Le Lézard
Classified in: Science and technology, Business
Subjects: ERN, ERP

COGNIZANT REPORTS FIRST QUARTER 2024 RESULTS


TEANECK, N.J., May 1, 2024 /PRNewswire/ -- Cognizant (Nasdaq: CTSH), one of the world's leading professional services companies, today announced its first quarter 2024 financial results.

"During the first quarter, we delivered revenue above the high-end of our guidance range and continued to make progress against our strategic priorities," said Ravi Kumar S, Chief Executive Officer. "We have built upon our large deal momentum of 2023, signing eight deals during the quarter, each with a total contract value of at least $100 million. As our clients navigate an uncertain economic environment, we are adapting to the market dynamics by helping them achieve operational efficiencies, supporting their innovation agendas, and preparing them for AI-driven transformation across their businesses."

$ in billions, except per share data

Q1 2024


Q1 2023

Revenue

$4.76


$4.81

Y/Y Change

(1.1 %)


(0.3 %)

Y/Y Change CC1

(1.2 %)


1.5 %

GAAP Operating Margin

14.6 %


14.6 %

Adjusted Operating Margin1

15.1 %


14.6 %

GAAP Diluted EPS

$1.10


$1.14

Adjusted Diluted EPS1

$1.12


$1.11








1 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. A full reconciliation of Adjusted Operating Margin guidance to the corresponding GAAP measure on a forward-looking basis cannot be provided without unreasonable efforts. See "About Non-GAAP Financial Measures and Performance Metrics" for more information and, as applicable, reconciliations to the most directly comparable GAAP financial measures.

 

"The first quarter's adjusted operating margin of 15.1% expanded by 50 basis points year-over-year, driven by our NextGen program. We remain focused on operational excellence and cost discipline as our clients continue to limit discretionary spending," said Jatin Dalal, Chief Financial Officer. "Our recently completed acquisition of Thirdera, an industry-leading ServiceNow partner, is already opening new growth opportunities and expanding our pipeline. As part of our balanced capital allocation strategy, we continue to seek organic and inorganic investment opportunities to accelerate our growth profile, expand our capabilities, and diversify our portfolio mix."

Bookings

Bookings in the first quarter declined 6% year-over-year. On a trailing-twelve-month basis, bookings grew 1% year-over-year to $25.9 billion, which represented a book-to-bill of approximately 1.3x.

Employee Metrics

Total headcount at the end of the first quarter was 344,400, a decrease of 3,300 from Q4 2023 and a decrease of 7,100 from Q1 2023. Voluntary attrition - Tech Services on a trailing-twelve months basis was 13.1% as compared to 23.1% for the period ended March 31, 2023.

Return of Capital to Shareholders

The Company repurchased 1.4 million shares for $110 million during the first quarter under its share repurchase program. As of March 31, 2024, there was $1.7 billion remaining under the share repurchase authorization. In April 2024, the Company declared a quarterly cash dividend of $0.30 per share for shareholders of record on May 20, 2024. This dividend will be payable on May 29, 2024.

Second Quarter and Full-Year 2024 Guidance2
(all growth rates year-over-year)

 








2 Guidance as of May 1, 2024

3 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. See "About Non-GAAP Financial Measures and Performance Metrics" for more information and a partial reconciliation at the end of this release.

Select Client and Partnership Announcements

Select Analyst Ratings, Company Recognition and Announcements

Conference Call

Cognizant will host a conference call on May 1, 2024, at 5:00 p.m. (Eastern) to discuss the Company's first quarter 2024 results. To listen to the conference call, please dial (877) 810-9510 (domestic) or +1 (201) 493-6778 (international) 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 +1 (201) 612-7415 (internationally) and enter 13744823 beginning two hours after the end of the call until 11:59 p.m. (Eastern) on Tuesday, May 15, 2024. The replay will also be available at Cognizant's website www.cognizant.com for 60 days following the call.

About Cognizant
Cognizant (Nasdaq: CTSH) engineers modern businesses. We help our clients modernize technology, reimagine processes and transform experiences so they can stay ahead in our fast-changing world. Together, we're improving everyday life. See how at www.cognizant.com or @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 is 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 strategy, strategic partnerships and collaborations, competitive position and opportunities in the marketplace, investment in and growth of our business, the pace and magnitude of change and client needs related to generative AI, the effectiveness of our recruiting and talent efforts and related costs, labor market trends, the anticipated amount of capital to be returned to shareholders 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, the competitive and rapidly changing nature of the markets we compete in, the competitive marketplace for talent and its impact on employee recruitment and retention, our ability to successfully implement our NextGen program and the amount of costs, timing of incurring costs and ultimate benefits of such plans, our ability to successfully use AI-based technologies, legal, reputational and financial risks resulting from cyberattacks, 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 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

Non-GAAP Financial Measures
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 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 and Adjusted Income from Operations excludes unusual items, such as NextGen charges. Our non-GAAP financial measure Adjusted Diluted EPS excludes unusual items, such as NextGen charges, 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 excluded from Adjusted Diluted EPS 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. Accordingly, we believe that the presentation of our non-GAAP measures, which exclude certain costs, 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.

Performance Metrics
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. Our book-to-bill ratio is defined as bookings for the trailing twelve months divided by revenue for the same period. Measuring bookings involves the use of estimates and judgments and there are no independent 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 subsequent terminations, reductions 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:

Tyler Scott




Jeff DeMarrais

VP, Investor Relations




VP, Corporate Communications

+1 551-220-8246




+1 475-223-2298

[email protected]




[email protected]

- tables to follow -

 

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



 (in millions, except per share data)

Three Months Ended
March 31,


2024


2023

 Revenues

$     4,760


$     4,812

 Operating expenses:




Cost of revenues (exclusive of depreciation and amortization expense shown separately below)

3,146


3,143

 Selling, general and administrative expenses

765


835

 Restructuring charges

23


?

 Depreciation and amortization expense

131


132

 Income from operations

695


702

 Other income (expense), net:




 Interest income

30


30

 Interest expense

(11)


(9)

 Foreign currency exchange gains (losses), net

6


12

 Other, net

2


3

 Total other income (expense), net

27


36

 Income before provision for income taxes

722


738

 Provision for income taxes

(179)


(158)

 Income (loss) from equity method investment

3


?

Net income

$        546


$        580

 Basic earnings per share

$       1.10


$       1.14

 Diluted earnings per share

$       1.10


$       1.14

Weighted average number of common shares outstanding - Basic

497


509

Dilutive effect of shares issuable under stock-based compensation plans

1


?

Weighted average number of common shares outstanding - Diluted

498


509

 

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)





(in millions, except par values)

March 31,
2024


December 31,
2023

Assets




Current assets:




Cash and cash equivalents

$          2,231


$          2,621

Short-term investments

12


14

Trade accounts receivable, net

3,822


3,849

Other current assets

1,021


1,022

Total current assets

7,086


7,506

Property and equipment, net

1,036


1,048

Operating lease assets, net

589


611

Goodwill

6,393


6,085

Intangible assets, net

1,171


1,149

Deferred income tax assets, net

993


993

Long-term investments

83


435

Other noncurrent assets

1,057


656

Total assets

$       18,408


$       18,483

Liabilities and Stockholders' Equity




Current liabilities:




Accounts payable

$             291


$             337

Deferred revenue

449


385

Short-term debt

33


33

Operating lease liabilities

143


153

Accrued expenses and other current liabilities

2,096


2,425

Total current liabilities

3,012


3,333

Deferred revenue, noncurrent

36


42

Operating lease liabilities, noncurrent

503


523

Deferred income tax liabilities, net

201


226

Long-term debt

598


606

Long-term income taxes payable

157


157

Other noncurrent liabilities

411


369

Total liabilities

4,918


5,256

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, 497 and 498 shares issued
and outstanding as of December 31, 2023 and 2022, respectively

5


5

Additional paid-in capital

20


15

Retained earnings

13,621


13,301

Accumulated other comprehensive income (loss)

(156)


(94)

Total stockholders' equity

13,490


13,227

Total liabilities and stockholders' equity

$       18,408


$       18,483

 

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

Reconciliations of Non-GAAP Financial Measures

(Unaudited)





 (dollars in millions, except per share amounts)

Three Months Ended
March 31,


Guidance


2024


2023


Full Year 2024 (1)

GAAP income from operations

$    695


$    702



NextGen charges(a)

23


?



Adjusted Income From Operations

$    718


$    702









GAAP operating margin

14.6 %


14.6 %



NextGen charges

0.5


?


0.3% - 0.4%

Adjusted Operating Margin

15.1 %


14.6 %


15.3% - 15.5%







GAAP diluted earnings per share

$   1.10


$   1.14



Effect of NextGen charges, pre-tax

0.05


?


0.14

Non-operating foreign currency exchange (gains) losses, pre-tax(b)

(0.01)


(0.02)


(b)

Tax effect of above adjustments(c)

(0.02)


(0.01)


(a) (b)

Adjusted Diluted Earnings Per Share

$   1.12


$   1.11


$4.50 - $4.68


(1) A full reconciliation of Adjusted Operating Margin and Adjusted Diluted Earnings Per Share 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, and such adjustments may be significant.


Notes:

(a) 

NextGen charges for the three months ended March 31, 2024 include $8 million of employee separation costs, $14 million of facility exit costs and $1 million of third party and other costs. We expect to incur approximately $70 million of costs in 2024 in connection with the NextGen program. The total costs related to the NextGen program are reported in "Restructuring charges" in our unaudited consolidated statements of operations. Our guidance anticipates pre-tax charges of approximately $0.14 per diluted share for the full year 2024. The tax effect of these charges is expected to be approximately $0.04 per diluted share for the full year 2024.

(b)

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.

(c) 

Presented below are the tax impacts of our non-GAAP adjustment to pre-tax income for the: 



(in millions)

Three Months Ended
March 31,


2024


2023

Non-GAAP income tax benefit (expense) related to:




NextGen charges

$            5


$          ?

Foreign currency exchange gains and losses

(1)


5

 

The effective tax rate related to non-operating foreign currency exchange gains and losses varies depending on the jurisdictions in which such income and expenses are generated and the statutory rates applicable in those jurisdictions. As such, the income tax effect of non-operating foreign currency exchange gains and losses shown in the above table may not appear proportionate to the net pre-tax foreign currency exchange gains and losses reported in our unaudited consolidated statements of operations.

 

Reconciliations of Net Cash

(Unaudited)






(in millions)


March 31, 2024


December 31, 2023

Cash and unrestricted cash equivalents


$                 2,231


$                 2,621

Short-term investments


12


14

Less:





Short-term debt


33


33

Long-term debt


598


606

Net cash


$                 1,612


$                 1,996

 

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 and Performance Metrics" 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 March 31, 2024






Year over Year


$


 % of total


 % Change


Constant
Currency
% Change (a)

Revenues by Segment:








Financial Services

$         1,385


29.1 %


(6.2) %


(6.5) %

Health Sciences

1,416


29.7 %


(1.2) %


(1.3) %

Products and Resources

1,133


23.8 %


1.3 %


0.9 %

Communications, Media and Technology

826


17.4 %


5.2 %


5.7 %

Total Revenues

$         4,760




(1.1) %


(1.2) %

Revenues by Geography:








North America

$         3,521


74.0 %


(0.7) %


(0.7) %

United Kingdom

456


9.6 %


(4.6) %


(7.7) %

Continental Europe

483


10.1 %


4.8 %


3.1 %

Europe - Total

939


19.7 %


? %


(2.4) %

Rest of World

300


6.3 %


(8.5) %


(3.7) %

Total Revenues

$         4,760




(1.1) %


(1.2) %










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" section of our press release for further information.

 

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



(in millions)

Three Months Ended

March 31,


2024


2023

Cash flows from operating activities:




Net income

$        546


$        580

Adjustments for non-cash income and expenses

181


187

Changes in assets and liabilities

(632)


(38)

Net cash provided by operating activities

95


729

Cash flows from investing activities:




Purchases of property and equipment

(79)


(98)

Net maturities of investments

262


292

Payments for business combinations, net of cash acquired

(421)


(409)

Net cash (used in) investing activities

(238)


(215)

Cash flows from financing activities:




Issuance of common stock under stock-based compensation plans

20


23

Repurchases of common stock

(133)


(222)

Net change in term loan borrowings and earnout and finance lease obligations

(40)


(1)

Dividends paid

(151)


(150)

Net cash (used in) financing activities

(304)


(350)

Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents

(39)


?

(Decrease) increase in cash, cash equivalents and restricted cash and cash equivalents

(486)


164

Cash, cash equivalents and restricted cash and cash equivalents, beginning of period

2,717


2,294

Cash, cash equivalents, end of period

$    2,231


$    2,458

 

SUPPLEMENTAL CASH FLOW INFORMATION



(in millions)

Three Months Ended

March 31,

Stock Repurchases under Board of Directors' authorized stock repurchase program:

2024


2023

Number of shares repurchased

1.4


3.2





Remaining authorized balance as of  March 31, 2024

$       1,667



 

Reconciliation of Free Cash Flow Non-GAAP Financial Measure



(in millions)

Three Months Ended

March 31,


2024


2023

Net cash provided by operating activities

$             95


$           729

Purchases of property and equipment

(79)


(98)

Free cash flow

$             16


$           631

 

SOURCE Cognizant


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