Cognizant Technology Solutions Corporation · NASDAQ:CTSH
Cognizant Technology Solutions — Q3 2020 Earnings Presentation
21 slides from Cognizant Technology Solutions's earnings presentation, Oct 28, 2020
Slide 1: Third Quarter 2020 Financial Results and Highlights
Exhibit 99.3 Third Quarter 2020 Financial Results and Highlights October 28, 2020
Slide 2: Forward-Looking Statements
Forward-Looking Statements This earnings supplement 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 assum
Slide 3: Results Summary
Results Summary • $4.2B, declined 0.1% (-0.7% CC1) Y/Y, including a negative ~130bps Y/Y impact REVENUE from decision to exit certain content-related services • GAAP Operating Margin of 14.2%, declined 150 bps Y/Y OPERATING MARGIN • Adjusted Operating Margin1 of 15.9%, declined 140 bps Y/Y 2 DILUTED
Slide 4: Revenue and GAAP & Adjusted Diluted EPS
Revenue and GAAP & Adjusted Diluted EPS $ In Millions Except Per Share Amounts $4,284 $4,248 $4,225 $4,243 $4,129 $4,141 $4,078 $4,110 $4,006 $4,000 $3,912 $1.05 $1.05 $1.08 $1.07 $0.94 $0.98 $0.91 $0.94 $0.96 $0.97 $0.82 Q1' 18 Q2' 18 Q3' 18 Q4' 18 Q1' 19 Q2' 19 Q3' 19 Q4' 19 Q1' 20 Q2' 20 Q3' 20 R
Slide 5: Revenue Performance: Q3 2020
Revenue Performance: Q3 2020 Segments Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD COMMUNICATIONS, MEDIA & TECHNOLOGY1 +4.4% Y/Y +7.1% Y/Y CC +0.2% Y/Y (0.2%) Y/Y CC EUROPE +3.6% Y/Y $282 $616 FINANCIAL SERVICES (0.5%) Y/Y CC $1,469 (1.5%) Y/Y $782 (2.2%) Y/Y CC PRODUCTS & RESOURCES $927 (4.0
Slide 6: GAAP & Adjusted Operating Margin
GAAP & Adjusted Operating Margin 19.2% 18.3%18.5% 17.7%17.7% 17.3% 16.7% 16.8%17.0% 17.0% 16.0% 16.1% 15.7% 15.9% 14.9% 14.6% 15.1% 13.7% 14.1% 14.2% 13.1% 11.7% Q1' 18 Q2' 18 Q3' 18 Q4' 18 Q1' 19 Q2' 19 Q3' 19 Q4' 19 Q1' 20 Q2' 20 Q3' 20 GAAP Operating Margin Adjusted Operating Margin 6
Slide 7: Financial Services Revenue Q3 '20
Financial Services Revenue Q3 '20 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD +0.8% Y/Y $1,492 +2.6% Y/Y CC $1,461 $1,469 $1,464 $1,473 $1,468 $1,469 $1,451 $1,436 $1,451 $1,396 EUROPE $132 (1.6%) Y/Y (5.6%) Y/Y CC $304 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 Q3
Slide 8: Healthcare Revenue Q3 '20
Healthcare Revenue Q3 '20 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD +16.7% Y/Y EUROPE $1,221 $1,231 +19.4% Y/Y CC $1,189 $1,202 $1,194 $21 $1,156 $1,165 $1,175 $1,157 +28.9% Y/Y $1,134 $1,121 +23.4% Y/Y CC $156 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 Q3 '20 $1
Slide 9: Products & Resources Revenue Q3 '20
Products & Resources Revenue Q3 '20 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD (1.4%) Y/Y $966 $963 $954 0.9% Y/Y CC $914 $927 $927 $863 $891 $867 $821 $840 $68 EUROPE (8.1%) Y/Y $193 (11.4%) Y/Y CC Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 Q3 '20 $666 Revenue Gr
Slide 10: Communications, Media & Technology Revenue Q3 '20
Communications, Media & Technology Revenue Q3 '20 Geography $ IN MILLIONS REST OF WORLD +17.3% Y/Y +22.5% Y/Y CC $615 $632 $626 $616 $585 $595 $607 $580 $541 $562 $509 EUROPE $61 +12.2% Y/Y +7.8% Y/Y CC $129 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 Q3 '20 $426 Revenue Gr
Slide 11: Employee Metrics
Employee Metrics Headcount and Annualized Attrition NUMBER OF EMPLOYEES IN THOUSANDS 24% 24% 23% 22% 23% 22% 20% 21% 19% 19% 18% 19% 18% 16% 16% 13% 11% 10% 261.4 268.9 274.2 281.6 285.8 288.2 289.9 292.5 291.7 281.2 283.1 Q1' 18 Q2' 18 Q3' 18 Q4' 18 Q1' 19 Q2' 19 Q3' 19 Q4' 19 Q1' 20 Q2' 20 Q3' 20
Slide 12: Cash Flow, Balance Sheet & Capital Allocation
Cash Flow, Balance Sheet & Capital Allocation $ IN MILLIONS $118 $116 $633 $116 $116 $1,054 $771 $120 $267 $121 $248 $ 74 $511 $121 $111 $110 $118 $632 $ 45 $259 $163 $580 $316 $477 $ 35 $403 $116 $197 $239 $146 $86 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 Q3 '20 Acquisi
Slide 13: 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 Q2 ‘20 Q3 ‘20 SERVICE LINE OUTSOURCING 42% 43% 42% 42% 41% 41% 40% 40% 40% 39% 38% CONSULTING & TECH SERVICES 58% 57% 58% 58% 59% 59% 60% 60% 60% 61% 62% CONTRACT TYPE FIXED BID 39% 36% 36% 37% 36% 36% 36
Slide 14: 2020 Fit for Growth
2020 Fit for Growth 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 automatio
Slide 15: 2020 Guidance
2020 Guidance1 FY2020 Assumptions ~$16.7B • Negative ~10bps of foreign exchange impact REVENUE ~(0.5%) decline • Negative ~110bps impact from the exit of certain content services business ~(0.4%) decline in constant currency ADJUSTED OPERATING MARGIN2 ~15% 2 • Average share count ~541M and ADJUSTED
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) Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Guidance Full Three Months Ended: 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 Year 2020 GAAP income from operation
Slide 19: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures Notes: (a) During the third quarter of 2020, we incurred realignment charges that include $8 million in professional fees. The total costs related to the realignment are reported in "Restructuring charges" in our unaudited consolidated statement of oper
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, Jun 30, Sep 30, 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2
Slide 21: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures (j) During the fourth quarter of 2019, the Government of India enacted a new tax regime ("India Tax Law") effective retroactively to April, 2019 that enables domestic companies to elect to be taxed at a lower income tax rate of 25.17%, as compared to th
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