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*Surpasses $2 Billion Annualized Revenue Run Rate in Second Quarter
*Plans to Invest Additional $100 Million in India Infrastructure Expansion
*Raises Outlook for Full Year 2007
TEANECK, N.J., Aug. 1 /PRNewswire-FirstCall/ -- Cognizant Technology
Solutions Corporation (Nasdaq: CTSH), a leading provider of global IT and
business process outsourcing services, today announced financial results
for the second quarter ended June 30, 2007.
Highlights - Second Quarter 2007
- Quarterly revenue increased to $516.5 million, up 53% from the year-ago
quarter.
- Quarterly diluted EPS on a GAAP basis was $0.54, compared to $0.37 in
the year-ago quarter.
- Quarterly diluted EPS on a non-GAAP basis was $0.59, excluding stock-
based compensation expense of $0.05, compared to $0.41 in the year-ago
quarter.
Revenue for the second quarter increased to $516.5 million, up 12% from
$460.3 million in the first quarter of 2007, and up 53% from $336.8 million
in the second quarter of 2006. GAAP net income was $82.3 million, or $0.54
per diluted share, compared to $55.1 million, or $0.37 per diluted share,
in the second quarter of 2006. GAAP operating margin for the quarter was
17.6%. Excluding stock based compensation expense of $9.5 million, non-GAAP
operating margin was 19.4%, in-line with the Company's targeted 19 to 20%
range. Reconciliations of these non-GAAP financial measures to GAAP
operating results and diluted EPS are included at the end of this release.
"We are very pleased with our strong second quarter financial results,
which further extend our track record of industry-leading growth," said
Francisco D'Souza, President and CEO of Cognizant. "During the quarter, we
surpassed the $2 billion annual revenue run rate, achieving this milestone
just six quarters after surpassing a $1 billion annual revenue rate in the
fourth quarter of 2005. Our rapid achievement of this milestone is a clear
testament to the success of our long-term strategy of reinvesting in our
business to meet the unique needs of our clients and drive value for our
shareholders. Our operating margin for the quarter was within our target
range and reflects our ability to effectively manage our business to offset
macroeconomic headwinds, such as the recent appreciation of the Indian
Rupee, while continuing to expand our proven growth platform around the
world."
D'Souza continued, "Cognizant's second quarter performance was driven
by growth across all dimensions of our business: vertical industry
segments, service-areas and geographies. We increased our strategic
customers by five, including two in Europe, where revenue grew 79%
year-over-year and continues to outpace the Company average. Revenue from
our Financial Services business segment, which includes banking, financial
services and insurance customers, grew over 13% sequentially, and we
experienced strong growth during the quarter from our telecommunications
and healthcare customers. Demand across our broad range of solutions
continued to rise, especially in ERP, Data Warehousing and Business
Intelligence, Testing, and Infrastructure Management. Moving forward, we
believe that the steadfast execution of our strategy and our commitment to
expanding our global platform will continue to translate into strong
financial and operating results."
2007 Outlook - Third Quarter & Full Year
Based on current visibility, the Company is now providing the following
guidance:
- Third quarter 2007 revenue anticipated to be at least $550 million.
- Third quarter 2007 diluted EPS expected to be $0.56 on a GAAP basis,
and $0.62 on a non-GAAP basis, which excludes the impact of stock-based
compensation expense of $0.06.
- Fiscal 2007 revenue now anticipated to grow more than 48% to at least
$2.11 billion.
- Fiscal 2007 diluted EPS expected to be at least $2.20 on a GAAP basis,
and at least $2.40 on a non-GAAP basis, which excludes the impact of
stock-based compensation expense of approximately $0.20.
- Total headcount by end of 2007 expected to be approximately 55,000,
reflecting the Company's plan to increase utilization throughout the
remainder of the year.
"Our second quarter results clearly reflect our ability to effectively
maintain our operating targets while continuing to reinvest in the growth
of the business," said Gordon Coburn, Chief Financial and Operating
Officer. "In order to support our future growth, Cognizant's Board of
Directors has approved plans to make an additional $100 million investment
in our previously announced infrastructure expansion program across India.
The expanded construction plan at our new Chennai campus, located in a
Special Economic Zone ("SEZ"), has now doubled in size with over two
million square feet of capacity currently under construction. We have also
increased the size of the first phase of planned construction of our SEZ
facility in Coimbatore to over 725,000 square feet, and are acquiring
additional property in Hyderabad and Chennai. We expect this investment to
enhance our flexibility to meet the escalating demand for our services from
both new and existing customers around the world. As a result of the strong
demand environment, we are raising our guidance for full year 2007."
Conference Call
Cognizant will host a conference call today, August 1, at 10:00 a.m.
(ET) to discuss the Company's quarterly results. To listen to the call
please dial (888) 652-6834 domestically or (706) 679-3288 internationally.
The call will also be broadcast live via the Internet at Cognizant's web
site, http://www.cognizant.com. Please go to the web site at least fifteen minutes
prior to the call to register, download and install any necessary audio
software. A replay will be made available on the web site at
http://www.cognizant.com or by calling (800) 642-1687 for domestic callers and
(706) 645-9291 for international callers and entering "7027903" from two
hours after the end of the call until 11:59 p.m. (ET) on August 8, 2007.
About Cognizant
Cognizant (Nasdaq: CTSH) is a leading provider of global IT and
business process outsourcing services. Focused on delivering strategic
information technology solutions that address the complex business needs of
its clients, Cognizant uses its own on-site/offshore outsourcing model to
provide applications management, development, integration, and
reengineering; infrastructure management; business process outsourcing; and
numerous related services, such as enterprise consulting, technology
architecture, program management, and change management.
Cognizant has more than 46,000 employees who are committed to
partnerships that sustain long-term, proven value for customers by
delivering high-quality, cost-effective solutions through its development
centers in India and on-site client teams. Cognizant maintains P-CMM,
SW-CMM and CMMI Maturity Level 5 assessments from an independent
third-party assessor and ranked among the top information technology
companies in Business Week's Hot Growth Companies. Cognizant is a member of
the NASDAQ-100 Index and the S&P 500 Index. Find additional information
about Cognizant at http://www.cognizant.com.
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
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.
About Non-GAAP Financial Measures
To supplement the consolidated financial statements presented in
accordance with GAAP, this press release includes the following measures
defined by the Securities and Exchange Commission as non-GAAP financial
measures: non-GAAP operating margin and non-GAAP diluted earnings per
share. These non-GAAP measures are not based on any comprehensive set of
accounting rules or principles and should not be considered a substitute
for, or superior to, financial measures calculated in accordance with GAAP,
and may be different from non-GAAP measures used by other companies. In
addition, these non-GAAP measures, the financial statements prepared in
accordance with GAAP and reconciliations of Cognizant's GAAP financial
statements to such non-GAAP measures should be carefully evaluated.
We seek to manage the company to targeted operating margin, excluding
stock-based compensation costs, of 19% to 20% of revenues. Accordingly, we
believe that non-GAAP operating margin and non-GAAP diluted earnings per
share, excluding stock-based compensation costs, are meaningful measures
for investors to evaluate our financial performance. For our internal
management reporting and budgeting purposes, we use financial statements
that do not include stock-based compensation expense related to employee
stock options and employee stock purchases for financial and operational
decision making, to evaluate period-to-period comparisons and for making
comparisons of our operating results to that of our competitors. Moreover,
because of varying available valuation methodologies and the variety of
award types that companies can use under FAS 123R, we believe that
providing non-GAAP financial measures that exclude stock-based compensation
allows investors to make additional comparisons between our operating
results to those of other companies. Accordingly, we believe that the
presentation of non-GAAP operating margin and non-GAAP diluted earnings per
share, when read in conjunction with our reported GAAP results, can provide
useful supplemental information TO our management and investors regarding
financial and business trends relating to our financial condition and
results of operations.
A limitation of using non-GAAP operating margin and non-GAAP diluted
earnings per share versus operating margin and diluted earnings per share
calculated in accordance with GAAP is that non-GAAP operating margin and
non- GAAP diluted earnings per share excludes a cost, namely, stock-based
compensation, that is recurring. Stock-based compensation has been and will
continue to be for the foreseeable future a significant recurring expense
in our business. In addition, other companies may calculate non-GAAP
financial measures differently than us, thereby limiting the usefulness of
these non- GAAP financial measures as a comparative tool. We compensate for
this limitation by providing specific information regarding the GAAP
amounts excluded from non-GAAP operating margin and non-GAAP diluted
earnings per share and evaluating such non-GAAP financial measures with
financial measures calculated in accordance with GAAP.
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Revenues $516,514 $336,836 $976,784 $622,315
Operating Expenses:
Cost of revenues (exclusive of
depreciation and
amortization expense shown
separately below) 292,326 188,320 547,235 346,908
Selling, general and
administrative expenses 120,464 80,044 229,963 146,749
Depreciation and amortization
expense 13,053 7,801 25,313 14,831
Income from operations 90,671 60,671 174,273 113,827
Other income (expense), net:
Interest income 6,450 3,853 13,121 7,290
Other income / (expense), net 529 1,508 512 1,467
Total other income /
(expense), net 6,979 5,361 13,633 8,757
Income before provision for
income taxes 97,650 66,032 187,906 122,584
Provision for income taxes 15,373 10,961 30,183 20,349
Net income $82,277 $55,071 $157,723 $102,235
Basic earnings per share $0.57 $0.39 $1.10 $0.73
Diluted earnings per share $0.54 $0.37 $1.04 $0.68
Weighted average number of
common shares outstanding 144,052 140,542 143,477 140,103
Weighted average number of
common and dilutive shares
outstanding 152,048 150,493 151,903 149,924
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
(In thousands)
June 30, December 31,
2007 2006
Assets
Current Assets
Cash and cash equivalents $268,985 $265,937
Short-term investments 441,251 382,222
Trade accounts receivable, net of
allowances of $5,283
and $3,719, respectively 348,878 259,210
Unbilled accounts receivable 54,721 39,265
Deferred income tax assets, net 78,728 61,257
Other current assets 37,007 32,500
Total Current Assets 1,229,570 1,040,391
Property and equipment, net 265,749 220,154
Goodwill 43,351 27,190
Intangible assets, net 14,755 20,463
Deferred income tax assets, net 6,275 1,024
Other assets 24,654 16,759
Total Assets $1,584,354 $1,325,981
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $24,619 $27,839
Deferred revenue 15,004 19,401
Accrued expenses and other liabilities 219,496 202,263
Total Current Liabilities 259,119 249,503
Other noncurrent liabilities 7,992 2,979
Total Liabilities 267,111 252,482
Stockholders' Equity 1,317,243 1,073,499
Total Liabilities and Stockholders' Equity $1,584,354 $1,325,981
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Measures
(Unaudited)
(In thousands, except per share data)
Three Months Ended June 30,
2007 2007 2007
GAAP Adjustments Non-GAAP
Income from operations $90,671 $9,512 (a) $100,183
Operating margin 17.6% 1.8% (a) 19.4%
Diluted earnings per share $0.54 $0.05 (e) $0.59
Three Months Ended June 30,
2006 2006 2006
GAAP Adjustments Non-GAAP
Income from operations $60,671 $6,769 (c) $67,440
Operating margin 18.0% 2.0% (c) 20.0%
Diluted earnings per share $0.37 $0.04 (e) $0.41
Six Months Ended June 30,
2007 2007 2007
GAAP Adjustments Non-GAAP
Income from operations $174,273 $16,950 (b) $191,223
Operating margin 17.8% 1.8% (b) 19.6%
Diluted earnings per share $1.04 $0.09 (e) $1.13
Six Months Ended June 30,
2006 2006 2006
GAAP Adjustments Non-GAAP
Income from operations $113,827 $14,371 (d) $128,198
Operating margin 18.3% 2.3% (d) 20.6%
Diluted earnings per share $0.68 $0.08 (e) $0.76
(a) Adjustment to exclude stock-based compensation of $9,512 from income
from operations of which $4,828 was reported in cost of revenues and
$4,684 was reported in selling, general and administrative expenses
in our unaudited condensed consolidated statements of operations.
(b) Adjustment to exclude stock-based compensation of $16,950 from income
from operations of which $8,096 was reported in cost of revenues and
$8,854 was reported in selling, general and administrative expenses
in our unaudited condensed consolidated statements of operations.
(c) Adjustment to exclude stock-based compensation of $6,769 from income
from operations of which $3,332 was reported in cost of revenues and
$3,437 was reported in selling, general and administrative expenses
in our unaudited condensed consolidated statements of operations.
(d) Adjustment to exclude stock-based compensation of $14,371 from income
from operations of which $6,479 was reported in cost of revenues and
$7,892 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.
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