Cognizant Technology Solutions Corporation (NASDAQ: CTSH), a leading provider of IT and business process outsourcing services, today announced its financial results for the three and twelve months ended December 31, 2007.
All share and per share amounts for the prior year periods presented have been adjusted to reflect the 2-for-1 stock split, effective October 16, 2007.
Highlights - Fourth Quarter 2007
- Quarterly revenue increased to $600.0 million, up 41% from the year-ago quarter.
- Quarterly diluted EPS on a GAAP basis was $0.32, compared to $0.23 in the year-ago quarter.
- Quarterly diluted EPS on a non-GAAP basis was $0.36, excluding stock- based compensation expense of $0.02 and a non-cash stock-based Indian fringe benefit tax expense of approximately $0.02, compared to $0.25, excluding stock-based compensation expense of $0.02, in the year ago quarter.
Revenue for the fourth quarter of 2007 increased to $600.0 million, up 7% sequentially from $558.8 million in the third quarter of 2007, and up 41% from $424.4 million in the fourth quarter of 2006. GAAP net income was $96.3 million, or $0.32 per diluted share, compared to $69.5 million, or $0.23 per diluted share, in the fourth quarter of 2006. Diluted earnings per share on a non-GAAP basis were $0.36. GAAP operating margin for the quarter was 17.7%. Excluding stock based compensation expense of $9.8 million and a $5.9 million non-cash operating expense charge resulting from the nine-month impact of the recently enacted and clarified fringe benefit tax on the exercise of stock options in India, non-GAAP operating margin was 20.3%, above the Company's targeted 19-20% range. Reconciliations of these non-GAAP financial measures to GAAP operating results and diluted EPS are included at the end of this release.
"We are very pleased with our fourth quarter and full year 2007 financial performance, which was driven by strong growth across our business segments, service offerings and geographic regions," said Francisco D'Souza, President and CEO of Cognizant. "Our results reflect Cognizant's ability to translate our investments in our global platform into new growth opportunities for the Company. Our leadership positions in key industry verticals resulted in strong revenue performance in our Healthcare and Financial Services business segments. We were also pleased to have closed the acquisition of marketRx during the quarter, which we anticipate will enable Cognizant to further enhance our strong market position in data analytics and the Life Sciences industry. Once again, I am pleased with our performance in Europe, where revenue grew 89%, compared to the fourth quarter of 2006."
Mr. D'Souza continued: "Looking forward, we remain focused on maintaining our industry-leading growth while continuing to improve efficiencies in our business and leveraging the scale of our operations through higher utilization. We intend to continue building distinctive positions in each vertical and horizontal service area, as well as expand our geographic footprint. In addition to building the infrastructure, processes and intellectual capital to allow us to scale the business, we remain committed to ensuring we have an environment at Cognizant where the best talent in the world can thrive. We are confident that our wide range of services, geographic footprint and strong pool of talent position us effectively to adapt to the changing economic environment, as we continue to capitalize on opportunities for the long-term growth of the business."
Highlights - Full Year 2007
- Revenue increased to $2.136 billion, up 50% from the year-ago period.
- Diluted EPS on a GAAP basis was $1.15, compared to $0.77 in the year- ago period.
- Diluted EPS on a non-GAAP basis was $1.27, excluding stock-based compensation expense of $0.10 and a non-cash stock-based Indian fringe benefit tax expense of $0.02, compared to $0.86, excluding stock-based compensation expense of $0.09, in the year-ago period.
Revenue for 2007 increased to $2.136 billion, up 50% from $1.424 billion for 2006. GAAP net income was $350.1 million, or $1.15 per diluted share, compared to $232.8 million, or $0.77 per diluted share, for 2006. Diluted earnings per share on a non-GAAP basis were $1.27. GAAP operating margin was 17.9%. Excluding stock based compensation expense of $35.9 million and a $5.9 million non-cash operating expense charge resulting from the recently enacted fringe benefit tax on the exercise of stock options in India, non-GAAP operating margin was 19.8%. Reconciliations of these non-GAAP financial measures to GAAP operating results and diluted EPS are included at the end of this release.
2008 Outlook - First Quarter & Full Year
Based on current visibility, the Company is now providing the following guidance:
- First quarter 2008 revenue anticipated to be at least $640 million.
- First quarter 2008 diluted EPS is expected to be $0.32 on a GAAP basis and $0.36 on a non-GAAP basis, which excludes $0.04 of estimated stock- based compensation and non-cash, stock-based Indian fringe benefit tax expense.
- Fiscal 2008 revenue expected to be at least $2.95 billion, up at least 38% compared to 2007.
- Fiscal 2008 diluted EPS expected to be at least $1.50 on a GAAP basis, and at least $1.67 on a non-GAAP basis, which excludes $0.17 of estimated stock-based compensation and non-cash, stock-based Indian fringe benefit tax expense.
- Total headcount by end of 2008 expected to be between 72,000 and 75,000, reflecting the Company's plan to increase utilization throughout the year.
"Our fourth quarter results are a testament to our ability to successfully manage our business while investing in Cognizant's growth platform around the world," said Gordon Coburn, Chief Financial and Operating Officer. "Throughout 2007, we continued to build our infrastructure to capture economies of scale and position Cognizant for long-term revenue growth. We generated approximately $150 million of cash from operations in the fourth quarter. After the acquisition of marketRx and buying back approximately 3.39 million shares of Cognizant stock for $105.4 million, we ended the year with over $670 million in cash and short-term investments on our balance sheet, leaving us with the financial flexibility to invest in our people, services and infrastructure to further differentiate Cognizant in the marketplace. Based on the demand environment and the strength of our growth platform, we believe that Cognizant will continue to outpace our overall market in 2008 and deliver value to our shareholders."
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