UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended	June 30, 2022
☐	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from                      to

Commission File Number 0-24429

 COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	13-3728359
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

300 Frank W. Burr Blvd.

Teaneck, New Jersey 07666

(Address of Principal Executive Offices including Zip Code)

Registrant’s telephone number, including area code: (201) 801-0233

N/A

(Former Name, Former Address and Former Fiscal Year,

if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	CTSH	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒   No:  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒    No:  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 22, 2022:

Class	Number of Shares
Class A Common Stock, par value $0.01 per share	517,784,927

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

TABLE OF CONTENTS

 

		Page
GLOSSARY		1
PART I.	FINANCIAL INFORMATION	2
Item 1.	Consolidated Financial Statements (Unaudited)	2
	Consolidated Statements of Financial Position (Unaudited) as of June 30, 2022 and December 31, 2021	2
	Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2022 and 2021	3
	Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 2022 and 2021	4
	Consolidated Statements of Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 2022 and 2021 and June 30, 2022 and 2021	5
	Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2022 and 2021	6
	Notes to Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6.	Exhibits	41
SIGNATURES		42

Table of Contents    

GLOSSARY

Defined Term	Definition
10b5-1 Plan	Trading plan adopted pursuant to Rule 10b5-1 of the Exchange Act
Adjusted Diluted EPS	Adjusted Diluted Earnings Per Share
ASC	Accounting Standards Codification
ASR	Accelerated Stock Repurchase
CC	Constant Currency
CITA	Commissioner of Income Tax (Appeals)
CMT	Communications, Media and Technology
COVID-19	The novel coronavirus disease
Credit Agreement	Credit agreement with a commercial bank syndicate, as amended
CTS India	Our principal operating subsidiary in India
DOJ	United States Department of Justice
DSO	Days Sales Outstanding
EPS	Earnings Per Share
ESG	Environmental, Social and Governance
EU	European Union
Exchange Act	Securities Exchange Act of 1934, as amended
GAAP	Generally Accepted Accounting Principles in the United States of America
High Court	Madras High Court
India Defined Contribution Obligation	Certain statutory defined contribution obligations of employees and employers in India
IoT	Internet of Things
ITD	Indian Income Tax Department
SCI	Supreme Court of India
SEC	United States Securities and Exchange Commission
Second Circuit	United States Court of Appeals for the Second Circuit
SG&A	Selling, general and administrative
Syntel	Syntel Sterling Best Shores Mauritius Ltd.
Tax Reform Act	Tax Cuts and Jobs Act
Term Loan	Unsecured term loan under the Credit Agreement
TriZetto	The TriZetto Group, Inc., now known as Cognizant Technology Software Group, Inc.
USDC-NJ	United States District Court for the District of New Jersey
USDC-SDNY	United States District Court for the Southern District of New York

Cognizant Technology Solutions 1 June 30, 2022 Form 10-Q

                        

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PART I. FINANCIAL INFORMATION

Item 1.     Consolidated Financial Statements (Unaudited).

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

(in millions, except par values)	June 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	1,768	$	1,792
Short-term investments	552		927
Trade accounts receivable, net	3,785		3,557
Other current assets	918		1,066
Total current assets	7,023		7,342
Property and equipment, net	1,121		1,171
Operating lease assets, net	907		933
Goodwill	5,517		5,620
Intangible assets, net	1,101		1,218
Deferred income tax assets, net	473		404
Long-term investments	443		463
Other noncurrent assets	673		701
Total assets	$	17,258	$	17,852
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	357	$	361
Deferred revenue	408		403
Short-term debt	38		38
Operating lease liabilities	178		195
Accrued expenses and other current liabilities	2,172		2,532
Total current liabilities	3,153		3,529
Deferred revenue, noncurrent	24		40
Operating lease liabilities, noncurrent	747		783
Deferred income tax liabilities, net	207		218
Long-term debt	608		626
Long-term income taxes payable	283		378
Other noncurrent liabilities	286		287
Total liabilities	5,308		5,861
Commitments and contingencies (See Note 10)
Stockholders’ equity:
Preferred stock, $0.10 par value, 15 shares authorized, none issued	—		—
Class A common stock, $0.01 par value, 1,000 shares authorized, 518 and 525 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	5		5
Additional paid-in capital	21		27
Retained earnings	12,193		11,922
Accumulated other comprehensive income (loss)	(269)		37
Total stockholders’ equity	11,950		11,991
Total liabilities and stockholders’ equity	$	17,258	$	17,852

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Cognizant Technology Solutions 2 June 30, 2022 Form 10-Q

                        

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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

(in millions, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues	$	4,906	$	4,585	$	9,732	$	8,986
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization expense shown separately below)	3,119		2,863		6,216		5,627
Selling, general and administrative expenses	883		881		1,745		1,708
Depreciation and amortization expense	144		145		287		286
Income from operations	760		696		1,484		1,365
Other income (expense), net:
Interest income	9		7		15		16
Interest expense	(3)		(2)		(5)		(4)
Foreign currency exchange gains (losses), net	(4)		(7)		(4)		(16)
Other, net	(1)		—		—		(2)
Total other income (expense), net	1		(2)		6		(6)
Income before provision for income taxes	761		694		1,490		1,359
Provision for income taxes	(184)		(184)		(354)		(344)
Income (loss) from equity method investments	—		2		4		2
Net income	$	577	$	512	$	1,140	$	1,017
Basic earnings per share	$	1.11	$	0.97	$	2.18	$	1.93
Diluted earnings per share	$	1.11	$	0.97	$	2.18	$	1.92
Weighted average number of common shares outstanding - Basic	520		527		522		528
Dilutive effect of shares issuable under stock-based compensation plans	1		1		1		1
Weighted average number of common shares outstanding - Diluted	521		528		523		529

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Cognizant Technology Solutions 3 June 30, 2022 Form 10-Q

                        

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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

(in millions)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	577	$	512	$	1,140	$	1,017
Change in Accumulated other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(193)		14		(230)		(11)
Unrealized gains and losses on cash flow hedges	(57)		(13)		(76)		(17)
Other comprehensive income (loss)	(250)		1		(306)		(28)
Comprehensive income	$	327	$	513	$	834	$	989

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Cognizant Technology Solutions 4 June 30, 2022 Form 10-Q

                        

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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in millions)	Class A Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount
Balance, December 31, 2021	525	$	5	$	27	$	11,922	$	37	$	11,991
Net income	—	—		—		563		—		563
Other comprehensive income (loss)	—	—		—		—		(56)		(56)
Common stock issued, stock-based compensation plans	1	—		31		—		—		31
Stock-based compensation expense	—	—		56		—		—		56
Repurchases of common stock	(5)	—		(83)		(387)		—		(470)
Dividends declared, $0.27 per share	—	—		—		(142)		—		(142)
Balance, March 31, 2022	521	5		31		11,956		(19)		11,973
Net income	—	—		—		577		—		577
Other comprehensive income (loss)	—	—		—		—		(250)		(250)
Common stock issued, stock-based compensation plans	1	—		21		—		—		21
Stock-based compensation expense	—	—		89		—		—		89
Repurchases of common stock	(4)	—		(120)		(198)		—		(318)
Dividends declared, $0.27 per share	—	—		—		(142)		—		(142)
Balance, June 30, 2022	518	$	5	$	21	$	12,193	$	(269)	$	11,950

(in millions)	Class A Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount
Balance, December 31, 2020	530	$	5	$	32	$	10,689	$	110	$	10,836
Net income	—	—		—		505		—		505
Other comprehensive income (loss)	—	—		—		—		(29)		(29)
Common stock issued, stock-based compensation plans	1	—		43		—		—		43
Stock-based compensation expense	—	—		62		—		—		62
Repurchases of common stock	(3)	—		(93)		(159)		—		(252)
Dividends declared, $0.24 per share	—	—		—		(128)		—		(128)
Balance, March 31, 2021	528	5		44		10,907		81		11,037
Net income	—	—		—		512		—		512
Other comprehensive income (loss)	—	—		—		—		1		1
Common stock issued, stock-based compensation plans	1	—		32		—		—		32
Stock-based compensation expense	—	—		67		—		—		67
Repurchases of common stock	(4)	—		(111)		(205)		—		(316)
Dividends declared, $0.24 per share	—	—		—		(128)		—		(128)
Balance, June 30, 2021	525	$	5	$	32	$	11,086	$	82	$	11,205

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Cognizant Technology Solutions 5 June 30, 2022 Form 10-Q

                        

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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in millions)	For the Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net income	$	1,140	$	1,017
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	287		286
Deferred income taxes	(74)		119
Stock-based compensation expense	145		129
Other	51		(2)
Changes in assets and liabilities:
Trade accounts receivable	(251)		(279)
Other current and noncurrent assets	131		60
Accounts payable	(9)		17
Deferred revenues, current and noncurrent	(8)		(34)
Other current and noncurrent liabilities	(578)		(591)
Net cash provided by operating activities	834		722
Cash flows from investing activities:
Purchases of property and equipment	(163)		(163)
Purchases of available-for-sale investment securities	(513)		(105)
Proceeds from maturity or sale of available-for-sale investment securities	375		—
Purchases of held-to-maturity investment securities	(32)		(89)
Proceeds from maturity of held-to-maturity investment securities	30		76
Purchases of other investments	(256)		(642)
Proceeds from maturity or sale of other investments	769		322
Proceeds from sales of businesses	19		—
Payments for business combinations, net of cash acquired	—		(658)
Net cash provided by (used in) investing activities	229		(1,259)
Cash flows from financing activities:
Issuance of common stock under stock-based compensation plans	52		75
Repurchases of common stock	(792)		(560)
Repayment of Term Loan borrowings and finance lease and earnout obligations	(26)		(28)
Dividends paid	(284)		(255)
Net cash (used in) financing activities	(1,050)		(768)
Effect of exchange rate changes on cash and cash equivalents	(37)		(7)
(Decrease) in cash and cash equivalents	(24)		(1,312)
Cash and cash equivalents, beginning of year	1,792		2,680
Cash and cash equivalents, end of period	$	1,768	$	1,368

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Cognizant Technology Solutions 6 June 30, 2022 Form 10-Q

                        

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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Interim Consolidated Financial Statements

The terms “Cognizant,” “we,” “our,” “us” and “the Company” refer to Cognizant Technology Solutions Corporation and its subsidiaries unless the context indicates otherwise. We have prepared the accompanying unaudited consolidated financial statements included herein in accordance with GAAP and the Exchange Act. The accompanying unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements (and notes thereto) included in our Annual Report on Form 10-K for the year ended December 31, 2021. In our opinion, all adjustments considered necessary for a fair statement of the accompanying unaudited consolidated financial statements have been included and all adjustments are of a normal and recurring nature. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year.

Note 2 — Revenues and Trade Accounts Receivable

Disaggregation of Revenues

The tables below present disaggregated revenues from contracts with clients by client location, service line and contract type for each of the business segments. We believe this disaggregation best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by industry, market and other economic factors. Our consulting and technology services include consulting, application development, systems integration, and application testing services as well as software solutions and related services while our outsourcing services include application maintenance, infrastructure and business process services. Revenues are attributed to geographic regions based upon client location, which is the client's billing address. Substantially all revenues in the North America region relate to clients in the United States.

We have defined our Financial Services, Health Sciences (previously referred to as Healthcare), Products and Resources and Communications, Media and Technology segments as ("FS"), ("HS"), ("P&R"), and ("CMT"), respectively, in our disaggregation of revenues tables.

	Three Months Ended June 30, 2022										Six Months Ended June 30, 2022
(in millions)	FS		HS		P&R		CMT		Total		FS		HS		P&R		CMT		Total
Revenues
Geography:
North America	$	1,104	$	1,210	$	770	$	572	$	3,656	$	2,184	$	2,405	$	1,531	$	1,105	$	7,225
United Kingdom	147		44		134		133		458		298		88		266		259		911
Continental Europe	143		126		143		33		445		300		246		288		70		904
Europe - Total	290		170		277		166		903		598		334		554		329		1,815
Rest of World	148		28		93		78		347		288		61		185		158		692
Total	$	1,542	$	1,408	$	1,140	$	816	$	4,906	$	3,070	$	2,800	$	2,270	$	1,592	$	9,732
Service line:
Consulting and technology services	$	1,078	$	805	$	753	$	465	$	3,101	$	2,135	$	1,609	$	1,507	$	913	$	6,164
Outsourcing services	464		603		387		351		1,805		935		1,191		763		679		3,568
Total	$	1,542	$	1,408	$	1,140	$	816	$	4,906	$	3,070	$	2,800	$	2,270	$	1,592	$	9,732
Type of contract:
Time and materials	$	894	$	505	$	471	$	471	$	2,341	$	1,784	$	999	$	938	$	919	$	4,640
Fixed-price	578		617		581		309		2,085		1,135		1,235		1,153		601		4,124
Transaction or volume-based	70		286		88		36		480		151		566		179		72		968
Total	$	1,542	$	1,408	$	1,140	$	816	$	4,906	$	3,070	$	2,800	$	2,270	$	1,592	$	9,732

Cognizant Technology Solutions 7 June 30, 2022 Form 10-Q

                        

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	Three Months Ended June 30, 2021										Six Months Ended June 30, 2021
(in millions)	FS		HS		P&R		CMT		Total		FS		HS		P&R		CMT		Total
Revenues
Geography:
North America	$	1,049	$	1,131	$	723	$	469	$	3,372	$	2,062	$	2,232	$	1,441	$	920	$	6,655
United Kingdom	130		45		116		112		403		255		85		222		211		773
Continental Europe	186		120		132		44		482		378		238		235		87		938
Europe - Total	316		165		248		156		885		633		323		457		298		1,711
Rest of World	137		29		84		78		328		265		58		155