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Cognizant Reports Fourth Quarter And Full Year 2012 Results

February 7, 2013

TEANECK, N.J., Feb. 7, 2013 /PRNewswire/ — Cognizant Technology Solutions Corporation (NASDAQ: CTSH), a leading provider of information technology, consulting, and business process outsourcing services, today announced its fourth quarter and full year 2012 financial results.

Highlights – Fourth Quarter 2012

  • Quarterly revenue rose to $1.95 billion, up 17.1% from the year-ago quarter and 3.0% sequentially.
  • Quarterly diluted EPS on a GAAP basis was $0.92, compared to $0.78 in the year-ago quarter.
  • Quarterly diluted EPS on a non-GAAP basis, which excludes stock-based compensation expense, was $0.99, compared to $0.84 in the year-ago quarter.
  • Net headcount addition for the quarter exceeded 6,300; year-end headcount was approximately 156,700.

Revenue for the fourth quarter of 2012 rose to $1.95 billion, up 17.1% from $1.66 billion in the fourth quarter of 2011. GAAP net income was $278.8 million, or $0.92 per diluted share, compared to $240.1 million, or $0.78 per diluted share, in the fourth quarter of 2011. Diluted EPS on a non-GAAP basis was $0.99. GAAP operating margin for the quarter was 18.3%. Excluding stock-based compensation expense of $27.4 million, non-GAAP operating margin was 19.7%, within 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.

“We are pleased to once again deliver industry-leading revenue growth in 2012,” said Francisco D’Souza, Chief Executive Officer of Cognizant. “As we look to 2013, it is clear that secular industry shifts, new technology architectures, virtual business models and changing demographics are forcing clients to re-examine how they operate. Increasingly, clients are finding incremental levels of performance inadequate and are challenging the status quo to find ways to maintain their market leadership.”

“When confronting their business challenges, clients not only look to Cognizant to help them run their operations better, but increasingly turn to us to help them run their operations differently in order to differentiate themselves in the market and drive topline growth,” said Gordon Coburn, President of Cognizant. “Given our strong client relationships and our deep consulting and domain expertise, Cognizant is uniquely positioned to address clients’ dual mandate of ‘running better’ and ‘running different’ from one global platform.”

Highlights – Full Year 2012

  • Revenue increased to $7.35 billion, up 20.0% from the previous year.
  • Diluted EPS on a GAAP basis was $3.44, compared to $2.85 in the previous year.
  • Diluted EPS on a non-GAAP basis, which excludes stock-based compensation expense, was $3.70, compared to $3.07 in the previous year.
  • GAAP and non-GAAP diluted EPS includes the impact of $0.05 in net non-operating foreign currency exchange loss.

Revenue for 2012 increased to $7.35 billion, up 20.0% from $6.12 billion for 2011. GAAP net income was $1.05 billion, or $3.44 per diluted share, compared to $883.6 million, or $2.85 per diluted share, for 2011. Diluted EPS on a non-GAAP basis was $3.70. GAAP operating margin was 18.5%. Excluding stock-based compensation expense of $107.4 million, non-GAAP operating margin was 20.0%. Reconciliations of these non-GAAP financial measures to GAAP operating results and diluted EPS are included in the table at the end of this release.

First Quarter & Full Year 2013 Outlook

Starting in 2013, our reported non-GAAP financial measures will exclude acquisition-related charges, including amortization of purchased intangibles, as well as stock-based compensation expense. This change is not reflected in our reported 2012 quarterly or annual results above, but is reflected in our 2013 non-GAAP guidance below.

The Company is providing the following guidance:

  • First quarter 2013 revenue anticipated to be at least $2.0 billion.
  • First quarter 2013 diluted EPS expected to be $0.92 on a GAAP basis and $1.01 on a non-GAAP basis.
  • Full year 2013 revenue expected to be at least $8.60 billion, up at least 17.0% compared to 2012. This guidance includes anticipated acquisition revenue of $90 million.
  • Full year 2013 diluted EPS expected to be at least $3.95 on a GAAP basis, and $4.31 on a non-GAAP basis.
  • EPS guidance excludes the impact of any non-operating foreign currency exchange gains or losses.

“Generating broad-based, industry leading growth of 20% within a tough demand environment of 2012 is a testament to the strength of our business model,” said Karen McLoughlin, Chief Financial Officer. “Furthermore, 2012 was a strong year of cash generation. Our cash and short-term investments balances grew by $430 million during the year, after covering over $480 million of share repurchases.”

Conference Call

Cognizant will host a conference call February 7, 2013 at 8:00 a.m. (Eastern) to discuss the Company’s quarterly and full year 2012 results. To listen to the conference call, please dial (877) 810-9510 (domestically) and (201) 493-6778 (internationally) and provide the following conference passcode: “Cognizant Call.”

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 (877) 660-6853 for domestic callers or (201) 612-7415 for international callers and entering 407306 from two hours after the end of the call until 11:59 p.m. (Eastern) on Thursday, February 21, 2013. 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 156,700 employees as of December 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 our financial results 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 should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of Cognizant’s GAAP financial measures to the corresponding non-GAAP measures should be carefully evaluated.

Historically, we sought to manage the company to a targeted operating margin, excluding stock-based compensation costs, of 19% to 20% of revenues. In 2013, we will continue to seek to manage the company to the same targeted operating margin, but will exclude acquisition-related charges, including amortization of purchased intangible assets, in addition to stock-based compensation expense, in setting our internal operating targets. Accordingly, in 2013, our aforementioned non-GAAP measures will also exclude acquisition-related charges. Management believes providing investors with an operating view consistent with how it manages the company provides enhanced transparency into the operating results of the company. For our internal management reporting and budgeting purposes, we use non-GAAP financial statements 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. Therefore, it is our belief that the use of non-GAAP financial measures provides a meaningful measure for investors to evaluate our financial performance. 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 measures versus financial measures calculated in accordance with GAAP is that non-GAAP measures do not reflect all of the amounts associated with our operating results as determined in accordance with GAAP and exclude costs that are recurring, namely stock-based compensation and acquisition-related charges, including amortization of purchased intangibles. 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 to allow investors to evaluate 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 data)

                             Three Months Ended                         Twelve Months Ended
                                December 31,                               December 31,
                                ------------                               ------------
                                                  2012                                       2011                      2012        2011
                                                  ----                                       ----                      ----        ----

    Revenues                                $1,948,215                                 $1,663,707                $7,346,472  $6,121,156

    Operating expenses:
    Cost of revenues
     (exclusive of
     depreciation and
     amortization expense
     shown separately below)                 1,150,934                                    970,689                 4,278,241   3,538,622
    Selling, general and
     administrative expenses                   401,746                                    352,456                 1,557,646   1,328,665
    Depreciation and
     amortization expense                       39,282                                     32,419                   149,089     117,401
                                                ------                                     ------                   -------     -------
    Income from operations                     356,253                                    308,143                 1,361,496   1,136,468
                                               -------                                    -------                 ---------   ---------

    Other income (expense),
     net:
    Interest income                             11,417                                     10,868                    44,514      39,249
    Other, net                                  (1,826)                                     4,069                   (18,414)     (6,568)
    Total other income
     (expense), net                              9,591                                     14,937                    26,100      32,681
                                                 -----                                     ------                    ------      ------

    Income before provision
     for income taxes                          365,844                                    323,080                 1,387,596   1,169,149

    Provision for income
     taxes                                      87,065                                     82,953                   336,333     285,531

    Net income                                $278,779                                   $240,127                $1,051,263    $883,618
                                              ========                                   ========                ==========    ========

    Basic earnings per share                     $0.93                                      $0.79                     $3.49       $2.91
                                                 =====                                      =====                     =====       =====

    Diluted earnings per
     share                                       $0.92                                      $0.78                     $3.44       $2.85
                                                 =====                                      =====                     =====       =====

    Weighted average number
     of common shares
     outstanding -Basic
                                               300,452                                    302,354                   301,291     303,277
                                               =======                                    =======                   =======     =======

    Weighted average number
     of common shares
     outstanding -Diluted
                                               303,777                                    308,827                   305,861     310,351
                                               =======                                    =======                   =======     =======

                                               COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
                                   CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
                                                             (In thousands)

                                                             December 31,                              December 31,
                                                             ------------                              ------------
                                                                              2012                                      2011
                                                                              ----                                      ----

    Assets

    Current Assets

      Cash and cash
       equivalents                                                      $1,570,077                                $1,310,906

      Short-term investments                                             1,293,681                                 1,121,358

      Trade accounts
       receivable, net of
       allowances of $25,816
      and $24,658,
       respectively                                                      1,345,661                                 1,179,043

      Unbilled accounts
       receivable                                                          183,085                                   139,627

      Deferred income tax
       assets, net                                                         201,894                                   109,042

      Other current assets                                                 219,896                                   225,530

               Total Current Assets                                      4,814,294                                 4,085,506

    Property and equipment,
     net                                                                   971,486                                   758,034

    Goodwill                                                               309,185                                   288,772

    Intangible assets, net                                                  87,475                                    97,616

    Deferred income tax
     assets, net                                                           178,824                                   164,192

    Other noncurrent assets                                                160,307                                   113,813

    Total Assets                                                        $6,521,571                                $5,507,933
                                                                        ==========                                ==========

    Liabilities and
     Stockholders' Equity

    Current Liabilities

    Accounts payable                                                      $108,707                                   $72,205

    Deferred revenue                                                       149,696                                   105,713

    Accrued expenses and
     other current
     liabilities                                                         1,118,927                                 1,031,787

           Total Current
            Liabilities                                                  1,377,330                                 1,209,705

    Deferred income tax
     liabilities, net                                                        2,777                                     3,339

    Other noncurrent
     liabilities                                                           287,081                                   342,003

    Total Liabilities                                                    1,667,188                                 1,555,047
                                                                         ---------                                 ---------

    Stockholders' Equity                                                 4,854,383                                 3,952,886
                                                                         ---------                                 ---------

    Total Liabilities and
     Stockholders' Equity                                               $6,521,571                                $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 December 31,                                                     Three Months Ended December 31,
                                              -------------------------------                                                     -------------------------------
                                                                      2012                                                2012                                                                         2012                                             2011                                           2011                     2011
                                                    GAAP                                              Adjustments                                                                  Non-GAAP                                              GAAP                                           Adjustments              Non-GAAP
                                                    ----                                              -----------                                                                  --------                                              ----                                           -----------              --------

    Income from
     operations                                                   $356,253                                             $27,444   (a)                                                               $383,697                                         $308,143                                        $25,988  (c)            $334,131
                                                                  ========                                             =======                                                                     ========                                         ========                                        =======                 ========

    Operating
     margin                                                           18.3%                                                1.4%  (a)                                                                   19.7%                                            18.5%                                           1.6% (c)                20.1%
                                                                      ====                                                 ===                                                                         ====                                             ====                                            ===                     ====

    Diluted
     earnings per
     share                                                           $0.92                                               $0.07   (e)                                                                  $0.99                                            $0.78                                          $0.06  (e)               $0.84
                                                                     =====                                               =====                                                                        =====                                            =====                                          =====                    =====

                                           Twelve Months Ended December 31,                                                    Twelve Months Ended December 31,
                                           --------------------------------                                                    --------------------------------
                                                                      2012                                                2012                                                                         2012                                             2011                                           2011                     2011
                                                    GAAP                                              Adjustments                                                                  Non-GAAP                                              GAAP                                           Adjustments              Non-GAAP
                                                    ----                                              -----------                                                                  --------                                              ----                                           -----------              --------

    Income from
     operations                                                 $1,361,496                                            $107,355   (b)                                                             $1,468,851                                       $1,136,468                                        $90,232  (d)          $1,226,700
                                                                ==========                                            ========                                                                   ==========                                       ==========                                        =======               ==========

    Operating
     margin                                                           18.5%                                                1.5%  (b)                                                                   20.0%                                            18.6%                                           1.4% (d)                20.0%
                                                                      ====                                                 ===                                                                         ====                                             ====                                            ===                     ====

    Diluted
     earnings per
     share                                                           $3.44                                               $0.26   (e)                                                                  $3.70                                            $2.85                                          $0.22  (e)               $3.07
                                                                     =====                                               =====                                                                        =====                                            =====                                          =====                    =====

    Notes:
    ------

    (a) Adjustment to exclude stock-based compensation of $27,444 from income from operations of which $4,120 was reported in cost of revenues and $23,324 was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
    -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    (b) Adjustment to exclude stock-based compensation of $107,355 from income from operations of which $16,773 was reported in cost of revenues and $90,582 was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
    ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    (c) Adjustment to exclude stock-based compensation of $25,988 from income from operations of which $4,118 was reported in cost of revenues and $21,870 was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
    -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    (d) Adjustment to exclude stock-based compensation of $90,232 from income from operations of which $15,257 was reported in cost of revenues and $74,975 was reported in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    (e) 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 December 31, 2012
                                    ------------------------------------
                                                                                       Growth %
                                                                                        -------
                                                                         $       % of total      Sequential                Year over Year
                                                                       ---       ----------      ----------                --------------
     Revenue by Segment:
     Financial Services                                           $815,399                 41.9%             3.4%                         19.9%
     Healthcare                                                    500,090                 25.7%             3.5%                          9.4%
     Manufacturing/Retail/Logistics                                408,706                 21.0%             3.1%                         28.2%
     Other                                                         224,020                 11.5%             0.2%                          7.7%
     Total Revenue                                              $1,948,215                                   3.0%                         17.1%
                                                                ==========                                   ===                          ====

     Revenue by Geography:
     North America                                              $1,535,859                 78.8%             2.1%                         15.7%
       United Kingdom                                              206,082                 10.6%             5.4%                         17.1%
       Rest of Europe                                              120,154                  6.2%            12.2%                         22.2%
     Europe - Total                                                326,236                 16.8%             7.8%                         19.0%
     Rest of World                                                  86,120                  4.4%             2.1%                         38.4%
     Total Revenue                                              $1,948,215                                   3.0%                         17.1%
                                                                ==========                                   ===                          ====

                                    Twelve Months Ended December 31, 2012
                                    -------------------------------------
                                                                                                                  Growth %
                                                                                                                   -------
                                                                         $       % of total                                Year over Year
                                                                       ---       ----------                                --------------
     Revenue by Segment:
     Financial Services                                         $3,035,447                 41.3%                                          20.5%
     Healthcare                                                  1,934,898                 26.3%                                          19.3%
     Manufacturing/Retail/Logistics                              1,498,668                 20.4%                                          25.2%
     Other                                                         877,459                 11.9%                                          12.0%
     Total Revenue                                              $7,346,472                                                                20.0%
                                                                ==========                                                                ====

     Revenue by Geography:
     North America                                              $5,836,258                 79.4%                                          21.5%
       United Kingdom                                              764,936                 10.4%                                           9.5%
       Rest of Europe                                              430,554                  5.9%                                           8.0%
     Europe - Total                                              1,195,490                 16.3%                                           8.9%
     Rest of World                                                 314,724                  4.3%                                          42.6%
     Total Revenue                                              $7,346,472                                                                20.0%
                                                                ==========                                                                ====

SOURCE Cognizant Technology Solutions Corporation


Source: PR Newswire