Cognizant Technology Solutions Corporation, announced its third quarter 2018 financial results.
Highlights - Third Quarter 2018¹
Revenue for the third quarter of 2018 rose to $4.08 billion, up 8.3% from $3.77 billion in the third quarter of 2017. GAAP operating margin was 18.3% and non-GAAP operating margin2 was 21.1% for the third quarter of 2018. Net income was $477 million, or $0.82 per diluted share, compared to $495 million, or $0.84 per diluted share, in the third quarter of 2017. The decrease in net income was primarily due to higher net non-operating foreign exchange losses in 2018 driven by the depreciation of the Indian rupee versus the prior year period. Non-GAAP diluted EPS was $1.19, compared to $0.98 in the third quarter of 2017.
“Cognizant delivered strong third-quarter results in three of our four business segments,” said Francisco D'Souza, Chief Executive Officer and Vice Chairman of the Board. “We made continued progress in our shift to digital by building new capabilities and helping our clients excel with digital services and solutions. We’re speeding clients along their journey to create more engaging customer experiences, automate their processes, and modernize their technology foundations, a three-layer transformation we call digital at scale. Our performance this year demonstrates our ability to both invest for growth and achieve our financial targets.”
1On January 1, 2018, we adopted ASC Topic 606, “Revenue from Contracts with Customers,” or the New Revenue Standard, using the modified retrospective method. Results for reporting periods beginning after January 1, 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting. For the three months ended September 30, 2018, adoption of the New Revenue Standard had a positive impact on revenue of $33 million, income from operations of $37 million and diluted earnings per share of $0.05 per share.
2Non-GAAP diluted EPS and non-GAAP operating margin exclude stock-based compensation costs, acquisition-related charges, realignment charges and, in the case of non-GAAP diluted EPS, the effect of an income tax benefit recognized upon the finalization of our calculation of the one-time net income tax expense related to the enactment of the Tax Reform Act, net non-operating foreign currency exchange gains or losses and the tax effect of the above adjustments, as applicable. Reconciliations of non-GAAP diluted EPS and non-GAAP operating margin to the corresponding GAAP measures are included at the end of this release.
Fourth Quarter & Full Year 2018 Outlook
The Company is providing the following guidance:
“We delivered solid performance in the third quarter as we continued to focus on sustainable revenue growth while increasing margins," said Karen McLoughlin, Chief Financial Officer. "The strength of our balance sheet allows the company to maintain financial flexibility while driving a substantial return of capital to shareholders.”
Return of Capital Program - Dividend
The Company has declared a quarterly cash dividend of $0.20 per share on Cognizant Class A common stock for shareholders of record at the close of business on November 20, 2018. This dividend will be payable on November 30, 2018.
Conference Call
Cognizant will host a conference call on October 30, 2018 at 8:00 a.m. (Eastern) to discuss the Company’s third quarter 2018 results. To listen to the conference call, please dial (877) 810-9510 (domestically) or (201) 493-6778 (internationally) and provide the following conference passcode: “Cognizant Call.”
The conference call will also be available live on the Investor Relations section of the Cognizant website at http://investors.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. An earnings supplement will also be available on the Cognizant website at the time of the conference call.
For those who cannot access the live broadcast, a replay will be available. To listen to the replay, please dial (877) 660-6853 (domestically) or (201) 612-7415 (internationally) and enter 13683206 from two hours after the end of the call until 11:59 p.m. (Eastern) on Tuesday, November 13, 2018. The replay will also be available at Cognizant’s website www.cognizant.com for 60 days following the call.
