“We accomplished a great deal in the past year whilst keeping our clients and our talented associates foremost in mind,” said Brian Humphries, Chief Executive Officer. “Having strengthened our portfolio, and anticipating the exit of a large financial services engagement, we enter 2021 reinvigorated by our growing commercial momentum, investments in our future, and our vision to become the preeminent technology services partner to clients globally.”
|
($ in billions) |
Impact of the |
|||||||||||
|
Revenue |
Y/Y % |
Y/Y CC % |
Anticipated Exit |
Exit of Certain |
||||||||
|
Q4 2020 |
$4.2 |
(2.3) |
% |
(3.0) |
% |
(250 bps) |
(120 bps) |
|||||
|
Full Year 2020 |
$16.7 |
(0.8) |
% |
(0.7) |
% |
(70 bps) |
(110 bps) |
|||||
|
Q4 2020 |
Impact of the |
Q4 2019 |
FY2020 |
Impact of the |
FY2019 |
|||||||||||
|
GAAP operating margin |
11.1 |
% |
(300 bps) |
14.6 |
% |
12.7 |
% |
(80 bps) |
14.6 |
% |
||||||
|
Adjusted Operating Margin1 |
12.3 |
% |
17.0 |
% |
14.4 |
% |
16.6 |
% |
||||||||
|
GAAP diluted EPS |
$0.59 |
($0.25) |
$0.72 |
$2.57 |
($0.27) |
$3.29 |
||||||||||
|
Adjusted Diluted EPS1 |
$0.67 |
$1.07 |
$3.42 |
$3.99 |
||||||||||||
Fourth Quarter 2020 Performance by Business Segment
Financial Services (31.2% of revenues) revenue decreased 11.1% year-over-year, or 11.4% in constant currency, driven by declines in both banking and insurance. Growth in regional banks and retail banking was offset by the anticipated exit from a customer engagement, which negatively impacted our revenues in this segment by 730 basis points.
Cognizant made an offer in the fourth quarter to settle and exit a large customer engagement in the financial services segment in Continental Europe. The offer includes, among other terms, a proposed one-time payment and forgiveness of certain receivables. As a result of this offer, in the fourth quarter of 2020, we recorded a reduction of revenue of $107 million and additional expenses of $33 million, primarily related to the impairment of long-lived assets.
Healthcare (30.3% of revenues) revenue grew 4.0% year-over-year, or 3.3% in constant currency, driven by growth in both healthcare and life sciences. Performance in healthcare improved, driven by strength in payer clients and software license sales. Within life sciences, strength in pharmaceutical clients was partially offset by weakness in medical device clients.
Products and Resources (22.7% of revenues) revenue decreased 1.6% year-over-year, or 2.4% in constant currency. The decline was driven by retail, consumer goods, travel and hospitality clients that were particularly adversely affected by the pandemic, partially offset by double-digit constant currency growth in manufacturing, logistics, energy and utilities.
Communications, Media and Technology (15.8% of revenues) revenue increased 4.6% year-over-year, or 3.4% in constant currency, including a negative 790 basis point impact from our exit of certain content-related services, driven by double-digit constant currency growth in both technology and communications and media, which benefited from our recent acquisitions.
“We made good progress on our transformation program, delivering on our cost optimization initiatives to fund our strategic growth priorities,” said Jan Siegmund, Chief Financial Officer. “Another strong cash flow quarter supports our commitment to balanced capital allocation through an accelerated pace of acquisitions, continued share repurchases and today’s announced dividend increase.”
First Quarter and Full Year 2021 Outlook
The Company is providing the following guidance:
- First quarter revenue expected to be $4.34–$4.38 billion, or growth of 2.8-3.8% (1.0-2.0% in CC). This assumes an estimated positive 180 basis points foreign exchange impact and a negative 85 basis points impact from the exit of certain content services
- Full year 2021 revenue expected to be $17.6–$18.1 billion, or growth of 5.5-8.5% (4.0-7.0% in CC). This assumes an estimated positive 150 basis points foreign exchange impact and a negative 30 basis points impact from the exit of certain content services
- Full year 2021 Adjusted Operating Margin 15.2-16.2%
- Full year 2021 Adjusted Diluted EPS expected to be in the range of $3.90–$4.02
Return of Capital to Shareholders
In December 2020, as part of its ongoing balanced capital allocation strategy, the Company increased its share repurchase authorization by $2 billion. In February 2021, the Company declared a quarterly cash dividend of $0.24 per share, a 9% increase, for shareholders of record on February 18, 2021. This dividend will be payable on February 26, 2021.