Cognizant Technology Solutions 10-Q 2022-03-31

Filed 2022-05-05. 2 sections, 196K 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	March 31, 2022
☐	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 April 29, 2022:


Class						Number of Shares
Class A Common Stock, par value $0.01 per share						521,173,838

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

TABLE OF CONTENTS


		Page
GLOSSARY		1

PART I.	FINANCIAL INFORMATION	2

Item 1.	Consolidated Financial Statements (Unaudited)	2

	Consolidated Statements of Financial Position (Unaudited) as of March 31, 2022 and December 31, 2021	2

	Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31 , 202 2 and 202 1	3

	Consolidated Statements of Comprehensive Income (Unaudited) for the Three M onths Ended March 31 , 202 2 and 202 1	4

	Consolidated Statements of Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 202 2 and 202 1	5

	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31 , 202 2 and 202 1	6

	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

PART II.	OTHER INFORMATION	34

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 6.	Exhibits	35

SIGNATURES		36

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
ASC			Accounting Standards Codification
ASR			Accelerated Stock Repurchase
CC			Constant Currency
CITA			Commissioner of Income Tax (Appeals)
Class Action Settlement Loss			Loss recorded in connection with the filing of a settlement agreement to 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
Credit Agreement			Credit agreement with a commercial bank syndicate, as amended
CTS India			Our principal operating subsidiary in India
DOJ			United States Department of Justice
DSO			Days Sales Outstanding
EPS			Earnings Per Share
ESG			Environmental, social and corporate governance
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
India Defined Contribution Obligation			Certain statutory defined contribution obligations of employees and employers in India
IoT			Internet of Things
ITD			Indian Income Tax Department
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
Third Circuit			United States Court of Appeals for the Third Circuit
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 Technology Solutions			1			March 31, 2022 Form 10-Q

Table of Contents

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)	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	2,192	$	1,792
Short-term investments	127		927
Trade accounts receivable, net	3,663		3,557
Other current assets	1,095		1,066
Total current assets	7,077		7,342
Property and equipment, net	1,171		1,171
Operating lease assets, net	915		933
Goodwill	5,605		5,620
Intangible assets, net	1,167		1,218
Deferred income tax assets, net	333		404
Long-term investments	458		463
Other noncurrent assets	708		701
Total assets	$	17,434	$	17,852
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	394	$	361
Deferred revenue	455		403
Short-term debt	38		38
Operating lease liabilities	194		195
Accrued expenses and other current liabilities	2,105		2,532
Total current liabilities	3,186		3,529
Deferred revenue, noncurrent	23		40
Operating lease liabilities, noncurrent	758		783
Deferred income tax liabilities, net	213		218
Long-term debt	617		626
Long-term income taxes payable	378		378
Other noncurrent liabilities	286		287
Total liabilities	5,461		5,861
Commitments and contingencies (See Note 1 0)
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, 521 and 525 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	5		5
Additional paid-in capital	31		27
Retained earnings	11,956		11,922
Accumulated other comprehensive income (loss)	(19)		37
Total stockholders’ equity	11,973		11,991
Total liabilities and stockholders’ equity	$	17,434	$	17,852

The accompanying notes are an integral part of the unaudited consolidated financial statements.


Cognizant Technology Solutions			2			March 31, 2022 Form 10-Q

Table of Contents

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


(in millions, except per share data)	Three Months Ended March 31,
	2022		2021
Revenues	$	4,826	$	4,401
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization expense shown separately below)	3,097		2,764
Selling, general and administrative expenses	862		827

Depreciation and amortization expense	143		141
Income from operations	724		669
Other income (expense), net:
Interest income	6		9
Interest expense	(2)		(2)
Foreign currency exchange gains (losses), net	—		(9)
Other, net	1		(2)
Total other income (expense), net	5		(4)
Income before provision for income taxes	729		665
Provision for income taxes	(170)		(160)
Income (loss) from equity method investments	4		—
Net income	$	563	$	505
Basic earnings per share	$	1.07	$	0.95
Diluted earnings per share	$	1.07	$	0.95
Weighted average number of common shares outstanding - Basic	524		530
Dilutive effect of shares issuable under stock-based compensation plans	1		1
Weighted average number of common shares outstanding - Diluted	525		531

The accompanying notes are an integral part of the unaudited consolidated financial statements.


Cognizant Technology Solutions			3			March 31, 2022 Form 10-Q

Table of Contents

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


(in millions)	Three Months Ended March 31,
	2022		2021
Net income	$	563	$	505
Change in Accumulated other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(37)

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