ctsh-20220930

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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	September 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 October 28, 2022:


Class						Number of Shares
Class A Common Stock, par value $0.01 per share						513,921,432

Table of Contents

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 September 30, 2022 and December 31, 2021	2

	Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021	3

	Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021	4

	Consolidated Statements of Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 2022 and 2021, June 30, 2022 and 2021 and September 30, 2022 and 2021	5

	Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2022 and 2021	7

	Notes to Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4.	Controls and Procedures	41

PART II.	OTHER INFORMATION	42

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 6.	Exhibits	43

SIGNATURES		44

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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)
Class Action Settlement Loss			Loss recorded in connection with the filing of a settlement agreement to resolve the consolidated putative securities class action against us and certain of our former officers
CMT			Communications, Media and Technology
COVID-19			The novel coronavirus disease
Credit Agreement			Credit agreement with a commercial bank syndicate dated November 6, 2018, 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
New Credit Agreement			Credit agreement with a commercial bank syndicate dated October 6, 2022
New Term Loan			Unsecured term loan under the New Credit Agreement
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			September 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)	September 30, 2022		December 31 2021
Assets
Current assets:
Cash and cash equivalents	$	2,042	$	1,792
Short-term investments	689		927
Trade accounts receivable, net	3,686		3,557
Other current assets	900		1,066
Total current assets	7,317		7,342
Property and equipment, net	1,105		1,171
Operating lease assets, net	873		933
Goodwill	5,425		5,620
Intangible assets, net	1,038		1,218
Deferred income tax assets, net	520		404
Long-term investments	431		463
Other noncurrent assets	638		701
Total assets	$	17,347	$	17,852
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	367	$	361
Deferred revenue	345		403
Short-term debt	—		38
Operating lease liabilities	173		195
Accrued expenses and other current liabilities	2,338		2,532
Total current liabilities	3,223		3,529
Deferred revenue, noncurrent	17		40
Operating lease liabilities, noncurrent	711		783
Deferred income tax liabilities, net	190		218
Long-term debt	636		626
Long-term income taxes payable	283		378
Other noncurrent liabilities	329		287
Total liabilities	5,389		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, 514 and 525 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	5		5
Additional paid-in capital	17		27
Retained earnings	12,447		11,922
Accumulated other comprehensive income (loss)	(511)		37
Total stockholders’ equity	11,958		11,991
Total liabilities and stockholders’ equity	$	17,347	$	17,852

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


Cognizant Technology Solutions			2			September 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues	$	4,857	$	4,744	$	14,589	$	13,730
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization expense shown separately below)	3,080		2,947		9,296		8,574
Selling, general and administrative expenses	838		924		2,583		2,632

Depreciation and amortization expense	141		144		428		430
Income from operations	798		729		2,282		2,094
Other income (expense), net:
Interest income	17		7		32		23
Interest expense	(6)		(3)		(11)		(7)
Foreign currency exchange gains (losses), net	3		(3)		(1)		(19)
Other, net	—		1		—		(1)
Total other income (expense), net	14		2		20		(4)
Income before provision for income taxes	812		731		2,302		2,090
Provision for income taxes	(183)		(187)		(537)		(531)
Income (loss) from equity method investments	—		—		4		2
Net income	$	629	$	544	$	1,769	$	1,561
Basic earnings per share	$	1.22	$	1.04	$	3.40	$	2.96
Diluted earnings per share	$	1.22	$	1.03	$	3.40	$	2.96
Weighted average number of common shares outstanding - Basic	516		525		520		527
Dilutive effect of shares issuable under stock-based compensation plans	1		1		1		1
Weighted average number of common shares outstanding - Diluted	517		526		521		528

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


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

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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


(in millions)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	629	$	544	$	1,769	$	1,561
Change in Accumulated other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(197)		(63)		(427)		(74)
Unrealized gains and losses on cash flow hedges	(45)		14		(121)		(3)

Other comprehensive income (loss)	(242)		(49)		(548)		(77)
Comprehensive income	$	387	$	495	$	1,221	$	1,484

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


Cognizant Technology Solutions			4			September 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
Net income	—	—		—		629		—		629
Other comprehensive income (loss)	—	—		—		—		(242)		(242)
Common stock issued, stock-based compensation plans	1	—		19		—		—		19
Stock-based compensation expense	—	—		58		—		—		58
Repurchases of common stock	(5)	—		(81)		(234)		—		(315)
Dividends declared, $0.27 per share	—	—		—		(141)		—		(141)
Balance, September 30, 2022	514	$	5	$	17	$	12,447	$	(511)	$	11,958

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


Cognizant Technology Solutions			5			September 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, 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
Net income	—	—		—		544		—		544
Other comprehensive income (loss)	—	—		—		—		(49)		(49)
Common stock issued, stock-based compensation plans	2	—		29		—		—		29
Stock-based compensation expense	—	—		65		—		—		65
Repurchases of common stock	(2)	—		(97)		(24)		—		(121)
Dividends declared, $0.24 per share	—	—		—		(127)		—		(127)
Balance, September 30, 2021	525	$	5	$	29	$	11,479	$	33	$	11,546

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


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

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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(in millions)	For the Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	1,769	$	1,561
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	428		430

Deferred income taxes	(128)		146
Stock-based compensation expense	203		194

Other	81		(1)
Changes in assets and liabilities:
Trade accounts receivable	(173)		(371)
Other current and noncurrent assets	261		257
Accounts payable	(17)		(39)
Deferred revenues, current and noncurrent	(77)		(75)
Other current and noncurrent liabilities	(481)		(432)
Net cash provided by operating activities	1,866		1,670
Cash flows from investing activities:
Purchases of property and equipment	(242)		(214)
Purchases of available-for-sale investment securities	(1,068)		(400)
Proceeds from maturity or sale of available-for-sale investment securities	774		105
Purchases of held-to-maturity investment securities	(44)		(160)
Proceeds from maturity of held-to-maturity investment securities	48		150
Purchases of other investments	(418)		(1,192)
Proceeds from maturity or sale of other investments	894		760
Proceeds from sales of businesses	28		—
Payments for business combinations, net of cash acquired	—		(715)
Net cash (used in) investing activities	(28)		(1,666)
Cash flows from financing activities:
Issuance of common stock under stock-based compensation plans	71		104


Repurchases of common stock	(1,107)		(689)
Repayment of Term Loan borrowings and finance lease and earnout obligations	(47)		(40)

Dividends paid	(425)		(382)
Net cash (used in) financing activities	(1,508)		(1,007)
Effect of exchange rate changes on cash and cash equivalents	(80)		(13)
Increase (decrease) in cash and cash equivalents	250		(1,016)
Cash and cash equivalents, beginning of year	1,792		2,680
Cash and cash equivalents, end of period	$	2,042	$	1,664

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


Cognizant Technology Solutions			7			September 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 September 30, 2022										Nine Months Ended September 30, 2022

(in millions)	FS		HS		P&R		CMT		Total		FS		HS		P&R		CMT		Total
Revenues
Geography:
North America	$	1,086	$	1,212	$	779	$	544	$	3,621	$	3,270	$	3,617	$	2,310	$	1,649	$	10,846
United Kingdom	148		41		130		127		446		446		129		396		386		1,357
Continental Europe	143		119		143		33		438		443		365		431		103		1,342
Europe - Total	291		160		273		160		884		889		494		827		489		2,699
Rest of World	144		33		96		79		352		432		94		281		237		1,044
Total	$	1,521	$	1,405	$	1,148	$	783	$	4,857	$	4,591	$	4,205	$	3,418	$	2,375	$	14,589

Service line:
Consulting and technology services	$	1,062	$	802	$	756	$	429	$	3,049	$	3,197	$	2,411	$	2,263	$	1,342	$	9,213
Outsourcing services	459		603		392		354		1,808		1,394		1,794		1,155		1,033		5,376
Total	$	1,521	$	1,405	$	1,148	$	783	$	4,857	$	4,591	$	4,205	$	3,418	$	2,375	$	14,589

Type of contract:
Time and materials	$	890	$	505	$	469	$	443	$	2,307	$	2,674	$	1,504	$	1,407	$	1,362	$	6,947
Fixed-price	564		609		592		303		2,068		1,699		1,844		1,745		904		6,192
Transaction or volume-based	67		291		87		37		482		218		857		266		109