Cognizant Technology Solutions Corporation · NASDAQ:CTSH
Cognizant Technology Solutions — Q1 2020 Earnings Presentation
21 slides from Cognizant Technology Solutions's earnings presentation, May 7, 2020
Slide 1: First Quarter 2020 Financial Results and Highlights
First Quarter 2020 Financial Results and Highlights May 7, 2020
Slide 2: Forward-Looking Statements
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
Slide 3: Results Summary
Results Summary • $4.2B, increased 2.8% (3.5% CC1) Y/Y, including a $23M (~50bps) Y/Y headwind from REVENUE decision to exit certain content-related services GAAP Operating Margin of 13.7%, increased 60 bps Y/Y OPERATING MARGIN • • Adjusted Operating Margin1 15.1%, declined 90 bps Y/Y NET INCOME • G
Slide 4: Our Response to COVID-19
Our Response to COVID-19 "Our priorities remain the health and safety of our associates and the business continuity of our clients. We are committed to helping our clients as they navigate unprecedented business challenges as well as – Brian Humphries, Chief Executive Officer supporting the efforts
Slide 5: Revenue and GAAP & Adjusted Diluted EPS
Revenue and GAAP & Adjusted Diluted EPS $ In Millions Except Per Share Amounts $4,284 $4,248 $4,225 $4,129 $4,141 $4,078 $4,110 $4,006 $3,912 $1.05 $1.05 $1.08 $1.07 $0.98 $0.94 $0.91 $0.94 $0.96 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Revenue Adjusted Diluted EPS Revenue Grow
Slide 6: Revenue Performance: Q1 2020 Segments and Geography
Revenue Performance: Q1 2020 Segments Geography $ IN MILLIONS $ IN MILLIONS COMMUNICATIONS, REST OF WORLD MEDIA & TECHNOLOGY1 +3.2% Y/Y +5.2% Y/Y +7.6% Y/Y CC +6.3% Y/Y CC EUROPE $261 $626 FINANCIAL +5.4% Y/Y SERVICES +7.6% Y/Y CC $1,451 +1.0% Y/Y $774 +1.8% Y/Y CC PRODUCTS & RESOURCES +4.4% Y/Y $95
Slide 7: GAAP & Adjusted Operating Margin
GAAP & Adjusted Operating Margin 19.2% 18.5% 17.7% 17.7% 18.3% 16.7% 16.8% 17.0% 17.3% 17.0% 16.0% 16.1% 15.7% 14.9% 14.6% 15.1% 13.1% 13.7% Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 GAAP Operating Margin Adjusted Operating Margin 7
Slide 8: Financial Services Revenue Q1 '20
Financial Services Revenue Q1 ‘20 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD +0.8% Y/Y $1,492 +5.3% Y/Y CC $1,469 $1,473 $1,461 $1,464 $1,468 $1,451 $1,451 $128 $1,436 EUROPE +6.9% Y/Y +8.4% Y/Y CC $311 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 $1,012 Revenue Growth NOR
Slide 9: Healthcare Revenue Q1 '20
Healthcare Revenue Q1 ‘20 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD $1,221 +6.3% Y/Y $1,202 $1,194 EUROPE +8.9% Y/Y CC $1,189 $1,175 $1,156 $1,165 +29.9% Y/Y $17 $1,121 $1,134 +31.5% Y/Y CC $139 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 $1,038 Revenue Growth Q1 ‘18 Q2
Slide 10: Products & Resources Revenue Q1 '20
Products & Resources Revenue Q1 ‘20 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD (1.6%) Y/Y $966 $963 $954 $914 $927 +2.7% Y/Y CC $863 $891 $821 $840 $63 EUROPE (3.3%) Y/Y $202 (0.6%) Y/Y CC Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 $689 Revenue Growth Q1 ‘18 Q2 ‘18 Q3 ‘1
Slide 11: Communications, Media & Technology Revenue Q1 '20
Communications, Media & Technology Revenue Q1 ‘20 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD +15.2% Y/Y +20.3% Y/Y CC $632 $626 $585 $595 $607 $615 $541 $562 $509 $53 EUROPE (3.9%) Y/Y (0.8%) Y/Y CC $122 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 $451 Revenue Growth NORT
Slide 12: Employee Metrics
Employee Metrics Headcount and Annualized Attrition NUMBER OF EMPLOYEES IN THOUSANDS 24% 22% 23% 22% 19% 23% 21% 20% 19% 288.2 289.9 274.2 268.9 281.6 285.8 292.5 291.7 261.4 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Headcount Quarterly Annualized Attrition Utilization 92% 93% 9
Slide 13: Cash Flow, Balance Sheet & Capital Allocation
Cash Flow, Balance Sheet & Capital Allocation $ IN MILLIONS $118 $116 $116 $116 $633 $121 $267 $110 $771 $111 $118 $1,054 $632 $163 $511 $477 $116 $259 $45 $316 $35 $239 $197 $146 $86 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Acquisitions Share Purchases Dividends Paid $ IN MILLIONS Q1 '
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 Q1 ‘20 SERVICE LINE OUTSOURCING 42.0% 42.9% 42.3% 41.8% 41.4% 41.1% 40.4% 40.1% 39.7% CONSULTING & TECH SERVICES 58.0% 57.1% 57.7% 58.2% 58.6% 58.9% 59.6% 59.9% 60.3% CONTRACT TYPE FIXED BID 38.9% 36.2% 36.4% 36
Slide 15: 2020 Assumptions
2020 Assumptions • Expected to remain volatile and uncertain, with particular weakness in Q2 given additional impact from ransomware incident • Travel & hospitality, retail, auto, energy, and media & entertainment (~20% of revenue) seeing heightened COVID-19 impact REVENUE • In addition to demand ch
Slide 16: APPENDIX: About Non-GAAP Financial Measures
APPENDIX: About Non-GAAP Financial Measures
Slide 17: 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 18: 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, 2018 2018 2018 2018 2019 2019 2019 2019 2020 GAAP income from operations $ 693 $ 670 $ 745 $ 693 $ 539 $ 619 $ 669 $ 626
Slide 19: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures Notes: (a) During the first quarter of 2020, we incurred realignment charges that include $6 million in employee retention costs and $14 million in professional fees. The total costs related to the realignment are reported in "Restructuring charges" in
Slide 20: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures (g) 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, 2018 2018 2018 2018 2019 2019 2019 2019 2020 Tax impacts of non-GAA
Slide 21: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures (j) During the third quarter of 2018, we finalized our calculation of the one-time net income tax expense related to the enactment of the Tax Cuts and Jobs Act (“Tax Reform Act”) and recognized a $5 million income tax benefit, which reduced our provisio
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