Cognizant Q2 profits rise

Source: Cognizant Technology Solutions

Cognizant Technology Solutions Corporation (NASDAQ: CTSH), a leading provider of IT and business process outsourcing services, today announced its financial results for the quarter ended June 30, 2008.

Highlights - Second Quarter 2008

  • Quarterly revenue increased to $685.4 million, up 33% from the year-ago quarter.
  • Quarterly diluted EPS on a GAAP basis was $0.35, compared to $0.27 in the year-ago quarter.
  • Quarterly diluted EPS on a non-GAAP basis was $0.39, excluding $0.04 of stock-based compensation and stock-based Indian fringe benefit tax expenses, compared to $0.30, excluding stock-based compensation expense of $0.03, in the year-ago quarter.

Revenue for the quarter increased to $685.4 million, up 6.6% sequentially from $643.1 million in the first quarter of 2008, and up 33% from $516.5 million in the second quarter of 2007. GAAP net income was $103.9 million, or $0.35 per diluted share, compared to $82.3 million, or $0.27 per diluted share, in the second quarter of 2007. GAAP operating margin for the quarter was 17.5%. Excluding stock-based compensation expense of $10.5 million and stock-based Indian fringe benefit tax expense of $5.9 million, non-GAAP operating margin was 19.8%, in line with the Company's targeted 19 to 20% range. Reconciliations of these non-GAAP financial measures to GAAP operating results and diluted EPS are included at the end of this release.

"Despite continued uncertainty in the marketplace, we exceeded our quarterly revenue guidance and our sequential growth once again outpaced our peer group in the second quarter," said Francisco D'Souza, President and CEO of Cognizant. "Several of our business segments, including Financial Services, performed well during the quarter. Furthermore, we generated continued strong performance across Europe and healthy growth from our Business/Knowledge Process Outsourcing and IT Infrastructure Services practices as a result of clients' focusing on cost efficiencies."

"Due to the continued deterioration in the macroeconomic environment and sagging consumer and business confidence, we are adopting a more conservative stance for e for the remainder of the year. However, we remain optimistic about our long-term growth prospects given that our pipeline of large deals remains healthy, our market position remains strong and the trend towards increasing offshore spending continues, driven by secular changes in industry dynamics, pressures to find cost efficiencies or, in some cases, both."

2008 Outlook - Third Quarter & Full Year

Based on current visibility, the Company is now providing the following guidance:

  • Third quarter 2008 revenue anticipated to be at least $723 million.
  • Third quarter 2008 diluted EPS expected to be $0.37 on a GAAP basis, and $0.41 on a non-GAAP basis, which excludes $0.04 of estimated stock-based compensation and stock-based Indian fringe benefit tax expense.
  • Fiscal 2008 revenue is anticipated to be at least $2.81 billion.
  • Fiscal 2008 diluted EPS expected to be at least $1.44 on a GAAP basis, and $1.61 on a non-GAAP basis, which excludes $0.17 of estimated stock-based compensation and stock-based Indian fringe benefit tax expense.

"Although we are disappointed with the necessity of reducing our outlook for the second half of the year due to the weakening economy, we are pleased to continue our expectation of industry leading growth and a healthy long-term outlook for the business," said Gordon Coburn, Chief Financial and Operating Officer. "We continue to invest across the markets we serve, deepening our consulting and domain capabilities and expanding our services offerings in areas such as Business/Knowledge Process Outsourcing and IT Infrastructure Services in order to extend our leading competitive position. At the same time, we are focused on managing our expenses and increasing utilization in order to optimize our operating performance while we invest for the long term success of the business."

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