Exhibit 99.1
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| FOR: | | Cognizant Technology Solutions Corporation |
| | 500 Glenpointe Centre West |
| | Teaneck, NJ 07666 |
| CONTACT: | | Gordon Coburn |
| | Chief Financial Officer |
| | 201-678-2712 |
For Immediate Release (7:00 AM ET on 10.26.04) | | |
| | Investors: Kirin Smith/Ian Bailey |
| | Press: Brian Maddox/Scot Hoffman |
| | Financial Dynamics |
| | 212-850-5600 |
| | shoffman@fd-us.com |
COGNIZANT TECHNOLOGY SOLUTIONS REPORTS RECORD THIRD QUARTER
RESULTS; RAISES FULL-YEAR GUIDANCE
Revenue Increases 58%; Net Income Up 63%
Teaneck, NJ – October 26, 2004 – Cognizant Technology Solutions Corporation (NASDAQ: CTSH), a leading provider of IT services, today announced its financial results for the third quarter ended September 30, 2004.
Highlights for the third quarter include:
| | • | | Quarterly revenue increased to $155.4 million, up 12% sequentially and 58% from the year ago quarter |
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| | • | | Operating margin of 19.9% compared to 19.6% in the year-ago period |
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| | • | | Diluted quarterly EPS of $0.18 |
Revenue for the third quarter increased to $155.4 million, up 12% from $138.7 million in the second quarter of 2004, and up 58% from $98.1 million in the third quarter of 2003. Net income for the third quarter increased to $26.1 million, or $0.18 per diluted share compared to $16.0 million or $0.12 per diluted share (on a split-adjusted basis) in the third quarter of 2003. Operating margin for the quarter increased to 19.9%, compared to 19.6% in the third quarter of 2003. In a separate release issued today, Cognizant also announced a further expansion of its planned India construction program to meet the continuing strong demand for its offshore services from new and existing clients.
“Our strong third-quarter financial results were marked by balanced growth across our key verticals, continued strength in our applications management business, and sustained growth in discretionary development spending,” said Lakshmi Narayanan, President and CEO of Cognizant. “During the quarter we also saw growing demand from existing customers for our infrastructure services capabilities, where Cognizant remotely manages its clients’ mission critical IT infrastructure. Our business-driven services, highly skilled employees, strong execution and solid customer satisfaction reinforce our position among the top providers of offshore IT outsourcing services. Additionally, our ongoing focus on strengthening and deepening our relationships with existing clients while maintaining our strong win rate has further enhanced our competitive position and provides a solid foundation for our continuing success in the future.”
2004 Outlook
Based on current visibility, the Company is now providing the following updated guidance:
| | • | | Fourth quarter 2004 revenue now anticipated to be at least $167 million |
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| | • | | Fourth quarter 2004 expected diluted EPS of $0.19 |
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| | • | | Fiscal 2004 revenue now anticipated to be at least $581 million |
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| | • | | Fiscal 2004 expected diluted EPS of $0.68 |
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| | • | | Total headcount by end of Fiscal 2004 expected to reach 15,000 |
“In addition to our strong revenue and margin performance during the quarter, we are particularly pleased with our cash flow metrics, including the generation of over $41 million of cash from operations,” said Gordon Coburn, Chief Financial Officer of Cognizant. “Our pipeline of new business remains strong as the interest level and demand from prospective customers continues to increase in both North America and Europe. Additionally, we continue to have significant visibility due to the high level of recurring revenue from our long-term customer relationships. As a result of our ongoing investment in infrastructure and the recruitment and training of our highly skilled staff, we believe that Cognizant is well positioned for strong performance for the remainder of this year and going into 2005.”
Conference Call
Cognizant will host a conference call on October 26th, at 9:00 a.m. (ET) to discuss the Company’s quarterly results. To listen to the call please dial (888) 652-6834 domestic and (706) 679-3288 internationally. The call will also be broadcast live via the Internet at Cognizant’s web site, www.cognizant.com. Please go to the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software. A replay will be made available on the web site at www.cognizant.com or by calling (800) 642-1687 for domestic callers and (706) 645-9291 for international callers and entering “1330076” from two hours after the end of the call until 11:59 p.m. (ET) on November 2, 2004.
About Cognizant Technology Solutions
Cognizant (NASDAQ: CTSH) is a leading provider of IT services. Focused on delivering strategic information technology solutions that address the complex business needs of its clients, Cognizant provides applications management, development, integration, and re-engineering, infrastructure management, business process outsourcing, and a number of related services such as enterprise consulting, technology architecture, program management and change management through its onsite/offshore outsourcing model.
Cognizant’s more than 14,000 employees are committed to partnerships that sustain long-term, proven value for customers by delivering high-quality, cost-effective solutions through its development centers in India, and onsite client teams. Cognizant maintains P-CMM and SEI-CMM Level 5 assessments from an independent third-party assessor, was recently named Forbes’ Best Small Company in America for the second consecutive year, and ranked as the top information technology company in BusinessWeek’s Hot Growth Companies. Further information about Cognizant can be found at http://www.cognizant.com.
This press release includes statements which 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 are necessarily subject to risks, uncertainties and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed in our most recent 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.
-tables to follow-
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
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| | | Three Months Ended | | Nine Months Ended |
| | | September 30,
| | September 30,
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| | | 2004
| | 2003
| | 2004
| | 2003
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| Revenues | | $ | 155,429 | | | $ | 98,111 | | | $ | 413,892 | | | $ | 257,498 | |
| Revenues -related party | | | — | | | | — | | | | — | | | | 2,575 | |
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| Total revenues | | | 155,429 | | | | 98,111 | | | | 413,892 | | | | 260,073 | |
| Cost of revenues | | | 84,585 | | | | 52,968 | | | | 225,153 | | | | 141,126 | |
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| Gross profit | | | 70,844 | | | | 45,143 | | | | 188,739 | | | | 118,947 | |
| Selling, general and administrative expenses | | | 35,889 | | | | 22,861 | | | | 94,614 | | | | 59,624 | |
| Depreciation and amortization expense | | | 4,083 | | | | 3,008 | | | | 11,776 | | | | 8,397 | |
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| Income from operations | | | 30,872 | | | | 19,274 | | | | 82,349 | | | | 50,926 | |
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| Other income (expense): | | | | | | | | | | | | | | | | |
| Interest income | | | 1,267 | | | | 617 | | | | 2,922 | | | | 1,358 | |
| Other income (expense), net | | | (252 | ) | | | (21 | ) | | | (31 | ) | | | (120 | ) |
| Split-off costs (non tax deductible) | | | — | | | | — | | | | — | | | | (2,010 | ) |
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| Total other income (expense) | | | 1,015 | | | | 596 | | | | 2,891 | | | | (772 | ) |
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| Income before provision for income taxes | | | 31,887 | | | | 19,870 | | | | 85,240 | | | | 50,154 | |
| Provision for income taxes | | | (5,835 | ) | | | (3,910 | ) | | | (15,599 | ) | | | (10,514 | ) |
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| Net income | | $ | 26,052 | | | $ | 15,960 | | | $ | 69,641 | | | $ | 39,640 | |
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| Basic earnings per share | | $ | 0.20 | | | $ | 0.13 | | | $ | 0.53 | | | $ | 0.32 | |
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| Diluted earnings per share | | $ | 0.18 | | | $ | 0.12 | | | $ | 0.49 | | | $ | 0.30 | |
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| Weighted average number of common shares outstanding | | | 131,747 | | | | 125,803 | | | | 130,248 | | | | 124,063 | |
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| Weighted average number of common and dilutive shares outstanding | | | 142,721 | | | | 138,164 | | | | 141,845 | | | | 134,212 | |
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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
(In thousands)
| | | | | | | | | |
| | | September 30,
| | December 31,
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| | | 2004
| | 2003
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Assets | | | | | | | | |
| Cash and cash equivalents | | $ | 250,370 | | | $ | 194,221 | |
| Investments in short-term bank deposits | | | 20,021 | | | | - | |
| Trade accounts receivable, net of allowances of $1,261 and $989, respectively | | | 86,781 | | | | 52,253 | |
| Unbilled accounts receivable | | | 16,952 | | | | 9,543 | |
| Current tax asset | | | 23,609 | | | | 14,066 | |
| Other current assets | | | 14,271 | | | | 8,414 | |
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| Total Current Assets | | | 412,004 | | | | 278,497 | |
| Property and equipment — net | | | 70,075 | | | | 58,438 | |
| Goodwill | | | 5,603 | | | | 4,477 | |
| Other Intangible assets — net | | | 14,627 | | | | 16,436 | |
| Other assets | | | 4,533 | | | | 2,741 | |
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Total Assets | | $ | 506,842 | | | $ | 360,589 | |
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Liabilities and Stockholders’ Equity | | | | | | | | |
Current Liabilities | | | | | | | | |
| Accounts payable | | $ | 11,739 | | | $ | 9,423 | |
| Accrued and other current liabilities | | | 84,545 | | | | 53,213 | |
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| Total Current Liabilities | | | 96,284 | | | | 62,636 | |
| Deferred income taxes | | | 16,449 | | | | 23,883 | |
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Total Liabilities | | | 112,733 | | | | 86,519 | |
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Stockholders’ Equity | | | 394,109 | | | | 274,070 | |
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Total Liabilities and Stockholders’ Equity | | $ | 506,842 | | | $ | 360,589 | |
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