TEANECK, N.J., Feb. 3,
2021 /PRNewswire/ -- Cognizant (Nasdaq: CTSH), one of the
world's leading professional services companies, today announced
its fourth quarter and full year 2020 financial results.
"We accomplished a great deal in the past year whilst keeping
our clients and our talented associates foremost in mind," said
Brian Humphries, Chief Executive
Officer. "Having strengthened our portfolio, and anticipating the
exit of a large financial services engagement, we enter 2021
reinvigorated by our growing commercial momentum, investments in
our future, and our vision to become the preeminent technology
services partner to clients globally."
($ in
billions)
|
|
|
|
|
Impact of
the
|
|
Revenue
|
|
Y/Y
%
|
|
Y/Y CC
%
|
|
Anticipated Exit
from a Customer
Engagement
|
|
Exit of Certain
Content Services
|
Q4 2020
|
$4.2
|
|
|
(2.3)
|
%
|
|
(3.0)
|
%
|
|
(250 bps)
|
|
(120 bps)
|
Full Year
2020
|
$16.7
|
|
|
(0.8)
|
%
|
|
(0.7)
|
%
|
|
(70 bps)
|
|
(110 bps)
|
|
|
Q4
2020
|
|
Impact of
the
Anticipated Exit
from a Customer
Engagement
|
|
Q4
2019
|
|
FY2020
|
|
Impact of the
Anticipated Exit
from a Customer
Engagement
|
|
FY2019
|
GAAP operating
margin
|
|
11.1
|
%
|
|
(300 bps)
|
|
14.6
|
%
|
|
12.7
|
%
|
|
(80 bps)
|
|
14.6
|
%
|
Adjusted Operating
Margin1
|
|
12.3
|
%
|
|
|
17.0
|
%
|
|
14.4
|
%
|
|
|
16.6
|
%
|
GAAP diluted
EPS
|
|
$0.59
|
|
|
($0.25)
|
|
$0.72
|
|
|
$2.57
|
|
|
($0.27)
|
|
$3.29
|
|
Adjusted Diluted
EPS1
|
|
$0.67
|
|
|
|
$1.07
|
|
|
$3.42
|
|
|
|
$3.99
|
|
Fourth Quarter 2020 Performance by Business Segment
Financial Services (31.2% of revenues) revenue decreased
11.1% year-over-year, or 11.4% in constant currency, driven by
declines in both banking and insurance. Growth in regional banks
and retail banking was offset by the anticipated exit from a
customer engagement, which negatively impacted our revenues in this
segment by 730 basis points.
Cognizant made an offer in the fourth quarter to settle and exit
a large customer engagement in the financial services segment in
Continental Europe. The offer includes, among other terms, a
proposed one-time payment and forgiveness of certain receivables.
As a result of this offer, in the fourth quarter of 2020, we
recorded a reduction of revenue of $107
million and additional expenses of $33 million, primarily related to the impairment
of long-lived assets.
Healthcare (30.3% of revenues) revenue grew 4.0%
year-over-year, or 3.3% in constant currency, driven by growth in
both healthcare and life sciences. Performance in healthcare
improved, driven by strength in payer clients and software license
sales. Within life sciences, strength in pharmaceutical clients was
partially offset by weakness in medical device clients.
Products and Resources (22.7% of revenues) revenue
decreased 1.6% year-over-year, or 2.4% 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 (15.8% of revenues)
revenue increased 4.6% year-over-year, or 3.4% in constant
currency, including a negative 790 basis point impact from our exit
of certain content-related services, driven by double-digit
constant currency growth in both technology and communications and
media, which benefited from our recent acquisitions.
"We made good progress on our transformation program, delivering
on our cost optimization initiatives to fund our strategic growth
priorities," said Jan Siegmund,
Chief Financial Officer. "Another strong cash flow quarter supports
our commitment to balanced capital allocation through an
accelerated pace of acquisitions, continued share repurchases and
today's announced dividend increase."
First Quarter and Full Year 2021 Outlook
The Company is providing the following guidance:
- First quarter revenue expected to be $4.34-$4.38
billion, or growth of 2.8-3.8% (1.0-2.0% in CC). This
assumes an estimated positive 180 basis points foreign exchange
impact and a negative 85 basis points impact from the exit of
certain content services
- Full year 2021 revenue expected to be $17.6-$18.1
billion, or growth of 5.5-8.5% (4.0-7.0% in CC). This
assumes an estimated positive 150 basis points foreign exchange
impact and a negative 30 basis points impact from the exit of
certain content services
- Full year 2021 Adjusted Operating Margin2
15.2-16.2%
- Full year 2021 Adjusted Diluted EPS2 expected to be
in the range of $3.90-$4.02
Return of Capital to Shareholders
In December 2020, as part of its
ongoing balanced capital allocation strategy, the Company increased
its share repurchase authorization by $2
billion. In February 2021, the
Company declared a quarterly cash dividend of $0.24 per share, a 9% increase, for shareholders
of record on February 18, 2021. This
dividend will be payable on February 26,
2021.
Conference Call
Cognizant will host a conference call on February 3, 2021,
at 5:00 p.m. (Eastern) to discuss the
Company's fourth quarter and full year 2020 results. To listen to
the conference call, please dial (877) 810-9510 (domestically) or
+1 (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. An earnings supplement will also be
available on the Cognizant website at the time of the conference
call.
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
13715007 from two hours after the end of the call until
11:59 p.m. (Eastern) on
Wednesday, February 17, 2021. The replay will also be
available at Cognizant's website www.cognizant.com for 60 days
following the call.
_____________
|
1 Free
cash flow, constant currency ("CC") revenue growth, Adjusted
Operating Margin and Adjusted Diluted Earnings Per Share ("Adjusted
Diluted EPS") are not measures of financial performance prepared in
accordance with GAAP. 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.
|
2A full
reconciliation of Adjusted Operating Margin and Adjusted Diluted
EPS guidance to the corresponding GAAP measure on a forward-looking
basis cannot be provided without unreasonable efforts, as we are
unable to provide reconciling information with respect to unusual
items. See "About Non-GAAP Financial Measures and Performance
Metrics" for more information and a partial reconciliation at the
end of this release.
|
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 194 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,
opportunities in the marketplace, our cost structure,
investment in and growth of our business, our realignment plans,
the impact of the 2020 Fit for Growth Plan, the likelihood and
potential terms of any settlement of and exit from our referenced
large customer engagement in the financial services segment, 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, 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.
Investor Relations
Contact:
|
|
|
|
Media
Contact:
|
Katie
Royce
|
|
|
|
Jeff
DeMarrais
|
Global Head of
Investor Relations
|
|
|
|
VP, Corporate
Communications
|
201-679-2739
|
|
|
|
475-223-2298
|
Katie.Royce@cognizant.com
|
|
|
|
Jeff.DeMarrais@cognizant.com
|
|
|
|
|
- tables to follow
-
|
|
COGNIZANT
TECHNOLOGY SOLUTIONS CORPORATION
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(in millions, except
per share data)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenues
|
$
|
4,184
|
|
|
$
|
4,284
|
|
|
$
|
16,652
|
|
|
$
|
16,783
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and amortization expense
shown separately below)
|
2,662
|
|
|
2,749
|
|
|
10,671
|
|
|
10,634
|
|
Selling, general and
administrative expenses
|
874
|
|
|
676
|
|
|
3,100
|
|
|
2,972
|
|
Restructuring
charges
|
38
|
|
|
101
|
|
|
215
|
|
|
217
|
|
Depreciation and
amortization expense
|
145
|
|
|
132
|
|
|
552
|
|
|
507
|
|
Income from
operations
|
465
|
|
|
626
|
|
|
2,114
|
|
|
2,453
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
Interest
income
|
14
|
|
|
40
|
|
|
119
|
|
|
176
|
|
Interest
expense
|
(3)
|
|
|
(6)
|
|
|
(24)
|
|
|
(26)
|
|
Foreign currency
exchange gains (losses), net
|
(11)
|
|
|
(36)
|
|
|
(116)
|
|
|
(65)
|
|
Other, net
|
2
|
|
|
2
|
|
|
3
|
|
|
5
|
|
Total other income
(expense), net
|
2
|
|
|
—
|
|
|
(18)
|
|
|
90
|
|
Income before
provision for income taxes
|
467
|
|
|
626
|
|
|
2,096
|
|
|
2,543
|
|
Provision for income
taxes
|
(152)
|
|
|
(174)
|
|
|
(704)
|
|
|
(643)
|
|
Income (loss) from
equity method investment
|
1
|
|
|
(57)
|
|
|
—
|
|
|
(58)
|
|
Net income
|
$
|
316
|
|
|
$
|
395
|
|
|
$
|
1,392
|
|
|
$
|
1,842
|
|
Basic earnings per
share
|
$
|
0.59
|
|
|
$
|
0.72
|
|
|
$
|
2.58
|
|
|
$
|
3.30
|
|
Diluted earnings per
share
|
$
|
0.59
|
|
|
$
|
0.72
|
|
|
$
|
2.57
|
|
|
$
|
3.29
|
|
Weighted average
number of common shares outstanding - Basic
|
533
|
|
|
548
|
|
|
540
|
|
|
559
|
|
Dilutive effect of
shares issuable under stock-based compensation plans
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Weighted average
number of common shares outstanding - Diluted
|
534
|
|
|
548
|
|
|
541
|
|
|
560
|
|
COGNIZANT
TECHNOLOGY SOLUTIONS CORPORATION
|
CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
|
(Unaudited)
|
(in millions, except
par values)
|
|
|
December
31,
2020
|
|
December 31,
2019
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
2,680
|
|
|
$
|
2,645
|
|
Short-term
investments
|
44
|
|
|
779
|
|
Trade accounts
receivable, net
|
3,087
|
|
|
3,256
|
|
Other current
assets
|
1,040
|
|
|
931
|
|
Total current
assets
|
6,851
|
|
|
7,611
|
|
Property and
equipment, net
|
1,251
|
|
|
1,309
|
|
Operating lease
assets, net
|
1,013
|
|
|
926
|
|
Goodwill
|
5,031
|
|
|
3,979
|
|
Intangible assets,
net
|
1,046
|
|
|
1,041
|
|
Deferred income tax
assets, net
|
445
|
|
|
585
|
|
Long-term
investments
|
440
|
|
|
17
|
|
Other noncurrent
assets
|
846
|
|
|
736
|
|
Total
assets
|
$
|
16,923
|
|
|
$
|
16,204
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
389
|
|
|
$
|
239
|
|
Deferred
revenue
|
383
|
|
|
313
|
|
Short-term
debt
|
38
|
|
|
38
|
|
Operating lease
liabilities
|
211
|
|
|
202
|
|
Accrued expenses and
other current liabilities
|
2,519
|
|
|
2,191
|
|
Total current
liabilities
|
3,540
|
|
|
2,983
|
|
Deferred revenue,
noncurrent
|
36
|
|
|
23
|
|
Operating lease
liabilities, noncurrent
|
846
|
|
|
745
|
|
Deferred income tax
liabilities, net
|
206
|
|
|
35
|
|
Long-term
debt
|
663
|
|
|
700
|
|
Long-term income
taxes payable
|
428
|
|
|
478
|
|
Other noncurrent
liabilities
|
368
|
|
|
218
|
|
Total
liabilities
|
6,087
|
|
|
5,182
|
|
Stockholders'
equity:
|
|
|
|
Preferred stock,
$0.10 par value, 15 shares authorized, none issued
|
—
|
|
|
—
|
|
Class A common
stock, $0.01 par value, 1,000 shares authorized, 530 and 548 shares
issued and
outstanding as of December 31, 2020
and 2019, respectively
|
5
|
|
|
5
|
|
Additional paid-in
capital
|
32
|
|
|
33
|
|
Retained
earnings
|
10,689
|
|
|
11,022
|
|
Accumulated other
comprehensive income (loss)
|
110
|
|
|
(38)
|
|
Total stockholders'
equity
|
10,836
|
|
|
11,022
|
|
Total liabilities and
stockholders' equity
|
$
|
16,923
|
|
|
$
|
16,204
|
|
COGNIZANT
TECHNOLOGY SOLUTIONS CORPORATION
|
Reconciliations of
Non-GAAP Financial Measures
|
(Unaudited)
|
(dollars in millions,
except per share amounts)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
Guidance
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Full Year
2021
|
GAAP income from
operations
|
$
|
465
|
|
|
$
|
626
|
|
|
$
|
2,114
|
|
|
$
|
2,453
|
|
|
|
Realignment
charges(a)
|
2
|
|
|
53
|
|
|
42
|
|
|
169
|
|
|
|
2020 Fit for Growth
Plan restructuring charges(b)
|
36
|
|
|
48
|
|
|
173
|
|
|
48
|
|
|
|
COVID-19
charges(c)
|
13
|
|
|
—
|
|
|
65
|
|
|
—
|
|
|
|
Incremental accrual
related to the India Defined
Contribution
Obligation(d)
|
—
|
|
|
—
|
|
|
—
|
|
|
117
|
|
|
|
Adjusted Income From
Operations
|
$
|
516
|
|
|
$
|
727
|
|
|
$
|
2,394
|
|
|
$
|
2,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
margin
|
11.1
|
%
|
|
14.6
|
%
|
|
12.7
|
%
|
|
14.6
|
%
|
|
|
Realignment
charges
|
—
|
|
|
1.3
|
|
|
0.3
|
|
|
1.0
|
|
|
—
|
2020 Fit for Growth
Plan restructuring charges
|
0.9
|
|
|
1.1
|
|
|
1.0
|
|
|
0.3
|
|
|
—
|
COVID-19
charges
|
0.3
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
Incremental accrual
related to the India Defined
Contribution Obligation
|
—
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|
(d)
|
Adjusted Operating
Margin
|
12.3
|
%
|
|
17.0
|
%
|
|
14.4
|
%
|
|
16.6
|
%
|
|
15.2% -
16.2%
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted earnings
per share
|
$
|
0.59
|
|
|
$
|
0.72
|
|
|
$
|
2.57
|
|
|
$
|
3.29
|
|
|
|
Effect of above
adjustments to income from
operations, pre-tax
|
0.10
|
|
|
0.18
|
|
|
0.52
|
|
|
0.60
|
|
|
(d)
|
Non-operating foreign
currency exchange (gains)
losses,
pre-tax(e)
|
0.02
|
|
|
0.08
|
|
|
0.22
|
|
|
0.11
|
|
|
(e)
|
Tax effect of above
adjustments(f)
|
(0.04)
|
|
|
(0.05)
|
|
|
(0.15)
|
|
|
(0.15)
|
|
|
(d),(e)
|
Tax on Accumulated
Indian Earnings(g)
|
—
|
|
|
—
|
|
|
0.26
|
|
|
—
|
|
|
—
|
Effect of the equity
method investment impairment(h)
|
—
|
|
|
0.10
|
|
|
—
|
|
|
0.10
|
|
|
—
|
Effect of the India
Tax Law(i)
|
—
|
|
|
0.04
|
|
|
—
|
|
|
0.04
|
|
|
—
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.67
|
|
|
$
|
1.07
|
|
|
$
|
3.42
|
|
|
$
|
3.99
|
|
|
$3.90 -
$4.02
|
Notes:
|
|
|
(a)
|
Realignment charges
include:
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
(in
millions)
|
|
|
Employee separation
costs
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
64
|
|
|
|
Executive transition
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
|
Employee retention
costs
|
—
|
|
|
27
|
|
|
15
|
|
|
45
|
|
|
|
Professional
fees
|
2
|
|
|
22
|
|
|
27
|
|
|
38
|
|
|
|
Total realignment
charges
|
$
|
2
|
|
|
$
|
53
|
|
|
$
|
42
|
|
|
$
|
169
|
|
|
|
|
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
consolidated statement of operations. We do not expect to incur
additional costs related to this plan.
|
|
|
(b)
|
2020 Fit for Growth
Plan restructuring charges include:
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
Employee separation
costs
|
$
|
24
|
|
|
$
|
45
|
|
|
$
|
127
|
|
|
$
|
45
|
|
|
|
Employee retention
costs
|
—
|
|
|
2
|
|
|
5
|
|
|
2
|
|
|
|
Facility exit costs
and other charges
|
12
|
|
|
1
|
|
|
41
|
|
|
1
|
|
|
|
Total 2020 Fit For
Growth charges
|
$
|
36
|
|
|
$
|
48
|
|
|
$
|
173
|
|
|
$
|
48
|
|
|
|
|
These charges include
$3 million and $23 million for the three months and the year ended
December 31, 2020, respectively, of costs incurred related to
our exit from certain content-related services as compared to $5
million for both the three months and the year ended
December 31, 2019. The total costs related to the 2020 Fit for
Growth Plan are reported in "Restructuring charges" in our
consolidated statements of operations. We do not expect to incur
additional costs related to this plan.
|
|
|
(c)
|
During 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, certain costs to enable
our employees to work remotely, and provide medical staff and extra
cleaning services for our facilities. Most of the costs related to
the pandemic are reported in "Cost of revenues" in our consolidated
statement of operations.
|
|
|
(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 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 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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
(in
millions)
|
|
(in
millions)
|
|
|
Non-GAAP income tax
benefit (expense) related to:
|
|
|
|
|
|
|
|
|
|
Realignment
charges
|
$
|
1
|
|
|
$
|
13
|
|
|
$
|
11
|
|
|
$
|
43
|
|
|
|
2020 Fit For Growth
plan restructuring charges
|
9
|
|
|
13
|
|
|
45
|
|
|
13
|
|
|
|
COVID-19
charges
|
3
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
|
Incremental accrual
related to the India Defined Contribution Obligation
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
|
Foreign currency
exchange gains and losses
|
9
|
|
|
—
|
|
|
6
|
|
|
(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.
|
|
|
(g)
|
During the third
quarter of 2020, after a thorough analysis of the impact of several
changes in tax law on the cost of earnings repatriation and
considering our strategic decision to increase our investments to
accelerate growth in various international markets and
expand our global delivery footprint, we reversed our
indefinite reinvestment assertion on Indian earnings accumulated in
prior years and recorded a $140 million Tax on
Accumulated Indian Earnings. The recorded income tax expense
reflects the India withholding tax on unrepatriated Indian
earnings, which were $5.2 billion as of December 31,
2019, net of applicable U.S. foreign tax credits.
|
|
|
(h)
|
During the fourth
quarter of 2019, we determined that the carrying value of one of
our equity method investments exceeded its fair value and therefore
recorded an impairment charge of $57 million within the caption
"Income (loss) from equity method investments" in our consolidated
statement of operations.
|
|
|
(i)
|
During the fourth
quarter of 2019, the Government of India enacted a new tax regime
("India Tax Law") effective retroactively to April 2019 that
enables domestic companies to elect to be taxed at a lower income
tax rate of 25.17%, as compared to the current income tax rate of
34.94%. Once a company elects into the lower income tax rate, a
company may not benefit from any tax holidays associated with
Special Economic Zones and certain other tax incentives, including
Minimum Alternative Tax credit carryforwards, and may not reverse
its election. As a result of the enactment of the India Tax Law, we
recorded a one-time net income tax expense of $21 million due to
the revaluation to the lower income tax rate of our India net
deferred income tax assets that we expected to reverse after we
expected to elect into the new tax regime.
|
|
|
|
|
|
Reconciliations of
net cash
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
December 31,
2020
|
|
December 31,
2019
|
|
|
Cash and cash
equivalents
|
|
$
|
2,680
|
|
|
$
|
2,645
|
|
|
|
Short-term
investments(a)
|
|
44
|
|
|
779
|
|
|
|
Less:
|
|
|
|
|
|
|
Short-term
debt
|
|
38
|
|
|
38
|
|
|
|
Long-term
debt
|
|
663
|
|
|
700
|
|
|
|
Net cash
|
|
$
|
2,023
|
|
|
$
|
2,686
|
|
|
Notes:
|
|
|
(a)
|
As of
December 31, 2019, $414 million in restricted time deposits
were classified as short-term investments. As of December 31,
2020, the restricted deposits in the amount of $405
million were classified as long-term investments and therefore
were 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. 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
|
Revenue by
Business Segment and Geography
|
(Unaudited)
|
(dollars in
millions)
|
|
|
Three Months Ended
December 31, 2020
|
|
|
|
|
|
Year over
Year
|
|
$
|
|
% of
total
|
|
%
Change
|
|
Constant
Currency %
Change (a)
|
Revenues by
Segment:
|
|
|
|
|
|
|
|
Financial Services
(b)
|
$
|
1,305
|
|
|
31.2
|
%
|
|
(11.1)
|
%
|
|
(11.4)
|
%
|
Healthcare
|
1,270
|
|
|
30.3
|
%
|
|
4.0
|
%
|
|
3.3
|
%
|
Products and
Resources
|
948
|
|
|
22.7
|
%
|
|
(1.6)
|
%
|
|
(2.4)
|
%
|
Communications, Media
and Technology (c)
|
661
|
|
|
15.8
|
%
|
|
4.6
|
%
|
|
3.4
|
%
|
Total
Revenues
|
$
|
4,184
|
|
|
|
|
(2.3)
|
%
|
|
(3.0)
|
%
|
Revenues by
Geography:
|
|
|
|
|
|
|
|
North
America
|
$
|
3,206
|
|
|
76.6
|
%
|
|
(1.1)
|
%
|
|
(1.1)
|
%
|
United
Kingdom
|
339
|
|
|
8.1
|
%
|
|
0.6
|
%
|
|
(2.3)
|
%
|
Continental Europe
(b)
|
360
|
|
|
8.6
|
%
|
|
(16.1)
|
%
|
|
(20.7)
|
%
|
Europe -
Total
|
699
|
|
|
16.7
|
%
|
|
(8.7)
|
%
|
|
(12.6)
|
%
|
Rest of
World
|
279
|
|
|
6.7
|
%
|
|
0.7
|
%
|
|
1.4
|
%
|
Total
Revenues
|
$
|
4,184
|
|
|
|
|
(2.3)
|
%
|
|
(3.0)
|
%
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended December 31, 2020
|
|
|
|
|
|
Year over
Year
|
|
$
|
|
% of
total
|
|
%
Change
|
|
Constant
Currency %
Change (a)
|
Revenues by
Segment:
|
|
|
|
|
|
|
|
Financial Services
(b)
|
$
|
5,621
|
|
|
33.8
|
%
|
|
(4.2)
|
%
|
|
(4.0)
|
%
|
Healthcare
|
4,852
|
|
|
29.1
|
%
|
|
3.3
|
%
|
|
3.1
|
%
|
Products and
Resources
|
3,696
|
|
|
22.2
|
%
|
|
(2.0)
|
%
|
|
(1.7)
|
%
|
Communications, Media
and Technology (c)
|
2,483
|
|
|
14.9
|
%
|
|
1.4
|
%
|
|
1.6
|
%
|
Total
Revenues
|
$
|
16,652
|
|
|
|
|
(0.8)
|
%
|
|
(0.7)
|
%
|
Revenues by
Geography:
|
|
|
|
|
|
|
|
North
America
|
$
|
12,581
|
|
|
75.6
|
%
|
|
(1.1)
|
%
|
|
(1.1)
|
%
|
United
Kingdom
|
1,335
|
|
|
8.0
|
%
|
|
1.7
|
%
|
|
1.0
|
%
|
Continental
Europe (b)
|
1,653
|
|
|
9.9
|
%
|
|
(2.2)
|
%
|
|
(3.3)
|
%
|
Europe -
Total
|
2,988
|
|
|
17.9
|
%
|
|
(0.5)
|
%
|
|
(1.4)
|
%
|
Rest of
World
|
1,083
|
|
|
6.5
|
%
|
|
2.8
|
%
|
|
6.4
|
%
|
Total
Revenues
|
$
|
16,652
|
|
|
|
|
(0.8)
|
%
|
|
(0.7)
|
%
|
Notes:
|
|
|
(a)
|
Constant currency
revenue growth is not a measure of financial performance prepared
in accordance with GAAP. See "About Non-GAAP Financial Measures and
Performance Metrics" for more information.
|
|
|
(b)
|
The anticipated exit
from a customer engagement in the Financial Services segment in
Continental Europe negatively impacted our revenues by $107 million
and $118 million for the quarter and year ended December 31, 2020,
respectively. The impact on Financial Services revenue growth was
730 basis points and 200 basis points for the quarter and year
ended December 31, 2020, respectively. The impact on Continental
Europe revenue growth was 2,490 basis points and 700 basis points
for the quarter and year ended December 31, 2020,
respectively.
|
|
|
(c)
|
Revenues in our
Communications, Media and Technology segment were negatively
impacted by $50 million, or 790 basis points of growth, for the
quarter ended December 31, 2020 and $178 million, or 730 basis
points of growth, for the year ended December 31, 2020 by our exit
of certain content-related services.
|
COGNIZANT
TECHNOLOGY SOLUTIONS CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
(in
millions)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net income
|
$
|
316
|
|
|
$
|
395
|
|
|
$
|
1,392
|
|
|
$
|
1,842
|
|
Adjustments for
non-cash income and expenses
|
108
|
|
|
155
|
|
|
1,094
|
|
|
556
|
|
Changes in assets and
liabilities
|
474
|
|
|
388
|
|
|
813
|
|
|
101
|
|
Net cash provided by
operating activities
|
898
|
|
|
938
|
|
|
3,299
|
|
|
2,499
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
(89)
|
|
|
(93)
|
|
|
(398)
|
|
|
(392)
|
|
Net sales (purchases)
of investments
|
94
|
|
|
(43)
|
|
|
283
|
|
|
2,597
|
|
Payments for business
combinations, net of cash acquired
|
(54)
|
|
|
(239)
|
|
|
(1,123)
|
|
|
(617)
|
|
Net cash (used in)
provided by investing activities
|
(49)
|
|
|
(375)
|
|
|
(1,238)
|
|
|
1,588
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Repurchases of common
stock
|
(788)
|
|
|
(163)
|
|
|
(1,621)
|
|
|
(2,247)
|
|
Repayment of term loan
borrowings and finance lease and earnout
obligations
|
(13)
|
|
|
(12)
|
|
|
(50)
|
|
|
(28)
|
|
Net change in notes
outstanding under the revolving credit facility
|
(1,740)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Dividends
paid
|
(118)
|
|
|
(110)
|
|
|
(480)
|
|
|
(453)
|
|
Issuance of common
stock under stock-based compensation plans
|
33
|
|
|
32
|
|
|
142
|
|
|
159
|
|
Net cash (used in)
financing activities
|
(2,626)
|
|
|
(253)
|
|
|
(2,009)
|
|
|
(2,569)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
21
|
|
|
(8)
|
|
|
(17)
|
|
|
(34)
|
|
(Decrease) increase
in cash and cash equivalents
|
(1,756)
|
|
|
302
|
|
|
35
|
|
|
1,484
|
|
Cash and cash
equivalents, beginning of period
|
4,436
|
|
|
2,343
|
|
|
2,645
|
|
|
1,161
|
|
Cash and cash
equivalents, end of period
|
$
|
2,680
|
|
|
$
|
2,645
|
|
|
$
|
2,680
|
|
|
$
|
2,645
|
|
SUPPLEMENTAL CASH
FLOW INFORMATION
|
(in
millions)
|
|
|
|
Three Months
Ended
|
Stock Repurchases
under Board of Directors' authorized stock repurchase
program:
|
|
December 31,
2020
|
|
December 31,
2019
|
Number of shares
repurchased
|
|
9.6
|
|
|
2.5
|
|
|
|
|
|
|
Remaining authorized
balance
|
|
$
|
2,815
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Free Cash Flow Non-GAAP Financial Measure
|
(in
millions)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net cash provided by
operating activities
|
$
|
898
|
|
|
$
|
938
|
|
|
$
|
3,299
|
|
|
$
|
2,499
|
|
Purchases of property
and equipment
|
(89)
|
|
|
(93)
|
|
|
(398)
|
|
|
(392)
|
|
Free cash
flow
|
$
|
809
|
|
|
$
|
845
|
|
|
$
|
2,901
|
|
|
$
|
2,107
|
|
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SOURCE Cognizant