|
|
Issuance of common
stock under stock-based compensation plans
|
36
|
|
|
40
|
|
|
76
|
|
|
90
|
|
Net cash (used in)
provided by financing activities
|
(171)
|
|
|
(1,137)
|
|
|
964
|
|
|
(1,976)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(13)
|
|
|
5
|
|
|
(132)
|
|
|
8
|
|
Increase in cash and
cash equivalents
|
536
|
|
|
710
|
|
|
1,777
|
|
|
499
|
|
Cash and cash
equivalents, beginning of period
|
3,886
|
|
|
950
|
|
|
2,645
|
|
|
1,161
|
|
Cash and cash
equivalents, end of period
|
$
|
4,422
|
|
|
$
|
1,660
|
|
|
$
|
4,422
|
|
|
$
|
1,660
|
|
SUPPLEMENTAL CASH
FLOW INFORMATION (in millions)
|
|
|
|
Three Months
Ended
|
Stock Repurchases
under Board of Directors' authorized stock repurchase
program:
|
|
June 30,
2020
|
|
June 30,
2019
|
Number of shares
repurchased
|
|
0.9
|
|
|
18.7
|
|
|
|
|
|
|
Remaining authorized
balance
|
|
$
|
1,818
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Free Cash Flow Non-GAAP Financial Measure (in
millions)
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net cash provided by
operating activities
|
$
|
979
|
|
|
$
|
575
|
|
|
$
|
1,476
|
|
|
$
|
844
|
|
Purchases of property
and equipment
|
(93)
|
|
|
(96)
|
|
|
(205)
|
|
|
(202)
|
|
Free cash
flow
|
$
|
886
|
|
|
$
|
479
|
|
|
$
|
1,271
|
|
|
$
|
642
|
|
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SOURCE Cognizant