ctsh-20230331

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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	March 31, 2023
☐	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 April 28, 2023:


Class						Number of Shares
Class A Common Stock, par value $0.01 per share						507,477,456

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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

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		Page
GLOSSARY		1

FORWARD LOOKING STATEMENTS		2

PART I.	FINANCIAL INFORMATION	4

Item 1.	Consolidated Financial Statements (Unaudited)	4

	Consolidated Statements of Financial Position (Unaudited) as of March 31 , 202 3 and December 31, 202 2	4

	Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31 , 202 3 and 202 2	5

	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31 , 202 3 and 202 2	6

	Consolidated Statements of Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 202 3 and 202 2	7

	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 3 1 , 202 3 and 202 2	8

	Notes to Consolidated Financial Statements (Unaudited)	9

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION	33

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 5.	Other Information	34

Item 6.	Exhibits	35

SIGNATURES		36

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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
CE			Continental Europe
CITA			Commissioner of Income Tax (Appeals) in India
CMT			Communications, Media and Technology
Credit Agreement			Credit agreement with a commercial bank syndicate dated October 6, 2022
CTS India			Our principal operating subsidiary in India
DOJ			United States Department of Justice
DSO			Days Sales Outstanding
EPS			Earnings per share
EU			European Union
Exchange Act			Securities Exchange Act of 1934, as amended
FS			Financial Services
GAAP			Generally Accepted Accounting Principles in the United States of America
HS			Health Sciences
High Court			Madras, India High Court
India Defined Contribution Obligation			Certain statutory defined contribution obligations of employees and employers in India
IoT			Internet of Things
IRS			Internal Revenue Service
ITD			Indian Income Tax Department
Mobica			MOBICA HOLDINGS LIMITED
NA			North America

P&R			Products & Resources
RoW			Rest of World
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.
UK			United Kingdom
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			March 31, 2023 Form 10-Q

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Forward Looking Statements

The statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements (within the meaning of Section 21E of the Exchange Act) that involve risks and uncertainties. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as “believe,” “expect,” “may,” “could,” “would,” “plan,” “intend,” “estimate,” “predict,” “potential,” “continue,” “should” or “anticipate” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. From time to time, we or our representatives have made or may make forward-looking statements, orally or in writing.

Such forward-looking statements may be included in various filings made by us with the SEC, in press releases or in oral statements made by or with the approval of one of our authorized executive officers. These forward-looking statements, such as statements regarding our anticipated future revenues or operating margin, earnings, capital expenditures, impacts to our business, financial results and financial condition as a result of the competitive marketplace for talent and future attrition trends, anticipated effective income tax rate and income tax expense, liquidity, financing strategy, access to capital, capital return strategy, investment strategies, cost management, plans and objectives, including those related to our digital practice areas, investment in our business, potential acquisitions, industry trends, client behaviors and trends, the outcome of and costs associated with regulatory and litigation matters, the appropriateness of the accrual related to the India Defined Contribution Obligation and other statements regarding matters that are not historical facts, are based on our current expectations, estimates and projections, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Actual results, performance, achievements and outcomes could differ materially from the results expressed in, or anticipated or implied by, these forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including:

•economic and political conditions globally, including inflation and the invasion of Ukraine by Russia, and in particular in the markets in which our clients and operations are concentrated;

•our ability to attract, train and retain skilled employees, including highly skilled technical personnel and personnel with experience in key digital areas and senior management to lead our business globally, at an acceptable cost;

•unexpected terminations of client contracts on short notice or reduced spending by clients for reasons beyond our control;

•challenges related to growing our business organically as well as inorganically through acquisitions, and our ability to achieve our targeted growth rates;

•our ability to successfully implement our NextGen program and the amount of costs, timing of incurring costs, and ultimate benefits of such plans;

•our ability to achieve our profitability goals and maintain our capital return strategy;

•the impact of future pandemics, epidemics or other outbreaks of disease, on our business, results of operations, liquidity and financial condition;

•fluctuations in foreign currency exchange rates, or the failure of our hedging strategies to mitigate such fluctuations;

•our ability to meet specified service levels or milestones required by certain of our contracts;

•intense and evolving competition and significant technological advances that our service offerings must keep pace with in the rapidly changing markets we compete in;

•legal, reputation and financial risks if we fail to protect client and/or our data from security breaches and/or cyber attacks;

•climate change impact on our business;

•the effectiveness of our risk management, business continuity and disaster recovery plans and the potential that our global delivery capabilities could be impacted;

•restrictions on visas, in particular in the United States, United Kingdom and EU, or immigration more generally or increased costs of such visas or the wages we are required to pay employees on visas, which may affect our ability to compete for and provide services to our clients;

•risks related to anti-outsourcing legislation, if adopted, and negative perceptions associated with offshore outsourcing, both of which could impair our ability to serve our clients;

•risks and costs related to complying with numerous and evolving legal and regulatory requirements and client expectations in the many jurisdictions in which we operate;

•potential changes in tax laws, or in their interpretation or enforcement, failure by us to adapt our corporate structure and intercompany arrangements, or adverse outcomes of tax audits, investigations or proceedings;


Cognizant Technology Solutions			2			March 31, 2023 Form 10-Q

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•potential exposure to litigation and legal claims in the conduct of our business; and

•the factors set forth in "Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

You are advised to consult any further disclosures we make on related subjects in the reports we file with the SEC, including this report in the section titled “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part I, Item 1. Business” in our Annual Report on Form 10-K for the year ended December 31, 2022. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.


Cognizant Technology Solutions			3			March 31, 2023 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)	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	2,458	$	2,191
Short-term investments	23		310
Trade accounts receivable, net	3,718		3,796
Other current assets	1,029		969
Total current assets	7,228		7,266
Property and equipment, net	1,102		1,101
Operating lease assets, net	842		876
Goodwill	6,040		5,710
Intangible assets, net	1,262		1,168
Deferred income tax assets, net	666		642
Long-term investments	424		427
Other noncurrent assets	583		662
Total assets	$	18,147	$	17,852
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	332	$	360
Deferred revenue	469		398
Short-term debt	16		8
Operating lease liabilities	173		174
Accrued expenses and other current liabilities	2,331		2,407
Total current liabilities	3,321		3,347
Deferred revenue, noncurrent	32		19
Operating lease liabilities, noncurrent	688		714
Deferred income tax liabilities, net	215		180
Long-term debt	630		638
Long-term income taxes payable	283		283
Other noncurrent liabilities	317		362
Total liabilities	5,486		5,543
Commitments and contingencies (See Note 11)
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, 507 and 509 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	5		5
Additional paid-in capital	22		15
Retained earnings	12,856		12,588
Accumulated other comprehensive income (loss)	(222)		(299)
Total stockholders’ equity	12,661		12,309
Total liabilities and stockholders’ equity	$	18,147	$	17,852

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


Cognizant Technology Solutions			4			March 31, 2023 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 March 31,
	2023		2022
Revenues	$	4,812	$	4,826
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization expense shown separately below)	3,143		3,097
Selling, general and administrative expenses	835		862

Depreciation and amortization expense	132		143
Income from operations	702		724
Other income (expense), net:
Interest income	30		6
Interest expense	(9)		(2)
Foreign currency exchange gains (losses), net	12		—
Other, net	3		1
Total other income (expense), net	36		5
Income before provision for income taxes	738		729
Provision for income taxes	(158)		(170)
Income (loss) from equity method investments	—		4
Net income	$	580	$	563
Basic earnings per share	$	1.14	$	1.07
Diluted earnings per share	$	1.14	$	1.07
Weighted average number of common shares outstanding - Basic	509		524
Dilutive effect of shares issuable under stock-based compensation plans	—		1
Weighted average number of common shares outstanding - Diluted	509		525

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


Cognizant Technology Solutions			5			March 31, 2023 Form 10-Q

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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


(in millions)	Three Months Ended March 31,
	2023		2022
Net income	$	580	$	563
Change in Accumulated other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	43		(37)
Unrealized gains and losses on cash flow hedges	34		(19)

Other comprehensive income (loss)	77		(56)
Comprehensive income	$	657	$	507

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


Cognizant Technology Solutions			6			March 31, 2023 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, 2022	509	$	5	$	15	$	12,588	$	(299)	$	12,309
Net income	—	—		—		580		—		580
Other comprehensive income (loss)	—	—		—		—		77		77
Common stock issued, stock-based compensation plans	2	—		23		—		—		23
Stock-based compensation expense	—	—		44		—		—		44
Repurchases of common stock	(4)	—		(60)		(163)		—		(223)
Dividends declared, $0.29 per share	—	—		—		(149)		—		(149)
Balance, March 31, 2023	507	$	5	$	22	$	12,856	$	(222)	$	12,661


(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

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


Cognizant Technology Solutions			7			March 31, 2023 Form 10-Q

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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(in millions)	For the Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income	$	580	$	563
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	132		143

Deferred income taxes	(16)		70
Stock-based compensation expense	44		56

Other	27		27
Changes in assets and liabilities:
Trade accounts receivable	89		(117)
Other current and noncurrent assets	(17)		(73)
Accounts payable	(26)		35
Deferred revenues, current and noncurrent	71		36
Other current and noncurrent liabilities	(155)		(434)
Net cash provided by operating activities	729		306
Cash flows from investing activities:
Purchases of property and equipment	(98)		(120)
Purchases of available-for-sale investment securities	—		(65)
Proceeds from maturity or sale of available-for-sale investment securities	225		310
Purchases of held-to-maturity investment securities	(3)		(16)
Proceeds from maturity of held-to-maturity investment securities	15		20
Purchases of other investments	(26)		(39)
Proceeds from maturity or sale of other investments	81		591
Proceeds from sales of businesses	—		19
Payments for business combinations, net of cash acquired	(409)		—
Net cash (used in) provided by investing activities	(215)		700
Cash flows from financing activities:
Issuance of common stock under stock-based compensation plans	23		31


Repurchases of common stock	(222)		(474)
Repayment of Term Loan borrowings and finance lease and earnout obligations	(1)		(14)

Dividends paid	(150)		(143)
Net cash (used in) financing activities	(350)		(600)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—		(6)
Increase in cash, cash equivalents and restricted cash	164		400
Cash, cash equivalents and restricted cash beginning of year	2,294		1,792
Cash and cash equivalents, end of period	$	2,458	$	2,192

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


Cognizant Technology Solutions			8			March 31, 2023 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, 2022. 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.


	Three Months Ended March 31, 2023

(in millions)	Financial Services		Health Sciences		Products and Resources		Communications, Media and Technology		Total
Revenues
Geography:
North America	$	1,033	$	1,248	$	741	$	523	$	3,545
United Kingdom	162		37		132		147		478
Continental Europe	152		124		150		35		461
Europe - Total	314		161		282		182		939
Rest of World	129		24		95		80		328
Total	$	1,476	$	1,433	$	1,118	$	785	$	4,812

Service line:
Consulting and technology services	$	1,000	$	812	$	732	$	442	$	2,986
Outsourcing services	476		621		386		343		1,826
Total	$	1,476	$	1,433	$	1,118	$	785	$	4,812

Type of contract:
Time and materials	$	861	$	490	$	445	$	464	$	2,260
Fixed-price	545		650		585		293		2,073
Transaction or volume-based	70		293		88		28		479
Total	$	1,476	$	1,433	$	1,118	$	785	$	4,812


Cognizant Technology Solutions			9			March 31, 2023 Form 10-Q

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	Three Months Ended March 31, 2022

(in millions)	Financial Services		Health Sciences		Products and Resources		Communications, Media and Technology		Total
Revenues
Geography:
North America	$	1,080	$	1,195	$	761	$	533	$	3,569
United Kingdom	151		44		132		126		453
Continental Europe	157		120		145		37		459
Europe - Total	308		164		277		163		912
Rest of World	140		33		92		80		345
Total	$	1,528	$	1,392	$	1,130	$	776	$	4,826

Service line:
Consulting and technology services	$	1,057	$	804	$	754	$	448	$	3,063
Outsourcing services	471		588		376		328		1,763
Total	$	1,528	$	1,392	$	1,130	$	776	$	4,826

Type of contract:
Time and materials	$	890	$	494	$	467	$	448	$	2,299
Fixed-price	557		618		572		292		2,039
Transaction or volume-based	81		280		91		36		488
Total	$	1,528	$	1,392	$	1,130	$	776	$	4,826

Costs to Fulfill

The following table presents information related to the capitalized costs to fulfill for the three months ended March 31:


(in millions)	2023		2022
Beginning balance	$	265	$	394
Costs capitalized	15		12
Amortization expense	(22)		(27)

Ending balance	$	258	$	379

Costs to obtain contracts were immaterial for the periods disclosed.

Contract Balances

The table below shows movements in contract assets for the three months ended March 31:


(in millions)	2023		2022
Beginning balance	$	326	$	310
Revenues recognized during the period but not billed	248		259
Amounts reclassified to trade accounts receivable	(223)		(202)
Amounts acquired in business combinations	9		—

Ending balance	$	360	$	367

The table below shows movements in the deferred revenue balances (current and noncurrent) for the three months ended March 31:


(in millions)	2023		2022
Beginning balance	$	417	$	443
Amounts billed but not recognized as revenues	322		396
Revenues recognized related to the beginning balance of deferred revenue	(251)		(361)
Amounts acquired in business combinations	13		—

Ending balance	$	501	$	478

Revenues recognized during the three months ended March 31, 2023 for performance obligations satisfied or partially satisfied in previous periods were immaterial.


Cognizant Technology Solutions			10			March 31, 2023 Form 10-Q

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Remaining Performance Obligations

As of March 31, 2023, the aggregate amount of transaction price allocated to remaining performance obligations was $3,680 million, of which approximately 50% is expected to be recognized as revenues within 2 years and 80% is expected to be recognized as revenues within 5 years. Disclosure is not required for performance obligations that meet any of the following criteria:

(1)contracts with a duration of one year or less as determined under ASC Topic 606: "Revenue from Contracts with Customers",

(2)contracts for which we recognize revenues based on the right to invoice for services performed,

(3)variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with ASC 606-10-25-14(b), for which the criteria in ASC 606-10-32-40 have been met, or

(4)variable consideration in the form of a sales-based or usage-based royalty promised in exchange for a license of intellectual property.

Many of our performance obligations meet one or more of these exemptions and therefore are not included in the remaining performance obligation amount disclosed above.

Trade Accounts Receivable and Allowance for Credit Losses

We calculate expected credit losses for trade accounts receivable based on historical credit loss rates for each aging category as adjusted for the current market conditions and forecasts about future economic conditions. The following table presents the activity in the allowance for credit losses for trade accounts receivable for the three months ended March 31:


(in millions)	2023		2022
Beginning balance	$	43	$	50
Credit loss expense	4		9
Write-offs charged against the allowance	(11)		(2)

Ending balance	$	36	$	57

Note 3 — Business Combinations

Acquisitions completed during the three months ended March 31, 2023 were not individually or in the aggregate material to our operations. Accordingly, pro forma results have not been presented. We have allocated the purchase price related to these transactions to tangible and intangible assets acquired and liabilities assumed, including goodwill, based on their estimated fair values.

During the three months ended March 31, 2023, we acquired 100% ownership in each of the following:

•certain net assets of OneSource Virtual, the professional and application management services business of OneSource Virtual, Inc. and OneSource Virtual (UK) Ltd., a leading provider of Workday services, solutions and products, acquired to complement our existing finance and human resources advisory implementation services related to Workday (acquired January 1, 2023), and

•Mobica, an IoT software engineering services provider, acquired to expand our IoT embedded software engineering capabilities (acquired March 10, 2023).


Cognizant Technology Solutions			11			March 31, 2023 Form 10-Q

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The allocations of preliminary purchase price to the fair value of the aggregate assets acquired and liabilities assumed were as follows:


(in millions)	OneSource Virtual		Mobica		Total		Weighted Average Useful Life
Cash	$	—	$	20	$	20
Trade accounts receivable	—		10		10
Other current assets	4		8		12
Property and equipment and other assets	1		6		7

Non-deductible goodwill	18		203		221
Tax-deductible goodwill	88		—		88
Customer relationship assets	11		118		129		10.9 years


Current liabilities	(17)		(38)		(55)
Noncurrent liabilities	(1)		(2)		(3)
Purchase price	$	104	$	325	$	429

Goodwill from our acquisition of OneSource Virtual is expected to benefit all of our reportable segments and has been allocated as such. Goodwill from our acquisition of Mobica has been allocated to our Financial Services, Products and Resources and Communications, Media and Technology segments. The primary items that generated goodwill are the value of the acquired assembled workforces and synergies between the acquired companies and us, neither of which qualify as an identifiable intangible asset. The above allocations are preliminary and will be finalized as soon as practicable within the measurement period, but in no event later than one year following the date of acquisition.

Note 4 — Investments

Our investments were as follows:


(in millions)	March 31, 2023		December 31, 2022
Short-term investments:
Equity investment security	$	10	$	10
Available-for-sale investment securities	—		225
Held-to-maturity investment securities	12		24
Time deposits	1		51
Total short-term investments	$	23	$	310


Long-term investments:
Other investments	$	64	$	70
Restricted time deposits(1)	360		357
Total long-term investments	$	424	$	427

(1)See Note 7.

Equity Investment Security

Our equity investment security is a U.S. dollar denominated investment in a fixed income mutual fund. Realized and unrealized gains and losses were immaterial for the three months ended March 31, 2023 and 2022.

Available-for-Sale Investment Securities

As of March 31, 2023, we had no available-for-sale investment securities. As of December 31, 2022, the amortized cost and fair value of the available-for-sale investments were each $225 million. Our available-for-sale investment securities consisted of highly rated U.S. dollar denominated investments in certificates of deposit and commercial paper maturing within one year. Unrealized losses were immaterial as of December 31, 2022. There were no realized gains or losses related to the available-for-sale investment securities during the three months ended March 31, 2023 and 2022. There were no sales of available-for sale investment securities during the three months ended March 31, 2023 and 2022.


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Held-to-Maturity Investment Securities

Our held-to-maturity investment securities consist of Indian rupee denominated investments in commercial paper and international corporate bonds. The basis for the measurement of fair value of the held-to-maturity investment securities is Level 2 in the fair value hierarchy.

The amortized cost and fair value of corporate debt securities as of March 31, 2023 and December 31, 2022 were each $6 million and $12 million, respectively. The amortized cost and fair value of commercial paper securities as of March 31, 2023 and December 31, 2022 were each $6 million and $12 million, respectively.

As of March 31, 2023, $6 million of corporate debt securities and $6 million of commercial paper were in an unrealized loss position. The total unrealized loss was less than $1 million and none of the securities had been in an unrealized loss position for longer than 12 months. As of December 31, 2022, $12 million of corporate debt securities and $12 million of commercial paper were in an unrealized loss position. The total unrealized loss was less than $1 million and none of the securities had been in an unrealized loss position for longer than 12 months.

The securities in our portfolio are highly rated and short-term in nature. As of March 31, 2023, the corporate debt securities were rated AA+ or better and the commercial paper securities were rated A-1+ by CRISIL, an Indian subsidiary of S&P Global, or ICRA, the Indian affiliate of Moody's.

Other Investments

As of March 31, 2023 and December 31, 2022, we had equity method investments of $62 million and $68 million, respectively, primarily related to an investment in the technology sector. As of each of March 31, 2023 and December 31, 2022, we had equity securities without a readily determinable fair value of $2 million.

Note 5 — Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were as follows:


(in millions)	March 31, 2023		December 31, 2022
Compensation and benefits	$	1,206	$	1,446
Customer volume and other incentives	251		222

Income taxes	348		217
Professional fees	154		165
Other	372		357
Total accrued expenses and other current liabilities	$	2,331	$	2,407

Note 6 — Debt

In 2022, we entered into the Credit Agreement providing for the $650 million Term Loan and a $1,850 million unsecured revolving credit facility, which are each due to mature in October 2027. We are required under the Credit Agreement to make scheduled quarterly principal payments on the Term Loan beginning in December 2023.

The Credit Agreement requires interest to be paid, at our option, at either the Term Benchmark, Adjusted Daily Simple RFR or the ABR Rate (each as defined in the Credit Agreement), plus, in each case, an Applicable Margin (as defined in the Credit Agreement). Initially, the Applicable Margin is 0.875% with respect to Term Benchmark loans and RFR loans and 0.00% with respect to ABR loans. Subsequently, the Applicable Margin with respect to Term Benchmark loans and RFR loans will be determined quarterly and may range from 0.75% to 1.125%, depending on our public debt ratings or, if we have not received public debt ratings, from 0.875% to 1.125%, depending on our Leverage Ratio, which is the ratio of indebtedness for borrowed money to Consolidated EBITDA, as defined in the Credit Agreement. Initially, the Term Loan is a Term Benchmark loan. The Credit Agreement contains customary affirmative and negative covenants as well as a financial covenant. We were in compliance with all debt covenants and representations of the Credit Agreement as of March 31, 2023.

In March 2023, our India subsidiary renewed its working capital facility at 15 billion Indian rupees ($183 million at the March 31, 2023 exchange rate). The facility requires us to repay any balances within 90 days from the date of disbursement. There is a 1.0% prepayment penalty applicable to payments made within 30 days of disbursement. This working capital facility


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contains affirmative and negative covenants and may be renewed annually. As of March 31, 2023, we have not borrowed funds under this facility or any of its predecessor facilities.

Short-term Debt

As of March 31, 2023 and December 31, 2022, we had $16 million and $8 million, respectively of short-term debt related to current maturities of our Term Loan.

Long-term Debt

The following table summarizes the long-term debt balances as of:


(in millions)	March 31, 2023		December 31, 2022

Term Loan	$	650	$