Cognizant-CEO Francisco D’Souza.
Teaneck N.J. – Cognizant Technology Solutions Corporation (NASDAQ: CTSH), a leading provider of information technology, consulting, and business process services, today announced its second quarter 2016 financial results.
Highlights—Second Quarter 2016
- Second quarter revenue of $3.37 billion was up 9.2% from the year-ago period and up 5.2% sequentially.
- GAAP diluted EPS was $0.41 vs. $0.68 in the year-ago period. Q2 2016 GAAP diluted EPS was negatively impacted by $0.31 per share of incremental taxes associated with a one-time remittance of cash from India to the U.S.
- Non-GAAP diluted EPS was $0.87, up from $0.79 in the year-ago period.
- Net headcount addition for the quarter was approximately 11,300.
Revenue for the second quarter of 2016 was $3.37 billion, up 9.2% from $3.09 billion in the second quarter of 2015. GAAP net income was $252.4 million, or $0.41 per diluted share, compared to $420.1 million, or $0.68 per diluted share, in the second quarter of 2015. Non-GAAP diluted EPS1 was $0.87 compared to $0.79 in the second quarter of 2015. GAAP operating margin for the quarter was 17.5%. Non-GAAP operating margin1 for the quarter was 20.3%, slightly higher than the Company’s target range of 19-20%.
In May 2016, our principal operating subsidiary in India repurchased shares from its shareholders, which are non-Indian Cognizant entities, resulting in a one-time remittance of $2.8 billion of cash from India. $1.2 billion, or $1.0 billion net of taxes, was transferred to the U.S. with the other $1.6 billion remaining overseas. As a result of this transaction, we will incur an incremental 2016 income tax expense of $237.5 million, of which $190.0 million was recognized in the quarter ended June 30, 2016 and approximately $23.7 million will be recognized in each of the quarters ending September 30, 2016 and December 31, 2016.
“Our second quarter performance, as anticipated, represented broad-based revenue growth across service lines, geographies and industries, including healthcare and financial services,” said Francisco D’Souza, Chief Executive Officer. “While our revised guidance reflects the impact of near-term macroeconomic headwinds, our longer term outlook and underlying business fundamentals remain strong. We continue to see an expanding market opportunity ahead and are well positioned to capitalize on the digital transformations taking place among enterprises around the world.”
“The shift to digital continues to intensify and accelerate,” said Gordon Coburn, President. “Our strong second quarter revenue growth, adding incremental quarterly revenue of nearly $170 million, is the result of clients turning to Cognizant to help them define strategy and infuse new technologies to address key challenges and implement new business models. Our robust strategy and implementation capabilities have made us a key partner to clients as they fundamentally transform their businesses and navigate the shift to the digital economy.”
“During the second quarter, we were pleased to execute a one-time remittance of $2.8 billion from India, which increased our cash in the U.S. by $1.0 billion, net of taxes, and in other international markets by $1.6 billion,” said Karen McLoughlin, Chief Financial Officer. “This provides additional financial flexibility in funding our strategic investments to drive long term growth for Cognizant.”
2016 Outlook—Third Quarter and Full Year
The Company is providing the following guidance:
- Third quarter 2016 revenue expected to be in the range of $3.43 billion to $3.47 billion.
- Third quarter 2016 non-GAAP diluted EPS expected to be in the range of $0.82 to $0.85.
- Fiscal 2016 revenue expected to be in the range of $13.47 billion to $13.60 billion.
- Fiscal 2016 non-GAAP diluted EPS2 remains unchanged and is expected to be in the range of $3.32 to $3.44.
Expansion of Stock Repurchase Program
Our Board of Directors approved an increase of the Company’s stock repurchase program by $1.0 billion, from $2.0 billion to $3.0 billion, and extended the term of the program by one year to December 31, 2018. Since inception of the program, the Company has repurchased $1.9 billion of its shares under this program.
The Company is authorized to repurchase shares under the program through open market purchases, including under a trading plan adopted pursuant to Rule 10b5-1, or through privately negotiated transactions, in accordance with applicable federal securities laws. The timing of repurchases and the exact number of shares to be purchased will be determined by the Company’s management, in its discretion, or pursuant to a Rule 10b5-1 trading plan, and will depend upon market conditions and other factors. The repurchases are expected to be funded using the Company’s working capital.
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 100 development and delivery centers worldwide and approximately 244,300 employees as of June 30, 2016, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com.