Cognizant Technology Solutions Corp 10-Q for FY2024 Q1

Cognizant Technology Solutions Corp (CTSH)

10-Q 2024-05-02 For: 2024-03-31

Added on April 12, 2026

About this 10-Q

Cognizant Technology Solutions Corp filed this 10-Q on May 2, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).

Headline figures

Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.76B; down 1.1% from $4.81B a year earlier
Net income: $546M; down 5.9% from net income of $580M a year earlier
Diluted EPS: $1.10; down 3.5% from $1.14 a year earlier

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☒	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended	March 31, 2024
☐	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from to


Delaware									13-3728359
(State or Other Jurisdiction of Incorporation or Organization)									(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	CTSH	The Nasdaq Stock Market LLC


Large Accelerated Filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐


Class						Number of Shares
Class A Common Stock, par value $0.01 per share						497,198,868


		Page
GLOSSARY		1

FORWARD LOOKING STATEMENTS		2

PART I.	FINANCIAL INFORMATION	4

Item 1.	Consolidated Financial Statements (Unaudited)	4

	Consolidated Statements of Financial Position (Unaudited) as of March 31, 2024 and December 31, 2023	4

	Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2024 and 2023	5

	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2024 and 2023	6

	Consolidated Statements of Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 2024 and 2023	7

	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2024 and 2023	8

	Notes to Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	34

PART II.	OTHER INFORMATION	35

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 5.	Other Information	35

Item 6.	Exhibits	36

SIGNATURES		37


Defined Term			Definition
10b5-1 Plan			Trading plan adopted pursuant to Rule 10b5-1 of the Exchange Act
Adjusted Diluted EPS			Adjusted diluted earnings per share
AI			Artificial intelligence
ASC			Accounting Standards Codification
CC			Constant Currency
CE			Continental Europe
CITA			Commissioner of Income Tax (Appeals) in India
CMT			Communications, Media and Technology
CODM			Chief Operating Decision Maker
Credit Agreement			Credit agreement with a commercial bank syndicate dated October 6, 2022
CTS India			Our principal operating subsidiary in India
DOJ			United States Department of Justice
DSO			Days Sales Outstanding
DTSA			Defend Trade Secrets Act
EPS			Earnings per share
EU			European Union
Exchange Act			Securities Exchange Act of 1934, as amended
FS			Financial Services
GAAP			Generally Accepted Accounting Principles in the United States of America
GenAI			Generative artificial intelligence
HS			Health Sciences
High Court			Madras, India High Court
India Defined Contribution Obligation			Certain statutory defined contribution obligations of employees and employers in India
IRS			Internal Revenue Service
ITAT			Income Tax Appellate Tribunal in India
ITD			Indian Income Tax Department
NA			North America
OECD			Organization for Economic Cooperation and Development
P&R			Products & Resources
RoW			Rest of World
SCI			Supreme Court of India
SEC			United States Securities and Exchange Commission
Second Circuit			United States Court of Appeals for the Second Circuit
SG&A			Selling, general and administrative
Syntel			Syntel Sterling Best Shores Mauritius Ltd.
Tax Reform Act			Tax Cuts and Jobs Act
Term Loan			Unsecured term loan under the Credit Agreement
TriZetto			The TriZetto Group, Inc., now known as Cognizant Technology Software Group, Inc.
UK			United Kingdom
USDC-NJ			United States District Court for the District of New Jersey
USDC-SDNY			United States District Court for the Southern District of New York


(in millions, except par values)	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	2,231	$	2,621
Short-term investments	12		14
Trade accounts receivable, net	3,822		3,849
Other current assets	1,021		1,022
Total current assets	7,086		7,506
Property and equipment, net	1,036		1,048
Operating lease assets, net	589		611
Goodwill	6,393		6,085
Intangible assets, net	1,171		1,149
Deferred income tax assets, net	993		993
Long-term investments	83		435
Other noncurrent assets	1,057		656
Total assets	$	18,408	$	18,483
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	291	$	337
Deferred revenue	449		385
Short-term debt	33		33
Operating lease liabilities	143		153
Accrued expenses and other current liabilities	2,096		2,425
Total current liabilities	3,012		3,333
Deferred revenue, noncurrent	36		42
Operating lease liabilities, noncurrent	503		523
Deferred income tax liabilities, net	201		226
Long-term debt	598		606
Long-term income taxes payable	157		157
Other noncurrent liabilities	411		369
Total liabilities	4,918		5,256
Commitments and contingencies (See Note 12)
Stockholders’ equity:
Preferred stock, $0.10 par value, 15 shares authorized, none issued	—		—
Class A common stock, $0.01 par value, 1,000 shares authorized, 497 and 498 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	5		5
Additional paid-in capital	20		15
Retained earnings	13,621		13,301
Accumulated other comprehensive income (loss)	(156)		(94)
Total stockholders’ equity	13,490		13,227
Total liabilities and stockholders’ equity	$	18,408	$	18,483


(in millions, except per share data)	Three Months Ended March 31,
	2024		2023
Revenues	$	4,760	$	4,812
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization expense shown separately below)	3,146		3,143
Selling, general and administrative expenses	765		835
Restructuring charges	23		—
Depreciation and amortization expense	131		132
Income from operations	695		702
Other income (expense), net:
Interest income	30		30
Interest expense	(11)		(9)
Foreign currency exchange gains (losses), net	6		12
Other, net	2		3
Total other income (expense), net	27		36
Income before provision for income taxes	722		738
Provision for income taxes	(179)		(158)
Income (loss) from equity method investments	3		—
Net income	$	546	$	580
Basic earnings per share	$	1.10	$	1.14
Diluted earnings per share	$	1.10	$	1.14
Weighted average number of common shares outstanding - Basic	497		509
Dilutive effect of shares issuable under stock-based compensation plans	1		—
Weighted average number of common shares outstanding - Diluted	498		509


(in millions)	Three Months Ended March 31,
	2024		2023
Net income	$	546	$	580
Change in Accumulated other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(73)		43
Unrealized gains and losses on cash flow hedges	11		34

Other comprehensive income (loss)	(62)		77
Comprehensive income	$	484	$	657


(in millions, except per share data)	Class A Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2023	498	$	5	$	15	$	13,301	$	(94)	$	13,227
Net income	—	—		—		546		—		546
Other comprehensive income (loss)	—	—		—		—		(62)		(62)
Common stock issued, stock-based compensation plans	1	—		20		—		—		20
Stock-based compensation expense	—	—		42		—		—		42
Repurchases of common stock	(2)	—		(57)		(76)		—		(133)
Dividends declared, $0.30 per share	—	—		—		(150)		—		(150)
Balance, March 31, 2024	497	$	5	$	20	$	13,621	$	(156)	$	13,490


(in millions)	For the Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	546	$	580
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	133		132

Deferred income taxes	(26)		(16)
Stock-based compensation expense	42		44

Other	32		27
Changes in assets and liabilities, net of the effect of business combinations:
Trade accounts receivable, current	39		89
Other current and noncurrent assets	(347)		(17)
Accounts payable	(47)		(26)
Deferred revenues, current and noncurrent	50		71
Other current and noncurrent liabilities	(327)		(155)
Net cash provided by operating activities	95		729
Cash flows from investing activities:
Purchases of property and equipment	(79)		(98)

Proceeds from maturity or sale of available-for-sale investment securities	—		225
Purchases of held-to-maturity investment securities	—		(3)
Proceeds from maturity of held-to-maturity investment securities	3		15
Purchases of other investments	—		(26)
Proceeds from maturity or sale of other investments	259		81

Payments for business combinations, net of cash acquired	(421)		(409)
Net cash (used in) investing activities	(238)		(215)
Cash flows from financing activities:
Issuance of common stock under stock-based compensation plans	20		23


Repurchases of common stock	(133)		(222)
Repayment of Term Loan borrowings and earnout and finance lease obligations	(40)		(1)

Dividends paid	(151)		(150)
Net cash (used in) financing activities	(304)		(350)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents	(39)		—
(Decrease) increase in cash, cash equivalents and restricted cash and cash equivalents	(486)		164
Cash, cash equivalents and restricted cash and cash equivalents beginning of year	2,717		2,294
Cash and cash equivalents, end of period	$	2,231	$	2,458


Date Issued and Topic	Effective Date	Description	Impact
November 2023 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures	Annual period starting in 2024 and interim periods starting in 2025 Retrospective basis	The standard requires enhanced segment disclosures but does not change the definition of a segment or the guidance for determining a reportable segment. The amendments require disclosure of significant segment expenses regularly provided to the CODM included within segment operating profit or loss and a description of how the CODM utilizes segment operating profit or loss to assess segment performance and allocating resources. The new standard also allows companies to disclose multiple measures of segment profit or loss if those measures are used to allocate resources.	The Company is currently evaluating the impact of the new standard on its disclosures.
December 2023 Income Taxes (Topic 740): Improvements to Income Tax Disclosures	Annual period starting in 2025 Prospective basis although retrospective application is permitted	The standard requires enhanced income tax disclosures primarily related to the income tax rate reconciliation and income taxes paid information.	The Company is currently evaluating the impact of the new standard on its disclosures.


	Three Months Ended March 31, 2024

(in millions)	Financial Services		Health Sciences		Products and Resources		Communications, Media and Technology		Total
Revenues
Geography:
North America	$	977	$	1,209	$	773	$	562	$	3,521
United Kingdom	143		44		131		138		456
Continental Europe	151		135		145		52		483
Europe - Total	294		179		276		190		939
Rest of World	114		28		84		74		300
Total	$	1,385	$	1,416	$	1,133	$	826	$	4,760

Service line:
Consulting and technology services	$	953	$	802	$	736	$	464	$	2,955
Outsourcing services	432		614		397		362		1,805
Total	$	1,385	$	1,416	$	1,133	$	826	$	4,760

Type of contract:
Time and materials	$	783	$	490	$	470	$	467	$	2,210
Fixed-price	556		670		582		328		2,136
Transaction or volume-based	46		256		81		31		414
Total	$	1,385	$	1,416	$	1,133	$	826	$	4,760


	Three Months Ended March 31, 2023

(in millions)	Financial Services		Health Sciences		Products and Resources		Communications, Media and Technology		Total
Revenues
Geography:
North America	$	1,033	$	1,248	$	741	$	523	$	3,545
United Kingdom	162		37		132		147		478
Continental Europe	152		124		150		35		461
Europe - Total	314		161		282		182		939
Rest of World	129		24		95		80		328
Total	$	1,476	$	1,433	$	1,118	$	785	$	4,812

Service line:
Consulting and technology services	$	1,000	$	812	$	732	$	442	$	2,986
Outsourcing services	476		621		386		343		1,826
Total	$	1,476	$	1,433	$	1,118	$	785	$	4,812

Type of contract:
Time and materials	$	861	$	490	$	445	$	464	$	2,260
Fixed-price	545		650		585		293		2,073
Transaction or volume-based	70		293		88		28		479
Total	$	1,476	$	1,433	$	1,118	$	785	$	4,812


(in millions)	2024		2023
Beginning balance	$	245	$	265
Costs capitalized	14		15
Amortization expense	(24)		(22)

Ending balance	$	235	$	258


(in millions)	Thirdera		Weighted Average Useful Life
Cash	$	8
Trade accounts receivable	22
Other current assets	10
Property and equipment and other noncurrent assets	2
Non-deductible goodwill	178
Tax-deductible goodwill	167
Customer relationship assets	73		8.0 years
Other intangible assets	1		1.0 year
Current liabilities	(29)
Noncurrent liabilities	(3)
Purchase price	$	429


	Three Months Ended
(in millions)	March 31, 2024




Employee separation costs	$	8

Facility exit costs (1)	14
Third party and other costs (2)	1
Total restructuring charges	$	23


Long-term investments:
Other investments	$	83	$	80
Restricted time deposits(1)	—		355
Total long-term investments	$	83	$	435


(in millions)	Change in Derivative Gains and Losses Recognized in Accumulated Other Comprehensive Income (Loss) (effective portion)				Location of Net (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (effective portion)	Net (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (effective portion)
	2024		2023			2024		2023
Foreign exchange forward and option contracts – Designated as cash flow hedging instruments	$	15	$	33	Cost of revenues	$	—	$	(11)
					SG&A expenses	—		(1)
					Total	$	—	$	(12)


	Location of Net Gains (Losses) on Derivative Instruments	Amount of Net Gains (Losses) on Derivative Instruments

(in millions)		2024		2023
Foreign exchange forward contracts – Not designated as hedging instruments	Foreign currency exchange gains (losses), net	$	31	$	(10)


(in millions)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	411	$	—	$	—	$	411
Time deposits	—		470		—		470

Short-term investments:
Time deposits	—		1		—		1
Equity investment security	11		—		—		11


Other current assets:
Foreign exchange forward contracts	—		25		—		25


Other noncurrent assets
Foreign exchange forward contracts	—		8		—		8
Accrued expenses and other current liabilities:
Foreign exchange forward contracts	—		(3)		—		(3)


(in millions)	March 31, 2024		March 31, 2023
Beginning balance	$	30	$	22

Change in fair value recognized in SG&A expenses	—		12
Payments	(30)		—
Ending balance	$	—	$	34



(in millions)	Before Tax Amount		Tax Effect		Net of Tax Amount
Foreign currency translation adjustments:
Beginning balance	$	(109)	$	5	$	(104)
Change in foreign currency translation adjustments	(74)		1		(73)
Ending balance	$	(183)	$	6	$	(177)
Unrealized gains and losses on cash flow hedges:
Beginning balance	$	13	$	(3)	$	10
Unrealized gains arising during the period	15		(4)		11




Ending balance	$	28	$	(7)	$	21
Accumulated other comprehensive income (loss):
Beginning balance	$	(96)	$	2	$	(94)
Other comprehensive income (loss)	(59)		(3)		(62)
Ending balance	$	(155)	$	(1)	$	(156)


	As of
(in millions)	March 31, 2024		December 31, 2023
Long-lived Assets: (1)
North America(2)	$	329	$	335
Europe	85		90
Rest of World (3)	622		623
Total	$	1,036	$	1,048


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.


			% of			% of	Increase / Decrease
(Dollars in millions, except per share data)	2024		Revenues	2023		Revenues	$		%
Revenues	$	4,760	100.0	$	4,812	100.0	$	(52)	(1.1)
Cost of revenues(a)	3,146		66.1	3,143		65.3	3		0.1
Selling, general and administrative expenses(a)	765		16.1	835		17.4	(70)		(8.4)
Restructuring charges	23		0.5	—		—	23		N/A
Depreciation and amortization expense	131		2.8	132		2.7	(1)		(0.8)
Income from operations	695		14.6	702		14.6	(7)		(1.0)
Other income (expense), net	27			36			(9)		(25.0)
Income before provision for income taxes	722		15.2	738		15.3	(16)		(2.2)
Provision for income taxes	(179)			(158)			(21)		13.3
Income (loss) from equity method investments	3			—			3		N/A
Net income	$	546	11.5	$	580	12.1	$	(34)	(5.9)
Diluted earnings per share	$	1.10		$	1.14		$	(0.04)	(3.5)

Other Financial Information3
Adjusted Income from Operations and Adjusted Operating Margin	$	718	15.1	$	702	14.6	$	16	2.3
Adjusted Diluted EPS	$	1.12		$	1.11		$	0.01	0.9


Revenues - Reportable Business Segments and Geographic Markets


Q1 2024 as compared to Q1 2023			Increase / (Decrease)
(Dollars in millions)	$	%			CC %4
Financial Services			$	(91)		(6.2)	(6.5)
Health Sciences			(17)			(1.2)	(1.3)
Products and Resources			15			1.3	0.9
CMT			41			5.2	5.7
Total revenues			$	(52)		(1.1)	(1.2)


SG&A Expenses (Exclusive of Depreciation and Amortization Expense)


(Dollars in millions)	2024		% of Revenues	2023		% of Revenues	Increase/(Decrease)
Total segment operating profit	$	955	20.1	$	1,006	20.9	$	(51)
Less: unallocated costs	260		5.5	304		6.3	(44)
Income from operations	$	695	14.6	$	702	14.6	$	(7)


	2024		% of Revenues	2023		% of Revenues
GAAP income from operations and operating margin	$	695	14.6	$	702	14.6
NextGen charges(1)	23		0.5	—		—
Adjusted Income from Operations and Adjusted Operating Margin	$	718	15.1	$	702	14.6

GAAP diluted EPS	$	1.10		$	1.14
Effect of NextGen charges, pre-tax	0.05			—
Non-operating foreign currency exchange (gains) losses, pre-tax (2)	(0.01)			(0.02)
Tax effect of above adjustments(3)	(0.02)			(0.01)

Adjusted Diluted EPS	$	1.12		$	1.11


Item 3. Quantitative and Qualitative Disclosures about Market Risk.


Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (in millions)
January 1, 2024 - January 31, 2024	—	$	—	—	$	1,777
February 1, 2024 - February 29, 2024	780,000	77.81		780,000	1,717
March 1, 2024 - March 31, 2024	636,396	77.48		636,396	1,667
Total	1,416,396	$	77.66	1,416,396