Cognizant Technology Solutions Corporation · NASDAQ:CTSH
Cognizant Technology Solutions — Q4 2019 Earnings Presentation
23 slides from Cognizant Technology Solutions's earnings presentation, Feb 5, 2020
Slide 1: Fourth Quarter 2019 Financial Results and Highlights
Exhibit 99.2 FOURTH QUARTER 2019 Financial Results and Highlights February 5, 2020 © 2019 Cognizant
Slide 2: Forward-Looking Statements
Forward-Looking Statements This earnings supplement 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 assu
Slide 3: Results Summary
Results Summary • Q4 $4.3B, increased 3.8% (4.2% CC1) Y/Y REVENUE • FY19 $16.8B, increased 4.1% (5.2% CC1) Y/Y • Q4 GAAP Operating Margin of 14.6%, declined 220 bps Y/Y • Q4 Adjusted Operating Margin1 17.0%, was flat Y/Y OPERATING MARGIN • FY19 GAAP Operating Margin of 14.6%, declined 280 bps Y/Y •
Slide 4: Revenue and GAAP & Adjusted Diluted EPS
Revenue and GAAP & Adjusted Diluted EPS $ IN MILLIONS EXCEPT PER SHARE AMOUNTS $4,248 $4,284 $4,141 $4,078 $4,129 $4,110 $4,006 $3,912 $3,828 $3,766 $3,670 $3,546 $1.08 $1.07 $1.05 $1.05 $0.98 $0.96 $0.94 $0.91 $0.94 $0.83 $0.88 $0.75 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2
Slide 5: Revenue Performance: Q4 2019
Revenue Performance: Q4 2019 Segments Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD COMMUNICATIONS, +13.1% Y/Y MEDIA & TECHNOLOGY +14.5% Y/Y CC +8.0% Y/Y +9.0% Y/Y CC $277 FINANCIAL EUROPE $632 SERVICES +3.5% Y/Y +5.3% Y/Y CC +1.2% Y/Y $766 $1,468 +1.5% Y/Y CC PRODUCTS & RESOURCES +8.1% Y/Y $9
Slide 6: Revenue Performance: FY2019
Revenue Performance: FY2019 Segments Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD +5.8% Y/Y COMMUNICATIONS, +9.8% Y/Y CC MEDIA & TECHNOLOGY +11.5% Y/Y $1,053 +13.1% Y/Y CC FINANCIAL EUROPE $2,449 SERVICES +5.9% Y/Y +10.5% Y/Y CC +0.4% Y/Y $3,004 $5,869 +1.6% Y/Y CC PRODUCTS & RESOURCES +10.4%
Slide 7: GAAP & Adjusted Operating Margin
GAAP & Adjusted Operating Margin 19.2% 18.3%18.5% 17.6% 17.2% 17.7% 17.2% 17.3% 17.7% 17.7% 17.3% 16.4% 16.5% 16.7% 16.8%17.0% 17.0% 16.1% 16.0% 16.1% 15.7% 14.9% 14.6% 13.1% Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 GAAP OPERATING MARGIN ADJUSTED OPERATING MARGIN 7
Slide 8: Financial Services Revenue Q4 '19
Financial Services Revenue Q4 ‘19 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD $1,492 +6.2% Y/Y $1,469 $1,464 $1,473 $1,468 $1,461 $1,451 +6.0% Y/Y CC $1,427 $1,427 $1,436 $1,406 $137 $1,376 EUROPE +2.0% Y/Y +3.8% Y/Y CC $299 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '
Slide 9: Healthcare Revenue Q4 '19
Healthcare Revenue Q4 ‘19 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD $1,221 +84.6% Y/Y $1,202 EUROPE $1,189 $1,175 +85.1% Y/Y CC $1,156 $1,165 +31.4% Y/Y $24 $1,125 $1,121 $1,134 +34.6% Y/Y CC $1,085 $134 $1,050 $1,003 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3
Slide 10: Products & Resources Revenue Q4 '19
Products & Resources Revenue Q4 ‘19 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD $966 $963 +16.4% Y/Y $914 $927 +20.9% Y/Y CC $863 $891 $821 $840 $64 $774 $782 $737 $747 EUROPE +1.0% Y/Y +2.6% Y/Y CC $207 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 $692
Slide 11: Communications, Media & Technology Revenue Q4 '19
Communications, Media & Technology Revenue Q4Q4 ‘19 Geography Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD +8.3% Y/Y +12.2% Y/Y CC $632 $585 $595 $607 $615 $541 $562 $509 $52 $467 $480 $494 EUROPE $430 (10.0%) Y/Y (8.6%) Y/Y CC $126 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '
Slide 12: Employee Metrics
Employee Metrics Headcount and Annualized Attrition NUMBER OF EMPLOYEES IN THOUSANDS 24% 21% 24% 23% 23% 22% 23% 20% 19% 18% 19% 289.9 292.5 15% 288.2 281.6 285.8 274.2 268.9 261.2 260.0 261.4 256.8 256.1 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 HEADCOUNT Q
Slide 13: Cash Flow, Balance Sheet & Capital Allocation
Cash Flow, Balance Sheet & Capital Allocation $ IN MILLIONS $118 $116 $116 $116 $1,514 $633 $267 $86 $118 $771 $1,054 $111 $110 $332 $45 $632 $163 $30 $89 $13 $90 $477 $116 $35 $259 $6 $316 $239 $66 $144 $197 $146 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 ACQUISITIONS S
Slide 14: Revenue & Operating Metrics
Revenue & Operating Metrics REVENUE BY… Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4 ‘19 FY18 FY19 SERVICE LINE OUTSOURCING 42.0% 42.9% 42.3% 41.8% 41.4% 41.1% 40.4% 40.1% 42.3% 40.7% CONSULTING & TECH 58.0% 57.1% 57.7% 58.2% 58.6% 58.9% 59.6% 59.9% 57.7% 59.3% SERVICES CONTRACT TYPE FIXED BID 38.9%
Slide 15: 2020 Fit for Growth Plan
2020 Fit for Growth Plan Protect and optimize the core Eliminate costs to fund growth investment Drive efficiency, tooling, delivery optimization, protect Reduce duplication and simplify delivery. renewals, strengthen industry mix and scale internationally Reinvest in sales, branding, talent and aut
Slide 16: Guidance
Guidance1 • Q1 ’20: $4.21-4.25B representing 2.5-3.5% reported growth or 2.8-3.8% in constant currency2 Assumes negative ~60bps impact from the exit of certain content services business REVENUE • • FY20: $17.11-17.45 representing 2.0-4.0% growth as reported and in constant currency3 • Assumes negati
Slide 17: Appendix: About Non-GAAP Financial Measures
APPENDIX: About Non-GAAP Financial Measures
Slide 18: About Non-GAAP Financial Measures
About Non-GAAP Financial Measures To supplement our financial results presented in accordance with GAAP, this earnings supplement includes references to the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: Adjusted Income From Operations, Adjusted
Slide 19: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures (In millions, except per share amounts) Three Months Ended: Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 GAAP income from operations $ 570 $ 6
Slide 20: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures (In millions, except per share amounts) Year Ended: Dec 31, Dec 31, Guidance 2018 2019 Full Year 2020 GAAP income from operations $ 2,801 $ 2,453 Realignment charges (a) 19 169 Incremental accrual related to the India Defined - 117 Contribution Obligati
Slide 21: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures Notes: (a) During the three months ended December 31, 2019, we incurred $53 million in realignment charges that include $4 million in employee separation costs, $27 million in employee retention costs and $22 million in third party realignment costs. Du
Slide 22: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures (f) Presented below are the tax impacts of each of our non-GAAP adjustments to pre-tax income: Three Months Ended Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, 2017 2017 2017 2017 2018 2018 2018 2018 201
Slide 23: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures (h) In December 2019, the Government of India enacted a new tax regime ("India Tax Law") effective retroactively to April 1, 2019 that enables domestic companies to elect to be taxed at a lower income tax rate of 25.17%, as compared to the current incom
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