filings.toolsCognizant Technology Solutions 10-Q 2021-09-30
Filed 2021-10-28. 2 sections, 253K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||||
| For the quarterly period ended | September 30, 2021 | |||||||
| ☐ | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||||
| For the transition period from to |
Commission File Number 0-24429
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 13-3728359 | ||||||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||||||||||
300 Frank W. Burr Blvd.
Teaneck, New Jersey 07666
(Address of Principal Executive Offices including Zip Code)
Registrant’s telephone number, including area code: (201) 801-0233
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| 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 |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No: ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of October 22, 2021:
| Class | Number of Shares | |||||||
| Class A Common Stock, par value $0.01 per share | 525,251,734 |
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
TABLE OF CONTENTS
GLOSSARY
| 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 | ||||
| ASR | Accelerated Stock Repurchase | ||||
| CC | Constant Currency | ||||
| Class Action Settlement Loss | Loss recorded in connection with the filing of a settlement agreement that, subject to the approval of the USDC-NJ, would resolve the consolidated putative securities class action against us and certain of our former officers | ||||
| CMT | Communications, Media and Technology | ||||
| COVID-19 | The novel coronavirus disease | ||||
| COVID-19 Charges | Costs directly related to the COVID-19 pandemic | ||||
| Credit Agreement | Credit agreement with a commercial bank syndicate dated November 5, 2018 | ||||
| Credit Loss Standard | ASC Topic 326: "Financial Instruments - Credit Losses" | ||||
| CTS India | Our principal operating subsidiary in India | ||||
| DevOps | Agile relationship between development and IT operations | ||||
| Division Bench | Division Bench of the Madras High Court | ||||
| DOJ | United States Department of Justice | ||||
| DSO | Days Sales Outstanding | ||||
| EPS | Earnings Per Share | ||||
| ESG Mobility | ESG Mobility GmbH | ||||
| EU | European Union | ||||
| Exchange Act | Securities Exchange Act of 1934, as amended | ||||
| GAAP | Generally Accepted Accounting Principles in the United States of America | ||||
| High Court | Madras High Court | ||||
| Hunter | Certain net assets of Hunter Technical Resources, LLC | ||||
| India Defined Contribution Obligation | Certain statutory defined contribution obligations of employees and employers in India | ||||
| IoT | Internet of Things | ||||
| IRS | Internal Revenue Service | ||||
| IT | Information Technology | ||||
| ITD | Indian Income Tax Department | ||||
| LIBOR | London Inter-Bank Offered Rate | ||||
| Linium | The ServiceNow business of Ness Digital Engineering | ||||
| Magenic | Magenic Technologies, LLC | ||||
| SCI | Supreme Court of India | ||||
| SEC | United States Securities and Exchange Commission | ||||
| Servian | SVN HoldCo Pty Limited | ||||
| SG&A | Selling, general and administrative | ||||
| SLP | Special Leave Petition | ||||
| Syntel | Syntel Sterling Best Shores Mauritius Ltd. | ||||
| Tax on Accumulated Indian Earnings | The income tax expense related to the reversal of our indefinite reinvestment assertion on Indian earnings accumulated in prior years | ||||
| Term Loan | Unsecured term loan |
| Cognizant | 1 | September 30, 2021 Form 10-Q |
| Third Circuit | United States Court of Appeals for the Third Circuit | ||||
| TQS | TQS Integration Limited | ||||
| TriZetto | The TriZetto Group, Inc., now known as Cognizant Technology Software Group, Inc. | ||||
| 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 |
| Cognizant | 2 | September 30, 2021 Form 10-Q |
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited).
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
| (in millions, except par values) | September 30, 2021 | December 31, 2020 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,664 | $ | 2,680 | |||||||
| Short-term investments | 749 | 44 | |||||||||
| Trade accounts receivable, net | 3,510 | 3,087 | |||||||||
| Other current assets | 1,072 | 1,040 | |||||||||
| Total current assets | 6,995 | 6,851 | |||||||||
| Property and equipment, net | 1,179 | 1,251 | |||||||||
| Operating lease assets, net | 956 | 1,013 | |||||||||
| Goodwill | 5,451 | 5,031 | |||||||||
| Intangible assets, net | 1,198 | 1,046 | |||||||||
| Deferred income tax assets, net | 282 | 445 | |||||||||
| Long-term investments | 466 | 440 | |||||||||
| Other noncurrent assets | 705 | 846 | |||||||||
| Total assets | $ | 17,232 | $ | 16,923 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 351 | $ | 389 | |||||||
| Deferred revenue | 312 | 383 | |||||||||
| Short-term debt | 38 | 38 | |||||||||
| Operating lease liabilities | 200 | 211 | |||||||||
| Accrued expenses and other current liabilities | 2,418 | 2,519 | |||||||||
| Total current liabilities | 3,319 | 3,540 | |||||||||
| Deferred revenue, noncurrent | 37 | 36 | |||||||||
| Operating lease liabilities, noncurrent | 804 | 846 | |||||||||
| Deferred income tax liabilities, net | 214 | 206 | |||||||||
| Long-term debt | 636 | 663 | |||||||||
| Long-term income taxes payable | 378 | 428 | |||||||||
| Other noncurrent liabilities | 298 | 368 | |||||||||
| Total liabilities | 5,686 | 6,087 | |||||||||
| 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, 525 and 530 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 5 | 5 | |||||||||
| Additional paid-in capital | 29 | 32 | |||||||||
| Retained earnings | 11,479 | 10,689 | |||||||||
| Accumulated other comprehensive income (loss) | 33 | 110 | |||||||||
| Total stockholders’ equity | 11,546 | 10,836 | |||||||||
| Total liabilities and stockholders’ equity | $ | 17,232 | $ | 16,923 |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| Cognizant | 3 | September 30, 2021 Form 10-Q |
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| (in millions, except per share data) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenues | $ | 4,744 | $ | 4,243 | $ | 13,730 | $ | 12,468 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization expense shown separately below) | 2,947 | 2,647 | 8,574 | 8,009 | |||||||||||||||||||
| Selling, general and administrative expenses | 924 | 804 | 2,632 | 2,226 | |||||||||||||||||||
| Restructuring charges | — | 51 | — | 177 | |||||||||||||||||||
| Depreciation and amortization expense | 144 | 138 | 430 | 407 | |||||||||||||||||||
| Income from operations | 729 | 603 | 2,094 | 1,649 | |||||||||||||||||||
| Other income (expense), net: | |||||||||||||||||||||||
| Interest income | 7 | 27 | 23 | 105 | |||||||||||||||||||
| Interest expense | (3) | (6) | (7) | (21) | |||||||||||||||||||
| Foreign currency exchange gains (losses), net | (3) | (1) | (19) | (105) | |||||||||||||||||||
| Other, net | 1 | 1 | (1) | 1 | |||||||||||||||||||
| Total other income (expense), net | 2 | 21 | (4) | (20) | |||||||||||||||||||
| Income before provision for income taxes | 731 | 624 | 2,090 | 1,629 | |||||||||||||||||||
| Provision for income taxes | (187) | (276) | (531) | (552) | |||||||||||||||||||
| Income (loss) from equity method investments | — | — | 2 | (1) | |||||||||||||||||||
| Net income | $ | 544 | $ | 348 | $ | 1,561 | $ | 1,076 | |||||||||||||||
| Basic earnings per share | $ | 1.04 | $ | 0.64 | $ | 2.96 | $ | 1.98 | |||||||||||||||
| Diluted earnings per share | $ | 1.03 | $ | 0.64 | $ | 2.96 | $ | 1.98 | |||||||||||||||
| Weighted average number of common shares outstanding - Basic | 525 | 542 | 527 | 543 | |||||||||||||||||||
| Dilutive effect of shares issuable under stock-based compensation plans | 1 | 1 | 1 | — | |||||||||||||||||||
| Weighted average number of common shares outstanding - Diluted | 526 | 543 | 528 | 543 |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| Cognizant | 4 | September 30, 2021 Form 10-Q |
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| (in millions) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net income | $ | 544 | $ | 348 | $ | 1,561 | $ | 1,076 | |||||||||||||||
| Other |
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