Cognizant Reports Second Quarter 2024 Results

• Revenue of $4.9 billion, above the high end of our guidance range; sequentially increased 1.9%, or 2.1% in constant currency¹
• Operating margin of 14.6%, up from 11.8% in the second quarter of 2023, and Adjusted Operating Margin¹ of 15.2%, which expanded 100 basis points year-over-year
• Trailing 12-month bookings of $26.2 billion; book-to-bill of 1.4x
• Third quarter of 2024 revenue guidance of flat to 1.5% year-over-year growth in constant currency
• Full-year 2024 revenue guidance narrowed to a decline of 0.5% to growth of 1.0% in constant currency, an increase at the midpoint
• Full-year 2024 Adjusted Operating Margin guidance unchanged at 15.3-15.5%, representing year-over-year expansion of 20 to 40 basis points

TEANECK, N.J., July 31, 2024 /PRNewswire/ -- Cognizant (Nasdaq: CTSH), one of the world's leading professional services companies, today announced its second quarter 2024 financial results.

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"In the second quarter, we delivered revenue above the high end of our guidance range, expanded adjusted operating margin, and maintained our large deal momentum," said Ravi Kumar S, Chief Executive Officer. "Progress against our strategic priorities is opening new opportunities with clients and allowing us to operate with greater agility. We believe our performance this quarter and the improved organic growth outlook for the full year demonstrate how our execution against these priorities is beginning to translate to our results and support long-term shareholder value."

"Sequential revenue growth of 2.1% in constant currency, driven by our Financial Services and Health Sciences segments, was the strongest in two years," said Jatin Dalal, Chief Financial Officer. "Our NextGen program has helped us fund investments in support of revenue growth and deliver 70 basis points of adjusted operating margin expansion in the first half of 2024. We enter the third quarter with improved revenue momentum and remain committed to driving operational excellence."

Bookings

Bookings in the second quarter increased 5% year-over-year. On a trailing-twelve-month basis, bookings declined 1% year-over-year to $26.2 billion, which represented a book-to-bill of approximately 1.4x.

Employee Metrics

Voluntary attrition - Tech Services on a trailing-twelve months basis was 13.6% as compared to 19.9% for the period ended June 30, 2023. Total headcount at the end of the second quarter was 336,300, a decrease of 8,100 from Q1 2024 and a decrease of 9,300 from Q2 2023.

Return of Capital to Shareholders

The Company repurchased 0.9 million shares for $63 million during the second quarter under its share repurchase program. As of June 30, 2024, there was $1.6 billion remaining under the share repurchase authorization. In July 2024, the Company declared a quarterly cash dividend of $0.30 per share for shareholders of record on August 20, 2024. This dividend will be payable on August 28, 2024.

Third Quarter and Full-Year 2024 Guidance²
(all growth rates year-over-year; excludes the impact of the Belcan transaction, which is expected to close in the third quarter 2024)

• Third quarter revenue is expected to be $4.89 - $4.96 billion, a decline of 0.2% to an increase of 1.3%, or flat to an increase of 1.5% in constant currency.
• Full-year 2024 revenue is expected to be $19.3 - $19.5 billion, a decline of 0.5% to an increase of 1.0% as reported and on a constant currency basis. This assumes approximately 70 basis points of inorganic contribution.
• Full-year 2024 Adjusted Operating Margin³ is expected to be in the range of 15.3% to 15.5%, or 20 to 40 basis points of expansion.
• Full-year 2024 Adjusted EPS³ is expected to be in the range of $4.62 to $4.70.

Select Company, Client and Partnership Announcements

• Signed definitive agreement to acquire Belcan, a leading global supplier of Engineering Research & Development (ER&D) services for a long-standing customer base across the commercial aerospace, defense, space, marine and industrial verticals, for $1.3 billion in cash and stock. The acquisition is expected to significantly expand Cognizant's ER&D capabilities, building upon the Company's leadership in the Internet of Things (IoT) and Digital Engineering practice areas. Belcan will bring a highly accredited and skilled workforce of approximately 6,500 engineers and technical consultants, primarily based in North America. The acquisition is expected to close in Q3 2024.
• Announced the launch of Cognizant Moment™, the next evolution of Cognizant's digital experience practice area, designed to help clients leverage the power of AI to reimagine customer experience and engineer innovative strategies aimed at driving growth. The new practice builds on the digital experience expertise and solutions Cognizant has delivered for clients over the last 20+ years and advanced through a series of key acquisitions in the digital experience space. Now, as the ways consumers interact with technology are shifting to include multi-modal experiences, Cognizant aims to give clients the tools and insights they need to drive differentiation, cultivate customer loyalty and become future-ready.
• Introduced Cognizant Neuro® Edge, a new platform in the Cognizant Neuro® suite, designed to empower businesses across industries to leverage artificial intelligence and generative AI at the edge. Edge computing enables enterprises to access computing power via sensors and devices on their networks, reducing dependency on centralized servers and the cloud. The platform facilitates real-time interactions with devices, helping businesses to accelerate decision-making, reduce data costs and privacy risks and maintain operational stability even in low bandwidth scenarios.
• Launched our first set of healthcare large language model (LLM) solutions on Google Cloud's generative AI (gen AI) technology, including the company's Vertex AI platform and Gemini models, aimed at redesigning healthcare administrative processes and improving experiences. The suite of healthcare LLM solutions addresses four high-cost workflows: marketing operations, call center operations (including appeals and grievances), provider management and contracting.
• Signed an agreement to provide engineering services to Gentherm, the global market leader of innovative thermal management and pneumatic comfort technologies for the automotive industry and a leader in medical patient temperature management systems. Cognizant is providing systems engineering, validation and model-based development services from Hyderabad, India, and has created a test facility to conduct research and development for Gentherm products.
• Signed a five-year strategic agreement with Victory Capital Holdings, Inc, a diversified global asset management firm. Cognizant will provide IT infrastructure, security, and data and analytics support to Victory Capital's next phase of digital transformation.
• Agreement with Texas Dow Employees Credit Union (TDECU), the largest credit union in Houston and the fourth largest in Texas, to accelerate its 'Run the Business' transformation journey. Cognizant will be leveraging its Neuro® IT Operations platform to help transform TDECU's enterprise infrastructure and technology, enhance the credit union's operational efficiency and resilience, and increase TDECU's ability to achieve cost savings over the next five years.
• Expanded relationship with Cengage Group, a global educational technology company that supports millions of students each year, from middle school through graduate school and skills education, with quality content and technology. Under this seven-year agreement, Cognizant will provide advanced technology services that are designed to enhance operational efficiency, reduce the total cost of ownership, and continue to support Cengage Group's digital transformation.
• Announced an agreement with Nexthink under which Cognizant will apply its deep expertise in digital workplace services and its portfolio of tools with Nexthink's flagship product, Nexthink Infinity, to create a new joint offering - Cognizant WorkNEXT™ Workplace Intelligence. The new joint offering aims to provide seamless, reliable experiences across the devices, applications and connectivity provided by workplace IT to reduce operational costs and improve user productivity.
• Partnered to support Kohler Co. in establishing its energy business – Kohler Energy – as a standalone entity with independent operations. As Kohler's existing strategic partner, Cognizant worked hand-in-hand with Kohler to evaluate the right approach for the carve-out, devise an optimal plan, and execute the separation of systems within a challenging six-month timeframe.
• Expanded relationship with Whitbread, the owner of Premier Inn, the UK's biggest hotel brand. The three-year digital innovation agreement will see Cognizant support Whitbread's ongoing digital transformation with product design, product management and engineering as Whitbread expands its operations in the UK and Germany. This follows a major modernization program where Cognizant helped Whitbread replace its legacy property management system.
• Announced a five-year agreement with Unitywater, a leading water utility in Queensland, for Unitywater's ICT Support Managed Services. The new relationship aims to support Unitywater's digital infrastructure, enhancing operational efficiency and productivity, in alignment with Unitywater's strategic ambition of healthy and thriving communities.
• Announced a deal with Hays, the world's leading specialist in workforce solutions and recruitment, to become its global technology partner. Cognizant is expected to manage Hays' IT operations globally by overseeing its IT service desk, business applications, and infrastructure and operations with the goal of enhancing Hays' operational efficiency and innovation capabilities.

Select Analyst Ratings, Company Recognition and Announcements

• Released a companion analysis to our comprehensive 2023 study with Oxford Economics and the related report – titled "New Work, New World" – that provides a detailed analysis outlining the current market adoption of generative AI across various industries and geographies. Key findings from the survey reveal that the greatest strategic priority for generative AI adoption is enhancing productivity. Additionally, the study found that 76% of businesses are looking to leverage the technology to create new revenue streams, while 58% are incorporating revenue increases into their business cases.
• Named one of "America's Greatest Workplaces" and "Greatest Workplaces for Job Starters" by Newsweek, a global media organization that recognized us for our engaging workplace culture and proficiency at helping early talent launch their careers.
• Salesforce named Cognizant their 2024 UKI Partner of the Year and Google Cloud awarded us their 2024 Industry Solution Services Partner of the Year - Healthcare and Life Sciences in recognition of our success driving digital transformations with customers utilizing Google Cloud technologies, including AI.
• Singapore's Digital for Life movement, a pivotal national initiative to foster a digitally empowered and inclusive society, recognized Cognizant as a Digital for Life – Champion. This award highlights our commitment to advancing tech-enabled livelihoods for women, enhancing Gen AI skills within our community, and creating pathways in technology through our collaboration with schools.
• Recognized as a Leader by Everest Group® in:
  • Healthcare Industry Cloud Services PEAK Matrix® Assessment, 2024
  • Care Management Platforms PEAK Matrix® Assessment, 2024
  • Guidewire IT Services PEAK Matrix® Assessment, 2024
  • Capital Market IT Services PEAK Matrix® Assessment, 2024
  • Open Banking IT Services PEAK Matrix® Assessment, 2024
  • Duck Creek Services, 2024
• A Leader in IDC MarketScape:
  • Worldwide Consulting and Digital Services Providers for the Upstream Oil and Gas Industry, doc #US51004123, May 2024
  • Worldwide Consulting and Digital Services Providers for the Downstream Oil & Gas Industry, doc #US51004223, June 2024
  • Asia/Pacific Sustainability/ESG Program Management Services 2024 Vendor Assessment, doc #AP50679323, June 2024
• Market Leader in HFS Horizon 3:
  • Healthcare Provider Services, 2024
  • Industry Cloud Services, 2024
• Leadership in ISG Provider Lens™:
  • ServiceNow Ecosystem Partners, 2024
  • SAP Ecosystem, 2024
• Leading Pack in TechMarketView MRI Report 2024 - The Road to AI
• Leadership in Avasant RadarView™:
  • Internet of Things Services, 2024
  • Applied AI Services, 2024
  • Banking Process Transformation, 2024
  • Banking Digital Services, 2024
  • Clinical and Care Management Services Business Process Transformation, 2024

Conference Call

Cognizant will host a conference call on July 31, 2024, at 5:00 p.m. (Eastern) to discuss the Company's second quarter 2024 results. To listen to the conference call, please dial (877) 810-9510 (domestic) or +1 (201) 493-6778 (international) and provide the following conference passcode: "Cognizant Call."

The conference call will also be available live on the Investor Relations section of the Cognizant website at http://investors.cognizant.com. An earnings supplement will also be available on the Cognizant website at the time of the conference call. For those who cannot access the live broadcast, a replay will be available. To listen to the replay, please dial (877) 660-6853 (domestically) or +1 (201) 612-7415 (internationally) and enter 13747233 beginning two hours after the end of the call until 11:59 p.m. (Eastern) on Tuesday, August 14, 2024. The replay will also be available at Cognizant's website www.cognizant.com for 60 days following the call.

About Cognizant

Cognizant (Nasdaq: CTSH) engineers modern businesses. We help our clients modernize technology, reimagine processes and transform experiences so they can stay ahead in our fast-changing world. Together, we're improving everyday life. See how at www.cognizant.com or @cognizant.

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 is necessarily subject to risks, uncertainties and assumptions as to future events that may not prove to be accurate. These statements include, but are not limited to, express or implied forward-looking statements relating to our strategy, strategic partnerships and collaborations, competitive position and opportunities in the marketplace, investment in and growth of our business, the anticipated closing of the pending Belcan acquisition, the pace and magnitude of change and client needs related to generative AI, the effectiveness of our recruiting and talent efforts and related costs, labor market trends, the anticipated amount of capital to be returned to shareholders and our anticipated financial performance. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions, the competitive and rapidly changing nature of the markets we compete in, the competitive marketplace for talent and its impact on employee recruitment and retention, our ability to successfully implement our NextGen program and the amount of costs, timing of incurring costs and ultimate benefits of such plans, our ability to successfully use AI-based technologies, legal, reputational and financial risks resulting from cyberattacks, changes in the regulatory environment, including with respect to immigration and taxes, matters relating to the acquisition of Belcan and the other factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Cognizant undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

About Non-GAAP Financial Measures and Performance Metrics

Non-GAAP Financial Measures

To supplement our financial results presented in accordance with GAAP, this press release includes references to the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: Adjusted Operating Margin, Adjusted Diluted EPS, free cash flow, net cash and constant currency revenue growth. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of our non-GAAP financial measures to the corresponding GAAP measures should be carefully evaluated.

Our non-GAAP financial measures Adjusted Operating Margin and Adjusted Income from Operations excludes unusual items, such as NextGen charges. Our non-GAAP financial measure Adjusted Diluted EPS excludes unusual items, such as NextGen charges, net non-operating foreign currency exchange gains or losses and the tax impact of all the applicable adjustments. The income tax impact of each item excluded from Adjusted Diluted EPS is calculated by applying the statutory rate and local tax regulations in the jurisdiction in which the item was incurred. Free cash flow is defined as cash flows from operating activities net of purchases of property and equipment. Net cash is defined as cash and cash equivalents and short-term investments less short-term and long-term debt. Constant currency revenue growth is defined as revenues for a given period restated at the comparative period's foreign currency exchange rates measured against the comparative period's reported revenues.

Management believes providing investors with an operating view consistent with how we manage the Company provides enhanced transparency into our operating results. For our internal management reporting and budgeting purposes, we use various GAAP and non-GAAP financial measures for financial and operational decision-making, to evaluate period-to-period comparisons, to determine portions of the compensation for our executive officers and for making comparisons of our operating results to those of our competitors. Accordingly, we believe that the presentation of our non-GAAP measures, which exclude certain costs, when read in conjunction with our reported GAAP results, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations.

A limitation of using non-GAAP financial measures versus financial measures calculated in accordance with GAAP is that non-GAAP financial measures do not reflect all of the amounts associated with our operating results as determined in accordance with GAAP and may exclude costs that are recurring such as our net non-operating foreign currency exchange gains or losses. In addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the usefulness of these non-GAAP financial measures as a comparative tool. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from our non-GAAP financial measures to allow investors to evaluate such non-GAAP financial measures.

Performance Metrics

Bookings are defined as total contract value (or TCV) of new contracts, including new contract sales as well as renewals and expansions of existing contracts. Bookings can vary significantly quarter to quarter depending in part on the timing of the signing of a small number of large contracts. Our book-to-bill ratio is defined as bookings for the trailing twelve months divided by revenue for the same period. Measuring bookings involves the use of estimates and judgments and there are no independent standards or requirements governing the calculation of bookings. The extent and timing of conversion of bookings to revenues may be impacted by, among other factors, the types of services and solutions sold, contract duration, the pace of client spending, actual volumes of services delivered as compared to the volumes anticipated at the time of sale, and contract modifications, including terminations, over the lifetime of a contract. The majority of our contracts are terminable by the client on short notice often without penalty, and some without notice. We do not update our bookings for subsequent terminations, reductions or foreign currency exchange rate fluctuations. Information regarding our bookings is not comparable to, nor should it be substituted for, an analysis of our reported revenues. However, management believes that it is a key indicator of potential future revenues and provides a useful indicator of the volume of our business over time.

- tables to follow -

The above tables serve to reconcile the Non-GAAP financial measures to the most directly comparable GAAP measures. Refer to the "About Non-GAAP Financial Measures and Performance Metrics" section of our press release for further information on the use of these Non-GAAP measures.

SOURCE Cognizant Technology Solutions Corporation