Annual revenue of $14.81 billion up 9.8% over 2016
Increases quarterly dividend 33% to $0.20 per share
TEANECK, N.J., February 7, 2018 – Cognizant Technology Solutions Corporation (Nasdaq: CTSH), one of the world’s leading professional services companies, today announced its fourth quarter and full year 2017 financial results.
Highlights – Fourth Quarter 2017
Quarterly revenue rose to $3.83 billion, up 10.6% from the year-ago quarter.
Quarterly GAAP diluted EPS was $(0.03), compared to $0.68 in the year-ago quarter.
Quarterly non-GAAP diluted EPS1 was $1.03, compared to $0.87 in the year-ago quarter.
Revenue for the fourth quarter of 2017 rose to $3.83 billion, up 10.6% from $3.46 billion in the fourth quarter of 2016. GAAP net loss was $(18) million, or $(0.03) per diluted share, compared to GAAP net income of $416 million, or $0.68 per diluted share, in the fourth quarter of 2016. 2017 GAAP net loss included a one-time incremental income tax expense of $617 million related to the U.S. Tax Cuts and Jobs Act (“Tax Reform Act”). Non-GAAP diluted EPS was $1.03, compared to $0.87 in the fourth quarter of 2016. GAAP operating margin was 17.2% and non-GAAP operating margin1 was 19.7% for the fourth quarter of 2017.
On December 22, 2017, the United States enacted the Tax Reform Act, which significantly revised the U.S. corporate income tax law by, among other provisions, reducing the U.S. federal statutory corporate income tax rate from 35% to 21% starting in 2018 and implementing a modified territorial tax system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries.
1 Non-GAAP diluted EPS and non-GAAP operating margin exclude stock-based compensation costs, acquisition-related charges, realignment charges and, in the case of non-GAAP diluted EPS, net non-operating foreign currency exchange gains or losses, the effect of recognition of an income tax benefit previously unrecognized in our consolidated financial statements related to a specific uncertain tax position (for the year ended December 31, 2017), the effect of incremental income tax expense related to the Tax Reform Act (for the quarter and year ended December 31, 2017) and the effect of incremental income tax expense related to the India cash remittance transaction (for the quarter and year ended December 31, 2016). Reconciliations of non-GAAP diluted EPS and non-GAAP operating margin to the corresponding GAAP measures are included at the end of this release.
During the quarter we recorded a one-time provisional income tax expense of $617 million related to the Tax Reform Act, which reduced our GAAP diluted EPS by $1.04 during the quarter and year ended December 31, 2017. This one-time expense was primarily attributable to the deemed repatriation tax on undistributed earnings of foreign subsidiaries. We expect our overall effective corporate income tax rate to be approximately 24% for 2018 and 24-26% beginning in 2019.
“Consistent and solid execution throughout 2017, along with continued investments to further accelerate the shift to digital during the year, gives us confidence that we can deliver a strong 2018,” said Francisco D’Souza, Chief Executive Officer. “As companies that are already leaders in their industries integrate their domain knowledge with today’s tremendously powerful technologies like artificial intelligence, analytics, and cloud, we see a new generation of digital heavyweights emerging. Cognizant is resolved to be the go-to partner to these digital-industrial leaders and also to our fast-growing digital-native clients.”
Highlights – Full Year 2017
Revenue increased to $14.81 billion, up 9.8% from 2016.
GAAP diluted EPS was $2.53, compared to $2.55 in 2016.
Non-GAAP diluted EPS was $3.77, compared to $3.39 in 2016.
Revenue for 2017 increased to $14.81 billion, up 9.8% from $13.49 billion for 2016. GAAP net income for 2017 was $1.50 billion, or $2.53 per diluted share, compared to $1.55 billion, or $2.55 per diluted share, for 2016. Non-GAAP diluted EPS was $3.77 in 2017, compared to $3.39 in 2016. GAAP operating margin was 16.8% and non-GAAP operating margin was 19.7% for 2017.
First Quarter & Full Year 2018 Outlook
The Company is providing the following guidance:
First quarter 2018 revenue expected to be in the range of $3.88 billion to $3.92 billion.
First quarter 2018 non-GAAP diluted EPS2 expected to be at least $1.04.
Full year 2018 revenue expected to be in the range of $16.00 billion to $16.30 billion.
Full year 2018 non-GAAP diluted EPS expected to be at least $4.53.
2 A full reconciliation of non-GAAP diluted EPS guidance to GAAP diluted EPS guidance on a forward-looking basis cannot be provided without unreasonable efforts, as we are unable to provide reconciling information with respect to acquisition-related charges, realignment charges, net non-operating foreign currency exchange gains or losses, the tax effects of these adjustments, the tax effects of stock-based compensation expense, and any future adjustments to the provision for income taxes as a result of the implementation of the Tax Reform Act, all of which are adjustments to non-GAAP diluted EPS. The reconciling information for non-GAAP diluted EPS guidance to GAAP EPS guidance that is available without unreasonable efforts is included at the end of this release.
“Our full year 2017 results reflect the successful on-going execution of our long-term strategy, which is expected to drive sustainable revenue and earnings growth, while ensuring we maintain our ability to invest in the business and our financial strength and flexibility,” said Karen McLoughlin, Chief Financial Officer. “Additionally, today we announced a substantial increase in our quarterly dividend. We are also evaluating the longer term impact the new U.S. tax legislation may have on our capital return program.”
Return of Capital Program – Dividend
The Company has declared a quarterly cash dividend of $0.20 per share on Cognizant Class A Common Stock for shareholders of record at the close of business on February 22, 2018. This dividend will be payable on February 28, 2018. The Company expects to repurchase $1.2 billion of shares by the end of 2018, including the $300 million Accelerated Share Repurchase commenced in December 2017.
Cognizant will host a conference call on February 7, 2018 at 8:00 a.m. (Eastern) to discuss the Company’s fourth quarter 2017 results. To listen to the conference call, please dial (877) 810-9510 (domestically) and (201) 493-6778 (internationally) and provide the following conference passcode: “Cognizant Call.”
The conference call will also be available live on the Investor Relations section of the Cognizant website at http://investors.cognizant.com. Please go to the website at least 15 minutes prior to the call to register and to download and install any necessary audio software. An earnings supplement will also be available on the Cognizant website at the time of the conference call.
For those who cannot access the live broadcast, a replay will be available by dialing (877) 660-6853 for domestic callers or (201) 612-7415 for international callers and entering 13675240 from two hours after the end of the call until 11:59 p.m. (Eastern) on Wednesday, February 21, 2018. The replay will also be available at Cognizant’s website www.cognizant.com for 60 days following the call.
Cognizant (Nasdaq-100: CTSH) is one of the world’s leading professional services companies, transforming clients’ business, operating and technology models for the digital era. Our unique industry-based, consultative approach helps clients envision, build and run more innovative and efficient businesses. Headquartered in the U.S., Cognizant is ranked 205 on the Fortune 500 and is consistently listed among the most admired companies in the world. Learn how Cognizant helps clients lead with digital at www.cognizant.com or follow us @Cognizant.