Q1 2017 revenue of $3.55 billion, up 10.7% over 2016
Declares initial quarterly cash dividend of $0.15 per share
Cognizant Technology Solutions Corporation (NASDAQ: CTSH), one of the world’s leading professional services companies, today announced its first quarter 2017 financial results.
• Quarterly revenue rose to $3.55 billion, up 10.7% from the year-ago quarter and 2.4% sequentially.
• Quarterly GAAP diluted EPS was $0.92, compared to $0.72 in the year-ago quarter.
• Quarterly non-GAAP diluted EPS was $0.84, compared to $0.80 in the year-ago quarter.
Revenue for the first quarter of 2017 rose to $3.55 billion, up 10.7% from $3.20 billion in the first quarter of 2016. GAAP net income was $557 million, or $0.92 per diluted share, compared to $441 million, or $0.72 per diluted share, in the first quarter of 2016. Non-GAAP diluted EPS was $0.84, compared to $0.80 in the first quarter of 2016. GAAP operating margin was 16.1% and non-GAAP operating margin1 was 18.9% for the first quarter of 2017.
“We delivered solid results in the first quarter and continued to build our digital solutions portfolio, expand our skills, and enhance our engagement with clients,” said Francisco D’Souza, Chief Executive Officer. “We’re making good progress in accelerating Cognizant’s shift to digital services and solutions to create value for clients and shareholders, positioning us well to achieve both our revenue and margin targets for this year.”
Second Quarter & Full Year 2017 Outlook
The Company is providing the following guidance:
• Second quarter 2017 revenue expected to be in the range of $3.63 billion to $3.68 billion.
• Second quarter 2017 non-GAAP diluted EPS2 expected to be at least $0.89.
• Full year 2017 revenue expected to be in the range of $14.56 billion to $14.84 billion.
• Full year 2017 non-GAAP diluted EPS expected to be at least $3.64.
“We are pleased to initiate our enhanced capital return program, as previously committed to our shareholders,” said Karen McLoughlin, Chief Financial Officer. “Expanding our share repurchase program and initiating a quarterly dividend reflect our ability to generate strong cash flows and confidence in the long term strength of our business.”
Return of Capital and Realignment Programs
The Company has declared its initial quarterly cash dividend of $0.15 per share on Cognizant Class A Common Stock for shareholders of record at the close of business on May 22, 2017. This dividend will be payable on May 31, 2017.
Share Repurchase Program
In March 2017, the Company entered into accelerated share repurchase agreements, referred to collectively as the ASR, with certain financial institutions under our existing stock repurchase authorization. Under the terms of the ASR and in exchange for up-front payments of $1.5 billion, the financial institutions initially delivered 21.5 million shares, a portion of the Company’s total expected shares to be repurchased under the ASR. The total number of shares ultimately delivered is determined at the end of the applicable purchase periods under the ASR based on the volume-weighted average price of the Company’s common stock during such periods. The ASR purchase periods are scheduled to end during or prior to the third quarter of 2017.
The Company is realigning the business to accelerate our shift to high value digital transformation work while continuing to reassess less profitable opportunities. Additionally, as part of this realignment we plan to improve utilization, optimize our pyramid structure and talent supply chain management to better align resourcing with client demand, simplify our business unit overhead structure, and leverage our corporate function spend more effectively. This realignment is part of our plan to improve our non-GAAP operating margin to 22% in calendar year 2019 while continuing to drive revenue growth.
During the three months ended March 31, 2017, the Company incurred severance costs related to the realignment and advisory fees related to non-routine shareholder matters and to the development of our realignment and return of capital programs. These costs are excluded from non-GAAP operating margin and non-GAAP diluted earnings per share. The Company expects to incur the majority of the total costs related to the realignment program in 2017.
Cognizant will host a conference call on May 5, 2017 at 8:00 a.m. (Eastern) to discuss the Company’s first quarter 2017 results. To listen to the conference call, please dial (877) 810-9510 (domestically) and (201) 493-6778 (internationally) and provide the following conference passcode: “Cognizant Call.”
The conference call will also be available live via the Internet by accessing the Cognizant website at www.cognizant.com. Please go to the website at least 15 minutes prior to the call to register and to download and install any necessary audio software.
For those who cannot access the live broadcast, a replay will be available by dialing (877) 660-6853 for domestic callers or (201) 612-7415 for international callers and entering 13659909 from two hours after the end of the call until 11:59 p.m. (Eastern) on Friday, May 19, 2017. The replay will also be available at Cognizant’s website www.cognizant.com for 60 days following the call.