Cognizant Technology Solutions Corporation · NASDAQ:CTSH
Cognizant Technology Solutions — Q2 2020 Earnings Presentation
21 slides from Cognizant Technology Solutions's earnings presentation, Jul 29, 2020
Slide 1: Second Quarter 2020 Financial Results and Highlights
Exhibit 99.2 Second Quarter 2020 Financial Results and Highlights July 29, 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 • $4.0B, declined 3.4% (2.5% CC1) Y/Y, including a (~120bps) Y/Y headwind from REVENUE decision to exit certain content-related services and (~90bps) from the ransomware attack impact on fulfillment • GAAP Operating Margin of 11.7%, declined 320 bps Y/Y OPERATING MARGIN • Adjusted Op
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 $4,129 $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 $0.82 Q1' 18 Q2' 18 Q3' 18 Q4' 18 Q1' 19 Q2' 19 Q3' 19 Q4' 19 Q1' 20 Q2' 20 Revenue Adjusted Dilu
Slide 5: Revenue Performance: Q2 2020 Segments and Geography
Revenue Performance: Q2 2020 Segments Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD COMMUNICATIONS, MEDIA & TECHNOLOGY1 +3.2% Y/Y +9.7% Y/Y (4.4%) Y/Y (3.2%) Y/Y EUROPE (2.1%) Y/Y $261 $580 FINANCIAL SERVICES +0.2% Y/Y CC $733 $1,396 (5.2%) Y/Y (4.3%) Y/Y CC PRODUCTS & RESOURCES $867 (6.5%) Y/
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% 14.9% 14.6% 15.1% 13.7% 14.1% 13.1% 11.7% Q1' 18 Q2' 18 Q3' 18 Q4' 18 Q1' 19 Q2' 19 Q3' 19 Q4' 19 Q1' 20 Q2' 20 GAAP Operating Margin Adjusted Operating Margin 6
Slide 7: Financial Services Revenue Q2 '20
Financial Services Revenue Q2 ‘20 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD $1,492 +0.8% Y/Y $1,469 $1,464 $1,473 $1,468 +6.5% Y/Y CC $1,461 $1,451 $1,451 $1,436 EUROPE $126 $1,396 (6.7%) Y/Y (4.9%) Y/Y CC $292 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 $978 Reve
Slide 8: Healthcare Revenue Q2 '20
Healthcare Revenue Q2 ‘20 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD +5.3% Y/Y $1,221 EUROPE $1,202 $1,194 +9.5% Y/Y CC $1,189 $1,175 $20 $1,156 $1,165 $1,157 +26.6% Y/Y $1,121 $1,134 +27.6% Y/Y CC $138 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 $999 Revenue Growt
Slide 9: Products & Resources Revenue Q2 '20
Products & Resources Revenue Q2 ‘20 Geography $ IN MILLIONS $ IN MILLIONS REST OF WORLD 3.2% Y/Y $966 $963 $954 9.9% Y/Y CC $914 $927 $863 $891 $867 $821 $840 $64 EUROPE (11.6%) Y/Y $183 (7.8%) Y/Y CC Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 $620 Revenue Growth Q1 ‘18 Q2
Slide 10: Communications, Media & Technology Revenue Q2 '20
Communications, Media & Technology Revenue Q2 ‘20 Geography $ IN MILLIONS REST OF WORLD +8.5% Y/Y +17.9% Y/Y CC $615 $632 $626 $585 $595 $607 $580 $541 $562 $509 EUROPE $51 0% Y/Y 2.5% Y/Y CC $120 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 $409 Revenue Growth Q1 ‘18 Q2 ‘18
Slide 11: Employee Metrics: Headcount and Annualized Attrition
Employee Metrics Headcount and Annualized Attrition NUMBER OF EMPLOYEES IN THOUSANDS 1 23% 23% 24% 24% 22% 21% 22% 20% 19% 19% 19% 18% 16% 16% 13% 11% 261.4 268.9 274.2 281.6 285.8 288.2 289.9 292.5 291.7 281.2 Q1' 18 Q2' 18 Q3' 18 Q4' 18 Q1' 19 Q2' 19 Q3' 19 Q4' 19 Q1' 20 Q2' 20 Headcount (in thous
Slide 12: Cash Flow, Balance Sheet & Capital Allocation
Cash Flow, Balance Sheet & Capital Allocation $ IN MILLIONS $118 $116 $633 $116 $116 $1,054 $771 $267 $121 $511 $ 40 $111 $110 $121 $118 $632 $259 $163 $316 $477 $403 $ 45 $ 35 $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 Acquisitions Share Purchases
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 SERVICE LINE OUTSOURCING 42.0% 42.9% 42.3% 41.8% 41.4% 41.1% 40.4% 40.1% 39.7% 38.6% CONSULTING & TECH SERVICES 58.0% 57.1% 57.7% 58.2% 58.6% 58.9% 59.6% 59.9% 60.3% 61.4% CONTRACT TYPE FIXED BID 3
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 automati
Slide 15: 2020 Guidance
2020 Guidance1 • FY20: $16.4-16.7B representing a decline of (2.2%) to (0.7%) as reported and a decline of (2.0%) to (0.5%) in constant currency REVENUE • Assumes of ~20bps foreign exchange impact • Assumes negative ~110bps impact from the exit of certain content services business ADJUSTED • Approxi
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, Guidance Full Three Months Ended: 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 Year 2020 GAAP income from operations $ 693 $ 670
Slide 19: Reconciliations of Non-GAAP Financial Measures: Notes
Reconciliations of Non-GAAP Financial Measures Notes: (a) During the second quarter of 2020, we incurred realignment charges that include $9 million in employee retention costs and $3 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: Tax Impacts
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, 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 Tax impac
Slide 21: Reconciliation of Free Cash Flow
Reconciliations of Non-GAAP Financial Measures (j) During the third quarter of 2018, we finalized our calculation of the one-time 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 provision for incom
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