ctsh-20230630

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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	June 30, 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 July 28, 2023:


Class						Number of Shares
Class A Common Stock, par value $0.01 per share						505,041,392

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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 June 30 , 2023 and December 31, 2022	4

	Consolidated Statements of Operations (Unaudited) for the Three and S ix Months Ended June 30 , 2023 and 2022	5

	Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30 , 2023 and 2022	6

	Consolidated Statements of Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 2023 and 2022 and June 30, 2023 and 2022	7

	Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30 , 2023 and 2022	8

	Notes to Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	40

PART II.	OTHER INFORMATION	41

Item 1.	Legal Proceedings	41

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 5.	Other Information	42

Item 6.	Exhibits	43

SIGNATURES		45

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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
DTSA			Defend Trade Secrets Act
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			June 30, 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 the NextGen program, 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			June 30, 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			June 30, 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)	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	2,055	$	2,191
Short-term investments	40		310
Trade accounts receivable, net	3,755		3,796
Other current assets	1,101		969
Total current assets	6,951		7,266
Property and equipment, net	1,087		1,101
Operating lease assets, net	788		876
Goodwill	6,065		5,710
Intangible assets, net	1,228		1,168
Deferred income tax assets, net	762		642
Long-term investments	425		427
Other noncurrent assets	661		662
Total assets	$	17,967	$	17,852
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	318	$	360
Deferred revenue	380		398
Short-term debt	24		8
Operating lease liabilities	171		174
Accrued expenses and other current liabilities	2,163		2,407
Total current liabilities	3,056		3,347
Deferred revenue, noncurrent	30		19
Operating lease liabilities, noncurrent	664		714
Deferred income tax liabilities, net	220		180
Long-term debt	622		638
Long-term income taxes payable	157		283
Other noncurrent liabilities	315		362
Total liabilities	5,064		5,543
Commitments and contingencies (See Note 12)
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, 505 and 509 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	5		5
Additional paid-in capital	17		15
Retained earnings	13,022		12,588
Accumulated other comprehensive income (loss)	(141)		(299)
Total stockholders’ equity	12,903		12,309
Total liabilities and stockholders’ equity	$	17,967	$	17,852

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


Cognizant Technology Solutions			4			June 30, 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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues	$	4,886	$	4,906	$	9,698	$	9,732
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization expense shown separately below)	3,231		3,119		6,374		6,216
Selling, general and administrative expenses	830		883		1,665		1,745
Restructuring charges	117		—		117		—
Depreciation and amortization expense	131		144		263		287
Income from operations	577		760		1,279		1,484
Other income (expense), net:
Interest income	30		9		60		15
Interest expense	(10)		(3)		(19)		(5)
Foreign currency exchange gains (losses), net	(9)		(4)		3		(4)
Other, net	(1)		(1)		2		—
Total other income (expense), net	10		1		46		6
Income before provision for income taxes	587		761		1,325		1,490
Provision for income taxes	(124)		(184)		(282)		(354)
Income (loss) from equity method investments	—		—		—		4
Net income	$	463	$	577	$	1,043	$	1,140
Basic earnings per share	$	0.92	$	1.11	$	2.05	$	2.18
Diluted earnings per share	$	0.91	$	1.11	$	2.05	$	2.18
Weighted average number of common shares outstanding - Basic	506		520		508		522
Dilutive effect of shares issuable under stock-based compensation plans	1		1		—		1
Weighted average number of common shares outstanding - Diluted	507		521		508		523

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


Cognizant Technology Solutions			5			June 30, 2023 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,
	2023		2022		2023		2022
Net income	$	463	$	577	$	1,043	$	1,140
Change in Accumulated other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	51		(193)		94		(230)
Unrealized gains and losses on cash flow hedges	30		(57)		64		(76)

Other comprehensive income (loss)	81		(250)		158		(306)
Comprehensive income	$	544	$	327	$	1,201	$	834

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


Cognizant Technology Solutions			6			June 30, 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
Net income	—	—		—		463		—		463
Other comprehensive income (loss)	—	—		—		—		81		81
Common stock issued, stock-based compensation plans	1	—		18		—		—		18
Stock-based compensation expense	—	—		42		—		—		42
Repurchases of common stock	(3)	—		(65)		(150)		—		(215)
Dividends declared, $0.29 per share	—	—		—		(147)		—		(147)
Balance, June 30, 2023	505	$	5	$	17	$	13,022	$	(141)	$	12,903


(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

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


Cognizant Technology Solutions			7			June 30, 2023 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,
	2023		2022
Cash flows from operating activities:
Net income	$	1,043	$	1,140
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	273		287

Deferred income taxes	(113)		(74)
Stock-based compensation expense	86		145

Other	29		51
Changes in assets and liabilities, net of the effect of business combinations:
Trade accounts receivable, current	50		(251)
Other current and noncurrent assets	(96)		131
Accounts payable	(40)		(9)
Deferred revenues, current and noncurrent	(20)		(8)
Other current and noncurrent liabilities	(447)		(578)
Net cash provided by operating activities	765		834
Cash flows from investing activities:
Purchases of property and equipment	(166)		(163)
Purchases of available-for-sale investment securities	—		(513)
Proceeds from maturity or sale of available-for-sale investment securities	225		375
Purchases of held-to-maturity investment securities	(3)		(32)
Proceeds from maturity of held-to-maturity investment securities	18		30
Purchases of other investments	(199)		(256)
Proceeds from maturity or sale of other investments	234		769
Proceeds from sales of businesses	—		19
Payments for business combinations, net of cash acquired	(409)		—
Net cash (used in) provided by investing activities	(300)		229
Cash flows from financing activities:
Issuance of common stock under stock-based compensation plans	41		52


Repurchases of common stock	(436)		(792)
Repayment of Term Loan borrowings and finance lease and earnout obligations	(11)		(26)

Dividends paid	(298)		(284)
Net cash (used in) financing activities	(704)		(1,050)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—		(37)
(Decrease) in cash, cash equivalents and restricted cash	(239)		(24)
Cash, cash equivalents and restricted cash beginning of year	2,294		1,792
Cash and cash equivalents, end of period	$	2,055	$	1,768

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


Cognizant Technology Solutions			8			June 30, 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 June 30, 2023										Six Months Ended June 30, 2023

(in millions)	FS		HS		P&R		CMT		Total		FS		HS		P&R		CMT		Total
Revenues
Geography:
North America	$	1,027	$	1,233	$	780	$	549	$	3,589	$	2,060	$	2,481	$	1,521	$	1,072	$	7,134
United Kingdom	155		44		137		137		473		317		81		269		284		951
Continental Europe	155		135		160		44		494		307		259		310		79		955
Europe - Total	310		179		297		181		967		624		340		579		363		1,906
Rest of World	126		28		100		76		330		255		52		195		156		658
Total	$	1,463	$	1,440	$	1,177	$	806	$	4,886	$	2,939	$	2,873	$	2,295	$	1,591	$	9,698

Service line:
Consulting and technology services	$	1,006	$	822	$	763	$	436	$	3,027	$	2,006	$	1,634	$	1,495	$	878	$	6,013
Outsourcing services	457		618		414		370		1,859		933		1,239		800		713		3,685
Total	$	1,463	$	1,440	$	1,177	$	806	$	4,886	$	2,939	$	2,873	$	2,295	$	1,591	$	9,698

Type of contract:
Time and materials	$	811	$	517	$	475	$	460	$	2,263	$	1,672	$	1,007	$	920	$	924	$	4,523
Fixed-price	608		655		612		305		2,180		1,153		1,305		1,197		598		4,253
Transaction or volume-based	44		268		90		41		443		114		561		178		69		922
Total	$	1,463	$	1,440	$	1,177	$	806	$	4,886	$	2,939	$	2,873	$	2,295	$	1,591	$	9,698


Cognizant Technology Solutions			9			June 30, 2023 Form 10-Q

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	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

Costs to Fulfill

The following table presents information related to the capitalized costs to fulfill for the six months ended June 30:


(in millions)	2023		2022
Beginning balance	$	265	$	394
Costs capitalized	27		19
Amortization expense	(43)		(55)

Ending balance	$	249	$	358

Costs to obtain contracts were immaterial for the periods disclosed.

Contract Balances

The table below shows movements in contract assets (current and noncurrent) for the six months ended June 30:


(in millions)	2023		2022
Beginning balance	$	326	$	310
Revenues recognized during the period but not billed	327		318
Amounts reclassified to trade accounts receivable	(296)		(243)
Amounts acquired in business combinations	9		—
Effect of foreign currency exchange movements	—		(7)
Ending balance	$	366	$	378


Cognizant Technology Solutions			10			June 30, 2023 Form 10-Q

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The table below shows movements in the deferred revenue balances (current and noncurrent) for the six months ended June 30:


(in millions)	2023		2022
Beginning balance	$	417	$	443
Amounts billed but not recognized as revenues	277		385
Revenues recognized related to the beginning balance of deferred revenue	(299)		(388)
Amounts acquired in business combinations	13		—
Effect of foreign currency exchange movements	2		(8)
Ending balance	$	410	$	432

Revenues recognized during the six months ended June 30, 2023 for performance obligations satisfied or partially satisfied in previous periods were immaterial.

Remaining Performance Obligations

As of June 30, 2023, the aggregate amount of transaction price allocated to remaining performance obligations was $3,841 million, of which approximately 55% is expected to be recognized as revenues within 2 years and approximately 85% 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 six months ended June 30:


(in millions)	2023		2022
Beginning balance	$	43	$	50
Credit loss expense (1)	9		—
Write-offs charged against the allowance	(15)		(7)

Ending balance	$	37	$	43

(1)Reported in "Selling, general and administrative expenses" in our unaudited consolidated statements of operations.

Note 3 — Business Combinations

Acquisitions completed during the six months ended June 30, 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 six months ended June 30, 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


Cognizant Technology Solutions			11			June 30, 2023 Form 10-Q

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

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		202		220
Tax-deductible goodwill	88		—		88
Customer relationship assets	11		120		131		10.9 years


Current liabilities	(17)		(9)		(26)
Noncurrent liabilities	(1)		(32)		(33)
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 — Restructuring Charges

In the second quarter of 2023, we initiated the NextGen program aimed at simplifying our operating model, optimizing corporate functions and consolidating and realigning office space to reflect the post-pandemic hybrid work environment.

The total costs related to our NextGen program are reported in "Restructuring charges" in our unaudited consolidated statements of operations. We do not allocate these charges to individual segments in internal management reports used by the chief operating decision maker. Accordingly, such expenses are separately disclosed in our segment reporting as “unallocated costs”. See Note 13.


(in millions)	Three and Six Months Ended June 30, 2023




Employee separation costs	$	78

Facility exit costs (1)	37
Third party and other costs (2)	2
Total restructuring charges	$	117

(1)Facility exit costs include lease restructuring of $26 million, related accelerated depreciation charges of $10 million and impairment of long-lived assets of $1 million.

(2)Third party and other costs include certain non-facility related asset impairments, as well as legal and other professional services fees directly related to the NextGen program.

We expect to record total costs of approximately $350 million in connection with the NextGen program, consisting of approximately $150 million of employee separation costs and $200 million of facility exit and other costs.


Cognizant Technology Solutions			12			June 30, 2023 Form 10-Q

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Changes in our accrued employee separation costs included in "Accrued expenses and other current liabilities" in our consolidated statements of financial position are presented in the table below for the six months ended June 30.


(in millions)	2023

Beginning balance	$	—
Employee separation costs accrued	78
Payments made	(27)
Ending balance	$	51

There were no restructuring charges during 2022.

Note 5 — Investments

Our investments were as follows:


(in millions)	June 30, 2023		December 31, 2022
Short-term investments:
Equity investment security	$	10	$	10
Available-for-sale investment securities	—		225
Held-to-maturity investment securities	9		24
Time deposits	21		51
Total short-term investments	$	40	$	310


Long-term investments:
Other investments	$	65	$	70
Restricted time deposits(1)	360		357
Total long-term investments	$	425	$	427

(1)See Note 8.

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 and six months ended June 30, 2023 and 2022.

Available-for-Sale Investment Securities

As of June 30, 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